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Directors Report of GlaxoSmithKline Pharmaceuticals Ltd.

Mar 31, 2015

Dear Members,

The Directors have pleasure in submitting their Report for the fifteen months period ended 31st March 2015. The Accounting year of the Company has been changed from January-December to April-March in line with the provisions of the Companies Act, 2013, which prescribe a uniform financial year. Accordingly, current year''s Annual Accounts and Report of the Company are for a period of fifteen months from 1st January 2014 to 31st March 2015. These figures, therefore, are not comparable with those of the previous year ended 31st December 2013.

1. Financial Results & Dividend for the fifteen months ended 31st March 2015

15 months ended Year ended 31st March 31st December 2015 2013 Rs. in lakhs Rs. in lakhs

Sale of Products (Net of Excise Duty) 3253,40.98 2520,17.24

Other Operating Revenue 34,16.82 25,97.50

Revenue from Operations 3287,57.80 2546,14.74

Profit before Exceptional Items and Tax 800,50.43 703,16.57

Less: Exceptional Items (51,88.14) 26,15.46

Profit before Tax 748,62.29 729,32.03

Less: Tax expense 276,97.71 227,43.79

Net Profit for the year 471,64.58 501,88.24

Add: Opening Surplus brought forward from the previous year 1099,93.27 1142,94.60

Less: Appropriations:

Proposed Dividend (including tax on distributed Profits) 637,16.78 494,70.75

Transfer to General Reserve 47,16.46 50,18.82

Closing Surplus carried forward 887,24.61 1099,93.27

2. Dividend

The Directors recommend a Dividend of Rs. 62.50 per Equity Share for the fifteen months period (previous twelve months period: Rs. 50 per Equity Share). If approved by the Shareholders at the Annual General Meeting, the Dividend will absorb Rs. 529 crores. The Dividend Distribution Tax borne by the Company will amount to Rs. 108 crores.

3. Directors

Mr. Mehernosh Kapadia retired as Director from 30th November 2014. Mr. Simon Harford resigned as a Director from 18th May 2015. The Board places on record its appreciation of the valuable services rendered by Mr. Kapadia and Mr. Harford during their tenure as Directors and for their contribution to the deliberations of the Board.

The Board of Directors has appointed Mr. Andrew Aristidou as Executive Director & CFO with effect from 1st December 2014, in the casual vacancy caused by the resignation of Mr. Mehernosh Kapadia. The Shareholders have approved his appointment by Postal Ballot. Approval to his appointment from Central Government is awaited. The Board has also appointed Mr. Regis Simard as Non-Executive Director with effect from 18th May 2015 in the casual vacancy caused by the resignation of Mr. Simon Harford.

In terms of the provisions under Section 149 of the Companies Act, 2013, the Board and Shareholders have approved the appointment of all the existing Independent Directors viz. Mr. R. R. Bajaaj, Ms. A. Bansal, Mr. P V. Bhide, Mr. N. Kaviratne, Mr. P V. Nayak, Mr. A. N. Roy and Mr. D. Sundaram for a term for five years from 30th March 2015. The Independent Directors have submitted the Declaration of Independence, as required pursuant to Section 149(7) of the Companies Act, 2013, stating that they meet the criteria of Independence as provided in sub-section (6).

Glaxo Group Limited U.K. have rights enshrined in the Articles of Association to appoint Directors not exceeding one-third of the total number of Directors. Accordingly they have appointed four Non-retiring Directors. In terms of the provisions of the Companies Act, 2013, the Independent Directors will be excluded for ascertaining the number of Directors liable to retire by rotation. In view of this Glaxo Group Limited will have right to appoint one third of the retiring Directors and can appoint two Non-retiring Directors. Accordingly, Mr. V. Thyagarajan and Mr. Regis Simard will now be the Directors retiring by rotation and, being eligible, offer themselves for re-appointment.

During the fifteen months period eight Board Meetings were held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

In compliance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board of Directors on the recommendation of the Nomination & Remuneration Committee, adopted a Policy on remuneration of Directors and Senior Management. The Remuneration Policy is stated in the Corporate Governance Report.

Performance evaluation of the Board was carried out during the period under review. The details are given in the Corporate Governance Report.

5. Related Party Transactions

All related party transactions that are entered into during the fifteen months period were on arms length basis and were in the ordinary course of business. There were no materially significant related party transactions made with the Promoters, Directors or Key Managerial Personnel which may have a potential conflict of interest of the Company at large.

6. Directors'' Responsibility Statement

Your Directors confirm:

(i) t hat in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) that the Directors have 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 31st March 2015 and of the profit of the Company for that period;

(iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

7. Corporate Governance & Business Sustainability Report

Your Company is part of the GlaxoSmithKline plc group and conforms to norms of Corporate Governance adopted by them. As a Listed Company, necessary measures are taken to comply with the Listing Agreements with the Stock Exchanges. A report on Corporate Governance, along with a Certificate of Compliance from the Auditors, given in Annexure ''B'', forms a part of this Report. Further a Business Responsibility Report, describing the initiatives taken by your Company from an environmental, social and governance perspective, given in Annexure ''C'', also forms a part of this Report.

8. Auditors

M/s. Price Waterhouse & Co Bangalore LLP Chartered Accountants (Firm Registration No. 007567S/S-200012), the Statutory Auditors of the Company, will hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment as per Section 139 of the Companies Act, 2013. Members are requested to re-appoint M/s. Price Waterhouse & Co., Bangalore LLP, Chartered Accountants, as the Auditors of the Company and authorise the Board of Directors to fix their remuneration.

Pursuant to Section 148 of the Companies Act, 2013, the Board of Directors on the recommendation of Audit Committee have appointed M/s. R. Nanabhoy & Co., Cost Accountants for conducting the audit of the cost accounting records maintained by the Company for its Formulations for 2015-2016 and have recommended their remuneration to the members of the Company for their ratification at the ensuing Annual General Meeting.

9. General

The particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure ''A'' forming part of this Report. The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, forms part of this Report. However, as per the provisions of Section 219(1)

(b)(iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company. Further, attached to the accounts of the Company are the Report and Audited Accounts of Biddle Sawyer Limited a, subsidiary company.

10. Employees

The Directors express their appreciation for the contribution made by the employees to the significant improvement in the operations of the Company and for the support received from all other stakeholders, including shareholders, doctors, medical professionals, customers, suppliers and business partners.

The Board and the Management of your Company are indeed appreciative of the substantial support being received from GSK plc the parent organization in providing new healthcare solutions which are products of its discovery labs and the technology improvements which benefits your Company immensely.

11. Disclaimer

The Ministry of Corporate Affairs vide its Circular No. 8/2014 dated 4th April 2014 clarified that the financial statements and the documents required to be attached thereto, the Auditor''s and Boards'' Report in respect of the financial year under reference shall continue to be governed by the relevant provisions of the Companies Act, 1956 schedules and rules made thereunder. Accordingly, whilst the financial statements and the Auditor''s Report as aforesaid are prepared as per the requirements of the Companies Act, 1956, the Company as a good governance practice has provided the information to the extent possible in the Directors'' Report as per the Companies Act, 2013.

