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Directors Report of Bal Pharma Ltd.

Mar 31, 2016

To the Members,

The Directors are pleased to present the Twenty Ninth (29th) Annual Report and the Company''s Audited Financial Statements for the Financial Year ended 31.03.2016.

FINANCIAL RESULTS

The following is the summary of the Company''s Consolidated financial performance during the year under review.

(Rs, in Crores)

Particulars

FY 2015-16

FY 2014-15

Total Income from operations

198.32

187.15

Profit from operations before Interest other income and exceptional items.

7.84

10.08

Tax expense

2.39

1.18

Finance cost

6.48

6.52

Profit After Tax

0.26

3.55

Profit After Taxes and Minority Interest and share of profit /loss of associates

1.40

3.62

Earnings per Share (in Rupees)

1.09

2.83

Note : Previous year''s expenses have been regrouped wherever necessary to confirm to this year''s classification.

2. DIVIDEND & APPROPRIATIONS

Your Directors are pleased to recommend dividend of Rs, 1.00/- (i.e 10%) on each Equity Share of Rs, 10/- , thereby absorbing an amount of Rs, 1.41 crores excluding Dividend Distribution Tax of Rs, 28.85 Lakhs.

3. SHARE CAPITAL:

The Company has made the allotment of 13,00,000 Equity Shares of Rs, 10/- each on preferential basis with each share carrying a premium of Rs, 52/-. With this allotment, the Paid-up Equity Share Capital of the Company has increased to Rs, 14,17,23,720/- divided into 1,41,72,372 Equity Shares of Rs, 10/- each.

During the period under review, the Company has not issued shares with differential voting rights nor granted stock options nor Sweat Equity Shares.

4. MANAGEMENT DISCUSSION AND BUSINESS ANALYSIS: Indian Pharmaceutical Industry scenario and opportunities:

India continues to be the global manufacturing hub for the pharmaceuticals during the financial year 2015.16. Presently there are 10,500 manufacturing units and over 3,000 Pharmaceutical Companies in India, and still growing at an exceptional rate. India has about 1,400 WHO GMP approved manufacturing units.1,105 CEP accredit ions , more than 950 TGA approvals and 584 sites approved by the USFDA. Globally more than 90 per cent of formulations approvals for Anti-retroviral (ARVs), Anti-tubercular & Anti-malarial (WHO pre-qualified) have been granted to companies present in India. Manufacturing costs in India are approximately 35-40 percent less than those in the US due to low installation and manufacturing costs. Qualified manpower , availability of raw materials and a huge domestic market for growth are some of the contributing factors for this scenario. India ranks amongst the top global generic formulation exporters in volume terms.

India''s exports of pharma and drugs stood at US$ 16.8 bn. India exports all forms of pharmaceuticals from APIs to formulations, both in modern medicine and traditional Indian medicines. The country''s pharmaceutical industry accounts for about 1.4 per cent of the global pharmaceutical industry in value terms and 10 per cent in volume terms.

Bal Pharma Limited during the year under review has aimed at consolidating its position in Indian market by advancing its project on modernizing and expansion of its manufacturing capabilities, which is expected to be completed by December 2017. Once the enhanced production capability is made available to the Company, it is expected to meet the demand of its signature products in Cardiology, Diabetology, Analgesics, Antipyretics, Antibiotic, Anti histamine, IV fluids, Nutrition supplements etc both in domestic and international markets.

Lifezen healthcare Private Limited, an Over The Counter (OTC) products marketing Company floated by Bal Pharma Limited as its Subsidiary has launched 2 new products in Indian OTC market and the said products has received encouraging response from the market. Even through the Subsidiary is yet to break even in its business; it has made its presence felt in OTC market and aiming at an profitable business model in near future.

5. BUSINESS OPERATIONS

(i) Turnover and Net profit:

During the Financial Year 2015-16, your Company has achieved a gross standalone turnover of Rs, 201.82 Crores as against Rs, 190.67 Crores achieved during the previous Financial Year, thus registering a top line growth of 5%. .

The Net Profit After Tax of the Company during the financial year 2015-16 stands at Rs, 2.81 Crores as against the Net Profit of Rs, 4.02 Crores achieved in the previous financial year 2014-15.

(ii) Formulations Business:

The Formulations Business of the Company has contributed a total revenue of Rs, 111.03 Crores, during the FY 2015-16 as compared to Rs, 115.40 Crores, during F Y 2014-15.

The turnover from export of formulations during the year under review stands at Rs, 61.51 Crores as against Rs, 73.51 Crores achieved during the previous financial year. This drop in revenues is due to sluggish economy in overseas markets.

In the domestic market, Branded formulations of the Company, consisting of mainly Diabetic, Gynaecology and Cardiac drugs have contributed to revenue of Rs, 36.00 Crores during the year under review as against Rs, 22.49 crores achieved during the previous year.

(iii) Bulk Drug Business:

Bulk Drug Business continue to show its momentum in sales with a revenue of Rs, 87.31 Crores during the year under review as compared to Rs, 75.13 Crores achieved during the previous financial year, thereby registering a growth of 10.7%.

Exports sales of bulk drugs during the year under review stands at Rs, 53.60 Crores as against Rs, 48.01 crores registered during the previous financial year.

Domestic sales of the bulk drugs have registered an revenue of Rs, 33.70 Crores as against the revenue of Rs, 27.24 Crores registered during the previous financial year.

(iv) Export Performance:

The overall export sales of the Company during the year under review has recorded a turnover of Rs, 115.11 Crores as against revenue of Rs, 121.53 Crores achieved during the previous financial year.

Revenues from the export sales continue to consistently dominate the Companies overall turnover.

(v) Domestic Performance:

Revenue from domestic sales has registered a turnover of Rs, 82.76 Crores as compared to Rs, 64.46 Crores achieved during 2014-15, there by registering an growth of 22% .

Diabetic and Cardiac drugs of the Company continue to prove their dominance in revenue earnings in Indian markets.

7. AUDIT COMMITTEE:

The Audit Committee, a sub-Committee of Board consists of Dr. G.S.R Subba Rao, Independent Director, Mr. Shrenik Siroya, Non-Executive Director, Mr. Pramod Kumar S, Independent Director and Mrs. Sarika Bhandari, Independent Director.

Mr. Pramod Kumar S was appointed as Chairman of the Committee on 10.02.2016 in place of Dr. G.S.R Subba Rao, who resigned from the Chairmanship of the Committee citing personal reasons. The Audit Committee has been discharging its duties as per the provisions of SEBI (LODR) Regulations, 2015 and as per Section 177 of the Companies Act, 2013.

8. AUDITORS AND AUDITORS REPORT :

a. Statutory Auditors:

Messrs T.D Jain and D I Sakaria , Chartered Accountants were appointed as Statutory Auditors of the Company from Financial Year 2015-16 to 2017-18 i.e., for the period of 3 years, to hold office from the conclusion of 28th Annual General Meeting held on 22nd September, 2015 until the conclusion of 31st Annual General Meeting, subject to ratification of their appointment at every subsequent Annual General Meeting..

