buisness enviroment

BUSINESS ENVIRONMENT
Assignment No. ----3

TOPIC-------------Corporate Governance & Social Responsibility [CIPLA]

MADE BY---------Haziq Mushtaq.

SECTION----------318.

ROLL NO.---------B-60.

SUBMITTED TO--Mr. Pankaj Jain.


LOVELY PROFESSIONAL UNIVERSITY
LOVELY SCHOOL OF
BUSINESS





CORPORATE SOCIAL RESPONSIBILITY
Companies need to answer to two aspects of their operations. 1. The quality of their management - both in terms of people and processes (the inner circle). 2. The nature of, and quantity of their impact on society in the various areas.
Outside stakeholders are taking an increasing interest in the activity of the company. Most look to the outer circle - what the company has actually done, good or bad, in terms of its products and services, in terms of its impact on the environment and on local communities, or in how it treats and develops its workforce. Out of the various stakeholders, it is financial analysts who are predominantly focused - as well as past financial performance - on quality of management as an indicator of likely future performance.
OTHER DEFINITIONS
The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts, used the following definition. "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large"
The same report gave some evidence of the different perceptions of what this should mean from a number of different societies across the world. Definitions as different as "CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government" from Ghana, through to "CSR is about business giving back to society" from the Phillipines.
Traditionally in the United States, CSR has been defined much more in terms of a philanthropic model. Companies make profits, unhindered except by fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable causes. It is seen as tainting the act for the company to receive any benefit from the giving.
The European model is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons. Personally, I believe this model is more sustainable because:
Social responsibility becomes an integral part of the wealth creation process - which if managed properly should enhance the competitiveness of business and maximise the value of wealth creation to society.

CORPORATE SOCIAL RESPONSIBILITY ---------CIPLA
One of HelpAge India 's most consistent supporters over the years has been pharma giant CIPLA. HelpAge's MMU programme requires immense financial support and free medication, which is the most vital aspect of the project.
CIPLA has been providing this munificent support for many years. In 2000-2001, they donated Rs. 38 lakh worth of medicines to support the then existing 20 MMUs, benefiting 4 lakh elderly persons.In 2002-03, HelpAge received nearly Rs. 1 crore worth of medicines from CIPLA, which helped treat over 1 million older people. It was due to this philanthropic support that the number of beneficiaries increased by 40%. As a part of its "Social Responsibility" CIPLA also runs a palliative care home (among their many other programmes), on the outskirts of Pune. HelpAge is grateful to CIPLA for supporting the cause of the disadvantaged elderly.
SAFETY AND ENVIRONMENT CARE
Various health, safety and environment awareness programmes were organised for neighbouring villages, school children and police personnel at Baddi, Patalganga, Kurkumbh and Bangalore. As always, the Company maintained high standards of occupational health, safety and environment- friendly practices at all units. During
the year, Cipla's Kurkumbh unit was awarded the Sword of Honour for the second time, by the British Safety Council, UK In addition, its Kurkumbh and Bangalore plants have been certified for compliance with ISO 14001 and OHSAS 18001 standards/The new Patalganga plant has been developed in accordance with OHSAS 18001 guidelines. In consultation with regulatory authorities, the Inspectorate of Factories &Boilers,Government of India, has awarded Cipla's Goa unit^a certificate for achieving the longest accident-free year since certification. The Company has modern, well-designed effluent treatment plants at its factories.The zero discharge treated water is used for maintaining its green belt.

