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Directors Report of Granules India Ltd.

Mar 31, 2016

The Directors are pleased to present 25th Annual Report and the Company''s audited financial statements for the financial year ended March 31, 2016.

Financial Results:

The Company''s financial performance, both standalone and consolidated, for the year ended March 31, 2016 is summarised below:

(Rs. In Lakhs)

Particulars Standalone Consolidated

Year ended Year ended Year ended Year ended March 31, 2016 March 31, 2015 March 31, 2016 March 31, 2015

Revenue from operations 1,32,849.38 1,21,487.25 1,43,118.43 1,29,368.14

Other income 628.70 140.20 602.56 358.40

Total income 1,33,478.08 1,21,627.45 1,43,720.99 1,29,726.55

EBITDA 27,572.58 21,274.75 28,439.44 21,295.73

Less: Finance costs 3,666.34 3,092.94 3,991.94 3,234.60

Less: Depreciation 5,824.71 4,955.87 6,432.99 5,265.10

Profit before tax 18,081.53 13,225.94 18,014.51 12,796.04

Less: Tax expenses 5,985.09 3,703.30 6,167.75 3,705.26

Net profit after tax 12,096.44 9,522.64 11,846.76 9,090.78

Less: Adjustment pursuant to amalgamation - (601.51) - (430.60)

Less: Net book value of the assets whose remaining useful life is NIL at the beginning of the year in terms of provisions of Companies Act 2013 - (17.00) - (17.00)

Add: Surplus brought forward from previous Year 7,200.74 9,528.92 6,615.16 9,204.30

Surplus available 19,297.18 18,433.05 18,461.92 17,847.47

Appropriations made to surplus:

Interim dividend 928.94 - 928.94 -

Proposed final dividend 433.42 1,021.26 433.42 1,021.26

Dividend distribution tax (on interim dividend and proposed final dividend) 277.35 207.90 277.35 207.90

Dividend of previous years (including dividend distribution tax) 3.07 3.15 3.07 3.15

Transfer to general reserve - 10,000.00 - 10,000.00

Balance carried to Balance Sheet 17,654.40 7,200.74 16,819.15 6,615.16

Review Of Operations:

The Company''s Standalone revenues from operations were Rs.1,32,849.38 Lakhs for the FY 2015-16 as compared to Rs.1,21,487.25 Lakhs for the previous year registering growth of 9.35% in the current financial year. The Company has made Net Profit of Rs.12,096.44 Lakhs on standalone basis for the year under review as compared to Rs.9,522.64 Lakhs for the previous year, registering a growth of 27.03% in the current financial year.

The primary growth driver in FY 2015-16 was led by change in product mix. On a standalone basis, the Active Pharmaceutical Ingredients (API) business contributed the largest share of revenue at 37% while Pharmaceutical Finished Intermediates (PFI) and Finished Dosages contributed 29% and 34%, respectively. This is compared to 40%, 25% and 35% for API, PFI and Finished Dosages respectively in FY 2014-15. The profitability outpaced revenue growth due to several reasons. Our continuous efforts on operational excellence, process innovation, yield improvement and lower raw material cost of some of the key starting materials resulted improved earnings.

During the year under review, two of our facilities located in Vizag and Jeedimetla have completed US FDA inspection. There were no observations for the Vizag facility and three observations for the Jeedimetla facility. We have responded to the US FDA within the stipulated time and we believe that these issues will be resolved in the near future. During the year, the US FDA had approved Ibuprofen Rx ANDA filed by us for 400 mg, 600 mg and 800 mg tablets. This will further strengthen our core base business and enable us to increase our product offering to our customers in the United States. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position through dedicated research and introduction of new products.

Vertical integration has always been our strength and focus area. We will continue our focus on our core business and strengthen it by enhancing our capacities, improving our efficiencies, adding new products, moving up in the value chain and most importantly offering better services to our customers. The Company will continue to solidify its business model and build systems that are sustainable as it continue to scale-up.

Expansions:

During the financial year 2015-16, the Company enhanced Paracetamol API capacity at Bonthapally plant by 3,000 metric tonnes per annum. The Company is further adding 3,600 tonnes of PFI capacity at Gagillapur facility. The Company is also enhancing Metformin and Guaifenesin API capacity at Bonthapally plant by 7,000 and 2,000 tons per annum respectively.

Dividend:

The Board of Directors has recommended a final dividend of 20 paisa per equity share(Face value Rs.1/- per equity share) for the FY 2015-16,amounting to Rs.433.42 Lakhs. This is in addition to the interim dividend of 45 paisa per equity share paid during the year. The total dividend for the FY 2015-16 aggregates 65 paisa per equity share amounting to Rs.1,362.36 Lakhs as compared to 50 paisa per equity share paid in the previous year. Dividend distribution tax is Rs.277.35 Lakhs for the FY 2015-16 on interim and proposed final dividend.

Transfer Of Amount To Reserves:

The Board has not recommended any transfer to general reserve from the profits of the year under review.

Share Capital:

The Authorized Share Capital of the Company is 34,50,00,000 equity shares of Rs.1/- each. The Company has allotted 1,13,50,230 equity shares of Rs.1/- each to the promoters upon exercise of an equal number of warrants vested in them pursuant to the approval of the members obtained during the financial year 2015-16. The Company has also allotted 11,10,000 equity shares of Rs.1/- each upon exercise of an equal number of stock options pursuant to the extant Stock Option Scheme of the Company.

In view of the above allotments, the outstanding shares of the company increased from 20,42,51,540 equity shares of Rs.1/- each to 21,67,11,770 equity shares of Rs.1/- each.

Transfer To The Investor Education & Protection Fund (IEPF):

According to Section 205C of the Companies Act, 1956 read with Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, the unclaimed dividend amounting to Rs.2,82,878/- (rupees two lakh eighty two thousand eight hundred and seventy eight only) for the financial year 2007-08, was transferred to the

Investor Education and Protection Fund established by the Central Government during the year under review.

Management''s Discussion and Analysis Report:

Management''s Discussion and Analysis Report for the year under review, as stipulated under regulation 34(2) of the Listing Regulations, is presented in a separate section forming part of the Annual Report.

Subsidiaries, Joint Ventures and Associate Companies:

No company has become/ceased to be a subsidiary or joint venture or associate during the financial year 2015-16.

Subsidiary Companies:

The developments in business operations / performance of subsidiaries consolidated with the Company are as below:

- Granules USA, Inc.

Granules USA, Inc. a wholly-owned foreign Subsidiary of your company, caters to the requirements of customers in the U.S market. The Share Capital of the Company as on March 31, 2016 is Rs.116.31 Lakhs. During the FY 2015-16, the Company achieved a turnover of Rs.29,828.82 Lakhs against the turnover of Rs.17,774.91 Lakhs of FY 2014-15 and the profit after tax is Rs.168.67 Lakhs against Rs.(40.82) Lakhs of FY 2014-15.

- GIL Life sciences Private Limited

The Company has not commenced its operations so far. However, construction of green field API project was started during the year under review in its land located at Visakhapatnam in the state of Andhra Pradesh. As on March 31, 2016, the Authorized Share Capital of the Company is Rs.1,600.00 Lakhs divided into 1,60,00,000 (one crore sixty lakhs) equity shares of Rs.10/- each and the Paid Up Share Capital of the Company is Rs. 1,383.06 Lakhs divided into 1,38,30,600 (one crore thirty eight lakh thirty thousand and six hundered) equity shares of Rs.10 each.

The draft scheme of amalgamation of M/s. GIL Lifesciences Private Limited with the Company was approved by the Board of Directors of the Company, subject to approval of the Hon''ble High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh.

- Granules Pharmaceuticals,lnc.

Renovation of facility of Granules Pharmaceuticals,Inc. a wholly-owned foreign subsidiary of your company was completed during the year. During the year, the company started Product development work in the renovated facility. The Share Capital of the Company as on March 31, 2016 is Rs.1,225.00 Lakhs.

The Policy for determining material subsidiaries as approved by the Board may be accessed on the Company''s website at the link: www.granulesindia. com

Joint Venture Companies:

The developments in business operations / performance of Joint Venture Companies consolidated with the Company are as below:

- Granules-Biocause Pharmaceutical Co. Limited

The Share Capital of the Company as on March 31, 2016 is Rs.3638.06 Lakhs. During the FY 2015-16, the Company achieved a turnover of Rs.17,008.32 Lakhs as against turnover of Rs.22,216.72 Lakhs in the FY 2014- 15 of which Granules India Limited reports 50% in its consolidated revenue. However, previous year figures are not comparable as current year figures are for nine months period from April to December 2015.

- Granules OmniChem Private Limited

The Share Capital of the Company as on March 31, 2016 is Rs. 8,576.19 Lakhs. The Company has commenced the commercial production during the FY 2015-16 and achieved a turnover of Rs.1,425.66 Lakhs of which Granules India Limited reports 50% in its consolidated revenue.

However, as per the provisions of section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary Companies and Joint Ventures is prepared in Form AOC-1 and it forms part of the consolidated financial statements.

Consolidated Financial Statements:

The consolidated financial statements, in terms of Section 129 of the Companies Act, 2013 and regulation 34 of the Listing Regulations and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2006 as amended thereof forms a part of this annual report. As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts of its Subsidiaries on its website www.granulesindia.com and copy of separate audited accounts of its Subsidiaries will be provided to the members at their request.

Director''s Responsibility Statement:

Pursuant to the requirement of Section 134(5) of the Companies Act, 2013 and based on the representations received from the operating management, the Directors hereby confirm that:

a) in the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2016 and of the profit of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a ''going concern'' basis for the financial year ended March 31, 2016;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

Corporate Governance Report:

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The report on Corporate Governance as stipulated under the Listing Regulations forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.

Corporate Social Responsibility (CSR):

The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board.

The Composition of the Committee is provided below.

