SOL Pharmaceuticals Ltd Directors Report.

SOL PHARMACEUTICALS LIMITED ANNUAL REPORT 1999-2000 DIRECTORS REPORT Your Directors present the Report for the Financial Year ended 31st March,2000. OPERATIONS The financial difficulties of the Company continued during the year under review also, pending approval of the Rehabilitation Scheme. With the market credit support and with the support of some of the bulk drug traders the company traders the company could utilise a portion of the capacity of Patancheru Plant. The production is mainly used for the Orders of M/s Teva Pharmaceutical Limited Israel with whom, the company is in negotiation for a Joint venture for the Patancheru Plant. The Jeedimetla Dexo plant and the pilot plant have done some job work for some local Bulk Drug manufactures. These activities have resulted in a sales volume of Rs.29.68 Crores as compared to a sales volume of Rs.43.88 Crores in the previous year. The main reason for the reduced sales volume is the reduced production level caused by the companys serious financial limitations and constraints. The sales volume though was not sufficient to meet the overheads of all the Units, administrative Cost and the interest cost, but has facilitated in meeting the Factory Overheads of all the units that are in production. But for this sales volume, the losses could have been higher. REHABILITATION SCHEME The company is able to achieve substantial progress in the approval of the Rehabilitation Scheme. IDBI, the Operating Agency in discussions with Institutions, Bands and other involved agencies have prepared a Draft Rehabilitation Scheme taking into account the directors of the Honble BIFR in this regard. The Honble BIFR has now circulated a Draft Rehabilitation Scheme for the consents of all the involved agencies and convened a hearing on 4th September, 2000. The company is making all best possible efforts for the early approval of the Draft Rehabilitation Scheme. The Board of Directors are confident that, on the approval of the Rehabilitation scheme, the company can be revived in a reasonable period of time. FIXED DEPOSITS The company has overdue deposits of Rs.33.91 Crores as at 31st March,2000. In view of the adverse liquidity position of the company the overdue deposits could not be repaid. However, in the proposed Rehabilitation scheme these repayments are considered. DIRECTORS The Honble BIFR has appointed Shri R.K.Bharagava as a special Director. M/s SICOM Limited has withdraw the nomination of Mr. A.D.Joshi and appointed Smt. U.J.Salpekar as the nominee. The Board places on record its appreciation for the services of Mr. A.D.Joshi during his tenure of office Dr. D.Rajagopala Reddy retires by rotation at the ensuing annual general meeting and is eligible for re- appointment. AUDITORS M/s J.B.Reddy & Co., the companys Auditors retire at the conclusion of this Annual General Meeting and are eligible for reappointment. The Auditors have made certain observation in their Report relating to the preparation of accounts on the principles of going concern, the extent of non-recoverability of certain debts, reconciliation of certain debits and credit balance, non-provision of compensation payable under VRS Scheme, non provision of financial liabilities for non fulfilment of certain export obligations, non provision of estimated liability of future payment of gratuity non repayment of overdue Fixed Deposits delay in deposit of Provident Fund and ESI dues and outstanding Statutory dues. Your Directors would like to clarify that /Note No.1 (relating to preparation of accounts on principles applicable to a going concern), Note No.6 and 7 (relating to non-recoverability of certain debts), Note No.8(relating to reconciliation of certain debit and credit balances), Note No.9(relating to non provision of compensation payable under VRS Scheme)and Note No.10 (relating to non provision of financial liabilities for non- fulfilment of certain export obligations) and Note No.21(relating to non provision of estimated liability of gratuity) are self-explanatory to the observations made by the Auditors. The company is making all efforts to clear the pending payments relating to Provident Fund, ESI and Statutory dues. The position with regard to Fixed Deposits have been explained elsewhere in this Report. Y2K Compliance The problem of Y2K to the company was restricted to the administrative functions only and hence the companys transition to the 21st Century was very smooth. PERSONNEL During the period under review, the relationship between the Management and employees were cordial. During the year under review, there were no employees who were in receipt of remuneration of Rs,6,00,000/-per annum or Rs.50,000/-per month, if employed for part of the year. STATUTORY INFORMATION Information on the conservation of energy, technology absorption foreign exchange earnings and outgo required to be disclosed under the Section 217(1)(e) of the companies Act, 1956, is enclosed. COST AUDIT The Central Government has prescribed cost Audit for the company under section 233(B) of the companies Act, 1956. The Audit is under progress and the report of the Cost Auditor will be submitted to the Government before the due date. ACKNOWLEDGMENTS Your Directors wish to place on record their appreciation for the co- operation received by the company from various departments of the central and state Governments companys Bankers and Financial Institutions during the year under review. Your Directors also express their gratitude to the shareholders of the company for the confidence reposed in the management. On behalf of the Board C.Chandrasekara Reddy Place : Hyderabad Chairman & Date : 25th August, 2000 Managing Director ANNEXURE TO DIRECTORS REPORT (Additional information given in terms of Notification No,1029 of 31-12- 1998, issued by the Department of company Affairs) A. CONSERVATION OF ENERGY (a) In house energy management team has implemented various energy saving measures such as replacement of high power consuming centrifuges with Auto Nutch Filters. This eliminates several centrifuges in the filtration area which resulted in cost of power saving (b) By secondary cooling methods, the cooling loads are reduced to save the power at compressors. (c) Condensate water in recycled to save the heat energy and to reduce the coal consumption at boilers. (d) The total energy consumption and energy consumption per unit of production are as per form A. FORM A. Form of disclosure of particulars with respect to conservations of Energy. B.Consumption per unit of production: Products Since the company manufactures Electricity different types of Bulk Drugs and Furnace Oil Formulations, it is not practicable Coal to give consumption per Unit of Others Production. B. TECHNOLOGY ABSORPTION Effort made in Technology absorption as per From B From B 1. Specific areas in which R & D is carried out by the company: BULK DRUGS a) Technology is developed for the manufacture of CIS(+) Lactam from basis raw material paraanisaldeehyde. CIS(+) Lactum is a advanced intermediate in the manufacture of Dilitazam. (b) CIS (+) Lactum technology is cmmercialised and acceptable material is produced. Material is exported to various countries. (c) Technology is developed for the manufacture of Diethy 1 Oxalate using alcohol. 50% of captive requirement of DEO is manufacture in-house. 2. Benefits derived as a result of R & D (a) Commercials of CIS(+) Lactum has given good contributions cost effective technology has given the required competitive edge to capture the market share for this product. (b) Backward integration for SMX has further improved the margins in this product. (c) Process are developed to recover D(-) Lactum from mother liquor. 3. Future plan of Action (a) Introduction of new product Rofecoxib. (b) Development of technology for 2-Methy 1 Pyrazine, which is a intermediate for the manufacture of pyrazinamide. (c) Upgradation of the technology to improve the yields on a continuous basis. C.FOREIGN EXCHANGE EARNINGS AND OUTGO (a) Activities relating to exports, initiatives taken to increase export development of new export markets for product and service and export plans. The company has entered into long term supply agreements with multinational companies for supply of certain Bulk Drugs. As a result the company will be exporting almost its entire production of bulk drugs. (b) Total foreign exchange used and earned: During the year under review, the company used Foreign Exchange equivalent to Rs.0.95 Crores (Previous year Rs.1.31.Crores) for the import of materials and earned NIL (Previous year Rs.0.21 Crores) worth of foreign exchange by way of Exports. On behalf of the Board C.Chandrasekara Reddy Place : Hyderabad Chairman & Date : 25th August, 2000. Managing Director