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Directors Report of Avon Lifesciences Ltd.

Mar 31, 2014

Dear members,

The Directors have pleasure in presenting their Twenty-First Annual Report on the business and operations of the Company and the Audited Financial Accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS

(Rs. in Lakhs)

Particulars 2013-14 2012-13

Revenue from Operations 5,688.67 17,015.04

Other Income 18.37 21.65

Total Revenue 5,707.04 17,036.69

Operating Costs 6,193.19 13,650.55

Profit/(Loss) Before Depreciation, Interest. Tax(PBDIT) (486.15) 3,386.14

Depreciation 961.88 996.51

Profit/(Loss) Before Interest &Tax(PBIT) (1,448.03) 2389.63

Profit/(Loss) Before Tax (PBT) (3,202.91) 879.41

Taxation:

Provision for Income Tax - 200.00

Deferred Tax 54.43 51.97

Profit/(Loss) for the year (3,257.34) 827.44

Previous Year''s figures have been regrouped/ reclassified wherever necessary to conform to the current year''s classification.

DIVIDEND

In view of loss incurred during the year. Your Directors do not recommend any dividend on Equity Shares for the year under review.

YEAR IN RETROSPECT

During the year, the Company registered a significant decline in Net Sales and the Operational income for the year was Rs. 5688.67 Lakhs as against 17015.04 Lakhs in the previous year, registering a decrease in sales by 66.57%, primarily the same was on account of Company''s high dependence on certain customers with whom your Company could not do business as compared to previous years and also on account of multiple issues including the one''s at the customers end beyond the control of your company. Also the market remained sluggish for the API & Intermediates players.

CAPITAL EXPENDITURE

During the year under review. Capital work in progress amounting to Rs. 291.90 Lakhs was capitalized and in addition Rs. 261.57 Lakhs was incurred on maintenance capex.

QUALITY SYSTEMS

The Company continues with its efforts to maintain highest quality standards and complies with various regulations as required by laws for supplies of products to various territories. The Company currently has following valid certifications:

* ISO 9001:2008

* The Solapur unit of the Company is cGMP compliant and is USFDA inspected.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

a) In the preparation of the annual accounts for the year ended 31st March, 2014, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2014 and of the Profit and Loss Account for the year ended on that date;

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 preventing and detecting fraud and other irregularities and

d) The accounts for the year ended 31st March, 2014 have been prepared on a going concern basis.

CORPORATE GOVERNANCE

Your company has been proactive in following the principle and practice of good corporate governance. The Company has taken adequate steps to ensure that the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement of the Stock Exchanges are complied with.

A separate statement on corporate governance is annexed as a part of the Annual Report along with the Auditors certificate on its compliance. A report in the form of Management Discussion and Analysis pursuant to clause 49 of the Listing Agreement, as a part of this report is annexed hereto.

DIRECTORS

Mr. Rajendra Kaimal (DIN: 00032839), Non-executive Chairman & Managing Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment,

Mr. Manoj Jain (DIN: 00034727), Non-executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Dr. Sunil Pitroda (DIN: 07028212), was appointed as an Additional Director of the Company, in the category of an Independent Director, Pursuant to Section 161(1) of the Companies Act, 2013, Dr. Sunil Pitroda holds office till the date of this Annual General Meeting and it is proposed to appoint him as an Independent Director of the Company for the period of 5 years from December 30,2014 to December 29,2019.

Brief profiles of the abovementioned Directors are included in a separate Annexure after the Notice, forming part of this Annual Report.

PARTICULARS OF EMPLOYEES:

The Board of Directors commends the continued dedication & support of employees at all levels. During the year under review the Management has made best efforts to keep the industrial relations peaceful and cordial.

Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, requires Companies to list out names of the employees drawing remuneration of more than Rs. 5 Lakhs per month and/or more than Rs. 60 Lakhs Per annum.

However, none of the employees of the Company drew remuneration of Rs. 60 Lakhs or above per annum and/or Rs. 5 Lakhs or above per month during the year under review.

STATUTORY AUDITORS

M/s. Mukesh Mehta & Associates, (Registration No. 116309W) Chartered Accountants, Mumbai, the statutory auditor of the Company hold office until the conclusion of the ensuing Annual General Meeting of the Company. The said Auditor have been holding office as Statutory Auditor of the Company for a period of 10 (Ten) consecutive financial years. In terms of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, a listed company cannot appoint or re-appoint an audit firm as an Auditor for more than two terms of five consecutive years. The period for which the firm has held office as Auditor prior to the commencement of the Companies Act, 2013 shall be taken into account for calculating the period of 10 (Ten) consecutive years, as the case may be. Further Section 139 of the Companies Act, 2013 has also provided a period of 3 (Three) years from date of commencement of the Act to comply with this requirement and accordingly they can be appointed as Auditors for a further period of 3 (three) years only in terms of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014. Accordingly it is proposed to appoint M/s. Mukesh Mehta & Associates, (Registration No. 116309W) Chartered Accountants, Mumbai as statutory auditors of the Company to hold office from the conclusion of the Twenty First Annual General Meeting till the conclusion of the Twenty Fourth Annual General Meeting of the Company, i.e. for a period of 3 (Three) years, subject to ratification of their appointment at every annual general meeting. The statutory auditor has confirmed their eligibility and willingness to accept office, if re-appointed.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required to be disclosed under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are set out as an annexure forming part of this Report.

