Divi's Laboratories Ltd
Directors Reports
To
The Members,
Divi's Laboratories Limited
Your Directors' present the 33rd Annual Report of
Divi's Laboratories Limited ("the Company" or "Divi's")
along with the audited financial statements for the financial year ended March 31, 2023.
The consolidated performance of the Company and its subsidiaries ("Group") has
been referred to wherever required.
Financial Results
Financial performance of the Company for the year ended March 31, 2023
is summarised below:
|
Standalone |
Consolidated |
|
2022-23 |
2021-22 |
2022-23 |
2021-22 |
| Revenue |
7,62,530 |
8,87,982 |
7,76,751 |
8,95,983 |
| Other Income |
34,901 |
11,126 |
34,466 |
11,387 |
| Total Income |
7,97,431 |
8,99,108 |
8,11,217 |
9,07,370 |
| Expenditure before depreciation, interest |
5,27,762 |
5,00,336 |
5,39,969 |
5,07,789 |
| Profit before depreciation, interest and tax
(PBDIT) |
2,69,669 |
3,98,772 |
2,71,248 |
3,99,581 |
| Depreciation |
34,207 |
31,055 |
34,318 |
31,151 |
| Finance Cost |
52 |
65 |
67 |
80 |
| Profit (PBT) before Tax |
2,35,410 |
3,67,652 |
2,36,863 |
3,68,350 |
| Tax Expense: |
|
|
|
|
| Current Tax |
43, 758 |
63,720 |
43,917 |
64,400 |
| Deferred Tax |
10,837 |
9,078 |
10,608 |
7,905 |
| Total Tax |
54,595 |
72,798 |
54,525 |
72,305 |
| Profit after Tax (PAT) |
1,80,815 |
2,94,854 |
1,82,338 |
2,96,045 |
| Other comprehensive Income (net of tax) |
233 |
218 |
1,194 |
406 |
| Total Comprehensive Income |
1,81,048 |
2,95,072 |
1,83,532 |
2,96,451 |
| Earnings per Share of C 2/- each (EPS) Basic
& Diluted (C) |
68.11 |
111.07 |
68.69 |
111.52 |
Operations
Standalone
Last year, the Company had the opportunity to make a significant
contribution for the treatment of covid pandemic and swiftly developed process, mobilised
its resources and capital infrastructure, quickly created capacities and produced large
volumes of a product for covid-19 infection for an MNC customer, which helped in treatment
of people infected with covid-19 virus. It is a great relief that the pandemic has since
abated and people across the world are breathing normal activity. As a result, our
supplies of the product for covid-19 have also substantially reduced during the year under
review.
As the restrictions on movement of people has since eased and the
over-stocking of inventories at different channels of some of the lifestyle medicines has
also reduced, we are seeing growth of our normal business portfolio.
This financial year, the Company has earned a total income of
C7,97,431 lakhs, which is about 11% lower than the previous financial
year. As stated above, due to significant change in the product-mix, our net material
consumption as a percentage of revenue for the year is about 40%, while it was about 34%
during the last financial year. Our Profit before tax for the year accounted to C2,35,410
lakhs, which is significantly lower than the previous year.
Tax expense for the year amounted to C54,595 lakhs as against a tax
expense of C72,798 lakhs in the previous year. Effective tax rate for the year has
increased over the last year due to the changes in product mix and the resultant
profitability across the
Company's manufacturing units.
Profit after tax for the year amounted to C1,80,815 lakhs as against
C2,94,854 lakhs during the previous year.
Consolidated
The Group's consolidated total income amounted to C8,11,217 lakhs
as against C9,07,370 lakhs in the previous year.
Profit before tax for the year is C2,36,863 lakhs as against
C3,68,350 lakhs in the previous year. The Company earned a Profit after
Tax of C1,82,338 lakhs for the year as against C2,96,045 lakhs in the previous year. The
consolidated operations are reflective of standalone operations, as standalone operations
are substantial part of our business.
