Dear Members,
Your Directors are pleased to present the 36th Annual Report
of your Company together with the audited accounts for the financial year ended March 31,
2023.
FINANCIAL HIGHLIGHTS
Consolidated & Standalone Financials
(Rs in million)
(' in million)
|
Consolidated |
Standalone |
|
2022-23 |
2021-22 H |
2022-23 |
2021-22 |
Revenue from operations |
2,48,554 |
2,34,555 |
1,27,923 |
1,12,871 |
Profit Before Depreciation, Interest, Tax and Exceptional
Items* |
39,976 |
46,759 |
21,647 |
21,444 |
Depreciation |
12,446 |
11,265 |
4,354 |
4,153 |
Finance cost |
1,405 |
486 |
1,150 |
169 |
Exceptional items |
- |
1,280 |
- |
747 |
Profit Before Tax |
26,125 |
33,727 |
16,144 |
16,375 |
Provision for Tax |
6,849 |
7,256 |
3,839 |
1,828 |
Net Profit After Tax |
19,277 |
26,471 |
12,304 |
14,547 |
Other Comprehensive Income/ (Expense) |
7,356 |
2,617 |
59 |
17 |
Total Comprehensive Income for the period |
26,632.3 |
29,088 |
12,363 |
14,564 |
DIVIDEND
Your Company has paid an interim dividend of 300% i.e., ' 3.00 per
equity share of ' 1 for the financial year 2022-23 against 900% i.e., ' 9.00 per equity
share of ' 1 paid in the previous year. The dividend recommended for the financial year
2022-23 is in accordance with the Company's Dividend Distribution Policy. Higher
dividends were paid during the previous year considering the profits made by the Company
on disposal of Natrol LLC, USA, a wholly owned step-down subsidiary of the Company engaged
in nutraceutical business.
Pursuant to Regulation 43A of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, top 1,000 listed entities based on market
capitalisation are required to formulate a Dividend Distribution Policy. The Board has
approved and adopted the Dividend Distribution Policy and the same is available on the
Company's website: https://www.aurobindo.
com/api/uploads/disclosure_under_regulation/Dividend- Distribution-Policy.pdf
PERFORMANCE REVIEW
Your Company is one of the leading generic pharma companies globally.
Your Company is also the largest supplier in the USA by prescription volume as per IQVIA
data for the quarter ending March 31, 2023. Your Company maintained its growth momentum in
revenue despite headwinds caused by the pandemic.
On a standalone basis, your Company's revenue increased by 13.3%
to '127,923 million in FY22, as against '112,871 million in the corresponding previous
period. The Formulations business increased by 14.8% to '76,653 million. The API business
witnessed a growth of 8.2% to '47,410 million. Profit Before
Depreciation, Interest, Tax and Exceptional Items for FY23 increased by
0.9% to '21,647 million, compared to '21,444 million in FY22. Profit Before Tax for the
year decreased by 1.4% Y-o-Y to '16,114 million. Your Company's Net Profit After Tax
(before Other Comprehensive Income) decreased by 15.4% to '12,304 million as against
'14,547 million in FY22.
On a consolidated basis, the revenues increased by 6.0% to '2,48,554
million. The formulations business increased by 5.4% to '210,074 million from '199,393
million in the corresponding previous period. The Active Pharmaceutical Ingredients (APIs)
business posted a growth of 9.5% to '38,478 million vs. '35,156 million in FY22. Profit
Before Depreciation, Interest, Tax and Exceptional Items stood at '39,976 million,
witnessing a 14.5% decrease Y-o-Y. Profit Before Tax for the year stood at '26,125
million, compared to '33,727 million in the previous year.
Your Company reported a Net Profit After Tax (before Other
Comprehensive Income) of '19,277 million in FY23, vs. '26,471 million in FY22. The Diluted
Earnings Per Share (reported) stood at '32.9 in FY23, compared to '45.19 in FY22.
The US is the largest market for your Company and accounted for 46.9%
of the total revenue. US revenue increased by 4.8% to '116,544 million. Your Company
launched 34 products in FY23. Your company's market share by prescription volume
(IQVIA TRX) in the US, for the quarter ending March 2023 stands at 8.7%, positioning your
Company as the largest generic pharmaceutical player.
Your Company continues to strengthen its pipeline for the global
markets including the US market. As on March 31, 2023, your Company filed 774 Abbreviated
New Drug Applications (ANDAs) on a cumulative basis. Of the total count, 565 have received
final approvals and 34 received tentative approvals and 175 ANDAs are currently under
review.
Your Company's revenue in its Europe formulations business was
'64,256 million in FY23 compared to '64,803 million in FY22. Your Company now operates in
ten countries in EU/UK and is present across multiple channels including pharmacy,
hospital and tender business.
The ARV Formulations business stood at '9,544 million in FY23, growing
14.6% compared to '8,330 million in FY22.
Growth Markets segment, including Brazil, Canada, Columbia and South
Africa and others, grew by 31.2% Y-o-Y to '19,729 million.
OUTLOOK
FY23 was a challenging year for businesses, as the global economy
slowly recovering from the pandemic was subjected to geo-political shocks leading to
soaring inflation and hurting demand. Your company's effort in diversifying product
portfolio and improving operational efficiency helped it to overcome the turbulent
macro-economic environment significantly.
