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Fulford (India) Ltd. Notes to Accounts, Fulford (India) Ltd. Company
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Notes to Accounts of Fulford (India) Ltd.

Mar 31, 2015

1. The above Cash Flow Statement has been prepared under the 'Indirect Method' as set out in the Accounting Standard - 3 on Cash Flow Statements, notified under sub-section (3C) of Section 211 of the Companies Act, 1956 [Refer Note 2(a)].

2. During the previous period, the company changed its accounting year end to 31st March, 2014. Accordingly, the figures for the previous period are for the fifteen months' period from 1st January, 2013 to 31st March, 2014 and are not comparable with those of the current year.

3. Previous period figures have been regrouped where necessary.

4. Contingent Liabilities

(a) Claims against the company not acknowledged as debts

Income-tax Matters - Matters decided against the company in respect of which the company has

preferred an appeal 477,180,401 465,435,659

Fringe Benefits Tax Matter 128,412 128,412

Sales tax Matters 1,794,910 1,794,910

Customs Duty Matter - 536,200

Employee related Matters 7,356,925 7,745,017

Others 277,500 427,500

(b) Guarantees issued by Banks on behalf of the company 15,955,097 11,595,694

Notes:

(i) Future cash outflows in respect of (a) above are determinable only on receipt of judgements/decisions pending with various authorities/forums and/or final outcome of the matters.

(ii) Future cash outflows in respect of (b) above are dependent on the future performance of the obligations by the company and/or other parties.

5. Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 1,225,398 (Previous period - Nil).

(b) Estimated amount of contracts remaining to be executed for Purchases of Stock-in-Trade - Nil (Previous period Rs. 312,431,773).

(C) Other Long-term Employee Benefit

The liability for Compensated Absences as determined by independent actuary as at the Balance Sheet date is Rs. 33,145,000 (Previous period Rs. 33,781,000).

6. The company has only one reportable business segment which is "Pharmaceuticals" and one reportable geographical segment which is "within India". Accordingly, no separate disclosures of segment information are required.

7. Related Party Disclosures

(A) Enterprises where control exists

(a) Ultimate Holding Company Merck & Co., Inc., USA

(b) Holding Company Dashtag, UK

(c) Subsidiary Company Schering-Plough (India) Private Limited

(B) Other Related Parties with whom the company had transactions during the year/period

(a) Fellow Subsidiaries Essex Chemie AG, Switzerland*

MSD International GMBH, Singapore

MSD Pharmaceuticals Private Limited, India

Organon (India) Private Limited, India

Merck Sharp & Dohme Corp., USA

Merck Sharp & Dohme (Australia) Pty Ltd., Australia*

Merck Sharp & Dohme (Asia) Limited, Hong Kong Merck Sharp & Dohme (I.A.) Corp., Philippines*

Merck Sharp & Dohme (Malaysia) SDN. BHD., Malaysia*

Merck Sharp & Dohme B. V., Netherlands MSD Korea Limited, Korea

Merck Sharp & Dohme (New Zealand) Limited, New Zealand MSD-Sun FZ LLC, UAE

(b) Key Management Personnel

K. G. Ananthakrishnan - Managing Director

Giridhar Sanjeevi (from 22nd July, 2013) - Chief Financial Officer

Rajesh Marwaha (up to 26th June, 2013)* - Chief Financial Officer

No transactions during the current year

8. Earnings per Share

Basic earnings per share has been calculated by dividing profit for the year/period attributable to equity shareholders by the weighted average number of equity shares outstanding during the year/period. The company has not issued any potential equity shares and accordingly, the basic earnings per share and diluted earnings per share are the same. Earnings per share has been computed as under:

The above information and that given in Note 6 - Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company.

9. In the year ended 31st December, 2006, the company had raised Rs. 402,500,000 by issuing 700,000 equity shares of Rs. 10 each at a premium of Rs. 565 per share to its promoters, Dashtag, UK. Of the aforesaid balance, the company has utilised Rs. 109,286,718 (Previous period Rs. 40,998,830) towards business expansion up to 31st March, 2015. The remaining amount of Rs. 293,213,282 continue to be invested in fixed deposits with banks pending utilisation of the same.

