Orchid Pharma Ltd.
|BSE: 524372||Sector: Health care|
|NSE: ORCHIDPHAR||ISIN Code: INE191A01019|
|BSE 00:00 | 15 Feb||3.19||
|NSE 00:00 | 15 Feb||3.25||
|Mkt Cap.(Rs cr)||28|
|Mkt Cap.(Rs cr)||28.38|
Orchid Pharma Ltd. (ORCHIDPHAR) - Director Report
Company director report
In accordance with the applicable provisions of the Insolvency and Bankruptcy Code 2016("IBC/Code") the Corporate Insolvency Resolution Process ("CIRPProcess") of Orchid Pharma Limited ("Company") was initiated by anOperational Creditor of the Company. The Operational Creditor's petition to initiate theCIRP Process was admitted by the National Company Law Tribunal ("NCLT") vide CP.No. CP/ 540/ (IB)/ CB/ 2017 on August 17 2017 ("Insolvency Commencement Date").Mr. CMA CS Rajasekaran R was appointed as the Interim Resolution Professional("IRP") to manage the affairs of the Company. Subsequently Mr. RamkumarSripatham Venkatasubramanian (IP Registration No. IBBI /IPA-001 /IP- P00015 /2016-17/10039) was confirmed as the Resolution Professional ("RP") by the committee ofcreditors ("CoC") and NCLT with effect from October 27 2017. On appointment ofthe IRP /RP the powers of the Board were suspended and the same vests with the RP.
RP invited expressions of interest and submission of a resolution plan in accordancewith the provisions of the Code. Upto the CIRP extended last date i.e. the 270thday - May 14 2018 there were no successful resolution applicants and accordingly RPfiled the status with the Hon'ble NCLT for necessary directions. Subsequently as directedby Hon'ble NCLT Chennai Resolution Professional (RP) placed the Resolution Plan fromprospective resolution applicant namely - Ingen Capital Group LLC USA - before Committeeof Creditors (CoC) for voting on June 04 2018 and re-voting on August 04 2018 in view ofthe Ordinance (IBC) passed on 6th June 2018. In the re-voting which concludedon 4th August 2018 the resolution plan had received an affirmative vote of 78%of the CoC by value in its favour. RP filed the re-voting results with Hon'ble NCLT and ason the date of this Report the status is "Order Reserved".
Pending this and measures to be adopted as part of the resolution process the auditedfinancial results have been continued to be prepared on a going concern basis
With this backdrop RP and the Board take pleasure in presenting the report on businessand operations of your Company along with the audited statement of accounts (Standaloneand Consolidated) for the financial year ended March 312018.
Financial summary /Performance /State of Company's affairs Transition to IND AS
The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazettedated February 16 2015 notified the Indian Accounting Standards (Ind AS) applicable tocertain classes of Companies. Ind AS has replaced the existing Indian GAAP prescribedunder Section 133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts)Rules 2014. For your company Ind AS is applicable from April 12017 with a transitiondate of April 12016.
The highlights of the standalone financial results for the year 2017-2018 as per theIND AS are given below:-
During the financial year 2017-18 your Company achieved a turnover and operatingincome of Rs. 649 crores (Rs.766.29 crores in 201617). The gross profit before interestdepreciation and taxes stood at Rs. 33.47crores (Rs. 25.06 crores in 2016-17). Afterproviding for interest expense of Rs. 301.65 crores (Rs.336.27crores in 2016-17)depreciation of Rs.133.29 crores (Rs. 139.42 crores in 2016-17) Extraordinary item of Nil( Rs. 86.26Crores in 2016-17) the Loss before tax of the Company was Rs. 401.47 crores(Rs. 536.88 crores (Loss) in 2016-17). The net loss after tax including OtherComprehensive Income stood at Rs.354.53crores (Rs. 490.11 crores (Loss) in 2016-17).
During the financial year i.e. in August 2017 due to non-payment of the dues of anoperational creditor your Company was admitted in the insolvency resolution process asper the IBC by NCLT Chennai Bench.
During the financial year 2017-18 your Company continued to reel under financialstress and the performance of the Company was affected due to liquidity constraintsmounting interest burdens which had an impact on the net profits of the Company. As aresult the ability of the Company to meet its repayment obligations /liabilities wereadversely affected. Despite the tough liquidity and working capital constraints yourCompany managed to sustain sales with a lower EBIDTA denoting the basic strength of thebusiness.
