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Shasun Pharmaceuticals Ltd. Notes to Accounts, Shasun Pharmaceuticals Ltd. Company
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Notes to Accounts of Shasun Pharmaceuticals Ltd.

Mar 31, 2013

1. Company overview

Shasun Pharmaceuticals Limited (''SPL'' / ''the Company'') was incorporated in 1976 having its registered office in Chennai, India. The Company is primarily engaged in manufacturing of Active Pharmaceutical Ingredients (APIs), their intermediates and finished dosage. The Company is also into product development and provides contract research and manufacturing services.

2 Operating Leases

The Company had entered into an operating lease arrangement in respect of office space during the previous year with a lease term of 3 years, which are subject to renewal at mutual consent thereafter. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expense recognized during the year amounts to Rs. 8.37 (Previous year: Rs. 7.59). The schedule for future minimum lease payments in respect of non-cancellable operating leases is set out below:

3 Earnings per share

Earnings per share are calculated by dividing the Profit / (loss) attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year.

4 Related party disclosures

Details of related parties including summary of transactions entered into by the Company during the year ended March 31, 2013 are summarized below:

Name of related parties and description of relationship:

Wholly owned subsidiaries:

Shasun USA Inc., USA

Shasun Life Sciences Private Limited, India

SVADS Holding SA, Switzerland

Wholly owned step down subsidiaries:

Shasun Pharma Solutions Limited, UK (100% subsidiary of SVADS Holding SA)

Shasun Pharma Solutions Inc., USA (100% subsidiary of SVADS Holding SA)

Joint venture:

Shasun NBI LLC, USA

Shasun NBI Nanotech India Private Limited (subsidiary of Shasun NBI LLC, USA)

Entities where Directors have control or significant influence:

Shasun Finance Limited Shasun Leasing and Finance Private Limited Devendra Estate Private Limited Shasun Foundation Trust

5 Segment reporting

In accordance with AS-17 ''Segment Reporting”, segment information has been given in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

6 Micro, small and medium enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. The following is the list of Micro, Small and Medium Enterprises to whom the Company owes any sum together with interest outstanding for more than thirty days as at March 31, 2013. This list of undertakings covered under MSMED was determined by the Company on the basis of information available with the Company and have been relied upon by the auditors.

7 Transfer pricing

The Company has international transactions with related parties. For the financial year ended March 31, 2012, the Company has obtained the Accountant''s Report from a Chartered Accountant as required by the relevant provisions of the Income-tax Act, 1961 and has filed the same with the tax authorities. For the financial year ended March 31, 2013, management confirms that it maintains documents as prescribed by the Income-tax Act, 1961 to prove that these international transactions are at arm''s length and the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

8 During the previous year, the Company has made preferential allotment of 1,500,000 convertible warrants of Rs. 75/- each aggregating to Rs. 112.50 to its Promoter, Promoter group and an independent director after obtaining the approval of the shareholders and stock exchanges. During the current year, consequent to the option exercised by the allotees towards conversion of the warrants, the Company had issued 1,500,000 equity shares to the allotees.

9 Borrowing costs in connection with the borrowing and funds utilized towards qualifying assets amounting to Rs. 22.86 (Previous year: Rs. Nil) have been capitalized and included in capital work-in-progress.

10 Comparative figures

Prior year figures have been reclassified/regrouped wherever necessary to conform to the current year''s classification.


Mar 31, 2012

1. Company overview

Shasun Pharmaceuticals Limited ('SPL' / 'the Company') was incorporated in 1976 having its registered office in Chennai, India. The Company is primarily engaged in manufacturing of Active Pharmaceutical Ingredients (APIs), their intermediates and enteric coating excipients. The Company is also into product development and provides contract research and manufacturing services.

a. Terms / rights attached to equity shares

The Company has one class of equity shares having a par value of Rs. 2.00/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

During the year ended March 31, 2012, the amount of dividend recognized as distribution to equity shareholders was Rs. 2.00/- per share (Previous year: Nil per share) on interim basis and Rs. 0.40/- per share (Previous year Rs. 0.30/- per share) as proposed final dividend.

As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

During the year, the Company has made a preferential allotment of 6,578,947 equity shares of Rs. 2/- each at a premium of Rs.74/- per share aggregating to Rs. 499.99 to Caduceus Asia Mauritius Limited, Mauritius, a SEBI registered foreign venture capital investor after obtaining the approval of the shareholders and stock exchanges. In response to the Company's intimation through the authorized dealer, the Reserve Bank of India has advised the Company to obtain the approval of the Foreign Investment Promotion Board in respect of such investment. The Company is in the process of filing the necessary documents with the concerned authorities. The Company believes that there would be no material financial implications arising out of the aforesaid matter.

