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Directors Report of Sequent Scientific Ltd.

Mar 31, 2014

Dear Members,

We hereby present the 29th Annual Report of your Company along with the Audited Financial Statements for the financial year ended 31 March 2014.

1. FINANCIAL RESULTS

The Financial performance of the Company (Standalone) for the Financial Year ended 31 March 2014 is given below:

(Rs. In Million) Particulars 2013-14 2012-13 Total operations

Total revenue 4,450.84 3,140.50

Other Income 52.52 24.90

Profit/ (Loss) before Interest, Depreciation, Tax & Exceptional Items 125.26 (40.23)

Less : Interest 387.39 320.45 : Depreciation and amortisation expenses 271.26 267.43

Profit/ (Loss) Before Tax & Exceptional Items (533.39) (628.11)

Exceptional Items (610.77) -

Profit/(Loss) Before Tax (1,144.16) (628.11)

Provision for - Current Tax - - - Deferred [Net] Charge (Credit) - (83.10)

Profit after Tax (1,144.16) (545.01)

Add: Balance brought forward from previous Year (159.77) 385.24

Surplus/ (Deficit) carried to Balance Sheet (1,303.93) (159.77)

2. BUSINESS PERFORMANCE REVIEW

During the financial year 2013-14, on a standalone basis, your Company''s revenues stood at Rs. 4,503.36 Million as against Rs. 3,165.40 Million in 2012- 13. The Company posted an EBITDA of Rs. 125.26 Million in the year as against Rs. (40.23) Million in 2012-13. The Company made a loss of Rs. 1,144.16 Million.

On a consolidated basis, your Company''s revenue for the financial year 2013-14 stood at Rs. 4,593.06 Million as against Rs. 3,294.26 Million in 2012-13. The Company posted an EBITDA of Rs. 206.30 Million as against Rs. (106.97) Million in 2012-13. On a consolidated level, the Company made a loss of Rs. 1,104.93 Million.

While the consolidated Revenue and EBITDA grew substantially, profit after Tax was impacted by exceptional/ non-recurring items to the tune of Rs. 589.11 Million resulting in a loss of Rs. 1,104.93 Million for the year (against Rs. 646.94 Million in the previous year). The Exceptional items are predominately on account of strategic decisions to discontinue penems project and exiting Africa/ Vietnam operations.

The Company had decided to discontinue the penems project due to delays in environmental approval from Government of India and the additional investment requirements to complete the project. pursuant to this, the Company has written off the related investments and cost of Rs. 482.01 Million which is included in exceptional items for the year ended 31 March 2014 of standalone results and Rs. 539.11 Million in consolidated results.

The Company exited Africa / Vietnam operations which were started for backward integration of a key product of the Company, which is no longer viable.

A detailed analysis on the Company''s operational and financial performance for the year is covered under ''Management''s Discussion and Analysis Report'' which forms part of the Annual Report.

Business Outlook

During the year, the Company initiated a set of corporate actions with a long- term vision of becoming a power-house in global animal health business with a portfolio of niche human APIs.

ANIMAL HEALTH BUSINESS - Create a valuable, independent, integrated, global Animal Health Business

* Set up a Joint Venture with Shasun Pharmaceuticals Limited named ''Alivira Animal Health Limited'' with a vision to create a Best-In- Class, Integrated Platform from APIs to Formulations in the Hugely Attractive Global Animal Health Market.

* To create a global brand under the name ''Alivira'', the name derived out of Elvira, Latin word for ''white, pure, clean'' and Alleviare, Latin word for ''relief''.

* Launched 18 new products in formulations business and 4 new APIs.

HUMAN API BUSINESS - Accelerate growth in Human API with focus on profitability

* Investments made to enhance capacities and achieve critical mass in business with increased focus on regulated markets.

* 6 new filings and 6 new approvals in the regulated markets.

* Entered into an agreement to acquire the manufacturing assets and business of Arvee Syntthesis Private Limited, Arvee would serve as a site for key intermediates for the Company''s Human API business. The site has all necessary approvals and infrastructure with space for future expansion of Company''s rapidly expanding business.

* The Company also acquired a land admeasuring approx. 3 acres, adjacent to its existing FDA approved facility in Mangalore.

* The facility at Mysore and land at Mangalore to be used for meeting the growing demand for the Company''s key products in the USFDA and WHO regulated markets.

3. DIVIDEND

The Board of Directors of the Company has not recommended any Dividend for the financial year ended 31 March 2014.

4. SHARE CAPITAL

As on date, the authorised capital of the Company is Rs. 500,000,000/- divided into 50,000,000 equity shares of Rs. 10/- each.

