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Notes to Accounts of SMS Pharmaceuticals Ltd.

Mar 31, 2016

1. During the year 2013-14, Company has brought back 15,50,000 Equity shares of Rs, 10/- each.

The face valule of equity share of Rs, 10/- each of the Company was sub-divided into 10 equity shares of Rs, I/- each w.e.f 05-12-2015 in terms of the approval of the shareholders of the Company through Postal Ballot.

2. Term Loans availed from State Bank of India, Export-Import Bank of India and IDBI Bank are secured by first charge on pari-passu basis of all movable and immovable fixed assets both present and future and second charge on pari-passu basis of all current assets both present and future and guaranteed by Sri P Ramesh Babu, Chairman and Managing Director and Sri TWSN Murthy Vice Chairman and Joint Managing Director of the Company in their personal capacities.

3. Term Loans along with working capital facilities sanctioned by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat No 416 admeasuring 618 Sq.ft, situated in Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad, along with undivided share of land of 25 sq. yds,, belonging to M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd) in which Spouse of Sri P Ramesh Babu, Chairman and Managing Director of the Company, is a Director.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 acres situated in Yalamanchili Village of West Godavari district, Andhra Pradesh belonging to Sri TWSN Murthy Vice Chairman and Joint Managing Director of the Company.

iii) Corporate Guarantee by M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd.) to the extent of collateral security extended by them.

iv) Personal Guarantee by Smt.T Annapurna, spouse of Sri TWSN Murthy, Vice Chairman and Joint Managing Director of the Company.

4. Hire Purchase Loans availed from ICICI Bank Ltd, BMW India Financial Services Pvt Ltd and Daimler Financial Services FVt Ltd are secured by the respective vehicles.

5. Terms of Repayment

a) Term Loan-ll availed from State Bank of India for an amount of Rs, 4,250.00 Lakhs is repayable in 20 Quarterly Installments ofRs, 212.50 Lakhs each, commenced from June, 2014. The loan carries interest rate of 12.5% p.a.

b) Term loan availed from Export Import Bank of India amounting to Rs, 3,000.00 Lakhs for funding the Expansion Project of Kazipally unit. The loan is repayable in 20 Quarterly Installments of Rs, 150.00 Lakhs each, commencing from December, 2015. The loan carries interest rate of 12.20% p.a.

c) Term loan availed from IDBI Bank amounting to Rs, 7,500.00 Lakhs for funding the Expansion Project of Kandivalasa unit. The loan carries interest rate of 12.75% p.a The loan is repayable in 24 Quarterly Installments commencing from December, 2016, as mentioned below.

First 4 Quarters t 100.00 Lakhs each

Next 4 Quarters t 200.00 Lakhs each

Next 4 Quarters t 300.00 Lakhs each

Next 4 Quarters t 400.00 Lakhs each

Next 4 Quarters t 425.00 Lakhs each

Next 4 Quarters t 450.00 Lakhs each

6. Current Maturities of Long Term borrowings have been disclosed separately under the head other current liabilities (Refer Note No.3)

7. Financial assistance received from Department of Scientific and Industrial Research (DSIR) of Rs, 120.00 Lakhs (previous year Rs, 120.00 Lakhs) sanctioned under PATSER Scheme of TPDU program for development of catalysts or Fine Chemicals apart from Active Pharmaceutical Ingredients (APIs), and their intermediates viz. Metal Acetylacetonates, Diltiazem Hydrochloride and Taxol C-1 3 Side Chain.

As per the terms of agreement entered with DSIR, 1.3 times of the above amount is payable in 5 equal annual installments after commencement of commercial operations of the product(s) developed under PATSER scheme. However the Company has not yet commenced commercial operations of the said products.

8. Working capital facilities sanctioned by State Bank of India, IDBI Bank Ltd and Export-Import Bank of India are secured by first charge on pari-passu basis of all current assets both present and future. These facilities are further secured by way of second charge on pari-passu basis of all movable and immovable fixed assets of the Company both present and future and also guaranteed by Sri P Ramesh Babu Chairman and Managing Director, and Sri TWSN Murthy, Vice Charman and Joint Managing Director of the Company, in their personal capacities.

9. Working Capital Facilities along with Term Loans extended by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable Mortgage of commercial flat No 416 admeasuring 618 Sq.ft, situated in Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad, along with undivided share of land of 25 sq. yds,, belonging to M/s.Potluri Laboratories Pvt. Ltd (formally Known as Hima Farms FVt Ltd) in which Spouse of Sri P Ramesh Babu, Chairman and Managing Director of the Company, is a Director.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 Acres situated in Yalamanchili Village of West Godavari District, belonging to Sri TWSN Murthy, Vice Chairman and Joint Managing Director of the Company.

iii) Corporate Guarantee by M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd.), to the extent of collateral security extended by them.

iv) Personal Guarantee of Smt. T Annapurna spouse of Sri TWSN Murthy Vice Chairman and Joint Managing Director of the Company.

I I.I During the year 2015-16 the Company has invested an amount of Rs, 803.99 Lakhs towards 5,1 1,400 Equity Shares of Rs, 10/- each. ( 4,06,000 Equity Shares at a premium of Rs, 140/- and 1,05,400 Equity Shares at a premium of Rs, I 75/-) in M/s. VKT Pharma Private Limited, an associated Companyas on 3 1.03.2016 the Company is holding 34.33 % of the total Paid up Capital of the said associated Company. Sri P Ramesh Babu, Chairman and Managing Director of the Company and his spouse &son are Directors in the said Company.

10. Deposits recoverable consists of Rs, 259.64 Lakhs (Previous Year Rs, 160.85 Lakhs) with Electricity Department, Rs, 30.60 (Previous Year Rs, 24.00 Lakhs) Rent Deposit and Rs, 22.26 Lakhs (Previous Year Rs, 21.32 Lakhs) with Others.

