Notes to Accounts of Hiran Orgochem Ltd.

Mar 31, 2015

1. COMPANY INFORMATION

Hiran Orgochem Limited (the 'Company') is a public limited company and is listed on the Bombay Stock Exchange (BSE) & Luxembourg Stock Exchange (LSE). The company is a leading integrated manufacturer of active pharmaceutical ingredients. The Company is manufacturing the Quinolones group of API's with its principal products comprising Ciprofloxacin, Ofloxacin, Levofloxacin and Enrofloxacin.

2. Rights, preferences and restrictions in respect of equity shares and CDRs issued by the Company

(a) The Equity shareholders are entitled to receive dividends as and when declared; a right to vote in proportion to holding etc. and their rights, preferences and restrictions are governed by / in terms of their issue under the provisions of the Companies Act, 1956.

(b) The rights, preferences and restrictions of the GDR holders are governed by the terms of their issue, and the provisions of the Companies Act 1956. Each GDR holder is entitled to receive 30 equity shares of Rs. 10 each, per GDR, and their voting rights can be exercised through the Depository.

*Secured loans taken from State Bank of India and State Bank of Patiala have been turned into NPA. Thereafter, State Bank of India and State Bank of Patiala have issued notices under SARFASEI Act, 2002 and recalled their dues. Further, State Bank of India had taken physical possesion of all the fixed assets on 04/02/2014. The above figures does not include interest accrued after 01.04.2011.

The Bank has transfered the loan to Edelweiss Asset Reconstruction Company Limited (FARCL) on 19.03.2014. Subsequently, EARCL has sold all the factory assets for 10.65 crores on 22nd October, 2014. However no documentary evidence with regards to sales consideration was received from FARCL. Also statement from FARCL was not available to confirm amount outstanding and hence loans are outstanding in the books in the name of the banks.

* * Secured loans taken from SICOM Ltd. have been turned into NPA. Thereafter;SICOM has issued notices under SARFASEI Act, 2002 and recalled their dues. Further SICOM had taken possession and sold the secured assets, i.e. office premises owned by promoters during the year 2013-14. The above figures does not include interest accrued after 16.01.2012.

* The company is in the process of compiling the information required to be disclosed underthe Micro, Small and Medium Enterprises Development Act, 2006. The management does not envisage any material impact on. the financials in this regard, which has been relied upon by the auditors.

*Networth of Actgen Pharma Private Limited was completely eroded but and hence provision for dimunition in value of Investments are accordingly provided in the books of accounts. All investments are held in company's own name.

3. Defined Benefit Plans

Contribution to Gratuity Fund and Leave Encashment is provided in the books of accounts on actual basis during the year. The charge on account of provision for gratuity and leave encashment has been included in Employees Remuneration and Benefits.

The Company has given corporate guarantee of Rs. 2700 Lacs in the earlier period and is continuing for the loans taken by Actgen Pharma Private Limited from Bank of India. The account of Actgen Pharma Private Limited with the bank has been classified as NPA w.e.f. 30.06.2013. Also, networth of Actgen Pharma Private Limited is completely eroded. However, Management is of the view that assets of Actgen pharma Private Limited are sufficient to meet the liabilities of the bank and management does not foresee any development of their liability on the company.

@ Details of contingent liability with regards to Sales Tax, excise duty, cess, Income tax, etc were not available with the company.

4 RELATED PARTY DISCLOSURES

(i) Related Party Disclosures and the nature of relationships is as follows:

Name of the Party Relationship

1 (a) Shri Kantilal M. Hiran Managing Director

(b) Smt. Dariyadevi Hiran RelativeParticulars

2 (a) Shri. Vijay K.Hiran Relative

(b) Shri. Naresh K.Hiran Relative

3 (a) Actgen Pharma Pvt.Ltd. Associate

5. SEGMENT REPORTING

The company has identified two business segments viz .Pharmaceuticals and Construction. Pharmaceuticals segment comprise of manufacture and trading of Pharmaceutical Intermediates and chemicals.

6. In view of substantial business loss and no virtual certainty to adjust losses against future profit, Deferred Tax Asset has not been considered for the year.

7. Loan against Keyman Insurance Policy, Sercured Loans, Sundry Payables, Sundry Receivables Borrowings and Loans & advances are subject to confirmation.

8. Company has not revalued its foreign exchange assets and liabilities (i.e mark to market) as per Accounting

Standard 11 relating to account of Foreign Exchange Transactions. Effect of the same is not ascertainable.

9. Loans & advances aggregating to Rs. 202.07 lakhs (Net) were written off by the management during the year. Also, Provision for doubtful loans & advances is made for Rs. 96.05 lakhs. However, documentations and supportings for the same were not available.

