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Notes to Accounts of Lyka Labs Ltd.

Jun 30, 2015

1. Rights, preferences and restriction attached to equity shares:

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

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

2. Non Convertible Debentures are secured by first charge on Trade Marks & second charge on Immovable Properties at Ankleshwar.

3. Details of terms of repayment and security provided for in respect of the Long-Term Borrowings as follows: (Including Current Maturities of Term Loans from Banks - Refer Note No. 10)

(a) Term Loan (Expansion) from Dena Bank repayable in 15 quarterly installments of Rs, 18.09 Lacs each.

Interest rate is base rate 1% ##

(b) Term Loan (R&D) from Dena Bank repayable in 14 quarterly installments of Rs, 6.77 Lacs each. Interest rate is Base Rate 1% ##

(c) Term Loan from Dena Bank repayable in 15 quarterly installments of Rs, 15.55 Lacs each. Interest rate is Base Rate 1% ##

(d) Term Loan (working capital) from Dena Bank repayable in 11 quarterly installments of Rs, 40 Lacs each. Interest rate is Base Rate 1% ##

(e) Term Loan (Lypholisation II) from Dena Bank repayable in 14 quarterly installments of Rs, 7.81 Lacs each. Interest rate is Base Rate 1% ##

(f) Term Loan (New Expansion) from Dena Bank repayable in 17 quarterly installments of Rs, 90.90 lacs each. Interest rate is Base Rate 1.55% # #

(g) Term Loan (Schedule - M Requirement) from Dena Bank repayable in 20 quarterly installments of Rs, 16.40 lacs each commencing from 12 months from the date of first disbursement. Interest rate is Base Rate 1.55% # #

(h) Term Loan (working capital) from Dena Bank repayable in 10 quarterly installments of Rs, 60 Lacs each commencing from 30th September 2015 Interest rate is Base Rate 1.05% ##

## The above Term Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the directors of the Company. These Loans are also secured by equitable mortgage of Company's immovable properties at Ankleshwar and Valsad.

(i) Term Loan from Bank of Maharashtra repayable in 10 quarterly installments of Rs, 50 Lacs each. Interest rate is Base Rate 1.2%. *

(j) Term Loan from Bank of Maharashtra repayable in 20 quarterly installments of Rs, 30 Lacs each. Interest rate is Base Rate 600 bps 50 bps (term premium). *

* Above Term Loans are Secured by extension of equitable mortgage of property situated at Shiv Shakti industrial Estate, Andheri (East), Mumbai - 400059

(k) Term Loans from Kapol Co-Operative Bank Ltd. repayable in 84 equal monthly installments of Rs, 12.16 lacs each and 6 equal monthly installments of Rs, 12.19 lacs each. Interest rate is @15%. **

** Above Term Loans are Secured by extension of equitable mortgage of property and machinery situated at Ankleshwar.

4. lease obligations repayable in equated monthly instalments up to June 2018 Secured by respective vehicles. Rate of interest ranges from 8.38% to 18.01 %

5. Details of terms of repayment and security provided in respect of Short -Term Borrowings:

(a) Interest on Dena Bank Cash Credit loan is Base Rate 1% p.a. # #

(b) Interest on Dena Bank Buyers Credit Loan ranges from LIBOR 0.75% to LIBOR 2.00% # #

# # The above Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Company's immovable properties at Ankleshwar and Valsad.

6. Interest on Loans from related parties ranges between 10.25 % to 12% simple Interest payable on yearly basis.

7. Interest on Inter Corporate Deposits ranges between 16% to 21% (simple interest)and repayable at quarterly/ half yearly / yearly basis.

8. Interest on Short Term Loans ranges between 12% and 21%

9. Contingent Liabilities are not provided for in respect of:

(i) There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. In the earlier year, the Company has received recovery notices for recovery of Rs, 209,440,565 to be deposited into "Drug Price Equalisation Account".

The Company has challenged the said notices in the writ petitions before the Hon'ble High Court of Gujarat. The Hon'ble High Court has admitted the writ petitions subject to the Company depositing certain amounts against the said demands. Accordingly, the Company has deposited Rs, 103,245,000.

The Company expects favorable outcome in the said writ petitions and hence, the amounts paid have been treated as advances which are considered by the Company as good and recoverable.

(ii) (a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals)

Baroda, dated 24th January, 2011 in respect of Company's appeal against the demand for Gujarat Sales Tax of Rs. 132,408,100 for the financial year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs, 8,545,195 against which Company has made payment of Rs, 4,585,150 under protest. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub- judice and the payments of Rs, 4,585,150 are considered by the Company as good and recoverable.

(b) Rs, 61,676,379 relating to disputed Sales Tax demands in respect of prior years, the matter is sub-judice.

(iii) The Company has received notices from Central Excise department causing demands as stated below:

(a) Rs, 10,875,257 against which it has paid Rs, 2,500,000. The matter is sub-judice and the payment of Rs, 2,500,000 is considered by the Company as good and recoverable.

(b) Rs, 7,137,254 relating to disputed Central Excise Duty, the matter is sub-judice. (iv) Rs, 1,809,830 disputed Service Tax demands, the matter is sub-judice.

(v) Rs, 794,807 being claims against the Company not acknowledged as debt.

(vi) Claim relating to Ex-gratia of Rs, 34,246,126 as the matter is sub-judice.

(vii) Bills of Exchange discounted with the Bank Rs, Nil (previous period Rs, 69,833,270).

(viii) Bank Guarantees provided by a bank on behalf of the Company Rs, 96,33,220 (previous period Rs, 9,342,832).

