MIRA INFORM REPORT

Report Date :

26.09.2012

IDENTIFICATION DETAILS

Name :	SEQUENT SCIENTIFIC LIMITED
Registered Office :	116, Vardhman Industrial Complex, L.B.S. Marg, Thane (West), Mumbai – 400601, Maharashtra
Country :	India
Financials (as on) :	31.03.2012
Date of Incorporation :	28.06.1985
Com. Reg. No.:	11-036685
Capital Investment / Paid-up Capital :	Rs. 213.400 Millions
CIN No.: [Company Identification No.]	L99999MH1985PLC036685
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchanges.
Line of Business :	Manufacturing of active pharmaceutical ingredients (API)
No. of Employees :	700 (Approximately)

RATING & COMMENTS

MIRA’s Rating :

Ba (43)

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 5100000
Status :	Satisfactory
Payment Behaviour :	Usually correct
Litigation :	Clear
Comments :	Subject is an established company having satisfactory track record. Trade relations are reported to be fair. Business is active. Payments are reported to be usually correct and as per commitments. The company can be considered for normal business dealing at usual trade terms and conditions.

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – June 30, 2012

Country Name	Previous Rating (31.03.2012)	Current Rating (30.06.2012)
India	A1	A1

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

INDIAN ECONOMIC OVERVIEW

India is developing into an open-market economy, yet traces of its past autarkic policies remain. Economic liberalization, including industrial deregulation, privatization of state-owned enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and has served to accelerate the country's growth, which has averaged more than 7% per year since 1997. India's diverse economy encompasses traditional village farming, modern agriculture, handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than half of the work force is in agriculture, but services are the major source of economic growth, accounting for more than half of India's output, with only one-third of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services and software workers. In 2010, the Indian economy rebounded robustly from the global financial crisis - in large part because of strong domestic demand - and growth exceeded 8% year-on-year in real terms. However, India's economic growth in 2011 slowed because of persistently high inflation and interest rates and little progress on economic reforms. High international crude prices have exacerbated the government's fuel subsidy expenditures contributing to a higher fiscal deficit, and a worsening current account deficit. Little economic reform took place in 2011 largely due to corruption scandals that have slowed legislative work. India's medium-term growth outlook is positive due to a young population and corresponding low dependency ratio, healthy savings and investment rates, and increasing integration into the global economy. India has many long-term challenges that it has not yet fully addressed, including widespread poverty, inadequate physical and social infrastructure, limited non-agricultural employment opportunities, scarce access to quality basic and higher education, and accommodating rural-to-urban migration.

Source : CIA

EXTERNAL AGENCY RATING

Rating Agency Name	CRISIL
Rating	Short term Bank facilities : A4
Rating Explanation	Minimal degree of safety and very high credit risk
Date	July 10, 2012

Rating Agency Name	CRISIL
Rating	Long term Bank facilities : B
Rating Explanation	High risk of default
Date	July 10, 2012

RBI DEFAULTERS’ LIST STATUS

Subject’s name is not enlisted as a defaulter in the publicly available RBI Defaulters’ list.

EPF (Employee Provident Fund) DEFAULTERS’ LIST STATUS

Subject’s name is not enlisted as a defaulter in the publicly available EPF (Employee Provident Fund) Defaulters’ list as of 31-03-2012.

LOCATIONS

Registered Office :	116, Vardhman Industrial Complex, L.B.S. Marg, Thane (West), Mumbai – 400601, Maharashtra, India
Tel. No.:	91-22-21723357 / 21721286
Fax No.:	Not Available
E-Mail :	vinayak.hegde@sequent.in kannan.pr@sequent.in pidsecretarial@yahoo.co.in pid@pidrugs.com
Website :	http://www.sequent.in
Corporate Office :	Star II, BileKahalli, Bannerghatta Road, Bangalore – 560076, Karnataka, India
Tel. No.:	91-80-67840340
Fax No.:	91-80-67840400
E-Mail :	marketing@sequent.in
Plant :	Ø Plot No. 7, MIDC Engineering Zone, Kalyan Badlapur Road, Ambernath, India Ø W-152,150, 151,136,137,138,139, 140 & 141, MIDC, Tarapur, Boisar, District Thane, Maharashtra, India Ø B-32, G-2, G-3, MIDC, Mahad, District Raigad, India Ø A-68 and 69, Additional Ambernath, MIDC Industrial Area, Ambernath (East), Dist. Thane, India Ø 120 A & B Plot No. 36,Industrial Area, Baikampady, New Mangalore, India Ø Plot No. 26, 26B, GIDC Industrial Estate, Panoli, District Bharuch Ø A-14, MIDC, Phase I, Dombivali (East), District Thane, India Ø Plot No. SPL 9 & 15 Kumta Industrial Area, Hegde Road, Kumta, India

