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Directors Report of Morepen Laboratories Ltd.

Mar 31, 2015

Dear Members,

The Directors take pleasure in presenting the 30th Annual Report on business, operations and achievements of the Company together with the Audited financial statements for the financial year ended March 31,2015.

FINANCIAL HIGHLIGHTS

(Rs. in Lacs)

Particulars 2014-15 2013-14

Total Revenue 37162 33676

Operating Surplus 4794 4660

Finance cost 863 989

Cash Surplus 3931 3671

Non-Cash Items:

Depreciation & Amortisation 3859 4577

Profit/(Loss) before Extra-ordinary 72 (906) items and Tax

Extra ordinary items - Income (Net) - 290

Profit/(Loss) Before Tax 72 (616)

Tax 14 -

Profit/(Loss) After Tax 58 (616)

REVIEW OF PERFORMANCE

Your Company has recorded revenues of Rs. 37,162 lacs during the current financial year against previous year revenues of Rs. 33,676 lacs recording a growth of 10% over last year revenues. Operating revenue for the current year has increased to Rs.37,026 lacs against last year revenues of Rs. 33,597 lacs. Sales revenues of the Company are steadily improving year on year basis.

Better customer reach, improved productivity and efficient cost management have helped the Company to offset the pressure in margins on account of product and market mix.

Growth in Active Pharmaceutical Ingredients (API) business has been steady at 7%. Home Diagnostics and Finished Formulations have shown significant improvement in its sales revenues recording a growth of 16% and 10% respectively.

Current year's operating surplus of Rs. 4,794 lacs translates into a moderate growth of 3% against last year surplus of Rs. 4,660 lacs.

Finance cost at Rs. 863 lacs has come down by 13% against Rs. 989 lacs in the previous year.

Cash generated during the year is Rs. 3,931 lacs against Rs. 3,671 lacs generated during previous financial year.

DIVIDEND

For the year under review the Directors do not recommend any dividend due to absence of adequate distributable surplus.

RESERVES

As per the provisions of Companies Act, 2013, additional depreciation of Rs. 1,176 lacs, on account of change in useful life of assets, has been charged to opening balance of Reserve & Surplus account. The profit of Rs. 58 lacs earned during the year has been added to the Reserves & Surplus.

DEPOSITS

The Company has not accepted deposit within the meaning of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.

FINANCES

The Management is committed to profitable growth of all its business segments by improving upon operating and financial performance.

The Company continues to service its debt obligations as per the terms approved by its lender banks and financial institutions. The Company has been managing its day to day operations without any institutional working support. It is running its business on the strength of surplus generated out of its operations.

Further, on account of accumulated losses, the provisions of Companies Act, 2013 places restrictions on redemption of Preference Shares. In view of above, the Company has not been able to redeem optionally convertible preference shares which have fallen due for redemption and/or conversion during the year.

SHARE CAPITAL

The total paid up share capital of the Company as on March 31, 2015 of Rs. 20,961 lacs comprises of Equity Share Capital of Rs. 8,996 lacs and Preference Share Capital of Rs. 11,965 lacs. During the year under review, there was no change in the paid-up share capital of the Company. No Provision of money was made by the Company for purchase of its own shares by employees or by trustees for the benefit of employees.

The shares issued by Company are listed at the following Stock Exchanges as on March 31,2015:

1. National Stock Exchange of India Limited (NSE)

2. Bombay Stock Exchange (BSE)

Annual listing fees for the financial year 2015-16 have been paid to both the Stock Exchanges. The Equity shares continue to be listed on both BSE and NSE.

BUSINESS PERFORMANCE

During the year under review, sales revenues at Rs. 35,459 lacs have registered a growth of around 10% against last year revenues of Rs. 32,206 lacs. Active Pharmaceutical Ingredients (API) business has recorded a growth of 7%. Home Diagnostics business has recorded a growth of 16% in its sales revenues and Finished Formulation business has recorded a growth of 10%.

Continued focus on margin improvement, cost control and efficient utilization of resources has helped the Company to moderately improve its operating margins over the preceding years despite margin erosion on account of product and market mix.

The operating surplus for the current year has improved to Rs. 4,794 lacs from Rs. 4,660 lacs in the previous year. Current year operating surplus has recorded 3% growth over the last financial year. After servicing the finance cost of Rs. 863 lacs, current year net cash surplus is Rs. 3,931 lacs, against Rs. 3,671 lacs generated in the previous year, a growth of around 11%.

The Company foresees improvement in revenues across all business segments and also expects that bottom line would i m prove over the preceding year.

Division wise business performance is detailed hereunder:

Active Pharmaceutical Ingredients (API)

Domestic API business recorded a growth of 31% over the last year whereas export business was down by 1%. Montelukast and Atorvastatin business recorded handsome growth during the year. Current year Loratadine revenues have recorded a dip of 20% against previous year revenues.

Over the years API business has significantly contributed towards the overall growth of the Company. During last few years expansion of domestic and export markets has added momentum to the revenue growth. During the current year growth of 7% has been recorded in the annual sales revenues. Current year Revenues are at Rs. 21,606 lacs against last year revenues of Rs. 20,288 lacs. Montelukast and Atorvastatin have recorded a growth of 13% and 80% respectively. Fexofenadine with current year revenues of Rs. 1,087 lacs has recorded a dip of around 16%.

There has been volume growth of 12% in 'Loratadine' Non- US business. However, lower price realisation has resulted in fall in US business.

Desloratadine 'API' has recorded a growth of 67% in its annual sales revenue over the preceding year. The Company expects steady business in the coming years.

Montelukast has recorded sales revenue of Rs. 5,604 lacs in the current year, against Rs. 4,967 lacs in last year. Atorvastatin with its annual sales revenues of Rs. 4,229 lacs has registered a growth of 80% over the last year.

During the current year, products like Sitagliptin Phosphate, Rosuvastatin Calcium, Olmesartan Medoxomil, Pioglitazone and Aliskirin have registered impressive volume growth. Product basket consisting of these products has recorded sales revenue of Rs. 1,966 lacs against Rs. 599 lacs recorded in the last financial year. The highest growth has been achieved by Rosuvastatin, which clocked annual sales of Rs. 815 lacs in the current year against Rs. 317 lacs done in last year.

Home Diagnostics

During the Current year 'Home Diagnostics' business has recorded a growth in revenues by 16%. Revenues for the current year are at Rs. 5,133 lacs against Rs. 4,431 lacs in the previous year. Blood Glucose Monitors, the biggest contributor to this business segment with annual revenue of Rs. 2,372 lacs has registered a growth of 37%. Blood Pressure Monitors with annual sales of Rs. 797 lacs have gone up by 22% over the last year. The Company is expanding its foothold all across India and also touching the markets/areas which were hitherto uncovered.

Finished Formulations

Finished Formulation business has recorded sales revenues of Rs. 8,256 lacs against Rs. 7,506 lacs recorded in the previous year.

Current year annual revenues have registered a growth of 10% over the last financial year. Branded formulation as a part of finished formulations registered a fall of 7% whereas contract manufacturing and brand sharing business reported a growth of 24%.

SUBSIDIARIES / JOINT VENTURES / ASSOCIATES

The Company has four subsidiaries as on March 31, 2015 namely:

1. Dr. Morepen Ltd.

2. Total Care Ltd. (Subsidiary of Dr. Morepen Ltd.)

3. Morepen Inc., USA

4. Morepen Max Inc., USA

The Company does not have any Associates or Joint Ventures as on March 31,2015.

Dr. Morepen Limited

Over The Counter (OTC) business of the Company carried out through its wholly owned subsidiary, Dr. Morepen Limited (DML) has gone up marginally. Sales revenue for the current year stood at Rs. 3,448 lacs against last year revenues of Rs. 3,356 lacs.

The Company is carrying two types of business under its brand name Dr. Morepen i.e. marketing of OTC products & Brand sharing.

There was marginal fall of around 2% in OTC marketing business. However brand sharing business registered a growth of around 14%. This business also looks promising keeping in view brand recall value attached to 'Dr. Morepen' brand.

In brand sharing segment, 31 Stock Keeping Units (SKUs) were launched in the current year, taking the tally to 183 SKUs during the year. It recorded sales revenue of Rs. 1,188 lacs as compared to Rs. 1,045 lacs in the last year. In 2015-16, Brand Sharing business has sales target of Rs. 1500 lacs.

In its OTC marketing segment, the Company has launched new products namely Burnol X, Burnol Spray and Burnol Prickderm as extension to its existing main brand 'Burnol'.

During the year, the Company changed its distribution model from Super Stockist model to C&F Model in respect of states having annual sale of more than Rs.150 lacs. The Company expects that the exercise will help the Company to increase its sales by direct billing to Distributors. Further the cost of distribution is also expected to come down significantly. Hence the Company expects to do better, on both the fronts i.e. increase in sales revenue and cost control.

On account of change in distribution model midway during the current year, sales was adversely affected, however it will give better revenues in the coming years.

Total Care Limited

The Company is now dealing in OTC & Health products. The scale of Company's operations was marginal during the year with the total revenues of Rs. 16 lacs. The Company plans to clock annual revenue of Rs. 100 lacs in the coming year.

Morepen Inc.

This Company is our marketing and distribution interface in USA for various OTC & other products. The Current year revenue was at Rs. 45 lacs ($72,574) as against Rs. 69 Lacs ($120,022) in the previous year. Current year loss is Rs. 38 lacs, against profit of Rs. 24 lacs in the last year.

Morepen Max Inc.

This Company has been in a dormant state for last few years. Board of Directors considers it expedient to divest the investment in the Company at an appropriate time.

Morepen Biotech Limited has ceased to be an associate Company during the year.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company pursuant to Section 129 (3) of the Companies Act, 2013, prepared in accordance with relevant Accounting Standards (AS) viz. AS 21 & AS 23, forms part of this Annual Report.

A Statement containing the salient features of the financial statements of Company's Subsidiaries, pursuant to Section 129 of the Companies Act, 2013 read with the Rule 5 of the Companies (Accounts) Rules, 2014 is annexed to this report as ANNEXURE 'A' in the prescribed form, AOC -1.

DIRECTORS'& KEY MANAGERIAL PERSONNEL

Changes in Directors' & Key Managerial Personnel

The Company has appointed Mr. Sukhcharan Singh, Mr. Manoj Joshi and Mr. Bhupender Raj Wadhwa, as Independent Directors of the Company for a term of 5 years with effect from 19th September, 2014 in the 29th Annual General Meeting (AGM) of the Company pursuant to provision of Section 149, 150, 152, Schedule IV and other applicable provisions, of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014. Your Directors extended a warm welcome to Mr. Sukhcharan Singh, Mr. Manoj Joshi and Mr. Bhupender Raj Wadhwa for being a part of the Board of Directors of Morepen Laboratories Limited.

Pursuant to Section 203 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 Mr. Sushil Suri, Chairman & Managing Director and Mr. Thomas P. Joshua, Company Secretary, who were already in office before the commencement of Companies Act, 2013, have been designated as Whole-Time Key Managerial Personnel of the Company. Mr. Ajay Sharma has been appointed as the Chief Financial Officer, designated as Whole-Time Key Managerial Personnel, of Morepen Laboratories Limited w.e.f. 9th August, 2014.

Mr. Sushil Suri, Chairman & Managing Director of the Company, who holds his office up to 19th October, 2015 and being eligible, has offered himself to be re-appointed pursuant to the provisions of Section 196, 197, 203, Schedule V and other applicable provisions of the Companies Act, 2013 and read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended or re-enacted from time to time. Your Directors recommend his appointment as the Chairman & Managing Director of the Company, in the ensuing Annual General Meeting, for another term of 3 years w.e.f. 20th October, 2015.

Dr. A. K. Sinha, Whole Time Director of the Company, who is liable to retire by rotation pursuant to the provisions of Section 152 and other applicable provisions of the Companies Act, 2013 read with Companies (Appointment and Qualification of Directors) Rules, 2014, as amended or re-enacted from time to time, has given his consent and being eligible has offered himself for re-appointment. Your Directors recommend his re-appointment as Whole-Time Director of the Company, in the ensuing Annual General Meeting.

Pursuant to the provisions of Section 149(1) of the Companies Act, 2013, Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014 and revised Clause 49 of Listing Agreement it was mandatory for the Company to appoint a Woman Director on the Board of the Company on or before March 31,2015. However, Hon'ble Supreme Court of India, vide its order dated July 16, 2007, in respect of petition filed by the Company before it, challenging the appointment of Special Directors by Hon'ble High Court of Himachal Pradesh, Shimla, has ordered 'status quo' to be maintained. Therefore, the Board in its meeting held on March 31,2015 took note of the same and felt that since the matter is sub-judice and the status quo order is still in force, as on date, the composition of the Board should remain unchanged. The Company has also apprised the matter to both the stock exchanges i.e. NSE and BSE. The Company is willing and ready to appoint a Woman Director on the Board of the Company as soon as the above matter is resolved.

Declaration by Independent Director(s) and re-appointment

As per the provision of Section 149(7) of Companies Act, 2013 and Listing Agreement, every Independent Director is required to give declaration to the effect that he meets the criteria of independence as provided in Section 149(6) of Companies Act, 2013 and Clause 49 of the Listing Agreement.

