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Directors Report of Elder Pharmaceuticals Ltd.

Jun 30, 2014

Dear Members,

The Directors are pleased to present the Thirty-first Annual Report of the Company together with the audited Accounts for the year ended 30th June 2014. The working results of the Company for the year ended 30th June 2014 vis-a-vis those of the previous year are summarized below:

Year ended Fifteen months 30.06.2014 Period ended 30.06.2013 (Rs. In Crores) (Rs. In Crores)

1. Operating Income 483.47 1233.10

2. Other Income 15.13 26.22

3. Profit before Tax 17.85 115.71

4. Less: Provision for Tax

Current Year - 24.50

Deferred Tax 0.67 (2.53)

5. Profit after Tax 17.18 93.74

6. Less: Prior year Tax 9.26 - adjustments

7. Add: Profit as per the last 216.62 192.88 Balance Sheet

8. Profit available for 224.54 286.62 appropriation Out of which Directors recommend Appropriation as under:

a) Proposed Dividend - -

b) Tax on Dividend - -

c) Transfer to General Reserve 30.00 30.00

d) Transfer to Debenture 40.00 40.00 Redemption Reserve

e) Surplus carried forward to 154.54 216.62 Balance Sheet

OPERATIONS AND PERFORMANCE:

During the year ended 30th June 2014, your company''s Operating Income was Rs.483.47 Crores for the year as compared to Rs. 1233.10 Crores for the fifteen months period ended 30th June, 2013. This represents an decrease of Rs.749.63 Crores over the previous year mainly on account of constraints of working capital. Profit before Tax was Rs. 17.85 Crores as against Rs. 115.71 Crores, for the previous year and Net Profit after providing for taxes was Rs. 17.18 Crores as against Rs.93.74 Crores for the previous year.

For the year ended 30th June 2014 financial results showed Exceptional Item accounted of Rs. 380.04 Crores (net) which is comprising of Profit from Slump sale of Rs. 1734.3 1 Crores (net of Tax) after writing off Trade receivables Rs. 322.71 Crores and advances Rs. 1031.56 Crores.

GLOBAL DEPOSITORY RECEIPTS:

The Company had made an issue of Global Depository Receipts (GDRs) during the year 2004-05. All the issued GDRs have been converted into equity shares and no GDRs are outstanding as on 30th June 2014. The Company''s listing for the GDRs, however, continues on the Luxembourg Stock Exchange and as on 30th June 2014 the same were quoted at RS. 7.243.

DIVIDEND:

In view of the severe financial constraints faced by the Company the Directors at their meeting held on 27th August 2014 have decided to skip dividend for the accounting year under review.

DIRECTORS:

Mrs. Urvashi Saxena who retires by rotation has resigned w.e.f. 28th November 2014 with an intent not to be re-appointed and company resolved not to fill in the vacancy.

Dr. S. Jayaram who retires by rotation has resigned w.e.f. 1st December 2014 with an intent not to be re-appointed and company resolved not to fill in the vacancy.

The Board of Directors of the Company ("the Board") under Section 161 of the Companies Act, 2013 and the Clause 120 of Articles of Association of the Company, appointed Mr. Farid Gulmohamed as Additional Director of the Company with effect from 14th February 2014. In terms of Section 161 of the Companies Act, 2013, and Clause 120 of Articles of Association of the Company Mr. Farid Gulmohamed holds office upto the date of this Annual General Meeting has resigned w.e.f. 14th November 2014 with an intent not to be re-appointed and company resolved not to fill in the vacancy.

There is no re-appointment of any director who are retire by rotation. Therefore as required under Clause 49 of the Listing Agreement, details are not given in the report on Corporate Governance,forming part of this Annual Report.

Mr. Edoardo Carlo Richter, the Director of the Company has resigned as Director of the Company with effect from 14th February, 2014, Mr. James McEuen has resigned as Director of the Company with effect froml4th May 2014, Dr. R. Srinivasan the Director of the Company has resigned as Director of the Company with effect from 5th June 2014 and Mr. Michael Bastain the Director of the Company has resigned as Director of the Company with effect from 9th August, 2014. The Board accepted their resignations and place on record their appreciation for the valuable guidance and advice provided by Mr. Edoardo Carlo Richter , Mr. James McEuen, Dr. R. Srinivasan and Mr. Michael Bastain during their tenure as Directors of the Company.

AUDITORS:

M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as the Auditors of the Company at the conclusion of the ensuing Annual General Meeting. They have signified their willingness to get re-appointed and have confirmed their eligibility in terms of the provisions of Section 141 of the Companies Act, 2013 and Rule 4 of Companies (Audit and Auditors) Rules, 2014. On the recommendation of the Audit Committee, the Board proposes for consideration of the Shareholders pursuant to the provisions of Section l39, l42 and other applicable provisions, if any, of the Companies Act, 2013, as Statutory Auditors of the Company, to hold office from the conclusion of the 31st Annual General Meeting up to the conclusion of the 34th consecutive Annual General Meeting. You are requested to appoint Auditors and fix their remuneration.

COST AUDITORS:

With the resignation of M/s. Sevakari, Khare and Associates, Cost Accountants, Mumbai having registration No. 00084, on the recommendation of the Audit Committee at its meeting held on November, 14th, 2014, the Board has, considered and approved the appointment of T.M. Rathi, Mumbai having Registration No10079 as the cost auditor for the Bulk Drugs and Formulations for the financial year 2014-2015.

The Cost Audit Reports for bulk drugs and formulations for fifteen months period ended on 30th June 2013 will be filed with the Central Government in due course of time. The Cost Audit Report for the accounting period for the year ended 30th June 2014 would be submitted to the Central Government in due course of time.

JOINT VENTURES / SUBSIDIARIES / INVESTMENTS:

''ELDER INTERNATIONAL FZCO'' the wholly owned subsidiary of the Company in Jebel Ali, Dubai, United Arab Emirates (Dubai WOS), continues to hold 100% stake in the U. K. based NeutraHealth Limited.

Dubai WOS also continues to hold 100% interest in Elder Biomeda EAD, Bulgaria which in turn continues to hold 100% stake in downstream Bulgarian entities, namely, Elder Bulgaria EOOD, the manufacturing company and Biomeda 2000 EOOD, the distribution company. Bulgaria, being a part of the European Union, offers an excellent opportunity for the Company to enter the Eastern European as well as CIS countries. The manufacturing unit in Bulgaria is being upgraded and once upgradation is completed it is expected that there will be a lot of opportunities for manufacturing products for the Eastern European, CIS and other markets. The distribution business has a lot of potential and during the year under review it has received a number of registrations which will help the distribution company to widen its scope. The distribution company which used to be operating only in the Bulgarian market has now started exporting some of its products to nearby countries.

The Dubai WOS continues to hold 100% interest in NutraHealth Ltd., the U.K. subsidiary. The U. K. operations have shown very encouraging results despite the slowing down of the U. K. economy. The said U. K. subsidiary has, in a cashless transaction, acquired Max Healthcare Ltd., U.K. to re-enter the OTC pharmaceutical category and extend and enhance its product range.

The Company continues to hold it''s investment in the Nepal Joint Venture. During recent period there have been certain issues on unilateral decisions taken by the Nepalese partner whereby the Company''s stake in terms of percentage to total capital was reduced from earlier 40% to 30.6%. The Company has notified its dissent to the action taken by the partner and has written to the Ministry of Industry, Government of Nepal seeking an amicable solution in the matter. The discussions were held with the Nepalese partner as directed by the Director of Industry, Government of Nepal for arriving at an acceptable solution, however no settlement could be reached so far. Efforts are being made to work out an amicable settlement to resolve the matter.

BANKERS AND FINANCIAL INSTITUTIONS:

The Directors wish to place on record their sincere gratitude to the consortium of Banks for working capital lead by State Bank of India for their continued and timely support to the Company.

The Directors also wish to place on record their sincere gratitude to the various term lenders and NCD holders for their continued and timely support to the Company. During the year under review, the company has been defaulting in the repayment of NCD and Interest thereon. The company is working on Short Term and Medium Term plan for regularization of default.

EXPORT HOUSE STATUS:

The Company continues to enjoy ''Export House'' status. The Company''s products are exported to certain African and South East Asian markets. The registration procedures are presently going on in a number of countries and once their formalities are completed, the Company''s exports are expected to increase.

ISO / WHO GMP ACCREDITATION:

The Company continues to be certified as conforming to ISO 9001 : 2000 for development, manufacturing and marketing of pharmaceutical products. The Company''s bulk drug manufacturing plant at Patalganga was upgraded according to ICH Q7A guidelines for manufacturing products for the European markets. The said bulk drug plant as well as formulation plants of the Company are now approved by WHO GMP and certified as conforming to ISO 9001 : 2008 standards relating to Quality Management Systems. While the Selaqui formulations plant of the Company has been accredited for WHO GMP the said plant is being upgraded for UK MHRA accreditation. The formulation plants at Nerul, Paonta Sahib have been accredited for WHO GMP standards. The formulations plant at Langha Road near Dehradun is designed as per USFDA compliance requirements and is also accredited for WHO GMP

DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors, on the basis of compliance certificate received from Managing Director, CFO and other executives of the Company and subject to disclosures in annual accounts as on 30th June 2014 and on the basis of discussions with the Statutory Auditors of the Company from time to time, declare and confirm:

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

b) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end year ended on 30th June 2014 and the profit of the Company for that year.

c) That the Directors had taken proper and sufficient care for maintenance of adequate accounting records for the year ended 30th June 2014 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.

d) That the Directors had prepared the accounts for the year ended 30th June 2014 on a ''going concern basis''.

CORPORATE GOVERNANCE:

In pursuance of the system of Corporate Governance instituted by SEBI and forming part of the Listing Agreement with the Stock Exchanges, a report thereon is separately attached to this report.

RESEARCH AND DEVELOPMENT ACTIVITY:

The Research and Development activities of the Company continue to be recognized by the Department of Science and Technology, Government of India. The Research and Development laboratory of the Company has successfully developed certain import substitute molecules / intermediates and has been working on development of a number of other molecules. It has also been continuously working on process developments of the molecules already developed by it. It has been engaged in development of new products and their improvement in terms of delivery, absorption and efficacy. The Company has applied for seventeen Indian patents with seven PCT applications. Out of these one PCT application has been entered in the USA, Europe and Japan.

INSURANCE OF ASSETS:

The Company is in the process of renewing the insurance cover for all the fixed assets, finished goods, semi-finished goods, raw materials, packing materials and other goods and assets of the Company lying at different locations against fire, burglary, transit, riots, strike, malicious damage and allied risks as well as goods in transit.

CAPITALISATION:

During the year under review the Company has added fixed assets worth Rs. 3.48 Crores whereas disposal and adjustment of fixed assets amounted to Rs. 46.66 Crores. The Company had capital work in progress amounting to Rs. 304.26 Crores as at 30th June 2014 at various project sites.