DIRECTORS

AS ON 31.03.2012

Name :	Mr. K. R. Ravishankar
Designation :	Chairman and Managing Director
Name :	Mr. Kannan Ramanujam
Designation :	Independent Director
Name :	Dr. Gopakumar G Nair
Designation :	Independent Director
Name :	Dr. Gautam Kumar Das
Designation :	Executive Director

KEY EXECUTIVES

Name :	Mr. Vinayak Hegde
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

AS ON 30.06.2012

Names of Shareholders	No. of Shares	Percentage of Holding
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family	11,189,979	51.01
Bodies Corporate	1,052,431	4.80
Sub Total	12,242,410	55.81
(2) Foreign
Total shareholding of Promoter and Promoter Group (A)	12,242,410	55.81
(B) Public Shareholding
(1) Institutions
Foreign Institutional Investors	41,000	0.19
Sub Total	41,000	0.19
(2) Non-Institutions
Bodies Corporate	999,268	4.56
Individuals
Individual shareholders holding nominal share capital up to Rs. 0.100 Million	907,569	4.14
Individual shareholders holding nominal share capital in excess of Rs.0.100 Million	1,942,389	8.86
Any Others (Specify)	5,802,555	26.45
Non Resident Indians	1,850,239	8.44
Clearing Members	45,097	0.21
Directors & their Relatives & Friends	23,348	0.11
Trusts	700,000	3.19
Foreign Corporate Bodies	3,183,871	14.51
Sub Total	9,651,781	44.00
Total Public shareholding (B)	9,692,781	44.19
Total (A)+(B)	21,935,191	100.00
(C) Shares held by Custodians and against which Depository Receipts have been issued	0	0.00
(1) Promoter and Promoter Group	0	0.00
(2) Public	0	0.00
Sub Total	0	0.00
Total (A)+(B)+(C)	21,935,191	0.00

BUSINESS DETAILS

Line of Business :

Manufacturing of active pharmaceutical ingredients (API)

GENERAL INFORMATION

No. of Employees :

700 (Approximately)

Bankers :

Ø Andhra Bank

Ø Bank of India

Ø State Bank of Hyderabad

Ø State Bank of Mysore

Ø State Bank of India

Ø Corporation Bank

Ø Axis Bank

Ø HDFC Limited

Ø Central Bank of India

Facilities :

Secured Loans	31.03.2011	31.03.2010
	(Rs. In Millions)
Term loans
From banks	980.870	1392.630
From other parties	613.850	14.730
Total	1594.720	1407.360
Note: (i) Working capital loan from banks are secured by a first pari-passu charge on current assets of the Company and a second pari-passu charge on fixed assets of the Company as collateral. (ii) Short-term borrowings of Rs.980.87 million (31 March 2011 Rs.689.04 million) are guaranteed by some of the Directors of the Company in their personal capacities. (iii) The Company has not defaulted in repayment of loans and interest.
Unsecured Loans	31.03.2011	31.03.2010
	(Rs. In Millions)
Loan from other parties	8.800	160.400
Total	8.800	160.400

Banking Relations :	--
Financial Institutions :	Technology Development Board, New Delhi, India
Statutory Auditors :
Name :	Deloitte Haskins and Sells Chartered Accountants
Address :	Deloitte Centre 100/2, Anchorage II, Richmond Road, Bangalore – 560025, Karnataka, India
Internal Auditors :
Name :	Mahajan and Aibara Chartered Accountants
Address :	No 1, Chawla House, 62 Wodehouse Road, Colaba, Mumbai – 400005, Maharashtra, India
Holding Company :	Fraxis Life Sciences Limited (merged with the Company w.e.f September 14, 2011)
Wholly-owned subsidiaries :	Ø SeQuent Global Holdings Limited Ø SeQuent European Holdings Limited (step-down subsidiary) Ø SeQuent IPCO GmbH (step-down subsidiary up to 23rd February 2011) Ø SeQuent Research Limited Ø SeQuent Antibiotics Private Limited Ø SeQuent Oncolytics Private Limited
Associates :	SeQuent Penems Private Limited (till 14 March 2012)
Enterprises owned or significantly influenced by key management personnel and relative of key management personnel :	Ø Strides Acrolab Limited Ø ATMA Projects Ø Agnus Holdings Private Limited Ø Strides Italia SRL Ø Strides Arcolab (FA) Limited Ø Latitude Projects Private Limited Ø Strides Vital Nigeria Limited Ø Paradime Infrastructure Development Company Ø Chayadeep Properties Private Limited
Subsidiaries :	Ø Sequent Research Limited Ø Sanved Research Labs Private Limited Ø Elysian Life Sciences Private Limited SeQuent Antibiotics Private Limited Ø Vedic Elements Private Limited Ø Galenica B.V. Ø Codiffar N.V. (wholly Owned Subsidiary of Galenica B.V.) Ø Elysian Health Care Private Limited (wholly owned subsidiary of Elysian Life Sciences Private Limited) Ø Vedic Fanxipang Pharma Chemic Company Limited (wholly owned subsidiary of Elysian Life Sciences Private Limited) Ø Elysian Life Sciences Mauritius Limited (step-down subsidiary) Ø SeQuent Penems Private Limited (with effect from 15 March 2012)
Firms/companies in which directors are interested :	Ø Paradime Infrastructure Development Company Ø Agnus Holdings Limited Ø Strides Arcolab Limited

