To,
The Members,
Lyka Labs Limited
The Directors are pleased to present their Thirty Ninth Annual Report along with Audited Financial Statements of the Company for the Financial Year ended 31st March, 2018.
1. FINANCIAL RESULTS
[Rs. in Lakhs]
|
Particulars
|
For the Year ended 31.03.2018
|
For the Year ended 31.03.2017
|
|
Total revenue
|
4438.30
|
8634.57
|
|
Profit/(loss) before Interest, provision for depreciation & Taxes and Write offs
|
137.51
|
2347.25
|
|
Less: Interest
|
775.94
|
1654.06
|
|
Operational Loss/Profit before Depreciation
|
(638.43)
|
693.18
|
|
Less: Depreciation
|
(630.89)
|
(552.55)
|
|
Exceptional Items (Net)
|
147.12
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(196.32)
|
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Less: Tax Expenses
|
38.26
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37.05
|
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Less: Other Comprehensive Income
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(29.71)
|
(5.55)
|
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Loss for the year
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(1113.65)
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(24.18)
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2. DIVIDEND
Due to loss during the year, no dividend was declared for the financial year ended 31st March 2018.
3. RESERVE
No amount is transferred to Reserves.
4. OPERATIONS
During the year under review, the total revenue earned by the Company was Rs. 4438.30 lakhs as against total revenue of Rs. 8634.57 lakhs of previous year ended 31st March, 2017. The Company has reported Net Loss of Rs. 1113.65 lakhs for the year ended 31st March, 2018 as against net loss of Rs. 24.18 lakhs for per previous year ended 31st March, 2017.
The Company’s current Financial situation has arisen, due to repayment of FD’s and Debentures in compliance with the changes in the Companies Act, 2013. As a result there has been significant outgo of funds resulting in Financial crunch impacting the sales and performance of the Company.
Due to fire in Lypholized Plant at Ankleshwar, the Company had to undergo huge loss and loss of Business which in turn impacted the performance of the Company. In the meanwhile, competition from new domestic manufacturing had an impact on Company margin.
The Company manufactures its products & export through its subsidiary Lyka BDR International Limited (LBDR) whose performance for its last year has been on the lower side, mainly due to currency crisis in buying countries as well as more countries are encouraging domestic production. The unsatisfactory performance of LBDR has inturn affected the sales of Lyka Labs Limited. Moreover, to meet with the requirement of developed market, company has suspended production of cepholosporins at its Ankleshwar plant, causing loss of revenue/production. This will be made up in the coming years.
5. Key features
a. The Company is engaged in discovery, manufacturing and marketing of formulations on P to P basis and of it’s own.
b. The Manufacturing activities are carried out with principles and practices of highest standards in production and testing of formulations.
c. The Products of various categories including cosmeceuticals, external preparations, dry powder injections, liquid and lyophilized injectable preparations are being produced in manufacturing facilities.
d. The Production of lyophilized injections including lyophilized bulk with outstanding output has been one of the important key features of the company.
6. Future Outlook
a. With overall growth of lyophilized product market, demand for lyophilized injectables are expected to increase. Company proposes to enhance and improve it’s existing infrastructure in order to cater increased requirement.
b. The Company plans to set up new world class manufacturing facility for injectable. After completion, this facility intends to cater to Europe/US markets.
c. The Company plans to initiate further international GMP approvals from Phillipines, Ukraine and EU for its current manufacturing facility. With these GMP approvals, company looks forward to expand it’s global business.
d. The Company has converted it’s cephalosporin production line into dry powder injection production line after systematic decontamination. This will enable to produce more injections of general category by achieving higher capability of production with technical ease in coming years.
e. The Company proposes to go for more emphasis on injectable research leading to development of new stable formulations. This shall be catering to future requirements.
f. The Company tends to increase business volume by entering into new business relationship with large and medium scale pharmaceutical companies in segment of cosmeceuticals, dermatology and injectables.
7. DIRECTORS
A. BOARD DIVERSITY
The Company recognize and embrace the importance of a diverse board in its success. Diverse Board comprising of professionals from various fields helps in guiding the Company from time to time.
B. BOARD MEETINGS
During the year, Eight Board Meetings were held. The details of which are given in the Corporate Governance Report.
