DIRECTORS' REPORT Dear Shareholders, Your Directors have pleasure in presenting their 68th Annual Report on the business and operations of the Company and the Audited Financial Statement for the financial year ended March 31, 2015. DIVIDEND The Board has recommended equity dividend of INR 20 per equity share i.e. @ 1000% on 17,25,63,100 equity shares of INR 2 each for the financial year ended March 31, 2015. The above dividend will be paid to eligible members within a period of five days from the date of the forthcoming Annual General Meeting, after approval of Members (i.e. from August 7, 2015 to August 11, 2015). The total cash outflow on account of dividend payment including dividend distribution tax thereon will be INR 415.39 Crores (FY2014 INR 1,059.93 Crores). The Board recommends the above dividend for declaration by the Members. SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR 2015 Sale of investment in Vodafone India Limited In April 2014, the Company divested its entire equity stake in Vodafone India Limited in favour of Prime Metals Limited, a subsidiary of Vodafone Group Plc, for a total consideration of INR 8,900 crores. The Company had earlier acquired this stake for a total consideration of INR 5,864 crores during FY2012. Merger of step-down wholly-owned subsidiaries with the Company In order to simplify the holding structure and improve operating efficiencies, Oxygen Bio-Research Private Limited, Piramal Pharmaceutical Development Services Private Limited and PHL Capital Private Limited, all wholly - owned / step - down subsidiaries of Piramal Enterprises Limited ("the Company") merged with the Company pursuant to the Scheme of Amalgamation sanctioned by the Hon'ble High Courts of Gujarat and Bombay, under Sections 391 to 394 of the Companies Act, 1956. Further investments in Shriram Group Companies In April 2014, the Company acquired a 20% equity stake in Shriram Capital Limited (SCL), an overarching holding company for the Financial Services Business of the Shriram Group. The total amount invested in SCL is INR 2,146 crores. In June 2014, the Company also acquired a 9.99% equity stake in Shriram City Union Finance Limited (SCUF), the retail sector focused Non-banking Financial Company (NBFC) of the Shriram Group. The total amount invested in SCUF is INR 801 crores. In November 2014, Mr. Ajay G. Piramal was appointed as Non-executive Chairman of SCL. Alliance with APG Asset Management In July 2014, the Company and APG Asset Management (APG), the Dutch pension fund asset manager, entered into a co-investment agreement for investing in infrastructure companies in India with a target investment of USD 1 billion over the next 3 years. PEL and APG had each initially committed USD 375 million for investments under this strategic alliance. Joint Venture with Navin Fluorine International Limited for specialty Fluorochemicals In August 2014, the Company entered into a Joint Venture and Shareholders' agreement with Navin Fluorine International Limited (an Arvind Mafatlal Group Company) to form a Joint Venture Company named Convergence Chemicals Private Limited. The Joint Venture Company will develop, manufacture and sell speciality Fluorochemicals to be used for the Company's healthcare business. The Joint Venture Company was incorporated on November 19, 2014. Acquisition of Coldstream Laboratories Inc. In January 2015, the Company through its wholly owned subsidiary in the US, acquired Coldstream Laboratories Inc., for a total consideration of USD 30.65 million. Coldstream, based in Kentucky, USA, is a Contract Development and Manufacturing Organisation (CDMO) focused on the development and manufacturing of sterile injectable products. Acquisition of Activate Networks Inc. During FY2015, the Company's wholly owned subsidiary in the US, Decision Resources Inc., which is engaged in the information management business, acquired Activate Networks Inc., a leading provider of network and relationship analysis for healthcare/life sciences companies. OPERATIONS REVIEW Total income from operations on a standalone basis for the year grew by 20.6% to INR 2,401.4 crores as compared with INR 1,990.5 crores in FY2014. Profit before interest, depreciation and tax (PBITDA) for FY2015 on a standalone basis grew by 48.4% to INR 743.3 crores as compared with INR 500.8 crores in FY2014. Growth in PBIDTA was driven by strong revenue performance across businesses. Net profit for the year was INR 372.7 crores as against a loss of INR 370.0 crores in FY2014. This is on account of steep reduction in finance cost primarily due to repayment of loans through amount received from monetization of our investments in Vodafone India. Also the finance cost for the previous year FY2014 included a one-time charge of INR 178.3 crores towards discounting of receivables from Abbott. Earnings per share were INR 21.6 for the year as against a loss of INR 21.4 per share during the previous year. A detailed discussion of operations for the year ended March 31, 2015 is provided in the Management Discussion and Analysis Report, which is presented in a separate section forming part of this Annual Report. RESEARCH & DEVELOPMENT In August 2014, the company