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Directors Report of Lyka Labs Ltd.

Jun 30, 2015

The Directors are pleased to present their Thirty Sixth Annual Report and the Audited Accounts of the Company for the Financial Year ended 30th June, 2015.

1. FINANCIAL RESULTS

Rs, in Lacs

Particulars For the Year For the Period Ended 30.06.2015 Ended 30.06.2014 (12 Months) (15 Months)

Total revenue 9219.16 9139.71

Profit before Interest, provision for depreciation,

taxes and write offs 2003.79 73.70

Less: Interest (1834.72) (2194.98)

Operational Profit/(Loss) before Depreciation 169.06 (2121.28)

Less: Depreciation (383.26) (543.04)

Exceptional Items (Net) 363.47 (1154.50)

Less: Prior period Expenses (12.60) (365.51)

Profit on Slump Sale - 3457.16

Profit/(Loss) for the year 136.67 (727.18)

2. DIVIDEND

No Dividend was declared for the financial year ended 30th June, 2015 as the Company wants to plough back the profit for its working capital requirements.

3. OPERATIONS

During the year under review, the total revenue earned by the Company was Rs, 9219.16 lacs as against total revenue of previous year of Rs, 7311.77 lacs on an annualized basis, an increase by 26%. The Company has reported Net Profit of Rs, 136.67 lacs as against net loss of Rs, 727.18 lacs of previous financial year.

The lypholized products manufactured at Ankleshwar factory are well in demand and subsequent to sale of Tarapur Plant, the Company is focusing on expansion of Lypholization Plant by installing two new Lypholizers purchased from Italy. This will enhance the manufacturing capacity of Lypholization plant and cater the demand of the products.

Lyka's Derma Products are well accepted by some of the leading pharma companies in India. Some of these products have already become market's leading brands in its moisturizing segment. Company has launched Cosmetological products for 'skin care' and 'hair care' segment. Dermatological products are growing very rapidly and has liquid margins. Company has tied up marketing arrangements for these products with renowned Companies. This segment will contribute significantly to the total revenue and profitability of the Company in the coming years.

Company's P2P Business is facing acute competition from the Companies located in Tax Free Zones as they are enjoying benefits in Excise and Sales Tax, as a result the margin on this products are always under pressure affecting profitability of the Company.

4. FUTURE OUTLOOK

Lyka has the technical expertise in Lyophilized products with all the latest machineries and equipments which enables it to give superior quality product.

Lyka offers its Dermatology products to various Indian companies on the multi branding model. Lyka has a product range of 35 formulations with more than 80 formulation in its pipeline. Several formulations are registered in African and South East Asian Markets also.

Lyka masters the art of development of 'Novel drug delivery system' in both topical preparation & lyophilized products. The innovations brought about by us in the topical formulation are the best amongst its class and offers an edge of benefits over other formulation of same class, this includes revolutionary development in creams, ointments, lotions, gels & foams.

Lyka shall expand base in existing markets by entering into 'Distribution agreements' for new emerging and Non – Regulated markets. The products are under the process of registrations and new agreements have been initiated. Commercialization of the said will commence by end of Financial Year 2016. The focus markets will be South East Asia, Russia, CIS, Africa and Latin America.

The Company's subsidiary namely Lyka BDR International Ltd have registration rights in various overseas markets. Currently, they have 401 registrations. During the year, 41 fresh registrations/renewals have been received by them. About 150 fresh registrations/ dossiers/ applications are submitted to the Health Authorities mainly in Asia and African markets of which approximately 50 registrations are expected to be received in Philippines, Myanmar, Kenya, Congo, Vietnam, Thailand and other various countries in the financial year 2015 – 2016, thereby increasing their intrinsic value.

Company's another subsidiary viz Lyka Exports Limited has reorganized its activities and in pursuance of this, it has sold its Animal Healthcare Business.

Company's wholly owned subsidiary, Lyka Healthcare Limited is in process of development of new therapy areas like Gastro, Intestinal, Anesthesia & Dermatological in the current year. Brand differentials will be added with Improved & increased coverage. Brand mix improvement is the key aspect in the coming year.

In the coming years, substantial growth of Lyka Healthcare Limited, a subsidiary is expected which would further improve consolidated sales and profitability of the Company.

5. MATERIAL CHANGES AND COMMITMENT AFTER THE END OF THE FINANCIAL YEAR

The Company had issued 230000 Equity Shares of Rs, 10/- each at a premium of Rs, 18/- on a Preferential basis to each of N. I. Gandhi (HUF) and Enai Trading & Investment Pvt. Ltd of Promoter Group on exercising their option to convert Warrants into Equity Shares. As a result, the Promoters holding had increased from existing 23.30% to 24.90% of the Issued Equity Capital of the Company.

The Promoters have applied to Securities Exchange Board of India (SEBI) for seeking exemption for issue of 1040000 Warrants under Series II to them so that funds would come into the operation of the Company and liquidity would improve. Necessary submissions have been made to SEBI, outcome is awaited.

M/s. Lyka Exports Limited, a material Subsidiary of the Company had sold their Animal Healthcare Division to M/s. Alivira Animal Health Limited, a subsidiary of M/s. Sequent Scientific Limited. This had helped the Company to recover its outstanding dues of about Rs, 10 crores from Lyka Exports Limited and improved its liquidity.

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

The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure A and is attached to this report.

7. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

The Company has formulated a policy on Risk Management and constituted a Risk Management Committee. The objective and scope of the Committee is to oversee the Risk Management Policy of the Company, review the various risks and define the framework for identifying, assessing and monitoring the risk.

8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE

COMPANIES ACT, 2013

There were no loans or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review.

The Company has given counter guarantee to Clearwater Capital Partners India Pvt Ltd who vide Deed of Assignment dated 24th September, 2014 assigned all receivables due from Lyka BDR International Limited, a subsidiary of Lyka Labs Ltd to Futuristic Solutions Ltd for a total amount of Rs, 25 crores. (The outstanding amount of the loan covered under this guarantee is Rs, 3,02,71,581 as on 30th June, 2015) and Rs, 2,91,30,222 as on 30th September, 2015.

