To the Members
Your Directors have pleasure in presenting their report on the business
and operations of your Company for the year ended March 31, 2018.
( Rs in million)
|Profit before interest, depreciation and tax
|Less: Finance Costs
|Less: Depreciation and amortisation
|Profit before share of profit from Jointly
|Controlled Entity and exceptional items
|Add: Share of Profit from Jointly Controlled Entity
|Less: Exceptional Items (Impairment of intangible assets)
|Less: Provision for taxation (including deferred tax)
|Profit after tax and before non-controlling interest
|Less: Non-controlling Interest
|Net Profit attributable to shareholders of the Company
Consolidated sales for the year ended March 31, 2018 were Rs 155598.4
million. International business contributes 71%.
Consolidated profitbefore interest, depreciation & amortisation,
exceptional item and tax was Rs 32978.6 million as against Rs 45996.5 million of the
previous year mainly on account of lower sales and margins in the USA. Net profit for the
year after exceptional item (impairment of certain intangible assets) was Rs 2512.6
On March 8, 2016, the Company, through its wholly-owned subsidiary,
Lupin Inc., USA, acquired Gavis Pharmaceuticals, LLC, USA Novel Laboratories, Inc., USA,
VGS Holdings, Inc., USA, Edison Therapeutics, LLC, USA and Novel Clinical Research (India)
Private Limited, India (collectively Gavis'), for a consideration of USD 892
million. The consideration paid was allocated between IPs for current marketed products,
ANDAs filed, products under R&D, fixed assets, working capital and goodwill on
acquisition. Significant pressure in the US generic pricing, particularly in the opioid
space (large part resulted in impairment on certain intangible assets acquired as a part
of Gavis acquisition. Each product in the Gavis portfolio was tested for its fair value
factoring the current and expected market conditions by comparing the carrying value in
the books with the value in use. The fair value was determined by an independent external
valuer after taking into consideration parameters like sales growth, weighted average cost
of capital, terminal growth rate etc. In line with conservative accounting principles, an
impairment provision of USD 227.2 million (Rs 14643 million) was made on certain
intangible assets of Gavis portfolio. Deferred tax for the year ended March 31, 2018
includes deferred tax assets of Rs 3223 million created on the difference between tax and
book value of certain intangible assets of Gavis portfolio.
Your Directors are pleased to recommend dividend at Rs 5/- per equity
share of Rs 2/- each, absorbing an amount of Rs 2260.5 million. Corporate tax on proposed
dividend is Rs 464.7 million.
As stipulated by Regulation 43A(1) of SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (Listing Regulations'), the Dividend
Distribution Policy has been hosted on the website of the Company www.lupin.com, (web
During the year, the paid-up equity share capital of the Company rose
by Rs 1 million consequent to the allotment of 505,981 equity shares of Rs 2/- each to
eligible employees of the Company and its subsidiaries on exercising stock options under
Lupin Employees Stock Option Plan 2003', Lupin Employees Stock Option
Plan 2005', Lupin Employees Stock Option Plan 2011', Lupin Employees
Stock Option Plan 2014, Lupin Subsidiary Companies Employees Stock Option Plan
2005' and Lupin Subsidiary Companies Employees Stock Option Plan 2011'.
Paid-up equity share capital as on March 31, 2018 was Rs 904.2 million.
ICRA Limited (ICRA) assigned the rating ICRA A1+'
(pronounced ICRA A one Plus') for the Company's short-term credit
facilities of Rs 13100 million, indicating very strong degree of safety regarding timely
payment of financial obligations and
ICRA AAA' (pronounced ICRA triple A') for
long-term credit facilities of Rs 1900 million, indicating highest degree of safety
regarding timely servicing of financial obligations. The outlook on the long-term rating
ICRA assigned the rating ICRA AAA' to the
Company's Non-Convertible Debenture programme of Rs 1000 million, indicating highest
degree of safety regarding timely servicing of financial obligations. The outlook on the
rating is Stable'.
Goods and Services Tax (GST)
GST, which was implemented on July 1, 2017 as one nation one
tax', is an all pervasive event. It has comprehensively impacted consumption of all
goods and services, triggering a colossal change in the way business dealings take place.
GST, which is still evolving, provides an opportunity to reset the way business
transactions could be optimized for efficiency in cost and quality.
