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Notes to Accounts of Gufic BioSciences Ltd.

Mar 31, 2015

I. Unsecured Loans :

Unsecured loans from Directors & Related Parties are interest free and repayable after March 2015 or any period there after as mutually decided.

NOTE 1 : BORROWING COST

Borrowing costs of Rs. Nil (2013 - 2014: Rs. 37.74 Lacs) that are attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets.

NOTE 2 : LEASE TRANSACTIONS

The Company's significant leasing arrangements are in respect of operating lease for premises and Vehicles. The period of agreement is generally for one year and is renewable by mutual consent. The aggregate lease rental expense are Rs. 114.00 Lacs (Previous year Rs. 95.28 Lacs)

NOTE 3

(a) Gross amount required to be spent by the company during the year: Rs.. 9.68 lacs

(b) Amount spent during the year on: NIL

NOTE 4

As per the requirement of the Companies Act, 2013 (Act), the company has reassessed the remaining useful life of the fixed assets taking into consideration the useful life prescribed in Schedule II of the Act. The written down value of Rs.. 280.07 Lacs as on April 1, 2014 (net of deferred tax of Rs.. 98.12 Lacs) of the assets, whose residual life is exhausted has been adjusted against the opening balance of Reserves and Surplus.

NOTE 5

In compliance with Accounting Standard-2 (AS-2) revised, excise Duty liability estimated at Rs.. 22.42 Lacs (Previous year Rs.. 8.91 Lacs) on finished goods lying in factory premises has been loaded on the valuation of Finished goods. However, it has no impact on the Profit and Loss Account. The Excise duty of Rs.. 13.51 lacs related to the difference between the closing stock and opening stock is given effect in the Profit & Loss Account.

NOTE 6

The Company has appointed an internal auditor ,an independent firm of Chartered Accountants to carry out the audit of stock records maintained by the company. The audit inter alia includes physical verification and valuation of inventories of all its locations and accordingly the same has been incorporated in accounts. Certificate issued in this regard be relied upon.

NOTE 7

In the opinion of the management inventories of Rs.. 3680.14 Lacs (Previous year Rs.. 2611.54 Lacs) shown in Balance Sheet are good and do not include any slow moving, or dead stock. Due provision is made for the near expiry material and depletion in its value, if any. In the opinion of the management, all the current assets including inventories, loans and advances have a value on a realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

NOTE 8

Balance of Trade Receivable, loans & advances, Trade Payable and security and Trade Deposits from Agents and Stockists balance are subject to confirmations, verification and adjustments necessary upon reconciliation thereof. Pending adjustments on confirmation, if any, it is shown as good in nature.

Company has already initiated process of identifying Trade Receivable, Advances and Trade creditors which are non-recoverable in nature and will make necessary provision upon completion of process. However during the financial year 2014-15 it has made necessary provision/or transferred amount to bad debts in respect of debtors which are not recoverable in nature.

NOTE 9

The company has given security deposit of Rs. 300 lacs to Gufic Private Limited towards the use of its factory premises at Navsari for its manufacturing activities. Accordingly an amount of Rs. 300 lacs has been shown under the head long term loans and advances.

Company has also given Security Deposit to Gufic Chem Private Limited of Rs. 120 lacs towards supply of products at concessional rate to the company and the same has been show under the head Long Term Loan and Advance to related parties.

NOTE 10

The company has unearthed the fraud committed by one of its marketing employee who has misappropriated amount of Rs.. 123.80 Lacs (gross Rs.. 146.30 Lacs less recovered Rs.. 22.50 Lacs). The management has taken necessary steps including legal action and is hopeful of recovering the said amount. Accordingly it has been shown the amount of Rs.. 123.80 Lacs under the head other non-Current Assets (other).

NOTE 11

The company is in process of implementing ERP system in a phased manner for integration of its various functions and it could implement only some of its modules. Company has also continued with the old accounting system. Pending implementation of complete ERP system, the management confirms that it has taken enough care/diligence to ensure that the data / accounts, so presented, are materially correct and that the books of accounts have been duly reconciled with the various systems.

