Your Directors have the pleasure of presenting the audited accounts of your Company for the financial year ended 31st March, 2022.
Financial Highlights
The table below gives the financial highlights of the Company for the year ended 31st March, 2022 on a standalone and consolidated basis as compared to the previous financial year.
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(' in lakhs)
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Particulars
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Standalone (Audited)
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Consolidated (Audited)
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For the year ended
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For the year ended
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31st March, 2022
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31st March, 2021
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31st March, 2022
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31st March, 2021
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Revenue from operations
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94,292.66
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1,12,397.28
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1,26,983.22
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1,23,513.53
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Other Income
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4,206.79
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4,737.11
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4,750.94
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5,018.76
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Total Income
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98,499.45
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1,17,134.39
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1,31,734.16
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1,28,532.29
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Profit/(Loss) before tax
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(8,674.77)
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6,564.55
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2,196.89
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5,147.94
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Current tax
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-
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-
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1,050.83
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1,668.26
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Deferred tax
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(3,155.51)
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1,094.30
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(2,183.81)
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(14.82)
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Short/(Excess) provision for tax (earlier years)
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23.70
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62.02
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23.70
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62.02
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Profit/(Loss) for the year
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(5,542.96)
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5,408.23
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3,306.17
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3,432.48
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Other Comprehensive Income
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5,537.20
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2,130.49
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5,375.05
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1,639.47
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Total Comprehensive Income
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(5.76)
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7,538.72
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8,681.22
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5,071.95
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Management Discussion and Analysis
As required by Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a Management Discussion and Analysis Report is part of this Report as Annexure A.
The state of the affairs of the business along with the financial and operational developments has been given in this Report.
Appropriations
A loss of ' (8,359.19) lakhs after considering dividend paid during the year is proposed to be carried forward in the Profit & Loss Account. Your Company does not propose to transfer any amount in the General Reserves of the Company.
Dividend
The Board has recommended a Dividend of ' 4/- (200%) per equity share of ' 2/- each for the year ended 31st March, 2022. The Dividend will be paid after approval of Members at the ensuing Annual General Meeting (AGM) of the Company which will result in a cash outflow of ' 2,816.23 lakhs.
The Register of Members and Share Transfer Books shall remain closed from Wednesday, 3rd August, 2022, to Tuesday, 9th August, 2022 (both days inclusive) for AGM and, Dividend, if approved by the Members.
Pursuant to Finance Act, 2020, Dividend income will be taxable in the hands of Shareholders with effect from 1 st April, 2020 and the Company shall deduct tax at source from Dividends paid to the Shareholders at the prescribed rates. A detailed communication on this shall be separately sent to the Shareholders.
The Company has a Dividend Distribution Policy in place and the same is available on the website of the Company at https://www.unichemlabs.com/dividend-distribution-policy.php.
Employees Stock Options Scheme
The Company has implemented the “Unichem Employee Stock Option Scheme, 2018” (Scheme) which was duly approved by the Shareholders vide a Special Resolution passed through Postal Ballot Meeting held on 15th May, 2018. Under the said Scheme 52,75,275 Options were approved, out of which 15,12,224 Options were granted to the eligible employees of the Company and its subsidiary in August 2018. 50% of the options granted i.e. 7,56,112 Options became vested on to them on 1st April,2022 and are exercisable in terms of the said Scheme. As on date none of the eligible employees have yet exercised these options.
The certificate from the Secretarial Auditor of the Company on the implementation of the said Scheme in accordance with the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (including any statutory modification(s) and/or re-enactment(s) thereof for the time being in force) has been duly obtained.
Details of this scheme form part of the Director’s Report and are available on the Company’s website at https://www.unichemlabs.com/annual-report.php.
Research and Development (R&D)
Kindly refer to the write-up in the Section, Management Discussion and Analysis Report.
Corporate Governance
As required under Regulation 34 of the Listing Regulations, a Report on Corporate Governance along with a Certificate of Compliance from the Auditors is given in Annexure B of this Report.
