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ADVANTA INDIA LIMITED ANNUAL REPORT 2011 DIRECTOR'S REPORT Dear members, Your Directors are pleased to present the 18th Annual Report together with the audited accounts of your Company for the year ended December 31, 2011. FINANCIAL HIGHLIGHTS: The financial performance of the Company, for the year ended December 31, 2011. is summarized below: (Rs. In Lacs) Consolidated Stand Alone Description December 31, December 31, December 31, December 31, 2011 2010 2011 2010 Sales Including other Income 95,214.92 70,652.07 17,044.22 14,052.22 Earnings Before interest, Tax & Depreciation and Amortization 13,584.90 7,539.66 7,315.10 2,623.93 Exceptional Items (238.24) (1,362.50) Nil Nil Profit/(Loss) Before Tax (PBT) 2,441.00 (3,016.84) 1,593.66 (2,923.14) Profit/(Loss)After Tax (PAT) 1,292.00 (2,822.82) 1,418.66 (2,923.14) Profit/(Loss) After Tax (Net of Minority Interest & prior period adjustment) 1,229.05 (2,745.29) 1,418.66 (2,976.14) Add: Balance brought forward from previous Year 13,654.21 16,399.50 (2,780.57) 195.57 Surplus Available for Appropriations 14,883.26 13,654.21 (1,361.91) (2,780.57) Appropriations: Proposed Final Dividend Nil Nil Nil Nil Tax on Dividend Nil Nil Nil Nil Transfer to General Reserve Nil Nil Nil Nil Transfer to Debenture Redemption Reserve 1,418.66 Nil 1,418.66 Nil Balance Transferred to Balance Sheet 13,464.60 13,654.21 (2,780.57) (2,780.57) TOTAL 14,883.26 13,654.21 (1,361.91) (2,780.57) Conversion rates as on 31st December, 2011: For Balance Sheet items (Closing Rate) For Profit & Loss Account (Average Rate) 1USD = Rs. 53.105 Rs. 48.930 1AUD = Rs. 53.9919 Rs. 49.7841 1EURO = Rs. 68.6993 Rs. 64.2695 1THB = Rs. 1.6827 Rs. 1.5862 1IDR = Rs. 0.00585 Rs. 0.00541 1BRL = Rs. 28.4638 Rs. 27.7180 BUSINESS OVERVIEW/OPERATIONS: The global consolidated business of Advanta has grown by an impressive 34.77% in 2011. Sweet Corn crop led the pack with a growth of 88% followed by Canola at 78%, Corn at 59%, Sunflower at 57% and Sorghum at 21%. Sorghum continues to be our largest crop contributing about 35% of our business. Among our subsidiaries we had excellent performances in Argentina, Thailand, USA and some of our International markets. Adverse weather conditions in Australia, Thailand and USA led to production losses which affected our business in the last quarter. Our wheat breeding program in Australia has started releasing good products to the market which are getting increasing acceptance from the farmers. New high quality forages are looking very promising in India. We continued to invest 11% of our revenues in research. This is an important investment we are making in order to have a secure future. We continue to access GM traits through licensing mechanism and are in the process of introducing GM corn in Brazil and Philippines. We have improved our inventory management very well in 2011. We are running very low on stocks in most of our crops by the end of the year. This is a result of tight production planning and generation of good sales as per plan. This helped us to improve our working capital management this year. We improved gross margins of our business from 44% to 46% through improved prices and reduced cost of goods. Overall, 2011 was a very good year for Advanta. During the year, the Company has recorded a consolidated total income of Rs. 95,214.92 Lacs as against Rs. 70,652.07 Lacs for the previous year, which is 34.77% higher than that of the previous year. The consolidated Profit after tax stood at Rs. 1,229.05 Lacs as against loss after tax of 2,745.29) Lacs for the previous year. As stipulated in the Listing Agreement with the Stock Exchanges, the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards issued by the Central Government under Companies (Accounting Standards) Rules, 2006. The audited consolidated financial statements together with Auditors' Report thereon form part of the Annual Report. FUTURE OUTLOOK: 2012 presents exciting prospects for us. The crop economics of corn, sunflower and canola look very good for the farmers which should help them to buy high quality inputs. The weather so far has been holding good. We expect good growth in all our subsidiaries although some of them will have a tight availability of seed in 2012. We expect very good growth in all our crops but more particularly in Canola, Corn, Sunflower and Sweet Corn. We are paying special attention to diversification of production and building supply chain capabilities in the organization. With considerable growth projected in some of the International markets like SE Asia, Europe, North Latin America and Africa we are looking at taking up new production sites in some of these countries. Corn is expected to drive most of our future growth and we are paying special attention to building capabilities in this crop. We are also looking at making processing arrangements in some of these countries either by ourselves or through outsourcing. We have reviewed our growth prospects till 2015 and are putting in place plans to plug the gaps in the required strengths and skills. This is a major area of investment for us. MODERNIZATION/EXPANSION PROJECTS: We are modernizing our plants in Thailand and Argentina. These investments will improve the quality of our products, particularly corn. We are increasing processing and storage capacities in many of our subsidiaries so that they can take care of the