There are no qualifications or reservations or adverse remarks by the Statutory Auditors in their report.

b. Cost Auditors:

Pursuant to the provisions of Section 148 of the Companies Act, 2013, the Company has appointed Mr. M.R Krishna Murthy, Cost Accountant as Cost Auditor for conducting audit of cost records of the Company, for the Financial Year 2015-16.

c. Secretarial Auditors:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Parameshwar G. Bhat, Practising Company Secretary to conduct Secretarial Audit of the Company for the Financial Year 2015-16. The Secretarial Audit report for the Financial Year 2015-16 is annexed to this report as Annexure 2. Certain non material observations made by Secretarial Auditor in his report have been suitably addressed by the Management with corrective actions, wherever necessary.

d. Internal Auditors:

Messrs Abhishek Jain and Dheeraj Bafna, Chartered Accountants were appointed as Internal Auditors of the Company for the financial year 2015-16 and their Reports on Internal Audit were periodically reviewed by the Audit Committee and recommends to the Board for its noting. The Internal Audit Reports do not contain any qualifications, reservations or adverse remarks.

9. RISK MANAGEMENT:

The Risk Management Committee of the Company consisting of the Functional heads and Company Secretary of the Company will submit its periodical report to the Board of Directors of the Company on the measures taken for mitigation of potential risk factors.

The Risk Management Policy devised and implemented by the Company is available on the website i.e www.balpharma.com.

10. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Your Company has an adequate system of internal controls with clearly defined authority limits. Internal controls ensure that the Company''s assets are protected against loss from unauthorized use or disposition and all transactions are authorized, recorded and reported in conformity with Generally Accepted Accounting Principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements.

11. DIRECTORS'' RESPONSIBILITY STATEMENT

In compliance with the provisions of Section 134(5) of the Companies Act, 2013, your Directors wish to confirm:

a) that in preparing the Annual Accounts, all the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

b) that the Directors had 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 and of the Profit and Loss of the Company for that period.

c) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities;

d) that the Directors have prepared the annual accounts on a going concern basis.

e) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively.

f) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

12. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES :

All contracts/arrangements/transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on arm''s length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties that could be considered material

i.e., exceeding 10% of the annual consolidated turnover of the Company, as defined in SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015.

The Company''s Policy on the Related Party Transactions as approved by the Board can be accessed from our website

i.e www.balpharma.com.

Please refer to the note #34 to the financial statements, which sets out related party disclosures.

13. SUBSIDIARY, JOINT VENTURE AND ASSOCIATE COMPANIES:

During the year under review, the following Companies listed below are Company''s Subsidiaries, Joint Ventures or Associate Companies. A report on the performance and financial position of each of the Subsidiaries, Associates, Joint Venture companies as per Companies Act, 2013 is provided as Annexure 1 to the Board''s Report and hence not repeated here for the sake of brevity.

Sl.

No.

Name of the Company/LLP

Nature of Business

% of stake as on 31.03.2016

01

Lifezen Healthcare Private Limited

Marketing of Over the counter (OTC) products

50%

02

Bal Research Foundation

Research and Development in Pharma and health care.

80%

03

Balance Clinics LLP

Diabetic care clinics

80%

14. DIRECTORS AND KEY MANAGERIAL PERSONNEL (KMP):

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Shrenik D Siroya, Non Executive Director of the Company retires by rotation at the Annual General Meeting and being eligible offers himself for reappointment.

As per Section 196,197 and Schedule V of the Companies Act,2013, Dr.S.Prasanna is being reappointed as the Whole time Director of the Company for a period of 2 years w.e.f 1.10.2016 to 30.9.2018.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013.

The Company has devised a Policy for familiarization of independent Directors with the Company, their roles, rights, responsibilities in the Company etc and the same is uploaded on the website of the Company i. e www.balpharma.com.

The Company also has in place a Policy for Nomination and remuneration of KMP''s, Senior Managerial personnel and Directors of the Company, which is in compliance with Section 178 of the Companies Act, 2013. The said Policy is available on the website of our Company.

15. VIGIL MECHANISAM:

The vigil mechanism of the Company, which also incorporates Whistle Blower Policy as per the SEBI (LODR) Regulations, 2015, includes compliance task force comprising of Senior Executives of the Company. The complete text on the vigil mechanism and Whistle Blower Policy can be accessed from our website i.e., www.balpharma.com.

16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND FOREIGN EXCHANGE OUTGO:

As per provisions of Section 134(m) of the Companies Act, 2013, read with the rule 8 of the Companies (Accounts) Rules, 2014, details relating to the Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outflow are given in Annexure-3, which forms part of the Board''s Report.

17. PARTICULARS OF EMPLOYEES:

Information as per Rule 5(1) of Chapter XIII of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as an Annexure - 5 to this report.

18. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHARE HOLDERS:

A detailed report on the Corporate Governance System and practices of the Company are given in a separate section of this Annual Report. Detailed information for the shareholders is given in Additional Shareholders information section.

19. PARTICULARS OF LOAN GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY:

The Company has not given any loan or guarantees covered under the provisions of Section 186 of the Companies Act, 2013.

20. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY BETWEEN END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT:

There were no material changes and commitments between the end of the financial year and the date of the Report, which affect the financial position of the Company.

21. EXTRACT OF ANNUAL RETURN:

Extract of the Annual Return of the Company for the Financial Year 2015-16, in Form MGT-9 is annexed to this report as Annexure - 4.

22. CORPORATE SOCIAL RESPONSIBILITY:

The Board has constituted a Corporate Social Responsibility Committee consisting of Dr. G.S.R Subba Rao, Mr. Pramod Kumar

S, Dr. S. Prasanna and Mr. Shailesh Siroya as its members.

The Committee has formulated a Corporate Social Responsibility (CSR) Policy and the Board has approved the Policy for its implementation. The CSR Policy may be accessed from our website i.e., www.balpharma.com .

Due to delay in suitable planning of the CSR activities, the Company could not spend any amount towards Corporate Social responsibility for the year ended 31.03.2016.

23. HUMAN RESOURCES:

The human resources of the Company continue to contribute its share in the growth of the Company. Human Resource agenda of the Company for the year continued to focus on building a talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement, and strengthening employee relations through progressive people management.

There was no complaint lodged by any woman employee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with the Company during the period under report.

24. ANNUAL BOARD EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out an annual performance evaluation of its own performance, its Committee''s and the Directors individually. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report

25. LISTING WITH STOCK EXCHANGES:

The Securities and Exchange Board of India (SEBI), on September

2, 2015, issued SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 with the aim to consolidate and streamline the provisions of the Listing Agreement for different segments of capital markets to ensure better enforceability. The said regulations were effective December 1, 2015. Accordingly, all listed entities were required to enter into the Listing Agreement within six months from the effective date. The Company entered into revised Listing Agreement with BSE Limited and the National Stock Exchange of India Limited, during November 2015.

The Company has paid the Annual Listing Fees for the year 201617 to National Stock exchange of India Limited (NSE) and BSE Limited (BSE) where the Company''s Shares are listed.

26. CEO & CFO CERTIFICATION:

The Board has acknowledged that Managing Director as the CEO of the Company and DGM Finance and Accounts as the CFO for the purpose of compliance under the Listing Regulations. The CEO and CFO have certified to the Board, in terms of Regulation 33(2) of SEBI (LODR) Regulations, 2015, that the financial statements present a true and fair view of the Company''s affairs and do not omit any material facts which may make the statements or figures contained therein misleading.

