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Notes to Accounts of SMS Pharmaceuticals Ltd.

Mar 31, 2023

1. Property, Plant and Equipment includes relating to Research and Development activities (Refer Note. 41).

2. Pledge on Property, Plant and Equipment :

(i) Refer Note 50 for disclosure of contractual commitments for the acquisition of property, plant and equipment for an amount of H 1401.95 lakhs (31st March 2022 H 898.51 lakhs)

(ii) The company has participated in the e-auction conducted by State Bank of India (Bank) and become successful bidder for the property situated at Jubilee Hills, Hyderabad for a sum of H 1055.00 Lakhs. The owner of the property has litigated with the Bank and filed case with Debt Recovery Tribunal (DRT), Hyderabad wherein the Company also impleaded and subsequently DRT has cancelled e-auction due to technical issue. Aggrieved by the order of DRT, the company has filed an appeal before the Hon''ble Debt Recovery Appellate Tribunal (DRAT), Kolkatta and dismissed the appeal on the grounds which DRT observed. Aggrieved by the DRAT order, the company has filed a Writ Petition before the Hon''ble High Court of Telangana. The Hon''ble High Court of Telangana has allowed our Writ Petition vide order dated 10th January 2023. The Company has paid Sale Consideration along with interest of H 342.60 Lakhs to Bank as per the Court order. The bank has registered the Sale of Certificate in the name of our Company in the sub-registrar office, Banjara Hills, Hyderabad. Subsequently, the owner of the property has filled Special Leave Petition before the Hon''ble Supreme Court of India and same has been dismissed. The total consideration along with interest has been shown in capital work in progress.

3. Refer Note 40 for information on Property, Plant and Equipment pledged as security by the Company

The Company do not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

The Company has also taken lease for office premises in Vishakapatnam and the said lease is revocable by either of the parties with three months prior intimation. During the year, the company has paid lease rental of H 3.06 lakhs (Previous Year H 4.45 lakhs).

Hence, disclosure requirement under Ind AS 17 "Leases” is not required.

5.1 Operating Lease Commitments - Company as Lessor :

The Company has given on Lease of its part premises in R & D Gagilapur for an amount of H 0.61 lakhs per month on lease to an associate company . The company has also given for sub lease of part of its corporate office building to associate company. The Company has recognized income for total amount of H 21.66 lakhs (Previous Year H 60.43 lakhs) under the head of other income.

10.1 An amount of H 304.91 lakhs was included in the Capital Advances paid on account of land admeasuring AC 23.00 in JNPC, Parwada, Visakhapatnam District, and the amount so paid is equivalent to 100% land cost to APIIC and about 80% of development cost to Ramky Pharmacity respectively. Due to the cancellation of part of land allotted to the company in earlier, the company has filed a Writ Petition before the Hon''ble High Court and the Court has granted stay which is pending.

a) No trade or other receivables are due from directors or other officers of the Company either severally or jointly with any other person.

b) Trade receivables are non-interest bearing and are generally on terms of 30 - 120 days.

c) Of the trade receivables balance, H 5,168.18 in aggregate (as at March 31, 2022 H 2,275.77) is due from the Company''s customers individually representing more than 5 % of the total trade receivables balance.

d) During the reporting period the company has not provided doubtful debts by considering the track record of receivables and continued the existing provision on doubtful debts.

e) Trade Receivables includes an amount of H 1085.97 lakhs ( March 31, 2022 H 395.09 lakh) receivable from VKT Pharma Pvt Ltd who is related party (Refer Note.48).

The Company has only one class of equity shares having face value of Re. 1 per share. The Company declares and pays dividends in Indian rupees. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. Every holder of equity shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

19.5 Nature and Purpose of Reserves

(a) Securities Premium Reserve:

Securities Premium Reserve is to record the premium on issue of shares. The reserve will be utilised in accordance with the provisions of the Companies Act, 2013.

(b) Capital Redemption Reserve:

The Company has recognized Capital Redemption reserve on buy back of equity shares. The amount in capital redemption reserve is equal to nominal amount of the equity shares bought back. This reserve will be utilized in accordance with Section 69 of the Companies Act, 2013.

(c) General Reserve:

General Reserves represent amounts transferred from retained earnings in earlier years under the provisions of the erstwhile Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.

(d) Retained Earnings:

These are the accummulated earnings after appropriation of total comprehensive income and related transfers. The company uses retained earnings in accordance with the provisions of the Companies Act.

(e) Analysis of items of OCI, net of tax

Re-measurements of defined benefit plans (Refer Note 39).

Re-measurements of defined plans comprises actuarial gains and losses and return on plan assets.

(a) Term Loans availed from IDBI Bank Limited (IDBI Bank), State Bank of India (SBI) and Export-Import Bank of India (Exim Bank) are secured by first charge on all movable and immovable fixed assets of the company both present and future on pari-passu basis. They are further secured by second charge on current assets both present and future on pari-passu basis. These facilities are guaranteed by Sri Ramesh Babu Potluri, Chairman & Managing Director and Sri Vamsi Krishna Potluri, Executive Director of the Company in their personal capacities.

(b) Long Term Working Capital Term Loans (LTWCTL) availed from Exim Bank are secured by first charge on all movable and immovable fixed assets of the company both present and future on pari-passu basis. Further secured by second charge on current assets of the Company both present and future on pari-passu basis. These facilities are guaranteed by Sri Ramesh Babu Potluri, Chairman & Managing Director of the Company in his personal capacity.

(c) Working Capital Term Loans (WCTL) under Guaranteed Emergency Credit Line (GECL) availed from IDBI Bank, RBL Bank Limited (RBL Bank), Exim Bank and SBI are secured by second charge on all movable and immovable fixed assets of the company both present and future on pari-passu basis . Further secured by second charge on current assets of the Company both present and future on pari-passu basis. These facilities are covered under GECL operated by National Credit Guarantee Trustee Company Limited (NCTC).

(d) The carrying amounts of financial and non-financial assets pledged as security for current and non - current borrowings are disclosed in Note 40.

(e) The WCTL under GECL availed from IDBI Bank amounting H 1,180 lakhs is to be repaid in 47 monthly equal principal repayment of H 24.60 Lakhs and 48th monthly instalment of H 23.80 lakhs after moratorium period of one year i.e. March 2022 onwards.

(f) The WCTL under GECL2 availed from IDBI Bank amounting H 590 lakhs is to be repaid in 47 monthly equal principal repayment of H 12.30 Lakhs and 48th monthly instalment of H 11.90 lakhs after moratorium period of two years i.e. December 2023 onwards.

(g) The WCTL under GECL availed from RBL Bank amounting H 1,130 lakhs is to be repaid in 47 monthly equal principal repayment of H 23.54 Lakhs and 48th monthly instalment of H 23.62 lakhs after moratorium period of one year i.e. April 2022 onwards.