Subsidiaries
The Company's wholly owned subsidiaries, vis., Divis Laboratories
(USA) Inc., in USA and Divi's Laboratories Europe AG in Switzerland, are engaged in
marketing/distribution of nutraceutical ingredients used in the food, beverage, dietary
supplement, feed and pet food industries; and they provide a greater reach to customers
within these regions. During the year, the subsidiaries have achieved aggregate revenue of
C51,530 lakhs as against C48,845 lakhs in the previous year, reflecting a growth of 5% of
revenue at the subsidiary level. During the year, there was no significant change in the
nature of business of the Subsidiaries. As per Section 129(3) of the Companies Act, 2013
read with Companies (Accounts) Rules, 2014, statement containing the salient features of
the financial statement of Company's subsidiaries in form AOC-1 is annexed herewith
as "Annexure - I". Moreover, pursuant to provisions of Section
136(1) of the Companies Act, 2013, audited financial statements of the subsidiary
companies are placed on the Company's website and can be accessed at
https://www.divislabs.com/Subsidiary-Financials-2023.pdf. The Consolidated Financial
Statements presented by the Company include the financial results of these two subsidiary
companies.
Policy for determining Material Subsidiaries, is available on the
Company's corporate website and can be accessed at:
https://www.divislabs.com/MaterialSubsidiaryPolicy.pdf. Presently, the Company does not
have any material subsidiary.
Consolidated Financial Statements
As stipulated in the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 ("SEBI Listing Regulations") and the Companies
Act, 2013 ("the Act"), the consolidated financial statements have been prepared
by the Company in accordance with the relevant accounting standards. The audited
consolidated financial statements together with Auditor's Report thereon form part of
the Annual Report.
Capital Expenditure
During the year, we have capitalised Property, Plant and Equipment
(PPE) and Intangible Assets valuing C74,140 lakhs. Capital Work-in-progress as at the
year-end amounted to C21,188 lakhs.
A major part of the capitalisation is in the DC and DCV SEZs, besides
capacity expansion, plant upgradation and augmenting the utility/support infrastructure at
the other manufacturing facilities.
Kakinada Project
During the year, the Company has made significant progress for
implementation of its project of setting up a manufacturing plant (Unit-III) at Ontimamidi
(Kona) Village, Thondangi Mandal, Kakinada District of Andhra Pradesh. With all clearances
obtained for the Unit III project, construction activity on the 500 acres of land is
progressing well with an estimated capex of C1,20,000 lakhs to C1,50,000 lakhs for Phase-1
development depending upon options and opportunities available to the company and
selection of capacities to be created for different products.
Material Changes and Commitments
No other material changes and commitments have occurred after the close
of the financial year till the date of this Report, which affect the financial position of
the Company. Further, there is no change in the nature of business of the Company.
Dividend
Your Directors are pleased to recommend a dividend of C30/- per equity
share of C2/- each, i.e., 1500% for the financial year ended
March 31, 2023, subject to approval of members at the ensuing Annual
General Meeting (AGM). The Dividend, if approved, will be paid to shareholders whose names
appear in the Register of Members as on the book closure/record date.
The total dividend payout for the current year amounts to C79,641 lakhs
as against C79,641 lakhs in the previous year.
Dividend payout for the year as a percentage of profits is 44%.
Payment of dividend to members will be subject to tax deduction at
source (TDS) as per statutory requirement.
The dividend recommended is in accordance with the Company's
Dividend Distribution Policy. The Dividend Distribution Policy is available on the
Company's website and can be accessed at
https://www.divislabs.com/DividendDistributionPolicy.pdf.
Transfer to Reserves
The Directors have decided to retain the entire total comprehensive
income for the current year in Other Equity.
Deposits
The Company has not accepted any deposits from public covered by
provisions of Section 73 of the Act.
Loans, Guarantees or Investments
The Company has not given any loans or guarantees covered under the
provisions of Section 186 of the Act. The details of investments made by the Company are
given in the notes to the financial statements forming part of this annual report.
Related Party Transactions
There are no materially significant related party transactions made by
the Company with related parties which may have potential conflict of interest with the
Company at large. a matter of policy, your Company carries out transactions with related
parties on an arms' length basis. Statement of these transactions is given at Note
No. 37 of the Notes to financial statements.
Accordingly, particulars of contracts or arrangements with related
parties referred to in Section 188(1) of the Act along with the justification for entering
into such contract or arrangement in prescribed Form AOC-2 does not form part of this
report. The Policy on Materiality of Related Party Transactions and on dealing with
Related Party Transactions as approved by the Board is available on the Company's
website and can be accessed at https://www.divislabs.com/RPT-Policy.pdf.
