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EQUITY - MARKET SCREENER

Cipla Ltd
Industry :  Pharmaceuticals - Indian - Bulk Drugs & Formln
BSE Code
ISIN Demat
Book Value()
500087
INE059A01026
320.578015
NSE Symbol
P/E(TTM)
Mar.Cap( Cr.)
CIPLA
36
118375.06
EPS(TTM)
Face Value()
Div & Yield %
40.73
2
0.58
 

As on: Feb 25, 2024 03:09 AM

Dear Members,

The Board is pleased to submit its report on the performance of the Company along with the audited standalone and consolidated financial statements for the year ended 31st March, 2023.

Financial Summary and State of Affairs

(Rs. in crores)

Year ended 31st

March, 2022

Particulars

Year ended 31st

March, 2023

Standalone Consolidated Standalone Consolidated
15,380.82 21,763.34 Gross total revenue 15,790.60 22,753.12

3,804.38

3,675.39

Profit before tax and exceptional item from continuing operations

3,626.44

4,220.77

100.70 - Profit before tax from discontinuing/restructuring operations 58.73 -

2,882.58

2,516.75

Profit for the year (after tax and attributable to shareholders) from continuing operations

2,469.53

2,801.91

75.35

-

Profit for the year (after tax and attributable to shareholders) from Discontinuing/Restructuring Operations

43.94

-

12.56

111.54

Other Comprehensive Income for the year (not to be reclassified to P&L) from continuing operations

(10.06)

2.64

(7.01)

272.13

Other Comprehensive Income for the year (to be reclassified to P&L) from continuing operations

1.26

134.99

0.55

-

Other comprehensive income for the year (not to be reclassified to P&L) from discontinuing/restructuring operations

(0.17)

-

14,961.71 13,536.98 Surplus brought forward from last balance sheet 17,534.77 15,669.07

17,938.12

16,072.42

Profit available for appropriation Appropriations:

20,037.72

18,460.53

(403.35) (403.35) Dividend (403.50) (403.50)
17,534.77 15,669.07 Surplus carried forward 19,634.22 18,057.03

The financial results and the results of operations, including major developments and statement of affairs of the Company have been discussed in detail in the Management Discussion and Analysis report.

The above information have been prepared on the basis of the standalone and consolidated financial statements.

Share Capital

During the year under review, the Company issued and allotted 3,36,557 equity shares of Rs. 2/- each to its employees under the Employee Stock Option Scheme 2013-A and Cipla Employee Stock Appreciation Rights Scheme 2021. As a result, the issued, subscribed and paid-up share capital of the Company increased from Rs. 1,61,36,28,072 (divided into 80,68,14,036 equity shares of Rs. 2 each) as on 31st March, 2022 to Rs. 1,61,43,01,186/- (divided into 80,71,50,593 equity shares of Rs. 2 each) as on 31st March, 2023. The equity shares issued under the Employee Stock Option Scheme 2013-A and Cipla Employee Stock Appreciation Rights Scheme 2021 rank pari- passu with the existing equity shares of the Company.

Apart from the above, there were no other changes in the equity share capital during the year.

Dividend

The Board recommends a final dividend of Rs. 8.50/- per equity share (425% of face value) for the financial year ended 31st March, 2023. The payment of dividend is subject to the approval of members at the ensuing Annual General Meeting and deduction of income tax at source. Upon approval, the dividend will be paid to those members whose names will appear in the Register of Members as on the close of 21st July, 2023. The total dividend pay-out will be approximately Rs. 686.08 crores, resulting in a pay-out of 27.30 % of the Standalone profit after tax of the Company.

During the year, the Dividend Distribution Policy was amended to update it in line with the leading industry practices and to provide more clarity on the company's dividend philosophy. The changes are summarised below:

Incorporated more specific quantitative parameters. As per the amended policy, the Board will endeavour to maintain dividend pay-out of upto 30% of its consolidated Profits After Tax (PAT).

Rearranged and reworded some of the qualitative parameters to provide more clarity, and added some factors e.g. capital expenditure and working capital, investment in organic and inorganic growth opportunities, capital markets and buyback of shares etc. to present the correct philosophy.

The Policy is available on the website of the Company at https://www.cipla.com/sites/default/files/2023-05/Dividend-Distribution-Policy.pdf.

Management Discussion and Analysis Report

Pursuant to Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), the Management Discussion and Analysis Report has been presented in a separate Section on page no. 106.

