Notes to Accounts of Lyka Labs Ltd.

Mar 31, 2018

1. CORPORATE INFORMATION

Lyka Labs Limited(“the Company”) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (as amended by the Companies Act, 2013). Its shares are listed on two stock exchanges in India. The Company is engaged in the business of pharmaceutical and related activities, including research.

A. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS:

The preparation of Financial Statements is in conformity with the recognition and measurement principles of Ind AS which requires the management to make judgements for estimates and assumptions that affect the amounts of assets, liabilities and the disclosure of contingent liabilities on the reporting date and the amounts of revenues and expenses during the reporting period and the disclosure of contingent liabilities. Differences between actual results and estimates are recognized in the period in which the results are known/ materialized.

2.1 ESTIMATES ASSUMPTIONS AND JUDGEMENTS:

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the financialstatements:

a) Estimation of current tax expense and deferred tax:

The calculation of the Company’s tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profits/losses and/or cash flows. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.

b) Recognition of deferred tax assets/ liabilities:

The recognition of deferred tax assets/ liabilities is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits, reference is made to the latest available profit forecasts.

c) Estimation of Provisions & Contingent Liabilities:

The Company exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities which is related to pending litigation or other outstanding claims. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual liability may be different from the originally estimated as provision.

d) Estimated useful life of Property, Plant and Equipment:

Property, Plant and Equipment represent a significant proportion of the asset base of the Company. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life, its expected usage pattern and the expected residual value at the end of its life. The useful lives, usage pattern and residual values of Company’s assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology etc.

e) Estimation of Provision for Inventory:

The Company writes down inventories to net realisable value based on an estimate of the realisability of inventories. Write downs on inventories are recorded where events or changes in circumstances indicate that the balances may not be realised. The identification of writedowns requires the use of estimates of net selling prices of the down-graded inventories. Where the expectation is different from the original estimate, such difference will impact the carrying value of inventories and write-downs of inventories in the periods in which such estimate has been changed.

f) Estimation of Defined Benefit Obligation:

The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employment plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations.

g) The Company determines the appropriate discount rate at the end of each year. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations. In determining the appropriate discount rate, the Company considers the interest rates of government bonds of maturity approximating the terms of the related plan liability.

h) Estimated fair value of Financial Instruments.

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Management uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at the end of each reporting period.

2.2 STANDARDS ISSUED BUT NOT YET EFFECTIVE

Appendix B to Ind AS 21, Foreign currency transactions and advance consideration: On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company has evaluated the effect of this on the financial statements and there is no impact on the company’s financial statements due to the said changes.

Ind AS 115- Revenue from Contract with Customers: On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The standard permits two possible methods of transition:

- Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors.

- Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach).

The company is in the process of evaluating the impact of above on its Financial Statements.

3.1 Rights, preferences and restriction attached to equity shares :

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

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts .The distribution will be in the proportion to the number of equity shares held by the shareholders.

3.2 Terms of warrants issued:

Each warrant is entitled to be converted in equity shares of Rs.10/- each Warrant does not bear any interest.

The warrants will be converted into equal no. of shares within a period of 18 months from the date of allotment upon receipt of balance amount of 75% of issue price. In the event of non receipt of balance amount of issue price, the subscription money paid on warrant shall be forfeited. All the outstanding warrants in respect of which the holder has not exercised option shall lapse on the completion of 18 months from the date of allotment.

The shares so allotted on conversion of warrants shall rank pari pasu in all respect in existing equity shares.

The shares so allotted on conversion of warrants shall remain under lock-in period of three years from the date of trading approval granted by the stock exchange.

The warrant holders shall have no right or privileges.

3.4 40 Lakhs Equity shares of Rs.10/- each were issued on 07.12.2005 by conversion of Global Depository Receipts.

3.5 The Company has allotted 4.60 Lakhs convertible warrants at Rs. 28/- per warrant to Promoters / Promoters Group on preferential basis pursuant to the Special Resolution passed by the members of the Company at their Extra Ordinary General Meeting held on January 23,2015. These warrants were converted ( in the ratio of 1 share for 1 warrant ) into equity shares of Rs.10/- each at a premium of Rs.18/-per share during the previous period.

Nature of Reserves:

Capital Reserves

The Capital reserve is created from the forfeiture of equity warrants and receipts of subsidy for setting up the factories in backward areas for performing research on critical medicines for the betterment of the society.

Securities Premium

Securities Premium account comprises of the premium on issue of shares. The reserve is utilised in accordance with the specific provision of the Companies Act, 2013.

General Reserves

The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be reclassified subsequently to the statement of profit and loss.

4.1 Details of terms of repayment and security provided for in respect of the Long-Term Borrowings as follows : (Including Current Maturities of Term Loans from Banks and finance lease obligation -Refer Note No. 21)

(a) Term Loan (Expansion) from Dena Bank repayable in 8 quarterly instalments of Rs. 18.09 Lakhs each. Interest rate is MCLR 1.10 % ##

(b) Term Loan (R&D) from Dena Bank repayable in 8 quarterly instalments of Rs. 6.77 Lakhs each. Interest rate is MCLR 1.10 % ##

(c) Term Loan from Dena Bank repayable in 6 quarterly instalments of Rs. 16.40 Lakhs each. Interest rate is MCLR 1.65 % ##

(d) Term Loan (working capital) from Dena Bank repayable in 4 quarterly instalments of Rs. 40 Lakhs each. Interest rate is MCLR 1.10 % ##

(e) Term Loan (Lyophilisation II) from Dena Bank repayable in 8 quarterly instalments of Rs. 7.81 Lakhs each. Interest rate is MCLR 1.10 % ##

(f) Term Loan (New Expansion ) from Dena Bank repayable in 11 quarterly instalments of Rs. 90.90 Lakhs each. Interest rate is MCLR 1.10 % # #

(g) Term Loan (Schedule - M Requirement) from Dena Bank repayable in 10 quarterly instalments of Rs. 15.50 Lakhs each. Interest rate is mClR 1.10 % # #

(h) Term Loan (working capital) from Dena Bank repayable in 4 quarterly instalments of Rs. 60 Lakhs each. Interest rate is MCLR 1.15% ##

(i) Term loan WCTL (Fresh) from Dena Bank repayable in 6 quarterly instalments of Rs. 100 Lakhs each and subsequently 10 quarterly instalments of Rs.140 Lakhs commencing after 1 year of moratorium period from the date of disbursement. Interest rate is MCLR 1.65% ##

## The above Term Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery and guaranteed by some of the directors of the Company. These Loans are also secured by registered mortgage of Company’s immovable properties at Ankleshwar and Valsad.

(j) Term Loan from Bank of Maharashtra repayable in 16 quarterly instalments of Rs. 30 Lakhs each. Interest rate is MCLR 3.5 % 1 % . *

(k) Term Loan from Bank of Maharashtra repayable in 4 quarterly instalment of Rs.50 Lakhs each. Interest rate is MCLR 1.25 %. *.

* Above Term Loans are Secured by extension of equitable mortgage of property situated at Shiv Shakti industrial Estate, Andheri - East, Mumbai - 400059

(l) Term Loan from Kapol Co-Operative Bank Ltd. repayable in 51 equal monthly instalments of Rs. 12.16 Lakhs each. Interest rate is @15%. **

* *Above Term Loan are Secured by extension of equitable mortgage of property and machinery situated at Ankleshwar.

4.2 7 Lease obligations repayable in equated monthly instalments upto March 2020 secured by respective Vehicles. Rate of interest ranges from 8.37% to 18.01%.

4.3 108,570 10% Cumulative Redeemable Preference Shares of Rs. 100 each fully paid up were issued on 30th September, 2005 redeemable at the option of the company but not later than 20 years from the date of allotment.

4.4 Details of continuing default as at 31st March, 2018 is as follows:

Principal Amount: Rs. 2570.38 Lakhs, period of default: From June 2016 to March 2018 InterestAmount: Rs. 814.26 Lakhs, period of default: From February 2016 to March 2018

5.1 Details of terms of repayment and securities provided in respect of Current Borrowings from bank:

(a) Interest on Dena Bank Cash Credit Loan is MCLR 1.10 %o p.a. # #

(b) Interest on Dena Bank Buyers Credit Loan ranges from LIBOR 0.75% to LIBOR 2.00% # #

# # The above Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery and guaranteed by some of the Directors of the Company. These Loans are also secured by registered mortgage of Company’s immovable properties at Ankleshwar and Valsad.

5.2 Interest on Loans from related parties ranges between 10.25 % and 18% ( simple Interest ).

5.3 Interest on Inter Corporate Deposits is 21% ( simple interest ).

5.4 Interest on Short Term Loans ranges between 12% and 21%

(6) Contingent Liabilities are not provided for in respect of following:

(i) Demands were raised against the Company aggregating to Rs. 680.62 Lakhs ( as at 31st March 2017 Rs. 680.62 Lakhs and as at 1st April 2016 Rs. 680.62 Lakhs) plus interest thereon under the Drug Price Control Order 1979 by the Government of India and the same was contested by the Company. In the earlier years, the Company had received recovery notices for recovery of Rs. 2,094.41 Lakhs( as at 31st March 2017 Rs. 2,094.41 Lakhs and as at 1st April 2016 Rs. 2,094.41 Lakhs) to be deposited into “Drug Price Equalisation Account”.

The Company has challenged the said notices in the writ petitions before the Hon’ble High Court of Gujarat. The Hon’ble High Court has admitted the writ petitions subject to the Company depositing certain amounts against the said demands. Accordingly, the Company has deposited Rs. 1,032.45 Lakhs (as at 31st March 2017 Rs. 1,032.45 Lakhs and as at 1st April 2016 Rs. 1,032.45 Lakhs).

The Company expects favourable outcome in the said writ petitions and hence, the amounts paid have been treated as advances which are considered by the Company as good and recoverable.

(ii) (a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals)Baroda, dated 24th January, 2011 in respect of Company’s appeal against the demand for Gujarat Sales Tax of Rs. 1,324.08 Lakhs ( as at 31st March 2017 Rs. 1,324.08 Lakhs and as at 1st April 2016 Rs. 1,324.08 Lakhs) for the financial year 2002-2003 for nonsubmission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs. 85.45 Lakhs (as at 31st March 2017 Rs. 85.45 Lakhs and as at 1st April 2016 Rs. 85.45 Lakhs) against which Company has made payment of Rs. 45.81 Lakhs (as at 31st March 2017 Rs. 85.45 Lakhs and as at 1st April 2016 Rs. 85.45 Lakhs) under protest. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub-judice and the payments of Rs. 45.81 Lakhs (as at 31st March 2017 Rs. 45.81 Lakhs and as at 1st April 2016 Rs. 45.81 Lakhs) are considered by the Company as good and recoverable.

(b) There are disputed Sales Tax demands in respect of prior years amounting to Rs. 549.96 Lakhs (as at 31st March 2017 Rs. 834.34 Lakhs and as at 1st April 2016 Rs. 677.71 Lakhs) against which the Company has made payment of Rs. 22.22 lakhs (as at 31st March 2017 Rs. 95.32 Lakhs and as at 1st April 2016 Rs. 69.02 Lakhs) under protest. The Company has further contested these demands before the Sales Tax Commissioner / Tribunal. The matters are sub-judice and the payments of Rs. 22.22 Lakhs (as at 31st March 2017 Rs. 95.32 Lakhs and as at 1st April 2016 Rs.45.85 Lakhs) are considered by the Company as good and recoverable.

(iii) The Company has received notices from Central Excise department raising demands as stated below:

(a) Rs. 108.75 Lakhs (as at 31st March 2017 Rs. 108.75 Lakhs and as at 1st April 2016 Rs. 108.75 Lakhs) against which the Company has paid Rs. 25.00 Lakhs (as at 31st March 2017 Rs. 25.00 Lakhs and as at 1st April 2016 Rs. 25.00 Lakhs). The matter is sub-judice and the payment of Rs. 25.00 Lakhs (as at 31st March 2017 Rs. 25.00 Lakhs and as at 1st April 2016 Rs. 25.00 Lakhs) is considered by the Company as good and recoverable.

(b) Rs. 71.37 Lakhs (as at 31st March 2017 Rs. 71.37 Lakhs and as at 1st April 2016 Rs.71.37 Lakhs) relating to disputed Central Excise duty, the matter is sub-judice.

(iv) Disputed Service Tax demand amounts to Rs. 18.10 Lakhs (as at 31st March 2017 Rs. 18.10 Lakhs and as at 1st April 2016 Rs. 18.10 Lakhs) against which the Company has made payment of Rs. 1.81 Lakhs (as at 31st March 2017 Rs. 1.81 Lakhs and as at 1st April 2016 Rs. NIL). The matter is sub-judice, and the payment of Rs. 1.81 Lakhs (as at 31st March 2017 Rs. 1.81 Lakhs and as at 1st April 2016 Rs. NIL) is considered by the Company as good and recoverable.

(v) The Company has received orders from Income Tax Department raising demands aggregating to Rs. 2,402.26 Lakhs (as at 31st March 2017 Rs. 2,325.04 Lakhs and as at 1st April 2016 Rs. 2,325.04 Lakhs) relating to prior years against which the Company has paid Rs. 115.45 Lakhs (as at 31st March 2017 Rs. 100.00 Lakhs and as at 1st April 2016 Rs. 100.00 Lakhs). The matter is sub-judice and the payment of Rs. 115.45 Lakhs (as at 31st March 2017 Rs. 100.00 Lakhs and as at 1st April 2016 Rs.100.00 Lakhs) is considered by the Company as good and recoverable.

(vi) Rs. 7.95 Lakhs (as at 31st March 2017 Rs. 7.95 Lakhs and as at 1st April 2016 Rs. 7.95 Lakhs) being claims against the Company not acknowledged as debt.

(vii) Employee (Including Ex-Employees) Claims relating to ex-gratia and other benefits aggregating to Rs. 429.55 Lakhs (as at 31st March 2017 Rs. 427.32 Lakhs and as at 1st April 2016 Rs. 424.57 Lakhs) as the matter is sub-judice.

(viii) Bank Guarantees provided by a Bank on behalf of the Company Rs. 56.92 Lakhs (as at 31st March 2017 Rs. 58.84 Lakhs and as at 1st April 2016 Rs. 96.33 Lakhs).

(ix) Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs. 135.71 Lakhs (as at 31st March 2017 Rs. 124.86 Lakhs and as at 1st April 2016 Rs. 114.00 Lakhs ).

(7) Fixed Deposits:

During the year, the Company has repaid deposits that were claimed aggregating to Rs. 17.85 Lakhs as regard the balance of unclaimed deposits of Rs. 49.52 Lakhs shall be paid as and when claimed.

