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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 '13    « Mar 12
The Directors are pleased to present the Thirtieth Annual Report of the
 Company together with the audited Accounts for the fifteen months
 period ended 30th June 2013. The working results of the Company for the
 fifteen months period ended 30th June 2013 vis-a-vis those of the
 previous year are summarized below:
 
                                      Fifteen months  Year ended
                                      Period ended    31.03.2012
                                      30.06.2013
                                     (Rs.In Crores)  (Rs.In Crores)
 
 1.  Operating Income                   1,233.10         984.69
 
 2.  Other Income                          26.22          24.31
 
 3.  Profit before Tax                    115.71         103.51
 
 4.  Less: Provision for Tax
 
     Current Year                          24.50          21.00
 
     Deferred Tax                          (2.53)         (1.65)
 
 5.  Profit after Tax                      93.74          84.16
 
 6.  Less: Prior year Tax                                  0.09 
     adjustments
 
 7.  Add: Profit as per the last          192.88         185.97 
     Balance Sheet
 
 8.  Profit available for                 286.62         270.04 
     appropriation Out of which
 
 Directors recommend Appropriation as under:
 
 a) Proposed Dividend                                      6.16
 
 b) Tax on Dividend                                        1.00
 
 c) Transfer to General Reserve           30.00           30.00
 
 d) Transfer to Debenture                 40.00           40.00 
    Redemption Reserve
 
 e) Surplus carried forward to           216.62          192.88 
    Balance Sheet
 
 OPERATIONS AND PERFORMANCE:
 
 The Indian economy has been passing through a very difficult phase and
 uncertainties which has impacted businesses across all sectors with
 industrial production slowing down, Indian Rupee depreciating in value,
 making the imported inputs costlier. The Indian GDP growth has been
 below expectation and with high interest rates, the already high
 inflation is having cascading effect.  All these factors have put a lot
 of pressure on both operating costs and margins of the Company. Your
 Company''s Operating Income during the period under review was Tl2.33.10
 crores as against Rs. 984.69 crores in the previous year. This represents
 an increase of Rs. 248.41 crores over the previous year. However, in view
 of increase in all round input costs, increased finance costs, etc.
 have brought the pre and post tax profits under tremendous pressure.
 
 During the period under review with a view to reducing the debt of the
 Company the Board of Directors has approved the proposal for carrying
 out restructuring of the Company''s business involving either raising of
 capital, hiving off of assets or other strategic options and have
 appointed advisors for the same for the purpose.
 
 All the products of the Company continue to be well accepted by the
 medical fraternity in India. The main therapeutic areas of interest to
 the Company continue to be Women''s healthcare, Wound care and Pain
 Management, Neutraceuticals / Vitamin Supplements, Life Style &
 Diabetes, and Antibiotics.
 
 EXTENSION OF FINANCIAL YEAR:
 
 The Board had by a resolution passed by circulation on 8th March 2013
 decided to extend the Financial Year of the Company by three months so
 as to end on 30th June 2013. Accordingly, the Financial Statements have
 been prepared for 15 months covering a period from Ist April 2012 to
 30th June 2013.
 
 DEMISE OF CHAIRMAN & MANAGING DIRECTOR:
 
 The Board regretfully reports the sad demise of its Founder Chairman &
 Managing Director, Mr. Jagdish Saxena after a prolonged illness. The
 Board further expresses its heartfelt condolences for Mr. Saxena''s
 untimely death and wishes to place on record its sincere and deep
 appreciation for his invaluable guidance and contribution from time to
 time in building the Company and its growth.
 
 Late Mr. Jagdish Saxena was a great visionary and had highest business
 acumen. He was able to feel the pulse and need of the Pharmaceutical
 market in India and introduced many ''first of its kind'' formulations
 into India. He always believed in creating asset for the Company and
 was successful in creating facilities of international standards for
 various dosage presentations. His policy of non-infringement of patents
 was comforting for the foreign pharma research companies of repute to
 work with the Company.
 
 MERGER OF ELDER HEALTH CARE LIMITED WITH ELDER PHARMACEUTICALS LIMITED:
 
 In view of the recent developments the Board of Directors of the
 Company had at its meeting held on 14th May 2013 decided not to proceed
 with the merger of Efder Health Care Ltd.  with the Company and to
 withdraw the application(s) filed by the Company in the High Court at
 Mumbai. Accordingly, the Company has withdrawn its application.
 
 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 2013. The
 Company''s listing for the GDRs, however, continues on the Luxembourg
 Stock Exchange and as on 28th June 2013 the same were quoted at U.S. $
 10.95.
 
 DIVIDEND:
 
 In view of the severe financial constraints faced by the Company the
 Directors at their meeting held on 29th August 2013 have decided to
 skip dividend for the accounting period under review.
 
 DIRECTORS:
 
 Dr. Joginder Singh Juneja, Director, is due to retire by rotation at
 the ensuing Annual General Meeting of the Company. He however, being
 eligible, has offered himself for re-appointment.
 
