21ST ANNUAL REPORT 2007-2008 · 2009. 11. 25. · 21ST ANNUAL REPORT 2007-2008 3 2 Other Terms The Executive Director shall also be entitled to the benefits under other benefits,

21ST ANNUAL REPORT 2007-200821ST ANNUAL REPORT 2007-200821ST ANNUAL REPORT 2007-200821ST ANNUAL REPORT 2007-200821ST ANNUAL REPORT 2007-2008

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Board of Directors

Sh Varinder Gupta - Chairman & Managing Director

Dr M A Zahir

Sh Chandra Mohan

Dr (Mrs) H K Bal

Mrs Dimple Gupta

Mrs Lalita Kapur - IDBI Nominee

Sh Ravi Pratap Singh

Sh R K Thukral - Executive Director

Senior Company SecretarySh Krishan Singla

Statutory AuditorsM/s K K Kapoor & AssociatesChartered Accountants,Ludhiana

Cost AuditorsM/s Ramanath Iyer & Co.Cost Accountants,New Delhi

BankersPunjab National BankOriental Bank of CommerceAllahabad BankIDBI Bank Limited

Registrar and Share Transfer AgentsAlankit Assignments Limited

2E/21, Jhandewalan Extention,

New Delhi- 110055.

Phone : +91-11-23541234, 42541234

Fax : +91-11-42541967

E-mail : [email protected]

Board’s CommitteesAudit CommitteeDr M A Zahir - Chairman

Dr (Mrs) H K Bal

Mrs Lalita Kapur

Investors’ Grievance CommitteeDr (Mrs) H K Bal - Chairman

Dr M A Zahir

Mrs Dimple Gupta

Remuneration CommitteeDr M A Zahir - Chairman

Dr (Mrs) H K Bal

Mrs Lalita Kapur

Registered Office :Trident Complex, Raikot Road,

Barnala - 148101 (Punjab)

Phone : +91-1679 - 244701-07

Fax : +91-1679 - 244708


Head Office :85, Industrial Area ‘A’

Ludhiana - 141003

Phone : +91-161 - 2225531-35

Fax : +91-161 - 2608784


Works :Village Fatehgarh Chhana,

Mansa Road, Barnala - 148101

Phone : +91-1679 - 285285-86

Fax : +91-1679 - 285292


Notice ....................................................................................... 2 Directors’ Report ........................................................... 10

Management Discussion and Analysis Report ........................14 Corporate Governance Report ..................................... 20

Auditors’ Report .......................................................................28 Balance Sheet ............................................................... 30

Profit & Loss Account ...............................................................31 Schedules ..................................................................... 32

Cash Flow Statement ...............................................................46

Please visit our website : www.iolcp.com

IOL CHEMICALS AND PHARMACEUTICALS LIMITEDIOL CHEMICALS AND PHARMACEUTICALS LIMITEDIOL CHEMICALS AND PHARMACEUTICALS LIMITEDIOL CHEMICALS AND PHARMACEUTICALS LIMITEDIOL CHEMICALS AND PHARMACEUTICALS LIMITED

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NOTICE

NOTICE is hereby given that the Twenty-first Annual GeneralMeeting of the Members of IOL Chemicals andPharmaceuticals Limited will be held on Saturday, the 20thday of September, 2008 at 10.00 AM at the Registered Office ofthe Company, Trident Complex, Raikot Road, Barnala, Punjabto transact the following business:

Ordinary Business:

1. To receive, consider and adopt the audited Balance Sheetof the Company as at 31

st March, 2008 and the Profit &

Loss Account for the year ended on that date alongwith theReports of the Auditors and the Directors thereon.

2. To appoint a Director in place of Sh Varinder Gupta, whoretires by rotation and being eligible offers himself forre-appointment.

3. To appoint a Director in place of Dr M A Zahir, who retiresby rotation and being eligible offers himself forre-appointment.

4. To appoint a Director in place of Sh Chandra Mohan, whoretires by rotation and being eligible offers himself forre-appointment.

5. To appoint a Director in place of Dr (Mrs) H K Bal, whoretires by rotation and being eligible offers herself forre-appointment.

6. To appoint a Director in place of Mrs Dimple Gupta, whoretires by rotation and being eligible offers herself forre-appointment.

7. To consider and, if thought fit, to pass with or withoutmodification(s), the following resolution as an OrdinaryResolution:

“RESOLVED that pursuant to the provisions of Section 224,225 and other applicable provisions, if any, of the CompaniesAct, 1956, M/s S C Vasudeva & Co., Chartered Accountants,New Delhi be and are hereby appointed as the StatutoryAuditors of the Company to hold office from the conclusionof this Annual General Meeting up to the conclusion of thenext Annual General Meeting of the Company in the place ofM/s K K Kapoor & Associates, Chartered Accountants, theretiring Auditors of the Company, who expressed theirunwillingness to be re-appointed as Statutory Auditors ofthe Company on their retirement at this Annual GeneralMeeting, on such remuneration as may be fixed by the Boardof Directors of the Company.”

Special Business:

8. Appointment of Director

To consider and if thought fit, to pass with or withoutmodification(s), the following resolution as an OrdinaryResolution:

“RESOLVED that Sh Ravi Pratap Singh, who was

appointed as an Additional Director of the Companypursuant to the provisions of Section 260 of the CompaniesAct, 1956 and holds office up to the date of this AnnualGeneral Meeting be and is hereby appointed as a Directorof the Company liable to retire by rotation under the Articlesof Association of the Company.”

9. Appointment of Director


“RESOLVED that Sh R K Thukral, who was appointed asan Additional Director of the Company pursuant to theprovisions of Section 260 of the Companies Act, 1956 andholds office up to the date of this Annual General Meetingbe and is hereby appointed as a Director of the Companyliable to retire by rotation under the Articles of Associationof the Company.”

10. Appointment of Sh R K Thukral as Executive Director ofthe Company.


“RESOLVED that in accordance with the provisions ofSections 198, 269, 309, Schedule XIII and all otherapplicable provisions of the Companies Act, 1956(including any statutory modification or re-enactmentthereof, for the time being in force) and subject to theapproval of any authority, if required, Sh R K Thukral beand is hereby appointed as Executive Director of theCompany, for a period of five years with effect from 31st

July, 2008 on the terms and conditions includingremuneration as given below:

1 a) Basic Salary: Rs 59,600/- (Rupees Fiftyninethousand six hundred) per month

b) Perquisites and allowances: Perquisites andallowances shall be in addition to basic salary asfollows:

i) House Rent Allowance 50% of basic salaryii) Conveyance Allowance 20% of basic salary

iii) Communication Allowance 10% of basic salaryiv) Medical Allowance 8.33% of basic salaryv) Newspaper and Periodicals 5% of basic salary

Allowancevi) Children Education Allowance 5% of basic salaryvii) Provident Fund Contribution 12% of basic salary

viii) Bonus 10% of basic salaryix) Gratuity 4.17% of basic salaryx) Uniform Allowance 8% of basic salaryxi) Self Development Allowance 13.33% of basic salaryxii) Medical CL/GIS 4.17% of basic salary


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2 Other Terms

The Executive Director shall also be entitled to the benefitsunder other benefits, schemes, privileges and amenities,amended salary structure as are granted to the seniorexecutives of the Company, in accordance with theCompany’s practice and rules and regulations in forcefrom time to time.”

“RESOLVED FURTHER that notwithstanding anything tothe contrary herein contained, where in any financial year,the Company has no profits or its profits are inadequate,the Company will pay aforesaid remuneration as minimumremuneration to the Executive Director.”

“RESOLVED FURTHER that the Board of Directors mayincrease the remuneration and perquisites of Sh R KThukral Executive Director within Schedule XIII of theCompanies Act, 1956 and such other guidelines or ceilingfixed by the Government from time to time without requiringany further resolution or consent of or reference to themembers.”

“RESOLVED FURTHER that Sh Varinder Gupta, Chairmanand Managing Director and Sh Krishan Singla, SeniorCompany Secretary be and are hereby authorised to doall acts, deeds, matters and things to give effect to theappointment of Sh R K Thukral as Executive Director of theCompany.”

11. Borrowing powers of the Company

To consider and, if thought fit, to pass with or withoutmodification(s), the following resolution as a OrdinaryResolution:

“RESOLVED that pursuant to the provisions of Section 293(1)(d) and all other applicable provisions, if any, of theCompanies Act, 1956 and all other applicable provisions,if any, and supplemental to the Ordinary resolution passedat the Annual General Meeting of the Company held on24th June, 2006, the consent of the Company be and ishereby accorded to the Board of Directors of the Companyto borrow such sum or sums of monies in any manner fromtime to time as may be required for the purpose of businessof the Company with or without security and upon suchterms and conditions as they may think fit, notwithstandingthat monies to be borrowed together with monies alreadyborrowed by the Company (apart from temporary loansobtained from the Company’s bankers in the ordinarycourse of business) may exceed the aggregate of thepaid-up capital of the Company and its free reserves, thatis to say, reserves not set apart for any specific purpose,provided that, the total amount so borrowed by the Boardof Directors and outstanding at any time shall not exceedthe sum of Rs 500 crores.(Rupees five hundred crores).”

“RESOLVED FURTHER that the Board of Directors be andis hereby authorised to take such steps and do such acts,

deeds, matters and things as may be deemed necessaryfor the purpose of giving effect to the above resolution.”

12. Creation of charges on the immovable/movable assetsof the Company.

To consider and, if thought fit, to pass with or withoutmodification(s), the following resolution as a OrdinaryResolution:

“RESOLVED that pursuant to the provisions of Section293(1)(a) and other applicable provisions, if any, of theCompanies Act ,1956 (including any statutory modificationsor re-enactments thereof) the Company hereby accords itsconsent to the Board of Directors to mortgage and/or chargein addition to the mortgages/charges created /to be createdby the Company in such form and manner and with suchranking and at such time and on such terms as the Boardmay determine, on all or any of the movable and/orimmovable properties of the Company, both present andfuture and/or the whole or any part of the undertaking(s) ofthe Company together with the power to take over themanagement of business and concern of the Company incertain events of default, in favour of the lender(s), agent(s),trustee(s) for securing the borrowings of the Companyavailed/ to be availed by way of loan(s) (in foreign currencyand/or in rupee currency) working capital limits andsecurities (comprising of fully/partly convertible debenturesand/or secured premium notes and/or floating rates notes/bonds or other debt instruments), issued /to be issued bythe Company, from time to time, in one or more trenches,upto an aggregate limit of Rs 500 crores (Rupees fivehundred crores only) as approved under Section 293(1)(d)of the Companies Act, 1956 together with interest at therespective agreed rates, additional interest in case of default,accumulated interest, liquidated damages, commitmentcharges, premia on prepayment, remuneration of theagent(s) and/or trustee(s), premium (if any) on redemption,all other costs, charges and expenses, including anyincrease as a result of devaluation/revaluation/fluctuationin the rates of exchange and all other monies payable bythe Company in terms of the respective loan agreement(s),heads of agreement(s), debenture trust deed(s) or loanagreements or any other document entered into/ to beentered into between the Company and the lender(s)/investor(s)/agent(s) and/or trustee(s) in respect of the saidand continuing such specific terms and conditions andcovenants in respect of enforcement of security as may bestipulated in that and agreed to between the Board ofDirectors or any Committees thereof and the lender(s),agent(s), and/ or trustee(s).”

“RESOLVED FURTHER that the Board of Directors of theCompany be and is hereby authorized to finalise thedocuments and such other agreements for creation ofcharge as aforesaid and to do all such acts, deeds, matters


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and things as may be deemed necessary and expedientfor giving effect to the above resolution.”

13. Alteration in Articles of Association

To consider and if thought fit, to pass with or withoutmodification(s), the following resolution as a SpecialResolution:

“RESOLVED that pursuant to the provisions of Section 31and other applicable provisions, if any, of the CompaniesAct,1956, the Articles of Association of the Company beand is hereby amended as follows:

Article 2

To delete the interpretation of Collaboration Agreement,Collaborator and PSIDC.

Article 6

To delete the line beginning from “ The Board…....” to theend “...............Collaborator shall be permitted” from Article 6.

Article 19 (a)

To substitute the words “ in compliance with the Act and/orrules” in place of “not exceeding rupee two per certificate”in the seventh and twelfth line of Article 19(a).

Article 62A

To delete the Article 62A.

Article 111

To substitute the words “such fee as may be prescribedunder the Act and/or rules” in place of “thirty seven paisefor every one hundred words or fractional part thereofrequired to be copied.” in the last line of Article 111.

Article 128

To substitute the word ‘twelve’ in place of ‘seven’ in the lastline of the Article128.

Article 129 (a)

To delete the Article 129 (a).

Article 139 (4)

To substitute the words “the amount as prescribed underthe Act and/or rules” in place of “one thousand rupees inthe aggregate in any year” in fourth line of Article 139(4).

Article 146

To replace the existing Article 146 with the following Articles:

Article146(a) Rotation and retirement

Subject to the provisions of Section 256 of the Act and ofthese Articles at every Annual General Meeting of theCompany, one third of such of the Directors for the timebeing are liable to retire by rotation or, if their number is notthree or a multiple of three, the number nearest to one thirdshall retire from office.

Article 146(b)Which Director retires

Subject to the provisions of these Articles, the Directors to

retire by rotation at every Annual General Meeting shall bethose who have been longest in office since their lastappointment, but as between persons who becomeDirectors on the same day, those to retire shall, in defaultof and subject to any agreement among themselves, bedetermined by lot.

Article 159

To replace the existing Article 159 with the following Article:

Appointment of Chairman and Vice Chairman

The Directors may elect a Chairman of their meetings. TheDirectors may also appoint a Vice-Chairman of the Boardof Directors to preside at the meetings of the Board ofDirectors at which the Chairman shall not be present anddetermine the period for which he is to hold office.

Article 160

To replace the existing Article 160 with the following Article:

Who to preside at meetings of the Board

All the meetings of the Directors shall be presided over bythe Chairman, if present, but if at any meeting of Directorsthe Chairman be not present at the time appointed forholding the same, the Vice-Chairman, if present, shallpreside and if he be not present at such time then and inthat case the Directors shall choose one of the Directorsthen present to preside at the meeting.

Article 162 (ii)

To delete the Article 162 (ii).

Article 172 (a)

To replace the existing Article 172 (a) and (b) with thefollowing Article 172 (a).

Power to appoint Managing Director

Subject to the provisions of the Act and of these Articles,the Board of Directors may from time to time appoint one ormore of their body to be Managing Director or ManagingDirectors (in which expression shall be included a JointManaging Director) or Wholetime Director or Whole-timeDirectors of the Company for such term not exceeding fiveyears at a time as they may think fit, and upon such termsand conditions as the Board may think fit and may fromtime to time (subject to the provisions of any contractbetween him or them and the Company) remove or dismisshim or them from office and appoint another or others in hisor their place or places.

Article 172 (c)

To substitute the number of Article 172 ( c) with Article 172 (b).

Article 172 (d)

To delete the Article 172 (d).

Article 173

Add the words “ Notwithstanding anything contained in


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the Article 146” at the beginning of Article 173.

“RESOLVED FURTHER that the Board of Directors beand is hereby authorized to do all ancillary andconsequential matters as may be required to give effect tothe above resolution.”

14. Issue of Shares to QIBs

To consider and, if thought fit, to pass with or withoutmodification(s), the following resolution as a Special Resolution:

“RESOLVED that pursuant to the provisions of Section81(1A) and all other applicable provisions of theCompanies Act,1956 (including any amendment theretoor re-enactment thereof) and the enabling provisions ofthe Memorandum and Articles of Association of theCompany and the Listing Agreement entered into by theCompany with the Stock Exchanges where the shares ofthe Company are listed and as per the provisions of ChapterXIIIA of SEBI (Disclosure & Investor Protection) Guidelines,2000 (“SEBI Guidelines”) and other prevailing statutoryguidelines in that behalf and subject to all necessaryconsents, permissions and approvals and/or sanctions fromall the appropriate authorities, including the Securitiesand Exchange Board of India (SEBI), Government of India,Reserve Bank of India, Financial Institutions, Banks, Agentsand Trustees, Stock Exchanges and all other bodies andinstitutions as may be relevant (hereinafter singly orcollectively referred to as “the Appropriate Authorities”) andsubject to such conditions and modifications as may beprescribed or imposed by any of them while granting anysuch consents, permissions, approvals, sanctions(hereinafter singly or collectively referred to as “therequisite approvals”) and which may be agreed to by theBoard of Directors of the Company (herein referred to as“the Board” which term shall be deemed to include anycommittee(s) consisting of one or more members of theBoard and/or one or more officials of the Companyappointed by the Board in this behalf which the Board mayconstitute to exercise the powers of the Board) the consent,permission and approval of the Company be and is herebyaccorded to the Board to issue, offer and allot equity shares,securities convertible into equity shares of face value ofRs 10 each not less than at the price calculated inaccordance with the provisions of Chapter XIIIA of SEBI(Disclosure & Investor Protection) Guidelines, 2000 (“SEBIGuidelines”) to the Qualified Institutional Buyers and Mutualfunds and such other investors as allowed under theguidelines for an amount not exceed Rs 50 crores (Rupeesfifty crores) and the relevant date for the purpose ofcalculating minimum price for the issue of equity shares is21st August, 2008 .”

“RESOLVED FURTHER that the equity shares to be issuedby the Company shall rank pari-passu with existing sharesof the Company in all respects.”

“RESOLVED FURTHER that the Board be and is herebyauthorized to issue, offer and allot the requisite number ofequity shares to the proposed allottee(s) at such time ortimes and in one or more tranches, at a price or prices as theBoard may in its absolute discretion decide, subject howeverto the SEBI Guidelines and the other applicable laws and onsuch terms and conditions including the terms of paymentas may be mutually agreed between the Board and theproposed alloteee(s) and shall also be entitled to vary, modifyor alter any of the terms and conditions, including the size ofthe issue, as may be deemed expedient by the Board andthe proposed allottee(s).”

“RESOLVED FURTHER that for giving effect to thisresolution, the Board be and is hereby specificallyauthorized to take all such steps and actions, to give suchdirections as it may in its absolute discretion, deemnecessary or desirable for issue and allotment of equityshares also to settle any question or difficulty that mayarise with regard to the proposed issue, offer and allotmentof equity shares and utilization of proceeds.”

“RESOLVED FURTHER that the Board be and is herebyauthorized to delegate all or any of the powers hereinconferred to any Committee of Board or the Chairman andManaging Director or any other officer or authorizedrepresentative of the Company to give effect to the aforesaidresolution.”

15. Raising of resources through issue of securities in theinternational market


“RESOLVED that pursuant to the provisions of Section 81(IA) and all other applicable provisions of the CompaniesAct, 1956 and all other applicable rules, regulations,guidelines and laws (including any modification or re-enactment thereof, for the time being in force) and inaccordance with all relevant provisions of the Memorandumand Articles of Association of the Company and the listingagreements entered into by the Company with the StockExchanges where the Company’s shares are listed andsubject to any necessary approval, consent, permissionand/or sanction of the Central Government, Reserve Bankof India, Ministry of Finance and/or any other appropriateauthority, wherever required, and subject to such conditionsas may be prescribed by any of them while granting anysuch approval, consent, permission, or sanction, and whichmay be agreed to by the Board of Directors of the Company(hereinafter referred to as the “Board”) and/or dulyauthorised persons thereof for the time being exercisingthe powers conferred by the Board by this resolution,consent of the Company be and is hereby accorded to theBoard to issue, offer and allot, in the course of aninternational offering to eligible foreign investors (whether


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or not such investors are members of the Company), byway of circulation of an offering circular or prospectus orby way of private placement, Foreign Currency ConvertibleBonds (FCCBs)/ Global Depository Receipts (GDRs)/American Depository Receipts (ADRs) in the aggregate ofprincipal amount not exceeding United States Dollars 10(Ten) Millions in one or more markets, one or more tranches(hereinafter referred to as “Securities”), to be subscribed inforeign currency, which at the option of the holders of theSecurities may be converted into equity shares of theCompany, such issue and allotment to be made on suchterms and conditions as may be decided and deemedappropriate by the Board at the time of issue or allotment.”