C. POLICY ON APPOINTMENT AND REMUNERATION POLICY
The Company has appropriate mix of Executive, Non-Executive and Independent Directors. As on 31st March, 2018, the Board consist of 5 Directors, one is Executive/Managing Director, one is NonExecutive Director and three are Independent Directors.
D. DECLARATION BY INDEPENDENT DIRECTORS
The Company has received necessary declaration from each of Independent Directors under Section 149(7) of the Companies Act, 2013 that they meet the criteria laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(b) of the SEBI (Listing Obligation and Disclosure Requirement), Regulations 2015.
E. RETIREMENT BY ROTATION
Smt. Nehal N Gandhi retire by rotation at the ensuing Annual General Meeting and being eligible offers herself for reappointment. The Board recommends her re-appointment as a Director for approval of members.
F. INDEPENDENT DIRECTORS FAMILIARIZATION PROGRAMME
The Company has framed policy on familiarization programme. The Independent Directors are familiarized with company’s operation. They are provided with financial and other information in the Board Meeting. They are also appraised about their role and function. This will help them to effectively discharge their responsibilities. Independent Directors have visited our factory/plant located at Ankleshwar, Gujarat and they were also familiarised with production operations of the Company.
G. EVALUATION OF BOARD, COMMITTEES AND DIRECTORS
The Board has carried out performance evaluation of its own, the Committee and of the Directors pursuant to the provisions of the Act and applicable provisions of Listing Regulations, 2015.
The performance of the Board was evaluated after seeking inputs from all the Directors on the basis of factors which includes Active Participation, Financial Literacy, contribution by a Director, positive Inputs, effective deployment of knowledge and expertise, integrity and maintenance of confidentiality and independence of behaviour and judgement.
In the meeting of Independent Directors, performance of Non-Independent Directors, Performance of Board and Performance of the Chairman was evaluated.
H. COMMITTEE OF BOARD
Currently, the Board has five Committees namely, Audit Committee, Nomination and Remuneration Committee, Stakeholder Committee, Share Transfer Committee and Risk Management Committee. A detailed note on composition of the Board and its committee is provided in the Corporate Governance Report which forms part of the Board Report.
I. CHANGES IN THE BOARD AND KMP
During the year under review, Shri. Vinod Shanbhag, Independent director on the Board has resigned with effect from 7th December, 2017.
Subsequent to closing of Financial Year:
1. Smt. Neha Thakore is appointed as Additional Independent Director (DIN No: 00893957) w.e.f 5th April, 2018.
2. Shri. Piyush G Hindia, Company Secretary and Compliance Officer has retired after closing hours of 5th April, 2018.
3. Shri. D. J. Darji is appointed as Company Secretary and Compliance Officer w.e.f 6th April, 2018.
8 AUDITORS
A. STATUTORY AUDITORS
M/s. Mehta Chokshi & Shah, Chartered Accountants (Firm Registration No. 106201W), were appointed as Statutory Auditors of the Company in 38th AGM to hold office till the conclusion of the 43rd Annual General Meeting.
In terms of the first proviso to Section 139 (1) of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting (AGM). Accordingly, the appointment of M/s. Mehta Chokshi & Shah, as Statutory Auditors of the Company, is placed for ratification of the shareholders at the AGM. The Company has received a certificate from the auditors to the effect that they fulfill the eligibility criteria of the provisions of Section 141 of the Companies Act, 2013. The Audit Committee has recommended their appointment for ratification.
B. BRANCH AUDITORS
M/s. M.I. Shah & Co., Chartered Accountants (Firm Registration No. 119025W), were appointed as Branch Auditor of the Company in 38th AGM to hold office till the conclusion of the 43rd Annual General Meeting.
In terms of the first proviso to Section 139 (1) of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting (AGM). Accordingly, the appointment of M/s. M.I. Shah & Co, as Branch Auditors of the Company, is placed for ratification of the shareholders at the AGM. The Company has received a certificate from the auditors to the effect that they fulfill the eligibility criteria of the provisions of Section 141 of the Companies Act, 2013. The Audit Committee has recommended their appointment for ratification.