Security details and terms of re-payment for loans:

i. External Commercial Borrowing from Standard Chartered Bank, Mauritius, amounting to Rs. 51.53 (Previous year: Rs. 133.80) is secured by way of first charge on plant and machinery situated at Cuddalore Units. The loan is repayable in 6 semi-annual installments of USD 1.00 million after an initial moratorium period of 30 months.

ii. External Commercial Borrowing from DBS, Singapore, amounting to Rs. 206.12 (Previous year: Rs. 178.40) is secured by way of pari passu charge of equitable mortgage on 45.47 acres of leasehold land at Pharma City, SEZ, Visakhapatnam. The loan is repayable in 8 semi-annual installments of USD 0.5 million after an initial moratorium period of 18 months.

iii. External Commercial Borrowing from ICICI Bank Ltd, Singapore, amounting to Rs. 309.18 (Previous year: Rs. Nil) is secured by way of first pari passu charge on

(a) Land, Building, Plant and machinery in Formulation Unit situated at Pondicherry

(b) Land and Building situated in Cuddalore Units

(c) Land and Building situated in API Unit in Pondicherry

The loan is repayable in 16 equal quarterly installments of USD 0.38 million after an initial moratorium period of 15 months.

The aforesaid external commercial borrowings carry interest ranging from 3.25% to 3.65% p.a.

iv. Foreign currency loan (converted from a Rupee loan to foreign currency loan in financial year 2010-11) from State Bank of India amounting to Rs. 158.16 (Previous year: Rs. 217.69) is secured by first charge on the moveable and immoveable fixed assets at Shasun Research Centre (SRC) located at Vandalur and on the unencumbered immoveable assets at Plot No. A1/A, measuring 5.01 acres located in SIPCOT Complex in Kudikadu village near Cuddalore. The loan carries interest ranging from 7.22% to 9.50% p.a. and is repayable in 33 monthly installments of USD 0.15 million.

v. Standby Line of Credit availed by Shasun Pharma Solutions Limited, UK (a wholly owned subsidiary) from Axis Bank Ltd amounting to GBP 2.00 million is secured by:

(a) Exclusive charge on Land (approx 3.13 acres) situated at Kumarapettai, Cuddalore

(b) Second charge on Plant and machinery situated at Cuddalore Units and

(c) Hypothecation by way of subservient charge on current assets of the Company.

vi. Standby Line of Credit availed by Shasun Pharma Solutions Limited, UK (a wholly owned subsidiary) from State Bank of India amounting to GBP 5.5 million is secured by:

(a) First charge on land (approx 1 acre 98 cents) and the Guest House constructed at Bommaiarpalayam Village, East Coast Road, Pillaichavadi

(b) Second Charge on the moveable and immoveable fixed assets at Shasun Research Centre (SRC) located at Vandalur.

(c) Pledge of 2,415,000 Shares of the Company held in the name of M/s Devendra Estate Private Limited

(d) Personal Guarantee from Mr. S. Vimal Kumar, Wholetime Director and

(e) Corporate Guarantee from M/s Devendra Estate Private Limited.

vii. Rupee Term loan from State Bank of Hyderabad amounting to Rs. Nil (Previous year: Rs. 59.86) was secured by way of pari passu charge of equitable mortgage on 45.47 acres of leasehold land at Pharma City, SEZ, Visakhapatnam. The loan carrries interest ranging from 14.50% to 15.75% p.a. and is repayable in 10 quarterly installments of Rs. 20 million after an initital moratorium period of 2 quarters.

Security details and terms of re-payment for loans:

i. Working capital facility sharing under Consortium arrangement from bankers (namely State Bank of Travancore, State Bank of India, State Bank of Mysore, State Bank of Hyderabad, Canara Bank, Axis Bank Ltd, ICICI Bank Ltd and IDBI Bank Ltd) aggregating to Rs. 2,800 (including non-fund based) and Standby line of credit Rs. 50 provided by State Bank of Travancore are secured by :

(a) Hypothecation of entire current assets on a pari passu basis with other members of the Consortium

(b) Pari passu first charge on land, building of API Unit, Pilot plant and Biotech plant at Pondicherry

(c) Pari passu first charge on land (approx 11.05 acres) and building at Cuddalore Units

(d) Pari passu first charge on land (approx 14.04 acres) and entire assets of Formulation unit, Pondicherry and

(e) Second charge on all other fixed assets of the Company.

ii. Packing credit facility from Bank of Nova Scotia amounting to Rs. Nil (Previous year: Rs. 145.17) was secured by way of hypothecation of the plant and machinery at Pilot plant and Active Pharmaceutical Ingredient plant, located in Pondicherry.

i. Loans and advances to related parties (including interest receivable): As at March 31, 2011 the audited financial statements of Shasun Pharma Solutions Limited, UK ('SPSL') indicate a negative net worth. However, SPSL has earned profits during the year. Further, in view of certain customer arrangements and working capital facilities that are being arranged, the management believes that the loans granted to SVADS and the receivables due from SPSL would be recovered and that there is no diminution other than temporary in the value of the investment in SVADS. Accordingly, the investment in and dues from SVADS / SPSL have been carried at cost.

ii. Share application money pending allotment with related parties: In view of certain provisions of Swiss Code of Obligations, SVADS has not yet allotted shares against such advances. The Company has made necessary arrangements to inform the Indian regulatory authorities in respect of the various pending procedural matters requiring intimation / compliance including the aforesaid matter in respect of pending allotment.