The issued, subscribed and paid up equity capital of the Company as on date is Rs. 273,351,910/- divided into 27,335,191 equity shares of Rs. 10/- each.

During the period, the Company allotted 2,750,000 equity shares of Rs. 10/- each at a premium of Rs. 162/- per equity share and 550,000 equity shares of Rs. 10/- each at a premium of Rs. 125.25 per equity share upon conversion of equal number of warrants which were allotted to Promoter Group Companies on preferential basis.

Pursuant to this, the issued, subscribed and paid up equity capital of the Company increased from Rs. 240,351,910/- to Rs. 273,351,910/- during the year.

Issue of Warrants on preferential basis

On 28 January 2014, the Company allotted 3,700,000 warrants convertible into equivalent number of equity shares at a price of Rs. 135.25 per warrant (including a premium of Rs. 125.25 per warrant) to promoter group entities. Out of which 550,000 warrants were converted into equal number of equity shares of Rs. 10 each at a premium of Rs. 125.25 per equity share. Company also issued 2,000,000 warrants at a price of Rs. 222.15 per warrant (including a premium of Rs. 212.15 per warrant) and 3,000,000 warrants at a price of Rs. 236/- per warrant (including a premium of Rs. 226/- per warrant) on 28 May 2014 and 11 July 2014 respectively to promoter group entities.

As on date, 8,150,000 warrants are outstanding.

5. SUBSIDIARIES

As at 31 March 2014, the Company had 10 subsidiaries, out of which 8 companies are wholly owned Subsidiaries.

On 30 September 2013, M/s. Alivira Animal Health Limited ("Alivira") was incorporated as a wholly owned Subsidiary of the Company to develop, manufacture and sell veterinary products inclusive of both Active Pharmaceutical Ingredients (APIs) and formulations in the global market.

The Company has entered into a Joint Venture Agreement with Shasun Pharmaceuticals Limited ("Shasun") on 07 March 2014. Subsequently, on 11 April 2014 Alivira became a Joint venture of the Company and Shasun.

6. CONSOLIDATED ACCOUNTS

In accordance with Accounting Standard 21 on Consolidated financial statements, the audited consolidated financial statements are provided in this Annual report.

In terms of the General Circular 2 of 2011 dated 8 February 2011 issued by the Ministry of Corporate affairs, the audited Financial Statements of the Company''s subsidiaries have not been attached to this Report. The Financial Statements of the said subsidiaries will be kept for inspection by any investor at the registered office of the Company during business hours.

7. STRATEGIC/ OPERATIONAL INITIATIVES

a. Joint Venture with shasun Pharmaceuticals Limited

The Company has set up a Joint Venture with Shasun Pharmaceuticals Limited named ''Alivira Animal Health Limited'' with a vision to create a Best-In- Class, Integrated Platform from APIs to Formulations in the Hugely Attractive Global Animal Health Market.

b. Hiving off of Specialty Chemicals Division

In order to focus the Company''s efforts and resources towards expansion of the Active Pharmaceuticals Ingredients and Veterinary Formulations Business, the Company decided to hive off the specialty chemicals division of the Company and the Company has obtained members'' approval through postal ballot. On 15 April 2014, the Company entered into an agreement with Songwon Industrial Group,

Korea to sell the Company''s specialty chemicals division. On 01 August 2014 the Company completed the sale of this division for a total cash consideration of Rs. 1,200 Million.

c. Acquisition of Business of Arvee Syntthesis Private Limited

The Company has entered into a definitive agreement to acquire the manufacturing assets and business of Arvee Syntthesis private Limited, Mysore (''''Arvee'''') on 22 May 2014 and completed the acquisition on 9 June 2014. The Company will be using the facility of Arvee for key intermediates for the Company''s Human API business. This will help for future expansion of Company''s rapidly expanding business.

d. hiving off of veterinary Formulations Division

The Company has obtained the approval of members of the Company to hive off the Veterinary Formulations Division including the manufacturing facility located at Additional Ambernath to Alivira Animal Health Limited ("Alivira"), a Joint Venture Company between the Company and Shasun pharmaceuticals Limited. This will help the Company to focus independently on high growth potential animal health market and to become a significant player in the market.

8. PUBLIC DEPOSIT

The Company has not accepted or renewed any public deposits under section 58A of the Companies Act, 1956.

9. DIRECTORS

Dr. Gautam Kumar Das, Joint Managing Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. A brief profile of Dr. Gautam Kumar Das is given in the corporate governance report which forms part of this report.

Mr. K R Ravishankar, Chairman of the Company who is liable to retire by rotation at the ensuing Annual General Meeting and is not seeking re-appointment.

