| The Directors have pleasure in presentng the 53rd Annual Report and
Audited Accounts for the 15 months period ended March 31, 2014.
STANDALONE WORKING RESULTS UNDER INDIAN GAAP
Rs. in Million
Fifeen Year
Months ended ended
March 31, December 31,
2014 2012
Net Sales 66,570.39 61,124.43
Expenditure 80,166.41 63,437.65
(Loss)/ Proft before exceptonal
items and tax (3,668.84) 2,169.42
Exceptonal Items
- Setlement provision reversal (1,458.05) -
- Proft on sale of intellectual
property rights (4,327.69) -
- Product recall expenses - 2,370.20
- Loss on foreign currency opton
derivatve, net (other than on loans) 3,279.16 412.05
- Inventory provision/ write of and
other costs 3,557.92 -
- Provision in respect of non-current
investment in a subsidiary 3,050.96 1,030.00
- Provision for other than temporary
diminuton in the value of non-current 713.11 -
investment in an associate
(Loss) before Tax (8,484.25) (1,642.83)
Income Tax Expenses
- Current tax 305.70 (19.44)
- Deferred tax - -
(Loss) afer Tax for the Year (8,789.95) (1,623.39)
Balance as per the last Balance Sheet (25,312.70) (23,689.31)
CONSOLIDATED WORKING RESULTS UNDER
INDIAN GAAP
Net Sales 130,403.24 122,528.94
Expenditure 133,287.41 112,784.10
Proft before exceptonal items and tax 1,225.75 14,720.53
Exceptonal Items
- Inventory provision/ write of and
other costs 3,428.73 -
- Impairment of goodwill 1,629.76 -
- Provision for other-than-temporary
diminuton in the value of non-current 305.68 -
investment in an associate
- Product recall expenses - 1,859.54
- Loss on foreign currency opton
derivatve, net (other than on loans) 3,279.16 412.05
(Loss)/ proft before tax, share in loss
of associate (net) and minority interest (7,417.58) 12,448.94
Income Tax Expenses
- Current tax 3,570.25 2,912.58
- Deferred tax (255.77) 26.46
(Loss)/ proft afer tax and before share
in loss of associates (net) and
minority interest (10,732.06) 9,509.90
Share in loss of associates (net) 140.41 185.82
Minority interest in (loss)/ proft for
the period (net) (19.95) 96.44
(Loss)/ proft afer tax, share in loss
of associates (net) and minority interest (10,852.52) 9,227.64
Balance as per the last Balance Sheet (7,957.23) (17,184.87)
CHANGE IN FINANCIAL YEAR
The Board of Directors of the Company approved change in the fnancial
year of the Company from January-December to April-March efectve April
1, 2014. In view of this, the current fnancial year is for a period of
15 months i.e. January 1, 2013 to March 31, 2014.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements for the 15 months period ended March
31, 2014, under Indian GAAP form part of the Annual Report.
OPERATIONS
The Company contnued to be among the top pharmaceutcal companies from
India with consolidated global sales of Rs.130,403.24 million for the
period of ffeen months ended March 31, 2014. Proft before exceptonal
items, tax, share in loss of associates (net) and minority interest
stood at Rs.1,225.75 million. However, the Company incurred a loss of
Rs.10,852.52 million primarily due to provision for diminuton in the
value of investments, impairment of goodwill, stock provision/write of
due to inclusion of Mohali and Toansa plants to certain terms of the
Consent Decree by the US FDA and loss on foreign currency opton
derivatves.
During the period, in terms of the setlement with the US DOJ, the Group
paid the setlement amount of US$ 515.40 million (including interest
expense and other related cost) towards resoluton of civil and criminal
allegatons. During the period, US FDA issued import alerts for the
Company's plants at Mohali and Toansa and advised that both these
plants will be subject to certain terms of the Consent Decree earlier
entered into by the Company. The Company proactvely, temporarily
stopped API supplies from Toansa and Dewas facilites to the rest of the
world pending further internal review. This voluntary decision was
taken as a precautonary measure and out of abundant cauton to beter
allow the Company to assess and review the processes and controls at
these sites.
In March 2014, US DOJ, United States Atorney's Ofce for the District of
New Jersey has issued an administratve subpoena seeking informaton
primarily related to the Company's API manufacturing facility at
Toansa. The Company is fully cooperatng with this informaton request.
The Company is contnuing its focus for improving margins through
innovatve product development, beter product mix, emphasis on branded
products and control on cost. Signifcant measures have been taken for
simplifcaton of processes and structures which will result in
improvement in productvity and efciency across the organisaton.
DIVIDEND
In view of the loss incurred by the Company, no dividend has been
proposed for the 15 months period ended March 31, 2014.
