DIRECTOR'S REPORT

Sun Pharmaceuticals Industries LtdIndustry : Pharmaceuticals - Indian - Bulk Drugs & Formln
BSE Code:524715
ISIN Demat:INE044A01036
Book Value(Rs):86.9897469
NSE Symbol:SUNPHARMA
Div & Yield %:0.68
Market Cap (Rs Cr.):123156.43
P/E(TTM):0
EPS(TTM):0
Face Value(Rs):1
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Your Directors take pleasure in presenting the Twenty-Fourth Annual Report and Audited Financial Statements for the year ended 31st March, 2016.

FINANCIAL RESULTS

(Rs. in million except dividend per share and book value)

Standalone Consolidated
Particulars Year ended 31st March, 2016 Year ended 31st March, 2015 Year ended 31st March, 2016 Year ended 31st March, 2015
Total Revenue 80,462.8 82,400.2 288,866.8 279,396.7
(Loss) / Profit after tax (10,733.6) (14,741.3) 47,159.1 45,393.8
Dividend on Equity Shares 2,406.8 7,219.5 2,406.8 7,219.5
Corporate Dividend tax 74.7 1,469.7 490.0 1,469.7
Transfer to various Reserves - - 1,230.8 1.9
Amount of dividend per equity share of Rs. 1/- each 1.0 3.0 1.0 3.0
Book value per equity share Rs. 1/- each* 89 95 130 107

* Including Share Suspense Account for 2014-15.

DIVIDEND

Your Directors are pleased to recommend an equity dividend of Rs. 1/- (Rupee One only) per equity share of face value of Rs. 1/- (Rupee One only) each (previous year Rs. 3/- (Rupees Three only) per equity share) for the year ended 31st March, 2016, subject to the approval of the shareholders at the ensuing Annual General Meeting.

CHANGES IN CAPITAL STRUCTURE

Pursuant to allotment of shares consequent upon merger of erstwhile Ranbaxy Laboratories Limited ("erstwhile Ranbaxy") into the Company, the paid-up share capital of the Company has increased from Rs. 2,07,11,63,910/- to Rs. 2,40,61,20,674/- and consequent to allotment of shares under the Employee Stock Option Schemes of the Company, paid up share capital of the Company increased from Rs. 2,40,61,20,674/- to Rs. 2,40,67,28,499/- during the year ended 31st March, 2016.

Post the financial year, the Company has also allotted 25,460 equity shares under Sun Employee Stock Option Scheme - 2015 on 2nd May, 2016 and paid up share capital of the Company increased from Rs. 2,40,67,28,499/- to Rs. 2,40,67,53,959/-.

REDEMPTION OF NONCONVERTIBLE DEBENTURES

The Company has made payment of redemption amount and interest pertaining to 5,000 Secured Rated Redeemable Non-Convertible Debentures (NCDs) of the face value of Rs. 10,00,000/- each aggregating to Rs. 500 Crores (listed on National Stock Exchange of India Ltd), on 23rd November, 2015 to the NCD holders of the Company whose names were registered on the Register of beneficial owners maintained by depositories in respect of the NCDs held in electronic form as on Tuesday, 10th November, 2015.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as provided under sub-section (3) of Section 92 of the Companies Act, 2013 (‘the Act’) in prescribed form MGT-9 is enclosed as "Annexure A" to this Report.

SUBSIDIARY/ JOINT VENTURE/ ASSOCIATE COMPANY

The statement containing the salient features of the financial statements of the Company’s subsidiaries/ joint ventures/ associate companies of the Company is given in Form AOC – 1, which forms a part of this Annual Report. Details pertaining to companies that became subsidiaries/ joint ventures /associates and those that ceased to be the subsidiaries/ joint ventures /associates of the Company during the year are provided in Note 30 of the notes to the Consolidated Financial Statements.

DIRECTORS & KEY MANAGERIAL PERSONNEL

Mr. Dilip Shanghvi, Managing Director of the Company retires by rotation and being eligible offers himself for reappointment at the ensuing Annual General Meeting.