“RESOLVED FURTHER that without prejudice to thegenerality of the above and subject to all applicable laws,the aforesaid issue of Securities may have all or anyterms or combination of terms in accordance withinternational practices including but not limited to conditionsin relation to payment of interest, additional interest, premiumon redemption, prepayment and any other debt servicepayments whatsoever, and all such terms as are provided inissue of Securities of this nature internationally includingterms for issue of equity shares upon conversion of theSecurities or variation of the conversion price of theSecurities during the term of the Securities and theCompany is also entitled to enter into and execute all sucharrangements/agreements/deeds/documents as the casemay be with any lead managers, underwriters, solicitors,advisors, bankers, depositaries, custodians, principalpaying/transfer/conversion agent, listing agent,intermediaries and all such agencies as may be involvedor concerned in such offerings of Securities and toremunerate all such agencies including the payment ofcommissions, brokerage, fees or the like, and also toseek the listing of any or all of such securities representingthe same in one or more Stock Exchanges outside India.”

“RESOLVED FURTHER that the Securities issued inforeign markets shall be deemed to have been madeabroad and/or in the international market and/or at theplace of issue of the Securities in the international marketand may be governed by foreign laws, as applicable.”

“RESOLVED FURTHER that the Board may enter intoany arrangement with any agency or body for the issue ofthe Securities, in registered or bearer form with suchfeatures and attributes as are prevalent in internationalcapital markets for instruments of this nature and toprovide for the tradeability or free transferability thereof asper the international practices and regulations, and underthe forms and practices prevalent in the internationalmarkets.”

“RESOLVED FURTHER that the Board be and is herebyauthorised to issue and allot such number of equity shares

as may be required to be issued and allotted uponconversion of any Securities referred herein above or asmay be necessary in accordance with the terms of theoffering, all such equity shares being pari passu with thethen existing equity shares of the Company in all respectsand also to seek the listing of any or all of such shares onthe Stock Exchanges in India where the existing shares ofthe Company are listed.”

“RESOLVED FURTHER that the Board be and ishereby authorised to dispose of such Securities as are tobe issued and are not subscribed on such terms andconditions as it may in its absolute discretion deem fit.”

“RESOLVED FURTHER that for the purpose of givingeffect to any issue or allotment of Securities representingthe same or equity shares, as described herein above, theBoard be and is hereby authorised on behalf of theCompany to do all such acts, deeds, matters and thingsas it may at its absolute discretion deem necessary ordesirable for such purpose, including without limitation theutilization of issue proceeds, entering into of underwritingand marketing arrangements, and with power on behalfof the Company to settle any questions, difficulties or doubtsthat may arise in regard to any such issue or allotment as itmay in its absolute discretion deem fit.”

“RESOLVED FURTHER that the Board may at its absolutediscretion do all such acts, deeds, matter and things asit may at its absolute discretion may deem fit for issue ofsecurities or in connection with or incidental to issue ofsecurities including the post issue formalities and withoutbeing required to seek any further consent or approval ofthe Members or otherwise to the end/and intent that theMembers shall be deemed to have given their approvalthereto expressly by the authority of this resolution.”

“RESOLVED FURTHER that the Board be and is herebyauthorized to delegate all or any of the powers hereinconferred to any Committee of the Board or the Chairmanand Managing Director or any other officer or authorizedrepresentative of the Company to give effect to the aforesaidresolution.”

16. Increase in sitting fees of Directors for attending Boardand Committee Meetings


“RESOLVED that pursuant to the applicable provisions ofthe Companies Act, 1956, the listing agreement with theStock Exchanges and Article 135 of the Articles ofAssociation of the Company, the consent of members ofthe Company be and is hereby accorded for the paymentof sitting fees to the Non-Executive Directors of theCompany of Rs 7,500 (Rupees Seven thousand fivehundred only) for attending meetings of the Board of


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Directors of the Company and of Rs 5,000 (Rupees Fivethousand only) for attending the meetings of the Committeesof the Board of Directors of the Company.”

“RESOLVED FURTHER that the Board of Directors beand is hereby authorised to do all ancillary andconsequential matters as may be required to give effect tothe above resolution.”

By order of the BoardFor IOL Chemicals and Pharmaceuticals Limited

Place : Barnala [Krishan Singla]Dated: July 31, 2008 Sr Company Secretary

NOTES:

i) A member entitled to attend and vote is entitled to appointa proxy to attend and vote on poll instead of himself/herself and proxy need not be a member. Proxy form inorder to be effective must be received by the Companynot less than 48 hours before the meeting. The blankproxy form is enclosed.

ii) All activities for transfer of shares, dematerialization ofshares, change of address etc. are carried out by theCompany through its Registrar and Share Transfer Agents(RTA). Members are requested to make their requests toRTA at the following address:

Alankit Assignments Limited2E/21, Jhandewalan Extention,New Delhi-110 055

iii) The Register of Members and Share Transfer Books willremain closed from Tuesday,16th day of September,2008 to Saturday, 20th day of September, 2008 (bothdays inclusive).

iv) Members who are holding shares in identical order ofnames under more than one folio are requested to sendthe relative share certificates to the RTA for consolidationof the entire holding under one folio.

v) Documents referred to in the Notice are open for inspectionat the Registered Office of the Company on all workingdays, except holidays, between 11.00 AM to 1.00 PM.

vi) Members desiring any information on Accounts or otheritems of Agenda are requested to write to the Company atits Registered Office at least ten days before the date of theAnnual General Meeting so as to enable the Managementto keep the information ready.

vii) Members are requested to:a) Intimate their Permanent Account Number (PAN).b) Notify the change of address with pin code, to ensure

quick delivery of letters.c) Bring their copies of Annual Report at the meeting.

d) Complete the enclosed attendance slip and deliver thesame at the entrance of the meeting hall.

e) Provide their e-mail Id for quick correspondencewith them at [email protected]

EXPLANATORY STATEMENT PURSUANT TO SECTION173(2) OF THE COMPANIES ACT, 1956.

Item No. 2 to 6The details of the retiring Directors is given in the CorporateGovernance Report under heading ‘Retiring Directors’.

Item No 7M/s K K Kapoor and Associates, Chartered Accountants,Ludhiana, the present auditors who retire at this Annual GeneralMeeting have shown their unwillingness to be re-appointed asStatutory Auditors of the Company.

The Company has received a special notice from a member ofthe Company, in terms of the provisions of the Act, proposingthe appointment of M/s S C Vasudeva and Co., CharteredAccountants, New Delhi as the Statutory Auditors of theCompany from the conclusion of this Annual General Meetingtill the conclusion of the next Annual Genera Meeting. M/s S CVasudeva and Co., Chartered Accountants, New Delhiexpressed their willingness to act as Statutory Auditors of theCompany, if appointed, and have further confirmed that thesaid appointment would be in conformity with the provisions ofSection 224(1B) of the Act. In view of the above and based onthe recommendations of the Audit & Risk ManagementCommittee, the Board of Directors, proposed the appointmentof M/s S C Vasudeva and Co., Chartered Accountants, NewDelhi as the Statutory Auditors in the place of M/s K K Kapoorand Associates, Chartered Accountants, Ludhiana.

The Board recommends this resolution for your approval.No director is concerned or interested in the passing of thisresolution.

Item No. 8Sh Ravi Partap Singh was appointed as an Additional Directoron the Board w.e.f. July 31, 2008 in terms of Article 133 of theArticles of Association of the Company. Pursuant to Section260 of the Companies Act, 1956 he holds office upto the date ofensuing Annual General Meeting. The Company has received anotice in writing from a member along with deposit of Rs 500/-under Section 257 of the Companies Act, 1956 proposing hisname for the appointment as Director of the Company.

Sh Ravi Partap Singh has a BS in Mechanical Engineering fromUniversity of Delhi and an MBA from Columbia University. He isa Partner of Sycamore Ventures, where he focuses on India relatedinvestments. Over the course of his 25 year career, he hasstructured and led numerous public and private financings,mergers and acquisitions and global investments. He is workingas Managing Director in indiaSTAR (Mauritius) Limited.

The Board has considered that the Company would beimmensely benefited by his mature advice and recommendsthe resolution for your approval.

None of the Directors except Sh Ravi Partap Singh, being theproposed appointee, is interested or concerned in theresolution.


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Item No. 9Sh R K Thukral was appointed as an Additional Director on theBoard w.e.f.July 31, 2008 in terms of Article 133 of the Articlesof Association of the Company. Pursuant to Section 260 of theCompanies Act, 1956 he holds office upto the date of ensuingAnnual General Meeting. The Company has received a notice inwriting from a member along with deposit of Rs 500/- underSection 257 of the Companies Act, 1956 proposing his namefor the appointment as Director of the Company.

Sh R K Thukral is a Science Graduate having a vast experiencein the field of chemical industry and he is also director of numberof other companies. The Board has considered that theCompany would be immensely benefited by his mature adviceand recommends the resolution for your approval.

None of the Directors except Sh R K Thukral being the proposedappointee, is interested or concerned in the resolution.

Item No. 10Sh R K Thukral was appointed as an Executive Director on theBoard w.e.f. 31.07.2008 for the period of five year on the termand conditions approved by the Board of Directors, subject tothe approval of the members and the Central Government.TheRemuneration Committee in its meeting held on 31.07.2008has also approved the appointment and remuneration payableto him. The Board recommends the resolution for your approval.

None of the Directors except Sh R K Thukral being the proposedappointee, is interested or concerned in the resolution.

Item No. 11In terms of the provisions of Section 293(1)(d) of the CompaniesAct, 1956, the Board of Directors of the Company cannot exceptwith the consent of the Company in General Meeting, borrowmonies, apart from temporary loans obtained from Company’sbankers in the ordinary course of business, in excess ofaggregate of the paid-up capital and its free reserves that is tosay reserves not set for any specific purpose.

Presently, the Company has power to borrow the monies uptoRs 250 (Rupees two hundred fifty) crores apart from the temporaryloans. Keeping in view of the Company’s business requirementsand its growth plans, it is considered desirable to increase thesaid borrowing powers to Rs 500 (Rupees five hundred) crores.

The Board accordingly recommends the resolution for theapproval of the members.

None of the Directors is concerned or interested in the resolution.

Item No. 12The Company is required to create charges over its assets,movable and immovable properties by way of hypothecation,mortgage, assignment, lien , pledge etc in favour of its lendersfor the purpose of securing the loan facilities and /or workingcapital limits extended/ to be extended by the lenders to theCompany. Further, upon occurrence of default under the relevantloan/facility agreements and other documents as may be

executed by the Company with the lenders, the lenders wouldhave certain rights in respect of the Company’s assets, movableand immovable properties including the the power to take overthe management of business and concern of the Company incertain events of default.

Section 293(1)(a) of the Companies Act, 1956 provides inter alia,that the Board of Directors shall not, without the consent of theCompany in the general meeting sell, lease or otherwise disposeof the whole or substantially the whole of the undertaking of theCompany or where the Company owns more than oneundertaking, the whole or substantially the whole of any suchundertaking.

Since the mortgage by the Company of its assets as aforesaidin favour of the lender(s) may be regarded as disposal of theCompany’s properties/undertakings, the approval of themembers is being sought under Section 293 (1)(a) of theCompanies Act, 1956 for creating of the said charge. Hence,the Board recommends the resolution for your approval.

None of the Directors is concerned or interested in this resolution.

Item No. 13The amendments in the Articles of Association have becomenecessitated due to buy back of shares from PSIDC and forbest Corporate Governance in the Company.

For amending the Articles of Association, approval of themembers is required. Hence, the Board recommends theresolution for your approval.

None of the Directors, except to the extent relating to the articlesdealing with the terms of appointment of Directors, is concernedor interested in the resolution.

Item No. 14According to guidelines of Chapter XIII A of SEBI (DIP)Guidelines, a listed Company may issue equity shares or othersecurities convertible into shares to the Qualified InstitutionalBuyers which are not related to the promoters at a price not lessthan as to be determined as per the provisions of this chapter.Your Directors thought it prudent to raise the long term resourcesthrough the issue of securities to the QIBs to pay the highlycostly debts and / or to part finance the future expansions to beunder taken by the Company.

Section 81 of the Companies Act, 1956 provides inter-alia thatwhen it is proposed to increase the issued capital of a Companyby allotment of further shares, such further shares shall beoffered to the existing members of the Company unless themembers decide otherwise by passing the special resolution,hence the approval of the members is required. The Board,accordingly, recommends the resolution for the approval of themembers.


Item No. 15The Company, in order to part finance its proposed expansion


9

plans undertaken/to be undertaken needs to strengthen itsfinancial position by augmenting the long term resources. Toachieve the significant competitive advantages, through easyaccess of large amount from International capital, with extendedmaturities, at optimal costs, the Company may need to issuesecurities in the international markets as contemplated in theresolution and as may be decided by the Board and found to beexpedient and in the interest of the Company.

The detailed terms and conditions of the issue as and whenmade will be determined by the Board of Directors inconsultation with the Merchant Bankers, Lead Managers,Advisors, Underwriters and other experts in accordance withthe applicable provisions of law.

Section 81 of the Companies Act, 1956 provides inter-alia thatwhen it is proposed to increase the issued capital of a Companyby allotment of further shares, such further shares shall beoffered to the existing members of the Company unless themembers decides otherwise by passing the special resolution,hence the approval of the members is required. The Boardaccordingly, recommend the resolution for the approval of themembers.


Item No. 16The members in their meeting held on December 12, 2003 hadapproved the payment of sitting fee of Rs 2,500/- to the Non-

Executive Directors for attending the meetings of the Board or aCommittee thereof. It is considered desirable to revise paymentof the sitting fee to the Non-Executive Directors looking to theincreased volume of business of the Company .

According to Combined Code of Corporate Governance andConduct, all fees/compensation to Non-Executive Directors shallbe fixed by the Board of Directors and shall require previousapproval of members in General Meeting.

Hence the resolution as given in the Notice is being placedbefore the members for their approval.

The following Directors, viz. Dr M A Zahir, Dr (Mrs) H K Bal,Mrs Lalita Kapur, Mr Chandra Mohan, Mrs Dimple Gupta andMr Ravi Pratap Singh are concerned or interested in theresolution to the extent of sitting fees that they will receive forattending the meetings of the Board of Directors of the Company/Committees of the Board of Directors of the Company.Mr Varinder Gupta being the husband of Mrs Dimple Gupta,may also be deemed to be interested in this resolution.


Place : Barnala [Krishan Singla]Dated : July 31, 2008 Sr Company Secretary


10

DIRECTORS’ REPORT

Dear Members

Your Directors are pleased to present the Twenty-first AnnualReport and Audited Accounts for the financial year ended31st March, 2008.

1. Financial Results

The financial results of the Company for the year under reportare given below:

(Rs in lacs)

Particulars Year ended Year ended

31st March, 2008 31st March, 2007

Net Sales and other Income 31830.46 20275.15

Profit before interest & depreciation 3685.54 1884.17

Interest 1295.85 664.63

Profit before depreciation 2389.69 1219.54

Depreciation 742.88 348.94

Profit for the year 1646.80 870.60

Less: Prior period expenses 10.14 0.67

Profit before tax 1636.67 869.93

Provision for tax 400.33 114.85

Profit after tax 1236.33 755.08

Balance carried to the Balance Sheet 1236.33 1122.66

2. Performance Review

There was overall improvement in the performance of theCompany in production, consumption norms and profitability incomparison to the previous year’s performance. The net salesand other income of the Company has increased by 57% fromRs 20275.15 lacs to Rs 31830.46 lacs due to increase in thecapacities of all plants. The Profit before interest & depreciationhas increased by 95.61% to Rs 3685.54 lacs during the yearunder review against Rs 1884.17 lacs during the previousyear due to efficient use of resources. The net profit hasincreased by 63.74% from Rs 755.08 lacs during the previousyear to Rs 1236.33 lacs during the year under review.

3. Expansion of Ibuprofen plant

During the year, the Company has completed the expansion ofIbuprofen plant with a total capital outlay of Rs 1300 lacs inJuly, 2007 which resulted in increase in the capacity ofIbuprofen plant from 1,800 TPA to 3,600 TPA , the full impact ofwhich will be reflected in the performance of the current year.

4. Contribution to National Exchequer

Your Company has contributed a sum of Rs 4305.06 lacs ascompared to Rs 2911.54 lacs in the previous year to the NationalExchequer by way of Central Excise Duty in addition tocontribution through other direct and indirect taxes.

5. Allotment of Equity Share

During the year Company has issued 26,00,000 equity sharesof Rs 10/- at a premium of Rs 32/- per share on June 23, 2007& 13, 30,000 equity shares of Rs.10/- at a premium of Rs 65/-per share on October 22, 2007 resulting in increase in the paidup equity share capital of the Company from Rs 9,45,00,000to Rs 13,38,00,000.

6. 10% Fully Convertible Debenture/ Equity Warrants

The Company has issued 13,99,998 debentures of Rs 100/-each on preferential basis which are compulsory convertible intoequity shares of Rs 10/- each at a premium of Rs 65/- withinperiod of 18 months from the date of allotment i.e. October 22,2007.

In addition the Company has issued 57,00,000 equity warrantson preferential basis carrying an option to the holders of suchwarrants to subscribe one equity share of Rs 10/- each at apremium of Rs 32/- per share for every warrant held, within theperiod of 18 months from the date of allotment i.e. August 21,2007 and 23,00,000 equity warrants on preferential basiscarrying an option to the holders of such warrants to subscribeone equity share of Rs 10/- each at a premium of Rs 65/- pershare for every warrant held, within the period of 18 monthsfrom the date of allotmenti.e. October 22, 2007.

7. Buy back of shares

During the year the promoters have bought back 9,80,000 equityshares held by the Punjab State Industrial DevelopmentCorporation Limited in the Company as per terms of FinancialCollaboration Agreement.

8. Future Expansions

The Company has further undertaken the expansion cumforward and backward integration project with a capitaloutlay of Rs 216 crores consisting of expansion of AceticAcid plant capacity from 50,000 TPA to 75,000 TPA, EthylAcetate plant capacity from 33,000 TPA to 36,000 TPA, AceticAnhydride plant capacity from 12,000 TPA to 18,000 TPA,Ibuprofen plant capacity from 3,600 TPA to 6,000 TPA andCogeneration power capacity from 4 MW to 17 MW.

In addition to this as backward and forward integrationproject, the Company has undertaken the setting up ofmanufacturing facilities of value added products that is AcetylChloride with capacity of 4,800 TPA and Mono Chloro-aceticAcid with a capacity of 6,600 TPA and Iso Butyl Benzenewith a capacity of 6,000 TPA. While these products will beused as major raw materials for the manufacture ofIbuprofen, Acetic Acid and Acetic Anhydride will be used asraw material for the manufacture of Acetyl Chloride andMono Chloro-Acetic Acid. The Company is hopeful tocomplete the project by February, 2010.

9. Directors

Sh Yogesh Goel, Nominee Director of PSIDC, ceased to beDirector of the Company w.e.f. 18.03.2008 on withdrawal of hisnomination by PSIDC due to buy back of its shareholding in theCompany by the promoters. The Board accepted the withdrawalof his nomination from the Board and places on record theirappreciation for the services rendered by him during his tenureas Director of the Company.

