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Dr.Datsons Labs Ltd.

BSE: 533412 Sector: Health care
NSE: DRDATSONS ISIN Code: INE928K01013
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Dr.Datsons Labs Ltd. (DRDATSONS) - Director Report

Company director report

DIRECTORS

To

The Members

The Directors of your Company have pleasure in presenting their Eighth AnnualReport together with the Audited Balance Sheet as on 31st March 2014 therelated Statement of Profit and Loss for the year ended on that date and the AuditorsReport thereon.

FINANCIAL RESULTS:-

This fiscal has been an exciting year in terms of growth and profitability. To buildfurther on the success achieved by the company we have embarked on increased investmentsin all aspects. We are confident that these spends will enable us to maintain our growthtrajectory into the future.

The Financial Highlights are given below:-

Figures in (Rs.Lacs)

2013-2014 2012-2013
Sales and Other Income 42892.42 52546.43
Earnings Before Interest Taxes Depreciation and Amortization 6474.52 6563.78
Less: Depreciation 2044.21 2022.15
Earnings Before Interest and Tax 4430.31 4541.63
Less: Finance Charges 4301.44 4264.50
Profit Before Tax 146.67 4767.76
Prior Period Expenses 17.80 4.43
Exceptional Item 0 4486.20
Less: Provision for Taxation
Current Tax 25.78 55.64
Deferred Tax 61.52 222.17
Add: MAT U/S 115JB 25.78 55.64
Net Profit after Tax as carried to Balance Sheet 67.35 54.96
Basic & Diluted Earnings Per Share 0.46 0.40
0.19 0.37

YEAR IN RETROSPECT:-

• The Company’s Sales decreased from Rs. 52546.43 Lacs in the previous yearto Rs. 42892.42 Lacs in the current year.

• EBITDA decreased from Rs. 6563.78 Lacs in the previous year to Rs. 6474.52 Lacsin the current year.

• Net Profit After Tax increaded from Rs. 54.96 Lacs in the previous year to Rs.67.35 Lacs in the current year.

• Debt equity ratio is 0.92 in current year as compare to previous year 1.07.

• Current Ratio is 1.02 in current year as compare to previous year 1.86.

BUSINESS OUTLOOK:-

Dr. Datsons Labs Ltd we believe that nothing toughens like the tough times. 2013-14was a tough year as input cost continued to rise and key segments faced competitivepressures.

The rupee devaluation on account of fiscal challenges in the country resulted infurther pushing up the costs. Delay in financial commitments led to deferred timelines andlow capacity build-up.

We have undertaken steps to raise equity through sale of Stake so that the company getsin required funding for its Working Capital & Capex Program. We are looking for longterm investors who can take forward the legacy of the company

We chose not to stop but to carry on; not be withered but to persist. Rough seas makebetter sailors.

At Dr. Datsons we continued to wade through multiple challenges diligently patientlyand persistently. Our investments made over the years into an integrated business modelalso stemmed the decline.

In wake of growing competition and increased inflation cost control emerged as thebiggest challenge during 2013-14. We focused on critically analyzing each process andproduct to clearly identify avoidable elements in the cost structures. This enabled us toimprove efficiency process time and capacity utilization without any compromise on theend product/process quality. We continued to add new clients across all our divisions. Weutilized the blend of our competitive cost structures with our global standards in R&Dand synthetic chemistry skills to partner large pharma companies for long-term productdevelopment. Presently we have forged four long-term partnerships for our products andderive 37 per cent of our total revenues from these partnerships.

RESEARCH & DEVELOPMENT:-

A large investment in R&D could dent the bottom line especially when it does notcreate fresh revenues.

Risk mitigation

The Company created a strong R&D team dedicated to creating new products. TheCompany filed for more than 20 patents across different countries. Through R&D theCompany pioneered various oral lozenges in India. The Company’s R&D centre hasbeen recognised by DSIR. Government of India

ENVIRONMENT & SAFETY OUTLOOK:-

Dr. Datsons aggressively pursues safety health and environment protection as anintegral part of its business. The Company strives to minimise the adverse impact of itsactivities and products on the environment and maintain a safe work place for its teammembers.