C. COST AUDITORS
Pursuant to Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules 2014, as amended from time to time, the cost audit records maintained by the Company are required to be audited by cost accountant. The Company has appointed M/s. Kirit Mehta & Associates, Cost Accountant (Firm Registration No.000048) to audit the cost records of the Company for the financial year 2018-19. The remuneration payable to them is required to be ratified by the Shareholders at the ensuing Annual General Meeting and accordingly, a resolution seeking ratification has been included as Item No. 6 of the Notice convening the Annual General Meeting.
D. SECRETARIAL AUDITOR
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company had appointed M/s Kaushal Doshi & Associates, Practicing Company Secretaries to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed to this report as “Annexure A”.
10. MATERIAL CHANGES AND COMMITMENT AFTER THE END OF THE FINANCIAL YEAR WHICH HAVE IMPACT ON FINANCIAL POSITION
The Company has outstanding Term Loan and Working Capital Credit Facilities aggregating Rs. 73.43 crores plus interest with Dena Bank. The Company has approached to Bank for compromise settlement of Accounts. The Bank has considered and granted ‘In Principle approval’ for compromise settlement of our accounts.
11. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATION OR ADVERSE REMARKS OR DISCLAIMERS MADE BY THE AUDITORS IN THEIR REPORT
AUDITOR’S QUALIFICATION:
(i) Note no. 1 of the auditor’s report for the quarter and year ended 31st March, 2018 regarding reversal of interest on term loan from two banks provided for the period from April 2017 to September 2017 amounting to Rs 469.92 Lakhs and non-provision of interest on term loan from said two banks for the period from October 2017 to March 2018 amounting to Rs 471.64 Lakhs, aggregating to Rs 941.56 Lakhs.
Further, the Company has reversed Interest expenses for earlier years for the period from February 2016 to March 2017 amounting to Rs 344.35 Lakhs. There is non-provision for penal interest on term loan from two banks and working capital limit from one bank amounting to Rs 80.04 Lakhs. These nonprovisions/reversal of provision for interest is not in compliance with Ind AS 109 Financial Instruments.
Accordingly loss for the year is understated by Rs. 1365.95 Lakhs.
(ii) Inventories include slow/non-moving raw material and packing materials procured during the earlier years amounting to 174.06 lakhs as on 31st March 2018, which are valued at cost. This is not in accordance with Ind AS 2 inventories, which requires such inventories to be valued at lower cost or net realizable value. Accordingly we are unable to quantify the impact of reduction in profit for the quarter ended 31st March, 2018 and increase in the loss for the year.
MANAGEMENT EXPLANATIONS:
(i) As our account with some of the Banks have been classified as NPA, we have on going discussion with Banks for OTS / Restructuring and accordingly Company has not provided interest in the current quarter as well as written back the interest provided in earlier quarters. The Company has approached to Bank for compromise settlement of Accounts. The Bank has considered and granted ‘In Principle approval’ for compromise settlement of our accounts.
(ii) As regards to slow/non moving materials Company is taking necessary steps to utilize/realize the same.
12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO
The information pertaining to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached to this report and marked as “Annexure B”.
13. STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY
The Company has formulated a policy on Risk Management and constituted Risk Management Committee.
14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013
There were no loans and guarantees given by the Company during the year under review and details of Investment made under Section 186 of the Companies Act, 2013 are given in the notes to the Balance Sheet.
15. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES
The Related Party Transactions effected during the financial year were on Arm’s length basis and in the ordinary course of business. Omnibus approval of Audit Committee is obtained as per RPT Policy. The Related Party transactions effected during the financial year are disclosed in the notes to the Financial Statement.
The particulars of Contracts or Arrangements made with related parties pursuant to Section 188 is attached to this report as per “Annexure C”.
The Company has obtained approval from the shareholders for the financial limit of the related party transactions that was entered into, during the year under review. The Company has formulated a policy for dealing with ‘Material Related Party’ transaction and ‘Related Party’ transactions.
