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Notes to Accounts of Lactose (India) Ltd.

Mar 31, 2015

A. Terms & Conditions

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holder 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. Increase in Authorised Share Capital

The Company in its Annual General Meeting held on 25th September, 2014 has increased its authorised share capital from Rs. 100,000,000/- divided into 10,000,000 Equity Shares of Rs.10/- each to Rs. 120,000,000/- divided into 12,000,000 Equity Shares of Rs.10/- each.

The Company in March, 2013 had made a preferential issue of 11,34,000 Convertible Warrants at a premium of Rs. 2.65 per warrant (Face value Rs.10 each) in accordance with SEBI guidelines and had received 25 % upfront money amounting to Rs. 35,86,275. In terms of the issue, the Company had converted 7,15,000 share warrants into 7,15,000 fully paid equity shares of Rs. 10/- after receiving balance 75% amounting to Rs. 67,83,563/- till 31st March, 2014

During the year, the Company has converted balance 4,19,000 share warrants into 4,19,000 fully paid equity shares of Rs. 10/- each after receiving balance 75% money on 26th June, 2014.

In terms of the issue, the amount so received from the above issue of shares has been utilized for the working capital requirements of the Company.

Other information regarding secured loans :

Term loan from banks :

a) Term loan from Oriental Bank of Commerce amounting to Rs. 17,39,73,439 (PY Rs. 17,96,33,190) is secured against hypothecation of Land and Building, Plant and Machinery, Furniture and Fixtures, Vehicles and other assets created out of the said Term loan. Loan is taken for the specific purpose of expansion of capacity for manufacturing of Lactose Monohydrate and Setting-up the new facility of Lactulose Solution. It carries an interest rate 4.00% Base Rate. The loan is repayable in 60 equal monthly installments of Rs. 30,00,000 each, after a moratorium of 12 months, which has commenced from February, 2015. The interest is payable as and when due. The Term Loan was sanctioned for Rs. 18,00,00,000.

b) Term loan from ICICI Bank amounting to USD 2,131,105 (equivalent to INR 13,33,93,830) (P.Y Rs. Nil) is secured by Pari pasu Charge with Oriental Bank of Commerce on present & future movable fixed assets, Factory land & building and current assets of the company. It carries an interest rate of 3 months LIBOR Rate 1.83% . The loan is repayable in 9 equal quarterly installment of USD 88,800 and one last installment of USD 1,332,003, starting from July,2015. Equitable mortgage on residential premises of directors of the Company is also offered as a collateral security. The loan is further secured by personal guarantees by the directors and relative of directors of the company.

Vehicle loans from banks :

a) Vehicle loan from ICICI Bank amounting to Rs. 12,38,857/- (PY Rs. 19,62,258/- ) is secured against respective vehicle. It carries interest rate of 10.60% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 74,749 each, starting from 1st November 2011.

b) Vehicle loan from ICICI Bank amounting to Rs. 12,38,864/- (PY Rs. 19,62,263/-) is secured against respective vehicle. It carries interest rate of 10.60% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 74,749 each, starting from 1st November 2011.

c) Vehicle loan from Kotak Mahindra Bank amounting to Rs. 5,30,576 (PY Rs. 8,34,336) is secured against respective vehicle. It carries interest rate of 12.20% p.a. and is repayable in 47 equal monthly installment amounting to Rs. 32,400 each, starting from 10th November 2012.

d) Vehicle loan from Kotak Mahindra Bank amounting to Rs. 5,19,975 (PY Rs. 7,61,219) is secured against respective vehicle. It carries interest rate of 11.40% p.a. and is repayable in 47 equal monthly installment amounting to Rs. 26,300 each, starting from 20th March 2013.

Vehicle Loan from Others :

a) Vehicle loan from Kotak Mahindra Prime Limited amounting to Rs. 2,40,259 (PY Rs. 6,22,600) is secured against respective vehicle. It carries interest rate of 9.46% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 35,415 each, starting from 1st December 2010

b) Vehicle loan from Tata Capital Limited amounting to Rs. 3,43,130 (PY Rs. 5,29,414) is secured against respective vehicle. It carries interest rate of 12.99% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 19,880 each, starting from 9th December 2011.