10. On 1st October, 2014, the company entered into a 'Business Transfer Agreement' with Bayer Pharmaceuticals Private Limited ("Bayer"), consequent to which the Consumer Care Business and Rx Product Business comprising of Alaspan, Polaramine and Tinaderm have been transferred to Bayer with effect from 1st January, 2015 for a consideration of Rs. 43,073,100.

11. Disclosures for Employee Share based Payments.

The Institute of Chartered Accountants of India has issued a Guidance Note on "Accounting for Employee Share based Payments", which is applicable to employee share based payment plans, the grant date in respect of which falls on or after 1st April, 2005. Some of the employees of the company are entitled to an option to purchase certain shares of the ultimate holding company, Merck & Co., Inc., USA under an option agreement entered into between the ultimate holding company and the employee. The stock option scheme of the ultimate holding company is being managed and administered by the ultimate holding company for its own benefit and the company is not compensating its ultimate holding company for the grants made to the employees and accordingly, there are no costs being reflected in the financial statements. The details of employee share based payments are not readily available with the company and hence, the same are not disclosed.

There are two schemes under which employees are granted stock options:

(A) A stock option scheme ('ESOP') as per which the employee has the right to purchase a fixed number of shares of the ultimate holding company at a fixed price for a fixed period of time. The incentive to the employee is the value employee realises from a stock option and is dependent on the current value of the stock being higher than the option price.

(B) Restricted Stock Award Unit ('RSU') is a grant valued in terms of the ultimate holding company stock, but the ultimate holding company stock is not issued at the time of the grant. After a recipient of a unit satisfies the vesting requirement, the ultimate holding company will distribute shares or the cash equivalent of the number of shares used to value the unit. No payment is required under the restricted stock award.

12. On 25th April, 2014, the promoter of the company, Dashtag ("Acquirer"), notified the company of its intention to make a voluntary delisting offer ("Delisting Offer") to the public shareholders of the company in accordance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 ("Delisting Regulations") to acquire 976,763 equity shares, representing 25.05% of the paid-up equity share capital of the company held by the public shareholders of the company and consequently delist the equity shares of the company from the BSE Limited. The Acquirer, vide letter dated on 1st December, 2014, has informed the company that on account of the abnormal spurt in the share price, the Acquirer has decided not to make the public announcement of the Delisting Offer at this time.

13. During the previous period, the company changed its accounting year end to 31st March, 2014. Accordingly, the figures for the previous period are for the fifteen months' period from 1st January, 2013 to 31st March, 2014 and are not comparable with those of the current year.

14. Previous period figures have been regrouped where necessary.


Mar 31, 2014

1. Background

Fulford (India) Limited (the ''company'') was incorporated as C. E. Fulford (India) Limited on 2nd March, 1948. The name of the company was subsequently changed to C. E. Fulford (India) Private Limited on 7th August, 1968, Fulford (India) Private Limited on 15th January, 1981 and Fulford (India) Limited on 17th August, 1981. The company is engaged in the business of manufacturing and trading of Pharmaceuticals. The company is a subsidiary of Merck & Co., Inc., USA.

As at As at 31st March, 2014 31st December, 2012

2. Contingent Liabilities

(a) Claims against the company not acknowledged as debts

Income-tax Matters – Matters decided against the company in respect of which the company has preferred an appeal 465,435,659 210,142,188

Fringe benefits Tax Matter 128,412 128,412

Sales tax Matters 1,794,910 17,787,124

Customs Duty Matter 536,200 536,200

Employee related Matters 7,745,017 7,674,418

Others 427,500 388,994

(b) Guarantees issued by Banks on behalf of the company 11,595,694 12,719,648

Notes:

(i) Future cash outflows in respect of (a) above are determinable only on receipt of judgements/decisions pending with various authorities/forums and/or final outcome of the matters.

(ii) Future cash outflows in respect of (b) above are dependant on the future performance of the obligations by the company and/or other parties.

3. Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for – Nil (Previous year Rs. 39,900).

(b) Estimated amount of contracts remaining to be executed for Purchases of Stock-in-Trade Rs. 312,431,773 (Previous year Rs. 18,672,283).

4. Excise duty relating to difference between closing stock and opening stock and other adjustments is included in Note 29 – Other Expenses. Excise duty relating to Sale of Products is reduced from Gross Sale of Products.

