Jubilant Organosys

1.  Capital Commitments
 
 Estimated amount of Contracts remaining to be executed on Capital
 Account (Net of Advances) Rs. 629.70 million (Previous year Rs.
 1,384.88 million) [Advances Rs. 113.89 million (Previous year Rs.
 107.01 million)].
 
 2.  Contingent liabilities
 
 a) Claims/Demands/Disputes against which appeals are pending and not
 acknowledged as debts on account of:
 
                                              (Rs. in million)
 
 As at 31st March,              2009         2008
 
 Central Excise                23.18         23.17
 
 Customs **                    74.67          5.76
 
 Sales Tax                     48.01          5.86
 
 Income Tax                   162.36        173.64
 
 Service Tax                    3.12          2.77
 
 Others                        59.48         10.57
 
 ** Excludes Rs. 111.09 million show cause notices/confirmed demands
 issued to the company against judicial procedures and unlikely to be
 sustained.
 
 Based upon the favorable decisions in similar cases, legal opinion
 taken by the Company or discussion with solicitors, the Company
 believes that its contentions in the matter of disputed demands/claims
 are legally tenable and hence the possibility of these maturing is
 remote.
 
 In additions to the amounts mentioned above, the Company may be
 required to pay interest on finality of the matters.
 
 b) The Company has challenged the levy of transport fee by State of
 Maharashtra on consumption of rectified spirit and molasses in the Nira
 factory. The order of State imposing the levy was stayed by the Hon’ble
 Mumbai High Court on 22nd October, 2001. The Company has been advised
 that the levy of transport fee on rectified spirit and molasses by
 State is not tenable. However, the Company has deposited Rs. 6.28
 million under protest out of the total transport fee of Rs. 124.03
 million.
 
 c) Outstanding guarantees furnished by Banks on behalf of the
 Company/by the Company including in respect of Letters of Credits/Loss
 make up guarantee is Rs. 1,066.75 million (Previous year Rs. 1,169.91
 million).
 
 The Company has given Corporate Guarantee on behalf of its
 subsidiaries, HSL Holdings Inc. & Draxis Specialty Pharmaceuticals Inc.
 (formerly Jubilant Acquisition Inc. & post merger of Draxis Health
 Inc.) to ICICI Bank UK. PLC. & ICICI Bank, Canada for USD 50 million
 (effective guarantee as at 31st March, 2009 USD 43.75 million) and USD
 50.21 million respectively (total effective guarantee equivalent to Rs.
 4,765.70 million), to secure financial facility granted by them.
 
 d) Exports obligation undertaken by the Company under EPCG scheme to be
 completed over a period of five/ eight years on account of import of
 Capital Goods at concessional import duty remaining outstanding is
 
 Rs. 1,101.50 million (Previous year Rs. 1,111.40 million). Similarly
 Export obligation under Advance License Scheme/DFIA scheme on duty free
 import of specific raw materials, remaining outstanding is Rs. 558.01
 million (Previous year Rs. 2,891.12 million)
 
 e) The Company has challenged the increase in denaturing fee by the
 State of Uttar Pradesh w.e.f. 1st April, 2004 on denaturing of
 rectified spirit in the Gajraula factory before the Hon’ble Allahabad
 High Court and the writ petition has been admitted by the court. The
 Company has deposited Rs. 19.11 million under protest which is shown as
 deposits.
 
 f) Zila Panchayat at J. P. Nagar (in respect of the Company’s Gajraula
 plant) served a notice demanding a compensation of Rs. 277.40 million
 allegedly for percolation of poisonous water stored in lagoons and
 flowing through the land of Zila Panchayat resulting in loss of crops
 and cattle of the farmers and for putting poisonous fly ash on national
 highway which caused loss to the health and damages to eyes and skin of
 people.
 
 District Magistrate issued a recovery certificate along with 10%
 collection charges inflating the demand to Rs. 305.14 million. In the
 opinion of the Company, the Zila Panchayat has no jurisdiction in
 raising this demand. The demand was challenged in Hon’ble Allahabad
 High Court and the court stayed the demand till further orders.
 
 3.  The Hon’ble Supreme Court has quashed the levy of license fee by
 State of Uttar Pradesh on captive consumption of denatured spirit in
 the Gajraula factory, and has ordered the refund of the fee paid during
 the period of dispute subject to condition that the amount has not been
 collected from the Company’s customers. Further the Court has directed
 the State to investigate whether the Company has collected the disputed
 fee from its customers to the extent bank guarantees were furnished.
 