Your Company made significant progress in advancing the biosimilar and
vaccine development program during the year. Through continued focus on R&D, the
company has advanced the complex product portfolio and capacity further for
commercialization.
Your company maintains its strong position in the key geographies of
the US and Europe and is poised to grow through new launches and increasing access. In the
US, your company has filed 774 ANDAs till March 31, 2023, with estimated total market
potential of US$150 billion as per IQVIA data. 565 out of the total filed ANDAs have
received final approval, while 209 ANDAs are in different stages of the review process.
During the year, your company filed 49 ANDAs with the US FDA, including 10 ANDAs for
injectable products, and received final approvals for 59 products including for 16
injectable products. The company remains committed to broaden the array of branded OTC
products in line with the market trend.
For the Europe market, your Company now has Operations in ten countries
with full-fledged pharmacy, hospital and tender sales infrastructure. It now ranks amongst
the top 10 generic pharmaceutical companies in 8 countries of Europe. Your Company aims to
expand its market share and growth, through new launches including day 1 launches,
differentiated offerings, niche and complex products like Biosimilars. The company also
completed building the Europe market focused injectable facility at Vishakhapatnam, India,
which is in the process of commissioning.
Your company preserved its ARV market dominance by winning bids to
supply in both the Global fund and PEPFAR allocation this year. Despite price erosion, its
efficient capacities and pricing capability have been a key factor in maintaining leading
position in the Dolutegravir-based regimen which is the standard therapy for HIV.
Among the key growth markets, your Company has completed building a
Orals facility at Taizhou, China which is in the process of commissioning. Moreover, in
China, the Company has filed 30 import products and has received 6 approvals till March
31, 2023, which will be manufactured in units in India. In Canada, your Company has 188
approved products while 52 products are awaiting final approval as at the end of FY23.
Your Company has long been focused on creating an efficient API
business, which is a key component in the company's overall growth journey. As part
of the ongoing strategy, the API business operations have been carved into a wholly owned
subsidiary. This move is expected to bring higher management bandwidth and more emphasis
on growth and productivity within the API segment.
Last year your Company had launched a Penicillin-G project in Kakinada,
Andhra Pradesh, of 15,000 tonnes/annum capacity, as part of the Indian Government's
production linked incentives (PLI) scheme. The project is progressing well on time and is
expected to be completed in FY24.
RESEARCH AND DEVELOPMENT (R&D)
Aurobindo, over the years, has consistently invested in R&D for
improving capabilities and on-boarding talented people across the globe. Your Company now
has a team of more than 1,500 scientists and analysts. This enables your Company to
develop a wide range of medications from generics to complex speciality products.
Currently, Aurobindo has nine Research and Development (R&D) centres, of which five
are in India and four are in the USA. The R&D centres are equipped with cutting- edge
technologies where the talented scientists develop generics and difficult-to-develop
products and strive to improve productivity. During FY23, your Company invested 5.7% of
its consolidated revenue or ' 14,115 million as against ' 15,814 million or 6.7% of its
consolidated revenue in FY22 in R&D.
Your Company is focused on developing specialty and
difficult-to-develop complex products in the respiratory and dermatological therapeutic
areas, including metered dose inhalers (MDIs), dry powder inhalers (DPIs), nasal sprays,
topical lotions, creams, ointments and transdermal patches.
The products are developed for global markets, where your Company will
be able to file the product, get approval and market the products. Your Company is further
diversifying its product portfolio by working on multiple R&D initiatives.
During the year, your Company has continued to advance our Phase 3
clinical trials of two oncology and one ophthalmic biosimilar products, including
completion of the treatment phase of our trastuzumab, a biosimilar to Herceptin.
To support future product launches, it has incurred a capacity
expansion in both the microbial and mammalian drug substance manufacturing facilities. The
additional microbial drug substance manufacturing capacities are commissioned for use
already in FY23, while the two new mammalian production lines will be ready for use in
FY24.
The 15 Valent Pneumococcal Conjugate Vaccine, developed by Tergene
Biotech, a joint venture 80% owned by your Company, completed successful 3+0 trial in
1,130 pediatric subjects.
The vaccine received recommendation from Subjects Expert Committee,
that operates under the aegis of CDSCO, for grant of permission to Tergene to manufacture
and market the vaccine with three dose schedule in pediatric age group of 6, 10 and 14
weeks.
ENVIRONMENT, HEALTH AND SAFETY (EHS) Environment
Environmental preservation has been critical to your company and it has
assigned the highest level of priority across the units. To accomplish this sustainability
goal, we are leaning more towards Renewable Energy, improving the Co-Processing of
Hazardous Waste, Reusing/Recycling 100% of NonHazardous waste, Managing Water resources
responsibly, and expanding Green belts around our facilities. We have adopted the best
standards of responsible manufacturing across our supply chain.
Health & Safety
Health, safety, and well-being of our employees and associates are a
crucial material topic for us. We are committed towards instilling a healthy lifestyle, a
safe working environment. Our EHS framework and management practices assure compliance
while prioritizing product and process safety and safeguarding all employees. Each
manufacturing facility has departmental and Plant safety committee. Every month Management
review meetings are conducted which comprises top management from Corporate and
representatives from all sites including site heads to examine safety performance and
streamline operational procedures critical to safety requirements. In addition to the
above Lean Daily Management meetings are also conducted daily with Senior leadership team
to track the actions for continuous improvement. Health and safety training is provided to
both permanent and contractual workers, ensuring that our team understands the
significance of safe procedures and guidelines. Risk identification and assessments are
undertaken as part of the process before scaling up. Before commencing any chemical
process in the manufacturing area, a hazard and operability study (HAZOP) is conducted.