The Company has given a guarantee to Kapol Co-operative Bank Ltd for loan facility of Rs, 4,35,00,000 given to Lyka Exports Ltd, a subsidiary. (The outstanding amount of the loan covered under this guarantee is Rs, 4,23,20,000 as on 30th June, 2015) which have since been paid on 30th September, 2015.

9. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

The particulars of Contracts or Arrangements made with related parties made pursuant to Section 188 is furnished in Annexure B and is attached to this report.

10. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS

A AUDITORS OBSERVATIONS:

1. Auditors pointed out Non-Compliance of the provisions of section 74 of the Companies Act, 2013 to the extent of non repayment of overdue Fixed Deposits mentioned at Note No. 28 to the Financial Statement.

2. Secretarial Auditor has also mentioned in their report regarding Non-Compliance of the provisions of section 74 of the Companies Act, 2013 by nonpayment of overdue Fixed Deposits. They also stated that the Company has not been regular in depositing statutory dues.

B MANAGEMENT EXPLANATION:

1. Due to fire in lyophilization plant at Ankleshwar Factory, the operation of the plant was suspended for about 4 months which resulted into substantial loss of Production and sales affecting the liquidity of the Company thereby impacted the performance of the Company.

2. The Company was regular in making payment of Fixed Deposit and interest thereon up to 31st March, 2014. Subsequent to introduction of the new Companies Act, 2013 w.e.f 1st April, 2014 the Company was not eligible to accept/renew the Fixed Deposits as a result; the Company's cash flow was under pressure.

The above factors delayed the payment of Fixed Deposits and Interest thereon. However, the Company has paid Fixed Deposits of Rs, 7.62 Crores during April, 2014 to 31st October, 2015 leaving overdue deposit of Rs, 3.25 Crores appx as of this date.

The Company has also preferred an application under Section 74(2) of the Companies Act, 2013 for seeking extension of time for repayment of Fixed Deposit and Interest thereon before CLB Bench, Western Region. The hearing of an Application is pending.

The Company is giving priority for making repayment of fixed deposits to senior citizens and small investors and also regularizing the interest payment. The Company is also in process of arranging funds to regularize the payment of outstanding deposits.

The Company has already paid undisputed statutory dues up to 31st October, 2015.

11. COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The Board on recommendation of the Nomination and Remuneration Committee has adopted the policy for selection, appointment and remuneration of Directors, KMP and Senior Management. The policy is available on Company's website www.lykalabs.com

12. ANNUAL RETURN

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished in Annexure C and attached to this Report.

13. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW

There were Nine Board meetings conducted during the financial year under review. The Information has been furnished in the Corporate Governance Report.

14. ANNUAL EVALUATION OF PERFORMANCE OF DIRECTORS, COMMITTEE AND BOARD

The performance evaluation of Independent Directors were done.The Board is of the view that the Independent Directors who were on the Board during the year under report have contributed through the process of Board and Committee Meetings of which they are members in effective manner as per expertise of their field. The suggestions made by them are well accepted. The overall contributions made by Directors on the Board are satisfactory.

15. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submits its responsibility statement:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

16. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has three subsidiaries namely Lyka BDR International Limited, Lyka Exports Limited and Lyka Healthcare Limited. The details of their financial performance is as under:

LYKA BDR INTERNATIONAL LIMITED (LBDR)

Lyka Labs is holding 65.22% of the Issued Capital of Lyka BDR International Limited. It has achieved a total revenue of Rs, 6673.72 lacs during the financial year ended on 31st March, 2015 as against Rs, 5046.65 lacs of the previous year thus recording a growth by 32% in the turnover. The Cash Profit for the financial year ended on 31st March, 2015, was Rs, 488.55 lacs and after considering depreciation of Rs, 304.88 lacs, exceptional expenses /write-off of Rs, 81.39 lacs and provision for tax of Rs, 56.21 lacs, the Company reported loss of Rs, 40.72 lacs.

LYKA EXPORTS LIMITED (LEL)

Lyka Labs is holding 72.80% of Issued Capital of Lyka Exports Limited. It has achieved total revenue of Rs, 1857.60 lacs as against Rs, 1211.91 lacs of previous year. The Company has reported a loss of Rs, 25.30 lacs due to increase in purchasing cost of materials and employee cost. As a measure of reorganization, Lyka Exports Limited has sold its Animal Healthcare business for an amount of Rs, 33.40 crores with an additional earn out of Rs, 8 crores based on the performance up to 31st March, 2016.

LYKA HEALTHCARE LIMITED (LHL)

Lyka Labs is holding 100% of Issued Capital of Lyka Healthcare Limited. Lyka Healthcare in its first year of Incorporation after getting separated from Lyka Labs Limited reported an Annual Turnover of Rs, 1259.80 Lacs during the financial year ending 31st March, 2015. This Company will further consolidate in the area of critical care and gastroenterology. Furthermore, newer therapy areas of dermatology and anesthesia as divisions will be launched with an expansion in current field operation and newer therapy areas. This Company is expected to be a revenue driving subsidiary. After providing for finance cost of Rs, 8.73 lacs and depreciation of Rs, 348.61 lacs, the Company has reported a loss of Rs, 6.55 crores for financial year ended 31st March, 2015,being its 1st year of operation as a wholly owned subsidiary.

Performance and financial position of each of the subsidiaries for the year ended 31st March, 2015 is attached in Annexure D and forms part of this report.

17. DEPOSITS

The Company has neither accepted nor renewed any fixed deposits during the year under review. The details of the outstanding fixed deposits are as under:

Sr. No. Particulars Amount in Rs,

1 Amount accepted during the year Nil

2 Amount remained unpaid or unclaimed as at the end of the year 10,85,86,000

3 whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved

(i) at the beginning of the year Nil

(ii) maximum during the year No. 2454

12,97,01,000

(iii) at the end of the year No. 1974

10,85,86,000

- The Company has filed a petition with the Company Law Board Bench, Western Region for seeking extension of time for repayment of Fixed Deposits and Interest thereon.

- The Company is giving priority for payment to small depositors, senior citizens and needy depositors and expects to pay all the outstanding deposits by end of the current financial year.