increasing load of the products. RESEARCH & DEVELOPMENT: We continue to invest 11% of our revenues in research. We want to increase the speed of creating new products through the use of modern technology. We are increasing the outlay on the use of molecular marker technology in our breeding programs. We are also building capabilities with a SNP marker platform in our Argentina biotech laboratory. This will help us to use the latest technology to enhance the speed and the power of our breeding programs. We have set up new breeding programs in France and Brazil which will help us to develop products for Europe and the tropical corn markets. This is a major investment we are making to increase our global reach. DIVIDEND: The Board of Directors do not recommend any dividend for the financial year ended 31st December, 2011 in view of inadequate profits during the said year. As such, no amount is proposed to be transferred to General Reserve. SUBSIDIARY COMPANIES: As on date, your Company has five direct subsidiaries: Unicorn Seeds Private Limited-India; Advanta Seeds Limited-India; Advanta Holdings B.V. - Netherlands; Advanta Seed International - Mauritius; PT Advanta Seeds Indonesia -Indonesia. and eleven step-down subsidiaries: Advanta US Inc. - USA; Advanta Netherlands Holdings B.V. - Netherlands; Advanta Finance B.V. - Netherlands; Advanta International B.V. - Netherlands; Pacific Seeds Holding (Thailand) Ltd -Thailand; Advanta Commercio De Sementas LTDA- Brazil; Pacific Seeds Pty. Ltd. - Australia; Advanta Semillas, SAIC- Argentina; Pacific Seeds (Thai) Ltd. - Thailand; Long Reach Plant Breeders Management Pty. Ltd. - Australia; Advanta (B.V.I) Ltd.- British Virgin Islands. Pursuant to the provisions of Section 212 of the Companies Act, 1956, the Company is required to attach the Directors' Report, Balance Sheet, and Profit and Loss account and other documents of its subsidiaries along with its Balance Sheet. In this regard, it may be noted that pursuant to the directions issued by the MCA, vide General Circular No.2/ 2011, Dt. 8th February, 2011, general exemption has been granted to the Companies from complying with the provisions of Section 212 of the Act in respect of their subsidiaries. This implies that your Company, being the Holding Company need not attach the Balance Sheet, Profit and Loss account etc., of its subsidiaries subject to compliance of certain conditions attached with the said exemption. In view of the compliance of said conditions, audited consolidated financial statements for the year ended 31st December, 2011, prepared in compliance with applicable Accounting Standards is attached herewith. Further, your Company undertakes that the Annual Accounts of the subsidiary Companies and the related detailed information will be made available to its shareholders and to the shareholders of its subsidiary companies seeking such information at any point of time. Further, the Annual Accounts of the subsidiary Companies shall also be kept for inspection by any shareholder in its head office and that of the concerned subsidiary companies. Further Statement as required under Section 212 in respect of Subsidiaries is annexed to this Report. Abridged Financial Information of Subsidiaries is also given on page No. 86 of the Annual Report. CONSOLIDATED FINANCIAL STATEMENTS: In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investment in Associates and with reference to Clause 32 of the Listing Agreement, your Directors present the Audited Consolidated Financial Statements in the Annual Report. CASH FLOW ANALYSIS: The Cash Flow Statement for the year under reference in terms of Clause 32 of the Listing Agreement entered by the Company with the Stock Exchanges is annexed hereto. NON-CONVERTIBLE DEBENTURES: During the year under review the Company has redeemed 2130 Unsecured Non- Convertible Debentures of Rs. 10,00,000 each aggregating to Rs. 213 Crores out of 3750 Unsecured Non-Convertible Debentures of Rs. 10,00,000 each aggregating to Rs. 375 Crores. As on date, the Company has 1620 outstanding Unsecured Non-Convertible Debentures of Rs. 10,00,000 each aggregating to Rs. 162 crores. INCREASE IN SHARE CAPITAL: Consequent to the issue of 2,223 equity shares of Rs. 10 each to employees upon exercise of options under Employee Stock Option Scheme - 2006 of the Company, during the year under review, the paid-up share capital of the Company increased from Rs. 1,685.20 lacs divided into 16,851,989 equity shares of Rs. 10/- each to Rs. 1,685.42 lacs divided into 16,854,212 equity shares of Rs. 10 each. The particulars of shares allotted during the FY ended 31st December, 2011 and till the date of this Report are as follows: Date of Allotment Name of the No. of Date of Listing Allottees Shares BSE NSE 28.02.2011 David Callachor 2223 05.04.2011 04.04.2011 27.02.2012 H. Sateesh Hegde 4028 26.03.2012 26.03.2012 09.05.2012 Atluri Suresh 504 - - * since the corresponding number of shares were allotted on the date of this report itself, the requisite listing application will be made in the due course of time. FOREIGN CURRENCY CONVERTIBLE BONDS: During the year under review the Company has issued USD 50,000,000 Floating Rate Guaranteed Convertible Bonds due 2016 Convertible into Ordinary Shares or Global Depository Shares representing Ordinary Shares of the Company. The said bonds are listed at Singapore Exchange Limited. Upon full conversion of these