01 May 2017 | Livemint.com

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Cipla Ltd.

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  • BSE Code: 500087
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  • NSE Code: CIPLA
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Cipla Ltd. Accounting Policy

REPORT ON CORPORATE GOVERNANCE

(Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges)

a. Company's Philosophy on Code of Governance

The Company is committed to good corporate governance. The Company respects the rights of its shareholders to obtain information on the performance of the Company. Its endeavour has always been to maximise the long term value to the shareholders of the Company. The Compliance Report on Corporate Governance herein signifies compliance of all mandatory requirements of Clause 49 of the Listing Agreement.

b. Board of Directors

• During the financial year 2014-15, the Company continued its emphasis to strengthen and broad base the Board with the induction of new independent directors with diverse backgrounds. The independent directors appointed during the financial year were Mr. Adil Zainulbhai (former Chairman, Mckinsey, India); Dr. Nachiket Mor (former Deputy Managing Director, ICICI Bank Limited) and Ms. Punita Lal (former CEO, NourishCo, a JV between Pepsico and the Tatas). The independent directors have also been appointed on various board committees based on their expertise. These independent directors have also undergone a formal induction process to familiarise them with the business and operations of the Company. During the financial year 2013-14, the Company appointed Mr. Ashok Sinha (former Chairman and Managing Director, Bharat Petroleum Corporation Limited) and Dr. Peter Mugyenyi (Director and Co-founder of Joint Clinical Research Centre based in Kampala, Uganda and a globally renowned researcher in the field of HIV/AIDS) as independent directors. All independent directors are associated with the Company for a tenure of less than 2 years.

c. Audit Committee

• The Audit Committee was constituted on 4th September 2000 in compliance with the requirements of Clause 49 of the Listing Agreement. The Audit Committee currently comprises of: Mr. Ashok Sinha -Chairman, Mr. Adil Zainulbhai - Member and Mr. S. Radhakrishnan - Member.

• The Executive Director and Global Chief Financial Officer and other functional managers along with Internal Auditors, Statutory Auditors and Cost Auditors are invited to attend the meetings of the Audit Committee, as and when necessary. The Company Secretary acts as Secretary to the Committee.

• The Audit Committee discharges such duties and functions generally indicated under Clause 49 of the Listing Agreement and the Act and also such other functions as may be specifically delegated to it by the Board from time to time.

• Role of the Audit Committee, inter-alia, includes the following:

- Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible;

- Recommendation for appointment, remuneration and terms of appointment of auditors of the company;

- Reviewing, with the management, the annual financial statement and auditors' report thereon before submission to the Board for approval;

- Reviewing, with the management, the quarterly financial statement before submission to the Board for approval;

- Approval or any subsequent modification of transactions of the company with related parties;

- Scrutiny of inter-corporate loans and investments;

- Valuation of undertakings or assets of the company, wherever it is necessary.

• Meetings and attendance during the financial year 2014-15:

Six Audit Committee meetings were held during the financial year. The dates on which the said meetings were held are: 29th May 2014; 14th August 2014; 25th September 2014; 13th October 2014; 13th November 2014 and 10th February 2015. The members attended all the meetings held during their tenure as members ofthe Committee during the financial year except Mr. S. Radhakrishnan who attended 5 out of 6 meetings.

d. Nomination and Remuneration Committee

• The Company had constituted a Compensation Committee on 27th February 2013.

The Compensation Committee was re-designated as Nomination and Remuneration Committee during the financial year. In accordance with the provisions of section 178 of the Act and based on legal advice, the Committee was reconstituted to consist of only non-executive directors effective 22nd July 2014.

• The Committee currently comprises of: Mr. Adil Zainulbhai - Chairman, Mr. Ashok Sinha - Member, Mr. M. K. Hamied - Member and Ms. Punita Lal - Member.

• The terms of reference of the Committee, inter-alia, includes the following:

- Implementation, administration and superintendence of the Company's Employee Stock Option Schemes (ESOS) including:

a. The quantum of options to be granted under an ESOS per employee and in aggregate;

b. Allotment of equity shares pursuant to ESOS;

- Formulate the criteria for determining qualifications, positive attributes and independence of Directors;

- Recommend to the Board a policy relating to the remuneration for the Directors, Key Managerial Personnel and other employees;

- Recommend remuneration of Managing Director and Global Chief Executive Officer, Executive Director and Global Chief Financial Officer, Whole-time Director and relative of promoters;

- Recommend commission to Non-Executive Directors;

- Identify persons who are qualified to become Directors and who may be appointed in senior management in accordance with the criteria laid down and recommend to the Board their appointment and removal;

- Evaluation of each Director's performance;

- Discharge such duties and functions as indicated in the listing agreement, the Act and the Rules made thereunder from time to time.