The additional liability of interest, if any, arising on account of delayed payment/ non-payment shall be provided for in the year in which the said liability is settled.

(8) Debentures:

The Company has repaid Debentures as per Order of National Company Law Tribunal (Ahmedabad Bench) dated 22nd May, 2017 as follows:

*Out of Rs. 724.00 Lakhs debentures paid by the Company during the year, Rs 12.00 Lakhs is outstanding due to cheques returned Undelivered/ Unclaimed.

(9) Rs. 502.50 Lakhs (Previous Year Rs. 502.50 Lakhs) placed with the Managing Director, as security deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The Company has been legally advised that the provisions of section 185 of the Companies Act, 2013 are not attracted in respect of the same.

(10) The balances relating to Trade Receivables, Trade Payables, Group Companies and Loans and Advances as on 31stMarch,2018 are subject to confirmation and adjustments, if any, on reconciliation of accounts. Since the extent to which these balances are subject to confirmation is not ascertainable, the resultant impact of the same on the accounts cannot be ascertained and shall be adjusted in the year in which the confirmation process is completed.

(11) Pledged shares of a Director encashed by a Lender:

During the year, the Company has received claims from a Director aggregating to Rs. 128.25 Lakhs being the value of 225,000 equity shares of the Company pledged as security for finance supposed to have been provided by a Finance Company to the Company. These pledged shares were allegedly invoked by the said Finance Company. Further, the said Director has claimed the interest on the same, post invocation of the pledged shares.

Pending receipt of documentary evidence to substantiate the above claims, the Company has debited to Finance Company with Rs. 128.25 Lakhs. However, the said Finance Company has not confirmed the same for which no provision has been made in the books. The Company is in the process of resolving the counter claims of both the parties.

(12) Investments in Subsidiaries:

(a) The Board of Directors at their meeting held on 10th March, 2016 resolved to merge Company’s Subsidiary i.e. Lyka Exports Limited with it, effective from 1st April, 2015 (“Appointed Date”) under the provisions of sections 391 to 394 and other applicable provisions, if any, of the Companies Act, 1956 as amended and the corresponding provisions of the Companies Act, 2013 and SEBI circular No. CIR/CFD/CMD/16/2015 dated 30th November, 2015. Since then the “appointed date” of the said merger of Lyka Exports Limited is postponed to 1st April, 2017 by the Board of Directors at their meeting held on 30th August, 2017.

(b) The Board of Directors at their meeting held on 29th May 2017, resolved to merge Company’s subsidiary Lyka Healthcare Limited with it effective from 1st April 2017 (“Appointed Date”) under the provisions of sections 391 to 394 and other applicable provisions, if any, of the Companies Act, 1956 as amended and the corresponding provisions of the Companies Act, 2013 and SEBI circular No. CIR/CFD/CMD/16/2015 dated 30th November, 2015.

The National Company Law Tribunal (NCLT), Ahmedabad approved the application vide its order dated 6th February 2018 and ordered to call Equity/Preference Shareholders and Secured/ Unsecured Creditors meeting on 27th March 2018 for approving the arrangement

The Equity / Preference Shareholders at the meetings convened, approved the arrangements of merger. The Unsecured Creditors at their meeting also approved the arrangement of merger. However, the meeting of Secured Creditors could not be proceeded, due of lack of quorum. Accordingly, the Company filed an interlocutory Application on 13th April 2018, before NCLT seeking directions for re-convening / conducting a fresh meeting of the Secured Creditors. Pursuant to Interlocutory Application, NCLT passed an order dated 9th May, 2018 directing the Company for reconvening meeting of Secured Creditors on 2nd July, 2018.

(13) Capital Expenditure:

(i) Tangible Project Capital Work-in-Progress Rs. 1,666.25 Lakhs as at 31st March,2018, (as at 31st March 2017 Rs. 1669.63 Lakhs and as at 1st April 2016 Rs. 1,624.60 Lakhs) includes allocable indirect expenditure in respect of modernization/expansion of Ankleshwar unit aggregating to Rs. 262.44 Lakhs (as at 31st March 2017 Rs. 258.15 Lakhs and as at 1st April 2016 Rs. 213.69 Lakhs) and interest amount of Rs. 299.66 Lakhs (as at 31st March 2017 Rs. 299.66 Lakhs and as at 1st April 2016 Rs. 235.56 Lakhs) which is pending allocation to Fixed Assets on completion of the project.

(ii) The Company has incurred direct expenditure and allocable indirect expenditure up to 31st March,2018 in respect of “new product development and applied research” aggregating to Rs. 976.53 Lakhs (as at 31st March 2017 Rs. 753.64 Lakhs and as at 1st April 2016 Rs. 569.22 Lakhs) including finance cost of Rs. 76.12 Lakhs (as at 31st March 2017 Rs. 214.40 Lakhs and as at 1st April 2016 Rs. 220.88 Lakhs) which is carried forward under “Capital Work in Progress - Intangibles”, to be recognized as “Self-Generated Intangible Assets” upon successful development of respective products or to be charged to Statement of Profit and Loss in the year in which development is abandoned.

During the year, the Company has capitalized Rs. 42.93 Lakhs (as at 31st March 2017 Rs. 93.27 Lakhs and as at 1st April 2016 Rs. 33.22 Lakhs) as “Self-Generated Intangible Assets” upon successful development of respective products.

(14) During the year, inventories include slow/non-moving raw material and packing materials procured during the earlier years amounting to 174.06 Lakhs as on 31st March 2018, which are valued at cost. The Company is evaluating to utilize/realise the same.

(15) The Company has provided Rs. 76.89 Lakhs (Previous Year Rs. 109.24 Lakhs) being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

(16) Employment and Retirement Benefits :

(i) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 31st March, 2018. The following tables set out the amounts recognized in the financial statements as at 31st March,2018 for the defined benefit plans.

(ii) The actuarial valuation of the present value of the defined benefit obligation in respect of Compensated Absence Liabilities has been carried out as at 31st March,2018. The following tables set out the amounts recognized in the financial statements as at 31st March, 2018 for the defined benefit plan.

Sensitivity Analysis:

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, expected salary increase and mortality. The sensitivity analysis below have been determined based on reasonably possible changes of the assumptions occurring at the end of the reporting period, while holding all other assumptions constant. The results of sensitivity analysis is given below:

Please note that the sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

(17) During the year, the Company has applied to two of its banks for settlement of principal / interest amount. The management has accordingly reversed interest on term loan provided for the period from April 2017 to September 2017 amounting to Rs 469.92 Lakhs and has not provided interest on term loan from said two banks for the period from October 2017 to March 2018 amounting to Rs 471.64 Lakhs, aggregating to Rs. 941.56 Lakhs.

Further the Company has reversed interest expenses for earlier years for the period from February 2016 to March 2017 amounting to Rs 344.35 Lakhs. There is also no provision for penal interest on term loan from two banks and working capital limit from one bank amounting to Rs 80.04 Lakhs.

(18) Assets taken on operating lease:

The future minimum lease payments and payment profile of non-cancellable operating leases are as under:

(19) Segment Disclosures :

a. Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Indian Accounting standard on ‘Operating Segments’ (IndAS-108), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segmental information thereof is given.

b. Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below 10% of the total turnover of the Company, there is no reportable geographical segment.

c. Revenues from two customers of the company were approximately Rs. 1794.77 Lakhs and Rs. 423.29 Lakhs representing approximately 42% and 10% of the Company’s total revenues, for the year ended 31st March, 2018.

Revenues from two customers of the company were approximately Rs. 2410.88 Lakhs and Rs. 1618.50 Lakhs representing approximately 31% and 21% of the Company’s total revenues, for the year ended 31st March, 2017.

20. Taxtation:

Current tax :

In view of Current year business loss, unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the year.

Deferred Tax:

Reconciliation of tax expenses and accounting profit multiplied by India’s domestic tax rate for the year ended 31st March 2018 and 31st March 2017.

b. Fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

The following table provides the fair value measurement hierarchy of the Company’s financials assets and liabilities that are measured at fair value or where fair value disclosure is required:

c Valuation technique to determine fair value

The following methods and assumptions were used to estimate the fair values of financial instruments

(i) The management assesses that fair value of cash and cash equivalents, trade receivables, trade payables, bank overdrafts and other current financial assets and liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

(ii) The fair values of the equity investment which are quoted, are derived from quoted market prices in active markets. The fair value of Mutual Fund Investment under Level-2 are based on NAV published. The Investments measured at fair value and falling under fair value hierarchy Level 3 are valued on cost which is considered as an appropriate estimate of fair value because of a wide range of possible fair value measurements and cost represents the best estimate of fair values within that range. The carrying value of those investments are individually immaterial.

d. Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprises of risks relating to interest rate risk and other price risks such as equity price risk and commodity price risk. Financial instruments affected by market risks mainly include borrowings, deposits and investments.

Foreign currency risk management

Foreign exchange risk arises on future commercial transactions and on all recognised monetary assets and liabilities, which are denominated in a currency other than the functional currency of the Company. The Company’s management has set policy wherein exposure is identified, benchmark is set and monitored closely, and accordingly suitable hedges are undertaken. Policy also includes mandatory initial hedging requirements for exposure above a threshold.

The Company’s foreign currency exposure arises mainly from foreign exchange imports, exports and other income/expenses in foreign currency, primarily with respect to USD.

As at the end of the reporting period, the carrying amounts of the company’s foreign currency denominated monetary assets and liabilities in respect of the primary foreign currency i.e. USD and derivative to hedge the exposure, are as follows:

The company’s exposure to foreign currency changes for all other currencies is not material.

Foreign currency sensitivity analysis

The following table demonstrate the sensitivity to a reasonable possible change in USD exchange rate, with all other variables held constant.

Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company exposure to the risk of changes in market interest rates relates primarily to the Company’s debt obligations and investments in debt instruments including debt mutual fund.

Interest rate sensitivity

The below table demonstrate the sensitivity of the company’s profit before tax to a reasonable possible change in interest rate with all other variables being constant.

e Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and other financial instruments.

Trade Receiveble

Customer credit risk is managed by SCM team subject to the company’s established policy, procedures and control relating to customer credit risk management. Outstanding customer receivables are regularly monitored and followed up.

Financial instruments and cash deposits

Credit risk from balances with banks is managed by the Company’s treasury department in accordance with the Company’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty’s potential failure to make payments.

Liquidity risk

Liquidity risk is defined as the risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. The Company’s objective is to at all times maintain optimum levels of liquidity to meet its cash and liquidity requirements. The Company closely monitors its liquidity position and deploys a robust cash management system. It maintains adequate source of financing through the use of bank deposits and cash credit facilities. Processes and policies related to such risks are overseen by senior management. Management monitors the Company’s liquidity position through rolling forecasts on the basis of expected cash flows. The Company assessed the concentration of risk with respect to its debt and concluded it to be low.

The table below summarises the maturity profile of the company’s financial liabilities based on contractual undiscounted payments.

f Excessive risk concentration

Concentrations arise when a number of counter parties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry. Company believes that there is no such excessive risk concentration.

21 Capital Management

The Company’s objective when managing capital is to ensure the going concern operation and to maintain an efficient capital structure to reduce the cost of capital, support the corporate strategy and meet shareholders expectations. The policy of the company is to borrow through banks supported by committed borrowing facility to meet anticipated funding requirements.The capital structure is governed by policies approved by the Baord of Directors.The following table summarises the capital of the Company.

21.1 Effect of Ind AS adoption on the statement of cash flows for the year ended March 31, 2017

There are no material adjustments to the statement of cash flow as reported under previous GAAP

22.2 Reconciliation Explanations:

a Remeasurements of financial assets and liabilities measured at amortised cost

Under Indian GAAP, the Security deposits/ Rent deposits receivable/payable are valued at cost less provision for impairment. Ind AS requires certain categories of financial assets and liabilities to be measured at amortized cost using the effective interest rate method. Security deposits/ Rent deposits are Financial Asset as the lease agreement/work contracts give a contractual right to the company to receive cash. Security deposit/ Rent deposit satisfies the contractual cash flow characteristic test and it also satisfies the business model test as there is intention of holding to collect contractual cash flows. Thus the same have been valued at amortised cost. The same has resulted in decrease in equity under Ind-AS by Rs. 322.04 Lakhs and Rs. 344.41 Lakhs respectively as at 31st March, 2017 and 1st April, 2016. b Restatement of fair value of investments

The company has invested in certain equity instruments. In previous GAAP, the same was measured at cost. As per Ind AS, investments are required to be measured at fair value. The same has resulted in decrease in equity under Ind-AS by Rs. 1.77 Lakhs as at 1st April, 2016. The same being sold within the year ending 31st March, 2017, there was no adjustment in equity as at 31st March, 2017. c Derecognition of assets under Ind AS

The company has derecognised its certain loans and advances, certain trade receivables, certain trade advances given and certain tangible and intangible capital work-in-progress, as they did not meet the recognition criteria. In previous GAAP, the same was measured at cost. The same has resulted in decrease in equity under Ind-AS by Rs. 1669.10 Lakhs as at 31st March, 2017 and 1st April, 2016. d ECL on Trade Receivables

As per Ind AS 109, the financial assets are subject to provision of expected credit loss. Under previous GAAP, there was no such provision. In compliance with Ind AS 109, the company has made provision of ECL on Trade Receivables following simplified approach. The same has resulted in decrease in equity under Ind-AS by Rs 132.79 Lakhs and Rs 114.18 Lakhs respectively as at 31st March, 2017 and 1st April, 2016. e Borrowings recognised as per EIR

Under Indian GAAP, the term loans are recorded at contracted rate. As per Ind AS, Borrowings are to be recognised as per effective interest rate. The same has resulted in decrease in equity under Ind-AS by Rs 27.49 Lakhs as at 31st March, 2017 and 1st April, 2016. f Redeemable Preference Shares classified as liability under Ind AS

Under the previous GAAP, Cumulative redeemable preference shares were classified as equity. As per Ind AS, the same is to be treated as a liability, since the company has contractual obligation to redeem the preference shares. The same has resulted in decrease in equity under Ind-AS by Rs. 81.96Lakhs as at 31st March, 2017 and 1st April, 2016. g Deferred Tax impact on Ind-AS adjustments

Various transitional adjustments resulted in temporary differences between taxable profits and accounting profits. Tax adjustments includes deferred tax impact on account of difference between previous GAAP and Ind AS on the adjustments discussed above. The same has resulted in increase in equity under Ind-AS by Rs. 102.58 Lakhs and Rs. 65.54 Lakhs respectively as at 31st March, 2017 and 1st April, 2016. h Remeasurement of defined benefit obligation

Under the previous GAAP, actuarial gain and losses are charged to profit or loss, however under Ind-AS, they form part of remeasurement of defined benefit liability/assets and are recognised in OCI.