Corporate Social Responsibility ("CSR")

A detailed report on the Company's CSR initiatives has been provided in the Social Capital section of the Integrated Annual Report on page no. 88. The Annual Report on CSR initiatives includingsummaryoftheImpactAssessmentReport,committee composition, salient features of the policy including change therein, etc. as required under Section 135 of the Companies Act, 2013 ("Act") is annexed as Annexure I to this report on page no. 128. Details of terms of reference of the Committee and meetings held during the year have been provided in the Report on Corporate Governance on page no. 180.

Integrated Annual Report

In compliance with SEBI circular dated 6th February, 2017, the Company has voluntarily published the Integrated Annual Report, which includes both financial and non-financial information and is based on the International Integrated Reporting Framework. This report covers aspects such as organisation's strategy, governance framework, performance and prospects of value creation based on the six forms of capitals viz. financial capital, manufactured capital, intellectual capital, human capital, social capital, relationship capital and natural capital.

The Company has engaged DNV Business Assurance India Private Limited as an independent assurance partner to issue the assurance report on the non-financial information in the Integrated Annual Report for FY 2022-23.

Business Responsibility & Sustainability Report

In compliance with Regulation 34(2)(f) of the Listing Regulations read with SEBI circular dated 10th May, 2021. The Company has presented the Business Responsibility & Sustainability Report ("BRSR"), for FY 2022-23 under a separate section on page no. 144.

Corporate Governance

In compliance with Regulation 34 read with Schedule V of the Listing Regulations, a Report on Corporate Governance for the year under review, has been presented in a separate section on page no. 165.

A certificate from M/s. BNP & Associates, Company Secretaries, confirming compliance with corporate governance requirements under the Listing Regulations, is annexed as Annexure II to this report.

Directors' Responsibility Statement

Pursuant to Section 134(3)(c) of the Act, it is confirmed that the Directors have:

i. in the preparation of the annual accounts for the year ended 31st March, 2023, followed the applicable accounting standards and there are no material departures from the same;

ii. 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 on 31st March, 2023 and of the profit of the Company for the year ended on that date;

iii. 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;

iv. prepared the annual accounts on a going concern basis;

v. laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

vi. devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Details of Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as Annexure III to this report.

Share-Based Incentive Schemes

The Company has the following share-based incentive schemes in force:

Employee Stock Option Scheme 2013-A ("ESOS 2013 – A") Cipla Employee Stock Appreciation Rights Scheme 2021 ("ESAR Scheme 2021") The Nomination and Remuneration Committee ("NRC") administers the ESOS 2013 – A and the ESAR Scheme 2021 (collectively referred to as "Schemes"). The Scheme are compliant with the Section 62 of the Act and Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB Regulations"). Details of the Schemes have been provided in note no. 41 of the standalone financial statements. The disclosure containing details of options granted, number of shares allotted upon exercise of options, etc. as required under the SEBI SBEB Regulations is available on the Company's website at https://www.cipla.com/investors/annual-reports.

In compliance with the requirements of the SEBI SBEB Regulations, a certificate from the secretarial auditor, confirming that the Schemes were implemented in accordance with the SEBI SBEB Regulations and as per the shareholder's resolution, is uploaded on the website of the Company at https://www. cipla.com/investors/ annual-reports. The certificate will also be available for electronic inspection by the members during the Annual General Meeting ("AGM") of the Company.

Human Resources

Information required under Section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as in Annexure IV to this report.

Information required under Section 197(12) of the Act read with rule 5(2) and rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in a separate exhibit forming part of this report and is available on the website of the Company at https://www.cipla.com/ investors/annualreports.

Particulars of Loans, Guarantees and Investments

Particulars of loans, guarantees and investments under Section 186 of the Act have been provided in note no. 43 to the standalone financial statements.

Annual Return

In compliance with the provisions of Section 92(3) read with Section 134(3)(a) of the Act, the Annual return of the Company i.e. E-form MGT-7 for FY 2022-23 has been uploaded on the website of the Company at https://www.cipla.com/investors/annual-reports.

Vigil Mechanism

The Company has a Whistle Blower Policy, which lays down the process to convey genuine concerns and seek resolution towards the same without fear of retaliation. A detailed update on the functioning of the Whistle Blower Policy including amendments made to the policy during the year, status of complaints and weblink of the Policy has been provided in the Report on Corporate Governance, on page no. 182.

Prevention of Sexual Harassment of Women at Workplace

The Company is committed to providing a safe and conducive work environment to all its employees and associates. The Company has a policy on Prevention of Sexual Harassment at Workplace, which is available on the website at https://www. cipla.com/sites/default/files/1558508425_POSH-%20Cipla.pdf.

