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Birla Pacific Medspa Ltd.

BSE: 533469 Sector: Consumer
NSE: N.A. ISIN Code: INE341L01017
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Birla Pacific Medspa Ltd. (BIRLAPACIFIC) - Director Report

Company director report

BIRLA PACIFIC MEDSPA LIMITED ANNUAL REPORT 2011-2012 DIRECTOR'S REPORT To The Members, The Directors present hereunder the 4th Annual Report on the Business and operations of the Company along with the Audited Statement of Accounts of the Company for the year ended March 31, 2012. The financial results for the year are summarized as under: 1. FINANCIAL RESULTS: (Amt. in Rupees) Particulars 2011-12 2010-11 Net Sales and Other Income 4,60,48,351 2,24,47,983 Profit/(Loss) before Interest, Depreciation and Taxation (58,42,778) (3,30,94,246) Less: Interest 17675 - Less: Depreciation 98,61,273 1,12,47,374 Net Profit/(Loss) After Tax (1,57,21,726) (4,43,41,620) Add: Balance bought forward (8,38,91,135) (3,95,49,515) Balance carried forward to Balance Sheet (9,96,12,861) (8,38,91,135) 2. PERFORMANCE REVIEW: The net sales and other income of the Company for the financial year 2011- 12 stood at Rs. 460.48 Lacs as against previous year Rs. 224.48 Lacs. The Loss after tax is Rs.157.22 Lacs as against Loss after tax of Rs.443.42 Lacs of corresponding previous year 2010-11. 3. DIVIDEND: Considering the financial performance of the Company for the financial year ended March 31, 2012, your Directors regret their inability to recommend dividend on the Equity shares. 4. SUBSIDIARY COMPANY: The Accounts of the wholly owned subsidiary Company, Birla IVF LLP have been received by the Company and a statement pursuant to Section 212 of the Companies Act, 1956 forms a part of this Annual report. PARTICULARS UNDER SECTION 212 OF THE COMPANIES ACT, 1956: The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2/2011 dated February 8, 2011, has granted a general exemption from compliance with Section 212 of the Companies Act, 1956, subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption. The financial data of the subsidiaries have been furnished under Annexure I to the consolidated notes' to financial statement forming part of the Annual Report. Consolidated Financial Statements of the Company and its subsidiary for the year ended March 31, 2012, together with reports of Auditors thereon and the statement pursuant to Section 212 of the Companies Act, 1956, form part of the Annual Report. The Annual Accounts and the related detailed information of subsidiary company will be made available to the Members of the Company and subsidiary Company seeking such information at any point of time. The Annual Accounts of the subsidiary Company will also be available for inspection by any member at the registered/head office of the Company and that of the subsidiary concerned. 5. DIVERSIFICATION OF BUSINESS: Your Directors thought it prudent to diversify and expand its existing business portfolio from pure service business to a scalable product business and need based medical services business such as to set up IVF Centers, Integrated Wellness Centers, Sports Nutrition etc. 6. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: In terms of clause 49 of the Listing Agreement with the Stock Exchange, the Management Discussion and Analysis Report is appended to this report. 7. CORPORATE GOVERNANCE: Your Company will continue to strive to incorporate best of standards for good corporate governance. As a listed company, all required measures are being taken to comply with the agreement entered with the Stock Exchange Guidelines and other statutory regulations. A separate report on Corporate Governance along with a Certificate of Compliance from the Auditors forms part of this report. 8. DIRECTORS' RESPONSIBILITY STATEMENT: Pursuant to the requirement under Section 217(2AA) of the Companies Act 1956, with respect to Directors' Responsibility Statement the Directors of the Company state as under that:- i. In the preparation of annual accounts, applicable accounting standards had been followed along with proper explanation relating to material departure; ii. The directors had 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 and of the profit or loss of the Company for that period; 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 & other irregularities; iv. The directors had prepared the annual accounts on a 'going concern' basis. 9. DIRECTORS: During the year under review, Shri Ramprakash Murlidhar Mishra was appointed as an Additional Director of the Company with effect from May 25, 2012. As per provisions of Section 260 of the Companies Act 1956, such director holds office only upto the date of forthcoming Annual General Meeting of the Company. The Company has received notice proposing Shri ramprakash Murlidhar Mishra as candidate for the office of Director pursuant to Section 257 of the Companies Act, 1956. Shri Venkateswarlu Nelabhotla tendered his resignation with effect from August 9, 2012 as Director of the Company. Shri Mohandas Shenoy Adige and Shri Anoj Menon Directors of the Company, retire by rotation and being eligible at the forthcoming Annual General Meeting, offers themselves for re-appointment. 