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Elder Pharmaceuticals Directors Report, Elder Pharma Reports by Directors
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Elder Pharmaceuticals
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Download Annual Report PDF Format 2012 | 2011 | 2010
Directors Report Year End : Jun '14    Jun 13
Dear Members,
 
 The Directors are pleased to present the Thirty-first Annual Report of
 the Company together with the audited Accounts for the year ended 30th
 June 2014. The working results of the Company for the year ended 30th
 June 2014 vis-a-vis those of the previous year are summarized below:
 
                                            Year ended    Fifteen months
                                            30.06.2014    Period ended
                                                          30.06.2013
                                       (Rs. In Crores)   (Rs. In Crores)
 
 1.  Operating Income                          483.47           1233.10
 
 2.  Other Income                               15.13             26.22
 
 3.  Profit before Tax                          17.85            115.71
 
 4.  Less: Provision for Tax
 
     Current Year                                  -              24.50
 
     Deferred Tax                                0.67            (2.53)
 
 5.  Profit after Tax                           17.18             93.74
 
 6.  Less: Prior year Tax                        9.26                 -
     adjustments
 
 7.  Add: Profit as per the last               216.62            192.88
     Balance Sheet
 
 8.  Profit available for                      224.54            286.62
     appropriation Out of which
     Directors recommend
     Appropriation as under:
 
  a) Proposed Dividend                              -                -
 
  b) Tax on Dividend                                -                -
 
  c) Transfer to General Reserve                30.00             30.00
 
  d) Transfer to Debenture                      40.00             40.00
     Redemption Reserve
 
 e) Surplus carried forward to                 154.54            216.62
    Balance Sheet
 
 OPERATIONS AND PERFORMANCE:
 
 During the year ended 30th June 2014, your company''s Operating Income
 was Rs.483.47 Crores for the year as compared to Rs. 1233.10 Crores for
 the fifteen months period ended 30th June, 2013. This represents an
 decrease of Rs.749.63 Crores over the previous year mainly on account
 of constraints of working capital. Profit before Tax was Rs. 17.85
 Crores as against Rs. 115.71 Crores, for the previous year and Net
 Profit after providing for taxes was Rs. 17.18 Crores as against
 Rs.93.74 Crores for the previous year.
 
 For the year ended 30th June 2014 financial results showed Exceptional
 Item accounted of Rs. 380.04 Crores (net) which is comprising of Profit
 from Slump sale of Rs. 1734.3 1 Crores (net of Tax) after writing off
 Trade receivables Rs. 322.71 Crores and advances Rs. 1031.56 Crores.
 
 GLOBAL DEPOSITORY RECEIPTS:
 
 The Company had made an issue of Global Depository Receipts (GDRs)
 during the year 2004-05. All the issued GDRs have been converted into
 equity shares and no GDRs are outstanding as on 30th June 2014. The 
 Company''s listing for the GDRs, however, continues on the Luxembourg 
 Stock Exchange and as on 30th June 2014 the same were quoted at
 RS. 7.243.
 
 DIVIDEND:
 
 In view of the severe financial constraints faced by the Company the
 Directors at their meeting held on 27th August 2014 have decided to
 skip dividend for the accounting year under review.
 
 DIRECTORS:
 
 Mrs. Urvashi Saxena who retires by rotation has resigned w.e.f.  28th
 November 2014 with an intent not to be re-appointed and company
 resolved not to fill in the vacancy.
 
 Dr. S. Jayaram who retires by rotation has resigned w.e.f. 1st December
 2014 with an intent not to be re-appointed and company resolved not to
 fill in the vacancy.
 
 The Board of Directors of the Company (the Board) under Section 161
 of the Companies Act, 2013 and the Clause 120 of Articles of
 Association of the Company, appointed Mr. Farid Gulmohamed as
 Additional Director of the Company with effect from 14th February 2014.
 In terms of Section 161 of the Companies Act, 2013, and Clause 120 of
 Articles of Association of the Company Mr. Farid Gulmohamed holds
 office upto the date of this Annual General Meeting has resigned w.e.f.
 14th November 2014 with an intent not to be re-appointed and company
 resolved not to fill in the vacancy.
 
 There is no re-appointment of any director who are retire by rotation.
 Therefore as required under Clause 49 of the Listing Agreement, details
 are not given in the report on Corporate Governance,forming part of
 this Annual Report.
 