DEPOSITS:

The Company is irregular in repayment of principal and payment of interest and has defaulted therein. The Company has made application to the Company Law Board for the extension of time in repayment of Deposits and approval is yet to be received. The Company has been complying with the provisions of Section 58A and other applicable provisions, if any, of the Companies Act, 1956 and the rules made thereunder. As at 30th June 2014 the fixed deposits outstanding under the public deposit schemes were Rs.143.38 Crores. The Company has discontinued acceptance of deposits from public.

AUDITORS'' REPORT:

The comments / observations of the Auditors, if any, are self explanatory and do not call for any further explanations or clarifications except the following :

As regards Point No. 1 of the basis for qualified opinion of the Auditor, the Company is of the view that the Plant concerned has intrinsic value which is higher than the values carried in the books of accounts as capitalization as well as capital Work in progress. As regards Point No.2 (i) & (ii), the management had reviewed all the balances carried in the accounts and taking a conservative view decided to write off those carrying amounts where no further economic benefit will be realizable from those pertinent assets, & management decided that it is now imperative that the same should get appropriately reflected in the Profit & Loss Account of the financial year ended 30th June, 2014. Our efforts for recovery to write off shall continue and recoveries will be accounted in the year of realization on cash basis. Point No. 3 & 4 of the qualified opinion of the Auditor are self explanatory.

As regards the comments of the Auditors in serial no. 1 & 2 under the ''Emphasis of matter'', the Company has completed first round of re-structuring by divesting some of its brands to M/s. Torrent Pharmaceuticals Ltd., for a consideration of Rs. 2004 crores during the year. The Company is further exploring the possibilities of divestment of some of its non-core assets and infusion of long term equity capital / debt funds for the revival of the company. The management has initiated efforts to pursue business plan involving existing products and launching of new products with effective marketing strategy and extending contract manufacturing activites. As regards the comments of the Auditors in Serial no. 3 the Company seized of the matter and in the process of completing reconciliation / confirmation of Trade receivables, inter-divisional balances, loans and advances and in certain cases of few bank accounts. The effect of the same shall be given in the accounts for the next financial year. However, management does not expect any significant impact of the same on the results of the Company. As regards Serial No.4, the company is seized of the matter and shall take appropriate steps in due course.

As regards non-depositing or investment of a sum of not less than 15% of the amount of debentures maturing during the period ended 30th June, 2014, the company is seized of the matter and said amount will be deposited / invested in due course.

PARTICULARS OF EMPLOYEES:

Information as per Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended is available at the registered office of the Company. As per the provisions of Section 219(i)(b)(iv) of the Companies Act, 1956 this Report and Accounts are being sent to all Shareholders of the Company and others entitled to it excluding the aforesaid information. Any Shareholder interested in obtaining a copy of the statement under Section 217(2A) of the Companies Act, 1956 may write to the Company Secretary at the address of the registered office of the Company.

EMPLOYER / EMPLOYEE RELATIONS:

The relationship with the workers of the Company''s manufacturing units and other staff continues to be cordial. The Directors wish to place on record their sincere appreciation and gratitude for the services rendered by the workers and staff at all levels.

EMPLOYEE STOCK OPTION PLAN:

The Shareholders at the 21st Annual General Meeting of the Company passed a resolution approving the Employee Stock Option Plan called ''Elder ESOP 2004''. A total of 1,439,274 equity shares of the Company are available under Elder ESOP 2004 for grant of Options at an exercise price of15% discount to the market rate. The Company had granted Options in respect of 399,250 shares which were to be exercised in four equal parts ending on 27th March 2008 at an exercise price of Rs. 209/- per share inclusive of a premium of Rs. 199/- per share. Out of the Options granted 285,748 were exercised during the accounting year under review. Options that were not exercised within the stipulated period have lapsed. There are 1,153,526 shares for which Options can still be granted to Employees under Elder ESOP 2004.

CORPORATE SOCIAL RESPONSIBILITY

The Board of Directors constituted a Corporate Social Responsibility (CSR) Committee in terms of the provisions of Section 135(1) of the Companies Act, 2013 on 21st August, 2014 with the strong belief in the principle of Trusteeship to serve the community

This CSR Committee shall review and restate the Company''s CSR policy in order to make it more comprehensive and aligned with the activities specified in Schedule VII of the Companies Act, 2013.

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

In accordance with Rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 as applicable, the particulars relating to conservation of energy and technology absorption are given in Annexure 1 to this Report.

The foreign exchange outgoings during the year under review was Rs. 4.31 Crores for imports of raw materials / finished goods and Rs. 0.34 Crores for foreign travel. The Company also paid Rs. 6.56 Crores in foreign exchange as interest on the External Commercial Borrowing and other expenses of Rs. 1.3 1 Crores. The foreign exchange earnings during the year were Rs. 30.66 Crores on account of exports on FOB basis.

For and on behalf of the Board Alok Jagdish Saxena Managing Director & CEO

Mumbai, 13th February, 2015


Jun 30, 2013

The Directors are pleased to present the Thirtieth Annual Report of the Company together with the audited Accounts for the fifteen months period ended 30th June 2013. The working results of the Company for the fifteen months period ended 30th June 2013 vis-a-vis those of the previous year are summarized below:

Fifteen months Year ended Period ended 31.03.2012 30.06.2013 (Rs.In Crores) (Rs.In Crores)

1. Operating Income 1,233.10 984.69

2. Other Income 26.22 24.31

3. Profit before Tax 115.71 103.51

4. Less: Provision for Tax

Current Year 24.50 21.00

Deferred Tax (2.53) (1.65)

5. Profit after Tax 93.74 84.16

6. Less: Prior year Tax 0.09 adjustments

7. Add: Profit as per the last 192.88 185.97 Balance Sheet

8. Profit available for 286.62 270.04 appropriation Out of which

Directors recommend Appropriation as under:

a) Proposed Dividend 6.16

b) Tax on Dividend 1.00

c) Transfer to General Reserve 30.00 30.00

d) Transfer to Debenture 40.00 40.00 Redemption Reserve

e) Surplus carried forward to 216.62 192.88 Balance Sheet

OPERATIONS AND PERFORMANCE:

The Indian economy has been passing through a very difficult phase and uncertainties which has impacted businesses across all sectors with industrial production slowing down, Indian Rupee depreciating in value, making the imported inputs costlier. The Indian GDP growth has been below expectation and with high interest rates, the already high inflation is having cascading effect. All these factors have put a lot of pressure on both operating costs and margins of the Company. Your Company''s Operating Income during the period under review was Tl2.33.10 crores as against Rs. 984.69 crores in the previous year. This represents an increase of Rs. 248.41 crores over the previous year. However, in view of increase in all round input costs, increased finance costs, etc. have brought the pre and post tax profits under tremendous pressure.

During the period under review with a view to reducing the debt of the Company the Board of Directors has approved the proposal for carrying out restructuring of the Company''s business involving either raising of capital, hiving off of assets or other strategic options and have appointed advisors for the same for the purpose.

All the products of the Company continue to be well accepted by the medical fraternity in India. The main therapeutic areas of interest to the Company continue to be Women''s healthcare, Wound care and Pain Management, Neutraceuticals / Vitamin Supplements, Life Style & Diabetes, and Antibiotics.

EXTENSION OF FINANCIAL YEAR:

The Board had by a resolution passed by circulation on 8th March 2013 decided to extend the Financial Year of the Company by three months so as to end on 30th June 2013. Accordingly, the Financial Statements have been prepared for 15 months covering a period from Ist April 2012 to 30th June 2013.

DEMISE OF CHAIRMAN & MANAGING DIRECTOR:

The Board regretfully reports the sad demise of its Founder Chairman & Managing Director, Mr. Jagdish Saxena after a prolonged illness. The Board further expresses its heartfelt condolences for Mr. Saxena''s untimely death and wishes to place on record its sincere and deep appreciation for his invaluable guidance and contribution from time to time in building the Company and its growth.

Late Mr. Jagdish Saxena was a great visionary and had highest business acumen. He was able to feel the pulse and need of the Pharmaceutical market in India and introduced many ''first of its kind'' formulations into India. He always believed in creating asset for the Company and was successful in creating facilities of international standards for various dosage presentations. His policy of non-infringement of patents was comforting for the foreign pharma research companies of repute to work with the Company.

MERGER OF ELDER HEALTH CARE LIMITED WITH ELDER PHARMACEUTICALS LIMITED:

In view of the recent developments the Board of Directors of the Company had at its meeting held on 14th May 2013 decided not to proceed with the merger of Efder Health Care Ltd. with the Company and to withdraw the application(s) filed by the Company in the High Court at Mumbai. Accordingly, the Company has withdrawn its application.

GLOBAL DEPOSITORY RECEIPTS:

The Company had made an issue of Global Depository Receipts (GDRs) during the year 2004-05. All the issued GDRs have been converted into equity shares and no GDRs are outstanding as on 30th June 2013. The Company''s listing for the GDRs, however, continues on the Luxembourg Stock Exchange and as on 28th June 2013 the same were quoted at U.S. $ 10.95.

DIVIDEND:

In view of the severe financial constraints faced by the Company the Directors at their meeting held on 29th August 2013 have decided to skip dividend for the accounting period under review.

DIRECTORS:

Dr. Joginder Singh Juneja, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He however, being eligible, has offered himself for re-appointment.

Dr. Sailendra Narain, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He, however, being eligible, has offered himself for re-appointment.

Mr. Saleem Shervani, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He, however, being eligible, has offered himself for re-appointment.

As required under Clause 49 of the Listing Agreement, the particulars of Dr. Joginder Singh Juneja, Dr. Sailendra Narain and Mr. Saleem Shervani, Directors who are due to retire by rotation at the ensuing Annual General Meeting but having offered for their re-appointment, are given in the Report on Corporate Governance, forming part of this Annual Report.

Mr. James McEuen was appointed as the Additional Director by the Board w.e.f. 2nd November 2012 to hold office up to the date of the ensuing Annual General Meeting. The Company has received notices from some shareholders proposing his candidature to the office of Director liable to retirement by rotation. You are requested to appoint Mr. James McEuen as Director.

In view of sad demise of Mr. Jagdish Saxena on 10th October 2013, the Board of Directors at their meeting held on I Ith October 2013 appointed Mr. Alok Jagdish Saxena as Managing Director & Chief Executive Officer of the Company w.e.f. I Ith October 2013 for a period of five years subject to approval of shareholders and governmental authorities, if any. Mr. Alok Jagdish Saxena was earlier holding the office of Joint Managing Director of the Company.