NOTE 12

Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.


Mar 31, 2014

LONG TERM BORROWINGS

Additional information to secured / unsecured

The long term portion of term loans are shown under long term borrowings and current maturities (payable within twelve months) of long term borrowings are shown under the current liabilities as per disclosure requirement of the Revised Schedule VI.

Details of securities and Terms of payment

(i) Secured by way of hypothecation of plant & machineries to the Bank.

(ii) The facilities granted to the company are further secured by Equitable / Legal mortgage of land and factory building of Gufic Private Limited - company in which directors are interested, situated at Navsari, against the credit facilities sanctioned to the company.

(iii) The loans are guaranteed personal guarantte of Managing Director and Executive Director.

(iv) Further the loan are secured by a corporate guarantee of Gufic Private Limited.

TERMS / RIGHTS ATTACHED TO SHARES : The Company has only one class of equity shares having a par value of Rs. 1 per shares. Each holder of equity share is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except in case of interim dividend. 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 shareholder.

Details of Security: For Rupee Loan

Hypothecation of stocks and book debts. The facilities granted to the company are further secured by Equitable / Legal mortgage of land and factory building of Gufic Private Limited - company in which directors are interested, situated at Navsari, against the credit facilities sanctioned to the company. The loans are secuered by personal guarantee of Managing Director and Executive Director and the loan are secured by a corporate guarantee of Gufic Private Limited.

Sundry Creditors - Dues to Micro and Small Enterprises

Pursuant to disclosure of amount due to Micro, Small and Medium Enterprises as defined under the "Micro, Small and Medium Enterprises Development Act, 2006" (MSMED ACT) included under the head "Trade Payable", the Company has initiated process of seeking necessary information from its suppliers. Based on the information available with the company regarding total amount due to supplier as at March 31, 2014 covered under MSMED Act, amounts to Rs. 22.38 lacs (2012 - 13 : Rs. 0.76 lacs). The company is generally regular in making payment of dues to such enterprise. There are no overdues beyond the credit period extended to the company which is less than 45 days hence liability for payment of interest or premium thereof and related disclosure under the said Act does not arise.

CONTINGENT LIABILITIES & COMMITMENTS NOT PROVIDED FOR

As at As at 31.3.2014 31.3.2013 Rs. in Lacs Rs. in Lacs

(a) Other money for which the Company is contingently liable

(i) Letter of Credit 631.55 131.55 (ii) Bank Guarantee 5.90 7.35 (iii) Excise Duty 108.86 110.49 (iv) Income Tax 128.03 - (v) Labor Cases 0.76 2.50 (b) Estimated amount of contracts remaining 149.01 219.51 to be executed on capital account and not provided for

Consequent to discontinuation of providing marketing support services by Gufic Private Limited to the company w.e.f. October 2013, company has decided to set up its own marketing divison and to appoint its marketing staff for the purpose of its business. As a result company has acquired experienced staff of Gufic Private Limited handling marketing activities of the company, alongwith the gratuity and leave encashment liabilitiies of Rs. 44.35 Lacs and Rs. 16.13 Lacs respectively and has made necessary provision in the accounts.

During the year, the company has received compensation of Rs. 105.09 lacs from the Insurance Company towards reinstatement value of the fixed assets, which were destroyed in the fire during the last year. The company has acquired or constructed new assets as against the assets destroyed by fire which has been shown as addition to respective block of assets and money received from insurance company to the extent of Rs. 105.09 lacs has been shown as deduction from the respective block of assets.

In compliance with Accounting Standard-2 (AS-2) revised, excise Duty liability estimated at Rs. 8.91 Lacs (Previous year Rs. 10.75 Lacs) on finished goods lying in factory premises has been loaded on the valuation of Finished goods. However, it has no impact on the Profit and Loss Account. The Excise duty of Rs. 1.84 lakhs related to the difference between the closing stock and opening stock is given effect in the Profit & Loss Account.

