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PartnershipGrowthSuccess
Annual Report 2007-08
PartnershipGrowthSuccess
Annual Report 2007-08
Leveraging the collective strengths
of its key businesses, Jubilant is creating
new opportunities for growth and
delivering more to stakeholders.
Corporate Office, Noida, Uttar Pradesh
1 Annual Report 2007-08
Board of Directors 2
Financials at a Glance 4
Jubilant Worldwide 6
Our Facilities 8
Chairmen’s Message 10
Executive Directors’ Messages 14
Awards & Accolades 16
Management Discussion & Analysis 17
Annual Accounts
Directors’ Report 42
Report on Corporate Governance 59
Auditors’ Report & Annexure to Auditors’ Report 87
Balance Sheet and Profit & Loss Account 90
Cash Flow Statement 92
Schedules 93
Notes to Accounts 104
Auditors’ Report to Consolidated Accounts 123
Consolidated Balance Sheet and Profit & Loss Account 124
Consolidated Cash Flow Statement 126
Schedule to Consolidated Accounts 127
Notes to Consolidated Accounts 138
Details of Subsidiary Companies 153
Corporate Information
CONTENTS
Jubilant Organosys Limited 2
BOARD OF DIRECTORS
Chairman and Managing DirectorShyam S Bhartia
Co-Chairman and Managing DirectorHari S Bhartia
Executive DirectorsDr. J M KhannaS N SinghS Bang
DirectorsArabinda RayBodhishwar RaiSurendra SinghH K KhanDr. Naresh TrehanAjay RelanAbhay HavaldarVishal Marwaha (alternate to Ajay Relan)
Executive Director - FinanceR Sankaraiah
Annual Report 2007-08
Standing L to R: Mr. Bodhishwar Rai, Dr. J M Khanna, Mr. S N Singh, Mr. Vishal Marwaha, Mr. Abhay Havaldar, Mr. Hari S Bhartia, Mr. R Sankaraiah, Mr. Ajay Relan, Mr. S Bang
Sitting L to R: Mr. Arabinda Ray, Mr. Surendra Singh, Mr. Shyam S Bhartia, Dr. Naresh Trehan, Mr. H K Khan
3
FINANCIALS AT A GLANCE
FY2008
FY2007
FY2006
FY2005
FY2004
FY2008
FY2007
FY2006
FY2005
FY2004
FY2008
FY2007
FY2006
FY2005
FY2004
FY2008
FY2007
FY2006
FY2005
FY2004
Jubilant Organosys Limited 4
5 Annual Report 2007-08
FY2008
FY2007
FY2006
FY2005
FY2004
FY2008
FY2007
FY2006
FY2005
FY2004
EXPONENTIAL GROWTH IN LAST 7 YEARS
Turnover
multiplied
4.6 times
from
Rs 544 crores
to
Rs 2489 crores
Profi t after tax
jumped
30.8 times
from
Rs 13 crores
to
Rs 400 crores
Market
capitalization
zoomed
119 times
from
Rs 40 crores to
Rs 4748 crores
5
JUBILANT WORLDWIDE
Corporate Office
1A, Sector 16A, Noida-201 301, Uttar Pradesh, IndiaTel: +91 120 251 6601-11 Fax: +91 120 251 6628-30
Manufacturing Locations
Bhartiagram, GajraulaDistt. Jyotiba Phoolay Nagar-244223Uttar Pradesh, IndiaTel: + 91 5924 252 353-60Fax: + 91 5924 252 352
56, Industrial AreaNanjangud, Distt. Mysore-571302Karnataka, IndiaTel: + 91 8221 228 402-08Fax: + 91 8221 228 410-11
Block 133, Village SamlayaTaluka Savli, Distt. Vadodara-391520Gujarat, IndiaTel: + 91 2667 251 361, 251 563-4Fax: + 91 2667 251 305
Village Nimbut, Rly. Stn. NiraDistt. Pune-412102Maharashtra, IndiaTel: + 91 2112 269 155-57Fax: + 91 2112 269 154
Sikanderpur BhainswalBhagwanpur, Roorkee-247661Distt. Haridwar, Uttarakhand, IndiaTel: + 91 1332 235 161-66Fax: + 91 1332 235 169
Village Singhpur, Tehsil-KapasanDistt. Chittorgarh, Rajasthan, IndiaTel: +91 1476 291 100Fax: +91 1476 229 009
DRAXIS Specialty Pharmaceuticals, Inc.16751, TransCanada Highway, Kirkland (Montreal), Québec, Canada H9H 4J4Tel: +514 630 7030Fax. +514 694 9295
Hollister-Stier Laboratories, LLC. 3525, N. Regal, Spokane Washington 99207, USA Tel: +1 509 489 5656 Fax: +1 509 484 4320
Cadista Pharmaceuticals Inc. 207, Kiley Drive, Salisbury, Maryland 21801, USATel: +1 410 860 8500 Fax: +1 410 860 8719
Jubilant Organosys (USA) Inc. 129, Church Street, Suite 320, New Haven CT 06510Tel: +1 203 562 2700 Fax: +1 203 562 2722
Jubilant Organosys (Shanghai) Ltd.Room No. 3403, Hongkong Plaza, South Tower, 283, Huai Hai Zhong Road, Shanghai-200021, ChinaTel: +86 21 6390 7388 Fax: +86 21 6390 7399
Principal Indian Subsidiaries
Jubilant Biosys Ltd.No.96, Industrial Suburb, 2nd Stage Industrial Area, Yeshwantpur, Bengaluru-560022, IndiaTel: +91 80 6662 8400 Fax: +91 80 6662 8333
6Jubilant Organosys Limited
Spokane
Salisbury
Bedminster New Haven
Kirkland (Montreal)
Principal International Subsidiaries
DRAXIS Specialty Pharmaceuticals, Inc.16751, TransCanada Highway, Kirkland (Montreal), Québec, Canada H9H 4J4Tel: +514 630 7030Fax. +514 694 9295
Hollister-Stier Laboratories, LLC. 3525, N. Regal, Spokane, Washington 99207, USA Tel: +1 509 489 5656 Fax: +1 509 484 4320
Cadista Pharmaceuticals Inc. 207, Kiley Drive, Salisbury, Maryland 21801, USATel: +1 410 860 8500 Fax: +1 410 860 8719
Clinsys Clinical Research, Inc. 1 Crossroads Drive, Building A, Second Floor, Bedminster, NJ 07921Tel: +1 908 947 7777 Fax: +1 908 947 7953
Pharmaceutical Services Incorporated N.V. AXXES BUSINESS PARK, Guldensporenpark, Blok C - nr. 22, Gelijkvloers Links, 9820 Merelbeke, BelgiumTel: +32 9 233 1404 Fax: +32 9 233 0016
PSI Supply N.V. AXXES BUSINESS PARK, Guldensporenpark, Blok C - nr. 22, Gelijkvloers Links, 9820 Merelbeke, BelgiumTel: +32 9 233 1404 Fax: +32 9 233 0016
Annual Report 2007-08
Jubilant Chemsys Ltd. D-12, Sector 59, Noida-201301, Uttar Pradesh, IndiaTel: +91 120 258 0309 Fax: +91 120 258 0310
Clinsys Clinical Research Ltd. C-46, Sector 62, Noida-201307, Uttar Pradesh, IndiaTel: +91 120 436 4000 Fax: +91 120 240 4336
Jubilant First Trust Healthcare Ltd.44A, Shyama Prasad Mukherjee Road,Kolkata 700026West Bengal, IndiaTel: +91 33 248 62651, 2454 6762Fax: +91 33 248 62651
Jubilant Infrastructure Ltd.1A, Sector 16A, Noida-201 301, Uttar Pradesh, IndiaTel: +91 120 251 6601-11 Fax: +91 120 251 6628-30
7 Annual Report 2007-08
International subsidiaries
Merelbeke
Shanghai
Jubilant Organosys Limited 8
2
2 3
4
1
5 6
OUR FACILITIES
9 Annual Report 2007-08
1. Gajraula, Uttar Pradesh2. Mysore, Karnataka3. Gajraula, Uttar Pradesh4. Spokane, USA5. Roorkee, Uttarakhand 6. Maryland, USA7. Samlaya, Gujarat8. Nira, Maharashtra9. Clinsys Clinical Research Ltd., Noida10. Jubilant Biosys Ltd., Bengaluru 11. Jubilant Chemsys Ltd., Noida
6
8
9 10
7
11
Jubilant Organosys Limited 10
Partnership remains key to our strategy. We are a preferred outsourcing partner to the global pharma and life sciences companies. This is where we deliver sustainable value to all our stakeholders
DEAR SHAREHOLDERS,
Fiscal year 2007-08 witnessed a spectacular improvement in turnover and profitability for Jubilant. The main focus is on Pharma and Life Sciences Products and Services (PLSPS) business. This business has grown eight times in the last 5 years to Rs. 15,302 million from a turnover of Rs. 1,939 million in 2002-03. Contribution to profitability stood at 70% in FY 08. Partnership remains key to our strategy and we have strengthened our position as a preferred outsourcing partner to the global pharmaceuticals and life sciences companies. This is where we deliver sustainable value to all our stakeholders. The Industrial and Performance Products (IPP) business also demonstrated buoyancy during this period.
Opportunity for outsourcing
The market for outsourcing is growing at an accelerated pace. Innovator pharmaceutical companies are facing expiry of patents, insufficient product pipeline and generic competition. They are outsourcing Research & Development and Manufacturing activities to countries like India. Jubilant as an integrated provider
CHAIRMEN’S MESSAGE
Shyam S Bhartia Hari S BhartiaChairman and Managing Director Co-Chairman and Managing Director
11 Annual Report 2007-08
of products and services, with its highly skilled scientists and its capability to provide cost effective end-to-end solutions, is very well positioned to capitalize on the outsourcing opportunity in research and manufacturing.
Jubilant, the partner of choice in outsourcing
Jubilant is a leader in outsourcing. The growth strategy of our Company is anchored by outsourcing. Our results this year have proven that we can successfully grow the outsourcing model into a global success story. Jubilant has utilised the triple advantages of strong customer relationships, scale of business and integrated operations to give its outsourcing business a strong growth momentum. The Company has become one of the largest Custom Research and Manufacturing Services (CRAMS) players in the country with established strengths in the marketplace in Proprietary Products, Exclusive Synthesis and Active Pharmaceutical Ingredients (APIs). Our acquisition of Hollister-Stier Laboratories, LLC., USA in the fiscal year has given Jubilant an opportunity to partake in the high value, high-growth, high-entry barrier, sterile injectables outsourcing play. This business has delivered robust growth and contributed strongly to PLSPS and international business growth. We feel there is even greater scope
for expansion here and we are committed to strengthen the operations through additional investments. We are taking measures to maintain our lead in outsourcing by strengthening research capabilities, building organization, increasing key capacities, scaling up customer engagements, entering newer markets and lastly looking for inorganic opportunities that will add niche and value added businesses to our portfolio.
As an outsourcing partner, Jubilant brings in added value such as Innovation, Continuous improvement, Financial strength, Quality of operations and Long term Sustainability. Jubilant is always in the forefront of Innovation through development of new processes – products for both existing and new ideas. Jubilant has strong culture of continuous improvement with identification of total savings through Lean Six Sigma practices. Jubilant is financially very strong to meet commitment to its partners for their future growth requirements. Jubilant gives emphasis on quality of its operations through world class manufacturing, supply chain excellence, employee engagement and integrated information system which provides high degree of customer satisfaction. Jubilant continuously invests in people with International corporate quality plans to meet the latest requirements of various
Jubilant has utilised triple advantages of strong customer relationships,scale of business and integrated operations to give its outsourcing business a strong growth momentum
Jubilant Organosys Limited 12
Regulatory Authorities. Jubilant’s Corporate Sustainability Program consisting of Environment, Health, Safety and Economic and Corporate Social Responsibility has received many accolades from our customers and international organizations. As a result of the above values which we bring in to our partnership, we have been able to sign many long term contracts with large Pharmaceuticals and Life Sciences companies.
Underlying good governance & risk management
Jubilant has followed a Triple Bottom Line Approach to measure its achievements on 3 parameters, i.e. environment, economics and society in its Corporate Governance. In FY 08, Jubilant has won many accolades at international and domestic forums for its role in corporate sustainability and delivering good governance. Our risk management culture is very strong and our prudent approach to risk in FY 08 was no exception. As a prudent risk management policy, we want to highlight that the Company has never entered into any speculative forex related transactions.
Looking ahead
Jubilant is poised for excellent growth in FY 09 and expects that the Company will record an organic growth of 35% in turnover. At the operating level,
the outlook is confident given strong momentum in volumes and margins translating into a much improved net profit. Jubilant will continue to focus on the Life Sciences business emphasising growth across CRAMS, Drug Discovery and Development Services (DDDS) and its international businesses. Some of the key highlights for the expected performance are as under:
PLSPS business
• Long-term contracts with a number of global customers in proprietary products to drive better volumes and margins
• Volume growth at Hollister given increase in vial filing capacities over 2.5 times to 120 million, enhanced traction from existing and new customers at higher margins
• Strong order book in exclusive synthesis and a robust pipeline with some products in phase III of customers’ drug development program
• Higher turnover and operating profit within APIs given new launches and greater revenue share from already commercialised products
• Buoyancy in DDDS following enhanced collaboration with existing pharma companies
Jubilant is poised for excellent growth in FY 09 and expects to record an organic growth of 35% in turnover
13 Annual Report 2007-08
on new collaborations and encouraging discussions with many new pharma and biotech companies.
IPP business
• De-bottlenecking and capacity addition to support increased demand for acetyls
• Continuing firmness in prices of acetyl products
• Near doubling of Single Super Phosphate revenues following commissioning of Udaipur facility; a favourable Government subsidy policy to increase the revenues and margins in agri business.
During FY 08, Jubilant entered the healthcare business by acquiring equity stake in First Trust Healthcare Limited, Kolkata.
Our key objective here is to deliver affordable good quality healthcare. We anticipate full benefits to flow from this in the next few years.
At this stage, we would also like to take the opportunity to thank every stakeholder in the Company for being a part of this success story and standing by us all these years. We want to especially mention the independent members of Board of Directors who offer us their invaluable insights and experience. We remain grateful towards our employees, customers, vendors, bankers and shareholders for their continued support. We are hopeful that they will remain with us as we venture into the future which holds unbounded promise.
Shyam S BhartiaChairman and Managing Director
Hari S BhartiaCo-Chairman and Managing Director
Our key objective in healthcare business is to deliver affordable good quality healthcare
Jubilant Organosys Limited 14
EXECUTIVE DIRECTORS’ MESSAGES
Jubilant has shown substantial growth in the Pharma and Life Sciences business in the recent fiscal year. The contribution to its overall turnover and earnings from this business is at its highest and it continues to increase. Part of the reason for this success, I think, is the consistent approach we have taken to position Jubilant as an ally to the industry’s leading players. We have invested judiciously in building a full-fledged presence that meets entirely the needs of the sector. Thus today we find Jubilant occupying global positions in several product & service areas.
Our CRAMS operation has been the single most important reason for Jubilant delivering sustained performance. We are about to launch commercial operations across the recently augmented sterile vial filling capacity at Hollister. We see the contract manufacturing of sterile injectables business as a high growth opportunity.
In Pharma, we are driving our position in select therapeutic areas where we have the scale and ability to address a global market. This year we had commercial launches of two prominent products, Oxcarbazepine and Resperidone in regulated markets.
In Dosage Forms, we have launched 14 products so far and have plans for filing about 10 ANDAs each year. Jubilant has established a well integrated research and manufacturing set-up, which gives us the necessary leverage to accelerate the launch of generic products worldwide. These are enhancing the performance of the Company.
There were many positives associated with the Industrial and Performance Products business for Jubilant in the current review period. Financial results for FY 08 were exceptional. We saw improvement in margins across our product categories. Volume off-take was generally higher in comparison to last year.
The product prices are directly linked to crude oil prices that strengthened through the year. The current year’s performance benefited from strong finished product prices of acetyls.
Jubilant is cognisant of changes in macro policy and what is happening at the customer’s end and has planned ahead in
Dr. J M Khanna Executive Director & President Life Sciences
terms of capacity adjustments. In the current fiscal year, the Government has implemented revised fertilizer policy that links subsidy to the input cost for the SSP plant. Jubilant that already has a plant in Uttar Pradesh, has recently commissioned an SSP plant in Rajasthan with a capacity of 2.6 lakh tonnes per annum and is bound to gain from the change in the policy.We have also de-bottlenecked our manufacturing capacities in some of the key acetyl products and the enhanced capacity will be available from the next year.
S N Singh Executive Director, Chemicals
15 Annual Report 2007-08
Undeniably, the success of Jubilant’s operating philosophy rests on its world-class manufacturing set-up. The integrated manner in which we work, puts our customer at the centre of our strategy for outsourcing. Jubilant acts as a single point of delivery for products and services across the value chain. We like to be globally relevant in every aspect of the business, especially in manufacturing. In Jubilant, we have created top ranking facilities in terms of scale and technology used.
The thrust of such initiatives, going forward, would be to help Jubilant maintain its pace of operating margin expansion year-on-year as it starts dealing in more value added products/services. Being a truly integrated player, we realise the need to match our best-in class production infrastructure with a world-class supply chain. In fact, the ultimate idea is to improve process efficiencies and reduce
the end cost (both in terms of finished product and time taken) to the customer. We have an avant-garde system that keeps the operating process seamless and helps to deliver the true benefits of our integrated model for outsourcing to the customer.
Jubilant’s operations are bench-marked with the best in the world. There are a series of ongoing programs both at the manufacturing and HR level that seek to maximise the productivity. These have been organised under ‘Velocity’, our corporate initiative for optimising business processes and Disha/Manthan where we are involving internal stake-holders (primarily employees) in operation/process planning.
Jubilant is clearly poised for greater growth. Its operating model that is built around the philosophy of outsourcing has all the right ingredients to maintain the positive momentum in performance. The Company has been successful in building a great value chain internally. The timing of our growth initiatives (organic and importantly inorganic) has helped us to capitalize on the opportunity available in outsourcing and has resulted in Jubilant being positioned as a top player in the industry.
Today we are seen as pioneers in the outsourcing play. The
appetite for creating high quality growth from high quality businesses is quite strong and we are looking at options that will give us new skill sets and scale in existing operations or through acquisitions. The Balance Sheet is well funded and we have been able to use FCCB funds (raised successively over the previous 3 years) and other foreign loans to act decisively when it comes to availing attractive opportunities.
I see continued robust expansion in the PLSPS side as the Company becomes the preferred and topmost player in the field of pharma and life sciences outsourcing. I am happy that the Company has exceeded performance expectations in the review period with revenue and earnings momentum across the board. The objective for us in the management is to really allocate capital intelligently to business areas that help us maintain this kind of exceptional growth and profitability.
R SankaraiahR SankaraiahExecutive Director, Finance
S Bang Executive Director, Manufacturing and Supply Chain
Jubilant Organosys Limited 16
AWARDS & ACCOLADES
Corporate Governance
• Golden Peacock Global Award for Excellence in Corporate Governance
• Featured in the Top 10 companies of India in Standard and Poor’s Environment, Social and Governance (ESG) index
Corporate Social Responsibility
• Golden Peacock Global Award for CSR
• Featured in the IFC document as one of the four companies who have successfully integrated sustainability in business
• Invited to International meet in Moscow for presenting the only case study from India on Public Private Partnership (PPP) model (DOTs centre for TB treatment at Gajraula)
• Jubilant Sustainability Report 2007 short listed for ‘Reader’s Choice’ award from 800 reports globally
• Certificate of Commendation from CII-ITC for Sustainability Performance
Innovation
Excellence in Innovation Award from Indira College of Engineering & Management
Receiving the Golden Peacock Global Award for Corporate Governance
Receiving the CII - ITC Certificate of Commendation for Sustainability Performance
17 Annual Report 2007-08
ManagementDiscussion & Analysis
Jubilant Organosys Limited 18
MANAGEMENT DISCUSSION & ANALYSIS
State of the Pharma Industry
The Pharmaceuticals market is in a state of transition. Players who had profited from the traditional model which focused on patent protection are seen changing track. Big pharma companies are now facing increasing threat due to generic drugs replacing patented drugs. It is estimated that a total of US$ 123 billion worth of patented drugs will go off patent between 2008 and 2012. To replace these drugs which are going off patent, the New Chemical Entities (NCE) are not being discovered fast enough. According to IMS, NCE launches for 2008 will be between 24 and 29 vs. average of 34 NCE launches in previous years. The industry is also facing increased uncertainty from safety issues due to safety review of US Food and Drug Administration (FDA) and European Medicines Agency (EMEA). Intellectual Property Rights is another area where these innovator companies are facing challenges on multiple fronts. Of the US$ 40 billion worth of products facing patent expiry in 2008 and 2009, nearly US$ 25 billion worth are facing patent challenges.
There is ample cause to suggest that pharma companies are searching for alternative models of doing business, which are not necessarily cheaper but more inventive methods. The only way to counter losses from patent erosion and other regulations is running an effective drug discovery programme. There is a natural case for following the outsourcing model both for innovator and generic companies seeking to accelerate the process of launching new drugs and focusing only on the core competencies and marketing / selling.
Total global pharma outsourcing opportunity was estimated at US$ 44 billion in 2007 which is estimated to grow to US$ 73 billion by 2011(13% CAGR). This creates opportunities in two areas:
i. Contract Manufacturing Outsourcing (CMO), which involves supply of formulations, APIs and intermediates to customers, was estimated at US$ 26 billion in 2007 and is expected to reach US$ 40 billion by 2011 (11% CAGR).
The global opportunity in pharma outsourcing was estimated at US$ 44 billion in 2007 and is estimated to grow to US$ 73 billion by 2011
19 Annual Report 2007-08
ii. Contract Research Outsourcing (CRO), which involves research services for molecules in the pre-launch stage was estimatedat US$ 18 billion in 2007 and expected to reach US$ 33 bn by 2011 (17% CAGR)
India advantage in CMO space
1. After US, India is the largest filer of Drug Master Files (DMFs), which has risen to 48% of the total DMFs filed worldwide excluding US vs. 15% in 2000.
2. After US, India has the largest no. of US FDA approved plants.
3. The manufacturing of APIs and formulations in India is more cost effective compared to that by US and European companies.
4. Availability of largest pool of highly trained chemists.
India advantage in CRO space
1. India has one of the largest number of patients across urban life style and tropical diseases. India also ranks high in the speed of recruiting patients, speed of conducting trials and return rate of patients.
2. India has one of the largest pools of physicians at graduate, post graduate and PhD levels.
3. Cost of conducting trials in India is much lower than that in developed markets.
Jubilant, the advantage in outsourcing
Jubilant is one of the largest outsourcing companies in India. The company’s products and services offerings are unique and unparalleled. It offers products at intermediate stage (fine chemicals & advanced intermediates), APIs and solid dosages and it also offers an integrated platform of drug discovery and development services. In terms of the number of scientists employed (1100) and its production capacities (leaders in most of the product categories), the Company clearly enjoys the advantage of economies of scale.
The Company has been offering an integrated play across the pharma and life sciences
Jubilant is one of the largest outsourcingplayers in India offering integrated capabilities from drug discovery to commercialisation
Jubilant has a successful working model in outsourcing and has earned strong position of choice amongst global pharma and biotech companies
State-of-the-art Analytical Lab in R&D Centre, Noida
Jubilant Organosys Limited 20
value chain with capabilities from drug discovery to drug commercialisation. The acquisition of Hollister-Stier in the review period has served to extend Jubilant’s reach into the contract manufacturing of sterile injectables. Further, it continues to examine opportunities for adding competencies in areas where it is not adequately represented, evidence of which can be found in the drug development business which started out as strategic build outs by the Company and which are now expected to be the next platform for growth.
Overview of segment wise business performance
Jubilant reported excellent results in fiscal 2007-08. In continuation of the trend for
the past 5 years, the Company derived greater share of Revenues and Profitability from the Pharmaceuticals and Life Sciences Products and Services (PLSPS) business segment. The performance in the Industrial and Performance Products (IPP) was along expected lines with continued improvement in profitability.
Financial review
FY 08 revenues showed significant increment of 37.5% to Rs. 24,889 million from Rs. 18,097 million last year. PLSPS revenues achieved spectacular growth of 71% at Rs. 15,302 million compared to Rs. 8,950 million in FY 07. IPP reported a stable growth in revenues at 5% to Rs. 9,587 million from Rs. 9,147 million.
Outsourcing of Drug Discovery and Development Services emerging as next frontier of growth for Jubilant
Kilo Lab cum Pilot Plant at Gajraula
21 Annual Report 2007-08
Revenues from International operations were at Rs. 13,940 million as compared to Rs. 8,318 million in FY 07. This follows Jubilant’s pursuit of growth from the regulated markets in PLSPS.
Operating Profits without accounting for the forex gains for FY 08 were 57.4% higher at Rs. 4,897 million from Rs. 3,112 million last year given best-ever results in PLSPS and continued buoyancy in the IPP business. Operating Margin improved to 19.7% without accounting for forex gains in FY 08 compared to the previous year’s 17.2%. Interest cost stood at Rs. 337 million in the period given the various growth initiatives (including inorganic) taken by the Company.
Earnings Before Interest and Taxes in FY 08 were at Rs. 4,898 million from Rs. 3,148 million in FY 07. The EBIT in PLSPS was at Rs. 3,102 million or 75.8% greater than Rs. 1,765 million last year, given the increasing proportion of higher value-added business and volume growth. The EBIT in IPP stood 24.3% higher at Rs. 1,324 million from Rs. 1,065 million as the Company benefited from higher value creating products and softer bias in input cost. Profit Before Tax in FY 08 was at Rs. 4,561 million as against Rs. 2,953 million in FY 07. Net Profit grew 75.7% from Rs. 2,280 million to Rs. 4,005 million given the better, all-round, performance.
The diluted EPS for the period stood at Rs. 22.42 compared to Rs.13.02 in FY 07.
Operational review
Jubilant Organosys is an outsourcing focused Company. Its operations are organised along two broad business segments: Pharma and Life Sciences Products and Services (PLSPS) and Industrial and Performance Products (IPP). IPP was formed after the consolidation of Performance Polymers business with Industrial Products given the limited size and contribution from it.
For many years now, PLSPS has acted as the engine of growth for the Company. Prudent and timely investments in capability augmentation (both organic and through acquisitions) have strengthened Jubilant’s competitive position. The recent fiscal year has seen PLSPS business obtaining dominant share of revenues and earnings. The IPP business segment has demonstrated growth that has been in line with a favorable operating environment. A more detailed perspective of the annual results across each of Jubilant’s businesses has been presented on the following pages:
Pharmaceuticals and Life Sciences Products and Services (PLSPS)
The key reason for Jubilant’s growth in FY 08 was the performance of the PLSPS business segment, where the
Revenue growth in PLSPS has exceeded 70% year-on-year. Impetus for growth has come from CRAMS operations
FY 08 revenues showed significant increment of 37.5% to Rs. 24,889 million and net profit up by 75.7% to Rs. 4,005 million given better all-round performance
Jubilant Organosys Limited 22
revenue expanded 71% from Rs. 8,950 million to Rs. 15,302 million owing to stronger revenues in the CRAMS operations. It thus constituted 61.5% of the Company’s overall revenues in FY 08 as opposed to 49.5% last year. The Hollister-Stier business at Spokane, Washington, USA (contract manufacturing of sterile injectables and allergenic extracts) acquired by the Company in June 2007 reported revenues of Rs. 2,815 million. CRAMS business had revenues of Rs. 13,069 million given volume based growth in Proprietary Products, Exclusive Synthesis and the APIs business. Revenues contributed by Dosage Forms and Drug Discovery & Development Services segments stood at 2.7% and 6.2% in the period and the results were as per the management expectations.
International revenues were 67.6% higher at Rs. 13,940 million from Rs. 8,318 million. This followed faster expansion
in regulated markets that accounted for 68% of the business segment’s revenues. The segment registered a record performance in the Chinese market. Revenues from North America & EU contributed 41.8% & 25.3% with a growth of 140% and 17% respectively. Segmental EBIT rose 75.8% from Rs. 1,765 million to Rs. 3,102 million as the proportion of higher margin CRAMS business (including Hollister) increased. There were a series of commercial launches in APIs which added to profitability in this period.
Developments during the year
Hollister acquisition
Jubilant acquired the operations of Hollister-Stier Laboratories, LLC, Spokane, Washington, USA in June 2007 for a consideration of US$ 122.4 million for the existing business and US$ 18.7 million for capacity expansion thereby augmenting its presence in CRAMS. Hollister is engaged in the contract manufacturing of sterile injectables, which is a high value, fast-growing business catering mostly to innovator pharma companies. In light of excellent opportunities, Jubilant has increased production capacity from 48 million vials per annum to 120 million vials per annum in this division. Hollister also produces and markets allergenic extracts. This is a steady growth business where the company is among the top three players globally.
Jubilant acquired the operations of Hollister-Stier Laboratories therebyaugmentingits presence in CRAMS
Sterile Injectables plant at Spokane
23 Annual Report 2007-08
First Trust Healthcare acquisition
Jubilant acquired a majority stake in First Trust Healthcare Ltd. w.e.f. May 23, 2007. Now, renamed as Jubilant First Trust Healthcare Ltd. (JFTH), the venture represents the Company’s foray into healthcare services and includes an established operation in the form of a 56-bed hospital in the state of West Bengal.
Jubilant’s PLSPS business segment can be further classified as under:
• Custom Research and Manufacturing Services
• Drug Discovery and Development Services
• Dosage Forms
• Healthcare
Custom Research and Manufacturing Services (CRAMS)
Jubilant is recognised as a significant player in the CRAMS space internationally. It has invested in building global scale in several key product categories and is known to work with the leading pharma, biotech and agro-chemical companies in the world. Jubilant has made it a priority to leverage its research set-up and strong base of scientific talent to drive innovation in CRAMS. The Company’s strength lies in its ability to provide complete solutions for its client base as a one-stop shop. The business
reported revenues of Rs. 13,069 million in FY 08 giving an increase of 85.5% over the previous year. It thus represented 85.4% of the revenues in PLSPS and 52.5% of the total revenues for the year. Jubilant’s CRAMS operation is broadly classified as:
• Proprietary products and Exclusive synthesis
• APIs
• CMO of Sterile Injectables
• Speciality Pharmaceuticals
Strength in CRAMS business lies in the ability to engineer complete solutions for customers as a one-stop shop. Revenue in FY 08 was up by 85.5% to Rs. 13,069 million
Jubilant is one of the few players that assists customers from drug discovery stage itself and partners them through clinical trials to the commercialisation stage
Pilot plant at Gajraula
Jubilant Organosys Limited 24
Proprietary Products and Exclusive Synthesis
Proprietary products and exclusive synthesis business recorded revenues of Rs. 8,387 million, an increase of 50.9% from Rs. 5,558 million last year. For the calendar year 2008, the business has reported signing of contracts worth over US$ 90 million already. Most of this growth is being realised from the existing clientele, which continues to scale up engagement with the Company. Growth going forward will continue as the Company is able to draw larger orders progressively from its existing and new customers.
Active Pharmaceutical Ingredients (APIs)
Jubilant is a leading maker of several APIs mainly for generic companies. The total business size stands at Rs. 1,867 million and has grown 25.5% from Rs. 1,488 million in FY 07 with good growth in volumes. Jubilant’s API facility is located at Nanjangud, Karnataka and comprises 6 multi-purpose plants which can be configured to produce specific APIs and a pilot plant to fasten commercialisation of APIs. Given its research infrastructure at Nanjangud and elsewhere, the Company is able to expeditiously offer support for new API development. The Company specialises in Central Nervous System (CNS), Cardiovascular System (CVS), Gastro-Intestinal
(GI), Anti-Diabetic and Anti-Infectives.
Jubilant has 19 commercialised products at present. This is against 24 DMF filings in the U.S. and 11 EDMFs in Europe. In addition there are 19 products at the research stage and 11 in a ready-to-launch state. In the review period, there were 5 new DMF filings. FY 08 saw the Company launch 2 new products - Oxcarbazepine and Resperidone. The Company has created world scale capacities for the supply of Oxcarbazepine and is presently supplying to three customers whose ANDAs have been approved by the USFDA. The Company plans to file 8-10 DMFs every year.
CMO of Sterile Injectables
Injectables is one of the fastest growing sub-segments in pharma industry and it is expected to have a 17% CAGR in the coming few years. The acquisition of Hollister-Stier gave Jubilant an established and fast growing business in the form of contract manufacturing of sterile injectables – liquid and lyophilized. Being a niche business with high initial capital investment, stringent compliance norms and complex manufacturing processes, very few companies globally are present in this field. About 95% of revenues of Hollister-Stier come from branded or patented products. The manufacturing facility comprising 48 million vials
Jubilant is among the leading makers of several APIs mainly for generic companies
25 Annual Report 2007-08
per year for sterile injectables is located at Spokane in the state of Washington, USA. The Company has made investments to the tune of US$ 43 million to enhance this capacity to 120 million per year in view of visible demand. This CMO business has grown strongly in the review period, contributing Rs. 2,050 million to Jubilant’s revenues.
Speciality Pharmaceuticals - Allergenic extracts
The allergenic extracts business of Hollister is basically an immunotherapy and vaccines business. Hollister is one of the leading North American companies with 85 years of presence and brand loyalty. The company is one of the three worldwide providers of stinging insect venom vaccines used to reduce a patient’s venom sensitivity. This is a cash generating business requiring minimal further capital expenditure. Jubilant has around one-third share in the U.S. market for such products. Total business size was Rs. 765.0 million in FY 08.
Outlook
CRAMS is expected to remain the primary growth driver for the Company in the immediate future. The CMO of sterile injectables part of the business is also demonstrating robust growth year-on-year and given the recent expansion of capacities, will continue to
contribute robustly to revenues and earnings. The rich product pipeline in phase III at Hollister provides good potential for further scaling up of business. The proprietary products business is seen as a volume play and going forward, the Company can be expected to benefit from increased business from existing customers. On the Exclusive Synthesis side, the Company has a portfolio of late stage products (phase II and III) where chances of commercialisation are greater and thus this business is likely to show good momentum. There is a concerted effort by the Company to increase the scale of the APIs business. The rate of filings of new DMFs is expected to average 8-10 each year going forward. There is good traction in this operation and Jubilant expects further launches of products in the coming months.
With Hollister, the Company is present in CMO of Sterile Injectables, which is a very attractive business to be in, with significant entry barriers
CRAMS is expected to remain the primary growth driver for the Company in the immediate future
FDA approved API plant
Jubilant Organosys Limited 26
Drug Discovery and Development Services (DDDS)
Jubilant offers an integrated and collaborative platform of drug discovery and development services to the globalpharmaceutical industry. The Company continues to evolve its business model focused on capitalizing upon the US$ 18 billion outsourcing spending by the global pharmaceuticals industry. The business is integrated via three operating subsidiaries across the entire value chain of drug discovery and development - each with a range of capabilities across the value chain. The collective business reported revenues of Rs. 1,541 million – an increase of 23.7% over the previous year. It represents 6.2% of total revenues of the company. The business covers a range of discovery services and shared risk collaborations with multiple global partners.
Jubilant Biosys Ltd., a subsidiary company, is positioned as a preferred integrated discovery collaborator to major pharmaceutical and biotech companies, accelerating their global discovery efforts across multiple therapeutic areas addressing unmet healthcare needs. It operates the Jubilant Discovery Research Centre, Bengaluru – a state of the art, integrated discovery research facility (125,000 sq. ft.)
with over 350 scientists, specialising in various aspects of discovery including discovery biology, medicinal chemistry, structural biology, ADME, TOX, pharmacology, molecular modelling, and information technology.
Jubilant Chemsys Ltd., a wholly owned subsidiary, focuses on providing medicinal chemistry services to the global pharmaceuticals industry. Uniquely positioned to focus on medicinal chemistry aspects, it provides and collaborates in all areas of medicinal chemistry that include design, synthesis and structure activity relation accelerating Hit lead optimization efforts within the global pharmaceuticals industry. Operating from its 75,000 sq ft, state of the art facilities located in Noida, Uttar Pradesh ,India, it provides automated and sophisticated instrumentation to support over 350 chemists. Jubilant Biosys and Jubilant Chemsys also combine to offer the most integrated lead generation capabilities available any where in Asia.
Clinsys Clinical Research Limited, a wholly owned subsidiary, is uniquely distinguished as the only Indian clinical research organization with an integrated workforce across USA, Europe and India and provides collaborators global or regional clinical research solutions to include Phase I to IV, BA/BE/PK studies, clinical data
Jubilant Biosys is a committed partner in drug discovery research to innovator pharma and biotech companies
Partner in Drug Discovery and Development
27 Annual Report 2007-08
management and bio-statistics. Clinsys Clinical Research, Inc. also provides targeted clinical staffing solutions in US and India to support global clinical development needs.
Jubilant’s Drug Discovery and Development Business is ideally structured to deliver utmost value to the pharmaceuticals industry and leverage upon its home grown competence and partner capabilities in most discovery and development aspects including:
i. Discovery Technologies - Computational modeling, Discovery IT and Discovery Informatics
ii. Discovery Research -Screening and validation capabilities across multiple target platforms
iii. Drug Development Services – Pre-clinical and translational capabilities across multiple therapeutic areas
iv. Clinical Research - Globalclinical development support across multiple therapeutic areas
The subsidiaries independently and in combination work with pharmaceuticals companies in identifying targets and developing them in collaboration from discovery or early stage development to proof of concept in Phase II. They provide expertise and solutions
across the therapeutic areas of Oncology, Metabolic Disoders, Central Nervous System, Pain / Inflammation, Dermatology as well as Infectious Diseases.
Outlook
The combined efforts of the subsidiaries - Jubilant Biosys, Jubilant Chemsys and Clinsys Clinical Research (USA and India) integrate well with the Jubilant Organosys capabilities in drug substance and drug product manufacturing as Pharmaceuticals companies look for more integrated service providers across the pharmaceutical vertical.
These businesses represent a very attractive strategic opportunity for growth. The Medicinal Chemistry services provided under Chemsys are doing very well – Jubilant is one of the few niche players in this field. We expect strong revenue growth in the operations of
Jubilant is one of the largest Drug Discovery and Development Services companies in India
Jubilant DDDS business is ideally structured to deliver utmost value to the pharmaceuticalsindustry and leverage upon its home grown competence
Clinical trials at the Clinsys Research Centre, Noida
Jubilant Organosys Limited 28
Biosys and Clinsys in subsequent years.
Dosage Forms
The Dosage Forms operations form an integral part of Jubilant’s strategy of end-to-end presence in the pharmaceuticals space. The business contributed about 4.4% to PLSPS revenues in FY08. Dosage forms business is focused on regulated markets i.e. US and EU - Pharmaceuticals Services Inc. (PSI) NV and PSISupply NV at Belgium giving the Company an European footprint and Cadista Pharmaceuticals Inc. covering the important U.S. market for generics.
This business has total manufacturing capacity of 3.5 billion tablets p.a. and 850 million capsules. Responsibilities for manufacturing are shared
between Salisbury unit in the state of Maryland, USA and Roorkee, Uttarakhand, India. All developmental activities are backed by a state-of-the-art R&D centre in Noida (India) capable of working on various immediate release products, NDDS & taste masked solid dose oral galenical forms at both the plants, wet & dry granulation, direct compression, coated and uncoated tablets, encapsulation, spheronization & extrusion, as well as packaging both blisters & bottle packs. The Company’s therapeutic focus thus far has been on Cardio-Vascular System, Central Nervous System, Anti-Infectives, Respiratory and Anti-diabetics. Business has 9 approved Abbreviated New Drug Applications (ANDAs) and 6 ANDAs awaiting approval in US and 5 approved Marketing Authorizations (MAs) in Europe & one e-CTD dossier under approval.
Outlook
Jubilant is keen to expand its portfolio of products in the regulated markets. Over the next couple of years, it plans to comfortably undertake filings for 8-10 products in the U.S. and in Europe. Given its integrated research and production setup,the Company is looking at expediting its commercialisation process for new therapies and grow the business strongly.
Dosage Forms are part of Jubilant’s strategy of being integrated across the pharma value chain
Formulations Laboratory at Salisbury
29 Annual Report 2007-08
Healthcare
Jubilant intends to scale up Jubilant First Trust Healthcare Ltd. (JFTH) into a network of specialist healthcare centres under a ‘Hub and Spoke’ model within West Bengal with a total investment of Rs. 1,700 million for a combined capacity of about 1000 beds. JFTH is making progress that is in line with its central theme of providing high quality healthcare services at economical cost to the target population with low cost infrastructure to minimize the payback period. A 400 bed hub at Howrah would provide services in Cardiology, Ophthalmology, Trauma, Oncology and Neurosciences besides services in Radiology. The 545 bed hospitals (8 in number) would complement the hub setting up case referrals. These hospitals would also undertake minor to medium complexity surgeries, low end diagnostics and other consultations. JFTH is also planning for 3-4 city clinics at key places. Currently, 92 bed hospitals at two locations are functioning and land purchase has been finalized in Howrah for a hub and 4 other spokes.
Industrial Products and Performance Polymers (IPP)
Jubilant’s second business segment, IPP reported a turnover of Rs. 9,587 million in FY 08, up 4.8%. This growth against revenues of Rs. 9,147
million in the last year was the result of the Company’s focus on value added and speciality products and its pursuit of newer markets. In terms of profitability too, the Company had segmental EBIT Rs. 1,324 million in FY 08 as opposed to Rs. 1,065 million previously, given favorable raw material prices and better top-line growth. Jubilant is positive about the buoyancy in IPP and is undertaking further de-bottlenecking here to improve volume throughput to cater to demand. The IPP operation can be seen as a combination of various distinct businesses including Organic Intermediates, Agrovet, Speciality Gases and Performance Polymers.
Organic Intermediates
This business involves a product group called ‘Acetyls’, which are organic chemicals required to produce other downstream products. Jubilant is regarded as the largest maker of these products through the molasses route as it makes them using fermentation of molasses, which is obtained from crushing sugarcane and is a by product of the sugar industry. Given its philosophy of creating world-class businesses, the Company has developed global leadership positions in several products such as Acetic Acid, Acetic Anhydride, Ethyl Acetate and Monochloroacetic Acid.
