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Notes to Accounts of Bal Pharma Ltd.

Mar 31, 2015

1. Corporate Information

Bal Pharma Limited (the company) is a Public Limited Company domiciled in India and incorporated under provisions of the Companies Act, 1956. Its shares are listed on two recognized stock exchanges in India. The company is engaged in the manufacturing and selling of pharmaceutical products. The company caters to both domestic and international markets.

2. Basis of preparation

The financial statements of the company have been prepared in accordance with Indian Generally Accepted Accounting Principles ('GAAP') under the historical cost convention on the accrual basis. The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) which continue to apply as per Section 133 of the Companies Act, 2013 (the Act) read with rule 7 of the Companies (Accounts) rules, 2014, and other recognized accounting practices and policies generally accepted in India.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The Management evaluates and adopts all recently issued or revised accounting standards on an ongoing basis.

b. Terms/Rights attached to Equity shares

The company has only one class of equity shares having par value of ' 10 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

c. Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting period : Nil (31 March 2014 : Nil)

d. The company had issued total 90,400 shares (31 March 2014: 90,400 ) during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee services.

As per records of the company, including its register of shareholders/members and other declaration received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

f. Shares reserved for issue under options

i. During the FY 2012-13, 2,298,748 preferential share warrants convertible into equivalent number of equity shares of Rs. 10/- each at a premium of Rs. 11 per share, had been issued to the promoters/strategic investors by the company on 19 October 2012. During the year, the preferential share warrants outstanding as at 1 April 2014 got converted in to equivalent number of equity shares.

ii. During the year 1,300,000 preferential share warrants convertible into equivalent number of equity shares of Rs. 10/- each at a premium of Rs. 52 per share, had been issued to the under mentioned strategic investors by the company on 18 August 2014, from whom 25% of the issue price amounting to Rs. 20,150,000 has been received in advance entitling the warrant holder to apply for an equivalant number of equity shares on payment of balance 75% of the issue price within 18 months from the date of allotment of warrants. As on 31 March 2015 all the warrants are outstanding and equivalent number of equity share are reserved for issue against the same. Balance amount outstanding against these warrants amounts to Rs. 60,450,000.

a. Term loan obtained from EXIM Bank of Rs. 6.00 Crores towards expansion of research & development centre at Bangalore and expenditure pertaining to R&D activities, is secured by pari passu first charge on the entire moveable fixed assets of the company by way of hypothecation and pari passu first charge by way of equitable mortgage on all immovable fixed assets of the company, both present and future, more particularly unit1, unit 2, unit 3 & Unit 4 of the company and personal guarantee of managing director. The loan is repayable in 20 equal quarterly installment of Rs. 0.30 Crore each, starting from April 2015 and carries interest @ EXIM bank LTMLR plus 250 basis points, which is currently @ 12.70%.

b. During the year the company was sanctioned a term loan of Rs. 23.45 Crores by Corporation Bank towards up gradation and expansion of the manufacturing facilities at unit 1,2 & 4. The loan is secured by Mortgage on paripassufirst charge with EXIM bank of the industrial property at unit 1, 2 & 4 and Hypothecation on pari passu first charge basis with EXIM bank of the entire movable fixed assets of the company, both present and future, belonging to unit 1, unit 2 & 4 of the company. The loan is repayable in 80 installments after a moratorium period of 24 months and carries interest @ 14%. An amount of Rs. 0.75 crores was availed as at 31 March 2015 against the said sanction.

c. The vehicle loans are secured by hypothecation of vehicles taken on loan.

3. Export benefits:

The Company has accounted an amount of Rs. 43,125,370 (31 March 2014: Rs. 35,919,992) being the net amount of credit under various export incentive schemes as announced under Foreign trade Policy. The same will be either received in cash or utilized for off-setting customs duty on future imports. The accumulated amount outstanding on this account as on 31 March 2015 is Rs. 45,585,361 (31 March 2014: Rs. 51,522,074) and the same is reflected under short-term loans and advances.

4. Based on the information available with the company, principal amount due to micro and small enterprises is 1,119 (31 March 2014: Rs. 1,635). Further interest paid during the year and interest due at the end of the year to micro and small enterprises is Rs. Nil (31 March 2014: Rs. Nil).

