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Notes to Accounts of Marksans Pharma Ltd.

Mar 31, 2016

Notes :

1 The Cash Flow Statement has been prepared under the ''Indirect Method'' as set out in Accounting Standard - 3 on Cash Flow Statements issued by the Institute of Chartered Accountants of India.

2 The Previous year''s figures have been regrouped wherever necessary in order to conform to this year''s presentation.


Mar 31, 2015

1. Contingent liabilities and commitments (to the extent not provided for)

Particulars 2014-2015 2013-2014

(Rs. in lacs) (Rs.in lacs)

Contingent Liabilities

(a) Claims against the company not acknowledged as debt 20.60 25.68

(b) Guarantees and Letter of Credit 5,529.81 8,342.30

(c) Other money for which the company is contingently liable Sales Tax

Sales Tax (BST,CST) – 03-04 5.06 5.06

Sales Tax (BST,CST) – 04-05 7.90 7.90

5,563.37 8,380.94

2.Foreign Currency Convertible Bonds (Bonds)

The Company had signed settlement agreement with few bond holders for settlement of 36,789 Bonds of USD 1,000 each in principal value representing about 97% of the outstanding bonds during February 2013. Out of that 21,511 bonds have been settled and cancelled. One bond holder holding 15,278 Bonds has defaulted in surrendering the third and final tranche bonds as per the settlement agreement even though the company was ready to pay the settlement consideration. They had already executed and surrendered first and second tranche bonds which were subsequently cancelled and extinguished but have defaulted in executing the third and final tranche settlement. The company has, therefore, filed a suit in the High Court of England for specific performance by the bond holder in accordance with the settlement agreement. In the meantime, the English High Court has granted injunction restraining the bond holder from selling or transferring their bonds to or create any interest in such bonds in favour of any person or entity other than the Company until further order of the court.

3. Accounting for Employee benefits

Liabilities for gratuity & other retirement benefits are accounted on accrual basis.

4. Segment Reporting as per AS 17

Business Segments

The Company is primarily engaged in a single business segment of manufacturing and marketing of Pharmaceutical Formulations and is managed as one entity for its various activities and is governed by a similar set of risks and returns.

5. Finance Leases

Assets acquired under finance lease are recognised as assets with corresponding liabilities in the Balance Sheet at the inception of the lease at amounts equal to lower of the fair value of the leased asset or at the present value of the minimum lease payments. These leased assets are depreciated in line with the Company's policy on depreciation of fixed assets. The interest is allocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Operating Leases

Lease rent in respect of assets taken on operating lease are charged to the statement of Profit and Loss as per the terms of lease agreements.

6. Earnings per share

As per Accounting Standard 20 "Earnings Per Share" issued by ICAI, basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

7. The Company has not received any information from "Suppliers" regarding their status under Micro, Small and Medium enterprises Development Act, 2006 and hence disclosures, if any, relating to the amounts as at year end together with interest paid/payable as required under the said Act have not been given.

8. Research and development expenditure

During the year, the Company expensed H1,719.83 Lacs (Previous year H1975.63 Lacs) as research and development costs.

9. Corporate Social Responsibility

Corporate Social Responsibility expenditure is not applicable for the year.

10.Figures of the previous year have been regrouped and re-arranged wherever necessary, so as to make them comparable with the current year's figures.

* The Company has on 30th March, 2015 issued and allotted 2,40,06,494 Equity Shares of H1/- each face value to qualified institutional buyers under QIP pursuant to Section 42 of the Companies Act, 2013 and Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 at H54.67 (including premium) determined in accordance with the said SEBI Regulations. Accordingly, the Issued, Subscribed and Paid-up Equity Share Capital of the Company has increased from H38,53,07,204 (Rupees thirty eight crore fifty three lac seven thousand two hundred four only) divided into 38,53,07,204 (thirty eight crore fifty three lac seven thousand two hundred four only) Equity Shares of H1/- (Rupee one only) each to H40,93,13,698/- (Rupees forty crore ninety three lac thirteen thousand six hundred ninety eight only) divided into 40,93,13,698 (Forty crore ninety three lac thirteen thousand six hundred ninety eight only) Equity Shares of H1/- (Rupee one only) each with effect from 30th March, 2015.

** In accordance with the terms of issue of 7% Redeemable Cumulative Preference Shares of H100/- each (the Preference Shares), the Company has decided to pre-redeem the preference shares in tranches before the redemption date of 27th March, 2018. Accordingly, the Company has on 07th February, 2015 redeemed 1,00,000 Preference Shares at par. Consequently, the Issued, Subscribed and Paid-up Preference Share Capital of the Company has reduced from H13,50,00,000 (Rupees thirteen crore fifty lac only) divided into 13,50,000 (thirteen lac fifty thousand only) Preference Shares of H100/- (Rupees one hundred only) each to H12,50,00,000 (Rupees twelve crore fifty lac only) divided into 12,50,000 (twelve lac fifty thousand only) Preference Shares of H100/- (Rupees one hundred only) each with effect from 07th February, 2015.

b. Terms/rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of H1/- per share. All the Equity Shares rank pari passu in all respect. Each holder of Equity Shares is entitled to one vote per share. The equity share holders are entitled to dividend, if declared by the shareholders in an Annual General Meeting, in proportion to the number of Equity Shares held by the shareholders.