Company’s focus on value added and speciality products has resulted in improvement in IPP turnover
Jubilant First Trust Healthcare Ltd. is creating network of specialist healthcare centres under a ‘Hub and Spoke’ model within West Bengal
Chemical Synthesis Laboratory
Jubilant Organosys Limited 30
The Company’s distilleries, which are built to global specifications and capacities, are located in the prime sugarcane growing regions of Uttar Pradesh and Maharashtra in India. Given the relationship it enjoys with sugar mills, the Company has had a stable supply of molasses to meet its requirements. During FY 08, there was a continuance of weakness in the sugar sector, given the surplus crushing achieved in the season. As a result, the prices of molasses (the main raw material) for this business remained subdued and led to significant improvement in profitability.
Outlook
Jubilant expects continued buoyancy in the market for acetyls given indications of higher demand particularly from pharmaceuticals and life sciences industry. Volume off take is likely to show stable
growth over the coming months.
Agrovet
This business comprises agricultural products and animal nutrition products. The main product in animal nutrition business is choline chloride, which is used in the rearing of cattle, poultry and aquaculture. The Company also makes vitamin and mineral pre-mixes besides toxin binders that eliminate the prevalence of mycotoxins in birds. The agri-side of the business pertains to fertilisers, fungicides, herbicides, plant growth regulators/biostimulators and herbal pest management products. Jubilant is a leading producer of SSP (Single Super Phosphate) in its market. It has a leading brand ‘Ramban’ that finds wide acceptance in the farming community. Jubilant also markets organic manure that it produces as a result of its distillery operations.
Outlook
In the coming fiscal year, the Government will implement revised fertilizer policy that links subsidy to the input costs for the SSP plant. The Company which already has a plant in Uttar Pradesh, has recently commissioned a new fertiliser plant in Rajasthan with a capacity of about 2.6 lakh tonnes per annum and believes that it would gain from the change in the policy.
Jubilant is seeing good growth in IPP business and is undertaking de-bottlenecking activities
Chemical plant at Gajraula
31 Annual Report 2007-08
Speciality Gases
Jubilant produces Ethylene Oxide Mixture (ETO) and liquid Carbon Di-oxide at its facilities at Nira and Gajraula. ETO is used to sterilise medical equipment and has emerged as an improved alternative to traditional methods for sterilization. Other applications for ETO include treatment of foodstuff, making of cosmetics and preservation of paper products. The Company produces high purity carbon dioxide for soft drink and beer manufacturing. The Company has invested in the distribution infrastructure and operates a fleet of cryogenic tankers to deliver the gases to its customers.
Outlook
The business is expected to demonstrate stable performance going forward.
Performance Polymers
Jubilant manufactures and markets a range of polymer based products under this business. These products typically find applications in textiles, decorative paints, construction, tyres, paper coating, food & beverages and packaging. The entire emphasis of this business is to develop very specific product applications in close co-ordination with the customers. The operation is broadly divided into Application Polymers and Consumer Products.
The Application Polymers business includes emulsions that
find applications in the areas of Coatings, Textiles, Industrial Adhesives ,Consumer Products and Vinyl Pyridine Latex. Under Consumer products business, the company provides a range of woodworking solutions (under the popular ‘Jivanjor’ brand). The Company also makes adhesives used in the footwear industry. This segment also includes the Vinyl Pyridine Latex unit of the Company. Jubilant has achieved a leadership position in Vinyl Pyridine Latex, a product used by makers of tyres across the globe.
Outlook
The outlook for this business remains positive. The changes made to the product mix, in terms of focusing on higher margin products are expected to show good results. The Company continues to expand its offering, working on a regular basis to develop products that are relevant to current market needs. Growth is also expected to come from Jubilant’s foray into overseas markets.
Food Polymers
Jubilant enjoys the distinction of being one of the largest and low cost producers of Solid Poly Vinyl Acetate (SPVA), the leading ingredient in chewing gum and bubble gum. Jubilant products are approved by many large international gum manufacturers and currently it exports about 75% of its production.
Jubilant enjoys the distinction of being one of the largest and low cost producers of Solid Poly Vinyl Acetate, the leading ingredient in chewing gum and bubble gum
The company continues to expand its product offerings and working on a regular basis to develop products and services that are relevant to current market needs.
Jivanjor range of products
Jubilant Organosys Limited 32
Outlook
Going forward, there are plans to expand the presence in the market with introduction of newer products.
HR in Jubilant
All our HR initiatives are based on the fact we need to be innovative and think fresh all the time.
Our desire to be ahead of the talent crunch leads us to develop the Jubilant Academy, to be launched in near future, which would identify potential talent from campuses, hone their skills through structured training and prepare young minds for an exciting career.
Our deep commitment to developing internal resources leads us to introduce a formal talent identification & development program, wherein high potential candidates are identified by a Committee at the senior most levels and
are carefully groomed for leadership roles. The process of Assessment / Development centre will be used as a tool for this program.
The HR function recognizes that each business of Jubilant is at an inflexion point, driven by huge global opportunities and strong strategic and operational management practices.
Human Resource Development plan builds within itself a framework of closely tracked transformational initiatives that simultaneously address areas for improvement and benchmark against the global best practices.
Employee Engagement
The group-wide employee engagement initiative termed ‘Disha’ is a structured exercise involving measurement of employees’ views on various issues measured at various intervals. This is currently deployed using the services of Gallup, internationally known experts in this field.
Frequent assessment of the views of our employees, helps us to keep abreast with their aspirations and develop plans and road maps that would address these aspirations.
Retention of key employees
• This remains a core focus area for the function. Some of the initiatives have been identification of key talent, base pay correction based
EmployeeEngagementinitiativetermed ‘Disha’ is a structured exercise involving measurement of employees’ views on various issues
HR training in progress
33 Annual Report 2007-08
on market, incentive program and retention bonus in some cases, and bonuses to reward employees who meet the stretched targets consistently.
• Stock option grants to senior and critical employees has created a positive impact on retention of key performers
• Reward and Recognition programs like Monthly contests, star awards and snap rewards are also practised across different businesses.
• Most important, it is the level of empowerment and freedom to innovate that has ensured the retention of critical and high performing employees.
Competency Mapping and Development
A detailed mapping of all competencies, starting with scientific competencies has been initiated across the organization.
Going beyond the basic concept of skill pools and inventories, these competencies would be broad banded to provide a real time access to management and help make decisions regarding manpower utilization, redeployment, succession and career planning, skill banding, certification and rewards, in astructured and objective manner.
Leadership competencies at different levels have been
identified and are being deployed across the various Jubilant Units.
These also become the basis for our revamped selection process and would be incorporated into Development Centres planned during the year.
Career and Succession Planning
Career and succession planning for key managerial personnel and other critical positions is a critical focus area.
Leadership competencies developed for each distinct responsibility level would be used to gauge and assess readiness and training needs.
Employee Participation
To encourage employees to participate in suggestion scheme, a Sankalp scheme modelled on the ‘Kaizen’ program has been instituted and we have received huge response from employees.
Career and successionplanning for key managerial personnel and other critical positions is a critical focus area.
HR initiatives are based on the fact that we need to be innovative and think fresh all the time
Empowering the future leaders
Jubilant Organosys Limited 34
Organisation of Jubilant Day, Cultural and Sports events provide a good opportunity for employee participation and interaction including their families. Manufacturing Meet,Safety Committee and Canteen are some of the other forums for constructive employee participation.
Internal Control Systems & Risk Management Framework
Risk arises out of uncertain events, the occurrence of which could adversely impact the objectives of the Company.
An effective risk management framework involves identifying particular events or circumstances relevant to the organization’s objectives (risks and opportunities), assessing them for their likelihood and magnitude of impact, determining a response strategy, and monitoring its progress. By identifying and proactively addressing risks and opportunities, business enterprises protect and create
value for their stakeholders, including owners, employees, customers, vendors, regulators, and the overall community.
An effective risk management framework drives continued competitive sustainability of an organization as it enables alignment of operations & activities of the organisation with its vision & values.
Jubilant’s Vision on Risk Management
To establish & maintain enterprise wide risk management capabilities for active monitoring & mitigation of organizational risks on a continuous basis.
Risk Management Framework
The achievement of our business objectives will necessarily involve taking risks. Our risk management process is intended to ensure that risks are taken with due diligence. We have created an integrated risk management framework to identify, assess, prioritize, manage, monitor and communicate risks across the Company.
Our effective risk management framework comprises the following elements:
• Risk management strategy
• Risk management structure
• Risk identification & monitoring
Our senior managementteam sets the overall tone and risk culture of the organization through defined and communicated corporate values
Employees at Dosage manufacturing facility, Roorkee
35 Annual Report 2007-08
Risk Management Strategy
Jubilant has a strong risk management framework in place that enables active monitoring of the business activities for identification, assessment and mitigation of potential internal or external risks.
Given the established processes and guidelines we already have in place combined with a strong oversight and monitoring system at the Board and senior management levels, we believe we have a robust risk management strategy in place.
Our senior management team sets the overall tone and risk culture of the organization through defined and communicated corporate values, clearly assigned risk responsibilities, appropriately delegated authority, and a set of processes and guidelines. We have laid down procedures to inform Board members about the risk assessment and risk minimization procedures. As an organization, we promote strong ethical values and high levels of integrity in all our activities, which in itself is a significant risk mitigator.
Risk Management Structure
Our risk management structure comprises of the Audit Committee at Board level, heads of businesses, heads of support functions, unit heads, divisional heads of accounts and finance, executive directors & head of assurance function.
As risk owners, the heads of businesses, unit heads and support functions are entrusted with the responsibility of identification & monitoring of risks. The Audit Committee, Executive Directors and Head of Assurance function monitor the effectiveness of the internal controls framework on a regular basis.
In addition, there is a perpetual internal audit activity carried out by M/s Ernst & Young Pvt. Ltd. As our internal audit partner, they give an independent assessment on our risk mitigating measures and provide suggestions for improvement, which are then considered for implementation.
Audit Committee
The Audit Committee, on a quarterly basis, reviews the adequacy & effectiveness of the internal controls being exercised by various businesses & support functions & advises the Board on matters of core concern for redress.
Risk Identification and Monitoring
We have a strong Board and a competent set of professional managers who attempt to identify risks at an early stage and take appropriate steps to pre-empt or mitigate the same.
The Company has completed two years of certification process using a software platform wherein, all concerned Control
The heads of businesses, unit heads and support functions are entrusted with the responsibility of identification & monitoring of risks.
Control Owners certified the correctness of key operating, financial and compliance related controls for approximately 1000 key controls every quarter
Jubilant Organosys Limited 36
Owners certified the correctness of key operating, financial and compliance related controls for approximately 1000 key controls every quarter. This has made our internal controls and processes stronger and robust. This serves as the basis of compliance with revised Clause 49 requirements mandated by the Securities and Exchange Board of India (SEBI), requiring a certification by the CEO and the CFO on accuracy of financial statements and on the adequacy of internal controls and risk management.
As a part of the above controls, the Company has also identified entity level controls across the organization, which covers integrity and ethical values, adequacy of internal audit and internal control mechanisms and effectiveness of internal and external communication.
We believe that this exercise has considerably strengthened the internal controls systems and processes within the Company along with clear documentation and certification of key control points.
Management’s Assessment of Risk
Foreign Currency Exposures
As a prudent risk management policy, the Company doesn’t enter into any forex derivatives which are speculative in nature. Hence there are no derivative transactions of a speculative nature outstanding as of date.
Foreign currency exposures on account of Jubilant’s global scale of operations could impact the bottom line of the Company.
The Company derives almost 56% of its revenues from exports. Apart from this, the Company has foreign currency exposures arising out of imports and foreign currency debt, including convertible bonds.
To mitigate foreign currency related risks, a risk management team comprising CMD, ED-Finance and Controller-Forex formulates the foreign exchange risk management approach and reviews it dynamically to align it with developments in the external environment and business requirements.
When exchange rate movements reveal a trend that adversely affects the value of the company’s exposures, forward contracts or derivatives are considered and decisions are taken to ensure that there is a high degree of certainty on the exchange rates at which actual transactions would be recorded / realized, resulting in insulation of the company’s financial statements from the risk of unfavourable exchange rate movements.
When market exchange rate trends are in favour of the company’s foreign exchange exposures, such exposures are kept open to benefit from these movements.
We have a strong Board and a competent set of professionals who identify risks at an early stage
37 Annual Report 2007-08
Further, Interest Rate Swaps are considered to protect the company’s interest rate exposures A quarterly update on foreign exchange exposures, outstanding forward contracts and swaps is placed before the Board on a regular basis.
Cost Competitiveness
The Company has manufacturing facilities developed to give large-scale economies of scale. The Company has captive utilities to support its production requirements on a perpetual basis. Being a low cost manufacturer in most of its product segments, including fine chemicals, Advance intermediates, APIs and Dosage forms, the Company de-risks itself from pressures of cost competitiveness. Besides this, the company enjoys a sustainable cost competitiveness position by being an integrated pharmaceutical player.
Environmental Issues
Being a chemical and pharmaceutical company, it is exposed to various environment related regulatory and health issues.
Some of our research and development and manufacturing operations involve dangerous chemicals, processes, by-products and effluent discharges. To manage these risks, substantial investments and resources are allocated on a continuous
basis to proactively adopt and implement manufacturing and effluent treatment processes, which ensures adherence to environmental quality standards and regulatory requirements. Stringent EHS systems and procedures at all manufacturing locations, including all R & D centers ensures strict compliance to international standards and safety practices which helps in addressing environment related risks. Besides, an independent assessment and verification of environment related hazard mitigation processes are also done by Ernst & Young as our assurance partner to provide comfort to stakeholders. In addition, we also maintain adequate property and public liability insurance covers at our manufacturing facilities as per industry practices.
Integration of Acquired Companies
The anticipated benefits on account of mergers or acquisitions of companies / businesses would get effected in case of difficulty in integrating the acquired Companies.
The Company manages acquisition related integration risks by deploying external experts along with suitable management teams comprising senior people who have the requisite experience and skill sets in rolling out and managing integration related issues. Besides, the Company
As a prudent risk management policy, the Company doesn’t enter into any forex derivatives which are speculative in nature
Independentassessment and verification of environment related hazard mitigation processes are also done by Ernst & Young
Jubilant Organosys Limited 38
uses a common technology platform across the board to enable seamless replication of systems and processes for acquired companies / businesses.
Retention and Development of Talent
The growth and success of an organization is driven by the value of human assets employed by it. For sustainability, it is imperative to have a defined risk management policy and procedure for retention and development of talent within the organization.
Jubilant has a vision to attract and retain the best talent. During the year, it has undertaken initiatives in this direction to employ, retain and develop human talent.
a) Employee Engagement Program was launched
under the name ‘Disha’. Through this program, initiatives have been identified through responses received from employees through the engagement survey. These initiatives will be executed to improve work place culture that will finally lead to higher employee engagement, retention and greater productivity for the organization. For this engagement exercise, we have parterned with The Gallup Organization, the world leader in employee engagement space.
b) Performance Management System was launched under the name ‘Manthan’. The aim of this initiative is to redesign the current Performance Management System (PMS) and successfully implement the same. A core design team (cross-functional, cross location, cross level) was created to spearhead the re-designing along with consultants from Grow Talent. The design team underwent a Rapid Design Workshop where they analyzed Management’s expectations, the feedback from the employees and internally brainstormed and conducted a risk analysis before arriving at a set of design parameters for the New PMS.
Jubilant has a vision to attract and retain the best talent and has undertaken no. of initiatives in this direction
Employee Engagement Programme
39 Annual Report 2007-08
Customer concentration in some businesses
Over dependence of sales on a set of few customers could directly impact the profitability of the Company in the event of customer attrition.
The Company continues to manage these risks by entering into long term contracts with its customers as well as developing new products for newer customer base.
Business Interruption due to Force Majeure
The company’s largest manufacturing facility is at Gajraula (UP). Any unforeseen event of a catastrophic nature at this facility could lead to a possible disruption in its manufacturing activities, which could have a resultant impact on the earnings of the company.
Adequate insurance protection has been taken by Jubilant to ensure continuity of its earning capacity. Besides, the presence of the majority of our workforce in the residential colony adjoining our plant premises ensures sustenance of plant operations under challenging circumstances.
Performance ManagementSystem was launched under the name ‘Manthan’
Employee Engagement Program was launched under the name ‘Disha’
Performance Management System
Jubilant Organosys Limited 40
Recent Developments
Subsequent to the close of fiscal year 2007-08, the Company announced the acquisition of Canada based Draxis Health Inc. (Draxis). DRAXIS offers products in three categories: sterile products, non-sterile products and radiopharmaceuticals. Sterile products include liquid and freeze-dried (lyophilized) injectables plus sterile ointments and creams. Non-sterile products are produced as solid oral and semi-solid dosage forms. Radiopharmaceuticals are used for both therapeutic and diagnostic molecular imaging applications. Radiopharmaceuticals are developed, produced, and sold by Draxis through its DRAXIMAGE division and contract manufacturing services are provided through DRAXIS Pharma for sterile and non-sterile products. Draxis operates a US FDA approved manufacturing facility and employs approximately 500 staff in its Montreal facility at Canada. It is recognized globally for its quality and execution capabilities, strong regulatory track record
and has an established customer base comprising large innovator and specialty pharmaceuticals companies.
Draxis is a debt free company and Jubilant proposes to finance US$ 255 million transaction using a combination of proceeds from a previous FCCB issue and debt amounting to US$ 160 million. Given the attractiveness of the business model and the opportunities available in radiopharmaceuticals, the transaction is likely to have a very attractive payback .
Companyannounced the acquisition of Canada based Draxis Health Inc. The transaction is likely to have a very attractive payback
41 Annual Report 2007-08
Annual Accounts
Jubilant Organosys Limited 42
Your Directors have pleasure in presenting the Thirtieth Annual Report and Audited Accounts for the year ended March 31, 2008, during which the Company has registered all round growth. Performance shows that we are on the right path - outsourcing remains our key strategy and your Company is considered the partner of choice by the international Pharma & Life Sciences industry.
Financial Results
Year ended March 31, 2008
[Rs. in million]
Year ended March 31, 2007
[Rs. in million]
Sales and Other Income 22,314 18,402Net Sales 19,767 16,097EBITDA 5,382 3,662Interest 147 151PBDT 5,235 3,511Depreciation 636 515PBT 4,599 2,996Provision for Taxation 676 681PAT 3,923 2,315Profit brought forward from previous year 4,046 2,441PROFIT AVAILABLE FOR APPROPRIATION 7,969 4,756Which the Directors have appropriated as follows:
- Proposed Dividend on Equity Shares 220* 179**
- Tax on Dividend on Equity Shares 37 31
- Transfer to General Reserve 1,000 500
Balance to be carried forward 6,712 4,046
* Includes Rs. 0.01 million (inclusive of Dividend Tax) in respect of shares allotted between April 01, 2007 and the record date for dividend payment.
** Includes Rs.0.87 million (inclusive of Dividend Tax) in respect of shares allotted between April 01, 2006 and the record date for dividend payment.
Operations
Financial Year 2007-08 has been a year of significant achievements and witnessed a spectacular growth in standalone and consolidated revenues and profitability. Your Company derived majority of revenues from the PLSPS (Pharmaceutical and Life Sciences Products and Services) operations, where its main business is outsourcing of products and services to international Pharma and Life Sciences companies.
This was outcome of higher sales volumes given the capacity enhancements undertaken during the year, addition of new customers and acquisition of Hollister-Stier Laboratories LLC.
Your Company continues to see strong growth traction across existing business and expects the momentum to continue in future also. To meet the growing needs of the global customers in outsourcing of products and services, your Company made substantial investment in increasing its manufacturing capacities and also the drug discovery and development capabilities during the year.
Net Sales of the Company recorded a growth of 22.8% to Rs. 19.77 billion as compared to Rs. 16.1 billion in the previous year. International Sales increased by 40.1% to Rs. 8.86 billion from Rs. 6.32 billion. This increase in exports was mainly due to high growth in Pharma and Life Sciences business in regulated markets of USA, Europe and China. The Industrial and Performance Products business witnessed 4.4% growth in sales to Rs. 9.56 billion as compared to Rs. 9.16 billion in FY 2006-07.
EBITDA and PBT at Rs. 4.34 billion and Rs. 3.56 billion before exchange gain of Rs. 1040 million (previous year Rs. 658 million) and interest income of Nil (previous year Rs. 189 million) showed an improvement of 54.3% and 65.6% respectively.
Profit after tax (PAT) increased to Rs. 3.92 billion (19.8% of net sales) from Rs. 2.31 billion (14.4% of net sales), an increase of 69.5%.
DIRECTORS’ REPORT
43 Annual Report 2007-08
Consolidated Financials
On a consolidated basis, Net Sales recorded a growth of 37.5% to Rs. 24.89 billion as compared to Rs.18.10 billion in the previous year. International Sales increased by 67.6% to Rs. 13.94 billion from Rs. 8.32 billion.
EBITDA and PBT at Rs. 4.64 billion and Rs. 3.27 billion before exchange gain of Rs. 1040 million (previous year Rs. 658 million) and interest income of Rs. 253 million (previous year Rs. 425 million) showed an improvement of 72.8% and 74.8% respectively.
PAT increased to Rs. 4.01 billion (16.1% of net sales) from Rs. 2.28 billion (12.6% of net sales), an increase of 75.7%.
Dividend
Your Directors recommend a dividend of 150% on fully paid up equity shares of Re. 1 each, for the year ended March 31, 2008. This will absorb Rs. 256.6 million (inclusive of tax) based on existing capital. The final outgo could, however, increase due to increase in capital on conversion of Foreign Currency Convertible Bonds or exercise of Employees Stock Options etc.
Appropriations
It is proposed to transfer Rs. 1000 million to General Reserve and retain the balance in Profit and Loss Account.
Capital Structure
(A) Foreign Currency Convertible Bonds (FCCBs)
Your Company, during 2004-05, 2005-06 and 2006-07, has successfully issued Foreign Currency Convertible Bonds (FCCBs) as under:
Particulars Year of Issue
Size of Issue
(in million US $ )
InterestRate
(%)
Conversion Details No. of shares converted till
March 31, 2008
OutstandingFCCBs as on
March 31, 2008(in Million
US $)
No. of shares of Re.1 each
on conversion of outstanding
FCCBs
ConversionPeriod
ConversionPrice per Equity
Share(Rs.)
FCCB 2009 2004-05 35 1.5 June 14, 2004 and April 15,
2009
163.646 9,500,521 0.300 82,140
FCCB 2010 2005-06 75 0 July 03, 2005 and May 14,
2010
273.0648 2,237,308 60.907 9,669,206
FCCB 2011 2006-07 200 0 June 30, 2006 and May 10,
2011
413.4498 0 200.000 21,792,246
Whilst the FCCBs are listed on Singapore Stock Exchange, the Global Depository Shares (GDSs) arising out of conversion of FCCBs are listed on Euro MTF Market of the Luxembourg Stock Exchange.
The above outstanding bonds, if exercised, will increase equity shares by 31,543,592.
(B) Employees Stock Options (ESOPs)
During 2007-08, 49,936 Options were granted to employees under Jubilant Employees Stock Option Plan 2005. Each Option entitles the holder to subscribe to 5 equity shares of Re.1/- each.
As on March 31, 2008, 539,160 Options were outstanding. A maximum of 2,695,800 shares will be allotted upon exercise of these Options.
Till date, holders of 13,641 options have exercised the conversion option resulting in allotment of 68,205 shares of Re.1/- each. The details as required under Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are given in Annexure A.
Jubilant Organosys Limited 44
(C) Paid Up Capital
The paid up Capital as at March 31, 2008 stands Rs. 146,185,914 comprising of 146,185,914 equity shares of Re.1/- each.
During the year, 2,740,580 equity shares were allotted on conversion of FCCBs into equity shares and exercise of stock options by employees / directors. Consequently, the paid up share capital of your Company increased from 143,445,334 shares to 146,185,914 shares.
The impact of future conversions of FCCB 2009, FCCB 2010 and FCCB 2011 into equity shares and exercise of Employees Stock Options (ESOPs) by employees on the share capital assuming full conversion/ exercise would be as follows:-
Particulars No. of Shares of Re.1/- each
Existing nos. of shares as on March 31, 2008 146,185,914Add : Shares to be allotted on conversion of outstanding FCCBs 31,543,592Add : Maximum no. of shares to be allotted on exercise of all ESOPs 3,519,295Fully diluted no. of equity shares on conversion of FCCBs and exercise of ESOPs
181,248,801
Subsidiaries
Brief particulars of each of the subsidiaries are given below:
1. Jubilant Biosys Limited – A subsidiary of your Company, this company provides Discovery Informatics products and services and collaborative drug discovery services that include pre-clinical, in-vivo and in-vitro services. It also provides discovery research services. Your Company currently holds 66.98% of the equity of Jubilant Biosys.
During the financial year 2007-08, this Company has built new capabilities in area of Drug Metabolism Pharmokinetics, Initial Validation Target Inhibition and high thruput screening. The addition of these capabilities made it as full fledged integrated player in early drug discovery phase. It has entered into a first of its kind drug discovery collaboration in India with a major pharmaceutical company in the US. In addition to the existing Eli Lilly order, it has signed contracts with Forest Lab and also executed successfully integrated programme for Millennium Pharma.
2. Jubilant Chemsys Limited – This wholly owned subsidiary of your Company offers medicinal chemistry services to drug discovery companies based out of US, Europe and Japan on Full Time Equivalent or molecule basis. It also works closely with Jubilant Biosys in collaborative drug discovery research services area.
During the financial year 2007-08, it successfully enhanced its operational capacity from 75 to 275 Fumehoods by creating new state-of-art facility. It also created Library synthesis and small multi gram scale up capabilities during the year.
3. Clinsys Clinical Research Limited – This wholly owned subsidiary of your Company offers a broad range of clinical research services to pharmaceutical and biotechnology companies in support of Phase I - IV drug development. Its services include project management, monitoring, regulatory consultancy, data management and bio-statistical support. It has 52 bed clinical pharmacology facility in Noida, occupying 34000 sq. feet, has its own ISO 15189 accredited Clinical Pathology Laboratory, Bio-analytical Laboratory units under one roof to perform all the operations from protocol development to final Clinical Study Report.
It has also initiated Phase II and Phase III clinical studies in patients covering approximately 40 hospital sites across India in cardiovascular and oncology therapeutic areas. The bio-studies conducted at its unit have been approved by European Regulatory Authorities and US FDA.
45 Annual Report 2007-08
4. Jubilant Infrastructure Limited – This wholly owned subsidiary of your Company has set up Special Economic Zone (SEZ) for Chemicals in Gujarat. About 107 hectares land has been taken on 99 years lease from GIDC in Bharuch District, Gujarat and the Government of India has notified the SEZ in February 2008.
5. Clinsys Holdings, Inc. – This Delaware, USA corporation, was earlier held to the extent of 100% by your Company. However, during the year, 68.3% capital was issued to Jubilant Pharma Pte. Ltd., a wholly owned subsidiary of your Company, and balance, being 31.7%, continues to be held directly by your Company. This company is still a wholly owned subsidiary of your Company. This Company holds 100% capital of Clinsys Clinical Research, Inc. and HSL Holdings Inc.
6. Clinsys Clinical Research, Inc. – This Delaware, USA corporation, is a wholly owned subsidiary of Clinsys Holdings, Inc. and is a therapeutically focused full service clinical research organization. This Company has expertise in a wide range of highly specialized therapeutic areas including oncology, cardiovascular, central nervous system, respiratory, dermatology, and allergy/immunology. It is offering broad range of clinical research services to pharmaceutical and biotechnology companies in support of Phase II - IV drug development including project management, medical and clinical monitoring, patient and investigator recruitment, site management, biostatistics, data management, drug safety, quality assurance, regulatory affairs and medical writing.
This Company also offers professional staffing solutions and innovative partnering programs for the life sciences industry via its staffing division “Targeted Clinical Staffing Solutions”.
7. Jubilant Pharma Pte. Ltd. – This wholly owned subsidiary, is incorporated in Singapore. This Company has made investments in Cadista Holdings Inc., Clinsys Holdings, Inc. and Jubilant Organosys (Shanghai) Ltd. It also has Cadista Pharmaceuticals (UK) Limited as its wholly owned subsidiary.
8. Cadista Holdings Inc. – This Delaware, USA corporation, is a subsidiary of Jubilant Pharma Pte. Ltd. which holds 75% capital of this Company. This Company holds 100% capital of Cadista Pharmaceuticals Inc.
9. Cadista Pharmaceuticals Inc. – This Delaware, USA corporation, is a wholly owned subsidiary of Cadista Holdings Inc. This Company is a generic pharmaceutical company having US FDA approved manufacturing facility in USA.
10. Jubilant Organosys (USA), Inc. – This Delaware, USA corporation, is a wholly owned subsidiary of your Company. It undertakes sales and distribution of advance intermediates, fine chemicals, CRAMS and APIs in USA.
11. Jubilant Organosys (Shanghai) Limited – During the year, the capital of this wholly owned subsidiary of your Company has been transferred to Jubilant Pharma Pte. Ltd. Now, it is a wholly owned subsidiary of your Company through Jubilant Pharma Pte. Ltd. It undertakes sales and distribution of products in China.
12. Jubilant Pharma N.V. – This Belgian company is a wholly owned subsidiary of your Company. This Company held 80% capital of Pharmaceutical Services Inc. N.V. and PSI Supply N.V. However, during the year, it acquired balance 20% in those companies from the other shareholder.
13. Pharmaceutical Services Inc. N.V. – Jubilant Pharma N.V. was holding 80% capital of this Belgian company. However, during the year, it became wholly owned subsidiary of your Company through Jubilant Pharma NV. It is engaged in the business of licensing of generic dosage forms and offers regulatory affairs services to generic pharmaceutical companies for the diverse European market.
14. PSI Supply N.V. – Jubilant Pharma N.V. was holding 80% capital of this Belgian company. However, during the year, it became wholly owned subsidiary of your Company through Jubilant Pharma N.V. It undertakes development and supply of generic dosage forms to European markets.
Jubilant Organosys Limited 46
15. HSL Holdings Inc. – This Delaware, USA corporation, is a wholly owned subsidiary of Clinsys Holdings, Inc. This Company holds 100% capital of Hollister Stier Laboratories LLC.
16. Hollister-Stier Laboratories LLC – This Delaware, USA based company, is a wholly owned subsidiary of HSL Holdings Inc. It is engaged in contract manufacturing of sterile injectables, having a well established and stable Allergy immunotherapy business. It has strengthened your Company’s global CRAMS business via entry into the high barrier sterile injectables segment.
17. Jubilant First Trust Healthcare Limited (earlier known as “First Trust Healthcare Private Limited”) – This Company is in the business of healthcare and became subsidiary of your Company in May 2007. This Company runs hospital and healthcare centers managed by a team of successful professional doctors in West Bengal. Your Company currently holds 88.17% of equity capital of this Company. This Company holds 99.68% capital of Asia Healthcare Development Private Limited.
18. Asia Healthcare Development Private Limited – This Company became subsidiary of your Company in March 2008 through Jubilant First Trust Healthcare Limited. This Company runs a hospital in Behrampur managed by a team of successful professional doctors in West Bengal.
19. Cadista Pharmaceuticals (UK) Limited – This Company, incorporated in England, is a wholly owned subsidiary of your Company through Jubilant Pharma Pte. Ltd. for marketing and selling generic dosage forms.
PARTICULARS REQUIRED AS PER SECTION 212 OF THE COMPANIES ACT, 1956
In terms of the exemption granted by the Government of India vide its letter dated April 21, 2008, from attaching the Directors’ Reports, Balance Sheets, Profit & Loss Accounts and other particulars of the aforesaid subsidiaries, the same have not been attached to this Report.
Voluntary Disclosures
(A) US GAAP
In keeping with the commitment to high standards of Corporate Governance, your Company continued voluntarily to compile financial statements that conform to US GAAP. This year the Company has also taken initiative to compile the financial statement as per IFRS.
(B) Corporate Sustainability Report
Your Company, being committed to address environmental issues and discharge its corporate social responsibility, is publishing for the sixth year in a row, Corporate Sustainability Report, duly audited by Ernst & Young, that conforms to Global Reporting Initiative Guidelines which is being mailed to all our shareholders.
Human Resource Management
Your Company has a forward-looking Human Resource Development Strategy, which focuses on talent management and strengthening of talent pool in building leadership across your Company. Systems are aligned to foster excellence, empower and enrich employees, recognize creativity, innovation and reward performance.
The HR policies are based on best in class practices and are strongly linked to the Jubilant values. The global recruitment policies are designed to identify top talent and ensure that the Jubilant brand is communicated among the target community consistently.
The new Performance Management System uses the leadership competencies. These leadership competencies help to identify, develop and push high potential talent within the Company.
Your Company through this Performance Management System focuses on identifying top performers for whom focused training and development plans are designed and executed. Efforts for employee development both through classroom training, personal coaching by senior management and mentoring has been scaled up. To create an environment of high degree of belongingness, a new induction program “Parichay” has been initiated.
47 Annual Report 2007-08
Your Company offers to employees a share in the value created by organization through the ESOP, which fosters a sense of ownership and togetherness throughout the Company.
A detailed note on HR policies is given in the “Management Discussion & Analysis”.
Risk Management
An effective risk management framework drives continued economic sustainability as it aligns operations & activities of the organisation to its vision & values.
Your Company has a strong risk management framework that enables active monitoring of the business environment and identification, assessment and mitigation of potential internal or external risks.
The senior management team sets the overall tone and risk culture of the organization through defined and communicated corporate values, clearly assigned risk responsibilities, appropriately delegated authority and a set of processes and guidelines. There are laid down procedures to inform Board members about the risk assessment and risk minimization procedures. Your Company promotes strong ethical values and high levels of integrity in all its activities, which in itself is a significant risk mitigator.
Further, a perpetual internal audit activity carried out by Ernst & Young as internal auditors, also provides us with their independent assessment on our risk mitigating measures along with recommendations for improvement.
A detailed note on Risk Management is given in the “Management Discussion & Analysis”.
Fixed Deposits
No fresh deposits have been accepted by your Company during the year from the public. As on March 31, 2008, your Company had no outstanding Fixed Deposits. There were no overdue deposits. There were, however, 128 unclaimed deposits amounting to Rs. 1.88 million.
Directors
In accordance with the Articles of Association of the Company, Mr. Hari S. Bhartia, Dr. J. M. Khanna, Dr. Naresh Trehan and Mr. Ajay Relan retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-appointment.
Conservation of Energy, Technology Absorption and Foreign Exchange Earnings And Outgo
Information relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required to be made pursuant to section 217(1)(e) of the Companies Act, 1956 read with Companies[Disclosure of Particulars in the Report of Board of Directors] Rules, 1988 is set out as Annexure B and forms part of this Report.
Employees
The particulars of employees, as required under section 217(2A) of the Companies Act 1956 read with the Companies (Particulars of Employees) Rules, 1975, are given in a separate Statement set out as Annexure Cand forms part of this Report.
Management Discussion & Analysis
Notes on Management Discussion & Analysis of the financial position of the Company have been given separately and form part of this Report.
Auditors
K. N. Gutgutia & Co., Chartered Accountants, Auditors of the Company, retire at the ensuing Annual General Meeting and offer themselves for re-appointment. They have confirmed that their re-appointment, if made, shall be within the limits laid down in Section 224 (1B) of the Companies Act, 1956.
Corporate Governance
A separate section on Corporate Governance is attached to this Report as Annexure D. A certificate from the auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under clause 49 of the Listing Agreements with Stock Exchanges is enclosed as Annexure E. A certificate
Jubilant Organosys Limited 48
from the Chairman & Managing Director that all Board members and senior management personnel have affirmed compliance with the Code of Conduct for the year ended March 31, 2008 is attached as Annexure F. CEO/CFO certificate is enclosed as Annexure G.
Awards and Accolades
The year 2007-08 was a year of awards and accolades. Your Company won Golden Peacock Global Award for Excellence in Corporate Governance in September 2007. Jubilant was one among the six companies selected internationally to get this coveted award.
Close on the heels of above award, your Company in February, 2008, was awarded Golden Peacock Global Award for Corporate Social Responsibility. Jubilant was among the eight companies selected internationally to win this Award.
Jubilant is the only company to win both the above global awards. These awards recognize the best Corporate Governance practices, concern for society and environment and creation of extraordinary value for shareholders by your Company.
During the year, Jubilant also received Greentech Safety Award, Greentech Environment Award, Certificate of Commendation from CII for Sustainability performance and was also adjudged finalist by the Bombay Stock Exchange for Corporate Social Responsibility. Further, Jubilant also received “Excellence in Innovation” award from Indira College of Engineering and Management.
Standard & Poor (S&P), reputed agency of the world, has launched ESG India Index 2008 wherein largest 500 NSE listed Indian companies are evaluated and ranked on Environment, Social and Governance standards. As of December 31, 2007, Jubilant has been ranked at number 6 on these parameters, implying that your Company is among the top six companies in India.
Certifications
Your Company follows several externally developed initiatives in the economic, environmental and social areas. API manufacturing facility at Nanjangud has got approval from US Food and Drug Administration. Dosage Forms facility at Roorkee has got approval from Medicines and Healthcare Products Regulatory Agency, UK, for tablets and capsules. Facilities of the Company at Gajraula, Nira, Savli and Nanjangud are ISO 9001:2000 certified for Quality Management System. The manufacturing facilities are ISO 14001 certified for Environmental Management System. For Occupational Health and Safety at work place, the manufacturing facilities are also certified to OHSAS 18001. The Company is signatory to ‘Responsible Care’ initiative of chemical industry. Working with the community around our manufacturing units has been a focus area on the social front. We try to align our efforts with the Millennium Development Goals and make our contribution in every possible manner. The Company has been publishing ‘Sustainability Report’ for the sixth year in a row on its performance in the social, environmental and economic fronts as per the guidelines of the Global Reporting Initiative (GRI). The Company continues its support to the GRI as an Organisational Stakeholder. The Company is gearing up to the requirements of REACH, a European Directive to continue smooth operations in the region.
Investor Services
In its endeavor to improve investor services, your Company has taken the following initiatives:
• With a view to communicating on a real time basis, your Company has been e-mailing to the shareholders, copies of unaudited financial results, press releases and other similar communications soon after they are sent to the stock exchanges.
• The Investor Section on the website of the Company www.jubl.com has been revamped and enlarged and is more user friendly now.
• A dedicated e-mail id viz. “investors@jubl.com” for sending communications to the Company Secretary has been made effective. Members may lodge their complaints or suggestions on this e-mail as well.
• The Company has been mailing feedback forms to investors, annually, so as to bring about
49 Annual Report 2007-08
improvement in service level based on responses received. The Company has now placed an online Investor Feedback Form on its website www.jubl.com under the sub-head “Forms” under the head “Investors”. You may submit the form electronically.
Material Changes and Commitments Affecting the Financial Position of the Company after March 31, 2008
Your Company has entered into an arrangement agreement to acquire DRAXIS Health Inc. (‘DRAXIS’), a Canada based corporation, which through its wholly owned subsidiary, DRAXIS Specialty Pharmaceuticals Inc., is engaged in providing sterile products, non-sterile products and radiopharmaceuticals.
Your Company will acquire all the outstanding common shares of DRAXIS at a price of US$ 6.00 per share in cash by way of a plan of arrangement. The total value of this transaction is approximately US$ 255 million.
The acquisition represents a unique opportunity in the North American market, offering entry into the attractive, regulated, high growth and high margin radiopharmaceutical business and will strengthen your Company’s position in the sterile and non-sterile contract manufacturing business. The transaction is subject to the customary closing conditions and necessary regulatory approvals.
Directors’ Responsibility Statement
In compliance of Section 217 (2AA) of the Companies Act, 1956, the Directors of your Company, based on the representation received from management, confirm:
• that in the preparation of annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.
• that 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 as on March 31, 2008 and of the profit or loss of the Company for the year ended March 31, 2008.
• that the Directors had taken proper and sufficient care 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.
• that the Directors had prepared the annual accounts on a going concern basis.
Acknowledgments
Your Directors acknowledge with gratitude the co-operation and assistance received from the Central and State Government Authorities. Your Directors thank the Shareholders, Private Equity Investors, Financial Institutions, Banks/other lenders, Depositors, Customers, Vendors and other business associates for their confidence in the Company and its management and look forward to their continued support. The Board wishes to place on record its appreciation for the dedication and commitment of your Company’s employees at all levels, which has continued to be our major strength.
For and on behalf of the Board
Noida Shyam S. BhartiaApril 22, 2008 Chairman & Managing Director
Jubilant Organosys Limited 50
Annexure-A
Details as per Regulation 12 of SEBI (ESOP & ESPS) Guidelines, 1999
a) Options granted during 2007-08 49,936 *
b) Options granted upto March 31, 2008 690,027 *
c) Pricing formula Market price of share as on the date of grant, as per SEBI Guidelines.
d) Options vested upto March 31, 2008 128,499 *
e) Options exercised upto March 31, 2008 13,641 *
f) Total number of shares arising as a result of exercise of options upto March 31, 2008
68,205 Equity shares of Re.1/- each.
g) Options lapsed upto March 31, 2008 137,226 *
h) Variation of terms of options upto March 31, 2008
Nil
i) Money realized by exercise of options upto March 31, 2008
Rs.13,731,712.65
j) Total number of options in force upto March 31, 2008
539,160 *
k) Employee-wise details of options granted during 2007-08 to:
i) senior management personnel;
ii) any other employee who received a grant in any one year of options amounting to 5% or more of options granted during that year;
iii) identified employees who are granted options, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant
Mr P Ravi Shankar - 8,000 Options*Mr. Manoj Devendra Soni - 4,000 Options*Mr. A K Ghose - 405 Options*
Mr Lalit Kumar Pradhan - 3,500 Options*Mr. Mukul Dixit - 3,500 Options*
Nil
l) Diluted earning per share pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard AS-20.
The Company has calculated the employee compensation cost using the intrinsic value method of accounting to account for options issued under “Jubilant Employees Stock Option Plan 2005”. The stock based compensation cost as per the intrinsic value method for the financial year 2007-08 is Nil.
