Mar 31, 2022
Your Board of Directors have pleasure in presenting the Twenty Ninth (29th) Board''s Report together with the Audited Financial Statements of the Company for the Financial Year ended March 31, 2022.
Financial summary / Performance /State of Company''s affairs
The Highlights of the standalone and consolidated financial results for the Financial Year 2021-2022 as per the IND AS are given below:-
(Rs. in Crores) |
||||
Particulars |
Standalone |
Consolidated |
||
Year ended |
Year ended |
Year ended |
Year ended |
|
31.03.2022 |
31.03.2021 |
31.03.2022 |
31.03.2021 |
|
Sales & Operating Income |
556.97 |
450.70 |
559.56 |
450.06 |
Other Income |
9.00 |
6.46 |
9.00 |
15.21 |
Total Expenditure |
499.72 |
392.79 |
509.95 |
400.27 |
Gross Profit /(Loss) |
66.26 |
64.36 |
58.61 |
65.00 |
Interest & Finance Charges |
32.01 |
51.34 |
32.01 |
51.34 |
Gross Profit after Interest but before Depreciation and Taxation |
34.25 |
13.03 |
26.60 |
13.67 |
Depreciation |
87.02 |
108.90 |
87.02 |
108.92 |
Profit / (Loss) before Tax and extraordinary items |
(52.77) |
(95.87) |
(60.42) |
(95.25) |
Exceptional items - [Income / (Expenditure)] |
- |
- |
- |
- |
Profit / (Loss) Before Tax |
(52.77) |
(95.87) |
(60.42) |
(95.25) |
Current & Deferred Tax |
- |
- |
- |
- |
Profit /(Loss) after Tax - Continuing Operations |
(52.77) |
(95.87) |
(60.42) |
(95.25) |
Profit / Loss from discontinued operations after tax |
47.96 |
(21.28) |
58.47 |
(21.28) |
Loss for the year |
(4.81) |
(117.15) |
(1.95) |
(116.53) |
Re-measurement of post-employment benefit obligations |
1.46 |
0.60 |
1.46 |
0.60 |
Gain /(Loss) on fair valuation of the Investments |
(0.04) |
0.07 |
(0.04) |
0.07 |
Comprehensive Loss for the Year |
(3.38) |
(116.49) |
(0.53) |
(115.87) |
Your Company operates in one business segment viz., pharmaceuticals in which the Company drives its sales through Active Pharmaceutical Ingredients (APIs). The Company has a strong pipeline of products in Cephalosporins to cater to the need of various international markets. The Company has a strong global presence with a wide customer base. The Company''s manufacturing facilities have the capabilities to manufacture various APIs by unique techniques / emerging Technologies, in which different kind chemical reactions are involved like alkylation, amidation, esterification, Halogenations, Mesylation reaction, Witting reactions, Ring expansion reactions, protection/deprotection reaction, Enzymatic reaction etc. Orchid Pharma''s key focus area comprise of developing New Chemical Entities, New Drug applications, adding 5th generation Oral & Sterile cephalosporin human/veterinary drugs with our world class manufacturing facility , strong intellectual property team having expertise and experience in chemistry, analytical techniques, dosage forms and global patent law.
During the financial year 2021-2022, your Company achieved a turnover and operating income of Rs. 556. 97 crores against Rs. 450.70 crores in 2020-2021. The Gross Profit before interest, depreciation and taxes during the year stood at Rs.66.26 crores against a Gross Profit of Rs.64.36 crores in 2020- 2021. After providing for interest expense, depreciation, exceptional item, the Loss before tax of the Company for the year was Rs. 52.77 Crores against Rs. 95.87 crores in 2020- 2021. The Comprehensive Loss stood at Rs.3.38 crores during 2021-2022 against Rs. 116.49 crores in 2020-2021.
During the financial year 2021-2022, your Company achieved a turnover and operating income of Rs. 559.56 crores as against Rs. 450.06 crores in 2020- 2021. The Gross Profit before interest, depreciation and taxes during the year stood at Rs. 58.61 crores against a Gross Profit of Rs. 65.00 crores in 2020- 2021. After providing for interest expense, depreciation, exceptional item, the Loss before tax of the Company for the year was Rs. 60.42 Crores against a loss of Rs. 95.25 crores in 2020-2021. The Comprehensive Loss stood at Rs. 0.53 crores during 2021-22 against a loss of Rs.115.87 crores in 2020-2021. You will appreciate that despite of lock down across the country due to Covid 19 pandemic, most of the plants of your Company were in operation and utilizing maximum capacity of the same and your Company managed to sustain standalone sales of Rs.556.97 crores but could not achieve gross margins due to the reduced turnover.
During the year, the Company has spent Rs. 38.00 lakhs on Plant & Equipment, etc., largely towards balancing facilities and essential sustenance capital items. As on March 31, 2022, the long-term secured financial facility availed by the Company is Rs. 147.78 crores.
Material events during the year under review
Scheme of Amalgamation and Arrangement of Dhanuka Laboratories Limited with Orchid Pharma Limited.
During the year under review, the Scheme of Amalgamation and Arrangement of Dhanuka Laboratories Limited (''Transferor Company'') with and into Orchid Pharma Limited ('' Transferee Company'') and their respective shareholders and creditors (''Scheme'') in compliance with Sections 230 to 232 and other relevant provisions of the Companies Act, 2013 ("the Actâ) as reviewed and recommended by the Audit Committee and the Independent Directors was approved by the Board. The implementation of the aforesaid Scheme, which is
subject to the approval of Shareholders and other Statutory authorities would inter-alia enable both the transferor and transferee Companies to realize benefit of greater synergies between their businesses, achieve wider product offerings and geographical footprints, consolidate operations thereby leveraging the capability of the Amalgamated company, yield beneficial results and pool financial resources as well as managerial, technical, distribution and marketing resources of each other in the interest of maximizing value to their Shareholders and the Stakeholders and aid in achieving economies of scale. The Company had submitted applications to the National Stock Exchange of India Limited ("NSEâ) and BSE Limited ("BSEâ) towards the aforesaid Scheme and has received the "No Objection certificatesâ from NSE on March 29, 2022 and BSE on March 30, 2022. Further, the First motion application towards the aforesaid Scheme has been submitted to the National Company Law Tribunal and the approval is awaited.
It is been more than two years now since the implementation of the approved Resolution plan and your Company is moving in the positive direction. Huge efforts are required still towards rebuilding the organization and taking it to greater heights. In financial terms, the objective of your Company is to lower earnings volatility, strive for higher predictable and calibrated growth and improve Sales, EBITDA margin and reduce debt. The target is to stay cash flow positive and expand earnings year-on-year. Your Company is striving hard to reverse the direction of the downward curve by ramping up businesses and achieve sizeable growth. The greatest challenge your Company is facing is to achieve growth and profit margins, inspite of the COVID 19 pandemic situation which has resulted in a significant reduction in Anti-Biotics demand across the world. The Board and the Management of your Company are committed and will put in their best efforts to turnaround your Company with optimum cost structure.
Management Discussion and Analysis report
A report on the Management Discussion and Analysis in terms of the provisions of Regulation 34 (2) (e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 "Listing Regulationsâ is provided as a separate annexure in the annual report.
Corporate Governance Report and Additional Shareholder''s information
A report on the Corporate Governance systems and practices of your Company along with a certificate of compliance from the Practising Company Secretary is given in Annexure IV which forms part of this report.
The details pertaining to the Audit Committee and other Committees of the Board are provided in the Corporate Governance section forming part of this report. All the recommendations made by the Committees of the Board including the Audit Committee were accepted and implemented by the Board. During the year under review, there was no change in the composition of any of the committees.
Adequacy of Internal Financial Control System
The Internal Financial Control over Financial Reporting System are existing and operative, however based on the observations of the auditors, the Company is further strengthening the Internal Financial Control systems over financial reporting.
Regulatory Filings and Approvals
In the generic formulations domain, the existing approval of 11 ANDAs in Cephalosporins segment have been transferred to Bion Pharma Inc ("Bionâ) out of which 6 ANDA''s are withdrawn and 5 ANDA''s are retained with Bion. In the API (Active Pharmaceutical Ingredients) domain, Orchid''s cumulative filings of US DMF stand at 46. The break-up of the total filings is 28 in the Cephalosporin Segment and 18 in NPNC segment. In European market space the cumulative filings of COS (Certificate of Suitability) count remained at 17 (15 approved and 2 under review) which pertains to the cephalosporin segment. In the Japan market, the cumulative filings of JDMFs count remained at 8 all in Cephalosporin segment.
The total number of active patent portfolio maintained by Orchid in various national and international patent offices so far is 29 including Process & New Chemical Entities (NCE). Out of 29 patents, 19 patents have been granted, 8 patent applications are published and 2 patent applications filed as of March 31, 2022.
In view of the net loss incurred during the financial year ended March 31, 2022, the Board does not recommend any dividend to the shareholders of the Company. Also, no amount has been transferred to the reserves.
During the year under review, your Company''s Active Pharmaceuticals Ingredients (API) manufacturing Unit, Alathur and Finished Dosage Formulations (FDF) manufacturing Unit, Irungattukottai (IKKT) were chosen for
the Export Excellence Awards by the Ministry of Commerce & Industry, Government of India based on the criteria enumerated below and performance of your Company during the financial years 2016-2017 to 2019-2020.
Year of award |
Criteria & Position |
2016-2017 |
API Unit, Alathur-Exports 2nd place Highest Exports in Pharmaceutical, Plastic & Rubber, Chemical & Allied Sector (Category: Above Rs.50 Crores) |
2017-2018 |
API Unit, Alathur-Exports 1st place Highest Exports in Pharmaceutical, Plastic & Rubber, Chemical & Allied Sector (Category: Above Rs.50 Crores) |
2018-2019 |
Orchid Healthcare Unit-II 1st place Highest Exports in Chemicals, Plastics & Rubber, Pharmaceuticals & Drugs (Category: Above Rs.10 Crores below Rs.50 Crores) |
2018-2019 |
API Unit, Alathur 2nd place Highest Employment in Chemicals, Plastics & Rubber, Pharmaceuticals & Drugs |
2018-2019 |
API Unit, Alathur-Exports 2nd place Highest Exports in Chemicals, Plastics & Rubber, Pharmaceuticals & Drugs (Category: Above Rs.50 Crores) |
2019-2020 |
API Unit, Alathur-Exports 2nd place Highest Exports in Chemicals, Plastics & Rubber, Pharmaceuticals & Drugs (Category: Above Rs.50 Crores) |
Regulation 43A of the Listing Regulation, as amended, requires the top 1000 listed entities, computed based on market capitalization as on March 31 of every Financial Year, to formulate a Dividend Distribution Policy and disclose the same on the website of the Company and a web link of the policy be disclosed in the Annual Report.
The Board of Directors of the Company has adopted a Dividend Distribution Policy which aims to ensure fairness, sustainability and consistency in distributing profits to the
Shareholders. The Policy is available on the website of the Company i.e., www.orchidpharma.com/downloads/Dividend% 20Distribution%20policy.pdf
Business Responsibility Reporting
As stipulated under the Listing Regulations, the Business Responsibility Report (BRR) describing the initiatives undertaken by the Company from an environment, social and governance perspective is given in Annexure X which forms part of this report.
The Employee stock options plans namely a) ORCHID ESOP 2010,
b) ORCHID ESOP - DIRECTORS 2011 and c) Orchid ESOP - Senior Management 2011 have all lapsed quite a few years ago. Moreover, these schemes are no longer a desirable and viable employee benefit; all the above three ESOP Schemes have become infructuous and hence have been terminated.
Subsidiaries & Step down Subsidiaries Bexel Pharmaceuticals Inc., USA (Bexel)
Bexel was incorporated basically to conduct Research & Development activities in new drug discovery segment. The current Bexel IP portfolio is being maintained by Global IP Unit of your Company.
Orchid Pharmaceuticals Inc., USA
Orchid Pharmaceuticals, Inc., is a wholly owned Delaware based subsidiary of your Company and also the holding company in the United States, under which all the operational business subsidiaries have been structured. The Company currently has two operating Subsidiaries, namely Orgenus Pharma Inc., and Orchid Pharma Inc., in the US. Orgenus Pharma Inc., is the entity that provides all business development and operational services for the parent Company including the initiation of marketing alliances with partner companies. It continues to represent your Company for all matters relating to the review and approval of such filings by the FDA and handling of logistics and product importation into the US as the Importer of Record for the US Customs. Orchid Pharma Inc., is the commercial entity that started direct marketing and selling your Company''s products in the US generics market place. Orchid Pharma Inc., has established a strong corporate image for your Company in the US.
Diakron Pharmaceuticals Inc., USA
Orchid''s stake in Diakron has been a part of the original transaction which includes direct investment and Master Services Agreement (MSA). Though your Company has completed most of its MSA obligations to develop and supply clinical quantities of API and extended release formulation a sizeable outstanding liabilities is still in its Books. A proper evaluation of cost and benefit would be done for revival and funding.
Orchid Europe Limited, United Kingdom
Your Company''s subsidiary in Europe namely Orchid Europe Limited (OEL) is a wholly owned subsidiary which provides liaising support to the parent Company and its customers in Regulatory, Pharma covigilance, Testing & Release, Retention of samples, Service Providers and Business Development in Europe.
Orchid Pharmaceuticals (South Africa) Proprietary Limited, South Africa
Your Company''s wholly owned subsidiary, Orchid Pharmaceuticals (South Africa) Proprietary Limited, was incorporated in the year 2006 mainly to register and market your Company''s products in South Africa. As not much progress has happened so far, the Board of your company has decided to wind up this entity.
During the year under review, your Company had subscribed to equity shares constituting 26% of paid up equity share capital of M/s OrBion Pharmaceuticals Private Limited ("OrBionâ) by virtue of which the Company has become an Associate of your Company. The total shares subscribed by your Company in OrBion as on March 31,2022 is 4,55,00,000 equity shares of Rs.10/- each constituting 26% of paid up equity share capital of M/s OrBion Pharmaceuticals Private Limited.
Orchid Bio-Pharma limited was incorporated as Indian Wholly owned Subsidiary ("WoSâ) of your Company on March 24, 2022. The main object of the aforesaid WoS is manufacturing of biotech chemicals, intermediates and biotechnology products. The WoS is yet to commence its business operations.
There are no Companies / Bodies Corporate which have ceased to be subsidiary / Joint Venture / Associate during the financial year 2021-2022. The Company did not have any material subsidiary as on March 31, 2022.
Highlights of the performance of Subsidiaries & Associate their contribution to the overall performance of the Company during the period under report
One of the Subsidiary Companies contributed 1.89 % of the consolidated sales of the Company. The Company accesses the US market through this subsidiary and expects reasonable growth in the US market in the years to come either through its wholly owned subsidiary or directly. The R&D subsidiaries of the Company were used for carrying out Research & Development of selected molecules, having good potential. Your Company has a subsidiary for holding Product registrations and approvals in Europe. The Board and Management is reviewing the operations of all the subsidiaries and representative offices of your Company and would take appropriate steps for either the revival of its businesses based on cost-benefit analysis or their closure to save costs.
For the Financial Year ended March 31, 2022, OrBion Pharmaceuticals Private Limited, Associate of your company had registered a net income of Rs. 2050.42 Lakhs with net loss of Rs. 1354.87 Lakhs.
Consolidated financial statements
Pursuant to Section 129(3) of the Companies Act, 2013, the Consolidated Financial Statements presented by the Company include the financial statements of its subsidiaries. Further, a statement containing the salient features of the financial statements of the Subsidiaries and Associate of the Company in the prescribed form AOC-1 is given in Annexure-VII & forms part of this report. This statement also provides the details of the performance and financial position of each subsidiary in accordance with Section 136 of the Companies Act, 2013.
Directors and Key Managerial Personnel
As at 31st March 2022, the Board of your Company comprised of eight Directors of which 4 (four) are independent. There was no change in the Directors and Key Managerial Personnel during the financial year 2021-2022.
Names of the Directors retiring by rotation at the ensuing Annual General Meeting and whether or not they offer themselves for re-appointment
In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Shri Ram Gopal Agarwal (DIN:00627386), Chairman and Non-Executive Director, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment. The Board recommends the re-appointment of Shri Ram Gopal Agarwal.
In accordance with Section 92(3) of the Companies Act, 2013, every company shall place a copy of the annual return on the website of the Company, if any, and the web-link of such annual return shall be disclosed in the Board''s report. A copy of the Annual return of the Company is available on the website of the Company and can be accessed at the following web-link: http://orchidpharma.com/downloads/annualreports
Board meetings held during the year
During the year under review, Seven (7) meetings of the Board of Directors were held. The Board Meetings were held in accordance with the provisions of the Companies Act, 2013 & the relevant rules made there under and the Listing Regulations. The details of the Board and committee meetings held are furnished in the Corporate Governance Report forming part of this report.
Director''s Responsibility Statement
Pursuant to the provisions contained in Section 134 (3) (c) of the Companies Act, 2013, the Board to the best of its knowledge and belief and according to the information and explanations obtained by it confirms that:
a) In the preparation of the annual accounts for the financial year ended March 31, 2022, the applicable accounting standards have been followed along with proper explanation relating to material departures;
b) The Directors 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 ended March 31, 2022 and of the profit and loss of the company for that period;
c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the company, and for preventing and detecting fraud and other irregularities;
d) The Directors have prepared the Annual accounts for the financial year ended March 31, 2022 on a going concern basis;
e) The Directors have laid down Internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;
f) The Directors have devised proper systems to ensure compliance with the provisions of applicable laws and that such systems were adequate and operating effectively.
Nomination & Remuneration policy
This Policy lays down standards with respect to the appointment, remuneration and evaluation of Senior Management Personnel, Directors and Key Managerial Personnel of the Company. The Policy is available on the website of the Company and the web-link for the same is www.orchidpharma.com/downloads/NOMINATION_AND_REMUN ERATION_POLICY.pdf
Appointment and Remuneration of Non- Executive Directors
Non-Executive Directors are entitled to receive sitting fees for attending the meetings of the Board or Committee thereof, as approved by the Board and within the overall limits prescribed under the Companies Act, 2013 and rules made thereunder.
The Criteria for determining independence of a director are based on the academic accomplishments, qualifications, expertise and experience in their respective Felds, diversity of the Board, global exposure, professional network, technical expertise, functional domain expertise, independence and innovation.
The Company has received the necessary declarations from each Independent Director in accordance with Section 149 (7) of the Act confirming that he/she meets the criteria of independence as laid out in Section 149 (6) of the Act and in accordance with Regulations 16 (1) (b) and 25 (8) of the Listing Regulations, 2015.
Further, the Board after taking these declarations/ disclosures
on record and acknowledging the veracity of the same, concluded that the Independent Directors are persons of integrity and possess the relevant expertise and experience to qualify as Independent Directors of the Company and are independent of the Management. All the Independent Directors have been registered and are members of Independent Directors Databank maintained by the Indian Institute of Corporate Affairs and whoever be required to qualify the online proficiency self-assessment test will be complied in due course of time, if any.
The Board opines that all the Independent Directors of the Company strictly adhere to corporate integrity, possesses requisite expertise, experience and qualifications to discharge the assigned duties and responsibilities as mandated by the Companies Act, 2013 and Listing Regulations diligently.
Related Party Transaction Policy
Your Company has framed a Related Party Transaction Policy in compliance with Section 177 of the Companies Act 2013 and Regulation 23 of the Listing Regulations in order to ensure proper reporting and approval of transactions with related parties. The Policy is available on the website of the Company and the web-link for the same is www.orchidpharma.com/ downloads/Policv%20on%20materialitv%20and%20dealing %20with%20Related%20Party%20Transactions.pdf. All the transactions entered with the related parties were in ordinary course of business and on arm''s length basis except for the purchase of land and buildings from M/s. Dhanuka Laboratories Limited and M/s. Synmedic Laboratories Limited which were not in the ordinary course of business.
Justification for entering into contracts / arrangements with related parties which are not in the ordinary course of business
The purchase of land and buildings from M/s. Dhanuka Laboratories Limited and M/s. Synmedic Laboratories Limited which was at arm''s length and not in the ordinary course of business of the Company was aimed at enhancing the operational efficiency of your Company and maximizing the Shareholder''s value. The aforesaid transactions is in the best interest of the Company. The Audit committee of the Board had reviewed the aforesaid transactions including the valuation reports and the transaction was effected with the approval of the Board of Directors and Prior approval of the Shareholders of the Company. The details of ''material'' contracts or arrangements or transactions in form AOC-2 is given in Annexure VIII to this report.
Corporate Social Responsibility (CSR)
Your Company does not meet the thresholds as prescribed under Section 135 (1) of the Companies Act, 2013 and hence the constitution of the CSR Committee is not applicable. However,
the erstwhile Board of the Company has approved the CSR policy and the same is available on the website of the Company and the web- link for the same is www.orchidpharma.com/ downloads/CSR-POLICY.pdf
Since the Company did not have any profits for the last three financial years, your company is not mandatorily required to contribute towards CSR activities.
Material changes and commitment, if any, affecting financial position of the Company from the end of Financial Year and till the date of this Report
Except otherwise stated herein in this Report, there are no material changes and commitment affecting financial position of the Company from the end of Financial Year March 31, 2022 and till the date of this Report.
Your Company has always been striving in the field of energy conservation. With the available limited resources, certain measures to conserve energy and to reduce associated costs were taken in a small way during the fiscal under review. The particulars in respect to conservation of energy as required under Section 134 (3) (m) of the Companies Act, 2013, are given in Annexure I to this report.
The particulars in respect of R&D/Technology absorption as required under Section 134 (3) (m) of the Companies Act, 2013, are given in Annexure II to this report.
Foreign Exchange Earnings and Outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as required under Section 134 (3) (m) of the Companies Act, 2013 are given in Annexure III to this report.
A statement indicating development and implementation of a risk management policy for the company including identification therein of elements of risk, if any, which in the opinion of the Board may threaten the existence of the company
The details and the process of Risk Management as were existing and implemented in the Company are provided as part of Management Discussion and Analysis, which forms part of this report.
The Company has constituted a Risk Management Committee aligned with the requirements of the Companies Act, 2013 and the Listing Regulations. The details of the aforesaid Committee and its terms of reference are set out in the Corporate Governance Report forming part of this Report
The Company has a risk management mechanism in place to manage uncertainties through identification, analysis, assessment, implementing and monitoring measures to reduce the impact of risks to the business which is discussed in detail in the Management Discussion and Analysis section of this Annual
The Company has adopted a Code of Prevention of Insider Trading with a view to regulate trading in securities by the Directors and the Designated Persons of the Company. The Code requires pre-clearance for dealing in the Company''s shares and prohibits the purchase or sale of Company shares by the Directors and the Designated Persons while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed.
Environment
Environment management is the prime concern in Orchid Pharma Limited. Orchid has employed a state-of-the-art technology, zero liquid trade effluent treatment plant and world class treatment facilities for its liquid and gaseous pollutants generated from the production processes. The zero discharge of liquid trade effluent treatment plant comprising Membrane Bio Reactor, Reverse Osmosis, Solvent Stripping Column, Thermal Evaporation & Crystallization plant to treat the entire trade effluent and recycle back into the utility process.
Waste Water Treatment
Low TDS effluent is collected, equalized and neutralized into neutral pH and treated aerobically by Membrane Bio Reactor process comprising of aeropac equipped with jet aeration system made up of Glass Fibre Reinforced Plastic & Ultrafiltration System loaded with ceramic membrane (aluminum zirconium). The permeate from ultrafiltration passes through reverse osmosis to separate inorganic salts. The permeate of reverse osmosis is utilized in the cooling towers as make up water. The reject from the reverse osmosis plant is mixed with high total dissolved solids effluent for further treatment. The excess bio mass from the aerobic system is centrifuged and sent to bio composting process to convert into useful manure. High TDS effluent is collected and neutralized into neutral pH. This effluent is sent to Mechanical Evaporators (Single stage, Three stage and Five stage) to concentrate the salts to the level of 35%. Heat energy is recovered during the process of evaporating the effluent and the recovered heat energy is utilized to reduce the energy consumption. The concentrate from the evaporators are sent to Agitated Thin Film Dryers (ATFD) where it gets dried and the dried salt is collected at the bottom of ATFD. The collected salt is bagged, stored in protected storage sheds and disposed at Government approved Treatment Storage & Disposal Facility (TSDF).
Waste Air Treatment
The major emissions from the unit is from the boiler, power plant, production process and powder processing area.
Process Scrubbers: Orchid installed process scrubbers in all production blocks to treat the waste air generated from process reactors.
Report.
Annual evaluation of Board, its Committees and individual Directors
Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board carried out an annual performance evaluation of its own performance, the Directors individually, the Chairman of the Board and its Committees as per the evaluation framework adopted by the Board on the recommendation of the Nomination and Remuneration Committee. The performance evaluation has been done by the entire Board of Directors, excluding the Director being evaluated. Various evaluation techniques are used to assess the performance of the Directors. The Directors have participated in this evaluation process. The Independent Directors in their separate meeting have also evaluated the performance of the Chairman of the Company, Non-Independent Directors and the Board as a whole. Separate questionnaires were used to evaluate the performance of individual Directors on parameters such as their participation and contribution, objective judgment etc. The Chairman was also evaluated based on the key aspects of his role.
Change in the Nature of Business
There is no change in the nature of business carried on by your company during the financial year ended March 31, 2022. During the year under review, the Company had sold its Formulations unit (IKKT) on a slump sale basis to M/s. OrBion Pharmaceuticals Private Limited. The IKKT unit was generating negative EBITDA, hence the sale of above unit would improve the EBITDA of your Company.
Details regarding deposits covered under Chapter V of the Act
During the Financial Year 2021-22, your company did not accept any deposits within the meaning of the provisions of Chapter V -Acceptance of Deposits by Companies read with the Companies (Acceptance of Deposits), Rules 2014 and as such no amount of principal or interest was outstanding as of the balance sheet date.
Significant and Material Orders Passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company
There have been no significant nor material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations.
Disclosure under the sexual harassment of women at work place (Prevention, Prohibition and Redressal) Act, 2013
The details pertaining to captioned header are disclosed in the Corporate Governance report which is annexed to the Board''s report.
Vent Gas Condensation: Orchid installed vent gas condensation system for fugitive emissions from the storage tanks of solvents and secondary condensers of solvent recovery area to control the fugitive emissions.
Reverse Jet Ventury Filter: Orchid installed reverse jet ventury filter to control the dust emission during the powder processing of bulk drugs.
