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Directors Report of Cadila Healthcare Ltd.

Mar 31, 2014

Dear Members,

The Directors are pleased to present the 19th Annual Report and the audited accounts for the financial year ended on March 31, 2014.

Financial Results:

The financial performance of the Company, for the year ended on March 31, 2014 is summarised below:

(INR-Millions)

For the year For the year Particulars ended on ended on March 31, 2014 March 31, 2013

Sales and Other Income 43,507 35,803

Profit before Interest, Finance Charges, Depreciation, 11,156 7,592 Amortisation and Impairment and Tax (PBIDT)

Less: Depreciation, Amortisation and Impairment 1,274 1,168

Profit before Interest and Finance Charges and Tax (PBIT) 9,882 6,424

Less: Interest and Finance Charges 425 1,110

Profit before Tax [PBT] 9,457 5,314

Less: Provision for Tax 421 328

Profit after Tax [PAT] 9,036 4,986

Add: Profit brought forward from the previous year 11,896 10,094

Profit available for appropriation, which is appropriated as follows: 20,932 15,080

Interim Dividend - 1,536

Proposed Final Dividend 1,843 -

Corporate Dividend Tax on Proposed Final Dividend / Interim 273 198 Dividend [Net of CDT Credit]

Transferred to Debenture Redemption Reserve 450 450

Transferred to General Reserve 1,000 1,000

Balance carried to Balance Sheet 17,366 11,896

Total 20,932 15,080

Earnings Per Share [EPS] [Face Value of shares of Rs.5/- each] [in Rupees] 44.13 24.35

Results of operations:

During the year under review, the consolidated gross sales grew by 14.69%. On standalone basis, the Company has achieved gross sales of Rs. 35,873 millions, showing a growth of 20.46% as compared to the previous year. The PBIDT was increased by 46.94% to Rs. 11,156 millions and the Profit before Tax increased by 77.96% to Rs. 9,457 millions. The Profit after Tax has increased to Rs. 9,036 millions as compared to Rs. 4,986 millions in the previous year and the EPS has increased from Rs. 24.35 in the previous year to Rs. 44.13. A detailed analysis of performance for the year has been included in the Management Discussion and Analysis, which forms part of the Annual Report.

Dividend:

Your Directors have recommended a dividend of Rs. 9/- [180%] per equity share [last year interim dividend of Rs. 7.50 per equity share] on 204,748,520 equity shares of Rs. 5/- each fully paid-up for the financial year ended on March 31, 2014, amounting to Rs. 2,116 millions [inclusive of corporate dividend tax [net of CDT credit] of Rs. 273 millions]. The dividend, if declared by the shareholders at the ensuing Annual General Meeting will be paid to those shareholders, whose names stand registered in the Register of Members on July 30, 2014. In respect of shares held in dematerialised form, it will be paid to the members whose names are furnished by the National Securities Depository Limited and the Central Depository Services [India] Limited, as beneficial owners. The Dividend Payout ratio for the current year (inclusive of Corporate Dividend Tax) is 23.42% on Profits after Tax.

Management Discussion and Analysis (MDA):

MDA, for the year under review, as stipulated under clause 49 of the Listing Agreement with the Stock Exchanges is presented in a separate section, which forms part of the Annual Report.

Consolidated Financial Statements:

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates and Accounting Standard AS-27 on Financial Reporting of Interest in Joint Ventures and as provided under the Listing Agreement with the Stock Exchanges, the audited Consolidated Financial Statements are provided in the Annual Report, which show the financial resources, assets, liabilities, income, profits and other details of the Company, its associate companies and its subsidiaries after elimination of minority interest, as a single entity.

Subsidiary Companies:

In accordance with the General Circular No. 51/12/2007-CL-III dated February 8, 2011 issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. As required under the Circular, the Board of Directors at its meeting held on May 16, 2014 passed a resolution giving consent for not attaching these documents with the Balance Sheet of the Company.

The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company, who may be interested in obtaining the same. The Annual Accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary Company. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

During the year as a part of long term strategic planning, the Company has decided to discontinue operations of its wholly owned subsidiary Company in Japan market. The Company''s subsidiary Company in Japan namely Zydus Pharma Japan Company Limited may be wound up after necessary formalities as per the regulations applicable to the subsidiary Company. The accounts of this subsidiary Company are therefore not prepared on a going concern basis.

The statement containing the list of subsidiaries along with brief financial details of the subsidiaries is given in this Annual Report separately.

Directors:

The Board of Directors at their meeting held on May 16, 2014 appointed Ms. Dharmishtaben N. Rawal as an Additional Director and she shall hold office till the ensuing Annual General Meeting of the Company and she has expressed her willingness to be appointed as an Independent Director.

As per the provisions of section 149 and other applicable provisions of the Companies Act, 2013 and rules made thereunder, your Directors are seeking appointment of Mr. H. Dhanrajgir, Mr. Nitin Raojibhai Desai and Ms. Dharmishtaben N. Rawal as independent Directors on the Board for a period of consecutive five years and they shall not be liable to retire by rotation.

Mr. Apurva S. Diwanji, Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for reappointment. The Board recommends the reappointment of Mr. Apurva S. Diwanji as Director liable to retire by rotation.

Brief profile of all Independent Directors proposed to be appointed at the ensuing Annual General Meeting for a period of five consecutive years and Mr. Apurva S. Diwanji, Director retiring by rotation and seeking reappointment, as required under clause 49 of the Listing Agreement, is annexed to the notice convening the 19th Annual General Meeting, which forms part of this Annual Report.

Disclosures:

There have been no material changes and commitments, which may affect the financial position of the Company between the end of the financial year and the date of this report.

Directors'' Responsibility Statement:

Pursuant to the requirements under section 217 (2AA) of the Companies Act, 1956 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby state that:

(a) The Annual Accounts for the year ended March 31, 2014 are prepared on going concern basis;

(b) In preparation of the Annual Accounts, all the applicable accounting standards have been followed. Necessary explanations are given for material departures, if any;

(c) Sound accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2014 and of the profit of the Company for the year ended on that date and

(d) Proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for prevention and detection of fraud and other irregularities.

Corporate Governance:

A detailed report on the Corporate Governance together with a certificate from the statutory auditors, confirming the compliance of conditions of Corporate Governance stipulated under clause 49 of the Listing Agreement with the Stock Exchanges forms part of the Annual Report.

Corporate Social Responsibility [CSR]:

In compliance of the provisions of section 135 of the Companies Act, 2013, the Board of Directors has formed a CSR Committee comprising three Directors. Ms. Dharmishtaben N. Rawal, an Independent Director is one of the members of the Committee.

