BOARD’S REPORT

To The Members of

Aster DM Healthcare Limited 

Your Directors take pleasure in presenting the Eighth Annual Report of the Company together with the audited financial statements for the year ended March 31, 2016. 

1.      FINANCIAL RESULTS

The financial results for the year ended March 31, 2016 are summarized below:

2. RESULTS OF OPERATIONS AND STATE OF COMPANY’S AFFAIRS
During the year under review your company, on a consolidated basis, reported total income from operations of INR 52,498.90 mn as compared to INR 38,758.43 mn. Increase in the overall revenue was a result of an increase in revenue from operations across all our business segments largely driven by organic growth, as well as the acquisition of three hospitals in fiscal 2015. The acquisition of three hospitals in fiscal 2015 increased our capacity by 227 beds. On a standalone basis, revenue from operations grew from INR 530.15 mn reported in FY 14-15 to INR 1,890.77 mn reported for the financial year 2015-16 mainly on account of the healthy increase in revenue reported from Aster Medcity, Kochi which was commissioned in August 2014. Profit before minority interest for the financial year 2015-16 stood at INR 2,851.28 mn as against INR 3,477.38 mn reported during the financial year 2014-15 and Profit for the year after adjusting for minority interest stood at INR 1,631.82 as against INR 1,668.01 mn reported during the financial year 2014-15. Decrease in the minority interest was on account of the acquisition of additional stake in our Saudi subsidiary company in the month of September 2015 which resulted in Aster DM’s stake being increased to 97%.

3. DIVIDEND
As your company has not generated distributable profits on a standalone basis, hence your directors do not recommend any dividend for the year.

4. TRANSFER TO RESERVES
As your company has not generated profits on a standalone basis, no amount is proposed to be transferred to reserves for the year.

5. SHARE CAPITAL
Share Capital of the Company as on March 31, 2016 was INR 4,626.33 Mn consisting of 403,051,574 equity shares of INR 10 each and 64,009,568 compulsorily convertible preference shares of INR 10 each. During the year under review, your Company has not issued shares with differential voting rights or any sweat equity shares. Details of Employee Stock Options granted by the Company are provided separately in the report.

As on March 31, 2016, except Mr. T J Wilson who holds 25,25, 523 equity shares and Mr. Shamsudheen Bin Mohideen Mammu Haji who was holds 56,12,607 equity shares, no other directors hold any equity shares or preference shares in the Company.

During the financial year under review, your company issued 4,908,029 equity shares of face value INR 10 to 21 individual shareholders in consideration for equity shares of Malabar Institute of Medical Sciences Limited. Moreover, 7,029,092 equity shares were issued to shareholders of Indogulf Hospitals Private Limited consequent upon the merger of Indogulf Hospitals Private Limited with your company. Moreover, your company issued 1 equity share and 50,155,666 RAR CCPS to Rimco (Mauritius) Limited on September 11, 2015 and 2,476,060 equity shares to 7 individual investors from Qatar on September 22, 2015.

During the year under review, your Company has not issued any bonus shares or rights shares.

6. HUMAN RESOURCES
People have been our most important strategic asset and the HR function plays an instrumental role in securing the future success of our group through people. In doing so, the function is guided by its long-term vision of working in partnership with business to create an environment where employees can thrive and are enabled to deliver sustainable and superior organizational performance. People are our competitive advantage and the reason we can provide high-quality service to the healthcare facilities and healthcare professionals with whom we work.

2015 has been a milestone year for HR to be able to articulate the long, intermediate and near term people strategy, the result of which is the initiation of a number of people centric interventions, all linked to ensure current business growth and long term sustainability with the guiding principles as below.

• HR strategy fully akin to business strategy with HR enabling business growth
• Agile and Adaptable to ever dynamic business environment (decentralizing and being more system, policies and process-oriented)
• From Reactive to Proactive
• From Transactional to Transformational
• People practices are inclusive , fair and respectful which instills a sense of pride at work

At Aster, we believe success is based not only on what is achieved, but also on how it is achieved. Our culture is driven by a core set of values that guide our behaviors and decision making, and that provides us with the ethos that are imbibed in every Asterian.