ANNEXURE TO THE DIRECTORS’ REPORT
51 Annual Report 2007-08
m) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed
If the employee compensation cost was calculated as per the fair-value of options based on Black Scholes methodology, read with Guidance Note on “Accounting for Employee Share-based Payments” issued by Institute of Chartered Accountants of India, the total cost to be recognized in the financial statements for the year 2007-08 would be Rs.40.98 million. The effect of adopting the fair value method on the net income and earnings per share is presented below.
Pro Forma Adjusted Net Income and Earnings Per Share:
Particulars Rs. in million
Net IncomeAs Reported 3922.67Add: Intrinsic Value Compensation Cost NilLess: Fair Value Compensation Cost 40.98Adjusted Pro Forma Net Income 3881.69
Earnings Per Share of Re.1 eachBasic (In Rupees)As Reported 27.26Adjusted Proforma 26.97
Earnings Per Share of Re.1 each:Diluted (In Rupees)As Reported 21.96Adjusted Pro Forma 21.73
n) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock options
(i) Where exercise price equals the market price of the stock options:- Weighted average of exercise prices of options:
Rs.214.22- Weighted average of fair values of options:
Rs.106.32(ii) Where exercise price exceeds the market price of
the stock options: Not applicable(iii) Where exercise price is less than the market price
of the stock options: Not applicableo) A description of the method and
significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information :–i) date of grantii) risk-free interest rate,iii) expected life,iv) expected volatility, v) expected dividends, andvi) the price of the underlying share in
market at the time of option grant.
The fair value has been calculated using the Black Scholes Option Pricing Model.
July 16, 20077.89%6.75 years35.22%0.60%Rs.309.00
October 16, 2007 7.89%6.75 years35.22%0.60%Rs.295.35
January 30, 2008 7.89%6.75 years35.22%0.60%Rs. 314.35
* Each option entitles the holder to subscribe to 5 equity shares of Re.1 each.
Jubilant Organosys Limited 52
Annexure - B
DISCLOSURE UNDER SECTION 217(1)(e) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988.
A. Conservation of Energy (a) Energy Conservation measures taken • Energy conservation by rationalization of cooling tower pump. • Utilization of flash steam from new acetyls at the Ethyl Acetate stripper column of Acetic Acid . • Optimization of the power consumption in the hot oil pump of water base furnace of 3 Cyno
Pyridine plant. • Utilization of the hot water unit of 3 Cyno Pyridine plant for the hot water requirements of the
Pyridine Hydro Bromide plant. • Energy conservation at the blowers of Acetaldehyde by optimizing the pulley size. • Installation of feed pre heaters at Ammonia recovery sections to reduce steam consumption in
Pyridine and Picoline plant. • Energy conservation by utilizing the steam generated during regeneration of activated carbon
filter of Carbon dioxide plant at Distillery plant. • Optimization of boiler feed water pumping system . • Power saving through optimization of pumping system in distillery and domestic water supply. • Installation of variable frequency drive (VFD) for cooling tower fans, pumps, circulation pump &
scrubber blower. • Installation of soft starter panel for chilled water compressor. • Installation of photocell system for outdoor lighting system of administration block. • Reduction of power consumption by installation of flat belts for Chilled Brine compressors and
Nitrogen compressors. • Energy saving by modulating cooling water pumps by using variable speed drive. • Improvement in steam trapping system in Ethyl Acetate plant. • Improvement in recovery of steam condensate from Ethyl Acetate plant . • Commissioning of second Biogas plant and boiler resulting in saving of coal. • Furnace oil fired boiler replaced by agro-waste fired boiler. • Installation of energy efficient CFL lamps, resulting in reduction of power consumption. • Improvement of boiler efficiency from 83% to 87 %, resulting in reduction of furnace oil
consumption. • Improved heat recovery in Sulphuric Acid plant.
(b) Additional investment and proposals, if any, being implemented for reduction of consumption of energy
• Installation of energy efficient brine chilling units at Acetyl section. • Installation of VFD on the hot water pump of Fine Chemicals plant to optimize the power
consumption. • Optimization of power consumption in the cooling water circulation at Pyridine plant (EOU). • Reutilization of blow down of 90 tonnes per hour (TPH) in flash steam generation for incinerator
feed preheat. • Energy conservation by optimizing the operating hours of the wet ash conveying system at 90
TPH boiler. • Energy conservation by optimizing the raw water pumping system at the distillery plant. • Energy conservation by optimizing raw water pumping at Carbon dioxide plant. • Energy conservation by optimizing cooling water supply system at Pyridine plant. • Energy conservation by utilizing waste heat vacuum seal pots of kilo lab and Solid Poly Vinyl
Acetate plants. • Reduction of utility failure by avoiding choking of ketene coolers. • Energy conservation by rerouting of 15 to 8 kg/cm2 steam utilization at fine chemicals. • Energy conservation by optimizing the cooling water circuit at multi effect evaporator . • Reduction of power consumption norms in Distillery plant by rationalization of pumps and
motors. • Energy conservation through improved insulation and process heat recovery in distillery and
Acetic Acid plants.
ANNEXURE TO THE DIRECTORS’ REPORT
53 Annual Report 2007-08
• Optimization of cooling tower pumping system and provision for VFD in process pumps. • Reduction of energy of cost of the site by 5%, by undertaking energy audit and implementing
the approved schemes. • Installation of backpressure turbine to generate electricity. • Replacement of low efficiency motors and pumps and provision of VFD in pumps running at
varying capacity. • Installation of VFD for VP latex refrigeration. • Energy saver lighting system for plant lighting. • Reduction in process power by optimizing batch cycle time. • Utilization of flash steam from condensate in Solvent Recovery plant.
Expected investment in the above initiatives is Rs. 65 Million
(c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods
• Reduction in steam and power consumption norms in all plants. • Reduction in steam and power generation cost. • Improved consistency in production. • Reduction in power consumption norms. 1. Savings due to conservation of energy: Rs 30 Million per annum, approx. 2. Savings due to (b) : Rs. 40 Million per annum, approx.
(d) Total Energy Consumption and energy consumption per unit of production
FORM A
A. Power & Fuel Consumption 2007 - 08 2006 - 07
1. Electricity A. Purchased
i) Units KWH 53,160,832.00 47,373,672.00 ii) Total Amount Rs. in million 244.78 208.10 iii) Rate / unit Rs./KWH 4.60 4.39 B. Own Generation Through DG i) Units KWH 39,227,317.00 41,141,986.00 ii) Unit per litre of RFO/LDO KWH/LTR 3.54 3.59 iii) Cost / unit Rs./KWH 5.03 4.73 Through Steam Turbine Generator *
i) Units KWH 136,694,640.00 124,421,920.00 ii) Units per MT of Steam KWH/MT 533.04 562.29 III) Cost / unit Rs./KWH 1.43 1.34
2. Coal**Quantity MT 383,829.15 313,529.68 Total Cost Rs. in million 971.61 730.24
Average Rate Rs./MT 2,531.36 2,329.09 3. Furnace Oil
Quantity KL 20,562.20 18,600.61 Total Cost Rs. in million 418.37 350.03 Average Rate Rs./KL 20,346.73 18,818.08
4. Others/Internal GenerationInternal Generation - Biogas Quantity NM3 51,074,087.00 57,029,698.00 Total Cost *** Rs. in million 24.27 24.46 Average Rate Rs./NM3 0.48 0.43
* Steam is produced in boilers using coal, fuel and gas.** E grade coal is used for power generation and C/D grade is used for steam generation.*** No raw material cost as it is produced from waste water only.
Jubilant Organosys Limited 54
ANNEXURE TO THE DIRECTORS’ REPORT
B. Consumption per Unit of Production2007-08 2006-07
Pharmaceuticals & Life Science ProductsElectricity KWH/MT 767.23 639.66 Steam MT/MT 8.40 5.69 Furnace Oil LT/MT 56.14 21.79Biogas NM3/MT 102.55 157.95
Industrial & Performance ProductsElectricity KWH/MT 154.48 134.54 Steam MT/MT 1.12 1.10 Furnace Oil L/MT 2.45 1.39 Biogas NM3/MT 5.32 7.39
Reasons for variation in consumption of power and fuel from standard of previous year : 1. In Pharmaceuticals & Life Science Products segment, consumption of furnace oil has gone up due to low
availability of biogas. 2. In Pharmaceuticals & Life Science Products segment, consumption of steam has gone up due to change in
product mix and lower burning of raffinate. 3. Power consumption has gone up due to induction of new products in existing plants and setting up of new
plants.
B. Technology Absorption
(a) Research and Development (R & D)
The Company has R&D Centres at Noida, Gajraula, Nanjangud and Samlaya. The Company has 350 R&D employees out of which 70 are doctorates and others are post graduates and graduates. R&D supports the activities of various businesses through new product development, diversification, process development, absorption of technology and establishing the technology on plant scale.
1. Specific areas where company carried out R&D:
(i) Active Pharmaceutical Ingredients and Dosage Forms • Non-infringing Process development of generic Active Pharmaceutical Ingredients (APIs). • Improvements in the processes for the manufacture of existing APIs. • Creation of intellectual property through development of new synthetic innovative &
non-infringing routes. • Development of generic dosage forms (orals). • Development of Veterinary dosage forms. • Development of Novel Drug Delivery System. • Established DRA team using e-CTD filing for Regulated markets. (ii) Biotechnology • Microbial processes for the treatment of industrial effluents. • Bio composting. • Processes for the manufacture of speciality and fine chemicals using bio-conversion
routes. • A special emphasis is laid down to create collaborative approach with leading
institutions to fast track development of biocatalytic processes for synthesis of organic compounds.
(iii) Fine Chemicals • Product/process developments in the area of Pyridine and its derivatives and related
heterocyclic chemistry. • Chemistry skill diversification to non-heterocyclic compounds. • Process improvements in the manufacture of key products. • Chiral compounds. (iv) Custom Research and Manufacturing Services (CRAMS) • Process development & process optimization for innovator, biotech & generic
pharmaceuticals on Full Time Equivalent (FTE) and Molecule basis. • Analytical protocol development service on FTE and Molecule basis.
55 Annual Report 2007-08
• Small-scale exclusive custom synthesis for pre-clinical and clinical studies. • Niche expertise in developing & optimizing process that are scalable for multi ton
quantities. • Expertise in route selection and non-infringing process development & process
optimization to provide creative chemical solutions by combining a unique set of technologies with its expertise in developing customized processes.
(v) Performance Chemicals • Development of speciality polymers. • Development of ethoxylates & emulsifiers. • Development of new latexes based on Butadiene chemistry. • Development of animal health care products.
2. Benefits derived as a result of the above R&D
• Strong position in generic based businesses. • Partners of choice for global pharmaceuticals and agrochemical companies. • Global leadership in select segments of our business. • Development of new products. • Generation of own IPRs to provide competitive edge. • Major growth in export of our products. • Competitiveness in cost and quality. • Effective effluent management.
3. Future Action Plan
• Process development for identified Active Pharmaceutical Ingredients. • Process development for identified dosage forms. • Novel Drug Delivery System research. • Process development of new derivatives of Pyridine and related heterocyclic chemicals. • Process development for non-heterocyclic chemicals leveraging existing skills. • Bio transformations for manufacture of fine and speciality chemicals. • Synthesis of chiral compounds. • Improvement in the fermentation technology and effluent management. • Development of new products in the field of polymers and adhesives for application in coating,
textile, footwear, paper, auto, electronic and other industries. • Business structure being created to handle SAARC, AsiaPac, Latin America and Africa. • Implementation of lean six sigma in R&D’s for enhanced efficiency. • Capex in production capacity enhancement to meet projected demand.
4. Expenditure on R&D
(Rs. in million)
2007-08 2006-07(a) Capital 480.20 395.46(b) Recurring 228.40 130.50(c) Total 708.60 525.96(d) Total R&D expenditure as a percentage of turnover 3.58% 3.27%(e) R&D expenditure as a percentage of Pharmaceuticals & Life
Science Products turnover6.94% 7.58%
(b) Technology absorption, adaptation and innovation
1. Efforts, in brief, made towards technology absorption, adaptation and innovation.
Research & Development plays a vital role in developing and adopting new technologies to enhance our operational efficiencies. We develop new technologies at the lab scale and the scientists and manufacturing engineers work in close co-ordination to seamlessly scale-up the processes to commercial scale without losing on the efficiency of the process. Six Sigma initiatives at plants and R&D support the adoption of new technologies and enhancing the efficiencies of our manufacturing plants to provide better services to our customers.
Jubilant Organosys Limited 56
2. Benefits derived as a result of the above efforts, e.g. product improvement, cost reduction, product development, import substitution etc.
The innovation in all the areas of our business results in new and more efficient products, which helps in improvement of the performance of our customers. Our R&D is grounded in business reality and we measure the performance of our R&D through the new product launches over the last five years and their contribution to the net sales of your Company. Over the last five years your Company developed 80 products, which contributed 16% of the net sales.
These continuous efforts result in improvement in cost and our service to the customers.
3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year): Not applicable
Technology Imported
Year of import
Has technology been fully absorbed?
If not fully absorbed, areas where this has not taken place, reasons therefor and future plans of action.
--------------------- NIL -----------------------
C. Foreign Exchange Earnings and Outgo
a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products and services; and export plans
• Activities relating to exports
Your Company has surpassed all export growth expectations by achieving 40.1% growth over the previous year. During FY 08, exports were Rs 8.9 billion, as compared to Rs 6.3 billion in the previous year. Exports contributed 44.8% of the net sales of the Company during FY 08, as compared to 39.3% in FY 07.
Exports focus continues in tandem with the corporate philosophy of Pharmaceuticals and Life Science Business. This segment contributed 51.6% of total sales during FY 08, as compared to 43.1% during FY 07. This marks a growth of 47.1% during FY 08, as compared to last year.
• Initiatives taken to increase exports
Your Company continued adding products to its existing as well as new markets during the FY 08, with the consistent philosophy of customer relationship and cost effective solutions to all its global partners. As corporate strategy, your Company always strives to tie-up major volumes with major customers, in long term or annual contracts.
• Development of new export markets for products and services
Your Company aggressively added new products within the same markets of Asia; and expanded products in new markets of America, Middle-East and Africa.
Our customer focused approach and consistency have paid rich dividends in China market and sales have grown by 100% over the previous year.
• Export Plans
Growth in export sales would be a key driver for your Company’s increased top line and market share. Growth would be led by our continued in-roads in the regulated markets of European Union, USA and Japan with special focus on China, Latin America and Africa.
• Approach towards Foreign Exchange Risk Management
Your Company managed its foreign exchange risks by protecting its foreign exchange exposures from the risk of unfavorable market trends. Continuous evaluation of forward contracts is done and implemented to ensure that there is a high degree of certainty about the exchange rates on which the actual transactions shall be recorded.
(b) Total foreign exchange used and earned
(Rs. in million)2007-08 2006-07
Foreign exchange used 2,978 2,697Foreign exchange earned 8,563 6,335
ANNEXURE TO THE DIRECTORS’ REPORT
57 Annual Report 2007-08
Ann
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Jubilant Organosys Limited 58
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ANNEXURE TO THE DIRECTORS’ REPORT
59 Annual Report 2007-08
REPORT ON CORPORATE GOVERNANCE
Annexure – D
REPORT ON CORPORATE GOVERNANCE
a) Company’s Philosophy
Corporate Governance is both a tradition and a way of life at Jubilant.
Our Jubilant promise is: Caring, Sharing, Growing.
“We will, with utmost care for the environment, continue to enhance value for our customers by providing innovative products and economically efficient solutions and for our shareholders through sales growth, cost effectiveness and wise investment of resources.”
This credo succinctly sums up our basic corporate governance principles as follows:
• Caring for the environment which includes caring for the society around us.
• Enhancement of stakeholders value through pursuit of excellence, efficiency of operations, quest for growth and continuous innovation.
• Transparency, promptness and fairness in disclosures to and communication with all stakeholders including shareholders, government authorities, customers, suppliers, lenders, employees and the community at large.
• Complying with laws in letter as well as in spirit.
Our Vision is driven by our Values, which are:
• teamwork to inspire confidence
• efficiency to create and provide best value to customers
• know how to provide innovative solutions
• delivery to provide excellent quality of products and services
The highlights of Jubilant’s Corporate Governance Regime are:
• Broad based and well-represented Board with a fair representation of executive, non-executive and independent directors with 83% of the Board being non-promoters.
• Constitution of several Committees such as Audit Committee, Remuneration Committee, Investors Grievance Committee etc. for more focused attention.
• Established Codes of Conduct for Directors and Senior Management as also for other employees. Instituted Whistle-blower policy and Code of Conduct for Prevention of Insider Trading.
• Focus on hiring, retaining and nurturing best talent and to promote a culture of excellence across the organisation. Exhaustive HRD Policies cover succession planning, training and development, employee grievance handling.
• Organisation wide ‘Velocity’ initiatives taken which include world-class improvement methodologies such as Six Sigma, Lean and World Class manufacturing.
• Exhaustive and unique system of internal controls spanning over 1000 control points monitored through especially designed software. The Company has voluntarily completed the documentation required as per Sarbanes-Oxley Act.
• Robust Risk Management framework for identifying various risks, assessing their probability as well as likely impact and finalizing risk minimization plans.
• Regular communication with shareholders including e-mailing of quarterly results just after release to Stock Exchanges, obtaining regular and also online feedback from shareholders.
• Comprehensive Corporate Sustainability Management System focussing on triple bottom- line reporting on economic, environment and society parameters as per Global Reporting Initiatives standards with a stated policy on sustainability.
The Corporate Governance practices of your Company are being acclaimed now. Standard & Poor (S&P), reputed agency of the world, launched ESG India Index 2008 wherein largest 500 NSE listed Indian companies were evaluated and ranked on Environment, Social and Governance standards. As of December 31, 2007, Jubilant was ranked at number 6 on these parameters, implying that your Company is among the top six companies in India.
Jubilant Organosys Limited 60
Your Company won Golden Peacock Global Award for Excellence in Corporate Governance in September 2007. Jubilant was one among six companies selected internationally to get this coveted award.
Close on the heels of above award, your Company in February, 2008, was awarded Golden Peacock Global Award for Corporate Social Responsibility. Jubilant was among eight companies selected internationally to win this Award.
Jubilant is the only company to win both the above global awards. These awards recognize the best Corporate Governance practices, concern for society and environment and creation of extraordinary value for shareholders by your Company.
b) Board of Directors
The Board comprises of twelve directors out of which seven are Non-Executive Independent Directors, two Managing Directors and three Executive Directors.
Board Meetings held during the year
During the year under review, 5 Board Meetings were held on April 24, 2007, April 27, 2007, July 17, 2007, October 16, 2007 and January 30, 2008. The composition of the Board of Directors and attendance of directors at the Board meetings, Annual General Meeting as also number of other directorships/committee memberships in Indian public limited companies are as follows:
Name of the Director Attendance at last AGM
No. of Board Meetingsattended
Category of Director Other Directorships
^
Committeememberships
(includingChairmanship) ** ^
Mr. Shyam S. Bhartia @ Yes 5 CMD (Promoter) 14 2 (2)
Mr. Hari S. Bhartia @ Yes 5 CCMD (Promoter) 13 4
Dr. J. M. Khanna Yes 5 ED 2 1
Mr. S. N. Singh Yes 4 ED 1 2
Mr. Shyam Bang Yes 5 ED 2 1
Mr. Bodhishwar Rai No 3 NED/ID 13 9 (5)
Mr. Arabinda Ray No 5 NED/ID 1 1
Mr. Surendra Singh No 4 NED/ID 6 7 (3)
Dr. Naresh Trehan No 3 NED/ID 4 1
Mr. H. K. Khan Yes 3 NED/ID 3 3 (1)
Mr. Ajay Relan # No 3 NED/ID 10 4 (1)
Mr. Abhay Havaldar * No 4 NED/ID 1 1
Mr. Vishal Marwaha #(Alternate Director to Mr. Ajay Relan)
No 2 NED/ID 1 -
CMD - Chairman & Managing Director; CCMD - Co-Chairman & Managing Director; NED - Non Executive Director; ED- Executive Director; ID - Independent Director@ Mr. Shyam S. Bhartia and Mr. Hari S. Bhartia are related to each other, being brothers.# Nominee of Citicorp International Finance Corporation and HPC Mauritius Ltd. – Equity Investors.* Nominee of GA European Investments Limited – Equity Investors** Committees for this purpose include Audit Committee and Investors Grievance Committee only. Committees of Jubilant are also
included.^ Excluding private companies, Section 25 companies and foreign companies
Board Agenda and Minutes
Regular Board meetings are held at least four times a year and maximum gap between the two meetings is not more than four months. In addition, special meetings are called as may be necessary. An annual calendar of meetings is provided to the directors in the beginning of the year, to enable them to plan their attendance at the meetings. Directors are expected to attend Board Meetings, spend the necessary time and meet as frequently as the situation warrants to properly discharge their responsibilities.
REPORT ON CORPORATE GOVERNANCE
61 Annual Report 2007-08
The Chairman and Managing Director (CMD)/Co-Chairman and Managing Director (CCMD) of the Company from time to time invite officers and other employees of the Company to attend Board Meetings, whenever deemed appropriate.
All Directors on the Board and various departments of the Company, communicate to the Company Secretary the matters requiring approval of the Board, well in advance, so that these can be included in the Agenda for the scheduled Board Meeting.
Agenda papers are circulated to the Board, well in advance before the Board Meeting. The agenda items are inclusive but not exhaustive of the following:
• Annual operating plans and budgets and any updates. • Capital budgets and any updates. • Quarterly results for the company and its operating divisions. • Minutes of meetings of various committees of the Board. • The information on recruitment and remuneration of senior officers just below the Board level,
including appointment or removal of Chief Financial Officer and the Company Secretary. • Show cause, demand, prosecution notices and penalty notices which are materially important.• Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems. • Any material default in financial obligations to and by the company or substantial non-payment for
goods sold by the company. • Any issue, which involves possible public or product liability claims of substantial nature, including
any judgement or order which may have passed strictures on the conduct of the company or taken an adverse view regarding another enterprise that can have negative implications on the company.
• Details of any joint venture or collaboration agreement.• Transactions that involve substantial payment towards goodwill, brand equity or intellectual
property. • Significant labour problems and their proposed solutions. Any significant development on the
Human Resources/ Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc.
• Sale of material nature of investments, subsidiaries or assets, which is not in the normal course of business.
• Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material.
• Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-payment of dividend, delay in share transfer etc.
Applicable provisions of law are being complied with by the Company. Further, the Company has substantially complied with the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI).
Draft Minutes of the Board meetings are circulated to the Directors of the Company for their comments thereon and, thereafter, confirmed by the Board in their next Meeting.
c) Committees of the Board
The Board of Directors has constituted Committees of Directors with adequate delegation of powers to discharge urgent business of the Company. Committee members are appointed by the Board with the consent of individual directors. The Committees meet as often as required.
Each Committee has its own charter. The Charters of Committee set forth the purposes, goals and responsibilities of the Committees.
The various Committees are:
I. Corporate Governance Committees
• Audit Committee • Investors Grievance Committee • Remuneration Committee
II. Other Committees
• Finance Committee • Compensation Committee • Special Committee
Jubilant Organosys Limited 62
The detailed terms of reference, composition, quorum and other details of the Committees are as under:
AUDIT COMMITTEE
The Audit Committee primarily constitutes a formal and transparent arrangement for accurate financial reporting and strong internal controls. The Committee through regular interaction with external and internal auditors and review of various financial statements ensures that the interests of stakeholders are properly protected.
All members of the Audit Committee are financially literate and a majority have accounting or financial management expertise.
(i) Terms of reference
The terms of reference of Audit Committee are the reviewing of all matters specified in clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956, which, inter-alia, include the following:
• Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the Statutory Auditors and the fixation of audit fees
• Approval of payment to Statutory Auditors for any other services rendered by the Statutory Auditors
• Reviewing with the management, the Annual Financial Statements before submission to the Board for approval, with particular reference to:
– Matters required to be included in the Directors’ Responsibility Statement to be included in the Board’s report in terms of clause (2AA) of section 217 of the Companies Act, 1956
– Changes, if any, in accounting policies and practices and reasons for the same – Major accounting entries involving estimates based on the exercise of judgment by
management – Significant adjustments made in the financial statements arising out of audit findings – Compliance with listing and other legal requirements relating to financial statements – Disclosure of any related party transactions – Qualifications in the draft audit report
• Reviewing with the management, the quarterly financial statements before submission to the Board for approval
• Reviewing with the management, performance of Statutory and Internal Auditors, adequacy of internal control systems
• Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure, coverage and frequency of internal audit
• Discussion with internal auditors of any significant findings and follow up thereon • Reviewing the findings of any internal investigations by the Internal Auditors into matters where
there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board
• Discussion with Statutory Auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern
• To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors
• Reviewing the functioning of the Whistle Blower mechanism • Reviewing the Management discussion and analysis of financial condition and results of
operations • Reviewing the Statement of significant related party transactions submitted by management. • Reviewing Management letters / letters of internal control weaknesses issued by the Statutory
Auditors • Reviewing the Internal audit reports relating to internal control weaknesses • Reviewing the appointment, removal and terms of remuneration of the Chief Internal Auditor
REPORT ON CORPORATE GOVERNANCE
63 Annual Report 2007-08
ii) Composition
The Committee comprises of 6 Non-Executive Independent Directors:– Mr. Bodhishwar Rai (Chairman)– Mr. Arabinda Ray– Mr. Surendra Singh – Mr. Ajay Relan– Mr. Abhay Havaldar – Mr. H. K. Khan
Mr. Vishal Marwaha (being Alternate Director to Mr. Ajay Relan) is an alternate member.
Invitees
– Mr. S. N. Singh (Executive Director) – Mr. Shyam Bang (Executive Director) – Dr. J. M. Khanna (Executive Director) – Mr. R. Sankaraiah (Executive Director- Finance)
The Statutory Auditors, Internal Audit firm’s representative, Head of the Assurance Audit Department, Cost Auditor, and/or other executives as desired by the Committee, attend the meetings as invitees.
Secretary
– Mr. Lalit Jain (Company Secretary)
iii) Meetings and Quorum
The Audit Committee meets at least four times in a year with a gap of not more than four months between two meetings. The quorum for the meeting is either two members or one third of the members, whichever is higher.
iv) Attendance during 2007-08
The Committee met 4 times during the year on April 27, 2007, July 16, 2007, October 16, 2007 and January 30, 2008. The attendance details are as follows:
Name of the Member Status No. of meetings attendedMr. Bodhishwar Rai Chairman 3Mr. Arabinda Ray Member 4Mr. Surendra Singh Member 3Mr. Ajay Relan Member -Mr. Abhay Havaldar Member 3Mr. H. K. Khan Member 3Mr. Vishal Marwaha * Alternate member * -
* Alternate Director to Mr. Ajay Relan
INVESTORS GRIEVANCE COMMITTEE
The Investors Grievance Committee aims at redressal of shareholder complaints and overseeing investor services.
To expedite the process of share transfers, the Board of the company has delegated the power of share transfer to the Investors Grievance Committee which attends to share transfer formalities once in a fortnight.
i) Terms of reference
The Committee approves the matters relating to:
• Transfer or transmission of shares • Issue of duplicate share certificates • Non-receipt of balance sheet • Non-receipt of dividend • Review or redressal of investors' grievances • Other areas of investor service
Jubilant Organosys Limited 64
ii) Composition The Committee comprises of the following Directors:
• Mr. H. K. Khan (Chairman) • Mr. Bodhishwar Rai • Mr. S. N. Singh • Mr. Shyam Bang
Secretary and Compliance Officer:
• Mr. Lalit Jain
iii) Meetings and Quorum
The Investor Grievance Committee meets once in a fortnight. The quorum for the meeting is either two members or one third of the members of the Committee, whichever is higher.
iv) Attendance during 2007-08
The Committee met every fortnight, 24 times during the year. The attendance details are as follows:
Name of the Member Status No. of meetings attendedMr. H. K. Khan Chairman 21Mr. Bodhishwar Rai Member 14Mr. S. N. Singh Member 21 Mr. Shyam Bang Member 24
v) Investors’ Complaints received and resolved during the year
During the year, the Company received 205 complaints, which were resolved. No complaint was pending as on March 31, 2008.
vi) Transfers and Transmissions approved
During the year under review, the Company received 298 cases (296,095 shares) of share transfer/transmission/ transposition out of which 123 cases (189,795 shares) were transferred and 175 cases (106,300 shares) were rejected for technical reasons.
The Company had 20,896 investors as on March 31, 2008.
REMUNERATION COMMITTEE
The Remuneration Committee is responsible for framing policy on executive remuneration and for fixing the remuneration packages of Wholetime/Managing Directors. It also ensures that the levels of remuneration are sufficient to attract, retain and motivate directors to run the company successfully.
i) Terms of reference
The Committee is empowered to decide and approve the remuneration of the Executive Board Members of the Company.
ii) Composition
The Committee comprises of 3 Non-Executive Independent Directors namely:
• Mr. Arabinda Ray (Chairman)
• Mr. Bodhishwar Rai
• Mr. Surendra Singh
Invitee
• Mr. R. Sankaraiah (Executive Director - Finance)
Secretary
• Mr. Lalit Jain (Company Secretary)
iii) Meetings and Quorum The Committee meets as frequently as circumstances necessitate. The quorum for the meeting is
either two members or one third of the members of the Committee, whichever is higher.
REPORT ON CORPORATE GOVERNANCE
65 Annual Report 2007-08
iv) Attendance during 2007-08
The Committee met twice during the year on July 16, 2007 and October 16, 2007. The attendance details are as follows:
Name of the Member Status No. of meetings attendedMr. Arabinda Ray Chairman 2Mr. Bodhishwar Rai Member 2Mr. Surendra Singh Member 1
FINANCE COMMITTEE
The Board of Directors of the Company has delegated to the Finance Committee the powers to borrow moneys.
i) Terms of reference
• To avail financial assistance from Banks, Financial Institutions, NBFCs, Mutual Funds, Insurance Companies or any other Lenders by way of term loans, working capital loans or any other funding method
• To approve creation of the mortgages/charges in favour of lenders
ii) Composition
The Committee comprises of the following:
- Mr. Shyam S. Bhartia (Chairman) - Mr. Hari S. Bhartia - Mr. Bodhishwar Rai - Mr. S. N. Singh - Mr. Shyam Bang
Invitee
- Mr. R. Sankaraiah (Executive Director - Finance)
Secretary
- Mr. Lalit Jain (Company Secretary)
iii) Meetings and Quorum
The Committee meets as frequently as circumstances necessitate. The quorum for the meeting is either two members or one third of the members, whichever is higher.
iv) Attendance during 2007-08
During the year, 3 meetings of the Committee were held on July 9, 2007, September 11, 2007 and January 17, 2008. The attendance details are as follows:
Name of the Member Status No. of meetings attendedMr. Shyam S. Bhartia Chairman 2Mr. Hari S. Bhartia Member 2Mr. Bodhishwar Rai Member 1Mr. S. N. Singh Member 1Mr. Shyam Bang Member 3
COMPENSATION COMMITTEE
The Compensation Committee has been constituted for administration and superintendence of the Jubilant Employees Stock Option Plan, 2005 (ESOP).
The Committee frames suitable policies and systems for grant of stock options so that there is full compliance with the relevant provisions of the law. It also monitors the quantum of options to be granted under ESOP.
i) Terms of reference
• To determine the quantum of options to be granted under ESOP per employee and in the aggregate
Jubilant Organosys Limited 66
• To formulate the conditions under which options vested in employees may lapse in case of termination of employment for misconduct
• To specify the exercise period within which the employees should exercise the options and that options would lapse on failure to exercise within the exercise period
• To specify the time period within which the employee shall exercise the vested options in the event of termination or resignation
• To establish the right of an employee to exercise all the vested options at one time or at various points of time within the exercise period
• To formulate the procedure for making a fair and reasonable adjustment to the number of options and to the exercise price in case of corporate actions such as rights issues, bonus issues, merger, sale of division and others and in case of employees who are on long leave and the procedure, if any, for cashless exercise of options.
• To frame suitable policies and systems to ensure compliance with Securities and Exchange Board of India (Insider Trading) Regulations, 1992 and Securities Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 1995
ii) Composition The Committee comprises of the following Directors: • Mr. Bodhishwar Rai (Chairman) • Mr. Hari S. Bhartia • Mr. S. N. Singh • Mr. Surendra Singh • Mr. H K Khan Invitee • Mr. R. Sankaraiah (Executive Director - Finance) Secretary • Mr. Lalit Jain (Company Secretary) iii) Meetings and Quorum The Committee meets as frequently as circumstances necessitate. The quorum for the meeting is
either two members or one third of the members, whichever is higher. iv) Attendance during 2007-08
During the year, 4 meetings of the Committee were held. The attendance details are as follows:
Name of the Member Status No. of meetings attendedMr. Bodhishwar Rai Chairman 3Mr. Hari S. Bhartia Member 3Mr. S. N. Singh Member 3Mr. Surendra Singh Member 3Mr. H. K. Khan Member 3
SPECIAL COMMITTEES
The Special Committees have been constituted to issue and allot FCCBs / GDSs / Equity shares etc. The Committees decide the type of instrument and the terms and conditions of the issue/allotment/ conversion, appointment of merchant bankers, lawyers, auditors, depositories, printers and various other agencies.
i) Terms of reference
• To decide the type of instrument and the terms and conditions of the issue/allotment/ conversion, appointment of various agencies
• To take all actions and decisions on matters relating to and/or incidental to the aforesaid issue • To decide the nature, timing, pricing and other terms and conditions of the issue • To issue and allot the GDSs / ADSs / FCCBs / Equity shares • To liaise with any regulatory authority • To approach stock exchange(s) for listing of the FCCBs/ GDSs / ADSs/ Equity shares • To do all other acts and deeds in connection with above
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67 Annual Report 2007-08
(ii) Composition
These Committees comprise of the following Directors:
• Mr. Shyam S. Bhartia (Chairman) • Mr. Hari S. Bhartia • Mr. S. N. Singh • Mr. Bodhishwar Rai
Invitee
• Mr. R. Sankaraiah (Executive Director - Finance)
Secretary
• Mr. Lalit Jain (Company Secretary)
iii) Meetings and Quorum
The Committees meet as frequently as circumstances necessitate. The quorum for the meeting is either two members or one third of the members, whichever is higher.
iv) Attendance during 2007-08
During the year, 7 meetings of these Committees were held. The attendance details are as follows:
Name of the Member Status No. of meetings attendedMr. Shyam S. Bhartia Chairman 6Mr. Hari S. Bhartia Member 6Mr. S. N. Singh Member 6Mr. Bodhishwar Rai Member 1
Apart from the above, there are several Executive Committees comprising of Managing Directors/Whole time Directors and senior executives of the Company.
SUPPLY CHAIN COMMITTEE
i) Terms of reference
• To discuss major raw materials planning, purchase price monitoring etc • To discuss issues on supplier advances, logistics and inventory • To monitor statutory compliances • To discuss the issues relating to write offs • To deal with Indirect tax matters
ii) Composition
• Mr. Shyam Bang (Executive Director) • Mr. S.N. Singh (Executive Director) • Dr. J. M. Khanna (Executive Director) • Mr. R. Sankaraiah (Executive Director - Finance) • Mr. Manoj D. Soni (Chief of Supply Chain) • Mr. Amit Arora (Head Corporate MIS)
Any other person, if required, is invited.
iii) Meetings
The Committee meets as frequently as circumstances necessitate. Normally meetings are held once a week.
Jubilant Organosys Limited 68
PURCHASE COMMITTEE
i) Terms of reference
• To approve Purchase Orders exceeding the laid down limits • To review purchase proposals, vendor evaluation, logistics, contract planning
ii) Composition
• Mr. Shyam Bang (Executive Director) • Mr. S.N. Singh (Executive Director) • Dr. J. M. Khanna (Executive Director) • Mr. R. Sankaraiah (Executive Director-Finance) • Mr. Manoj D Soni (Chief of Supply Chain) • Mr. Amit Arora (Head Corporate MIS)
Any other person, if required, is invited.
iii) Meetings
The Committee meets as frequently as circumstances necessitate. Normally the Committee meets twice a week.
BUSINESS PERFORMANCE REVIEW COMMITTEE
i) Terms of reference
To review the business performance of the Company.
ii) Composition
• Mr. Shyam S. Bhartia (Chairman and Managing Director) • Mr. Hari S. Bhartia (Co- Chairman and Managing Director) • Mr. R. Sankaraiah (Executive Director - Finance) • Dr. J. M. Khanna (Executive Director) • Mr. S.N. Singh (Executive Director) • Mr. Shyam Bang (Executive Director) • Mr. Amit Arora (Head Corporate MIS)
Any other person, if required, is invited.
iii) Meetings
The Committee meets as frequently as circumstances necessitate. Normally meetings are held once in a month.
CAPEX COMMITTEE
i) Terms of reference
To approve the capital expenditure proposals
ii) Composition
• Mr. R Sankaraiah (Executive Director - Finance) • Mr. Shyam Bang (Executive Director) • Mr. S.N. Singh (Executive Director) • Dr. J. M. Khanna (Executive Director) • Mr. Amit Arora (Head Corporate MIS)
Any other person, if required, is invited.
iii) Meetings
The Committee meets as frequently as circumstances necessitate. Normally meetings are held once in a month.
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69 Annual Report 2007-08
CREDIT CONTROL COMMITTEE
i) Terms of reference
• To approve credit limits of customers
ii) Composition
• Mr. R Sankaraiah (Executive Director - Finance) • Mr. S.N. Singh (Executive Director) • Dr. J. M. Khanna (Executive Director) • Mr. Shyam Bang (Executive Director) • Mr. Amit Arora (Head Corporate MIS)
Any other person if required, is invited.
iii) Meetings
The Committee meets as frequently as circumstances necessitate.
d) Details of remuneration paid to directors for the year 2007-08, their Directorships, business interests and relationships with the other Directors/Company.
i) Remuneration to Managing/Whole-Time Directors
Mr. Shyam S. Bhartia, Chairman & Managing Director and Mr. Hari S. Bhartia, Co-Chairman & Managing Director, were re-appointed for a period of five years each w.e.f. April 01, 2007. Mr. S. N. Singh and Mr. Shyam Bang, Executive Directors were re-appointed for a period of five years each w.e.f. November 01, 2003. Dr J.M. Khanna, was re-appointed w.e.f. August 16, 2007 as Executive Director for a period of five years.
Remuneration including perquisites, commission, sitting fees and retirement benefits paid/payable to directors for the year 2007-08 was as follows:
(Amount in Rupees)
Mr. ShyamS. Bhartia
Mr. HariS. Bhartia
Mr. S. N. Singh
Mr. Shyam Bang
Dr. J. M. Khanna
Salary 1,500,000 1,500,000 4,743,900 4,262,400 6,575,550
Commission 21,000,000 21,000,000 Nil Nil Nil
Perquisites/Allowances
22,737,477 23,083,000 3,846,159 3,461,587 5,335,236
Contribution to Superannuation Fund
225,000 225,000 711,585 639,360 986,333
Contribution toProvident Fund
180,000 180,000 569,268 511,488 789,066
TOTAL 45,642,477 45,988,000 9,870,912 8,874,835 13,686,185
The above excludes the provision for gratuity as the same is calculated on overall company basis.
Service Contracts, Notice Period, Severance Fees
The appointments of Managing Directors and Whole-time Directors are contractual.
The appointments of the Whole time Directors are terminable by the Company by giving 3 months notice or salary in lieu thereof.
Jubilant Organosys Limited 70
ii) Remuneration to Non-Executive Directors
Sitting fees for Board Meetings/ Committee Meetings and commission paid/ payable to the Non-Executive Directors for year ended March 31, 2008 were as under:
Sitting Fees (Rs.) Commission* (Rs.)Mr. Bodhishwar Rai 157,500 200,000Mr. Arabinda Ray 150,000 200,000Mr. Surendra Singh 130,000 200,000Mr. H.K. Khan 157,500 200,000Dr. Naresh Kumar Trehan 60,000 200,000Mr. Ajay Relan - -Mr. Abhay Havaldar - -Total 655,000 1,000,000
* Commission to the non-executive directors is payable in terms of approval obtained from the Central Government. The same is payable after the accounts are approved at the next Annual General Meeting.
Number of Equity Shares/ Stock Options in the Company held by Non-Executive Directors as on March 31, 2008
Name No. of Equity Shares of Re.1/- held
No. of Stock Options #
Mr. Bodhishwar Rai - 5000Mr. Arabinda Ray - 4500 *Mr. Surendra Singh - 5000Mr. H.K. Khan - 5000Dr. Naresh Kumar Trehan - 5000Mr. Ajay Relan - -Mr. Abhay Havaldar - -
# These Stock Options were granted on September 06, 2005. The holder of each Stock Option has a right to subscribe to five equity shares of Re.1/- each at an exercise price of Rs.201.33 per equity share.
* Mr. Arabinda Ray was granted 5000 Stock Options on September 06, 2005. He exercised 500 options during 2006-07.
