MANAGEMENT DISCUSSION AND ANALYSIS REPORT Pursuant to clause 49[VI] of the Listing Agreement with the BSE Limited, ManagementDiscusssion and Analysis Report is given below and a Report on Corporate Governance isannexed to this report. A declaration in regard to compliance with the Code of Conduct bythe Directors and Senior Management Personnel signed by the Managing Director forms partof the Annual Report.
A certificate from the Statutory Auditors of the Company regarding compliance with theconditions of Corporate Governance is also annexed.
Macro Economic Industry and Development :
Not much has changed from last year in terms of opportunities in the contractmanufacturing space in pharma industry. In fact the scope has widened. Increase in Inputcost and high finance charges are major areas of risk and concern. The future outlookstill remains favourable on comparable factors.
Overview :
The pharma industry in India is the third largest in terms of volume and fourteenth interms of value globally. The industry is growing at a CAGR of average 6%+globally and atCAGR 11%+in the developing countries like India, China, South Korea, Indonesia andMalaysia.
Threats, Risks and Concerns :
The business and operations of the company are susceptible to specific risks which areinherent to pharma business. Apart from these, there is always an exposure to generalcommercial risks which are common to any business. In addition to these risks, there arerisk of government price control and regulation [through DPCO] ; foreign exchangefluctuations ; increase in input cost ; increase in interest rates; Patent regime, etc.
The Company was in preparation to attain the growth in the future years, howeverfactors beyond the management's control overpowered the situation in 2011 and 2012. Thecapex was funded out of short term borrowings at high rate of interest in anticipation ofbetter leverage and expected profitability. The Company made a reference to the CDR cellin January 2011 for restructuring of the debts and for sanction of adequate workingcapital. The restructuring was approved by CDR EG in its meeting held on June 30, 2011 andAugust 30, 2011 and communicated to the Company in September 2011. Though the existingdebt of the Company was restructured, unfortunately some of the participating banks of theconsortium did not agree to take further exposure not withstanding additional workingcapital facilities appraised by lead bank, SBI . Some of the members of the consortium ofbankers who initially agreed to provide relief for our short term/working capital fundingalso did not release their share of additional working capital due to which liquidityproblems were aggravated. However, the Company was given a go ahead signal for raising theresidual portion of the assessed working capital outside the banking system. The Companymade efforts to raise external funds but on account of global economic down turnparticularly economic crises in the Euro Zone, defaults in serving FCCB's of severalIndian Companies, increase in interest rates, paralysis in govt. policy making etc, itcould not raise the necessary funds despite receiving in principle approval from a foreignfund. As a consequence the Company suffered production delays at the new plant/s,liquidity crunch and working capital problems. There was a plethora of problems to befaced all at once. We are Resilient to overcome the problems and have takenconsidered decisions. We visualize the joy of bright future with hope and anticipation ofgreat things to come and we are working towards it.
Outlook :
The company has initiated various steps to improve its operational performance andremove the bottlenecks relating to production. The Company is also exploring variousoptions to raise the resources to raise the working capital requirement so very essentialfor overcoming from the ongoing financial woes of the company. The company is sanguine toraise the resources and based of the current business plan, the company is confident thatit would be able to meet its financial commitment.
Accordingly, the financial statements has been prepared on a going concern basis. Weare Resilient to overcome the current crises with an improved performance in thenext year.
Internal Control Systems and their Adequacy :
The Company conducts its business with integrity and high standards of ethical behaviorand in compliance with the laws and regulations that governs its business. It has a wellestablished framework of internal controls in operation, supported by standard operatingprocedures, policies and guidelines. Considering the growing capital expenditure program,the company continuously reviews the documented approval policy besides the Capex Budgetbeing approved by the Audit Committee and the Board of Directors. These controls areconstantly reviewed and revised with the changing business dynamics. The management dulyconsiders and takes appropriate action on recommendations made by the statutory auditorsand the Audit committee of the Board of Directors.
Human Resources :
The Company strongly believes that the growth of the organization can be sustainedthrough the continuous development of its people who contribute to the business success.Employees are the key to achievement of the Company's objectives and growth strategies.The Company provides employees with a fair and equitable work environment and support todevelop their capabilities. With the added emphasis placed on 'safe operation', thetraining given to employees not only covers knowledge and technical skills but also laysstress on behavioral areas, like creating a 'safety mindset', and 'attitude building'. Anumber of HR initiatives have been taken for the well being and continuous development ofthe employees. We are continuously striving in bringing new talent, improving competenciesof people in the organisation and building the existing strength of the employees totransform the Company to be a key player in the Indian market. The relations between theemployees and the Company continue to be cordial and healthy at all the threeManufacturing Units. As on March 31, 2012 the employee strength of your Company was around1245 [including contract work force].
Cautionary Statement :
Statement in the Management Discussion and Analysis describing the Company'sobjectives, projections, expectations and estimates regarding future performance may be"forward looking statements" and are based on currently available information.The Management believes these to be true to the best of its knowledge at the time ofpreparation of this report. However, these statements are subject to certain future eventsand uncertainties, which may cause actual results to differ materially from thoseindicated in such statements. The Company assumes no responsibility to publically amend,modify or revise any forward looking statements, on the basis of any subsequentdevelopments, information or events.