Home  »  Company  »  Aurobindo Pharma  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Aurobindo Pharma Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present the 28th Annual Report of the Company together with the audited accounts for the financial year ended March 31, 2015.

FINANCIAL RESULTS

Standalone financials Rs. Million

2014-15 2013-14

Gross Turnover 82,448.4 72,695.3

Profit before depreciation, interest, tax and exceptional items 23,176.4 19,942.7

Depreciation/amortization 2,451.5 1,859.7

Finance cost 565.8 866.2

Exchange difference adjusted to borrowing cost 755.6 2,022.2

Profit before tax 19,403.5 15,194.6

Provision for tax/deferred tax 4,240.0 3,473.7

Net profit after tax 15,163.5 11,720.9

Balance brought forward from previous year 28,278.4 18,752.2

Balance available for appropriation 43,441.9 30,473.1

Appropriations:

Dividend on equity shares - Interim 1,312.8 874.1

Final - -

Tax on dividend 250.4 148.5

Depreciation adjusted (as per Schedule II) 196.4 -

Transferred to general reserve - 1,172.1

Surplus carried to Balance Sheet 41,682.3 28,278.4

DIVIDEND

Your Directors have approved a third interim dividend of 100% i.e. Rs.1 per equity share and together with the first interim dividend of 150% i.e. Rs.1.50 per equity share and second interim dividend of 200% i.e. Rs.2.00 per equity share, the total dividend for the financial year 2014-15 comes to 450% i.e. Rs.4.50 per share on the equity share of Rs.1 against 300% i.e. Rs.3 per share of Rs.1 paid in the previous year.

PERFORMANCE REVIEW

Your Company delivered financially satisfactory results by executing on core strategies and setting the stage for long term growth. The revenue from operations was Rs.80,951 million on a standalone basis, an increase of 13.8% over 2013-14. On a standalone basis, the EBITDA for 2014-15 was Rs.23176.4 million, an increase of 16.2% over the previous year.

Profit before tax was increased to Rs.19,403.5 million from Rs.15,194.6 million in the previous year. This 27.7% increase was achieved by ramping up the volumes, improving productivity and saving on finance costs. Profit after tax was higher by 29.4% for the year under review at Rs.15,163.5 as compared to Rs.11,720.9 million in the previous fiscal. Diluted earnings per share on standalone basis is Rs.51.97 as compared to Rs.40.20 in the previous year.

Members will be pleased to know that the Company did well at the consolidated level, as well. In 2014-15, the consolidated revenues increased by 49.6% to Rs.121,205.2 million. EBITDA for the year grew 23.4% and was Rs.26,603.3 million as compared to Rs.21,552.1 million in 2013-14 and diluted earnings per share grew by 34.3% to Rs.54.0 reflecting strong execution and continued momentum in the business.

Your Company made the necessary long term investments to advance the geographical reach of formulations, to grow both in the US and Europe. The performance in 2014-15 was driven by competitive edge of the products across the portfolio. Over the financial year, formulation sales grew by 42% in the US and 375% in Europe, complimented by the acquisition of commercial operations from Actavis across seven Western European countries with effect from April 1, 2014.

Formulations in the US contributed 50.5% to the overall formulations revenues in the year under review and share of Europe has increased to 33.4% in 2014-15 from 12.5% in the previous year, demonstrating the focus on both the markets.

Formulation sales across all geographies grew by 77.7% to Rs.95,586 million as compared Rs.53,785 million in 2013-14. Formulations business constituted 77.9% of the revenues while active ingredients make the balance 22.1%.

In the US, Aurobindo Pharma continued to deliver strong revenue growth with its customer relationships and increased market penetration of existing products.

While sales of several generic products have been raised through the year, the growth has been more skewed towards controlled substances and non-institutional business. The injectable business in the US continued to outperform and grew by 88.7% over fiscal 2013-14.

In addition to the US, your Company is now present in over 150 countries with growing visibility in advanced markets such as France, Germany, Spain and Italy.

Aurobindo has delivered to expectations in Europe. The revenues from Europe stood at Rs.31,947 million, significantly growing over the previous year. This has been primarily on account of the acquisition of the products from Actavis in Western European markets. Presently, France is the biggest market in Europe for Aurobindo followed by Germany, Netherlands, Spain, UK and Portugal. A concerted effort is being made to create an impact in Western Europe, and reach a critical mass.

Aurobindo has been supporting several multilateral agencies to provide cost effective treatment of HIV/AIDS patients. Your Company started executing a few notable tenders and stepped up deliveries across regions, of triple combination products. Anti-retroviral formulations sales increased by about 14.7% over the previous year. Your Company's products are estimated to have targeted treatment of over 2 million HIV/AIDs affected people across 110 countries.

In the emerging markets such as Africa, CIS, Latin America and MENA (Middle East and North Africa), there was a major shift from tenders/generics to more sustainable and better valued branded generics, especially in the high value therapy areas of cardiovasculars and neuro-psychiatry ailments. Close customer interaction helped gain traction in markets such as Malaysia, Myanmar, Philippines, Vietnam and Cambodia.

Proportion of revenue from active ingredients came down from 34.7% to about 22.1%, since there was an exponential growth in the formulations business, as compared to the API business. Your Company sees opportunities for growth of API business. Hence, the manufacturing capacities of API are being further expanded.

During the year, your Company completed the acquisition of the assets of nutritional supplement maker Natrol LLC, which was acquired for a consideration of Rs.8,344 million. Natrol manufactures and sells quality nutritional supplements in the US and select international markets. It offers branded products including vitamins, minerals, and supplements; diet and weight management products; sports nutrition products; and products for hair, skin, and nails. This acquisition is a strategic move to gain an entry for Aurobindo into the growing nutraceutical segment.

The US based Natrol is a leading 35 year old nutraceuticals manufacturer with established brands and was acquired with all the manufacturing assets, personnel and commercial infrastructure including the well established brands of Natrol along with an agreement to take on certain liabilities. The due approval was obtained from authorities and the acquisition was completed on December 4, 2014. In the consolidated financial statements, the financials of the acquired entity have been integrated effective that date.

OUTLOOK

Aurobindo is shaping its future, by ensuring sustainable growth with niche and differentiated basket of products, offering the highest product quality while being cost competitive, to meet the needs of customers and patients.

Your Company has already demonstrated its capabilities by creating a portfolio of very large number of generic products, including 193 ANDA approvals from the US FDA. The product profile includes wide range of injectables and more difficult to develop complex products and drug delivery systems.

The existing manufacturing capacities have helped reach revenues of almost USD 2 billion. Three new plants are being commissioned over the next 12 months, while three more are being expanded to double their existing capacities. Systems and processes are being improved with the help of a well-known consultant. Aurobindo aims to service its customers with performance standards in deliveries that meet their expectations.

The developed markets of US, Europe and Japan will remain the focus on the organisational dash board for generics and APIs. There are huge opportunities for your Company's ARV products which are being addressed. Emerging markets will be another thrust area for growth. Overall, Team Aurobindo is striving to create an impact in all these key markets.

As Members are aware, your Company develops, manufactures, markets and distributes store brand Over-the-Counter (OTC) products. The mission is to develop as many OTC products for most of US retail market as possible, providing a consistent and reliable supply, at a fair price and of the highest quality.

The plans are to include Rx to OTC switch molecules, ANDA & Monograph OTC products in various dosage forms/formats - solids (tablets, capsules, soft gels), liquids, semi solids & nasal sprays. The manufacturing sites are located in New Jersey, US at Lawrenceville with facility to make liquids, semi solids & nasal sprays (about 52 million units per year); another manufacturing site is at Dayton with facility to make solids including Drug Enforcement Administration (DEA) controlled products (about 3 billion doses per year); and the third facility is set up at Jedcherla, near Hyderabad, with capacity to manufacture solids (about 8 billion doses a year). This business is supported with adequate infrastructure including 200,000 sq ft of packaging & distribution facilities for solids & liquids.

70 liquid products have been developed, exhibit batches have been made for a few solids and some are undergoing stability tests. Your Company has also commenced marketing a few products through well-established chain stores in the US. Aurobindo will work to get a strong foothold in this competitive but attractive market.

Streamlining of the newly acquired Natrol's current operation would expand operating margin in the near term. The management aims to enlarge the market, improve revenues and enhance efficiencies significantly.

Your Company is making determined foray into oncology and hormonal products, penems and peptides technology. In all the newer ventures, Aurobindo will build and leverage on its inherent strengths augmented by a team of generic industry-seasoned professionals. Your Company has strong relationships in the market that would help to create businesses with a broad, unique product portfolio in record time. In essence, the new business models are founded on core competencies.

Your Company has set a vision to build businesses that meaningfully impact their addressable markets, are respected for customer centric products and services, meet industry benchmarks in productivity of resources, are recognized for quality and compliance standards and in the ultimate analysis, create societal wealth for all stakeholders.

In financial terms, the objective is to lower earnings volatility, strive for higher predictable and calibrated growth, and improve EBITDA margin and Return on Investment higher than industry average. The target is to stay cash flow positive, improve the quality of the balance sheet, lower the leverage, reduce interest outgo and expand earnings year-on-year.

RESEARCH & DEVELOPMENT

Clearly your Company's best investment for future growth has been and remains in research and development, and in order to maintain the momentum, allocation of funds was increased during the year under review. R&D expenses constituted 3.9% of the gross revenue for the year. In absolute amount, the expenditure in 2014-15 on standalone basis was Rs.3,182.4 million, while it was Rs.2,550.5 million in the previous year. More importantly, the resource base was ramped up by adding experienced scientists and researchers.

Aurobindo's expertise in R&D has given your Company the edge in designing the product basket, process technology, drug delivery systems, anticipation of customer and patient needs of the future and intellectual property challenges. Every effort has been made to ensure quality and compliance standards are met both at the lab and on the production floor, while reviewing the costs and time to launch the products in to the market.

During the year, 15 molecules (API/Intermediates) were taken up to modify/optimize the manufacturing technology to bring down the raw materials cost. Four new CRAMS API projects were taken up for development during 2014-15. Process for one complex API was successfully commercialized for a Japanese customer.