• Meetings and attendance during the financial year 2014-15:

Five meetings of the Committee were held during the financial year. The dates on which the said meetings were held are: 29th May 2014; 23rd July 2014; 8th September 2014; 31st October 2014 and 11th February 2015. Mr. Ashok Sinha attended 4 out of 5 meetings held during the financial year. The other members attended all the meetings held during their tenure as members of the Committee except Mr. M. R. Raghavan who attended 1 out of 2 meetings.

e. Remuneration to Directors

• The details of remuneration to Executive Directors during the financial year 2014-15 are given below:

• Variable bonus is determined by the Board of Directors on the basis of recommendation of Nomination and Remuneration Committee.

• No stock options were granted to the Executive Directors during the financial year 2014-15.

• Service Contracts, Notice Period and Severance Fees:

The period of appointment of Mr. Subhanu Saxena is for a term of 5 years from the date of appointment. The appointment can be terminated by either party by giving not less than six months' prior notice in  writing to the other party or pro-rata basic salary in lieu of notice. The severance fees shall be as per the terms and conditions laid down in the employment agreement entered into with him.

The period of appointment of Mr. S. Radhakrishnan is for a term of 5 years from the date of appointment. The appointment can be terminated by either party by giving not less than three months' prior notice in writing to the other party. There is no separate provision for payment of severance fees.

Mr. Rajesh Garg was appointed as Whole-time Director of the Company designated as "Executive Director and Global Chief Financial Officer" for a period of 5 years commencing from 1st April 2014. Mr. Rajesh Garg demitted office as a Director, Whole-time Director and Chief Financial Officer with effect from close of business hours on 12th June 2015. The severance fees shall be as per the terms and conditions laid down in the employment agreement entered into with him.

• The Commission payable to Non-Executive Directors is determined by the Board of Directors on the basis of recommendation of the Nomination and Remuneration Committee.

• Apart from sitting fees and commission, there are no pecuniary payments by the Company to Non-Executive Directors during the year.

• Remuneration Policy

The Board of Directors approved the Remuneration Policy on the recommendation of the Nomination and Remuneration Committee. The salient aspects of the Remuneration Policy are outlined below:

Objective

The primary objective of the Remuneration Policy is to ensure that:

(a) level and composition of remuneration is reasonable and sufficient to attract, retain and motivate right talent at all levels to run the Company successfully;

(b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and

(c) remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals.

Scope

The policy is divided into separate sections for Directors, Key Managerial Personnel, members of Senior Management and other employees of the Company. It does not cover temporary or contractual employees, trainees, apprentices, consultants engaged on a retainer basis or otherwise and casual labour.

I. Directors

A. Remuneration to Managing Director/Whole-time Director

The Managing Director/Whole-time Director are appointed for a fixed tenure as approved by the shareholders and such appointments are renewable upon expiry of the tenure subject to recommendation by the Nomination and Remuneration Committee and approval of the Board of Directors, shareholders and other authorities as the case may be.

The remuneration to the Managing Director/Whole-time Director shall be in accordance with their employment agreement/letter of appointment and within the overall limit prescribed under the Act and approved by the shareholders. The key components of remuneration package shall include fixed salary, perquisites, allowances, joining bonus, variable bonus, commission, retiral benefits, other benefits in accordance with the market practice and industry analysis depending upon the criticality of the role.

Managing Director/Whole-time Director are also eligible for grant of stock options under the Employee Stock Option Scheme framed/to be framed, where deemed fit, as decided by the Nomination and Remuneration Committee from time to time.

The Managing Director/Whole-time Director shall be covered under the Directors and Officers Liability Insurance (D&O) Policy.

Annual increments shall be linked to their overall performance, Company performance, future plans, market practice and environment and any other relevant factors as per the recommendation of the Nomination and Remuneration Committee and approval of the Board of Directors within the limits approved by the shareholders.

B. Remuneration to Non-Executive Directors

Non-Executive Directors are paid sitting fees for attending meetings of the Board or the Committees thereof at the rate of Rs.50,000 per meeting or such fees as may be decided by the Board from time to time within the limits prescribed under the Act.

Non-Executive Directors may be entitled to Commission on profits within the limits prescribed under the Act and approved by the shareholders as per the recommendation of the Nomination and Remuneration Committee and approval of the Board of Directors.

As Non-Executive Chairman/Vice Chairman play a key role at the Board, are members of key committees, contributes as a visionary and represents business interest of the Company at various forums, they may be paid Commission higher than the other Non-Executive Directors as per the recommendation of the Nomination and Remuneration Committee and approval of the Board of Directors.

