capsugel healthcare ltd Directors report

CAPSUGEL HEALTHCARE LIMITED ANNUAL REPORT 2009-2010 DIRECTORS REPORT To The Members Yours Directors are pleased to present the 27th Directors Report on the business and operations of the Company together with the Audited Accounts for the financial year ended 31st March, 2010. FINANCIAL RESULTS & OPERATIONS: (Rs. in Thousands) PARTICULARS YEAR ENDED YEAR ENDED 31.03.2010 31.03.2009 Gross Sales & Other Income 2,82,160 2,09,364 Profit/(Loss) before financial expenses and depreciation (70,233) (1,87,581) Financial charges 23,100 4,264 Depreciation 45,388 31,836 Profit/(Loss) before tax (1,38,721) (2,23,681) Provision for tax - Fringe Benefit Tax - 1,475 Profit/(Loss) after tax (1,38,721) (2,25,156) Prior period Adjustments (Net) - Transitional adjustment for retirement benefits - Balance of profit/(loss) brought forward (6,18,300) (3,93,144) Balance carried to Balance Sheet (7,57,021) (6,18,300) Basic and Diluted Earnings per Share (EPS) (in Rs.) (face value of Rs. 10/- each) - Before extraordinary Items (1.37) (2.32) - After extraordinary Items (1.37) (2.32) During the year under review, the Gross Total Turnover/ Sales and Other Income of the Company was Rs. 2,82,160 thousands as against Rs.2,09,364 thousands, during the previous financial year. The Company recorded a net loss of Rs.1,38,721 thousands against a net loss of Rs.2,23,681 thousands during the Previous financial year. The earning per share (EPS) thus has been recorded at Rs. (1.37). DIVIDEND In view of the loss incurred by the Company, Your Board of Directors express their inability to recommend any dividend for the financial year 2009-2010. TRANSFER TO GENERAL RESERVES In view of the loss, your Board of Directors have not appropriated any amount to be transferred to General Reserves during the year under review. MATERIAL CHANGES AND COMMITMENTS No Material changes and commitments affecting the financial position of the Company have occurred between the end of the financial year of the Company and the date of signing of this report. FIXED DEPOSITS Your Company has not accepted any deposit(s) under Section 58A of the Companies Act, 1956 read with Companies (Acceptance of Deposits) Rules, 1975. Further, your Company is not required to furnish any information as required pursuant to the Non Banking Non Financial (Reserve Bank) Directions, 1996. DIRECTORS In accordance with the provisions of Section 255 & 256 of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Vonchai Santimanochai and Ms. Siriporn Sridech, directors of the company retire by rotation at the ensuing Annual General Meeting (AGM) and being eligible offer themselves for re-appointment at the ensuing AGM. The Board of Directors recommend their re-appointment and have accordingly proposed their re-appointment by the shareholders in the 27th AGM. Mr. Venkatraman G. Iyer and Mr. Rana Bhattacharjee resigned from the directorship of the Company w.e.f. 30th November, 2009 & 31st December, 2009 respectively and Mr. Darshak Pandya was appointment as additional directors of the Company w.e.f 24th March, 2010. The Board of directors records their appreciation for the contribution made by them during their tenure. AUDITORS M/s. BSR & Associates, Chartered Accountants, Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting, and being eligible, offer themselves for re-appointment. The Company has received a certificate form the retiring auditors to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends their appointment. AUDITORS REPORT The point wise comments of the Board of Directors on the observations of Auditors in their report, is as under: a) Clause 4(f) of the Auditors regarding Impairment the auditors have made factual observations that the Company has incurred recurring losses due to delay in completion of the refurbishment project, which is very critical to companys success. As the strategy in place to circumvent the situation, no provision is required. b) Clause 4 (g) of the Auditors Report regarding Excess Managerial Remuneration- it has been provided in clause 4(g) of the Auditors Report that the Company has paid managerial remuneration amounting to Rs.3,572 thousands to its directors in excess of the limits prescribed under the provisions of Section 198, Section 269 and Section 310 read with Schedule XIII to the Companies Act, 1956 without obtaining the approval of the Central Government. The Company did not apply in advance in the case of Mr. Rana Bhattacharjee as his remuneration was well below the limits prescribed. However when he resigned. He was provided twelve months salary as a non-compte