Name Category

Mrs. Uma Devi Non-Independent,

Chigurupati, Chairperson Executive

Mr. Krishna Prasad Non-Independent,

Chigurupati Executive

Mr. A. Arun Rao Independent,

Non-Executive

The CSR Policy may be accessed on the Company''s website at the link: www.granulesindia.com

The Company is undertaking CSR initiatives in compliance with Schedule VII to the Act. During the year under review, the Company has spent Rs.140.04 Lakhs on CSR activities. The annual report on CSR activities is annexed here with marked as Annexure I.

Nomination and Remuneration Committee:

The Company''s Nomination and Remuneration Committee consists of majority of Independent Directors which ensures transparency in determining the remuneration of Directors, KMPs and other employees of the Company. The Chairman of the committee is an Independent Director, thereby resulting in independent and unbiased decisions.

During the financial year 2015-16, the composition of Nomination and Remuneration Committee is provided below.

Name Category

Mr. C. Parthasarathy, Independent, Chairman Non-Executive

Mr. L. S. Sarma Independent, Non-Executive

Mr. A. Arun Rao Independent, Non-Executive

Mr. K.B. Sankar Rao Non-Independent, Non-Executive

Mr. Krishna Prasad Non-Independent, Chigurupati Executive

The Performance Evaluation and Remuneration Policy framed by the Committee and approved by the Board is directed towards rewarding performance of Executive and Non-Executive Directors, Key Managerial Personnel and Senior Management Personnel of the Company based on review of achievements periodically.

Risk Management Committee:

Risk Management Committee has been entrusted with the responsibility to assist the Board in (a) overseeing and approving the Company''s enterprise wide risk management framework; and (b) overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. Your Company has proper process for Risk Management.

Internal Audit & Controls:

Your Company continues to engage M/s Dhanunjaya & Haranath, Chartered Accountants as its Internal Auditors. During the year, your Company continued to implement their suggestions and recommendations to improve the internal controls. Their scope of work includes review of operational efficiency, effectiveness of systems & processes, compliances and assessing the internal control strengths in all areas. Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an on-going basis to improve efficiency in operations.

The Company''s internal control systems are well established and commensurate with the nature of its business and the size and complexity of its operations. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations. The recommendations/suggestions of the internal auditors are discussed in the Audit Committee meetings.

Directors and Key Managerial Personnel:

Mr. Harsha Chigurupati ceased to be Executive Director during the year under review due to his resignation on October 31, 2015. However, Mr. Harsha is continuing as member of the Board and he is Non-Executive Director of the Company.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Harsha Chigurupati, Non-Independent, Non- Executive Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under the Companies Act and the Listing Regulations.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which include criteria for performance evaluation of the Non-Executive Directors and Executive Directors.

The Board of Directors have complete access to the information within the Company. Independent Directors have the freedom to interact with the Company''s management. Interactions happen during Board / Committee meetings, when CXOs are asked to make presentations about performance of the Company. Apart from this, they also have independent interactions with the Statutory Auditors, the Internal Auditors and external advisors appointed from time to time. Further, they meet without the presence of any management personnel and their meetings are conducted informally to enable the Independent Directors to discuss matters pertaining to the Company''s affairs and put forth their combined views to the Board of Directors of the Company.

Mr. Krishna Prasad Chigurupati, Chairman and Managing Director, Mrs. Uma Devi Chigurupati, Executive Director, Mr. VVS Murthy, Chief Financial Officer and Mrs. Chaitanya Tummala, Company Secretary are key managerial personnel of the Company.

Employee Stock Option Plan (ESOP):

The Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employee Stock Option Plan of the Company in accordance with the applicable SEBI Guidelines.

The applicable disclosures as stipulated under the SEBI Guidelines as on March 31, 2016 (cumulative position) with regard to the Employee''s Stock Option Scheme are herein under provided. The issue of equity shares pursuant to exercise of options does not affect the Statement of Profit and Loss of the Company, as the exercise is made at the market price prevailing as on the date of the grant plus taxes as applicable.

Pursuant to clause 14 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, certificate from M/s. Kumar & Giri, Statutory Auditors is given as Annexure II to this report. Voting rights on the shares issued to employees under the ESOP are either exercised by them directly or through their appointed proxy.

The details of the stock options granted / vested / exercised under the Granules India Equity Stock Option Plan 2009 approved by the members in 18th Annual General Meeting, are given below:

SI. Description Details no.

(a) Options granted till date under the scheme 80,00,000 options

(b) Pricing formula Closing market price as on the date prior to the grant date on National Stock Exchange (where there was highest trading volume).

(c) Options vested during the year 6,90,000

(d) Options exercised during the year 11,10,000

(e) Total number of shares arising as a result of exercise of options 11,10,000

(f) Options lapsed during the year 20,000

(g) Options lapsed till date under the scheme 22,50,000

(h) Variation in terms of options Nil

(i) Money realized by exercise of options during the year Rs.1,94,32,000/-

(j) Total number of options in force 23,50,000

(k) Employee wise details of options granted during the year to: Nil

(i) Senior managerial personnel Not Applicable

(ii) Any other employee who receives a grant in any one year of Not Applicable options amounting to 5% or more of options granted during the year.

(iii) Identified employees who were granted option, during any one Not Applicable year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant.

(l) Diluted Earnings per share (EPS) pursuant to issue of shares on Rs.5.74 per share exercise of options calculated in accordance with Accounting Standard (AS) 20 - Earning per share.

(m) Where the company has calculated the employee compensation cost Not Applicable using the intrinsic value of the stock options, the difference between the employee compensation cost that shall have been recognized if it had used the fair value of the options.

(n) Weighted-average exercise price, whose exercise price either equals or exceeds or is less than the market price of the stock Rs.17.51/- per share

(o) Description of the method and significant assumptions used during the year to estimate the fair values of options. Not Applicable

Auditors & Their Report:

Statutory Auditors

Pursuant to the provisions of Sections 139, 141 & 142 and other applicable provisions, if any, of the Companies Act, 2013 and rules made thereon, M/s. Kumar & Giri, Chartered Accountants, Hyderabad was re-appointed for three years in the 23rd Annual General meeting subject to ratification at every Annual General meeting. The Company has received a certificate from the auditors to the effect that their ratification for re-appointment if made, would be in accordance with the conditions as specified under Section 141 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014. The Directors recommend for ratification of re-appointment of M/s. Kumar & Giri, Chartered Accountants as Statutory Auditors for the financial year 2016-17. A resolution proposing ratification of re-appointment of M/s. Kumar & Giri, Chartered Accountants as the Statutory Auditors of the Company for the financial year 2016-17 pursuant to section 139 of the Companies Act, 2013 forms part of the Notice.

Comments of the Auditors in their report and the notes forming part of the accounts are self-explanatory and need no comments. However, the Auditors have not made any adverse qualifications in their report on the accounts of the Company for the year under review.

Secretarial Auditor

The Board has appointed M/s. Saurabh Poddar & Associates, Company Secretaries, to conduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report for the financial year ended March 31, 2016 is annexed here with marked as Annexure III to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Contracts And Arrangements With Related Parties:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm''s length basis. During the year, except with the wholly owned subsidiary, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company''s website at the link: www.granulesindia.com.

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

Disclosures:

Audit Committee

The Audit Committee comprises majority Independent Directors namely Mr. C. Parthasarathy (Chairman), Mr. L.S. Sarma, Mr. A.P. Kurian, Mr. A. Arun Rao and Mr. Krishna Prasad Chigurupati as other members. During the period under review, Mr. L.S. Sarma resigned as Chairman of the Audit Committee and Mr. C. Parthasarathy, Independent Director, was elected as Chairman of the Committee by Committee members. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism

The Company has a Vigil mechanism and Whistle blower policy in terms of the Listing Regulations, under which the employees are free to report violations of applicable laws and regulations and the Code of Conduct. Protected disclosures can be made by a whistle blower through a dedicated e-mail, or a letter to the Chairman of the Audit Committee.

The Policy on vigil mechanism and whistle blower policy may be accessed on the Company''s website at the link:www.granulesindia.com

Meetings of the Board

Eight (8)meetings of the Board of Directors were held during the year under review. The details of the Board Meetings with regard to their dates and attendance of each of the Directors thereat have been provided in the Corporate Governance Report.

Code of Conduct

A declaration regarding compliance with the code of conduct signed by the Company''s Chairman and Managing Director is published in the Corporate Governance Report which forms part of the annual report.

Particulars of Loans given, Investments made, Guarantees given and Securities provided

Particulars of loans given, investments made, guarantees given and securities provided are provided in the standalone financial statement (Please refer to Note No.2.12, 2.13 and 2.35 to the standalone financial statement).

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure V to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure VI to this Report.

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are also forms part of this Report.

However, having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours for a period of 21 days before the date of ensuing Annual General Meeting and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. This information is available on the Company''s website link: www.granulesindia.com

Your Directors further state that, the remuneration paid to the Key managerial Personnel and others is as per the Remuneration Policy of the Company.

Policy on Sexual Harassment

The Company has a Policy on "Prevention of Sexual Harassment of Women at Workplace" for the matters connected there with or incidental thereto covering all the aspects as contained under the "The Sexual Harassment of Women at Work place (Prohibition, Prevention and Redressal)Act, 2013".

During the year under review, the Company has not received any complaints pertaining to Sexual Harassment.

General:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOP referred to in this Report.

4. Cost Audit is not applicable for the financial year 2015-16.

5. Neither the Chairman and Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.

Appreciations And Acknowledgements:

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your Directors wish hereby to place on record their appreciation of the services rendered by the employees, without whose whole-hearted efforts, the over all satisfactory performance would not have been possible.

Your Directors look forward to the long term future with confidence.