Qualitative and Quantitative risk assessments are carried out for establishing effective
controls.
Evaluation of Safety performance through EHS Score card on monthly
basis. This EHS Score card provides insight to help an organization to understand its
safety performance by evaluating on monthly basis based on Key Performance Indicators
identified. Inter Unit audits are conducted for gap assessments and performance
improvement. Regular Knowledge sharing session are conducted for sharing best practices
among the manufacturing facilities.
Engagement in National and global initiatives on Antimicrobial
Resistance (AMR)
As a healthcare service provider, the Company is partnering with
The Access to Medical Foundation,' which is monitoring what the 30 most active
firms in antimicrobial R&D and production are doing to combat antibiotic resistance.
We participated in The Antimicrobial Resistance Benchmark 2018, 2020 and 2021.
The Company is also a member of the AMR Industry Alliance,'
which is driving antimicrobial resistance progress via common objectives and commitment to
increase access to high-quality antimicrobial products, encourage responsible usage, and
reduce environmental concerns. We participated in AMR Industry Alliance Survey report
2020,2021 and 2022.
Membership with Pharmaceutical Supply Chain Initiative (PSCI):
The Pharmaceutical Supply Chain Initiative (PSCI) is a group of
pharmaceutical and healthcare companies who share a vision of better social, health,
safety and environmental outcomes in the communities. Aurobindo became Associate Member of
PSCI in 2022.
Participation in Carbon Disclosure Project (CDP):
CDP is a not-for-profit charity that runs the global disclosure system
for investors, companies, cities, states and regions to manage their environmental
impacts. CDP holds the largest environmental database in the world, and this year scored
nearly 15,000 companies on their climate change, forests and water security disclosures.
Your company participated in the CDP Disclosure 2022 (Performance in
Climate Change and Water security) and it has received a CDP score of C' for
Climate Change and Water Security for exemplary performance as a First-Time responder.
AWARDS AND ACCOLADES
Significant Achievement in HR Excellence, 13th CII
National HR Excellence Award, 2022
Excellence in Business Partnering, Economic Times Human Capital
Awards, 2022
IKON Talent Acquisition Awards - HR Guru, 2022
L&D Excellence" and Best L&D Team " in 12th
Edition Learning and development Summit & Awards 2023 organised by UBS FORUMS PVT LTD
23rd National Award for Excellence in Energy
Management 2022" at CII Virtual Platform:
Unit IX received the Excellence Energy Efficient Unit -
Consistent in the same category in the last 02 years.
Unit XIV received Excellence Energy Efficient Unit - Current
year and Energy Efficient Unit category in the last year.
Unit I received Energy Efficient Unit - Consistent in the same
category in the last three Years.
Unit V received Energy Efficient Unit Current Year.
Unit XI received Energy Efficient Unit Consistent in the same
category in the last two Years.
Unit XIU received Energy Efficient Unit Current Year.
SUBSIDIARIES/JOINT VENTURES
As per the provisions of Section 129 of the Companies Act, 2013 read
with the Companies (Accounts) Rules 2014, a separate statement containing the salient
features of the financial statements of Subsidiary companies/Associate companies/Joint
ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.
The Company has formulated a Policy for determining Material
Subsidiaries. The Policy is available on the Company's website and can be accessed at
https://www.aurobindo.com/api/uploads/disclosure_under_regulation/Policy-MaterialSubsidiary.pdf
During the year, the following were the changes in the subsidiaries of
the Company:
Ceased subsidiaries / JVs
During the period under review, the following are the companies that
ceased as subsidiaries/JVs:
Auro PR I LLC (formerly known as Mylan LLC) Merged with Auro PR
Inc w.e.f. May 23, 2022.
Eugia Injectable Inc, is dissolved w.e.f. April 26, 2022
Auro Steriles LLC, a wholly owned stepdown subsidiary in USA has
been cancelled w.e.f. September 30, 2022.
New subsidiaries / JVs
During the period under review, following subsidiary/step-down
subsidiary companies were incorporated/acquired:
Theranym Biologics Private Limited was incorporated as wholly
owned subsidiary of Curateq Biologics Private Limited w.e.f. September 22, 2022.
PT Aurogen Pharma Indonesia was incorporated as a wholly owned
stepdown subsidiary (99% held by Helix Healthcare BV and 1% held by Agile Pharma BV)
w.e.f. July 1, 2022
51% share capital of GLS Pharma Limited was acquired and it
became a subsidiary with effect from August 17, 2022
Name changes of Subsidiaries / JVs
During the period under review, names of the following subsidiary/JVs
were changed:
Acrotech Biopharma LLC name has been changed to Acrotech
Biopharma Inc. w.e.f. June 2, 2022
Auro Cure Private Limited name has been changed to Eugia
Steriles Private limited w.e.f. July 26, 2022
Wytells Pharma Private Limited name has been changed to Eugia
SEZ Private Limited w.e.f. September 2, 2022
Auro Medics Pharma LLC name has been changed to Eugia US LLC
w.e.f. August 8, 2022
Tergene Biotech Private Limited has been converted from private
limited company to public limited company w.e.f. October 20, 2022, hence the name changed
to Tergene Biotech Limited.