Mr. Keki Mistry, Mr. S. Mohanchand Dadha, Mr. Ashwin Dani, Mr. Hasmukh Shah and Ms. Rekha Sethi, Independent Directors of the Company were appointed for term of 2 (Two) years and their appointment was approved by the shareholders at the 22nd Annual General Meeting of the Company. Their tenure expires at the conclusion of the ensuing 24th Annual General Meeting of the Company. The Nomination and Remuneration Committee at their meeting held on 30th May, 2016 has recommended a second term for all the Independent Directors. The Board of Directors have also recommended appointment for a second term of 2 (Two) years for Mr. Keki Mistry, Mr. S. Mohanchand Dadha, Mr. Ashwin Dani and Mr. Hasmukh Shah upto the conclusion of 26th Annual General Meeting of the Company, and a second term of 5 (Five) years for Ms. Rekha Sethi upto the conclusion of 29th Annual General Meeting, subject to the approval of members at the ensuing Annual General Meeting.

DECLARATION BY INDEPENDENT DIRECTORS

The Company has received declaration from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Act and as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations, 2015").

REMUNERATION POLICY FOR DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

For the purpose of selection of any Director, the Nomination & Remuneration Committee identifies persons of integrity who possess relevant expertise, experience and leadership qualities required for the position. The Committee also ensures that the incumbent fulfills such other criteria with regard to age and other qualifications as laid down under the Act, Listing Regulations, 2015 or other applicable laws. The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection, appointment and remuneration of Directors & Senior Management. The summary of Remuneration Policy of the Company is disclosed in the Corporate Governance Report, which forms a part of this Report.

FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS

In compliance with the requirements of the Clause 49 of the erstwhile Listing Agreement and as per Regulation 25(7) of the Listing Regulations, 2015 the Company has put in place a Familiarization Programme for the Independent Directors to familiarize them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model etc. The details of the Familiarization Programme is available on the website of the Company www.sunpharma.com and may be accessed through the web link: http://www.sunpharma.com/policies.

NUMBER OF MEETINGS OF THE BOARD

The Board of Directors of the Company met 5 (Five) times during the previous financial year on 29th May, 2015, 11th August, 2015, 31st October, 2015, 7th November, 2015 and 12th February, 2016. The particulars of attendance of the Directors at the said meetings are detailed in the Corporate Governance Report of the Company, which forms a part of this Report. The intervening gap between the Meetings was within the period prescribed under the Act, erstwhile Listing Agreement and Listing Regulations, 2015.

EVALUATION OF PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS

The Board of Directors have laid down the manner for carrying out an annual evaluation of its own performance, its various Committees and individual directors pursuant to the provisions of the Act and relevant Rules and the Corporate Governance requirements as prescribed under Clause 49 of the erstwhile Listing Agreement which are in compliance with Regulation 17 of Listing Regulations, 2015. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria such as Board Composition, process, dynamics, quality of deliberations, strategic discussions, effective reviews, committee participation, governance reviews etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of criteria such as Committee composition, process, dynamics, deliberation, strategic discussions, effective reviews etc. The Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria such as Transparency, Analytical Capabilities, Performance, Leadership, Ethics and ability to take balanced decisions regarding stakeholders etc.

In a separate meeting of Independent Directors, performance of Non Independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of the Executive Directors and Non-executive Directors. The same was discussed in the Board Meeting that followed the meeting of Independent Directors at which the performance of the Board, its Committee and individual Directors was also discussed.

HUMAN RESOURCES

Your Company considers its employees as most valuable resource and ensures strategic alignment of Human Resource practices to business priorities and objectives. Globally the Company (including subsidiary and associate companies) has a dedicated human capital of over 30,000 employees at various locations across our Corporate Office, R & D Centers & more than 45 Manufacturing locations, dedicated Sales Professionals across various geographies. Our constant endeavor is to invest in people and people processes to improve human capital for the organisation and service delivery to our customers. Attracting, developing and retaining the right talent will continue to be a key strategic imperative and the organisation continues its undivided attention towards that. Your Company strives to provide a conducive and competitive work environment to help the employees excel and create new benchmarks of productivity, efficiency and customer delight. Your Directors would also like to take this opportunity to express their appreciation for the hard work and commitment of the employees of the Company and look forward to their continued contribution. Information as per Section 197 (12) of the Act, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in "Annexure - B" to this report. Further, the information pertaining to 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, pertaining to the names and other particulars of employees is available for inspection at the Registered office of the Company and pursuant to the proviso to Section 136 (1) of the Act, the report and the accounts are being sent to the members excluding this. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary/Compliance Officer at Corporate office or Registered office address of the Company.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE PREVENTION, PROHIBITION AND REDRESSAL ACT, 2013

Your Company strongly believes in providing a safe and harassment free workplace for each and every individual working for the Company through various interventions and practices. It is the continuous endeavor of the Management of the Company to create and provide an environment to all its employees that is free from discrimination and harassment including sexual harassment. The Company has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder for prevention and redressal of complaints of sexual harassment at workplace. During the year ended 31st March, 2016, no complaints pertaining to sexual harassment was received by the Company.