AUDITORS:

M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as the Auditors of the Company at the conclusion of the ensuing Annual General Meeting. They have signified their willingness to get re-appointed and have given a declaration that if re-appointed their appointment will be within the limits specified under Section 224(I)(B) of the Companies Act, 1956. On the recommendation of the Audit Committee, the Board proposes for consideration of the Shareholders, the re-appointment of M/s. S. S. Khandelwal & Co. as Auditors of the Company for the financial year 2013-14. You are requested to appoint Auditors and fix their remuneration.

COST AUDITORS:

The Directors have appointed M/s. Sevekari, Khare and Associates, Cost Accountants, Mumbai, having registration No. 00084, as Cost Auditors of the Company for the pharmaceuticals (formulations and bulk drugs) activities of the Company for the financial year 2013-14 and their appointment has been approved and taken on record by the Central Government.

The Cost Audit'' Reports for bulk drugs and formulations for the year ended 31st March 2012 were filed with the Central Government on 18th January 2013. The Cost Audit Report for the accounting period ended 30th June 2013 would be submitted to the Central Government within the prescribed time limit.

NON-CONVERTIBLE DEBENTURES:

As mentioned in the Directors'' Report of the last year your Company made one more issue of Rated Secured Redeemable Non-Convertible Debentures on a private placement basis called

3rd Tranche during the fifteen months accounting year under review. The issue size was Rs. 70.00 crores comprising of 700 units of Rs. 10.00 lacs each and carrying interest @ 12.50% p.a. payable quarterly and redeemable in sixteen equal quarterly installments of Rs.4.375 crores starting from the end of the thirteenth quarter from the date of allotment and ending at the end of the twentieighth quarter from the date of allotment. The jssue was rated by Credit Analysis and Research Limited (CARE) who had assigned A '' rating to the said NCD issue of the Company. The said NCD units have been listed on the WDM Segment of National Stock Exchange of India Limited (NSE). The issue of NCDs was made for the purpose of retirement of high cost debt and to augmenting medium to long term resources of the Company including regular capital expenditure (not constituting a project). During the year , under reference CARE has downgraded the rating assigned to ''D'' to the NCDs issued by the Company.

Attached hereto at Appendix I are the details of funds raised through issuance of Non-Convertible Debentures in the 3rd Tranche and utilization of those funds.

The Directors take this opportunity to thank all the investors who have invested in the NCD issues of the Company and solicit their continued support.

OPTIONALLY CONVERTIBLE DEBENTURE:

Since the close of the accounting year under review the Company has made an issue of unrated, unlisted, secured Optionally Convertible Debentures (OCDs) on a private placement basis of an amount up to X 50.00 crores having a face value of Rs. 100,000/- each per Debenture unit. The Company has completed allotment of 4055 units of Rs. 10.00 lacs each aggregating Rs. 40.55 crores carrying coupon of 22% p.a. and which will have a maturity date of 20th May 2014.

Attached hereto at Appendix II are the details of funds raised through issuance of Optionally Convertible Debenture and utilization of those funds.

The Directors take this opportunity to thank all the investors who have invested in the QCD issue of the Company and solicit their continued support.

JOINT VENTURES / SUBSIDIARIES / INVESTMENTS:

ELDER INTERNATIONAL FZCO'' the wholly owned subsidiary of the Company in Jebel Ali, Dubai, United Arab Emirates (Dubai WOS), continues to hold 100% stake in the U.K. based Nutra Health Limited.

The U. K. operations have shown very encouraging results despite the slowing down of the U.K. economy. The said U. K. subsidiary has, in a cashless transaction, acquired Max Healthcare Ltd., U.K. to re-enter the OTC pharmaceutical category and extend and enhance its product range.

Dubai WOS also continues to hold 100% interest in Elder Biomeda EAD, Bulgaria which in turn continues to hold 100% stake in downstream Bulgarian entities, namely, Elder Bulgaria EOOD, the manufacturing company and Biomeda 2000 EOOD, the distribution company. Bulgaria, being a part of the European Union, offers an excellent opportunity for the Company to enter the Eastern European as well as CIS countries. The manufacturing unit in Bulgaria is being upgraded and once upgradation is completed it is expected that tfiere will be a lot of opportunities for manufacturing products for the Eastern European, CIS and other markets. The distribution business has a lot of potential and during the period under review it has received a number of registrations which will help the distribution company to widen its scope. The distribution company which used to be operating only in the Bulgarian market has now started exporting some of its products to nearby countries.

The Dubai WOS had entered into a 50 : 50 joint venture in Syncro Health Limited, Guernsey (Syncro), which was engaged in web marketing of certain neutraceutical products. Guernsey offered certain tax concessions and this was the consideration for the business set up by Syncro Health Limited which provided a competitive edge as compared to buying neutraceuticals in stores. Since the business of Syncro did not pick up and the concessions offered were also withdrawn by me U. K. Government, the said company ended up in insolvent trading. As per the Guernsey laws, it was voluntarily decided to appoint administrator for Syncro. The liquidation of die said company has been completed.

The Company continues to hold it''s investment in the Nepal Joint Venture. During recent period there have been certain issues on unilateral decisions taken by the Nepalese partner whereby the Company''s stake in terms of percentage to total capital was reduced from earlier 40% to 30.6%. The Company has notified its dissent to the action taken by the partner and has written to the Ministry of Industry, Government of Nepal seeking an amicable solution in the matter. The discussions were held with the Nepalese partner as directed by the Director of Industry, Government of Nepal for arriving at an acceptable solution, however no settlement could be reached so far. Efforts are being made to work out an amicable settlement to resolve the matter.

During the accounting period under review the Company has signed a Memorandum of Understanding with Holding PharmEco, a Russian company, for establishing a joint venture in Russia for setting up manufacturing facility/ies for pharmaceutical formulations / APIs. However, little progress has been made towards the said joint venture.

During the accounting period under review the Company has entered into a joint venture agreement with KOSE Corporation of Japan for establishment of a joint venture company in India for manufacturing, selling and distribution of cosmetics products in

India.

Pursuant to and in compliance with the General Circular No. 2/ 201 I being No. 5I/I2/2007-CL-III dated 8th February 2011 issued by Government of India, Ministry of Corporate Affairs, the Company has given the required particulars of its subsidiary and subsidiaries of the subsidiary in a statement forming part of this Annual Report. The Annual Audited Accounts and related, information of the subsidiary and subsidiaries of subsidiary has been kept for the inspection at the registered / head office of your Company as well as at the head office of subsidiary companies concerned and the shareholders of the Company and subsidiaries seeking such information shall be provided with the same at any point of time. The Company shall also furnish a hard copy of detailed accounts of subsidiaries to any shareholder on demand.

BANKERS AND FINANCIAL INSTITUTIONS:

The Directors wish to place on record their sincere gratitude to the consortium of Banks for working capital led by State Bank of India for their continued and timely support to the Company.

The Directors also wish to place on record their sincere gratitude to the various term lenders and NCD / OCD holders for their continued and timely support to the Company.

EXPORT HOUSE STATUS:

The Company continues to enjoy ''Export House'' status. The Company''s products are exported to certain African and South East Asian markets. The registration procedures are presently going on in a number of countries and once their formalities are completed, the Company''s exports are expected to increase.

ISO / WHO GMP ACCREDITATION:

The Company continues to be certified as conforming to ISO 9001 : 2000 for development, manufacturing and marketing of pharmaceutical products. The Company''s bulk drug manufacturing plant at Patalganga was upgraded according to ICH Q7A guidelines for manufacturing products for the US and UK markets. The said bulk drug plant as well as formulation plants of the Company are now approved by WHO GMP and certified as conforming to ISO 9001 : 2008 standards relating to Quality Management Systems. While the Sela Qui formulations plant of the Company has been accredited for WHO GMP the said plant is being upgraded for UK MHRA accreditation. The formulation plants at Nerul, Paonta Sahib have been accredited for WHO GMP standards. The formulations plant at Langha Road near Dehradun is designed as per USFDA compliance requirements and is also accredited for WHO GMR

DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors, on the basis of compliance certificate received from Managing Director, CFO and other executives of the Company and subject to disclosures in annual accounts as on 30th June 2013 and on the basis of-discussions with the Statutory Auditors of the Company from time to time, declare and confirm:

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

b) that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the fifteen months period ended on 30th June 2013 and the profit of the Company for that period.

c) That the Directors had taken proper and sufficient care for maintenance of adequate accounting records for the 15 months period ended 30th June 2013 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.

d) That the Directors had prepared the accounts for the fifteen months period ended 30th June 2013 on a ''going concern basis''.

CORPORATE GOVERNANCE:

In pursuance of the system of Corporate Governance instituted by SEBI and forming part of the Listing Agreement with the Stock Exchanges, a report thereon is separately attached to this report.

RESEARCH AND DEVELOPMENT ACTIVITY:

The Research and Development activities of the Company continue to be recognized by the Department of Science and Technology, Government of India. The Research and Development laboratory of the Company has successfully developed certain import substitute molecules / intermediates and has been working on development of a number of other molecules. It has also been continuously working on process developments of the molecules already developed by it. It has been engaged in development of new products and their improvement in terms of delivery, absorption and efficacy. The Company has applied for seven Indian patents with two in the USA and Japan and the other PCT applications has been entered in the USA, Europe and Japan.

INSURANCE OF ASSETS:

The Company is in the process of renewing the insurance cover for all the fixed assets, finished goods, semi-finished goods, raw materials, packing materials and other goods and assets of the Company lying at different locations against fire, burglary, transit, riots, strike, malicious damage and allied risks as well as goods in transit.

CAPITALISATION:

During the year under review the Company has added fixed assets worth Rs. 13.24 crores whereas disposal and adjustment of fixed assets amounted to Rs. 0.34 crores. The Company had capital work in progress amounting to Rs. 268.36 crores as at 30th June 2013 at various project sites.

DEPOSITS:

The Company''s public deposit scheme has been receiving good response from depositors. The Company is regular in repayment of principal and payment of interest and has not defaulted therein. The Company has been complying with the provisions of Section 58A and other applicable provisions, if any, of the Companies Act, 1956 and the rules made thereunder. As at 30th June 2013 the - fixed deposits outstanding under the public deposit schemes were Rs. 167.72 crores. The Company has discontinued acceptance of deposits from public since the close of accounting period under review.

AUDITORS'' REPORT:

As regards non-depositing or investment of a sum not less than 15% of the amount of Debentures maturing during the period ended 30th June 2013, the Company is seized of the matter and the said amount will be deposited / invested in due course.

As regards the comments of the Auditors at Sr. No. I under ''Emphasis of Matter, the Company is still in the process of restructuring its business. As regards comments at Sr. Nos. 2 and 3, the Company is seized of the matter and has been negotiating payment modalities with the lenders. As regards comment at Sr. No. 4 the matter has been withdrawn by the lender concerned upon the Company having repaid the amount in question.