22.3 Disclosures as required by Indian Accounting Standard (Ind-AS) 101 First Time adoption of Indian Accounting Standards:

The Company has adopted Ind AS with effect from 1 April 2017 with comparatives being restated. Accordingly the impact of transition has been provided in the Opening Retained Earnings as at 1 April 2016 and all the periods presented have been restated accordingly.

Exemptions availed on first time adoption of Ind AS 101:

On first time adoption of Ind AS, Ind AS 101 allows certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has availed the following exemptions:

i) Deemed Cost:

Ind AS 101 permits a first time adopter to elect to continue with the carrying values measured under the previous GAAP and use that carrying value as the deemed cost for property, plant and equipment, and intangible assets on the date of transition.

ii) Investments in subsidiary and associate:

The company has elected to consider the carrying cost of equity investments in subsidiary and associate as per the previous GAAP as the deemed cost at the date of transition.

iii) Designation of previously recognised financial instruments:

a) Under Ind AS 109, at initial recognition of a financial asset, an entity may make an irrevocable election to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income. Ind AS 101 allows such designation of previously recognized financial assets, as ‘fair value through other comprehensive income’ or ‘fair value through profit and loss’ on the basis of the facts and circumstances that existed at the date of transition to Ind AS.

Accordingly, the Company has designated its investments in certain investments at fair value through other comprehensive income and fair value through profit and loss on the basis of the facts and circumstances that existed at the date of transition to Ind AS.

iv) Leases:

Ind AS17 - Leases requires an entity to assess whether a contract or an arrangement is in the nature of lease arrangement. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. However, the Company has used Ind AS 101 exemption and recognised arrangements having embedded leases based on facts and circumstances existing as at the date of Transition.

Exceptions

The following mandatory exceptions have been applied in accordance with Ind AS 101 in preparing the financial statements:

a) Estimates:

The estimates as at 1st April 2016 and 31st March 2017 are consistent with those made for the same dates in accordance with previous GAAP (after adjustment to reflect and differences if any, in accounting policies) apart from the following items where the application of previous GAAP did not require estimation:

(i) Impairment of financial assets based on the expected credit loss model; and

(ii) Investments in equity instruments carried as FVPL or FVOCI.

The estimates used by the Company to present the amounts in accordance with the Ind AS reflect conditions that existed at the date on transition to Ind AS.

b) Derecognition of financial assets:

The Company has elected to apply the Derecognition requirements for financial assets and financial liabilities in Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.

c) Classification and movement of financial assets and liabilities:

The Company has classified the financial assets and liabilities in accordance with Ind AS 109 on the basis of facts and circumstances that existed at the date on transition to Ind AS.

(23) The Company has regrouped/reclassified the Previous Year’s figures in order to conform to the figures of the Current Year.

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Mar 31, 2016

1. Rights, preferences and restriction attached to equity shares :

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

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts .The distribution will be in the proportion to the number of equity shares held by the shareholders.

2. 4,000,000 Equity shares of Rs.10/- each were issued on 07.12.2005 by conversion of Global Depository Receipts.

3. 108,570 10% Cumulative Redeemable Preference Shares of Rs.100 each fully paid up were issued on 30th September, 2005 redeemable at the option of the Company but not later than 20 years from the date of allotment.

4. The Company had alloted 460,000 convertible warrants at Rs.28/- per warrant to Promoters / Promoters Group on preferential basis pursuant to the Special Resolution passed by the members of the Company at their Extra Ordinary General Meeting held on January 23, 2015.

These warrants were converted (in the ratio of 1 share for 1 warrant) into equity shares of Rs.10/- each at a premium of Rs.18/- per share during the current period.

5. Details of terms of repayment and security provided for in respect of the Long-Term Borrowings as follows : (Including Current maturities of Term Loans from Banks and Finance Lease Obligation -Refer Note No. 10)

(a) Term Loan (Expansion) from Dena Bank repayable in 12 quarterly installments of Rs.18.09 Lacs each. Interest rate is base rate 1% # #

(b) Term Loan (R&D) from Dena Bank repayable in 12 quarterly installments of Rs.6.77 Lacs each. Interest rate is Base Rate 1% # #

(c) Term Loan from Dena Bank repayable in 7 quarterly installments of Rs.16.40 Lacs each. Interest rate is Base Rate 1.55 % # #

(d) Term Loan (working capital) from Dena Bank repayable in 8 quarterly installments of Rs.40 Lacs each. Interest rate is Base Rate 1% # #

(e) Term Loan (Lypholisation II) from Dena Bank repayable in 12 quarterly installments of Rs.7.81 Lacs each. Interest rate is Base Rate 1% # #

(f) Term Loan (New Expansion ) from Dena Bank repayable in 15 quarterly installments of Rs.90.90 lacs each. Interest rate is Base Rate 1.55% # #

(g) Term Loan (Schedule - M Requirement) from Dena Bank repayable in 14 quarterly installments of Rs.15.55 lacs each. Interest rate is Base Rate 1% # #

(h) Term Loan (working capital) from Dena Bank repayable in 8 quarterly installments of Rs.60 Lacs each. Interest rate is Base Rate 1.05% # #

* # The above Term Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the directors of the Company. These Loans are also secured by registered mortgage of Company''s immovable properties at Ankleshwar and Valsad.

(i) Term Loan from Bank of Maharashtra repayable in 16 quarterly installments of Rs.30 Lacs each. Interest rate is Base Rate 600 bps 50 bps (term premium). *

(j) Term Loan from Bank of Maharashtra repayable in 6 quarterly installment of Rs.50 lacs each. Interest rate is Base Rate 1.2%. *.

* Above Term Loans are Secured by extension of equitable mortgage of property situated at Shiv Shakti industrial Estate, Andheri - East, Mumbai - 400059

(k) Term Loans from Kapol Co-Operative Bank Ltd. repayable in 74 equal monthly installments of Rs.12.16 lacs each. Interest rate is @15%. **

* *Above Term Loans are Secured by extension of equitable mortgage of property and machinery situated at Ankleshwar.

6. 10 Lease obligations repayable in equated monthly installments up to July 2018 secured by respective Vehicles. Rate of interest ranges from 8.38% to 18.01%.

7. Details of terms of repayment and security provided in respect of Short -Term Borrowings:

(a) Interest on Dena Bank Cash Credit loan is Base Rate 1% p.a. # #

(b) Interest on Dena Bank Buyers Credit Loan ranges from LIBOR 0.75% to LIBOR 2.00% # #

(c ) Term Loan from Dena Bank repayable by way of bullet payment of Rs.10 crore at the end of 12 months from the date of disbursement. Interest rate is Base Rate 1.05%. # #

(d) Term Loan from Bank of Maharashtra repayable by way of bullet payment of Rs.4.50 crores at the end of 12 months from the date of first disbursement. Interest rate is Base Rate 600 bps. # #

# # The above Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the Directors of the Company. These Loans are also secured by registered mortgage of Company''s immovable properties at Ankleshwar, Valsad and secured by equitable mortgage of Companies immovable property at Mumbai.

8. Interest on Loans from related parties ranges between 10.25 % and 12% (simple Interest) payable on yearly basis.

9. Interest on Inter Corporate Deposits ranges between 16% and 21% (simple interest)and repayable at quarterly / half yearly / yearly basis.

10. Interest on Short Term Loans ranges between 12% and 21%

11. Contingent Liabilities are not provided for in respect of:

(i) Demands raised against the Company aggregating to Rs.68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. In the earlier year, the Company had received recovery notices for recovery of Rs.209,440,565 to be deposited into “Drug Price Equalization Account”.

The Company has challenged the said notices in the writ petitions before the Hon''ble High Court of Gujarat. The Hon''ble High Court has admitted the writ petitions subject to the Company depositing certain amounts against the said demands. Accordingly, the Company has deposited Rs.103,245,000.

The Company expects favorable outcome in the said writ petitions and hence, the amounts paid have been treated as advances which are considered by it as good and recoverable.

(ii) (a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24th January, 2011 in respect of Company''s appeal against the demand for Gujarat Sales Tax of Rs.132,408,100 for the financial year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs.8,545,195 against which Company has made payment of Rs.4,585,150 under protest. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub-judice and the payments of Rs.4,585,150 are considered by it as good and recoverable.

(b) Rs.67,770,889 (Previous Year Rs.61,676,379) relating to disputed Sales Tax demands in respect of prior years against which the Company has made payment of Rs.6,901,923 under protest. The Company has further contested this demand before the Sales Tax Commissioner / Tribunal. The matter is sub-judice and the payments of Rs.6,901,923 are considered by it as good and recoverable.

(iii) The Company has received notices from Central Excise department raising demands as stated below:

(a) Rs.10,875,257 against which the Company has paid Rs.2,500,000. The matter is sub-judice and the payment of Rs.2,500,000 is considered by the Company as good and recoverable.

(b) Rs.7,137,254 relating to disputed Central Excise duty, the matter is sub-judice.

(iv) Rs.1,809,830 disputed Service Tax demands, the matter is sub-judice.

(v) The Company has received orders from Income Tax Department raising demands aggregating to Rs.232,504,087 relating years against which the Company has paid Rs.10,000,000. The matter is sub-judice and the payment of Rs.10,000,000 is considered by the Company as good and recoverable.

(vi) Rs.794,807 being claims against the Company not acknowledged as debt.

(vii) Employees (Including Ex-Employees) Claim relating to ex-gratia and other benefits aggregating to Rs.42,456,862 as the matter is sub-judice.

(viii)Bank Guarantees provided by a Bank on behalf of the Company Rs.9,633,220. (Previous Year Rs.9,633,220).

(ix) The Company has given a “counter guarantee” to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs.250,000,000 advanced to Lyka BDR International Ltd., [LBDR] a Subsidiary of the Company. The outstanding amount of the loan is Rs.12,564,137 (Previous Year Rs.30,271,581) (including interest Rs.182,192 (Previous Year Rs.359,190) as on 31st March, 2016. Under the restructuring of the Term Loan, the Company''s liability in respect of the amount advanced to LBDR is restricted to the extent of 50% of the principal and interest quantum due thereon.

Clearwater Capital Partners India Pvt. Ltd., have vide Deed of Assignment dated 26th September, 2014 assigned all the receivables due from Lyka BDR International Ltd., to Futuristic Solutions Limited.

(12) FIXED DEPOSITS:

The Company has received order of Company Law Board (CLB) dated 22nd January, 2016, granting extension of time for repayment of Fixed Deposits (excluding Short Term Loans in respect of which, the Company has been legally advised that such loans are not deposits, as defined, in the Companies (Acceptance of Deposits) Rules, 2014) matured/maturing and claimed (as on 31st March, 2016) aggregating to Rs.38,339,031 (including Interest of Rs.2,904,031) up to 31st December, 2015 on or before 30th June, 2016 and Fixed deposits maturing and claimed (as on 31st March, 2016) aggregating to Rs.33,932,220 (including Interest of Rs.2,15,220) from 1st January, 2016 to 30th September, 2016 on or before 31st March, 2017, failing which this Order shall be deemed as cancelled after 31st March, 2017. The liability, if any, arising on account of delayed payment/ non-payment of dues shall be provided for in the year in which the said liability is settled.

(13) DEBENTURES:

In respect of Overdue Debentures amounting to Rs.83,400,000 and Interest due thereon Rs.6,401,137 up to 31st March, 2016, the Company has filed a petition with Company Law Board, seeking extension of time for repayment up to March, 2020.

The liability, if any, arising on account of delayed payments/non-payment of dues shall provided for in the year in which the said liability is settled.

(14) FIXED ASSETS AND DEPRECIATION:

(i) Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing on or after 1st April, 2014 the Company has re-worked depreciation with reference to the useful lives of Fixed Assets prescribed by PART”C” of Schedule II to the Act. Where the remaining useful life of an Asset is nil, the carrying amount of the Asset after retaining the residual value, as at 1st April, 2014 has been adjusted to the General Reserve. In other cases, the carrying values have been depreciated over the remaining useful lives of the Assets and recognized in the Statement of Profit and Loss.

Since then, as per the amendment dated 20th August, 2014, the useful life specified in Part “C” of Schedule II has been defined to mean that if the cost of a Part of Asset is significant to the total cost of the Assets and useful life of that part is different from the useful life of the remaining Assets, useful life of that significant part shall be determined separately and depreciated accordingly.

In the opinion of the Management, the Company''s Assets are such that there are no significant parts thereof whose life would be different than the useful life of the whole Asset. Consequently, the Company has continued to provide depreciation in respect of all its Assets on the basis as was followed in the financial year 2014-15, i.e. based on useful lives of the respective Assets.

“Component Accounting” being a technical matter, the opinion of the Management is relied upon by the Auditors.

(ii) The depreciation and amortization charged to Statement of Profit and Loss for the period

Rs.26,401,514(Previous Year Rs.38,326,316) includes Rs.6,401,632 (Previous Year Rs.8,818,670) being depreciation relating to Revaluation of Fixed Assets carried out on 31st March, 2007.

(iii) The depreciation for the period on the Revaluation of Fixed Assets carried out in September 2010 aggregating to Rs.4,482,349 (Previous Year Rs.6,299,038) has been charged to Revaluation Reserve.

(15) Rs.50,250,000 (Previous Year Rs.50,250,000) placed with the Managing Director, as security deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The company has been legally advised that the provisions of section 185 of the Companies Act, 2013 are not attracted in respect of the same.

(16) Loans and Advances include Rs.23,101,339 (Previous Year Rs.22,686,339), granted to a Company as interest free financial assistance is considered good for recovery by the Management.

(17) Sundry Debtors aggregating to Rs.264,484,652 (Previous Year Rs.288,327,248) include debtors of Rs.101,090,003 (Previous Year Rs.129,639,709) outstanding for more than six months which are considered good for recovery by the Management.

(18) The balances relating to Sundry Debtors, Sundry Creditors, Fixed Deposits, Group Companies and Loans & Advances as on 31st March, 2016 are subject to confirmation and adjustments, if any, on reconciliation of accounts. Since the extent to which these balances are subject to confirmation is not ascertainable, the resultant impact of the same on the accounts cannot be ascertained and shall be adjusted in the year in which the confirmation process is completed.