On behalf of the Board of Directors Sd/-

Krishna Prasad Chigurupati

Chairman and Managing Director

DIN:00020180

Hyderabad,

April 28, 2016


Mar 31, 2015

The Members,

The Directors are pleased to present 24th Annual Report and the Company's audited financial statements for the financial year ended March 31,2015.

FINANCIAL RESULTS

The Company's financial performance, both standalone and consolidated, for the year ended March 31,2015 is summarised below:

Standalone Particulars Year ended March Year ended March 31,2015 31,2014

Revenue from Operations 121,331.13 100,167.99

Other Income 296.32 364.75

Total Income 121,627.45 100,532.74

EBITDA 21,274.75 16,665.57

Less: Finance Costs 3,092.94 1,892.70

Less: Depreciation 4,955.87 2,639.79

Profit Before Tax 13,225.94 12,133.08

Less: Tax Expenses 3,703.30 4,031.94

Net Profit After Tax 9,522.64 8,101.14

Add: Adjustment pursuant to amalgamation (601.51) -

Add: Net book value of the assets whose remaining (17.00) - useful life is NIL at the beginning of the year in terms of provisions of Companies Act 2013.

Add: Surplus Brought Forward from Previous Year 9,528.92 12,258.25

Surplus Available 18,433.05 20,359.39

Appropriations made to Surplus:

Provision for Dividend 1021.26 709.84

Provision for Dividend Tax 207.90 120.64

Dividend of Previous years (including tax) 3.15 -

Transfer to General Reserve 10,000.00 10,000.00

Balance Carried to Balance Sheet 7,200.74 9,528.92

Basic Earnings Per Share 4.67 4.01

Diluted Earnings Per Share 4.62 3.93



Consolidated Particulars Year ended March Year ended March 31,2015 31,2014

Revenue from Operations 129,292.24 109,586.48

Other Income 434.31 431.09

Total Income 129,726.55 110,017.57

EBITDA 21,295.73 16,260.14

Less: Finance Costs 3,234.59 2,042.73

Less: Depreciation 5,265.10 2,981.25

Profit Before Tax 12,796.04 11,236.16

Less: Tax Expenses 3.705.26 3,713.03

Net Profit After Tax 9,090.78 7,523.13

Add: Adjustment pursuant to (430.59) - amalgamation

Add: Net book value of the assets (17.00) - whose remaining useful life is NIL at the beginning of the year in terms of provisions of Companies Act 2013.

Add: Surplus Brought Forward from 9,204.28 12,511.63 Previous Year

Surplus Available 17,847.47 20,034.76

Appropriations made to Surplus:

Provision for Dividend 1021.26 709.84

Provision for Dividend Tax 207.90 120.64

Dividend of Previous years 3.15 - (including tax)

Transfer to General Reserve 10,000.00 10,000.00

Balance Carried to Balance Sheet 6,615.16 9,204.28

Basic Earnings Per Share 4.46 3.72

Diluted Earnings Per Share 4.41 3.65

REVIEW OF OPERATIONS

During the period under review, the Company has earned revenue of Rs. 121,331.13 lakhs on standalone basis.

The Company posted very good results for the FY 2014-15 and it has reported record sales of Rs. 121,331.13 lakhs in the FY 2014-15 compared to net sales of Rs. 1,00,167.99 lakhs in FY 2013-14, registering growth of 21.13% in the current financial year. However, the figures reported for the FY 2014-15 includes the figures of Auctus Pharma Ltd., amalgamated Company. The Company's growth was driven by strong performance across all manufacturing facilities. The primary growth driver in FY 2014-15 was led by change in product mix. On a standalone basis, the Active Pharmaceutical Ingredients (API) business contributed the largest share of revenue at 40% while Pharmaceutical Finished Intermediates (PFI) and Finished Dosages contributed 25% and 35%, respectively. This is compared to 32%, 33% and 35% for API, PFI and Finished Dosages, respectively in FY 2013-14.

The EBITDA stood at Rs. 21,274.75 lakhs for FY 2014-15 compared to Rs. 16,665.57 lakhs for FY 2013-14, registering a growth of 27.66%. The profit after tax for FY 2014-15 stood at Rs. 9,522.64 lakhs compared to Rs. 8,101.14 lakhs for FY 2013-14, registering a growth of 17.55% in the current financial year. The profitability outpaced revenue growth due to several reasons. The Company improved its economy of scale by increasing

production facility utilization in formulation capacity at the Gagillapur facility. Due to the increased utilization, the product mix shifted more towards Finished Dosages which bolstered margin profiles. During the year, the Company has re- enforced its fundamental strength of FDA complied facilities by successfully completing the US FDA audits at Bonthapally and Gagillapur facilities with no observations. Your Company acquired Auctus Pharma Ltd. in the last financial year, which was successfully turned around in the fourth quarter of current fiscal and the Company believes that the operations will continue to expand and add value. The management believes that the profitability margins from the operations are sustainable and it will continue to strengthen its leadership position through dedicated research and introduction of new products.

In addition to concentrating on its core business, the Company has been looking at opportunities to diversify its sales by leveraging its core competency of efficient manufacturing. In the short-to-mid-term, Company will focus on selling APIs to quality conscious customers. Over the long-term, it will add value by offering Finished Dosages from select APIs in the same portfolio from our product basket. In the endeavour to go deeper into the regulated markets, Company has initiated strategies to reach out to the end user directly bypassing intermediaries. The Company will continue to strengthen its model and build systems that are sustainable as it continue to scale-up.

EXPANSIONS

During FY 2014-15, the Company enhanced PFI capacity by adding 4000 Tons per annum in the Gagillapur facility which will help to produce PFIs and formulations in the year to come. The Company also expanded clean room facility at Visakhapatnam plant which will enable to produce and sell more APIs.

DIVIDEND

Your Directors have recommended a dividend of Rs. 0.50 (i.e. 50%) per equity share of face value Rs.1/- each (last year, Rs.3.50 per share of face value Rs. 10/- each i.e. 35%) for the financial year ended March 31,2015, amounting to Rs. 1229.16 lakhs(inclusive of tax of Rs.207.90 lakhs) . The dividend payout is subject to approval of members at the 24th Annual General Meeting. Dividend will be paid to the members whose names appear in the Register of Members as on the date of book closure and in respect of shares held in dematerialised form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date.

TRANSFER TO GENERAL RESERVES

The Company proposes to transfer Rs. 10,000 lakhs to general reserves for the FY 2014-15. With this addition, the total Reserves & Surplus (including Capital Reserve, Securities Premium Reserve, Central Subsidy, General Reserve and Surplus) as on March 31, 2015 is Rs. 40,498.41 lakhs as against the Paid up Capital of Rs. 2,042.52 lakhs.

SHARE CAPITAL

With a view to broad base the investor base by encouraging the participation of the small investors and also to increase the liquidity of equity shares, the Company, with the approval of the Shareholders, has sub-divided each equity share of face value of Rs. 10/- (Rupees Ten only) of the Company into 10 (Ten) equity shares of face value Rs. 1/- (Rupee One only) each during the year under review with effect from 24 th March 2015.

Consequent to amalgamation of Auctus Pharma Ltd. with the Company during the year, the Authorised Share Capital of Auctus Pharma Ltd. of Rs. 4,50,00,000 was merged with the Authorised Share Capital of the Company. Thus the Authorised Share Capital of the Company stood increased from Rs. 30,00,00,000/- to Rs. 34,50,00,000/- for the financial year ended 31st March 2015.

The Authorized Share Capital of the Company is Rs. 34,50,00,000/- (rupees thirty four crores fifty lakhs only) divided into 34,50,00,000 (thirty four crores fifty lakhs only) equity shares of Rs. 1/- each. The Paid Up Share Capital of the Company is Rs. 20,42,51,540 (rupees twenty crores forty two lakhs fifty one thousand five hundred and forty only) divided into 20,42,51,540 equity shares of Rs. 1/- each as on 31st March 2015.

TRANSFER TO THE INVESTOR EDUCATION & PROTECTION FUND (IEPF)

According to Section 205C of the Companies Act, 1956 read with Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, the unclaimed dividend amounting to Rs. 1,95,483/- (rupees one lakh ninety five thousand four hundred and eighty three only) for the FY 2006- 07, was transferred to the Investor Education and Protection Fund established by the Central Government during the year under review.

MANAGEMENT'S DISCUSSION AND ANALYSIS STATEMENT

Management's Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is presented in a separate section forming part of the Annual Report

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

Subsidiary Companies: M/s. Auctus Pharma Ltd.

During the year, the Honb'le High Court of Judicature at Hyderabad for the state of Telangana and the state of Andhra Pradesh, vide its order dated 23rd September 2014 approved the Company Petition no. 144 of 2014 filed by M/s. Auctus Pharma Ltd., a wholly owned subsidiary of the Company, for the Scheme of amalgamation of M/s. Auctus Pharma Ltd. with the Company. Consequent to the said Honb'le High Court order, M/s. Auctus Pharma Ltd. was amalgamated with the Company on 13th November 2014, being the effective date, with effect from 1st April 2013, i.e. appointed date. By virtue of the aforesaid amalgamation, M/s Auctus Pharma Ltd. ceased to be the subsidiary of your company and stood dissolved pursuant to the scheme of amalgamation sanctioned by the Honb'le High Court.

The developments in business operations / performance of subsidiaries consolidated with the Company are as below:

- Granules USA Inc.

Granules USA Inc, a wholly-owned subsidiary of your company, operates for the marketing requirements of the Company in the U.S market. The Share Capital of the Company as on March 31, 2015 is Rs. 116.31 lakhs. During FY 2014-15, the Company achieved a turnover of Rs. 17,774.91 lakhs against the turnover of Rs. 11,079.99 lakhs of FY 2013-14 and the profit after tax is Rs.(40.82) lakhs against Rs. 86.40 lakhs of FY 2013-14.