As regards statutory payments the Company has deposited Provident Fund dues up to 30th June 2013. The Company has also

deposited Income Tax Dues (Tax Deducted at Source - Others) up to March 2013. The outstanding of Employees State Insurance and Service Tax reported in the Auditors'' Report have also been cleared.

As regards defaults in payment of interest and repayment of installments due to banks and debenture holders, the Company is making all out efforts to clear the same at die earliest.

PARTICULARS OF EMPLOYEES:

Information as per Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended is available at the registered office of the Company. As per the provisions of Section 219(i)(b)(iv) of the Companies Act, 1956 this Report and Accounts are being sent to all Shareholders of the Company and others entitled to it excluding the aforesaid information. Any Shareholder interested in obtaining a copy of the statement under Section 2I7(2A) of the Companies Act, 1956 may write to the Company Secretary at the address of the registered office of the Company.

EMPLOYER/ EMPLOYEE RELATIONS:

The relationship with the workers of the Company''s manufacturing units and other staff continues to be cordial. The Directors wish to place on record their sincere appreciation and gratitude for the services rendered by the workers and staff at all levels.

EMPLOYEE STOCK OPTION PLAN:

The Shareholders at the 21st Annual General Meeting of the Company passed a resolution approving the Employee Stock Option Plan called ''Elder ESOP 2004''. A total of 1,439,274 equity shares of the Company are available under Elder ESOP 2004 for grant of Options at an exercise price of 15% discount to the market rate. The Company had granted Options in respect of 399,250 shares which were to be exercised in four equal parts ending on 27* March 2008 at an exercise price of Rs. 209/- per share inclusive of a premium of Rs. 199/- per share. Out of the Options granted 285,748 were exercised during the accounting year under review. Options that were not exercised within the stipulated period have lapsed. There are 1,153,526 shares for which Options can still be granted to Employees under Elder ESOP 2004.

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

In accordance with Rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 as applicable, the particulars relating to conservation of energy and technology absorption are given in Annexure I to this Report.

The foreign exchange outgo during the year under review was Rs. 29.76 crores for imports of raw materials / trading, interest and other items, and Rs. 50.22 lacs for foreign travel. The Company also paid Rs. 5.83 crores in foreign exchange as interest on the External Commercial Borrowing. The foreign exchange earnings during the year were Rs. 31.77 crores on account of exports on FOB basis.

For and on behalf of die Board

Atok Jagdish Saxena

Mumbai, 13th November 2013 Chairman


Mar 31, 2012

The Directors are pleased to present the Twenty Ninth Annual Report of the Company together with the audited Accounts for the year ended 31st March 2012. The working results of the Company for the year ended 31st March 2012 vis-a-vis those of the previous year are summarized below:

Year ended Year ended 31.03.2012 31.03.2011 (Rs.In Lacs) (Rs.In Lacs) 1. Operating Income 98,468.73 83,858.56

2. Other Income 2,430.75 804.27

3. Profit before Tax 10,351.12 8,906.95

4. Less: Provision for Tax

Current Year 2,100.00 1,800.00

Deferred Tax (164.83) (33.17)

5. Profit after Tax 8,415.95 7,140.12

6. Less: Prior year Tax adjustments (8.62) (61.00)

7. Add: Profit as per the last 18596.86 19,233.78 Balance Sheet

8. Profit available for 27,004.19 26,312.90 appropriation

Out of which Directors recommend Appropriation as under:

a) Proposed Dividend 616.11 616.09

b) Tax on Dividend 99.95 99.95

c) Transfer to General Reserve 3,000.00 3,000.00

d) Transfer to Debenture 4,000.00 4,000.00

Redemption Reserve

e) Surplus carried forward to 19,288.13 18,596.86 Balance Sheet

OPERATIONS AND PERFORMANCE:

The economy throughout the world witnessed economic and political turmoil during the year under review with natural and man made calamities which have impacted businesses across all sectors. The Indian GDP growth was below expectation and with high interest rates and monsoon playing truant this season, the already high inflation is likely to have spiraling effect. Added to this is the depreciating Rupee against US Dollar making the imported inputs costlier. All these factors have brought a lot of pressure on both operating costs and margins of the Company. Your Company's Operating Income during the year under review was Rs. 98,468.73 lacs as against Rs. 83,858.56 lacs in the previous year. This represents an increase of Rs. 14,610.17 lacs which is equivalent to 17.42% increase over the previous year. Ever rising oil prices and resultant increase in the all round input costs, increased finance costs, etc. have brought the pre and post tax profits under pressure. However, there has been slight improvement in the pre tax and post-tax profit, although in percentage terms it is less than the top line growth, with profit before tax for the year under review being Rs. 10,351.12 lacs as against profit before tax of Rs. 8,906.95 lacs in the previous year and profit after tax for the year under review being Rs. 8,415.95 lacs as against profit after tax of Rs. 7,140.12 lacs in the previous year.

During the year under review the Company introduced a number of new products. These products were BFX, MENY, MENY Plus, Elpod O and FORMIC OF in the Anti-infective category, New Zephrol Cold Syrup, New Zephrol Cold Tablets and New Zephrol DC Syrup in the Cough & Cold category, Aptirez Syrup in Appetite Stimulant category, Vagisil Range in the Women's Health Care category, Chymoral AP in Wound Care & Pain Management category and Gastrochill & Gastrochill D in the G. I. category.

All the products of the Company including new introductions have been well accepted by the medical fraternity in India. The main therapeutic area of interest to the Company continues to be Women's healthcare, Wound care and Pain Management, Neutraceuticals / Vitamin Supplements, Life Style & Diabetes, and Antibiotics.

MERGER OF ELDER HEALTH CARE LIMITED WITH ELDER PHARMACEUTICALS LIMITED

The Company has explored and evaluated the various opportunities for growth and expansion available for the Company. Looking at the synergies of operations and the benefits that would accrue to the Company it was decided by the Board of Directors to merge Elder Health Care Limited into the Company and at its meeting held on 2nd August 2012 has approved the draft Scheme of Arrangement in respect thereof u/s 391 to 394 of the Companies Act, 1956. The Directors are of the opinion that the draft Scheme of Arrangement is advantageous and beneficial to the Shareholders of the Company and the terms thereof are fair and reasonable. Subject to the approval of the Stock Exchanges, the Shareholders of both the transferor and transferee companies, the Registrar of Companies, the Hon'ble High Court of Judicature at Mumbai and other authorities, if any, the Scheme of Arrangement will come into effect from 1st April 2012, being the Appointed Date. It is proposed to allot 100 (One Hundred) equity shares of Rs. 10/- each fully paid up in the capital of the Company for every 358 (Three Hundred Fifty Eight) equity shares of Rs. 10/- each fully paid up held by the shareholders of the transferor company i.e. Elder Health Care Limited, once the Scheme of Arrangement is approved by all the appropriate authorities.

GLOBAL DEPOSITORY RECEIPTS:

The Company had made an issue of Global Depository Receipts (GDR) during the year 2004-05. All the issued GDRs have been converted into equity shares and no GDRs are outstanding as on 31st March 2012. The Company's listing for the GDRs, however, continues on the Luxembourg Stock Exchange and as on 31st March 2012 the same were quoted at $13.31.

DIVIDEND:

The Directors have pleasure in recommending a dividend of 30 % i.e. Rs. 3/- per equity share of Rs. 10/- each for the year ended 31st March 2012 and the same, once approved by the shareholders, will be paid on or before 23rd October 2012 to those shareholders whose names appear in the Register of Members as on the close of business on 19th September 2012.

DIRECTORS:

Dr. R. Srinivasan, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He however, being eligible, has offered himself for re-appointment.

Dr. S. Jayaram, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He, however, being eligible, has offered himself for re-appointment.

Mr. Michael Bastian, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He, however, being eligible, has offered himself for re-appointment.

As required under Clause 49 of the Listing Agreement, the details of Dr. R. Srinivasan, Dr. S. Jayaram and Mr. Michael Bastian, Directors who are due to retire by rotation at the ensuing Annual General Meeting but having offered for their re-appointment are given in the Report on Corporate Governance, forming part of this Annual Report.

The Board of Directors at its meeting held on 9th August 2012, has subject to provisions of sections 198, 269, 309, 310, 311 and other applicable provisions, if any, of the Companies Act, 1956 and further subject to the consent and approval of Shareholders and /or any other statutory authorities, if any, that may be required, re-appointed Mr. Yusuf Karim Khan as Executive Director for a period of Five years effective from 28th August, 2012.

The particulars of Mr. Yusuf Karim Khan are given in the Notice of the 29th Annual General Meeting as well as in the Report on Corporate Governance.

AUDITORS & AUDITORS' REPORT:

M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as the Auditors of the Company at the conclusion of the ensuing Annual General Meeting. They have signified their willingness to get re-appointed and have given a declaration that if re-appointed their appointment will be within the limits specified under Section 224(1)(B) of the Companies Act, 1956. On the recommendation of the Audit Committee, the Board proposes for consideration of the Shareholders, the re-appointment of M/s. S. S. Khandelwal & Co. as Auditors of the Company for the financial year 2012-13. You are requested to appoint Auditors and fix their remuneration.

The Auditors' Report to the Shareholders is self explanatory and does not contain any reservations, qualifications or adverse remark. Notes on Accounts as referred to in the Auditors' Report are self explanatory and do not call for further comments or explanation.

COST AUDITORS AND COST AUDIT REPORT:

The Directors have appointed M/s. Sevekari, Khare and Associates, Cost Accountants, Mumbai, having registration No. 00084, as Cost Auditors of the Company for the formulations and bulk drugs activities of the Company for the financial year 2012-13 and their appointment has been approved and taken on record by the Central Government. The Cost Audit Reports would be submitted to the Central Government within the prescribed time limit.

The Cost Audit Reports for bulk drugs and formulations for the year ended 31st March 2011 were filed with the Central Government on 11th October 2011.

NON-CONVERTIBLE DEBENTURES:

Your Company made two issues of Rated Secured Redeemable Non- Convertible Debentures on a private placement basis during the previous financial year. The first issue was of 1,188 units of Rs. 10.00 lacs each aggregating Rs. 118.80 crores carrying interest @ 10.75% p.a. payable half yearly and redeemable in twelve equal quarterly installments starting from the end of the 9th quarter from the date of allotment i.e. 23rc December 2010 & ending at the end of the 20th quarter from the date of allotment. The installments will commence after two years of moratorium from the date of allotment. The second issue aggregated Rs. 73.00 crores comprising of 730 units of Rs. 10.00 lacs each having seven year maturity. This issue carries interest @ 11.25% p.a. which is payable half yearly from the date of allotment i.e. 30th March 2011 and is redeemable in ten equal semi annual installments starting from six months after the end of the second year from the date of allotment & ending at the end of seventh year from the date of allotment. Both the issues were rated by Credit Analysis and Research Limited (CARE) who had assigned 'A ' rating to the said NCD issues of the Company. NCD units issued under both the issues have been listed with the WDM Segment of National Stock Exchange of India Limited (NSE). The purpose of the NCD issue was retirement of high cost debt and to augment the medium to long term resources of the Company, including regular capital expenditure (not constituting a project).