Adequate Stack Height: Adequate stack heights are provided for Steam Boiler and Power Plant for better dispersion.
Electro Static Precipitator (ESP): ESP is provided at the boiler emission to control the particulate matter.
Ambient Air Quality and Stack Emission Monitoring: Ambient air quality and stack emission monitoring is being carried out round the clock to check the emission level in the atmosphere.
Hazardous wastes are collected and stored in protected storage shed and disposed into the approved landfill sites / authorized recyclers.
Bio sludge generated from the biological process of effluent treatment are converted into useful compost.
World Environment Day Celebration
World Environment Day was celebrated on 4th June 2021 by planting trees with in our factory premises to create awareness on environment among employees.
Orchid is highly committed to Safety, Health and Environment aspects. In spite of challenging circumstances brought about by COVID-19, there has been no compromise on critical needs of safety. This has been possible because of committed Line Management, dedicated Safety Professionals and relentless Leadership direction. Central Safety Committee (CSC), the apex committee of the organization have ensured that risks have been contained to keep us free from any major incident. Orchid strongly believes that human behaviour plays key role in safety management. Reinforcing the Safety observation & Audit (SOA) -a Lead indicator, becomes a key focus area always in our Central Safety Committee meetings. CSC continues to meet every month, review critical concerns on Safety and provides directions to minimize the risks at all levels.
In light of the evolving Coronavirus situation, organization is taking critical measures to contain the spread of COVID-19. Essential preventive measures have been taken to ensure that we keep ourselves, our families and our communities safe. Orchid established a comprehensive crisis management plan to handle the pandemic. This plan addresses the adequate preparedness and response measures for the following risks that arises out of the pandemic situation.
F Spread of infection across employees operating within plants
F Contract employee health issues F Contamination from employees returning from hot spots F Inadequate availability of work force due to absenteeism spikes
F Inadequate focus on Safe work practices, maintenance under restricted work force F Shutdown and start-up of process F Contamination of work place / warehouse F Contamination risk from Visitors / Contractors F Inadequate social distancing
F Risk of movement of Contaminated vehicles
F Gap in Sanitation and hygiene requirements
At Orchid, we have initiated protocols for hygiene and sanitation, social distancing, Virtual meetings, medical assistance and vaccination initiatives in alignment with National /Global guidelines on disease prevention and control to prevent contamination and to cope with adverse situations. These measures have been rolled out across all Orchid business processes, Manufacturing Sites, offices, and Technology Development facilities.
Process Safety is of paramount importance for any Chemical and Pharmaceutical organization, therefore, we have built a strong Process safety culture at Orchid over the years. The company also realized the need of effective safety communication in culture building activity / exercise. This is backed up by periodical safety talks, Safety Posters and Interactive discussions. Several safety-related initiatives, awareness campaigns were conducted to promote a "zero incidentsâ mindset among employees. These efforts resulted in behavioural change, making a zero-reportable-incidents year. By applying Risk Assessment technologies at work on chemicals and process, we ensured that highest workplace safety standards were implemented across the manufacturing value chain.
Particulars of Employees and Remuneration
The Information as required pursuant to Section 197 (12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in Annexure V to this report. The information as per Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, forms part of this Report. However, as per First proviso to Section 136(1) of the Companies Act, 2013 and Second proviso to Rule 5(2) of the Rules, the Report and Financial Statements are being sent to the Members of the Company excluding the Statement of Particulars of Employees under Rule 5(2) of the Rules. Any Member interested in obtaining a copy of the said statement may write to the Company Secretary at the address of the Corporate Office of the Company.
Remuneration received by Managing/Whole time Director from holding or subsidiary company
No remuneration was received by Shri Manish Dhanuka, Managing Director and Shri Mridul Dhanuka, Whole time Director of your Company from the holding and the Subsidiary companies of your company for the financial year ended March 31, 2022.
Particulars of Loans, Guarantees or investments under Section 186 of the Companies Act, 2013
Particulars of Loans, Guarantees or investments as required under Section 186 of the Companies Act, 2013 are provided in the Note no. 6 & 14 to the Standalone financial statements for the financial year 2021-2022.
The Securities of the Company were not suspended from trading during the year under review. With effect from November 15, 2021, 14,803 outstanding Global Depository Receipts (GDR''s) were delisted from the Luxembourg Stock Exchange and London Stock Exchange.
Transfer of Shares to the Investor Education and Protection Fund (IEPF)
The details pertaining to the transfer of shares to the Investor Education and Protection Fund during the reporting period are disclosed in the Corporate Governance report annexed to this report.
The details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the financial year
Not Applicable to the company.
The details of difference between amount of the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof
Not Applicable to the company.
The Statutory Auditors, M/s CNGSN & Associates LLP, Chartered Accountants were appointed at the 24th Annual General Meeting of the Company held on September 13, 2017 for a period of five (5) years from the conclusion of 24th Annual General Meeting till the conclusion of 29th Annual General Meeting. The term of the current Statutory Auditors M/s. CNGSN & Associates LLP, Chartered Accountants, will expire at the conclusion of the 29th Annual General Meeting of the Company and consequently a new audit firm have to be appointed. The Board of Directors at their meeting held on June 14, 2022, based on the recommendation of the Audit Committee have recommended the appointment of M/s.Singhi & Co., Chartered Accountants (Firm Registration No. 302049E) as the Statutory Auditors, subject to the approval of the members of the Company. The resolution seeking
appointment of M/s.Singhi & Co., Chartered Accountants, (Firm Registration No. 302049E) as the Statutory Auditors of the Company for a period of five years from the conclusion of the 29th AGM of the Company is being sought for at the ensuing AGM.
The Board places on record its appreciation for the services of M/s. CNGSN & Associates LLP, Chartered Accountants, during their tenure as the Statutory Auditors of your company.
The Auditors have audited the standalone and consolidated financial statements of the Company for the financial year ended March 31, 2022 and no fraud have been reported by the Auditors under Section 143 (12) of the Companies Act, 2013 requiring disclosure in the Board''s Report.
Explanation to the Audit qualifications
The explanation to the Audit qualifications for the financial year ended March 31, 2022 are given in Annexure IX to this report.
Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, M/s S Dhanapal & Associates (a firm of Practising Company Secretaries) were appointed to conduct the Secretarial audit of your Company for the Financial Year 20212022. The Secretarial Audit Report is forming part of this Annual Report (Annexure VI).
Upon recommendation of the Audit Committee, the Board has re-appointed M/s S Dhanapal & Associates (a firm of Practising Company Secretaries), as Secretarial Auditors of the Company for the Financial Year 2022-23.
In terms of Regulation 24A of the Listing Regulations, there is no material unlisted subsidiary incorporated in India. Material unlisted subsidiary for the purpose of this Regulation is a subsidiary whose income/net worth exceeds 10 per cent of the consolidated income/net worth respectively of the Company and its Subsidiaries in the immediately preceding accounting year. Hence, there is no requirement for a Secretarial audit to be conducted for any of the Company''s Subsidiaries in India.
In respect of delay in filing returns with relevant authorities on certain occasions, the Company is taking necessary steps for filing the returns on time in the ensuing years. With reference to the mentioning of the web link of the Business Responsibility Report in the Annual report, the web-link was inadvertently missed to be printed in the Annual report
Compliance with the provisions of Secretarial Standards
The Company has deployed proper systems to ensure compliance with the provisions of the applicable secretarial standards issued by the Institute of Company Secretaries of India.
The Central Government has prescribed that an audit of the cost accounts maintained by the Company in respect of Bulk Drugs and Formulations be conducted under Section 148 of the Companies Act, 2013. Consequently, your Company had appointed Shri J Karthikeyan as Cost Auditor for the FY 2021- 22, for the audit of the cost accounts maintained by the Company in respect of both Bulk Drugs and Formulations. The cost audit report for the Financial Year 2021-2022 is under progress and will be filed with the Central Government within the stipulated timeline and the relevant Cost Audit reports for FY 2020-2021 were filed with the Central Government on January 05, 2022. Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014, the Company maintains the Cost Audit records in respect of its pharmaceutical business. The Board, at its meeting held on May 12, 2022, on the recommendation of the Audit Committee, has appointed Shri J Karthikeyan, Cost Accountant, Chennai (Membership No.29934 & Firm Reg. No.102695) to conduct the audit of the cost accounting records of the Company for financial year 2022-2023 at a remuneration of Rs.2,00,000/- (Rupees Two Lakhs Only) plus applicable taxes and reimbursement of out- of-pocket expenses. The remuneration is subject to the ratification of the Members in terms of Section 148 read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014 and is accordingly placed for your ratification.
No disclosure or reporting is made with respect to the following items, as there were no transactions during the year under review:
F The issue of equity shares with differential rights as to dividend, voting or otherwise
F The issue of shares to the employees of the Company under any scheme (sweat equity or stock options)
F There is no change in the Share Capital structure during the year under review.
F The Company does not have any scheme or provision of money for the purchase of its own shares by employees or by trustees for the benefits of employees
F There was no revision in the financial statements Acknowledgements
The Board is grateful and thankful to all the Banks, Financial Institutions both in public sector and in private sector who have fully supported your Company''s initiatives. The Board is grateful to the Central and State Government and the Central Drugs Standard Control Organization and State Food Safety and Drugs Administration (State FDAs) for their support to the Company''s business plans. The Board places on record their appreciation of the support provided by the Employees, customers, suppliers, service providers, medical fraternity and business partners.
Mar 31, 2018
Dear Members,
In accordance with the applicable provisions of the Insolvency and Bankruptcy Code 2016 (âIBC/Codeâ), the Corporate Insolvency Resolution Process (âCIRP Processâ) of Orchid Pharma Limited (âCompanyâ) was initiated by an Operational Creditor of the Company. The Operational Creditorâs petition to initiate the CIRP Process was admitted by the National Company Law Tribunal (âNCLTâ) vide CP. No. CP/ 540/ (IB)/ CB/ 2017 on August 17, 2017 (âInsolvency Commencement Dateâ). Mr. CMA CS Rajasekaran R was appointed as the Interim Resolution Professional (âIRPâ) to manage the affairs of the Company. Subsequently, Mr. Ramkumar Sripatham Venkatasubramanian (IP Registration No. IBBI /IPA-001 /IP-P00015 /2016-17 /10039) was confirmed as the Resolution Professional (âRPâ) by the committee of creditors (âCoCâ) and NCLT with effect from October 27, 2017. On appointment of the IRP /RP, the powers of the Board were suspended and the same vests with the RP.
RP invited expressions of interest and submission of a resolution plan in accordance with the provisions of the Code. Upto the CIRP extended last date i.e. the 270th day - May 14, 2018, there were no successful resolution applicants and accordingly RP filed the status with the Honâble NCLT for necessary directions. Subsequently, as directed by Honâble NCLT, Chennai, Resolution Professional (RP) placed the Resolution Plan from prospective resolution applicant namely - Ingen Capital Group LLC, USA - before Committee of Creditors (CoC) for voting on June 04, 2018 and re-voting on August 04, 2018 in view of the Ordinance (IBC) passed on 6th June 2018. In the re-voting which concluded on 4th August 2018, the resolution plan had received an affirmative vote of 78% of the CoC by value in its favour. RP filed the re-voting results with Honâble NCLT and as on the date of this Report, the status is âOrder Reservedâ.
Pending this, and measures to be adopted as part of the resolution process, the audited financial results have been continued to be prepared on a going concern basis
With this backdrop, RP and the Board take pleasure in presenting the report on business and operations of your Company along with the audited statement of accounts (Standalone and Consolidated) for the financial year ended March 31, 2018.
Financial summary /Performance /State of Companyâs affairs Transition to IND AS
The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazette dated February 16, 2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes of Companies. Ind AS has replaced the existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. For your company Ind AS is applicable from April 1, 2017, with a transition date of April 1, 2016.
The highlights of the standalone financial results for the year 2017-2018 as per the IND AS are given below:-
(Rs.in Crores)
IND-AS |
||
Particulars |
Year ended 31.03.2018 |
Year ended 31.03.2017 |
Sales & Operating Income |
649.00 |
766.29 |
Other Income |
19.87 |
27.32 |
Total Expenditure |
635.40 |
768.54 |
Gross profit |
33.47 |
25.06 |
Interest & Finance Charges |
301.65 |
336.27 |
Gross Profit after Interest but before Depreciation and Taxation |
(268.18) |
(311.20 ) |
Depreciation |
133.29 |
139.42 |
Profit / (Loss) before Tax, extraordinary items |
(401.47) |
(450.62) |
Extraordinary items - Income (Expenditure) |
- |
(86.26) |
Profit / (Loss) Before Tax |
(401.47) |
(536.88) |
Current & Deferred Tax |
(46.19) |
(48.34 ) |
Profit /(Loss) after Tax |
(355.28) |
(488.54) |
Other Comprehensive Income (OCI) |
0.74 |
(1 58) |
Net Profit / (Loss) for the period including OCI |
(354.53) |
(490.11) |
During the financial year 2017-18, your Company achieved a turnover and operating income of Rs. 649 crores (Rs.766.29 crores in 201617). The gross profit before interest, depreciation and taxes stood at Rs. 33.47crores (Rs. 25.06 crores in 2016-17). After providing for interest expense of Rs. 301.65 crores (Rs.336.27crores in 2016-17), depreciation of Rs.133.29 crores (Rs. 139.42 crores in 2016-17), Extraordinary item of Nil ( Rs. 86.26Crores in 2016-17), the Loss before tax of the Company was Rs. 401.47 crores (Rs. 536.88 crores (Loss) in 2016-17). The net loss after tax including Other Comprehensive Income stood at Rs.354.53crores (Rs. 490.11 crores (Loss) in 2016-17).
Business Overview
During the financial year, i.e. in August 2017, due to non-payment of the dues of an operational creditor, your Company was admitted in the insolvency resolution process as per the IBC by NCLT, Chennai Bench.
During the financial year 2017-18, your Company continued to reel under financial stress and the performance of the Company was affected due to liquidity constraints, mounting interest burdens, which had an impact on the net profits of the Company. As a result, the ability of the Company to meet its repayment obligations /liabilities were adversely affected. Despite the tough liquidity and working capital constraints, your Company managed to sustain sales with a lower EBIDTA denoting the basic strength of the business.
During the year, your Company had received ANDA approval from the USFDA for Aripiprazole tablets USP, 2mg, 5mg, 10mg, 15mg, 20mg and 30 mg Aripiprazole Orally-Disintegrating Tablets USP, 10 mg and 15 mg.
Future Prospects
It is now four years since the restructuring of the debt and one year since the CIRP, approval of the resolution plan for revival of the Business as recommended with an affirmative vote of 78% by the Committee of Creditors and given to the NCLT is still in progress. The resolution plan submitted by RP, came up for Hearings in NCLT and as it stands âthe Order is Reservedâ.
Your Company has been extremely fortunate to have the full support of its Lenders, Employees, Vendors and Customers during the financially stressed period. Although, huge efforts are required towards regaining the confidence of various Stakeholders, your Company is hopeful and confident of accomplishing the same during the course of time. Your Board believes that the Company will be able to revive its operations towards profitability post receipt of the approval from NCLT and the implementation of the Resolution Plan.
Management Discussion and Analysis report
A report on the Management discussion and analysis in terms of the provisions of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is provided as a separate annexure in the annual report.
Corporate Governance Report and Additional Shareholderâs information
A report on the corporate governance systems and practices of your company along with a certificate of compliance from the Practising Company Secretary is given in Annexure V which forms part of this report
Audit committee
The details of the Composition of the Audit committee are available in the Corporate Governance report. The Board has accepted the recommendations made by the Audit committee during the financial year 2017-2018.
Pursuant to the resignation of Shri K N Venkatasubramanian, Chairman & Independent Director and Shri R Kannan, Independent Director, the reconstitution of the Board as well as the Audit committee is pending.
Adequacy of Internal Financial Control System
The internal financial control over financial reporting system are existing and operative, however based on the observations of the auditors, the Company is further strengthening the internal financial control systems over financial reporting
Regulatory Filings and Approvals
In the generic formulations domain, Orchidâs cumulative Abbreviated New Drug Application (ANDA) filings for the US market stood at 46. This includes 8 Para IV FTF (First-To-File) filings. The break-up of the total ANDA filings is 13 in Cephalosporins segment and 33 in NPNC space.
During the year, the Company had received ANDA approval from the USFDA for Aripiprazole tablets USP, 2mg, 5mg, 10mg, 15mg, 20mg and 30 mg and for Aripiprazole Orally-Disintegrating Tablets USP, 10 mg and 15 mg
In the European Union (EU) region, the cumulative count of Marketing Authorisation (MA) filings stood at 31. The breakup of the total MA filings is 15 in the Cephalosporin segment and 16 in the NPNC segment.
In the API (Active Pharmaceutical Ingredients) domain, Orchidâs cumulative filings of US DMF stand at 76 The break-up of the total filings is 28 in the Cephalosporin Segment,48 in NPNC segment. In European market space the cumulative filings of COS (Certificate of Suitability) count remained at 19 which includes 14 in cephalosporin segment,5 in NPNC segment. In Japan market, the cumulative filings of JDMFs count remained at 7 only in Cephalosporin segment.
Intellectual Property Rights
During the year, Orchid continued to take forward the IPR work on a number of products. The total number of patent applications filed by Orchid in various national and international patent offices so far was 219 including Process, Formulation, New Chemical Entities (NCE), Novel Drug Delivery System (NDDS), Biotech and Generics. As of March 31, 2018, 27 patent applications have been published while 178 patents have been granted cumulatively.
The number of patent applications filed by Orchid from April 01, 2017 to March 31, 2018 is 23 (Including Process, Formulation, NCE, NDDS, Biotech and Generics), and out of this 9 patents have been granted.
Dividend & Reserves
In view of the net loss incurred during the financial year ended March 31, 2018, the Resolution Professional does not recommend any dividend to the shareholders of the Company. Also, no amount has been transferred to reserves.
Awards and Achievements
During the year, your Companyâs Generics Manufacturing Unit, Irungattukottai (IKKT) was chosen for the Export Excellence Award (II Position) by the Ministry of Commerce & Industry, Government of India for performance during 2015 - 2016 and Exim Achievement Award (II Position) by the Tamil Chamber of Commerce in Association with Chozha Nachiar Foundation, Government of Tamil Nadu for performance during the financial year 2014-15.
Issue of Equity Shares
To comply with the requirements of Corporate Debt Restructuring Programme, your Company pursuant to the approval granted by the members through Postal ballot on August 26, 2014, had obtained in principle approval from NSE Ltd. & BSE Ltd. to allot 1,85,12,251 (One Crore Eighty Five Lakhs Twelve Thousand Two Hundred Fifty One Only) equity shares of Rs.10/- each at a premium of Rs.39.79 per share to the Promoter Group Company M/s Orchid Healthcare Private Ltd. Out of the above, your Company allotted 1,48,09,801 shares as part of first tranche during December 2014. The Company allotted the remaining 3,702,450 (Thirty Seven Lakh Two Thousand Four Hundred and Fifty Only) equity shares of RS.10/- each at a premium of Rs.39.79 per share during October 2015. During the financial year 2017-2018, your Company had received the final trading approval for 37,02,450 shares from NSE Ltd and BSE Ltd.
Employees Stock Option Plan
The details of options granted to employees under the ORCHID ESOP 2010, ORCHID ESOP - DIRECTORS 2011, Orchid ESOP -Senior Management 2011 schemes and the status of such options as on March 31, 2018 are given in Annexure IV to this Report.
Subsidiaries Bexel Pharmaceuticals Inc., USA (Bexel)
Bexel was incorporated basically to conduct Research & Development activities in new drug discovery segment. The current Bexel IP portfolio is being maintained by global IP unit of your Company.
Orchid Pharmaceuticals Inc., USA
Orchid Pharmaceuticals, Inc. is a wholly owned Delaware based subsidiary of your Company and also the holding company in the United States, under which all the operational business subsidiaries have been structured. The Company currently has two operating Subsidiaries, namely Orgenus Pharma Inc., and Orchid Pharma Inc., in the US. Orgenus Pharma Inc. is the entity that provides all business development and operational services for the parent Company including the initiation of marketing alliances with partner companies. It continues to represent your Company for all matters relating to the review and approval of such filings by the FDA, and handling of logistics and product importation into the US as the Importer of Record for the US Customs. Orchid Pharma Inc., is the commercial entity that started direct marketing and selling your Companyâs products in the US generics market place. Orchid Pharma Inc. has established a strong corporate image for your Company in the US and will be launching all future (unpartnered) generics products under the Orchid label.
Diakron Pharmaceuticals Inc., USA
Orchidâs stake in Diakron has been a part of the originaltransaction which includes direct investment and Master Services Agreement (MSA). Your Company has completed most of its MSA obligations to develop and supply clinical quantities of API and extended release formulation.
Orchid Europe Limited, United Kingdom
Your Companyâs subsidiary in Europe namely Orchid Europe Limited (OEL) is a wholly owned subsidiary which provides liaising support to the parent Company and its customers in Regulatory, Pharma covigilance, Testing & Release, Retention of samples, Service Providers and Business Development in Europe.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your Companyâs wholly owned subsidiary, Orchid Pharmaceuticals (South Africa) Pty Ltd., was incorporated mainly to register and market your Companyâs products in South Africa.
Highlights of the performance of subsidiaries and their contribution to the overall performance of the Company during the period under report
One of the Subsidiary Companies contributed 6% of the sales of the Company. The Company accesses the US market through this subsidiary and expects strong growth in the US market in the years to come. The R&D subsidiaries of the Company are used for carrying out Research & Development of selected molecules, having good potential. Your Company has a subsidiary for holding Product registrations and approvals in Europe.
Consolidated Financial Statements
Pursuant to Section 129(3) of the Companies Act, 2013, the Consolidated Financial statements presented by the Company include the financial statements of its subsidiaries. Further, a statement containing the salient features of the financial statements of the subsidiaries of the Company in the prescribed form AOC-1 is given in Annexure -VIII, forming part of this report.
Key & Senior Managerial Personnel
Shri. K Raghavendra Rao (DIN: 00010096), Managing Director and Shri. L Chandrasekar, CFO & Company Secretary are the Key Managerial Personnel of the Company as per Section 203 of the Companies Act, 2013. Ms. Edna Braganza, Chief Operating Officer and Shri Mani Sivaswami, President - API, CSR&SH&E are part of the Senior Management Team.
Extract of Annual Return
As per the amendments carried out by the Companies (Amendment) Act, 2017 in section 92(3), every company shall place a copy of the Annual Return on the website of the Company, if any, and the web-link of such Annual return shall be disclosed in the Boardâs report. A copy of Annual return of the company is available on the website of the company www.orchidpharma.com
Board & RP Meetings held during the year
During the year, 2 (two) meetings of the Board were held prior to commencement of the CIRP. The Board Meetings were held in accordance with provisions of the Companies Act, 2013 and the relevant rules made there under. After the commencement of the CIRP on August 17, 2017, Board Meetings have not taken place as the Powers of the Board remained suspended and entrusted to the Resolution Professional appointed by NCLT. During CIRP, RP had convened meetings with the Senior Management, KMP and with the Board members.
The details of the RP meetings, dates of Board & Committee meetings alongwith the CoC Meetings held during the FY 2017-18 are furnished in the Corporate Governance Report forming part of this report.
Boardâs Responsibility Statement
Members may kindly note that during the CIRP Process (i.e. after August 17, 2017 and continuing till the date of this Report), the RP was entrusted with the management of the affairs of the Company. Prior to the Insolvency Commencement Date, the Board of Directors had the oversight on the management of the affairs of the Company. The Resolution Professional along with the Managing Director is submitting this report. The RP is not to be considered responsible to discharge fiduciary duties with respect to the oversight on financial and operational health of the Company and performance of the management for the period prior to the commencement of CIRP
Accordingly, pursuant to Section 134(5) of the Act, the Board & RP (based on the knowledge /information gained by him about the affairs of the Company in a limited period of time and based on understanding of the then existing processes of the Company) and to the best of their /his knowledge state:
a) that in the preparation of the annual accounts for the financial year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures,
b) that RP has continued with such accounting policies as were adopted on CIRP date, made judgments and estimates that are reasonable and prudent so as to give a reasonably true and fair view of the state of affairs of the Company at the end of the financial year ended March 31, 2018 and of the profit or loss of the Company for that period,
c) that the annual accounts for the financial year ended March 31, 2018 have been prepared on a going concern basis as explained herein above in the preamble,
d) that proper systems which have been devised to ensure compliance with the provisions of applicable laws are adequate and operating and
e) that Internal financial controls which were laid down and followed by the company on the date of CIRP, along with the necessary steps and changes in the Management Structure that have been taken to improve the internal financial controls during CIRP are operating effectively.
f) that proper and sufficient care has been taken care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities.
Nomination & Remuneration policy
This Policy lays down standards with respect to the appointment, remuneration and evaluation of Senior Management Personnel, Directors and Key Managerial Personnel of the Company. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com/downloads NOMINATION_AND_REMUNERATION_POLICY.pdf.
Appointment and Remuneration of Non- Executive Directors
The Criteria for determining independence of a director are based on the academic accomplishments, qualifications, expertise and experience in their respective fields, diversity of the Board, global exposure, professional network, technical expertise, functional domain expertise, independence and innovation. The Independent Directors of your Company have given declarations to the Company under Section 149 (7) of the Act that, they meet the criteria of independence as provided in Sub Section 6 of Section 149 of the Act and also under the Listing Regulations, 2015.
Non-Executive Directors are entitled to receive sitting fees for attending the meetings of the Board or Committee thereof, as approved by the Board and within the overall limits prescribed under the Companies Act, 2013 and rules thereunder.
Related Party Transaction Policy
Your Company has framed a Related Party Transaction Policy in compliance with Section 177 of the Companies Act 2013 and Regulation 23 of SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015, in order to ensure proper reporting and approval of transactions with related parties. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com/downloads/ RELATED-PARTY-TRANSACTION-POLICY.pdf
All the transactions entered with the related parties were in ordinary course of business and are on armâs length basis. The particulars of contracts or arrangements with the related parties under Section 188(1) are disclosed in Form AOC-2 which is given in Annexure -IX, forming part of this report.