10. PUBLIC DEPOSIT: Your Company has not accepted any fixed deposit from the public. As such, no amount of principal or interest is outstanding as on the Balance Sheet date. 11. AUDITORS: M/s. Kanu Doshi Associates, Charter Accountants, the Statutory Auditors of the Company, retire at the ensuing Annual General Meeting. They have confirmed their eligibility and willingness for reappointment. The Directors recommend their reappointment by the Members at the forthcoming Annual General Meeting. 12. AUDITORS REMARKS: Auditors' Qualification Directors' Explanation The Auditors have made a remark in The Board of Directors explanation point no. 4(vi) of the Auditors' to this remark is that the Report for the year ended March management has continued to defer 31, 2012 which states that the these expenses as it is felt that Company has deferred the accumulated these expenses have benefit off revenue expenditure of enduring nature to the Company and Rs. 8,97,55,020 (previous period therefore the same shall be written Rs. 5,56,38,638 plus current period of in the future years. Rs. 3,41,16,382) being in the nature of Brand Building Expenses which is not in accordance with of Accounting Standard 26 'Accounting for Intangibles'. Due to the above, the loss as reported by the profit and loss account is understated by Rs. 3,41,16,382 and reserve of the company is overstated to the extent of Rs. 8,97,55,020. Our report for the earlier period contained similar observation 13. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The information relating to energy, technology absorption and 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 the Annexure 'A' to the Directors Report. 14. PARTICULARS OF EMPLOYEES: During the year under review, there was no employee covered under the provision of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended by Notification GSR 289(E) dated 31.03.2011, General Circular No. 23 dated 03.05.2011. 15. HUMAN RESOURCE: Your Directors place on the record their appreciation to the contribution made by the employees at all levels who, through their competence, diligence, solidarity, co-operation and support, have enabled the Company to achieve the desired results during the year. 16. ACKNOWLEDGMENTS: Your Directors take this opportunity to thank all investors, clients, vendors, banks, regulatory authorities and wishes to acknowledge the invaluable support extended to the Company by them. The Directors are pleased to place on record their appreciation for the valuable information made by the employees of the Company. For and on behalf of Board of Directors Place: Mumbai Dr. Abhijit Desai P.V.R. Murthy Date : August 9, 2012 Managing Director Director ANNEXURE 'A' TO THE DIRECTORS' REPORT: Information under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March 31, 2012. A. Conservation of Energy: During the year under review, efforts continued to conserve and avoid wastage of energy in every possible way. B. Technology Absorption: Research & Development: 1. Specific areas in which R & D carried out by the Company: Not Applicable. 2. Benefit derived as a result of the above R & D: Not Applicable. 3. Expenditure on R & D: Not Applicable. 4. Technology Absorption, Adaption and Innovation: Not Applicable. C. Foreign Exchange Earnings and Outgo: 5. Activities relating to the exports, initiatives taken to increase exports: Not Applicable. 6. Total foreign exchange earnings and outgo: (Amount in Rupees) Particulars 2011-12 2010-11 Total foreign exchange earnings - - Total foreign exchange outgo - 226,127 MANAGEMENT DISCUSSION AND ANALYSIS a) Economy and Market Trends: As per a study made by FICCI - PWC, the overall wellness market is estimated at INR 490 billion and wellness services alone comprise 40% of this market. Some of the key industry trends include: * The growing wellness industry has attracted a large number of domestic entrants and international players. * Established players are pursuing revenue maximization through product and service diversification and are exploring new global and domestic markets. Franchising is emerging as a popular option for scaling up. * Companies are actively seeking public and private equity investments to fuel their growth. * While there is strong optimism about future growth prospects, recovery of investments may spread over a longer horizon than anticipated. * There exists an opportunity for micro-segmentation to develop more targeted value propositions for consumers and commercialization of traditional Indian home remedies. b) Road Ahead: Paucity of skilled and trained personnel is one of the biggest challenges in the industry today. However, their availability is a concern. Effective monitoring of the industry is a challenge. Initial attempts at quality accreditation have not been impactful. However, during the next three years we estimate that the Indian wellness industry will grow at a CAGR of 20% to reach INR 875 billion. Consumers and their needs will continue to evolve, driving the transition from remedial care to a more holistic view on preventive care. This augurs well for the wellness industry in India. c) About the Company: Our company, was incorporated on July 15, 2008 to carry on in India and abroad the business of beauty and healthcare treatments, health and fitness resorts, dieticians, yoga ashrams, saloons, hair and skin treatments, Sanatorium centers, and to manufacture soaps