At present there are total of three Independent Directors on the Board of the Company and accordingly in compliance with the aforesaid provisions of the Companies Act, 2013 and the Listing Agreement, Mr. Sukhcharan Singh, Mr. Manoj Joshi and Mr. Bhupender Raj Wadhwa, have given the Declaration of Independence to the Company.

Evaluation of Board, Committees and Directors

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out its own performance evaluation, Board Committees and its directors individually. The manner in which the evaluation has been carried out has been detailed in Corporate Governance Report.

Familiarization Programme for Independent Directors

The details pertaining to Familiarization Programme for Independent Directors has been detailed in Corporate Governance Report.

Meetings of Board of Directors

During the year under review, the Board of Directors met 5 times to transact the business of the Company, the details of which are given in Corporate Governance Report.

Independent Directors Meeting

During the year under review a separate meeting of the Independent Directors of the Company was held on February 11, 2015, without the presence of Non Independent Directors and members of Management. The Independent Directors reviewed the performance of Non- Independent Directors and the Board as a whole, performance of Chairperson of the Company and assessed the quality, quantity and timelines of flow of information between the Company management and the Board. All the Independent Directors of the Company were present in the meeting.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 (3) (c) of the Companies Act, 2013:

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

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

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for prevention and detecting fraud and other irregularities;

d) the annual accounts have been prepared on a going concern basis;

e) they had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

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

MANAGERIAL REMMUNERATION AND OTHER DISCLOSURES

Disclosure pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

a) Ratio of the remuneration of each Director to the median employee's remuneration and other details pursuant to Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: The aforesaid Disclosure is annexed and forms part of this report as ANNEXURE 'B'.

b) Detail of every employee of the Company as required pursuant to Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: The aforesaid Disclosure is annexed and forms part of this report as ANNEXURE 'C'.

c) No Director of the Company, including its Managing Director or Whole-Time Director, is in receipt of any commission from the Company or its Subsidiary Company.

AUDIT COMMITTEE

Your Company has an Audit Committee in compliance to the provisions of Section 1 77 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The complete details with respect to Audit Committee as required to be given under the Companies Act, 2013 and Clause 49 of the Listing agreement is given in the 'Corporate Governance Report'.

WHISTLE BLOWER /VIGIL MECHANISM

The Company has established a Whistle Blower Pol icy/Vigi l Mechanism through which its Directors, Employees and Stakeholders can report their genuine concern about unethical behaviors, actual or suspected fraud or violation of the Company's Code of Conduct or Ethics Policy. The said policy provides for adequate safeguard against victimization and also direct access to the higher level of superiors including Chairman of the Audit Committee in exceptional cases. The same is reviewed by the Audit Committee from time to time.

RISK MANAGEMENT

The Company has in place a mechanism to inform the Board about the risk assessment and minimisation procedures and periodical review to ensure that management controls risk through means of a properly defined framework.

The Company has formulated and adopted Risk Management Policy to prescribe risk assessment, management, reporting and disclosure requirements of the Company.

NOMINATION AND REMUNERATION COMMITTEE

Your Company has a Nomination and Remuneration Committee in compliance to the provisions of Section 1 78 of the Companies Act, 2013 and Clause 49 of the Listing agreement. The complete details with respect to Nomination and Remuneration Committee as required to be given under the Companies Act, 2013 and Clause 49 of the Listing agreement is given in the 'Corporate Governance Report'.

The Company has adopted a Nomination and Remuneration Policy for Directors, Key Managerial Personnel (KMP) and other employees of the Company as formulated by Nomination and Remuneration Committee, pursuant to provisions of Section 178 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, which shall act as a guideline for determining, inter-alia, qualifications, positive attributes and independence of a Director, matters relating to the remuneration, appointment, removal and evaluation of performance of the Directors, Key Managerial Personnel, Senior Management and other employees.

The detailed policy formulated by Nomination and Remuneration Committee is annexed and forms part of this report as ANNEXURE 'D'.

STATUTORY AUDITORS

M/s. M. Kamal Mahajan and Co., the Statutory Auditors' of the Company, appointed by shareholders pursuant to Section 129 of the Companies Act, 2013, in 29th Annual General Meeting to hold office till conclusion of 31st Annual General Meeting have confirmed their eligibility under Section 141 (3) of the Companies Act, 2013 and are willing to continue as the Auditors of the Company, subject to ratification of their appointment by the shareholders in the ensuing Annual General Meeting of the Company.

EXPLANATION TO AUDITORS REPORT

The Auditors vide Para (ix) of the annexure to the audit report have commented on delay in payment of dues to the lenders. The delay in payment was for a period less than 90 days and the Company reiterates its commitment to service its debt obligations as per the agreed terms.

Further, the Auditors in the independent audit report on consolidated financial statements have drawn attention to the Note No. 12(b) to the financial statements regarding legal case in respect of trademark "Burnol". The Company reiterated its comments mentioned therein.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. PD and Associates, Company Secretaries were appointed by Board of Directors of the Company as Secretarial Auditors of the Company for the financial year 2014-15.

The Secretarial Audit Report given by Secretarial Auditors' is annexed and forms part of this report as ANNEXURE 'E'.

EXPLANATION TO SECRETARIAL AUDIT REPORT

The Secretarial Auditor has observed that the Company has not appointed a Woman Director pursuant to the provisions of Companies Act, 2013 and not redeemed the preference shares due for redemption. The reasons for non-appointment of Woman Director has been duly explained under the head Directors' & Key Managerial Personnel in this report, while the reason for not redeeming the preference shares have been suitably explained in Note No. 2(C) to the Financial Statements for the year ended March 31,2015.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013, read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Cost Accounting Records maintained by the Company in respect of its Bulk Drugs and Formulations activity are required to be audited by Cost Auditors. The Board of Directors of the Company has, on the recommendation of the Audit Committee, appointed M/s. Vijender Sharma & Co., Cost Accountants, as the Cost Auditor of the Company for the financial year ended March 31, 2016, at a remuneration of Rs. 3 Lacs, subject to the ratification of their remuneration by the shareholders in the in the ensuing Annual General Meeting.

INTERNAL FINANCIAL CONTROLS

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The internal financial controls are adequate and are operating effectively so as to ensure orderly and efficient conduct of business operations. The Company's internal financial control procedures ensure that Company's financial statements are reliable and prepared in accordance with the applicable laws.

To maintain its objectivity and independence, the Internal Audit Team reports to the Chairman of the Audit Committee of the Board. Based on the internal audit report, process owners undertake corrective action in their respective areas and thereby strengthening the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. Team engaged in internal audit carries out extensive audits throughout the year across all functional areas, and submits its reports from time to time to the Audit Committee of the Board of Directors.

CORPORATE SOCIAL RESPONSIBILITY

Section 135 of the Companies Act, 2013 lays down the criteria for the constitution of Corporate Social Responsibility (CSR) Committee by a Company and other compliances applicable under the said provisions. As the Company does not fulfill any of the criteria mentioned therein the provisions of Corporate Social Responsibility (CSR) are presently not applicable on the Company and hence the Company was not required to comply with the same.

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

The Company has in place a policy on Prevention, Prohibition and Redressal of Sexual Harassment of women at workplace pursuant to the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. The policy has set guidelines on the redressal and enquiry process that is to be followed by complainants and the ICC, while dealing with issues related to sexual harassment at the work place. All women employees whether permanent, temporary, contractual and trainees are covered under this policy. The Company has not received any complaints during the year.

LEGAL & CORPORATE MATTERS

During the financial year ending March 31, 2010, the Company had allotted 9,24,90,413 equity shares to the fixed deposit holders towards settlement of their dues under the Scheme of Arrangement or Compromise under Section 391 of the Companies Act, 1956, approved by the Hon'ble Shimla High Court vide its order dated August 4, 2009. The Central Government appealed against the said order which was allowed by the Division Bench and the matter was remanded back to provide a hearing to Central Government. The matter is pending before the Single Judge for final adjudication.

During the year, the Company had withdrawn a Writ Petition filed before the Hon'ble High Court, Delhi for a decision in respect of listing of equity shares, allotted on preferential basis by the Company to Banks & Financial Institutions, Promoters and Foreign Investors in terms of Debt Restructuring Scheme approved by the CDR Cell in June, 2006. The Company has been constantly taking up the matter with the Stock Exchanges and SEBI. The Stock Exchanges have now allowed listing of shares, preferentially issued to promoters in the year 2005 and the Company is hopeful that it will get listing approval in respect of shares which have been issued to banks & financial institutions, foreign investor and balance unlisted shares of the promoters.

The cases filed against the Company on the basis of investigation carried under Section 235 of the Companies Act, 1956 and the consequential cases filed by the Registrar of Companies against the Company and its Directors are being defended by the Company.

The Company's appeal with the Hon'ble Supreme Court against the appointment of special directors on the board of the Company under Section 408 of Companies Act, 1956 is pending for final disposal.

EXTRACT OF ANNUAL RETURN

The detailed extract of Annual Report in Form MGT-9 as required under Section 134 (3) (a) of the Companies Act, 2013 is annexed and forms part of this report as ANNEXURE 'F'.

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

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and out go, as required under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is annexed and forms part of this report as ANNEXURE 'G'.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All the related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of business. There were no materially significant related party transactions, including certain arm's length transactions, during the year under review hence, the disclosure in Form AOC 2 is not required.

The complete details with respect to contracts or arrangements with related parties as required to be given under the Companies Act, 2013 and Clause 49 of the Listing agreement is given in the 'Corporate Governance Report'.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed review of the operations and performance of the Company is set out in the Management Discussion and Analysis Report pursuant to Clause 49 of the Listing Agreement which forms part of this Annual Report as ANNEXURE 'H'.

HUMAN RESOURCES

A detailed review of Human Resources of the Company is set out in the Management Discussion and Analysis Report.

CORPORATE GOVERNANCE

A Report on Corporate Governance along with a certificate from the Practicing Company Secretary regarding compliance with conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement forms part of this report and i s annexed as ANNEXURE ' I'.

ACKNOWLEDGEMENTS

Your Directors also take this opportunity to place on record their sincere appreciation to the Customers, Suppliers, Collaborators, Company's GMP consultants, Directors, Auditors, Bankers, Financial Institutions, Medical & Legal Professionals, Drug Control Authorities, Government Agencies, Business Associates, Employees and Shareholders for their unstinted support and confidence reposed in the Company and its Management.

Your Directors look forward to your continued support in our efforts to grow together and enhance health through quality products.

For and on behalf of Board of Directors

Sushil Suri

Place: New Delhi (Chairman & Managing Director) Date: August 7, 2015 DIN: 00012028




Mar 31, 2014

Dear Shareholders,

The Directors have pleasure in presenting the 29th Annual Report and Audited Accounts for the year ended 31st March, 2014.

FINANCIAL HIGHLIGHTS

(Rs. in Lacs) Particulars 2013-14 2012-13

Total Revenue 33,676 30,597

Operating Surplus 4,660 3,160

Finance cost 989 1,161

Cash Surplus 3,671 1,999

Non-Cash Items:

Depreciation & Amortisation 4,577 4,574

Profit/(Loss) before Extra-ordinary (906) (2,575) items and Tax

Extra ordinary items - Income (Net) 290 308

Profit/(Loss) Before Tax (616) (2,267)

Tax - -

Profit/(Loss) After Tax (616) (2,267)

MANAGEMENT OVERVIEW

Your company has recorded revenues of Rs. 33,676 Lacs during the current financial year against last year revenues of Rs. 30,597 Lacs, recording a growth of 10% over the previous year revenues. Operating revenue for the current year at Rs. 33,597 Lacs has posted a growth of 10.8% over the last year. Sales revenues of the company are steadily improving over the past few years.

Better planning, improved productivity and the effective cost control have helped the company to substantially improve its operating margins in the current year.

Growth in Active Pharmaceutical Ingredients (API) business has been moderate, though export price realisation was better on account of weak Indian Rupee against US Dollar. Home Diagnostics and branded formulation business has shown significant improvement in their sales revenues recording a growth of 21% and 27% respectively.

Current year''s operating surplus of Rs. 4,660 Lacs has translated into a growth of 48% against last year of Rs. 3,160 Lacs. Finance cost at Rs. 989 Lacs has come down by 15% against Rs. 1,161 Lacs incurred in the previous year.

Cash generated during the year stands at Rs. 3,671 Lacs against Rs. 1,999 Lacs generated during the last financial year.

The management is committed towards profitable growth of all its business segments by improving their operating and financial performance. It is committed for the timely servici ng of its financial obligations.

DIVIDEND

For the year under review the Directors do not recommend any dividend due to absence of any distributable surplus.

OPERATIONS

Current year sales revenues of Rs. 32,206 Lacs have registered a growth of around 9% against last year revenues of Rs. 29,578 Lacs. Home Diagnostics business has recorded a growth of 21% in its sales revenues. Active Pharmaceutical Ingredients (API) business and Finished Formulation business have recorded moderate growth of 6% & 5% respectively.

Continued focus on margin improvement, cost control and efficient utilization of resources has helped the company to significantly improve its operating margins over the preceding years. The operating surplus for the current year has improved to Rs. 4,660 Lacs from Rs. 3,160 Lacs in the previous year. Current year operating surplus has recorded 48% growth over the last financial year. After servicing the finance cost of Rs. 989 Lacs, current year net cash surplus is Rs. 3,671 Lacs against Rs. 1,999 Lacs generated in the previous year.

