DIRECTORS’ REPORT
Dear Shareholders,
Your directors have pleasure in presenting the 38*' Annual Report on business, operations, and achievements of the company together with the audited financial statements for the financial year ended 31st March 2023.
FINANCIAL HIGHLIGHTS
Particulars
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Consolidated
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Standalone
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2022-23
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2021-22
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2022-23
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2021-22
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Sales
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141395.48
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154156.51
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133547.91
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144604.93
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Other Operating Income
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357.52
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526.18
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340.42
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321.73
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Other Income
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613.34
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1030.72
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575.88
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1023.53
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Total Income
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142366.34
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155713.41
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134464.21
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145950.19
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Operating Surplus
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8566.65
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14697.96
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8302.86
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13937.32
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Finance cost
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198.08
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(736.55)
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198.08
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(736.55)
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Cash Surplus
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8368.57
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15434.51
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8104.78
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14673.87
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Non-Cash Items:
Depreciation & Amortisation
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2793.04
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2764.25
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1800.57
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2119.49
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Profit before Tax
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5575.53
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12670.26
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6304.21
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12554.38
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Tax - Current Year
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1681.78
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2528.49
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1659.99
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2462.35
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Tax - Earlier Years
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5.86
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(274.62)
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(0.41)
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(262.52)
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Deferred Tax
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20.34
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248.26
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20.34
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248.26
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Profit after Tax before non-controlling interest
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3867.55
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10168.13
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4624.29
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10106.29
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Less: Non - controlling interest
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0.03
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(0.14)
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-
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-
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Profit after Tax and non-controlling interest
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3867.52
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10168.27
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4624.29
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10106.29
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Other Comprehensive Income (Net of Tax)
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(148.03)
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(37.10)
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(144.78)
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(36.85)
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Total Comprehensive Income
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3719.49
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10131.17
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4479.51
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10069.44
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EPS (Basic)
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0.77
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2.26
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0.92
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2.25
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EPS (Diluted)
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0.77
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1.96
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0.92
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1.94
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REVIEW OF PERFORMANCE
The current year consolidated revenues of '142366.34 Lakhs reflect a decrease compared to the previous year's revenues of '155713.41 Lakhs. The decline in revenue amounts to 8.57 percent on a year-on-year basis.
In the year under review, the share of export revenue in total sales revenues has increased to 40 percent at '57249.13 Lakhs. Although there has been a marginal increase in annual export revenues of around 3 percent, the rise in the share of export revenue indicates a positive trend for the company's international sales. During the period, the company experienced significant growth in its exports to Europe, with a notable increase of 31 percent. Exports to Africa also witnessed a healthy growth rate of 24 percent. On the other hand, the growth rate for exports to the USA was relatively lower at 4 percent. In terms of domestic business, the company experienced a decline of 15 percent. There was also a decline in exports to Asia, with a decrease of 13 percent.
The lower levels of current year revenues are attributed to
multiple factors, including market conditions and large base effect of preceding year, on strength of staggering 30 percent revenue growth recorded during the financial year ending 31st March 2022.
During the year, the home diagnostics business experienced a significant drop in its annual revenues, with a decline of 22 percent. Similarly, the Over the Counter (OTC) business also faced a decline in revenues, with a drop of 11 percent. The API (Active Pharmaceutical Ingredient) business
Sales
Since financial year 2004-05, the revenues of the company are on growth trajectory with successive year of revenue growth till 31st March 2022. However, revenue growth has taken a pause during the current year. The consolidated sales revenues for the year under review are at lower levels, at '141395.48 Lakhs, down by 8 percent against previous year revenues of '154156.51 Lakhs. Total income for the current year is at '142366.34 Lakhs against '155713.41 Lakhs in the preceding year. The export revenues at '57249.13 Lakhs are up by 3 percent whereas domestic sales revenues are down by 15 percent for the year under review.
On standalone basis, the company registered sales revenues of '133547.91 Lakhs against '144604.93 Lakhs of revenues recorded during previous financial year, a degrowth of 8 percent.
Material Cost
The material cost, as a percentage of sales at 67.59 percent, is 48 basis points lower against the previous year material cost of 68.07 percent. The company is improving its sourcing channels to save on input cost which can be shared with its customers, bringing better value for money for company's products.