The Company had, pursuant to the provisions of clause 49 of the Listing Agreement as entered with the Stock Exchange, appointed Dr. Gopakumar G Nair as an Independent Director on the Board of the Company.

As per the provisions of Section 149 (4) of the Companies Act, 2013 (the Act), which came in to effect from 1 April 2014, every listed public company is required to have at least one-third of the total number of directors as independent directors, who are not liable to retire by rotation.

As per Section 149 (4) of the Act read with amended Clause 49 of the Listing Agreement, the Company proposes to appoint Dr. Gopakumar G Nair as an Independent Director to hold the office for a term upto 5 consecutive years from the date of his appointment i.e.,ensuing Annual General Meeting.

Board is of the opinion that Dr. Nair fulfills the criteria of independence as provided under section 149(6) of the Act and the Rules framed thereunder and is independent of the management. The Company has received a declaration from him that he meets the criteria of independence as prescribed under sub-section (6) of Section 149 of the Act.

A proposal will be placed before the members at the ensuing Annual General Meeting for their appointment/re-appointment.

10. DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956 as amended by the Companies (Amendment) Act, 2000, the director confirms that:

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

2. Appropriate Accounting Policies have been selected and applied consistently and have made adjustments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on 31 March 2014 and of the loss of the Company for the year ended 31 March 2014.

3. Proper and sufficient care has been taken 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.

4. The Annual Accounts have been prepared on a going concern basis.

11. AUDITORS

The Statutory Auditors viz., M/s. Deloitte Haskins & Sells, Chartered Accountants, Bangalore (Registration No. 008072S) ("DHS") retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Pursuant to provisions of section 139 of the Companies Act, 2013 and the rules framed thereunder, the company proposes to re-appoint DHS from the conclusion of ensuing Annual General Meeting of the Company for a term of 5 years which is subject to ratification by members at every Annual General Meeting of the Company. Your directors recommend their re-appointment.

Pursuant to Companies (cost records and audit) Rules, 2014, Mr. Girish Kambadaraya, Cost Accountant, has been appointed as the Cost Auditor for the financial year 2014-15. The due date for filing the Cost Audit Reports in XBRL mode for the financial year ended 31 March 2013 was 30 September 2013 and the Cost Audit reports were filed by the Cost Auditor on 25 September 2013. The due date for filing the Cost Audit Reports for the financial year ended 31 March 2014 is 30 September 2014.

12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS / OUTGO

The particulars as prescribed under Section 217 (1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure to the Directors'' Report.

13. CORPORATE GOVERNANCE

The Company has complied with all mandatory requirements of Corporate Governance specified by the Securities and Exchange Board of India through Clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Statutory Auditors of the Company regarding compliance with Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement entered with Stock Exchange also forms part of the Annual Report.

Board also confirms that the Company has devised proper systems to ensure compliance of all laws applicable to the Company.

14. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to Clause 49 of the Listing Agreement entered into with the Stock Exchanges, Management Discussion and Analysis Report forms part of this Report.

15. RESEARCH AND DEVELOPMENT

Detailed write-up on Research and Development activity forms part of the annexure to the Directors'' Report.

16. EMPLOYEE STOCK OPTION SCHEME

The Company has formulated an Employee Stock Option plan titled ''SSL ESOP Scheme 2010'' and the scheme is administered through a trust. As on date 700,000 shares have been issued to the trust. During the year the Compensation Committee has granted 640,000 options to identified employees, out of which 70,000 options were lapsed due to resignation of employees. As at 31 March 2014, 570,000 Stock options are outstanding.

Further, Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock purchase Scheme) Guidelines, 1999 is annexed to this report.

17. PARTICULARS OF EMPLOYEES U/S 217 OF THE COMPANIES ACT, 1956

Any shareholder interested in obtaining a copy of the statement of particulars of employees referred to in section 217 (2A) of the Companies Act, 1956, may write to the Company Secretary at the Registered Office of the Company.

18. APPRECIATION

Your Directors would like to express their grateful appreciation for the excellent support and co-operation received from the Shareholders, Customers, Financial Institutions, Banks, Government Authorities, Reserve Bank of India, Securities and Exchange Board of India, Stock Exchanges, Manufacturers and Suppliers to the Company.

At this point, we would like to place on record our sincere appreciation for the total commitment, dedication, untiring efforts and hard work put in by the employee members at all levels of the Company in realisation of the corporate goals in the years ahead.

