Notes to Accounts of Surya Pharmaceuticals Ltd.

Mar 31, 2013

1 FIXED ASSETS

Fixed Assets includes assets held for R & D Purposes of the company

Intangible assets relates to Deferred revenue expenditure incurred with respect to brand promotion and other long term activities.

The Company''s investments in equity of Surya Healthcare Ltd. of Rs. 16.03 crores, in Emsons Organics Ltd. of Rs. 9.17 crores, were made to achieve certain strategic objectives. The business of these investee companies are facing challenges and the companies are making efforts to reorganize their businesses. In view of complete erosion in net worth of these investee companies, the Company has provided for diminution in value of investments to the extent of amount of investment less nominal / face value of investments. The Company''s investments in Surya Pharmaceutical Inc. (USA) of Rs. 0.23 crores and in Surya Bio Pharma Inc. (USA) of Rs. 1.22 crores have been stated by reducing provision for diminution in value of those investments as the business of these companies is no longer viable and no operations are being carried on by the companies.

The Company was in a position to put to use the inventory earlier during the year, if the Lenders had released funds withheld by them out of the resources of the Company which Inventory have now become more than one year old and considered slow moving. The recoverability and reliability of the inventories will be determinable at the time the inventories are put to use by the Company.

i) Recovery from an overeas debtor has become sticky due to economic crisis in its host country. The Company is in discussion with the customer and expects to recover the outstanding on restoration of supplies to the customer. Recoveries from certain overseas customers are pending for which Company has filed claims with Export Credit Guarantee Corporation.

ii) The Company has initiated legal actions for recovery of outstanding amount from its debtors, which includes recovery suits, winding up petitions, etc.

Some of the banks have not provided the Bank Statements, their balances are shown as appearing in books of the Company and their balances are subject to reconciliation/confirmation.

* Fixed deposits includes amount given as margin money for bank guarantees, tender participation and Rs. 3.24 crores paid to Exim Bank as fees towards registered mortgage of property situated at Jammu (Registered mortgage is yet to be created).

i) Deposits / balances represent refunds recoverable from sales tax authorities, which are being followed by the Company with the relevant authorities. Deposits / balances with excise department pertain to cenvat credit available with the Company and refunds of excise duty / service tax.

ii) Export incentives pertain to amount recoverable from the government, value of entitlement of the Company for duty free scrips for import under Focus Market Scheme or Vishesh Krishni Yozna Scheme or Duty Exemption Pass Book Scheme, and other similar amounts pending recovery. For reasons of certain compliances pending on the part of the Company, Director General of Foreign Trade (DGFT) has issued show cause notices claiming the amounts of incentives and there have come about to be passed order/s by it for adjudication of claims against which the Company has filed appeals. The refunds sought by the Company and the value of benefits expected to be realized by the Company will be adjusted with the amounts finally determined and / or realized, if any, on this account.

The banks and financial institutions from whom the Company had availed facilities had restructured the same under Corporate Debt Restructuring Forum. The lenders did not permit the use of funds withheld from operations to be utilized by the Company in line with the aforesaid sanction, and the Company was therefore, unable to fulfill certain conditions of the sanction of restructuring, all leading to failure of the restructuring scheme as sanctioned by the lenders. The Company though disputing the charge of interest, has accounted the same on the basis as accounted in earlier years.

2 CONTINGENT LIABILITIES (to the extent not provided for in books of account)

Particulars 31.03.2013 31.03.2012 (Rs. in lacs) (Rs. in lacs)

a) Bank guarantees given 78.30 254.01

b) Corporate guarantee given (Subsidiaries) 15,249.86 14,021.97

c) Corporate guarantee given (Agri Loan) 801.21 -

(Axis Bank has invoked corporate guarantee on 01.07.2013 for outstanding amt of Rs.8.01 crs)

d) Bills discounted (FOBN) - 746.00

e) Claims against the Company not acknowledged as debt as on 31.03.2013 in respect of:

- Excise matters under dispute 1,196.99 2,039.51

- Sales Tax matters under dispute 1,015.25 -

- Service Tax matter under dispute 396.84 201.77

- Customs Act 384.80 313.27

- Foreign Trade Development Regulation Act (FTDR) 7,558.11 -

26,681.36 17,576.53

f) The effect of assessment of taxes by the Authorities is accounted on completion of assessments or disposal of appeals, and subject to the Company accepting the outcome.

g) Certain creditors of the Company have initiated proceedings for winding up of the Company which are being contested by the Company.

h) The assessments of the Company have been made u/s 143(3) of the Income Tax Act, 1961 and the additions made in respect of the same have partly been allowed by the Commissioner Income Tax (Appeals) and in respect of items where no relief allowed by Commissioner Income Tax (Appeals), the Company is before the Appellate Tribunal which are still pending before the Ld. Income Tax Appellate Tribunal (ITAT).

Further to the above, the Assessing Officer had preferred Appeal against the Orders of the Commissioner of Income Tax (Appeals) before the Ld. Income Tax Appellate Tribunal (ITAT) which Appeals are also pending before the Ld. Income Tax Appellate Tribunal (ITAT) pertaining to AY 2006-07 and 2007-08. However, the balance demands which arose after the Orders of the Commissioner Income Tax (Appeals) have been adjusted out of the refunds due to the Company in other Assessment Years. The adjustments of the same in the books of accounts will be made as and when the disputed additions are finalized by the Appellate authorities.

There were certain search and seizer operations in the premises of the Company and its Directors in September 2010. The Assessments as were pending u/s 153A of the Income Tax Act, 1961 pertaining to six Assessment Years till AY 2010-11 as well as for AY 2011-12. The Company has a filed a petition u/s 245C of the Income Tax Act, 1961 before the Hon''ble Income Tax Settlement Commission for all the Assessment Years following within the preview of section 153A of the Income Tax Act, 1961 as aforesaid as well as for AY 2011-12 and 2012- 13 which petitions are pending for disposal by the Hon''ble Income Tax Settlement Commission. The necessary adjustments will be made in the books of accounts as and when the matter is decided by the Hon''ble Income Tax Settlement Commission.

The Assessing Officer has provisionally attached various immovable properties of the Company and its Directors u/s 281B of the Income Tax Act, 1961 as a precautionary measures due to the pending assessments of the Companies under Chapter XIV of the Income Tax Act, 1961.

3 Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period assuming the conversion of diluted potential equity shares.

4 There is not more than one reportable segment of the Company, therefore information as per AS - 17 on "Segment Reporting" is not required to be disclosed.

5 Related Party Disclosures*:

Pursuant to Accounting Standards (AS-18) on "Related Party Disclosures" issued by the Institute of Chartered Accountants of India, following parties are to be treated as related parties along with their relationships:

a) Name of related parties and description of relationship:

i) Subsidiary Companies ii) Step - down Subsidiary Companies

M/s. Surya Healthcare Ltd. M/s Medi Mart India Pvt. Ltd.

M/s. Surya Pharmaceutical INC. U.S.A. M/s Family First Pharmaceutical Ltd.

M/s. Surya pharmaceutical (singapore) INC M/s Amershire Investment Corporation Ltd.

M/s. Surya Bio Pharma. U.S.A INC M/s Herkules Capital Management Ltd.

iii) Key Management Personnel (Director/Whole-time directors)

Mr. Rajiv Goyal Mrs. Alka Goyal

iv) Entities over which management of the Company is having control

M/s. Surya Healthcare Ltd. M/s Emsons Organics Ltd.

M/s. Surya Pharmaceutical INC. U.S.A M/s Emm Bee Fincap Pvt. Ltd.

M/s. Surya Pharmaceutical (Singapore) INC M/s Futuristics Garments Pvt. Ltd.

M/s. Surya Bio Pharma. U.S.A INC M/s Valuesource Mercantile Limited

M/s. Ess Ess Exim Pvt. Ltd. M/s Nova Machino Fabrik

M/s Mediwell Healthcare Pvt. Ltd.

M/s Surya Softedge Ltd.

* Excludes not for profit organization wherein key management personnel are office holders and the beneficiary is public at large.