- GIL Lifesciences Private Limited

The Company has not commenced any activity so far. As on 31st March 2015, the Authorized Share Capital of the Company is Rs. 350.00 lakhs divided into 3,500,000 (thirty five lakhs) equity shares of Rs. 10/- each and the Paid Up Share Capital of the Company is Rs. 294.62 lakhs divided into 2,946,176 (twenty nine lakhs forty six thousand one hundred and seventy six only) equity shares of Rs. 10 each.

- Granules Pharmaceutical Inc.

Granules Pharmaceutical Inc. was incorporated on 20th October 2014 by the Company as a wholly owned subsidiary in USA which will focus on formulations and R&D. The operations are not yet commenced.

The Policy for determining material subsidiaries as approved by the Board may be accessed on the Company's website at the link: www.granulesindia.com

Joint Venture Companies:

No company has become/ceased to be a joint venture or associate during the FY 2014-15.

The developments in business operations / performance of Joint Venture Companies consolidated with the Company are as below:

- Granules-Biocause Pharmaceutical Co. Limited

The Share Capital of the Company as on March 31, 2015 is Rs. 3,638.06 lakhs. During FY 2014-15, the Company achieved a turnover of Rs. 22,216.72 lakhs of which Granules India Limited reports 50% in its consolidated revenue.

- Granules OmniChem Private Limited

The Share Capital of the Company as on 31st March 2015 is Rs. 7,546.19 lakhs. The Company has completed trial production and partially capitalized the project in January 2015. As there were no commercial sales after project capitalization, there was no income during the FY 2014-15. The Company plans to obtain all necessary regulatory approvals from the U.S. Food and Drug Administration ("FDA") and other regulatory authorities by March 31, 2016.

However, as per the provisions of section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary Companies and Joint Ventures is prepared in Form AOC-1 and it forms part of the consolidated financial statements.

CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements, in terms of Section 129 of the Companies Act, 2013 and Clause 32 of the Listing Agreement and prepared in accordance with Accounting Standard 21 as specified in the Companies (Accounting Standards) Rules, 2006 forms a part of this annual report. As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts of its Subsidiaries on its website www.granulesindia.com and copy of separate audited accounts of its Subsidiaries will be provided to the members at their request.

DIRECTOR'S RESPONSIBILITY STATEMENT

Pursuant to the requirement ofSection 134(5) of the Companies Act, 2013 and based on the representations received from the operating management, the Directors hereby confirm that:

a) i n the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give

a true and fair view of the state of affairs of the Company as at March 31,2015 and of the profit of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a 'going concern' basis for the financial year ended March 31, 2015;

e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

CORPORATE GOVERNANCE REPORT

The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The report on Corporate Governance as stipulated under the Listing Agreement forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board.

The Composition of the Committee is provided below.

Name Category

Mrs. C. Uma Devi Non-Independent, Executive Chairman

Mr. C. Krishna Prasad Non-Independent, Executive

Mr. A. Arun Rao Independent, Non-Executive

The CSR Policy may be accessed on the Company's website at the link: www.granulesindia.com

The Company would undertake CSR initiatives in compliance with Schedule VII to the Act. During the year, the Company has spent Rs. 30.97 Lakhs on CSR activities. The Annual Report on CSR activities is annexed herewith marked as Annexure I.

NOMINATION AND REMUNERATION COMMITTEE

The Company's Nomination and Remuneration committee consists of majority of Independent Directors which ensures transparency in determining the remuneration of Directors, KMPs and other employees of the Company. The Chairman of the committee is an Independent Director, thereby resulting in independent and unbiased decisions.

During the FY 2014-15, the composition of Nomination and Remuneration Committee is provided below.

Name Category

Mr. L.S. Sarma Independent, Non-Executive Chairman

Mr. A.P. Kurian Independent, Non-Executive

Mr. Krishna Murthy Ella Independent, Non-Executive

Mr. C. Krishna Prasad Non-Independent, Executive

The Performance Evaluation and Remuneration Policy framed by the Committee and approved by the Board is directed towards rewarding performance of Executive and Non- Executive Directors, Key Managerial Personnel and Senior Management Personnel of the Company based on review of achievements periodically.

RISK MANAGEMENT

During the year, your Directors have constituted a Risk Management Committee which has been entrusted with the responsibility to assist the Board in (a) Overseeing and approving the Company's enterprise wide risk management framework; and (b) Overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. Your Company has proper process for Risk Management.

INTERNAL AUDIT & CONTROLS

Your Company continues to engage M/s Dhanunjaya & Haranath, Chartered Accountants as its Internal Auditors. During the year, your Company continued to implement their suggestions and recommendations to improve the internal controls. Their scope of work includes review of operational efficiency, effectiveness of systems & processes, compliances and assessing the internal control strengths in all areas. Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an on-going basis to improve efficiency in operations.

The Company's internal control systems are well established and commensurate with the nature of its business and the size and complexity of its operations. The Audit Committee reviews adequacy and effectiveness of the Company's internal control environment and monitors the implementation of audit recommendations. The recommendations/suggestions of the internal auditors are discussed in the Business Review Committee and Audit Committee meetings periodically.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Dr. C. Nageswara Rao, Chairman of the Company ceased to be Director during the year under review due to his demise on May, 15, 2014.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Kolli Basava Sankar Rao, Non-Executive, Non- Independent Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment.

Mr. Harsha Chigurupati was appointed as an Executive Director of the Company with effect from 1st August, 2010 by the Shareholders at the 19th Annual General Meeting of the Company held on 27th September 2010. The current term of office of Mr. Harsha Chigurupati as an Executive Director of the Company expires on 31st July 2015. In view of his consistent effortswhich have contributed to the growth of the organization and the sincere service rendered for the better performance of the organization during his tenure as an Executive Director, the Board of Directors on the recommendation of the Nomination and Remuneration Committee, has decided to re-appoint Mr. Harsha Chigurupati as an Executive Director of the Company for a further period of 5 (five) years effective from 1st August 2015 under Section 196, 197, 203 read with Schedule V of the Companies Act, 2013 and rules made thereunder. The approval of the members is being sought to the terms, conditions and stipulations for the re-appointment of Mr. Harsha Chigurupati as an Executive Director and the remuneration payable to him and resolution pertaining to the same is contained in the notice calling Annual General Meeting.

During the year under review, the members approved the appointments of Mr. L.S. Sarma, Mr. A.P. Kurian, Mr. C. Parthasarathy, Dr. Krishna Murthy Ella and Mr. A. Arun Rao as Independent Directors of the Company who are not liable to retire by rotation. The members have also approved the re- appointment of Mr. C. Krishna Prasad as Managing Director as well as Chairman of the Company.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which include criteria for performance evaluation of the non-executive directors and executive directors.

The Board of Directors has complete access to the information within the Company. Independent Directors have the freedom to interact with the Company's management. Interactions happen during Board / Committee meetings, when CXOs are asked to make presentations about performance of the Company to the Board. Apart from this, they also have independent interactions with the Statutory Auditors, the Internal Auditors and external advisors appointed from time to time. Further, they meet without the presence of any management personnel and their meetings are conducted informally to enable the Independent Directors to discuss matters pertaining to the Company's affairs and put forth their combined views to the Board of Directors of the Company.

EMPLOYEE STOCK OPTION PLAN (ESOP)

The Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees' Stock Option Plan of the Company in accordance with the applicable SEBI Guidelines.

The applicable disclosures as stipulated under the SEBI Guidelines as on March 31, 2015 (cumulative position) with regard to the Employees' Stock Option Scheme (ESOS) are herein under provided. The issue of equity shares pursuant to exercise of options does not affect the Statement of Profit and Loss of the Company, as the exercise is made at the market price prevailing as on the date of the grant plus taxes as applicable.

Pursuant to clause 14 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, certificate from M/s. Kumar & Giri, Statutory Auditors is given as Annexure II to this report. Voting rights on the shares issued to employees under the ESOP are either exercised by them directly or through their appointed proxy.

The details of the stock options granted / vested / exercised under the Granules India Equity Stock Option Plan 2009 approved by the members in 18th AGM, are given below:

Description Details

Options granted till date under the scheme 80,00,000 options

Pricing formula Closing market price as on the date prior to the grant date on National Stock Exchange (where there was highest trading volume).

Options vested during the year 12,40,000

Options exercised during the year 11,60,000

Total number of shares arising as a result of exercise of options 11,60,000

Options lapsed during the year 6,00,000

Options lapsed till date under the scheme 23,10,000

Variation in terms of options Nil

Money realized by exercise of options during the year 11,057,000

Total number of options in force 34,00,000

Employee wise details of options granted to:

Senior managerial personnel

Name No. of Options

Mr. B. Madhusudan Rao 2,00,000

Mr. VVS Murthy 2,50,000

Mr. Stefan Lohle 2,00,000

Dr. VVNKV Prasada Raju 5,00,000

Mr. PSN Murthy 1,50,000

Any other employee who receives a grant in any one year of options amounting to 5% or more of options granted during the year.

Name No. of Options

Mr. R. Ramraj 1,00,000

Mr. M. Satyababu 2,00,000

Mr. P.N. Baskaran 1,00,000

Mr. R. Sudhakar Babu 1,00,000

Mr. B.N.R. Prasad 1,00,000

Identified employees who were granted option, during any one year, equal to or exceeding 1% of Not Applicable the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant.

Diluted Earnings per share (EPS) pursuant to issue of shares on exercise of options calculated in Rs 4.62 per share accordance with Accounting Standard (AS) 20 - Earning per share.

Where the company has calculated the employee Not Applicable compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost that shall have been recognized if it had used the fair value of the options.

Weighted-average exercise prices and weighted- Rs 9.53/- per share average fair values of options, whose exercise price either equals or exceeds or is less than the market price of the stock

Description of the method and significant Not Applicable assumptions used during the year to estimate the fair values of options.