 Dr. Sailendra Narain, Director, is due to retire by rotation at the
 ensuing Annual General Meeting of the Company. He, however, being
 eligible, has offered himself for re-appointment.
 
 Mr. Saleem Shervani, Director, is due to retire by rotation at the
 ensuing Annual General Meeting of the Company. He, however, being
 eligible, has offered himself for re-appointment.
 
 As required under Clause 49 of the Listing Agreement, the particulars
 of Dr. Joginder Singh Juneja, Dr. Sailendra Narain and Mr. Saleem
 Shervani, Directors who are due to retire by rotation at the ensuing
 Annual General Meeting but having offered for their re-appointment, are
 given in the Report on Corporate Governance, forming part of this
 Annual Report.
 
 Mr. James McEuen was appointed as the Additional Director by the Board
 w.e.f. 2nd November 2012 to hold office up to the date of the ensuing
 Annual General Meeting. The Company has received notices from some
 shareholders proposing his candidature to the office of Director liable
 to retirement by rotation. You are requested to appoint Mr. James
 McEuen as Director.
 
 In view of sad demise of Mr. Jagdish Saxena on 10th October 2013, the
 Board of Directors at their meeting held on I Ith October 2013
 appointed Mr. Alok Jagdish Saxena as Managing Director & Chief
 Executive Officer of the Company w.e.f. I Ith October 2013 for a period
 of five years subject to approval of shareholders and governmental
 authorities, if any. Mr. Alok Jagdish Saxena was earlier holding the
 office of Joint Managing Director 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 given a declaration that if re-appointed their
 appointment will be within the limits specified under Section 224(I)(B)
 of the Companies Act, 1956. On the recommendation of the Audit
 Committee, the Board proposes for consideration of the Shareholders,
 the re-appointment of M/s. S. S. Khandelwal & Co. as Auditors of the
 Company for the financial year 2013-14. You are requested to appoint
 Auditors and fix their remuneration.
 
 COST AUDITORS:
 
 The Directors have appointed M/s. Sevekari, Khare and Associates, Cost
 Accountants, Mumbai, having registration No.  00084, as Cost Auditors
 of the Company for the pharmaceuticals (formulations and bulk drugs)
 activities of the Company for the financial year 2013-14 and their
 appointment has been approved and taken on record by the Central
 Government.
 
 The Cost Audit'' Reports for bulk drugs and formulations for the year
 ended 31st March 2012 were filed with the Central Government on 18th
 January 2013. The Cost Audit Report for the accounting period ended
 30th June 2013 would be submitted to the Central Government within the
 prescribed time limit.
 
 NON-CONVERTIBLE DEBENTURES:
 
 As mentioned in the Directors'' Report of the last year your Company
 made one more issue of Rated Secured Redeemable Non-Convertible
 Debentures on a private placement basis called
 
 3rd Tranche during the fifteen months accounting year under review. The
 issue size was Rs. 70.00 crores comprising of 700 units of Rs. 10.00 lacs
 each and carrying interest @ 12.50% p.a. payable quarterly and
 redeemable in sixteen equal quarterly installments of Rs.4.375 crores
 starting from the end of the thirteenth quarter from the date of
 allotment and ending at the end of the twentieighth quarter from the
 date of allotment. The jssue was rated by Credit Analysis and Research
 Limited (CARE) who had assigned A '' rating to the said NCD issue of the
 Company. The said NCD units have been listed on the WDM Segment of
 National Stock Exchange of India Limited (NSE). The issue of NCDs was
 made for the purpose of retirement of high cost debt and to augmenting
 medium to long term resources of the Company including regular capital
 expenditure (not constituting a project). During the year , under
 reference CARE has downgraded the rating assigned to ''D'' to the NCDs
 issued by the Company.
 
 Attached hereto at Appendix I are the details of funds raised through
 issuance of Non-Convertible Debentures in the 3rd Tranche and
 utilization of those funds.
 
 The Directors take this opportunity to thank all the investors who have
 invested in the NCD issues of the Company and solicit their continued
 support.
 
 OPTIONALLY CONVERTIBLE DEBENTURE:
 
 Since the close of the accounting year under review the Company has
 made an issue of unrated, unlisted, secured Optionally Convertible
 Debentures (OCDs) on a private placement basis of an amount up to X
 50.00 crores having a face value of Rs. 100,000/- each per Debenture
 unit. The Company has completed allotment of 4055 units of Rs. 10.00 lacs
 each aggregating Rs. 40.55 crores carrying coupon of 22% p.a. and which
 will have a maturity date of 20th May 2014.
 
 Attached hereto at Appendix II are the details of funds raised through
 issuance of Optionally Convertible Debenture and utilization of those
 funds.
 
 The Directors take this opportunity to thank all the investors who have
 invested in the QCD issue of the Company and solicit their continued
 support.
 
 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 Nutra Health Limited.
 
 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.
 