27. INSURANCE COVERAGE:

The Board of Directors reports that your Company has adequate and comprehensive insurance cover on all the movable and immovable assets of the Company.

28. CREDIT RATING:

The Company''s financial discipline is reflected in the BBB (stable) rating given by ICRA for the Companies borrowings, both for term loan and working capital for the financial year 2015-16 which is a notch above the previous year''s credit rating of BBB - . The Company looks forward to further improve its credit rating during the Financial Year 2016-17.

29. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2015-16:

No. of complaints received : NIL No. of complaints disposed off : NIL

30. GENERAL:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review.

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting etc.

3. Issue of shares (including sweat equity shares) to the employees of the Company under any scheme.

4. Neither the Managing Director nor the whole time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

5. No significant or material orders were passed by the regulators or courts or tribunals which impact the going concern status and Company''s operations in the future.

31. APPRECIATION:

Your Directors wish to express their sincere appreciation on significant contributions made by the employees through their dedication, hard work and commitment. Your Directors also place on record their sincere thanks on the trust reposed on the Company by the medical fraternity and the patients. We also acknowledge the support extended by Canara Bank, Punjab National Bank, EXIM Bank, Corporation Bank and other financial institutions, government agencies, shareholders and investors at large. We look forward to the continued support from all the quarters in our endeavor to help people lead healthier lives.

For and on behalf of the Board of Directors

Bengaluru Dr. S. Prasanna Shailesh D Siroya

10th August 2016 Whole Time Director Managing Director


Mar 31, 2014

Dear Members,

The Directors have pleasure in presenting the 27th Annual Report together with the Audited Accounts of the Company, for the financial year ended on 31st March, 2014. As notified by MCA vide Circular No. 1/19/2013-CL-V dated 04.04.2014, we have followed the provisions of Companies Act, 1956, in the preparation of this report.

1. FINANCIAL RESULTS

(Rs. in Crores)

Particulars FY 2013-14 FY 2012-13

1) Total Income from operations 182.01 150.25

2) Earnings before Interest , Tax , 18.53 17.88

Depreciation & Amortisation

Less :

Depreciation & Amortisation 4.74 4.81

Finance cost 7.16 7.98

Profit before taxation and prior

period adjustments. 6.63 5.09

Less :

3) Current Tax (Net) 1.55 -

4) Deferred Tax 0.01 0.82

5) Extra Ordinary / Non Recurring items - -

6) Prior year Adjustments (0.01)

7) Net Profit 5.07 4.28

Add :

8) Profit & loss account balance at the 15.16 11.80

beginning of the year

9) Profit /(Loss) made available for 20.23 16.08

appropriation

Less :

10) Proposed Dividend on Equity Shares 1.11 0.79

11) Tax on Dividend 0.19 0.13

12) Balance Carried to Balance sheet 18.93 15.16

Note : Previous year''s figures have been regrouped wherever necessary to confirm to this year''s classification.

2. DIVIDEND & APPROPRIATIONS

Your Directors are pleased to recommend a payment of Dividend of Re. 1.00/- (i.e 10%) on each Equity Share of Rs. 10/- each, thereby absorbing an amount of Rs. 1.11 crores excluding Dividend Distribution Tax of Rs. 0.19 crores. The balance amount of profit is retained as surplus in the Statement of Profit and Loss, forming part of Reserves and Surplus.

3. BUSINESS OPERATIONS

(i) Turnover and Net profit:

During the financial year 2013-14, your Company has achieved highest ever gross turnover of Rs. 182.01crores as against Rs. 150.25 crores achieved during the previous financial year, thus registering a good growth of 21.14%.

The net profit after tax of the Company during the financial year 2013-14 stands at Rs. 5.07 Crores as against the net profit of Rs. 4.28 crores achieved in the previous financial year, 2012-13.

(ii) Formulations'' Business:

The turnover from export of formulations during the year under review stands at Rs. 72.24 crores as against Rs. 48.47 crores achieved during the previous financial year, thus registering an excellent growth of 49%. The growth in export sales of formulations was due to high value orders received from overseas markets, especially markets like Latin America, Africa, etc.

In the domestic market, Branded formulations of the Company, consisting of mainly Diabetic, Gynaecology and Cardiac drugs have contributed to a revenue of Rs. 24.93 crores during the year under review as against Rs. 24.63 crores achieved during the previous year.

During the year revenue from the sale of Export formulation comprising of Branded Items surpassed the revenue from the sale of Bulk Drugs.

(iii) Bulk Drug Business:

Bulk drug business continue to grow, with a revenue of Rs. 62.25 crores during the year under review as compared to Rs. 54.86 crores achieved during the previous financial year, thereby registering a double digit growth of 13.47%. Exports of bulk drug during the year under review stands at Rs. 35.42 crores as against Rs. 37.57 crores during the previous financial year. Thus, during the year under review, while export sales remained stagnant but domestic sales showed a healthy growth of 55% by achieving a turnover of Rs. 26.83 Crores as against Rs. 17.29 Crores achieved during the previous financial year. In order to exploit the Low Volume and High margin products in Bulk Drug segment, your Company has commissioned a Kilo Lab facility at Bangalore, during the Financial Year 2013-14, which will contribute to growth in the years to come.

(iv) Overall Export Performance:

The over all exports of your Company during the year under review increased to Rs. 107.66 crores from Rs. 86.04 crores achieved during the previous financial year, thus registering a growth of 25%. Your Company for the first time crossed a milestone of Rs. 100 crore in revenues from Export sales.

Your Company continues to be a consistent net foreign exchange earner to the country''s economy.

(v) Others:

Revenue from sales to Govt. Institutional business registered a turnover of Rs. 2.88 crores during the year under review as against Rs. 5.11 crores achieved during the previous financial year. This negative growth in turnover is mainly due to Company''s focus shift towards export markets. The Ayurvedic products Division has contributed to a turnover of Rs. 3.19 crores, during the year under review as against Rs. 1.92 crores registered during the previous year. Your Company is planning to give more focus to this division to improve its share in the overall revenue contribution, in the years to come.

4. HEALTH CARE BUSINESS

As part of its forward integration plans, Your Company has ventured into the Health Care Segment by starting its maiden health care clinic in Bangalore which is aimed at providing holistic diabetes care to the patients. Your Company plans to expand its network based on the success of this pilot project.

5. RESEARCH & DEVELOPMENT

The Research and Development division of our Company has continued its activity in the field of development and standardization of pathways for the manufacture of novel and high value active pharmaceutical ingredients. The efficient pathways thus devised have resulted in reaching commercial production levels of these drugs to meet the needs of the international markets.

The products developed by the R&D division, when they enter the manufacturing stream, are backed by extensive documentation of data pertaining to the control of the quality of the drug. The quality and purity of these products are established by recourse to extensive and sophisticated analytical methodology. The R&D division works in tandem with the Quality Control Department in the development of stringent analytical procedures and protocols.

The quality of the drugs that are offered to our customers being of such high order that there is ready acceptance of our products in the international markets. There is continuing and growing demand for products of your Company. New products in the therapeutic segments of anti allergic, psychiatrics and for the treatment of inflammatory disorders are being introduced in the near future in the commercial market. These products are of direct result of R&D efforts in this direction.