Auditors:

M/s. Mukesh M. Shah & Co., Chartered Accountants, (Firm Registration No. 106625W) Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. As per the provisions of section 139 of the Companies Act, 2013 [the Act] and rules made thereunder, as M/s Mukesh M. Shah & Co., Chartered Accountants have provided their services for more than 10 years; the Company shall comply with the said provisions within a period of three years. Accordingly, M/s Mukesh M. Shah & Co., Chartered Accountants shall hold office from the conclusion of the 19th Annual General Meeting till the conclusion of the 20th Annual General Meeting.

The Company has received a letter from M/s Mukesh M. Shah & Co., Chartered Accountants to the effect that their reappointment, if made, would be within the prescribed limits under section 139 of the Act and rules made thereunder and that the firm is eligible for appointment and is not disqualified for appointment under the Act, the Chartered Accountants Act, 1949 and the rules and regulations made thereunder.

The Audit Committee and the Board of Directors recommend the reappointment of M/s Mukesh M. Shah & Co., Chartered Accountants, as the Statutory Auditors of the Company.

Auditors'' Report and Notes on Accounts:

The Board has duly reviewed the Statutory Auditor''s Report on the Accounts. The observations and comments, appearing in the Auditor''s Report are self-explanatory and do not call for any further explanation / clarification by the Board of Directors under section 217[3] of the Companies Act, 1956.

Cost Auditors:

The Ministry of Corporate Affairs vide General Circular No. 15/2011 dated April 11, 2011 mandated the cost audit for the Pharmaceutical Products. For conducting the cost audit for the financial year ended March 31, 2014, based on the recommendation of Audit Committee, the Board has appointed M/s Dalwadi & Associates, Cost Accountants and made an application to the Central Government in accordance with MCA Circular dated April 11, 2011. The Cost Auditor has filed the cost audit reports for the financial year ended on March 31, 2013 for Pharmaceutical Products within the due date on August 1, 2013. The due date of filing the cost audit report in XBRL was September 30, 2013.

Particulars of Employees:

The names and other particulars of the employees as set out under section 217(2A) of the Companies Act, 1956 and rules made thereunder are provided in Annexure forming part of the Report. In terms of section 219(1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary. None of the employees listed in the said Annexure is related to any Director of the Company.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Directors) Rules, 1988, are provided in the Annexure - A to this Report.

Acknowledgment:

Your Directors place on record their sincere appreciation for the continued co-operation extended to the Company by the Consortium Banks and Financial Institutions. Your Directors also thank the Medical Profession, the Trade and Consumers for their patronage of the Company''s products. Your Directors also place on record sincere appreciation of the continued hard work put in by the employees at all levels. The Directors also thank the Company''s vendors, investors, business associates, Government of India, State Government and various departments and agencies for their support and co-operation.

By Order of the Board of Directors

Place : Ahmedabad Pankaj R. Patel

Date : May 16, 2014 Chairman


Mar 31, 2013

The Directors are pleased to present 18th Annual Report and the audited accounts for the financial year ended on March 31, 2013.

Financial Results:

The financial performance of the Company, for the year ended on March 31, 2013 is summarized below:

(INR-Millions)

For the year For the year Particulars Growth ended on ended on March 31,2013 March 31,2012

Sales and Other Income 37,286 33,877 10.06

Profit before Interest, Finance Charges, Depreciation, 7,592 9,047 -16.08 Amortisation and Impairment and Tax (PBIDT)

Less: Depreciation, Amortisation and Impairment 1,168 1,082 7.95

Profit Before Interest and Finance charges and Tax (PBIT) 6,424 7,965 19.35

Less: Interest and Finance charges 1,110 1,261 11.97

Profit Before Tax 5,314 6,704 20.73

Less: Provision for Tax 328 129 154.26

Profit After Tax 4,986 6,575 24.17

Add: Profit brought forward from the previous year 10,094 6,675

Profit available for appropriation, which is appropriated as follows: 15,080 13,250

Interim Dividend 1,536 -

Proposed Final Dividend - 1,536

Corporate Dividend Tax on Interim Dividend / Proposed Final Dividend 198 170 [Net of CDT Credit]

Transferred to Debenture Redemption Reserve 450 450

Transferred to General Reserve 1000 1000

Balance carried to Balance Sheet 11,896 10,094

Total 15,080 13,250

Earnings per share [EPS] [Face Value of shares of Rs. 5/-] [in Rupees] 24.35 32.11

Results of operations:

During the year under review, the consolidated gross sales grew by 21.31%. On standalone basis, the Company has achieved gross sales of Rs. 29,781 millions, showing a growth of 21.23% compared to the previous year. However, the PBIDT was decreased by 16.08% to Rs. 7,592 millions and the Profit Before Tax was also decreased by 20.73% to Rs. 5,314 millions. As a result, the Profit After Tax has decreased to Rs. 4,986 millions as compared to Rs. 6,575 millions in previous year and the EPS decreased from Rs. 32.11 in the previous year to Rs. 24.35. The standalone figures are not comparable with the previous year as they include the financials of the merged entities. A detailed analysis of performance for the year has been included in the Management Discussion and Analysis, which forms part of the Annual Report.

Dividend:

Your Directors have declared an Interim Dividend of Rs. 7.50 per Equity Share [last year final dividend recommended of Rs. 7.50 per Equity Share] on 204,748,520 equity shares of Rs.5/- each fully paid-up, out of the profits for the financial year ended March 31, 2013, amounting to Rs. 1,734 millions [inclusive of Corporate Dividend Tax of Rs. 198 millions]. The Interim Dividend was paid to the shareholders of the Company, whose names stand registered in the Register of Members as on June 12, 2013, being the Record Date fixed for the purpose. In respect of shares held in dematerialized form, it was paid to the members whose names were furnished by the depositories, as beneficial owners as on the Record Date. The Dividend payout ratio for the current year (inclusive of Corporate Dividend tax) is 34.78 percent on profits of the merged entity.

Scheme of Amalgamation:

Board of Directors of your Company, subject to requisite approvals, approved a Scheme of Amalgamation [the Scheme] under sections 391 - 394 of the Companies Act, 1956 for amalgamation of Liva Healthcare Limited, Zydus Animal Health Limited and Zydus Pharmaceuticals Limited, the wholly owned subsidiary companies with the Company.

After requisite approvals / NOC from the Stock Exchanges, Regional Director and Official Liquidator, the Hon''ble High Court of Gujarat at Ahmedabad on its hearing on August 8, 2013 approved the Scheme.

The appointed day for the merger was April 1, 2012. However, the Scheme became effective from August 26, 2013, being the date of filing of High Court Orders with the Registrar of Companies, Gujarat at Ahmedabad.

The Company has prepared and presented the merged accounts, which include the financials of three subsidiary Companies.

Management Discussion and Analysis (MDA):

MDA, for the year under review, as stipulated under clause 49 of the Listing Agreement with the Stock Exchanges is presented in a separate section, which forms part of the Annual Report.