On behalf of the Board of Directors

D. S. Parekh Chairman

Mumbai, 18th May 2015


Dec 31, 2013

The Directors have pleasure in submitting their Report for the year ended 31st December 2013

1. Results & Dividend for the year ended 31st December 2013

Year ended Year ended 31st December 31st December 2013 2012 Rs. in lakhs Rs. in lakhs

Sale of Products (Net of Excise Duty) .. .. .. 2520,17.24 2599,93.10

Other Operating Revenue .. .. 25,97.50 26,50.37

Revenue from Operations .. .. 2546,14.74 2626,43.47

Profit before Exceptional Items and Tax .. 703,16.57 994,77.65

Exceptional Items .. .. .. .. 26,15.46 (148,21.70)

Profit before Tax .. .. .. .. 729,32.03 846,55.95

Tax expense .. .. .. .. .. .. 227,43.79 269,30.06

Net Profit for the year .. .. .. 501,88.24 577,25.89

Add: Opening Surplus brought forward from the previous year 1142,94.60 1110,59.15

Less: Appropriations:

Proposed Dividend (including tax on distributed Profits) 494,70.75 487,17.85

Transfer to General Reserve.. .. 50,18.82 57,72.59

Closing Surplus carried forward .. 1099,93.27 1142,94.60

2. Dividend

The Directors recommend a Dividend of Rs. 50 per Equity Share for the year (previous year: Rs. 50 per Equity Share). If approved by the Shareholders at the Annual General Meeting, the Dividend will absorb Rs. 424 crores. The Dividend Distribution Tax borne by the Company will amount to Rs. 71 crores.

3. Management Discussion and Analysis

(a) Finance and Accounts

Sale of Products (net of Excise Duty) declined by 3.1% as compared with the previous year, with sales of the Pharmaceutical business being lower than last year by 4.3%. The introduction of the revamped Drugs (Prices Control) Order extending coverage to the National List of Essential Medicines impacted sales in the second half of the year. The Pharmaceuticals business was also affected by significant supply constraints through the year. In addition, during the second half of the year, a segment of the trade did not buy the Company''s products and the Company believes that, having regard to its internal plans, it would have lost a sales opportunity on this account in the region of Rs.180 crores. The maximum impact of the above developments was felt in the Mass Markets and Mass Speciality businesses, each of which declined by 12% compared to last year. Sales in the Speciality segments which include dermatologicals and oncology grew by 9%, and Vaccines sales recorded a growth of 12% compared to the previous year.

The above factors, coupled with material cost escalations and the adverse exchange rate movement, had its inevitable impact on Gross Margin which declined by 9.3% compared to last year. Incremental investments were required on the manufacturing side in manpower and other spends and in costs associated with outsourcing finished products from third parties. Field force recruitment was restricted to segments that required resourcing for growth. Significant investments were made for the consumer brands lodex and Ostocalcium which are managed by GSK''s Consumer Healthcare business in India. Profit after Exceptional items and Tax amounted to 20% of Net Sales (previous year: 22%) and declined by 13.1% as compared to the previous year.

Cash generation from Operations continued to remain favourable this year and is in line with business performance. Your Company continues to look for ways and means of deploying accumulated cash balances which remain invested largely in bank deposits.

Your Company has not accepted any fixed deposits during the year. There was no outstanding towards unclaimed deposit payable to depositors as on 31st December 2013.

(b) Pharmaceuticals Business performance and outlook

Your Company continues to enjoy a leadership position in the therapy areas in which it provides health care solutions to patients.

Your Company has strategically decided to expand its presence in the Specialty segment six years back. The initiative continues to reflect in its outcome. The growing trend from Specialty contribution to Sales continued in 2013 and has reached 23%.

Your Company''s leadership in the therapeutic area of Dermatology has been maintained. In clinical dermatology, most of the steroid products like Betnovate N, Betnovate C, T Bact, Tenovate and the cosmetology products like Ansolar and Oilatum sustained market competitive growth, thereby benefiting increased number of patients.

Your Company''s Oncology division''s vision to improve patient care in cancer management by offering access to breakthrough medicine from GSK''s pipeline at an affordable price (Tiered Pricing Policy) has benefited almost six thousand patients with our range of products - Tykerb, Hycamtin, Revolade & Votrient in 2013. Your Company has also initiated two patient support and management programs "Swasti" for Tykerb and Votrient to enhance patients access. Patient care is the basic mantra of Oncology and the mission has reflected in its competitive performance, ranked as the 6th largest MNC in Oncology segment (source: IPSOS MAT JUNE 13). In June 2013, your Company has launched XGEVA licensed from Amgen, USA for the prevention of SRE (Skeletal Related Events) in the management of bone metastasised solid tumors. The XGEVA launch has helped treat more than one thousand patients within six months of its introduction. Oncology division''s ability to differentiate from competition has reflected in an independent survey conducted by McCANN Health & GFK in the Asia Pacific Region which rated your Company as the number one company to provide medical education to Health Care Providers especially, Oncologists, Diabetologists and Consulting Physicians.

Your Company''s Cardio Vascular presence was strengthen by launching "Cardio Check" in the diagnostics segment. The device helps establish the patient''s lipid profile in a few minutes. The point of care addresses the unmet need of the physician to diagnose the lipid profile in the Doctor''s clinic itself to improve the patient outcome. This strategic expansion is aimed at improving the Company''s equity among the physicians in the cardiology segment. This will help your Company to leverage for its existing range of products.

The revitalised Respiratory division focus has become strong with the launch of a dose counter supported Seretide Evohaler. The new product has achieved 5% of the market share in the SFC Inhaler segment in 2013. Your Company''s recently launched CNS division has begun making its impact with Lamictal becoming the 3rd largest prescribed Lamotrogine in treating Anti Epileptic Disease as per SMSRC Prescription Track.

The Mass Speciality business saw constraints on Augmentin on account of limitations at the site of the overseas supplier. Limitations of supply from a local contract manufacturer impacted the antibiotic Ceftum in the first half of the year. Sustained and focused efforts have helped the Mass Speciality business record a market competitive growth in the prescriber base resulting in benefits to a larger pool of patients.

Market competitive growth has helped some dosage forms of Augmentin to record significant gain in share, thereby benefiting a much larger patient pool. To help patients with hypothyrodism, two additional put ups of Eltroxin were launched and were well received by patients and prescribers. A focused campaign to increase awareness of congenital hypothyroidism has helped increase disease awareness and resulted in early treatment of patients, thereby enabling better patient outcomes.

The need for calcium supplements is a growing problem arising out of improper nutrition and limited outdoor activity in urban India. To service this growing need, your Company has launched CCM and this brand has rapidly become the 2nd largest product in the therapeutic area (source: IMS MAT DEC 13). It has also in the current year become one of the top three hundred products in the Pharmaceutical Industry in India. To help patients afflicted by allergic rhinitis, your Company has launched Avamys, a leading health solution from GSK plc''s portfolio. It has been well received by the patients and the prescribers and has rapidly become the 2nd largest brand in its relevant market in the first year of introduction (source: IMS TSA MAT DEC 13).

Serious fungal infections in the intensive care setting are a barrier to treatment of patients. Mycamine which was launched by your Company a few years ago has become the 2nd largest product in this therapeutic area among twenty six offerings with competitive increase in market share. (source: IMS TSA MAT DEC 13).