Corporate Social Responsibility (CSR)
The Board has constituted a Corporate Social Responsibility (CSR) Committee to monitor the implementation of CSR activities of your Company. The Annual Report on CSR activities as amended in terms of Section 135 of the Act and the Rules made thereunder, is annexed as Annexure C to this Report.
During the year under review, there was no mandatory requirement to spend towards CSR. However, the Company has voluntarily spent ' 63.22 lakhs for the year under review which includes an amount of ' 2.60 lakhs which has remained unutilized with an implementing agency as on 31st March, 2022. This is expected to be utilized in the subsequent financial year.
Consolidated Financial Statements
The annual consolidated financial statements together with the report of the Auditors thereon form part of this Annual Report.
Review of Subsidiaries and Associates
Your Company has 6(six) subsidiaries and 1(one) associate company. A statement containing salient features of the financial statements of the subsidiaries and associate company, pursuant to Section 129 of the Companies Act, 2013 (the Act), and the Rules made thereunder, is annexed to this Report as Annexure D in the prescribed Form AOC -1 and hence not repeated here for the sake of brevity.
Synchron Research Services Private Limited (Synchron) is an associate company in terms of Section 2(6) of the Act. Synchron is a contract research organization in India which offers clinical trial services to pharmaceutical companies. The Company has made a provision towards impairment of its equity investment in Synchron as per the note appearing under 6.2 of the notes to the accounts under standalone financial statements.
Particulars of Loans, Guarantees and Investments
Details of Loans, Guarantees, and Investments covered under the provisions of Section 186 of the Act are given in the notes to the financial statements.
Deposits
The Company has not accepted any deposits within the meaning of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014.
Risk Management
Your Company considers risk management as a key element of its business operations and has put in place effective systems to identify, monitor, and mitigate risks to ensure sustained operations. Your Company has constituted a Risk Management Committee, details of which are disclosed in the Corporate Governance Report. A section on Risk Management practices of the Company is included in the Management Discussion and Analysis Report.
Directors and Key Managerial Personnel
All Independent Directors have declared that they meet the criteria of Independence as laid down under Section 149(6) of the Act and Regulation 16(b) of the Listing Regulations. All Independent Directors have given declarations stating compliance with the Code of Ethics and Business Conduct. There has been no change in the circumstances affecting their status as Independent Directors of the Company. In the opinion of the Board, the Independent Directors fulfill the conditions specified in these Regulations and are independent of the management.
During the year under review, the Non-Executive Independent Directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees and reimbursement of expenses incurred by them for attending Meetings of the Board/Committee of the Company and the dividend paid on the equity shares held by them.
In terms of Section 203 of the Act, Dr. Prakash A. Mody, Chairman & Managing Director, (DIN: 00001285), Mr. Dilip Kunkolienkar, Director Technical, (DIN: 02666678), Mr. Sandip Ghume, Deputy Chief Financial Officer, and Mr. Pradeep Bhandari, Head-Legal & Company Secretary are the Key Managerial Personnel of the Company. Mr. Kunkolienkar retires by rotation and being eligible has offered himself for re-appointment.
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 (Act):
1. that in preparation of annual accounts for the year ended 31st March, 2022, the applicable accounting standards have been followed and no material departures, have been made from the same;
2. that such accounting policies have been selected and applied consistently and made judgements 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 the end of the financial year and Profit /Loss for that year;
3. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for
Committee and as approved by the Board of Directors, subject to the approval of the Shareholders within the limits stipulated by the Act and the Rules made thereunder. The remuneration paid to the Whole Time Directors is determined keeping in view the industry benchmark and the relative performance of the Company compared to the industry performance.
Non-Executive Directors
Non-Executive Directors receive sitting fees for attending Meetings of the Board and its Committees as per the provisions of the Act and the Rules made thereunder. Besides payment of sitting fees and Dividends on equity shares, if any, held by the Directors, no other remuneration is paid to the Non-Executive Directors.