The Company has appointed Sh Ravi Pratap Singh asAdditional Director and Sh R K Thukral as Additional andExecutive Director w.e.f. 31.07.2008. They hold office upto thedate of ensuing Annual General Meeting. The Company hasreceived notices under Section 257 of Companies Act, 1956for their appointment as Directors of the Company.


11

In accordance with the provisions of the Companies Act, 1956,Article 146 of the Articles of Association of the Company andCombined Code of Corporate Governance and Conduct, allDirectors of the Company except the nominee Director of IDBIare liable to retire by rotation and being eligible, offerthemselves for re-appointment.10. Corporate GovernanceThe Company has in place a system of Corporate Governance.A separate report on Corporate Governance alongwith Auditors’certificate regarding compliance with the Clause 49 of the ListingAgreement is annexed to this Annual Report.11. Management Discussion and Analysis ReportThe Management Discussion and Analysis Report is givenseparately in this Annual Report.12. Safety, Health and EnvironmentSafety is Company’s top priority with regard to employment andthe Company has been encouraging safety measures at all levelsof operations especially at the floor level. Regular trainingprogrammers are being conducted to bring in awareness aboutthe importance of safety at the work place. Bi-monthly medicalcamps are also being organized for the welfare of the membersin addition to regular medical facilities provided to them.13. Investor ServicesThe Company is committed to provide the best services to theshareholders. Alankit Assignments Limited, New Delhi isworking as Registrar and Share Transfer Agents (RTA) of theCompany for transfer and dematerialization of shares. Till dateno correspondence/enquiry from any shareholder is pendingwith the Company for reply.14. Fixed DepositsThe Company has not accepted any deposits from the public/members during the year under review.15. Listing of SharesThe equity shares of the Company continued to be listed andtraded on the Bombay Stock Exchange Limited (BSE). Thescript code of the Company at BSE is 524164. The Companyhas made all compliances of the Listing Agreementincluding payment of annual listing fees to the Stock Exchange.16. Statutory Auditors’ ReportThe Auditors’ Report on the accounts is self-explanatoryand no comments are required.17. Statutory AuditorsM/s K K Kapoor and Associates, Chartered Accountants,Ludhiana the present auditors who retire at this Annual GeneralMeeting have shown their unwillingness to be re-appointed asStatutory Auditors of the Company.The Company has received a special notice from a member ofthe Company, in terms of the provisions of the Act, proposingthe appointment of M/s S C Vasudeva and Co., CharteredAccountants, New Delhi as the Statutory Auditors of theCompany from the conclusion of this Annual General Meetingtill the conclusion of the next Annual Genera Meeting. M/s S CVasudeva and Co., Chartered Accountants, New Delhiexpressed their willingness to act as Statutory Auditors of theCompany, if appointed, and have further confirmed that thesaid appointment would be in conformity with the provisions ofSection 224(1B) of the Act. In view of the above and based on

the recommendations of the Audit & Risk ManagementCommittee, the Board of Directors, proposed the appointmentof M/s S C Vasudeva and Co., Chartered Accountants, NewDelhi as the Statutory Auditors in the place of M/s K K Kapoorand Associates, Chartered Accountants, Ludhiana.

18. Cost Auditors

The Central Government had directed the audit be carried outof the cost accounts maintained by the Company in respect ofchemicals by a qualified cost accountant. The Board subject tothe approval of the Central Government has appointedM/s Ramanath Iyer & Co., Cost Accountants, New Delhi asCost Auditors, for the year 2008-09.

19. Industrial Relations

The industrial relations remained cordial and harmoniousthroughout the year.

20. Energy Conservation/Technology absorption and ForeignExchange earnings and outgo

Energy conservation continues to be an area of major emphasisin the Company. A statement giving details of conservation ofenergy, technology absorption, foreign exchange earnings andoutgo, in accordance with Section 217(1)(e) of the CompaniesAct, 1956, read with the Companies (Disclosure of Particularsin the Report of Board of Directors) Rules, 1988 is annexedhereto as Annexure I and forms part of the report.

The Company has received the “National Award for EnergyConservation” (2nd prize) in the chemical sector for the year2007 from the Ministry of Power, Government of India,consecutively for the Third year.

21. Information on personnel

The statement showing the particulars of the employees asrequired by the provisions of Section 217(2A) of the CompaniesAct, 1956 read with the Companies (Particulars of Employees)Rules, 1975 as amended, is not given as no employee was inreceipt of remuneration equal to or exceeding Rs 24 lacs perannum, if employed for the full year or Rs 2 lacs per month ifemployed for the part of the year.

22. Directors’ Responsibility Statement

Directors’ Responsibility statement pursuant to the provisionsof Section 217(2AA) of the Companies Act, 1956 is enclosedas Annexure II and forms part of the report.

23. Acknowledgement

We are pleased to place on record our sincere gratitude andappreciation for the assistance and co-operation received fromthe Union Government, the Punjab Government, the PunjabState Industrial Development Corporation Limited, the FinancialInstitutions and the Company’s Bankers, Members, Customersand Business Constituents.

We also place on record our sincere appreciation for thecontribution made by the employees at all levels. Our consistentgrowth is made possible by their devout, sincere and unstintedservices.

For and on behalf of the Board

Place : Ludhiana Varinder GuptaDated : July 31, 2008 Chairman & Managing Director


12

ANNEXURE I TO THE DIRECTORS’ REPORT

Information as per Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in theReport of Board of Directors) Rules, 1988 and forming part of the Directors’ Report for the year ended 31st March, 2008.

I CONSERVATION OF ENERGY

1.1 Energy conservation measures taken:

a) Networking of the heat exchangers has been done to save the heat energy & cooling water.b) Brine consumption has been reduced by using chilled water which ultimately reduced the steam consumption.c) PHE’s and corrugated type heat exchangers are installed in place of Shell & Tube Heat Exchangers which gives more

efficiency hence saves energy.d) Replacement of old gear boxes and agitators with new helical type gear boxes and agitators to save power.e) Newly designed Furnace for Acetic Anhydride Plant to save power, steam and furnace oil.f) Replacement of old evaporator in Ibuprofen plant with agitated thin film evaporator to save diesel.g) Using the steam flash of condensate tank to reduce the steam consumption.h) Providing the backwash provision on all heat exchangers to attain its complete efficiency, which ultimately saves energy.

1.2 Additional investments and proposals, if any, being implemented for reduction of consumption of energy.a) Changing the oxidation technology to save power.b) Changing the oxidation reactor in Acetaldehyde Plant to save steam and power.c) Shifting of ordinary distillation to multi pressure distillation system to save steam and power and using the crude column

vapors as the heating media for product column reboiler in Ethyl Acetate section, so reducing the load on cooling towerand reducing the steam consumption.

d) Heat exchanger networking.e) By utilizing the vent off gases as cooling media to save electrical energy.

1.3 Impact of measures taken at (1.1) and (1.2) above for reduction of energy consumption and consequent impact on thecost of production of goods:These measures have been resulted in saving of power, steam and fuel consumption.

1.4 Total energy consumption and consumption per unit of production as per Form-A of the annexure in respect ofindustries specified in the schedule thereto.

Partiiculars Unit 2007-08 2006-07

A. Power and Fuel Consumption1. Electricity

a) Purchased Units KWH IN LACS 70.25 146.87Total Amount RS IN LACS 311.45 631.54Rate/Unit RS/KWH 4.43 4.30

b) Own Generationi) Through Diesel Generator

Units KWH IN LACS 2.39 4.92Units per liter of HSD KWH 3.55 3.57Cost/Unit RS/KWH 7.76 8.20

ii) Through Turbine GeneratorUnits KWH IN LACS 301.08 84.11Units per MT of Steam KWH 116 104Cost/Unit RS/KWH 2.85 3.12

2. Coal MT 21259 NIL3. Furnace Oil KL 1742.79 1601.844. Others/Internal Generation NIL NIL

B. Consumption per unit of production :Acetic Acid KWH/MT 309 315Ethyl Acetate KWH/MT 73 95Acetic Anhydride KWH/MT 258 371Ibuprofen KWH/MT 3465 3621


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II TECHNOLOGY ABSORPTIONEfforts made in technology absorption as per Form B of the annexure

FORM-B

Disclosure of particulars with respect to technology absorption1. Research & Development (R & D):

a) Specific areas in which R & D is carried out by the Company:1. Reducing the norms of Ibuprofen by providing new process conditions.2. Improving the yield of Ibuprofen by performing trail run of IPCA stage3. Working of new Products like Rabiperzole, Lansoprazole, Omeprazole, Pantoprazole, Bucropion HCl, S-Citraloform,

Venlafuxin, Serttraline Hydrochloride etc.4. Minimizing the deviation of process.5. Designing of new equipment for expansion of existing plant like Acetic Acid, Acetic Anhydride and new projects like IBB,

MCA, and Ibuprofen expansion using designing software CHEMCAD.6. Identifying & synthesising the impurities.7. Analysis of material balance, energy balance, mass transfer & heat transfer networks.8. Reduction in cost of production & improvement in the quality of the products.9. Implementation of Pintch Energy Technology.10. Pilot Plant Installation with MSGLR, SSR, AHU, Centrifuge, Sifter, Scrubber, GMP Area facility for trail run of new and

existing products.11. Working on utilization of byproducts such as PAC.

b) Benefits derived as a result of the above R & D :1. Improvement in solvent recovery by providing new process conditions.2. Providing route for solution of plant problems by analyzing in R&D.3. Designing of new equipments for Projects.4. Reduction in ETP Load by providing new processes.5. Reduction in solvents and catalysts by providing new processes.

c) Future plan of action:The R & D team is working on minimizing the deviation that is between practical norms and theoretical norms by trails runsin the New Pilot Plant and also developing new processes for existing and new products to reduce the cost of production andimprove the quality of products in chemical & drugs sections.

d) Expenditure on Research & Development: Expenses incurred on R & D are booked in respective general accounting heads.

2. Technology Absorption, Adaptation & Innovation: Nil

3. Foreign Exchange Earnings & Outgo:(Rs in lacs)

Used 306.40 Earned 4542.79

ANNEXURE II TO THE DIRECTORS’ REPORT

Directors’ Responsibility StatementPursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, it is hereby confirmed that:

1. in preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanationsrelating to material departures;

2. the directors had selected such accounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financialyear and of the profit or loss of the Company for that period;

3. the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with theprovisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

4. the directors had prepared the annual accounts on a going concern basis. For and on behalf of the Board

Place : Ludhiana Varinder GuptaDated : July 31, 2008 Chairman & Managing Director


14

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

1. Chemical Industry - An Overview

Global scenario

Chemical Industry is one of the fastest growing Industries globally.Demand in different segments of chemical Industry likepharmaceuticals, Inorganic Chemicals, Organic Chemicals, Fineand Specialties, Bulk Drugs, Agrochemicals, and Paints andDyes are increasing rapidly. Industry players are following stateof the art techniques and extensive research and developmentpolicies to fulfill the increasing demand for chemicals.

The global chemical industry, estimated at US$ 2.4 trillion, isone of the fastest growing sectors of the manufacturing industry.Despite the challenges of escalating crude oil prices anddemanding international environmental protection standardsnow adopted globally, the chemicals industry has still grown ata rate higher than the overall-manufacturing segment. As perindustry reports the pharmaceutical segment contributesapproximately 26% of the total industry output and approx.35-40% is dominated by the petrochemical segment.

Commodity chemicals is the largest segment in the chemicalsmarket with an approx. size of $ 750 billion while the specialtyand fine chemicals segment accounts for $ 500 billion.Some ofthe major markets for chemicals are North America, WesternEurope, Japan and emerging economies in Asia and LatinAmerica. The US consumes approximately one-fifth of the globalchemical consumption whereas Europe is the largest consumerwith approx. half the consumption. The US is the largest consumerof commodity chemicals whereas Asia Pacific is the largestconsumer of agrochemicals and fertilizers.

Indian scenario

Chemical Industry is one of the oldest industries in India, whichcontributes significantly towards industrial and economic growthof the nation. It is highly technology based and provides valuablechemicals for various end products such as textiles, paper, paintsand varnishes, leather etc., which are required in almost allwalks of life. The Indian Chemical Industry forms the backboneof the industrial and agricultural development of India andprovides building blocks for downstream industries.

Chemical Industry is an important constituent of the Indianeconomy. Its size is estimated at around US$ 35 billion approx.,which is equivalent to about 3% of India’s GDP. The totalinvestment in Indian Chemical Sector is approx. US$ 60 billionand total employment generated is about 1 million. The IndianChemical sector accounts for 13-14% of total exports and 8-9%of total imports of the country. In terms of volume, it is 12th largestin the world and 3rd largest in Asia. Currently, per capitaconsumption of products of chemical industry in India is about1/10th of the world average. Over the last decade, the IndianChemical industry has evolved from being a basic chemicalproducer to becoming an innovative industry. With investmentsin R&D, the industry is registering significant growth in theknowledge sector comprising of specialty chemicals, finechemicals and pharmaceuticals. The Indian Chemical MarketSegment wise is as under: -

Segment Market Value (billion US$)Basic Chemicals 20Specialty Chemicals 9High End / Knowledge Segment 6Total 35

The Indian Chemicals Industry comprises both small and large-scale units. The fiscal concessions granted to small sector inmid-eighties led to establishment of large number of units in theSmall Scale Industries (SSI) sector. Currently, the IndianChemical industry is in the midst of a major restructuring andconsolidation phase. With the shift in emphasis on productinnovation, branch building and environmental friendliness, thisindustry is increasingly moving towards greater customerorientation. Even though India enjoys an abundant supply ofbasic raw materials, it will have to build upon technical servicesand marketing capabilities to face global competition andincrease its share of exports.

As the Indian economy was a protected economy till the earlynineties, very little large-scale R&D was undertaken by theChemical Industry to create intellectual property. The Industrywould, therefore, have to make large investments in R&D tosuccessfully counter competition from the international chemicalindustry. India has a number of scientific institutions and thecountry’s strength lies in its large pool of highly trained scientificmanpower.

India also produces a large number of fine and specialtychemicals, which have very specific uses and are essential forincreasing industrial production. These find wide usage as foodadditives and pigments, polymer additives, anti-oxidants in therubber industry, etc.

In Chemical Sector, 100% FDI is permissible. Manufacture ofmost chemical products inter-alia covering organic / inorganic,dyestuffs & pesticides is delicensed. The entrepreneurs need tosubmit only IEM with the Department of Industrial Policy &Promotion provided no locational angle is applicable.

Alcohol and alcohol based units constitute an important segmentof the Indian Chemical Industry which plays a vital role in thecountry’s economy. Alcohol and alcohol based units account for11-12 percent of the total capital employed in the manufacturingsector and employ 6 percent of the country’s factory workforce.The chemical industry produces value added products worthRs 16-17 billion per year of which an estimated Rs 3. 5-4 billion isaccounted for by alcohol based units. The alcohol based chemicalindustry has been endeavoring to promote export of value addedchemicals rather than molasses and alcohol. Organic chemicalsproduced in India have a strong market in the Middle East, Africa,Far East and European countries.

Industrial Production

It contributes 2.8% in the GDP of the country. Basic chemicalsand chemical products account for 14% in overall Index ofIndustrial production (IIP).The compound annual rate of growth(CARG) of Index of Industrial Production (IIP) for the basicchemicals and its products during the 10th Five Year Plan wasmarginally higher at 8.9% as against 8.8%in manufacturing and8.2% in overall IIP. As compared to the last year i.e 2005-06, thegrowth in basic chemicals and its products was 9.8% .


15

Index of Industrial Production : (1993-94 = 100)

Years IIP Mining & Manu- Electricity Chemicals &Overall Quarrying facturing chemical

Productsincluded inManufacturing

Weight 100 10.47 79.4 10.17 14.0Indices

2001-02 167 131.9 172.7 159.2 185

2002-03 176.6 139.6 183.1 164.3 191.82003-04 189 146.9 196.6 172.6 208.42004-05 204.8 153.4 214.6 181.5 238.6

2005-06 221.5 154.8 234.1 190.9 258.22006-07 247.1 163.2 263.5 204.7 283.4CARG* (%)

2006-07/ 8.2 4.4 8.8 5.2 8.92001-022006-07/ 11.6 5.4 12.6 7.2 9.82005-06

Source: Department of Chemicals & Petrochemicals

Exports and ImportsDuring the period of nineties, India was a net importer ofchemicals and petrochemical products, but now India hasbecome a net exporter of chemicals because of implementationof several large scale petrochemical plants, and tremendousgrowth of exports in sectors like bulk drugs and pharmaceuticals,pesticides, and dyes and intermediates. The plastic products,miscellaneous chemical products and pharmaceuticalsconstitute the main items of exports and imports.

0

20000

40000

60000

80000

2002-03 2003-04 2004-05 2005-06 2006-07

Years

(Rs

in C

rore

)

Export Im port Trade Balance

Exports and Imports – Chemicals, Petrochemicals and Drugs/ Pharmaceuticals(Rs Crore, Growth : Percentage)

Items/Years 2002-03 2003-04 2004-05 2005-06 2006-07 CARG*(2006- 07/ (2006-07/ 2001-02) 2005-06)

A: Total National Exports 255137 293367 375340 456418 571779 22.3 25.3 Of Which :

(a) Chemicals 17397 20679 25574 33462 39351 24.0 17.6(b) Petrochemicals 11186 13444 17492 17268 21801 21.0 26.3(c) Drugs/Pharmaceuticals 6779 7445 9263 10821 14380 23.4 32.9(d) Sub-Total (a+b+c) 35362 41568 52329 61551 75532 22.9 22.7(e) Share of (a+b+c) in Total Exports (%) 13.9 14.2 13.9 13.5 13.2

B: Total National Imports 297206 359108 501065 660409 840506 27.9 27.3Of Which

(a) Chemicals 20190 25258 32838 40492 47914 21.5 8.3 (b) Petrochemicals 6674 7865 10018 14141 16339 24.8 15.5 (c) Drugs/Pharmaceuticals 1152 1150 1303 1945 2914 29.7 49.8 (d) Sub-Total (a+b+c) 28016 34273 44159 56578 67167 22.6 18.7 (e) Share of (a+b+c) in Total Exports (%) 9.4 9.5 8.8 8.6 8.0 C: Trade Balance{A(d)-B(d)} 7346 7295 8170 4973 8365

*Compound Annual Rate of Growth During the Tenth Five year Plan (%) (Base Year 2001-02)Source: Department of Chemicals & Petrochemicals

During the period from 2002-03 to 2006-07, exports of chemicalsector increased from Rs 35362 crore to Rs 75532 crore. Theexports have been consistently out stripping the values of importsduring the corresponding period, with the result that the tradebalance increased from Rs 7346 crore in 2002-03 to Rs 8365crore in 2006-07.

International Trade of Chemical Industry *

*including Chemicals, Petrochemicals and Drugs &Pharmaceuticals

Source: Department of Chemicals & Petrochemicals

The share of imports of the chemical industry in the total nationalimports ebbed from 9.4% to 8.0% during the period 2002-03 to2006-07 whereas the share of exports declined marginally from13.9% to 13.2% during the corresponding period.