CAPITAL STRUCTURE

AFTER 29.11.2011

Authorised Capital : Rs. 320.000 Millions

Issued, Subscribed & Paid-up Capital : Rs. 219.352 Millions

AS ON 31.03.2012

Authorised Capital :

No. of Shares	Type	Value	Amount
32,000,000	Equity Shares	Rs. 10/- each	Rs. 320.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
21,935,191	Equity Share	Rs.10/- each	Rs. 219.350 Millions
	Less: Amount receivable from SeQuent Scientific Employee Stock Option Scheme Trust (Being Face Value of 700,000 Equity Shares of Rs. 10 each allotted to the trust)		Rs. 5.950 Millions
			Rs. 213.400 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2012	31.03.2011	31.03.2010
SHAREHOLDERS FUNDS
1] Share Capital		213.400	212.350	212.350
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		1053.730	1043.180	946.290
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		1267.130	1255.530	1158.640
LOAN FUNDS
1] Secured Loans		1594.720	1407.360	1306.120
2] Unsecured Loans		8.800	160.400	61.030
TOTAL BORROWING		1603.520	1567.760	1367.150
DEFERRED TAX LIABILITIES		82.410	122.910	87.460
TOTAL		2953.060	2946.200	2613.250
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		2145.430	1892.800	1179.490
Capital work-in-progress		93.130	126.540	210.290
INVESTMENT		390.910	138.890	453.860
DEFERREX TAX ASSETS		0.000	0.000	0.000
Other non-current assets		33.240	123.130	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	631.080	614.710	466.670
	Sundry Debtors	824.800	530.140	454.740
	Cash & Bank Balances	157.670	57.770	124.650
	Other Current Assets	103.780	7.520	0.000
	Loans & Advances	584.130	714.850	517.380
Total Current Assets		2301.460	1924.990	1563.440
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	1225.740	784.110	565.850
	Other Current Liabilities	716.010	338.810	12.190
	Provisions	69.360	137.230	215.790
Total Current Liabilities		2011.110	1260.150	793.830
Net Current Assets		290.350	664.840	769.610
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		2953.060	2946.200	2613.250

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2012	31.03.2011	31.03.2010
	SALES
		Income	3324.300	2779.800	2463.350
		Other Income	113.270	114.100	72.870
		TOTAL	3437.570	2893.900	2536.220
Less	EXPENSES
		Cost of materials consumed	1807.480	1247.530
		Purchases of stock-in-trade	85.130	284.200
		Changes in inventories of finished goods and work-in-progress and intermediates	6.120	(129.150)
		Employee benefits expense	254.370	227.040
		Other expenses	816.500	680.500
		TOTAL	2969.600	2310.120	1862.500
Less	PROFIT/ (LOSS) BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION		467.970	583.780	673.720
Less	FINANCIAL EXPENSES		282.650	200.350	187.310
	PROFIT/ (LOSS) BEFORE TAX, DEPRECIATION AND AMORTISATION		185.320	383.430	486.410
Less/ Add	DEPRECIATION/ AMORTISATION		210.280	171.810	125.220
	PROFIT/ (LOSS) BEFORE EXCEPTIONAL ITEMS AND TAX		(24.960)	211.620	361.190
Less	EXCEPTIONAL ITEMS		0.000	(10.530)	(57.500)
	PROFIT/ (LOSS) BEFORE TAX		(24.960)	222.150	303.690
Less	TAX		(39.640)	62.830	95.760
	PROFIT/ (LOSS) AFTER TAX		14.680	159.320	207.930
Add	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		370.560	296.420	129.240
	Included on Amalgamation		0.000	(38.850)	24.530
Less	APPROPRIATIONS
		Transfer to General Reserve	0.000	7.970	15.590
		Dividend	0.000	32.900	42.470
		Tax on Dividend	0.000	5.460	7.220
	BALANCE CARRIED TO THE B/S		385.240	370.560	296.420
	EARNINGS IN FOREIGN CURRENCY
		Export Earnings	1381.650	1147.840	1059.860
	IMPORTS
		Raw Materials	988.290	439.110	340.830
		Capital Goods	6.330	17.430	0.000
	TOTAL IMPORTS		994.620	456.540	340.830
	Earnings Per Share (Rs.)		0.67	7.26	9.79