The Company has appointed an internal auditor ,an independent firm of Chartered Accountants to carry out the audit of stock records maintained by the company. The audit inter alia includes physical verification and valuation of inventories of all its locations and accordingly the same has been incorporated in accounts. Certificate issued in this regard be relied upon.

In the opinion of the management inventories of Rs. 2611.54 Lacs (Previous year Rs. 1999.59 Lacs) shown in Balance Sheet are good and do not include any slow moving, or dead stock. Due provision is made for the near expiry material and depletion in its value, if any. In the opinion of the management, all the current assets including inventories, loans and advances have a value on a realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

Balance of sundry debtors, loans & advances, sundry creditors and Security and Trade Deposits from Agents and Stockists balances are subject to confirmations, verification and adjustments necessary upon reconciliation thereof. Pending adjustments on confirmations, if any, it is shown as good in nature.

The company has given security deposit of Rs. 791.91 lacs to Gufic Private Limited towards the use of its factory premises at Navsari for its manufacturing activities. Accordingly an amount of Rs. 300 lacs has been shown under the head long term loans and advances and Rs. 491.91 lacs under the head short term loans and advances to related parties.

Company has also given Security Deposit to Gufic Chem Private Limited of Rs. 120 lacs towards supply of products at concessional rate to the company and the same has been show under the head Long Term Loan and Advance to related parties.

In view of management debts of Rs. 326.69 lacs outstanding for more than year and advances of Rs. 40.14 lacs outstanding for more than two years are good and recoverable in nature. Management is taking necessary steps for recovery of the said amount.

The company has obtained approval of the Central Government u/s. 297 of the Companies Act, 1956, with respect to transaction entered by the company with certain private companies in which directors are interested. However such approval is for lesser amount and the company has decided to comply with the provision of law and to make necessary application for increase its limits.

The company is in process of implementing ERP system in a phased manner for integration of its various functions and could implement only some of its modules. Company has also continued with the old accounting system. Pending implementation of complete ERP system, the management confirms that it has taken enough care/diligence to ensure that the presented data / accounts, so presented, are materially correct and that the books of accounts have been duly reconciled with the various systems.

Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure


Mar 31, 2013

1.1 During the earlier year, the Company introduced different modules of an ERP System integrating few of its operations at different points of time. Consequently, the Company discontinued its legacy system. Subsequently, it was found that various accounts / data could not be reconciled and as a result, the Company decided to defer further implementation until the deficiencies are resolved. Consequently, the Company reverted to legacy financial accounting systems to record transactions of the earlier as well as of the current year and draw up its books of accounts and is continuing on its dual accounting system.

As a result, some data, particularly quantitative information, has been compiled based on limited information available including from the new ERP Modules, which itself has not been tested for its accuracy. Management represents and confirms that it has taken enough care/diligence to ensure that the presented data / accounts, so computed, are materially correct and that the books of accounts shall be duly reconciled and necessary entries arising therefrom, which in the opinion of the Board will not be material, shall be given effect to in the subsequent year.

1.2 The Company has appointed internal auditor, an independent Chartered Accountant to carry out the audit of stock records maintained by the Company. The Audit inter-alia includes physical verification and valuation of inventory, summary of quantitative data with its value lying at all its factories and branches including inventory lying with the third parties and has issued a certificate dt. 10th May, 2013 valuing the inventory at Rs.. 1999.59 Lacs as at 31.03.2013 and accordingly the same has been incorporated in accounts.

1.3 In compliance with Accounting Standard-2 (AS-2) revised, Excise Duty liability estimated at Rs. 10.75 Lacs (Previous year Rs. 9.72 Lacs) on Finished goods lying in factory premises has been loaded on the valuation of Finished goods. However, it has no impact on the Profit and Loss Account.