During the year your Company had received ANDA approval from the USFDA forAripiprazole tablets USP 2mg 5mg 10mg 15mg
It is now four years since the restructuring of the debt and one year since the CIRPapproval of the resolution plan for revival of the Business as recommended with anaffirmative vote of 78% by the Committee of Creditors and given to the NCLT is still inprogress. The resolution plan submitted by RP came up for Hearings in NCLT and as itstands "the Order is Reserved".
Your Company has been extremely fortunate to have the full support of its LendersEmployees Vendors and Customers during the financially stressed period. Although hugeefforts are required towards regaining the confidence of various Stakeholders yourCompany is hopeful and confident of accomplishing the same during the course of time. YourBoard believes that the Company will be able to revive its operations towardsprofitability post receipt of the approval from NCLT and the implementation of theResolution Plan.
Management Discussion and Analysis report
A report on the Management discussion and analysis in terms of the provisions ofRegulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is provided as a separate annexure in the annual report.
Corporate Governance Report and Additional Shareholder's information
A report on the corporate governance systems and practices of your company along with acertificate of compliance from the Practising Company Secretary is given in Annexure Vwhich forms part of this report
The details of the Composition of the Audit committee are available in the CorporateGovernance report. The Board has accepted the recommendations made by the Audit committeeduring the financial year 2017-2018.
Pursuant to the resignation of Shri K N Venkatasubramanian Chairman & IndependentDirector and Shri R Kannan Independent Director the reconstitution of the Board as wellas the Audit committee is pending.
Adequacy of Internal Financial Control System
The internal financial control over financial reporting system are existing andoperative however based on the observations of the auditors the Company is furtherstrengthening the internal financial control systems over financial reporting
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.
During the year the Company had received ANDA approval from the USFDA for Aripiprazoletablets USP 2mg 5mg 10mg 15mg 20mg and 30 mg and for AripiprazoleOrally-Disintegrating Tablets USP 10 mg and 15 mg
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 Segment48in NPNC segment. In European market space the cumulative filings of COS (Certificate ofSuitability) count remained at 19 which includes 14 in cephalosporin segment5 in NPNCsegment. In Japan market the cumulative filings of JDMFs count remained at 7 only inCephalosporin segment.
Intellectual Property Rights
During the year Orchid continued to take forward the IPR work on a number of products.The total number of patent applications filed by Orchid in various national andinternational patent offices so far was 219 including Process Formulation New ChemicalEntities (NCE) Novel Drug Delivery System (NDDS) Biotech and Generics. As of March312018 27 patent applications have been published while 178 patents have been grantedcumulatively.
The number of patent applications filed by Orchid from April 01 2017 to March 31 2018is 23 (Including Process Formulation NCE NDDS Biotech and Generics) and out of this 9patents have been granted.
Dividend & Reserves
In view of the net loss incurred during the financial year ended March 312018 theResolution Professional does not recommend any dividend to the shareholders of theCompany. Also no amount has been transferred to reserves.
Awards and Achievements
During the year your Company's Generics Manufacturing Unit Irungattukottai (IKKT) waschosen for the Export Excellence Award (II Position) by the Ministry of Commerce &Industry Government of India for performance during 2015 - 2016 and Exim AchievementAward (II Position) by the Tamil Chamber of Commerce in Association with Chozha NachiarFoundation Government of Tamil Nadu for performance during the financial year 2014-15.
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 Ltd. & BSE Ltd. to allot 18512251 (OneCrore Eighty Five Lakhs Twelve Thousand Two Hundred Fifty One Only) equity shares ofRs.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. During the financial year2017-2018 your Company had received the final trading approval for 3702450 shares fromNSE Ltd and BSE Ltd.
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 of suchoptions as on March 312018 are given in Annexure IV to this Report.
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 Subsidiaries namelyOrgenus Pharma Inc. and Orchid Pharma Inc. in the US. Orgenus Pharma Inc. is the entitythat provides all business development and operational services for the parent Companyincluding the initiation of marketing alliances with partner companies. It continues torepresent your Company for all matters relating to the review and approval of such filingsby the FDA and handling of logistics and product importation into the US as the Importerof Record for the US Customs. Orchid Pharma Inc. is the commercial entity that starteddirect marketing and selling your Company's products in the US generics market place.Orchid Pharma Inc. has established a strong corporate image for your Company in the US andwill be launching all future (unpartnered) generics products under the Orchid label.