(ix) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., [Clearwater Capital Partners India Pvt. Ltd., has vide Deed of Assignment dated 26th September, 2014 assigned all the receivables due from Lyka BDR International Ltd., to Futuristic Solutions Limited] by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs, 250,000,000 advanced to Lyka BDR International Ltd., [LBDR] a Subsidiary of the Company (the outstanding amount of the loan is Rs, 30,271,581 (including interest Rs, 359,190) as on 30th June, 2015). Under the restructuring of Term Loan Agreement, the Company's liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest quantum due thereon.

(x) The Company has given a guarantee to Kapol Co-operative Bank Limited for its loan facility of Rs, 43,500,000 given to Lyka Exports Limited. (The outstanding amount of the loan is Rs, 42,320,000 as on 30th June, 2015).

10. FIXED DEPOSITS:

The Company has not been able to repay overdue Fixed Deposits aggregating to Rs, 108,586,000 and interest due thereon Rs, 14,889,768 up to 30th June, 2015 (excluding Short Term Loans in respect of which, the Company has been legally advised that such loans are not deposits, as defined, in the Companies (Acceptance of Deposits) Rules, 2014). Consequently, the Company has not complied with the provisions of Section 74 of the Companies Act, 2013 to the extent of such non repayment of overdue Fixed Deposits.

The Company has filed a petition with the Company Law Board on 31st March, 2015 to seek extension of time for repayment of principal and interest (dues) thereon up to 31st March, 2020. The liability, if any, arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached.

11. DEBENTURES:

The Company has not been able to repay Overdue Debentures aggregating to Rs, 61,650,000 and interest due thereon Rs, 2,423,376 (dues) up to 30th June, 2015. Therefore, the Company has filed a petition with the Company Law Board, seeking extension of time for repayment of Debenture dues up to 31st March, 2020. The liability, if any, arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached.

12. BANK LOAN:

Bank of Maharashtra (Bank) has taken action under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 24th June, 2015 and called upon the Company to repay the loans aggregating to Rs, 116,117,228 plus interest thereon @ 16.50% w.e.f 1st June, 2015 within 60 days. The Company is following up with the Bank in this regard. The liability, if any, will be accounted for in the year in which finality is reached.

13. The Board of Directors at its meeting held on 14th July, 2014 resolved to sell its manufacturing facilities for formulations at Tarapur, Maharashtra as the said unit has become unviable due to various factors for a total sale consideration of Rs, 386,100,000 resulting in a gain of Rs, 85,395,586 which has been presented as an "Exceptional Item".

14. (i) During the previous period, fire destroyed certain Fixed Assets, at the Company's Ankleshwar Plant aggregating to Rs, 25,423,471 (Written down value Rs, 21,087,494) and Materials-in-Process aggregating to Rs, 6,110,356. The said loss of Rs, 27,197,850 had been written off to the Statement of Profit and Loss. The company had lodged an insurance claim for an aggregate sum of Rs, 27,097,850 which had been credited to Statement of Profit and Loss.

(ii) The Company has recognized revenue by way of insurance claim aggregating to Rs, 27,097,850 on account of loss of certain fixed assets and materials due to fire. The Company has received on account payments aggregating to Rs, 20,993,310 and realized Rs, 428,571 by way of sale of scrap arising from such destroyed fixed assets. The balance of Rs, 5,675,969 is considered good for recovery by the Management. The shortfall if any, will be adjusted in the year in which finality is reached.

15. DEPRECIATION:

(i) The depreciation and amortization charged to Statement of Profit and Loss for the year Rs, 38,326,316 (Previous Period Rs, 54,303,516) includes Rs, 8,818,670 (Previous Period Rs, 9,457,823) being depreciation relating to Revaluation of Fixed Assets carried out on 31st March, 2007.

(ii) The depreciation for the year on the Revaluation of Fixed Assets carried out in September 2010 aggregating to Rs, 6,299,038 (Previous Period Rs, 7,772,174) has been charged to Revaluation Reserve.

(iii) Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing on or after 1st April, 2014, the Company has re-worked depreciation with reference to the useful lives of tangible fixed assets prescribed by PART 'C' of Schedule II to the Act; where the remaining useful life of tangible fixed asset is nil, the carrying amount of the assets after retaining the residual value, as at 1July, 2014 amounting to Rs, 26,390,697 has been adjusted to the balance of General Reserve. In other cases, the carrying values have been depreciated over the remaining useful lives of the assets and recognized in the Statement of Profit and Loss. As a result, the charge for depreciation is higher by Rs, 3,581,006 for the year ended 30th June, 2015.

16. Rs, 50,250,000 (Previous Period Rs, 50,250,000) placed with the Managing Director, as security deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The company is legally advised that the provisions of section 185 of the Companies Act, 2013 are not attracted in respect of the same.

17. Loans and Advances include Rs, 22,686,339 (Previous Period Rs, 52,321,737), granted to a Company as interest free financial assistance is considered good for recovery by the management.

18. Sundry Debtors aggregating to Rs, 288,327,248 (Previous Period Rs, 253,550,238) include debtors of Rs, 129,639,709 (Previous Period Rs, 112,999,170) outstanding for more than six months which are considered good for recovery by the management.

19. The balances relating to Sundry Debtors, Sundry Creditors, Fixed Deposits, Group Companies and Loans & Advances as on 30th June, 2015 are subject to confirmation and adjustments, if any on reconciliation of accounts. Since the extent to which these balances are subject to confirmation is not ascertainable, the resultant impact of the same on the accounts cannot be ascertained.