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

c. Terms/rights attached to Preference Shares

The Company had issued 1,350,000 7% Redeemable Cumulative Preference Shares of H100/- each (Preference Shares) fully paid- up to Glenmark Pharmaceuticals Limited on 27th March, 2013 against redemption of 1,350,000 7% Redeemable Cumulative Preference Shares of H100/- each issued on 27th March, 2008. These new preference shares will be due for redemption on 27th March,2018. However, In accordance with the terms of issue, the Company has decided to pre-redeem the preference shares in tranches before the redemption date of 27th March, 2018.

Accordingly, the Company has on 07th February, 2015 redeemed 1,00,000 Preference Shares at par . These preference shares carry dividend at the rate of 7% per annum subject to approval of the shareholders at an Annual General Meeting. The holder of the preference shares is entitled to one vote per share only on resolutions placed before the Company which directly affect the rights attached to the preference shares. In the event of liquidation of the Company before redemption of the preference shares, the holder of the preference shares will have priority over equity shares in the payment of dividend and repayment of capital.

d. The company has not issued bonus shares and shares for consideration other than cash nor the company has bought back any shares during the period of five years immediately preceding the reporting date except redemption of preference shares as stated in Note No.3a above.

e. As on 31st March, 2015, 61 Bonds of USD 1000 each in principal value are unsettled and outstanding as they are remaining untraceable. In accordance with the terms of the issue of the Bonds, these Bonds carry conversion rights until they are redeemed or repurchased. Accordingly, 81,314 equity shares of H1/- each will be issued in case the bond holders opt for the conversion of the said 61 Bonds into equity shares.

11. Foreign Curreny Convertible Bonds (Bonds)

The Company had issued 50,000 Bonds of USD 1,000 each in principal value. Out of that, the Company has bought back/ entered into settlement agreement for 49,939 Bonds. Under the settlement agreement, USD 5,250,000 is remaining to be paid as on 31st March, 2015. The balance 61 Bonds are outstanding as on 31st March, 2015 as the same are untraceable. Adequate provisions have been made in the books of account for both these cases. Accordingly, the current outstanding (including payables under the settlement agreement) as above is USD 5,338,572 (H334,218,095) as on 31st March, 2015.

12. Current maturities of Term Loan

The term loan is secured by hypothecation of current assets and all the movable fixed assets, equitable mortgage of the immovable assets and personal guarantee by Mr.Mark Saldanha, Managing Director. There areno overdues repayment of the term loan.


Mar 31, 2014

BACKGROUND

Marksans Pharma Limited (The Company) together with it''s subsidiaries, operates as an international pharmaceutical organisation with business encompassing the research, manufacturing, marketing and distribution of pharmaceutical products.

The company''s equity shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India.

The Company has been de-registered from the purview of SICA and is no longer in BIFR as per the directions of the Honorable BIFR in its hearing held on 17th July 2013.

Contingent liabilities and commitments (to the extent not provided for) (Rs in lacs)

Particulars 2013-2014 2012-2013 Contingent Liabilities

(a) Claims against the company not acknowledged as debt 25.68 142.93

(b) Guarantees and Letter of Credit 8,342.30 8,339.05

(c) Other money for which the company is contingently liable Sales Tax

Sales Tax (BST,CST) - 03-04 5.06 20.21

Sales Tax (BST,CST) - 04-05 7.90 7.90

(d) Foreign Currency Convertible Bonds - 15,192.89

8,380.94 23,702.98

2.16 Foreign Currency Convertible Bonds

The Company had signed settlement agreement with few bond holders for settlement of 36,789 Bonds of USD 1000 each in principal value representing about 97% of the outstanding bonds during February 2013.

One bond holder holding 15,278 Bonds has defaulted in surrendering the third and final tranche bonds as per the settlement agreement even though the company was ready to pay the settlement consideration. They had already executed and surrendered first and second tranche bonds which were subsequently cancelled and extinguished but have defaulted in executing the third and final tranche settlement. The company has, therefore, filed a suit in the High Court of England for specific performance by the bond holder in accordance with the settlement agreement. In the meantime, the English High Court has granted injunction restraining the bond holder from selling or transferring their bonds to or create any interest in such bonds in favour of any person or entity other than the Company until further order of the court.

