Divi's Laboratories Ltd
Directors Reports
To
The Members,
Divi’s Laboratories Limited
Your Directors’ have pleasure in presenting the 32nd 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, 2022.
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, 2022 is summarized
below:
| Particulars |
Standalone |
Consolidated |
|
2021-22 |
2020-21 |
2021-22 |
2020-21 |
| Revenue |
8,87,982 |
6,79,861 |
8,95,983 |
6,96,940 |
| Other Income |
11,126 |
6,253 |
11,387 |
6256 |
| Total Income |
8,99,108 |
6,86,114 |
9,07,370 |
7,03,196 |
| Expenditure before depreciation, interest |
5,00,336 |
3,97,793 |
5,07,789 |
4,10,946 |
| Profit before depreciation, interest and tax (PBDIT) |
3,98,772 |
2,88,321 |
399,581 |
2,92,250 |
| Depreciation |
31,055 |
25,465 |
31,151 |
25,559 |
| Finance Cost |
65 |
69 |
80 |
87 |
| Profit before Tax (PBT) |
3,67,652 |
2,62,787 |
3,68,350 |
2,66,604 |
| Tax Expense: |
|
|
|
|
| Current Tax |
63,720 |
60,905 |
64,400 |
61,646 |
| Deferred Tax |
9,078 |
6,410 |
7,905 |
6,529 |
| Total Tax |
72,798 |
67,315 |
72,305 |
68,175 |
| Profit after Tax (PAT) |
2,94,854 |
1,95,472 |
2,96,045 |
1,98,429 |
| Other comprehensive Income (net of tax) |
218 |
16 |
406 |
40 |
| Total Comprehensive Income |
2,95,072 |
1,95,488 |
2,96,451 |
1,98,469 |
| Earnings per Share of H 2/- each (EPS) Basic & Diluted |
111.07 |
73.63 |
111.52 |
74.75 |
Operations
Standalone
We have been able to achieve yet another year of decent business growth and
profitability. The company has been able to conduct its operations with agility and
resilience, duly handling the unprecedented covid pandemic and simultaneously quickly
responded to the emerging opportunities.
During the year, the fast-track project taken up for an MNC customer was fully
operational and achieved significant business. With our dynamic business model supported
by our multi-purpose manufacturing facilities, we have been able to cater to customer
demands and ensure speed of delivery.
Some of the highlights of the operations for the year are:
• Revenue for the year increased by 31% to H 8,87,982 lakhs.
• Profit before Tax (PBT) for the year has grown by 40% to H 3,67,652
lakhs.
• Tax Provision for the current year amounted to H 72,798 lakhs as against a tax
provision of H 67,315 lakhs for the last year.
• Profit after Tax (PAT) for the year grew by 51% to H 2,94,854 lakhs as against a
PAT of H 1,95,472 lakhs last year.
• Earnings Per Share of H 2/- each works out to H 111.07 for the year as against H
73.63 last year.
• Out of the total revenue, North America accounted for 44% and Europe for 33%.
Consolidated
The Group’s total consolidated income increased by 29% to H 9,07,370 lakhs
from H7,03,196 lakhs in the previous year.
Profit before tax (PBT) for the year grew by 38% to H 3,68,350 lakhs as against H
2,66,604 lakhs in the previous year. Profit after Tax for the year has increased by 49% to
H 2,96,045 lakhs as against H 1,98,429 lakhs in the previous year.
Subsidiaries
The Company has 2 wholly owned subsidiaries viz., M/s. Divis Laboratories (USA) Inc.,
in USA and M/s. Divi’s Laboratories Europe AG in Switzerland, which are engaged in
marketing/ distribution of nutraceutical products and to provide a greater reach to
customers within these regions.
During the year, the subsidiaries have achieved revenue of H 48,845 lakhs as against H
45,631 lakhs in the previous year, reflecting a growth of 7% of revenue at the subsidiary
level.
Subsidiaries are successful in establishing their market presence and in achieving
consistent revenue. There has been no material change in the nature of the 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-2022.pdf.) The
Consolidated Financial Statements presented by the Company include the financial results
of its 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, the Company has capitalized Property, Plant and Equipment (PPE) and
Intangible Assets valuing H 93,456 lakhs. Capital Work-in-Progress (WIP) as at the
year-end amounted to H 46,993 lakhs.