6 Note on Corporate Debt Restructuring:

A majority of banks and financial institutions from whom the Company had availed facilities had restructured the same under Corporate Debt Restructuring Forum in January 2013 with a cut-off date as December 31, 2011. The Master Restructuring Agreement was executed between the Company and the lenders on March 31, 2013 and charges and securities to the extent required and possible were created from time to time. Certain securities and charges could not be created by the company due to subsisting order for provisional attachment of assets of the company by Income Tax Department, and order of restraint issued by Hon''ble Debt Recovery Tribunal in the matter of recovery suit filed by IFCI Ltd.

The lapse of time from December 2011 to March 2013 for no fault of the Company, and without shifting forward the cut-off date for restructuring of facilities of the Company to a realistic prospective date, coupled with lack of co-operation of the lenders during the period of over 15 months, has had a negative effect on operations of the Company.

For reasons of the lenders not permitting the use of funds withheld with them from operations of the Company and unilateral adjustment of sales recoveries towards certain accounts, which were all contrary to the terms of restructuring, prevented the Company from carrying on its operations and also not being able to fulfill certain conditions forming part of sanction of restructuring, the Company suffered huge losses.

While all lenders who are members of the consortium of banks having restructured the facilities of the Company were in the process of giving effect to sanction of restructuring, the Company has recently been informed by the lead bank that some of the lenders to the consortium have recalled the sanction of restructuring and recalled the loans, and have demanded repayment of entire dues within 10 days, and in the event of failure of the Company to pay dues within the unrealistic period of 10 days, are contemplating taking action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Company has no knowledge of termination of Master Restructuring Agreement by the lenders, and all actions taken by lenders are unilateral. In the circumstances, the conduct of the lenders has caused and is continuing to cause losses to the Company.

Without prejudice to the rights and claims that the Company has against the lenders in the matter, the Company though disputing the outstanding balances and charge of interest, the Company has accounted the same on the basis as accounted in earlier years.

7 In the opinion of the Management, save and except recoverability and reliability of inventories being determinable at the time they are put to use by the Company, the realizable value of current assets in the ordinary course of business will not be less than their value stated in the Balance Sheet.

8 Figures and words in brackets pertain to previous year unless otherwise indicated.

Signature to the above notes which form an integral part of the Balance Sheet and the Statement of Profit and Loss.

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Mar 31, 2012

1.1 Excluding current maturities of term loans of Rs.97.69 cr.

1.2 Term Loans of Rs. 94.03 crs (including current maturities)are secured by 1st Pari-Passu charge on FixedAssetsand2nd Pari-Passu Charge on Current Assets of the Company and Personal Guarantee of Mr. Rajiv Goyal and Mrs. Alka Goyal and Equitable Mortgage of H. No. 64, Sector 9-A, Chandigarh,in the name of Mrs & Mr Rajiv Goyal

1.3 Term Loans of Rs. 182.68 crs (Including current maturities)are secured by 1st Pari-Passu charge on Fixed Assets and 2nd Pari-Passu Charge on CurrentAssetsofthe Company and Personal Guarantee of Mr. Rajiv Goyal and Mrs.Alka Goyal

1.4 Term loan of Rs. 10.94 crs (including current maturities) is secured by SCO 8, Sector-11, PKL

1.5 Deferred paymentfor acquisition of fixed assets are secured by the respective assets financed by them

1.6 Other loans and advances are taken on long term basis from the parties not related with the directors

1.7 Deposit from other exclude current maturities of deposits taken from the public of Rs. 0.81 lacs

1.8 Deposits from others include suppliers deposits of Rs.1.97 crs taken from the distributors and C & F agents

1.9 Other unsecured borrowing are intercorporate deposits taken on the basis of PDC cheques.

1.10 Current maturities of long term debts includes Rs. 97.69 crs towards term loans and Rs. 0.81 lacs towards taken from the public.Restof the long term debts have maturity of 2-3 years as on date.

