Dr.Datsons Labs Ltd Directors Report.

DIRECTORS

To,

The Members,

The Directors of your Company have pleasure in presenting their Eighth Annual Report together with the Audited Balance Sheet as on 31st March 2014, the related Statement of Profit and Loss for the year ended on that date and the Auditors Report thereon.

FINANCIAL RESULTS:-

This fiscal has been an exciting year in terms of growth and profitability. To build further on the success achieved by the company we have embarked on increased investments in all aspects. We are confident that these spends will enable us to maintain our growth trajectory into the future.

The Financial Highlights are given below:-

Figures in (Rs.Lacs)

2013-2014 2012-2013
Sales and Other Income 42892.42 52546.43
Earnings Before Interest, Taxes, Depreciation and Amortization 6474.52 6563.78
Less: Depreciation 2044.21 2022.15
Earnings Before Interest and Tax 4430.31 4541.63
Less: Finance Charges 4301.44 4264.50
Profit Before Tax 146.67 4767.76
Prior Period Expenses 17.80 4.43
Exceptional Item 0 4486.20
Less: Provision for Taxation
Current Tax 25.78 55.64
Deferred Tax 61.52 222.17
Add: MAT U/S 115JB 25.78 55.64
Net Profit after Tax as carried to Balance Sheet 67.35 54.96
Basic & Diluted Earnings Per Share 0.46 0.40
0.19 0.37

YEAR IN RETROSPECT:-

• The Company’s Sales decreased from Rs. 52,546.43 Lacs in the previous year to Rs. 42,892.42 Lacs in the current year.

• EBITDA decreased from Rs. 6563.78 Lacs in the previous year to Rs. 6474.52 Lacs in the current year.

• Net Profit After Tax increaded from Rs. 54.96 Lacs in the previous year to Rs. 67.35 Lacs in the current year.

• Debt equity ratio is 0.92 in current year as compare to previous year 1.07.

• Current Ratio is 1.02 in current year as compare to previous year 1.86.

BUSINESS OUTLOOK:-

Dr. Datsons Labs Ltd, we believe that nothing toughens like the tough times. 2013-14 was a tough year as input cost continued to rise and key segments faced competitive pressures.

The rupee devaluation on account of fiscal challenges in the country resulted in further pushing up the costs. Delay in financial commitments led to deferred timelines and low capacity build-up.

We have undertaken steps to raise equity through sale of Stake so that the company gets in required funding for its Working Capital & Capex Program. We are looking for long term investors who can take forward the legacy of the company

We chose not to stop, but to carry on; not be withered but to persist. Rough seas make better sailors.

At Dr. Datsons we continued to wade through multiple challenges diligently, patiently and persistently. Our investments made over the years into an integrated business model also stemmed the decline.

In wake of growing competition and increased inflation, cost control emerged as the biggest challenge during 2013-14. We focused on critically analyzing each process and product to clearly identify avoidable elements in the cost structures. This enabled us to improve efficiency, process time and capacity utilization without any compromise on the end product/process quality. We continued to add new clients across all our divisions. We utilized the blend of our competitive cost structures with our global standards in R&D and synthetic chemistry skills to partner large pharma companies for long-term product development. Presently, we have forged four long-term partnerships for our products and derive 37 per cent of our total revenues from these partnerships.

RESEARCH & DEVELOPMENT:-

A large investment in R&D could dent the bottom line especially when it does not create fresh revenues.

Risk mitigation

The Company created a strong R&D team dedicated to creating new products. The Company filed for more than 20 patents across different countries. Through R&D, the Company pioneered various oral lozenges in India. The Company’s R&D centre has been recognised by DSIR. Government of India

ENVIRONMENT & SAFETY OUTLOOK:-

Dr. Datsons aggressively pursues safety, health and environment protection as an integral part of its business. The Company strives to minimise the adverse impact of its activities and products on the environment and maintain a safe work place for its team members.

The Company maintains a lawn and garden (shrubs and decorative plants) at its manufacturing units. More than 800 trees were planted over the five years leading to 2012-13.

• Safety and health: Dr.Datsons strives to maintain the highest safety and health standards. The Company received the ISO 14001 (for environment management) and OHSAS 18001:1999 (for safety and health) certifications, vindicating its endeavour of maintaining operating practices in line with international benchmarks; each team member is adequately trained in maintaining these standards. The Company completed all its expansion projects without a single accident. The Company constituted a six-member SHE committee.

• Training on safety: The Company ensures that every team member is capable of handling emergency situations. It organises regular classroom and practical training from government approved agencies.

• Evacuation plan: The Company’s safety programs are based on emergency evacuation plans. The team is kept informed about the updated documents and displays and the facilities are well indicated with assembly points.