Grant of stock options, where deemed fit, under the Employee Stock Option Scheme framed/to be framed and as decided by the Nomination and Remuneration Committee.

Non-Executive Independent Directors are not entitled to any stock options.

Non-Executive Directors shall be entitled to reimbursement of expenses for participation in the Board and other meetings.

The Non-Executive Directors shall be covered under the Directors and Officers Liability Insurance (D&O) Policy.

II. Remuneration to Key Managerial Personnel (not being a Board member)

The appointment and remuneration to Key Managerial Personnel of the Company (not being a Board member) shall be decided by the Board of Directors as per the recommendation of the Nomination and Remuneration Committee after taking into account educational and professional qualification, experience, expertise, roles and responsibilities required for the position and competitive market practices.

The key components of remuneration package of the Key Managerial Personnel shall inter-alia include Fixed Salary; Perquisites, Allowances and Retiral benefits; Performance-linked bonus by whatever named called shall be a cumulative outcome of both the individual target achievement level as well as the Company's performance; Grant of stock options as decided by the Nomination and Remuneration Committee and such other benefits in accordance with the market practices.

The Key Managerial Personnel shall be covered under the Directors and Officers Liability Insurance  (D&O) Policy.

Annual increments shall be linked to the Company's performance, individual performance, market environment and as per the recommendation of the Nomination and Remuneration Committee and approval of the Board of Directors.

III. Remuneration to Senior Management

The appointment and remuneration of Senior Managerial personnel of the Company shall be decided by the Nomination and Remuneration Committee after taking into account educational and professional qualification, experience, expertise, roles and responsibilities required for the position and competitive market practices.

The key components of remuneration package of the Senior Management Personnel shall inter-alia include Fixed Salary; Perquisites, Allowances and Retiral benefits; Performance-linked bonus by whatever named called shall be a cumulative outcome of both the individual target achievement level as well as the Company's performance; Grant of stock options as decided by the Nomination and Remuneration Committee; Such other benefits in accordance with the market practices.

Annual increments shall be linked to the Company's performance, individual performance, market environment, future plans and as decided by the Nomination and Remuneration Committee in consultation with the Managing Director or CEO as the case may be.

IV. Remuneration to other Employees

The remuneration to other employees shall be based on the experience, qualification, expertise ofthe individual employee as well as the roles and responsibilities required for the position.

The elements of the remuneration structure of other employees inter-alia include Fixed Salary; Perquisites, Allowances and Retiral benefits; Performance-linked bonus, by whatever named called, where deemed fit; Grant of stock options as decided by Nomination and Remuneration Committee; Such other benefits in accordance with market practices and relevant factors, where deemed fit.

Annual increments for the other employees shall be linked to the individual's overall performance and as decided by the Human Resources Department within the overall framework of performance management scheme(s) as approved by the Managing Director/Chief Executive Officer from time to time.

f. Stakeholders Relationship Committee

• The Company has a Stakeholders Relationship Committee to attend to and address the grievances of the security holders as and when received. During the year under review, the Share Committee of the Company was dissolved and the terms of reference of the Stakeholders Relationship Committee was expanded to inter-alia approve transfer, transmission, issue of duplicate share certificates and allied matters.

• The Executive Directors and the Company Secretary, under the authority of the Board, are severally authorised to approve transfer, transmission, transposition requests, etc., upto a specified limit which are noted at subsequent meetings ofthe Stakeholders Relationship Committee.

• The Company's Share Transfer Agents, Karvy Computershare Private Limited have adequate infrastructure to process the above matters.

• In compliance with the requirement of Listing Agreement, periodic certificates issued by a Practising Company Secretary are filed with the Stock Exchanges.

• The Stakeholders Relationship Committee currently comprises of Mr. M. K. Hamied - Chairman; Mr. S. Radhakrishnan - Member and Dr. Nachiket Mor - Member.

• Four meetings of the Stakeholders Relationship Committee were held during the year. The dates on which the said meetings were held are: 15th May 2014; 14th August 2014; 13th November 2014 and 11th February 2015. The members attended all the meetings held during their tenure as members of the Committee except Dr. H. R. Manchanda who attended 2 out of 3 meetings.

• Mr. Mital Sanghvi, Company Secretary acts as the Company's Compliance Officer. The Company attends to the shareholders'/investors' grievances/correspondence expeditiously. During the financial year under review, 44 investor grievances were received and all of them have been resolved.

g. Risk Management Committee

• The Risk Management Committee was constituted by the Board of Directors on 29th September 2014 adhering to the requirements of Clause 49 of the Listing Agreement. The Committee's prime responsibility is to monitor and review the risk management plan and to discharge such other functions as may be delegated to the Committee by the Board from time to time.

