Notes to Accounts of Elder Pharmaceuticals Ltd.

Jun 30, 2014

1. Rights, preferences, and restrictions attached to Equity shares

The Company has only one class of Equity shares having par value of Rs.10/- each. Each holder of Equity share is entitled to one vote per share.

The Company pays dividend to Equity share holders in Indian rupees. In the event of the liquidation of the Company, the holders of Equity shares will be entitled to receive remaining assets of the Company. The distribution will be in proportion to the number of Equity shares held by the shareholders.

2. CONTINGENT LIABILITIES AND COMMITMENTS

(Rs. in Lacs)

As at As at 30th June, 2014 30th June, 2013

(I) Contingent Liabilities

a) Letters of Credit 2,015.82 405.09

b) Bank Guarantees 182.04 305.37

c) Corporate Guarantees to Subsidiary 12,432.00 19,473.75

d) Disputed liability in respect of :

i) Income tax * 268.58 268.58

ii) Sales tax 29.19 -

iii) Service Tax 639.54 717.51

* Includes demand of Rs. 216.53/- lacs decided in favour of the Company but disputed by Income-tax Department.

(II) Claim against the Company not acknowledged as debts

a) Interest on Unsecured Loan 578.99 -

b) Other - 224.00

(III) Commitments

a) Estimated amount of contracts remaining to be executed on Capital 548.58 386.45 Account and not provided for.

3. The balance in respect of trade receivable, inter-division balances, bank balances in few cases and loans & advances ar subject to reconciliation/confirmations by the respective parties.

4. With a view to reducing the debts of the Company, the board of directors has approved the proposal to restructure th Company''s business involving either raising of capital, hiving off assets or other strategic options and have appointe advisers for this purpose. The advisers have commenced due diligence of the Company''s operations. No strategy has yet been finalized. The slump sales transaction with Torrent Pharmaceuticals Limited was completed & consummated on 29t June,2014.

5. Some lenders have filed legal cases against the Company, its directors and other officers under section 138 of the Negotiable Instruments Act 1981. In some cases winding up petition under section 433 and 434 of the Companies Act1956 has also been filed. The Company in some cases has made part payments and settlement negotiations are initiate in other cases.

6. Some of the Non-convertible Debenture Holders have preferred legal action against the Company for non-payment of Principle and interest thereon.

7. Disclosure as per Accounting Standard 15 (Revised) "Employee Benefits" as notified by the Companies (Accounting Standard) Rules, 2006.

Defined Benefit Plan

The Company provides gratuity benefits to its employees which is defined benefit plan. The present value of obligation is determined based on the actuarial valuation which recognizes each period of service as giving rise to additional unit employee benefit entitlement and measures each unit separately to build up final obligations.

8. Segment Information

The company is primarily engaged and deals in pharmaceuticals & related products, which in the context of Accounting Standard-17, is the only business segment and has been identified as the primary reporting segment. Accordingly, the information appearing in these financial statements relate to the aforesaid primary reporting segment.

Secondary segmental reporting is performed on the basis of the geographical locations of customers. The geographical segments considered for disclosure are based on the revenue within India (including sales to customers located in India and service income accrued in India) and revenues outside India (sales to customers located outside India).

9. "The Company has sold and transferred its branded domestic formulations business in India and Nepal to Torrent Pharmaceuticals Limited on a slump sale basis. The proceed of sale and transfer was primarily utilised to repay financial obligations to banks/institutions. The Company has major liabilities towards vendors, statutory dues, payment to fixed deposit holders and non-convertible debenture holders. Although these events or conditions may cast significant doubt on the Company''s ability to continue as a going concern, it has detailed plans to strengthen its business operations. The Company is negotiating with the banks to infuse additional finance to streamline its operations. Based on the detailed evaluation of the current situation, plans formulated and active discussions underway, the management is confident of raising adequate finance, rescheduling debt and receiving continued support from the parties. The Company has got strong and adequate fixed assets capital base to raise additional resources and funds.

Therefore, the management holds the view that the Company will realize its assets and discharge liabilities in the normal course of business. Accordingly, the financial statements have been prepared on the basis that the Company is a going concern and that no adjustments are required to the carrying value of assets and liabilities."

10. Advances to sundry creditors under short term loans and advances includes Rs. 851.59 Lacs advances to related parties on current account/trade advance.