 The Company is entitled to a refund of Rs. 84.06 million as the amount
 paid during the period of dispute or secured by bank guarantees was not
 collected from its customers. Accordingly the Company has approached
 the State of Uttar Pradesh for the refund of the said amount.
 
 4.  The Company has challenged the levy of license fees of Rs. 2.87
 million by State of Uttar Pradesh, for grant of PD-2 license for
 manufacture of Ethyl Alcohol for industrial use, before the Hon’ble
 Allahabad High Court. The writ petition has been admitted and is being
 listed for final hearing. Though the amount has been deposited and
 shown as such, no provision against this has been made as the issue is
 covered by the earlier favorable judgment of the Hon’ble Supreme Court
 of India.
 
 5.  Dividend on Equity Shares includes Rs. 2.36 million (inclusive of
 Dividend Distribution Tax) in respect of Shares allotted between 31st
 March, 2008 to the record date for Dividend.
 
 6.  Loans to Subsidiary Companies repayable on demand, including
 interest accrued thereon, namely, Jubilant Biosys Ltd. - Rs. 1,083.80
 million (Previous year Rs. 769.80 million) & Jubilant Chemsys Ltd. -
 Rs. Nil (Previous year
 
 Rs. 28.00 million). {Maximum amount due at any time during the year,
 Jubilant Biosys Ltd. - Rs. 1,148.53 million (Previous year Rs. 816.21
 million), Jubilant Chemsys Ltd. - Rs. 28.94 million (Previous year Rs.
 36.28 million), Jubilant Pharma Pte. Ltd. Singapore - Rs. 223.12
 million (Previous year Rs. Nil) & Speciality Molecules Ltd.  Rs. 20.60
 million (Previous year Rs. Nil)}.
 
 Maximum balance outstanding, during the year, recoverable from
 following Companies in which Directors are interested, Jubilant Enpro
 Pvt. Ltd. - Rs. 2.83 million, Jubilant Oil & Gas Pvt. Ltd. - Rs. 4.08
 million, B&M Hot Breads Pvt. Ltd. - Rs. 0.13 million.
 
 7.  Employee Stock Option Scheme
 
 In terms of approval of shareholders accorded at the AGM held on 29th
 August, 2005 and in accordance with SEBI (ESOP & ESPS) Guidelines,
 1999, the Company instituted Jubilant Employees Stock Option Plan, 2005
 (“Plan”) for specified categories of employees and directors of the
 Company and its Subsidiaries. Under the Plan, upto 717,500 Stock
 Options can be issued to eligible directors (other than promoter
 directors) and other specified categories of employees of the Company /
 Subsidiaries. The options are to be granted at market price. As per
 SEBI Guidelines, the market price is taken as the closing price on the
 day preceding the date of grant of options, on the stock exchange where
 the trading volume is the highest.
 
 During the year, in accordance with SEBI (ESOP & ESPS) Guidelines,
 1999, approval was accorded to increase the number of Stock Options
 that the Company can create, offer, issue and grant/allot at any time,
 directly, or through a trust, to the eligible employees of the Company
 and its Subsidiaries, from 717,500 Stock Options to 1,100,000 Stock
 Options thereby increasing the resultant Equity Shares on exercise from
 3,587,500 shares to 5,500,000 shares of Re. 1 each under the Jubilant
 Employees Stock Option Plan, 2005.
 
 During the year, Jubilant Employee Welfare Trust was constituted for
 the purpose of acquisition of equity shares of the Company from the
 Secondary market or subscription of shares from the Company, to hold
 the shares and to allocate/transfer these shares to eligible employees
 of the Company from time to time, in such manner and terms and
 conditions specified under Jubilant Employees Stock Option Plan, 2005.
 The Company would grant loan to Trust upto Rs. 1,000 million in one or
 more trenches, either free of interest or at interest agreed between
 the Board and the Trust. The Trust has purchased 5,371,747 equity
 shares of the Company from the open market, out of interest free loan
 of Rs. 567.85 million provided by the Company till March 31, 2009.
 
