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Orchid Pharma Ltd.

BSE: 524372 Sector: Health care
NSE: ORCHIDPHAR ISIN Code: INE191A01019
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VOLUME 26449
52-Week high 39.70
52-Week low 16.70
P/E
Mkt Cap.(Rs cr) 161
Buy Price 0.00
Buy Qty 0.00
Sell Price 18.10
Sell Qty 50.00
OPEN 17.85
CLOSE 17.75
VOLUME 26449
52-Week high 39.70
52-Week low 16.70
P/E
Mkt Cap.(Rs cr) 161
Buy Price 0.00
Buy Qty 0.00
Sell Price 18.10
Sell Qty 50.00

Orchid Pharma Ltd. (ORCHIDPHAR) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the report on business and operations ofyour Company along with the audited statement of accounts (Standalone and Consolidated)for the financial year ended March 31 2017.

Performance / State of Company's affairs

The highlights of the standalone financial results for the year 2016-2017 are givenbelow:-

(Rs. in Crores)
Particulars Year ended March 31 2017 Year ended March 31 2016
Sales & Operating Income 755.36 879.33
Other Income 19.48 24.60
Total Expenditure 663.28 705.27
Gross profit 111.56 198.66
Interest & Finance Charges 331.10 294.23
Gross Profit after Interest but before Depreciation and Taxation (219.54) (95.56)
Depreciation 139.42 143.41
Profit / (Loss) Before Tax exceptional and extraordinary items (358.96) (238.97)
Exceptional Item - Loss 86.45 52.54
Profit / (Loss) Before Tax and Extraordinary item (445.41) (291.52)
Extraordinary items (Expenditure) 86.26 _
Profit / (Loss) Before Tax (531.67) (291.52)
Current & Deferred Tax (48.04) (17.25)
Profit /(Loss) after Tax (483.63) (274.27)

During the financial year 2016-17 your Company achieved a turnover and operatingincome of Rs.755.36 crores (Rs.879.33 crores in 2015-2016). The gross profit beforeinterest depreciation and taxes stood at Rs.111.56 crores (Rs.198.66 crores in 2015-16).After providing for interest expense of Rs.331.10 crores (Rs.294.23 crores in 2015-16)depreciation of Rs.139.42 crores (Rs.143.41 crores in 2015-16) Exceptional item Rs.86.45crores (Rs.52.54 crores in 2015-16) and Extraordinary item of Rs.86.26 crores (Nil in2015-16) the Loss before tax of the Company was Rs.531.67 crores (Rs.291.52 crores (Loss)in 2015-16). The net loss after tax stood at Rs. 483.63 crores (Rs.274.27 crores (Loss) in2015-16).

Business Overview

In the year 2014 your Company had implemented Corporate Debt Restructuring (CDR)Scheme approved by CDR EG (CDR Empowered Group). Your Company is currently under the framework of CDR and constantly striving towards improvement of its operations.

During the FY 2016-17 your Company was not able to scale up the sales volume onaccount of regulatory issues at customer/ supplier end. The lower volume of sales led toliquidity constraints resulting in mounting interest burdens with impact on the operatingprofits. As a result the ability of your Company to meet its repaymentobligations/liabilities were adversely affected.

Denoting the basic strength of the business capabilities your Company managed tosustain sales and operating profitability to a better extent despite the tough liquidityand working capital constraints faced. During January 2017 your Company had launched anew product having significant market potential ("Rasagiline") in the USmarket.

Your Company is in the process of launching new products in NPNC segment in the currentfinancial year for the US EU and other markets which are expected to aid in strengtheningthe revenue / profitability streams of the Company going forward.

Future Prospects

Your Company is constantly working towards revival/scaling up of its operations andbelieves that it will gradually be able to achieve profitability. The key focus areas forthe Company would be increasing productivity level improving operational efficiencies andprofit maximisation.

Your Company continued to have the full support of its Lenders Employees Vendors andCustomers during the financially stressed period and all efforts are being made to sustaincontinuous and full support to revive the operations of the Company. Although sizeableefforts are required towards regaining the confidence of various Stakeholders yourCompany is also in the process of restructuring the business operations / financesincluding identification of strategic investor to overcome any uncertainties and ishopeful and confident of accomplishing the same over a period of time.

Management Discussion and Analysis report

A detailed report on the Management Discussion and Analysis in terms of Regulation 34of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 formspart of this report.

Corporate Governance Report

A detailed report on the corporate governance systems and practices of your companyalong with a certificate of compliance from the Practising Company Secretary is given inAnnexure V which forms part of this Report.

Audit Committee

The Audit Committee of the Board of Directors is constituted in accordance withRegulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 and Section 177 of the Companies Act 2013. Presently the Committee comprises ofShri K N Venkatasubramanian (Chairman & Independent Director) Shri R Kannan(Independent Director) and Shri Rabinarayan Panda (Nominee Director – IDBI).Furtherdetails are available in the corporate governance report. The Board has accepted therecommendations made by the Audit Committee during the financial year 2016-2017.

Regulatory Filings and Approvals

In the generic formulations domain Orchid's cumulative Abbreviated New DrugApplication (ANDA) filings for the US market stood at 46. This includes 8 Para IV FTF(First-To-File) filings. The break-up of the total ANDA filings is 13 in Cephalosporinssegment and 33 in NPNC space. Your Company had launched Rasagiline Mesylate Tablets onJanuary 2 2017 with 180 day generic drug exclusivity.

In the European Union (EU) region the cumulative count of Marketing Authorisation (MA)filings stood at 31. The breakup of the total MA filings is 15 in the Cephalosporinsegment and 16 in the NPNC segment.

In the API (Active Pharmaceutical Ingredients) domain Orchid's cumulative filings ofUS DMF stand at 76. The break-up of the total filings is 28 in the Cephalosporin Segment48 in NPNC segment. In European market space the cumulative filings of COS (Certificateof Suitability) count remained at 19 which includes 14 in Cephalosporin segment 5 in NPNCsegment. In Japan market the cumulative filings of JDMFs count remained at 7 inCephalosporin segment.

Your Company had received ANDA approval from the USFDA for Aripiprazole tablets USP2mg 5mg10mg 15mg 20mg and 30mg during May 2017.

Intellectual Property Rights

During the year your Company continued the IPR work on a number of products. The totalnumber of patent applications filed by your Company in various national and internationalpatent offices so far is 940 including Process Formulation New Chemical

Entities (NCE) Novel Drug Delivery System (NDDS) Biotech and Generics. As of March31 2017 46 patent applications have been published while 161 patents have been grantedcumulatively.

The number of patent applications filed by your Company from April 01 2016 to March31 2017 is 3 (Including Process Formulation NCE NDDS Biotech and Generics) 1 patentapplication has been published and 25 patents have been granted.

Dividend

Due to losses incurred by the Company during the financial year 2016-17 your Directorsexpress their inability to recommend any dividend to the equity shareholders.