PUBLIC DEPOSITS

During the year under review, the company has neither invited nor received any deposits from the public.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to thank the Financial Institutions, Banks, employees, business associates, suppliers. Stock Exchanges, other regulatory authorities and all the stake holders of the Company for valuable sustained support and cooperation in conducting the operations of the Company. The Board also places on record the sustained management support received from M/s. Arch Pharmalabs Limited, the Parent Company.

For and on behalf of the Board

Date: 05.12.2014 Sd/- Sd/- Place: Mumbai Manoj Jain Ajit Kamath Director Chairman & Managing Director DIN: 00034727 DIN: 00032799


Mar 31, 2013

To The Members,

The Directors have pleasure in presenting their Twentieth Annual Report on the business and operations of the Company and the Audited Financial Accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS

Particulars 2012-13 2011-12 (Rs. in Lakhs) (Rs. in Lakhs)

Sales & Operational

Income 17015.04 16703.34

Gross Profit /(Loss) before Interest,

Depreciation and Tax(PBDIT) 3596.74 4175.69

Less. Depreciation 996.51 1086.09

Gross Profit before Interest and Tax (PBIT) 2600.23 3089.60

Less. Financial charges 1720.82 1954.32

Profit / (Loss) before

Tax(PBT) 879.41 1135.28

Less Provision for Taxation

: Provision for tax 200.00 222.00

Add: MAT credit (200.00) (222.00)

: Short provision for Tax for earlier years 76.76

: Deferred Tax 51.97 51.97

Net Profit / (Loss) after

Tax (PAT) 827.44 1006.55

Previous Year''s figures have been regrouped/ reclassified wherever necessary to conform to the current year''s classification.

DIVIDEND

Inorder to conserve available financial resources, your Directors do not recommend any dividend on Equity Shares for the year under review.

YEAR IN RETROSPECT

During the year, the Company has achieved Net Sales and Operational income of Rs. 17015.04 Lakhs as against Rs. 16703.34 Lakhs in the previous year, registering an increase in sales by 1.87%. The Company has achieved a Net Profit of Rs.827.44 Lakhs as against Rs. 1,006.55 Lakhs during the previous fiscal year.

During the year under review the export turnover amounting to Rs.3716.64 Lakhs constituted 21.84% of the total turnover vis-a-vis Rs. 5202.26 Lakhs,

Constituting 31.15% achieved in the previous year. CAPITAL EXPENDITURE

During the year under review, Capital work in progress amounting to Rs. 1349.07 Lakhs was capitalized and in addition Rs. 492.64 Lakhs was incurred on maintenance capex.

QUALITY SYSTEMS

The Company continues with its efforts to maintain highest quality standards and complies with various regulations as required by laws for supplies of products to various territories. The Company currently has following valid certifications:

- ISO 9001:2008

- The Solapur unit of the Company is cGMP compliant and is USFDA inspected.

CONSOLIDATION AND SHIFTING OF ENTIRE MANUFACTURING OPERATIONS OF THE COMPANY TO THE SOLAPUR UNIT AND FUTURE EXPANSION

As a defining step in the cost control and operational optimization exercise, the Company at its Board meeting held on 9th August, 2013, has decided to shift complete manufacturing operations from the unit at Sadasivpet near Hyderabad to Solapur unit, Maharashtra. The consolidation of operations is expected to yield a considerable savings in operational cost.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

a) In the preparation of the annual accounts for the year ended 31s'' March, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2013 and of the Profit and Loss Account forthe year ended on that date;

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 preventing and detecting fraud and other irregularities; and

d) The accounts for the year ended 31s1 March, 2013 have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The Company strives to ensure that the best corporate governance policies and practices are consistently followed. It is the continuous endeavour of the Company to sustain such corporate governance standards at all levels through the company. The specific report on Corporate Governance, included in this Annual Report, states the exact nature of compliances made by the Company during the year under review. A certificate from Chairman and Managing Director of the Company, inter alia, confirming the correctness of the financial statements, compliance with company''s code of conduct, adequacy of internal control measures and reporting of the matters to the Audit Committee in terms of Clause 49 of the Listing Agreements entered into by the Company with Stock Exchanges, is also enclosed asa part of this Annual Report.

NOTE ON OPERATION OF THE SUBSIDIARY COMPANY IN SINGAPORE

The Company acquired 10% stake from the promoter shareholders to make Regal Pharma Pte. Ltd., a wholly owned subsidiary of Avon Organics Limited. Your company gets assistance in marketing operations in the overseas market.