Auro Pharma India Private Limited name has been changed to
Apitoria Pharma Private Limited w.e.f. March 29, 2023.
Ownership changes in Subsidiaries
During the period under review, ownership of the following subsidiaries
was changed from one subsidiary to other subsidiary:
AuroMedics Pharma LLC (now Eugia US LLC) - Ownership changed
from Aurobindo Pharma USA Inc to Auro Steriles LLC w.e.f. April 1, 2022. Consequent to
cancellation of Auro Steriles LLC on September 30, 2022, ownership of Eugia US LLC changed
from Auro Steriles LLC to Eugia Inc w.e.f. October 1, 2022
Auro Steriles LLC - Ownership changed from Aurobindo Pharma USA
Inc to Eugia Inc w.e.f. April 1, 2022
Eugia US Manufacturing LLC - Ownership changed from Aurobindo
Pharma USA Inc to Eugia Inc w.e.f. April 1, 2022
INTEGRATED ANNUAL REPORT
In compliance with the SEBI Circular SEBI/HO/CFD/CMD/ CIR/P/2017/10
dated February 6, 2017 and based on the International Integrated Reporting Framework, the
Company Voluntarily adopted the Integrated Annual Report for the financial year 2022-23,
which encompasses both financial and non-financial information to Members of the Company
to view insight into the organization's strategy, governance framework, stakeholder
relationship and future outlook and performance and prospects of value creation based on
the six forms of capitals viz. financial capital, manufactured capital, intellectual
capital, human capital, social capital, relationship capital and natural capital.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements have been prepared by the Company in
accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the
Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies
Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on
its website https://
www.aurobindo.com/investors/disclosures-under-regulation-46/financials-subsidiariesin
compliance with the provisions of Section 136 of the Companies Act, 2013. Audited
financial statements of the Company's subsidiaries will be provided to the Members,
on request.
CODE FOR PREVENTION OF INSIDER TRADING
The Company adopted a Code of Conduct to regulate, monitor and report
trading in securities of the Company by the designated persons and their immediate
relatives pursuant the Securities and Exchange Board of India (Prohibition of Insider
Trading) Regulations, 2015. This Code of Conduct also includes code of practices and
procedures for fair disclosure of unpublished price sensitive information and has been
made available on the Company's website at https://www.
aurobindo.com/api/uploads/Code-Fair-Disclosure-PIT-Feb2019. pdf. Company has implemented
System Driven Disclosures for monitoring dealings in the securities of the Company by the
promoters, directors and designated persons and also structured digital database to keep
record of the persons with whom the unpublished price sensitive information of the Company
has been shared with.
VIGIL MECHANISM
The Board of Directors adopted the Whistle Blower Policy which is in
compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower
Policy aims to conduct the affairs of the Company in a fair and transparent manner by
adopting the highest standards of professionalism, honesty, integrity, and ethical
behaviour.
All permanent employees and Whole-time Directors of the Company are
covered under the Whistle Blower Policy.
A mechanism has been established for employees and other stakeholders
to report their concerns about unethical behaviour, actual or suspected fraud or violation
of the Code of Conduct and Ethics, and leak of price-sensitive information under the
Company's Code of Conduct formulated for regulating, monitoring, and reporting by
Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from
time to time. It also provides for adequate safeguards against the victimisation of
employees who avail of the mechanism and allows direct access to the Chairperson of the
Audit Committee and also Managing Director of the Company in exceptional cases. During the
year, no complaints were reported under the Whistle Blower Policy. The Whistle Blower
Policy is available on the Company's website https://www.aurobindo.com/investors/
disclosures-under-regulation-46/vigil-mechanism-whistle- blower-policy
PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT
Your Company has a policy and framework for employees to report sexual
harassment cases at the workplace and the said process ensures complete anonymity and
confidentiality of information. Your Company has constituted an Internal Complaints
Committee in compliance with the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy
on prevention and prohibition of sexual harassment at the workplace. The policy provides
for protection against sexual harassment of women at the workplace and for the prevention
and redressal of such complaints. During the year, the Company has not received any
complaint. The Company has been conducting regular awareness programmes aimed at
prevention of sexual harassment.
MEETINGS OF THE BOARD
The Board and Committee meetings are prescheduled, and a tentative
calendar of the meetings is created, in consultation with the Directors. However, in case
of special and urgent business needs, approval is taken by passing resolutions through
circulation. During the year under review, five Board Meetings and six Audit Committee
Meetings were convened and held.
The details of the meetings including composition of the Audit
Committee are provided in the Corporate Governance Report. During the year, all the
recommendations of the Audit Committee were accepted by the Board.
DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONAL
Key Managerial Personnel
Mr. K. Nithyananda Reddy, Vice Chairman & Managing Director, Dr. M.
Sivakumaran, Whole-time Director, Mr. M. Madan Mohan Reddy, Whole-time Director, Mr.
Santhanam Subramanian, Chief Financial Officer, and Mr. B. Adi Reddy, Company Secretary
are Key Managerial Personnel of the Company in accordance with the provisions of
Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014. In view of temporary inability to
perform executive functions of the Company by Mr. P. Sarath Chandra Reddy, he has been
relieved from his executive responsibilities with effect from November 12, 2022. However,
he continues to remain as director on the Board of the Company.