ANNEXURE TO DIRECTORS'' REPORT

RESEARCH AND DEVELOPMENT:

Core areas of R&D:

Process chemistry aspects of Active Pharmaceuticals Ingredients (APIs) and intermediates which includes:

a. Development of new products for different regulatory filings.

b. Development of non-infringing processes through innovative synthetic routes.

c. Development of green technology to minimise hazardous operations and reagents.

d. Improvement of product life cycle management through alternate approaches.

e. Identification and implementation of cost reduction measures in the commercial scales.

Benefits derived as a result of R&D:

a. Cutting edge technology for niche products.

b. Speedy commercialisation of new products.

c. Tapping potential market through new filing of Drug Master Files (DMFs) using non-infringing processes.

d. Creation of Intellectual Property wealth.

Future plan of Action:

a. In the animal health segment, the company will continue to focus on therapeutic segments of anthelmintic and anti parasiticide.

b. Continued focus on improving quality, cost and operation through process modification as per regulatory norms.

For and on behalf of the Board of Directors

Dr. Gautam Kumar Das Dr. Gopakumar G Nair Joint Managing Director Director

Place : Bangalore Date : 13 August 2014


Mar 31, 2013

Dear Members,

The take pleasure in presenting the 28th Annual Report of your Company along with the Audited Financial Statements for the financial year ended March 31, 2013.

1. FINANCIAL RESULTS

The Financial Performance of the Company (Standalone) for the Financial Year ended March 31, 2013 is given below:

(Rs.In Million) Particulars 2012-13 2011-12

Total revenues 3,140.50 3,324.30

Other Income 24.90 113.27

Earnings before Interest, Depreciation & Tax (40.23) 467.97

Less : Interest (320.45) 282.65

Depreciation and amortisation expenses (267.43) 210.28

Profit/(Loss) Before Tax & Exceptional Items (628.11) (24.96)

Profit/(Loss) Before Tax (628.11) (24.96)

Provision for - Current Tax 0.86

- Deferred Tax [Net] (83.10) (40.50)

Profit after Tax (545.01) 14.68

Add: - Balance brought forward from Previous Year 385.24 370.56

Profit/(Loss) available for appropriation (159.77) 385.24

Surplus/(Deficit) carried to Balance Sheet (159.77) 385.24

2. BUSINESS PERFORMANCE REVIEW

During the financial year 2012-13, on a standalone basis, your Company''s revenues stood at Rs. 3,165.40 Million as against Rs. 3,437.57 in 2011-12. The Company posted an EBITDA of Rs. (40.23) Million in the year as against Rs. 467.97 Million in 2011-2012. The Company registered a net loss of Rs. 545.01 Million.

On a consolidated basis, your Company''s revenues for the year 2012-13 stood at Rs. 3,294.26 Million as against Rs. 3,562.93 Million in 2011-12. The Company posted an EBITDA of Rs. (106.97) Million as against Rs. 475.58 Million in 2011-2012. The Company made a loss of Rs.646.94 Million.

A detailed analysis on the Company''s operational and financial performance for the year is covered under ‘Management''s Discussion and Analysis Report'' which forms part of the Annual Report.

3. DIVIDEND

The Board of Directors of the Company has not recommended any Dividend for the financial year ended March 31, 2013.

4. SHARE CAPITAL

As at March 31, 2013, the authorized capital of the Company stood at Rs.320,000,000.00 divided in to 32,000,000 equity shares of Rs. 10/- each.

The issued, subscribed and paid up equity capital of the Company as at March 31, 2013 is Rs. 240,351,910.00 divided into 24,035,191 equity shares of Rs. 10/- each.

During the year, the Company has allotted 2,100,000 equity shares of Rs. 10 each at a premium of Rs. 110.75 per equity share upon conversion of equal number of warrants which were allotted to Promoter Group entilies on preferential basis.

Pursuant to this, the issued, subscribed and paid up equity capital of the Company increased from Rs. 219. 35 Million to Rs. 240.35 Mio

Issue of Warrants on preferential basis

On September 28, 2012, the Company issued 2,100,000 warrants convertible into equivalent number of equity shares at a price of Rs. 120.75 per warrant (including a premium of Rs. 110.75 per warrant) to promoter group entities. These warrants have already been converted into equity shares in 3 tranches during the year.

On March 30, 2013, the Company issued 2,750,000 warrants convertible into equivalent number of equity shares at a price of Rs. 172.00 per warrant (including a premium of Rs. 162.00 per warrant) to promoter group entities. As at March 31, 2013 these warrants are outstanding.

5. SUBSIDIARIES

During the year ended March 31, 2013 Elysian Life Sciences Private Limited became wholly owned subsidiary of the Company and Elysian Healthcare Private Limited, a step-down subsidiary of the Company, ceased to be a subsidiary of the Company.