18. DIRECTORS

In accordance with the provision of Section 152(6) of the Companies Act, 2013, Smt. Nehal N. Gandhi, Director, retires by rotation at the ensuing Annual General Meeting and being eligible, has offered herself for re-appointment.

Shri. Sandeep P. Parikh, an Independent Director has resigned as a Director w.e.f 11th March, 2014 due to his pre-occupations. Shri. Vinodkant A. Sanghani, an Independent Director has resigned as a Director w.e.f 7th April, 2014 on account of health ground. The Board records appreciation of their services rendered by them.

The Board of Directors have appointed Shri. Yatin N. Shah as an additional director on 24th April, 2015. Shri. Atit N. Shukla and Shri. Ajit S. Bagadia have been appointed as Additional Directors on 11th August, 2015 to hold the said office till the date of the Annual General Meeting. The above Directors are meeting the criteria of Independence, as mentioned in Section 149(6) of the Companies Act, 2013. The Board recommends their appointment as Independent Directors of the Company at the 36th Annual General Meeting for the period of three years.

19. DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors have submitted their declarations to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.

20. AUDITORS

M/s. M.A Parikh & Co., Chartered Accountants, who were appointed as Statutory Auditors of the Company and M/s. Thacker Butala Desai, Chartered Accountants who were appointed as Branch Auditors of the Company retires at the 36th Annual General Meeting. Your Company has received their eligibility certificates for reappointment pursuant to provisions of Section 139 and 141 of the Companies, Act 2013 read with Companies (Audit and Auditors) Rules, 2014.

21. COST AUDITOR

M/s. Kirit Mehta & Associates, Cost Accountant have been appointed as Cost Auditor by the Board on the recommendation of the Audit Committee to conduct Cost Audit of Cost Records of Pharmaceutical products of the Company for the financial year 2015-16.

22. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

The Audit Committee consists of the following members

(a) Shri Vinod S. Shanbhag

(b) Shri Yatin N. Shah

(c) Shri Narendra I. Gandhi Gandhi

The above composition of the Audit Committee consists of Independent Directors viz., Shri. Vinod S. Shanbhag and Shri. Yatin N. Shah, who form the majority.

The Company has established a vigil mechanism who oversees the genuine concerns expressed by the employees and other Directors. The Company has provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the Chairman of the Audit Committee on reporting issues concerning the interests of the employees.

23. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS. There are no significant, material orders passed by the courts during the year under report.

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

The Company is complying with the Provisions of Prevention and Prohibition and Redressal Act, 2013 and constituted a committee to redress the grievances of women employees.

25. RELATED PARTY TRANSACTIONS

The Company has obtained approval from the shareholders by passing a special resolution approving the financial limit of all the related party transactions that was entered into, during the year under review. The Company has formulated a policy for dealing with 'Material Related Party' transaction and 'Related Party' transactions.

26. SECRETARIAL AUDIT REPORT

As required under section 204 of the Companies Act, 2013 Secretarial Audit Report of the Company prepared by M/s V. Sundaram & Co. is attached as Annexure E.

27. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As required under listing Agreement with the Stock Exchanges, the Management Discussion and Analysis Report is attached as Annexure F.

28. DISCLOSURE FOR RATIO OF REMUNERATION OF EACH DIRECTOR TO THE MEDIAN EMPLOYEES REMUNERATION AND OTHER DETAILS AS PER RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

1. The percentage increase in remuneration of each Director, Chief Financial Officer and Company Secretary of the Company and ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2014-15:

Name % Increase in the remuneration Ratio of the remuneration of

each Directors/to median remuneration of the employees

Shri Narendra Ishwarlal Gandhi 12.39% 1:43

No increase in the remuneration of Chief Financial Officer and Company Secretary.

2. The Percentage increase in the median remuneration of employees of the financial year: 2.35%

3. The number of permanent employees on the rolls of the Company: 182

4. Explanation on the relationship between average increase in remuneration and the Company's performance.

The Increase in remuneration is considered based on the performance of the Company and available liquidity.

5. Comparison of the remuneration of the Key Managerial Personnel against performance of the Company.

Remuneration of KMP against turnover of the Company is 0.74%

6. Variation in the market capitalization of the Company.

Variation in the market capitalization of the Company is Rs, 96,39,78,600.

7 Price Earnings Ratio: 109.48

8. Percentage increase or decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the public offer.

The Company came out with initial public offer (IPO) in the year 1985 at price of Rs, 10/- per share. The market price of the share as on 30th June, 2015 was Rs, 63.48/- on BSE and Rs, 63.50/- on National Stock Exchange of India Limited. Increase in percentage is 635%.

9. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration.

There is increase in the salaries of employees other than the senior managerial personnel in the financial year 2014-15 and hence comparison is not possible.

10. The key parameters for variable component of remuneration availed by the directors are as follow.

The Managing Director is paid remuneration of Rs, 42 lacs p.a. as per Schedule V of the Companies Act, 2013 as the Company has loss/inadequate profit. The other Directors are paid sitting fees for attending Board Meeting.

11. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year.

Not Applicable.

12. It is affirmed that the remuneration paid to Directors, Key Managerial Personnel and other Employees is as per the Remuneration Policy of the Company.

Not as per policy.

29. PARTICULARS OF EMPLOYEES PURSUANT TO RULE 5(2) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014.

Name Narendra Ishwarlal Gandhi

Destination Chairman & Managing Director

Nature of Employment Contractual

Qualification & Experience B.com, DBM

Worked as Jt Managing Director for about 15 years and working as Managing Director since April,1994

Date of Commencement of Employment Reappointed as Managing Director

w.e.f 1st April, 2014

Age 65 Years

Remuneration Rs, 86,63,832/- includes leave encashment

Last Employment held by the employee

before joining the Company N.A.

Percentage of Equity Shares held by the Employee 4.79%

Relative of Employee in the Company Smt. Nehal N. Gandhi - Director is a wife of Shri Narendra I. Gandhi

Mr. Kunal N. Gandhi - Vice President & Business Development is a son of Shri Narendra I. Gandhi

30. CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a separate report on Corporate Governance along with the Certificate from the Auditor regarding compliance of the said conditions is given as per Annexure G.