(h) The WCTL under GECL availed from SBI amounting H 2,320 lakhs is to be repaid in 48 equal monthly installments commencing after a moratorium of 2 years from the date of first disbursement i.e. March 2024.

(i) The WCTL under GECL availed from Exim Bank amounting H 1,609 lakhs is to be repaid in 48 equal monthly installments commencing after a moratorium of 2 years from the date of first disbursement i.e. April 2024.

20.1.4 The Company has used the borrowings for the purposes for which it was taken.

20.1.5 The quarterly returns of current assets filed by the Company with banks are in agreement with books of account.

20.2.1 Financial Assistance received from Department of Scientific and Industrial Research (DSIR) of H 120.00 Lakhs (previous year H 120.00 Lakhs) sanctioned under PATSER Scheme of Technology Promotion Development and Utilization (TPDU) Programme for development of catalysts or Fine Chemicals apart from Active Pharmaceutical Ingredients (API''s), and their intermediates viz. Metal Acetylacetonates, Diltiazem Hydrochloride and Taxol C-13 Side Chain. The Company has executed agreements with DSIR, NRDC, IICT Hyderabad, IICT Guwahati under the said programme.

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

However, NRDC has filed an application before the Honourable High Court of Delhi at New Delhi for appointment of an Arbitral Tribunal and the Court referred the disputes to the Delhi International Arbitration Centre (DIAC), which would appoint an arbitrator to resolve the disputes. The Company has not yet received any communication from DIAC.

23.1 Security Terms

(a) Working Capital Facilities sanctioned by State Bank of India, IDBI Bank Limited and RBL Bank Limited are secured by first charge on all current assets of the Company both present and future on pari-passu basis. These facilities are further secured by second charge on all movable and immovable fixed assets of the Company both present and future on pari-passu basis and also guaranteed by Sri Ramesh Babu Potluri, Chairman and Managing Director and Sri Vamsi Krishna Potluri, Executive Director of the Company, in their personal capacities

(b) The carrying amounts of financial and non-financial assets pledged as security for current and non-current borrowings are disclosed in Note 40.

Terms and conditions of the above financial liabilities:

Trade Payables are non-interest bearing and normally settled on 30-120 day terms.

For explanations on the company''s credit risk management processes, (refer note no.44)

24.1 Trade Payables includes an amount of H 540.99 lakhs (March 31, 2022 H 46.02 lakhs) payable to SMS Lifesciences India Limited, H 64.80 lakhs (March 31, 2022 H 9.19 lakhs) payable to Eshwar Coal Movers,H 12.76 lakhs (March 31, 2022 H 38.53 Lakhs ) payable to Raghavendra Engineering Industries India Pvt Ltd and H NIL (March 31, 2022 H 9.46 lakhs) payable to VKT Pharma Pvt Ltd who are related parties (Refer Note 48).

39 Post Employment Benefits

39.1 Defined Contribution plans

39.1.1 Employer’s Contribution to Provident Fund:

Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the Government of India. The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the year towards PF contribution is H 332.87 lakhs (Previous Year- H 291.42 lakhs).

39.1.2 Employer’s Contribution to State Insurance Scheme:

Contributions are made to State Insurance Scheme in India for employees at the rate of 3.25%. The Contributions are made to Employees State Insurance Corporation(ESI) to the respective State Governments of the Company''s location. This Corporation is administered by the Government and the obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards ESI contribution is H 23.00 lakhs(Previous Year- H 22.36 lakhs).

39.2 Defined Benefit Plans

The Company has a defined benefit gratuity plan governed by Payment of Gratuity Act, 1972. Every Employee who has completed five years or more of service is entitled to a gratuity on departure at 15 days salary for each completed year of Service. The Scheme is funded through a policy with Life Insurance Corporation of India (LIC).

The Company has a defined benefit Compensated Absence Plan governed by The Factories Act, 1948. Every Employee who has worked for a period of 240 days or more during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated as per Act.

The following table summarise net benefit expenses recognised in the statement of profit and loss, the status of funding and the amount recognised in the Balance Sheet for both the plans:

(a) Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.

(b) Plan assets does not comprise any of the Company''s own financial instruments or any assets used by the Company. The Company has the plan covered under a policy with the Life Insurance Corporation of India.

(c) The Significant acturial assumptions for the determination of the defined benefit obligation are the discount rate, the salary growth rate and the average life expectancy. The calculation of the net defined benefit liability is sensitive to these assumptions. However, the impact of these changes is not ascertained to be material by the management.

The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant acturial assumptions, the same method (Projected Unit Credit Method) has been applied while calculating the defined benefit liability recognised within the Balance Sheet.

39.2.11 Other Information

(i) Expected rate of return basis

Since the scheme funds are invested with LIC of India EROA is based on rate of return declared by fund managers.

(ii) Description of Plan Assets and Reimbursement Conditions

100% of the Plan Asset is entrusted to LIC of India under their Group Gratuity Scheme. The reimbursement is subject to LIC''s Surrender Policy

(iii) Discount Rate

The discount rate has decreased from 7.37% to 7.24% and hence there is a increase in liability leading to actuarial gain due to change in discount rate.

(iv) Present Value of Defined Benefit Obligation:

Present value of the deined benefit obligation is calculated by using Projected Unit Credit Method (PUC Method). Under the PUC Method, a "projected accrued benefit” is calculated at the beginning of the year and again at the end of the year for each benefit that will accrue for all active members of the Plan. The "Projected accrued benefit” is based on the Plan''s accrual formula and upon service as of the beginning or end of the year, but using a member''s final compensation, projected to the age at which the employee is assumed to leave active service. The Plan Liability is the acturial present value of the " Projected accrued benefits” as of the begining of the year for active members.

(v) Expected Average remaining service vs. Average remaining future service:

The average remaining service can be arithmatically arrived by deducting current age from normal retirement age whereas the expected average remaining service is arrived acturially by applying multiple decrements to the average remaining future service namely mortality and withdrawals. Thus, the expected average remaining service is always less than the average remaining future service.

(vi) Current and Non Current Liability:

The total of current and non-current liability must be equal with the total of PVO ( Present value obligation) at the end of the period plus short term compensated liability if any. It has been classified in terms of " Schedule III” of the Companies Act, 2013.

(vii) Defined Benefit Liability and Employer Contributions

The Company has purchased insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. The company considers that the contribution rate set at the last valuation date are sufficient to eliminate the deficit over the agreed period and that regular contributions, which are based on service costs will not increase significantly.

Through it is defined benefit plans, the company is exposed to a number of risks, the most significant of which are

detailed below:

(a) Investment/Interest Rate Risk: The Company is exposed to Investment / Interest risk if the return on the invested fund falls below the discount rate used to arrive at present value of the benefit.