Loan from Directors / Inter Corporate Loans :

Loans from Directors and Inter Corporate Loans are unsecured and repayable only after 31st March, 2016. The loans carry interest @ 14% p.a.

Other Information regarding loans repayable on demand

a) Cash Credit Facility from Oriental Bank of Commerce amounting to Rs. 2,95,33,233/- (PY Rs. 2,32,86,465) is secured against hypothecation of stocks of raw materials, stock in process, finished goods, stores & spares and trade receivables of the Company. It carries interest rate of 13.90% (3.50% Base Rate of 10.40%).

b) Cash Credit Facility from ICICI Bank amounting to Rs. 72,27,950 (PY Rs. Nil) is secured against hypothecation of stocks of raw materials, stock in process, finished goods, stores & spares and trade receivables of the Company ranking pari pasu with Oriental Bank of Commerce and second pari pasu charge on future and present movable fixed assets of the Company. Equitable mortgage of the residential premises of directors of the Company is also given as a collateral security.The loan is further secured by personal guarantees from directors and relative of directors.

Note:

Interest paid or payable by the Company on the aforesaid principal amount has been waived by the concerned suppliers.

Note 2 : Contingent Liabilities

As at As at Particulars March 31, 2015 March 31,2014

Guarantee given by Bank on behalf of the Company 805,000 455,000

Letter of Credit 11,358,199 11,727,450

Custom Duty against Export Obligation (Refer Note below) 16,510,288 10,985,244

TOTAL 28,673,487 23,167,694

Note: The Company has obtained license under Export Promotion Capital Goods Scheme (EPCG) for purchase of capital goods on zero percent custom duty. Under the EPCG the Company needs to fulfill certain export obligations, failing which, it is liable for payment of custom duty. Export Obligations amounting to Rs. 48,82,86,691/- (PY Rs. 32,85,69,733 /-) needs to be completed within 6 years from the date of purchase of respective license.

Note 3 : Commitments

Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for is Rs. 1,48,39,714/ - (PY: Rs. 7,39,39,966/-).

Note 4 :

In the opinion of the Board the Current Assets and Long Term Loans and advances, are realisable in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet. The provision for all known liabilities is adequate and not in excess of amount reasonably necessary.

Note 5 :

Balances of trade receivables, payables, loans and advances are subject to confirmation, reconciliation and consequential adjustment, if any. Consequently revenue impact, presently is not ascertainable, will be considered as and when determined.

Note 6 :

a) During the FY 2013-14, the Company had commenced production of its upgraded manufacturing facility to manufacture up to 10000 metric tons 200 Mesh Lactose per year exclusively for Kerry Indegrients India Private Limited (KIIPL) and accordingly as per the manufacturing agreement with KIIPL , has recognised during the year income of Rs. 57,77,200 (P.Y. Rs. 33,70,033/-) on proportionate basis out of total Advance Manufacturing Consideration amounting to Rs. 5,77,72,000 and the balance of Rs. 57,77,200/ - (P.Y. Rs. 57,77,200/- is disclosed under the head "Other Current liability" and Rs. 4,28,47,561/-(P.Y. Rs. 4,86,24,767/-) is disclosed under the head "Other Long term liability".

b) During the year, Company has received an advance amounting to Rs. 2,60,00,000/- from Sanofi India Limted for procurement of machinery, equipment and carrying out civil work for structural modification of manufacturing facility exclusively meant for Sanofi India Limited through an agreement dated 10th April, 2014 and addendum thereto dated 1st January, 2015.As per said agreement, advance payment is to be adjusted by way of monthly deductions by Sanofi India Limited equivalent to 20% of the Conversion and Packaging charges billed to Sanofi India Limited by Lactose (India) Limited from F.Y 2015-2016.Accordingly, out of advance of Rs. 2,60,00,000/-, Rs. 36,00,000/- is disclosed under the head "Other Current liability" and Rs. 2,24,00,000/- is disclosed under the head "Other Long term liability" on estimated basis.