(19) INVESTMENTS IN SUBSIDIARIES:

(20) At the meeting of the Board of Directors held on 10th March, 2016, the board noted that the Company intends to merge its wholly owned subsidiary i.e. Lyka Healthcare Limited and its subsidiary Lyka Export Limited with the Company w.e.f. 1st April, 2015 (“appointed date”) under the provisions of section 391 to 394 and other applicable provisions, if any, of the Companies Act, 1956 as amended and the corresponding provisions of the Companies Act, 2013 and SEBI circular No. CIR/CFD/ CMD/16/2015 dated 30th November, 2015. The proposed merger of Lyka Healthcare Limited and Lyka Export Limited with the Company would be in the best interest of the Company, its shareholders, creditors and all other stakeholders.

(21) The investments in unquoted equity shares of Lyka BDR International Limited, Lyka Exports Limited and Lyka Healthcare Limited, have been acquired at par/premium respectively. Though their present book values are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the Management is of the opinion that no provision for fall in it''s values is required to be made at this juncture.

(22) CAPITAL EXPENDITURE:

(23) Tangible Project Capital Work-In-Progress Rs.173,628,211 as on 31st March, 2016, includes allocable indirect expenditure in respect of modernization/expansion of Ankleshwar unit up to 31st March, 2016 aggregating to Rs.44,925,009 (including Interest of Rs.23,555,813) (includes for the period Rs.8,960,844, including Interest of '' 6,206,184) which is pending allocation to Fixed Assets on completion of the project.

(24) The Company has incurred direct expenditure and allocable indirect expenditure up to 31st March, 2016 in respect of “new product development and applied research” aggregating to Rs.131,388,064 including finance cost of Rs.22,087,970 which is carried forward under “Capital Work in Progress -Intangibles”, to be recognized as “Self-Generated Intangible Assets” upon successful development of respective products or charged to Statement of Profit and Loss in the year in which development is abandoned.

During the period, the Company has capitalized Rs.3,322,454 as “Self-Generated Intangible Assets” upon successful development of respective products.

(25) Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs.11,399,850 (Previous Year Rs.10,585,575).

(26) Inventories include slow/non-moving raw materials and packing materials procured during the prior year''s aggregating to Rs.12,663,008 (Previous Year Rs.12,560,316) for which steps are being taken to utilize/realize the same.

(27) During the earlier period, the Company has recognized revenue by way of insurance claim aggregating to Rs.27,097,850 on account of loss of certain fixed assets and materials due to fire. The Company has received “on account payments” aggregating to Rs.20,993,310 and realized Rs.428,571 by way of sale of scrap arising from loss of such fixed assets. The balance of Rs.5,675,969 is considered good for recovery by the Management. The shortfall if any, shall be adjusted in the year in which the claim is finally settled.

(28) The Company has provided Rs.4,065,190 being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

(29) During the period, the Company has lodged claim for refund of excess finance costs charged by two banks aggregating to Rs.5,713,906.

Of the above:

i. Rs.3,349,209 relates to prior year(s) which is presented as Prior Period Income of which Rs.825,675 is recovered during the period.

ii. Rs.2,364,697 relating to the period July, 2015 to December, 2015 is adjusted against Finance cost for the period.

(30) Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, (MCA), relating to AS 11 Accounting Standard on the “Effects of changes in Foreign Exchange Rates”, the Company was to amortize the balance loss on account of foreign currency translation of Rs.27,647,974. Accordingly, the Company charged Rs.13,823,987 during the previous period ended 30th September, 2010 to the Statement of Profit & Loss. Subsequently, pursuant to Notification dated 29th December, 2011, the Company exercised its option to amortize the balance loss of Rs.13,823,987 on or before 31st March, 2020.

(31) Employment and Retirement Benefits.

(i) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 31^st March, 2016. The following tables set out the amounts recognized in the financial statements as at 31^st March, 2016 for the defined benefit plans.

(32) Minimum Lease/Hire Purchase payments payable under Finance leases/Hire purchase agreements are as under: (Accounting Standard 19 - Leases)

(33) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on ‘Segment Reporting'' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segmental information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below 10% of the total turnover of the company, there is no reportable geographical segment.

(34) As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with the related parties as defined in the Accounting Standard are given below:

(35) During the period, Company''s claim for interest on unpaid dues payable by Lyka Export Limited has been settled with them. Accordingly, the Company has recognized Interest Income of Rs.102,552,146 for the period from 1^st April, 2012 to 30^th September, 2015.

(36) Taxation:

Current Tax:

In view of unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the period.

Deferred Tax:

The Company has not recognized Deferred Tax Assets in view of virtual uncertainty of sufficient future taxable income to set off carried forward losses and unabsorbed depreciation.

(37) Details of dues to Micro, Small and Medium Enterprises as per MSMED Act, 2006 as per the records of the Company.

Note: During the period upon obtaining the relevant information from the suppliers who are registered under the MSMED Act, 2006, it has disclosed the principal amounts payable as on 31^st March, 2016. The Company has not provided for interest on these dues payable to the said suppliers as there are no claims for interest by them.

(38) The figures for the Current Period ended 31st March, 2016 being for 9 months are not comparable with those of the Previous Year.

(39) The Company has regrouped and reclassified the Previous Year''s figures in order to conform to the figures of the Current Period.

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Jun 30, 2015

1. Rights, preferences and restriction attached to equity shares:

The Company has only one class of equity shares having par value of Rs, 10 per share. Each holder of equity share is entitled to one vote per share.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts. The distribution will be in the proportion to the number of equity shares held by the shareholders.

2. Non Convertible Debentures are secured by first charge on Trade Marks & second charge on Immovable Properties at Ankleshwar.

3. Details of terms of repayment and security provided for in respect of the Long-Term Borrowings as follows: (Including Current Maturities of Term Loans from Banks - Refer Note No. 10)

(a) Term Loan (Expansion) from Dena Bank repayable in 15 quarterly installments of Rs, 18.09 Lacs each.

Interest rate is base rate 1% ##

(b) Term Loan (R&D) from Dena Bank repayable in 14 quarterly installments of Rs, 6.77 Lacs each. Interest rate is Base Rate 1% ##

(c) Term Loan from Dena Bank repayable in 15 quarterly installments of Rs, 15.55 Lacs each. Interest rate is Base Rate 1% ##

(d) Term Loan (working capital) from Dena Bank repayable in 11 quarterly installments of Rs, 40 Lacs each. Interest rate is Base Rate 1% ##

(e) Term Loan (Lypholisation II) from Dena Bank repayable in 14 quarterly installments of Rs, 7.81 Lacs each. Interest rate is Base Rate 1% ##

(f) Term Loan (New Expansion) from Dena Bank repayable in 17 quarterly installments of Rs, 90.90 lacs each. Interest rate is Base Rate 1.55% # #

(g) Term Loan (Schedule - M Requirement) from Dena Bank repayable in 20 quarterly installments of Rs, 16.40 lacs each commencing from 12 months from the date of first disbursement. Interest rate is Base Rate 1.55% # #

(h) Term Loan (working capital) from Dena Bank repayable in 10 quarterly installments of Rs, 60 Lacs each commencing from 30th September 2015 Interest rate is Base Rate 1.05% ##

## The above Term Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the directors of the Company. These Loans are also secured by equitable mortgage of Company's immovable properties at Ankleshwar and Valsad.

(i) Term Loan from Bank of Maharashtra repayable in 10 quarterly installments of Rs, 50 Lacs each. Interest rate is Base Rate 1.2%. *

(j) Term Loan from Bank of Maharashtra repayable in 20 quarterly installments of Rs, 30 Lacs each. Interest rate is Base Rate 600 bps 50 bps (term premium). *

* Above Term Loans are Secured by extension of equitable mortgage of property situated at Shiv Shakti industrial Estate, Andheri (East), Mumbai - 400059

(k) Term Loans from Kapol Co-Operative Bank Ltd. repayable in 84 equal monthly installments of Rs, 12.16 lacs each and 6 equal monthly installments of Rs, 12.19 lacs each. Interest rate is @15%. **

** Above Term Loans are Secured by extension of equitable mortgage of property and machinery situated at Ankleshwar.

4. lease obligations repayable in equated monthly instalments up to June 2018 Secured by respective vehicles. Rate of interest ranges from 8.38% to 18.01 %

5. Details of terms of repayment and security provided in respect of Short -Term Borrowings:

(a) Interest on Dena Bank Cash Credit loan is Base Rate 1% p.a. # #

(b) Interest on Dena Bank Buyers Credit Loan ranges from LIBOR 0.75% to LIBOR 2.00% # #

# # The above Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Company's immovable properties at Ankleshwar and Valsad.

6. Interest on Loans from related parties ranges between 10.25 % to 12% simple Interest payable on yearly basis.

7. Interest on Inter Corporate Deposits ranges between 16% to 21% (simple interest)and repayable at quarterly/ half yearly / yearly basis.

8. Interest on Short Term Loans ranges between 12% and 21%

9. Contingent Liabilities are not provided for in respect of:

(i) There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. In the earlier year, the Company has received recovery notices for recovery of Rs, 209,440,565 to be deposited into "Drug Price Equalisation Account".

The Company has challenged the said notices in the writ petitions before the Hon'ble High Court of Gujarat. The Hon'ble High Court has admitted the writ petitions subject to the Company depositing certain amounts against the said demands. Accordingly, the Company has deposited Rs, 103,245,000.

The Company expects favorable outcome in the said writ petitions and hence, the amounts paid have been treated as advances which are considered by the Company as good and recoverable.

(ii) (a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals)

Baroda, dated 24th January, 2011 in respect of Company's appeal against the demand for Gujarat Sales Tax of Rs. 132,408,100 for the financial year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs, 8,545,195 against which Company has made payment of Rs, 4,585,150 under protest. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub- judice and the payments of Rs, 4,585,150 are considered by the Company as good and recoverable.

(b) Rs, 61,676,379 relating to disputed Sales Tax demands in respect of prior years, the matter is sub-judice.

(iii) The Company has received notices from Central Excise department causing demands as stated below:

(a) Rs, 10,875,257 against which it has paid Rs, 2,500,000. The matter is sub-judice and the payment of Rs, 2,500,000 is considered by the Company as good and recoverable.

(b) Rs, 7,137,254 relating to disputed Central Excise Duty, the matter is sub-judice. (iv) Rs, 1,809,830 disputed Service Tax demands, the matter is sub-judice.

(v) Rs, 794,807 being claims against the Company not acknowledged as debt.

(vi) Claim relating to Ex-gratia of Rs, 34,246,126 as the matter is sub-judice.

(vii) Bills of Exchange discounted with the Bank Rs, Nil (previous period Rs, 69,833,270).

(viii) Bank Guarantees provided by a bank on behalf of the Company Rs, 96,33,220 (previous period Rs, 9,342,832).

(ix) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., [Clearwater Capital Partners India Pvt. Ltd., has vide Deed of Assignment dated 26th September, 2014 assigned all the receivables due from Lyka BDR International Ltd., to Futuristic Solutions Limited] by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs, 250,000,000 advanced to Lyka BDR International Ltd., [LBDR] a Subsidiary of the Company (the outstanding amount of the loan is Rs, 30,271,581 (including interest Rs, 359,190) as on 30th June, 2015). Under the restructuring of Term Loan Agreement, the Company's liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest quantum due thereon.

(x) The Company has given a guarantee to Kapol Co-operative Bank Limited for its loan facility of Rs, 43,500,000 given to Lyka Exports Limited. (The outstanding amount of the loan is Rs, 42,320,000 as on 30th June, 2015).

10. FIXED DEPOSITS:

The Company has not been able to repay overdue Fixed Deposits aggregating to Rs, 108,586,000 and interest due thereon Rs, 14,889,768 up to 30th June, 2015 (excluding Short Term Loans in respect of which, the Company has been legally advised that such loans are not deposits, as defined, in the Companies (Acceptance of Deposits) Rules, 2014). Consequently, the Company has not complied with the provisions of Section 74 of the Companies Act, 2013 to the extent of such non repayment of overdue Fixed Deposits.

The Company has filed a petition with the Company Law Board on 31st March, 2015 to seek extension of time for repayment of principal and interest (dues) thereon up to 31st March, 2020. The liability, if any, arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached.

11. DEBENTURES:

The Company has not been able to repay Overdue Debentures aggregating to Rs, 61,650,000 and interest due thereon Rs, 2,423,376 (dues) up to 30th June, 2015. Therefore, the Company has filed a petition with the Company Law Board, seeking extension of time for repayment of Debenture dues up to 31st March, 2020. The liability, if any, arising on account of delayed payments/non-payment of dues will be provided for in the year in which finality is reached.

12. BANK LOAN:

Bank of Maharashtra (Bank) has taken action under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 24th June, 2015 and called upon the Company to repay the loans aggregating to Rs, 116,117,228 plus interest thereon @ 16.50% w.e.f 1st June, 2015 within 60 days. The Company is following up with the Bank in this regard. The liability, if any, will be accounted for in the year in which finality is reached.

13. The Board of Directors at its meeting held on 14th July, 2014 resolved to sell its manufacturing facilities for formulations at Tarapur, Maharashtra as the said unit has become unviable due to various factors for a total sale consideration of Rs, 386,100,000 resulting in a gain of Rs, 85,395,586 which has been presented as an "Exceptional Item".

14. (i) During the previous period, fire destroyed certain Fixed Assets, at the Company's Ankleshwar Plant aggregating to Rs, 25,423,471 (Written down value Rs, 21,087,494) and Materials-in-Process aggregating to Rs, 6,110,356. The said loss of Rs, 27,197,850 had been written off to the Statement of Profit and Loss. The company had lodged an insurance claim for an aggregate sum of Rs, 27,097,850 which had been credited to Statement of Profit and Loss.

(ii) The Company has recognized revenue by way of insurance claim aggregating to Rs, 27,097,850 on account of loss of certain fixed assets and materials due to fire. The Company has received on account payments aggregating to Rs, 20,993,310 and realized Rs, 428,571 by way of sale of scrap arising from such destroyed fixed assets. The balance of Rs, 5,675,969 is considered good for recovery by the Management. The shortfall if any, will be adjusted in the year in which finality is reached.

15. DEPRECIATION:

(i) The depreciation and amortization charged to Statement of Profit and Loss for the year Rs, 38,326,316 (Previous Period Rs, 54,303,516) includes Rs, 8,818,670 (Previous Period Rs, 9,457,823) being depreciation relating to Revaluation of Fixed Assets carried out on 31st March, 2007.

(ii) The depreciation for the year on the Revaluation of Fixed Assets carried out in September 2010 aggregating to Rs, 6,299,038 (Previous Period Rs, 7,772,174) has been charged to Revaluation Reserve.