Mass Markets service the largest patient pool of your Company. New offerings like Uricostat in the treatment of gout, Cefspan, an anti-infective, Lilo, a statin for lowering blood cholesterol and the nutritional range (being marketed by your Company on behalf of GSK''s Consumer business) have all recorded significant acceptance by the patients and the prescribers alike. To meet the increasing healthcare needs of rural India, the rural team "Reach" continued to expand its patient base as the portfolio of products offered to patients in these geographies continued to expand. This team now services six thousand villages and twenty thousand healthcare professionals. Your Company''s efforts at increasing the knowledge base of healthcare professionals in these geographies continued and 140 programs were conducted for the benefit of healthcare professionals in these geographies. Calpol continues to remain the most prescribed brand in the Indian Pharmaceutical Industry (source: IMS TSA JAN 14).

In the area of preventive healthcare, GSK Vaccines became the leading company in the private market for vaccines in India. The recently introduced vaccine for pneumococcal conjugate disease, Synflorix, became the biggest brand in the vaccine portfolio of your Company in the second year of its launch. The efforts of your Company in raising awareness about vaccines preventable diseases continued with increasing fervour.

Exports recorded a sales turnover of Rs. 9.5 crores comprising of both Bulk Drugs and Formulations. Exports of Bulk Drugs were to major markets like Japan, France, Jordan, and Sri Lanka.

(c) Opportunities, risk, concerns and threats

The Indian Government notified the National Pharmaceutical Policy and the new Drugs (Prices Control) Order, 2013 was implemented in May 2013. The new DPCO expanded the list of drugs from 74 to 348 (approximate 650 formulations got added). It brought about challenges for the Pharmaceutical Industry with regard to labeling of the new notified prices on all the products available in the market within a period of 45 days from the date of the Notification coupled with challenges with regard to recall and storage of recalled drugs. This has impacted sales in the second half of the year.

However, some of the stakeholders continued to oppose the new DPCO and a petition is pending before the Supreme Court. Any changes to the new DPCO would have an impact on the working of your Company.

Your Company has recently made an announcement with regard to its intent of creating a new Greenfield site with additional manufacturing capability, with an estimated investment of Rs. 860 crores. This new facility will substantially increase the capacity of manufacturing base and enable us to bring more medicines to the people of India.

(d) Regulatory Affairs, Clinical Research, Medical Affairs and Medical Governance

During the year under review, in order to support the commercial availability of new drugs that would benefit and improve the quality of life of Indian patients suffering from various diseases, your Company submitted several applications for New Products in India to the CDSCO (Central Drugs Standard Control Organization), Ministry of Health and Family Welfare, Government of India. After a thorough review of these applications, your Company has received approval for some of these products from CDSCO, which will enable timely access to new and innovative therapeutic options to patients in our country.

Some of the innovator products approved by the regulatory agency in India during the year under review include a biological oncology product panitumumab in-licenced from Amgen (Vectibix) for the treatment of patients of metastatic colorectal carcinoma as third line treatment option, a line extension for amoxicillin and clavulanic acid formulation (Augmentin Drops) for paediatric use, expansion of use of DTaP vaccine (Boostrix) for use in adults and new indication for the use of cefixime formulation (Cefspan) in enteric fever. All these new products approved for the Company during the year under review will be beneficial to Indian patients. In addition, the Company also received approval for import and marketing of 7 cosmetic products in India.

GlaxoSmithKline globally continues to be committed to Research and Development of medicines that will improve the quality of life of people around the world and truly make a difference to patients. Our scientists work hard to discover new medicines that prevent, treat or cure diseases.

Your Company conducted studies in oncology, anti-infectives and osteoporosis, after obtaining necessary Ethics Committee and regulatory approvals. Your Company has trained 42 new investigators on Good Clinical Practices and protocol-related science at approximately 40 clinical trial sites across India. Quality continues to be a priority as demonstrated by a number of internal and external compliance audits with no critical findings. To strengthen quality of data, quality checks are meticulously reviewed, systems and processes are simplified to ensure compliance to regulations. This will help generate accurate and meaningful data, and ensure that the rights, dignity and safety of patients taking part in our studies are protected.

The Medical Affairs team has provided valuable medical inputs for the development and execution of launch strategy for several products including Avamys (fluticasone furoate), Xgeva (denosumab), Cardio Check, Physiogel and Acne-aid wash. The team played a crucial role in communicating high-quality scientific information to the medical fraternity. It was involved in conducting scientific engagement activities such as advisory board meetings, congress presentations, publications, satellite symposia and provision of evidence-based medical information to healthcare practitioners. The Medical Affairs team and the Medical Governance teams ensure that your Company''s promotional activities and HCP (healthcare practitioner) engagements are in line with all the applicable guidelines and standard operating practices.

(e) Internal Control Framework

Your Company conducts its business with integrity and high standards of ethical behaviour, and in compliance with the laws and regulations that govern its business. Your Company has a well-established framework of internal controls in operation, supported by standard operating procedures, policies and guidelines, including suitable monitoring procedures and self-assessment exercises. In addition to external audit, the financial and operating controls of your Company at various locations are reviewed by the Internal Auditors, who report significant findings to the Audit Committee of the Board. Compliance with laws and regulations is also monitored.

Your Company''s Code of Conduct sets out the fundamental standards to be followed by employees in their everyday actions. In accordance with the Code of Conduct, and Standards associated with the Code of Conduct, employees are required to become familiar with the legal requirements, policies and procedures applicable to their areas of operation, avoid conflicts of interest and are tasked with upward reporting of all unethical and illegal conduct. All employees are committed to the principle of performance with integrity and ensuring that activities comply with all applicable laws.

Additionally, employees are required to certify on an annual basis whether there have been any transactions which are fraudulent, illegal or violative of the Code of Conduct. Strong oversight and self monitoring policies and procedures demonstrate your Company''s commitment to the highest standards of integrity.

Your Company''s policies and updated Global Code of Practice for Promotion and Customer Interactions prescribe the nature of practices and prohibits specifically those which are unethical. Your Company is a signatory to the OPPI (Organisation of Pharmaceuticals Producers in India) Code of marketing conduct. Your Company is also governed by the anti- bribery and corruption programme which is applicable across the global organisation and complies with the principles laid down under US Foreign Corrupt Practices Act and British anti-bribery laws.

(f) Human Resources

2013 has seen a good progress in the key areas of the Human Resources function in your Company i.e. Talent Management, Capability Building and Employee Engagement. Your Company has been conferred the prestigious Confederation of Indian Industries (CII) Award for "Significant Achievement in HR Excellence" in 2013. A team of trained assessors from CII spent around 300 man-hours for evaluation, post submission of the application document. The robustness of the assessing process continued through a review of assessor findings by distinguished jurors. Your Company was rated amongst top 50 (41) companies in India and also amongst the top 3 in the Drugs, Pharmaceuticals & Healthcare segment in the Fortune magazine study of "India''s Most Admired Companies" in 2013. Business Today in its "The Best Companies to Work For" also ranked your Company amongst the top three among the pharmaceutical companies in India.

