BOARD'S REPORT & MANAGEMENT DISCUSSION AND ANALYSIS To, The Members, Syncom Formulations (India) Limited The Directors take pleasure in presenting their 27th Annual Report together with the audited consolidated and standalone financial statements of the Company (Syncom) for the year ended March, 31 2015. The Management Discussion and Analysis has also been incorporated into this Report. 1. HIGHLIGHTS OF PERFORMANCE • Consolidated income for the year increased by 15.06% to Rs 17536.80 Lakhs as compared to Rs 15240.90 Lakhs in the previous year; • Consolidated net sales for the year was Rs 17339.11 Lakhs as compared to Rs.15128.85 Lakhs in the previous year, a growth of 14.61%; • Consolidated profit before tax for the year was Rs 1563.48 Lakhs as compared to Rs.1392.63 Lakhs in the previous year, a growth of 12.26% • Consolidated Profit after tax for the year was Rs 975.65 Lakhs as compared to Rs 931.65 Lakhs in 2014, a growth of 4.72% 2. DIVIDEND Syncom always strives to enhance stakeholders and customers satisfaction value. In pursuance of the same your directors are pleased to recommend payout of 24th dividend @ Rs. 0.02 (2.%) on the equity share of Re.1 each, (Previous year @ Rs 0.02 (2%) of the equity shares of Rs.1/- each) and proposes to pay Rs 156.13 Lacs as dividend (Previous year 156.13 Lacs) subject to approval by the members at the ensuing Annual General Meeting. 3. SHARE CAPITAL The paid up Capital of Syncom as on 31st March, 2015 was Rs. 78,06,52,180/-divided into 78,06,52,180 equity shares of Rs. 1/- each. During the year under review, Syncom has not issued shares with differential voting rights nor granted stock options nor sweat equity. As on 31st March, 2015, none of the Directors of Syncom hold convertible instruments. Promoters are not holding any security convertible into equity shares during the year 2014-15. 4.1 Transfer to reserves During the year under review your company proposes to transfer Rs 785.27 Lakhs to the general reserves. (Previous year Rs. 493.91 Lakhs) 4. FINANCE Cash and cash equivalent as at 31st March, 2015 was Rs 677.35 Lakhs. Syncom continues to focus on judicious management of its working capital. Receivables, inventories and other working capital parameters were kept under strict check through continuous monitoring. 5.1 Deposits Syncom has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014 and there were no remaining unclaimed deposits as on 31st March, 2015. 5.2 Particulars of Loans, Guarantees or Investments Details of Loans, Guarantees & Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to Financial Statements. (Please refer Note 10 & 11 to the Standalone Financial Statements) 6. ECONOMIC SCENARIO AND OUTLOOK Demographic trends in both developed & emerging markets create basis for pharmaceuticals sector growth. These include an aging population; increasing population growth & rising wealth; and an increase in lifestyle & at the same time increase in chronic diseases is also been observed. While these trends are heartening from pharmaceutical company's perspective, pharmaceutical companies around the globe continue to be battered by blockbuster drug patent expirations, ever increasing competition from generics makers, and government & health care industry efforts to control costs which is broadly demonstrated by price controls, pro-generic policies & patent challenges. Across the globe, Governments and health care prayers are looking at ways to reduce cost of rigidly rising healthcare. In recent times heavy cost of drugs has become a contentious issue & focus remains on reducing the burden on payers. Changing demographics around the world, growing awareness, affordability & patent expires every year worth thousands of Rupees are offering global generic companies tremendous opportunities for consistent growth. Your Company believes in "Quality and Reliability" and these values have been pillars of success in the international markets. Syncom has been always on the right side of the various regulatory audits and has followed processes recommended by various regulators thereby constantly upgrading by implementing and adopting WHO-GMP guidelines. 7. INDUSTRY STRUCTURE AND OPPORTUNITIES An analysis by IMS shows that the Indian Pharmaceuticals Market will likely grow between 10% and 11% year on year to more than 1 lakh crore by 2018. This growth will be driven by increasing affordability, increasing access particularly as private providers expand to lower tier towns and cities and favorable demographic factors-an overall increase in Indian population as well as increased prevalence of chronic, non-communicable diseases such as cardiovascular diseases, diabetics & cancer. Several large selling drugs going off patent over next few years & increasing use of pharmaceutical generics in developed markets to reduce healthcare cost will provide attractive growth opportunities to generics manufacturers and thus Indian Pharmaceutical industry is poised for an accelerated growth in the coming years. For the near future, the Company has identified specific opportunities to leverage this growth, capitalize on its strengths & position itself as a leading science driven pharmaceutical company. 