Export Excellence Awards

During the year under review your Company's Active Pharmaceuticals Ingredients (API)manufacturing Unit Alathur and Finished Dosage Formulations (FDF) manufacturing UnitIrungattukottai (IKKT) were chosen for the Export Excellence Awards by the Ministry ofCommerce & Industry Government of India based on the criteria enumerated below andperformance of your Company during the financial years 2014-15 & 2015-16.

Year of Award Criteria Position
2014-15 API Unit Alathur - Exports 2nd
2014-15 API Unit Alathur - Employment 2nd
2014-15 API Unit Alathur - Net Foreign Exchange Earnings (NFEE) 1st
2015-16 FDF Unit IKKT - Exports 2nd

Issue of Equity Shares

To Comply with the requirements of Corporate Debt Restructuring Programme your Companypursuant to the approval granted by the members through Postal ballot on August 26 2014had obtained in principle approval from NSE & BSE to allot 18512251 (One CroreEighty Five Lakhs Twelve Thousand Two Hundred Fifty One Only) equity shares of Rs.10/-each at a premium of Rs.39.79 per share to the Promoter Group Company M/s OrchidHealthcare Private Ltd. Out of the above your Company allotted 14809801 shares as partof first tranche during December 2014. The Company allotted the remaining 3702450(Thirty Seven Lakh Two Thousand Four Hundred and Fifty Only) equity shares of Rs.10/- eachat a premium of Rs.39.79 per share during October 2015. The Listing approval for 3702450shares has been received from BSE and the approval from NSE is awaited.

Employees Stock Option Plan

The details of options granted to employees under the ORCHID ESOP 2010 ORCHID ESOP– DIRECTORS 2011 ORCHID ESOP – Senior Management 2011 schemes and the status ofsuch options as on March 31 2017 are given in Annexure IV to this Report.

Subsidiaries

Bexel Pharmaceuticals Inc. USA (Bexel)

Bexel was incorporated basically to conduct Research & Development activities innew drug discovery segment. The current Bexel IP portfolio is being maintained by globalIP unit of your Company.

Orchid Pharmaceuticals Inc. USA

Orchid Pharmaceuticals Inc. is a wholly owned Delaware based subsidiary of yourCompany and also the holding company in the United States under which all the operationalbusiness subsidiaries have been structured. The Company currently has two operating whollyowned Subsidiaries namely Orgenus Pharma Inc. and Orchid Pharma Inc. in the US. OrgenusPharma Inc. is the entity that provides all business development and operational servicesfor the parent Company including the initiation of marketing alliances with partnercompanies. It continues to represent your Company for all matters relating to the reviewand approval of such filings by the FDA and handling of logistics and product importationinto the US as the Importer of Record for the US Customs. Orchid Pharma Inc. is thecommercial entity that started direct marketing and selling your Company's products in theUS generics market place. Orchid Pharma Inc. has established a strong corporate image foryour Company in the US and will be launching all future (unpartnered) generics productsunder the Orchid label.

Diakron Pharmaceuticals Inc. USA

Orchid's stake in Diakron has been a part of the original transaction which includesdirect investment and Master Services Agreement (MSA). Your Company has completed most ofits MSA obligations to develop and supply clinical quantities of API and extended releaseformulation.

Orchid Europe Limited United Kingdom

Your Company's wholly owned subsidiary namely Orchid Europe Limited (OEL) is a whollyowned subsidiary which provides liaising support to the parent Company and its customersin Regulatory Pharma covigilance Testing & Release Retention of samples ServiceProviders and Business Development in Europe.

Orchid Pharmaceuticals (South Africa) Pty Ltd. South Africa

Your Company's wholly owned subsidiary Orchid Pharmaceuticals (South Africa) Pty Ltd.was incorporated mainly to register and market your Company's products in South Africa.The applications for obtaining marketing approvals from the regulatory authority are atvarious stages of registration process.

Highlights of the performance of subsidiaries and their contribution to the overallperformance of the Company during the period under report

One of the Subsidiary Companies contributed 5% of the consolidated sales of theCompany. The Company accesses the US market through this subsidiary and expects stronggrowth in the US market in the years to come. The R&D subsidiaries of the Company areused for carrying out Research & Development of selected molecules having goodpotential. The Company also has a subsidiary for holding Product registrations andapprovals in Europe.

Erstwhile Associate

Allecra Therapeutics GmbH Germany

Orchid had invested in Allecra Therapeutics GmbH Germany (Allecra) with a view toenter into drug discovery in the areas of obesity CNS and other therapeutic areas. YourCompany was holding 18.27 % stake in Allecra. Subsequent to implementation of CDR SchemeAllecra has within the meaning of the redemption clause contained in the Articles ofAssociation redeemed the shares held by your Company as Debt restructuring programmewould be considered as insolvency proceedings. Your Company referred the dispute toarbitration in Germany as per the Agreement.

After a series of hearings the arbitrator confirmed the redemption of shares held byyour Company in Allecra and on account of this the value of investment in Allecra hasbeen written off in the books.

Consolidated Financial Statements

Pursuant to Section 129(3) of the Companies Act 2013 the Consolidated Financialstatements presented by the Company include the financial statements of its subsidiaries.Further a statement containing the salient features of the financial statements of thesubsidiaries of the Company in the prescribed form AOC-1 is given in Annexure –IXforming part of this report.

Key Managerial Personnel

Shri K Raghavendra Rao (DIN:00010096) Managing Director and Shri L Chandrasekar CFO& Company Secretary are the Key Managerial Personnel of the Company under theprovisions of the Companies Act 2013.

Extract of Annual Return

As per provisions of Section 92(3) of the Companies Act 2013 read with Rule 12(1) ofthe Companies (Management and Administration) Rules 2014 an extract of the Annual Returnin the Form MGT-9 is given in Annexure - VI forming part of this report.

Board Meetings held during the year

During the year 6 (Six) meetings of the Board of Directors were held. The BoardMeetings were held in accordance with the provisions of the Companies Act 2013 and therelevant rules made there under. The details of the meetings are furnished in theCorporate Governance Report forming part of this report.

Directors' Responsibility Statement

In accordance with the provisions of Section 134(5) of the Companies Act 2013 yourDirectors state that:

In the preparation of the annual accounts for the financial year 2016-17 theapplicable accounting standards were followed along with proper explanation relating tomaterial departures if any.

We have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year i.e. on March 312017 and of the loss of the Company for the year ended on that date.

We have taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.

We have prepared the annual accounts for the financial year 2016-17 on a going concernbasis.

We have laid down internal financial controls to be followed by the company and thatsuch internal financial controls are adequate and were operating effectively.

We have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.

