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Directors Report of Orchid Pharma Ltd.

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

 
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