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Directors Report of Biocon Ltd.

Mar 31, 2014

Dear Shareholders,

The present before you the Thirty-Sixth Annual Report on business and operations along with the audited financial statements and the auditor''s report of your company for the financial year ended March 31, 2014.

Financial Highlights

In Rs. Millions

Standalone Results Consolidated Results Particulars FY 2014 FY 2013 FY 2014 FY 2013

Total Revenue 22,631 19,895 29,332 25,380

Profit before tax and exceptional items 4,086 3,609 5,377 4,083

Exceptional items, net - 139 - 2,019

Income Tax 842 713 1,069 975

Minority Interest - - 170 38

Profit After Tax 3,244 2,757 4,138 5,089

Adjustment on account of merger of subsidiary 55 - - -

Profit after adjustment on account of merger 3,299 2,757 - -

Performance Overview

During the fiscal year ended March 31, 2014, Consolidated total revenue grew by 16% YoY driven by strong impetus from research services and biopharmaceuticals segments. Export revenue contributed 62% of total revenue. Consolidated Profit before tax and exceptional items grew by 32% from Rs. 4,083 to Rs. 5,377.

A detailed performance analysis is provided in the Management Discussion and Analysis segment, which is annexed to this report.

Appropriations

Dividend

Your directors are pleased to recommend a dividend of 100% which is Rs. 5/- per equity share for the year ended March 31, 2014.

Transfer to Reserves

We propose to transfer Rs. 330 to the General Reserves and the balance of Rs. 16,137 is proposed to be retained in the profit and loss account.

Subsidiaries and Joint Ventures

As on March 31, 2014, the Company has five subsidiaries, one step down subsidiary and a Joint Venture. The direct subsidiaries are Syngene international Limited, Biocon SA, Biocon Research Limited, Biocon Sdn Bhd and Biocon Academy. Syngene International Limited has a subsidiary, Clinigene International Limited. NeoBiocon FZ LLC is our Joint Venture.

During the year Biocon Biopharmaceuticals Limited (BBL), a wholly owned subsidiary was merged with the Company post approval by the Hon''ble High Court of Karnataka on July 12, 2013 and subsequently the Company had filed form 21 along with a copy of Court order and Scheme of Amalgamation with the Ministry of Corporate Affairs on August 8, 2013. The financial statements for the year ended March 31, 2014 considers the impact of the merger.

Annual Accounts of Subsidiary Companies

The Ministry of Corporate Affairs has granted a general exemption to companies from attaching the financial accounts of the subsidiary company to this report, as part of Section 212 of the Companies Act, 1956. However, a declaration illustrating relevant details of the subsidiaries is enclosed in this annual report. The members can write to the company for obtaining copies of the annual accounts of the subsidiary concerns. The same will also be available for inspection at our registered office in Bangalore, India.

Credit Ratings

CRISIL and ICRA continued to reaffirm their rating of "AA / Stable" and "A1 ", for your Company''s Banking Facilities throughout the year enabling your Company to avail facilities from banks at attractive rates indicating a very strong degree of safety for timely payment of financial obligations.

The Company also enjoys CRISIL rating of "A1 / Stable" for Short Term Debt programme, indicating a very strong degree of safety for timely payment of financial obligations. The Company has not issued any short term debt during the year.

Standalone and Consolidated Financial Statements

The standalone and consolidated financial statements have been prepared by your Company in line with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006. The revised Schedule VI of the Companies Act, 1956 has been adopted while preparing these statements, in accordance with the notification from the Ministry of Corporate Affairs. The audited, consolidated financial statements of FY14 together with the annexed Auditor''s report form a part of this Annual report.

Transfer of Unpaid and Unclaimed Amounts to IEPF

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends, which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

Employee Stock Option Plan (ESOP)

Pursuant of the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock option Scheme and Employee Stock Purchase Scheme) Guidelines 1999, the details of stock options as on March 31, 2014 are provided in the annexure to the Director''s Report.

Corporate Governance

We strive to maintain high standards of Corporate Governance in all our interactions with our stakeholders. The Company has conformed to the Corporate Governance code as stipulated under the listing agreement with the Stock Exchanges. A separate section on Corporate Governance along with a certificate from the auditors confirming the level of compliance is attached and forms a part of the Director''s Report.

Directors

Ms. Kiran Mazumdar Shaw, Chairman and Managing Director, shall retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment. Whereas, all Independent Directors i.e. Mr. Russell Walls, Mr. Daniel M Bradbury, Prof. Charles L Cooney, Mr. Suresh N Talwar, Mr. Bala S Manian & Ms. Mary Harney, being eligible and offer themselves for appointment as Independent Directors at the ensuing Annual General Meeting.

The Company has received a declaration of Independence from all the Independence Directors of the Company confirming that they meet the criteria of independence as prescribed under Clause 49 of the Listing Agreement and under section 149(6) of the Companies Act, 2013.

Pursuant to provisions of section 161(1) of the Companies Act, 2013 Dr. Arun S Chandavarkar has been inducted as Additional Director and designated as Chief Executive Officer and Joint Managing Director effective April 24, 2014. A notice as required under section 160 of the Companies Act, 2013 has been received for his appointment as a Director. The Board recommends to the members for the appointment of Dr. Arun S Chandavarkar as a Director and liable to retire by rotation.

Auditors

The Statutory Auditors M/s. S. R. Batliboi & Associates LLP (Firm registration no: 101049W), Chartered Accountants, Bangalore, retire at the ensuing Annual General Meeting, and have confirmed their eligibility and willingness to accept office, if re-appointed.

Cost Auditors

In compliance with section 233B of the Companies Act of 1956, the Central Government has prescribed a cost auditor M/s. Rao, Murthy & Associates, Cost Accountant, whose term of office ended on March 31, 2014 and have confirmed their eligibility and willingness to accept office, if re-appointed and approved by the Central Government for the FY 2014-1 5 to carry out the Cost Audit of records of the Company maintained as per norms of pharmaceutical industry.

Management Discussion and Analysis Report

A detailed report on the Management Discussion and Analysis is provided as a separate section in the annual report.

Fixed Deposits

The Company has not accepted any fixed deposits from the public.

Director''s Responsibility Statement

In compliance with the section 217 (2AA) of the Companies Act, 1956; the board of directors hereby confirm the following

- In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departure, if any.

- We have selected such accounting policies and applied them consistently. We have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs and of the profit of the company at the end of the fiscal year.

- We have taken proper and sufficient care 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.

- We have prepared the annual accounts on a going concern basis

Particulars of Research and Development, Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo.

Details required as per section 217(1 )(e) of the Companies Act, 1956 in conjugation with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules of 1988, are provided in the annexure to this report.

Particulars of Employees

Details required as per section 217(2A) of the Companies Act, 1956 in conjugation with Rule 2 of the Companies (Particulars of Employees) Rules of 1975, as amended; are provided in the annexure to this report.

However, in line with the provisions of Section 219(1 )(b)(iv) of the aforementioned Act; post the exclusion of the information as required above, the annual report is being sent to all the members of the company and the others entitled thereto. Any member interested in obtaining these details may write to the Company Secretary at our registered office in Bengaluru, India.

Acknowledgements

The board greatly appreciates the commitment and dedication of its employees across all levels who have contributed to the growth and sustained success of the Company. We would like to thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Karnataka, Ministry of Information Technology and Biotechnology, Ministry of Commerce and Industry, Ministry of Finance, Department of Scientific and Industrial Research, Customs and Excise Departments, Income Tax Department, CSEZ, LTU Bangalore and all other government agencies for their support during the year and look forward to the same in the future.

For and on Behalf of the Board

(Sd/-)

Date: April 24, 2014 Kiran Mazumdar Shaw

Place: Bangalore Chairman and Managing Director


Mar 31, 2013

Dear Shareholders,

The present before you the Thirty-Fifth Annual Report on business and operations along with the audited financial statements and the Auditor''s Report of your company for the financial year ended March 31, 2013.