Our Performance Management System ensures the best deployment of our business vision and strategy through the six articulated strategic pillars for our overall business performance (I) Talent Engagement (II) Clinical Excellence (III) Service Excellence (IV) Business Growth (V) Innovation and (VI) Community Connect.  The performance management process captures each of the six pillars mapped with every individual’s goals (KPI’s). This also enables us to look at performance at 3 levels: Overall Company performance, the group/team or unit performance and individual performance, while being able to connect them together.  As an outcome there is further clarity of individual goals and alignment to the overall company objectives, one of the most important element to creating a high performing culture.

Introduction to the design of Role Banding helps integrate our people and people practices through a common framework. This helps us achieve our two goals of decentralizing and being more system, policies and process-oriented, and make all these individual entities, brands or locations talk to each other. The role banding framework also helps articulate the five critical and differentiating cluster of employees Doctors, Nurses, Paramedics, Pharmacists and Allied/Support. At a high level 100% of our employees can be assigned to one of these five role clusters, thereby giving clarity to career progression, benefits and policy administration.

HR technology implementation (Oracle Fusion HRMS) was initiated with the view to get rid of all such actions/ processes/ transactions, which a system can take care and most of the times which does not need Intellectual bandwidth or management decision-making. This will additionally support HR to focus on data and analytics for wiser and meaningful decision making rather than just delivering administrative HR services.

Our goal is to create a culture of honest, open, two-way communication throughout the company. We conduct engagement surveys to gauge overall satisfaction and engagement levels by team, department, and division on an ongoing basis. Everyone is asked to rate the effectiveness of our people processes and our communication efforts, and they are asked to share their attitudes concerning fairness, trust, and pride as they relate to Aster. Based on the feedback in the surveys, we develop action plans each year to increase the engagement of our employees. These action plans have been the catalyst for many of the improvements in our programs, including leadership assessments, employee focus groups, and many more.

Investment in skills and accelerating employees’ professional and personal development are essential components of Aster’s people agenda. We are committed to strengthening the capability of leaders and managers and holding them accountable to enable employees to thrive and meet their full potential. Our culture also positively affects the ability to add new and retain great people. We have added close to 2000 people over the year, increased our female population to about 56% of the overall population and increased the number of nationalities working with us to 30, to add to our overall diversity.

The alignment and execution of the business performance will be the overriding theme in 2016 and beyond. For the HR agenda, this translates into a stronger focus on change management and advising our company’s divisions, helping to reduce complexity, increase efficiencies and build an effective organization. We seek to retain, develop and continue to attract people with the requisite skills to help shape a better Aster and foster employees’ engagement and motivation throughout the implementation process.

7. PARTICULARS OF EMPLOYEES
The statement containing particulars of employees as required under section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a Annexure A forming part of this report.

8. EMPLOYEE STOCK OPTION SCHEME
Keeping its promise of value creation for its employees and employees of subsidiary companies, your company had instituted an ESOP Scheme “DM Healthcare Employee Stock Option Scheme 2013” in the year 2013. Details of ESOPs as required under Rule 12 (9) of Companies (Share Capital and Debentures) Rules, 2014 as given as Annexure B.

9. QUALITY CONTROL AND INITIATIVES
Your Company subscribe to the view that quality is the outcome of all activities that take place within the organization. We constantly strive for a high standard of clinical excellence at all our hospitals, clinics and retail pharmacies. We follow well-defined quality and patient safety protocols and adhere to internationally accepted clinical standards in patient handling and care. Our focus on quality is evidenced by the quality certifications and accreditations that our facilities have obtained from various local and international accreditation agencies, which include accreditation from the U.S.-based Joint Commission International, or JCI. We believe that JCI is considered the gold standard of hospital accreditation in the healthcare industry and three of our hospitals and one clinic in the GCC states, and Aster Medcity in Kochi, Kerala, have obtained such accreditation. JCI accreditation for our Medcare Dubai hospital was obtained in only eight months from the time of application. We have received JCI accreditation for Medcare Orthopaedics and Spine Hospital and Medinova Diagnostic Centre (our first central laboratory clinic in the GCC states). In the GCC states, Medcare Hospital and our Aster pharmacy retail chain received quality and service awards, respectively, from the Dubai Department of Economic Development. Our multi-specialty hospital MIMS Hospital in Kozhikode received accreditation by the Indian National Accreditation Board for Hospitals and Healthcare Providers, or NABH, in 2006. Our MIMS hospital in Kottakkal, Aster Aadhar hospital in Kolhapur and Aster Medcity in Kochi have also received NABH accreditation. Our Sanad Hospital in Saudi Arabia obtained accreditation from the Saudi Central Board for Accreditation for Healthcare Institutions, or CBAHI. We continually solicit after-service patient feedback through various means such as discussions, feedback forms and in some cases through call-centres. This helps in continuous improvement of our service delivery to our patients.