2.17 Foreign Exchange Transactions

As required by Accounting Standard 11 "the effect of changes in the foreign exchange rates", the company has restated its assets & liabilities at the closing exchange rate prevailing at the Balance Sheet date.

2.18 Accounting for Employee benefits

Liabilities for gratuity & other retirement benefits are accounted on accrual basis.

2.19 Segment Reporting as per AS 17

BUSINESS SEGMENTS

The Company is primarily engaged in a single business segment of manufacturing and marketing of Pharmaceutical Formulations and is managed as one entity for its various activities and is governed by a similar set of risks and returns.

2.20 Related Party Disclosures

As required by Accounting Standard 18 "Related Parties Disclosure" issued by The Institute of Chartered Accountants of India, list of parties with whom transactions have taken place during the year are as follows:

Rent paid to Mr. Mark Saldanha of H110.96 Lacs during the year.

(b) Parties where control exists Subsidiary Companies

Nova Pharmaceuticals Australasia Pty Ltd

Marksans Pharma (UK) Limited

(c) Related party relationships where transaction have taken place during the year Nova Pharmaceuticals Australasia Pty Ltd - Subsidiary Company

Marksans Pharma (UK) Limited - Subsidiary Company

2.21 Remuneration paid/payable to the Directors for the financial year ended 31st March, 2014, is in accordance with the provisions of section 198 read with section 304(3) of the Companies Act, 1956.

2.22 Finance Leases

Assets acquired under finance lease are recognised as assets with corresponding liabilities in the Balance Sheet at the inception of the lease at amounts equal to lower of the fair value of the leased asset or at the present value of the minimum lease payments. These leased assets are depreciated in line with the Company''s policy on depreciation of fixed assets. The interest is allocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Operating Leases

Lease rent in respect of assets taken on operating lease are charged to the statement of profit and loss as per the terms of lease agreements.

2.23 Earnings per share

As per Accounting Standard 20 "Earnings Per Share" issued by ICAI, basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

The calculations of earnings per share (basic and diluted) are based on the earnings and number of shares as computed below.

2.24 The Company has not received any information from "Suppliers" regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to the amounts as at year end together with interest paid/payable as required under the said Act have not been given.

2.25 Research and development expenditure

During the year, the Company expensed H1975.63 Lacs (Previous year H453.77) as research and development costs.

2.26 Additional information pursuant to the provisions of paragraphs 3, 4C, 4D of Part II of Schedule VI to the Companies Act, 1956 (figures in brackets relates to the previous year)

2.27 Figures of the previous year have been regrouped and re-arranged wherever necessary, so as to make them comparable with the current year''s figures.

b. Terms/rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of H1/- per share. All the Equity Shares rank pari passu in all respect. Each holder of Equity Shares is entitled to one vote per share. The equity share holders are entitled to dividend, if declared by the shareholders in an Annual General Meeting, in proportion to the number of Equity Shares held by the shareholders.

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

c. Terms/rights attached to Preference Shares

The Company has issued 1,350,000 7% Redeemable Cumulative Preference Shares of H100/- each fully paid-up to Glenmark Pharmaceuticals Limited on 27th March, 2013 against redemption of 1,350,000 7%Redeemable Cumulative Preference Shares of H100/- each issued on 27.03.2008. These new preference shares will be due for redemption on 27th March, 2018. These preference shares carry dividend at the rate of 7% per annum subject to approval of the shareholders at an Annual General Meeting.

The holder of the preference shares is entitled to one vote per share only on resolutions placed before the Company which directly affect the rights attached to the preference shares. In the event of liquidation of the Company before redemption of the preference shares, the holder of the preference shares will have priority over equity shares in the payment of dividend and repayment of capital.

d. The company has not issued bonus shares and shares for consideration other than cash nor the company has bought back any shares during the period of five years immediately preceding the reporting date except the issue of preference shares as stated in Note No.3c above.

5.1 The term loan is secured by a charge on the plants and machineries of Goa plants. There are no overdues repayment of the term loan. Maturity profile of Term Loan are as set out below.

9.1 Foreign Curreny Convertible Bonds

The Foreign Currency Convertible Bonds had become due for redemption on 9th November, 2010 and were not redeemed.

These Bonds have redemption premium of 45.20% of the principal value. Further, due to the redemption default, the redemption amount attracts default interest at 8% p.a. from the due date of redemption.

The current outstanding(Including payables under settlement agreement signed with few bond holders is USD 10,398,954 (Rs.621,966,636) as at 31.03.2014.

12.2 Marksans Pharma Ltd had made an investment of GBP 8,491,565 in Marksans Pharma (UK) Limited shown as advance in the books of Marksans Pharma (UK) Ltd. Marksans Pharma (UK) Ltd. has issued and allotted 8,491,565 ordinary shares of GBP 1 each in consideration of the said advance. Accordingly, the shareholding of Marksans Pharma Limited in Marksans Pharma (UK) Limited has increased from 1000 ordinary shares of GBP 1 each to 8,492,565 ordinary shares of GBP 1 each.