Financial Highlights Standalone Results Rs. Million

Particulars FY 2013 FY 2012

Total Revenues 19,895 16,224

Total Expenditure 15,323 12,223

Earnings before Interest, Tax, Depreciation and Amortization 4,572 4,001

Interest 12 17

Depreciation and Amortization 951 940

Exceptional items, net 139 -

Profit before tax 3,470 3,044

Income Tax 713 489

Profit after tax 2,757 2,555

Surplus brought forward from previous year 13,750 12,613

Profit available for Appropriation 16,507 15,168

Appropriations:

Transfer to General Reserve 276 256

Proposed Dividend 1,500 1,000

Tax on Dividend Proposed 255 162

Surplus in Profit and Loss account 14,476 13,750

Consolidated Results

Rs. Million

Particulars FY 2013 FY 2012

Total Revenues 25,380 21,483

Total Expenditure 19,417 15,692

Earnings before Interest, Tax, Depreciation and Amortization 5,963 5,791

Interest 81 122

Depreciation and Amortization 1,793 1,744

Exceptional items, net 2,012 -

Profit before tax and minority 6,101 3,925

Income Tax 975 541

Minority Interest 39 -

Profit after tax 5,087 3,384

Business Operations Overview

During the fiscal year, the group delivered a 18% top line growth with revenues reaching 25,380 millions vis-a-vis 21,483 millions in FY12. This growth has been driven by a strong momentum in research services and branded formulations which grew YoY at 36% and 34% respectively. The biopharma segment excluding branded formulations grew by 10% YoY led by strong Insulin sales in RoW markets, Immuno- suppressants, speciality molecules like Fidaxomicin and Orlistat.

Group net profits for FY 2013 grew over 50% to Rs. 5,087 million on the back of exceptional income recognized on the re-licensing of our generic insulin analogs portfolio. Further, on a prudent basis, the Company has also made a provision in respect of its investment in IATRICA Inc. a U.S. startup engaged in development of molecules, on account of value erosion in its IP

This fiscal year witnessed good traction in all our business verticals viz. Small Molecules, Branded Formulations, Biosimilars, Research Services and Novel Molecules with a firm focus on emerging markets. Emerging markets are currently outpacing growth in developed markets reiterating our emphasis in these geographies.

The construction of our new insulin manufacturing facility in Malaysia is on track. A significant milestone during the fiscal has been the extension of our partnership with Mylan for generic insulin analogs. This partnership assumes importance given the strong co-development and commercialization partner for our key growth vertical. The contract with Mylan for biosimilar insulin analogues will enable us to optimise our partnership approach to carve out a large slice of the global Insulin market in the developed markets. We aim to leverage existing alliances in RoW markets for penetration of our biosimilar molecules.

The year was also marked by significant advances in our R&D initiatives in our insulins and biosimilar mAbs programmes which added momentum to our journey up the value chain. Our biosimilar mAbs programmes with Mylan are progressing well and are also due to enter clinics over the course of the next couple of years. We expect FY14 to carry forward the momentum of our R&D programs and substantiate our efforts of moving up the value chain.

A detailed performance analysis is provided in the Management Discussion and Analysis segment, which is annexed to this report.

Appropriations

Transfer to Reserves

We propose to transfer Rs. 276 million to the General Reserves and the balance of Rs. 18,520 million is proposed to be retained in the profit and loss account.

Dividend

The Board of Directors are pleased to recommend a dividend of 100% (Rs. 5/- per share) and also recommend a special dividend of 50% (Rs. 2.50/- per share) taking the total dividend payout to 150% (Rs. 7.50 per share) for the year ended March 31, 2013.

Subsidiaries and Joint ventures Syngene International Limited

Syngene International Limited (Syngene) is the largest contract and custom research enterprise in India with extensive competencies in chemistry and biologics. Syngene offers integrated research services in the drug discovery and development space along with manufacturing services in APIs, Intermediates and Biologics. The organization offers value-added service models to complement the evolving needs of global Pharma, Bio-pharma and Biotech players. Syngene''s clientele spans across industries like pharmaceuticals, nutraceuticals, agri-chemicals, engineering and speciality segments, and today includes 16 of the top 20 pharma companies of the world.

During the year, Syngene had made a preferential issue of 7.7% equity shares at Rs. 300/- per share to GE Equity International for a total consideration of Rs. 125 Crores.

In this fiscal year, Syngene recorded a growth of 33% in top line with revenues touching Rs. 5,542 millions against Rs. 4,182 millions in FY12. Syngene''s EBIDTA margin for the year was 30%, with the operational margin at Rs. 1,681 millions compared to Rs. 1,404 millions last year, a growth of 20%.

Clinigene International, a 100% subsidiary of Syngene works across the clinical trial domain, conducting complex bioavailability, bioequivalence and clinical trials required for validation of drugs and pharmaceuticals in India. It also has competencies in medical sciences for the development and enhancement of medical diagnostic, surgical and therapeutic techniques. For the fiscal ended March 31, 2013, Clinigene clocked revenues worth Rs. 385 millions and turned the corner to deliver a net profit of Rs. 4 millions.

Biocon Biopharmaceuticals Limited

Biocon Biopharmaceuticals Limited (BBL) is a wholly owned subsidiary engaged in the production of monoclonal antibodies and other biologics. During the year, BBL earned revenues worth of Rs. 584 millions and generated a net profit of Rs. 55 millions. During the year, the Company commissioned its state of the art biologics facility built with an investment to the tune of Rs. 150 crores.

In April 2012, the Board of BBL has approved the merger of the Company with Biocon Limited. The merger application has been filed with the Hon''ble High Court of Karnataka and the same is pending.

Biocon Research Limited

Biocon Research Limited (BRL), a 100% subsidiary of Biocon, undertakes discovery and development research work in Biologics, Monoclonal antibody molecules and Proteins. This fiscal year saw the inauguration of a world class research facility which primarily houses the operations of BRL. Known as Biocon Research Centre, this state of the art facility is spread across 200,000 sq. ft. and houses cutting-edge technology to enable the development of ''best-in-class'' biologics and biosimilars. For the current year, BRL registered revenues of Rs. 254 millions largely on account of services rendered to other group companies. The Biosimilar mAbs programme with Mylan undertaken by BRL is in development stage and hence BRL has reported a net loss of Rs. 899 millions for the year ended March 31, 2013.

Biocon SA

Biocon SA is our wholly owned subsidiary based out of Switzerland, engaged in development and commercialization of biopharmaceuticals for the global markets. During the current year Biocon SA entered into an agreement with Mylan for the co-development and commercialisation of insulin analogs. The added impetus from our partner gives us reason to believe that there is a possibility of an early approval for insulin products in the regulated markets.

The commitment of the company to the biosimilars program stays in place as demonstrated by the progress of our molecules in the clinics. Biosimilar rh-Insulin has completed EU phase III trial while Biosimilar glargine is expected to enter global phase III trial for the developed markets shortly. For the current year, at the back of exceptional income Biocon SA registered a net profit of Rs. 2,468 millions.

Biocon SDN. BHD

Biocon SDN. BHD., a wholly owned subsidiary in Malaysia is setting up the group''s first overseas manufacturing facility in BioXcell, a biotechnology park being promoted by the Malaysian government. This facility is expected to be operational with regulatory approvals in 2015. Biocon SDN BHD is in the process of setting up the manufacturing facility and is yet to commence commercial operations.

Neo Biocon FZ LLC

Neo Biocon FZ LLC. is a research and marketing pharmaceutical company, which was incorporated in January 2008 as a ''50:50'' joint venture with Dr. B. R. Shetty of Neo Pharma. Based out of Abu Dhabi, Neo Biocon helps us reach out to the Middle East and GCC with our veritable portfolio of quality small molecules and biologics. During the current fiscal, Neo Biocon earned Rs. 227 millions in revenues and reported a net profit of Rs. 66 millions.