10. LOANS, GUARANTEE AND INVESTMENTS
Particulars of Loans, guarantees and investments form part of the notes to the financial statements provided in this Annual Report.

11. SUBSIDIARY, JOINT VENTURES AND ASSOCIATE COMPANIES
Your Company along with its subsidiaries are engaged in the business of setting of hospitals, clinics and pharmacies in India and GCC. At the beginning of the year your Company had 8 direct subsidiaries 65 step-down subsidiaries and 3 associate companies. As on 31st March, 2016 your company has 7 direct subsidiaries 45 step-down subsidiaries and 4 associate companies. Company does not have any Joint Ventures as on 31st March 2016. There has been no material change in the nature of the business of the subsidiaries.

During the financial year 2015-16, Indogulf Hospitals Private Limited was amalgamated with our Company pursuant to the Orders of the Hon’ble High Court of Kerala. Consequently, the entire business, assets, liabilities, duties and obligations of Indogulf Hospitals Private Limited were transferred to and vested in our Company with effect from the Appointed Date, i.e. April 1, 2015.

During the reporting period, following are the subsidiary companies which has ceased to be subsidiaries:

Pursuant to provisions of section 129(3) of the Act, a statement containing salient features of the financial statements of the Company’s subsidiaries in Form AOC-1 is attached to the financial statements of the Company.

12. CORPROATE SOCIAL RESPONSIBILITY
An obligation to do good is the calling of a good heart that beats for humanity. Your Company has been taking initiatives under Corporate Social Responsibility (CSR) for society at large, well before it has been prescribed thorough the Companies Act, 2013. The Company has well defined policy on CSR as per the requirement of Section 135 of the Companies Act, 2013 which covers the activities as prescribed under Schedule VII of the Companies Act 2013. The Company has in-house department which is exclusively working CSR activities. Corporate social responsibility is an integral part of our operations and part of our mission is to provide quality healthcare services and assistance to the underprivileged. The “average net profit” for the last years as required for computing the CSR obligation on the Company is negative and hence the requirement of spending minimum of 2% of the net profits on identified CSR projects is not applicable as on date on your Company.

13. INTERNAL CONTROL SYSTEMS
The Company maintains appropriate systems of internal control, including monitoring procedures, to ensure that all assets are safeguarded against loss from unauthorized use or disposition. Company policies, guidelines and procedures provide for adequate checks and balances and are meant to ensure that all transactions are authorized, recorded and reported correctly.

The Head of Internal Audit together with external audit consultants review the effectiveness and efficiency of these systems and procedures to ensure that all assets are protected against loss and that the financial and operational information is accurate and complete in all respects. Audits are conducted on an on-going basis and significant deviations are brought to the Board of Directors following which corrective action is taken. All these measures facilitate timely detection of any irregularities and early remedial steps.

14. VIGIL MECHANISM
Your Company has established a whistle blower mechanism / vigil mechanism that enables the Directors and Employees to report genuine concerns. The mechanism enables the Company to deal with instances of unethical behaviour, actual or suspected fraud or violation of Company’s code of conduct or ethics policy. During the year under review, none of the employees were denied access to Audit Committee of the Company as required under the Whistle Blower Policy.

15. PUBLIC DEPOSITS
Your Company has not accepted any public deposits and, as such, no amount on account of principal or interest on public deposits was outstanding as on the date of Balance Sheet. Thus no particulars are reported as required under Rule 8 (5) (v) of Companies (Accounts) Rules, 2014.

16. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the financial year were on an arm’s length basis and were in the ordinary course of business. There are no maternally significant related party transactions made by the Company with promoters, Directors and Key Managerial Personnel which may have a potential conflict with the interest of Company at large. Form AOC – 2 as required under Section 188 is appended as Annexure C to the Board’s Report.