API export business registered a growth of around 11% whereas domestic API business recorded a dip of 6% over the last year. Atorvastatin and Fexofenadine business recorded handsome growth. Current year Loratadine revenues have not shown many variations against previous year revenues.

During the Current year ''Home Diagnostics'' business has recorded revenue of Rs. 4,431 Lacs against Rs. 3,652 Lacs recorded in previous financial year. The handsome growth in revenues was made possible by expanding consumer base by tying up with online portals for sales and marketing of company''s products.

Finished Formulation business has recorded sales revenues of Rs. 7,506 Lacs against Rs. 7,147 Lacs recorded in the previous year.

FINANCES

The company continues to service its debt obligations as per the terms approved by its lender banks and financial institutions. The company has been managing its day to day operations without any institutional working support. It is surviving on the surplus generated out of its operations. Further on account of accumulated losses including losses for the current year the provisions of Companies Act, 2013, place restrictions on redemption of Preference Shares. In view of above, the company has not been able to redeem optionally convertible preference shares which have fallen due for redemption and/or conversion on 4th May, 2014.

REPORT ON BUSINESS PERFORMANCE A. ACTIVE PHARMACEUTICAL INGREDIENTS (API)

Over the years API business has significantly contributed towards the overall growth of the company. During last few years expansion of domestic and export markets has fast tracked the revenue growth. During the current year a growth of 6% has been recorded in the annual sales revenues. Current year Revenues are at Rs. 20,288 Lacs against last year revenues of Rs. 19,061 Lacs. Loratadine API and its intermediates have recorded a marginal growth of 1.6% however Atorvastatin and Fexofenadine respectively has recorded a growth of 30% and 42% respectively. Montelukast with current year revenues of Rs. 4,967 Lacs has recorded a dip of around 9%.

There has been volume growth of 11% in ''Loratadine'' US business. Lower price realisation in terms of US Dollars has been compensated by weak rupee and hence squeeze in margins was not material. Loratadine intermediate business has been steady and marginally crossed the previous year sales revenues. The company was able to secure good business in other markets for the Loratadine supply based on its strength of cost effective route of Loratadine production. Further, the company has already been granted Loratadine Certificate of Suitability (CoS).

Desloratadine ''API'' has recorded sales revenue of Rs. 355 Lacs against Rs. 322 Lacs recorded in the last financial year. The company expects steady business in the coming years.

Current year sales revenues of Montelukast have recorded a dip of 9% over the previous year. Competitive prices offered by the Chinese markets have adversely affected the ''Montelukast'' business of the company. Morepen was granted Certificate of Suitability (CoS) for Montelukast during the year under review. It will facilitate the company in capturing the highly profitable regulated European markets.

Atorvastatin with its annual sales revenues of Rs. 2,351 Lacs has registered a growth of 30% over the last year. During the current year Fexofenadine'' have posted a healthy growth of 42% in its annual sales revenues. The company has also been granted Certificate of Suitability (CoS) for Crystalline Atorvastatin Calcium Tri hydrate.

During the current year, new products like Sitagliptin Phosphate, Rosuvastatin Calcium, Olmesartan Medoxomil and Aliskiren have been developed in the R&D laboratory. Their scale up as well as commercialization has been completed and these products are now commercially produced in plant to fulfill the customer''s requirement. This product basket has recorded sales revenue of Rs. 733 Lacs against Rs. 154 Lacs recorded in the last financial year.

The company continues to work towards enhancement and strengthening of its Intellectual Property. The company has filed four new patent applications during the year.

B. HOME DIAGNOSTICS

There has been healthy growth in current year sales revenues. Revenues for the current year are at Rs. 4,431 Lacs against Rs. 3,562 Lacs in the previous year. The company has tied up with online portals for expansion of its product reach with the end customers. The Company was able to reach households directly, however there was margin erosion. The company was not fully able to pass on the benefit of weak rupee to its customers. As most of the products are imported by the company weak rupee adversely affected the Home Diagnostics business of the company.

C. FINISHED FORMULATIONS

Current year annual revenue has registered a modest growth of 5% over the last financial year. Revenue for the current year is at Rs. 7,506 Lacs, against Rs. 7,147 Lacs recorded in the previous financial year. Branded formulation as a part of finished formulations registered a growth of 27% whereas contract manufacturing and brand sharing business reported a minor slide. The company has got the breakthrough for export business in semi and non-regulated countries which will give it a handsome growth and business in coming years. Further, the focus on institutional business has also improved and will give better results in coming years. The business performance is expected to improve significantly in the years ahead.

SUBSIDIARIES

PERFORMANCE OF SUBSIDIARIES:

The working of all its subsidiaries for the year under review and the performance of each of its subsidiaries is given here-in-below:

Dr. Morepen Limited

Over The Counter (OTC) business of the company carried out through its wholly owned subsidiary, Dr. Morepen Limited (DML) is showing healthy growth. During the current year OTC business has recorded a jump of 29% in its annual revenues. Sales revenue for the current year stood at Rs. 3,356 Lacs against last year revenues of Rs. 2,601 Lacs.

Net Profit for the current year is at Rs. 304 Lacs against Rs. 232 Lacs recorded during last financial year. There has been healthy growth in Net profits levels during the last few years.

The brand sharing business of the company has attained respectable volumes during the current year. It recorded revenue of Rs. 1,045 Lacs during the year against Rs. 361 Lacs in the last year.

The company has ambitious plan of increasing its sales revenues by capturing consumers'' attention. It continues its focus on marketing and media activities. However, limited cash flows provide little room for large scale marketing and other activities. We expect steady improvement in the business and financial performance which would allow a greater room for major actions on marketing and product expansions.

Total Care Limited

There was no business activity during the year. Other income of Rs. 10 Lacs was recorded during the year.

Morepen Inc.

This company is our marketing and distribution interface in USA for various OTC & other products. The Current year revenue was at Rs. 69 Lacs ($116,090) as against Rs. 69 Lacs ($120,022) in the previous year. Current year profit after tax is at Rs. 24 Lacs, against loss of Rs. 5 Lacs in the last year.

Morepen Max Inc.

This company has been in a dormant state for last few years. Board of Directors consider it expedient to divest the investment in the company at an appropriate time.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis of Corporate Governance pursuant to Clause 49 of the Listing Agreement is enclosed and forms part of the Annual Report as per Annexure ''A''.

LEGAL & CORPORATE MATTERS

During the financial year ending 31st March, 2010, the company had allotted 9,24,90,413 equity shares to the fixed deposit holders towards settlement of their dues under the Scheme of Arrangement or Compromise U/s 391 of the Companies Act, 1956, approved by the Hon''ble Shimla High Court vide its order dated 4th August, 2009. The Central Government appealed against the said order which was allowed by the Division Bench and the matter was remanded back to provide a hearing to Central Government. The matter is pending before a Single Judge for final adjudication.

The company has also filed a Writ Petition before the Hon''ble High Court, Delhi for a decision on listing of equity shares allotted on preferential basis by the company to Banks & Financial Institutions, Promoters and Foreign Investors in the wake of Debt Restructuring Scheme approved by the CDR Cell in June, 2006. The matter is sub-judice.

The cases filed against the company on the basis of investigation carried U/s 235 of the Companies Act, 1956 and the consequential cases filed by the Registrar of Companies against the company and its Directors are being defended by the company.

The company''s appeal with the Hon''ble Supreme Court against the appointment of special directors on the board of the company u/s 408 of Companies Act, 1956 is pending for final disposal.

ENVIRONMENT

The company as a responsible corporate citizen is committed for safeguarding the environment. It is taking all necessary and mandated precautions for the proper upkeep of natural resources. Good manufacturing practices are adhered to consistently in carrying out day to day operations. It also takes proper care of treatment of effluents and its disposal. Air and water pollution have been contained within permissible limits by adopting latest techniques. Timely up-gradation of all equipment''s i.e. production equipment''s, Effluent Treatment Plant and other related equipment''s are being done. The company is regularly investing in new equipment''s and methods of production to lessen the power and fuel consumption and thereby regulate emission of particles and gases as per laid down norms.

HUMAN RESOURCES

Your Company had always endeavored to attract good and talented people. Many of employees have long term association with the company.

The Company has a long tradition of providing rightful and equal opportunity to all its employees. It has strong belief in the spirit of fairness and transparency at all levels of employee engagement. The company understands that Human capital of a company differentiates between progressive companies and the rest of the companies. It remains committed to protect and promote the interest of its work force by way of collective efforts of all the team members. The inter-personal relationship amongst workers, staff and officers has always been cordial and healthy.

As on 31st March, 2014, 1342 employees were working for the company across all levels at various locations.

PARTICULARS OF EMPLOYEES

No employee of the Company is in receipt of remuneration in excess of the limits prescribed under the provisions of Section 21 7(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended up to date.

DISCLOSURE OF PARTICULARS

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and out go, as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors), Rules 1988 is annexed and forms part of this report as Annexure-''B''.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of provisions of Section 217(2AA) of the Companies Act, 1956, ("Act"), your Directors confirm that:

1. In the preparation of annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, wherever appl icable.

2. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.

3. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detecting fraud and other irregularities.

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

DIRECTORS

Mr. Manoj Joshi, Mr. Sukhcharan Singh and Mr. B.R. Wadhwa, have given their consent to act as a Director of the Company pursuant to Section 152 of Companies Act, 2013, read with Rule 8 of Companies (Appointment and Qualification of Directors) Rules, 2014 and have offered themselves to be appointed as the Independent Directors of the Company. Your directors recommended their appointment as Independent Directors on the Board, in accordance with the provisions of Section 149 of Companies Act, 2013, read with Companies (Appointment and Qualification of Directors) Rules, 2014, as amended from time to time, in the ensuing Annual General Meeting.

Mr. Sushil Suri, Chairman & Managing Director of the Company, who is liable to retire by rotation pursuant to the provisions of Section 152 of Companies Act, 2013, read with Companies (Appointment and Qualification of Directors) Rules, 2014, as amended from time to time, has given his consent and being eligible has offered himself for re-appointment. Your directors recommended his re-appointment as Chairman & Managing Director of the Company in the ensuing Annual General Meeting.

Dr. A. K. Sinha, Whole-Time Director of the Company, has given his consent and offered himself for appointment as Whole-Time Director of the Company pursuant to Section 196, 197, Schedule V and other applicable provisions of Companies Act, 2013, read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Your directors recommended his appointment as Whole-Time Director of the Company in the ensuing Annual General Meeting.

Further, as per the provisions of Section 149(1) of the Companies Act, 2013, Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2014 and revised clause 49 of Listing Agreement it is mandatory to appoint a Woman Director on the Board of the Company. However, as per the terms of the order of the Supreme Court of India, in the case of Morepen Laboratories Limited vs. Union of India, status quo as on 16th July, 2007 has been ordered to be maintained. Therefore, the Board has expressed its inability to comply with the said requirements and has asked the management to seek further legal opinion on the matter. The Company shall comply with the above requirements once the case has been decided by the Hon''ble Supreme Court.

COST AUDIT

The Board of Directors of the Company appointed M/s. Vijender Sharma & Co., Cost Accountants, as the Cost Auditor of the Company for the year ended March 31, 2014. The due date for filing the Cost Audit Reports in XBRL mode for the financial year ended March 31, 2013 was September 30, 2013 and the Cost Audit Reports were filed by the Cost Auditor on September 29, 2013. The due date for filing the Cost Audit Reports for the financial year ended March 31, 2014 is September 30, 2014.

AUDITORS

M/s. M. Kamal Mahajan And Co., Chartered Accountants, retire as Auditors of the Company at conclusion of the ensuing Annual General Meeting and have confirmed their eligibility under Section 141(3) of the Companies Act, 2013 and are willing to continue as Auditors of the Company, if re-appointed.

EXPLANATION TO AUDITORS'' REPORT

The Auditors have vide Para (i) (a) of the annexure to the audit report commented on the quantitative details and situation of items like pipe, meter instruments and other similar items. Your Company is a pharmaceutical company, where, in the manufacturing plants controlled reactions take place in the reactors and the items of Plant and Machinery like pipes runs criss-cross throughout the various sections of the plant, like pilot plants, utility sections and various control valves and meters and instrumentations are mounted on such pipes, samplings, reactors and items of Plant & Machinery. Therefore, on account of nature of the industry, these particular items cannot be attributed to a particular place to the exclusion of others. Further, in your Directors view, this is not a qualification but an observation of a clarificatory nature.

Further, the auditors vide Para (xi) of the annexure to the audit report have commented on delay in payment of dues to the lenders. The Company reiterates its commitment to service its debt obligations as per the agreed terms.

LISTING

Annual listing fees for the year 2014-2015 have been paid to both the Stock Exchanges i.e. BSE and NSE. The Equity shares continue to be listed on BSE and NSE.

CORPORATE GOVERNANCE

A detailed report on Corporate Governance pursuant to Clause 49 of the Listing Agreement is given in a separate section and forms part of the Annual Report.

The statement pursuant to section 212 of the Companies Act, 1956 is annexed as Annexure ''C'' and forms part of this Report.

ACKNOWLEDGMENTS

Your Directors place on record their sincere appreciation for the valuable inputs and continued support extended by the Employees, Customers, Suppliers, Collaborators, Company''s GMP consultants, Directors, Auditors, Bankers, Financial Institutions, Medical& Legal Professionals, Drug Control Authorities, Government Agencies, Business Associates, and our large Shareholder Family.