Prior omnibus approval of the Audit Committee is has been obtained for the transactions which are foreseeable and of repetitive nature. Corporate Social Responsibility (CSR)
Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013 the Company had constituted the Corporate Social Responsibility Committee to recommend: (a) the policy on
Corporate Social Responsibility and (b) implementation of the CSR Projects or Programs to be undertaken by the Company as per CSR Policy for consideration and approval by the Board of Directors. The details of the composition of the Corporate Social Responsibility committeee are disclosed in the Corporate Governance report.
The Board has approved the CSR policy and the same is available on the website of the Company and the web link for the same is http://www. orchidpharma.com/downloads/CSR-POLICY.pdf.
Since the Company did not have any profits for the last three financial years, the Company is not mandatorily required to contribute towards Corporate Social Responsibility activities. However, your Company has undertaken the CSR activities voluntarily on Education, Health, Youth development, Women Empowerment, Community assets creation (Infrastructure Development), Tribal development, Environment & Renewable energy programmes during the financial year 2017-18 through âOrchid Trustâ and spent Rs. 11 Lakhs towards CSR activities.
Material changes and commitment, if any, affecting financial position of the Company from the end of Financial Year and till the date of this Report
Subject to the ongoing CIRP process as per the IBC 2016, there are no material changes and commitment affecting financial position of the Company from the end of Financial Year and till the date of this Report.
Conservation of Energy
Your Company has always been striving in the field of energy conservation. Certain measures to conserve energy and to reduce associated costs were taken in a small way during the fiscal under review. The particulars in respect to conservation of energy as required under Section 134 (3) (m) of the Companies Act, 2013, are given in Annexure I to this report.
Technology Absorption
The particulars in respect of R&D/Technology absorption as required under Section 134 (3) (m) of the Companies Act, 2013, are given in Annexure II to this report.
Foreign Exchange Earnings and Outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as required under Section 134 (3) (m) of the Companies Act, 2013 are given in Annexure III to this report.
Risk Management Policy
The details and the process of Risk Management as were implemented in the Company are provided as part of Management Discussion and Analysis which forms part of this Report.
Annual evaluation of Board, its Committees and individual Directors
Pursuant to the initiation of the Corporate Insolvency Resolution Process and as the same is still in process, the powers of the Board of Directors stands suspended from August 17, 2017. Accordingly, the Annual evaluation of Board, its committees and individual directors as required under Section 134 (p) could not be carried out.
Change in the Nature of Business:
There is no change in the nature of business carried on by your company during the financial year ended 31st March 2018.
Details regarding deposits, covered under Chapter V of the Act
During the Financial Year 2017-18, your Company did not accept any deposits within the meaning of the provisions of Chapter V -Acceptance of Deposits by Companies read with the Companies (Acceptance of Deposits), Rules 2014 and as such, no amount of principal or interest was outstanding as of the balance sheet date.
Significant and Material Orders Passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company:
In view of pendency of the CIRP, and in view of suspension of the powers of board of directors, the powers of adoption of this standalone & consolidated financial results vests with the RP. The RP as relied upon the representations, clarifications and explanations provided by the Managing Director, Chief Financial Officer and Senior Management Personnel of the Company. During CIRP, there have been no significant nor material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations.
Vigil Mechanism (Whistle Blower Policy)
Your Company has established a vigil mechanism that enables the Directors & the Employees report genuine concerns. The Company encourages its employees who have concerns about unethical behaviour, actual or suspected fraud or violation of the Companyâs code of conduct to come forward and express their concerns without fear of punishment or unfair treatment. The committee affirms that in compliance with the Whistle -Blower Policy/Vigil Mechanism no personnel had been denied access to the Audit Committee. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com / downloads /whistle-blower-policy.pdf.
Policy for determining material subsidiaries
Your Company has framed a Policy for determining material subsidiaries in compliance with Regulation 16 (1) (c) of SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015, in order to determine the material subsidiaries of the Company. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com /ir_downloads. aspx
Disclosure under the sexual harassment of women at work place (Prevention, Prohibition and Redressal) Act, 2013
Your Company has in place an anti-sexual harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Grievance redressal cell within the Human Resource Department has been set up to redress complaints regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has not received complaints on sexual harassment during the financial year ended 31st March, 2018.
Your Company has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Environment
Environment management is the prime concern in your Company. Orchid has employed a state of the art technology zero liquid trade effluent treatment plant system and world class treatment facilities for its liquid and gaseous pollutants generated from the production processes. The zero discharge of liquid trade effluent treatment plant comprises Membrane Bio Reactor, Nano Filtration, Reverse Osmosis, Solvent Stripping Column, Thermal Evaporation & Crystallization plant to treat the entire trade effluent and recycle back into the utility process.
Waste Water Treatment:
Low TDS effluent is collected, equalized and neutralized into neutral pH and treated aerobically by Membrane Bio Reactor process comprising of aeroapc equipped with jet aeration system made up of Glass Fibre Reinforced Plastic & Ultrafiltration System loaded with ceramic membrane (aluminum zirconium). Waste Air Treatment is done through installation of process scrubbers, vent gas condensation, Reverse Jet Ventury Filter, Adequate stack height and Electro Static Precipitator.
Hazardous waste management is done by collecting and storing hazardous wastes in protected storage shed and disposing it into the approved landfill sites / authorized recyclers
Safety
Orchid is highly committed to Safety, Health and Environment aspects. Though resource constraints continue to be a challenge in this financial year also, there is no compromise on critical needs of safety. This has been possible because of committed Line Management, dedicated SPROs and relentless Leadership direction. CSC, the apex committee of the organization have ensured that risks have been contained to keep us free from any major incident. Orchid strongly believes that human behavior plays key role in safety management. To reinforce that Safety observation & Audit (SOA) - Lead indicator, become key focus area always in Our Central Safety Committee meetings (CSC). CSC continues to meet every month review critical concerns on Safety and also provides directions to minimize the risks at all levels.
Process safety management is another key area, being a pharma sector. The company also realized the need of effective safety communication in culture building activity / exercise. This is backed up by periodical safety talks, Safety Posters and Interactive discussions. Orchid also believes Continuous learning is the critical element in Safety Management. Hence, various training programs have been conducted in the year 2017-18 to reinforce the safe behaviour and also to enhance the necessary skills to perform the job safely.
Particulars of Employees and Remuneration
The Information as required pursuant to Section 197 (12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in Annexure VI to this report.
A statement showing names and other particulars of the employees drawing remuneration in excess of the limits prescribed under rule 5(2) of the rules forms part of this Report. However, as per provision of Section 136 of the Act, the report and accounts are being sent to the members, excluding the aforesaid information which is available for inspection by the members at the registered office of the company during business hours on working days of the company. If any member is interested in obtaining a copy, such member may write to the Company Secretary.
Particulars of Loans, Guarantees or investments under Section 186 of the Companies Act, 2013
Particulars of Loans, Guarantees or investments as required under Section 186 of the Companies Act, 2013 are given in Notes to standalone Financial Statements - Reference Nos. 7, 8, 9 & 46.
Green Initiative
To augment the green initiative of the Ministry of Corporate Affairs and to reduce carbon foot print, your Company proposes to send various communication including the Annual Reports in electronic form, to the members who have opted for the same. This would help in reducing the number of physical copies to be printed, thereby contributing to a greener environment. The full text of the Annual Report 2017-18 is available at www.orchidpharma.com. As a member of the Company, you are entitled to receive all such communications in physical form, upon request.
Directors Reappointment of Directors and Resignations
During the year under review, Shri K N Venkatasubramanian resigned from his position of Chairman and Non-Executive Independent Director with effect from October 13, 2017 and Shri R Kannan, resigned from his position of Independent Director with effect from December 27, 2017 due to personal reasons and other professional pre -occupations.
RP /Board wish to record its appreciation for the services rendered and the professional guidance given by Shri K N Venkatasubramanian, Chairman & Non-Executive, Independent Director and Shri R Kannan, Independent Director to the Board from time to time during their tenure.
During the year, IDBI Bank Ltd withdrew the nomination of Shri Rabinarayan Panda and instead appointed Shri Rama Krishna Eda, on the Board with effect from August 10, 2017.
Shri Ramakrishna Eda, Nominee Director will retire by rotation at the ensuing Annual General Meeting and is eligible for reappointment in accordance with the provisions of the said Act.
None of the Directors of the Company are disqualified under Section 164(2) of the Companies Act, 2013.
Statutory Auditors:
The Statutory Auditors, M/s. CNGSN & Associates LLP, Chartered Accountants have been appointed for a period of five (5) years from the conclusion of 24th Annual General Meeting till the conclusion of 29th Annual General Meeting subject to ratification at every AGM.
The Companies(Amendment) Act, 2017 has done away with the provisions of ratification of statutory auditors.
The resolution seeking approval for remuneration to M/s. CNGSN & Associates LLP, Chartered Accountants, the statutory Auditors of the company for the four financial years from 2018-2019 to 2021-2022 is being sought for in the ensuing 25th AGM.
Auditorsâ Report Explanation to the Audit qualifications
The Auditors in their report have made certain observations relating to realisation of value of inventories, overdue receivables, recovery of loans and advances, provision for impairment confirmation of balance from banks for loans, net worth of subsidiaries, further strengthening of internal controls over financial reporting and about their inability to comment on the possible adjustments to be made in the assets, liabilities, disclosure requirements, etc., under âQualified Opinionâ in their report to the members.
The Company is under CIRP and the Resolution Professional is required to invite submission of resolution plans from potential resolution applicants, which has been put up for necessary approvals before the Honourable NCLT. The CIRP is not yet concluded and hence, the final outcome is yet to be ascertained.
The company has not taken in consideration impact on the value of the assets due to this information for impairment, if any, in preparation of Financial Result as required by Ind-AS 10 on âEvents after the reporting periodâ and Ind-AS 109 on Financial Instrumentsâ. Further, the Company has not made assessment of impairment as required by Ind AS 36 on Impairment of Assets, if any, as at 31st March 2018 in the value of tangible and intangible assets.
In respect of investments /loans given to subsidiaries, the company is exporting and selling profitable products through its marketing subsidiary and the profit generated by the marketing subsidiary from the operations will be available for settlement of loan, after meeting their dues. The investments made in R&D Subsidiaries are strategic and long term in nature and hence no provision has been considered.
In accordance with the Code, public announcement was made calling upon the financial creditors and operational creditors of the Company to submit their claims with the Interim Resolution Professional (âIRPâ).
The Company is in the process of obtaining confirmation for receivables, loans and advances given, payables, employee claims and bank loans as at March 31, 2018. NCLT and the final decision of NCLT is awaited. Such claims can be submitted to the IRP /RP during CIRP, till the approval of a resolution plan by the Committee of Creditors (CoC). Pursuant to the claims received the CoC was informed and the list of such creditors was duly notified to the NCLT and uploaded on the company website. Thereafter, there have been regular revisions to the list in view of the claims received and the Company and RP are in process of receiving, collating, verifying, seeking clarifications, sending communications for unreconciled balance calling for additional documents to substantiate whole /part of the unreconciled claims on such claims.
The Companyâs ability to meet the financial /contractual obligations including repayment of various loans, unpaid interest and ability to fund various obligations pertaining to operations for ensuring / commencing normal operations and further investments required towards ongoing research and development projects under progress, is dependant on the resolution of the aforesaid matters as part of the CIRP.
Under the CIRP, a resolution plan has been presented and approved by the Committee of Creditors (âCoCâ) and thereafter to be approved by the Honâble NCLT to keep the company as a going concern. The extended CIRP period was over on May 14, 2018 and RP has completed required fillings with NCLT and the final decision of NCLT is awaited.
Pending this and measures to be adopted as part of the resolution process, the audited financial results have been continued to be prepared on a going concern basis.
In respect of claims submitted of the financial creditors, the process for submission and reconciliation of claims as on the Insolvency Commencement Date remains an on-going process.
The RP has received the claims from the creditors of the Company under the provisions of the Insolvency and Bankruptcy Code, 2016 and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (as amended). The status of these claims are available at the following link: http://www.orchidpharma.com/downloads-cirp.aspx.
The internal financial control over financial reporting system are existing and operative, however based on the observation of the auditors we are further strengthening the internal financial control over financial reporting.
With regard to the inability to comment on the possible adjustments required to be carried in the carrying amount of assets, liabilities, possible presentation and disclosure impacts, it is submitted, that the RP is obliged not to share certain information which are integral part of the CIRP, in order to maintain confidentiality of the process and in line with the directions of the COC.
The resolution plan has been submitted to NCLT and the status is âOrder Reservedâ
Secretarial Auditor:
Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, M/s S Dhanapal Associates (a firm of Practising Company Secretaries), Practicing Company Secretary were appointed to conduct the secretarial audit of your Company for FY 2017-18. The secretarial audit report for the fiscal year ended March 31, 2018 is attached herewith as âAnnexure VIIâ.
Secretarial Audit report
In respect of delay in filing/ non filing of returns with relevant authorities in certain occasions, the Company is taking necessary steps for filing the returns on time in the ensuing years.
Cost Audit
The Central Government has prescribed that an audit of the cost accounts maintained by the Company in respect of Bulk Drugs and Formulations be conducted under Section 148 of the Companies Act, 2013. Consequently, your Company had appointed Shri Kalyanaraman as Cost Auditor for the FY 2017-2018, for the audit of the cost accounts maintained by the Company in respect of both Bulk Drugs and Formulations.
For the period ended March 31, 2017, the due date for filing the cost audit report was October 20, 2017 and the cost audit report was filed on October 12, 2017.
Acknowledgements
The Board is grateful and thankful to all the Banks, Financial Institutions both in public sector and private sector who have fully supported your Companyâs initiatives ~ during the stressed financial situation and during the CIRP ~ and for their wholehearted mandate for approving a resolution plan and for the revival of the Companyâs businesses.
RP / the Board is grateful to the Central and State Governments and the Central DCGI and State FDAs for their support to the Companyâs business plans. RP /Board places on record their appreciation of the support provided by the customers, suppliers, service providers, medical fraternity and business partners.
RP / the Board and the Management acknowledge and are thankful to the employees who stayed back with the Company during this crucial period and for their contributions for the revival of the businesses and operations.
K.Raghavendra Rao
Managing Director
DIN: 00010096
Shri Ramkumar S V
(IP Registration No.IBBI/IPA-001/IP-
P00015/2016-17/10039)
Place : Chennai
Date : August 21, 2018 Resolution Professional
Mar 31, 2016
Dear (Members,
The Directors take pleasure in presenting the report on business and operations of your Company along with the audited statement of accounts for the financial year ended March 31, 2016.
Performance
The highlights of the Standalone financial results for the year 2015 - 2016 are given below:-
(Rs. in Crores)
Particulars |
Year ended 31.03.2016 |
18 months ended 31.03.2015 |
Sales & Operating Income |
879.33 |
1,736.19 |
Other Income |
24.60 |
42.37 |
Total Expenditure |
705.27 |
1,416.33 |
Gross profit |
198.66 |
362.23 |
Interest & Finance Charges |
294.23 |
537.00 |
Gross Profit after Interest but before Depreciation and Taxation |
(95.56) |
(174.77) |
Depreciation |
143.41 |
321.37 |
Profit / (Loss) before Tax, exceptional and extraordinary items |
(238.97) |
(496.14) |
Exceptional Item |
52.54 |
157.26 |
Profit / (Loss) Before Tax and Extraordinary item |
(291.52) |
(653.41) |
Extraordinary items [Income / (Expenditure)] |
270.62 |
|
Profit / (Loss) Before Tax |
(291.52) |
(382.79) |
Current & Deferred Tax |
(17.25) |
(191.75) |
Profit /(Loss) after Tax |
(274.27) |
(191.04) |
The operations of the Alathur API facility were affected for about 3 months, due to torrential rains and floods that occurred during December 2015. Your Company has taken all corrective measures to overcome this impact within the best possible time. Your Company has processed necessary insurance claims for material damage and loss of profit with the insurers. Despite the constraints on account of floods during the financial year 2015-16, your Company achieved a turnover and operating income of Rs.879.33 crores (Rs.1,736.19 crores in 2013-15 which includes business from Aurangabad API facility for about 9 months, till it was transferred in July 2014). The gross profit before interest, depreciation and taxes stood at Rs.198.66 crores (Rs.362.23 crores in 2013-15). After providing for interest expense of Rs.294.23 crores (Rs.537 crores in 2013-15), depreciation of Rs.143.41crores (Rs.321.37 crores in 2013-15), Exceptional item Rs.52.54 crores (Rs.157.26 crores in 2013-15) and Extraordinary item of Rs. Nil (Rs.270.62 crores in 2013-15), the Loss before tax of the Company was Rs.291.52 crores (Rs.382.79 crores (Loss) in 2013-15). The net loss after tax stood at Rs.274.27 crores (Rs.191.04 crores (Loss) in 2013-15). The name of the Company was changed from âOrchid Chemicals & Pharmaceuticals Ltd." to âOrchid Pharma Ltd." effective from October 19, 2015.
During the year, your Company was conferred with the Export Excellence Award for the FY 2012-13 & 2013-14 by Madras Export Processing Zone (MEPZ) - Special Economic Zone, Government of India.
Business Overview
Presently your company is working under the framework of CDR and working towards revival of its operations. Your Company is in the process of launching new products in NPNC segment in the current financial year for the US, EU and other Markets on expiry of patent cover, which will have a positive impact on the Company''s revenue and profitability streams.
Your Company has been extremely fortunate to have the full support of its Lenders, Employees, Vendors and Customers during the financially stressed period and all efforts are being made to garner continuous and full support to revive the operations of the Company. Although, huge efforts are required towards regaining the confidence of various Stakeholders, your Company is hopeful and confident of accomplishing the same over a period of time. With the above measures, your Directors believe that the Company will gradually be able to revive its operations towards profitability.
Future Prospects
It is now two years since the restructuring of the Debt and implementation of the Corporate Debt Restructuring and your Company is moving in the positive direction. In financial terms, the objective of your Company is to lower earnings volatility, strive for higher predictable and calibrated growth and improve EBITDA margin and Return on Investment. The target is to stay cash flow positive and expand earnings year-on-year from FY 2017-18.
All of your Company''s facilities located in Tamil Nadu, India consistently match rigorous global operating standards and are approved by international regulators such as US FDA, UK MHRA, ANVISA Brazil. This key strength provides your Company with the ability to be present and compete in Indian market as well as in various international markets such as USA, Europe, Japan, Australia, China and other emerging countries. Your Company, owes this credit not just to the customers who believe in quality, but also Lenders, Suppliers, Service Providers and Employees who have extended their fullest support and cooperation. Your company is gaining confidence with its various stake holders and your Company is sure that this effort will continue and grow.
Regulatory Filings and Approvals
In the generic formulations domain, Orchid''s cumulative Abbreviated New Drug Application (ANDA) filings for the US market stood at 46. This includes 8 Para IV FTF (First-To-File) filings. The break-up of the total ANDA filings is 13 in Cephalosporinâs segment and 33 in NPNC space. Your Company has received approval from USFDA for the Abbreviated New Drug Application (ANDA) of Rivastigmine Tartrate Capsules USP, 1.5 mg, 3 mg, 4.5 mg, 6 mg, Felodipine Extended - Release Tablets USP, 2.5 mg, 5 mg, 10 mg ,Gemifloxacin Mesylate Tablets, 320 mg and Rasagiline Mesylate Tablets, 0.5 mg & 1 mg with 180 days of generic drug exclusivity. The Company has received tentative approval from USFDA for the Abbreviated New Drug Application (ANDA) of Risedronate Sodium Tablets USP, 30 mg & 35 mg.
In the European Union (EU) region, the cumulative count of Marketing Authorization (MA) filings stood at 31. The breakup of the total MA filings is 15 in the Cephalosporin segment and 16 in the NPNC segment.
In the API (Active Pharmaceutical Ingredients) domain, Orchid''s cumulative filings of US DMF stand at 76. The break-up of the total filings is 28 in the Cephalosporin Segment, 48 in NPNC segment. In the European market space the cumulative filings of COS (Certificate of Suitability) count remained at 20 which includes 14 in cephalosporin segment, 6 in NPNC segment.
Intellectual Property Rights
During the year, Orchid continued to accelerate the IPR work on a number of products. The total number of patent applications filed by Orchid in various national and international patent officeâs so far is 923 including Process, Formulation, New Chemical Entities (NCE), Novel Drug Delivery System (NDDS), Biotech and Generics. As of March 31, 2016, 82 patent applications have been published while 136 patents have been granted cumulatively.
The number of patent applications filed by Orchid from April 01, 2015 to March 31, 2016 is 2 (Including Process, Formulation, NCE, NDDS, Biotech and Generics), 2 patent applications have been published and 44 patents granted .
Dividend
Due to losses incurred by the Company during the financial year 2015-16, your Directors express their inability to recommend any dividend to the equity shareholders.
Issue of Equity Shares
To comply with the requirements of Corporate Debt Restructuring Programme, your Company pursuant to the approval granted by the members through Postal ballot on August 26, 2014, had got in-principle approval from NSE & BSE to allot 1,85,12,251 (One Crore Eighty Five Lakhs Twelve Thousand Two Hundred Fifty One Only) equity shares of Rs.10/each at a premium of Rs. 39.79 per share to the Promoter Group Company M/s Orchid Healthcare Private Ltd. Out of the above, your Company allotted 1,48,09,801 shares as part of first tranche during December 2014. The Company allotted the remaining 3,702,450 (Thirty Seven lakh Two Thousand Four Hundred and Fifty Only) equity shares of Rs.10/- each at a premium of Rs.39.79 per share during October 2015. The Listing approval for 37,02,450 shares has been received from BSE and the approval from NSE is awaited.
Employees Stock Option Plan
The details of options granted to employees under the ORCHID ESOP 2010, ORCHID ESOP - DIRECTORS 2011, Orchid ESOP -Senior Management 2011 schemes and the status of such options as on March 31, 2016 are given in Annexure IV to this Report.
Subsidiaries
Bexel Pharmaceuticals Inc., USA (Bexel)
Bexel was incorporated basically to conduct Research & Development activities in new drug discovery segment. The current Bexel IP portfolio is being maintained by global IP Unit of your Company.
Orchid Pharmaceuticals Inc., USA
Orchid Pharmaceuticals, Inc. is a wholly owned Delaware-based subsidiary of your Company and also the holding company in the United States, under which all the operational business subsidiaries have been structured. The Company currently has two operating Subsidiaries, namely Orgenus Pharma Inc., and Orchid Pharma Inc., in the US. Orgenus Pharma Inc. is the entity that provides all business development and operational services for the parent Company including the initiation of marketing alliances with partner companies. It continues to represent your Company for all matters relating to the review and approval of such filings by the FDA, and handling of logistics and product importation into the US as the Importer of Record for the US Customs. Orchid Pharma Inc., is the commercial entity that started direct marketing and selling your Company''s products in the US generics market place. Orchid Pharma Inc. has established a strong corporate image for your Company in the US and will be launching all future (unpatented) generics products under the Orchid label.
Diakron Pharmaceuticals Inc., USA
Orchid''s stake in Diakron has been a part of the original transaction which includes direct investment and Master Services Agreement (MSA). Your Company has completed most of its MSA obligations to develop and supply clinical quantities of API and extended release formulation.
Orchid Europe Limited, United Kingdom
Your Company''s subsidiary in Europe namely Orchid Europe Limited (OEL) is a wholly owned subsidiary which provides liaising support to the parent Company and its customers in Regulatory, Pharmacovigilance, Testing & Release, Retention of samples, Service Providers and Business Development in Europe.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your Company''s wholly owned subsidiary, Orchid Pharmaceuticals (South Africa) Pty Ltd., was incorporated mainly to register and market your Company''s products in South Africa. The Company is in the process of submitting dossiers for obtaining marketing approval from the regulatory authority, MCC for various oral products and the applications are at various stages of the registration process.
Associate
Allecra Therapeutics GmbH, Germany
With a view to enter into drug discovery in the areas of obesity, CNS and other therapeutic areas in response to potential MNC interest, Orchid decided to invest in Allecra Therapeutics GmbH (Allecra) and holds 18.27 % stake in the Company. Allecra is a drug development Company based in Germany focused on clinically differentiated products and develops unique products for novel treatments to combat multi drug resistant bacterial infections. Currently the Company is pursuing arbitration proceedings with the Management of Allecra for certain legal dispute concerning the shareholding in the Associate, as according to German Law debt restructuring programme is considered as insolvency proceedings.
Consolidated Financial Statements
Pursuant to Section 129(3) of the Companies Act, 2013, the Consolidated Financial statements presented by the Company include the financial statements of its subsidiaries. Further, a statement containing the salient features of the financial statements of the subsidiaries of the Company in the prescribed form AOC-1 is given in Annexure IX, forming part of this report.
Key Managerial Personnel
Shri. K Raghavendra Rao (DIN: 00010096), Managing Director and Shri. L Chandrasekar, CFO & Company Secretary are the Key Managerial Personnel of the Company under the provisions of the Companies Act, 2013.
Extract of Annual Return
As per provisions of Section 92 (3) of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, an extract of the Annual Return in the Form MGT-9 is given in Annexure - VI, forming part of this report.
Board Meetings held during the year
During the year, 6 meetings of the Board of Directors were held. The Board Meetings were held in accordance with provisions of the Companies Act, 2013 and the relevant rules made there under. The details of the meetings held are furnished in the Corporate Governance Report forming part of this report.
Directors'' Responsibility Statement
In accordance with the provisions of Section 134 (5) of the Companies Act, 2013, your Directors confirm that :
- In the preparation of the annual accounts for the Financial year 2015-16, the applicable accounting standards were followed along with proper explanation relating to material departures, if any.
- The Directors had 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, i.e. on March 31, 2016 and of the profit or loss of the Company for that period 2015-16.
- The Directors had 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 preventing and detecting fraud and other irregularities.
- The Directors had prepared the annual accounts for the Financial year 2015-16 on a going concern basis.
- The Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and are operating effectively.
- The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Nomination & Remuneration policy
This Policy lays down standards with respect to the appointment, remuneration and evaluation of Senior Management Personnel, Directors and Key Managerial Personnel of the Company. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com/downloads NOMINATION_AND_REMUNERATION_POLICY.pdf.
Appointment and Remuneration of Non-Executive Directors
The Criteria for determining independence of a director are based on the academic accomplishments, qualifications, expertise and experience in their respective fields, diversity of the Board, global exposure, professional network, technical expertise, functional domain expertise, independence and innovation.
The Independent Directors are appointed after the Nomination and Remuneration committee satisfies itself with regard to the independent nature of the Director with the Company and ensure that the independent Director meets the criteria as stipulated in the Section 149 (7) of the Companies Act, 2013 and the SEBI (LODR) Regulations, 2015.