6. CONSOLIDATED ACCOUNTS

In accordance with Accounting Standard 21 on consolidated financial statements read with Accounting Standard 27 on Accounting for Joint Ventures, the audited consolidated financial statements are provided in this Annual report.

In terms of the General Circular 2 of 2011 dated February 8, 2011 issued by the Ministry of Corporate affairs, the audited Financial Statements of the Company''s subsidiaries have not been attached to this Report. The Financial Statements of the said subsidiaries will be kept for inspection by any investor at the registered office of the Company during business hours.

7. PUBLIC DEPOSIT

The Company has not accepted or renewed any public deposits under section 58A of the Companies Act, 1956.

8. DIRECTORS

Dr. Gopakumar G Nair retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

A brief profile of Dr. Gopakumar G Nair is given in the corporate governance report which forms part of this report.

Dr. Gautam Kumar Das was re-appointed as an Executive Director w.e.f. January 7, 2013 for a further period of 3 years. Further on May 30, 2013, Dr. Das was re-designated as Joint Managing Director.

9. DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the act, as amended by the companies (amendment) Act, 2000, the director confirms that:

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

2. Appropriate Accounting Policies have been selected and applied consistently and have made adjustments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on March 31, 2013 and of the loss of the Company for the year ended March 31, 2013.

3. Proper and sufficient care has been taken 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.

4. The Annual Accounts have been prepared on a going concern basis.

10. AUDITORS

The Statutory Auditors viz., M/s. Deloitte Haskins & Sells, Chartered Accountants, Bangalore (Registration No. 008072S) retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Your directors recommend their re- appointment.

Pursuant to the directives of the Central Government under the provisions of Section 233B of the Companies Act, 1956, in respect of the audit of Cost Records of the Company, Girish Kambadaraya, Cost Accountant, has been appointed as the Cost Auditor for the financial year 2013-14. The due date for filing the Cost Audit Reports in XBRL mode for the financial year ended March 31, 2012 was February 28, 2013 and the Cost Audit Reports were filed by the Cost Auditor on January, 31, 2013. The due date for filing the Cost Audit Reports for the financial year ended March 31, 2013 is September 30, 2013.

11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING / OUTGO

The particulars as prescribed under Section 217 (1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given as Annexure to the Directors'' Report.

12. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities and Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of this report. A certificate from the Statutory Auditors of the Company regarding compliance with Corporate Governance requirements as stipulated in Clause 49 of the Listing Agreement entered with Stock Exchange also forms part of the Annual Report.

Board also confirms that the Company has devised proper systems to ensure compliance of all laws applicable to the Company.

13. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, Management Discussion and Analysis Report forms part of this Report.

14. RESEARCH AND DEVELOPMENT

Detailed write-up on Research and Development activity is given as an annexure to the Directors'' Report.

15. EMPLOYEE STOCK OPTION SCHEME

The Company has formulated an Employee Stock Option Plan titled ‘SSL ESOP Scheme 2010'' and the scheme is administered through a trust. As on date 700,000 shares have been issued to the trust. However no ESOPs are outstanding as on March 31, 2013.

Further, Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed to this report.

16. PARTICULARS OF EMPLOYEES U/S 217 OF THE COMPANIES ACT, 1956

Any shareholder interested in obtaining a copy of the statement of particulars of employees referred to in section 217 (2A) of the Companies Act, 1956, may write to the Company Secretary at the Registered Office of the Company.

17. APPRECIATION

Your Directors would like to express their grateful appreciation for the excellent support and cooperation received from the Shareholders, Customers, Financial Institutions, Banks, Government Authorities, Reserve Bank of India, Securities and Exchange Board of India, Stock Exchanges, Manufacturers and Suppliers to the Company.

At this point, we would like to place on record our sincere appreciation for the total commitment, dedication, untiring efforts and hard work put in by the employee members at all levels of the Company in realisation of the corporate goals in the years ahead.

For and on behalf of the Board of Directors

Dr. Gautam Kumar Das Dr. Gopakumar Nair

Joint Managing Director Director

Place: Bangalore

Date: August 14, 2013


Mar 31, 2012

The take pleasure in presenting the 27th Annual Report together with the Audited Statement of Accounts of the Company for the financial year ended March 31, 2012.