Key Managerial Personnel (KMP) and Senior Management
The remuneration of KMP other than the Executive Directors and other Senior Managerial Employees largely consists of basic salary, perquisites, allowances and performance incentives (wherever paid). Perquisites and retirement benefits are paid according to the Company’s policy. The components of the total remuneration vary for different grades and are governed by the industry pattern, qualification and experience, merits, and performance of each employee. The Company while deciding the remuneration package takes into consideration the current employment scenario and remuneration package prevalent in the industry and peer group companies.
Board Meetings
During the year, 5 (five) Board Meetings were held, the details of which are given in the Corporate Governance Report.
Audit Committee
The Company has an Audit Committee pursuant to the requirements of the Act read with the Rules framed thereunder and Listing Regulations. The details relating to the same are given in the report on Corporate Governance forming part of this Report. During the financial year 2021-22, the recommendations of the Audit Committee were duly accepted by the Board.
Whistle Blower Policy
The Company has in place a Whistle Blower/Vigil Mechanism through which its Stakeholders, Directors, and Employees can report genuine concerns about unethical behaviour and actual or suspected fraud or violation of the Company’s Code of Business Conduct and Ethics. The said policy provides for adequate safeguards against victimization and direct access to the Audit Committee. The e-mail id for reporting genuine concerns is whistleblower@unichemlabs.com. No complaints were received during the year.
Significant and Material Orders passed by the Regulators /Courts/Tribunals
No significant or material orders were passed by the regulators or courts or, tribunals which impact the Company’s going concern status and its operations in the future.
preventing and detecting fraud and other irregularities;
4. that the annual accounts have been prepared on a going concern basis;
5. that the internal financial controls were in place and that they were adequate and operating effectively; and
6. that systems to ensure compliance with the provisions of all applicable laws were devised and such systems were adequate and operating effectively.
Board performance and evaluation
Pursuant to the provisions of the Act and the Listing Regulations, the Board has carried out an annual performance evaluation of the working of its performance, its Committees, and the Directors individually. The performance evaluation of Independent Directors was done by the entire Board of Directors and in the evaluation, the Directors who were subject to evaluation did not participate. A structured questionnaire was prepared after taking into consideration inputs received from the Directors covering various aspects of the functioning of the Board and its Committees.
The evaluation of the Directors was done on various parameters such as vision and strategy, Board participation, Board disclosures of interests, review of management policies, budget concerning the risk and return, and leadership skills. The Directors expressed their satisfaction with the evaluation process.
Salient features of the Nomination and Remuneration Policy
The Board, on the recommendation of the Nomination and Remuneration Committee, has adopted a policy for selection, appointment, and remuneration of Directors, Key Managerial Personnel, and Senior Management. The policy is available on the Company’s website at
https://www.unichemlabs.com/nomination-and-remunerationpolicv.php.
The Company considers human resources as its invaluable assets. The Nomination and Remuneration Policy aims to pay equitable remuneration to all Directors, Key Managerial Personnel (KMP), and employees of the Company and is linked to the overall individual performance. The Remuneration policy for all employees is designed to attract talented personnel and remunerate them fairly and responsibly, this being a continuous, ongoing exercise at each level in the organization.
Whole-time/Managing Director
The Company pays remuneration by way of salary, perquisites, and allowances (fixed component) and commission (variable components wherever applicable as per terms of appointment) to its Whole-time Directors. A proper balance between fixed and variable components is aimed at. Salary is paid based on the recommendation of the Nomination and Remuneration
Further, as per the management the future business outlook and projections of the subsidiary are sufficient so as not to warrant any impairment on the investments in subsidiary (Niche) unless the outcome of EU matter is not in favour of the subsidiary.