Due to its multifaceted impact, GST has become an important factor in
competitive businesses environment.
GST on API and Formulations is 18% and 12% respectively. While the
headline indirect tax rate on API/Bulk drugs remains constant, the rate increased from
10.5% to 12% on Formulations. However, the increase in headline tax is likely to be offset
by the tax efficiencies that may accrue on procurements.
Your Company is geared to deal with the challenges thrown up as a
result of numerous amendments made by the Government viz: implementation of E-Way Bill
system, matching credit concepts, anti-profiteering provisions, etc.
During the year, the Company through its US subsidiary, Lupin Inc.,
acquired Symbiomix Therapeutics, LLC. The acquisition of Symbiomix and its SolosecTM
franchise significantly expands your Company's branded women health specialty
Subsidiary Companies/Joint Venture
As on March 31, 2018, the Company had 33 subsidiaries and a joint
On February 5, 2018, Lupin Atlantis Holdings SA, Switzerland,
wholly-owned subsidiary of the Company, incorporated Lupin Europe Gmbh, Germany, for
holding product registrations.
An application has been made to the Registrar of Companies, Bangalore,
for removal of the name of Novel Clinical Research (India) Pvt. Ltd., wholly-owned
subsidiary of the Company, from the Register of Companies w.e.f. March 27, 2018 and Order
pursuant to the said application is awaited.
Pursuant to the first proviso to Section 129(3) of the Companies Act,
2013 (Act') and Rules 5 and 8(1) of the Companies (Accounts) Rules, 2014,
salient features of the financial statements, performance and financial position of each
subsidiary and joint venture are given in Form No. AOC - 1 as Annexure A'
to this Report.
As stipulated by Regulation 46(2)(h) of the Listing Regulations, the
policy for determining material subsidiaries has been hosted on the Company's website
www.lupin.com (web link: http://www.lupin.com/pdf/Policy_for_determining_material_
Management Discussion and Analysis
As stipulated by Regulation 34(3) read with Schedule V(B) of the
Listing Regulations, Management Discussion and Analysis forms part of this Annual Report.
As stipulated by Regulation 34(3) read with Schedule V(C) of the
Listing Regulations, Corporate Governance Report forms part of this Annual Report. Annexed
to the said Report is the Auditors' certificate as prescribed under Schedule V(E) of
Listing Regulations certifying compliance with the conditions of
Business Responsibility Report
As stipulated by Regulation 34(2)(f) of the Listing Regulations, the
Business Responsibility Report forms part of this Annual Report.
Corporate Social Responsibility (CSR)
In dedication of high moral values, Lupin Human Welfare and Research
Foundation (LHWRF), the CSR arm of the Company, has been undertaking social responsibility
activities since 1988. LHWRF forges knowledge partnerships with domain experts and reputed
academic and technical institutes like IITs, to develop and deploy appropriate
technologies to the rural poor. LHWRF mobilizes resources from banks and government to
achieve high impact in its chosen geographic area of operations. LHWRF which operates
across 18 centers has touched lives of more than 2.5 million residing in more than 4171
villages located in 62 blocks of 22 districts.
LHWRF carried out GRI 4 sustainability reporting process and it is
first corporate foundation to do so in India. LHWRF possesses elaborate and well-set
implementation mechanism at grass-root level and creates replicable and ever-evolving
models for sustainable rural development for uplifting families living below the poverty
line with a view to transform rural lives and improve Human Development Indices. LHWRF
adopts a holistic development approach and focuses on rural development programmes which
help promote equitable economic and social development.
Pursuant to the provisions of Section 135 of the Act read with
Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company ought to have
spent Rs 750.5 million on CSR activities during the year. The actual spend was Rs 216.8
million. The Company undertakes the following CSR activities: -
Natural Resource Management;
Rural Infrastructure Development;
Learn and Earn Programme; and
The Company plans to accelerate its CSR spend by setting-up a
state-of-the-art JCI and NABH accredited hospital through Lupin Foundation', a
charitable trust, set up by the Company. The proposed hospital would offer a wide mix of
therapies which shall entail huge investment in land, infrastructure, medical
equipments/instruments, over the next few years.