decided to scale down the Research and Development activities of its India New Chemical Entity (NCE) division based in Mumbai. During FY2015, the Company started selling commercial doses of Neuraceq™ (Florbetaben) in USA, Germany, France, Austria, Spain, Netherlands and Italy and executed manufacturing and distribution agreements with partners in EU and USA. Licensing deals have also been signed for Australia, Canada & Ireland. The business has also signed its first clinical supply agreement with a pharmaceutical company developing a disease-modifying drug for Alzheimer's disease. SUBSIDIARY COMPANIES Piramal Healthcare Inc. Piramal Healthcare Inc. includes financials of its wholly-owned subsidiaries Decision Resources Group, Piramal Critical Care Inc, Piramal Pharma Inc. and Coldstream Laboratories Inc. Net sales of Piramal Healthcare Inc. for FY2015 were at INR 1710.5 crores. Profit before interest, depreciation and tax for the year was at INR 386.4 crores. Piramal Healthcare Inc. reported a net profit of INR 8.2 crores for the year. Piramal Healthcare UK Limited Net sales of Piramal Healthcare UK Limited for FY2015 were at INR 669.1 crores. Profit before interest, depreciation and tax forthe year was at INR 101.4 crores. Piramal Healthcare UK Limited reported a net profit of INR 48.3 crores for the year Piramal Healthcare (Canada) Limited Net sales of Piramal Healthcare (Canada) Limited for FY2015 were at INR 151.7 crores. Loss before interest, depreciation and tax for the year was at INR 16.6 Crores. Piramal Healthcare (Canada) Limited reported a net loss of INR 27.1 crores for the year. Piramal Critical Care Italia SPA Net sales of Piramal Critical Care Italia SPA for FY2015 were at INR 30.0 crores. Loss before interest, depreciation and tax for the year was at INR 3.4 crores. Piramal Critical Care Italia SPA reported a net loss of INR 7.2 crores for the year. Piramal Imaging SA Piramal Imaging SA includes financials of its wholly - owned subsidiaries Piramal Imaging GmBh and Piramal Imaging Limited. Net sales of Piramal Imaging SA for FY2015 were at INR 2.5 crores. Loss before interest, depreciation and tax for the year was at INR 99.8 crores. Piramal Imaging SA reported a net loss of INR 151.1 crores for the year. Piramal Finance Private Limited (Formerly known as PHL Finance Private Limited) Income from operations of Piramal Finance Private Limited for FY2015 was at INR 148.1 crores. Profit before depreciation and tax for the year was at INR 84.6 crores. Piramal Finance Private Limited reported a net profit of INR 54.6 crores for the year. Piramal Fund Management Private Limited (Formerly known as Indiareit Fund Advisors Private Limited) Piramal Fund Management Private Limited includes financials of Indiareit Investment Management Co. and Piramal Asset Management Private Limited. Income from operations for FY2015 was at INR 88.5 crores. Profit before depreciation and tax for the year was at INR 13.3 crores. Piramal Fund Management Private Limited reported a net profit of INR 9.7 crores for the year. Convergence Chemicals Private Limited Convergence Chemicals Private Limited is a 51:49 Joint Venture, between PEL and Navin Fluorine International Limited, for developing, manufacturing and selling speciality fluorochemicals. Convergence Chemicals Private Limited was incorporated during the year and reported a net loss of INR 0.6 crores for the year. Other Subsidiaries For subsidiaries engaged in CSR activities, reference may please be made to the Report on Corporate Social Responsibility Activities given at Annexure A and Form AOC-1 forming part of this Annual Report. Operative details of subsidiaries of PEL having nominal business activity or that are in the process of pursuing appropriate business opportunities are mentioned in Form AOC-1 forming part of this Annual Report. JOINT VENTURES AND ASSOCIATE COMPANIES Allergan India Private Limited (AIL) is a 51:49 Joint Venture, between Allergan Pharmaceuticals (Ireland) Ltd Inc and PEL, for ophthalmic products. Total FY2015 revenues of AIL were INR 279.7 crores. Profit before interest, depreciation and tax for the year was at INR 72.6 crores. AIL reported a net profit of INR 46.3 crores for the year. Shrilekha Financial Services is a partnership firm jointly owned by Piramal Enterprises Limited (74.95%) and Shriram Ownership Trust. During FY 2015, PEL has acquired an effective 20% equity stake in Shriram Capital Limited for an aggregate consideration of INR 2,146.16 Crores. PEL's share of profit / loss of associates include share of profit of Shriram Capital Limited amounting to INR 158.70 crores. Piramal Enterprises Limited (directly or through its subsidiaries) had acquired 27.83% stake in Bluebird Aero Systems Ltd, Israel for a consideration of USD 7 million in 2012. Profits of INR 0.57 Crores has been considered for consolidation in the year ended 31 st March, 2015. CHANGES IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES During the year under review, companies listed in Annexure B to this Report have become or ceased to become subsidiaries, joint ventures or associate companies. FINANCIAL DETAILS OF SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of