AUDITORS & THEIR REPORT

Statutory Auditors

Pursuant to the provisions of Sections 139, 141 & 142 and other applicable provisions, if any, of the Companies Act, 2013 and rules thereon, M/s. Kumar & Giri, Chartered Accountants, Hyderabad was re-appointed for three years in the last Annual General meeting subject to ratification at every Annual General meeting. The Company has received a certificate from the auditors to the effect that their ratification for re-appointment if made, would be in accordance with the conditions as specified under Section 141 of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014. The Directors recommend for ratification of re- appointment of M/s. Kumar & Giri, Chartered Accountants as Statutory Auditors for the FY 2015-16. A resolution proposing ratification of re-appointment of M/s. Kumar & Giri, Chartered Accountants as the Statutory Auditors of the Company for the FY 2015-16 pursuant to section 139 of the Companies Act, 2013 forms part of the Notice.

Comments of the Auditors in their report and the notes forming part of the accounts are self-explanatory and need no comments. However, the Auditors have not made any adverse qualifications in their report on the accounts of the company under review.

SECRETARIAL AUDITOR

The Board has appointed M/s. Saurabh Poddar & Associates, Company Secretaries, to conduct Secretarial Audit for the FY 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure III to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, except with the wholly owned subsidiary, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: www.granulesindia.com .

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

DISCLOSURES

Audit Committee

The Audit Committee comprises majority Independent Directors namely Mr. L.S. Sarma (Chairman), Mr. A.P. Kurian, Mr. A. Arun Rao and Mr. C. Krishna Prasad as other members. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism

The Company has a Vigil mechanism and Whistle blower policy in terms of the Listing Agreement, under which the employees are free to report violations of applicable laws and regulations and the Code of Conduct. Protected disclosures can be made by a whistle blower through a dedicated e-mail, or a letter to the Chairman of the Audit Committee.

The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: www. granulesindia.com

Meetings of the Board

Seven meetings of the Board of Directors were held during the year under review. For further details, please refer report on Corporate Governance of this Annual Report.

Code of Conduct

A declaration regarding compliance with the code of conduct signed by the Company's Chairman and Managing Director is published in the Corporate Governance Report which forms part of the annual report.

Particulars of Loans given, Investments made, Guarantees given and Securities provided

Particulars of loans given, investments made, guarantees given and securities provided are provided in the standalone financial statement (Please refer to Note No.2.12 and 2.35 to the standalone financial statement).

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure V to this Report.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure VI to this Report.

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules forms part of this Report.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are also forms part of this Report.

However, having regard to the provisions of the first proviso to Section 136(1) of the Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours for a period of 21 days before the date of ensuing Annual General Meeting and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. This information is available on the Company's website link: www.granulesindia.com

Your Directors further state that, the remuneration paid to the Key managerial Personnel and others is as per the Remuneration Policy of the Company.

Policy on Sexual Harassment

The Company has adopted policy on Prevention of Sexual Harassment of women at Workplace in accordance with The Sexual Harassment of women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year under review, the Company has not received any complaints pertaining to Sexual Harassment.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOP referred to in this Report.

4. Cost Audit is not applicable for the FY 2014-15.

5. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

APPRECIATIONS AND ACKNOWLEDGEMENTS

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the financial institutions, banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company's executives, staff and workers.

On behalf of the Board Sd/-

C. Krishna Prasad Hyderabad, Chairman and Managing Director June 20, 2015 DIN: 00020180


Mar 31, 2013

To the members.

The Directors are pleased to present the Annual Report, on the business and operations of Granules India Limited together with audited accounts for the financial year ended March 31, 2013.

Financial results

The Company''s revenue, expenditure and results of operations are presented as below showing both the consolidated and standalone financial results.

(Rs. in lakhs) Particulars Standalone Consolidated

Year ended Year ended Year ended Year ended March 31, 2013 March 31, 2012 March 31, 2013 March 31, 2012

Revenue from Operations 67,979.70 56,267.77 76,437.30 65,396.59

Other Income 171.81 120.82 206.04 137.51

Total Income 68,151.51 56,388.58 76,643.34 65,534.10

EBITDA 8,077.56 7,380.72 8,708.02 8,066.06

Less: Finance Costs 1,649.49 1,549.41 1,767.11 1,698.87

Less: Depreciation 2,020.89 1,797.60 2,308.46 2,069.54

Profit Before Tax 4,407.18 4,033.72 4,632.45 4,297.64

Less: Tax Expenses 1,389.65 1,303.09 1,375.73 1,302.37

Net Profit After Tax 3,017.53 2,730.63 3,256.73 2,995.28

Add: Surplus Brought Forward from Previous Year 9,937.97 7,878.45 9,952.14 7,647.84

Surplus Available 12,955.50 10,609.09 13,208.86 10,643.12

Appropriations made to Surplus:

Provision for Dividend 402.52 401.23 402.52 401.23

Provision for Dividend Tax 68.41 65.09 68.41 65.09

Transfer to General Reserve 226.31 204.80 226.31 224.65

Balance Carried to Balance Sheet 12,258.24 9,937.97 12,511.62 9,952.15

Basic Earnings Per Share 15.02 13.61 16.21 14.93

Diluted Earnings Per Share 14.62 13.56 15.78 14.87

Review of Operations

During the year under review, there were many challenges in the macro-environment including a weak global economy. In spite of adverse conditions, your Company posted good results. The net sales of the Company in FY13 stood at Rs.67,979.70 lakhs compared to the net sales of Rs.56,267.77 lakhs in FY12, registering a growth of 20.8% in the current financial year. The EBITDA stood at Rs.8,077.56 lakhs in FY13 compared to Rs.7,380.72 lakhs in FY12, registering a growth of 9.4%. The profit after tax for FY13 stood at Rs.3,017.53 lakhs compared to Rs.2,730.63 lakhs in FY12, registering a growth of 10.5% in the current financial year. The Company continued to strengthen its position in the market and aims to increase productivity gains, volume growth and profit margins.

Transfer to General Reserves

The Company proposes to transfer Rs.226.31 lakhs to General Reserve out of the profits available for appropriation, which is higher than the Rs.204.80 lakhs transferred to the General Reserve in the previous year. With this addition, the total Reserves & Surplus (including Capital Reserve, Securities Premium Reserve, Central Subsidy, General Reserve and Surplus) as on March 31,2013 is Rs.25,036.68 lakhs as against the Paid up Capital of Rs.2,012.62 lakhs.

Dividend

Your Directors are pleased to recommend for approval of the shareholders, a final dividend of 20% (Rs.2 per share) on 2,01,26,154 equity shares (face value of Rs.10 each) of the Company with respect to the FY13. The dividend, if declared as above, would involve an outflow of Rs.402.52 lakhs towards dividend and Rs.68.41 lakhs towards dividend tax, resulting in a total outflow of Rs.470.93 lakhs. Under the Income Tax Act, 1961, the dividend will be tax free in the hands of the shareholders. The members are requested to approve the final dividend. The dividend, subject to approval of shareholders at the Annual General Meeting on 19th August 2013, will be paid to the shareholders whose names appear in the Register of Members as on the date of book closure.

Share Capital

The Authorised Share Capital of the Company is Rs.30,00,00,000/- (rupees thirty crores only) divided into 3,00,00,000 (three crores) equity shares of Rs.10/- each.

The Paid Up Share Capital of the Company increased from Rs.20,06,16,540 (rupees twenty crores six lakhs sixteen thousand five hundred and forty only) divided into 2,00,61,654 equity shares of Rs.10 each to Rs.20,12,61,540 (rupees twenty crores twelve lakhs sixty one thousand five hundred and forty only) divided into 2,01,26,154 equity shares of Rs.10/- each. During the year. Company allotted 64,500 (sixty four thousand five hundred) equity shares of Rs.10 each on exercise of stock option issued under Granules India Equity Stock Option Plan 2002.

Transfer to the Investor Education & Protection Fund

According to Section 205C of the Companies Act, 1956, read with Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, the unclaimed dividend amounting to Rs.1,58,395/- (rupees one lakh fifty eight thousand three hundred and ninety five only) for the financial year 2004-05, was transferred to the Investor Education and Protection Fund established by the Central Government during the year under review.

Expansions

During FY12, the Company commenced work on an expansion at its Gagillapur facility. The expansion involved a capacity expansion in the PFI and Finished Dosage facilities. The expansion mainly focused on efficient design and output in terms of material transfer and automation.

Upon completion of the PFI module, the Company faced initial scale up issues. The problems were addressed by the technical team along with outside consultants. The Finished Dosage (FD) facility was expanded from an existing capacity of 6 billion doses to 18 billion doses. Both expansions were done in an existing facility and did not require further regulatory approvals and will be used for manufacturing products for the regulated markets after completion of trials and necessary approvals from relevant customers.

In addition, during FY13, the Company completed an upgrade of its existing warehouse and also commenced construction of a new warehouse at its Gagillapur facility. The existing Finished Goods and Raw Material Warehouses were modified with a mobile racking system which has increased capacity. The construction of a new warehouse commenced in FY13 at Gagillapur; construction is expected to be completed in FY14.

Research & Development

The Company is committed to building a sound base for sustained growth both in API, PFI and FD businesses through the development of innovative, future-oriented technologies, intellectual property protection and engineering technologies in stable-ops by leveraging our collective R&D expertise resulting in value for all stakeholders. R&D at Granules India Limited represents an effective edge, reflected in the introduction of pioneering products and processes towards a superior price value proposition. Our R&D primarily caters to our in-house product development requirements for both PFI and Finished Dosage products. Our development philosophy aims to collaborate and offer a business model of delivering end-to-end solutions for Over the Counter monograph, OTC Abbreviated New Drug Application (ANDA) and prescription products.