The Company maintains a lawn and garden (shrubs and decorative plants) at itsmanufacturing units. More than 800 trees were planted over the five years leading to2012-13.

• Safety and health: Dr.Datsons strives to maintain the highest safety and healthstandards. The Company received the ISO 14001 (for environment management) and OHSAS18001:1999 (for safety and health) certifications vindicating its endeavour ofmaintaining operating practices in line with international benchmarks; each team member isadequately trained in maintaining these standards. The Company completed all its expansionprojects without a single accident. The Company constituted a six-member SHE committee.

• Training on safety: The Company ensures that every team member is capable ofhandling emergency situations. It organises regular classroom and practical training fromgovernment approved agencies.

• Evacuation plan: The Company’s safety programs are based on emergencyevacuation plans. The team is kept informed about the updated documents and displays andthe facilities are well indicated with assembly points.

• Fire equipment: The Company’s facilities are equipped with sophisticatedfire fighting infrastructure. It conducts three mock drills at its facilities annually.Critical areas like general warehouses and finished goods warehouses have smoke sensorswith multiple alarms systems.

• Environment: The Company is committed to comply with all applicable legalrequirements through continual improvement in operational process for improving itsenvironment measures. The Company does not generate any harmful/chemical wastes; it has afull-fledged effluent treatment plant for processing plant waste. The waste water isrecycled for gardening purposes within the complex. All operating practices are based onthe principle of efficient utilisation of material and energy .The Company practices apolicy of substituting hazardous materials and recycling of resources to the maximumextent possible.

DIVIDEND:-

In order to conserve the resources of the Company for any future expansion your Boarddeems fit not to recommend any dividend for the financial year 2013-2014.

FIXED DEPOSIT:-

The company has not accepted any fixed deposits during the year under reveiw.

MANAGEMENT’S DISCUSSION AND ANALYSIS REPORT:-

Management’s Discussion and Analysis Report for the year under review asstipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India ispresented in a separate section forming part of the Annual Report.

SUBSIDIARY COMPANIES:-

As per general exemption granted vide Government of India Ministry of CorporateAffairs’ general circular no. 2/2011 dated 8th February 2011 the Company has notattached the annual accounts of its subsidiaries to this Annual Report. As required by thesaid circular the relevant information for each subsidiary has been disclosed in theconsolidated financial statements attached to this Annual Report.

The Company will make available the annual accounts of subsidiaries and the relatedinformation to any Member of the Company who may be interested in obtaining the same. Theannual accounts of subsidiaries will also be kept for inspection by any Member of theCompany at the registered office of the Company. The Consolidated Financial Statementspresented by the Company include the financial information of its subsidiaries.

Further Statement under Section 212 of the Companies Act 1956 is enclosed herewith.

DIRECTORS:-

During the year under review Mr. Shashikant Shinde retires by rotation and beingeligible offers himself for reappointment at the forthcoming Annual General Meeting.

Further Mr. Balkrishna Parab and Dr. Ullooppee Badade resigned as Directors of theCompany w.e.f. 24th February 2014.

Further Mr. Chandulal Shah who was nominated as the Chairman-Emeritus of the Companystepped down as such w.e.f. 05th April 2014.

The Companies Act 2013 (the Act) provides for appointment of independent directors.Sub-section (10) of Section 149 of the Companies Act 2013 (effective from April 1 2014)provides that independent directors shall hold office for a term of up to five consecutiveyears on the Board of a company; and shall be eligible for reappointment on passing ofordinary resolution by the shareholders of the company.

Sub-section (1) states that no independent director shall be eligible for more than twoconsecutive terms of five years. Sub-section (13) states that the provisions of retirementby rotation as defined in sub-sections (6) and (7) of Section 152 of the Act shall notapply to such independent directors.