Nomination & Remuneration policy

This Policy lays down standards with respect to the appointment remuneration andevaluation of Senior Management Personnel Directors and Key Managerial Personnel of theCompany. The Policy is available on the website of the Company and the web link for thesame is http://www.orchidpharma.com/downloads NOMINATION_AND_REMUNERATION_POLICY.pdf

Appoinment and Remuneration of Non-Executive Directors

The Criteria for determining independence of a director are based on the academicaccomplishments qualifications expertise and experience in their respective fieldsdiversity of the Board global exposure professional network technical expertisefunctional domain expertise independence and innovation.

The Independent Directors of your Company have given declarations to the Company underSection 149 (7) of the Act that they meet the criteria of independence as provided inSub- Section 6 of Section 149 of the Act and also under the Listing Regulations 2015.

Non-Executive Directors are entitled to receive sitting fees for attending the meetingsof the Board or Committee thereof as approved by the Board and within the overall limitsprescribed under the Companies Act 2013 and rules thereunder.

Related Party Transaction Policy

Your Company has framed a Related Party Transaction Policy in compliance with Section177 of the Companies Act 2013 and Regulation 23 of SEBI (Listing Obligations &Disclosure

Requirements) Regulations 2015 in order to ensure proper reporting and approval oftransactions with related parties. The Policy is available on the website of the Companyand the web link for the same is http://www.orchidpharma.com/downloads/RELATED-PARTY-TRANSACTION-POLICY.pdf

All the transactions entered with the related parties were in ordinary course ofbusiness and are on arm's length basis. The particulars of contracts or arrangements withthe related parties under Section 188(1) are disclosed in Form AOC-2 which is given inAnnexure – X forming part of this report.

Prior omnibus approval of the Audit Committee is obtained for the transactions whichare foreseeable and of repetitive nature. For the transactions entered into pursuant tothe omnibus approval so granted a statement giving details of all related partytransactions is placed before the Audit Committee and the Board of Directors for theirinformation and approval at regular intervals.

Corporate Social Responsibility (CSR)

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act 2013the Company had constituted the Corporate Social Responsibility Committee to recommend:(a) the policy on Corporate Social Responsibility and (b) implementation of the CSRProjects or Programs to be undertaken by the Company as per CSR Policy for considerationand approval by the Board of Directors. The Corporate Social Responsibility Committee ofyour Company comprises of Shri K N Venkatasubramanian (Chairman & IndependentDirector) Smt Soundara Kumar (Nominee Director-State Bank of India) and Shri RabinarayanPanda (Nominee Director – IDBI)

The Board has approved the CSR policy and the same is available on the website of theCompany and the web link for the same is http://www.orchidpharma.com/downloads/CSR-POLICY.pdf.

Since the Company did not have any profits for the last three financial years theCompany is not mandatorily required to contribute towards Corporate Social Responsibilityactivities. However your Company has undertaken the CSR activities voluntarily onEducation Health Youth development Women Empowerment Community assets creation(Infrastructure Development) Tribal development Environment & Renewable energyprogrammes during the financial year 2016-17 through "Orchid Trust" and spentRs.17.36 Lakhs towards CSR activities.

Material changes and commitment if any affecting financial position of the Companyfrom the end of Financial Year and till the date of this Report

There are no material changes and commitments affecting the financial position of theCompany which have occurred between March 31 2017 and the date of this report.

Conservation of Energy

Your Company has always been striving hard in the field of energy conservation. Severalmeasures to conserve energy and to reduce associated costs were taken during the fiscalunder review as well. The particulars in respect to conservation of energy as requiredunder Section 134 (3) (m) of the Companies Act 2013 are given in Annexure I to thisreport.

Technology Absorption

The particulars in respect of R&D/Technology absorption as required under Section134(3)(m) of the Companies Act 2013 are given in Annexure II to this report.

Foreign Exchange Earnings and Outgo

The particulars in respect of Foreign Exchange Earnings and Outgo as required underSection 134(3)(m) of the Companies Act 2013 are given in Annexure III to this report

Risk Management Policy

The details and the process of Risk Management as implemented in the Company areprovided as part of Management Discussion and Analysis which forms part of this Report.

Annual evaluation of Board its Committees and Individual Directors

The Board of Directors has carried out an annual evaluation of its own performance itsCommittees and individual Directors pursuant to the requirements of the Companies Act2013 and the Listing Regulations 2015.

The Annual evaluation was carried out as per the format prescribed by the Nominationand Remuneration Committee of the Company.

The structured questionnaire covers various aspects of the Board's functioning such asadequacy of the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations and governance.

The Directors expressed their satisfaction with the evaluation process.

Change in the Nature of Business

There is no change in the nature of business carried on by your company during thefinancial year ended 31st March 2017.

Details regarding deposits covered under Chapter V of the Act

During the Financial Year 2016-17 your Company did not accept any deposits within themeaning of the provisions of Chapter V – Acceptance of Deposits by Companies readwith the Companies (Acceptance of Deposits) Rules 2014 and as such no amount ofprincipal or interest was outstanding as of the balance sheet date.

Significant and Material Orders Passed by the Regulators or Courts or Tribunalsimpacting the Going Concern status of the Company

There have been no significant nor material orders passed by the regulators or courtsor tribunals impacting the going concern status and Company's operations. The Ordersreceived by the Company from Courts or Tribunals during the year have no significant/material impact.

Adequacy of Internal Financial Control System

Your Company has in place adequate internal financial controls with reference tofinancial statements. These controls ensure the accuracy and completeness of theaccounting records and preparation of financial statements.

The Internal Auditors and the Statutory Auditors review the adequacy of internalcontrol system and suggest satisfactory necessary checks and balances to ensure andincrease the effectiveness of the system.

Vigil Mechanism (Whistle Blower Policy)

Your Company has established a vigil mechanism that enables the Directors &Employees report genuine concerns .The Company encourages its employees who have concernsabout unethical behaviour actual or suspected fraud or violation of the Company's code ofconduct to come forward and express their concerns without fear of punishment or unfairtreatment. The committee affirms that in compliance with the Whistle Blower Policy/VigilMechanism no personnel had been denied access to the Audit Committee. The Policy isavailable on the website of the Company and the web link for the same is http://www.orchidpharma.com/downloads/ whistle-blower-policy.pdf.

Policy for determining material subsidiaries

Your Company has framed a Policy for determining material subsidiaries in compliancewith Regulation 16(1)(c) of SEBI (Listing Obligation & Disclosure Requirements)Regulations 2015 in order to determine the material subsidiaries of the Company. ThePolicy is available on the website of the Company and the web link for the same ishttp://www.orchidpharma.com/ ir_downloads.aspx

Disclosure under the sexual harassment of women at work place (Prevention Prohibitionand Redressal) Act 2013

Your Company has in place an anti-sexual harassment Policy in line with therequirements of The Sexual Harassment of Women at the Workplace (Prevention Prohibition& Redressal) Act 2013. Grievance redressal cell within the Human Resource Departmenthas been set up to redress complaints regarding sexual harassment. All employees(permanent contractual temporary trainees) are covered under this policy. The Companyhas not received any complaint on sexual harassment during the financial year ended 31stMarch 2017.