1.4 Confirmations have not been obtained with respect to balances of Other Long Term Liabilities, Trade Payables, Advances from Customers, Long Term Loans and Advances, Trade Receivables, Others Short Term Loans and Advances. These balances are subject to confirmations from the respective parties and consequential reconciliations and adjustments arising there from, if any. The management, however, does not expect any material variation.

1.5 Capital Advances of Rs. 9.11 Lacs (Prev Year Rs. 8.53 Lacs), Advances to Suppliers Rs. 21.08 Lacs (Prev Year Rs. 25.06 Lacs) and Advances to others Rs. 5.20 Lacs (Prev Year Rs. 4.17 Lacs) are old receivable due for more than three years and Trade Receivables of Rs. 191.52 Lacs (Prev Year Rs. 174.48 Lacs) due for more than one year which in the opinion of auditors may not be recoverable and not been provided for. The Management is of the opinion that these are good and realisable and thus no provision is required.

1.6 In the opinion of the management inventories of Rs. 1999.59 Lacs (Previous year Rs. 1690.94 Lacs) shown in Balance Sheet are good and do not include any slow moving, or dead stock. Due provision is made for the near expiry material and depletion in its value, if any. In the opinion of the management, all the current assets including inventories, loans and advances have a value on a realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

1.7 (a) The Company had entered into various transactions with companies in which directors are interested without prior approval of the Central Government. u/s 297 of the Companies Act, 1956. The same has been compounded by the Authority vide its order dated 14 Dec, 2012.

(b) Thecompany had also made an application during July, 2012 u/s 297 for approval of the future transactions with few of the companies In which directors are interested. Though the same has been approved for by the Authority, it is for the lesser amount. Accordingly, the Company has exceeded the limit specified in the said Order. The Company has decided to reapply and get the limit increased so as to cover these transactions.

(c) The Company has also into some other transactions with few other parties in which directors are interested without the prior approval of the central Government u/s 297 of the Companies Act, 1956. The Company has yet to apply for compounding of offence of inadvertent non-compliance for the said transactions and get the same approved and regularising.

1.8 CONTINGENT LIABILITIES: As At As At 31.3.2013 31.3.2012 (Rs. in Lacs) (Rs. in Lacs)

A Estimated amount of contract remaining to be executed

On capital account and not provided for 219.51 292.22

B Letter of Credit 131.55 239.13

C Bank Guarantee 7.35 17.00

D Claims against company not acknowledge as Debts, Being disputed 110.49 108.86

E Labor Cases 2.50 0.70

F Other Commitments

Details of other commitments arising out of major Contracts entered into by the Company

The Company has entered into an agreement revising earlier arrangement for availing marketing services with Gufic Private Limited, a company in which directors are interested. In terms of the said agreement, consideration committed is 13.5 % of the turnover of the company and in future it shall be additional 10% on increased sales over and above the sales for financial year ended 2011-12. The company is also required to pay an additional interest free deposit equivalent to three months of expected monetary expenses.

1.9 Gratuity benefit plans:

The Company''s Provision for Gratuity as at the close of the year has been computed by the Actuary appointed for the purpose as per the AS 15(Revised), adopting the "Projected Unit Credit Method". The Company has also taken the Policy to partly fund the liability.

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The following tables summarise the components of net benefit expense recognised in the profit and loss account and amounts recognised in the balance sheet.