Attached hereto at Appendix 1 are the details of funds raised through Non-Convertible Debentures as above and their utilization.

Since the close of the accounting year under review, the Company has made another issue of NCDs on private placement basis, called NCD 3rd Tranche issue amounting to Rs. 100.00 crores for augmenting medium to long term resources of the Company including regular capital expenditure (not constituting a project).

The directors take this opportunity to express their sincere thanks to the investors in NCDs for the confidence reposed by them in the Company.

JOINT VENTURES / SUBSIDIARIES / INVESTMENTS:

'ELDER INTERNATIONAL FZCO' the wholly owned subsidiary of the Company in Jebel Ali, Dubai, United Arab Emirates ((Dubai WOS), continues to hold 100% stake in the U. K. based NeutraHealth Limited. Upon acquisition of 100% stake in the said company it was delisted from AIMS Exchange.

Mr. Jagdish Saxena, Chairman and Managing Director of your Company continues to be a Director on the Board of NeutraHealth Limited.

The Dubai WOS had been holding 92.2% interest in Elder Biomeda AD, Bulgaria, a step down subsidiary of the Company. During the year under review the stake in Bulgarian Company was increased to 100%. Thus it has become a wholly owned subsidiary of Dubai WOS and as a single shareholder company, it is now known as Elder Biomeda EAD. It continues to hold 100% interest in Elder Bulgaria EOOD, a pharmaceuticals & neutraceuticals manufacturing company and Biomeda 2000 EOOD, a distribution company. Bulgaria, being a part of the European Union, offers an excellent opportunity for the Company to enter the Eastern European as well as CIS countries. The manufacturing unit in Bulgaria is being upgraded and once upgradation is completed it is expected that there will be a lot of opportunities for manufacturing products for the Eastern European, CIS and other markets. The distribution business in Bulgaria has started picking up. The distribution company which used to be operating only in the Bulgarian market has now started exporting some of its products to nearby countries. The Company is trying to promote some of the products manufactured by Elder Bulgaria EOOD in the export markets in which it has been operating.

The Dubai WOS had entered into a 50 : 50 joint venture in Syncro Health Limited, Guernsey (Syncro), which was engaged in web marketing of certain neutraceutical products. Guernsey offered certain tax concessions and this would have made the products offered by Syncro Health Limited competitive as compared to buying them in stores. Since the business of Syncro did not pick up as expected it was voluntarily decided to liquidate Syncro.

The Company continues to hold it's investment in the Nepal Joint Venture. During recent period there have been certain issues on decisions taken by the Nepalese partner whereby the Company's stake in terms of percentage to total capital was reduced from earlier 40% to 30.6%. The Company has notified its dissent to the action taken by the Nepalese partner and has written to the Ministry of Industry, Government of Nepal seeking an amicable solution in the matter. The discussions are going on with the Nepalese partner as directed by the Director of Industry, Government of Nepal for arriving at an acceptable solution.

Pursuant to and in compliance with the General Circular No. 2 / 2011 being No. 51/12/2007-CL-111 dated 8th February 2011 issued by Government of India, Ministry of Corporate Affairs the Company has given the required particulars of its subsidiary and subsidiaries of the subsidiary in a statement forming part of this Annual Report. The Annual Audited Accounts and related detailed information of the subsidiary and subsidiaries of subsidiary has been kept for the inspection at the registered / head office of your Company as well as the head office of subsidiary companies concerned and the shareholders of the Company and subsidiaries seeking such information shall be provided the same at any point of time. The Company shall also furnish a hard copy of detailed accounts of subsidiaries to any shareholder on demand.

BANKERS AND FINANCIAL INSTITUTIONS:

The Directors wish to put on record their sincere gratitude to the consortium of Banks for working capital comprising State Bank of India, Canara Bank, Bank of India, Axis Bank Ltd., Development Credit Bank Ltd., , DBS Bank Ltd. and Bank of Baroda for their continued and timely support to the Company.

The Directors also wish to put on record their sincere gratitude to the various term lenders for their continued and timely support to the Company.

EXPORT HOUSE STATUS:

The Company continues to enjoy 'Export House' status. The Company's products are exported to certain African and South East Asian markets. The registration procedures are presently going on in a number of countries and once their formalities are completed, the Company's exports are expected to increase.

ISO / WHO GMP ACCREDITATION:

The Company continues to be certified as conforming to ISO 9001 : 2000 in the areas of development, manufacturing and marketing of pharmaceutical products. The Company's bulk drug manufacturing plant at Patalganga complies with ICH Q7A guidelines for manufacturing products for international markets including the US and UK markets. The Company's Sela Qui and Paonta Sahib formulation units are accredited for WHO GMP apart from these units being certified as conforming to ISO 9001 : 2000. The facility at Paonta Sahib in Himachal Pradesh, which has been set up as per the highest industry standards, has been approved by WHO for manufacturing and packing of pharmaceutical products. The formulations plant at Langha Road in Uttarakhand is designed as per US FDA requirements for drug products and steriles. The formulation plant at Nerul, Navi Mumbai is in the process of renewing its WHO GMP accreditation..

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors, on the basis of compliance certificate received from Managing Director, CFO and other executives of the Company and subject to disclosures in annual accounts as on 31st March 2012 and on the basis of discussions with the Statutory Auditors of the Company from time to time, declare and confirm:

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

b) that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended on 31st March 2012 and the profit of the Company for that year;

c) That the Directors had taken proper and sufficient care for maintenance of adequate accounting records for the year ended 31st March 2012 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; and

d) That the Directors had prepared the accounts for the financial year ended 31st march 2012 on a 'going concern basis'.

CORPORATE GOVERNANCE:

In pursuance of the system of Corporate Governance instituted by SEBI and forming part of the Listing Agreement with the Stock Exchanges, a report thereon is separately attached as a part of to this report.

RESEARCH AND DEVELOPMENT ACTIVITY:

The Research and Development activities of the Company continue to be recognized by the Department of Science and Technology, Government of India. The Research and Development laboratory of the Company has successfully developed certain import substitute molecules / intermediates and has been working on development of a number of other molecules. It has also been continuously working on process developments of the molecules already developed by it. It has been engaged in development of new products and their improvement in terms of delivery, absorption and efficacy. The Company has applied for eighteen Indian patents with seven PCT applications. Out of these one PCT application has been entered in the USA, Europe and Japan. The Company enjoys "approved" status for its Research & Development Facility from the Secretary, DSIR u/s 35 (2AB) of the Income Tax Act, 1961 for claiming rebate on the expenses incurred by the Company on Research and Development.

INSURANCE OF ASSETS:

All the fixed assets, finished goods, semi-finished goods, raw materials, packing materials and other goods and assets of the Company lying at different locations and in-transit have been insured against fire, burglary, transit, riots, strike, malicious damage and allied risks.

CAPITALISATION:

During the year under review the Company has added fixed assets worth Rs. 59.84 crores whereas disposal and adjustment of fixed assets amounted to Rs. 0.72 crores. The Company had capital work in progress amounting to Rs. 191.01 crores as at 31st March 2012 at various project sites.

DEPOSITS:

The Company's public deposit scheme has been receiving good response from depositors. The Company is regular in repayment and payment of interest and has not defaulted therein. The Company has been complying with the provisions of Section 58A and other applicable provisions, if any, of the Companies Act, 1956 and the rules made thereunder. As at 31st March 2012 the fixed deposits outstanding under the public deposit schemes were Rs. 128.55 crores. Bajaj Capitals Limited continue to be the Managers to the Fixed Deposit Schemes of the Company.

PARTICULARS OF EMPLOYEES:

Information as per Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended is available at the registered office of the Company. As per the provisions of Section 219(i)(b)(iv) of the Companies Act, 1956 this Report and Accounts are being sent to all Shareholders of the Company and others entitled to it excluding the aforesaid information. Any Shareholder interested in obtaining a copy of the statement under Section 217(2A) of the Companies Act, 1956 may write to the Company Secretary at the address of the registered office of the Company.

EMPLOYER / EMPLOYEE RELATIONS:

The relationship with the workers of the Company's manufacturing units and other staff continues to be cordial. The Directors wish to place on record their sincere appreciation and gratitude for the services rendered by the workers and staff at all levels.

EMPLOYEE STOCK OPTION PLAN:

The Shareholders at the 21st Annual General Meeting of the Company passed a resolution approving the Employee Stock Option Plan called 'Elder ESOP 2004. A total of 1,439,274 equity shares of the Company are available under Elder ESOP 2004 for grant of Options at an exercise price of 15% discount to the market rate. The Company had granted Options in respect of 399,250 shares which were to be exercised in four equal parts ending on 27th March 2008 at an exercise price of Rs. 209/- per share inclusive of a premium of Rs. 199/- per share. Out of the Options granted 285,748 Options were exercised. Options that were not exercised within the stipulated period have lapsed. There are 1,153,526 shares for which Options can still be granted to Employees under Elder ESOP 2004.

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

In accordance with Rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 as applicable, the particulars relating to conservation of energy and technology absorption are given in Annexure 1 to this Report.

The foreign exchange outgo during the year under review was Rs. 30.64 crores for imports of raw materials / trading and other items, and Rs 39.84 lacs for foreign travel. The Company also paid Rs. 1.38 crores in foreign exchange as interest on the External Commercial Borrowing of Japanese Yen equivalent of USD 15 million. The foreign exchange earnings during the year were Rs. 28 crores on account of exports on FOB basis.

For and on behalf of the Board

Jagdish Saxena

Mumbai, 9th August, 2012 Chairman


Mar 31, 2011

Dear Members,

The Directors are pleased to present the Twenty Eighth Annual Report of the Company together with the audited Accounts for the year ended 31st March 2011. The working results of the Company for the year ended 31a March 2011 vis-a-vis those of the previous year are summarized below:

Year ended Year ended 31.03.2011 31.03.2010 (Rs. In Crores) (Rs. In Crores)

1. Operating Income 832.44 702.79

2. Other Income 8.43 7.63

3. Profit before Tax 89.07 64.68

4. Less: Provision for Tax Current Year 18.00 10.50

Deferred Tax (10.33) (1.21)

5. Profit after Tax 71.40 55.39

6. Less: Prior year Tax 0.61 - adjustments

7. Add: Profit as per the 192.34 173.54 Balance Sheet

8. Profit available for 263.13 228.93 Appropriation

Out of which Directors recommend Appropriation as under:

a) Proposed Dividend 6.16 5.66

b) Tax on Dividend 1.00 0.94

c) Transfer to General 30.00 30.00 Reserve

d) Transfer to Debenture 40.00 - Redemption Reserve

e) Surplus carried forward 185.97 192.34 to Balance Sheet

OPERATIONS:

Your Company's Operating Income during the year under review was Rs. 832.44 crores as against Rs. 702.79 crores in the previous year. This represents an increase of Rs. 129.65 crores which is equivalent to 18.45% increase over the previous year. However, in view of ever rising oil prices and resultant increase in the all round input costs, increased finance costs, etc. have in effect brought the pre and post tax profits under pressure. However, there has been slight improvement in the pre tax and post-tax profit although it is less than the top line growth with profit before tax for the year under review being Rs. 89.07 crores and profit after tax of Rs. 71.40 crores.