 Mr. Edoardo Carlo Richter, the Director of the Company has resigned as
 Director of the Company with effect from 14th February, 2014, Mr. James
 McEuen has resigned as Director of the Company with effect froml4th May
 2014, Dr. R. Srinivasan the Director of the Company has resigned as
 Director of the Company with effect from 5th June 2014 and Mr. Michael
 Bastain the Director of the Company has resigned as Director of the
 Company with effect from 9th August, 2014. The Board accepted their
 resignations and place on record their appreciation for the valuable
 guidance and advice provided by Mr. Edoardo Carlo Richter , Mr. James
 McEuen, Dr. R. Srinivasan and Mr. Michael Bastain during their tenure
 as Directors of the Company.
 
 AUDITORS:
 
 M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as
 the Auditors of the Company at the conclusion of the ensuing Annual
 General Meeting. They have signified their willingness to get
 re-appointed and have confirmed their eligibility in terms of the
 provisions of Section 141 of the Companies Act, 2013 and Rule 4 of
 Companies (Audit and Auditors) Rules, 2014. On the recommendation of
 the Audit Committee, the Board proposes for consideration of the
 Shareholders pursuant to the provisions of Section l39, l42 and other
 applicable provisions, if any, of the Companies Act, 2013, as Statutory
 Auditors of the Company, to hold office from the conclusion of the 31st
 Annual General Meeting up to the conclusion of the 34th consecutive
 Annual General Meeting. You are requested to appoint Auditors and fix
 their remuneration.
 
 COST AUDITORS:
 
 With the resignation of M/s. Sevakari, Khare and Associates, Cost
 Accountants, Mumbai having registration No. 00084, on the
 recommendation of the Audit Committee at its meeting held on November,
 14th, 2014, the Board has, considered and approved the appointment of
 T.M. Rathi, Mumbai having Registration No10079 as the cost auditor for
 the Bulk Drugs and Formulations for the financial year 2014-2015.
 
 The Cost Audit Reports for bulk drugs and formulations for fifteen
 months period ended on 30th June 2013 will be filed with the Central
 Government in due course of time. The Cost Audit Report for the
 accounting period for the year ended 30th June 2014 would be submitted
 to the Central Government in due course of time.
 
 JOINT VENTURES / SUBSIDIARIES / INVESTMENTS:
 
 ''ELDER INTERNATIONAL FZCO'' the wholly owned subsidiary of the Company
 in Jebel Ali, Dubai, United Arab Emirates (Dubai WOS), continues to
 hold 100% stake in the U. K. based NeutraHealth Limited.
 
 Dubai WOS also continues to hold 100% interest in Elder Biomeda EAD,
 Bulgaria which in turn continues to hold 100% stake in downstream
 Bulgarian entities, namely, Elder Bulgaria EOOD, the manufacturing
 company and Biomeda 2000 EOOD, the distribution company. Bulgaria,
 being a part of the European Union, offers an excellent opportunity for
 the Company to enter the Eastern European as well as CIS countries. The
 manufacturing unit in Bulgaria is being upgraded and once upgradation
 is completed it is expected that there will be a lot of opportunities
 for manufacturing products for the Eastern European, CIS and other
 markets. The distribution business has a lot of potential and during
 the year under review it has received a number of registrations which
 will help the distribution company to widen its scope. The distribution
 company which used to be operating only in the Bulgarian market has now
 started exporting some of its products to nearby countries.
 
 The Dubai WOS continues to hold 100% interest in NutraHealth Ltd., the
 U.K. subsidiary. The U. K. operations have shown very encouraging
 results despite the slowing down of the U. K. economy.  The said U. K.
 subsidiary has, in a cashless transaction, acquired Max Healthcare
 Ltd., U.K. to re-enter the OTC pharmaceutical category and extend and
 enhance its product range.
 
 The Company continues to hold it''s investment in the Nepal Joint
 Venture. During recent period there have been certain issues on
 unilateral decisions taken by the Nepalese partner whereby the
 Company''s stake in terms of percentage to total capital was reduced
 from earlier 40% to 30.6%. The Company has notified its dissent to the
 action taken by the partner and has written to the Ministry of
 Industry, Government of Nepal seeking an amicable solution in the
 matter. The discussions were held with the Nepalese partner as directed
 by the Director of Industry, Government of Nepal for arriving at an
 acceptable solution, however no settlement could be reached so far.
 Efforts are being made to work out an amicable settlement to resolve
 the matter.
 
 BANKERS AND FINANCIAL INSTITUTIONS:
 
 The Directors wish to place on record their sincere gratitude to the
 consortium of Banks for working capital lead by State Bank of India for
 their continued and timely support to the Company.
 
 The Directors also wish to place on record their sincere gratitude to
 the various term lenders and NCD holders for their continued and timely
 support to the Company. During the year under review, the company has
 been defaulting in the repayment of NCD and Interest thereon. The
 company is working on Short Term and Medium Term plan for
 regularization of default.
 