CONSOLIDATED FINANCIAL STATEMENT

The Ministry of Corporate affairs vide its General Circular no. 2/2011 dated 8"1 February, 2011 has granted a general exemption from appending the balance sheet of subsidiary companies to the annual report of the parent company as per Section 212 (8) of the Companies Act, 1956. As required under the circular, the Board of Directors of the

Company, has, at its meeting held on 30th May, 2013, passed a resolution issuing consent for not attaching the Balance Sheet of Subsidiary company to this Annual Report. Accordingly, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary company are not being appended with the Balance Sheet of the Company.

The Company will arrange for the Annual Accounts of the subsidiary company and other relevant information in detail, for any shareholder of the Company who may be interested in obtaining the same.

The consolidated financial statements as prepared in accordance with the requirements of AS 21 and AS 23 issued by ICAI, and a statement pursuant Section 212 of the Companies Act, 1956 are appended to and are forming part of this annual report.

DIRECTORS

The Board has an optimum combination of Executive and Non-Executive Directors.

As per the requirements of Clause 49 of Listing Agreement, the Non-Executive Chairman, being a Promoter Director of the parent Company, fifty percent of the Board comprises of Independent Directors, in compliance with the provisions of Clause 49 of the Listing Agreement.

Details of Directors re-appointed during the year

Mr. Ajit Kamath, Non-Executive Chairman & Managing Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Mr. Manoj Jain, Non-Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Details of Director appointed as Additional Director during the year

Mr. Rajendra Kaimal, appointed as Additional Director at the Meeting of the Board of Directors held on 30th May, 2013, is proposed to be confirmed at the Annual General Meeting of the Company.

Brief profiles of the abovementioned Directors are included in a separate Annexure after the Notice, forming part of this Annual Report.

PARTICULARS OF EMPLOYEES:

The Board of Directors commends the continued dedication of employees at all levels and the industrial relations continue to be peaceful and cordial. Your Company''s dedicated and talented workforce has enabled it to remain at the forefront of the Industry. Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, requires Companies to list out names of the employees drawing remuneration of more than Rs. 5 Lakhs per month and/or more than Rs. 60 Lakhs Perannum.

However, none of the employees of the Company drew remuneration of Rs. 60 Lakhs or above per annum and/or Rs. 5 Lakhs or above per month during the year under review.

STATUTORY AUDITORS

IWs. Mukesh Mehta & Co., Chartered Accountants, Statutory Auditors of the Company, continue to hold office until conclusion of this Annual General Meeting and are recommended for re-appointment upto the conclusion of next Annual General Meeting. In terms of Clause 41(1 )(h) of the Listing Agreement, the Statutory Auditors of the Company are subjected to the Peer Review Process of Institute of Chartered Accountants of India (ICAI), and hold a valid certificate issued by Peer Review Board of ICAI.

COST AUDITORS

In compliance with the directives issued by Central Government from time to time and in terms of the

provisions of Section 233B of the Companies Act, 1956, M/s. D.Z.R. & Co., Cost Accountants were appointed as Cost Auditors of the Company at the meeting of the Board of Directors held on 30th May, 2013 for the manufacturing units of the Company located at Solapur, Maharashtra and Sadasivpet, Andhra Pradesh, respectively. A certificate of eligibility has been received from M/s. D.Z. R. &Co., Cost Accountants, to the effect that their appointment is in accordance with the provisions of Section 224 (1) B of the Companies Act, 1956.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required to be disclosed under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are set out as an annexure forming part of this Report.

PUBLIC DEPOSITS

During the year under review, the company has neither invited nor received any deposits from the public.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to thank the Financial Institutions, Banks, employees, business associates, suppliers, Stock Exchanges, other regulatory authorities and all the stake holders of the Company for valuable sustained support and cooperation in conducting efficient operations of the Company. The Board also places on record the sustained management support received from M/s. Arch Pharmalabs Limited, the Parent Company.

For and on behalf of the Board

Sd/-

Place : Mumbai Ajit Kamath

Date : 09.08.2013 Chairman & Managing Director


Mar 31, 2012

The Directors have pleasure in presenting their Nineteenth Annual Report on the business and operations of the Company and the Audited Financial Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS



Particulars 2011-12 2010-11 (Rs. in Lakhs) (Rs. In Lakhs)

Sales & Operational Income 16703.34 16212.07

Gross Profit/(Loss) Before interest. Depreciation and Tax (PBDIT) 4175.69 2945.63

Less. Depreciation 1086.09 611.64

Profit before Interest and Tax (PBIT) 3089.60 2333.99

Less. Interest & Financial charges 1954.32 1347.93

Profit/(Loss) before Tax (PBT) 1135.28 986.05

Less Provision for Taxation

: Provision for tax 222.00 200.00

Add; MAT credit (222.00) (200.00)

: Short provision for

Tax for earlier years 76.76 -

: Deffered Tax 51.97 -

Net Profit/(Loss) after tax (PAT) 1006.55 986.05

Previous Year's figures have been regrouped/reclassified wherever necessary to conform to the current year's classification.

