1.  Demerger of undertaking at Sachana under Scheme of Compromise and
 Arrangement.
 
 A Composite Scheme of Compromise and Arrangement between the company
 (and its lenders and shareholders) (hereinafter referred to as Scheme)
 and Nirma Limited (and its shareholders) was approved by the Honble
 High Court of Gujarat vide its order dated 1st March, 2007. The scheme,
 amongst others, provided demerger of industrial undertaking of the
 company located at Village Sachana, Tal.  Viramgam, District Ahmedabad
 (hereinafter referred to as Demerged Undertaking) on a going-concern
 basis with all its assets and liabilities as defined in the scheme.
 The scheme has become effective from 7th March, 2007 as per its
 provisions. The appointed date for demerger is 1st December, 2004.
 
 As the scheme has become effective with effect from the appointed date
 for demerger, the Demerged Undertaking stands transferred to and vest
 in as a going- concern to Nirma Limited at its book values.
 Accordingly, assets and liabilities of demerged undertaking have been
 transferred to Nirma Limited and excess of assets over liabilities of
 Rs. 43904.56 lacs has been adjusted against Rs.30000.00 lacs out of
 Share Premium Account, Rs.375.00 lacs of Capital Redemption Reserve,
 Rs.  166.20 lacs of Capital Reserve and balance of Rs. 13363.36 lacs
 has been transferred to Profit & Loss Account as per the provisions of
 the Scheme.
 
 As per the provisions of the Scheme, the results of the operations of
 business of the Demerged Undertaking for the period from the appointed
 date for demerger (1st December, 2004) till the effective date (7th
 March, 2007) of the scheme, have also vested in Nirma Limited.
 Accordingly necessary effects in respect of above have been given in
 the books of accounts of the company during the year.
 
 2.  Reconstruction and Compromise:
 
 In accordance with the Composite Scheme of Compromise & Arrangement,
 which has been approved by the Honble High Court of Gujarat, effects
 of compromise with  lenders and reconstruction in accordance with the
 approved scheme have been given in the accounts as under:
 Reconstruction:
 
 3) The company has no plans ,of carrying out any operations in future.
 The assets of Pharma plant of the company at Rajpur has suspended
 operations since May, 2005 and its possession is not with the company (
 refer note-5 below). However, the accounts of the Company have been
 prepared on going concern basis.
 
 4) Contingent liability not provided for:
 
 a) Disputed liabilities for Custom duty and Excise duty : Rs.  373.60
 lacs (previous year Rs. 2385.06 lacs)
 
 b) Claims against the company not acknowledged as debts: Rs. Nil
 (previous year Rs. 470.54 lacs.)
 
 5) Depreciation on fixed assets of demerged undertaking for the period
 from 1st April, 2006 to 7thi March, 2007 has not been provided for
 however, this has no effect on loss for the year.
 
 6) The Fixed Assets as appeared in the Schedule of Fixed Assets
 (Schedule: 5) as at 31st March, 2007 are of pharmaceutical plant of the
 company located at Village: Rajpur, District Mehsana except the data
 processing equipment having net book value of Rs. 0.43 lacs In terms of
 the provisions of Securitisation & Reconstruction of Financial Assets &
 Enforcement of Security Interest Act. 2002, Asset Reconstruction
 Company of India Limited (ARCIL) has taken over the possession of this
 plant in July, 2005 and in March, 2007, it has issued notice for sale
 of assets of this plant. As the company is not having possession of the
 assets of thisplant, no physical verification of the assets of the
 plant could be carried out. The management of the company is of the
 opinion that there is an impairment of the assets of this plant,
 however, such loss has not been estimated or determined and, therefore,
 no provision for loss on account of impairment of assets has been made
 in the accounts. To this extent, the company has not complied with the
 Accounting Standard 28, Impediment of Assets.
 
 7.  Liability for Sales Tax:
 
 For various years from F.Y. 1992-93 to F.Y.2002-03 in respect of
 Pharmaceutical plant of the company at Rajpur, against the liability of
 Sales Tax, interest and penalties aggregating to Rs. 576.97 lacs (net
 of liability transferred to the resultant company on demerger of the
 Sachana undertaking pursuant to the scheme of Compromise &
 Arrangement), provision for Rs. 20.06 lacs only has been made in the
 books of accounts of the company.
 
 8.  No provision for interest on secured and unsecured loans as well as
 interest payable on the assets taken on lease for Co-generation Power
 Plant has been made in the accounts, the estimated liability of which
 aggregates to Rs. 2401 .60 lacs including Rs. 1200.80 lacs for F.Y.
 2006-07.
 
 9.  The company had allotted 100 lacs equity shares in lieu of warrants
 of Rs.1O0/- each as per the resolution of the Extra Ordinary General
 Meeting held on 11.02.1994, out of which Rs.90/- is in respect of
 premium. Amount received till 31st March 2004 of Rs.4125.95 lacs is
 adjusted to share capital Rs.819.26 lacs and share premium Rs.3306.69
 lacs. The balance amount of Rs.5874.05 lacs is in respect of 90.37 lacs
 shares will be payable as per the revised schedule commencing on or
 before 31st December, 2007 as decided by the Board of Directors at its
 meeting held on 17-11-2005.
 
