surya pharmaceutical ltd Directors report

Director

Dear Shareholders,

We are pleased to present the 21^st Annual Report on the business and operations of Surya Pharmaceutical Limited along with the Annual Accounts and the Auditors Report thereon for the financial year ended 31st March, 2013. The financial highlights for the year under review are given below:-

CORPORATE RESULTS

		(Rs. in Crores)
PARTICULARS	2012-2013	2011-2012
Revenue From operations	60.33	1622.95
Profit (loss) before Interest, Depreciation & Taxes	(174.62)	(192.75)
Profit (loss) before Depreciation & Taxes	(378.31)	(358.60)
Depreciation	62.46	34.62
Profit (loss) before Tax	(440.78)	(393.22)
Provision for Taxation
Current	-	-
Deferred Tax	144.19	120.72
MAT Asset Appropriation	-	-
Net Profit (loss) after Tax	(314.52)	(272.50)
Opening balance of General Reserve	227.20	494.12
Appropriations:
Proposed Dividend	-	-
Other Appropriations	12.71	(0.65)
Transfer to General Reserves	(301.81)	(273.15)
Closing Balance of General Reserves	(74.60)	227.20

During the year 2012-13, the net revenue of your Company was Rs. 60.33 crores as compared to Rs. 1622.95 crores during the previous year.

Loss before interest, depreciation and taxes was Rs. (174.62) crores as compared to loss of Rs. (192.75) crores during the previous year. Further, the Company reported a Net Loss of Rs. (314.52) crores after tax as compared to Net Loss after tax of Rs. (272.50) crores in the previous year.

DIVIDEND

In lieu of the current financial condition of your Company, the Board of Directors regret their inability to declare any Dividend for the Financial Year 2012-2013.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion & Analysis of financial condition and results of operation of the Company for the year under review is included in the Management Discussion & Analysis section of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY

Your company is an integrity driven organization that focuses on traditional values coupled with innovative management and broad social vision. Today, society expects corporates to go beyond statutory compliances and contributing towards the society for its development. In sync with this, giving back to society has always been a key mandate for your Company and as a company, its role stretches into demonstrating serious corporate social commitment.

Your Company is committed to developing its business towards ecological, social and economic sustainability. All activities and initiatives are planned specific to the needs of the target stakeholders. The ultimate objective is to see that each business decision takes into account its social impact and accordingly plans an intervention to mitigate the adverse impacts arising out of that decision. Accordingly, your Company installed the most advanced anti-pollution devices to keep the environment in and around the manufacturing facilities clean and green.

SUBSIDIARY COMPANIES

As approved by the Board of Directors of the Company, the reports and accounts of the subsidiary Companies are not annexed to this Report. A statement pursuant to Section 212 of the Companies Act, 1956 however, is annexed.

Annual accounts of the subsidiary Companies are kept at the Registered Office of the Company for scrutiny by any Member. Members interested in obtaining a copy of the accounts of the subsidiaries may write to the Company.

The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated February 8, 2011 provided an exemption to Companies from complying with the provisions of Section 212 of the Companies Act, 1956, of the provisions of attaching the Directors Report, Balance Sheet and Profit and Loss Account of subsidiary Companies with the Annual Report, provided the Companies publish the audited consolidated financial statements in the Annual Report. Accordingly, the Annual Report 2012-13 does not contain the financial statements of the subsidiary Companies. The audited annual accounts and related information of the subsidiary Companies are available for viewing at your Company s website at www.suryapharma.com. Relevant information of the subsidiary Companies, as required to be furnished by the aforesaid circular, forms part of the Annual Report.

The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in Companies (Accounting Standards) Rules, 2006 also forms part of this Annual Report.

REFERENCE TO SICK INDUSTRIES & BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR)

As on July 20, 2013, at time of adopting the financial statements of your Company for the year ended/as at March 31, 2013, the Board of Directors formed an opinion that the entire net worth of your Company had eroded and, in accordance with the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985, a reference is being filed with the Hon,ble Board for Industrial and Financial Reconstruction (BIFR).

FIXED DEPOSITS

During the year under review, your Company has not accepted any fresh deposits. There were no overdue deposits as on 31st March, 2013 except an amount of Rs.1,52,554/- which remained unclaimed.

CAPITAL STRUCTURE

During the year under review, there was no change in the Authorized Share Capital and the Paid up Share Capital of the Company.

DIRECTORS

Mrs. Alka Goyal, Director of the Company, retires by rotation and being eligible has offered herself for reappointment.

Mr. Shiv Kumar Yadav, an Independent Director of your Company, resigned from the said office with effect from May 25, 2013, and Mr. Subhash Chander Marwaha, Nominee Director of SBI, also resigned with effect from May 29, 2013. Mr. Dharam Pal Singhal, another Independent Director of your Company, resigned from the said office on June 15, 2013.