Standalone and Consolidated Financial Statements

The standalone and consolidated financial statements have been prepared by your company in line with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006.

We wish to bring to the attention of the member that the Company has adopted a prudent approach towards accounting for licensing income commensurate with its obligation for development for clinical and regulatory activity of Biosimilar products. Assessing the development obligation for insulin program, our contract with Mylan greatly reduces our spends for insulin analogs. Accordingly, we have booked a part of deferred amounts as an exceptional income and continued defer the balance amounts towards outstanding obligation in respect of our obligations for clinical and development activities. We feel that this treatment rightly reflects our approach towards the development program. Our Auditors have drawn a reference to this accounting treatment in the consolidated financial statements of the Company.

The audited, consolidated financial statements of FY13 together with the annexed Auditors'' Report form a part of this Annual Report. Accounts of Subsidiary companies

The Ministry of Corporate Affairs has granted a general exemption to companies from attaching the financial accounts of the subsidiary company to this report, as part of Section 212 of the Companies Act of 1956. However a declaration illustrating relevant details of the subsidiaries is enclosed in this annual report. The members can write to the company for obtaining copies of the annual accounts of the subsidiary companies. The same will also be available for inspection at our registered office in Bengaluru, India.

Employee Stock Option Plan (ESOP)

Pursuant of the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, as amended), the details of stock options as on March 31, 2013 are provided in the annexure to the Director''s Report.

Corporate Governance

We strive to maintain high standards of corporate governance in all our interactions with our stakeholders. The company has conformed to the corporate governance code as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance along with a certificate from the auditors confirming the level of compliance is attached and forms a part of the Director''s Report.

Evaluation of Board Effectiveness

The evaluation of the Board''s performance is effected periodically by the Chairman of the Audit Committee to quantify the effectiveness of the Board. Action plans for certain improvements in key areas are periodically reviewed for implementation.

Directors

Prof. Ravi Mazumdar and Prof. Charles L. Cooney shall retire by rotation at the ensuing Annual General Meeting; being eligible they offer themselves for re-appointment.

Mr Daniel M Bradbury has been inducted as an additional non-executive Director on Board effective April 25, 2013. A notice as required under Section 257 of the Companies Act, 1956 has been received by the Company for his appointment as Director. The Board recommends to the shareholders for the appointment of Mr Daniel M Bradbury as a Director liable to retire by rotation.

Auditors

The Statutory Auditors M/s. S. R. Batliboi & Associates LLP (earlier known as M/s. S. R. Batliboi & Associates) (ICAI Firm registration no.: 101049W), Chartered Accountants, Bangalore, retire at the ensuing Annual General Meeting, and have confirmed their eligibility and willingness to accept office, if re-appointed.

Cost Auditors

In compliance with Section 233B of the Companies Act, 1956, M/s Rao, Murthy & Associates, Cost Accountant, were appointed to carry-out audit of the cost records maintained by the Company. Their term of office ended on March 31, 2013 and have confirmed their eligibility and willingness to accept office, if re-appointed and approved by Central Government to carry out the Cost Audit of the records maintained as per the norms of Pharmaceutical Industry.

Management Discussion and Analysis Report

The report as required under the Listing agreements with the Stock Exchange is annexed and forms an integral part of this Report. Cumulative Disclosures under the stock option scheme as on March 31, 2013 Fixed Deposits

The company has not accepted any fixed deposits from the public.

Directors'' Responsibility Statement

In compliance with the Section 217 (2AA) of the Companies Act, 1956; the board of directors hereby confirm the following:

i. In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departure, if any.

ii. We have selected such accounting policies and applied them consistently. We have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs and of the profit of the company at the end of the fiscal year.

iii. We have taken proper and sufficient care 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.

iv. We have prepared the annual accounts on a going concern basis.

Particulars of Research and development, conservation of energy, technology absorption and Foreign Exchange earnings and outgo

Details requited as per Section 217(1)(e) of the Companies Act,1956 in conjugation with Rule 2of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules of 1988, are provided in the annexure to this report.

Particulars of Employees

Details requited as per Section 217(2A) of the Companies Act, 1956 in conjugation with Rule 2 of the Companies (Particulars of Employees) Rules of 1975, as amended; are provided in the annexure to this report.

However, in line with the provisions of Section 219(1)(b)(iv) of the aforementioned Act; post the exclusion of the information as required above, the annual report is being sent to all the members of the company and the others entitled thereto. Any member interested in obtaining these details may write to the Company Secretary at our registered office in Bengaluru, India.

Acknowledgements

The Board greatly appreciates the commitment and dedication of its employees across all levels who have contributed to the growth and sustained success of the company. We would like to thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Karnataka, Ministry of Information Technology and Biotechnology, Ministry of Commerce and Industry, Ministry of Finance, Department of Scientific and Industrial Research, Drugs and other regulatory authorities at the Centre and State, Department of Pharmaceuticals, Customs and Excise Departments, Income Tax Department, CSEZ, LTU Bangalore and all other government agencies for their support during the year and look forward to the same in the future.

For and on behalf of the Board

Kiran Mazumdar-Shaw John Shaw

Chairman and Managing Director Vice Chairman

April 25, 2013


Mar 31, 2012

We are delighted to present before you the Thirty-Fourth Annual Report on business and operations along with the audited financial statements and the Auditors' Report of your company for the financial year ended March 31, 2012.

Financial Highlights Standalone Results

Rs.Million

Particulars FY 2012 FY 2011

Total Revenues 16,224 16,183

Total Expenditure 12,223 10,099 Earnings before Interest, Depreciation and Tax 4,001 6,084

Interest 17 10

Depreciation and amortization 940 902

Profit before tax 3,044 5,172

Income Tax 489 579

Profit after tax 2,555 4,593

Surplus brought forward from previous year 12,613 9,470

Profit available for Appropriation 15,168 14,063

Proposed Dividend 1,000 900

Tax on dividend Proposed 162 91

Transfer to General Reserve 256 459

Balance in Profit and Loss Account 13,750 12,613

Consolidated Results (for continuing operations)

Rs.Million

Particulars FY 2012 FY 2011

Total Revenues 21,483 18,576

Total Expenditure 15,692 12,844

Earnings before Interest, Depreciation and Tax 5,791 5,732

Interest 122 231

Depreciation and amortization 1,744 1,516

Profit before tax 3,925 3,985

Income Tax 541 586

Profit after tax 3,384 3,399

During the fiscal ended March 31, 2012, Biocon Group revenues grew by 16% driven by strong impetus from branded formulations and research services. There was marginal growth in EBITDA, while the PAT remained at almost the same level as last year. This was largely due to the decrease in earnings contribution by licensing income.

The year was marked by significant events which included the India launch of INSUPen ease®, ground breaking of our first overseas manufacturing facility in Malaysia and substantial progress in our R&D programs. The end of the fiscal was punctuated by the conclusion of our biosimilar insulin's partnership with Pfizer over change in priorities at Pfizer's biosimilar division.

A detailed performance analysis is provided in the Management Discussion and Analysis, which is annexed to this report.

Appropriations Dividend

Your directors are pleased to recommend a 100% dividend of Rs 5.00 per equity share for the year ended March 31, 2012.

Transfer to Reserves

We propose to transfer Rs 256 million to the General Reserves and the balance of Rs 13,750 million is proposed to be retained in the profit and loss account.

Business Operations Overview and Outlook

The year marked the beginning of a crucial action phase for Biocon with the looming biologics patent expiries which commence from 2015. During this fiscal, your company delivered a 16% top line growth with revenues reaching Rs 2,148 Crores vis-a-vis Rs 1,858 Crores in FY11. This growth has been driven by strong performances in research services and branded formulations which grew at 29% and 39%, respectively. Biopharmaceutical sales excluding branded formulations grew about 10% YoY with sustained momentum from Immuno suppressants, speciality molecules like Fidaxomicin, Orlistat and resilient sales from Statins.