(b) Longevity Risk: The Company is not exposed to risk of the employees living longer as the benefit under the scheme ceases on the employee separating from the employer for any reason.

(c) Risk of Salary Increase: The Company is exposed to higher liability if the future salaries rise more than assumption of salary escalation.

40 Assets Pledged as Security

For Non Current Borrowings

Secured by First Charge on Property, Plant and Equipment and Second Charge on Current Assets.

For Current Borroiwngs

Secured by First Charge on Current Assets and Second Charge on PPE (Property, Plant and Equipment).

42.1 The Company''s principal financial liabilities, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

42.2 The carrying amounts of trade payables, other financial liabilities, cash and cash equivalents, other bank balances, trade receivables and other financial assets are considered to be the same as their fair values due to their short term nature.

42.3 The management has assessed that fair value of borrowings approximate to their carrying amounts largely since they are carried at floating rate of interest.

42.4 Other non current financial assets consists of deposits with Government authorities where the fair value is considered to be the carrying value.

43 Fair Value Measurements

43.1 Fair Value Hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three

levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement,

as follows:

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

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entry specific estimates.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

43.2 Valuation Techniques used to determine fair value:

Specific Valuation techniques used to value financial instruments include:

- The use of quoted market prices or dealer quotes for similar instruments.

- The fair value of remaining financial instruments is determined using discounted cashflow analysis.

The Finance and accounts department of the Company performs the valuation of financial assets and liabilities required for financial reporting purposes, and report to the Board of Directors. The main Level 3 inputs are derived using the Discounted Cash Flow Analysis, Market Approach, Net Assets Value Method as applicable..

44 Financial Risk Management Objectives and Policies

Financial Risk Management Framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversley impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

44.1 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. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for credit. Financial instruments that are subject to concentrations of credit risk principally consist of trade receivables, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in Material Concentration of credit risk, except for Trade Receivables.

Financial Instruments and Cash Deposits

For banks and financial institutions, only high rated banks/ institutions are accepted. Other Financial Assets (excluding Bank Deposits) majorly constitute deposits given to State Electricity Departments for supply of power, which the company considers to have negligible credit exposure. Counterparty credit limits are reviewed by the Management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

Expected Credit Loss for Trade Receivables under simplified approach

For Trade Receivables, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Credit risk is the risk of financial loss to the Company if a customer to a financial instrument fails to meet its contractual obligations and arises primarily from trade receivables, treasury operations etc. The credit risk related to trade receivables is influenced mainly by the individual characteristics of each customer.

The credit risk is managed by the company by establishing credit limits and continuously monitoring the credit worthiness of the customer. The Company also provides for expected credit losses based on the past experience where it believes that there is high probability of default. In general, all trade receivables greater than 180 days are reviewed and provided for by analysing individual receivables. The Company has considered possible effect from the pandemic relating to Covid-19 on Credit risks including forward looking information to develop expected credit losses.

Liquidity risk refers to the risk that the Company cannot meet its financial obligations. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

44.3 Market Risk:

Market risk is the risk that the fair value or future cash flows of a financial isntruments will fluctuate because of changes in market prices. Market prices comprise three types of risk, currency rate risk, interest rate risk and other price risks such as equity risk. Financial instruments affected by market risk include loans and advances deposits investments in debt securities mutual funds and other equity funds.

44.3.1 Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instruments will fluctuate because of change in market interest rates. In order to optimize the Company''s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest risk management by balancing the proportion of fixed rate and floating rate financial instruments in its portfolio.

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

44.3.2 Foreign Currency Exchange Rate Risk:

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when transactions are denominated in foreign currencies.

The Company has transactional currency exposures arising from services provided or availed that are denominated in a currency other than the functional currency. The foreign currencies in which these transactions are denominated are mainly in US Dollars ($). The Company''s trade receivable and trade payable balances at the end of the reporting period have similar exposures.

(b) Foreign Currency Sensitivity

The following tables demonstrate the sensitivity to a reasonably possible change in USD exchange rate, with all other variables held constant. The impact on the Company''s profit before tax is due to changes in the fair value of monetary assets and liabilities including foreign currency derivatives. The Company''s exposure to foreign currency changes for all other currencies is not material.

44.3.3 Other Price Risk:

Other price risk is the risk that the fair value or future cash flows of the Company''s financial instruments will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market.

45 Capital Management

For the purposes of the Company''s Capital Management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company''s capital management is to maximise the shareholder value.

The Company manages its capital structure in consideration to the changes in economic conditions and the requirements of the financial covenants. The Company monitors capital using a gearing ratio, which is net debt divided by total equity plus net debt. The Company intends to keep the gearing ratio less than 1. The Company includes within net debt, borrowings including interest accrued on borrowings less cash and short term deposits.

In order to achieve this overall objective, the Company''s capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. Breaches in meeting the financial covenants would permit the bank to immediately call loans and borrowings. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current year

46 Segment Information

A Basis for segmentation

The operations of the Company are limited to one segment viz. Pharmaceutical products including ingredients and intermediaries. The products being sold under this segment are of similar nature and comprises of pharmaceutical products only. The Chairman & Managing Director has been identified as Chief Operating Decision Maker(CODM). CODM reviews the internal management reports prepared based on aggregation of financial information of the Company on a periodic basis, for the purpose of allocation of resources and evaluation of performance. Accordingly, management has identified pharmaceutical segment as the only operating segment for the Company.

B Segment information for secondary segment reporting (by geographical segment)

The Company is engaged in the manufacture of Pharmaceuticals, which in the context of Ind AS 108 is considered only business segment.

The Company has reportable geographical segments based on location of its customers:

(i) Revenue from customers within India - Domestic

(ii) Revenue from customers outside India - Exports

(iii) Revenue from customers - EOUs - Deemed Exports

(iv) Revenue from Export Incentives

49 Contingent Liabilities

Particulars

March 31, 2023

March 31, 2022

Letter of credits opened in favor of suppliers for which goods are yet to be received

-

334.40

Customs Duty against Advance Autharizations

223.34

429.45

NRDC claim against DSIR assistance (Refer No.20.2.1)

51.91

46.30

Entry Tax Liability

-

1.75

Note: Provident Fund

Pursuant to Supreme Court Judgement dated 28 February 2019, regarding the provident fund contribution wherein there has been a clarification provided of the inclusions of basic wages for the purpose of computation of contribution towards provident fund, the Company has been legally advised that there are interpretative challenges on the application of the judgement retrospectively. Based on the legal advice and in the absence of reliable measurement of the provision for earlier periods, the Company has assessed the impact of the judgement only from the year ended March 31, 2019 and concluded that there was no impact. Further, no contingent liability has been recognised based on retrospective application as amount cannot be reliably measured.