Mar 31, 2013

1 Background

Marksans Pharma Limited (The Company) together with it''s subsidiaries and associates, operates as an international pharmaceutical organisation with business encompassing the research, manufacturing, marketing and distribution of pharmaceutical products.

The company''s equity shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India.

As per the audited Balance Sheet as at 31 March, 2011, the Company''s Net Worth had been completely eroded. Therefore, as required under Section 15(1) of the SICA 1985, the Company has made a reference to the Board for Industrial and Financial Reconstruction (BIFR).

Due to settlement of the substantial amount of the FCCBs and improved financial performance of the Company, the Net Worth of the Company has turned positive as at 31 March, 2013. Under the circumstances, the Company will seek withdrawal of its reference and will await necessary directives from the BIFR.

2.1 PROVISIONS, CONTINGENT LIABILITIES & CONTINGENT ASSETS

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a. the Company has a present obligation as a result of past event,

b. a probable outflow of resources is expected to settle the obligation; and

c. the amount of the obligation can be reliably estimated.

Contingent liability is not recognized but disclosed in the Notes to the Accounts.

The Contingent Assets are neither recognized, nor disclosed.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

Contingent liabilities and commitments (to the extent not provided for)

(Rs.in lacs) Particulars 2012-13 2011-12

Contingent Liabilities

(a) Claims against the company not acknowledged as debt 142.93 174.09

(b) Guarantees and Letter of Credit 8,339.05 14,947.22

(c) Other money for which the company is contingently liable Sales Tax

Sales Tax (BST,CST) - 03-04 20.21 20.21

Sales Tax (BST,CST) - 04-05 7.90 7.90

Sales Tax (CST) - 06-07 3.23

(d) Foreign Currency Convertible Bonds 15,192.89

23,702.98 15,152.65

(i) The Company has signed Settlement Agreement with few bond holders for settlement of principal value of USD 36,789,000 worth of Bonds. Under the Settlement Agreement, the settlement amount is payable over a period of 12 months from the date of signing the respective agreements.

Accordingly, the Company has written back the entire amount of USD 36,789,000 Bonds alongwith redemption premium of USD 16,628,628 (aggregating to USD 53,417,628) and provided for new liability based on the settlement payout in terms of the Settlement Agreement in the books of accounts for the year ended 31 March, 2013.

In case the Company delays in making the payment of the balance consideration (as provided in the books of accounts), the Company will have to pay surcharge for the delayed payment in terms of the Settlement Agreement. However, if the delay is beyond 28 months from the date of signing the Agreement, then the said Agreement will be treated as terminated and the liability towards outstanding bonds along with redemption premium already written back will be re-instated in the books of accounts.

2.2 Foreign Exchange Transactions

As required by Accounting Standard 11 "the effect of changes in the foreign exchange rates", the company has restated its assets & liabilities at the closing exchange rate prevailing at the Balance Sheet date.

2.3 Accounting for Employee benefits

Liabilities for gratuity & other retirement benefits are accounted on accrual basis.

2.4 Segment Reporting as per AS 17

BUSINESS SEGMENTS

The Company is primarily engaged in a single business segment of manufacturing and marketing of Pharmaceutical Formulations and is managed as one entity for its various activities and is governed by a similar set of risks and returns.

2.5 Related Party Disclosures

As required by Accounting Standard 18 "Related Parties Disclosure" issued by The Institute of Chartered Accountants of India, list of parties with whom transactions have taken place during the year are as follows:

(b) Parties where control exists

Subsidiary Companies

Nova Pharmaceuticals Australasia Pty Ltd

Marksans Pharma (UK) Limited

(c) Related party relationships where transaction have taken place during the year

Nova Pharmaceuticals Australasia Pty Ltd - Subsidiary Company Marksans Pharma (UK) Limited - Subsidiary Company

2.6 Remuneration paid/payable to the Directors for the financial year ended 31 march 2013, is in accordance with the provisions of section 198 read with section 304(3) of the Companies Act, 1956.

2.7 Accounting for Leases

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease rentals in respect of assets taken under operating leases are charged to the statement of Profit and Loss on a straight line basis over the lease term.

The Company has taken various residential and commercial premises on cancelable operating lease or leave & license agreement The lease agreement which are non cancelable are for period of three years. The rental expenses of such cancelable operating lease are recognized as rent expenses in the Statement of Profit and Loss. The Leasing arrangements which are cancelable range between 11 months and 3 years and are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally interest free deposits have been given.