bonds, the equity capital of the Company will increase by an amount of Rs. 7,94,44,210 comprising of 79,44,421 equity shares of Rs. 10 each. During the year, the Company has not received any conversion notice from the FCCB holders. Details such as the total bonds issued, bonds converted, expected number of shares allotted with respect to outstanding FCCBs have been given in detail in Corporate Governance Report. COMMERCIAL PAPER: In January 2012, the Company has issued 300 units of Commercial Paper (CP) of face value of Rs. 5 lacs each aggregating to Rs. 15 Crores in de mat mode, having a tenor of 364 days. M/s. Axis Bank Ltd., Begumpet, Hyderabad has been appointed as Issuing and Paying Agent. The said instruments were rated 'CARE A1+(SO)' [A One Plus (Structured Obligation)] by CARE, the Credit Rating Agency. Subsequently, the Company redeemed the outstanding Commercial Paper (CP) of Rs. 15 Crores which were issued in January 2011. RIGHTS ISSUE: As the members are aware, an enabling resolution was passed in their EGM held on 17th March, 2011, authorizing the Board to raise funds up to an amount of Rs. 750 Crores. In view of the aforesaid, the Company has filed Draft Letter of Offer (DLOF) for issue of equity shares on rights basis aggregating to an amount up to Rs. 200 Crores with SEBI on 30.03.2011. SEBI approval is awaited in this regard. PUBLIC DEPOSITS: The Company has neither accepted nor renewed any deposits from public within the meaning of Section 58A and 58AA of the Companies Act, 1956, and the Companies (Acceptance of Deposits) Rules, 1975, during the year under review. DIRECTORS: Pursuant to the provisions of Section 256 of the Companies Act, 1956 and the Articles of Association of the Company Dr. Vasant P. Gandhi and Mr. Jaidev R. Shroff, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re- appointment. Board of Directors recommends their re-appointment. SCHEME OF AMALGAMATION AND ARRANGEMENT: The members may note that the Board of Directors of your Company has approved the Scheme of amalgamation and arrangement between Advanta India Limited, the transfer Company and Unicorn Seeds Private Limited, the Wholly owned Subsidiary of your Company, being the transferor company and their respective shareholders and creditors (the Scheme). In this regard, both the Stock Exchanges, BSE and NSE, where the shares of the Company are listed, have accorded their respective approval to the said Scheme. Further, the members may note that the Hon'ble High Court of A.P. vide its Order, Dt.26th April, 2012 has directed that the respective Meetings of Equity Shareholders and Trade Creditors of the Company be held on 2nd June, 2012 for the purpose of approving the said Scheme. AGREEMENT WITH UPL: With the completion of the pilot project on integration of sales and marketing function with United Phosphorus Limited (UPL) in India, as a progression of this process, the Company has entered into a License Agreement subsequent to the end of the year for transfer of technical know- how, manufacture and sale of licensed products in consideration of royalty from UPL. Pursuant to this arrangement the Company has sold its inventories to UPL. AUDITORS AND AUDITORS REPORT: M/s. SR Batliboi and Associates, Chartered Accountants, Auditors of the Company retires at the ensuing Annual General Meeting. They have expressed their willingness to continue and confirmed that their appointment, if made, shall be in accordance with the provisions of Section 224(1B) of the Companies Act, 1956. Statutory Auditors of the Company vide Para 8 in their Report on Consolidated Financial Statements read with Note No. 10 of Schedule 21 (Notes to Consolidated Accounts) have qualified the recognition of deferred tax assets with respect to the subsidiary companies i.e. Pacific Seeds Holdings (Thailand) Ltd., Longreach Plant Breeders Management Pty. Ltd., PT Advanta Seeds Indonesia, Advanta Comercio De Sementes LTDA., Pacific Seeds Pty Ltd., Advanta Holdings BV and Advanta Semillas SAIC, stating that there is no virtual certainty to indicate that the said companies will have sufficient taxable profits against which such deferred tax assets can be utilized. In this regard, your attention is requested to Note No.10 of Schedule 21 (Notes to Consolidated Accounts) on recognition of deferred taxes containing management's opinion that the said unused losses can be utilized. Auditors of the Company, vide para 9 of their Report on Consolidated Financial Statements have qualified their Report about 'consolidated segment information.' Your attention is invited to Note No.19 of Schedule 21, wherein the management explained its view that providing the said information would be prejudicial to the interest of the Company. DIRECTOR'S RESPONSIBILITY STATEMENT: To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217 (2AA) of the Companies Act, 1956: i. That in the preparation of accounts for the period ended December 31, 2011, the applicable accounting standards have been followed and that no material departures have been made from the same. ii. That the selected accounting policies have been applied consistently and the judgments and estimates are reasonable and prudent so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year and of the profit of the Company for that period. iii. That proper and sufficient care has been taken for the maintenance of the 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. iv. That the Directors had prepared annual accounts for the year ended 31st December, 2011 on a going concern basis. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: Pursuant to the provisions of Clause 49 of the Listing Agreement, a report on Management Discussion and Analysis is furnished as Annexure - A to this Report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: Particulars with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 217(1) (e) of the Companies Act, 1956 read with the Companies (Disclosures of particulars in the report of Board of Directors) Rules, 1988 are provided in Annexure - B which forms part of this report. PARTICULARS OF EMPLOYEES: Particulars of employees as required under section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended, forms part of this report. However in pursuance of section 219(1)(b)(iv) of the Companies Act, 1956, this report is being sent to all the shareholders of the company excluding the aforesaid information and the said particulars are made available at the registered office of the Company. Any shareholder interested in obtaining copy of the same may write to the Company Secretary at the registered office of the Company. None of the employees listed therein is related to any Director of the Company and all the employments are contractual in nature. EMPLOYEES STOCK OPTION PLAN (ESOP): The Advanta India Limited Employees Stock Option and Shares Plan-2006 (ESOPs) approved by the shareholders on 20th September, 2006 is in force. In accordance with the said scheme, the Company reserved 1,68,000 Equity Shares for its employees and for the employees of its subsidiaries on one to one basis at an exercise price of Rs. 285/- being the market price as per the valuation report from a Chartered Accountant on the date of grant. The options were granted with a vesting period spread over 4 years and 6 months. Out of the total options granted, vesting of options granted is conditional upon the employee's tenor and upon the Company meeting annual performance benchmarks based on parameters set by the Remuneration Committee. As the intrinsic value (difference between Market price and Excise price) on the date of the grant was nil, no compensation cost has been recognized in the financial statements. The disclosures as required under Clause 12 & 19 of SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines, 1999 are enclosed as Annexure-C to this Report. CORPORATE GOVERNANCE: As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on Corporate Governance practices followed by the Company together with a certificate from the Company Secretary in practice confirming compliance is annexed as part of the Annual Report. LISTING: The Equity Shares of your Company continue to be listed on Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE). There is no default in payment of Annual listing fees. DEMATERIALIZATION OF SHARES: It may be noted that the entire paid up equity share capital of the Company (except 102 shares) are held in dematerialized form as on 31st December 2011. ACKNOWLEDGMENTS: Your Directors wish to express their grateful appreciation for the valuable support and co-operation received from customers, investors, lenders, business associates, banks, financial institutions, various statutory authorities and society at large. Your Directors also place on record, their appreciation for the contribution, commitment and dedication of the employees of the Company and its subsidiaries at all levels. For and on behalf of the Board of Advanta India Limited Date : 07.05.2012 Vikram R Shroff V.R. Kaundinya Place: Hyderabad Director Managing Director CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: Information in accordance with the Companies (Disclosures of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Director's Report for the period ended 31st December, 2011: A. CONSERVATION OF ENERGY: 1. Energy conservation measures taken: The Company is not a typical manufacturing unit and hence does not consume substantial energy as such. However, keeping in view the peculiar characteristics of the manufacturing processes involved in the seed industry, wherein the Company is involved, the process of drying of seeds involves fair amount of energy consumption. Hence significant energy conservation measures have been undertaken during the year. We use convection techniques, where solar cabinets with photovoltaic cells are used to convert solar energy into heating energy up to 40 to 42 degree Celsius, which in turn dries the wet cobs to the desired moisture content. Using this, we replace Liquefied Petroleum Gas (LPG) with renewable solar energy, which is green and cost effective. We are also using conduction, where boilers fired by waste coconut cells, heat water, which in turn is used to dry the wet cobs. The company is also using machines powered by variable frequency drive, which are more energy-efficient than the existing machines. However, on an ongoing basis, identification of new energy saving means and measures are carried out. 2. Additional Investments and proposals, if any, being implemented for reduction of consumption of energy: We are planning to install turbo ventilators in our manufacturing plants to exhaust fumes, dust and smoke and ensure good uniform ventilation at premises. Powered by wind, these are noise and pollution free. 3. Impact of the measures at (1) and (2) above for reduction of energy consumption and consequent impact on the cost of production of goods: Savings in energy consumption results in low cost of production and eventual rise in profitability. 