Environment

Environment management is the prime concern in your Company. Orchid has employed astate of the art technology zero liquid trade effluent treatment plant system and worldclass treatment facilities for its liquid and gaseous pollutants generated from theproduction processes. The zero discharge of liquid trade effluent treatment plantcomprises Membrane Bio Reactor Nano Filtration Reverse Osmosis Solvent StrippingColumn Thermal Evaporation & Crystallization plant to treat the entire trade effluentand recycle back into the utility process.

Waste Water Treatment

Low TDS effluent is collected equalized and neutralized into neutral pH and treatedaerobically by Membrane Bio Reactor process comprising of aeroapc equipped with jetaeration system made up of Glass Fibre Reinforced Plastic & Ultrafiltration Systemloaded with ceramic membrane (aluminium zirconium). Waste Air Treatment is done throughinstallation of process scrubbers vent gas condensation Reverse Jet Ventury FilterAdequate stack height and Electro Static Precipitator.

Hazardous waste management is done by collecting and storing hazardous wastes inprotected storage shed and disposing it into the approved landfill sites / authorizedrecyclers.

Safety Excellence Journey

Orchid is highly committed to Safety Health and Environment aspects. Though resourceconstraints continue to be a challenge in this financial year also there is no compromiseon critical needs of safety. This has been possible because of committed Line Managementdedicated SPROs and relentless Leadership direction. Central Safety Committee (CSC) theapex committee of the organization have ensured that risks have been contained to keep usfree from any major incident. Orchid strongly believes that human behaviour plays key rolein safety management. To reinforce that Safety observation & Audit (SOA) – Leadindicator become key focus area always in our Central Safety Committee meetings (CSC).CSC continues to meet every month to review critical concerns on Safety and also providesdirections to minimize the risks at all levels.

Process safety management is another key area being a pharma sector. The company alsorealized the need of effective safety communication in culture building activity /exercise. This is backed up by periodical safety talks Safety Posters and Interactivediscussions. Orchid also believes Continuous learning is the critical element in SafetyManagement. Hence various training programs have been conducted during the year 2016-17 toreinforce the safe behaviour and also to enhance the necessary skills to perform the jobsafely.

Particulars of Employees and Remuneration

The information as required pursuant to Section 197(12) of the Act read with Rule 5(1)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 aregiven in Annexure VII to this report.

A statement showing names and other particulars of the employees drawingremuneration in excess of the limits prescribed under Rule 5(2) of the rules formspart of this Report. However as per provision of Section 136 of the Act thereport and accounts are being sent to the members excluding the aforesaid informationwhich is available for inspection by the members at the registered office of the Companyduring business hours on all working days. If any member is interested in obtaininga copy such member may write to the Company Secretary.

Particulars of LoansGuarantees or investments under Section 186 of the Companies Act2013

Particulars of Loans Guarantees or investments under Section 186 of the Companies Act2013 are given in Note No. 13 and 32(b) to the standalone financial statements.

Green Initiative

To augment the green initiative of the Ministry of Corporate Affairs and to reducecarbon foot print your Company sends various communication including the Annual Reportsin electronic form to the members who have opted for the same. This helps in reducing thenumber of physical copies to be printed thereby contributing to a greener environment.The full text of the Annual Report 2016-17 is available at www.orchidpharma.com. As amember of the Company you are entitled to receive all such communications in physicalform upon request.

Directors

Appointment/Re-appointmentofDirectorsandResignation

During the year under review Shri S Krishnan resigned from his position ofNon-Executive Director of the Company with effect from May 31 2016 due to personalreasons and other professional pre-occupations. Your Board of Directors wish to record itsappreciation for the services rendered and the professional guidance given by Shri SKrishnan Non-Executive Director to the Board from time to time during his tenure.

In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Smt. Soundara Kumar(DIN:01974515) Nominee Director- State Bankof India will retire by rotation at the ensuing Annual General Meeting and being eligibleoffers herself for re-appointment in accordance with the provisions of the said Act.

Further in terms of Sections 196 197 and 203 read with Schedule V and otherapplicable provisions of the said Act Shri K Raghavendra Rao (DIN 00010096) whose termas Managing Director of the Company shall expire on June 302017 is proposed to bereappointed as Managing Director of the Company for a period of 3 (Three) years witheffect from July 012017 till June 302020 liable to retire by rotation on the terms andconditions including remuneration as set out in the explanatory statement annexed to theNotice convening the ensuing Annual General Meeting (AGM).

None of the Directors of the Company are disqualified under Section 164(2) of theCompanies Act 2013.

A brief resume of the Directors proposed to be re-appointed names of the Companies inwhich they hold Directorships Committee memberships/Chairmanships their shareholdingetc. are furnished in the Notice of the ensuing AGM.

Your Directors recommend their re-appointment at the ensuing AGM.

Statutory Auditors

TheStatutoryAuditorsM/sSNBAssociatesCharteredAccountants were re-appointed at the22nd Annual General Meeting of the Company held on September 15 2015 for a period of two(2) years from the conclusion of 22nd Annual General Meeting till the conclusion of 24thAnnual General Meeting subject to ratification at every AGM.

Pursuant to the provisions of the Companies Act 2013 pertaining to the mandatoryrotation of auditors the term of the current Statutory Auditors M/s. SNB AssociatesChartered Accountants will expire at the conclusion of the 24th Annual General Meeting ofthe Company and consequently a new audit firm have to be appointed.

The Board of Directors based on the proposal of the Audit Committee have recommendedthe appointment of M/s.CNGSN & Associates LLP Chartered Accountants as the StatutoryAuditors subject to the approval of the members of the Company.

The resolution seeking appointment of M/s.CNGSN & Associates LLP CharteredAccountants as the Statutory Auditors of the Company for a period of five years from theconclusion of the 24th AGM of the Company is being sought for in the ensuing AGM.

Auditor's Report

Explanation to the Audit qualifications

The Auditors in their report have made certain observations relating to recovery ofadvances paid to suppliers non-provision of diminution in value of investments in foreignR&D subsidiaries non-provision for receivables from one of the marketing subsidiarynon-receipt of confirmation of balance from banks for loans under "QualifiedOpinion" in their report to the members.

The Company is currently under Corporate Debt Restructuring (CDR) Scheme. Due tofinancial constraints the Company was not able to take delivery of materials / capitalgoods and the Company is confident that with the revival envisaged under the CDR regimeand with the plans of infusion of alternate funding the Company would be able to takedelivery of these materials in due course.

As per the valuation of molecules in its current status the Company is confident thatthe value of Intellectual Property of the molecules held by the foreign subsidiaries willbe more than the investment.

In respect of dues from the marketing subsidiary the Company is exporting and sellingprofitable products through its marketing subsidiary and the profit generated by themarketing subsidiary from the operations will be available for settlement of the pastdues.