5. The company has only one reportable business segment which is "Pharmaceuticals" and one reportable geographical segment which is "within India". Accordingly, no separate disclosures of segment information are required.

6. Related party disclosures

(A) Enterprises where control exists

(a) Ultimate Holding Company Merck & Co., Inc., USA

(b) Holding Company Dashtag, UK

(c) Subsidiary Company Schering-Plough (India) Private Limited, India

(B) Other Related Parties with whom the company had transactions during the period/year

(a) Fellow Subsidiaries

Essex Chemie AG, Switzerland

MSD International GMBH, Singapore

MSD Pharmaceuticals Private Limited, India

Organon (India) Private Limited, India

Merck Sharp & Dohme Corp., USA

Shanghai Schering-Plough Pharmaceuticals Co. Ltd., China*

SOL Limited (Singapore Branch), Singapore*

SOL Limited, Bermuda*

Merck Sharp & Dohme (Australia) Pty Ltd., Australia

Merck Sharp & Dohme (Asia) Limited, Hong Kong

Merck Sharp & Dohme (I.A.) Corp., Philippines

Merck Sharp & Dohme (Malaysia) SDN. BHD., Malaysia

MSD (Thailand) Limited, Thailand*

Merck Sharp & Dohme B. V., Netherlands

(b) Key Management Personnel

K. G. Ananthakrishnan Giridhar Sanjeevi (from 22nd July, 2013)* Rajesh Marwaha (Up to 26th June, 2013) *No transactions during the current period

The above information and that given in Note 7 – Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company.

7. In the year 2006, the company had raised Rs. 402,500,000 by issuing 700,000 equity shares of Rs. 10 each at a premium of Rs. 565 per share to its promoters, Dashtag, UK. Of the aforesaid balance, the company has utilised Rs. 40,998,830 (Previous year Rs. 16,111,593) towards business expansion up to 31st March, 2014. The remaining amount of Rs. 361,501,170 continue to be invested in fixed deposits with banks pending utilisation of the same.

8. The company has appointed independent consultants for conducting a transfer pricing study for the year ended 31st March, 2014 to determine whether the transactions with associate enterprises were undertaken at "arms length basis". Adjustments, if any, arising from the transfer pricing study shall be accounted for, as and when the study is completed. The management confirms that all international transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms. The transfer pricing report for the year ended 31st March, 2013 has been obtained and there are no adverse comments requiring adjustments in the financial statements for the current period.

9. Disclosures for Employee Share based Payments.

The Institute of Chartered Accountants of India has issued a Guidance Note on "Accounting for Employee Share based Payments", which is applicable to employee share based payment plans, the grant date in respect of which falls on or after 1st April, 2005. Some of the employees of the company are entitled to an option to purchase certain shares of the ultimate holding company, Merck & Co., Inc., USA under an option agreement entered into between the ultimate holding company and the employee. The stock option scheme of the ultimate holding company is being managed and administered by the ultimate holding company for its own benefit and the company is not compensating its ultimate holding company for the grants made to the employees and accordingly, there are no costs being refected in the financial statements. The details of employee share based payments are not readily available with the company and hence, the same are not disclosed.

There are two schemes under which employees are granted stock options:

(A) A stock option scheme (''ESOP'') as per which the employee has the right to purchase a fixed number of shares of the ultimate holding company at a fixed price for a fixed period of time. The incentive to the employee is the value employee realises from a stock option and is dependent on the current value of the stock being higher than the option price.

(B) Restricted Stock Award Unit (''RSU'') is a grant valued in terms of the ultimate holding company stock, but the ultimate holding company stock is not issued at the time of the grant. After a recipient of a unit satisfes the vesting requirement, the ultimate holding company will distribute shares or the cash equivalent of the number of shares used to value the unit. No payment is required under the restricted stock award.