COMMUNITY CARE
Over the years, Cipla has initiated several programmes to fulfil its corporate social responsibility (CSR). Cipla has provided affordable medicines for HIV/AIDS,malaria, second-line TB and other diseases. The Company's anti-AIDS drugs are sold in more than 102 countries, as per data collected by World Health Organisation (WHO) and the Clinton Foundation. One out of every three HIV patients in the world receiving treatment is on an anti-AIDS drug manufactured by Cipla. Cipla has one of the largest portfolios of anti-malarial drugs and supplies more than 20 million anti-malarial treatments worldwide. Cipla has also partnered with Schistosomiasis Control Initiative (a public health programme by the Imperial College of London) for the control of
the second most prevalent tropical disease in Africa after malaria. In keeping with the Company's continuous endeavour towards the treatment of neglected diseases (usually diseases of the Third World), Cipla has been working with Drugs For Neglected Diseases Initiative (DNDi), a Geneva-based research organisation and Medecins Sans Frontieres (MSF), an independent humanitarian medical aid agency,to develop new drugs for malaria and leishmaniasis (kala azar). Cipla has also joined hands with the Clinton Foundation to support its worldwide paediatric HIV/AIDS initiative.This programme covers more than 45,000 infected children.The Company has provided subsidised drugs, estimated to be worth USD 3 million.
As of date, the Cipla Foundation's Palliative Care and Training Centre in Pune has provided comfort and solace to more than 5200 patients. Cipla also provides medicines to treat over a million poor,aged patients in slums and villages. For this work, Helpage India has felicitated the Company with the Silver Plate Award 2005-2006. In addition, the Company continued to support the promotion of education and community welfare, both directly and through its charitable trusts.

CORPORATE MATTERS
Responsibility Statement

Pursuant to Section 217 (2AA) of the Companies Act, 1956 it is confirmed that the Directors have:

1] followed applicable accounting standards in the preparation of the annual accounts;

2] 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 at the end of the financial year ended 31st March 2007 and of the profit or loss of the Company for that period;

3] taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

4] prepared the annual accounts on a going concern basis.



CORPORATE GOVERNANCE
Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations. A well-defined and enforced corporate governance provides a structure that, at least in theory, works for the benefit of everyone concerned by ensuring that the enterprise adheres to accepted ethical standards and best practices as well as to formal laws. To that end, organizations have been formed at the regional, national, and global levels.
In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. An integral part of an effective corporate governance regime includes provisions for civil or criminal prosecution of individuals who conduct unethical or illegal acts in the name of the enterprise.