QUARTERLY RESULTS

PARTICULARS	30.06.2012
	1^st Quarter
Sales Turnover	718.110
Total Expenditure	759.350
PBIDT (Excl OI)	(41.240)
Other Income	8.640
Operating Profit	(32.600)
Interest	73.630
Exceptional Items	0.000
PBDT	(106.230)
Depreciation	56.160
Profit Before Tax	(162.390)
Tax	(10.590)
Provision and Contingencies	0.000
Reported PAT	(151.800)
Extraordinary Items	0.000
Prior Period Expenses	0.000
Other Adjustments	0.000
Net Profit	(151.800)

KEY RATIOS

PARTICULARS		31.03.2012	31.03.2011	31.03.2010
PAT / Total Income	(%)	0.43	5.51	8.20
Net Profit Margin (PBT/Sales)	(%)	(0.75)	7.99	12.33
Return on Total Assets (PBT/Total Assets}	(%)	(0.56)	5.82	11.07
Return on Investment (ROI) (PBT/Networth)		(0.02)	0.18	0.26
Debt Equity Ratio (Total Liability/Networth)		2.85	2.25	1.87
Current Ratio (Current Asset/Current Liability)		1.14	1.53	1.97

LOCAL AGENCY FURTHER INFORMATION

Sr. No.	Check List by Info Agents	Available in Report (Yes / No)
1]	Year of Establishment	Yes
2]	Locality of the firm	Yes
3]	Constitutions of the firm	Yes
4]	Premises details	No
5]	Type of Business	Yes
6]	Line of Business	Yes
7]	Promoter's background	Yes
8]	No. of employees	Yes
9]	Name of person contacted	No
10]	Designation of contact person	No
11]	Turnover of firm for last three years	Yes
12]	Profitability for last three years	Yes
13]	Reasons for variation <> 20%	--
14]	Estimation for coming financial year	No
15]	Capital in the business	Yes
16]	Details of sister concerns	Yes
17]	Major suppliers	No
18]	Major customers	No
19]	Payments terms	No
20]	Export / Import details (if applicable)	No
21]	Market information	--
22]	Litigations that the firm / promoter involved in	--
23]	Banking Details	Yes
24]	Banking facility details	Yes
25]	Conduct of the banking account	--
26]	Buyer visit details	--
27]	Financials, if provided	Yes
28]	Incorporation details, if applicable	Yes
29]	Last accounts filed at ROC	Yes
30]	Major Shareholders, if available	No
31]	Date of Birth of Proprietor/Partner/Director, if available	No
32]	PAN of Proprietor/Partner/Director, if available	No
33]	Voter ID No of Proprietor/Partner/Director, if available	No
34]	External Agency Rating, if available	Yes

BOARD OF DIRECTORS:

KR Ravishankar

Chairman and Managing Director

Mr. KR Ravishankar has been in the pharmaceutical business for over 20 years. He started as an entrepreneur, and then joined Strides Arcolab Ltd as co-promoter in 1991. He was Executive Director of Strides Arcolab Limited till he resigned from the executive post in Dec 2007 (he continues on the Board of Strides Arcolab Limited). He took over as CMD of SeQuent Scientific Limited in January 2008

Kannan Ramanujam

Independent Director

Mr. Kannan Ramanujam, a Chartered Accountant by qualification has over 24 years of business and professional experience. He is the Promoter, CEO and Managing Director of Emerge Learning Services Limited, a company in learning space. The company offers complete solutions in Education, Training, e-governance and Information management areas. He is an Independent Director on the Board.

