Ankur Drugs & Pharma Ltd Management Discussions

ANKUR DRUGS AND PHARMA LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS Pursuant to clause 49[VI] of the Listing Agreement with the BSE Limited, Management Discusssion and Analysis Report is given below and a Report on Corporate Governance is annexed to this report. A declaration in regard to compliance with the Code of Conduct by the Directors and Senior Management Personnel signed by the Managing Director forms part of the Annual Report. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance is also annexed. Macro Economic Industry and Development: Not much has changed from last year in terms of opportunities in the contract manufacturing space in pharma industry. In fact the scope has widened. Increase in Input cost and high finance charges are major areas of risk and concern. The future outlook still remains favourable on comparable factors. Overview: The pharma industry in India is the third largest in terms of volume and fourteenth in terms of value globally. The industry is growing at a CAGR of average 6%+ globally and at CAGR 11%+ in the developing countries like India, China, South Korea, Indonesia and Malaysia. Threats, Risks and Concerns: The business and operations of the company are susceptible to specific risks which are inherent to pharma business. Apart from these, there is always an exposure to general commercial risks which are common to any business. In addition to these risks, there are risk of government price control and regulation [through DPCO] ; foreign exchange fluctuations ; increase in input cost ; increase in interest rates; Patent regime, etc. The Company was in preparation to attain the growth in the future years, however factors beyond the managements control overpowered the situation in 2011 and 2012. The capex was funded out of short term borrowings at high rate of interest in anticipation of better leverage and expected profitability. The Company made a reference to the CDR cell in January 2011 for restructuring of the debts and for sanction of adequate working capital. The restructuring was approved by CDR EG in its meeting held on June 30, 2011 and August 30, 2011 and communicated to the Company in September 2011. Though the existing debt of the Company was restructured, unfortunately some of the participating banks of the consortium did not agree to take further exposure not withstanding additional working capital facilities appraised by lead bank, SBI . Some of the members of the consortium of bankers who initially agreed to provide relief for our short term/working capital funding also did not release their share of additional working capital due to which liquidity problems were aggravated. However, the Company was given a go ahead signal for raising the residual portion of the assessed working capital outside the banking system. The Company made efforts to raise external funds but on account of global economic down turn particularly economic crises in the Euro Zone, defaults in serving FCCBs of several Indian Companies, increase in interest rates, paralysis in govt. policy making etc, it could not raise the necessary funds despite receiving in principle approval from a foreign fund. 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 be faced all at once. We are Resilient to overcome the problems and have taken considered decisions. We visualize the joy of bright future with hope and anticipation of great things to come and we are working towards it. Outlook: The company has initiated various steps to improve its operational performance and remove the bottlenecks relating to production. The Company is also exploring various options to raise the resources to raise the working capital requirement so very essential for overcoming from the ongoing financial woes of the company. The company is sanguine to raise the resources and based of the current business plan, the company is confident that it would be able to meet its financial commitment. Accordingly, the financial statements has been prepared on a going concern basis. We are Resilient to overcome the current crises with an improved performance in the next year. Internal Control Systems and their Adequacy: The Company conducts its business with integrity and high standards of ethical behavior and in compliance with the laws and regulations that governs its business. It has a well established framework of internal controls in operation, supported by standard operating procedures, policies and guidelines. Considering the growing capital expenditure program, the company continuously reviews the documented approval policy besides the Capex Budget being approved by the Audit Committee and the Board of Directors. These controls are constantly reviewed and revised with the changing business dynamics. The management duly considers and takes appropriate action on recommendations made by the statutory auditors and the Audit committee of the Board of Directors. Human Resources: The Company strongly believes that the growth of the organization can be sustained through the continuous development of its people who contribute to the business success. Employees are the key to achievement of the Companys objectives and growth strategies. The Company provides employees with a fair and equitable work environment and support to develop their capabilities. With the added emphasis placed on safe operation, the training given to employees not only covers knowledge and technical skills but also lays stress on behavioral areas, like creating a safety mindset, and attitude building. A number of HR initiatives have been taken for the well being and continuous development of the employees. We are continuously striving in bringing new talent, improving competencies of people in the organisation and building the existing strength of the employees to transform the Company to be a key player in the Indian market. The relations between the employees and the Company continue to be cordial and healthy at all the three Manufacturing Units. As on March 31, 2012 the employee strength of your Company was around 1245 [including contract work force]. Cautionary Statement: Statement in the Management Discussion and Analysis describing the Companys objectives, 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 of preparation of this report. However, these statements are subject to certain future events and uncertainties, which may cause actual results to differ materially from those indicated in such statements. The Company assumes no responsibility to publically amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.