31. ACKNOWLDEGEMENTS

Your Directors place on record their appreciation of the continued assistance, co-operation and support received from various Ministries of the Government of India, Government of Maharashtra, Government of Gujarat, the Company's Bankers, Customers, Shareholders, Fixed Deposit Holders and loyal & committed Employees for their unstinted support.

By order of the Board

N. I. GANDHI Place: Mumbai Chairman and Managing Director

Date: 28th November, 2015 (DIN: 00021530)


Jun 30, 2014

Dear Members,

The Directors have pleasure in presenting Thirty Fifth Annual Report and the Audited Accounts of the Company for the Financial Period of Fifteen Months ended 30th June, 2014.

The Financial Results are as under :

FINANCIAL RESULTS

Particulars 2013 - 2014 2012 - 2013 15 months 12 months (Rs. in lacs) (Rs. in lacs )

Total Revenue 9139.71 9845.07

Profit before interest, Provision for Depreciation, Taxes and Write offs. 73.70 1536.98

Less : Interest (2194.98) (1511.92)

Operational Profit /(Loss) before Depreciation (2121.28) 25.06

Less : Depreciation (543.04) (329.90)

Exceptional Items — —

Less: Bad Debts written off (838.25) —

Less : Loss due to fire (299.57) —

Less: Loss on Sale of Fixed Assets (16.69) —

Less: Prior period Expenses (365.51) —

Add : Excess Provision written back — 62.21

Less : Extra Ordinary Item — —

Less : Amortization of expenses for restructuring of Loan — (37.46)

Add : Profit on Slump Sale 3457.16 —

Profit/(Loss) for the year/ period (722.18) (280.10)

In compliance with SEBI directives, the Company has restated its Annual Accounts for the Financial Year 2012-2013, as a result, loss has increased by Rs. 365.51 lacs which were stated as prior period expenses in Financial Year 2013-2014.

OPERATIONS

During the period under review, the Total Revenue earned by the Company was Rs. 9139.71 Lakhs and on an annualized basis was Rs. 7311.77 Lakhs as against Total Revenue of Rs. 9845.07 Lakhs of previous year. The Company has reported a loss of Rs. 722.18 Lakhs which was mainly on account of:

i. Lower capacity utilization of factory at Tarapur, as a result, contribution was not adequate enough to cover the fixed cost of the Company which resulted into operational losses.

ii. Due to Fire in Company''s Lypholisation Plant at Ankleshwar in October, 2013, there was damage to Plant & Machineries and Stores, Raw Materials & Packing Materials which are estimated at about Rs. 4 Crores and the Company had to suspend its manufacturing operations for about 4 months which further resulted into Loss of production and Sales of the Company.

iii. Acute Competition in P2P Business affected sales margin.

The lyophilized products of Ankleshwar Factory are well accepted in the market and Company has therefore planned expansion of its capacity to cater to regulatory markets.

The Company''s Factory at Tarapur was closed for nearly two years for modernization to meet requirements of WHO, GMP and regulated market like EU GMP certification. The plant has commissioned production during March 2013. Due to pending approvals / Licenses from relevant Authorities, it was operating at very low capacity. Further, manufacturing the products for Domestic Market is not viable since it is not possible to compete with factories located in Tax Free Zones, hence the Company has to depend on Exports of finished formulations, which is possible only after the products are registered with Registering Authorities of respective countries which would take substantial time between 12 months to 24 months.

Thus contribution from manufacturing facility at Tarapur was not adequate enough to cover the operating cost of running the plant and therefore in the interest of the Company, the manufacturing facilities at Tarapur, Maharashtra was sold for Rs. 38.61 Crores in the Current Financial Year. A very large amount of the sales realization was utilized to pay the debts of the Bank as per the terms of their sanction. The sale of this factory would consequently result in saving of operating fixed costs in the current Financial Year.

The Performance of Domestic Marketing Division of Ethical Products is encouraging. It has introduced a wide range of anti-infective, anesthetics, anti-ulcerants and steroid in parenteral dosage forms and has more then 50 products which are being sold across 12 states in India. With a view to achieve expansion and growth of Domestic Marketing Division of Ethical Products independently, the Company during the year has promoted a new wholly owned Subsidiary Company viz. Lyka Healthcare Limited and sold its Domestic Marketing Division of Ethical Products by way of Slump Sale to Lyka Healthcare Limited, a wholly owned Subsidiary of the Company.

Sale of P2P business has dropped due to acute market competition from Tax Free Zones and margins are always under pressure. The Company is focusing Dermatological products and Lyophilized product range and have marketing tie up with several renowned Pharma Companies which would help to regain the lost revenue and profitability in the coming years.

The Company is continuously putting its efforts to find a potential buyer in international markets for tie up of Technical Know How arrangements.

SUBSIDIARIES

During the Financial Year 2013-14,Company''s Subsidiary Lyka BDR International Ltd (LBDR) has reported total income of Rs. 5047 lacs and focusing on increase in volume of exports, change in product mix and concentration on high contribution products, better marketing strategies, new product registrations and cost controls, etc.

During the year, nearly 51 fresh registrations/renewals have been received by LBDR and approximately 150 registrations/ dossiers are submitted to the Health Authorities of various countries, thereby increasing the intrinsic value of the Company of which approximately 100 registrations are expected to be received in the Financial Year 2014 - 2015

The main assets of LBDR are its registration rights in various markets. In the coming years, the LBDR is likely to file about 100 new dossiers mainly in rest of the world markets. Recent Registrations received are likely to help the LBDR to generate new businesses in the more remunerative products.

LBDR is now focusing on emerging markets like Nigeria, Iran, Indonesia and Brazil where it expects new business in the coming years. It will endeavor to improve its product mix to achieve better realizations.

With enhanced number of registrations, the company plans to achieve turnover of Rs. 70 crores in Financial Year 2014-15 with improved bottom line and accordingly the Consolidated Financials of the Company would improve.

During the year under review, the Company has floated a Wholly Owned Subsidiary Company namely Lyka Healthcare Limited to provide independent opportunities to focus, develop and expand Domestic Marketing of Ethical Products.