11. Out of the above amount, cash and cash equivalents was Rs, 1,125.10 Lakhs (Previous Year Rs, 240.76 Lakhs).

12. Deposit against margin money amount ofRs, 373.37 Lakhs (Previous YearRs, 373.37 Lakhs) have maturity period of more than 12 months.

13. Fixed Deposits amount ofRs, 0.80 Lakhs have maturity period of more than 12 months.

14. Special Term Deposits amount of Rs, 1,000.00 Lakhs ( Previous Year Rs, nil) have maturity period of less than three months.

15. Advances for Raw Materials includes Rs, 162.50 Lakhs (Previous Year Rs, Nil) given to M/s. VKT Pharma (P) Ltd, and Rs, 93.25 Lakhs (Prevous YearRs, 127.64 Lakhs) to M/s. Rchem (Somanahalli) Pvt Ltd, related parties.

16. Advances to Others includes an amount of Rs, 44.31 Lakhs (Previous Year Rs, 44.54 Lakhs) towards Staff Advances.

17. Advance to Others includes an amount of Rs, 1.16 Lakhs (Previous Year Rs, I 1.26 Lakhs) which is outstanding for more than 3 years. However the management is confident about the recovery of the said amount.

18. Equity shares having face value of Rs, 10/-each has been sub-divided into Rs, I/-each, accordingly earnings per share has been restated for the previous year.

19. Note on CSR Liability

As per Section 135 (I) of the Companies Act, 2013 Corporate Social Responsibility provisions are applicable to the Company and the liability for the financial year 2015-16 was Rs, 18.47 Lakhs. During the year 2015-16 the Company has initiated the following activities at the surrounding of its manufacturing facilities and spent an amount of Rs, 19.22 Lakhs:

20. Organized School Benches to Government Primary School of Mandal Parishad Prathamika Patashala at Kazipally Villagejinnaram Mandal, Medak District. The amount incurred for this activity was Rs, 0.78 Lakhs.

21.Construction of 600 Square Feet of RCC roof building for Public Health Center at Kowada Vllage, Poosapatirega Mandal, Vizianagaram District with an estimated cost of Rs, 10.00 Lakhs excluding medical equipments. The Company has already incurred an amount of Rs, 9.22 Lakhs and the balance is mainly miscellaneous to be spent on completion of the building.

22. Construction of 600 Square Feet of RCC roof building for Public Health Center at Gumpam Vllage, Poosapatirega Mandal, Vizianagaram District with an estimated cost of Rs, 10.00 Lakhs excluding medical equipments. The Company has already incurred an amount of Rs, 9.22 Lakhs and the balance is mainly miscellaneous to be spent on completion of the building.

23. (i) The Company has entered in to an agreement with M/s. Divya Enterprises Limited for purchase of 918 sqm industrial plot and buildings and structures situated at D-63, Phase - I, Jeedimetla, for a consideration of Rs, 60.00 Lakhs. Pending registration of the same, the Company has paid the entire amount to the vendor for the said property and has taken the possession during the year 2002-03. The said property was not yet registered in the name of the Company as on the Balance Sheet date.

(ii) The Company has constructed/modified buildings and structures to suit the requirement for carrying out its manufacturing activity in the said premises. The Company has incurred an amount of Rs, 169.68 Lakhs during the earlier years for modification of buildings and also for acquiring required equipment and other assets. The said assets were capitalized and the Company is claiming depreciation.

(iii) Central excise department has issued a demand for an amount of Rs, 16.40 Lakhs towards interest for the period from 01-04-1995 to 18-03-201 I jointly in the name of Divya Enterprises Limited and SMS Pharmaceuticals Limited for which M/s Divya Enterprises Limited has obtained stay from the Honorable High court of Andhra Pradesh in the year 2013. Presently the Company is not carrying out any manufacturing activity at this location.

24. Disclosure Required by Micro. Small and Medium Enterprises (Development) Act,2006.

Disclosure of Sundry Creditors under Current Liabilities is based on the information available with the Company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development (Act, 2006)" and relied upon by the auditors.

During the year the Company has paid no interest in terms of Section 16 of the said Act. Particulars of amount due to the MSMED customers, interest due and paid during the Year are as furnished below.

The above information regarding Micro Small and Medium Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

25. Related Party Disclosures:

Disclosures as required by the Accounting Standard 18 of the Institute of Chartered Accountants of India are given below:

(i) Key Managerial personnel (KMP)and their relatives

S.No. Name Relationship

1. Sri. R RameshBabu Chairman and Managing Director

2. Sri.TVVS.N. Murthy Vice Chairman and Joint Managing Director

3. Sri. TV Praveen Relative of the Key Managerial personnel

4. Sri. R Vamsikrishna Relative of the Key Managerial personnel

5. Smt. R HimaBindu Relative of the Key Managerial personnel

6. N. Rajendra Prasad Chief Financial Officer

7. R Prabhakara Rao Company Secretary (up to3 1.08.15)

8. Saurav Roy Company Secretary ( 04.08.15 onwards)

(ii) List of Related Parties

S.No. Name of the Company Relationship

1. Potluri Packing Industries Private Limited

2. Potluri Laboratories Private Limited.Enterprises over which KMP are able to

3. Potluri Infra Projects Private Limited Exercise significant influence.

4. Rchem (Somanahalli) Pvt Ltd

5. SMS Lifesciences (India) Pvt Ltd

6. VKT Pharma Pvt Ltd Associate Company

26. Segment Reporting:

As the Company''s business during the reporting Year consists of single reportable business segment of manufacturing and sale of Active Pharmaceutical Ingredients and their intermediates, no separate disclosure pertaining to segmental reporting is given. As part of business segment, revenues are attributed to geographical areas based on the location of the customers as detailed below:


Mar 31, 2015

1. Term Loans availed from State Bank of India, Export-Import Bank of India and IDBI bank are secured by first charge on pari-passu basis of all movable and immovable fixed assets both present and future and second charge on pari-passu basis of all current assets both present and future and guaranteed by Sri P. Ramesh Babu, Chairman and Managing Director and Sri T V V S N Murthy Vice Chairman and Joint Managing Director of the Company in their personal capacities.