50 Commitments

Particulars

March 31, 2023

March 31, 2022

Capital Commitments

1,401.95

898.51

Export Obligations

11,552.43

12,110.25

53 Other statutory information

i) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Group for holding any Benami property.

ii) The Company does not have any transactions with companies struck off.

iii) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

iv) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

v) The Company has not been declared wilful defaulter by any bank or financial institution or government or any government authority

vi) The Company has not utilised short term funds for long term uses.

vii) The Company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

viii) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Group shall:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries

ix) The Company has not any such transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961.

54 Previous year figure have been regrouped and reclassified wherever considered necessary to confirm to this year''s classifications.


Mar 31, 2018

Notes to the Financial Statements

(All amounts: Indian Rupees in Lakhs, unless otherwise stated)

20.1.1 Security Terms

(a) Term Loans availed from State Bank of India, IDBI bank and long term working capital loan availed from Export-Import Bank of India ( Exim Bank) are secured by first charge on pari-passu basis of all movable and immovable fixed assets both present and future and second charge on pari-passu basis of all Current Assets both present and future.

(b) Term Loans availed from State Bank of India and IDBI Bank are also guaranteed by Sri P Ramesh Babu, Chairman and Managing Director and Sri TVVSN Murthy, Director of the company in their personal capacities.

(c) Long Term Working Capital Loan availed from Exim Bank is gauranteed by Sri P Ramesh Babu, Chairman and Managing Director in his personal capacity.

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

Equitable mortgage of Agricultural land admeasuring 3.65 acres situated in Yalamanchili Village of West Godavari District, Andhra Pradesh belonging to Sri TWSN Murthy, Director of the Company.

(e) The carrying amounts of financial and non-financial assets pledged as security for current and non-current borrowings are disclosed in Note 43.

(f) Hire Purchase Loans from BMW India Financial Services Pvt Ltd and Daimler Financial Services Pvt Ltd are secured by the respective vehicles on which loan availed.

20.1.2

Rate of Interest :

Name of the Bank

Rate of Interest

Term Loans

State Bank of India (Base Rate 3.2% p.a.)

10.70%

IDBI Bank (MCLR(Y) 1.10% p.a.)

9.65%

Long Term Working Capital Loan

Exim Bank (LTMLR 50 basis points)

9.50%

20.1.3 Terms of Repayment

(a) Term Loan availed from State Bank of India for an amount of Rs.4,250.00 Lakhs is repayable in 20 Quarterly Installments of Rs. 212.50 Lakhs each, commenced from June, 2014.

(b) The loan availed from IDBI Bank amounting to Rs.7,500.00 for funding the Expansion Project of Kandivalasa unit. The loan is repayable in 24 Quarterly Installments commencing from December, 2016, as mentioned below.

First 4 Quarters

Rs. 100 Lakhs each

Next 4 Quarters

Rs. 200 Lakhs each

Next 4 Quarters

Rs. 300 Lakhs each

Next 4 Quarters

Rs. 400 Lakhs each

Next 4 Quarters

Rs. 425 Lakhs each

Next 4 Quarters

Rs. 450 Lakhs each

(c) The Long Term Working Capital Loan availed from Exim Bank of India amounting Rs. 1,500.00 Lakhs is to be repaid in 20 structured quarterly installments commencing from October 1, 2019, as mentioned below:

First 4 Quarters

Rs. 25 Lakhs each

Next 4 Quarters

Rs. 25 Lakhs each

Next 4 Quarters

Rs. 50 Lakhs each

Next 4 Quarters

Rs. 125 Lakhs each

Next 4 Quarters

Rs. 150 Lakhs each

20.1.4 Current Maturities of Long Term borrowings have been disclosed seperately under the head Other Current Financial Liabilities (Refer Note No.25)

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

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

20.4 Debt Reconciliation as required by Ind AS -7 Statement of Cash Flows

Note

Particulars

as at 31.03.2018

as at 31.03.2017

Opening Borrowings

7,421.54

8,927.22

Add: Opening Current Maturities

1,515.87

1,137.29

Add: Amortisation of Transaction Cost

1.74

10.19

Add: Received during the year

1,350.00

-

Less: Paid during the year Closing Borrowings Less: Closing Current Maturities Non Current Borrowings as per Balance Sheet

1,515.87

1,137.29

8,773.28

8,937.41

1,633.46

1,515.87

7,139.82

7,421 .54

Note

Particulars

Current Year 2017-18

Previous Year 2016-17

37.2

Reconciliation of Tax Expense and the Tax on Accounting Profit at normal Tax Rate:

(a) Profit before Income Tax Expenses

6,034.82

4,158.01

(b) Enacted Tax Rate in India (c) Expected Tax Expenses (a)x(b)

34.61%

34.61%

2,088.53

1,439.00

(d) Tax Effect on Permanent Difference:

Weighted Deduction under section 35(2AB) under the Income Tax Act, 1961

(126.59)

(87.31)

Expenses not allowed under Income Tax Act

29.24

10.04

Other Adjustments

22.06

(28.30)

MAT Credit Entitlement for earlier years

-

(727.94)

Adjustment of Current Tax of Prior Periods

(23.85)

(8.94)

Total Adjustments

(99.14)

(842.45)

Current Tax Expense as per P & L

1,989.39

596.55

Effective Tax Rate

32.97%

14.35%

38

Other Comprehensive Income

Actuarial Gain/(Loss) on Post Employment Benefit Expenses

5.22

(11.50)

Return on Plan Assets excluding net interest

1.09

(1.33)

6.31

(12.83)

39

Deferred Taxes on above

(2.20)

4.44

Net Comprehensive Income

4.11

(8.39)

Earning Per Share (Basic and Diluted)

(a) Net profit for Basic & Diluted EPS

4,045.43

3,561.46

(b) Weighted average number of equity shares of Re. 1/- each (Basic & Diluted)

84,652,030

84,652,030

(c) Earnings per share of par value Re 1/- per share -(Basic & Diluted)

4.78

4.21

40 Scheme of arrangement (De-Merger) between the Company and SMS Life Sciences India Ltd, Resulting Company.

The Scheme for Demerger of Semi Regulatory Units as approved by the Company in respective meetings and as sactioned by the National Company Law Tribunal (NCLT) has been implemented with appointed date as 01 -04-2016 as provided in the Scheme. Accordingly, the Company has transferred all its assets and liabilities pertaining to each of the demerged undertaking at their book value appearing in the books of the Company as on 01st April, 2016.

41 Post Employment Benefits 41.1 Defined Contribution plans

41.1.1 Employer''s Contribution to Provident Fund:

Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the Government of India. The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the year towards PF contribution is Rs. 177.47 Lakhs (Previous Year- Rs. 156.81 Lakhs).

