Natco Pharma

(Rs. in thousands)
 
 1.  CONTINGENT LIABILITIES NOT PROVIDED FOR  As at   As at
                                          31.03.2009 31.03.2008
 
 On account of: Letters of Credit            32893    84075
 Bank Guarantees                             12270    14517
 Income Tax                                  84018    75102
 Demands from Sales tax department            8690     8690
 Claims against the Company not 
 acknowledged as debts                      157053   157053
 Corporate Guarantee given on 
 behalf of a company
 in which the directors are interested      100000   201100
 
 2.  SECURED LOANS :
 
 A.  Term Loans :
 
 a.  The medium term loan from Yes Bank Limited, repayable in 8
 quarterly installments, is secured by mortgage of Fixed assets situated
 at Kothur plant and further guaranteed by Mr. V.C. Nannapaneni,
 Chairman & Managing Director in his personal capacity.(repayable within
 one year Rs. 13.50 crores)
 
 b.  The term loans from Export Import Bank of India are secured by a
 first exclusive charge by way of mortgage and hypothecation of
 immovable properties and moveable fixed assets, both present and
 future, pertaining to the companys API plant at Mekaguda and
 formulations plants at Dehradoon and by the personal guarantee of Mr.
 V.C. Nannapaneni, Chairman & Managing Director.
 
 c.  The short term loans from State Bank of Hyderabad is secured by an
 equitable mortgage of a portion of the Companys land situated at
 Mekaguda Village, Mahaboobnagar Dist. Andhra Pradesh and further
 secured by the personnel guarantee of Mr. V.C. Nannapaneni, Chairman &
 Managing Director.
 
 B.  Working Capital Borrowings from Banks:
 
 Working Capital Borrowings from Banks: Secured by a first charge on all
 raw materials, work-in- process, finished goods, semi-finished goods,
 book debts and other movables, consumable stores and collaterally
 secured by way of a first charge on the land and buildings of corporate
 office and a first charge by way mortgage and hypothecation of
 immovable properties and movable fixed assets situated at Nagarjuna
 sagar Plant and guaranteed by two Directors of the company.
 
 3.  During the year the company has provided an amount of Rs.18.91
 lakhs being the excise duty on finished goods lying in the factory
 premises and not cleared from excise bonded warehouses as on 31st
 March, 2009.
 
 4.  Interest free sales tax loan from Andhra Pradesh State Government,
 repayable in the financial year 2009-2010 is Rs 2.03 lakhs.
 
 5.  The company is in the process of obtaining information from its
 suppliers regarding their status as per Micro, Small and Medium
 Enterprises Development Act, 2006.  In the absence of information from
 the suppliers disclosures, if any, relating to amounts unpaid as at the
 year end together with interest paid/payable as required under the said
 Act could not be furnished.
 
 6.  Balances of Debtors, Creditors, Advances and Loans etc are subject
 to confirmations and reconciliations.
 
 7.  In the opinion of the Board, the current assets, Loans and Advances
 have a value on realisation in the ordinary course of business at least
 equal to the amount at which they are stated.
 
 8.  RELATED PARTY DISCLOSURES
 
 Disclosures as required by the Accounting Standard 18 of the Institute
 of Chartered Accountants of India are given below:
 
 a) Key management personnel and their relatives (KMP):
 
 1) Mr. V.C. Nannapaneni, Chairman & Managing Director
 
 2) Mrs. Durga Devi Nannapaneni, Whole - time Director
 
 3) Mr. Rajeev Nannapaneni, Director and Chief Operating Officer.
 