Note 7 : Segment Reporting Basis of preparation

In accordance with the requirements of Accounting Standard 17 "Segment Reporting", the Company's business consists of one reportable business segment i.e., "Manufacturing & Trading of Pharmaceutical Products", hence no separate disclosures pertaining to attributable Revenues, Profits, Assets, Liabilities, Capital Employed are given.

Note 8 : Depreciations

Effective from April 1,2014, the Company has charged depreciation on its assets based on their useful life as stipulated under Schedule II of the Companies Act, 2013. Due to this, the depreciation for the year ended on 31st March, 2015 is lower by Rs.49,13,249/ - as compared to the depreciation computed under the earlier provisions of the Companies Act, 1956.


Mar 31, 2014

1.a. Terms & Conditions

The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holder 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.

The Company in March 2013 had made a preferential issue of 11,34,000 Convertible Warrants at a premium of Rs. 2.65 per warrant (Face value Rs. 10 each) in accordance with SEBI guidelines and had received 25 % upfront money amounting to Rs. 35,86,275.

In terms of the issue out of the above.

a) 3,18,000 share warrants had been converted into 3,18,000 fully paid equity shares of Rs. 10/- each at a premium of Rs. 2.65 per share on 18th March 2013 and had received Rs. 30,17,025 against the balance amount receivable on warrants.

b) 3,97,000 share warrants have been converted into 3,97,000 fully paid equity shares of Rs. 10/- each at a premium of Rs. 2.65 per share on 21st January 2014 and have received Rs. 37,66,538 against the balance amount receivable on warrants.

c) Further, the Company on the balance 4,19,000 shares had received an amount of Rs. 3,32,063 in addition to the 25 % upfront money and the entire balance of Rs. 16,57,150 is reflected under Money received against Convertible Share Warrants.

The total amount so received so received from the above issue of shares has been utilized for the working capital requirements of the Company.

Other information regarding secured loans :

Term loan from banks :

a) Term loan from Oriental Bank of Commerce amounting to Rs. 17,96,33,190 (PY Rs. 4,17,90,616) is secured against hypothecation of Building, Plant and Machinery, Furniture and Fixtures, Vehicles and other assets created out of Term Loan. Loan is taken for the specific purpose of expansion of capacity for manufacturing of Lactose Monohydrate and Setting-up the new facility of Lactulose Solution in the factory. It carries an interest rate of 14.40 % (4.00% Base Rate of 10.40%). The loan is repayable in 60 equal monthly installments of Rs. 30,00,000 each, after a moratorium of 12 months, starting from the February, 2014. However, at the specific request of the Company, the bank has extended the date of repayment by a year i.e. from February 2014 to February 2015. The interest is payable as and when due. The Term Loan is sanctioned for Rs. 18,00,00,000.

Vehicle loans from banks :

a) Vehicle loan from HDFC Bank amounting to Rs. NIL (PY Rs. 74,724) is secured against respective vehicle. It carries interest rate of 10.14% p.a. and is repayable in 36 equal monthly installment amounting to Rs. 12,825 each, starting from 7th October 2010.

b) Vehicle loan from ICICI Bank amounting to Rs. NIL (PY Rs. 82,779) is secured against respective vehicle. It carries interest rate of 12.99% p.a. and is repayable in 36 equal monthly installment amounting to Rs. 12,533 each, starting from 15th November 2010.

c) Vehicle loan from ICICI Bank amounting to Rs. 19,62,258/- (PY Rs. 26,13,178) is secured against respective vehicle. It carries interest rate of 10.60% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 74,749 each, starting from 1st November 2011.

d) Vehicle loan from ICICI Bank amounting to Rs. 19,62,263/- (PY Rs. 26,13,181) is secured against respective vehicle. It carries interest rate of 10.60% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 74,749 each, starting from 1st November 2011.