First half of the financial year saw large number of ANDA filings, especially for difficult to develop niche products, primarily in the steriles portfolio as well as oncology and hormonal products. Such products are highly development intensive, hold high risk in bioequivalence, but are rewarding from a business perspective. Cost optimization continued to be a focus area with alternate APIs, excipients and packs being worked upon, for both the US and EU markets.

In order to execute the requirements of products for which marketing rights were acquired for the key western European markets from Actavis, your Company has set up a dedicated formulation R&D. The objective is to design and develop cost effective compositions to compete with generics in the EU tender market. Development work has been initiated to create a pipeline of 60-70 products to be manufactured at Vizag and commercialized in the next 12 to 18 months.

Development work is on-going, on as many as 20 products in the oncology and hormone segments, both injectable and solid dosage forms. Dossier filings are expected to start in the financial year 2015-16.

Your Company is deepening the integration of the products acquired from Actavis and it will remain a priority in 2015-16 to grow the business profitably and create value for shareholders. The value is being realized through a combination of cost and growth synergies and excellence in deliveries.

In terms of the filings to US FDA, a total of 376 ANDAs have been filed as on March 31, 2015 out of which 166 final approvals had been received and another 27 tentative approvals (including 21 ANDA approved under PEPFAR, which are not for sales in the US market) too have been received. The balance 183 ANDAs are under review for approval.

The filings with regulatory authorities across all products are in excess of 2,100 generic registrations and over 2,500 API filings. In addition, 594 process patent applications have been filed so far.

ENVIRONMENT, HEALTH & SAFETY

The year under review ended on a satisfactory note in environmental management across API and formulations divisions. In respect of environment management operations at manufacturing locations and R&D establishments, activities and operations across all sites are adequately stabilized.

This was yet another year that witnessed competencies and commitment demonstrated by Aurobindo in sustained environmental management in its manufacturing locations.

From a regulatory perspective, environment regulatory approvals have been obtained well on time for all green field projects. State and central level environmental approvals have been obtained for one of the acquired API units. Process for central level environmental clearance for one of the expansion projects of an API unit is completed and awaiting consideration of the Expert Technical Committee concerned.

Investments continued to be made for up-gradation of existing environmental infrastructure and development of new projects in line with planned manufacturing activities. Planned activity of establishment of sewerage treatment plants at API units is completed for one unit and the project is nearing completion in one more unit. With an objective to reduce wastewater disposal to CETP and reuse treated wastewater, installation of RO plant was taken up in one of the formulations unit. One major achievement in the year is reduction of disposal costs of organic solid wastes by 50% which was made possible due to increased awareness, discipline and efforts in environmental management practices at manufacturing locations.

The EHS team of your Company prepared and implemented 'Guidelines for EHS risk assessment'. This framework provides methodologies to be followed to:

a. perform risk assessment of all activities of Aurobindo;

b. rank and prioritize activities;

c. identify and define risk controls;

d. ensure that the controls are working effectively to maintain risk within acceptable levels.

Several training programs were initiated to increase employee awareness and knowledge. Safety videos were used extensively to make an impact. A separate EHS training matrix was prepared for contract workmen based on work activities they perform.

Chemical exposure risk assessment was initiated to determine hazardous effects of chemical exposure. This risk assessment has been completed for 129 materials.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary companies/associate companies/joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The following companies have become the Company's subsidiaries during the year: Aurovitas Spain S.A.U., Spain; Actavis France SAS, France; Arrow Generiques SAS, France; Actavis Deutschland GmbH & Co., Germany; Actavis B.V., The Netherlands; Actavis Management GmbH, Germany; Aurovitas S.L., Spain; Aurex B.V., Spain and Natrol, LLC, U.S.A.

The following companies have ceased to be the Company's subsidiaries during the year: Aurobindo Pharma Limited S.R.L., Dominican Republic; Aurobindo Pharma France SARL, France merged into Arrow Generiques SAS, France; Aurovitas SL, Spain while Agile Malta Holdings Limited, Malta merged into Aurobindo Pharma (Malta) Limited, Malta.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standards 21 issued by the Institute of Chartered Accountants of India (ICAI) and as per the provisions of Companies Act, 2013. As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com and copy of audited financial statements of its subsidiaries will be provided to the Members at their request.

HUMAN RESOURCE DEVELOPMENT

Your Company has the necessary managerial bandwidth to navigate the growth opportunities. Planning ahead of the requirement has ensured that Aurobindo has a strong team in many markets, in manufacturing facilities, research labs, supply-chain management and in fact, in every functional area. However, considering the potential opportunities and the organizational growth targets, there is a constant review being done to be ahead of the curve. Talent acquisition and talent retention are being given considerable emphasis in people management.

The strength of the organization is manifest in the enthusiasm to overcome competitive pressures, in building a robust pipeline of products, in the focus to monitor and control quality, in the premium attached to data governance, in the commitment to improve On-Time-In-Full (OTIF) performance and in the hunger to deliver results.

To strengthen the alignment between strategy, accountability, performance and recognition, there is a challenging but participative target setting, and the progress is closely tracked on a dashboard of milestones and actions, key operational metrics and financial performance. Individual goals are getting aligned to corporate results. The goal setting has ring fenced the risks, driven the business model towards sustainable growth and made the enterprise collaborative.

At every level in the hierarchy, learning & development inputs ensure that people stay agile and resilient to the challenges of growth.

While Team Aurobindo seeks new opportunities to extend geographies and build on the existing relationships, at every level, in every transaction, your Company will strive to minimize risks. The team is being sensitized to do whatever it takes to anticipate and pre-empt challenges. The measure of this approach is in the full involvement of the management at the senior most level. For instance, the team makes no compromise on quality and compliance. This approach is targeted to achieve predictable growth.

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(10) of the Companies Act, 2013 and Clause 49 of the Listing Agreement with the stock exchanges. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees and whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases. The Whistle Blower Policy is available on the Company's website http://www.aurobindo.com/about-us/corporate- governance.

POLICY ON SEXUAL HARASSMENT

Your Company has constituted an Internal Complaints Committee as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention & prohibition of sexual harassment at workplace The policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. During the year, no complaints have been received under the policy.

RATING

The National Long-term Fitch Rating of your Company has been upgraded to 'IND AA' from 'IND AA-' indicating stable outlook of the Company.

MEETINGS OF THE BOARD

The Board and Committee meetings are pre-scheduled and a tentative calendar of the meetings finalized in consultation with the Directors to facilitate them to plan their schedule. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, nine Board Meetings and five Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are given in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DIRECTORS

As per the provisions of the Companies Act, 2013 Mr. P. Sarath Chandra Reddy and Dr. M. Sivakumaran will retire at the ensuing annual general meeting and being eligible, seek re- appointment. The Board of Directors recommends their re-appointment.

The re-appointments of Mr. K. Nithyananda Reddy, Dr. M. Sivakumaran and Mr. M. Madan Mohan Reddy, Whole-time Directors and Mr. N. Govindarajan, Managing Director are being proposed at the ensuing Annual General Meeting.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

The Members of the Company at the 27th Annual General Meeting of the Company held on August 27, 2014 have re-appointed Mr. K. Ragunathan, Mr. M. Sitarama Murty and Dr. Rajagopala Reddy as independent directors of the Company for a period of five years up to March 31, 2019.

Dr. C. Channa Reddy ceased to be a Director due to his resignation from the Board of the Company for personal reasons with effect from January 27, 2015. The Board places on record its appreciation of the services rendered by him as a Director during his association with the Company.

Dr. (Mrs.) Avnit Bimal Singh was appointed by the Board as an Additional Director (Independent Director) of the Company with effect from March 25, 2015 and being eligible, her appointment as an independent director for a period of five years up to March 24, 2020 is being proposed at the ensuing Annual General Meeting. The Board of Directors recommends her appointment.

Mr. Sudhir B. Singhi relinquished his responsibilities as Chief Financial Officer of the Company with effect from July 1, 2014 and was re-designated as Head of Global Finance & Operations Department. Mr. Santhanam Subramanian was appointed as Chief Financial Officer of the Company with effect from July 1, 2014.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The independent directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company's website http://www.aurobindo.com/about-us/corporate-governance.

BOARD EVALUATION

Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board including performance and working of its Committees.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The policy of the Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company's website http://www.aurobindo.com/about-us/corporate-governance.

TRANSFER TO RESERVE

The Company has not transferred any amount to general reserve out of the profit of the Company. LOANS, GUARANTEES OR INVESTMENTS

The details of loans, guarantees, investments given during the financial year ended on March 31, 2015 is in Annexure-2 to this Report in compliance with the provisions of Section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-3 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return prepared in Form MGT-9 is in Annexure-4 to this Report.

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

Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-5 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors namely Mr. M. Sitarama Murty, Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. The Company has established a separate department to monitor the enterprise risk and its management.

The Committee had formulated a risk management policy for dealing with different kinds of risks which it faces in day-to-day operations of the Company. Risk management policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on regular basis at the time of review of quarterly financial results of the Company. A report on the risk and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS' REPORT

The statutory auditors' report is annexed to this report. The notes on financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

The members of the Company at the 27th Annual General Meeting had appointed M/s. S.R. Batliboi & Associates LLP, Chartered Accountants as Statutory Auditors of the Company up to the conclusion of 30th Annual General Meeting of the Company subject to ratification of the appointment by the members at every Annual General Meeting. The ratification of the appointment of statutory auditors is proposed at the ensuing Annual General Meeting.

COST AUDIT

M/s. Sagar & Associates, Cost Accountants, were appointed as Cost Auditors of the Company to conduct cost audit of the Company for the year 2013-14. The due date for filing Cost Audit Report of the Company in XBRL format for 2013-14 was September 30, 2014 and the same was filed with the Ministry of Corporate Affairs on September 26, 2014.