17. MATERIAL CHANGES AND COMMITTEMENTS AFFECTING FINANCIAL POSITION
There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this report.

18. STATUTORY AUDITORS
At the Annual General Meeting held on September 12, 2014,  M/s B S R and Associates., Chartered Accountants, [Firm Registration No: 128901W] were appointed as the Statutory Auditor of the Company to hold office till the conclusion of 11th Annual General Meeting to be held in the year 2019. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of B S R and Associates, Chartered Accountants, [Firm Registration No: 128901W] is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the statutory auditor to the effect that if they are reappointed, it would be in accordance with the provisions of Sections 141 of the Companies Act, 2013.

19. AUDIT REPORT
Audit report on the financial statements of the Company for the financial year 2015-16 is being circulated to the shareholders along with the financial statements. There are no qualifications or adverse remarks made by the statutory auditors in their report for the financial year ended March 31, 2016.

The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company in the year under review.

20. SECRETARIAL AUDITOR
Mr. Sunil Sankar, Practising Company Secretary was appointed to conduct the secretarial audit of the Company for the financial year 2015-16, as required under Section 204 of the Companies Act, 2013 and Rules thereunder. The secretarial audit report for FY 2015-16 forms part of the Annual Report as Annexure D to the Board’s Report. There are no qualified statements in the secretarial audit report.

20. COST AUDITORS
Pursuant to the provisions of the Companies Act, 2013 read with the Companies (Cost Records Activities and Audit) Amendment Rules, 2014, your Directors had, on the recommendation of the Audit Committee, appointed M/s BBS & Associates Cost Accountants, Kochi [Firm Registration No: 00273] to conduct the audit of cost records of your company for the financial year 2016-17.

21. DECLARATION BY INDEPENDENT DIRECTORS
Your Company has received necessary declarations from each independent directors under Section 149 (7) of the Companies Act, 2013, that they meet the criteria of independence laid down in Section 149 (6) of the Companies Act, 2013.

22. DIRECTORS AND KEY MANAGERIAL PERSONNEL
In accordance with Articles of Association, Mr. T J Wilson and Mr. Shamsudheen Bin Mohindeen Mammu Haji, Directors retire by rotation at the ensuing Annual General Meeting. Mr. T J Wilson and Mr. Shamsudheen Bin Mohindeen Mammu Haji being eligible seek re-appointment at the Annual General Meeting. There has been no change in the constitution of the Board of Directors since the last report of the Board of Directors.

During the financial year Mr. Daniel Robert Mintz, Mr. Sanjay N Arte and Mr. Anver Ameen C resigned from the Board. Your Board placed their sincere gratitude for the contributions made by these Directors during their tenure.

Further during the financial year Mr. Shamsudheen Bin Mohideen Mammu Haji and Mr. Suresh M Kumar were appointed to the Board based on the recommendations from the Nomination and Remuneration Committee.

Key Managerial Personnel
Pursuant to the provisions of Section 203 of the Companies Act, 2013, your Company has appointed the following Key Managerial Personnel:

(i) Dr. Azad Moopen - Managing Director
(ii) Sreenath Reddy - Chief Financial Officer
(iii) Rajesh A  - Company Secretary

Dr. Azad Moopen was appointed as our Chairman and Managing Director, pursuant to a Board resolution dated November 19, 2014 with effect from December 1, 2014 for a period of five years. Dr. Azad Moopen is a non-resident Indian and in accordance with the provisions of the Companies Act. 2013, we have received approval from the Central Government for his appointment as the Managing Director of our Company. The details of remuneration governing his appointment as set out in the Board resolution dated November 19, 2014 are stated below:

In addition to the above, Dr. Azad Moopen is entitled to gratuity payments and leave encashment as per our Company’s policies. It has been agreed that if our Company incurs a loss or if our profits are inadequate during any Financial Year, our Company shall pay Dr. Azad Moopen such remuneration not exceeding the limits specified under Section II, Part II of Schedule V of the Companies Act, 2013.

23. COMMITTEES OF DIRECTORS
Your Board has constituted to various committees required under the Companies Act, 2013 and for meeting the operational conveniences. Following details set out the brief terms of reference of these committees and constitution of the committees:

Audit & Risk Management Committee: