Polar Pharma India Ltd Directors Report

POLAR PHARMA INDIA LIMITED ANNUAL REPORT 2011-2012 DIRECTORS REPORT Dear Shareholders, Your Directors have the pleasure in presenting their 23rd Annual Report of the Company and the Audited Accounts for the financial year ended 31st March, 2012. FINANCIAL HIGHLIGHTS (Rs. in Lacs) Year Ended Year Ended 31st March, 2012 31st March, 2011 Revenue from operation & Other Income 1641.30 1094.76 Profit/(Loss) before Interest, Depreciation & Extraordinary Item (181.88) 206.86 Interest & finance charges 1484.81 1332.84 Profit/(Loss) before Depreciation & Extraordinary Item (1666.69) (1125.98) Depreciation 225.39 223.02 Profit/(Loss) before Extraordinary Item (1892.08) (1349.00) Extraordinary Item 2.25 (4.15) Profit/(Loss) before Taxation (1889.83) (1353.15) Provision for Tax Current Tax - - Deferred tax - - Profit/(Loss) after Taxation (1889.83) (1353.15) Add : Balance Profit/(Loss) brought forward from last year (11383.67) (10030.52) Balance carried forward to Balance Sheet (13273.50) (11383.67) DIVIDEND In view of inadequacy of profit, your Directors regret their inability to recommend payment of dividend on equity shares for the period under review. PERFORMANCE During the year ended March 31st, 2012 your Company was involved in completing the balance orders received from the Ministry of Health & Family Welfare (MHFW), Government of India (GOI) carried forward from the fiscal year 2010-11 The turnover of the Company has increased to Rs. 1605.88 lakhs as against Rs. 1085.67 lakhs reflecting a growth in the performance of the Company. Your Company has also participated in a supply tender dated 12.06.2012 floated by Ministry of Health & Family Welfare (MHFW), Government of India for procurement of male contraceptives for an overall value of Rs. 174 crores. Your Company expects to receive an order against the said tender by August12. Performance during the current year looks to be bright. Your Directors are continuously looking for avenues for future growth of the Company in healthcare industry. DOMESTIC MARKET During the year ended March 31, 2012 your Company has been able to execute GOI order of the value of Rs.1605.88 lakhs. Your Company expects to receive orders of higher quantity from them in the current fiscal year. INTERNATIONAL MARKET Your Company could not assertively participate in international tenders as the sharp rise in the indigenous input costs leaves barely any profit margin in the global tender business. QUALITY During the year under review, your Company executed orders received from the Ministry of Health and Family Welfare (MHFW), Government of India. Your Company conforms to good quality maintenance practices. LONG TERM DEBTS Due to continuous cash losses during the Year under review, the Company could not repay any long term debts. Debts payable to Industrial Investment Bank of India (IIBI) has been assigned to Phoenix ARC Private Limited (Trustee of Phoenix ARF Scheme 9). DIRECTORS Under Article 116 of the Articles of Association of the Company, Mr. V.P. Jain and Prof. Madhu S. Mishra will retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment. Dr. Gora Ghose resigned from the services of the Company with effect from 03.11.2011. The Board of Directors placed on record their sincere appreciation for the valuable guidance and contribution made to the Company by Dr. Ghose during his tenure. Mr. Kishan Lai Sharma has been appointed as Additional Director with effect from 05.01.2012. He shall hold office till the conclusion of the ensuing Annual General Meeting. The Company has received a notice under Section 257 of the companies Act, 1956 for his candidature. CORPORATE GOVERNANCE Your Company reaffirms to uphold good Corporate Governance practices. With the purpose of appropriate and timely implementation of the Corporate Governance framework, the Ministry of Corporate Affairs has incorporated certain provisions in the Companies Bill 2009. The Ministry has issued a set of voluntary guidelines in the second half of December, 2009 for adoption by the companies. The Guidelines generally outline the conditions for constitution of Nomination Committee, appointment of Directors (including Independent Directors), guiding principles to remunerate Directors, responsibilities of the Board, Risk Management, the enhanced role of Audit Committee, rotation of audit partners and firms and conduct of secretarial audit. Your Company has initiated appropriate action in compliance thereof to the extent viable keeping in view the current position of the Companys business. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. A certificate from the Auditors of the Company ensuring proper compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this Report. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is presented in a separate section forming part of the Annual Report. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirements under Section 217(2AA) of the Companies Act, 1956 (the Act) with respect to Directors Responsibility Statement, it is hereby confirmed: a) That in the preparation of the Annual Accounts for the financial year ended 31st March, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures. b) That 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 at the end of the financial year ended 31st March, 2012 and of the profit or loss of the Company for that financial year. c) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. d) That the Directors have prepared the Annual Accounts for the financial year ended 31st March, 2012 on a going concern basis AUDITORS REPORT & AUDITORS OBSERVATIONS Regarding Auditors observation in point 4(i) of the main report, your Directors wish to clarify that the Company is in the process of compiling information with regard to suppliers covered under Micro, Small and Medium Enterprises Development Act, 2006. In absence of detailed information from the vendors the disclosure as required in Section 22 of said Act could not be given in these accounts. In regard to Auditors observation in point 4(ii) the Company is in the process of obtaining confirmation in respect of balances lying under advances, sundry debtors and sundry creditors. In regard to Auditors observation in Annexure to the Auditors Report (referred to in paragraph 3 of the report of even date) in point no. 9(a) the Company could not pay the arrear Statutory Dues amounting to Rs. 183.79 lacs owing to huge losses due to sub optimal operations during the year. Regarding Auditors observation in point no. 11 of the Annexure to Auditors Report for non repayment of term loan installments to its term lenders your Directors wish to clarify that the Company due to liquidity constraint could not repay the installments. With regard to other observations made in the Auditors Report, the Notes on the accounts are self explanatory and hence no further clarification is required. AUDITORS The Auditors, M/s. LB. Jha & Co. hold office till the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re- appointment. The Company has received a letter from M/s. L.B. Jha & Co. to the effect that their re-appointment as Auditors, if made, would be within the limits under Section 224(1 B) of the Act. The Members are requested to appoint Auditors for the current year at the Annual General Meeting and to authorize the Board of Directors to fix their remuneration to be mutually agreed upon between the Board and the Auditors. PARTICULARS RELATING TO CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO The particulars as prescribed under sub-section 1(e) of Section 217 of the Act, read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, is annexed hereto as Annexure - I to the Directors Report. PARTICULARS OF EMPLOYEES Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 (the Act), read with the Companies (Particulars of Employees) Rules, 1975, as amended, regarding employees is given in Annexure II to the Directors Report. INDUSTRIAL RELATIONS The overall relation of the Company with its employees and workmen remained healthy throughout the year. The workmen have also extended their full support & cooperation to the management in executing the supply orders received from the Ministry of Health & Family Welfare, Government of India. BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION Your Company has submitted the Draft Rehabilitation Scheme to Board of Industrial and Financial Reconstruction (BIFR)and also to IDBI, the operating Agency. BIFR in its hearing held on 12.04.2012 did not accept the draft rehabilitation scheme and directed the operating agency to advertise change of management of the Company in two leading newspapers. However, your company has preferred an appeal to the Appellate Authority for Industrial and Financial Reconstruction. SUBSIDIARY & CONSOLIDATED FINANCIAL STATEMENTS Pursuant to the provisions of Accounting Standard 21 (AS 21) and Clause 32 of the Listing Agreement, the investment made by the Company in overseas subsidiary has been fully provided for in view of its full diminution in value, there is no need to consolidate the accounts and as such provision of Section 212 of the Companies Act, 1956 are also not required to be complied with. FIXED DEPOSITS The Company has not accepted any fixed deposit during the year under review. ACKNOWLEDGEMENT Your Directors wish to place on record their sincere gratitude to the continued support received from shareholders, Depositors, Banks & Financial Institutions, Ministry of Health and Family Welfare, Investors, Suppliers, Dealers, Collaborators and all other Government Agencies. Your Director also express their genuine appreciation of the diligent, dedicated and creditable performance of the employees at all levels that constitute the most valuable asset of the Company. For and on behalf of the Board of Directors ANIL AGARWAL Kolkata, 6th August, 2012. Chairman & Managing Director ANNEXURE TO THE DIRECTORS REPORT Statement Showing Particulars pursuant to Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988. CONSERVATION OF ENERGY Your Company adheres to the continuous process of energy conservation by means of operational and maintenance practices. FORM-A Total energy consumption and energy consumption per unit of production :- A. Power and Fuel Consumption Current Year Previous Year 2011-12 2010-11 1. Electricity (a) Purchased Unit (Kwh) 638331 356238 Total amount (Rs) 4002931 1620112 Rate/Unit (Rs) 6.27 4.55 (b) Own generation (i) Through diesel generator Unit (Kwh) 54596 91998 Units per Itr. of diesel oil (Kwh) 3.80 3.80 Cost/Unit (Rs) 11.32 10.44 (ii) Through steam turbine/generator N. A. N.A. 2. Coal NIL NIL 3. Furnace Oil Quantity (K. Ltr.) 419.664 330.336 Total amount (Rs.) 17713697 11079969 Average rate (Rs./K.Ltr.) 42209 33542 4. Others/internal generation N.A. N.A. B. Consumption per unit of production Units Standards Current Year Previous Year (if any) Electricity (Kwh/Mpc) 5,550 7582 5109 Furnace Oil (K.Ltr./Mpc) 5.00 4.59 3.76 Coal N.A. N.A. N.A. Others N.A. N.A. N.A. ANNEXURE I TO THE DIRECTORS REPORT FORM - B Form of disclosure of particulars with respect to Absorption of Technology, Research & Development (R & D). Research and Development (R&D) 1. During the year, your Company was mainly focused in improving the product quality & reduction of loss due to wastage in the following areas:- a) Development of compounding process operations. b) Modification of vulcanizing process operations. c) Development of new dressing chemical. 2. Benefits derived as a result of R&D effort: a) Reduction of wastage and cosmetic defects in moulding process. b) Reduction in time and energy consumption in vulcanizing process. c) Reduction of condom smells reaching to almost neutral. d) Execution of order to Ministry of Health & Family Welfare, Govt, of India. 3. Future Plan of Action. a) Validation of new compound in commercial scale. b) Attain further improved consistency in the product quality. c) Process improvements to eradicate packing & packaging related issues based on the customer needs. MANAGEMENT DISCUSSION AND ANALYSIS REPORT INDUSTRY STRUCTURE & DEVELOPMENT India is one of the largest and most populated countries in the world, with over one billion inhabitants. Of this number, its estimated that around 2.4 million people are currently living with HIV. With this number in mind Government of India have initiated various social awareness programmes regarding family planning and prevention of spreading of HIV which in turn have increased the demand for condoms in India. The Company believes that business projections have an inherent element of uncertainty owing to unknown factors and presumed that managing risks is a paramount need for ensuring present and future growth plan. Over the years, the Company has encountered several risks and concerns during the process of its business. In keeping with problem solving approach that characterized the Company, it has taken several steps to counter and mitigate these, while simultaneously pursuing every possible risk. OPPORTUNITIES & THREATS Increased demand in market owing to various reasons has considerably raised the demand for the product in both local and international market. As a result, your Company is trying to optimize this opportunity to its level best by bagging the orders of Government. Large numbers of players have entered the market therefore creating huge competition and also threat to the business. Moreover hike in the price of indigenous product is also a matter of concern. However, your Company is confident to pass all the hurdles of the time and ready to face all the threats and at the same time rationally use the opportunities. SEGMENT-WISE/ PRODUCT-WISE PERFORMANCE As the Company is dealing only in latex prophylactics there is no other identifiable business segment. FUTURE OUTLOOK Outlook of the Company appears optimistic and your Company expects to get orders from Government of India as well as trying to get orders from international markets also. Future outlook seems to be very good. RISKS & CONCERNS The analysis presented in the Industry Scenario and Opportunities and Threats section of this Report throws light on