INTERNAL AUDITORS

The Board of Directors of the Company has appointed M/s. KPMG to conduct internal audit of the Company for the financial year ended March 31, 2015.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework at Aurobindo encompasses internal controls over financial reporting (ICOFR) as well as operational controls that have been put in place across all key business processes of the Company. The internal controls are designed to facilitate and support the achievement of the Company's business objectives and such controls do enable the Company to adapt to changing and operating environment, to mitigate risks to acceptable levels and to support sound decision making and good governance.

Details in respect of adequacy of internal financial controls with reference to the financial statements are briefly iterated below:

a. The Company maintains all its major records in ERP System (Oracle Financials) and the work flow and approvals are routed accordingly;

b. The Company has appointed internal auditors to examine the internal controls, whether the workflow of the organization is being done through the approved policies of the Company. In every quarter, during the approval of financial statements, internal auditors present the internal audit report and the management comments on the internal audit observations; and

c. The Board of Directors of the Company has adopted various SOPs and policies such as related party transactions policy, whistle blower policy, policy to determine material subsidiaries and such other procedures for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. S. Chidambaram, Practicing Company Secretary (C.P.No: 2286), Company Secretary in Whole- time Practice, to undertake the Secretarial Audit of the Company for the financial year 2014-15. The Secretarial Audit Report issued in form MR-3 is in Annexure-6 to this Report. There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has formulated a corporate social responsibility policy with the objective 'give back to the society'. In line with this approach, Aurobindo has undertaken social activities such as promoting education, hygiene, preventive health care, eradicating hunger, poverty & malnutrition, making available safe drinking water, environment sustainability, ecological balance & conservation of natural resources, rural sports and setting up of old age homes etc.

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, the Corporate Social Responsibility (CSR) Committee of the Board of Directors has been formed consisting of following members namely Mr. K. Nithyananda Reddy, Mr. K. Ragunathan (Independent Director), Dr. M. Sivakumaran and Mr. P. Sarath Chandra Reddy to recommend the policy on Corporate Social Responsibility and monitor its implementation. Your Company has initially decided to focus on education, health, drinking water and sanitation as key areas which require attention. The objective is to make an impact on the quality of life of the common people in its neighborhood.

Your Company assesses each project for feasibility, organizes the volunteers and support staff before initializing the activity. Being the first year of a co-ordinated approach, the earmarked monies i.e. the stipulated two per cent of the average net profit of the last three financial years, could not be spent in full and hence is being carried forward.

Corporate Social Responsibility policy was adopted by the Board of Directors on the recommendation of Corporate Social Responsibility Committee and it is placed on the Company's website at: http://www.aurobindo.com/about-us/corporate-governance.

Annual report on the CSR activities of the Company during the year are also placed on the Company's website at: http://www.aurobindo.com/social-responsibility/csr-activities.

Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is in Annexure-7 to this Report.

STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

The statement of particulars of appointment and remuneration of managerial personnel as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-8 to this Report.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2015 to the date of signing of the Director's Report.

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is enclosed as a separate section forming part of this report.

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges in India is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is presented in a separate section forming part of this report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company's performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends which remain unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government.

SHARE CAPITAL

The paid up share capital of the Company increased by Rs.525,254 during the year due to the allotment of 525,254 equity shares of Rs.1 each on exercise of stock options under the Employee Stock Option Plan - 2006 (ESOP 2006) of the Company.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries. Details of the stock options as on March 31, 2015 is in Annexure-9 to this Report. The details of the employee stock options form part of the notes to accounts of the financial statements in this Annual Report.

ACKNOWLEDGEMENTS

Your Directors would like to thank the employees of Aurobindo for the dedication they have shown to accelerate the Company towards sustainable growth and shaping the future. The Directors are also grateful to the customers, business associates, banks and government agencies for their support and co-operation. Every day, the investors have shown their trust in Aurobindo. The Board shall continue to reciprocate their trust in the Company.

For and on behalf of the Board K. Ragunathan

Hyderabad Chairman

May 28, 2015 DIN: 00523576


Mar 31, 2013

Dear Members'',

The Directors are pleased to present the 26th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2013.

FINANCIAL RESULTS

Standalone financials Rs. Million

2012-13 2011-12

Gross Turnover 55695.0 43787.3

Profit before depreciation, finance costs, tax and exceptional items 9845.7 5925.6

Depreciation/Amortization 1713.9 1429.4

Finance costs 1147.4 931.1

Exchange difference adjusted to borrowing cost (Revised Schedule VI) 1353.2 1744.7

Profit before tax 5631.2 1820.4

Provision for tax/Deferred tax 671.3 (952.1)

Profit after tax before exceptional item 4959.9 2772.5

Less: Exceptional items - 3198.6

Net Profit/(Loss) after exceptional items 4959.9 (426.1)

Balance brought forward from previous year 14797.1 15561.5

Balance available for appropriation 19757.0 15135.4

Appropriations

Dividend on equity shares 436.8 291.1

Tax on dividend 72.0 47.2

General reserve 496.0 -

Surplus carried to Balance Sheet 18752.2 14797.1

DIVIDEND

Your Directors have proposed a final dividend of 50% i.e. Rs.0.50 per equity share and with the interim dividend of 100% i.e. Rs.1 per equity share, the total dividend for the financial year 2012-13 comes to 150% i.e. Rs.1.50 per share on the equity share of Rs.1 against 100% i.e. Rs.1 per share of Rs.1 paid in the previous year.

FINANCIAL HIGHLIGHTS

Your Company continued to show steady performance, achieved increase in revenues, operating profit and bottom line during the financial year 2012-13, despite the macroeconomic challenges in almost all the overseas markets. On the manufacturing side, there was severe stress due to shortage as well as high cost of power purchased from state grids. Currencies remained volatile, with intermittent sharp movements.

Your Company demonstrated its resilience and the strength of its business model by expanding the product portfolio and aggressively marketing them, managing costs better in an inflationary environment, stepping up its manufacturing efficiencies and by staying focused on steadily raising its bottom line. Every effort as in the past was made to expand the global footprint and consolidate the position in the existing growth markets. Overall, the focus was on improving shareholder value.

The consolidated gross revenue from operations was higher by 27% at Rs.60008.3 million in the year under review, over the previous year. The formulation and API ratio during the year was 57:43. Consolidated net operating income inclusive of dossier income of Rs.759.8 million is Rs.58553.2 million showing a growth of 26.5% over the previous year.

Consolidated gross revenue from formulation during the year was Rs.33872 million, 30.1% higher on a year-on-year basis. In the API markets, both domestic and overseas, your Company strived to increase its share of high value products and special efforts were made to build relationships in the developed markets. API revenues for the year under review were Rs.25362 million, a growth of 23% over the previous year, on account of favorable demand scenario as well as focused efforts at enhancing product realizations.

There has been a year-on-year improvement in EBITDA by 200 basis points. EBITDA before forex adjustments and other income for the year was Rs.8891 million which is 15.2% of net operating income and has gone up by 45.7% on year-on-year basis. Profitability during the year under review has improved due to better sales and business mix which had favorable impact on material consumption to net sales by 3.4%, and staff cost to net sales marginally decreased by 25 basis points and other expenses to net sales increased by 1.1%.

As far as foreign exchange is concerned, the closing rupee dollar rate was Rs.54.285 on March 31, 2013 while it was Rs.50.875 on March 31, 2012. The rupee has been highly volatile through the year and has depreciated by 6.7% during the financial year. This has resulted in a net exchange loss of Rs.1634.4 million during the year which includes an amount of Rs.1353.2 million on borrowings adjusted to finance charges as per revised Schedule VI. It has also increased your Company''s borrowings by approximately Rs.2100 million as on March 31, 2013 on account of restatement.

REVIEW OF OPERATIONS

Formulations sales to USA was Rs.17526 million, recording a 48.1% growth over the previous year. Europe and Rest of the World geographies recorded a sale of Rs.8843 million in 2012-13, an increase of 39.8% over the previous fiscal. There was a 4.6% fall in ARV formulation sales at Rs.7503 million, in an endeavour to shed low margin products and optimize on our margins. Strategic action was taken to be selective in building products and markets that contribute to the bottom line.

In terms of segmental contribution to the formulations revenue, the share of US was 51.7% against 45.5% in the previous year. Similarly, European as well as the rest of the world was 26.1% against 24.3% and ARV was 22.2% against 30.2% in the previous year. The segmental shift in both API and formulations is reflective of your Company''s efforts to improve margins and this trend is expected to continue.

In generic markets of US, UK, Germany, Spain and the Netherlands, your Company is progressing well. Additional thrust to raise the marketing presence and gain margin is ongoing in countries such as Japan, Portugal and Italy. The subsidiaries in the US have turned around and are substantially improving their sales.

In respect of US business, your Company has had a balanced growth between new product introductions and the base business. There was an increased presence with key customers. The marketing efforts were directed towards expanding strongly through retail chains with new product launches. Necessarily, aggressive positions were taken from an inventory standpoint in preparations for those launches; wherever required, your Company built inventory to take advantage of launch needs, while trimming inventory costs as a routine. Today, Aurobindo has a well balanced portfolio and a pragmatic growth plan.

In the formulation business, your Company is spreading across the geographies to grow in each of the geography independently rather than trying to be focused on only one or two markets. In case of API business, the objective is to grow high value and niche products while taking advantage of the vertically integrated manufacturing systems.

Your Company targets to grow the ARV business while ensuring that the focus remains on the bottom line. During the year, in keeping with this strategy, Aurobindo participated in tenders where the Company could quote a price which will ensure competitive margins rather than just chasing the top-line. There is a very large portfolio of ARV products with your Company and the objective is to grow this business while climbing the value chain.

OUTLOOK

Going ahead, introduction of new products by your Company is expected to be a strong driver in the formulations market with about 20 to 25 launches in 2013-14 and efforts shall continue to increase the penetration in the existing baseline business.