1. FINANCIAL RESULTS

The Highlights of the Performance of the Company during the Financial Year ended March 31, 2012 are appended below:-

(Rs. In Mn)

Particulars 2011-2012 2010-11

Revenue from operations 3,324.30 2,779.80

Other Income 113.27 114.10

Earnings before Interest, Depreciation & Tax 467.97 583.78

Less : Finance Costs (282.65) (200.35)

: Depreciation (210.28) (171.81)

Profit/(Loss) Before Tax & Exceptional Items (24.96) 211.62

Exceptional Items - (10.53)

Profit/(Loss) Before Tax (24.96) 222.15

Tax Expenses - Current Tax 0.86 36.50

- Deferred Tax (40.50) 42.59

- MAT Credit - (16.26)

Profit after Tax 14.68 159.32

Add: Balance brought forward from Previous Year 370.56 296.42

Included on Amalgamation - (38.85)

Profit available for appropriation 385.24 416.89 Which we recommend to appropriate as follows:

Transfer to General Reserve - 7.97

Proposed Dividend - 32.90

Tax on Dividend - 5.46

Surplus carried to Balance Sheet 385.24 370.56

Note:

Previous year figures have been regrouped/restated wherever necessary to make them comparable with those of the current year.

2. BUSINESS PERFORMANCE REVIEW

On standalone basis, the company posted 18.8 per cent growth in the total revenues, from Rs.2,893.90 mn in 2010-11 to Rs.3,437.57 mn in 2011-12. The company posted an EBIDTA of Rs.467.97 mn as against Rs.583.78 mn in 2010-11. On a standalone level, the Company registered a net profit of Rs.14.68 mn.

On consolidated basis, the company posted 11.8 per cent growth in the total revenues, from Rs.3,185.81 mn in 2010-11 to Rs.3,562.93 mn in 2011-12. The company posted an EBIDTA of Rs.475.58 mn as against Rs.521.86 mn in 2010-11. On a consolidated level, the Company made a loss of Rs.14.59 mn.

Detailed analysis of the operational and financial performance for the year is covered under the 'Management Discussion & Analysis' as well as other sections in this Annual Report.

3. DIVIDEND

The Board of Directors of the Company has not recommended any Dividend for the financial year.

4. SHARE CAPITAL

As at March 31, 2012, the authorized capital of the Company stood at Rs.320 mn divided into 32,000,000 equity shares of Rs. 10/- each.

There was no change in the Issued, subscribed and paid up equity capital which stood at Rs. 219.35 mn.

5. MERGER OF FRAXIS LIFE SCIENCES LIMITED WITH THE COMPANY

Fraxis Life Sciences Limited, a promoter group Company merged with the Company conSequent to the scheme of amalgamation ('Scheme') approved by the Hon'ble High Court of Bombay vide its order dated August 20, 2011. Pursuant to the Scheme, the Company on November 21, 2011 allotted 14,865,000 fully paid up New Equity Shares of Rs. 10/- to the shareholders of Fraxis Life Sciences Limited. There would be no change in the paid up capital of the Company as in terms of the scheme, the said shares were issued against the cancellation of equivalent number of shares held by Fraxis Life Sciences Limited in the Company.

6. CONSOLIDATED ACCOUNTS

In accordance with Accounting Standard 21 on

Consolidated Financial Statements, the audited Consolidated financial statements are provided in this Annual report.

In terms of the General Circular 2 of 2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, the audited Financial Statements of the Company's subsidiaries have not been attached to this Report. The Financial Statements of the subsidiaries shall be made available to the shareholders of the Company / its subsidiaries seeking such information at any point of time and such Financial Statements will also be kept for inspection by any shareholder during business hours at the registered office and the corporate office of your Company.

7. PUBLIC DEPOSIT

The Company has not accepted or renewed any public deposits under section 58A of the Companies Act, 1956.

8. DIRECTOR

Mr. Kannan Ramanujam retires by rotation at the ensuing Annual General Meeting and is proposed for re-appointment. The Board recommends his re-appointment at the ensuing Annual General Meeting.

Further during the financial year Mr. K R N Moorthy, Dy. Managing Director and Mr. Joe Thomas Director of the Company, has resigned from the directorship of the company.

9. DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the act, as amended by the Companies (Amendment) Act, 2000, the director confirms that:

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

2. Appropriate Accounting Policies have been selected and applied consistently and have made adjustments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on March 31, 2012 and profit of the Company for the year ended March 31, 2012.

3. Proper and sufficient care has been taken 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.

4. The Annual Accounts have been prepared on a going concern basis.

10. AUDITORS

M/s Deloitte Haskins & Sells retire as Statutory Auditors of the Company at the ensuing Annual General Meeting and are eligible for re- appointment.

11. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING / OUTGO

The particulars as prescribed under Section 217 (1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure to the Directors' Report.

12. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities and Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

13. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchange, Management Discussion and Analysis Report forms part of this Report.

14. RESEARCH AND DEVELOPMENT

Detailed write-up on Research and Development activity forms part of the annexure to the Directors' Report.