the unavoidable risks and concerns faced by your Company. Steps are taken to minimize such risks. Safety is the core concern for your Company and is an important part of any business decision. In compliance with the revised Clause 49 of the Listing Agreement, steps are being taken to improve the existing Risk Management System. INTERNAL CONTROL SYSTEM & ADEQUACY The Company remains committed to ensure the prevalence of an effective internal control environment commensurate with its size and nature of business that provides reliable financial and operational information ensure compliance of corporate policies and applicable statutory regulations and safeguards Companys assets. Your Company in relation to internal controls intends to offer reasonable promise regarding the success of the following objectives: 1. Effectiveness & Efficiency of operations; 2. Adequacy in safeguard of assets & 3. Reliability of financial controls. The Audit Committee has been vested with wide powers to review any transaction and has been empowered with the term of reference as mandated by amended Clause 49 of the Listing Agreement. CORPORATE SOCIAL RESPONSIBILITY Your Company firmly believes that any progressive activity cannot be carried out in a society that fails. In line with this vision, the focus of all activities is sustainable development and inclusive growth in the periphery and engagement of local community in a positive manner. The Corporate Social Responsibility (CSR) activities are carried out by the Company in a systematic manner with the involvement of its team of dedicated professionals. The various activities are undertaken after proper need assessment and implementation is made effective with the involvement of employees, voluntary organizations and local representatives. Some of the initiatives taken by your Company during the period under review for the benefit of the people in the locality as well as society at large pertain to: 1. Skill development and Employment Generation 2. Health care initiatives and improvement of Health infrastructure 3. Assistance to needy people The CSR activities taken up by your Company have a focus on continuity and gradually the emphasis is more on the basic requirements in the area like Environmental Protection, birth control etc. TECHNOLOGY The primary concern of your Company is always cost reduction and Quality improvement which is only possible by adoption of new technology. Technological improvement is the need of the hour in the brutally competitive and dynamic contraceptive industry. Skilled employees as well as proper planning have enabled your Company to attain an edge over its competitors. Your Company succeeds to ensure frequent development in quality and range of its products. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE During the year under review, the Company has posted a turnover of Rs 1605.88 lakhs owing to receipt of orders from Ministry of Health & Family Welfare (MHFW), Government of India as against Rs.1085.67 lakhs in the previous fiscal. However, your Company has witnessed operating loss of Rs. 181.88 in the current year under review. HUMAN RESOURCES/ INDUSTRIAL RELATIONS Your Company has always tried to maintain healthy and harmonious professional environment at its manufacturing unit at Baleshwar and healthy and cordial employee relations in all its offices. Efforts are constantly made to attract, develop, train, motivate and retain the best talent. Team work and Ownership are respected values and system for knowledge and experience sharing has been made to create a learning organization. As part of the overall HR Strategy, training programmes were undertaken for enhancement of employee skills and talents at all levels through both internal and external faculties during the year under review, putting forth health and safety of all its employees as its priority. CAUTIONARY STATEMENT Statement in the Managements Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predications may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied in this report. Important factors that would make a difference to the Companys operations include global and Indian demand/supply conditions, raw materials prices, feed stock availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations/policies, tax regimes, economic developments within the country and other factors such as litigation and labour negotiations. The Company assumes no responsibility to modify or revise any forward-looking statements on the basis of any future events or new information. Actual results may differ from those mentioned in the report. For and on behalf of the Board of Directors Kolkata, ANIL AGARWAL 6th August, 2012 Chairman & Managing Director