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SUN PHARMACEUTICAL INDUSTRIES LTD.

20 June 2024 | 04:06

Industry >> Pharmaceuticals

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ISIN No INE044A01036 BSE Code / NSE Code 524715 / SUNPHARMA Book Value (Rs.) 265.35 Face Value 1.00
Bookclosure 09/02/2024 52Week High 1639 EPS 39.91 P/E 36.86
Market Cap. 352942.17 Cr. 52Week Low 977 P/BV / Div Yield (%) 5.54 / 0.92 Market Lot 1.00
Security Type Other

DIRECTOR'S REPORT

You can view full text of the latest Director's Report for the company.
Year End :2023-03 

Your Directors take pleasure in presenting the Thirty-first Annual Report and Company's Audited Financial Statements for the financial year ended March 31, 2023 (‘FY23').

Financial Results

in Million)

Standalone

Consolidated

Year ended March 31, 2023

Year ended March 31, 2022

Year ended March 31, 2023

Year ended March 31, 2022

Revenue from operations

208,121.4

155,859.8

438,856.8

386,544.9

Profit before exceptional item and tax

46,788.4

21,273.9

95,798.8

90,481.4

Exceptional Item

29,377.9

18,205.3

1,714.5

45,668.2

Profit before tax but after exceptional item

17,410.5

3,068.6

94,084.3

44,813.2

Profit after tax

16,907.2

(999.9)

85,608.4

34,058.2

Opening balance in Retained Earnings

136,120.8

159,645.5

376,456.5

365,980.9

Closing balance in Retained Earnings

127,908.8

136,120.8

436,102.5

376,456.5

Material changes and commitments affecting the financial position of the Company, between the end of the financial year and the date of this report

There have been no material changes and commitments affecting the financial position of the Company, between the end of the financial year and the date of this report.

Consolidated Accounts

The consolidated financial statements for the year ended March 31, 2023 pursuant to Section 129(3) of the Companies Act, 2013, form part of this Annual Report.

Dividend

During the year under review, the Directors have declared an interim dividend of ^ 7.50/- (Rupees Seven and Paise Fifty only) per equity share of ^ 1/- (Rupee One only) each [previous year ^ 7.00/- (Rupees Seven only) per equity share of ^ 1/- (Rupee One only) each] for the year ended March 31, 2023.

In addition to above, the Directors have recommended a final dividend of ^ 4.00/- (Rupees Four only) per equity share of ^ 1/- (Rupee One only) each [previous year ^ 3.00/-(Rupees Three only) per equity share of ^ 1/- (Rupee One only) each] for the year ended March 31, 2023, subject to the approval of the shareholders at the ensuing 31st Annual General Meeting of the Company.

The total dividend payout for the FY23 is ^ 11.50/- (Rupees Eleven and paise fifty only) per equity share of ^ 1/- each [previous year ^ 10.0/- (Rupees Ten only) per equity share of ^ 1/- (Rupee One only) each].

The dividend payout is in accordance with the Company's Dividend Distribution Policy. The policy is available on the website of the Company, https://sunpharma.com/policies.

Transfer to Reserves

The Directors do not propose any transfer to reserve.

Loans, Guarantees & Investments

The particulars of loans, guarantees and investments have been disclosed in the Financial Statements.

Public Deposits

The Company has not accepted any deposit from the public during the year under review.

Changes in Capital Structure

During the year under review there was no change in the capital structure of the Company.

Credit Rating

The highest credit rating has been reaffirmed by CRISIL and ICRA and the ratings are disclosed in the Corporate Governance Report which forms part of this Annual Report.

Subsidiaries/ Joint Ventures/ Associates

The statement containing the salient features of the Financial Statements of the Company's subsidiaries/ joint ventures/ associates is given in Form AOC - 1, provided in Notes to the Consolidated Financial Statements, forming part of this Annual Report.

During the year under review, apart from the other acquisitions, the Company has completed the acquisition of Concert Pharmaceuticals, Inc. which was a strategic investment to strengthen global specialty product portfolio of the Company.

Details pertaining to entities that became subsidiaries/ joint ventures/ associates and those that ceased to be the subsidiaries/ joint ventures/ associates of the Company during the year under review are provided in the notes to the Consolidated Financial Statements, forming part of the Annual Report.