The focus on API is to reduce the dependency on the pure Betalactam products. Your Company has 279 DMFs filed in the U.S., Europe and Japan. While Aurobindo has a growing presence in the US and several countries of Europe for over several years, a determined effort is being made to make inroads in to Japan. Today Aurobindo exports six API products and intermediates to several prestigious customers in that country. Purposeful efforts are being made to grow this quality-conscious market, and your Company has been able to maintain more than 50% growth in Japan in each of the last six quarters.

Aurobindo has a wide array of well-balanced products on offer. Some are specialized and can drive higher margins, some belong to niche spaces such as ophthalmics, while others are typical mass market, high volume molecules that are expected to boost the bottom line over the next couple of years. There are others that are gaining higher volumes which are being leveraged to take advantage of the in-house API strengths, vertical integration of capacities and improving manufacturing efficiencies.

There are a large number of ANDA applications that have been submitted in the past few months, which await approvals, adding to the pipeline of products on offer. Your Company believes that there would be significant increase in the product basket over next 2 to 3 years. Aurobindo is making a foray in to the injectables market which could gain traction in the latter half of 2013-14. Given that there are fewer competitors than in solid orals, the objective is to gain around 10-15% market share as the Company moves forward.

It needs to be highlighted that the improved performance in 2012-13 was without the manufacturing capacities at Unit-IV, Unit-VI and less than optimum capacity utilization at Unit-XII. The recent spate of approvals would further ramp up the capacity utilization at Unit-VII. Team Aurobindo is fairly confident of improving the market share and top line every quarter of the year ahead.

It is expected that European operations in countries such as Italy and Portugal would stabilize in 2013-14 and turn around a year later. Meanwhile operations in countries such as UK, the Netherlands, Germany and Spain are targeted to grow faster than the previous year. Volumes in Canada are also picking up and Australian operations are likely to stabilize over the next 18 to 24 months.

Aurobindo has made a foray into the CRAMS business in the past few months and believes that it should become a significant portion of the income in about 3 years. While it has started contributing to the business model, and is likely to improve gradually, your Company shall work to ramp up the CRAMS business, build a mutually advantageous relationship with customers, become a dependable resource and contribute meaningfully to the revenue stream.

Your Company will be overcoming a major challenge in availability and cost of power. The possibility of plant shutdown and cost escalation through diesel generation threatened the operations of almost all your Company''s facilities. The year under review witnessed an energy crisis which included three-day week power holiday, surprise power- cuts and prohibitive cost increases. Considerable relief has now been worked out by independently installing the meters in all but one of the production units, to do power trading through the power exchange which has brought down the cost and added to the certainty of power availability.

RESEARCH & DEVELOPMENT

During 2012-13, your Company developed certain niche products involving complex chemistry and technology and strived to reduce cost of certain fast moving/high volume products. Further, your Company has opted to go for establishing the CRAMS division and a few projects have been activated.

Your Company carried out process development/scale-up of various niche products (such as Fondaparinux Sodium, Isosulfan Blue, Iron Sucrose, Fosaprepitant Dimeglumine etc.), which involve complex chemistry and complicated purification technology. Further, Aurobindo has developed the processes to commercialize different Carbapenem antibiotics, such as Meropenem, Imipenem, Doripenem and Ertapenem. During the year under review, your Company has also initiated R&D in the area of nutraceuticals, peptides and biocatalysis.

New technologies and processes were worked out to develop soft gel capsules, infusion bags, OTC ANDA products, OTC monograph products and suspension based injectables.

Looking ahead, your Company would focus on the R&D activities in the coming year as well, with special emphasis on the development of niche products, nutraceuticals, peptides and biocatalysis and strengthen its CRAMS business.

ENVIRONMENT, HEALTH & SAFETY

During the year under review, your Company initiated benchmarking itself with the best in the industry by conducting safety management evaluation (SME) in partnership with one of the best consultants in the chemical industry for safety performance. The consultants visited all the API facilities, interacted with senior management personnel and representative employee groups, observed the operations, and provided key insights on areas of improvement. Action is being taken on all their suggested improvements.

Substantial investments were made in the area of wastewater treatment, recycling and disposal. As part of the Company policy and to comply with regulations, disposal of wastewater generated from manufacturing processes of API units to common effluent treatment plants has been stopped. Two of your Company''s facilities have even achieved zero liquid discharge competencies. In 2012-13, it was decided to sustain the same level of operating conditions of treatment systems and demonstrate consistency in performance of organization in wastewater treatment.

More importantly, your Company could successfully demonstrate to the government on the commitment of Aurobindo to environment management relating to its activities through the inspections and audits conducted by high level technical expert committees constituted for the purpose.

SUBSIDIARIES/JOINT VENTURES

As approved by the Board the reports and accounts of the subsidiary companies are not annexed to this Report. A statement pursuant to Section 212 of the Companies Act, 1956 however, is annexed.

Annual accounts of the subsidiary companies are kept at the Registered Office of the Company as well as at the Registered Offices of the respective subsidiary companies for scrutiny by any member. Members interested in obtaining a copy of the accounts of the subsidiaries may write to the Company Secretary.

HUMAN RESOURCES

A governing council has been constituted to serve as an apex body in Aurobindo to shape HR agenda and actions within the organization with the objective of enhancing business performance and capability of people under a strong value based framework. The council gives a broad direction and support initiation for talent management programs in line with short term and long term business imperatives/organizational needs.

A new chapter has been added in the area of strategic leadership development by partnering with a leading consulting firm. This initiative aims at providing role clarity, mapping of functional and behavioral skills and consequently creation of individual development plan and covers all middle level and senior level leadership positions across API and formulations business.

The management has given adequate attention to employee communications to share various developments in the business and at the organizational level. Apart from a periodic newsletter mode of communication, half-yearly Town Hall meeting is organized at API and formulations level to address the group at large and communicate various developments and apprise them of short and long term dimensions of the business and for better interactions. There is a perceptible improvement in the corporate performance and proactive approach to business, by employees at all levels.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. P. Sarath Chandra Reddy, Mr. K. Ragunathan and Dr. M. Sivakumaran retire by rotation at the ensuing Annual General Meeting. All of them being eligible offer themselves and seek re-appointment.

Mr. P.V. Ramprasad Reddy relinquished his responsibilities as Whole-time Director of the Company with effect from December 1, 2012 and continues to be a Non-Executive Director on the Board. He has been appointed as Managing Director designated as Chairman in Aurobindo Pharma USA Inc., US, the wholly owned subsidiary of the Company with effect from December 1, 2012.

Mr. Ravindra Y. Shenoy ceased to be the Joint Managing Director of the Company due to his resignation with effect from November 9, 2012.

A brief profile of Mr. P. Sarath Chandra Reddy, Mr. K. Ragunathan and Dr. M. Sivakumaran are provided in the Report on Corporate Governance forming part of the Annual report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirm that in the preparation of the Statement of Profit and Loss for the year ended March 31, 2013 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed:

ii. selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the year;

iii. proper and sufficient care has been taken for the 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 annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of a Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS'' & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report.The notes on financial statements referred to in the Auditors'' Report are self explanatory and do not call for any further comments.

M/s. S.R. Batliboi & Associates LLP, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2013-14.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been reappointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of the Company for the year 2012-13. The due date for filing Cost Audit Report of the Company in XBRL format for 2011-12 was February 28, 2013 and the same was filed with the Ministry of Corporate Affairs on February 27, 2013.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees stand motivated and have shown initiative in improving the Company''s performance.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors'' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme-2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

Under ESOP 2006 Scheme 1,715,500 options were granted and 90,000 equity shares of Rs.1 each were issued and allotted during the year.

Details of the options granted up to March 31, 2013 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Company is grateful to the customers and business associates for their support and encouragement. Your Board is appreciative of the passion, dedication and commitment demonstrated on the job by all the employees and is confident that they shall continue to underwrite the Company''s growth. Your Directors wish to place on record their gratitude to the valuable clientele, Union and state governments, banks, financial institutions, and shareholders and seek their continuing support, guidance, and assistance in all our future endeavors.

For and on behalf of the Board

Hyderabad K. RAGUNATHAN

May 30, 2013 Chairman


Mar 31, 2012

The Directors are pleased to present the 25th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2012.

FINANCIAL RESULTS

Standalone financials Rs.Million

2011-12 2010-11

Gross Turnover 43787.3 42299.9

Profit before depreciation, finance costs, tax and exceptional items 5925.6 10142.2

Depreciation/Amortization 1429.4 1250.4

Finance costs 931.1 550.2

Exchange difference adjusted to borrowing cost (revised Schedule-VI) 1744.7 -

Profit before tax 1820.4 8341.6

Provision for tax/Deferred tax (952.1) 2116.5

Profit after tax before exceptional item 2772.5 6225.1

Less: Exceptional items 3198.6 287.1

Net Profit/(Loss) after exceptional items (426.1) 5938.0

Balance brought forward from previous year 15561.5 10900.9

Balance available for appropriation 15135.4 16838.9 Appropriations

Dividend on Equity Shares 291.1 587.2

Tax on Dividend 47.2 96.4

General Reserve - 593.8

Surplus carried to Balance Sheet 14797.1 15561.5

DIVIDEND

Your Directors have recommended a dividend of 100% i.e. Rs1 per equity share of Rs1 against the dividend of Rs2 per share on the equity share of Rs1 paid in the previous year.

In view of the loss for the financial year ended March 31, 2012 the dividend is proposed to be paid out of accumulated profits of the Company.

FINANCIAL HIGHLIGHTS

Your Company's performance must be viewed against an extremely challenging year for the western economies and a highly volatile currency with a tendency to turn weak. Several of the advanced markets that we deal with experienced weak growth, while the emerging markets were implementing policies to dampen inflation. While these undermined business confidence, the volatile rupee biased towards a weakening trend added to the pressure throughout the financial year.

The first half of the current fiscal was challenging on account of lower formulation sales, full impact of the USFDA alert on Unit VI Cephalosporin manufacturing facility, subdued demand environment in Europe, disruption in operations due to regional unrest and exchange loss on repayment of foreign currency borrowings.

The fact that we achieved remarkable presence in each of our markets, improved our volume sales and earned steadily growing margins, underlines the robust business that Aurobindo has created and the benefit of the actions your Company has taken to optimize operations and hold costs on a sustainable basis.