The Nomination and Remuneration Committee ensures that the candidate identified for appointment as a Director is not disqualified for appointment under Section 164 of the Companies Act, 2013.
All Independent Directors of the Company have given declarations to the Company under Section 149 (7) of the Act that, they meet the criteria of independence as provided in Sub- Section 6 of Section 149 of the Act and also under the Listing Regulations, 2015.
Non-Executive Directors are entitled to receive sitting fees for attending the meetings of the Board or Committee thereof, as approved by the Board and within the overall limits prescribed under the Companies Act, 2013 and rules there under.
Related Party Transaction Policy
The Company has framed a Related Party Transaction Policy in compliance with Section 177 of the Companies Act 2013 and Regulation 23 of SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015, in order to ensure proper reporting and approval of transactions with related parties. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com/downloads/ RELATED-PARTY-TRANSACTION-POLICY.pdf
All the transactions entered with the related parties were in ordinary course of business and are on arm''s length basis and there are no material related party transactions as per policy adopted by the Company. The particulars of contracts or arrangements with the related parties under Section 188(1) are disclosed in Form AOC-2 which is given in Annexure - X, forming part of this report.
Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseeable and of repetitive nature. For the transactions entered into pursuant to the omnibus approval so granted, a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their information and approval at regular intervals.
Corporate Social Responsibility (CSR)
Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013 the Company had constituted the Corporate Social Responsibility Committee to recommend:
(a) the policy on Corporate Social Responsibility and (b) implementation of the CSR Projects or Programs to be undertaken by the Company as per CSR Policy for consideration and approval by the Board of Directors.
The Board has approved the CSR policy and the same is available on the website of the Company and the web link for the same is http://www. orchidpharma.com/downloads/CSR-POLICY.pdf.
Since the Company did not have any profits for the last three financial years, the Company is not mandatorily required to contribute towards Corporate Social Responsibility activities. However, your Company has undertaken the CSR activities voluntarily on Education, Health, Youth development, Women Empowerment, Community assets creation (Infrastructure Development), Environment & Renewable Energy during the financial year 2015-16 through âOrchid Trust" and spent Rs.14.75 Lakhs
Material changes and commitment, if any, affecting financial position of the Company from the end of Financial Year and till the date of this Report
There are no material changes and commitments affecting the financial position of the Company which have occurred between 31st March 2016 and the date of this report.
Conservation of Energy
Your Company has always been striving hard in the field of energy conservation. Several measures to conserve energy and to reduce associated costs were taken during the fiscal under review as well. The particulars in respect to conservation of energy as required under Section 134(3)(m) of the Companies Act, 2013, are given in Annexure I to this report.
Technology Absorption
The particulars in respect of R&D/Technology absorption as required under Section 134(3)(m) of the Companies Act, 2013, are given in Annexure II to this report.
Foreign Exchange Earnings and Outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Companies Act, 1956, are given in Annexure III to this report.
Risk Management Policy
The details and the process of Risk Management as implemented in the Company are provided as part of Management Discussion and Analysis which forms part of this Report.
Annual evaluation of Board, its Committees and Individual Directors
The Board of Directors has carried out an annual evaluation of its own performance, its Committees and individual Directors pursuant to the requirements of the Companies Act, 2013 and the Listing Regulations, 2015.
The Annual evaluation was carried out as per the format (Questionnaire) prescribed by the Nomination and Remuneration Committee of the Company.
The structured questionnaire covers various aspects of the Board''s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.
The Directors expressed their satisfaction with the evaluation process.
Change in the Nature of Business
There is no change in the nature of business carried on by your Company during the financial year ended 31st March 2016.
Details regarding deposits, covered under Chapter V of the Act
During the Financial Year 2015-16, your Company did not accept any deposits within the meaning of the provisions of Chapter V - Acceptance of Deposits by Companies read with the Companies (Acceptance of Deposits), Rules 2014.
Significant and Material Orders Passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company
There have been no significant nor material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations. All Orders received by the Company from Courts or Tribunals during the year are of routine nature which have no significant /material impact.
Adequacy of Internal Financial Control System
The Company has in place satisfactory internal financial controls with reference to financial statements. These controls ensure the accuracy and completeness of the accounting records and preparation of financial statements.
The Internal Auditors and statutory Auditors review the adequacy of internal control system and suggest necessary checks and balances to ensure and increase the effectiveness of the system.
Vigil Mechanism (Whistle Blower Policy)
The Company has established vigil mechanism that enables the Directors and employees to report genuine concerns. The Company encourages its employees who have their concerns about unethical behaviour, actual or suspected fraud or violation of the Company''s code of conduct to come forward and express concerns without fear of punishment or unfair treatment.
The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com/ downloads/ whistle-blower-policy.pdf.
Policy for determining material subsidiaries
The Company has framed a Policy for determining material subsidiaries in compliance with Regulation 16 (1) (c) of SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015, in order to determine the material subsidiaries of the Company. The Policy is available on the website of the Company and the web link for the same is http://www.orchidpharma.com/ ir_downloads.aspx
Disclosure under the sexual harassment of women at work place (Prevention, Prohibition and Redressal) Act, 2013
The Company has in place an anti-sexual harassment Policy in line with the requirements of The Sexual Harassment of Women at the work place (Prevention, Prohibition & Redressal) Act, 2013.
Grievance redressal cell within the Human Resource Department has been set up to redress complaints regarding sexual harassment. All employees (permanent, contractual, trainees) are covered under this policy.
The Company has not received any complaint on sexual harassment during the financial year ended 31st March, 2016.
Environment
Environment management is the prime concern in your Company. Orchid has employed a state of the art technology zero liquid trade effluent treatment plant system and world class treatment facilities for its liquid and gaseous pollutants generated from the production processes. The zero discharge of liquid trade effluent treatment plant comprises Membrane Bio Reactor, Nano Filtration, Reverse Osmosis, Solvent Stripping Column, Thermal Evaporation & Crystallization plant to treat the entire trade effluent and recycle back into the utility process. Waste Air Treatment is done through installation of process scrubbers, vent gas condensation, Reverse Jet Ventury Filter, Electro Static Precipitator.
Safety Excellence Journey
Safety being a core organizational value, safety is given a first thought to manage the risk even at these challenging times. Though resource constraints have prevented complete risk mitigation, Line Management, Safety Professionals (SPRO) and Leadership in the form of the Central Safety Committee (CSC) have ensured that risks have been contained to keep your Company free from any major incidents. This was possible because of the Orchid''s strong belief on relentless Visible, Felt Leadership.
Safety performance of the various locations are periodically monitored and reviewed by Central Safety Committee and Site Safety Committees.
Safety Site Teams at the locations play a major role in sustaining the safety spirit among the employees.
The Company recognizes the need for influencing skills at different levels to implement safety effectively. Critical safety concerns are being reviewed by Site Heads and progress is tracked in the Central Safety Committee.
All line managers are entrusted to carry out Safety Observation Audits (SOAs) and to identify the hazards in their area and associated unsafe behaviours. This is a unique two-way conversational process to bring about improved safety-behavior and thereby control risk. Orchid also believes that continuous learning is a critical element in Safety Management. Hence various in-house training programs are being conducted to reinforce safe behavior. All incidents are investigated and corrective and preventive actions have been taken.
Particulars of Employees and Remuneration
The Information as required pursuant to Section 197(12) of the Act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in Annexure VII to this report.
A statement showing names and other particulars of the employees drawing remuneration in excess of the limits prescribed under rule 5(2) of the rules forms part of this Report. However, as per provision of Section 136 of the Act, the report and accounts are being sent to the members, excluding the aforesaid information which is available for inspection by the members at the registered office of the Company during business hours on all working days. If any member is interested in obtaining a copy, such member may write to the Company Secretary.
Particulars of Loans, Guarantees or Investments under section 186 of the Companies Act, 2013
Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013 are given in Note No.13 and 32b to the standalone financial statements.
Green Initiative
To augment the green initiative of the Ministry of Corporate Affairs and to reduce carbon foot print, your Company proposes to send various communication including the Annual Reports in electronic form, to the members who have opted for the same. This would help in reducing the number of physical copies to be printed. The full text of the Annual Report 2015-16 is available at www.orchidpharma.com. As a member of the Company, you are entitled to receive all such communications in physical form, upon request.
Corporate Governance
The Company follows the code of Corporate Governance issued by the stock exchanges for listed companies. As a Listed Company, necessary measures are taken to comply with the Listing Regulations. A report on Corporate Governance, along with a certificate of compliance from the Practicing Company Secretary is given in Annexure V and forms part of this Report.
Directors
Nominee Director
During the year, the IDBI Bank Ltd withdrew the nomination of Shri Nagaraj Garla and appointed Shri Rabinarayan Panda, in his place on the Board with effect from December 28, 2015.
Retirement of Directors by rotation
In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company Shri K Raghavendra Rao, Managing Director, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.
None of the Directors of the Company is disqualified under Section 164(2) of the Companies Act, 2013.
Statutory Auditors
The Statutory Auditors, M/s SNB Associates, Chartered Accountants have been appointed for a period of two (2) years from the conclusion of 22nd Annual General Meeting till the conclusion of 24th Annual General Meeting subject to ratification at every AGM. The resolution seeking ratification of their appointment is being sought for in this AGM.
Auditors'' Report
Explanation to the Audit qualifications
The Auditors in their report have made certain observations relating to recovery of advances paid to suppliers, non-provision of diminution in value of investments in foreign R&D subsidiaries and non-provisioning of the hold back amount receivable under the BTA agreement under âQualified Opinion" in their report to the members.
The Company, for meeting the future business expansion, for sustaining the current regulatory approvals and customer expectations and also to meet the demand for some of the existing products which are increasing both in regulated markets and emerging markets, has given advances to vendors for supply of capital goods and materials. The Company is currently under Corporate Debt Restructuring (CDR) Scheme. Due to financial constraints, the company was not able to take delivery of materials/capital goods and the company is confident that with the revival envisaged under the CDR regime and with the plans of infusion of alternate funding, the Company would be able to take delivery of these materials in due course.
As per the valuation of molecules in its current status, the Company is confident that the value of molecules held by the foreign subsidiaries will be more than the investment. Hence, no adjustment is considered necessary.
In respect of holdback money claims, the Company has refuted its claims through it lawyers. As the BTA transaction has been done in accordance with the CDR terms and conditions and the holdback amount was captured in the CDR package as receivable after a period of 18 months from the date of BTA, the Company is confident of receiving the holdback amount from the party pending finalization of negotiation.
Secretarial Auditor
Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, M/s S Dhanapal Associates, practicing Company Secretaries were appointed to conduct the secretarial audit of your Company for FY2015-16. The secretarial audit report for the year are given in Annexure VIII to this report.
Secretarial Audit Report
In respect of delay in filing/non filing of returns with relevant authorities in certain occasions, the Company is taking necessary steps for filing the returns on time in the ensuing years.
Cost Audit
The Central Government has prescribed that an audit of the cost accounts maintained by the Company in respect of Bulk Drugs and Formulations be conducted under Section 148 of the Companies Act, 2013. Consequently, your Company had appointed Shri. V Kalyanaraman, B.Sc., FCMA, as Cost Auditor for the FY 2016-17 and 2017-18, for the audit of the cost accounts maintained by the Company in respect of both Bulk Drugs and Formulations.
For the period ended March 31, 2015 (18 months period from October 1, 2013 to March 31, 2015) the due date for filing the cost audit report was September 27, 2015 and the cost audit report was filed on September 23, 2015.
In accordance with the provisions of the Companies Act, 2013, remuneration of the Cost Auditor requires the approval of shareholders and accordingly approval is being sought for the payment of remuneration for the FY 2016-17 and 2017-18.
Acknowledgements
Your Directors are grateful and thankful to all the Banks, Financial Institutions both in public sector and private sector who have fully supported your company''s initiatives during the stressed financial situation and for their wholehearted mandate for restructuring the long term debts of your Company and for their continuous support for meeting the working capital needs of your Company''s businesses.
Your Directors are grateful to the Central and State Governments and the Central DCGI and State FDAs for their support to the Company''s business plans. Your Board places on record their appreciation of the support provided by the customers, suppliers, services providers, medical fraternity and business partners.
Your Directors are thankful to the esteemed shareholders for their support and encouragement. The Directors and the Management acknowledge and are thankful to the employees who stayed back with the Company during this crucial period and for their commitment and contributions for the revival of the businesses and operations.
For and on behalf of the Board
Place: Chennai K Raghavendra Rao
Date: May 27, 2016 Managing Director
Mar 31, 2015
Dear Members,
The Company has extended its Financial Year 2013-14 i.e October
01,2013 to September 30, 2014 by a period of six months i.e., up to
March 31, 2015 and accordingly has prepared its Financial Statements
for a period of 18 months i.e. from October 01,2013 to March 31, 2015
i.e. financial year 2013-2015. Your Directors take pleasure in
presenting the report on business and operations of your Company for
the Financial Year 2013-15 along with the audited statement of accounts
for the same period ended March 31,2015.
The Ministry of Corporate Affairs has, vide General Circular 08/2014
No. 1/19/2013-CL-V dt. 4th April 2014, clarified that the financial
statements (and documents required to be attached thereto), auditors
report and board's report in respect of financial years that commenced
earlier than 1st April 2014 shall be governed by the relevant
provisions/schedules/rules of the Companies Act, 1956. In veiw of the
same, the aforementioned statements have been prepared in line with the
applicable provisions of the Companies Act, 1956.
Performance
The highlights of the financial results for the year 2013 - 2015 are
given below:
(Rs. crores)
Particulars 18 months ended 18 months ended
31.03.15 30.09.13
Sales & Operating Income 1,7 36.19 1,906.58
Other Income 42.57 59.77
Total Expenditure 1,416.33 1,776.74
Gross profit 362.2 3 169.61
Interest & Finance Charges 537.00 520.38
Gross Profit after Interest (174.77) (350.77)
but before Depreciation
and Taxation
Depreciation 321.37 243.86
Profit / (Loss) before Tax, (496.14) (594.63)
exceptional and
extraordinary items
Exceptional Item 157.26 51.11
Profit / (loss) Before fix (653.41) (543.52)
and Extraordinary item
Extraordinary items (270.62) -
Profit Before Tax ( 382.79) (54 3.52)
Provision for Taxation
Current & Deferred Tax (191.75) (13.29)
Profit / (loss) after Tax (191.04) (530.23)
During the financial year 2013-15, your Company achieved a turnover and
operating income of Rs.1,736.19 crores (Rs.1,906.58 crores in 2012-13).
The gross profit before interest, depreciation and taxes stood at
Rs.362.23 crores (Rs.169.61 crores in 2012-13). After providing for
interest expense of Rs.537.00 crores (Rs.520.38 crores previous
fiscal), depreciation of Rs.321.37 crores (Rs.243.86 crores previous
fiscal), Exceptional item Rs.157.26 crores (Rs.51.11 crores previous
fiscal) and Extraordinary item Rs.270.62 crores (Nil in previous
fiscal], the Loss before tax of the Company was Rs.382.79 crores
(Rs.543.52 crores (Loss) previous fiscal). The net loss after tax stood
at Rs.191.04 crores (Rs.530.23 crores (Loss) in the previous fiscal).
Business Overview
Your Company had made a reference to the Corporate Debt Restructuring
(CDR) Cell constituted by Reserve Bank of India for Restructuring of
its financial debt. The CDR Cell considered, admitted and approved the
debt restructuring proposal given by the Company. The letter of
approval was given on March 10, 2014. The Business Transfer Agreement
(BTA) with Hospira for the transfer of Aurangabad Penems and Penicillin
Plant and R&D facility at Shozhanganallur was completed on July 4,
2014. For the purpose of implementation of the approved package and
also to comply with the post-implementation the CDR Lenders appointed
State Bank of India as the Monitoring Institution (MI). To facilitate
implementation of the approved package and terms, monitoring the
performance of the Company as per the restructured package on a
continuous basis, a Monitoring Committee (MC), comprising
representatives of five member Banks has been constituted. These
initiatives enabled your Company to come out of working capital
constraints and resulted in improved performance.
Your Company is in the process of launching new products in NPNC
segment in the next financial year for the US, EU and other Markets on
expiry of patent cover, which will have a positive impact on the
Company's revenue and profitability streams.
Future Prospects
With the restructuring of its debt and implementation of the revival
package approved by the CDR Cell, your Company believes that it will
gradually be able to revive its operations towards profitability. Your
Company has been extremely fortunate to have the full support of its
Lenders, Employees, Vendors and Customers during the financial stressed
period and all efforts are being made to garner continuously full
support to revive the operations of the Company. Although, huge efforts
are required towards regaining the confidence of various Stakeholders,
your Company is hopeful and confident of accomplishing the same over a
period of time.
Regulatory Filings and Approvals
In the generic formulations domain, Orchid's cumulative Abbreviated New
Drug Application (ANDA) filings for the US market stood at 46. This
includes 8 Para IV FTF (First-To-File) filings. The break-up of the
total ANDA filings is 13 in Cephalosporins segment and 33 in NPNC space.
In the European Union (EU) region, the cumulative count of Marketing
Authorisation (MA) filings stood at 31. The breakup of the total MA
filings is 15 in the Cephalosporin segment and 16 in the NPNC segment.
In the API (Active Pharmaceutical Ingredients) domain, Orchid's
cumulative filings of US DMF stand at 76. The break-up of the total
filings is 28 in the Cephalosporin Segment, 48 in NPNC segment. In the
European market space the cumulative filings of COS (Certificate of
Suitability) count remained at 20 which includes 14 in cephalosporin
segment, 6 in NPNC segment.
Dividend
Due to losses incurred by the Company during the financial year
2013-15, your Directors express their inability to recommend any
dividend to the equity shareholders.
Intellectual Property Rights
During the year, Orchid continued to accelerate the IPR work on a
number of products. The total number of patent applications filed by
Orchid in various national and international patent offices so far was
889 (including Process, Formulation, NCE, NDDS, Biotech and Generics).
As of March 31, 2015, 108 patent applications have been published while
97 patents have been granted cumulatively.
Issue of Equity Shares
To Comply with the requirements of Corporate Debt Restructuring
Programme, your Company pursuant to the approval granted by the members
through Postal ballot on August 26, 2014, had got inprinciple approval
from NSE, BSE & MSE to allot 1,85,12,251 (One Crores Eighty Five Lakhs
Twelve Thousand Two Hundred Fifty One Only) equity shares of Rs.10/-
each at a premium of Rs.39.79 per share to the Promoter Group Company
M/s Orchid Healthcare Private Ltd. Out of the above, your Company
allotted 1,48,09,801 shares during December 2014. The remaining
37,02,450 shares would be allotted during 2015-16.
Delisting of Company's Equity Shares from the Madras Stock Exchange
Limited
In terms of the Exit Order issued by Securities Exchange Board of India
(SEBI) through its circular No. WTM/RKA /MRD/47/2015 dated May 14, 2015
to Madras Stock Exchange Limited (MSE), all the Company's listed in the
MSE stands delisted from the date of the above said Exit Order.
Consequent to the above your Company's shares stand delisted from MSE.
Presently your Company's shares are listed in National Stock Exchange
(NSE) and Bombay Stock Exchange (BSE) in India.
Employees Stock Option Plan
The details of options granted to employees under the ORCHID ESOP 2010,
ORCHID ESOP - DIRECTORS 2011, Orchid ESOP - Senior Management 2011
schemes and the status of such options as on March 31,2015 are given in
Annexure IV to this Report.
Your Company formulated the following schemes:-
* Orchid - ESOP 2010 Scheme - grant of 10,00,000 options to the
employees of the Company including whole-time Director(s) of the
Company but excluding the Promoter Directors. The said scheme was
approved by the shareholders at the Annual General Meeting held on July
21, 2010. Your Company granted 9,01,000 options during the year
2010-11. Pursuant to exercise of options by the employees, 10,000
equity shares of Rs.10/- each were issued during the year 2012-13 and
as at March 31,2015, the outstanding options yet to be exercised under
the said scheme is Nil.
* Orchid ESOP - Directors 2011 Scheme - grant of 5,00,000 options to the
directors of the Company including whole-time directors but excluding
promoter director. Your Company granted 3,00,000 options during the year
2011-12 and as at March 31, 2015, the outstanding options in force under
the said scheme is 80,000.
* Orchid ESOP - Senior Management 2011 Scheme - grant of
10,00,000 options to the employees in the grade of Senior Ma nager and
above out of which 7,50,000 options are ear marked to the employees of
Orchid and 2,50,000 options to the employees of various subsidiary
companies of Orchid, either in India or abroad. Your Company granted
42,700 options during the year 2011-12 and as at March 31,2015, the
outstanding options in force under the said scheme are 32,025.
Associate
Allecra Therapeutics GmbH, Germany
With a view to enter into drug discovery in the areas of obesity, CNS
and other therapeutic areas in response to potential MNC interest,
Orchid decided to invest in Allecra Therapeutics GmbH (Allecra) and
presently holds 18.27% stake in the Company. Allecra is a drug
development company based in Germany focused on clinically
differentiated products and shall develop unique products for novel
treatments to combat multi drug resistant bacterial infections.
Subsidiaries
Bexel Pharmaceuticals Inc., USA (Bexel)
Bexel was incorporated basically to conduct Research & Development
activities in new drug discovery segment. The current Bexel IP
portfolio is being maintained by OCPL global IP unit.
Orchid Pharmaceuticals Inc., USA
Orchid Pharmaceuticals, Inc. is a wholly owned Delaware based subsidiary
of your Company and also the holding company in the United States, under
which all the operational business subsidiaries have been structured.
The Company currently has two operating Subsidiaries, namely Orgenus
Pharma Inc., and Orchid Pharma Inc., in the US.
Orgenus Pharma Inc. is the entity that provides all business
development and operational services for the parent Company including
the initiation of marketing alliances with partner companies, filing of
your Company's Drug Master Files (DMFs) and Abbreviated New Drug
Applications (ANDAs) as the Importer of record for your Company with
the FDA. It continues to represent your Company for all matters
relating to the review and approval of such filings by the FDA, and
handling of logistics and product importation into the US as the
Importer of Record for the US Customs.
Orchid Pharma Inc., is the commercial entity that started directly
marketing and selling your Company's products in the US generics market
place. Orchid Pharma Inc. has established a strong corporate image for
your Company in the US and will be launching all future (unpartnered)
generics products under the Orchid label.
Diakron Pharmaceuticals Inc., USA
Orchid's stake in Diakron has been a part of the original transaction
which includes direct investment and Master Services Agreement (MSA).
Your Company has completed most of its MSA obligations to develop and
supply clinical quantities of API and extended release formulation.
Orchid Europe Limited, United Kingdom
Your Company's subsidiary in Europe namely Orchid Europe Limited (OEL)
is a wholly owned subsidiary which provides liaising support to the
parent Company and its customers in Regulatory, Pharma covigilance,
Testing & Release, Retention of samples, Service Providers and Business
Development in Europe.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your Company's wholly owned subsidiary, Orchid Pharmaceuticals (South
Africa) Pty Ltd., was incorporated mainly to register and market your
Company's products in South Africa. The Company is in the process of
submitting dossiers for obtaining marketing approval from the regulatory
authority, MCC for various oral products and the applications are at
various stages of the registration process.
Orchid Pharma Singapore Private Ltd, Singapore
Your Company incorporated Orchid Pharma Singapore Private Limited a
wholly owned subsidiary in Singapore to deal in pharmaceuticals
products. During the year 2013-15, your Company closed this subsidiary
due to non-commencement of business.
Central Government Approval
The Ministry of Corporate Affairs, Government of India vide its circular
dated February 8, 2011 has provided general exemption to companies from
attaching the balance sheets of their subsidiary companies as required
under Section 212(8) of the Companies Act 1956.
The exemption is available provided the companies publish the audited
consolidated financial statements in the Annual Report. The
consolidated financial statements duly audited are presented along with
the accounts of your Company. The statement as required under Section
212 is given as part of the consolidated accounts in this report. The
annual accounts of subsidiary companies are kept at the Company's
registered office and also at the respective registered office of the
subsidiaries for inspection and shall be made available to the members
seeking such information.
Fixed Deposit
The Company has not accepted any fixed deposits and as such, no amount
of principal or interest was outstanding as of the balance sheet date.
Directors' Responsibility Statement
In accordance with the provisions of Section 217 (2AA) of the Companies
Act, 1956, your Directors confirm:
* That in the preparation of the annual accounts for 2013-15 the
applicable accounting standards were followed along with proper
explanation relating to material departures, if any.
* That the Directors 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, comprising 18 months,
i.e. on March 31, 2015 and of the profit or loss of the Company for
that period 2013-15.
* That the Directors took 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.
* That the Directors prepared the annual accounts for 2013-15 on a
going concern basis.
Corporate Social Responsibility (CSR)
During the year, the Company constituted the Corporate Social
Responsibility Committee as required under Section 135 of the Companies
Act 2013. The Composition of the Committee comprises Shri K N
Venkatasubramanian, Shri S Krishnan, and Shri Nagaraj Garla as members.
The said committee has been entrusted with responsibility of formulating
and recommending to the Board, a Corporate Social Responsibility Policy.
The Board has approved the policy in its meeting held on November 13,
2014 and the same is available on the website of the Company and the web
link for the same is http//www.
orchidpharma.com/downloads/CSR-POLICY.pdf.
Your Company is undertaking its CSR activity through "Orchid Trust"
which qualifies as CSR activity under Schedule VII of the Companies Act
2013. Orchid Trust has undertaken various initiatives and programmes in
the following areas such as Education, Health, Youth development, Women
Empowerment, Community assets creation (Infrastructure Development),
Environment & Renewable Energy.
Various programmes undertaken by Orchid Trust are briefly mentioned
here:
Education Development Programmes which includes Orchid Tuition centre,
Supplementary Teachers in Schools, Special Coaching for 10th and 12th
Standard students.
Health Programmes which includes Transport facilities in case of
emergency, Sponsorship to government health programmes, Eye camp.
Women Empowerment Programmes which includes formation of Self Help
Group (SHGs), Training on Tailoring, Women counselling center.
Youth development Programmes which includes providing training in
various occupation to make them employed and Sponsorship for Sports in
the Village panchayats.
Environmental & Renewable energy Programmes which includes Planting
tree saplings and Implementation of bio-gas plant instead of LPG.