1.11 As on 31-03-2012 ,there was principal default of Rs. 22.20 crs and interest default of Rs. 13.30 crs in the term loan account since Jan,2012

2.1 Working Capital Facilities of the company are secured by 1st Pari-Passu charge on Current Assets and 2nd Pari-Passu Charge on Fixed Assets of the Company and Personal Guarantee of Mr. Rajiv Goyal and Mrs. Alka Goyal and Working capital facilities are further secured by Equitable Mortgage of H. No. 64, Sector 9-A, Chandigarh in the name of Mrs. and Mr. Rajiv Goyal

2.2 Vehicle loans of Rs. 2.01 cr included in from banks are secured by hypothecation of respective vehicles ,they have maturity of 2-3 years as on date

2.3 From others relates to vehicle loans taken from NBFC which are secured by the respective vehicles

2.4 Secured from others are short term loans taken from banks secured by the subservient charge on the fixed assets/current assets of the company

2.5 As on 31-03-2012,there is default of Rs. 26.48 crs in interest since Jan,2012

3.1 Current maturities of long term debts includes Rs. 97.69 crs towards term loans and Rs. 0.81 lacs towards deposits taken from the public

3.2 Interest accrued and due includes overdues since Jan,2012 to the respective banks and institutions

3.3 Other payables relates to payment to be made to contractors, commission and other liabilities

3.4 Application money to be refunded relates to balance of convertible warrants expired, this has to be refunded to warrant holders for non extension of warrant allotments period by the stock exchange as agreed with warrant holders subject to permission

4.1 FixedAssets include assets held for R & D Purposes of the company

4.2 Intangible assets relates to Deferred revenue expenditure incurred with respect to brand promotion and other long term activities.

5.1 Security Deposits relates to deposit given to the electircity deptt,telephone deptt,services suppliers

5.2 Loans andAdvances to related parties(Refernote no. 23.12)

6.1 Deposits/Balances relates to balances with sales tax authorities that are refundable to the company, for which the company is continuously following up with the relevant authorities. Deposits/Balances with excise deptt relates to cenvat credit lying with the company and excise duty/service tax refundable

6.2 Others relates to export incentives that are refundable/recoverable from the govt and duty free scrips under Focus marketing scheme, Vishesh Krishni yozna scrip, DEPB and otherexport incentives.

7.1 Packing material consumed relates to indigenously procured materials.

7.2 Emsons organics Ltd came underthe same management w.e.f. 25th Feb,2012

7.3 The Company has made an reference to CDRon 10-03-2012 with a cut off date of 31-12-2011

7.4 The Scheme is yet to be approved as on 31-03-2012,however the impairment in stocks of Rs.328.02 crs as per stock auditor report has been given effect in the inventory

7.5 The promoters and their associates have pledged theirentire shareholding with IFCI, the IFCI has invoked the pledge.

7.6 The company has paid managerial remuneration in excess of prescribed limits by Rs.270.62 lacs, after the audit of the balance sheet the company will make an application to the central govt. for condonation of the same.

7.7 The company has outstanding derivative contract of US $1.45 cr at an average rate of Rs. 50.09 per US$ with an maturity up to 31/10/2012.

7.8 CONTINGENTLIABILITIES

Sr.No. Particulars 31.03.2012 31.03.2011 (Rs. in lacs) (Rs. in lacs)

i. Foreign/Inland Letterof Credit - 2,117

ii. Bank Guarantees 254 1,414

iii Corporate Guarantee (Subsidiaries) 17,732 11,365

iv. Bills Discounted (FOBN) 746 2,327

v. Claims against the Company not acknowledged as debt as on 31.03.2012 in respect of:

a. Income Tax matters, pending decisions on various appeals made by the company and by the department i. Cases forA.Y. 2000-01,2001-02, 2004-05 & 2005-06 are remanded back by ITAT toAssessing Officerfor reframing the case. No Demand Pending No Demand Pending

i. Cases forA.Y. 2006-07 are pending withTribunal. Appeal Pending at Appeal Pending at

ITAT ITAT

iii. Case forA.Y. 2007-08 is under processing with ITAT. Appeal Pending at ITAT CIT(A)has

allowed ourappeals and company has applied forappeal affectasking for refund of (Rs 555.61 Lacs)

b. Excise matters, under dispute 2,039.5 734.5

c. Sales Tax matters, under dispute - -

d. Service Tax, under dispute 201.8 173.9

e. CustomsAct 313.3 313.3

7.9 There was a search and seizure operation at various premises of the company and its employees on 17.09.2010. Thenecessaryentries/adjustmentinrespectofthesame, Ifany, will be made as an when assessmentare completed under Chapter XIV of Income TaxAct, 1961 in pursuance of provision of Section 153AofthesaidAct.