2.8 The Company has not received any information from "Suppliers" regarding their status under Micro, Small and Medium enterprises Development Act, 2006 and hence disclosures, if any, relating to the amounts as at year end together with interest paid/payable as required under the said Act have not been given.

2.9 Figures of the previous year have been regrouped and re-arranged wherever necessary, so as to make them comparable with the current year''s figures.


Mar 31, 2012

1 Background

Marksans Pharma Limited (The Company) together with its subsidiaries and associates, operate as an integrated international pharmaceutical organisation with business encompassing the entire value change in and distribution of pharmaceutical products.

The company's equity shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India.

As per the audited Balance Sheet as at 31st March, 2011, the Company's Net Worth had been completely eroded.

Therefore, as required under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985, the company has made a reference to the Board for Industrial and Financial Reconstruction (BIFR) for measures to be determined with respect to the company. Accordingly, the company is registered with the BIFR.

a. Terms/rights attached to Equity Shares

The Company has only one class of Equity Shares having a par value of Rs. 1/- per share. All the Equity Shares rank pari passu in all respect. Each holder of Equity Shares is entitled to one vote per share. The equity share holders are entitled to dividend, if declared by the shareholders in an Annual General Meeting, in proportion to the number of Equity Shares held by the shareholders. In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the shareholders.

b. Terms/rights attached to Preference Shares

The Company has issued 1,350,000 7% Redeemable Cumulative Preference Shares of Rs. 100/- each fully paid-up to Glenmark Pharmaceuticals Limited on 27 March, 2008. These preference shares carry dividend at the rate of 7% per annum subject to approval of the shareholders at an Annual General Meeting. These preference shares will be redeemed at par on 27th March, 2013. The holder of the preference shares is entitled to one vote per share only on resolutions placed before the Company which directly affect the rights attached to the preference shares. In the event of liquidation of the Company before redemption of the preference shares, the holder of the preference shares will have priority over equity shares in the payment of dividend and repayment of capital.

c. The company has not issued bonus shares and shares for consideration other than cash nor the company has bought back any shares during the period of five years immediately preceding the reporting date.

d. Pursuant to the special Resolution passed by the share holders at the Annual General Meeting held on 29th September, 2011, the Board of Directors of the company at its meeting held on 25th October, 2011 allotted 17,500,000 warrants to Mr. Mark Saldanha, Promoter of the company at a price of Rs. 2.56 per warrant on preferential basis and received Rs. 11,565,500 being 25.81% upfront price. Mr. Mark Saldanha is entitled to apply for allotment of one fully paid up equity share of Rs. 1/- each against each warrant at any time after the date of allotment but on or before expiry of 18 months from the date of allotment.

Note No. 1.1

Working capital facilities are secured by Hypothecation of stock of raw material, packing material, finished goods, work-in- progress, receivables and equitable mortgage on fixed assets of manufacturing facility of Goa plants, present and future.

*Note No. 2.1 Foreign Currency Convertible Bonds

The current outstanding of principal value of Foreign Currency Convertible Bonds of Rs. 19746.64 Lacs have become due for redemption on 9th November, 2010 and were not redeemed. These Bonds have redemption premium of Rs. 8925.48 Lacs. Further, due to the redemption default, there will be a default interest payable at 8% p.a. from the due date of redemption which has not yet been provided.

Note No.3.1

Land held on leasehold basis. Building includes those constructed on leasehold land.

The company has internally generated intangible assets in the nature of ANDA/Market Authorisation/Site Variation Licenses for CRAMS. The expenses incurred on development of process/product and compliance with regulatory procedures of US FDA and other global health authorities in filing of Abbreviated New Drug Application (ANDA), Market Authorisation/Site Variation Licenses for CRAMS and MHRA procedure for Market Authorisation/Site Variation Licenses are capitalised and identified as intangible assets in accordance with AS - 26 (Intangible Assets). Some of these intangible assets are out licensed to overseas parties giving them exclusive/semi exclusive rights to market the company's products in the international markets.

The Company has carried out an assessment on the impairment of the intangible assets in accordance with AS - 28 (Impairment of Assets). Accordingly, the carrying value of the Intangible Assets have been reduced to their recoverable amount in the Balance Sheet as on 31 March 2012 and the amount of such impairment loss has been charged to the Statement of Profit and Loss in accordance with AS - 28. The recoverable amount is as per the binding out licensing/distribution agreements for the respective products.

In some cases of Site Variation Licenses for CRAMS, the Company has either terminated the agreement and/or stopped manufacturing and supplying of the products. The relative capitalised development cost has been written off and charged to the Statement of Profit and Loss during the financial year ended 31 March, 2012.