1.10 Borrowing Cost capitalised as Fixed Assets in F. Y. 2012-2013 Rs. 12.30 Lacs (Prev Year NIL)

1.11 The amount of lease payments in respect of operating leases recognised in the profit and loss account was

Rs. 87.44 Lacs ( Previous year Rs. 77.18 Lacs) The minimum future payments during non-cancellable periods under the foregoing arrangements in the aggregate for each of the following periods is as follows :

a) Not later than one year Rs. 1.20 Lacs (Previous year Rs. 1.20 Lacs)

b) Later than one year but not later than five years Rs. 3.90 Lacs (Previous year Rs. 4.80 Lacs)

c) Later than five years Rs. Nil (Previous year Rs. 0.30 Lacs)

During the current year ended March 31, 2013 the lease payments recognised in the Profit and Loss Account for the aforesaid arrangements amounts to Rs. 97.44 Lacs (Previous year Rs. 77.18 Lacs)

1.12 Considering the nature, existing and projected sales and profitability, the Board is of the opinion that no impairment of assets is required. Being too technical, Auditors have relied upon the same and hence impairment, If any, has not been recognised

1.13 Previous year''s figures have been regrouped and rearranged, reclassified wherever necessary to correspond with the current year''s classification/disclosure.


Mar 31, 2012

From a Bank:

Term Loans:

Secured by hypothecation and / or Equitable Mortgage of assets purchased under the term loans, other specific assets, together with hypothecation of Plant and Machinery and other movable assets situated at Navsari Unit and are further secured by Registered Mortgage of land, Corporate Guarantee and Cash collateral in the form of TDRs of Rs. 500 Lacs, all of an associate company and guaranteed by the Managing Director of Company.

The loans are repayable in 60 monthly installments of Rs. 5 lacs starting from April 2010 and ending on March 2015. The rate of interest is 3.00% above SBAR, payable at monthly rest.

Vehicle Loans:

Secured by charge on specific vehicles purchased.

These loans are repayable in 36 to 60 EMI of Rs. 19.73 Lacs (Incl Interest) starting from the date of the respective contract. The effective rate of interest ranges from 8.90 % to I3.50 %.

Unsecured Loans:

Of the above unsecured loans,

As a part of condition laid down by the Bank, Rs. 327 Lacs is to be converted into equity by 3I.03.20I3.

Sundry Creditors - Dues to Micro and Small Enterprises

In terms of the notification issued by the Department of Company affairs, the Company is required to make certain disclosure under the head " Sundry Creditors" in respect of dues to Micro Enterprises and Small Enterprises as defined under the "The Micro, Small and Medium Enterprises Development Act,2006" (MSMED ACT) . The Company has not yet started process of inviting information from its vendors regarding their status under MSMED Act. The Company has also not received any memorandum by such suppliers (as required to be filed with the notified authority under the MSMED Act, 2006) claiming their status as micro or small or medium enterprises. Therefore, bifurcation between Total Outstanding Dues of Micro Enterprises and Small Enterprises and other dues are not disclosed under the head ''Sundry Creditors" under the head Current Liabilities and Provision. 26

Security Deposits were given to Gufic Private Ltd for use of it's factory premises at Navsari for the company's manufacturing activities under an operating lease for a period of 10 years. Gufic Private Ltd. has created an Equitable Mortgage on the said factory premises in favour of the Bank for availing the credit facilities to the company. Hence, the said deposits are secured and considered good. The company has also paid lease rentals of Rs. 1.20 Lacs during the year for use of the factory premises.

Security deposits to Gufic Chem Private Ltd was given for supply of products and usage of its facilities at concessional rate to the Company. Such deposits are unsecured and considered good.

1.1 During the earlier year, the Company introduced different modules of an ERP System integrating few of its operations at different points of time. Consequently, the Company discontinued its legacy system. Subsequently, it was found that various accounts / data could not be reconciled and as a result, the Company decided to defer further implementation until the deficiencies are resolved. Consequently, the Company reverted to legacy financial accounting systems to record transactions of the earlier as well as of the current year and draw up its books of accounts and is continuing on its dual accounting system.

As a result, some data, particularly quantitative information, has been compiled based on limited information available including from the new ERP Modules, which itself has not been tested for its accuracy. Management represents and confirms that it has taken enough care/diligence to ensure that the presented data / accounts, so computed, are materially correct and that the books of accounts shall be duly reconciled and necessary entries arising therefrom, which in the opinion of the Board will not be material, shall be given effect to in the subsequent year.