The Company provides comprehensive drug development resources and solutions for pre-formulation, formulation development, analytical development, technology transfer cGMP, scale-up, stability and also co-ordinate for conducting bioavailability and bioequivalence studies for regulated and emerging markets. The Company possesses capabilities to develop several IR and MR solid dosage products and filing dossiers and ANDAs for regulated markets including the U.S., Canada, Europe, Australia and other countries. The Company has several programs for in-house R&D and formed alliances with national and international reputed institutions which focus on our activities on the themes of innovation, culture and growth.

Directors

The Board consists of executive and non-executive directors including independent directors who have wide and varied experience in different disciplines of corporate functioning. During the year under review, Mr. Joby Varughese John, Director resigned from the Directorship of the Company w.e.f December 26, 2012. The Board places on record its deep sense of appreciation for the guidance and services rendered by Mr. Joby Varughese John as Director of the Company.

Mr. Kolli Basava Sankar Rao was appointed as an Additional Director of the Company w.e.f February 19, 2013, to hold office up to date of the forthcoming Annual General Meeting. Notice was received from the Company''s member under section 257 of the Companies Act, 1956 proposing the candidature of Mr. Kolli Basava Sankara Rao as the Director of the Company. Resolutions seeking your approval to his appointment are in the notice convening the 22nd Annual General Meeting of the Company.

Pursuant to provisions of sections 255 and 256 of the Companies Act, 1956 and article 51 of the articles of association of the Company, Mr. A. Arun Rao, Non-Executive Director and Mr. Harsha Chigurupati, Executive Director of the Company are liable to retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re-appointment to the office of directorship. Your Board of Directors recommend for their re-appointment.

Brief profiles of Mr. A. Arun Rao, Mr. Harsha Chigurupati and Mr. Kolli Basava Sankar Rao, the nature of their expertise in specific functional areas and the number of companies in which they hold directorships and memberships/ chairmanships of committees of the Board, as stipulated under clause U9 of the listing agreement with the stock exchanges, are provided in the section on Corporate Governance in this Annual Report. Members are requested to refer to the said section of the Corporate Governance Report.

The board has formed different committees delegating various functions, the description of the same is provided in the Corporate Governance Report, attached herewith. Members are requested to refer to the said section of the Corporate Governance Report.

Corporate Governance Report

Your Company endeavors to maximise the wealth of the shareholders by managing the affairs of the Company with a pre-eminent level of accountability, transparency and integrity. Your Company''s Board of Directors comprises of eminent professionals in their respective fields with rich experience in policy making and strategy formulation. Your Company still continually works at improving its practices and processes as it is spreading through nations to ensure that the best practices are identified, adopted and followed. The Company has implemented all of its major stipulations as applicable to the Company. Most of the committees of the Board are headed by Independent Directors and Company has two different individuals as Chairman and Managing Director for several years.

The Statutory Auditor''s certificate, in accordance with clause U9 of the listing agreement is annexed with the Corporate Governance Report. The Managing Director and Chief Financial Officer have given a certificate to the Board with regard to the financial statements for the year ending March 31, 2013, as contemplated under clause 49 of the listing agreement and the same is annexed with the Corporate Governance Report. A detailed report on corporate governance practices followed by your Company, in terms of clause 49 of the listing agreement with stock exchanges, is provided separately in this annual report. The members are requested to refer to the same.

Internal Audit & Controls

Your Company continues to engage M/s Dhanunjaya & Prabhakar, Chartered Accountants as its Internal Auditors. During the year, your Company continued to implement their suggestions and recommendations to improve the internal controls. Their scope of work includes review of operational efficiency, effectiveness of systems and processes and assessing the internal control strengths in all areas. Internal Auditors findings are discussed and suitable corrective actions are taken as per the directions of Audit Committee on an on-going basis to improve efficiency in operations.

The Company''s internal control systems are commensurate with the nature of its business and the size and complexity of its operations. The Audit Committee reviews adequacy and effectiveness of the Company''s internal control environment and monitors the implementation of audit recommendations including those relating to strengthening of the Company''s risk management policies and systems.

Your Company has proper process for Risk Management. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. These are discussed with both Business Review Committee and Audit Committee periodically.

Management Discussion and Analysis Statement

A management discussion and analysis statement as required under the clause 49 of the listing agreement is annexed, forming a part of the Director''s Report. The members are requested to refer to the same.

Director''s Responsibility Statement

Pursuant to the requirement of section 217(2AA) of the Companies Act, 1956 and based on the representations received from the operating management, the Directors hereby confirm that:

i. in the preparation of accounts, the applicable accounting standards have been followed and that no material departure have been made from the same;

ii. appropriate accounting policies were applied consistently. Judgment and estimates that were reasonable and prudent were made to give a true and fair view of the Company''s state of affairs as at the end of the financial year and of the Company''s profits for the year.

iii. proper and sufficient care was taken to maintain adequate accounting records in accordance with the provisions of the Companies Act, 1956, to safeguard the Company''s assets and to prevent and detect fraud and other irregularities.

iv. the annual accounts were prepared on a going concern basis.

Subsidiary Companies

- Granules USA Inc

Granules USA Inc, a wholly-owned subsidiary Company, operates for the marketing requirements of the Company in the U.S market. The Share Capital of the Company as on March 31, 2013 is Rs.1,16,31,470 (rupees one crore sixteen lakhs thirty one thousand four hundred and seventy only). During FY13, the Company achieved a turnover of Rs.7,510 lakhs and the profit after tax is Rs.270.96 lakhs.

- GIL Lifesciences Private Limited

The Company is yet to commence its operations. As on March 31, 2013 the Authorised Share Capital of the Company is Rs.3,50,00,000/- (rupees three crores fifty lakhs only) divided into 35,00,000 (thirty five lakhs) equity shares of Rs.10/- each and the Paid Up Share Capital of the Company is Rs.2,94,61,760 (rupees two crores ninety four lakhs sixty one thousand seven hundred and sixty only) divided into 29,46,176 (twenty nine lakhs forty six thousand one hundred and seventy six only) equity shares of Rs.10 each.

- Granules Singapore Pte Ltd.

The Company has not commenced any activity so far. The Share Capital of the Company as on March 31, 2013 is Rs.5,00,500 (rupees five lakhs five hundred only).

The relevant particulars of subsidiary companies and the consolidated final accounts for the year ended March 31, 2013, in accordance with the accounting standard AS-21 on consolidated financial statements, read with accounting standard AS-23 on accounting for investment in associates are appended to this Report.

Joint Venture Companies

- Granules-Biocause Pharmaceutical Co. Limited

The Share Capital of the Company as on March 31, 2013 is Rs.18,19,02,807/- (rupees eighteen crores nineteen lakhs two thousand eight hundred and seven only). During the FY13, the Company achieved a turnover of Rs.10,24463 lakhs.

- Granules OmniChem Private Limited

The Share Capital of the Company as on March 31,2013 is Rs.18,75,50,000 /-(rupees eighteen crores seventy five lakhs fifty thousand only). The Company has not yet commenced its commercial activity during the period under review hence there was no income during FY13. However the Company incurred a loss of Rs.36,94,434 (rupees thirty six lakhs ninety four thousand four hundred and thirty four only). Granules OmniChem Private Limited is a 50:50 joint venture that will manufacture pharmaceutical intermediates and APIs in a greenfield facility in Visakhapatnam (AP) and mainly focus on high-value, low-volume APIs for the regulated markets. The Company will initially cater to Ajinomoto OmniChem''s (one of the joint venture partners and shareholders) existing customers and will focus on oncology, cardiovascular and central nervous system (CNS) products. Granules India Limited will also purchase APIs from the joint venture Company and will offer finished dosages.

The joint venture Company is setting up 100% export oriented unit at Jawaharlal Nehru Pharma City (JNPC), Parwada Mandal, Visakhapatnam (AP) under the API 1C special economic zone to manufacture active pharmaceutical ingredients. The construction of the unit (including manufacturing block, administration block, warehouse and utility electric substation block) and various installations are ongoing and expected to finish construction in mid- 2013. The trial and commercial production is expected to commence by December 2013. The Company plans to obtain all necessary regulatory approvals from the U.S. Food and Drug Administration ("FDA") or relevant European regulatory authorities by March 31, 2016 and all Good Manufacturing Practice ("GMP") standards in relation to the unit by March 31, 2015.

Statement under Section 212 of the Companies Act, 1956

Pursuant to the provision of section 212(8) of the Companies Act, 1956, the Ministry of Corporate Affairs vide its circular no. 2/2011 dated February 8, 2011 has granted general exemption from attaching the balance sheet, profit & loss account and other documents of the subsidiary companies with the balance sheet of the Company. The Board of Directors of your Company has by a resolution, given consent for not attaching the balance sheet of the subsidiaries concerned. Accordingly, the annual accounts and other documents of Company''s subsidiaries for the year ended March 31, 2013 are not attached to this Annual Report. Pursuant to Section 212 of the Companies Act, 1956 a brief statement related to subsidiary companies has been given as annexure to the balance sheet and the same forms a part of this Annual Report.

The annual accounts of subsidiaries and detailed information will be made available for inspection by any member of the Company at the registered office of the Company and also at the registered office of the concerned subsidiaries. The annual accounts of the subsidiary companies and detailed information will be made available to the members of the Company and subsidiaries upon receipt of request from them. The Company shall furnish a copy of annual accounts of subsidiaries to the member on demand. The consolidated annual report is attached with the Annual Report of the Company.

Auditors & their Report

M/s. Kumar & Giri, Chartered Accountants, Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. The Company has received a certificate from the auditors to the effect that their re- appointment if made, would be in accordance with the provisions of Section 224(1B) of the Companies Act, 1956. The Directors recommend their re-appointment.

Comments of the auditors in their report and the notes forming part of the accounts, are self-explanatory and need no comments.