In view of the delay in payment of interest and principal few banks have not providedbalance confirmation. However the interest on the outstanding loan amounts with suchbanks has been provided at the applicable interest rates.

The Company is in the process of restructuring the business operations/financesincluding identification of strategic investor to overcome the uncertainties regardingcontinuity as a going concern.

The Statement on impact of Audit qualifications (Standalone & Consolidated basis)for the financial year ended March 31 2017 filed with the stock exchanges pursuant toRegulations 33 & 52 of the SEBI (LODR) (Amendment) Regulations 2016 is given inAnnexure XI forming part of this report.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act 2013 and the Companies (Appointment &Remuneration of Managerial Personnel) Rules 2014 M/s S Dhanapal Associates (a firm ofPractising Company Secretaries) Practising Company Secretary were appointed to conductthe secretarial audit of your Company for FY 2016-17. The secretarial audit report for theyear ended March 31 2017 is enclosed herewith as Annexure VIII.

Secretarial Audit Report

In respect of delay in filing / non filing of returns with relevant authorities incertain occasions the Company is taking necessary steps for filing the returns on time inthe ensuing years.

Cost Audit

The Central Government has prescribed that an audit of the cost accounts maintained bythe Company in respect of bulk drugs and formulations be conducted under Section 148 ofthe Companies

Act 2013. Consequently Your Company had appointed Shri. V Kalyanaraman B.Sc. FCMAas Cost Auditor for the FY 2016-17 and 2017-18 for the audit of the cost accountsmaintained by the Company in respect of both bulk drugs and formulations .

For the year ended March 31 2016 the due date for filing the cost audit report wasSeptember 27 2016 and the cost audit report was filed on August 31 2016.

Acknowledgements

Your Directors are grateful and thankful to all the Banks Financial Institutions bothin public sector and private sector who have fully supported your company's initiativesduring the stressed financial situation and for their continuous support for meeting theworking capital needs of your Company's businesses.

Your Directors are grateful to the Central and State Governments and the Central DCGIand State FDAs for their support to the Company's business plans. Your Board places onrecord their appreciation of the support provided by the customers suppliers serviceproviders medical fraternity and business partners.

Your Directors are thankful to the esteemed shareholders for their support andencouragement. The Directors and the Management acknowledge and are thankful to theemployees who stayed back with the Company during this crucial period and for theircommitment and contributions for the revival of the businesses and operations.

For and on behalf of the Board
Place: Chennai K N Venkatasubramanian
Date: May 26 2017 Chairman

Annexure I Conservation of Energy

[Pursuant to Section 134(3) (m) of the Companies Act 2013 and Rule 8(3) of theCompanies (Accounts) Rules 2014]

Steps taken or impact on conservation of energy

(a) Energy Conservation measures taken

The following energy conservation measures were taken by your Company during the yearunder review at its manufacturing facility in Alathur

Light load reduction by the conversion of High Rating Lights to its equivalent LED.

Batch cycle time reduced in Cyclohexane distillation process in MPDU results in steamsavings.

Reduction of reflux ratio of first distillation in MPSR from 3.0 to 1.0 reduced theseam consumption.

Power consumption reduced by utilizing CT water instead of chilled water in recoveryarea.

By reduction of cleaning and changeover process in MPDU water consumption was reduced.

Due to the various energy conservation activities implemented mentioned in (a) abovethere was a reduction in power consumption by around 404 UPD and 13.68TPD leading to asaving of around Rs.23.60 Lakhs annually with the investment of Rs.2.73lakhs.

(b) Proposed energy conservation measures

Some of the proposals that are considered / being implemented for saving energy are:

Conversion of -40'B' chiller from single stage to double stage.

Improving the performance of -70 chillers.

Utilizing the geothermal energy for chiller in +10 system

Conversion of tube lights and CFL lamps to LED lamps

Provision of Hot and Cold insulation.

Effective utilization of cold room compressors.

Timer provision for process blowers.

Improving condensate recovery.

Stopping of one -25 system by improving the efficiency of another -25 system.

Further the energy conservation measures proposed to be taken up by the company asmentioned in (b) above are expected to bring in savings of around Rs.132.89 lakhs annuallywith the investment of Rs.120 lakhs.

(c) The steps taken by the Company for utilizing alternate sources of energy

Energy wheeling through gas based captive generating plant is being done resulting inlesser cost of power compared to TANGEDCO power. We are trying to source renewable poweron economical cost.

(d) Capital Investment on Energy Conservation Equipments:

No capital investment was made on energy conservation equipment during the FinancialYear 2016-17.

Annexure II – TECHNOLOGY ABSORPTION

I. Research and Development

1. Specific areas in which research and development activities have been carried out bythe Company during the year.

Process Research and Development Centre focused on the development of manufacturingprocess for selected APIs (Active Pharmaceutical Ingredients) in non-penicillinnon-cephalosporin segment. For few approved products R&D Centre has pursued costreduction research for manufacturing APIs through review of technology and improvement inprocess of APIs and API Intermediates to improve competitiveness. R&D Centre has alsogenerated scientific data new validations and experimental support to respond to thequeries from various regulatory agencies related to review of ANDA (Abbreviated New DrugApplication) and support the approval process of dossiers. R&D ensured theavailability of impurities through synthesis and isolation to meet the requirement ofcommercial supply of APIs and developing new customers. R&D team supported theinvestigations required for continuing the production of the approved APIs for commercialsupply. R&D team supported manufacturing location through demonstration of the processwith appropriate modification on manufacturing scale for few APIs. R&D has transferredtechnology of APIs to new manufacturing site and produced APIs for formulationdevelopment.

In Drug Discovery Research the Malaysian regulatory has approved the renewal ofClinical trial application for NAFLD/ NASH. In the anti-infective area with the newfindings of the collaborative research work a patent application was filed now incollaboration with Merck.

2. Benefits derived as a result of the above R&D activities.

Generation of scientific data scientific/experimental justification for the processand analytical data at R&D Centre has enabled to get approval or progress towardsapproval of ANDA dossiers filed with various regulatory agencies pave way forcommercialization of APIs and supply of APIs for developing in house formulation forgeneric business. Cost reduction improvements for APIs and API intermediates generationof impurity standards and investigations required at the manufacturing locations haveenabled to prepare for commercialization of APIs. Development of manufacturing process fornew APIs will pave way for introducing new products in the Orchid's product portfolio. Theanalytical data and methods have been utilized to include Orchid's methods in OfficialPharmacopoeia Monographs.

Orchid's IP review and FTF positioning challenging the Orange Book patents have enabledto launch earlier than patent expiry as first-to-file generic firm.

3. Future plan of action

R&D will focus its efforts in the development of manufacturing process of APIs ofnew drug products which have potential to be launched in next few years. In addition tothe reduction of the cost of materials and improvement of productivity to maintain andincrease the competitiveness R&D will also concentrate on improvement of themanufacturing and route of synthesis. In case of high cost KSMs (Key Starting Materials)R&D will focus on developing manufacturing process to produce it at an economic cost.

