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Lyka Labs Ltd.

BSE: 500259 Sector: Health care
NSE: LYKALABS ISIN Code: INE933A01014
BSE LIVE 15:40 | 21 Aug 53.20 -1.00
(-1.85%)
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54.20

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54.90

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NSE 15:31 | 21 Aug 53.30 -0.70
(-1.30%)
OPEN

54.00

HIGH

55.55

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OPEN 54.20
PREVIOUS CLOSE 54.20
VOLUME 6305
52-Week high 76.80
52-Week low 38.65
P/E 55.42
Mkt Cap.(Rs cr) 150
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 54.20
CLOSE 54.20
VOLUME 6305
52-Week high 76.80
52-Week low 38.65
P/E 55.42
Mkt Cap.(Rs cr) 150
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Lyka Labs Ltd. (LYKALABS) - Director Report

Company director report

Report Of The Board Of Directors

To

The Members

Lyka Labs Limited.

Your Directors have pleasure in presenting Thirty Fifth Annual Report and the AuditedAccounts of the Company for the Financial Period of Fifteen Months ended 30thJune 2014.

The Financial Results are as under :

FINANCIAL RESULTS

Particulars 2013 - 2014 2012 - 2013
15 months 12 months
( Rs. in lacs) ( Rs. in lacs)
Total Revenue 9139.71 9845.07
Profit before interest Provision for Depreciation Taxes and Write offs. 73.70 1536.98
Less : Interest (2194.98) (1511.92)
Operational Profit /(Loss) before Depreciation (2121.28) 25.06
Less : Depreciation (543.04) (329.90)
Exceptional Items
Less : Bad Debts written off (838.25)
Less : Loss due to fire (299.57)
Less : Loss on Sale of Fixed Assets (16.69)
Less : Prior period Expenses (365.51)
Add : Excess Provision written back 62.21
Less : Extra Ordinary Item
Less : Amortization of expenses for restructuring of Loan (37.46)
Add : Profit on Slump Sale 3457.16
Profit/(Loss) for the year/ period (722.18) (280.10)

In compliance with SEBI directives the Company has restated its Annual Accounts forthe Financial Year 2012-2013 as a result loss has increased by Rs. 365.51 lacs whichwere stated as prior period expenses in Financial Year 2013-2014.

OPERATIONS

During the period under review the Total Revenue earned by the Company was Rs. 9139.71Lakhs and on an annualized basis was Rs. 7311.77 Lakhs as against Total Revenue of Rs.9845.07 Lakhs of previous year. The Company has reported a loss of Rs. 722.18 Lakhs whichwas mainly on account of:

i. Lower capacity utilization of factory at Tarapur as a result contribution was notadequate enough to cover the fixed cost of the Company which resulted into operationallosses.

ii. Due to Fire in Company’s Lypholisation Plant at Ankleshwar in October 2013there was damage to Plant & Machineries and Stores Raw Materials & PackingMaterials which are estimated at about Rs. 4 Crores and the Company had to suspend itsmanufacturing operations for about 4 months which further resulted into Loss of productionand Sales of the Company.

iii. Acute Competition in P2P Business affected sales margin.

The lyophilized products of Ankleshwar Factory are well accepted in the market andCompany has therefore planned expansion of its capacity to cater to regulatory markets.

The Company’s Factory at Tarapur was closed for nearly two years for modernizationto meet requirements of WHO GMP and regulated market like EU GMP certification. The planthas commissioned production during March 2013. Due to pending approvals / Licenses fromrelevant Authorities it was operating at very low capacity. Further manufacturing theproducts for Domestic Market is not viable since it is not possible to compete withfactories located in Tax Free Zones hence the Company has to depend on Exports offinished formulations which is possible only after the products are registered withRegistering Authorities of respective countries which would take substantial time between12 months to 24 months.

Thus contribution from manufacturing facility at Tarapur was not adequate enough tocover the operating cost of running the plant and therefore in the interest of theCompany the manufacturing facilities at Tarapur Maharashtra was sold for

Rs. 38.61 Crores in the Current Financial Year. A very large amount of the salesrealization was utilized to pay the debts of the Bank as per the terms of their sanction.The sale of this factory would consequently result in saving of operating fixed costs inthe current Financial Year.

The Performance of Domestic Marketing Division of Ethical Products is encouraging. Ithas introduced a wide range of anti-infective anesthetics anti-ulcerants and steroid inparenteral dosage forms and has more then 50 products which are being sold across 12states in India. With a view to achieve expansion and growth of Domestic MarketingDivision of Ethical Products independently the Company during the year has promoted a newwholly owned Subsidiary Company viz. Lyka Healthcare Limited and sold its DomesticMarketing Division of Ethical Products by way of Slump Sale to Lyka Healthcare Limited awholly owned Subsidiary of the Company.