DIVIDEND

The Directors are pleased to recommend payment of Dividend @ 10% (Re. 1/- per Equity Share of the face value of Rs. 10/- each), which, if approved by the Members at the forthcoming Annual General Meeting will involve an outflow of Rs. 225 Lakhs to-wards Dividend and Rs. 36.50 Lakhs as Dividend Distribution Tax resulting in a total outflow of Rs. 261.50 Lakhs.

YEAR IN RETROSPECT

During the year under review, the Company has achieved Net Sales and Operational income of Rs. 16703.34 Lakhs as against Rs. 16212.07 Lakhs in the previous year, registering an increase in sales by 3.03%. During the year the Company has achieved a Net profit of Rs. 1006.55 Lakhs as against Rs. 986.05 Lakhs, during the corresponding period in the previous year.

The total sales of the Company includes export sales of Rs. 5202.26 Lakhs during the year under review as against 4223.65 Lakhs, during the previous year and account for approximately 31.15% of the total sales in the current year as against 26.05% in the previous corresponding period.

QUALITY SYSTEMS

The Company being engaged in the pharmaceutical sector strives to maintain higher quality standards and compiles with various regulations in relation to the same. The manufacturing facility of the company situated at Solapur, Maharashtra is a cGMP facility and is USFDA inspected. The facility of the company situated at Sadasivpeth is ISO 9001:2008 certified.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act. 1956, the Directors confirm that:

a) In the preparation of the annual accounts for the year ended 31st March, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2012 and of the Profit and Loss Account for the year ended on that date;

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 preventing and detecting fraud and other irregularities and

d) The accounts for the year ended 31st March, 2012 have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The Company's essential character revolves around values based on transparency, integrity, professionalism and accountability. At the highest level, the company continuously endeavours to improve upon these aspects on an ongoing basis and strives to achieve the higher standards of Corporate Governance. The nature of compliances made in order to meet the requirements and to promote transparency and efficient governance, are more specifically detailed in a separate report on Corporate Governance attached herewith, which forms pan of the Annual Report. A certificate from Chairman and Managing Director of the Company, inter alia, confirming the correctness of the financial statements, compliance with company's code of conduct, adequacy of internal

control measures and reporting of the matters to the Audit Committee in terms of Clause 49 of the Listing Agreement entered into by the Company with Stock Exchanges, is also enclosed as a part of this Annual Report.

NOTE ON OPERATIONS OF THE SUBSIDIARY COMPANY IN SINGAPORE

The Company's subsidiary company in Singapore, M/s. Regal Pharma Pte. Ltd. is involved in facilitating marketing operations in the overseas market.

During the year under review, the company has infused of Rs. 1076.40 Lakhs as capital in its subsidiary company, Regal Pharma PTE Ltd., Singapore by subscribing to 31,20,000 Equity shares for Singapore $1 each.

CONSOLIDATED FINANCIAL STATEMENT

The Ministry of Corporate affairs vide its General Circular no. 2/2011 dated 8th February, 2011 has granted a general exemption from appending the balance sheet of subsidiary companies to the annual report of the parent company as per Section 212 (8) of the Companies Act, 1956. As required under the circular, the Board of Directors of the Company, has, at its meeting held on 30th May, 2012, passed a resolution issuing consent for not attaching the Balance Sheet of Subsidiary company to this Annual Report. Accordingly, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary company are not being appended to the Balance Sheet of the Company.

The Company will arrange for the Annual Accounts of the subsidiary company and other relevant information in detail, for any shareholder of the Company who may be interested in obtaining the same. The Annual Accounts of the Subsidiary company will also be made available for inspection at the registered offices of both the Company and the subsidiary company.

The consolidated financial statements as prepared in accordance with the requirements of AS 21 and AS 23 issued by ICAI, and a statement pursuant Section 212 of the Companies Act, 1956 are appended to and are forming part of this annual report.

DIRECTORS

The Board comprise of Chairman & Managing Director and Non-Executive Directors with majority of the Board comprising of Non-Executive Independent Directors.

As per the requirements of Clause 49 of Listing Agreement, the Chairman & Managing Director, being a Promoter Director of the parent Company, more than fifty percent of the Board comprises of Independent Directors, in compliance with the provisions of Clause 49 of the Listing Agreement.

Re-appointment of Mr. Sudhir Ghate, Non-Executive Director

Mr. Sudhir Ghate, Non-Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

He is a commerce graduate by qualification and possesses an extensive experience in various commercial and industrial matters. He also owns and manages a premier institution called "The Academy" at Mangalore for over a decade. He is presently a Director in M/s. Magnum Intergrafiks Private Limited, M/s. Mangalore Infotech Solutions Private Limited, M/s. Trichur Heart Hospital Limited, M/s. VRL Logistics Limited and M/s. Kanara Chamber of Commerce & Industry.

Re-appointment of Mr. Ashit Shah, Non-Executive Director

Mr. Ashit Shah, Non-Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

He is a practicing Chartered Accountant and proprietor of M/s. Ashit Shah & Co., Chartered Accountants. He has rich experience in commercial matter & laws and have effectively handled cases relating to Direct Tax, Indirect Tax and Assurance Services. He has also authored many books on subjects related to his profession. He is also a Director in M/s. Pears Financial Services Pvt. Ltd.