11. Related Party Disclosures

Related party disclosures, as required by AS-18, "Related Party Disclosures" are given below :

(I) Names of the related parties and description of relationship:

A) Related parties where control exists

i) Subsidiaries Elder International FZCO Dubai, UAE

ii) Associates/ Joint Venture Elder Universal Pharmaceuticals (Nepal) Private Limited

B) Enterprises over which key Elder Health Care Limited. management personnel and their Elder Projects Limited. relatives are able to Elder Instruments Private Limited. exercise significant influence Maveer Prints Private Limited E W F Pharmaceuticals Private Limited. Redle Pharmaceuticals Private Limited Akshaya Holdings Private Limited. Anjay Prints Ansul Printers

C) Key Management Personnel Mr. Alok Jagdish Saxena and their Relatives Mr. Yusuf Karim Khan Mrs. Shalini Kumar

Note: Related party relationship is as identified by the company and relied upon by the auditors.

12. The accounts for current financial year are for a period of fifteen months as compared to twelve months accounting period for previous year and hence to that extent the figures are not comparable.

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Jun 30, 2013

1 CONTINGENT LIABILITIES AND COMMITMENTS

(Rs.in Lacs)

Period ended Year ended 30.06.2013 31.3.2012

(I) Contingent Liabilities

a) Letters of Credit 405.09 3308.91

b) Bank Guarantees 305.37 9689.04

c) Corporate Guarantees to Subsidiary 19473.75 16034.65

d) Disputed liability in respect of:

i) Income tax* 268.58 268.58

ii) Sales tax 36.21

iii) Customs Duty 25.00

iv) Service Tax 717.51 492.62

* Includes demand of Rs. 216.53/- lacs decided in favour of the Company but disputed by Income-tax Department.

e) Claim against the Company not acknowledged as debt 224.00

(II) Commitments

a) Estimated amount of contracts remaining to be executed on Capital Account and 386.45 230.70 not provided for._

2. The balance in respect of trade receivable, inter-division balances, bank balances in few cases and loans & advances are subject to reconciliation/confirmations by the respective parties.

3. The balances of trade payables were confirmed at random and reconciliations / adjustments have been made in such accounts, wherever necessary.

4. With a view to reducing the debts of the Company, the board of directors has approved the proposal to restructure the Company''s business involving either raising of capital, hiving off assets or other strategic options and have appointed advisers for this purpose. The advisers have commenced due diligence of the Company''s operations. No strategy has yet been finalized.

5. Subsequent to close of Accounting period, some lenders have filed legal cases against the Company, its directors and other officers under section 138 of the Negotiable Instruments Act 1981. In some cases winding up petition under section 433 and 434 of the Companies Act 1956 has also been filed. The Company in some cases has made part payments and settlement negotiations are initiated in other cases.

6. Some lenders/ bankers/ non- convertible debenture holders have served the notices on the Company for dishonoring of the cheques and default in payment of their dues under various acts governing dishonoring of cheques and default in repayments of loans. As informed, the Company has been negotiating payment modalities with such lenders/ bankers/ non- convertible debenture holders.

7. One of the lenders has filed winding up petition under section 433 and 434 of the Companies Act, 1956 and arbitration proceedings have commenced. The court has granted time up to 15th September 2013 for settlement of the dues.

8. Disclosure as per Accounting Standard 15 (Revised) "Employee Benefits" as notified by the Companies (Accounting Standard) Rules, 2006.

9. Hedging and Derivatives

Pursuant to ICAI Announcement "Accounting for Derivatives" on the early adoption of Accounting Standard 30 - "Financial Instruments :"Recognition and Measurement" ("AS 30"), the company has early adopted AS 30 with effect from I st October, 2008, to the extent that the adoption does not conflict existing mandatory accounting standards and other authoritative pronouncements, company law and other regulatory requirements. Pursuant to the adoption :-

a) Transitional Loss representing the Loss on fair valuation of foreign currency options, determined to be ineffective cash flow hedges on the date of adoption, amounting to Rs. 490.76 Lacs has been adjusted against the opening balance of General Reserve Account in the Balance Sheet.

b) Loss on the fair valuation of forward covers, which qualify as effective cash flow hedge amounting to Rs. 69.31 Lacs, on the date . of adoption, has been recognized in the hedging reserve account.

Following are the outstanding forward exchange contracts and currency options entered into by the Company:

10. Long Term loans & advances includes Rs. 3,073.19 Lacs advances against acquisition of trade mark.

11. Advances to sundry creditors under short term loans and advances includes Rs. 5,816.90 Lacs advances to related parties on current account/trade advance.