The Company has also engaged services of a reputed consultancy firm for
conducting preliminary feasibility study. The Company is in the process of identifying the
right opportunity and is looking out for a suitable plot in Mumbai for setting-up a
hospital. The Company has explored eight sites in Mumbai, keeping in mind strategic
location, accessibility, presence of major hospitals/nursing homes and
diagnostic/pathology centers in the vicinity, etc. While some plots were narrow or too
small, others were reserved in the Development Plan or were encroached upon or had
In the course of business, the Company spent on a number of social
causes which strictly may not qualify as CSR activities viz., Punarjyoti'
(Rebirth of Eyes'), campaign which promotes the noble message of eye donation
after death, Respiratory Clinics' to increase awareness of respiratory
diseases, Focused Learning in lnterventional Pulmonology' programmes for
doctors, multilingual website Right2breathe' to educate patients about Asthma
and Allergies. With a view to provide affordable medicines to the common man, the Company
consistently spends large amounts on Research & Development which, though, is for a
social cause, does not qualify as a CSR activity.
Particulars of CSR activities undertaken by the Company are given in Annexure
B' to this Report. The CSR policy as approved by the Board has been hosted
on the Company's website www.lupin.com.
Directors' Responsibility Statement
In compliance with the provisions of Section 134(3)(c) read with
Section 134(5) of the Act, your Directors confirm:
i) that in the preparation of the annual financial statements for the
year ended March 31, 2018, the standards have been followed along with proper explanations
relating to material departures;
ii) that they had selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of your Company at the end of the
financial year March 31, 2018 and of the profit of your Company for that year;
iii) that they have taken proper and sufficient care 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
iv) that the annual financial tatements have been prepared on a
going concern basis;
v) that they had laid down proper internal financialcontrols and that
the same are adequate and were operating effectively; and
vi) that they had devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate and operating
The Board places on record the invaluable contributions of Late Dr.
Desh Bandhu Gupta, Founder & Chairman of the Lupin group and doyen of the Indian
Pharma Industry who passed away on June 26, 2017. The exemplary vision and perseverance of
Dr. Gupta helped the Company to become one of the most admired organisations. The Board
appointed Mrs. Manju D. Gupta as Non-Executive Chairman of the Company, for a period of
two years, effective August 11, 2017 considering her wide experience, moderating influence
and quiet demeanor.
As recommended by the Nomination and Remuneration Committee, the Board,
at its meeting held on May 15, 2018, re-appointed Mr. Nilesh Deshbandhu Gupta, Managing
Director, for a period of five years, effective September 1, 2018, subject to approval of
the Members. Mr. Gupta has been responsible for transforming the Company's research
programme and expanding its manufacturing operations as also instrumental in formulating
and executing the core strategy that helped the Company to emerge as a global specialty
Pursuant to the provisions of Section 152 of the Act, Mr. Ramesh
Swaminathan, Chief Financial Officer & Executive Director, retires by rotation at the
forthcoming Annual General Meeting (AGM) and is eligible for re-appointment.
Pursuant to the provisions of Section 149(7) of the Act, the
Independent Directors have affirmed that they meet the criteria of independence prescribed
by Section 149(6) of the Act.
During the year, six Board meetings were held, on May 23, 2017, May 24,
2017, August 2, 2017, August 11, 2017, October 30, 2017 and February 6, 2018, the details
of which are given in the Corporate Governance Report which forms part of this Annual
Pursuant to the provisions of Section 134(3)(p) of the Act read with
Rule 8(4) of the Companies (Accounts) Rules, 2014, an annual evaluation was carried out by
the Board of its own performance as also of its Committees and individual Directors. The
evaluation was done by the Board after seeking inputs from all Directors, inter-alia
covering different aspects viz. composition and structure of the Board, attendance
including participation of the Directors at the Board and Committee meetings, observance
of governance, quality of deliberations and effectiveness of the procedures adopted by the
Board. In evaluating the performance of individual Directors, criteria such as
qualifications, knowledge, attendance at meetings and participation in long-term strategic
planning, leadership qualities, responsibilities shouldered, inter-personal relationships
and analytical decision making ability were taken into consideration. In compliance with
Regulation 17(10) of the Listing Regulations, the Board carried out performance evaluation
of Independent Directors without the participation of the Director being evaluated.