Other than holding shares/options as above and remuneration indicated above, the non-executive directors did not have any pecuniary relationship or transactions with the Company.
iii) Criteria for making payment to Non-Executive Directors
The Company considers the time and efforts put in by the Non-Executive Directors in deliberations at Board/Committee meetings. They are compensated through sitting fees for attending the meetings and also through commission as approved by members and the Central Government.
iv) Holding of Directorships in other Companies
Mr. Shyam S. Bhartia
• Jubilant Chemsys Limited• Clinsys Clinical Research Limited• Jubilant Infrastucture Limited• Domino’s Pizza India Limited• Geo-Enpro Petroleum Limited• Vam Holdings Limited• Enpro Secan India Limited• Zuari Industries Limited• Lionel India Limited
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71 Annual Report 2007-08
• Chambal Fertilizers & Chemicals Limited• Birla Cotton Spinning & Weaving Mills Limited• PSI Supply N.V.• Pharmaceutical Services Inc. N.V.• Jubilant Pharma N.V.• Jubilant Pharma Pte. Limited• Cadista Holdings Inc.• Cadista Pharmaceuticals Inc.• Clinsys Clinical Research, Inc.• Clinsys Holdings, Inc. USA• Jubilant Discovery Services Inc.• Jubilant Organosys (USA), Inc.• Jubilant Energy (Holding) BV, Netherlands• Jubilant Energy Limited, Canada• Enpro Oil Private Limited• Jubilant Enpro Private Limited• Jubilant Capital Private Limited• American Orient Capital Partners (India) Private Limited• Jaytee Private Limited• Nikita Resources Private Limited• B & M Hotbreads Private Limited• B T Telecom (India) Private Limited• Tower Promoters Private Limited• Jubilant Bhartia Foundation• Jubilant First Trust Healthcare Limited• Hollister-Stier Laboratories LLC• HSL Holdings Inc.• Jubilant Energy NV, Netherlands• Putney Inc.• CFCL Technologies Limited• CFCL Venture Limited• Jubilant Innovation (USA) Inc.• Jubilant Innovation (India) Limited• ACME Tele Power Limited• Jubilant Acquisition Inc.• Indo Moroco Phosphore SA, Morocco
Mr. Hari S. Bhartia
• Clinsys Clinical Research Limited• Jubilant Biosys Limited• Jubilant Chemsys Limited• Jubilant Infrastructure Limited• Television Eighteen India Limited• Domino’s Pizza India Limited• Vam Holdings Limited• Enpro-Secan India Limited• Geo-Enpro Petroleum Limited• Global Broadcast News Limited• PSI Supply N.V.• Pharmaceutical Services Inc. N.V.• Jubilant Pharma N.V.• Jubilant Pharma Pte. Limited
Jubilant Organosys Limited 72
• Cadista Holdings Inc.• Cadista Pharmaceuticals Inc.• Clinsys Holdings, Inc.• Clinsys Clinical Research, Inc.• Jubilant Discovery Services Inc.• Jubilant Energy (Holding) B.V. Netherlands• Jubilant Energy Limited, Canada• Enpro Oil Private Limited• Jaytee Private Limited• Nikita Resources Private Limited• Jubilant Enpro Private Limited• B & M Hotbreads Private Limited• Digital Talkies Private Limited• American Orient Capital Partners (India) Private Limited• Jubilant Securities Private Limited• B T Telecom (India) Private Limited• Jubilant Bhartia Foundation• Jubilant First Trust Healthcare Limited• Asia Healthcare Development Private Limited• Hollister Stier Laboratories LLC• HSL Holdings Inc.• Jubilant Energy NV, Netherlands• Jubilant Innovation (USA) Inc.• Jubilant Innovation (India) Limited• Jubilant Organosys International Pte Limited• Jubilant Biosys (Singapore) Pte. Limited• Jubilant Drug Development Pte Limited• Jubilant Biosys (BVI) Limited• Jubilant Organosys (BVI) Limited• Jubilant Acquisition Inc.
Mr. Arabinda Ray
• SDV Air Link India Limited• UCS Consultancy Private Limited
Mr. Bodhishwar Rai
• Suven Life Sciences Limited• Clinsys Clinical Research Limited• Sutlej Textile & Industries Limited• Madhya Bharat Papers Limited• Oriental Carbon & Chemical Limited• Texmaco Limited• Hindustan Wires Limited• Magma Shrachi Finance Limited• West Coast Paper Mills Limited• NRC Limited• HB Estates Developers Limited• Domino’s Pizza India Limited• Dhir & Dhir Asset Reconstruction & Securitization Company Limited• Global Trust Capital Finance Private Limited• Foresight Trust Capital Finance Private Limited
REPORT ON CORPORATE GOVERNANCE
73 Annual Report 2007-08
Mr. S. N. Singh
• Jubilant Biosys Limited • Jubilant Organosys (USA), Inc.
Mr. Shyam Bang
• U. C. Gas Engineering Limited• Jubilant Infrastructure Limited• Asia Infrastructure Development Co. Private Limited
Dr. J. M. Khanna
• Jubilant Chemsys Limited• Jubilant Biosys Limited• PSI Supply NV• Pharmaceutical Services, Inc. NV• Cadista Holdings Inc.• Cadista Pharmaceuticals Inc.• Cadista Pharmaceuticals (UK) Limited
Mr. Surendra Singh
• CMC Limited• NIIT Limited• NIIT Technologies Limited• NIIT Smart Serve Limited• AXIS Bank Limited• BAG Films Limited
Dr. Naresh Trehan
• Dabur Pharma Limited• Kingfisher Airlines Limited• Shrumps Real Estate Limited• Punj Lloyd Limited• Wah India Private Limited• Trasa Investments Private Limited• Raksha TPA Private Limited• Naresh Trehan Holdings Private Limited• Globerian India Private Limited• Global Health Private Limited• Afsan Health Resorts Private Limited• Dr. Naresh Trehan & Associates Health Services Private Limited
Mr. H. K. Khan
• Lafance Overseas Private Limited• Sherwood Infrastrucutres (India) Private Limited• Asahi Songwon Colors Limited• Today’s Petrochemicals Limited
• Calcom Visions Limited
Mr. Ajay Relan
• Citicorp Finance (India) Limited• Techno Electric & Engineering Company Limited• Himadri Chemical and Industries Limited• Micro Abrasives (India) Private Limited
Jubilant Organosys Limited 74
• International Tractors Limited• International Cars & Motors Limited• Suzlon Energy Limited• Abhishek Industries Limited• Hindustan Times Media Limited• Monnet Ispat and Energy Limited• Jindal Drilling and Industries Limited
Mr. Abhay Havaldar
• Patni Computer Systems Limited• IBS Software Services Private Limited
Mr. Vishal Marwaha (Alternate Director to Mr. Ajay Relan)
• Hindustan Sanitaryware & Industries Limited• Henderson Equity Partners India Private Limited• Sharda Worldwide Exports Private Limited
e) Remuneration Policy
Remuneration policy aims at encouraging and rewarding good performance/contribution to company objectives.
f) General Body Meetings
i) The last three Annual General Meetings of the Company were held as under:
Financial Year Date Time Location2006-07 September 25, 2007 11.30 a.m. Registered Office: Bhartiagram, Gajraula
District Jyotiba Phoolay Nagar, U.P.2005-06 September 19, 2006 11.30 a.m. Same as above2004-05 August 29, 2005 11.30 a.m. Same as above
ii) Special resolutions passed during last 3 AGMs
AGM Date of AGM Subject matter of Special Resolutions Passed29th AGM September 25, 2007 NIL28th AGM September 19, 2006 NIL27th AGM August 29, 2005 1. Payment of commission to Non-Executive Directors not
exceeding 1% p.a. of the net profits of the Company, subject to a maximum of Rs.2 Lacs p.a. to each such Non-Executive Director
2. Permitting one or more Foreign Institutional Investors to invest and hold in the aggregate, upto 45% of the paid-up capital of the Company
3. Preferential issue of 990,000 equity shares of Rs.5 each, at a price of Rs.1,100 per equity share to GA European Investments Limited
4. Issue of upto 717,500 Stock Options to employees5. Issue of Stock Options to employees of subsidiary
companies
iii) Special resolutions passed through Postal Ballot last year
No resolution was passed through postal ballot during the year.
REPORT ON CORPORATE GOVERNANCE
75 Annual Report 2007-08
iv) Whether any Special resolutions are proposed to be passed through Postal Ballot
We propose to pass two Special Resolutions for modification of Jubilant Employees Stock Option Plan 2005.
v) Procedure for Postal Ballot
• The notices containing the proposed resolutions and explanatory statements thereto are sent to the registered addresses of all shareholders of the Company alongwith a Postal Ballot Form and a postage pre-paid envelope containing the address of the Scrutinizer appointed by the Board for carrying out postal ballot process.
• The Postal Ballot Forms received within 30 days of despatch are considered by the Scrutinizer.
• The Scrutinizer submits his report to the Chairman and Managing Director of the Company, who on the basis of the report, announces the results.
g) Disclosures
(i) There are no materially significant transactions with the related parties viz. promoters, directors or the management, their subsidiaries or relatives, etc. that may have a potential conflict with the interests of the Company at large. Related party transactions are given at Note No. 21A of Schedule ‘O’ to the accounts.
(ii) No non-compliances have taken place nor have any penalties or strictures been imposed on the Company by the Stock Exchanges or SEBI or any statutory authority on any matter related to capital markets during the last three years.
The Company has established a Whistle Blower Policy to make the workplace conducive to open communication regarding business practices and to protect the employees from unlawful victimization, retaliation or discrimination for their having disclosed or reported fraud, unethical behaviour, violation of Code of Conduct, questionable accounting practices, grave misconduct etc.
The Policy has been posted on the Company’s intranet viz: “Chemway”.
During the year, no personnel were denied access to the Audit Committee.
h) Means of Communication
(i) The quarterly results of the Company are sent to the Stock Exchanges immediately after they are approved by the Board. The results are published in leading Business Newspapers of the country like ‘The Economic Times’ and ‘The Hindu Business Line’, general interest national newspapers like ‘The Times of India’, ‘Hindustan Times’ and ‘The Pioneer’ and regional newspapers like ‘Amar Ujala’ and ‘Dainik Jagran’ in accordance with the guidelines of Stock Exchanges.
(ii) The quarterly financial results are posted on the website of the Company at www.jubl.com. The website also displays official news release. The results are also posted on the official website of SEBI www.sebiedifar.com.
(iii) As a proactive initiative, the Company is voluntarily e-mailing the quarterly results of the Company along with press release etc., to those investors whose e-mail IDs are available with us.
(iv) Your Company has well laid out plans for communication to institutional shareholders and brokers. A detailed investors communication is sent through e-mail to all the leading Indian and international analysts on both buy and sell side and fund managers. During the financial year, the Company organised Earnings Calls after announcement of every quarterly result, which were well attended by the analysts and fund managers. The Company also organised one to one meetings with investors in Mumbai post the announcement of quarterly results. Investor presentations were made during road shows in India as well as overseas.
Jubilant Organosys Limited 76
i) General Shareholders’ Information
i) Date, time and venue for 30th Annual General Meeting:
As per notice of 30th Annual General Meeting.
ii) Tentative Financial Calendar- 2008-09*
Item Tentative Dates *First Quarter Results July 15, 2008Half Yearly Results October 14, 2008Third Quarter Results January 13, 2009Audited Annual Results for the year April 21, 2009
* As approved by the Board. However these dates are subject to change.
iii) Book Closure & Dividend Payment Dates
As per Notice of 30th Annual General Meeting. The dividend, if declared, will be paid within 30 days from the date of the Annual General Meeting.
iv) Listing on Stock Exchange and Stock codes
The names of the Stock Exchanges at which the securities of the Company are listed and the respective stock codes are as under:
S. No. Name of the Stock Exchange Security Listed Stock Code
1. Bombay Stock Exchange Limited Equity Shares 530019
2. National Stock Exchange of India Limited Equity Shares JUBILANT
3. Singapore Stock Exchange FCCB XS 0191865632XS 0219608022XS 0252816672
4. Luxembourg Stock Exchange GDS (on conversion of FCCB)
019274578
v) Market price data
High/low of market price of the Company’s equity shares traded on the Stock Exchanges during 2007-08 was as follows:
(Equity Shares of Re.1/- each)
Month BSE NSE
High (Rs) Low (Rs) High (Rs) Low (Rs)
April, 2007 268.00 245.00 269.00 251.10
May, 2007 287.90 251.50 287.90 252.00
June, 2007 332.00 267.00 333.00 266.50
July, 2007 330.00 280.60 330.00 294.00
August, 2007 316.00 279.00 317.90 284.30
September, 2007 329.90 275.00 325.00 286.00
October, 2007 364.00 255.00 371.00 294.00
November, 2007 343.00 298.00 342.00 302.10
December, 2007 378.00 290.00 380.00 292.00
January, 2008 369.90 244.00 370.00 270.00
February, 2008 377.95 320.00 377.90 317.00
March, 2008 375.00 303.00 360.00 304.95
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77 Annual Report 2007-08
vi) Performance of the Company’s equity shares in comparison to BSE Sensex
The above chart is based on the monthly closing prices of the shares of the Company and monthly closing BSE Sensex.
vii) Growth In Equity Capital
Year Particulars Increase in number of
Shares
CumulativeNumber of
Shares
Face Value (Rs.)/each
1978 Issue of Shares to initial subscribers 1,200 1,200 10
1981 Issued to Indian promoters 608,370 609,570 10
1981 Issued to Foreign collaborators 655,430 1,265,000 10
1981 Issued to Public through public issue 2,200,000 3,465,000 10
1982-1983 Rights Issue 1: 5 693,000 4,158,000 10
1984-1985 Forfeited on account of non-payment of allotment money
-3,200 4,154,800 10
1986-1987 Conversion of loan into equity shares 1,006,180 5,160,980 10
1995-1996 Issued to shareholders of Ramganga Fertilizers Limited upon merger with the Company
256,522 5,417,502 10
1999-2000 Issued to Shareholders of Anichem India Limited & Enpro Speciality Chemicals Limited upon merger with the Company.
839,897 6,257,399 10
2001-2002 Conversion of 15,00,000 Warrants issued to promoters on preferential basis
1,500,000 7,757,399 10
2002-2003 Sub-division of shares from Rs.10/- to Rs.5/-
7,757,399 15,514,798 5
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
24,000
Apr
-07
May
-07
Jun-
07
Jul-0
7
Aug
-07
Sep
-07
Oct
-07
Nov
-07
Dec
-07
Jan-
08
Feb-
08
Mar
-08
BS
E S
ense
x
0
50
100
150
200
250
300
350
400
Sha
re P
rice
BSE Sensex Jubilant
Jubilant Organosys Limited 78
Year Particulars Increase in number of
Shares
CumulativeNumber of
Shares
Face Value (Rs.)/each
2002-2003 Cancellation of shares as per Scheme of Amalgamation of the Company with Vam Leasing Limited & Vam Investments Limited
-851,234 14,663,564 5
2003-2004 Issue of Bonus shares in the ratio of 3: 5
8,798,139 23,461,703 5
2004-2005 Issued to foreign investors on preferential basis
2,424,273 25,885,976 5
2004-2005 Part conversion of FCCBs 27,379 25,913,355 5
2005-2006 Part conversion of FCCBs 1,448,348 27,361,703 5
2005-2006 Issued to foreign investors on preferential basis
990,000 28,351,703 5
2005-2006 Sub-division of shares from Rs.5/- to Re.1/-
113,406,812 141,758,515 1
2005-2006 Part conversion of FCCBs 684,480 142,442,995 1
2006-2007 Part conversion of FCCBs 999,339 143,442,334 1
2006-2007 Issue of shares upon exercise of Options under Jubilant Employees Stock Option Plan 2005
3,000 143,445,334 1
2007-2008 Part conversion of FCCBs 2,675,375 146,120,709 1
2007-2008 Issue of shares upon exercise of Options under Jubilant Employees Stock Option Plan 2005
65,205 146,185,914 1
viii) Appreciation in Share Price
Over the last 7 years, the Company transformed from a commodity chemicals manufacturer to an integrated pharmaceutical industry player.
A person who invested Rs.1 lac in the Company on April 01, 2001, has holdings worth over Rs. 82 lacs now as shown below:
Date ActionNo. of
Resultant Shares
Face Value (Rs.)
April 02, 2001 Purchased shares @ Rs. 62.90 per share (BSE Opening Price)
1,589.83 10
November 21, 2002 Sub-division of shares from Rs.10/- to Rs.5/- 3,179.65 5
March 18, 2004 Issue of Bonus Shares 3: 5 5,087.44 5
March 24, 2006 Sub-division of shares from Rs.5/- to Re.1/- 25,437.20 1
Total value of 25,437.20 equity shares on March 31, 2008 @ Rs. 324.80 per share is Rs. 8,262,002.56
Thus the investor has multiplied his wealth over 82 times in 7 years, implying a Compounded Annual Growth Rate of 88% approximately. In addition, he has got handsome dividends.
REPORT ON CORPORATE GOVERNANCE
79 Annual Report 2007-08
ix) Compliance Officer
Mr. Lalit Jain, Company Secretary, is the Compliance Officer appointed by Board. He can be contacted for any investor related matter relating to the Company. His contact no. is +91 120 2516601, Fax no. +91 120 2516629 and e-mail id is investors@jubl.com.
x) Registrar and Transfer Agent
The Company has appointed M/s Alankit Assignments Limited, Alankit House, 2E/21, Jhandewalan Extension, New Delhi - 110055 as Registrar and Share Transfer Agent for physical as well as electronic connectivity with the depositories for dematerialised shares.
xi) Share Transfer System
Investors Grievance Committee is authorised to approve transfers of securities. Share transfers which are received in physical form, are processed and the share certificates are normally returned within a period of 15 days from the date of receipt subject to the documents being valid and complete in all respects. The dematerialised shares are transferred directly to the beneficiaries by the depositories.
xii) Shareholder Satisfaction Survey
During the year under review, the Company conducted a survey to assess the shareholders’ satisfaction level on the investor services being rendered by the Company, comprising:
1. Timely receipt of Annual Report 2. Quality & content of Annual report 3. Dissemination of information about the Company 4. Response time & satisfaction level experienced 5. Interaction with Company’s officials 6. Interaction with Registrar & Transfer Agents 7. Investor service section of Company’s website 8. Overall rating of our investor services
The shareholders were asked to give one of the four possible ratings to each of the above:-
• Excellent • Very Good • Good • Poor
The responses were converted into numbers after assigning weightages for each of the above 4 ratings.
The Composite Satisfaction Index arrived as above is 72.59%.
xiii) Distribution of shareholding as on March 31, 2008
a) Value wise
Shareholding of nominal value in Rs.
Shareholders ShareholdingNumber % of Total Number % of Total
Upto 5000 20,523 98.22 11,416,159 7.815001 to 10000 203 0.97 1,459,353 1.0010001 to 20000 50 0.24 675,741 0.4620001 to 30000 23 0.11 579,578 0.4030001 to 40000 11 0.05 398,554 0.2740001 to 50000 5 0.02 227,320 0.1650001 to 100000 21 0.10 1,583,181 1.08100001 and above 60 0.29 129,846,028 88.82Total 20,896 100.00 146,185,914 100.00
Jubilant Organosys Limited 80
(b) Category wise
S. No. Category No. of shares Shareholding as a percentage of total
number of sharesA Promoters & Promoter Group 74,378,024 50.88 B Public Shareholding
1. Financial Institutions / Banks 2,332,464 1.602. UTI & Mutual Funds 3,480,800 2.383. Domestic Companies 11,551,523 7.904. Non Resident Indians 652,319 0.455. FII / Foreign Investors 40,204,582 27.506. Indian Public 13,586,202 9.29
Grand Total 146,185,914 100.00
xiv) Disclosures
In accordance with the SEBI (Prohibition of Insider Trading) Regulations, 1992 and subsequent amendments, the company has implemented a Code of Conduct for Prevention of Insider Trading in Equity Shares of the company for observance by its Directors and other identified persons.
The Company Secretary is the Compliance Officer in this regard.
xv) Unclaimed Dividends
Dividends pertaining to the financial years upto and including 1993-94, remaining unclaimed, have been transferred to the General Revenue Account of the Central Government. Shareholders having valid claims of unpaid dividend for any of these financial years may approach the Registrar of Companies, U.P. & Uttaranchal, Kanpur.
Dividends pertaining to the financial years 1994-95 to 1999-00, remaining unpaid, have been transferred to the Investor Education and Protection Fund (the Fund) established under Section 205C of the Companies Act, 1956 (the Act). As per said Section, no claims are allowed from the Fund.
In respect of unpaid/unclaimed dividends for the year 2000-01 onwards, the shareholders are requested to write to the Company. Dividends remaining unclaimed for seven years from the date of transfer of unpaid dividend account, will be transferred as per Section 205A(5) of the Act to the Fund.
Shareholders who have not encashed their dividend warrants relating to the dividends specified in the table given below are requested to immediately approach the Registrar and Transfer Agent for issue of duplicate warrants.
Financial Year Particulars Date of declaration Due for transfer
2000-01 Final Dividend September 13, 2001 October 11, 2008
2001-02 Final Dividend September 23, 2002 October 26, 2009
2002-03 Final Dividend September 26, 2003 October 29, 2010
2003-04 Interim Dividend January 09, 2004 February 13, 2011
2003-04 Final Dividend September 15, 2004 October 15, 2011
2004-05 Final Dividend August 29, 2005 October 04, 2012
2005-06 Final Dividend September 19, 2006 October 22, 2013
2006-07 Final Dividend September 25, 2007 October 30, 2014
REPORT ON CORPORATE GOVERNANCE
81 Annual Report 2007-08
xvi) Information pursuant to Clause 49 IV (G) (i) of the Listing Agreement
Information pertaining to particulars of Directors to be appointed and re-appointed at the forthcoming Annual General Meeting is being included in the Notice convening the Annual General Meeting.
xvii) Compliance Certificate of the Statutory Auditors
The Company has obtained a Certificate from the Statutory Auditors regarding compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement. The Certificate is attached as Annexure E.
xviii) Distribution of Shareholding as on March 31, 2008
xix) a) Dematerialisation of Shares
The shares of the Company fall under the category of compulsory delivery in dematerialised mode by all categories of investors. The Company has signed agreements with National Securities Depository Limited (NSDL) and Central Depositories Services (India) Limited (CDSL).As on March 31, 2008, 133,894,403 equity shares of the Company (91.59 % of the paid-up capital) were in dematerialised form.
b) Liquidity
The Equity Shares of the company are frequently traded on the National Stock Exchange as well as on the Bombay Stock Exchange Limited (Group B).
(xx) Outstanding GDRs/ADRs/Warrants or any Convertible Instruments, conversion date and likely impact on equity
a) Your Company has issued Foreign Currency Convertible Bonds (FCCBs) as under:
Particulars Year of Issue
Size of Issue (in
millionUS $)
InterestRate
(% per annum)
Conversion Details Outstanding FCCBs as on
March 31, 2008(in Million US $)
No. of shares of Re.1 each
on conversion of outstanding
FCCBs
Conversion Period
ConversionPrice per
Equity Share(Rs.)
FCCB 2009 2004-05 35 1.5 June 14, 2004 and April 15, 2009
163.6460 0.300 82,140
FCCB 2010 2005-06 75 Nil July 03, 2005 and May 14, 2010
273.0648 60.907 9,669,206
FCCB 2011 2006-07 200 Nil June 30, 2006 and May 10, 2011
413.4498 200.000 21,792,246
Whilst the FCCBs are listed on Singapore Stock Exchange, the Global Depository Shares (GDSs) arising out of conversion of FCCBs are listed on Euro MTF market of the Luxembourg Stock Exchange.
IndianPublic/Others
9.29%
FIIs/Banks/MutualFunds3.98%
Bodies Corporate7.90%
FIIs/NRIs/ForeignBodies27.95%
Promoters/GroupCompanies
50.88%
Jubilant Organosys Limited 82
b) Further, the impact of future conversions of FCCB 2009, FCCB 2010 and FCCB 2011 into equity shares and exercise of Employees Stock Options by employees on the share capital assuming full conversion/ exercise would be as follows:-
Particulars No. of Shares of Re.1/- eachPaid-up Share Capital as on March 31, 2008 146,185,914 Add : Conversion of balance FCCB 2009 82,140Add : Conversion of FCCB 2010 9,669,206Add: Conversion of FCCB 2011 21,792,246
Add : Maximum no. of shares to be allotted on exercise of all ESOPs
3,519,295
Eventual Paid-up Capital 181,248,801
c) Employees Stock Options
During the year, 49,936 Stock Options were granted under the Jubilant Employees Stock Option Plan 2005. Each option is convertible into five equity shares of Re.1/- each at the exercise price fixed at the time of grant being market value as per SEBI Guidelines. As on March 31, 2008, 539,160 Stock Options were outstanding.
d) Paid-up Capital
The Paid-up Capital as at March 31, 2008 stands at 146,185,914 equity shares of Re.1/- each amounting to Rs.146.19 million.
The impact of conversion of FCCB 2009, FCCB 2010 and FCCB 2011 into equity shares and exercise of Employees Stock Options by employees on the share capital assuming full conversion/exercise has been explained in (b) above.
xxi) Location of the Plantsa) Bhartiagram, Gajraula,
District Jyotiba Phoolay Nagar,Uttar Pradesh
b) Block 133, Village Samalaya, Taluka Savli, District Vadodara, Gujarat
c ) Village Nimbut, Rly. Stn. Nira,District Pune, Maharashtra
d) 56 Industrial Area,Nanjangud, District Mysore,Karnataka
e) Sikanderpur BhainswalBhagwanpur, RoorkeeDistrict Haridwar, Uttarakhand
(f) Village SinghpurThasil KapasanDistrict ChittorgarhRajasthan
xxii) R & D Centres
Central R & D C-26, Sector 59, Noida, Uttar PradeshD-12, Sector 59, Noida, Uttar Pradesh C- 46, Sector 62, Noida, Uttar Pradesh
REPORT ON CORPORATE GOVERNANCE
83 Annual Report 2007-08
Gajraula R & D Bhartiagram, Gajraula, District Jyotiba Phoolay Nagar, U.P.
Nanjangud R & D 56, Industrial Area, Nanjangud,District Mysore, Karnataka.
Savli Block 133, Village Samalaya, Taluka Savli, District Vadodara,Gujarat
xxiii) Address for Correspondence
Jubilant Organosys Limited Plot No.1A, Sector-16A Noida, U.P. 201 301 Tel: +91 120 2516601/ 2516611 Fax: +91 120 2516629 e-mail : investors@jubl.com Website: www.jubl.com
Compliance with Clause 49 of Listing Agreement
a) Mandatory Requirements
The Company has complied with all mandatory requirements of Clause 49 as detailed below:
Particulars Clause of Listing Agreement
Compliance Status
I. Board of Directors
(A) Composition of Board 49(IA) Complied(B) Non- Executive Director’s compensation and
disclosure49(IB) Complied
(C) Other provisions as to Board and committees 49(IC) Complied(D) Code of Conduct 49(ID) Complied
II. Audit Committee
(A) Qualified and Independent Audit Committee 49(IIA) Complied(B) Meeting of Audit Committee 49(IIB) Complied(C) Powers of Audit Committee 49(IIC) Complied(D) Role of Audit Committee 49(IID) Complied(E) Review of information by Audit Committee 49(IIE) Complied
III. Subsidiary Companies 49(III) CompliedIV. Disclosures
(A) Basis of Related Party Transaction 49(IVA) Complied(B) Disclosure of accounting treatment 49(IVB) Complied(C) Board Disclosures- Risk Management 49(IVC) Complied(D) Proceeds from public issues, right issues,
preferential issues etc.49(IVD) Complied
(E) Remuneration of Directors 49(IVE) Complied(F) Management 49(IVF) Complied(G) Shareholders 49(IVG) Complied
V. CEO/CFO certification 49(V) CompliedVI. Report on Corporate Governance 49(VI) CompliedVII. Compliance 49(VII) Complied
Jubilant Organosys Limited 84
(b) Extent to which Non-Mandatory Requirements have been adopted
1. The Board
- Non Executive Chairman’s Office Not applicable as Chairman is executive.
- Tenure of independent directors not to exceed 9 years Not Adopted
2. Remuneration Committee
The Company has set up a Remuneration Committee. The composition, terms of reference and other details of the same are given in preceding pages.
3. Shareholders’ Rights
Not complied.
4. Audit Qualifications
The financial statements of the Company contain no audit qualifications.
5. Training of Board Members
The Board of Directors is periodically updated on the business model, company profile, entry into new products and markets.
6. Mechanism for Evaluating Non-Executive Board Members
Not Adopted.
7. Whistle Blower Policy
The Company has a Whistle Blower Policy. The Audit Committee periodically reviews its functioning.
Compliance with Code of Conduct
A declaration by the Chairman and Managing Director that all directors and senior management personnel have affirmed compliance with the Code of Conduct of the Company for the year ended March 31, 2008 is attached as Annexure F.
CEO/CFO Certification
In compliance with Clause 49(V) of the Listing Agreement, a declaration by the CEO, i.e. the Chairman and Managing Director and the CFO i.e. the Executive Director - Finance, has been attached as Annexure Gwhich, inter-alia, certifies to the Board the accuracy of financial statements and the adequacy of internal controls for the financial reporting purpose.
REPORT ON CORPORATE GOVERNANCE
85 Annual Report 2007-08
Annexure E
AUDITORS’ CERTIFICATE ON COMPLIANCE OF CONDITIONS OF CORPORATE GOVERNANCE
To the Members of Jubilant Organosys Limited
We have examined the compliance of conditions of corporate governance by Jubilant Organosys Limited (“the Company”) for the year ended on March 31, 2008, as stipulated in clause 49 of the Listing Agreement of the Company with the stock exchanges.
The compliance of conditions of corporate governance is the responsibility of the Company’s management. Our examination was limited to procedures and implementations thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.
In our opinion and to the best of our information and according to the explanations sought and replies given to us by the Company, its Directors and Officers. We certify that the Company has complied with, in all material respects, the mandatory conditions of Corporate Governance as stipulated in Clause 49 of the above mentioned Listing Agreements.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.
For K.N. Gutgutia & Co.Chartered Accountants
Place : Noida B.R. GoyalDate : April 22, 2008 Partner
Annexure F
CERTIFICATE OF COMPLIANCE WITH THE CODE OF CONDUCT
This is to confirm that all the Board members and senior management personnel have affirmed compliance with the Code of Conduct of the Company for the year ended March 31, 2008.
For Jubilant Organosys Limited
Place : Noida Shyam S. BhartiaDate : April 22, 2008 Chairman & Managing Director
Jubilant Organosys Limited 86
Annexure G
CERTIFICATE OF CEO/CFO
This is to certify that :
(a) We have reviewed financial statements and the cash flow statement for the year 2007-08 and that to the best of our knowledge and belief:
i. these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;
ii. these statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.
(b) There are, to the best of our knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violative of the company’s code of conduct.
(c) We accept responsibility for establishing and maintaining internal controls and that we have evaluated the effectiveness of the internal control systems of the company and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware and the steps we have taken or propose to take to rectify these deficiencies.
(d) We have indicated to the auditors and the Audit Committee:
i. significant changes in internal control during the year;
ii. significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and
iii. instances of significant fraud of which we have become aware and the involvement therein, if any, of the management or an employee having a significant role in the company’s internal control system.
For Jubilant Organosys Limited
Chairman & Managing Director Executive Director - Finance
Place: NoidaDate : April 22, 2008
REPORT ON CORPORATE GOVERNANCE
87 Annual Report 2007-08
To the members of Jubilant Organosys Limited
1. We have audited the attached Balance Sheet of Jubilant Organosys Limited as at March 31, 2008 the related Profit and Loss Account for the year ended on that date annexed thereto, and the cash flow statement of the company for the period ended on that date, which we have signed under reference to this report. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statement. An Audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government in terms of Section 227 (4A) of the Companies Act, 1956, and on the basis of such checks as considered appropriate and according to the information and explanation given to us during the course of our audit, we enclose in the Annexure hereto a statement on the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments mentioned in the Annexure referred to in above paragraph we report that:
a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
b) In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of the books of the Company.
c) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by the report are in agreement with the Books of Account of the Company.
d) In our opinion, the Profit & Loss Account, Balance Sheet and Cash Flow Statement comply with the mandatory Accounting Standards referred to in Sub-Section 3 (c) of Section 211 of the Companies Act, 1956.
e) According to the information and explanation given to us and on the basis of written representations received from the Directors as on March 31, 2008 of the Company and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on March 31, 2008, from being appointed as a Director in terms of clause (g) of Sub Section (1) of Section 274 of the Companies Act, 1956.
f) The Company has received proper returns from branches not visited by us. g) In our opinion and to the best of our information and according to the explanations given to us, the
said Accounts, and read together with the notes and Significant Accounting Policies thereon give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) In the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2008. (ii) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on
that date; and (iii) In the case of the Cash Flow Statement, of the cash flows of the Company for the year ended
on that date.
For K.N. Gutgutia & Company Chartered Accountants
B R Goyal Place : Noida Partner Date : 22nd April, 2008 Membership No. 12172
AUDITORS’ REPORT
Jubilant Organosys Limited 88
Re: Jubilant Organosys Limited
Referred to in paragraph 3 of our report of even date.i) (a) The Company has maintained proper records showing full particulars including quantitative details and
situation of fixed assets. (b) In our opinion, physical verification of fixed assets has been carried out in terms of the phased
programme of verification of its fixed assets adopted by the Company and no material discrepancies were noticed on such verification. In our opinion the frequency of verification is reasonable, having regard to the size of the Company and nature of its business.
(c) During the year the Company has not disposed off any substantial/ major part of fixed assets.ii) (a) The inventories have been physically verified during the year by the management at reasonable intervals. (b) In our opinion and according to the information and explanations given to us, the procedures of physical
verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) The Company is maintaining proper records of inventory. In our opinion, discrepancies noticed on physical verification of stocks were not material in relation to the operations of the Company.
iii) (a) There were only two companies covered in the register maintained under section 301 of the Companies Act, 1956 to which the Company has granted loan. The maximum amount involved during the year was Rs. 797.80 million and the year end balance of loan granted to such party was Rs. 797.80 million.
(b) In our opinion the rate of interest and other terms and condition on which loan were granted to the said Companies listed in register maintained under section 301 of the Companies Act, 1956 are not prima facie, prejudicial to the interest of the Company.
(c) One of the said parties has repaid a part of principal amount on demand and has been regular in the payment of interest.
(d) There is no overdue amount of loan granted to the said company. (e) The Company had not taken any loan from any company covered in the register maintained under section
301 of the companies act, 1956. Accordingly, paragraph 4 (iii) (e), (f) & (g) of the Order are not applicable.iv) In our opinion and according to the information and explanations given to us, there are adequate internal control
systems commensurate with the size of the company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system.
v) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under Section 301 have been so entered.
(b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register under Section 301 have been made at prices which are reasonable having regard to prevailing market prices, wherever comparable prices are available, at the relevant time.
vi) In the case of public deposits received by the company, the directives issued by the Reserve Bank of India and the provisions of Section 58A, 58AA or any other relevant provisions of the companies act, 1956 and the Companies (Acceptance of Deposit) Rules 1975 have been Compiled with. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.
vii) In our opinion, the company has an internal audit system commensurate with the size of the company and the nature of its business.
viii) The Central Government has prescribed maintenance of the Cost Records under section 209(1)(d) of the Companies Act, 1956 in respect to the companies’ certain products. We have broadly reviewed the books of account maintained by the company pursuant to the Order made by the Central Government for the maintenance of the cost records for certain products of the Company and are of the opinion that prima facie the prescribed accounts and records have been maintained. We are, however, not required to and have not carried out any detailed examination of such accounts and records.
ix) (a) According to the records examined by us, the company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investors education and protection fund, employees state insurance, income tax, sales-tax, wealth tax, service tax, custom duty, excise duty, cess and other statutory dues wherever applicable. According to the information and explanations given to us, no undisputed arrears of statutory dues were outstanding as at March 31, 2008 for a period of more than six months from the date they became payable.
ANNEXURE TO THE AUDITORS’ REPORT
89 Annual Report 2007-08
(b) According to the records of the Company, the dues of sale tax, income-tax, customs, wealth-tax, service tax, excise duty, cess which have not been deposited on account of disputes and the forum where the dispute is pending are as under:
Name of the Statute Nature of the dues
Amount(Rs. in
million)
Period to which the amount relates Forum where dispute is pending
1 Central Excise Act, 1944 Excise Duty 0.27 September 1998 to October 1999 CESTAT, Delhi
1.26 April 2001 to March 2002 Joint Commissioner, PuneExcise Duty 3.70 April 2004 to July 2005 Additional Commissioner, PuneExcise Duty 0.22 March 1997 Commissioner (Appeal), MeerutPenalty 0.55 March 1997 Commissioner (Appeal), Meerut
Excise Duty 1.27 February 2003 to September 2004 Additional Commissioner, MeerutExcise Duty 10.26 January 2005 to March 2005 Govt. of India, Ministry of FinanceExcise (Penalty) 0.01 April 2006 Govt. of IndiaCENVAT 2.85 April 2002 to March 2007 ADC. VadodaraExcise-EOU 0.30 April 2007 to November 2007 Deputy Commissioner, Hapur
2. Customs Act, 1962 Customs (Penalty) 0.51 2005-2006 Commissioner (Customs) Chennai3. Service Tax, Finance Tax
1994Service Tax 0.35 April 2003 to March 2004 Asstt. Commissioner, HapurService Tax 6.34 September 2004 to November 2006 CommissionerService Tax (Interest)
0.41 January 2005 to March 2005 Commissioner (Appeal) Mangalore
Service Tax 6.34 September 2004 to November 2006 Commissioner, Pune-IIIService Tax 2.95 December 2006 to September 2007 Commissioner, Pune-IIIService Tax 1.70 April 2006 to March 2007 Commissioner, Meerut
4. Central Sales Tax Act, 1956 and Sales Tax Act
Sales Tax Demand 0.24 1983-1984 Supreme CourtSales Tax Demand 1.00 1996-2001 TribunalSales Tax Demand 0.80 1995-2005 Supreme CourtSales Tax Demand 0.80 1996-2003 Assessing OfficerSales Tax Demand 1.37 1997-2003 Tribunal
x) There are no accumulated losses of the Company as on March 31, 2008. The company has not incurred any cash losses during the financial year covered by our audit and in the immediately preceding financial year.
xi) Based on our audit procedures and the information given by the management, we are of the opinion that the company has not defaulted in repayment of dues to any financial institution, bank or debenture holders.
xii) Based on our examination of the records and the information and explanations given to us, the Company has not granted any loans and/ or advances on the basis of security by way of pledge of shares, debentures and other securities.
xiii) The provisions of any special statute as specified under paragraph (xiii) of the Order are not applicable to the company.
xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures, and other investments. Accordingly, the provisions of clause 4 (xiv) of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.
xv) According to the information and explanations given to us, Company has given guarantees for loans taken by its certain subsidiary companies from bank and the terms of such guarantees are not prejudicial to the interest of the company.
xvi) According to the information and explanations given to us, the term loans raised (including by way of ECB loans) during the year have been applied for the purpose for which they were raised.
xvii) According to the information & explanation given to us and on an overall examination of the balance sheet of the company, we report that the no funds raised on short-term basis have been used for long term investment.
xviii) The Company has not made any preferential allotment of shares during the year to parties/companies covered in the register maintained under section 301 of the companies Act, 1956.
xix) During the year covered by our audit report the Company has not issued secured debentures.xx) The company has not raised any money by Public Issue during the year.xxi) Based upon the audit procedures performed and the information and explanations given to us, by the
management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.
For K.N. Gutgutia & Company Chartered Accountants
B R GoyalPlace : Noida PartnerDate : 22nd April, 2008 Membership No. 12172
Jubilant Organosys Limited 90
BALANCE SHEET
(Rs. in million)
As at 31st March, Schedules 2008 2007
SOURCES OF FUNDS Shareholders’ Funds
Share Capital A 146.96 143.76
Reserves & Surplus B 13,639.66 9,473.15
13,786.62 9,616.91
Loan Funds C
Secured Loans 6,174.46 3,614.05
Unsecured Loans 10,480.53 12,338.13
16,654.99 15,952.18
Deferred Tax Liabilities (Net) D 1,427.05 1,360.15
31,868.66 26,929.24
APPLICATION OF FUNDS Fixed Assets E
Gross Block 13,789.32 12,427.33
Less: Depreciation 4,565.76 4,033.14
Net Block 9,223.56 8,394.19
Capital Work-in-Progress 3,225.52 1,768.36
12,449.08 10,162.55
Investments F 13,782.51 12,758.12
Current Assets, Loans and Advances G
Inventories 3,215.56 3,117.71
Sundry Debtors 3,591.02 2,901.39
Cash & Bank Balances 76.72 130.41
Loans and Advances 3,945.79 2,543.08
10,829.09 8,692.59
Less: Current Liabilities & Provisions H
Liabilities 2,413.63 2,466.19
Provisions 2,794.88 2,258.68
5,208.51 4,724.87
Net Current Assets 5,620.58 3,967.72
Miscellaneous Expenditure I 16.49 40.85
(To the extent not written off or adjusted)
31,868.66 26,929.24
Notes to Accounts & Significant Accounting Policies O
Schedule “A” to “I” and “O” referred above form an integral part of the Balance Sheet.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
91 Annual Report 2007-08
PROFIT & LOSS ACCOUNT
(Rs. in million)
For the year ended 31st March, Schedules 2008 2007
INCOME
Sales & Services J 21,166.38 17,434.24
Less: Excise Duty on Sales (1,398.89) (1,337.25)
Net Sales & Services 19,767.49 16,096.99
Other Income K 1,148.00 967.98
Increase/(Decrease) in Stocks L 162.35 197.19
21,077.84 17,262.16
EXPENDITURE
Manufacturing & Other Expenses M 15,696.12 13,600.21
Depreciation & Amortisation (Net) 635.90 515.56
Interest N 146.80 150.63
16,478.82 14,266.40
Profit Before Tax 4,599.02 2,995.76
Income Tax
- Current Tax provision including Wealth Tax 684.31 357.22
- Deferred Tax Liability 113.36 303.80
- Fringe Benefit Tax 24.00 19.80
- MAT Credit Entitlement (145.32) -
676.35 680.82
Profit After Tax 3,922.67 2,314.94
Balance Brought Forward from Previous Year 4,045.61 2,441.31
Balance Available For Appropriation 7,968.28 4,756.25
APPROPRIATIONS
Dividend on Equity Shares 219.29 180.07
Tax on Distributed Profits on Equity Shares 37.27 30.57
256.56 210.64
Transfer to General Reserve 1,000.00 500.00
Balance Carried To Balance Sheet 6,711.72 4,045.61
Basic Earnings Per Share of Re 1 each (In Rupees) O 27.26 16.17
Diluted Earnings Per Share of Re 1 each (In Rupees) O 21.96 13.22
Notes to Accounts & Significant Accounting Policies O
Schedule “J” to “O” referred above form an integral part of the Profit & Loss Account.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
Jubilant Organosys Limited 92
(Rs. in million)
For the year ended 31st March, 2008 2007
A. Cash flow arising from Operating Activities :Net profit before tax 4,599.02 2,995.76 Adjustment for : i) Depreciation & Amortisation 635.90 515.56
ii) Loss/(Profit) on Sale of Fixed Assets (Net) 128.99 15.72 iii) Interest (Net) 146.80 150.63 iv) Amortisation/Write off (VRS Expenses) 24.36 30.95 v) Provision for Doubtful Debts (1.26) 4.47 vi) Provision for Gratuity & Leave Encashment 42.75 27.09 vii) Bad Debts/Irrecoverable Advances written off(net of write-in) 2.92 9.17 viii) Unrealised Exchange Difference (1,032.28) (429.64)ix) Interest Income as shown in Schedule “K” (0.28) (189.52)x) Income from Current Investment (Non Trade) - Dividend (8.12) (2.66)
(60.22) 131.77 Operating Profit before Working Capital Changes 4,538.80 3,127.53 Adjustment for : i) Trade and other Receivables 1,522.38 496.18
ii) Inventories 97.85 299.67 iii) Miscellaneous Expenditure - 39.60
1,620.23 835.45 2,918.57 2,292.08
i) Current Liabilities & Provision (26.50) 116.18 Cash inflow from Operations 2,892.07 2,408.26 Deduct : i) Interest Paid 186.33 176.24
ii) Direct taxes Paid (net of refunds) 429.96 324.40 616.29 500.64
Add : i) Interest Income Received (as shown in Schedule “K”) 0.28 189.52 Net Cash Inflow/(Outflow) in course of Operating Activities 2,276.06 2,097.14
B. Cash Flow arising from Investing Activities :Outflow i) Acquisition/Purchase of Fixed Assets/CWIP 3,095.90 2,527.21
ii) Purchase/(Sale) of Investments (net) (Including in Subsidiaries) 1,024.39 10,342.68 iii) Loans to Subsidiaries (net) 436.60 261.00
4,556.89 13,130.89 Deduct :Inflow i) Sale Proceeds of Fixed Assets 2.78 2.81
ii) Interest Received 50.30 40.59 iii) Dividend Received 8.12 2.66
61.20 46.06 Net Cash Inflow/(Outflow) in course of Investing Activities (4,495.69) (13,084.83)
C. Cash flow arising from Financing Activities :Inflow i) Proceeds from Issue of Share Capital { Including Share Premium of
Rs. 13.06 million (Previous year Rs.0.60 million) }13.59 0.90
ii) Proceeds from Long Term & Short term Borrowings 2,361.61 1,352.80 iii) Proceeds from issue of Foreign Currency Convertible Bonds{net of
expenses-Rs. Nil (Previous year Rs.124.87 million)} - 8,885.13 2,375.20 10,238.83
Deduct :Outflow i) Dividend Paid (including Corporate Dividend Tax & Education Cess) 208.72 202.82 Net Cash Inflow/(Outflow) in course of Financing Activities 2,166.48 10,036.01 Net Increase in Cash & Cash equivalents (A+B+C) (53.15) (951.68)Add: Cash & Cash Equivalents at the beginning of Year (Including Balance in Dividend Accounts)
130.41 1,082.28
Cash & Cash Equivalents at the close of the Year (Including Balance in Dividend Accounts)
77.26 130.60
Cash & Cash Equivalents Comprise:Cash and Bank Balances 76.72 130.41 Unrealised Exchange Difference on Foreign Currency Cash and Cash Equivalents 0.54 77.26 0.19 130.60
Notes: 1) Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard 3 (AS-3)-”Cash Flow Statements”, issued by the Institute of Chartered Accountants of India.