The non-executive independent directors were appointed as directors liable to retire byrotation under the provisions of the erstwhile Companies Act 1956. The Board of Directorshas been advised that non executive (independent) directors so appointed would continue toserve the term that was ascertained at the time of appointment as per the resolutionpursuant to which they were appointed. Therefore it stands to reason that only thosenon-executive (independent) directors who will complete their present term at the ensuingAGM of the Company in September 2014 being eligible and seeking re-appointment beconsidered by the shareholders for re-appointment for a term of upto five consecutiveyears.

Non-executive (independent) directors who do not complete their term at the ensuingAGM will continue to hold office till the expiry of their term (based on retirementperiod calculation) and thereafter would be eligible for re-appointment for a fixed termin accordance with the Companies Act 2013.

Further Mr. Giridhar Pulleti is appointed as an Independent Director of the Companyfor a period of five years w.e.f. April 1 2014 upto March 31 2019.

COMPLIANCE OFFICER:-

Mr. Yogesh Patel an Associate Member of the Institute of Company Secretaries of Indiais the Company Secretary and Compliance Officer of the Company.

AUDITORS AND AUDITORS REPORT:-

M/s. Agarwal Desai & Shah Chartered Accountants Auditors of the Company retiresat the conclusion of this Annual General Meeting and being eligible offers themselves forreappointment.

Auditors Report:

Auditors Report as issued by M/s. Agarwal Desai & Shah Chartered Accountants isself explanatory and do not call for further clarification by the Board.

COST AUDITORS:-

Your Board has proposed the appointment of M/s. Aatish Dhatrak & Associates as CostAuditors of the Company for conducting Cost Audit for the financial year 2014-2015.

PERSONNEL:-

The Company considers human resources as its greatest asset and strength in the processof development and progress. In terms of the provisions of Section 217(2A) of theCompanies Act 1956 read with the Companies (Particulars of Employees) Rules 1975 asamended by the Companies (Particulars of Employees) Rules 2011 the names and otherparticulars of the employees are set out in the Annexure-A to the Directors’ Report.

DISCLOSURE OF PARTICULARS:-

Information as per the Companies (Disclosure of Particulars on the report of the Boardof Directors) Rules 1988 relating to Conservation of Energy Technology Absorption ForexEarnings & Outgo is provided in Annexure B forming part of this report.

DIRECTORS RESPONSIBILITY STATEMENT: -

Pursuant to the requirement under section 217(2AA) of the Companies Act with respect toDirectors Responsibility Statement it is hereby confirmed.

a. That in preparation of the accounts for the finacial year ended 31stMarch 2014 the applicable accounting standards have been followed along with properexplanation relating to material departure.

b. That the Directors have selected such accounting policies and adopted themconsistently and made judgment and estimates that were reasonable and prudent so As togive a true and fair view of the state of affairs of the Company for the year under thereview.

c. That the Directors have taken proper and sufficient care for maintenance of adequateaccounting records in accordance with the provision of the companies Act 1956 forsafeguarding the assets and for preventing detecting fraud and other irregularities.

d. That the Directors have prepared the accounts for the financial year ended 31stMarch 2014 on a going concern basis.

CORPORATE GOVERNANCE:-

The Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by SEBI. The Company has alsoimplemented several best Corporate Governance practices as generally prevalent.

The Report on Corporate Governance as stipulated under Clause 49 of the ListingAgreement forms part of the Annual Report.

The requisite Certificate from the Statutory Auditor confirming compliance with theconditions of Corporate Governance as stipulated under the aforesaid Clause 49 is attachedto this Report.

LISTING:-

The shares of the Company are listed on the National Stock Exchange of India Limitedand Bombay Stock Exchange Limited. The Company has paid the annual listing fees to the NSEand BSE for the year 2014-2015.

