AFFLUENCE

ALKEM LABORATORIES LIMITED

DIRECTORS’ REPORT TO THE MEMBERS

Your Directors have pleasure in presenting their 40th Annual Report along with the audited accounts for the year ended 31st March, 2014.

 FINANCIAL RESULTS:                                                       (Rs. in Lakhs)

DIVIDEND :    

The Company has paid an interim dividend of 200% during the year. Your Directors do not recommend any further dividend for the year ended 31st March, 2014.

OPERATIONS :

The Company’s sales (Gross) has increased to Rs. 2,72.645.20 lakhs as against Rs. 2,33,528.73 lakhs for the previous year resulting in an increase of 16.75% over the previous year.

SUBSIDIARIES :

A statement pursuant to section 212 of the Companies Act, 1956 relating to the subsidiaries have been given as an annexure to the Annual Report. ( Please note that 212 statement attached in the annual report contains the figures in respective currency of each subsidiary Company).

DIRECTORS :

Mr. D K Singh and Mr. B P Singh  retire by rotation and are eligible for reappointment.

PERSONNEL :

As  required  by  the provision of  Section  217(2A)  of  the Companies  Act,  1956, read with Companies  (Particulars  of Employees)  Rules,  1975  as amended,  the particulars  of the employees are set out in the Annexure  to the  Directors’  Report. However, as per the provision of the Companies Act,1956, the  Report and Accounts are  being sent to all the shareholders of  your Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Registered Office of the Company.

DIRECTORS RESPONSIBILITY STATEMENT :

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Board of Directors of the Company confirms:

i.    that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure;

ii    that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the profit of the Company for the year ended on that date;

      iii     that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

ENERGY, TECHNOLOGY & FOREIGN EXCHANGE:

Information  in  accordance with the  provisions  of  Section 217(1)(e) of the  Companies  Act, 1956, read  with  Companies     (Disclosure  of  Particulars  in  the  Report  of  Board   of     Directors)  Rules,  1988 regarding  conservation  of  energy,     technology  absorption  and  foreign  exchange  earnings  and outgo is given in the Annexure forming part  of this report.

AUDITORS:

The Board of Directors has proposed M/s. BSR & Co. LLP  as the Statutory Auditors of  the Company in place of M/s  R.S. Sanghai  &  Associates, Chartered  Accountants who has shown its unwillingness to act as the Auditors of the Company  to hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting of the Company.

ACKNOWLEDGEMENTS: 

Your   Directors  would  like  to  express  their   grateful  appreciation    to   the   Bankers and trade associates  for  their    valuable   assistance, continued  support  and  co-operation  and  also  wish  to  extend  their   thanks   and  appreciation to the Management team, Staff and Workers of the Company  for their  commitment,  dedication  and  respective contributions  to  the  Company’s operations during the year under review.

                                                                                              For and on behalf of the Board

                                                                                                         (SAMPRADA SINGH)

                                                                                                                   Chairman

Place:- Mumbai

Date:- 7th July, 2014

ANNEXURE TO DIRECTORS’ REPORT

Information  under Section 217(1)(e) of the  Companies  Act,1956 read with the Companies (Disclosure of Particulars in the  Report of  Board  of  Directors) Rules,1988,and  forming  part  of   the Directors’ Report.

A.    CONSERVATION OF ENERGY:

        (a)      Energy Conservation Measures taken:

                  Energy conservation continues to receive top  priority  in the company, energy   consumption are monitored,  maintenance systems  improved  and distribution  losses  are reduced. Specific Energy Conservation measures taken include installation of energy efficient system  in  the  existing equipment configuration.

        (b)     Additional proposals or activities, if any:

                 Improving the insulation of low and high temperature services.

        (c)     Impact of measures taken:

                 Energy conservation measures of the type mentioned  above have resulted in gradual savings.

          (d)   Total  energy consumption and energy conservation per  unit of production :

                  As per Form A of the Annexure hereunder:-

             FORM A

CONSUMPTION PER UNIT OF PRODUCTION

Electricity        }          Since   the Company   manufactures   different  types  of

Coal                 }          formulations   (Capsules, Tablets,   Ointment, Liquids &

Furnace Oil     }          Injectables) there is no specific standard as the consumption

Others             }          Per unit depends on the product mix of formulations.