16

Pharmaceutical IndustryThe Indian pharmaceutical industry, now a $17 billion (overRs 68,000 crore) Industry, has shown tremendous progress interms of infrastructure development, technology base creationand a wide range of products. It has established its presenceand determination to flourish in the changing environment. Theindustry now produces bulk drugs belonging to all majortherapeutic groups requiring complicated manufacturingtechnologies. Formulations in various dosage forms are beingproduced in GMP compliant facilities. Strong scientific andtechnical manpower and pioneering work done in processdevelopment have made these possible. The country now ranksfourth worldwide accounting for 8% of world’s production byvolume and 1.5% by value. It ranks seventeenth in terms ofexport value of bulk actives and dosage forms. Indian exportsare destined to more than 200 countries around the globeincluding highly regulated markets of US, Europe, Japan andAustralia and the share of export of Drugs, Pharmaceuticalsand Fine Chemicals is more than Rs 24,942 crore (aroundUS $ 6 Billion) during the year 2006-07.

Exports – Drugs, Pharmaceuticals and Fine Chemicals (Rs in crores)

Years 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Export 9751 12826 15213 17857 22116 24942

(Source:-Directorate General of Commercial Intelligence and Statistics- DGCIS, Kolkata)

India is now recognized as one of the leading global players inpharmaceuticals. Europe accounts for the highest share of Indianpharma exports followed by North America and Asia. Anincreasing number of Indian pharmaceutical companies havebeen receiving international regulatory approvals for their plants.The policy initiatives taken by the Government of late have ledto quantitative and qualitative improvements in the R&Dactivities of the industry. The National Pharmaceutical Policy,aimed at ensuring availability of lifesaving drugs at reasonableprices, is being finalized. Taking stock of the imperativerequirement for skilled manpower, the Government has decidedto set up six new National Institutes of PharmaceuticalEducation and Research (NIPERs) in different regions of thecountry. As a new initiative in the pharmaceutical sector, theFirst Pharmaceutical Census of India (FPCI) is proposed to belaunched during 2007-08 to obtain a robust database for thesector.

2. Opportunities and ThreatsOpportunities1. Technically trained manpower.2. Large domestic market, with good potential for growth.3. Backward & Forward Integration of Products.

Threats:1. Cost of Power & Cost of Finance in India is very high as

compared to prevailing in developed countries.2. Infrastructure facilities are not of world class. Transport and

Communications are complex resulting in delays and slowmovement of goods.

3. Business Segment PerformanceThe Company deals in main two segments i.e. Chemicals and

Pharmaceuticals. While under chemical division the Companymanufactures Acetic Acid, Ethyl Acetate & Acetic Anhydrideand under pharmaceuticals division, the Companymanufactures bulk drug i.e. Ibuprofen.The segment wiseperformance is given below:

Acetic AcidThe production of Acetic Acid has increased from 39566 MTduring the previous year to 50851 MT during the year underreview showing an increase of 28.52% and its sale hasincreased by 8.52% from 15523 MT to 16845 MT during theyear under review. The Company has captively consumed34075 MT of Acetic Acid in the process of Ethyl Acetate andAcetic Anhydride during the year under review against24011 MT during the previous year.

Ethyl AcetateThe production of Ethyl Acetate has increased from 17127 MTto 28074 MT showing an increase of 63.92% and its sale alsoincreased by 64.53 % from 17177 MT to 28262 MT during theyear under review.

Acetic AnhydrideThe production of Acetic Anhydride has increased from9492 MT during the previous year to 11413 MT during the yearunder review showing an increase of 20.24% and its sale hasincreased by 25.12% from 9312 MT to 11651 MT during theyear under review.

IbuprofenThe production of the Ibuprofen has increased from 873 MT to2331 MT recording an increase of 167% and its sale hasincreased from 844 MT to 2134 MT during the year underreview signifying a growth of 152.84%.

4. Future ProspectsA growing Indian economy, particularly in the increasingmanufacturing sector, will continue to drive the growth of thecountry’s chemical industry for the next decade. A sharp rise inper capita income will also be a factor. Since 2006, the Indianchemical industry as grown at 12 percent per year, and that ratecould increase to as much as 16 percent annually by 2010.Pharmaceuticals and biotechnology are leading the way withgrowth rates of 18 percent per year. With a 14 percent annualgrowth rate, the petrochemical sector is also receiving significantinvestment dollars. In 2007, the government announced its plansfor investing more than $9 billion over the next five years and apolicy to create several designated petroleum, chemicals, andpetchem investment regions (PCPIR) throughout the country.Analysts expect India to become a major global player inspecialties and polymers, in addition to pharma, biotech andpetrochemicals. Rising feedstock costs, reduced creditavailability and shortages of skilled engineers and constructionequipment could, however, delay projects planned for the nearfuture.

The changing dynamics of the global pharmaceutical industry,especially that of the regulated markets like USA and Europe,have presented a number of opportunities for IndianPharmaceutical Industry (IPI) to capitalize on. Some of the majorconcerns facing the global pharmaceutical industry are higherhealthcare costs, competition from generics, patent expires of


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block buster drugs, drying R&D pipelines and increasing R&Dcosts. These translate into a significant growth opportunity forIPI in the form of exports of generics to regulated markets andcontract manufacturing / research for global pharmaceuticalcompanies. It is estimated that the IPI, which has been growingbetween 7-15% over the last five years, is expected to grow at aCAGR of about 11-13% over the next five years. It is forecastedto reach a market size of around US$ 9.5 Bn in 2010, from itspresent level of about US$ 5.7 Bn.

It is estimated that by the year 2010, the Indian pharmaceuticalIndustry has the potential to achieve over Rs 1,00,000 croreproduction of formulations and bulk drugs.

5. Risk ManagementOur Company beliefs that there is no activity without risk but atthe same time one has to tread very cautiously and with care.Our Company encourages the members to take appropriatemeasures to manage the risk in their sphere to maximize thevalue addition in their every activity which will result in wealthmaximization of every stake holder. It enables us to protect ourmargins in adverse business conditions and maximize them infavorable markets.

A description of the main risks to which the Company isexposed as well as the approach taken by the management tocontrol and mitigate those risks is shown below:

Competition risk

Our Company may face competition from indigenous as well asforeign suppliers. Over the years our Company has de-bottlenecked and expanded the installed capacities of itsChemicals and Pharmaceuticals divisions. Our Company isfurther increasing the installed capacities of its Chemicals &Pharmaceuticals divisions with appropriate investment andsetting up the manufacturing facilities of other value addedproducts towards backward and forward integration tostrengthen its position.

Geographic risk

A significant dependence on a particular market could be a riskin the event of a selective downturn in that region. OurCompany’s sales are spread throughout the country and hasalso expanded the export to about 50 countries to mitigate thiskind of risk.

Technological risk

Technological advances could result in asset obsolescencewarranting a high cost of replacement. Our Company is usingthe latest technology in the manufacturing, processing andquality control measures and keeps itself in touch with the latestadvancement in technology and tries to adopt the same toremain efficient in productivity and cost minimization.

Credit risk

Credit risk is associated with losses that occur when debtors areunable to meet their repayment obligations on time. TheCompany has established internal policies to determine thecredit worthiness and reliability of potential customers.

Liquidity risk

This refers to the possibility of default of a Company to meet its

obligations because of unavailability of funds to meet bothoperational and capital requirements. In order to ensureadequacy of its funding, cash flow forecasts are preparedregularly and actions taken appropriately.

Foreign exchange risk

The Company is exposed to foreign exchange risk with respectto foreign currencies, denominated mainly in US dollars, onrevenue and supplies. However, the risk is hedged as theCompany is engagsed both in imports and exports.

Personnel risk

Personnel risk deals with the risks that effect the safety or stabilityof personnel within an organization. These are managed bythrough occupational health and safety management andmaintaining good industrial relations which minimize these risksand provides an organization with a competitive edge throughmaintaining high moral and highly experienced staff.

Insurance

In order to reduce and mitigate identifiable risks all theinsurable immovable as well as movable assets of theCompany including stocks continued to be properly insuredand all the insurance policies are in force as on the date of thereport.

6. Internal Control Systems

Well established and well defined internal controls, checks andsystems are in place at all levels and in all departments of theCompany, supported by an internal audit conducted byindependent firm of Chartered Accountants.

7. Financial PerformanceOverviewThere was overall improvement in the performance of theCompany in production, consumption norms and profitability incomparison to the previous year’s performance. The net salesof the Company has increased by 56.94% from Rs 20259.40lacs to Rs 31794.29 lacs due to increase in the capacities of allplants and improvement and modification of the existing plantstructure.The profit before interest and depreciation hasincreased by 95.61% to Rs 3685.54 lacs during the year underreview against Rs 1884.17 lacs during the previous year.

Share Capital

The Authorized Share Capital of the Company is Rs 30 croresdivided into 2,50,00,000 equity shares of Rs 10/- each and50,00,000 Preference shares of Rs 10/- each.

During the year Company has issued 26,00,000 equity sharesof Rs 10/- at a premium of Rs 32/- per share on June 23, 2007& 13, 30,000 equity shares of Rs 10/- at a premium of Rs 65/-per share on October 22, 2007 resulting in increase in the paidup equity share capital of the Company from Rs 9,45,00,000 toRs 13,38,00,000.

10% Fully Convertible Debenture/ Equity Warrants

The Company has issued 13,99,998 debentures of Rs 100/- eachon preferential basis which are compulsory convertible into equityshares of Rs 10/- each at a premium of Rs 65/- within period of 18months from the date of allotment i.e. October 22, 2007.


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In addition the Company has issued 57,00,000 equity warrantson preferential basis carrying an option to the holders of suchwarrants to subscribe one equity share of Rs 10/- each at apremium of Rs 32/- per share for every warrant held, within theperiod of 18 months from the date of allotment i.e. August 21,2007 and 23,00,000 equity warrants on preferential basiscarrying an option to the holders of such warrants to subscribeone equity share of Rs 10/- each at a premium of Rs 65/- pershare for every warrant held, within the period of 18 monthsfrom the date of allotment i.e. October 22, 2007.

Reserves and Surplus

The addition to the Share Premium account of Rs 1696.50 lacsduring the year is due to the premium received on issue of26,00,000 equity shares of Rs 10/- at a premium of Rs 32/- pershare and 13, 30,000 equity shares of Rs 10/- at a premium ofRs 65/- per share.

Loan Funds

Secured Loans at the end of the financial year 2008 wereRs 8616.19 lacs, against Rs 8157.78 lacs at the end of previousyear. Unsecured Loan at the end of financial year 2008 stood atRs 1316.25 lacs, against Rs 2083.27 lacs at the end of previous year.

Deferred Tax Liability

The Company has a deferred tax liability (net of deferred taxassets) of Rs 421.63 lacs as on March 31, 2008 as againstRs 32.83 lacs as the end of the previous year.

Fixed Assets

During the year, the Company added Rs 5652.65 lacs to itsgross block of assets. Gross block of fixed assets as on March31, 2008 stood at Rs 15277.50 lacs as against Rs 9624.85lacs as on March 31, 2007. The increase in gross block is dueto major additions in plant and machinery of Rs 4474.59 lacs, infreehold land of Rs 210.13 lacs and in building of Rs 957.36lacs during the year.

The Company remained focused on the growth in fixed assetsrequired to support its growing business in India and Overseas.

Current Assets, Loans and Advancesa) InventoriesThe Company had inventories of Rs 3472.89 lacs as on March31, 2008 against Rs 3030.49 lacs as on March 31,2007.

b) Sundry Debtors

Sundry debtors amounted to Rs 3225.93 lacs as on March 31,2008 as compared with Rs 1867.99 lacs as on March 31, 2007.

c) Cash and Bank balance

As on March 31, 2008 the Company had cash & bank balanceof Rs 373.38 lacs as compared to Rs 338.22 lacs as on March31, 2007.

d) Loans and advancesLoans and advances as on March 31, 2008 were Rs 1737.42lacs as compared to Rs 1071.15 lacs as on March 31, 2007.

Current LiabilitiesCurrent liabilities went up to Rs 5283.49 lacs as on March 31,2008 as compared to Rs 4101.01 lacs as on March 31, 2007.This increase is primarily due to increase in sundry creditorsfrom Rs 3002.27 lacs as on March 31, 2007 to Rs 4133.08 lacs

as on March 31, 2008.

Provisions made towards taxes aggregated to Rs 40 lacs duringthe year as against Rs 39.83 lacs in the previous year. Duringthe year provision is made of Rs 13.36 lacs towards Employeebenefits as per AS-15.

Net Sales

During the year, net sales of the Company have increased by56.94% from the previous year. The net sales of the Company isRs 31794.29 lacs for the year ended March 31, 2008 as againstRs 20259.40 lacs during the previous year. Net sales of theCompany has increased mainly due to increase inproduction of all the products of the Company.

Exports

During the year under review, export turnover of theCompany has registered substantial improvement over the lastyear. The exports of the Company on FOB value has beenincreased by 115.54% to Rs 4542.79 lacs as compared toprevious year’s exports of Rs 2107.60 lacs. As percentage tonet sales it has increased from 10.40% to 14.29% during theyear.

Other Income

Other income for the year ended March 31, 2008 is Rs 36.18lacs as against Rs 15.75 lacs in the previous year. Interestreceived during the year is Rs 29.53 lacs as against Rs 12.30lacs during the previous year.

Raw Material Consumed

During the year, percentage of raw material consumption to netsales is 72.55% as against 78.23% for the previous year,showing a decrease of 5.68%.

Manufacturing Expenses

During the year, percentage of manufacturing expenses to netsales is increased by 0.14% from 10.55% to 10.69%.

Personnel Expenses

Percentage of personnel expenses to net sales during theyear is 2.59% against 1.93% for the previous year.

Administrative Expenses

During the year, percentage of administrative expenses to netsales is decreased by 0.13% from 1.02% to 0.89% due toincrease in sales volume.

Selling and Distribution Expenses

During the year, selling and distribution expenses to net saleshas increased mainly due to increase in the exports. Theseexpenses stand at 3.91% of net sales during the year underreview against 2.98% in previous year.

Financial Expenses

During the year, percentage of financial expenses to net salesis 4.08% against 3.28% in previous year showing a increaseof 0.80%.

Miscellaneous expenditure written off

Miscellaneous expenditure written off for the year ended March31, 2008 are Rs 27.30 lacs as against Rs 30.80 lacs for theyear ended March 31, 2007.


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Depreciation

The depreciation charged to the profit and loss account hasincreased during the year to Rs 742.88 lacs as compared toRs 348.94 lacs in previous year, mainly because of theincrease in gross block of assets due to implementation ofexpansion-cum-captive co-generat ion project of theCompany.

Profit after tax

The Company has provided provision for current tax, deferredtax and fringe benefit tax computed in accordance withprovision of Income Tax, 1961. Net provision of tax for the currentyear is Rs 400.33 lacs in comparison to Rs 114.85 lacs in theprevious year.

During the year, profit after tax is Rs 1236.33 lacs againstRs 755.08 lacs during the previous year.

Cash flows

Our net cash flow from operating activities for the year endedMarch 31, 2008 increased by 45.15% to Rs 2236.13 lacs againstRs 1540.57 lacs during the previous year.

Our net cash used in the investing activities amounts toRs 4692.21 lacs during the year ended March31,2008 againstRs 6436.65 lacs during the previous year.

During the year, net cash flow from financing activitiesdecreased to Rs 2491.24 lacs as against Rs 4993.78 lacs duringthe previous year. The cash used for paying interest isRs 1161.75 lacs during the year under review.

8. Contribution to National Exchequer

The Company has contributed a sum of Rs 4305.06 lacs ascompared to Rs 2911.54 lacs during the previous year to theNational Exchequer by way of central excise duty in additionto contribution through other direct and indirect taxes.

9. Human Resources

The Company has a team of about 704 strong membersconsisting of 8% Professionals /Engineers, 23% Post Graduates/Graduates, 27% Diploma/ITI and 42% others.

The Company stresses on the all around development of thehuman resources. The Company’s HR policies entail injecting

the Company with a high degree of expertise, professional depth,dynamism and power of the youth. The Company belief in respectof human resources and dignity of labour and considerhuman resources very valuable and vital assets for thedevelopment of the organization. To continuously enhancethe competencies of the employees, the Company organizes aseries of in-house as well as external training programs.

10. Cautionary Statement

Statement in the Management Discussion and Analysisdescribing the Company’s objectives, projections, estimatesand expectations may be “Forward Looking Statements” with inthe meaning of applicable laws & regulations. Actual resultsmay differ materially from those expressed or implied.Important factors that could make a difference to theCompany’s operations include but are not restricted to theeconomic conditions affecting demand/supply and priceconditions in the domestic and overseas markets in which theCompany operates, changes in the Government regulations,tax laws, and other statues, as also other incidental factors.


Place : Chandigarh Varinder GuptaDated : May 05, 2008 Chairman and Managing Director

Manpower Profile

Others42%

Professionals/Engineer8%

PostGraduates/Graduates

23%

Diploma/ITI27%


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CORPORATE GOVERNANCE REPORT

Company’s Philosophy on Corporate GovernanceIt has been the continuous endeavor of IOL Chemicals and Pharmaceuticals Limited to exceed and excel through betterCorporate Governance and fair & transparent governance practices, many of which were in place before they were mandated bySEBI. For creation and maximization of wealth of shareholders on a sustainable and long-term basis, it is imperative for theManagement to institutionalize a “Framework of Corporate Governance and Code of Practices” as an enabling methodology tofurther strengthen management and decision-making process. We believe in leveraging the resources to translate dreams intoopportunities and opportunities into reality; to infuse people with a vision which sparks dynamism and entrepreneurship; tocreate a system of succession which combines stability with flexibility and continuity with change.

1. Board of Directors:a) Composition of the Board:

The Board comprises one executive director and five non-executive directors including one nominee director as on 31stMarch 2008. The Company is having majority of non executive independent directors on the Board. The detail of thecomposition of the Board, attendance at last AGM, shareholding in the Company, number of directorship and committee’smembership & chairmanship are as given below:

Name of the Category Attendance Shareholding No. of No. of Committees @Director at last in the Directorship Memberships Chairmanships

AGM Company held # held heldSh Varinder Gupta Promoter Yes 11,56,630 7 — —(Chairman &Managing Director)

Dr M A Zahir Non-Executive Yes 300 10 4 3

Sh Chandra Mohan Non-Executive No — 8 4 —

Dr (Mrs) H K Bal Non-Executive No — 8 4 3

Mrs Lalita Kapur Non-Executive No — 1 — —(Nominee of IDBI)

Mrs Dimple Gupta Non-Executive No — 5 1 —

# including IOL Chemicals and Pharmaceuticals Limited@ Board Committees for this purpose includes Audit Committee and Shareholders’/Investors’ Grievance Committee(including Board Committees of IOL Chemicals and Pharmaceuticals Limited)The Company has appointed Sh Ravi Pratap Singh as Additional Director and Sh R K Thukral as Additional and ExecutiveDirector w.e.f. 31.07.2008. They hold office upto the date of ensuing Annual General Meeting. The Company has receivednotices under Section 257 of Companies Act, 1956 for their appointment as Directors of the Company.