5. Expenditure on research and development:

An amount of Rs. 16,632,682 (31 March 2014: Rs. 13,050,019) has been incurred during the year on research and development of new products and processes in the R & D centre. Amount written off during the year on account of the above was Rs. 16,560,061 (31 March 2014: Rs. 15,025,617). The balance on this account as on 31 March 2015: Rs. 48,245,654 (31 March 2014: Rs. 48,655,922).

6. The company has provided for Rs. 2,42,414/- (31 March 2014: Rs. 262,215) being excise duty on finished goods lying at various manufacturing units at the end of reporting period.

7. Contingent liabilities not provided for:

- Letter of credit Rs. 103,179,442 (31 March 2014: Rs. 1,44,441,190)

- Estimated value of contracts remaining to be executed on capital account and not provided for Rs. 28,332,935 (31 March 2014: Rs. 2,878,000)

- Claims against company not acknowledged as debts comprises:

Amount in Rs. Nature 31 March 2015 31 March 2014

Excise & Customs 24,514,120 6,050,923

Service Tax 10,836,228 10,836,228

Sales Tax 1,788,034 1,788,034

Income Tax 8,950,439 -

Total (*) 46,088,821 18,675,185

(*) Pre - deposit under protest Rs. 643,729 (Previous year Rs. 777,006)

- The company is also involved in other lawsuits, claims, investigations and proceedings including patent and commercial matters, which arise in the ordinary course of business, however, there are no such matters pending that the company expects to be material in relation to its business.

8. The company has given counter guarantees to bank against guarantees issued by them on behalf of the company Rs. 31,441,990 (31 March 2014: Rs. 18,997,040).

9. Effective from 1 April 2014, the Company has changed the depreciation charge based on revised remaining useful lives of the assets as per requirement of schedule II of the Companies Act, 2013. Due to this, the depreciation charge for the year ended 31 March 2015 is higher by Rs.17,327,086. Further, based on transitional provisions as provided in Schedule II, an amount of Rs. 7,010,983 (net of deferred tax) has been charged to accumulated retained earnings (Surplus) in respect of asset whose remaining useful life is nil as on 1 April 2014.

10. Segment information

The company is primarily engaged in a single business segment of manufacturing and marketing of pharmaceutical formulations and active pharmaceutical ingredients and is managed as ONE entity, for its various activities and is governed by a similar set of risks and returns.

Geographical segments

In the view of the management, the Indian and export markets represent geographical segments.

11. Balances of sundry debtors, sundry creditors, loans and advances, receivables and payables are subject to confirmation/reconciliation, if any.

12. In the opinion of the board of directors adequate provision has been made in the accounts for all known liabilities and the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the value stated in the balance sheet.

13. The company's significant leasing arrangements are in respect of operating leases for premises (office, stores, godowns, residential, guest houses, etc.) Theses are cancelable operating leases and these lease agreements are normally renewed on expiry. The aggregate lease rentals payable are charged as rent under note 26.

14. The company has reclassified previous year figures to conform to current year's classification.


Mar 31, 2014

1. Corporate Information

Bal Pharma Limited (the company) is a Public Limited Company domiciled in India and incorporated under provisions of the Companies Act, 1956. Its shares are listed on two recognized stock exchanges in India. The company is engaged in the manufacturing and selling of pharmaceutical products. The company caters to both domestic and international markets.

2. Basis of preparation

The financial statements of the company have been prepared and presented in accordance with Indian Generally Accepted Accounting Principles (''GAAP'') under the historical cost convention on the accrual basis. GAAP comprises accounting standards notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006, (as amended), other pronouncements of Institute of Chartered Accountants of India and the relevant provisions of Companies Act, 1956.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The Management evaluates and adopts all recently issued or revised accounting standards on an ongoing basis.

a. Terms/Rights attached to Equity shares

The company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

b. Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting period : Nil (31 March 2013 : Nil)

c. The company had issued total 90,400 shares (31 March 2013: 1,27,400 ) during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee services.