During the year under review the Company introduced a number of new products across several therapeutic categories, such as Acebrolin' capsules and syrup, 'Bronconil' syrup and 'Elfecol' syrup for Cough & cold, 'Eldocort" and 'Eldoflam MR' for pain management, Plasmorid' as anti-malarial, Prexan' for

hematinic use, 'Eldervit Plus' tablets, 'l-VIT Plus' and Samplus' as nutritional supplements, 'Elmecob PG" for neuropathy, 'Shelcal HD' tablets for Calcium supplementation, 'Shelcal K' tablets for Osteoporosis and 'Somazina Plus' tablets as neuroprotective.

All the products of the Company including new introductions have been well accepted by the medical fraternity in India. The main therapeutic area of interest to the Company continues to be Women's healthcare, Wound care and Pain Management, Neutraceuticals / Vitamin Supplements, Life Style Diseases & Diabetes, and Antibiotics.

All the three units of the Company in North India, one at Sela Qui and the other at Vitlage Charba, Langha Road, near Dehradun in the State of Uttarakhand and the third at Paonta Sahib in Himachal Pradesh have been enjoying the Central Government's excise and income tax incentives. The production capacities have been expanded at the Sela Qui unit in Uttarakhand. The said unit is also being upgraded to meet UK MHRA accreditation. This accreditation will help the Company cater to some of the export markets. The manufacturing units of the Company at Nerul, Navi Mumbai, Paonta Sahib, Himachal Pradesh and Sela Qui, Uttarakhnad, are WHO GMP accredited. The bulk drug unit of the Company at Patalganga in the Raigad district of Maharashtra received accreditation from the Japanese Health Ministry in January 2011.

GLOBAL DEPOSITORY RECEIPTS:

The Company had made an issue of Global Depository Receipts 1GDR) during the year 2004-05. All the issued GDRs have been converted into shares and no GDR is outstanding as on 31s1 March 2011. The Company's listing for the GDRs. however, continues on the Luxembourg Stock Exchange and as on 31st March 2011 the quote for Company's GDRs was $ 17.51.

DIVIDEND:

The Directors have pleasure in recommending a dividend of 30% i.e. Rs. 3.00 per share of Rs. 10/- each for the year ended 31st March 2011 and the same, once approved by the shareholders, will be paid on or before 23"' October 2011 to those shareholders whose names appear in the Register of Members as on 16th September 2011.

DIRECTORS:

During the Accounting year under review Mr. M. V. Thomas, a Founder Director who was appointed by the General Meeting as an Executive Director of the Company designated as Director (Finance) and whose period of office as such Director iFinance) expired on 30th June 2010, resigned as Director vide his letter dated 1st July 2010. The Board has accepted his resignation at its meeting held on 27* July 2010. He had, however, continued as the Company's Chief Financial Officer'*jp to 12* November 2010.

Dr. J. S. Juneja, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He, however, being eligible, has offered himself for re-appointment.

Mr. Edoardo Richter, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. He, however, being eligible, has offered himself for re-appointment.

Mrs. Urvashi Saxena, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company. She, however, being eligible, has offered herself for re-appointment.

As required under Clause 49 of the Listing Agreement, the details of Dr. J. SJuneja, Mr. Edoardo Richter and Mrs Urvashi Saxena. Directors who are due to retire by rotation at the ensuing Annual General Meeting but having offered for their re-appointment are given in the Report on Corporate Governance, forming part of this Annual Report.

The Board of Directors at its meeting held on 12th August 2011, consequent to the approval of the Remuneration Committee, at its meeting held on 9th August 2011, has subject to provisions of sections 198, 269, 309, 310, 311 and other applicable provisions, if any, of the Companies Act, 1956 and further subject to the consent and approval of Shareholders and /or any other statutory approvals, if any, that may be required, appointed Mr. Alok Saxena as Joint Managing Director for a period of Five years effective from 12,h August, 2011.

AUDITORS:

M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as the Auditors of the Company at the conclusion of the ensuing Annual General Meeting. They have signified their willingness to get re-appointed and have given a declaration that if re-appointed their appointment will be within the limits specified under Section 224(1 )(B) of the Companies Act, 1956. On the recommendation of the Audit Committee, the Board proposes, for consideration of the Shareholders, the re-appointment of M/s. S. S. Khandelwal & Co. as Statutory Auditors of the Company for the financial year 2011-12. You are requested to appoint Auditors and fix their remuneration.

COST AUDITOR:

The Directors have appointed M/s. Sevekari, Khare and Associates, Cost Accountants, Mumbai, having registration No. 00084, as Cost Auditors of the Company for the formulations and bulk drugs activities of the Company for the financial year 2011-12 and their appointment has been approved by the Central Government.

INCREASE IN SHARE CAPITAL:

During the year under review the Company made an issue of its equity shares to Qualified Institutional Buyers on a private placement basis. The Company issued 1,679,450 equity shares of Rs. 10/- each at a price ofRs. 415/- per share including a premium of Rs. 405/- per share. The paid-up share capital of the Company, therefore, stands increased to Rs. 205,369,360/- divided into 20,536,936 equity shares ofRs. 10/- each.

Attached hereto at Appendix 1 are the details of funds raised through Qualified Institutional Placement as above and their utilization.

NON-CONVERTIBLE DEBENTURES:

Your Company made two issues of Rated Secured Redeemable Non-Convertible Debentures on a private placement basis during the year under review. The first issue was of 1,188 units of Rs. 10.00 lacs each aggregating Rs. 118.80 crores carrying interest 0 10.75% p.a. payable half yearly and redeemable in twelve equal quarterly installments starting from the end of the 9th quarter from the date of allotment i.e. 23rd December 2010 and ending at the end of the 20th quarter from the date of attotment. The installments will commence after two years of moratorium from the date of allotment. The second issue aggregated Rs. 73.00 crores comprising of 730 units of Rs. 10.00 lacs each having seven year maturity. This issue carries interest 0 11.25% p.a. which is payable half yearly from the date of allotment i.e. 30th March 2011 and is redeemable in ten equal semi annual installments starting from six months after the end of the second year from the date of allotment & ending at the end of seventh year from the date of allotment. Both the issues were rated by Credit Analysis and Research Limited (CAREl who had assigned A ' rating to the said NCD issues of the Company. NCD units issued under both the issues have been listed with the WDM Segment of National Stock Exchange of India Limited (NSE). The purpose of the NCD issue was retirement of high cost debt and to augment the medium to long term resources of the Company, including regular capital expenditure [not constituting a project).

Attached hereto at Appendix 2 are the details of funds raised through Non-Convertible Debentures as above and their utilization.

The directors take this opportunity to express their sincere thanks to the investors in NCDs for the confidence reposed by them in the Company.

JOINT VENTURES / SUBSIDIARIES / INVESTMENTS:

ELDER INTERNATIONAL FZCO' the wholly owned subsidiary (WOS) of the Company in Jebel Ali, Dubai, United Arab Emirates, was holding 21.1% stake in NeutraHealth PLC, U.K. (Neutra). During the year under review it acquired 100% stake through a Scheme of Offer (Scheme) recommended by Directors of Neutra. The Scheme was approved by the High Court of the United Kingdom and has become effective from 16th November 2010. The Offer was made 0 6.5 pence per share and the total outlay was approximatelyRs. 68.50 crores.

Mr. Jagdish Saxena, Chairman and Managing Director of your Company continues to be a Director on the Board of Neutrahealth PLC.

The Dubai WOS had been holding 61% interest in Elder Biomeda AD, Bulgaria, a step down subsidiary. During the year under review the stake was increased to 92.2% by acquiring shares of two shareholders. Elder Biomeda AD holds 100% interest in Elder Bulgaria EOOD, a pharmaceuticals & neutraceuticals manufacturing company and Biomeda 2000 EOOD, a distribution company. Bulgaria, being a part of the European Union, offers an excellent opportunity for the Company to enter the Eastern

European as well as CIS countries. The manufacturing unit in Bulgaria is proposed to be upgraded and expanded for manufacturing products for the Eastern European, CIS and other markets. The distribution business in Bulgaria has started picking up. It is looking at exporting some products to nearby countries which hitherto were distributed within Bulgaria.

The Dubai WOS has also entered into a 50 : 50 joint venture in Syncro Health Limited, Guernsey, which is engaged in web marketing of certain neutraceutical products. Guernsey offers certain tax concessions and this would make the products offered by Syncro Health Limited competitive as compared to buying them in stores. Your directors expect that the said joint Venture wilt do well in the years to come..

The Company continues to hold it's investment in the Nepal Joint Venture. During the recent past there have been certain issues on decisions taken by the Nepalese partner whereby the Company's stake in terms of percentage to total capital was reduced from earlier £0% to 30.6%. The Company has notified its dissent to the action taken by the partner and has written to the Ministry of Industry, Government of Nepal, seeking an amicable solution in the matter. The discussions are going on with the Nepalese partner as directed by the Director of Industry, Government of Nepal, for arriving at an acceptable solution.

The Company had incorporated a wholly owned subsidiary in Cyprus by the name 'Somerta Holdings Co. Limited'. Since inception no activity was carried out in the said subsidiary. Application was made for striking the name of the company off the Register under the applicable Companies Law in Cyprus and the company was closed on 28th April 2010.

BANKERS AND FINANCIAL INSTITUTIONS:

The Directors wish to put on record their sincere gratitude to the consortium of Banks for working capital comprising State Bank of India, Canara Bank, Syndicate Bank, Axis Bank Ltd., Development Credit Bank Ltd., DBS Bank Ltd. and Bank of Baroda for their continued and timely support to the Company.

The Directors also wish to put on record their sincere gratitude to the various term lenders for their continued and timely support to the Company.

EXPORT HOUSE STATUS:

The Company continues to enjoy "Export House' status. The Company's APIs and Formulations are exported to countries like Italy, Bangladesh, Egypt, Brazil, Mexico, Japan, South Korea, Vietnam, Nigeria, Georgia, France, Switzerland, Cambodia, Kosovo, Thailand etc. The registration procedures are presently going on in a number of countries such as Kenya, Netherlands, Ukraine, Ethiopia, Ghana, Botswana etc. and once their formalities are completed, the Company's exports are expected to increase.