As a result of the aforesaid resignations, the total strength of the Board of Directors of your Company has reduced to two, which is less than the minimum number of Directors statutorily required for a Public Limited Company.

The Board of Directors are making efforts to appoint a new person as a Director of your Company, which act is likely to take time as persons are unwilling to be appointed to office of Director of your Company due to actions initiated by certain creditors for winding up of your Company.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956, with respect to Director s Responsibility

Statement, it is hereby confirmed that:-

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) The Directors have selected such accounting policies and applied them consistently and made 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 as at 31st March, 2013 and of the loss incurred for the year ended on that date.

(iii) The Directors have taken proper and sufficient care 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 preventing and detecting fraud and other irregularities; and

(iv) The Directors have prepared the annual account of the Company on a going concern basis.

AUDITORS AND THEIR REPORT

M/s. AAD & Associates, Chartered Accountants, Auditors of the Company have expressed their unwillingness to be reappointed to the said office. The Board of Directors of your Company have held discussions with M/s. MSN & Associates, Chartered Accountants, who have expressed their willingness to be appointed to the said office. The said M/s. MSN & Associates, Chartered Accountants, have confirmed that their appointment, if made, would be within the limits prescribed in the Companies Act, 1956, and that they are not otherwise disqualified within the meaning of Section 226 (3) of the Companies Act, 1956 for such appointment.

The point wise Management s reply to Auditors observation contained in the Auditor s Report at Serial Nos.1 to 4 is as under:-

Opinion No. 1

The Provision for employee benefit has been provided on accrual basis and no actuarial valuation certificate has been obtained as required by AS15. The Directors do not expect that there would be a material difference between the amount provided for on accrual basis and the amount that may be determined on basis of actuarial valuation.

Opinion No. 2

Managerial Remuneration paid to Directors in FY 2011-12 has exceeded the limit as prescribed in the Companies Act, 1956. The Company sought approval from Central Government for condonation of excess remuneration. The same is still pending. Necessary adjustment, if any, shall be carried out upon receipt of communication from the Central Government.

Opinion No. 3

Attention is invited to restructuring of facilities carried out by lenders to the Company in January, 2013, followed by recall of loan notice issued by some of the lenders. At this stage, it is not possible to evaluate the effect of the outcome of aforesaid notice of recall. Necessary entries shall be carried out in books of account once the same are is determined.

Opinion No. 4

The Board of Directors of the Company since June 15, 2013 comprises of 2 persons, which is less than the minimum number of Directors statutorily required in case of Public Company, and is a contravention of section 252 of the Act. The Whole Time Secretary mandatorily required to hold office under section 383A of the Act is not in office since from May 28, 2013, which is a contravention of the said section. As on date, there is no person in employment of the Company except its Managing Director and Executive Director. Your Board is making efforts to appoint Directors as per applicable requirements.

INDUSTRIAL RELATIONS

The Company maintained healthy, cordial and harmonious industrial relations at all levels. The enthusiasm and unstinting efforts of employees have enabled the Company to gain present level of growth.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Company has complied with the applicable provisions of Corporate Governance under clause 49 of the Listing Agreement with the Stock Exchanges. A Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to this Report.

SECRETARIAL AUDIT

For each quarter of the Financial Year 2012-13, a qualified practicing Company Secretary carried out audits to reconcile the total admitted Share Capital with NSDL and CDSL, total issued and listed Share Capital. The reports confirm that the total issued/paid up Share Capital is in agreement with the total number of Shares in physical form and the total number of dematerialized Shares held with NSDL and CDSL.

COST AUDIT

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Company s pharmaceutical products. Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government, the Board of Directors have re-appointed M/s. J. Verma & Associates as Cost Auditors of the Company for the Financial Year 2013-14. The Cost Audit Report for the year 2011-12 is under finalization.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to energy conservation, technology absorption, foreign exchange earnings and outgo required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure-A forming part of this Report.

PARTICULARS OF EMPLOYEES

There were no employees whose particulars are required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

APPRECIATIONS AND ACKNOWLEDGEMENTS

Your Directors express their gratitude to all Banks and Financial Institutions who have directly or indirectly supported the Company for meeting Short Term or Long Term and financial needs of the Company s expanding operations.

Your Directors place on record their sincere thanks to the Central and State Governments of Punjab, Haryana, Himachal Pradesh and the state of J&K for their continued support to the Company. The Board also places on record the appreciation for the support provided by the customers, suppliers, equipment vendors and others to the Company. Your Directors also wish to place on record their sincere thanks and appreciation for the continuing support of the esteemed Shareholders of the Company. The Board expresses its appreciations of the commitment, contribution and support of all employees of the Company for attaining the present level of growth.