BOARD COMMITTEES:

In Compliance with both the mandatory and non-mandatory requirements under the ListingAgreement and the applicable laws the Board has maintained the following committees:

(i) Audit Committee

(ii) Shareholders/ Investor Grievance Committee

(iii) Remuneration & Nomination Committee

(iv) Investment Committee

(v) Corporate Governance Committee

(vi) Health Safety Environment & Corporate Social Responsibility Committee

FOREIGN CURRENCY CONVERTIBLE BONDS:

The Company came out with the issue of Foreign Currency Convertible Bonds [FCCBs]aggregating to USD 40 million on 21st March 2013. However the proceeds of theissue were fully utilized for which issue was made as mentioned in the Offering Circulardated March 21 2013.

AUTHORISED CAPITAL:

During the year under review the authorized share capital of the Company was increasedfrom Rs 500000000 (Rupees Fifty crores) to Rs. 1100000000 (Rupees One Hundred Tencrores) divided into 110000000 Equity Shares of Rs. 10/- each.

ALLOTMENT OF SHARES:-

During the year under review the Company has allotted 39484717 equity sharesconsequent to the conversion notice(s) received from the Bondholder for conversion of theForeign Currency Convertible Bonds ("FCCB") for total value of US$ 40.00million at a conversion price of Rs. 55 per share in accordance with the terms of theOffering Circular dated March 21 2013 for issue of US$ 40 million unsecured foreigncurrency convertible bonds and the Supplemental Trust Deed dated February 21 2014.

Consequently the paid up share capital of the Company has increased from Rs.138871510 aggregating 13887151 equity shares of Rs. 10 each to Rs. 533718680aggregating 53371868 equity shares of Rs. 10 each.

The Company has received approval from BSE Limited and the National Stock Exchange ofIndia Limited for listing and dealing of all the above Equity Shares of the Company.

ACKNOWLEDGMENT:-

Your Directors would like to express their appreciation for the assistance andco-operation received from Bankers Govt authorities customers and vendors during theyear.Your Directors also wish to place on record their deep sense of appreciation for thecommitted services of Executives Staff and workers of the company.

We are on the verge of storming both the domestic and international markets with ourinnovative and specialty products and make a mark globally for the Company. We seek youractive cooperation for all our future endeavors to make your Company a leadingpharmaceutical Company.

For and on behalf of the Board

Dr. KANNAN VISHWANATH PRABHAT GOYAL
MANAGING DIRECTOR DIRECTOR
Place: Taloja
Date: 14/08/2014

ANNEXURE – A to the Directors’ Report:

Statement of particulars of employees pursuant to the provisions of Section 217(2A) ofthe Companies Act 1956 read with the Companies (Particulars of Employees) Rules 1975forming part of the Directors Report for the year ended March 31 2014.

Sl. No. Name of the Employee Designation Remuneration Qualification and Experience Date of Commencement of Employment Age Last Employment held
(in Rs )
1. Dr. Kannan Vishwanath Vice Chairman & Managing Director 10000000/- Bachelor's degree in chemical engineering Masters in Business Administration and having 15 yrs experience in pharmaceutical industry 04/05/2010 38 -

Annexure –B to the Directors Report:

Information as per the The Companies (Disclosure of Particulars on the report of theBoard of Directors) Rules 1988 relating to Conservation of Energy Technology AbsorptionForex Earnings & Outgo

A. Conservation of Energy:

i) Energy conservation measures taken-

- Monitoring closely high energy consuming equipments

- Optimum use of compressor thru shut down during low demand period

- Use of energy saving lighting arrangements.

ii) Additional investment/ proposals being implemented for reduction of consumption ofEnergy – Exploring use of Solar AC.

iii) Impact of measures at (i) &(ii) for reduction of energy consumption and oncost of production of goods. – Energy conserved and cost of production reduced..

iv) Total Energy consumption and Energy consumption per unit of production as per FormA.