None of the Directors of the Company are disqualified under the
provisions of the Companies Act, 2013 (Act') or under the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015. All Independent Directors have
provided confirmations as contemplated under section 149(7) of the Act. As required by
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a certificate
from the Company Secretary in practice, that none of the Directors on the Board of the
Company have been debarred or disqualified from being appointed or continuing as Directors
of companies by the Board/Ministry of Corporate Affairs or any such statutory authority,
forms part of Corporate Governance Report as Annexure-A.
Appointments/Reappointments
During the year, the Members approved the reappointment of Mr. Girish
Paman Vanvari (DIN: 07376482) as an Independent Director for second term of five years
from November 5, 2022 to November 4, 2027 and approved the appointment of Mr. Santanu
Mukherjee (DIN: 07716452) as an Independent Director for a period of two years from
February 9, 2023 to February 8, 2025. In the opinion of the Board, both Mr. Girish Paman
Vanvari and Mr. Santanu Mukherjee are the persons of integrity, fulfil requisite
conditions as per applicable laws and are independent of the management and promoters of
the Company
Further, as per the provisions of the Companies Act, 2013, Dr.
M.Sivakumaran and Mr. P. Sarath Chandra Reddy will retire as Directors at the ensuing
Annual General Meeting and being eligible, seek reappointment. The Board recommends their
reappointment.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors
confirm that:
a. in the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to material
departures, if any;
b. appropriate accounting policies have been selected and applied
consistently. Judgement and estimates which are reasonable and prudent have been made so
as to give a true and fair view of the state of affairs of your Company as at the end of
the financial year and of the profit of your Company for the year;
c. proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the Companies Act, 2013
for safeguarding the assets of your Company and for preventing and detecting fraud and
other irregularities;
d. the annual accounts have been prepared on an on-going concern basis;
e. proper internal financial controls have been laid down to be
followed by your Company and such internal financial controls are adequate and are
operating effectively; and
f. proper systems to ensure compliance with the provisions of all
applicable laws have been devised, and such systems are adequate and are operating
effectively.
DECLARATION FROM INDEPENDENT DIRECTORS
The Independent Directors have submitted the declaration as to the
compliance with the Company's Code of Conduct and the declaration of independence
stating that they meet the criteria of independence as provided in sub-section (6) of
Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation (1) of
Regulation 16 of the Listing Regulations (including any statutory modification(s) or
re-enactment(s) thereof for the time being in force) and confirmed that they have
registered their names in the Independent Directors' Data bank. In terms of
Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that
they are not aware of any circumstance or situation, which exist or may be reasonably
anticipated, that could impair or impact their ability to discharge their duties.
BOARD DIVERSITY
The Company recognises and embraces the importance of a diverse Board
in its success. The Board has adopted the Board Diversity Policy which sets out with an
approach to diversify the Board of Directors. The Board Diversity Policy is available on
the Company's website: https://www.aurobindo.com/api/uploads/
Policy-on-Board-Diversity.pdf
BOARD EVALUATION
SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015 mandates that the Board shall monitor and review the Board evaluation framework. The
Companies Act, 2013 states that a formal annual evaluation needs to be conducted by the
Board of its own performance and that of its committees and individual Directors. Schedule
IV of the Companies Act, 2013 states that the performance evaluation of Independent
Directors shall be conducted by the entire Board of Directors, excluding the Director
being evaluated.
The Annual Performance Evaluation was conducted for all Board Members,
for the Board and its Committees for FY23.
This evaluation was led by the Nomination and Remuneration/
Compensation Committee of the Company. The Board evaluation framework has been designed in
compliance with the requirements under the Companies Act, 2013 and the Listing Regulations
and in accordance with the Guidance Note on Board Evaluation issued by SEBI in January
2017 The Board evaluation was conducted through questionnaires designed with qualitative
parameters and feedback based on ratings.
Evaluation of Committees was based on criteria such as adequate
independence of each Committee, frequency of meetings and time allocated for discussions
at meetings, functioning of Board Committees and effectiveness of its advice/
recommendation to the Board, etc.
Evaluation of Directors was based on criteria such as participation and
contribution in Board and Committee meetings, representation of shareholders interest and
enhancing shareholders value, experience, and expertise to provide feedback and guidance
to top management on business strategy, governance, risk and understanding of the
organisation's strategy, etc.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION
The policy of the Company on Directors' appointment and
remuneration, including criteria for determining qualifications, positive attributes,
independence of a Director and other matters are adopted as per the provisions of the
Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out
in the Nomination and Remuneration Policy of the Company. The Nomination and Remuneration
Policy as adopted by the Board is available on the Company's website:
https://www.aurobindo.com/api/uploads/NRC-Policy- AUROBINDO-09022023.pdf
TRANSFER TO RESERVES
Your Company has not transferred any amount to reserves during the year
under review.
LOANS, GUARANTEES AND INVESTMENTS
Loans, guarantees and investments covered under Section 186 of the
Companies Act, 2013 form part of the Notes to the financial statements provided in this
Annual Report.
CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All transactions entered with Related Parties for the year under review
were on arm's length basis and in the ordinary course of business. All Related Party
transactions are mentioned in the Notes to the Financial Statements. The Company has
developed a framework through Standard Operating Procedures for the purpose of
identification and monitoring of such Related Party Transactions. A statement giving
details of all Related Party Transactions are placed before the Audit Committee and the
Board for review and approval. The policy on Related Party Transactions, as approved by
the Board of Directors, has been uploaded on the website of the Company https://www.
aurobindo.com/investors/disclosures-under-regulation-46/ policy-on-rpt
The particulars of contracts or arrangements with Related Partie:
referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in
Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and
Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this
Report.
There were no materially significant Related Party Transactions which
could have potential conflict with the interests of the Company at large.
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
EARNINGS & OUTGO
Information with respect to conservation of energy, technology
absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act
read with Companies (Accounts) Rules, 2014 is in Annexure-3 to this Report.
ANNUAL RETURN
The Annual Return of the Company as on March 31, 2023 is available on
the Company's website and can be accessed at:
https://www.aurobindo.com/investors/disclosures-under- regulation-46/annual-returns
RISK MANAGEMENT COMMITTEE
Risk Management Committee of the Company consists of the following
Directors viz., Mr. Girish Paman Vanvari, Mr. P. Sarath Chandra Reddy and Mr. K.
Ragunathan as on March 31, 2023.
The Risk Management Committee was re-constituted on April 1, 2023 with
the following Directors viz., Mr. Girish Paman Vanvari, Mr. Santanu Mukherjee and Mrs.
Savita Mahajan as members.
Mr. Girish Paman Vanvari is the Chairman of the Committee.
The Company has established a separate department to monitor the
enterprise risk and for its management. The Committee had formulated a Risk Management
Policy for dealing with different kinds of risks which the Company faces in its day-today
operations. The Risk Management policy of the Company outlines a framework for
identification of internal and external risks specifically faced by the Company, in
particular including financial, operational, sectoral, sustainability (particularly, ESG-
related risks), information, cyber security risks, or any other risk as may be determined
by the Committee; measures for risk mitigation including systems and processes for
internal control of identified risks; and Business continuity plan. Risk is an integral
part of the Company's business, and sound risk management is critical to the success
of the organisation. The Company has adequate internal financial control systems and
procedures to combat the risk. The risk management procedure is reviewed by the Audit
Committee and Board of Directors on a regular basis at the time of review of the quarterly
financial results of the Company. A report on the risks and their management is enclosed
as a separate section forming part of this report.
AUDITORS & AUDITORS' REPORT
Pursuant to Section 139 (2) of the Companies Act, 2013, read with
Companies (Audit and Auditors) Rules, 2014, the Company at its 35th Annual
General Meeting (AGM) held on August 2, 2022, had appointed M/s. Deloitte Haskins &
Sells, Chartered Accountants as Statutory Auditors for a period of 5 years i.e. up to the
conclusion of the 40th AGM to be held in the year 2027 Further, as per the
Companies (Amendment) Act, 2017 effective from May 7, 2018, the provisions relating to
ratification of the appointment of Statutory Auditors at every AGM are not required to be
followed. The Auditors have confirmed that they are not disqualified from continuing as
Auditors of the Company. The Statutory Auditors' report forms part of the Annual
Report. The notes on financial statements referred to in the Auditors' Report are
self-explanatory and do not call for any further comments. There are no specifications,
reservations, adverse remarks on disclosure by the statutory auditors in their report.
They have not reported any incident of fraud to the Audit Committee of the Company during
the year under review.
INTERNAL AUDITORS
Ernst & Young LLP are the Internal Auditors of the Company and to
maintain its objectivity and independence, the Internal Auditors report to the Chairman of
the Audit Committee. The scope and authority of the Internal Audit function is clearly
defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate
the efficacy and adequacy of the internal control system of the Company, its compliance
with applicable laws/regulations, accounting procedures and policies on a standalone
basis. Based on the reports of the Internal Auditors, corrective actions will be
undertaken, thereby strengthening the controls. Significant audit observations and action
plans were presented to the Audit Committee of the Board on a quarterly basis.
COST AUDIT
As per Section 148 of the Act, the Company is required to have the
audit of its cost records conducted by a Cost Accountant. The Board of Directors of the
Company has on the recommendation of the Audit Committee, approved the appointment of EVS
& Associates, a firm of Cost Accountants in Practice (Registration No. 000175) as the
Cost Auditors of the Company to conduct cost audit for relevant products prescribed under
the Companies (Cost Records and Audit) Rules, 2014 for the year ending on March 31, 2024
at a remuneration of ' 650,000/- plus reimbursement of out-of-pocket expenses at actuals
and applicable taxes. As per the provision of the Act, the remuneration payable to the
Cost Auditor for audit of cost records, subject to ratification by the Members in the
forthcoming AGM. The Cost Auditor, EVS & Associates have, under Section 139(1) of the
Companies Act, 2013 and the Rules framed thereunder, furnished a certificate of their
eligibility and consent for appointment.
INTERNAL FINANCIAL CONTROLS
The internal financial controls (IFC) framework institutionalised in
Aurobindo has been evaluated in-depth for its adequacy and operating effectiveness,
wherein the Company has covered financial reporting controls, operational controls,
compliance- related controls and also Information Technology (IT) controls, comprising IT
general controls (ITGC) and application-level controls. The ITGC would include controls
over IT environment, computer operations, access to programmes and data, programme
development and programme changes. The application controls would include transaction
processing controls in ERP Oracle system which supports accurate data input, data
processing and data output, workflows, reviews and approvals as per the defined
authorisation levels.