In compliance with the provisions of Section 177(8) of the Act and
Regulation 18 of the Listing Regulations, the Audit Committee comprises Dr. K. U. Mada,
Chairman and Mr. Dileep C. Choksi, Independent Directors and Dr. Kamal K. Sharma, Vice
Chairman. The functions performed by the Audit Committee, details of meetings held and
attendances thereat are given in the Corporate Governance Report, which forms part of this
Annual Report. The Board has accepted all the recommendations made by the Audit Committee.
Nomination and Remuneration Policy
As stipulated by Section 178(3) of the Act and Regulation 19(4) of the
Listing Regulations, the Board has, on the recommendation of the Nomination and
Remuneration Committee, framed a Policy relating to the remuneration of Directors, key
managerial personnel and other employees. The Policy includes
criteriafordeterminingqualifications, positive attributes and independence of directors
and other matters. The role of the Nomination and Remuneration Committee is disclosed in
the Corporate Governance Report, which forms part of this Annual Report. In terms of
proviso to Section 178(4) of the Act, the Nomination and Remuneration Policy has been
hosted on the Company's website www.lupin.com (web link: http://www.
Related Party Transactions
During the year, no transaction with related parties was in
conflictwith the interests of the Company. All transactions entered into by the Company
with related parties during the financial year were in the ordinary course of business and
on an arm's length pricing basis. The Company did not enter into any transaction with
its Key Managerial Personnel. Statements of transactions with related parties are
periodically placed before the Audit Committee and are approved. Material related party
transactions were entered into by the Company only with its subsidiaries. As stipulated by
Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014,
particulars of related party transactions are given in Form No. AOC - 2, as Annexure
C' to this Report. In compliance with Regulation 46(2)(g) of the Listing
Regulations, the policy on dealing with Related Party Transactions as approved by the
Board has been hosted on the Company's website www.lupin.com and web link for the
same is http://www.lupin.com/pdf/POLICY-RELATED_PARTY_TRANSACTIONS.pdf.
The Company has a structured approach for handling risks. It has in
place a Risk Management framework which defines roles and responsibilities at various
levels. Risk Management team reviews the overall risk canvas and identifies critical
risks that matter' by assessing their probability, impact and volatility. The
Risk Management Committee has a well-set monitoring process of the risk environment
through reviews, discussions and deliberations and it deploys concrete mitigation plans.
As stipulated by Regulation 21 of the Listing Regulations, the roles and
responsibilities of the Risk Management Committee has been defined by the Board.
Monitoring and reviewing the risk management plan was delegated to the Committee.
Particulars of the Risk Management Committee its terms of reference,
the details of meeting held and attendance thereat are given in the Corporate Governance
Report, which forms part of this Annual Report.
Particulars of loans/guarantees/investments/securities
In compliance with provisions of Section 134(3)(g) of the Act,
particulars of loans, guarantees, investments and securities given under Section 186 of
the Act are given in the notes to the Financial Statements forming part of this Annual
Conservation of Energy, Technology Absorption and Foreign Exchange
Earnings and Outgo
Particulars as prescribed under Section 134(3)(m) of the Act read with
Rule 8 of the Companies (Accounts) Rules, 2014 relating to conservation of energy,
technology absorption and foreign exchange earnings and outgo, are given in Annexure
D' to this Report.
Your Company firmlybelieves that human resources are invaluable assets
of the Company. In the surveys jointly conducted by Great Places to Work
Institute' and The Economic Times', the Company continued to be ranked
high on a pan-industry basis. The Company has been ranked no. 1 in the Pharmaceutical and
Biotech sector and 4th Best amongst Large Employers. The Company's
progressive people practices', deep rooted value-driven culture and employee
development efforts have been the prime reasons behind these laurels.
Employees Stock Options
Pursuant to the provisions of Regulation 14(B) of SEBI (Share Based
Employee Benefits) Regulations, 2014, details of stock options as on March 31, 2018 are
given in Annexure E' to this Report.
