DIRECTORS' REPORT TO THE MEMBERS OF AARTI DRUGS LIMITED Your Directors have pleasure in presenting the Thirty First Annual Report together with the Audited Financial Statements along with the Report of the Auditors for the year ended 31st March, 2016. SHARE CAPITAL The paid-up Equity Share Capital as on 31st March, 2016 was Rs. 24,21,71,000/-. The Company has neither issued shares with differential rights as to dividend, voting or otherwise nor issued sweat equity shares. There is no scheme for employee stock option or provision of money for shares of the Company to employees or Directors of the Company. DIVIDEND During the year under review, your Company had declared and paid three interim dividends aggregating to Rs. 6.75/- per equity share of Rs. 10/- each (Previous Year: Rs. 8/- per share ex-bonus including two interim and final dividends). Keeping in view the three interim dividends already declared by the Company, the Board have not recommended any further dividend. Total cash outflow on account of dividend payments including dividend distribution tax will be Rs. 1967.43 Lakhs for the financial year 2015-16 (Previous Year: Rs. 2327 Lakhs). OPERATIONS REVIEW During the year under review, Gross Sales of the Company is Rs. 1166.10 Crores (Previous Rs. 1169.94 Crores) registering a decline of 0.33%. The Company has achieved Export Sales of Rs. 389.19 Crores as against Rs. 411.71 Crores for the last year, registering a decline of 5.47%. EBITDA has been Rs. 171.70 Crores (Previous Year: Rs. 168.96 Crores), registering a growth of 1.62%. PAT has been Rs. 66.29 Crores (Previous Year Rs. 77.60 Crores), registering a decline of 14.57%. INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY Your Company's internal control systems commensurate with the nature and size of its business operations. Your Company has maintained a proper and adequate system of internal controls. This ensures that all Assets are safeguarded and protected against loss from unauthorized use or disposition and that the transactions are authorised, recorded and reported diligently. The Audit Committee and M/s. Raman S. Shah & Associates, Chartered Accountants, Independent Internal Auditors, regularly review internal financial controls and operating systems and procedures for efficiency and effectiveness. The Internal Auditor's Reports are regularly reviewed by the Audit Committee of the Board. DIRECTORS' RESPONSIBILITY STATEMENT As required u/s. 134(3)(c) of the Companies Act, 2013, your Directors hereby state that - a) in the preparation of the Annual Accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed. There are no material departures from the applicable accounting standards; b) t he 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 on 31st March, 2016 and of the profit of the Company for that period; c) the Directors have taken proper and sufficient care 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) the Directors had prepared Annual Accounts on a going concern basis; e) t he Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively and f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and were operating effectively. BOARD OF DIRECTORS Composition Aarti Drugs Limited (ADL) Board presently consists of 12 Directors out of which 7 (Seven) are Non-Executive. Out of 7 (Seven) Non-Executive Directors, 6 (Six) Directors are Independent Directors. Retirement by Rotation In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Shri Rashesh C. Gogri (DIN: 00066291), Managing Director of the Company retires by rotation and being eligible offers his candidature for re-appointment as Director. Independent Directors The Independent Directors hold office for a fixed term upto 31st March, 2019 and are not liable to retire by rotation. In accordance with Section 149(7) of the Companies Act, 2013, each Independent Director has given a written declaration to the Company confirming that he/she meets the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. Number of Meetings of the Board The Board of Directors met 5 (Five) times in the year 2015-16. The details of Board and Committee Meetings and the attendance of the Directors at such meetings are provided in the Corporate Governance Report. The details regarding the Board Meetings and the attendance of the Directors at the Board Meeting/Committee Meeting during the year are set out in detail in the Corporate Governance Report. BOARD EVALUATION During the year, the Board evaluated its performance and as well as that of its Committees and Individual Directors, including the Chairman of the Board. Separate exercise was carried out to evaluate the performance of Non-Independent Directors including the Board Chairman who were evaluated on parameters such as Key achievements, Short term and long term targets, challenges faced, Implementation of Strategic decisions, organizational success, participation and attendance in Board and Committee Meetings etc. The evaluation of the Independent Directors was carried out by the entire Board and that of the Chairman and Non-Independent Directors was carried out by the Independent Directors. Independent Directors were evaluated on the parameters such as attendance and participations in the meetings and timely inputs on the minutes of the meetings, adherence to ethical standards & code of conduct of the Company, disclosure of non-independence, as and when exists and disclosure of interest, interpersonal relations with other Directors and Management, understanding of the Company and the external environment in which it operates and contribution to strategic direction, safeguarding interest of whistle-blowers under vigil mechanism and safeguard of confidential information. The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS The Chairman and Managing Director have one to one discussion with all Directors to familiarize them with the Company's operations. Further the Company has put in place a system to familiarize the Independent Directors about the Company, its products, business and on-going events relating to the Company. The details of such familiarization programmes for Independent Directors are posted on the website of the Company viz. www.aartidrugs.com . KEY MANAGERIAL PERSONNEL During the year under review, Shri Sunny D. Pagare, Company Secretary & Compliance Officer of the Company resigned w.e.f. 1st December, 2015 and Shri Vibhav S. Ranade has been appointed as Company Secretary & Compliance Officer of the Company w.e.f. 22nd February, 2016. DETAILS RELATING TO DEPOSITS COVERED UNDER CHAPTER V OF COMPANIES ACT, 2013 Your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 and no amount on account of principal or interest on public deposits was outstanding as on the date of the balance sheet. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013, are given in the notes to the Financial Statements. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES All related party transactions made during the financial year 2015-16 were on arm's length basis and were in the ordinary course of business. All transactions with related parties are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement specifying the nature, value and terms & conditions of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The statement is supported by a certification from the Jt. Managing Director and the Chief Financial Officer (CFO). The details of related party transactions are provided in the accompanying financial statements. The Policy on Related Party Transactions as approved by the Board is available on the Company's website and can be accessed through www.aartidrugs.com . All transactions entered into with related parties during the year were on an arm's length basis and were in the ordinary course of business. Accordingly, there are no transactions that are required to be reported in Form AOC-2. EXTRACT OF ANNUAL RETURN As required by Section 92(3) of the Companies Act, 2013 and rules framed thereunder, the extract of the Annual Return in Form MGT-9 is enclosed as "Annexure - A". SUBSIDIARY The Company has one subsidiary, namely, Pinnacle Life Science Private Limited. The Company has attached along with its financial statement, a separate statement containing the salient features of the financial statement of the said subsidiary in "Form AOC-1" which is annexed as "Annexure - B". CONSOLIDATED FINANCIAL STATEMENTS As stipulated under the provisions of the SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015, the Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards. The audited Consolidated Financial Statements together with Auditors' Report form part of the Annual Report. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION There are no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statement relate and the date of the report. BUSINESS RISK MANAGEMENT During the year under review, the Company has identified and evaluated elements of business risk. Business risk, inter alia, further includes fluctuations in foreign exchange, Raw Material Procurement risk, Environmental & Safety Risk, Working Capital Risk, Market Risk and Business Operations Risk. The risk management framework defines the risk management approach of the Company and includes periodic review of such risk and also documentation, mitigating controls and reporting mechanism of such risks. The Board of Directors and senior management team currently assess the operations and operating environment to identify potential risks and take necessary mitigation actions. DISCLOSURES RELATED TO COMMITTEES & POLICIES 1. Audit Committee The Audit Committee of Directors is constituted as per the provisions of Section 177 of the Companies Act, 2013. The Composition of the Audit Committee is in conformity with the provisions of the said section and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015. The composition & terms of reference of Audit Committee of the Board of Directors of the Company is disclosed in the report of Corporate Governance, which forms part of this report. During the year under review, the Board of Directors of the Company had accepted all the recommendations of the Audit Committee. 2. Nomination & Remuneration Committee The Nomination & Remuneration Committee of Directors is constituted in accordance with the requirements of Section 178 of the Companies Act, 2013. The Company strives to maintain an appropriate combination of executive, non-executive and Independent Directors. In terms of provisions of Section 178 of the Companies Act, 2013, the Nomination and Remuneration Committee considers and recommends the Board on appointment and remuneration of Directors and Key Managerial Personnel and the Company's Nomination and Remuneration Policy is enclosed as "Annexure - C". 3. Stakeholders Relationship Committee Pursuant to Section 178 of the Companies Act, 2013, the Board of Directors has constituted the Stakeholders Relationship Committee, details of which are given in the Corporate Governance Report. The Company Secretary acts as the secretary to the Committee. 4. Corporate Social Responsibility Committee As per the provisions of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board of Directors has constituted a Corporate Social Responsibility (CSR) Committee and the Board of Directors of the Company has approved CSR Policy based on the recommendations of the CSR Committee. The CSR Policy is available on the Company's website and can be accessed through www.aartidrugs.com . Your Company actively contributes to the following segments- i. Education & Skill Development ii. Environment iii. Rehabilitation in Disaster Affected areas i. Education & Skill Development Your Company through own trusts Aarti Foundation & Dhanvallabh Charitable Trust and various other NGO's has been doing work in this segments. In addition to this year Company provides direct help to schools located nearby all its manufacturing facilities by way of constructing schools, grant/aid for fees etc. ii. Environment Your Company has entered into an agreement with The Governor, Government of Maharashtra through Deputy Conservator of Forest, Dahanu Forest Division, Dahanu through local NGO M/s. Sudha