We have audited the attached Balance Sheet of LYKA LABS LIMITED as at
31st March, 2012 and also the Profit and Loss Account and the Cash Flow
Statement for the period ended on that date annexed thereto (in which
are incorporated the accounts of the company''s branches at Ankleshwar
and Tarapur audited by other auditors making such changes as were
considered for the purpose of incorporation). These financial
statements are the responsibility of the company''s management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We have conducted our audit in accordance with auditing standards
generally accepted in India. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
1 As required by the Companies (Auditor''s Report) Order, 2003, issued
by the Central Government in terms of sub- section (4A) of section 227
of the Companies Act, 1956 as amended by the Company (Auditors Report)
(Amendment) Order 2004, we give in the Annexure a statement on the
matters specified in the said Order'' as amended.
2 Further to our comments in the annexure referred to in paragraph 1
above, we report that:
a) We have obtained all the information and explanations, which to the
best of our knowledge and belief were necessary for the purpose of our
b) In our opinion, proper books of account as required by law have been
kept by the company so far as appears from our examination of those
books. Proper returns adequate for the purpose of our audit have been
received from the Branches not visited by us. The Branch Auditor''s
Reports have been forwarded to us and have been appropriately dealt
c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
dealt with by this report are in agreement with the books of account
and with the audited returns from the Branches;
d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
Flow Statement dealt with by this report comply with the Accounting
Standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956, except Accounting Standard 5 (AS-5) Net Profit
or Loss for the Period, Prior Period Items and Changes in Accounting
Policies'''' and Accounting Standard 10 (AS-10) Accounting for
Fixed Assets as referred to in Para 3(B) herein.
e) On the basis of written representation received from the Directors
as on 31st March, 2012 and taken on record by the Board of Directors,
we report that none of the Directors are disqualified as on 31st March,
2012 for being appointed as a Director in terms of clause (g) of
sub-section (1) of section 274 of the Companies Act, 1956.
3 Attention is invited to the following Notes in Schedule 15 :
(A) In respect of which are enable to express an opinion:
i. Certain unsecured loans and advances referred to in notes 7(ii),
(Hi) and (iv) amounting to Rs. 77,633,760, Rs.48,606,065 and Rs.50,000,000
respectively, considered by the company as good for recovery.
ii. Note No 9 regarding non provision for diminution in value of cost
iii. The Company has incurred an aggregate expenditures of Rs.80,004,844
on New products Developments and Applied Research, which has
been held in Intangible Capital Work-In-Progress pending recognition as
Intangibles Viz. Technical Know How or Trade Marks, as referred to in
note No. 10
(B) During the previous year the Company had written off / adjusted the
slow and non- moving raw and packing material, certain long overdue
debts, loans & advances and deferred revenue expenses, aggregating to
Rs.243,576,752 to the Revaluation Reserve instead of the Profit and Loss
Account, which was not in accordance with the Generally Accepted
Accounting Practice (GAAP) and requirements of Accounting Standard 5
(AS-5) Net Profit or Loss for the Period, Prior Period Items and
Changes in Accounting Policies. Further, the recognition of profit
on sale of Revalued Fixed Assets is not in accordance with Accounting
Standard 10 (AS-10), as referred to in note No. 6(B)(ii).
4 In our opinion and to the best of our information and according to
the explanations given to us, we further report that, without
considering items mentioned in para (3)(A) (i), (ii), and (Hi), the
effect of which we are unable to express an opinion on and subject to
the consequential effects of the item referred to in para 3(B) of not
increasing the loss for the period, the said accounts read with
Significant Accounting Policies and other notes thereon, while giving
the information required by the Companies Act, 1956, in the manner so
required to give a true and fair view in conformity with the accounting
principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the
company as at 31st March, 2012;
(b) in the case of the Profit and Loss Account, of the loss for the
period ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for the
period ended on that date.
ANNEXURE TO THE AUDITORS'' REPORT
(Referred to in paragraph 1 of our report of even date)
(i) In respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets.
(b) There is a phased programme of verification which, in our opinion,
is reasonable having regard to the size of the company and the nature
of its assets. The discrepancies noticed on such verification which are
not material have been suitably dealt with in the books of account.
(c) In our opinion, a substantial part of the fixed assets has been
disposed off during the period. However it has not affected the going
concern status of the company.
(ii) In respect of its inventories:
(a) As explained to us, inventories were physically verified during the
period by the management at regular intervals except the inventories
lying with the third parties for which confirmations have been
(b) In our opinion and according to the information and explanations
given to us, the procedures of physical verification of inventories
followed by the management are reasonable and adequate in relation to
the size of the company and the nature of its business.
(c) In our opinion and according to the information and explanations
given to us, the Company has maintained proper records of its
inventories and discrepancies noticed on physical verification which
are not material have been properly dealt with in the books of account.
(iii) (a) The Company has granted interest bearing unsecured loans in
earlier years to two parties covered in the register maintained under
section 301 of the Companies Act, 1956 (the Act). Further, during the
period the Company has granted interest bearing unsecured loan
amounting to Rs. 20,000,000 repayable on demand, to a subsidiary. The
maximum amount outstanding at any time during the period and the year
end balance is Rs. 98,606,065 and Rs. 98,606,065 respectively.
(b) In our opinion, the rate of interest and other terms and conditions
of unsecured loans given by the Company, are prima facie not
prejudicial to the interests of the Company.
(c) Since the loans / interest are repayable on demand there is no
overdue and hence, the question of Company taking reasonable steps for
recovery thereof does not arise.
(d) Since the loans / interest are repayable on demand, the question of
regular receipt of the principal amounts and interest does not arise.