SCHEME OF ARRANGEMENT BETWEEN THE COMPANY AND SUN PHARMACEUTICAL
INDUSTRIES LIMITED
The Board of Directors at its meetng held on April 6, 2014 approved the
Scheme of Arrangement for merger of the Company with Sun Pharmaceutcal
Industries Ltd. (SPIL) with an Appointed Date of April 1, 2014 at a
Share Exchange Rato of 4 Equity Shares of SPIL of Re.1 each fully
paid-up for every 5 Equity Shares of the Company of Rs.5 each fully
paid-up subject to requisite regulatory approvals in India and overseas
as well as the approval of shareholders, creditors and the Courts in
India. The transacton will be benefcial to all the stakeholders of the
Company. Post-merger, the combined entty is expected to have a
leadership positon in the Indian Pharmaceutcal Market with about 9.2%
market share and No.1 Indian pharma company in the USA market, with
more than $2 billion in sales. The combined entty will have operatons
in 65 countries and 47 manufacturing facilites across the globe.
CHANGES IN CAPITAL STRUCTURE
Allotment of shares on exercise of Stock Optons by the Employees
During the period, the ESOPs Allotment Commitee alloted Equity Shares
(on pari-passu basis) pursuant to exercise of stock optons granted
prior to 2011 under the old ESOP Schemes as summarised below:
Date of Allotment No. of Shares
January 11, 2013 93,050
April 15, 2013 94,136
July 10, 2013 28,520
October 11, 2013 12,273
January 10, 2014 37,281
The Allotment Commitee of Directors on December 11, 2013, alloted
600,000 Equity Shares of Rs.5 each for cash at par to Ranbaxy ESOP
Trust (Trust), set up to administer Ranbaxy Employee Stock Opton
Plan-2011 (ESOP-2011). The
Trust allocates the shares to the employees of the Company and of its
subsidiaries on exercise of stock optons from tme to tme under
ESOP-2011.
SUBSIDIARIES AND JOINT VENTURES
In December 2012, the Company had approved the proposal to integrate
the business operatons and management of Ranbaxy Unichem Co. Ltd.
('Unichem'), its subsidiary, with Daiichi Sankyo (Thailand) Ltd., a
subsidiary of Daiichi Sankyo Company Limited, Japan. The said
integraton has been completed with efect from October 1, 2013. Pursuant
to this, Unichem had become an associate of the Company. During the
period, a new wholly owned subsidiary company was incorporated in
Thailand by the name of Ranbaxy (Thailand) Co. Ltd. Ranbaxy Pharma AB,
Sweden and Ranbaxy (Hong Kong) Limited, non-operatng enttes were
liquidated during the period. The Hon'ble High Courts of Delhi and
Punjab & Haryana vide their orders dated 7 December 2012 and 6 February
2013 respectvely had approved the scheme of merger of Rexcel
Pharmaceutcals Limited, Solus Pharmaceutcals Limited, Ranbaxy Drugs and
Chemicals Company, Ranbaxy Life Sciences Research Limited and Ranbaxy
SEZ Limited, subsidiaries of the Company with Ranbaxy Drugs Limited
another subsidiary of the Company, with an Appointed Date of April 1,
2012. The Scheme became efectve on 9 May 2013 upon fling of the Order
of the Hon'ble High Court of Delhi and Punjab & Haryana with the
Registrar of Companies at Chandigarh, India.
A statement pursuant to Secton 212 of the Companies Act, 1956, relatng
to subsidiary companies is atached to the accounts. In terms of the
general exempton granted by the Ministry of Corporate Afairs vide its
circular no. 02/2011 dated February 8, 2011, the Audited Accounts and
Reports of Board of Directors and Auditors of the Company's
subsidiaries have not been annexed to this Annual Report. The Company
has complied with the requirements as prescribed under the said
circular. The consolidated fnancial statements prepared in accordance
with Accountng Standard - 21 issued by the Insttute of Chartered
Accountants of India forming part of this Annual Report include the
fnancial informaton of the subsidiary companies.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Management Discussion and Analysis Report, as required under the Listng
Agreements with the Stock Exchanges, is enclosed at Annexure 'A'.
EMPLOYEES' STOCK OPTION SCHEMES
Informaton regarding the Employees' Stock Opton Schemes is enclosed at
Annexure 'B'.
LISTING AT STOCK EXCHANGE
The Equity Shares of the Company contnue to be listed on Bombay Stock
Exchange Ltd. and The Natonal Stock Exchange of India Ltd. Global
Depository Shares are listed on the Stock Exchange at Luxembourg. The
annual listng fees for the year 2013-2014 has been paid to these
Exchanges.
DISCLOSURE OF PARTICULARS
As required by the Companies (Disclosure of Partculars in the Report of
Board of Directors) Rules, 1988, the relevant informaton and data is
given at Annexure 'C'.
FIXED DEPOSITS
The Company has not invited / received any fxed deposits during the
period.
DIRECTORS' RESPONSIBILITY STATEMENT
In terms of provisions of Secton 217 (2AA) of the Companies Act, 1956,
("Act"), your Directors confrm that:
(i) In the preparaton of the annual accounts, the applicable accountng
standards have been followed, alongwith proper explanaton relatng to
material departures, wherever applicable.