4. Total Energy consumption and energy consumption per unit of production: Not Applicable B. TECHNOLOGY ABSORPTION: RESEARCH AND DEVELOPMENT (R & D): 1. Specified areas in which R & D carried out by the Company: a) Identification and development of superior, high yielding pest and disease resistant proprietary hybrids. Utilization of the Molecular Breeding Technology to increase the speed and precision in the Breeding Programs. b) Development, testing and specification setting of packaging materials. 2. Benefits derived as a result of the above R & D: a) Cost reduction, import substitution and strategic resource management. b) Quality evaluation of seeds. c) Higher productivity and economic returns to the farming community consequent to development of high yielding Hybrids. d) Entering new market segments. e) Increased speed of introduction of new products. 3. Future Plan of Action: To continue and extend research in the above areas. 4. Expenditure on R & D: Description Standalone Consolidated FY 2011 FY 2010 FY 2011 FY 2010 Capital 105.78 32.35 184.46 121.30 Revenue 858.40 790.87 9216.00 6623.20 Total 964.18 823.22 9400.46 6744.50 R&D Expenditure as a % of Net Sales 7.35 8.12 10.31 10.32 * The expenditure given above does not include the amount spent on Nutrisun project. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION: 1. Efforts, in brief, made towards technology Absorption, adaptation and innovation: Utilizing plant breeding and bio-technological tools for the development of high yielding proprietary hybrids suitable for Indian agro climatic environment. 2. Benefits derived as a result of the above efforts: Product improvement and development leading to cost reduction by introduction of high yielding superior quality disease and pest resistant hybrids for the benefit of the Indian farmer. 3. Information reading Imported Technology: a. Technology Imported : Plant breeding and bio-technology know-how relating to seeds. b. Year of Import : Technology up gradation takes place on a continuous basis during the year c. Has Technology been fully absorbed : Yes d. Future plans of action : To continue ongoing research C. FOREIGN EXCHANGE EARNINGS AND OUTGO: 1. (a) Activities relating to exports : Export of various Hybrid Seeds in field crops and vegetable crops (b) Initiatives taken to increase : Started producing seeds for our other subsidiaries and for export markets taking the advantage of the low cost of production in India. (c) Export plans : Company is having ambitious export plan of hybrid seeds in the year 2012 by exploring the possibilities of taking production of hybrid seeds in India on behalf of overseas Buyers. 2. Foreign Exchange used : Current year Previous year (on stand-alone basis) (Rs. in Lacs) (Rs. in Lacs) Consumables : - - Capital Expenditure : - 19.75 Import of Seeds : 407.98 368.51 Travel : 26.27 13.02 Legal and Professional Charges : 58.06 55.63 Other Expenses : 61.57 64.50 Interest : 553.31 - Reimbursement of expenses : 68.20 - Total 1175.39 521.41 Foreign Exchange Earned (On stand-alone basis) FOB Value of Exports : 548.32 1378.03 Interest Income : 2897.13 2574.04 Reimbursement of expenses : 1201.22 242.86 Others : 104.47 - Total 4751.14 4194.93 For and on behalf of the Board of Advanta India Limited Date : 07.05.2012 Vikram R Shroff V R Kaundinya Place: Hyderabad Director Managing Director Disclosure pursuant to Clause 12 & 19 of SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines, 1999: Particulars As at 31st December, 2011 Granted during the year Nil Pricing Formula Black Schools Formula Vested during the year 11,439 Exercised during the year 2,223 Forfeited during the year 7,970 Lapsed during the year 11,432 Outstanding invested at the end of the year 5,446 Exercisable vested options at the end of the year 54,170 Total number of options in force 59,616 Total No of Shares arising as a result of exercise of option (cumulative) 19,712 Variation of Terms of options Nil Money Released by Exercise of options during the year Rs. 633,555 Employee wise details of options granted during the year: (a) Senior managerial personnel 3028 (b) Any other employee who received a grant in any one year, Nil of options amounting to 5% or more of options granted during the year (c) Identified employees who were granted options, Nil during the year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of the grant. Diluted Earnings Per Share (EPS) pursuant to issue of Shares on Rs. 8.34 exercise of options calculated in accordance with Accounting Standard 20. The Difference between the employee compensation cost using the intrinsic value of the stock options, and the employee compensation Rs. 7.66 Lacs cost that shall have been recognized if it had used the fair value of the options. The impact of this difference on profit Profit reduced by Rs. 7.66 Lacs Basic EPS of the Company. Rs. 8.42 Weighted average exercise price of options where exercise price is Rs. 285/- less than market price Weighted average exercise price of options where exercise price is - equal to or exceeds market price Weighted average fair value of options where exercise Rs. 285/- price is less than market price Weighted average fair value of options where exercise price is equal to or