AUDITORS

Statutory Auditors

The Company’s Auditors, Messrs. Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm’s Regn No. 117366W/W-100018), were appointed as the Statutory Auditors of the Company for a period of three years at the 22nd Annual General Meeting of the Company, upto the conclusion of the 25th Annual General Meeting of the Company, subject to ratification by members at every Annual General Meeting of the Company. They have confirmed their eligibility under Section 141 of the Act and the Rules framed thereunder for reappointment as Auditors of the Company. As required under Regulation 33 of the Listing Regulations, 2015 the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

The Auditors' Report for the financial year ended 31st March, 2016 has been issued with an unmodified opinion.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Messrs C. J. Goswami & Associates, Practicing Company Secretaries, Mumbai to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as "Annexure C".

Secretarial Audit Report

There have been observations in the Secretarial Audit Report as follows:

a) There has been a delay of 3 working days in filing of disclosure under Regulation 30 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 for disclosing the aggregate shareholding and voting rights in Zenotech Laboratories Limited (Target Company) as of 31st March, 2015.

b) During the financial year 2015-16, the Company has published financial results in the English language newspaper but not published in the regional language newspaper, where the registered office of the Company is situated as per the requirement of Clause 41 of the Listing Agreement / Regulation 47 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Board’s response to the observations is as follows:

a) There was an inadvertent delay.

b) The results were earlier published in daily newspaper which had a English and Gujarati Edition. However, on account of change in newspaper for publication from one daily to another daily (which does not have a Gujarati Edition), the publication of results in the regional language newspaper was missed due to inadvertence.

Cost Auditors

The Company has appointed Messrs. Kailash Sankhlecha & Associates, Cost Accountants, Vadodara as Cost Auditors of our Company for conducting Cost Audit in respect of Bulk Drugs & Formulations of your Company for the year 2016-17.

LOANS, GUARANTEES & INVESTMENTS

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

RELATED PARTY TRANSACTIONS

The policy on Related Party Transactions as approved by the Board is available on the website of the Company and can be accessed through the web link http://www.sunpharma.com/policies. All contracts/ arrangements entered by the Company during the previous financial year with the related parties were in the ordinary course of business and on arm’s length basis.

The Company has entered into material Related Party Transactions, i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements, during the year with Sun Pharma Laboratories Limited, a wholly owned subsidiary. The transactions entered into between a holding company and its wholly owned subsidiary of the Company do not require approval of the shareholders. The disclosure of Related Party Transactions as required under Section 134(3)(h) of the Act, in Form AOC 2 is not applicable.

AUDIT COMMITTEE COMPOSITION

The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms a part of this Report.

RISK MANAGEMENT

The Company has developed & implemented an integrated Enterprise Risk Management Framework through which it identifies monitors, mitigates & reports key risks that impacts its ability to meet the strategic objectives. The Board of Directors have constituted a Risk Management Committee which is entrusted with the responsibility of overseeing various strategic, operational and financial risks that the organization faces, along with the adequacy of mitigation plans to address such risks. There is an overarching Risk Management Policy in place that was reviewed and approved by the Board. The details of Risk Management Committee are mentioned in the Corporate Governance Report, which forms a part of this Report.

INTERNAL FINANCIAL CONTROLS

The Company has in place well defined and adequate internal financial control framework. During the year, such controls were tested and no material weaknesses in their design or operation were observed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with the requirements of Section 135 of the Act, read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors have constituted a Corporate Social Responsibility (CSR) Committee. The details of membership of the Committee & the meetings held are detailed in the Corporate Governance Report, forming part of this Report. The contents of the CSR Policy of the Company as approved by the Board on the recommendation of the CSR Committee is available on the website of the Company and can be accessed through the web link: http://www.sunpharma.com/policies. The average net profits of the Company for last three financial years is negative, therefore the Company was not required to spend on CSR activities during the previous year. However, the Company has voluntarily spent on CSR activities and the Annual Report on CSR activities containing details of voluntary expenditure incurred by the Company including that of erstwhile Ranbaxy and brief details on the CSR activities are given in "Annexure D".