Consolidated Financial Statements:

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates and Accounting Standard AS-27 on Financial Reporting of Interest in Joint Ventures and as provided under the Listing Agreement with the Stock Exchanges, the audited Consolidated Financial Statements are provided in the Annual Report, which show the financial resources, assets, liabilities, income, profits and other details of the Company, its associates companies and its subsidiaries after elimination of minority interest, as a single entity.

Subsidiary Companies:

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. As required under the circular, the Board of Directors at its meeting held on August 30, 2013 passed a resolution giving consent for not attaching these documents with the Balance Sheet of the Company.

In view of the long term business prospects, your Company incorporated Zydus Healthcare Philippines, Inc.

The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The Annual Accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

The statement containing the list of subsidiaries along with brief financial details of the subsidiaries is given in this Annual Report separately.

Directors:

Mr. Mukesh M. Patel, Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for reappointment. The Board of Directors recommends the reappointment of Mr. Mukesh M. Patel. Brief profile of Mr. Mukesh M. Patel, Director proposed to be reappointed as required under clause 49 of the Listing Agreement is annexed to the notice convening 18th Annual General Meeting forming part of this Annual Report.

Directors'' Responsibility Statement:

Pursuant to the requirements under section 217 (2AA) of the Companies Act, 1956 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby state that:

(a) the Annual Accounts for the year ended March 31, 2013 are prepared on going concern basis;

(b) in preparation of the Annual Accounts, all the applicable accounting standards have been followed. Necessary explanations are given for material departures, if any;

(c) sound accounting policies have been selected and applied consistently and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2013 and of the profit of the Company for the year ended on that date, and

(d) proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for prevention and detection of fraud and other irregularities.

Corporate Governance:

A detailed report on the Corporate Governance together with a certificate from the statutory auditors, confirming the compliance of conditions of Corporate Governance stipulated under clause 49 of the Listing Agreement with the Stock Exchanges forms part of the Annual Report.

Auditors:

M/s. Mukesh M. Shah & Co., Chartered Accountants, (Firm Registration No. 106625W) Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received a letter from them to the effect that their reappointment, if made, would be within the prescribed limits under section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of section 226 of the said Act.

Auditors'' Report and Notes on Accounts:

The Board has duly reviewed the Statutory Auditor''s Report on the Accounts. The observations and comments, appearing in the Auditor''s Report are self-explanatory and do not call for any further explanation / clarification by the Board of Directors under section 217[3] of the Companies Act, 1956.

Cost Auditors:

The Ministry of Corporate Affairs vide general circular No. 15/2011 dated April 11, 2011 mandated the cost audit for the Pharmaceutical Products. For conducting the cost audit for the financial year ended March 31, 2013, based on the recommendation of Audit Committee, the Board has appointed M/s Dalwadi & Associates, Cost Accountants and made an application to the Central Government in accordance with MCA circular dated April 11, 2011. The Cost Auditor has filed the cost audit reports for the financial year ended on March 31, 2012 for Pharmaceutical Products within the due date on January 31, 2013. The due date of filing the cost audit report in XBRL was February 28, 2013.

Particulars of Employees:

The names and other particulars of the employees as set out under section 217(2A) of the Companies Act, 1956 and rules made thereunder is provided in Annexure forming part of the Report. In terms of section 219(1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary. None of the employees listed in the said Annexure is related to any Director of the Company.

Energy Conservation, Technology Absorption and Foreign Exchange Earning and Outgo:

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under section 217(1 )(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules, 1988, are provided in the Annexure - A to this Report.

Acknowledgment:

Your Directors place on record their sincere appreciation for the continued co-operation extended to the Company by the Consortium Banks and Financial Institutions. Your Directors also thank the Medical Profession, the Trade and Consumers for their patronage of the Company''s products. Your Directors also place on record sincere appreciation of the continued hard work put in by the employees at all levels. The Directors also thank the Company''s vendors, investors, business associates, Government of India, State Government and various departments and agencies for their support and co-operation.

By Order of the Board of Directors

Place : Ahmedabad Pankaj R. Patel

Date : August 30, 2013 Chairman


Mar 31, 2012

The Directors are pleased to present 17th Annual Report and the audited accounts for the financial year ended on March 31, 2012.

Financial Results:

The financial performance of the Company, for the year ended on March 31, 2012 is summarized below:

(INR-Millions) For the year For the year Particulars Growth ended on ended on (%) March 31, 2012 March 31, 2011

Sales and Other Income 33,899 29,784 13.82

Profit before Interest, Finance Charges, Depreciation, 9,069 7,659 18.41

Amortisation and Impairment and Tax (PBIDT)

Less: Depreciation, Amortisation and Impairment 1,082 969 11.66

Profit Before Interest and Finance charges and Tax (PBIT) 7,987 6,690 19.39

Less: Interest and Finance charges 1,283 318 303.46

Profit Before Tax 6,704 6,372 5.21

Less: Provision for Tax 129 268 (51.87)

Profit After Tax 6,575 6,104 7.72

Add: Profit brought forward from the previous year 6,675 3,323

Profit available for appropriation, which is appropriated as follows: 13,250 9,427

Proposed Dividend 1,536 1,280

Corporate Dividend Tax on Proposed Dividend [Net of CDT Credit] 170 146

Transferred to Debenture Redemption Reserve 450 100

Transferred to General Reserve 1,000 1,226

Balance carried to Balance Sheet 10,094 6,675

Total 13,250 9,427

Earnings per share [EPS] [Face Value of shares Rs.5/-] [in Rupees] 32.11 29.81

Results of operations:

During the year under review, the consolidated sales grew by 14.59 %. On standalone basis, the Company has achieved sales of Rs. 24,565 millions, showing a growth of 11.09 % compared to the previous year. The PBIDT increased by 18.41 % to Rs. 9,069 millions. The Profit before Tax was higher by 5.21 % to Rs. 6,704 millions. The Profit after Tax increased to Rs. 6,575 millions up by 7.72% compared to Rs. 6,104 millions in 2010-11. The Company achieved EPS of Rs. 32.11 compared to Rs. 29.81 in 2010-11. A detailed analysis of performance for the year has been included in the Management Discussion and Analysis, which forms part of the Annual Report.

Dividend:

Your Directors have recommended a dividend of Rs. 7.50 per Equity Share [last year Rs. 6.25 per Equity Share] on 204,748,520 equity shares of Rs.5/- each fully paid-up for the financial year ended March 31, 2012, amounting to Rs. 1,706 millions [inclusive of tax of Rs. 170 millions]. The dividend, if declared by the shareholders at the ensuing Annual General Meeting, will be paid to those shareholders, whose names stand registered in the Register of Members as on August 6, 2012. In respect of shares held in dematerialized form, it will be paid to the members whose names are furnished by National Securities Depository Limited and Central Depository Services [India] Limited, as beneficial owners. The Dividend Payout ratio for the current year (inclusive of corporate tax on dividend distribution) is 25.95 percent.