41.1.2 Employer''s Contribution to State Insurance Scheme:

Contributions are made to State Insurance Scheme for employees at the rate of 4.75%. The Contributions are made to Employee State Insurance Corporation(ESI) to the respective State Governments of the Company''s location. This Corporation is administered by the Government and the obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards ESI contribution is Rs.37.07 Lakhs (Previous Year- Rs. 23.98 Lakhs).

41.2 Defined Benefit Plans

The Company has a defined benefit gratuity plan governed by Payment of Gratuity Act, 1972. Every Employee who has completed five years or more of service is entilted to a gratuity on departure at 15 days salary for each completed year of Service. The Scheme is funded through a policy with Life Insurance Corporation of India (LIC).

The Company has a defined benefit Compensated Absence Plan governed by The Factories Act, 1948. Every Employee who has worked for a period of 240 days or more in a factory during a calendar year shall be allowed during the subsequent calendar year, leave with wages for a number of days calculated as per Act.

The following table summarise net benefit expenses recognised in the statement of profit and loss, the status of funding and the amount recognised in the Balance Sheet for both the plans:

as at 3 1.03.20 18

as at 31.03.2017

Particulars

Gratuity (Funded)

Leave Encashment (Unfunded)

Gratuity (Funded)

Leave Encashment (Unfunded)

41.2.1 Net Employee Benefit Expense

(recognised in Employee Benefit Expenses)

Current Service Cost

30.59

19.21

22.29

22.29

Interest Cost

8.45

4.18

9.66

2.08

Past Service Cost (Vested Benefits)

24.78

Adj to Opening Balance

3.53

Expected Return on Plan Assets

-

4.92

Contribution paid

-

(6.48)

(39.71)

(6.03)

67.35

16.91

(2.84)

18.34

46 Fair Value Measurements

46.1 Fair Value Hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level I: Quoted prices (unadjusted) in active market for identical assets or liabilities.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data rely as little as possible on entry speciifc estimates.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

46.2 Valuation Techniques used to determine fair value:

Specific Valuation techniques used to value financial instruments include:

- The use of quoted market prices or dealer quotes for similar instruments.

- The fair value of remaining financial instruments is determined using discounted cashflow analysis.

46.3 Valuation Process:

The Finance and accounts department of the Company performs the valuation of financial assets and liabilities required for financial reporting purposes, and report to the Board of Directors. The main Level 3 inputs are derived using the discounted cash flow Analysis, Market Approach, Net Assets value method as applicable.

47 Financial Risk Management Objectives and Policies Financial Risk Management Framework

The Company is exposed primarily to credit risk, liquidity risk and market risk (fluctuations in foreign currency exchange rates and interest rate), which may adversley impact the fair value of its financial instruments. The Company assesses the unpredictability of the financial environment and seeks to mitigate potential adverse effects on the financial performance of the Company.

47.1 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. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditwrothiness as well as concentration of risks. Credit risk is controlled by analysing credit limits and creditworthiness of customers on a continuous basis to whom the credit has been granted after obtaining necessary approvals for cerdit. Financial instruments that are subject to concentrations of credit risk, principally consist of trade receivables, cash and cash equivalents, bank deposits and other financial assets. None of the financial instruments of the Company result in Material Concentration of credit risk, except for Trade Receivables.

Financial Instruments and Cash Deposits

For banks and financial institutions, only high rated banks/ institutions are accepted. Other Financial Assets (excluding Bank Deposits) majorily constitute deposits given to State Electricity Departments for supply of power, which the company considers to have negligible credit exposure. Counterparty credit limits are reviewed by the Management on an annual basis, and may be updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through counterparty''s potential failure to make payments.

Expected Credit Loss for Trade Receivables under simplified approach

For Trade Receivables, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

56 First-Time Adoption of Ind AS Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in Note 4 have been applied in preparing the financial statements for the year ended 3 1st March, 2018, the comparatives information presented in these financial statements for the year ended 31st March, 2017 and in the preparation of an opening Ind AS balance sheet at 01st April, 2016 (company''s date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation on how the transition from previous GAAP to Ind AS has effected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.

56.1 Exemptions and Exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

56.1.1 Ind AS Optional Exemptions Deemed Cost

Ind AS 101 permits a first-time adopter to opt to continue with the carrying value for alI of its property, plant and equipment and intangible assets as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the Company has opted to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

Ind AS 101 permits a first-time adopter to opt to measure its investments in subsidiaries, joint ventures and associates at fair value at the entity''s date of transition to Ind ASs or continue with the carrying value as recognised in the financial statements as at the date of transition to Ind AS. Accordingly the Company has opted to measure its investment in subsidiary and associates at their previous GAAP carrying value.

56.1.2 Ind AS mandatory exceptions

(a) Estimates

An entity''s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with the estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at 01st April, 2016 are consistent with the estimates as at the same date made in confirmity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

Investment in Equity instruments carried at FVPL or FVOCI

Investments in debt instruments carried at FVPL and;

Impairment of financial asset based on expected credit loss model.

(b) Classification and Measurement of Financial Asset

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist on the date of transition to Ind AS

56.3.4 Proposed Dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accoridngly, the liability for proposed dividend and tax thereon of Rs. Nil as at 31st March, 2017 ( 01st April, 2016- Rs.-203.77 Lakhs) included under provisions have been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

56.3.5 Revenue Recognition and Excise Duty

Under the previous GAAP revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended 31st March, 2017 by Rs. 889.03 Lakhs. There is no impact on the total equity and profit.

56.3.6 Remeasurements of Post-Employement Benefit Obligations

Under Ind AS, remeasurements i.e. Acturial gains and losses and the return on plan assets , excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit or loss. Under the previous GAAP these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended 31 st March, 2017 decreased by RS. 12.83 Lakhs. There is no impact on the total equity as at 31st March, 2017.

56.3.7 Deferred Tax

Indian GAAP requires deferred tax accounting using the statement of profit and loss approach, which focuses on difference between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of the asset or liability in the balance sheet and its tax base.

As per Ind AS-12, the Company has recognised deferred tax asset on the indexation benefit available on free hold land as it has no plans to sell the business on a slump sale thereby increasing the retained earnings by Rs. 96.62 Lakhs as at 31 st March, 2017 (01st April, 2016: Rs. 89.08 Lakhs).

Other Deferred tax adjustments amounting to (Rs. 1.97 Lakhs) as at 31 st March, 2017 (01 st April, 2016: Rs. (1.68) Lakhs ) include deferred tax impact on account of differences between previous GAAP and Ind AS. The profit for the year ended i.e. 31st March , 2017 increased by Rs. 6.76 Lakhs due to the deferred tax adjustments made.