However, there was a decline in dossier income by Rs1958 million on year-on-year basis. Dossier income is non-recurring and subject to periodic variability. The US formulation sales was shaded to the extent of a potential USD 36 million as a full-year impact due to import alert.

Despite constraints, consolidated net operating income was Rs46274 million showing a growth of 5.6% over the previous year. Gross sales from formulations have been at Rs26020 million, which is 7.4% higher on year-on-year basis.

The ARV sales have grown by 13.4% to Rs7866 million during the year under review. Europe and the rest of the world geographies recorded a sale of Rs6315 million, thereby growing at 17% over the financial year 2010-11. Gross sales from API have been at Rs20634 million which is 14.5% higher over the corresponding previous fiscal while the SSP sales grew by 11.4%. There is a decline in Cephalosporin sales to the extent 11.8%. However, non-betalactam (non-penicillin and non-cephalosporin) product sales has seen a rapid growth at 76% at Rs6870 million during the year over Rs3901 million last year.

Profit from operations before other income, finance costs, foreign exchange gain/loss, exceptional items, depreciation/ amortization and tax for the year was Rs6101 million which is 13.2% of net operating income, declined as compared to the previous year by 36.7%.

As already referred, EBITDA was impacted due to lower dossier income by Rs1958 million. Loss of margin is mainly due to full year sales impact on USFDA alert on Unit-VI, material consumption to net sales higher by 2.5% on account of change in sales mix, increase in staff cost by 1.4% mainly due to the new hiring in Europe and USA, increase in other expenses such as power, fuels, consumables and freight by 1.2%. Further, your Company booked redemption premium of Rs3198.6 million while the outstanding FCCBs were redeemed on due date in the first quarter of the financial year.

As far as foreign exchange is concerned, the closing rupee- dollar rate was Rs50.875 on March 31, 2012 while it was Rs44.595 on March 31, 2011. The rupee has been highly volatile and depreciated by 14.1% during the financial year. This has resulted in a net exchange loss of Rs2232.9 million during the year includes an amount of Rs1744.7 millions on borrowings adjusted to finance charges as per revised Schedule VI. It has also increased your Company's borrowings by approximately Rs3500 million as on March 31, 2012 on account of restatement.

REVIEW OF OPERATIONS

Your Company consolidated its business during the year and climbed the value chain by focusing on quality of its processes and products, controlling the variable costs, building on its relationship with its customers and enhancing the commitment towards environment, health and safety.

On the product and process front, your Company worked on time cycle reductions by practicing lean manufacturing concepts to improve productivity. Similarly, process stabilization efforts increased yields, while newer methods of recycling of solvents added to by-product recoveries. Energy costs account for approximately 5.75% of total revenue and the organization was audited and sensitized to make judicious and effective use of energy to minimize costs, strive for saving potential of 12% and enhance competitive position.

Several scale up efforts were attempted successfully which helped launch new products. A new API plant was commissioned to cater exclusively to the quality conscious Japanese market.

Members would be gratified to note that your Company has been launching one new product in major markets, every month.

Despite increasing the product base and stepping up volume deliveries, the capacity utilization is at around 50% in formulation facilities and about 70% in the API units. The investments made in the past in vertically integrated mega manufacturing facilities have provided headroom for growth and enabled your Company to compete better for several more quarters. The built-in manufacturing flexibility offers Aurobindo the opportunity to optimize its product mix, reduce the time- to-launch new products after regulatory approvals and provide customers a single-window approach to draw from the large basket of approved products from Aurobindo.

OUTLOOK

Aurobindo's growth strategy will be to work towards profitable growth, focus on high value products, ramp up its operations, with higher utilization of capacities for top ten products both in APIs and formulations and deliver larger volume of existing products and by commercializing newer products that have received regulatory approvals. Your Company has a basket of largest number of approved products. For instance, the regulatory approvals for generics (ANDAs) as at March 31, 2011 were 133 which stood increased to 145 as at March 31, 2012.

The Company's manufacturing facilities are approved by several leading regulatory agencies like US FDA, UK MHRA, WHO, Health Canada, MCC (South Africa) and ANVISA (Brazil). The Company's robust product portfolio is spread over 6 major therapeutic/ product areas encompassing antibiotics, anti-retroviral, CVS, CNS, gastroenterological, and anti-allergic, supported by an outstanding R&D set-up. The Company is marketing these products globally, in over 125 countries. The intellectual property and a well-organized manufacturing and marketing team will continue to add traction to the growth trajectory.

The Company has benefited from several learning opportunities to improve its processes with specific emphasis on quality and regulatory requirements. At the same time, Aurobindo believes that improvements need to be closely monitored internally as a dynamic day-to-day exercise and every effort made to meet/ exceed expectations. The level of vigilance has been raised to offer excellence through proactive initiatives to carve out more focus and add impetus to the quality culture in the production process. The accountability levels stand enhanced with responsibility for vendor quality, adherence to quality management systems and post-marketing surveillance.

Your Company has a mutually advantageous relationship with some of the best pharma companies globally, who have shown enormous trust in Aurobindo meeting their market needs. Your Company will continue to strive building a strong relationship and be a dependable resource for all of them. Their feedback has been positive in areas such as collaboration, order handling and product quality which helped your Company to further hone its systems and processes. Systematic monitoring and management of customer relationships, reliable processes and enhanced product quality has enabled Aurobindo to understand and meet their needs and expectations.

Internally, several cost control measures have been put in place by strengthening the budgeting process and carefully controlling cost of operations and reducing overhead and capital expenditure. Production unit-wise focus on bottom line improvement, alignment of input: output ratios, productivity improvements and inventory management to lower the holding costs are some of the aggressive efforts made to implement a unified policy to enhance margins.

RECOGNITION

The export promotion council for EOUs and SEZ under Ministry of Commerce & Industry, Government of India has selected your Company for our outstanding export performance in 2009-10. Mr. Jyotiraditya M. Scindia, Hon'ble Minister for State for Commerce & Industries handed over the award on May 17, 2012.

RESEARCH & DEVELOPMENT

The year under review has been one of the formidable years for the API R&D team in terms of the technology transfer dossiers (TTD) submissions, patent filings and regulatory agency submissions. In addition to working on close to 30 new products, the team also worked on the various improvement initiatives on the commercialized products.

The R&D function has 68 projects under various stages of development including 5 products with first-to-file (FTF) opportunities, 7 processes for patent applications, and 10 recipients. Several other products are under active development in therapeutic areas such as ophthalmic, inhalation and injectables and a few more have been taken up for cost optimization.

During the year, the API R&D Center has been shifted from Bachupally to Pashamylaram in a seamless manner and is fully operational. The new Center is dedicated to API research (synthetic and analytical) along with creating relevant intellectual property rights and is duly supported by a strong regulatory affairs team.

ENVIRONMENT, HEALTH & SAFETY

Your Company is committed to ensuring ecological balance and protecting the health and safety of its employees and neighborhood. In the long run, environmentally conscious process design and development are central ways to reduce harmful ecological impact. Therefore, the Company has taken up initiatives to optimize energy efficiency, minimize substances harmful to the environment and people, and recycle materials and resources as far as practicable.

A few of the initiatives undertaken in 2011-12 include, introduction of activity based risk assessment for non-process activities, enhancement of the safety culture and work ethics on the shop floor and empowerment of the safety committees charged with the task of improving the well-being of the people and the neighborhood. More specifically, some of the safety initiatives undertaken include:

- Process risk analysis in all the API units;

- A hazard and operability study (HAZOP) i.e. a structured and systematic examination of existing process/operations were undertaken to review all processes in API units in order to identify and evaluate problems that may represent risks to personnel or equipment and steps taken to prevent them;

- Activity based risk assessment for non-process activities (warehouse, engineering, QC) in both API and formulation units;

- Devised specific handling procedures for hazardous chemicals and training personnel on those procedures;

- Process safety testing - Determination of thermal conductivity of all powders, flammability of powders which are non-conductive in character; and,

- Review of layouts and product improvement and development by the EHS team, before finalization of new projects.

Several initiatives were also made in the area of environmental management. A few of them are listed below:

- Achieved zero process liquid discharge status at two API Units (Units VIII and IX);

- Installed on-line stack monitoring equipment for boiler stacks at Units I, V and VI;

- Installed and commissioned stripper, multiple-effect evaporator (MEE) and agitated thin film drier (ATFD) at Unit XI;

- Installation of stand-by wastewater treatment systems at Units V and IX (MEE and ATFD) for business continuity;

- Entered in to agreements with cement units for disposal of liquid organic wastes at 'zero' handling and disposal costs;

- Sewage treatment plant at Unit I;

- Initiation for installation of continuous ambient air quality monitoring station at Unit XI; and,

- Accredited to ISO:14001 certification for Units VI (A&B).

During the year under review, your Company was proud to receive the National Award for Energy Excellence & Energy Management

- 2010 conferred by the Confederation of Indian Industry (CII) for Unit I.

FOREIGN CURRENCY CONVERTIBLE BONDS

During 2006-07, your Company had issued 150,000 Zero Coupon Foreign Currency Convertible Bonds of USD 1,000 each due in 2011 (Tranche A Bonds) and 50,000 Forward Conversion Convertible Bonds of USD 1,000 also due in 2011 (Tranche B Bonds). After repurchase and cancellation (43,750 of Tranche A bonds and 17,050 of Tranche B bonds), the outstanding 106,250 of Tranche A bonds and 32,950 of Tranche B bonds were repaid on due date in May, 2011 at 146.285% and 146.991% respectively to the principal amount.

The redemption premium (Yield to Maturity) has been charged to the Statement of Profit and Loss and is disclosed as an exceptional item in the financial results. By virtue of such redemption, all outstanding FCCBs have been fully redeemed and extinguished.

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Board of Directors of the Company have approved and passed a resolution in this regard. A statement pursuant to the provisions of Section 212 of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any Member at the Registered Office of the Company as well as at the Registered Office of the respective subsidiary companies. Any Member interested in a copy of the accounts of the subsidiaries may write to the Company Secretary.