Diakron Pharmaceuticals Inc. USA
Orchid's stake in Diakron has been a part of the originaltransaction 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 subsidiary in Europe 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.
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 6% of the sales of the Company. The Companyaccesses the US market through this subsidiary and expects strong growth in the US marketin the years to come. The R&D subsidiaries of the Company are used for carrying outResearch & Development of selected molecules having good potential. Your Company hasa subsidiary for holding Product registrations and approvals in Europe.
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 -VIIIforming part of this report.
Key & Senior Managerial Personnel
Shri. K Raghavendra Rao (DIN: 00010096) Managing Director and Shri. L ChandrasekarCFO & Company Secretary are the Key Managerial Personnel of the Company as per Section203 of the Companies Act 2013. Ms. Edna Braganza Chief Operating Officer and Shri ManiSivaswami President - API CSR&SH&E are part of the Senior Management Team.
Extract of Annual Return
As per the amendments carried out by the Companies (Amendment) Act 2017 in section92(3) every company shall place a copy of the Annual Return on the website of theCompany if any and the web-link of such Annual return shall be disclosed in the Board'sreport. A copy of Annual return of the company is available on the website of the companywww.orchidpharma.com
Board & RP Meetings held during the year
During the year 2 (two) meetings of the Board were held prior to commencement of theCIRP. The Board Meetings were held in accordance with provisions of the Companies Act2013 and the relevant rules made there under. After the commencement of the CIRP on August17 2017 Board Meetings have not taken place as the Powers of the Board remainedsuspended and entrusted to the Resolution Professional appointed by NCLT. During CIRP RPhad convened meetings with the Senior Management KMP and with the Board members.
The details of the RP meetings dates of Board & Committee meetings alongwith theCoC Meetings held during the FY 2017-18 are furnished in the Corporate Governance Reportforming part of this report.
Board's Responsibility Statement
Members may kindly note that during the CIRP Process (i.e. after August 17 2017 andcontinuing till the date of this Report) the RP was entrusted with the management of theaffairs of the Company. Prior to the Insolvency Commencement Date the Board of Directorshad the oversight on the management of the affairs of the Company. The ResolutionProfessional along with the Managing Director is submitting this report. The RP is not tobe considered responsible to discharge fiduciary duties with respect to the oversight onfinancial and operational health of the Company and performance of the management for theperiod prior to the commencement of CIRP.
Accordingly pursuant to Section 134(5) of the Act the Board & RP (based on theknowledge /information gained by him about the affairs of the Company in a limited periodof time and based on understanding of the then existing processes of the Company) and tothe best of their /his knowledge state:
a) that in the preparation of the annual accounts for the financial year ended March31 2018 the applicable accounting standards have been followed along with properexplanation relating to material departures
b) that RP has continued with such accounting policies as were adopted on CIRP datemade judgments and estimates that are reasonable and prudent so as to give a reasonablytrue and fair view of the state of affairs of the Company at the end of the financial yearended March 312018 and of the profit or loss of the Company for that period
c) that the annual accounts for the financial year ended March 31 2018 have beenprepared on a going concern basis as explained herein above in the preamble
d) that proper systems which have been devised to ensure compliance with the provisionsof applicable laws are adequate and operating and
e) that Internal financial controls which were laid down and followed by the company onthe date of CIRP along with the necessary steps and changes in the Management Structurethat have been taken to improve the internal financial controls during CIRP are operatingeffectively.
f) that proper and sufficient care has been taken care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.
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/downloadsNOMINATION-AND-REMUNERATION-POLICY.pdf.
Appointment 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 ofyour Company have given declarations to the Company under Section 149 (7) of the Act thatthey meet the criteria of independence as provided in Sub Section 6 of Section 149 of theAct 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 Obligation &Disclosure Requirements) Regulations 2015 in order to ensure proper reporting andapproval of transactions with related parties. The Policy is available on the website ofthe Company and 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 - IX forming part of this report.
Prior omnibus approval of the Audit Committee is has been obtained for the transactionswhich are foreseeable and of repetitive nature.
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 CSR Projects or Programsto be undertaken by the Company as per CSR Policy for consideration and approval by theBoard of Directors. The details of the composition of the Corporate Social Responsibilitycommitteee are disclosed in the Corporate Governance report.