Dr. Gopakumar G Nair

Independent Director

Dr. Gopakumar Nair is an Independent Director on the Board. With his 40 years experience and knowledge in pharmaceutical and chemical industry at different levels and positions like Director, Chairman and Managing Director, as well as Past-President of Indian Drug Manufacturers’ Association, Dr. Gopakumar Nair had the opportunity to familiarise himself with GATT, WTO, TRIPs and other IP laws over the years. It is with this wealth of experience that Dr. Nair became an IP/ Patent practitioner under the name Gopakumar Nair Associates.

Dr. Gautam Kumar Das

Executive Director

Dr. Gautam Kumar Das is an Executive Director on the Board and has over thirty years of in depth experience in the pharmaceutical industry. Dr. Das has extensive experience in R&D, Plant Operations, Project Management, Material Management, Resource Management and Man Management. He has a proven track record in developing several cost effective processes, driving these processes from the laboratory to the plant and increasing productivity of plants. Dr. Das, a Doctorate in Synthetic Organic Chemistry from IIT Kharagpur, has authored several publications on chemical processes. In his immediate previous assignment, Dr. Das was with Orchid Chemicals and Pharmaceuticals Limited, Chennai as President – API.

BUSINESS PERFORMANCE REVIEW

On standalone basis, the company posted 18.8 percent growth in the total revenues, from Rs. 2,893.90 mn in 2010-11 to Rs. 3,437.57 mn in 2011-12. The company posted an EBIDTA of Rs. 467.97 mn as against Rs. 583.78 mn in 2010-11. On a standalone level, the Company registered a net profit of `14.68 mn.

On consolidated basis, the company posted 11.8 per cent growth in the total revenues, from Rs. 3,185.81 mn in 2010-11 to Rs. 3,562.93 mn in 2011-12. The company posted an EBIDTA of Rs. 475.58 mn as against Rs. 521.86 mn in 2010-11. On a consolidated level, the Company made a loss of Rs. 14.59 mn.

MERGER OF FRAXIS LIFE SCIENCES LIMITED WITH THE COMPANY

Fraxis Life Sciences Limited, a promoter group Company merged with the Company consequent to the scheme of amalgamation (‘Scheme’) approved by the Hon’ble High Court of Bombay vide its order dated August 20, 2011.

Pursuant to the Scheme, the Company on November 21, 2011 allotted 14,865,000 fully paid up New Equity Shares of ` 10/- to the shareholders of Fraxis Life Sciences Limited. There would be no change in the paid up capital of the Company as in terms of the scheme, the said shares were issued against the cancellation of equivalent number of shares held by Fraxis Life Sciences Limited in the Company.

DETAILS OF AMALGAMATIONS

i. Amalgamation of Fraxis Life Sciences Limited with the Company:

The Scheme of Amalgamation of Fraxis Life Sciences Limited (Transferor Company) with the Company (Transferee Company) has been sanctioned by the High Court of Bombay on August 20, 2011 with the appointed date and effective date being September 14, 2011, the date on which the sanctioned Scheme is filed by the Company with the Registrar of Companies, Mumbai (the Scheme). In terms of the Scheme:

a) The amalgamation has been accounted for under the Purchase Method of accounting as specified in Accounting Standard (AS) – 14 Accounting for Amalgamations, notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006.

b) All the assets and liabilities of the Transferor Company have been recorded by the Transferee Company at their respective carrying amounts as appearing in the books of the Transferor Company as on the appointed date.

c) The investment in the equity share capital of the Transferee Company as appearing in the books of accounts of the Transferor Company stands cancelled and accordingly, the share capital of the Transferee Company shall stand reduced to the extent of face value of shares held by the Transferor Company in the Transferee Company as on the appointed date.

e) The excess of the value of the net assets of the Transferor Company acquired by the Transferee Company over the face value of the shares issued by the Transferee Company as consideration to the shareholders of the Transferor Company and after adjusting for cancellation of equity share capital as mentioned in (c)above is treated as Capital Reserve amounting to Rs. 6.48 Mio.

f) All costs, charges, taxes including duties, levies and all other expenses incurred in carrying out and implementing the Scheme and to put it into operation has been adjusted against the Capital Reserve. Details of assets and liabilities acquired on amalgamation and treatment of the difference between the net assets acquired and the face value of the shares issued by the Transferee Company as consideration to the shareholders of the Transferor Company and after adjusting for cancellation of equity share capital:

(Rs. In Millions)

Particulars	Year ended 31 March 2012
Value of assets and liabilities acquired:
Cash and bank balances	6.390
Deferred tax asset	0.140
		6.530
Less: Current liabilities	0.050	0.050
Difference considered as capital reserve		6.480
Less: Merger expenses		6.480

ii. During the year the Company purchased the research and development unit of its subsidiary Sequent Antibiotics Private Limited on a slump sale basis for a total consideration of Rs. 91.100 million. Below is the breakup of assets and liabilities taken over.