Lyka Exports Limited is engaged in marketing veterinary products and considering the future growth and prospects of Lyka Exports Limited, the Company has appropriated part of the amount due from Lyka Exports Limited towards additional shares issued by Lyka Exports Ltd. As a result, Company''s stake in Lyka Exports Limited has increased from existing 48% to 73% and Lyka Exports has become a Subsidiary of your Company during the year under review.

The Financial Statements of Company''s subsidiaries are consolidated with the Financial Statements of the Company and form part of this Report.

As required under provisions of Section 212 of the Companies Act, 1956, a statement related to its subsidiaries is attached to this report. The Company is not attaching the Balance Sheet and Profit & Loss Account of its Subsidiaries to its Annual Report. However, if any, requisition made by Shareholder, the Company shall provide hard copy of Annual Accounts and related information of its Subsidiaries and shall keep available hard copy of Annual Accounts of subsidiaries for inspection by shareholders at its Corporate Office during business hours.

FUTURE OUTLOOK

i. The Company is in process of introducing Cosmetic Products in ''Skin Care'' and ''Hair Care'' Segment and will launch these products in the market in the near future. The negotiations are going on with big Pharma Companies for commercialization of these products.

ii. To cope up with the increase in demand of Lyophilized Products, the Company has planned to expand capacity of its Lyophilized Plant at Ankleshwar Factory for which the Company has already purchased two Lyophilizers to cater the requirements of Regulated Markets. On completion of the expansion, revenue and profitability of the Company would improve.

iii. Upgradation of raw material stores, packing material stores and packing departments at Ankleshwar factory have been planned which would facilitate better use of space and would also meet Regulatory requirements of local and international customers.

iv. Opportunities are being explored for sale/transfer of Technical KnowHow to International Companies.

v. In the coming years, Lyka BDR International Limited (LBDR) a subsidiary is likely to file about 100 new dossiers mainly in semi regulated / unregulated markets. These new Registrations would increase the revenue and profitability of the LBDR which would in turn increase the consolidated revenue and profitability in the coming years.

vi. In the coming years, substantial growth of Lyka Exports Limited and Lyka Healthcare Limited - Subsidiaries are expected which would further improve Consolidated Sales and Profitability of the Company.

DEPOSITS

As at 31st March, 2014, the Company had fixed Deposits of Rs. 17.23 Cr and unclaimed matured Fixed Deposits of Rs. 64.99 lakhs. Since, the Company is not meeting the criteria as mentioned under the provisions of The Companies (Acceptance of Deposits) Rules, 2014, the Company is unable to accept fresh deposits and also renew its existing deposits which resulted into acute cash crunch. The Company has filed an Application with the Company Law Board Bench, Western Region, Mumbai for seeking an extension of time for repayment of Fixed Deposits and Interest thereon.

DIRECTORS

Smt. N. N.Gandhi (DIN : 00021530) Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offered herself for reappointment. The Board recommends her reappointment.

The appointment of Shri. S. Parikh (DIN : 00022365), Shri. V. S. Shanbhag (DIN : 00555709), as Independent Directors are considered for a term of 5 (five) years and appointment of Dr. D. B. Parikh (DIN : 00368820) and Shri. V. A. Sanghani (DIN : 00967316) as Independent Directors are considered for a term of 1 (one) year in the ensuing Annual General Meeting.

DIRECTORS RESPONSBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

i. In the preparation of the Annual Accounts, the applicable accounting standards have been followed except where otherwise stated in Auditors Report and Notes to Accounts.

ii. The Directors have selected accounting policies and applied them consistently. The Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 30th June, 2014 and of the loss of the Company for the period ended on that date.

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. The annual accounts have been prepared on a going concern basis.

PERSONNEL

The relations between the Management and the employees have been generally cordial.

OTHER INFORMATION

a. As required under Provisions of Sexual Harassment for Women at work place (Prevention, Prohibition and Redressal) Act, 2013, the Company has constituted a Committee to redress the grievances of Women employees.

b. There are no employees who are covered under section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975 as amended till date.

c. As required by the Companies (Disclosure of Particulars in the report of Board of Directors) rules, 1988, information pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in Annexure "A" of this Report.

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

As required under the Listing Agreement with the Stock Exchange, the Management discussion and analysis report on the operations of the Company is given in Annexure "B" of this Report.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a Report on Corporate Governance along with the certificate from the Auditors of the Company regarding compliance of the said conditions is given as per Annexure "C" of this Report.

AUDITORS

M/s. M. A. Parikh & Co. Chartered Accountants, retire as Statutory Auditors (Firm Registration No.107556W) of the Company and M/s.Thakorebhai Shirish Desai & Butala, Chartered Accountants (Firm Registration No.110864W) Branch Auditors retire at the ensuing Annual General Meeting, and they have confirmed their eligibility for reappointment u/s.139 read with Section 141 of the Companies Act, 2013. The Board recommends their reappointment.

AUDITORS OBSERVATIONS

Auditors in their report have observed the following

1. In respect of Non Compliance :

Note No. 38 relating to Capital Work in Progress of Intangible assets aggregating to Rs. 9,72,57,847/-.

MANAGEMENT EXPLANATION:

Research and Development works on New Drug Delivery System which is one of the important activity of the Company. We are continuously required to develop new formulations and offer to our P2P partners for marketing.

Company is recognizing "Intangible Capital Work In Progress" when it is probable that the future economic benefits that are attributable to the assets will flow for the enterprise and the cost of the assets can be measured reliably.

Upon completion of product development, the related expenditures incurred shall be recognized as intangible assets, This is the normal practice of accounting intangibles followed by Company.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued assistance, co-operation and support received from various Ministries of the Government of India, Government of Maharashtra, Government of Gujarat, the Company''s Bankers, Customers, Shareholders, Fixed Deposit Holders and loyal and committed employees for their unstinted support.