Nomination & Remuneration policy
During the year, the Company formulated a Nomination and Remuneration
Policy in Compliance with Section 178 of the Companies Act, 2013 and
Clause 49 of the Listing Agreement. This Policy lays down standards
with respect to the appointment, remuneration and evaluation of Senior
Management Personnel, Directors and Key Managerial Personnel of the
Company. The Policy is available on the website of the Company and the
web link for the same is
http://www.orchidpharma.com/downloads/Nomination-Remuneration-policy.
pdf.
Familiarisation Programme for Independent Directors
The Clause 49 of the Listing Agreement with the Stock Exchange
stipulates that the Company shall familiarise the independent directors
of the Company about their roles, rights, responsibilities in the
Company, nature of the industry in which the Company operates, business
model of the Company, etc through various programmes. The detailed
familiarisation programme for Independent Directors is available on the
website of the Company and the web link for the same is
http://www.orchidpharma.
com/downloads/Familiarisation-Programme-for-Independant Directors .pdf.
Vigil Mechanism (Whistle Blower Policy)
The Company is committed to adhere to the highest standards of ethical,
moral and legal conduct of business operations. To maintain these
standards, the Company encourages its employees who have their concerns
about unethical behaviour, actual or suspected fraud or violation of
the Company's code of conduct to come forward and express these
concerns without fear of punishment or unfair treatment through Vigil
Mechanism (Whistle Blower Policy) which provides a channel to the
Employees and Directors to report to the Management. The mechanism
provides for adequate safeguards against victimisation of employees and
Directors.
The Policy is available on the website of the Company and the web link
for the same is http://www.orchidpharma.com/downloads/
whistle-blower-policy.pdf.
Related Party Transaction Policy
The Company has framed a Related Party Transaction Policy in compliance
with Section 177 of the Companies Act 2013 and Clause 49 of the Listing
Agreement in order to ensure proper reporting and approval of
transactions with related parties. The Policy is available on the
website of the Company and the web link for the same is
http://www.orchidpharma.com/downloads/RELATED-PARTY-TRANSACTION-POLICY.
pdf
Disclosure under the sexual harassment of women at work place
(Prevention, Prohibition and Redressal) Act, 2013
The Company has in place an Anti Sexual Harassment Policy in line with
the requirements of The Sexual Harassment of Women at the Workplace
(Prevention, Prohibition & Redressal) Act, 2013.
Internal Complaints Committee (ICC) has been set up to redress
complaints received regarding sexual harassment. All employees
(permanent, contractual, temporary, trainees) are covered under this
policy.
The Company has not received any complaint on sexual harassment during
the financial period ended March 31,2015.
Environment
Environment management is the prime concern in your Company. Orchid has
employed a state of the art technology zero liquid trade effluent
treatment plant system and world class treatment facilities for its
liquid and gaseous pollutants generated from the production processes.
The zero discharge of liquid trade effluent treatment plant comprises
Membrane Bio Reactor, Nano Filtration, Reverse Osmosis, Solvent
Stripping Column, Thermal Evaporation & Crystallisation plant to treat
the entire trade effluent and recycle back into the utility process.
Waste Air Treatment is done through installation of process scrubbers,
vent gas condensation, Reverse Jet Ventury Filter, Electro Static
Precipitator.
Safety Excellence Journey
Orchid's commitment to Safety, Health and Environment aspects is being
sustained with the active participation from various line management
functions. Safety performance of the various locations are periodically
monitored and reviewed by the Central Safety Committee and Site Safety
Committees. Risk assessment and Risk minimisation have taken priority
in the last fiscal year. All line managers have carried out Safety
Observation Audits (SOAs) to identify the hazards in their respective
areas and have helped control the risk through conversation.
The Company recognises the need for effective safety communication in
culture building. This is ensured through periodic Safety Talks, Safety
Posters and interactive discussions. Orchid also believes that
continuous learning is a crucial element in Safety Management.
Accordingly, various training programs have been conducted to reinforce
safe behavior and also to enhance the necessary skills to perform the
job safely.
The Company also does not want to miss any learning opportunity that an
incident may offer. Hence, Incident Investigation also is an important
area of focus. All incidents are investigated and Corrective and
Preventive Action (CAPA) have been taken.
Conservation of Energy
Your Company has always been striving hard in the field of energy
conservation. Several measures to conserve energy and to reduce
associated costs were taken during the fiscal under review as well. The
particulars in respect to conservation of energy as required under
Section 217 (1) (e) of the Companies Act, 1956, are given in Annexure I
to this report.
Technology Absorption
The particulars in respect of R&D/Technology absorption as required
under Section 217 (1) (e) of the Companies Act, 1956, are given in
Annexure II to this report.
Foreign Exchange Earnings and Outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as
required under Section 217 (1) (e) of the Companies Act, 1956, are
given in Annexure III to this report.
Particulars of Employees
Information as per Section 217(2A) of the Companies Act, 1956 read with
Companies (Particulars of Employees) Rules, 1975 forms part of this
Report. However, as per the provisions of Section 219(1)(b)(iv) of the
Companies Act, 1956, the Report and Accounts are being sent to all
members of the Company excluding the aforesaid information. Any member
interested in obtaining a copy of the particulars may write to the
Secretary at the Registered Office of the Company.
Corporate Governance
The Company follows the code of Corporate Governance issued by the
stock exchanges for listed companies. As a Listed Company, necessary
measures are taken to comply with the Listing Agreements with the Stock
Exchanges. A report on Corporate Governance, along with a certificate
of compliance from the Auditors, given in Annexure V, forms a part of
this Report.
Green Initiative
To augment the green initiative of the Ministry of Corporate Affairs
and to reduce carbon foot print, your Company proposes to send various
communication including the Annual Reports in electronic form, to the
members who have opted for the same. This would help in reducing the
number of physical copies to be printed, thereby contributing to a
greener environment. The full text of the current year's (2013-15)
annual report is available in an easily navigable format at
www.orchidpharma.com. As a member of the Company, you are entitled to
receive all such communication in physical form, upon request.
Directors
Appointment of Directors
Shri K N Venkatasubramanian was appointed as Additional Director on the
Board on March 31, 2014. Pursuant to the appointment, Shri K N
Venkatasubramanian holds office up to the forthcoming Annual General
Meeting. A notice has been received from a member as per Section 160 of
the Companies Act, 2013 along with the prescribed fee. Shri K N
Venkatasubramanian has filed with the Company his declaration of
Independence to act as Independent Director for a term of five years if
appointed, in terms of Section 149, 150, 152 of the Companies Act 2013.
A resolution seeking his appointment as Independent Director is being
placed before the members for approval.
Shri R. Kannan was appointed as Additional Director on the Board on May
28, 2015. Pursuant to the appointment Shri R. Kannan holds office up to
the forthcoming Annual General Meeting. A notice has been received from
a member as per Section 160 of the Companies Act, 2013 along with the
prescribed fee. Shri R. Kannan has filed with the Company his
declaration of Independence to act as Independent Director for a term
of five years if appointed, in terms of Section 149, 150, 152 of the
Companies Act 2013. A resolution seeking his appointment as Independent
Director is being placed before the members for approval.
Smt Soundara Kumar was appointed as Nominee director of State Bank of
India on the board on March 30, 2015. Sri Nagaraj Garla was appointed
as Nominee director of IDBI Bank Ltd on the Board on November 13, 2014.
Pursuant to their appointment and in line with the provisions of the
Companies Act, 2013 both the directors hold office up to the
forthcoming Annual General Meeting. Notice has been received from
members as per Section 160 of the Companies Act, 2013 along with the
prescribed fee relating to appointment of the directors. Both Mr.
Nagaraj Garla and Smt Soundara Kumar have filed the consent with the
Company to act as Director, if appointed as required under Section
152(5) of the Companies Act 2013. A resolution seeking the appointment
of Smt Soundara Kumar and Sri Nagaraj Garla as Directors liable to
retire by rotation is being placed before the members for approval.
Vacation of Office
Shri S Yuvaraj was appointed as an additional director by the Board on
August 14, 2013 and as a director at the last Annual General Meeting
held on March 19, 2014. He now vacates the office pursuant to Section
167(1)(b) of the Companies Act 2013, as he could not attend any of the
meetings of the Board of Directors held during the period from April
01, 2014 to March 31, 2015. i.e for a period of 12 months.
Retirement of Directors by rotation
In accordance with the provisions of the Companies Act, 2013 and the
Articles of Association of the Company Shri S Krishnan retires by
rotation at the ensuing Annual General Meeting and being eligible
offers himself for re-appointment.
Change in Terms & Remuneration of Managing Director
Given the financial position of the Company, the Board approved a
revision in terms & the remuneration of Shri K Raghavendra Rao for a
period of 2 years effective from April 01, 2015, in accordance with the
various provisions of Companies Act, 2013. However his appointment as a
Managing Director already approved by the shareholders &, valid till
June 30, 2017 shall be liable to retirement by rotation.
None of the Directors of the Company are disqualified under Section
164(2) of the Companies Act, 2013.
Auditors
The Statutory Auditors, M/s SNB Associates, Chartered Accountants
retire at the forthcoming Annual General Meeting, and being eligible,
offer themselves for re-appointment for a period of two (2) years from
the conclusion of this Annual General Meeting till the conclusion of
24th Annual General Meeting. M/s. SNB Associates, Chartered Accountants
have furnished certificate under Section 139(1) of the Companies Act,
2013 of their eligibility for the appointment.
Auditor's Report
The Auditors' in their report have made certain observations relating
to recovery of advances paid to suppliers, non provision of diminution
in value of investments in foreign R&D subsidiaries, receivables from
one of the marketing subsidiary and confirmation from Banks for certain
loans and Bank accounts under "Qualified Opinion" in their report to
the members.
The Company has already implemented the approved CDR package and is
gearing its operations. Upon scaling up the operations and volume of
business, the Company would be able to take delivery of
materials/capital goods and complete the projects. With regard to the
diminution in value of investments, the Company is confident that the
value of Intellectual Property of the molecules held by the foreign
subsidiaries will be more than the investment. In view of the inventory
level of the marketing subsidiary and based on the demand and the
prevailing prices for the products in those markets, the Company is
confident that the subsidiary will be in a position to settle the
outstanding payments in a phased manner. The Company was not able to
obtain bank statements for two of the loan accounts due to the legal
proceedings initiated by them for recovery which are still pending.
The Auditors in their report have further made observations relating to
excess remuneration paid to Managing Director and Whole Time Director
under "Emphasis of Matter" in their report to the members. The Company
has made applications to the Central Government for approval of the
excess remuneration paid to the Managing Director and the Whole Time
Director for the years 2011-12 & 2012-13 and the approval is awaited.
For the Year 2013-15, the Company would be making an application for
approval of the Central Government for the excess remuneration paid to
the Managing Director.
Cost Audit
The Central Government has prescribed that an audit of the cost
accounts maintained by the Company in respect of bulk drugs and
formulations be conducted under Section 148 of the Companies Act, 2013.
Consequently, your Company has appointed Shri V Kalyanaraman, B.Sc.,
FCMA, as Cost Auditor for 2014-2015 and 2015-2016, with the consent of
the Central Government, for the audit of cost accounts maintained by the
Company in respect of both bulk drugs and formulations.
For the year ended September 30, 2013, the due date of filing the cost
audit report was March 31,2014 and the cost audit report was filed on
February 21,2014.
In accordance with the provisions of the Companies Act, 2013
remuneration of the Cost Auditior requires the approval of Shareholders
and accordingly approval is being sought for the payment of
remuneration for FY 2013-15 & FY 2015-16.
Acknowledgements
Your Directors are grateful and thankful to all the Banks, Financial
Institutions both in public sector and private sector who have fully
supported your company's initiatives during the stressed financial
situation and for their wholehearted mandate for restructuring the long
term debts of your Company and for their continuous support for meeting
the working capital needs of your Company's businesses.
Your Directors are grateful to the Central and State Governments and
the Central DCGI and State FDAs for their support to the Company's
business plans. Your Board places on record its appreciation of the
support provided by the customers, suppliers and equipment vendors to
the Company.
Your Directors are thankful to the esteemed shareholders for their
support and encouragement. The Directors and the Management acknowledge
and are thankful to the employees who stayed back with the Company
during this crucial period and for their commitment and contributions
for the revival of the business and operations.
Your Directors are also thankful for the support received from all
other stakeholders, including doctors, medical professionals,
consultants, advisors, distributors and business partners.
For and on behalf of the Board
Place: Chennai K Raghavendra Rao
Date: May 28, 2015 Managing Director
Sep 30, 2013
The Directors takes pleasure in presenting the report on business and
operations of your Company along with the audited statement of accounts
for the financial year ended September 30, 2013.
Performance
Your Company has extended its Financial Year 2012-13 by a period of six
months i.e., up to September 30, 2013 and accordingly has prepared its
Financial Statements for a period of 18 months i.e. from April 1, 2012
to September 30, 2013. The highlights of the financial results for the
year 2012 - 2013 are given below:
(Rs.Cores)
Particulars 18 Months
ended
31.09.2013 Year ended
31.03.2012
Sales & Operating Income 1906.58 1736.33
Other Income 39.77 55.81
Total Expenditure 1776.74 1380.41
Gross profit 169.61 411.73
Interests Finance Charges 520.38 179.05
Gross Profit after Interest
but before (350.77) 232.68
Depreciation and Taxation
Depreciation 243.86 149.05
Profit/(Loss) before Tax,
exceptional and (594.63) 83.62
extraordinary items
Exceptional Item 51.11 83.88
Profit/(Loss) Before Tax and
Extraordinary item (543.52) (0.26)
Extraordinary items (80.00)
Profit Before Tax (543.52) 79.74
Provision for Taxation
- Current & Deferred Tax M (13.29) (23.37)
Profit/(Loss) after Tax (530.23) 103.11
During the financial year 2012-13, your Company achieved a turnover and
operating income of Rs 1906.58 crores (Rs 1736.33 crores in 2011-12).
The gross profit before interest, depreciation and taxes stood at Rs
169.61 crores, 8.90% of turnover (Rs 411.73 crores (23.71 % of
turnover) in 2011 -12). After providing for interest expense of Rs
520.38 crores (Rs 179.05 crores previous fiscal), depreciation of Rs
243.86 crores (Rs 149.05 crores previous fiscal), Exceptional item Rs
51.11 crores (Rs 83.88 crores previous fiscal) and Extraordinary item
Nil [(Rs 80) crores previous fiscal], the Loss before tax of the
Company was Rs 543.52 crores [Rs 79.74 crores (Profit) previous
fiscal]. The net loss after tax stood at Rs 530.23 crores (the net
profit after tax was Rs 103.11 in the previous fiscal).
Business Overview
During the year your Company recorded a slow growth, recovering from
the issues faced in previous financial year - closure of Alathur plant
for a period of more than a month on account of an order from Tamil
Nadu Pollution Control Board (TNPCB), and liquidity constraints on
account of redemption of outstanding FCCBsin February 2012. Despite the
tough liquidity and working capital constraints, your Company managed
to sustain sales and operating profitability denoting the basic
strength of the business. Orchid initiated a process of restructuring
its debt and accordingly made a reference to the Corporate Debt
Restructuring (CDR) cell. Once CDR process is completed there would be
an ease in flow of working capital through rescheduled loan repayment,
funding of interest by banks and reduction in rate of interest which
would help the Company in improving its performance.
Your Company is planning to launch some new products in the next
financial year for the EU and US markets, which are expected to aid in
strengthening the revenue/profitability streams of the Company going
forward.
Corporate Debt Restructure (CDR)
The Company was admitted for Corporate Debt Restructuring process in
August 2013 by the CDR Empowered Group (CDR
EG) with requisite support from Banks.
Your Company had entered into a Business Transfer Agreement (BTA) in
August 2012 with Hospira Healthcare India Private Limited, a subsidiary
of Hospira Inc., USA, for the sale and transfer of the Company''s
Penicillin and Penem API Business together with its manufacturing
facilities in Aurangabad and associated Research and Development Unit
situated in Shozhanganallur. Your Company obtained the requisite
approvals for this transaction as follows - Shareholders approval in
October 2012, Competition Commission of India (CCI) clearance in
December 2012 and the Foreign Investment Promotion Board (FIPB)
clearance in January 2013. Subsequently, the initial consideration of
USD 202.50 million was enhanced to USD217.50 million for transfer of
additional portion of land and building at R&D Centre Shozhanganallur.
As the Company is admitted for CDR process, the consummation of BTA has
been added as a part of the CDR process. The final CDR package is under
preparation and expected to be completed in December 2013.
Regulatory Filings and Approvals
In the generic formulations domain, Orchid''s cumulative Abbreviated New
Drug Application (ANDA) filings for the US market stood at 43. This
includes 8 Para IV FTF (First-To- File) filings. The break-up of the
total ANDA filings is 13 in Cephalosporins segment and 30 in NPNC
space. Few more ANDAs which are in the later stages of development are
expected to be filed in the ensuing quarters.
In the European Union (EU) region, the cumulative count of Marketing
Authorisation (MA) filings stood at 30. The break- up of the total MA
filings is 1 5 in the Cephalosporin segment and 1 5 in the NPNC
segment.
In the API (Active Pharmaceutical Ingredients) domain, Orchid increased
its cumulative filings of its US DMF count to 90. The break-up of the
total filings is 28 in the Cephalosporin Segment, 47 in NPNC segment, 2
in the Betalactam segment and 13 in the Carbapenems segment. In the
European market space the cumulative filings of COS (Certificate of
Suitability) count remained at 21 which includes 14 in cephalosporin
segment, 6 in NPNC segment and 1 in the betalactam segment. With
staunch efforts on product development, the count of filing and
approval is set to increase in the current financial year.
Dividend
Due to losses incurred by the Company during the financia year 2012-13,
your Directors express their inability to recommend any dividend to the
equity shareholders.
Awards
During the year, your Company was conferred with the following awards:
- Top Indian Public Limited Company in Patent at the 5th National
Intellectual Property Award 2013, organised by CM in partnership with
the Department of Industria Policy & Promotion and Indian Intellectual
Property Office, Government of India.
- EXIM Achievement Award 2012 for meritorious export performance by
The Tamil Chamber of Commerce, Chennai.
Intellectual Property Rights
During the year, Orchid continued to accelerate the PR work on a number
of products. The total number of patent applications filed by Orchid in
various national and international patent offices so far was 931
(including Process, formulation, NCE, NDDS, biotech and Generics). As
of September 30, 2013, 731 patent applications have been published
while 210 patents have been granted cumulatively.
Employees Stock Option Plan
The details of options granted to employees under the ORCHID ESOP 2010,
ORCHID ESOP - DIRECTORS 2011, Orchid ESOP - Senior Management 2011
schemes and the status of such options as on September 30, 2013 are
given in Annexure IV to this Report.
Your Company formulated a stock option plan viz., Orchid
- ESOP 2010 Scheme for grant of 10,00,000 options to the employees of
the Company including whole-time Director(s) of the Company but
excluding the Promoter Directors. The said scheme was approved by the
shareholders at the Annual General Meeting held on July 21, 2010. Your
Company granted 9,01,000 options during the year 2010- 11. Pursuant to
exercise of options by the employees, 10,000 equity shares of Rs 10/-
each were issued during the year and as at September 30, 2013, the
outstanding options yet to be exercised under the said scheme is
5,09,500.
Your Company has also formulated the following schemes which were
approved by the shareholders at the Annua General Meeting held on July
29, 2011.
- Orchid ESOP - Directors 2011 Scheme - grant of 5,00,000 options to
the directors of the Company including whole- time directors but
excluding promoter director. Your Company granted 3,00,000 options
during the year 2011 - 12 and as at September 30, 2013, the outstanding
options yet to be exercised under the said scheme is 1,00,000.
- Orchid ESOP - Senior Management 2011 Scheme - grant of 10,00,000
options to the employees in the grade of Senior Manager and above out
of which 7,50,000 options are ear marked to the employees of Orchid and
2,50,000 options to the employees of various subsidiary companies of
Orchid, either in India or abroad. Your Company granted 42,700 options
during the year 2011-12 and as at September 30, 2013, the outstanding
options yet to be exercised under the said scheme are 42,700.
Associate
Allecra Therapeutics GmbH, Germany
With a viewto enter into drug discovery in the areas of obesity, CNS
and other therapeutic areas in response to potentia MNC interest,
Orchid decided to invest in Allecra Therapeutics GmbH (Allecra) and
presently holds 20.65% stake in the Company. Allecra is a drug
development company based in Germany focused on clinically
differentiated products and shall develop unique products for novel
treatments to combat multi drug resistant bacterial infections.
Joint Venture Company
NCPC Orchid Pharmaceutical Company Limited, China
NCPC Orchid Pharmaceutical Company Limited was incorporated in 2002, as
a joint venture in China for manufacture of sterile cephalosporin APIs.
The Joint Venture Partner North China Pharmaceuticals Company Limited
(NCPC) desired to re-organise the JV Company and make it as their
subsidiary Company. As a result, Orchid made an exit from the Joint
Venture during the year 2012-13.
Subsidiaries
Bexel Pharmaceuticals Inc., USA (Bexel)
Bexel was incorporated basically to conduct Research & Development
activities in new drug discovery segment. The current Bexel IP
portfolio is being maintained by OCPL globa IP unit.
Orchid Pharmaceuticals Inc., USA
Orchid Pharmaceuticals Inc., is a wholly owned Delaware based
subsidiary of your Company and also the holding companyin the United
States, under which all theoperationa business subsidiaries have been
structured. The Company currently has two operating Subsidiaries,
namely Orgenus Pharma Inc., and Orchid Pharma Inc., in the US.
Orgenus Pharma Inc., is the entity that provides all business
development and operational services for the parent Company including
the initiation of marketing alliances with partner companies, filing of
your Company''s Drug Master Files (DMFs) and Abbreviated New Drug
Applications (ANDAs) as the Importer of record for your Company with
the FDA. It continues to represent your Company for all matters
relating to the review and approval of such filings by the FDA, and
handling of logistics and product importation into the US as the
Importer of Record for the US Customs.
Orchid Pharma Inc., is the commercial entity that started directly
marketing and selling your Company''s products in the US generics market
place. Orchid Pharma Inc., has established a strong corporate image for
your Company in the US and will be launching all future (unpartnered)
generics products under the Orchid label.
Diakron Pharmaceuticals Inc., USA
Orchid''s stake in Diakron has been a part of the original transaction
which includes direct investment and Master Services Agreement (MSA).
Your Company has completed most of its MSA obligations to develop and
supply clinica quantities of API and extended release formulation.
Orchid Europe Limited, United Kingdom
Your Company''s subsidiary in Europe namely Orchid Europe Limited (OEL)
is a wholly owned subsidiary which provides liasing support to the
parent Company and its customers in Regulatory, Pharma covigilance,
Testing & Release, Retention of samples, Service Providers and Business
Development in Europe.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your Company''s wholly owned subsidiary, Orchid Pharmaceuticals (South
Africa) Pty Ltd., was incorporated mainly to register and market your
Company''s products in South Africa. The Company is in the process of
submitting dossiers for obtaining marketing approval from the
regulatory authority, MCC for various oral products and the
applications are at various stages of the registration process.
Orchid Pharma Singapore Private Ltd, Singapore
During the year, your company incorporated Orchid Pharma Singapore
Private Limited a wholly owned subsidiary in Singapore to deal in
pharmaceuticals products.
Closure of Orchid Pharma Japan K K
Orchid Pharma Japan KK was incorporated during April 2008 as a
subsidiary of your Company in order to foray into the high potential
and growing Japanese generics market. During the year 2012-13, your
Company closed this subsidiary, as its business activities have been
very much constrained due to the non-availability of customer questing
samples and test data as a result of Orchid''s financial conditions.
Central Government Approval
The Ministry of Corporate Affairs, Government of India vide its
circular dated February 8, 2011 has provided genera exemption to
companies from attaching the balance sheets of their subsidiary
companies as required under Section 212(8) of the Companies Act, 1956.
The exemption is available provided the companies publish the audited
consolidated financial statements in the Annual Report. The
consolidated financial statements duly audited are presented along with
the accounts of your Company. The statement as required under Section
212 is given as part of the consolidated accounts in this report. The
annua accounts of subsidiary companies are kept at the Company''s
registered office and also at the respective registered office of the
subsidiaries for inspection and shall be made available to the members
seeking such information.
Fixed deposit
The Company has not accepted any fixed deposits and as such, no amount
of principal or interest was outstanding as of the balance sheet date.
Directors'' Responsibility Statement
In accordance with the provisions of Section 217 (2AA) of the Companies
Act, 1956, your Directors confirm:
- That in the preparation of the annual accounts for 2012- 13 the
applicable accounting standards were followed along with proper
explanation relating to material departures, if any.
- That the Directors 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 (30th September 2013)
and of the profit or loss of the Company for that period (2012-13).
- That the Directors took 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.
- That the Directors prepared the annual accounts for 2012- 13 on a
going concern basis.
Corporate Social Responsibility (CSR)
It is the strong belief of Orchid that Corporate Social
Responsibility means a holistic development of the community that
caters the basic needs on education, health, women and child
development, Youth development, capacity building and infrastructure.
These are the major areas where significant contribution was achieved
with public participation this year.
Mission
To accelerate sustainable development of rural areas by empowering
socially and economically deprived sections.
Our Approach :
ORCHID
GOVERNMENT NGOs
As a Corporate Orchid believes in playing the role of a catalyst in
bringing the resources and knowledge for development with people''s
participation.
Education
Poor Socio-Economic conditions, lack of motivation, lack of
infrastructure and poor coaching are some of the challenges which
affect rural children''s education and the continuity. Orchid Trust has
understood these issues and has planned its education promotion
initiatives for their educationa improvement.
Facilitating better training
Appointment of 24 supplementary teachers in schools through the PTA
(Parent Teacher Association) in schools were made during the year,
where there are no sufficient teachers. As a result the school final
year result has improved. The average SSLC results and Higher secondary
results percentage have increased considerably due to this assistance.
Running of four community tuition centers, teaching aids to seven
Government schools and sponsorship of higher education to 48 poor
deserving students were made aimed at making education available to all
and providing an atmosphere of pleasant learning to students.
Educationa institutes and Grass root associations were involved in
research to find out school drop outs and to bring them back to
schools.
Summer Camp to Rural children
Summer camp to school going students was organised this year, more than
196 children participated in the camp. Yoga, music, sports, physical
exercise, drawing and painting, clay modelling, dance, Karate, drama
are some of the programs that were given as entertainment on a
participatory approach.