Internal Financial Controls
Information in respect of internal financial controls and their
adequacy is included in the Management Discussion and Analysis, which forms part of this
Annual report.
Risk Management
The Company has a Risk Management Committee of the Board. The brief of
terms of reference, composition and names of members and chairperson are set out in the
Corporate Governance Report forming part of the Report.
The Company has an enterprise-wide approach to risk management, which
lays emphasis on identifying and managing key operational and strategic risks. The aim is
to avoid or minimise risks that pose a threat to Divi's continued existence and to
make improved managerial decisions to create value. The Company has been addressing
various risks impacting the Company pursuant to the Risk Management Policy.
The Risk Management Committee constantly evaluates various risks –
business, customer concentration, supplier concentration, regulatory compliances,
confidentiality processes, consistency of cGMP practices, environment, employee health and
safety etc., monitors risks and deploy appropriate control systems aimed at mitigating
such risks to the extent possible. The Audit Committee reviews the risk elements of the
company's business, finance, operations compliance, and their respective mitigation
strategies.
Further details on the Risk Management activities including key risks
identified, and their mitigations are covered in
Management Discussion and Analysis Report, forming part of this Annual
Report.
During the financial year 2022-23, the focus areas of Risk
Management Committee included review of cyber security and data
protection, business continuity, various ESG risks.
Management Discussion and Analysis
In terms of provisions of Regulation 34(2) of SEBI Listing Regulations
report on Management Discussion & Analysis for the year under review is provided in a
separate section forming part of this Annual Report.
Directors' Responsibility Statement
As required under Section 134 (5) of the Act, Directors of your
Company hereby state and confirm that: a) the applicable accounting
standards read with requirements of Schedule III to the Act have been followed in the
preparation of the annual accounts for the year ended March 31, 2023 and there are no
material departures from the same; b) accounting policies selected were applied
consistently and the judgements and estimates made 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 of the profit of the Company for the period; c) 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 preventing
and detecting fraud and other irregularities; d) the annual accounts have been prepared on
a going concern basis. e) internal financial controls have been laid down and such
controls are adequate and operating effectively; f) proper systems have been laid down to
ensure compliance with the provisions of all applicable laws and such systems are adequate
and operating effectively.
Number of Meetings of Board of Directors
The Board meets at least four times in a year at quarterly intervals
and more frequently if deemed necessary, to transact its business. During the financial
year, the Board has met four times, i.e. May 23, 2022, August 12, 2022, November 07, 2022
and February 03, 2023.
Directors and Key Managerial Personnel
During the financial year, there were no changes in the Board of
Directors or Key Managerial Personnel.
Pursuant to the Members' approval dated March 26, 2022 via postal
ballot, Dr. Ramesh B.V. Nimmagadda and Dr. Ganapaty Seru were re-appointed as Independent
Directors for a second term of 5 years, and Ms. Nilima Prasad Divi was re-appointed as
Whole-time Director (Commercial) of the Company for a period of 5 years.
Dr. Kiran S. Divi and Ms. Nilima Prasad Divi retires by rotation at the
forthcoming 33rd AGM and being eligible, offer themselves for re-appointment.
Declaration by Independent Directors
The Company received declaration from all the Independent Directors of
the Company under Section 149(7) of the Act and Regulation 25 of the SEBI Listing
Regulations, confirming that they meet the criteria of independence as provided in Section
149(6) of the Act and Regulation 16(1)(b) of SEBI Listing Regulations and there has been
no change in the circumstances affecting their status as Independent Directors of the
Company Further, they have confirmed compliance to the code of conduct for independent
directors as prescribed in Schedule IV of the Act. In the opinion of the Board, the
Independent Directors of the Company possess necessary expertise, integrity and
experience.
Performance Evaluation
The Board of Directors carried out an annual evaluation of its own
performance, of the Committees of the Board and of the individual directors including
Independent Directors, pursuant to the provisions of the Companies Act, 2013 and SEBI
Listing Regulations. Performance evaluation was carried out on the basis of criteria
evolved, as provided by the Guidance Note on Board Evaluation issued by Securities and
Exchange Board of India, seeking inputs from the Directors individually and the committees
through a structured questionnaire which provides a valuable feedback for contribution to
the Board, improving Board effectiveness, maximising strengths and highlighting areas for
further improvement, etc. In a separate meeting of the Independent Directors, performance
of the Chairperson, non-independent directors and the Board as a whole was evaluated
taking into account the views of the non-independent directors and the same was discussed
in the Board Meeting. Performance evaluation of Independent Directors is done by the
entire Board of Directors (excluding the Directors being evaluated). The details of the
separate meeting of the Independent Directors are reported in the Report on Corporate
Governance which forms part of the Board's Report.