2 Commitments and Contingent liabilities

Particulars As at As at March 31, 2012 March 31, 2011

Income tax 318.14 312.31

Sales tax 13.27 0.48

Excise/customs 83.53 37.43

Service tax - 0.48

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 591.23 107.65

Counter guarantees given by the company to the bankers for bank guarantee 58.15 55.81

Obligations in respect of letter of credit outstanding 348.97 130.79

Corporate guarantee given by the Company to bankers in respect of loan taken by 949.67 1,542.84 Shasun Pharma Solutions Limited, UK (wholly owned subsidiary)

Out of the above corporate guarantee utilized in connection with loans availed by 454.14 1,267.64 Shasun Pharma Solutions Limited, UK

Other claims against the Company not acknowledged as debts 38.76 2.00

Commitments relating to further investment in joint venture 58.40 72.18

3 Related party disclosures

Details of related parties including summary of transactions entered into by the Company during the year ended March 31, 2012 are summarized below:

Name of related parties and description of relationship:

Wholly owned subsidiaries:

Shasun USA Inc., USA

Shasun Life Sciences Private Limited, India

SVADS Holding SA, Switzerland

Wholly owned step down subsidiaries:

Shasun Pharma Solutions Limited, UK (100% subsidiary of SVADS Holding SA)

Shasun Pharma Solutions Inc., USA (100% subsidiary of SVADS Holding SA)

Joint venture:

Shasun NBI LLC, USA

4 Segment reporting

In accordance with AS-17 "Segment Reporting", segment information has been given in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

5 Employee Stock Option Plan

Plan I (Year 2001)

In 2001, the Board and the members of the Company approved the Employee Stock Option Plan 2001 ('Plan I') effective April

1, 2002 under which employees and directors of the Company were also covered.

- The Scheme would be administered and supervised by the members of the Board Compensation Governance Committee (the 'Committee') of the Company.

- The vesting period of the option will be spread over a period of 48 months.

- The option was priced at a discount that is not greater than 50% of the closing market price on the date when the meeting of the compensation committee for granting of options was held.

Plan II (Year 2006)

In 2006, the Board and the members of the Company approved the Employee Stock Option Plan 2006 ('Plan II') effective May 25, 2006 under which employees and directors of the Company were also covered.

- The Scheme would be administered and supervised by the members of the Board Compensation Governance Committee of the Company.

- Exercise period within which the employees would exercise the options would be 1 year from the date of grant of option.

The Company follows Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines. The Company follows the intrinsic value method to account compensation expense arising from issuance of stock options to the employees.

6 Micro, small and medium enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. The following is the list of Micro, Small and Medium Enterprises to whom the Company owes any sum together with interest outstanding for more than thirty days as at March 31, 2012. This list of undertakings covered under MSMED was determined by the Company on the basis of information available with the Company and have been relied upon by the auditors.

7 Transfer pricing

The Company has international transactions with related parties. For the financial year ended March 31, 2011, the Company has obtained the Accountant's Report from a Chartered Accountant as required by the relevant provisions of the Income-tax Act, 1961 and has filed the same with the tax authorities. For the financial year ended March 31, 2012, management confirms that it maintains documents as prescribed by the Income-tax Act, 1961 to prove that these international transactions are at arm's length and the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

8 During the year, the Company has made a preferential allotment of 1,500,000 convertible warrants of Rs. 75/- each ag- gregating to Rs. 112.50 to its Promoter, Promoter group and an independent director after obtaining the approval of the shareholders and stock exchanges. As part of the allotment, the Company had received Rs. 28.13 as advance being 25% of the allotment value. The preferential allotees have a right to subscribe for one equity share of face value Rs. 2/- each per warrant at any time within a period of 18 months from the date of issue of such warrants being October 7, 2011

9 Provision for taxation comprise current tax including minimum alternate tax, deferred tax charge or (benefit) including those in respect of carry forward of losses / unabsorbed depreciation and minimum alternate tax credit entitlements arising from earlier periods.

10 Mark-to-market loss on option contracts relating to prior periods

As a consequence of the application of the provisions of the announcement of the Institute of Chartered Accountants of India dated March 29, 2008 the Company has, in the previous year, accounted for mark-to-market losses aggregating to Rs 405.32 in respect of option contracts outstanding as at March 31, 2010 as a prior period item. The Company has adopted the alternative approach to present the prior period item under AS 5 "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies" after the current net profit.