CREDIT RATING:

Your Company continues to enjoy the topmost rating of "CARE A1 " from Credit Analysis and Research Limited [CARE) for short term debt (including Commercial Paper) Programme of Rs. 105 Crores [carved out of working capital) and standalone Commercial Paper Programme of Rs. 75 crores. Further, CARE has also reaffirmed its "CARE A " rating for long term debt, Secured NCDs programme, working capital and other banking facilities (including term loans) of Rs. 486.23 crores signifying adequate degree of safety regarding the timely servicing of financial obligations.

ISO / WHO GMP ACCREDITATION:

The Company's Corporate Office continues to be certified as conforming to ISO 9001 : 2000 as along with the manufacture units at Pawane, Nerul and Patalganga for development, manufacturing and marketing of pharmaceutical products. The Company's bulk drug manufacturing plant at Patalganga was upgraded according to ICH Q7A guidelines for manufacturing products for the US and UK markets. While the Sela Qui formulations plant of the Company has been accredited for WHO GMP, the said plant is being upgraded for UK MHRA accreditation. The formulations plants at Nerul and Paonta Sahib have also received WHO GMP accreditation. The upcoming formulations plant at Langha Road near Dehradun is designed as per US FDA compliance requirements.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AAi of the Companies Act, 1956 the Directors, on the basis of compliance certificate received from Managing Director, CFO and other executives of the Company and subject to disclosures in annual accounts as on 31st March 2011 and on the basis of discussions with the Statutory Auditors of the Company from time to time, declare and confirm:

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

b) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended on 31st March 2011 and the profit of the Company for that year;

c) That the Directors had taken proper and sufficient care for maintenance of adequate accounting records for the year ended 31st March 2011 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;

d) That the Directors had prepared the accounts for the financial year ended 31st March 2011 on a 'going concern basis'.

CORPORATE GOVERNANCE:

In pursuance of the system of Corporate Governance instituted by SEBI and forming part of the Listing Agreement with the Stock Exchanges, a report thereon is separately attached to this report.

RESEARCH AND DEVELOPMENT ACTIVITY:

The Research and Development activities of the Company continue to be recognized by the Department of Science and Technology, Government of India. The Research and Development laboratory of the Company has successfully developed certain import substitute molecules / intermediates and has been working on development of a number of other molecules. It has also been continuously working on process developments of the molecules already developed by it. It has been engaged in development of new products and their improvement in terms of delivery, absorption and efficacy. The Company has applied for sixteen Indian patents with seven PCT applications. Out of these one PCT application has been entered in the USA, Europe and Japan. The Company enjoys "approved" status for its Research & Development Facility from the Secretary', DSIR u/s 35 (2AB] of the Income Tax Act, 1961 for claiming rebate on the expenses incurred by the Company on Research and Development.

INSURANCE OF ASSETS:

All the fixed assets, finished goods, semi-finished goods, raw materials, packing materials and other goods and assets of the Company lying at different locations and in-transit have been insured against fire, burglary, transit, riots, strike, malicious damage and allied risks.

CAPITALISATION:

During the year under review the Company has added fixed assets worth Rs. 37.38 crores whereas disposal and adjustment of fixed assets amounted toRs. 0.12 crores. The Company had capital work in progress amounting to Rs. 93.03 crores as at 315' March 2011 at various project sites.

DEPOSITS:

The Company's public deposit scheme has been receiving good response from depositors. The Company is regular in repayment and payment of interest and has not defaulted therein. The Company has been complying with the provisions of Section 58A and other applicable provisions, if any of the Companies Act, 1956 and the rules made thereunder. As at 31sl March 2011 the fixed deposits outstanding under the public deposit scheme were Rs. 52.06 crores. During the accounting year under review the Company has appointed Bajaj Capitals Limited as the Managers to the Fixed Deposit Schemes of the Company.

AUDITORS' REPORT:

Notels] on accounts as referred to in the Auditors Report is / are self-explanatory and therefore do not call for further comments or explanation.

PARTICULARS OF EMPLOYEES:

Information as per Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended is available at the registered office of the Company. As per the provisions of Section 219(i)(b)(iv) of the Companies Act, 1956, this Report and Accounts are being sent to all Shareholders of the Company and others entitled to it excluding the aforesaid information. Any Shareholder interested in obtaining a copy of the statement under Section 217(2A) of the Companies Act, 1956 may write to the Company Secretary at the address of the registered office of the Company.

EMPLOYER / EMPLOYEE RELATIONS:

The relationship with the workers of the Company's manufacturing units and other staff continues to be cordial. The Directors wish to place on record their sincere appreciation and gratitude for the services rendered by the workers and staff at all levels.

EMPLOYEE STOCK OPTION PLAN:

The Shareholders at the 21s' Annual General Meeting of the Company passed a resolution approving the Employee Stock Option Plan called 'Elder ESOP 2004'. A total of 1,439,274 equity shares of the Company are available under Elder ESOP 2004 for grant of Options at an exercise price of 15% discount to the market rate. The Company had granted Options in respect of 399,250 shares which were to be exercised in four equal parts ending on 27,h March 2008 at an exercise price of Rs. 209/- per share inclusive of a premium of Rs. 199/- per share. Out of the Options granted 285,748 were exercised. Options that were not exercised within the stipulated period have lapsed. There are 1,153,526 shares for which Options can still be granted to Employees under Elder ESOP 2004.

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

In accordance with Rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 as applicable, the particulars relating to conservation of energy and technology absorption are given in Annexure 1 to this Report.

The foreign exchange outgo during the year under review was Rs. 35.66 crores for imports of raw materials / trading and other items, and Rs. 31.46 lacs for foreign travel. The Company also paid Rs. 2.83 crores in foreign exchange as interest on the External Commercial Borrowing of Japanese Yen equivalent of USD 15 million. The foreign exchange earnings during the year were Rs. 22.78 crores on account of exports on FOB basis.

For and on behalf of the Board

Jagdish Saxena

Mumbai, 12th August, 2011 Chairman


Mar 31, 2010

The Directors are pleased to present this the Twenty seventh Annual Report of the Company together with the audited Accounts for the year ended 31st March 2010. The working results of the Company for the year ended 31st March 2010 vis-à-vis those of the previous year are summarized below:

Year ended Year ended 31.03.2010 31.03.2009 (Rs. in (Rs. in Crores) Crores)

1. Sales and other Income 710.42 628.16

2. Proft before Tax 64.68 58.59

3. Less: Provision for Tax

Current Year 10.50 6.50

Deferred Tax (1.21) (0.15)

Fringe Beneft Tax - 1.60

4. Proft after Tax 55.39 50.64

5. Less: Prior year Tax adjustments - (1.50)

6. Add: Proft as per the last Balance Sheet 173.54 159.92

7. Proft available for appropriation 228.93 209.06

Out of which Directors recommend

Appropriation as under:

Proposed Dividend 5.66 4.71

Tax on Dividend 0.94 0.80

Transfer to General Reserve 30.00 30.00

Surplus carried forward to Balance Sheet 192.34 173.54



l OPERATIONS:

Your Company achieved Sales Turnover of Rs. 702.79 crores during the year under review which represents an increase of Rs.82.77 crores representing 13.35% increase over the previous year. However, in view of the economic pressures the pre and post tax profts were under pressure and did not show as much increase as in Sales Turnover. The proft before tax for the year was Rs.64.68 crores whereas proft after tax was Rs.55.39 crores.

During the year under review the Company introduced a number of new products in the market like Pepamino, a research based nutritional supplement from a Norwegian company, Flavospas – O, for treatment of Urinary Tract Infections, Tazomust, an Anti- infective having wide range of indications and applications and Somazina OD for the management of cerebral strokes. During the current accounting year the Company has introduced products like NRT Pastilles, a Nicotine replacement therapy with unique German delivery system and Ecozyne, a nutritional supplement for management of male infertility.

The Company has plans for launching various new products, both own and in-licensed, in therapeutic areas where it is already entrenched. These launches are expected to further strengthen the product portfolio and enable growth as well as increase market share in niche therapeutic areas.

All the products of the Company including new introductions have been well accepted by the medical fraternity in India. The main therapeutic area of interest to the Company continues to be Women’s healthcare, Wound care, Neutraceuticals / Vitamin Supplements, Life Style & Diabetes, Dermatology, Antibiotics and CNS.

The Directors are pleased to inform that during the year under review the formulation facilities of the Company set up as per the US FDA requirements at Village Charba, Langha Road, Tehsil Vikas Nagar, District Dehradun, in the State of Uttarakhand for manufacture of injectibles in liquid ampoule form, oral liquids, tablets and capsules dosage forms, have commenced commercial production. The said unit is eligible for incentives such as the Central Excise exemption for a period of ten years from the year of commencement of commercial production, Income Tax exemption, Central Subsidy, etc.

The other two units of the Company in North India, one at Sela Qui near Dehradun in Uttarakhand and the other at Paonta Sahib in Himachal Pradesh have been enjoying the Central Government’s excise and income tax incentives. The production capacities have been expanded at the Sela Qui unit in Uttarakhand. The said unit is being upgraded to meet UK MHRA accreditation. This accreditation will help the Company cater to some of the export markets.

During the previous year the Ministry of Corporate Affairs, New Delhi (MCA) had commenced an investigation on the Company under Section 235 of the Companies Act, 1956. The investigation report was forwarded to the Company for its comments thereon. After receipt of Company’s comments the investigating agency issued a show cause notice to the Company and some of its Directors / officers relating only to alleged violations of certain provisions of the Companies Act, 1956 which the Company has replied. The Company reckons that the matter is concluded as the investigating agency has since issued the last letter dated 4th February 2010 in the matter only warning the Company to be particular in future in complying with the provisions of Section 154 of the Companies Act, 1956.

l GLOBAL DEPOSITORY RECEIPTS:

The Company had made an issue of Global Depository Receipts (GDR) during the year 2004-05. All the issued GDRs have been converted into shares and no GDR is outstanding as on 31st March 2010. The Company’s listing for the GDRs, however, continues on the Luxembourg Stock Exchange and as on 31st March 2010 the quote for Company’s GDRs was $ 15.985.

l DIVIDEND:

The Directors recommend a dividend of 30% i.e. Rs.3/- per share of Rs.10/- each for the year ended 31st March 2010 and the same will be paid on or before 25th October 2010 to those shareholders whose names appear in the Register of Members as on 20th September 2010.

l DIRECTORS:

During the year under review Mr. Peter Bibby resigned as Director on health grounds. The Board accepted his resignation at its meeting held on 29th April 2009. The Directors report with a heavy heart Mr. Bibby’s sad demise later on 22nd July 2009. Since the close of the Accounting year under review Mr. M. V. Thomas, a Founder Director who was appointed by the General Meeting as an executive director of the Company designated as Director (Finance) and whose period of office as such Director (Finance) expired on 30th June 2010, resigned as Director effective 1st July 2010 vide his letter dated 1st July 2010. He was appointed as the Chief Financial Officer in terms of the Listing requirements and will be continuing with the Company in that capacity.