Resignation of Mr. V. S. Soma, Executive Director & Company Secretary

Mr. V. S. Soma resigned as Executive Director & Company Secretary of the Company with effect from 17th January, 2012 citing his other engagements.

PARTICULARS OF EMPLOYEES:

Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended, requires Companies to list out names of the employees drawing remuneration of more than Rs. 5 Lakhs per month and/or more than Rs. 60 Lakhs Per annum.

We would like to state that, none of the employees of the Company drew remuneration of Rs. 60 Lakhs or above per annum and/or Rs. 5 Lakhs or above per month during the year under review.

STATUTORY AUDITORS

M/s. Mukesh Mehta & Co., Chartered Accountants, Statutory Auditors of the Company, continues to hold office until conclusion of this Annual General Meeting and have been recommended for re-appointment upto the conclusion of next Annual General Meeting. In terms of Clause 41 (1)(h) of the Listing Agreement, the Statutory Auditors of the Company are subjected to the Peer Review Process of Institute of Chartered Accountants of India (ICAI), and should hold a valid certificate issued by Peer Review Board of the ICAI. M/s. Mukesh Mehta & Co., Chartered Accountants hold a valid certificate issued by Peer Review Board of the ICAI.

COST AUDITORS

In compliance with the directives issued by Central Government from time to time and in terms of the provisions of Section 233B of the Companies Act, 1956, M/s. D.Z.R. & Co., Cost Accountants were appointed as Cost Auditors of the Company at the meeting of the Board of Directors held on 30th May, 2012 for the manufacturing units of the Company located at Solapur, Maharashtra and Sadasivpet, Andhra Pradesh, respectively. A certificate of eligibility has been received from M/s. D.Z.R. & Co., Cost Accountants, to the effect that their appointment is in accordance with the provisions of Section 224 (1) B of the Companies Act, 1956.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo as required to be disclosed under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are set out as an Annexure forming part of this Report.

PUBLIC DEPOSITS

During the year under review, the company has neither invited nor received any deposits from the public.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to thank the Financial Institutions, Banks, employees, business associates, suppliers, Stock Exchanges, other regulatory authorities and all the stake holders of the Company for valuable sustained support and cooperation in conducting efficient operations of the Company.

For and on behalf of the Board

Sd/- Ajit Kamath Chairman & Managing Director

Date: 30.05.2012 Place: Mumbai


Mar 31, 2011

The Members,

The Directors have pleasure in presenting their Eighteenth Annual Report on the business and operations of the Company and the Audited Financial Accounts for the year ended 31s" March, 2011.

FINANCIAL RESULTS (Rs In Lakhs)

Particulars Year Ended Year Ended

31,03.2011 3103.2010

Sales & Operational Income 16212.07 15045.49

Gross Profit /(Loss) before Interest, Depreciation and Tax (PBDIT) 2945.63 2645.33

Less: Depreciation 611.64 585.10

Gross Profit before Interest and Tax (PBIT) 2333.99 2060.23

Less: Interest & Financial charges 1347.93 1169.40

Profit/(Loss) before Tax (PBT) 986.05 890.83

Less: Provision for Taxation : Provision for tax 200.00 -

Add: MAT credit (200.00) -

: Dividend Distribution Tax 37.37 38.24

: Short provision for Tax for earlier years - 0.63

Net Profit / (Loss) after tax (PAT) 948.68 851.96

The figures of the previous year have been reclassified to conform to the current classification.

DIVIDEND

The Directors are pleased to recommend a Dividend of 10% (Re. 1/- per Equity Share of the face value of Rs. 10/- each), which, if approved by the Members at the ensuing Annual General Meeting will involve an outflow of Rs. 225 Lakhs towards Dividend and Rs. 37.37 Lakhs towards Dividend Distribution Tax resulting in a total outflow of Rs. 262.37 Lakhs.

PERFORMANCE REVIEW

During the year, the Company has achieved Net Sales and Operational income of Rs. 16212.07 Lakhs as against Rs. 15045.49 Lakhs in the previous year, registering an increase in sales by 7.75%. During the year, the Company has achieved a Net profit before Tax of Rs. 986.05 Lakhs as against Rs. 890.20 Lakhs, during the corresponding period in the previous year, resulting in consistent rise in profits for the 3rd consecutive financial year.

The total sales of the Company includes export sales of Rs. 4223.65 Lakhs during the year under review as against Rs. 5081.30 Lakhs in the previous year and account for approximately 26.05% of the total sales in the current year as against 33.77% in the previous corresponding period.

CAPITAL EXPENDITURE

During the year under review, the Company has incurred capital expenditure amounting to Rs. 2949.96 Lakhs. The amount has primarily been used in upgradation and modernization of the manufacturing facilities including set up of ETP facility at Solapur.

QUALITY SYSTEMS

The Company being engaged in the pharmaceutical sector strives to maintain the higher quality standards and complies with various regulations in relation to the same. The Company has following valid certifications:

- The Company complies with the ISO standards and has a valid ISO 9001:2008 Certificate for the unit of the Company located at Sadasivpet.