HUMAN RESOURCES

Your Company has been ably managed and competitively better positioned by the commitment demonstrated by all the 8,635 employees in their effort generate sustainably profitable growth. They are the key building block for implementing the Company's strategy and the financial year 2011-12 saw them respond flexibly to the dynamic changes in a highly challenging globalized market.

Several business excellence initiatives started in 2010-11 under the program Aurobindo Achieving Competitive Edge (A CE) has been further strengthened during the year under review with the involvement of more teams at shop floor level. Significant number of project proposals on yield improvement, quality enhancement, waste reduction and productivity upscale are implemented at both formulation and API units. A cross

functional team has been formed to validate the results and share the critical learning across the organization. A CE platform has given significant opportunity to the people at all levels to exercise their creative talents and channelize their potential to impact the company's performance in a positive manner.

DIRECTORS

Dr. K. Ramachandran ceased to be Director due to his resignation from the Board with effect from May 3, 2011. The Board places on record its appreciation for the services rendered by him as a Director during his association with the Company.

Dr. C. Channa Reddy has been appointed as an Additional Director of your Company with effect from January 18, 2012 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office up to the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment.

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Mr. M. Sitarama Murthy, Dr. D. Rajagopala Reddy and Dr. P.L. Sanjeev Reddy retire by rotation at the ensuing Annual General Meeting. All of them being eligible, offer themselves and seek re-appointment except Dr. Sanjeev Reddy.

Dr. P.L. Sanjeev Reddy expressed his intention not to seek re-reappointment. The members of the Board place on record the deep sense of appreciation for the services rendered by Dr. Sanjeev Reddy during his tenure as a member of the Board.

The re-appointment of Dr. M. Sivakumaran, and Mr. M. Madan Mohan Reddy, Wholetime Directors are being proposed at the ensuing Annual General Meeting.

Mr. K. Nithyananda Reddy seeks to relinquish his responsibilities as Managing Director of the Company and the Board has appointed him as Wholetime Director of your Company designated as Vice Chairman with effect from June 1, 2012 subject to approval of the Members at the ensuing Annual General Meeting.

Mr. N. Govindarajan has been appointed as a Director of the Company with effect from June 1, 2012 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office up to the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment. Further, Mr. Govindarajan has been appointed as Managing Director of the Company with effect from June 1, 2012 subject to approval of the Members at the ensuing Annual General Meeting.

Mr. Ravindra Y. Shenoy has been appointed as a Director of the Company with effect from June 1, 2012 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office up to the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment. Further, Mr. Shenoy has been appointed as Joint Managing Director of the Company with effect from June 1, 2012 subject to approval of the Members at the ensuing Annual General Meeting.

Mr. P.V. Ramprasad Reddy seeks to relinquish his responsibilities as Executive Chairman of the Company with effect from June 1, 2012 and continues to be on the Board as a Whole time Director.

Mr. K. Ragunathan, an Independent Director, has been appointed as Non-Executive Chairman of the Board with effect from June 1, 2012.

A brief profile of Dr. C. Channa Reddy, Mr. M. Sitarama Murthy, Dr. D. Rajagopala Reddy, Mr. K. Nithyananda Reddy, Dr. M. Sivakumaran, Mr. M. Madan Mohan Reddy, Mr. N. Govindarajan and Mr. Ravindra Y. Shenoy are provided in the Report on Corporate Governance forming part of the Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Statement of Profit and Loss for the year ended March 31, 2012 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed:

ii. had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the loss of the Company for the year;

iii. proper and sufficient care has been taken for the 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 annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges in India is annexed.

AUDITORS & AUDITORS' REPORT

M/s. S.R. Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2012-13.

The notes on financial statements referred to in the Auditors' Report are self explanatory and do not call for any further comments.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been reappointed as Cost Auditors of the Company with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2011-12. The due date for filing cost audit report reports of the Company for 2010-11 was September 30, 2011 and the same was filed with the Ministry of Corporate Affairs on September 26, 2011.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

As in the earlier years, your Company had cordial relations with its employees at all levels. There is a continuous effort to step up leadership and technical skills that has helped them function better, stay focused on systems and best practices and in the process, build a robust Aurobindo with capabilities to face emergent challenges.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956 the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of Employee Stock Option Scheme - 2004 (ESOP 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year 1,205,000 options were granted under ESOP- 2006. Further, no options were exercised and no shares were allotted under the ESOP Schemes.

Details of the options granted up to March 31, 2012 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Board is grateful for the passion, dedication and commitment demonstrated on the job by all employees and is confident that they shall continue to underwrite the Company's growth. Your Company as in the past, looks forward to the support and encouragement from the customers and business associates. Your Directors thank the banks, financial institutions, government departments and shareholders and seeks their continuing guidance and assistance in all our future endeavors.

For and on behalf of the Board

Hyderabad P. V. RAMPRASAD REDDY

May 29, 2012 Chairman


Mar 31, 2011

The Directors are pleased to present the 24th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2011.

FINANCIAL RESULTS

Rs. Million

2010-2011 2009-2010

Gross Turnover 42299.9 33196.0

Profit before Depreciation, Interest, Tax and exceptional items 10096.9 8579.4

Depreciation/Amortization 1250.4 954.6

Interest (Net) 504.9 523.3

Profit before tax 8341.6 7101.5

Provision for tax/Deferred tax 2116.5 1865.8

Profit after tax before exceptional item 6225.1 5235.7

Exceptional items (287.1) 21.9

Net Profit after exceptional items 5938.0 5257.6

Balance brought forward from previous year 10900.9 6493.2

Balance available for appropriation 16838.9 11750.8

Appropriations

Dividend on Equity Shares 587.2 277.4

Tax on Dividend 96.4 46.7

General Reserve 593.8 525.8

Surplus carried to Balance Sheet 15561.5 10900.9

DIVIDEND

Your Directors have proposed a final dividend of 100% i.e. Rs.1 per equity share of Rs.1 and with the interim dividend of 100% i.e. Rs.5 per equity share of Rs.5, the total dividend for the financial year 2010-2011 comes to 200% i.e. Rs.2 per share on the equity share of Rs.1 against 100% i.e. Rs.5 per share of Rs.5 paid in the previous year.

FINANCIAL HIGHLIGHTS

Members will be happy to know that your Company is in its Silver Jubilee year. This eventful journey has been a period of planned growth and success, and your Directors take this opportunity to compliment each one of the Members, customers, business associates and employees for their encouragement, support and co-operation. Your Company shall maintain the momentum and stands dedicated to strive for continued growth and thereby meet every stakeholder expectation in the future, as well.

The year under review witnessed Aurobindo cross the one billion dollar revenue mark, a landmark that truly reflects the presence

your Company has in the global pharmaceutical market. The challenges of the market were met vigorously due largely to the enormous advantage that your Company has built with its customer relationships, product basket, manufacturing capabilities and organizational strength. Aurobindo demonstrated great speed and flexibility in its marketing and manufacturing efforts and resilience while dealing with competitive pressures. The performance results showcase the success.

The financial year 2010-2011 saw significant improvement in all parameters including revenues, operating income, profit before tax, profit after tax and earnings per share. The revenue growth of over 27.4% at Rs.42299.9 million was a culmination of our strategic initiatives in widening our presence in Europe and USA, penetrating better with larger basket of products with existing customers and commercializing of new products as well as creating footprints in untapped markets such as Japan.

Net profit after tax at Rs.5938 million was higher by 12.9% over ~ Rs.5257.6 million in the previous year. It is a new high for your

Company translating to Earnings per Share of Rs.18.56 (Face Value Rs.1) as compared to Rs.16.63 (adjusted for split in Face Value from Rs.5 to Rs.1). Effectively, your Company earned 11.6% higher earnings over the previous year.

REVIEW OF OPERATIONS

Despite the difficult economic environment, your Company delivered sales growth both in USA and Europe. Your Companys total volume was higher in each of the existing markets. More importantly, there were higher deliveries in all the key therapeutic segments.

Your Company continues to hold an enviable basket of a large number of products in several therapeutic segments approved by regulatory authorities across the globe. The marketing efforts were galvanized to create demand, deliver on expectations and ensure top line growth. Converting approvals and quickly commercializing them remains one of your Companys key strengths.

The newly commercialized manufacturing unit, Unit VII (SEZ) at Gedcherla added to the existing huge production capabilities of your Company to support the marketing thrust. The unit at Dayton (USA) was significantly scaled up to deliver high value products.

Consolidation of facilities helped add newer products in all other facilities. Across all facilities, production was optimized and utilization was stepped up. Overall, capacity utilization was higher month after month from June 2010.

Large state-of-the-art manufacturing facilities have created headroom for growth for your Company to meet market expectations. Rising volume deliveries and new product launches during 2010-2011 are a testimony to your Companys improving competitiveness.

OUTLOOK

Aurobindos business strategies and financial position are on solid footing even as the dynamics of the global market are challenging and changing increasingly towards cost effective generic formulations. This change is accelerating and driving the need for Aurobindo to continuously renew and upgrade its operations. Your Company is equal to the challenges and expected results are being achieved by the dedicated teamwork on the manufacturing side as well as by aligning with the needs of the customers.

Today, greater traction is visible in formulation sales in USA, Europe and the emerging markets. Working closely with MNCs has enabled Aurobindo to become a preferred choice supplier.

During 2011-2012, your Company is striving towards commercializing 12 new generics, with 4 of them expected to be on a first-to-launch basis. Higher volumes, higher utilization and improvements in productivity would improve visibility of revenues, margins and earnings.

Your Companys clear focus on quality, product development, manufacturing efficiencies, productivity improvements and quicker reach to market will drive the future success. This focus will enable Aurobindo to enter the financial year 2011-2012 with optimism and keep the Company on track to deliver revenue of USD 2 billion in 2013-2014.