15. EMPLOYEE STOCK OPTION SCHEME

The Company has formulated a Employee Stock Option Plan titled 'SSL ESOP Scheme 2010 'and the scheme is administered through a trust. As on date, 700,000 shares have been issued to the trust. Details of the ESOPs issued are provided in the corporate governance report.

Further, Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Guidelines, 1999 is annexed to this Directors' Report.

16. PARTICULARS FOR EMPLOYEES U/S 217 OF THE COMPANIES ACT, 1956

Any shareholder interested in obtaining a copy of the statement of particulars of employees referred to in section 217 (2A) of the Companies Act, 1956, may write to the Company Secretary at the Registered Office of the Company.

17. APPRECIATION

Your Directors would like to express their grateful appreciation for the excellent support and co- operation received from the Financial Institutions, Banks, Government Authorities, Reserve Bank of India, Securities and Exchange Board of India, Stock Exchanges, Customers, Manufacturers, Suppliers, Directors and Shareholders during the year under review.

At this point, we would like to place on record our sincere appreciation for the total commitment, dedication, untiring efforts and hard work put in by the employee members at all levels of the Company in realisation of the corporate goals in the years ahead.

For and on behalf of the Board of Directors

KR Ravishankar

Chairman & Managing Director

Place: Bengaluru Date : August 14, 2012


Mar 31, 2011

Dear Members,

We take pleasure in presenting the 26th Annual Report together with the Audited Statement of Accounts of the Company for the financial year ended March 31, 2011.

1. FINANCIAL RESULTS

The Highlights of the Performance of the Company during the Financial Year ended March 31, 2011 are appended below:-

(Rs. In Million)

Particulars 2010-11 2009-10

Total revenues 2,778 2,463

Other Income 116 73

Earnings before Interest, Depreciation & Tax 596 673

Less : Interest (213) (187)

: Depreciation (172) (125)

Profit Before Tax & Exceptional Items 211 361

Exceptional Items 11 (58)

Profit Before Tax 222 303

Provision for - Current Tax (37) (65)

- Deferred Tax (42) (87)

- MAT Credit Entitlement 16 57

Profit after Tax 159 208

Add: - Balance brought forward from Previous Year 296 129

Included on Amalgamation (38) 25

Profit available for appropriation 417 362 Which we recommend to appropriate as follows:

Transfer to General Reserve 8 16

Proposed Dividend 33 43

Tax on Dividend 5 -

Surplus carried to Balance Sheet 371 296

2. BUSINESS PERFORMANCE REVIEW

On standalone basis, the company posted a 12.8% growth in the total revenues, from Rs.2,463.35 Million in 2009-10 to Rs.2,777.56 Million in 2010-11. The company posted an EBIDTA of Rs.596 Million as against Rs.673 Million in 2009-10. On a standalone level, the Company made a PAT of Rs.159.33 Million.

On consolidated basis, the company posted a 9.6% growth in the total revenues, from Rs.2,844.48 Million in 2009-10 to Rs.3,116.65 Million in 2010-11. The company posted an EBIDTA of Rs.522 Million as against Rs.849 Million in 2009-10. On a consolidated level, the Company made a loss of 40.24 Million.

The company caters to two major segments - Pharmaceuticals Division (consisting of API, CRAMS and Veterinary Formulations businesses) accounted for 85.6 per cent of the company's revenues while the Specialty chemicals divisions accounted for 14.4 per cent.

During the year, the Company forayed in to four new therapeutic segments - Penems, Penicillin, Oncology and Phy to-Pharmaceutical/Herbal Extracts. The company signed a Memorandum of Understanding with Government of Karnataka to set up three new Greenfield facilities in Bangalore, for which it will invest Rs.1500 Million.

Detailed analysis of the operational and financial performance for the year is covered under the Management Discussion & Analysis' section.

3. DIVIDEND

The Board of Directors of the Company has recommended a final dividend of Rs.1.50 (15 per cent) per equity share for the year 2010-11. This, if approved by the shareholders, would result in a cash outflow of Rs.32.90 Million.

4. SHARE CAPITAL

Pursuant to the approval of the Scheme of Amalgamation for merger of Vedic Elements Private Limited, which was a wholly owned subsidiary of the Company with the Company, the Authorised Share Capital of the Company enhanced by Rs.70 Million during the year. As at March 31, 2011, the authorized capital of the Company stood at Rs.320 Million as against Rs.250 Million as at March 31, 2010.

There was no change in the Issued, subscribed and paid up equity capital which stood at Rs.219.35 Million.