exceeds market price Description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted average information: a) Risk free interest rate 7.50% per annum b) Expected life Vesting period + 18 months c) Expected volatility 43% d) Expected dividends and 1.40% per annum e) The price of the underlying share in market at the time of option grant. Unlisted Company MANAGEMENT DISCUSSION AND ANALYSIS: Mankind witnessed the first ray of biotechnology when wine from grapes was made and yeast was discovered. Though not pronounced, biotechnology did get into action centuries ago. With the advent of agriculture in the civilized world, a sort of technology of leavening bread, melting grains and making cheese became a domestic activity, until Liven Hook discovered the cell and Louis Pester discovered the process of pasteurization. The biological science went into an upward spiral when the double helix of the DNA was unfolded to the world in the early part of the 20th Century. INDUSTRY STRUCTURE AND DEVELOPMENTS: Growth in agriculture is twice as effective in reducing poverty as growth in other sectors. Though the economic growth in the other nations was below average, the Asian economies, particularly India and China, recorded robust growth. The year also faced head winds, such as European sovereign debt crises, political upheaval in middle-east, spill-over from the Japanese natural disaster and the high oil & other commodities prices as well as monetary tightening in emerging market economies to contain inflationary pressures. Agriculture in India has a significant history. As of 2011, India has a large and diverse agricultural sector, accounting, on average, for about 16 percent of GDP and 10 percent of export earnings. India's arable land area of 159.7 million hectares (394.6 million acres) is the second largest in the world, after the United States. Its gross irrigated crop area of 82.6 million hectares (215.6 million acres) is the largest in the world. India has grown to become among the top three global producers of a broad range of crops, including wheat, rice, pulses, cotton, peanuts, fruits and vegetables. Worldwide, as of 2011, India has the largest herds of buffalo and cattle, is the largest producer of milk and has one of the largest and fastest growing poultry industries. Agriculture is demographical the broadest economic sector and plays a significant role in the overall socio- economic fabric of India. In fiscal year ending December 2011, with a normal monsoon season, Indian agriculture accomplished an all time record production of 85.9 million tons of wheat, a 6.3 percent increase from a year earlier. Rice output in India also hit a new record at 95.3 million tons, a 7% increase from the year earlier. Lentils and many other food staples production also increased year over year. Indian farmers, thus produced about 71 kilograms of wheat and 80 kilograms of rice for every member of Indian population in 2011. The per capita supply of rice every year in India is now higher than the per capita consumption of rice every year in Japan. India exported about 2 billion kilograms each of wheat and rice in 2011 to Africa, Nepal, Bangladesh and other regions of the world. The magazine released by the World Bank, 'India Country Overview 2011' briefed Indian Agriculture as follows: 'With a population of just over 1.2 billion, India is the world's largest democracy. In the past decade, the country has witnessed accelerated economic growth, emerged as a global player with the world's fourth largest economy in purchasing power parity terms, and made progress towards achieving most of the Millennium Development Goals. India's integration into the global economy has been accompanied by impressive economic growth that has brought significant economic and social benefits to the country. Nevertheless, disparities in income and human development are on the rise. Preliminary estimates suggest that in 2009-10 the combined all India poverty rate was 32% compared to 37% in 2004-05. Going forward, it will be essential for India to build a productive, competitive and diversified agricultural sector and facilitate rural, non-farm entrepreneur ship and employment. Encouraging policies that promote competition in agricultural marketing will ensure that farmers receive better prices.' The global seed industry had a good year in 2011 with better weather in many parts of the world, except for the drought in Southern parts of US. The GM crops acreage continues to grow rapidly. The global seed market is currently being driven by the increasing acceptance and adoption of GM crops. The GM crops market size has grown to more than 150m ha in 2011. Corn and soybean still lead this revolution. Advent's participation in this segment is still at early stages. We have GM canola in Australia, GM corn in Argentina and GM cotton in India. Our GM business is expected to grow rapidly in the next three years. The sorghum market is an important component of the global seed market. This market is primarily located in USA, Mexico, Argentina and Australia. Large sorghum acreages in India and Africa provide staple food to large populations. Advanta has a 26% share in the global sorghum market and is a leader in this market. Some of the significant developments related to the seed industry in India during the last two years have been discussed below. The Government of India imposed a moratorium on the development