Consolidated financials - Note no. 39
The management has obtained the counsel view on this matter and they have stated that there has not been any formal change in position after the last hearing and the uncertainty as in the past continues. Considering the status quo, in view of the management, no provision for the aforesaid fine is considered necessary and fine imposed by the EU of Euro 13.96 million (equivalent to ' 11,818.62 lakhs) is continued to disclose the matter under contingent liability.
On the above matter, the auditors of the Niche have given qualified opinion in their audit report and the statutory auditor of Company have reported the said qualification in their audit report on consolidated financial statement for the year ended 31st March, 2022.
Material changes and commitment, if any, affecting the financial position of the Company from the end of the financial year till the date of this Report
In November 2018, the Company had made a strategic investment in two Hyderabad based Active Pharmaceutical Ingredients (APIs) manufacturing company namely Optimus Drugs Private Limited (“ODPL”) and Optrix Laboratories Limited (“Optirx”) for a total consideration of ' 120 crs (Rupees One hundred twenty crores) by acquiring 19.99% of the issued and paid-up share capital of each of the said companies. Optrix was later merged into ODPL which no change in the overall shareholdings of the Company in the merged entity. Unichem held 19.99% of the equity share capital of ODPL.
Subsequent to the financial year ended 31st March, 2022, the Company has entered into binding Share Purchase Agreement (‘SPA’) dated 10th May, 2022 with Sekhmet Pharmaventures Private Limited (‘Purchaser’) and Optimus Drugs Private Limited (‘Optimus’) to sell its entire shareholding in Optimus to the Purchaser (‘Transaction’). As per the SPA, the Company will sell 19.97% equity shares on a fully diluted basis in the first tranche and remaining 0.02% equity shares in the second tranche. For the first tranche, total consideration is ' 27,098.99 lakhs and for the second tranche for a price to be determined as per the said SPA after satisfaction of necessary conditions precedent. Fair value gain of ' 7,646.40 lakhs was recognized in Other Comprehensive Income in the current quarter and year ended 31st March, 2022 based on independent valuation report and carrying value of such investment as at balance sheet date is ' 22,595.23 lakhs. The additional fair value gain will be recognized in the subsequent period as per SPA. The Transaction is expected to complete in the subsequent period after satisfaction of necessary condition precedents as mutually agreed between the parties under the SPA.
However on 9th July, 2014, the European Commission (“EU”) decided to impose an unjustified fine of Euro 13.96 million, jointly and severally on the Company and its subsidiary Niche Generics Ltd (“Niche”) contending that they had acted in breach of EU competition law as Niche Generics Ltd had, in early 2005 (when the Company was only a part owner and financial investor in Niche) had agreed to settle a financially crippling patent litigation with Laboratories Servier. The Company vehemently denies any wrongdoing on the part of either itself or Niche. Both the Company & Niche had submitted appeals in September 2014 to the General Court of the EU seeking appropriate relief in the matter. The General Court of the EU has rejected the appeals vide Order dated 12th December, 2018 and confirmed the fine of Euro 13.96 million. The Company and its subsidiary based on legal advice and merits, have filed appeals against the decision of General Court before the Court of Justice of the EU and outcome of the appeals are awaited.
Audit qualification and Response of the Management on the above matter.Standalone financials - Note no. 38
In this regard, the statutory auditors of Niche have given qualified audit opinion on the financial statement of Niche for the year ended 31st March, 2022. They have stated that previously the outcome of the appeal was sufficiently uncertain that a contingent liability was deemed sufficient, however following the hearing in October 2021, and their review of the available documentation, their opinion is that it is more likely than not that Niche will be liable for the fine of Euro 13.96 million (equivalent to ' 11,818.62 lakhs) and hence they believe that this should be provided for in the financial statements of Niche. As per the Board of Directors of Niche, there remains an inherent uncertainty as to the outcome of the appeal and therefore the Directors are of the opinion that no provision should be made at this point of time. The management has obtained the counsel view on this matter and they have stated that there has not been any formal change in position after the last hearing and the uncertainty as in the past continues. Considering the status quo, in view of the management, no provision for the aforesaid fine is considered necessary and continued to disclose the matter under contingent liability.