For and on behalf of the Board

Sd/- Sushil Suri Chairman & Managing Director New Delhi 9th August, 2014


Mar 31, 2013

Dear Shareholders,

The Directors have pleasure in presenting the 28th Annual Report and Audited Accounts for the year ended 31st March 2013.

FINANCIAL HIGHLIGHTS

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

Total Revenue 30597 27051

Operating Surplus 3160 1865

Finance cost 1161 796

Cash Surplus 1999 1069

Non Cash Items

Depreciation & Amortisation 4574 4689

(Loss) before Extra ordinary items (2575) (3620)

Extra ordinary items - Income (Net) 308 1204

(Loss) Before Tax (2267) (2416)

Tax

(Loss) after Taxation (2267) (2416)







MANAGEMENT OVERVIEW

Current year''s total revenues at Rs. 30597 Lacs have recorded a growth of 13.1% over previous year revenues of Rs. 27051 Lacs. There has been consistent growth in operating revenues year after year, for the current year, the revenues are at Rs. 30335 Lacs against Rs. 26950 Lacs during the last year, a growth of 12.6%. With the sustained and dedicated team efforts, there has been steady improvement in the operations of your company.

Better sales realisation and effective control over the incidental costs have paved the way for substantial improvement in current year operating surplus.

Growth in Active Pharmaceutical Ingredients (API) business and the weakness in Indian Rupee led to significant improvement in the current year operating surplus which during the year has risen to Rs. 3160 Lacs compared to Rs. 1865 Lacs, recorded during the previous year. Current year finance cost has increased by Rs. 365 Lacs on account of higher interest outgo.

Cash generated during the year at Rs.1999 Lacs has recorded a growth of 87%, against Rs.1069 Lacs generated in the last financial year.

The management is committed towards growth in all business segments and better financial performance so as to make it possible to service all its obligations in time.

DIVIDEND

For the year under review the Directors do not recommend any dividend due to absence of any distributable surplus.

OPERATIONS

Current year''s net sales revenues at Rs. 29578 Lacs are up by 13% over last year''s revenues of Rs. 26117 Lacs. The growth in sales revenues is primarily driven by the ''Active Pharmaceutical Ingredients'' (API) and Finished Formulations business segments, which have recorded growth of 13% & 23% respectively in the current year.

Improved margins and efficient utilization of resources have enabled the company to increase its operating surplus from Rs.1865 Lacs to Rs. 3160 Lacs in the current year i.e. a growth of 69%. After servicing the finance cost of Rs. 1161 Lacs, net cash surplus of Rs. 1999 Lacs has been generated during the year, against Rs. 1069 Lacs in the previous year.

API business has recorded a growth of 13% in the current year on the strength of 38% increase in its domestic business. Export segment of API business grew by over 6% in the current year. However Loratadine API & intermediates business has de-grown by 4.5% in the current year.

Current year sales revenues from sales of Montelukast & its intermediates have registered a growth of 60%, whereas growth in Atorvastatin revenues was recorded at 71%.

During the Current year ''Home Diagnostics'' business has recorded revenue of Rs. 3562 Lacs, against Rs. 3451 Lacs of previous financial year. The growth in revenues has been marginal at 3% over the last financial year.

Finished Formulation business at Rs. 7147 Lacs has registered a revenue growth of 23% against previous year revenues of Rs. 5789 Lacs.

FINANCES

The company continues to service its debt obligations as per the terms approved by its lender banks and financial institutions.

REPORT ON BUSINESS PERFORMANCE

A. ACTIVE PHARMACEUTICAL INGREDIENTS (API)

API business has been steadily moving on the path of progress. During the year growth of 13% has been recorded in its annual revenues. Current year Revenues are at Rs. 19061 Lacs against last year revenues of Rs. 16880 Lacs. Loratadine API and its intermediates have secured a business of Rs. 10660 Lacs during the current financial year, which is marginally lower than the business recorded in the last financial year.

The growth in ''Loratadine'' exports to the regulated markets was restricted on account of its lower quantity off take. The company is able to secure good business in Japanese and Chinese markets for the supply of ''Loratadine'' intermediates.

On account of USFDA approval for Desloratadine ''API'' received in the last year, export revenues are steadily rising. During the current year revenue worth Rs. 322 Lacs were recorded, against Rs. 276 Lacs in the last year. The company is expecting higher revenues in the coming years.

Final response for Certificate of Suitability (COS) for Montelukast, anti-asthma drug, was filed during the current year. It would help in capturing the highly profitable regulated European markets. ''Current year sales revenues of Montelukast API & its intermediates have registered a growth of 60% over the previous year. Morepen was granted Montelukast process patent in US during the year under review.

Final response for COS & USDMF for Crystalline Atorvastatin Trihydrate was also filed during the current year. Atorvastatin, a cholesterol lowering drug, with current year annual revenue of Rs. 1811 Lacs, has registered a growth of 71% over previous financial year. Fexofenadine'' sales revenues have posted a growth of 25% during the current year.

During the current year, new products Sitagliptin, Saxagliptin and Olmesartan were taken for development in the R&D laboratory. New products like Rosuvastatin and Aliskiren have contributed more than Rs. 154 L to the top line during the year. In order to enhance and strengthen the Intellectual Property of the company five new patent applications were filed during the year. Further, Morepen was awarded Pharmexcil Patent Award second time in a row.

B. HOME DIAGNOSTICS

Current year sales revenues at Rs. 3562 Lacs are marginally up by 3% as compared to previous year revenues of Rs. 3451 Lacs. There has been a growth of 21% in sales revenue of ''Home Diagnostics'' products, with revenue of Rs. 3274 Lacs during the current year. With an objective to stay focussed on main business of sales of ''Home Diagnostics'', clinical diagnostics'' business, was not promoted during the current year. Weak rupee continues to affect the profitability of the business. Keeping in view the market dynamics and affordability of consumers the company absorbed the input price increase.

C. FINISHED FORMULATIONS

Annual revenue for the current year is at Rs. 7147 Lacs, against Rs. 5789 Lacs recorded in the previous financial year, a growth of more than 23%. We trust that the business performance shall continue to improve in the coming financial years. New customers and new products have been added, which contributed a larger growth in contract manufacturing business during the year.

SUBSIDIARIES

Performance of subsidiaries-

The working of all its subsidiaries for the year under review and the performance of each of its subsidiaries is given here- in-below:

Dr. Morepen Limited

The performance of the company dealing in sales and distribution of Over The Counter (OTC) products is steadily improving. Sales revenue for the current year at Rs. 2601 Lacs has recorded a growth of 12% over last year revenues of Rs. 2321 Lacs.

Net profits have improved significantly during the year. Net Profit of Rs. 232 Lacs was recorded during the year as against Rs. 33 Lacs recorded during last year.

Improved revenue realisation has led to generation of a Cash Surplus of Rs. 238 Lacs, against Rs. 147 Lacs in the previous year, a growth of 62%.

The company would continue its focus on marketing and media activities to expand the markets for its entire product range. We expect steady improvement in the business and financial performance in the coming years.

Total Care Limited

Due to change in business dynamics there was not much business activity during the year under review. Sales revenue was Rs. 14 Lacs, against Rs. 106 Lacs in the previous financial year.

Morepen Inc.

This company is our marketing and distribution interface in USA for various OTC & other products. The Current year revenue was at Rs. 65 Lacs ($120,022) as against Rs. 86 Lacs ($168,744) in the previous year. Loss during the year is pegged at Rs. 5 Lacs, against profit after tax of Rs. 28 Lacs in the last year.

Morepen Max Inc.

This company is in a dormant state, without any further investment and activity during past few years. Board of Directors considers it expedient to divest the investment in the company at an appropriate time.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis of Corporate Governance pursuant to Clause 49 of the Listing Agreement is enclosed and forms part of the Annual Report as per Annexure ''A''.

LEGAL & CORPORATE MATTERS

During the financial year ending 31st March, 2010, the company had allotted 9,24,90,413 equity shares to the fixed deposit holders towards settlement of their dues under the Scheme of Arrangement or Compromise U/s 391 of the Companies Act, 1956 , approved by the Hon''ble Shimla High Court vide its order dated 4th August, 2009. The Central Government appealed against the said order which was allowed by the Division Bench and the matter was remanded back to give a hearing to Central Government. The matter is pending before a Single Judge for final adjudication.

The company has also filed a Writ Petition before the Hon''ble High Court, Delhi for a decision on listing of equity shares allotted on preferential basis by the company to Banks & Financial Institutions, Promoters and Foreign Investors in the wake of Debt Restructuring Scheme approved by the CDR Cell in June 2006. The matter is sub-judice.

The cases filed against the company on the basis of investigation carried U/s 235 of the Companies Act, 1956 and the cases filed by the Registrar of Companies against the company and its Directors are being defended by the company.

The company''s appeal with the Hon''ble Supreme Court against the appointment of special directors on the board of the company u/s Section 408 of Companies Act, 1956 is pending for final disposal.

ENVIRONMENT

The company remains committed to safeguarding the environment in its day to day operations. It strives to adopt good manufacturing practices and also takes proper care of treatment of effluent and its disposal. Air and water pollution have been contained within permissible limits by adopting latest techniques. Continuous up-gradation of all equipments i.e. production equipments, Effluent Treatment Plant and other related equipments is being done regularly. Also with the help of various manpower training programs, the company aids and assists environment protection in terms of lower fuel consumption and lesser emission of particles and gases.

HUMAN RESOURCES

Your Company continues to attract right and talented people. Most of employees have long term association with the company.

The Company remains committed to provide rightful and equal opportunity to all its employees in the spirit of fairness and transparency. The company believes that its Human capital plays an important role in its development and remains committed to protect and promote its interest by way of collective efforts of all the team members. The inter-personal relationship amongst workers, staff and officers has always been cordial and healthy.

As on 31st March 2013, 1333 employees were working for the company across all levels at various locations.

PARTICULARS OF EMPLOYEES

None of the employees of the Company is in receipt of remuneration in excess of the limits prescribed under the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended up to date.

DISCLOSURE OF PARTICULARS

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and out go, as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors), Rules 1988 is annexed and forms part of this report as Annexure-''B''.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of provisions of Section 217(2AA) of the Companies Act, 1956, ("Act"), your Directors confirm that:

1. In the preparation of annual accounts, the applicable accounting standards have been followed, along with proper explanation relating to material departures, wherever applicable.

2. They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.

3. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detecting fraud and other irregularities.

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

DIRECTORS

In accordance with the provisions of Companies Act, 1956 and the Company''s Articles of Association, Mr. Sukhcharan Singh, Director of the company retires by rotation and offers himself for re-appointment. Your Directors recommend his reappointment as Director on the Board in the ensuing Annual General Meeting.

COST AUDIT

The Board of Directors of the Company appointed M/s. Vijender Sharma & Co., Cost Accountants, as the Cost Auditor of the Company for the year ended March 31, 2013. The due date for filing the Cost Audit Reports in XBRL mode for the financial year ended March 31, 2012 was February 28, 2013 and the Cost Audit Reports were filed by the Cost Auditor on February 25, 2013. The due date for filing the Cost Audit Reports for the financial year ended March 31, 2013 is September 30, 2013.

AUDITORS

M/s. M. Kamal Mahajan And Co., Chartered Accountants, retire as Auditors of the Company at conclusion of the ensuing Annual General Meeting and have confirmed their eligibility under Section 224(1B) of the Companies Act, 1956 and are willing to continue as Auditors of the Company, if re-appointed.

EXPLANATION TO AUDITORS'' REPORT

The Auditors have vide Para (i) (a) of the annexure to the audit report commented on the quantitative details and situation of items like pipe, meter instruments and other similar items. Your Company is a pharmaceutical company, where, in the manufacturing plants controlled reactions take place in the reactors and the items of Plant and Machinery like pipes runs criss-cross throughout the various sections of the plant, like pilot plants, utility sections and various control valves and meters and instrumentations are mounted on such pipes, samplings, reactors and items of Plant & Machinery. Therefore, on account of nature of the industry, these particular items cannot be attributed to a particular place to the exclusion of others. Further in your Directors view, this is not a qualification but an observation of a clarificatory nature.

Further the auditors vide Paras (iii) (b) & (xi) of the annexure to the audit report have commented on delay in payment of dues to the lenders. The Company reiterates its commitment to service its debt obligations as per the agreed terms.

LISTING

During the year 90,00,000 Equity Shares were admitted for trading on Bombay Stock Exchanges Limited (BSE), Mumbai & National Stock Exchange of India Limited (NSE), Mumbai. Annual listing fees for the year 2013-2014 have been paid to both the Stock Exchanges i.e. BSE & NSE. The Equity shares continue to be listed on BSE and NSE.

CORPORATE GOVERNANCE

A detailed report on Corporate Governance pursuant to Clause 49 of the Listing Agreement is given in a separate section and forms part of the Annual Report.

The statement pursuant to section 212 of the Companies Act, 1956 is annexed as Annexure ''C'' and forms part of this Report.

ACKNOWLEDGMENTS

Your Directors place on record their sincere appreciation for the valuable inputs and continued support extended by the Employees, Customers, Suppliers, Collaborators, Company''s GMP consultants, Directors, Auditors, Bankers, Financial Institutions, Medical Professionals, Drug Control Authorities, Government Agencies, Business Associates, and our large Shareholder Family.