None of the directors is a Member of more than 10 (ten) Committees or Chairman of more than 5 (five) Committees asprescribed under Clause 49 of the Listing Agreement.

b) Director Attendance at Board Meetings:

During the financial year 2007-08, the Board of Directors met 7 (seven) times on the following dates:Directors/ Sh Varinder Dr M A Zahir Sh Yogesh Sh Chandra Dr (Mrs)H K Bal Mrs Lalita Mrs Dimple Total MembersDate of meeting Gupta Goel* Mohan Kapur Gupta Present

07.04.2007 p L P P P P P 6

23.06.2007 P P P P P L P 6

30.07.2007 P P P L P P P 6

25.09.2007 P P P P L P P 6

15.10.2007 P P P P L P P 6

31.12.2007 P P P P P L P 6

30.01.2008 P P L P P P P 6

Meeting Attended 7 6 6 6 5 5 7 42

P = Present, L = Leave*Ceased to be director with effect from 18.03.2008.There was no gap of more than four months between any two consecutive meetings.

c) Remuneration of Directors:i) Executive Director : The Company pays remuneration to its Managing Director as approved by the Remuneration

Committee, Board of Directors, Members of the Company and the Central Government, if required. Detail of theremuneration given to the Managing Director during the year is given below:


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Name Position Salary Commission Contribution to Other TotalProvident & perquisites &other Funds allowances

Sh Varinder Gupta Managing Director 7,55,000 — 90,600 10,46,484 18,92,084

ii) Non-Executive Directors: Non-Executive Directors have not paid any remuneration except sitting fees @ Rs 2500/- each forattending the Board and Committee meetings. The setting fees has been paid to the respective nominating Institutions forattending the meeting by their nominees. The details of sitting fees paid during the year 2007-2008 is as follow: (in Rs)

Name of the Director Fee paid for Fee paid for Total Fee paidBoard Meetings Committees Meetings

Dr M A Zahir 15,000 32,500 47,500Sh Yogesh Goel (Nominee of PSIDC)* 15,000 10,000 25,000Sh Chandra Mohan 15,000 — 15,000Dr (Mrs) H K Bal 12,500 30,000 42,500Mrs Lalita Kapur (Nominee of IDBI) 12,500 — 12,500Mrs Dimple Gupta 17,500 — 17,500

* Ceased to be director with effect from 18.03.2008.

d) Retiring DirectorsThe brief resume of the retiring Directors and other relevant information as required under Clause 49 of the Listing Agreemententered into with the Stock Exchange are furnished hereunder :

1. Sh Varinder GuptaSh Varinder Gupta, Promoter Director aged 45 years is presently Chairman and Managing Director of the Company. He isan industrialist and having wide and rich experience of more than 24 years in chemical and fertilizer industry. He had alsobeen associated as Joint Managing Director with Varinder Agro Chemicals Limited now merged with Abhishek IndustriesLimited from 1989 to 1991.

He is also Director of G Drugs and Pharmaceuticals Limited, Mayadevi Polycot Limited, Trident Towel Limited, IOL LifesciencesLimited, NM Merchantiles Limited and NCG Enterprises Limited. He is holding 11,56,630 equity shares of IOL Chemicalsand Pharmaceuticals Limited.

2. Dr M A ZahirDr M A Zahir, aged 65 years is a Director of the Company since 1998. He has more than 42 years of experience in businessmanagement education and involved in imparting training to the executives at senoior levels of different institutions inpublic as well as private sector. He has remained Dean, College of Basic Science and Humanities, PAU, Ludhiana.Presently he is on the Board of many reputed companies and Chairman of Synetic Business School (SBS), Ludhiana.Inaddition he also takes interest in cultural activities and serving as President of Society for Promotion of Indian ClassicalMusic and Culture among Youth, Ludhiana Chapter since 1985. He holds a Masters’ Degree in Commerce and Ph.D.

He is also Director of Hero Cycles Limited, Highway Industries Limited, Ralson (India) Limited, Sohrab Spinning MillsLimited, Rockman Industries Limited, Hero Honda Finlease Limited, Sunshine Corporation Limited, Lotus Integrated TexparkLimited and Praneel Innovations Limited. He is a member of Audit Committee of Hero Cycles Limited, Lotus IntegratedTexpark Limited and Praneel Innovations Limited and of Shareholders’/ Investors’ Grievance Committee of IOL Chemicalsand Pharmaceuticals Limited. He is Chairman of Audit Committee in Rockman Industries Limited and IOL Chemicals andPharmaceuticals Limited and of Shareholders’/ Investors’ Grievance Committee in Praneel Innovations Limited. He isholding 300 equity shares of IOL Chemicals and Pharmaceuticals Limited.

3. Dr (Mrs) H K BalDr (Mrs) H K Bal, aged 69 years is a Director of the Company since, 2002. She had served many colleges and was headof Department of Business Management of Punjab Agriculture University, Ludhiana. She is Doctorate in Statistics andholds Diploma in Management.She is also Director of Nahar Spinning Mills Limited, Nahar Investments & Holding Limited (Nahar Exports Limited), NaharIndustrial Enterprises Limited, Shreyans Industries Limited, Oswal Woolen Mills Limited, Sportking India Limited and NaharCapital and Financial Services Limited. She is a member of Audit Committee in Shreyans Industries Limited, Sportking IndiaLimited, Nahar Industrial Enterprises Limited and IOL Chemicals and Pharmaceuticals Limited. She is Chairman ofShareholders’/Investors’ Grievance Committee in Nahar Spinning Mills Limited, Nahar Investments & Holding Limited(Nahar Exports Limited) and IOL Chemicals and Pharmaceuticals Limited.


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4. Sh Chandra MohanSh Chandra Mohan, aged 75 years is a Director of the Company since, 2005. He has an experience of more than fivedecades in Indian Industry. He was Vice Chairman and Managing Director of Punjab Tractors Limited for 28 years longestChief Executive Officer in Indian corporate world. He was instrumental in the designing and developing Indian tractornamed Swaraj with totally indigenous technology which not only competed successfully with foreign technology but exceedthem. He has been decorated with numerous awards including Padmashree in 1985 for his contribution to the Industry andsociety as well. Even after his stint at Punjab Tractors Limited, he has enlarged his endeavours to develop Indian engineeringcapabilities. He is B A (Hons) and B Sc in Mechanical Engineering.He is also Director of Rico Auto Industries Limited, Engineering Innovations Limited, Sandhar Technologies Limited,Winsome Yarns Limited, DCM Engineering Limited, Kamla Dials & Devices Limited, Winsome Textiles Industries Limited,ITIDA CAD Services (Pvt) Limited, and Meera Explorations Private Limited. He is member of Audit Committee in WinsomeYarns Limited, DCM Engineering Limited, Winsome Textiles Industries Limited and Punjab Tractors Limited.5. Mrs Dimple GuptaMrs Dimple Gupta, aged 41 years is a Director of the Company since, 2006. She is an Industrialist and having wide and richexperience in this field.She is also a Director of Mayadevi Polycot Limited, IOL lifesciences Limited, NM Merchantiles Limited and NCG EnterprisesLimited. She is a member of Shareholders’/Investors’ Grievance Committee in IOL Chemicals and Pharmaceuticals Limited.6. Sh Ravi Pratap SinghSh Ravi Partap Singh aged 49 years has been appointed as a Directors of the Company w.e.f. 31.07.2008 . He is a Partnerof sycamore ventures, where he focuses on India related investments. Over the course of his 25 year career, he hasstructured and led numerous public and private financings, mergers and acquisitions and global investments. He has a BSin Mechanical Engineering from University of Delhi and an MBA from Columbia University. He is working as ManagingDirector in indiaSTAR (Mauritius) Limited.7. Sh R K ThukralSh R K Thukral aged 57 years has been appointed as a Executive Directors of the Company w.e.f. 31.07.2008 . He hasmore than 35 years experience in the field of chemical industry. He has worked as President (works) with Varinder AgroChemicals Limited now merged with Abhishek Industries Limited. He has done graduate in Science.

He is also Director of G Drugs and Pharmaceuticals Limited, Sunshine Corporation Limited, Abhishek Corporate ServicesLimited and Prudential Techno Ventures Limited.

2. Committees of the Board:

a) Audit and Risk Management Committee

The Board has reconstituted Audit and Risk Management Committee on 26.04.2008 consisting of three directors, all beingnon-executive and independent Directors viz. Dr. M.A Zahir (Chairman), Dr (Mrs) H K Bal and Mrs Lalita Kapur. The StatutoryAuditors, Internal Auditors and Finance Officer are invitees on the Committee. The Company Secretary acts as Secretary tothe Committee.

The terms of reference of the Audit and Risk Management Committee are as contained in the Section 292A of the CompaniesAct, 1956 and also as contained in the Clause 49 of the Listing Agreement. The primary objective of the Audit and RiskManagement Committee is to monitor and provide effective supervision of the management’s financial reporting processwith a view to ensure accurate, timely and proper disclosures, transparency, integrity & quality of financial reporting andminisation of risk.

During the year 2007-2008 the Audit and Risk Management Committee met five times on 31st May, 2007, 23rd June, 2007,30th July, 2007, 15th October, 2007 and 30th January, 2008. There was no gap of more than four months between any twoconsecutive meetings. The attendance recared of Audit and Risk Management Committee Members is give below:

Name of the Members Category No. of Meetings

Held Attended

Dr M A Zahir (Chairman) Non-executive Independent Director 5 5Sh Yogesh Goel* Non-executive Independent Director 5 3Dr (Mrs) H K Bal Non-executive Independent Director 5 4Mrs Lalita Kapur ** Non-executive Independent Director — —

*Ceased to be member with effect from 18.03.2008. **Appointed as member w.e.f. 26.04.2008


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b) Remuneration CommitteeThe Board has reconstituted Remuneration Committee on 31.07.2008 consisting of three directors, all being non-executiveand independent Directors viz. Dr M.A Zahir (Chairman), Dr (Mrs) H K Bal and Mrs Lalita Kapur. The terms of reference ofRemuneration Committee include the determination of remuneration packages of the executive directors includingremuneration policy, pension rights etc. During the year one meeting was held on 23.06.2007.

Name of the Director Category No. of Meetings Held Attended

Dr M A Zahir (Chairman) Non-executive Independent Director 1 1Sh Yogesh Goel* Non-executive Independent Director 1 1

Dr (Mrs) H K Bal Non-executive Independent Director 1 1Mrs Lalita Kapur Non-executive Independent Director 1 —

*Ceased to be member with effect from 18.03.2008.c) Shareholders’/Investors’ Grievance Committee

The Shareholders’/Investors’ Grievance Committee consists of three Directors viz. Dr (Mrs) H K Bal (Chairman), Dr M A Zahirand Mrs Dimple Gupta to specifically look into the redressal of the Shareholders and Investors complaints. No need wasarisen during the year to hold the meeting.

d) Other CommitteesBesides, the above three Committees, the Board of Directors has delegated banking and finance matters to the Banking andFinance Committee which consists three members viz.Sh Varinder Gupta (Chairman), Dr M A Zahir and Dr(Mrs) H K Bal.

3. Management Discussion and Analysis ReportThe Management Discussion and Analysis Report has been included in this Annual Report and includes discussion on thematters specified in the Clause 49 of the Listing Agreement.

4. Code of Conduct The ‘Combined Code of Corporate Governance and Conduct’ has been adopted by the Company in 2003. The said Code of

Conduct is available on the website of the Company. A certificate required under clause 49(I)(D)(iii) affirming compliance ofsaid code is given in this Annual Report.

5. Shareholdersa) Disclosures regarding appointment or re-appointment of Directors

According to Article 146 of the Articles of Association of the Company, all Directors for the time being except NomineeDirector of IDBI, are liable to retire by rotation shall retire and being eligible, may offer themselves for re-election at theAnnual General Meeting. Accordingly Sh Varinder Gupta, Dr M. A. Zahir, Dr (Mrs) H K Bal, Sh Chandra Mohan and MrsDimple Gupta Directors are liable to retire by rotation in the ensuing Annual General Meeting and being eligible offerthemselves for re-appointment. The Board has recommended the re-election of these directors to the members.Sh Yogesh Goel, nominee director of PSIDC, ceased to be director of the Company w.e.f. 18.03.2008 on withdrawal of hisnomination by PSIDC due to buy back of its shareholding in the Company by the promoters. The Board accepted thewithdrawal of his nomination from the Board and places on record their appreciation for the services rendered by him duringhis tenure as director of the Company.The Company has appointed Sh Ravi Pratap Singh as Additional Director and Sh R K Thukral as Additional and ExecutiveDirector w.e.f. 31.07.2008. They hold office upto the date of ensuing Annual General Meeting. The Company has receivednotices under Section 257 of Companies Act, 1956 for their appointment as Directors of the Company.

b) Communication to the MembersThe quarterly, half yearly and annual results are generally published in ‘Economic Times’ (English), Business Standard(English) and the ‘Desh Sewak’ (Punjabi). As per the requirements of the Listing Agreement, the Company is also providingregular information to the Stock Exchange. The Company is also providing the Quarterly Results, Segment Reports,Shareholding Pattern, Corporate Governance Report and Annual Report on the EDIFAR website as per Clause 51 of theListing Agreement. The same are also available at the Company’s website i.e. www.iolcp.com.

c) Compliance OfficerSh Krishan Singla, Senior Company Secretary is Compliance Officer. Any Investor/Shareholder of the Company can contacthim on the matters related with the Company at 85, Industrial Area, ‘A’, Ludhiana, Phone:91-161-2225531-35, Fax:91-161-2608784 and e-mail: [email protected] & [email protected]

d) Annual General MeetingsThe last three Annual General Meetings were held at the Registered Office of the Company at Trident Complex, RaikotRoad, Barnala as per the details given below:

Meetings Date Day Time No. of Special Resolutions20th AGM September 22, 2007 Saturday 10:00 A.M —19th AGM June 24, 2006 Saturday 10.00 A.M 418th AGM June 25, 2005 Saturday 10.00 A.M —


24

Board meetings to take on record Schedule

Financial Results for the quarter ending June 30, 2008 During July 2008Financial Results for the quarter/half year ending September 30, 2008 During October 2008Financial Results for the quarter ending December 31, 2008 During January 2009Financial Results for the quarter/year ending March 31, 2009 During June 2009

c) Date of Book ClosureTuesday, the 16th day of September, 2008 to Saturday, 20th day of September,2008 (both days inclusive).

d) The Shares of the Company are listed on the following Stock Exchange

Name and Address of the Stock Exchange Stock Code

Bombay Stock Exchange Limited (BSE) 524164Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai

The Company has made all the compliances of the Listing Agreement including payment of annual listing fee to the BombayStock Exchange Limited where the shares of the Company are listed.

e) Distribution Schedule

The distribution schedule of the Company as on March 31, 2008 is as follow:

Range Shareholders Shares

No. of shares Number %age to total holders Number %age to total capital

Upto 5000 7,397 95.25 9,51,037 7.115001 to 10000 176 2.27 1,49,254 1.1210001 to 20000 78 1.00 1,20,214 0.9020001 to 30000 26 0.33 67,812 0.5130001 to 40000 14 0.18 51,079 0.3840001 to 50000 20 0.26 96,626 0.7250001 to 100000 17 0.22 1,37,220 1.02Above 100001 37 0.49 1,18,06,758 88.24

Total 7,765 100.00 1,33,80,000 100.00

e) Postal Ballot

During the year ended 31st March, 2008, the Company has not passed any resolution through postal ballot.

6. Disclosures

a) Related Party Transactions

There have been no materially significant related partly transactions, pecuniary transactions or relationships between theCompany and its directors, promoters that may have potential conflict with the interests of the Company at large except thedetails of transactions annexed to the Balance Sheet. All details relating to financial and commercial transactions, wheredirectors may have a potential interest are provided to the Board and the interested directors neither participate in thediscussion, nor do they vote on such matters.

b) Compliance made by the Company

The Company has continued to comply with the requirements of the Stock Exchange, SEBI and other Statutory Authorities onall matters related to capital markets during the last three years; no penalties or strictures have been imposed on theCompany by the Stock Exchange, SEBI or any other Statutory Authorities relating to the above.

7. General Shareholders Information

The Following information would be useful to our shareholders:

a) The Annual General Meeting of the Company will be held on Saturday, the 20th day of September 2008 at 10.00 AM atthe Registered Office of the Company at Trident Complex, Raikot Road, Barnala, Punjab.

b) Financial Calendar :The Last financial year of the Company was of twelve months from April 2007 to March 2008.Thetentative financial calendar of the Company for the year 2008-09 shall be as follow:


25

f) Shareholding Pattern:The Shareholding Pattern of the Company as on March 31, 2008 is as follow:

Category Shares % age

Promoter - Indians 65,37,953 48.86 - Foreign — —

Sub - total 65,37,953 48.86Non-Promoters

- Financial Institutions/Mutual Funds 11,000 0.08 - Bodies Corporates 34,68,743 25.93 - Individuals 20,27,481 15.15 - NRI 4,823 0.04 - Foreign Companies 13,30,000 9.94

Sub -total 68,42,047 51.14

Total 1,33,80,000 100.00

g) Complaints/ queries received and resolved:

Detail of Complaints/queries received and resolved during the year 2007-08 are as under:

Sr. No Nature of complaints/ queries No. of complaints/ queries during the year

Received Attended Pending

1 Transfer of shares 7 7 NIL

2 Dividend 3 3 NIL

3 Loss/Issue of duplicate shares certificate 26 26 NIL

4 SEBI/Stock Exchange NIL NIL NIL

5 Change of Address NIL NIL NIL

6 Split/Consolidation NIL NIL NIL

7 Others 24 24 NIL

h) Market Price data

Monthly high and low prices of equity shares of IOL Chemicals and Pharmaceuticals Limited at the Bombay Stock ExchangeLimited (BSE) are as follow:

Financial Year IOL Chemicals and Pharmaceuticals Limited BSE SENSEX

2007-08 High Low High Low

April, 2007 41.70 33.50 14384 12426

May, 2007 44.00 35.65 14576 13554

June, 2007 72.80 39.00 14683 13947

July, 2007 79.00 61.05 15869 14639

August, 2007 70.80 51.50 15542 13780

September, 2007 102.80 52.00 17361 15323

October, 2007 100.00 82.20 20238 17145

November, 2007 132.05 76.95 20204 18183

December, 2007 204.00 129.90 20498 18886

January, 2008 220.00 126.30 21207 15332

February, 2008 154.95 123.70 18895 16458

March, 2008 137.85 87.55 17228 14677

Source: bseindia.com


26

i) Registrar and Share Transfer Agents

Alankit Assignments Limited,“Alankit House” ,2E/21, Jhandewalan Extension,New Delhi - 110055Phone : 91-11-23541234, 42541234Fax : 91-11-42541967E mail : [email protected]

j) Dematerialisation and Transfer of shares

Dematerialisation and Transfer of shares are being done by the Registrar and Share Transfer Agents of the Company.Presently the Registrar and Share Transfer Agents of the Company is Alankit Assignments Limited, New Delhi.

The equity shares of the Company are under rolling settlement and are compulsory traded and settled only in the dematerialisedform. During the year 2007-2008, 49,86,300 (37.27%) equity shares of the Company have been dematerialised and in total1,25,77,230 (94%) shares of the Company have been dematerialised as on March 31, 2008. No case is pending for transferas well as dematerialisation of shares. The ISIN No. of the Company is INE485C01011.

k) Plant Location

Village Fatehgarh Chhana, Dhaula Complex,Mansa Road, Barnala-148 001.Phone : 91-1679-285285-86Fax : 91-1679-285292

l) Address for Correspondence

IOL Chemicals and Pharmaceuticals Limited85, Industrial Area ‘A’,Ludhiana – 141 003.Phone : 91-161-2225531-35Fax : 91-161-2608784

E-mail : [email protected], [email protected]

8. CEO and CFO certificate

The certificate from the Chairman and Managing Director and Vice President (Finance and Accounts) under Clause 49 (V) ofListing Agreement is given in this Annual Report.

9. Auditor’s Certificate on Compliance

A certficate from the Statutory Auditors confirming the compliance of Clause 49 (VII) is given in this Annual Report.