2) Purchase of fixed assets includes movement of Capital Work-in-Progress during the year.3) Closing Cash & Cash Equivalents includes Rs.6.78 million (Previous Year Rs. 7.02 million) which can be utilised for specific purposes.4) Previous Year’s figures have been regrouped/rearranged wherever found necessary to conform to this year’s classification.
CASH FLOW STATEMENT
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
93 Annual Report 2007-08
(Rs. in million)
As at 31st March, 2008 2007
A. SHARE CAPITALAuthorised550,000,000 Equity Shares of Re. 1 each
(Previous Year 550,000,000 Equity Shares of Re.1 each)550.00 550.00 550.00 550.00
Issued & Subscribed146,217,914 Equity Shares of Re. 1 each
(Previous Year 143,477,334 Equity Shares of Re.1 each)146.22 143.48 146.22 143.48
Paid up 146,185,914 Equity Shares of Re. 1 each 146.19 143.44
(Previous Year 143,445,334 Equity Shares of Re.1 each) Add: Equity Shares Forfeited (paid up) 0.02 0.02
146.21 143.46 Add: Share Application money received pending allotment 0.75 0.30
146.96 143.76
SCHEDULES FORMING PART OF THE BALANCE SHEET
Notes:
1) The Company issued Zero Coupon Foreign Currency Convertible Bonds due 2011 (FCCB 2011) for an aggregate value of US$ 200 million, convertible at any time between June 30, 2006 to May 10, 2011 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDS) each representing one equity share at an initial conversion price of Rs. 413.4498 per share with a fixed rate of exchange of Rs.45.05 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 19, 2009, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 20, 2011 at 142.429% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Assuming full conversion of these FCCBs, 21,792,246 equity shares of Re 1 each would be allotted.
2) The Company issued Zero Coupon Foreign Currency Convertible Bonds due 2010 (FCCB 2010) for an aggregate value of US$ 75 million, convertible at any time between July 03, 2005 to May 14, 2010 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDS) each representing one equity shares at an initial conversion price of Rs. 273.0648 per share with a fixed rate of exchange of Rs.43.35 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 23, 2008, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 24, 2010 at 138.383% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. US$ 14.093 million were converted upto 31st March, 2008 into equity shares and this represents 2,237,308 shares of Re.1 each as on 31st March, 2008.
The outstanding balance of FCCB 2010 - US$ 60.907 million, on conversion would result in allotment of 9,669,206 equity shares of Re 1 each .
3) The Company issued 1.5% Foreign Currency Convertible Bonds due 2009 (FCCB 2009) aggregating US$ 35 million, in the year 2004-05. The Bonds are convertible at any time between June 14, 2004 and April 15, 2009 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDSs) each representing one Equity Shares at an initial conversion price of Rs.163.646 per share with a fixed rate of exchange on conversion of Rs. 44.805 = US $1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 14, 2007 and prior to May 08, 2009, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 15, 2009 at 113.70% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Out of these FCCB 2009, US$ 34.70 million were converted upto 31st March, 2008 into equity shares and this represents 9,500,521 shares of Re.1 each as on 31st March, 2008.
Jubilant Organosys Limited 94
The outstanding balance of FCCB 2009 - US$ 0.30 million, on conversion would result in allotment of 82,140 equity shares of Re 1 each.
4) Under the Jubilant Employees Stock Option Plan;
a) Options in force as of March 31, 2008- 539,160 options convertible into 2,695,800 shares of Re. 1 each (Previous year 555,494 options convertible into 2,777,470 shares).
b) 13,641 vested options have been exercised upto 31st March, 2008.
5) Paid up capital includes :
a) 43,990,695 equity shares of Re. 1 each fully paid allotted and issued in 2003-04, as bonus shares by capitalization of Capital Redemption Reserve in accordance with the resolution passed by the shareholders dated February 28, 2004.
b) 1,644,020 equity shares of Re. 1 each allotted and issued pursuant to the Scheme of Amalgamation of erstwhile Ramganga Fertilizers Ltd. with the Company for consideration other than cash in 1994-95.{761,780 equity shares of Re. 1 each allotted to Vam Investments Ltd. and 159,420 equity shares of Re. 1 each allotted to Vam Leasing Ltd. were cancelled during the year 2002-03 - refer note no 6 below}.
c) 5,064,000 equity shares of Re. 1 each allotted and issued pursuant to the Scheme of Amalgamation to shareholders of erstwhile Anichem India Ltd. and of erstwhile Enpro Specialty Chemicals Ltd. with the Company for consideration other than cash in 1999-00. {1,620,970 Equity shares of Re.1 each allotted to Vam Investment Ltd. and 1,714,000 equity shares of Re. 1 each allotted to Vam Leasing Ltd. were cancelled during the year 2002-03 -refer note no. 6 below}.
d) 68,205 (Previous year 3,000) equity shares of Re. 1 each allotted to employees and directors of Company on exercise of the vested stock options in accordance with the terms of exercise under the “Jubilant Employees Stock Option Plan”.
6) Pursuant to the Scheme of Amalgamation approved by the Hon’ble High Court of Judicature, Allahabad and Hon’ble High Court of Delhi, Delhi, and as contained in the Opening Reference Balance Sheet annexed to the Scheme, the paid up share capital of the Company reduced during the year 2002-03 by cancellation of 2,382,750 and 1,873,420 equity shares of Re. 1 each fully paid up held by erstwhile Vam Investments Ltd. and Vam Leasing Ltd. respectively as investments in the company.
(Rs. in million)
As at 31stMarch, 2007
Additions /Created
during the year
Deductions As at 31stMarch, 2008
B. RESERVES AND SURPLUS
Capital Reserve 22.82 22.82
Capital Redemption Reserve 9.86 9.86
Amalgamation Reserve 13.21 13.21
Securities Premium Account (1) 3,380.05 693.01 102.37 3,970.69
General Reserve (2) 2,001.60 1,000.00 90.24 2,911.36
5,427.54 6,927.94
Add : Surplus as per Profit & Loss Account 4,045.61 3,922.67 1,256.56 6,711.72
Total 9,473.15 5,615.68 1,449.17 13,639.66
Previous Year 8,102.10 3,077.98 1,706.93 9,473.15
Notes :(1) a) Additions denote premium on issue of shares on conversion of FCCB and exercise of ESOP options. b) Deductions denote provision of premium on redemption of FCCB’s (net of tax benefits), Exchange Loss
on conversion of FCCB’s and tax benefits in respect of expenses charged to Securities Premium Account (Refer Note 15(D) of Schedule “O”).
(2) Deductions denote adjustment of employee benefits of Rs. 90.24 million (net of deferred tax of Rs.46.47 million) in terms of the transitional provision of AS-15 (revised).
SCHEDULES FORMING PART OF THE BALANCE SHEET
95 Annual Report 2007-08
(Rs. in million)
As at 31st March, 2008 2007
C. LOANS
Secured
A. Loans From Bank
- Term Loans [ Including Rs. 4413.20 million (Previous year Rs. 1738.80 million) in
foreign currency ]
5,913.20 1,738.80
- Working Capital [ Including Rs. 60.80 million (Previous year Rs. 217.35 million) in
foreign currency ]
93.69 1,596.02
- Vehicle Loans 0.57 1.23
B. Loans From Others
- Term Loans 167.00 278.00
6,174.46 3,614.05
Unsecured
1.5 % Foreign Currency Convertible Bonds -FCCB 2009 * 12.03 82.59
Zero Coupon Foreign Currency Convertible Bonds -FCCB 2010 * 2,443.59 3,260.25
Zero Coupon Foreign Currency Convertible Bonds -FCCB 2011 * 8,024.00 8,694.00
Fixed Deposits - 0.26
Deferred Sales Tax Credits 0.91 1.03
Short Term Loan from Bank - 300.00
10,480.53 12,338.13
*(Refer Note 9 of Schedule “O”)
Notes:
1. Term Loans (in Indian Currency) from Export Import Bank of India, Corporation Bank, External Commercial Borrowing of US$ 20 million from State Bank of India-New York Branch, Foreign Currency Loan of US$ 75 million from State Bank Of India and, US$ 20 million (in eq. JPY 2,304.50 million) from BNP Paribas Singapore are secured by a first charge by way of: -
a. Mortgage of the immovable assets and charge by way of hypothecation on the movable assets, both present and future [Save & except Book Debts and Bankers Goods as per Note 2 below and specified exclusions listed in notes i to iv below] pertaining to the Company’s manufacturing facilities located at Bhartiagram, District Jyotiba Phoolay Nagar, Uttar Pradesh and at Village Samlaya, Taluka Savli, District Vadodara, Gujarat.
i. Specified land and buildings situated at Bhartiagram, District Jyotiba Phoolay Nagar, Uttar Pradesh and constructed out of the financial assistance granted by HDFC.
ii. Land and Building located at Plot No 1A, Sector 16A, Noida, Uttar Pradesh.
iii. Land & Building of Active Pharmaceuticals Ingredients Unit located at Nanjangud, Mysore, Karnataka.
iv. Immovable assets of the Company situated at Nimbut Village, Nira, District Pune, Maharashtara.
b. Hypothecation of fixed assets [other than Land and Building as mentioned in 1 a (iii) above] both present and future pertaining to the Company’s manufacturing unit situated at Nanjangud, Mysore, Karnataka;
c. Such charges to rank pari-passu amongst the said chargeholders;
Jubilant Organosys Limited 96
d. Mortgage in respect of External Commercial Borrowing of US$ 20 million from BNP Paribas, Singapore, State Bank of India –FCNRB USD 75 million, Corporation Bank –Rs.1500 million is pending creation with respect to properties of Company’s Fertiliser Division.
2. i) Working Capital Facilities sanctioned by Consortium of Banks and notified Financial Institutions comprising of ICICI Bank Limited, Corporation Bank, Punjab National Bank, State Bank of India, Canara Bank, Export Import Bank of India, ING Vysya Bank Ltd., ABN Amro Bank and Standard Chartered Bank are secured by a first charge by way of hypothecation, ranking pari passu inter-se Banks, of the entire book debts and receivables of the Company and moveable inventories both present and future at the manufacturing facilities at Bhartiagram, District Jyotiba Phoolay Nagar, Uttar Pradesh; at Nimbut Village, Nira, District Pune, Maharashtra; at Village Samlaya, Taluka, Savli, District Vadodara, Gujarat and at Nanjangud, Mysore, Karnataka (save and except book debts and inventories related to IMFL business at Nimbut Village, Nira , District Pune, Maharashtra);
ii) The Company also has a Commercial Paper Programme aggregating Rs. 1,000 million and Short-term debt programme of Rs. 1000 million within the overall Working Capital Limits sanctioned to it by the Working Capital Consortium. As on 31.03.08, there was Rs. Nil loan outstanding against the same. The Company has availed Rs. 10,450 million against the said facility during the year (Previous year Rs. 7,150 million).
3. Loans availed for financing purchase of vehicles are secured by a first charge by way of an exclusive hypothecation of the vehicles purchased out of the loan proceeds in favour of the lender.
4. Unsecured Short Term loan from a Bank for specific purpose of utilising the same for distribution of Fertilisers & Feed to the Dealers and Distributors.
5. Secured loan of US$ 50 million to HSL Holdings Inc. from ICICI Bank UK PLC as the arranger and the agent is secured by way of irrevocable and unconditional corporate guarantee from Jubilant Organosys Limited and Jubilant Pharma Pte Ltd.,Singapore (WOS of Jubilant Organosys Ltd) guaranteeing all outstanding obligations of the borrower under the facility. (Total guaranteed amount as on 31.03.2008 is Rs.2006 million)
6. Secured Loans includes loans of Rs. 632.56 million (Previous year Rs. 328.50 million) repayable within one year.
SCHEDULES FORMING PART OF THE BALANCE SHEET
(Rs. in million)
As at 31st March, 2008 2007
D. DEFERRED TAX LIABILITY
Deferred Tax Liabilities 1,547.84 1,422.47
Deferred Tax Assets 120.79 62.32
Deferred Tax Liabilities(Net) 1,427.05 1,360.15
(Refer Note 15(A) of Schedule “O”)
97 Annual Report 2007-08
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Jubilant Organosys Limited 98
(Rs. in million)As at 31st March, 2008 2007
F. INVESTMENTS : (At Cost) Number Face value
per unitAll unquoted unless otherwise specified
Trade Investments (Long Term)
In Subsidiary Companies
A) Fully paid Equity Shares
375(375)
No Par Value - Jubilant Organosys (USA) Inc. 17.11 17.11
- US$1 - Jubilant Organosys (Shanghai) Ltd. (2) - 8.80 (200,000)
13,900,000 EURO 1 - Jubilant Pharma N.V. (Belgium) 743.79 743.79 (13,900,000)
1,999,766 Rs.10 - Jubilant Chemsys Ltd. 20.00 20.00 (1,999,766)1,999,766 Rs.10 - Clinsys Clinical Research Ltd. 20.00 20.00
(1,999,766)295,600 Rs.10 - Jubilant Biosys Ltd. 147.80 147.80
(295,600)210,793,994 US$1 - Jubilant Pharma Pte. Ltd. (Singapore) 9,637.17 9,637.17
(210,793,994)20,000,000 No Par Value - Clinsys Holdings Inc. (USA) 1,660.44 1,660.44
(20,000,000)21,850,000 Rs.10 - Jubilant Infrastructure Ltd. 218.50 10.00 (1,000,000)48,44,000 Rs.10 - Jubilant First Trust Healthcare Ltd. 223.55 -
(-) (formerly First Trust Healthcare Pvt Ltd)
B) Preference Shares - Jubilant Chemsys Ltd.
26,450,000(26,450,000)
Rs.10 6% Optionally Convertible Non-Cumulative Redeemable Preference Shares fully paid.
264.50 264.50
18,600,000(-)
Rs.10 8% Optionally Convertible Non-Cumulative Redeemable Preference Shares fully paid.
186.00 -
- Clinsys Clinical Research Ltd
20,850,000(20,850,000)
Rs.10 6% Optionally Convertible Non-Cumulative Redeemable Preference Shares fully paid up
208.50 208.50
3,500,000(-)
Rs.10 8% Optionally Convertible Non-Cumulative Redeemable Preference Shares fully paid up
35.00 -
Current Investments
Investment in Mutual Fund - Rs.10 LICMF Liquid Fund-Dividend Plan - 20.01
(1,822,209)25,003,026 Rs.10 Principal Cash Management Fund-Growth Plan 250.05 -
(-)15,002,551 Rs.10 HSBC Cash Fund Institutional Plus -Dividend Plan 150.10 -
(-)13,782.51 12,758.12
Notes: (1) Figures in ( ) are in respect of previous year.(2) During the year, the Company transferred holding in Jubilant Organosys (Shanghai) Ltd. a trading
subsidiary, to its wholly owned subsidiary Jubilant Pharma Pte. Ltd. (Singapore).(3) During the year, the following current investments (Non-Trade) were purchased and sold: i) 97,966,250 Units of Standard Chartered Grind Mutual Fund-at cost of Rs. 980.00 million. ii) 104,994,750 Units of ICICI Prudential Mutual Fund - at cost of Rs. 1050.00 million. iii) 16,119,114 Units of SBI Mutual Fund - Magnum Insta Cash Fund-at cost of Rs. 270.00 million.
SCHEDULES FORMING PART OF THE BALANCE SHEET
99 Annual Report 2007-08
(Rs. in million)
As at 31st March, 2008 2007
G. CURRENT ASSETS, LOANS AND ADVANCESCurrent Assets
Inventories: (Including in Transit & with Third Parties) (at lower of cost or net realisable value)
- Raw Materials 1,569.80 1,609.77
- Stores, Spares, Process Chemicals, Catalyst, Fuels & Packing Material 412.05 358.75 - Process Stocks 512.58 429.11
- Finished Goods (including Trading Goods) 721.13 720.08
3,215.56 3,117.71
Sundry Debtors
Unsecured- Over Six Months - Good
(Includes Subsidy receivable from State Government Rs. 39.85 million (Previous Year Rs. 12.11 million))
107.85 126.02
- Doubtful 3.21 4.47 - Other Debts - Good 3,483.17 2,775.37
(Includes Subsidy receivable from State Government Rs. 4.68 million(Previous Year Rs. 33.88 million))
3,594.23 2,905.86
Less: Provision for Doubtful Debts 3.21 4.47
3,591.02 2,901.39
Cash & Bank Balances
- Cash in hand and as Imprest 5.15 5.29
- Cheques/Drafts in hand 47.18 29.29
- With Scheduled Banks
- On Current Accounts 4.19 39.17
- On Dividend Account 8.40 7.33 - On Deposit Accounts (1) 5.02 42.31
- With Non Scheduled Banks (2) 6.78 7.02
76.72 130.41 Loans And Advances(Unsecured, Considered good)
- Loans to Subsidiaries (including interest accrued) 797.80 361.20
- Advances recoverable in cash or in kind or for value to be received (3) 1,243.28 706.35
- Deposits 138.84 93.17
- Deposits with Excise / Sales Tax Authorities (4) 759.94 509.03
- Advance Payment of Income Tax/Wealth Tax (including TDS) 614.38 873.33
- MAT Credit Entitlement 391.55 -
3,945.79 2,543.08
10,829.09 8,692.59
(1) Includes Margin Money - Rs.2.78 million (Previous Year Rs. 1.51 million).
(2) Maximum Balance outstanding during the Year
a) Rs.0.72 million (Previous Year Rs.8981.81 million) with ICICI Bank UK Ltd.
b) Rs. 6.06 million (Previous Year Rs. 878.90 million) with SBI New York in Fixed Deposit Account.
c) Rs. Nil (Previous Year Rs. 6321.46 million) with SBI Nassau Bahamas.
(3) Includes Rs. 317.30 million (Previous Year Rs. 135.61 million) Export Benefits Receivables.
(4) Deposit against disputed demands -Rs.109.12 million (Previous Year Rs.105.62 million).
Jubilant Organosys Limited 100
(Rs. in million)As at 31st March, 2008 2007
H. CURRENT LIABILITIES AND PROVISIONS
A) Current Liabilities
Sundry Creditors and Expenses Payable (1) 2,179.77 2,263.72
Trade Deposits & Advances 68.13 89.25
Interest Accrued but not due 42.13 30.81
Other Liabilities 111.68 69.06
Investors Education and Protection Fund shall be credited with the following amounts namely:- Unclaimed/unpaid Dividends 8.40 7.33
- Unclaimed Fixed Deposits 3.52 5.47
- Interest on Unclaimed Matured Fixed Deposits - 0.55 2,413.63 2,466.19
B) ProvisionsFor Dividends on Equity Shares 256.55 209.78
For Income Tax & Wealth Tax 569.61 916.25
For Retirement/Post retirement Employee Benefits 324.30 144.84
For Others (2) 1,644.42 987.81 2,794.88 2,258.68
Total (A+B) 5,208.51 4,724.87
(1) Includes Rs 25.82 million (Previous year Rs. 148.39 million) being Acceptances.(2) Includes Premium on redemption of FCCB -Rs.1633.37 million (Previous Year Rs.975.15 million).
(Rs. in million)
As at 31st March, 2008 2007
I. MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)
Payments under Voluntary Retirement Scheme 16.49 40.85 16.49 40.85
SCHEDULES FORMING PART OF THE BALANCE SHEET
101 Annual Report 2007-08
SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT
(Rs. in million)
For the year ended 31st March, 2008 2007
J. SALES & SERVICESSales 21,138.22 17,405.29
Manufacturing Services (Refer Note 16 of Schedule “O” ) 28.16 28.95 21,166.38 17,434.24
(Rs. in million)For the year ended 31st March, 2008 2007
K. OTHER INCOMEIncome from Current Investments (Non-Trade) - Dividend 8.12 2.66
Insurance / Other Claims (Net) 0.59 36.51
Net Gain- Foreign Exchange Fluctuation -FCCBs/Loans 1,039.71 658.19
Miscellaneous Receipts (1) 99.58 270.62
(Includes Sale of unserviceable spares, used drums,residual catalyst, etc.) 1,148.00 967.98
(1) Includes: a) Income from Utilities & Services provided Rs. 19.31 million (Previous year Rs.14.82 million) (Tax Deducted at source Rs.3.01 million - Previous Year Rs.2.60 million). b) Interest Income of Rs.0.28 million (Previous year Rs.189.52 million) on un-utilized proceeds of
FCCB’s and on other deposits. c) Bad Debts recovered/recoverable Rs. Nil (Previous year Rs.0.25 million).
(Rs. in million)
For the year ended 31st March, 2008 2007
L. INCREASE/(DECREASE) IN STOCKS
Stock at close - Process 512.58 429.11
Stock at close - Finished 721.13 720.08 1,233.71 1,149.19
Stock at commencement - Process 429.11 349.57
Stock at commencement - Finished 720.08 563.75 1,149.19 913.32
Increase/ (Decrease) in Stocks 84.52 235.87
Less: Increase/Decrease of Finished & Process Stock of IMFL Business 77.83 (38.68)
(Refer Note 16 of Schedule “O”) 162.35 197.19
Jubilant Organosys Limited 102
SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT
(Rs. in million)
For the year ended 31st March, 2008 2007
M. MANUFACTURING AND OTHER EXPENSES
Purchases - Traded Goods 474.77 370.26 Raw & Process Materials Consumed 8,942.78 7,916.40 Power and Fuel 1,641.03 1,297.89 Excise Duty -Net (3) 5.33 8.41 Stores, Spares, Chemicals, Catalyst & Packing Materials consumed 1,066.83 961.53 Processing Charges 156.15 167.87 Repairs - Plant & Machinery 333.17 308.92
- Buildings 37.56 27.20 Salaries, Wages, Bonus, Gratuity & Allowances 1,137.84 846.11 Contribution to Provident & Superannuation Fund 80.34 62.45 Staff Welfare Expenses 75.24 66.08 Rent (Net of recoveries) 47.73 16.04 Rates & Taxes 23.27 22.32 Insurance [Net of recoveries -Rs. 8.97 million (PY -Rs.9.68 million)] 52.07 60.85 Advertisement, Publicity & Sales Promotion 122.56 69.33 Traveling & Other Incidental Expenses 153.71 134.77 Offices Maintenance (including water, electricity & repairs to office equipments ) 72.34 59.79 Vehicle Maintenance (Including vehicle taxes, insurance & driver cost) 35.03 29.80 Printing & Stationery 21.72 20.33 Communication Expenses 48.52 46.20 Staff Recruitment & Training 35.84 32.67 Donation 0.79 10.37 Auditors Remuneration - As Auditors 1.49 1.16
- for Taxation Matters 0.34 0.31 - for Certification/Advices/Other Matters 0.64 1.15
- Out of Pocket Expenses 0.17 0.10 Legal , Professional & Consultancy Charges 120.11 118.26 Freight & Forwarding (including Ocean freight) 426.01 404.02 Amortisation/write off - (VRS Expenses) 24.36 30.95 Directors’ Sitting Fees 0.66 0.72 Directors’ Commission 43.00 34.00 Miscellaneous Expenses 30.10 18.97 Financial Charges (incl. Bank Charges & Foreign Exchange fluctuations net gain of Rs.26.08 million (PY net loss of Rs.31.52 million) (4)
19.79 80.29
Discounts & Claims to Customer(Net) and Other Selling Expenses 221.82 220.91 Commission on Sales 108.05 112.58 Lease Rentals & Hire Purchase Charges 0.74 2.77 Loss on sale/disposal/discard of Fixed Assets/Intangibles 128.99 15.72 Loss on sale of Raw Materials 3.57 9.07 Bad Debts / irrecoverable Advances written off /provided for(Net of write in) 1.66 13.64
15,696.12 13,600.21
(1) The above expenses are Netted off,after taking into account credit of Rs. 1.25 million (Previous year Rs.1.03 million).(2) The above total expenditure includes :
a) Expenditure incurred on R&D of Rs.228.40 million (Previous year Rs.130.50 million) under various heads of accounts.
b) Prior period adjustments determined during the year are adjusted to respective heads of account of Rs.2.79 million (Previous year of Rs.2.47 million).
(3) Excise duty expense denotes provision on closing stock and other claims of the Deptt.(4) Foreign exchange gain of Rs.59.17 million (Previous year Rs.28.40 million) is adjusted against total foreign
exchange losses of Rs.33.09 million (Previous year Rs.59.92 million) as disclosed above.
103 Annual Report 2007-08
(Rs. in million)
For the year ended 31st March, 2008 2007
N. INTERESTOn Term Loans 139.51 109.38 On Deposits - 3.31 On FCCB 0.33 1.54 On Overdrafts & other Borrowings (2) 57.26 71.11
197.10 185.34 Less: Interest Income [Tax deducted at source Rs.11.38 million (50.30) (1) (34.71) (1)(Previous year Rs.7.67 million)] 146.80 (3) 150.63 (3)
(1) Includes Rs.47.94 million (Previous year Rs.13.71 million) charged to Subsidiary Companies.(2) Includes Rs.12.88 million (Previous year Rs.12.10 million) as Discounting Charges on Commercial Papers.(3) Net of Interest Capitalisation.
Research & Development Expenses comprises as mentioned hereunder:-
(Rs. in million)For the year ended 31st March, 2008 2007
M-1. RESEARCH & DEVELOPMENT EXPENSES
Material Consumption 96.08 95.01
Employee Cost 194.11 155.14
Utilities- Power 20.02 16.75
Others 180.52 130.18 490.73 397.08
Less: Transferred to Intangibles/Capital Work in Progress (262.33) (266.58)
Balance, charged to Revenue 228.40 130.50
Jubilant Organosys Limited 104
O NOTES TO THE ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES
Notes to the Balance Sheet as at 31st March, 2008 and Profit and Loss Account for the year ended on that date.
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of Preparation
The financial statements of the Company have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India (“GAAP”) and comply with the mandatory Accounting Standards (“AS”) issued by the Institute of Chartered Accountants of India to the extent applicable and with the relevant provisions of the Companies Act, 1956. The financial statements are presented in Indian rupees rounded off to the nearest million.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the results of operations during the reporting periods. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates.
B. a. Fixed Assets and Depreciation
(i) Fixed Assets are stated at original cost net of tax/duty credits availed, if any, less accumulated depreciation/amortisation. The cost of fixed assets includes freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing costs directly attributable to fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalised. In case of fixed assets acquired at the time of amalgamation of certain entities with Company, the same are at book value/fair value ascertained by the valuers.
Insurance spares / standby equipments are capitalised as part of the mother assets and are depreciated at the applicable rates, over the remaining useful life of the mother assets. Such spares are charged off, on issue for Consumption.
Interest on loans and other financial charges and preoperative expenses including Trial Run Expenses (Net) for projects and/or substantial expansion up to the date of commencement of commercial production/ stabilisation of the project are capitalised
(ii) Depreciation is provided on Straight Line Method, except in case of Plant & Machinery at Nira & Savli plants which is on Written Down Value Method, at rates mentioned and in the manner specified in Schedule XIV to the Companies Act, 1956 (as amended), on the original cost/ acquisition cost of assets and read with the statement as mentioned herein under. Certain plants were classified as continuous process plants from the financial year ended 31-03-2000 and such classification has been done on technical assessment, (relied upon by the auditor being a technical matter) and depreciation on such assets has been provided accordingly.
Depreciation, in respect of assets added/installed up to December 15, 1993, is provided at the rates applicable at the time of additions/installations of the assets as per Schedule XIV to the Companies Act, 1956 and depreciation, in respect of assets added/installed during the subsequent period, is provided at the rates, mentioned in Schedule XIV to the Companies Act, 1956 read with Notification dated December 16, 1993 issued by Department of Company Affairs, Government of India except for the following classes of fixed assets, where the useful life has been estimated as under;
a. R&D related Equipments & Machineries are depreciated over ten years. b. Motor Vehicles are depreciated over five years. c. Computer & Information Technology related assets are depreciated over three to five years. d. Certain employee perquisite – related assets are depreciated over five years, being the period of the
perquisite scheme.
Depreciation on assets added/disposed off during the year has been provided on pro-rata basis with reference to the month of addition/disposal.
b. Intangible, product development and amortisation
Intangible assets are recorded at the consideration paid for acquisition. Intangible assets are amortised over their estimated useful lives on straight-line basis, commencing from the date the asset is available to the Company for its use.
Cost incurred for acquiring rights for product under development are recognised as intangible assets and amortised on a straight-line basis over a period of five years from the date of regulatory approval. Subsequent expenditures on development of such products are also added to the cost of intangibles.
NOTES TO THE ACCOUNTS
105 Annual Report 2007-08
c. Leased Assets: Amortisation/charging off (i) Leasehold Land value is not amortised in view of the long tenure of the un-expired lease period/option of
conversion to freehold at the expiry of lease tenure. (ii) Other lease assets: Assets, if any, acquired under finance lease from April 01, 2001 are capitalised at the
lower of their fair value and the present value of the minimum lease payment in line with the Accounting Standard 19(AS-19)-“Leases”, issued by the Institute of Chartered Accountants of India (ICAI). In respect of other leases, lease rentals are charged to Profit and Loss Account.
C. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except scrap, which is at net estimated realisable value.
The methods of determining cost of various categories of inventories are as follows:
Raw materials Weighted average methodStores and spares Weighted average methodWork-in-process and finished goods (manufactured) Variable Cost at weighted average including an
appropriate share of production overheadsFinished goods (traded) Actual cost of purchaseGoods in transit Actual cost of purchase
Cost includes all direct costs, cost of conversion and appropriate portion of overheads and such other costs incurred as to bring the inventory to its present location and condition inclusive of excise duty wherever applicable. Cost formula used is based upon weighted average cost.
D. Investments
Long Term quoted investments (non-trade) if any, are valued at cost unless there is a permanent fall in their value as at the date of Balance Sheet.
Unquoted investments in subsidiaries being of long term and of strategic in nature are valued at cost and no loss is recognised for the fall, if any, in their net worth, unless the diminution in value is other than temporary. Investment in foreign subsidiary Companies are expressed in Indian currency at the rates prevailing on the date when the remittance for the purpose was made/ foreign currency balance abroad was used, as the case may be.
E. Income Tax
Current Tax Current Tax provision is made, taking into consideration the various benefits / concessions to which the Company
is entitled to as well as the normal tax provisions and the contentions of the Company and also the fact that certain expenditure becoming allowable on payment being made before filing of the return of income.
Deferred Tax In accordance with Accounting Standard 22 (AS-22) – “Accounting for Taxes on Income”, issued by the ICAI, the
deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the Balance Sheet date.
Deferred tax assets (reviewed at each Balance Sheet date) arising from timing differences are recognised to the extent there is virtual certainty, as the case may be, that such assets are capable of being realised in future.
Fringe Benefit Tax Provision for Fringe Benefit Tax has been made in accordance with the Income Tax Laws prevailing for the relevant
assessment years.
F. Foreign Currency Conversions/ Translation
Transactions in foreign currency are recorded at the exchange rate prevailing on/or closely approximating to the date of transactions. Current Assets and Liabilities (other than relating to fixed assets and investments) are restated at the rate prevailing at the period end or at the forward rate where forward cover for specific asset/liability has been taken. The difference between the period end rate and the exchange rate at the date of the transaction is recognised as income or expense in the Profit and Loss Account. In respect of forward exchange contracts, the difference between the contract rate and the rate on the date of transaction is recognised as income or expense in the Profit and Loss Account over the life of the contract.
G. Provisions, Contingent Liability and Contingent Assets
The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent Assets are not recognised/disclosed.
Jubilant Organosys Limited 106
Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet Date.
H. Research & Development Revenue expenditure on Research and Development is included under the natural heads of expenditure.
Capital expenditure on Research and Development (R&D) is capitalised as fixed assets. Development cost including legal expenses and/or in relation to patent/trade marks relating to the new and improved product and/or process development is recognised as an intangible asset to the extent that it is expected that such asset will generate future economical benefits. Other Research & Development cost is expensed as incurred.
I. Employee Benefits • Contribution payable to recognised provident fund , employee state insurance and superannuation scheme
which is defined contribution scheme, is charged to profit & loss account. For certain employees, Provident Fund contributions are made to a trust, administered by the company. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Misc Provisions Act 1952. The Remaining contributions are made to the government administered Provident Fund
• Gratuity and leave encashment which are defined benefits are accrued based on actuarial valuation as at balance sheet date by an independent actuary.
• The company has also opted for a group Gratuity-cum Life Assurance Scheme of the Life Insurance Corporation of India for certain employees of one of its unit and the contribution is charged to the profit & loss account each year
J. Borrowing Cost Borrowing costs attributable to acquisition and construction/fabrication of qualifying assets are capitalised as a
part of the cost of such assets up-to the date as mentioned in Note No. B(a)(i) above. Other borrowing costs are charged as expenses in the year in which they arise.
K. Revenue Recognition Revenue from Sales is recognised on dispatch of material and point when risk and reward are transferred to the
customers. Sales include excise duty, export incentives and subsidies but exclude Inter Divisional Transfers and Sales Tax. In order to comply with the Accounting Standard Interpretation ASI-14 issued by ICAI, Sales (including excise duty) and Net Sales (excluding excise Duty) is disclosed in Profit & Loss Account.
Export incentives/ benefits are accounted for on accrual basis and as per the principles given under AS-9 (Revenue Recognition).
L. Miscellaneous Expenditure / Amortisation (i) Miscellaneous expenditure consists of expenditure in respect of compensation payable in terms of Voluntary
Retirement Scheme of the Company and the same are amortised over a period of thirty six months commencing from the month in which payment / liability arise.
(ii) FCCB and share issue expenses / premium on FCCB are adjusted against securities premium account.
M. Segment Accounting The accounting policies adopted for segment reporting are in line with accounting policies of the Company.
Revenue, Expenses, Assets and Liabilities have been identified to segments on the basis of their relationship to operating activities of the segments (taking in account the nature of products and services and risks & rewards associated with them) and internal management information systems and the same is reviewed from time to time to realign the same to conform to the Business Units of the Company. Revenue, Expense, Assets and Liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as “Common Revenue/Expense/Assets/Liabilities”, as the case may be.
N. Impairment of Fixed AssetsThe Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the assets belongs is less than the carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
O. Employee stock option schemesIn accordance with the Securities and Exchange Board of India Guidelines, in respect of the stock options granted pursuant to the Company’s Stock Option Scheme, the intrinsic value, if any, of the option being the excess of the
NOTES TO THE ACCOUNTS
107 Annual Report 2007-08
market price, of share over the exercise price of the option, at the date of grant of option, is treated as discount and accounted as employee compensation cost and amortised on a straight-line basis over the vesting period.
2. Capital Commitments
Estimated amount of Contracts remaining to be executed on Capital Account (Net of Advances) Rs. 1384.88 million (Previous Year Rs. 892.14 million) [Advances Rs. 107.01 million (Previous Year Rs. 128.28 million)].
3. Contingent liabilities
a) Claims/Demands/Disputes against which appeals are pending and not acknowledged as debts on account of:
(Rs. in million)
2007-08 2006-07
Central Excise 23.17 23.17
Customs 5.76 5.73
Sales Tax 5.86 11.30
Income Tax 173.64 146.10
Service Tax 2.77 1.59
Others 10.57 5.33
The Company has been advised that its contentions in the matter of disputed demands are legally tenable and hence the possibility of these maturing is remote.
In additions to the amounts mentioned above, the Company may be required to pay interest on finality of the matters.
b) The Company has challenged the levy of transport fee by State of Maharashtra on consumption of rectified spirit and molasses in the Nira factory. The order of State imposing the levy was stayed by the Hon’ble Mumbai High Court on October 22, 2001. The Company has been advised that the levy of transport fee on rectified spirit and molasses by State is not tenable. However, the Company has deposited Rs. 6.28 million under protest out of the total transport fee of Rs. 114.71 million.
c) Outstanding guarantees furnished by Banks on behalf of the Company/by the Company including in respect of Letters of Credits/Bonds/Loss make up guarantee is Rs. 1,169.91 million (Previous Year Rs. 1003.53 million).
The Company has given Corporate Guarantee on behalf of HSL Holdings Inc. to ICICI Bank UK. PLC. for USD $ 50 million to secure financial facility guaranteed by them.
d) Exports obligation undertaken by the Company under EPCG scheme to be completed over a period of five/eight years on account of import of Capital Goods at concessional import duty remaining outstanding is Rs. 1111.40 million (Previous year Rs. 499.60 million). Similarly Export obligation under Advance License Scheme/DFIA scheme on duty free import of specific raw materials, remaining outstanding is Rs. 2891.12 million (Previous year Rs. 1,416.05 million).
e) The Company has challenged the increase in denaturing fee by the State of Uttar Pradesh w.e.f April 01, 2004 on denaturing of rectified spirit in the Gajraula factory before the Hon’ble Allahabad High Court and the writ petition has been admitted by the court. The Company has deposited Rs 15.91 million under protest which is shown as deposits.
f) Zila Panchayat at J.P. Nagar (in respect of the Company’s Gajraula plant) served a notice demanding a compensation of Rs. 277.40 million allegedly for creating lagoons on their lands, percolation of poisonous water stored in lagoons resulting in loss of crops and cattle of the farmers and for putting poisonous fly ash on national highway which caused loss to the health and damages to eyes and skin of people.
District Magistrate issued a recovery certificate along with 10% collection charges inflating the demand to Rs.305.14 million. In the opinion of the Company, the Zila Panchayat has no justification in raising this demand. The demand was challenged in Hon’ble Allahabad High Court and the court stayed the demand till further orders.
Jubilant Organosys Limited 108
4. The Hon’ble Supreme Court has quashed the levy of licence fee by State of Uttar Pradesh on captive consumption of denatured spirit in the Gajraula factory, and has ordered the refund of the fee paid during the period of dispute subject to condition that the amount has not been collected from the Company’s customers. Further the Court has directed the state to investigate whether the Company has collected the disputed fee from its customers to the extent bank guarantees were furnished.
The Company is entitled to a refund of Rs. 84.06 million as the amount paid during the period of dispute or secured by bank guarantees was not collected from its customers. Accordingly the Company has approached the State of Uttar Pradesh for the refund of the said amount.
5. The Company has challenged the levy of license fees of Rs.2.87 million by State of Uttar Pradesh, for grant of PD-2 license for manufacture of Ethyl Alcohol for industrial use, before the Hon’ble Allahabad High Court. The writ petition has been admitted and is being listed for final hearing. Though the amount has been deposited and shown as such, no provision against this has been made as the issue is covered by the earlier favorable judgment of the Hon’ble Supreme Court of India.
6. Dividend on Equity Shares includes Rs.0.01 million (inclusive of Dividend Tax) in respect of Shares allotted between 31st March,2007 to the record date for Dividend.
7. Loans to Subsidiary Companies repayable on demand, including interest accrued thereon, namely, Jubilant Biosys Ltd. – Rs.769.80 million (Previous year Rs. 338.20 million) & Jubilant Chemsys Ltd – Rs.28.00 million (Previous year Rs.23.00 million).{Maximum amount due at any time during the year Rs. 816.21 million (Previous year Rs. 351.42 million) & Rs.36.28 million (Previous year Rs. 23.49 million ) to Jubilant Biosys Ltd and Jubilant Chemsys Ltd respectively.}
8. Micro and Small Business Entities
There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March, 2008. The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.