12. Related Party Disclosures

Related party disclosures, as required by AS-18, "Related Party Disclosures" are given below: (I) Names of the related parties and description of relationship:

A) Related parties where control exists

i) Subsidiaries Elder International FZCO Dubai, UAE

ii) Associates/Joint Venture Elder Universal Pharmaceuticals (Nepal) Private Limited

B) Enterprises over which key management Elder Health Care Limited. personnel and their relatives are able to Elder Projects Limited. exercise significant influence Elder Instruments Private Limited.

Maveer Prints Private Limited

E W F Pharmaceuticals Private Limited.

Redle Pharmaceuticals Private Limited

Akshaya Holdings Private Limited.

Anjay Prints

Anshul Printers

C) Key Management Personnel Mr. J Saxena

and their Relatives Mr. Alokjagdish Saxena

Mr. Yusuf Karim Khan

Mrs. Shalini Kumar Note: Related party relationship is as identified by the company and relied upon by the audito

13. The accounts for current financial year are for a period of fifteen months as compared to twelve months accounting year for previous year and hence to that extent the figures are not comparable.

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Mar 31, 2012

NOTE 1:

(Rs. in Lacs)

Year Ended Year Ended 31st March, 2012 31st March, 2011

CONTINGENT LIABILITIES :

a) Letters of Credit 3,308.91 3,242.89

b) Bank Guarantees 9,689.04 342.55

c) Corporate Guarantees to Subsidiary 16,034.65 8,673.47

d) Disputed liability in respect of :

i) Income tax * 268.58 268.58

ii) Sales tax 36.21 17.56

iii) Customs Duty 25.00 25.00

iv) Service Tax 492.62 -

* Includes demand of Rs. 216.53/- lacs decided in favour of the Company but disputed by Income-tax Department.

e) Estimated amount of contracts remaining to be executed on Capital 230.70 1869.96 Account and not provided for.

2. The balance in respect of trade receivables and loans & advances are subject to confirmations by the respective parties. The balances of trade payables were confirmed at random and reconciliations / adjustments have been made in such accounts, wherever necessary.

3 HEDGING AND DERIVATIVES

Pursuant to ICAI Announcement "Accounting for Derivatives" on the early adoption of Accounting Standard 30 - "Financial Instruments : "Recognition and Measurement" ("AS 30"), the company has early adopted AS 30 with effect from October 1, 2008, to the extent that the adoption does not conflict existing mandatory accounting standards and other authoritative pronouncements, Company Law and other regulatory requirements. Pursuant to the adoption :-

a) Transitional Gain representing the Gain on fair valuation of foreign currency options, determined to be ineffective cash flow hedges on the date of adoption, amounting to Rs. 667.67 Lacs has been adjusted against the opening balance of General Reserve Account in the Balance Sheet.

b) Gain on the fair valuation of forward covers, which qualify as effective cash flow hedge amounting to Rs. 206.18 Lacs, on the date of adoption, has been recognised in the hedging reserve account.

4 SEGMENT INFORMATION

The company is primarily engaged and deals in pharmaceuticals & related products, which in the context of Accounting Standard -17, is the only business segment and has been identified as the primary reporting segment. Accordingly, the information appearing in these financial statements relate to the aforesaid primary reporting segment.

Secondary segmental reporting is performed on the basis of the geographical locations of customers. The geographical segments considered for disclosure are based on the revenue within India (including sales to customers located in India and service income accrued in India) and revenues outside India (sales to customers located outside India).

5 Long term loans and advances include Rs. 3434.20 Lacs advances against acquisition of trade mark.

6. During the year under review, the Income Tax authorities had carried out search operations in the office and factory premises of the Company. The liability, if arises, on completion of block assessment proceedings under the provisions of the Income Tax Act, 1961, will be provided as and when ascertained.

7. The Board of Directors of the Company has at its meeting held on 2nd August 2012 approved Scheme of Arrangement for merger of Elder Health Care Ltd. with the Company under sections 391 to 394 of the Companies Act, 1956, subject to the approvals of shareholders and other appropriate authorities.

The Scheme of Arrangement will become effective from 1st April 2012. On the approval of the Scheme of Arrangement, it is proposed to allot 100 equity shares of Rs.10/- each of the Company for every 358 equity shares of Rs.10/- each held by the shareholders of Elder Health Care Ltd.