(iii) Consequent to the enactment of the Companies Act, 2013 (the Act) and its applicability for accounting periods commencing on or after 1st April, 2014, the Company has re-worked depreciation with reference to the useful lives of tangible fixed assets prescribed by PART 'C' of Schedule II to the Act; where the remaining useful life of tangible fixed asset is nil, the carrying amount of the assets after retaining the residual value, as at 1July, 2014 amounting to Rs, 26,390,697 has been adjusted to the balance of General Reserve. In other cases, the carrying values have been depreciated over the remaining useful lives of the assets and recognized in the Statement of Profit and Loss. As a result, the charge for depreciation is higher by Rs, 3,581,006 for the year ended 30th June, 2015.

16. Rs, 50,250,000 (Previous Period Rs, 50,250,000) placed with the Managing Director, as security deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The company is legally advised that the provisions of section 185 of the Companies Act, 2013 are not attracted in respect of the same.

17. Loans and Advances include Rs, 22,686,339 (Previous Period Rs, 52,321,737), granted to a Company as interest free financial assistance is considered good for recovery by the management.

18. Sundry Debtors aggregating to Rs, 288,327,248 (Previous Period Rs, 253,550,238) include debtors of Rs, 129,639,709 (Previous Period Rs, 112,999,170) outstanding for more than six months which are considered good for recovery by the management.

19. The balances relating to Sundry Debtors, Sundry Creditors, Fixed Deposits, Group Companies and Loans & Advances as on 30th June, 2015 are subject to confirmation and adjustments, if any on reconciliation of accounts. Since the extent to which these balances are subject to confirmation is not ascertainable, the resultant impact of the same on the accounts cannot be ascertained.

20. The investments in unquoted shares of Lyka BDR International Ltd., Lyka Exports Ltd. and Lyka Healthcare Ltd., have been acquired at par/premium respectively. Though their present book values are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its values is required to be made at this juncture taking into consideration intrinsic value of their business.

21. The Company has incurred direct expenditure and allocable indirect expenditure in respect of "new product development and applied research" aggregating to Rs, 121,622,302 (Previous Period Rs, 121,790,478) including finance cost of Rs, 23,210,133 (Previous Period Rs, 25,614,668).

Of the above:

- Rs, 9,354,720 (Previous Period Rs, 168,869) has been transferred to "Self-Generated Intangible assets" on successful development including finance cost of Rs, 602,577 (Previous Period Rs, Nil).

- During the year in fructuous development expenditure relating to certain products aggregating to Rs, 2,624,399 (Previous Period Rs, 24,363,762) including finance cost of Rs, 519,586 (Previous Period Rs, 2,404,535) has been expensed.

- Balance of Rs, 109,643,183 (Previous Period Rs, 97,257,847), including finance cost of Rs, 22,087,970 (Previous Period Rs, 23,210,133), being balance of expenditure is carried forward under "Capital Work-in-Progress – Intangibles" which shall be recognized as "Self-Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the Period in which development is abandoned.

22. Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs, 10,585,575 (Previous Period Rs, 9,499,875).

23. Inventories include slow/non-moving materials procured during the earlier years aggregating to Rs, 12,560,316 (Previous Period Rs, 7,998,296). The Company is in the process of evaluating the quantum of usable materials.

24. The Company has provided Rs, 10,302,279 being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

25. Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, (MCA), relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation of Rs, 27,647,974. Accordingly, the Company charged Rs, 13,823,987 during the previous period ended 30th September, 2010 to the Profit & Loss Account. Subsequently, pursuant to Notification dated 29th December, 2011, the Company exercised its option to amortize the balance loss of Rs, 13,823,987 on or before 31st March, 2020.

26. Employment and Retirement Benefits.

(i) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 30th June, 2015. The following tables set out the amounts recognized in the financial statements as at 30th June, 2015 for the defined benefit plans.

27. Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on 'Segment Reporting' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

28. As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with the related parties as defined in the Accounting Standard are given below:

(a) List of related parties and their relationship

Category Name of the Related Party Relationship

1 Lyka BDR International Limited Subsidiary 1 Lyka Healthcare Ltd. Subsidiary 2 Lyka Exports Ltd. Subsidiary 3

2 Lyka Securities & Investment Pvt. Ltd. Associate 1

3 Mr. N. I. Gandhi Key Management Personnel (KMP) (Chairman & Managing Director)

Mr. Yogesh Shah (Chief Financial Officer)

Mr. Piyush Hindia (Company Secretary)

4 Mr. Kunal N. Gandhi Relative of KMP Mrs. Nehal N. Gandhi (Non-Executive Director)

Mrs. Alisha K. Gandhi

5 Enai Trading & Investment Pvt. Ltd. Entities owned by/over which KMP is N. I. Gandhi H.U.F. able to exercise significant influence

Note: Figures in brackets denote items of credit nature

29. (i) Deferred tax:

Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

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Jun 30, 2014

1. CORPORATE INFORMATION

Lyka Labs Limited ("the Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956 (as amended by the Companies Act, 2013). Its shares are listed on two stock exchanges in India. The Company is engaged in the business of pharmaceutical and related activities, including research.

2. Rights, preferences and restriction attached to equity shares :

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity share is entitles to one vote per share.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts. The distribution will be in the proportion to the number of equity shares held by the share holders.

3. 4,000,000 Equity shares of Rs. 10/- each were issued on 07.12.2005 by conversion of Global Depository Receipts.

4. 108,570 10% Cumulative Redeemable Preference Shares of Rs. 100 each fully paid up redeemable at the option of the Company but not later than 20 years from the date of allotment.

5. Non Convertible Debentures are secured by first charge on Trade Marks & second charge on Immovable Properties at Ankleshwar.

6. Details of terms of repayment and security provided for in respect of the Long-Term Borrowings as follows : (Including Current Matirities of Term Loans from Banks - refer note no. 10)

(a) Term Loan (Expansion) from Dena Bank payable in 24 quarterly installment of Rs.18.09 Lacs each commencing from 31st March 2013. Interest rate is base rate 1% # #

(b) Term Loan (R&D) from Dena Bank payable in 24 quarterly installment of Rs. 6.77 Lacs each commencing from 31st March 2013. Interest rate is Base Rate 1% # #

(c) Term Loan from Dena Bank payable in 24 quarterly installment of Rs. 15.59 Lacs each commencing from 31st March 2013. Interest rate is Base Rate 1% # #

(d) Term Loan (working capital) from Dena Bank payable in 20 quarterly installment of Rs. 40 Lacs each commencing from 31st March 2013 Interest rate is Base Rate 1% # #

(e) Term Loan (Lypholisation II) from Dena Bank payable in 24 quarterly installment of Rs. 7.81 Lacs each commencing from 31st March 2013. Interest rate is Base Rate 1% # #

(f) Term Loan (WCDL) from Dena Bank payable bullet payment at end of 30 months i.e. on/or before 31/03/2015. Interest Rate is 12% p.a.# #

(g) Term Loan (New Expansion) from Dena Bank payable in 22 quarterly installment of Rs. 90.90 lacs each commencing from 31st March 2014. Interest rate is Base Rate 1.55% # #

# # The above Term Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the directors of the Company. These Loans are also secured by equitable mortgage of Company''s immovable properties at Tarapur & Ankleshwar. Shares held by the promoters in the Company have been provided as collateral security to the Bank.

(h) Term Loan from Bank of Maharashtra repayable in 16 quarterly installment of Rs. 50 Lacs each commencing from 30th July 2013. Interest rate is Base Rate 1.2%. *

(i) Term Loan from Bank of Maharashtra repayable in 20 quarterly installment of Rs. 30 Lacs each commencing from March, 2015. Interest rate is Base Rate 600 bps 50 bps (term premium). *

* Above Term Loans are Secured by extension of equitable mortgage of property situated at Shiv Shakti industrial Estate, Andheri - East, Mumbai - 400059

7. Details of terms of repayment and security provided in respect of Short -Term Borrowings:

(a) Interest on Dena Bank Cash Credit loan is Base Rate 1% p.a. # #

(b) Interest on Dena Bank Buyers Credit Loan ranges from LIBOR 0.75% to LIBOR 2.00% # #

(c) Interest on Kapol Bank Bil Discounting facility @ 15% p.a.# #

# # The above Loans are secured by first charge on stock in trade, book debts, other movable assets, movable machinery & guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Company''s immovable properties at Tarapur & Ankleshwar. Shares held by the promoters in the Company have been provided as collateral security to the Banks.

8. Interest on Loans from related parties ranges between 12% to 15% simple Interest payable on yearly basis.

9. Interest on Inter Corporate Deposits ranges between 16% to 24% (simple interest) and payable at quarterly / half yearly / yearly basis.

10. Interest on Short Term Loans ranges between 15% to 19%.

11. CONTINGENT LIABILITIES ARE NOT PROVIDED FOR IN RESPECT OF:

(a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24th January, 2011 in respect of Company''s appeal against the demand for Gujarat Sales Tax of Rs. 132,408,100 for the Financial Year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to ! 8,545,195 against which Company has made payment of Rs. 4,585,150. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub-judice and the payment of Rs. 4,585,150 is considered by the Company as good and recoverable.

(b) Particulars Current Period Previous Year (Rs. ) (Rs. )

Ex-gratia - employees 33,887,861 33,432,128

Disputed Central Excise duty 11,997,395 1,122,138

Disputed Sales Tax Demands 28,484,451 23,573,094

Disputed Service Tax Demands 1,809,830 1,809,830 Undertaking given to the excise dept for goods cleared for export without payment of duty — 30,000,000

(c) Bills of Exchange discounted with the Banks Rs. 69,833,270 (Previous Year Rs. 59,394,963).

(d) Bank Guarantees provided by bank on behalf of the Company Rs. 9,342,832 (Previous Year Rs. 1,981,961).

(e) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs. 250,000,000 advanced to Lyka BDR International Ltd., a Subsidiary of the Company (the outstanding amount of the loan is Rs. 69,911,654 as on 30th June, 2014). Under the restructuring of Term Loan Agreement, the Company''s liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest quantum due thereon.

(f) The Company has given a guarantee to Kapol Co-operative Bank Limited for it''s loan facility of Rs. 43,500,000 given to Lyka Exports Limited. (The outstanding amount of the loan is Rs. 43,797,103 as on 30th June, 2014).

12. SLUMP SALE :

(i) The Board of Directors of the Company at its meeting held on 28th March, 2014 resolved to hive off its "Hospital Division" to its wholly owned subsidiary, "Lyka Healthcare Limited" with effect from 1st March, 2014 as and by way of a "Slump Sale" for a consideration valued at Rs. 36.50 crores resulting in a gain on Slump Sale of Rs. 34.57 crores which has been presented as an Extraordinary Item in the Financial Statements.

(ii) According to the Slump Sale Agreement, Lyka Healthcare Limited, will discharge the dues to Lyka Labs Limited, against the ''Slump Sale'' consideration of Rs. 36.50 crores in the manner indicated as below :

* Issue of 75 lacs Equity Shares of Rs. 10/- each at a premium of Rs. 30/- each aggregating to Rs. 30 crores.

* Interest free unsecured loan Rs. 6.50 crores repayable over a period of 5 years as per mutually agreed terms.

13. As advised by Securities and Exchange Board of India, the Company has restated its financial statements for the year ended 31st March, 2013 by debiting certain items as stated hereunder as Prior Period Adjustment:

(i) Rs. 27,239,600 relating to write-off of irrecoverable Sundry Debtors/Loans and Advances, which in the earlier year were debited to Revaluation Reserve.

(ii) Rs. 9,311,805 relating to interest/damages for delay in depositing statutory dues with Government, Semi- Government and Local Authorities upto 31st March, 2013.

14. The Board of Directors at its meeting held on 14th July, 2014 resolved to sell its manufacturing facilities for formulations at Tarapur, Maharshtra as the said unit has become unviable due to various factors for a total sale consideration of not less than Rs. 36 crores. The Company has obtained the requisite approval of the Members through Postal Ballot as per the requirements of the Companies Act, 2013.

The Company is in the process of complying with the regulatory / other requirements to complete the sale.

15. On 31st October, 2013 fire destroyed certain Fixed Assets, at the Company''s Ankleshwar Plant aggregating to Rs. 25,423,471 (Written down value Rs. 21,087,494) and Materials-in-Process aggregating to Rs. 6,110,356. The said loss of Rs. 27,197,850 has been written off to the Statement of Profit and Loss. The company has lodged an insurance claim for an aggregate sum of Rs. 27,097,850 which has been credited to Statement of Profit and Loss against which the company has received a sum of Rs. 9,993,310 and the balance claim of Rs. 17,104,540 is being processed by the insurance company.

16. Depreciation :

(i) The depreciation and amortisation charged to Statement of Profit and Loss for the period Rs. 54,303,516 (Previous year Rs. 32,989,778) includes Rs. 9,457,823 (Previous year Rs. 7,569,413) being depreciation relating to Revaluation of Fixed Assets carried out in March, 2007.

(ii) The depreciation for the period on the Revaluation of Fixed Assets carried out in September 2010 aggregating to Rs. 7,772,174 (Previous Year Rs. 6,219,098) has been charged to Revaluation Reserve.

17. Rs. 50,250,000 (Previous Year Rs. 50,250,000) placed with the Managing Director, as deposit for residential accommodation/garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

18. Loans and Advances include Rs. 52,321,737 (Previous Year Rs. 93,499,068), granted to a Company as interest bearing financial assistance is considered good for recovery by the management.

19. Sundry Debtors aggregating to Rs. 253,550,238 (Previous Year Rs. 593,221,313) include debtors of Rs. 112,999,170 (Previous year Rs. 318,187,410) outstanding for more than six months which are considered good for recovery by the management.

20. Balances relating to Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances are pending confirmation from the respective parties. Adjustment if any will be made in the year in which confirmations are received.

21. The investments in unquoted shares of Lyka BDR International Ltd., and Lyka Exports Ltd., have been acquired at par/premium respectively. Though their present book value are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its value is required to be made at this juncture taking into consideration intrinsic value of business.

22. The Company has incurred direct expenditure and allocable indirect expenditure in respect of "new product development and applied research" aggregating to Rs. 121,790,478 (previous year Rs. 115,945,456) including finance cost of Rs. 25,614,668 (previous year Rs. 21,680,917).

Of the above:

* Rs. 168,869 (Previous year Rs. 29,206,663) has been transferred to "Self Generated Intangible assets" on successful development including finance cost of Rs. Nil (previous year Rs. 6,558,605).