2. Term Loans along with working capital facilities sanctioned by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat No 416 admeasuring 618 Sq.ft, situated in Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad, along with undivided share of land of 25 sq. yds,. belonging to M/s.Potluri Laboratories Pvt. Ltd. (formally Known as Hima Farms Pvt Ltd) in which Spouse of Sri P. Ramesh Babu, Chairman and Managing Director of the Company , is a director.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 acres situated in Yalamanchili Village of West Godavari district, Andhra Pradesh belonging to Sri T V V S N Murthy Vice Chairman and Joint Managing Director of the Company .

iii) Corporate Guarantee by M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd.) to the extent of collateral security extended by them.

iv) Personal Guarantee by Smt.T.Annapurna, spouse of Sri T V V S N Murthy, Vice Chairman and Joint Managing Director of the Company .

3. Hire Purchase Loans availed from ICICI Bank Ltd, BMW India Financial Services Pvt Ltd and Daimler Financial Services Pvt Ltd are secured by the respective vehicles.

4. Terms of Repayment

a) Term Loan I availed from State Bank of India for an amount of Rs. 3,000.00 Lakhs is repayable in 15 Quarterly Installments of Rs. 200.00 Lakhs each commenced from December, 2011. The loan carries interest rate of 13.20% p.a

b) Term Loan II availed from State Bank of India for an amount of Rs. 4,250.00 Lakhs is repayable in 20 Quarterly Installments of Rs. 212.50 Lakhs each, commenced from June, 2014. The loan carries interest rate of 13.30% p.a

c) Term loan availed from Export Import Bank of India amounting to Rs. 3000.00 Lakhs Loan for funding, the Expansion Project of Kazipally unit. The loan is repayable in 20 Quarterly Installments of Rs. 150.00 Lakhs each, commencing from December, 2015. The loan carries interest rate of 12.75% p.a

d) During the year Company has taken a term loan from IDBI Bank amounting to Rs. 7,500.00 Lakhs for funding the Expansion Project of Kandivalasa unit. The loan carries interest rate of 13.00% p.a. The loan is repayable in 24 Quarterly Installments commencing from December, 2016, as mentioned below.

5. Financial assistance received from Department of Scientific and Industrial Research (DSIR) of Rs.120.00 Lakhs (previous year Rs. 120.00 Lakhs) sanctioned under PATSER Scheme of TPDU program for development of catalysts or Fine Chemicals apart from Active Pharmaceutical Ingredients (API's), and their intermediates viz.Metal Acetylacetonates, Diltiazem Hydrochloride and Taxol C-13 Side Chain.

As per the terms of agreement entered with DSIR, 1.3 times of the above amount is payable in 5 equal annual installments after commencement of commercial operations of the product(s) developed under PATSER scheme. However the Company has not yet commenced commercial operations of the said products.

6. Working capital facilities sanctioned by State Bank of India and Export-Import Bank of India are secured by first charge on pari-passu basis of all current assets both present and future. These facilities are further secured by way of second charge on pari-passu basis of all movable and immovable fixed assets of the Company both present and future and also guaranteed by Sri P. Ramesh Babu Chairman and Managing Director, and Sri T V V S N Murthy, Vice Chairman and Joint Managing Director of the Company , in their personal capacities.

7. Working Capital Facilities along with term loans extended by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat No 416 admeasuring 618 Sq.ft, situated in Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad, along with undivided share of land of 25 sq. yds,. belonging to M/s.Potluri Laboratories Pvt. Ltd. (formally Known as Hima Farms Pvt. Ltd.) in which Spouse of Sri P. Ramesh Babu, Chairman and Managing Director of the Company , is a Director.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 Acres situated in Yalamanchili Village of West Godavari District, belonging to Sri T V V S N Murthy, Vice Chairman and Joint Managing Director of the Company .

iii) Corporate Guarantee by M/s.Potluri Laboratories Pvt. Ltd. (formally Known as Hima Farms Pvt. Ltd.), to the extent of collateral security extended by them.

iv) Personal Guarantee of Smt. T. Annapurna spouse of Sri T V V S N Murthy Vice Chairman and Joint Managing Director of the Company.

8. Statutory Dues includes an amount of Rs. 52.45 Lakhs represents Income tax dues pending for more than six months on account of dispute.

9. Company has invested an amount of Rs. 1,318.80 Lakhs towards 21.98 Lakhs Equity Shares of Rs. 10/- each at a premium of Rs. 50/- of M/s. VKT Pharma Private Limited, an associated Company under the same management. As on 31.03.2015 the Company is holding 31 % of the total Paid up Capital in M/s VKT Pharma Private Limited. Sri P. Ramesh Babu, Chairman and Managing Director of the Company and his spouse are Directors in the said Company.

10. Deposits recoverable consists of Rs. 1,60.85 Lakhs (Previous year Rs. 144.56 Lakhs) with Electricity Department, Rs. 24.00 Lakhs (Previous year Rs. 24,83 Lakhs ) Rent Deposit and Rs. 21.32 Lakhs (Previous year Rs. 23.23 Lakhs) with Others.

11. Trade Receivables exceeding six months includes an amount of Rs. 59.47 Lakhs which is outstanding for more than three years. The recovery of which is doubtful. However the management is confident of receiving the same, hence no provision was made in the books of account.