This fiscal witnessed large strides that we took in our key growth verticals as we crystallized our strategy to take your company to the next growth platform. Our five growth verticals namely Small Molecules, Branded Formulations, Biosimilars, Research Services and Novel Molecules are built with a firm focus on emerging markets. Emerging markets are currently growing at 13-18% compared to the almost flat growth in most developed markets.

We initiated supplies of Fidaxomicin API to Optimer Pharma this year. Optimer has launched the molecule in US markets to a very warm reception, thanks to its superior profile. They have also received commercialization approval for the molecule in the European markets. We are their sole suppliers for this molecule for both of these markets, an extension of our long association with Optimer over the development phase of this molecule.

The Indian healthcare market is being driven by chronic therapies, especially diabetes and dermatology. The two new divisions that we launched last year, Comprehensive Care and Immunotherapy, have done very well on the strength of their niche positioning and differentiated offerings.

We launched INSUPen ease®, a world-class, reusable delivery device for insulin and analogs based on proprietary German technology, in India. The best-in-class delivery device has been very well received and appreciated by doctors and patients alike. Capitalizing on this launch, our domestic Insulin business (part of our Dialectology portfolio in branded formulations) grew rapidly over the last year. According to IMS February 2012 MAT, Biocon was the fastest growing Insulin Company in India and the only indigenous company that has been able to catapult itself to the top league.

The ground breaking for our new insulin facility in Malaysia during September 2011, reiterating our commitment to take our Biosimilar insulin and analogs to the global markets. We are looking at optimizing our regional partnership approach to carve out a large slice of the global Insulin market. We have regional partners in 32 geographies including Brazil, Mexico, China and Japan. We aim to forge new partnerships as well as leverage existing alliances to augment the access and penetration of our biosimilar molecules.

In our Novels portfolio, we received positive news flow from Phase III trial in Psoriasis for Itolizumab, the anti-CD6 molecule targeted at auto- immune disorders like plaque psoriasis and rheumatoid arthritis. Itolizumab successfully met all primary and secondary endpoints in the 52- week, double blind, and placebo controlled trial. Our partner, Amylin had filed a US IND for phybrid: a novel biological entity targeted at diabetes and obesity. The molecule has entered into phase I clinical trials in US.

Our biosimilar Trastuzumab has commenced multi centric, phase III trials in India; aimed at accessing the pie in emerging markets. The other molecules from our Mylan partnership are also due to enter clinics over the course of the next couple of years. The current innovator market size for this portfolio was approximately US$ 33 Billion in 2011. We expect to carry forward the momentum of our research programs and substantiate our efforts of moving up the value chain over the coming years.

Subsidiaries and Joint Ventures

Syngene International Limited

Syngene is a leading contract and custom research enterprise in India with veritable expertise in chemistry and biologics. Syngene offers integrated research services in the drug discovery and development space with customisable service models to effectively tap into the evolving needs to the global biopharma and biotech players. Syngene's clientele includes businesses across the biopharma and specialty pharma continuum including Bristol Myers Squibb, Pfizer and Merck.

During the year, Syngene acquired 100% of the shareholding of Clinging International Limited from the parent company to ensure seamless operational integration of the combined research service offerings.

In this fiscal, our research services arm recorded a growth of 27% in top line with revenues touching Rs 4,182 million against Rs 3,229 million in FY11. Syngene's operational margin (EBIDTA)for the year increased from Rs 1,404 million compared to Rs 1,005 million representing a growth of 40%.

Biocon Biopharmaceuticals Private Limited

Biocon Biopharmaceuticals Private Limited (BBPL) is a wholly owned subsidiary engaged in the production of monoclonal antibodies and other biologics. During the year, BBPL earned revenues worth of Rs 398 and generated a net profit of Rs 56 million.

Biocon Research Limited

Biocon Research Limited (BRL), a wholly owned subsidiary, undertakes discovery and development research work in biologics, antibody molecules and proteins. The biosimilar monoclonal antibodies commercialization alliance with Mylan is progressing well. Biosimilar Trastuzumab has commenced phase I trial in Europe. Some of the other biosimilar molecules from this portfolio are expected to enter the clinics over the next few years. For the current year BRL registered revenues of Rs 161 million and has reported a net loss of Rs 404 million for the year ended March 31, 2012, largely due to the development spents on its research initiatives.

Biocon SA

Biocon SA our wholly owned subsidiary is engaged in development and commercialization of biopharmaceuticals for the global markets. Biocon SA is currently undertaking clinical development of the biosimilar insulins product in EU and post termination of the commercialisation agreement with Pfizer due to change in biosimilar priorities, the commitment of the company to the biosimilars program stays in place as demonstrated by the progress of our molecules in the clinics. Biosimilar rh-Insulin is approaching completion of its phase III trial in EU. Biosimilar glargine has commenced multi-centric, phase I trial for the developed markets.

During this fiscal, Biocon SA earned revenues of Rs 1,551 million and reported a net profit of Rs 314 million.

Biocon SDN. BHD

Biocon SDN. BHD. our Malaysian subsidiary is aimed at aiding our foray into the Malaysian market. The company will set up the group's first overseas manufacturing facility in BioXcell, a biotechnology park being promoted by the Malaysian government. The manufacturing plant will be developed in two phases, with the first phase commanding an outlay of around US$ 160 Million. This facility is expected to be operational with regulatory approvals in the calendar year 2015. Biocon SDN BHD is in the process of setting up the manufacturing facility and is yet to commence commercial operations.

NeoBiocon FZ LLC

NeoBiocon FZ LLC., a research and marketing pharmaceutical company based in Abu Dhabi was incorporated in January 2008 as a Rs50:50' joint venture with Dr B. R. Shetty of Neo Pharma. Neo Biocon aims to increase the access and penetration of our portfolio offerings in the GCC markets. During the current year Neo Biocon registered sales of Rs 114 million.

Standalone and Consolidated Financial Statements

The standalone and consolidated financial statements have been prepared by the Company in line with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006. The revised schedule VI of the Companies Act, 1956 has been adopted while preparing these statements, in accordance with the notification from the Ministry of Corporate Affairs. The audited, consolidated financial statements for the year ended March 31, 2012 together with the annexed Auditor's report form a part of this Annual report.

Accounts of Subsidiary companies

The Ministry of Company Affairs has granted a general exemption to companies from attaching the financial accounts of the subsidiary company to this report, as part of Section 212 of the Companies Act of 1956. However a declaration illustrating relevant details of the subsidiaries is enclosed in this annual report. The members can write to the company for obtaining copies of the annual accounts of the subsidiary companies. The same will also be available for inspection at our registered office.

Employee Stock Option Plan (ESOP)

Pursuant of the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock option Scheme and Employee Stock Purchase Scheme Guidelines, as amended), the details of stock options as on March 31, 2012 are provided in the annexure to this report.

Corporate Governance

We strive to maintain high standards of corporate governance in all our interactions with our stakeholders. The Company has conformed to the Corporate Governance code as stipulated under the listing agreement with the stock exchanges. A separate section on corporate governance along with a certificate from the auditors confirming the level of compliance is attached and forms a part of this report.

Evaluation of Board Effectiveness

The evaluation of the Board's performance is effected periodically by the chairman of the Audit Committee to quantify the effectiveness of the Board. Dr Neville Bain has considerable experience in Board reviews and has carried out similar exercises in the United Kingdom and elsewhere.

The review conducted earlier, expressed overall confidence in the company and the Board's supervision in corporate strategies. Action plans for improvements in key areas are continuously monitored and reviewed for implementation.

Directors

Mr. John Shaw and Mr Suresh N Talwar shall retire by rotation at the ensuing Annual General meeting and being eligible are proposed for re-appointment.

Mrs Mary Harney has been inducted as an additional director of the company effective April 26, 2012. It is proposed to appoint Mrs Mary Harney has director of the company, liable to retire by rotation at the ensuing Annual General Meeting.