10. Company has not appointed a Chief Financial Officer & a whole time Company Secretary as on 31st March, 2015, as required by Section 203 of Companies Act, 2013;

11. Company has exceeded the limit specified in Section 186 of Companies Act, 2013 as regards to lending money.

12. Previous year figures have been regrouped/reclassified wherever necessary to correspond with the current year classifications/disclosures. However, previous years figures are not comparable as previous year's figures are for 9 months, i.e. from July 13 to March 14.

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Mar 31, 2014

COMPANY INFORMATION

Hiran Orgochem Limited (the ''Company'') is a public limited company and is listed on the Bombay Stock Exchange (BSE) & Luxembourg Stock Exchange (LSE). The company is a leading integrated manufacturer of active pharmaceutical ingredients. The Company is manufacturing the Quinolones group of API''s with its principal products comprising Ciprofloxacin, Ofloxacin, Levofloxacin and Enrofloxacin.

1 CONTINGENT LIABILITIES (Rs. In Lacs) 31.03.2014 30.06.2013

Claims against the company not acknowledged as debts

(i) Sales Tax 1,504.98 1,137.97

(ii) Excise Duty 86.40 86.40

(iii) Income Tax 227.93 2.67

Total 1819.31 1227.04

The Company has given corporate guarantee of Rs. 2700 Lacs in the earlier period and is continuing for the loans taken by Actgen Pharma Private Limited from Bank of India. The account of Actgen Pharma Private Limited with the bank has been classified as NPA w.e.f. 30.06.2013. Also, networth of Actgen Pharma Private Limited is completely eroded. However, Management is of the view that assets of Actgen pharma Private Limited are sufficient to meet the liabilities of the bank and management does not foresee any development of their liability on the company.

2 In view of substantial business loss and no virtual certainty to adjust losses against future profit, Deferred Tax Asset has not been considered for the year.

3 Loan against Keyman Insurance Policy, Sercured Loans, Sundry Payables, Sundry Receivables Borrowings and Loans & advances are subject to confirmation.

4 Company has not revalued its foreign exchange assets and liabilities (i.e mark to market) as per Accounting Standard 11 relating to account of Foreign Exchange Transactions. Effect of the same is not ascertainable.

5 Balances aggregating to Rs. 597.81 lakhs (Net) were written off by the management during the year. However, documentations and supportings for the same were not available for our verification.

6 Previous year figures have been regrouped/reclassified wherever necessary to correspond with the current year classifications/disclosures. However, previous years figures are not comparable as current year''s figures are for 9 months, i.e. from July 13 to March 14.

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Jun 30, 2013

COMPANY INFORMATION

Hiran Orgochem Limited (the ''Company'') is a public limited company and is listed on the Bombay Stock Exchange (BSE) and Luxembourg Stock Exchange (LSE). The company was a leading integrated manufacturer of active pharmaceutical ingredients. The Company is manufacturing and trading the Quinolones group of API''s with its principal products comprising Ciprofloxacin, Ofloxacin, Levofloxacin and Enrofloxacin.

1 In view of substantial business loss and no virtual certainty to adjust losses against future profit, Deferred Tax Asset has not been considered forthe year.

2 Previous year figures have been regrouped/reclassified wherever necessary to correspond with the current year classifications/disclosures.

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Jun 30, 2011

1. The Board of Directors at its board meeting held on 27th May, 2011 had approved extension of Accounting year of the company to end on 30th June, 2011. Thus the figures of the current accounting period relate to 15 Months (1st April, 2010 to 30th June, 2011), are not comparable with previous year figures related to 12 Months (1st April 2009 to 31st March 2010).

2. CONTINGENT LIABILITIES

(Rs. In Lacs) Particulars Current Year Previous Year 30.06.2011 31.03.2010

(i) Liability in respect of Bills Discounted with bank Nil 447.37

(ii) Letter of Credit Nil 346.58

(iii) Claims against the company not acknowledged as debts

(a) Sales Tax 143.89 Nil

(b) Excise Duty 68.02 21.74

(c) Income Tax 4.80 Nil

3. Sundry debtors include Rs. 229.25 Lacs (P.Y. Rs. 64.85 Lacs) due from local debtors Rs. 117.18 Lacs and from export debtors Rs. 112.07 Lacs, which are considered doubtful of recovery and provision for the same is made.

4. The company is in the process of compiling the information required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006. The management does not envisage any material impact on the financials in this regard, which has been relied upon by the auditors.