 8.  (A) In line with the applicable Accounting Standards, interest on
 funds utilised and preoperative expenses
 including trial run expenses (net) for projects and/or substantial
 expansions have been capitalised up to the date of commercial
 production/stabilisation of the project, amounting to Rs. 298.53
 million (Previous year Rs. 276.63 million), including interest Rs.
 220.09 million (Previous year Rs.150.55 million). The said expenditure
 (net of trial run receipts), so capitalised are accumulated as Capital
 work in progress and have been allocated to respective Fixed Assets to
 the extent fixed assets were put to use and balance is appearing in
 Capital work in progress.
 
 (B) The carrying value of internally generated Intangible Asset -
 Product Development including under progress is reviewed for impairment
 annually. Accordingly a sum of Rs. 79.49 million has been written off
 during the year.
 
 13.  (A) During the year, the Company through its wholly owned
 subsidiaries has acquired 100% stake in Draxis
 
 Specialty Pharmaceuticals Inc. (formerly Jubilant Acquisition Inc. &
 post merger of Draxis Health Inc.) along with its Subsidiaries
 (Draxis)., a Canada Based company which become subsidiary w.e.f. 28th
 May, 2008. The acquired Company offers Contract Manufacturing services
 in the area of sterile and non-sterile products and also focuses on
 discovering, developing and manufacturing diagnostic imaging and
 therapeutic radiopharmaceutical products.
 
 (B) During the year, the Company acquired 100% stake in Speciality
 Molecules Ltd., a niche manufacturer of Specialty Intermediates with
 manufacturing facilities located in Ambarnath (near Mumbai), which
 become subsidiary w.e.f. 3rd June, 2008. The acquired Company is
 engaged in the business of developing, manufacturing and selling of
 specialty intermediates.
 
 (C) In the year 2007-08, the Company through its wholly owned
 subsidiaries acquired 100% stake in Hollister-Stier Laboratories LLC
 (HSL), a US based Company engaged in Contract Manufacturing of sterile
 injectables & producers of allergenic extracts.
 
 (D) In the year 2004-05, the Company acquired 80% equity interest in
 two Belgium based pharmaceutical companies namely Pharmaceutical
 Services Incorporated N.V. and PSI Supply N.V. through its subsidiary
 namely Jubilant Pharma N.V. for a consideration of Euro 13.5 million.
 
 In the year 2007-08, the Company through its wholly owned subsidiary
 invested Euro 1 million to acquire balance 20% equity interest in
 Belgium based said pharmaceutical companies.
 
 (E) In the year 2005-06 & 2006-07, the Company made, investment of USD
 12.70 & USD 198.09 million respectively, in the Equity of its wholly
 owned Subsidiary - Jubilant Pharma Pte. Ltd., Singapore.
 
 During the year, the Company made further investment of USD 21.60
 million.
 
 (F) In the year 2007-08, the Company acquired 88.17% stake in Jubilant
 First Trust Healthcare Limited (JFTHL) for a consideration of Rs.
 223.55 million, which became subsidiary w.e.f. 23rd May, 2007. JFTHL is
 engaged in the business of Development & Management of Hospitals &
 Health care units and is run by a team of professional doctors in West
 Bengal. During the year the Company increased its holding in JFTHL from
 88.17% to 92.80%.
 
 JFTHL has also invested a sum of Rs. 12.52 million to acquire 99.68%
 stake in Asia Healthcare Development Ltd. which became its subsidiary
 w.e.f 13th March, 2008.
 
 (G) The Company made during the year, further investment of Rs. 60.50
 million in Jubilant Infrastructure Ltd., a wholly owned subsidiary
 engaged in setting up of SEZ in the State of Gujarat.
 
 9.  (A) During the year, the Company sold all the equity shares held
 by it in its subsidiary viz; Jubilant Biosys Ltd. to its step down
 subsidiary Jubilant Biosys (Singapore) Pte. Limited and also sold all
 the equity shares held by it in its subsidiaries viz; Jubilant Chemsys
 Ltd. and Clinsys Clinical Research Ltd. to its another step down wholly
 owned subsidiary-Jubilant Drug Development Pte. Limited, Singapore.
 
 (B) In the year 2007-08, the Company sold all the shares held by it in
 its subsidiary viz; Jubilant Organosys (Shanghai) Ltd., to its wholly
 owned subsidiary Jubilant Pharma Pte. Ltd., Singapore.
 