Employee Cost
The current year employee cost at '15468.05 Lakhs is lower against previous year cost of '16424.65 Lakhs. However, on account of lower current year sales revenues, the percentage employee cost to annual sales revenues has jumped up to 10.94 percent against 10.65 percent in the last financial year. The company continues to pay merit- based employee compensation so as to retain best talent.
Other Expenses
The consolidated expenditure on manufacturing, sales & marketing and the administrative activities at 16.09 percent of sales revenues, is at higher levels, against 12.75 percent recorded in the preceding financial year. Increased spend on manufacturing, selling & distribution followed by
administrative activities has adversely impacted the bottom line for the current year.
Finance Cost & Depreciation
Finance cost comprises of interest on working capital facilities backed by fixed deposit made by the company, on car loan interest pay outs and interest on delay payment of advance income tax. Annual consolidated depreciation & amortisation charge are marginally up at '2793.04 Lakhs against '2764.25 Lakhs in the previous year.
Other Operating Income & Other Income
The consolidated other operating income represents export incentives and others. The export incentives for the current year at '314.15 Lakhs are marginally up against last year amounting to '289.15 Lakhs. Other income for the current year at '43.36 Lakhs is lower against '237.03 Lakhs in the preceding year.
Consolidated other income representing currency fluctuations, interest income and others is lower at '613.34 Lakhs, against previous year of '1030.72 Lakhs.
Profit after Tax
The consolidated profit before interest, depreciation and tax is lower at '8566.65 Lakhs against '14697.96 Lakhs generated in the previous year. Net profit after tax but before share of profit from non-controlling interest is down at '3867.55 Lakhs against '10168.13 Lakhs in last financial year. The consolidated net profit, net of minority share, at '3867.52 Lakhs is down by 61.97 percent over previous years' profit of '10168.27 Lakhs. Total Comprehensive Income for the current year is at '3719.49 Lakhs against '10131.17 Lakhs earned in the previous financial year.
On standalone basis, the net profit after tax for the year is at '4624.29 Lakhs as against '10106.29 Lakhs during previous financial year, a drop of 54.24 percent. Total Comprehensive Income for the year is down by 55.51 percent, at '4479.51 Lakhs vis-a-vis '10069.44 Lakhs of the preceding year.
Finished Formulations
The finished dosages business is now expanding its reach and has recorded a sales revenue of '18537.25 Lakhs during the current year against last year revenue of '16866.90 Lakhs, a growth of 10 percent. The formulation business has sustained its growth trajectory and has built up the revenue, despite recording tremendous growth of 28 percent in the immediately preceding year.
At '6209.72 Lakhs, a growth of 25 percent was recorded in the annual revenue for the branded formulation business for the current year. Brand sharing generics business at '6245.02 Lakhs have recorded a growth of 8 percent, whereas contract manufacturing business at '6082.51 Lakhs has remained at previous year levels. Under the Branded Prescription (Rx) product category, the top three therapeutic categories namely Antibiotics, Gastroenteritis and Vitamins collectively registered a growth of 18 percent. In the current year, their annual revenues amounted to '3587.95 Lakhs, whereas in the previous financial year, sales revenue for these categories was '3050.29 Lakhs.
DIVIDEND
Given the growing resource needs for expanding the business of the company, the directors do not recommend any dividend for the year under review.
RESERVES
Standalone net profit after tax of '4624.29 Lakhs, has been carried forward to the 'Retained Earnings' during the year. No amount has been transferred to the general reserve during the current year. A sum of '13798.35 Lakhs was added to securities premium account during the year, on account of issuance of 2,13,42,505 Equity Shares, to banks, financial institutions and other at a premium of '51.72/- per share and preferential issuance of
1.20.00. 000 Equity Shares at a premium of '23/- per share to the entities belonging to promoter group (towards conversion of fully convertible warrants).
A sum of '1875.00 Lakhs has been transferred to Capital Reserve Account, being amount forfeited towards
3.00. 00.000 share warrants, which could not be subscribed by the entities belonging to promoter group within stipulated period and were therefore lapsed during the year.