7.10 Sales TaxAssessmentsforpreviousyearsare in progress. No provision has been made on account of sales tax liability and the same, if any, will be provided at the time of assessment.

7.11 Basic earning per share is calculated by dividing the net profit or loss for the year attribut able to equity share holders by the weighted average numberofequitysharesduringtheyear. Dilutedearningpershareiscalculatedbydividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period assuming the conversion of diluted potential equity shares.

7.12 There is not more than one reportable segment; hence information as perAS 17 is not required to be disclosed.

7.13 Related party disclosures as required underAccounting Standard on "Related Party Disclosures" issued by the Institute of Chartered Accountants of India are given below:-

a) Relationship

i) Subsidiary Companies M/s. Surya Healthcare Ltd.

M/s. Surya Pharmaceutical INC. U.S.A.

M/s. Surya pharmaceutical (singapore) Pte Ltd.

M/s. Surya Bio Pharma U.S.AINC

ii) Key Management Personnel (Director/Whole-time directors)

Sh. Rajiv Goyal

Smt.Alka Goyal

Entities overwhich key management personnel/their relatives are able to exercise significant influence

M/s. Surya Healthcare Ltd

M/s. Surya Pharmaceutical INC. U.S.A

M/s. Ess Ess Exim Pvt. Ltd.

M/s. Surya Healthway Ltd

M/s. Surya Mediwell Ltd

M/s Surya Tradewings Pvt Ltd

M/s Mediwell Healthcare Ltd

M/s Surya Softedge Ltd

M/s Emsons Organics Ltd

M/s Emm Bee Fincap Pvt Ltd

M/s Futuristics Garments Pvt Ltd

M/s Value Edutech Ltd

M/s. Surya pharmaceutical (singapore) INC

M/s. Surya Bio Pharma. INC

M/s Raja Forgings & Gears Ltd

M/s SuryaAutomotives Ltd

M/s Surya World Educational and Research Charitable Initiative (SWERCI)

b) The following transactions were carried out with related parties in the ordinary course of business.

i) Subsidiary Companies, Joint Ventures and associates

7.14 During the year Company has received insurance claim of Rs 402.72 lacs caused by fire in banur Plant 2009-10.

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Mar 31, 2011

I) Contingent Liabilities

(Rs. in lacs)

Sr. No. Particulars 31.03.2011 31.03.2010

i. Foreign/ Inland Letter of Credit 2,116.73 3,576.89

ii. Bank Guarantees 1,413.89 88.92

iii Corporate Guarantee (Subsidiaries) 11,365.00 1,085.82

iv. Bills Discounted (FOBN) 2,327.29 3,413.27

v. Claims against the Company not acknowledged as debt as on 31.03.2011 in respect of:

a. Income Tax matters, pending decisions on various appeals made by the company and by the department

i. Cases for A.Y. 2000-01,2001-02, 2003-04, 2004-05 & No Demand No Demand

2005-06 are remanded back by ITAT to Assessing Officer Pending Pending for reframing the case.

ii. Cases for A.Y. 2006-07 are pending with Tribunal. Appeal Pending Demand Notice

at ITAT 89.72 Lacs

iii. Case for A.Y. 2007-08 is under processing with ITAT. CIT(A) has allowed Demand Notice

our appeals and Rs.649.47 Lacs company has applied (Rs.125 Lacs deposited

for appeal affect under protest, till asking for refund of 31-03-10.) with (Rs.555.61 Lacs) (CIT A)

b. Excise matters, under dispute 734.52 1,591.48

c. Sales Tax matters, under dispute – 155.82

d. Service Tax, under dispute 173.94 24.87

e. Customs Act 313.27 313.27

iii) There was a search and seizure operation at various premises of the company and its employees on 17.09.2010. The necessary entries/adjustment in respect of the same, if any, will be made as an when assessment are completed under Chapter XIV of Income Tax Act, 1961 in pursuance of provision of Section 153A of the said Act.