agreement entered with him since his resignation could not be anticipated advance application was not contemplated. In the case of Mr. Madan Madhav Joshi, as the Bonus Amount was finalized only at the mid end of the year the application could not have been made earlier. The application will therefore be made now that the amount has been as contained. Subsequent to the approval of accounts in the ensuing annual general meeting for the financial year 2009-10, the Company shall file the prescribed application with the Ministry of Corporate Affair (MCA), Govt. of India & Seek for waiver of the excess remuneration paid by the Company to the aforesaid directors. Regarding excess managerial remuneration for the year ended 31st March, 2008 the Company has already applied on 1st April, 2009 and excess managerial remuneration for the year ended 31st March, 2009 the Company has already applied on 04th May, 2010 and the same is under process the Company Law Board. c) Clause(x) of the Annexure to the Auditors Report regarding SICA as the accumulated losses of the Company are more than 50% of its net worth, for the financial year end 31st March, 2010, the Company will report this fact to BIFR (Board for Industrial and Financial Reconstruction) in the prescribed from-C within a period of sixty days from the date of finalization of duly audited accounts. as per section 23(1)(a) of SICA. d) Clause (xvii) of the Annexure to the Auditors Report regarding utilization of funds - The Auditors have reported in the Annexure to the Auditors Reports that the short term funds amounting to Rs. 461,195 thousands have been applied for long term purpose. It is hereby explained/clarified that the said funds have been provided by the majority shareholder PPIPL, without any specific mandate to the Company as to whether the funds ought to be used for short-term or long term purpose. In the absence of a specific prohibition in this regard, the funds raised through the majority shareholder have been utilized appropriately. REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) As the net-worth of the Company has eroded more than 50% for the financial year ended on 31st March, 2010 and it has become necessary to report the erosion in the net worth of the Company to BIFR under section 23 of Sick industrial Companies (Special Provisions) Act, 1985. The same was discussed and approved in the meeting of the Board of Directors held on Monday, 20th September, 2010 and will be placed before the shareholders for their consideration of such erosion in the ensuing Annual General Meeting to be held on Tuesday, 30th November, 2010. The Board is simultaneously taking necessary steps to improve the financial position of the Company INDUSTRIAL RELATIONS During the period under review, the company maintained healthy, cordial and harmonious industrial relations at all level. As a measure of cost reduction and re-structuring of the organization to improve the health of the Company, it has reduced the contractual labour force substantially. Your directors wish to place on record their appreciation of the co- operation, valuable contributions, enthusiasm and unstinting efforts made by the employees and workers of the company at all levels in the organization RISK MANAGEMENT The company is continuously evaluating the various systems internally, externally and follows a comprehensive system of Risk Management. The Company is also trying to achieve complete statutory legal compiles in all areas. CORPOATE GOVERNANCE REPORT The Corporate Governance Report, placed before the Board of Directors, be read as part & parcel of this Directors Report, and forms an integral part of the 27th Annual Report of the Company. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Board of Directors of the Company confirm; 1. that in the preparation of the annual accounts for the year ended March 31, 2010, the applicable accounting standards have been followed, and that there have been no material departures from such standards; 2. that the directors have selected appropriate accounting policies and applied consistently and made such judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for the financial year ended March 31, 2010 and the loss for the said financial year; 3. that proper and sufficient care has been taken for the maintenance of adequate accounting records 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; and 4. The annual accounts for the year ended March 31, 2010 have been prepared on a going concern basis. STATUTORY STATEMENTS Statements pursuant to Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 with respect