9. Foreign Currency Convertible Bonds (FCCB)
a) 1.5 % FCCB -US$35 million (FCCB 2009)
The Company issued 1.5% Foreign Currency Convertible Bonds due 2009 (FCCB 2009) aggregating US$ 35 million, in the year 2004-05. The Bonds are convertible at any time between June 14, 2004 and April 15, 2009 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (“GDSs”) each representing One equity share at an initial conversion price of Rs.163.646 per share with a fixed rate of exchange on conversion of Rs. 44.805 = US$ 1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 14, 2007, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 15, 2009 at 113.70% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Out of these FCCB 2009, US$ 34.70 million were converted upto March 31, 2008 into equity shares and this represents 9,500,521 shares of Re.1 each as on 31st March, 2008. The balance bonds of US$ 0.30 million net of exchange difference, outstanding as of March 31, 2008 are included under ‘Unsecured Loans’.
The outstanding balance of FCCB 2009 - US$ 0.30 million, on conversion would result in allotment in of 82,140 equity shares of Re. 1 each.
The proceeds were utilised for funding new projects & expansion of existing units – Rs. 795.4 million (US$ 17.1 million), investment in subsidiary companies for acquisitions abroad - Rs.722.0 million (US$16.7 million) and issue expenses – Rs.50.7 million (US$ 1.1 million).
b) FCCB – US$75 million (FCCB 2010)
The Company issued, Zero Coupon Foreign Currency Convertible Bonds due 2010 (FCCB 2010) for an aggregate value of US$ 75 million, convertible at any time between July 03, 2005 to May 14, 2010 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDSs) each representing one equity share of Re. 1 each at an initial conversion price of Rs.273.0648 per share with a fixed
NOTES TO THE ACCOUNTS
109 Annual Report 2007-08
rate of exchange of Rs.43.35 = US$1. The conversion price is subject to adjustment in certain circumstances.The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 23, 2008, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 24, 2010 at 138.383% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Out of these FCCB 2010, US$ 14.093 million were converted upto March 31, 2008 into equity shares and this represents 2,237,308 shares of Re.1 each as on 31st March, 2008. The balance bonds of US$ 60.907 million net of exchange difference, outstanding as of March 31, 2008 are included under ‘Unsecured Loans’.
The outstanding balance of FCCB 2010 - US$ 60.907 million, on conversion would result in allotment in of 9,669,206 equity shares of Re. 1 each.
The proceeds of FCCB 2010 have been used for funding new projects & expansion of existing units – Rs. 1384.1 million (US$ 32.2 million), investment in subsidiary companies for acquisitions abroad - Rs.1827.9 million (US$41.0 million), issue expenses – Rs.78.0 million (US$ 1.8 million).
c) FCCB – US$200 million (FCCB 2011)
The Company issued Zero Coupon Foreign Currency Convertible Bonds due 2011 (FCCB 2011) for an aggregate value of US$ 200 million, convertible at any time between June 30, 2006 to May 10, 2011 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDSs) each representing one equity share at an initial conversion price of Rs.413.4498 per share with a fixed rate of exchange of Rs.45.05 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 19, 2009, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 20, 2011 at 142.429% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Assuming full conversion of these FCCB’s, 21,792,246 equity shares of Re 1 each would be allotted.
The proceeds of FCCB 2011 have been used for funding new projects –Rs.13.5 million (US$0.30 million) ,investment in subsidiary companies - Rs.8,873.0 million (US$196.96 million) and issue expenses – Rs.123.4 million (US$ 2.74 million). There has been no conversion during the year in respect of the above FCCBs.
10. Employee Stock Option Scheme
In terms of approval of shareholders accorded at the AGM held on 29th August, 2005 and in accordance with SEBI (ESOP & ESPS) Guidelines, 1999, the Company instituted Jubilant Employees Stock Option Plan, 2005 (“Plan”) for specified categories of employees and directors of the Company and its subsidiaries. Under the Plan, upto 717,500 Stock Options can be issued to eligible Directors (other than promoter directors) and other specified categories of employees of the Company/ subsidiaries. The options are to be granted at market price. As per SEBI Guidelines, the market price is taken as the closing price on the day preceding the date of grant of options, on the stock exchange where the trading volume is the highest.
Each option, upon vesting, shall entitle the holder to subscribe to five equity shares of Re.1 each. The vesting takes place on a staggered basis over a period of 5 years from the date of grant.
The Company has constituted a Compensation Committee comprising of a majority of independent directors. This Committee is empowered to administer the Scheme.
During the year, the following options were granted to eligible directors/ employees:
Date of grant Number of options granted
Exercise Price per Share (Rupees)
Market Price (Rupees) (As per
SEBI Guidelines)*
16th July, 2007 22,273 309.00 309.00 (a)
16th October, 2007 14,400 295.35 295.35 (b)
30th January, 2008 13,263 314.35 314.35 (c)
* Based on closing price (a) on 13th July 2007 at NSE (b) on 15th October 2007 at BSE (c) on 29th January 2008 at BSE where higher turnover was recorded.
Jubilant Organosys Limited 110
The movement in the stock options during the year ended March 31, 2008 is set out below:
Number
Options outstanding at the beginning of the year 555,494
Granted during the year 49,936
Expired/forfeited during the year (53,229)
Exercised during the year (13,041)
Options outstanding at the end of the year 539,160
11. The Company’s significant operating lease arrangements are in respect of premises (residential, offices, godown etc.). These leasing arrangements, which are cancelable, range between 11 months and 9 years generally and are usually renewable by mutual agreeable terms. The aggregate lease rentals payable are charged as expenses.
12. Capitalisation of Interest, Pre-operative and Trial Run expenses
In line with the applicable Accounting Standards, interest on funds utilised and preoperative expenses including trial run expenses (net) for projects and/or substantial expansions have been capitalised up to the date of commercial production/stabilisation of the project, amounting to Rs.276.63 million (Previous Year Rs. 190.22 million). All preoperative expenditure including interest totaling to Rs. 150.55 million (Previous Year Rs 55.97 million) so capitalised and Trial Run Expenses (net of trial run receipts) are accumulated as Capital work in progress and have been allocated to respective Fixed Assets.
13. (A) In the Year 2005-06, the Company, through its wholly owned Subsidiary, Clinsys Holdings Inc. acquired 100% stake in Clinsys Clinical Research, Inc., USA, a clinical research organisation, for a payment of US $ 33.50 million. In the year 2006-07,the Company further invested US$ 21.70 million as equity share capital in the said Clinsys Holdings, Inc.
(B) In the Year 2005-06,the Company, through it’s wholly owned Subsidiary Jubilant Pharma Pte. Limited in Singapore, acquired 66.61% equity stake in Cadista Holdings, Inc. along with its wholly owned subsidiary Cadista Pharmaceuticals, Inc., a USA based generic pharmaceuticals Company having US FDA approved manufacturing facility for solid dosage forms in Salisbury, USA. In the year 2006-07, the Company further invested US$ 6.59 million increasing its stake to 75% in the said Company.
(C) In the Year 2004-05, the Company acquired 80% equity interest in two Belgium based pharmaceutical companies namely Pharmaceutical Services Incorporated N.V. and PSI Supply N.V. through its subsidiary namely Jubilant Pharma N.V. for a consideration of Euro 13.5 million.
During the year ,the Company through its wholly owned subsidiary invested Euro 1 million to acquire balance 20% equity interest in Belgium based said pharmaceutical companies.
(D) In the Year 2006-07, the Company made, further investment of US $ 198.09 million in the Equity of its wholly owned Subsidiary - Jubilant Pharma Pte. Ltd., Singapore.
(E) During the year, the Company through its wholly owned subsidiaries has acquired 100% stake in Hollister –Stier Laboratories LLC(HSL), a US based company engaged in Contract Manufacturing of sterile injectables & producers of allergenic extracts.
(F) During the year, the Company acquired 88.17% stake in Jubilant First Trust Healthcare Limited (JFTHL) for a consideration of Rs.223.55 million, which became subsidiary w.e.f. May 23,2007. JFTHL is engaged in the business of Development & Management of Hospitals & Health care units and is run by a team of professional doctors in West Bengal.
JFTHL has also invested a sum of Rs. 12.52 million to acquire 99.68% stake in Asia Healthcare Development Pvt. Ltd which became its subsidiary w.e.f March 13, 2008.
(G) The Company made during the year, further investment of Rs.208.50 million in Jubilant Infrastructure Ltd., a wholly owned subsidiary engaged in setting up of SEZ in the state of Gujarat.
14. The Company transferred holding in Jubilant Organosys (Shanghai) Ltd., a trading subsidiary, to its wholly owned subsidiary Jubilant Pharma Pte. Ltd., Singapore.
NOTES TO THE ACCOUNTS
111 Annual Report 2007-08
15. (A) Deferred Assets and Liabilities are attributable to the following items: [Rs. in million]
As at 31st March, 2008 2007
Deferred Tax Assets
Provision for Leave Encashment and Gratuity 110.23 49.23
Amount disallowed u/s 43 B 2.84 5.26
Deduction allowed under section 35D 0.82 1.63
Payment under Voluntary Retirement scheme 5.85 5.09
Others 1.05 1.11
120.79 62.32
Deferred Tax Liabilities
Accelerated Depreciation 1,368.75 1,272.85
Difference in value of CWIP/Intangibles 179.09 149.62
1,547.84 1,422.47
Deferred Tax Liabilities (Net) 1,427.05 1,360.15
(B) In the year 2006-07, a sum of Rs.42.20 million recognised as income against the claim raised by the Company for breach of contract by the other party, is treated as non-taxable, based on the legal opinion and upon which auditor has replied upon.
(C) The profit attributable to the operations under the (EOU) Export Oriented Units Scheme are deductible from taxable income up to 31st March 2010,and accordingly income from EOU setup at Nanjangud, Mysore ,and at Bhartiagram, Jyotiba Phoolay Nagar (Gajraula), Uttar Pradesh have been considered as tax deductible, and provision for current tax is made accordingly.
(D) Tax provision are based upon certain expenses , though charged to securities premium account , but claimed as deductible expense in tax return and the benefit of tax has been credited to securities premium.
(E) Tax provision for the current year is after adjustment of net excess provision for the past years amounting to Rs. 57.98 million and further MAT credit entitlement in respect of 2006-2007 amounting to Rs 246.23 million.
16. The bottling unit of the Company situated at Nira holds a potable liquor license for Indian Made Foreign Liquor (IMFL) and the same is bottling IMFL on the order of another Company and is charging bottling fee.
The Accounts recognise Revenue and Expenditure, only to the extent the Company enjoys beneficial interest.
In Compliance with the requirements of Schedule VI to the Companies Act, 1956, the following information is given hereunder in respect of the transactions where the Company does not enjoy beneficial interest.
(Rs. In million)
For the year ended 31st March, 2008 2007
Sales 933.80 856.17
Excise Duty (659.84) (679.22)
Other Income 7.94 3.48
Increase/(Decrease) in Finished & Process Stocks (77.83) 38.68
Raw & Process Materials Consumed (63.72) (79.03)
Stores, Spares, Chemicals, Catalyst & Packing Materials consumed (104.19) (101.07)
Other Expenses (0.30) (0.45)
Freight & Forwarding (including Ocean Freight) - (7.05)
Purchase of Trading Material (7.70) (2.56)
Jubilant Organosys Limited 112
17. Disclosure required by Accounting Standard 29 (AS-29) ”Provisions, Contingent Liabilities and Contingent Assets”
Movement in Provisions: (Rs. in million)
Sr. No.
Particulars of disclosure Class of Provisions
Excise Duty Premium on redemption of
FCCB.
Total
1 Balance as at April 01, 2007 52.93(50.20)
975.15(203.63)
1028.08(253.83)
2 Additional provision during 2007-2008 34.63(52.93)
663.21(777.26)
697.84(830.19)
3 Provision used during 2007-2008 52.93(50.20)
-(-)
52.93(50.20)
4 Provision reversed during 2007-2008 -(-)
4.99(5.74)
4.99(5.74)
5 Balance as at March 31, 2008 34.63(52.93)
1633.37(975.15)
1668.00(1028.08)
Provision for excise duty represents the excise duty on closing stock of finished goods.
18. The Company uses derivative financial instruments such as forward contracts and currency swaps to selectively hedge its currency exposures, firm commitments and highly probable forecast transactions, denominated in USD, EURO and GBP. Usually, the forward contracts mature within twelve months. The Company also enters into interest rate swaps to selectively hedge its interest rate exposures. The Company actively manages its currency/interest rate exposures through a centralised treasury setup and uses derivatives to mitigate the risk from such exposures.
No derivative transactions are entered into for any speculative purpose.
The information on derivative instruments is as follows:
a) Derivative instruments outstanding:
Details Buy/Sell Amount (foreign currency in millions)
31.03.2008 31.03.2007
Foreign Exchange Contracts
- USD/INR Sold USD 87.58 USD 33.04
- USD/INR Bought - USD 19.22
- EURO/USD Sold EURO 11.52 EURO 9.32
- GBP/USD Sold - GBP 0.28
Currency Swaps
- Loans of JPY 2304.50 million swapped into USD USD 20.00 USD 20.00
Interest Rate Swaps
- Loans swapped from floating six month USD LIBOR to fixed USD interest rate
- USD 20.00
NOTES TO THE ACCOUNTS
113 Annual Report 2007-08
b) Foreign currency exposure not hedged by derivative instrument:
Details Amount (foreign currency in millions)
31.03.2008 31.03.2007
Amount receivable on account of sale of goods/services. USD 17.44 USD 32.02
EURO 1.78 EURO 0.67
GBP 0.07 GBP 0.04
Amount payable on account of purchase of goods/services, loans, FCCB, etc.
USD 380.23 USD 327.70
- EURO 0.05
- JPY 4.88
Amount outstanding as deposits with Banks USD 0.27 USD 0.41
19. Effective April 01,2007, the Company adopted the revised accounting standard AS-15 issued by The Institute of Chartered Accountants of India on employee benefits. Pursuant to the adoption, the transitional obligation of the Company amounted to Rs. 90.24 million (Net of deferred tax of Rs. 46.47 million) and as required by the Standard, the same has been adjusted against opening balance of General Reserve.
The Company has calculated the various benefits provided to employees as under:
A) Defined Contribution Plans
a) Provident Fund b) Superannuation Fund
During the year the Company has recognised the following amounts in the Profit and Loss account:
(Rs. in million)
For the year ended 31st March, 2008
Employers Contribution to Provident Fund 48.77
Employers Contribution to Superannuation Fund 17.94
B) State Plans
a) Employee State Insurance b) Employee’s Pension Scheme 1995
During the year the Company has recognised the following amounts in the Profit and Loss account:
(Rs. in million)
For the year ended 31st March, 2008
Employers Contribution to Employee State Insurance 1.24
Employers Contribution to Employee’s Pension Scheme 1995 17.05
C) Defined Benefit Plans
a) Gratuity b) Leave Encashment
The discount rate assumed is 8.55 % which is determined by reference to market yield at the Balance Sheet date on government bonds. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
Jubilant Organosys Limited 114
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
(Rs. in million)
Gratuity* Leave Encashment
Present Value of obligation as at period beginning 31st March, 2007 188.56 80.05Current service cost 22.39 15.99Interest cost 16.12 6.85Actuarial (gain)/loss (3.15) (18.23)Present value of obligation as at period ended 31st March, 2008(Net of Benefits Paid)
223.92 84.66
Reconciliation of the present value of defined benefit obligation and the fair value of the plan assets:
Gratuity* Leave Encashment
Present Value of obligation as at period ended 31st March, 2008 223.92 84.66Fair value of plan assets at period end - -Assets/(Liabilities) recognised in the Balance Sheet (223.92) (84.66)
Cost recognised for the period (included under Salaries, Wages, Allowances, Bonus and Gratuity):
Gratuity* Leave Encashment
Current service cost 22.39 15.99Interest cost 16.12 6.85Actuarial (gain)/loss (3.15) (18.23)Net cost recognised for the period 35.36 4.61
*Excluding for certain employees of Nanjangud Unit.
Reconciliation of opening and closing balances of the present value of the defined benefit obligation**:(Rs. in million)
Gratuity
Present Value of obligation as at period beginning 31st March, 2007 16.59Current service cost 3.27Interest cost 1.42Actuarial (gain)/loss (0.33)Benefits paid (0.51)Present value of obligation as at period ended 31st March, 2008 20.44
Reconciliation of the present value of defined benefit obligation and the fair value of the plan assets**:
Gratuity
Present Value of obligation as at period ended 31st March, 2008 20.44Fair value of plan assets at period end 4.71Funded Status excess of Actual over estimated 10.36Assets/(Liabilities) recognised in the Balance Sheet (15.72)
Cost recognised for the period(included under Salaries, Wages, Allowances, Bonus and Gratuity)**:
Gratuity
Current service cost 3.27Interest cost 1.42Actuarial (gain)/loss (1.37)Expected Return on Plan Asset (0.31)Net cost recognised for the period 3.01
** In respect of certain employees of Nanjangud Unit.
NOTES TO THE ACCOUNTS
115 Annual Report 2007-08
(Rs. in million)
Particulars Pharmaceuticals and Life
Science Products & Services Industrial & Performance
ProductsTotal
2008 2007 2008 2007 2008 2007
1) Revenue 10,553.99 7,223.89 10,653.50 10,238.00 21,207.49 17,461.89
Less: Inter Segment Revenue 41.11 27.65 41.11 27.65
Less: Excise Duty on Sales 347.53 283.96 1,051.36 1,053.29 1,398.89 1,337.25
Net sales 10,206.46 6,939.93 9,561.03 9,157.06 19,767.49 16,096.99
2) Segment results 3,196.66 1,979.56 1,327.11 1,068.82 4,523.77 3,048.38
Less : Interest (Net) 146.80 150.63
Other un-allocable expenditure(net of un-allocable income)
(222.05) (98.01)
Total Profit Before Tax 3,196.66 1,979.56 1,327.11 1,068.82 4,599.02 2,995.76
3) Capital Employed
(Segment Assets - Segment Liabilities)
Segment Assets 12,308.19 9,955.75 8,343.50 7,188.13 20,651.69 17,143.88
Add: Common Assets 16,425.48 14,510.23
Total Assets 12,308.19 9,955.75 8,343.50 7,188.13 37,077.17 31,654.11
Segment Liabilities 1,025.44 995.26 1,529.44 1,492.46 2,554.88 2,487.72
Add: Common Liabilities 2,653.63 2,237.15
Total Liabilities 1,025.44 995.26 1,529.44 1,492.46 5,208.51 4,724.87
Segment Capital Employed 11,282.75 8,960.49 6,814.06 5,695.67 18,096.81 14,656.16
Add: Common Capital Employed 13,771.85 12,273.08
Total Capital Employed 11,282.75 8,960.49 6,814.06 5,695.67 31,868.66 26,929.24
4) Segment Capital Expenditure 763.80 1,514.21 699.03 395.40 1,462.83 1,909.61
Add: Common Capital Expenditure 145.88 62.02
Total Capital Expenditure 763.80 1,514.21 699.03 395.40 1,608.71 1,971.63
5) Depreciation & Amortisation (Net) 378.36 281.05 243.61 224.25 621.97 505.30
Add: Common Depreciation 13.93 10.26
Total Depreciation & Amortisation 378.36 281.05 243.61 224.25 635.90 515.56
Notes:
1) The Company has disclosed Business Segment as the Primary Segment.2) Segments have been identified and reported taking into account the nature of products and services, the differing risk and
returns, the organization structure and the internal financial reporting systems.3) Performance Polymers Segment has been combined with Industrial Products Segment as in the opinion of the management the
same is more representative in the current circumstances.4) The Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments and
amounts allocated on a reasonable basis.5) Total Capital Employed excludes Secured Loans, Unsecured Loans, Deferred Tax.
20. Segment Reporting :
i) Based on the guiding principles given in Accounting Standard on “ Segment Reporting” ((AS-17) Issued by the Institute of Chartered Accountants of India) the Company’s Primary Business Segments are organized around customers on industry and product lines as under :
a. Pharmaceuticals and Life Science Products & Services : Active Pharmaceuticals Ingredients (APIs), Custom Research & Manufacturing Services(CRAMS).
b. Industrial & Performance Products : Organic Intermediates , Agri and Animal Nutrition Products, Industrial products for tyres, textiles and coatings; Consumer Products for woodworking solutions; Food Polymers and Specialty Gases.
ii) In respect of Secondary Segment information, the Company has identified its Geographical segments as (i) Within India (ii) Outside India.
iii) Inter Segment Transfer Pricing
Inter Segment Transfer prices are based on market prices.
iv) The Financial information about the primary business segments is presented in the table given below:
Jubilant Organosys Limited 116
v) Secondary Segment Reporting: Geographical
21 A. Related Party Transactions
a. Related parties where control exists
– Subsidiaries
Jubilant Pharma N.V. Jubilant Organosys (Shanghai) Ltd. Pharmaceutical Services Incorporated N.V. Jubilant Organosys (USA), Inc. PSI Supply N. V. Jubilant Chemsys Ltd. Jubilant Pharma Pte. Ltd. Clinsys Clinical Research Ltd. Cadista Holdings, Inc. Jubilant Biosys Ltd. Cadista Pharmaceuticals, Inc. Jubilant Infrastructure Ltd. Clinsys Holdings,Inc. Jubilant First Trust Healthcare Ltd Clinsys Clinical Research, Inc. (formerly First Trust Healthcare Pvt. Ltd) HSL Holdings Inc. Asia Healthcare Development Pvt Ltd. Hollister-Stier Laboratories LLC.
b. Other related parties with whom transactions have taken place during the year
– Associates
Jubilant Enpro Pvt. Ltd., Jubilant Oil & Gas Pvt. Ltd., Enpro Oil Pvt. Ltd. Domino Pizza India Ltd., Tower Promoters Pvt Ltd.
– Others
Vam Employees Provident Fund Trust, Jubilant Bhartia Foundation.
c. I. Key Management Personnel
Mr. Shyam. S. Bhartia, Mr. Hari. S. Bhartia, Mr. S. N. Singh, Mr. Shyam Bang, Dr. J. M. Khanna, Mr. R. Sankaraiah.
II. Relatives of Key Management Personnel
Ms. Asha Khanna , Ms. Shobha Bang
NOTES TO THE ACCOUNTS
(Rs. in million)
ParticularsWithin India Outside India Total
2008 2007 2008 2007 2008 2007
External Revenue by Geographical location of Customers
10,909.09 9,773.88 8,858.40 6,323.11 19,767.49 16,096.99
Carrying Amount of Segment Assets 22,780.25 18,153.31 14,296.92 13,500.80 37,077.17 31,654.11
Capital Expenditure 1,608.71 1,971.63 - - 1,608.71 1,971.63
(Rs. in million)
ParticularsIndia Americas & Europe China Asia & Others Total
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
External Revenue by Geographical Markets
10,909.09 9,773.88 4,364.00 3,770.80 3,093.40 1,425.80 1,401.00 1,126.51 19,767.49 16,096.99
117 Annual Report 2007-08
d. Transactions with related parties during the period (Rs.in million)
Particulars Subsidiaries Associates Key Mgmt. Personnel &
Relatives
Others
Expenses recharged by Companies/to others for facilities/services provided and Software Purchased
79.15(38.54)
21.71(19.60)
0.05(-)
Assets purchased during the year -(-)
17.47(-)
Sale of Finished Goods 2986.21(1888.79)
Purchase of Innovators Samples & Products under Development
5.92(23.09)
Expenses paid/made on our Behalf 52.83(40.02)
Guarantees on behalf of Subsidiary 2000.00 (-)
Company’s Contribution to PF Trust. 115.72(93.59)
Inter-Corporate Deposits Given 443.60(1203.69)
Inter-Corporate Deposits Received Back/adjusted against Investment
7.00(942.69)
Interest on Inter-Corporate Deposits 47.94(13.71)
Investments in Equity Share Capital 432.05(10,077.17)
Investment in optionally convertible Non-cumulative Redeemable Preference Shares.
221.00(245.50)
Remuneration and Related Expenses 137.57(78.70)
Donation 0.50(-)
Receipt of Sales Consideration for transfer of Holding in Jubilant Organosys (Shanghai) Ltd.
8.80(-)
Rent paid 24.50(-)
5.05(3.93)
Housing Loan Given -(2.50)
Security Deposit Given 21.00(-)
Housing Loan Outstanding 2.00(2.50)
Inter-Corporate Deposits Outstanding (including interest accrued thereon)
797.80(361.20)
Outstanding Receivables (other than ICD’s) 935.18(671.55)
Outstanding Payables 38.77(24.39)
Notes: (1) Managerial remuneration – Details as per Note 22 of Schedule “O”. (2) Figures in ( ) indicates in respect of previous year. (3) Related party relationship is as identified by the Company and relied upon by the Auditors. (4) No amount has been written off/provided for in respect of dues from or to any related party.
Jubilant Organosys Limited 118
21B. Promoter Group
Group companies
The Company is controlled by Mr. Shyam S Bhartia/Mr. Hari S Bhartia group (“the promoter group”), being a group as defined in the Monopolies and Restrictive Trade Practices Act, 1969.
The persons constituting the promoter group include individuals and corporate bodies who/which jointly exercise, and are in a position to exercise, control over the Company. The names of these individuals and bodies corporate are Mr. Shyam S Bhartia, Mr. Hari S Bhartia, Mrs. Shobhana Bhartia, Mrs. Kavita Bhartia, Mr.Priyavrat Bhartia, Mr.Shamit Bhartia, Ms. Aashti Bhartia, Master Arjun S Bhartia, Best Luck Vanijya Private Ltd., Enpro Exports Private Ltd., Jaytee Private Ltd., Jubilant Enpro Private Ltd., Jubilant Securities Private Ltd., Jubilant Capital Private Ltd., Klinton Agencies Private Ltd., Speedage Vinimay Private Ltd., Rance Investment Holdings Ltd., Cumin Investments Ltd., Torino Overseas Ltd., Vam Holdings Ltd., Westcost Vyapaar Private Ltd., Nikita Resources Private Ltd., Jubilant Oil & Gas Pvt. Ltd.
22. Details of Remuneration to the Managing Directors,Executive Directors & other Directors under section 198 of the Companies Act 1956
(Rs. in million)
2007-2008 2006-2007
i) Salaries 18.58 16.42
ii) Rent/Rent Free Accommodation 50.64 10.61
iii) Contribution to Provident Fund and Superannuation Fund 5.02 4.43
iv) Perquisite value of other Benefits 7.82 4.89
v) Commission to Managing Directors 42.00 ** 33.00 **
vi Commission to other Directors (Excluding Executive Directors) 1.00 1.00
125.06 70.35
The above excludes provision for gratuity/earned leave where calculations are on overall Company basis.
Calculation of Profit in accordance with Section 198 of the Companies Act, 1956 for the purpose of calculation of Commission payable to Directors.
Profit before tax as per Profit & Loss Account 4599.02 2995.76
Add: Managerial Remuneration as above 125.06 70.35
Directors Sitting Fees 0.66 0.72
Depreciation(Net) as per Accounts 635.90 515.56
Net Profit 5360.64 3582.39
Less: Depreciation under Section 350 of the Companies Act 1956 635.90 515.56
Premium on Redemption of FCCB 658.22 771.52
Exchange Gain on FCCBs/Loans 1039.71 658.19
Profit / (Loss) on Sale of Assets (Net) (128.99) (15.72)
Net Profit in accordance with Section 198 (I) /349 of Companies Act 1956 for calculation of Commission to Directors
3155.80 1652.84
Commission @ 0.75% (Previous Year @ 1% ) to each Managing Director (Rounded amount)
47.00 33.00
As Determined by the Board & Restricted to:
**Managing Directors (Previous year Rs.16.50 million to each) 42.00 33.00
Other Directors(Excluding Executive Directors) Rs.0.20 million each (Previous Year Rs.0.20 million each) .
1.00 1.00
NOTES TO THE ACCOUNTS
119 Annual Report 2007-08
Sr. No.
Class of Goods QuantitativeDenomination
Capacity*Installed
Opening Stock Production Turnover Closing Stock
Quantity Rs. in million
QTY @@ Quantity Rs. in million
Quantity Rs. in million
1. Alcohol KBL 157,700 1,625 19.87 103,136 861 19.61 481 6.62 KBL (157,700) (1,709) (28.12) (116,737) (147) (4.50) (1,625) (19.87)
2 Organic Including Specialty Chemicals & Its Intermediates
M.T 522,261 25,484 440.38 518,819 243,597 15725.19 40,278 385.07 M.T (508,423) (10,152) (326.90) (493,929) (225,271) (12,724.60) (25,484) (440.38)
3 Polymers Including Co-polymers & VP Latex/ SBR latex
M.T 34,560 871 58.79 27,666 27,765 1871.32 724 51.58 M.T (34,560) (1,053) (63.29) (24,958) (25,078) (1,664.10) (871) (58.79)
4 Single Super Phosphate M.T 425,700 10,601 35.66 142,964 134,588 603.00 18,978 97.16 M.T (161,700) (5,618) (17.80) (170,095) (165,111) (711.96) (10,601) (35.66)
5 Sulphuric Acid M.T 68,835 1,643 0.43 50,795 16,905 102.14 2,089 19.65 M.T (57,750) (490) (0.25) (62,289) (23,090) (62.43) (1,643) (0.43)
6 Dry & Aqueous Choline Chloride & Ethyoxylates
M.T 22,000 173 13.71 7,952 4,550 240.60 538 31.93 M.T (22,000) (323) (15.18) (8,269) (4,978) (240.34) (173) (13.71)
7 Feed Premixes M.T 3,500 168 1.83 2,010 2,036 129.25 120 3.13 M.T (3,500) (177) (3.18) (1,794) (1,775) (88.90) (168) (1.83)
8 Agri Chemicals K.L - 67 6.55 1,133 966 58.88 234 5.84 K.L - (49) (6.17) (809) (788) (26.46) (67) (6.55)
9 Active Pharma Ingredients (API)
M.T 393 24 45.89 293 302 1844.22 15 97.02 M.T (336) (28) (52.58) (247) (251) (1,452.89) (24) (45.89)
10 IMFL KBL 10,800 446 77.26 4,841 - - 5 1.31 KBL (10,800) (233) (38.79) (5,021) - - (446) (77.26)
* Under the Industrial Policy Statement dated July 24,1991 and the notifications issued thereunder, no licensing is required for the Company’s products.
@@ Includes products manufactured by contract manufacturers on conversion basis wherever applicable
Notes:
a) Acetaldehyde is also produced which is mainly for captive consumption.b) Closing Stock has been arrived at after considering Captive Consumptions.c) Installed capacities are as certified by the Management, being a technical matter and relied upon by the Auditors accordingly.d) Formaldehyde is also produced which is mainly used captively as process chemicals.e) V.P. Latex / SBR Latex installed Capacity is on Wet Basis.f) Difference in quantitative tally represent materials damaged / obsolete / issue for sample etc.
23. (A) Capacities, Stocks, Production and Turnover
23. (B) Particulars in respect of Trading goods.
Particulars 2007-2008 2006-2007
Quantity Rs. in
million
Quantity Rs. in
million
i) Opening Stock
Agrochemicals (Ltrs.) 63,672 11.70 113,225 11.23
Other Organic Chemicals (MT) - - - -
Others 145 8.00 137 0.26
ii) Purchases
Agrochemicals (Ltrs.) 1,132,000 38.93 1,014,923 44.00
Other Organic Chemicals (MT) 2,364 110.80 1,322 64.15
Others 1,578 342.87 1,070 262.10
iii) Sales
Agrochemicals (Ltrs.) 802,530 34.42 1,064,476 65.33
Other Organic Chemicals (MT) 2,364 130.50 1,322 79.96
Others 1,549 379.09 1,062 283.86
iv) Closing Stock
Agrochemicals (Ltrs.) 393,142 16.22 63,672 11.70
Other Organic Chemicals (MT) - - - -
Others 174 5.61 145 8.00
Jubilant Organosys Limited 120
2007-2008 2006-2007
I. (A) Profit Computation for Basic Earnings Per Share of Re 1 each
Net Profit as per Profit and Loss Account available for Equity
Shareholders
Rs. in million 3,922.67 2,314.94
Adjustments for the purpose of Diluted EPS :-
Interest on Foreign Currency Convertible Bonds Rs. in million 0.33 1.54
Less: Tax on above Rs. in million (0.05) (0.35)
(B) Profit for Diluted Earnings Per Share of Re 1 each Rs. in million 3,922.95 2,316.13
II. Weighted average number of equity shares for Earnings per Share
computation
(A) For Basic Earnings per Share Nos 143,919,482 143,156,801
(B) For Diluted Earnings per Share:
No. of shares for Basic EPS as per II A Nos 143,919,482 143,156,801
Add: Weighted Average outstanding Option/Shares related to
FCCB & Employee stock options.
Nos 34,742,665 32,096,107
No. of shares for Diluted Earnings per Share Nos 178,662,147 175,252,908
III. Earnings per Share (Weighted Average)
Basic Rupees 27.26 16.17
Diluted Rupees 21.96 13.22
23. (D) Value of imported and indigenous raw materials, stores and spare parts consumed and percentage thereof for the year.
Particulars 2007-2008 2006-2007
Rs. in million % Rs. in million %
Consumption of Raw Materials
- Imported 1,553.22 17.37 1,676.07 21.17
- Indigenous 7,389.56 82.63 6,240.33 78.83
8,942.78 100.00 7,916.40 100.00
Stores,Spares,Chemicals,Catalyst & Packing
Materials Consumed
- Imported 127.69 11.97 103.09 10.72
- Indigenous 939.14 88.03 858.44 89.28
1,066.83 100.00 961.53 100.00
23. (C) Raw Materials Consumed
Items 2007-2008 2006-2007
Quantity Rs. in million Quantity Rs. in million
Molasses (MT) 443,409 1,053.09 513,177 1,569.09
Alcohol (KL) 152,811 2,656.53 106,993 2,098.43
Process Chemicals (MT) 129,834 3,443.18 86,150 2,664.49
Rock Phosphate (MT) 82,596 302.67 98,421 328.44
Sulphur etc (MT) 40,613 248.37 48,759 140.21
Chemicals for Feed Additive (Kgs) 2,868,933 166.77 2,643,442 145.38Chemicals for Latex (MT) 2,618 242.97 2,345 249.99Chemicals for API (MT) 868 732.02 7,019 618.54Others (MT) (none of which individually account for more than 10% of total consumption)
- 97.18 - 101.83
8,942.78 7,916.40
23. (E) Earnings Per Share (EPS)
NOTES TO THE ACCOUNTS
121 Annual Report 2007-08
[Rs. in million]
2007-2008 2006-2007
23. (F) Expenditure in foreign currency (on remittance basis)- Technical Knowhow Fee/Services/Patent/Consultancy 95.17 49.13
- Travel /Entertainment Expenses 29.56 31.00
- Commission on Export Sales 55.62 45.50
- Interest on FCCB 0.70 2.31
- R&D Materials 10.36 30.90
- Others 33.00 35.03
23. (G) Value of Imports on C.I.F. basis
- Raw Materials 2,160.23 1,973.53
- Spares, Process Chemicals & Catalyst 207.55 119.09
- Capital Goods 103.78 150.82
- Trading Goods 274.72 252.73
23. (H) Remittance in Foreign Currency on account of Final Dividend
a) Amount of Dividend Remitted 6.96 6.96
b) Number of Non-Resident Shareholders 3 3
c) Number of Equity Shares held by Non-Resident Shareholders* 5,570,445 5,570,445
d) The Year to which Dividend related 2006-2007 2005-2006
*excluding where Dividend has been paid in Indian currency
23. (I) Earnings in Foreign Exchange
- Export Sales (FOB Value) 8562.45 6145.65
- Interest Income on Bank Deposits (overseas) 0.28 189.52
24. Events occurring after the close of the fiscal year
Acquisitions of Draxis Health Inc.
Subsequent to the year ended March 31, 2008, the Company has entered into arrangement agreement whereby a wholly owned subsidiary of the Company will acquire all the shares of Canada based premier specialty pharmaceutical company, Draxis Health Inc., at a price of US$ 6 per share in cash by way of plan of arrangement. The total value of the transaction is approx. US$ 255 million and is likely to complete by Q1 FY-2009. Company plans to fund the acquisition through combination of cash-on -hand and debt.
25. Previous Year’s figures have been regrouped/rearranged wherever found necessary to conform to this year’s classification.
Signatures to Schedule “A” to “O” forming part of the Balance Sheet and Profit and Loss Account.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
Jubilant Organosys Limited 122
Balance Sheet Abstract and Company’s General Business Profile
I. Registration Details
Registration No. 2 0 4 6 2 4 State Code 2 0
Balance Sheet Date 3 1 0 3 2 0 0 8 Date Month Year
II. Capital Raised During the Year (Amount in Rs.Thousands) *
Public Issue Rights Issue
N I L N I L
Bonus Issue Private Placement
N I L N I L
* Issue of equity shares upon conversion of FCCB’s -Rs.2676 & exercise of options under ESOP-Rs.65.
III. Position of Mobilization and Deployment of Funds(Amount in Rs. Thousands)
Total Liabilities Total Assets3 1 8 6 8 6 6 0 3 1 8 6 8 6 6 0
Sources of Funds Paid-Up Capital Reserves & Surplus
1 4 6 9 5 7 1 3 6 3 9 6 6 7 Secured Loans Unsecured Loans
6 1 7 4 4 5 9 1 0 4 8 0 5 3 2
Deferred Tax Assets & Liability (Net)1 4 2 7 0 4 5
Application of Funds Net Fixed Assets Investments
1 2 4 4 9 0 8 0 1 3 7 8 2 5 1 0 Net Current Assets Misc. Expenditure
5 6 2 0 5 8 0 1 6 4 9 0
IV. Performance of Company (Amount in Rs. Thousands)
Turnover** Total Expenditure
2 0 9 1 5 4 8 9 1 6 3 1 6 4 6 5 **Includes other Income
+ – Profit/Loss Before Tax + – Profit/Loss After Tax
� 4 5 5 9 0 2 4 � 3 9 2 2 6 7 1
Basic Earning Per Share of Re 1 each (In Rs.) Dividend Rate %
2 7 . 2 6 1 5 0
V. Generic names of Principal Products/Services of Company (as per monetary terms)
Item Code (ITC No.) Product Description
2 9 3 3 3 1 . 0 0 P Y R I D I N E2 9 3 3 1 9 . 9 0 O X C A R B A Z E P I N E2 9 1 5 2 1 . 0 0 A C E T I C A C I D
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
123 Annual Report 2007-08
AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF JUBILANT ORGANOSYS LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF JUBILANT ORGANOSYS LIMITED AND ITS SUBSIDIARIES.
1 We have examined the attached Consolidated Balance Sheet of Jubilant Organosys Limited (‘the company’) and its subsidiaries, namely, Jubilant Biosys Ltd., Clinsys Clinical Research Ltd., Jubilant Chemsys Ltd., Jubilant Infrastructure Ltd., Jubilant First Trust Healthcare Ltd., Asia Healthcare Development Pvt. Ltd., Jubilant Organosys (USA) Inc., Jubilant Organosys (Shanghai) Ltd., Jubilant Pharma N.V., Pharmaceutical Services Incorporated N.V., PSI Supply N.V., Jubilant Pharma Pte Ltd., Clinsys Holding Inc., Clinsys Clinical Research Inc., Cadista Holdings Inc., Cadista Pharmaceuticals Inc., Hollister-Stier Laboratories LLC, and HSL Holdings Inc. as at March 31, 2008, the Consolidated Profit and Loss Account for the year then ended and annexed thereto and the consolidated Cash Flow Statement for the year ended on that date. These financial statements are the responsibility of the Jubilant Organosys Limited’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
2 We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonable basis for our opinion.
3 We report that the Consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of Jubilant Organosys Limited, and its subsidiaries included in the Consolidated Financial Statements.
4 On the basis of the information and explanation given to us and on consideration of the separate audit report on individual audited financial statements of Jubilant Organosys Limited, and its aforesaid subsidiaries, in our opinion, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:
a) In the case of the consolidated Balance Sheet, of the consolidated state of affairs of ‘ the group’ as at March 31, 2008;
b) In the case of the consolidated Profit and Loss Account, of the consolidated results of operations of ‘the group’ for the year ended on that date; and
c) In the case of the consolidated Cash Flow Statement, of the consolidated cash flows of ‘the group’ for the year ended on that date.