ii) Director's Remuneration

a) Details of Remuneration to Managing Director & Whole Time Directors:

Remuneration to Directors Rs.312.00 lacs (Rs.264.66 Lacs) and Commission to directors Rs.526.86 lacs (Rs.361.85 lacs).

iii. Sales Tax Assessments for previous years are in progress. No provision has been made on account of sales tax liability and the same, if any, will be provided at the time of assessment.

iv. Provision for Income tax has been made as per Income-tax Act, 1961.

v. During the year, company is writing off Deferred Revenue Expenditure for marketing of products, exhibitions etc. over a period of five years.

vi. Profit made in currency derivatives trading during the year is Rs.70.64 lacs, (previous year Rs.197.33 lacs) and exposure in sale is Rs.6,765 lacs (Rs.6,367.93) as on 31.03.2011.

vii. Menthol incentive for Vishesh Krishi Gram Upaj Yojana is Rs.449.02 lacs. and quantity exported under this scheme is 1274.93 MT

D. EARNING PER SHARE

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares during the year. Diluted earning per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period assuming the conversion of diluted potential equity shares.

E. SHARE CAPITAL

1) The company has issued and allotted 47,00,000 Share Warrants at an exercise price of Rs.70/- (inclusive of Rs.10/- face value and Rs.60/- premium) to the promoters, which are 25% paid up. The warrants shall be converted in equity shares at the option of allotted within eighteen months from the date of allotment of the warrants. Out of this during the year 9,50,000 convertible share warrants have been converted in share capital at face value of Rs.1 per share (one share warrant comprises 10 equity share consequent to subdivision of face value from Rs.10 to Rs.1 per share). Further during the year 2011-12, the promoters have exercised another 10,00,000 share warrants and the paid up capital has increased to 20,27,52,380 number of shares.

2) The Company has raised USD 25 million through issue of 3,85,690 GDRs at US $ 64.819 in October 2010, 1 GDR comprises 10 equity shares, the proceeds of GDRs were used for setting up/acquisition of new manufacturing facility, upgradation/modernisation of existing facilities, investment in subsidiaries, augmenting long term working capital.

3) GDR issue expenses of Rs.396.39 lacs has been adjusted against the Security premium accounts as permitted by Sec 78 (2) of Companies Act, 1956.

F. SEGMENT REPORTING

There is not more than one reportable segment; hence information as per AS 17 is not required to be disclosed.

G. RELATED PARTY DISCLOSURES

Related party disclosures as required under Accounting Standard on "Related Party Disclosures" issued by the Institute of Chartered Accountants of India are given below :- a) Relationship

i) Subsidiary Companies

M/s. Surya Healthcare Ltd.

M/s. Surya Pharmaceutical Inc.

M/s. Surya Pharmaceutical (Singapore) Pte Ltd

M/s. Surya Biopharma U.S.A Inc

ii) Key Management Personnel (Director/Whole-time directors) Sh. Rajiv Goyal Smt. Alka Goyal

Entities over which key management personnel/their relatives are able to exercise significant influence

M/s. Surya Healthcare Ltd

M/s. Surya Pharmaceutical Inc.

M/s. Ess Ess Exim Pvt. Ltd.

M/s. Surya Envirotech Ltd.

M/s. Kala Infra Pvt. Ltd.

M/s. Surya Pharmaceutical (Singapore) Pte Ltd

M/s. Surya Biopharma U.S.A Inc

b) The following transactions were carried out with related parties in the ordinary course of business. i) Subsidiary Companies, Joint Ventures and associates of as follows: Rent paid to M/s Surya Envirotech Ltd. of Rs.25.50 lacs. Rent paid to M/s Ess Ess Exim Pvt Ltd of Rs.7.00 Lacs Rent paid to M/s Kala Infra Pvt. Ltd. of Rs.97.00 Lacs Rent received from M/s Surya Healthcare Ltd of Rs.10.32 Lacs

H. IMPAIRMENT OF ASSETS

1) The indicators listed in paragraph 8 to 10 of Accounting Standard (AS) – 28 "Impairment of Assets" issued by Institute of Chartered Accountants of India have been examined and on such examination, it has been found that none of the indicators are present in the case of the Company. A formal estimate of the recoverable amount has not been made, as there is no indication of a potential impairment loss.

