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Omega Laboratories Ltd.

BSE: 524406 Sector: Health care
NSE: N.A. ISIN Code: INE006E01011
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Omega Laboratories Ltd. (OMEGALABS) - Director Report

Company director report

OMEGA LABORATORIES LIMITED ANNUAL REPORT 2006-2007 DIRECTOR'S REPORT To The Members of Omega Laboratories Limited. On behalf of the board of directors of Omega Laboratories Ltd, I feel pleasure for a very warm and cordial welcome to twenty first Annual General Meeting of your Company. The notice covering the meeting, the Directors Report and Audited Accounts for the year ended 31st March 2007 have been with you for sometime and with your permission take them as read. Business Aspects and past effects: The units of your company are closed for a long period due to various reasons which were explained in previous reports. These reasons were beyond the control of the management because of shortage of the funds and company suffered with lot to close the units. During 1997, the Income Tax Authorities raided all premises of the company and distributors and imposed the tax liability of Rs. 15.86 crs and seized the accounts of all distributors which resulted to close the dealing with them with the fear of tax. The units remained closed for about 2 years and after that we started the working but due to pressure of Income Tax Authorities, it could not restated as their demand was under pressure to pay. The company filed the appeal against it and decision was taken in its favour and liability was reduced to Rs.35.79 lakhs, Due to the pressure of Income Tax the company paid this liability but appealed to refund. The raids have ruined the entire setup of the company and since that it could not restarted the production activities. Still the units are closed and now machinery and other assets have been heavily damaged. Due to the above situation, the company has suffered with heavy losses from 1998 onward and resulted to become sick. This was mainly because of income tax search and short finance of the funds from bank. This also affected the working of Ghaziabad unit and closed the operation. The entire capital of the company has been eroded and case has been registered with Board for Industrial and Financial Reconstruction for rehabilitation of the units. However, it was turned down on the ground of delay in reference to BIFR was not submitted in time. The company has appealed to AAIFR on the ground that its case was wrongly turned down and should be reconsider for further processing. The case has now been registered under BIFR for further proceeding and under process. The company has not made the provision for interest to be charge by IDBI and bank for their outstanding loans due to dispute and not settled so far. The liability has not been agreed by the company and requested to recalculate the amount. Both the units of the company are closed, though, Ghaziabad unit renovated for starting the production, it could not be restarted on account of various reasons. In the month of March 2002, it was leased out to SGS Pharmaceutical (P) Ltd. with the intention that detorisation of machines and building will stop apart from some regular source of income and saving of watch and ward expenses. Last year, the unit of Dadra was also let out to earn the rent apart from saving the huge expenses on watch & ward and maintenance. This also vacated the building and now it is vacant. The future of the industry is not looks to be bright till the Govt, policies are suitably announced and the income tax department releases our assets. We are also negotiating for one time settlement with bank and after that restart the units. Financial Results: During the year, the company has incurred the losses and the working results for last two years are given as under: (Rs. In lakhs) Particulars For the year ended 31st March 2007 31st March 2006 Sales and other incomes 0.75 12.82 Gross Profit (2.18) 549 Less: Depreciation & Pre. Expenses 43.46 50.02 Profit before tax (45.64) (44.53) Less: Provision for Income Tax - - Profit after tax (45.64) (44.53) Add Profit brought forward (1589.38) (1544.84) Funds for Appropriation - - Less: Dividend - - Balance carried forward to Balance Sheet (1635.02) (1589.38) Prospects: The situation of the industry is more or less as to the previous years. There is no major change except to enter by multinationals for generic products. Last year, the Govt also announced new scheme of excise on the products to charge on MRP which resulted to close maximum units and shifted to exempted area like HP, Uttmchal. With the overall results and the market situation in some of the items, the industry has started picking up but not to the full expectation as was in earlier years. It has been better for high class and branded products of multinational companies. Even few, multinational companies have also entered in the field of generic products which they are selling at very competitive price. Even in some cases, the selling price is near to variable cost. The economy of India is badly affected over the years and industrial scenario is not good inspite of high projection of the growth announced by the Govt. There are so many uncertainties in the market in terms of Govt, policies, imports and disturbances etc., that not permit to the market. Raw material required for formulations has become more competitive as the material from international market is cheaper than the own production. All big companies since the change in the rate of excise duty , have entered in the field of generic products and are manufacturing all kind of formulations which have become a major threat to us. This has not only created the more competition in the market but more flexible to provide on credit by the multinational companies in the market and that is too at very less prices. Every one has become to fight for survival for the companies. In the situation, it is very difficult to continue with the operation and plan to look after the suitable buyers with the approvals of bank and financial institutions. Till the time, the unit is leased out as running unit may get the better price. This will not only earn some money but also keep the machines in intact and maintain the assets so that the units could be restarted without heavy repair & maintenance. We tried for negotiating to dispose of Dadra unit and pay the dues of Banks and or IDBI, but it could not be resulted. That unit has also been come in the bad situation because of rust in the area of sea and low maintenance. Directors retirement and responsibility statement: Shri Vipin Gupta retires by rotation and being eligible, offer himself for reappointment. Pursuant to the requirement under section 217 (2AA) of the Companies Act 1956 with respect to the Director's responsibility statement it is hereby confirmed: (I) That in preparation of the annual accounts for the financial year ended 31st March 2007, the applicable accounting standard has been followed along with proper explanation relating to material departures. (II) That the directors has selected such accounting policies and applied that consistently and made judgment and estimates that were 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 profit and loss account. (III) That 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 and other irregularities. (IV) That the directors have prepared the accounts for the closed units and estimated the realisable value of the assets as per books. Disclosure of particulars pursuant to section 217 (1)(e) of the Companies Act 1956: a. Conservation of energy: The company has continuously identified the areas of energy where it can save and appropriate measures have been taken to optimize conservation of the energy. Since the closer of the operation, all utilities are closed and not in operation, no further efforts are putted. b. Technology Absorption: Research and Development for more kind of formulation and cost effective will continue once the company come in the position of restarting the working as company has the full setup of required equipment's to develop the new products. The plant of the company is based on latest art of technology and installed with the facilities to manufacture of all formulations. Technology absorption, adaptation and innovation are other field of the company where it has continuous efforts to reduce the cost of the products and follow the new steps to adopt the latest technology on restart the units. Foreign exchange earnings and outgo are nil for the year ended 31st march 2007 as the company has neither imported the material, machines nor exported the medicines. Particulars of Employees: Information as per section 217(2A) of the Companies Act 1956 read with the Companies Rules 1975 (Particulars of Employees) and forming the part of Directors Report for the year ended 31st March, 2007 employed through out the financial year under review. Listing and Corporate Governance: The equity shares of the company are listed at Delhi, Bombay, Jaipur, Madras, Calcutta. The process for di-listing with stock exchange is under progress. The steps are being taken for compliance of the provisions of clause 49 of the listing agreements on Corporate Governance. Fixed deposit: The company has not taken deposits from the market/ public which attract the provision of u/s 58A of the Companies Act 1956. Dividend: As the financial position of the company is not good, your directors have not recommended any dividend. Auditors: Statutory Auditor of the company M/s R.K. Varshney & Co., Chartered Accountants, KD-188, Pitampura, Delhi, retire and eligible for appointment have offered for reappointment. They are eligible for reappointment. Yours Directors thanks to the staff, Bank and Government Organisation for the Cooperation extended during the course of Business. They acknowledge with gratitude the valuable support received from the suppliers, shareholders and employees of the company. For and on Behalf of the Board For OMEGA LABORATORIES LTD. (Rajeev Gupta) Director Date : 17th August 2007 Place: Delhi.