LAUREL ORGANICS LIMITED
ANNUAL REPORT 2011-2012
Your Directors have pleasure in presenting the Nineteenth Annual Report on
the business and operations of the Company together with the Audited
Statements of Accounts along with the Report of the Auditors for the year
ended 31st March, 2012.
Financial Results 2011-12 2010-11
(Rs. in lacs) (Rs. in lacs)
Net sales/income from operation 869.27 784.49
Other Income 4.15 7.01
Total Income 873.42 791.50
Total expenditure 764.78 620.39
Depreciation 38.00 36.28
Finance Charges 25.47 33.46
Profit/(Loss) for the year 45.17 101.37
Deferred Tax (5.28) (2.91)
Balance carried to Balance Sheet 38.89 98.46
The Company recorded income from operation of Rs. 869.27 lacs against
Rs.784.49 lacs in the previous year, registering a growth of about 10.8%.
The growth in turnover was mainly on account of revenues from reimbursement
of store consumables. However, Profit before exceptional items and tax
stood at Rs. 45.17 lacs against Rs. 101.37 lacs for the previous year due
to overall price rise in input cost. Earlier, during 2010-11, the company
was working on fixed monthly revenue model in which even during lower plant
capacity utilization, fixed monthly charges were payable. During the
current year the company moved to variable job work charges based on per kg
output as per the requirement of Ranbaxy, hence the advantage of lower
utilization, but fixed revenue was no more available to us. This has
resulted in he lower profitability during the current year temporarily. In
view of management, however, this model will be more beneficial as compared
to fixed model in long run corresponding increasingly with better capacity
utilisation. Your company has incurred Repair & Maintenance expenditure of
Rs 64.67 lacs and Laboratory Expenditure of Rs 28.53 lacs as compared to
last year of Rs 41.65 lacs and Rs. 20.03 lacs to fulfill additional
requirement & stabilization of new products manufactured for Ranbaxy. This
increase in maintenance cost has also affected the profitability of the
The global pharmaceutical industry has been growing at the rate of 7%.
While R&D and innovations within the industry are still mainly dominated by
MNCs based in the western world, the manufacturing focus has been shifting
to Asian giants - China and India. China continues to remain the biggest
manufacturing centre followed by Italy and India, and it is estimated that
India will emerge as the second largest manufacturing hub in 2012,
With more and more reputed companies shifting manufacturing focus to India,
our company will tend to gain in terms of more outsourced business from
these companies directly or indirectly. Your Company has never believed in
waiting for favorable tailwinds to achieve its goals. We have always
believed in seizing opportunities and pursuing aggressive plans to capture
them. This phase of our growth will be no different. We are moving ahead
with a well thought out strategy. The vision, objectives and detailed road-
map for the businesses have been defined and strategic initiatives have
been identified along with an execution plan. The only threat is
requirement of working capital, which will be arranged through financing.
The Company is carrying out contract manufacturing activity for M/s Ranbaxy
Laboratories Ltd, (a wholly owned subsidiary of the Japanese giant M/S
Daichi Sankyo) a reputed pharmaceutical company for the past 10 years.
Taking advantage of this growing segment, your company is exploring all
possibilities to expand further and intends to enter into such agreement
with other companies within and outside India. The experience of your
company in efficiently manufacturing and supplying about 35 different
products to M/S RLL during the past several years.
Since last year we are also focusing on written standard operating
procedures in all working of the departments and focusing on Good
Manufacturing Practice (GMP). This gives your company a sense of confidence
that it would be able to handle the offshore business opportunities very
well in future.
Since the Company has manufactured so may different types of Intermediates
of all most all therapeutic groups, it has resulted in building up a
capacity which extremely flexible which can handle all type of reactions
relevant in the pharmaceutical manufacturing. This has helped the Company
being way ahead of its competitors in terms of plant flexibilities which
has helped to cater to higher demand, increase in yields and steady costs
thus maintaining reasonable steady growth. Dues of unsecured creditors:
Your Company owes Rs 125.43 lacs to M/s Ranbaxy Lab as on the Balance Sheet
date. The company is regular in repayment of its liability with interest.