Other Educational Programs
Career guidance programs, best student and Teachers award, talent
improvement programmes, school annual day sponsorships, sponsorship of
prizes for school awareness programmes are some of the activities that
helped the students in improving their skills.
Student Counselling Program
Children were given proper guidance and advice by a professional
counsellor whenever they had any persona problems or poor performance
in their studies. The counsellor was able to identify the root cause
and helped the students to overcome the problems that they faced and
facilitated the students to find solutions to solve the issues. This
program has helped more than 146 students this year.
Special coaching to SSLC students
Orchid in coordination with the school Parent Teachers'' Association
conducted an intensive night coaching for one month for selected
students who appeared for public examination in 10th and 12th standard.
Teachers volunteered to be available for students to clear their
doubts. This program was organised in 7 schools that benefited 346
students.
Health
Mobile Health Program
Orchid Trust conducts weekly village health camp programs for the
villages. The exclusive medical team for this purpose visits Pattipulam
(in East Coast Road) and Alathur (in Old Mamallapuram Road). Large
numbers of people are benefited from this programme/visits, regularly.
Eye Camp
Orchid Trust in coordination with Sankara Hospital conducted 12 monthly
eye camps and did eye screening for more than 800 people and free
cataract surgery for more than 60 people. A tie up has also been made
with Pamma Shankara Hospital for weekly eye camp program in Primary
Health Centre, Tiruporur.
Special Health Camp to Women and Children
Mother and child care is one of the basic aspects of health care which
is lacking in rural areas and the same may be attributed to many
reasons like early marriage, ignorance and the socio economic
conditions. The poor rural women were trained on nutrition, vaccination
and other aspects of child care.
Orchid Trust in coordination with the ICDS (Integrated Child
Development Services) organised a pediatric camp in Tiruporur near
Alathur. Many women willingly participated and shown keen interest in
learning the aspects. As many as 450 women were benefited by way of
consultancy and free treatment.
Sponsorship of Government Health Programs
Orchid Trust brings in more response for Government initiatives like
Pulse Polio drive, Health Camps organised by local Primary Health
Centre. These sponsorship includes provision of vehicles, food, notice,
posters, medicines and program sponsorships.
Empowerment of Women through SHGs
Tailoring for women
The training given to the Self Help Groups (SHGs) on tailoring and
embroidering also gave an employment opportunity to the women in
apparels. Women were able to get jobs in the nearby export garment
units; 14 out of 65 women trained got job opportunities. Leadership
training was imparted to 73 SHGs.
Greenery Development
In order to create awareness and to involve women in greenery
development initiatives, a program was organised in Alathur in
coordination with NEED Trust, Tiruporur known for greenery development
initiatives. More than 300 women from the adopted villages took part
and received saplings to plant and raise it in their houses.
Infrastructure Development
School buildings
Orchid paid the public contribution part to four school buildings and
drinking water were improved in those schools. All these were possible
only under the Government scheme called ''Namakku Naame'' with the
support of grass root associations and the elected body members.
Canal Distilling
Canal distilling is an ongoing activity for enabling agricultura
development in the area. More than 300 acres of land got benefited out
of this
Youth Development
Orchid Trust used sports as a gateway to reach the youth. More than 25
youth functions were sponsored. The next step was to offer variety of
training programmes on Personality Development, Career Guidance, Self
Esteem, Spoken English and Entrepreneurship Development Programmes to
change the attitude of youth towards unemployment and motivate them to
take up self employment as the alternative.
Environment
Environment management is the prime concern in your Company. Orchid has
employed a state of the art technology zero liquid trade effluent
treatment plant and world class treatment facilities for its liquid and
gaseous pollutants generated from the production processes. The zero
discharge of liquid trade effluent treatment plant comprises Membrane
Bio Reactor, Nano Filtration, Reverse Osmosis, Solvent Stripping
Column, Thermal Evaporation & Crystallisation plant to treat the entire
trade effluent and recycle back into the utility process.
Waste water Treatment:
Orchid has segregated the effluent as per the guidelines of Corporate
Responsibility for Environmental Protections for pharmaceuticals
industries i.e. Low Total Dissolved Solids effluent (including sewage)
and High Total Dissolved Solids effluent.
Waste Air Treatment
The major emissions from the Unit are emissions from the boiler, power
plant, process scrubbers and powder processing area. Orchid installed
process scrubbers in all the production blocks to treat the waste air
generating from process reactors. These scrubbers are made up of FRP
(fiber reinforced plastic) with structure packing to enhance the
efficiency of the scrubbing. The emissions from the process scrubbers
meet the general emission standards prescribed by the Pollution Control
Board. The scrubbed liquid is sent back to waste water treatment plant
for further treatment.
Vent Gas Condensation
Orchid installed the vent gas condensation system for fugitive
emissions from the storage tanks of solvents and secondary condensers
of solvent recovery area to control the fugitive emissions. The
collected solvent is recycled back into the process.
Reverse Jet Ventury Filter
Orchid installed reverse jet ventury filter to control the dust
emission during the powder processing of bulk drugs.
You would be happy to note that Orchid is the first bulk drug company
in the country which was certified with ISO - 14001 in the year 1999
itself by Dutch Council and has been retaining the certificate
continuously for its environment management system.
Safety Excellence Journey:
Orchid''s thrust on Safety and Health has persisted meticulously during
this financial period. The sustained safety excellence journey is
achieved with the high level participation from various line management
functions.
Orchid''s integrated Safety organisation structure and line management
responsibility has become one of the key strengths in maintaining
safety in all its Units. In addition to Process safety, Orchid strongly
believes that human behavior plays a key role, in building safety
culture. Hence to monitor and reinforce actions on process safety,
safety observation and audit (SOA), is a key focus area in Our Central
Safety Committee meetings (CSC). To give thrust to Process safety
management the Company continues to develop inherently safe processes
with the help of in-house process safety labs.
The CSC meets regularly and review progress on Safety elements and also
provides directions to various subcommittees which work towards
identifying hazards and minimising the risks at all levels.
Conservation of energy
Your Company has always been striving hard in the field of energy
conservation. Several measures to conserve energy and to reduce
associated costs were taken during the fiscal under review as well. The
particulars in respect to conservation of energy as required under
Section 217 (1) (e) of the Companies Act, 1956, are given in Annexure I
to this report.
Technology absorption
The particulars in respect of R&D/Technology absorption as required
under Section 217 (1)(e) of the Companies Act, 1956, are given in
Annexure II to this report.
Foreign exchange earnings and outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as
required under Section 217 (1)(e) of the Companies Act, 1956, are given
in Annexure III to this report.
Particulars of employees
nformation as per Section 217(2A) of the Companies Act, 1956 read with
Companies (Particulars of Employees) Rules, 1975 forms part of this
Report. However, as per the provisions of Section 219(1 )(b)(iv) of the
Companies Act, 1956, the Report and Accounts are being sent to all
members of the Company excluding the aforesaid information. Any member
interested in obtaining a copy of the particulars may write to the
Secretary at the Registered Office of the Company.
Corporate Governance
The Company follows the code of Corporate Governance issued
bythestockexchangesfor listed companies. Corporate Governance info
given in Annexure V to this Report. A compliance certificate from the
Practicing Company Secretary is appended to this report.
Green Initiative
To augment the green initiative of the Ministry of Corporate Affairs
and to reduce carbon foot print, your Company proposes to send various
communication including the Annual Reports in electronic form, to the
members who have opted for the same. This would help in reducing the
number of physical copies to be printed, thereby contributing to a
greener environment. The full text of the current year''s (2012- 13)
annual report is available in an easily navigable format at
www.orchidpharma.com. As a member of the Company, you are entitled to
receive all such communication in physical form, upon request.
Directors Appointment of Director
Shri S. Yuvaraj was appointed as Additional Director on the Board on
August 14, 2013. Pursuant to the appointment, Shri S. Yuvaraj holds
office up to the date of the forthcoming Annual General Meeting. A
notice has been received from a member as per Section 257 of the
Companies Act, 1956 along with the prescribed fee. Shri S. Yuvaraj has
also filed with the Company his consent to act as Director, if
appointed, as required under Section 264(1) of the Companies Act, 1956.
A resolution seeking his appointment as Director is being placed before
the members for approval.
Change in Designation
Shri S. Krishnan, whole-time director of Orchid, resigned from the
services of the Company on April 17, 2013. He continues to be on the
Board as Non-executive Director.
Resignation of Directors
Shri Deepak Vaidya, Director of Orchid, resigned from the Board with
effect from November 19, 2012. The Board places on record its
appreciation for the contribution made by Shri Deepak Vaidya during his
tenure as Director.
Shri Bharat D Shah, Director of Orchid, resigned from the Board with
effect from November 15, 2012. The Board places on record its
appreciation for the contribution made by Shri Bharat D Shah during his
tenure as Director.
Prof. Bala V Balachandran, Director of Orchid, resigned from the Board
with effect from August 14, 2013. The Board laces on record its
appreciation for the contribution made by Prof. Bala V Balachandran
during his tenure as Director.
Retirement of Directors by rotation
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company Shri.S.Krishnan retires by
rotation at the ensuing Annual General Meeting and being eligible
offers himself for re-appointment.
None of the Directors of the Company are disqualified under Section
274(1 )(g) of the Companies Act, 1956.
Auditors
The Statutory Auditors, M/s SNB Associates, Chartered
AccountantsretireattheforthcomingAnnual General Meeting, and being
eligible, offer themselves for re-appointment. M/s. SNB Associates,
Chartered Accountants have furnished certificate under section 224(1 B)
of the Companies Act, 1956 of their eligibility for the appointment.
Auditor''s Report
The Auditor''s in their report have made certain observations relating
to recovery of advances paid to suppliers, non provision of diminution
in value of Investments in a foreign R&D subsidiary and non-provision
of penal interest on loans taken by the Company under ''Qualified
Opinion'' in their report to the members.
The Company has already been admitted for Corporate Debt Restructuring
(CDR) scheme and the final approva for the scheme is expected. Due to
financial constraints, the Company was not able to take delivery of
materials / capital goods and the Company is confident that with the
CDR approval, the Company would be able to take delivery of these
materials in due course. As far as the diminution in value of
investments is concerned, the Company is confident that the value of
molecules held by the foreign subsidiary will be more than the
investment. With the approval for the CDR scheme, the interest
liability will come down and hence there will be no need for any
provision for penal interest. The Management confirms that there will
be no impact on the financials on account of the matters referred to in
the Auditor''s report.
The Auditor''s in their report have further made observations relating
to notice given by IDBI Bank Limited to convert the term loan into
shares and the excess remuneration paid to the Managing Director and
the Whole time Director under ''Emphasis of Matter'' in their report to
the members.
IDBI Bank Limited has given notice to the Company to convert the term
loan amounting to Rs 30.19 crores into shares at par as per the terms
of the Loan agreement. The same has been disputed by the Company. IDBI
has filed a Civil Suit which is pending before the Honourable High
Court of Madras.
The Company has paid remuneration to the Managing Director and the
Whole time Director based on the approval given by the shareholders at
the Annual General Meetings held on September 20, 2012 and July 21,
2010, respectively. Due to the loss incurred by the Company during the
year 2012-13, the Company is making an application for the approval of
the Central Government for the remuneration paid to Chairman & Managing
Director and Executive Director.
Cost Audit
The Central Government has prescribed that an audit of the cost
accounts maintained by the Company in respect of bulk drugs and
formulations be conducted under Section 233B of the Companies Act,
1956. Consequently, your Company has appointed Shri V Kalyanaraman,
B.Sc, FCMA, as Cost Auditor for 2012-13 and 2013-14, with the consent
of the Central Government, for the audit of cost accounts maintained by
the Company in respect of both bulk drugs and formulations.
For the year ended March 31, 2012, the due date of filing the cost
audit report was December 31, 2012 and the actua date of filing the
cost audit report was December 29, 2012.
Acknowledgements
Your Directors are thankful to various public sector and private sector
banks and financial institutions for meeting the long term and working
capital needs of the Company''s businesses.
The Directors are grateful to the Central and State Governments and the
Central DCGI and State FDAs for their continued support to the
Company''s expansion plans. Your Board places on record its
appreciation of the support provided by the customers, suppliers and
equipment vendors to the Company. Your Directors are also thankful to
the vendors, distributors and agents for their continued support.
Your Directors are thankful to the esteemed shareholders for their
support and encouragement. The Directors acknowledge the commitment and
contribution of all employees to the growth of the Company.
For and on behalf of the Board
Place: Chennai K Raghavendra Rao
Date: November 29, 2013 Chairman & Managing Director
Mar 31, 2012
The Directors take pleasure in presenting the report on business and
operations of your Company along with the audited statement of accounts
for the financial year ended March 31, 2012. The highlights of the
financial results for the year 2011 -12 are given below:
Rs. (Rs crore)
Particulars Year ended Year ended
March 31,2012 March 31,2011
Sales & Operating Income 1,736.33 1,663.34
Other Income 55.81 48.79
Total Expenditure 1,380.41 1,314.81
Gross Profit 411.73 397.32
Interests Finance Charges 179.05 115.76
Gross Profit after Interest but
before 232.68 281.56
Depreciation and Taxation
Depreciation 149.05 128.45
Profit/(Loss) before Tax,
Exceptional and 83.62 153.11
Extraordinary Items
Exceptional Item 83.88 (20.69)
Profit/(Loss) Before Tax and
Extraordinary Items (0.26) 173.80
Extraordinary Items (80.00) -
Profit Before Tax 79.74 173.80
Provision for Taxation
- Currents Deferred Tax (23.37) 14.32
- Profit/(Loss) After Tax 103.11 159.48
PERFORMANCE
During 2011-12, your Company achieved a turnover and operating income
of Rs 1,736.33 crore as compared to Rs 1,663.34 crore in 2010-11
recording a growth rate of 4.38%. The gross profit before interest,
depreciation and taxes stood at Rs 411.73 crore (23.71% of turnover) as
compared to Rs 397.32 crore (23.88% of turnover) of last fiscal. After
providing for interest expense of Rs 179.05 crore (Rs 115.76 crore
previous fiscal), depreciation of Rs 149.05 crore (Rs 128.45 crore
previous fiscal), Exceptional item Rs 83.88 crore (Rs Nil previous
fiscal) and Extraordinary item Rs 80 crore (Rs Nil previous year), the
profit before tax of the Company was Rs 79.74 crore (Rs 173.81 crore
previous fiscal). The net profit after tax stood at Rs 103.11 crore
(5.94% of turnover) compared to the net profit after tax of Rs 159.48
crore (9.6% of turnover) in the previous fiscal.
BUSINESS OVERVIEW
During the year, your Company continued to record a strong growth in
its operational performance inspite of its API plant in Alathur being
closed for more than a month owing to the closure order from the Tamil
Nadu Pollution Control Board (TNPCB), fire accident at the R&D centre
and liquidity constraints on account of redemption of outstanding
Foreign Currency Convertible Bonds. The business model change that
your Company had initiated post the inject able business transfer to
Hospira in 2010 continues to augur well with the several long-term
supply contracts entered into with large global players paving the way
for continued robust earnings. Our Active Pharmaceutical Ingredient (API)
supply arrangement continued to perform significantly well, registering
higher than expected business volumes.
Your Company is planning to launch several products during the current
financial year 2012-13 for the EU and US markets, which are expected to
strengthen the revenue streams for regulated generics business of the
Company from the current financial year 2012-13.
REGULATORY FILINGS AND APPROVALS
In the generic formulations domain, Orchid's cumulative Abbreviated New
Drug Application (ANDA) filings for the US market stood at43. This
includes 8 Para IV FTF (FirstÃToÃFile) filings. The break-up of the
total ANDA filings is 13 in Cephalosporins segment and 30 in NPNC
space. Few more ANDAs which are in the later stages of development are
expected to be filed in ensuing quarters.
In the EU region, the cumulative count of Marketing Authorisation (MA)
filings stood at 28. The break-up of the total MA filings is 13 in the
Cephalosporin segment and 15 in the NPNC segment.
In the Active Pharmaceutical Ingredients (API) domain, Orchid increased
the cumulative filings of its US Drug Master Files (DMF) count to 89.
The break-up of the total filings is 28 in the Cephalosporin Segment,
47 in NPNC segment, 2 in the Betalactam segment and 12 in the
Carbapenems segment. In the European market space the cumulative
filings of CoS (Certificate of Suitability) count remained at 21 which
includes 14 in cephalosporin segment, 6 in NPNC segment and 1 in the
betalactam segment. With staunch efforts on product development, the
count of filing and approval is set to increase in the current
financial year.
DIVIDEND
Your Directors recommend a 30% dividend (Rs 3/- per equity share of Rs
10/-each) for the year ended March 31, 2012, subject to the approval of
shareholders at the ensuing Annual General Meeting. Under the Income Tax
Act, 1961, the receipt of dividend is tax-free in the hands of the
shareholders.
AWARDS
During the year, your Company was conferred with the following awards:
- Export Excellence Award 2010-11 by MEPZ - Special Economic Zone,
Government of India.
- EXIM Achievement Award 2011 for meritorious export performance under
the category Air Exports by The Tami Chamber of Commerce, Chennai.
- Gold Patent Award for the year 2010-11 in recognition of its
commendable contribution to R&D in Drug Discovery Sector by the
Pharmaceutical Export Promotion Council.
- IGCW - 2011 Green Innovation Award for the outstanding research in
the field of Green Chemistry & Engineering.
INTELLECTUAL PROPERTY RIGHTS (IPR)
During the year, Orchid continued to accelerate the Intellectual
Property Rights work on a number of products. The total number of
patent applications filed by Orchid in various national and
international patent offices so far is 904 (including Process,
Formulation, NCE, NDDS, Biotech and Generics). As of March 31, 2012,
722 patent applications have been published while 170 patents have been
granted cumulatively.
FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)
Your Company had issued Foreign Currency Convertible Bonds amounting to
US$ 175 million in February 2007, which was listed on the Singapore
Stock Exchange. During the years 2008-09and 2009-10,theCompany bought
back FCCBs amounting to US$ 37.80 million and US$ 19.778 million
respectively. The outstanding bonds due for redemption in February 2012
was US$ 117.422 million.
Accordingly, your Company redeemed the aforesaid outstanding FCCBs,
including yield-to-maturity, aggregating to US$ 167.64 million (Rs
824.08 crore), on the due date i.e. February 28,2012.
EMPLOYEES STOCK OPTION PLAN (ESOP)
The details of options granted to employees under the ORCHID - ESOP
2010, ORCHID - ESOP Directors 2011, ORCHID - ESOP Senior Management
2011 schemes and the status of such options as on March 31, 2012 are
given in Annexure IV to this Report.
Your Company formulated a stock option plan viz., ORCHID-ESOP 2010
Scheme for grant of 1,000,000 options to the employees of the Company
including Whole Time Director(s) of the Company but excluding the
Promoter Director(s). The said scheme was approved by the shareholders
At the Annual General Meeting held on July 21, 2010. Your Company
granted 901,000 options during the year 2010-11 and as on March 31,
2012, the total number of options in force under the said scheme are
854,000.
Your Company has also formulated the following schemes which were
approved by the shareholders at the Annual General Meeting held on July
29, 2011.
- ORCHID - ESOP Directors 2011 Scheme - grant of 500,000 options to the
Directors of the Company including Whole Time Director(s) but excluding
Promoter Director(s). Your Company granted 300,000 options during the
year and as at March 31, 2012, the total number of options in force
under the said scheme are 250,000.
- ORCHID - ESOP Senior Management 2011 Scheme - grant of 1,000,000
options to the employees in the grade of Senior Manager and above out
of which 750,000 options will be granted to the employees of Orchid and
250,000 options to the employees of various subsidiary companies of
Orchid, either in India or abroad. Your Company granted 42,700 options
during the year and as at March 31, 2012, the total number of options
in force under the said scheme are 42,700.
AMALGAMATION OF WHOLLY OWNED SUBSIDIARY WITH THE COMPANY
During the year, Orchid Research Laboratories Limited (ORLL) a
wholly-owned subsidiary was merged with your Company with effect from
April 01, 2010 i.e. 'the Appointed Date'. The Hon'ble High Court of
Madras had vide its Order dated March 20, 2012, sanctioned the Scheme
of Amalgamation of ORLL with your Company. The scheme became effective
from March 30, 2012 upon filing the certified true copy of High court
orders with the Registrar of Companies, Chennai, Tamil Nadu.
OVERSEAS JOINT VENTURES
NCPC Orchid Pharmaceutical Company Limited, China
Your Company's 50:50 joint venture in China, NCPC Orchid
Pharmaceuticals established for manufacture of sterile cephalosporin
Active Pharmaceutical Ingredients (API) continued to perform well. The
joint venture is profitable with a significant sales turnover of US$
52.11 million during the year under review.
SUBSIDIARIES
Bexel Pharmaceuticals Inc., USA (Bexel)
During the yea r, Bexel became a 100% subsidiary of your Company upon
amalgamation of Orchid Research Laboratories Limited with your Company.
Bexel was incorporated basically to conduct Research & Development
activities in New Drug Discovery segment. Bexel provides all scientific
documentation to Orchid Research Laboratories Limited, which as of
March 30, 2012, stands amalgamated with your Company. The current Bexel
IP portfolio is being maintained by Orchid global Intellectual Property
(IP) unit. During the year, Bexel has conducted advanced studies on
BLX-1002, while Phase Ha clinical studies has been initiated for the
indication of Non-alcoholic fatty liver disease (NAFLD) / Non-alcoholic
Steatohepatitis (NASH).
Orchid Pharmaceuticals Inc., USA
Orchid Pharmaceuticals Inc., is a wholly owned Delaware based
subsidiary of your Company and also the holding Company in the US,
under which all the operational business subsidiaries have been
structured. The Company currently has two operating Subsidiaries,
namely Orgenus Pharma, Inc., and Orchid Pharma, Inc., in the US.
Orgenus Pharma Inc., is the entity that provides all business
development and operational services for the parent Company including
the initiation of marketing alliances with partner companies, filing of
your Company's Drug Master Files (DMFs) and Abbreviated New Drug
Applications (ANDAs) as the Importer of record for your Company with
the FDA. It continues to represent your Company for all matters
relating to the review and approval of such filings by the FDA and
handling of logistics and product importation into the US as the
Importer of Record for the US Customs.
Orchid Pharma, Inc., is the commercial entity that started directly
marketing and selling your Company's products in the US generics market
place. Orchid Pharma Inc. has established a strong corporate image for
your Company in the US and will be launching all future (un partnered)
generics products under the Orchid label.
Diakron Pharmaceuticals Inc., USA
During the year, your Company increased its stake in Diakron
Pharmaceuticals Inc., and holds 76.4% in the Company. Orchid's stake in
Diakron has been a part of the original transaction which includes
direct investment and Master Services Agreement (MSA). Your Company
has completed most of its MSA obligations to develop and supply
clinical quantities of Active Pharmaceutical ingredients (API) and
extended release formulations.
Orchid Europe Limited, United Kingdom
Your Company's subsidiary in Europe namely Orchid Europe Limited (OEL)
is a wholly owned subsidiary which provides liaising support to the
parent Company and its customers in Regulatory, Pharmaco vigilance,
Testing & Release, Retention of samples, Service Providers and Business
Development in Europe.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your Company's wholly owned subsidiary, Orchid Pharmaceuticals (South
Africa) Pty Ltd., was incorporated mainly to register and market your
Company's products in South Africa. The Company is in the process of
submitting dossiers for obtaining marketing approval from the
regulatory authority, MCC for various or a products and the applications
are at various stages of the registration process.
Orchid Pharma Japan K K
The subsidiary Company in Japan has continued to make noteworthy
progress during the year. At the end of the fiscal year 2011-12, there
are 9 Drug Master Files (DMFs) filed with Pharmaceutical and Medical
Devices Agency (PMDA) of Japan and additional Drug Master Files (DMFs)
will be filed in the current financial year to meet the market needs.
During the year under review, the Company successfully started supplies
to few Japanese Pharma Companies and business discussions are on with
various companies for supply of new products and the Company is
expected to make good progress on both business and regulatory fronts
during the current year.
GENERAL EXEMPTION FROM CENTRAL GOVERNMENT
The Ministry of Corporate Affairs, Government of India vide its
circular dated February 8,2011 has provided General exemption to
companies from attaching the balance sheets of their subsidiary
companies as required under Section 212(8) of the Companies Act 1956.
The exemption is available provided the companies publish the audited
consolidated financial statements in the Annual Report. The consolidated
financial statements duly audited are presented along with the accounts
of your Company. The statement as required under Section 212 is given
as part of the consolidated accounts in this report. The Annual
accounts of subsidiary companies are kept at the Company's registered
office and also at the respective registered office of the subsidiaries
for inspection and shall be made available to the members seeking such
information.
FIXED DEPOSIT
The Company has not accepted any fixed deposits and as such, no amount
of principal or interest was outstanding as of the balance sheet date.
DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 217 (2AA) of the Companies
Act, 1956, your Directors confirm:
- That in the preparation of the Annual accounts for 2011-12 the
applicable accounting standards were followed along with proper
explanation relating to material departures, if any.
- That the Directors 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 (March 31,2012) and of the
profit or loss of the Company for that period (2011-12).
- That the Directors took 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.
- That the Directors prepared the Annual accounts for 2011 -12 on a
going concern basis.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Company's constant focus has been on community development as part
of its corporate social responsibility initiative. As a part of CSR
your Company has created a Trust - 'Orchid Trust', which has adopted 24
villages and 6 panchayats and works continuously in implementing
several welfare schemes in key-identified thrust areas like community
health development, children education, women empowerment, youth
development, community asset creation and a greener environment, self
employment and capacity building.
ENVIRONMENT
Environment Management has been a prime focus area of your Company Your
Company has employed a state of the art technology, zero discharge
liquid trade effluent treatment plant and world class treatment
facilities for its liquid and gaseous pollutants Generated from the
production processes. The effluent treatment plant comprising Membrane
Bio Reactor, Nano Filtration, Reverse Osmosis, Solvent Stripping
Column, Therma Evaporation & Crystallisation plant treats the entire
trade effluent and recycles it back into the utility process.
Your Company was the first bulk drug manufacturing company in the
country to get ISO - 14001 certification in the year 1999 by Dutch
Council and has retained the certification continuously for its
Environment Management System. Your Company's Active Pharmaceutical
Ingredient (API) manufacturing facility at Alathur was re-assessed and
was certified with ISO 9001: 2008 (Quality Management System) and ISO
14001: 2004 (Environmental Management System).