Talent Management practices have seen a continued investment in building the talent pipeline across the business. The Management Trainees programme branded as ‘future leaders programme'' has seen continued hiring in this area, like previous years, from key business school campuses.

The Learning & Development plan has been in place to provide training inputs for employees across functions and levels. They have addressed both skill and knowledge gaps. Leadership programs continue with First Line Leaders program, Leading Delivery for second line leaders and Leading Business for grooming people into senior leadership roles.

Coaching continues to be an important leadership approach and your Company has covered a significant population of its managers through the "Practical Coaching at the Workplace" programme. In addition select leaders have attended a Job Plus Coaching programme by which they have been trained and certified to coach key talent and other employees.

Lecture series and other knowledge sessions have been conducted on the important aspect of Employee Safety e.g. Driving Two Wheelers Safely. Wellness and Wellbeing services provided employees with counselling opportunities on the day-to-day issues faced in life.

"PULSE" volunteering and "Orange Day" wherein employees are encouraged to contribute to society saw good enthusiasm amongst the employees. PULSE is a volunteering programme by which selected employees work with an NGO on projects for a span of 3-6 months while Orange Day sees employees going on joint field work with specific NGOs for a day.

On the Industrial Relations front, your Company continues to share a cordial relationship with the Unions and acknowledges the contribution of the Unions and the Employees towards meeting the objectives of your Company.

(g) Supply Chain Manufacturing

The India manufacturing operations continues its journey on the road-map and defined long term strategy. Capacity expansion project of Eltroxin have been started at the Nashik site. Your Company continues to work on building capacities through dual sourcing for key products. The Nashik site is continuously building capabilities through productivity, OEE improvements, recruitment of professionals, specifically in Quality, EHS and Manufacturing, as well as recruitment of fresh diploma engineers on the shop floor. High speed Ointment filling and packing line was installed and commissioned during the year. The Nashik site continues to deliver for Government Tenders which are highly customised packs, and is geared up for implementation of Serialisation requirements as mandated by Government for Export products.

Manufacturing Excellence

The Nashik Site is working on various regional initiatives like operations excellence programme, End to End Supply chain, performance management systems in line with Global Manufacturing and Supply initiatives.

In line with Global Best Practices in the area of Manufacturing and Supply chain, your Company has been working on strategy deployment, performance management, lean leadership, visual factory, gemba with purpose etc. Through strategy deployment, the Nashik site is striving to engage everybody and aligning the collective efforts of everyone with the site roadmap to deliver the business goals. Several improvement projects have been identified related to OEE improvement, cost reduction, productivity improvement, quality & safety improvement which are in progress. The Nashik site achieved a new landmark in supporting patient requirements by recording the highest production in the dermatology range of 128 Mn tubes.

Logistics

I n line with business needs, the focus continued on base capability build up, infrastructure development, standardizing the way of working and making progress in our performance system & governing mechanism. The year saw the enhancement in cool storage capability, complete Corporate Security & Investigations (CSI) review of business partners, roll out of various quality & customer connect programs. There was an external challenge of implementing the new DPCO within 45 days and detailed planning and execution ensured compliance.

(h) Corporate Social Responsibility

As a part of its social development initiatives, your Company''s commitment towards Corporate Social Responsibility continued by supporting the ongoing long term social projects and the addition of new projects through various non-governmental organisations.

Your Company through Gramin Arogya Vikas Sanstha (GAVS), a registered public trust promoted by the Company, through its tribal healthcare project in Nashik, Maharashtra has reached out to approximately 260 villages through health centres and mobile vans. There have been more than 40,000 direct beneficiaries and 1.25 lakh indirect beneficiaries through health checkup camps and education sessions. This project is in partnership with NGO Niramaya Health Foundation.

Your Company continued its support to the Institute for Indian Mother and Child, an NGO in West Bengal with primary healthcare services to mother and child, educating the community on ante-natal, natal and post natal. In 2013, there have been more than 2.2 lakh beneficiaries which included mothers for maternal and child health screening, dietary supplements and other healthcare needs.

Your Company continued to support through Niramaya Health Foundation, another healthcare project in the slums of the dumping grounds of Deonar, Mumbai. To meet the immediate health care needs, a fully-equipped mobile medical van is available to attend to 30,000 slum dwellers.

During the year, your Company continued to support three voluntary organisations for cancer care towards underprivileged patients - Sri Chaitanya Seva Trust, Mumbai; Indian Cancer Society, Mumbai; and Bangalore Hospice Trust, Karunashraya, Karnataka through screening camps to facilitate early detection, treatment, rehabilitation and palliative care etc. Over 95 camps were conducted, following which approximately 9000 patients were screened for cancer. More than 100 cancer patients were rehabilitated through vocational training and more than 1100 critically ill cancer patients were supported through donation of medicines.

A successful partnership with Pratham continued in 2013 with the education projects in Behraich, Uttar Pradesh and Jodhpur, Rajasthan. Through the shelter homes a total of 63 children went back to their homes with social workers of Pratham monitoring that they have been continuing with their education in the local schools successfully and 89 new children were enrolled. GSK continued to support Paraplegic Foundation in Mumbai for rehabilitation of the severely orthopaedically disabled lower socio-economic class patients. Besides, your Company extended its support towards the education of disadvantaged orphaned children in Barasat district of West Bengal through Kamakhya Balak Ashram by building a school block and has partnered with Aural Education for Hearing Impaired (AURED) in Hyderabad, Andhra Pradesh to help early intervention and detection.

Your Company supported other education projects including Ashirwad Special Education School, Delhi which serves mentally challenged children, Pushpawati Runtha Kanya Vidyalaya, Chandak Kanya Vidyalaya, Vanita Vikas Mandal in Nashik, Maharasthra and Nai Dharti in Patna, Bihar, by supporting the education of underprivileged girls. Your Company continued its support to educate the underprivileged children of Shree Ichhyaamni Vidyamandir, Avishkar Education Sanstha, Shri Ram Vidyalaya managed by Tarun Aikal Mandal and the Down''s Syndrome Care Association in Nashik, Maharashtra. Besides, your Company initiated support to The Association of Parents of Mentally Retarded Children, Nashik for medical equipments and The National Federation of Blind, Nashik, towards vocational training and rehabilitation.

Your Company also supported the relief operations of the disaster hit victims of the Uttarakhand floods and Typhoon Phailin by donating medicines through Americares India Foundation.

GlaxoSmithKline Plc continued their donation of Albendazole. In 2013, we donated 325 million albendazole tablets to support the Government of India''s Lymphatic Filariasis elimination programme. In addition, for de-worming of school-age children in India, in 2013, 11.2 million albendazole tablets were donated.

(i) Cautionary Note

Certain statements in the "Management Discussion and Analysis" section may be forward- looking and are stated as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook.

4. Directors

Ms. A. Bansal, Mr. PV. Nayak and Mr. D. Sundaram retire by rotation and, being eligible, offer themselves for re-appointment.