The Board of Directors of the Company has in principle approved setting up of a research foundation called as ''Bal Research Foundation'' with an objective of doing research and study in allopathic, ayurvedic and herbal formulations. This foundation is being formed exclusively as non profit organisation with an intention for promoting the wellbeing of the society at large.

6. AUDIT COMMITTEE

The Audit Committee, a sub-committee of Board consists of Dr. G.S.R Subba Rao, Independent Director, Mr. Shrenik Siroya, Non-executive Director, Mr. Pramod Kumar S. Independent Director and Mr. S. Pranesh, Director who is nominee of EXIM Bank, the term loan lender to the Company.

This Committee is chaired by Dr. G.S.R Subba Rao. Audit Committee has been discharging its duties under SEBI Guidelines read with the Listing Agreement. The said Committee is also functioning as Audit committee under Section 292A of the Companies Act, 1956.

7. AUDITORS'' REPORT

There are no qualifications or adverse remarks by the auditors in their report.

8. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has an adequate system of internal controls with clearly defined authority limits. They ensure that the Company''s assets are protected against loss from unauthorised use or disposition and all transactions are authorised, recorded and reported in conformity with generally accepted accounting principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements.

Internal Audit is carried out by Messrs., Manjunath & Co. a firm of independent Chartered Accountants. They interact with the Audit Committee and have reported to the Directors that there is adequate internal control systems in place in respect of the areas of audit carried out by them.

9. DIRECTORS'' RESPONSIBILITY STATEMENT

In compliance to the provisions of Section 2I7(2AA) of the Companies Act, 1956, your Directors wish to confirm with reference to statement of Accounts for the financial year ended on 31.03.2014:

(i) that in preparing the Annual Accounts, all the applicable Accounting Standards have been followed;

(ii) that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the P&L of the Company for that period.

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities;

(iv) That the Directors have prepared the annual accounts on ''going concern'' basis.

(v) That the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively.

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

10. SUBSIDIARY COMPANIES

As on 31.03.2014, your Company has no subsidiaries, either wholly owned or otherwise, Indian or overseas.

11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND FOREIGN EXCHANGE OUTGO

As per provisions of Section 2I7(I)(e) of the Companies Act, I956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, details relating to the Conservation of Energy and Technology Absorption & Foreign Exchange Earnings and Outflow are given in Annexure I which forms part of the Directors'' Report.

12. PARTICULARS OF EMPLOYEES

A statement of particulars of employees as required under Section 2I7(2A) of the Companies Act, 1956, is given as Annexure II and forms part of this report.

13. PUBLIC DEPOSITS

As on date of the Report, the Company has not accepted any deposits from public.

14. DIRECTORS

Dr. G.S.R Subba Rao and Mr. Pramod Kumar S, Directors, retire by rotation and being eligible, offer themselves for re-appointment. In terms of the requirements of the new Companies Act, 2013, their appointments as Independent Directors are proposed under Special Business.

Mr. Shrenik Siroya, Non Independent Director, retires by rotation as per the new Companies Act, 2013 and being eligible, offers himself for re-appointment.

Mr. Shailesh Siroya was reappointed as Managing Director by the Board for a period of next 5 (five) years i.e. from 01.08.2014 to 31.07.2019, subject to the approval by the Shareholders.

15. AUDITORS

Messrs T D. Jain & DI Sakaria Chartered Accountants, Statutory Auditors of the Company retire at the Annual General Meeting and being eligible, offer themselves for re-appointment.

16. COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed Cost Audit of the Company''s Formulations as well as Bulk Drug Business.

The Board has appointed Mr. M.R. Krishna Murthy as Cost Auditor of the Company for the financial year 2013-14 for cost audit of both Formulations and Bulk Drug units of the Company. The cost audit report will be submitted to authorities within the time limit prescribed for the purpose.

17. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHARE HOLDERS

A detailed report on the Corporate Governance System and practices of the Company are given in a separate section in this Annual Report. Detailed information for the shareholders is given in Additional Shareholders information section.

Outstanding Un-paid dividend amount for the financial year 2005-06 that is due for transfer to the Investor Education and Protection Fund has been duly transferred, during the year.

18. HUMAN RESOURCES

The human resources of the Company continue to contribute its share in the growth of the Company. Human Resource agenda of the company for the year continued to focus on building a robust talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement, and strengthening employee relations though progressive people management.

There was no complaint lodged by any woman employee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, with the Company during the period under report.

19. CEO & CFO CERTIFICATION

The Board has acknowledged the Managing Director as the CEO of the Company and AVP Finance & Accounts as the CFO for the purpose of compliance under the Listing Agreement. The CEO and CFO have certified to the Board, in terms of Clause 49 of the Listing Agreement that the financial statements present a true and fair view of the company''s affairs and are in compliance with accounting standards.

20. INSURANCE COVERAGE

The Board of Directors reports that your Company has adequate and comprehensive insurance cover on all the movable and immovable assets of the Company.

21. APPRECIATION

Your Directors place on record their sincere appreciation of significant contributions made by the employees through their dedication, hard work and commitment. Your directors also place on record their sincere thanks to the trust reposed on the Company by the medical fraternity and the patients. Your board also acknowledge the support extended to your Company by Canara Bank, Punjab National Bank, EXIM Bank, other Banks & financial institutions, government agencies, shareholders and investors at large. Your Company look forward to the continued support from all the quarters in its endeavour to help people lead healthier lives.

For and on behalf of the Board of Directors

Bangalore Dr. S. Prasanna Shailesh D Siroya 28th May, 2014 Whole Time Director Managing Director


Mar 31, 2013

The Directors have pleasure in presenting the 26th Annual Report together with the Audited Accounts of the Company for the financial year ended on 31st March, 2013.

1. FINANCIAL RESULTS

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

1) Total Income from operations 150.25 142.25

2) Earnings before Interest, Tax, 17.88 15.89 Depreciations Amortisation

Less:

Depreciations Amortisation 4.81 4.13

Finance cost 7.98 7.39

Profit/(Loss)before taxation and prior period adjustment 5.09 4.37

Less:

3) Current Tax

4) Deferred Tax 0.82 0.61

5) Extra Ordinary/Non Recurring items

6) Prior year Adjustments (0.01) -

7) Profit after tax for the year 4.28 3.76

Add:

8) Profits loss account balance at the 11.80 8.04 beginning of the year

9) Profit/(Loss) made available for 16.08 11.80 appropriation

Less:

10) Proposed Dividend on Equity Shares 0.79 0.00

11) Tax on Dividend 0.13 0.00

12) Balance Carried to Balance sheet 15.16 11.80

Note : Previous year''s expenses have been regrouped to confirm this year''s classification.

2. DIVIDEND & APPROPRIATIONS

Your directors are pleased to recommend payment of dividend of Re. 0.75/- (i.e 7.5%) on each equity share of Rs. 10 each, thereby absorbing an amount of Rs. 0.92 crores including dividend distribution tax of Rs. 0.13 crores. The balance amount of profit is retained as surplus in the statement of profit and loss, forming part of reserves and surplus.