All employees, consultants, trainees, volunteers, third parties and/ or visitors at all business units or functions of the Company, its subsidiaries and/or its affiliated or group companies are covered by the said policy. Across the organisation, adequate workshops and awareness programmers against sexual harassment are conducted.

In compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company had constituted an Internal Complaints Committee and was fully compliant of the Committee composition requirements. The complaints pertaining to sexual harassment were periodically reviewed by the Audit Committee.

Details of complaints received/disposed during FY 2022-23 have been provided in the Report on Corporate Governance on page no. 187.

Related Party Transactions

A detailed note on procedure adopted by the Company in dealing with contracts and arrangements with related parties has been provided in the Report on Corporate Governance on page no. 183.

During the year, the consumer business undertaking of the Company was transferred to Cipla Health Limited ("CHL"), wholly owned subsidiary, on a slump sale basis through a Business Transfer Agreement. Since the transaction was between the holding company and its wholly owned subsidiary, and the entire economic value of the wholly owned subsidiary following the transfer of the undertaking continued to remain with the holding company, the arm's length principle was not relevant.

Except the above referred transaction as further detailed in Form AOC-2 annexed as Annexure V, all other contracts, arrangements and transactions entered by the Company with its related parties were in the ordinary course of business and on an arm's length basis.

During the year, the Company did not enter any transaction, contract or arrangement with related parties, that could be considered material in accordance with the Listing Regulations and the Company's Policy on Related Party Transactions ("RPT Policy"). Details of the related party transactions as per IND AS-24 have been provided under note no. 40 of the standalone financial statements on page no. 260 and under note no. 48 of the consolidated financial statements on page no. 362

During the year, the Company amended its RPT Policy to align with the provisions of the amended Listing Regulations. The RPT policy is available on the Company's website at https://www. cipla.com/sites/default/files/2023-02/Policy-on-Related-Party-Transaction_Revised-%20Final.pdf.

Internal Financial Controls and Their Adequacy

Cipla has laid down an adequate system of internal controls, policies and procedures for ensuring orderly and efficient conduct of the business, including adherence to the Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures.

The current system of internal financial controls is aligned with the statutory requirements and is in line with the globally accepted risk-based framework issued by the Committee of Sponsoring Organisations ("COSO") of the Treadway Commission. The internal financial controls with respect to the financial statements are adequate and operating effectively.

Effectiveness of internal financial controls is ensured through management reviews, controlled self-assessment and independent testing by the Internal Audit Team.

The Statutory and Internal auditors have confirmed that there were no internal control weakness during FY 2022-23.

Risk Management

The Investment and Risk Management Committee ("IRMC") of the Board oversees the Enterprise Risk Management ("ERM") process. An update on ERM activities is presented and deliberated upon in the IRMC meetings on a quarterly basis and periodically at the Board level at least once a year. The Audit

Committee has an additional oversight in the area of financial risks and controls. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on an ongoing basis. In terms of the provisions of Section 134 of the Act, a detailed note on Risk Management has been provided on page no. 46.

Board Evaluation

A detailed disclosure on the performance evaluation criteria and the process of Board evaluation as well as the outcome has been provided in the Report on Corporate Governance on page no. 169.

Subsidiaries, Associates and Joint Ventures

The Company had 45 subsidiaries and 8 associates as on 31st March, 2023. Changes during the year were as follows:

Acquisition of 21.05% stake in Achira Labs Private Limited on 17th August, 2022, to enter into the business domain of designing, developing and manufacturing microfluidics-based PoC immunoassay and molecular assay technologies.

Incorporation of Aspergen Inc., USA as a 60:40 joint venture between Cipla (EU) Limited and Kemwell Biopharma UK Limited on 30th August, 2022, for undertaking the business of developing, applying for and obtaining licenses for and manufacturing, commercialising, importing and exporting biological products.

Divestment of entire stake held in Avenue Therapeutics Inc., an associate company, focused on development and commercialisation of intravenous (IV) Tramadol, on account of non-completion of second stage closing conditions as per the agreed timelines, with effect from 11th October, 2022.

Cipla Medpro Holdings (Pty) Limited, wholly owned step-down subsidiary in South Africa being a dormant entity was dissolved with effect from 25th August, 2022.

Cipla (EU) Limited, wholly owned subsidiary and Meditab Holdings Limited, wholly owned subsidiary entered a into Share Purchase Agreement ("SPA") With Africa Capital works SSA 3 on 14th March, 2023 for sale of entire 51.18% stake held in Cipla Quality Chemical Industries Limited ("CQCIL"), Uganda. Upon execution of the transaction, the CQCIL will cease to be the subsidiary of Cipla Limited.