5. Directors'' Responsibility Statement

Your Directors confirm:

(i) t hat in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) that the Directors have 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 31st December 2013 and of the profit of the Company for that year;

(iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

6. Corporate Governance & Business Sustainability Report

Your Company is part of the GlaxoSmithKline plc group and conforms to norms of Corporate Governance adopted by them. As a Listed Company, necessary measures are taken to comply with the Listing Agreements with the Stock Exchanges. A report on Corporate Governance, along with a certificate of compliance from the Auditors, given in Annexure ‘B'', forms a part of this Report. Further a Business Responsibility Report, describing the initiatives taken by your Company from an environmental, social and governance perspective, given in Annexure ‘C'', also forms a part of this Report.

7. Auditors

Members are requested to re-appoint M/s. Price Waterhouse & Co., Bangalore, Chartered Accountants, as the Auditors of the Company and authorise the Audit Committee to fix their remuneration.

Pursuant to the Order issued by the Central Government under Section 233B of the Companies Act, 1956, the Board of Directors of your Company have appointed Messrs R. Nanabhoy & Co., Cost Accountants for conducting the audit of the cost accounting records maintained by the Company for its Formulations.

8. General

The particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure ‘A'' forming part of this Report. The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, forms part of this Report. However, as per the provisions of Section 219(1) (b)

(iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company. Further, attached to the accounts of the Company are the Report and Audited Accounts of Biddle Sawyer Limited, a subsidiary company.

9. Employees

The Directors express their appreciation for the contribution made by the employees to the significant improvement in the operations of the Company and for the support received from all other stakeholders, including shareholders, doctors, medical professionals, customers, suppliers and business partners.

The Board and the Management of your Company are indeed appreciative of the substantial support being received from GSK plc the parent organization in providing new healthcare solutions which are products of its discovery labs and the technology improvements which benefits your Company immensely.

On behalf of the Board of Directors

D. S. Parekh

Chairman

Mumbai, 18th February 2014


Dec 31, 2012

The Directors have pleasure in submitting their Report for the year ended 31st December 2012

1. Results for the year ended 31st December 2012

Year ended Year ended 31st December 31st December 2012 2011 Rs. in lakhs Rs. in lakhs

Sale of Products (Net of Excise Duty) 2599,93.10 2338,03.40

Other Operating Revenue 30,37.21 37,84.70

Revenue from Operations 2630,30.31 2375,88.10

Profit before Exceptional Items and Tax 994,77.65 921,59.78

Less: Exceptional Items (148,21.70) (322,54.14)

Profit before Tax 846,55.95 599,05.64

Less: Tax expense 269,30.06 168,45.22

Net Profit for the year 577,25.89 430,60.42

Add: Opening Surplus brought forward from the previous year 1110,59.15 1164,52.81

Less: Appropriations:

Proposed Dividend (including tax on distributed Profits) 487,17.85 441,48.04

Transfer to General Reserve 57,72.59 43,06.04

Closing Surplus carried forward 1142,94.60 1110,59.15

2. Dividend

The Directors recommend a Dividend of Rs. 50 per Equity Share for the year (previous year: Rs. 45.00 per Equity Share). If approved by the Shareholders at the Annual General Meeting, the Dividend will absorb Rs. 423 crores. The Dividend Distribution Tax borne by the Company will amount to Rs. 64 crores.

3. Directors

Dr. A. Banerjee resigned as Alternate Director to Mr. S. Harford from 31st July 2012 and Mr. V. Narayanan resigned as Director from 9th November 2012. The Board places on record its appreciation of the valuable services rendered by Dr. A. Banerjee and Mr. V. Narayanan during their tenure as Directors and for their contributions to the deliberations of the Board.

The Board of Directors has appointed Ms. Anjali Bansal as Non-Executive Independent Director with effect from 19th February 2013, in the casual vacancy caused by the resignation of Mr. V. Narayanan.

Mr. P. V. Bhide, Mr. M. B. Kapadia and Mr. R. C. Sequeira retire by rotation and, being eligible, offer themselves for re-appointment.

4. Directors'' Responsibility Statement

Your Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) that the Directors have 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 31st December 2012 and of the profit of the Company for that year;

(iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

5. Corporate Governance & Business Responsibility Report

Your Company is part of the GlaxoSmithKline plc group and conforms to norms of Corporate Governance adopted by them. As a Listed Company, necessary measures are taken to comply with the Listing Agreements with the Stock Exchanges. A report on Corporate Governance, along with a certificate of compliance from the Auditors, given in Annexure ‘B'', forms a part of this Report. Further a Business Responsibility Report, describing the initiatives taken by your Company from an environmental, social and governance perspective, given in Annexure ‘C'', also forms a part of this Report.

6. Auditors

Members are requested to re-appoint M/s. Price Waterhouse & Co., Bangalore, Chartered Accountants, as the Auditors of the Company and authorise the Audit Committee to fix their remuneration.

Pursuant to the Order issued by the Central Government under Section 233B of the Companies Act, 1956, the Board of Directors of your Company have appointed M/s. R. Nanabhoy & Co., Cost Accountants for conducting the audit of the cost accounting records maintained by the Company for its Formulations.

7. General

The particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure ‘A'' forming part of this Report. The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, forms part of this Report. However, as per the provisions of Section 219(1)(b) (iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company. Further, attached to the accounts of the Company are the Report and Audited Accounts of Biddle Sawyer Limited, a subsidiary company.

8. Employees

The Directors express their appreciation for the contribution made by the employees to the significant improvement in the operations of the Company and for the support received from all other stakeholders, including shareholders, doctors, medical professionals, customers, suppliers and business partners.

The Board and the Management of your Company are indeed appreciative of the substantial support being received from GSK plc, the parent organization, in providing new healthcare solutions which are products of its discovery labs and the technology improvements which benefits your Company immensely.

On behalf of the Board of Directors

V. Thyagarajan

Vice-Chairman

Mumbai, 19th February 2013


Dec 31, 2010

The Directors have pleasure in submitting their Report for the year ended 31st December 2010

1. Results for the year ended 31st December 2010

Year ended Year ended 31st December 31st December 2010 2009 Rs. in Lakhs Rs. in Lakhs

SALES (Gross) 2155,08.20 1912,77.03

Less: Excise duty on Sales 43,43.95 42,00.31

NET SALES 2111,64.25 1870,76.72

PROFIT BEFORE TAXATION AND

EXCEPTIONAL ITEMS 867,26.60 758,48.20

Less: Provision for Taxation 285,88.43 253,58.88

PROFIT AFTER TAXATION AND

BEFORE EXCEPTIONAL ITEMS 581,38.17 504,89.32

Exceptional Items (Net of Tax) (17,69.36) 7,39.77

NET PROFIT AFTER TAX 563,68.81 512,29.09

Add: Balance brought forward from

the previous year 1049,23.41 882,40.80

Amount available for disposal 1612,92.22 1394,69.89

APPROPRIATIONS :

General Reserve 56,36.88 51,22.91

Equity Dividend 338,81.20 254,10.90

Distribution Tax on Dividend 53,21.33 40,12.67

Balance carried forward 1164,52.81 1049,23.41

2. Dividend

The Directors recommend a Dividend of Rs. 40 per Equity Share for the year (previous year: Rs.30 per Equity Share). If approved by the Shareholders at the Annual General Meeting, the Dividend will absorb Rs. 339 crores. The Dividend Distribution Tax borne by the Company will amount to Rs. 53 crores.