Policy on Directors' Appointment and Remuneration
The Policy on appointment and remuneration of directors, key managerial
persons (KMP) and senior management including criteria for determining qualifications,
positive attributes and director's independence as required under Section 178(3) of
the Act, and Regulation 19 read with Schedule II Part D of SEBI Listing Regulations has
been formulated by the Company, inter-alia includes:
To identify persons who are qualified to become directors and who may
be appointed in senior management in accordance with the criteria laid down.
To ensure a transparent board nomination process with the diversity of
thought, experience, knowledge, perspective and gender in the Board.
To determine remuneration based on the Company's size and
financial position and trends and practices on remuneration prevailing in peer companies,
in the Pharma industry besides qualifications, skills, capabilities, etc.
To carry out evaluation of the performance of Directors, as well as Key
Managerial and Senior Management Personnel.
To provide them rewards linked directly to their effort, performance,
dedication and achievement relating to the Company's operations.
To retain, motivate and promote talent and to ensure long term
sustainability of talented managerial persons and create competitive advantage. Policy on
Nomination and Remuneration of Directors, Key/ Senior Managerial Personnel may be accessed
on the Company's website at:
https://www.divislabs.com/NominationRemunerationPolicy.pdf.
Remuneration details of Directors & KMP and Particulars of
Employees
Pursuant to Section 197(12) of the Act, read with Rule 5(1) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the
prescribed particulars pertaining to remuneration and other details are given in "Annexure
– II" to this Report.
The non-executive directors of the Company had no pecuniary
relationship or transactions with the Company, other than sitting fees, annual
remuneration and reimbursement of expenses, if any.
In terms of the provisions of Section 197(12) of the Act read with
Rules 5(2) and 5(3) of the Rules, a statement showing the names and other particulars of
employees drawing remuneration in excess of the limits set out in the said Rules forms
part of this report. Further, the report and the annual accounts are being sent to the
Members excluding the aforesaid statement. In terms of Section 136 of the Act, the said
statement will be open for inspection upon request by the Members. Any Member interested
in obtaining such particulars may write to the Company Secretary at cs@divislabs.com.
Corporate Social Responsibility (CSR)
The Company has been doing CSR activities for over the past 3 decades.
The CSR initiatives of the Company during the year include promoting education, safe
drinking water, preventive healthcare, village development, environmental sustainability,
support to differently abled, Swatch Bharath, livelihood enhancement, promotion of rural
sports, etc.
Corporate Social Responsibility Policy (CSR Policy) indicating the
activities to be undertaken by the Company was adopted by the Board on the recommendation
of the CSR Committee. During the year the CSR policy was amended to include recent changes
in the statutory requirements. The policy can be accessed at
https://www.divislabs.com/wp-content/uploads/2022/12/Divis-CSR-Policy-1.pdf. Report on
Corporate Social Responsibility as per Rule 8 of Companies (Corporate Social
Responsibility Policy) Rules, 2014 is prepared and the same is enclosed as "Annexure
– III" to this Report.
Business Responsibility and Sustainability Report (BRSR)
Pursuant to the Regulation 34 of SEBI Listing Regulations, BRSR
describing the initiatives taken by the Company is enclosed as part of this Report.
Conservation of Energy, Technology
Absorption and Foreign Exchange Earnings & Outgo
Particulars required under Section 134 (3) (m) of the Act read with
Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the "Annexure –
IV" to this report.
Corporate Governance Report
The report on Corporate Governance as per Regulation 34(3) read with
Schedule V of the SEBI Listing Regulations is included as a part of this Annual Report.
The requisite certificate from Mr. V. Bhaskara Rao, Practicing Company Secretary
confirming the compliance with the conditions of Corporate Governance is attached to the
report on Corporate Governance.