8. The revised schedule VI notified under Companies Act 1956 has become applicable to the Company during the current year. The previous years figures have been re-grouped, re-arranged, re-worked & reclassified, wherever necessary, to conform to revised schedule VI classification and are to be read in relation to the amounts and other disclosures relating to the current year.

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Mar 31, 2011

As at As at 31st March 2011 31st March 2010

(Rs. in Lacs) (Rs. in Lacs)

1. CONTINGENT LIABILITIES

a) Letters of Credit 3242.89 2933.74

b) Bank Guarantees 342.55 180.39

c) Corporate Guarantees to Subsidiary 8673.47 -

d) Disputed liability in respect of:

i) Income tax* 268.58 73.79

iil Sales tax 17.56 17.56

iiil Customs Duty 25.00 49.50

iv) Excise Duty - 12.55

* includes demand ofRs. 216.53 lacs decided in favour of the Company but disputed by Income-tax Department.

2. Hedging and Derivatives

Pursuant to ICAI Announcement "Accounting for Derivatives" on the early adoption of Accounting Standard 30 - "Financial Instuments :"Recognition and Measurement" i"AS 30"), the company has early adopted AS 30 with effect from October 1, 2008, to the extent that the adoption does not conflict with existing mandatory accounting standards and other authoritative pronouncements, company law and other regulatory requirements. Pursuant to the adoption :-

a) Transitional Gain representing the Gain on fair valuation of foreign currency options, determined to be ineffective cash flow hedges on the date of adoption, amounting toRs. 194.41 Lacs has been adjusted against the opening balance of General Reserve Account in the Balance Sheet.

b) Gain on the fair valuation of forward covers, which qualify as effective cash flow hedge amounting to T501.29 Lacs, on the date of adoption, has been recognised in the hedging reserve account.

3 DEFINED BENEFIT PLAN:

In accordance with applicable Indian laws, the Company provides for gratutity. A defined benefit retirement plan (Gratuity Plan). The Gratutity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee's last drawn salary and the years of employment with the Company. The Company provides the gratutiy benefit through annual contributions to a fund managed by the Insurer viz. (LIC). Under this plan, the settlement obligation remains with the Company.although the Employees Gratutity Trust administers the plan and determines the contribution premium required to be paid by the Company.

4. Segment Information:

The company is primarily engaged and deals in pharmaceuticals & related products, which in the context of Accounting Standard-17, is the only business segment and has been identified as the primary reporting segment. Accordingly, the information appearing in these financial statements relate to the aforesaid primary reporting segment. Secondary segmental reporting is performed on the basis of the geographical locations of customers.

5. Debtors are secured to the extent of security deposit ofRs. 1334.60 lacs (Previous YearRs. 1271.50 lacs) received from Distributors and Consignment Agents.

6. Sundry Debtors and Loans & Advances includes Rs. 848.06 lacs (Previous Year Rs. 967.25 lacs) and Rs. 37.40.lacs (Previous Year Rs. 1415.56 lacs ) respectively, for value to be received, due from a company in which one of the Directors of this company is interested as Director. Maximum Debit Balance outstanding during the year Rs. 848.06 lacs and Rs. 836.94 lacs (Previous Year Rs. 1097.22 lacs and Rs. 1415.56 lacs) respectively.

7 I Related Party Disclosures:-

Related party dislosures, as required by AS-18, "Related Party Disclosures" are given below : Names of the related parties and description of relationship :

Related parties where control exists (A) Subsidiaries

Elder International FZCO, Dubai, UAE

IB) Enterprises over which key management personnel and their relatives are able to exercise significant influence

Elder Health Care Limited.

Elder Projects Limited.

Elder Instruments Private Limited.

Maveer Prints Private Limited

E W F Pharmaceuticals Private Limited.

Redle Pharmaceuticals Private Limited

Akshaya Holdings Private Limited.

Anjay Prints

Anshul Printers

(C) Key Management Personnel and their Relatives

Mr Jagdish Saxena

Mr M. V. Thomas (Upto 30-06-2010)

Mr Alok Saxena

Mr Yusuf Karim Khan

Mrs Shalini Kumar

Note: Related party relationship is as identified by the company and relied upon by the auditors.