In order to further strengthen and provide focus to the growing volume of APIs and formulation business, the Board has constituted a Restructuring Committee to explore and evaluate possible growth linked restructuring options, inter alia, including spin-off or demerger or any other suitable form, with the ultimate objective of enhancing shareholders value and customer satisfaction. The Restructuring Committee, consisting of Directors including independent directors, will take all necessary steps and recommend the best options to the Board for consideration.

RESEARCH & DEVELOPMENT

The Company has maintained its momentum to enlarge the product pipeline. Given the nature of the pharmaceutical industry, all activities translate into results after considerable investment of inputs, necessary process validations, stringent quality assurances and uncompromising compliance needs. Therefore, there is a time lag in achieving results and/or commercializing new products.

Your Company has invested in a large pool of skilled talents to actively create newer products. Their accomplishments have been in areas as varied as product development, quality enhancement, process development, customer support and knowledge sharing.

During the year under review, the R&D team has entered into newer therapeutic areas such as ophthalmic products and contraceptives. Validation batches are planned to be taken in 2011-2012. The R&D team in USA have commercialized and launched new products and many more are expected in the forthcoming financial year.

Overall, your Company filed 46 new patent applications taking the total applications filed to 464. During the year under review, Aurobindo filed 380 DMFs taking the aggregate of DMFs filed in different countries to 1,937. At the same time, 98 formulation dossiers were filed taking the aggregate of formulation dossiers filed in different countries to 588. As at March 31, 2011 your Company holds 133 FDA approved/tentatively approved ANDAs, and 156 formulation dossier approvals from other regulatory authorities.

Every R&D effort is focused on enhancing the competitiveness and long term sustainability of your Company.

QUALITY MANTRA

Your Company is pledged to supplying highest quality medicines to customers founded on the belief that Aurobindo is committed to healthier life. This presupposes that your Company at all times is regulatory compliant, meets stringent requirements of customers and that the drugs sold shall provide health care and wellness for the consumers.

While your Company has put in place the necessary systems, regularly all the systems, procedures and controls are continuously fine-tuned. As a consequence, the quality systems have been revisited to strengthen them while training inputs have been stepped up to elevate the level of awareness, supervision and controllership.

Aurobindo is striving to ensure that it is benchmarked as the best-in-class and thereby provide reassurance to all stakeholders. Every effort is hence being made to ensure that there is no compromise on quality of products and processes.

ENVIRONMENT, HEALTH & SAFETY

At Aurobindo, in every activity, your Company safeguards its employees, facilities and the environment, conserves natural resources and promotes environmental awareness. In the pursuit of the corporate goal as a responsible corporate, your Company has initiated several activities and adopted best practices such as:

/ Stepped up investments on wastewater treatment systems across all facilities;

. Installed stripper system, multiple effect evaporation, agitated thin film drier systems and reverse osmosis systems established across API Units;

. Established multiple effect evaporation systems in three formulation units;

. Significantly reduced wastewater disposal to common effluent treatment facility;

. Explored avenues for disposal of hazardous wastes through alternate destruction and reuse technologies; and,

. Instituted continuous on-line monitoring systems for treated wastewater and on-line emission of suspended particulate matter. Safety and health of all the employees continues to be of paramount importance. Considerable work has gone into making our operations safer by implementation of Standard Operating procedures, ergonomics initiatives, regular safety audits etc. Among the focus area during the year under review were as follows:

. Introduction of risk assessments to identify all risks in the work area and devise and implement proper controls to mitigate the risk;

/ Training to all new employees and contract workmen;

/ Identification of process hazards at lab stage itself and usage of calorimetric reaction.

Your Company stayed on track to get accreditation to ISO 14001:2004, a key objective of the year. One of the API units achieved ISO 14001:2004 certification while three formulation units are on the verge of being certified.

FOREIGN CURRENCY CONVERTIBLE BONDS

As Members are aware, in 2005, your Company had issued 60,000 Foreign Currency Convertible Bonds of USD 1,000 each due in 2010. After conversion into equity shares, repurchase and cancellation, the outstanding bonds aggregating to face value of USD 2.118 million were repaid on due date in August, 2010.

During 2006, your Company had issued 150,000 Zero Coupon Foreign Currency Convertible Bonds of USD 1,000 each due in 2011 (Tranche A Bonds) and 50,000 Forward Conversion Convertible Bonds of USD 1,000 also due in 2011 (Tranche B Bonds).

The outstanding FCCBs as at March 31, 2011 is 139,200 bonds and are due for repayment as per the terms of the Offering Circular. Your Company is confident of discharging its commitment.

EQUITY SHARE CAPITAL

The Board of Directors of your Company at their meeting held on November 3, 2010, approved the sub-division of equity shares of the face value of Rs.5 each in the Company into equity shares with the face value of Rs.1 each. With approval of the Members at the Extraordinary General Meeting of the Company held on December 23, 2010, the sub-divided shares were issued to Members as on February 11, 2011 (the Record Date).

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Board of Directors of the Company have approved and passed a resolution in this regard. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any investor at the Registered Office of the Company as well as at the Registered Office of the respective subsidiary companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

HUMAN RESOURCES

Aurobindo is well known for its execution capabilities, manufacturing strengths, product quality, ability to keep to its commitments and be a reliable partner for its customers. Over the years, organizational strengths have enabled your Company to grow faster than the industry average in each of the past decade.

The momentum continued during the year under review with a new high in volume sold, highest ever revenues and profit after tax. Your Company has been well served by all the employees, Aurobindos valuable resources.

As at March 31, 2011 employees on roll constituted 8,317, higher by 3% over 8,066 as on the same date a year ago.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. K. Ragunathan, Dr. M. Sivakumaran and Mr. M. Madan Mohan Reddy, Directors retire at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

The re-appointment of Mr. P.V. Ramprasad Reddy, Chairman and Mr. K. Nithyananda Reddy, Managing Director is being proposed at the ensuing Annual General Meeting.

A brief profile of Mr. K. Ragunathan, Dr. M. Sivakumaran, Mr. M. Madan Mohan Reddy, Mr. P.V. Ramprasad Reddy and Mr. K. Nithyananda Reddy are provided in the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit and Loss Account for the year ended March 31, 2011 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed;

ii. had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken for the 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 annual accounts have been prepared on a going concern basis.

GROUP

Pursuant to an intimation from the promoters, the names of the promoters and entities comprising group as defined under the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 are disclosed in the Annual Report for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary Mr. S. Chidambaram confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS

M/s. S.R.Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2011-2012.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been re- appointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2010-2011. The due date for filing Cost Audit Report Reports of the Company for 2009-10 was September 30, 2010 and the same was filed with the Ministry of Corporate Affairs on September 18, 2010.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

As in the earlier years, your Company had cordial relations with its employees at all levels. There is a continuous effort to step up leadership and technical skills that has helped them function better, stay focused on systems and best practices and in the process, build a robust Aurobindo with capabilities to face emergent challenges.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors Report. However, as per the provisions of Section 219 (l)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of Employee Stock Option Scheme - 2004 (ES0P 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ES0P 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year no options were granted under ESOP-2004 and ESOP-2006. 29,707 equity shares of Rs.5 each were issued and allotted under the ESOP-2004 Scheme.

Details of the options granted up to March 31, 2011 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Directors place on record their sincere appreciation for the dedication and commitment of the employees at all levels and their significant contribution to your Companys growth. Your Company is grateful to the customers and business associates for their support and encouragement. Your Directors thank the banks, financial institutions, government departments and shareholders and look forward to having the same support in all our future endeavors

Annexure-I to the Directors Report

RESEARCH AND DEVELOPMENT

Specific areas in which Research and Development carried out by the Company

The Company carried out process development and commercialized various products in cephalosporin antibiotics and antiviral compounds. Further, it continued process research for maximizing the yield with improved quality.

Benefits derived as a result of the above R&D

The Companys continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

Newer products and processes have facilitated Aurobindo to expand its market.

Future plan of action

Your Company has ambitious plans to invest further for enhancing its R&D capabilities.

Expenditure on Research and Development , Million

2010-2011 2009-2010

Capital 338.4 42.1

Recurring 1,394.0 972.7

Total R&D expenditure 1,732.4 1014.8

as a percentage of total turnover 4.10 3.06

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts, in brief, made towards technology absorption, adaptation and innovation:

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the Company.

Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, import substitution etc.

The processes were simplified and thereby achieving reduction in cost and improvement in products.

Particulars of imported technology: Nil

Foreign Exchange Earning & Outgo

Activities relating to exports, initiatives taken to increase exports. Registration of more product dossiers with global authorities, setting up of foreign subsidiaries and commencement of activities at subsidiaries and joint ventures.

For and on behalf of the Board

P. V. RAM PRASAD REDDY

Chairman Hyderabad,

May 9, 2011.


Mar 31, 2010

The Directors are pleased to present the 23rd Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2010.

FINANCIAL RESULTS



Rs. Million

2009-2010 2008-2009

Gross Turnover 33196.0 28852.5

Profit before Depreciation, Interest, Tax and exceptional items 8579.4 2945.1

Depreciation/Amortization 954.6 824.1

Interest (Net) 523.3 550.6

Profit before tax 7101.5 1570.4

Provision for tax/Deferred tax 1865.8 321.2

Profit after tax before exceptional item 5235.7 1249.2

Exceptional items 21.9 36.2

Net Profit after exceptional items 5257.6 1285.4

Balance brought forward from previous year 6493.2 5619.4

Balance available for appropriation 11750.8 6904.8 APPROPRIATIONS

Dividend on Equity Shares 277.4 242.0

Tax on Dividend 46.7 41.1

General Reserve 525.8 128.5

Surplus carried to Balance Sheet 10900.9 6493.2





DIVIDEND

Your Directors have proposed a final dividend of 40% i.e., Rs.2 per equity share and together with the interim dividend of 60% i.e. Rs.3 per equity share, the total dividend for the financial year 2009-10 amounts to 100% i.e. Rs.5 per share on the equity shares of Rs.5 against 90% i.e. Rs.4.50 per share paid in the previous year.