DEPOSITS
Your company has not accepted any deposits from the public, during the year under review, within the meaning of Section 73 of the Companies Act, 2013 ('the Act') read with the Companies (Acceptance of Deposits) Rules, 2014.
FINANCES
The company continues to fund its growth through its internal accruals without relying on any outside funding support. A sum of '2250.00 Lakhs, brought in towards balance 75 percent payment of 1,20,00,000 warrants, issued to the entities belonging to promoter group, has been used to fund working capital needs and others.
SHARE CAPITAL
During the year, the Equity Share Capital of the company has gone up by '666.85 Lakhs to '10222.71 Lakhs against '9555.86 Lakhs as of 31st March 2022.
The company, during the current year, has issued
3.33.42.505 Equity Shares of '2/- each to banks, financial institutions, promoter entities and other. Out of these
2.13.42.505 Equity Shares, were issued to banks, financial institutions and other, at a premium of '51.72/- per share, whereas 1,20,00,000 Equity Shares has been issued at a premium of '23/- per share to the entities belonging to the promoter group.
In respect of 50,38,983 Equity Shares surrendered with the company for the cancellation, in compliance with Hon'ble NCLT order dated 12.03.2018, the company has filed an application with Stock Exchanges for the cancellation of these equity shares from its total listed capital. The said application is yet to be approved.
The Equity Shares issued by the company are listed at following Stock Exchanges as on 31st March 2023:
1. National Stock Exchange of India Limited (NSE)
2. BSE Limited (BSE)
Annual listing fee for the financial year 2023-24 has been paid to both the Stock Exchanges. The Equity Shares continue to be listed on NSE and BSE.
SUBSIDIARIES / JOINT VENTURES / ASSOCIATES
The company has incorporated a new wholly owned subsidiary namely, Morepen Rx Limited, to carry out and focus more, on the 'Formulation business', post receipt of requisite approvals, if any.
As on 31st March 2023, the company has five (5) subsidiaries, namely:
1. Dr. Morepen Limited
2. Morepen Devices Limited
3. Morepen Rx Limited
4. Total Care Limited (subsidiary of Dr. Morepen Ltd.)
5. Morepen Bio Inc., USA (Formerly Morepen Inc.)
Dr. Morepen Limited
The current year revenues for the over the counter (OTC) business at '9349.37 Lakhs, has recorded revenue a dip of around 11 percent, against last year revenues of '10563.99 Lakhs. The drop in current sales have been brought about by lower sales in top selling products like Burnol, Lemolate, Isabgol and also fall in revenue for grooming and covid products.
The current year combined sales revenues for primary brands comprising of Burnol (Burn Cream), Lemolate (Cough & Cold) and Fiber-X (Sat Isabgol) is at '1703.84 Lakhs against revenues of '1901.77 Lakhs posted in last year.
OTC range, which refers to a range of other over-the - counter products, has experienced a decline in annual revenues. The revenue for OTC range is '2372.88 Lakhs , a dip of 24 percent compared to previous year.
The brand sharing revenues have increased to '3006.50 Lakhs, representing a growth of 18 percent compared to previous year revenues.
The grooming business, with its annual revenues of '2275.09 Lakhs, have recorded a decline of 18 percent in its annual revenues.
Online OTC revenues, at '2030.74 Lakhs has gone up by 23 percent during the year. During the current year, the share of online business, has reached 22 percent from 16 percent in the last year.
On account of cleaning up of the trade channels filled with excessive inventory, the company has called back its surplus stocks from such channels, which have affected the sales revenues for the year under review. However, it has helped the company to use the inventory so released to cater to the fresh demands generated and save on new investments to be made on fresh buying.
The company has expanded its reach on the online channels and intends to put more resources for the same as it positively affects OTC trade channels as well.
Morepen Devices Limited & Morepen Rx Limited
No operating activities have been carried out during the year.
Total Care Limited
The company is dealing in OTC & Health Care products. The revenue during the year has been meagre at '3.04 Lakhs.
Morepen Bio Inc. (Formerly Morepen Inc.)
