earnest healthcare ltd Directors report

1995 EARNEST HEALTHCARE LIMITED DIRECTORS REPORT Your Directors have pleasure in presenting the 16th Annual Report of the Company alongwith the audited statement of`accounts for the year ended 30th June 95. 1. Dividend The Directors recommend payment of dividend at the rate of 15 % ( previous, 15 % for a period of 15 months ), subject to deduction of tax at appropriate rate on 1,47,26,700 fully paid up equity shares of the Company. The dividend, if approved by the share holders at the Annual General Meeting, will absorb Rs. 220.90 lakhs. 2. Capital Expenditure Capital expenditure of Rs.382 lakhs was incurred mainly for upgrading the facility at indore factory, to maintain high standards of production and to meet increased volume of sales. 3. Operations In order to achieve and sustain higher turnover the product mix was revamped, resulting in higher production/sale of tablets and liquid orals. Due to the rationalisation of the product mix, your company concentrated on a few items of bulk drugs where the margins are higher. In due course this will pay rich dividends, though the turnover of the bulk drugs have decreased in the year under consideration. The Companys present product range has shown a good growth rate. Preliminary work is in progress for introduction of newer and specialised products, under the range of ethical specialities. Exports have registered a healthy growth. Apart from consolidating the present overseas contracts, newer opportunities are being identified, to accelerate the growth of exports. 4. Current Years Working Your Company has achieved higher growth in the half year ending December95 with the turnover of Rs. 21.09 crores and a profit of Rs. 2.24 crores, thus validating the forecast that the revamping of the product mix and rationalisation of the bulk drug item would result in better performance. Based on the half yearly results, the directors expect a turn over in the region of Rs. 45 crores for the current year. 5. Future Plans Your Companys core strength lies in the healthcare segment. Hence, it has been decided to concentrate on diversifying in areas which would provide the right synergy with existing operations and consolidate the core competence of the group. Accordingly, a systematic survey was undertaken and reputed consultants like Coopers & Lybrand, KPMG were engaged to prepare detailed reports in various areas. Based on these reports it has been decided as follow :- (1) To start a chain of retail outlets designated as "Healthcare Shops " and in due course to increase such outlets to 60. Such shops would provide complete healthcare items. (2) To set up a modern hospital cum medical college at Indore for which an in principle approval has been received from the Government of Madhya Pradesh. The above referred activities may he taken up by the Company or a separate company in due course. 6. Public Deposits The Company has neither invited nor accepted any deposits in contravention of section 58A of the Companies Act, 1956 and the rules made thereunder. 7. Observations in Auditors Report The observations made by the Auditors in their main audit report are self explanatory and does not need any further clarification. 8. Research & Development R&D Department has been successful in reducing costs and improving the yield in a number of processes. 9. Personnel Industrial relations remained cordial through out the year. The Company has been able to achieve its objectives of growth and progress due to the hard work and devotion of all the employees. The particulars of the employees as required to be disclosed under the provision 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 1994, are furnished in the annexure to this report. 10. Directors Mr. Franklin John retires by rotation and being eligible has offered himself for reappointment. 11. Auditors The existing auditor of the Company M/s P. K Shishodiya & Co. Chartered Accountants have resigned and as such an Auditor has to be appointed to fill in the vacancy. It is proposed to appoint M/s. J & K Agarwal & Company, chartered accountants, as the Auditor of the company. Shareholders are requested to appoint the auditors and fix their remuneration. 12. Particulars of Conversation of Energy, Technology Absorption, Foreign Exchange earnings and outgo, etc. Annexure A enclosed is deemed to form part of Directors Report and deals with the requirements of the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988. It relates to energy conservation, technology absorption and foreign exchange earnings and outgoing. 13. Acknowledgement The Directors take this opportunity to thank all the employees for their contribution to the Company s performance during the period under review. The Directors place on record their appreciation for the assistance and support from various Government agencies, banks and financial institutions. Your Directors also express their gratitude to the Share holders of the Company for their continued support to the management. Form A - Disclosure of Particulars with respect to Conservation of Energy U/S 2171(e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the Report of Board of Directors) 1988. Current Previous Year Year A. Power and fuel consumption 1. Electricity (a) Purchased Units (KWH) 4,02,210 4,52,360 Total amounts (Rs. in lacs) 7.28 8.19 Rate/Unit (Rs.) 1.81 1.81 (b) Own generation (i) Through diesel generator Units (KWH) Units per lit. of diesel oil Cost/Unit (Rs.) (ii) Through Steam Turbine 2. Coal 3 Diesel Quantity in (K. Ltrs.) 40,781 5,971 Total amount (Rs. in lacs) 3.19 0.41 Average rate per K.Ltr. (Rs.) 7.81 6.80 4. Others/Internal Generation B. Consumption per kg. of production 1 . Electricity Units (Direct) 2. Furnace Oil in Ltrs. RESEARCH & DEVELOPMENT (R&D) 1. Specific areas in which R&D carried out by the Company :- Development of Bulk Drugs and Intermediates and process improvement of Sustained Release dosage forms and Ayurvedic products. 2. Benefits derived as a result of the above R & D Based on our R&D efforts, the Company has developed the following new products :- 1. Sanjeevan Minieral Ice 2. Vigatone Syrup 3. Future plan of action :- Development of new synthetic routes to some active ingredients presently being imported. 4. Expenditure on R&D :- a) Capital 100.05 18.18 b) Recurring 10.66 6.05 c) Total 110.71 24.23 d) Total R&D expenditure as a percentage of total turnover 3.27% 1.002% TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION: a) Efforts, in brief, made towards technology absorption adaptation and innovation :- Pharmaceutical development is an on going process and is involved in developing formulations and dosage forms. Development work in the bulk drugs area covers process development trouble shooting and involving alternate routes with the emphasis on cost containment, clinical research work is carried out on new and existing drugs. b) Benefits derived as a result of the above efforts e.g. product improvement, cost reduction, product development, import substitution, etc. R&D activities of the company have resulted in new product introductions, process upgradation and cost containment. c) In the case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year): i) Technology imported ii) Year of import lii) Has technology been fulling absorbed iv) If not fully absorbed, areas where this has not been taken place, reasons therfor and future plan of action. 5. Foreign Exchange Earnings and Outgo (i) Activities relating to exports: Initiatives taken to increase exports development of new export markets for products and services; and export plants. The Export income in the current year amounted t Rs. 478.73 lakhs. The Export markets cover Switzerland, Germany, Indonesia, Taiwan and Singapore . During the year export performance has shown substantial growth. Efforts are being made to develop further by exploring new markets such as Africa,, South America, Russia, etc. (ii) Total foreign exchange used and earned: The particulars required are furnished under ITM 4, 5 & 6 of Schedule 21 Annexed to Balance Sheet. For and On behalf of the Board of Directors, For Earnest Healthcare Limited, IGNATIUS JOHN, CHAIRMAN. Place : Indore, DateD : January 15, 1996.