12. Out of the above amount, cash and cash equivalents was Rs 240.76 Lakhs (previous year Rs. 824.83 Lakhs)

13. Deposit against margin money amount of Rs. 373.37 Lakhs (Previous Year Rs. 373.37 Lakhs) have maturity period of more than 12 months.

14. Fixed Deposits amount of Rs. 0.80 Lakhs have maturity period of more than 12 months.

15. Advances to Others includes Rs. Nil (Previous Year Rs. 379.70 Lakhs) given to M/s. VKT Pharma (P) Ltd, a related party and Rs. 44.75 Lakhs ( Previous year Rs. 38,50 Lakhs) towards Staff Advances

16. Advances to others includes an amount of Rs. 11.26 Lakhs (Previous Year Rs. 11.26 Lakhs) which is outstanding for more than 3 years. However the management is confident about the recovery of the said amount.

17. Interest received includes an amount of X 1,507.18 Lakhs received towards interest from Natco Pharma Ltd on settlement of long pending legal issue. (Refer Note No.34).

18. Pursuant to the guidelines under the Schedule-II of the Companies Act, 2013 the carrying amount of the assets as on 01.04.2014 has been depreciated over the remaining revised useful life of the fixed assets. Consequently, depreciation for the year ended 31.03.2015 is lower by Rs. 13.66 Lakhs and the profit before tax is higher to that extent. Further based on transitional provision as per note 7(b) of Schedule-II in respect of fixed assets that had completed it's useful life as on 01.04.2014, the net residual value of Rs. 48.96 Lakhs has been charged to retained earnings.

19. An amount of Rs. 271.71Lakhs (Previous year Rs. 850.00 Lakhs) was provided towards income tax liability for earlier years on account of search operations conducted by the income tax authorities during the financial year 2012-13.

20. As per Section 135 (1) of the Companies Act, 2013 Corporate Social Responsibility provisions are applicable to the company. During the year the Company has constituted CSR Committee of Board and approved CSR Policy. However, the average net profits of the Company for the last 3 years, as per the provisions of Section 198 of the Companies Act, 2013, is negative, spending provisions of CSR are not applicable for the current financial year.

21. During the year the Company has settled the long pending legal issue with Natco Pharma Ltd by entering into an MOU with Natco Pharma Ltd. As per the terms of said MOU Natco Pharma Ltd agreed to pay an amount of Rs. 2,700.00 Lakhs and both the companies agreed to withdraw all pending legal cases between them. The said amount of Rs. 2,700.00 Lakhs includes interest of Rs. 1,507.18 Lakhs for the period from 07.03.2000 to 13.11.2014. This amount also includes an amount of Rs. 78.17 Lakhs towards reimbursement of legal expenses and the balance amount of Rs. 1,114.65 Lakhs towards claim of the Company .

22. Capital work-in-progress includes expansion project at Unit-7 situated at Kandivalasa village in Vijayanagaram Dist. and incurred an amount of Rs. 2,782.55 Lakhs (Previous year Rs. 1,746.46 Lakhs) towards Land, Plant & Machinery and Buildings which consists of Rs. 556.79 Lakhs (Previous year(Rs. 556.79 Lakhs) paid for acquiring land to the extent of Ac. 42 in Jawaharlal Nehru Pharma City Parawada in Viskhapatanm Dist.

Subsequently, during the year 2007-08 M/s Ramkey Pharma City (India) Ltd, the developer, has sent a communication to cancel the allotment to the extent of Ac. 23 and proposed to sell the said land to others. Aggrieved by this, the Company filed a Writ Petition with Hon'ble High Court of A P in the year 2010 and obtained orders restraining the alienation of the said land till the pending of further orders. The case is pending before the High Court of Judicature at Hyderabad (for the State of Telangana and for Andhra Pradesh).

23. (a) The Company has entered in to an agreement with M/s. Divya Enterprises Limited for purchase of 918 sqm industrial plot and buildings and structures situated at D-63, Phase – I, Jeedimetla, for a consideration of Rs. 60.00 Lakhs Pending registration of the same, the Company has paid the entire amount to the vendor for the said property and has taken the possession of property. The said property was not yet registered in the name of the Company as on the Balance Sheet date.

(b) The Company has constructed / modified buildings and structures to suit the requirement for carrying out its manufacturing activity in the said premises. The Company has incurred an amount of Rs. 169.68 Lakhs during the earlier years for modification of buildings and also for acquiring required equipment and other assets. The said assets were capitalized and the Company is claiming depreciation.

(c) Central excise department has issued a demand for an amount of Rs. 16.40 Lakhs towards interest for the period from 01-04-1995 to 18-03-2011 jointly in the name of Divya Enterprises Limited and SMS Pharmaceuticals Limited for which M/s Divya Enterprises Limited has obtained stay at that time from Honourable High Court of Andhra Pradesh. Presently the Company is not carrying out any manufacturing activity at this location.

24. Disclosure Required by Micro, Small and Medium Enterprises (Development) Act, 2006.

Disclosure of Sundry Creditors under Current Liabilities is based on the information available with the Company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development (Act, 2006)" and relied upon by the auditors.

25 Segment Reporting:

As the Company 's business during the reporting year consists of single reportable business segment of manufacturing and sale of Active Pharmaceutical Ingredients and intermediates, no separate disclosure pertaining to segmental reporting is given. As part of business segment, revenues are attributed to geographical areas based on the location of the customers as detailed below:

26. Balances of sundry debtors/ creditors and Loans and advances are subject to confirmation

27. Previous Year figures have been regrouped / reclassified wherever necessary to Corroborate with current year figures.

28. Figures have been rounded off to the nearest Rupee.


Mar 31, 2014

Buy Back of Equity Shares

Pursuant to the Board of Directors approval for buy back of equity shares under section 77A of the Companies Act, l956, the company has bought back l5,50,000 equity shares of Rs. l0/- each through open market transactions for an aggregate amount of Rs. 4,l02.55 Lakhs. out of this an amount of Rs. 3,947.55 Lakhs has been debited to share premium account and the balance amount of Rs. l55.00 Lakhs has been reduced from share capital account.

