DIRECTORS' REPORT: Dear Shareholders, We are pleased to present the 20th Annual Report on the business and operations of Surya Pharmaceutical Ltd. along with the Annual Accounts and the Auditors' Report thereon for the financial year ended 31st March, 2012. The financial highlights for the year under review are given below: CORPORATE RESULTS During the year 2011-12, the net revenue of the Company was Rs. 1622.95 crore as compared with Rs.1659.91 crore during the previous year. Loss before interest, depreciation and taxes was Rs (192.75) Crore as compared with profit of Rs. 256.05 crore during the previous year. Further, the Company reported a Net Loss of Rs.(272.50),after tax as compared with PAT of Rs.100.16 Crore last year. The company has faced various operational and financial problems in the recent past. Some of them are:- 1) Steep fall in prices of cephalosporins and the slowdown in the industry. 2) Time and Cost overrun in commissioning of plant at Jammu due to changes in the regulatory framework and the change in product profile owing to competition from Chinese players resulted into increased fixed costs. 3) The menthol business could not do as per the expectation due to volatility in prices of menthol products. 4) The company has borrowed funds for financing its rapid expansion in business and formation of subsidiaries which resulted in disproportionate increase in debt as compared to the revenues. 5) The Company incurred a forex exchange loss during the FY 2012 on account of huge volatility in the price of rupee against dollar. DIVIDEND In lieu of the current Financial condition of the company, the Board of Directors regret their inability to declare any dividend for the financial year 2011-2012. MANAGEMENT DISCUSSION AND ANALYSIS Management discussion & Analysis of financial condition and results of operation of the Company for the year under review is included in the Management Discussion & Analysis section of this Annual Report. CORPORATE SOCIAL RESPONSIBILITY Surya Pharmaceutical is an integrity driven organization that focuses on traditional values coupled with innovative management and broad social vision. Today, society expects corporate to go beyond the statutory compliances and putting something back into society. In sync with this, 'giving back to society' has always been a key mandate for Surya and as a company, its role stretches beyond mere business considerations into demonstrating serious corporate social commitment. Surya is committed to developing its business towards ecological, social and economic sustainability. The Group rather sees Corporate Social Responsibility as a new business strategy to reduce investment risks and maximise profits by taking all the key stakeholders into confidence. All activities and initiatives are planned specific to the needs of the target stakeholders. The ultimate objective is to see that each business decision takes into account its social impact and accordingly plans an intervention to mitigate the impacts arising out of that decision. Accordingly, we installed at Surya's manufacturing facilities the most advanced anti-pollution devices to keep the environment in and around the manufacturing facilities clean and green. Actioning its CSR mandate and realising skills and education as critical to catalyse the growth of society, Surya further ventured into Education and set up an academic institution under the aegis of Surya World Educational Research & Charitable Initiative. Ideally located near Chandigarh, the 50 acre sprawling integrated campus with state-of -the -art infrastructure and facilities, named as "SURYA WORLD - Institutions of Academic Excellence," provides perfect balance between academic excellence and extra co-curricular activities. EXPANSION /GROWTH PLANS AND OUTLOOK At SPL, a number of initiatives will deliver superior returns from 2012-13 onwards. The company's mature verticals will capitalize on emerging opportunities; new business verticals will report their full years of operations. We will increase our product offerings in US markets and other regulated markets leveraging over strength of Action. Soon Surya will be one of the very few companies in the world to have an exclusive set up for Carbapenem manufacturing. With all these as well similar other initiatives, the Company expects to graduate from domestic pharmaceutical player to global pharmaceutical brand strengthening its value for share holders. SUBSIDIARY COMPANIES Having established a pre-dominant position in manufacturing APIs, Surya Pharma has gradually strengthened its global footprint with acquisitions in US and customers in over 90 countries over last two decades. This astounding growth has been well acknowledged as the company was ranked 17th largest pharmaceutical company and 364th over-all in the prestigious Fortune India 500 list and 417th in the top ET 500 companies in India. Marching ahead, the wholly owned subsidiary in Singapore, Surya Pharmaceutical Singapore Pte Ltd for the purpose of trading in API's and raw materials for the Indian manufacturing plants and also for launching Crocs therapeutic footwear in the South East Asian market, showcased visible business growth. The company's extension into healthcare retail (through its subsidiary Surya Healthcare Limited) appears optimistic as VIVA and Medimart network comprises over 200 stores covering 27 cities across 7 states serving more than 4 Lakh customers every month and is already the fastest growing Indian Pharmacy retail network chain. These numbers are testament to the success of brands, VIVA - Your Family Chemist and Medimart. As per Section 212 of the Companies Act, 1956, we are required to attach the Directors' Report, Balance Sheet and Profit and Loss Account of our subsidiaries to our annual report. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated February 8 ,2011 provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in the annual report. Accordingly, the annual report 2011-12 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries, where applicable, will be made available for inspection during business hours at our registered office in Delhi, India. The same will also be published on our website, www.suryapharma.com. The consolidated financial statements, in terms of Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in Companies (Accounting Standards) Rules, 2006 also forms part of this annual report. The members, if desire, may write to Company Secretary at Surya Pharmaceutical Limited, Registered Office to obtain a copy of the financials of the subsidiary companies. CORPORATE DEBT RESTRUCTURING (C.D.R) Due to various operational and financial problems ,State Bank of India as the lead bank of the consortium of Bankers of the company has referred the company for restructuring of its debt to Corporate Debt Restructuring(CDR) cell. The