20. The investments in unquoted shares of Lyka BDR International Ltd., Lyka Exports Ltd. and Lyka Healthcare Ltd., have been acquired at par/premium respectively. Though their present book values are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its values is required to be made at this juncture taking into consideration intrinsic value of their business.

21. The Company has incurred direct expenditure and allocable indirect expenditure in respect of "new product development and applied research" aggregating to Rs, 121,622,302 (Previous Period Rs, 121,790,478) including finance cost of Rs, 23,210,133 (Previous Period Rs, 25,614,668).

Of the above:

- Rs, 9,354,720 (Previous Period Rs, 168,869) has been transferred to "Self-Generated Intangible assets" on successful development including finance cost of Rs, 602,577 (Previous Period Rs, Nil).

- During the year in fructuous development expenditure relating to certain products aggregating to Rs, 2,624,399 (Previous Period Rs, 24,363,762) including finance cost of Rs, 519,586 (Previous Period Rs, 2,404,535) has been expensed.

- Balance of Rs, 109,643,183 (Previous Period Rs, 97,257,847), including finance cost of Rs, 22,087,970 (Previous Period Rs, 23,210,133), being balance of expenditure is carried forward under "Capital Work-in-Progress – Intangibles" which shall be recognized as "Self-Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the Period in which development is abandoned.

22. Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs, 10,585,575 (Previous Period Rs, 9,499,875).

23. Inventories include slow/non-moving materials procured during the earlier years aggregating to Rs, 12,560,316 (Previous Period Rs, 7,998,296). The Company is in the process of evaluating the quantum of usable materials.

24. The Company has provided Rs, 10,302,279 being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

25. Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, (MCA), relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation of Rs, 27,647,974. Accordingly, the Company charged Rs, 13,823,987 during the previous period ended 30th September, 2010 to the Profit & Loss Account. Subsequently, pursuant to Notification dated 29th December, 2011, the Company exercised its option to amortize the balance loss of Rs, 13,823,987 on or before 31st March, 2020.

26. Employment and Retirement Benefits.

(i) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 30th June, 2015. The following tables set out the amounts recognized in the financial statements as at 30th June, 2015 for the defined benefit plans.

27. Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on 'Segment Reporting' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

28. As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with the related parties as defined in the Accounting Standard are given below:

(a) List of related parties and their relationship

Category Name of the Related Party Relationship

1 Lyka BDR International Limited Subsidiary 1 Lyka Healthcare Ltd. Subsidiary 2 Lyka Exports Ltd. Subsidiary 3

2 Lyka Securities & Investment Pvt. Ltd. Associate 1

3 Mr. N. I. Gandhi Key Management Personnel (KMP) (Chairman & Managing Director)

Mr. Yogesh Shah (Chief Financial Officer)

Mr. Piyush Hindia (Company Secretary)

4 Mr. Kunal N. Gandhi Relative of KMP Mrs. Nehal N. Gandhi (Non-Executive Director)

Mrs. Alisha K. Gandhi

5 Enai Trading & Investment Pvt. Ltd. Entities owned by/over which KMP is N. I. Gandhi H.U.F. able to exercise significant influence

Note: Figures in brackets denote items of credit nature

29. (i) Deferred tax:

Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.


Jun 30, 2014

1. CORPORATE INFORMATION

Lyka Labs Limited ("the Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (as amended by the Companies Act, 2013). Its shares are listed on two stock exchanges in India. The Company is engaged in the business of pharmaceutical and related activities, including research.

2. Rights, preferences and restriction attached to equity shares :

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

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

3. 4,000,000 Equity shares of Rs. 10/- each were issued on 07.12.2005 by conversion of Global Depository Receipts.

4. 108,570 10% Cumulative Redeemable Preference Shares of Rs. 100 each fully paid up redeemable at the option of the Company but not later than 20 years from the date of allotment.

5. Non Convertible Debentures are secured by first charge on Trade Marks & second charge on Immovable Properties at Ankleshwar.

6. Details of terms of repayment and security provided for in respect of the Long-Term Borrowings as follows : (Including Current Matirities of Term Loans from Banks - refer note no. 10)

(a) Term Loan (Expansion) from Dena Bank payable in 24 quarterly installment of Rs.18.09 Lacs each commencing from 31st March 2013. Interest rate is base rate 1% # #

(b) Term Loan (R&D) from Dena Bank payable in 24 quarterly installment of Rs. 6.77 Lacs each commencing from 31st March 2013. Interest rate is Base Rate 1% # #

(c) Term Loan from Dena Bank payable in 24 quarterly installment of Rs. 15.59 Lacs each commencing from 31st March 2013. Interest rate is Base Rate 1% # #

(d) Term Loan (working capital) from Dena Bank payable in 20 quarterly installment of Rs. 40 Lacs each commencing from 31st March 2013 Interest rate is Base Rate 1% # #

(e) Term Loan (Lypholisation II) from Dena Bank payable in 24 quarterly installment of Rs. 7.81 Lacs each commencing from 31st March 2013. Interest rate is Base Rate 1% # #

(f) Term Loan (WCDL) from Dena Bank payable bullet payment at end of 30 months i.e. on/or before 31/03/2015. Interest Rate is 12% p.a.# #

(g) Term Loan (New Expansion) from Dena Bank payable in 22 quarterly installment of Rs. 90.90 lacs each commencing from 31st March 2014. Interest rate is Base Rate 1.55% # #

# # The above Term Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the directors of the Company. These Loans are also secured by equitable mortgage of Company''s immovable properties at Tarapur & Ankleshwar. Shares held by the promoters in the Company have been provided as collateral security to the Bank.