The Capital Redemption Reserve has been created out of current year profits for Rs. l55.00 Lakhs being the nominal value of shares bought back in terms of section 77 AA of the Companies Act, l956.

Current maturities of the above loans have been classified under other current liabilities

1 a) Term Loans availed from State Bank of India, Export-Import Bank of India, are secured by first charge on pari-passu basis of all movable and immovable fixed assets both present and future and second charge on pari-passu basis of all current assets both present and future and guaranteed by two directors of the company in their personal capacities.

2 b) Term Loans along with working capital facilities sanctioned by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat along with undivided share of land of 25 sq. yds. Belonging to M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd). (related party) in Plot no.4l6 Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 acres belonging to Sri T.V.V.S.N. Murthy, a director of the company, situated in Yalamanchili Village of West Godavari district, Andhra Pradesh

iii) Corporate Guarantee by M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd)., to the extent of collateral security extened by them.

iv) Personal Guarantee by relative of a Director.

3 Terms of Repayment

a) Term Loan availed from State Bank of India for an amount of Rs. 3,000.00 Lakhs is repayable in l5 Quarterly Instalments commensed from February, 20l2. The loan carries the interest rate of l3.l0% p.a

b) Term Loan II availed from State Bank of India for an amount of Rs. 4250.00 Lakhs is repayable in 20 Quarterly Instalments commensed from December, 2013. The loan carries the interest rate of l3.20% p.a

c) During the year company has taken a term loan from Export Import Bank of India amounting to Rs. 3,000.00 Lakhs Loan for the funding the Expansion Project of Kazipally unit. The loan is repayable in 20 Quarterly Instalments commensing from October, 20l5. The loan carries the interest rate of l2.90% p.a

4 Financial assistance received from Department of Scientific and Industrial Research (DSIR)of Rs. l20.00 Lakhs (previous year Rs. l20.00 Lakhs) sanctioned under PATSER Scheme of TPDU program for development of catalysts or Fine Chemicals apart from Active Pharmaceutical Ingredients (API''s), and their intermediates viz.Metal Acetylacetonates,Diltiazem Hydrochloride and Taxol C-l3 side chain.

As per the terms of agreement entered with DSIR, l.3 times of the above amount is payable in 5 equal annual installments after commencement of commercial operations of the product(s) developed under PATSER scheme. But the company has not yet commensed commercial operations of the said products.

a) Working capital facilities sanctioned by State Bank of India and Export-Import Bank of India are secured by first charge on pari-passu basis of all current assets both present and future. These facilities are further secured by way of second charge on pari-passu basis of all movable and immovable fixed assets of the company both presenet and future and also guaranteed by two directors of the company in their personal capacities.

b) Working Capital Facilities along with term loans extended by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat along with undivided share of land of 25 sq. yds. Belonging to M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd). in Plot No.4l6 Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 Acres belonging to Sri T.V.V.S.N. Murthy, a director of the company, situated in Yalamanchili Villege of West Godavari District.

iii) Corporate Guarantee by M/s.Potluri Laboratories Pvt Ltd (formally Known as Hima Farms Pvt Ltd)., (related party) to the extent of collateral security extened by them.

iv) Personal Guarantee of relative of a Director.

5. During the year, the company has invested in 9,72,100 equity Shares of Rs. l0/- each with a premium of Rs. 50/- (total cost per share Rs. 60/-) in M/s. VKT Pharma (P) Ltd, a related Party. l2.2. It was considered that amount realisable was Nil for 4,76,476 redeemable preference shares in M/s. Divya Enterprises Ltd

*During the previous year i.e 20l2-l3 the company has written off entire amount of Deffered Revenue and Deferred R&D Expenditure , as it is considred that there is no enduring benfit accrues.

** This amount represents revenue expenditure consists of salaries to the employees, cost of materials consumed for R&D purpose and also Power, machinary maintenace and other expenses relating to R&D activity.

Note: Out of the above amount of cash and cash equilants was Rs. 824.83 Lakhs (previous year Rs. 975.49 Lakhs)

Deposit against margin money includes an amount of Rs. 373.37 Lakhs (Previous Year Rs. Nil) which have maturity period of more than l2 months and an amount of Rs. Nil (Previous Year Rs. 303.86 Lakhs) which have maturity period of less than l2 months.

Fixed Deposits includes an amount of Rs. 0.80 Lakhs which have maturity period of less than l2 months.

6. During the financial year 20l2-l3 search operations were conducted by the income tax department. In view of this additional income tax liability of Rs. 823.50 Lakhs has araised.

I. Corporate Information:

SMS Pharmaceuticals Limited is a mult -location, multi-product company manufacturing Bulk Drugs and APIs and their intermediates. SMS Pharmaceuticals Limited has manufacturing facilities at IDA Kazipally, Bachupally, IDA Jeedimetla, and Bolaram apart from R&D center at Gagillpur in and around Hyderabad city and also at Kandivalasa in Vijayanagaram Dist and having registred office at Plot No. l9-III, Road No. 7l, Jublie Hills, Hyderabad.

a. Contingent Liabilities not provided for (Amount: Rs. in Lakhs)

Particulars 2013-14 20l2-l3

(a) Guarantees given by banks 35.50 93.l7

(b) Foreign Letter of credits opened in favour of suppliers for 501.18 l,l7l.2l which goods are yet to be received

(c) Disputed Income Tax demands against Which company is 40.20 l09.79 in Appeals.

(d) Interest dues in respect of disputed demands of Income 185.87 l78.8l Tax and Central Excise.