Vigil Mechanism/Whistleblower Policy
As stipulated by Section 177(9) of the Act read with Rule 7 of the
Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of the Listing
Regulations, the Company has in place a vigil mechanism for Directors and employees to
report concerns and provides adequate safeguards against victimization of persons who use
the mechanism. The vigil mechanism provides for direct access to the Chairperson of the
Audit Committee. Details of the same are covered in the Corporate Governance Report which
forms part of this Annual Report. Whistleblower Policy has been hosted on Company's
website www.lupin.com. Policy on Prevention of Sexual Harassment is on Company's
Particulars of Employees Remuneration
As prescribed by Section 197(12) of the Act read with Rule 5(1) of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, particulars
of remuneration of employees required to be disclosed are given in Annexure
F' to this Report. In terms of Rules 5(2) and 5(3) of the said Rules,
statement containing particulars of remuneration of employees for the year ended March 31,
2018, which forms part of the Board Report shall be provided to Members upon written
request pursuant to the second proviso of Rule 5. Particulars of remuneration of employees
are available for inspection by Members at the Registered Office of the Company during
business hours on all working days up to the date of the forthcoming AGM.
At the 34th AGM held on Wednesday, August 3, 2016, Members
appointed B S R & Co. LLP, Chartered Accountants (Firm
Registration No. 101248W/W-100022), as Statutory Auditors of the
Company, for a period of five years from the conclusion of the 34th AGM till
the conclusion of the 39th AGM, subject to ratification of their appointment by
Members at every AGM.
Pursuant to the provisions of Section 40 of the Companies Amendment
Act, 2017, which was notified on May are not required to ratify appointment of Statutory
Auditors at every AGM.
Pursuant to the provisions of Sections 139(1) and 141 of the Act, the
Company has received certifying that if they are appointed as Auditors, their appointment
would be as per the conditions prescribed by the said Sections.
Ernst & Young LLP, Mumbai, are Internal Auditors of the Company for
India operations. PricewaterhouseCoopers Private Limited are Internal Auditors of the
Company for international subsidiaries. The Company has appointed local Chartered
Accountants firms as Internal Auditors to conduct audits of Carrying
& Forwarding Agents and Central Warehouses of the
Company in India.
Pursuant to the provisions of Section 148 of the Act read with the
Companies (Cost Records and Audit) Amendment Rules, 2014 and as recommended by the Audit
Committee, the Board had appointed Mr. S. D. Shenoy, practising Cost Accountant
(FCMA, Membership No. 8318), holding a valid certificate of practice to
conduct cost audit for the year ended March 31, 2018. Mr. Shenoy had confirmed that his
appointment met the requirements of Section 141(3)(g) of the Act and that he was free from
disqualifications as specified under Section 141 read with Section 148 of the Act. He had
further confirmed that he was independent, maintained an arm's length relationship
with the Company and that no orders were pending against him relating to professional
matters of conduct before the Institute of Cost Accountants of India or any
In terms of Rule 14 of the Companies (Audit and Auditors) Rules, 2014,
remuneration payable to the Cost Auditor is required to be ratified by Members.
Accordingly, an Ordinary Resolution was passed by Members at the 35th AGM,
approving the remuneration payable to Mr. Shenoy.
In compliance with Section 148(6) of the Act and Rule 6(6) of the
Companies (Cost Records and Audit) Rules, 2014, Cost Audit Report, in Form CRA - 4 (XBRL
mode), for the year ended March 31, 2017, under the head Drugs and
Pharmaceuticals' was filed with the Central Government on October 18, 2017, well
within the prescribed time.
In terms of the provisions of Section 204 of the Act and Rule 9 of the
Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Ms. Neena
Bhatia, Company Secretary in Practice, was appointed to undertake Secretarial Audit of the
Company for the year ended March 31, 2018. Secretarial Audit Report in prescribed Form No.
MR - 3 is enclosed as Annexure G' to this Report. The Company continues
to have an unqualified Secretarial Audit Report.
Compliance with the Secretarial Standards
The Company has complied with all the provisions of Secretarial
Standards on Board Meetings and General Meetings issued by the Institute of Company
Secretaries of India and approved by the Central Government.
Extract of Annual Return
In compliance with provisions of Sections 134(3)(a) and 92(3) of the
Act read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an
extract of the Annual Return as on March 31, 2018, in prescribed Form No. MGT - 9 is given
in Annexure H' to this Report.
Your Directors commend all employees of the Company for their continued
dedication, commitment, hard work and significant contributions. They also wish to express
their deep gratitude to various departments of the Central and State governments, banks,
financialinstitutions, business associates, customers, distributors, suppliers, analysts,
medical professionals and members for their whole-hearted support and cooperation.
|For and on behalf of the Board of Directors
|Manju D. Gupta
|Mumbai, May 15, 2018