subsidiaries, associates and joint venture companies (herein collectively referred to as 'Group Companies') in Form AOC 1 is attached to the Accounts. The separate audited financial statements of the Group Companies shall be kept open for inspection at the Registered Office of the Company during working hours for a period of 21 days before the date of the Annual General Meeting. Your Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. The separate audited financial statements of the Group Companies is also available on the website of your Company at http://www.piramal.com/ investors/financial-reports#parentVerticalTab2. SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE Acquisition of Health superHiway Priv> ate Limited In April 2015, the Company agreed to acquire a majority stake in Health SuperHiway Private Limited (HealthHiway), a healthcare analytics company, over the next 12 months. The Company has invested INR 0.6 crores for a minority stake and plans to invest up to an additional INR 44.2 crores in the 33 months commencing from April 2015, subject to HealthHiway achieving specified growth milestones. ADEQUACY OF INTERNAL FINANCIAL CONTROLS The Company has adequate internal financial controls in place with reference to financial statements. These are continually reviewed by the Company to strengthen the same wherever required. The internal control systems are supplemented by internal audit carried out by an independent firm of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses issues raised by both, the Internal Auditors and the Statutory Auditors. DEPOSITS Your Company has not accepted any deposits from the public and as such, no amount of principal or interest was outstanding as on the balance sheet date. STATUTORY AUDITORS AND AUDITORS REPORT In accordance with Sec 139 of the Companies Act, 2013, M/s Price Waterhouse, Chartered Accountants, were re-appointed by the shareholders of the Company at the Annual General Meeting held on July 25, 2014, as Statutory Auditors for a period of 3 years to hold office until the conclusion of the 70th Annual General Meeting of the Company in calendar year 2017. In accordance with the provisions of Section 139, 142 and other applicable provisions of the Companies Act, 2013 and of the Companies (Audit and Auditors) Rules, 2014, the appointment of the Statutory Auditors is required to be ratified by the shareholders at every Annual General Meeting during their tenure. M/s Price Waterhouse, Chartered Accountants, have confirmed that they are eligible for having their appointment as Statutory Auditors ratified at this Annual General Meeting. The Auditors Report does not contain any qualification, reservation or adverse remark on the financial statements for the year ended 31st March, 2015. The statements made by the Auditors in their Report are self - explanatory and do not call for any further comments. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Particulars regarding Conservation of energy, technology absorption and foreign exchange earnings and outgo are given as Annexure C to this Report. EXTRACT OF ANNUAL RETURN The extract of the Annual Return in Form MGT-9 is annexed herewith as Annexure D. CORPORATE SOCIAL RESPONSIBILITY The Annual Report on Corporate Social Responsibility activities for FY2015 is enclosed as Annexure A. DIRECTORS AND KEY MANAGERIAL PERSONNEL Mr. Vijay Shah - Executive Director, whose term of office was upto December 31, 2014, has been re-appointed for a further period of three years with effect from January 1, 2015, subject to approval of shareholders, which is being sought at the ensuing Annual General Meeting. There were no other changes in Directors or Key Managerial Personnel. The Company has received declarations from all its Independent Directors, confirming that they meet the criteria of independence as prescribed under the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges. In accordance with the provisions of the Companies Act, 2013, Ms. Nandini Piramal retires by rotation at the ensuing Annual General Meeting and is eligible for re-appointment. BOARD EVALUATION Evaluation of performance of all Directors is undertaken annually. The Company has implemented a system of evaluating performance of the Board of Directors and of its Committees and individual Directors on the basis of a structured questionnaire which comprises evaluation criteria taking into consideration various performance related aspects. The Board of Directors has expressed their satisfaction with the evaluation process. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS During the year 8 Board Meetings were convened and held, details of which are given in the Corporate Governance Report. VIGIL MECHANISM / WHISTLE BLOWER POLICY FOR DIRECTORS AND EMPLOYEES The Company has established a Vigil Mechanism, which includes a Whistle Blower Policy, for its Directors and Employees, to provide a framework to facilitate responsible and secure reporting of concerns of unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct & Ethics. The Whistle Blower Policy is posted on the website of the Company and the weblink to the same is http:// www.piramal.com/investors/policies-codes AUDIT & RISK COMMITTEE The Audit & Risk Committee comprises three members, all of whom are independent directors. 