• During the financial year, the Committee comprised of Mr. Subhanu Saxena - Chairman, Mr. S. Radhakrishnan - Member and Mr. Rajesh Garg - Member.

• One meeting of the Committee was held during the financial year on 10th February 2015 and attended by all the Committee members.

h. Corporate Social Responsibility Committee

• The Corporate Social Responsibility Committee was constituted by the Board of Directors on 13th March 2014 adhering to the requirements of the Act.

• The Committee currently comprises of Mr. M. K. Hamied - Chairman, Mr. S. Radhakrishnan -Member, Mr. Adil Zainulbhai - Member, Ms. Punita Lal - Member, Dr. Nachiket Mor - Member and Mr. Subhanu Saxena - Member.

• The terms of reference of the Committee, inter-alia, include the following:

- Formulate and recommend to the Board, the Corporate Social Responsibility Policy and the activities to be undertaken by the Company.

- Recommend the amount of expenditure to be incurred on the activities.

- Monitor the Corporate Social Responsibility Policy from time to time.

- Discharge such duties and functions as indicated in Section 135 of the Act and Rules made thereunder from time to time and such other functions as may be delegated to the Committee by the Board from time to time.

- Take all necessary actions as may be necessary or desirable and also to settle any question or difficulty or doubts that may arise with regards to Corporate Social Responsibility activities/Policy of the Company.

• Two meetings of the Committee were held during the financial year. The dates on which the said meetings were held are: 13th August 2014 and 11th February 2015. The members attended all the meetings held during their tenure as members of the Committee.

i. Mergers & Acquisitions Committee

• The Mergers & Acquisitions Committee was constituted by the Board of Directors on 7th April 2014.

• The terms of reference ofthe Committee inter-alia includes granting in-principle approval for acquisitions/ divestments to be made by the Company/subsidiary companies upto a certain limit, approval for setting up of branch/representative office and discharge such other duties/functions as may be delegated to the Committee by the Board.

• During the financial year, the Committee comprised of Mr. Subhanu Saxena - Chairman, Mr. S. Radhakrishnan - Member, Mr. Ashok Sinha - Member and Mr. Rajesh Garg - Member.

• Three meetings ofthe Committee were held during the financial year. The dates on which the said meetings were held are: 13th October 2014; 11th February 2015 and 30th March 2015. The members attended all the meetings held during the financial year except Mr. S. Radhakrishnan who attended 2 out of 3 meetings.

k. Disclosures

• During the financial year 2014-15, there was no materially significant transaction entered into between the Company and its Promoters, Directors or the Management, subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large. Further details of related party transactions are presented in Notes to the financial statements.

• The Company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on all matters related to capital markets during the last three years. In absence of any non-compliance by the Company, there were neither any penalties imposed nor any strictures passed on the Company by the Stock Exchanges, SEBI or any other statutory authority.

• The Company always believes in upholding professional integrity and ethical behaviour in the conduct of its business. To uphold and promote these standards, the Company has formulated Vigil Policy which serves as a mechanism for its Directors and employees to report genuine concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct without fear of reprisal. During the financial year, no employee was denied access to the Audit Committee.

• The Company has fulfilled the following non-mandatory requirements as prescribed in Clause 49 of the Listing Agreement:

- The Company is in the regime of unqualified financial statements.

- Dr. Y. K. Hamied is the Chairman of the Company and Mr. Subhanu Saxena is the Managing Director and Global Chief Executive Officer of the Company. The Company has complied with the requirement of having separate persons to the post of Chairman and Managing Director/CEO.

- Internal audit function reports directly to the Audit Committee.  

l. Code of Conduct

The Code of Conduct for the Directors and Senior Management of the Company has been laid down by the Board and the same is posted on the website of the Company. Mr. Subhanu Saxena, Managing Director and Global Chief Executive Officer has declared that the Board Members and Senior Management have affirmed compliance with the Code of Conduct of the Company.

m. CEO and CFO Certification

The CEO/CFO of the Company have certified positively to the Board on the matters specified under Clause 49(IX) of the Listing Agreement.

n. Means of Communication

• The half yearly/quarterly results are published in the newspapers (Mumbai edition) and are not being sent to each household of shareholders.

• The results are usually published in the following newspapers: The Economic Times; Navbharat Times; The Financial Express; Business Standard; The Hindu Business Line; and Sakaal.