 10.  (A) The Company has opted for accounting the exchange difference
 arising on reporting of long term foreign currency monetary items in
 line with the Companies (Accounting Standard) Amendment Rules, 2009 on
 AS 11 (AS-11) - “The Effects of Changes in Foreign Exchange Rates”
 notified by the Ministry of Corporate Affairs on 31st March, 2009.
 Accordingly during the year the Company has capitalised exchange
 difference amounting to Rs. 1,130.81 million to the cost of fixed
 assets and the balance amount Rs. 1,596.03 million to Foreign Currency
 Monetary Item Translation Difference Account [FCMITDA]. Also the
 exchange gain amounting to Rs. 1,030.57 million credited to Profit &
 loss account in the previous year is now reversed through General
 Reserve. Had the Company not opted for this method of accounting the
 profit for the year would have been lower by Rs. 3,757.41 million and
 the reserves would have been lower by Rs. 1,130.81 million. The balance
 in FCMITDA will be amortised on or before March, 2011.
 
 (B) The Company uses derivative financial instruments such as forward
 contracts and currency swaps to selectively hedge its currency
 exposures, firm commitments and highly probable forecast transactions,
 denominated in USD and EURO. Usually, the forward contracts mature
 within two years. The Company also enters into interest rate swaps to
 selectively hedge its interest rate exposures. The Company actively
 manages its currency/interest rate exposures through a centralised
 treasury setup and uses derivatives to mitigate the risk from such
 exposures.
 
 (C) Defined Benefit Plans
 
 a) Gratuity
 
 b) Leave Encashment
 
 The discount rate assumed is 7.60% which is determined by reference to
 market yield at the Balance Sheet date on Government bonds. The
 estimates of future salary increases, considered in actuarial
 valuation, take account of inflation, seniority, promotion and other
 relevant factors, such as supply and demand in the employment market.
 
 11.  Segment Reporting :
 
 i) Based on the guiding principles given in Accounting Standard 17
 (AS-17) on “Segment Reporting”, notified by the Central Government
 under the Companies (Accounting Standard) Rules, 2006. The Company’s
 Primary Business Segments are organized around customers, on industry
 and product lines as under:
 
 a.  Pharmaceuticals and Life Sciences Products & Services: Active
 Pharmaceuticals Ingredients (APIs), Custom Research & Manufacturing
 Services (CRAMS).
 
 b.  Industrial & Performance Products: Organic Intermediates, Agri and
 Animal Nutrition Products, Industrial products for tyres, textiles and
 coatings; Consumer Products for woodworking solutions; Food Polymers
 and Specialty Gases.
 
 ii) In respect of Secondary Segment information, the Company has
 identified its Geographical segments as:
 
 (i) Within India (ii) Outside India.
 
 iii) Inter Segment Transfer Pricing
 
 Inter Segment Transfer prices are based on market prices.
 
 12.  A.  Related Party Disclosures
 
 1.  Related parties where control exists:
 
 a) Subsidiaries including Step–down subsidiaries:
 
 Jubilant Pharma Pte. Ltd. Singapore, Draximage Ltd. Cyprus (formerly
 Pancity Ltd.), Draximage Ltd.  Ireland (formerly Basehell Ltd.),
 Draximage LLC. USA., DSPI Inc. USA, Deprenyl Inc. USA, Draxis Specialty
 Pharmaceuticals Inc. Canada. (formerly Jubilant Acquisition Inc.),
 6963196 Canada Inc.  Canada, 6981364 Canada Inc. Canada, DAHI LLC. USA,
 DAHI Animal Health (UK) Ltd. UK., Draxis US Inc. (Merged with Deprenyl
 Animal Health Inc.), DAHI Nevada Inc. (Merged with Deprenyl Animal
 Health Inc), Deprenyl Animal Health Inc (Dissolved on 18th December
 2008), Draximage (UK) Ltd. UK., Clinsys Holdings Inc. USA., Clinsys
 Clinical Research, Inc. USA. Cadista Holdings Inc. USA., Cadista
 Pharmaceuticals Inc. USA., Colvant Sciences Inc. USA., Cadista
 Pharmaceuticals (UK) Limited, UK.  (formerly Cadista UK Ltd.), Jubilant
 Organosys International Pte. Ltd. Singapore, HSL Holdings Inc. USA.,
 Hollister–Stier Laboratories LLC. USA., Jubilant Organosys (Shanghai)
 Ltd. China., Jubilant Pharma N.V.  Belgium., Jubilant Pharmaceuticals
 N.V. (formerly Pharmaceutical Services Incorporated N.V.) Belgium., PSI
 Supply N.V. Belgium., Jubilant Organosys (USA) Inc. USA., Jubilant
 Organosys (BVI) Ltd. BVI., Jubilant Biosys (BVI) Ltd. BVI., Jubilant
 Biosys (Singapore) Pte Ltd. Singapore., Jubilant Biosys Ltd., Jubilant
 Discovery Services Inc. USA., Jubilant Drug Development Pte. Ltd.
 Singapore., Jubilant Chemsys Ltd., Clinsys Clinical Research Ltd.,
 Jubilant Infrastructure Ltd., Jubilant First Trust Healthcare Ltd.,
 Asia Healthcare Development Ltd., Speciality Molecules Ltd., Jubilant
 Innovation (BVI) Ltd., BVI., Jubilant Innovation Pte. Ltd., Singapore.
 