As per records of the company, including its register of shareholders/members and other declaration received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

d. Shares reserved for issue under options

i. During the FY 2012-13, 2,298,748 preferential share warrants convertible into equivalent number of equity shares of Rs. 10/- each at a premium of Rs. 11 per share, had been issued to the under mentioned promoters/strategic investors by the company on 19 October 2012, from whom 25% of the issue price amounting to Rs. 12,068,441 had been received in advance entitling the warrant holder to apply for an equivalent number of equity shares on payment of balance 75% of the issue price within 18 months from the date of allotment of warrants. As on 31 March 2014 warrants issued to Anita Siroya got converted into equity share capital on receipt of the balance amount of the issue price. All other warrants are outstanding as at 31 March 2014 and equivalent number of equity shares are reserved for issue against the same. Balance amount outstanding against these warrants amounts to Rs. 19,616,734.

e. Term loan obtained from EXIM Bank of Rs. 6.00 Crores towards the expansion of research & development centre at bangalore and expenditure pertaining to R&D activities, is secured by pari pasi first charge on the entire moveable fixed assets of the company by way of hypothecation and pari pasu first charge by way of equitable mortagage on all immovable fixed assets of the company, both present and future, more particularly unitI, unit 2, unit 3 & Unit 4 of the company and personal guarantee of managing director. The loan is repayable in 20 equal quarterly installment of Rs. 0.30 Crore each, starting from April 2015 onwards and carries interest @ Exim bank LTMLR plus 250 basis points, which is currently @ 12.70%.

f. Term loan of Rs. 0.90 Crores obtained from Kotak Mahindra Prime Ltd is secured by hypothecation of vehicles and is repayable in 28 equal monthly installments of Rs. 3,78,637/- each and carries interest @ 14.73%. There are 9 monthly installments outstanding as on 3! March 2014.

g. The vehicle loans are secured by hypothication of vehicles taken on loan.

Short term borrowings from banks obtained under consortium arrangement with pari passu charge is secured by hypothecation of stock and book debts and second charge on all movable fixed assets. Cash credit is repayable on demand and carries interest rate @ 13.45% p.a to 15.50% p.a.

3. Export benefits:

The Company has accounted an amount of Rs. 35,919,992 (31 March 2013: Rs. 28,065,977) being the net amount of credit under the DEPB and other schemes as announced by the Import Export Policy. The same will be utilized for off-setting the customs duty on future imports. The accumulated amount outstanding on this account as on 31 March 2014 is Rs. 51,522,074 (31 March 2013: Rs. 40,181,523) and the same is reflected under short-term loans and advances.

4. Based on the information available with the company, principal amount due to micro and small enterprises is Rs. Nil (31 March 2013: Rs. Nil). Further interest paid during the year and interest due at the end of the year to micro and small enterprises is Rs. Nil (31 March 2013: Rs. Nil).

5. Expenditure on research and development:

An amount of Rs. 13,050,019 (31 March 2013: Rs. 11,637,462) has been incurred during the year on research and development of new products and processes in the R & D Centre. Amount written off during the year on account of the above was Rs. 15, 025,617 (31 March 2013: Rs. 16, 972,153). The balance on this account as on 31 March 2014: Rs. 48,655,922 (31 March 2013: Rs. 50,631,520).

6. The Company has provided for Rs. 262,215 (31 March 2013: Rs. 496,053) being excise duty on finished goods lying at various manufacturing units at the end of reporting period.

7. Contingent liabilities not provided for:

* Letter of credit Rs. 144,441,190 (31 March 2013: Rs. 102,553,564)

* Estimated value of contracts remaining to be executed on capital account and not provided for Rs. 2,878,000 (31 March 2013: Rs. 3,585,644)

* Claims against company not acknowledged as debts comprises:

Amount in Rs.

Nature 31 March 2014 31 March 2013

Excise & Customs 6,050,923 4,094,194

Service Tax 10,836,228 10,836,228

Sales Tax 1,788,034 749,720

Total (*) 18,675,185 (*) 15,680,142

(*) Pre - deposit under protest Rs. 777,006 (Previous year Rs. 517,006)

* The Company is also involved in other lawsuits, claims, investigations and proceedings including patent and commercial matters, which arise in the ordinary course of business, however, there are no such matters pending that the company expects to be material in relation to its business.

8. The company has given counter guarantees to bank against guarantees issued by them on behalf of the company Rs. 18,997,040 (31 March 2013: Rs. 11,222,098).