8. RISKS & CONCERNS The Pharmaceutical regulatory environment across the world is becoming more stringent including the Indian Pharmaceutical Industry. The Industry witnessed many important changes & challenges which included the New Pharmaceutical Pricing Policy, additional oversight mechanisms for clinical trials, Fixed Dose Combinations (FDCs) and new rules being notified for new drugs as well as clinical trials. Various Regulatory Committees were formed by the Government to streamline the current processes which resulted in delays of clinical trials & new drug approvals. These processes form an inherent part of the drug development process. The mandatory generics drive by the State Governments will also pose challenges for pharma companies in the near future. However, poor public healthcare funding & infrastructure, low per capita consumption of medicines in developing and under developed countries including India, currency fluctuations, regulatory issues and inflation and results in all round increase in input costs, are few causes of concern. Syncom has a Risk Management Policy in force to review and mitigate risks relevant to environmental, operational & business risks to safeguard its interest. Syncom continued investments in manufacturing facilities and its strategy to remain a vertically integrated pharmaceutical business is a critical differentiator to create sustainable competitive advantage not only for products launched in international markets but also for contractual supplies to global generic companies, with a conscious endeavor for market and customer diversification. To de-risk significant concentration of domestic revenues from few brands, the Company's strategy is for focused promotion of specific brands to increase their share of revenue to overall revenue. 9. CSR INITIATIVES In view of the profits and turnover of Syncom during the previous three years, it is required to undertake social responsibility projects during the year 2014-15 under the provisions of the section 135 of the Companies Act, 2013 and the rules made there under. As part of its initiatives under "Corporate Social Responsibility (CSR), Syncom has undertaken projects in the areas of Education, Livelihood, Health, Water and Sanitation. These projects are largely in accordance with Schedule VII of the Companies Act, 2013. The Annual Report on CSR activities is annexed herewith as "Annexure A" and the CSR policy is also available at the Company's website at www.sfil.in . 10. OCCUPATIONAL HEALTH & SAFETY (OH&S) This initiative involved and positively engaged all levels of personnel on the plant and the Company's business. With regard to contractor safety, two key areas of focus identified were Facility Management for the contractors' employees and Equipment, Tools & Material Management. The Facility Management initiative was implemented to ensure adequate welfare facilities for contract labour such as washrooms with bathing facilities, rest rooms, availability of drinking water etc. The Equipment, Tools & Material Management program ensured that the tools used by contractors were safe. The process of screening of contractors was made more stringent to ensure that the contractors were aligned with the Company's objectives to ensure 'Zero Harm'. 11. HUMAN RESOURCES Many initiatives have been taken to support business through organizational efficiency, process change support and various employee engagement programmes which has helped the Organization achieve higher productivity levels. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement. Syncom's HR processes such as hiring and on-boarding, fair transparent online performance evaluation and talent management process, state-of-the-art workmen development process, and market aligned policies have been seen as benchmark practices in the Industry. During the year under review, the following Human Resources initiatives received greater focus: • Employer of Choice: Employees are encouraged to express their views and are empowered to work independently. Employees are given the opportunity to learn through various small projects which make them look at initiatives from different perspectives and thus provide them with a platform to become result oriented. This has helped greatly in overall development of the employee and has significantly arrested the attrition rate. • Leadership Development: As a part of leadership development, talented employees have been seconded to the senior leadership team to mentor them and prepare them for the next higher role. • Industrial Relations: Syncom Industrial Relations policy shares relevant business information with the Unions in order to enlighten them and make them sensitive towards business requirements. This has helped to build a healthy relationship and resolve issues through mutual dialogue. 11.1 Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No complaint was received during the year under review. 12. RISK MANAGEMENT POLICYAND INTERNAL ADEQUACY Syncom has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of Syncom. Syncom has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. The risk management policy of the Company is also available at the website at www.sfil.in . 13. VIGIL MECHANISM/WHISTLE BLOWER POLICY Syncom has a vigil mechanism named vigil mechanism/Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Risk Management Policy is explained in the Corporate Governance Report and also posted on the website at www.sfil.in . Vigil mechanism/Whistle Blower Policy is attached with the Annual Report as "Annexure B" 14. AUDITED FINANCIAL STATEMENTS OF THE COMPANY'S SUBSIDIARY As on 31st March, 2015, Syncom has Trade Services FZE foreign subsidiary which is 100% Wholly Owned Subsidiary Company. The Company does not have any associate or joint venture company at the beginning or any time during the year 2014-15. There has been no change in the number of subsidiaries or in the nature of business of the subsidiaries, during the year under review. In accordance with Section 129(3) of the Companies Act, 2013, Your Company has prepared a consolidated financial statement of Syncom which is forming part of the Annual Report. A statement containing salient features of the financial statements of the subsidiary company in the Form AOC-1 is also included in the Annual Report as the "Annexure C". In accordance with third proviso of Section 136(1) of the Companies Act, 2013, the Annual Report of your Company, containing therein its standalone and the consolidated financial statements has been placed on the website of the Company, www.sfil.in . Further, as per fourth proviso of the said section, audited annual accounts of the subsidiary company have also been placed on the website of the Company, www.sfil.in . Shareholders interested in obtaining a copy of the audited annual accounts of the subsidiary company may write to the Company Secretary at the Company's registered office. 15. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNELS At the Annual General Meeting (AGM) of Syncom held on September 22nd Sept., 2014, the Members had re-appointed all the existing independent directors viz Shri Krishna Das Neema, (DIN 02294270) Shri Vinod Kumar Kabra (DIN 01816189) and Shri Praveen Jindal (05327830) under the Companies Act, 2013 for a term of 5 years with effect from 1st April 2014, not liable to retire by rotation. All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Mrs. Rinki Ankit Bankda, (DIN 06946754) was appointed by the Board on 13th August, 2014 as an Additional Director under the category of Women Director as per provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, and her appointment was confirmed by the members at their annual general meeting held on 22.09.2014. In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, Mr. Vijay Shankarlal Bankda (DIN 00023027) director is liable to retire by rotation and he is eligible for re-appointment. Your Board of directors recommend to pass necessary resolution for his re-appointment. Syncom has appointed CS Praniti Porwal as the Company Secretary w.e.f. 1st January, 2015 and Shri Ankit Kedarmal Bankda as the Chief Financial Officer of the Company, w.e.f. 1st April, 2014 and designated them as the Key Managerial Personnels. Syncom has already having appointed Shri Vijay Shankarlal Bankda, as the Managing Director and Shri Kedarmal Shankarlal Bankda as the Whole-time director of the Company. CS Shikha Sethi, Company Secretary and Key Managerial Personnel had resigned from the office w.e.f. 31st Dec., 2014 due to her personal reasons. 15.1 Number of meetings of the Board The Board meets at regular intervals to discuss and decide on Company/business policy and strategy apart from other Board business. However, in case of a special and urgent business need, the Board's approval is taken by passing resolutions through circulation, as permitted by law, which are confirmed in the subsequent Board meeting. The notice of Board meeting is given well in advance to all the Directors. Usually, meetings of the Board are held at the Corporate Office at Indore (M.P.). The Agenda of the Board/ Committee meetings is circulated at least a week prior to the date of the meeting. The Agenda for the Board and Committee meetings includes detailed notes on the items to be discussed at the meeting to enable the Directors to take an informed decision. The Board met 4 (four) times in financial year 2014-15 viz., on 30th May, 2014, 13th August, 2014, 13th Nov., 2014 and 12th Feb., 2015. The maximum interval between any two meetings did not exceed 120 days. 15.2 Board independence The definition of 'Independence' of Directors is derived from Clause 49 of the Listing Agreement with Stock Exchanges and Section 149(6) of the Companies Act, 2013. Based on the confirmation/disclosures received from the Independent Directors and on evaluation of the relationships disclosed, Shri Krishna Das Neema, Shri Praveen Jindal and Shri Vinod Kumar Kabra are the Non-Executive and Independent Directors in terms of Clause 49 of the Listing Agreement and Section 149(6) of the Companies Act, 2013; 15.3 Policy on Directors' appointment and remuneration The Policy of Syncom on Directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided under section 178(3), is appended as " "Annexure D" to this Report and has also placed on the website at www.sfil.in <http://www.sfil.in>. 15.4 Annual evaluation by the Board The evaluation framework for assessing the performance of Directors comprises of the following key areas: I. Attendance of Board Meetings and Board Committee Meetings ii. Quality of contribution to Board deliberations iii. Strategic perspectives or inputs regarding future growth of Company and its performance iv. Providing perspectives and feedback going beyond information provided by the management v. Commitment to shareholder and other stakeholder interests The evaluation involves Self-Evaluation by the Board Member and subsequently assessment by the Board of Directors. A member of the Board will not participate in the discussion of his/her evaluation. 16. DIRECTORS' RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013: a. that in the preparation of the annual financial statements for the year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b. that such accounting policies as mentioned in Note 27.22 of the Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March, 31st 2015 and of the profit of the Company for the year ended on that date; c. that 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 the Company and for preventing and detecting fraud and other irregularities; d. that the annual financial statements have been prepared on a going concern basis; e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. f. that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. 17. COMMITTEES OF THE BOARD During the year, the Board has the six Committees, as required under the Companies Act, 2013and Clause 49 of the Listing Agreement as follows: (a) Audit Committee (b) CSR Committee (c) Nomination and Remuneration Committee (d) Stakeholders' Relationship Committee (e) Risk management Committee (f) Internal Committee for (Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 redressal of complaint at the workplace Details of all the Committees along with their charters, composition and meetings held during the year, are provided in the "Report on Corporate Governance", a part of this Annual Report and placed on the website at www.sfil.in . 