Directors and Key Managerial Personnel

During the year, following were the changes in Director/ Key Managerial Personnel:

1. Mr. Dilip Shanghvi (DIN: 00005588) is re-appointed as Managing Director for a further period of 5 years, from April 1, 2023 to March 31, 2028 at the 30th Annual General Meeting held on August 29, 2022.

2. Mr. Gautam Doshi (DIN: 00004612) is re-appointed as an Independent Director for a second term of 5 years, from May 25, 2023 to May 24, 2028 at the 30th Annual General Meeting held on August 29, 2022.

3. Mr. Sanjay Asher (DIN: 00008221) is appointed as an Independent Director for a term commencing from November 1, 2022 till March 31, 2025, by the shareholders vide resolution passed by Postal Ballot on January 27, 2023.

4. Mr. Israel Makov (DIN: 05299764) retired and ceased to be the Chairman and Director upon the conclusion of 30th Annual General Meeting held on August 29, 2022.

5. Mr. Kalyanasundaram Subramanian (DIN: 00179072) retired and ceased to be the Director effective from February 13, 2023.

After the year end and upto the date of the Report, following were the changes:

6. The Board of Directors at its meeting held on May 26, 2023, on the recommendation by Nomination and Remuneration Committee, has approved the appointment of Mr. Rolf Hoffmann as an Independent Director for a term of five years to be effective from the date of allotment of Director Identification Number, subject to approval of the shareholders.

7. The Board of Directors at its meeting held on May 26, 2023, on the recommendation by Nomination and Remuneration Committee, has approved the appointment and remuneration of Mr. Aalok Shanghvi (DIN: 01951829) as a Whole-time Director for a term of five years effective from June 1, 2023, subject to approval of the shareholders.

Mr. Sudhir Valia Director of the Company, retires by rotation at the ensuing 31st Annual General Meeting, and being eligible has offered himself for re-appointment.

The necessary disclosures required under the Companies Act, 2013 (“Act”) and the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) and Secretarial Standards-2 on General Meetings issued by the Institute of Company Secretaries of India, for the above-mentioned appointments/ re-appointment are provided in the 31st Annual General Meeting Notice of the Company.

Declaration by Independent Directors

The Company has received declarations from all the Independent Directors confirming that they meet with the criteria of independence as prescribed under Section 149(6) of the Act and the Regulation 16(1)(b) of the Listing Regulations. In the opinion of the Board, the Independent Directors fulfil the conditions specified under the Act and the Listing Regulations and are independent of the management.

Familiarisation Programme for the Independent Directors

In compliance with the requirements of Regulation 25(7) of the Listing Regulations, the Company has put in place a Familiarisation Programme for the Independent Directors to familiarise them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model etc. The details of the Familiarisation Programme conducted are available on the website of the Company: https://sunpharma.com/policies.

Evaluation of performance of the Board, its Committees and Individual Directors

During the year, annual performance evaluation of the Board and Committees of the Board, individual Directors including the Chairman of the Company, was carried out as per the criteria and process approved by Nomination and Remuneration Committee, which is in line with the SEBI Guidance Note on Board Evaluation.

The Board discussed upon the outcome of performance evaluation and concluded that they were satisfied with the overall performance of the Board and Committees of the Board and Directors individually. The Board also assessed the fulfilment of the independence criteria by the Independent Directors of the Company and their independence from the management as specified in the Listing Regulations.

The performance evaluation of the Non-Independent Directors and the performance of the Board as a whole was discussed at the separate meeting of the Independent Directors as well.

Remuneration policy for Directors, Key Managerial Personnel and Other Employees and Criteria for appointment of Directors

The Company has in place a process for selection of any Director, wherein the Nomination and Remuneration Committee identifies persons of integrity who possess relevant expertise, experience and leadership qualities required for the position and the Committee also ensures that the incumbent fulfils such criteria with regard to qualifications, positive attributes, independence, age and other criteria as laid down under the Act, Listing Regulations or other applicable laws and the diversity attributes as per the Board Diversity Policy of the Company.