PUBLIC DEPOSITS

The Company has not accepted any deposit from the Public during the year under review, under the provisions of the Act, and the rules framed thereunder.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis on the operations of the Company as prescribed under Part B of Schedule V read with regulation 34 (3) of the Listing Regulations, 2015 is provided in a separate section and forms a part of this Report.

CORPORATE GOVERNANCE REPORT

Report on Corporate Governance and Certificate of the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in Part C of Schedule V of the Listing Regulations, 2015 with the Stock Exchanges, are enclosed as a separate section and forms a part of this Report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure E".

EMPLOYEES’ STOCK OPTION SCHEMES

The Company has two Employees’ Stock Option Schemes, one through Trust Route and the other by Direct Route, both inherited from erstwhile Ranbaxy. The scheme through Direct Route has been named as Sun Pharma Employee Stock Option Scheme – 2015, and the one through Trust Route as Sun Pharma Employee Stock Option Plan – 2015. Both the schemes were adopted by the Company with certain amendments consequent upon merger of erstwhile Ranbaxy into the Company.

Disclosures with respect to the Employees’ Stock Option Schemes are enclosed in "Annexure F".

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS

There are no significant and material orders passed by the regulators or courts or tribunals which impact the going concern status and Company’s operations in future.

WHISTLE BLOWER POLICY/ VIGIL MECHANISM

To create enduring value for all stakeholders and ensure the highest level of honesty, integrity and ethical behaviour in all its operations, the Company has a ‘Whistle Blower Policy’ for Sun Pharmaceutical Industries Limited (SPIL) and its Indian subsidiaries and a ‘Global Whistle Blower Policy’ for its Global subsidiaries, in addition to the existing Global Code of Conduct that governs the actions of its employees. In the Corporate Governance Report forming part of this report further details are provided on the vigil mechanism of the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirements under Section 134(5) read with Section 134(3)(c) of the Act with respect to Directors’ Responsibility Statement, it is hereby confirmed that:

a) in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of loss of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis; and

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

CONSOLIDATED ACCOUNTS

In accordance with the requirements of the Act and Listing Regulations 2015, the Consolidated Accounts of the Company and its subsidiaries, form a part of this Annual Report.

CREDIT RATING

ICRA Ltd. has reaffirmed the highest credit rating of ‘ICRA A1+’/‘ICRA AAA (Stable)’ for the commercial paper programs and bank facilities of the Company. Further, CRISIL Ltd. has also reaffirmed the highest credit rating of ‘CRISIL A1+’/‘CRISIL AAA (Stable)’ for the bank facilities of the Company.

During the year, at the request of the Company, Credit Analysis & Research Ltd., (CARE) has withdrawn the ratings assigned to the Non-Convertible Debenture (NCD) issue and bank facilities of the Company. The Company had voluntarily requested for such withdrawal since it has fully repaid the amounts under the said NCD issue and the bank facilities continue to be rated ‘A1+’/‘AAA (Stable)’ by ICRA Ltd. and CRISIL Ltd.

BUSINESS RESPONSIBILITY REPORTING

The Business Responsibility Report of the Company for the year ended 31st March, 2016, in line with Green initiative, is made available on the website of the Company (http://www.sunpharma.com/pdflist/all-documents) and forms part of the Annual Report, and is kept at the Registered office / Corporate office of the Company for inspection. A copy of the aforesaid report shall be made available to such of those shareholders who are desirous and interested, upon receipt of a written request from them.

ACKNOWLEDGEMENTS

Your Directors wish to thank all stakeholders, employees and business partners, Company’s bankers, medical profession and business associates for their continued support and valuable co-operation.

The Directors also wish to express their gratitude to investors for the faith that they continue to repose in the Company.

For and on behalf of the Board of Directors
ISRAEL MAKOV
Chairman
30th May, 2016
Mumbai

   

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