5. Export incentive has been computed on the basis of prevailing rates as per Import & Export policy. Difference, if any, between actual realisation and the amount so computed will be accounted for as and when realised. Export incentives of Rs. 169.82 Lacs (previous year 179.32 Lacs) includes Rs. 119.18 Lacs (previous year 119.18 Lacs) incentive under the target plus scheme announced by the Union Government. However due to subsequent reduction of incentive under target plus scheme there may be a lapse of Export incentive to the extent of Rs. 119.18 Lacs. No provision has been created for the said loss as management anticipates some relief from the Union Government in this respect.

6. The company has suffered huge loss of WIP inventory of Rs. 5959.1 1 lacs due to non conformity with Q.C. specifications. Quality deterioration was caused mainly because of serious problem of controlling process cycle, owing to various reasons chiefly effluent disposal bottleneck caused by restrictions enforced by Gujarat Pollution Control Board for discharge of effluent in Common Effluent Treatment Plant at Panoli. This disrupted the entire business cycle with a resultant impact on financial flow and its constrictions reflected in severe limitation to salvage the situation, which went beyond the control of the management.

7. In view of substantial business loss and no virtual certainty to adjust losses against future profit, Deferred Tax Asset has not been considered for the year.

8. The company has advanced against orders Rs. 2780.24 Lacs to various parties pertaining mainly to construction division. In the opinion of the management these are good and recoverable. The increase in advance against order during the period under review was caused by non materialization of reduction in advance against order of Rs. 1850 Lacs in the previous year.

9. FINANCIAL & DERIVATIVE INSTRUMENTS

(a) Derivative Contract entered into by the company and outstanding as on 30th June, 2011. For hedging currency and Interest rate related Risks:-

10. EMPLOYEE BENEFITS

The company has classified the various benefits provided to employees as under:

i) Defined Contribution Plans

During the year, the company has recognised the following amounts in the Profit and Loss Account:

i) Defined Benefit Plans

In accordance with Accounting Standard 15 (R), actuarial valuation was done as on 30th June 2011 in respect of Contribution to Gratuity Fund and Leave Encashment using Projected Unit Method. The charge on account of provision for gratuity and leave encashment has been included in Employess Remunaration and Benefits.

(e) Note:

The estimates of rate of escalation in salary considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

11. Excise duty shown under the head Manufacturing & Other Expenses represents the aggregate of excise duty borne by the company and the difference between excise duty on the opening and closing stock of finished goods.

12. Exceptional Item of Rs. 156.27 lacs include foreign exchange loss relating to GDR Issue, expenses incurred and income accrued in connection thereto.

13. The company has issued 15,38,462 GDR at an offer price of USD 6.50 per GDR aggregating to USD 10 million. Each GDR represents 30 Equity Shares of Rs. 10 each. Out of the above USD 5 Million equivalent to Rs. 2210.53 Lacs has been transferred to India and balance is lying in the from of FDR in a foreign bank.

14. Previous year figures have been regrouped and recast wherever deemed necessary.

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Mar 31, 2011

1. The Board of Directors at its board meeting held on 27th May, 2011 had approved extension of Accounting year of the company to end on 30th June, 2011. Thus the figures of the current accounting period relate to 15 Months (1st April, 2010 to 30th June, 2011), are not comparable with previous year figures related to 12 Months (1st April 2009 to 31st March 2010).

2. CONTINGENT LIABILITIES

(Rs. In Lacs)

Particulars Current Year Previous Year

30.06.2011 31.03.2010

(i) Liability in respect of Bills

Discounted with bank Nil 447.37

(ii) Letter of Credit Nil 346.58

(iii) Claims against the company not acknowledged as debts

(a) Sales Tax 143.89 Nil

(b) Excise Duty 68.02 21.74

(c) Income Tax 4.80 Nil

3. Sundry debtors include Rs. 229.25 Lacs (P.Y. Rs. 64.85 Lacs) due from local debtors Rs. 117.18 Lacs and from export debtors Rs. 112.07 Lacs, which are considered doubtful of recovery and provision for the same is made.

4. The company is in the process of compiling the information required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006. The management does not envisage any material impact on the financials in this regard, which has been relied upon by the auditors.

5. Export incentive has been computed on the basis of prevailing rates as per Import & Export policy. Difference, if any, between actual realisation and the amount so computed will be accounted for as and when realised. Export incentives of Rs. 169.82 Lacs (previous year 179.32 Lacs) includes Rs. 119.18 Lacs (previous year 119.18 Lacs) incentive under the target plus scheme announced by the Union Government. However due to subsequent reduction of incentive under target plus scheme there may be a lapse of Export incentive to the extent of Rs. 119.18 Lacs. No provision has been created for the said loss as management anticipates some relief from the Union Government in this respect.