As at Balance Sheet date, the Company has aggregate financial exposure of ' 12,267.33 lakhs in Niche comprising of investment, trade receivable and corporate guarantee given to bank for loan availed by Niche. Considering the impact of on-going litigation as elaborated in the above para and accumulated losses in Niche as at Balance Sheet date, the statutory auditor of the Company are of the view that the Company would need to provide for impairment on the exposure involved of ' 12,267.33 lakhs. However, the Company is of the view that such provision for impairment on exposure would be required only in the event of unfavourable outcome of the appeal which itself is uncertain. On the above matter, the auditors of the Company have given qualified opinion in their audit report on standalone financial statement for the year ended 31st March, 2022.
Other than the above, there have been no material changes and commitments, affecting the financial position of the Company between the end of the financial year to which the financial statements relate and the date of this Report.
Related Party Transactions
During the year under review, approval of the Audit Committee and Board of Directors was sought for Related Party Transactions wherever required.
The Audit Committee has given prior approval for all Related Party Transactions wherever applicable. The policy on Related Party Transactions as approved by the Board is uploaded on the Company’s website and the weblink is https://www.unichemlabs.com/related-party-transactions-policy.php. The particulars of contracts or arrangements with Related Parties referred to in Section 188(1) of the Act are provided, in the prescribed Form AOC-2 annexed as Annexure E to this Report.
Except to the extent of the shares held in the Company and the remuneration drawn from the Company, none of the Directors and Key Managerial Personnel have any pecuniary relationships or transactions vis-a-vis the Company.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
The Company has in place a policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and inquiry process that is to be followed by complainants and the ICC, whilst dealing with issues related to sexual harassment at the workplace. All women employees (permanent, temporary, contractual, and trainees) are covered under this policy. The policy also provides for the requisite checks, balances, and safeguards to ensure that no employee is victimized or harassed for reporting and bringing up such incidents in the interest of the Company. The ICC received 1 (one) compliant which was addressed during the year.
Auditors
Pursuant to the provisions of Section 139 of the Act read with applicable Rules framed thereunder, M/s. N. A. Shah Associates LLP, Chartered Accountants the existing Statutory Auditors of the Company will complete their first term of 5 (five) years as Statutory Auditors of the Company at the concl usion of this 59th Annual General Meeting (‘AGM’). In view of the same, M/s. N. A. Shah Associates LLP, Chartered Accountants (Firm Registration 1 16560W/W100149) based on the recommendation of the Audit Committee, have been reappointed by the Board as the Statutory Auditors of the Company for a second term of 5 (five) consecutive years to hold office from the conclusion of the 59th AGM till the conclusion of
the 64th AGM subject to the approval of the Members of the Company at the ensuing Annual General Meeting on such remuneration plus applicable taxes and out-of-pocket expenses incurred in connection with the Audit as may be decided by the Board and the said auditors.
The said Auditors have given their eligibility certificate and willingness to be appointed as statutory auditors for a second term of 5 (five) years from the conclusion of the 59th AGM till the conclusion of the 64th AGM.
The said Auditors have confirmed that their firm has been subjected to the peer-review process of the Institute of Chartered Accountants of India (ICAI) and they hold a valid certificate issued by the Peer Review Board of the ICAI.
During the year under review, the Auditors have not reported any matter under Section 143 (12) of the Act and therefore no details are disclosed under Section 134 (3) (ca) of the Act.
Cost Auditors
The Company is required to maintain cost records as specified by the Central Government under sub-section (1) of Section 148 of the Act, accordingly such accounts and records are made and maintained by the Company.