Auditors

The Statutory Auditors M/s. S. R. Batliboi & Associates (Firm registration no: 101049W), Chartered Accountants, Bangalore, retire at the ensuing Annual General meeting, and have confirmed their eligibility and willingness to accept office, if re-appointed.

Cost Audit

In compliance with section 233B of the Companies Act of 1956, the Central Government has prescribed cost audit for the Company's Bulk Drug and Formulation division. The cost auditors, M/s. Rao, Murthy & Associates, Cost Accountants, Bangalore have confirmed their willingness to be re-appointed.

Management Discussion and Analysis Report

The report as required under the Listing agreements with the Stock Exchange is annexed and forms an integral part of the Director's Report.

Fixed Deposits

The company has not accepted any fixed deposits from the public.

Director's Responsibility Statement

In compliance with the section 217 (2AA) of the Companies Act, 1956; the board of directors hereby confirm the following:

(i) In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departure, if any

(ii) We have selected such accounting policies and applied them consistently. We have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs and of the profit of the company at the end of the fiscal.

(iii) We have taken proper and sufficient care 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.

(iv) We have prepared the annual accounts on a going concern basis. Particulars of Research and development, conservation of energy, technology absorption and Foreign Exchange earnings and outgo Details requited as per section 217(I)(e) of the Companies Act,1956 read with Rule 2of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules of 1988, are provided in the annexure to this report.

Particulars of Employees

Details required as per section 217(2A) of the Companies Act, 1956 read with Rule 2 of the Companies (Particulars of Employees) Rules of 1975, as amended; are provided in the annexure to this report.

However in line with the provisions of Section 219(1)(b)(iv) of the aforementioned Act, post the exclusion of the information as required above, the annual report is being sent to all the members of the company and the others entitled thereto. Any member interested in obtaining these details may write to the Company Secretary at the registered office in Bengaluru, India.

Acknowledgements

The board greatly appreciates the commitment and dedication of its employees across all levels who have contributed to the growth and sustained success of the Company. We would like to thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Karnataka, Ministry of Information Technology and Biotechnology, Ministry of Commerce and Industry, Ministry of Finance, Department of Scientific and Industrial Research, Customs and Excise Departments, Income Tax Department, CSEZ, LTU Bangalore and all other government agencies for their support during the year and look forward to the same in the future.

For and on behalf of the Board

Kiran Mazumdar-Shaw John Shaw

Chairman and Managing Director Vice Chairman

April 27, 2012


Mar 31, 2011

We are pleased to present Thirty-third Annual Report on business and operations together with the audited financial statements and the auditors report of your company for the financial year ended 31st March 2011.

The financial highlights for the year under review are given below:

Results of Operations:

Rs. in Millions Particulars for the year ended March 31, 2011 2010

Total Revenues 15,921 12,289

Total Expenditure 9,824 8,710

Profit before Interest, Depreciation and Tax 6,097 3,579

Interest 24 20

Depreciation 902 797

Profit before Tax 5,171 2,762

Income Tax 579 278

Profit after Tax 4,592 2,484

Surplus b/f from previous year 9,470 8,009

Profit available for appropriation 14,062 10,493

Proposed dividend 900 700

Tax on proposed divided 90 74

Transfer to General Reserve 459 248

Balance in Profit and Loss account 12,613 9,470

Consolidated Results (Under Indian GAAP):

Rs. in Millions Particulars for the year ended March 31, 2011 2010

Total Revenues 28,137 24,048

Total Expenditure 21,841 18,963

Profit before Interest, Depreciation and Tax 6,296 5,085

Interest 257 169

Depreciation 1,568 1,401

Profit before Tax and Exceptional Items 4,471 3,515

Income Tax 721 487

Profit after Tax, before Minority Interest 3750 3,028

Minority Interest (75) (96)

Profit after Tax 3,675 2,932

For the year ended March 31, 2011 consolidated revenues grew by 17% driven by a strong growth in biopharmaceutical segment, EBITDA grew by 24% and Profit after tax (PAT) grew by 25% to Rs. 3,675 million as compared to Rs. 2,932 million in the previous financial year.

The highlight of this past year was the strategic partnership with Pfizer for taking our biosimilar insulin global.

The standalone financial statements refect higher profits on account of transfer of certain intangible to subsidiaries within the group, which are eliminated upon consolidation.

A detailed performance analysis is also discussed in the Management Discussion and Analysis, which is annexed to this report.

Appropriations

Dividend

Directors are pleased to recommend a final dividend of Rs. 3.00 per equity share, which is in addition to the interim dividend of Rs. 1.50 per share takes the total dividend payout to 90% on the paid up equity capital of the Company.

Transfer to Reserves

We propose to transfer Rs. 459 millions to the General Reserves and the balance of Rs. 12,613 million is proposed to be retained in the profit and loss account.

Business Operations Overview and Outlook:

During the year, Companys revenue increased by 17% from Rs. 24,048 million to Rs. 28,137 million. The growth in biopharmaceuticals sales was driven by a significant increase in sale across business segments including statins, immunosuppresants and insulins. The immunosuppresants segment specifically grew by over 30%. The domestic branded formulations business grew 36% on increasing market share of key brands, introduction of new products and the launch of two new divisions – Immunotherapy and Comprehensive Care.

We have sought both research and marketing partnerships as a way to access global markets and we have forged some key strategic partnerships this year. The most visible and high-profile partnership that we recently announced was with Pfizer to commercialize our insulins portfolio which is going to be a very important growth driver in the foreseeable future.

Industry reports cite the insulin market at about US$ 15 billion today and estimated to grow to a size of US$ 20 billion by 2020. The insulins space accounts for 46% of the total diabetes drug segment. We estimate this business will continue to grow at about 6% per annum going forward, factoring the advent of biosimilar insulins. Biocons partnership with Pfizer aims at addressing this very large opportunity first in the emerging markets, which offer sizeable volume and thereafter at a later stage, enter the developed markets. Clinical trials for recombinant human insulin for the European Market are in progress and patient recruitments are currently underway. Biocons insulin business in India is also beginning to gain traction and although our insulins business is merely seven years old, we have steadily gained market share. In volume terms, we have around 11% share in the insulin vial segment and around 13% market share in the glargine vial segment. While the market has grown 11%, Biocons sales in the segment has grown by over 12%.

Another significant event in this past year was the supply agreement with Optimer Pharmaceuticals for the supply of Fidaxomicin API. Biocon is the currently sole supplier of this product for certain regulated markets and has been involved with this project from 2005.

We have made considerable progress in our partnership with Mylan for developing biosimilar monoclonal antibodies for the global markets. In addition to this, we have some very key strategic research partnerships with Amylin, Vaccinex, the Center for Immunology in Havana, and IATRICa. What really makes this whole partnering opportunity special for us is that we can develop all these programs leveraging Indias costs and clinical base in a very cost-effective manner, and we are able to take them first to the emerging markets and then on to the regulated markets as the program advances.

Within the novel pipeline, the Company released encouraging preliminary data from a recently concluded Phase III clinical study conducted in India on IN-105, its novel oral insulin candidate for the treatment of diabetes. Initial data analysis show that an unexpectedly high placebo effect prevented IN-105 from meeting its primary end point of lowering HbA1c as compared to placebo by a margin effect. However, multiple secondary endpoints on both efficacy and safety were met, further strengthening the emerging profile of IN-105.

Our coveted T1h program for a novel Anti-CD6 targeting monoclonal antibody is in Phase III clinical trials for Psoriasis. Additionally, our novel anti-CD20 molecule (BVX 20 with Vaccinex) has completed preclinical studies and we are scheduled to commence clinical trials this year. Our novel programs are expected to unlock substantial value upon licensing in the coming years.