1.2 The Company has appointed internal auditor, an independent Chartered Accountant to carry out the audit of stock records maintained by the Company. The Audit inter-alia includes physical verification and valuation of inventory, summary of quantitative data with its value lying at all its factories and branches including inventory lying with the third parties and has issued a certificate dt. 20th May, 2012 valuing the inventory at Rs.. 1690.94 Lacs as at 31.03.2012 and accordingly the same has been incorporated in accounts.

1.3 In compliance with Accounting Standard-2 (AS-2) revised, Excise Duty liability estimated at Rs. 9.72 Lacs (Previous year Rs. 8.09 Lacs) on Finished goods lying in factory premises has been loaded on the valuation of Finished goods. However, it has no impact on the Profit and Loss Account.

1.4 Confirmations have not been obtained with respect to balances of Other Long Term Liabilities, Trade Payables, Advances from Customers, Long Term Loans and Advances, Trade Receivables, Others Short Term Loans and Advances. These balances are subject to confirmations from the respective parties and consequential reconciliations and adjustments arising there from, if any. The management, however, does not expect any material variation.

1.5 Capital Advances of Rs. 8.53 Lacs (Prev Year Rs. 8.40 Lacs), Advances to Suppliers Rs. 25.06 Lacs (Prev Year Rs. 29.09 Lacs) and Advances to others Rs. 4.I7 Lacs (Prev Year Rs. 3.50 Lacs) are old receivable due for more than three years and Trade Receivables of Rs. I74.48 Lacs (Prev Year Rs. I04.69 Lacs) due for more than one year which in the opinion of auditors may not be recoverable and not been provided for. The Management is of the opinion that these are good and realisable and thus no provision is required.

1.6 In the opinion of the management inventories of Rs. I690.94 Lacs (Previous year Rs. I276.67 Lacs) shown in Balance Sheet are good and do not include any slow moving, or dead stock. Due provision is made for the near expiry material and depletion in its value, if any. In the opinion of the management, all the current assets including inventories, loans and advances have a value on a realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

1.7 The Company has entered into various transactions on an Arm's-Length basis in the ordinary course of business with Companies in which Directors are interested which requires the prior approval of the Central Government u/s 297 of the Companies Act, I956. The Company has yet to apply for compounding of offence of inadvertent non-compliance with the provisions of Sec 297 of the Act in respect of the past transactions and regularising the future transactions.

1.8 CONTINGENT LIABILITIES: As At As At 31.3.2012 31.3.2011 (Rs.in Lacs) (Rs.in Lacs)

A Estimated amount of contract remaining to be executed On capital account and not provided for 292.22 42.51

B Letter of Credit 239.13 10.15

C Bank Guarantee 17.00 17.49

D Claims against company not acknowledge as Debts, Being disputed 108.86 108.86

E Labor Cases 0.70 34.11

F Other Commitments

Details of other commitments arising out of major Contracts entered into by the Company

The Company has entered into contract during December 2007 to avail Marketing Services with erstwhile Placer Mercantile and Investments Private Limited, now amalgamed with Gufic Private Limited, a company in which Managing Director and other Director are Directors and are member of the said amalgamated company. As per the Terms of Contract, the present Minimum Fees is Rs. 650 Lacs per year Plus I0% of the increase in sales turnover of products over the 2009-I0, The Company is required to pay an interest free deposit, equivalent to three months of monetary expenses, to be settled on a yearly basis.

1.9 Gratuity benefit plans:

The Company's Provision for Gratuity as at the close of the year has been computed by the Actuary appointed for the purpose as per the AS I5(Revised), adopting the "Projected Unit Credit Method". The Company has also taken the Policy to partly fund the liability.

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The following tables summarise the components of net benefit expense recognised in the profit and loss account and amounts recognised in the balance sheet.