During the year, the company has taken up several capacity expansion programs at the
Company’s manufacturing facilities besides plant upgradation, augmenting the utility
and support infrastructure.
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 H 30/- per equity share of H 2/-
each, i.e., 1500% for the financial year ended March 31, 2022, subject to approval of
members at the ensuing Annual General Meeting. 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 H 79,641 lakhs as against H
53,094 lakhs in the previous year. Dividend payout as a percentage of profits is 27% in
line with the previous year. Payment of dividend to members will be subject to tax
deduction at source (TDS) as per statutory requirement.
ThedividendrecommendedisinaccordancewiththeCompany’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.
As 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 of
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 and 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 2021-22, 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, 2022 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 29, 2021, August 07, 2021, November 06, 2021 and
February 11, 2022.
Directors and Key Managerial Personnel
During the financial year, the Members of the Company have approved re-appointment of
Dr. Ramesh B.V. Nimmagadda as an Independent Director for a second term of 5 years
effective from June 27, 2022, including approval pursuant to Regulation 17(1A) of the SEBI
Listing Regulations for his continuation as Independent Director upon attaining 75 years
of age on August 14, 2022. The Members also approved re-appointment of Dr. Ganapaty Seru
as an Independent Director for a second term of 5 years effective from July 22, 2022.
Further, the Members have re-appointed Ms. Nilima Prasad Divi as Whole-time Director
(Commercial) of the Company for a further period of 5 years with effect from June 27, 2022
and approved her remuneration.
Mr. N.V. Ramana and Mr. Madhusudana Rao Divi retires by rotation at the forthcoming 32nd
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
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.
During the year, Dr. Kiran S. Divi received H 40 lakhs remuneration from the
Company’s wholly owned subsidiary, Divi’s Laboratories Europe AG, for the
services rendered by him in the capacity of Director. Pursuant to the terms of appointment
of Dr. Kiran S. Divi to the extent of the remuneration paid at subsidiary is reduced from
his salary payable by Divi’s Laboratories Limited.
Particulars of Employees
Particulars of employees required to be furnished under Rule 5(2) and 5(3) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended
are given in "Annexure – III" and forms part of this Report.
Corporate Social Responsibility
The Board of Directors has constituted Corporate Social Responsibility Committee (CSR
Committee) consisting of members viz. Mr. R. Ranga Rao (Chairman), Dr. Murali K. Divi, Mr.
Madhusudana Rao Divi and Dr. Ramesh B.V. Nimmagadda.
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.
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
– IV" to this Report.
Business Responsibility Report
Pursuant to the SEBI Listing Regulations, Business Responsibility Report (BRR)
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 – V" 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 victimization 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 five consecutive years from the conclusion of the 27th Annual
General Meeting (AGM) of the Company held on September 25, 2017 till the conclusion of the
32nd AGM to be held in the year 2022.
M/s. Price Waterhouse Chartered Accountants LLP will complete their first term of five
consecutive years as the statutory auditors of the Company at the conclusion of the 32nd
AGM of the Company.
Pursuant to Section 139(2) of the Act, the Company can appoint M/s. Price Waterhouse
Chartered Accountants LLP for a second term of five consecutive years.
The Audit Committee and the Board of Directors recommend to the Members for the
reappointment of M/s. Price Waterhouse Chartered Accountants LLP, as statutory auditors of
the Company for a second term of five consecutive years from the conclusion of the 32nd
AGM till the conclusion of 37th AGM to be held in the year 2027.
M/s. Price Waterhouse Chartered Accountants LLP have consented to the said
reappointment, and confirmed that their reappointment, if made, would be within the limits
specified under Section 141(3)(g) of the Act. They have further confirmed that they are
not disqualified to be reappointed as statutory auditor in terms of the provisions of the
Act, and the provisions of the Companies (Audit and Auditors) Rules, 2014, as amended from
time to time.
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 (PCS Registration No.
4182) as the Secretarial Auditor of the Company to conduct the Secretarial audit for the
financial year 2021-22. The Secretarial Audit report for the financial year 2021-22 is
annexed herewith as "Annexure - VI".
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, 2022 is
available on the Company’s website and can be accessed at (https://www.
divislabs.com/annual-return/2021-22.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.
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 |
|
Chairman |
Managing Director |
| Place: Hyderabad |
DIN: 07854042 |
DIN: 00005040 |
| Date: May 23, 2022 |
|
|
  Â