(h) Term Loan from Bank of Maharashtra repayable in 16 quarterly installment of Rs. 50 Lacs each commencing from 30th July 2013. Interest rate is Base Rate 1.2%. *

(i) Term Loan from Bank of Maharashtra repayable in 20 quarterly installment of Rs. 30 Lacs each commencing from March, 2015. Interest rate is Base Rate 600 bps 50 bps (term premium). *

* Above Term Loans are Secured by extension of equitable mortgage of property situated at Shiv Shakti industrial Estate, Andheri - East, Mumbai - 400059

7. Details of terms of repayment and security provided in respect of Short -Term Borrowings:

(a) Interest on Dena Bank Cash Credit loan is Base Rate 1% p.a. # #

(b) Interest on Dena Bank Buyers Credit Loan ranges from LIBOR 0.75% to LIBOR 2.00% # #

(c) Interest on Kapol Bank Bil Discounting facility @ 15% p.a.# #

# # The above Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Company''s immovable properties at Tarapur & Ankleshwar. Shares held by the promoters in the Company have been provided as collateral security to the Banks.

8. Interest on Loans from related parties ranges between 12% to 15% simple Interest payable on yearly basis.

9. Interest on Inter Corporate Deposits ranges between 16% to 24% (simple interest) and payable at quarterly / half yearly / yearly basis.

10. Interest on Short Term Loans ranges between 15% to 19%.

11. CONTINGENT LIABILITIES ARE NOT PROVIDED FOR IN RESPECT OF:

(a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24th January, 2011 in respect of Company''s appeal against the demand for Gujarat Sales Tax of Rs. 132,408,100 for the Financial Year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to ! 8,545,195 against which Company has made payment of Rs. 4,585,150. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub-judice and the payment of Rs. 4,585,150 is considered by the Company as good and recoverable.

(b) Particulars Current Period Previous Year (Rs. ) (Rs. )

Ex-gratia - employees 33,887,861 33,432,128

Disputed Central Excise duty 11,997,395 1,122,138

Disputed Sales Tax Demands 28,484,451 23,573,094

Disputed Service Tax Demands 1,809,830 1,809,830 Undertaking given to the excise dept for goods cleared for export without payment of duty — 30,000,000

(c) Bills of Exchange discounted with the Banks Rs. 69,833,270 (Previous Year Rs. 59,394,963).

(d) Bank Guarantees provided by bank on behalf of the Company Rs. 9,342,832 (Previous Year Rs. 1,981,961).

(e) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs. 250,000,000 advanced to Lyka BDR International Ltd., a Subsidiary of the Company (the outstanding amount of the loan is Rs. 69,911,654 as on 30th June, 2014). Under the restructuring of Term Loan Agreement, the Company''s liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest quantum due thereon.

(f) The Company has given a guarantee to Kapol Co-operative Bank Limited for it''s loan facility of Rs. 43,500,000 given to Lyka Exports Limited. (The outstanding amount of the loan is Rs. 43,797,103 as on 30th June, 2014).

12. SLUMP SALE :

(i) The Board of Directors of the Company at its meeting held on 28th March, 2014 resolved to hive off its "Hospital Division" to its wholly owned subsidiary, "Lyka Healthcare Limited" with effect from 1st March, 2014 as and by way of a "Slump Sale" for a consideration valued at Rs. 36.50 crores resulting in a gain on Slump Sale of Rs. 34.57 crores which has been presented as an Extraordinary Item in the Financial Statements.

(ii) According to the Slump Sale Agreement, Lyka Healthcare Limited, will discharge the dues to Lyka Labs Limited, against the ''Slump Sale'' consideration of Rs. 36.50 crores in the manner indicated as below :

* Issue of 75 lacs Equity Shares of Rs. 10/- each at a premium of Rs. 30/- each aggregating to Rs. 30 crores.

* Interest free unsecured loan Rs. 6.50 crores repayable over a period of 5 years as per mutually agreed terms.

13. As advised by Securities and Exchange Board of India, the Company has restated its financial statements for the year ended 31st March, 2013 by debiting certain items as stated hereunder as Prior Period Adjustment:

(i) Rs. 27,239,600 relating to write-off of irrecoverable Sundry Debtors/Loans and Advances, which in the earlier year were debited to Revaluation Reserve.

(ii) Rs. 9,311,805 relating to interest/damages for delay in depositing statutory dues with Government, Semi- Government and Local Authorities upto 31st March, 2013.

14. The Board of Directors at its meeting held on 14th July, 2014 resolved to sell its manufacturing facilities for formulations at Tarapur, Maharshtra as the said unit has become unviable due to various factors for a total sale consideration of not less than Rs. 36 crores. The Company has obtained the requisite approval of the Members through Postal Ballot as per the requirements of the Companies Act, 2013.

The Company is in the process of complying with the regulatory / other requirements to complete the sale.

15. On 31st October, 2013 fire destroyed certain Fixed Assets, at the Company''s Ankleshwar Plant aggregating to Rs. 25,423,471 (Written down value Rs. 21,087,494) and Materials-in-Process aggregating to Rs. 6,110,356. The said loss of Rs. 27,197,850 has been written off to the Statement of Profit and Loss. The company has lodged an insurance claim for an aggregate sum of Rs. 27,097,850 which has been credited to Statement of Profit and Loss against which the company has received a sum of Rs. 9,993,310 and the balance claim of Rs. 17,104,540 is being processed by the insurance company.