For K.N. Gutgutia & Company Chartered Accountants
Place : NoidaDate : 22nd April 2008 B R Goyal
Partner Membership No. 12172
AUDITORS’ REPORT
Jubilant Organosys Limited 124
CONSOLIDATED BALANCE SHEET
(Rs. in million)
As at 31st March, Schedules 2008 2007
SOURCES OF FUNDS Shareholders’ Funds
Share Capital A 146.96 143.76
Reserves & Surplus B 12,415.01 8,917.59
12,561.97 9,061.35
Minority Interest 213.91 174.12
Loan Funds C
Secured Loans 10,585.88 4,171.68
Unsecured Loans 10,498.65 12,354.45
21,084.53 16,526.13
Deferred Tax Liabilities (Net) D 1,302.30 1,360.15
35,162.71 27,121.75
APPLICATION OF FUNDS Fixed Assets E
Gross Block 24,959.09 16,671.47
Less: Depreciation 5,834.90 4,392.48
Net Block 19,124.19 12,278.99
Capital Work-in-Progress 4,846.90 2,356.85
23,971.09 14,635.84
Investments F 456.37 38.84
Current Assets, Loans and Advances G
Inventories 4,349.67 3,532.43
Sundry Debtors 4,257.80 2,948.11
Cash & Bank Balances 5,237.68 8,749.11
Loans and Advances 3,552.70 2,424.69
17,397.85 17,654.34
Less: Current Liabilities & Provisions H
Liabilities 3,717.83 2,917.82
Provisions 2,961.26 2,330.30
6,679.09 5,248.12
Net Current Assets 10,718.76 12,406.22
Miscellaneous Expenditure I 16.49 40.85
(To the extent not written off or adjusted)
35,162.71 27,121.75
Notes to Accounts & Significant Accounting Policies O
Schedule “A” to “I” and “O” referred above form an integral part of the Consolidated Balance Sheet.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
125 Annual Report 2007-08
CONSOLIDATED PROFIT & LOSS ACCOUNT
(Rs. in million)
For the year ended 31st March, Schedules 2008 2007
INCOMESales & Services J 26,287.66 19,434.40
Less: Excise Duty on Sales (1,398.89) (1,337.25)
Net Sales & Services 24,888.77 18,097.15
Other Income K 1,429.99 1,234.55
Increase/(Decrease) in Stocks L 154.48 253.05
26,473.24 19,584.75
EXPENDITUREManufacturing & Other Expenses M 20,536.11 15,814.21
Depreciation & Amortisation (Net) 1,039.14 622.86
Interest N 336.68 194.64
21,911.93 16,631.71 Profit Before Tax 4,561.31 2,953.04
Income Tax
- Current Tax provision including Wealth Tax 702.47 369.84
- Deferred Tax Liability (11.97) 318.61
- Fringe Benefit Tax 27.66 24.04
- MAT Credit Entitlement (145.32) -
572.84 712.49 Profit After Tax 3,988.47 2,240.55
Minority Interests 16.47 39.45
Profit After Tax And Minority Interests 4,004.94 2,280.00
Balance Brought Forward from Previous Year 3,960.05 2,390.69
Balance Available For Appropriation 7,964.99 4,670.69
APPROPRIATIONS Dividend on Equity Shares 219.29 180.07
Tax on Distributed Profits on Equity Shares 37.27 30.57
256.56 210.64
Transfer to General Reserve 1,000.00 500.00
Balance Carried To Balance Sheet 6,708.43 3,960.05 Basic Earnings Per Share of Re 1 each (In Rupees) O 27.83 15.93 Diluted Earnings Per Share of Re 1 each (In Rupees) O 22.42 13.02
Notes to Accounts & Significant Accounting Policies O
Schedule “J” to “O” referred above form an integral part of the Consolidated Profit & Loss Account.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
Jubilant Organosys Limited 126
CONSOLIDATED CASH FLOW STATEMENT
(Rs. in million)
For the year ended 31st March, 2008 2007
A. Cash flow arising from Operating Activities :Net profit before tax 4,561.31 2,953.04Adjustment for : i) Depreciation & Amortisation 1,039.14 622.86
ii) Loss/(Profit) on Sale of Fixed Assets (Net) 128.99 31.68 iii) Interest (Net) 336.68 194.64 iv) Amortisation/Write off (VRS Expenses) 24.36 30.95 v) Provision for Doubtful Debts 31.23 8.24 vi) Provision for Gratuity & Leave Encashment 77.13 46.15 vii) Bad Debts/Irrecoverable Advances written off (net of write-in) 1.31 (4.68) viii) Unrealised Exchange Difference (1,030.35) (426.12)ix) Interest Income as shown in Schedule “K” (252.91) (425.27)x) Income from Current Investment (Non Trade) - Dividend (8.58) (2.97)
347.00 75.48Operating Profit before Working Capital Changes 4,908.31 3,028.52 Adjustment for : i) Trade and other Receivables 1,993.61 544.19
ii) Inventories 217.43 415.54 iii) Miscellaneous Expenditure - 39.60
2,211.04 999.33 2,697.27 2,029.19
i) Current Liabilities & Provision 360.07 113.15Cash inflow from Operations 3,057.34 2,142.34 Deduct : i) Interest Paid 335.45 220.68
ii) Direct taxes Paid (net of refunds) 454.22 355.66 789.67 576.34
Add : i) Interest Income Received (as shown in Schedule “K”) 307.01 340.36 Net Cash Inflow/(Outflow) in course of Operating Activities 2,574.68 1,906.36
B. Cash Flow arising from Investing Activities :Outflow i) Acquisition/Purchase of Fixed Assets/CWIP 5,134.72 3,674.23
ii) Purchase/(Sale) of Investments (net) 417.53 36.61 iii) Payment for Business Acquisitions 5,868.05 -
11,420.30 3,710.84 Deduct :Inflow i) Sale Proceeds of Fixed Assets 4.08 8.11
ii) Interest Received 14.12 24.91 iii) Dividend Received 8.58 2.97
26.78 35.99 Net Cash Inflow/(Outflow) in course of Investing Activities (11,393.52) (3,674.85)
C. Cash flow arising from Financing Activities :Inflow i) Proceeds from Issue of Share Capital { Including Share Premium of
Rs. 13.06 million (Previous year Rs.0.60 million) }13.59 0.90
ii) Proceeds from Long Term & Short term Borrowings 6,178.83 946.30iii) Proceeds from issue of Foreign Currency Convertible Bonds {net of
expenses - Rs. Nil (Previous year Rs. 124.87 million)} - 8,885.13 iv)) Payment to Minority (55.64) -
Deduct : 6,136.78 9,832.33 Outflow i) Dividend Paid (including Corporate Dividend Tax & Education Cess) 208.72 202.82 Net Cash Inflow/(Outflow) in course of Financing Activities 5,928.06 9,629.51
D. Change in Foreign Currency Translation Reserve on Consolidation (622.02) (501.29)Net Increase in Cash & Cash equivalents (A+B+C+D) (3,512.80) 7,359.73Add: Cash & Cash Equivalents at the beginning of Year (Including Balance in Dividend Accounts)
8,749.11 1,389.57
Add: Cash & Cash Equivalents on consolidation of Hollister-Stier Laboratories LLC & Jubilant First Trust Healthcare Ltd. (including Step down subsidiary Asia Healthcare Development Pvt. Ltd.)
1.91 -
Cash & Cash Equivalents at the close of the Year (Including Balance in Dividend Accounts)
5,238.22 8,749.30
Cash & Cash Equivalents Comprise:Cash and Bank Balances 5,237.68 8,749.11 Unrealized Exchange Difference on Foreign Currency Cash and Cash Equivalents 0.54 5,238.22 0.19 8,749.30
Notes: 1) Cash flow statement has been prepared under the indirect method as set out in the Accounting Standard 3 (AS-3)-”Cash Flow Statements”, issued by the Institute of Chartered Accountants of India.
2) Purchase of fixed assets includes movement of Capital Work-in-Progress during the year.3) Closing Cash & Cash Equivalents includes Rs. 4654.78 million (Previous Year Rs. 8266.33 million) which can be utilised for specific purposes.4) Previous Year’s figures have been regrouped/rearranged wherever found necessary to conform to this year’s classification.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
127 Annual Report 2007-08
Notes:
1) The Company issued Zero Coupon Foreign Currency Convertible Bonds due 2011 (FCCB 2011) for an aggregate value of US$ 200 million, convertible at any time between June 30, 2006 to May 10, 2011 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDS) each representing one equity share at an initial conversion price of Rs.413.4498 per share with a fixed rate of exchange of Rs.45.05 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 19, 2009, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 20, 2011 at 142.429% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Assuming full conversion of these FCCBs, 21,792,246 equity shares of Re 1 each would be allotted.
2) The Company issued Zero Coupon Foreign Currency Convertible Bonds due 2010 (FCCB 2010) for an aggregate value of US$75 million, convertible at any time between July 03, 2005 to May 14, 2010 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDS) each representing one equity shares at an initial conversion price of Rs.273.0648 per share with a fixed rate of exchange of Rs.43.35 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 23, 2008, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 24, 2010 at 138.383% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. US$ 14.093 million were converted upto 31st March, 2008 into equity shares and this represents 2,237,308 shares of Re.1 each as on 31st March, 2008.
The outstanding balance of FCCB 2010 - US$ 60.907 million, on conversion would result in allotment of 9,669,206 equity shares of Re 1 each.
3) The Company issued 1.5% Foreign Currency Convertible Bonds due 2009 (FCCB 2009) aggregating US$ 35 million, in the year 2004-05. The Bonds are convertible at any time between June 14, 2004 and April 15, 2009 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDSs) each representing one Equity Shares at an initial conversion price of Rs.163.646 per share with a fixed rate of exchange on conversion of Rs. 44.805 = US $1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 14, 2007 and prior to May 08, 2009, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 15, 2009 at 113.70% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Out of these FCCB 2009, US$ 34.70 million were converted upto 31st March 2008 into equity shares and this represents 9,500,521 shares of Re.1 each as on 31st March, 2008.
The outstanding balance of FCCB 2009 - US$ 0.30 million, on conversion would result in allotment of 82,140 equity shares of Re 1 each.
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
(Rs. in million)
As at 31st March, 2008 2007
A. SHARE CAPITALAuthorised550,000,000 Equity Shares of Re. 1 each
(Previous Year 550,000,000 Equity Shares of Re.1 each)550.00 550.00 550.00 550.00
Issued & Subscribed146,217,914 Equity Shares of Re. 1 each
(Previous Year 143,477,334 Equity Shares of Re.1 each)146.22 143.48 146.22 143.48
Paid up 146,185,914 Equity Shares of Re. 1 each 146.19 143.44
(Previous Year 143,445,334 Equity Shares of Re.1 each)Add: Equity Shares Forfeited (paid up) 0.02 0.02
146.21 143.46 Add: Share Application money received pending allotment 0.75 0.30
146.96 143.76
Jubilant Organosys Limited 128
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
4) Under the Jubilant Employees Stock Option Plan;
a) Options in force as of March 31, 2008- 539,160 options convertible into 2,695,800 shares of Re. 1 each (Previous year 555,494 options convertible into 2,777,470 shares)
b) 13,641 vested options have been exercised upto 31st March, 2008.
5) Paid up capital includes:
a) 43,990,695 equity shares of Re. 1 each fully paid allotted and issued in 2003-04, as bonus shares by capitalization of Capital Redemption Reserve in accordance with the resolution passed by the shareholders dated February 28, 2004.
b) 1,644,020 equity shares of Re. 1 each allotted and issued pursuant to the Scheme of Amalgamation of erstwhile Ramganga Fertilizers Ltd. with the Company for consideration other than cash in 1994-95. {761,780 equity shares of Re. 1 each allotted to Vam Investments Ltd. and 159,420 equity shares of Re. 1 each allotted to Vam Leasing Ltd. were cancelled during the year 2002-03 - refer note no 6 below}.
c) 5,064,000 equity shares of Re. 1 each allotted and issued pursuant to the Scheme of Amalgamation to shareholders of erstwhile Anichem India Ltd. and of erstwhile Enpro Specialty Chemicals Ltd. with the Company for consideration other than cash in 1999-00. {1,620,970 Equity shares of Re.1 each allotted to Vam Investment Ltd. and 1,714,000 equity shares of Re. 1 each allotted to Vam Leasing Ltd. were cancelled during the year 2002-03 -refer note no. 6 below}.
d) 68,205 (Previous year 3,000) equity shares of Re. 1 each allotted to employees and directors of Company on exercise of the vested stock options in accordance with the terms of exercise under the “Jubilant Employees Stock Option Plan”.
6) Pursuant to the Scheme of Amalgamation approved by the Hon’ble High Court of Judicature, Allahabad and Hon’ble High Court of Delhi, Delhi, and as contained in the Opening Reference Balance Sheet annexed to the Scheme, the paid up share capital of the Company reduced during the year 2002-03 by cancellation of 2,382,750 and 1,873,420 equity shares of Re. 1 each fully paid up held by erstwhile Vam Investments Ltd. and Vam Leasing Ltd. respectively as investments in the company.
(Rs. in million)
As at 31stMarch, 2007
Additions /Created
during the year
Deductions As at 31stMarch, 2008
B RESERVES AND SURPLUS
Capital Reserve 22.82 22.82
Capital Redemption Reserve 9.86 9.86
Amalgamation Reserve 13.21 13.21
Securities Premium Account (1) 3,380.05 693.01 102.37 3,970.69
Foreign Currency Translation Reserve (471.16) 740.92 (1,212.08)
Legal Reserve 2.84 2.84
General Reserve (2) 1,999.92 1,000.00 90.24 2,909.68
4,957.54 5,717.02
Add : Surplus as per Profit & Loss Account (3) 3,960.05 4,004.94 1,267.00 6,697.99
Total 8,917.59 5,697.95 2,200.53 12,415.01
Previous Year 8,114.74 3,043.04 2,240.19 8,917.59
Notes :
(1) a) Additions denote premium on issue of shares on conversion of FCCB and exercise of ESOP options. b) Deductions denote provision of premium on redemption of FCCB’s (net of tax benefits), Exchange Loss on
conversion of FCCB’s and tax benefits in respect of expenses charged to Securities Premium Account (Refer Note 12(D) of Schedule ”O”.
(2) Deductions denote adjustment of employee benefits of Rs. 90.24 million (net of deferred tax of Rs.46.47 million) in terms of the transitional provision of AS-15 (revised) for Holding Company.
(3) Adjustment of employee benefits of Rs. 10.44 million in terms of the transitional provision of AS-15 (revised) in respect of Subsidiaries.
129 Annual Report 2007-08
Notes:
1. Term Loans (in Indian Currency) from Export Import Bank of India, Corporation Bank, External Commercial Borrowing of US$ 20 million from State Bank of India-New York Branch, Foreign Currency Loan of US$ 75 million from State Bank Of India and, US$ 20 million (in eq. JPY 2,304.50 million) from BNP Paribas Singapore are secured by a first charge by way of: -
a) Mortgage of the immovable assets and charge by way of hypothecation on the movable assets, both present and future [save & except Book Debts and Bankers Goods as per Note 2 below and specified exclusions listed in notes i to iv below] pertaining to the Company’s manufacturing facilities located at Bhartiagram, District Jyotiba Phoolay Nagar, Uttar Pradesh and at Village Samlaya, Taluka Savli, District Vadodara, Gujarat.
i. Specified land and buildings situated at Bhartiagram, District Jyotiba Phoolay Nagar, Uttar Pradesh and constructed out of the financial assistance granted by HDFC.
ii. Land and Building located at Plot No 1A, Sector 16A, Noida, Uttar Pradesh. iii Land & Building of Active Pharmaceuticals Ingredients Unit located at Nanjangud, Mysore, Karnataka. iv Immovable assets of the Company situated at Nimbut Village, Nira, District Pune, Maharashtara.
b) Hypothecation of fixed assets [other than Land and Building as mentioned in 1 a (iii) above] both present and future pertaining to the Company’s manufacturing unit situated at Nanjangud, Mysore, Karnataka;
c) Such charges to rank pari-passu amongst the said chargeholders;
d) Mortgage in respect of External Commercial Borrowing of US$ 20 million from BNP Paribas, Singapore, State Bank of India –FCNRB USD 75 million, Corporation Bank –Rs.1500 million is pending creation with respect to properties of Company’s Fertiliser Division.
2. i) Working Capital Facilities sanctioned by Consortium of Banks and notified Financial Institutions comprising of ICICI Bank Limited, Corporation Bank, Punjab National Bank, State Bank of India, Canara Bank, Export Import Bank of India, ING Vysya Bank Ltd., ABN Amro Bank and Standard Chartered Bank are secured by a first charge by way of hypothecation, ranking pari passu inter-se Banks, of the entire book debts and receivables of the Company and moveable inventories both present and future at the manufacturing facilities at Bhartiagram,
(Rs. in million)
As at 31st March, 2008 2007C. LOANS
SecuredA. Loans From Bank
- Term Loans [Including Rs. 7534.05 million (Previous year Rs.1882.25 million) in foreign currency]
9,245.40 2,171.25
- Working Capital [Including Rs. 1136.64 million (Previous year Rs.342.53 million) in foreign currency]
1,172.68 1,721.20
- Vehicle Loans 0.80 1.23
B. Loans From Others
- Term Loans 167.00 278.00
10,585.88 4,171.68
Unsecured
1.5 % Foreign Currency Convertible Bonds -FCCB 2009 * 12.03 82.59
Zero Coupon Foreign Currency Convertible Bonds -FCCB 2010 * 2,443.59 3,260.25
Zero Coupon Foreign Currency Convertible Bonds -FCCB 2011 * 8,024.00 8,694.00
Short Term Loans From Bank [Including Rs. 3.98 million (Previous year Rs. 5.36 million) in foreign currency]
10.08 305.36
Other Loans From Bank [Including Rs. 8.04 million (Previous year Rs. 10.96 million) in foreign currency]
8.04 10.96
Fixed Deposits 0.26
Deferred Sales Tax Credits 0.91 1.03
10,498.65 12,354.45*(Refer Note 8 of Schedule “O”)
Jubilant Organosys Limited 130
District Jyotiba Phoolay Nagar, Uttar Pradesh; at Nimbut Village, Nira, District Pune, Maharashtra; at Village Samlaya, Taluka, Savli, District Vadodara, Gujarat and at Nanjangud, Mysore, Karnataka (save and except book debts and inventories related to IMFL business at Nimbut Village, Nira, District Pune, Maharashtra);
ii) The Company also has a Commercial Paper Programme aggregating Rs. 1,000 million and Short-term debt programme of Rs. 1,000 million within the overall Working Capital Limits sanctioned to it by the Working Capital Consortium. As on 31.03.08, there was Rs. Nil loan outstanding against the same. The Company has availed Rs. 10,450 million against the said facility during the year (Previous year Rs. 7,150 million).
3. Loans availed for financing purchase of vehicles are secured by a first charge by way of an exclusive hypothecation of the vehicles purchased out of the loan proceeds in favour of the lender.
4. Unsecured Short Term loan from a Bank outstanding as on 31.03.08- Nil (Previous year – Rs. 300 million) is for specific purpose of utilising the same for distribution of Fertilisers & Feed to the Dealers and Distributors.
5. Secured Loan of Rs.5.75 million from Indian Bank, New Delhi is secured by way of charge on the whole of the moveable properties of Jubilant Biosys Ltd. situated at Bangalore including its plant & machinery, machinery spares, computers, tools and accessories and other movables, both present and future, whether installed or not and whether now lying loose or in cases from time to time.
6. Secured Loan of Rs. 188.62 million from ING Vysya Bank to Jubilant Biosys Ltd. is secured by way of an Exclusive Charge on Fixed Assets to be created out to the said term loan.
7. Term Loan of US$ 8 million (Rs. 320. 95 million) from State Bank of India, New York Branch in consortium is secured by way of charge on all of the fixed assets including, without limitation, all equipment, machinery, vehicles, fixtures, improvements and furniture, general intangibles and other corporate property of the borrower expressly excluding the security for Revolving Credit, now owned or hereinafter acquired, of Cadista Pharmaceuticals Inc. situated at Salisbury, Maryland, USA.
8. Revolving Credit facility of US$ 2.94 million (Rs.117.90 million) from State Bank of India, New York Branch in consortium with Bank of Baroda New York is secured by way of charge over inventories and receivables, contract rights and rights to payments, present and future, of Cadista Pharmaceuticals Inc. situated at Salisbury, Maryland, USA.
9. Secured loan of US$ 19.78 million (Rs.793.90 million) under construction loan facility and US$ 23.8 million. (Rs.957.94 million) under Line of Credit to Hollistier-Stier Laboratories LLC from Bank of America N.A. are secured by way of
i) Security interest in the receivable inventory, equipments and fixtures, deposit accounts, general intangibles, including patents, trade marks, computer software etc. All books and records pertain to the collateral more particularly described in the security interest agreement date May 31, 2007.
ii) Deed of Trust dated May 31, 2007 irrevocably & unconditionally growing security interest in the parcel or parcels of real property located in Spokane County, State of Washington, USA.
10. Secured loan of US$ 50 million. to HSL Holdings Inc from ICICI Bank UK PLC as the arranger and the agent is secured by way of irrevocable and unconditional corporate guarantee from Jubilant Organosys Limited and Jubilant Pharma Pte Ltd., Singapore (WOS of Jubilant Organosys Ltd) guaranteeing all outstanding obligations of the borrower under the facility. (Total guaranteed amount as on 31.03.2008 is Rs.2006 million)
11. Working capital facilities granted to Jubilant Chemsys Ltd. by ING Vysya Bank are secured by way of First Charge by way of hypothecation of entire current assets (receivables & inventory) of Jubilant Chemsys Ltd.
12. Working capital facilities granted to Clinsys Clinical Research Ltd. by ING Vysya Bank are secured by way of First Charge by way of hypothecation of entire current assets (receivables & inventory) of Clinsys Clinical Research Ltd.
13. Loan facility granted to Jubilant First Trust Healthcare Ltd. by State Bank of India is secured by way of :-i. Mortgage of leasehold rights of Jubilant First Trust Healthcare Ltd. on land and Building located at Barasat,
West Bengal.ii. Hypothecation of movable assets, present and future.iii. Personal guarantee of Dr. Satadal Saha & Mr. Utpal Chakraborty.
14. Secured Loans includes loans of Rs. 1142.04 million (Previous year Rs. 433.90 million) repayable within one year.
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
(Rs. in million)
As at 31st March, 2008 2007
D. DEFERRED TAX LIABILITY Deferred Tax Liabilities 1,554.42 1,422.47
Deferred Tax Assets 252.12 62.32
Deferred Tax Liabilities (Net) 1,302.30 1,360.15
(Refer Note 12 (A) of Schedule “O”)
131 Annual Report 2007-08
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Jubilant Organosys Limited 132
Note:
(1) Figures in ( ) indicates in respect of previous year
(2) During the year, the following current investments (Non-Trade) were purchased and sold:
i) 97,966,250 Units of Standard Chartered Grind Mutual Fund-at cost of Rs. 980.00 million.
ii) 104,994,750 Units of ICICI Prudential Mutual Fund -at cost of Rs. 1050.00 million.
iii) 16,119,114 Units of SBI Mutual Fund - Magnum Insta Cash Fund-at cost of Rs. 270.00 million.
iv) 19,996 Units of 470 Standard Chartered Liquidity Manager - Plus - Daily Dividend Fund - at cost of Rs. 20.00 million.
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
(Rs. in million)As at 31st March, 2008 2007
F. INVESTMENTS : (At Cost)
Number Face valueper unit
All unquoted unless otherwise specified
Non Trade Investments
Muroplex Therapeutics Inc. - Secured Convertible Note & Warrants
8.90 8.69
166,667 Putney Inc., (USA) - Convertible Preferred Stock 40.12 -
(-)
Current Investments
Investment in Mutual Fund
- Rs.10 LICMF Liquid Fund-Dividend Plan - 20.01
(1,822,209)
- Rs.10 Principal Cash Management Fund-Dividend Plan - 10.14
(1,013,906)
25,003,026 Rs.10 Principal Cash Management Fund-Growth Plan 250.05 -
(-)
15,002,551 Rs.10 HSBC Cash Fund Institutional Plus -Dividend Plan 150.10 -
(-)
7201 Rs.1000 Standard Chartered Liquidity
Manager-Plus-Daily Dividend
7.20 -
(-)
456.37 38.84
133 Annual Report 2007-08
(Rs. in million)As at 31st March, 2008 2007
G. CURRENT ASSETS, LOANS AND ADVANCESCurrent Assets
Inventories: (Including in Transit & with Third Parties)(at lower of cost or net realisable value)- Raw Materials 2,008.21 1,695.77- Stores, Spares, Process Chemicals, Catalyst, Fuels & Packing Material 440.76 380.04- Process Stocks 621.18 444.51- Finished Goods (including Trading Goods) 1,279.52 1,012.11
4,349.67 3,532.43
Sundry DebtorsUnsecured- Over Six Months - Good
(Includes Subsidy receivable from State Government Rs. 39.85 million (Previous Year Rs. 12.11 million))
237.94 213.06
- Doubtful 41.60 10.37- Other Debts - Good 4,019.86 2,735.05
(Includes Subsidy receivable from State Government Rs. 4.68 million (Previous Year Rs. 33.88 million))
4,299.40 2,958.48
Less: Provision for Doubtful Debts 41.60 10.374,257.80 2,948.11
Cash & Bank Balances- Cash in hand and as Imprest 6.98 6.54- Cheques/Drafts in hand 47.18 39.91- With Scheduled Banks
- On Current Accounts 57.41 107.39- On Dividend Account 8.40 7.33- On Deposit Accounts (1) 15.48 46.08
- With Non Scheduled Banks (2) 5,102.23 8,541.865,237.68 8,749.11
Loans And Advances(Unsecured, Considered good)
- Advances recoverable in cash or in kind or for value to be received (3) 1,426.66 862.21- Unbilled Revenues 42.06 25.35- Deposits 191.49 126.61- Deposits with Excise / Sales Tax Authorities (4) 846.64 514.42- Advance Payment of Income Tax/Wealth Tax (including TDS) 654.30 896.10- MAT Credit Entitlement 391.55 -
3,552.70 2,424.6917,397.85 17,654.34
(1) Includes Margin Money - Rs.2.78 million (Previous Year Rs. 1.51 million)
(2) Includes, Account with Bank of China, Rs. 20.82 million (Previous year Rs.75.74 million), Bank of Shanghai, Rs.1.31 million (Previous year Rs. 0.96 million), Standard Chartered Bank China- Rs.41.01 million (Previous Year Nil), Chase operating A/c USA Rs.20.30 million (Previous year Rs.17.40 million), J P Money Market A/c USA Rs.Nil (Previous year Rs.0.45 million), ICICI UK Ltd Rs.0.72 million (Previous Year Rs.0.77 million), ING Brussels Rs.23.66 million (Previous Year Rs. 30.21 million), SBI New York Rs.3137.09 million (Previous year Rs. 12.13 million), PNC Bank New York Rs.49.00 million (Previous year Rs. 49.39 million ), Branch Banking & Trust Co. (BT&T) Salisbury, Rs.34.23 million (Previous year Rs. 66.13 million), SBI Nassau Bhamas Rs.Nil (Previous year Rs. 8274.0 million), KBC Bank Gent Rs.31.96 million (Previous year Rs. 14.67 million), Bank of America. Rs.10.95 million (Previous Year Rs. Nil), SBI Los Angles Rs.1731.18 million (Previous year Rs Nil).
(3) Includes Rs.317.30 million (Previous Year Rs. 135.61 million) Export Benefits Receivables.(4) Deposit against disputed demands -Rs.109.12 million (Previous Year Rs.105.62 million).
Jubilant Organosys Limited 134
(Rs. in million)As at 31st March, 2008 2007
H. CURRENT LIABILITIES AND PROVISIONSA) Current Liabilities
Sundry Creditors and Expenses Payable (1) 3,066.47 2,545.93
Trade Deposits & Advances (2) 384.82 229.81
Interest Accrued but not due 47.66 31.76
Other Liabilities 206.96 96.97
Investors Education and Protection Fund shall be credited with the following amount namely:
- Unclaimed/unpaid Dividends 8.40 7.33
- Unclaimed Fixed Deposits 3.52 5.47
- Interest on Unclaimed Matured Fixed Deposits - 0.55
3,717.83 2,917.82
B) Provisions
For Dividends on Equity Shares 256.55 209.78
For Income Tax & Wealth Tax 617.55 949.49
For Retirement/Post retirement Employee Benefits 428.76 178.11
For Others (3) 1,658.40 992.92
2,961.26 2,330.30
Total (A+B) 6,679.09 5,248.12
(1) Includes Rs. 25.82 million (Previous year Rs. 148.39 million) being Acceptances.
(2) Includes Rs. 127.22 million (Previous year Rs. 99.33 million) towards unearned income.
(3) Includes Premium on redemption of FCCB -Rs. 1633.37 million (Previous Year Rs. 975.15 million).
(Rs. in million)
As at 31st March, 2008 2007
I. MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)
Payments under Voluntary Retirement Scheme 16.49 40.85
16.49 40.85
SCHEDULES FORMING PART OF THE CONSOLIDATED BALANCE SHEET
135 Annual Report 2007-08
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT
(Rs. in million)
For the year ended 31st March, 2008 2007
J. SALES & SERVICESSales 24,651.91 18,097.81
Licensing & Regulatory Fees 49.55 61.17
Drug Discovery Development Services 1,541.43 1,246.47
Hospital Revenue 16.61 -
Manufacturing Services (Refer Note 13 of Schedule “O” ) 28.16 28.95
26,287.66 19,434.40
(Rs. in million)
For the year ended 31st March, 2008 2007
K. OTHER INCOMEIncome from Current Investments (Non-Trade) - Dividend 8.58 2.97
Insurance / Other Claims (Net) 0.59 36.51
Net Gain-Foreign Exchange Fluctuation -FCCBs/Loans 1,039.71 658.19
Miscellaneous Receipts (1) 381.11 536.88
(Includes Sale of unserviceable spares, used drums, residual catalyst, etc.) 1,429.99 1,234.55
(1) Includes: a) Income from Utilities & Services provided Rs. 19.31 million (Previous year Rs. 14.82 million)
(Tax Deducted at source Rs.3.01 million - Previous Year Rs.2.60 million)
b) Interest Income of Rs. 252.91 million (Previous year Rs.425.27 million) on un-utilized proceeds of FCCB’s and on other accounts.
c) Bad Debts recovered/recoverable Rs. Nil (Previous year Rs.0.25 million)
(Rs. in million)
For the year ended 31st March, 2008 2007
L. INCREASE/(DECREASE) IN STOCKS Stock at close - Process 621.18 444.51
Stock at close - Finished 1,279.52 1,012.11
1,900.70 1,456.62
Stock Adjustment; Pursuant to consolidation of Hollistier-Stier Laboratories
LLC, USA - Process 117.52 -
- Finished 249.91 -
Stock at commencement - Process 444.51 349.57
Stock at commencement - Finished 1,012.11 815.32
1,824.05 1,164.89
Increase/ (Decrease) in Stocks 76.65 291.73
Less: Increase/Decrease of Finished & Process Stock of IMFL Business
(Refer Note 13 of Schedule “O” )
77.83 (38.68)
154.48 253.05
Jubilant Organosys Limited 136
SCHEDULES FORMING PART OF THE CONSOLIDATED PROFIT & LOSS ACCOUNT
(Rs. in million)For the year ended 31st March, 2008 2007
M. MANUFACTURING AND OTHER EXPENSES Purchases - Traded Goods 506.91 395.90Raw & Process Materials Consumed 9,510.17 8,160.44Power and Fuel 1,704.32 1,304.76Excise Duty -Net (3) 5.33 8.41Stores, Spares, Chemicals, Catalyst & Packing Materials consumed 1,674.45 1,133.01Processing Charges 156.15 169.11Repairs - Plant & Machinery 387.03 320.45 - Buildings 44.44 35.34Salaries, Wages, Bonus, Gratuity & Allowances 3,328.64 1,884.15Contribution to Provident & Superannuation Fund 187.18 116.76Staff Welfare Expenses 323.36 148.08Rent (Net of recoveries) 153.71 81.17Rates & Taxes 94.72 46.88Insurance [Net of recoveries - Rs. 8.97 million (PY -Rs.9.68 million)] 86.33 83.64Advertisement, Publicity & Sales Promotion 169.12 84.71Traveling & Other Incidental Expenses 277.76 209.88Offices Maintenance (including water, electricity & repairs to office equipments) 169.70 112.93Vehicle Maintenance (Including vehicle taxes, insurance & driver cost) 45.96 32.63Printing & Stationery 44.39 33.83Communication Expenses 102.11 75.93Staff Recruitment & Training 59.93 54.17Donation 2.16 10.37Auditors Remuneration - As Auditors 6.31 2.66 - for Taxation Matters 0.39 0.36 - for Certification/Advices/Other Matters 0.64 1.15 - Out of Pocket Expenses 0.17 0.10Legal, Professional & Consultancy Charges 243.52 245.46Freight & Forwarding (including Ocean freight) 507.22 471.57Amortisation/write off - (VRS Expenses) 24.36 30.95Directors’ Sitting Fees 0.66 0.72Directors’ Commission 43.00 34.00Miscellaneous Expenses 69.88 35.77Financial Charges (incl. Bank Charges & Foreign Exchange fluctuations net gain of Rs.8.05 million (PY net loss of Rs.31.52 million) (4)
32.79 85.03
Discounts & Claims to Customer(Net) and Other Selling Expenses 282.26 238.52Commission on Sales 117.01 116.82Lease Rentals & Hire Purchase Charges 8.93 4.24Loss on sale/disposal/discard of Fixed Assets/Intangibles 128.99 31.68Loss on sale of Raw Materials 3.57 9.07Bad Debts / irrecoverable Advances written off /provided for (Net of write in) 32.54 3.56
20,536.11 15,814.21
(1) The above expenses are Netted off, after taking into account credit of Rs. 1.25 million (Previous year Rs.1.03 million).
(2) The above total expenditure includes:a) Expenditure incurred on R&D of Rs.228.40 million (Previous Year Rs.130.50 million) under various heads of
accounts.(In respect of the Holding Company).b) Prior period adjustments determined during the year are adjusted to respective heads of account of Rs. 2.79
million (Previous year of Rs.2.47 million)(3) Excise duty expense denotes provision on closing stock and other claims of the Deptt.(4) Foreign exchange gain of Rs. 59.17 million (Previous year Rs.28.40 million) is adjusted against total foreign exchange
losses of Rs. 51.12 million (Previous year Rs.59.92 million) as disclosed above.
137 Annual Report 2007-08
Research & Development Expenses comprises as mentioned here under:
(Rs. in million)
For the year ended 31st March, 2008 2007
M-1. RESEARCH & DEVELOPMENT EXPENSES**Material Consumption 96.08 95.01
Employee Cost 194.11 155.14
Utilities- Power 20.02 16.75
Others 180.52 130.18
490.73 397.08
Less: Transferred to Intangibles/Capital Work in Progress (262.33) (266.58)
Balance, charged to Revenue 228.40 130.50
** In respect of Jubilant Organosys Ltd, the Holding Company.
(Rs. in million)
For the year ended 31st March, 2008 2007
N. INTERESTOn Term Loans 162.03 133.95
On Deposits - 3.31
On FCCB 0.33 1.54
On Overdrafts & other Borrowings (1) 188.44 80.75
350.80 219.55
Less: Interest Income [Tax deducted at source Rs.0.53 million (14.12) (1) (24.91) (1)
(Previous year Rs.4.53 million)] 336.68 (2) 194.64 (2)
(1) Includes Rs.12.88 million (Previous year Rs.12.10 million) as Discounting Charges on Commercial Papers.
(2) Net of Interest Capitalisation.
Jubilant Organosys Limited 138
NOTES TO THE CONSOLIDATED ACCOUNTS
O. NOTES TO THE CONSOLIDATED ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES
Notes to the Consolidated Balance Sheet as at 31st March, 2008 and Consolidated Profit and Loss Account for the year ended on that date
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES:
A. Basis of Accounting/ Preparation
The consolidated financial statements (CFS) relate to Jubilant Organosys Ltd. (hereinafter referred to as the “Company “) and its Subsidiaries (hereinafter referred as the “Group”).
The accounts of the Group are prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India (“GAAP”) and comply with the mandatory Accounting Standards (“AS”) issued by the Institute of Chartered Accountants of India to the extent applicable and with the relevant provisions of the Companies Act, 1956. The financial statements are presented in Indian rupees rounded off to the nearest million.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the results of operations during the reporting periods. Management believes that the estimates used in the preparation of the consolidated financial statements are prudent and reasonable. Actual results could differ from these estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates.
B. Principles of Consolidation
The consolidated financial statements have been prepared on the following basis:
(i) The financial statements of the Company and its Subsidiary Companies have been combined substantially on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intra-group balances and intra-group transactions.
(ii) The Consolidated Financial Statements have been prepared in accordance with the Accounting Standard 21 (AS-21), “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India (ICAI) and using uniform accounting policies for like transactions and other events in similar circumstances and are presented to the extent possible, in the same manner as the Company’s separate financial statements.
The Subsidiary Companies considered in the Consolidated Financial Statements are:
Name of Subsidiary Country of Incorporation
Name of Parent Nature of Business Percentage of ownership
Jubilant Pharma Pte. Ltd Singapore Jubilant Organosys Limited Investment 100%Clinsys Holdings Inc. USA Jubilant Pharma Pte. Ltd
Jubilant Organosys LimitedInvestment 68.30%
31.70%Clinsys Clinical Research, Inc. USA Clinsys Holdings Inc. Clinical Research 100%Cadista Holdings Inc. USA Jubilant Pharma Pte. Ltd Investment 75%
Cadista Pharmaceuticals Inc. USA Cadista Holdings Inc. Generic-Pharmaceuticals & Dosage Forms
100%
HSL Holdings Inc. USA Clinsys Holdings Inc. Investment (Subsidiary with effect from May 31, 2007)
100%
Hollister-Stier Laboratories LLC. USA HSL Holdings Inc. Manufacture of allergenic extracts & sterile injectables vials (Subsidiary with effect from June 01, 2007)
100%
Jubilant Organosys (Shanghai) Ltd. China Jubilant Pharma Pte. Ltd Trading 100%Jubilant Pharma N.V. Belgium Jubilant Organosys Limited Investment 100%Pharmaceuticals Services Incorporated N.V. Belgium Jubilant Pharma N.V. Licensing & Regulatory Services 100%PSI Supply N.V. Belgium Jubilant Pharma N.V. Supply of Dosage Forms 100%Jubilant Organosys (USA),Inc. USA Jubilant Organosys Limited Trading 100%Jubilant Biosys Ltd India Jubilant Organosys Limited Drug Discovery &
Development Services66.98%
Jubilant Chemsys Ltd India Jubilant Organosys Limited Medicinal Chemistry Services 100%Clinsys Clinical Research Ltd. India Jubilant Organosys Limited Clinical Research 100%
Jubilant Infrastructure Ltd. India Jubilant Organosys Limited Setting up of Special Economic Zone(s)
100%
Jubilant First Trust Healthcare Ltd India Jubilant Organosys Limited Health Care (Subsidiary with effect from May 23, 2007)
88.17%
Asia Healthcare Development Pvt. Ltd India Jubilant First Trust Healthcare Ltd
Health Care (Subsidiary with effect from March 13, 2008)
99.68%
139 Annual Report 2007-08
iii. For the purpose of Consolidation of accounts of foreign subsidiaries, average rate of currencies have been taken for revenue items and the year-end rates have been applied for Balance Sheet items, (except for fixed assets) which is taken on basis of original rates of transaction.
iv. The net exchange difference for the translation of items in the financial statement of foreign subsidiaries is taken to Exchange Fluctuation Reserve, except to that extent adjusted to carrying amount of fixed assets, if any.
v. The excess of cost to the Company of its investments in the subsidiary Company over its share of the equity of the subsidiary Company, at the dates on which the investments in the subsidiary Company was made, is recognised as ‘goodwill’ being an asset in the consolidated financial statement.
vi. Minority Interest in the net assets of consolidated subsidiaries consist of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the Company in the subsidiary companies and further movements in their share in the equity, subsequent to the dates of investments as stated above.
vii. Goodwill in the Balance Sheet represents goodwill arising on consolidation of Jubilant Biosys Ltd, India, Jubilant Pharma N.V, Belgium, Clinsys Holdings, USA, Jubilant Pharma Pte. Ltd, Singapore, Hollistier Holdings Inc., USA, Jubilant First Trust Healthcare Ltd, India, such Goodwill has been tested for impairment using the cash flow projections of the said entities, based on the most recent financial budgets / forecasts approved by the management and accordingly, no amortisation was made during the Year.
C. a. Fixed Assets and Depreciation
(i) Fixed Assets are stated at original cost net of tax/duty credits availed, if any, less accumulated depreciation/amortisation. The cost of fixed assets includes freight and other incidental expenses related to the acquisition and installation of the respective assets. Borrowing costs directly attributable to fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalised. In case of fixed assets acquired at the time of amalgamation of certain entities with Company, the same are at book value/fair value ascertained by the valuers.
Insurance spares / standby equipments are capitalised as part of the mother assets and are depreciated at the applicable rates, over the remaining useful life of the mother assets. Such spares are charged off, on issue for Consumption.
Interest on loans and other financial charges and preoperative expenses including Trial Run Expenses (Net) for projects and/or substantial expansion up to the date of commencement of commercial production/ stabilisation of the project are capitalized.
(ii) Depreciation is provided on Straight Line Method, except in case of Plant & Machinery at Nira & Savli plants which is on Written Down Value Method, at rates mentioned and in the manner specified in Schedule XIV to the Companies Act, 1956 (as amended), on the original cost/ acquisition cost of assets and read with the statement as mentioned herein under. Certain plants were classified as continuous process plants from the financial year ended 31-03-2000 and such classification has been done on technical assessment, (relied upon by the auditor being a technical matter) and depreciation on such assets has been provided accordingly.
Depreciation, in respect of assets added/installed up to December 15, 1993, is provided at the rates applicable at the time of additions/installations of the assets as per Schedule XIV to the Companies Act, 1956 and depreciation, in respect of assets added/installed during the subsequent period, is provided at the rates, mentioned in Schedule XIV to the Companies Act, 1956 read with Notification dated 16th December, 1993 issued by Department of Company Affairs, Government of India, except for the following classes of fixed assets, where the useful life has been estimated as under;
a. R&D related Equipments & Machineries are depreciated over ten years.
b. Motor Vehicles are depreciated over five years.
c. Computer & Information Technology related assets are depreciated over three to five years.
d. Certain employee perquisite – related assets are depreciated over five years, being the period of the perquisite scheme.
Depreciation on assets added/disposed off during the year has been provided on pro-rata basis with reference to the month of addition/disposal.
Jubilant Organosys Limited 140
(iii) Depreciation in respect to assets of overseas subsidiaries is provided over the estimated useful life by using the Straight Line method (SLM).
However, the said rate of depreciation in respect of overseas subsidiaries is higher than the rates prescribed vide Schedule XIV to the Companies Act, 1956.
b. Intangible, product development and amortisation
Intangible assets are recorded at the consideration paid for acquisition. Intangible assets are amortised over their estimated useful lives on straight-line basis, commencing from the date the asset is available to the Company for its use.
Cost incurred for acquiring rights for product under development are recognised as intangible assets and amortised on a straight-line basis over a period of five years from the date of regulatory approval. Subsequent expenditures on development of such products are also added to the cost of intangibles.
c. Leased Assets: Amortisation/charging off
(i) Leasehold Land value is not amortised in view of the long tenure of the un-expired lease period/option of conversion to freehold at the expiry of lease tenure.
(ii) Other lease assets: Assets, if any, acquired under finance lease from April 01, 2001 are capitalised at the lower of their fair value and the present value of the minimum lease payment in line with the Accounting Standard 19 (AS-19)-“Leases”, issued by the Institute Of Chartered Accountants of India (ICAI). In respect of other leases, lease rentals are charged to Profit and Loss Account.
D. Valuation of Inventories
Inventories are valued at lower of cost or net realisable value except scrap, which is at net estimatedrealisable value.