3. BUSINESS OPERATIONS

(i) Turnover and Net profit

Duringthe financial year 2012-13, your Company has achieved an gross turnover of Rs. 150.25 cores as against Rs. 142.25 crores achieved during the previous financial year, thus registering a moderate growth of 5.62%.

The net profit after tax of the Company during the financial year 2012-13 stands at Rs. 4.28 Crores as against the net profit of Rs. 3.75 crores achieved in the previous financial year, 201 l-l2.Theprofitofthefinancialyear20l l-l2includeaone time gain of Rs. 0.88 crores on sale of fixed assets (building). If the same is excluded for comparison purpose, the net profit growth during the current financial year stands at 49% over the previous year.

(ii) Formulations

The turnover from export formulations during the year under review stands at Rs. 48.47 crores as against Rs. 39.42 crores achieved during the previous financial year thus registering a good growth of 22.96%. The growth in export was due to penetration in new virgin markets like Lain America, African and South East Asian Countries with both the plants at Bangalore and Uttaranchal contributing with higher volume of production to meet the demand.

In the domestic market, Branded formulations of the company, consisting of mainly Diabetic and Cardiac drugs have contributed to a revenue of Rs. 24.63 crores during the year under review as against Rs. 24.09 crores achieved during the previous year, Considering the overall sluggishness in the domestic market, the performance may be considered satisfactory.

(iii) Bulk Drugs

Bulk drug business continues to be the major contributor of revenue, with a revenue of Rs. 54.86 crores during the year under review as compared to Rs. 53.01 crores achieved during the previous financial year, thereby registering the moderate growth of 3.48%. Exports of bulk drug during the year under review stands at Rs. 37.57 crores as against Rs. 36.44 crores during the previous financial year.

(iv) Overall export performance

The over all exports of your Company during the year under review increased to Rs. 86.04 crores from Rs. 75.85 crores achieved during the previous financial year, thus registering a growth of 13.43%

Your company continues to be a consistent net foreign exchange earner to the country''s economy.

(v) Others

Revenue from sales to Govt. Institutional business registered a turnover of Rs. 5.1 I crores during the year under review as against Rs. 8.14 crores achieved during the financial year 201 1-12. This negative growth in turnover is mainly due to company''s focus shift towards export markets. The Ayurvedic products Division has contributed to a turnover of Rs. 1.92 crores, during the year under review as against Rs. 1.73 crores registered during the previous year. Your company is planning to give more focus to this division to improve its share in the overall revenue contribution in the years to come.

5. RESEARCH & DEVELOPMENT

The Research and Development division of our Company has continued its activity in the field of development and standardization of pathways for the manufacture of novel and high value active pharmaceutical ingredients. The efficient pathways thus devised have resulted in reaching commercial production levels of these drugs to meet the needs of the international market.

The products developed by the R&D division, when they enter the manufacturing stream, are backed by extensive documentation of data pertaining to the control of the quality of the drug. The quality and purity of these products are established by recourse to extensive and sophisticated analytical methodology. The R&D division works in tandem with the Quality Control Department in the development of stringent analytical procedures and protocols.

The quality of the drugs that are offered to our customers being of such high order that there is ready acceptance of our products in the international markets. There is continuing and growing demand for products of your Company. Very new products in the therapeutic segments of anti allergic, psychiatrics and for the treatment of inflammatory disorders are being introduced in the near future in the commercial market. These products are of direct result of R&D efforts in this direction.

6. AUDIT COMMITTEE

The Audit Committee, a sub-committee of Board consists of Dr. G.S.R Subba Rao, Independent Director, Mr. Shrenik Siroya, Non- executive Director, Mr.Pramod Kumar S Independent Director and Mr. Ajit Kumar, Director who is nominee of EXIM Bank, the lender to the company.

This Committee is Chaired by Dr.G.S.R Subba Rao. Audit Committee has been discharging its duties under SEBI Guidelines read with the listing agreement. The said Committee is also functioning as Audit committee under section 292A of the Companies Act, 1956.

7. AUDITORS''REPORT

There are no adverse qualifications or remarks by the Auditors'' in the Auditors''Report.

8. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has an adequate system of internal controls with clearly defined authority limits. They ensure that the Company''s assets are protected against loss from unauthorised use or disposition and all transactions are authorised, recorded and reported in conformity with general accepted accounting principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements.

Internal Audit is carried out by Messrs., Manjunath & Co. a firm of independent Chartered Accountants. They interact with the Audit Committee and have reported to the Directors that there is adequate internal control systems in place in respect of areas of audit carried out by them.

9. DIRECTORS'' RESPONSIBILITY STATEMENT

In compliance to the provisions of Section 2I7(2AA) of the Companies Act, 1956, your Directors wish to confirm with reference to statement of Accounts for the financial year ended on 31.03.2013:

(i) that in preparing the Annual Accounts, all applicable Accounting Standards have been followed;

(ii) that the accounting policies adopted are consistently followed and the judgements or estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and Loss Account of the Company for the financial year;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities;

(iv) That the Directors have prepared the annual accounts on ''going concern''basis.

10. SUBSIDIARY COMPANIES

As on 3 1.03.2013, your company has no subsidiaries, either wholly owned or otherwise, Indian or overseas.

11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND FOREIGN EXCHANGE OUTGO

As per provisions of Section 217( I )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, details relating to the Conservation of Energy and Technology Absorption and Foreign

Exchange Earnings and Outflow are given in Annexure I which forms part of the Directors''Report.

12. PARTICULARS OF EMPLOYEES

A statement of particulars of employees as required under Section 217(2A) of the Companies Act, 1956, is given as Annexure II and forms part of this report.

13. PUBLIC DEPOSITS

As on date of the Report, the Company has not accepted any deposits from public.

14. DIRECTORS

Dr. S Prasanna and Mr. Pramod Kumar. S, Independent Directors of the Company are retiring by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. Your Directors recommend their reappointment.

15. AUDITORS

Messrs TD.jain & Dl Sakaria (eststwhile) M/s Ostawal & Jain, Chartered Accountants, Statutory Auditors of the Company retire at the Annual General Meeting and being eligible offer them selves for re-appointment.

16. COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed Cost Audit of the Company''s Formulations as well as Bulk Drug Units.

The Board has appointed Mr. M.R Krishna Murthy as Cost Auditor of the Company for the financial year 2012-13 for cost audit of both Formulation and Bulk Drug units of the Company and the Company has also obtained the central government approval for the same. The Cost Audit is under progress and the Company will submit the Cost Auditor''s report for FY 2012-13, to the Central Government soon.

17. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHARE HOLDERS

A detailed report on the Corporate Governance System and practices of the Company are given in a separate section in this Annual Report. Detailed information for the shareholders is given in Additional Shareholders information section.

Outstanding Un-paid dividend amount for the year 2004-05 that is due for transfer to the Investor Education and Protection Fund has been duly transferred, during the year.

18. HUMAN RESOURCES

The human resources of the Company continue to contribute its share in the growth of the Company. Human Resource agenda of the company for the year continued to focus on building a robust talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement, and strengthening employee relations though progressive people management.