8. Previous year's figures have been regrouped / rearranged wherever necessary.

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Mar 31, 2010

As At As At 31st March, 31st March, 2010 2009 (Rs. in Lacs) (Rs. in Lacs)

1. CONTINGENT LIABILITIES

a) Letters of Credit 2933.74 2208.39

b) Bank Guarantees 180.39 222.08

c) Corporate Guarantees to Subsidiary - 13986.70

d) Disputed liability in respect of :

i) Income tax 73.79 263.14

ii) Sales tax 17.56 8.61

iii) Customs Duty 49.50 49.50

iv) Excise Duty 12.55 7.94

2. Estimated amount of contracts remaining to be executed on 1906.21 1667.48 Capital Account and not provided for. NOTE :

1. The Installed Capacity is as certified by the management and not verify by auditors, this being a technical matter.

2. Actual Production Includes: i) Sample Production.

ii) Production at Loan Licences locations.

iii) Production of goods for Captive consumption.

3. Hedging and Derivatives

Pursuant to ICAI Announcement "Accounting for Derivatives" on the early adoption of Accounting Standard 30 - "Financial Instuments :"Recognition and Measurement" ("AS 30"), the company has upon early adoption of AS 30 with effect from October 1, 2008, to the extent that the adoption does not conflict with existing mandatory accounting standards and other authoritative pronouncements, company law and other regulatory requirements. Pursuant to the adoption :- a) Transitional Gain representing the Gain on fair valuation of foreign currency options, determined to be ineffective cash flow hedges on the date of adoption, amounting to Rs.1096.58 Lacs has been adjusted against the opening balance of General Reserve Account in the Balance Sheet.

4. Defined Benefit Plans

In accordance with applicable Indian laws, the company provides for gratutity,a defined benefit retirement plan(Gratuity Plan). The Gratutity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employees last drawn salary and the year of employment with the company. The company provides the gratutiy benifit through annual contributions to a fund managed by the Insurer (LIC). Under this plan, the settlement obligation remains with the company,although the Employees Gratutity Trust administers the plan and determines the contribution premium required to be paid by the company.

5. During the previous year the Ministry of Corporate Affairs New Delhi (MCA) had commenced an investigation on the Company under Section 235 of the Companies Act, 1956. The investigation report was forwarded to the Company for its comments thereon. After receipt of Companys comments the investigating agency issued a show cause notice to the Company and some of its Directors/ Officers relating only to alleged violations of certain provisions of the Companies Act, 1956 which the Company has replied. The Company reckons that the the matter is concluded as the investigating agency has since issued the last letter dated 4th February 2010 in the matter only warning the Company to be particular in future in complying with the provisions of Section 154 of the Companies Act, 1956

6. Debtors are secured to the extent of security deposit of Rs.1271.50 lacs (Previous Year Rs 940.00 lacs) received from Distributors and Consignment Agents.

7. Sundry Debtors and Loans & Advances for value to be received includes Rs.967.25 lacs (Previous Year Rs.1097.22 lacs) and Rs1415.56.lacs (Previous Year Rs.396.86 lacs ) respectively due from a company in which one of the Directors of this company is interested as Director. Maximum Debit Balance outstanding during the year Rs.1097.22 lacs and Rs 1415.56 lacs (Previous Year Rs.1097.22 lacs and Rs 396.86 lacs) respectively.

8. The Companys Plant at Village Charba, Langa Road commenced commercial production during the financial year. The delay in getting the statutory clearance, which was beyond the control of the management, resulted in time and cost over run of the project.

9. Related Party Disclosures :-

Related party dislosures, as required by AS-18, "Related Party Disclosures" are given below : Names of the related parties and description of relationship :

(A) Related parties where control exists : Subsidiaries Elder International FZCO Dubai, UAE Somerta Holdings Co. Limited, Cyprus

(B) Enterprises over which key management personnel and Elder Health Care Limited. their relatives are able to exercise significant influence Elder Projects Limited.

Elder Instruments Private Limited.

Maveer Prints Private Limited

E W F Pharmaceuticals Private Limited.

Redle Pharmaceuticals Private Limited

Akshaya Holdings Private Limited.

Anjay Prints

Ansul Printers

(C) Key Management Personnel and their Relatives Mr J Saxena Mr M V Thomas

Mr Alok Saxena

Mr Yusuf Karim Khan

Mrs Shalini Kumar

Note: Related party relationship is as identifed by the company and relied upon by the auditors

10. Previous years figures have been regrouped / rearranged wherever necessary.