10. Morgan Stanley India Company Private Limited, on behalf of Dashtag, UK , the holding company (Promoter) which is an indirect wholly owned subsidiary of Merck & Co., Inc., USA, announced a voluntary open offer to acquire 821,913 equity shares of the company on 25th July, 2012. The tendering period closed on 28th September, 2012 and Dashtag, UK received approval of Foreign Investment Promotion Board on 25th October, 2012 and subsequently, 593 shareholders holding 820,150 shares who had validly tendered their shares during the tendering period between 14th September, 2012 and 28th September, 2012 were paid by Dashtag, UK on 29th October, 2012 and their shares were accepted by Dashtag, UK under the open offer. Out of these 820,150 shares,10,433 shares in physical form acquired under the voluntary open offer were already transferred to the account of Dashtag, UK. Remaining 809,717 shares which were lying in ''LIIPL Fulford India Open Offer Escrow Demat Account'' were the shares acquired under the voluntary open offer in dematerialised form have been transferred to the account of Dashtag, UK during the current period. Consequently, the shareholding of Dashtag, UK has increased to 74.95%.

11. On 25th April, 2014, the promoter of the company, Dashtag, UK ("Acquirer"), notifed the company of its intention to make a voluntary delisting offer ("Delisting Offer") to the public shareholders of the company in accordance with the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 ("Delisting Regulations") to acquire 976,763 equity shares, representing 25.05% of the paid-up equity share capital of the company held by the public shareholders of the company and consequently delist the equity shares of the company from the BSE Limited. Subject to approval of the proposed Delisting Offer by way of a special resolution by the shareholders of the company and receipt of applicable regulatory approvals, the Acquirer may make a delisting offer in accordance with the Delisting Regulations.

12. During the period, the company has changed its accounting year end to 31st March, 2014. Accordingly, the figures for the current period are for the fifteen months'' period from 1st January, 2013 to 31st March, 2014 and are not comparable with those of the previous year.

13. Previous year figures have been regrouped/reclassified where necessary.


Dec 31, 2012

1. Background

Fulford (India) Limited (the ''company'') was incorporated as C. E. Fulford (India) Limited on 2nd March, 1948. The name of the company was subsequently changed to C. E. Fulford (India) Private Limited on 7th August, 1968, Fulford (India) Private Limited on 15th January, 1981 and Fulford (India) Limited on 17th August, 1981. The company is engaged in the business of manufacturing and trading of Pharmaceuticals. The company is a subsidiary of Merck & Co., Inc.'', USA.

(a) The company has only one class of shares i.e. Equity Shares having a face value of < 10 each. Each shareholder is eligible for one vote per share held. 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, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

(b) Of the above, 2,113,520 (Previous year-2,103,087) shares are held by Dashtag, UK, the holding company [Refer Note 54],

Notes:

(i) Future cash outflows in respect of (a) above are determinable only on receipt of judgements/decisions pending with various authorities/forums and/or final outcome of the matters.

(ii) Future cash outflows in respect of (b) above are dependant on the future performance of the obligations by the company and/or other parties.

2. Commitments

(a) Estimated amount of contracts remaining to be executed on capital account and not provided for 139,900 (Previous year Rs. 64,800).

(b) Estimated''amount of contracts remaining to be executed for Purchases of Stock-in-Trade Rs. 186,512 (Previous year Rs. 318,992,681).

3. Salaries and Bonus include - Nil (Previous year Rs. 1,000,000) paid to employees as severance pay.

4. Excise duty relating to difference between closing stock and opening stock and other adjustments is included in Note 28 - Other Expenses. Excise duty relating to Sale of Products is reduced from Gross Sale of Products.

Notes:

(a) Consumption of Raw Materials represents consumption by third parties under contract with the company and consumption in respect of samples.

(b) Components and spare parts referred to in Paragraph (viii)(c) of Additional Information (Paragraph 5) under General Instructions for Preparation of Statement of Profit and Loss in Part II of Revised Schedule VI of the Act are assumed to be those forming part of the finished goods produced and not those used for maintenance of plant and machinery.

(C) Other Long-term Employee Benefit _

The liability for leave encashment as determined by independent actuary as at the Balance Sheet date is Rs. 29,519,000 (Previous year Rs. 23,570,000).

5. The company has only one reportable business segment which is "Pharmaceuticals" and one geographical segment which is "within India". Accordingly, no separate disclosures of segment information are required.