 EXPORT HOUSE STATUS:
 
 The Company continues to enjoy ''Export House'' status. The Company''s
 products are exported to certain African and South East Asian markets.
 The registration procedures are presently going on in a number of
 countries and once their formalities are completed, the Company''s
 exports are expected to increase.
 
 ISO / WHO GMP ACCREDITATION:
 
 The Company continues to be certified as conforming to ISO 9001 : 2000
 for development, manufacturing and marketing of pharmaceutical
 products. The Company''s bulk drug manufacturing plant at Patalganga was
 upgraded according to ICH Q7A guidelines for manufacturing products for
 the European markets. The said bulk drug plant as well as formulation
 plants of the Company are now approved by WHO GMP and certified as
 conforming to ISO 9001 : 2008 standards relating to Quality Management
 Systems.  While the Selaqui formulations plant of the Company has been
 accredited for WHO GMP the said plant is being upgraded for UK MHRA
 accreditation. The formulation plants at Nerul, Paonta Sahib have been
 accredited for WHO GMP standards. The formulations plant at Langha Road
 near Dehradun is designed as per USFDA compliance requirements and is
 also accredited for WHO GMP
 
 DIRECTORS'' RESPONSIBILITY STATEMENT:
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors,
 on the basis of compliance certificate received from Managing Director,
 CFO and other executives of the Company and subject to disclosures in
 annual accounts as on 30th June 2014 and on the basis of discussions
 with the Statutory Auditors of the Company from time to time, declare
 and confirm:
 
 a) that in preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures;
 
 b) that the Directors had selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Company at the end year ended on 30th June 2014 and the profit
 of the Company for that year.
 
 c) That the Directors had taken proper and sufficient care for
 maintenance of adequate accounting records for the year ended 30th June
 2014 in accordance with the provisions of the Companies Act, 1956 for
 safeguarding the assets of the Company and for prevention and detection
 of fraud and other irregularities.
 
 d) That the Directors had prepared the accounts for the year ended 30th
 June 2014 on a ''going concern basis''.
 
 CORPORATE GOVERNANCE:
 
 In pursuance of the system of Corporate Governance instituted by SEBI
 and forming part of the Listing Agreement with the Stock Exchanges, a
 report thereon is separately attached to this report.
 
 RESEARCH AND DEVELOPMENT ACTIVITY:
 
 The Research and Development activities of the Company continue to be
 recognized by the Department of Science and Technology, Government of
 India. The Research and Development laboratory of the Company has
 successfully developed certain import substitute molecules /
 intermediates and has been working on development of a number of other
 molecules. It has also been continuously working on process
 developments of the molecules already developed by it. It has been
 engaged in development of new products and their improvement in terms
 of delivery, absorption and efficacy. The Company has applied for
 seventeen Indian patents with seven PCT applications. Out of these one
 PCT application has been entered in the USA, Europe and Japan.
 
 INSURANCE OF ASSETS:
 
 The Company is in the process of renewing the insurance cover for all
 the fixed assets, finished goods, semi-finished goods, raw materials,
 packing materials and other goods and assets of the Company lying at
 different locations against fire, burglary, transit, riots, strike,
 malicious damage and allied risks as well as goods in transit.
 
 CAPITALISATION:
 
 During the year under review the Company has added fixed assets worth
 Rs. 3.48 Crores whereas disposal and adjustment of fixed assets
 amounted to Rs. 46.66 Crores. The Company had capital work in progress
 amounting to Rs. 304.26 Crores as at 30th June 2014 at various project
 sites.
 
 DEPOSITS:
 
 The Company is irregular in repayment of principal and payment of
 interest and has defaulted therein. The Company has made application to
 the Company Law Board for the extension of time in repayment of
 Deposits and approval is yet to be received. The Company has been
 complying with the provisions of Section 58A and other applicable
 provisions, if any, of the Companies Act, 1956 and the rules made
 thereunder. As at 30th June 2014 the fixed deposits outstanding under
 the public deposit schemes were Rs.143.38 Crores. The Company has
 discontinued acceptance of deposits from public.
 
 AUDITORS'' REPORT:
 
 The comments / observations of the Auditors, if any, are self
 explanatory and do not call for any further explanations or
 clarifications except the following :
 
 As regards Point No. 1 of the basis for qualified opinion of the
 Auditor, the Company is of the view that the Plant concerned has
 intrinsic value which is higher than the values carried in the books of
 accounts as capitalization as well as capital Work in progress.  As
 regards Point No.2 (i) & (ii), the management had reviewed all the
 balances carried in the accounts and taking a conservative view decided
 to write off those carrying amounts where no further economic benefit
 will be realizable from those pertinent assets, & management decided
 that it is now imperative that the same should get appropriately
 reflected in the Profit & Loss Account of the financial year ended 30th
 June, 2014. Our efforts for recovery to write off shall continue and
 recoveries will be accounted in the year of realization on cash basis.
 Point No. 3 & 4 of the qualified opinion of the Auditor are self
 explanatory.
 