 10.  Details of securities for Secured Loans:
 
 Loans and borrowings obtained by the company from various banks,
 financial institutions and by way of debentures were secured by assets
 of Sachana undertaking as well as assets of other undertakings
 (residual undertaking) of the company. Upon compromise with lenders and
 demerger of the Sachana undertaking under Composite Scheme of
 Compromise and Arrangement as described in note-1 above, outstanding
 amounts of secured loans in Scheduie-3 as at 31st March, 2007 are in
 accordance with terms of compromise and are in respect of residual
 undertaking as provided in the scheme. No fresh documents or deeds with
 lenders have been executed by the company after approval of the scheme.
 As per the scheme, upon receipt by the lenders of the entire sale
 proceeds (net of expenses) of Rajpur Unit, when sold, the residual
 liability of the company relating to lenders shall be deemed to be
 discharged in full. In view of this, security interest, charge and
 encumbrance of the lenders are on all the assets, both immovable and
 moveable, of the company.
 
 Details of security as at 31st March, 2006 are as under:
 
 A.  Term Loans from Financial Institutions
 
 Term loans from The Industrial Credit and Investment Corporation of
 India Limited (Rs 11960.64 lacs),The Industrial Finance Corporation of
 India Limited (Rs.13514.31 lacs), Life Insurance Corporation of India
 (Rs. 1900 lacs) and Industrial Development Bank of India (Rs. 4159
 lacs) are secured by way of first pari passu charge on all the movable
 and immovable, present and future assets of the Company excluding
 assets which are exclusively Term loans from The Industrial Credit and
 Investment Corporation of India Limited (Rs1846.29 lacs), is secured by
 way of first pari passu charges on all the movable and immovable,
 present and future assets of the company excluding assets which are
 exclusively charged to other banks/institutions- It further secured by
 assignment of specific receivables.
 
 B Term Loans from Banks
 
 1.  Term Loans from Dena Bank (Rs.0.25 lacs),State Bank of Mysore
 
 (Rs. 1145 lacs) and State Bank of Travancore (Rs. 1810 lacs) are
 secured by way of hypothecation of imported and indigenous equipment
 purchased out of the said loan.
 
 2 Term loan from The Hongkong & Shanghai Banking Corporation Limited
 (Rs. 2454.69 lacs) and Dresdner Bank (Rs. 7005.80) is secured by way of
 first pari passu charge on all the movable, present and future assets
 of the Company excluding assets which are exclusively charged to other
 banks/institutions.
 
 3 Term Loan from Global Trust Bank (Rs.1250 lakhs) is secured by way of
 mortgage of a property owned by a company.
 
 C Term Loans from Companies
 
 1 Term Loan from GE Capital Services India Limited (Rs. 3184.93 lacs)
 is secured by exclusive charge by way of hypothecation of imported and
 indigenous equipment purchased out of the said loan.
 
 2 Term Loan from M/s. Astramed Technologies Limited (Rs.1136.64 lakh)
 is secured by way of second pan pasu charge over the Companys fixed
 assets excluding assets which are exclusively charged to banks /
 institutions.
 
 D Foreign Currency Loan
 
 1 The foreign currency loan of USD 23.19 million from Standard
 Chartered Bank and group of International Banks is secured by way of
 first pari pasu charge on the entire movable and the immovable, present
 and future assets of the Company excluding assets which are exclusively
 charged to other banks/institutions.
 
 E Debentures
 
 1 Partly Convertible Debentures are secured by way of second charge
 over all the immovable/movable properties of the Company subject to
 prior charges in favour of financial institutions and banks for their
 loans.
 
 2 Non-Convertible Debentures placed with LIC Mutual Fund are to be
 secured by way of first charge on all the immovable and movable
 properties of the Company excluding assets which are exclusively
 charged to other banks / financial institutions.
 
 3 18.75% Non-convertible Debentures are secured by way of a second
 charge on all the movable and immovable assets of the Company subject
 to prior charges in favour of financial institutions and banks for
 their loans.
 
 4 Non-Convertible Debentures placed with IDBi Mutual Fund and ICICI
 Limited are secured by way of first charge on all the movable and
 immovable, present and future assets of the Company excluding assets
 which are exclusively charged to other banks/institutions.
 
 5 19.5% Non-Convertible Debentures placed with LIC, GIC & subsidiaries
 are secured by way of first charge on all movable & immovable assets of
 company excluding assets which are exclusively cnarged to other
 banks/institutions.
 
 6 15.5% Non Convertible Debentures placed with Dena Bank are secured by
 way of exclusive charge on specific assets of the company.
 
 F Working Capital Loans
 
 Loans for working capital from banks are secured by way of
 hypothecation of entire stocks of raw material stock in process,
 finished goods, stores and spares and packing materials pertaining to
 the business of the Company and all the book debts of the Company. The
 Loans from Bank of Baroda, State Bank of India and Dena Bank are
 further secured by way of third charge on fixed assets of the company.
 
 11. Deferred Tax Assets arising mainly on account of unabsorbed
 depreciation and carried forward losses have not been considered for
 recognition as there is no virtual certainty that sufficient future
 taxable income will be available against which such deferred tax assets
 can be realized.
 
 14.  Unsecured Loans include amount to be credited to Investor
 Education and Protection Fund - Matured & Unclaimed Fixed Deposits and
 Interest thereon: Rs.13.35 lacs. (Previous year: Rs.10.85).
 
 15.  a) Sundry Creditors (Schedule 11 to the Balance Sheet) : includes
 Rs.Nil (previous year Rs. Nil), due to small scale Industrial
 undertakings.
 
 b) The above information has been compiled in respect of parties to the
 extent to which they could be identified as small scale and ancillary
 undertakings on the basis of information available with the company and
 has been relied upon by auditors.
 
 16.  In the opinion of the company, the company has only one segment
 viz., drugs and pharmaceuticals, hence no separate disclosure of
 segment wise information has been made.
 
 17.  No provision for advances of Rs. 2.00 lacs and loan to a
 subsidiary company of Rs.  52.01 lacs has been made in the accounts
 which are considered as doubtful of recovery.