Note No.4.1

The Company, in the year 2008, acquired two UK based companies Bell, Sons and Co (Druggists) Limited and Relonchem Limited through its 100% subsidiary, Marksans Pharma (UK) Limited. The company has made an investment of Rs. 68.78 Crores to part finance above acquisitions.However, Relonchem Limited has been incurring losses and Bell, Sons and Co (Druggists) Limited has failed to meet the expectations. Therefore, the Management has carried out an analysis of the value of investment in subsidiaries. The analysis is based on financial projections and market valuation of the peer companies operating in the similar area of operation. This analysis indicated a diminution in the realisable value of investment in the subsidiaries. Accordingly, the carrying value of the investment in subsidiaries has been reduced in the Balance Sheet as on 31 March, 2012 and the amount of the diminution of Rs. 4686 Lacs has been charged to the Statement of Profit and Loss for the year ended 31 March, 2012 in accordance with AS - 13 (Accounting for Investments).


Mar 31, 2011

Background

Marksans Pharma Ltd. (The Company) together with its subsidiaries and associates, operate as an integrated international pharmaceutical organisation with business encompassing the entire value change in the marketing, production and distribution of pharmaceutical products.

The company's shares are listed for trading on the National Stock Exchange and the Bombay Stock Exchange in India.

Contingent Liabilities

(Rs. In Lacs)

31st March, 31st March, 2011 2010

(a) In respect of Letters of Credit 1558.83 178.17 & Bank Guarantees issued by the Company's Bankers :

(b) In respect of Material - Nil

(c) Foreign Exchange Fluctuation on FCCB - 2164.80

(d) Sales Tax (BST,CST) – 03-04 11.51 -

(e) Sales Tax (BST,CST) – 04-05 7.62 -

(3) (a) The current outstanding of principal value of Foreign Currency Convertible Bonds of USD 43,999,000 (Rs. 19949.85 Lacs) have become due for redemption on 9th November, 2010 and were not redeemed. These Bonds have redemption premium of USD 19.89 Mn. (Rs. 9017.33 Lacs). The Company was in constructive conversations with the Bond holders for the restructuring of the Bonds. However, as on 31st March, 2011 the same has not yielded any results. Therefore, the Company is in default in the Bond redemption. The Company has provided for these liabilities in its books of accounts along with exchange loss of Rs. 2363.45 Lacs. Further, due to the redemption default, there will be a default interest payable at 8% p.a. from the due date of redemption which has not yet been provided(Rs.620.90 Lacs).

(b) Due to the losses incurred by the company for the year ended 31st March, 2011, the Net Worth of the Company as on 31st March, 2011 has been completely eroded. Therefore, the Directors have formed an opinion that the Company has become a Sick Industrial Company within the meaning of Section 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 and it is mandatory under the provisions of the said Act to make a reference to the Board for Industrial and Financial Reconstruction for determining measures that will be adopted with respect to the Company. Under the circumstances, the Directors will make a reference to the Board for Industrial and Financial Reconstruction within the stipulated time after the accounts are adopted by the shareholders in the forthcoming AGM.

(4) Foreign Exchange Transactions

As required by Accounting Standard 11 "the effect of changes in the foreign exchange rates" during the year the company has restated its assets & liabilities at the closing exchange rate prevailing at the Balance Sheet date.

(5) Accounting for investment

The long term investments made by the Company are stated at cost which includes investment made in the Subsidiaries. The current investments are valued at lower of cost or market value.

(6) Accounting for Employee benefits

Liabilities for gratuity & other retirement benefits are accounted on accrual basis.

All the other borrowing costs are recognized as expenses in the period in which they are incurred.

(7) Segment Reporting as per AS 17

BUSINESS SEGMENTS

The Company is primarily engaged in a single business segment of manufacturing and marketing of Pharmaceutical Formulations and Active Pharmaceutical Ingredients and is managed as one entity, for its various activities and is governed by a similar set of risks and returns.

(8) Related Party Disclosures

(b) Parties where control exists

Subsidiary companies

Nova Pharmaceuticals Australasia Pty Ltd

Marksans Pharma (UK) Limited

(c) Related party relationships where transaction have taken place during the year

Subsidiary Companies

Nova Pharmaceuticals Australasia Pty Ltd

Marksans Pharma (UK) Limited

(9) Accounting for Leases

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease rentals in respect of assets taken under operating leases are charged to Profit and Loss Account on a straight line basis over the lease term.

The Company has taken various residential and commercial premises on cancelable operating lease or leave & license agreement .The lease agreement which are non cancelable are for period of three years. The rental expenses of such cancelable operating lease are recognized as rent expenses in the Profit and Loss Account.

The Leasing arrangements, which are cancelable range between 11 months and 3 years, are usually renewable by mutual consent on mutually agreeable terms. Under these arrangements, generally interest free deposits have been given.

10) Earnings per share.