10. Compliance of clause 49 pertaining to Mandatory and Non-Mandatory requirements

The Company has complied with all the Mandatory requirements on Corporate Governance as specified in Clause 49 of theListing Agreement entered into with the Stock Exchange. So far as Non-Mandatory requirements are concerned, the Companyhas constituted the Remuneration Committee of the Board of Directors and has adopted a Whistle Blower Policy.

Monthly high low of share price

0

50

100

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250

April,

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May,

2007

June,

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Nov,

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2008

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High Low

Monthly high low of sensex

0

5000

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15000

20000

25000

April,

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May,

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July,

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Aug,

2007

Sep,

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27

Chief Executive Officer (CEO) and Chief Financial Officer (CFO) Certification

We, Varinder Gupta , Chief Executive Officer and Chairman and Managing Director and Rakesh Mahajan, Chief Financial Officerand Vice President (Finance and Accounts) of IOL Chemicals and Pharmaceuticals Limited, certify that:

1. We have reviewed the financial statements and the cash flow statement for the year ended 31st March, 2008 and that to the bestof our knowledge and belief :

a) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might bemisleading;

b) these statements together present a true and fair view of the Company’s affairs and are in compliance with existing accountingstandards, applicable laws and regulations;

2. There are, to the best of our knowledge and belief, no transactions entered into by the Company during the year are fraudulent,illegal or violative of the Company’s code of conduct;

3. We accept responsibility for establishing and maintaining internal controls and that we have evaluated the effectiveness of theinternal control systems of the Company and we have disclosed to the auditors and the Audit & Risk Management Committee,deficiencies in the design or operation of internal controls, if any, of which we are aware and the steps we have taken or proposeto take to rectify these deficiencies;

4. We have indicated to the Auditors and the Audit & Risk Management Committee

a) significant changes in internal controls during the year;

b) significant changes in accounting policies during the year, if any, and that the same have been disclosed in the notes to thefinancial statements; and

c) instances of significant fraud of which we have become aware and involvement therein, if any, of the management or otheremployees who have a significant role in the Company’s internal controls system.

5 We further declare that all board members and senior managerial personnel have affirmed compliance with the CombinedCode of Corporate Governance and Conduct for the financial year ended 31st March, 2008 .

Varinder Gupta Rakesh MahajanPlace : Chandigarh Chief Executive Officer, and Chief Financial Officer andDated : May 05, 2008 Chairman and Managing Director Vice President (Finance & Accounts)

Auditors’ Certificate on Compliance with the conditions of Corporate Governance under clause 49 of the Listing Agreement

ToThe Members,IOL Chemicals and Pharmaceuticals Limited

We have examined the compliance of conditions of Corporate Governance by IOL Chemicals and Pharmaceuticals Limited for theyear ended 31st March, 2008 as stipulated in clause 49 of the Listing Agreement of the said Company with Stock Exchange in India.

The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to areview of the procedures and implementation thereof, adopted by the Company, for ensuring the compliance of the conditions ofCorporate Governance. It is neither an audit nor an expression of the opinion on the financial statements of the Company.

In our opinion and to the best of our information and the explanations given to us, we may certify that the Company has compliedwith the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that no investor grievance is pending for a period of exceeding one month against the Company as per the recordsmaintained by the Company and presented to the Shareholders/Investor’s Grievence Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairs of the Company.

for K K KAPOOR & ASSOCIATESChartered Accountants

Place : Ludhiana Vinay kohliDated : July 31, 2008 Partner

Membership No 94249


28

AUDITORS’ REPORT

ToThe Members,IOL Chemicals and Pharmaceuticals Limited

1. We have audited the attached Balance Sheet of IOLChemicals and Pharmaceuticals Limited (here in afterreffered to as ‘The Company’) as at 31st March 2008, theProfit and Loss Account and the Cash flow Statement for theyear ended on that date annexed thereto. These financialstatements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion onthese financial statements based on our audit.

2. We conducted our audit in accordance with auditingstandards generally accepted in India. Those standardsrequire that we plan and perform the audit to obtainreasonable assurance about whether the financialstatements are free of material misstatement. An auditincludes examining, on test basis, evidence supporting theamounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used andsignificant estimates made by management, as well asevaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for ouropinion .

3. As required by the Companies (Auditor’s Report) Order, 2003issued by the Central Government in terms of Section227(4A) of the Companies Act, 1956, we enclosed in theannexure a statement on the matters specified in paragraph4 & 5 of the said order.

4. Further to our comments in annexure referred to in paragraph(3) above, we report that:

(a) We have obtained all the information and explanations,which to the best of our knowledge and belief werenecessary for the purpose of our audit.

(b) In our opinion, proper books of account, as required bylaw, have been kept by the Company so far as appearsfrom our examination of such books.

(c) The Balance Sheet , Profit & Loss Account and CashFlow Statement dealt with by this report are in agreementwith the books of accounts.

(d) In our opinion, the Balance Sheet, Profit & Loss Accountand Cash Flow Statement dealt with in this report complywith the Accounting Standards referred in sub-section(3C) of Section 211 of the Companies Act, 1956.

(e) On the basis of representations received from thedirectors as on 31.03.2008 and taken on record by theBoard of Directors, we report that none of the directors isdisqualified as on 31.03.2008 from being appointed asdirectors in terms of clause (g) of sub-section (1) of

Section 274 of the Companies Act, 1956.

(f) In our opinion and to the best of our information andaccording to the explanations given to us, the saidaccounts give the information required by the CompaniesAct, 1956 in the manner so required and give us a trueand fair view in conformity with the accounting principlesgenerally accepted in India:

i) In the case of Balance Sheet, of the state of affairs ofthe Company as at 31st March, 2008,

ii) In the case of Profit and Loss Account, of the profitfor the year ended on that date and

iii) In case of Cash Flow Statement, of the cash flow forthe year ended on that date


Place : Chandigarh Vinay KohliDated : May 05, 2008 Partner

Membership No 94249

ANNEXURE TO THE AUDITORS’ REPORT

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 situationof fixed assets.

(b) All fixed assets have not been physically verified by themanagement during the year but there is a regularprogramme of verification which, in our opinion, isreasonable having regard to the size of the Companyand the nature of its assets. No material discrepancieswere noticed on such verification.

(c) During the year, the Company has not disposed of anymajor part of the fixed assets.

(ii) (a) The inventory has been physically verified during theyear by the management. In our opinion, the frequencyof verification is reasonable.

(b) The procedure of physical verification of inventoriesfollowed by the management are reasonable andadequate in relation to the size of the Company and thenature of its business.

(c) The Company is maintaining proper records ofinventory. The discrepancies noticed on verificationbetween the physical stocks and the book records werenot material.

(iii) The Company has not taken loan from any Companycovered in the register maintained under Section 301of the Companies Act,1956.

(iv) In our opinion and according to the information andexplanations given to us, there are adequate internal


29

control procedures commensurate with the size of theCompany and the nature of its business with regard topurchases of inventory, fixed assets and with regard tothe sale of goods. During the course of our audit, wehave not observed any continuing failure to correct majorweaknesses in internal controls.

(v) (a) According to the information and explanations given tous, we are of the opinion that the transactions that needto be entered into the register maintained underSection 301 of the have been so entered.

(b) In our opinion and according to the information andexplanations given to us, the transactions made inpursuance of contracts or arrangements entered in theregister maintained under Section 301 of the Act andexceeding the value of rupees five lacs in respect ofany party during the year have been made at priceswhich are reasonable having regard to prevailing marketprices at the relevant time.

(vi) The Company has not accepted any deposits as definedunder Sections 58A and 58AA of the Companies Act,1956 and the Companies (Acceptance of Deposits)Rules, 1975.

(vii) In our opinion, the Company has an internal auditsystem commensurate with the size and nature of itsbusiness.

(viii) We have broadly reviewed the books of account relatingto materials, labour and other items of cost maintainedby the Company pursuant to the rules made by theCentral Government for the maintenance of cost recordsunder Section 209 (1) (d) of the Act and we are of theopinion that prima facie the prescribed accounts andrecords have been made and maintained.

(ix) (a) The Company is regular in depositing with appropriateauthorities undisputed statutory due including providentfund, investor education protection fund, employee’sstate insurance, income tax, sales tax, wealth tax,custom duty, excise duty, cess and other materialstatutory dues applicable to it.

(b) According to the information and explanations given tous, no undisputed amount payable in respect of incometax, wealth tax, sales tax, customs duty, excise duty andcess were in arrears, as at March 31, 2008 for a periodof more than six months from the date they becamepayable.

(c) According to the information and explanations given tous, there are no dues of sales tax, income tax, customsduty, wealth tax, excise duty and cess which have notbeen deposited on account of any dispute.

(x) In our opinion, there are no accumulated losses withthe Company and the Company has not incurred cash

losses during the financial year covered by our auditand immediately preceding financial year.

(xi) In our opinion and according to the information andexplanations given to us, the Company has not defaultedin repayment of dues to a financial institution, bank ordebenture holders.

(xii) The Company has not granted any loans and advanceson the basis of security by way of pledge of shares,debentures and other securities.

(xiii) In our opinion, the Company is not a chit fund or a nidhi/mutual benefit fund/society. Therefore, the provisionsof clause 4(xiii) of the Order are not applicable to theCompany.

(xiv) In our opinion, the Company is not dealing in or tradingin shares, securities, debentures and other investments,hence the provisions of clause 4(xiv) of the Order arenot applicable to the Company.

(xv) In our opinion, the terms and conditions on which theCompany has given guarantees for loans taken by othersfrom banks or financial institutions are not prejudicial tothe interest of the Company.

(xvi) In our opinion, the term loans have been applied for thepurpose for which they were raised.

(xvii) According to the information and explanations given tous and on an overall examination of the balance sheetof the Company, we report that no funds raised on shortterm basis have been used for long term investment .

(xviii) The Company has made preferential allotment of sharesto parties covered in the register maintained underSection 301 of the Act during the year. In our opinionand according to the information and explanationsgiven to us, the price at which such shares have beenissued is not prejudicial to the interest of the Company.

(xix) According to the information and explanations given tous, during the year covered by our audit report,no securityhas been created for debentures issued during the yearsince they are unsecured.

(xx) The Company has not raised money by way of publicissues during the year.

(xxi) According to the information and explanations given tous, no fraud on or by the Company has been noticed orreported during the course of our audit.



Membership No 94249


30

BALANCE SHEET AS AT MARCH 31, 2008

Particulars Schedule As at As atNo. 31st March, 2008 31st March, 2007

Rs Rs

I. SOURCES OF FUNDS1. Shareholders’ Funds

a) Share Capital 1 18,38,00,000 14,45,00,000b) Reserves & Surplus 2 47,80,46,876 18,58,11,330c) 10% Fully Convertible Debentures 13,99,99,800 —d) Equity Warrants 3 4,72,10,000 —

2. Loan Fundsa) Secured Loans 4 86,16,18,711 81,57,77,712b) Unsecured Loans 5 13,16,25,453 20,83,27,483Deferred Tax Liabilities (Net) 6 4,21,63,466 32,82,731

TOTAL 1,88,44,64,306 1,35,76,99,256

II. APPLICATION OF FUNDS1. Fixed Assets

a) Gross Block 7 1,52,77,49,974 96,24,84,527b) Less:Depreciation 26,06,33,660 18,71,71,534c) Net Block 1,26,71,16,314 77,53,12,993d) Capital work-in-progress 8 26,21,51,603 35,63,89,111

1,52,92,67,917 1,13,17,02,104

2. Current Assets, Loans and Advancesa) Inventories 9 34,72,89,319 30,30,49,130b) Sundry Debtors 10 32,25,92,523 18,67,98,709c) Cash and Bank Balances 11 3,73,37,897 3,38,22,288d) Loans & Advances 12 17,37,41,971 10,71,14,515

(A) 88,09,61,710 63,07,84,642Less: Current Liabilities & ProvisionsCurrent Liabilities 13 (B) 52,83,48,802 41,01,01,364

Net Current Assets (A - B) 35,26,12,908 22,06,83,278

3. Miscellaneous Expenditure(To the extent not written off or adjusted) 14 25,83,481 53,13,874

TOTAL 1,88,44,64,306 1,35,76,99,256

Significant Accounting Polices 25Notes to the Accounts 26The Schedules referred to above form an integral part of the Balance Sheet

As per our report of even date annexed hereto For and on behalf of the Board

for K K KAPOOR & ASSOCIATESChartered Accountants Varinder Gupta M.A.Zahir Chandra Mohan

Chairman and Managing Director Director DirectorVinay KohliPartner Dimple Gupta H.K.Bal Lalita KapurM.No. 94249 Director Director Director

Place : Chandigarh Krishan Singla Rakesh MahajanDated : May 05, 2008 Sr. Company Secretary Vice President (Finance & Accounts)


31

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2008

Particulars Schedule Year ended Year endedNo. 31st March, 2008 31st March, 2007

Rs Rs

INCOMEOperating Income- Turnover 3,60,99,34,182 2,31,70,94,281Less : Excise Duty 43,05,05,632 29,11,53,943Net Turnover 3,17,94,28,550 2,02,59,40,338Other Income 15 36,17,504 15,74,628

3,18,30,46,054 2,02,75,14,966

EXPENDITURERaw Material Consumed 16 2,30,67,67,871 1,58,49,00,910(Increase)/Decrease in Stocks 17 (7,01,47,562) (8,26,45,219)Manufacturing Expenses 18 33,99,82,637 21,36,92,871Personnel Expenses 19 8,24,21,786 3,91,07,470Administrative Expenses 20 2,83,03,340 2,06,49,059Selling & Distribution Expenses 21 12,44,34,059 6,03,12,816Financial Expenses 22 12,95,84,852 6,64,63,184Miscellaneous Expenditure Written Off 23 27,30,393 30,80,392Depreciation 7,42,88,478 3,48,93,919

3,01,83,65,854 1,94,04,55,402

Profit for the year 16,46,80,200 8,70,59,564Less: Prior period expenses (Net) 24 10,13,625 66,492

Profit before tax 16,36,66,575 8,69,93,072

Less : Provision for taxation- Current year 1,85,88,814 97,68,083- MAT Credit Entitlement (1,85,88,814) (97,68,083)- Fringe benefit tax 6,13,000 6,30,000- Deferred tax 3,94,20,256 4,00,33,256 1,08,55,452 1,14,85,452

Profit after tax 12,36,33,319 7,55,07,620

Balance carried to the Balance Sheet 12,36,33,319 7,55,07,620

Earning Per Share (Weighted)(Equity shares, nominal value Rs 10/- each)

- Basic 10.26 9.18

- Diluted 7.60 9.18

- Cash 18.38 13.93

Significant Accounting Polices 25Notes to the Accounts 26

The Schedules referred to above form an integral part of the Profit and Loss Account






32

SCHEDULES ANNEXED TO AND FORMING PART OF THE ACCOUNTS

Particulars As at As at31st March, 2008 31st March, 2007

Rs Rs

SCHEDULE 1: SHARE CAPITAL

Authorised2,50,00,000 (Previous Year 1,50,00,000)Equity Shares of Rs 10/- each 25,00,00,000 15,00,00,000

50,00,000 (Previous Year - 50,00,000) 5,00,00,000 5,00,00,000Preference Shares of Rs 10/- each

30,00,00,000 20,00,00,000

Issued, Subscribed and Paid-up1,33,80,000 (Previous Year 94,50,000)Equity Shares of Rs 10/- each 13,38,00,000 9,45,00,000

50,00,000 (Previous Year - 50,00,000) 5,00,00,000 5,00,00,0007% Non Cumulative Redeemable Preference Shares of Rs 10/- each

18,38,00,000 14,45,00,000

SCHEDULE 2 : RESERVES & SURPLUS

Capital ReserveCapital Subsidy 65,00,000 65,00,000Capital Reserve 40,45,651 40,45,651Share Premium - Opening Balance 6,30,00,000 — - Additions during the year 16,96,50,000 23,26,50,000 6,30,00,000 6,30,00,000

Revenue ReserveSurplus being balance in Profit and Loss Account - Opening Balance 11,22,65,679 3,67,58,059Less: Adjustment of employee benefit (net of deferred tax) (10,47,773) —(Refer Note No. 14 on Schedule 26) - Addition during the year 12,36,33,319 23,48,51,225 7,55,07,620 11,22,65,679

47,80,46,876 18,58,11,330

SCHEDULE 3 : EQUITY WARRANTS

57,00,000 (Previous Year Nil) equity warrants, alloted on 2,99,60,000 —preferential basis, carrying an option to the holder of suchwarrants to subscribe to one equity share of Rs 10/- eachat a premium of Rs 32/- per share for every warrant held,within 18 months from the date of allotment, (i.e from Aug 21,2007) (12.51% of price fixed has been received)Less :23,00,000 equity warrants, alloted on preferential basis, carrying 1,72,50,000 —an option to the holder of such warrants to subscribe to one equityshare of Rs 10/- each at a premium of Rs 65/- per share for everywarrant held, within 18 months from the date of allotment, (i.e fromOct 22, 2007) (10% of price fixed has been received)

4,72,10,000 —


33


Rs Rs

SCHEDULE 4 : SECURED LOANS

Loan From Banks :Working Capital Loans * 16,92,12,534 11,53,88,478Term Loans ** 56,39,93,539 53,27,00,927Vehicle Loans *** 35,81,515 29,00,184Term Loans From :Financial Institutions ** 12,48,31,123 16,47,88,123

86,16,18,711 81,57,77,712

* Cash Credit from the banks is secured by way of first charge on all present and future finished goods, work-in-process, rawmaterials, stores & spares and book debts and futher secured by personal guarantee of the Promoters Directors.

** Term loans from the Financial Institution and the Banks are secured by way of equitable mortgage of all the present and futureimmovable properties of the Company rank pari passu and hypothecation of all the Company’s movable properties, save andexcept Book Debts but including movable machinery, spares, tools and accessories both present and future subject to priorcharges created /to be created in favour of the Company’s Bankers on specified movable properties for securing borrowingsfor working capital requirements.The term loans are further secured by the personal guarantee of the Promoter Directors. TermLoan from IDBI Ltd. is further secured by letter of comfort by a company.