 As regards the comments of the Auditors in serial no. 1 & 2 under the
 ''Emphasis of matter'', the Company has completed first round of
 re-structuring by divesting some of its brands to M/s. Torrent
 Pharmaceuticals Ltd., for a consideration of Rs. 2004 crores during the
 year. The Company is further exploring the possibilities of divestment
 of some of its non-core assets and infusion of long term equity capital
 / debt funds for the revival of the company. The management has
 initiated efforts to pursue business plan involving existing products
 and launching of new products with effective marketing strategy and
 extending contract manufacturing activites.  As regards the comments of
 the Auditors in Serial no. 3 the Company seized of the matter and in
 the process of completing reconciliation / confirmation of Trade
 receivables, inter-divisional balances, loans and advances and in
 certain cases of few bank accounts. The effect of the same shall be
 given in the accounts for the next financial year. However, management
 does not expect any significant impact of the same on the results of
 the Company. As regards Serial No.4, the company is seized of the
 matter and shall take appropriate steps in due course.
 
 As regards non-depositing or investment of a sum of not less than 15%
 of the amount of debentures maturing during the period ended 30th June,
 2014, the company is seized of the matter and said amount will be
 deposited / invested in due course.
 
 PARTICULARS OF EMPLOYEES:
 
 Information as per Section 217(2A) of the Companies Act, 1956, read
 with Companies (Particulars of Employees) Rules, 1975 as amended is
 available at the registered office of the Company. As per the
 provisions of Section 219(i)(b)(iv) of the Companies Act, 1956 this
 Report and Accounts are being sent to all Shareholders of the Company
 and others entitled to it excluding the aforesaid information. Any
 Shareholder interested in obtaining a copy of the statement under
 Section 217(2A) of the Companies Act, 1956 may write to the Company
 Secretary at the address of the registered office of the Company.
 
 EMPLOYER / EMPLOYEE RELATIONS:
 
 The relationship with the workers of the Company''s manufacturing units
 and other staff continues to be cordial. The Directors wish to place on
 record their sincere appreciation and gratitude for the services
 rendered by the workers and staff at all levels.
 
 EMPLOYEE STOCK OPTION PLAN:
 
 The Shareholders at the 21st Annual General Meeting of the Company
 passed a resolution approving the Employee Stock Option Plan called
 ''Elder ESOP 2004''. A total of 1,439,274 equity shares of the Company
 are available under Elder ESOP 2004 for grant of Options at an exercise
 price of15% discount to the market rate. The Company had granted
 Options in respect of 399,250 shares which were to be exercised in four
 equal parts ending on 27th March 2008 at an exercise price of Rs. 209/-
 per share inclusive of a premium of Rs. 199/- per share. Out of the
 Options granted 285,748 were exercised during the accounting year under
 review.  Options that were not exercised within the stipulated period
 have lapsed. There are 1,153,526 shares for which Options can still be
 granted to Employees under Elder ESOP 2004.
 
 CORPORATE SOCIAL RESPONSIBILITY
 
 The Board of Directors constituted a Corporate Social Responsibility
 (CSR) Committee in terms of the provisions of Section 135(1) of the
 Companies Act, 2013 on 21st August, 2014 with the strong belief in the
 principle of Trusteeship to serve the community
 
 This CSR Committee shall review and restate the Company''s CSR policy in
 order to make it more comprehensive and aligned with the activities
 specified in Schedule VII of the Companies Act, 2013.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
 EARNINGS AND OUTGO:
 
 In accordance with Rule 2 of the Companies (Disclosure of Particulars
 in the Report of the Board of Directors) Rules, 1988 as applicable, the
 particulars relating to conservation of energy and technology
 absorption are given in Annexure 1 to this Report.
 
 The foreign exchange outgoings during the year under review was Rs.
 4.31 Crores for imports of raw materials / finished goods and Rs. 0.34
 Crores for foreign travel. The Company also paid Rs. 6.56 Crores in
 foreign exchange as interest on the External Commercial Borrowing and
 other expenses of Rs. 1.3 1 Crores. The foreign exchange earnings
 during the year were Rs. 30.66 Crores on account of exports on FOB
 basis.
 
                                          For and on behalf of the Board
                                                     Alok Jagdish Saxena
                                                 Managing Director & CEO
 
 Mumbai, 13th February, 2015
 
 
Source : Dion Global Solutions Limited
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