Further, the Company has a Policy on remuneration of Directors, Key Managerial Personnel and other Employees. The salient features of the Remuneration Policy of the Company are as under:

A. Guiding Principles for remuneration: The Company shall remunerate all its personnel reasonably and sufficiently as per industry benchmarks and standards. The remuneration shall be commensurate to retain and motivate the human resources of the Company. The compensation package will, inter alia, take into account the experience of the personnel, the knowledge & skill required including complexity of his job, work duration and risks associated with the work, and attitude of the employee like positive outlook, team work, loyalty etc.

B. Components of Remuneration: The following will be the various remuneration components which may be paid to the personnel of the Company based on the designation and class of the personnel.

(a) Fixed compensation

(b) Variable compensation

(c) Share based payments

(d) Non-monetary benefits

(e) Gratuity/group insurance

(f) Commission

The Remuneration Policy as approved by the Board is available on the website of the Company and can be accessed through the web link: https://sunpharma.com/policies.

Information as per Section 197 (12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in ‘Annexure - A' to this Report. Further, the information pertaining to Rule 5(2) and 5(3) of the aforesaid Rules, pertaining to the names and other particulars of employees is available for inspection at the Registered office of the Company during business hours and the Annual Report is being sent to the members excluding this. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary and Compliance Officer either at the Registered/ Corporate Office address or by email to secretarial@sunpharma.com.

Management Discussion and Analysis

The Management Discussion and Analysis as prescribed under Part B of Schedule V read with Regulation 34(3) of the Listing Regulations is provided in a separate section and forms part of this Report which includes the state of affairs of the Company.

Corporate Governance Report

The Corporate Governance Report and the Certificate from the Auditors of the Company as stipulated in Schedule V of the Listing Regulations, are provided in a separate section and forms part of this Report.

Board Meetings

The Board of Directors of the Company met 6 (six) times during the year under review. The dates of the Board meeting and the attendance of the Directors at the said meetings are provided in the Corporate Governance Report, which forms a part of this Report.

Committees of the Board

As on March 31, 2023, the Board has 6 (six) Committees. Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee, Corporate Social Responsibility Committee and Corporate Governance & Ethics Committee.

The details pertaining to the meetings and composition of the Committees of the Board are included in the Corporate Governance Report, which forms part of this Report.

Related Party Transactions

The policy on Related Party Transactions as approved by the Board is available on the website of the Company, https://www.sunpharma.com/policies. All contracts/ arrangements/ transactions entered by the Company during the year under review with the related parties were in the ordinary course of business and on an arm's length basis.

As required under Section 134(3)(h) of the Act, details of transactions entered with related parties under the Act are given in Form AOC-2, provided as ‘Annexure - B' to this Report.

Internal Controls and Internal Financial Controls

The management believes that internal controls are the prerequisite of governance and that action emanating from agreed business plans should be exercised within a framework of checks and balances. The management is committed to ensuring adequate internal controls environment commensurate with the size and complexity of the business, which assures compliance with internal policies, applicable laws and regulations, ensures reliability and accuracy of records, promotes operational efficiency, protects resources and assets, helps to prevent and detect fraud, errors and irregularities and overall minimises the risks.

The Company has a well-established internal controls framework comprising a set of policies, procedures and systems, instrumental in enhancing the efficiency and effectiveness of business operations, reducing risks and costs, and improving decision-making and accountability.

Internal financial controls framework, sub-set of internal controls framework assures the reliability and accuracy of financial reporting and the preparation of financial statements for external purposes following generally accepted accounting principles.

Whistle-Blower Policy/Vigil Mechanism

As a Company of repute and global standing, Sun Pharma is committed to conducting its business by adopting the highest standards of professional integrity and ethical behaviour. The organisation has a detailed Global Code of Conduct (‘Code') that directs the Employees to uphold the Company values and urges them to conduct business with integrity and the highest ethical standards. Management intends to prevent the occurrence of any practice not in compliance with this Code through the Global Whistle Blower Policy. This mechanism aims to provide a secure environment to Employees for responsible reporting of Code violations by Employees. The Board approved Global Whistle-blower Policy is available on the website, https://sunpharma.com/policies. Further details on the vigil mechanism of the Company are provided in the Corporate Governance Report, forming part of this Report.