(ii) The Directors have selected such accountng policies and applied
them consistently and made judgments and estmates that are reasonable
and prudent so as to give a true and fair view of the state of afairs
of the Company, as at the end of the accountng year and of the loss of
the Company for the period.
(iii) The Directors have taken proper and sufcient care for the
maintenance of adequate accountng records in accordance with the
provisions of the Act for safeguarding the assets of the Company and
for preventng and detectng fraud and other irregularites.
(iv) The Directors have prepared the annual accounts on a going concern
basis.
DIRECTORS
As per provisions of the Companies Act, 2013, Mr. Akihiro Watanabe, Dr.
Anthony H. Wild, Mr. Percy K. Shrof and Mr. Rajesh V. Shah, Independent
Directors, are proposed to be reappointed at the ensuing AGM for a term
of fve years. Mr. Takashi Shoda, Non-Executve-Non-Independent Director,
retres by rotaton at the ensuing AGM and being eligible ofers himself
for re-appointment.
CORPORATE GOVERNANCE
Report on Corporate Governance alongwith the Certfcate of the Auditors,
M/s. B S R & Co. LLP, confrming compliance of conditons of Corporate
Governance as stpulated under Clause 49 of the Listng Agreement with
the Stock Exchanges forms part of the Annual Report.
COST AUDIT
M/s. R. J. Goel & Co., Cost Accountants, were appointed as the Cost
Auditor of the Company and their Audit report on the Cost Accounts of
the Company for the 15 months period ended March 31, 2014, will be
submited to the Central Government in due course.
In terms of the Companies (Cost Accountng Records and Compliance)
Rules, 2011, Cost Audit Report for the year ended December 31, 2012 was
fled on June 8, 2013, well before the last date of fling being June 30,
2013.
AUDITORS
M/s. B S R & Co. LLP, Chartered Accountants, retre as Auditors of the
Company at the conclusion of ensuing Annual General Meetng and have
confrmed their eligibility and willingness to accept the ofce of the
Auditors, if reappointed.
AUDITORS' REPORT
With regard to the comments contained in the Auditors' Report,
explanatons are given below :-
(i) The accumulated losses of the Company at the end of the current
period are more than ffy percent of its net worth (Computed without
adjustng accumulated losses) and the Company incurred cash losses in
the current period (Clause x of the Annexure to the Auditors' Report)
The accumulated losses are primarily due to provision created (net of
reversal) for setlement with the Department of Justce (DOJ) of the
United States of America for resoluton of civil and criminal allegatons
by the DOJ (refer to note 8 of the fnancial statements) in earlier
years. The Company has incurred cash losses during the current period
primarily due to US FDA related remediaton costs and certain exceptonal
items including loss on foreign exchange opton derivatves and inventory
provision/ write of and other costs at Toansa and Mohali plants.
(ii) Short Term funds used for long term purposes (Clause xvii of the
Annexure to the Auditors' Report)
The Company had created a provision for setlement (net of reversal
during the current period) with the DOJ during the year ended December
31, 2011, which is currently refected as payable of Rs.29,238.60
million to a subsidiary (refer to note 8 of the fnancial statements).
This has resulted in long-term funds being lower by Rs.35,175.73
million compared to long-term assets as at 31 March 2014. Accordingly,
short term funds of Rs.35,175.73 million have been used for long-term
purposes. The Company expects to overcome the situaton in the near
future.
(iii) Procedures of physical verifcaton of inventories and maintaining
proper records of inventories and fraud reported on the Company (clause
(ii)(b), (c) and clause (xxi) of the Annexure to the Auditors' Report)
During the current period, the Company has writen-down carrying amount
of inventory by Rs.424 million, consequent to the fndings of an
exercise carried out by the management in response to certain internal
informaton received by it. The fndings primarily concluded intentonal
incorrect inventory management of certain intermediate products by
certain manufacturing unit level staf resultng in yield mismanagement
and consequent incorrect higher quantty of inventories. Appropriate
actons have been taken by the Company including strengthening of
internal controls.
(iv) Slight delay in deposit of statutory dues (clause ix(a) of the
Annexure to the Auditors' Report).
In few cases, there was slight delay in depositng small amounts of
statutory dues. Requisite correctve actons have been taken.
STATEMENT OF EMPLOYEES
Statement of partculars of employees as required under Secton 217(2A)
of the Companies Act, 1956 ("Act") and Rules framed thereunder forms
part of the Annual Report. However, in terms of the provisions of
Secton 219(1)(b) (iv) of the Act, this Report and Accounts are being
sent to all the shareholders excluding the Statement of partculars of
employees under Secton 217(2A) of the Act. Any shareholder interested
in obtaining a copy of the statement may write to the Company Secretary
at the Corporate Ofce of the Company.
ACKNOWLEDGEMENTS
The Directors hereby wish to place on record their appreciaton of the
signifcant contributon made by each and every employee of the Company.
The Directors also thank all other stakeholders for their support and
encouragement. Your Directors look forward to your contnued support in
the years to come.
On behalf of the Board of Directors
Gurgaon Dr. Tsutomu Une
May 9, 2014 Chairman |