11 Comparative figures

Till the year ended March 31, 2011, the Company had used pre-revised Schedule VI to the Companies Act 1956, for preparation and presentation of its financial statements. During the year ended March 31, 2012, the revised Schedule VI was notified under the Companies Act 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements.


Mar 31, 2010

1. Security for Loans in Schedule 3:

i) Working Capital facilities under consortium arrangement from bankers (namely SBT, SBM, SBI, SBH, Axis, RBS, ICICI) to the tune of Rs. 1163.77 Mns. is secured by way of (A) Hypothecation of entire Current Assets on a pari passu basis with other members of the Consortium (B) Pari passu first charge on entire assets (including Land 10 Ground) of Biotech Unit, Velachery (C) Pari passu first charge on Land (11.50 Acre) + Building of API and Pilot Unit, Puducherry (D) Pari passu first charge on Land (22 Acre) + Building of Cuddalore (EOU I, EOU II, DTA) unit (E) Pari passu first charge on Land (Approx 12.00 Acre) + entire assets of Formulation unit, Puducherry(F) Second pari passu charge on all other Fixed Assets.

Working Capital facility from Bank of Nova Scotia to the tune of Rs. 144.51 Mns. is secured by way of First pari passu charge over the Plant and Machinery at Pilot Plant and Active Pharmaceutical Ingredient Plant, units located in Puducherry.

Term Loan (External Commercial Borrowing) from Standard Chartered Bank to the tune of Rs. 224.50 Mns. (2009 - 309.32 Mns.) is secured by way of Specific first hypothecation charge on Plant & Machineries situated at Cuddalore Unit (EOU I + EOU II + DTA).

Corporate Term Loan from State Bank of Hyderabad to the tune of Rs. 139.27 Mns. (2009 - 196.01 Mns.) is secured by way of Equitable mortgage of leasehold land in Pharma City, SEZ, Vizag on exclusive charges basis.

Rupee Term Loan from IDBI Bank Ltd. to the tune of Rs. 291.67 Mns. (2009 - 350.00 Mns.) is secured by way of paripassu charge on entire assets of the R&D centre of the company located at Vandalur (+) First paripassu charge on the unencumbered leasehold land located in SIPCOT complex in Kudikadu Village, Cuddalore.

Interest Free Sales-Tax Loan to the tune of Rs. 2.02 Mns. is secured by second charge on Ranitidine and Ibuprofen Plant (Aldheyde Plant) at Cuddalore unit towards Deferral on Sales tax for 9 years.

Standby Letter of Credit - Bank Guarantee - Availed by Shasun Pharma Solution Limited, UK From State Bank of India to the tune of £ 3.50 Million against collateral security of :

(a) First charge on Land (approx 1 Acre 98 Cents) and the Guest House constructed at Bommaiarpalayam Village, East Coast Road, Villupuram

(b) Second Charge on the entire assets of the R&D centre of the company located at Vandalur (First Charge with IDBI Bank for Term Loan)

(c) Pledge of 24,15,000 Share of SCDL in the name of M/s. Devendra Estate Private Limited (5% of paid up capital)

(d) Personal Guarantee of Mr. S. Vimal Kumar, Director

(e) Corporate Guarantee of M/s. Devendra Estate Private Limited.

2) Employee Stock Option Plan

Plan I (Year 2001)

The employee stock option Plan 2001 provided for grant of stock options to employees. The said plan was approved by the shareholders of the company at the AGM held in July 2001

Details on share options,granted , exercised and forfeited under the plan 2009-10 2008-09

No of shares No of shares

Options granted as on Apr 1st 150,510 166,230

Granted during the year

Exercised during the year - -

Forfeited & Lapsed during the year (21,080) (15,720)

Options granted as on Mar 31st 129,430 150,510

Plan II (Year 2006)

The employee stock option Plan 2006 provided for grant of stock options to employees. The said plan was approved by the shareholders of the company at the AGM held in July 2006

Details on share options,granted , exercised and forfeited under the plan

Options granted as on Apr 1st - -

Granted during the year 191,766 -

Exercised during the year - -

Forfeited & Lapsed during the year - -

2008-09 No of shares No of shares Options granted as on Mar 31st 191,766

28 Related party disclosure

A) Particulars of Subsidiary / JV companies

i) Wholly owned subsidiary

a) Shasun USA Inc

b) Shasun Life Sciences (P) Ltd.

c) SVADS Holding SA

ii) Wholly owned step down subsidiary

a) Shasun Pharma Solutions Ltd. -UK (100% subsidiary of SVADS Holding SA)

b) Shasun Pharma Solutions Inc-USA (100% subsidiary of SVADS Holding SA)

 
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