9. Segment information

The company is primarily engaged in a single business segment of manufacturing and marketing of pharmaceutical formulations and active pharmaceutical ingredients and is managed as ONE entity, for its various activities and is governed by a similar set of risks and returns.

Geographical segments

In the view of the management, the Indian and export markets represent geographical segments.

10. Balances of sundry debtors, sundry creditors, loans and advances, receivables and payables are subject to confirmation/reconciliation, if any.

11. In the opinion of the board of directors adequate provision has been made in the accounts for all known liabilities and the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the value stated in the balance sheet.

12. The company''s significant leasing arrangements are in respect of operating leases for premises (office, stores, godowns, residential, guest houses, etc.) Theses are cancelable operating leases and these lease agreements are normally renewed on expiry. The aggregate lease rentals payable are charged as rent under note 26.

13. The company has reclassified previous year figures to conform to current year''s classification.


Mar 31, 2013

1. Corporate Information

Bal Pharma Limited (the company) is a Public Limited Company domiciled in India and incorporated under provisions of the Companies Act, 1956. Its shares are listed on two recognized stock exchanges in India. The company is engaged in the manufacturing and selling of pharmaceutical products. The company caters to both domestic and international markets.

2. Basis of preparation

The financial statements of the company have been prepared and presented in accordance with Indian General Accepted Accounting Principles (''GAAP'') under the historical cost convention on the accrual basis. GAAP comprises accounting standards notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006, (as amended), other pronouncements of Institute of Chartered Accountants of India and the relevant provisions of Companies Act, 1956.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The Management evaluates and adopts all recently issued or revised accounting standards on an ongoing basis.

3. During the year, company reclassified authorized share capital of 4,00,000 redeemable preferential shares of Rs. 100 each in to 40,00,000 equity shares of Rs. 10 each, in order to accommodate the proposed preferential issue of share warrants and with a perception of non utilization of redeemable preferential shares in foreseeable future after necessary special resolution passed at the Annual General Meeting held on 21 September 2012. Consequently, the current authorized share capital of the company, post reclassification of redeemable preferential shares isRs. 15,00,00,000/-divided into 1,50,00,000 equity shares of Rs. 10 each.

4. Export benefits:

The Company has accounted an amount of Rs.28,065,977 (3 I March 2012: Rs.23,594,720) being the net amount of credit under the DEPB and other schemes as announced by the Import Export Policy. The same will be utilized for off-setting the customs duty on future imports. The accumulated amount outstanding on this account as on 3 I March 2013 is f40,181,523 (31 March 2012: Rs.27,186,366) and the same is reflected under short-term loans and advances.

5. Based on the information available with the company, principal amount due to micro and small enterprises is f Nil (3 I March 2012: Rs.Nil). Further interest paid during the year and interest due at the end of the year to micro and small enterprises is f Nil (3 I March 2012: Rs.Nil).

6. Expenditure on research and development:

An amount of f I 1,637,462 (31 March 2012: Rs. I 1,398,007) has been incurred during the year on research and development of new products and processes in the R & D Centre. The same is proposed to be amortized over a period of 10 years commencing from the year of commercial production. Amount written off during the year on account of the above was Rs. 16,972,153 (3 I March 2012: Rs. 14,183,620). The balance on this account as on 3 I March 2013: Rs.50,63 1,520 (3 I March 2012: Rs.55,966,2I I).

7. Related party disclosures:

Name of related parties and related party relationship

Related parties where control/significant influence exist or with whom transactions have taken place during the year:

i. Enterprises where principal/ promoter shareholders have control or significant influence (Significant interest entities): Micro Labs Ltd - Enterprise owned by some of the promoter shareholders

ii. Others:

Desa Marketing International - Enterprise owned by the managing director of the company

Siroya Developers (P) Ltd. - Enterprise owned by relatives of managing director of the company

Siroya Constructions - Enterprise over which the managing director of the company exercises joint control with other partners

Siroya Wellness - Enterprise over which the managing director of the company exercises joint control with other partners

Key managerial personnel represented on the board

Shailesh D Siroya - Managing director (MD)

Dr.SPrasanna - Whole time director (WTD)

ShrenikD Siroya - Director

8. The Company has provided for Rs. 496,053 (3 I March 2012:Rs. 634,716) being Excise Duty on Finished Goods lying at various manufacturing units at the end of reporting period.