15 COMPANY’S POLICY
The highest ethical standards are followed by the Company in business transactions. The SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, mandated the formulation of certain policies for all listed Companies. The Company has framed various policies such as Nomination and Remuneration Policy, Policy on materiality subsidiaries and related matters, Policy on Materiality of events, Related Party Transactions Policy, Risk Management Policy, Whistle Blower Policy, Insider Trading code etc which are displayed on the company’s Website i.e. www.lykalabs.com.
16 ANNUALRETURN
The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished as per “Annexure D” and attached to this Report. A Detailed Annual Return after filing with ROC, will be available on our website i.e. www.lykalabs.com.
17 DIRECTORS’ RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Companies Act, 2013, the Board hereby submits its responsibility statement:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and 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 at the end of the financial year and of the profit and loss of the company for that year;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors, in case of a listed company had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(f) that the Directors had devised proper systems to ensure compliance with the provisons of all applicable laws were in place and were adequate and operating effectively.
18 SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES
The Company has three subsidiaries namely Lyka BDR International Limited, Lyka Exports Limited and Lyka Healthcare Limited. The details of their performance are as under:
LYKA BDR INTERNATIONAL LIMITED (LBDR)
Lyka Labs Ltd is holding 65.22% of the Issued capital of Lyka BDR International Limited. During the year, the Company has reported EBDITA of Rs. 301.08 Lakhs and Net Loss after Tax is (Rs. 292.13 Lakhs) as against in previous year EBDITA of (Rs. 146.81 Lakhs) and Net Loss after Tax is (Rs. 501.33 Lakhs)
LYKA EXPORTS LIMITED (LEL)
Lyka Labs Ltd is holding 72.80% of Issued capital of Lyka Exports Limited. During the year, the Company has reported EBDITA of Rs. 17.03 Lakhs and Profit after Tax is Rs. 2.64 Lakhs as against in previous year EBDITA of (Rs. 5.13 Lakhs) and Net Loss after Tax is (Rs. 16.15 Lakhs), which was due to progress in the Business of Generic Pharmaceutical products meant for human consumption on PAN India basis.
LYKA HEALTHCARE LIMITED (LHL) - WHOLLY OWNED SUBSIDIARY
Lyka Labs Ltd is holding 100% of Issued capital of Lyka Healthcare Limited. During the year under review, the Company has reported EBDITA of (Rs. 151.77 Lakhs) and Net Loss after Tax is (Rs. 317.20 Lakhs) as against in previous year EBDITA of (Rs. 188.70 Lakhs) and Net Loss after Tax is (Rs. 330.63 Lakhs).
Performance and financial position of each of the subsidiaries for the year ended 31st March, 2018 attached in ‘Annexure E’ and forms part of this report.
19. DISCLOSURE OF CSR:
CSR is not applicable to the Company.
20. SHARE CAPITAL
During the year under review:
1. The Company has allotted 6100000 Equity Shares to Non-Promoters on preferential basis. Subsequent to allotment of 6100000 Shares, the paid up capital of the Company is increased to Rs. 28,14,00,000.
2. The Company has also allotted 550000 convertible equity warrants to one of the promoters on preferential basis.
21. SCHEME OF MERGER (BY ABSORPTION)
The Board of Directors at their meeting held on 29th May, 2017 had approved the Scheme of Merger of Lyka Healthcare Limited, Wholly Owned Subsidiary (“the transferor”) with Lyka Labs Limited, Holding Company (“the Transferee”) and their respective shareholders (The Scheme of Amalgmation).
The Scheme was approved by Equity Shareholders, Preference Shareholder and Unsecured Creditors at their respective meetings held on 27th March, 2018. The meeting of Secured Creditors could not be proceeded with due to lack of quorum.
The Company’s management is taking necessary steps to implement merger.
22. DEPOSITS
During the year under review, the Company has not accepted any deposits under Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
As of March, 2018, the company has unclaimed fixed deposits of Rs. 49,52,000/-.
23. DEBENTURES
As per Order dated 22nd May, 2017 passed by National Company Law Tribunal (NCLT), Ahmedabad, the
Company was required to make first payment of debentures of Rs. 3.85 Crores due upto 31st March, 2015 by 30th July, 2017, second payment of debentures of Rs. 2.13 crores due in between 1st April, 2015 to 31st July, 2015 by 31st December, 2017 and third payment of debentures of Rs. 1.39 crores due in between 1st August, 2015 to 30th April, 2016 by 30th March, 2018 aggregating outstanding debentures of Rs. 7.37 crores. The Company has made the payment as per NCLT order.