However, your company could not arrange to make payment of Long Term
outstanding dues to ICD lenders.
In view of accumulated losses of the company your directors do not
recommend any dividend.
The networth of the company has moved in positive direction during the
year. However, there remain huge brought forward accumulated losses still
to be wiped out.
Your company has not accepted fixed deposits from the members or public, by
public invitation during the year.
Three directors namely M;. Sandeep Gupta, Mrs. Shakuntala Prasad & Mr.
Binod Roy who retire by rotation at the ensuing Annual General Meeting and
being eligible, offer themselves for re-appointment.
M/s AK Jalan & Associates, Chartered Accountants, retires as Auditors of
the company at the conclusion of the ensuing Annual General Meeting and ate
eligible for re-appointment. The company has received certificate from them
under section 224(1 B) of the Companies Act, 1956.
The Central Government has notified an audit of the cost accounts
maintained by the Company in respect of formulations and bulk drugs
businesses. For conducting the cost audit for these activities for the
financial year ended March 31,2012, based on the recommendation of Audit
Committee, the Board has appointed M/s Mahesh Singh & Co, Cost Accountants
and made an application to the Central Government in accordance with MCA
Circular dated April 11,2011. The Cost Audit Reports would be submitted to
the Central Government within the prescribed time.
Your Company has taken adequate steps to ensure compliance with the
provisions of Corporate Governance prescribed under the Listing Agreement
with the Stock Exchanges. A separate report on Corporate Governance along
with the certificate of the auditors confirming compliance with the
conditions of Corporate Governance, as stipulated under Clause 49 of the
Listing Agreements entered into with the Stock Exchanges is annexed.
Health and Safety
The company continues to accord high priority to health and safety of
employees. During the year under review, a health & safety week was
organized several times in its factory and the training programme and
workshop for safety, awareness was also conducted for all employees at the
plant. The comprehensive health check up of the employees was also carried
out at the plant.
The plant is maintained strictly in compliance with the provisions of the
Pollution Control Act. All the Effluents either of water or Air being
generated during the manufacturing process are released after proper
treatment strictly as per the Pollution Control Regulations and Rules.
Listing of Shares
Your Company equity shares are listed with Bombay Stock Exchange Limited.
However, the scrip is under temporary suspension for trading for want of
certain compliances. The Company has been putting its best possible efforts
to recommence the trading at the earliest.
It is worth mentioning that your Company had issued 885,000 equity shares
of Rs 107- each at par in payment of dues to IDBI in partial modification
of sanctioned rehabilitation scheme by Hon'ble BIFR in March,2004 in view
of subsequent OTS reached with the said Financial Institution. However,
sanction to the modification of BIFR approved scheme could not be obtained
by IDBI in time despite requested for the same. Now, BSE insist for
sanction of the Hon'ble BIFR/AA1FR, which is under consideration at their
end. Your company has filled an appeal to High Court for seeking direction
to BIFR relating to issue of equity shares to IDBI and we hope to get the
sanction at an early date and continuation of listing thereafter.
Directors' Responsibility Statement
In terms of section 217 of the Companies Act, 1956, your directors confirm
(i) In the preparation of annual accounts the applicable accounting
standards have been followed along-with proper explanations, wherever
necessary relating to the material departures.
(ii) Your directors have selected prudent accounting policies.
(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 assets of the
company and for preventing and detecting fraud and other irregularities.
(iv) The directors have prepared the annual accounts on a going concern
The company had no employee of the category specified in sub section
217(2A) of the Companies Act, 1956 read with the companies (particulars of
employees) Rules, 1975. The statement showing particulars of foreign
exchanges earning and outgo is annexed hereto and form part of this report.