B.        RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION:

                                       RESEARCH & DEVELOPMENT(R & D)

1.        Specific areas in which R&D work is carried out:

           The focus of the Company’s R&D efforts was on the following areas:

i.                    Development of new drug formulations for existing and newer active drug substances. 

ii.                  Development of agro technology, genetics and biotechnology for cultivation of medicinal plants and isolation of active ingredients from plant materials.

iii.                Development of new drug delivery systems for existing and newer active drug substances as also newer medical devices.

iv.                Patenting of newer processes/newer products/newer drug delivery   systems/newer medical devices/newer usage of drugs for both local and  international markets.

v.                  Development of new innovative technology for the manufacture of existing APIs and their intermediates.

vi.                Development of new products, both in the area of APIs as well as formulations, specifically for export.

vii.              Development of methods to improve safety procedures, effluent control, pollution control, etc.

viii.            Projects to develop APIs and formulations jointly with overseas companies.

ix.                Development of products related to the indigenous system of medicines.

2.       Some of the major benefits derived as a result of R&D include:

i.                    Successful commercial scale up of several new APIs and formulations.

ii.                  Development of new drug delivery systems and devices.

iii.                Improved processes and enhanced productivity in both APIs and formulations.

3.       Future plan of action :

i.                    Optimisation of process parameters with emphasis on cost reduction and simplification. 

ii.                  Development of new drug delivery systems, pharmaceutical and nutritive supplements.

iii.                Studying feasibility of using new manufacturing techno-logy in existing solid dosage forms.

iv.                Development of formulations based on certain herbal preparation, a set of diagnostic kits based on Elisa techniques, etc.

v.                  Development of new molecules for formulations & processes for manufacture of bulk drugs.

 4.      Expenditure on R & D :                                                       (Rs lakhs)

           (i)    Capital                     :                                                    1564.26                         

           (ii)   Recurring                 :  (excluding depreciation of       14779.98  

                                                       Rs. 511.49  lakhs) 

           (iii)   Total                       :                                                   16344.24    

(iv)    Total R & D expenditure as percentage to total turnover :  5.99% 

  TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1.         Efforts, in brief, made towards technology absorption, adaptation and innovation:

             i.         Development and patenting of new molecular forms and methods of

                        synthesis.

             ii.        Development of new drug delivery systems.

2.         Benefits derived as a result of the above efforts:

              i.        Improvement in operational efficiency through reduction in batch hours, increase in batch sizes, better solvent recovery and simplification of processes.

             ii.        Meeting norms of external regulatory agencies to facilitate more exports.

              iii.        Improvements in effluent treatment, pollution control and all-round safety standards.

iv.          Maximum utilization of indigenous raw materials.

             v.        Development of products for import substitution.

3.         In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished: N.A.

 C.       FOREIGN EXCHANGE EARNINGS AND OUTGO:

a)      Activities relating to exports : Over the years Alkem has grown its international Business significantly. Export Business in Europe (Germany and UK), Africa (RSA, Nigeria, FWA), Asia and Latin American (Chile and Colombia) countries increased significantly during the previous year. Alkem will continue to strive to make its international business stronger, consistent and more profitable in years to come.

        b)    Earnings in foreign exchange was equivalent to Rs. 30,947.89 lakhs and expenditure was Rs. 8348.03 lakhs.

The Company’s sales (Gross) has increased to Rs. 2,72.645.20 lakhs as against Rs. 2,33,528.73 lakhs for the previous year resulting in an increase of 16.75% over the previous year. for more details please go through notes

The Company has paid an interim dividend of 200% during the year. Your Directors do not recommend any further dividend for the year ended 31st March, 2014.

Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the Annexure forming part of this report.

Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the Annexure forming part of this report.

Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 regarding conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the Annexure forming part of this report.

As required by the provision of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended, the particulars of the employees are set out in the Annexure to the Directors’ Report. However, as per the provision of the Companies Act,1956, the Report and Accounts are being sent to all the shareholders of your Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Registered Office of the Company.

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Board of Directors of the Company confirms: i. that in the preparation of the annual accounts, the applicable accounting standards have been followed and there has been no material departure; ii that the selected accounting policies were applied consistently and the directors made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the profit of the Company for the year ended on that date; iii that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv that the annual accounts have been prepared on a going concern basis.