16. Depreciation :

(i) The depreciation and amortisation charged to Statement of Profit and Loss for the period Rs. 54,303,516 (Previous year Rs. 32,989,778) includes Rs. 9,457,823 (Previous year Rs. 7,569,413) being depreciation relating to Revaluation of Fixed Assets carried out in March, 2007.

(ii) The depreciation for the period on the Revaluation of Fixed Assets carried out in September 2010 aggregating to Rs. 7,772,174 (Previous Year Rs. 6,219,098) has been charged to Revaluation Reserve.

17. Rs. 50,250,000 (Previous Year Rs. 50,250,000) placed with the Managing Director, as deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

18. Loans and Advances include Rs. 52,321,737 (Previous Year Rs. 93,499,068), granted to a Company as interest bearing financial assistance is considered good for recovery by the management.

19. Sundry Debtors aggregating to Rs. 253,550,238 (Previous Year Rs. 593,221,313) include debtors of Rs. 112,999,170 (Previous year Rs. 318,187,410) outstanding for more than six months which are considered good for recovery by the management.

20. Balances relating to Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances are pending confirmation from the respective parties. Adjustment if any will be made in the year in which confirmations are received.

21. The investments in unquoted shares of Lyka BDR International Ltd., and Lyka Exports Ltd., have been acquired at par/premium respectively. Though their present book value are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its value is required to be made at this juncture taking into consideration intrinsic value of business.

22. The Company has incurred direct expenditure and allocable indirect expenditure in respect of "new product development and applied research" aggregating to Rs. 121,790,478 (previous year Rs. 115,945,456) including finance cost of Rs. 25,614,668 (previous year Rs. 21,680,917).

Of the above:

* Rs. 168,869 (Previous year Rs. 29,206,663) has been transferred to "Self Generated Intangible assets" on successful development including finance cost of Rs. Nil (previous year Rs. 6,558,605).

* During the period infructuous development expenditure relating to certain products aggregating to Rs. 24,363,762 (Previous year Rs. 1,416,578) including finance cost of Rs. 2,404,535 (previous year Rs. 332,406) has been expensed.

* Balance of Rs. 97,257,847 (Previous year Rs. 85,322,215), including finance cost of Rs. 23,210,133 (previous year Rs. 14,789,906), being balance of expenditure is carried forward under "Capital Work in Progress - Intangibles" which shall be recognized as "Self Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the year in which development is abandoned.

23. Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs. 9,499,875 (Previous Year Rs. 8,142,750).

24. Inventories include slow/non-moving materials procured during the earlier period aggregating to Rs. 7,998,296 (Previous year Rs. 6,576,549). The Company is in the process of evaluating the quantum of usable materials.

25. The Company has provided Rs. 14,943,432 being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

26. Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation. Accordingly, the Company amortized Rs. 13,823,987 during the previous year ended 30th September, 2010 to the Profit & Loss Account and the balance of Rs. 13,823,987 was to be amortized by 31st March, 2011. Subsequently, pursuant to Notification dated 29th December, 2011, the Company exercised its option to amortize the balance loss of Rs. 13,823,987 on or before 31st March, 2020.

27. Employment and Retirement Benefits.

(i) Gratuity of Rs. 1,297,361 as included in Contribution to Provident and Other Funds in Note No. 23 of Statement to Profit & Loss comprises of:

a) Rs. 352,051 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

b) Rs. 657,310 being charge for the Period as per actuarial valuation.

c) Rs. 288,000 being provision for gratuity relating to Managing Director on accrual basis.

(ii) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 30th June, 2014. The following tables set out the amounts recognized in the financial statements as at 30th June, 2014 for the defined benefit plans.

28. There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. During the Previous Year, the Company has received notices for recovery of Rs. 209,440,565 to be deposited into "Drug Price Equalization Account".

The Company has challenged the said notices in the writ petitions filed before the Hon''ble Gujarat High Court. The Hon''ble Gujarat High Court has admitted the writ petitions subject to the Company depositing certain amount against the said demands. Accordingly, the Company has deposited Rs. 103,245,000.

The Company expects favorable outcome in the said writ petitions, and hence the amounts paid have been considered by the Company as good for recovery.

29. Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on ''Segment Reporting'' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

30. (i) Deferred tax :

In accordance with Accounting Standard (AS-22) on Accounting for Taxes on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax :

In view of the loss for the year, unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the period.

31. The figures for the Current Period ended 30th June, 2014 being for a period of 15 months are not comparable with those of the Previous Year for 12 months.

32. The Company has regrouped and reclassified the Previous Year''s figures in order to conform to the figures of the Current Period.


Mar 31, 2013

(1) Contingent Liabilities are not provided for in respect of:

(a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24th January, 2011 in respect of Company''s appeal against the demand for Gujarat Sales Tax of Rs. 132,408,100 for the financial year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs. 8,545,195 against which Company has made payment of Rs. 4,585,150. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub-judice and the payment of Rs. 4,585,150 is considered by the Company as good and recoverable.

(c) Bills of Exchange discounted with the Banks Rs. 59,394,963 (Previous Period Rs. 70,000,000).

(d) Bank Guarantees provided by bank to Government departments for Tender application on behalf of the Company Rs. 1,981,961 (Previous Period Rs. 4,646,620).

(2) (i) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs. 250,000,000 advanced to Lyka BDR International Ltd., a Subsidiary of the Company (the outstanding amount of the loan is Rs. 69,911,654 as on 31st March, 2013). Under the restructuring of Term Loan Agreement, the Company''s liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest due thereon.

(ii) The Company has given a guarantee to Kapol Co-operative Bank Limited for Its loan facility of Rs. 43,500,000 given to Lyka Exports Limited. (The outstanding amount of the loan is Rs. 43,595,658 as on 31st March, 2013).