* During the period infructuous development expenditure relating to certain products aggregating to Rs. 24,363,762 (Previous year Rs. 1,416,578) including finance cost of Rs. 2,404,535 (previous year Rs. 332,406) has been expensed.

* Balance of Rs. 97,257,847 (Previous year Rs. 85,322,215), including finance cost of Rs. 23,210,133 (previous year Rs. 14,789,906), being balance of expenditure is carried forward under "Capital Work in Progress - Intangibles" which shall be recognized as "Self Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the year in which development is abandoned.

23. Arrears of dividend on 10% Cumulative Redeemable Preference Shares aggregates to Rs. 9,499,875 (Previous Year Rs. 8,142,750).

24. Inventories include slow/non-moving materials procured during the earlier period aggregating to Rs. 7,998,296 (Previous year Rs. 6,576,549). The Company is in the process of evaluating the quantum of usable materials.

25. The Company has provided Rs. 14,943,432 being interest / damages on an estimated basis in respect of delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed.

26. Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation. Accordingly, the Company amortized Rs. 13,823,987 during the previous year ended 30th September, 2010 to the Profit & Loss Account and the balance of Rs. 13,823,987 was to be amortized by 31st March, 2011. Subsequently, pursuant to Notification dated 29th December, 2011, the Company exercised its option to amortize the balance loss of Rs. 13,823,987 on or before 31st March, 2020.

27. Employment and Retirement Benefits.

(i) Gratuity of Rs. 1,297,361 as included in Contribution to Provident and Other Funds in Note No. 23 of Statement to Profit & Loss comprises of:

a) Rs. 352,051 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

b) Rs. 657,310 being charge for the Period as per actuarial valuation.

c) Rs. 288,000 being provision for gratuity relating to Managing Director on accrual basis.

(ii) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 30th June, 2014. The following tables set out the amounts recognized in the financial statements as at 30th June, 2014 for the defined benefit plans.

28. There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. During the Previous Year, the Company has received notices for recovery of Rs. 209,440,565 to be deposited into "Drug Price Equalization Account".

The Company has challenged the said notices in the writ petitions filed before the Hon''ble Gujarat High Court. The Hon''ble Gujarat High Court has admitted the writ petitions subject to the Company depositing certain amount against the said demands. Accordingly, the Company has deposited Rs. 103,245,000.

The Company expects favorable outcome in the said writ petitions, and hence the amounts paid have been considered by the Company as good for recovery.

29. Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on ''Segment Reporting'' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products/ pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

30. (i) Deferred tax :

In accordance with Accounting Standard (AS-22) on Accounting for Taxes on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax :

In view of the loss for the year, unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the period.

31. The figures for the Current Period ended 30th June, 2014 being for a period of 15 months are not comparable with those of the Previous Year for 12 months.

32. The Company has regrouped and reclassified the Previous Year''s figures in order to conform to the figures of the Current Period.

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Mar 31, 2013

(1) Contingent Liabilities are not provided for in respect of:

(a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24th January, 2011 in respect of Company''s appeal against the demand for Gujarat Sales Tax of Rs. 132,408,100 for the financial year 2002-2003 for non-submission of proof of export. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs. 8,545,195 against which Company has made payment of Rs. 4,585,150. The Company has further contested this demand before the Sales Tax Tribunal. The matter is sub-judice and the payment of Rs. 4,585,150 is considered by the Company as good and recoverable.

(c) Bills of Exchange discounted with the Banks Rs. 59,394,963 (Previous Period Rs. 70,000,000).

(d) Bank Guarantees provided by bank to Government departments for Tender application on behalf of the Company Rs. 1,981,961 (Previous Period Rs. 4,646,620).

(2) (i) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs. 250,000,000 advanced to Lyka BDR International Ltd., a Subsidiary of the Company (the outstanding amount of the loan is Rs. 69,911,654 as on 31st March, 2013). Under the restructuring of Term Loan Agreement, the Company''s liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest due thereon.

(ii) The Company has given a guarantee to Kapol Co-operative Bank Limited for Its loan facility of Rs. 43,500,000 given to Lyka Exports Limited. (The outstanding amount of the loan is Rs. 43,595,658 as on 31st March, 2013).

(3) Revaluation Reserve:

(A) (i) The Company during the previous period ended 31.03.2007 had Revalued Land, Building and Plant & Machinery based on valuation report, of an approved valuer M/s. Sigma Engineering Consultants, dated 31st March, 2007 and had restated the said assets at their "Net Present Replacement Value" of Rs. 518,473,763. The difference between the said "Net Present Replacement Value" and the written down value of the said assets of Rs. 362,717,501 had been credited to Revaluation Reserve No. I as under:

(ii) The company utilized Rs. 341,762,712 out of Revaluation Reserve Rs. 362,717,501 to write off irrecoverable sundry debtors during the financial year ended 31st March 2007, which is not in accordance with the Generally Accepted Accounting Practice (GAAP) and requirements of Accounting Standard 5 (AS-5) "Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies". The balance amount in Revaluation Reserve Rs. 20,954,789 has been utilized to provide for the differential depreciation on "Net Revalued amount" (Net Present Replacement Value Less Written Down Value) till 30th September, 2009.

The depreciation on above revaluation for the year aggregating to Rs. 7,569,413 has been charged to the Statement of Profit and Loss.

(B) (i) The Company during the previous period ended 30.09.2010 has again revalued its tangible assets at its "current replacement cost" as on 30th September, 2010 based on valuation report of an approved valuer M/s Engineers Associates vide their report dated 30th September, 2010 and has re-stated the said assets at their Net Present Replacement Value of Rs. 1,115,884,476 as on 30th September, 2010. The difference between the said replacement value and the written down value of the said assets of Rs. 489,551,141 as on 30.09.2010 has been credited to Revaluation Reserve No. II as under:-

(ii) The Company utilized Rs. 243,576,572 out of Revaluation Reserve II of Rs. 489,551,141 to write off / adjust slow and non moving inventories, certain debtors loans and advances and Deferred Revenue Expenditure during financial year ended 30th September, 2010 due to which there is a shortfall in the Revaluation Reserve of Rs. 243,576,572.

(iii) During the current year, the Company has further utilized Rs. 27,239,600 out of the balance lying in Revaluation Reserve II to write-off Sundry Debtors and Loans & Advances aggregating to Rs. 27,239,600 due to which there is a further shortfall in the Revaluation Reserve in like sum.

(iv) The depreciation on the Revalued assets for the year aggregating to Rs. 6,219,098 has been charged to Revaluation Reserve.

(4)Rs. 50,250,000 (Previous period Rs. 50,250,000) placed with the Managing Director, as deposit for residential accommodation / garage taken on leave and license, which has been given by the Company to him, in accordance with the terms of his reappointment. The Company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

(5) Loans and Advances includes Rs. 93,499,068 (Previous Period Rs. 77,633,760), granted to a Company as interest bearing financial assistance is considered good for recovery by the management.

(6) Sundry Debtors aggregating to Rs. 593,221,313 include debtors of Rs. 318,187,410 outstanding for more than six months which are considered good for recovery by the management.

(7) Balances relating to Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances are pending confirmation from the respective parties. Adjustment, if any, will be made in the year in which confirmations are received.

(8) The investments in unquoted shares of Lyka BDR International Ltd. and Lyka Exports Ltd. have been acquired at par / premium respectively. Though their present book value are significantly lower than their cost of acquisition, keeping in view their long term business synergy and potential, the management is of the opinion that no provision for fall in its value is required to be made at this juncture taking into consideration intrinsic value of business.

(9) CWIP Intangible:

(i) The Company has made investments by way of direct expenditure and allocable indirect expenditure to date in respect of "new product development and applied research" aggregating to Rs. 115,945,456 (Previous Period Rs. 80,004,844) including finance cost of Rs. 21,680,917 (Previous Period Rs. 10,405,221) of which, the cost of "Self Generated Intangible Assets" recognized during the year aggregates to Rs. 29,206,663 (Previous Period Rs. Nil), which includes finance cost of Rs. 3,442,895 (Previous Period Rs. Nil).

(ii) Rs. 1,416,578 (Previous Period Rs. 645,726), including finance cost of Rs. 332,406 (Previous Year Rs. Nil), has been charged to Statement of Profit and Loss in respect of expenditure relating to certain products which have been since discontinued.

(iii) CWIP intangible Rs. 85,322,215 (Previous Period Rs. 80,004,844). The statement of profit and loss comprises of expenditure under the respective heads as below, which shall be recognized as "Self Generated Intangible Assets" upon successful development of respective products or charged to Statement of Profit and Loss in the year in which finally is reached.

(10) Arrears of dividend on 10% Cumulative Redeemable Preference Share dividend aggregates to Rs. 8,142,750 (Previous Period Rs. 7,057,050).

(11) The company concluded restructuring of loans during previous period resulting in deferment of repayment of loans and reduction of interest cost. The cost of professional fees and other charges incurred for availing the above benefits aggregated to Rs. 4,994,860, of which, a sum of Rs. 1,248,715 was expensed as exceptional item during the previous period and balance of Rs. 3,746,145 is expensed as exceptional item during the current year

(12) Inventories include slow / non-moving materials procured during the earlier period aggregating to Rs. 6,576,549. The Company is in the process of evaluating the quantum of usable materials.

(13) The delays in depositing statutory dues with Government, Semi-Government and Local Authorities beyond the time allowed will be suitably represented to the appropriate authorities. The liability, if any, towards interest, penalty etc will be provided for as and when it arises.

(14) Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, relating to AS 11 Accounting Standard on the "Effects of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation. Accordingly, the company amortized Rs. 13,823,987 during the previous year ended 30th September, 2010 to the Profit & Loss Account and the balance of Rs. 13,823,987 was to be amortized by 31st March, 2011. Subsequently, the Company exercised its option in items of Notification dated 29 December, 2011 issued by the Ministry of Company Affairs will be amortized on or before 31st March, 2020.

(15) Employment and Retirement Benefits.

(i) Gratuity of Rs. 5,735,947 as included in Contribution to Provident and Other Funds in Note No. 22 of Statement to Profit & Loss comprises of:

a) Rs. 123,724 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

b) Rs. 3,450,223 being charge for the year as per actuarial valuation.

c) Rs. 2,162,000 being provision for gratuity relating to Managing Director on accrual basis.

(ii) The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 31st March, 2013. The following tables set out the amounts recognized in the financial statements as at 31st March, 2013 for the defined benefit plans.

(iii) Though the Company has provided for actuarial liability in respect of leave salary as in the past, it has not disclosed "Defined Benefit Obligations", as required as per AS-15 (revised) - "Employee Benefits".

(16) Contingent Liabilities are not provided for in respect of:

(a) There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. During the previous period, the Company has received notices for recovery of Rs. 209,440,565 to be deposited into "Drug Price Equalization Account".

The Company has challenged the said notices in the writ petitions filed before the Hon''ble Gujarat High Court, which has admitted the writ petitions subject to the Company paying Rs. 103,245,000 against the said demands.

Since the Company expects favorable outcome in the said writ petitions, the amounts paid have been considered by the Company as advances which are considered by the Company as good for recovery.

(17) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on ''Segment Reporting'' (AS-17), the primary segment of the company is business segment, which comprises of pharmaceutical products / pharma related services. As the company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

(18) As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with the related parties as defined in the Accounting Standard are given below:

(a) List of related parties and their relationship

(19) (i) Deferred tax :

In accordance with Accounting Standard (AS-22) on Accounting for Taxes on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which they said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax :

In view of loss for the year, unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the year.

(20) The figures for the Current Year ended 31st March, 2013 being for a period of 12 months are not comparable with those of the Previous Period for 18 months.

(21) The Presentation and Disclosure of the Financial statements have been made in accordance with the Revised Schedule VI notified by the Central Government vide Notification No. S. O. 447 (E), dated 28th February, 2011 (as amended by Notification No. F. N. 2/6/2008 - CL - V, dated 30th March, 2011) which has become effective for Accounting periods commencing on or after 1st April, 2011. The Company has regrouped and reclassified the previous period''s figures in order to conform to the figures of the current year.

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Mar 31, 2012

Of the above shares

i) 32,220 Equity Shares of Rs.10 (as subdivided) each were allotted to the Shareholders of erstwhile Lyphin Chemicals Private Limited pursuant to scheme of amalgamation without payment being received in cash.

ii) 1,200,000 Equity Shares of Rs.10 each were allotted as fully paid up by way of Bonus shares by capitalisation of General Reserve.

iii) 1,160,000 Equity Shares of Rs.10 each were alloted as fully paid up as under :

(a) 920,000 Equity shares on conversion of 92,000 (Series A) fully Convertible Debentures of Rs.200 each into 10 Shares at a premium of Rs.10 each.

(b) 200,000 Equity shares on conversion of the convertible portion of Rs.40 each of 100,000 (Series B) Convertible Debentures into 2 Shares at a premium of Rs.10 each.

(c) 40,000 Equity shares on conversion of 40,000 zero interest fully Convertible Debentures into one equity share of Rs.10 each at a premium of Rs.61 each.

iv) 4,000,000 Equity share of Rs.10 each on conversion of Global Depository Receipt at a premium of Rs. 47.45 each.

v) 1,250,000 Equity shares of Rs.10 each on conversion of non-transferable Equity Share Warrants to Promoters, Promoters group , Domestic investors & Business Associates.

vi) 930,000 Equity shares of Rs.10 each on Preferential basis to Promoters & Business Associates.

vii) 6,380,000 Equity shares of Rs.10 each on Preferential basis to Promoters & Domestic investors.

viii) 650,000 Equity shares of Rs.10 each on Preferential basis to Promoters group & Domestic investors.

ix) 108,570 10% Cumulative Redeemable Preference Shares of Rs.100 each fully paid up redeemable at the option of the Company but not later than 20 years from the date of allotment.

(2) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 80,469,240 (Previous year Rs.68,872,967).

(3) Contingent Liabilities are not provided for in respect of :

(a) The Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24/ 01/2011 in respect of Company's appeal against the demand for Gujarat Sales Tax of Rs.132,408,100 for the financial year 2002-2003 for non-submission of proof of export etc. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs.8,545,195 against which Company has made payment of Rs.4,585,150. The Company has further contested this demand before the Sales Tax Tribunal.

(b) Particulars Current Period Previous year (Rs.) (Rs.)

Ex-gratia - employees 34,592,745 34,295,458

Disputed Central Excise duty 1,122,138 1,122,138

Disputed Sales Tax Demands 13,227,361 10,049,815

Disputed Service Tax Demands 1,809,830 — Undertaking given to the excise dept for goods cleared for export without payment of duty 30,000,000 8,280,201

(c) Bills of Exchange discounted with the Banks Rs.70,000,000 (Previous year Rs.70,625,849).

