J.K. PHARMACHEM LIMITED
ANNUAL REPORT 2004-2005
Your Directors present the Annual Report and Audited Accounts of the
Company for the year ended 30th September 2005.
During the year under review there was a turnover of Rs.6.53 Crores. There
was an operating loss of Rs.4.18 Crores and after providing for financial
charges and depreciation, there was a deficit of Rs.10.91 Crores.
The woes of Indian Penicillin-G industry caused by imports from China
continued during the year under review resulting in suspension of
operations of several units.
As a result of cheap imports from China and the un-remunerative domestic
prices, the manufacturing operations of the Company continued to be
unviable and remained suspended throughout the year under review. To
further cut losses a settlement with the workmen was arrived at in January,
2005 and all the workmen were amicably paid off.
The Company has been making efforts to find a viable proposition for
revival of our unit as well as for strategic alliance with Indian or
On a notice of motion taken out by Bank of India in its capacity as
Trustees for Secured Debenture holders, the Bombay High Court has appointed
a Receiver over the immovable properties, current assets and book debts on
which the Debentures are secured.
Conservation of Energy, etc:
Pursuant to 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, particulars of energy conservation, technology absorption,
foreign exchange earnings and outgo are annexed.
During the year Dr. S.K. Sagar ceased to be the Whole-time Director of the
Company w.e.f. 19th February 2005. Dr. S.K. Sagar, however continues to be
a Director on the Board of the Company.
Shri D.C. Jain and Shri Pramod Kapoor retire by rotation at the ensuing
Annual General Meeting, and being eligible offer themselves for re-
appointment. The Company has been advised legally that the provisions of
Section 274(1)(g) of the Companies Act, 1956 is not applicable in respect
of re-appointment in this Company of the Directors who are retiring by
On 29th April, 2005, Shri V.P. Vig was appointed as an additional Director
pursuant to Section 260 of the Companies Act, 1956 and holds office upto
the ensuing Annual General Meeting. The Company has received a notice under
Section 257 of the Companies Act from a member of the Company signifying
his intention to propose the appointment of Shri V.P. Vig as a Director
liable to retire by rotation.
Further Shri V.P. Vig has been appointed as Manager in terms of Section 269
of the Companies Act, 1956 w.e.f. 27th July 2005 without any remuneration.
M/s. Lodha & Co., Chartered Accountants, the Auditors of the Company,
retire at the conclusion of the ensuing Annual General meeting and being
eligible, offer themselves for re-appointment. The observations of
the Auditors in their Report read with relevant notes on accounts are self-
In view of there being no production during the year, the Company has
sought exemption from the applicability of Cost Audit from Department of
Company Affairs for the year.
Particulars of Employees:
None of the employees are in receipt of remuneration in excess of limits
prescribed under the provisions of Section 217(2A) of the Companies Act,
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a
Management Discussion and Analysis, Corporate Governance Report and
Auditors' Certificate regarding compliance of conditions of Corporate
Governance are annexed hereto which form part of this Annual Report.
Directors' Responsibility Statement:
As required under Section 217(2AA) of the Companies Act 1956, your
Directors state that:
(i) In the preparation of annual accounts, the applicable accounting
standards have been followed along with the proper explanation relating to
(ii) The accounting policies have been selected and applied consistently
and judgements and estimates made are 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 of the profit and loss of Company for that period;
(iii) proper and sufficient care has been taken for maintenance of adequate
accounting records in accordance with the provisions of the said Act for
safeguarding the assets of the company and for preventing and detecting
fraud and other irregularities; and
(iv) The annual accounts have been prepared on a going concern basis.
Your Directors acknowledge and sincerely appreciate the continued support
and co-operation from Financial Institutions, Banks, various Government
agencies, Shareholders, Debenture holders, our valued customers and the
On behalf of the Board
Place: New Delhi V.P. Vig D.C. Jain
Date : 30th November 2005 Director &Manager Director
ANNEXURE TO THE DIRECTORS' REPORT
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF
DIRECTORS) RULES, 1988.
A. CONSERVATION OF ENERGY:
Operations of the Company remained suspended during the year under review.
PARTICULARS OF CONSERVATION OF ENERGY:
(I) POWER & FUEL CONSUMPTION 2004-05 2003-04
Unit (MWH) - 26.32
Total Amount (Rs. in Lacs) - 257.22
Rate/Unit (Rs.) - 9.77
(Including Max. Demand Charges)
(b) Own Generation:
Unit (MWH) - 345.80
Unit/Ltr. of HSD/Furnace Oil - 3.81
Cost/Unit (Rs.) - 2.78
2. COAL - -
3. FURNACE OIL
Quantity (KL) - 15200.41
Total Amount (Rs. in Lacs) - 1539.53
Average Rate (Rs./Ltr.) - 10.12
(II) CONSUMPTION PER UNIT OF PRODUCTION
Electricity (KWH/BU) - 31.21
Furnace Oil (Ltr./BU) - 12.75
B. TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT
1. RESEARCH & DEVELOPMENT:
No R&D activities were carried out during the year under review in view of
suspension of operations of the factory and no expenses were incurred under
2. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:
Operations remained suspended during the year.