- The Solapur unit of the Company is cGMP compliant and is USFDAinspected.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

a) In the preparation of the annual accounts for the year ended 31st March, 2011, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31s1 March, 2011 and of the Profit and Loss Account for the year ended on that date;

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 preventing and detecting fraud and other irregularities and

d) The accounts for the year ended 31st March, 2011, have been prepared on a going concern basis.

CORPORATE GOVERNANCE

Your company complies with all the requirements which are mandatory for compliance under the Companies Act, 1956 and the Listing Agreement entered with the Stock Exchanges. The nature of compliances made in order to meet the requirements and to promote transparency are more specifically detailed in a separate report on Corporate Governance attached herewith, which forms the part of the Annual Report.

NOTE ON OPERATION OF THE SUBSIDIARY COMPANY IN SINGAPORE

Pursuant to the resolution passed at the Meeting of the Board of Directors of the Company, held on 15,h May, 2010, a wholly owned subsidiary company has been incorporated in the name of Regal Pharma PTE Ltd. in Singapore. The Subsidiary company has been formed to facilitate the marketing operations of the Company in the overseas market and to explore any further business opportunities.

CONSOLIDATED FINANCIAL STATEMENT

The Ministry of Corporate affairs vide its General Circular no. 2/2011 dated 8th February, 2011, has granted a general exemption under Section 212(8) of the Companies Act, 1956, from appending the balance sheet of subsidiary companies to the annual report of the parent company. Accordingly, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary company are not being appended to the Balance Sheet of the Company. The Company will arrange for the Annual Accounts of the subsidiary company and other the relevant information in detail, for any shareholder of the Company who may be interested in obtaining the same. The Annual Accounts of the Subsidiary company will also be made available for inspection at the registered offices of both the Company and the subsidiary company. The details of accounts of the subsidiary company shall be made available in hard copies to any shareholder, on demand in writing.

The consolidated financial statements and a statement pursuant to Section 212 of the Companies Act, 1956 are appended to and are forming part of this annual report.

DIRECTORS

The Board has an optimum combination of Executive and Non-Executive Directors with majority of the Board comprising of Non-Executive

Directors.

As per the requirements of Clause 49 of Listing Agreement, only one-third of the Board should comprise of Independent Directors in case the Chairman of the Board is a Non-Executive Director. However, in our case since the Non-Executive Chairman is a Promoter Director of the parent company, therefore he cannot be considered to be Independent and therefore the Company has fifty percent of the Board comprising of Independent Directors, in compliance with the provisions of Clause 49 of the Listing Agreement.

Re-appointment of Mr. Ajit Kamath, Non- Executive Chairman & Managing Director Mr. Ajit Kamath, Non-executive Chairman & Managing Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Mr. Ajit Kamath is the Chairman & Managing Director in Arch Pharmalabs Limited, the parent company of Avon organics Limited. He is a commerce graduate by qualification and possesses an experience of more than 12 years in the Pharmaceutical industry.

Re-appointment of Mr. V. S. Soma, Executive Director Mr. V.S.Soma, Executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re- appointment.

Mr. V. S. Soma is a Company Secretary and Chartered Accountant by qualification. He has two and a half decades of experience spanning diverse industries, majority being in the pharmaceutical industry. He is associated with Avon Organics Limited as a Company Secretary since April, 2006.

Regularisation of appointment of Mr. Upkar Singh Kohli, Non-Executive, Independent Director

Mr. Upkar Singh Kohli was appointed as Additional Director of the Company at the meeting of Board of Directors held on 22nd January, 2011. As per the provisions of Section 260 of the Companies Act, 1956, Mr. Upkar Singh Kohli will hold office of a Director up to the conclusion of Annual General Meeting. The Company has received notice in writing as per provisions of Section 257 of the Companies Act, 1956, proposing his candidature forthe office of the Director.

Mr. Upkar Singh Kohli holds a degree in Bachelor of Engineering (Mechanical). He is a certified associate of Indian Institute of Bankers. He has more than 35 years of experience in the banking sector and has worked with Punjab National Bank, Punjab & Sind Bank, etc. in various capacities like General Manager-Zonal, Manager- C.V.C. etc.

He is currently a Director on the Boards of Birla Power Solutions Ltd., Birla Cotsyn India Ltd., ST1 India Ltd., Union KBC Trustee Co. Pvt. Ltd., U.V.Asset Reconstruction Pvt. Ltd., Wizeman Finance and C. M. Farming alongwith Avon Organics Limited.

Resignation of Mr. Ramakant Nayak and Or. Shantilal Jain, Non-Executive, Independent Directors

Mr. Ramakant Nayak and Dr. Shantilal Jain, appointed as Non-Executive, Independent Directors in the Company, resigned from the Board of the Company with effect from 22nd January, 2011. The Board would like to place on record, its appreciation for their services to the Company during the tenure of their appointment.