For & on behalf of the Board

For Surya Pharmaceutical Limited

Sd/-

RAJIV GOYAL

(Chairman & Managing Director)

Place: Chandigarh

Date: 14.08.2013.

ANNEXURE-A TO THE DIRECTORS REPORT

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO AS PER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 AND THE RULES MADE THEREUNDER AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED MARCH, 2013.

(I). CONSERVATION OF ENERGY :

Your Company has taken various initiatives for the conservation of energy for cost reduction in process to stay competitive by saving on power & fuel cost and resorting to various energy saving methods. Proper suggestions were incorporated as mentioned below:-

1. Strict adherence to contract demand of State Electricity Board Power Supply.

2. Separate utilities for each and every production plant to reduce the power & fuel cost.

3. Stabilization & improvements of manufacturing processes for better productivity & yields

4. Emphasis on awareness for energy saving by control & process up gradation, better house keeping, preventing wastages & reuse of ETP water after through treatment by installing RO plants etc.

5. Preventive maintenance of all equipments at regular intervals.

6. Proper insulation of steam, chilled water, chilled Brine & condensate lines.

7. Installation of screw chillers by replacing Reciprocating chillers. Screw Chillers are more energy efficient.

8. Installation of VFD on reactors, centrifuges, Pumps, AHUs etc.

9. For proper burning of fuel to achieve better efficiency carbon mono oxide monitoring system is installed and condensate is reused by recovery system in boiler.

10. Installation of BMS system for proper control of utilities. 11. To save fuel repairing of brick work in incinerator was done.

The power and fuel consumption is as under:-

	Year Ended March 31, 2013	Year Ended March 31, 2012
Particulars
1 ELECTRICITY
a) Purchased:
Units	2834010	21210111
Total Amount (Rs. lacs)	299.91	1006.94
Rate per unit (Rupees)	10.58	4.75
b) Own Generation:
Through Diesel Generator:
Units	279173.40	3016828
Units per liter of Diesel Oil	3.03	2.96
Cost per unit (Rupees)	12.96	13.45
2A FURNANCE OIL
Quantity (K liters)	NIL	1181.69
Total Cost (Rs. lacs)	NIL	434.42
Average rate (Rs. per K liters)	NIL	36.76
2B LIGHT DIESEL OIL
Quantity (K liters)	NIL	NIL
Total Cost (Rs. lacs)	NIL	NIL
Average rate (Rs. per K liters)	NIL	NIL
2C HIGH SPEED DIESEL
Quantity (K liters)	155.96	1488.53
Total Cost (Rs. lacs)	60.63	591.61
Average rate (Rs. per K liters)	0.39	39744
3 PETCOKE
Details:
Quantity (In Tons)	216.28	934.27
Rate per Ton (Rs.)	7424.46	7455.83
3A RICE HUSK
Quantity (In Tons)	NIL	15502.05
Total Cost (Rs. lacs)	NIL	733.58
Rate per Ton (Rs.)	NIL	4732.15

(II) TECHNOLOGY ABSORPTION:

Research and Development (R&D)

The R&D Department of your Company has developed & commercialized novel product during the year 2012-13.

Some of the technologies successfully Commercialized were:-

* Production of CMIC Chloride, FCMIC Chloride & DCMIC Chloride.

* Filling of EDQM Drossier for Di-Cloxacillin and Cefadroxil.

* Production of Sumitriptan Succinate: Sumitriptan Succinate was developed by non-infringing route for cram client of U.K Production achieved and quality was conforming International standards.

* Process improvement in Thiocolchiside synthesis

(III) EXPENDITURE ON R&D

The R&D outlay during the year is as follows:

		(Rs. In lacs)
Particulars	Year ended March 31, 2013	Year ended March 31, 2012
a) Capital	825.11	6887.21
b) Recurring	-	126.50
c) Total	825.11	7013.71
d) Total R&D expenditure as a percentage of total turnover & operating income	13.68	4.29

(IV) TOTAL FOREIGN EXCHANGE EARNINGS & OUTGO:

		(Rs. In lacs)
Particulars	Year ended March 31, 2013	Year ended March 31, 2012
1. Earnings in Foreign Exchange during the year (F.O.B. value of Exports)
2 C.I.F. Value of Imports (on cash basis)
Raw Materials	49.41	26994.94
Capital Goods	-	21.52
Spare Parts, Components and Consumables	-	-
3 Expenditure in Foreign Currency during the year (on cash basis)
Traveling Expenses	3.60	17.90
Interest and Bank Charges	-	-
Technical Know-how fees	-	-
Consultancy Fees	18.72	-
Others	20.32	185.56
4 Total Foreign Exchange used (2+3)	92.05	27219.92