• Fire equipment: The Company’s facilities are equipped with sophisticated fire fighting infrastructure. It conducts three mock drills at its facilities annually. Critical areas like general warehouses and finished goods warehouses have smoke sensors with multiple alarms systems.

• Environment: The Company is committed to comply with all applicable legal requirements through continual improvement in operational process for improving its environment measures. The Company does not generate any harmful/chemical wastes; it has a full-fledged effluent treatment plant for processing plant waste. The waste water is recycled for gardening purposes within the complex. All operating practices are based on the principle of efficient utilisation of material and energy .The Company practices a policy of substituting hazardous materials and recycling of resources to the maximum extent possible.

DIVIDEND:-

In order to conserve the resources of the Company for any future expansion, your Board deems fit not to recommend any dividend for the financial year 2013-2014.

FIXED DEPOSIT:-

The company has not accepted any fixed deposits during the year under reveiw.

MANAGEMENT’S DISCUSSION AND ANALYSIS REPORT:-

Management’s Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report.

SUBSIDIARY COMPANIES:-

As per general exemption granted vide Government of India, Ministry of Corporate Affairs’ general circular no. 2/2011 dated 8th February, 2011, the Company has not attached the annual accounts of its subsidiaries to this Annual Report. As required by the said circular, the relevant information for each subsidiary has been disclosed in the consolidated financial statements attached to this Annual Report.

The Company will make available the annual accounts of subsidiaries and the related information to any Member of the Company who may be interested in obtaining the same. The annual accounts of subsidiaries will also be kept for inspection by any Member of the Company at the registered office of the Company. The Consolidated Financial Statements presented by the Company include the financial information of its subsidiaries.

Further Statement under Section 212 of the Companies Act, 1956 is enclosed herewith.

DIRECTORS:-

During the year under review, Mr. Shashikant Shinde retires by rotation and being eligible offers himself for reappointment at the forthcoming Annual General Meeting.

Further Mr. Balkrishna Parab and Dr. Ullooppee Badade resigned as Directors of the Company w.e.f. 24th February 2014.

Further, Mr. Chandulal Shah who was nominated as the Chairman-Emeritus of the Company stepped down as such w.e.f. 05th April 2014.

The Companies Act, 2013 (the Act) provides for appointment of independent directors. Sub-section (10) of Section 149 of the Companies Act, 2013 (effective from April 1, 2014) provides that independent directors shall hold office for a term of up to five consecutive years on the Board of a company; and shall be eligible for reappointment on passing of ordinary resolution by the shareholders of the company.

Sub-section (1) states that no independent director shall be eligible for more than two consecutive terms of five years. Sub-section (13) states that the provisions of retirement by rotation as defined in sub-sections (6) and (7) of Section 152 of the Act shall not apply to such independent directors.

The non-executive independent directors were appointed as directors liable to retire by rotation under the provisions of the erstwhile Companies Act, 1956. The Board of Directors has been advised that non executive (independent) directors so appointed would continue to serve the term that was ascertained at the time of appointment as per the resolution pursuant to which they were appointed. Therefore, it stands to reason that only those non-executive (independent) directors who will complete their present term at the ensuing AGM of the Company in September 2014, being eligible and seeking re-appointment, be considered by the shareholders for re-appointment for a term of upto five consecutive years.

Non-executive (independent) directors who do not complete their term at the ensuing AGM, will continue to hold office till the expiry of their term (based on retirement period calculation) and thereafter would be eligible for re-appointment for a fixed term in accordance with the Companies Act, 2013.

Further, Mr. Giridhar Pulleti is appointed as an Independent Director of the Company for a period of five years w.e.f. April 1, 2014 upto March 31, 2019.

COMPLIANCE OFFICER:-

Mr. Yogesh Patel, an Associate Member of the Institute of Company Secretaries of India is the Company Secretary and Compliance Officer of the Company.

AUDITORS AND AUDITORS REPORT:-

M/s. Agarwal, Desai & Shah, Chartered Accountants, Auditors of the Company retires at the conclusion of this Annual General Meeting and being eligible offers themselves for reappointment.

Auditors Report:

Auditors Report as issued by M/s. Agarwal Desai & Shah, Chartered Accountants is self explanatory and do not call for further clarification by the Board.

COST AUDITORS:-

Your Board has proposed the appointment of M/s. Aatish Dhatrak & Associates as Cost Auditors of the Company for conducting Cost Audit for the financial year 2014-2015.

PERSONNEL:-

The Company considers human resources as its greatest asset and strength in the process of development and progress. In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended by the Companies (Particulars of Employees) Rules, 2011, the names and other particulars of the employees are set out in the Annexure-A to the Directors’ Report.