The Board of Directors at its Meeting held on 27th May, 2022, based on the recommendation of the Audit Committee, appointed Kishore Bhatia & Associates, Cost Accountants, (Firm Registration No. 00294); as Cost Auditors for undertaking Cost Audit of the Cost Accounting Records maintained by the Company for the financial year 2022-23 at a remuneration not exceeding ' 9.00 lakhs (Rupees Nine Lakhs Only Only) plus applicable taxes and out-of-pocket expenses at actuals. The said Auditors have confirmed their eligibility for appointment as Cost Auditors. The remuneration payable to the said Cost Auditors is required to be placed before the Members at the ensuing AGM for ratification and a suitable Resolution has been set out in the Notice of this AGM. The Cost Audit Report for the year ended 31st March, 2021 was filed with the Ministry of Corporate Affairs on 4th August, 2021.
During the year under review, the Cost Auditors have not reported any matter under Section 143 (12) of the Act, and therefore no details are disclosed under Section 134(3) (ca) of the Act.
Secretarial Audit
Pursuant to the provisions of Section 204 of the Act and the Rules made thereunder, the Company has appointed Alwyn Jay & Co., Company Secretaries in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed as Annexure F to this Report. There is no qualification, reservation, adverse remark, or disclaimer in the said Report.
During the year under review, the Secretarial Auditors have not reported any matter under Section 143 (12) of the Act, and therefore no details are disclosed under Section 134(3) (ca) of the Act.
Compliance with Secretarial Standards
The Company has complied with the Secretarial Standards issued by The Institute of Company Secretaries of I ndia about Board Meetings (SS-1) and General Meetings (SS-2).
Internal control systems and their adequacy
The Company has in place adequate internal financial controls concerning its financial statements. These controls ensure the accuracy and completeness of the accounting records and the preparation of reliable financial statements. The details of the same are included in the Management Discussion and Analysis Report.
Energy Conservation, Technology Absorption, and Foreign Exchange Earnings and Outgo
The particulars as prescribed under Section 134(3)(m) of the Act and Rules made thereunder are set out in Annexure G to this Report.
Dividend Distribution Policy
Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a Dividend Distribution Policy and is available on the Company’s website https://www.unichemlabs.com/dividend-distribution-policy.php.
Particulars of Employees and related disclosures
Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act and Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, are annexed as Annexure H to this Report.
In terms of the provisions of Section 197(12) of the Act and Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, details of employee’s remuneration, form part of this Report. However, as per the provisions of Sections, 134 and 136 of the Act, the Report and financial statements are being sent to the Members and others entitled thereto, excluding the information on employees’ particulars. Any Member interested in obtaining a copy of the same may write to the Company Secretary at shares@unichemlabs.com.
Extract of Annual Return
In accordance with the provisions of Section 92(3) and Section 134 of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 of the Act, Annual Return of the Company is hosted on the website of the Company at https://www.unichemlabs.com/annual-report.php.
Business Responsibility Report
In compliance with Regulation 34(2) of the Listing Regulations, the Business Responsibility Report for the financial year 2021-22 is set out in Annexure I of this Annual Report.
Human Resources and Employee Relations
The Board of Directors commends the continued dedication of all its employees. Details of Human Resources and Employee Relations and matters incidental thereto are provided in the Management Discussion and Analysis Report.
Acknowledgement
Your Directors acknowledge the support and wise counsel extended to the Company by investors, analysts, bankers, government agencies, shareholders, suppliers, and others associated with the Company as its business partners. Your Directors also acknowledge the trust reposed in the Company by the medical fraternity and patients. We look forward to having the same support in our mission to enhance health through quality products.
Cautionary Statement
Statements in this Directors’ Report and Management Discussion and Analysis Report describing the Company’s objectives, projections, estimates, expectations, or predictions may be “forward-looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include raw material availability and prices, cyclical demand, pricing and changes in government regulations, tax regimes, economic developments among the countries in which the Company conducts business, and other ancillary factors.
For and on behalf of the Board of Directors,
Dr. Prakash A. Mody
Mumbai Chairman & Managing Director
27th May, 2022 (DIN: 00001285)
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