As of 31st March, 2018, the Company has unclaimed debentures of Rs. 12,00,000/24.
STATUS OF BANK LIABILITY
Bank of Maharashtra:
1. Due to unforeseen circumstances, as a result the Company has defaulted in making repayment of installment of term loan since June 2016 and Interest payment since February, 2016 to Bank of Maharashtra.
2. The Company has received a Notice from Bank for repayment of their outstanding dues of Rs.14 crores including interest. The Company has replied to the Notice.
3. Further, Bank of Maharashtra has taken symbolic possession of the Company’s premises at 101 Shiv Shakti Industrial Estate, Andheri Kurla Road, Andheri East, Mumbai, (Andheri office). The Company had applied for Compromise Settlement which is pending for approval.
4. Till date Bank of Maharashtra has invoked 160000 equity shares which were pledged by promoter as a collateral security for giving Loan to the Company.
5. The Company has filed a securitisation application in Debt Recovery Tribunal, in order to restrict the Bank from taking any further action.
Dena Bank:
1. The payment of principal amount and interest to Dena Bank has become overdue. The Company has received a Notice from Dena Bank for repayment of their outstanding Term Loan and Working Capital Credit Facilities aggregating Rs. 73.43 crores plus interest.
2. Subsequently, the Company has received In Principle approval from Dena Bank for compromise of our accounts. The Company is in process of compliance of Terms & Conditions of In Principle approval of Compromise Settlement.
25. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS, COURTS AND TRIBUNAL.
During the year under review, the Company has received Order from National Company Law Tribunal (NCLT) Ahmedabad dated 22nd May, 2017, granting extension of time for repayment of Debentures as follows:
|
Sr. No.
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Outstanding Debentures due
|
Amount (Rs.)
|
Payable by
|
|
1
|
Upto 31st March, 2015
|
38,500,000
|
30th July, 2017
|
|
2
|
From 1st April, 2015 to 31st July, 2015
|
21,300,000
|
31st December, 2017
|
|
3
|
From 1st August, 2015 to 30th April, 2016
|
13,900,000
|
30th March, 2018
|
| |
Total
|
73,700,000
|
|
The Company has complied with NCLT order.
26. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION AND PROHIBITION AND REDRESSAL) ACT, 2013
The Company is complying with the Provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. A Committee has been set up to redress complaints received regarding Sexual harassments. No Complaints has been received by the Committee during the year under review.
27. PARTICULARS OF EMPLOYEES PURSUANT TO RULE 5(2) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014.
Disclosure with respect to the remuneration of Directors and employees as required under Section 197 of the Act, and Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have been annexed to this report as “Annexure F”.
The information required pursuant to Section 197 (12) of the Act read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, a statement showing the names and other particulars of the employees drawing remuneration in excess of the Limits set out in the said rules, if any which includes names of top 10 employees in terms of remuneration drawn forms part of this Report. However, as per the provision of Section 136(1) of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the said Statement i.e. the information on employees particulars which is available for inspection by the members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. Any member interested in obtaining a copy of such statement may write to the Company Secretary at the Company’s Administrative Office at Mumbai.
28. CORPORATE GOVERNANCE
A Report on Corporate Governance along with certificate from Practising Company Secretary confirming the Compliance of the condition of Corporate Governance as stipulated in the Listing regulations is annexed in “Annexure G” and forms an integral part of this Annual report.
29. MANAGEMENT DISCUSSION ANALYSIS REPORT
Management Discussion and Analysis Report is attached in “Annexure H”.
30. ACKNOWLDEGEMENTS
Your Directors place on record their appreciation of the continued assistance, co-operation and support received from various Ministries of the Government of India, Government of Maharashtra, Government of Gujarat, the Company’s Bankers, Customers, Shareholders, Fixed Deposit Holders and loyal & committed Employees for their unstinted support.
By Order of the Board
Place: Mumbai N. I. Gandhi
Date: 13th August, 2018 Chairman & Managing Director
(DIN: 00021530)
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