DISCLOSURE OF PARTICULARS:-

Information as per the Companies (Disclosure of Particulars on the report of the Board of Directors) Rules, 1988 relating to Conservation of Energy, Technology Absorption, Forex Earnings & Outgo is provided in Annexure B forming part of this report.

DIRECTORS RESPONSIBILITY STATEMENT: -

Pursuant to the requirement under section 217(2AA) of the Companies Act with respect to Directors Responsibility Statement, it is hereby confirmed.

a. That in preparation of the accounts for the finacial year ended 31st March 2014 the applicable accounting standards have been followed along with proper explanation relating to material departure.

b. That the Directors have selected such accounting policies and adopted them consistently and made judgment and estimates that were reasonable and prudent so As to give a true and fair view of the state of affairs of the Company for the year under the review.

c. That the Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provision of the companies Act, 1956 for safeguarding the assets and for preventing, detecting fraud and other irregularities.

d. That the Directors have prepared the accounts for the financial year ended 31st March 2014 on a going concern basis.

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 also implemented several best Corporate Governance practices as generally prevalent.

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report.

The requisite Certificate from the Statutory Auditor confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49 is attached to this Report.

LISTING:-

The shares of the Company are listed on the National Stock Exchange of India Limited and Bombay Stock Exchange Limited. The Company has paid the annual listing fees to the NSE and BSE for the year 2014-2015.

BOARD COMMITTEES:

In Compliance with both the mandatory and non-mandatory requirements under the Listing Agreement and the applicable laws, the Board has maintained the following committees:

(i) Audit Committee

(ii) Shareholders/ Investor Grievance Committee

(iii) Remuneration & Nomination Committee

(iv) Investment Committee

(v) Corporate Governance Committee

(vi) Health, Safety, Environment & Corporate Social Responsibility Committee

FOREIGN CURRENCY CONVERTIBLE BONDS:

The Company came out with the issue of Foreign Currency Convertible Bonds [FCCBs] aggregating to USD 40 million on 21st March 2013. However, the proceeds of the issue were fully utilized for which issue was made as mentioned in the Offering Circular dated March 21, 2013.

AUTHORISED CAPITAL:

During the year under review, the authorized share capital of the Company was increased from Rs 50,00,00,000 (Rupees Fifty crores) to Rs. 110,00,00,000 (Rupees One Hundred Ten crores) divided into 11,00,00,000 Equity Shares of Rs. 10/- each.

ALLOTMENT OF SHARES:-

During the year under review, the Company has allotted 3,94,84,717 equity shares consequent to the conversion notice(s) received from the Bondholder for conversion of the Foreign Currency Convertible Bonds ("FCCB") for total value of US$ 40.00 million at a conversion price of Rs. 55 per share, in accordance with the terms of the Offering Circular dated March 21, 2013 for issue of US$ 40 million unsecured foreign currency convertible bonds and the Supplemental Trust Deed dated February 21, 2014.

Consequently the paid up share capital of the Company has increased from Rs. 13,88,71,510 aggregating 1,38,87,151 equity shares of Rs. 10 each to Rs. 53,37,18,680 aggregating 5,33,71,868 equity shares of Rs. 10 each.

The Company has received approval from BSE Limited and the National Stock Exchange of India Limited for listing and dealing of all the above Equity Shares of the Company.

ACKNOWLEDGMENT:-

Your Directors would like to express their appreciation for the assistance and co-operation received from Bankers, Govt authorities, customers, and vendors during the year.Your Directors also wish to place on record their deep sense of appreciation for the committed services of Executives, Staff and workers of the company.

We are on the verge of storming both the domestic and international markets with our innovative and specialty products and make a mark globally for the Company. We seek your active cooperation for all our future endeavors to make your Company a leading pharmaceutical Company.

For and on behalf of the Board

Dr. KANNAN VISHWANATH PRABHAT GOYAL
MANAGING DIRECTOR DIRECTOR
Place: Taloja
Date: 14/08/2014

ANNEXURE – A to the Directors’ Report:

Statement of particulars of employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 forming part of the Directors Report for the year ended March 31, 2014.