SAFETY EXCELLENCE JOURNEY
Safety is a part of the corporate culture in your Company. This
includes infrastructural, employee, Environmental and community safety.
Starting with the employee induction programme, training programmes on
various aspects of operational safety are periodically conducted. In
association with a global expert on safety procedures, a number of
initiatives have been designed to ensure that all manufacturing
processes and systems are executed in the safest manner. These include:
- Use of high-end technologies to recycle discharge and make it toxic
free through a series of processes thereby leading to zero discharge
manufacturing
- Three-tier safety committees to monitor safety initiatives, standard
operating procedures (SOPs), processes and working standards for R&D
and manufacturing units
- Round-the-clock medical care and safety training for all employees
- Use of sophisticated equipment in mobile vans to monitor air quality
inside and outside plants
In 2011, Orchid's Active Pharmaceutical Ingredient (API) manufacturing
facility at Alathur was awarded with OHSAS 18000: 2007 (Occupational
Health and Safety Management System) certification.
The year 2011-2012 saw an all-round improvement in various elements of
safety in the Company. By focusing on repeat incidents and carrying out
necessary corrective and preventive actions, your Company was able to
achieve considerable reduction in incidents. The Central Safety
Committee continued to monitor safety, health and environment
performance and provide necessary direction for improvement through
regular monthly reviews.
CONSERVATION OF ENERGY
Your Company has always been striving hard in the field of energy
conservation. Several measures to conserve energy and to reduce
associated costs were taken during the fiscal under review as well.
The particulars in respect to conservation of energy as required under
Section 217 (1) (e) of the Companies Act, 1956, are given in Annexure I
to this report.
TECHNOLOGY ABSORPTION
The particulars in respect of R&D/Technology absorption as required
under Section 217 (1)(e) of the Companies Act, 1956, are given in
Annexure II to this report.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars in respect of Foreign Exchange Earnings and Outgo as
required under Section 217 (1)(e)of the Companies Act, 1956, are given
in Annexure III to this report.
PARTICULARS OF EMPLOYEES
Information as per Section 217(2A) of the Companies Act, 1956 read with
Companies (Particulars of Employees) Rules, 1975 forms part of this
Report. However, as per the provisions of Section 219(1 )(b)(iv) of the
Companies Act, 1956, the Report and Accounts are being sent to all
members of the Company excluding the aforesaid information. Any member
interested in obtaining a copy of the particulars may write to the
Company Secretary at the Registered Office of the Company.
CORPORATE GOVERNANCE
The spirit of good Corporate Governance remains integral to the
Company's corporate philosophy. The Company follows the code of
Corporate Governance issued by the stock exchanges for listed
companies. For 2011-12 all information relating to Corporate Governance
is given in Annexure V to this Report. A compliance certificate from
the Statutory Auditors is appended to this report.
GREEN INITIATIVE
To augment the green initiative of the Ministry of Corporate Affairs
and to reduce carbon foot print, your Company sends various
communication including the Annual Reports in electronic form, to the
members who have opted for the same. This helps in reducing the number
of physical copies to be printed, thereby contributing to a greener
environment. The full text of the current year's (2011-12) Annual
report will also be available in an easily navigable format on our
website, www.orchidpharma.com. As a member of the Company, you will
always be entitled to receive all such communication in physical form,
upon request.
DIRECTORS
Resignation of Directors
Shri R Sankaran, who has been a Director of Orchid, resigned from the
Board with effect from January 9, 2012. The Board places on record its
appreciation for the contribution made by Shri R. Sankaran during his
tenure as Director.
Retirement of Directors by rotation
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company Shri Deepak Vaidya retires by
rotation at the ensuing Annual General Meeting and being eligible
offers himself for re-appointment.
Reappointment of Chairman & Managing Director
The tenure of Shri K Raghavendra Rao as Chairman & Managing Director of
the Company expires on June 30, 2012. The Board of Directors at their
meeting held on May 14, 2012 reappointed Shri K Raghavendra Rao as the
Chairman & Managing Director of the Company for another period of 5
(five) years with effect from July 01, 2012 subject to the approval of
members in the ensuing Annual General Meeting. The notice convening the
Annual General Meeting includes the proposal for reappointment of Shri K
Raghavendra Rao.
None of the Directors of the Company are disqualified under Section
274(1 )(g) of the Companies Act, 1956.
AUDITORS
The existing Statutory Auditors, M/s SNB Associates, Chartered
Accountants retire at the forthcoming Annual General Meeting, and being
eligible, offer themselves for re-appointment. M/s. SNB Associates,
Chartered Accountants have furnished certificate under Section 224(1 B)
of the Companies Act, 1956 of their eligibility for the appointment.
AUDITORS'REPORT
In reference to the point no. 5 of the Auditors' Report on the
standalone accounts, the Company will be making an application to the
Central Government seeking approval for the remuneration paid.
COST AUDIT
The Central Government has prescribed that an audit of the cost
accounts maintained by the Company in respect of bulk drugs and
formulations be conducted under Section 233B of the Companies Act,
1956. Consequently, your Company has appointed Shri V Kalyanaraman,
B.Sc, FICWA, as Cost Auditor for 2012-13 and 2013- 14, with the consent
of the Central Government, for the audit of cost accounts maintained
by the Company in respect of both bulk drugs and formulations.
For the year ended March 31, 2011, the due date of filing the cost
audit report was September 30, 2011 and the actual date of filing the
cost audit report was August 20, 2011.
ACKNOWLEDGEMENTS
Your Directors are thankful to various public sector and private sector
banks and institutions for meeting the long term and working capital
needs of the Company's expanding operations and also the holders of
Foreign Currency Convertible Bonds (FCCBs) and Global Depositary
Receipts (GDRs) for their support.
The Directors are grateful to the Central and State Governments and the
Central DCGI and State FDAs for their continued support to the
Company's expansion plans. Your Board places on record its appreciation
of the support provided by the customers, suppliers and equipment
vendors to the Company. Your Directors are also thankful to the
vendors, distributors and agents for their continued support.
Your Directors are thankful to the esteemed shareholders for their
support and encouragement. The Directors acknowledge the commitment and
contribution of all employees to the growth of the Company.
For and on behalf of the Board
Place: Chennai K Raghavendra Rao
Date: May 14,2012 Chairman & Managing Director
Mar 31, 2011
Dear Members,
The Directors have pleasure in presenting the 19th Annual Report of
your Company along with the audited statement of accounts for the
financial year ended March 31, 2011. The Report also includes the
consolidated financial statements and the Management's Discussion and
Analysis Report in accordance with the guidelines on Corporate
Governance. The highlights of the financial results for 2010-2011 are
given below:
(Rs crore)
Particulars Year ended
31.03.2011 Year ended
31.03.2010
Sales & operating income 1663.34 1249.83
Other income 7.60 1016.58
Total expenditure 1252.92 1422.55
Gross profit 418.02 843.87
Interest & finance charges 115.76 241.23
Gross profit after interest but before
depreciation and taxation 302.26 602.64
Depreciation 128.45 151.10
Profit / (Loss) from ordinary activities
before exceptional items 173.81 451.53
Exceptional item - 8.52
Profit / (Loss) before tax 173.81 460.05
Provision for taxation
- Current & deferred tax 14.32 128.71
Profit / (Loss) after tax 159.48 331.34
Add: Surplus brought forward 58.59 28.32
Surplus available 218.08 359.66
Appropriations:
- Transfer to general reserve 150.00 200.00
- Excess provision of dividend for earlier
year written back (21.74) (2.47)
- Dividend 25.57 88.79
- Tax on distributed profits 4.15 14.75
Balance carried to balance sheet 60.09 58.59
Performance
During 2010-11, your Company achieved a turnover and operating income
of Rs 1663.34 crore compared to Rs 1249.83 crore in 2009-10. The gross
earnings before interest, depreciation and taxes stood at Rs 418.02
crore for the current financial year. The gross earnings for the
previous year included the profit on sale of undertaking and thus not
comparable. After providing for interest expense of Rs 115.76 crore (Rs
241.23 crore previous fiscal) and depreciation of Rs 128.45 crore (Rs
151.10 crore previous fiscal), the profit before tax of the Company was
Rs 173.81 crore.The net profit after tax stood at Rs 159.48 crore,
compared to the net profit after tax of Rs 331.34 crore in the previous
fiscal. However, figures for the previous year ended March 31, 2010 are
not comparable as they include the sale consideration received by the
Company on account of sale and transfer of its Injectable formulation
business to Hospira in March 2010.
Pharmaceuticals business
The key highlight of our performance was the change in our business
strategy where we moved away from a supply push approach to a demand
pull business model. This is reflected in growing number of long-term
contracts with large global pharmaceutical companies. These long term
business agreements provide clear revenue visibility and allowed for
improved business planning and management which strengthened business
profitability and liquidity.
Our API-supply arrangement performed significantly well, registering
higher than expected business volumes. Our newly acquired front-end
marketing Company, Karalex Pharma, LLC, in the US delivered heartening
results.
We expanded our contractual business with Hospira to supply API for
their Add Vantage vials (patented technology) which will generate
superior returns for your Company over the medium term. We settled five
Para IV products, out of which four are FTF applications, which will
allow us to market products in the US. These represent attractive
opportunities over the coming years.
Dividend
Your Directors recommend a 30% dividend (Rs 3/- per equity share of Rs
10/- each) for the year ended 31st March 2011, subject to the approval
of shareholders at the ensuing Annual General Meeting. Under the
Income Tax Act, 1961, the receipt of dividend is tax-free in the hands
of the shareholders.
Regulatory filings and approvals
In the generic formulations domain, Orchid's cumulative ANDA filings
for the US market stood at 42. This includes 8 Para IV FTF
(FirstÃToÃFile) filings. The break-up of the total ANDA filings is 13
in Cephalosporins segment and 29 in NPNC space. Few more ANDAs which
are in the later stages of development are expected to be filed in
ensuing quarters.
In the EU region the cumulative count of Marketing Authorisations (MA)
filings stood at 17. The break-up of the total MA filings is 9 in the
Cephalosporin segment and 8 in the NPNC segment. A few more dossiers
have been lined up for filing during 2011, based on the De-centralised
Procedure (DCP) slots allotted by the respective Reference Member
States (RMS) countries in the EU. This is likely to increase the
cumulative filing count in the coming quarters.
In the API domain, Orchid increased its cumulative filings of its US
DMF count to 81. The break-up of the total filings is 27 in the
Cephalosporin segment, 41 in NPNC segment, 2 in the Betalactam segment
and 11 in the Carbapenems segment. In the European market space the
cumulative filings of COS (Certificate of Suitability) count stood at
21 which includes 14 in Cephalosporin segment, 6 in NPNC segment and 1
in the Betalactam segment.
Awards
During the year, your Company was conferred with the following awards.
Greentech Gold award 2011 in Pharmaceutical sector for outstanding
achievement in safety management given by the Ministry of Health &
Family Welfare, Government of India and Greentech Foundation for
Orchid's Alathur facility.
Good Green Governance (G3) award by the Ministry of Water Resources &
Minority Affairs, Government of India.
Outstanding Achievement in Environment Management in the Chemical
Sector was conferred by Greentech Foundation with a Silver Award 2010.
- Siemens Ecovatives - IBN Live Award 2010 conferred in recognition of
the Company's commitment to the environment.
- Bureau of Energy Efficiency (BEE) Certificate of Merit on Energy
Efficiency was received by the Company's Alathur API facility from the
Ministry of Power, Government of India, New Delhi.
- Excellent Energy Efficient Unit was conferred on the Company at the
9th Energy Efficiency Summit 2010 by the Confederation of Indian
Industries.
Southern Region excellence award from Confederation of Indian
Industries for meritorious achievement in Environment, Health & Safety
(EHS) for the year 2010.
Dr R J Rathi award for Environmental Pollution Control for the year
2010 in Industries in Maharashtra for Orchid's Aurangabad facility
given by Mahratta Chamber of Commerce, Industries & Agriculture and Dr
Ramvilas Rathi Charity Trust, Pune.
Intellectual property
During the year, Orchid continued to accelerate the IPR work on a
number of products. The total number of patent applications filed by
Orchid in various national and international patent offices so far is
820 (including Process, Formulation, NCE, NDDS, Biotech and Generics).
As of March 31, 2011, 621 patent applications have been published while
153 patents have been granted.
Foreign Currency Convertible Bonds
Your Company had issued FCCBs during November 2005, which were listed
on the Luxembourg and London Stock Exchanges and during February 2007,
which are listed on the Singapore Stock Exchange. The FCCBs due in 2010
are termed 2010 Bonds and those due in 2012 are termed 2012 Bonds.
During the year under review, your Company redeemed the outstanding
FCCBs (2010 Bonds), including yield-to-maturity, aggregating to US$
25.69 million (Rs 114.10 crore), on the due date i.e. November 03,
2010.
The status of outstanding FCCBs (2012 Bonds) is as follows:
Description 2012 Bonds
FCCB Issue value US$ 175 million
Conversion into equity so far Nil
Redemption value (%) of the book value 142.77%
FCCBs bought back 57.578 million
FCCBs outstanding 117.422 million
Your company intends to raise long-term resources aggregating to an
amount not exceeding Rs 1,000 crore through a combination of
appropriate instruments to take care of the outstanding FCCBs coming up
for redemption in February 2012. The fund raising proposal was
approved by the board at its meeting held on May 18, 2011 and a
resolution seeking the members approval by way of postal ballot is
being sent.
Employees stock option plan
The details of options granted to employees under the ORCHID - ESOP
1999, ORCHID - ESOP 2005 and ORCHID - ESOP 2010 schemes and the status
of such options as on March 31, 2011 are given in Annexure IV to this
Report.
Your Company formulated a stock option plan viz., Orchid - ESOP 2010
Scheme for grant of 10,00,000 options to the employees of the Company
including whole-time Director(s) of the Company but excluding the
Promoter Directors. The said scheme was approved by the shareholders at
the Annual General Meeting held on July 21, 2010. Your Company granted
9,01,000 options during the year and as at March 31, 2011, the
outstanding options under the said scheme is 8,98,000.
Your Company has also formulated the following schemes which have been
approved by the Board of Directors at their meeting held on May 18,
2011 and the resolutions are placed before the members for approval in
the ensuing Annual General Meeting.
Orchid-ESOP Senior Management 2011 Scheme - grant of 10,00,000 options
to the employees in the grade of Senior Manager and above, out of which
7,50,000 options will be granted to the employees of Orchid and
2,50,000 options to the employees of various Subsidiary Companies of
Orchid, either in India or abroad.
- Orchid-ESOP Directors 2011 Scheme - grant of 5,00,000 options to the
directors of the Company including whole time directors but excluding
Promoter Director.
Listing of equity shares
Your Company's equity shares are presently listed on the National Stock
Exchange of India Limited (NSE), Bombay Stock Exchange Limited (BSE)
and the Madras Stock Exchange Limited (MSE). The GDRs issued during
2005-06 are listed on the Luxembourg Stock Exchange and the London
Stock Exchange. The convertible bonds issued by the Company during
2006-07 are listed on the Singapore Exchange Limited.
Alliances / Acquisitions
Your Company acquired Karalex Pharma, LLC, a US based generic marketing
and sales services Company headquartered in New Jersey through your
Company's step down subsidiary Orchid Pharma Inc. Karalex Pharma has
been a leading provider of generic pharmaceuticals focused exclusively
on the US healthcare market. Through this acquisition, your Company has
created its presence in the front end US market and will be able to
reach its generic products to the US customers directly.
Overseas joint ventures
NCPC Orchid Pharmaceuticals Company Limited, China
Your Company's 50:50 joint venture in China, NCPC Orchid
Pharmaceuticals established for manufacture of sterile Cephalosporin
APIs continued to perform well. The joint venture is profitable with a
significant sales turnover of US$ 55.42 million during the year under
review.
Subsidiaries
Orchid Research Laboratories Limited, India (ORLL)
Your Company's Indian subsidiary, ORLL is engaged in proprietary, novel
drug discovery research in the following therapeutic areas namely,
anti-infectives, anti-inflammatory, anti-cancer, metabolic disorders
and Central Nervous System (CNS). New drug discovery and development
activities are conducted in state-of-the art laboratories spanning
expertise in analytical research, bio-informatics, medicinal chemistry,
molecular biology, pharmacology, drug metabolism and Pharmacokinetics,
intellectual property management and quality assurance.
The subsidiary company has a robust pipeline of drug development
projects to address unmet medical needs. During the year under review,
regulatory documents were filed for four clinical candidates in India
and EU for initiation of clinical trials. ORLL has also designed and
synthesised a good number of New Chemical Entities (NCEs) in various
therapeutic areas and significant molecules are under various
biological profiling to strengthen the existing pipeline.
ORLL has built a successful partnership with Merck and Co., USA for
collaborative drug discovery in the anti-infectives area. Certain NCEs
were synthesised and tested in various in vitro and in vivo biological
assays and several promising compounds have been identified. A
significant number of patents have been filed in various therapeutic
areas to provide for protection of intellectual property generated by
ORLL.
Bexel Pharmaceuticals Inc., USA (Bexel)
During the year, Bexel conducted advanced basic studies on the lead
molecule BLX-1002 internally and has filed documents seeking consent to
conduct expanded phase 2 clinical trials with the regulatory
authorities. Though, the molecule has exhibited potential for multiple
indications, the envisaged clinical trial will test efficacy for a
select indication. Further, basic mechanistic studies in animal models
conducted at a leading research institute have presented insights to
understand the mechanism of this molecule. Additional advanced studies
in animals and later in select patients is being planned to generate
scientific data backed mechanistic rationale for the molecule. The
referred studies are being planned in the subsequent quarters, while
approval to conduct clinical trial is awaited.
Orchid Pharmaceuticals, Inc., USA
Orchid Pharmaceuticals, Inc., is a wholly owned Delaware based
subsidiary of your Company and also the holding company in the United
States, under which all the operational business subsidiaries have been
structured. The Company currently has two operating subsidiaries,
Orgenus Pharma, Inc., and Orchid Pharma, Inc., (formed during the year)
both located in Princeton, New Jersey, in the US.
Orgenus Pharma, Inc., is the entity that provides all business
development and operational services for the parent Company including
the initiation of marketing alliances with partner companies, filing of
your Company's Drug Master Files (DMFs) and Abbreviated New Drug
Applications (ANDAs) as the
Importer of record for your Company with the FDA. It continues to
represent your Company for all matters relating to the review and
approval of such filings by the FDA, and handling of logistics and
product importation into the US as the Importer of Record for the US
Customs.
During the year under review, the Company formed a new subsidiary
namely Orchid Pharma, Inc., in the USA. Orchid Pharma, Inc., is the
commercial entity that started directly marketing and selling your
Company's products in the US generics market place through the
acquisition of Karalex Pharma, LLC during the fiscal year 2010-11.
Orchid Pharma, Inc., has established a strong corporate image for your
Company in the US and will be launching all future (unpartnered)
generics products under the Orchid label. Equipped with a strong and
experienced US commercial team, this Subsidiary would be a key growth
driver for your Company, starting this year.
Diakron Pharmaceuticals Inc., USA
During the year, your Company increased its stake in Diakron
Pharmaceuticals Inc. and holds 64.55% in the Company. Orchid's stake
in Diakron has been a part of the original transaction which includes
direct investment and Master Services Agreement (MSA). Your Company has
completed most of its MSA obligations to develop and supply clinical
quantities of API and extended release formulation. At present, phase 1
clinical studies in patients have commenced in Europe with the new
extended release formulation and the study is likely to be completed
during the year 2011. Subsequently, based on the phase 1 study results,
additional formulation studies will be needed and phase 2 clinical
studies in human subjects will be planned later.
Orchid Europe Limited, United Kingdom
Your Company's subsidiary in Europe namely Orchid Europe Limited (OEL)
provides liaising support to the parent Company and its customers in
Regulatory, Pharmacovigilance, Testing & Release, Retention of samples,
Service Providers and Business Development in Europe. The Company has
chalked out a business plan for capturing a significant market share
for the products. With a rich product pipeline and the expanding
product portfolio, the Company's business development is already in
discussions with major generic houses in EU for expanding the
co-operation and are simultaneously discussing with regional majors to
increase market share.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your Company's wholly owned subsidiary, Orchid Pharmaceuticals (South
Africa) Pty Ltd., was incorporated mainly to register and market your
Company's products in South Africa. The Company is in the process of
submitting dossiers for obtaining marketing approval from the
regulatory authority, MCC for various oral products and the
applications are at various stages of the registration process.
Orchid Pharma Japan K K
The subsidiary Company in Japan has continued to make noteworthy
progress during the year. At the end of the fiscal year 2010-11, there
are 9 DMFs filed with Pharmaceutical and Medical Devices Agency (PMDA)
of Japan and additional DMFs will be filed in the current financial
year to meet the market needs.
A major achievement was to commence the supplies to one of the top 5
Japanese innovator Companies for their global business partners.
Business discussions are on with various Japanese Companies for supply
of new products and the Company is expected to make good progresses on
both business and Regulatory fronts during the current year.
Central Government Approval
Your Company has been making applications for an approval under Section
212(8) of the Companies Act, 1956 from the Ministry of Corporate
Affairs, seeking exemption from attaching the Annual Report of
subsidiary Companies with the Annual Report of Orchid. The Ministry of
Corporate Affairs, Government of India vide its circular dated February
8, 2011 has provided general exemption to companies from attaching the
balance sheets of their subsidiary Companies as required under Section
212(8) of the Companies Act 1956.
The exemption is available provided the Companies publish the audited
consolidated financial statements in the Annual Report. The
consolidated financial statements duly audited are presented along with
the accounts of your Company. The statement as required under Section
212 is given as part of the consolidated accounts in this report. The
annual accounts of subsidiary Companies are kept at the Company's
registered office and also at the respective registered office of the
subsidiaries for inspection and shall be made available to the members
seeking such information.
Fixed deposit
The Company has not accepted any fixed deposits and as such, no amount
of principal or interest was outstanding as of the balance sheet date.
Directors' Responsibility Statement
In accordance with the provisions of Section 217 (2AA) of the Companies
Act, 1956, your Directors confirm:
- That in the preparation of the annual accounts for 2010-11 the
applicable accounting standards were followed along with proper
explanation relating to material departures, if any.
- That the Directors 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 (31st March 2011) and of
the profit or loss of the Company for that period (2010-11).
That the Directors took 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.
That the Directors prepared the annual accounts for 2010- 11 on a going
concern basis.
Corporate Social Responsibility
Your Company's constant focus has been on the community development as
part of its corporate social responsibility. Various activities are
continuously being carried out and focused on Community Health
Development, Children Education, Women Empowerment, Youth Development,
Community Asset Creation and a Greener Environment.
Specialised children education programs through activities like summer
camp, special english coaching, leadership and motivation programs
during the year have reached a good number of 950 children. These
programs aim to achieve the development rights of the children as
stated by United Nations.
Various health programs benefitted 9713 people which included personal
surgical support and community based education programmes on health.
The women development programs reached around 1900 women directly
through 161 women self- help groups organised at the hamlet level. The
youth development programs helped around 2700 young boys and girls to
enhance their skills to be employed elsewhere and also to take up
self-employment program. An integrated development program aimed at
better living for tribal people benefitted about 200 tribes and their
families.
Environment
Environment management has been a prime focus area of your Company.
Your Company has employed a state of the art technology, zero liquid
trade effluent treatment plant and world class treatment facilities for
its liquid and gaseous pollutants generated from the production
processes. The zero discharge of liquid trade effluent treatment plant
comprising Membrane Bio Reactor, Nano Filtration, Reverse Osmosis,
Solvent Stripping Column, Thermal Evaporation & Crystallisation plant
treat the entire trade effluent and recycles it back into the utility
process.
Your Company was the first bulk drug manufacturing Company in the
country to get ISO - 14001 certification in the year 1999 by Dutch
Council and has retained the certification continuously for its
environment management system.
The Environment programs have also been carried out in the form of
planting saplings, dissemination of bio technologies to the communities
and installation of bio gas plants for a few houses as pilot projects.
Your Company also has plans laid out for sustainable development of
communities in the form of low cost sanitation, recycling of wastes
into articles etc.
Safety Excellence Journey
The year 2010 - 2011 saw an all-round improvement in various elements
of Safety in the Company. By focusing on repeat incidents and carrying
out necessary corrective and preventive actions, your Company was able
to achieve considerable reduction in incidents. The Central Safety
Committee continued to monitor safety, health and environment
performance and provide necessary direction for improvement through
regular monthly reviews.
In recognition of the various safety initiatives, your Company was
awarded OHSAS 18001 certification in February 2011 for its API facility
at Alathur, near Chennai.
The manufacturing sites at Alathur, Aurangabad and the Research &
Development unit at Shozhanganallur received International Safety Award
- Merit from British Safety Council, UK for the year 2010.
Conservation of energy
Your Company has always been striving hard in the field of energy
conservation. Several measures to conserve energy and to reduce
associated costs were taken during the fiscal under review as well. The
particulars in respect to conservation of energy as required under
Section 217 (1) (e) of the Companies Act, 1956, are given in Annexure I
to this report.
Technology absorption
The particulars in respect of R&D/Technology absorption as required
under Section 217 (1)(e) of the Companies Act, 1956, are given in
Annexure II to this report.
Foreign exchange earnings and outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as
required under Section 217 (1)(e) of the Companies Act, 1956, are given
in Annexure III to this report.
Particulars of employees
Information as per Section 217(2A) of the Companies Act, 1956 read with
Companies (Particulars of Employees) Rules, 1975 forms part of this
Report. However, as per the provisions of Section 219(1)(b)(iv) of the
Companies Act, 1956, the Report and Accounts are being sent to all
members of the Company excluding the aforesaid information. Any member
interested in obtaining a copy of the particulars may write to the
Secretary at the registered office of the Company.
Corporate Governance
The spirit of good Corporate Governance remains integral to the
Company's corporate philosophy. The Company follows the code of
Corporate Governance issued by the stock exchanges for listed
companies. For 2010-11 all information relating to Corporate Governance
is given in Annexure V to this Report. A compliance certificate from
the statutory auditors is appended to this report. General Shareholders
Information is given in Annexure VI.
Green Initiative
To augment the green initiative of the Ministry of Corporate Affairs
and to reduce carbon foot print, your Company proposes to send various
communication including the Annual Reports in electronic form, to the
members who have opted for the same. This would help in reducing the
number of physical copies to be printed, thereby contributing to a
greener environment. The full text of the current year's (2010-11)
annual report will also be available in an easily navigable format on
our website, www.orchidpharma.com. As a member of the Company, you will
always be entitled to receive all such communication in physical form,
upon request.