STATUTORY AUDITORS

The Statutory Auditors, M/s. Mukesh Mehta & Co., Chartered Accountants, hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment upto the conclusion of next Annual General Meeting. A certificate of eligibility has been received from the Auditors to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

COST AUDITORS

Pursuant to the Cost Audit Branch Order no. F.52/26/CAB-2010 dated 02.05.2011 and Notification dated 03.06.2011 issued by the Ministry of Corporate Affairs, appointment of Cost Auditor for the financial year 2011-12, has been made mandatory for all the Companies to which the Cost Accounting Records (Bulk Drugs) Rules, 1974 apply and which has a net worth exceeding rupees five crores in the previous financial year or a turnover exceeding rupees twenty crores in the previous financial year or having its equity or debt securities listed or are in the process of getting listed on the Stock Exchange whether in India or outside India.

However, the Company has appointed Cost Auditors pursuant the Cost Audit Order no. 52/66/CAB - 2010 dated 16m December, 2010 issued by Central Government to our Company. M/s. D. Z. R. & Co., Cost Accountants, have been appointed at the meeting of the Board of Directors held on 19,h May, 2011, to act as Cost Auditors for the manufacturing facilities of the Company. A certificate of eligibility has been received from M/s. D. Z. R. & Co., Cost Accountants, to the effect that their appointment is in accordance with the provisions of Section 224 (1) B of the Companies Act, 1956.

PARTICULARS OF EMPLOYEES

None of the employees of the Company drew remuneration of Rs. 60 Lakhs or above per annum and/or Rs. 5 Lakhs or above per month during the year under review. This information is furnished as per the requirements of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended.

CONSERVATION OF ENERGY, FOREIGN EXCHANGE, ETC.

Information as required under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to conservation of energy, technology absorption, foreign exchange earnings and outgo is given in Annexure-A attached hereto, which forms part of this report.

PUBLIC DEPOSITS

During the year under review, your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956 from the public.

ACKNOWLEDGEMENTS

The Board of Directors would like to place on record their sincere appreciation for the support and assistance extended by the Companys suppliers, bankers, financial institutions, employees, customers business associates and various departments of the Central and State Governments for their continued support and valuable co- operation.

Your Directors also express their gratitude to investors for the support and confidence reposed in the Company and the Management.

For and on behalf of the Board

Sd/-

Ajit Kamath

Chairman & Managing Director

Place: Mumbai

Date: 19.05.2011


Mar 31, 2010

The Directors have pleasure in presenting their Seventeenth Annual Report on the business and operations of the Company and the Audited Financial Accounts for the year ended 31st March, 2010.

The figures of the previous year have been reclassified to conform to the current classification.

FINANCIAL RESULTS (Rs. in Lakhs)

Particulars Year ended Year ended

3103.2010 3103.2009

Sales & Operational Income 15045.49 12228.43

Gross Profit / (Loss) before 2645.33 2111.94

Interest, Depreciation and Tax (PBDIT)

Less: Depreciation 585.10 552.00

Gross Profit before 2060.23 1559.94

Interest and Tax (PBIT)

Less: Financial charges 1169.40 994.66

Profit/(Loss) before Tax (PBT) 890.83 565.28

Less: Provision for Taxation

Fringe Benefit Tax - 7.00

Short provision for 0.63 -

Tax for earlier years

Net Profit / (Loss) after tax (PAT) 890.20 558.28

DIVIDEND

The Directors are pleased to recommend payment of a Dividend of 10% (Re. 1/-per Equity Share of the face value of Rs. 10/- each), which, if approved by the Members at the Annual General Meeting will involve an outflow of Rs. 225 Lakhs towards Dividend and Rs. 38.24 Lakhs as Dividend Distribution Tax resulting in a total outflow of Rs. 263.24 Lakhs.

PERFORMANCE REVIEW

During the year the Company has achieved Net Sales and Operational income of Rs. 15045.49 Lakhs as against Rs. 12228.43 Lakhs in the previous year, registering an increase in sales by 23.04%. During the year the Company has achieved a Net profit of Rs. 890.20 Lakhs as against Rs. 558.28 Lakhs, during the corresponding period in the previous year, resulting in

consistent rise in profits for the 2na consecutive financial year.

The total sales of the Company includes export sales of Rs. 5081.30 Lakhs during the year under review as against Rs. 2257.46 Lakhs, during the previous year and account for approximately 33.77% of the total sales in the current year as against 18.46% in the previous corresponding period.

A major part of the revenues of our Solapur plant are attributable to the successful launch of the Generic version of Valtrex, with an exclusivity period of 180 days, by Ranbaxy Laboratories Limited. Your company was the supplier of choice of the Active Pharmaceutical Ingredient for the same ie. Valacyclovir. This also helped the Solapur facility from being a single product facility to multiple products and acquire new capabilities.

PERSONNEL

The Board records its appreciation for the support and contribution of all employees towards the growth of the company. Your Company has 472 employees as on31sMarch, 2010.

None of the employees of the Company drew remuneration of Rs. 24 Lakhs and above per annum or Rs. 2 Lakhs and above per month during the year under review. This information is furnished as required under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

CAPITAL EXPENDITURE

In an effort to support future growth, during the year under review, the Company has invested in modernization and enhancement of the facilities and has incurred capital expenditure amounting to Rs. 2611.19 Lakhs, which includes Capital Work-in progress.