56.3.8 Rental Deposits

Rental deposits were recognised at transaction value under previous GAAP Based on Ind AS 109 this security deposit has to be recognised at fair value and the difference between fair value and carrying cost is to be treated as prepaid lease rental. Further the difference amount relating to period before date of transition to Ind AS is charged to retained earnings. Accordingly, security deposit as at 31st March, 2017 has been decreased by Rs 1.91 Lakhs, as at 01st April, 2016 has been decreased by Rs. 2.47 Lakhs and profit increased by Rs. 0.56 Lakhs.

Under the previous GAAP, rental deposits are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly the company has fair valued the rental deposits. Difference between the fair value and transaction value is recognised as prepaid rent. Consequent to this change, the amount of rental deposit decreased by Rs. 4.88 Lakhs as at 31st March, 2017 (01st April, 2016: Rs. 6.93 Lakhs). The prepaid rent increased by Rs. 2.97 Lakhs as at 31st March, 2017 (01st April, 2016: Rs. 4.46 Lakhs).

56.3.9 Borrowings

Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognised in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method. Under previous GAAP these transaction costs were charged to profit or loss as and when incurred. Accordingly, borrowings as at 31st March, 2017 have been reduced by Rs. 35.96 Lakhs (01st April, 2016 : Rs. 46.15 Lakhs) with a corresponding adjustment to retained earnings. The total equity increased by an equivalent amount. The profit for the year ended 31st March, 2017 reduced by Rs. 10.19 Lakhs as a result of the additonal interest expense.

56.3.10 Retained Earnings

Retained earnings as at 01st April, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

56.3.11 Other Comprehensive Income

Under Ind AS, all items of income and expense recognized in a year should be included in the profit or loss for the year, unless a standard requires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit or loss as ''other comprehensive income'' includes remeasurements of defined benefit plans. The concept of ''other comprehensive income'' did not exist under previous GAAP

56.3.12 Statement of Cash Flows

The transition from Indian GAAP to Ind AS has not had a material impact on the statement of cash flows.

The accompanying notes are an integral part of the

Financial Statements

as per our report of even date

for and on behalf of the Board

for SURYANARAYANA & SURESH

RAMESH BABU POTLURI

TVVSN MURTHY

Chartered Accountants FRN 00663 IS

Chairman and Manging Director DIN No.: 00166381

Director DIN No.: 00465198

V NAGENDRA RAO

V.S.VENKATISH

T. LAKSHMI NARAYANA

Partner

Company Secretary

Chief Financial Officer

M.No. 227679

Place : Hyderabad

Date: 26-05-2018


Mar 31, 2016

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

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

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

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

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

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

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

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

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

5. Terms of Repayment

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

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

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

First 4 Quarters t 100.00 Lakhs each

Next 4 Quarters t 200.00 Lakhs each

Next 4 Quarters t 300.00 Lakhs each

Next 4 Quarters t 400.00 Lakhs each

Next 4 Quarters t 425.00 Lakhs each

Next 4 Quarters t 450.00 Lakhs each

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

19. Note on CSR Liability

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

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

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

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

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

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

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

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

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

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

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

25. Related Party Disclosures:

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

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

S.No. Name Relationship

1. Sri. R RameshBabu Chairman and Managing Director

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

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

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

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

6. N. Rajendra Prasad Chief Financial Officer

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

8. Saurav Roy Company Secretary ( 04.08.15 onwards)

(ii) List of Related Parties

S.No. Name of the Company Relationship

1. Potluri Packing Industries Private Limited

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

3. Potluri Infra Projects Private Limited Exercise significant influence.

4. Rchem (Somanahalli) Pvt Ltd

5. SMS Lifesciences (India) Pvt Ltd

6. VKT Pharma Pvt Ltd Associate Company

26. Segment Reporting:

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


Mar 31, 2015

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

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

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

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

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

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

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

4. Terms of Repayment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

25 Segment Reporting:

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

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

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

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


Mar 31, 2014

Buy Back of Equity Shares

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

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

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

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

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

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

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

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

iv) Personal Guarantee by relative of a Director.

3 Terms of Repayment

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

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

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

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

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

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

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

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

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

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

iv) Personal Guarantee of relative of a Director.

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

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

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

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

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

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

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

I. Corporate Information:

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

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

Particulars 2013-14 20l2-l3

(a) Guarantees given by banks 35.50 93.l7

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

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

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

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

(f) Capital Commitments 704.84 428.79

TOTAL 1,483.99 2,003.5l

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

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

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

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

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

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

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

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

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


Mar 31, 2013

I. Corporate Information

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

a. Contingent Liabilities not provided for

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

(a) Guarantees given by banks 93.17 51.87

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

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

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

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

(g) Capital Commitments 428.79 -

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

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

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

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

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

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

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

e. Lease:

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

i. General description of leasing arrangements:

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

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

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

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

f. Segment Reporting:

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

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

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

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

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


Mar 31, 2012

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

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

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

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

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

iv) Personal Guarantee of relative of a Director.

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

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

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

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

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

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

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

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

iv) Personal Guarantee of relative of a Director.

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

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

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

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

I. Corporate Information

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

a. Contingent Liabilities not Provided for

(Amount : Rs. in Lakhs)

Particulars 2011-12 2010-11

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

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

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

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

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

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

(g) Capital Commitments - l09.69

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

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

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

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

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

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

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

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

f. Lease:

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

i. General description of leasing arrangements:

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

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

iii. Future Lease Rental Payments:

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

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

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

h. Segment Reporting:

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

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

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

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

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

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


Mar 31, 2011

1. (a) Contingent Liabilities not provided for

(Amount in Rs.)

Particulars 2010-11 2009-10

(a) Guarantees given by banks 51,86,529 1,72,33,700

(b) Foreign Letter of credits opened in favour of suppliers for which goods are yet to be received 12,20,62,814 16,00,84,603

(c) Inland Letter of credits opened in favour of suppliers for which goods are yet to be received – 1,26,51,577

(d) Claims not acknowledged as debts by the company. 5,62,79,529 5,62,79,529

(e) Disputed Income Tax demands against which company is in Appeals. 1,16,85,138 1,36,89,411

(f) Interest dues in respect of disputed demands of Income Tax and Central Excise. 1,65,00,000 1,87,00,000

(b) Claims not acknowledged as debt of Rs.5,62,79,529/- is the claim made against the company by M/s. Natco Pharma Ltd. with whom the Company has entered into an agreement on September 10, 1998 for conversion of raw materials supplied to Natco into finished products. Subsequently, due to a dispute in respect of payment terms, Natco filed a suit on October 9, 2002 before the Chief Judge, City Civil Court, Hyderabad for recovery of Rs.5,62,79,529/- and interest thereon. The Company has filed a written statement refusing the contentions made by Natco. The suit is pending before Fast Track Court at City Civil Courts, Hyderabad.

The management has considered that no provision is required.