4. Directors

Resignation

Mr. Ajit Nimbalkar resigned as Director from 27th April 2010. The Board places on record its appreciation of the valuable services rendered during his tenure as Director and for his contributions to the deliberations of the Board.

Appointments

The Board of Directors has appointed Mr. Pradeep Bhide as Non-Executive Independent Director with effect from 28th October 2010, in the casual vacancy caused by the resignation of Mr, Ajit Nimbalkar. The Board has also appointed Mr. Simon Harford as Non-Executive, Non - Retiring Director with effect from 28th October 2010.

Mr. P. V. Nayak, Mr. V. Narayanan and Mr. D. Sundaram retire by rotation and, being eligible, offer themselves for re-appointment.

5. Directors Responsibility Statement

Your Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) that the Directors have 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 31s December 2010 and of the profit of the Company for that year;

(iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

6. Corporate Governance

Your Company is part of the GlaxoSmithKline pic group and conforms to norms of Corporate Governance adopted by them. As a Listed Company, necessary measures are taken to comply with the Listing Agreements with the Stock Exchanges. A report on Corporate Governance, along with a certificate of compliance from the Auditors, given in Annexure B, forms a part of this Report.

7. Auditors

Members are requested to re-appoint M/s. Price Waterhouse & Co, Chartered Accountants, as the Auditors of the Company and authorise the Audit Committee to fix their remuneration.

Pursuant to the Order by the Central Government under Section 233B of the Companies Act, 1956, the Board of Directors of your Company have appointed Messrs R. Nanabhoy & Co., Cost Accountants for conducting the audit of the cost accounting records maintained by the Company for its Bulk Drugs and Formulations.

8. General

The particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure A forming part of this Report. The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, forms part of this Report. However, as per the provisions of Section 219(1) (b) (iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company. Further, attached to the accounts of the Company are the Report and Audited Accounts of Biddle Sawyer Limited, a subsidiary company.

9. Appreciations and Acknowledgements

The Board places on record its appreciation of enormous contribution and support received by your Company from GlaxoSmithKline pic, by providing access to the latest innovative products, other products relevant to the local market, sales/marketing and training inputs, technological support and global business processes which have played an important role in helping your Company to become a leading player in the Indian pharmaceutical market.

The Directors express their appreciation for the contribution made by the employees to the significant improvement in the operations of the Company and for the support received from all other stakeholders, including shareholders, doctors, medical professionals, customers, suppliers and business partners.

On behalf of the Board of Directors

D.S. Parekh Chairman

Mumbai, 14th February 2011


Dec 31, 2009

The Directors have pleasure in submitting their Report for the year ended 31st December 2009

1. Results & Dividend for the year ended 31st December 2009

Year ended Year ended 31st December 31st December 2009 2008 Rs. in Lakhs Rs. in Lakhs

SALES (Gross) . . 1912,77.03 1751,56.06

Less: Excise duty on Sales . . .. .. 42,00.31 91,15.53

NET SALES 1870,76.72 1660,40.53

PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS 758,48.20 679,89.76

Less: Provision for Taxation 253,58.88 231,53.94

PROFIT AFTER TAXATION AND BEFORE

EXCEPTIONAL ITEMS . . 504,89.32 448,35.82

Exceptional Items (Net of Tax) 7,39.77 128,21.08

NET PROFIT AFTER TAX . . 512,29.09 576.56.90

Add: Balance brought forward from the previous year . . 882,40.80 759,88.90

Amount available for disposal 1394,69.89 1336,45.80

APPROPRIATIONS :

General Reserve . . 51,22.91 57,65.69

Equity Dividend (including special additional Dividend in the previous year) 254,10.90 338,81.20

Distribution Tax on Dividend 40,12.67 57,58.11

Balance carried forward 1049,23.41 882,40.80

The growth in Net Sales (net of Excise duty) was 12.7% and in Profit after Tax and before Exceptional Items was 12.6% for the year ended 31st December 2009. The growth in Gross Sales was impacted on account of lower selling prices as a result of the benefit of excise duty reduction being passed on to the consumer.

2. Dividend

The Directors recommend a Dividend of Rs.30 per Equity Share for the year (previous year: Rs.22 per Equity Share and a special additional Dividend of Rs.18 per Equity Share). If approved by the Shareholders at the Annual General Meeting, the Dividend will absorb Rs.254 crores. The Dividend Distribution Tax borne by the Company will amount to Rs.40 crores.

3. Management Discussion and Analysis

(a) Your Company maintained its leadership position in the Pharmaceuticals market with Net Sales registering a growth of 12.7%. Profit Before Tax and Exceptional Items grew by 11.6%. Sales performance in all of the Companys diversified business units i.e. in the mass market and mass specialty segments, dermatologicals, oncology, critical care and vaccines helped to support sales growth. Despite significant investments in sales promotion and field force expansion, Profit before investment income and tax was maintained at 35% of Net Sales.

Cash generation from operations was favourable, driven by the strong business performance and management of working capital. The Companys investment portfolio continues to remain deployed largely in Bank Deposits.

(b) Pharmaceuticals Business Performance, Opportunities and Outlook

Your Company continues to enjoy a leadership position in the categories in which its products are represented. The growth of your Company was marginally better than the growth of the Indian Pharmaceuticals market.

The Mass Markets activity comprising mainly of acute care products grew faster than the market in their represented segments: the rural marketing initiative has picked up momentum. Calpol, an anti-pyretic drug, is now the largest prescribed product in the industry (Source: CMarc - Dec09) while other products such as Parit, Vozet, Cobadex CZS, Neosporin and Zentel have gained market share in their represented categories.

The Mass Specialty team continued to record good growth. Augmentin, currently the largest selling antibiotic brand in the industry, Arixtra, Zobactin, Supacef and Eltroxin are major growth drivers for this team. Arixtra is the 6th largest brand in the anti-thrombotic market. The focus on Hospital and Tender businesses will help further growth opportunities in these specialities.

The Companys chronic care portfolio includes the Dermatology, Oncology, Cardiovascular, Respiratory and Diabetes segments. Your Company is currently the leader in the Dermatology category with 14% market share and key products such as Betnovate, Zovirax, Zimig and Tenovate are consistently maintaining a leadership position in their respective categories. In Oncology, your Company has supported approximately 400 patients with the drug Tykerb. Lanoxin has consistently maintained a leadership position and launch of Benitec makes the Companys foray in cardiovascular therapy. In diabetes care, Windia is the leader in the Rosiglitazone segment. With the acquisition of distribution rights for the Stiefel (a global dermatologicals company) range of products in India, plans are in hand for market expansion in cosmetic dermatology therapies like acne, sun protection, emollients and moisturizers.

The Vaccines business continued to perform well in the current year. Rotarix, a vaccine for rotaviral diarrhoea is making significant strides. Cervarix, a vaccine for prevention of cervical cancer, was launched during the year. Your Company expects to introduce newer and sophisticated vaccines which will help increase market penetration.

New products launched during the year included Benitec A (Olmesatan in combination with Amilodipine) in Cardiology, Dermocalm (Calamine lotion) in Dermatology, Ventorlin CFC free inhaler (Salbutamol) in Respiratory and Esblanem (Meropenem) in Antibiotic segments.