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 2017-18 through "Orchid Trust" and spentRs. 11 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
Subject to the ongoing CIRP process as per the IBC 2016 there are no material changesand commitment affecting financial position of the Company from the end of Financial Yearand till the date of this Report.
Conservation of Energy
Your Company has always been striving in the field of energy conservation. Certainmeasures to conserve energy and to reduce associated costs were taken in a small wayduring the fiscal under review. The particulars in respect to conservation of energy asrequired under Section 134 (3) (m) of the Companies Act 2013 are given in Annexure I tothis report.
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 were 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
Pursuant to the initiation of the Corporate Insolvency Resolution Process and as thesame is still in process the powers of the Board of Directors stands suspended fromAugust 17 2017. Accordingly the Annual evaluation of Board its committees andindividual directors as required under Section 134 (p) could not be carried out.
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 2018.
Details regarding deposits covered under Chapter V of the Act
During the Financial Year 2017-18 your Company did not accept any deposits within themeaning of the provisions of Chapter V - Acceptance of Deposits by Companies read with theCompanies (Acceptance of Deposits) Rules 2014 and as such no amount of principal orinterest 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:
In view of pendency of the CIRP and in view of suspension of the powers of board ofdirectors the powers of adoption of this standalone & consolidated financial resultsvests with the RP. The RP as relied upon the representations clarifications andexplanations provided by the Managing Director Chief Financial Officer and SeniorManagement Personnel of the Company. During CIRP there have been no significant normaterial orders passed by the regulators or courts or tribunals impacting the goingconcern status and Company's operations.
Vigil Mechanism (Whistle Blower Policy)
Your Company has established a vigil mechanism that enables the Directors & theEmployees 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 ishttp://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 complaints on sexual harassment during the financial year ended 31stMarch 2018.
Your Company has complied with provisions relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.
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 (aluminum 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
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. CSC the apex committee of theorganization have ensured that risks have been contained to keep us free from any majorincident. Orchid strongly believes that human behavior plays key role in safetymanagement. To reinforce that Safety observation & Audit (SOA) - Lead indicatorbecome key focus area always in Our Central Safety Committee meetings (CSC). CSC continuesto meet every month review critical concerns on Safety and also provides directions tominimize 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 in the year 2017-18 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 VI to this report.
A statement showing names and other particulars of the employees drawing remunerationin excess of the limits prescribed under rule 5(2) of the rules forms part of this Report.However as per provision of Section 136 of the Act the report and accounts are beingsent to the members excluding the aforesaid information which is available for inspectionby the members at the registered office of the company during business hours on workingdays of the company. If any member is interested in obtaining a copy such member maywrite to the Company Secretary.
Particulars of Loans Guarantees or investments under Section 186 of the Companies Act2013
Particulars of Loans Guarantees or investments as required under Section 186 of theCompanies Act 2013 are given in Notes to standalone Financial Statements - Reference Nos.7 8 9 & 46.
To augment the green initiative of the Ministry of Corporate Affairs and to reducecarbon foot print your Company proposes to send various communication including theAnnual Reports in electronic form to the members who have opted for the same. This wouldhelp in reducing the number of physical copies to be printed thereby contributing to agreener environment. The full text of the Annual Report 2017-18 is available at
Reappointment of Directors and Resignations
During the year under review Shri K N Venkatasubramanian resigned from his position ofChairman and Non-Executive Independent Director with effect from October 13 2017 and ShriR Kannan resigned from his position of Independent Director with effect from December 272017 due to personal reasons and other professional pre -occupations.
RP /Board wish to record its appreciation for the services rendered and theprofessional guidance given by Shri K N Venkatasubramanian Chairman & Non-ExecutiveIndependent Director and Shri R Kannan Independent Director to the Board from time totime during their tenure.
During the year IDBI Bank Ltd withdrew the nomination of Shri Rabinarayan Panda andinstead appointed Shri Rama Krishna Eda on the Board with effect from August 10 2017.
Shri Ramakrishna Eda Nominee Director will retire by rotation at the ensuing AnnualGeneral Meeting and is eligible for reappointment in accordance with the provisions of thesaid Act.
None of the Directors of the Company are disqualified under Section 164(2) of theCompanies Act 2013.