Management Discussion and Analysis [MDA]:

MDA, for the year under review, as stipulated under clause 49 of the Listing Agreements with the Stock Exchanges is presented in a separate section, which forms part of the Annual Report.

Consolidated Financial Statements:

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on Accounting for Investments in Associates and AS-27 on Financial Reporting of Interest in Joint Ventures and as provided under the Listing Agreement with the Stock Exchanges, the audited Consolidated Financial Statements are provided in the Annual Report, which show the financial resources, assets, liabilities, income, profits and other details of the Company, its associates companies and its subsidiaries after elimination of minority interest, as a single entity.

Subsidiary Companies:

During the year, Quimica E Pharmaceutica Nikkho Do Brazil Ltda., Brazil was merged with Zydus Healthcare Brazil Ltda, Brazil with effect from April 1, 2011. After the merger, the name of the Company was changed to Zydus Nikkho Pharmaceutica Ltda, Brazil.

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. As required under the circular, the Board of Directors at its meeting held on May 10, 2012 passed a resolution giving consent for not attaching these documents with the Balance Sheet of the Company.

The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

The statement containing the list of subsidiaries along with brief financial details of the subsidiaries is given in this Annual Report separately.

Directors:

Mr. Apurva S. Diwanji, Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for reappointment. The Board of Directors recommends the reappointment of Mr. Apurva S. Diwanji.

The Board of Directors of the Company has, subject to approval of the shareholders at the ensuing Annual General Meeting reappointed Dr. Sharvil P. Patel as Deputy Managing Director of the Company. An abstract of the terms and conditions of his appointment and memorandum of interest under section 302 of the Act have been sent to the members of the Company.

Brief profiles of the Directors proposed to be reappointed as required under clause 49 of the Listing Agreement are annexed to the notice convening 17th Annual General Meeting forming part of this Annual Report.

Directors' Responsibility Statement:

Pursuant to the requirements under section 217 (2AA) of the Companies Act, 1956 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby state that:

(a) the Annual Accounts for the year ended March 31, 2012 are prepared on going concern basis;

(b) in preparation of the Annual Accounts, all the applicable accounting standards have been followed. Necessary explanations are given for material departures, if any;

(c) sound accounting policies have been selected and applied consistently and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2012 and of the profit of the Company for the year ended on that date and

(d) proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detection of fraud and other irregularities

Corporate Governance:

A detailed report on the Corporate Governance together with a certificate from the statutory auditors, confirming the compliance of conditions of Corporate Governance stipulated under clause 49 of the Listing Agreements with the Stock Exchanges forms part of the Annual Report.

Auditors:

M/s. Mukesh M. Shah & Co., Chartered Accountants, (Firm Registration No. 106625W) Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received a letter from them to the effect that their reappointment, if made, would be within the prescribed limits under section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of section 226 of the said Act.

Auditors' Report and Notes on Accounts:

The Board has duly reviewed the Statutory Auditor's Report on the Accounts. The observations and comments, appearing in the Auditor's Report are self-explanatory and do not call for any further explanation / clarification by the Board of Directors under section 217[3] of the Companies Act, 1956.

Cost Auditors:

The Central Government has directed an audit of the cost accounts maintained by the Company in respect of formulations and bulk drugs businesses. For conducting the cost audit for these activities for the financial year ended March 31, 2012, based on the recommendation of Audit Committee, the Board has appointed M/s A. G. Dalwadi & Co., Cost Accountants and made an application to the Central Government in accordance with MCA Circular dated April 11, 2011. The Cost Auditor has filed the cost audit reports for the financial year ended on March 31, 2011 for formulations and bulk drugs businesses within the due date on September 17, 2011. The due date of filing the cost audit report was September 30, 2011.

Particulars of Employees:

The names and other particulars of the employees as set out under section 217(2A) of the Companies Act, 1956 and rules made thereunder is provided in Annexure forming part of the Report. In terms of section 219(1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary. None of the employees listed in the said Annexure is related to any Director of the Company.

Energy Conservation, Technology Absorption and Foreign Exchange Earning and Outgo:

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules, 1988, are provided in the Annexure - A to this Report.

Acknowledgment:

Your Directors place on record their sincere appreciation for the continued co-operation extended to the Company by the Consortium Banks and Financial Institutions. Your Directors also thank the Medical Profession, the Trade and Consumers for their patronage of the Company's products. Your Directors also place on record sincere appreciation of the continued hard work put in by the employees at all levels. The Directors also thank the Company's vendors, investors, business associates, Government of India, State Government and various departments and agencies for their support and co-operation.

By Order of the Board of Directors

Place : Ahmedabad Pankaj R. Patel

Date : May 10, 2012 Chairman


Mar 31, 2011

The Directors are pleased to present 16 th Annual Report and the audited accounts for the financial year ended on 31 st March 2011.

Financial Results:

The financial performance of the Company, for the year ended on 31 st March, 2011 is summarised below :

For the For the Particulars Year Year Growth ended ended (%) 31st March 31st March 2011 2010

Sales and Other Income 29780 24684 20.6

Profit before Interest, Finance Charges, Depreciation, 7659 6534 17.2

Amortisation and Impairment and Tax (PBIDT) 6690 5634 18.7

Less: Depreciation, Amortisation and Impairment 969 900 7.7

Profit Before Interest and Finance charges and Tax (PBIT) 6690 5634 18.7

Less: Interest and Finance charges 318 431 (26.2)

Profit Before Tax 6372 5203 22.5

Less: Provision for Tax 268 170 57.6

Profit After Tax 6104 5033 21.3

Add: Profit brought forward from the previous year 3323 2030

Profit available for appropriation, which is appropriated as follows: 9427 7063

Proposed Dividend 1280 1024

Corporate Dividend Tax on Proposed Dividend [Net of CDT Credit] 146 116

Transferred to Debenture Redemption Reserve 100 100

Transferred to General Reserve 1226 2500

Balance carried to Balance Sheet 6675 3323

Total 9427 7063

Earnings per share [EPS] [Face Value of shares Rs.5/-] [in Rupees] 29.81 24.58*

* After considering bonus equity shares issued after 31st March, 2010.

Results of operations:

During the year under review, the Company has scaled new heights and achieved milestone total revenues of one billion dollar mark on consolidated basis. The consolidated sales grew by 25 % during the year. On standalone basis, the Company has achieved sales of Rs. 22,113 mn, showing a growth of 19.2 % compared to the previous year. The PBIDT increased by 17.2 % to Rs. 7,659 mn. The Profit before Tax was higher by 22.5 % to Rs. 6,372 mn. The Profit after Tax increased to Rs. 6,104 mn up by 21.3 % compared to Rs. 5,033 mn in 2009-10. The Company achieved EPS of Rs. 29.81 compared to Rs.24.58 in 2009-10, calculated on the enhanced capital after the issue of Bonus Equity Shares. A detailed analysis of performance for the year has been included in the Management Discussion and Analysis, which forms part of the Annual Report.

