Tonira Pharma Ltd merged Directors Report

TONIRA PHARMA LIMITED ANNUAL REPORT 2010-2011 DIRECTORS REPORT To, The Shareholders Tonira Pharma Limited Your Directors have pleasure in presenting herewith their 19th Annual Report for the year ended 31st March, 2011. Financial Performance: Following figures summarize the financial performance of the Company. (Rs. in Lacs) Particulars 2010-11 2009-10 Sales and other income 3016.42 3684.02 (Net of Excise duty & Sales Tax) Profit before Foreign 320.78 632.37 Exchange (Gain)/Loss, Financial Cost and Depreciation Foreign Exchange (Gain)/ (60.98) (53.46) Loss Financial Cost 295.17 267.63 Depreciation and 307.19 283.79 Amortisation Profit/(Loss) before (220.60) 134.41 Tax Less:Provision for taxation Current - 25.00 Deferred (12.49) 32.01 Add:MAT Credit - 25.00 Entitlement Net Profit/(Loss) (208.11) 102.40 after Tax Adjustments Balance of Profit 639.80 537.40 brought forward Amount available 431.68 639.80 for appropriation Your Directors recommend the following appropriations Balance carried forward 431.68 639.80 to Balance Sheet Financial Performance and Operations Review: During the financial year under Report, your Company had a net total income of Rs. 3016.42 Lacs as against Rs. 3684.02 Lacs in the previous year. The decrease in the income is mainly on account of disruption in manufacturing operations at Companys manufacturing facility at Ankleshwar (Gujarat) on account of air and water pollution issues generally faced by Ankleshwar industrial area. The Companys manufacturing unit at Ankleshwar was operating at reduced production load during the second half of the financial year under Report to keep the production waste and effluents at minimum possible level. During the same period, your Company invested funds in improving its pollution control capabilities by installing Reverse Osmosis (RO) and Multiple Evaporator (ME) plants. With the upgradation of its pollution control capabilities, your Companys Ankleshwar manufacturing facility is now operating at its optimum production capacity with increased production volume since April, 2011. The operations for the financial year under report have resulted in a net loss of Rs. 208.11 Lacs as against net profit of Rs. 102.40 Lacs in the previous financial year. Subsidiary Company/Consolidated Financial Statement: In accordance with Accounting Standard AS-21, the audited consolidated financial statements together with Auditors Report is annexed to this Annual Report along with statement pursuant to Section 212 of the Companies Act, 1956. The required financial details of the subsidiary company is also annexed with this Annual Report. The Audited Accounts of the subsidiary company is not annexed to this Annual Report and is available for inspection at the Registered Office of the Company and is also uploaded on the Companys website. Any member interested in obtaining the same may write to the Company Secretary at the Registered Office. Dividend: In view of the losses incurred during the financial year under Report, your Board does not recommend payment of any dividend to the Shareholders. Directors: Mr. J.L. Nagori, Mr. Rajesh J. Shah and Mr. Mahesh M. Bhatt retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. Mr. Lalit Kumar Gupta was appointed as Additional Director and designated as Executive Director of the Company with effect from 23rd March, 2011. Mr. R.P. Verma resigned as the Managing Director of the Company with effect from 3rd May, 2011 upon completion of his period of appointment. He has also resigned as a Director of the Company effective from 20th May, 2011. The Board places on record its sincere appreciation for services rendered by Mr. R.K.P. Verma during his tenure as the Managing Director. A brief note on Directors retiring by rotation and eligible for re-appointment as well as Director being appointed is furnished in the Annexure to the Notice calling the ensuing Annual General Meeting. Directors Responsibility Statement: In terms of the Section 217 (2AA) of the Companies Act, 1956, your Directors confirm that: i. In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed; ii. 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 true and fair view of the state of affairs of the Company at end of the financial year March 31, 2011 and of the loss of the Company for the year; iii. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and iv. the Directors have prepared the Annual Accounts on a going concern basis. Corporate Governance: As per the requirement of listing agreement with the Bombay Stock Exchange Ltd., your Company has complied with the requirements of Corporate Governance in all material aspects. A report on Corporate Governance together with a certificate of its compliance from Company Secretary in Practice, forms part of this report as Annexure-B. Fixed Deposits: During the year under review, the Company has not accepted any fixed deposits. Auditors, Audit Report and Audited Accounts: M/s Mitesh P. Vora & Co., Chartered Accountants, retire as Auditors and being eligible, offer themselves for re- appointment. The Auditors Report read with the notes to the accounts referred to therein are self-explanatory and therefore, do not call for any further comments. Employees: There were no employees covered under the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo: In accordance with the requirements of Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, statement showing particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the enclosed Annexure-C. Acknowledgements: Your Directors place on record their appreciation for the continued co- operation and support extended to the Company by the Companys bankers. Your Directors also thank the Trade and Consumers for their patronage of the Companys products. Your Directors also place on record their profound admiration and sincere appreciation of the continued hard work put in by employees at all levels. For and on behalf of the Board Date : 20th May, 2011 Bhailal B. Shah Place: Mumbai Chairman MANAGEMENT DISCUSSION AND ANALYSIS: Industry Scenario and Developments: Indian Pharmaceutical Industry is one of the fast growing sector of the Indian Economy clocking double digit growth consistently over the few years. India is preferred cost effective manufacturing location for pharmaceuticals. Comparatively low cost of Active Pharmaceuticals Ingredients (APIs), robust manufacturing capabilities, existence of regulatory approved manufacturing facilities for APIs and formulations and availability of abundant skilled manpower are the main driving factors for healthy growth of Indian pharma industry. For Indian API manufacturers, opportunities are present in two forms -one export of non patented APIs to regulated market of US, Europe and Japan and another the contract manufacturing of patent-protected APIs for patent/license holders. Introduction: Tonira Pharma Limited is a Star Export House company engaged in manufacturing and marketing of Active Pharmaceutical Ingredients (APIs). The Companys manufacturing units situated at Nandesari and Ankleshwar are inspected and approved by PMDA Japan. With the recent US FDA approval of the Nandesari manufacturing unit, the Company will now have access to regulated markets of US for its APIs. SWOT Analysis: Strengths: 1. Tonira is a quality producer of APIs and Intermediates for its customers as per their specific requirements. 2. Its Nandesari manufacturing unit is USFDA approved and ISO 9002 certified. Both Nandesari and Ankleshwar manufacturing units are PMDA, Japan accredited. 3. Tonira has a state-of-the-art R & D Center at Nandesari, Dist. Vadodara. The Center is engaged in developing manufacturing process for newer APIs through innovative and cost effective processes. 4. Tonira has capability to provide Contract Research and Manufacturing services to its customers. 5. The Company has also filed few Drug Master Files in CTD format. Risk and Concerns: The growing competition, foreign exchange fluctuation, increasing energy and solvent costs are few causes of concern. Opportunities and threats: All pharmaceutical companies which have succeeded in achieving manufacturing excellence over the years and have developed cost-effective synthesis routes have scope for partnering with other companies for contract manufacturing and research services i.e. CRAMS. With the state-of the art R&D Center and regulatory compliant manufacturing facilities, the Company is geared up to encash the business opportunities available in this space. Internal Control and its Adequacy: For effective inter departmental communications and follow up process, networks for communication have been installed. The system of internal control provides updated accounting records and the necessary financial information essential for running business. The Company has a clearly defined organization structure and delegation authority. Sufficient control is exercised through monthly, quarterly and annual business reviews by the management. Financials: The detailed financial analysis of the Companys operations for the year is given in the Directors Report and therefore, the same is not repeated. Human Resources: Human Resource being the most significant of the factors contributing to the success of the Company in