of Bt brinjal in February 2010. This moratorium has brought in a certain level of uncertainty in the development and the future of GM food crops in India. The regulatory process for the introduction of GM crops has also now prescribed obtaining a No Objection Certificate (NOC) from each of the state governments before undertaking GM crop trials in those states. This measure has considerably slowed down the regulatory process for GM crops in India as many states have not given the NOCs in 2011. These measures are expected to delay the introduction of more GM traits in India. The new seed bill has been waiting for introduction in the Parliament for some time now. The introduction has got delayed due to lack of political consensus on certain provisions in the proposed law. The proposed law prescribes a product registration system in India for the first time. This is good for responsible seed companies like Advanta. Advanta India endeavors to breed improved hybrid varieties of field (rice, cotton, mustard, forage & grain sorghums, corn, sunflower and pearl millet) and vegetable (okra, hot pepper, brinjal, gourds) crops to increase the productivity and profitability of Indian farmers. Investment in Agriculture R&D is the most effective way of ensuring food security and economic growth. The pressing need is for quality seed of varieties and hybrids that are not only high yielding but resilient to less input- water, fertilizers etc. Thus food security is interwoven with the seed security. Advanta's R&D targeted its research for developing hybrids that excel in the market with quality assurance. Your Company with vast experience in seed production of major agricultural crops backed by a very strong in-house R&D program for crops sorghum, sunflower, rice and several vegetable crops nurtured a competitive edge in seed and agribusiness. OPPORTUNITIES AND OUTLOOK: The fundamentals of the Agriculture sector continue to be robust and will drive growth in the years to come. The future of the seed industry in India is expected to be very good, with the demand for branded and quality seeds increasing. Seeds will be an important contributor to the targeted 4% growth in agriculture. Agriculture is gaining significance the world over with the rising needs from cultivation coupled with limited availability of land under cropping against the backdrop of the growing population. It is given that most of this need will be met by increasing productivity and making efficient use of natural resources which will see more constraints into the future. In India, the changing demographics and increasing aspirations is leading to a varied set of expectations in the farming sector. The Government too is seized of all these perspectives and is devoting increased attention to the farming needs. Government Initiative: The Union Government is planning the largest farm- loan relief package in the country's history- totaling at least 32,000 crore-and proposals to this effect will be unveiled when the Union Budget is presented on 29 February 2011. The package, which could end up totaling as much as Rs. 90,000 crore depending on the final shape of the proposals, is at the core of efforts by the ruling United Progressive Alliance and its largest constituent, the Congress party, to revive Indian agriculture and hopefully ride back to power in elections due in about a year. People familiar with the process of creating the package say it will have several components-from a waiver of interest on some loans to the complete writing off of not just stressed assets (or bad loans) but even those loans that have been rescheduled. Outlook: The Company remains focused on its key objectives of profitable and sustainable growth, maximizing operational efficiencies and striving to attain the highest standards of quality, safety and productivity through - continuous breeding research efforts, new product offerings, aggressive sales and marketing strategies, a strong brand, far-reaching distribution infrastructure and investments in people development, the Company is hopeful of maintaining its performance going forward. Efforts at offering better technologies, that provide better value to the farmer, while mitigating external risks, have been generally well received both by the Government and the farmer. Continued success in these efforts is critical to maintain these growth prospects. Some of the early indicators for 2012 are very positive. * The sunflower market and the corn markets continue to be very strong in 2012. There is a tight supply of sorghum seed because of drought in US. We will launch GM corn in Brazil and Philippines with outsourced products this year We are expecting our canola business to grow substantially compared to 2011 giving a big boost to our Australian business. * The growth in Latin America is expected to be very strong in many parts like Argentina, Venezuela, Ecuador, etc. We expect a big jump in the corn business in Thailand and Indonesia. This year could be a significant one in the history of corn business in Advanta. We will see a substantial increase in the wheat business of Longreach due to increasing acceptance of our wheat varieties. * Sweet corn and other vegetables business should see a good growth in this year. We already have good growth oriented indents for our sweet corn from some countries. * We will launch our sunflower in Europe for the first time. This is a major