2) During the year Company has received insurance claim of Rs.672.50 lacs caused by fire in Banur Plant last year. Out of this Rs.300 lacs has been accounted this year.

L. In compliance with Accounting Standard (AS-22) relating to "Accounting on Taxes on Income" issued by the Institute of Chartered Accountants of India, Deferred Tax Liability accruing during the period aggregating to Rs.61.43 Lacs (Rs.96.69 lacs) has been recognised in the Profit & Loss Account.

R. FOREIGN ACQUISITION

During the year under review, the company through its 100% owned overseas subsidiary acquired one of the leading brands in US in tropical Analgesic category, i.e ActivOn and marketing operations thereof. Thus, Surya Pharmaceutical (Singapore) Pte Ltd. (SPSPL) acquired 100% shareholding of Amershire Investment Corp and Herkules Capital Management Ltd. The total envisaged Investment by SPSPL for this acquisition is USD 22 Million, out of which a sum of USD 10.92 Million had been incurred till 31st March, 2011.

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Mar 31, 2010

A. BALANCE SHEET

1. SECURED LOANS

i. TERM LOANS

All Term Loans are secured by First pari passu Charge on all the fixed assets of the company and second pari-passu charge on the current assets of the Company.

ii. WORKING CAPITAL LIMITS

All Working Capital Limits both fund based & non fund based are secured by way of first pari passu charge on all the current assets of the Company and second pari passu charge on all the fixed assets of the Company.

2. UNSECURED LOANS

All Short Term Loans are secured by way of subservient charge on the fixed assets of the Company and personal guarantee of the Managing Director and Executive Director of the Company,

3. FIXED ASSETS

A sum of Rs.897.47 lacs [2644.29 Lacs) (includes revenue and capital expenditure) has been capitalized under the head Research & Development Assets. The company has been regularly working on modernization and development of its existing technological system and development of new products & processes. In the opinion of management, the process will yield benefits in the coming years in the shape of improved yields, more demand in the international market as well as better price.

4, INVESTMENTS

Investments considered long term are stated at cost. All investments are non trade.

5, CURRENT ASSETS, LOANS & ADVANCES

i. The company has sent letters of balance confirmation to all the parties but only a few have responded so far. So the balance in the party accounts whether in debit or in credit are subject to reconciliation.

ii. Sundry debtors, Loans & Advances, Sundry creditor and Advances from customers are subject to confirmation, reconciliation and adjustments. Thus the impact of the same on the accounts of the company could not be ascertained.

iii. In the opinion of the directors of the Company, the current assets, loans and advances are approximately of the value as stated, if realized in the ordinary course of business,

iv. In the opinion of the directors of the Company, the Advance Ilicenses/DEPB licenses are approximately of the value as stated, if realized/utilized in the ordinary course of business.

v. Fixed Deposits of Rs. 307.44 lacs
vi. The inventory of stocks, stores & spares has been taken, valued and certified by the management. vii. Sundry Debtors are stated after making adequate provisions for doubtful debts.

6. CURRENTUAB1LITIES

I. As regards compliance of provisions relating to dues to the Small Scale Industries in terms of the Companies (Amendment) Act, 1999, the Company has sent letters to the creditors to intimate whether they are Small Scale Industrial Units, The Company is yet to receive the required information from them. Hence, it is not possible to quantify the dues, Ifany, towards the Small Scale Units.

ii. CONTINGENT LIABILITIES

(Rs. in lacs)

Sr, Particulars 31.03.2010 31.03.2009

No.

i. Foreign/ Inland Letter of Credit 3576.89 3238.69

ii. Bank Guarantees 88.92 68.25

iii. Corporate Guarantee
iv- Bills Discounted [FOBN) Ml "1.27 2054.

v. Claims against the Company not acknowledged as debt as on 31.03.2010 in respect of: a.Income Tax matters, pending decision* on various appeals made by the company and by the department,