e) Vehicle loan from Kotak Mahindra Bank amounting to Rs. 8,34,336 (PY Rs. 11,03,429) is secured against respective vehicle. It carries interest rate of 12.20% p.a. and is repayable in 47 equal monthly installment amounting to Rs. 32,400 each, starting from 10th November 2012.

f) Vehicle loan from Kotak Mahindra Bank amounting to Rs. 7,61,219 (PY Rs. 9,76,614) is secured against respective vehicle. It carries interest rate of 11.40% p.a. and is repayable in 47 equal monthly installment amounting to Rs. 26,300 each, starting from 20th March 2013.

Vehicle Loan from Others :

a) Vehicle loan from Kotak Mahindra Prime Limited amounting to Rs. 6,22,600 (PY Rs. 9,70,531) is secured against earmarked vehicle. It carries interest rate of 9.46% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 35,415 each, starting from 1st December 2010

b) Vehicle loan from Tata Capital Limited amounting to Rs. 5,29,414 (PY Rs. 6,95,211) is secured against earmarked vehicle. It carries interest rate of 12.99% p.a. and is repayable in 60 equal monthly installment amounting to Rs. 19,880 each, starting from 9th December 2011.

Loan from Directors / Inter Corporate Loans :

Loans from Directors and Inter Corporate Loans are unsecured and repayable only after financial year 2020-21. The loans carry interest @ 14% p.a.

Other Information regarding loans repayable on demands

a) Cash Credit Facility from Oriental Bank of Commerce amounting to Rs. 2,32,86,465 (PY Rs. 2,81,08,037) is secured against hypothecation of stocks of raw material, stock in process, finished goods, stores & spares and Trade receivables of the Company. It carries interest rate of 13.90% (3.50% Base Rate of 10.40%).

Note: The Company had during the earlier years received an amount of Rs. 1,90,00,000 from Kerry Ingredients Private Limited (KIIPL) for transfer of Company''s customers as per the manufacturing agreement executed on 11th January, 2013. During the Current year in terms of Manufacturing Agreement, the Comapny has transferred its entire customers to KIIPL and accordingly the amount received has been recognized as income under exceptional item.

Note 2 : Contingent Liabilities

As at As at Particulars March 31, 2014 March 31,2013

Guarantee given by Bank on 455,000 455,000 behalf of the Company

Letter of Credit 11,727,450 -

TOTAL 12,182,450 455,000

Note 3 : Commitments

Estimated amount of contracts remaining to be executed on capital account (net of advances) and not provided for is Rs. 7,39,39,966/ - (PY: Rs. 48,65,059).

Note 4 :

In the opinion of the Board the Current Assets and Long Term Loans and advances, are realisable in the ordinary course of business atleast equal to the amount at which they are stated in the Balance Sheet. The provision for all known liabilities is adequate and not in excess of amount reasonably necessary.

Note 5 :

During the FY 2013-14, the Company has commenced Commercial production of its upgraded manufacturing facility to produce Lactose exclusively for Kerry Indegrients India Private Limited (KIIPL) from 1st September, 2013 and accordingly as per the manufacturing agreement with KIIPL dated 11th January, 2013, has recognised income of Rs. 33,70,033 (P.Y. Nil) on proportionate basis out of total Advance Manufacturing Consideration amounting to Rs. 5,77,72,000 and the balance Rs. 5,44,01,967 is disclosed as liabilities under Note no. 7 of the financial statements.

Note 6 : Segment Reporting Basis of preparation

In accordance with the requirements of Accounting Standard 17 "Segment Reporting", the Company''s business consists of one reportable business segment i.e., "Manufacturing & Trading of Pharmaceutical Products", hence no separate disclosures pertaining to attributable Revenues, Profits, Assets, Liabilities, Capital Employed are given.