Bonus Equity Shares and Listing:

On 9 th April, 2010, the Company has allotted 68,249,507 bonus equity shares in the ratio of 1:2 [one bonus equity share for every two equity shares] to the members, whose names appeared on the Register of Members on the Record Date fixed for the purpose. Bonus shares were listed on the Stock Exchanges, where the existing equity shares are listed.

Dividend:

In celebration of joining the billion dollar league of Indian Pharma Companies, your Directors are pleased to recommend a dividend of Rs. 6.25 [previous year Rs.5.00] per equity share on 204,748,520 equity shares of Rs. 5/- each fully paid-up for the financial year ended 31 st March, 2011. The dividend, if declared by the shareholders at the ensuing Annual General Meeting, will be paid to those shareholders, whose names stand registered in the Register of Members on 19 th July, 2011. The Dividend Payout ratio for the current year (inclusive of corporate tax on dividend distribution) is 23.36 percent.

Management Discussion and Analysis (MDA):

MDA, as required under the Listing Agreements with the Stock Exchanges is given as a separate statement, which forms part of this Annual Report.

Subsidiary Companies and Consolidated Financial Statements:

During the year, the Company has formed following two wholly owned subsidiaries to enter in the Mexican Pharma market;

(1) Zydus Pharmaceuticals Mexico S.A. de C.V., Mexico and

(2) Zydus Pharmaceuticals Mexico Service Company S.A. de C.V., Mexico.

As required under the Listing Agreements with the Stock Exchanges, Consolidated Financial Statements of the Company and all its subsidiaries are attached. The Consolidated Financial Statements have been prepared in accordance with Accounting Standards 21 and 23 issued by the Institute of Chartered Accountants of India and show the financial resources, assets, liabilities, income, profits and other details of the Company, its associates companies and its subsidiaries after elimination of minority interest, as a single entity.

Ministry of Corporate Affairs, Government of India has granted general exemption for the requirements to attach various documents in respect of subsidiary Companies vide circular No. 2/2011 vide its letter No. 51/12/2007-CL-III dated 8th February, 2011. Details of major subsidiaries of the Company are covered in Managements Discussion and Analysis Report forming part of the Annual Report.

The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include financial results of its subsidiary companies.

The statement containing the list of subsidiaries along with brief financial details of the subsidiaries is given in this Annual Report separately.

Directors:

Mr. Nitin Raojibhai Desai was appointed as an Additional Director effective from 6 th May, 2011. In terms of section 260 of the Companies Act, 1956, he shall hold office only upto the date of the ensuing Annual General Meeting. The Company has received a notice in writing under section 257 of the Companies Act, 1956 from a member proposing his candidature along with deposit of Rs. 500/- for the office of Director liable to retire by rotation.

Your Directors express their profound grief on the sad demise of Mr. Pranlal Bhogilal. The Board places on record its deep sense of appreciation for the valuable contributions made by late Mr. Pranlal Bhogilal during his tenure as a Director of the Company.

Mr. Humayun Dhanrajgir, Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. The Board of Directors recommends the re-appointment of Mr. Humayun Dhanrajgir.

The Board of Directors of the Company has, subject to approval of the shareholders at the ensuing Annual General Meeting re-appointed Mr. Pankaj R. Patel as Managing Director of the Company. An abstract of the terms and conditions of his appointment and memorandum of interest under section 302 of the Act have been sent to the members of the Company.

Brief profiles of the Directors proposed to be appointed / re-appointed as required under clause 49 of the Listing Agreement are annexed to the notice convening 16 th Annual General Meeting forming part of this Annual Report.

Directors Responsibility Statement:

Pursuant to the requirements under section 217 (2AA) of the Companies Act, 1956 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby state that:

(a) the Annual Accounts for the year ended 31 st March, 2011 are prepared on going concern basis;

(b) in preparation of the Annual Accounts, all the applicable accounting standards have been followed. Necessary explanations are given for material departures, if any;

(c) sound accounting policies have been selected and applied consistently and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31 st March, 2011 and of the profit of the Company for the year ended on that date and

(d) proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detection of fraud and other irregularities.

Corporate Governance:

A detailed report on the Corporate Governance together with a certificate from the statutory auditors, confirming the compliance of conditions of Corporate Governance stipulated under clause 49 of the Listing Agreements with the Stock Exchanges forms part of the Annual Report.

Auditors:

M/s. Mukesh M. Shah & Co., Chartered Accountants, (Firm Registration No. 106625W) Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

The Company has received a letter from them to the effect that their reappointment, if made, would be within the prescribed limits under section 224 (1B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of section 226 of the said Act.

Auditors Report and Notes on Accounts:

The Board has duly reviewed the Statutory Auditors Report on the Accounts. The observations and comments, appearing in the Auditors Report are self-explanatory and do not call for any further explanation / clarification by the Board of Directors under section 217[3] of the Companies Act, 1956.

Cost Auditors:

The Central Government had directed an audit of the cost accounts maintained by the Company in respect of Formulations and Bulk Drugs businesses. For conducting the cost audit for these activities for the financial year ended 31 st March, 2011, the Central Government has approved the appointment of M/s A. G. Dalwadi & Co., Cost Accountants as Cost Auditors. The Cost Auditor has filed the cost audit report on 16 th September, 2010 as against the last date of filing it of 30 th September, 2010.

Particulars of Employees:

The names and other particulars of the employees as set out under section 217(2A) of the Companies Act, 1956 and rules made there under is provided in Annexure forming part of the Report. In terms of section 219(1) (b) (iv) of the Companies Act, 1956, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary. None of the employees listed in the said Annexure is related to any Director of the Company.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules, 1988, are provided in the Annexure - A to this Report.

Acknowledgment:

Your Directors place on record their sincere appreciation for the continued co-operation extended to the Company by the Consortium Banks and Financial Institutions. Your Directors also thank the Medical Profession, the Trade and Consumers for their patronage of the Companys products. Your Directors also place on record sincere appreciation of the continued hard work put in by the employees at all levels. The Directors also thank the Companys vendors, investors, business associates, Government of India, State Government and various departments and Agencies for their support and co-operation.

By Order of the Board of Directors

Place : Ahmedabad Pankaj R. Patel

Date : 6th May, 2011 Chairman


Mar 31, 2010

The Directors take pleasure in presenting the 15th Annual Report of the Company with the Audited statement of Accounts for the year ended 31st March 2010.