The company has made a claim against Natco Pharma Limited for recovery of Rs.15,62,90,614/- which consists of failure to return of raw materials belonging to the Company, non payment of amounts received by Natco on the sale of finished goods belonging to the company, failure to return Duty Entitlement Pass Book (DEPB) benefits to the Company and failure to repay the amounts paid by the Company on behalf of Natco to their creditors along with interest on all above stated claims. For recovery of this amount the Company filed a suit on October 12, 2002. The suit is also pending before City Civil Court, Hyderabad.

(c) Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account not provided for (net of advances) Rs.1,09,69,237/- (Previous year Rs.3,22,10,798/-).

2. Secured Loans:

a) Term Loans availed from Exim Bank, Axis Bank Limited and IDBI Bank Limited are secured by First charge by way of equitable mortgage of company's immovable properties and hypothecation of all movable fixed assets both present and future on pari-passu basis and also second charge on all chargeable current assets of the company both present and future.

b) Working Capital Facilities availed from State Bank of India are secured by hypothecation of all chargeable current assets of the company, both present and future, and also second charge on fixed assets of the Company, on pari-pasu basis with Exim Bank for its Working Capital facilities,. These facilities are also covered by collateral security by way of Equitable Mortgage of agricultural lands belonging to the promoters.

c) Working Capital Facilities availed from Exim Bank both Rupee & Foreign Currency are secured by hypothecation of all chargeable current assets of the company, both present and future, and also second charge on fixed assets of the Company, on pari-pasu basis with State Bank of India.

d) All the above facilities are covered by un-conditional and irrevocable personal guarantees of CMD and VC&JMD.

e) Vehicle loans are secured by hypothecation / lien on the respective assets acquired with the loan amounts.

3. Unsecured Loans:

(a) Sales Ta x Deferment

The company has availed sales tax deferment to the tune of Rs.6,14,54,041/-during the years 1996-97 to 2007-08. This amount is repayable in 11 years. Out of this the company has paid an amount of Rs.5,84,092/- during the year 2010-11.The remaining balance of Rs.6,08,69,949/- is repayable in 11 years for which details are furnished below.

(b) DSIR Assistance

Financial assistance received from Department of Scientific and Industrial Research (DSIR) of Rs.1,20,00,000/- (previous year Rs.1,20,00,000/-) sanctioned under TPDU program for development of Catalysts or Fine Chemicals apart from Active Pharmaceutical Ingredients (API's), and their intermediates.

As per the terms of agreement entered with DSIR, 1.3 times of the above amount is payable in 5 equal annual installments after commencement of commercial sale" of the "product(s)" developed under PATSER scheme.

However, the company has not yet commenced commercial operations of the said products.

4. Land admeasuring 950 Sq Yds for value of Rs.10.84 lakhs purchased in the year 1994-95 in Hyderabad City by the erstwhile Plant Organics Ltd (POL) acquired by the company on amalgamation of said POL vide BIFR order dated 28-08-2008 is under litigation with City Civil Court at Hyderabad. Now it is considered that either the land or any value for that is not recoverable. Hence the same was deleted from the land in Fixed Assets Schedule (schedule 5) and the same amount was reduced from opening balance of the General Reserve (Schedule 2).

5. Advance Income Tax shown under schedule 10 "Loans & Advances" includes an amount of Rs.78.34 Lakhs paid against demands raised by the Income Tax Department for which Appeals under the Income Tax Act, 1961 are pending before ITAT for the years 2000-01 to 2003-04 and with CIT (A) for the year 2007-08.

6. The company has acquired 43 Acres land from APIIC through Ramky Pharma City (India) Ltd, in JN Pharma City, Parawada besides to the existing oncology plant is under dispute. For this an amount of Rs.5.57 crores was paid and the same was included in Capital Work in Progress.

7. Lease:

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

a. General description of leasing arrangements:

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

b. Lease payment recognized in the profit & loss account was Rs.58,02,550/- (previous year Rs.50,14,900/-)

9. Disclosure required by Micro, Small and Medium Enterprises (Development) Act, 2006

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

13. a) The company has entered in to an agreement with M/s. Divya Enterprises Limited for purchase of 918 sqm industrial plot and buildings and structures situated at D-63, Phase - I, Jeedimetla, for a consideration of Rs.60.00 lakhs. Pending registration of the same, the company has paid to the vendor an amount of Rs.34.82 lakhs for the said property and has taken the possession of property.

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

14. Deferred Ta x Liability:

For the year 2010-11 Deferred Tax Asset is more than deferred tax liability on account of unabsorbed depreciation, business loss and R&D expenditure. Considering the reasonable certainty of taxable profits in the near future deferred tax asset was not recognised.

19. Related Party Disclosures:

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

a) Key Management personnel and their relatives

S. No. Name Relationship

1. Sri P.Ramesh Babu Key Management personnel

2. Sri T.V.V.S.N.Murthy Key Management personnel

3. Sri P.Hari Kishore Relative of the Key Management personnel

4. Sri T.V.Praveen Relative of the Key Management personnel

(i) Associated Companies.

(Enterprises in which the key management personnel / relatives are interested)

S.No. Name of the associated Company

1. Webcity Softech Private Limited

2. Potluri Builders Private Limited

3. Potluri Real Estate Private Limited.

4. Hima Farms Private Limited.

5. Ogene Systems (I) Pvt Ltd

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

20. Additional information pursuant to the provisions of Paragraph 3, 4C and 4D of Part II of Schedule VI to the Companies Act.

a) Capacities & Production:

(i) Licensed Capacity

The Department of Industrial Policy and Promotion, Ministry of Industry, Government of India abolished the Industrial licensing in respect of Bulk Drugs & Formulations vide notification No. S.O 137(E) 13 Dated 01-03-1999.

(ii) Installed Capacity

Installed capacity is flexible as the plant is versatile, enabling the company to production in different capacities and therefore it varies depending on the product mix.

(iv) The Ministry of Corporate Affairs, Government of India has exempted certain classes of Companies from disclosing information as required vide paragraph 3(i) (a),3(ii)(a), 3(ii) (b) and 3(ii) (d) of Part II, Schedule VI of Companies Act 1956, vide notification no S.O 301(E) dated 08-02-2011 issued under Sec 211(3) of the Act,. The company being an export oriented company is entitled to the exemption. Accordingly the information regarding sales Opening and Closing Stocks and also item wise details of Raw material consumption has not been provided.

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

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


Mar 31, 2010

1. (a) Contingent Liabilities not provided for

(Amount in Rs.)

Particulars 2009-10 2008-09

(a) Guarantees given by banks 1,72,33,700 65,44,700

(b) Foreign Letter of credits opened

in favour of 16,00,84,603 4,20,59,381

suppliers for which goods are yet

to be received

(c) Inland Letter of credits opened

in favour of 1,26,51,577 -

suppliers for which goods are yet

to be received

(d) Claims not acknowledged as debts

by the company. 5,62,79,529 5,62,79,529

(e) Disputed Income Tax demands

against which 1,36,89,411 1,76,37,052

company is in Appeals.