Cost Auditors

M/s. EVS & Associates, Cost Accountants, were appointed as the Company''s Cost Auditors to conduct cost audit of Jeedimetla manufacturing unit and for issuance of Compliance Certificates as required under Companies (Cost Accounting Records) Rules, 2011 for Gagillapur and Bonthapally manufacturing unit of the Company for FY14. The Cost Audit Report and the Compliance Report for the financial year ended March 31, 2012 were duly filed with the Central Government.

Fined Deposits

Your Company did not accept any public deposits and no amount on account of principal or interest on public deposits was outstanding on the date of balance sheet.

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

The information pertaining to conservation of energy, technology, absorption, foreign exchange earnings and outgo, as required under section 217(l)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given as ''Annexure I'' and forms part of the Directors Report.

Human Resources

Your Company recognises that "Human Resources" is its principal asset. Your Company is striving relentlessly to strengthen talent pool across all levels and to drive performance orientation as work culture by implementing various schemes, system, process and programs from time to time resulting in all around development of the employees and vibrant work culture. Your Company has further strengthened its team to bring the leadership skills which are directly relevant to our growth at this stage. To attract and retain people, your Company provides a judicious combination of attractive career, personal growth and a lucrative compensation structure. Your Company places great importance on nurturing and retaining the best skills in the industry. Moreover, it is careful in aligning the needs of your Company with aspirations of the employees.

Particulars of Employees

Particulars of employees, as required under section 217(2A) of the Companies Act, 1956, read with the Companies (particulars of employees) rules, 1975, as amended, forms part of this report. However in pursuance of Section 219(l)(b) (iv) of the Companies Act, 1956, this report and accounts are being sent to all shareholders of the Company, excluding the statement containing the particulars to be provided under Section 217(2A) of the said act. Any member interested in obtaining such particulars may inspect the same at the registered office of the Company or write to the Company Secretary for a copy thereof.

Employee Stock Option Plan (ESOP)

Your Company implemented the Granules India Equity Stock Option Plan 2002 and Granules India Equity StockOption Plan 2009, recognising the Directors as well as the employee''s contribution to the organisation''s success. During the year under review 64,500 options were exercised under Granules India Equity Option Plan 2002 at an exercise price of Rs.45 (forty five) per share, resulting into allotment of 64,500 shares during the year. The said shares has been listed at Bombay Stock Exchange and National Stock Exchange and also approved for trading thereof. The Granules India Equity Stock Option Plan 2002 came to an end on October 29, 2009, however the grants made on April 25, 2009 under said plan are still under force.

Details of the shares issued under ESOP, as also the disclosures in compliance with clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 are herein under provided.

Pursuant to clause 1U of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, certificate from M/s. Kumar & Giri, Statutory Auditors is given as Annexure II to this report.

Code of Conduct

Your Company has laid down a Code of Conduct for all Board members and senior management of the Company. The Code of Conduct has been posted on the website of the Company. In pursuance of clause U9 of the listing agreement, the declaration by the Managing Director of the Company affirming compliance with the Code of Conduct by the Directors and senior management personnel forms part of Corporate Governance Report.

Acknowledgements

Your Company continues to build shareholder value and your Directors look to the future with confidence. Your Directors place on record their appreciation for the overwhelming co- operation and assistance received from investors, customers, business associates, bankers, vendors and financial institutions. The Directors also thank the Government of India and Governments of various countries, concerned State Governments and other Government Departments and Governmental Agencies for their co-operation and support.

Your Directors are especially indebted to employees of the Company and its subsidiaries at all levels, who through their dedication, co-operation, support and dynamic work, have enabled the Company to achieve rapid growth. Your Directors seek, and look forward to the same support during the future years of growth.

On behalf of the Board

Sd/-

Place: Hyderabad Dr. C. Nageswara Rao

Date: April 25, 2013 Chairman


Mar 31, 2011

To the Members

The Directors submit the Annual Report of the Company together with the audited statement of accounts for the year ended March 31, 2011.

Financial results

The Company's revenue, expenditure and results of operations are presented as below showing both the consolidated and standalone financial results.

(Rs. lakhs)

Particulars Standalone Consolidated

year ended Year ended year ended Year ended

march 31, 2011 March 31, 2010 march 31, 2011 March 31, 2010

Net Sales 40,567.70 38,619.49 47,517.97 46,108.93

Other Income 71.17 48.00 80.25 107.36

Total Income 40,638.87 38,667.49 47,598.22 46,216.29

Profit Before Depreciation, Interest and Tax 5,464.16 6,280.90 5,765.69 7,371.97

Less: Interest and Finance Charges 1,136.20 1,639.98 1,258.69 1,754.90

Less: Depreciation 1,588.13 1,589.67 1,831.47 1,857.43

Profit Before Tax 2,739.83 3,051.25 2,675.53 3,759.64

Less: Provision for Taxes Including Deferred Tax 568.01 656.40 585.95 722.44

Net Profit After Taxes 2,171.82 2,394.85 2,089.58 3,037.20

Add: Surplus Brought Forward from Previous Year 6,164.89 4,123.36 6,016.52 3,332.64

Surplus Available 8,336.72 6,518.22 8,106.10 6,369.84

Appropriations

made to Surplus:

Provision for Dividend 300.86 250.71 300.86 250.71

Provision for Dividend Tax 48.81 42.61 48.80 42.61

Transfer to General Reserve 108.60 60.00 108.60 60.00

Balance Carried to Balance Sheet 7,878.45 6,164.89 7,647.84 6,016.52

Basic Earnings Per Share 10.83 11.94 10.42 15.14

Diluted Earnings Per Share 10.78 11.89 10.37 15.08

2. Dividend

In view of the Company's profitable performance, the Directors are pleased to recommend for approval of the shareholders, a dividend of 15% on 2,00,57,154 equity shares (face value of Rs. 10 each) of the Company with respect to the financial year 2010-11. The dividend, if declared as above, would involve an outfow of Rs. 300.86 lakhs towards dividend and Rs. 48.81 lakhs towards dividend tax, resulting in a total outfow of Rs. 349.67 lakhs. Under the Income Tax Act, 1961, the dividend will be tax free in the hands of the shareholders.

3. Transfer To The investor

Education and Protection fund

According to section 205C of the Companies Act, 1956, read with Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001, the unclaimed dividend amounting to Rs. 71,215/- (Seventy One Thousand Two Hundred and Fifteen only) for the Financial Year 2002-03, was transferred to the Investor Education and Protection Fund established by the Central Government during the year under review.

4. Transfer To General reserves

The Company proposes to transfer Rs. 108.60 lakhs to the General Reserve out of the amount available for appropriations. After the appropriations, it has been proposed to retain Rs. 1,713.56 lakhs from the current year's profits.

5. Review of Operations

The net sales of the Company for the financial year 2010-11 stood at Rs. 40,567.70 lakhs compared to the net sales of Rs. 38,619.49 lakhs in the previous Financial Year 2009-10, registering a growth of 5% in the current financial year. The profit before interest, depreciation and tax stood at Rs. 5,464.16 lakhs and profit after taxes stood at Rs. 2,171.82 lakhs during the current financial year. The Company continued to strengthen its position in the rapidly growing market and aims at achieving productivity gains, growth in volumes, sustained margins and neutralising cost increases.

6. Funding

During the year under review, the Company has not sought or received any external funding.

7. Research & Development

The Company is committed to building a sound base for sustained growth both in both API and PFI businesses through the development of innovative, future-oriented technologies, intellectual property protection and engineering technologies in stable-ops by leveraging our collective R&D expertise resulting in value for all stakeholders. Our unrelenting focus on R&D has yielded achievements in year ending March 2011. The Company filed first patent application during the year and is also preparing to file several more patent applications. The Company is also developing API technologies which will offer higher quality material. R&D efforts also helped in improving operational productivity.

To face challenges in the business environment, the Company has strengthened its R&D by enhancing resources and creating new facilities. The Company also lined up several programmes for in-house R&D and formed alliances with national and international reputed institutions. We are positioning the period covered by the 2011-2012 Plan as a time of transformation, in which the Company will move forward from our past successes and grow into a new Granules which focuses on our activities on the themes of Innovation, Culture and Growth.

8. Directors

The Board consists of executive and non-executive directors including independent directors who have wide and varied experience in different disciplines of corporate functioning. During the year under review the following changes were witnessed:

a. Mr. Arun Rao Akinepally was appointed Additional Independent Director by resolution of the Board passed by circulation on April 27, 2010 duly confrmed by the shareholders in the Annual General Meeting dated September 27, 2010.

b. Mr. Harsha Chigurupati was appointed as an Additional Director by Board Resolution on July 26, 2010 and was subsequently confrmed and appointed as an Executive Director for a period of five years w.e.f August 1, 2010 by the shareholders in the Annual General Meeting dated September 27, 2010.

There is no change in the Board after the date of Balance Sheet.

Pursuant to provisions of Sections 255 and 256 of the Companies Act, 1956 and Article 51 of the Articles of Association of the Company, Mr. L.S. Sarma and Mr. C. Parthasarathy, Independent Directors of the Company are liable to retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re-appointment to the office of Directorship. Your Board of Directors recommend for their re-appointment.

Brief profiles of Mr. L.S. Sarma and Mr. C. Parthasarathy, the nature of their expertise in specific functional areas and the number of companies in which they hold directorships and memberships/chairmanships of Committees of the Board, as stipulated under Clause 49 of the Listing Agreement with the stock exchanges, are provided in the section on Corporate Governance in this Annual Report.

The Board has formed different Committees delegating various functions, the description of the same is provided in the Corporate Governance Report, attached herewith.

9. Corporate Governance Report

Your Company is committed to good Corporate Governance Practices and following the guidelines prescribed by the Stock Exchange Board of India from time to time. Your Company still continually works at improving its practices and processes as it is spreading through nations to ensure that the best practices are identifed, adopted and followed. The Company has implemented all of its major stipulations as applicable to the Company. The Statutory Auditors Certificate, dated July 28, 2011 in accordance with Clause 49 of the Listing Agreement is annexed with Corporate Governance Report.