During the accounting year under review, Mrs. Urvashi Saxena, who was appointed as an Additional Director by the Directors at their meeting held on 29th April 2009, was appointed by the Shareholders at the 26th Annual General Meeting of the Company held on 29th September 2009 as a non-executive and independent Director whose period of office is liable to retirement by rotation.

D r. R. Srinivasan, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company but being eligible has offered himself for re-appointment.

D r. Sailendra Narain, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company but being eligible has offered himself for re-appointment.

M r. Saleem Shervani, Director, is due to retire by rotation at the ensuing Annual General Meeting of the Company but being eligible has offered himself for re-appointment.

During the year under review the Shareholders at the 26th Annual General Meeting of the Company re-appointed Mr. Jagdish Saxena as Managing Director of the Company for a period of fve years w.e.f. 1st May 2009.

As required under Clause 49 of the Listing Agreement the details of Dr. R. Srinivasan, Dr. Sailendra Narain and Mr. Saleem Shervani, Directors due to retire by rotation at the ensuing Annual General Meeting but having offered for their re-appointment are given in the Report on Corporate Governance.

l AUDITORS:

M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as the Auditors of the Company at the conclusion of the ensuing Annual General Meeting. They have signiifed their willingness to get re-appointed and have given a declaration that if re-appointed their appointment will be within the limits specified under Section 224(1)(B) of the Companies Act, 1956. On the recommendation of the Audit Committee, the Board proposes the re-appointment of M/s. S. S. Khandelwal & Co. as Auditors of the Company for the fnancial year 2010-11. You are requested to appoint Auditors and fix their remuneration.

The Directors have appointed M/s. Sevekari, Khare and Associates, Cost Accountants, Mumbai as Cost Auditors of the Company for the financial year 2010-11 and their appointment has been approved by the Central Government.

JOINT VENTURES / SUBSIDIARIES / INVESTMENTS:

During the accounting year 2006-07 the Company established a wholly owned subsidiary in the Jebel Ali Free Trade Zone, Dubai, U.A.E. called ‘ELDER INTERNATIONAL FZCO’. The Company was issued a trading license in March 2007 for ‘para pharmaceuticals marketing’. The Company has, through this Dubai subsidiary made investments in Neutra Health PLC, U.K., and Elder Biomeda AD, Bulgaria, a step down subsidiary in which it has 61% interest. Elder Biomeda AD holds 100% interest in Elder Bulgaria EOOD, a manufacturing company and Biomeda 2000 EOOD, a distribution company. Bulgaria being a part of European Union now offers an excellent opportunity for the Company to enter Eastern European as well as CIS countries. The manufacturing unit in Bulgaria will soon be upgraded and expanded for manufacturing products for the Eastern European and CIS markets. The distribution business in Bulgaria has started picking up and is slowly gaining the lost ground. As reported in the last year’s report the logistic support business has been merged with the distribution company in Bulgaria during the accounting year under review.

During the accounting year under review it was decided to withdraw from Ghana joint venture and the joint venture agreement with Vincom Pharmaceuticals Limited, Ghana, was terminated. The Company, however, continues to hold it’s stake in the Nepal Joint Venture company.

Mr. J. Saxena, Chairman and Managing Director of the Company continues to be a Director on the Board of Neutrahealth PLC.

The Company had incorporated a wholly owned subsidiary in Cyprus by the name ‘Somerta Holdings Co. Limited’. From inception no activity was carried out in the said subsidiary. The Directors in their last report, had informed the shareholders that the said Cyprus subsidiary would shortly be closed. Accordingly, application was made for closing the Cyprus subsidiary. The Directors would like to inform the shareholders that the Registrar of Companies, Nicosia has issued a Certificate dated 5th May 2010 certifying that the name of Somerta Holdings Co. Limited has been struck off the Register under the Companies Law Cap. 113, Section 327 on the 28th April 2010. However, since the closure has taken place after the close of the accounting year under review the accounts of the said Cyprus subsidiary are attached as a part of annual accounts and are included in the Consolidated Accounts of the Company for the year ended 31st March 2010.

* BANKERS AND FINANCIAL INSTITUTIONS:

The Directors wish to put on record their sincere gratitude to the consortium of Banks for working capital comprising State Bank of India, Canara Bank, Syndicate Bank, Development Credit Bank Ltd., Axis Bank Ltd., DBS Bank Ltd. and Bank of Rajasthan Ltd. for their continued and timely support to the Company. The Directors are also thankful to and wish to put on record their sincere gratitude to various term lenders for their timely support to the Company.

* EXPORT HOUSE STATUS:

The Company continues to enjoy ‘Export House’ status. The Company’s products are exported to certain African and South East Asian markets. The registration procedures are presently going on in a number of countries and once their formalities are completed, the Company’s exports are expected to increase.

* CREDIT RATING BY CARE:

The Company continues to enjoy the highest rating of ‘PR1+’ assigned to its Commercial Paper programme by Credit Analysis and Research Limited (CARE) for an amount of Rs.75.00 crores. As at 31st March 2010 the Company had issued CPs to the extent of Rs.25.00 crores and placed them with investors at the most competitive rates of interest. The subscription amount of the Commercial Papers is utilized for earmarking working capital limits.

During the accounting year under review stand alone Commercial Paper programme of a value of Rs.50.00 crores was rated by CARE assigning to it the highest PR1+ (PR One Plus) rating. These Commercial Papers are being placed by the Company at the most competitive rates of interest. The Commercial Paper programme of the Company has helped it reduce interest cost.

* ISO / WHO GMP ACCREDITATION:

The Company continues to be certifed as conforming to ISO 9001 : 2000 for development, manufacturing and marketing of pharmaceutical products. The Company’s bulk drug manufacturing plant at Patalganga was upgraded according to ICH Q7A guidelines. The Company has been upgraded for customers sourcing APIs manufactured in the plant for the US and European markets. The said plant has been audited by customers and approved by them. While the Sela Qui formulations plant of the Company has been accredited for WHO GMP the said plant is being upgraded for UK MHRA accreditation. The formulations plant at Nerul has obtained WHO GMP renewal. The plant at Paonta Sahib built as per the highest standards is in the process of being subjected to inspection for WHO GMP accreditation. The upcoming formulations plant at Langha Road near Dehradun is designed as per USFDA requirements.

* DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section 217(2AA) of the Companies Act, 1956 the Directors, on the basis of compliance certificate received from Managing Director, CFO and other executives of the Company and subject to disclosures in annual accounts as on 31st March 2010 and on the basis of discussions with the Statutory Auditors of the Company from time to time, declare and confirm:

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

b) that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended on 31st March 2010 and the profit of the Company for that year.

c) That the Directors had taken proper and sufficient care for maintenance of adequate accounting records for the year ended 31st March 2010 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.

d) That the Directors had prepared the accounts for the financial year ended 31st march 2010 on a ‘going concern basis’.

* CORPORATE GOVERNANCE:

In pursuance of the system of Corporate Governance instituted by SEBI and forming part of the Listing Agreement with the Stock Exchanges, a report thereon is separately attached to this report.

* RESEARCH AND DEVELOPMENT ACTIVITY:

The Research and Development activities of the Company continue to be recognized by the Department of Science and Technology, Government of India. The Research and Development laboratory of the Company has successfully developed certain import substitute molecules and has been working on development of a number of other molecules. It has also been continuously working on process developments of the molecules already developed by it. The Company has fled totally sixteen Indian patents with seven PCT applications. Out of these one PCT application has been entered in the USA, Europe and Japan. The Company enjoys approval to the Research & Development Facility from the Secretary, DSIR u/s 35 (2AB) of the Income Tax Act, 1961 for claiming rebate on the expenses incurred by the Company on Research and Development.

* INSURANCE OF ASSETS:

All the fixed assets, finished goods, semi-finished goods, raw materials, packing materials and other goods and assets of the Company lying at different locations and in-transit have been insured against fire, burglary, transit, riots, strike, malicious damage and allied risks.

* CAPITALISATION:

During the year under review the Company has added fixed assets worth Rs.311.14 crores whereas disposal and adjustment of fixed assets amounted to Rs.0.60 crores. The Company had capital work in progress amounting to Rs.65.74 crores as at 31st March 2010 at various project sites.

* DEPOSITS:

The Company’s public deposit scheme has been receiving good response from depositors. The Company is regular in repayment and payment of interest and has not defaulted therein. The Company has been complying with the provisions of Section 58A and the rules made thereunder. As at 31st March 2010 the fxed deposits outstanding under the public deposit scheme were Rs.39.88 crores. During the accounting year under review the Company has appointed Bajaj Capital Limited as the Managers to the Fixed Deposit Schemes of the Company.

* AUDITORS REPORT:

Note(s) on accounts as referred to in the Auditors Report is / are self-explanatory and therefore do not call for further comments or explanation.

* PARTICULARS OF EMPLOYEES:

Information as per Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 as amended is available at the registered office of the Company. As per the provisions of Section 219(i)(b)(iv) of the Companies Act, 1956 this Report and Accounts are being sent to all Shareholders of the Company and others entitled to it excluding the aforesaid information. Any shareholder interested in obtaining a copy of the statement under Section 219(2A) of the Companies Act, 1956, may write to the Company Secretary at the address of the registered office of the Company.

* EMPLOYER / EMPLOYEE RELATIONS:

The relationship with the workers of the Company’s manufacturing units and other staff continues to be cordial. The Directors wish to place on record their sincere appreciation and gratitude for the services rendered by the workers and staff at all levels.

* EMPLOYEE STOCK OPTION PLAN:

The Shareholders at the 21st Annual General Meeting of the Company passed a resolution approving the Employee Stock Option Plan called ‘Elder ESOP 2004’. A total of 1,439,274 equity shares of the Company are available under Elder ESOP 2004 for grant of Options at an exercise price of 15% discount to the market rate. No Options were granted to the Employees during he accounting year under review. As as 31st March 2010 there were 1,153,526 shares for which Options could still be granted to Employees under Elder ESOP 2004.

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

In accordance with Rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 as applicable, the particulars relating to conservation of energy and technology absorption are given in Annexure 1 to this Report.

The foreign exchange outgo during the year under review was Rs.30.13 crores for imports of raw materials / trading and other items, and Rs.0.43 crores for foreign travel. The Company also paid Rs.3.93 crores in foreign exchange as interest on the External Commercial Borrowing of Japanese Yen equivalent of USD 15 million. The foreign exchange earnings during the year were Rs.17.46 crores on account of exports on FOB basis.

For and on behalf of the Board

J. Saxena

Chairman