• The annual/half yearly/quarterly results and other official news releases are displayed on the website of the Company - www.cipla.com  

• Presentations made to the institutional investors and financial analysts on the Company's financial results are uploaded on the Company's website.

• The Management Discussion and Analysis Report forms part of the Directors' Report.

o. General Shareholder Information

• Date, Time and Venue of the AGM : : Thursday, 27th August 2015 at 3.00 p.m. Y. B. Chavan Auditorium, General Jagannath Bhosale Marg, Mumbai-400 021

• Financial Calendar  : :1st day of April to 31st day of March in the next calendar year

• Adoption of Financial Results (tentative)

For the quarter ending 30th June 2015 : : 2nd week of August 2015

For the quarter and half year ending 30th September 2015 : : 1st week of November 2015

For the quarter and nine months ending 31st December 2015 : : 2nd week of February 2016

For the financial year ending 31st March 2016 : : 3rd / 4th week of May 2016

• Date of Book Closure : :13th August 2015 to 27th August 2015 (both days inclusive)

• Dividend Payment Date : : Will be dispatched / credited on or after 1st September  2015

• Corporate Identity Number (CIN) : : L24239MH1935PLC002380

• Listing on Stock Exchanges : Equity Shares: BSE Limited and National Stock Exchange of India Limited.

Global Depository Receipts (GDRs): Luxembourg Stock Exchange

The Company has paid the requisite annual listing fees to the above stock exchanges for the financial year 2015-16.

• Stock Code  : 500087 on BSE Limited  CIPLA EQ on National Stock Exchange of India Limited

• ISIN Number for NSDL & CDSL :  INE059A01026

• Market Price Data

: The high and low prices of every month during the financial year 2014-15 are given hereinafter. The Company's market capitalisation is included in the computation of BSE Sensex and S&P CNX NIFTY Index.

• Address for Correspondence

All communications with regard to transfer, transmission, National Electronic Clearing Service (NECS), dividend, dematerialisation, etc. should be addressed to the Share Transfer Agents viz. Karvy Computershare Private Limited.

Share Transfer Agents :  

Karvy Computershare Private Limited (Unit: Cipla Limited) Karvy Selenium Tower B, Plot No.: 31 & 32, Gachibowli, Financial District, Nanakramguda, Serilingampally, Hyderabad, Telangana - 500032 Tel: (040) 6716 2222 / 6716 1511 Fax: (040) 2300 1153 E-mail: einward.ris@karvy.com Website: www.karvy.com

Company :  

Shares Department Cipla House, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel Mumbai-400 013 Tel: (022) 24826000/24826951 Fax: (022) 24826893 E-mail: cosecretary@cipla.com Website: www.cipla.com

• Dematerialisation of Shares and Liquidity

As on 31st March 2015, 92.27 percent of the share capital was held in dematerialised form.

As to the liquidity, equity shares of the Company are traded in the 'A'/Forward group and have been included in the SENSEX at BSE Limited. They are also included in S&P CNX NIFTY of National Stock Exchange of India Limited. They are among the select scrips in which derivatives trading has been permitted in the form of stock futures and stock options.

• Outstanding GDRs/ADRs/Warrants

The GDRs are listed on Luxembourg Stock Exchange and the underlying equity shares are listed on BSE Limited and National Stock Exchange of India Limited. Each GDR represents one underlying equity share of the Company.  

As on 31st March 2015, 1,75,18,445 GDRs were outstanding.

The Company has not issued any American Depository Receipts (ADRs)/Warrants.

The Company has granted stock options to its employees and those of its subsidiaries under the Employee Stock Option Scheme(s). The Company allots equity shares from time to time on exercise of stock options by the employees pursuant to the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the terms and conditions of the respective Employee Stock Option Scheme(s).

• Plant Locations

i. Virgonagar, Old Madras Road, Bengaluru-560 049, Karnataka

ii. Bommasandra-Jigani Link Road, Industrial Area, KIADB 4th Phase, Bengaluru-560 099, Karnataka

iii. MIDC, Patalganga-410 220, District: Raigad, Maharashtra

iv. MIDC Industrial Area, Kurkumbh-413 802, Daund, District: Pune, Maharashtra

v. Verna Industrial Estate, Verna-403 722, Salcette, Goa

vi. Village Malpur Upper, P.O. Bhud, Nalagarh, Baddi-173 205, District: Solan, Himachal Pradesh

vii. Village Kumrek, Rangpo-737 132, District : East Sikkim, Sikkim

viii. Indore SEZ, Phase II, Sector III, Pharma Zone,

P.O. Pithampur-454 774, District: Dhar, Madhya Pradesh