Sale of P2P business has dropped due to acute market competition from Tax Free Zonesand margins are always under pressure. The Company is focusing Dermatological products andLyophilized product range and have marketing tie up with several renowned Pharma Companieswhich would help to regain the lost revenue and profitability in the coming years.

The Company is continuously putting its efforts to find a potential buyer ininternational markets for tie up of Technical Know How arrangements.

SUBSIDIARIES

During the Financial Year 2013-14Company’s Subsidiary Lyka BDR International Ltd(LBDR) has reported total income of Rs. 5047 lacs and focusing on increase in volume ofexports change in product mix and concentration on high contribution products bettermarketing strategies new product registrations and cost controls etc.

During the year nearly 51 fresh registrations/renewals have been received by LBDR andapproximately 150 registrations/ dossiers are submitted to the Health Authorities ofvarious countries thereby increasing the intrinsic value of the Company of whichapproximately 100 registrations are expected to be received in the Financial Year 2014– 2015

The main assets of LBDR are its registration rights in various markets. In the comingyears the LBDR is likely to file about 100 new dossiers mainly in rest of the worldmarkets. Recent Registrations received are likely to help the LBDR to generate newbusinesses in the more remunerative products.

LBDR is now focusing on emerging markets like Nigeria Iran Indonesia and Brazil whereit expects new business in the coming years. It will endeavor to improve its product mixto achieve better realizations.

With enhanced number of registrations the company plans to achieve turnover of Rs. 70crores in Financial Year 2014-15 with improved bottom line and accordingly theConsolidated Financials of the Company would improve.

During the year under review the Company has floated a Wholly Owned Subsidiary Companynamely Lyka Healthcare Limited to provide independent opportunities to focus develop andexpand Domestic Marketing of Ethical Products.

Lyka Exports Limited is engaged in marketing veterinary products and considering thefuture growth and prospects of Lyka Exports Limited the Company has appropriated part ofthe amount due from Lyka Exports Limited towards additional shares issued by Lyka ExportsLtd. As a result Company’s stake in Lyka Exports Limited has increased from existing48% to 73% and Lyka Exports has become a Subsidiary of your Company during the year underreview.

The Financial Statements of Company’s subsidiaries are consolidated with theFinancial Statements of the Company and form part of this Report.

As required under provisions of Section 212 of the Companies Act 1956 a statementrelated to its subsidiaries is attached to this report. The Company is not attaching theBalance Sheet and Profit & Loss Account of its Subsidiaries to its Annual Report.However if any requisition made by Shareholder the Company shall provide hard copy ofAnnual Accounts and related information of its Subsidiaries and shall keep available hardcopy of Annual Accounts of subsidiaries for inspection by shareholders at its CorporateOffice during business hours.

FUTURE OUTLOOK

i. The Company is in process of introducing Cosmetic Products in ‘Skin Care’and ‘Hair Care’ Segment and will launch these products in the market in the nearfuture. The negotiations are going on with big Pharma Companies for commercialization ofthese products.

ii. To cope up with the increase in demand of Lyophilized Products the Company hasplanned to expand capacity of its Lyophilized Plant at Ankleshwar Factory for which theCompany has already purchased two Lyophilizers to cater the requirements of RegulatedMarkets. On completion of the expansion revenue and profitability of the Company wouldimprove.

iii. Upgradation of raw material stores packing material stores and packingdepartments at Ankleshwar factory have been planned which would facilitate better use ofspace and would also meet Regulatory requirements of local and international customers.

iv. Opportunities are being explored for sale/transfer of Technical KnowHow toInternational Companies.

v. In the coming years Lyka BDR International Limited (LBDR) a subsidiary is likely tofile about 100 new dossiers mainly in semi regulated / unregulated markets. Thesenew Registrations would increase the revenue and profitability of the LBDR which would inturn increase the consolidated revenue and profitability in the coming years.

vi. In the coming years substantial growth of Lyka Exports Limited and Lyka HealthcareLimited - Subsidiaries are expected which would further improve Consolidated Sales andProfitability of the Company.

DEPOSITS

As at 31st March 2014 the Company had fixed Deposits of Rs. 17.23 Cr andunclaimed matured Fixed Deposits of Rs. 64.99 lakhs. Since the Company is not meeting thecriteria as mentioned under the provisions of The Companies (Acceptance of Deposits)Rules 2014 the Company is unable to accept fresh deposits and also renew its existingdeposits which resulted into acute cash crunch. The Company has filed an Application withthe Company Law Board Bench Western Region Mumbai for seeking an extension of time forrepayment of Fixed Deposits and Interest thereon.