5. SUBSIDIARIES

The Company has a total of 11 subsidiaries as at March 31, 2011. They are:

1. SeQuent Global Holdings Limited, Mauritius

2. SeQuent European Holdings Limited, Cyprus

3. SeQuent Research Limited

4. Sanved Research Labs Private Limited

5. Vedic Fanxipang Pharma Chemic Company Limited, Vietnam

6. Galenica B.V., Netherlands

7. Codifar N.V., Belgium

8. SeQuent Anti Biotics Private Limited

9. SeQuent Oncolytics Private Limited

10. Elysian Life Sciences Private Limited

11. Elysian Health Care Private Limited

6. MERGER OF FRAXIS LIFE SCIENCES LIMITED WITH THE COMPANY

The Company is in the process of merging Fraxis Life Sciences Limited, a promoter group Company with that of the Company. The merger was approved by the shareholders at their meeting held on March 15, 2011 and final order from the Hon'ble High Court of Judicature at Bombay is awaited.

On approval, Company will allot 14,865,000 equity shares to the shareholders of Fraxis Life Sciences Limited and the shares held by Fraxis Life Sciences Limited in the Company will stand cancelled.

7. CONSOLIDATED ACCOUNTS

In accordance with Accounting Standard 21 on consolidated financial statements, the audited consolidated financial statements are provided in this Annual report.

In terms of the Central Government approval under Section 212(8) of the Companies Act, 1956, the audited Financial Statements of the Company's subsidiaries have not been attached to this Report. The Financial Statements of the said subsidiaries will be kept for inspection during business hours by any investor at the registered office and at the corporate office of your Company. The Company will also make available the audited annual accounts and related information of the subsidiary companies, upon request by any investor of the Company.

8. PUBLIC DEPOSIT

The Company has not accepted or renewed any public deposits under section 58A of the Companies Act, 1956.

9. DIRECTOR

Dr. Gopakumar Gopalan Nair & Dr. Gautam Kumar Das retire by rotation at the ensuing Annual General Meeting and are proposed for re-appointment. The Board recommends their re-appointment at the ensuing Annual General Meeting.

Mr. Moorthy was appointed as a Deputy Managing Director w.e.f 8th day of September, 2010.

10. DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the act, as amended by the companies (amendment) Act, 2000, the Directors confirms that:

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

However, the deviation on the accounting standard has been with reference to the scheme of amalgamation sanctioned by the Hon'ble High Court of Karnataka for amalgamation of the company's wholly owned subsidiary, Vedic Elements Private Limited (the Transferor Company) with SeQuent Scientific Limited (the Transferee Company). Refer notes to account for details on the same.

2. Appropriate Accounting Policies have been applied consistently and have made adjustments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as on 31st March 2011 and profit of the Company for the year ended 31st March 2011.

3. Proper and sufficient care has been taken 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.

4. The Annual Accounts have been prepared on a going concern basis.

11. AUDITORS

M/s Deloitte Haskins & Sells retire as Statutory Auditors of the Company at the ensuing Annual General Meeting and are eligible for re-appointment.

12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING / OUTGO

The particulars as prescribed under Section 217 (1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in the Annexure to the Directors' Report.

13. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities and Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

14. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, Management Discussion and Analysis Report forms part of this Report.

15. RESEARCH AND DEVELOPMENT

A write-up on Research and Development activity forms part of the annexure to the Directors' Report.

16. EMPLOYEE STOCK OPTION SCHEME

The Company has formulated a Employee Stock Option Plan titled 'SSL ESOP Scheme 2010' and the scheme is administered through a trust. As on date, 700,000 shares have been issued to the trust and 1,00,000 options has been granted to the Deputy Managing Director. The Company is in the process of expanding the coverage to other employees. Details of the ESOPs issued are provided in the corporate governance report.

Further, Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Guidelines, 1999) is annexed to this Directors' Report.

17. PARTICULARS OF EMPLOYEES U/S 217 OF THE COMPANIES ACT OF, 1956

Any shareholder interested in obtaining a copy of the statement of particulars of employees referred to in section 217 (2A) of the Companies Act, 1956, may write to the Company Secretary at the Registered Office of the Company.

18. APPRECIATION

Your Directors would like to express their grateful appreciation for the excellent support and co- operation received from the Financial Institutions, Banks, Government Authorities, Reserve Bank of India, Securities and Exchange Board of India, Stock Exchanges, Customers, Manufacturers, Suppliers, Directors and Shareholders during the year under review.

At this point, we would like to place on record our sincere appreciation for the total commitment, dedication, untiring efforts and hard work put in by the employees at all levels of the Company in realisation of the corporate goals in the years ahead.

For and on behalf of the Board of Directors

K R Ravishankar

Chairman & Managing Director Place: Bangalore

Date: August 12, 2011

 
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