For and on behalf of the Board

Sushil Suri Chairman & Managing Director

New Delhi 13th May, 2013


Mar 31, 2012

The Directors have pleasure in presenting this 27th Annual Report and Audited Accounts for the year ended 31st March 2012.

FINANCIAL HIGHLIGHTS

(Rs. in Lacs)

Particulars 2011-12 2010-11

Total Revenue 27051 21735

Operating Surplus 1865 828

Finance cost 796 623

Cash Surplus 1069 205

Non Cash Items

Depreciation & Amortisation 4689 4578

(Loss) before Extra ordinary items (3620) (4373)

Extra ordinary items - Income (Net) 1204 -

(Loss) Before Tax (2416) (4373)

Tax - (75)

(Loss) after Taxation (2416) (4298)

MANAGEMENT OVERVIEW

Your company has recorded a healthy growth of 25%, in its annual operating revenues for the current year. Operating revenues for the current year have been recorded at Rs. 26950 Lacs against Rs. 21631 Lacs achieved in the previous financial year. The management team and entire work force of your company is working hard to improve upon its business and financial performance across all business segments.

The management's continuous emphasis on cost control and the economies of scale of increased business volumes have led to generation of higher operating surplus in the current financial year as compared to surplus generated in the previous year.

Increased Active Pharmaceutical Ingredients (API) business and better export realization due to weakening rupee has led to improved operating margins for the current year. Operational surplus during the year has risen to Rs. 1865 Lacs from Rs. 828 Lacs, recorded in the last year, on the strength of growth in revenues, better price realization and the cost effective controls. During the current year finance cost has increased by Rs. 173 Lacs on account of higher interest outgo on restructured debt. However during the year, there has been increased net cash generation of Rs. 1069 Lacs against Rs. 205 Lacs generated in the previous year.

Efforts continue towards improving performance across all the business segments so that with profitable growth and increased cash flows, the company is able to timely service all its financial obligations.

DIVIDEND

For the year under review the Directors do not recommend any dividend due to absence of any distributable surplus. OPERATIONS

In the current year, sales revenues at Rs. 26489 Lacs are up by 24% over previous year sales revenues of Rs. 21410 Lacs. The main driver of this impressive growth in sales revenues is the 'Active Pharmaceutical Ingredients' (API) business, which recorded growth of 38% in the current year.

The increased operating surplus of Rs.1037 Lacs is attributable to profitable growth in API business and continuous cost control measures exercised across all business segments. However increase in finance cost by Rs. 173 Lacs, on account of increased interest rate on restructured debt, has restricted the growth in cash surplus to Rs. 864 Lacs.

Annual growth of 38% in API business was achieved due to 41% growth in export business and 18% growth in domestic business. Loratadine API & intermediates business has grew to Rs. 11161 Lacs as against Rs. 7708 Lacs in last financial year, thus recording a growth of 45%.

Montelukast, anti-asthmatic drug, with sales revenues of Rs. 3420 Lacs, registered an increase of 52% over the previous year business of Rs. 2255 Lacs. Atorvastatin sales revenues have gone up to Rs. 1059 Lacs, from previous year's sale revenues of Rs. 634 Lacs. Weak rupee has positively affected the API business.

Formulation business, due to on going reorganization in distribution network and product rationalization, has recorded lower annual revenues of Rs. 1796 Lacs, against Rs. 1851 Lacs in the previous financial year.

Home Health & Diagnostics Equipment (Medipath) business, with current year revenue of Rs. 3512 Lacs, has recorded a growth of 13% over the previous year. Home Health segment has recorded a growth of 11%, whereas Clinical Diagnostics segment has shown a growth of 9%.

Pharmaceutical Contract Manufacturing (PCM) business at Rs. 3993 Lacs has registered a growth of 9% over the previous financial year.

FINANCES

The company continues to service its debt obligations and settle its debt in terms of approved CDR (Corporate Debt Restructuring) scheme and also as in terms of individual settlement with banks and financial institutions.

REPORT ON BUSINESS PERFORMANCE A. ACTIVE PHARMACEUTICAL INGREDIENTS (API)

API business has recorded a handsome growth in its top line for the current financial year, vis-a-vis last financial year. Current year sales revenues at Rs. 17785 Lacs are up by 38% over last year's revenue of Rs. 12893 Lacs. Loratadine API and intermediates business at Rs. 11161 Lacs has recorded a growth of 45% over the last year. Current year 'Loratadine' API sales at Rs. 9411 Lacs, is up by 43% over the last year, whereas its intermediate business has grown by 24%.

'Loratadine', anti-allergic drug, exports to the regulated markets, has registered a handsome growth of 33% over the last financial year. The company's increased business with Japanese and Chinese market for supply of 'Loratadine' intermediates has helped the company to grow at 24% in intermediate business of 'Loratadine'.

USFDA approval for Desloratadine 'API' was received during the year. Out of current year revenue of Rs. 276 Lacs, US markets generated revenue worth Rs.102 Lacs. The company is eyeing increased penetration in highly regulated US API markets which is expected to lead to profitable growth in the coming years.

Certificate of Suitability (COS) for Montelukast, anti-asthma drug, was filed during the current year to capture the highly profitable regulated European market. 'Montelukast', with annual growth of 52% has recorded sales revenue of Rs. 3420 Lacs, in the current financial year. Morepen was granted Montelukast process patent in Europe as well as Canada during the year under review.

COS & USDMF for Crystalline Atorvastatin Trihydrate was also filed during the current year to enter the highly profitable regulated markets. Atorvastatin, cholesterol lowering drug, with current year annual revenue of Rs. 1059 Lacs, has shown a growth of 67% over previous financial year. Morepen was awarded Pharmexcil Patent Award for the patent of Amorphous Atorvastatin already granted in US and Canada.

'Fexofenadine' business worth Rs. 721 Lacs was achieved during the current financial year against Rs. 249 Lacs in the previous year.

During the year, new products like Carvedilol, Linezolid, Rosuvastatin and Aliskerin have added more than Rs. 101 L during the year.

Besides this, two patent applications for new polymorphic form of 'Rosuvastatin' and Process patent on 'Fexofenadine' were filed to enhance and strengthen the Intellectual properties of the company.

B. MEDIPATH (Home Health & Diagnostics Equipments)

Sales revenue for the current year at Rs. 3451 Lacs are up by 11% over the previous year. 'Home Health' products with annual revenues of Rs. 2695 Lacs, have registered a growth of 11%. Sale of weighing scales doubled on receipt of big corporate order, whereas glucometer revenues rose by 26% over the last year. 'Clinical Diagnostics' business with annual sales of Rs. 578 Lacs has grown by 9% over the last year. 'Blood Banking' business with annual sales of Rs. 178 Lacs is up by 13%. During the year, Aids & Hepatitis product business has witnessed a growth of 38%. Weak rupee adversely affected the current year margins as the company was not able to pass on the additional cost to consumer due to market competition.

C. BRANDED PRESCRIPTION DRUGS

Current year sales revenues for the domestic formulation business, at Rs. 1790 Lacs, are marginally down against previous year's revenues of Rs. 1851 Lacs, as the company was engaged in reorganizing its market territories, product mix and scaling down the injectable business. Gastrointestinal formulations have shown a growth of 12% whereas Antibiotics business is down by 5%. Share of Gastrointestinal formulations in overall formulations sales has gone up to 36% from 31% in the last year, whereas share of Antibiotics has remained static at 48% of last year.

D. PHARMACEUTICAL CONTRACT MANUFACTURING (PCM)

Co- branding business of Rs. 2436 Lacs has recorded a growth of 15% over the last year, whereas third party formulation manufacturing business is up by 5% over the last year. New customers and new products were added during the year.

Revival of old customer base having confidence in quality of 'Morepen' products has resulted in the increased capacity utilization and business growth.

SUBSIDIARIES Performance of subsidiaries-

The working of all its subsidiaries for the year under review and the performance of each of its subsidiaries is given here- in-below:

Dr. Morepen Limited

Current year sale revenue of Rs. 2321 Lacs has registered a growth of 50% against last year's revenues of Rs. 1543 Lacs.

The company's efforts in re-jigging the distribution channels have borne fruit and paved the way for deeper penetration of targeted markets for its varied range of its 'OTC' products.

Fresh demand was created by extensive field coverage and product promotion on TV channels. Improved distribution and trade practices helped the company in lowering its investment in working capital and significantly lower return of goods.

Higher current year sales revenues have enabled the company to generate a cash surplus of Rs. 147 Lacs against cash deficit of Rs. 184 Lacs in the previous financial year. This is despite the fact, that the company has made additional marketing spends of Rs. 104 Lacs during the current financial year.

The company is continuously expanding its marketing and media activities, with a view to enhance product visibility and product placement. The financial performance of the company is expected to improve significantly in the coming years.

Total Care Limited

Current year sales revenue of Rs. 106 Lacs, have significantly improved over last year revenues of Rs. 50 Lacs. The company is primarily selling goods to its holding company. Current year loss at Rs. 7 Lacs is nearly the same as last year.

Morepen Inc.

This company is our marketing and distribution interface in USA for various OTC & other products. The Current year revenue was at Rs. 86 Lacs ($1.69 Lacs) as against Rs. 74 Lacs ($1.64 Lacs) in the previous year, where as profit after tax is Rs. 28 Lacs.

Morepen Max Inc.

This company is in a dormant state, without any further investment and activity over the previous few years. Board of Directors considers it expedient to dispose off the investment in the company at an appropriate time.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis of Corporate Governance pursuant to Clause 49 of the Listing Agreement is provided and forms part of the Annual Report as per Annexure 'A'.

LEGAL MATTERS

During the financial year ending March 31st, 2010, the Company had allotted, 9,24,90,413 Equity Shares to the fixed deposit holders towards settlement of their dues, under the Scheme of arrangement or compromise u/s 391 of the Companies Act, 1956, approved by Hon'ble High Court at Shimla vide order dated 4th August, 2009. The central government preferred an appeal against the said order which was allowed. The Hon'ble Divisional Bench remanded the matter back to the Single Judge. The matter is pending final adjudication.

The cases filed against the company, on the basis of investigation carried u/s 235 of the Companies Act, 1956 and by the Registrar of Companies are being defended by the company and its directors.

LISTING OF SHARES OF THE COMPANY

In July 2006, debt restructuring scheme of the company was approved by Corporate Debt Restructuring (CDR) Cell. In pursuance of the approved CDR scheme 20,62,95,790 Equity Shares were allotted to the banks & financial institutions, promoters and the foreign investor on a preferential basis. The company has complied with the necessary requirements in respect of listing of these shares by the Stock Exchanges. However these shares are yet to be listed. The company has now filed a writ petition before Hon'ble High Court at Delhi, to facilitate an early decision in respect of the above matter. The matter is now sub-judice.

ENVIRONMENT

The company has always focused on environment protection in its day to day operations by adopting various good practices which take care of effluent treatment and proper disposal. Air and water pollution have been contained within permissible limits by adopting latest techniques. By way of constant up-gradation in the efficiency of Effluent Treatment Plant, other related equipments and the training program, we have consistently maintained the track record of proper upkeep and maintenance.

HUMAN RESOURCES

Your Company is doing its best to attract right and talented people. The company is improving its track record of retaining the valued Human Resources. People at most of the levels have maintained long term association with the company paving the way for improved decision making and operational efficiency.

The Company is committed to provide rightful and fair opportunity to people at all levels and encourage the spirit of openness and transparency. The company believes that its Human Resource is an asset for the company and a participative work environment driven by sense of team work and collective ownership will ensure the growth and success of the company. The inter-personal relationship amongst workers, staff and officers continues to be extremely cordial.

As on 31st March 2012, 1379 employees were working for the company across all levels and at various locations.

DISCLOSURE OF PARTICULARS

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and out go, as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors), Rules 1988 is annexed and forms part of this report as Annexure-'B'.

DIRECTORS' RESPONSIBILITY STATEMENT

Your directors certify:

1. That the applicable accounting standards have been followed along with proper explanation relating to material departures in the preparation of annual financial statements.

2. That they have selected such accounting polices and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.

3. That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detecting fraud and other irregularities.

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

DIRECTORS

In accordance with the provisions of Companies Act, 1956 and the Company's Articles of Association, Mr. Manoj Joshi and Mr. Bhupinder Raj Wadhwa, Directors of the company retire by rotation and offer themselves for re-appointment. Your Directors recommend their reappointment as Directors on the Board in the ensuing Annual General Meeting.

AUDITORS

M/s. M. Kamal Mahajan And Co., Chartered Accountants, retire as Auditors of the Company at conclusion of the ensuing Annual General Meeting and have confirmed their eligibility under Section 224(1B) of the Companies Act, 1956 and willingness to continue as Auditors of the Company, if re-appointed.

EXPLANATION TO AUDITORS' REPORT

The Auditors have vide Para (i) (a) of the annexure to the audit report commented on the quantitative details and situation of items like pipe, meter instruments and other similar items. Your Company is a pharmaceutical company, where, in the manufacturing plants controlled reactions take place in the reactors and the items of Plant and Machinery like pipes runs criss-cross throughout the various sections of the plant, like pilot plants, utility sections and various control valves and meters and instrumentations are mounted on such pipes, samplings, reactors and items of Plant & Machinery. Therefore, by the very nature of the industry, these particular items cannot be attributed to a particular place to the exclusion of other place. Further in your Directors view, this is not a qualification but clarification only.