Secondary segment reporting is on the basis of geographical location of the customers. The operation of the Company comprises local sales and export sales. The management views the Indian market and Export market as distinct geographical segments. The following is the distribution of the Company''s sales by geographical markets:

Note 7 :

Previous year''s figures have been re-grouped re-classified to conform to this year''s classification.


Mar 31, 2013

Note 1 :

In the opinion of the Board the Current Assets and Long Term Loans and advances, are realisable in the ordinary course of business atleast equal to the amount at which they are stated in the Balance Sheet. The provision for all known liabilities is adequate and not in excess of amount reasonably necessary.

Note 2:

Balances of trade receivables, payables, loans and advances are subject to confirmation, reconciliation and consequential adjustment, if any. Consequently revenue impact, presently is not ascertainable, will be considered as and when determined.

Note 3:

a) During the F.Y 2011-12, the Company had received from Kerry Ingredients India Private Limited (Kerry) a sum of Rs. 767.72 lacs for expansion of production capacity and others measures for strengthening of business and the same had been reflected as Liabilities in the financial statements for the year ended 31st March 2012 in absence of any agreement with Kerry.

b) During the current year, the Company has executed a Manufacturing Agreement with Kerry on 11th January, 2013 and as per the terms of the agreement the said sum Rs. 767.72 has been received as follows:

I. Rs. 190 Lacs has been received for the purchase of Company''s customers for such products. The said sum will be accounted for as Income in the year when the Company''s customers will be transferred to Kerry,

ii. Rs. 577:72 Lacs has been received as Advance Manufacturing Consideration by the Company on having agreed to upgrade its plant and produce up to 10000 metric tons. 200 Mesh Lactose per year exclusively for Kerry. This Consideration shall be apportioned over a period of 10 years from the commencement date which is the date on which the Company commences the production of the upgraded manufacturing facility as agreed in the Manufacturing Agreement.

Accordingly, the said sum of Rs. 767.72 Lacs has been reflected as current / long term liability as the case may in the in the Financial Statements for the year ended 31st March 2013.

Note 4:

The previous year''s figures have been re-grouped / re-classified to conform to this year''s classification.


Mar 31, 2010

1. Liabilities in respect of Gratuities and Leave Encashment are accounted for on cash basis which is not in conformity with Accounting Standard (AS) 15 (Revised 2005) on Employee Benefits as notified by the Companies (Accounting Standards) Rules, 2006 which requires that Gratuity and Leave Encashment be accounted for on accrual basis.

2. Contingent Liabilities not provided for :

i) Guarantee given by Banks on behalf of the Company Rs. 1.05 lacs. (Previous year Rs. 1.21 lacs)

ii) Estimated amount of contracts remaining to be executed on capital account is Rs. Nil (Previous year Rs.58.75 lacs)

iii) Income Tax Demands which are under dispute and is being contested by the Company by the way of appeal with ITAT Rs.111.15 Lacs (Previous year Rs.111.15 Lacs). Amount Paid Rs.55.10 Lacs (Previous year Rs.55.10 Lacs)

iv) Guarantee to Assistant Commissioner of Central Excise on behalf of other Company is NIL. (Previ- ous year Rs.100 Lacs)

3. In the opinion of the Board the Current Assets, Loans & Advances are approximately of the value stated and are realisable in the ordinary course of business except for those which are considered doubtful and provided for. The provisions for all known liabilities are adequate and not in excess of the amount reasonably necessary.

4. Balances of sundry debtors, creditors, loans and advances including cash held at Baroda are subject to confirmation, reconciliation and consequential adjustment, if any.

5. Secured Loans:

i) Term Loans from Banks:

Term Loan I - Rs.64.50 Lacs ** (Previous year Rs. 34.09 Lacs) is secured by Equitable Mortgage of Plant & Machinery, Furniture & Fixtures and Other Fixed Assets.