case has been admitted by the CDR Cell in its meeting held on 29th March, 2012. REFERENCE TO SICK INDUSTRIES & BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTIN (BIFR) : The Total losses of the Company as at 31st March, 2012 have resulted in more than 50% erosion of the prak Net Worth during the immediately preceding four financial years and the company is required to report this fact of erosion of the peak Net Worth by more than 50% to the BIFR under the provision of Section 23 (1) (a) (i) of the Sick Industrial Companies (Special Provisions) Act, 1985. FIXED DEPOSITS During the year under review the company has accepted deposits amounting to Rs 2,23,54,000/- in the financial year 2011-2012. There was no overdue deposits as on 31st March 2012 except Rs 1,19,144/- which remained unclaimed. CAPITAL STRUCTURE During the year under review, there was no change in the Authorized Share Capital of the Company. The outstanding 27,50,000 Zero Coupon Convertible share warrants issued to promoter group were cancelled and hence there are no convertible share warrants pending for conversion. DIRECTORS During the year under review Mr. Rajiv Goyal, Managing Director of the Company, retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, offer himself for reappointment. The Board recommends his re-appointment. In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the company, Mr. D.P Singhal & Dr. S.K. Yadav , were appointed as Additional Directors of the Company whose term expires at this Annual General Meeting of the Company. It is proposed to appoint them as Directors of the Company liable to retire by rotation. The details of their re-appointment together with nature of their expertise in specific functional areas and names of the companies in which they hold office as Director and/or the Chairman/ Membership of Committees of the Board, are provided in the Notice of this Annual General Meeting. DIRECTOR'S RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Director's Responsibility Statement, it is hereby confirmed 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 a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the profit of the Company for the year ended on that date. (iii) The Directors have 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 account of the Company on a 'going concern' basis. AUDITORS AND THEIR REPORT M/s. AAD & Associates, Chartered Accountants, the statutory auditors of the Company holds office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. The Company has received their consent letter under Section 224 (1-B) of the Companies Act, 1956 to the effect that their appointment, if made, would be within the prescribed limit and that they are not other wise disqualified within the meaning of Section 226 (3) of the Companies Act, 1956 for such appointment. The Board recommends their reappointment as Auditors of the Company for the financial year 2012-13. The management's reply to auditors observation contained in the auditor's report at serial no. 3 regarding approval of Central government for excess managerial remuneration of Rs 270.62 Lacs paid to directors is as under: The re-appointment of Sh. Rajiv Goyal ,Chairman & Managing Director (CMD) & Mrs. Alka Goyal, Executive Director was approved by the shareholders in the annual general meeting held on 30.09.2009 w.e.f 01.11.2009 for a period of five years and their remuneration was approved as per the limits prescribed under schedule XIII Part II Section I of the companies act,1956. During the year under review, the company was in profits in the first half but suffered losses in the 2nd half for the reasons mentioned above .The remuneration paid exceeds the amount permissible due to losses. The company will file application to Ministry of Corporate affairs under the companies act, 1956 for waiver of excess remuneration paid to them. The notes to the accounts referred to in the Auditors Report are self explanatory and therefore do not call for any further comments. INDUSTRIAL RELATIONS The Company maintained healthy, cordial and harmonious industrial relations at all levels. The enthusiasm and unstinting efforts of employees have enabled the Company to gain present level of growth. 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 complied with the applicable provisions of Corporate Governance under clause 49 of the Listing Agreement with the Stock Exchanges. A Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite Certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is attached to this Report. SECRETARIAL AUDIT For each quarter of the financial year 2011-12, a qualified practicing Company Secretary carried out audits to reconcile the total admitted share capital with NSDL and CDSL, total issued and listed share capital. The reports confirm that the total issued / paid up share capital is in agreement with the total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. COST AUDIT Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Company's pharmaceutical products. Based on the recommendations of the Audit Committee, and subject to the approval of the Central Government the Board of Directors had re-appointed M/s. J. Verma & Associates as Cost Auditors of the Company for the financial year 2012-13. The cost audit report will be filed with the Central Government as per timeline. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information relating to energy conservation, technology absorption, foreign exchange earnings and outgo required to be disclosed under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure-B forming part of this report. PARTICULARS OF EMPLOYEES Particulars of Employees in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this report and are given in Annexure-A attached with the Director's Report. APPRECIATIONS AND ACKNOWLEDGEMENTS Your Directors express their gratitude to all Banks and Financial Institutions who have directly or indirectly supported the Company for meeting short term or Long Term and financial needs of the Company's expanding operations. Your Directors place on record their sincere thanks to the Central and State Governments of Punjab, Haryana, Himachal Pradesh and the state of J & K for their continued support to the Company. The Board also places on record the appreciation for the support provided by the customers, suppliers, equipment vendors and others to the Company. Your Directors also wish to place on record their sincere thanks and appreciation for the continuing support of the esteemed shareholders of the Company. The Board expresses its appreciations of the commitment, contribution and support of all employees of the Company for attaining the present level of growth. For & on behalf of the Board For Surya Pharmaceutical Limited Sd/- RAJIV GOYAL (Chairman & Managing Director) PLACE: Chandigarh DATE: July 7, 2012 |