Further the auditors have vide Para (xi) of the annexure to the audit report commented on certain defaults made in repayment of dues to debenture holders. The Company reiterates its commitment to settle these lenders and has taken steps to settle with them as per the CDR terms.

LISTING

The Company has paid the annual listing fee for the year 2011-2012 to The Bombay Stock Exchange Limited, Mumbai (BSE) and The National Stock Exchange Limited, Mumbai (NSE).The Equity shares continue to be listed on BSE and NSE.

CORPORATE GOVERNANCE

A detailed report on Corporate Governance pursuant to Clause 49 of the Listing Agreement is given in a separate section and forms part of the Annual Report.

The statement pursuant to section 212 of the Companies Act, 1956 is annexed as Annexure 'C' and forms part of this Report.

ACKNOWLEDGEMENTS

Your Directors appreciate the valuable co-operation and continued support extended by the Employees, Customers, Suppliers, Collaborators, Company's GMP consultants, Auditors, Bankers, Financial Institutions, Medical Professionals, Drug Control Authorities, Government Agencies, Business Associates, and our large Shareholder Family.

For and on behalf of the Board

Sushil Suri

Chairman & Managing Director

New Delhi

14th May, 2012


Mar 31, 2011

Dear Shareholders,

The Directors have pleasure in presenting this 26th Annual Report and Audited Accounts for the year ended 31st March 2011.

FINANCIAL HIGHLIGHTS

(Rs. in Lacs)

Particulars 2010-11 2009-10

Sales and Other Income 21510 19616

Operating Surplus 940 1360

Interest 604 357

Cash Surplus 336 1003

Non Cash Items

Depreciation & Amortization 4571 4563

Loss before Extra ordinary Items (4234) (3560)

Extra ordinary items (Net) - 3386

Loss Before Tax (4234) (174)

Loss after Taxation (4234) (174)



MANAGEMENT OVERVIEW

The current year revenues at Rs. 21510 lacs are up by 10% over the last year. The company is steadily improving upon its sales performance year after year. During the year the company's Sales and operating income has gone up to Rs. 21100 Lacs against Rs. 19583 Lacs in the previous year. The cost reduction and process improvement efforts are on to improve upon the bottom line. Increased product manufacturing cost vis-à-vis sales price realization both for domestic and export markets and change in product mix have affected the bottom-line of the company. Current year operational surplus has come down to RS. 940 Lacs from Rs. 1360 Lacs in the last year, on account of the margins squeeze. Apart from reduced operating surplus increased interest burden by Rs. 247 Lacs in the current year, has also contributed to reduced cash surplus available with company to Rs. 336 Lacs from Rs. 1003 Lacs in the last year.

The management is focusing on the continuous improvement in business dynamics so as to have a positive impact both on top line and bottom line. It is putting in its best of the efforts to help the company to move forward on the profitable growth path.

DIVIDEND

For the year under review the Directors do not recommend any dividend due to absence of any distributable surplus.

OPERATIONS

During the year the company has recorded a growth of 10% in its annual sales revenues as compared to previous year. It could be made possible by adopting focused approach for growth of business, across all segments. The operating surplus during the year was at Rs. 336 Lacs against Rs. 1360 Lacs in the last year on account of tight operating margins and higher interest pay outs.

API business recorded a growth of 7% in its annual sales revenues on the support of increased API business with domestic and un-regulated markets. Loratadine grew up by 18% over the previous year due to growth of its intermediates business and supplies to un-regulated markets. Atorvastatin with annual sales revenue at Rs. 620 Lacs grew up by more than two times over the last year sales revenue. Current year Montelukast business was at Rs. 2252 Lacs against Rs. 2451 Lacs in the previous year on account of stronger rupee, the export realizations were also adversely affected.

Formulation business was able to maintain sales revenues at previous year's level. The company reorganized its distribution channels and product mix was also revamped.

Medipath business at Rs. 3113 Lacs, has recorded a growth of 31% over the last year on account of better market penetration and focus on corporate customers. Home Health and clinical Diagnostics business segment of Medipath business grew up by 41% & 12% respectively, whereas Blood Banking business was down by 7%.

Current year revenues of Pharmaceutical Contract Manufacturing (PCM) business at Rs. 3647 Lacs have shown a growth of 7% over the previous year.

FINANCES

The company continues to service its outstanding debt obligations, as per CDR (Corporate Debt Restructuring) scheme and also as per terms of individual settlement with banks and financial institutions. Absence of institutional working capital support led to slower business growth during the year apart from squeezing the operating margins of the company.

REPORT ON BUSINESS PERFORMANCE

A. ACTIVE PHARMACEUTICAL INGREDIENT (API)

Current year Loratadine API and intermediates business at Rs. 7696 Lacs recorded a growth of 18% over the last year. 'Loratadine' API sales was at Rs. 6558 Lacs against Rs. 5921 Lacs of the previous year. 'Loratadine' exports to the regulated markets at Rs. 5856 Lacs showed a marginal improvement over last year of Rs. 5798 Lacs. During the year, the company has also started supplying advance intermediate of Loratadine to Japanese market. Free markets and intermediate business at Rs. 2140 Lacs is more than two times from the previous year's levels.

Montelukast sodium, an anti-asthmatic drug, recorded annual revenue of Rs. 2252 Lacs, against Rs. 2437 Lacs of the previous year. During the current year USP as well as IP grade API was produced to meet the requirements of various customers.

Atorvastatin has recorded annual sales revenue of Rs. 620 Lacs as against Rs. 176 Lacs in the last year, an increase by 252%. The company has developed a cost effective process for its key intermediates which has also led to improved quality of Atorvastatin intermediates and API.

The company has produced small quantities of Linezolid (API) & its intermediates and commercial quantities of key intermediate of Carvedilol were also produced for export markets. New products and their intermediates have added more than Rs. 691 Lacs during the year.

The company has developed a non-infringing process for 'Fexofenadine' which have yielded highly pure 'Fexofenadine' API & its key intermediates. Further the company has filed a process patent for the same.

Morepen has successfully developed manufacturing process for highly pure Rosuvastatin Calcium. The product has been commercialized in the plant.

USFDA approval for DesLoratadine API is expected very soon. It will give the company greater penetration in highly regulated US API markets.

B. MEDIPATH

Current year sales revenue of Rs. 3113 Lacs has shown a positive growth of 31% over last year revenues of Rs. 2368. The primary component of marked improvement in top line was the 'Home- Health' segment. 'Home Health' with current year sales of Rs. 2422 Lacs has recorded a growth of 41% on the back of strong sales of Nebulisers, Thermometers, BP monitors, Weighing Scales and other equipments. 'Clinical Diagnostics' business has recorded sales of Rs. 534 Lacs, an increase of 12% over the last year. 'Blood Banking' business with annual sales of Rs. 157 Lacs has shown a de- growth of 8%. Sales of Aids & Hepatitis products continue to be hampered on account of regulatory issues. Tight cash flow situation continues to affect the timely material availability, thereby hampering the business growth. Margins also improved during the year on account of stronger rupee against USD.

With the introduction of new Haemoglobin testing machines from Orsense, Israel, & growth in other product categories like Malaria , Pregnancy testing product, Urine Strips , Accuvein etc. Clinical Diagnostics business has gone up by 12%. It has received a good response from market resulting in its higher revenues.

C. BRANDED PRESCRIPTION DRUGS

The domestic formulation business at Rs. 852 Lacs has remained at the previous year level. Antibiotics has grown up by 11% during the year, 'Gastrointestinal' and pain management has shown a de- growth during the year. Share of Antibiotics has gone up to 48% from 43% in the last year, whereas share of Gastrointestinal has come down to 31% from 33% in the last year.

D. PHARMACEUTICAL CONTRACT MANUFACTURING (PCM)

The company has expanded its activities in the field of third party manufacturing for formulations and API intermediates. The company was able to maintain its client base and has added new customers. The third party formulation manufacturing business has recorded an increase of 7% over the last year.

SUBSIDIARIES

Performance of subsidiaries

The Company has reviewed the working of all its subsidiaries for the year under review and the performance of each of its subsidiaries is given here-in-below:

Dr. Morepen Limited

The company during the current year has recorded sale revenue of Rs. 1543 Lacs against Rs. 2018 Lacs in the last year.

During the current year, the company has re- organized the distribution channels with a view to expand the reach of its 'OTC products through out the country. The expansion of existing markets and coverage of previously un-covered markets with the help of increased sales force has the desired impact in terms of creation of fresh demand. The company re-worked its OTC distribution and marketing model. During the year markets were cleansed and reorganized, saleable stocks were redistributed and revamped. During the year, the company did a major turnaround in its product distribution strategy wherein goods, which in earlier years were being sold on credit, during the current year, were sold against receipt of money in advance. Strong super distributor and trade policies have enabled the company to safe guard its interests and also drive the business forward on the profitable growth path.

The company has reported a cash deficit of Rs. 180.93 Lacs for the current year against deficit of Rs. 192.62 Lacs in the previous year.

The company is expanding marketing and media activities, with a view to enhance product visibility and product

placement. Marketing activities and product development were focused during the year with a view to create fresh demand. The company is hopeful of the better financial performance in the coming years.

Total Care Limited

Your directors hereby report that business of the company has recorded an income of Rs. 49.51 Lacs against Rs. 158.91 Lacs in the last year. The company has been able to bring down the cash losses to Rs. 6.08 Lacs against Rs. 19.01 Lacs in the previous year. The company expects improved cash flow in the next year and is working towards for turnaround of its business.

Morepen Inc.

This company is our marketing and distribution interface in USA for various OTC & other products. The Current year revenue was at Rs. 73.85 Lacs as against Rs. 87.60 Lacs in the previous year.

Morepen Max Inc.

This company is in a dormant state in the absence of any business opportunity and Board of Directors consider it expedient to dispose off the investment in the company at an appropriate time.



MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis of Corporate Governance pursuant to Clause 49 of the Listing Agreement is provided and forms part of the Annual Report as per Annexure A'.

LEGAL MATTERS

The company had allotted, during the last financial year 9,24,90,413 Equity Shares to the fixed deposit holders towards settlement of their dues, under the Scheme of arrangement or compromise u/s 391 of the Companies Act, 1956, approved by Hon'ble High Court at Shimla vide order dated 04th August, 2009. The central government preferred an appeal against the said order and the Hon'ble Divisional Bench remanded the matter back to the Single Judge while setting aside the previous order. The matter is under adjudication.

The cases filed against the company by Ministry of Corporate Affairs, on the basis of investigation carried out by SFIO u/s 235 of the Companies Act, 1956 are being defended by the company and its directors.

ENVIRONMENT

The company has always focused on environment protection in its day to day operations by adopting various good practices which take care of effluent treatment and proper disposal. Air and water pollution have been contained within permissible limits by adopting latest techniques. By way of constant up-gradation in the efficiency of Effluent Treatment Plant and the training program, we have consistently maintained the track record of best upkeep and maintenance.

HUMAN RESOURCES

Your Company has endeavored to attract right and talented people. The company is improving its track record of retaining the valued Human Resources. People across all levels have maintained long term association with the company paving the way for improved decision making and operational efficiency.

The Company is committed to provide rightful and fair opportunity to people at all levels and encourage the spirit of openness and transparency. The company believes that its Human Resource is an asset for the company and a participative work environment driven by sense of team work and collective ownership will ensure the growth and success of the company. The inter-personal relationship amongst workers, staff and officers continues to be extremely cordial.

As on 31st March 2011, 1283 employees were working for the company across all levels and at various locations.

DISCLOSURE OF PARTICULARS

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and out go, as required under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors), Rules 1988 is annexed and forms part of this report as Annexure-'B'.

DIRECTORS' RESPONSIBILITY STATEMENT

Your directors certify:

1. That the applicable accounting standards have been followed along with proper explanation relating to material departures in the preparation of annual accounts.

2. That they have selected such accounting polices and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.

3. That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detecting fraud and other irregularities.

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

DIRECTORS

In accordance with the provisions of Companies Act, 1956 and the Company's Articles of Association, Dr. A.K. Sinha, Director of the company retires by rotation and offers himself for reappointment. Your Directors recommend his reappointment as Director on the Board in the ensuing Annual General Meeting.

AUDITORS

M/s. M. Kamal Mahajan And Co., Chartered Accountants, retire as Auditors of the Company at conclusion of the ensuing Annual General Meeting and have confirmed their eligibility under Section 224(1B) of the Companies Act, 1956 and willingness to continue as Auditors of the Company, if re-appointed.

EXPLANATION TO AUDITORS' REPORT

The Auditors have vide Para (i) (a) of the annexure to the audit report commented on the quantitative details and situation of items like pipe, meter instruments and other similar items. Your Company is a pharmaceutical company, where, in the manufacturing plants controlled reactions take place in the reactors and the items of Plant and Machinery like pipes runs criss-cross through out the various sections of the plant, like pilot plants, utility sections and various control valves and meters and instrumentations are mounted on such pipes, samplings, reactors and items of Plant & Machinery. Therefore, by the very nature of the industry, these particular items cannot be attributed to a particular place to the exclusion of other place. Further in your Directors view, this is not a qualification but is a clarification only.