(e) Interest on disputed demand of Central Excise (refer Note 16.40 2l.74 30 B (d))

(f) Capital Commitments 704.84 428.79

TOTAL 1,483.99 2,003.5l

1. The Company has made a claim against M/s NATCO Pharma Limited for an amount of Rs. l,562.9l Lakhs for recovery of materials and receivables and filed a case in the court of Addl. Chief Judge, (Fast Track Court) Hyderabad. The Honorable court has considered the claim and decreed for the said amount of Rs. l,562.9l Lakhs The Company has filed Executive Petition (EP) for recovery of decreed amount. M/s NATCO PharmaLtd, preferred an appeal before the Hon''ble High Court of AP against the said decree and EP filed by the company. The Hon''ble High Court Stayed the EP proceedings and directed M/s NATCO Pharma Ltd, to deposit an amount of Rs. l,l58.4l Lakhs. Out of this, an amount of Rs. 540.l2 Lakhs was paid to the Company towards part of decreed amount apart from costs. Since the appeal is pending before the High Court of Andhra Pradesh the claim amount received of Rs. 540.l2 Lakhs was accounted as other long term liability.

2. Capital work-in-progress includes expansion project at Unit-7 situated at Kandivalasa village in Vijayanagaram Dist. and incurred an amount of Rs. l,746.46Lakhs towards Land, Plant & Machinery and Buildings.

Out of the above amount of Rs. l746.46 Lakhs an amount of Rs. 556.79 Lakhswas paid for acquiring land to the extent of Ac. 42 in Jawaharlal Nehru Pharma City Parawada in Viskhapatanm Dist.

Subsequently, during the year 2007-08 M/s RamkeyPharma City (India) Ltd, the developer, has sent a communication to cancel the allotment to the extent of Ac. 23 and proposed to sell the said land to others. Aggrieved by this, the company filed a Writ Petition with Hon''ble High Court of A P in the year 20l0 and obtained orders restraining the alienation of the said land till the pending of further orders. The case is pending before the High Court of Andhra Pradesh.

3. The company has entered in to an agreement with M/s. Divya Enterprises Limited for purchase of 9l8 sqm industrial plot and buildings and structures situated at D-63,Phase - I, Jeedimetla, for a consideration of Rs. 60.00 lakhs. Pending registration of the same, the company has paid the entire amount to the vendor for the said property and has taken the possession of property.

The company has constructed/modified buildings and structures to suit the requirement for carrying out its manufacturing activity in the said premises. The said assets were capitalized and the company is claiming depreciation. The said property was not yet registered in the name of the company as on the Balance Sheet date.

Central excise department has issued a demand for an amount of Rs. l6.40 Lakhs towards interest for the period from 0l-04-l995 to l8-03-20ll jointly in the name of Divya Enterprises Limited and SMS Pharmaceuticals Limited for which M/s Divya Enterprises Limited has obtained stay from Honourable AP High court. Presently the company is not carrying out any manufacturing activity at this location.

4. Disclosure Required by Micro,Small and Medium Enterprises (Development) Act, 2006.

Disclosure of Sundry Creditors under Current Liabilities is based on the information available with the company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development (Act, 2006)" and relied upon by the auditors.


Mar 31, 2013

I. Corporate Information

SMS Pharmaceuticals Limited is a mult-location, multi-product company manufacturing Bulk Drugs and APIs and their intermediates. SMS Pharmaceuticals Limited has manufacturing facilities at IDA Kazipally, Bachupally, IDA Jeedimetla, and Bolaram apart from two R&D centers at Sanatnagar and Gagillpur in and around Hyderabad city and also at Kandivalasa in Vijayanagaram Dist and having registred office at Road No. 71, Jublie Hills, Hyderabad.

a. Contingent Liabilities not provided for

(Amount : Rs. in Lakhs) Particulars 2012-13 2011-12

(a) Guarantees given by banks 93.17 51.87

(b) Foreign Letter of credits opened in favour of suppliers for which goods are yet to be received 342.90 1,171.21 (c) Claims not acknowledged as debts by the company. - 562.80

(d) Disputed Income Tax demands against which company is in Appeals. 116.85 116.85

(e) Interest dues in respect of disputed demands of Income Tax and Central Excise. 178.81 172.00

(f) Interest on disputed demand of Central Excise (refer Note 29B (e)(iii)) 21.74 21.74

(g) Capital Commitments 428.79 -

Note: Claims not acknowledged as debt of Rs. 562.80 lakhs relating to civil suit filed by M/s. NATCO Pharma Limited against the company before the Hon''ble City Civil Court Hyderabad in the year 2002. In the month of February 2012 the court was dismissed this suit. However, aggrieved with this order M/s. Natco Pharma preferred an appeal before AP High Court.

b. The Company has made a claim against M/s NATCO Pharma Limited for an amount of Rs. 1,562.91 Lakhs for recovery of materials and receivables and filed a case in the court of Addl. Chief Judge, (Fast Track Court) Hyderabad. The said court has considered the claim and decreed for the same. The Company has filed Executive Petition (EP) for recovery of the said amount. M/s NATCO Pharma Ltd, preferred an appeal before the Hon''ble High Court of AP against the said decree and EP filed by the company. The Hon''ble High Court Stayed the EP proceedings and directed M/s NATCO Pharma Ltd, to deposit an amount of Rs. 1,158.41 Lakhs. Out of this, an amount of Rs. 540.12 Lakhs was paid to the Company towards part of decreed amount and costs. Since the appeal is pending before the High Court of Andhra Pradesh the claim amount received of Rs. 540.12 Lakhs was accounted under Current Liability.

c. Capital work-in-progress includes expansion project at Unit-7 situated at Kandivalasa village in Vijayanagaram Dist. and incurred an amount of Rs. 8,968.15 Lakhs towards Land, Plant & Machinery and Buildings and Rs. 556.79 Lakhs paid for acquiring land to the extent of Ac. 42 in Jawaharlal Nehru Pharma City Parawada in Viskhapatanm Dist.