Drug Discovery Research (DDR) would in addition to progressing promising NCEs to thenext stage in the clinical studies also take-up new leads to the next level of proof ofconcept evaluation studies and out-licensing opportunities. Efforts have been taken-upfurther to continue research on metabolic disorders/diseases to develop back-up compoundfor clinical stage NCEs. Drug Discovery R & D has initiated developmental activitiestowards positioning the lead anti-inflammatory candidate to other indications also.

4. Expenditure on R& D

The R&D outlay was as follows ( Rs. in Lakhs)
Particulars Year ended March 312017 Year ended March 31 2016
a) Capital - -
b) Recurring 3532.47 2883.53
c) Total 3532.47 2883.53
d) Total R&D expenditure as a percentage of the total turnover 4.68% 3.28%

II. Technology absorption adaptation and innovation

I. Research and Development:

1. Efforts in brief made towards technology absorption adaptation and innovation:With a need to have an alternate site for manufacturing APIs for both in house consumptionand for market requirement R&D evaluated new facilities and subsequently transferredthe manufacturing technology to a new facility. In addition R&D was actively involvedin identifying new KSM manufactures besides supporting existing KSM manufactures throughscientific support in order to supply KSMs meeting the stringent quality requirements.

2. Benefits derived as a result of the above efforts e.g. product improvement costreduction product development import substitution etc.:

The product improvement and demonstration of process at the manufacturing location havehelped progress towards commercialization of the drug products in the markets. Scientificand technical inputs with respect to manufacturing of APIs at the manufacturing locationand manufacturing of KSMs by the KSM manufacturers have helped maintain the manufacturingof API and KSM meeting the respective filed specifications and maintain commercializationin regulated and other markets.

3. Imported technology (imported during the last 3 years reckoned from the beginning ofthe financial year):

a) Technology No new technology has been imported by Orchid during the year
b) Year of import Not applicable.
c) Has this technology been fully absorbed Not applicable.
d) If not fully absorbed areas where this has not taken place reasons thereof and future plans of action. Not applicable.

Annexure III - FOREIGN EXCHANGE EARNINGS & OUTGO

a) Activities relating to exports initiatives taken to increase exports developmentof new export markets for products and services and export plans.

The company is focusing to increase the sale and distribution of its cephalosporin andthe non-penicillin non cephalosporin APIs and generics in regulated markets.

b) Total foreign exchange earnings and outgo Rs. in Lakhs

Year ended March 312017 Year ended March 312016
1. Earnings in foreign exchange during the year
F.O.B value of exports 55876.18 58659.17
Export of services (net of TDS) - -
2. C.I.F. value of imports (on cash basis)
Raw materials& Packing materials 19494.20 17341.74
Capital goods 90.85 57.15
Spare parts components and consumables 1675.84 1496.38
3. Expenditure in foreign currency during the year (on cash basis)
Travelling expenses 21.90 29.72
Interest and bank charges 3988.05 3726.65
Professional / Consultancy fees 846.16 469.46
Others 2328.32 2475.19
4. Total foreign exchange used (2+3) 28445.32 25596.29

Annexure IV to the Directors' Report

DETAILS OF STOCK OPTIONS - PURSUANT TO SEBI GUIDELINES ON STOCK OPTIONS:- ORCHIDEMPLOYEE STOCK OPTION SCHEMES

Orchid ESOP 2010 Scheme

In terms of the resolution passed by the company at the AGM dated July 21 2010 theshareholders approved the scheme formulated under "ORCHID-ESOP 2010" forallotting 1000000 options. Accordingly 901000 options were granted to the eligibleEmployees and the Executive Director except the Promoter Director by the CompensationCommittee of the Board of Directors at a meeting held on October 28 2010. Each option isconvertible into one equity share of Rs.10/- each at a price of Rs.329.55 per share beingthe closing share price of Orchid at the National Stock Exchange of India Ltd on October27 2010 the day prior to the date of the meeting.

Considering the fall in the price of the shares of the Company and in the interest ofthe employees the Compensation Committee of the Board of Directors at its meeting held onNovember 1 2011 considered repricing of 864500 options in force on the said date fromRs.329.55 to Rs.166.15 as per the closing share price of Orchid at the National StockExchange of India Ltd on October 31 2011. As at March 31 2017 the outstanding optionsyet to be exercised under the said scheme is Nil

Orchid ESOP – Directors 2011 Scheme

In terms of the resolution passed by the company at the AGM held on July 29 2011 theshareholders approved a scheme formulated as "ORCHID ESOP – DIRECTORS 2011SCHEME" for allotting 500000 options to Directors of the Company.

Accordingly 300000 options were granted to the Directors of the Company including theWhole Time Director but excluding the Promoter Director by the Compensation Committee ofthe Board of Directors at a meeting held on November 1 2011. Each option is convertibleinto one equity share of Rs.10/- each at a price of Rs.166.15 per share being the closingshare price of Orchid at the National Stock Exchange of India Ltd on October 31 2011 theday prior to the date of the meeting. As at March 31 2017 the outstanding options yet tobe exercised under the said scheme is Nil.

Orchid ESOP – Senior Management 2011 Scheme

In terms of the resolution passed by the company at the AGM held on July 29 2011 theshareholders approved a scheme formulated as "ORCHID ESOP – SENIOR MANAGEMENT2011 SCHEME" for allotting 1000000 options to senior employees of the Company outof which 750000 options will be granted to the employees of the Company and 250000options will be granted to the employees of its subsidiary companies. Accordingly 42700options were granted to the Employees of the Company by the Compensation Committee of theBoard of Directors at a meeting held on November 01 2011. Each option is convertible intoone equity share of Rs.10/- each at a price of Rs.10/- each (i.e. At Par). 10675 optionsare in force as at March 31 2017 under ORCHID ESOP – SENIOR MANAGEMENT 2011 Scheme.

DESCRIPTION

ORCHID ESOP - 2010 SCHEME

ORCHID ESOP - DIRECTORS 2011 SCHEME ORCHID ESOP - SENIOR MANAGEMENT 2011 SCHEME
a. No. of shares available under ORCHID ESOP

1000000

500000 1000000
b. Options granted during the year (Net of Lapses)

Nil

Nil Nil
c. Pricing formula

The closing prices for the Company's Equity shares quoted on the BSE Limited and / or National Stock Exchange of India limited preceding the date of granting options

Rs. 10/-
d. Options Vested during FY 2016-17 Nil

Nil

Nil
e. Options exercised during FY 2016-17 Nil

Nil

Nil
f. Total no. of shares arising out of Exercise of options Nil

Nil

Nil
g. Options lapsed during FY 2016-17 Nil

40000

10675
h. Variation of terms of Options Due to the fall in the share price the compensationcommitte revised the price of the options from Rs. 329.55 to Rs.166.15 as per the closing price of Orchid at NSE on October 31 2011.