To further strengthen the existing IFC framework and support the
growing business, the Company has redefined all the process level controls at activity
level which has brought in more clarity and transparency in day-to-day processing of
transactions and in addressing any related risks. All the controls so redefined and
identified have been properly documented and tested with the help of an independent
auditor to ensure their adequacy and effectiveness.
The Internal Auditors conduct Process & control review'
on a quarterly basis as per the defined scope and submit the audit findings along with
management comments and action taken reports to the Audit Committee for its review.
The IFC framework at Aurobindo ensures the following:
Establishment of policies and procedures, assignment of
responsibility, delegation of authority, segregation of duties to provide a basis for
accountability and controls;
Physical existence and ownership of assets at a specified date;
Enabling proactive anti-fraud controls and a risk management
framework to mitigate fraud risks to the Company;
Recording of all transactions occurred during a specific period.
Accounting of assets, liability, and revenue and expense components at appropriate
amounts;
Preparation of financial information as per the timelines
defined by the relevant authorities.
These controls cover the policies and procedures adopted by the Company
for ensuring the orderly and efficient conduct of its business including adherence to the
Company's policies, safeguarding of its assets of the Company, prevention and
detection of its frauds and errors, accuracy and completeness of accounting records and
timely preparation of reliable financial information. The Company has an internal control
system, commensurate with the size, scale and complexity of its operation.
SECRETARIAL AUDIT REPORT
Pursuant to the provisions of Section 204 of the Companies Act, 2013
and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,
2014, the Company has appointed Mr. A. Mohan Rami Reddy, a Company Secretary in Practice,
to undertake the secretarial audit of the Company for the financial year 2022-23. The
Secretarial Audit Report issued in form MR-3 is in Annexure-4 of this Report.
As per regulation 24A(1) of SEBI Listing Regulations, your Company is
required to annex a secretarial audit report of its material unlisted subsidiary
incorporated in India to its Annual Report. Accordingly, the Secretarial Audit Report for
the Financial Year 2022-23 of APL Healthcare Limited, a material subsidiary incorporated
in India, is annexed along with Annexure-4 of this report.
There are no qualifications, reservations or adverse remarks in either
of these Secretarial Audit Reports. Also, pursuant to Regulation 24A of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the
Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the
same to stock exchanges where the shares of the Company are listed.
CORPORATE SOCIAL RESPONSIBILITY
In compliance with Section 135 of the Companies Act, 2013 read with the
Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established
the Corporate Social Responsibility Committee (CSR Committee).
The Board, on the recommendation of the CSR Committee, adopted a CSR
Policy. The same is available on the Company's website at
https://www.aurobindo.com/api/uploads/CSR-policy. pdf The CSR objectives are designed to
serve societal, local and national goals in the locations that we operate in, to create a
significant and sustained impact on local communities.
The Company undertakes its CSR activities through Aurobindo Pharma
Foundation, a wholly-owned subsidiary of the Company incorporated under Section 8 of the
Companies Act 2013.
The details of CSR projects approved by the Board for the financial
year 2022-23 are available on the Company's website at
https://www.aurobindo.com/sustainability/annual-action-plan. The Annual Report on
Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social
Responsibility Policy) Rules, 2014 is annexed as Annexure-5 to this Report.
PARTICULARS OF EMPLOYEES
The statement of particulars of appointment and remuneration of
managerial personnel as required under Section 197(12) of the Companies Act, 2013 read
with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,
2014 is in Annexure-6 to this Report. The statement containing particulars of
employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of
the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open
for inspection at the Registered Office of the Company during business hours on all
working days of the Company, up to the date of the ensuing Annual General Meeting. Any
shareholder interested in obtaining such details may write to the Company Secretary of the
Company at cs@aurobindo.com.
Affirmation that the remuneration is as per the remuneration policy of
the Company.
In compliance with the provisions of the Companies Act, 2013 and SEBI
Listing Regulations, the Board, on the recommendation of the Nomination and
Remuneration/Compensation Committee approved the Policy for selection, appointment of
Directors, KMPs and Senior Management persons. The said Policy provides a framework to
ensure that suitable and efficient succession plans are in place for appointment of
Directors on the Board and other management members. The Policy also provides for
selection and remuneration criteria for the appointment of Directors and senior management
persons. The Company affirms that the remuneration is as per the Remuneration Policy of
the Company.
INSURANCE
All properties and insurable interests of the Company including
building, plant and machinery and stocks have been fully insured. The Company has also
taken D&O Insurance Policy covering Company's Directors and Officers.
MATERIAL CHANGES AND COMMITMENTS
There are no material changes and commitments in the business
operations of the Company from the financial year ended March 31, 2023 to the date of
signing of the Board's Report other than the transfer of certain Units of the Company
viz. Unit 1, Unit 5, Unit 8, Unit 9, Unit 11, Unit 14, Unit 17 and R&D Unit 2, to the
Company's wholly owned subsidiary Apitoria Pharma Private Limited for an aggregate
consideration of ' 38,0979 million subject to necessary adjustments as prescribed in the
business transfer agreements and on a cash free basis.
CORPORATE GOVERNANCE
A separate report on Corporate Governance standards followed by your
Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part
of this report. The certificate of the Practicing Company Secretary, Mr. S. Chidambaram
with regard to compliance of conditions of corporate governance as stipulated under
Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015 is annexed to the Corporate Governance Report.