1. Mr. N. Vaghul - Chairman 2. Mr. Keki Dadiseth 3. Dr. R.A. Mashelkar Further details on the Audit & Risk Committee are provided in the Corporate Governance Section of the Annual Report. NOMINATION AND REMUNERATION POLICIES The Board of Directors has formulated a Policy which lays down a framework for selection and appointment of Directors and Senior Management and for determining qualifications, positive attributes and independence of Directors. The Board has also formulated a Policy relating to remuneration of Directors, members of Senior Management and Key Managerial Personnel. Details of the Nomination Policy and the Remuneration Policy are given in Annexure E. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of loans to subsidiaries are given at Note No. 42 in the financial statements. No loans have been provided to Related Parties other than Subsidiaries, Joint Ventures or Associate Companies, referred to in Note No. 42. Loans to other Bodies Corporate given by the Company in the ordinary course of business and on arms length basis and outstanding as on March 31, 2015, amounted to INR 860.29 crores. Details of Investments in all bodies corporate are given in Note Nos. 13 and 16 in the financial statements. Guarantees provided by the Company in connection with loans availed by wholly owned subsidiaries and outstanding as on March 31, 2015, amounted to INR 2,865.36 crores. RELATED PARTY TRANSACTIONS All contracts/arrangements/transactions entered by the Company during the financial year with related parties were in ordinary course of business and on arm's length basis. During the year, the Company had not entered into any contract/arrangement/transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC 2 is not applicable. Post October 1, 2014, prior omnibus approval of the Audit Committee has been obtained on an annual basis for transactions with related parties which are of a foreseeable and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all transactions with related parties are placed before the Audit Committee for their review on a periodic basis. MANAGERIAL REMUNERATION A) Remuneration to Directors and Key Managerial Personnel i. The percentage increase in remuneration of each Director, Chief Financial Officer and Company Secretary during FY2015, ratio of the remuneration of each Director to the median remuneration of the employees of the Company for FY2015 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under ii. The median remuneration of employees of the Company during FY2015 was INR 4,82,270; iii. In the financial year, there was an increase of 12.94% in the median remuneration of employees; iv. There were 2420 permanent employees on the rolls of the Company as on March 31, 2015; v. Relationship between average increase in remuneration and Company's performance The increase in median remuneration of employees was 12.94%. As regards Company's performance, its Profit after Tax for the financial year 2014-15 was INR 372.74 Crores as against Loss of INR 370 Crores for the financial year 2013-14. Remuneration to Employees is as per the HR Policy of the Company in force from time to time and in compliance with applicable regulatory requirements. Total remuneration comprises fixed pay, perquisites, retiral benefits and performance pay. Key Managerial Personnel and Senior Management are also provided Employee Stock Options (ESOPs) by the ESOP Trust. Performance Pay, which is the variable component of remuneration and comprises a significant portion of total remuneration is, amongst other factors, linked to Company's performance. vi. a) Variations in the market capitalisation of the Company The market capitalisation as on March 31, 2015 was INR 15,029 crores (INR 9,465 crores as on March 31, 2014). b) Price Earnings Ratio of the Company was 40.32 as at March 31, 2015 and was (25.63) as at March 31, 2014 vii. Percent increase over/ decrease in the market quotations of the shares of the company as compared to the price at which the last public offer was made The last offer of shares to the public was made in August 2005, which was the Rights Issue of 19,001,601 equity shares of INR 2 each at a price of INR 175 per share. As against this, the average closing price of the Company's equity shares on the Stock Exchange for FY2015 was INR 741.73. viii. Average percentage increase made in the salaries of employees other than the managerial personnel in the last financial year i.e. FY2015 was 14.42%. As regards Managerial Remuneration, as mentioned above, the remuneration of each Whole- Time Director for FY2014 was restricted to INR 1.48 Crores, being the maximum limit imposed by the Central Government in view of inadequacy of profits for that year. For FY2015, in view of adequacy of profits, remuneration was paid to the Whole-Time Directors within the limits prescribed under Section 197 of the Companies Act, 2013. Details of remuneration paid to Whole-Time Directors are given in a tabular format earlier in this Report. In view of this, comparison of percentage increase of Managerial Remuneration with increase in Employee Remuneration for FY2015 is not comparable. ix. Key parameters for the variable component of remuneration availed by Directors The variable component of remuneration for Executive Directors are determined on the basis of several criteria including their individual performance as measured by achievement of their respective Key Result Areas (KRAs), strategic initiatives taken and being implemented, their respective roles in the organization, fulfillment of their responsibilities and performance of the Company. This is in accordance with the Company's Remuneration Policy. x. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year Not Applicable xi. It is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees. B) Employee Particulars Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate statement forming part of this Report. Further, this report is being sent to the Members excluding the said statement. The said statement is available for inspection of members at the Registered Office of the Company during working hours upto the date of the Annual General Meeting and shall be made available to any shareholder on request. The said statement is also available on your Company's website. The weblink to which is http://www.piramal.com/ investors/financial-reports#parentVerticalTab2 I) None of the Whole-Time Directors received any commission nor any remuneration from any of the Company's subsidiaries. II) The following details are given in the Corporate Governance section of this Annual Report: (i) all elements of remuneration package of all the directors; (ii) details of fixed component and performance linked incentives of Whole-Time Directors along with the performance criteria; (iii) service contracts, notice period, severance fees of Whole-Time Directors; (iv) stock option details of Whole-Time Directors III) Requisite details relating to ESOP are given as Annexure F to this Report SECRETARIAL AUDIT REPORT Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Rules made thereunder, the Company has appointed M/s. N. L. Bhatia & Associates, Practicing Company Secretaries as the Secretarial Auditor of the Company. The Secretarial Audit Report is annexed as Annexure G and forms an integral part of this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. CORPORATE GOVERNANCE CERTIFICATE The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite Certificate from M/s. N.L. Bhatia & Associates, Practicing Company Secretaries, confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is annexed hereto as Annexure H and forms part of this Report. RISK MANAGEMENT POLICY The Company has a robust Risk Management framework to identify, measure and mitigate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objective and enhance the Company's competitive advantage. This risk framework thus helps in managing market, credit and operations risks and quantifies exposure and potential impact at a Company level. DIRECTORS' RESPONSIBILITY STATEMENT Your Directors state that: (a) in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards have been followed with no material departures; (b) the Directors have 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 the Company as at March 31, 2015 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 Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) the Directors have prepared the annual financial statements 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 operating effectively; and (f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. COST AUDIT M/s. G.R. Kulkarni & Associates, Cost Accountants have been duly appointed as Cost Auditors for conducting Cost Audit in respect of products manufactured by the Company which are covered under the Cost Audit Rules for current financial year ending March 31, 2016. They were also the Cost Auditors for the previous year ended March 31, 2015. As required by Section 148 of the Companies Act, 2013, necessary resolution has been included in the Notice convening the Annual General Meeting, seeking ratification by Members to the remuneration proposed to be paid to the Cost Auditors for the financial year ending March 31, 2016. 1. The details relating to deposits, covered under Chapter V of the Act, since neither has the Company accepted deposits during the year under review nor were there any deposits outstanding during the year 2. Details relating to issue of equity shares including sweat equity shares and shares with differential rights as to dividend, voting or otherwise, since there was no such issue of shares. 3. None of the Whole-Time Directors of the Company received any remuneration or commission from any of its subsidiaries. 4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. Your Directors further state that during the year under review, there were no cases filed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. ACKNOWLEDGEMENTS We take this opportunity to thank the employees for their dedicated service and contribution to the Company. We also thank our banks, business associates and our shareholders for their continued support to the Company. For and on behalf of the Board of Directors Chairman Place :Mumbai Date : May 7, 2015 |