Nil

Nil
i. Money realized by exercise of options Nil

Nil

Nil
j. Total no. of options in force as on March 312017 Nil

Nil

10675
k. Grant details to
i) Members of Senior Managerial personnel/Director during the year Nil

Nil

Nil
ii) Any other employees receives a grant in any one year of option amounting to 5% or more of option granted during the year. Nil

Nil

Nil
iii) Identified employees who were granted option during the year equal to or exceeding 1% of issued Capital of the company at the time of the grant. Nil

Nil

Nil
l. Diluted EPS as per Accounting Standard 20 (Rs.54.36)
i) Method of calculation of employee compensation cost

Not Applicable

ii) Difference between the employee compensation cost so computed at(i) above and the employee compensation cost that shall have been recognized if it had used the fair value of the options

Nil

m. iii) The impact of this difference on profits and on EPS of the company on the cur rent year profits (Amortized Amount)c Profit /(Loss) after Tax (Rs.48363.09) lakhs
Add:Employee cost of intrinsic value over fair value Nil
Adjusted PAT (loss) (Rs.48363.09) lakhs
Adjusted EPS (Rs.54.36)
n. Weighted average exercise price and fair value of stock options granted:
Stock options granted on Weighted average Exercise price (Rs.)

Weighted average fair value (Rs.)

Closing Market price at NSE on the preced- ing day of the date of grant (Rs.)
October 28 2010 (Employees) 166.15

NA

166.15
November 01 2011 (Directors) 166.15

NA

166.15
November 01 2011 (Senior Management) 10.00

NA

166.15
o. Description of the method and significant assumptions used during the year to estimate the fair value of the options including the following weighted average information

Since there was no exercise of options by any employees during the year assumptions for estimating the fair value of options exercised does not arise.

p. The main assumptions used in The Black and Scholes Option Pricing Model model during the year were as follows
i) Risk free interest rate
Not applicable
ii) Expected Life of Options
iii) Expected Volatility
iv) Dividend yield (average based on option price)

Annexure VII

PARTICULARS PURSUANT TO SECTION 197(12) OF THE COMPANIES

ACT 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OFMANAGERIAL PERSONNEL) RULES 2014 a) The ratio of the remuneration of each director to themedian remuneration of the employees of the company for the financial year

Except for Shri. K Raghavendra Rao Managing Director none of the other directors arein receipt of remuneration.

Ratio of remuneration of Managing Director Shri. K Raghavendra Rao to the medianremuneration of the employees of the company for the financial year 2016-17 is 15.38times.

b) Percentage increase in remuneration of each Director Chief Financial OfficerCompany Secretary in the financial year

The details pertaining to the percentage increase in the remuneration of theDirectors (Except the Managing Director Shri K Raghavendra Rao) cannot becalculated for the reasons as stated in the point no. (a) above.

Name of the KMP/ Designation % Increase in remuneration in 2017 as compared to 2016
Shri K Raghavendra Rao - Managing Director Shri L Chandrasekar - CFO & Company Secretary There was no increase in the remuneration of the Managing Director and there was an increase of 4% in the remuneration of CFO and CS during the Financial Year 2016-17

c) Percentage increase in median remuneration of employees in the financial year

There has been an increase of 16.07% in the median remuneration of employees duringthe FY 2016-17

d) Number of permanent employees on the rolls of Company (as of 31st March 2017): 1574

e) Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentageincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration.

The average percentile increase made in the salaries of employees other than themanagerial personnel in the last financial year 2016-17 was 2.40%.

The percentage increase in the remuneration of Key Managerial Personnel during the FY2016-17 was: Shri K Raghavendra Rao- Managing Director- NIL

Shri L Chandrasekar – Chief Financial Officer and Company Secretary – 4 %

f) Affirmation that the remuneration is as per the Remuneration policy of the Company

It is hereby affirmed that the remuneration paid is as per the Remuneration policyof the Company.

Annexure - IX Form AOC-I

(Pursuant to first proviso to sub-section (3) of Section 129 read with Rule 5 ofCompanies (Accounts) Rules 2014) Statement containing salient features of the financialstatement of Subsidiaries/Associate companies/Joint ventures

Part "A": Subsidiaries

S. No. Name of the subsidiary Orchid Europe Ltd UK

Orchid Pharmaceuticals Inc and Subsidiaries USA

Bexel Pharmaceuticals Inc USA

Orchid Pharmaceuticals SA (Propreitary) Limited South Africa

Diakron Pharmaceuticals Inc USA

1 Reporting period for the subsidiary concerned if different from the holding company's reporting period Apr 16 - Mar 17

Apr 16 - Mar 17

Apr 16- Mar 17

Mar 16 - Feb 17

Apr 16 - Mar 17

2 Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries. GBP ;81.79 US $;65.30 US $;65.30 South African Rand 4.98 US $;65.30
Rs. In Lakhs $ Rs. In Lakhs $ Rs. In Lakhs RAND Rs. In Lakhs $ Rs. In Lakhs
3 Share capital 10000 8.18 100.00 0.07 35895.27 23.44 303638.00 15.12 - -
4 Reserves & surplus 239675.32 196.03 (6497497.00) (4242.87) (5298624.00) (3460.00) (303638.00) (15.12) (2583128.00) (1686.78)
5 Total assets 485442.34 397.04 6047334.93 3948.91 384992.52 251.40 - - 5998.00 3.92
6 Total Liabilities 485442.34 397.04 6047334.93 3948.91 384992.52 251.40 - - 5998.00 3.92
7 Investments - - - - - - - - - -
8 Turnover 85791.57 70.17 12438305.00 8122.21 - - 3825.00 0.19 - -
9 Profit before taxation (123926.44) (101.36) 178743.00 116.72 - - 3825.00 0.19 (591054.00) (385.96)
10 Provision for taxation - - - - - - - - - -
11 Profit after taxation (123926.44) (101.36) 178743.00 116.72 - - 3825.00 0.19 (591054.00) (385.96)
12 Proposed Dividend - - - - - - - - - -
13 % of shareholding 100% 100% 100% 100% 76.65%

1. Names of subsidiaries which are yet to commence operations -NIL

2. Names of subsidiaries which have been liquidated or sold during the year-NIL

Note : Indian equivalent figures have been arrived at by applying the year end rate 1 = Rs.81.79 1 South African Rand = Rs. 4.98 and 1 US $ = Rs.65.30 and do not form partof the reports of Orchid Europe Limited Orchid Pharmaceuticals Inc. BexelPharmaceuticals Inc. Orchid Pharmaceuticals SA (Proprietary) Limited and DiakronPharmaceuticals Inc.