DIRECTORS

Smt. N. N.Gandhi (DIN : 00021530) Director of the Company retires by rotation at theensuing Annual General Meeting and being eligible offered herself for reappointment. TheBoard recommends her reappointment.

The appointment of Shri. S. Parikh (DIN : 00022365) Shri. V. S. Shanbhag (DIN :00555709) as Independent Directors are considered for a term of 5 (five) years andappointment of Dr. D. B. Parikh (DIN : 00368820) and Shri. V. A. Sanghani (DIN : 00967316)as Independent Directors are considered for a term of 1 (one) year in the ensuing AnnualGeneral Meeting.

DIRECTORS RESPONSBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act 1956 the Directors based on therepresentations received from the Operating Management confirm that:

i. In the preparation of the Annual Accounts the applicable accounting standards havebeen followed except where otherwise stated in Auditors Report and Notes to Accounts.

ii. The Directors have selected accounting policies and applied them consistently. TheDirectors made judgments and estimates that are reasonable and prudent so as to give atrue and fair view of the state of affairs of the Company as at 30th June 2014and of the loss of the Company for the period ended on that date.

iii. Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

iv. The annual accounts have been prepared on a going concern basis.

PERSONNEL

The relations between the Management and the employees have been generally cordial.

OTHER INFORMATION

a. As required under Provisions of Sexual Harassment for Women at work place(Prevention Prohibition and Redressal) Act 2013 the Company has constituted a Committeeto redress the grievances of Women employees.

b. There are no employees who are covered under section 217 (2A) of the Companies Act1956 read with Companies (Particulars of Employees) Rules 1975 as amended till date.

c. As required by the Companies (Disclosure of Particulars in the report of Board ofDirectors) rules 1988 information pertaining to Conservation of Energy TechnologyAbsorption and Foreign Exchange Earnings and Outgo is given in Annexure "A" ofthis Report.

MANAGEMENT DISCUSSIONS AND ANALYSIS REPORT

As required under the Listing Agreement with the Stock Exchange the Managementdiscussion and analysis report on the operations of the Company is given in Annexure"B" of this Report.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange a Report onCorporate Governance along with the certificate from the Auditors of the Company regardingcompliance of the said conditions is given as per Annexure "C" of thisReport.

AUDITORS

M/s. M. A. Parikh & Co. Chartered Accountants retire as Statutory Auditors (FirmRegistration No.107556W) of the Company and M/s.Thakorebhai Shirish Desai & ButalaChartered Accountants (Firm Registration No.110864W) Branch Auditors retire at the ensuingAnnual General Meeting and they have confirmed their eligibility for reappointmentu/s.139 read with Section 141 of the Companies Act 2013. The Board recommends theirreappointment.

AUDITORS OBSERVATIONS

Auditors in their report have observed the following

1. In respect of Non Compliance :

Note No. 38 relating to Capital Work in Progress of Intangible assets aggregating toRs. 97257847/-.

MANAGEMENT EXPLANATION:

Research and Development works on New Drug Delivery System which is one of theimportant activity of the Company. We are continuously required to develop newformulations and offer to our P2P partners for marketing.

Company is recognizing "Intangible Capital Work In Progress" when it isprobable that the future economic benefits that are attributable to the assets will flowfor the enterprise and the cost of the assets can be measured reliably.

Upon completion of product development the related expenditures incurred shall berecognized as intangible assets This is the normal practice of accounting intangiblesfollowed by Company.

ACKNOWLEDGEMENTS

Your Directors place on record their appreciation of the continued assistanceco-operation and support received from various Ministries of the Government of IndiaGovernment of Maharashtra Government of Gujarat the Company’s Bankers CustomersShareholders Fixed Deposit Holders and loyal and committed employees for their unstintedsupport.

By Order of the Board
Place: Mumbai N. I. Gandhi
Dated: 13th November 2014 Chairman & Managing Director
(DIN : 00021530)

ANNEXURE ‘A’

Information under Section 217(1)(e) of the Companies Act 1956 read with the Companies(Disclosure of Particulars in the Report of Board of Directors) Rules 1988 and formingpart of the Directors’ Report for the period ended 30th June 2014.

I. (1) Energy Conservation measures taken.

The Company has taken several measures including reduction of transmission lossesrational organization of manufacturing activity and regular preventive maintenance.

(2) Additional investments and proposals are being implemented for reduction of energyconsumption: The following measures are taken / being taken:

– Replacement of obsolete systems with improved energy saving systems.