Details of these subsidiaries and associates are set out on page no. 287. Pursuant to Section 129(3) of the Act read with

Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing the salient features of the financial statements of the subsidiary and associate companies in Form AOC-1 has been presented on page no. 369. The statement also provides details of the performance and the financial position of each of the subsidiaries and associates. The consolidated financial statements presented in this annual report include financial results of the subsidiary and associate companies.

Copies of the financial statements of the subsidiary companies will be available on the Company's website www.cipla.com.

Nomination, Remuneration and Board Diversity Policy and it's Salient Features

The Company has in place a Nomination and Remuneration and Board Diversity ("NRC Policy") which provides for process w.r.t. selection, appointment and remuneration of directors, key managerial personnel and senior management employees including other matters as provided under Section 178(3) of the Act.

Following are the salient features of the NRC Policy:

to provide criteria and terms and conditions with regard to identifying persons who are qualified to become directors (executive and non-executive including independent directors), key managerial personnel and persons who may be appointed in senior management positions.

to recommend the remuneration of the directors, key managerial personnel and senior management personnel in alignment with the Company's business strategies, values, key priorities and goals.

to provide rewards linked directly to the effort, performance, dedication and achievement of the Company's targets by the employees.

to monitor and periodically review and recommend improvement in board diversity aspects and measure progress accordingly.

undertake any other matters as the Board may decide from time to time.

The Policy is available on the website of the Company at https://www. cipla.com/sites/default/files/2021-06/NominationRemuneration-and-Board-Diversity-Policy.pdf.

Directors and Key Managerial Personnel and Board Meetings

At the 86th Annual General Meeting of the Company held on 26th August, 2022 the shareholders approved (i) the reappointment of Ms Samina Hamied as a Director liable to retire by rotation; (ii) the appointment of Dr Mandar Vaidya as an Independent Director for a period of five years with effect from 29th July, 2022. In accordance with the provisions of the Act and the Articles of Association of the Company, Mr Umang Vohra, is liable to retire by rotation at the ensuing 87th Annual General Meeting and being eligible, has offered himself for re-appointment. On the recommendation of the NRC, the Board of Directors recommends his re-appointment as Director, liable to retire by rotation. The said re-appointment is subject to the approval of members at the ensuing AGM.

In the opinion of the Board, all directors including the directors appointed / re-appointed during the year possess requisite qualifications, experience and expertise and hold high standards of integrity. Except Dr Mandar Vaidya, all Independent Directors have passed or are exempted from passing the proficiency test. Dr Mandar Vaidya is required to pass the proficiency test within the permissible time limit. The list of key skills, expertise and core competencies of the Board is provided in the Report on Corporate Governance on page no. 167.

Criteria for determining qualification, positive attributes and independence of a director is given in the NRC Policy.

Mr Kedar Upadhye, resigned from the position of Global Chief Financial Officer and Key Managerial Personnel of the Company w.e.f. close of business hours of 3rd May, 2022. The Board placed on record its sincere appreciation for the contribution made by him over the years.

In order to fill in the interim vacancy, Mr Dinesh Jain, Senior Vice President – Head Corporate Finance was appointed as the interim Chief Financial Officer and Key Managerial Personnel, with effect from 10th May, 2022.

Mr Ashish Adukia was appointed as the Global Chief Financial Officer and Key Managerial Personnel with effect from 16th August, 2022. Upon appointment of Mr Ashish Adukia, Mr Dinesh Jain was relieved from the additional responsibility and continued with his existing responsibility as Head of Corporate Finance. The Board expressed its gratitude towards his valuable contribution as the Interim Chief Financial Officer.

Dr Peter Mugyenyi, resigned from the position of Independent Director w.e.f. 13th May, 2023. The Board placed on record its sincere appreciation for the contribution made by him over the years.

As on the date of this report, the Company has the following Key Managerial Persons as per Section 2(51) and 203 of the Act:

Name of the KMP Designation
Ms Samina Hamied

Executive Vice-Chairperson

Mr Umang Vohra Managing Director and Global Chief
Executive Officer
Mr Ashish Adukia

Global Chief Financial Officer

Mr Rajendra Chopra

Company Secretary and Compliance officer

Except Ms Samina Hamied, Mr Umang Vohra, Dr Peter Mugyenyi, Mr Ashok Sinha and Mr Robert Stewart no other directors received any remuneration or sitting fees from any subsidiary of the Company during FY 2022-23.

Declaration by Independent Directors

All Independent Directors have submitted requisite declarations confirming that they (i) continue to meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the Listing Regulations and are independent; and (ii) continue to comply with the Code of Conduct laid down under Schedule IV of the Act. Details on the same have also been provided in the Report on Corporate Governance on page no. 171.