The Statutory Auditors M/s. CNGSN & Associates LLP Chartered Accountants havebeen appointed for a period of five (5) years from the conclusion of 24th Annual GeneralMeeting till the conclusion of 29th Annual General Meeting subject to ratification atevery AGM.
The Companies(Amendment) Act 2017 has done away with the provisions of ratification ofstatutory auditors.
The resolution seeking approval for remuneration to M/s. CNGSN & Associates LLPChartered Accountants the statutory Auditors of the company for the four financial yearsfrom 2018-2019 to 2021-2022 is being sought for in the ensuing 25th AGM.
Explanation to the Audit qualifications
The Auditors in their report have made certain observations relating to realisation ofvalue of inventories overdue receivables recovery of loans and advances provision forimpairment confirmation of balance from banks for loans net worth of subsidiariesfurther strengthening of internal controls over financial reporting and about theirinability to comment on the possible adjustments to be made in the assets liabilitiesdisclosure requirements etc. under "Qualified Opinion" in their report to themembers.
The Company is under CIRP and the Resolution Professional is required to invitesubmission of resolution plans from potential resolution applicants which has been put upfor necessary approvals before the Honourable NCLT. The CIRP is not yet concluded andhence the final outcome is yet to be ascertained.
The company has not taken in consideration impact on the value of the assets due tothis information for impairment if any in preparation of Financial Result as required byInd-AS 10 on "Events after the reporting period" and Ind-AS 109 on FinancialInstruments". Further the Company has not made assessment of impairment as requiredby Ind AS 36 on Impairment of Assets if any as at 31st March 2018 in the value oftangible and intangible assets.
In respect of investments /loans given to subsidiaries the company is exporting andselling profitable products through its marketing subsidiary and the profit generated bythe marketing subsidiary from the operations will be available for settlement of loanafter meeting their dues. The investments made in R&D Subsidiaries are strategic andlong term in nature and hence no provision has been considered.
In accordance with the Code public announcement was made calling upon the financialcreditors and operational creditors of the Company to submit their claims with the InterimResolution Professional ("IRP").
The Company is in the process of obtaining confirmation for receivables loans andadvances given payables employee claims and bank loans as at March 312018. NCLT and thefinal decision of NCLT is awaited. Such claims can be submitted to the IRP /RP duringCIRP till the approval of a resolution plan by the Committee of Creditors (CoC). Pursuantto the claims received the CoC was informed and the list of such creditors was dulynotified to the NCLT and uploaded on the company website. Thereafter there have beenregular revisions to the list in view of the claims received and the Company and RP are inprocess of receiving collating verifying seeking clarifications sending communicationsfor unreconciled balance calling for additional documents to substantiate whole /part ofthe unreconciled claims on such claims.
The Company's ability to meet the financial /contractual obligations includingrepayment of various loans unpaid interest and ability to fund various obligationspertaining to operations for ensuring / commencing normal operations and furtherinvestments required towards ongoing research and development projects under progress isdependant on the resolution of the aforesaid matters as part of the CIRP.
Under the CIRP a resolution plan has been presented and approved by the Committee ofCreditors ("CoC") and thereafter to be approved by the Hon'ble NCLT to keep thecompany as a going concern. The extended CIRP period was over on May 14 2018 and RP hascompleted required fillings with NCLT and the final decision of NCLT is awaited.
Pending this and measures to be adopted as part of the resolution process the auditedfinancial results have been continued to be prepared on a going concern basis.
In respect of claims submitted of the financial creditors the process for submissionand reconciliation of claims as on the Insolvency Commencement Date remains an on-goingprocess.
The RP has received the claims from the creditors of the Company under the provisionsof the Insolvency and Bankruptcy Code 2016 and the Insolvency and Bankruptcy Board ofIndia (Insolvency Resolution Process for Corporate Persons) Regulations 2016 (asamended). The status of these claims are available at the following link:http://www.orchidpharma.com/downloads-cirp.aspx.
The internal financial control over financial reporting system are existing andoperative however based on the observation of the auditors we are further strengtheningthe internal financial control over financial reporting.
With regard to the inability to comment on the possible adjustments required to becarried in the carrying amount of assets liabilities possible presentation anddisclosure impacts it is submitted that the RP is obliged not to share certaininformation which are integral part of the CIRP in order to maintain confidentiality ofthe process and in line with the directions of the COC.