By Order of the Board

Place: Mumbai N. I. Gandhi Dated: 13th November, 2014 Chairman & Managing Director (DIN : 00021530)


Sep 30, 2010

The Directors have pleasure in presenting Thirty Second Annual Report and the Audited Accounts of the Company. The Financial Results are as under:

FINANCIAL RESULTS

2009-10 2008-09 12 months 18 months (Rs. in lacs) (Rs. in lacs)

Total Operating Income 11869.92 15207.55

Profit before interest, Provision for Depreciation, Taxes and Write offs. 1764.69 1320.10

Less: Interest 1112.12 1445.04

Operational Profit / (loss) before Depreciation 652.57 (124.94)

Less: Depreciation 339.59 369.29

Less: Provision for taxation 0.22 13.22

Add/(Less): Foreign Currency monetary translation difference Accounts (138.24) 276.48

Add/(Less): Provision for taxation of earlier years 6.48 (269.66)

Less: Prior year interest on OTS -- 143.78

Net Profit/(Loss) 181.00 (644.41)

Add: Balance brought forward (2899.64) (2255.23)

Balance carried to Balance Sheet (2718.64) (2899.64)

OPERATIONS

During the year under review, the total operating income of the Company was Rs.11870 Lacs as against Rs.10139 Lacs of the previous year on an annualized basis. The net profit after tax was Rs.181 Lacs as against loss of Rs.644 Lacs of previous period.

Subsequent to upgradation of Lyophilization facilities at Ankleshwar factory, the capacity utilization has significantly improved. Companys lyophilized products have been receiving encouraging response from major Pharma Companies. To cope up with the increase in demand, the company has planned enhancement of capacity of its Lyophilization plant by installation of two more lyophilizers at its Ankleshwar factory.

The Company has also undertaken modernization of its Tarapur factory to comply with revised W.H.O. GMP guidelines. This will, in turn, enable the Company to obtain fresh registrations to export its products, manufactured at Tarapur factory, through its subsidiary viz. Lyka BDR International Ltd.

The Companys Principal to Principal (P to P) arrangements with major Pharma Companies are progressing steadily and the Companys business in this segment has been growing continuously.

In view of the increase in the demand of its Sterile Bulk Drugs, the Company has initiated steps to increase its manufacturing capacity of Sterile Bulk Drugs. The Companys business of Contract Manufacturing and Marketing and sale of its critical care injectables is on the rise. The Company expects continued growth from these areas of activities in coming years.

PATENTS

Companys R&D centre continued to develop formulations of new Drug entities, novel drug delivery systems and new products for its P to P markets. During the year under report, the Company has filed applications for 13 new patents with Indian Patent office and filed 1 International PCT application. The Company has already received till date approval for 13 patents from Indian Patent office and obtained process patent from European patent Office for Rabeprazole lyophilized injection which has been validated in 25 European countries.

RECOGNITION

The Company was awarded SILVER PATENT AWARD by the Department of Pharmaceuticals, Ministry of Chemical & Fertilizers, Government of India and Pharmaceutical Export Promotion Council for the year 2009-2010 in recognition of commendable contribution in Formulation Patents Category and the Company was also awarded IDMA PATENT APPRECIATION AWARD for the year 2009-2010 in the category of formulations.

FUTURE OUTLOOK

The Company has planned expansion of its Lyophilisation Capacity and modernization of Sterile Area of its existing facility at Ankleshwar factory. This will enable the Company to meet the increased demand of its Lyophilized Formulations and Sterile Bulk Drugs. The expansion of capacity will have the positive impact on the sales and profitability of the Company. The Company has also started manufacturing Liposomal Lyophilized Products and future of these high-tech products is very promising. The Company has also undertaken modernization of its factory at Tarapur which will be completed shortly and this will further increase sales and profitability of the Company in the coming years.

The Company has received approval for 6 new products from the Drug Regulatory Authorities and few more products are in pipeline for approval. By now, the Company has received approval for more than 60 new products and has been leveraging upon the same to generic sales on P to P basis.

The Company has also initiated exploring International Markets for its sterile APIs and expects to generate considerable revenue from International Markets.

The Company is considering to float a wholly owned new subsidiary Company in the current year, which will undertake marketing of wide range of formulations, in various dosage forms, across therapeutic categories.

The Companys Subsidiary LYKA BDR INTERNATIONAL LIMITED (LBDR) has successfully added 74 more registrations to its base of 518 registrations and has planned for about 200 more registrations in the emerging markets, thereby increasing the value of its intangible assets. LBDR is focusing more on the growth of its existing markets such as Sri Lanka, Congo, Sudan, Kenya, Peru etc. and is also exploring new markets like Franco Phonic African Countries, Nigeria and Uganda. It is concentrating more on sale of Lyophilized Products including various PENAMs. The modernization of Tarapur Plant will help the Company to boost its Sale to LBDR, as it will be able to market and sell High Value Tablets and Capsules Internationally. This will provide necessary stimulus to the growth of LBDR. This in turn will contribute to the sales growth and profitability of the Company in coming years.

DEPOSITS

During the year under review, the Company has mobilized Fixed Deposits of about Rs.978 lacs. As at 30th September, 2010, matured and unclaimed Fixed Deposits amounted to Rs.36 lacs out of which the deposits aggregating to Rs.21 lacs have been renewed / paid and deposits aggregating to Rs.15 lacs have still remained unclaimed as of 31s December, 2010.

DEBENTURES

The Company has issued during February, 2011 13.5% Secured Non Redeemable Convertible Debentures, aggregating to Rs. 245 lacs, on a private placement basis.

SUBSIDIARY

As per Accounting Standard AS-21 issued by ICAI, the consolidated financial statements are reported in the Annual Report.

As required under section 212 of the Companies Act, 1956, a statement related to its subsidiary viz. Lyka BDR International Ltd (LBDR) is attached to this Report. Annual Accounts together with Directors Report & Auditors Report of LBDR is reported separately in the Annual Report.

DIRECTORS

Shri. S.S. Satyamurthy resigned as Director w.e.f. 10lh November, 2010. The Board places on record its appreciation for the valuable services rendered, guidance and advice given by him to the Company.

Smt. N. N. Gandhi, Shri V. A. Sanghani and Shri. V.S.Taksali retires by rotation at the forthcoming Annual General Meeting and being eligible, have offered themselves for re-appointment. The Board recommends their re-appointment.