6. (Loss)/Earnings per Share

Basic (loss)/earnings per share has been calculated by dividing (loss)/profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The company has not issued any potential equity shares and accordingly, the basic earnings per share and diluted earnings per share are the same. (Loss)/Earnings per Share has been computed as under:

(e) Included in (d) above is - Nil (Previous year Rs. 10,316) being interest on amounts outstanding as at the beginning of the accounting year.

The above information and that given in Note 7 - Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

7. In the year 2006, the company had raised t 402,500,000 by issuing 700,000 equity shares of Rs. 10 each at a premium of Rs. 565 per share to its promoters, Dashtag, UK. Of the aforesaid balance, the company has utilised Rs. 16,111,593 (Previous year Rs. 5,662,081) towards business expansion up to 31st December, 2012. The remaining amount of Rs. 386,388,407 continue to be invested in fixed deposits with banks pending utilisation of the same.

8. Purchases of Stock-in-Trade are net of insurance claim of - Nil (Previous year Rs. 9,123,517) for goods damaged consequent to temperature excursion and claim of - Nil (Previous year Rs. 8,399,059) for goods recalled consequent to quality assurance.

9. The company''s ultimate holding company, Merck & Co., Inc. had announced a relinquishment of exclusive marketing rights of the products Caelyxand Remicade in favour of Johnson & Johnson with effect from 1st January, 2011 and 1st July, 2011 respectively. Consequent to the aforesaid announcement, the total turnover of Remicade (excluding transfer of stocks to Johnson & Johnson Limited) for the year is lower by Rs. 154,989,805 (Previous year Rs. 130,880,616) as compared to the previous year.

10. Disclosures for Employee Share based Payments

The Institute of Chartered Accountants of India has issued a Guidance Note on "Accounting for Employee Share based Payments", which is applicable to employee share based payment plans, the grant date in respect of which falls on or after 1st April, 2005.

Some of the employees of the company are entitled to an option to purchase certain shares of the ultimate holding company, Merck & Co., Inc., USA under an option agreement entered into between the ultimate holding company and the employee. The stock option scheme of the ultimate holding company is being managed and administered by the ultimate holding company for its own .benefit and the company is not compensating its ultimate holding company for the grants made to the employees and accordingly, there are no costs being reflected in the financial statements. The details of employee share based payments are not readily available with the company and hence, the same are not disclosed. -

There are two schemes under which employees are granted stock options:

(A) A stock option scheme (''ESOP'') as per which the employee has the right to purchase a fixed number of shares of the ultimate holding company at a fixed price for a fixed period of time. The incentive to the employee is the value employee realises from a stock option and is dependent on the current value of the stock being higher than the option price.

(B) Restricted Stock Award Unit (''RSU'') is a grant valued in terms of the ultimate holding company stock, but the ultimate holding company stock is not issued at the time of the grant. After a recipient of a unit satisfies the vesting requirement, the ultimate holding company will distribute shares or the cash equivalent of the number of shares used to value the unit. No payment is required under the restricted stock award.

11. Morgan Stanley India Company Private Limited, on behalf of Dashtag, UK, the holding company which is an indirect wholly owned subsidiary of Merck & Co., Inc., USA, announced a voluntary open offer to acquire 821,913 equity shares of the company on 25th July, 2012. The tendering period closed on 28th September, 2012 and Dashtag, UK received approval of Foreign Investment Promotion Board on 25th October, 2012 and subsequently, 593 shareholders holding 820,150 shares who had validly tendered their shares during the tendering period between 14th September, 2012 and 28th September, 2012 were paid by Dashtag, UK on 29th October, 2012 and their shares were accepted by Dashtag, UK under the open offer. The number of shares being 809,717 shares in ''LIIPL Fulford India Open Offer Escrow Demat Account'' are the shares acquired under the voluntary open offer in dematerialised form. These shares in the process of being transferred to the account of Dashtag, UK. 10,433 shares in physical form acquired under the voluntary open offer have already been transferred to the account of Dashtag, UK. With the completion of this process, the shareholding of Dashtag, UK will increase to 74.95%.

12. The company has appointed independent consultants for conducting a transfer pricing study for the year ending 31 st March, 2013 to determine whether the transactions with associate enterprises were undertaken at "arms length basis". Adjustments, if any, arising from the transfer pricing study shall be accounted for, as and when the study is completed. The management confirms that all international transactions with associate enterprises are undertaken at negotiated contracted prices on usual commercial terms. The transfer pricing report for the year ended 31st March, 2012 has been obtained and there are no adverse comments requiring adjustments in the financial statements for the current year.