19. CEO &CFO CERTIFICATION

The Board has acknowledged the Managing Director as the CEO of the Company and G.M Finance as the CFO for the purpose of compliance under the Listing Agreement. The CEO & CFO have certified to the Board, in terms of Clause 49 of the Listing Agreement that the financial statements present a true and fair view of the company''s affairs and are in compliance with accounting standards.

20. INSURANCE COVERAGE

The Board of Directors reports that your Company has adequate and comprehensive insurance cover on all the movable and immovable assets of the Company.

21. APPRECIATION

Your Directors place on record their sincere appreciation of significant contributions made by the employees through their dedication, hard work and commitment. Your directors also places on record its thanks on the trust reposed on the Company by the medical fraternity and the patients. We also acknowledge the support extended to us by Canara Bank, Punjab National Bank, EXIM Bank, and other Banks & financial institutions, government agencies, shareholders and investors at large. We look forward to having the same support in our endeavor to help people lead healthier lives.

For and on behalf of the Board of Directors

Bangalore Dr. S Prasanna Shailesh Siroya

27th May, 2013 Non-Executive Director Managing Director


Mar 31, 2012

The Directors have pleasure in presenting the 25th Annual Report together with the Audited Accounts of the Company for the financial year ended on 31st March, 2012.

1. FINANCIAL RESULTS:

(Rs. in Lakhs)

Particulars 2011-12 2010-11

1) Total Income 14,224.60 11,664.84

2) Earnings before Interest , Tax, 1588.51 1131.76

Depreciation & Amortisation

Less :

Depreciation & Amortisation 413.08 342.36

Finance cost 729.91 679.13

Profit /(Loss)before taxation and prior period adjustment 445.52 110.27

Less :

3) Provision for taxation 8.95 4.53

4) Deferred Tax 60.75 58.67

5) Extra Ordinary / Non Recurring items - -

6) Prior year adjustments 0.12 (0.16)

7) Profit after Tax 375.70 47.23

Add:

8) Profit & loss account balance at the 804.53 809.56 beginning of the year

9) Profit /(Loss) made available for 1,180.23 856.79 appropriation

Less:

10) Proposed Dividend on Equity Shares - -

11) Tax on Dividend - -

12) Balance Carried to Balance sheet 1,180.23 856.79

Note: Previous year's income has been regrouped in line with that of the year under review for comparison. The opening balance of P & L has been reduced during the year consequent upon merger of Basava Chem Ltd., with the Company.

2. DIVIDEND:

In view of the capex plans and to facilitate expansion programs under consideration, your Directors have decided not to recommend payment of dividend for the financial year 2011-12.

4. BUSINESS OPERATIONS:

During the financial year 2011-12, your Company has achieved a total turnover of Rs 142.25 crores as against Rs. 116.65 crores achieved during the previous year 2010-11, thus registering a growth of 21.95%.

With this increase in turnover, the net profit after tax of the Company during 2011-12 has increased substantially to Rs. 3.76 crores as against the net profit of Rs. 0.47 crore achieved in the previous year, 2010-11.

The bulk drug business continues to dominate, as the total sales on this segment has increased from Rs. 46.20 crores in 2010-11 to Rs. 53.01 crores during the year 2011-12. The products mix during the year 2011-12 improved with higher sale of high value items in addition to our regular API.

Exports of Bulk Drugs has registered a growth of 16.05% during the year under review with a turnover of Rs. 36.44 crores as against Rs. 31.40 crores achieved during the previous financial year.

The export formulations division registered a growth of 6.71% by increasing its turnover from Rs. 36.94 crores in the previous year to Rs. 39.42 crores during the year under review. Your Company expanded its presence in many new global markets such as Latin America, many African countries, South East Asia etc.

Your Company's branded formulations Divisions mainly consisting of "Diabetic" and "Cardiac" Products made a net sale of Rs. 24.09 crores during 2011.12 as against Rs. 19.58 crores during the previous year, thereby strengthening the Company's presence in the domestic market.

The over all exports of your Company during the year under review has increased to Rs. 75.85 crores from Rs. 66.48 crores achieved during the previous year.

Supplies to Govt. Institutional business registered a turnover of Rs. 8.14 crores during the year, as against Rs. 6.44 crores during the previous year and the Ayurvedic products Division has achieved a turn over of Rs 1.73 crores, during the year under review as against Rs. 1.94 crores achieved during the previous financial year.

Your Company has also won the Best Exporter award from the Sri Lankan Government for the Year 2011-12 for supply of drugs and medical equipments to Sri Lanka Pharmaceutical Corporation, a Government of Sri Lanka enterprise.

5. RESEARCH & DEVELOPMENT:

The Research and Development division of your Company continued its activities in the field of development and standardization of pathways for the manufacture of novel and high value active pharmaceutical ingredients. The clear pathways thus established have resulted in the scale up of production levels of these drugs to meet the needs of the international market.

The products developed by the R&D division, when they enter the manufacturing stream, are backed by extensive documentation of data pertaining to the control of the quality of the drug. The quality and purity of these products are established by recourse to extensive and sophisticated analytical methodology. The R&D division works in tandem with the Quality Control Department in the development of stringent analytical procedures and protocols.

The quality of the drugs your Company offers to its customers being of such high order, there is ready acceptance of these products in the international markets. There is continuing and growing demand for products of your Company. New products in the therapeutic segments of antihistamines, anxiolytics and for the treatment of neurological disorders are being introduced in the near future in the commercial market. These products are of direct result of R&D efforts in this direction.

6. AUDIT COMMITTEE:

The Audit Committee consisted of Dr. G.S.R. Subba Rao, Independent Director as Chairman, Mr. Ajit Kumar, nominee Director of EXIM Bank and Mr. Shrenik Siroya, Non-executive Director; Mr. Pramod Kumar. S who is Independent Director was inducted into the Committee as member, with effect from 10.08.2012. The Audit Committee has been discharging its duties under SEBI Guidelines read with the Listing Agreement. The said Committee is also functioning as Audit Committee under Section 292A of the Companies Act, 1956.

7. AUDITORS' REPORT

There are no adverse qualifications or remarks in the Auditors' Report. However, regarding the outstanding un-paid dividend amount for the year 2003.04 of Rs. 1,84,828 which was due for transfer to the Investor Education and Protection Fund, as mentioned in the Auditors' Report, it is hereby confirmed that the amount has since been transferred to the said Fund.

8. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Your Company has an adequate system of internal controls with clearly defined authority limits. They ensure that the Company's assets are protected against loss from unauthorised use or disposition and all transactions are authorised, recorded and reported in conformity with generally accepted accounting principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements.

Internal Audit is carried out by Messrs. Manjunath & Co. Bangalore, an independent firm of Chartered Accountants. They interact with the Audit Committee and have reported to the Directors that there is adequate internal control systems in respect of areas carried out by them.

9. DIRECTORS' RESPONSIBILITY STATEMENT:

In compliance to the provisions of Section 2I7(2AA) of the Companies Act, 1956, your Directors wish to confirm with reference to statement of Accounts for the financial year ended on 31.03.2012:

(i) that in preparing the Annual Accounts, all applicable Accounting Standards have been followed;

(ii) that the accounting policies adopted are consistently followed and the judgements or estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and Loss Account of the Company for the financial year ;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities;

(iv) That the Directors have prepared the annual accounts on 'going concern' basis.