FINANCIAL HIGHLIGHTS

Your Company achieved all-time high revenues, operating income, EBITDA, operating profit before tax and profit after tax. New highs were also recorded in several other parameters such as volume sold and Earnings per Share, while your Company became long-term debt free and holds its net assets free of all encumbrances.

The gratifying part of the performance was the accomplishment in a year which saw recessionary conditions in several countries, where your Company has a presence, at a time of high volatility in raw material prices and exchange rate.

The revenues at Rs.33196 million for the year under review was higher by 15% over Rs.28852.5 million reported in 2008-09. Volume sold was higher year-on-year and more significantly, with higher average realization per product sold.

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding foreign exchange adjustments was Rs.7723.6 million in 2009-10 higher by 47.9% over Rs.5223.3 million earned in 2008-09. EBITDA margin excluding foreign exchange adjustments was 23.3% in the year under review compared to 18.1% in the previous year. It is relevant to mention that your Company had an exchange gain of Rs.855.8 million during the year, while there was a foreign exchange fluctuation loss of Rs.2278.2 million in 2008-09.

Profit after Tax after exceptional items was Rs.5257.6 million during the year under review, a significant improvement over Rs.1285.4 million reported in 2008-09. The diluted Earnings per Share for the year is hence Rs.83.16 as compared to Rs.19.86 for the previous year.

REVIEW OF OPERATIONS

In the face of global recessionary conditions and the consequent severe competitive pressures, your Company strengthened its presence in all its geographies and improved its marketing reach. The expanded product portfolio and the investments made to augment manufacturing capacities were leveraged to gain market share, strengthen distribution channels and build further on the existing relationships with customers.

Formulations sales (Consolidated) during the year under review were up by 32.6% to Rs.18520 million from Rs.13971 million in 2008-09. Formulations sales constituted 53.6% of gross sales, while it accounted for 46.2% in the previous year.

As in the earlier years, your Company continued to pursue newer product offerings to respond to market needs. While Aurobindo has a presence in several therapeutic segments in the formulations business, the focus has been to increase the offerings in six segments in all the addressable markets, both in the premium and emerging markets. In order to ensure a sustainable growth, the product pipelines were further expanded by filing 22 more ANDAs covering both Indian and US facilities.

Your Company has a mutually rewarding relationship with all its multinational customers including some of the best pharmaceutical majors across the globe and strives to meet their exacting demands. Volume sales have been rising and your Company has been working to keep to their expectations, especially quality and timelines.

Manufacturing capacity stands optimized with the commissioning of the Unit VII (SEZ) at Jedcherla as well as de- bottlenecking at other units. The manufacturing facility at Dayton, New Jersey, U.S.A. commenced commercial production during the year under review. Capacities were added both at the active ingredient units as well as in the formulation units. While some of them were commissioned in the course of the year, the full benefits at both revenue and profitability levels are anticipated in the financial year 2010-11.

There has been improvement in efficiencies, increase in power generation and moderate increase in operating margins. While productivity and yields have increased, focused efforts are being made to improve on the key parameters at the manufacturing units.

EVENTS AFTER THE BALANCE SHEET DATE

As Members are aware, your Company in 2006 had issued 60,000 Zero Coupon Foreign Currency Convertible Bonds (bonds) due in 2010 of $ 1,000 each on the following terms:

- either convertible by the holders at any time on or after September 20, 2005 but prior to close of business on August 1, 2010. Each bond will be converted into 83.12 fully paid up equity share with par value of Rs.5 per share at a fixed price of Rs.522.036 per share at a fixed exchange rate conversion of Rs. 43.3925 = $ 1; or

- redeemable in whole but not in part at the option of the Company at any time on or after February 25, 2008 and on or prior to August 1, 2010 as per the terms and conditions of the bonds mentioned in the Offering Circular;

- redeemable on maturity date at 139.954% of its principal amount if not redeemed or converted earlier.

The bonds have been since determined and crystallized and all except 2,118 bonds of $ 1,000 each have been converted/ repurchased. The balance bonds are due for repayment as per the terms of the Offering Circular.

OUTLOOK

Going ahead, your Company will continue to focus on higher capacity utilization and augmenting the existing large portfolio of generic products. The marketing plans are also tailored to becoming more geographically diversified in the emerging markets and deepen the presence in the premium markets in order to have a more balanced and derisked growth.

Your Company is well-positioned for the long term with its proven business strategy that has withstood the challenges of global economic environment, regulatory compliant product basket, sound financials and dedicated team of people working together to achieve superior results.

However, in the recent past, raw material prices have tended to rise leading to cost push and supply-demand mismatch. Your Company is cognizant of such challenges and is geared to face them. Aurobindos vertically integrated manufacturing facilities enable producing and delivering on due dates as well as managing margin pressures.

In order to ensure sourcing reliability and provide for growth requirements, your Company will continue to invest in manufacturing systems and add to capacity of both intermediates and active ingredients. Similarly, investment will continue to be made to add to product pipeline as well launch products soon after they are approved by regulatory authorities. Today, your Company is managed by competent and experienced people and initiatives are being taken to add to resources, equip them for present and future needs and enable them to face the challenges of a high energy organization on a fast track.

In the ultimate analysis, your Company will maintain its momentum to grow sustainably and reach the stated objective of $ 2 billion revenues by 2012-13.

RESEARCH & DEVELOPMENT

Your Companys research and development (R&D) activities are focused on developing new products and new non-infringing processes, as well as maintaining and improving the quality of the existing products. Research is also being carried out on risk characterization, patenting new process patents, creating a framework for ensuring regulatory compliance and for understanding the future needs of the markets.

Efforts are on to launch a focused program of Quality by Design to ensure and improve assurance standards in processes and products. Risk reduction such as developing technologies that have the potential to ensure valence and conform to regulatory requirements is a central part of the R&D program.

Aurobindos strength is its research based chemistry capabilities and expertise in developing dosage forms that meet compliance standards and market needs. On an on-going basis, your Company continues to invest in high-end talents to identify new products and non-infringing processes and improve process controls.

During the year under review, the R&D Centre filed 22 ANDAs including 7 Paragraph IV applications. The R&D facility in the U.S.A. filed 3 ANDAs for controlled substances. The new formulation facility in SEZ has been formally inaugurated and has commenced filing ANDAs /Dossiers.

Further, 49 more patent applications covering improved processes for various active pharmaceutical ingredients and pharmaceutical compositions were filed. Your Company is proud to report that the patent Appreciation Award was received for its API process from the Indian Drug Manufacturers Association, Mumbai.

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Company has obtained in writing an exemption in this regard from the relevant authority. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary Companies are kept for inspection by any investor at the Registered Office of your Company as well as at the Registered Office of the respective subsidiary Companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

ENVIRONMENT & SAFETY

Your Company places considerable emphasis on its commitment and responsibility towards the health and safety of its employees as well as on its environmental footprint. Considerable care is taken to not only meet the regulatory standards, but also to become best-in-class in the pharmaceutical industry.

Large investments have been made in competent and experienced supervisory human resources, state-of-the-art hardware, latest technologies, updated systems and processes and focused training of employees. Site visits were made by the supervisory teams to familiarize themselves and train to get a hands-on understanding of the international practices.

The team at Aurobindo is upgrading the facilities to implement a comprehensive safety improvement and capacity building program.

On the environmental front, some of the initiatives taken during the year include:

- establishing environmental management infrastructure across all units;

- streamlining the process of disposal of certain categories of hazardous wastes through alternate destruction and reuse technologies;

- promoting and encouraging innovative emerging technologies of water treatment; and

- progressing towards achieving zero liquid discharge.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. K. Ramachandran, Dr. P.L. Sanjeev Reddy and Mr. P. Sarath Chandra Reddy, Directors retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

A brief profile of Dr. K. Ramachandran, Dr. P.L. Sanjeev Reddy and Mr. P. Sarath Chandra Reddy are provided in the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit and Loss Account for the year ended March 31, 2010 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed;

ii. had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken for the 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 annual accounts have been prepared on a going concern basis.

CREDIT RATING

Fitch Ratings has upgraded and assigned a National Long Term Issuer rating of AA-(ind) with a Stable Outlook to your Company.

The upgrades reflect an improvement in your Companys financial and credit profile during 2009-10. The ratings also factor in Fitchs expectation of a further improvement in Aurobindos capacity utilization, strong visibility of business growth and profitability as well as a reduction in its financial risks despite the additional capital expenditure planned during 2010-11.

GROUP

Pursuant to an intimation from the promoters, the names of the promoters and entities comprising group as defined under the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 are disclosed in the Annual Report for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS

M/s. S.R. Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2010-11.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been re-appointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2009-10.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

HUMAN RELATIONS

Aurobindos 8,066 (as at March 31, 2010) employees bring their skills and motivation to their workplace and their specialized knowledge is valuable to steer the future growth. Employees play a major role in putting Aurobindos strategy into practice and are being encouraged to innovate, improve and measurably contribute to creating a strong and successful pharmaceutical company.

Your Companys goals include instilling the organizations values and commitments, recruiting and maintaining skills tuned to present needs and future growth, providing employees with a continually safe, stimulating and satisfying work environment.

Your Board would like to thank all of the employees of Aurobindo for the role that they have played in 2009-10 to build a stronger, fitter organization.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of Employee Stock Option Scheme - 2004 (ESOP-2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP-2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year, no options were granted under ESOP-2004 and ESOP-2006. 150,030 equity shares were issued and allotted under the ESOP-2004 scheme.

Details of the options granted up to March 31, 2010 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees at all levels through their dedication, hard work and commitment and look forward to their continued support. Your Company has hugely benefited by the encouragement and patronage of its large number of customers and is deeply indebted to them. Your Directors are grateful to the central and state governments for their continued support for the Companys expansion plans and wish to place on record their appreciation and acknowledge with gratitude the co-operation extended by regulatory authorities, banks, financial institutions and shareholders and look forward to having their support in the future.

For and on behalf of the Board

P. V. RAMPRASAD REDDY Chairman

Hyderabad August 5, 2010

Find IFSC