1.10 The amount of lease payments in respect of operating leases recognised in the profit and loss account was Rs. 77.18 Lacs ( Previous year Rs. 68.10 Lacs) The minimum future payments during non-cancellable periods under the foregoing arrangements in the aggregate for each of the following periods is as follows :

a) Not later than one year Rs. 1.20 Lacs (Previous year Rs. 1.20 Lacs)

b) Later than one year but not later than five years Rs. Nil

c) Later than five years Rs. Nil

During the current year ended March 31, 2012 the lease payments recognised in the Profit and Loss Account for the aforesaid arrangements amounts to Rs. 77.18 Lacs (Previous year Rs. 68.10 Lacs)

1.11 Considering the nature, existing and projected sales and profitability, the Board is of the opinion that no impairment of assets is required. Being too technical, Auditors have relied upon the same and hence impairment, If any, has not been recognised

1.12 The Revised Schedule VI has become effective from April 01, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped and rearranged reclassified wherever necessary to correspond with the current year's classification/disclosure.


Mar 31, 2011

1. During the earlier year, the Company introduced different modules of an ERP System integrating few of its operations at different points of time. Consequently, the Company discontinued its legacy system. Subsequently, it was found that various accounts / data could not be reconciled and as a result, the Company decided to defer further implementation until the deficiencies are resolved. Consequently, the Company reverted to legacy financial accounting systems to record transactions of the earlier as well as of the current year and draw up its books of accounts and is continuing on its dual accounting system.

As a result, some data, particularly quantitative information, has been compiled based on limited information available including from the new ERP Modules, which itself has not been tested for its accuracy. Management represents and confirms that it has taken enough care/diligence to ensure that the presented data / accounts, so computed, are materially correct and that the books of accounts shall be duly reconciled and necessary entries arising therefrom, which in the opinion of the Board will not be material, shall be given effect to in the subsequent year.

2. The Company has appointed internal auditor, an independent Chartered Accountant to carry out the audit of stock records maintained by the Company. The Audit inter-alia includes physical verification and valuation of inventory, summary of quantitative data with its value lying at all its factories and branches including inventory lying with the third parties and has issued a certificate dt. 15th May, 2011 valuing the inventory at Rs. 127667 thousand as at 31.03.2011 and accordingly the same has been incorporated in accounts.

3. In compliance with Accounting Standard-2 (AS-2) revised. Excise Duty liability estimated at Rs. 809 thousand (Previous year Rs. 233 thousand) on Finished goods lying in factory premises has been loaded on the valuation of Finished goods.

However, it has no impact on the Profit and Loss Account.

4. Confirmations have not been obtained with respect to balances of Unsecured Loans, Sundry Debtors, Deposits, Loans and Advances, Sundry Creditors and Other Liabilities. These balances are subject to confirmations from the respective parties and consequential reconciliations and adjustments arising therefrom, if any. The management, however, does not expect any material variation.

5. Previous year figures have been regrouped, reclassified and rearranged wherever necessary.

6. In the opinion of the management inventories of Rs. 127667 thousand ( Previous year 103553 thousand) shown in Balance Sheet are good and do not include any slow moving, or dead stock. Due provision is made for the near expiry material and depletion in its value, if any. In the opinion of the management, all the current assets including inventories , loans and advances have a value on a realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

7. Secured Loans are secured as under:

A) Cash Credit and Foreign Currency Working Capital Term Loan from a Bank:

Secured against hypothecation of entire current assets, Plant and Machinery at Navsari Unit of the Company.

B) Term Loans from a Bank:

Secured by hypothecation and / or Equitable Mortgage over assets purchased under the term loans, other specific assets, and further extension of charge created for the cash credit facilities.

(A) and (B) above are further secured by registered mortgage of certain intangible rights as well as immovable properties of an associate company, guaranteed by the Managing Director of Company, corporate guarantee of an associate company together with hypothecation of Plant and Machinery and other movable assets at Navsari Unit.