ANNEXURE TO DIRECTORS’ REPORT Information under Section 217(1)(e) of the Companies Act,1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules,1988,and forming part of the Directors’ Report. A. CONSERVATION OF ENERGY: (a) Energy Conservation Measures taken: Energy conservation continues to receive top priority in the company, energy consumption are monitored, maintenance systems improved and distribution losses are reduced. Specific Energy Conservation measures taken include installation of energy efficient system in the existing equipment configuration. (b) Additional proposals or activities, if any: Improving the insulation of low and high temperature services. (c) Impact of measures taken: Energy conservation measures of the type mentioned above have resulted in gradual savings. (d) Total energy consumption and energy conservation per unit of production : As per Form A of the Annexure hereunder:- FORM A Particulars Total 31.03.2014 PY 31.03.2013 CONSERVATION OF ENERGY 1. Power & Fuel Consumption (a) Electricity Purchased : Units (Nos.Lacs) 499.84 447.04 Total Amount (Rs Lacs) 2915.39 2187.43 Unit Rate (Rs) 5.83 4.89 (b) Own Generation : (i) Through Diesel Generator (No.of units in Lacs) 23.50 37.85 Cost of HSD (Rs Lacs) 388.84 472.23 Cost / Unit (Rs) 16.54 12.48 (ii) Through Steam Turbine/ Generator 0.00 0.00 Units per litre of Oil/Gas 0.00 0.00 Cost per Unit 0.00 0.00 2. Coal Quantity (M.T.) 2332.50 4025.94 Cost (Rs Lacs) 81.08 162.62 Average Rate / M.T. (Rs.) 3476.00 4039.31 3. Furnace Oil Quantity (Ltrs in Lacs) 7.11 19.57 Total Cost (Rs Lacs) 293.67 784.37 Average Rate / Litre (Rs.) 41.31 40.07 4. Others Quantity (M.T.) 171.12 130.96 Total Cost (Rs Lacs) 1473.53 1047.87 Average Rate (Rs.) 8.61 8.00 CONSUMPTION PER UNIT OF PRODUCTION Electricity } Since the Company manufactures different types of Coal } formulations (Capsules, Tablets, Ointment, Liquids & Furnace Oil } Injectables) there is no specific standard as the consumption Others } Per unit depends on the product mix of formulations. B. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION: RESEARCH & DEVELOPMENT(R & D) 1. Specific areas in which R&D work is carried out: The focus of the Company’s R&D efforts was on the following areas: i. Development of new drug formulations for existing and newer active drug substances. ii. Development of agro technology, genetics and biotechnology for cultivation of medicinal plants and isolation of active ingredients from plant materials. iii. Development of new drug delivery systems for existing and newer active drug substances as also newer medical devices. iv. Patenting of newer processes/newer products/newer drug delivery systems/newer medical devices/newer usage of drugs for both local and international markets. v. Development of new innovative technology for the manufacture of existing APIs and their intermediates. vi. Development of new products, both in the area of APIs as well as formulations, specifically for export. vii. Development of methods to improve safety procedures, effluent control, pollution control, etc. viii. Projects to develop APIs and formulations jointly with overseas companies. ix. Development of products related to the indigenous system of medicines. 2. Some of the major benefits derived as a result of R&D include: i. Successful commercial scale up of several new APIs and formulations. ii. Development of new drug delivery systems and devices. iii. Improved processes and enhanced productivity in both APIs and formulations. 3. Future plan of action : i. Optimisation of process parameters with emphasis on cost reduction and simplification. ii. Development of new drug delivery systems, pharmaceutical and nutritive supplements. iii. Studying feasibility of using new manufacturing techno-logy in existing solid dosage forms. iv. Development of formulations based on certain herbal preparation, a set of diagnostic kits based on Elisa techniques, etc. v. Development of new molecules for formulations & processes for manufacture of bulk drugs. 4. Expenditure on R & D : (Rs lakhs) (i) Capital : 1564.26 (ii) Recurring : (excluding depreciation of 14779.98 Rs. 511.49 lakhs) (iii) Total : 16344.24 (iv) Total R & D expenditure as percentage to total turnover : 5.99% TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 1. Efforts, in brief, made towards technology absorption, adaptation and innovation: i. Development and patenting of new molecular forms and methods of synthesis. ii. Development of new drug delivery systems. 2. Benefits derived as a result of the above efforts: i. Improvement in operational efficiency through reduction in batch hours, increase in batch sizes, better solvent recovery and simplification of processes. ii. Meeting norms of external regulatory agencies to facilitate more exports. iii. Improvements in effluent treatment, pollution control and all-round safety standards. iv. Maximum utilization of indigenous raw materials. v. Development of products for import substitution. 3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished: N.A. C. FOREIGN EXCHANGE EARNINGS AND OUTGO: a) Activities relating to exports : Over the years Alkem has grown its international Business significantly. Export Business in Europe (Germany and UK), Africa (RSA, Nigeria, FWA), Asia and Latin American (Chile and Colombia) countries increased significantly during the previous year. Alkem will continue to strive to make its international business stronger, consistent and more profitable in years to come. b) Earnings in foreign exchange was equivalent to Rs. 30,947.89 lakhs and expenditure was Rs. 8348.03 lakhs