CORPORATE GOVERNANCE OF CIPLA
The Company is committed to good corporate governance practices. The report on corporate governance as stipulated under Clause 49 of the Listing Agreement forms part of this report.
MANAGEMENT REVIEW : 2006 - 07
Industry Structure and Development
The Indian pharmaceutical industry grew at the rate of 14.30 per cent, according to ORG-IMS figures, as compared to 11 percent in the previous year. Over the last few years, exports have been growing consistently at an average rate of 25 per cent.Today, pharmaceutical products from leading Indian companies are accepted the world over as safe, affordable and effective and are playing a significant role in meeting the healthcare needs of millions. Several companies in the pharmaceutical sector sought to increase their market share and relied on the consolidations and mergers route in order to do so. In this era of global expansion, India has emerged as an important cost-effective destination for pharmaceutical manufacturing.The country's pool of scientific talent has been a major attraction. As domestic pharmaceutical companies continue to make substantial investments in expansion, multinational corporations too, are either stepping in or enhancing their presence.
Performance Review
The Company's turnover was Rs. 3533 crore with a growth of 17 per cent over the previous year.The net profits for the year grew by nearly 10 per cent over the previous year.The Company's profit at Rs. 668 crore was 18 per cent of its income from operations. This percentage was slightly lower than the previous, year mainly on account of higher material costs and a change in product mix.
Exports accounted for over 50 per cent of the overall sales and exports exceeded Rs.1750 crore. Cipla exports to 180 countries across all the continents-the U.S., Latin America, Europe, Australia, Africa and Asia.
Cipla's continued success in its overseas business has been largely due to its strategy in forming strategic alliances with partners all over the globe who assist with the registration process and help market Cipla products internationally the U.S.,Cipla has alliances with nine generic majors including Teva Pharmaceutical USA, Inc., Watson Pharmaceutical, Inc., Eon Labs, Inc. and Akorn, Inc. for over 125 projects. Similar alliances exist in Europe, South Africa, Australia and the Middle East. In other international markets, Cipla has exclusive marketing tie-ups with companies which are well versant with the local market.
Awards
Cipla received many awards during 2006 for its excellent performance in various spheres. These included:
* The Scrip Best Company in an Emerging Market Award.
* The Dun & Bradstreet - American Express Corporate Award for the best company in the pharmaceutical sector.
* The Pharma Excellence Award for Sustained Growth.
* DHL and CNBC-TV18 International Trade Award for Outstanding Exporter of the Year (Pharmaceuticals, Healthcare and Life Sciences category).
Products
The Company launched many novel drugs and formulations during the year. Significant among these were:
* Ciclohale (ciclesonide inhaler and rotacaps) - Latest steroid inhaler for asthma prophylaxis
* SimplyOne (ciclesonide and formoterol inhaler and rotacaps) - Novel combination therapy for asthma prophylaxis
* Calcinase (calcitonin-salmon nasal spray) - Safe and convenient treatment for osteoporosis
* Neosurf (bovine lipid extract surfactant suspension) - Rescue treatment for neonatal respiratory distress syndrome
* Varipres (terlipressin injection) - Hormone analogue to prevent variceal bleeding
* Viraday (efavirenz, emtricitabine and tenofovir disoproxil fumarate tablets) - Single-dose triple drug combination for HIV/AIDS
* Maximune (saquinavir tablets)-new protease inhibitor for HIV/AIDS
* Dytor Plus (torsemideand spironolactone tablets) - Potassium-sparing diuretic
* Gatiquin-P (gatifloxacin and prednisolone acetate eye drops) - New combination therapy for eye inflammation
* Androfil (testosterone transdermal gel) - For testosterone deficiency in men
* Elcepan (levodopa, carbidopa and entacapone tablets) - Novel combination therapy for epilepsy
* Estaspray (estrogen transdermal spray) - Estrogen replacement therapy for menopausal women
* Tobamist (tobramycin respules) - Inhaled antibiotic for lung infections
* Virenza (zanamivir capsules) - Inhaled antiviral for treatment of influenza A and B
Development of innovative drug delivery systems for new and existing active drug substances continued to be an integral part of the Company's growth strategy. Work on new medical devices, mainly in the area of respiratory medicine, progressed rapidly, as did its inhaled insulin project.The Company has developed a unique transdermal delivery system. It has already launched a spray patch for testosterone and another for estradiol. Other new developments include a novel dry powder inhaler device and a unique single-action single-dose inhaler device.