18. RELATED PARTY TRANSACTIONS 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 materially significant related party transactions made by Syncom with Promoters, Directors, Key Managerial Personnel, or other designated persons which may have a potential conflict with the interest of Syncom. Therefore there is no requirement to furnish any details in the Form AOC-2. All Related Party Transactions are placed before the Audit Committee and also the Board for approval on a quarterly basis. The statement is supported by a Certificate from the MD and the CFO. The Company has developed a Related Party Transactions Policy, Standard Operating Procedures for purpose of identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website at www.sfil.in . 19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS Except that the SEBI has issued an Ex-Party Ad- Interim Order No. WTM/RKA/ISD/2014 dated 19th December, 2014 in the matter of First Financial Services Limited, and has restrain the company to access the capital market till the further order. The Company has also filed an application before the SEBI for deletion of the name of the Company which is pending before the SEBI for necessary order. Except that there are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations. 20. AUDITORS 20.1 Statutory Auditors Your Company's Auditors, M/s S.P.Moondra & Co., Chartered Accountants, who were appointed for a term of three years at the Annual General Meeting of the Company held on 22nd Sept., 2014 are eligible for ratification of their appointment. They have confirmed their eligibility under Section 141(3)(g) of the Companies Act, 2013 and the Rules framed thereunder for ratification for appointment as Auditors of the Company. Your Board is pleased to inform that there is no such observation made by the Auditors in their report which needs any explanation by the Board 20.2 Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its drug formulation activity is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s M.Goyal & Co. Cost Accountants to audit the cost accounts of the Company for the financial year 2014-15 on a remuneration of Rs.25,000/-. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s M.Goyal & Co, Cost Auditors is included at Item No. 5 of the Notice convening the Annual General Meeting. Your Company has filed the Cost Audit Report for the year 2013-14 to the Central Government on 26.09.2014, which was self explanatory and needs no comments. 20.3 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, your Board of directors has appointed M/s D.K.Jain & Co., Company Secretaries to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as "Annexure E". The Secretarial Audit Report is self explanatory and needs no comments as such. 21. ENHANCING SHAREHOLDERS VALUE Your Company believes that its Members are among its most important stakeholders. Accordingly, your Company's operations are committed to the pursuit of achieving high levels of operating performance and cost competitiveness, consolidating and building for growth, enhancing the productive asset and resource base and nurturing overall corporate reputation. Syncom is also committed to creating value for its other stakeholders by ensuring that its corporate actions positively impact the socio-economic and environmental dimensions and contribute to sustainable growth and development. 22. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from the Company's Auditors confirming compliance forms an integral part of this Report ("Annexure F"). 22.1. MD & CFO certification Certificate obtained from Shri Vijay Shankarlal Bankda, Managing Director and Mr. Ankit Kedarmal Bankda, Chief Financial Officer, pursuant to provisions of Clause 49(V) of the Listing Agreement, for the year under review was placed before the Board at its meeting held on 13th August, 2015. A copy of the certificate on the financial statements for the financial year ended March, 31, 2015 is annexed along with this Report as "Annexure G". 23. CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report. 24. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as "Annexure H". 25. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY There have been no material changes and commitments, if any, affecting the financial position of the Company since the close of the financial year ie. since 31st March, 2015. Further it is hereby confirmed that there has been no change in the nature of business of the Company. 26. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return for the year 2014-15 in Form MGT-9 is annexed herewith as "Annexure I". 27. PARTICULARS OF REMUNERATION OF EMPLOYEES Disclosures pertaining to remuneration & other details as required under section 197(12) of the Act read with Rule 8(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as "Annexure J". In terms of provisions of section 197(12) of the Act read with Rules 5(2) & 5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, none of the employees received remuneration in excess of Rs. 5 Lacs per month Rs. 60 Lacs or more per annum. Therefore is no information to disclose in terms of the provisions of Sec 136(1) of the Companies Act, 2013 28. ACKNOWLEDGEMENTS Your Directors thank the various Central and State Government Departments, Organizations and Agencies for the continued help and co-operation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year. The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company. 29. CAUTIONARY STATEMENT Statements in the Board's Report and the Management Discussion & Analysis describing the Company's objectives, expectations or forecasts may be forward-looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations. By order of the Board of Director KEDARMAL BANKDA Chairman & Whole Time Director DIN : 00023050 Place: Indore Date : 13th August, 2015 |