The resolution plan has been submitted to NCLT and the status is "OrderReserved"
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) Practicing Company Secretary were appointed to conductthe secretarial audit of your Company for FY 2017-18. The secretarial audit report for thefiscal year ended March 312018 is attached herewith as "Annexure VII".
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.
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 Kalyanaraman asCost Auditor for the FY 2017-2018 for the audit of the cost accounts maintained by theCompany in respect of both Bulk Drugs and Formulations.
For the period ended March 312017 the due date for filing the cost audit report wasOctober 20 2017 and the cost audit report was filed on October 12 2017.
The Board is grateful and thankful to all the Banks Financial Institutions both inpublic sector and private sector who have fully supported your Company's initiatives ~during the stressed financial situation and during the CIRP ~ and for their wholeheartedmandate for approving a resolution plan and for the revival of the Company's businesses.
RP / the Board is grateful to the Central and State Governments and the Central DCGIand State FDAs for their support to the Company's business plans. RP /Board places onrecord their appreciation of the support provided by the customers suppliers serviceproviders medical fraternity and business partners.
RP / the Board and the Management acknowledge and are thankful to the employees whostayed back with the Company during this crucial period and for their contributions forthe revival of the businesses and operations.
Managing Director DIN: 00010096
Shri Ramkumar S V
(IP Registration No.IBBI/IPA-001/IP- P00015/2016-17/10039)
Place : Chennai
Date : August 212018 Resolution Professional
Resolution Plan - implementation status
As stated in the Board's Report the Resolution Professional (RP) invited expressionsof interest and submission of a resolution plan in accordance with the provisions of theCode. Of the various resolution plans submitted the CoC approved the resolution plansubmitted by Ingen Capital Group LLC USA ("Ingen"). The RP submitted theCoC approved resolution plan to the NCLT for its approval and the NCLT approved theresolution plan submitted by Ingen and approved by the CoC ("Approved ResolutionPlan") by an Order dated September 17 2018 ("IBC/NCLT Order").Based on this Order the moratorium period as per IBC ended on this date.
Subsequently NCLT passed an Order on October 10 2018 to constitute interim monitoringcommittee (iMC) with the Officials of 5 Lenders stating that the RP shall discharge thefunctions of the Company as per the instructions of the iMC until further orders as Ingendid not infuse any money into the Company.
Again NCLT passed another Order on November 02 2018 directing Ingen to deposit within5 days an amount of Rs. 334 crores (representing 1/3rd of the payment due to financialcreditors) into the Company Account. As of this date Ingen is yet to comply with thisOrder.
Remuneration of Cost Auditor
RP and Board have appointed M/s Karthikeyan J Cost Accountants (Membership Number:FCMA 102695) Chennai as the Cost Auditors of your Company for the Year 2018-19 andrecommend payment of remuneration of Rs. 2 (two) lakhs p.a. + out of pocket expenses +GST. As per the provisions of Companies Act 2013 the remuneration payable to the costauditors requires the approval of the shareholders. The RP/Board recommends the same tothe members and are seeking necessary approvals at the ensuing 25th AGM.
Annual General Meeting (AGM)
In normal course your Company should have conducted the AGM this year on or beforeSeptember 30 2018 as per the provisions of the Companies Act 2013. Based on anapplication made by your Company ROC Chennai vide an Order dated November 012018granted additional time upto December 12 2018 to conduct the 25th AGM.
Resignation /Withdrawal of Nomination of Directors
Smt. Soundarakumar Nominee Director representing State Bank of India has resigned fromthe Board with effect from September 10 2018
IDBI Bank Ltd has withdrawn the nomination of Shri. Ramakrishna Eda as its nomineedirector with effect from September 18 2018.
Reappointment of Directors retiring by rotation
As stated in the Board Report at the ensuing 25th AGM the nomineeappointed by IDBI Bank Shri Ramakrishna Eda retires by rotation and is eligible forreappointment. As IDBI Bank Ltd has withdrawn the nominee from the Board subsequently (asstated above) RP /the Board is not seeking any approval from the members for replacementin his place. .
For and on behalf of the Board
K. Raghavendra Rao
Managing Director DIN: 00010096
Shri Ramkumar S V
(IP Registration No.IBBI/IPA-001/ IP-P00015/2016-17/10039) Resolution Professional
Date : November 9 2018