Cipla has entered into a research agreement with Avestha Gengraine Technologies Private Limited, Bangalore with the objective of working on a collaborative biopharmaceuticals development programme. The partnership will focus on the development of range of biosimilar products for autoimmune disorders, cardiovascular diseasesandca
INFRASTRUCTURE
Manufacturing Facilities
During the year under review, the Company commenced commercial manufacture at its new Patalganga export oriented unit (EOU), set up with an investment exceeding Rs. 170 crore. New projects are underway at Bangalore and Kurkumbh for the manufacture of APIs,and at Sikkim for formulations.The overall capital expenditure for the year amounted to nearly Rs. 440 crore.
Regulatory Approvals
Several dosage forms and APIs manufactured in various plants of the Company continue to enjoy the approval of most major international regulatory agencies.These agencies include the US FDA, MHRA (UK), PIC (Germany), MCC (South Africa), TGA (Australia), Department of Health (Canada), ANVISA (Brazil), SIDC (Slovak Republic), the Danish Medical Agency and the WHO.
Internal Control Systems
The Company's internal control procedures are tailored to match the organisation's pace of growth and increasing complexity of operations. These ensure compliance with various policies, practices and statutes. Cipla's internal audit team carries out extensive audits throughout the year, across all functional areas,and submits its reports to the Audit Committee of the Board of Directors.
Human Resources
Particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956 forms part of this report. Any shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company.
THREATS, RISKS, CONCERNS
Patents
Two years after the implementation of the new patent laws, the government is yet to address important issues like ever-greening of patents and compulsory licensing. Unless the government takes some decisive steps, these can have serious adverse effects on the functioning and future of the Indian pharmaceutical industry.
Data Exclusivity
The policy of data exclusivity remains a significant area of concern for the Indian pharmaceutical industry. There is a need to safeguard against any attempt by vested interests to extend the monopoly of certain big companies and to delay the launch of generic versions even after their expiry of related patents.
Lower Realisation with Rising Costs
While the Company has taken adequate foreign exchange cover against its exports, the steady appreciation of the rupee against all major currencies is bound to have an adverse impact on realisations. Moreover, China's recent move to cut incentives on exports may add to the cost of imports.These factors will impact the Company's overall margins.
Drug Pricing
The government's drug pricing policy has a direct bearing on the health of the domestic pharmaceutical industry. We understand that the policy is being looked into by a Group of Ministers (GOM) and we hope that, instead of arbitrary drug control measures, the GOM would let free and fair competition determine drug prices.This will enable all Indians to have access to affordable healthcare.
OPPORTUNITIES
Domestic Markets
In the domestic arena, Cipla continued to maintain its leadership position. Again, the focus was not only on consolidating its existing brands but also on introducing new products and dosage forms. The Company will aim to increase its penetration and coverage for increasing its market share further.
International Markets
International business is a major thrust area for future growth. Cipla's strategic plans include partnerships and agency arrangements which will optimise the opportunities in the international arena.Presently,in the U.S. alone, Cipla has partnerships with nine companies for over 125 products.The Company has filed over 100 Drug Master File (DMF) registrations in the U.S. and over 85 in Europe. Already, Cipla has more than 5000 approvals for formulations in South and Central America, the Middle East and Africa. The Company has undertaken a rapid expansion of facilities for the manufacture of APIs and formulation dosage forms. Cipla is in the process of setting up SEZ projects for the manufacture of formulations in Indore and Goa. In addition, the Company's ECU projects at Kurkumbh and Bangalore are expected to be completed by March 2008.
Fixed Deposits
The Company neither accepted nor renewed any fixed deposits from the public during the year.
Disclosure of Particulars
As required by the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, the relevant information and data are annexed to this report.
Directors
Dr.H.R.Manchanda and Mr.Ramesh Shroff retire by rotation and being eligible, offer themselves for reappointment. A brief resume of the said directors is provided in the Notice.
Cost Audit
Messrs R. Nanabhoy & Co. have been reappointed to carry out the cost audit for the year.
Auditors
Messrs R.S. Bharucha & Co.and Messrs R.G.N. Price & Co., joint auditors of the Company, retire at the conclusion of the forthcoming Annual General Meeting and are eligible for reappointment.

ANNEXURE TO THE DIRECTORS' REPORT
I. CONSERVATION OF ENERGY
a. The Company is striving continuously to conserve energy by adopting innovative measures to reduce wastage and optimize consumption. Some of the specific measures undertaken are:
i.The Company has installed and commissioned variable frequency drives for water pumps leading to reduction in power usage.
ii. The Company has installed flash steam vessels at Goa to collect steam from boiler and reuse for increasing boiler feed water temperature, leading to savings in fuel consumption.
iii. The Company has carried out modifications in the piping design of chilled water systems and pumping systems resulting in substantial savings in energy consumption due to improved operational efficiency.
iv. Building Monitoring Systems has been extended to other plants in Goa & in Patalganga to monitor and control service floors which has lead to a significant savings in power usage.
b. Impact of the above measures for reduction of energy consumption and consequent impact on the cost of production of goods :
The adoption of the above energy conservation measures have helped to curtail the proportionate increase in total energy usage consequent to overall increase in production.This has made it possible to maintain cost of production at optimum levels.