Global Internal Audit

An independent and empowered Global Internal Audit Function (GIA) at the corporate level with support from highly skilled and reputed external audit firms, carries out risk-based internal audits of the Company's operations, governance, risk management and internal controls wherever required. GIA audits all businesses & support functions on a rotation basis to ensure that business process controls are adequate and functioning effectively. These reviews include financial, operational, and compliance controls' design and operating effectiveness and risk mitigation plans.

The GIA department comprises qualified Chartered Accountants, Certified Internal Auditors, Certified Information System Auditors, Certified Fraud Examiners, Company Secretaries, MBAs and Engineers. GIA provides assurance and advice to management on improving the effectiveness and efficiency of the Company's processes and systems.

GIA's functioning is governed by the Audit Charter, duly approved by the Audit Committee of the Board, which stipulates matters contributing to the proper and effective conduct of the audit. The Audit Committee of the Board periodically reviews key findings, provides strategic guidance, and monitors the performance of the GIA function.

The Company's operating management closely monitors the internal control environment and ensures that the audit recommendations are effectively implemented.

Enterprise Risk Management

The Board of Directors has constituted a Risk Management Committee which is entrusted with the responsibility of overseeing various organisational risks. The Corporate Governance Report, which forms part of this Report, contains the details of the Risk Management Committee of the Company. The Risk Management Committee assesses the adequacy of mitigation plans to address such risks.

The Board approved an overarching Risk Management Policy. The Policy synopsis is available on the website at https://sunpharma.com/policies.

The Company has developed and implemented an integrated Enterprise Risk Management (ERM) Framework through which it identifies, assesses, prioritises, mitigates, monitors, reports and manages, critical risks impacting its ability to meet its key strategic and operational objectives. ERM helps to align the risk appetite and strategy of the organisation, enhance risk response decisions, reduce operational surprises and losses, and improve stakeholder confidence and trust.

The ERM team engages with all Functional heads/designees to identify internal and external events that may harm the achievement of the Company's objectives and periodically monitors changes in both internal and external environments leading to a new threat/risk. Risks are categorised into various categories viz. Financial, Operational, Sectorial, Sustainability, Cyber, Strategic, Compliance, Social, GeoPolitical, Third-Party etc. These risks are captured in a risk register with all the relevant information such as risk area, risk description, risk rating, root cause, mitigation plans, action items etc. The risk register is refreshed periodically.

AUDITORS Statutory Auditors

S R B C & Co. LLP, Chartered Accountants, (Firm's Regn.

No. 324982E/ E300003), were re-appointed as the Statutory Auditors of the Company for a period of 5 (five) years at the 30th Annual General Meeting of the Company to hold office till the conclusion of the 35th Annual General Meeting of the Company.

The Auditor's Report for the financial year ended March 31, 2023, has been issued with an unmodified opinion, by the Statutory Auditors. Further, the Statutory Auditors of the Company have not reported any fraud as specified under Section 143(12) of the Companies Act, 2013.

Secretarial Auditor

The Board had appointed KJB & Co. LLP, Practicing Company Secretaries, to undertake the Secretarial Audit of the Company for the financial year ended March 31, 2023. The Secretarial Audit Report in the Form No. MR - 3 for the year is provided as ‘Annexure - C1' to this Report.

The Secretarial Audit Report for the year does not contain any qualification, reservation or adverse remark except a comment, as follows, which, in the opinion of the Board is self-explanatory.

“We report that the UDIN and date of issue of certificate annexed in the Annual Report for FY 2021-22, issued under Regulation 34 read with Schedule V, Para C, Clause 10(i) of SEBI LODR Regulations was incorrectly mentioned. It is clarified that there is no change in the contents of such certificate and such certificate was without any qualifications.’’

In accordance with the provision of Regulation 24A of the Listing Regulations, Secretarial Audit of two material unlisted Indian subsidiaries of the Company namely, Sun Pharma Laboratories Limited (SPLL) and Sun Pharma Distributors Limited (SPDL), was undertaken by KJB & Co. LLP, Practicing

Company Secretaries, Mumbai and the Secretarial Audit Reports issued by them are provided as ‘Annexure - C2' and ‘Annexure - C3' respectively to this Report. The Secretarial Audit Reports for these material unlisted Indian subsidiaries do not contain any qualification, reservation or adverse remark.