Subsequently, during the year 2007-08 M/s Ramkey Pharma City (India) Ltd, the developer, has sent a communication to cancel the allotment to the extent of Ac. 23 and proposed to sell the said land to others. Aggrieved by this, the company filed a Writ Petition with Hon''ble High Court of A P in the year 2010 and obtained orders restraining the alienation of the said land pending further orders. The case is pending before the High Court of Andhra Pradesh.

d. i. The company has entered into an agreement with M/s. Divya Enterprises Limited for purchase of 918 sqm industrial plot and buildings and structures situated at D-63, Phase - I, Jeedimetla, for a consideration of Rs. 60.00 lakhs. Pending registration of the same, the company has paid the entire amount to the vendor for the said property and has taken the possession of property.

ii. The company has constructed/modified buildings and structures to suit the requirement for carrying out its manufacturing activity in the said premises. The said assets were capitalized and the company is claiming depreciation. The said property was not yet registered in the name of the company as on the Balance Sheet date.

iii. Central excise department has issued a demand for an amount of Rs. 21.74 Lakhs towards interest for the period 01-04-1992 to 18-03-2011 jointly in the name of Divya Enterprises Limited and SMS Pharmaceuticals Limited for which M/s Divya Enterprises Limited has obtained stay from Honourable AP High court. Presently the company is not carrying out any manufacturing activity at this location.

e. Lease:

The company obtained office premises under lease. The future minimum lease payments and payment profile of non cancellable leases and lease amount incurred during the year are as under.

i. General description of leasing arrangements:

Office premises - Lease rental are charged on the basis of agreed terms.

ii. Lease payment recognized in the statement of profit & loss was Rs. 57.88 Lakhs (Previous year Rs. 57.40 Lakhs)

i. Disclosure Required by Micro, Small and Medium Enterprises (Development) Act, 2006.

Disclosure of Sundry Creditors under Current Liabilities is based on the information available with the company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development (Act, 2006)" and relied upon by the auditors.

f. Segment Reporting:

As the company''s business during the reporting period consists of single reportable business segment of manufacturing and sale of Active Pharmaceutical Ingredients and intermediates, no separate disclosure pertaining to segmental reporting is given.

As part of business segment, revenues are attributed to geographical areas based on the location of the customers as detailed below:

g. Balances of sundry debtors/creditors and Loans and advances are subject to confirmation.

h. Previous Year figures have been regrouped/reclassified wherever necessary to corroborate with current year figures.

i. Figures have been rounded off to the nearest Rupees.


Mar 31, 2012

A) Term Loans availed from State Bank of India, Export-Import Bank of India, IDBI Bank Limited, Axis Bank Limited and ICICI Bank Limited are secured by first charge on pari-passu basis of all movable and immovable fixed assets both present and future and second charge on pari-passu basis of all current assets both present and future and guaranteed by two directors of the company in their personal capacities.

b) Term Loans along with working capital facilities sanctioned by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat along with undivided share of land of 25 sq. yds. Belonging to M/s.Hima Farms Pvt Ltd. (related party) in Plot no.416 Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 acres belonging to Mr.TVVSN Murthy, a director of the company, situated in Yalamanchili Villege of West Godavari District.

iii) Corporate Guarantee by M/s.Hima Farms Pvt Ltd., to the extent of collateral security extened by them.

iv) Personal Guarantee of relative of a Director.

Financial assistance received from Department of Scientific and Industrial Research (DSIR) of Rs.l20.00 lakhs (previous year Rs.l20.00 lakhs) sanctioned under PATSER Scheme of TPDU program for development of catalysts or Fine Chemicals apart from Active Pharmaceuticals Ingredients (API's), and their intermediates viz. Metal Acetyl Acetonates, Diltiazem Hydrochloride and Taxol C-l3 Side Chain.

As per the terms of agreement entered with DSIR, l.3 times of the above amount is payable in 5 equal annual installments after commencement of commercial operations of the product(s) developed under PATSER scheme. But the company has not yet commenced commercial operations of the said products.

4 During the year Deferred Tax Asset has not been provided considering the unabsorbed depreciation, unabsorbed R & D expenditure and MAT credit available for set off of future tax liability.

a) Working capital facilities sanctioned by State Bank of India and Export-Import Bank of India are secured by first charge on pari-passu basis of all current assets both present and future. These facilities are futher secured by way of second charge on pari-passu basis of all movable and immovable fixed assets of the company both presenet and future and also guaranteed by two directors of the company in their personal capacities.

b) Working Capital Facilities along with term loans extended by State Bank of India are having the following additional security apart from the details of security mentioned supra.

i) Equitable mortgage of commercial flat along with undivided share of land of 25 sq. yds. Belonging to M/s.Hima Farms Pvt Ltd. in Plot no.4l6 Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad.

ii) Equitable mortgage of Agricultural land admeasuring 3.65 acres belonging to Mr.TVVSN Murthy, a director of the company, situated in Yalamanchili Villege of West Godavari District.

iii) Corporate Guarantee by M/s.Hima Farms Pvt Ltd., (related party) to the extent of collateral security extened by them.

iv) Personal Guarantee of relative of a Director.

* This amount represents revenue expenditure consists of salaries to the employees, cost of materials consumed for R & D purpose and also Power, machinary maintenace and other expenses relating to R & D activity.

Note: Out of the above amount of cash and cash equilants was Rs.901.43 Lakhs (previous year Rs.597.89 Lakhs).

Out of the margin money deposits, an amount of Rs.298.00 Lakhs (Previous Year Rs.298.00 Lakhs) has maturity period of more than 12 months. This amount consists of Rs.298.35 Lakhs (Previous Year Rs.288.04 Lakhs) given against LC's and Rs.5.18 Lakhs (Previous Year Rs.17.23 Lakhs) given aginst Bank Guarantees.