13. The financial statements for the year ended 31 st December, 2011 were prepared as per the then applicable, pre-revised Schedule VI to the Act. Consequent to the notification of Revised Schedule VI under the Act, the financial statements for the year ended 31 st December, 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year''s classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.


Dec 31, 2010

As at As at 31st December, 31st December 2010 2009

1. Contingent Liabilities:

(a) Claims against the company not acknowledged as debts

Income-tax Matters - Matters decided against the company in respect of which the company has preferred an appeal 150,844,649 81,691,351

Fringe Benefits Tax Matter 128,412 -

Claim from a third party manufacturer in respect of

Excise Matter - 6,282,782

Purchase Commitment Charges from a Supplier 42,029,000 42,029,000

Employee related Matters 4,946,648 4,017,512

Others 388,994 388,994

(b) Guarantees issued by Banks on behalf of the company 2,232,722 1,562,722

Notes:

(i) Future cash outflows in respect of (a) above are determinable only on receipt of judgements/decisions pending with various authorities/forums and/or final outcome of the matters.

(ii) Future cash outflows in respect of (b) above are dependant on the future performance of the obligations by the Company and/or other parties.

2. Salaries, Wages and Bonus include Rs. 1,561,806 [Previous year Rs. 7,972,120] paid to employees as severance pay.

3. During the previous year, the company had received a show cause notice from the Regional Provident Fund Commissioner (Exemption) on completion of assessment, directing the company to deposit Employee Deposit Linked Insurance Charges pertaining to earlier years. The company had accrued for an estimated liability of Rs. 2,337,567 in respect of the same in the previous year which has been paid during the year.

4. Excise duty relating to difference between closing stock and opening stock and other adjustments is included in Schedule 15 - Other Expenses. Excise duty relating to sales is reduced from Gross Sales.

5. Employee Benefits

(A) Brief Description of the Plans

The company has various schemes for long-term benefits such as provident fund, superannuation fund, gratuity and leave encashment. In case of funded schemes, the funds are recognised by the Income-tax authorities. The companys defined contribution plans are in the form of Provident Fund and Employees Pension Scheme (under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952) and Superannuation Fund which are administered through Government of India and Life Insurance Corporation of India (LIC) respectively and the company has no further obligation beyond making the contributions. The companys defined benefit plan represents gratuity. Gratuity schemes of the company are administered through LIC. The employees of the company are also entitled to leave encashment as per the companys policy.

6. The company has only one reportable business segment which is "Pharmaceuticals" and one geographical segment which is "within India". Accordingly, no separate disclosures of segment information are required.

7. Related Party Disclosures

(A) Enterprises where control exists

(a) Ultimate Holding Company Schering-Plough Corporation, USA (up to 3rd November, 2009)

Merck & Co., Inc., USA (from 4th November, 2009)

(b) Holding Company Dashtag, UK

(c) Subsidiary Company Schering-Plough (India) Private Limited, India

(B) Other Related Parties with whom the Company had transactions during the year

(a) Fellow Subsidiaries Essex Chemie AG, Switzerland

MSD Pharmaceuticals Private Limited, India MSD Technology Pte. Ltd., Singapore Organon (India) Limited, India Schering-Plough (Avondale) Company, Ireland Schering-Plough Ltd, Singapore Schering-Plough, USA SOL Ltd (Singapore Branch), Singapore SOL Ltd, Bermuda

(b) Key Management Personnel K. G. Ananthakrishnan

R. Marwaha (from 29th January, 2010)

8. In the year 2007, pursuant to the relevant provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, Dashtag, UK made an open offer to acquire 780,000 equity shares (representing 20% of the post-preferential issue capital) from the existing shareholders of the company. Pursuant to this open offer, Dashtag, UK acquired 123,087 shares constituting 3.16% of the post preferential capital of the company and the present holding of Dashtag, UK is 2,103,087 equity shares, constituting 53.93% of the paid-up share capital of the company. In a prior year, the company had raised Rs. 402,500,000 by issuing 700,000 equity shares of Rs. 10 each at a premium of Rs. 565 per share to its promoters, Dashtag, UK. The above amount is presently invested in fixed deposits with banks, pending utilisation of the same.