– Use of balancing equipments to optimize production.

– Reduction in contract demand.

– Improve the process parameters to consume less energy.

(3) Impact of measures taken:

The adoption of energy conservation measures stated above is expected to saveconsiderably in cost of production.

(4) Total energy consumption and energy consumption per unit of production:

Period ended 30th June 2014 (15 months) Year ended 31st March 2013 (12 months)
(A) Power and Fuel Consumption
1) Electricity
(a) Purchased
Units (in 000kwh) 3642 2372
Total Amount ( Rs. in lacs) 275.63 167.62
Rate/Unit ( Rs. /kwh) 7.57 7.07
(b) Own Generation
(i) Through Diesel Generator
Units (in 000kwh) 59 49
Units per litre of Diesel (kwh) 3.17 3.10
Cost/Unit ( Rs. /kwh) 19.98 16.42
2) Coal
Quantity
Total Cost
Average Rate
3) Furnace Oil & Diesel Oil
Quantity (kl.) 25.67 21.38
Total Amount ( Rs. in lacs) 15.98 11.44
Average Rate 62.27 53.52
4) Others – Steam
a. Purchased
Quantity (MT) 586 565
Total Amount ( Rs. in lacs) 15.57 12.14
Rate/Unit ( Rs. /kg) 2.66 2.15
b. Own Generation
Quantity (MT) 77 74
Units per litre of Furnace/Diesel (KG) 13.714 13.714
Cost/Unit ( Rs. /kg) 5.33 4.91

 

Period ended 30th June 2014 (15 months)

Year ended 31st March 2013 (12 months)

Bulk Drugs Per tonne Formulations Per million Bulk Drugs Per tonne Formulations Per million
(B) Consumption per unit of production
Electricity (Units) (000) kwh 453.882 75.190 281.950 47.102
Coal (M. Tonnes)
Furnace Oil & Diesel Oil (kl) 2.999 0.582 2.027 0.516
Steam (M.Tonnes) 92.882 13.307 71.542 13.732

II. Research and Development and Technology Absorption

A. Research and Development

Company’s In-house R & D Centre at Mumbai is recognized by the Ministry ofScience & Technology Department of Scientific & Industrial Research Governmentof India.

1. Specific Areas in which R & D work is carried on by the Company are:

- Development of Formulations with New Molecules and development of Novel Drug DeliverySystems e.g. Nasal drug delivery system Topical Foam formulations in the therapeuticsegments of corticosteroid Anti Fungal etc.

- Development of lyophilised injectables Liposomal lyophilized injectablesFormulations etc.

- Development of Patient friendly formulations like sustained release products mouthdissolving tablets ready mix granules in sachet etc.

- Development of Cosmoceutical products such as Hair Revitalizing serum/shampoo Skinlightening cream Depigmentation cream Acne care cream Under eye roll on gel FoamingFace wash using actives from Switzerland USA Italy & Japan .

- Upgradation of products and processes to improve quality stability shelf-life andthus reduce cost.

- Tie ups with Medical Institutions to establish Bio availability /Bio equivalence/Animal Toxicity studies of new formulations and to carry out clinical trials

- Developing Products for P to P markets.

2. Benefits derived as a result of R & D efforts:

- The Company has introduced a number of new products in domestic market such asMoisturizing Cream Salicylic Acid Foaming Face Wash 1% etc.

- The Company derives long term benefits viz. better yield and Quality of the finalproduct with cost effectiveness.

3. Future plans

The Company aims to consolidate its presence in the domestic market through focuseddevelopment of various therapeutic segments such as Anti-infective Dermatologicalcardiovascular pain management Neuroprotectives Cosmeceuticals Anti-oxidantsLiposomal drugs Nasal sprays etc.

This will help the Company to broaden its base for its domestic operation

ACHIVEMENTS / RECOGNITION:

• Patents filed / under process:

Total No of Patents filed: 53 (From year 2002 to year 2011)

• Patents granted at Indian patent office : 14 till date

• Patents granted Internationally:

• Rabeprazole Injection: Countries - SriLanka and Europe.

• European patent is validated in 26 countries.

Recognition as in-house R & D Centre by Government of India Ministry of Science& Technology Department of Scientific and Industrial Research

DCGI Applications:

Total DCGI Permissions: 76 till date

III. Foreign Exchange Earnings and Outgo

Details of Foreign Exchange spent and earned are given in Schedule 52 & 53 under‘Other Notes’ to Statement of Profit & Loss Account and Balance Sheet.

By Order of the Board
Place: Mumbai N. I. Gandhi
Dated: 13th November 2014 Chairman & Managing Director
(DIN : 00021530)