C. FOREIGN EXCHANGE EARNINGS AND OUTGO:
(Rs. in lacs)
Foreign Exchange Earning Nil Nil
Foreign Exchange Outgo 13.77 111.80
MANAGEMENT DISCUSSION AND ANALYSIS
During the year under review, no improvement in the domestic Penicillin-G
industry, was noticed. Presently only one Penicillin-G unit is
manufacturing whereas another is producing small quantity for its captive
Import prices hovered around US$ 6.0-6.25/BU during the year under review &
accordingly domestic prices were also in the range of about Rs.320/BU. Raw
materials prices continued to rise (by about 25%) & furnace oil from
Rs.10841/KL in Sept. 04 to Rs.18000/KL in Sept. 05 due to spurt in global
oil prices, hence cost of production increased substantially thereby
continuing to render the operations unviable. Due to this, the units
producing Penicillin-G continued to incur heavy losses.
As per information available and as reported earlier prices of Penicillin-G
being imported from China are at dumping level, which are lower than
manufacturing cost in China. Indian Penicillin Manufactures Association
(IPMA) brought this anomaly to the notice of the Government of India with a
request to impose anti-dumping duty on imports of Penicillin-G but to no
avail. On the contrary, export obligation period which was reduced from 30
months to 3 months, was subsequently increased to 6 months during the year.
This has adversely affected the Indian Penicillin industry.
The global market share of India has further come down to 3% against 7%,
whereas China's market share went up to 75% against 65% last year. Huge
build-up of capacities in China has led to over-supply resulting in a price
crash. Although the international prices increased somewhat but the cost of
production increased much more due to spurt in global prices of petroleum
products and raw materials especially solvents and sugar.
As per available information, the price level of Penicillin-G imported from
China is below the cost of manufacture for most of the producers
internationally but China continued dumping Penicillin-G in the Indian
market which crippled the Indian Penicillin industry.
On the international front, the capacity expansions for manufacturing
Penicillin-G is increasing and China will continue to dominate the global
Penicillin-G scenario. Any further reduction in import duty will adversely
impact the domestic industry. Unless suitable measures are taken to
neutralize the inequalities through lower power tariff, higher customs duty
and also imposition of anti-dumping duty, it will be difficult for the
Indian Penicillin industry to recover.
The operations of the Company remained suspended from middle of September'
04. An amicable settlement was reached with the workmen whereby all the
workmen were paid off. Only a nucleus management cadre continues.
THREATS AND CONCERNS:
Major area of concern is the continuous import of Penicillin-G from China
at very low prices, i.e. at below their cost prices. Further, expected
reduction in customs duty, rise in the petroleum products globally as well
as absence of anti-dumping duty on Penicillin-G by Govt. of India will
completely destroy the Indian Penicillin-G industry.
FINANCIAL PERFORMANCE AND INTERNAL CONTROL SYSTEMS:
During the year under review, the Company's turnover was Rs.6.53 crores and
Operating loss Rs.4.18 crores. After providing for financial charges,
depreciation, extraordinary income, the loss for the year was Rs.10.91
PARTICULARS 2004-05 2003-04
Turnover 6.53 44.91
Operating Profit (PBIDT) (4.18) (14.03)
Cost of Borrowings 6.53 7.46
Profit/(Loss) before tax (10.90) (31.45)
Fringe Benefit Tax 0.01 -
Extraordinary Items - 3.15
Profit/(Loss) After Tax (10.91) (28.30)
During the year, the Company has paid all dues towards principal redemption
and interest upto 30.04.2005 of debentures held by public. The Company
could not meet the commitments of other two institutional debenture holders
and the interest due to the public accrued upto 30.09.2005.
Internal control systems are in place in all activities of the operations
of the Company. The Company has been conducting structured and elaborate
internal audits since its inception. The Audit Committee of Directors meets
regularly and reviews operations of internal audit and action thereon.
'Management Discussion and Analysis Report' contains forward looking
statements, which may be identified by the use of words in that direction,
or connoting the same. All statements that address expectations or
projections about the future, including but not limited to statements
about the Company's strategy for growth, product development, market
position and expenditures and financial results are forward looking
statements. The Company's actual results, performance or achievement could
thus differ materially from those projected in any such forward-looking
statements. The Company assumes no responsibility to publicly amend, modify
or revise any forward looking statements, on the basis of any subsequent
development, information or events.