10. SUBSIDIARY COMPANIES:

The Amalgamation proceedings of Basav Chem limited, with Bal Pharma Limited was approved by Honourable High Court of Karnataka vide COP No 90/2010 and 89/2010. As on 31.03.2012 the Company has no subsidiaries, either wholly owned or otherwise. Hence, the financial results of the Company for the year under review and the results pertaining to the previous year, are not entirely comparable.

11. PARTICULARS OF EMPLOYEES:

There was no employee drawing remuneration falling within the limits prescribed under Section 2I7(2A) of the Companies Act, 1956.

12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND FOREIGN EXCHANGE OUTGO:

As per provisions of Section 217(I)(e) of the Companies Act, I956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, I988, details relating to the Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outflow are given in Annexure I, which is forming part of the Directors Report.

13. PUBLIC DEPOSITS:

As on date of the Report, the Company has not accepted any public deposits.

14. DIRECTORS:

Dr. G. S. R Subba Rao and Mr. Shrenik Siroya, Directors retire by rotation at the 25th Annual General Meeting of the Company and being eligible, offer themselves for reappointment. Your Directors recommend their reappointments.

15. AUDITORS:

Messrs T. D. Jain & DI Sakaria (erstwhile Messrs Ostawal & Jain), Chartered Accountants, Statutory Auditors of the Company retire at the Annual General Meeting and are eligible them for appointment.

16. COST AUDIT:

Pursuant to Section 233B of the Companies Act, I956, the Central Government has prescribed Cost Audit of the Company's Formulations Division as well as Bulk Drug Division.

Subject to the approval of the Central Government, the Board has appointed Mr. M.R. Krishna Murthy as Cost Auditor of the Company for the financial year, 2011-12 for cost audit of both Formulation and Bulk Drug divisions of the Company separately. The Cost Audit is under progress and the Company will submit the Cost Auditor's report to the Central Government soon.

17. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHAREHOLDERS:

A detailed report on the Corporate Governance System and practices of the Company are given in a separate section in this Annual Report. Detailed information for the shareholders is given in Additional Shareholders information section.

18. HUMAN RESOURCES:

The Company's Human Resource agenda for the year focused on strengthening four key areas: Building a robust talent pipeline, enhancing individual and organizational capabilities for future readiness, driving greater employee engagement, and strengthening employee relations through progressive people management.

19. INSURANCE COVERAGE:

The Board reports that your Company has adequate insurance cover on all the assets of the Company.

20. APPRECIATION:

Your Directors place on record their sincere appreciation of significant contributions made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. The Directors also acknowledge the support and wise counsel extended to the Company by Canara Bank, Punjab National Bank, EXIM Bank, State Bank of India and other Banks and financial institutions, government agencies, shareholders and investors at large. Your Directors look forward to having the same support in their endeavour to help people lead healthier lives.

For and on behalf of the Board of Directors

Bangalore

Dr. S. Prasanna Shailesh Siroya

10th August, 2012 Executive Director Managing Director


Mar 31, 2010

The Directors have pleasure in presenting the 23rd Annual Report together with the Audited Accounts of the Company for the financial year ended on 31st March, 2010.

1. FINANCIAL RESULTS:

(Rs. in Lakhs)

Particulars 2009-10 2008-09

1) Total Income 108,15.16 10667.67

2) Profits before 195.47 598.59 Depreciation and

provision for Taxation

Less : Depreciation 285.90 188.58

Profits before (90.43) 410.01

Taxation and prior year adjustments

Less :

3) Provision for Taxation 7.33 3.52

4) Fringe Benefit Tax - 23.47

5) Deferred Tax 44.94 79.30

6) Extraordinary/ Non Recurring items - -

7) Prior year adjustment (0.18) 52.08 4.44 110.73

Add:

8) Profit & Loss Account 142.89 299.28 balance at the

beginning of the year

9) Profit made available 906.62 699.32 for appropriation

763.74 998.60

Less:

10) Proposed Dividend on - 78.62 Equity Shares

11) Tax on dividends - - 13.36 (-) 91.98

12) Balance Carried to 763.74 906.62 Balance Sheet

2. DIVIDEND:

In view of the results, your Directors have decided not to recommend payment of dividend for the year, 2009-10.

3. MANAGEMENT DISCUSSION AND ANALYSIS:

Global Pharmaceutical Industry Challenges

The global pharmaceutical business is becoming more complicated than ever before. Older business models are being challenged by competition; new verticals are coming into play. There will be new developments and alliances, as well as new opportunities and challenges. In such an environment only the rapid, clever and nimble will win.

If present industry overview is taken in to consideration, the global pharmaceutical market in 2010 is projected to grow 4% to 6% exceeding US$ 825 billion. This growth will be largely driven by strong overall growth in the emerging countries, as well as the rising influence of healthcare access and funding on market demand. Moreover, the global market is expected to grow at 4-7% Compound Annual Growth Rate (CAGR) through 2013. Global pharmaceutical market value is expected to expand to $975 plus billions by 2013.

EMERGING TRENDS:

Emerging markets are set to play a pivotal role in future pharmaceutical success. Emerging pharmaceutical markets are typically small. However, their rapid growth vis-à-vis the more regulated markets make them attractive prospects for the pharmaceutical industry. Rapidly growing economies, increasing population and greater health awareness combined with larger incomes to spend on healthcare will drive the growth of pharmaceuticals in emerging markets. By 2017, IMS forecasts revenues from emerging markets at US$ 290 billion to US$ 320 billion, with a CAGR of 12% to 15%.

INDIAN PHARMACEUTICAL INDUSTRY:

The Indian Pharmaceutical Industry ranks as a frontrunner among the Country’s science based industries with wide ranging capabilities in the complex field of drug manufacture and technology. The industry has been growing at an impressive CAGR in excess of 8-9%, and will touch $10 billions by 2010.

Indian pharmaceutical industry is the world’s 13th largest in terms of value and 14th in terms of volume with over all 60,000 brands in over 60 therapeutic categories. India has world class facilities and expertise in manufacturing with the largest number of US FDA approved manufacturing units in the world out side US. Ancillary industries are also well developed with support available locally. Quality bulk drugs at competitive prices are assured.

- Global pharma looks to India: Prospects for growth:

The huge potential of the Indian pharmaceuticals market is impossible for foreign companies to ignore, given that it will be one of the top 10 sales markets by 2020. India’s population is growing rapidly, as is its economy - creating a large middle-class able to afford western medicines. India’s epidemiological profile is also changing and the population is ageing, so demand is likely to increase for drugs for cardiovascular problems, disorders of the central nervous system and other chronic diseases such as diabetes which is increasing at an alarming rate. The total market is expected to rise to a value of approximately US $50 billions by 2020.

4. BUSINESS OPERATIONS:

During the year, 2009-10 your Company has achieved an over all turnover of X 108.15 crores as against X 106.67 crores of the previous year. Thus registering a marginal growth of 1.39% on the top line. Despite a marginal increase in sales, the net results after tax decreased from X 2.99 crores of the previous year to a net loss of X 1.42 crores during the current year. The main reason for the fall in net profit is commissioning of our Uttarakhand plant, difference in product mix, and cut-throat competition from large pharma players in Indian and international markets.