Audit Committee
The details pertaining to the role, objective and composition of the
Audit Committee are included in the Corporate Governance Report forming part of this
Annual Report.
Vigil Mechanism
The Company has established a vigil mechanism and formulated a Whistle
Blower Policy to provide mechanism for directors and employees of the Company to report
their concerns about any unethical behavior, actual or suspected fraud or violation of the
Company's code of conduct or ethics policy. The Policy provides
that the Company investigates such incidents, when reported, in an impartial manner and
takes appropriate action to ensure that requisite standards of professional and ethical
conduct are always upheld. This mechanism also provides for adequate safeguards against
victimisation of director(s)/ employee(s) who avail the mechanism and also provide for
direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle
Blower Policy may be accessed on the Company's website at:
https://www.divislabs.com/WhistleBlowerPolicy.pdf.
Audit Reports
Report of the Statutory Auditors on the financial statements for the
year does not contain any qualification, reservation or adverse remark or disclaimer; or
reporting of any offence or fraud.
The Secretarial Audit Report does not contain any qualification,
reservation or adverse remark or disclaimer.
The Auditors have not reported any instances of frauds to the Audit
Committee as prescribed under Section 143(12) of the Act.
Statutory Auditors
M/s. Price Waterhouse Chartered Accountants LLP (Firm Registration No.
012754N/ N500016), Chartered Accountants, were appointed as statutory auditors of the
Company to hold office for a second term of five consecutive years from the conclusion of
the 32nd AGM of the Company held on August 22, 2022 till the conclusion of the
37th AGM to be held in the year 2027.
Secretarial Audit
Pursuant to provisions of Section 204 of the Act and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors
of the Company has appointed Mr. V. Bhaskara Rao, Practicing Company Secretary (CP No.
4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the
financial year 2022-23. The Secretarial Audit report for the financial year 2022-23 is
annexed herewith as "Annexure - V".
Cost Audit
Pursuant to the Section 148 of the Act and Rule 3 of the Companies
(Cost Records and Audit) Rules, 2014 as amended, the Company maintains cost records in its
books of account. As per Rule 4 of the said rules, the requirement for cost audit is not
applicable to a company which is covered under Rule 3, and whose revenue from exports, in
foreign exchange, exceeds seventy five per cent of its total revenue or which is operating
from a special economic zone. However, the Company has voluntarily opted for audit of cost
records and appointed M/s. E.V.S & Associates, Cost Accountants as Cost Auditors.
Annual Return
In terms of Section 92(3) of the Act and Rule 12 of the Companies
(Management and Administration) Rules, 2014, the Annual Return of the Company as on March
31, 2023 is available on the Company's website and can be accessed at
https://www.divislabs.com/annual-return/2022-23.pdf
Other Disclosures
Information on Unclaimed Dividend and transfer to IEPF is provided in
the Corporate Governance Report.
No Company has become or ceased to be its subsidiary, joint venture or
associate company during the year.
No significant and material orders were passed by the regulators or
courts or tribunals impacting the going concern status and Company's operations in
future.
The Company has complied with provisions relating to the constitution
of Internal Complaints Committee under the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013 and rules made thereunder and during the
year under review, there were no complaints received or pending.
The information with respect to Compensation, Nomination and
Remuneration Committee, Stakeholders Relationship Committee, Risk management Committee are
disclosed in the Corporate Governance Report forming part of the Annual Report.
The Company has followed the applicable Secretarial Standards, i.e.
SS-1 and SS-2, relating to ‘Meetings of the Board of Directors' and
‘General Meetings' respectively.
There was no application made or proceeding pending against the Company
under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.
Acknowledgements
Your Directors take this opportunity to thank the customers,
shareholders, suppliers, bankers, business associates, financial institutions and Central
and State Governments for their consistent support and encouragement to the Company. We
are sure you will join our Directors in conveying our sincere appreciation to employees at
all levels of the Company and its subsidiaries, for their hard work, dedication and
commitment, in particular during this unprecedented year, thereby ensuring uninterrupted
supply of life saving medicines across the globe.
|
For and on behalf of the Board |
|
|
Dr. Ramesh B.V. Nimmagadda |
Dr. Murali K. Divi |
| Date: May 20, 2023 |
Chairman |
Managing Director |
| Place: Hyderabad |
DIN: 07854042 |
DIN: 00005040 |
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