Directors Report of KDL Biotech Ltd.

Mar 31, 2012

To The Members of KDL Biotech Limited

The Current Accounting Year is of 12 months i.e. 1st April, 2011 to 31st March, 2012. Your Directors hereby present the Twenty-fifth Annual Report together with the Audited Statement of Accounts for the aforesaid year.

FINANCIAL RESULTS:

(Rupees In Lacs)

Current 12 Previous 12 months Period months Period from from 01.04.2011 to 01.04.2010 to 31.03.2012 31.03.2011

Net Sales/Income from Operations 2722.41 2872.87

Profit/(Loss)

Before Depreciation & Tax (807.94) (2277.23)

Less : Depreciation and Impairment 913.29 2234.81

Profit/(Loss) Before Tax (1721.23) (4512.04)

Add : Exceptional Item - (1150.00)

Less : Fringe Benefit Tax - -

Add : Deferred Tax W/Off - (769.27)

Profit/(Loss) after Tax (1721.23) (6431.31)

Add : Prior Period Exps

Add : Balance brought forward from previous year (16757.64) (10326.33)

Amount available for appropriation (18478.87) (16757.64)

Surplus/(Deficit) carried forward to Balance Sheet (18478.87) (16757.64)

FINANCIAL PERFORMANCE

For the Current Accounting Year of 12 months, the Company has achieved Sales and Other Income aggregating to Rs. 2722.41 lacs, which includes Job Work Charges amounting to Rs. 1796.35 lacs, whereas for the previous Accounting year of 12 months, the Company had achieved Sales and other Income aggregating to Rs. 2872.87 Lacs.

DIVIDEND

In view of the losses incurred during the period under review, no dividend has been recommended on Equity Shares.

FINANCE

It has been a constant endeavour on the part of the company to avail low cost debt by restructuring process with the banks and others. The response was slow due to the fact that the company had to depend more on job work business than its own production which affected the operation of the company as well as the restructuring process with the banks and others.

The Company is negotiating with the Bankers for One Time Settlement of it's Working Capital facility, which will resolve it's issues effectively with the banks and the Company is hopeful of settling this issue through One- time Settlement Scheme (OTS). The Company is a sick Company within the meaning of Section 3(1)(O) of the Sick Industrial Companies (Special Provisions) Act, 1985. The Company has made a reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 (1) of the Sick Industrial Companies (Special Provisions) Act, 1985 on 6th June, 2011, which has been registered by BIFR as case No. 35/2011. The case before BIFR is at a hearing stage and is pending before BIFR for determination of Sickness of the Company.

The last hearing was held on 18th July, 2012. The advocate representing State Bank of India (SBI) stated that they had already filed their written submission as directed by BIFR, vide their letter dated 13th June, 2012.

The Consultant representing the company stated that they had not received the copy of the written submission made by SBI. The advocate representing SBI stated that he will hand over a copy of written submission to the Company on the same day.

The representative of Canara Bank stated that they had already filed their objection vide letter dated 3rd May, 2012. He handed over a copy of the same to the Consultant representing the company, during the course of hearing.

The advocate representing Sales Tax Department stated that the total outstanding due against the company amounts to Rs. 9.27 crores.

Having considered the submissions made and material on record, the honourable Bench directed that the case be listed for Argument. The next date of hearing in the case has been fixed on 10th September, 2012.

After a constant follow-up with SBI, the Company has recieved the copy of written submission from SBI on 22nd August, 2012. The Company has filed it's reply against the submission of SBI & Canara Bank before BIFR.

Further, with the help of Financial Advisors, the Company is also working on the alternative mode of Finance for funding OTS.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Dr. Tushar K. Srivastava and Mr. Yogendra K. Chauhan retires by rotation at the ensuing Annual General Meeting and are eligible for re-appointment.

Brief resume of the Directors being appointed/re-appointed, is provided in the Notice convening the Annual General Meeting of the Company as required under Clause 49 of the Listing Agreement.

None of the Directors of the Company are disqualified from being appointed as specified under Section 274 of the Companies Act, 1956.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, in relation to financial statements of the Company for the accounting period ended 31st March, 2012, the Board of Directors state that:

i) the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii) reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgements and estimates have been made in respect of items not concluded by the end of the Accounting period, so as to give a true and fair view of the state of affairs of the Company as at the end of the accounting period ended 31st March, 2012 and of the profit/(loss) of the company for the period under review;

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

iv) the financial statements for the accounting period ended 31st March, 2012, have been prepared on a going concern basis.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORBTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Information pursuant to Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given in the Annexure - A to the Report.

PARTICULARS OF EMPLOYEES

The Ministry of Corporate Affairs has vide notification dated 31st March, 2011 enhanced the limits for the purpose of disclosure of particulars of employees in Directors Report as required under Section 217(2A) read with Companies (Particulars of Employees) Rules, 1975 from the existing limit of Rs. 24 lac per year/ Rs. 2 lac per month to Rs. 60 lac per year/ Rs. 5 lac per month.

The information required to be disclosed under Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Amendment Rules, 2011, is not applicable to the Company, as none of the employee of the Company was in receipt of remuneration prescribed in Companies (Particulars of Employees) Amendment Rules, 2011.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a separate Report on Corporate Governance and a Certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance are annexed to the Directors' Report.

GROUP

Group means Jayant Mohanlal Parekh, Madhukanta Jayant Parekh, Mehul Jayant Parekh, Beena Mehul Parekh, Sandip Jayant Parekh, Nandini Sandip Parekh, Sonali Mehul Parekh, Pooja Mehul Parekh, Sarang Sandip Parekh, J. M. Parekh (HUF), Unimark Remedies Limited, Glade Organics Private Limited, India, Morganite Trading Company Limited, Synpac Pharmaceuticals (UK) Limited, Synpac Pharmaceuticals Limited, UK, Synpac Limited BVI, Glade Organics Private Limited, UK and Glade Remedies Private Limited, Mauritius are part of the same Group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969).

FIXED DEPOSITS

During the period under review, the Company has not accepted any fixed deposits.

INSURANCE

All Properties/Assets including Buildings, Plant and Machineries, Furnitures and Fixtures etc. and insurable interest of the Company are adequately insured.

AUDITORS

M/s. Khandelwal Jain & Co., Chartered Accountants, Mumbai, retires at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received confirmation from them to the effect that their re-appointment, if made, would be within the prescribed limits under Section 224(1 B) of the Companies Act, 1956. The observations of the Auditors in their report on Accounts read with the relevant notes are self-explanatory and therefore do not call for any further comments.

AUDITOR'S REPORT

With regard to qualifications made by the Statutory Auditors in their report, the relevant notes appended in the Schedule of the note are Self-explanatory and requires no further explanation and elucidation.

ACKNOWLEDGMENTS

Your Directors would like to express their grateful appreciation for the assistance and co-operation received from the Financial Institutions, Banks, Government Authorities, Customers, Vendors, Shareholders and Employees during the period under review.

For and on behalf of the Board of Directors

(Dr. Rajesh Agrawal)

Director - Technical

Place : Mumbai

Date : August 28, 2012