to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo and Statement showing Particulars of Employees as required under section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 are annexed hereto and forms an integral part of this Report. ACKNOWLEDGEMENT The Board of Directors acknowledge with gratitude the cooperation and assistance extended by all its stakeholders, including its shareholders, employees /workers, bankers, customers, business associates and employees as well as its holding company, M/s Pfizer Pharmaceutical India Pvt. Ltd. The Board also takes this opportunity to express its deep gratitude for the continued co-operation and support received from its valued shareholders. By Order of the Board For Capsugel Healthcare Limited Sd/- Madan Madhav Joshi Managing Director Sd/- Place : Dharuhera/Mumbai Darshak Pandya Dated : 20 September 2010 Director ANNEXURE TO THE DIRECTORS REPORT II. Information under Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31st March, 2010: I. CONSERVATION OF ENERGY The Company continued to make efforts to conserve and optimize the use of energy through implementation of improved operational methods and other energy saving methodologies. Further, investment has been made to implement new technology upgrade the existing facilities. II. TECHNOLOGY ABSORPTION Details of efforts made in Technology Absorption are given in Form B hereunder, as specified in the Annexure to the aforesaid Rules. I. Information as per Section 217(2A) of the Companies Act, 1956 forming part of the Director Report for the year ended 31st March, 2010. A. Employed throughout the year ended 31st March, 2010, in respect of Remuneration not less than Rs. 24,00,000/- (Rupees Twenty Four Lacs Only) Per annum. FORM - A Form for Disclosure of Particulars with respect to Conservation of Energy: Current Year Previous year 31st March, 2010 31st March, 2009 A. Power and Fuel Consumption 1. Electricity a) Purchased Units (KWH) 1,64,622 6,90,894 Total Amount (Rupees in Thousand) 2,415 3,329 Rate/ Unit (Rs.) 14.66 4.81 b) Own generation (i) Through diesel generator Units (KWH) 61,70,398 4,972,449 Unit per-ltr of Diesel Oil 3.31 3.30 Cost / Unit (Rs.) 9.21 9.91 (ii) Through Steam Turbine Units (KWH) - Unit per-ltr of fuel oil/gas - Cost / Unit (Rs.) - 2. Coal Quantity (Tonnes) - Total cost (Rs.) - Average Rate - 3. Furnace Oil Quantity (Tonnes) - Total Amount - Average Rate - 4. Other/interest generation Quantity (K.Ltr.) - Total cost - Average Rate - B. Consumption per unit of Standards Current Year Previous year production (if any) Products: Empty Hard Gelatine 31st March, 31st March, Capsules 2010 2009 Units 34,45,657 23,84,287 Electricity (per Capsule) 1.8385 2.3752 Furnace Oil - Coal - Others ***: As our plant was under up gradation for approx 6 Months due to which the purchased power could not be used however the fixed monthly charges for the HSEB was continued to be paid. FORM - B (A) RESEARCH & DEVELOPMENT (R&D) a. Specific areas in which R & D carried out by the Company - Research & Development is carried out for improvement in the production process and quality of products. b. Benefit derived as a result of the above R&D - The Company has been successful in improvement in production processes leading to higher productivity. c. Future Plan of action - The management is committed to strengthen R & D activities to improve the productivity and achieving high quality norms for the Capsules. d. Expenditure on R & D - The Company is engaged only in technological upgradation of its products and is not involved into technical R&D activities. (B) TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION The Company is continuously making efforts for induction of improved technology for higher productivity and quality in alignment with Capsugel Global Standards. The Company has been able to achieve higher productivity, better quality standards to strengthen its position both in the domestic as well as the international market. (C) FOREIGN EXCHANGE EARNINGS AND OUTGO a) Efforts Continuous efforts are on, to establish the company as the leading exporter of empty Hard Gelatine Capsules, not only by increasing the exports to the existing customers but also by exploring and entering new markets worldwide. b) Total Foreign Exchange Earnings and Outgo (Rs. in Thousand) Current Year Previous Year 31st March, 2010 31st March, 2009 Foreign Exchange Inflow 40,046 77,335 Foreign Exchange Outflow 43,521 155,446 By Order of the Board For Capsugel Healthcare Limited Sd/- Madan Madhav Joshi Managing Director Sd/- Place : Dharuhera/Mumbai Darshak Pandya Dated : 20 September 2010 Director