a). Total Fuel & oil
consumed : 18163.51 Ltrs.
Expense : Rs .1174069/-
Average rate per Ltr. : Rs .64.64
Coal used : 3028.10 MT
Expense : Rs .29437979/-
Average Rate per Kg. : Rs .9.72/Kg
b) Total power consumed : 321972.60 units in kwh
Expense : Rs .3579780
Average rate per unit : Rs .11.11/kwh

B . Technology Absorption:-

Efforts made in technology absorption as per Form B

Research and Development:

1. Specific areas in which R & D carried out are in Anti-Cancer;Anti-Malarial andNiche APIs. Other Areas include process monitoring and development work to improveoperating efficiencies.

2. The benefits derived are

• Opening up avenues for more business in future including export potential.

• Broadening of product range and opening new product lines for future growth ofbusiness

• Technology upgradation

• Generation of know-why as well as know –howi

• Winning International awards

• Saving of Forex and development of ability to com pete Globally.

3. Future Plan of Action

Development of New products and Process

Creation of Intellectual Property and leveraging to increase the value of business

Upgradation and new variants of existing products

Technology Absorption Adaptation and Innovation:

1. Efforts in brief made towards technology absorption adoption and innovation

• Using state of the art equipmentinstrumentation and software.

• Deputation of Personnel for Training.

• Participation in symposium and exhibitions.

• Review of technical literature and patents in relevant technology areas

• Analysing feed back from users to improve process and services

• Use of alternate materials

2. Benefits derived are-

• Product quality performance in view of new business opportunities.

• Expansion of product range and export opportunity

• Product improvement

Cost reduction and reduced delivery time

Exposure to internatiuonal developments and opportunity to show case productsdeveloped

Improvement in job knowledge and capability development for global acceptance

3. Information regarding Technology imported-Nil.

C. Forex:-

Activities relating to exports

The company endeavours to have a diversified range of products and there is a dedicatedcell for giving impetus to exports.The company regularly participates in prestigiousinternational exhibitions and conducts market surveys. Company has agents in over 60countries to boost exports. Company is intensifying efforts in selected countries andexploring new markets.

Foreign exchange Earnings & Outgo:

Earning Rs. 9640.41 Lacs
Expenditure Rs. 52.82 Lacs

Section 212

Statement pursuant to of the Companies Act 1956

Sr. No. Name of the Subsidiary EROS PHARMACHEM PTE. LIMITED AANJ PHARMALABS LIMITED FZE. DR. DATSONS LABS LIMITED (U.K.) FAIT SUCCESS (H.K.) LIMITED
1 Financial Year Ended 31/03/2014 31/03/2014 31/03/2014 31/03/2014
2 Date from which it became subsidiary company 28/02/2012 21/01/2013 23/07/2013 11/4/2013
3 Shares of Subsidiary held as on 31st March 2014 200000 1 100 1
Total Number of Share and Face Value 200000 1 100 1
(Face Value- 1 SGD) (Face Value- 1 AED) (Face Value – 1 GBP) (Face Value– 0.12 USD)
b. Extent of holding 100% 100% 100% 100%
4 Net aggregate amount of profit/(loss) of the subsidiary so far as it concerns the members of Aanjaneya Lifecare Limited for current financial year
A Dealt with in the accounts of Aanjaneya Lifecare Ltd. NIL NIL NIL NI
B Not dealt with in the accounts of Dr. Datsons Labs Limited. NIL NIL NIL NIL
5 Net aggregate amount of profit/(loss) of the subsidiary so far as it concerns the members of Aanjaneya Lifecare Ltd. for the previous financial year
a Dealt with in the accounts of Aanjaneya Lifecare Ltd. NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE
b Not dealt with in the accounts of Aanjaneya Lifecare Ltd. NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE NOT APPLICABLE

 

For and on behalf of the Board of Directors
Place: Taloja KANNAN VISHWANATH PRABHAT GOYAL
Date: 14/08/2014 MANAGING DIRECTOR DIRECTOR