Cost Auditor

The Board has appointed K D & Co, Cost Accountants, (Firm's Registration No. 004076) as Cost Auditor of the Company for conducting Cost Audit in respect of Bulk Drugs & Formulations of your Company for the FY23.

The Company has maintained the Cost Records as specified by the Central Government under Section 148(1) of the Act.

Business Responsibility & Sustainability Report

The Business Responsibility and Sustainability Report of the Company for the year ended March 31, 2023, is provided in a separate section and forms part of this Annual Report and is also made available on the website of the Company at https://sunpharma.com/investors-annual-reports-presentations.

Corporate Social Responsibility

In compliance with the requirements of Section 135 of the Act read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the CSR Policy of the Company is available on the website of the Company and can be accessed through the web link: https://sunpharma. com/policies.

The Annual Report on CSR activities containing details of expenditure incurred by the Company and brief details on the CSR activities are provided in ‘Annexure - D' to this Report.

Conservation of energy, technology absorption and foreign exchange earnings and outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014, is provided as ‘Annexure - E' to this Report.

Human Resources

FY23 was an exciting year for everyone. Our 41,000 strong global workforce worked relentlessly to ensure medicines continue to reach patients who rely on us. Driven by Sunology, our employees spread across manufacturing

sites, distribution centres, R&D centres and sales offices worldwide enabled us in delivering a high performance.

The top priority for the Human Resource function is to provide a work environment which is safe, diverse, inclusive and full of growth opportunities.

Your Directors would like to take this opportunity to express their gratitude and appreciation for the passion, dedication and commitment of the employees and look forward to their continued contribution.

Disclosure under the sexual harassment of women at workplace (Prevention, Prohibition and Redressal) act, 2013

Your Company strongly believes in providing a safe and harassment free workplace for each and every individual working for the Company through various interventions and practices. It is the continuous endeavour of the Management of the Company to create and provide an environment to all its employees that is free from discrimination and harassment including sexual harassment. The Company has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Company has arranged various interactive awareness workshops in this regard for the employees at the manufacturing sites, R & D set ups & corporate office during the year under review.

There were four complaints received during the year. All the complaints were disposed of and no complaints were pending as on the end of March 31, 2023.

Your 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.

Significant and material orders passed by the regulators or courts or tribunals

There are no significant and material orders passed by the regulators or courts or tribunals which impact the going concern status of the Company.

Annual Return

The Annual Return as required under sub-section (3) of Section 92 of the Companies Act, 2013 (‘the Act') in form MGT-7 is made available on the website of the Company and can be accessed at https://sunpharma.com/annual-return


Secretarial Standards

The Company has complied with the applicable Secretarial Standards as amended from time to time.

Other Disclosures

There are no proceedings initiated/ pending against your Company under the Insolvency and Bankruptcy Code, 2016 and there is no instance of one-time settlement with any Bank or Financial Institution.

Cyber Security Incident

In March 2023, the Company experienced an IT Security Incident that impacted some of the Company's IT assets and operations. Based on the Company's investigation, the Company currently believes that the incident's effects on its IT system include a breach of certain file systems and the theft of Company data and personal data. A ransomware group has claimed responsibility for this incident. As part of the Company's containment and remediation efforts, the Company has taken various measures, including but not limited to strengthening its cybersecurity infrastructure to safeguard against such risks in the future. The details on the IT Security Incident are also provided in Note 55(11) of the standalone financial statements.

Directors’ Responsibility Statement

Pursuant to the requirements under Section 134(5) read with Section 134(3)(c) of the Act, with respect to Directors' Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2023, the applicable accounting standards have been followed and there are no material departures from the same;

(b) the Directors have selected such accounting policies and applied them 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 March 31, 2023 and of the profit of the Company for the year ended on that date;

(c) the Directors 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 other irregularities;

(d) the Directors have prepared the annual accounts on a going concern basis;

(e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgements

Your Directors wish to thank all stakeholders, employees and business partners, Company's bankers, medical professionals and business associates for their continued support and valuable cooperation.

The Directors also wish to express their gratitude to investors for the faith that they continue to repose in the Company.

For and on behalf of the Board of Directors

Mr. Dilip Shanghvi Mr. Sailesh Desai

Managing Director Whole-time Director

(DIN: 00005588) (DIN: 00005443)

Place: Mumbai Date: May 26, 2023