9. Contingent liabilities not provided for:

Letter of credit Rs. 102,553,564 (3 I March 2012: Rs. 137,439,654)

Estimated value of contracts remaining to be executed on capital account and not provided for Rs. 3,585,644 (3 I March 2012:Rs. 4,490,588)

Claims against company not acknowledged as debts comprises:

10. The company has given counter guarantees to bank against guarantees issued by them on behalf of the company Rs. I 1,222,098 (3 I March 2012:Rs. 13,672,151).

11. Employee stock option scheme

Bal Pharma Limited''s Employee stock option scheme - 2006 (ESOP 2006) : The Company instituted the 2006 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on 23-09-2004. The Scheme covers all non promoter directors and employees and its subsidiaries. Under the scheme, the compensation Committee of the Board (''the Committee'') shall administer the Scheme and grant stock options to eligible directors and employees of the Company and its subsidiaries. The Committee shall determine the employees eligible for receiving the options, the number of options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for the options issued on the date of the grant.

The market value of a share on each grant date is defined as the average of the two weeks high and low price of the share preceding the date of grant of option on the stock exchange where there is highest trade volume during that period.

In case of termination of employment, all non-vested options would stand cancelled. Options that have vested but have not been exercised can be exercised within the time prescribed under each option agreement by the Committee, failing which they would stand cancelled.

The company under ESOP-2006 had granted 2,19,500 options to eligible employees. The vesting period for the options granted varies from 12 to 60 months.

12. Segment information

The Company is primarily engaged in a single business segment of manufacturing and marketing of Pharmaceutical Formulations and Active Pharmaceutical Ingredients and is managed as ONE entity, for its various activities and is governed by a similar set of risks and returns.

Geographical segments

In the view of the management, the Indian and Export Markets represent geographical segments.

13. Balances of Sundry debtors, sundry creditors, loans and advances, receivables and payables are subject to confirmation/reconciliation, if any

14. In the opinion of the Board of directors adequate provision has been made in the accounts for all known liabilities and the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the value stated in the balance sheet.

15. The Company''s significant leasing arrangements are in respect of operating leases for premises (office, stores, godowns, residential, guest houses, etc.) Theses are cancelable operating leases and these lease agreements are normally renewed on expiry. The aggregate lease rentals payable are charged as rent under note 26.

16. The company has reclassified previous year figures to conform to this year''s classification.


Mar 31, 2012

1. Corporate Information

Bal Pharma Limited (the company) is a Public Limited Company domiciled in India and incorporated under provisions of the Companies Act, 1956. Its shares are listed on two recognized stock exchanges in India. The company is engaged in the manufacturing and selling of pharmaceutical products. The company caters to both domestic and international markets.

2. Basis of preparation

The financial statements of the company have been prepared and presented in accordance with Indian Generally Accepted Accounting Principles ('GAAP') under the historical cost convention on the accrual basis. GAAP comprises accounting standards notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006, (as amended), other pronouncements of Institute of Chartered Accountants of India and the relevant provisions of Companies Act, 1956.

Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. The Management evaluates and adopts all recently issued or revised accounting standards on an ongoing basis.

a. Terms/Rights attached to equity shares

The company has only one class of equity shares having par value of Rs..10 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

In addition, the company has issued total 127,400 shares (31 March 2011: 37,000 ) during the period of five years immediately preceding the reporting date on exercise of options granted under the employee stock option plan (ESOP) wherein part consideration was received in form of employee services.

As per records of the company, including its register of shareholders/members and other declaration received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

b. Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option plan (ESOP) of the company, please refer note no. 40.

a. Term Loan from State Bank of India of Rs.. 2.30 Crores obtained during the financial year 2009-10 and repayable in 10 monthly installments of Rs.. 23 Lakh each. The term is secured by hypothecation of assets of Unit II and Unit III, and Unit IV funded by them. Term loan is further secured by collateral securities & personal guarantees of Directors and carries interest rate @ 16.5%.

b. Term loans obtained from EXIM Bank of Rs..21.55 Crores towards establishment of Formulation Plant at Uttaranchal and repayable in quarterly installments. The term loan is secured by first pari passu charge on the entire immovables and Hypothecation of whole of moveable fixed as- sets, both present and future of the Company including:

i. Moveable plant and machinery, Equipment, Appliances, furniture, vehicles, machinery spares and stores, tools and accessories, whether or not installed.

ii. Related movables in the course of transit or delivery whether now belonging or which may hereafter belong to the Company or which may be held by any person at any place within or outside India to the order or disposition of the company and all document or title including bills of lading, shipping documents, policies of insurance and other instruments and documents relating to such movables together with benefits of all rights thereto. Term loan is further secured by collateral securities & personal guarantees of Directors and carries interest rate @ 12%.

c. The vehicle loans are secured by hypothecation of vehicles taken on loan.