step forward for our International business. Rice and corn businesses in India should grow well based on our product performance and the Government subsidy programs SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE Business Segment: The Company has considered hybrid seed business segment as the primary segment for disclosure. The Company is engaged in research, development, production and distribution of Hybrid seeds, which in the context of Accounting Standard 17, India is considered the only Business Segment. Geographical Segment: Our sales are predominantly generated from international markets contributing about 85% to total sales and about 15% of the sales are generated from domestic markets. Secondary segmental information is based on the geographical location of the customers. The geographical segment have been disclosed based on revenues within India (sales to customers in India) and revenues outside India (sales to customers located outside India). The relevant information has been given at Para 8 under Schedule T, (Notes to Accounts) RISKS, CONCERNS AND THREATS: Agricultural activities are still greatly dependent upon the vagaries of the monsoon and upon soil conditions, availability of skilled labour, quality inputs and farm credit. Non-availability of adequate irrigation facilities in most parts of the country restricts the acreage and possibility of a 2nd crop in the year. Macro economic factors like post recession effect, inadequate rainfall, subdued demand, political uncertainty and social upheavals and acts of god may also affect the business of your Company and also the industry at large. Government of India has been supportive of technology advancement and improvement in agriculture techniques in the country. The business of the Company is dependent on various laws, regulations and policies announced from time to time. Any developments in these areas affecting the freedom of the Company to operate may adversely affect the business and growth of the Company. Major fluctuations in total rainfall and its distribution affect the crop acreages, pest incidence and overall productivity and have a direct correlation with sales. Exchange rate fluctuations between Dollar and Rupee could also impact revenues as well as costs in the foreseeable future. The rising crude prices could have an impact on the costs and prices of various products. Apart from the quantum, timing and even distribution of rainfall are critical for the domestic business. The situation in 2011 was better than what it was in 2010. Farmers' willingness and ability to spend will be an important driver to demand generation. Strong support prices and better availability of credit will ease the pressure on the farming community. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: Advanta has a robust internal audit and control system which is a process overseen by the Board of Directors, Management and other personnel and provides reasonable assurance regarding the effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable laws and regulations. The Company's internal Audit function is staffed with qualified and experienced people. It appraises, periodically, its activities and audit findings to the audit committee, statutory auditors and the management. The observations and suggestions of the internal audit are reviewed by the Audit Committee periodically. Adequate follow up measures are taken to overcome the pointed weaknesses, if any. The standard operating Procedures (SOPs) put in place by the company is in line with the best global practices and has been laid down across the process flows along with authority controls for each activity. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.: The Company has recorded a consolidated total income of Rs. 95214.92 Lacs as against Rs. 70652.07 Lacs for the previous year, which is 34.77% higher than that of the previous year. The consolidated profit after tax stood at Rs. 1229.05 lacs as against loss after tax of Rs. (2745.29) Lacs for the previous year. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED.: The Company believes that the quality of the employees is the key to its success in the long run and is committed to provide necessary human resource development and training opportunities to equip them with skill, enabling them to adopt the contemporary technological advancements. An atmosphere of cordial relations with the employees has prevailed in the organization all over the world. During the year, the Company has organized training programs for all categories of employees in different areas such as technical/skill development, behavioral, Business excellence, customer orientation, safety, company values and code of conduct and product training. As on 31st December 2011, the employee strength was 876. CAUTIONARY STATEMENT: Statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may be 'forward-looking statements' within the meaning of applicable laws and regulations. Actual results could differ substantially or materially from those expressed or implied. Important factors that could effect the company's operations include a downward trend in the Domestic Industry, Monsoon, rise in input cost, exchange rate fluctuations and significant change in Political & Economic environment in India, environment standards, litigations, changes in the Government regulations, tax laws, statutes and other incidental factors.