(d) The delays in depositing statutory dues to Government, Semi-Government and Local Authorities beyond the time allowed have been suitably represented to the appropriate authorities. Liability if any towards interest, penalty etc. would be provided as and when they arise.

(4) Secured Loans :

(i) During the period the company has concluded restructuring of loans from Dena Bank resulting into deferment of repayment of loans and reduction of interest rate. The professional fees and other charges incurred for availing the above benefits aggregate to Rs.4,994,860, of which a sum of Rs.1,248,715 is amortised as exceptional item during the period and the balance Rs.3,746,145 will be amortised over three equated quarterly installments by 31st December, 2012 to coincide with the deferment period.

(ii) Nature of security and other particulars of Secured Loans.

(a) Bill discounting facility from Kapol Co-op Bank Ltd. is secured by underlying bills as well as collateral security by equitable mortgage by deposit of Title Deeds of Company's residential premises/flats situated at Ankleshwar.

(b) The Working Capital Loans & Term Loans from Banks are secured by way of first charge on Stock-in- Trade, Book Debts, Other Movable Assets, Movable Machinery and guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Company's immovable properties at Ankleshwar, Tarapur & Mumbai. Further, the shares held by the promoters in the company have been provided as collateral security to the banks.

(c) Redeemable Non Convertible Debentures (privately placed) are secured by way of first charge on Trade Marks and second charge on Immovable property at Ankleshwar.

(5) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories for a total amount of Rs.250,000,000 advanced to Lyka BDR International Ltd., a Subsidiary of the Company (the outstanding amount of the loan is Rs.194,330,548 as on 31/03/2012). Under the restructuring of Term Loan Agreement, the Company's liability in respect of the amount advanced to Lyka BDR International Ltd. is restricted to the extent of 50% of the principal and interest due thereon.

(6) Revaluation Reserve:

(A) (i) The Company during the previous year ended 31.03.2007 had Revalued Land, Building and Plant & Machinery based on valuation report, of an approved valuer M/s. Sigma Engineering Consultants: dated 31st March, 2007 and had restated the said assets at their "Net Present Replacement Value" of Rs.518,473,763. The difference between the said "Net Present Replacement Value" and the written down value of the said assets of Rs. 362,717,501 had been credited to Revaluation Reserve No. I as under :

(ii) The company utilized Rs.341,762,712 out of Revaluation Reserve Rs.362,717,501 to write off irrecoverable sundry debtors during the financial year ended 31st March 2007. The balance amount in Revaluation Reserve Rs. 20,954,789 has been utilized to provide for the differential depreciation on "Net Revalued amount" (Net Present Replacement Value Less Written Down Value) till 30th September, 2009.

(B) (i) The Company during the previous year ended 30.09.2010 has again revalued its tangible assets at its "current replacement cost" as on 30th September, 2010 based on valuation report of an approved valuer M/s Engineers Associates vide their report dated 30th September, 2010 and has restated the said assets at their Net Present Replacement Value of Rs. 1,115,884,476 as on 30th September, 2010. The difference between the said replacement value and the written down value of the said assets of Rs. 489,551,141 as on 30.09.2010 has been credited to Revaluation Reserve No. II as under:-

(ii) The Company utilized Rs. 243,576,572 out of Revalued Reserve II of Rs. 489,551,141 to write off/ adjust slow and non moving inventories, certain debtors loans and advances and Deferred Revenue Expenditure in the previous year due to which there is a shortfall in the Revaluation Reserve of Rs.243,576,572.

During the current period, the Company sold certain revalued assets having an aggregate book value of Rs.86,514,890 whose corresponding revalued value was Rs.263,190,274 at the time of sale.

The difference between the sale consideration of Rs. 175,722,043 of the said assets and book value of Rs.86,514,890 as on the date of sale has been credited as Profit on sale of Assets Rs.89,207,153 in the Profit and Loss account for the period. There would be loss of Rs.3,186,848 instead of profit of Rs. 89,207,153 had such shortfall on Revaluation Reserve been considered.

(7) Loans and Advances :

(i) Rs. 50,250,000 (Previous year Rs. 50,000,000) placed with the Managing Director, as deposit for a residential accommodation/garage taken on Leave and License, which has been given by the Company to him, in accordance with the terms of his reappointment. The Company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

(ii) Rs.77,633,760 (Previous year Rs.11,138,269), which is granted to a Company as interest bearing financial assistance.

(iii) Rs.48,606,065 (Previous year Rs.41,185,843) to Lyka Exports Ltd., as interest bearing financial assistance with effect from 1st October, 2010.

(iv) Rs.50,000,000 (Previous year Rs.30,000,000) to Lyka BDR International Ltd. as interest bearing financial assistance.

The said loans and advances as referred to in (ii), (iii) and (iv) above are considered as good for recovery by the management.

(8) Balances relating to Sundry Debtors, Sundry Creditors, Loan Licensees and Loans & Advances are pending confirmation from the respective parties though sent by the Company during the period in many cases. Adjustment if any will be made in the year in which confirmations are received.

(9) The investments in unquoted shares of Lyka BDR International Ltd., and Lyka Exports Ltd., have been acquired at par/premium respectively. Though their present book values are significantly lower than their cost of acquisition, keeping in view their long term business synergies and potential, the management is of the opinion that no provision for fall in their values is required to be made at this juncture taking into consideration intrinsic values of their respective businesses.

(10) The Company has incurred direct expenditure and allocable indirect expenditure to date in respect of "new product development and applied research" aggregating to Rs. 80,004,844 (Previous year Rs.31,102,207) has been classified under "Capital Work in Progress - Intangible". Upon completion of successful development of the respective products, the corresponding expenditure incurred till then, shall be recognized as "Intangibles viz. Technical Know How or Patent / Trade Marks", as the case may be.

(11) Pursuant to the Notification dated 31st March, 2009 issued by the Ministry of Company Affairs, relating to AS 11, Accounting Standard on the "Effect of changes in Foreign Exchange Rates", the Company was to amortize the balance loss on account of foreign currency translation. Accordingly, the company had amortized Rs.13,823,987 in the previous year to the Profit & Loss Account and the balance of Rs.13,823,987 was to be amortized by 31st March, 2011. However, the Company in items of Notification dated 29/12/2011 issued by the Ministry of Company Affairs has exercised its option to amortize the balance Rs.13,823,987 on or before 31st March, 2020.

(12) Arrears of dividend on 10% Cumulative Redeemable Preference Share dividend aggregates to Rs.7,057,050 (Previous year Rs.5,428,500). Rs.

(13) Employment and Retirement Benefits

a. Gratuity of Rs.4,621,239 as shown in Schedule 13 of Profit & Loss Account comprises of:

(i) Rs.4,134,415 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

(ii) Rs.361,824 being charge for the year as per actuarial valuation.

(iii) Rs.125,000 being provision for gratuity relating to Managing Director on accrual basis.

b. The actuarial valuation of the present value of the defined benefit obligation in respect of Gratuity has been carried out as at 31st March, 2012. The following tables set out the amounts recognized in the financial statements as at 31st March, 2012 for the defined benefit plans.

c. Though the Company has provided for actuarial liability in respect of leave salary as in the past , it has not disclosed "Defined Benefit Obligations", as required as per AS-15 (revised) - "Employee Benefits".

(14) There were demands raised against the Company aggregating to Rs. 68,061,957 plus interest thereon under the Drug Price Control Order 1979 by the Government of India which were contested by the Company. In the current period, the Company has received recovery notices for recovery of Rs. 209,440,565 to be deposited into "Drug Price Equalisation Account".

The Company has challenged the said notices in the writ petitions before the Hon'ble Gujarat High Court. The Hon'ble High Court has admitted the writ petitions subject to the Company depositing certain amounts against the said demands. Accordingly the Company has deposited Rs.103,245,000.

The Company expects favourable outcome in the said writ petitions and hence, the amounts paid have been treated as deposits.

(15) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on 'Segment Reporting' (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products / pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

Segment information for secondary segment reporting (by geographical segments)

The company caters mainly to the needs of Indian market and the export turnover being below10% of the total turnover of the company, there is no reportable geographical segment.

(16) (i) Deferred tax :

In accordance with Accounting Standard (AS-22) on Accounting for Taxes on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets comprise of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax :

In view of the loss for the period, unabsorbed Business Losses and Depreciation of the earlier years, current tax has not been provided for the period.

* As certified by the management

** (i) Actual production of Bulk Drugs includes Production for Captive consumption. Actual Production of formulations includes quantity manufactured by processor.

(ii) Actual production of Bulk Drugs and Formulations does not include quantity manufactured for third party.

# Installed capacity has not been disclosed as this is variable and subject to changes in product mix, and utilization of manufacturing facilities, given the nature of operations.

(17) The figures for the Current Period ended 31st March, 2012 are not comparable with those of the previous year for 12 months.

(18) The figures for the Previous year ended 30th September, 2010 have been reclassified / regrouped, wherever necessary in order to conform to those of the current period.

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Sep 30, 2010

(1) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 68,872,967 (Previous period Rs.18,964,800).

(2) Contingent Liabilities are not provided for in respect of:

(a) As reported in the previous period, there were demands raised against the company aggregate to Rs. 83,565,226 under the Drug Price Control Order, 1979 (DPCO) by Government of India which were contested by the company. Recently, the Government of India has issued notices for recovery of Rs. 83,565,226 plus the interest thereon, in respect of Five bulk drugs, from the Company, to be deposited into "Drug Price Equalization Account". The Company has contested the same in Writ Petition in the High Court of Gujarat for one of the bulk drugs which constitutes major part of this demand. As per Companys contention, this bulk drug is not covered under "DPCO 1979" and therefore, the demand has no legal basis and hence, not enforceable. The Company is in the process of filing further petitions in the High Court of Gujarat in respect of other Bulk Drugs contesting the demands.

(b) During the year, the Company has received an Order from the Gujarat Sales Tax Commissioner (Appeals) Baroda, dated 24/01/2011 in respect of Companys appeal against the demand for Gujarat Sales Tax of Rs.132,408,100 for the financial year 2002-2003 for non-submission of proof of export etc. The Commissioner of Sales Tax (Appeals) based on the facts as submitted, has revised the demand to Rs.8,545,195 against which Company has made payment of Rs.4,585,150. The Company has further contested this demand before the Sales Tax Tribunal.

(d) Bills of Exchange discounted with the Banks Rs.70,625,849 (Previous period Rs.63,946,251).

(e) The delays in depositing statutory dues to Government, Semi-Government and Local Authorities beyond the time allowed have been suitably represented to the appropriate authorities. Liability if any towards interest, penalty etc. would be provided as and when they arise.

(3) Nature of security and other particulars of Secured Loans.

(a) Bill discounting facility from Kapol Co-op Bank Ltd. is secured by underlying bills as well as collateral security by equitable mortgage by deposit of Title Deeds of Companys residential premises/flats situated at Mumbai and Ankleshwar.

(b) The Working Capital Loans, Corporate Loan & Term Loans from other Bank are secured by way of first charge on Stock-in-Trade and Book Debts, Other Movable Assets, Movable Machinery and guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Companys immovable properties at Ankleshwar, Tarapur & Mumbai. Further the shares held by the promoters in the company have been provided as collateral security to the banks.

(4) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories along with export registration certificate for a total amount of Rs.250,000,000 advanced to Lyka BDR International Ltd., are erstwhile Joint Venture Company and now a Subsidiary of the Company (the outstanding amount of the loan is Rs.218,927,755 as on 30/09/2010). Under the restructuring of Term Loan Agreement, the Companys liability in respect of the amount advanced to Lyka BDR International Ltd. is to the extent of 50% of the principal and interest due thereon. The Company has issued post dated cheques worth Rs.66,956,767 as collateral to Clearwater Capital Partners India Pvt. Ltd.

(ii) The company utilized Rs. 341,762,712 out of Revaluation Reserve Rs.362,717,501 to write off irrecoverable sundry debtors during the financial year ended 31st March 2007. The balance amount in Revaluation Reserve Rs. 20,954,789 has been utilized to provide for the differential depreciation on "Net Revalued amount" (Net Replacement Value Less Written Down Value) till 30th September, 2009.

(iii) Depreciation charged to the Profit & Loss Account of Rs. 33,959,147 includes Rs. 10,571,167 being the depreciation differential between Net Replacement Value recognized upon revaluation of assets carried out on 31st March, 2007 and the Written Down Value as on that date.

(ii) The Management of the Company has decided to write off / adjust slow and non-moving inventories, certain Sundry Debtors, Loans and Advances and Deferred Revenue Expenditure as mentioned here below aggregating to Rs. 243,576,752 against Revaluation Reserve credited during the year, as hereunder:

(a) Slow and non-moving raw material and packing material of Rs.7,277,040 upon being determined as not suitable for production.

(b) Sundry Debtors of Rs.88,782,222 : comprising of Rs.27,862,594 due from a subsidiary, Lyka BDR International Ltd., and Rs.60,919,628 due from others upon being determined as long overdue.

(c) Loans and Advances : of Rs.101,385,483 comprising of Rs.51,331,520 from Hetero Drugs Limited, an erstwhile Joint Venture Company and Rs.50,053,963 from others upon being found as unrecoverable.

(d) Deferred Revenue Expenditure of Rs.46,132,009 on the basis that the Company does not expect the economic benefits from the said expenditure to flow to the Company.

(iii) Since the Revaluation has been carried out on the last date of the accounting year no depreciation there against has been provided.

(5) Loans and Advances include interest free unsecured loans granted, unless otherwise stated:

(i) Rs.50,000,000 (Previous period Rs.50,000,000) placed with the Managing Director, as deposit for a residential accommodation taken on Leave and License, which has been given by the Company to him, in accordance with the terms of his reappointment. The Company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

(ii) Rs.11,138,269 (Previous period Rs.13,894,037), which is granted to a Company bearing interest @ 18% per annum.

(iii) Rs.41,185,843 (Previous period Rs.37,185,843) to Lyka Exports Ltd., as non interest bearing financial assistance. The same is not in compliance with section 372(A)(3) of the Companies Act, 1956.

(iv) Rs.30,000,000 (Previous period Rs.30,000,000) to Lyka BDR International Ltd. as interest bearing financial assistance.

The said loans and advances as referred in (ii), (iii) and (iv) above are expected to be recovered or adjusted during the next year. In the meanwhile, the same have been considered by the management as good for recovery.

(6) Balances relating to Sundry Debtors, Sundry Creditors and Loans & Advances are pending confirmation from the respective parties though sent by the Company during the year in many cases. Adjustment if any will be made in the year in which confirmations are received.