9. On 29th January, 2010, goods amounting to Rs. 18,456,427 were damaged consequent to fire at the companys warehouse at Bhiwandi, Maharashtra. Subsequently, the company has received full amount towards the insurance claim for the aforesaid damaged goods.

10. Previous year figures have been regrouped where necessary.


Dec 31, 2009

(Figures in Rupees. unless otherwise specified)

December 31, December 31, 2009 2008

1. Contingent Liabilities:

(a) Claims against the Company not acknowledged as debts - Excise 6,282,782 5,880,600 matters (Disallowance of Rs.6,282,782 (including interest Rs.3,584,543 and penalty Rs.470,000)of modvat credit availed on goods destructed)

(b) Claims against the Company not acknowledged as debts - Income tax 74,791,708 51,488,822 & Sales tax matters (A-Disallowance of inventory write -off pertaining to year 2001-02 Rs.9,004,625, dispute is pending at CIT-Appeals, B-Disallowance of purchases u/s 92CA pertaining to year 2002-03 Rs.8,218,884, C- Disallowance of purchases u/s 92CA pertaining to year 2003-04 Rs.9,007,863, D-Disallowance of purchases u/s 92C Apertaining to year 2004-05 Rs.19,568,669, E- Others Rs.5,692,783. F-Disallowance of purchases u/s 92CA pertaining to year 2005-06 Rs.23,298,884)

(c) Claims against the Company not acknowledged as debts - Interest 86,494 86,494 on lease (Liability to pay service tax to official liquidators of CRB Capital Market Ltd for delayed lease payments)

(d) Claims against the Company not acknowledged as debts - others 42,331,500 302,500 (A- Fine of Rs. 175,000 by regulatory authorities for non - compliance of regulations pertaining to filing of promoter/substantial shareholders holdings with stock exchange. Company has made representation,seeking personal hearing, B- Claims made by import agents in 1978 for service charges to import material for company where no supply of material has effected, C- Purchase commitment charges-Rs. 4,20,29,000)

(e)Other guarantees issued by banks on behalf of the Company 1,562,722 1,632,722 (margin money guarantees issued Rs. 15,08,722 ; previous year Rs. 323,000)

(Includes guarantees given to Sales tax and Excise authorities for payment of taxes and to customers for supply of materials)

2. Salaries, wages, bonus and commission (under Schedule 15) includes expenditure on severance pay Rs.7,972,120 (P.Y Rs. 14,118,463).

3. Cost of materials/goods and operating and other expenses include cost of samples distributed Rs.23,815,235 (previous year Rs.28,165,234).

Stock of samples amounting to Rs.7,506,254 (previous year Rs. 14,808,921) are included in stocks of finished goods.

4. Excise duty related to differences between closing and opening stock and other adjustments are stated under operating and other expenses. Excise duty related to turnover is reduced from the gross turnover.

5. Disclosure for lease under Accounting Standard (AS) 19 - "Leases": Operating lease

The Company had entered into an agreement for taking office premises on leave and license basis at Mumbai. The Company also has an Agreement for vehicles and laptops sourced under operating lease contract. The specified disclosure in respect of the same is given below :

1. Lease payment recognized in the Profit and Loss Account for the year - Rs.51,496,112 (previous year Rs. 14,254,207).

6. Related Party Disclosures:

1. Relationships:

i) Merck & Co.lnc.-USA.,the ultimate holding Company w.e.f November 4,2009 through its subsidiary Dashtag.U.K., holds 53.93% (P.Y. 53.93%) of equity shares in the Company as at 31st December, 2009.

ii) Schering - Plough Corporation, New Jersey, U.S.A.,the ultimate holding Company upto November 3,2009 through its subsidiary Dashtag,U.K., held 53.93% (P.Y. 53.93%) of equity shares in the Company.

iii) Schering - Plough (India) Pvt. Ltd. is wholly owned Subsidiary of the Company.