Fixed Deposits having maturity period of less than 3 months of Rs.350.00 Lakhs (Previous Year Rs.Nil).

I. Corporate Information

SMS Pharmaceuticals Limited is a multi-location, multi-product company manufacturing Bulk Drugs and APIs and their intermediates. SMS Pharmaceuticals Limited has manufacturing facilities at IDA Kazipally, Bachupally, IDA Jeedimetla, and Bolaram apart from two R&D centers at Sanatnagar and Gagillpur in and around Hyderabad city and also JNPC Parawada in Vishakapatnam Dist and Kandivalasa in Vijayanagaram Dist and having registred office at Road No. 7l, Jublie Hill, Hyderabad. Out of these facilities, Bachupally and Kandivalasa facilities are qualified by USFDA.

a. Contingent Liabilities not Provided for

(Amount : Rs. in Lakhs)

Particulars 2011-12 2010-11

(a) Guarantees given by banks 51.87 5l.87

(b) Foreign Letter of credits opened in favour of suppliers for which goods are yet to be received 1,171.21 l,220.63

(c) Claims not acknowledged as debts by the company. 562.80 562.80

(d) Disputed Income Tax demands against which company is in Appeals. 116.85 ll6.85

(e) Interest dues in respect of disputed demands of Income Tax and Central Excise. 172.00 l65.00

(f) Interest on disputed demand of Central Excise (refer Note 27B (e)(iii)) 21.74 -

(g) Capital Commitments - l09.69

Note : Claims not acknowledged as debt of Rs.562.80 lakhs relating to civil suit filed by M/s Natco Pharma Limited against the company before the Hon'ble City Civil Court Hyderabad in the year 2002. In the month of February 20l2 the court was dismissed this suit. However, M/s. Natco Pharma preferred an appeal before A.P High Court.

b. The company has filed civil suit against Natco Pharma Limited before the Hon'ble City Civil Court Hyderabad for recovery of Rs.l,562.9l lakhs in the month of October, 2002. The said suit was decreed in the month of February, 20l2 for entire suit amount of Rs. 3,350.47 lakhs including interest @l5.50% and costs.

The company has filed executive petition before the Hon'ble City Civil Court Hyderabad for implementation of the direction given by the said court. Meanwhile, aggrieved by the said order, M/s Natco Pharma Limited has preferred to file the appeal before Hon'ble AP High Court.

c. The company has acquired 43 Acres land from APIIC through Ramky Pharma City (India) Limited, in JN Pharma City, Parawada besides to the existing oncology plant is under dispute. For this an amount of Rs.556.79 lakhs was paid and the same was included in Capital Work in Progress.

d. Land admeasuring 950 Sq Yds for value of Rs.l0.84 lakhs purchased in the year l994-95 in Hyderabad City by the erstwhile Plant Organics Ltd (POL) acquired by the company on amalgamation of said POL vide BIFR order dated 28-08-2008 is under litigation with City Civil Court at Hyderabad. It was considered that either the land or any value for that is not recoverable. Hence the same was deleted from the land in Fixed Assets Schedule (Note l0) and the same amount was reduced from opening balance of the General Reserve (Note 2) during the year 20l0-ll.

e. (i) The company has entered in to an agreement with M/s. Divya Enterprises Limited for purchase of 9l8 sqm industrial plot and buildings and structures situated at D-63, Phase - I, Jeedimetla, for a consideration of Rs.60.00 lakhs. Pending registration of the same, the company has paid to the vendor an amount of Rs.42.93 lakhs for the said property and has taken the possession of property.

(ii) The company has constructed/ modified buildings and structures to suit the requirement for carrying out its manufacturing activity in the said premises. The said assets were capitalized and the company is claiming depreciation. The said property was not yet registered in the name of the company as on the Balance Sheet date.

(iii) Central excise department has issued a demand for an amount of Rs.21.74 lakhs towards interest for the period 01-04-1992 to 18-03-2011 jointly in the name of Divya Enterprises Limited and SMS Pharmaceuticals Limited for which the company is contesting.

f. Lease:

The company obtained office premises under lease. The future minimum lease payments and payment profile of non cancellable leases and lease amount incurred during the year are as under.

i. General description of leasing arrangements:

Office premises - Lease rental are charged on the basis of agreed terms.

ii. Lease payment recognized in the statement of profit & loss was Rs.57.40 lakhs (previous year Rs.58.03 lakhs)

iii. Future Lease Rental Payments:

- Net benefit expenses of Rs.l7.30 lakhs relating to Gratuity charged to statement of profit & loss being the difference between the independent actuary valuation and that of LIC. This amount was unfunded and total amount of unfunded was Rs.l09.30 lakhs as on the balance sheet date.

g. Disclosure Required by Micro,Small and Medium Enterprises (Development) Act,2006.

Disclosure of Sundry Creditors under Current Liabilities is based on the information available with the company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development (Act, 2006)" and relied upon by the auditors. During the year the company has paid no interest in terms of Section 16 of the said Act.

h. Segment Reporting:

As the company's business during the reporting period consists of single reportable business segment of manufacturing and sale of Active Pharmaceutical Ingredients and intermediates, no separate disclosure pertaining to segmental reporting is given.

As part of business segment, revenues are attributed to geographical areas based on the location of the customers as detailed below:

i. Balances of sundry debtors/ creditors and Loans and advances are subject to confirmation.

j. The Revised Schedule VI has become effective from the current year for the presentation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. However, it does not impact recognition & measurement principles followed for preparation of financial statements.

k. Previous Year figures have been regrouped / reclassified wherever necessary to corroborate with current year figures.

l. Figures have been rounded off to the nearest Rupees in Lakhs.

 
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