Further the auditors have vide Para (xi) of the annexure to the audit report commented on certain defaults made in repayment of dues to debenture holders. The Company reiterates its commitment to settle these outstanding lenders and has taken steps to settle them as per the CDR terms.

LISTING

The Company has paid the annual listing fee for the year 2010-2011 to The Bombay Stock Exchange Limited, Mumbai (BSE) and The National Stock Exchange Limited, Mumbai (NSE) The Equity shares continue to be listed on BSE and NSE.



CORPORATE GOVERNANCE

A detailed report on Corporate Governance pursuant to Clause 49 of the Listing Agreement is given in a separate section and forms part of the Annual Report.

The statement pursuant to section 212 of the Companies Act, 1956 is annexed as Annexure 'C and forms part of this Report.

ACKNOWLEDGEMENTS

Your Directors also appreciate the valuable co-operation and continued support extended by the Employees, Customers, Suppliers, Collaborators, Company's GMP consultants, Auditors, Bankers, Financial Institutions, Medical Professionals, Drug Control Authorities, Government Agencies, Business Associates and our large Shareholder Family.

For and on behalf of the Board Sushil Suri Chairman & Managing Director

Place : New Delhi Date :13th May, 2011


Mar 31, 2010

The Directors have pleasure in presenting this 25th Annual Report and Audited Accounts for the year ended 31 st March 2010.

FINANCIAL HIGHLIGHTS

(Rs. in Lacs)

Particulars 2009-10 2008-09

Sales and Other Income 19616 16525

Operating Surplus 1360 292

Interest 357 201

Cash Surplus 1003 91 Non Cash Items

Depreciation & Amortisation 4563 4551

Loss before Extra ordinary Items (3560) (4460)

Extra ordinary items (Net) 3386 804

Loss Before Tax (174) (3656)

Fringe Benefit Tax - 28

Loss after Taxation (174) (3684)



MANAGEMENT OVERVIEW

The company has recorded sales revenue and other income of Rs. 19616 Lacs against Rs. 16525 Lacs in the previous year. It represents a growth of 18.70% over preceding year. The company is steadily moving on high growth trajectory and shall continue its journey of profitable growth. The Company continues to focus on cost optimization and efficient working capital management. The continuous growth momentum carried forward during the current year has helped the company in significantly improving its operational performance. The growth in companys operations has helped the company to generate operational surplus of Rs. 1360 Lacs in the current year against Rs. 292 Lacs in the previous year i.e. a growth over 365%. After servicing an interest burden of Rs. 357 Lacs, the company has been able to earn cash surplus of Rs. 1003 Lacs against Rs. 91 Lacs earned in the last financial year. Cash generated from operations, after payment to Fixed Depositors has been ploughed back into operations so as to make the company more self reliant in the absence of any institutional support for working capital facilities.

The managements aggressive strategy of focusing on improving business and operational performance has borne fruits. The operations of the company are steadily improving and company is looking forward to healthy revenue and profit numbers in the coming years. To fund the expansion plans, the company shall continue its endeavor for tying up finances, both for working capital as well as for capacity addition and optimization.

During the year, the scheme of arrangement and compromise with the fixed deposit holders filed by the company under section 391 of Companies Act, 1956, was approved by the Honble High Court of Himachal Pradesh at Shimla. Pursuant to the approved scheme, the company has allotted 9,24,90,413 Equity Shares of Rs. 2/-each, at a price of Rs. 11.32 per share, determined under SEBI (DIP) Guidelines, to the fixed deposit holders equivalent to 75% of the principal amount due. The balance 25% of the principal amounting to Rs. 3385.77 Lacs, as per the approved scheme, has been waived off and is shown under the head extraordinary items in the profit and loss account for the current year. As per the approved scheme, the interest on fixed deposits has been waived off.

With the resolution of the issues relating to fixed deposit holders, the management can now focus its energies for all round improvement in business performance and also for exploring new business avenues. The management is confident that with fixed depositors becoming partners now, they shall be able to share and enjoy the fruits of profitable growth of company in the coming years.

DIVIDEND

For the year under review the Directors do not recommend any dividend due to absence of any distributable surplus.

OPERATIONS

The Company has recorded commendable performance with larger volume and higher sales and operating revenues despite tight liquidity position of the company. The consistent increase in sales revenue year after year speaks a lot about the focused approach being adopted for all round growth of business. Current year income of Rs.19616 Lacs is up by Rs. 3091 Lacs over the last year income of Rs. 16525 Lacs. The improvement in top line coupled with increased efficiencies in operations has enabled the company to generate an operating surplus of Rs. 1360 Lacs against Rs. 292 Lacs, recorded in last year.

API business, with over 60% revenue share has recorded steep growth of 28% in its annual sales revenues. Its main product, Loratadine has shown a revenue growth of 14%. Revenue growth of other two products namely Montelukast and Sultamicillin has also shown a healthy upside during the current year. Stronger US Dollar continues to help the company to derive better price realisation in terms of Indian Rupees.

Formulation business, with10% business share has recorded handsome growth of 21 %. During the current year, the company focused on deriving more sales revenue from existing product portfolios.

Medipath business, on account of lower revenues in its diagnostics segment has recorded a fall of 5% in its current year revenues.

Pharmaceutical Contract Manufacturing (PCM) has shown a growth of 10% in its annual revenues for the current year.

Extraordinary items of Rs. 3385.77 Lacs represent liability waived off in respect of fixed deposit holders pursuant to approved scheme of compromise and arrangement with fixed deposit holders.

The company continues to service its outstanding debt, as per CDR (Corporate Debt Restructuring) scheme and also as per terms of individual settlement with banks and financial institutions.

REPORT ON BUSINESS PERFORMANCE

A. ACTIVE PHARMACEUTICAL INGREDIENT (API)

Loratadine

During the year, the company sold Loratadine API to the tune of Rs. 5900 Lacs against Rs. 5192 Lacs sold in the last year. Loratadine exports to the US markets remained firm during the year. The response of domestic markets for Loratadine APIs has been very encouraging during the year. New route adopted for manufacture of Loratadine API have been successful and company is able to attract good orders. Intermediates quality was also improved considerably by process improvement in order to meet customers expectations and to have better price realisation. This includes almost impurity free intermediates of Loratadine to Japan.

The company is consistently maintaining its supply lines to the likes of supplying Loratadine API to some of the big names in pharma industry like Novartis/Sandoz, Perrigo, Chemo and Apotex and others.

The company has done PCTfilingofone patent application on the improved process for Loratadine.

Montelukast Sodium

Montelukast sodium, an anti-asthmatic drug, is continuing its remarkable performance in the current year.

In the current year, Montelukast intermediates and API sales at Rs. 2437 Lacs, have shown a growth of 44% over the previous year of Rs. 1695 Lacs. Intermediates Sales has gone up to Rs. 1753 Lacs against Rs. 1501 Lacs of previous year, whereas Montelukast API sales have improved to Rs. 684 Lacs against Rs. 194 Lacs of previous year. The company intends to further expand the capacities for Montelukast Sodium and its various intermediates.

During the year, a new economical process has also been developed for side chain of Montelukast sodium followed by its scale up. Its commercialization is planned for the coming year.

PCT filing of one patent application has been done during the year for non-infringing process of Montelukast Sodium.

Atorvastatin Calcium

During the year, cost effective process for normal grade crystalline Atorvastatin calcium and its intermediates was developed and the product was commercialized to capture domestic market. The company experienced good market traction for the process, during the year.

We have got patent for our process of preparation of Atorvastatin calcium amorphous in United States and Canada. It has already granted in India.

PCT of another process patent application, on new amine salts of Atorvastatin, has also been filed and has been published.

Sultamicillin

The current years revenue of Sultamicillin Tosylateand Sultamicillin Base at Rs. 1 756 Lacs shown a growth of 88% over last year sales revenue of Rs. 935 Lacs.

Fexofenadine

Fexofenadine is an antihistamine drug used in the treatment of hay fever and similar allergy symptoms. Mo re pen has developed a novel process for the preparation / purification of Fexofenadine API as well as intermediate which have yielded highly pure Fexofenadine API & its key intermediates.

As a step forward to capture new markets especially Japan and to expand the product portfolio, the quality of intermediates was improved considerably by process improvement, to meet customers expectations. Besides this, process of Fexofenadine API was modified/ improved to capture the domestic market and shall be commercialized soon.

Linezolid

Linezolid (INN) is a synthetic antibiotic used for the treatment of serious infections caused by Cram-positive bacteria that are resistant to several other antibiotics. A non-infringing process for Linezolid (API) was developed to produce highly pure form of Linezolid API. The product has been commercialized successfully during the year and has been sold to various markets.

Carvedilol

Carvedilol is a non-selective beta blocker/alpha-1 blocker indicated in the treatment of mi Id to moderate congestive heart failure (CHF). A process for the key intermediate has been developed and have been produced on commercial scale. During the year good quantities ofCarvedilol intermediates were sold.

Lamotrigine

Process for Lamotrigine Schiffs base intermediate was scaled up and material was supplied to the customers. We expect bigger quantities for supply in the coming years. Small quantity of Lamotrigine (API) was also produced for free market.

New products

During the year, process for Telmisartan (API) was developed in the laboratory and samples were sent for market development. Besides this development work for other new complex molecules (API) like Aliskiren Hemifumarate, Eletriptan, Rosuvastatin calcium, Quetiapine & Risperidone was done and samples of target intermediates were produced for market development. Non-infringing process for Fexofenadine intermediates was also developed. Further development work is going on for synthesis of these APIs as well as for further process improvement.

B. MEDIPATH

Current year annual revenue at Rs. 2368 Lacs has recorded an erosion of 5% over the last year revenue of Rs. 2487 Lacs. The fall in current year sales revenue was caused by 20% revenue drop in Diagnostics products. Lower sales of Aids & Hepatitis products because of regulatory issues and Homecue blood banking products, because of franchise discontinuance are two primary reasons for lower sales revenue of these products. Tight cash flow situation affecting timely material availability also hampered the growth of business. Point of Care (Home- Health) segment, with annual revenue of Rs. 1605 Lacs, has shown a growth of 5% during the year on the support of higher sales of Thermometers, BP monitors, weighing scales and other equipments. High Dollar value against Indian Rupee and old discontinued products inventory write off has adversely affected the profitabiIity of Diagnostics business.

A no. of new products like Pulse Oxymeter, Fetal Doppler, Commercial Nebuliser and many new variants of existing product ranges like Blood Pressure Monitor, Clucometer, Weighing Scales and others are also introduced during the year, which have filled in the gap on account of discontinued /disturbed products. Better payment terms with vendors and availability of credit facilities will help the company in timely receipt of materials.

C. BRANDED PRESCRIPTION DRUGS

The domestic formulation business is showing consistent growth year after year. The growth has been recorded in most of the therapeutic categories. In some of the therapeutic categories like Anti-allergic and Antibiotics the growth is as high as 59% & 37% respectively. The largest therapeutic contributor i.e. Gastrointestinal has maintained the sales revenue at the last years level. Most of the sales territories have recorded a growth in revenue as compared to last year. Out of top five formulations products, four has recorded growth ranging from 18%-41 % whereas one of the product has recorded a fall in its annual sales. We continue to focus on high margin formulations. However the company will also expand its horizons in institutional business, to increase its sales revenues.

D. PHARMACEUTICAL CONTRACT MANUFACTURING (PCM)

The company is continuing with its existing activities in the field of third party manufacturing for formulations and API intermediates. As the company consistently provides Good Manufacturing Practices (GMP) compliant manufacturing facilities and highly trained workforce, therefore it is confident of delivering quality products on consistent basis. The third party formulation manufacturing business has recorded an increase of 29% over the last year.

SUBSIDIARIES

Performance of subsidiaries-

The Company has reviewed the affairs of all its subsidiaries for the year under review and the performance of each of its subsidiaries is given here-in-below:

Dr. Morepen Limited

During the current year sales revenue of the company at Rs. 2018.12 Lacs is up by 1% against last years revenue of Rs. 2000.35 Lacs. The company is seeking to promote new products and expand customer base. It has spent extensively on marketing and sales promotion, which has resulted in, the company reporting a cash deficit of Rs. 192.62 Lacs for the currentyearagainstsurplusof Rs. 129.65 Lacs generated in the previous year.

During the year a number of new products were test marketed across various categories. Special emphasis is being put on marketing activities, with a view to develop and promote the new products in the market. During the year, in order to support companys marketing campaign it has appointed famous Bollywood actress Ms. Sonali Bendre as its Brand Ambassador for a period of 3 years. The company expects to reap good benefits of marketing campaign with Ms. Sonali Bendre in the coming years.

Continuing the trend of introduction of new products, the company has introduced Fever X (Fever Tablet), Head X (Head Ache tablet), Option 72 (Emergency Contraceptive pill), Fibre X (Flavored Laxative) and Pain X (Pain Relief ointment). These products represent categories which are having large market share. It has resulted in large product basket catering to diverse consumer needs round the year and thereby even out the seasonal fluctuations in OTC business.

New product additions shall make more products available in the customers hand which will build up the revenue stream as also the improved profit margins, resulting into better returns on the capital employed.

The company will continue to expand marketing and media activity, keeping in view the potential of its OTC business. It will be more organized and focused in planning and orgainsing the media so that company can derive full advantage of its media spent and financial performance of the company improves year over year.