 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 tfiere 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 period 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 had entered into a 50 : 50 joint venture in Syncro Health
 Limited, Guernsey (Syncro), which was engaged in web marketing of
 certain neutraceutical products. Guernsey offered certain tax
 concessions and this was the consideration for the business set up by
 Syncro Health Limited which provided a competitive edge as compared to
 buying neutraceuticals in stores.  Since the business of Syncro did not
 pick up and the concessions offered were also withdrawn by me U. K.
 Government, the said company ended up in insolvent trading. As per the
 Guernsey laws, it was voluntarily decided to appoint administrator for
 Syncro.  The liquidation of die said company has been completed.
 
 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.
 
 During the accounting period under review the Company has signed a
 Memorandum of Understanding with Holding PharmEco, a Russian company,
 for establishing a joint venture in Russia for setting up manufacturing
 facility/ies for pharmaceutical formulations / APIs. However, little
 progress has been made towards the said joint venture.
 
 During the accounting period under review the Company has entered into
 a joint venture agreement with KOSE Corporation of Japan for
 establishment of a joint venture company in India for manufacturing,
 selling and distribution of cosmetics products in
 
 India.
 
 Pursuant to and in compliance with the General Circular No.  2/ 201 I
 being No. 5I/I2/2007-CL-III dated 8th February 2011 issued by
 Government of India, Ministry of Corporate Affairs, the Company has
 given the required particulars of its subsidiary and subsidiaries of
 the subsidiary in a statement forming part of this Annual Report. The
 Annual Audited Accounts and related, information of the subsidiary and
 subsidiaries of subsidiary has been kept for the inspection at the
 registered / head office of your Company as well as at the head office
 of subsidiary companies concerned and the shareholders of the Company
 and subsidiaries seeking such information shall be provided with the
 same at any point of time. The Company shall also furnish a hard copy
 of detailed accounts of subsidiaries to any shareholder on demand.
 
 BANKERS AND FINANCIAL INSTITUTIONS:
 
 The Directors wish to place on record their sincere gratitude to the
 consortium of Banks for working capital led 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 / OCD holders for their continued and
 timely support to the Company.
 
 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 US and UK 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 Sela Qui 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 GMR
 
 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 2013 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 judgements 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 of the fifteen months period ended on 30th
 June 2013 and the profit of the Company for that period.
 
 c) That the Directors had taken proper and sufficient care for
 maintenance of adequate accounting records for the 15 months period
 ended 30th June 2013 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 fifteen months
 period ended 30th June 2013 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 seven
 Indian patents with two in the USA and Japan and the other PCT
 applications 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.
 13.24 crores whereas disposal and adjustment of fixed assets amounted
 to Rs. 0.34 crores. The Company had capital work in progress amounting to
 Rs. 268.36 crores as at 30th June 2013 at various project sites.
 
 DEPOSITS:
 
 The Company''s public deposit scheme has been receiving good response
 from depositors. The Company is regular in repayment of principal and
 payment of interest and has not defaulted therein.  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 2013 the - fixed deposits outstanding under
 the public deposit schemes were Rs. 167.72 crores. The Company has
 discontinued acceptance of deposits from public since the close of
 accounting period under review.
 
 AUDITORS'' REPORT:
 
 As regards non-depositing or investment of a sum not less than 15% of
 the amount of Debentures maturing during the period ended 30th June
 2013, the Company is seized of the matter and the said amount will be
 deposited / invested in due course.
 
 As regards the comments of the Auditors at Sr. No. I under ''Emphasis of
 Matter, the Company is still in the process of restructuring its
 business. As regards comments at Sr. Nos. 2 and 3, the Company is
 seized of the matter and has been negotiating payment modalities with
 the lenders. As regards comment at Sr.  No. 4 the matter has been
 withdrawn by the lender concerned upon the Company having repaid the
 amount in question.
 
 As regards statutory payments the Company has deposited Provident Fund
 dues up to 30th June 2013. The Company has also
 
 deposited Income Tax Dues (Tax Deducted at Source - Others) up to March
 2013. The outstanding of Employees State Insurance and Service Tax
 reported in the Auditors'' Report have also been cleared.
 
 As regards defaults in payment of interest and repayment of
 installments due to banks and debenture holders, the Company is making
 all out efforts to clear the same at die earliest.
 
 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 2I7(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 of 15% 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 27* 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.
 
 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 I to this Report.
 
 The foreign exchange outgo during the year under review was Rs. 29.76
 crores for imports of raw materials / trading, interest and other
 items, and Rs. 50.22 lacs for foreign travel. The Company also paid Rs.
 5.83 crores in foreign exchange as interest on the External Commercial
 Borrowing. The foreign exchange earnings during the year were Rs. 31.77
 crores on account of exports on FOB basis.
 
                                     For and on behalf of die Board
 
                                     Atok Jagdish Saxena
 
 Mumbai, 13th November 2013          Chairman
Source : Dion Global Solutions Limited
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