As per Accounting standard 20 "Earnings Per Share" issued by ICAI, basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

(11) DEFERRED TAX LIABILITY / (ASSET) :

As per Accounting standard 22 "Accounting for taxes on income" issued by ICAI, deferred Income taxes are recognized for the future tax consequence attributable to timing differences between the financial statement determination of income and their recognition for tax purposes. The effect on deferred tax assets and liabilities because of a change in tax rates is recognized in the Statement of Profit and Loss using the tax rates and tax laws that have been enacted or substantively enacted as on the Balance Sheet date.

Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

(12) Impairment of Assets

The company identifies impairable assets at the year end in terms of cash generating unit concept based on para-5 to 13 of AS-28 issued by ICAI for the purpose of arriving at impairment loss thereon being the difference between the book value and recoverable value of relevant assets. Impairment loss, if any, when crystallizes is charged against revenue of the year.

During the year under review there are no impaired assets requiring recognition of impairment loss as per Accounting Standard 28"Impairment of Assets" issued by the Institute of Chartered Accountants of India.

(16) Security for Loans in Schedule 3 :

(1) Term Loans & Cash Credit from Banks : Secured by mortgage on pari-passu charge basis of the Company's all immovable assets, Present and future, situated at L-82,L-83 Verna(Goa), and Hypothecation of plant and machinery situated at the Company's Manufacturing facilities. Cash Credit from Banks are secured against hypothecation of current assets viz; stock of raw material, packing material, work in progress, receivables.]

(2) Vehicle Loans: Secured by hypothecation of respective vehicle.

(17) The Company has no information as to whether any of its suppliers constitute small scale undertakings and therefore, the amount due to such suppliers has not been identified.

(18) Additional information pursuant to the provisions of paragraphs 3, 4C, 4D of Part II of Schedule VI to the Companies Act, 1956 (figures in brackets relates to the previous year)

(19) Figures of the previous year have been regrouped and re-arranged wherever necessary, so as to make them comparable with the current figures.


Mar 31, 2010

(1) PROVISIONS,CONTINGENT LIABILITIES & CONTINGENT ASSETS

Provisions are recognized for liabilities that can be measured only by using a substantial degree of estimation, if

a. the Company has a present obligation as a result of past event,

b. a probable outflow of resources is expected to settle the obligation; and

c. the amount of the obligation can be reliably estimated.

Contingent liability is not recognized but disclosed in the notes to the Accounts.

The Contingent Assets are neither recognized, nor disclosed.

Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet date.

Contingent Liabilities

(Rs.In Lacs)

31st March, 2010 31st March, 2009

(a) In respect of Letters of Credit & Bank Guarantees issued by the Companys Bankers : 178.17 297.89

(b) Disputed Taxes/Dues(See note 3 below) 250 Nil

(c) In respect of Material Nil 86.06

(d) Foreign Exchange Fluctuation on FCCB 2164.80 5335

(2) During the year, the Company received an assessment order from the Income tax department for the A.Y.2002-03 to A.Y.2008-09 along with the demand of Rs.450Lacs. The company has gone in to appeal before the Commissioner of Income Tax(Appeals) against the said assessment order after making tax payment of Rs.200 lacs under protest. The hearing of appeal for the A.Y.2002-03 to A.Y2008-09 before the Commissioner of Income Tax (Appeals) is underway. The appeal order is expected soon we are expecting substantial tax relief hence no additional tax liability is expected thereof, therefore no provision has been made in the books of accounts but shown as contingent liability of Rs.250 Crore.

3) CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

1. The Company has issued and allotted 1333 equity shares of Re.1 each on conversion of FCCB of US$1000 on 14.04.2010.Accordingly the Issued ,Subscribed and Paid up equity share capital of the company has increased from Rs.367805871/- to Rs.367807204/- effective from 14.04.2010.

2. The Company has on 28th July,2010 entered into a Business Transfer Agreement with Kores (India) Limited for sale and transfer of its Active Pharmaceutical Ingredients (API) business together with its manufacturing facilities located at Plot Nos. A-88 & D-10, MIDC, Kurkum, Pune, Maharashtra.

4) FOREIGN EXCHANGE TRANSACTIONS

As required by Accounting Standard 11 "the effect of changes in the foreign exchange rates" during the year the company has restated its assets & liabilities at the closing exchange rate prevailing at the Balance Sheet date except towards Foreign Exchange Difference of Rs.2164.80 Lakh in case of Foreign Currency Convertible Bond, the Management is of the opinion the determination and Crystallization of Liabilities is dependent upon the outcome of uncertain future events or actions not wholly within the control of the Company and therefore the same has been considered as ‘Contingent Liability as on 31.3.2010 and Due to this profit for the year ended 31.3.2010 is overstated.

5) ACCOUNTING FOR INVESTMENT

The long term investments made by the Company are stated at cost which includes investment made in the Subsidiaries.

The current investments are valued at lower of cost or market value. The current investment made by the Company includes investment made in the SBI Premier Liquid Fund for Rs.10.00 Crores.