 b) Other Entities:
 
 Draxis Pharma General Partnership Canada, Draximage General Partnership
 Canada
 
 2.  Other Related parties with whom transactions have taken place
 during the year.
 
 i) Enterprise over which certain Key Management Personnel have
 significant influence:
 
 Jubilant Enpro Pvt. Ltd., Jubilant Oil & Gas Pvt. Ltd., Enpro Oil Pvt.
 Ltd., Domino Pizza India Ltd., Tower Promoters Pvt. Ltd., Focus Brands
 Trading India Pvt. Ltd., B&M Hot Breads Pvt. Ltd.
 
 ii) Key Management Personnel:
 
 Mr. Shyam S. Bhartia, Mr. Hari S. Bhartia, Mr. S. N. Singh, Mr.
 Shyamsundar Bang, Dr. J. M. Khanna, Mr. R. Sankaraiah, Mr. Pramod
 Yadav, Mr. Rajesh Srivastava, Mr. Ananda Mukherjee
 
 iii) Relatives of Key Management Personnel:
 
 Ms. Asha Khanna (wife of Dr. J. M. Khanna), Ms. Shobha Bang (wife of
 Mr. Shyamsundar Bang)
 
 iv) Others:
 
 Vam Employees Provident Fund Trust, Jubilant Employee Welfare Trust,
 Jubilant Bhartia Foundation
 
 13.  B.  Promoter Group
 
 Group companies
 
 The Company is controlled by Mr. Shyam S. Bhartia/Mr. Hari S. Bhartia
 group (“the promoter group”), being a group as defined in the
 Monopolies and Restrictive Trade Practices Act, 1969.
 
 The persons constituting the promoter group include individuals and
 corporate bodies who/which jointly exercise, and are in a position to
 exercise, control over the Company. The names of these individuals and
 bodies corporate are Mr. Shyam S. Bhartia, Mr. Hari S. Bhartia, Mrs.
 Shobhana Bhartia, Mrs. Kavita Bhartia, Mr. Priyavrat Bhartia, Mr.
 Shamit Bhartia, Ms. Aashti Bhartia, Master Arjun S. Bhartia, Mrs.
 Namrata Bhartia, Master Agastya Bhartia, Best Luck Vanijya Private
 Ltd., Enpro Exports Private Ltd., Jaytee Private Ltd., Jubilant Enpro
 Private Ltd., Jubilant Securities Private Ltd., Jubilant Capital
 Private Ltd., Klinton Agencies Private Ltd., Speedage Vinimay Private
 Ltd., Rance Investment Holdings Ltd., Cumin Investments Ltd., Torino
 Overseas Ltd., Vam Holdings Ltd., Westcost Vyapaar Private Ltd., Nikita
 Resources Private Ltd., Jubilant Oil & Gas Pvt. Ltd., Enpro Oil Pvt.
 Ltd., Tower Promoters Pvt. Ltd., U C Gas & Engineering Ltd., Asia
 Infrastructure Development Co. Pvt. Ltd., Western Drilling Contractors
 Pvt. Ltd, Jubilant Realty Pvt. Ltd, Dignesh Suppliers Pvt. Ltd., Love
 Life Vinimay Pvt. Ltd., Skylark Holdings Pvt. Ltd., Jubilant Properties
 Pvt. Ltd., Cougar Sales Agency Pvt. Ltd., Indian Country Homes Pvt.
 Ltd., Jubilant E&P Ventures Pvt. Ltd., Jubilant Retail Pvt. Ltd.,
 Jubilant Retail Holding Pvt. Ltd., Jubilant Motors Pvt.  Ltd., Jubilant
 Retail Consolidated Pvt. Ltd., B&M Hot Breads Pvt. Ltd.