Auditors & their Report
With reference to the observation and remarks of the Auditors in their
report, which are self-explanatory and have been suitably covered in the
notes on accounts.
Industrial relations continued to be cordial during the year under review.
Your Directors acknowledge the vital role played by hard working employees
of the Company at all levels towards its overall success, other
stakeholders, bankers and business associates, who have continued to lend
their valuable support to the Company in its efforts to success. The
Directors take this opportunity to record their appreciation in this
For and on behalf of the Board
Date : August 14, 2012. Sd/-
(Abhishek Sahay Varma)
ANNEXURES TO THE DIRECTORS' REPORT:
Particulars as per the Companies (Disclosure of particulars in the report
of Board of Directors) Rules, 1988 forming part of the Director's Report
for the year ended 31st March, 2012
A. Conservation of energy:
a) Energy conservation measure taken - Cold water re-circulation system was
adopted to reduce energy loss.
- Old Chiller has been replaced with new energy efficient chiller.
- Existing one F.O. fired boiler was Modified to permit the use of
alternate cheaper fuel in place of F.O.
b) Additional investment and proposals,
if any, being implemented for reduction -NIL-of consumption of energy
c) Impact of measure at (a) & (b) above As a result of the measure at (a)
above the consumption of diesel and electricity is minimal.
d) Energy consumption particulars
Form for Disclosure of particulars with respect to conservation of energy
A. Power and fuel consumption Current Year Previous Year
Unit KWH'000 679.330 715.725
Total amount (Rs in lacs) 42.47 39.51
Rate per unit (Rs.) 6.25 5.52
(b) Own generation:
Through steam turbine/generator
Units KWH'000 644.232 700.043
Unit per Itr of diesel/oil 3.55 3.44
Cost per unit (Rs.) 11.98 11.30
2. Furnace Oil/HSD & Coal/Petcoke/Ors. used in Boiler/Thermopac etc.:
Current Year Previous Year
F.O./HSD Coal/Petcoke/ors F.O./HSD Coal/Petcoke
Quantity (K.ltrs) 58.097 740.987 277.239 -
(Rs in lacs) 21.92 47.45 94.05 -
Average rate (Rs.) 37.73 6.40 33.92 -
3. Consumption per unit of Production:
Current Year Previous Year
Production (in MT) 52.191 33.133
Electricity per MT KWH'000 25.36 42.73
Furnace oil/HSD per MT (K. ltrs) 15.31 8.37
Note: Figures for the year are not exactly comparable with last year, since
the figures pertain to Jobwork of high power Intensive, multiple products,
less/more time consuming and more/less steps to reach the final products
B. Technology absorption: -NIL-(Previous year-NIL-)
C. Foreign exchange earnings and outgo:
a) Activities relating to export initiatives taken to increase exports,
development of new Products and services, and export plan: NIL.
b) Total foreign exchange used and earned:
Used Rs. NIL (P.Y. Rs. NIL)
Earnings NIL (P.Y - NIL)
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
Industry Structure & Developments
During the year, positive signs had begun to emerge in many countries,
signifying recovery from the general recession and economic crisis.
However, there is high uncertainty, with one crisis or the other,
particularly in Europe, affecting overall sentiments. The developed nations
will need to take the initiative to pull the rest of the world back to
The recovery of the Indian economy seems to be on track with GDP predicted
to grow to higher levels. Industrial recovery has also gathered momentum in
recent months, The government is expected to adopt a gradual approach while
withdrawing policy stimulus measures so that the recovery Is not hampered.
The Indian pharmaceutical industry maintained its momentum and registered a
growth of about 18 per cent, according to ORG-IMS statistics.
The dynamics of the Indian pharmaceutical industry is undergoing
significant changes. Multinational corporations are working to entrench
themselves as evidenced by the recent buyouts of the domestic business of
major Indian pharmaceutical organizations. In the coming years, the
industry may witness a significant shift and a consolidation phase. All the
major players are trying to reach out to emerging rural markets in order to
expand their reach.