*** The vehicle loans are secured by hypothecation of vehicles.

SCHEDULE 5 : UNSECURED LOANS

From :Directors 2,76,708 2,76,708Others 13,13,48,745 20,80,50,775

13,16,25,453 20,83,27,483

SCHEDULE 6 : DEFERRED TAX LIABILITY / (ASSETS)

Deferred Tax Liability /( Assets) 32,82,731 (75,72,721)Deferred Tax asset on adoption of AS-15 (revised 2005)* (5,39,521) —Adjustment for the Current year 3,94,20,256 1,08,55,452* (Refer Note No. 5 of Schedule 25 and Note No. 14 of Schedule 26)

4,21,63,466 32,82,731SCHEDULE 7 : FIXED ASSETS

(in Rs)

Particulars GROSS BLOCK DEPRECIATION NET BLOCK

As at Additions Sale/ As at Upto For the Written Upto As at As at31st March, during the Adjustments 31st March, 31st March, year back 31st March, 31st March, 31st March,

2007 year 2008 2007 2008 2008 2007

LandFreehold 1,11,56,402 2,10,12,722 — 3,21,69,124 — — — — 3,21,69,124 1,11,56,402Leasehold 25,24,273 — — 25,24,273 3,26,415 43,522 — 3,69,937 21,54,336 21,97,858

Buildings 6,76,59,145 9,57,36,053 — 16,33,95,198 49,79,394 35,16,210 — 84,95,604 15,48,99,594 6,26,79,751Plant & Machinery 87,19,16,841 44,74,59,289 1,17,519 1,31,92,58,611 17,86,12,387 6,92,83,764 20,457 24,78,75,694 1,07,13,82,917 69,33,04,454Furniture & Fixtures 19,68,834 7,66,020 — 27,34,854 13,65,513 6,51,441 — 20,16,954 7,17,900 6,03,321Vehicles 72,59,032 23,35,061 19,26,179 76,67,914 18,87,825 7,93,541 8,05,895 18,75,471 57,92,443 53,71,207

Total 96,24,84,527 56,73,09,145 20,43,698 1,52,77,49,974 18,71,71,534 7,42,88,478 8,26,352 26,06,33,660 1,26,71,16,314 77,53,12,993

Previous year 51,06,96,984 45,25,48,093 7,60,550 96,24,84,527 15,24,31,091 3,48,93,919 1,53,476 18,71,71,534 77,53,12,993 35,82,65,893


34


Rs Rs

SCHEDULE 8 : CAPITAL WORK-IN-PROGRESS

Building under construction 1,44,84,070 5,69,60,709Machinery under erection 13,53,25,849 25,00,78,099Capital Advances 9,75,96,774 1,18,99,858Project & Pre-Operative Expenses 1,47,44,910 3,74,50,445(Pending Allocation)

26,21,51,603 35,63,89,111

SCHEDULE 9 : INVENTORIES

Stores & Spares * 5,47,04,027 5,11,95,868Raw Material * - Industrial Alcohol 2,54,02,760 5,87,87,919

- Molasses 20,46,570 20,46,570- Others 1,70,97,923 1,31,28,296

Work-in-process 13,92,55,068 13,04,07,916Finished Goods ** - Acetic Acid 5,31,186 30,06,584

- Ethyl Acetate 30,91,957 1,24,06,002- Acetic Anhydride 9,49,158 1,34,34,536- Ibuprofen 10,34,12,825 1,86,35,439- Green Acid 7,97,845 —

34,72,89,319 30,30,49,130

* At cost** At cost or net realisable value whichever is lower

SCHEDULE 10 : SUNDRY DEBTORS

Unsecured and considered good, untill otherwise stated- Over six months 1,45,43,920 1,40,05,542- Others 30,80,48,603 17,27,93,167

32,25,92,523 18,67,98,709

SCHEDULE 11 : CASH & BANK BALANCES

Cash and Cheques in hand 61,90,616 29,64,523With Schedule Banks-in Current Accounts 31,27,281 92,57,765-in Margin Money Account 2,80,20,000 2,16,00,000 (under Bank’s lien)

3,73,37,897 3,38,22,288

SCHEDULE 12 : LOANS & ADVANCES(Unsecured and considered good)

Advances recoverable in cash or in kind or for value to be received 1,13,72,180 73,57,674Balances with Government Authorities on current account 12,58,29,701 8,18,05,565MAT Credit Entitlement 3,65,40,090 1,79,51,276

17,37,41,971 10,71,14,515


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Particulars As at as at31st March, 2008 31st March, 2007

Rs Rs

SCHEDULE 13 : CURRENT LIABILITIES & PROVISIONS

Current LiabilitesSundry Creditors - Trade

- Dues of Micro, Small & Medium Enterprises — —- Dues of others 41,33,08,040 30,02,27,427

Sundry Creditors -Capital- Dues of Micro, Small & Medium Enterprises — —- Dues of others 5,99,13,231 7,58,64,032

Other Liabilites 4,73,51,824 2,85,29,993Interest accrued but not due on loans 24,39,571 14,96,712ProvisionsCurrent Tax 39,99,698 39,83,200Employee Benefits* 13,36,438 —*(Refer Note No. 5 of Schedule 25 and Note No. 14 of Schedule 26)

52,83,48,802 41,01,01,364

SCHEDULE 14 : MISCELLANEOUS EXPENDITURE(To the extent not written off or adjusted)

Deferred Revenue Expenses 25,83,481 34,21,674Interest Differential IDBI — 18,92,200

25,83,481 53,13,874

Particulars Year ended Year ended31st March, 2008 31st March, 2007

Rs Rs

SCHEDULE 15 : OTHER INCOME

Interest received 29,53,482 12,29,570(Tax Deducted at Source Rs 5.76 Lacs, Previous Year Rs 2.85 Lacs)Miscellaneous Income 4,84,022 1,65,058Rent received 1,80,000 1,80,000

36,17,504 15,74,628

SCHEDULE 16 : RAW MATERIAL CONSUMED

Opening StocksRaw Material - Indigenous 7,07,29,866 4,84,55,151Raw Material - Imported/Highseas 11,86,349 3,08,15,230

Total Opening Stock 7,19,16,215 7,92,70,381

Add : PurchasesRaw Material - Indigenous 2,21,75,51,790 1,53,57,54,659Raw Material - Imported (Highseas) 3,01,53,990 3,82,18,619

- Imported (Direct) 2,72,16,240 1,67,43,748Total Purchases 2,27,49,22,020 1,59,07,17,026Less : Consumption during trial run — 1,31,70,282Less : Closing StocksRaw Material - Indigenous 3,85,41,340 7,07,29,866Raw Material - Imported/Highseas 15,29,024 11,86,349

Total Closing Stock 4,00,70,364 7,19,16,215

2,30,67,67,871 1,58,49,00,910


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Rs Rs

SCHEDULE 17 : (INCREASE) / DECREASE IN STOCKS

Opening Stocks

Work-in-Process 13,04,07,916 6,70,16,086Finished Goods - Acetic Acid 30,06,584 17,71,327Finished Goods - Ethyl Acetate 1,24,06,002 1,51,07,202Finished Goods - Acetic Anhydride 1,34,34,536 40,09,934Finished Goods - Ibuprofen 1,86,35,439 60,15,531

Finished Goods 17,78,90,477 9,39,20,080

(Increase)/Decrease during Trial Run — 13,25,178

Less : Closing Stocks

Work-in-Process 13,92,55,068 13,04,07,916Finished Goods - Acetic Acid 5,31,186 30,06,584Finished Goods - Ethyl Acetate 30,91,957 1,24,06,002Finished Goods - Acetic Anhydride 9,49,158 1,34,34,536Finished Goods - Ibuprofen 10,34,12,825 1,86,35,439

- Green Acid 7,97,845 —

24,80,38,039 17,78,90,477

(Increase)/Decrease in Stocks (7,01,47,562) (8,26,45,219)

SCHEDULE 18 : MANUFACTURING EXPENSES

Power & Fuel 29,61,11,033 19,57,74,789Stores & Spares consumed 4,27,23,291 1,63,94,357Repairs to Plant & Machinery 11,48,313 15,23,725

33,99,82,637 21,36,92,871

SCHEDULE 19 : PERSONNEL EXPENSES

Salaries & Wages 7,17,40,720 3,33,05,311Bonus 33,02,167 20,39,383Contribution to Funds* 54,01,620 26,29,488Staff & Labour Welfare 19,63,031 11,27,156Punjab Labour Welfare Fund 14,248 6,132*(Refer Note No.5 of Schedule 25 and Note No. 14 of Schedule 26)

8,24,21,786 3,91,07,470


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Rs Rs

SCHEDULE 20 : ADMINISTRATIVE EXPENSES

Rent 13,54,872 8,65,342Lease Rent 1,91,845 99,703Insurance 65,95,490 49,51,614Printing & Stationery 12,36,305 9,33,127Postage, Telegram & Telephone 22,96,698 17,82,232Travelling & Conveyance 26,24,067 22,60,990Travelling Expenses - Foreign 74,898 40,196Director’s Travelling 1,78,165 49,541Director’s Travelling-Foreign 91,517 —Director’s Remuneration 18,92,084 11,30,955Director’s Sitting Fee 1,60,000 1,85,000Auditor’s Remuneration 1,19,019 1,08,548Cost Auditor’s Remuneration 36,884 34,099Internal Auditor’s Remuneration 1,25,698 75,246Fees & Taxes 14,75,674 3,75,645Legal & Professional Charges 8,82,245 13,96,602Computer Repair & Consumables 8,17,535 6,55,753Secretarial Expenses 9,69,014 6,18,871Repair to Building 7,63,041 1,49,605Other Repairs 4,05,538 2,58,000Vehicle Maintance 12,28,555 12,95,064Charity and Donation 4,98,480 78,551Electricity Expenses 9,64,777 7,78,133Office Expenses 1,30,467 1,20,803Subscription / Periodicals 4,29,582 3,17,032House Keeping Expenses 11,31,685 6,43,248Diwali Expenses 1,47,377 5,76,961Staff Recruitment Expenses 3,43,942 1,22,407Training Expenses 1,19,560 2,51,296R & D Expenses 6,97,980 3,24,771Loss on Sale of Fixed Assets 3,20,346 1,69,724

2,83,03,340 2,06,49,059

SCHEDULE 21 : SELLING & DISTRIBUTION EXPENSES

Rebate & Discount 2,01,72,993 1,05,78,346Freight & Octroi Outward 7,76,72,996 3,30,14,633Advertisement 5,66,176 83,299Business Promotion 2,33,840 7,42,639Entertainment Expenses 20,599 18,714Export Expenses 21,83,794 6,57,970Sales Tax Expenses — 27,101Packing & Forwarding Charges 12,44,652 72,315Commission 2,23,39,009 1,51,17,799

12,44,34,059 6,03,12,816


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SCHEDULE 22 : FINANCIAL EXPENSES

Interest - Term Loans 7,29,48,892 2,09,74,424 - Others 4,32,26,065 3,19,46,441Bank Charges 1,34,09,895 1,35,42,319

12,95,84,852 6,64,63,184

SCHEDULE 23 : MISCELLANEOUS EXPENDITURE WRITTEN OFF

Deferred Revenue Expenses written off 8,38,193 8,38,192Loan Processing Fee written off — 3,50,000Interest Differential written off 18,92,200 18,92,200

27,30,393 30,80,392

SCHEDULE 24 : PRIOR PERIOD EXPENSES

Administrative Expenses (88,116) 48,842Selling Expenses 10,76,951 17,650Personnel Expenses 24,790 —

10,13,625 66,492


Rs Rs


39

SCHEDULE 25 : SIGNIFICANT ACCOUNTING POLICIES1. Accounting Convention

The financial statements are prepared on accrual basis underthe historical cost convention in accordance with theAccounting Standards referred to in sub section (3C) ofSection 211 of the Companies Act, 1956 and other relevantprovisions of the said Act.

2. Revenue Recognition- Sale of goods is recognised at the point of despatch to the

customers. Sales include excise duty and exclude sales tax.- The revenue in respect of DEPB benefit is recognised on post

export basis at the rate at which entitlement accrues and isincluded in the turnover.

- Insurance and other claims are recognised when thereexists no significant uncertainty with regard to the amountto be realized and the ultimate collection thereof.

3. Fixed Assetsi) Fixed Assets are stated at cost which comprises the

purchase price, freight, duties (net of cenvat), taxesand any attributable cost of bringing the assets to itsworking conditions for its intended use.

ii) Capital Work-in-Progress is stated at the amountexpended up to the date of the Balance Sheet.

iii) Expenditure during construction period (includingfinancing cost relating to borrowed funds forconstruction or acquisition of fixed assets) incurred onproject under implementation are treated as pre-operative expenses, pending allocation to the assets,and are included under “Capital Work-in-Progress”.These expenses are apportioned to fixed assets oncommencement of commercial production.

4. Depreciation/Amortisationi) The fixed assets are depreciated on the straight line

method at the rates and in the manner specified inSchedule XIV of the Companies Act, 1956.

ii) The fixed assets costing Rs 5,000/- or less acquiredduring the period, are depreciated at 100%.Depreciation has been provided on fixed assets onprorata basis for the period the assets are first put touse.

iii) The lease hold land is amortised over the lease period.5. Employees Benefits The Company has defined contribution plan for the post

employment benefits namely Provident Fund which isrecognised by the Income Tax Authorities. These funds areadministered through the Regional Provident FundCommissioner and the Company’s contributions theretoare charged to revenue every year. The Company’scontribution to state plan namely Employee State InsuranceFund is charged to revenue every year.The Company has defined benefit plan namely Gratuity,the liability for which is determined on the basis of anactuarial valuation at the end of the year. The Gratuity fundsare recognised by Income Tax Authorities and isadministered through Life Insurance Corporation of Indiaunder its Group Gratuity Scheme.Gains and Losses arising out of actuarial evaluation are

recognised immediately in the Profit and Loss Account asIncome or Expenses.

In the year of transition, the difference between transitionalliability and the liability that would have been recognised atthe beginning of the financial year under the Company’sprevious accounting policy is adjusted against the openingrevenue reserve of the financial year in accordance withAccounting Standard–15 (revised 2005) “Employee Benefit.”

6. InventoriesStores and Spares, Raw Materials and Work-in-Processare valued at cost. Finished Goods are valued at cost or netrealisable value, whichever is lower. The basis of determiningcost for different categories of inventory are as follows:-

Stores and Spares Weighted Average Method plusdirect expenses.

Raw Materials First in First out Method plus directexpenses.

Work-in-Process Cost of material plus appropriateshare of overheads thereon atdifferent stage of completion onFirst in First out Method.

Finished Goods Cost of material plus conversioncost, packing cost, excise duty andother overheads incurred to bringthe goods to their presentconditions & location.

7. Foreign Exchange FluctuationsTransactions in foreign currency in respect of Export Salesare recorded at the exchange rate prevailing at the time ofthe transactions.

Current assets and current liabilities (other than thoserelating to fixed assets) are restated at the rates prevailingat the period/year end, and the difference between theperiod/year end rate and the exchange rate at the date ofthe transaction is recognised as income or expense in theProfit and Loss Account.

8. CenvatCenvat credit on excise duty paid goods is accounted foron the receipt of the related goods by reducing the costprice.

9. Expenditure incurred during construction periodIn respect new/major expansion, the indirect expensesincurred during construction period up to the date ofcommencement of commercial production is capitalizedon various categories of fixed assets on proportionate basis.

10. Borrowing CostsBorrowing costs that are attributable to acquisition orconstruction of a qualifying asset are capitalised as part ofcost of such assets. Qualifying asset is one that necessarilytakes substantial period of time to get ready for its intendeduse. All other borrowing cost is recognised as an expensesin the period in which they are incurred.

11. Accounting for Taxes on IncomeTax expenses comprises of Current, Deferred and FringeBenefit Tax. Current Income Tax and Fringe Benefit Tax ismeasured at the amount expected to be paid to the tax


40

authorities in accordance with the Income Tax Act. DeferredTax is the tax effect of timing difference subject to theconsideration of prudence. In respect of carried forwardlosses, deferred tax assets are recognised based on virtualcertainty that sufficient future taxable income will be availableagainst which such deffered tax assets can be realised,MAT Credit is recognised as an asset when there isconvincing evidence that the Company will pay normalincome tax within the period specified under the IncomeTax Act, 1961. MAT Credit entitlement shall be reviewed ateach Balance Sheet date.

12. Miscellaneous Expenditure

Miscellaneous Expenditure are amortised over period oftime as under :i) Deferred Revenue Expenses are amortized over period

of five years.ii) Interest Differential Charges charged by IDBI Ltd on

account of reduction in interest rates and RestructuringFee charged by IDBI Ltd. for deferment of interest andrefixation of principal has been amortised over a periodof five years.

13. Impairment of AssetsAt each Balance Sheet an assessment is made whetherany indication exists that an asset has been impaired. Incase of the Company no indication exists in regard toimpairment, hence no impairment loss has been providedin the books.

SCHEDULE 26 : NOTES TO THE ACCOUNTS1. Contingent liabilities not provided for :

(i) Bank Guarantees - Nil (Previous year - Nil)(ii) Bills discounted with bankers against irrevocable letter

of credit Rs 349.69 lacs (Previous year Rs 245.84 lacs)

2. CommitmentsEstimated amount of contracts remaining to be executed oncapital account (net of advances) Rs 3260.47 lacs (Previousyear Rs 306.66 lacs)

3. Managerial Remuneration paid/payableParticulars Current Previous

year yearRs Rs

Chairman cum Managing Director*Salary 7,55,000 4,68,000Contribution to Provident Fund 90,600 56,160Other Perquisites & Allowances 10,46,484 6,06,795

Total 18,92,084 11,30,955

4. Auditors’ RemunerationParticulars Current Previous

year yearRs Rs

Statutory Audit Fee 28,000 28,000Tax Audit Fee 25,000 25,000Certification/Company Law/Other Matters 56,326 51,769Out of pocket expenses 9,693 3,779

Total 1,19,019 1,08,548

5. In the opinion of the Board of Directors and to the best oftheir knowledge and belief, the value on realisation ofCurrent Assets, Loans and Advances in the ordinary courseof business will not be less than the amount at which theyare stated in the Balance Sheet.

6. In view of the profits for the year as well as previous yearsand also considering the future profit projections, theCompany is hopeful of being able to take credit of the taxpaid under MAT for adjustment against the normal incometax payable in the future within the period specified underthe Income Tax Act, 1961. Accordingly MAT tax paid isconsidered as an asset and is disclosed under the head“Loans and Advances”.

7. Deferred Tax AssetThe major components of deffered tax arising on account oftemporary timing differences are:

Deferred Tax Assets/(Liabilities) (Rs in lacs)Particulars As at As at

31st March, 31st March,2008 2007

Deferred Tax Liability on 1928.50 1169.00account of depreciationLess: Deferred Tax Asset 1506.87 1136.17on account of unabsorbeddepreciation and carriedforward losses etc.Net Deferred Tax Liability 421.63 32.83

Deferred Tax Assets in respect of unabsorbed depreciation& brought forward losses, Employee’s Benefit on adoptionof AS-15, etc. has been recognised on the basis that theCompany will have sufficient future taxable income. Thereis a virtual certainty that the said assets will be realisableon account of the fact that there has been a deduction asper tax laws.

8. Increase in share capitalThe Company has issued 26, 00,000 equity shares of Rs 10/-at a premium of Rs 32/- per share on 23rd June 2007 &13,30,000 equity shares of Rs 10/- at a premium ofRs 65/- per share on 22nd Oct 2007.

9. Equity Warrants/Fully Convertible DebentureThe Company has issued 57,00,000 warrants, carryingoption to convert each warrant into one equity shares ofRs 10/- each at a premium of Rs 32/- per share, within aperiod of 18 months from the date of allotment i.e. 21st

August, 2007, as per SEBI guidelines.The Company has further issued 23,00,000 warrantscarrying option to convert each warrant into one equityshares of Rs 10/- each at a premium of Rs 65/- per share,within a period of 18 months from the date of allotment i.e.22nd October 2007 as per SEBI guidelines.The Company has issued 13,99,998 Fully ConvertibleDebentures with coupon rate of 10% per annum ofRs 100/- each which will be compulsory convertible intoone equity shares of Rs 10/- each at a premium of Rs 65/-per share, within a period of 18 months from the date ofallotment i.e. 22nd October 2007 as per SEBI guidelines.


41

10. Disclosures required under the Micro, Small and MediumEnterprises Development Act, 2006 (the Act) are givenas follows:

Particulars As at As at31st March, 31st March,

2008 2007a) (i) Principal amount due — —

(ii) Interest due on the above — —b) Interest paid during the period — —

beyond the appointed day

c) Amount of interest due and — —payable for the period ofdelay in making paymentwithout adding the interestspecified under the Act

d) Amount of interest accrued — —and remaining unpaid atthe end of the period

e) Amount of further interest — —remaining due and payableeven in the succeedingyears, until such date whenthe interest dues as aboveare actually paid to the smallenterprise for the purposeof disallowance as adeductible expenditureunder Section 23 of the Act

The above information and that given in Schedule-12

“Current Liabilities & Provisions” regarding Micro and Small& Medium Enterprises has been determined on the basisof information available with the Company. This has beenrelied upon by the Auditors.