consumables, oils, medicines, body sprays and scents, creams, powders, natural and artificial skin and hair conditioners. In line with the above study, the Company offers a 'one-stop-solution' for all cosmetic services under the brand name 'Evolve'. Our Centers act as a single stop set up for beauty related medical procedures in India which gives our company an edge over local unorganized players. d) Current Status: While the company is currently operating its one stop cosmetic services centers under the brand name 'Evolve', the business in 2011-12 at these centers has not been to the company's expectations. The services offered by the company are cosmetic and discretionary in nature and the business has direct correlation with the disposable income in the hands of the consumer. Most organized players have a mix of established centers and new outlets. Achieving stable operations for a new centre (in terms of footfalls and enrolments) depends on location, positioning, local competition, etc. and varies between 6-36 months. Having achieved stable operations, payback may vary between 2-4 years, depending on the type of service and business model. With the current economic slowdown, economic conditions prevailing in the economy are unfavorable and after analyzing the performance of the existing centers, the company is of the view that there would be a slack in the business potential at these centers. Keeping in view of the slowdown in the economy and the not so good customer response in the existing centers, the management has decided to go slow in finalizing and opening of new Evolve centers. While exposure to western culture continues, Indian consumers remain connected to their roots and traditions. Benefits of natural ingredients, herbs and natural foods is ingrained in the psyche of most Indians and they are considered 'safer' than their chemical counterparts. Recognising this opportunity, companies have launched products and services with traditional Indian practices, home remedies and ayurveda as their core proposition. In the light of the aforesaid, your Company has adopted a cautious approach towards utilization of the IPO Proceeds. As a result, the management has devised new strategies which would not only complement its existing business but also help the company in diversifying & expanding its business portfolio. As a risk mitigating strategy, the Company has thought fit to diversify the businesses from pure service business to a scalable products business and need based medical service business. With this context in purview, the Company has decided to utilize its current proceeds of IPO under the following new business segments: Need based Medical Services: 1. IVF Centers 2. Integrated Wellness Centers Wellness related products businesses: I. Sports Nutrition: Others: 1. Acquisition of Company for alternative medicine viz. Ayurvedic, Unani etc. 2. Ayurveda Medicine Products With the initiation of above business, your company will truly convert itself from its current pure cosmetic services business into a fully integrated wellness company offering both products & services. f) Internal Control Systems and their adequacy: Your Company continues to remain committed to maintain high standards of internal control designed to provide adequate assurance on the efficiency of operations and security of its assets. The adequacy and effectiveness of the internal control across various activities, as well as compliance with laid down systems and policies are comprehensively and frequently monitored by your Company's management at all levels of the organization. g) Human Resources and Industrial Relations: Your Company continues to lay emphasis on qualitative growth of its human resources by providing congenial and constructive work environment, in consonance with its belief that the real strength of its organization lies in its employees. Industrial relations were cordial and satisfactory throughout the financial year. h) Financial highlights: a. Sales:- Sales (net of Excise) during the financial year 2011-12 was Rs. 331.61 Lacs as against Rs. 213.53 Lacs previous year ended March 31, 2011. b. Profit/Loss:- The net sales and other income of the Company for the financial year 2011- 12 stood at Rs. 460.48 Lacs as against previous year ended March 31, 2011 Rs. 224.48 Lacs. The Loss before tax is Rs.157.22 Lacs as against Loss before tax of Rs. 443.42 Lacs of corresponding previous year ended March 31, 2011. Forward Looking Statements: Statements in this report on Management's Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be forward looking statements within the meaning of applicable security laws or regulations. Forward-looking statements are based on certain assumptions and expectations of future events and the Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The important factors that could make difference to the Company's operations includes the economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, change in Government regulations, tax laws and other statutory and numerous incidental factors. The Company assumes no responsibility to publicly amend or revise the forward-looking statements or any loss to the investors in the shares of the Company making investments relying on such forward-looking statements.

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