Your Company continued the search for new Business Development opportunities in high growth therapeutic areas like Cardiology, Diabetes and Oncology and in therapeutic areas in which your Company has well established presence like Dermatology, Gynecology, Antibiotics and Gastroenterology. Going forward, your Company intends to enter into high growth segments such as CNS (Central Nervous System).

Exports recorded a sales turnover of Rs.71.50 crores comprising both Bulk Drugs and Formulations. Exports of bulk drugs were to major markets like Japan, Mexico, France, Indonesia, Jordan, U.K. and Germany.

(c) Risk, Concerns and Threats

As expected, India has been relatively insulated from the global recession, without any significant impact on the growth of the pharmaceutical industry. The industry growth is largely driven by chronic disease segments viz. cardiovascular, diabetes, asthma, cancer, and largely influenced by changing lifestyles. There are signs that health awareness has increased due to higher disposable incomes, urbanization and greater health insurance coverage, which could improve further with acceleration in Government spend on healthcare infrastructure. The adoption of intellectual property rights has encouraged innovation. The industry continues to remain under price control; the scope and coverage of the Governments new pharmaceuticals policy cannot be ascertained, since it is pending review by the Government and remains an area of uncertainly for the pharmaceutical industry. It is hoped that Government will consider several representations made by industry associations in framing the new policy. Data Exclusivity/Data Protection remain concern area for the industry.

(d) Research & Development and Regulatory Matters

GlaxoSmithKline continues to be committed to research and development of medicines that will improve the quality of life of people around the world and that truly make a difference to patients. The Clinical Operations group in India, which conducts clinical studies across a number of disease areas ranging from Cancer, Coronary Heart Disease including acute coronary syndrome, Diabetes, Chronic Liver Disease and Hepatitis C, supports this effort.

Last year, your Company conducted 18 clinical trials, of which 7 were new studies initiated in 2009. In all, over 800 patients participated. The therapeutic area focus for 2009 has been Oncology and Cardiovascular diseases. Your Company has so far trained clinical trial investigators in over 131 hospitals / institutes across India. The quality of work continues to be of a very high order, evidenced by a number of successful internal compliance audits as well as US FDA inspections at two of our investigational sites.

During the year under review, in order to support the launch of new drugs that would benefit and improve the quality of life of Indian patients suffering from various diseases, your Company submitted 7 NDAs (New Drug Applications) for GlaxoSmithKline innovator and in-licensed products and 2 INDs (Investigations New Drug Applications) to the CDSCO (Central Drugs Standard Control Organization), Ministry of Health and Family Welfare, Government of India. Your Company has received approval for 3 NDAs and 1 IND from CDSCO which paves the way for speedy introduction of new drugs. Additionally, to support the R&D efforts of GlaxoSmithKline, your Company submitted 3 global Clinical Trial applications to CDSCO, and was granted approval to conduct these studies in the Indian population through the Clinical Operations group in India.

Efforts towards a speedy review and approval by regulatory authorities for some of these products, particularly a calcium supplement, micafungin, retapamulin and a new indication for Carzec help achieve early access to new and innovative therapeutic options to patients in the country. The Medical Affairs team is adequately resourced to play a pivotal role in communicating cutting edge scientific information to internal and external stakeholders.

(e) Internal Control Framework

Your Company conducts its business with integrity and high standards of ethical behavior, and in compliance with the laws and regulations that govern its business. Your Company has a well established framework of internal controls in operation, including suitable monitoring procedures and self-assessment exercises. In addition to external audit, the financial and operating controls of your Company at various locations are reviewed by the Internal Auditors, who report their findings to the Audit Committee of the Board. Compliance with laws and regulations is also monitored.

Your Companys Code of Conduct sets out the fundamental standards to be followed by employees in their everyday actions. In accordance with the Code of Conduct, and Standards associated with the Code of Conduct, employees are required to become familiar with the legal requirements, policies and procedures applicable to their areas of operation, avoid conflicts of interest and are tasked with upward reporting of all unethical and illegal conduct. All employees are committed to the principle of performance with integrity and ensuring that activities comply with all applicable laws.

Additionally, Managers are required to certify on an annual basis whether there have been any transactions which are fraudulent, illegal or violative of the Code of Conduct. Strong oversight and self monitoring policies and procedures demonstrate your Companys commitment to the highest standards of integrity.

(f) Human Resources

With the increasing importance of Human Resources, emphasis has been laid on capability building and towards enhancing the effectiveness of specialised teams. Structured Management Trainee schemes have been set up/revamped to support the different functions. Your Companys employees have played a key role in contributing to the growth and maintaining its status as one of the most reputed companies in India and more specifically in the pharmaceuticals industry.

In reaching out to its employees, the Company has also launched a Wellness and Well being Program, a recognition scheme called AAA award (Acknowledge, Appreciate and Award) to recognize employees who have made good contributions as well as an Empowerment Program for employees to contribute their ideas through small group activities. Talent management continues to be an important area for your Company and key talent amongst the first line managers attended a three Module Leadership and Development program in collaboration with the SP Jain Institute of Management. Other employees were encouraged to avail of an educational assistance policy so as to encourage a learning culture.

Your Company has maintained an amicable relationship with its Unions. During the course of the year, long term settlements have been signed at the two manufacturing sites, Thane and Nashik. Long term settlements were also signed with the Unions representing the field sales force.

Sales training supports the delivering of quality communication to the medical fraternity. A Brand Calling Card prompts Medical Representatives on differentiating their Brand communication to Doctors. This interactive detailing also has a bank of FAQs, Rebuttals, Clinical Papers and other Pathology-Product-Promotion literature for training. A new Development Navigator and Field Coaching Tool enables Performance Tracking and Continuous Improvement from the sales teams.

Your Company had staff strength of 4006 employees as on 31st December, 2009 compared to 3722 employees at the end of the previous year. The additional headcount is on account of new initiatives in the Field to extend our reach.

(g) Procurement

To meet the challenges in procurement which surfaced in 2008, strategic contracts helped in capitalizing on the opportunities in key raw material categories. This has ensured procurement efficiency and assurance of supply. Focus on risk based sourcing management received a thrust with the launch of advance procurement initiatives aimed at building capability of vendors. Supplier Quality Management, through a dedicated team launched this year, aims at ensuring best quality of all our ingredients by end to end quality management at vendors sites. A vendor assessment tool specifically aimed at measuring capability and capacity of vendors was developed and deployed.

Sourcing strategies were developed for spend optimization in the area of marketing promotional support items, promotional printing, air travel and events management.

(h) Manufacturing

Your Companys Nashik site commenced manufacture and supply of Albendazole tablets to WHO for the Lymphatic Filriasis eradication programme. Thane site continued to supply Betamethasone and its derivatives to highly regulated markets. Upgradation at Nashik site has been undertaken resulting in significant increase in productivity. There was considerable focus on improving Environment, Health and Safety and a number of activities have been undertaken at both the Nashik and Thane sites during the year.

(i) Information Technology (IT) & Supply Chain

As a global initiative to bring down cost and reinvest for further improvements in technology, the IT function has been restructured globally to form IT demand (business facing) and IT supply (technology delivery) functions. The transition to the new model was well planned and executed, with no adverse impact on the business.