MANAGEMENT DISCUSSION AND ANALYSIS
Management Discussion and Analysis Report for the year under review as
stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
is presented in a separate section forming part of this report.
DEPOSITS
Your Company has not accepted any deposits from the public within the
purview of Chapter V of the Companies Act, 2013.
INDUSTRIAL RELATIONS
Industrial relations at all units of the Company have been harmonious
and cordial. The employees are motivated and have shown initiative in improving the
Company's overall performance during the year.
TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF
The dividends that remained unpaid/unclaimed for a period of seven
years, have been transferred on due dates by the Company to the Investor Education and
Protection Fund (IEPF) established by the Central Government. Section 124 of the Companies
Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting,
Audit, Transfer and Refund) Rules, 2016 (the Rules') mandates that companies
shall apart from transfer of dividend that has remained unclaimed for a period of seven
years in the unpaid dividend account to the IEPF, also transfer the corresponding shares
with respect to the dividend, which has not been paid or claimed for seven consecutive
years or more to IEPF.
Accordingly, the dividends that remain unclaimed for seven years and
also the corresponding shares have been transferred to IEPF account on due dates. The
details of amount of unclaimed unpaid dividend and corresponding shares transferred to
IEPF during the financial year 2022-23 have been provided in the AGM Notice.
Further, in accordance with the IEPF Rules, the Board of Directors have
appointed Mr. B. Adi Reddy, Company Secretary as Nodal Officer of the Company for the
purpose of verification of claims of shareholders pertaining to shares transferred to IEPF
and / or refund of dividend from IEPF Authority and for coordination with IEPF Authority.
The details of the Nodal Officer are available on the website of the Company at
https://www.aurobindo.com/api/ uploads/unpaiddividendaccountdetails/Nodal-Officer-IEPF.pdf
SHARE CAPITAL
During the financial year under review, there has been no change in the
Authorised, Subscribed and Paid-up Share Capital of the Company. The paid-up share capital
of the Company as on March 31, 2023 was ' 585,938,609 divided into 585,938,609 equity
shares of ' 1 each. The Company has not issued any shares, debentures, bonds or
convertible / non-convertible securities during the financial year under review.
BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT
A detailed Business Responsibility and Sustainability Report in terms
of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 is available as a separate section in this Annual Report.
SIGNIFICANT/ MATERIAL ORDERS PASSED BY COURTS/ REGULATORS/TRIBUNALS
There were no significant material orders passed by the Regulators or
Courts or Tribunals that would impact the going concern status of the Company and its
operations in future.
SECRETARIAL STANDARDS
The Company has complied with the applicable Secretarial Standards
issued by the Institute of Company Secretaries of India, i.e., SS-1 and SS-2, relating to
Meetings of the Board of Directors' and General Meetings'
respectively.
OTHER DISCLOSURES
Acquisitions / Disinvestment / merger / demerger
Acquisition of 51% equity stake in GLS Pharma Limited
The Board of Directors of the Company at its meeting held on June 17,
2022, approved the acquisition of 51% equity shares in GLS Pharma Limited, operating in
oncology business and having manufacturing facility in Hyderabad for a cash consideration
of ' 280.5 millions. GLS Pharma Limited is engaged in the business of Oncology products
which include orals and injectables used in chemotherapy for solid malignancies,
chemotherapy for hematological malignancies and chemo supportive products.
GLS Pharma Limited was incorporated on September 1, 2014 and initiated
manufacturing in the year 2015. It had a total sales of ' 258 millions during the
financial year 2021-22 and ' 273 millions during the financial year 2022-23.
Acquisition of business operations of Veritaz Healthcare Limited
The Company completed the acquisition of business and certain assets of
Veritaz Healthcare Limited on slump sale basis in July 2022, for a consideration of '
1,710 million as per the Business Transfer Agreement dated March 28, 2022. Veritaz
operates in the pharmaceutical industry in India and sells branded generic formulations
and other health care related products.
Merger Scheme
The Board of directors at its meeting held on August 12, 2021 had
approved Scheme of Amalgamation providing for the amalgamation of two of its wholly owned
subsidiaries viz., Auronext Pharma Private Limited and Mviyes Pharma Ventures Private
Limited with the Company subject to the requisite statutory / regulatory approvals
including the approval of the National Company Law Tribunal (Hyderabad Bench). Since there
were other restructuring proposals in discussion, this amalgamation was put on hold and
the Board of Directors at its meeting held on April 1, 2023 has decided to proceed with
the aforesaid Scheme of Amalgamation.
CREDIT RATING
The Company has obtained the Credit ratings from India Ratings &
Research Private Limited and it has assigned ND AA+/Stable/ IND A1+ on Rating Watch
Evolving for Company's fund based working capital facilities and ND A1+ on Rating
Watch Evolving for Company's non-fund-based working capital limits vide their letter
dated October 20, 2022.
ACKNOWLEDGEMENTS
Your directors are grateful for the invaluable contribution made by the
employees and are encouraged by the support of the customers, business associates, banks
and government agencies. The Directors deeply appreciate their faith in the Company and
remain thankful to them. The Board shall always strive to meet the expectations of all the
stakeholders.
|
For and on behalf of the Board |
|
K. Ragunathan |
Date: May 27, 2023 |
Chairman |
Place: Hyderabad |
DIN: 00523576 |
|