(e) The Company had taken interest bearing unsecured loans in earlier
years from two parties, covered in the register maintained under
section 301 of the Act, the amount outstanding at the beginning of the
year was Rs. 2,355,000. During the period Company borrowed Rs. 205,000 from
one of the parties and repaid an aggregate of Rs. 600,000 to both the
The maximum balance outstanding at any time during the period and the
period end balance is Rs. 2,355,000 and Rs. 1,960,000 respectively.
(f) The rate of interest and other terms and conditions of such
unsecured loans are, in our opinion, prima facie not prejudicial to the
interest of the Company.
(g) Since the principal and interest thereon are payable on demand, the
question of payment of the same being regular does not arise.
(iv) In our opinion and according to the information and explanations
given to us, there are internal control procedures commensurate with
the size of the Company and the nature of its business for the purchase
of inventory and fixed assets and for the sale of goods and services.
(v) (a) According to the information and explanations given to us, the
particulars of contracts or arrangements referred to in section 301 of
the Act, have been entered in the register maintained thereunder.
(b) According to the information and explanations given to us, the
transactions made in pursuance of such contracts or arrangement have
been made at prices which are prima facie reasonable having regard to
the prevailing market prices at the relevant time except that, the
prices at which sales of branded pharma products made to the aforesaid
parties during the period, as informed to us, are not comparable in
view of marginal presence of the company in branded pharma products.
(vi) In our opinion and according to the information and explanations
given to us, the Company has generally complied with the provisions of
Sections 58A and 58AA and other relevant provisions of the Act, and the
rules framed there under and the directives issued by the Reserve Bank
of India, where applicable, with regard to the deposits accepted from
(vii) In our opinion, the scope and extent of internal audit is
commensurate with the size of the Company and the nature if its
(viii) We have broadly reviewed the books of account and records, to
the extent, maintained by the Company relating to the manufacture of
Bulk Drugs and Formulations, pursuant to the Order made by the Central
Government for the maintenance of cost records under Section 209(1)(d)
of the Act, and are of the opinion that prima facie most of the
prescribed accounts and records have generally been made and
maintained. We have, however, not made a detailed examination of the
records with a view to determining whether they are accurate or
(ix) According to the information and explanations given to us and as
per the relevant records produced before us in respect of statutory and
(a) During the period Company has not been regular in depositing
undisputed statutory dues relating to Provident Fund, Professional Tax,
E.S.I.C., Service Tax, Income-tax and Sales-tax. The arrears of the
said dues as at the last day of the financial period and outstanding
for more than six months from the date they become payable are as
Sr. Nature of Dues Amount
1. Tax Deducted at Source 2,211,304
2. Sales Tax Payable 3,434,738
(b) Following dues have not been deposited since the matters are
pending with the respective forums:
Sr. Nature of dues Amount Period to which the Name of Forum
No. (Rs.) amount
1. Demand under Drugs
Price 209,440,565 Demands raised in Gujarat
Control Order 1987, 1990 and 1995
2. Purchase Tax 1,600,442 1991-96 Gujarat
3. Excise duty,
penalties & 1,122,138 Since August 22, Commissioner
interest thereon 2006. Excise
4. Bombay Sales Tax 6,186,400 1998-99 Appellate
5 Sales Tax - Tarapur 50,714 2004-05 Joint
6 Central Sales Tax 1,795,241 1998-99 Appellate
7 Service Tax 1,809,830 2011-12 Additional
8 Gujrat Sales Tax 8,545,195 2002-03 Commissioner
1,370,850 2006-07 Sales Tax
(x) The accumulated losses of the Company have not exceeded fifty per
cent of its net worth as at the end of the period. The Company has
incurred cash losses during the period. In the immediately preceding
financial year the Company had not incurred cash losses.
(xi) During the period, the Company''s Banker has granted reschedulement
and repayment of loans. In the view of the same and as also based on
our audit procedures and on the basis of information and explanations
given by the management, the Company has not defaulted in the repayment
of dues to Banks.
(xii) According to the information and explanations given to us, the
Company has not granted any loans and advances on the basis of security
by way of pledge of shares, debentures and other securities. Therefore,
the provisions of clause 4 (xii) of the Order'', are not applicable
to the Company.
(xiii) In our opinion, the Company is not a chit fund or a nidhi mutual
benefit fund / society. Therefore, the provisions of clause 4 (xiii) of
the Order, are not applicable to the Company.
(xiv) The Company is not dealing in or trading in shares, securities,
debentures and other investments. The shares held by the Company are in
its own name.
(xv) According to the information and explanations given to us, the
Company has not given guarantee for loans taken by others from banks or
financial institutions. Therefore, the provisions of clause 4 (xv) of
the Order'', are not applicable to the Company.
(xvi) To the best of our knowledge and belief and according to the
information and explanations given to us, term loans availed by the
Company were, prima facie, applied by the Company during the period for
the purposes for which the loans were obtained.
(xvii) According to the records examined by us and the information and
explanations given to us, on an overall basis, funds raised on
short-term basis have not been used for long term purposes.
(xviii)The Company has not made preferential allotment of shares during
the period to parties covered under section 301 of the Act. Therefore,
the provisions of clause 4 (xviii) of the Order, are not applicable
to the Company.
(xix) According to the information and explanation given to us and the
records examined by us, the Company has created a charge in respect of
the Non Convertible Debentures (privately placed) issued during the
period aggregating to Rs. 98,200,000.
(xx) The Company has not raised money by public issue during the period
and accordingly the question of disclosure of end use of money raised
does not arise.
(xxi) To the best of our knowledge and belief and according to the
information and explanations given to us, no fraud on or by the Company
was noticed or reported during the period.
For M. A. Parikh & Co.
Firm Reg. No. 107556W
Membership No. 32489
Date: 31st August, 2012