The exports formulations division registered a growth of 42.34% by increasing its turnover from X 22.39 crores in the previous year to X 31.87 crores in the current year. Your Company expanded its presence in many new global markets such as Latin America and many African countries.

The bulk drug business both domestic and exports have been very encouraging with the growth of 44.36% as the turn over of the division reached X 42.24 crores as against X 29.26 crores in the previous year. Utilization of facility at Basav Chem Limited (wholly owned subsidiary Company) has also been to its full capacity. Regular supplies of the products are made to developed markets such as Europe, Japan, Australia and Canada where the products are already registered. Various DMF have been filed across the globe to increase our presence in other markets.

The over all exports of your Company increased (by 54.7%) to X 57.35 crores as against 37.07 crores during the year 2008-09.

The govt. Institutional business made a turnover of Rs 4.44 crores and the Ayurvedic Division has made a turn over of Rs 2.04 crores during the year 2009-10.

Your Company’s branded formulations divisions mainly consisting of Diabetic and Cardiac Products made a net sale of Rs 23.36 crores as against Rs 35.21 crores during the last year. This reduction in sales in branded formulation has affected the profit margins of the Company (34% shortfall during the year). This short fall in sale is due to mass attrition of a number of employees from major divisions of the Company.

Appropriate measures are being taken by your management to overcome the reduction in branded formulation sales and to retain the existing market.

5. RESEARCH & DEVELOPMENT:

The Research and Development division is actively engaged in the development, scale-up and commercialization of processes for the manufacture of high value API’s in niche areas. Production of these products has enabled the Company to market them, both nationally and internationally.

All the products manufactured through the processes developed by the R&D division are backed by complete, internationally accepted, documentation and controls. The quality and purity of these products are established and maintained by sophisticated analytical methods and protocols developed in-house by the R&D and QC divisions.

The ready acceptance of our products in the international market is a clear indicator of their high quality. This is further reinforced by tight quality controls at every stage of the manufacturing process, leading to excellent quality characteristics in our APIs.

All this developmental work has resulted in the generation of valuable intellectual property (IP) which the Company is now in the process of patenting. Simultaneously, Bal Pharma has made a beginning in the development of new chemical entities and some promising leads have been obtained in this direction.

6. AUDIT COMMITTEE:

The Audit Committee, a sub-committee of the Board consists of Mr. David Rasquinha (nominee Director of EXIM Bank), Dr. G. S. R. Subba Rao, Independent Director and Mr. Shrenik Siroya, Non-Executive Director.

This Committee headed by Dr.G.S.R Subba Rao, has been discharging its duties under SEBI Guidelines read with the Listing Agreement. The said Committee is also functioning as Audit Committee under Section 292A of the Companies Act, 1956.

7. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

Your Company has an adequate system of internal controls with clearly defined authority limits. They ensure that the Company’s assets are protected against loss from unauthorised use or disposition and all transactions are authorised, recorded and reported in conformity with generally accepted accounting principles. These systems are designed to ensure accuracy and reliability of accounting data, promotion of operational efficiency and adherence to the prescribed management policies. These policies are periodically reviewed to meet current business requirements.

Internal Audit is carried out by Messrs. Ishwar & Gopal an independent firm of Chartered Accountants. They interact with the Audit Committee and have reported to the Directors that there is adequate internal control systems in respect of areas carried out by them.

8. DIRECTORS’ RESPONSIBILITY STATEMENT:

In compliance to the provisions of Section 217(2AA) of the Companies Act, 1956, your Directors wish to confirm with reference to statement of Accounts for the financial year ended 31.03.2010:

(i) that in preparing the Annual Accounts, all applicable Accounting Standards have been followed;

(ii) that the accounting policies adopted are consistently followed and the judgements or estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit and Loss Account of the Company for the financial year ;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing/detecting fraud and other irregularities;

(iv) That the Directors have prepared the annual accounts on going concern’ basis.

9. SUBSIDIARY COMPANIES:

The Company had two wholly owned Subsidiary Companies during the financial year, 2009-10. One of the subsidiary companies, Novosynth Research Labs Private Limited applied for striking off its name from the register under Section 560 of the Companies Act,1956 and the Amalgamation proceedings of Basav Chem Limited with Bal Pharma Limited is before the Honourable High Court of Karnataka.

Statement pursuant to Section 212 of the Companies Act, 1956, relating to Company’s interest in subsidiary company, Basav Chem Limited is as given in Annexure I forming part of the Director’ Report.

10. PARTICULARS OF EMPLOYEES:

A statement of particulars of employees as required under Section 217(2A) of the Companies Act, 1956, is given as Annexure II and forms part of this report.

11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

As per provisions of 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, details relating to the Conservation of Energy and Technology Absorption and Foreign Exchange Earnings and Outgoings are given in Annexure forming part of the Directors Report.

12. PUBLIC DEPOSITS:

As on date of the Report, the Company has not accepted any public deposits.

13. DIRECTORS:

As on date, your Board consists of 6 (six) Directors, 3 (three) of whom are Non-Executive Directors and of which 2 (two) are Independent Directors. 1 (one) of who is Nominee Director of Export Import Bank of India. 2 (two) of whom are Executive Directors. Mr. Shrenik Siroya, Non-Executive Director and Dr. G.S.R. Subba Rao, Independent Director of the Company who retire by rotation at the 23rd Annual General Meeting of the Company and being eligible, offer themselves for reappointment. Your Directors have pleasure in recommending their reappointments.

14. AUDITORS:

Messrs Ostawal & Jain, Chartered Accountants, Auditors of the Company, retire at the Annual General Meeting and are eligible for re-appointment.

15. COST AUDIT:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed Cost Audit of the Company’s Formulations Division.

Subject to the approval of the Central Government, the Board has appointed Mr. G.I. Srinivasamurthy as Cost Auditor of the Company for the financial year, 2010-11. The Cost Audit is under process and the Company will submit the Cost Auditors’ Report to the Central Government in time.

16. EMPLOYEE STOCK OPTION SCHEME:

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on 31st March, 2010 under the “Bal Pharma Limited Employees Stock Option Scheme, 2006” is set out in the Annexure – III to the Directors Report.

17. CORPORATE GOVERNANCE AND ADDITIONAL INFORMATION TO SHARE HOLDERS:

A detailed report on the Corporate Governance System and practices of the Company are given in a separate section in this Annual Report. Detailed information for the shareholders is given in Additional Shareholders information section.

18. INSURANCE COVERAGE:

The Board reports that your Company has adequately insured all the assets of the Company.

19. APPRECIATION:

Your Directors place on record their sincere appreciation for significant contribution made by the employees through their dedication, hard work and commitment and the trust reposed on us by the medical fraternity and the patients. Your Board also acknowledges the support and wise counsel extended by Canara Bank, Punjab National Bank, Exim Bank, State Bank of Indore and other Banks and financial institutions, government agencies, shareholders and investors at large. The Directors look forward to having the same support in the our endeavor to help people lead healthier lives.

For and on behalf of the Board of Directors

Bangalore Dr. S. Prasanna Shailesh Siroya

9th August, 2010 Executive Director Managing Director

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