c. Total energy consumption and energy consumption per unit of production as per Form A:
Considering that the Company has a multi-product, multi-facility production system, it is not possible to determine product-wise energy consumption. Therefore,the consumption is categorised under different classes of goods as shown below.The figures for the year are not exactly comparable with the previous year's figures because of changes in the product mix.
II. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION
A. Research & Development
1. Specific areas in which R&D work is carried out:
The focus of the Company's R&D efforts was on the following areas:
i. Development of new drug formulations for existing and newer active drug substances, ii. Development of agrotechnology, genetics and biotechnology for cultivation of medicinal plants and isolation of active ingredients from plant materials.
iii. Development of new drug delivery systems for existing and newer active drug substances as also newer medical devices.
iv. Patenting of newer processes/newer products/newer drug delivery systems/newer medical devices/newer usage of drugs for both local and international markets.
v. Development of new innovative technology for the manufacture of existing APIs and their intermediates.
vi. Development of new products, both in the area of APIs as well as formulations, specifically for export.
vii. Development of methods to improve safety procedures, effluent control, pollution control, etc.
viii. Projects to develop APIs and formulations jointly with overseas companies,
ix. Development of products related to the indigenous system of medicines.

2. Some of the major benefits derived as a result of R&D include:
i. Successful commercial scale up of several new APIs and formulations.
ii. Development of new drug delivery systems and devices.
iii. Improved processes and enhanced productivity in both APIs and formulations.
3. Future plan of action:
The Company will continue its R&D efforts in the various areas indicated in (1) above.The major thrust would be on developing new products and delivery systems.
4. Expenditure on R&D:
Rs. in Crore
a. Capital 28.41
b. Recurring 147.32
Total--------------------- 175.73
The total R&D expenditure as a percentage of total turnover is nearly 5 per cent.
B. Technology Absorption, Adaptation and Innovation
1. Efforts, in brief, made towards technology absorption, adaptation and innovation:
i. Development and patenting of new molecular forms and methods of synthesis.
ii. Development of new drug delivery systems.
2. Benefits derived as a result of the above efforts:
i. Improvement in operational efficiency through reduction in batch hours, increase in batch sizes, better solvent recovery and simplification of processes.
ii. Meeting norms of external regulatory agencies to facilitate more exports.
iii. Improvements in effluent treatment, pollution control and all-round safety standards.
iv. Maximum utilization of indigenous raw materials.
v. Development of products for import substitution.
III. FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports, initiative taken to increase exports, development of new export markets for products and services and export plans:
At Rs.1780 crore, exports registered a growth of 18 per cent and constituted more than 50 per cent of total sales.The Company earned Rs.76 crore towards Technical Know-how/Fees.Cipla's continued success in its overseas business has been largely due to its strategy of forming key alliances with various partners all over the globe who assist in the registration and marketing of products in local/regional markets. In the U.S. market, Cipla has alliances with nine U.S. generic majors including leva Pharmaceuticals USA, Inc., Watson Pharmaceuticals, Inc., Eon Labs, Inc. and Morton Grove Pharmaceuticals, Inc. for over 125 projects. Similar alliances exist in Europe, South Africa, Australia as well as in several countries in the Middle East. In other international markets, Cipla has exclusive marketing tie-ups with companies familiar with the local market. The Company currently exports to nearly 180 countries and this will continue to be our thrust area.
2. Total foreign exchange used and earned:
During the year, the foreign exchange outgo was Rs. 765 crore and the earnings in reign exchange was Rs. 1865 crore.
BIBLIOGAPHY
http://www.cipla.com/whatsnew/newsarchive2004.htm
http://www.moneycontrol.com/stocks/company_info/directors_report.php?sc_did=C
http://www.cipla.com/whatsnew/newsarchive2007.htm
http://www.cipla.com/homepage/companyprofile.htm
http://www.moneycontrol.com/