Directors
Appointment of Chairman
Consequent to the resignation of Shri R Narayanan from the Board of
Orchid, the Board decided that Shri K Raghavendra Rao will be the
Chairman and Managing Director with effect from October 28, 2010. We
are pleased to inform that Shri K Raghavendra Rao was conferred the
prestigious 'Padma Shri' award for the year 2011 by the Government of
India in the Trade and Industry category. The award was presented to
Shri K Raghavendra Rao by the Honourable President of India on April 1,
2011.
Appointment of Additional Directors
Shri R Sankaran was appointed as Additional Director on the Board on
January 19, 2011. Pursuant to the appointment, Shri Sankaran holds
office up to the date of the forthcoming Annual General Meeting. A
notice has been received from a member as per Section 257 of the
Companies Act, 1956 along with the prescribed fee. Shri R Sankaran has
also filed with the Company his consent to act as Director, if
appointed, as required under Section 264(1) of the Companies Act, 1956.
A resolution seeking his appointment as Director is being placed before
the members for approval.
Shri Bharat Dhirajlal Shah was appointed as Additional Director on the
Board on January 19, 2011. Pursuant to the appointment, Shri Bharat
Shah holds office up to the date of the forthcoming Annual General
Meeting. A notice has been received from a member as per Section 257 of
the Companies Act, 1956 along with the prescribed fee. Shri Bharat Shah
has also filed with the Company his consent to act as Director, if
appointed, as required under Section 264(1) of the Companies Act, 1956.
A resolution seeking his appointment as Director is being placed before
the members for approval.
Professor Bala V Balachandran was appointed as Additional Director on
the Board on May 18, 2011. Pursuant to the appointment, Shri Bala
Balachandran holds office up to the date of the forthcoming Annual
General Meeting. A notice has been received from a member as per
Section 257 of the Companies Act, 1956 along with the prescribed fee.
Shri Bala Balachandran has also filed with the Company his consent to
act as Director, if appointed, as required under Section 264(1) of the
Companies Act, 1956. A resolution seeking his appointment as Director
is being placed before the members for approval.
Resignation of Directors
Shri R Narayanan, who has been the Chairman and Director of Orchid
since inception, resigned from the Board with effect from October 28,
2010. The Board places on record its appreciation for the outstanding
contribution made by Shri R Narayanan during his long tenure as a
Director and Chairman on the Board of Orchid.
Shri Anil Thadani, who has been a Director of Orchid, resigned from the
Board with effect from September 28, 2010. Consequent to his
resignation, Shri Raj Rajkumar, Alternate Director to Shri Anil Thadani
also ceased to be director from the said date. The Board places on
record its appreciation for the contributions made by Shri Anil Thadani
and Shri Raj Rajkumar as Directors.
Retirement of Directors by rotation
In accordance with the provisions of the Companies Act, 1956, and the
Articles of Association of the Company, Dr M R Girinath and Dr I
Seetharam Naidu retire by rotation and are eligible for re-appointment.
However, Dr M R Girinath and Dr I Seetharam Naidu have opted not to get
re-elected at the ensuing AGM. A resolution pursuant to Section 256 of
the Companies Act, 1956 for not filling the vacancy, at present, caused
by Dr M R Girinath and Dr I Seetharam Naidu's retirement has been
included in the Agenda of the Annual General Meeting (AGM).
Auditors
The existing Statutory Auditors, M/s SNB Associates, Chartered
Accountants retire at the forthcoming Annual General Meeting, and being
eligible, offer themselves for re-appointment.
Cost Audit
The Central Government has prescribed that an audit of the cost
accounts maintained by the Company in respect of bulk drugs and
formulations be conducted under Section 233B of the Companies Act,
1956. Consequently, your Company has appointed Shri V Kalyanaraman,
B.Sc, FICWA, as Cost Auditor for 2010-11 and 2011-12, with the consent
of the Central Government, for the audit of cost accounts maintained by
the Company in respect of both bulk drugs and formulations.
Acknowledgements
Your Directors are thankful to various public sector and private sector
banks and institutions for meeting the long term and working capital
needs of the Company's expanding operations and also the holders of
FCCBs and GDRs for their support.
The Directors are grateful to the Central and State Governments and the
Central DCGI and State FDAs for their continued support to the
Company's expansion plans. Your Board places on record its appreciation
of the support provided by the customers, suppliers and equipment
vendors to the Company. Your Directors are also thankful to the
vendors, distributors and agents for their continued support.
Your Directors are thankful to the esteemed shareholders for their
support and encouragement. The Directors acknowledge the commitment and
contribution of all employees to the growth of the Company.
For and on behalf of the Board
K Raghavendra Rao
Chairman & Managing Director
Place: Chennai
Date: May 18, 2011
Mar 31, 2010
The Directors have pleasure in presenting the 18th Annual Report of
your Company along with the audited statement of accounts for the
financial year ended March 31, 2010. The Report also includes the
consolidated financial statements and the ManagementÃs Discussion and
Analysis Report in accordance with the guidelines on Corporate
Governance. The highlights of the financial results for 2009-10 are
given below:
(Rs crore)
Particulars Year ended Year ended
31.03.2010 31.03.2009
Sales and operating income 1249.83 1191.44
Other income 1016.58 22.85
Total expenditure 1422.55 1033.28
Gross profit 843.87 181.00
Interest and finance charges 241.23 155.19
Gross profit after interest but before
depreciation and taxation 602.64 25.82
Depreciation 151.10 129.97
Profit / (Loss) from ordinary activities
before exceptional items 451.53 (104.15)
Exceptional item 8.52 67.30
Profit / (Loss) before tax 460.05 (36.85)
Provision for taxation
- Current and deferred tax 128.71 13.72
- Fringe benefit tax - 1.61
Profit / (Loss) after tax 331.34 (52.17)
Add: Surplus brought forward 28.32 81.57
Surplus available 359.66 29.40
Appropriations:
- Transfer to general reserve 200.00 -
- Excess provision of dividend for earlier
year written back (2.47) (9.64)
- Dividend 88.79 9.16
- Tax on distributed profits 14.75 1.56
Balance carried to balance sheet 58.59 28.32
Performance
During 2009-10, your Company achieved a turnover and operating income
of Rs 1249.83 crore compared to Rs 1191.44 crore in 2008-09. The other
income of Rs 1016.58 crore included consideration arising out of the
sale and transfer of the CompanyÃs Generic Injectable Formulations
Business. The gross earnings before interest, depreciation and taxes
stood at Rs 843.87 crore compared to Rs 181.00 crore of last fiscal.
After providing for interest expenses of Rs 241.23 crore (Rs 155.19
crore previous fiscal) and depreciation of Rs 151.10 crore (Rs 129.97
crore previous fiscal), the profit before tax of the Company was Rs
460.05 crore, compared to the previous yearÃs loss before tax of Rs
36.85 crore. The net profit after tax stood at Rs 331.34 crore,
compared to the net loss after tax of Rs 52.17 crore in the previous
fiscal. The profitability figures reflect the impact of adoption of the
modified AS 11 accounting treatment and the impact of buyback (and
cancellation) of Foreign Currency Convertible Bonds (FCCBs) of the face
value of USD 19.778 million of the 2012 Bonds and the sale transaction
effected during the last quarter.
Pharmaceuticals business
A highlight of the performance this year was the approval from the US
Food and Drug Administration (US FDA) for the CompanyÃs Abbreviated New
Drug Applications (ANDAs) for Piperacillin and Tazobactam for
Injection. The US FDA also determined that Orchid is the Ãfirst
applicantà for the products and accordingly granted 180-day generic
drug exclusivity, under applicable provisions.
Orchid launched this product in marketing and distribution partnership
with Apotex in the US and utilised significant portion
of the manufacturing capacity to cater to the US market. Also, the
market share of Piperacillin-Tazobactam injections for Europe and ANZ
regions too showed good signs of growth during the second part of the
fiscal year 2009-10.
In the NPNC (Non-Penicillin, Non-Cephalosporin) segment, the Company
geared up to meet the increase in demand by dedicating a separate
manufacturing line at the formulations facility. The Company is of the
opinion that significant improvement in the manufacturing process and a
dedicated manufacturing line supported by higher levels of API
manufacturing will lead to the desired results in the ensuing quarters.
Sale and transfer of Sterile Injectable Business
Your Company successfully completed the sale and transfer of the
CompanyÃs Generic Injectable Formulations Business, including the
facility situated at Irungattukottai near Chennai to Hospira Healthcare
India Private Limited, a subsidiary of Hospira Inc., USA (Hospira)
based on the approval from various Government agencies and the
shareholders. The business transfer proposal was built on the existing
product development and commercialisation relationship between Hospira
and Orchid, which covered several product-market segments.
In order to have financial flexibility and to support new growth
opportunities across the value chain, the business transfer was
completed by your Company. The transferred business includes the
business of development, manufacture and marketing of injectable
pharmaceutical products including the product pipeline. Your Company
will however be free to conduct the said business in India and Russia &
CIS countries.
As part of the transaction Hospira would source the APIs required for
its injectibles business from Orchid on a long term basis which
would provide revenue assurance to Orchid. Hospira would undertake
manufacture of oral cephalosporin formulations for Orchid on a contract
basis. Your Company is also expecting growth in various sectors of its
operations like core API Business, Oral Formulations Business, other
non-injectable formulations products and in the Drug Discovery space.
The transaction paved way for your Company to repay a substantial
portion of the long term debt. The Company had repaid loans totalling
to around Rs 1355 crore using the said consideration. In addition, the
Company will also have enhanced flexibility to grow the retained
businesses and pursue new growth opportunities.
Dividend
Your Directors recommend a 100% dividend (Rs 10 per equity share of Rs
10/- each) for the year ended 31st March 2010, subject to the approval
of shareholders at the ensuing Annual General Meeting. Under the Income
Tax Act, 1961, the receipt of dividend is tax-free in the hands of the
shareholders.
Regulatory filings and approvals
In the generic formulations domain, OrchidÃs cumulative ANDA filings
for the US market stood at 36. This includes 8 Para IV FTF
(FirstÃToÃFile) filings. The break-up of the total ANDA filings is: 13
in Cephalosporins segment and 23 in NPNC segment. Few more ANDAs which
are in various stages of development are expected to be filed in
ensuing quarters.
In the EU region the cumulative count of Marketing Authorisations (MA)
filings moved to 18. The break-up of the total MA filings is: 12 in the
Cephalosporins segment and 6 in the NPNC segment. Few more dossiers
have been lined up for filing during 2010, based on the DCP slots
allotted by the respective RMS (Reference Member States) countries in
the EU. This is likely to increase the cumulative filing count
significantly in the ensuing quarters.
In the API (Active Pharmaceutical Ingredients) domain, Orchid increased
its cumulative filings of its US DMF count to 80. The break-up of the
total filings is: 29 in the cephalosporin segment, 38 in NPNC segment,
2 in the betalactam segment and 11 in the carbapenems segment. In the
European market space, the
cumulative filings of COS (Certificate of Suitability) count remained
at 20 which includes 13 in cephalosporin segment, 6 in NPNC segment and
1 in the betalactam segment.
Awards
During the year, your Company was conferred with the following awards.
à Corporate Social Responsibility (CSR) award by the Government of
Tamil Nadu for the year 2008-09.
à G3 à GOOD GREEN GOVERNANCE AWARD - 2010 à OrchidÃs Alathur facility
declared as Runners Up in the Chemical Manufacturing sector. This award
is given by SRISHTI PUBLICTIONS P LTD., New Delhi.
à Greentech Safety Award 2010 (Silver Award) in pharmaceutical sector
for outstanding achievement in Safety Management given by Greentech
Foundation, New Delhi for OrchidÃs Alathur facility.
à British Safety Council International Safety Award for 2009 given by
the British Safety Council for high safety standards.
à Category III TERI Corporate Award for Environmental Excellence 2009
(Special Award) in appreciation of OrchidÃs efforts for source
reduction of pollutants by process transformation from magnesium based
dehalogenation process to catalytic dehalogenation process.
Intellectual property
During the year, Orchid continued to accelerate the IPR work on a
number of products. The total number of patent applications filed by
Orchid in various national and international patent offices so far was
699 (including Process, Formulation, NCE, NDDS, Biotech and Generics).
As of March 31, 2010, 415 patent applications have been published while
107 patents have been granted cumulatively.
Description 2010 Bonds 2012 Bonds
FCCB value US$ 42.50 Million US$ 175 Million
Conversion into equity done so far US$ 22.79 million Nil
Redemption value (%) of the book value 147.17% 142.77%
FCCBs bought back so far 2.25 million 57.578 million
Employees stock option plan
The details of options granted to employees under the ÃORCHID - ESOP
1999Ã and ÃORCHID - ESOP 2005Ã schemes and the status of such options
as on March 31, 2010 are given in Annexure to this Report.
Your Company also formulated a stock option plan viz., Orchid - ESOP
2007 for grant of 5,00,000 options to the employees of subsidiary
companies either working in India or overseas, or a Director of the
Company (excluding the Promoter Directors). The said scheme was
approved by the shareholders at the Annual General Meeting held on July
19, 2007. As of March 31, 2010, your Company did not grant any options
under this scheme.
During April 2010, your Company has formulated a stock option plan
viz., Orchid - ESOP 2010 for grant of 10,00,000 options to the
employees in the grade of General Manager and above, including
whole-time directors of the Company (excluding the Promoter Directors).
The resolution seeking the approval is placed before the shareholders.
Listing of equity shares
Your Companys equity shares are presently listed on the National Stock
Exchange of India Limited (NSE), Bombay Stock Exchange Limited (BSE)
and the Madras Stock Exchange Limited (MSE).
Alliances / Acquisitions
Your Company recently entered into an out-licensing and distribution
alliance with US-based pharma major Alvogen for
marketing 8 of your CompanyÃs oral non-antibiotic generic formulations
in the US market. Alvogen would source these products from your Company
on an exclusive basis and share profits arising from marketing of these
products in the US. Through this alliance, your Company is confident
of achieving robust additions to its business from the US
non-antibiotic generic formulations segment going forward.
Your Company proposes to acquire Karalex Pharma, LLC, a US- based
generic marketing and sales services company headquartered in New
Jersey, USA through an all-cash deal. The transaction is expected to
close by July 2010 subject to customary closing conditions. Through
this acquisition, your Company has created a front-end presence in the
US market and will be able to reach its generic products to the US
customers directly paving the way for synergistic returns from our
upcoming and long-term strategic generic pharmaceuticals pipeline
comprising key first- to-file and Paragraph-IV products.
Overseas joint ventures
NCPC Orchid Pharmaceuticals Company Limited, China Your CompanyÃs joint
venture in China, NCPC Orchid Pharmaceuticals has been engaged in the
production, marketing, research and development of cephalosporin bulk
and formulation products. The Company has maintained a considerable
share for its key injectable Cephalosporin API products in the Chinese
markets and continues to perform well. The Joint Venture has made a
significant sales turnover of US$ 47.78 million during the year under
review.
Diakron Pharmaceuticals Inc., USA With a view to enter into the drug
discovery in the anti-coagulant space Orchid decided to invest in
Diakron and presently holds about 42% stake in the Company. As part of
the transaction Orchid entered into certain Master Services Agreement
among other agreements for development of clinical quantities of API
and an extended release formulation with different doses. During the
year under review, the manufacture of non-GMP API has been completed
and the development of formulation is expected to be completed during
the third quarter of this year.
Subsidiaries
Orchid Research Laboratories Limited, India (ORLL) ORLL continued its
research in the anti-infectives, anti- inflammation, anti-cancer and
metabolic disorder areas and has achieved progress. Developmental
candidates in anti-cancer and anti-inflammation areas have reached the
stage of regulatory toxicological & safety studies. In the
anti-metabilic disorders area the Company is exploring possibilities of
repositioning of a molecule which has multiple efficacy indications.
Under the collaborative research program which relates to the
anti-infectives area certain NCEs have been designed, synthesised and
screened and the Company is confident of making good progress going
forward.
Bexel Pharmaceuticals Inc., USA (Bexel) During the year, Bexel
continued its further studies on the lead anti-diabetes molecule
BLX-1002. The results of these studies still do not justify
out-licensing as an anti-diabetic molecule. However, the molecule has
multiple efficacy indications scope for repositioning of the compound
in other indications and they are being explored. Certain important
studies in this context are being conducted by a reputed overseas
research institute in animal models and the initial results are showing
promise.
Orchid Pharmaceuticals Inc., USA Orchid Pharmaceuticals, Inc., is a
wholly owned Delaware based subsidiary of the Company and is also the
100% holding company of Orgenus Pharma, Inc. Orgenus has reported a
satisfactory year in the US market. The Company continued to support
your Company in its current business relationships and also provide the
required services with ground operations and regulatory processes. It
has also continued to explore new strategic business expansion
opportunities for the Company.
Orchid Europe Limited, United Kingdom The principle activity of your
CompanyÃs subsidiary in Europe namely Orchid Europe Limited (OEL) is to
support the generic foray into the EU market and provision of
regulatory support as well as business development support to the
parent company. The entity is already active in the field of generics
registrations and in identifying business partnerships and is well
established on the path of supporting the generics plans of Orchid in
Europe.
Orchid Pharmaceuticals (South Africa) Pty Ltd., South Africa
Your CompanyÃs wholly owned subsidiary, Orchid Pharmaceuticals (South
Africa) Pty Ltd., was incorporated to register and market bulk drugs
and formulations in South Africa. The Company is only in the process
of submitting dossiers for obtaining marketing approval from the
regulatory authority, MCC and the applications are at various stages of
the registration process.
Orchid Pharma Japan K K
The Company has made noteworthy progress during the year. Through this
subsidiary company the various capabilities which include manufacture
and supply of API, formulation and CRAMS capabilities of the parent
company Orchid Chemicals & Pharmaceuticals Limited have been presented
to various companies in Japan. A major achievement during the fiscal
year was obtaining the approval of Pharmaceutical and Medical Devices
Agency (PMDA) for OrchidÃs Alathur facility. On the regulatory front
the Company plans to file more DMFs and ANDAs during the year for oral
cephalosporin and other products. Discussions with few companies are
on and the Company expects to make good progress during this year.
Central Government Approval
Your Company had applied for an approval under Section 212(8) of the
Companies Act, 1956 from the Department of Company Affairs, Ministry of
Finance seeking exemption from attaching the Annual Report of
subsidiary companies with the Annual Report of Orchid and to provide
the accounts in the same manner as certified by overseas auditors in
the respective countries where the subsidiaries are situated. The
statement as required under Section 212 has been prepared on the
assumption that the Company would receive the approval and the same is
given as part of the consolidated accounts in the report.
The consolidated financial statements of the subsidiaries duly audited
are presented along with the accounts of your Company. The annual
accounts of subsidiary companies are kept at the CompanyÃs registered
office and also at the respective registered office of the subsidiaries
for inspection and shall be made available to the members seeking such
information.
Fixed deposit
The Company has not accepted any fixed deposits and as such, no amount
of principal or interest was outstanding as of the balance sheet date.
Directorsà Responsibility Statement
In accordance with the provisions of Section 217 (2AA) of the Companies
Act, 1956, your Directors confirm:
à That in the preparation of the annual accounts for 2009-10 the
applicable accounting standards were followed along with proper
explanation relating to material departures, if any.
à That the Directors 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 (31st March 2010) and of
the profit or loss of the Company for that period (2009-10).
à That the Directors took 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.
à That the Directors prepared the annual accounts for 2009- 10 on a
going concern basis.
Safety Excellence Journey
Orchid has always been committed to the highest standards of Safety,
Health and Environment right from its inception. Significant time,
effort and resources are being invested in maintaining a safe work
environment. Continuous emphasis is laid on Safety Observations and
incident investigations along with timely completion of corrective and
preventive actions.
In the last couple of years consistent efforts have been put in
identifying and mitigating reactive hazards by thermo-chemical studies
in the process safety lab in the R&D Centre. Hazard Identification,
Risk Assessment and Risk Reduction have been made as integral part of
Process Development and Research so that scaling up is safe.
Corporate Social Responsibility
Community development continues to be the prime focus of your CompanyÃs
CSR activities. The activities are built over five pillars i.e. Health,
Education, Youth Development, Women Empowerment and Community asset
creation.
Considerable creative talent was unearthed when a Summer Camp for over
350 rural school children was conducted with an aim to strengthen
values such as friendship and teamwork. Certain new initiatives were
taken to bring awareness on road safety in the rural areas. A road
safety awareness rally was one such initiative in which people from all
walks of life participated. Three main activities namely, Mobile
health clinic, Eye camp and Medical referral support initiatives
continued during the year, due to which more than 1200 people were
benefitted.
The women empowerment programmes aimed at improving the awareness level
of the women and to create employment opportunities for them. Your
Company supports 160 Women self help groups out of which 25 new groups
were formed during the year 2009-10.
Micro finance support were given to youth for setting up micro
enterprises to address unemployment and with a focus to develop
education and skill sets among the youth, as part of youth development
initiatives. Focus was also given to Community asset creation.
Conservation of energy
Your Company has always been striving hard in the field of energy
conservation. Several measures to conserve energy and to reduce
associated costs were taken during the fiscal under review as well.
The particulars in respect to conservation of energy as required under
Section 217 (1) (e) of the Companies Act, 1956, are given in Annexure I
to this report.
Technology absorption
The particulars in respect of R&D/Technology absorption as required
under Section 217 (1)(e) of the Companies Act, 1956, are given in
Annexure II to this report.
Foreign exchange earnings and outgo
The particulars in respect of Foreign Exchange Earnings and Outgo as
required under Section 217 (1)(e) of the Companies Act, 1956, are given
in Annexure III to this report.
Particulars of employees
Information as per Section 217(2A) of the Companies Act, 1956 read with
Companies (Particulars of Employees) Rules, 1975 forms part of this
Report. However, as per the provisions of Section 219(1)(b)(iv) of the
Companies Act, 1956, the Report and Accounts are being sent to all
members of the Company excluding the aforesaid information. Any member
interested in obtaining a copy of the particulars may write to the
Secretary at the registered office of the Company.
Corporate Governance
The spirit of good Corporate Governance remains integral to the
CompanyÃs corporate philosophy. The Company follows the code of
Corporate Governance issued by the stock exchanges for listed
companies. For 2009-10 all information relating to Corporate Governance
is given in Annexure IV to this Report. A compliance certificate from
the statutory auditors is appended to this report. General
Shareholders Information is given in Annexure VI.
Directors
Appointment of Shri S Krishnan
Shri S Krishnan has been associated with your Company for over a period
of 9 years and was heading the finance function in the last few years.
Considering his expertise in the field of finance and other related
functions, the Board felt that he may be inducted into the Board of
Orchid as an Executive Director to look after the overall day-to-day
operations of the Company and affairs concerning, amongst others,
finance, corporate communication, mergers and acquisitions
opportunities / activities of the Company. Accordingly, Shri
S.Krishnan was appointed as Executive Director- Finance with effect
from April 28, 2010 for a period of 5 (five) years. Shri S. Krishnan,
in addition to his executive responsibilities as a Board member, will
also hold the current role of the Chief Financial Officer of the
Company. A resolution seeking his appointment as Director is being
placed before the shareholders for approval.
Resignation of Dr.C Bhaktavatsala Rao Dr.C.Bhaktavatsala Rao has been
associated with Orchid since its inception as Director and was
subsequently appointed as the Deputy Managing Director of the Company
with effect from August 19, 1998. In the context of the sale and
transfer of the sterile injectables formulations business to Hospira,
Dr.C.Bhaktavatsala Rao sought separation from the services /
directorship of Orchid as well as from
the Boards of all the affiliate companies as of the closing hours of
business on March 29, 2010, to head Hospira Healthcare India Pvt. Ltd.
as its Managing Director.The Board places on record its appreciation
for the varied and substantial contributions made by Dr.C.Bhaktavatsala
Rao during his entire tenure.
Change in IDBI Nominee
IDBI Bank Limited withdrew the nomination of Shri S. Jeyakumar and
nominated Shri T A Ganesh as its nominee in his place, with effect from
May 10, 2010. The Board places on record its appreciation for the
contribution made by Shri S Jeyakumar and welcomes Shri T A Ganesh.
Retirement of Directors by rotation
In accordance with the provisions of the Companies Act, 1956, and the
Articles of Association of the Company, Shri. Deepak Vaidya and Shri.
Anil Thadani retire by rotation at the ensuing Annual General Meeting
and being eligible offer themselves for re-appointment.
Auditors
The existing Statutory Auditors, M/s SNB Associates, Chartered
Accountants retire at the forthcoming Annual General Meeting, and being
eligible, offer themselves for re-appointment.
AuditorÃs report
Note No. 30 in the notes on accounts of Schedule ÃQÃ to the Standalone
Financial Statements explains the point referred to in point 5(b) of
the AuditorÃs Report on Standalone accounts.
Cost Audit
The Central Government has prescribed that an audit of the cost
accounts maintained by the Company in respect of bulk drugs and
formulations be conducted under Section 233B of the Companies Act,
1956. Consequently, your Company has appointed Shri V Kalyanaraman,
B.Sc., FICWA, as Cost Auditor for 2010-11 and 2011-12, with the consent
of the Central Government, for the audit of cost accounts maintained by
the Company in respect of both bulk drugs and formulations.
Acknowledgements
Your Directors are thankful to Bank of India, IDBI Bank Ltd, State Bank
of India, Allahabad Bank, Bank of Baroda, Canara Bank, Central Bank of
India, ICICI Bank Limited, Indian Bank, Punjab National Bank, State
Bank of Hyderabad, Union Bank of India and other public sector and
private sector banks and institutions for meeting the long term and
working capital needs of the CompanyÃs expanding operations and also to
the holders of FCCBs and GDRs for their support.
The Directors are grateful to the Central and State Governments and the
Central DCGI and State FDAs for their continued support to the
CompanyÃs expansion plans. Your Board places on record its appreciation
of the support provided by the customers, suppliers and equipment
vendors to the Company. Your Directors are also thankful to the
vendors, distributors and agents for their continued support.
Your Directors are thankful to the esteemed shareholders for their
support and encouragement. The Directors acknowledge the commitment and
contribution of all employees to the growth of the Company.
For and on behalf of the Board
Place: Chennai R Narayanan
Date: May 27, 2010 Chairman