Financial Results

INR-Millions Particulars Year ended March 31, Growth

2010 2009 (%)

Sales and Other Income 24684 20052 23.1

Profit Before Interest, Depreciation, Exceptional items and Tax (PBIDET) 6534 4798 36.2

Less: Depreciation, Amortisation and Impairment 900 826 9.0

Profit Before Interest, Exceptional items and Tax (PBIET) 5634 3972 41.8

Less: Interest 431 880 (51.0)

Less: Exceptional Expenses:

Expenses incurred pursuant to Composite Scheme of Arrangement 0 128

Profit Before Tax 5203 2964 75.5

Less: Provision for Tax 170 305 (44.3)

Profit After Tax 5033 2659 89.3

Add: Profit brought forward from the previous year 2030 1628

Add: Pursuant to a Composite Scheme of Arrangement 0 38

Profit available for appropriation, which is appropriated as follows: 7063 4325

Proposed Dividend 1024 614

Corporate Dividend Tax on Proposed Dividend [Net of CDT Credit] 116 105

Transferred to Debenture Redemption Reserve 100 0

Transferred to General Reserve 2500 1576

Balance carried to Balance Sheet 3323 2030

Total 7063 4325

Earnings per share [EPS] [Face Value of shares Rs.5/-] [in Rupees] Basic:

- Before Exceptional items 36.87 20.42

- After Exceptionalitems 36.87 19.48 Diluted :*

- Before Exceptional items 24.58 13.61

- After Exceptional items 24.58 12.99

* After considering bonus equity shares issued after 31st March, 2010.

Operations and Business Performance

During the year under review, the Company achieved sales of Rs.18549 mn, showing a growth of 6.8% compared to the previous year. The PBIDT increased by 36.2 % to modest Rs.6534 mn. The Profit before Tax was higher by 75.5 % to Rs. 5203 mn. The Profit after Tax increased to Rs. 5033 mn up by 89.3 % compared to Rs.2659 mn in 2008-09. The Company achieved EPS (After Exceptional items) of Rs.36.87 compared to Rs.19.48 in 2008-09. EPS on enhanced capital after considering the issue of Bonus Equity Shares was Rs.24.58. A detailed analysis of performance for the year has been included in the Management Discussion and Analysis, which forms part of the Annual Report.

After 31st March 2010, the Company has capitalized the entire amount of Rs.l 15,711,547/- from Security Premium Account and Rs. 225,535,988/- from General Reserves for issuing fully paid-up bonus equity shares.

Issue of Bonus shares and Dividend

The Board of Directors in February, 2010 recommended the issue of Bonus shares in the ratio of It2 to the shareholders of the Company. Subsequently, an Extra Ordinary General Meeting of the shareholders of the Company was held on 22 March 2010. The Shareholders approved the increase in Authorised Share Capital from Rs. 700 mn to Rs. 1100 mn divided into 220,000,000 Equity Shares of Rs. 5/- each and issue of Bonus Equity shares in the ratio ofl:2 i.e. One Equity share of Rs.5/-each fully paid-up for every Two Equity Shares of Rs.5/- each held by them on 6th April 2010, being the Record Date fixed by the Bonus Committee for the purpose to ascertain the names of the shareholders entitled to receive the Bonus shares. The said committee has allotted Bonus Equity Shares on 9th April 2010 to all the shareholders whose names were appearing on the Register of Members or in the respective beneficiary accounts with their Depository Participants as per the details provided by NSDL and CDSL ("the Depositories") on the Record Date. The demat accounts of the eligible shareholders were credited as per the confirmations provided by the depositories. For the Bonus shares issued in physical form, the corresponding share certificates were dispatched to the addresses of the respective shareholders.

Your Directors are pleased to recommend a dividend of Rs.5.00 (previous year Rs.4.50) per equity share on enhanced paid-up share capital consequent to Bonus Issue in the ratio of 1:2, which was 204,748,520 equity shares of Rs.5/- each for the financial year ended 31st March 2010. The dividend, if approved by the shareholders, will be paid to the eligible shareholders within the period stipulated under the Companies Act, 1956. The Dividend payout ratio for the current year (inclusive of corporate tax on dividend distribution) is 16.13 percent.

Funding

During the year, your Company issued Secured Redeemable Non-Convertible Debentures (NCDs) aggregating to Rs. 500 mn on a private placement basis. NCDs are listed on the Wholesale Debt market segment of National Stock Exchange of India Limited. NCDs were rated AA+ by CRISIL Limited, a renowned rating agency. IDBI Trusteeship Services Limited has been appointed as the Trustees for these NCDs.

The Company will continue to raise additional funds from banks, financial institutions, bond markets, commercial papers, etc. in line with the need for maintaining sustained growth of business. ¦

Performance of Suhsidiary / loint Venturt Companies

The performance of subsidiaries and joint ventures as per the audited accounts of the respective subsidiary / joint venture companies is summarised hereunder. The accounts of the foreign subsidiaries are audited as at December, 2009 / February, 2010 whereas the January / February to March, 2010 accounts are subjected to limited review.

(INR-mn)

Sr. Name of the Subsidiary Cempaay % holding Main business

NO.

1 Zydus Pharmaceuticals Limited, India 100 Distribution of pharmaceuticals

2. German Remedies Limited, India 100 Marketing services

3. Dialforthealth India Limited, India 100 Operates a chain of retail

pharmacies

4. Liva Healthcare Limited, India 100 Marketing of Pharmaceuticals

5. Zydus Animal Health Umited, India 100 Manufacturingand marketing

of animal health products

6. Dialforhealth Unity Limited, India 55 Operates a chain of retail

pharmacies on Franchisee basis

7. Dialforhealth Greencross Limited, India* 100 Operates a chain of retail pharmacies in Maharashtra

8. Zydus Wellness Limited, India 72.51+ Manufacturing and marketing of consumer products

9. Zydus Technologies Limited, India 99 Manufacturing and marketing

of NDDS products.

10. Zydus International Private Limited, Ireland 100 Holds Companys Global Investments

11. tydusrlealthaWSAfjPty) Ltd., South Africa 100 Marketing of formulations in South Africa

12. Simayla Pharmaceuticals (Pty.) Ltd., South Africa** 100 Marketing of Pharmaceutical products 13 ZC Pharma Services (Proprietary)Ltd., 100 Providing marketing

South Africa*** intelligence and data management services to

pharmaceutical industry

14. Laboratorios Combix, Spain 100 Marketing and distribution of pharmaceutical products

15. Etna Biotech S.R.L (Italy) 100 Carrying out biotech research

16. Zydus Healthcare (USA) LLC, USA 100 Marketing of APIs in USA



Sr. Name of the Subsidiary Cempaay Year, Revenues Profit / (Loss)

ended on after tax

1 Zydus Pharmaceuticals Limited, India 31st March 2 1

2. German Remedies Limited, India31st March 71 70

3. Dialforthealth India Limited, India 31st March 140 (3)

4. Liva Healthcare Limited, India 31st March 502 67

5. Zydus Animal Health Umited, India 31st March 1213 171

6. Dialforhealth Unity Limited, India 31st March - (0.02)

7. Dialforhealth Greencross Limited, India* 31st March 0.08 (0.68)

8. Zydus Wellness Limited, India 31st March 2740 453

9. Zydus Technologies Limited, India 31st March - (5)

10. Zydus International Private Limited, Ireland 31st Dec. 99 56

11. tydusrlealthaWSAfjPty) Ltd., South Africa 28th Feb. 242 (9)

12. Simayla Pharmaceuticals (Pty.) Ltd., South Africa** 28th Feb. 519 (18)

13 ZC Pharma Services (Proprietary)Ltd., 31st March 10 0.06 South Africa***

14. Laboratorios Combix, Spain 31st Dec. 161 (207)

15. Etna Biotech S.R.L (Italy) 31st Oec. 29 (13)

16. Zydus Healthcare (USA) LLC, USA 31st Dec. 33 2

Performance of Subsidiary / joint Venture Companies

INR. mn

sr. Name of the Subsidiary Company % holding Main business

No.