DIRECTORS RESPONSBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

i. in the preparation of the Annual Accounts, the applicable accounting standards have been followed except where otherwise stated in Auditors Report and Notes to Accounts.

ii. the Directors have selected accounting policies and applied them consistently, except where otherwise stated in the notes to the Accounts. The Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 30th September, 2010 and of the profit of the Company for the year ended on that date.

iii. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. the annual accounts have been prepared on a going concern basis.

PERSONNEL

The relations between the Management and the employees have been generally cordial.

The Company closed down its Distribution Department at Bhiwandi after arriving at a settlement with the employees of the Distribution Department.

OTHER INFORMATION

None of the employees are covered under section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended till date.

As required by the Companies (Disclosure of Particulars in the report of Board of Directors) rules, 1988, information pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in Annexure A to this Report.

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

As required under the Listing Agreement with the stock exchange, the Management discussion and analysis report on the operations of the Company is given in Annexure B to this Report.

CORPORATE GOVERNANCE

Pursuant to clause 49 of the Listing Agreement with the Stock Exchange, a Report on Corporate Governance along with the certificate from the Auditors of the Company regarding compliance of the said conditions is given as per Annexure C to this Report.

AUDITORS

M/s. M. A. Parikh & Co. Chartered Accountants, retire as the Auditors of the Company at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

As required under section 224(1 B) of the Companies Act, 1956, the Company has obtained from them a confirmation to the effect that their re-appointment, if made, would be in conformity with the limits prescribed in the said section. The Board recommends their reappointment.

The appointment of Branch Auditors to audit the accounts of the Companys manufacturing facilities at Ankleshwar and Tarapur is proposed at Item no. 6 of the Notice.

COST AUDITORS

As required under provisions of Section 233-B of the Companies Act, 1956, M/s.Kirit Mehta & Associates, Cost Accountants were appointed as Cost Auditors to conduct cost audit in respect of Sterile Bulk Drugs and Formulations being manufactured at Ankleshwar factory and formulations being manufactured at Tarapur Factory for the year 2010-2011 The necessary approval of the Central Government has been obtained.

AUDITORS REPORT

The Auditors in their Report at Para 3(A) and 3(B) have stated that they are unable to express their opinion with regard to:

3 A (i) At Note No. 10 of Notes to Accounts, the expenditure incurred on trial runs, clinical trials, toxicity studies, product development and patent etc. The benefits for which would accrue in the subsequent years which would be of enduring nature. Accordingly, the management wishes to recognize the said expenditures as capital expenditure.

(ii) At Note No. 9 of Notes to Accounts, Management has not provided diminution in value of investments, keeping in view, the long term business synergies and potential based on its intrinsic value of business.

(iii) At Note No. 7(iii) and (iv) of Notes to Accounts, advances given to Subsidiary and Associate Company, are in the normal course of business and good for recovery.

3 B At Note No.6 (B)(i) of Notes to Accounts, the Management is of the view that such extraordinary items relating to the past years could legitimately be written off against the "net present replacement value" of the tangible assets represented by Revaluation Reserve without affecting the current years profits.

The liability to Sales Tax stated at item No(ix) in Annexure to Auditors Report has arisen on account of non receipt of various forms, which would be collectedand produced at the time of Business Audit by the department at which point, the actual tax liability would be determined and paid, if any.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued assistance, co-operation and support received from various Ministries of the Government of India, Government of Maharashtra, Government of Gujarat, the Companys Bankers, Customers, Shareholders, Fixed Deposit Holders and loyal and committed employees for their unstinted support.

By Order of the Board of Directors

Place: Mumbai N. I. Gandhi

Dated: 25th March, 2011 Chairman & Managing Director




Sep 30, 2009

The Directors have pleasure in presenting Thirty first Annual Report and the Audited Accounts of the Company. The financial year ending of the Company has been extended by six months from 31st March, 2009 to 30th September, 2009. The Annual Accounts are therefore prepared for a period of 18 months from 1st April, 2008 to 30th September, 2009 The Financial Results are as under:

FINANCIAL RESULTS

2008-09 2007-08 18 months 12 months (Rs.in lacs) (Rs. in lacs)

Total Operating Income 15207.55 9330.70

Profit before interest, Provision for Depreciation, Taxes and Write offs. 1320.10 1183.39

Less : Interest 1445.04 714.14

Operational Profit / (loss) before Depreciation (124.94) 469.25

Less: Depreciation 369.29 128.69

Less: Provision for taxation 13.22 33.10

Add: Foreign Currency monetary translation difference Accounts 276.48 -- Less: Provision for taxation of earlier years 269.66 --

Less: Prior year interest on OTS 143.78 --

ProfiV(Loss) for the period (644.41) 307.46

Add: Bad Debts recovered - 111.44

Add: Balance brought forward (2255.23) (2562.68)

Less: Transfer to Revaluation Reserve - 111.44

Balance carried to Balance Sheet (2899.64) (2255.23)

OPERATIONS

During the period under review, the total operating income of the Company is Rs. 15208 Lacs, which on an annualized basis, is Rs. 10139 lacs against Rs 9331 lacs of the previous year. During the year, Companys Lyophilization facility was upgraded as well as its manufacturing capacity was increased suitably. This necessitated shut down of the plant for nearly 6 months thereby adversely affecting the growth of the Company during the period under review.

The Companys lyophilized products have been receiving continuous encouraging response from major Pharma Companies. Companys contract manufacturing activities also continued to generate reasonable revenue for the Company. The Company has also started manufacturing and marketing of sterile APIs (Bulk Drugs) in the domestic market and the initial response has been quite encouraging. Companys manufacturing and marketing of injectables has also been showing encouraging results in domestic market.

The Company continued to develop new formulations during the period under review. The Companys R&D Department developed several new formulations including new dosage forms, new drug delivery systems as well as new fixed dose combinations. During the period under review, the Company was granted 10 patents and filed applications for 12 more patents. Thus, till date the Company has filed applications for 49 patents and has been granted 13 patents. The Company received permission for 18 new products during the period under review, from the Drug Regulatory Authorities. By now the company has received approval for more than 60 new products and applications for few more new products are already filed with Drug Regulatory Authorities.