Subsidiaries and Joint Ventures:

Syngene International Limited:

Syngene continues to be one of the leading contract research organizations in the country which offers integrated services across discovery and development continuum. State-of-the-art infrastructure, talented and experienced scientific and techno-commercial team, flexibility of business models, robust communication systems, ability to consistently deliver with quality and speed are some of the reasons why Syngene has become a preferred partner of choice for several small, medium and large companies around the world. In addition to pharmaceutical companies, Syngene has developed a broad customer base in other industries including fine chemical, petrochemical, agro, cosmetic and electronic companies.

During the year, Syngene continued to successfully manage large relationships including those with Bristol-Myers Squibb, Merck and DuPont Agro division which involved various aspects of drug discovery and development research.

With the emergence of biologics over past few years as important medicinal interventions, Syngene also offer services in discovery and development of biologic molecules. Syngenes state-of-the-art biologics pilot plant is capable of delivering clinical trial material of both bacterial and mammalian origin.

During the financial year 2010-11, Syngene registered a strong growth of 21% in revenues from Rs. 2,675 million to Rs. 3,231 million. Operational Margin (EBITDA) increased from Rs. 877 million to Rs. 1,005 million representing a 14% increase during the year.

Increased charge on account of depreciation has led to a marginal decline in the net profit which was at Rs. 283 million for the year against of Rs. 308 million for the previous year.

Clinigene International Limited:

For the year under review, Clinigene registered revenues of Rs. 289 million Clinigene had a challenging year and has incurred a loss of Rs. 37 million on account unfavourable market conditions, delay in study startup and intensive pricing pressures.

Clinigene is continuing to evolve and adapt its capability platforms and service offerings against a background of continued macro market pressure as global R&D spends are being reduced, consolidation of market players continues and the shift to globally capable preferred partnerships accelerates. In addition to our standard service platforms, we have identified several more specialized areas, for example patient based early studies, complex BA/BE studies and immunoanalytical services where Clinigene offers strong capabilities. We believe that, these new speciality services, which have relatively high entry barriers, will allow us to drive new and differential revenue opportunities.

Biocon Biopharmaceuticals Private Limited:

During the year Biocon Biopharmaceuticals Private Limited (BBPL) became a wholly owned subsidiary of the Company.

For the year under review, BBPL earned revenues of Rs. 491 million as against Rs. 381 million in the previous year. The net profits for the year stood at Rs. 192 million as against Rs. 26 million in the previous year.

Biocon Research Limited:

Biocon Research Limited (BRL) is a wholly owned subsidiary set up to undertake discovery and development research work in biologics, antibody molecules and proteins.

For the current year BRL registered revenues of Rs. 649 million as against Rs. 392 million in the previous year. BRL continues to progress the development activity on the monoclonal antibody program in joint collaboration with Mylan. BRL has reported a net loss of Rs. 322 Million for the year ended March 31, 2011 against a loss of Rs. 51 million in the previous year.

Being a research driven enterprise, the Company is in the initial stage of operations and has enlarged its scope to other challenging research projects during the year.

Biocon SA:

Biocon SA, a wholly owned subsidiary in Switzerland is primarily engaged in development and commercialisation of biopharmaceuticals across the globe. Clinical Development of Insulin is currently ongoing in the European region.

AxiCorp GmbH:

AxiCorp is a specialized Pharma marketing and distribution company based in Germany.

For the current financial year AxiCorp revenues rose from Rs. 9,117 million to Rs. 9,800 million. The Company earned a net profit of Rs. 353 million for the year against Rs. 299 million for the previous year. Given the synergies brought about by the Pfizer partnership, the Company has decided to divest its 78% stake in AxiCorp to the existing group of promoter shareholders.

NeoBiocon FZ LLC:

NeoBiocon FZ LLC is a pharmaceutical research and marketing company based at Abu Dhabi. Incorporated in January 2008, NeoBiocon is an equal joint venture with Dr. B.R. Shetty of NeoPharma.

During the current year, NeoBiocon registered significant growth in revenue to Rs. 60 million and a net profit of Rs. 21 million.

In addition to launching oncology products. NeoBiocons range of branded generic products, now approved by the UAE Ministry of Health, has been successfully launched to address the therapeutic segments of cardiology, diabetology and infection management.

Biocon SDN. BHD.

During the year, Company has incorporated a wholly owned subsidiary in Malaysia to set up a state of the art manufacturing facility at BioXcell a biotechnology park promoted by the Government of Malaysia.

In the first phase of capital outlay the Company envisages an investment of US$ 161 million and expects the facility to go on stream by year 2015.

Consolidated financial statements:

The consolidated financial statements have been prepared by the Company in accordance with the Accounting Standards as prescribed by the Companies (Accounting Standards) Rules, 2006. The audited consolidated financial statements together with Auditors Report thereon also form part of the Annual report.

Accounts of subsidiary companies:

The Ministry of Company Affairs has granted General Exemption to Companies from attaching the financial accounts of the subsidiary companies to this Report pursuant to Section 212 of the Companies Act, 1956. However, a statement showing the relevant details of the Subsidiaries is enclosed and is a part of the Annual Report. The members can write to the Company for obtaining the annual accounts of the subsidiary companies and copies will also be available for inspection at the registered office in Bangalore, India.

Employees Stock Option Plan (ESOP):

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on March 31, 2011 are set out in the Annexure to the Directors Report.

Corporate Governance:

We strive to attain high standards of corporate governance while interacting with all our stakeholders. The Company has complied with the corporate governance code as stipulated under the listing agreement with the stock exchanges. A separate section on Corporate Governance along with a certificate from the auditors confirming the level of compliance is annexed and forms a part of the Directors report.

Evaluation of Board effectiveness:

The evaluation of the performance of the Board is periodically carried out by the Chairman of the Audit Committee to measure the effectiveness of the Board. Dr Bain has considerable experience in Board reviews and has carried out similar exercises for other companies in the United Kingdom and elsewhere.

The review conducted earlier showed overall confidence in the company and the Boards oversight of corporate strategies. Action plans for certain improvements in key areas were reviewed and evaluated for implementation.

Directors:

Dr. Neville Bain and Mr. Bala Manian shall retire by rotation at the ensuing Annual General Meeting, and being eligible, offer themselves for re-appointment.

Mr. Russell Walls was inducted as Additional Director by the board of directors on 28th April 2011. A resolution confirming his appointment as a director liable to retire by rotation is proposed at the Annual General Meeting.

Auditors:

The Statutory Auditors M/s. S. R. Batliboi & Associates (Firm Registration No. 10104910), Chartered Accountants, Bangalore, retire at the ensuing Annual General Meeting, and have confirmed their eligibility and willingness to accept office, if re-appointed.

Cost Audit:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed cost audit of the Companys bulk drug and formulation division.

The board has appointed the Cost Auditors and they have been duly approved by the Central Government.

Management Discussion and Analysis Report:

The report as required under the Listing agreements with the Stock Exchanges is annexed and forms part of the Directors Report.

Cumulative disclosure under the stock option scheme as on March 31, 2011:

Disclosure of the particulars of stock options schemes as on the above date, as per SEBI guidelines:

Particulars Third Grant Fourth Grant Fifth Grant

a. i) Options Granted (Post equity split and bonus, net of 444,600 5,701,628 235,428 options cancelled)

b. Exercise price

i) Pre-bonus of 2008 Rs. 315 each 20% discount Market Price to Market on date of Price on Grant date of Grant

ii) Post-bonus of 2008 Rs. 157.5 each

c. Options vested 426,450 4,411,433 -

d. Options exercised 340,275 3,068,317 -

e. Total number of Equity Shares to be transferred from the 340,275 3,068,317 - ESOP Trust as a result of exercise of options

f. Options lapsed 104,950 1,721,946 -

g. Variation in the terms of options None None None

h. Money realized by exercise of options (Rs. lacs) 909 4,459 -

i. Option pending exercise Nil 1,343,115 -

j. Total number of options in force Nil 1,590,526 235,428

k. Person-wise details of options granted to:

i. Directors and key managerial employees Nil Please see Nil Table (1) below for details regarding options granted to key managerial employees

l. Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of options Not applicable since shares will be transferred by the ESOP Trust upon exercise of the options and the Company will not be required to issue any new shares

m. Vesting schedule 25% each in April of Year 1-25% Year 1-25% 2005, 2006, 2007 and

Year 2-35% Year 2-35%

2008.