According to a recent report, the Indian healthcare services industry,
which primarily includes hospitals, is growing at an unprecedented rate of
16 per cent and is already one of the largest service sectors in the
country. The Indian pharmaceutical industry will need to realign its
strategies to cater to this segment. Opportunities and challenges
With the core promoters/management including technocrats, the Company has
been healthy on technical side which is reflected in its ability to
manufacture wide range of Bulk drug products in a cost effective manner by
regularly evaluating alternate processes, inputs, sources etc. Technical
competency has also helped the Company to continuously update and upgrade
its technology and improvement in processes, increased yields and value
additions as also to foresee opportunities in new products and adjust to
the dynamics of the market. Wide range of products enables the Company to
balance seasonal and cyclical fluctuations in the market. Segment-wise or
Since the company's operations are restricted and dependent on contract
manufacturing, therefore no product wise or segment wise performance can be
However, in the context of Contract manufacturing, the increased revenue
from job work reflects the production performance of the company.
Your Company's overall earnings presently depend on the job work of
pharmaceutical products. Because pharmaceutical business is global in
nature and also the company is doing job work for an Indian MNC(now a
global MNC), its volume of business depends on overall global economic
outlook & global demand and supply scenario. Risks and concerns
Though the pharmaceutical products, and particularly bulk drug
intermediates, which can be manufactured by the company, are
internationally traded, but at present the company has no production of its
own. It is completely dependent on the job work.
There are no risk areas like market fluctuations or import tariffs, but the
major risk is job order itself. As a part of its overall risk management
strategy, the company has carried its operations based on a manufacturing
Contract for five years with M/s Ranbaxy Laboratories Ltd., executed in
2008 for manufacturing Bulk Drug intermediates as per their specification
and requirements on Fixed minimum monthly Job Charges basis till 28.02.09.
With effect from 1st Mach'09, the model of operation has changed in view of
Ranbaxy's internal requirements partially on fixed basis and for regular
products on per kg. basis. Revenue from this activity for the year has been
taken accordingly. From 1st January, 2011 the system of Conversion Charges
has been changed to per kg basis in entirety, so your company risk depends
on the volume of job work being provided.
Internal control system and their adequacy
A proper and extensive system of internal control is practiced by your
company, to ensure that all its assets are safeguarded and protected, and
that transactions are authorized, recorded and reported properly. An
adequate programme of internal audits, reviews by management and documented
policies, guidelines and procedures, supplements the internal control
systems, that are designed to ensure reliability of financial and all other
records to prepare financial statements and other data & to maintain
accountability of assets. During the year the Company has appointed M/s
R.K.Aggarwal & Associates, Chartered Accountant to conduct internal audit
of the company. Top management and audit committee of the Board reviews the
findings and recommendation of internal audit panel.
The company is also following written procedures in all it departments with
special emphasis in manufacturing and Quality Assurance activities.
The Company has cleared all dues of Sales Tax Department and dues of
unsecured loans reduced to Rs 170.36 lacs. However, dues to unsecured
creditors increased to Rs.95.12 lacs. To mitigate this risk, the company is
looking forward for working capital finance & term finance from banks
and/or other lenders. However the company was able to meet slowly its
entire requirements for payment of outstanding statutory dues and unsecured
creditors from its operating cash flows. Financial performance with respect
to operational performance
The Jobwork done by the company for the year 2011-12 is Rs. 873.42 lacs in
comparison to the year 201011 which was Rs.791.50 lacs . The details are in
Your Directors report that in spite of adverse financial position there was
excellent performance in contract manufacturing during the year.
Material Development in human resources/Industrial relations front,
including number of people employed.: In the context of people employed,
there have been no significant changes in workforce employed during 2011-12
compared to the previous year.
For and on behalf of the Board
Date : August 14, 2012 Sd/-
(Abhishek Sahay Varma)