Part "B": Associates and Joint Ventures

Statement pursuant to Section 129 (3) of the Companies Act 2013 related to AssociateCompanies and Joint Ventures

Name of Associates/Joint Ventures
1. Latest Audited Balance Sheet Date
2. Shares of Associate/Joint Ventures held by the company on the year end:
No. of shares
Amount of Investment in Associates/Joint Venture (Rs. In Lakhs)
Extend of Holding % Not Applicable
3. Description of how there is significant influence The Company did not have any investments in Associates or
4. Reason why the associate/joint venture is not consolidated
5. Networth attributable to Shareholding as per latest audited Balance Sheet
6. Profit / Loss for the year
i. Considered in Consolidation
ii. Not Considered in Consolidation

1. Names of Associates or Joint ventures which are yet to commence operations-NIL

2. Names of Associates or Joint ventures which have been liquidated / sold / redemptionof shares during the year- Allecra Therapeutics GmbH

Your Company was holding 16094 fully paid equity shares of Euro 1 each in AllecraTherapeutics GmbH. Subsequent to the implementation of CDR scheme Allecra has within themeaning of the redemption clause contained in the Articles of Association redeemed theshares held by your Company.

On behalf of the Board
K.N. Venkatasubramanian K. Raghavendra Rao
Chairman Managing Director
Place : Chennai L. Chandrasekar
Date : May 26 2017 EVP - Finance & Secretary

Annexure X

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act 2013and Rule 8(2) of the Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts/arrangements entered into by thecompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arms length transactions under third provisothereto.

1. Details of contracts or arrangements or transactions not at arm's lengthbasis.

NIL

2. Details of material contracts or arrangement or transactions at arm's lengthbasis

a) Name(s) of the related party and nature of relationship.

1. Orchid Pharma Inc. USA - Subisidiary

2. Orchid Europe Ltd. UK - Subisidiary

b) Nature of contracts/arrangements/transactions

Details of transaction with the above related parties are provided in Note No. 32to the accounts of financial year 2016-17.

c) Duration / Salient terms / Date(s) of approval by the Board of / for the Contracts /Arrangements / Transactions

As the value of transactions with the above related parties are less than 10% ofthe total income for the financial year 2016-17 the details of such contracts /arrangements have not been furnished.

d) Amounts paid as advances if any

Details of transaction with the above related parties are provided in Note No. 32to the accounts of financial year 2016-17.

On behalf of the Board
Place : Chennai K N Venkatasubramanian
Date : May 26 2017 Chairman

Annexure XI

Statement on Impact of Audit Qualifications Submitted for the Financial Year endedMarch 31 2017 – Standalone Basis [Pursuant to Regulation 33 & 52 of the SEBI(LODR) (Amendment) Regulations 2016]

I Sl.No Particulars Audited figures (as reported before adjusting for qualifications) (Rs. In Lakhs) Audited figures (audited figures after adjusting for qualifications) (Rs. In Lakhs)*
1 Turnover / Total Income (including other income) 78108.44 78108.44
2 Total Expenditure (Including finance cost exceptional and extra-ordinary items) 131275.87 131275.87
3 Net Profit / (Loss) (48363.11) (48363.11)
4 Earnings per Share (In Rs.) (54.36) (54.36)
5 Total Assets 347395.32 347395.32
6 Total Liabilities 373778.63 373778.63
7 Net worth (26383.31) (26383.31)
8 Any Other Financial item(s) (as felt appropriate by the management) - -
II Audit Qualification
II(1) (a) Details of Audit Qualification: The Company has given advances amounting to Rs. 726 crores to various parties and are outstanding as on March 31 2017. The Company has not received any materials/ capital goods against these advances. As per information and explanation given the Company is not able to take delivery of materials due to financial constraints. We are not able to express any opinion on the recoverability of these amounts.
(b) Type of Audit Qualification : Qualified opinion
(c ) Frequency of Qualification : Repetitive from period 18 months ended 30th September 2013
(d) For Audit Qualification(s) where the impact is quantified by the auditor Management Views: N.A
(e) For Audit Qualification(s) where the impact is not quantified by the auditor:
(i) Management's estimation on the impact of audit qualification: NIL
The Company is currently under the Corporate Debt Restructuring (CDR) scheme. The Corporate Debt Restructuring scheme has been implemented in July 2014. Due to financial constraints the Company was not able to take delivery of materials /capital goods and the company is confident that it would be able to take delivery of these materials/capital goods in due course based on its performance.
(ii) If management is unable to estimate the impact reason for the same N.A
(iii) Auditor's Comment on (i) or (ii) above: We are not able to express any opinion on the recoverability
of these amounts in the absence of full information
II(2)(a) Details of Audit Qualification: The Company has investments of Rs. 28.25 Crores in a subsidiary carrying on research and development activities. The subsidiary has not been spending any money on the research during the current period as no financial support is given by the parent Company and the parent Company has not allocated any funds for the future development. No information is also available with the company regarding the value of molecules available with the subsidiary. In view of the above it is necessary to impair the value of this investment.
(b) Type of Audit Qualification : Qualified opinion
(c ) Frequency of Qualification : Repetitive from period 18 months ended 30th September 2013
(d) For Audit Qualification(s) where the impact is quantified by the auditor Management Views: As far as the diminution in value of investments is concerned the Management is confident that the value of intellectual property of molecules held by the foreign subsidiary will be more than the investment.
(e) For Audit Qualification(s) where the impact is not quantified by the auditor: N.A
II(3)(a) Details of Audit Qualification: The Company has an exposure of Rs. 27.35 crores towards receivables from one of its marketing subsidiary whose net worth is negative. Provision has not been made for same.
(b) Type of Audit Qualification : Qualified opinion
(c ) Frequency of Qualification : Repetitive from period 18 months ended March 312015
(d) For Audit Qualification(s) where the impact is quantified by the auditor Management Views: In respect of dues from the marketing subsidiary the Company is exporting and selling profitable products through its marketing subsidiary and the profit generated by the marketing subsidiary from the operations will be available for settlement of past dues.
(e) For Audit Qualification(s) where the impact is not quantified by the auditor: N.A
II(4)(a) Details of Audit Qualification: The Company has not received confirmation of balance from banks for loans amounting to Rs.290.89 crores
(b) Type of Audit Qualification : Qualified opinion
(c ) Frequency of Qualification : Repetitive from period 18 months ended March 312015
(d) For Audit Qualification(s) where the impact is quantified by the auditor Management Views: N.A
(e) For Audit Qualification(s) where the impact is not quantified by the auditor:
(i) Management's estimation on the impact of audit qualification: In view of the delay in payment of interest and principal few banks have not provided balance confirmation. However the interest on the outstanding with such banks has been provided at the applicable rates.
(ii) If management is unable to estimate the impact reason for the same N.A.
iii) Auditor's Comment on (i) or (ii) above: N.A
III Signatories
CEO/ Managing Director
CFO
Audit Committee Chairman
Statutory Auditor
Place: Chennai
Date: 26/05/2017