(f) Interest dues in respect of

disputed demands of 1,87,00,000 1,70,00,000

Income Tax and Central Excise.

(b) Claims not acknowledged as debt of Rs.5,62,79,529/- is the claim made against the company by M/s. Natco Pharma Ltd. The facts of the issue are that the Company entered into an agreement with Natco Pharma Ltd. (‘Natco) on September 10, 1998 for conversion of raw materials supplied to Natco into finished products. Subsequently, due to a dispute in respect of payment terms, Natco filed a suit on October 9, 2002 before the Chief Judge, City Civil Court, Hyderabad for recovery of Rs.5,62,79,529/- and interest thereon. The Company has filed a written statement refusing the contentions made by Natco. The suit is pending before Fast Track Court at City Civil Courts, Hyderabad.

The company has made a claim against Natco Pharma Limited for recovery of Rs.15,62,90,614/- which consists of Natcos illegal misappropriation and failure to return and illegal sale of raw materials belongs to the Company, non payment of amounts received by Natco on the sale of finished goods belongs to the company, failure to return Duty Entitlement Pass Book (DEPB) benefits to the Company and failure to repay the amounts paid by the Company on behalf of Natco to their creditors along with interest on all above stated claims. For recovery of this amount the Company filed a suit on October 12, 2002. The suit is also pending before City Civil Court, Hyderabad.

The management has considered that no provision is required.

(c) Capital Commitments:

Estimated amount of contracts remaining to be executed on capital account not provided for (net of advances) Rs.3,22,10,798/- (Previous year Rs.15,71,92,000).

2. Secured Loans:

a) Rupee Term Loan of Rs.30 Crores availed from Exim Bank for setting up Oncology facility in Jahwarlal Nehru Pharmacity, at Parawada, Visakhapatnam are secured by First charge by way of equitable mortgage of companys immovable properties and hypothecation of all movable fixed assets both present and future on pari-passu basis with Axis Bank and other loans of Exim Bank apart from exclusive charge on the said facility and also un-conditional and irrevocable personal guarantees of promoters of the company ,except the exclusive charges mentioned below.

b) Other Term Loans both Rupee & Foreign Currency and Working Capital Term Loan availed from Exim Bank and Axis Bank are secured by First charge by way of equitable mortgage of companys immovable properties and hypothecation of all movable fixed assets both present and future on pari-passu basis, apart from un-conditional and irrevocable personal guarantees of promoters of the company, except the following assets of the Company.

- Flat No.417, Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad to SBI for working capital facilities.

- Oncology facility at Pharma city, Vizag to Exim Bank for Rupee Term Loan of Rs.30 Crores for the said plant.

c) Working Capital Facilities availed from State Bank of India are secured by hypothecation of all chargeable current assets of the company, both present and future, apart from an exclusive charge on Flat No.417, Nilgiri Block, Aditya Enclave, Ameerpet, Hyderabad and also second charge on fixed assets of the Company, on pari-pasu basis with Exim Bank for its Working Capital facilities, apart from un-conditional and irrevocable personal guarantees of promoters. These facilities are also covered by collateral security by way of Equitable Mortgage of agricultural lands belonging to the promoters.

d) Working Capital Facilities availed from Exim Bank both Rupee & Foreign Currency are secured by hypothecation of all chargeable current assets of the company, both present and future, and also second charge on fixed assets of the Company, on pari-pasu basis with State Bank of India except exclusive charges as stated above, apart from un-conditional and irrevocable personal guarantees of the promoters.

e) Vehicle loans are secured by hypothecation / lien on the respective assets acquired with the loan amounts.

(b) DSIR Assistance

Financial assistance received from Department of Scientific and Industrial Research (DSIR) of Rs.1,20,00,000/- (previous year Rs.1,20,00,000/-) sanctioned under TPDU program for development of Active Pharmaceutical Ingredients (APIs), and their intermediates.

As per the terms of agreement entered with DSIR, 1.3 times of the above amount is payable in 5 equal annual installments after commencement of commercial sale" of the "product(s)". Till such time, royalty @ 6% on ex-factory price of commercial sale of the "product(s)" is payable.

However, the company has not yet commenced commercial operations of the products developed with the assistance of DSIR.

5. Land shown under Schedule 5 "Fixed Assets" consists of the value of Rs.10.84 lakhs to the extent of 950 Sq.Yds in Hyderabad city, acquired by merger of erstwhile Plant Organics Limited with the company, is under litigation, with City Civil Court at Hyderabad was purchased during the year 1994-95 by the said erstwhile Plant Organics Limited. The management is confident of winning the case.

6. Advance Income Tax shown under schedule 10 "Loans & Advances" includes an amount of Rs.73.04 Lakhs paid against demands raised by the Income Tax Department for which Appeals under the Income Tax Act, 1961 are pending before ITAT for the years 2000-01 to 2003-04 and with CIT (A) for the year 2006-07.

7. The company has acquired 43 Acres land from APIIC through Ramky Pharma City (India) Ltd, in JN Pharma City, Parawada near Vishakapatnam, besides to the existing oncology plant is under dispute. For this an amount of Rs.5.57 Crores was paid and the same was included in Capital Work in Progress.

8. a) The company has entered in to an agreement with M/s. Divya Enterprises Limited for purchase of 918 sqm industrial plot and buildings and structures situated at D-63, Phase – I, Jeedimetla, for a consideration of Rs.60.00 lakhs. Pending registration of the same, the company has paid to the vendor an amount of Rs.34.82 lakhs for the said property and has taken the possession of same.

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

9. Deferred Tax Liability:

For the year 2009-10 Deferred Tax Asset is more than deferred tax liability on account of unabsorbed carry forwarded losses and depreciation apart from unabsorbed R&D expenditure. Considering the reasonable certainty deferred tax asset was not recognised. Hence there is no change in the amount of net deferred tax liability as on 31-03-2010 and 31-03-2009

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

11. Additional information pursuant to the provisions of Paragraph 3, 4C and 4D of Part II of Schedule VI to the Companies Act.

a) Capacities & Production:

(i) Licensed Capacity

In terms of press Note No.4 (1994 series ) dated 25-10-1994 issued by the Department of Industrial Development, Ministry of Industry, Government of India and Notification No.S.O.137 (E) 13 dated 01-03-1999 issued by the Department of Industrial Policy & Promotion, Ministry of Industry, Government of India, industrial licensing has been abolished in respect of bulk drugs and formulations. Hence, there is no registered / licensed capacities for these bulk drugs and formulations.

(ii) Installed Capacity

Installed capacity is flexible as the plant is versatile, enabling the company to production in different capacities and therefore it varies depending on the product mix.

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

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

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