Year 3-40% Year 3-40%

(Year 1 being (Year 1 being 3 years from 3 years from date of joining date of or 1 year from joining) July, 19 2006, whichever is later)

n. Lock-in No lock-in, subject to a minimum vesting period of 1 year.

There are no employees who have received a grant in any one year amounting to 5% or more of the options granted during that year.

There are no employees who have been granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant.

Consequent to the bonus shares in the ratio 1:1 on Sept 15, 2008, employees who had not exercised their options were credited with bonus entitlements based on ESOP Plan (Eligibility for corporate action).

Table (1) details regarding options granted to key managerial employees are provided below:

Sl. Name of Director or key managerial personnel Fourth Grant (No. of No. Options Granted)*

Key managerial employees

1. Mr. Chinappa M B 75,000*

2. Mr. Sandeep Rao 60,000*

3. Mr. Harish Iyer 60,000*

*Adjusted for 2008 Bonus issue.

Fixed Deposits:

The Company has not accepted any fixed deposits from public.

Directors responsibility statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of Directors hereby confirm as under:

i) In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii) We have 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 at the end of the financial year and of the profit of the Company for that period;

iii) We have taken proper and sufficient care 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;

iv) We have prepared the annual accounts on a going concern basis.

Particulars of Research and Development, Conservation of energy, technology absorption etc:

Particulars required under Section 217 (I) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in the annexure to the Report.

Particulars of employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, is annexed and is a part of this report.

However, having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company.

Acknowledgements

The Board greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We would also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Karnataka, Ministry of Information Technology and Biotechnology, Ministry of Commerce and Industry, Ministry of Finance, Department of Scientific & Industrial Research, Customs and Excise Departments, Income Tax Department, CSEZ, LTU Bangalore and all other Government agencies for their support during the year and look forward to their continued support in the future.



For and on behalf of the Board



Kiran Mazumdar-Shaw John Shaw Chairman and Managing Director Vice Chairman



April 28, 2011


Mar 31, 2010

We are pleased to present Thirty-Second Annual Report on business and operations together with the audited financial statements and the auditors report of your Company for the financial year ended March 31, 2010

The financial highlights for the year under review are given below:

Corporate Results: Rs in Millions

Particulars for the year ended March 31, 2010 2009

Total Revenues 12,289 9,871

Total Expenditure 8,710 6,937

Profit before Interest, Depreciation and Tax 3,579 2,934

Interest 19 49

Depreciation 797 743

Profit before Tax and Exceptional Items 2,762 2,142

IncomeTax 278 104

Profit after Tax, before Exceptional Items 2,484 2,038

Exceptional items (net of tax) (920)

Profit after Tax, after Exceptional Items 2,484 1,118

Surplus b/f from previous year 8,009 7,705

Profit available for appropriation 10,493 8,823

Proposed dividend on equity shares 700 600

Tax on proposed divided 74 102

Transfer to General Reserve 248 112

Balance in Profit and Loss account 9,470 8,009



Consolidated Results (Under Indian GAAP): Rs in Millions

Particulars for the year ended March 31, 2010 2009

Total Revenues 24,048 16,732

Total Expenditure 18,963 12,854

Profit before Interest, Depreciation and Tax 5,085 3,878

Interest 169 176

Depreciation 1,401 1,102

Profit before Tax and Exceptional Items 3,515 2,600

IncomeTax 487 119

Profit after Tax, before Exceptional Items 3,028 2,481

Minority Interest (96) (71)

Share of losses in associate company - (7)

Profit after Tax and Minority Interest, before Exceptional Items 2,932 2,403

Exceptional items (net of tax) - (1,472)

Profit after Tax, after Exceptional Items 2,932 931





Results of Operations:

For the year ended March 31, 2010 consolidated revenues grew by 44%, EBITDA grew by 31% and Profit after tax (PAT) before exceptional items, grew by 22%. The company has posted a strong 27% growth in its biopharmaceutical business despite the challenging environment that prevailed in the last year. The landscape was characterized by pricing pressures, reduced spending from consumers and companies and intense competition between companies for the end markets. This year we entered new markets, strategically moving up the value chain with formulations in addition to APIs and improved operational efficiencies in our manufacturing processes.

A detailed performance analysis is given in the Management Discussion and Analysis, which is annexed to this report.

Appropriations: Dividend

Directors are pleased to recommend a dividend of 70%, which translates to Rs 3.5 per equity share.

Transfer to Reserves

We propose to transfer Rs. 248 millions to the General Reserves. An amount of Rs. 9,470 Million is proposed to be retained in the profit and loss account.

Consolidated financial statements:

The consolidated financial statements have been prepared by the Company in accordance with the Accounting Standards as prescribed by the Companies (Accounting Standards) Rules, 2006. The audited consolidated financial statements together with Auditors Report thereon form part of the Annual Report. The consolidated net profits of the Group before exceptional items for the year amounted to Rs 2,932 Million as compared to Rs. 2,403 million in the previous financial year. For the year under review, profit (after exceptional items) amounted to Rs. 2,932 Million, resulting in basic earnings per share Rs.15 per share.

Business Operations overview and Outlook:

During the year, total revenues increased by 44% from Rs. 16,732 million to Rs 24,048 million. In the year under review, Statins segment grew 26%, Immunosuppressants by 27% and Insulins by 11%. Our domestic branded formulations business grew 35% with successful market share wins for our key brands. The Indian pharmaceutical market is estimated to grow at over 17% per annum and presents a good market opportunity for your company. As India’s epidemiological profile alters, drugs for cardio-vascular problems, disorders of the central nervous system and other chronic diseases will account for 64% of total pharmaceutical sales in 2012, up from 50% in 2009. The remaining 36% will come from anti-infective, gastrointestinal drugs and vitamins. With leading brands in Diabetology, Nephrology, Oncology and Cardiology, we are best positioned to capitalize on this opportunity and expect our domestic branded formulations segment to contribute about a quarter of our revenues by 2015. With a view to attaining leadership in key therapies, we will focus on building large brands and increasing the number of successful new introductions. Acquisitions, partnerships and in-licensing are also value creating strategies that will likely be adopted towards reaching this goal.

The research services landscape has been in a state of flux for the last decade. In what started as a labour arbitrage opportunity in the early nineties for “low probability candidates”, is now converting into a good business model with the integrated drug discovery process. Big pharma companies are facing the pressures of reduced R&D budgets, shrinking revenues, higher costs of drug development and declining R&D productivity. The financial meltdown has further added to their woes.

On the research front, we have made significant progress in our partnership with Mylan for developing biosimilars for global markets. We expect to commence clinical trials in India with two biosimilar monoclonal antibodies at a fast pace. We will shortly commence clinical trials for our Recombinant Human Insulin for European registration. Our novel pipeline has achieved significant milestone spearheaded by the IND filing with USFDA for our Oral Insulin program IN105. We expect to initiate a clinical study for Type I Diabetics under this US IND later this year. Our coveted T1h program for a novel Anti-CD6 targeting monoclonal antibody is also entering Phase III clinical trials for Psoriasis. Additionally, our novel anti-CD20 molecule has completed preclinical studies and is expected to get into the clinic in India this year. Our novel programs are expected to unlock substantial value upon licensing.

Subsidiaries and Joint Ventures:

Syngene International Limited

Syngene has consolidated its position as India’s premier Custom Research Organization and registered a 30% growth in revenues. During the year, Syngene has demonstrated its ability to successfully manage large relationships and has also forayed into Integrated Drug Discovery services. The commencement of operations from our recently commissioned biologics pilot plant and the AAALAC accredited Vivarium, coupled with Formulation Development capabilities positions Syngene as the ideal partner for providing high quality discovery services at competitive prices in both large & small molecules.