(Rs. In Millions)

Particulars
Tangible fixed assets	90.890
Current assets	3.620
Less: Current liabilities	3.410
Total Consideration paid	91.100

iii. Amalgamation of Vedic Elements Private Limited with the Company:

During the year ended 31 March 2011, the Scheme of Amalgamation of Vedic elements Private Limited (Transferor Company) with the Company with an Appointed Date of 1 October, 2009 (the Scheme) was sanctioned by the High Court of Karnataka and came into effect on 7 September 2010. In terms of the Scheme:

a. The amalgamation has been accounted for under the purchase method prescribed by Accounting Standard (AS) 14 – ‘Accounting for Amalgamations’ notified by the Central Government of India under the Companies (Accounting Standards) Rules, 2006 and accordingly value of assets and liabilities of the transferor Company have been recorded in the books based on values determined by the Board of Directors of the transferee Company.

b. The reserves and balances in profit and loss account of the Transferor Company has been recorded in the same form and at same values as they appear in the financial statements of the transferor Company as on the appointed date.

c. The carrying value of investments in the shares of the Transferor Company held by the Transferee Company and inter-corporate balances stand cancelled.

d. Upon the Scheme becoming effective, the assets and liabilities of the Transferee Company have been revalued based on valuation report or value as determined by the Board of Directors of the Company and the net surplus arising out of such valuations (over the carrying value of the respective assets and liabilities prior to the valuation) have been credited to the Restructuring Reserve account as follows:-

Particulars of assets and liabilities

(Rs. In Millions)

i. Investment in Galenica B.V.	(72.420)
ii. Investment in Sanved Research Labs Private Limited	(19.900)
iii. Leasehold land	128.320
iv. Buildings	305.080
Total	341.080

e. The deficit arising on amalgamation of Rs. 337.02 Million representing the value of assets over the value of liabilities of the Transferor Company, after cancellation of capital of the transferor Company and the reserves recorded as per point ‘d’, has been set-off against Restructuring reserve account as created in point ‘d’ above post-merger.

The assets and liabilities as at October 1, 2009 taken over have been accounted at their fair values as follows:

(Rs. In Millions)

Particulars	Year ended 31 March 2012
Value of assets and liabilities acquired:
Fixed assets	0.210
Investments	58.590
Debtors	0.390
Loans and advances	11.060
Cash and bank balances	2.490
Deferred tax assets	7.140
Reserves and surplus (Debit balance) (net)	11.160	91.040
Less:
Current liabilities and provisions	0.570
Secured loans	40.690
Unsecured loans	109.080	150.340
Excess of liabilities over assets taken over		59.300
Investment cancelled		277.720
Net deficit on amalgamation representing the excess of shares allotted over the fair value of net assets amalgamated set off against Restructuring Reserve as per the Scheme		337.020
The Inter-Company Balance of Rs. 30.19 Million, as appearing in the books of Transferor Company and the Company was eliminated.

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY OVERVIEW

Global overview

The global pharmaceutical market registered a growth of 4.5 per cent to US$ 839 bn, largely driven by a double digit (12 per cent) growth in Emerging markets. Average revenue growth in Established Markets was 2.8 per cent while that in Emerging Markets was over four times higher at 12 per cent. The top five pharmaceutical markets in the world remained the US, Japan, Germany, France and China, with the US representing 38.1 per cent of global prescription pharmaceutical sales (2010: 38.5 per cent)

WORLD PHARMACEUTICAL MARKET

The world population is estimated to have passed seven billion in 2011, increasing from six billion in 1998, and is expected to reach nine billion by 2050. In addition, the number of people who can access healthcare continues to increase, particularly among the elderly. Globally, it is estimated that the number of people over 65 will be almost one billion by 2030, double of what it was in 2005. Emerging markets is the key growth avenue for global pharma companies, owing to the large population (emerging markets account for 85 per cent of the global population), under-penetration of medical infrastructure resulting in greater government spending on healthcare.

In addition, the prevalence of chronic disease is increasing in middle-income countries and is also beginning to have an impact in low-income countries. It is estimated that nearly 33 per cent of the world’s diabetes patients will come from India and China by 2030, by which date its prevalence in Brazil is expected to have increased by two thirds.