Term Loan II - Rs.146.79 Lacs** (Previous year Rs. 162.80 Lacs) is secured by Equitable Mortgage of Plant & Machinery, Furniture & Fixtures and Other Fixed Assets.

ii) Working Capital Loans from Banks:

a) Cash Credit Loan**:

Rs.368.20 Lacs (Previous year Rs. 400.66 Lacs) is secured by hypothecation of Stocks and Book Debts.

b) Packing Credit Loan:

Rs.4.9 Lacs (Previous year Rs27.90 Lacs) is secured by hypothecation of Stocks and Book Debts of export division and the personal guarantee of promoter directors.

iii) Vehicle Loans (Hire Purchase Loan):

Rs.30.48Lacs (Previous year Rs 42.55 Lacs) is secured by specific assets financed.

**Term Loans and Cash Credit Loans are further collaterally secured by:

- Equitable Mortgage over Factory Land.

- Hypothecation of all Movable Assets of the Company.

- Personal Guarantee of Directors of the Company.

6. Additional Information Pursuant to the Provisions of Part II of the Schedule VI of the Companies Act 1956

i) Quantitative Information:

i) Installed Capacity 2500 MT

Note: - Figures in brackets are pertaining to the previous year.

Notes: 1) Licensed capacity is not applicable

2) All capacities are expressed on triple shift basis

3) The installed capacities are as per the certificate given by the Executive Director on which the Auditors have relied, being a technical matter.

7. Amounts due to Micro, Small and Medium Enterprises:

The name of the Micro, Small and Medium Enterprises suppliers defined under "The Micro, Small and Medium Enterprises Development Act 2006 could not be identified, as necessary evidence is not in the possession of the Company.

Note:

The Basic EPS is calculated by dividing the net profit after tax for the year by the weighted average number of equity shares outstanding during the year.

8. Taxation:

i) Provision for taxation for the year has been made in accordance with the provisions of the Income Tax Act, 1961.

ii) In terms of Accounting Standard 22 on "Accounting for Taxes on Income", the Company has recognised st Deferred Tax Liabilities amounting to Rs.25.17 lacs for the year ended 31 March 2010 in the Profit & Loss Account.

9. Segmental Information:

i) Primary (Business) Segment:

In accordance with the requirements of Accounting Standard 17 "Segment Reporting", the Companys business consists of one reportable business segment i.e., "Manufacturing & Trading of Pharmaceutical Products", hence no separate disclosures pertaining to attributable Revenues, Profits, Assets, Liabilities, Capital Employed are given.

10. Advances recoverable in cash or in kind includes advance paid for office premises to a relative of the directors amounting to Rs. 135.00 lacs (P.Y Rs. 131.91 lacs). The registration and stamp duty for the transfer of the premises is under process.

11. Related Party Disclosures:

As required under Accounting Standard 18 "Related Party Disclosure", following are the details of transactions during the year with the related parties of the Company as defined in AS 18:

i) For the year ended 31st March, 2010

a) Key Management Personnel

Mr. S. M. Maheshwari Director

Mr. Atul Maheshwari Director



b) Relative of Director and Name of the enterprises having same Key Management Personnel and / or their relatives as the reporting enterprise with whom the Company has entered into transactions during the year.

- Mrs. Sangita Maheshwari

- Madhusha Projects Private Limited

Note: Related Parties are as disclosed by the Management and relied upon by the Auditors.

i) For the year ended 31st March, 2009

a) Key Management Personnel

Mr. S. M. Maheshwari Director

Mr. Atul Maheshwari Director

Mr. Anand Sharma Director (Upto 04.04.2008)



b) Name of the enterprises having same Key Management Personnel and / or their relatives as the reporting enterprise with whom the Company has entered into transactions during the year.

- Mrs. Sangita Maheshwari

- Madhusha Projects Private Ltd

Note: Related Parties are as disclosed by the Management and relied upon by the Auditors.

12. During the year, the company has raised funds amounting to Rs. 29.52 lacs through the conversion of share warrants which were issued in previous years.

13. Figures of the previous year have been regrouped, reclassified and/or rearranged wherever necessary.



















 
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