In March 2010, Syngene partnered with Endo Pharmaceuticals to develop a novel biological therapeutic molecule against cancer. Under the terms of the agreement, Endo will retain all rights to the molecule developed and in return Syngene will receive research fees, milestone payments and success fees from Endo. This is a first in India involving the discovery of a biological therapeutic entity and Syngene is proud to be a part of this.

For the current financial year, Syngene registered a 30% growth in revenues from Rs. 2,065 million in the previous year to Rs. 2,676 million.

Operational margins increased from Rs. 607 million to Rs. 878 million representing a 45% increase, primarily driven by revenues generated by the BMS facility which was fully operational during the year. Depreciation charge increased from Rs. 231 million to Rs. 451 million

Syngene earned a net profit of Rs 308 million for the year as against loss of Rs 225 million for the previous year. The increase is primarily attributed to an exceptional forex loss in the previous year

Clinigene International Limited

For the year under review, Clinigene, a wholly own subsidiary registered revenue of Rs. 403 million as against Rs. 330 million in the previous year and earned a profit of Rs. 22 million as against a profit Rs. 45 million in the previous year

Being a full-service clinical research organization, covering early- to late phase clinical development programs, Clinigene is now well positioned to cater to clinical development requirements for its partners globally

Biocon Biopharmaceuticals Private Limited

Biocon Biopharmaceuticals Private Limited (BBPL) began as a 51:49 JV with CIMAB SA, to manufacture monoclonal antibodies and other Recombinant Therapeutics

For the year under review, BBPL earned revenues of Rs. 381 million as against Rs. 186 million in the previous year. BBPL earned a profit of Rs. 26 million from loss of Rs. 52 million in the previous year. Due to a limited product portfolio, sales have been under pressure and expect to improve performance in the coming year

In March 2010, Biocon, through its 100% subsidiary Biocon SA entered into a agreement with CIMAB SA, to acquire its 49% stake in BBPL

Biocon Research Limited

Biocon Research Limited (BRL) is a wholly owned subsidiary set up to undertake discovery and development research work in biologies, antibody molecules and proteins. BRL has during the year entered into a collaborative agreement with Mylan to jointly develop and commercialize certain monoclonal antibodies

For the current year BRL registered revenues of Rs. 393 million and has commenced development activity on the monoclonal antibody program. BRL has reported a net loss of Rs. 51 million for the year ended March 31, 2010

Biocon SA

Biocon SA, a wholly owned subsidiary in Switzerland is primarily engaged in development and marketing of biopharmaceuticals in the European region. Clinical Development of Insulin is currently ongoing. During the current year Biocon SA has entered into an agreement to buy 49% stake of CIMAB SA, in group company Biocon Biopharmaceuticals Private Limited

AxiCorp GmbH

AxiCorp is a specialized Pharma marketing and distribution company based in Germany. In January 2010, AxiCorp was ranked no. 30 in Germany by IMS and recognised as one of the three fastest growing German pharmaceutical companies

For the current financial year AxiCorp earned revenues of Rs. 9,117 million and a profit of Rs. 299 million, contributing 38 % to the group revenues and 10% to the group net profit

NeoBiocon FZ LLC

NeoBiocon FZ LLC. is a research and marketing pharmaceutical company based in Abu Dhabi. Incorporated in January 2008, NeoBiocon is a 50:50 joint venture with Dr. B.R.Shetty of NeoPharma

For the year under review, NeoBiocon registered revenues of Rs 48 million and a net profit of Rs 5 million

In addition to launching oncology products, NeoBiocon is the process of obtaining regulatory approvals for an entire range of formulations in the GCC Market

Accounts of subsidiary companies:

The Company has obtained exemption from the Government of India, Ministry of Company Affairs from attaching the financial accounts of the subsidiary companies to this Report pursuant to Section 212 of the Companies Act, 1956. However, a statement showing the relevant details of the Subsidiaries is enclosed and is a part of the Annual Report

Employees Stock Option Plan (ESOP):

Pursuant to the provisions of Guideline 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999, as amended, the details of stock options as on 31 March 2010 are set out in the Annexure to the Directors Report

Corporate Governance:

We strive to attain high standards of corporate governance while interacting with all our stakeholders. The Company has complied with the corporate governance code as stipulated under the listing agreement with the stock exchanges. A separate section on Corporate Governance along with a certificate from the auditors confirming the level of compliance is annexed and forms a part of the Directors’ Report.

Evaluation of Board Effectiveness:

The evaluation of the performance of the Board is periodically carried out by Dr Neville Bain, Chairman of the Audit Committee to measure the effectiveness of the Board. Dr Bain has considerable experience in Board reviews and has carried out similar exercises for other companies in the United Kingdom and elsewhere.

The review showed overall confidence in the company and the Board’s oversight of corporate strategies. Action plans for certain improvements in key areas were reviewed and evaluated for implementation.

Directors:

Prof. Charles Clooney and Mr. Ravi Mazumdar shall retire by rotation at the ensuing Annual General Meeting, and being eligible, offer themselves for re-appointment.

Auditors:

The Statutory Auditors M/s. S. R. Batliboi & Associates (Firm registration no. 101049W), Chartered Accountants, Bangalore, retire at the ensuing Annual General Meeting, and have confirmed their eligibility and willingness to accept office, if re-appointed.

Management Discussion and Analysis Report

The report as required under the Listing agreements with the Stock Exchanges is annexed and forms part of the Directors’ Report.

k) Diluted Earnings Per Share (EPS) Not applicable since shares will be transferred by the ESOP Trust upon exercise of the options and pursuant to issue of shares on the Company will not be required to issue any new shares exercise of options

Note:

There are no employees who have received grant in any one year amounting to 5% or more of the options granted during that year

There are no employees have been granted options during any one year equal to or exceeding 1 % of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant

Consequent to the bonus shares in the ratio 1:1 on September 15, 2008, employees who had not exercised their options were credited with bonus entitlements based on ESOP Plan (Eligibility for corporate action)

Table (1) details regarding options granted to Directors and key managerial employees:

Sl. No. Name of Director or First Grant Fourth Grant key managerial personnel

Directors

1 Dr. Neville Bain 195,902 Nil

2 Prof. Charles Cooney 195,902 Nil

Key managerial employees (of the Group)

3 Dr. Arun Chandavarkar 195,902 Nil

4 Mr. Murali Krishnan K. N. 195,902 Nil

5 Dr. Goutam Das 195,902 Nil

6 Mr. Rakesh Bamzai 122,430 Nil

7 Mr. Chinappa M. B. 122,439 75,000*

8 Mr. Sandeep Rao Nil 60,000*

9 Mr. Harish Iyer Nil 60,000*



"Adjusted for 2008 Bonus issue

Fixed Deposits:

The Company has not accepted any fixed deposits from public

Directors responsibility statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of Directors hereby confirm as under:

i) In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures,

ii) We have 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 at the end of the financial year and of the profit of the Company for that period;

ii) We have taken proper and sufficient care 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;

iv) We have prepared the annual accounts on a going concern basis Particulars of Research and Development, Conservation of energy, technology absorption etc:

Particulars required under Section 217 (I) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in the annexure to the Report

Particulars of employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, is annexed and is a part of this report

However, having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company

Acknowledgements

The Board greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We would also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year

We also thank the Government of India, Government of Karnataka, Ministry of Information Technology and Biotechnology, Ministry of Commerce and Industry, Ministry of Finance, Customs and Excise Departments, Income Tax Department, CSEZ and all other Government agencies for their support during the year and look forward to their continued support in the future

For and on behalf of the Board of Directors Kiran Mazumdar-Shaw John Shaw Chairman and Managing Director Vice Chairman

April 29, 2010

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