The Company was awarded IDMA INDIAN PATENT APPRECIATION AWARD 2008-2009 for its patent for Stable Pharmaceutical preparation of substituted Benzimidazole.

FUTURE OUTLOOK

The prospects of lyophilized products, both formulations and Bulk Drugs, are promising. The Company has entered into manufacturing and/or sales agreement with many major Pharma Companies for this range of products. The Company has applied for registration of few of these products in several countries abroad. This segment of activity is expected to contribute substantially to the Sales growth of the Company in coming years.

The company has initiated exploring international markets for its sterile APIs and expects to generate considerable revenue through sale of APIs in international markets.

With the expansion of its marketing team and supply chain network, the Company is expected to grow its business of injectables substantially.

The Companys subsidiary LYKA BDR INTERNATIONAL LTD (LBDR) has registered about 543 products in various countries, which are emerging markets. Presently, about 200 more products are under registration. LBDR has also launched its products in Venezuela, Peru, Costa Rica, Ukraine and Philippines and is also in the process of validating few of its products in U.K. This will provide necessary stimulus to the growth of LBDR, which in turn, will contribute to the sales growth and profitability of the Company in the coming years.

SHARE CAPITAL

During the period under review, 6,50,000 warrants issued on preferential basis to the promoters in the year 2006. were converted into equity shares at an exercise price of Rs 41.50 each. As result, the paid up equity capital as at 30th September, 2009 stands at Rs 2158 lacs.

DEPOSITS

During the period under review, the Company has mobilized Fixed Deposits of about Rs. 7 Crores. As at 30lh September, 2009, matured and unclaimed Fixed Deposits amounted to Rs 21.11 lacs, out of which the deposits aggregating to Rs.6 lacs have been renewed / paid and deposits aggregating to Rs.15.11 lacs have still remained unclaimed as of 31s1 December, 2009.

SUBSIDIARY

During the period under review, the Company has purchased further 37,00,000 Equity Shares of Rs. 10 each of LYKA BDR INTERNATIONAL LTD (LBDR). As a result, the investment of the Company in the Capital of LBDR has increased to 65.22% and LBDR has become subsidiary w.e.f 4th May, 2009.

A statement under Section 212 of the Companies Act, 1956 relating to LBDR, a subsidiary is attached to this Report.

DIRECTORS

The Board regrets to inform the sad demise of Shri.V. C. Sanghavi, former Director of our Company on 10th September, 2008. Shri. D. G. Shah resigned as Director w.e.f 21st April, 2009. The Board places on record its appreciation for the valuable services rendered and guidance and advice given by both these Directors to the Company.

Shri. N. I. Gandhi has been reappointed as Managing Director of the Company for a period of 5 (five) years w.e.f 1st April, 2009. Shri. V. S. Taksali has been reappointed as Executive Director for a period of 2 (Two) years w.e.f 1st August, 2009. The Company has made applications to the Central Government for obtaining their approval for the above reappointments.

Shri. S. Parikh, Dr. D. B. Parikh and Smt. S.V. Satyamurthy retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for reappointment. The Board recommends their reappointment.

DIRECTORS RESPONSBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:

i. in the preparation of the Annual Accounts, the applicable accounting standards have been followed except where otherwise stated in Auditors Report and Notes to Accounts.

ii. the Directors have selected accounting policies and applied them consistently, except where otherwise stated in the notes to the Accounts. The Directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 30,h September, 2009 and of the loss of the Company for the period ended on that date.

iii. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. the annual accounts have been prepared on a going concern basis.

PERSONNEL

The relations between the Management and the employees have been generally cordial.

OTHER INFORMATION

There are no employees who are covered under section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 as amended till date.

As required by the Companies (Disclosure of Particulars in the report of Board of Directors) Rules, 1988, information pertaining to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in Annexure A to this Report

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

As required under the Listing Agreement with the stock exchange, the Management discussion and analysis report on the operations of the Company is given in Annexure B to this Report

CORPORATE GOVERNANCE

Pursuant to clause 49 of the Listing Agreement with the Stock Exchange, a Report on Corporate Governance along with the certificate from the Auditors of the Company regarding compliance of the said conditions is given as per Annexure C to this Report.

AUDITORS

M/s, M. A. Parikh & Co. Chartered Accountants, retire as the Auditors of the Company at the ensuing Annual General Meeting, and, being eligible, offer themselves for re-appointment.

As required under section 224(1 B) of the Companies Act, 1956, the Company has obtained from them a confirmation to the effect that their re-appointment, if made, would be in conformity with the limits prescribed in the said section. The Board recommends their reappointment.

The appointment of Branch Auditors to audit the accounts of the Companys manufacturing facilities at Ankleshwar and Tarapur is proposed at Item no. 6 of the Notice.

COST AUDITORS

As required under provisions of Section 233-B of the Companies Act, 1956, M/s.Kirit Mehta & Associates, Cost Accountants were appointed as Cost Auditors to conduct cost audit in respect of Bulk Drugs and Formulations being manufactured at Ankleshwar factory and formulations being manufactured at Tarapore Factory for the year 2009-2010.The necessary approval of the Central Government has been obtained.

AUDTIORS REPORT

Your Directors refer to the observations made by the Auditors in their report and state that:

Note No.9 (ii) : The Sundry Debtors considered doubtful of Rs.1,01,74,965/- have not been provided, since the management is pursuing for its recovery.

Note No.11 : It is an industrial practice to defer R&D expenses of Rs.4,61,32,009/-, the benefits of which will accrue in the future years as explained in the note.

Note No. 13 : Regarding slow / non-moving inventories of Rs. 1,22,70,023/- as explained in the Note have not been provided for.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued assistance, co-operation and support received from various Ministries of the Government of India, Government of Maharashtra, Government of Gujarat, the Companys Bankers, Customers, Shareholders, Fixed Deposit Holders and loyal and committed employees for their unstinted support.

By Order of the Board of Directors

Place: Mumbai N. I. Gandhi

Dated: 23rd February, 2010 Chairman & Managing Director

 
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