The global markets for generic drugs will continue to grow despite cost reduction measures from governments and healthcare players in many markets. As per the, The World Generic Market Report, despite pressure on prices in many markets, the generics sector continues to thrive with increased sales across the globe in 2011.

The generics market is experiencing two opposing trends driven by the global recession. On the one hand, the use of generics is increasing due to their cost-effectiveness and adoption has accelerated in markets where brand-name prescribing was dominant. On the other hand, the squeeze on government spending has not left generics untouched with many countries lowering generics prices through cuts in reimbursement rates or contract tendering with a resultant pressure on margins.

INDIAN OVERVIEW

India’s pharmaceutical sector can be classified into three broad market segments namely Contract Research and Manufacturing Services (CRAMS), Formulations, and Active Pharmaceutical Ingredients (APIs).

The Indian Pharmaceutical industry is highly fragmented with about 24,000 players (around 330 in the organized sector). The top ten companies make up for more than a third of the market. The Indian pharma sector has grown at 14+ per cent rate for the past four years. The Indian domestic pharma sector is expected to maintain its growth rate of 14-16+ per cent over the next few years. The major drivers for this growth are: 1) rising incomes, 2) increasing reach, 3) insurance, 4) government regulation and 5) expanding products.

INDIAN GENERICS MARKET

India tops the world in exporting generic medicines worth US$ 11 billion. The Indian generic drug market is to grow at a CAGR of around 17 per cent between 2010-11 and 2012-13. Over the next few years, it is expected that the patent laws will provide impetus to the launch of patent-protected products. Such products have the potential to capture upto a 10 per cent share of the market by 2015, implying the market size of US$2 bn.

Both the US and Europe together account for 53 per cent of the global pharmaceutical market, but the US is the more coveted territory for many reasons. It has a favourable regulatory environment compared to the stringent price control norms in key European markets. A depreciating rupee versus the dollar has also helped. Moreover, generic drugs are now a core part of how the US health system cuts its costs today. According to the Generic Pharmaceutical Association, during 1999-2008, generic drugs saved the American healthcare system more than US$ 734 bn (Rs. 41801924.900 Millions).

Expenditure on prescription medicines is one of the fastest-growing components of healthcare costs, and hence, is a prime target for cost reduction. According to industry estimates, Indian companies are filling an average of 1,000 abbreviated new drug application (ANDAs) every year in the US to tap the opportunity. The bulk drug filings from Indian companies in US have also increased significantly. Of the total bulk drug filings in US, India accounted for 45 per cent in 2009 and 49 per cent in 2010, which further increased to 51 per cent last year.

APIs

In terms of global ranking, India is now the third largest API producers of the world just after China and Italy and by end 2011 was expected to be the second largest producer after China. However, in Drug Master File (DMF) filings India is currently ahead of China. In addition, India scores over China in ‘documentation’ and ‘Environment, Health and Safety (EHS) compliance. All these have contributed to India having around 175 USFDA approved world class manufacturing facilities, which is considered the largest outside the US. India is likely to be the fastest growing API supplier during the next five years.

Japan is the largest market for APIs in the Asia-Pacific region contributing 42.8 per cent of the region’s total API market revenues. China is the second largest and the fastest growing API market in Asia-Pacific. China currently holds a share of 20.8 per cent in the region’s total API market revenues. India accounts for 10.3 per cent, while South Korea holds an 8.1 per cent share of the market. The top three markets for APIs are the US, Europe and Asia Pacific in which Asia-Pacific is the fastest growing. The region is the third largest regional market for APIs by revenue in the world after North America and Europe.

CRAMS

According to industry estimates, India’s CRAMS sector is likely to touch US$ 7.6 bn by 2012 end from US$ 3.5 bn in 2010.According to industry sources, outsourcing market is of ~US$80 bn in 2011 and increasing at 15 percent CAGR. Of this, 35 per cent is R&D outsourcing and remaining is for manufacturing. Considering competitive labor cost (skilled labor in emerging countries cost is as low as 20 per cent of manufacturing cost in US market), many MNCs are shifting their manufacturing and R&D work to emerging countries including India. Approximately 64 per cent of the estimated US$ 67 bn global CRAMS market in 2010 is dominated by contract manufacturing, which includes manufacturing of intermediates for new chemical entities (NCEs) or manufacturing of APIs. Contract Research predominantly consists of drug discovery, preclinical and clinical research and represent US$ 25 bn opportunity globally It is estimated that currently only ~20 per cent of global Pharma R&D spend is being outsourced. This represents a huge opportunity for the Indian Companies.