17. Zydus Ptormaeeuticals USA Inc., USA 100 Marketing of formulaHons in USA

18. Zydus Noveltech Inc., USA 85 Developing, marketing,

selling and distribution of Pharmaceutical dosages

19. Zydus Netherlands B.V., the Netherlands 100 Holds investments in fellow

subsidiaries

20. Zydus Healthcare Brasil Ltda, Brazil 100 Marketing of formulations

21. Quimica E Farmaceutica Nikkho Do Brasil Ltda, 100 Manufacturing, marketing and Brazil Distribution of Pharmaceutical

Products

22. Zydus France SAS, France 100 Marketing of Pharmaceuticals

in France

23. Nippon Universal Pharmaceutical Company 100 Manufacturing, Marketing and Limited, Japan Distribittim of Pharmaceutical

Products

24. Zydus IntRus Limited, Russia 100 Providing logistic services and

distribution of Pharmaceutical products in Russia

sr. Name of the Subsidiary Company Year Revenues Profit / (Loss)

ended on aftertax

17. Zydus Ptormaeeuticals USA Inc., USA 31st Dec. 5709.0 79.0

18. Zydus Noveltech Inc., USA 31st Dec. 385.8 235.0

19. Zydus Netherlands B.V., the Netherlands 31st Dec. 0.5 (10.0)

20. Zydus Healthcare Brasil Ltda, Brazil 31st Dec. 447.3 (101.0)

21. Quimica E Farmaceutica Nikkho Do Brasil Ltda, 31st Dec. 1403.4 48.0 Brazil

22. Zydus France SAS, France 31st Dec. 2198.0 159.0

23. Nippon Universal Pharmaceutical Company 31st Dec. 315.8 (248-0) Limited, Japan

24. Zydus IntRus Limited, Russia 31st Dec. 63.0 12.0

* Became a 100% subsidiary during the year upon acquisition of 50% shares held by a joint venture partner pursuant to an agreement.

** Became a 100% subsidiary during the year upon acquisition of 30% shares held by a joint venture partner pursuant to an agreement.

*** Acquired during the year.

Particulars under section 212 of the Companies Act, 1956 Your Company has received an approval under section 212 (8) of the Companies Act, 1956 from the Ministry of Corporate Affairs, Government of India vide its letter No. 47/152/2010-CL-lll dated 19th April, 2010 exempting the Company from attaching the Annual Report of the subsidiary companies with the Annual Report of the Company. As required under the provisions of section 212 of the Companies Act, 1956, a statement of the holding Companys interest in the subsidiary companies is attached to this report. The annual accounts of the subsidiary companies are kept at the Companys Registered Office and also at the respective Registered Offices of the subsidiaries for inspection. Shareholders desirous of obtaining the annual accounts of subsidiaries may obtain the same upon request.

Consolidated Financial Statements

As stipulated in clause 41 of the Listing Agreement with the Stock Exchanges, the consolidated financial statements have been prepared by the Company in accordance with the Accounting Standard AS-21 on "Consolidated Financial Statements", as issued by the Institute of Chartered Accountants of India. The consolidated financial statements presented by the Company include the financial information of its subsidiaries.

Performance of Joint Venture Companies

Detailed discussion on performance of each joint venture Company is covered in Management Discussion and Analysis Report.

1 Zydus Nycomed Healthcare Private Limited (ZNHPL)

This 50:50 joint venture between the Company and Nycomed GmbH, is a 100% EOU situated at Navi Mumbai. This JV Company achieved turn over of Rs. 1786.5 mn for the year ended on 31st December 2009 as against Rs.1747.1 mn in the previous year. The net profit of the Company was Rs.l 139.4 mn as against Rs.1241.3 mn in the previous year.

2 Zydus Hospira Oncology Private Limited (ZHOPL)

This 50:50 joint venture Company has set up manufacturing facilities near Ahmedabad and got approval of USFDA, Medicines and Healthcare Products Regulatory Agency, UK (MHRA) and Department of Therapeutics Goods Administration, Australia (TGA). ZHOPL has commenced its commercial operations from May, 2009. ZHOPL has earned total income of Rs. 1702 mn and Profit after Tax of Rs. 504 mn for the year ended on 31st March, 2010.

3 Zydus BSV Pharma Private Limited (ZBSV)

This is a 50:50 joint venture between the Company and Bharat Serums and Vaccines Limited. ZBSVs novel and patented oncology product continued to perform well in the Indian market. ZBSV completed the Phase I clinical trial during the year and has initiated the Phase II / III Clinical Trials. ZBSV has also sought the opinion from the US FDA for the pivotal trials for approval in the US. ZBSVs patent has been granted by the EU Patent Office and few other countries during the year. As part of its generic business plans, ZBSV has submitted an ANDA during the year and is in talks with couple of buyers in Europe to leverage its manufacturing capabilities set up near Ahmedabad as SEZ unit. During the year, ZBSV has earned total income of Rs. 5.7 mn as compared to Rs.9.2 mn in the previous year.

4 Zydus Noveltech Inc., USA (ZN)

This Joint Venture is between the Company and Dr. Sharad Govil, a technocrat. ZN is formed for sates, marketing and distribution of non-oral dosage form generic and brand name drugs using drug delivery system technologies in several therapeutic areas targeted for North America, Western Europe and Japan. ZN is in the development stage. ZN has not commenced any commercial operations and therefore no revenue has been generated during the year ended on 31st December 2009.

5 Zydus Technologies Limited (ZTL)

This JV Company has set up its Research and Development and Manufacturing facilities at SEZ near Ahmedabad. ZTL will commence the developmental activities in 2010-11. ZTL will develop and manufacture NDDS products for export to the developed countries.