Morepen Bio Inc. has been the marketing and distribution interface of the company in USA for its API business, various
OTC & other products. However the company intends to use it presence in US markets for Bio similar and other pharmaceuticals activities as and when any opportunity arises. During the year, it has also bought Bulk Drugs ( i.e. API) from its parents and sell in US and neighbouring markets either directly or through local trade channels.
During the current year, the company has recorded revenue of Rs. 2698.08 Lakhs ($3,281,931) as against '204.46 Lakhs ($270,205) of previous year. The company has recorded 73 percent growth in post-tax profit at '112.38 Lakhs against profit of '65.09 Lakhs logged in the previous year.
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements for the year ended 31st March 2023 have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended together with the comparative period data as at and for the previous year ended 31st March 2022.
In accordance with the Companies Act, 2013 and Indian Accounting Standards (Ind AS) 110 on 'Consolidated Financial Statements' read with Ind AS 112 on 'Disclosure of interests in other entities', the Audited Consolidated Financial Statements is provided in the Annual Report.
In accordance with the provisions of Section 129(3) of the Act, read with the Companies (Accounts) Rules, 2014, a report on the performance and financial position of each of the subsidiaries is attached as ANNEXURE 'A' to this Report in the prescribed form, AOC-1.
DIRECTORS & KEY MANAGERIAL PERSONNEL Changes in Directors & Key Managerial Personnel
I. Mrs. Anju Suri (DIN:00042033), a Non-Executive Director, Non-Independent Director, has resigned from the directorship of the company on 22nd June 2022.
II. The members in their 37*' Annual General Meeting (AGM) held on 27"' September 2022, approved the appointment of Mr. Sanjay Suri (DIN: 00041590), who retired by rotation at said annual general meeting and being eligible, offered himself for re-appointment.
III. Pursuant to approval of members at 37" AGM, the term of Mr. Sanjay Suri (DIN: 00041590) as a whole-time director has been extended for a period of 3 years commencing from 13 th August 2022 till 12" August 2025.
The existing term of Mr. Sushil Suri (DIN: 00012028) as Chairman & Managing Director of the company, is going to be completed on 19th October 2023. In view of aforesaid,
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134(3)(c) of the Act, your Directors, to the best of their knowledge and belief and according to the information and explanations obtained by them, confirm that:
a) in the preparation of annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, wherever applicable, within statutory prescribed timeline.
b) your 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 at the end of the financial year and of the profit and loss of the company for that period;
c) your 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 prevention and detecting of fraud and other irregularities;
d) the annual accounts have been prepared on a going concern basis;
e) internal financial controls to be followed by the company have been laid down and such internal financial controls are adequate and were operating effectively;
f) proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems were adequate and operating effectively.
MANAGERIAL REMUNERATION AND OTHER
DISCLOSURES
Disclosure pursuant to Section 197 of the Act read with Rule
5 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014:
a) Ratio of the remuneration of each Director to the median remuneration of the employee's (MRE) and other details pursuant to Section 197 (12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed and forms part of this report as ANNEXURE 'B'.
b) The Statement containing the particulars of employees as required under section 197(12) of the Act read with Rule 5(2) and other applicable Rules (if any) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided in a separate annexure forming part of this report. Further, the report and the accounts are being sent to the members excluding the aforesaid annexure. In terms of Section 136 of the Act the said annexure is open for inspection at the Registered and Corporate office of the company during the working hours. Any member
to be a material subsidiary, in accordance with second proviso of Regulation 15 (2) (a) of the Listing Regulations.
The annexed Secretarial Audit Report of Dr. Morepen Limited is of the second financial year, out of total three succeeding financial years from the financial year in which the status of Dr. Morepen Limited has been changed from the material subsidiary company to subsidiary company.
EXPLANATION TO SECRETARIAL AUDIT REPORT
The notes referred to in the secretarial auditor's report of the company are self-explanatory and do not call for any further comments. The secretarial auditor' report does not contain any qualification, reservation, adverse remark or disclaimer.
The observations made in point no. (g) i.e., cancellation of equity shares surrendered by FD holders, the company has filed application with the Stock Exchanges to take effect of such cancellation of equity shares from total listed capital of the company and awaiting their response, although said shares were cancelled by the Board of Directors. Further, in point no. (h) i.e., appointment of Central Government Nominee Directors, the requisite explanations are already given in point (i) of 'Legal and Corporate Matters', in this report.