QUALITY SYSTEMS

The Companys certificate for quality systems under ISO 9001:2000continues to be valid.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

a) In the preparation of the annual accounts for the year ended 31s March, 2010, the applicable accounting standards have been followed;

b) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company as at 31s March, 2010 and of the Profit and Loss Account for the year ended on that date;

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 preventing and detecting fraud and other irregularities and

d) The accounts for the year ended 31s March, 2010 have been prepared on a going concern basis.

CORPORATE GOVERNANCE

Your company has complied with all the mandatory provisions of Corporate Governance as prescribed in the Listing Agreement with the Stock Exchanges. A detailed report on Corporate Governance together with the Certificate, from the Statutory Auditors of the Company regarding compliance of the Corporate Governance, also forms part of the Annual Report.

INCORPORATION OF A SUBSIDIARY COMPANY IN SINGAPORE

Pursuant to the resolution passed at the Meeting of the Board of Directors of the Company, held on 15th May, 2010, a wholly owned subsidiary company has been incorporated in Singapore. The subsidiary will help to facilitate marketing operations, source new technology as well as raw material inputs from the Far East and South East Asian market.

DIRECTORS

The Board has an optimum combination of Executive and Non-Executive Directors with majority of the Board comprising of Non-executive Directors.

As per the requirements of Clause 49 of Listing Agreement, only one-third of the Board should comprise of Independent Directors in case the Chairman of the Board is a Non-Executive Director.

In our Company, the Non-Executive Chairman, being a Promoter Director of the parent Company, more than fifty percent of the Board comprises of Independent Directors, in compliance with the provisions of Clause 49 of the Listing Agreement.

Re-appointment of Mr. Manoj Jain, Non-Executive Director

Mr. Manoj Jain, Non-Executive Director retries by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

Mr. Manoj Jain is the Deputy Managing Director in Arch Pharmalabs Limited, the parent company of Avon Organics Limited. He is a Chartered Accountant by qualification and possesses an experience of more than 14 years in the Pharmaceutical industry.

Regularisation of appointment of Mr. Ramakant Nayak, Non-Executive, Independent Director

Mr. Ramakant Nayak was appointed as Additional Director of the Company at the meeting of Board of Directors held on 31s October, 2009. As per the provisions of Section 260 of the Companies Act, 1956, the abovementioned Directors will hold office of a Director up to the conclusion of Annual General Meeting. The Company has received notice in writing under Section 257 of the Companies Act, 1956, proposing his candidature for the office of the Director. Mr. Ramakant Nayak has a distinguished career spanning for more than 40 years in commercial banking. His career includes the esteemed positions of Chairman & Chief Executive Officer (CEO) of Lakshmi Vilas Bank from June, 2005 to June, 2007, The Managing Director & Chief Executive Officer (CEO) of erstwhile The Lord Krishna Bank Ltd., merged with Centurion Bank / HDFC Bank Ltd. from January, 2003 to June, 2005 and Chairman of Marathwada Gramin Bank from 1995 till 1997. Mr. Nayak is a Certified Associate of Indian Institute of Banking (I) and has served as a member on several Indian Banks Association (IBA) committee. He possesses degrees in Science and Law and has Diploma in Marketing and Advertising. Mr. Ramakant Nayak currently serves on the Board of Sun Capital Advisory Services Pvt. Ltd., Nine Rivers Capital Holdings Pvt. Ltd., Sun Global Investments

Ltd. - UK, Sunteck Realty Ltd., Nitin Fire Protection Industries Ltd. and Blend Financial Services Ltd. alongwith Avon Organics Limited.

AUDITORS

The Statutory Auditors, M/s. Mukesh Mehta & Co., Chartered Accountants hold office until the conclusion of the ensuing Annual General Meeting and are recommended for re-appointment upto the conclusion of next Annual General Meeting. A certificate has been received from the Auditors to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

CONSERVATION OF ENERGY, FOREIGN EXCHANGE ETC.

Information as required under Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to conservation of energy, technology absorption, foreign exchange earnings and outgo is given in Annexure - A attached hereto, which forms part of this report.

PUBLIC DEPOSITS

During the year under review, the company has

neither invited nor received any deposits from the public.

PROPOSED LISTING WITH NATIONAL STOCK EXCHANGE OF INDIA LIMITED [NSE]

The Management is proposing to list the equity shares of the Company with National Stock Exchange of India Limited [NSE] during the current financial year.

ACKNOWLEDGMENTS

The Board of Directors would like to place on record their sincere appreciation for the support and assistance extended by the Companys suppliers, bankers, financial institutions, employees, business associates and various departments of the Central and State Governments for their continued support and valuable co-operation.

Your Directors also express their gratitude to investors for the support and confidence reposed in the Company and Management.

For and on behalf of the Board

Sd/-

Ajit Kamath Chairman & Managing Director

Place: Mumbai Date : 13.08.2010



 
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