Overseas Acquisitions

During the year under report, your Company through its subsidiaries has made the following overseas acquisitions:

Pursuant to an agreement Zydus Healthcare S.A. (Pty.) Limited ("ZHSA") has acquired remaining 30% stake in Simayla

1 Pharmaceuticals (Pty.) Limited, South Africa (Simayla). The acquisition will open up several new opportunities for the group in a market which is USD 5 bn (IMS 2009). Now, Simayla has become a wholly owned subsidiary of ZHSA.

ZHSA has purchased 100% stake in Newshelf 1034 (Proprietary) Limited, South Africa from its promoters. The name of the

2 Company was changed to ZC Pharma Services (Proprietary) Limited. This Company will market intelligence and data management services in pharmacy market to ZHSA and Simayla.

International market initiatives

The Companys commercial operations in the regulated developed markets like US, Europe, japan and Brazil and other semi and non- reguiated markets of Asia Pacific and Africa and Middle East regions have continued their journey on the growth path and have made significant contribution in your companys overall business growth. With continuous endeavour to meet needs of the customers across all trade classes, Zydus Pharmaceuticals USA Inc., the subsidiary in US has achieved "Preferred Supplier" status from many of the customers and has gained good market share in the participated market. In Europe, the French subsidiary continued strong performance, with launch of several new products, including a couple of launches on day of patent expiry, which helped strengthen its position in the French generics market. Laboratorios Combix, the subsidiary in Spain, continued its thrust on new products and filing of more dossiers for launch in future. The subsidiary in Brazil launched new products in neuro - psychiatric segment to strengthen its position in branded market space. Continuing your companys initiatives to build presence in Japan, worlds second largest pharmaceutical market with promising potential for generics players, the subsidiary in Japan launched several in-licensed products. In a strategic move to get entry into the hospitals market in japan, your company has acquired brand "Aldomet", an anti-hypertensive drug. Zydus Healthcare SA (Proprietary) Limited, our subsidiary in South Africa acquired remaining 30% stake in Simayla Pharmaceuticals (Proprietary) Limited, from the co-promoters. With this, Simayla became 100% subsidiary of Zydus Healthcare SA (Proprietary) Limited. We aim to consolidate our position in this key market and contribute to the healthcare community in South Africa in a meaningful way. In the emerging markets of Asia Pacific, Africa and Middle East, your company continued its journey on the growth path and maintained leading positions in Sri Lanka, Myanmar, Uganda and Sudan. The product development and regulatory filing activities from India for global markets have kept their pace with development and filing of a range of products for regulatory and other markets.

A detailed discussion on the global operations is covered in Management Discussion and Analysis.

Fixed Deposits

During the year under review, your Company has not invited / accepted any fixed deposits pursuant to provisions of section 58A of the Companies Act, 1956.

Disclosures

As required under section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of

Directors) Rules, 1988, the relevant information and data with respect to the conservation of energy, technology absorption and foreign exchange earnings/outgo have been provided in Annexure-A, attached to this report and forms part of this report.

There have been no material changes and commitments, which may affect the financial position of the Company between the end of the financial year and the date of the report.

As required under section 217(2) of the Companies Act, 1956, the Board of Directors inform the members that during the financial

year, there has been no change in the nature of the Companys business and its subsidiaries, except those specifically stated in this report.

Management Discussion and Analysis [MDA]

MDA covering details of operations, markets, research and development, opportunities and threats, etc. for the year under review is given as a separate statement, which forms part of this Annual Report.

Directors

In accordance with the provisions of the Companies Act, 1956 and Companys Articles of Association, Mr. Apurva S. Diwanji and Mr. Mukesh M. Patel, Directors of the Company will retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Board has recommended their re-appointment. As required under clause 49 of the Listing Agreement, a brief profile of these Directors is given as annexure to the notice of the ensuing Annual_General Meeting.

Mr. H. K. Bilpodiwala ceased to be a Director with effect from 29th July 2009 as he has not offered for re-appointment at the last Annual General Meeting. The Board records its appreciation for the services rendered by Mr. Bilpodiwala.

Auditors

The Auditors of the Company, M/s. Mukesh M. Shah & Co., Chartered Accountants retire at the forthcoming Annua! General Meeting and are eligible for re-appointment. The Audit Committee of the Board of Directors of the Company and Board of Directors have recommended that M/s. Mukesh M. Shah & Co., Chartered Accountants, be appointed as auditors to hold office until the conclusion of the next Annual General Meeting. The Company has received confirmation that their appointment, if made will be within the limits prescribed under section 224 (1B) of the Companies Act, 1956.

Internal Audit

During the year under review, the Company has engaged the services of KPMG India Limited, Mumbai as Internal Auditors to carry out internal audit on regular basis. The reports of the internal audit are presented for review before the Audit Committee. The Audit Committee also scrutinizes all the programmes and the adequacy of the internal audits.

Personnel

The statement of particulars of employees, providing information as per section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, form a part of this report. However, as per the provisions of section 219(1) (b) (iv) of the Companies Act, 1956, the Annual Report excluding this statement is being sent to all members. Any member interested in obtaining a copyof this statement may write to the Company Secretary at the Registered Office of the Company.

Directors Responsibility Statement

Pursuant to the requirements under section 217 (2AA) of the Companies Act, 1956 and to the best of their knowledge and belief, and according to the information and explanations provided to them, your Directors hereby state that:

(a) the Annual Accounts for the year ended 31st March 2010 are prepared on going concern basis;

(b) in preparation of the Annual Accounts, all the applicable accounting standards have been followed. Necessary explanations are given for material departures, if any;

(c) sound accounting policies have been selected and applied consistently and judgments and estimates made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on 31st March 2010 and of the profit of the Company for the year ended on that date and

(d) proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for prevention and detection of fraud and other irregularities.

Corporate Governance

In terms of clause 49 of the Listing Agreement with the Stock Exchanges a Corporate Governance Report is made part of this Annual report.

In compliance of section 292A of the Companies Act, 1956 and relevant clause of the Listing Agreement, an Audit Committee consisting of four Independent Directors has been formed.

A certificate from the Statutory Auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance under clause 49 of the Listing Agreement is attached to the Corporate Governance Report.

The declaration by the Managing Director addressed to the members of the Company pursuant to clause 49 of the Listing Agreement regarding adherence of the Code of Conduct by the members of the Board and by the Senior Management Personnel of the Company is also attached to the Corporate Governance Report.

Acknowledgment

Your Directors wish to place on record their sincere appreciation for significant contribution made by the employees at all levels through their dedication, hard work and commitment, enabling the Company to achieve good performance during the year under review.

Your Directors also take this opportunity to place on record the valuable co-operation and continued support extended by the banks, financial institutions, government, medical professionals, foreign collaborators, business associates and the shareholders for their continued confidence reposed in the Company and look forward to having the same support in all future endeavors.

By Order of the Board of Directors

Place: Ahmedabad Pankaj R. Patel

Date : 29th April 2010 Chairman

 
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