Short term borrowings from banks is secured under a Consortium arrangement with pari passu charge is secured by hypothecation of stock and book debts and second charge on all the movable fixed assets. Cash credit is repayable on demand and carries interest rate @ 14.50% p.a to 15.25% p.a.

3. export benefits:

The Company has accounted an amount of Rs.. 23,594,720 (31 March 2011: Rs. 16,875,462) being the net amount of credit under the DEPB and other schemes as announced by the Import Export Policy. The same will be utilized for off-setting the customs duty on future imports. The accumulated amount outstanding on this account as on 31 March 2012 is Rs.27,186,366 (31 March 2011: Rs. 21,118,281) and the same is reflected under short-term loans and advances.

4. Based on the information available with the company, principal amount due to micro and small enterprises is Rs. Nil (31 March 2011: Rs. Nil). Further interest paid during the year and interest due at the end of the year to micro and small enterprises is Rs. Nil (31 March 2011: Rs. Nil).

5. expenditure on research and development:

An amount of Rs. 11,398,007 (31 March 2011: Rs. 12,805,725) has been incurred during the year on research and development of new products and processes in the R & D Centre. The same is proposed to be amortized over a period of 10 years commencing from the year of commercial production. Amount written off during the year on account of the above was Rs.14,183,620 (31 March 2011: Rs.5,458,572). The balance on this account as on 31 March 2012: Rs. 55,966,211 (31 March 2011: Rs. 58,751,824).

6. Related party disclosures:

- Name of related parties and related party relationship

Related parties where control/significant influence exist or with whom transactions have taken place during the year:

i. Erstwhile subsidiary - Basav Chem Limited

ii. Enterprises where principal/ promoter shareholders have control or significant influence (Significant interest entities):

Micro Labs Ltd - Enterprise owned by some of the promoter shareholders

iii. Others:

Desa Marketing International - Enterprise owned by the Managing director of the Company Siroya Developers (P) Ltd. - Enterprise owned by relatives of Managing director of the company

Siroya Constructions - Enterprise over which the Managing director of the company exercises joint control with other partners

Siroya Wellness - Enterprise over which the Managing director of the company exercises joint control with other partners

Key managerial personnel represented on the board

Shailesh D Siroya - Managing director (MD)

Dr. S P Prasanna - Whole time director (WTD)

Shrenik D Siroya - Director

7. The Company has provided for Rs. 1,231,948 (31 March 2011: Rs. 1,227,343) being Excise Duty on Finished Goods lying at various manufacturing units at the end of reporting period.

8. Contingent liabilities not provided for:

- Guarantees issued by Company's bankers Rs.13,672,151 (31 March 2011: Rs.11,452,970)

- Letter of credit Rs. 137,439,654 (31 March 2011: Rs. 111,713,626)

- Estimated value of contracts remaining to be executed on capital account and not provided for Rs. 4,490,588 (31 March 2011: Rs. NIL)

- The claim of duty and penalty of Rs 868,598 for the period May 2000 to November 200! by Central Excise in respect of Unit III is being contested and under the directions of CESTAT , Mumbai a pre-deposit of Rs. 30,000 has been made. The same is still pending decision.

- A Sales Tax claim of Rs. 749,720 on treating stock transfer as sales in Ernakulam by the Commercial Taxes, Special Circle !, KGST is being contested and a deposit of Rs. 253,729 has been made. The application is being heard by the Deputy Commissioner, Ernakulam and is still pending decision.

- The Company is also involved in other lawsuits, claims, investigations and proceedings including patent and commercial matters, which arise in the ordinary course of business, however, there are no such matters pending that the company expects to be material in relation to its business.