11. Project and Pre-operative Expenses pending allocationincludes:

(Rs in lacs)Particulars Current Previous

year yearOpening Balance pending for 374.50 170.68allocationExpenses during the yearPower and Fuel 108.71 70.48Raw Material Consumption — 131.70Personnel Expenses 15.73 100.08Insurance 0.33 12.71Travelling and Conveyance 7.95 2.65Legal & Profession Charges 31.95 23.21Interest 242.27 451.90Bank Charges 1.49 9.34Freight 0.78 4.54Commission 28.00 —Miscellaneous 2.78 9.14Total Project and Pre-operative 439.99 815.75Expenses during the yearLess: Sales during trial run — 134.36Less:Allocated to fixed assets 667.04 477.57during the yearBalance Pending Allocation 147.45 374.50

12. The disclosure of transactions with the related parties as described in the Accounting Standard-18 issued by ICAI aregiven below:

a) Related Parties

Name of related parties Relationship

Mayadevi Polycot Limited Enterprise that control the Company (directly or indirectly holds majorityvoting right)

G Drugs and Pharmaceuticals Limited Enterprises over which KMP is able to exercise significant influenceSh Varinder Gupta Key Management Personnel (KMP)

b) Transactions with related parties (Rs in lacs)Nature of Transactions Enterprises that Enterprises over which KMP Key Managementduring the period control the is able to exercise Personnel

Company significant influence

Particular Current Previous Current Previous Current Previousyear year year year year year

Sales and other Income — — 29.65 155.06 — —Purchase and other Services — — 49.70 2.06 — —Managerial Remuneration — — — — 8.92 11.31Finance including loans & 883.40 30.00 — — — —equity/warrants contributionin cash or in kindOutstanding to the Company — — 408.23 428.27 — —Amount payable by the Company — — — — 0.46 0.33

Notes:- Related party relationship is as identified by the Company.Notes:- No amount has been written off or written back during the year in respect of debts due from or to related parties.


42

A. Change in Defined Benefit obligation during the yearended March 31, 2008

(Rs in lacs)

Sr. No. Particulars Amount

1 Present value of Defined Benefit 47.01obligation as at April 1, 2007

2 Current service cost 11.063 Interest cost 3.774 Benefit paid 1.695 Actuarial(gain)/loss on obligation (1.55)6 Present value of obligation as at 58.61

March 31, 2008

B. Change in Assets during the year ended March 31,2008

(Rs in lacs)


1 Fair value of plan assets as 31.15at April 1, 2007

2 Expected return in plan assets 2.853 Contribution made 12.644 Benefit Paid 1.695 Actuarial gain/(loss) on plan assets 0.306 Fair value of plan assets as 45.25

at March 31, 2008

C. Net Asset/(Liability) recognised in the Balance Sheetas at March 31, 2008

(Rs in lacs)


1 Present value of the Defined 58.61benefit obligation

2 Fair value of plan assets 45.253 Net Asset/(Liability) recognised in 13.36

the Balance Sheet*

D. Expenses recognised in the statement of Profit andLoss Account for the year ended March 31, 2008

(Rs in lacs)


1 Current service cost 11.062 Interest cost 3.773 Expected return on plan assets 2.854 Net actuarial (gain)/loss recognised (1.86)

during the year5 Expenses/(income)recognised in

Profit and Loss Account** 10.12

*Included in the Employee Benefit (Refer Schedule No 13)**Included in the contribution to funds under Personnel Expenses(Refer Schedule No. 19)

13. Earning Per Share (Weighted)Net Profit after tax attributable to shareholders:

Particulars Current Previousyear year

Basic Number of Equity Shares 1,33,80,000 94,50,000

Weighted Average Diluted Number 1,62,76,119 94,50,000of Equity Shares

Weighted Average Number of 1,20,49,071 82,26,438Equity Shares

Basic EPS (Rs) 10.26 9.18

Diluted EPS (Rs) 7.60 9.18

14. Employees Benefits1. The Company has during the year adopted the

Accounting Standard -15 (Revised 2005) “EmployeesBenefit”. Accordingly, the transitional adjustmentaggregating to Rs 10.47 lacs (net of Deferred TaxRs 5.40 lacs) has been charged against the GeneralReserve during the year ended March 31, 2008. Thedetail of the transitional adjustment is as below:

(Rs in lacs)

Gratuity 15.87Total 15.87Less: Deffered tax Asset 5.40Net transfer to General Reserve 10.47

2. The Company has classified the various benefitsprovided to employees as under:

(A) Defined Contribution PlanProvident Fund: During the year the Company hasrecognised the following amounts to the Profit andLoss Account

Employer’s Contribution to Rs 40.02 lacsProvident Fund*

(B) State PlanEmployee State Insurance: During the year theCompany has recognised the following amounts tothe Profit and Loss Account

Employer’s Contribution to Rs 14.00 lacsEmployee State Insurance*

*included in the contribution to funds underPersonnel Expenses (Refer Schedule No 19)

(C) Defined Benefit PlansContribution to Gratuity Fund - Life InsuranceCorporation of india.

As per Actuarial valuation as on March 31, 2008

Actuarial assumptions

1 Discount rate 8%2 Expected rate of return on plan assets 9.15%3 Salary Escalation 7%


43

15. Change in Accounting PoliciesDuring the year, the Company has made provisions for the employees benefits in accordance with the Accounting Standard -15(Revised 2005) “Employee Benefit” (AS-15) which has become applicable to the Company. Consequent to the change, theemployee cost for the year is lower by Rs 2.5 lacs and the provision for the employee benefits as at the year ended 31st March2008 is higher by Rs 13.36 lacs. Further in accordance with the AS-15, the additional provision towards Employee Benefits asat April 1, 2007 amounting Rs 10.47 lacs (net of deferred tax liabilities of Rs 5.40 lacs) has been adjusted to the GeneralReserve.

16. Segment wise Revenue, Results and Capital EmployedThe Company operates in two segments i.e. Chemicals & Drugs, the summary of which is given as under:

(Rs in lacs)

Particulars Chemicals Drugs Unallocated Year to datefigures for thecurrent year

1. Segment RevenueNet Sales/Income 23339.51 8376.87 77.90 31794.28Less : Inter Segment Revenue — — — —Net sales/income from operations 23339.51 8376.87 77.90 31794.28

2. Segment ResultsProfit/(Loss) before tax and interest from each segment 2398.94 419.50 — 2818.44Less: Interest from each segment — — (1295.85) (1295.85)Add: Other un-allocable income net of unallocable expenditure — — 114.08 114.08

Total Profit/(Loss) before tax 2398.94 419.50 (1181.77) 1636.67

3. Capital Employed (Segment Assets - Segment Liabilities) 6041.41 7414.51 — 13455.92

Sr. No. Particulars

1 Qualifying Insurance Policies 100%

2 Gratuity is administered through duly constituted and approved independent trusts and also through Group GratuityScheme with Life Insurance Corporation of India.

3 Future salary increases considered in actuarial valuation take into account inflation, seniority, promotion and other relevantfactors, such as supply and demand in the employment market.

4 Basis used to determine expected rate of return on plan assets:

The expected rate of return on plan assets is based on market expectation, at the beginning of the year, for returns overthe entire life of the related obligation. The Gratuity Scheme is invested in a Group Gratuity-cum-Life Assurance CashAccumulation Policy offered by Life Insurance Corporation (LIC) of India

5 This being the first year in which the Company has adopted the Accounting Standard 15 (Revised) on Employees Benefits;figures for the previous year have not been included.

E. Major categories of plan assets as a percentage of total plan assets

17. Information required by para 3, 4C & 4D of part II of ScheduleVI of the Companies Act, 1956. Particulars of Capacity,Production, Sales, Stocks and Raw Materials consumed.

A. Licensed/Installed Capacity:

Particulars Unit Licensed Capacity Installed Capacity Current Previous Current Previous

year year year year

Acetic Acid MT 75,000 60,000 50,000 50,000Ethyl Acetate MT 36,000 36,000 33,000 33,000Acetic Anhydride MT 22,000 22,000 12,000 12,000Ibuprofen MT 7,500 4,200 3,600* 1,800

B. Actual ProductionParticulars Unit Current year Previous year

Acetic Acid MT 50851** 39,566Ethyl Acetate MT 28,074 17,127Acetic Anhydride MT 11,413 9,492Ibuprofen MT 2,331 873

Notes:1. *The annual Installed capacities of Ibuprofen Plant on account of

expansion undertaken during the current financial year have beenincreased from 1800 TPA to 3600 TPA w.e.f. 30th September,2007.


44

18. Figures have been rounded off to the nearest rupee.19. Previous year figures have been regrouped / recasted wherever necessary20. Schedules 1 to 26 form an integral part of the accounts

F. Raw Material Consumed

Particulars Current year Previous year

Qty Value Qty Value***BL Rs BL Rs

Alcohol- Indigenous 7,71,02,240 1,44,63,19,296 5,60,17,164 1,22,89,44,870- Imported* — — 16,65,942 5,41,05,895Others**- Indigenous 82,97,20,138 29,94,63,028- Imported * 3,07,28,437 1,55,57,399

2,30,67,67,871 1,59,80,71,192

* Imported material includes import on high seas basis ** Various chemicals for Drugs and Chemicals

***Includes Rs 1,31,70,282/- being raw material consumed during trialrun.

2. ** Includes 34,073 MT (Previous year 24,011 MT) Acetic Acid hasbeen consumed for captive consumption, out of which 19,737 MT(Previous Year 12,208 MT) has been consumed for Ethyl Acetateprocess and 14,336 MT (Previous Year 11,803 MT) in AceticAnhydride process.

3. Licensed and installed capacity is on annual basis.

4. Installed capacity has been certified by the Management and notverified by the Auditors, being a technical matter.s

G. Value of Imports calculated on CIF Basis

Particulars Current year Previous yearValue (Rs) Value (Rs)

Raw Material 2,17,54,482 1,13,48,735Capital Goods — 20,79,475

H. Expenditure in Foreign ExchangeParticulars Current year Previous year

Value (Rs) Value (Rs)

Travelling 1,66,415 40,196Others 87,19,424 1,35,044

I. Earning in Foreign ExchangeParticulars Current year Previous year

Value (Rs) Value (Rs)

Exports of Goods 45,42,78,841 21,07,59,724(Calculated on FOB value)

J. Consumption of Raw Materials and Stores & Spares

Particulars Current year Previous yearValue % age Value % age

Rs RsI) Raw Material

- Imported 3,07,28,437 1.33 6,96,63,294 4.36- Indigenous 2,27,60,39,434 97.67 1,52,84,07,898 95.64

2,30,67,67,871 100.00 1,59,80,71,192 100.00II) Stores &

Spares- Imported Nil Nil Nil Nil- Indigenous 4,27,23,291 100.00 1,63,94,357 100.00

4,27,23,291 100.00 1,63,94,357 100.00

E. Sales of goods dealt with by the CompanyParticulars Current year Previous year

Qty Value Qty ValueMT Rs MT Rs

Acetic Acid 16,845 63,23,49,470 15,523 58,03,29,454Ethyl Acetate 28,262 1,35,28,88,358 17,177 85,28,50,175Acetic Anhydride 11,651 67,55,85,689 9,312 51,63,36,291Ibuprofen 2,134 89,37,84,757 844 35,37,45,361Others 5,53,25,908 2,72,68,992TOTAL 3,60,99,34,182 *2,33,05,30,273

*Included sale of Rs 1,34,35,992/- being sales during trial run.

D. Closing Stock of finished goods

Particulars Current year Previous year

Qty Value Qty ValueMT Rs MT Rs

Acetic Acid 18 5,31,186 85 30,06,584Ethyl Acetate 68 30,91,957 256 1,24,06,002Acetic Anhydride 20 9,49,158 258 1,34,34,536Ibuprofen 242 10,34,12,825 45 1,86,35,439Green Acid 147 7,97,845 — —

TOTAL 10,87,82,971 4,74,82,561

C. Opening Stock of finished goods

Particulars Current year Previous yearQty Value Qty ValueMT Rs MT Rs

Acetic Acid 85 30,06,584 53 17,71,327Ethyl Acetate 256 1,24,06,002 306 1,51,07,202Acetic Anhydride 258 1,34,34,536 78 40,09,934Ibuprofen 45 1,86,35,439 16 60,15,531

TOTAL 4,74,82,561 2,69,03,994


45

21. Information required by part IV of Schedule VI of the Companies Act. 1956.

Balance Sheet abstract and Company’s General Business Profile as at 31st March, 2008

I. Registration Details

Registration No. 7 0 3 0 State Code 1 6

Balance Sheet Date 3 1 0 3 2 0 0 8

Date Month Year

II. Capital Raised during the Year (Amount in Rs Thousand)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L 3 9 6 1 6 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs Thousand)Total Liabilities Total Assets

1 8 8 4 4 6 4 1 8 8 4 4 6 4

Sources of FundsPaid-Up Capital Reserves & Surplus

3 7 1 0 1 0 4 7 8 0 4 7

Secured Loans Unsecured Loans

8 6 1 6 1 9 1 3 1 6 2 5

Deferred Tax Liabilities (Net)

4 2 1 6 3

Application of FundsNet Fixed Assets Investments

1 5 2 9 2 6 8 N I L

Net Current Assets Misc. Expenditure(to be extent not written off)

3 5 2 6 1 3 2 5 8 3

IV. Performance of Company (Amount in Rs Thousand)Turnover & Other Income Total Expenditure

3 6 1 3 5 5 2 3 4 4 9 8 8 5

Profit before tax Profit after tax

1 6 3 6 6 7 1 2 3 6 3 3

Earning per share (in Rs) Dividend rate %

+ 1 0 . 2 6 N I L

V. Generic Names of Four Principal Products/Services of Company (as per monetary terms)

Item Code No. (ITC Code) 2 9 1 5 2 1

Product Description A C E T I C A C I D G L A C I A L


Product Description E T H Y L A C E T A T E


Product Description A C E T I C A N H Y D R I D E

Item Code No. (ITC Code) 2 9 4 2

Product Description I B U P R O F E N


46

CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2008(Pursuant to clause 32 of the Listing Agreement)


Rs Rs

A. CASH FLOW FROM OPERATING ACTIVITIES :Net Profit/(Loss) before tax and extra-ordinary items 16,46,80,200 8,70,59,564Adjustments for :

— Depreciation 7,42,88,478 3,48,93,919— Misc. expenses written off 27,30,393 30,80,392— (Profit)/Loss on sale of assets 3,20,346 1,69,724— Interest received (29,53,482) (12,29,570)— Interest paid 11,61,74,957 5,29,20,865— Provision for Gratuity (15,87,294) —Operating profit before working capital changes 35,36,53,598 17,68,94,894Adjustments for :— Trade and other receivables (18,38,32,456) (11,17,21,205)— Inventories (4,42,40,189) (9,08,47,432)— Trade paya0bles 11,82,47,438 19,01,95,346Cash Generated from Operations 24,38,28,391 16,45,21,603

Cash flow before extra-ordinary items 24,38,28,391 16,45,21,603— Extra-ordinary Items— Prior period expenses (10,13,625) (66,492)— Tax (1,92,01,814) (1,03,98,083)

Net cash flow from operating activities 22,36,12,952 15,40,57,028

B. CASH FLOW FROM INVESTING ACTIVITIES— Purchase of fixed assets (47,30,71,637) (64,12,66,340)— Deferred Revenue Expenses — (40,65,723)— Sale of fixed assets 8,97,000 4,37,350— Interest received 29,53,482 12,29,570Net cash used in investing activities (46,92,21,155) (64,36,65,143)

C. CASH FLOW FROM FINANCING ACTIVITIES— Proceeds from issue of share capital 20,89,50,000 6,93,00,000— Proceeds from long term borrowing (Net) (8,46,85,087) 45,06,00,530

— Equity Share Warrant 4,72,10,000 — — 10% Fully Convertible Debentures 13,99,99,800 —

— Proceeds from short term borrowing (Net) 5,38,24,056 3,23,98,378— Payment of interest (11,61,74,957) (5,29,20,865)

Net cash flow from financing activities 24,91,23,812 49,93,78,043

Net increase / (decrease) in cash and cash equivalents (A+B+C) 35,15,609 97,69,928Cash and cash equivalents as at 01.04.2007 (Opening balance) 3,38,22,288 2,40,52,360Cash and cash equivalents as at 31.03.2008 (Closing balance) 3,73,37,897 3,38,22,288

AUDITORS’ CERTIFICATE

We have checked the above cash flow statement of IOL Chemicals and Pharmaceuticals Limited, derived from the audited financialstatements for the year ended March 31, 2008, with the books and records maintained in the ordinary course of business and found the same inaccordance therewith. for K K KAPOOR & ASSOCIATES

Chartered Accountants


M.No. 94249






47

IOL CHEMICALS AND PHARMACEUTICALS LIMITEDRegd. Office : Trident Complex, Raikot Road, Barnala - 148 101 (Punjab)

PROXY FORMI/We ......................................................................................of ..........................................................................in the district of ............................................................. being a member/members of M/s IOL Chemicals andPharmaceuticals Limited, hereby appoint ..................................................................................................... of........................................................................ of the district of .........................................................................as my/our Proxy to vote for me/us on my/our behalf at the Twenty-first Annual General Meeting of the Companyto be held on Saturday, the 20th day of September, 2008 at 10.00 A.M. a the Registered Office of the Companysituated at Trident Complex, Raikot Road, Barnala-148101, Punjab, and at any adjournment thereof.

Signed this ...................................................... day of .................................. 2008

Address .........................................................................Folio/Client ID No. ........................................................

Note :If it is intended to appoint a proxy, the form of proxy should be completed and deposited at the RegisteredOffice of the Company at least 48 hours before the commencement of the meeting.

IOL CHEMICALS AND PHARMACEUTICALS LIMITEDRegd. Office : Trident Complex, Raikot Road, Barnala - 148 101 (Punjab)

MEMBERS FEEDBACK FORM 2007-08Members are requested to send this FEEDBACK FORM duly filled in to the Secretarial Department, IOLChemicals and Pharmaceuticals Limited, 85, Industrial Area ‘A’, Ludhiana - 141003

Please rate on a 5 point scale of 1 to 5 by marking (✔) in the box

Sr No Areas Excellent Very Good Satis- Unsatis-Good factory factory

1 2 3 4 5

1. Turnaround time for response to shareholder query2. Quality of Response3. Timely receipt of Annual Report4. Presentation of information on Company’s Website5. Promptness in confirming demat/remat requests6. Overall Rating

Suggestion/QuestionIn case you have any suggestion/question for the betterment of your Company, please do write to us. TheManagement would be pleased to consider and reply the sameName ................................................... Folio/Client ID No. ...............................................................................Address ..............................................................................................................................................................Signatures .........................................................................................................................................................

Signature of Member/ProxyNotes :1. Members/ Proxies are requested to produce the attendance slip duly signed for admission to the meeting hall.2. Members are requested to bring their copy of the Annual Report.

Regd. Office : Trident Complex, Raikot Road, Barnala - 148 101 (Punjab)

ATTENDANCE SLIP

IOL CHEMICALS AND PHARMACEUTICALS LIMITED

Registered Folio/Client ID No. : ................................. Name of the Member : ................................................

Name of the Proxy : ..................................... No. of shares held : ................................................

I hereby record my presence at the Twenty-first Annual General Meeting of the Company held on Saturday,the 20th day of September, 2008 at 10.00 A.M. at Trident Complex, Raikot Road, Barnala - 148 101, Punjab.

Affix Re 1/-Revenue Stamp

here

Signature(s)