The Directors have further confirmed that they are not debarred from holding the office of director under any SEBI order or under the order of any such authority.

Board Committees and Number of Meetings of the Board and Board Committees

As on the date of this report the Board has the following committees:

i) Audit Committee ii) Nomination and Remuneration Committee iii) Corporate Social Responsibility Committee iv) Stakeholders Relationship Committee v) Investment and Risk Management Committee vi) Operations and Administrative Committee

All the recommendations made by the Board committees, including the Audit Committee, were accepted by the Board.

The Board met eight times during the year under review. Details of the meetings of the Board and the Board Committees are provided in the Report on Corporate Governance on page no. 193.

Statutory Auditor and Their Reports

M/s Walker Chandiok & Co LLP, Chartered Accountants, (Firm Registration No 001076N/ N500013) were re-appointed as the Statutory Auditors of the Company at the 85th AGM held on 25th August, 2021, to hold the office till the conclusion of the 90th AGM to be held in the year 2026.

The Statutory Auditors' Report for the standalone and consolidated financial statements does not contain any qualification, reservation, adverse remarks or observation and has been presented separately on page no. 197 and 280 respectively.

Secretarial Auditor and their Reports

M/s BNP & Associates, Company Secretaries, were appointed as the Secretarial Auditors for the financial year ended 31st March, 2023. The Secretarial Audit Report is annexed as Annexure VI to this report.

In compliance with Regulation 24A of the Listing Regulations, the Annual Secretarial Compliance Report issued by the Secretarial Auditor was submitted to the stock exchanges within the statutory timelines.

The Secretarial Audit Report and the Annual Secretarial Compliance Report did not contain any qualification, reservation, adverse remarks or observation.

The Board of Directors, on the recommendation of the Audit Committee, has re-appointed M/s BNP & Associates, Company Secretaries, who have confirmed their eligibility for the said re-appointment, to conduct the secretarial audit of the Company for FY 2023-24.

Cost Auditor and Cost Audit Report

Mr D Rs. Zaveri, practising Cost Accountant (Fellow Membership No. 8971), was appointed as the Cost Auditor to conduct the audit of the Company's cost records for the financial year ended 31st March, 2023. Mr Zaveri has confirmed his eligibility for the said appointment. The Cost Auditor will submit his report for FY 2022-23 by the due date.

The Cost Audit Report, for FY 2021-22, was filed with the Central Government within the statutory timelines. The Company maintains the cost records as per the provisions of Section 148(1) of the Act.

In accordance with the provisions of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, since the remuneration to be paid to the Cost Auditor for FY 2023-24 is required to be ratified by the members, the Board of Directors recommends the same for ratification at the ensuing AGM. The proposal forms a part of the notice of the AGM.

During the year under review, the Statutory, Secretarial and Cost Auditors did not report any instance of fraud committed in the Company by its officers or employees under Section 143(12) of the Act, the details of which need to be mentioned in the Board's report.

Other Disclosures

During the financial year under review:

There was no amount proposed to be transferred to the Reserves;

There were no changes made in the nature of business of the Company;

The Company has complied with the applicable Secretarial Standards, i.e., SS-1 and SS-2, relating to ‘Meetings of the Board of Directors' and ‘General Meetings', respectively;

The Company issued and allotted equity shares as per its ESOS 2013-A Scheme and the ESAR Scheme 2021 and there was no instance wherein the Company failed to implement any corporate action within the statutory time limit;

The Company did not accept any deposit within the meaning of Sections 73 and 74 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 and accordingly no amount on account of principal or interest on public deposits was outstanding as on 31st March, 2023;

The Company has not issued shares with differential voting rights and sweat equity shares during the year under review;

There were no significant or material orders passed by the regulators or courts or tribunals which could impact the going concern status of the Company and its future operations;

There were no material changes and commitments which occurred after the close of the year till the date of this report, which may affect the financial position of the Company.

There are no amounts due and outstanding to be credited to Investor Education and Protection Fund as on 31st March, 2023.

Acknowledgements

We wish to place on record our appreciation to the Government of various countries where the Company has its operations. We thank the Ministry of Chemicals and Fertilisers, India; Central Government; State Government and other regulatory bodies / authorities; banks; business partners; shareholders; medical practitioners and other stakeholders for the assistance, cooperation and encouragement extended to the Company. We would also like to place on record our deep sense of appreciation to the employees for their contribution and services.

On behalf of the Board of Directors

Date: 12th May, 2023 Y. K. Hamied
Place: London Chairman