9. Employee stock option scheme

Bal Pharma Limited's Employee stock option scheme - 2006 (ESOP 2006) : The Company instituted the 2006 Plan for all eligible employees in pursuance of the special resolution approved by the shareholders in the Annual General Meeting held on 23-09-2004. The Scheme covers all non promoter directors and employees and its subsidiaries. Under the scheme, the compensation Committee of the Board ('the Committee') shall administer the Scheme and grant stock options to eligible directors and employees of the Company and its subsidiaries. The Committee shall determine the employees eligible for receiving the options, the number of options, the number of options to be granted, the exercise price, the vesting period and the exercise period. The vesting period is determined for the options issued on the date of the grant.

The market value of a share on each grant date is defined as the average of the two weeks high and low price of the share preceding the date of grant of option on the stock exchange where there is highest trade volume during that period.

In case of termination of employment, all non-vested options would stand cancelled. Options that have vested but have not been exercised can be exercised within the time prescribed under each option agreement by the Committee, failing which they would stand cancelled.

The company under ESOP-2006 had granted 2, 19,500 options to eligible employees. The vesting period for the options granted varies from 12 to 60 months.

10. Segment information

The Company is primarily engaged in a single business segment of manufacturing and marketing of Pharmaceutical Formulations and Active Pharmaceutical Ingredients and is managed as ONE entity, for its various activities and is governed by a similar set of risks and returns.

Geographical segments

In the view of the management, the Indian and Export Markets represent geographical segments.

11. Balances of Sundry debtors, sundry creditors, loans and advances, receivables and payables are subject to confirmation/reconciliation, if any

12. In the opinion of the Board of directors adequate provision has been made in the accounts for all known liabilities and the current assets, loans and advances have a value on realization in the ordinary course of business at least equal to the value stated in the balance sheet.

13. The Company's significant leasing arrangements are in respect of operating leases for premises (office, stores, godowns, residential, guest houses, etc.) Theses are cancelable operating leases and these lease agreements are normally renewed on expiry. The aggregate lease rentals payable are charged as rent under note 26.

14. Accounting for amalgamation

The Honorable High Court of Karnataka, on 26 August 2011, sanctioned a scheme of amalgamation (the scheme) under sections 391 to 394 of the Companies Act, 1956. In accordance with the scheme, Basav Chem Limited (transferor company) merges with the company with retrospective effect from 1 April 2009. However, since the sanction to the scheme was given during the year, the assets and liabilities of the transferor company stands transferred to and vested in the company with effect from 1 April 2011. The transferor company was engaged in the business of manufacture of pharmaceutical products. The amalgamation is expected to channelize synergies and lead to better utilization of available resources and result in greater economies of scale.

The accounting treatment has been given as per the scheme as sanctioned by the Honorable High court of judicature of Karnataka and accordingly the assets, liabilities and reserves of Basav Chem Limited., as at 1 April 2011 have been accounted under the pooling of interest method.

The company's investment in the equity share capital of Basav Chem Limited, aggregating to Rs.500,000/- stands cancelled on amalgamation and the excess of net assets of transferor company over the cost of investment amounting to Rs. 500,000 has been adjusted to reserves as per the order of Karnataka High Court.

As a result of above, figures in respect of current financial year are not comparable with those of previous financial year.

15. Disclosure as required under Accounting Standard 14 - Accounting for Amalgamation:

- Name of the Amalgamating company: Basav Chem Limited

- Nature of its business: Manufacture of pharmaceutical products

- Effective date of amalgamation for accounting purposes: 01 April 2011

- Method of accounting used to reflect amalgamation: The pooling of interest method

- Particulars of scheme sanctioned: Scheme sanctioned by the Honorable High Court of Karnataka, Bangalore through order dated 26 August 2011.

- Description and number of shares issued, together with the percentage of company's equity shares exchanged to effect the amalgamation : Not applicable

- The amount of any difference between the consideration and the value of net identifiable assets acquired and treatment thereof: Not applicable

16. Till the year ended 31 March 2011, the company was using pre-revised schedule VI to the companies Act 1956, for preparation and presentation of its financial statements. During the year ended 31 March 2012, the revised schedule VI notified under the companies Act,1956, has become applicable to the company. The company has reclassified previous year figures to conform to this year's classification.

 
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