Sl. No. Name of the Employee Designation Remuneration Qualification and Experience Date of Commencement of Employment Age Last Employment held
(in Rs )
1. Dr. Kannan Vishwanath Vice Chairman & Managing Director 1,00,00,000/- Bachelors degree in chemical engineering, Masters in Business Administration and having 15 yrs experience in pharmaceutical industry 04/05/2010 38 -

Annexure –B to the Directors Report:

Information as per the The Companies (Disclosure of Particulars on the report of the Board of Directors) Rules, 1988 relating to Conservation of Energy, Technology Absorption, Forex Earnings & Outgo

A. Conservation of Energy:

i) Energy conservation measures taken-

- Monitoring closely high energy consuming equipments

- Optimum use of compressor thru shut down during low demand period

- Use of energy saving lighting arrangements.

ii) Additional investment/ proposals being implemented for reduction of consumption of Energy – Exploring use of Solar AC.

iii) Impact of measures at (i) &(ii) for reduction of energy consumption and on cost of production of goods. – Energy conserved and cost of production reduced..

iv) Total Energy consumption and Energy consumption per unit of production as per Form A.

a). Total Fuel & oil
consumed : 18,163.51 Ltrs.
Expense : Rs .11,74,069/-
Average rate per Ltr. : Rs .64.64
Coal used : 3,028.10 MT
Expense : Rs .2,94,37,979/-
Average Rate per Kg. : Rs .9.72/Kg
b) Total power consumed : 321972.60 units in kwh
Expense : Rs .3579780
Average rate per unit : Rs .11.11/kwh

B . Technology Absorption:-

Efforts made in technology absorption as per Form B

Research and Development:

1. Specific areas in which R & D carried out are in Anti-Cancer;Anti-Malarial and Niche APIs. Other Areas include process monitoring and development work to improve operating efficiencies.

2. The benefits derived are

• Opening up avenues for more business in future including export potential.

• Broadening of product range and opening new product lines for future growth of business

• Technology upgradation

• Generation of know-why as well as know –howi

• Winning International awards

• Saving of Forex and development of ability to com pete Globally.

3. Future Plan of Action

Development of New products and Process

Creation of Intellectual Property and leveraging to increase the value of business

Upgradation and new variants of existing products

Technology Absorption, Adaptation and Innovation:

1. Efforts in brief made towards technology, absorption, adoption and innovation

• Using state of the art equipment,instrumentation and software.

• Deputation of Personnel for Training.

• Participation in symposium and exhibitions.

• Review of technical literature and patents in relevant technology areas

• Analysing feed back from users to improve process and services

• Use of alternate materials

2. Benefits derived are-

• Product quality performance in view of new business opportunities.

• Expansion of product range and export opportunity

• Product improvement

Cost reduction and reduced delivery time

Exposure to internatiuonal developments and opportunity to show case products developed

Improvement in job knowledge and capability development for global acceptance

3. Information regarding Technology imported-Nil.

C. Forex:-

Activities relating to exports

The company endeavours to have a diversified range of products and there is a dedicated cell for giving impetus to exports.The company regularly participates in prestigious international exhibitions and conducts market surveys. Company has agents in over 60 countries to boost exports. Company is intensifying efforts in selected countries and exploring new markets.

Foreign exchange Earnings & Outgo:

Earning Rs. 9640.41 Lacs
Expenditure Rs. 52.82 Lacs

Section 212

Statement pursuant to of the Companies Act, 1956

Sr. No. Name of the Subsidiary EROS PHARMACHEM PTE. LIMITED AANJ PHARMALABS LIMITED FZE. DR. DATSONS LABS LIMITED (U.K.) FAIT SUCCESS (H.K.) LIMITED
1 Financial Year Ended 31/03/2014 31/03/2014 31/03/2014 31/03/2014
2 Date from which it became subsidiary company 28/02/2012 21/01/2013 23/07/2013 11/4/2013
3 Shares of Subsidiary held as on 31st March, 2014 200000 1 100 1
Total Number of Share and Face Value 200000 1 100 1
(Face Value- 1 SGD) (Face Value- 1 AED) (Face Value – 1 GBP) (Face Value– 0.12 USD)
b. Extent of holding 100% 100% 100% 100%
4 Net aggregate amount of profit/(loss) of the subsidiary so far as it concerns the members of Aanjaneya Lifecare Limited for current financial year
A Dealt with in the accounts of Aanjaneya Lifecare Ltd. NIL NIL NIL NI
B Not dealt with in the accounts of Dr. Datsons Labs Limited. NIL NIL NIL NIL
5 Net aggregate amount of profit/(loss) of the subsidiary so far as it concerns the members of Aanjaneya Lifecare Ltd. for the previous financial year
a Dealt with in the accounts of Aanjaneya Lifecare Ltd. NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
b Not dealt with in the accounts of Aanjaneya Lifecare Ltd. NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE

 

For and on behalf of the Board of Directors
Place: Taloja KANNAN VISHWANATH PRABHAT GOYAL
Date: 14/08/2014 MANAGING DIRECTOR DIRECTOR