(3) Revaluation Reserve:

(A) (i) The Company during the previous period ended 31.03.2007 had Revalued Land, Building and Plant & Machinery based on valuation report, of an approved valuer M/s. Sigma Engineering Consultants, dated 31st March, 2007 and had restated the said assets at their "Net Present Replacement Value" of Rs. 518,473,763. The difference between the said "Net Present Replacement Value" and the written down value of the said assets of Rs. 362,717,501 had been credited to Revaluation Reserve No. I as under:

(ii) The company utilized Rs. 341,762,712 out of Revaluation Reserve Rs. 362,717,501 to write off irrecoverable sundry debtors during the financial year ended 31st March 2007, which is not in accordance with the Generally Accepted Accounting Practice (GAAP) and requirements of Accounting Standard 5 (AS-5) "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies". The balance amount in Revaluation Reserve Rs. 20,954,789 has been utilized to provide for the differential depreciation on "Net Revalued amount" (Net Present Replacement Value Less Written Down Value) till 30th September, 2009.

The depreciation on above revaluation for the year aggregating to Rs. 7,569,413 has been charged to the Statement of Profit and Loss.

(B) (i) The Company during the previous period ended 30.09.2010 has again revalued its tangible assets at its "current replacement cost" as on 30th September, 2010 based on valuation report of an approved valuer M/s Engineers Associates vide their report dated 30th September, 2010 and has re-stated the said assets at their Net Present Replacement Value of Rs. 1,115,884,476 as on 30th September, 2010. The difference between the said replacement value and the written down value of the said assets of Rs. 489,551,141 as on 30.09.2010 has been credited to Revaluation Reserve No. II as under:-

(ii) The Company utilized Rs. 243,576,572 out of Revaluation Reserve II of Rs. 489,551,141 to write off / adjust slow and non moving inventories, certain debtors loans and advances and Deferred Revenue Expenditure during financial year ended 30th September, 2010 due to which there is a shortfall in the Revaluation Reserve of Rs. 243,576,572.

(iii) During the current year, the Company has further utilized Rs. 27,239,600 out of the balance lying in Revaluation Reserve II to write-off Sundry Debtors and Loans & Advances aggregating to Rs. 27,239,600 due to which there is a further shortfall in the Revaluation Reserve in like sum.

(iv) The depreciation on the Revalued assets for the year aggregating to Rs. 6,219,098 has been charged to Revaluation Reserve.

(4)Rs. 50,250,000 (Previous period Rs. 50,250,000) placed with the Managing Director, as deposit for residential accommodation / garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The Company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

(5) Loans and Advances includes Rs. 93,499,068 (Previous Period Rs. 77,633,760), granted to a Company as interest bearing financial assistance is considered good for recovery by the management.

(6) Sundry Debtors aggregating to Rs. 593,221,313 include debtors of Rs. 318,187,410 outstanding for more than six months which are considered good for recovery by the management.

(7) Balances relating to Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances are pending confirmation from the respective parties. Adjustment, if any, will be made in the year in which confirmations are received.

(8) The investments in unquoted shares of Lyka BDR International Ltd. and Lyka Exports Ltd. have been acquired at par / premium respectively. Though their present book value are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its value is required to be made at this juncture taking into consideration intrinsic value of business.

(9) CWIP Intangible:

(i) The Company has made investments by way of direct expenditure and allocable indirect expenditure to date in respect of "new product development and applied research" aggregating to Rs. 115,945,456 (Previous Period Rs. 80,004,844) including finance cost of Rs. 21,680,917 (Previous Period Rs. 10,405,221) of which, the cost of "Self Generated Intangible Assets" recognized during the year aggregates to Rs. 29,206,663 (Previous Period Rs. Nil), which includes finance cost of Rs. 3,442,895 (Previous Period Rs. Nil).

(ii) Rs. 1,416,578 (Previous Period Rs. 645,726), including finance cost of Rs. 332,406 (Previous Year Rs. Nil), has been charged to Statement of Profit and Loss in respect of expenditure relating to certain products which have been since discontinued.

(iii) CWIP intangible Rs. 85,322,215 (Previous Period Rs. 80,004,844). The statement of profit and loss comprises of expenditure under the respective heads as below, which shall be recognized as "Self Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the year in which finally is reached.

(10) Arrears of dividend on 10% Cumulative Redeemable Preference Share dividend aggregates to Rs. 8,142,750 (Previous Period Rs. 7,057,050).

(11) The company concluded restructuring of loans during previous period resulting in deferment of repayment of loans and reduction of interest cost. The cost of professional fees and other charges incurred for availing the above benefits aggregated to Rs. 4,994,860, of which, a sum of Rs. 1,248,715 was expensed as exceptional item during the previous period and balance of Rs. 3,746,145 is expensed as exceptional item during the current year

(12) Inventories include slow / non-moving materials procured during the earlier period aggregating to Rs. 6,576,549. The Company is in the process of evaluating the quantum of usable materials.

(13) The delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed will be suitably represented to the appropriate authorities. The liability, if any, towards interest, penalty etc will be provided for as and when it arises.

(14) Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation. Accordingly, the company amortized Rs. 13,823,987 during the previous year ended 30th September, 2010 to the Profit & Loss Account and the balance of Rs. 13,823,987 was to be amortized by 31st March, 2011. Subsequently, the Company exercised its option in items of Notification dated 29 December, 2011 issued by the Ministry of Company Affairs will be amortized on or before 31st March, 2020.

(15) Employment and Retirement Benefits.