Pratishthan, Masvan, Palghar to participate and assist Government in implementing Afforestation Programme in the degraded forest land of Dahanu Forest Division spread over 100 Hectares Government Land over a period of 7 years. iii. Rehabilitation in Disaster Affected areas Aarti Drugs which holds an expertise of working in collaboration with the government and local NGOs has carried out rehabilitation in drought affected areas of Aurangabad through Shree Siddhivinayak Sevabhavi. I n addition to above, your Company participates into a spectrum of CSR activities evolving around the general up-liftment of the economically backward class of people. Your Company also makes active contribution to various local NGOs to assist in the relief measures in the affected areas. During the year, the Company has spent Rs. 175.38 lakhs on CSR activities. The Annual Report on CSR activities is annexed as "Annexure - D" and forms an integral part of the Report 5. Vigil Mechanism/Whistle Blower Policy The Company has a vigil mechanism/whistle blower policy to deal with instance of fraud and mismanagement. The details of the said policy is explained in the Corporate Governance Report and also posted on the website of the Company, viz. www.aartidrugs.com >. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS 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. CORPORATE GOVERNANCE A separate section on Corporate Governance practices followed by the Company, together with a certificate from the Company's Auditors confirming compliance, forms a part of this Annual Report, as per SEBI (Listing Obligations & Disclosure Requirements), Regulations, 2015. MANAGEMENT DISCUSSION AND ANALYSIS Management Discussion and Analysis Report as required under the provisions of SEBI Regulations, 2015 is annexed hereto forming 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 in Section 134(3)(m) of the Companies Act, 2013 and rules framed thereunder is enclosed herewith as "Annexure - E". STATUTORY AUDITORS At the Annual General Meeting held on 11th July, 2014, M/s. Gokhale & Sathe, Chartered Accountants (Firm Regn. No. 103264W) were appointed as Statutory Auditors of the Company to hold office till the conclusion of the Thirty Second Annual General Meeting (AGM). In terms of the provisions of the Companies Act, 2013, it is necessary to get the appointment ratified by the shareholders in every Annual General Meeting until the expiry of the period of original appointment. In this regard, the Company has received a certificate from the Auditors to the effect that if they are reappointed, it would be in accordance with the provisions of the Section 141 of the Companies Act, 2013. In view of the above, the Board of Directors recommends your ratification of the appointment of M/s. Gokhale & Sathe, Chartered Accountants (Firm Regn. No. 103264W) as the Statutory Auditors as mentioned in the Notice convening AGM. There are no qualifications, reservation or adverse remarks or disclaimers made by the Statutory Auditors in their Audit Report. COST AUDIT The Cost Auditor Mr. Girikrishna S. Maniar was re-appointed by the Company under Section 148 of the Companies Act, 2013 and he attended the Audit Committee Meeting, where Cost Audit Reports was discussed. The due date for filing the Cost Audit Reports in XBRL mode for the financial year ended 31st March, 2015 was 30th September, 2015 and the Cost Audit Reports were filed by the Cost Auditor on 15th January, 2016. The due date for filing the Cost Audit Reports for the financial year ended 31st March, 2016 is 30th September, 2016. The Company is seeking the ratification of the remuneration to be paid to Mr. Girikrishna S. Maniar, Cost Auditor of the Company in respect of Cost Audit for the financial year ending 31st March, 2017 as mentioned in the Notice convening AGM. SECRETARIAL AUDITOR The Secretarial Audit Report for the financial year ended 31st March, 2016 issued by CS Sunil M. Dedhia of Sunil M. Dedhia & Co., Practicing Company Secretaries, Secretarial Auditor is annexed as "Annexure - F". The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. PARTICULARS OF EMPLOYEES Disclosure pertaining to the remuneration and other details as required under 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 enclosed as "Annexure - G". However, as per the provisions of the Section 136(1) of the Companies Act, 2013, this Report is sent to the shareholders excluding the said information. Any shareholder interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company. HUMAN RESOURCES ENVIRONMENT & SAFETY Your Company recognizes its human resources as one of its prime & critical resources. The relations between the Management and the Staff Members remained very cordial throughout the year under review. As on 31st March, 2016 the Company had 1072 permanent employees at its manufacturing plants and administrative office. The Company has constituted an Internal Complaint Committee pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 for prevention, prohibition or redressal of complaints/grievances on the sexual harassment of women at work places. Your Directors further states that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. GREEN INITIATIVE Your Company has adopted green initiative to minimize the impact on the environment. The Company has been circulating the copy of the Annual Report in electronic format to all those members whose email addresses are registered with the Company. Your Company appeals other members also to register themselves for receiving Annual Report in electronic form. ACKNOWLEDGEMENT We place on record our sincere Green appreciation to the employees of the Company at all levels for their co-operation and dedicated services. We also thank all our customers and suppliers who are always co-operative. We also express our sincere thanks to Bankers, Financial Institutions and the Shareholders for their continued support. For and on behalf of the Board of Directors of Aarti Drugs Limited Sd/- Prakash M. Patil Chairman & Managing Director DIN: 00005618 Place: Mumbai Date: 5th May, 2016 |