A mobile phone based Field activity reporting initiative was successfully piloted across two cities. Another major IT initiative, aimed at risk mitigation and control, was successfully completed during the year. IT enabled external facing web applications were reviewed and the identified risks were mitigated through a well coordinated plan.

In a goods and services tax regime, a Hub and Spoke initiative is being piloted in the distribution network. New ways of working were put in place for better networking of supply sites, both local and global, using global GSK systems and resources to ensure an uninterrupted supply.

(j) Corporate Social Responsibility

During the year, your Company undertook several community development projects by continuing to make a positive and significant contribution to the society.

Gramin Arogya Vikas Sanstha (GAVS), the Trust established and supported by the Company continues to operate in predominantly tribal and remote villages around Nashik. The Trusts Mobile Clinic operates in these remote regions covering a distance of over 160 kms each day, visiting around 35 clusters of villages in rotation. GAVS during the year has been successful in reaching out to over 40000 tribal people as direct and indirect beneficiaries, covering six blocks of Peth Taluka. Three Medical centres located in the pre-dominantly remote villages provide primary healthcare services to the tribals, who are socio-economically disadvantaged and marginalized group of people living in very difficult terrain, with very limited access to healthcare services. The project was executed in collaboration with Niramaya Health Foundation.

GAVS, in its on-going education initiative for the Rural Tribal youth, runs three Vocational Training Centers in Peth Taluka, Nashik, in collaboration with partner organization Kherwadi Social Welfare Association. The project was undertaken with the long term objective of imparting specialized skills and making the tribal youth more employable in the areas of computer literacy, tailoring, beauty training, wireman/ electrician training, English speaking, motor training etc. Various batches covering around 700 youth have successfully completed their courses, with over 50% of them currently gainfully employed.

During the year, the Company continued its support to Pratham, a charitable Organization, in running a Shelter home for children under the age of 16. This Shelter home is located in Behraich, Lucknow, which is one of the highest child migrating regions in the country. During the year the shelter home catered to 120 children and provided shelter to 52 needy and vulnerable children. The Shelter home provides education, food and shelter to these children for their holistic development.

Your Company continues supporting the medical healthcare services in Deonar dumping ground, the largest garbage dumping ground in Mumbai. The project involves providing primary healthcare services to children who are rag-pickers and their families who work in and around the dumping ground. The intervention has achieved improved life expectancy of the children working as rag pickers in the dumping ground, while reducing the rate of anaemia and other nutritional deficiencies and general ailments in the community.

Donation of essential medicines / products for humanitarian causes was continued with, while also continuing to support ISKCON Foundations Mid-Day Meal project in Mumbai for municipal school children by way of Cash Donation.

Your Company also undertook new projects for capacity building in Kolkata. It supported Institute of Child Health, a charitable organisation, by providing donation to set up a technically sound NICU step down Unit for its 150 bedded hospital, benefiting increased number of infants from economically weaker section. Your company also extended its support to Indian Institute for Mother and Child, a voluntary organization, committed to promote child and maternal health and literacy. An annual financial support was provided to the organization to run its on-going medical programs benefiting over 1 lakh poor people.

As part of its regional CSR program, your Company supported smaller projects in Nashik and New Delhi. The Company also supported St. Jude India Care centre by way of providing infrastructure support to its new centre in Navi Mumbai for cancer afflicted poor children and also donated a dialysis machine to Tamilnadu Kidney Research Association, a Charitable organization supporting economically weak patients in need of dialysis.

The Company also initiated new projects in support of the geriatric population. The first project, your Company initiated was a long term project for supporting annually a 24 X 7 Helpline for senior citizens in Mumbai, run by Dignity Foundation, a voluntary non profit organization. The Helpline provides immediate and emergency support, rescue and relief to elderly people calling at the Helpline. The second project was for providing medical support to the aged in the remote and under developed Khurda district of Orissa. The project envisages support to about 14,000 underserved villagers suffering from debilitating diseases, especially orthopaedic conditions and helping in their rehabilitation.

The Company also took active steps by partnering with the Mumbai Municipal Corporation in spreading awareness of swine flu. There were a number of promotional initiatives that were taken that included release of advertisements, creation of bus panels, posters etc. among other initiatives.

India is increasingly becoming an integral part of GlaxoSmithKlines CSR initiatives. During the year, our parent fulfilled its plans of up scaling its efforts in India and building a new manufacturing production line in India that would help substantially towards helping eliminate Lymphatic Filariasis (LF) by 2020. The Global Community partnerships project, Personal Hygiene and Sanitation Education (PHASE) has also been successfully launched during the year in India covering 16 municipal schools in Mumbais Deonar Dumping ground and Dharavi.

(k) Cautionary Note

Certain statements in the "Management Discussion and Analysis" section may be forward- looking and are stated as required by applicable laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook.

4. Directors

Resignation

Mr. Peter Bains and Dr. Mark Reilly resigned as Directors from 27th July 2009. The Board places on record its appreciation of the valuable services rendered during their tenure as Directors and for their contributions to the deliberations of the Board.

Appointment

The Board of Directors has appointed Mr. D. Sundaram as Non-Executive Independent Director of the Company with effect from 27th July 2009, in the casual vacancy caused by the resignation of Dr. Mark Reilly. The Board has also appointed Mr. A. M. Nimbalkar as additional Director of the Company with effect from 27th July 2009. A proposal for his appointment as Non-Executive Independent Director is being placed before the Members for approval at the ensuing Annual General Meeting.

Mr. R. R. Bajaaj, Mr. M. B. Kapadia and Mr. R. C. Sequeira retire by rotation and, being eligible, offer themselves for re-appointment.

5. Directors Responsibility Statement

Your Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards have been followed;

(ii) that the Directors have 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 31st December 2009 and of the profit of the Company for that year;

(iii) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the annual accounts on a going concern basis.

6. Corporate Governance

Your Company is part of the GlaxoSmithKline pic group and conforms to norms of Corporate Governance adopted by them. As a Listed Company, necessary measures are taken to comply with the Listing Agreements with the Stock Exchanges. A report on Corporate Governance, along with a certificate of compliance from the Auditors, given in Annexure B, forms a part of this Report.

7. Auditors

Members are requested to re-appoint M/s. Price Waterhouse & Co., Chartered Accountants, as the Auditors of the Company and authorise the Audit Committee to fix their remuneration.

8. General

The particulars relating to conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure A forming part of this Report. The particulars of employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the rules thereunder, forms part of this Report. However, as per the provisions of Section 219(1 )(b) (iv) of the Companies Act, 1956, the reports and accounts are being sent to all the Shareholders of the Company excluding the statement of particulars of employees. Any Shareholder interested in obtaining a copy may write to the Company Secretary at the Registered Office of the Company. Further, attached to the accounts of the Company are the Report and Audited Accounts of Biddle Sawyer Limited, a subsidiary company.

9. Employees

The Directors express their appreciation for the contribution made by the employees to the significant improvement in the operations of the Company and for the support received from all other stakeholders, including shareholders, doctors, medical professionals, customers, suppliers and business partners.

On behalf of the Board of Directors

D.S. Parekh Chairman Mumbai, 15th February 2010

 
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