(i) Gratuity of Rs. 5,735,947 as included in Contribution to Provident and Other Funds in Note No. 22 of Statement to Profit & Loss comprises of:

a) Rs. 123,724 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

b) Rs. 3,450,223 being charge for the year as per actuarial valuation.

c) Rs. 2,162,000 being provision for gratuity relating to Managing Director on accrual basis.

(ii) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 31st March, 2013. The following tables set out the amounts recognized in the financial statements as at 31st March, 2013 for the defined benefit plans.

(iii) Though the Company has provided for actuarial liability in respect of leave salary as in the past, it has not disclosed "Defined Benefit Obligations", as required as per AS-15 (revised) - "Employee Benefits".

(16) Contingent Liabilities are not provided for in respect of:

(a) There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. During the previous period, the Company has received notices for recovery of Rs. 209,440,565 to be deposited into "Drug Price Equalization Account".

The Company has challenged the said notices in the writ petitions filed before the Hon''ble Gujarat High Court, which has admitted the writ petitions subject to the Company paying Rs. 103,245,000 against the said demands.

Since the Company expects favorable outcome in the said writ petitions, the amounts paid have been considered by the Company as advances which are considered by the Company as good for recovery.

(17) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on ''Segment Reporting'' (AS-17), the primary segment of the company is business segment, which comprises of pharmaceutical products / pharma related services. As the company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

(18) As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with the related parties as defined in the Accounting Standard are given below:

(a) List of related parties and their relationship

(19) (i) Deferred tax :

In accordance with Accounting Standard (AS-22) on Accounting for Taxes on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which they said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax :

In view of loss for the year, unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the year.

(20) The figures for the Current Year ended 31st March, 2013 being for a period of 12 months are not comparable with those of the Previous Period for 18 months.

(21) The Presentation and Disclosure of the Financial statements have been made in accordance with the Revised Schedule VI notified by the Central Government vide Notification No. S. O. 447 (E), dated 28th February, 2011 (as amended by Notification No. F. N. 2/6/2008 - CL - V, dated 30th March, 2011) which has become effective for Accounting periods commencing on or after 1st April, 2011. The Company has regrouped and reclassified the previous period''s figures in order to conform to the figures of the current year.


Sep 30, 2010

(1) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 68,872,967 (Previous period Rs.18,964,800).

(2) Contingent Liabilities are not provided for in respect of:

(a) As reported in the previous period, there were demands raised against the company aggregate to Rs. 83,565,226 under the Drug Price Control Order, 1979 (DPCO) by Government of India which were contested by the company. Recently, the Government of India has issued notices for recovery of Rs. 83,565,226 plus the interest thereon, in respect of Five bulk drugs, from the Company, to be deposited into "Drug Price Equalization Account". The Company has contested the same in Writ Petition in the High Court of Gujarat for one of the bulk drugs which constitutes major part of this demand. As per Companys contention, this bulk drug is not covered under "DPCO 1979" and therefore, the demand has no legal basis and hence, not enforceable. The Company is in the process of filing further petitions in the High Court of Gujarat in respect of other Bulk Drugs contesting the demands.

(b) During the year, the Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24/01/2011 in respect of Companys appeal against the demand for Gujarat Sales Tax of Rs.132,408,100 for the financial year 2002-2003 for non-submission of proof of export etc. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs.8,545,195 against which Company has made payment of Rs.4,585,150. The Company has further contested this demand before the Sales Tax Tribunal.

(d) Bills of Exchange discounted with the Banks Rs.70,625,849 (Previous period Rs.63,946,251).

(e) The delays in depositing statutory dues to Government, Semi-Government and Local Authorities beyond the time allowed have been suitably represented to the appropriate authorities. Liability if any towards interest, penalty etc. would be provided as and when they arise.

(3) Nature of security and other particulars of Secured Loans.

(a) Bill discounting facility from Kapol Co-op Bank Ltd. is secured by underlying bills as well as collateral security by equitable mortgage by deposit of Title Deeds of Companys residential premises/flats situated at Mumbai and Ankleshwar.

(b) The Working Capital Loans, Corporate Loan & Term Loans from other Bank are secured by way of first charge on Stock-in-Trade and Book Debts, Other Movable Assets, Movable Machinery and guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Companys immovable properties at Ankleshwar, Tarapur & Mumbai. Further the shares held by the promoters in the company have been provided as collateral security to the banks.

(4) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories along with export registration certificate for a total amount of Rs.250,000,000 advanced to Lyka BDR International Ltd., are erstwhile Joint Venture Company and now a Subsidiary of the Company (the outstanding amount of the loan is Rs.218,927,755 as on 30/09/2010). Under the restructuring of Term Loan Agreement, the Companys liability in respect of the amount advanced to Lyka BDR International Ltd. is to the extent of 50% of the principal and interest due thereon. The Company has issued post dated cheques worth Rs.66,956,767 as collateral to Clearwater Capital Partners India Pvt. Ltd.

(ii) The company utilized Rs. 341,762,712 out of Revaluation Reserve Rs.362,717,501 to write off irrecoverable sundry debtors during the financial year ended 31st March 2007. The balance amount in Revaluation Reserve Rs. 20,954,789 has been utilized to provide for the differential depreciation on "Net Revalued amount" (Net Replacement Value Less Written Down Value) till 30th September, 2009.

(iii) Depreciation charged to the Profit & Loss Account of Rs. 33,959,147 includes Rs. 10,571,167 being the depreciation differential between Net Replacement Value recognized upon revaluation of assets carried out on 31st March, 2007 and the Written Down Value as on that date.