Total Care Limited

Your directors hereby report that business of the company has recorded income of Rs. 158.91 Lacs against Rs. 221.95 Lacs in the last year, recording a drop of 28% from last years revenue. In a step towards generating cash surplus, the company has been able to bring down the cash losses to Rs. 19.01 Lacs against Rs. 41.84 Lacs in the previous year. Efforts are on to make the operations viable and management is hopeful of turnaround of the business.

Morepen Inc.

This company is our marketing and distribution interface in USA for various OTC & other products. Revenue of Rs. 87.60 Lacs was earned as commission during the current year.

Morepen Max Inc.

This company is lying dormant in the absence of any business opportunity and Board of Directors considers it proper to dispose off the investment in the company at an appropriate time.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed report on Management Discussion and Analysis of Corporate Governance pursuant to Clause 49 of the Listing Agreement is provided in and forms part of the Annual ReportasperAnnexureA.

SHARE CAPITAL

Pursuant to the scheme of arrangement and compromise with the fixed deposit holders filed by the company under section 391 of Companies Act, 1956, approved by the Honble High Court of Himachal Pradesh at Shimla, the company has allotted 9,24,90,413 Equity Shares of Rs. 21- each, at a price of Rs. 11.32 per share, determined under SEBI (DIP) Guidelines, to the fixed deposit holders . Post issue of Equity Shares to fixed deposit holders the number of Equity Shares of the company has increased from 35,73,35,790 to 44,98,26,203.

FIXED DEPOSITS

During the year, the scheme of arrangement and compromise with the fixed deposit holders filed by the company under section 391 of Companies Act, 1956, was approved by the Honble High Court of Himachal Pradesh at Shimla. Pursuant to the approved scheme, the company has allotted 9,24,90,413 Equity Shares of Rs. 21- each, at a price of Rs. 11.32 per share, determined under SEBI (DIP) Guidelines, to the fixed deposit holders equivalent to 75% of the principal amount due. The balance 25% of the principal amounting to Rs. 3385.77 Lacs, as per the approved scheme, has been waived off and is shown as extraordinary items in the profit and loss account for the current year. As per the approved scheme, the interest on fixed deposits has been waived off.

LEGAL MATTERS

The settlement with the banks and financial institutions and sundry creditors done in the previous financial year and the fixed depositors liabilities settled during the year, as per court approved scheme will put an end to most of the legal cases against the company.

The cases filed against the company by Ministry of Corporate Affairs, on the basis of investigation carried u/s 235 of the Companies Act, 1956 are being defended by the company and its directors.

ENVIRONMENT

Environment has always been under continuous focus of your company. Through constant up-gradation in the efficiency of Effluent Treatment Plant by investment and training program, we have consistently maintained the track record of best upkeep and maintenance.

HUMAN RESOURCES

Your Company continues to attract good and talented people. Quality of work force is steadily improving. People have long term association with the company which helps them in improving operational efficiencies in their work areas. The company is able to employ and retain better sales and marketing staff for domestic markets.

The Company is committed to encourage and promote talent at all levels in an environment of openness and transparency as we believe that a participative work environment driven by a sense of teaming and collective ownership of the organizations objectives alone will ensure the growth and success of the company in its objectives. The relationship with workers, staff and officers continues to be extremely cordial.

As on 31st March 2010,1221 employees were workingforthe company across all locations.

Information pursuant to Section 21 7(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 as amended, is annexed, as AnnexureBof this report.

DISCLOSURE OF PARTICULARS

The information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and out go, as required under Section 21 7(1 )(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors), Rules 1988 is annexed and forms part of this report as Annexure-C.

DIRECTORS RESPONSIBILITY STATEMENT

Your directors certify:

1. That the applicable accounting standards have been followed along with proper explanation relating material departures in the preparation of annual accounts.

2. That they have selected such accounting polices and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fai r view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period.

3. That they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detecting fraud and other irregularities.

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

DIRECTORS

In accordance with the provisions of Companies Act, 1956 and the Companys Articles of Association, Mr. Sukhcharan Singh Director of the company retires by rotation and being eligible offer himself for reappointment. Your Directors recommend his reappointment as Director on the Board in the ensuing Annual General Meeting.

AUDITORS

M/s. M. Kamal Mahajan And Co., Chartered Accountants, retire as Auditors of the Company at conclusion of the ensuing Annual General Meeting and have confirmed their eligibility under Section 224(1 B) of the Companies Act, 1956 and willingness to continue as Auditors of the Company, if re-appointed.

EXPLANATION TO AUDITORS REPORT

The Auditors have vide Para (i) (a) of the annexure to the audit report commented on the quantitative details and situation of items like pipe, meter instruments and other similar items. Your Company is a pharmaceutical company, where, in the manufacturing plants controlled reactions take place in the reactors and the items of Plant and Machinery like pipes runs criss-cross through out the various sections of the plant, like pilot plants, utility sections and various control valves and meters and instrumentations are mounted on such pipes, samplings, reactors and items of Plant & Machinery. Therefore, by the very nature of the industry, these particular items cannot be attributed to a particular place to the exclusion of other place. Further in your Directors view, this is not a qualification but is a clarification only.

Further the auditors have vide Para (xi) of the annexure to the audit report commented on certain defaults made in repayment of dues to debenture holders. The Company reiterates its commitment to settle these outstanding lenders and has taken steps to settle them as per the CDR terms.

LISTING

The Company has paid the annual listing fee for the year 2009-2010 to The Bombay Stock Exchange Limited, Mumbai (BSE) and The National Stock Exchange Limited, Mumbai (NSE) .The Equity shares continue to be listed on BSE and NSE.

CORPORATE GOVERNANCE

A detailed report on Corporate Governance pursuant to Clause 49 of the Listing Agreement is given in a separate section and forms part of the Annual Report.

The statement pursuant to section 212 of the Companies Act, 1956 is annexed as Annexure - D and forms part of this Report.

ACKNOWLEDGEMENTS

Your Directors also appreciate the valuable co-operation and continued support extended by the Employees, Customers, Suppliers, Collaborators, Companys GMP consultants, Auditors, Bankers, Financial Institutions, Medical Professionals, Drug Control Authorities, Government Agencies, Business Associates, and our large Shareholder Family.

For and on behalf of the Board

Sushil Suri Chairman & Managing Director

New Delhi

13th May, 2010


Mar 31, 2010

The Directors have pleasure in presenting the 17thAnnual Report of the Company for the period ended 31 st March 2010.

1. PARK HYATT GOA RESORT & SPA

Park Hyatt Goa Resort & Spa continues to be the market leader and has achieved highest revenue and Revenue Market Share Index (RMSI) with an appropriate mix of Occupancy and room rates. For the year under Report the performance indicator of the Park Hyatt Goa Resort & Spa is given herein below :

For the year ended For the year ended Variation (%age)

March 31, 2010 March 31, 2009

Average Occupancy 73% 61% 12

Average Room Revenue (ARR) Rs. 8529 Rs 9296 8.25 (-)

Rev PAR Rs. 6206 Rs. 5660 9.65

The above performance indicators demonstrate that your Company is coming out of the aftereffects of the global recession, financial meltdown and Mumbai terror attack.

2. OPERATIONAL RESULTS & APPROPRIATIONS

The Board is pleased to inform that the Companys Total Income for the year under report has increased from Rs. 7705.77 Lacs to Rs. 8915.08 lakhs. Both Profit before Tax and Profit after Tax have increased twofold from the previous year. The summarized financial position of the Company for the year under review is given herein below :

Rs. In Lacs

For the year ended For the year ended Variation

March 31, 2010 March 31, 2009 (% age)

Total Income 8854.67 7705.77 14.91

Expenditure 5939.46 5693.22 4.33

(before Interest & Depreciation)

Profit before Interest, 2915.22 2012.55 44.85 Depreciation & Tax

Profit Before Tax 668.89 318.34 110.12

Profit After Tax 687.39 203.84 237.22

As at the end of the year under report balance available for appropriation stood at Rs. 1373.85 lakhs (previous period Rs. 686.46 lakhs) which was carried forward to the Balance Sheet.

During the year the Company has repaid its existing secured term loans of Rs. 7249 lacs in full by obtaining fresh corporate loan of Rs. 1500 Lacs from IFCI Limited and has utilized the balance amount for making an investment in new five star Hotel Project.

3. EXPANSION/NEW PROJECTS

In view of the growing opportunities in the Indian Hospitality Sector your Company has commenced implementing its expansion plans and acquired lands at Delhi and Amritsar for developing the Hotel Projects. The said Projects have been undertaken in the Subsidiaries of the Company. The Company through its subsidiary has executed the Letter of

Intent with MGM MIRAGE Hospitality International Holdings Limited, Las Vegas, USA for their Luxury Brands MGM Grand, New Delhi and Skylofts at the MGM Grand New Delhi for the Luxury / Upscale Hotel Project at Delhi for approximately 500 rooms Deluxe Hotel.

The 180 rooms Deluxe Hotel Project at Amritsar is being developed as Sheraton Amritsar Hotel.

4. DIVIDEND

The Board of Directors has not recommended any dividend on Share Capital for the financial year ended March 31, 2010.

5. PUBLIC DEPOSITS

During the period under report your Company has not accepted or renewed any public deposit.

6. SUBSIDIARY COMPANIES

During the year under review two new subsidiary companies viz. Golden Joy Hotel Pvt. Ltd. and Silver Resort Hotel India Pvt. Ltd. have been incorporated to implement the expansion plans of developing five star Deluxe Hotels at Amritsar and New Delhi.

A statement under Section 212 of the Companies Act, 1956 is annexed to this report with respect to its subsidiaries viz. Blue Coast Hospitality Limited, Golden Joy Hotel Pvt. Ltd. and Silver Resort Hotel India Pvt. Ltd. the subsidiaries of the Company. Their Balance Sheets, Profit & Loss A/c and other documents, as applicable pursuant to the provisions of the Companies Act, 1956, are attached with the Balance Sheet of the Company. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

7. VOTING RIGHTS

In terms of the provisions contained in Section 87(2)(b)(i) of the Companies Act, 1956, the Preference Shareholders of the Company with respect to the 81,50,000 Redeemable Cumulative Preference shares of Rs.100 each are entitled to vote on every resolution placed before the Company at any General Meeting. As the said preference shares are held by the existing Promoters/ Promoters Group there is no change in the management/ control of the Company.

8. BOARD OF DIRECTORS

The Board recommends the re-appointment of Mrs. Mamta Suri and Mr. K.S. Mehta who retire by rotation as Directors of the Company and, being eligible, offer themselves for re-appointment.

Mr. Shivendra Tomar has been appointed as Nominee Director on the Board of the Company with effect from July 26, 2010 by IFCI Limited. The information relating to Mr. Tomar required to be given as per the listing agreement has been given at the end of the explanatory statement

9. DIRECTORS RESPONSIBILITY STATEMENT

The Directors hereby confirm :

a) that in the preparation of the annual accounts for the financial year ended 31st March, 2010 the applicable accounting standards have been followed, along with proper explanation relating to material departures;

b) that they have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

c) that they have taken proper and sufficient care for the maintenance of adequate accounting records, in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) that they have prepared the annual accounts on a going concern basis.

10.AUDITORS

M/s. M. Kamal Mahajan And Co., Chartered Accountants, the Auditors of the Company will retire on the conclusion of the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment.

Observations made by the Auditors in their report read with the relative notes on accounts are self explanatory.

11.CORPORATE GOVERNANCE

Your Company has complied with the provisions of the Code on Corporate Governance and as required by Clause 49 of the Listing Agreement entered into with the Stock Exchanges, the report on Corporate Governance and the Auditors Certificate in connection therewith form part of this report. The Management Discussion and Analysis Report is also appended to this report.

12.AWARDS & ACCOLADES

Park Hyatt Goa Resort & Spa continues to be a leader in its segment. Towards the recognition of the facilities it commands it has been awarded following Awards and Accolades:

- India Today travel plus readers choice survey 2009-10 - "The Best Spa in India"

- India Today travel plus readers choice survey 2010-11 - "The Best Spa in India"

- Best Resort Spa (Sereno Spa) - Pevonia asiaSpa India Awards 2009

- Best Goan Restaurant in South Goa (Casa Sarita restaurant) - Times Good Food Guide 2010

- Conde Nast Traveller Readers Travel Awards 2010 India Special - Awarded as the second runner-up in the "Favourite Leisure Hotel in India"

13.PARTICULARS OF EMPLOYEES

Required particulars pursuant to Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, are set out in the annexure to this report. However, the same is not being sent to the shareholders. Any shareholder desirous of obtaining a copy of the said particulars may write to the Company at its Corporate Office.

14.CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information in pursuance of Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 pertaining to the conservation of energy, technology absorption, foreign exchange earnings & outgo are annexed to this report.

15.PAYMENT OF ANNUAL LISTING FEE PAID.

Annual listing fee up to date has been paid to the stock exchanges.

16.ACKNOWLEDGMENTS

The Directors express their sincere appreciation of the co-operation and assistance received from Shareholders, Bankers and Hyatt International and other Business Associates. The Directors also wish to place on record their deep sense of appreciation for the commitment displayed by the Employees at all levels.

For and on behalf of the Board of Directors of Blue Coast Hotels Ltd.

New Delhi P. L. SURI

28th August, 2010 Chairman & Managing Director

 
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