The notes referred to in the secretarial auditor's report of Dr. Morepen Ltd., are self-explanatory and do not call for any further comments. The secretarial auditor' report does not contain any qualification, reservation, adverse remark or disclaimer.
BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT
The company being the part of top 1000 listed entity based on the market capitalisation as on 31st March 2022, is required to annex Business Responsibility & Sustainability Report in compliance with Regulation 34(2)(f) of the Listing Regulations, with Annual Report, in enclosed as ANNEXURE 'D'.
SECRETARIAL STANDARDS
The company has devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems are adequate and operating effectively.
COST AUDIT
Pursuant to Section 148 of the Act, read with the Companies (Cost Records and Audit) Rules, 2014, the Cost Accounting Records maintained by the company are required to be audited by the Cost Auditors. The Board of Directors of the company on the recommendation of the Audit Committee, has appointed M/s. Vijender Sharma & Co., Cost
Accountants, as the Cost Auditor of the company for the financial year ended 31st March 2024, at a remuneration of '2.50 Lakhs, subject to the ratification of their remuneration by the members at the ensuing AGM.
INTERNAL FINANCIAL CONTROLS
The company has an Internal Control System, commensurate with the size, scale, and complexity of its operations. The internal financial controls are adequate and are operating effectively to ensure orderly and efficient conduct of business operations. The company's internal financial control procedures ensure that company's financial statements are reliable and prepared in accordance with the applicable laws.
Based on the internal audit report, process owners undertake corrective action in their respective areas and thereby strengthening the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. The internal auditor carries out extensive audits throughout the year across all functional areas and submits its reports from time to time to the Audit Committee of the Board of Directors.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility ('CSR') Committee of the company was constituted by the Board to monitor implementation of CSR activities by the company in accordance with Section 135 read with Schedule VII of the Act read with (Corporate Social Responsibility Policy) Rules, 2014, as amended. The composition of the CSR Committee, CSR Policy and Projects approved have been placed on the website of the company. Based on the recommendation of the CSR Committee, your Board has adopted a CSR Policy indicating the activities to be undertaken by the Company as specified in Schedule VII.
The Report on CSR Activities with details of the composition of CSR Committee, CSR Policy, CSR initiatives and activities during the year is annexed and forms part of this report as ANNEXURE 'E'.
DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The company has in place a policy on Prevention, Prohibition and Redressal of Sexual Harassment of Women at Workplace pursuant to the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the ICC,
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANT OUTGO
The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and outgo, as required under Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014 is annexed and forms part of this report as ANNEXURE 'F'.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Act are given in the notes to the Financial Statements.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All the related party transactions that were entered into during the financial year were on arm's length basis and in the ordinary course of business. During the year under review there were no materially significant related party transactions, including arm's length transactions; hence, disclosure in Form AOC - 2 is not required.
The complete details with respect to contracts or arrangements with related parties as required to be given under the Act and Part C of Schedule V of Listing Regulations is given in the 'Corporate Governance Report'.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A detailed review of the operations and performance of the Company is set out in the Management Discussion and Analysis Report pursuant to Part B of Schedule V of Listing Regulations which forms part of the Annual Report for the year under review as ANNEXURE 'G'.
HUMAN RESOURCES
A detailed review of Human Resources of the company is set out in the Management Discussion and Analysis Report.
CORPORATE GOVERNANCE
A Report on Corporate Governance along with a certificate from the Practicing Company Secretary regarding compliance with conditions of Corporate Governance as stipulated in Part E of Schedule V of Listing Regulations forms part of this report and is annexed as ANNEXURE 'H'.
ACKNOWLEDGMENTS
The Directors would like to express their gratitude to various stakeholders for their cooperation, continuous support, and confidence in the management of the company. They extend their thanks to the shareholders, customers, dealers, suppliers, bankers, governments, and all other business associates for their valuable contributions to the company's success. Their support has been instrumental in the company's growth and achievements.
For and on behalf of Board of Directors
Sushil Suri
Place: Gurugram, Haryana (Chairman & Managing Director)
Date: 05th August 2023 DIN: 00012028
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