The methods of determining cost of various categories of inventories are as follows:
Raw materials Weighted average method
Stores and spares Weighted average method
Work-in-process and finished goods (manufactured) Variable Cost at weighted average including an appropriate share of production overheads
Finished goods (traded) Actual cost of purchase
Goods in transit Actual cost of purchase
Cost includes all direct costs, cost of conversion and appropriate portion of overheads and such other costs incurred as to bring the inventory to its present location and condition inclusive of excise duty wherever applicable. Cost formula used is based upon weighted average cost.
E. Investments
Long Term quoted investments (non-trade) if any, are valued at cost unless there is a permanent fall in their value as at the date of Balance Sheet.
F. Income Tax
Current Tax
Current Tax provision is made, taking into consideration the various benefits / concessions to which the Company is entitled to as well as the normal tax provisions and the contentions of the Company and also the fact that certain expenditure becoming allowable on payment being made before filing of the return of income.
Deferred Tax
In accordance with Accounting Standard 22 (AS-22) – “Accounting for Taxes on Income”, issued by the ICAI, the deferred tax for timing differences between the book and tax profits for the year is accounted for using the tax rates and laws that have been enacted or substantively enacted as of the Balance Sheet date.
Deferred tax assets (reviewed at each Balance Sheet date) arising from timing differences are recognised to the extent there is virtual certainty, as the case may be, that such assets are capable of being realised in future.
Fringe Benefit Tax
Provision for Fringe Benefit Tax has been made in accordance with the Income Tax Laws prevailing for the relevant assessment years.
NOTES TO THE CONSOLIDATED ACCOUNTS
141 Annual Report 2007-08
G. Foreign Currency Conversions/ Translation
Transactions in foreign currency are recorded at the exchange rate prevailing on/or closely approximating to the date of transactions. Current Assets and Liabilities (other than relating to fixed assets and investments) are restated at the rate prevailing at the period end or at the forward rate where forward cover for specific asset/liability has been taken. The difference between the period end rate and the exchange rate at the date of the transaction is recognised as income or expense in the Profit and Loss Account. In respect of forward exchange contracts, the difference between the contract rate and the rate on the date of transaction is recognised as income or expense in the Profit and Loss Account over the life of the contract.
H. Provisions, Contingent Liability and Contingent Assets
The Company recognises a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent Assets are not recognised/disclosed. Provisions, Contingent Liabilities and Contingent Assets are reviewed at each Balance Sheet Date. Based on the said policy, Service warranty cost in respect of post software development and implementation phase are accrued at the year-end on the basis of management estimates of the efforts required on the respective projects as per the terms of the agreements.
I. Research & Development
Revenue expenditure on Research and Development is included under the natural heads of expenditure.
Capital expenditure on Research and Development (R&D) is capitalised as fixed assets. Development cost including legal expenses and/or in relation to patent/trade marks relating to the new and improved product and/or process development is recognised as an intangible asset to the extent that it is expected that such asset will generate future economical benefits. Other Research & Development cost is expensed as incurred.
In respect of subsidiaries, Pharmaceuticals Services Incorporated N.V. and PSI Supply N.V., Cost of Licenses, including incidental expenses, are capitalised and amortised over a period of five years from the date of registration. Expenses during the period of development of Dosage forms, till the final development are capitalised and are amortised over a period of five years. However, Research expenses in respect of Dosage forms are charged to revenue.
J. Employee Benefits
• Contribution payable to recognised provident fund , employee state insurance and superannuation scheme which is defined contribution scheme, is charged to profit & loss account. For certain employees, Provident Fund contributions are made to a trust, administered by the company. The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees Provident Funds and Misc Provisions Act 1952. The Remaining contributions are made to the government administered Provident Fund
• Gratuity and leave encashment which are defined benefits are accrued based on actuarial valuation as at balance sheet date by an independent actuary.
• The company has also opted for a group gratuity-cum Life Assurance Scheme of the Life Insurance Corporation of India for certain employees of one of its unit and the contribution is charged to the profit & loss account each year
K. Borrowing Cost
Borrowing costs attributable to acquisition and construction/fabrication of qualifying assets are capitalised as a part of the cost of such assets up-to the date as mentioned in Note No. C (a)(i) above. Other borrowing costs are charged as expenses in the year in which they arise.
L. Revenue Recognition
(i) Revenue from Sales is recognised on dispatch of material and point when risk and reward are transferred to the customers. Sales include excise duty, export incentives and subsidies but exclude Inter Divisional Transfers and Sales Tax. In order to comply with the Accounting Standard Interpretation ASI-14 issued by ICAI, Sales (including excise duty) and Net Sales (excluding excise Duty) is disclosed in Profit & Loss Account.
Export incentives/ benefits are accounted for on accrual basis and as per the principles given under AS-9 (Revenue Recognition).
Jubilant Organosys Limited 142
(ii) For Jubilant Biosys Ltd:
(a) In respect of sales of products, revenue is recognised on delivery/acceptance of products to/by the customers, as the case may be, and
(b) In respect of projects taken up as per the specification of the customers, revenue is recognised on proportionate completion method, and
(c) In respect of on site services rendered, revenue is recognised on the basis of billable man-days actually spent.
(iii) For Pharmaceuticals Services Incorporated N.V. and PSI Supply N.V.: Revenue for licensing and regulatory services is recognised on the basis of milestones achieved as determined in the respective contracts with the clients.
(iv) For Jubilant Chemsys Ltd:
(a) In respect of projects taken up as per the specification of the customers, revenue is recognised on Proportionate Service Contract method, and
(b) In respect of FTE Contracts, revenue is recognised on the basis of billable man-days actually spent.
(v) For Clinsys Clinical Research Ltd, Revenue of Fixed-price contracts, are recognised, based on percentage of completion method (on the technical estimates made by the management), and in case of service performed on time basis, revenues are recognised as services are rendered in accordance with terms of the contracts
(vi) For Clinsys Clinical Research, Inc., USA, revenue from Fixed-price contracts are recorded on a Proportional Performance basis. Revenue from time and material contracts are recognised as hours are incurred, multiplied by contractual billing rates. Revenue from unit-based contracts is generally recognised as units are completed.
(vii) For Cadista Pharmaceuticals, Inc., USA, Sales is recognised upon delivery of products and point when risk & rewards are transferred to the customers.
(viii) For Hollistier Stier Laboratories LLC, USA, Sales of goods is recognised upon delivery of products and point when risk & rewards are transferred to the customers. Revenues related to contract manufacturing arrangement are recognised when performance obligations are substantially fulfilled. Revenues related to development contracts are recognized as defined milestones are achieved.
(ix) For Jubilant First Trust Healthcare Ltd & Asia Healthcare Development Pvt Ltd., revenue from rendering of medical services is recognized upon completion/performance of such service to the customers which generally coincides with the discharge of the patients. Revenue from sale of pharmacy is recognized on delivery of the same.
M. Miscellaneous Expenditure / Amortisation
(i) Miscellaneous expenditure consists of expenditure in respect of compensation payable in terms of Voluntary Retirement Scheme of the Company and the same are amortised over a period of thirty six months commencing from the month in which payment / liability arise.
(ii) FCCB and share issue expenses / premium on FCCB are adjusted against securities premium account.
N. Segment Accounting
The accounting policies adopted for segment reporting are in line with accounting policies of the Company. Revenue, Expenses, Assets and Liabilities have been identified to segments on the basis of their relationship to operating activities of the segments (taking in account the nature of products and services and risks & rewards associated with them) and internal management information systems and the same is reviewed from time to time to realign the same to conform to the Business Units of the Company. Revenue, Expense, Assets and Liabilities, which are common to the enterprise as a whole and are not allocable to segments on a reasonable basis, have been treated as “Common Revenue/Expense/Assets/Liabilities”, as the case may be.
O. Impairment of Fixed Assets
The Company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash-generating unit to which the assets belongs is less than is carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an
NOTES TO THE CONSOLIDATED ACCOUNTS
143 Annual Report 2007-08
impairment loss and is recognised in the Profit and Loss Account. If at the Balance Sheet date there is an indication that previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount.
P. Employee stock option schemes
In accordance with the Securities and Exchange Board of India Guidelines, in respect of the stock options granted pursuant to the Company’s Stock Option Scheme, the intrinsic value, if any, of the option being the excess of the market price, of share over the exercise price of the option, at the date of grant of option, is treated as discount and accounted as employee compensation cost and amortised on a straight-line basis over the vesting period.
2. Capital Commitments
Estimated amount of Contracts remaining to be executed on Capital Account (Net of Advances) Rs. 2033.08 million (Previous Year Rs. 1035.49 million) [Advances Rs. 107.01 million (Previous Year Rs. 128.28 million)].
3. Contingent liabilities
a) Claims/Demands/Disputes against which appeals are pending and not acknowledged as debts on account of:
[Rs. in million]
2007-08 2006-07
Central Excise 23.17 23.17
Customs 5.76 5.73
Sales Tax 5.86 11.30
Income Tax 173.64 146.10
Service Tax 2.77 1.59
Others 10.57 5.33
The Company has been advised that its contentions in the matter of disputed demands are legally tenable and hence the possibility of these maturing is remote.
In additions to the amounts mentioned above, the Company may be required to pay interest on finality of the matters.
b) The Company has challenged the levy of transport fee by State of Maharashtra on consumption of rectified spirit and molasses in the Nira factory. The order of State imposing the levy was stayed by the Hon’ble Mumbai High Court on October 22, 2001. The Company has been advised that the levy of transport fee on rectified spirit and molasses by State is not tenable. However, the Company has deposited Rs. 6.28 million under protest out of the total transport fee of Rs. 114.71 million.
c) Outstanding guarantees furnished by Banks on behalf of the Company/by the Company including in respect of Letters of Credits/Bonds/Loss make up guarantee is Rs. 1,186.96 million (Previous Year Rs. 1025.92 million).
The Company has given Corporate Guarantee on behalf of HSL Holdings Inc. to ICICI Bank UK. PLC. for USD $ 50 million to secure financial facility guaranteed by them.
d) Exports obligation undertaken by the Company under EPCG scheme to be completed over a period of five/eight years on account of import of Capital Goods at concessional import duty remaining outstanding is Rs. 1214.05 million (Previous year Rs. 499.60 million). Similarly Export obligation under Advance License Scheme/DFIA scheme on duty free import of specific raw materials, remaining outstanding is Rs. 2891.12 million (Previous year Rs. 1,416.05 million)
e) The Company has challenged the increase in denaturing fee by the State of Uttar Pradesh w.e.f April 01, 2004 on denaturing of rectified spirit in the Gajraula factory before the Hon’ble Allahabad High Court and the writ petition has been admitted by the court. The Company has deposited Rs 15.91 million under protest which is shown as deposits.
f) Zila Panchayat at J.P. Nagar (in respect of the Company’s Gajraula plant) served a notice demanding a compensation of Rs. 277.40 million allegedly for creating lagoons on their lands, percolation of poisonous water stored in lagoons resulting in loss of crops and cattle of the farmers and for putting poisonous fly ash on national highway which caused loss to the health and damages to eyes and skin of people.
Jubilant Organosys Limited 144
District Magistrate issued a recovery certificate along with 10% collection charges inflating the demand to Rs.305.14 million. In the opinion of the Company, the Zila Panchayat has no justification in raising this demand. The demand was challenged in Hon’ble Allahabad High Court and the court stayed the demand till further orders.
4. The Hon’ble Supreme Court has quashed the levy of licence fee by State of Uttar Pradesh on captive consumption of denatured spirit in the Gajraula factory, and has ordered the refund of the fee paid during the period of dispute subject to condition that the amount has not been collected from the Company’s customers. Further the Court has directed the state to investigate whether the Company has collected the disputed fee from its customers to the extent bank guarantees were furnished.
The Company is entitled to a refund of Rs. 84.06 million as the amount paid during the period of dispute or secured by bank guarantees was not collected from its customers. Accordingly the Company has approached the State of Uttar Pradesh for the refund of the said amount.
5. The Company has challenged the levy of license fees of Rs.2.87 million by State of Uttar Pradesh, for grant of PD-2 license for manufacture of Ethyl Alcohol for industrial use, before the Hon’ble Allahabad High Court. The writ petition has been admitted and is being listed for final hearing. Though the amount has been deposited and shown as such, no provision against this has been made as the issue is covered by the earlier favorable judgment of the Hon’ble Supreme Court of India.
6. Dividend on Equity Shares includes Rs.0.01 million (inclusive of Dividend Tax) in respect of Shares allotted between 31st March,2007 to the record date for Dividend.
7. Micro and Small Business Entities
There are no Micro and Small Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March, 2008. The information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.
8. Foreign Currency Convertible Bonds (FCCB)
a) 1.5 % FCCB -US$35 million (FCCB 2009)
The Company issued 1.5% Foreign Currency Convertible Bonds due 2009 (FCCB 2009) aggregating US$ 35 million, in the year 2004-05. The Bonds are convertible at any time between June 14, 2004 and April 15, 2009 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (“GDSs”) each representing One equity share at an initial conversion price of Rs.163.646 per share with a fixed rate of exchange on conversion of Rs. 44.805 = U.S.$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 14, 2007, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 15, 2009 at 113.70% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Out of these FCCB 2009, US$ 34.70 million were converted upto 31st March 2008 into equity shares and this represents 9,500,521 shares of Re.1 each as on 31st March, 2008. The balance bonds of US$ 0.30 million net of exchange difference, outstanding as of March 31, 2008 are included under ‘Unsecured Loans’.
The outstanding balance of FCCB 2009 - US$ 0.30 million, on conversion would result in allotment in of 82,140 equity shares of Re. 1 each.
The proceeds were utilised for funding new projects & expansion of existing units – Rs. 795.4 million (US$ 17.1 million), investment in subsidiary companies for acquisitions abroad - Rs.722.0 million (US$16.7 million) and issue expenses – Rs.50.7 million (US$ 1.1 million).
b) FCCB – US$ 75 million (FCCB 2010)
The Company issued, Zero Coupon Foreign Currency Convertible Bonds due 2010 (FCCB 2010) for an aggregate value of US$75 million, convertible at any time between July 3, 2005 to May 14, 2010 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDSs) each representing one equity share of Re. 1 each at an initial conversion price of Rs.273.0648 per share with a fixed rate of exchange of Rs.43.35 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may
NOTES TO THE CONSOLIDATED ACCOUNTS
145 Annual Report 2007-08
also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 23, 2008, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 24, 2010 at 138.383% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Out of these FCCB 2010, US$ 14.093 million were converted upto 31st March 2008 into equity shares and this represents 2,237,308 shares of Re.1 each as on 31st March, 2008. The balance bonds of US$ 60.907 million net of exchange difference, outstanding as of March 31, 2008 are included under ‘Unsecured Loans’.
The outstanding balance of FCCB 2010 - US$ 60.907 million, on conversion would result in allotment in of 9,669,206 equity shares of Re. 1 each.
The proceeds of FCCB 2010 have been used for funding new projects & expansion of existing units – Rs. 1384.1 million (US$ 32.2 million), investment in subsidiary companies for acquisitions abroad - Rs.1827.9 million (US$41.0 million), issue expenses – Rs.78.0 million (US$ 1.8 million).
c) FCCB – US$200 million (FCCB 2011)
The Company issued Zero Coupon Foreign Currency Convertible Bonds due 2011 (FCCB 2011) for an aggregate value of US$200 million, convertible at any time between June 30, 2006 to May 10, 2011 by holders into fully paid equity shares of Re.1 each of the Company or Global Depositary Shares (GDSs) each representing one equity share at an initial conversion price of Rs.413.4498 per share with a fixed rate of exchange of Rs.45.05 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at the option of the Company at any time on or after May 19, 2009, subject to satisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds will be redeemed on May 20, 2011 at 142.429% of their principal amount. The FCCBs are listed on Singapore Stock Exchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange. Assuming full conversion of these FCCB’s, 21,792,246 equity shares of Re 1 each would be allotted.
The proceeds of FCCB 2011 have been used for funding new projects –Rs.13.5 million (US$0.30 million) ,investment in subsidiary companies - Rs.8,873.0 million (US$196.96 million) and issue expenses – Rs.123.4 million (US$ 2.74 million). There has been no conversion during the year in respect of the above FCCBs.
9. Employee Stock Option Scheme
In terms of approval of shareholders accorded at the AGM held on 29th August, 2005 and in accordance with SEBI (ESOP & ESPS) Guidelines, 1999, the Company instituted Jubilant Employees Stock Option Plan, 2005 (“Plan”) for specified categories of employees and directors of the Company and its subsidiaries. Under the Plan, upto 717,500 Stock Options can be issued to eligible Directors (other than promoter directors) and other specified categories of employees of the Company/ subsidiaries. The options are to be granted at market price. As per SEBI Guidelines, the market price is taken as the closing price on the day preceding the date of grant of options, on the stock exchange where the trading volume is the highest.
Each option, upon vesting, shall entitle the holder to subscribe to five equity shares of Re.1 each. The vesting takes place on a staggered basis over a period of 5 years from the date of grant.
The Company has constituted a Compensation Committee comprising of a majority of independent directors. This Committee is empowered to administer the Scheme.
During the year, the following options were granted to eligible directors/ employees:
Date of grant Number of options granted
Exercise Price per Share (Rupees)
Market Price (Rupees)(As per SEBI Guidelines)*
16th July, 2007 22,273 309.00 309.00 (a)
16th October, 2007 14,400 295.35 295.35 (b)
30th January, 2008 13,263 314.35 314.35 (c)
* Based on closing price (a) on 13th July 2007 at NSE (b) on 15th October 2007 at BSE (c) on 29th January 2008 at BSE where higher turnover was recorded.
Jubilant Organosys Limited 146
The movement in the stock options during the year ended March 31, 2008 is set out below:
NumberOptions outstanding at the beginning of the year 555,494Granted during the year 49,936Expired/forfeited during the year (53,229)Exercised during the year (13,041)Options outstanding at the end of the year 539,160
10. The Company’s significant operating lease arrangements are in respect of premises (residential, offices, godown etc.). These leasing arrangements, which are cancelable, range between 11 months and 9 years generally and are usually renewable by mutual agreeable terms. The aggregate lease rentals payable are charged as expenses.
11. Capitalisation of Interest, Pre-operative and Trial Run expenses
In line with the applicable Accounting Standards, interest on funds utilized and preoperative expenses including trial run expenses (net) for projects and/or substantial expansions have been capitalised up to the date of commercial production/stabilisation of the project, amounting to Rs.347.34 million (Previous Year Rs. 280.21 million). All preoperative expenditure including interest totaling to Rs. 209.97 million (Previous Year Rs 67.04 million) so capitalised and Trial Run Expenses (net of trial run receipts) are accumulated as Capital work in progress and have been allocated to respective Fixed Assets.
12. (A) Deferred Assets and Liabilities are attributable to the following items: (Rs. in million)
As at 31st March, 2008 2007
Deferred Tax Assets
Provision for Leave Encashment and Gratuity 110.23 49.23
Amount disallowed u/s 43 B 2.84 5.26
Deduction allowed under section 35D 0.82 1.63
Payment under Voluntary Retirement scheme 5.85 5.09
Others 132.38 1.11
252.12 62.32
Deferred Tax Liabilities
Accelerated Depreciation 1,368.72 1,272.85
Difference in value of CWIP/Intangibles 185.70 149.62
1,554.42 1,422.47
Deferred Tax Liabilities (Net) 1,302.30 1,360.15
(B) In the year 2006-07, a sum of Rs.42.20 million recognised as income against the claim raised by the Company for breach of contract by the other party, is treated as non-taxable, based on the legal opinion and upon which auditor has replied upon.
(C) The profit attributable to the operations under the (EOU) Export Oriented Units Scheme are deductible from taxable income up to 31st March 2010,and accordingly income from EOU setup at Nanjangud, Mysore ,and at Bhartiagram, Jyotiba Phoolay Nagar (Gajraula), Uttar Pradesh have been considered as tax deductible, and provision for current tax is made accordingly.
(D) Tax provision are based upon certain expenses , though charged to securities premium account , but claimed as deductible expense in tax return and the benefit of tax has been credited to securities premium.
(E) Tax provision for the current year is after adjustment of net excess provision for the past years amounting to Rs. 57.98 million and further MAT credit entitlement in respect of 2006-2007 amounting to Rs 246.23 million.
13. The bottling unit of the Company situated at Nira holds a potable liquor license for Indian Made Foreign Liquor (IMFL) and the same is bottling IMFL on the order of another Company and is charging bottling fee.
The Accounts recognise Revenue and Expenditure, only to the extent the Company enjoys beneficial interest.
In Compliance with the requirements of Schedule VI to the Companies Act, 1956, the following information is given hereunder in respect of the transactions where the Company does not enjoy beneficial interest.
NOTES TO THE CONSOLIDATED ACCOUNTS
147 Annual Report 2007-08
(Rs. in million)
For the year ended 31st March, 2008 2007
Sales 933.80 856.17
Excise Duty (659.84) (679.22)Other Income 7.94 3.48
Increase/(Decrease) in Finished & Process Stocks (77.83) 38.68
Raw & Process Materials Consumed (63.72) (79.03)
Stores, Spares, Chemicals, Catalyst & Packing Materials consumed (104.19) (101.07)
Other Expenses (0.30) (0.45)Freight & Forwarding (including Ocean Freight) - (7.05)
Purchase of Trading Material (7.70) (2.56)
14. (A) Disclosure required by Accounting Standard 29(AS-29) ”Provisions, Contingent Liabilities and Contingent Assets”Movement in Provisions: (Rs. in million)
Sr. No.
Particulars of disclosure Class of Provisions
Excise Duty ProductWarranties
Premium on redemption of
FCCB.
Total
1 Balance as at April 01, 2007 52.93(50.20)
1.83(5.47)
975.15(203.63)
1029.91(259.30)
2 Additional provision during 2007-2008
34.63(52.93)
1.03(-)
663.21(777.26)
698.87(830.19)
3 Provision used during 2007-2008 52.93(50.20)
-(-)
-(-)
52.93(50.20)
4 Provision reversed during 2007-2008 -(-)
1.83(3.64)
4.99(5.74)
6.82(9.38)
5 Balance as at March 31, 2008 34.63(52.93)
1.03(1.83)
1633.37(975.15)
1669.03(1029.91)
Provision for excise duty represents the excise duty on closing stock of finished goods.14. (B) The Company uses derivative financial instruments such as forward contracts and currency swaps to selectively
hedge its currency exposures, firm commitments and highly probable forecast transactions, denominated in USD, EURO and GBP. Usually, the forward contracts mature within twelve months. The Company also enters into interest rate swaps to selectively hedge its interest rate exposures. The Company actively manages its currency/interest rate exposures through a centralised treasury setup and uses derivatives to mitigate the risk from such exposures.
No derivative transactions are entered into for any speculative purpose. The information on derivative instruments is as follows: a) Derivative instruments outstanding:
Details Buy/Sell Amount (foreign currency in millions)
31.03.2008 31.03.2007
Foreign Exchange Contracts
- USD/INR Sold USD 111.14 USD 37.04
- USD/INR Bought - USD 19.22
- EURO/USD Sold EURO 11.52 EURO 9.32
- GBP/USD Sold - GBP 0.28
Currency Swaps
- Loans of JPY 2304.50 million swapped into USD USD 20.00 USD 20.00
Interest Rate Swaps
- Loans swapped from floating six month USD LIBOR to fixed USD interest rate
- USD 20.00
Jubilant Organosys Limited 148
b) Foreign currency exposure not hedged by derivative instrument:
Details Amount (foreign currency in millions)
31.03.2008 31.03.2007Amount receivable on account of sale of goods/services. USD 17.74 USD 33.06
EURO 1.78 EURO 0.67GBP 0.07 GBP 0.06
Amount payable on account of purchase of goods/services, loans, FCCB, etc.
USD 380.32 USD 327.73 - EURO 0.05 - JPY 4.88
Amount outstanding as deposits with Banks USD 0.49 USD 0.4115. Effective April 01,2007, the Company adopted the revised accounting standard AS-15 issued by The Institute of
Chartered Accountants of India on employee benefits. Pursuant to the adoption, the transitional obligation of the Company amounted to Rs.100.68 million (Net of deferred tax of Rs. 46.47 million) and as required by the Standard, the same has been adjusted against opening balance of General Reserve/Profit & Loss.
The Company has calculated the various benefits provided to employees as under:
A) Defined Contribution Plans
a) Provident Fund
b) Superannuation Fund
During the year the Company has recognised the following amounts in the Profit and Loss account:
(Rs. in million)
For the year ended 31st March, 2008
Employers Contribution to Provident Fund 59.57Employers Contribution to Superannuation Fund 17.94
B) State Plans
a) Employee State Insurance
b) Employee’s Pension Scheme 1995
During the year the Company has recognised the following amounts in the Profit and Loss account:
(Rs. in million)
For the year ended 31st March, 2008
Employers Contribution to Employee State Insurance 1.64Employers Contribution to Employee’s Pension Scheme 1995 22.36
C) Defined Benefit Plansa) Gratuity
b) Leave Encashment
The discount rate assumed is 8.55 % which is determined by reference to market yield at the Balance Sheet date on government bonds. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
(Rs in million)
Gratuity* Leave Encashment
Present Value of obligation as at period beginning 31st March, 2007 198.91 89.39Current service cost 29.37 24.41Interest cost 17.01 7.65Actuarial (gain)/loss (3.38) (17.92)Present value of obligation as at period ended 31st March, 2008 (Net of Benefits Paid)
241.91 103.52
NOTES TO THE CONSOLIDATED ACCOUNTS
149 Annual Report 2007-08
Reconciliation of the present value of defined benefit obligation and the fair value of the plan assets:
Gratuity* Leave Encashment
Present Value of obligation as at period ended 31st March, 2008 241.91 103.52
Fair value of plan assets at period end - -
Assets/(Liabilities) recognised in the Balance Sheet (241.91) (103.52)
Cost recognised for the period (included under Salaries, Wages, Allowances, Bonus and Gratuity)
Gratuity* Leave Encashment
Current service cost 29.37 24.41
Interest cost 17.01 7.65
Actuarial (gain)/loss (3.38) (17.92)
Net cost recognised for the period 43.00 14.13
* Excluding for certain employees of Nanjangud Unit.
Reconciliation of opening and closing balances of the present value of the defined benefit obligation**:
(Rs. in million)
Gratuity
Present Value of obligation as at period beginning 31st March, 2007 16.59
Current service cost 3.27
Interest cost 1.42
Actuarial (gain)/loss (0.33)
Benefits paid (0.51)
Present value of obligation as at period ended 31st March, 2008 20.44
Reconciliation of the present value of defined benefit obligation and the fair value of the plan assets**:
Gratuity
Present Value of obligation as at period ended 31st March, 2008 20.44
Fair value of plan assets at period end 4.71
Funded Status excess of Actual over estimated 10.36
Assets/(Liabilities) recognised in the Balance Sheet (15.72)
Cost recognised for the period (included under Salaries, Wages, Allowances, Bonus and Gratuity)**:
Gratuity
Current service cost 3.27
Interest cost 1.42
Actuarial (gain)/loss (1.37)
Expected Return on Plan Asset (0.31)
Net cost recognised for the period 3.01
** In respect of certain employees of Nanjangud Unit.
Jubilant Organosys Limited 150
(Rs. in million)
ParticularsPharmaceuticals and Life
Science Products & Services Industrial & Performance
ProductsTotal
2008 2007 2008 2007 2008 2007
1) Revenue 15,649.05 9,233.85 10,679.72 10,228.20 26,328.77 19,462.05
Less: Inter Segment Revenue 41.11 27.65 41.11 27.65
Less: Excise Duty on Sales 347.53 283.96 1,051.36 1,053.29 1,398.89 1,337.25
Net sales 15,301.52 8,949.89 9,587.25 9,147.26 24,888.77 18,097.15
2) Segment results 3,101.77 1,764.81 1,323.71 1,065.02 4,425.48 2,829.83
Less : Interest (Net) 336.68 194.64
Other un-allocable expenditure (472.51) (317.85)
(net of un-allocable income)
Total Profit Before Tax 3,101.77 1,764.81 1,323.71 1,065.02 4,561.31 2,953.04
3) Capital Employed
(Segment Assets - Segment Liabilities)
Segment Assets 26,244.79 15,400.39 8,343.50 7,215.13 34,588.29 22,615.52
Add: Common Assets 7,253.51 9,754.35
Total Assets 26,244.79 15,400.39 8,343.50 7,215.13 41,841.80 32,369.87
Segment Liabilities 2,471.64 1,509.57 1,529.44 1,492.46 4,001.08 3,002.03
Add: Common Liabilities 2,678.01 2,246.09
Total Liabilities 2,471.64 1,509.57 1,529.44 1,492.46 6,679.09 5,248.12
Segment Capital Employed 23,773.15 13,890.82 6,814.06 5,722.67 30,587.21 19,613.49
Add: Common Capital Employed 4,575.50 7,508.26
Total Capital Employed 23,773.15 13,890.82 6,814.06 5,722.67 35,162.71 27,121.75
4) Segment Capital Expenditure 2,455.74 2,296.69 699.03 395.40 3,154.77 2,692.09
Add: Common Capital Expenditure 354.54 62.02
Total Capital Expenditure 2,455.74 2,296.69 699.03 395.40 3,509.31 2,754.11
5) Depreciation & Amortisation (Net) 781.60 388.35 243.61 224.25 1,025.21 612.60
Add: Common Depreciation 13.93 10.26
Total Depreciation & Amortisation 781.60 388.35 243.61 224.25 1,039.14 622.86
16. Segment Reporting : i) Based on the guiding principles given in Accounting Standard on “Segment Reporting” ((AS-17) Issued by
the Institute of Chartered Accountants of India) the Company’s Primary Business Segments are organized around customers on industry and product lines as under :
a. Pharmaceuticals and Life Science Products & Services : Active Pharmaceuticals Ingredients (APIs), Dosage Forms, Regulatory Affairs, Drug Discovery & Development Services, Chemistry Services, Clinical Research, Custom Research & Manufacturing Services (CRAMS), Contract Manufacturing of Sterile Injectables & Allergenic Extracts and Development & Management of Health Care Units.
b. Industrial & Performance Products : Organic Intermediates, Agri and Animal Nutrition Products, Industrial products for tyres, textiles and coatings; Consumer Products for woodworking solutions; Food Polymers and Specialty Gases.
ii) In respect of Secondary Segment information, the Company has identified its Geographical segments as (i) Within India (ii) Outside India.
iii) Inter Segment Transfer Pricing
Inter Segment Transfer prices are based on market prices.
iv) The Financial information about the primary business segments is presented in the table given below:
NOTES TO THE CONSOLIDATED ACCOUNTS
Notes:1) The Company has disclosed Business Segment as the Primary Segment2) Segments have been identified and reported taking into account the nature of products and services, the differing risk and
returns, the organization structure and the internal financial reporting systems.3) Performance Polymers Segment has been combined with Industrial Products Segment as in the opinion of the management
the same is more representative in the current circumstances.4) The Segment Revenue, Results, Assets and Liabilities include the respective amounts identifiable to each of the segments
and amounts allocated on a reasonable basis.5) Total Capital Employed excludes Secured Loans, Unsecured Loans , Deferred Tax and Minority Interests.
151 Annual Report 2007-08
v) Secondary Segment Reporting: Geographical(Rs. in million)
17 A. Related Party Transactions a. Other related parties with whom transactions have taken place during the year – Associates Jubilant Enpro Pvt. Ltd., Jubilant Oil & Gas Pvt. Ltd., Enpro Oil Pvt. Ltd. Domino Pizza India Ltd., Tower
Promoters Pvt Ltd.
– Others Vam Employees Provident Fund Trust, Jubilant Bhartia Foundation.
b. I. Key Management Personnel Mr. Shyam S. Bhartia, Mr. Hari S. Bhartia, Mr. S.N. Singh, Mr. Shyam Bang, Dr. J. M. Khanna,
Mr. R Sankaraiah, Mr. Sridhar Mosur, Mr. Christopher Worrell, Dr. V N Balaji, Mr. David E Williams, Mr.Anthony D. Bonanzino*, Dr. Satadal Shah*, Ms. Lieve Vermassen*.
* For part of the year
II. Relatives of Key Management Personnel Ms. Asha Khanna, Ms. Shobha Bang
c. Transactions with related parties during the period (Rs.in million)
Particulars Associates
Key Mgmt. Personnel &
Relatives
Others
Expenses recharged by Companies/to others for facilities/services provided and Software Purchased
21.71(19.60)
0.05(-)
Assets purchased during the year 17.47(-)
Assets sold during the year 0.36(-)
Company’s Contribution to PF Trust. 115.72(93.59)
Remuneration and Related Expenses 214.24(159.74)
Rent paid 24.50(-)
6.47(9.19)
Payment towards acquisition of balance 20% shares in PSI & PSI Supply N.V.
55.64(-)
Security Deposit Given 21.00(-)
Housing Loan Given -(2.50)
Housing Loan Outstanding 2.00(2.50)
Donation 0.50(-)
(1) Figures in ( ) indicates in respect of previous year.(2) Related party relationship is as identified by the Company and relied upon by the Auditors.
(3) No amount has been written off/provided for in respect of dues from or to any related party.
ParticularsWithin India Outside India Total
2008 2007 2008 2007 2008 2007
External Revenue by Geographical location of Customers
10,949.21 9,778.40 13,939.56 8,318.75 24,888.77 18,097.15
Carrying Amount of Segment Assets 22,780.48 18,435.32 19,061.32 13,934.55 41,841.80 32,369.87
Capital Expenditure 2,618.52 2,530.61 890.79 223.50 3,509.31 2,754.11
(Rs. in million)
ParticularsIndia Americas & Europe China Asia & Others Total
2008 2007 2008 2007 2008 2007 2008 2007 2008 2007
External Revenue by Geographical Markets
10,949.21 9,778.40 9,468.20 5,659.40 3,024.60 1,428.30 1,446.76 1,231.05 24,888.77 18,097.15
Jubilant Organosys Limited 152
2007-2008 2006-2007
I. (A) Profit Computation for Basic Earnings Per Share of Re 1 eachNet Profit as per Profit and Loss Account available for Equity Shareholders
Rs. in million 4,004.94 2,280.00
Adjustments for the purpose of Diluted EPS :-Interest on Foreign Currency Convertible Bonds Rs. in million 0.33 1.54 Less: Tax on above Rs. in million (0.05) (0.35)
(B) Profit for Diluted Earnings Per Share of Re 1 each Rs. in million 4,005.22 2,281.19
II. Weighted average number of equity shares for Earnings per Share computation
(A) For Basic Earnings per Share Nos 143,919,482 143,156,801 (B) For Diluted Earnings per Share:
No. of shares for Basic EPS as per II A Nos 143,919,482 143,156,801 Add: Weighted Average outstanding Option/Shares related to FCCB & Employee stock options.
Nos 34,742,665 32,096,107
No. of shares for Diluted Earnings per Share Nos 178,662,147 175,252,908 III. Earnings per Share (Weighted Average)
Basic Rupees 27.83 15.93Diluted Rupees 22.42 13.02
19. Events occurring after the close of the fiscal year
Acquisitions of Draxis Health Inc.
Subsequent to the year ended March 31, 2008, the Company has entered into arrangement agreement whereby a wholly owned subsidiary of the Company will acquire all the shares of Canada based premier specialty pharmaceutical company, Draxis Health Inc., at a price of US$ 6 per share in cash by way of plan of arrangement. The total value of the transaction is approx. US$ 255 million and is likely to complete by Q1 FY-2009. Company plans to fund the acquisition through combination of cash-on -hand and debt.
20. Figures pertaining to the Subsidiaries, have been reclassified wherever considered necessary to bring them in line with the Company’s Financial Statements.
21. Previous Year’s figures have been regrouped/rearranged wherever found necessary to conform to this year’s classification.
Signatures to Schedule “A” to “O” forming part of the Consolidated Balance Sheet and Consolidated Profit and Loss Account.
In terms of our report of even date attached. For and on behalf of the Board
For K. N. Gutgutia & Co. Chartered Accountants
B R Goyal Shyam S BhartiaPartner Chairman & Managing DirectorMembership No. 12172
Noida Lalit Jain R Sankaraiah Hari S BhartiaDate : 22nd April, 2008 Company Secretary Executive Director- Finance Co-Chairman & Managing Director
17 B. Promoter Group Group companies
The Company is controlled by Mr.Shyam S Bhartia/Mr. Hari S Bhartia group (“the promoter group”), being a group as defined in the Monopolies and Restrictive Trade Practices Act, 1969.
The persons constituting the promoter group include individuals and corporate bodies who/which jointly exercise, and are in a position to exercise, control over the Company. The names of these individuals and bodies corporate are Mr. Shyam S Bhartia, Mr. Hari S Bhartia, Mrs. Shobhana Bhartia, Mrs. Kavita Bhartia, Mr.Priyavrat Bhartia, Mr.Shamit Bhartia, Ms. Aashti Bhartia, Master Arjun S Bhartia, Best Luck Vanijya Private Ltd., Enpro Exports Private Ltd., Jaytee Private Ltd., Jubilant Enpro Private Ltd., Jubilant Securities Private Ltd., Jubilant Capital Private Ltd., Klinton Agencies Private Ltd., Speedage Vinimay Private Ltd., Rance Investment Holdings Ltd., Cumin Investments Ltd., Torino Overseas Ltd., Vam Holdings Ltd., Westcost Vyapaar Private Ltd., Nikita Resources Private Ltd., Jubilant Oil & Gas Pvt. Ltd.
18. Earnings Per Share(EPS)
NOTES TO THE CONSOLIDATED ACCOUNTS
153 Annual Report 2007-08
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Jubilant Organosys Limited 154
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155 Annual Report 2007-08
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ccou
nt w
here
ap
plic
able
)
(1,6
90,7
31)
(1
11.2
3)43
,797
,752
1
,754
.85
11,6
58,6
78
(712
.37)
23,7
17,2
08
9
51.1
8 (9
,365
,565
)
(349
.48)
-
-
(c)
Tota
l Ass
ets
(Fix
ed
Ass
ets+
Cur
rent
Ass
ets)
6,50
8,69
0
261
.13
128,
917,
522
5,1
83.2
0 11
9,37
2,73
9
4,
789.
24
23,8
66,7
08
9
57.5
3 30
,392
,077
1
,245
.60
-
-
(d)
Tota
l Lia
bilit
ies
(Deb
ts +
C
urre
nt L
iabi
litie
s)82
,629
,946
3
,315
.11
63,5
98,4
92
2,5
51.5
7 20
,719
0.
83
66,0
86
2.6
5 39
,757
,641
1
,595
.08
-
-
(e)
Det
ails
of
Inve
stm
ents
(e
xcep
t in
cas
e of
Inve
stm
ent
in
subs
idia
ries)
--
--
1,22
1,89
2
49.
02
-
-
-
-
-
-
(f)
Turn
over
(Inc
ludi
ng
Oth
er In
com
e)-
-
70
,343
,117
2
,815
.13
6,47
9,18
7
2
61.2
4 -
-
13
,288
,148
535
.78
-
-
(g)
Prof
it/(L
oss)
bef
ore
Taxa
tion
(1,6
90,7
31)
(
67.6
6)14
,193
,378
563
.32
6,46
4,61
3
2
60.6
5 (7
,275
)
(0
.29)
(2,5
35,9
37)
(1
05.8
9)
-
-
(h)
Prov
isio
n fo
r Ta
xatio
n-
-3,
675,
444
1
47.0
9 12
,719
0.
51
-
-
(2,9
95,4
17)
(1
20.7
8)
-
-
(i)Pr
ofit/
(Los
s) a
fter
Ta
xatio
n(1
,690
,731
)
(67
.66)
10,5
17,9
34
4
16.2
3 6,
451,
894
260
.14
(7,2
75)
(0.2
9)45
9,48
0
14
.88
-
-
(j)Pr
opos
ed D
ivid
end
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
- -
No
tes:
i)C
adis
ta P
harm
aceu
tical
s (U
K) L
td. (
form
erly
Cad
ista
UK
Ltd
.) is
sub
sidi
ary
com
pany
by
virt
ue o
f su
bscr
iptio
n to
Mem
oran
dum
of
Ass
ocia
tion
of t
he C
ompa
ny b
y Ju
bila
nt P
harm
a P
te
Ltd.
Sin
gapo
re, a
100
% s
ubsi
diar
y co
mpa
ny o
f J
ubila
nt O
rgan
osys
Lim
ited.
The
re a
re n
o op
erat
ions
in t
his
com
pany
, till
dat
e. T
he f
inan
cial
sta
tem
ents
of
the
fore
ign
subs
idia
ries
have
be
en c
onve
rted
into
Indi
an R
upee
s on
the
bas
is o
f ap
prop
riate
exc
hang
e ra
tes.
(ii)
The
Min
istr
y of
Com
pany
Aff
airs
, Gov
ernm
ent
of In
dia,
vid
e its
lett
er d
ated
Apr
il 21
, 200
8 ha
s gr
ante
d ap
prov
al u
nder
Sec
tion
212(
8) o
f th
e C
ompa
nies
Act
, 195
6 (t
he A
ct) f
or t
he
finan
cial
yea
r en
ded
Mar
ch 3
1, 2
008
whe
reby
the
Bal
ance
She
et, P
rofit
& L
oss
Acc
ount
, Dire
ctor
s’ R
epor
t an
d A
udito
rs’ R
epor
t of
the
sub
sidi
arie
s an
d ot
her
docu
men
ts r
equi
red
to b
e at
tach
ed a
s pe
r se
ctio
n 21
2 (1
) of
the
Act
are
not
req
uire
d to
be
atta
ched
to
the
Com
pany
’s A
ccou
nts.
Hen
ce, t
he s
ame
are
not
bein
g at
tach
ed. H
owev
er, t
he a
nnua
l acc
ount
s of
the
su
bsid
iary
com
pani
es a
nd t
he r
elat
ed d
etai
led
info
rmat
ion
will
be
mad
e av
aila
ble
to t
he m
embe
rs o
f th
e ho
ldin
g an
d su
bsid
iary
com
pani
es s
eeki
ng s
uch
info
rmat
ion
at a
ny p
oint
of
time.
(iii)
The
annu
al a
ccou
nts
of t
he s
ubsi
diar
y co
mpa
nies
will
als
o be
kep
t op
en f
or in
spec
tion
by a
ny in
vest
or in
its
Hea
d O
ffic
e an
d th
at o
f th
e su
bsid
iarie
s co
ncer
ned.
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