I) Cases for A.Y. 2000-01, 2001-02, 2003-04,2004-05 No Demand No Demand & 2005-06 are remanded back by ITAT 10 Assessing Officer tor refraining the case,

ii) Case for A.Y. 2006-07 is pending with Tribunal. Demand Notice No Demand

89.72 Lacs Pending

iii) Case for A.Y. 2007-08 is under processing with CIT(A). Demand Notice No Demand

649.47 Lacs (Rs. 125 Lacs Pending deposited under protest, till 31-03-10.1

I) Excise matters, under dispute 1591.48 143,46

c. Sales Tax matters, under dispute 155.81 155.81

d. Service Tax, under dispute 24.38 37.97

e. Customs Act 313.27 71.52





ii) Directors Remuneration

a, Details of Remuneration to Managing Director & Whole Time Directors:-

Remuneration to Directors Rs. 264.66 lacs ( Rs. 200 Lacs) and Commission to directors Rs.361.85 lacs (Rs. 256.39 lacs).

ill. Sales Tax Assessments (ar previous years are in progress. No provision has been made on account of sales tax liability and the same, if any, will be provided at the time of assessment.

iv. Provision for income tax has been made as per income-tax Act, 1961.

v. During the year, company is writing off Deferred Revenue Expenditure for marketing of products, exhibitions etc.

over a period of five years. vi. Profit made in currency derivative trading during the year rs Rs. 197.33 lacs, (previous year Loss Rs. 350.57 lacs) and exposure in sale is Rs, 6367,93 lacs, as on 31.03,2010 vii. Menthol incentive for Vishesh KrishiCram Upaj Yojana is Rs. 723.24 lacs, and quantity exported under this scheme is 2565.07 MT.

D. EARNING PER SHARE

Basic earning per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares during the year. Diluted earning.per share is calculated by dividing the net profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period assuming the conversion of diluted potential equity shares.

E. SEGMENT REPORTING

There is not more than one reportable segment; hence information as per AS 17 is not required to be disclosed.

F. RELATED PARTY DISCLOSURES

Related party disclosures as required under Accounting Standard on "Related Party Disclosures" issued by the Institute of Chartered Accountants of India are given below :-

a) Relationship

i) Subsidiary Companies

M/s. Surya Healthcare Ltd.

M/s. Surya Pharmaceutical Inc. U.S,A,

ii) Key Management Personnel (Director/Whole-timedirectors)

Sh. Rajiv Goyal

Smt, Alka Goyal

iii) Entities over which key management personnet/their relatives are able to exercise significant influence.

M/s. Surya Healthcare Ltd

M/s. Surya Pharmaceutical Inc. U.S.A

M/s, Ess EssExim Pvr, Ltd.

M/s, Surya Envirotech Ltd,

M/s. Kala Infra Pvt. Ltd.

b) The following transactions were carried out with related parties in the ordinary course of business.

i) Subsidiary Companies, Joinr Ventures and associates Rent paid to M/S Surya Envirotech Lid, Rs, 18,00 lacs, Rent paid to M/S Ess Ess Exim Pvt Ltd Rs 12.00 Lacs Rent paid to M/S Kala Infra Pvl. Ltd. 192.00 Lacs.

Other services includes rent paid to Mr. Rajiv Goyal and Mrs. Alka Goyal.

G. IMPAIRMENT OF ASSETS

(1) The indicators listed in paragraph 8 to 10 of Accounting Standard (AS) -28 "Impairment of Assets* issued by Institute of Chartered Accountants of India have been examined and on such examination, it has been found that none of the indicators are present in the case of the Company. A formal estimate of the recoverable amount has not been made, as there is no indication of a potential impairment loss.

(2) During the year there was an incidence of fire at Companys Banur Plant, There was a loss of Rs. 264.57 lacs to the fixed assets (Cost) and Rs. 922.88 lacs to the Stocks. The same have been accounted for in the books. The Company is having adequate insurance cover and the claim whenever received shall be accounted for on receipt basis as per the Companys accounting policy.

H, In compliance with Accounting Standard (AS-22) relating to "Accounting on Taxes on Income" issued by the Institute of Chartered Accountants of India, Deferred Tax Assets accruing during the period aggregating to Rs. 96.69 Lacs (Previous Year DTL 71 ,93 lacs) has been recognized in the Profit & Loss Account.