6) ACCOUNTING FOR EMPLOYEE BENEFITS

Liabilities for gratuity & other retirement benefits are accounted on payment basis which is in non conformity with Accounting Standard 15 "Employee Benefits" issued by The Institute of Chartered Accountants of India which requires accounting for same on accrual basis as per actuarial valuation

All the other borrowing costs are recognized as expenses in the period in which they are incurred.

The Company has incurred borrowing costs on Term Loan & Overdraft facility taken in the Previous Years but not against any Qualifying Fixed Assets. During the current year Company has not borrowed any funds for the acquisition of the Qualifying Fixed Assets therefore Accounting Standard 16 for accounting of borrowing costs issued by the Institute of Chartered Accountants of India is not applicable to the company.

7) SEGMENT REPORTING AS PER AS 17

BUSINESS SEGMENTS

The Company is primarily engaged in a single segment business of manufacturing and marketing of Pharmaceutical formulations and Active Pharmaceutical ingredients and is managed as one entity, for its various activities and its governed by a similar set of risks and returns.

8) RELATED PARTY DISCLOSURES

As required by Accounting Standard 18 "Related Parties Disclosure" issued by The Institute of Chartered Accountants of India, list of parties with whom transactions have taken place during the year are as follows:

b) Parties where control exists

Subsidiary companies

Nova Pharmaceuticals Australasia Pty Ltd

Marksans Pharma (UK) Limited

c) Related party relationships where transaction have taken place during the year

Subsidiary Companies

Nova Pharmaceuticals Australasia Pty Ltd

Marksans Pharma (UK) Limited

9) ACCOUNTING FOR LEASES

Assets acquired under finance leases are recognised at the lower of the fair value of the leased assets at inception and the present value of minimum lease payments. Lease payments are apportioned between the finance charge and the outstanding liability. The finance charge is allocated to periods during the lease term at a constant periodic rate of interest on the remaining balance of the liability.

Lease rentals in respect of assets taken under operating leases are charged to profit and loss account on a straight line basis over the lease term.

The Company has taken various residential and commercial premises on cancelable operating lease or leave & license agreement .The lease agreement which are non cancelable are for period of three years. The rental expenses of such cancelable operating lease are recognized as rent expenses in the Profit and Loss Account.

10) EARNINGS PER SHARE

As per Accounting standard 20 "Earnings per share" issued by ICAI Basic earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the weighted average numbers of shares outstanding are adjusted for the effects of all dilutive potential equity shares from the exercise of options on unissued share capital and on conversion of FCC Bonds. The calculations of earnings per share (basic and diluted) are based on the earnings and number of shares as computed below.

11) DEFERRED TAX LIABILITY / (ASSET) :

As per Accounting standard 22 "Accounting for taxes on income" issued by ICAI, deferred Income taxes are recognized for the future tax consequence attributable to timing differences between the financial statement determination of income and their recognition for tax purposes. The effect on deferred tax assets and liabilities because of a change in tax rates is recognized in the Statement of Profit and Loss using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

Deferred tax assets are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The major elements of deferred tax liability / (asset) are as under:

12) IMPAIRMENT OF ASSETS

The company identifies impairable assets at the year end in terms of cash generating unit concept based on para-5 to 13 of AS-28 issued by ICAI for the purpose of arriving at impairment loss thereon being the difference between the book value and recoverable value of relevant assets. Impairment loss, if any, when crystallizes is charged against revenue of the year.

During the year under review there are no impaired assets requiring recognition of impairment loss as per Accounting Standard 28"Impairment of Assets" issued by the Institute of Chartered Accountants of India.

13 SECURITY FOR LOANS IN SCHEDULE 3 :

1] Term Loans: Secured by Mortgage on pari-passu charge basis of the Companys all Immovable assets, Present and future, situated at L-82,L-83 Verna(Goa), Plot D-10 and A-88, MIDC Kurkumbh, Tal. Daund, Dist. Pune, and Hypothecation of Plant and machinery situated at the Companys all three Manufacturing facilities.

2] Cash Credit from Banks: Secured against hypothecation of Current assets viz; stock of raw material, packing material, work in progress, receivables.

3] Vehicle Loans: Secured by Hypothecation of respective vehicle.

14 The Company has no information as to whether any of its suppliers constitute small scale undertakings and therefore the amount due to such suppliers has not been identified.

15 Additional information pursuant to the provisions of paragraphs 3, 4C, 4D of Part II of Schedule VI to the Companies Act, 1956 (figures in brackets relates to the previous year)

a) Licensed capacity, installed capacity and production (as certified by the management and not verified by auditors, it being technical matter)

16 Figures of the previous year have been regrouped and re-arranged wherever necessary, so as to make them comparable with the current years figures.