ADVANTAGE INDIA

• High Number of USFDA and UK MHRA approved plants (250+)

• Well-developed chemistry skills

• Robust talent pool

• Low production and R&D cost

• Quality Infrastructure and established track record of IPR compliance

• Sufficient product filing track record: Indian companies have been on the fore-front, both in terms of filing DMFs and ANDA

CORPORATE PERFORMANCE REVIEW

Background

SeQuent Scientific Limited (hereinafter referred to as ‘SeQuent’) is a fast growing pharmaceuticals company having presence in Human and Veterinary segments. In 2007, first generation entrepreneurs, each having more than a decade’s experience, acquired SeQuent Scientific Limited. The Company has evolved into an integrated player in the pharmaceuticals segment, with footprints in API (Human and Veterinary), Formulations (Veterinary) and CRAMS. Besides, the Company is also a leading producer of specialty chemicals. The Company has seven units across the country, including two state-of-the-art R&D centres – in Mangalore and Bengaluru. SeQuent is also the leading producer of Anthelmentic APIs in the world.

The year 2011-12

2011-12 was a tough year for SeQuent. Even though we crossed `3 bn mark in terms of our revenues, rising input costs resulted in significant erosion in their operating margins. The non-operational capacities (due to Industrial Incidents) coupled with rising finance charges led to a loss in terms of bottomline. In wake of these challenges, they continued to critically identify key avenues that required our attention in order to ensure sustained growth in the coming years. In other words, they utilised a challenging phase to invest in key strengths like people, processes, products and markets; the impact of which is expected to be visible in the coming years.

The Company filed 5 new drug master files, taking the total DMFs filed as on March 31 2012 to 33.

CONTINGENT LIABILITIES

(Rs. In Millions)

Particulars	31.03.2012	31.03.2011
(a) Claims against the Company not acknowledged as debts
Sales tax / Value added tax *	16.680	16.620
Income tax *	2.080	10.750
Service tax *	0.160	0.070
Excise duty*	0.020	0.020
(b) Guarantees
Guarantees to banks and financial institutions against credit facilities extended to subsidiaries	1066.260	58.050
(c) Other money for which the Company is contingently liable
Bills receivables discounted with banks	154.850	133.70

* Outflow, if any, arising out of the said claim would depend on the outcome of the decision of the appellate authority and the Company’s right for future appeal before the judiciary.

Note:

(a) The Company has given a corporate guarantee to Triodos Sustainable Trade Fund towards a credit facility availed by its stepdown subsidiary (Vedic Fanxipang Pharma Chemic Company Limited) amounting to USD 1.30 Million (Rs.66.50 Million) (Previous Year Rs. 58.05 Million).

(b) The Company has given a corporate guarantee to Stichting Triodos Sustainable Trade Fund towards a credit facility availed by its stepdown subsidiary (Elysian Life Sciences (Mauritius) Limited) amounting to USD 1.95 Million (Rs.99.76 Million.) (Previous Year Rs. Nil). However the stepdown subsidiary has used facility to an extent of USD 0.6 Million (Rs.30.69 Million.) (Previous Year Rs. Nil) as at the year end.

(c) The Company has given a corporate guarantee to State Bank of Hyderabad and State Bank of Travancore towards a credit facility availed by its subsidiary (Sequent Penems Private Limited) amounting to Rs. 900 Million. (Previous Year Rs. Nil). However the subsidiary has used facility to an extent of Rs.175 Million (Previous Year Rs. Nil) as at the year end. The Company is in the process of obtaining the confirmation from the shareholders for the above guarantees in accordance with provisions of Section 372A of the Companies Act, 1956.

FIXED ASSETS:

TANGIBLE ASSETS

Ø Free hold land

Ø Lease hold land

Ø Land development

Ø Lease hold property-development

Ø Building

Ø Furniture and fixtures

Ø Office equipment and computers

Ø Plant and machinery

Ø Vehicles

INTANGIBLE ASSETS

Ø Product process development

Ø Software

Ø

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs. 53.53
UK Pound	1	Rs. 86.82
Euro	1	Rs. 69.03

INFORMATION DETAILS

Report Prepared by :

BVA

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	4
PAID-UP CAPITAL	1~10	4
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	5
--PROFITABILIRY	1~10	5
--LIQUIDITY	1~10	5
--LEVERAGE	1~10	5
--RESERVES	1~10	5
--CREDIT LINES	1~10	5
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		43

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.