(7) The investments in unquoted shares of Lyka BDR International Ltd., and Lyka Exports Ltd., have been acquired at par/premium respectively. Though their present book values are lower than their cost of acquisition, keeping in view their long term business synergies and potential, the management is of the opinion that no provision for fall in their values is required to be made at this juncture taking into consideration intrinsic values of their respective businesses.

(8) During the year, the expenditure incurred in respect of "new product development and applied research" amounting to Rs.31,102,207 has been classified under "Capital Work in Progress - New Product Development". Upon completion of development of the respective products, the corresponding expenditure incurred till then, shall be recognized as "Intangibles viz. technical know how or trade marks", as the case may be.

(9) Pursuant to the Notification dated 31st March, 2009 issued by the Department of Company Affairs, relating to AS 11, Accounting Standard on the "Effect of changes in Foreign Exchange Rates", permitting the Company to amortize the loss on account of foreign currency translation, the company had written back aggregate amount of Rs.27,647,974 in respect of such loss in the period ended 30th September, 2009. Accordingly, the company during the year has amortized Rs.13,823,987 to the Profit & Loss Account and the balance of Rs.13,823,987 shall be amortized by 31st March, 2011.

(10) Arrears of unclaimed dividend Rs.260,665 (Previous period Rs. 260,665) on 15% Cumulative Preference Shares and arrears of 10% Cumulative Redeemable Preference Share dividend amount to Rs.5,428,500 (Previous period Rs. 4,342,800).

(11) Employment and Retirement Benefits

i) Gratuity of Rs.12,465,381 as shown in Schedule 13 of Profit & Loss Account comprises of:

(a) Rs.4,408,438 relating to prior period.

(b) Rs.3,024,174 being the amount borne by the Company representing the difference between the actual Gratuity paid and the surrender value received from Life Insurance Corporation of India in respect of retiring employees.

(c) Rs.1,322,212 being charge for the year as per actuarial valuation.

(d) Rs.2,135,000 as explained below in (ii).

(e) Rs.1,575,557 being gratuity referred to in note no. 20 relating to Managerial Remuneration.

(ii) During the previous period the Company had adopted Accounting Standard (AS-15) (Revised 2005) -"Employee Benefits" which resulted in a transitional liability of Rs.4,825,000 as at 1st April, 2007 being required to be provided. In accordance with the transitional provisions of the Accounting Standard, the transitional liability was decided by the Company to be provided over a period of 5 years. Consequently, the company has provided Rs. 2,135,000 (Previous period Rs. 1,725,000) as an expense for the year as gratuity under Schedule 13.

(12) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on Segment Reporting (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products / pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

(13) (i) Deferred tax:

In accordance with Accounting Standard (AS-22) on Accounting for Tax on Income notified by the Companies (Accounting Standards) Rules, 2006, Deferred Tax Assets consist of substantial amounts of carried forward losses and unabsorbed depreciation under the Income Tax Act, 1961. However, since the availability of sufficient future taxable income against which the said benefits can be set off is not possible to be ascertained with virtual certainty, the Deferred Tax Assets have not been recognized as a measure of abundant caution.

(ii) Current Tax:

(a) In view of the unabsorbed Business Losses and Depreciation of the earlier years, there is no tax provision for the year.

(b) Since the Company is not expected to have "Book Profit" for the "Previous Year" ending 31s March, 2011, no provision for "Minimum Alternate Tax" has been made under section 115JB of the Income Tax Act,1961 for the year ended 30 September, 2010.

(14) The Company has neither received any intimation from its vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 nor any claim for interest and hence the disclosure, under the said Act has not been made.

(15) The figures for the Current Year ended 30th September, 2010 are not comparable with those of the pervious period for 18 months.

(16) The figures for the Previous Period ended 30th September, 2009 have been reclassified / regrouped, wherever necessary.

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Sep 30, 2009

(1) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 18,964,8007- (Previous year Rs. 19,572,782/-).

(2) Contingent Liabilities are not provided for in respect of:

(a) (i) The Government of India has appointed a Three Member Committee headed by a retired High Court Judge to go into the demands made on pharmaceutical companies under the Drugs Price Control Order (DPCO). Demands aggregating to Rs.83,565,226/- (Previous year Rs. 83,565,226/-) had been raised on the Company in 1987, 1990 and 1995 for payment into the Drugs Price Equalisation Account under the DPCO 1979 and DPCO 1987 read with DPCO 1995 being the difference between the price of bulk drugs purported to have been allowed in the prices of formulations of the Company and actual procurement price of the bulk drugs according to the Government. The Company has disputed the said demands and has submitted representation to the Government. The Company has also filed counter claims and claims for set off and adjustments under DPCO 1979 and DPCO 1987 on the grounds among others that the Government inadvertently included the items where the DPCO has no application as well as where actual cost incurred by the Company has not been taken into consideration. These counter claims raised by the Company exceed the demands made by the Government. The Company expects that both these matters would neutralise on admission of the Companys claim by the Government and the Company would not be required to pay any amount under DPCO to the Government and accordingly there would be, no material impact on the financials of the Company.

(ii) Since the Company had approached the aforesaid Committee, Mumbai High Court has by its order dated 3rd April, 1996 vacated the interim relief granted on 6th April, 1990. However, the undertaking furnished by the Company for non-disposal or transfer of immovable properties as on the date of the court order i.e. 6.8.1990 save and except in the normal course of business shall continue in respect of demand for Rs. 67,873,006/- (Previous year Rs.67,873,006/-).

(c) Bills of Exchange discounted with the Banks Rs.63,946,251/- (Previous year Rs.42,842,308/-).

(d) The delay in depositing statutory dues to Government, Semi-Government and Local Authorities beyond the time allowed have been suitably represented to the appropriate authorities. Liability if any towards interest, penalty etc. would be provided as and when arise.

(e) During the year, the Company has received a demand in respect of Gujarat Sales Tax for Rs.132,408,100/- for the financial year 2002-2003 for non-submission of proof of Export etc. The Company has since submitted the same, filed an appeal and obtained a stay on the said demand on payment under protest of Rs. 4,585,150/-. The final order there against is awaited. The Company is confident that there will not be any liability on this account.

(3) Nature of security and other particulars of Secured Loans.

(a) The Term Loan from Kapol Co-op Bank Ltd. is secured by equitable mortgage by deposit of Title Deed of Companys certain residential premises/flats situated at Mumbai and Ankleshwar. A part of the said term loan is also secured by specific movable machinery of specific plant at Ankleshwar and Tarapur. Further, Bill Discounting Facility is secured by underlying Bills.

(b) The Working Capital Loans & Corporate Loans from other Banks are secured by way of first charge on Stock-in-Trade and Book Debts Other Movable Assets, Movable Machinery and guaranteed by some of the Directors of the Company. These Loans are also secured by equitable mortgage of Companys immovable properties at Ankleshwar, Tarapur & Mumbai. These Loans are also secured by pledge of Promoters shares.

(4) The Company has given a "counter guarantee" to Clearwater Capital Partners India Pvt. Ltd., by creation of first pari-passu charge on its current assets and movable machinery, including spares and accessories along with export registration certificate for a total amount of Rs. 250,000,000/- advanced to Lyka BDR International Ltd., erstwhile a Joint Venture and now a Subsidiary of the Company, (the outstanding amount is Rs. 236,688,000/- as on 30/09/2009). Under the restructuring of Term Loan Agreement, the Companys liability in respect of the amount advanced to Lyka BDR International Ltd., is to the extent of 50% of the principle and interest due thereon. The Company has issued post dated cheques worth Rs. 141,153,592/- to Clearwater Capital Partners India Pvt. Ltd., which are payable quarterly upto 2011.

(5) (a) The Company during the previous year had revalued land, building and plant & machinery based on valuation report of an approved valuer M/s. Sigma Engineering Consultants; vide their report dated 31sl March, 2007 and has restated the said Assets at their net present replacement value of Rs.518,473,763/-. The difference between

(b) The Company has provided depreciation of Rs. 15,768,662/- (Previous year Rs. 10,667,198/-) on revalued assets for the period at the rates applicable as per straight line method, which has been set-off to the extent of the available Revaluation Reserve and the balance amount of Rs.7,502,285/- has been charged to the Profit & Loss Account.

(6) Sundry Debtors include Rs. 50,259,495/- (Previous year Rs. 35,713,330/-) from Lyka BDR International Ltd (LBDR) which are not acknowledged by them as debt. While negotiations are in progress, the Company is of the view, that on reaching finality, the consequential impact on account of short realization if any, will be accounted.

(7) Loans and Advances include interest free unsecured loans granted, unless otherwise stated:

(i) Rs. 50,000,000/- (Previous Year Rs. 50,000,000/-) placed with the Managing Director, as deposit for a residential accommodation taken on Leave and License, which has been given by the Company to him, in accordance with the terms of his reappointment The Company is legally advised that the provisions of section 295 of the Companies Act, 1956 are not attracted in respect of the same.

(ii) Rs. 56,331,520/- (Previous year Rs. 61,331,520/-) due from Hetero Drugs Ltd., (formerly known as Lyka Hetero Healthcare Limited erstwhile JVC).

(iii) Rs. 13,894,037/- (Previous year Rs. 15,914,354/-), which is granted to a Company bearing interest @ 18% per annum.

(iv) In view of long term strategic investment, the Company has granted Rs. 37,185,843/- (Previous year Rs. 73,585,843/-) to Lyka Exports Ltd., as non interest bearing financial assistance. The same is not in compliance with section 372(A)(3) of the Companies Act 1956.

The said loans and advances as referred in (ii), (iii) and (iv) above are expected to be recovered or adjusted during the next year. In the meanwhile the same have been considered by the management as good for recovery.

(8) (i) Balances relating to Sundry Debtors, Sundry Creditors and Loans & Advances are pending confirmation from the respective parties though sent by the Company during the period in many cases. Adjustment if any will be made in the year in which confirmations are received.

(ii) Sundry Debtors aggregating to Rs. 10,174,965/- are doubtful of recovery.

(9) The investment in unquoted shares of Lyka BDR International Ltd., and Lyka Exports Ltd., has been acquired at par/premium respectively though their present book values are lower than their cost of acquisition. Keeping in view the long term business synergies and potential, the management is of the view that no provision for fall in their values is required to be made as the same is of temporary nature and it is premature to recognize such fall in intrinsic values.

(10) Expenditure amounting to Rs.46,132,009/- (Previous year Rs. 27,514,204/-) being an expense in connection with Research and Development activities for developing new molecules, formulations and New Drug Delivery System, • the benefits of which are expected to accrue over the next 5 years and hence it is treated as Deferred Revenue Expenditure to be written off over the said period. In view of the above, the same has not been considered as period cost.

(11) Pursuant to the Notification dated 31st March, 2009 issued by the Department of Company Affairs, relating to AS 11, Accounting Standard on the "Effect of changes in Foreign Exchange Rates", the Company has written back an aggregate amount of Rs. 27,647,974/- being the exchange loss on account of foreign currency translation written off in the earlier years to be amortized by 31st March, 2011. The corresponding amount is held under the head Miscellaneous Expenditure - Foreign Currency Monetary Item Translation Difference Account.

(12) Inventories include slow /non-moving raw materials and packing materials procured during prior years aggregating to Rs. 12,270,023/- (Previous year Rs. 14,168,172/-). The Company is in the process of identifying the quantum of material that is suitable for production. Pending such ascertainment, the Company has written down such inventory by Rs.3,029,303/- (Previous year Rs.2,000,000/-) and the balance if any will be written down in the current period.

(13) Arrears of unclaimed 15% Cumulative Preference Shares dividend amounting to Rs. 260,665/- (Previous year Rs. 260,665/-) and 10% Cumulative Redeemable Preference Share dividend amounting to Rs. 4,342,800/- (Previous year Rs. 2,714,250/-).

(14) Employment and Retirement Benefits

i) Defined contribution plan

The Company makes contribution at a specified percentage of payroll cost towards Employee Provident Fund for qualifying employee. The company recognized Rs.11,966,294/- (Previous year Rs. 6,199,261/-) for Provident Fund and Superannuation Fund contribution in the profit and loss account.

ii) Defined benefit plans

During the previous year the Company had adopted Accounting Standard (AS-15) (Revised 2005) -" Employee Benefits". This had resulted in a transitional liability (net) of Rs. 4,825,000/- as at 1st April, 2007. In accordance with the transitional provisions of the Accounting Standard, the company had decided to charge the transitional liability as an expenses over a period of 5 years and accordingly Rs. 1,725,000/- (Previous year Rs. 965,000/-) has been recognised as an expense for the period as gratuity under Schedule 13 and balance amount of Rs. 2,135,000/- (Previous year Rs. 3,860,000/-) is unrecognised transitional liability as at 30th September, 2009.

(15) Segment information for primary segment reporting (by business segments):

Based on guiding principles given in the Accounting standard on Segment Reporting (AS-17), the primary segment of the Company is business segment, which comprises of pharmaceutical products /pharma related services. As the Company operates in a single primary business segment, no segment information thereof is given.

(16) As per Accounting Standard 18, issued by the Institute of Chartered Accountants of India, the disclosures of transactions with the related parties as defined in the Accounting Standard are given below:

(a) List of related parties and their relationship

Category Name of the Related Party Relationship

1 Lyka Exports Ltd. Associate 1 Lyka Securities & Investment Pvt Ltd. Associate 2

2 Lyka BDR International Ltd. Subsidary

3 BDR Pharmaceutical Intl Pvt Ltd. Venture Partner

4 Mr. N. I. Gandhi Key Management Personnel (KMP) Mr. R. A. S. Iyer (Till 31/07/2009)

Mr.V.S.Taksali

5 Ms. N. N. Gandhi Relatives of KMP Mr. Kunal N. Gandhi

Ms. Ushma R. Shah Ms. Sweta S. Shah

6 Enai Trading & Investment Pvt. Ltd. Entities owned by / over which KMP is N. I. Gandhi H.U.F. able to exercise significant influence

(17) As a matter of prudence the company has not recognised "Deferred Tax Assets" in respect of carry forward of losses and other allowances, in the absence of virtual certainty that in foreseeable future it shall have taxable income to realise such an asset.

(18) The Company has neither received any intimation from its vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 nor any claim for interest and hence the disclosure, under the said Act has not been made.

19) The figures for the current period ended 30th September, 2009 are not comparable with those of the pervious year for 12 months.

20) The figures for the previous year ended 31st March, 2008 have been reclassified / regrouped, wherever necessary.