C) Vehicle Loans:

Secured by charge on specific vehicles purchased.

4. The amount of lease payments in respect of operating leases recognised in the profit and loss account was Rs. 6810 thousand ( Previous year Rs.7l 14 thousand) The minimum future payments during non-cancellable periods under the foregoing arrangements in the aggregate for each of the following periods is as follows:

a) Not later than one year Rs. 120 thousand (Previous year Rs. 120 thousand)

b) Later than one year but not later than five years Rs. Nil

c) Later than five years Rs. Nil

During the current year ended March 31,2011 the lease payments recognised in the Profit and Loss Account for the aforesaid arrangements amounts to Rs. 6810 thousand (Previous year Rs. 7114 thousand)

5. No Provision has been made for doubtful Debts amounting to Rs. 10469 thousand (Previous year Rs. 25560 thousand) which are outstanding for more than one year. The management is of the opinion that these debtors are good and realisable.

6. Sundry Creditors - Dues to Micro and Small Enterprises

In terms of the notification issued by the Department of Company affairs, the Company is required to make certain disclosure under the head " Sundry Creditors" in respect of dues to Micro Enterprises and Small Enterprises as defined under the "The Micro, Small and Medium Enterprises Development Act,2006" (MSMED ACT). The Company has not yet started process of inviting information from its vendors regarding their status under MSMED Act. The Company has also not received any memorandum by such suppliers (as required to be filed with the notified authority under the MSMED Act, 2006) claiming their status as micro or small or medium enterprises. Therefore, bifurcation between Total Outstanding Dues of Micro Enterprises and Small Enterprises and other dues are not disclosed under the head "Sundry Creditors" under the head Current Liabilities and Provision.

7. An amount of Rs. 2284 thousand (Previous year Rs. 1381 thousand) being accrued under the duty entitlement passbook and other scheme as per Import-Export policy, as detailed in significant accounting policies above has been included under the head export benefits.

8. Gratuity benefit plans: The Company's Provision for Gratuity as at the close of the year has been computed by the Actuary appointed for the purpose as per the AS l5(Revised), adopting the "Projected Unit Credit Method". The Company has also taken the Policy to partly fund the liability.

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The following tables summarise the components of net benefit expense recognised in the profit and loss account and amounts recognised in the balance sheet.

A) Security Deposits were given to Gufic Private. Ltd for use of it's factory premises at Navsari for the company's manufacturing activities under an operating lease for a period of 10 years . Gufic Private Ltd. has created an equitable mortgage on the said factory premises in favour of the Bank for availing the credit facilities to the company. Hence, the said deposits are secured and considered good. The company has also paid lease rentals of Rs. 120 thousands during the year for use of the factory premises.

B) Security deposits to Gufic Chem Private Ltd was given for supply of products at concessional rate to the Company. Such deposits are unsecured and considered good.

9. Borrowing Cost capitalised as Fixed Assets in FY. 2010-20 li Rs. 1128 thousand. (Previous Year Rs. 911)

10. The Company has entered into various transactions on an Arm's-Length basis in the ordinary course of business with Companies in which Directors are interested which requires the prior approval of the Central Government u/s 297 of the Companies Act, 1956. The Company has yet to apply for compounding of offence of inadvertent non-compliance with the provisions of Sec 297 of the Act in respect of the past transactions and regularising the future transactions.

11. Loans and Advances includes old receivable due for more than three yrs Rs.4099 thousand which in the auditors' opinion may not be recoverable and not been provided for.

12. i) Current Tax includes interest of Rs.240 Thousand for the delayed payment of income Tax Dues.

ii) Provision for Tax under Current Liabilities and Provisions

Provision for Income Tax under Current Liabilities and Provision is net of Advance Tax of Rs. 29598 thousand. Similarly, Fringe Benefit Tax Receivable under Loans, Advances and Deposits is net of Provision for Fringe Benefit Tax of Rs. 489 thousand

 
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