achieving its objectives. The Company has been following a proactive policy for Human Resource Management. Suitably qualified and trained team has been engaged and continuously developed to facilitate smooth and efficient functioning of all departments. New recruitments have been made to keep pace with increasing requirement of skilled and experienced technical personnel for new projects and expansion. Initiatives to develop a team capable of functioning in ever changing technology have been taken. The Company has total 151 Employees as of 31st March, 2011. Outlook and Future Strategy: With the new DMFs getting filed and manufacturing facilities approved by PMDA Japan and USFDA, the Company is confident of good growth in exports in the coming year. The Company is focusing on core business of manufacturing and marketing of APIs and Intermediates. Research and Development has been put on fast track for cost competitiveness and to comply with the requirements of regulatory market. Cost rationalization and management control at all levels are practiced to ensure operational efficiencies in the sphere of manufacturing and marketing. Armed with strong resource base and a vision to be a leading manufacturer of APIs in selected therapeutic areas, Tonira is poised to unleash its true potentials to meet the challenges and exploit the growth opportunities ahead. 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 and current scenario. 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 could cause actual results to differ materially from those that may be indicated in such statements. Annexure-C: Information pursuant to the Companies (Disclosure of particulars in Report of the Board of Directors) Rules, 1988 1. CONSERVATION OF ENERGY: (i) Energy conservation measures taken: The Company continues its policy of giving priority to energy conservation measures including regular review of energy input and consumption and effective control on utilisation of energy. (ii) Additional investments and proposals being implemented for reduction of energy consumption: The Company is continuously installing electroflow and other devices to improve quality of power through voltage improvement. (iii) Impact of the above measures: The adoption of energy conservation measures have resulted in considerable savings and increased level of awareness amongst the employees. The energy conservation measures have also resulted in improvement of power factor. (i) Power and Fuel Consumption: a) Electricity: 2110-11 2009-10 (i) Purchased Units (KHP) 2,403,479 2,391,672 Total Amount (Rs. In Lacs) 142.78 125.66 Rate/Unit (Rs.) 5.94 5.25 (ii) Own Generation Through Diesel Generator Units (KWH) 26,550 21,879 Units per-ltr, of 3.20 3.26 diesel oil (KWH) Cost of Diesel 12.50 11.90 per KWH (Rs.) b) Light Diesel Oil (LDO) Quantity (K. Ltrs.) N.A. N.A. Total Amount (Rs. In Lacs) N.A. N.A. Average Rate/Ltr. (Rs.) N.A. N.A. c) Others (Rs. In Lacs) HSD LSDS Coal Furnace Oil Others Steam Units (scm) 6,89,824 6,81,027 Total Cost (Rs.) 10,664,914 7,711,624 Cost/Unit (scm) 15.46 11.32 B. Consumption per unit of Production: In view of the varied nature of the products and packs, the compilation of accurate consumption per unit of production is not feasible. 2. TECHNOLOGY ABSORPTION: Research & Development: (A) Specific areas in which R&D work was carried out by the Company: (i) Development of indigenous technologies for major drugs and intermediates, process improvements, technology absorption and optimisation of basic drugs, process simplification etc. (ii) Improvement of existing processes to improve yields and quality, reduce cost and lead to eco friendly process. (iii) Development of non-infringing processes for APIs. (B) Benefits derived as a result of the above R & D: (i) R&D efforts have helped bring out an improvement in processes, product design and operating efficiencies. (ii) Development of various APIs and Intermediates. (iii) Development of new markets, adaptation to meet export requirements, quality upgradation and cost reduction. (C) Future Plan of Action: (i) Development of various APIs/intermediates having good potential for exports and local market. (D) Expenditure on R & D: Since not significant, the same is clubbed in the business expenses. (E) Imported technology (imported during last 5 years): The Company has not imported any technology during the last 5 years. 3. FOREIGN EXCHANGE EARNINGS AND OUTGO: (A) Earnings: The CIF value of exports of the Company during the year aggregated to Rs.2727.48 Lacs as against Rs. 3507.78 Lacs in the previous year. (B) Outgo: Detailed information is furnished in the Notes to the Accounts.