6. The company has suffered huge loss of WIP inventory of Rs. 5959.11 lacs due to non conformity with Q.C. specifications. Quality deterioration was caused mainly because of serious problem of controlling process cycle, owing to various reasons chiefly effluent disposal bottleneck caused by restrictions enforced by Gujarat Pollution Control Board for discharge of effluent in Common Effluent Treatment Plant at Panoli. This disrupted the entire business cycle with a resultant impact on financial flow and its constrictions reflected in severe limitation to salvage the situation, which went beyond the control of the management.

7. In view of substantial business loss and no virtual certainty to adjust losses against future profit, Deferred Tax Asset has not been considered for the year.

8.The company has advanced against orders Rs. 2780.24 Lacs to various parties pertaining mainly to construction division. In the opinion of the management these are good and recoverable. The increase in advance against order during the period under review was caused by non materialization of reduction in advance against order of Rs. 1850 Lacs in the previous year.

9. RELATED PARTY DISCLOSURES

A) Related Party Disclosures and the nature of relationships is as follows:

SR. NO. NAME OF THE PARTY RELATIONSHIP

1. (i) Shri K.M. Hiran Managing Director

(ii) Shri. V.K.Hiran Whole Time Director

(iii) Shri. N.K.Hiran Director

(iv) Shri M. Kailash Kumar Director

2. (i) Smt. Dariyadevi Hiran Relative

3. (i) Actgen Pharma Pvt.Ltd. Associate

10.EMPLOYEE BENEFITS

i) Defined Benefit Plans

In accordance with Accounting Standard 15 (R), actuarial valuation was done as on 30th June 2011 in respect of Contribution to Gratuity Fund and Leave Encashment using Projected Unit Method. The charge on account of provision for gratuity and leave encashment has been included in Employess Remunaration and Benefits.

11. Excise duty shown under the head Manufacturing & Other Expenses represents the aggregate of excise duty borne by the company and the difference between excise duty on the opening and closing stock of finished goods.

12. Exceptional Item of Rs. 156.27 lacs include foreign exchange loss relating to GDR Issue, expenses incurred and income accrued in connection thereto.

13. The company has issued 15,38,462 GDR at an offer price of USD 6.50 per GDR aggregating to USD 10 million. Each GDR represents 30 Equity Shares of Rs. 10 each. Out of the above USD 5 Million equivalent to Rs. 2210.53 Lacs has been transferred to India and balance is lying in the from of FDR in a foreign bank.

14. Previous year figures have been regrouped and recast wherever deemed necessary.

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Mar 31, 2010

Current Previous Particulars Year Year (Rs. in Lacs) (Rs. in Lacs)

Contingent Liabilities i) Liability in respect of Bills 447.37 477.72 Discounted with Bank

ii) Letter of Credit 346.58 956.55

iii) Claims against the company not acknowledged as debts

a) Sales Tax NIL 11.30

b) Excise Duty 21.74 59.03

2. Exchange differences relating to long-term monetary items, arising during the year, in so far as they relate to acquisition of depreciable capital assets are deducted from the cost of assets and depreciated over the balance life of asset. Accordingly an amount of Rs. 15.83 lacs has been deducted from the cost of fixed assets and the profit for the year is lower by this amount.

3. Sundry debtors include Rs. 64.85 lacs (P.Y. Rs.50.20 Lacs) which are considered doubtful of recovery. However no provision is made as the matter is subjudice and necessary effect will be given in the account as and when settled.

4. The company is in the process of compiling the information required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006. The management does not envisage any material impact on the financials in this regard, which has been relied upon by the auditors.

5. Export incentive has been computed on the basis of prevailing rates as per Import & Export policy. Difference, if any, between actual realisation and the amount so computed will be accounted for as and when realised. Export incentives of Rs. 179.32 lacs (previous year 220.75 lacs) includes Rs. 119.18 lacs (previous year 119.18 lacs) incentive under the target plus scheme announced by the Government of India. However, due to subsequent reduction of incentive under target plus scheme there will be a lapse of Export incentive to the extent of Rs. 119.18 lacs. No provision has been created for the said loss.

6. Related Party Disclosures

a) Related Party Disclosures and the nature of relationships is as follows:

Sr. No. Name of the Party Relationship

1 (i) Shri K. M. Hiran Managing Director

(ii) Shri V. K. Hiran Whole Time Director (iii) Shri. N. K. Hiran Director

2 (i) Smt. Dariyadevi Hiran Relative

3 (i) Actgen Pharma Pvt. Ltd. Associate

7. Financial & Derivative Instruments

(a) Derivative Contracts entered into by the company and outstanding as on 31s1 March, 2010.

8. Excise duty shown under the head Manufacturing & Other Expenses represents the aggregate of excise duty borne by the company and the difference between excise duty on the opening and closing stock of finished goods.

9. Previous years figures have been regrouped and recast wherever necessary.