(ii) The Management of the Company has decided to write off / adjust slow and non-moving inventories, certain Sundry Debtors, Loans and Advances and Deferred Revenue Expenditure as mentioned here below aggregating to Rs. 243,576,752 against Revaluation Reserve credited during the year, as hereunder:

(a) Slow and non-moving raw material and packing material of Rs.7,277,040 upon being determined as not suitable for production.

(b) Sundry Debtors of Rs.88,782,222 : comprising of Rs.27,862,594 due from a subsidiary, Lyka BDR International Ltd., and Rs.60,919,628 due from others upon being determined as long overdue.

(c) Loans and Advances : of Rs.101,385,483 comprising of Rs.51,331,520 from Hetero Drugs Limited, an erstwhile Joint Venture Company and Rs.50,053,963 from others upon being found as unrecoverable.

(d) Deferred Revenue Expenditure of Rs.46,132,009 on the basis that the Company does not expect the economic benefits from the said expenditure to flow to the Company.

(iii) Since the Revaluation has been carried out on the last date of the accounting year no depreciation there against has been provided.

(5) Loans and Advances include interest free unsecured loans granted, unless otherwise stated:

(i) Rs.50,000,000 (Previous period Rs.50,000,000) placed with the Managing Director, as deposit for a residential accommodation taken on Leave and License, which has been given by the Company to him, in accordance with the terms of his reappointment. The Company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

(ii) Rs.11,138,269 (Previous period Rs.13,894,037), which is granted to a Company bearing interest @ 18% per annum.

(iii) Rs.41,185,843 (Previous period Rs.37,185,843) to Lyka Exports Ltd., as non interest bearing financial assistance. The same is not in compliance with section 372(A)(3) of the Companies Act, 1956.

(iv) Rs.30,000,000 (Previous period Rs.30,000,000) to Lyka BDR International Ltd. as interest bearing financial assistance.

The said loans and advances as referred in (ii), (iii) and (iv) above are expected to be recovered or adjusted during the next year. In the meanwhile, the same have been considered by the management as good for recovery.

(6) Balances relating to Sundry Debtors, Sundry Creditors and Loans & Advances are pending confirmation from the respective parties though sent by the Company during the year in many cases. Adjustment if any will be made in the year in which confirmations are received.

(7) The investments in unquoted shares of Lyka BDR International Ltd., and Lyka Exports Ltd., have been acquired at par/premium respectively. Though their present book values are lower than their cost of acquisition, keeping in view their long term business synergies and potential, the management is of the opinion that no provision for fall in their values is required to be made at this juncture taking into consideration intrinsic values of their respective businesses.

(8) During the year, the expenditure incurred in respect of "new product development and applied research" amounting to Rs.31,102,207 has been classified under "Capital Work in Progress - New Product Development". Upon completion of development of the respective products, the corresponding expenditure incurred till then, shall be recognized as "Intangibles viz. technical know how or trade marks", as the case may be.

(9) Pursuant to the Notification dated 31st March, 2009 issued by the Department of Company Affairs, relating to AS 11, Accounting Standard on the "Effect of changes in Foreign Exchange Rates", permitting the Company to amortize the loss on account of foreign currency translation, the company had written back aggregate amount of Rs.27,647,974 in respect of such loss in the period ended 30th September, 2009. Accordingly, the company during the year has amortized Rs.13,823,987 to the Profit & Loss Account and the balance of Rs.13,823,987 shall be amortized by 31st March, 2011.

(10) Arrears of unclaimed dividend Rs.260,665 (Previous period Rs. 260,665) on 15% Cumulative Preference Shares and arrears of 10% Cumulative Redeemable Preference Share dividend amount to Rs.5,428,500 (Previous period Rs. 4,342,800).

(11) Employment and Retirement Benefits

i) Gratuity of Rs.12,465,381 as shown in Schedule 13 of Profit & Loss Account comprises of:

(a) Rs.4,408,438 relating to prior period.

(b) Rs.3,024,174 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

(c) Rs.1,322,212 being charge for the year as per actuarial valuation.

(d) Rs.2,135,000 as explained below in (ii).

(e) Rs.1,575,557 being gratuity referred to in note no. 20 relating to Managerial Remuneration.

(ii) During the previous period the Company had adopted Accounting Standard (AS-15) (Revised 2005) -"Employee Benefits" which resulted in a transitional liability of Rs.4,825,000 as at 1st April, 2007 being required to be provided. In accordance with the transitional provisions of the Accounting Standard, the transitional liability was decided by the Company to be provided over a period of 5 years. Consequently, the company has provided Rs. 2,135,000 (Previous period Rs. 1,725,000) as an expense for the year as gratuity under Schedule 13.

(12) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on Segment Reporting (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products / pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

(13) (i) Deferred tax:

In accordance with Accounting Standard (AS-22) on Accounting for Tax on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets consist of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax:

(a) In view of the unabsorbed Business Losses and Depreciation of the earlier years, there is no tax provision for the year.

(b) Since the Company is not expected to have "Book Profit" for the "Previous Year" ending 31s March, 2011, no provision for "Minimum Alternate Tax" has been made under section 115JB of the Income Tax Act,1961 for the year ended 30 September, 2010.

(14) The Company has neither received any intimation from its vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 nor any claim for interest and hence the disclosure, under the said Act has not been made.

(15) The figures for the Current Year ended 30th September, 2010 are not comparable with those of the pervious period for 18 months.

(16) The figures for the Previous Period ended 30th September, 2009 have been reclassified / regrouped, wherever necessary.

 
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