iv) Other related parties with whom transactions have taken place during the year:

a) Essex Chemie A.G, Switzerland

b) Schering - Plough (Ireland) Company

c) Schering - Plough Ltd, Singapore Branch

d) SOL Ltd., Bermuda.

e) Schering - Plough , Korea

f) SOL Ltd., Hongkong Branch

g) Schering - Plough , Pakistan (Private) Limited h) Schering- Plough International Inc , USA

i) Schering - Plough Brinny (Ireland) Limited

j) Schering - Plough Tibbi Urunler Tic A.S.,Turkey

k) Schering - Plough sdn bhd,Malaysia

l) Schering - Plough (China) Ltd

m) Schering Corporation, U.S.A.

n) Schering - Plough Pty Ltd, Australia

o) Schering - Plough Ltd, Thailand

p) P T Schering - Plough, Indonesia

q) SOL Ltd., Singapore Branch

r) Schering - Plough Ltd, Taiwan

s) Organon (India) Limited

r) Schering - Plough Corporation, Philippines

v) Key Management Personnel

Mr. K.G. Ananthakrishnan - President & Managing Director

7. In year 2007, pursuant to the relevant provisions ot the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, Dashtag, U.K. made an open offer to acquire 780,000 equity shares (representing 20% of the post-preferential issue capital) from the existing shareholders of the Company. Pursuant to this open offer, Dashtag, U.K. acquired 123,087 shares constituting 3.16% of the post- preferential capital of the Company, and the present holding of Dashtag, U.K. is 2,103,087 equity shares, constituting 53.93% of the paid-up share capital of the Company. In a prior year the Company had raised Rs. 40.25 Crores by issuing 700,000 equity shares of Rs.10 each at a premium of Rs.565 per share to its promoters, Dashtag. The above amount is presently invested in fixed deposits with banks, pending utilization of the same.

8. Disclosures under the Micro, Small and Medium Enterprises Development Act, 2006:

a) An amount of Rs. 354,794 (previous year Rs. Nil)and Rs. 50,841 (previous year Rs. Nil) was due and outstanding to suppliers as at the end of the accounting year on account of Principal and Interest respectively.

(b) No interest was paid during the year in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006 and no amount was paid to the supplier beyond the appointed day.

(c) No interest is payable at the end of the year other than interest under Micro, Small and Medium Enterprises Development Act, 2006.

The above information and that given in Schedule 10 - "Current Liabilities and Provisions" regarding Micro, Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the Auditors.

9. Common service expenses paid/payable include payments/recoveries on account of payroll of finance, administration and other service areas under common services agreement with Organon (India) Limited.

10. During the year Company has received a show cause notice from the Regional Provident fund commissioner (Exemption) on completion of assessment, directing company to deposit EDLI charges pertaining to prior years. The Company has accrued for an estimated liability of Rs. 23,37,576 in respect of the same.

11. Subsequent to the year end, on January 29th 2010, goods amounting to Rs. 2.15 crores were damaged on account of fire at Bhiwandi warehouse. The company is in the process of filing its claim with the insurance authorities.

12. Provisions, Contingent Liabilities and Contingent Assets Disclosure for the year December 31, 2009:

The Company has an understanding with trade associations, based on prevailing trade practices, for the replacement of its date expired and damaged products upon return of such products subject to certain terms and conditions. With effect from the current financial year, the Company has also opted to replace such products by way of credit notes issued. Provision for replacement of such products of the Company is made based on the best estimates of the management taking into consideration the type of products sold, the likely returns and the costs required to be incurred for such replacements.

13. In respect of the amount as mentioned under Section 205C of the Companies Act 1956, no dues are required to be credited to the Investor Education and Protection Fund as at December 31, 2009.

14. The Company operates in one reportable business segment i.e." Pharmaceuticals" and one reportable geographical segment i.e. "Within India". Hence no separate information for segment-wise disclosure is required.

15. As per the best estimate of the management, no provision is required to be made as per Accounting Standard (AS) 29 "Provisions, Contingent Liabilities and Contingent Assets" as notified by the Companies (Accounting Standards) Rules, 2006 in respect of any present obligation as a result of a past event that could lead to a probable outflow of resources which would be required to settle the obligation.

16. Figures for the previous year have been regrouped and / or reclassified, wherever necessary, to conform with current years classification.

 
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