 4) Mr. P.Bhaskara Narayana, Director and Chief Financial Officer.
 
 b) List of Related Parties:
 
 i) Enterprises in which the key management personnel/relatives are
 interested.
 
 ii) Joint Venure: K & C Pharmacy trading as Nicks Drugs, New Jersey,
 USA
 
 iii) Subsidiary company:
 
 Natco Pharma Inc., trading as Save Mart Pharmacy, Lancaster, PA,USA
 
 9.  DISCLOSURE IN RESPECT OF JOINT VENTURES:
 
 a) List of Joint Ventures :
 
 Name of the Joint Venture : K & C Pharmacy
 
 Description of Interest : Jointly controlled entity (partner in the
 firm)
 
 Proportion of ownership interest : 75%
 
 Country of residence : United States of America
 
 b) Financial interest in Jointly controlled entity :
 
 Name of the Joint Partner (minority interest) : Mr. Krishnayya, Bikkina
 
 10.  DEFERRED TAX:
 
 The company has accounted for deferred tax in accordance with the
 Accounting Standard - 22 Accounting for Taxes on Income issued by the
 Institute of Chartered Accountants of India.
 
 Deferred tax liability accruing during the year, aggregating to Rs.
 36,947,305/- (Rounded to Rs. 37,000,000/-) has been debited to the
 profit and loss account.
 
 11.  SEGMENT REPORTING :
 
 Based on the Accounting Standard - 17 Segment Reporting issued by the
 Institute of Chartered Accountants of India, the companys principal
 segments of business are bulk chemicals, finished dosage formulations.
 Segments revenue, expense, assets and liabilities includes amount of
 such items that are directly attributable to the segment and the
 amounts of such items that can be allocated to the segment on a
 reasonable basis. Revenues, expenses, assets and liabilities which
 relate to the enterprise as a whole and are not allocable to segments
 on a reasonable basis have been included under common.
 
 b) The company has common fixed assets for producing goods for domestic
 market and overseas market. Hence separate figures for fixed assets
 cannot be furnished. Sundry debtors for segment outside India amount to
 Rs.260,774,731/- (Py.Rs.22,51,49,560/-) and in India amount to
 Rs.216006037/- (Py.Rs.13,20,65,650/-)
 
 Directors remuneration in Schedule 15 is net of Rs. NIL /-
 (Rs.28,50,000/-) being recovery from other company for services
 rendered.
 
 12.  Additional information pursuant to the provisions of Paragraph 3,
 4C & 4D of Part II of Schedule VI of the Companies Act, 1956 :
 
 A.  Capacities and production
 
 I.  Classes of Goods Manufactured
 
 a) Bulk Drugs
 
 b) Bulk drug Intermediates
 
 c) Formulations
 
 II.  Licensed capacity: Not applicable
 
 G.  Value of Imported and indigenous Raw Materials, Packing Materials
 and Stores Consumed and their percentage to total Consumption:
 
 13.  Salaries and Research and Development expenses are net of Rs. Nil
 /-(Rs.1,03,62,601/-) and Rs.Nil (Rs. 83,10,160/-) respectively being
 recoveries from others.
 
 20.  The Company had formulated an employees stock options plan
 (NATSOP 2004) in 2004 and had granted 598300 stock options at Rs.10/-
 each to eligible employees/directors of the Company (excluding
 promoters). An amount of Rs 6.20 lakhs (previous year: Rs.  78.45
 lakhs) being the proportionate intrinsic value of the estimated options
 that could be vested and exercised is charged under staff cost and has
 been accounted in accordance with the guidance note on Accounting for
 employee share-based payments issued by the Institute of Chartered
 Accountants of India.
 
 14.  Employee Benefits:
 
 The Company has provided for Gratuity based on actuarial valuation on
 the basis of projected unit credit method.
 
 The following table summarise the components of the net benefit
 recognized in the profit and loss account and amounts recognized in the
 balance sheet for Gratuity.
 
 The estimates of future salary increase, considered in actuarial
 valuation, take account of inflation, seniority, promotion and other
 relevant factors, such as supply and demand in the employment market.
 
 15.  The company has no outstanding derivative contracts as at 31st
 March, 2009.
 
 16.  Previous year figures have been regrouped or reclassified wherever
 necessary to be in conformity with the current year figures. Figures in
 brackets denote those of previous year. Paise have been rounded off.
 
 Note: The previous year figures have been regrouped or reclassified
 where ever necessary to be in with the current year.