Mr. C. Krishna Prasad, Managing Director and Mr. Pranesh Raj Mathur, CFO and President (API), have given a Certificate to the Board with regard to the Financial Statements for the Year ending March 31, 2011 and the same is annexed with Corporate Governance Report, as contemplated in Clause 49 of the Listing Agreement.

A Detailed report on Corporate Governance practices followed by your Company, in terms of Clause 49 of the Listing Agreement with Stock Exchanges, is provided separately in this Annual Report.

10. Management Discussion and analysis Statement

A Management Discussion and Analysis statement as required under the clause 49 of the Listing Agreement is annexed, forming a part of the Directors Report.

11. Director's Responsibility Statement

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 and based on the representations received from the operating management, the Directors hereby confrm that:

i. In the preparation of accounts, the applicable accounting standards have been followed.

ii. Appropriate accounting policies were applied consistently. Judgment and estimates that were reasonable and prudent were made to give a true and fair view of the Company's state of affairs as at the end of the financial year and of the Company's profits for the year.

iii. Proper and sufficient care was taken to maintain adequate accounting records in accordance with the provisions of the Companies Act, 1956, to safeguard the Company's assets and prevent and detect fraud and other irregularities.

iv. The annual accounts were prepared on a going concern basis.

12. Subsidiary companies

Granules uSa inc.

Granules USA Inc., a wholly-owned subsidiary company, operates for the marketing requirements of the Company in the U.S. During the financial year 2010-11, the Company achieved a turnover of Rs. 7,543.74 lakhs.

Gil lifesciences Private limited

GIL Lifesciences Private Limited, a wholly-owned subsidiary of the Company has acquired land at Jawaharlal Nehru Pharma City (JNPC), Parwada Mandal, Visakhapatnam (AP) to set up a Pharmaceutical manufacturing unit. The Company is yet to commence operations here.

Granules Singapore Pte limited

The Company has not commenced any activity from this wholly-owned subsidiary company.

The relevant particulars of subsidiary companies and the consolidated final accounts for the year ended March 31, 2011, in accordance with the Accounting Standard AS-21 on Consolidated Financial Statements, read with Accounting Standard AS-23 on Accounting for Investment in Associates are appended to this Report.

13. Joint venture companies

Granules-biocause Pharmaceutical co. limited

During the financial year 2010-11, Granules-Biocause Pharmaceutical Co. Limited, our Joint Venture Company achieved a turnover of Rs. 6,299.46 lakhs.

The Company has signed Joint Venture Agreement with a Belgium based Company, S. A. Ajinomoto Omnichem N.V. on July 14, 2011 for the purpose of establishing a 50:50 Joint Venture Company in India for manufacture of pharmaceutical intermediates and APIs. The incorporation of the Joint Venture Company is under process however, the name of the proposed company"Granules Omnichem Private Limited” has been approved by the Registrar of Companies, Hyderabad (AP).

14. Statement under Section 212 of The companies act, 1956

Pursuant to the General Circular no. 2/2011 dated February 8, 2011 issued by Ministry of Corporate Affairs, the Company is entitled for exemption from the provisions of section 212 of the Companies Act, 1956 and the Company has complied with the requisite criteria mentioned in the above stated circular. However, a brief statement pursuant to section 212 of the Companies Act, 1956 related to Subsidiary Companies has been given as Annexure to the Balance Sheet and forms a part of this Annual Report.

Copies of the Annual Report of the Subsidiary Companies and the related detailed information will be made available to any member of the Company and its Subsidiaries who may be interested in obtaining the same. The Annual Report of the Subsidiaries Companies will also be kept open for inspection by any investor at the Registered Office of the Company and that of the respective Subsidiary Companies. The consolidated Annual Report is attached with the Annual Report of the Company.

15. Auditors and Their report

M/s. Kumar & Giri, Chartered Accountants, Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. The Company has received a certificate from the Auditors to the effect that their re-appointment if made, would be in accordance with the provisions of Section 224(1B) of the Companies Act, 1956. The Directors recommend their re-appointment and to fix their remuneration.

Comments of the Auditors in their report and the notes forming part of the Accounts, are self explanatory and need no comments.

16. Cost auditors

M/s. EVS & Associates, Cost Accountants, were appointed as the Company's Cost Auditors subject to the consent of the Government of India to conduct cost audit of the bulk drugs and formulations division of the Company for the Financial Year 2010-11. The said appointment was approved by the Central Government.

17. Fixed Deposits

Your Company did not accept any public deposits and no amount on account of principal or interest on public deposits was outstanding on the date of Balance Sheet.

18. conservation of energy, Technology absorption, and foreign exchange earnings and outgo

The information pertaining to conservation of energy, technology, absorption, foreign exchange earnings and outgo, as required under section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given as 'Annexure I' and forms part of the Directors Report.

19. Human resources

Your Company continued to have cordial relations with its employees. Your Company is striving relentlessly to strengthen talent pipeline across all levels and to drive performance orientation as work culture by implementing various schemes, system, process and programs from time to time resulting in all around development of the employees and vibrant work culture. Your Company has robust process of human resources development which is provided for in Management Discussion and Analysis.

20. ParticularS of employees

Particulars of employees, as required under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of employees) Rules, 1975, as amended, form part of this Report as 'Annexure II'. However in pursuance of section 219(1)(b)(iv) of the Companies Act, 1956, this report is being sent to all shareholders of the Company, excluding the aforesaid information and the said particulars are made available at the Registered Office of the Company. The members interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

21. Employee Stock Option Plan

Your Company implemented the Granules India Equity Option Plan 2002 with the objective of enhanced employee commitment. The details of the stock options granted under the Granules India Equity Option Plan 2002, are given below:

Sr. no. Description Details

(a) Options granted during the year NIL

(b) Pricing formula Not Applicable.

(c) Options vested during the year 3,750 options out of those granted during the financial year 2006-07.

69,500 options out of those granted during the financial year 2009-10.

(d) Options exercised during the year Nil

(e) Total number of shares arising as a result of exercise of options Not Applicable

(f) Options lapsed during the year Nil

(g) Variation in terms of options Nil

(h) Money realised by exercise of options during the year Nil

(i) Total number of options in force 1,54,000

(j) Employee wise details of options granted during the year to:

(j)(i) Senior managerial personnel Not Applicable

(j)(ii) Any other employee who receives a grant in any one year of options amounting to 5% or more of options granted during the year.

Not Applicable

(j)(iii) Identifed employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant.

Not Applicable

(k) Diluted Earnings per share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard (AS) 20 – Earning per share.

Not Applicable

(l) Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost that shall have been recognised if it had used the fair value of the options.

Not Applicable

(m) Weighted-average exercise prices and weighted-average fair values of options, whose exercise price either equals or exceeds or is less than the market price of the stock

Not Applicable

(n) Description of the method and significant assumptions used during the year to estimate the fair values of options.

Not Applicable

Pursuant to clause 14 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, certificate from M/s. Kumar & Giri, Statutory Auditors is given as Annexure III to this report.

22. Related Party Transactions

As a matter of policy, your Company carries out transactions with related parties on an arm's length basis. Statement of these transactions is given in the Notes to Accounts (Point no. 13) in compliance of Accounting Standard (AS) 18.

23. Code of conduct

Your Company has laid down a Code of Conduct for all Board members and senior management of the Company. The code of conduct has been posted on the website of the Company. In pursuance of Clause 49 of the Listing Agreement, the declaration by the Managing Director of the Company affrming compliance with the code of conduct by the directors and senior management personnel is provided herein as 'Annexure IV' and forms part of Directors Report.

24. Acknowledgements

Your Company continues to build shareholder value and your Directors look to the future with confdence. Your Directors place on record their appreciation for the overwhelming co- operation and assistance received from investors, customers, business associates, bankers, vendors and financial institutions. The Directors also thank the Government of India and Governments of various countries, concerned State Governments and other Government Departments and Governmental Agencies for their co-operation and support.

Your Directors are especially indebted to employees of the Company and its subsidiaries at all levels, who through their dedication, co-operation, support and dynamic work, have enabled the Company to achieve rapid growth.

On behalf of the Board of Directors

Sd/-

L. S. Sarma

Director

Sd/-

C. krishna Prasad

Managing Director Place: Hyderabad

Date: July 28, 2011


Mar 31, 2010

The Directors submit the Annual Report of the Company together with the audited statement of accounts for the year ended March 31, 2010.

1. Financial Results (Rs. in lakhs)

Particulars Year ended 9-month period ended March 31, 2010 March 31, 2009

Sales 38,619.49 25,387.36

Other income 48.90 85.47

Total income 38,668.39 25,472.83

Expenditure before Depreciation, Interest and Tax 32,387.50 22,258.54

Interest and finance charges 1,639.98 1,453.83

Depreciation and amortization 1,589.67 974.79

Profit before tax 3,051.25 785.67

Provision for taxes including deferred tax and FBT 656.40 277.15

Profit after tax 2,394.85 508.52

Add: Surplus brought forward 4,123.36 3,921.16

Surplus available 6,518.22 4,429.69

Appropriations

Dividend 250.71 250.71

Tax on distributed profits 42.61 42.61

Transfer to General Reserve 60.00 13.00

Balance carried to Balance Sheet 6,164.89 4,123.36



2. Dividend

In view of the Companys profitable performance, the Directors are pleased to recommend for approval of the shareholders, a dividend of 12.5% on 2,00,57,154 equity shares (face value of Rs.10 each) of the Company in respect of the financial year 2009-10. The dividend, if declared as above, would involve an outflow of Rs. 250.71 lakhs towards dividend and Rs. 42.61 lakhs towards dividend tax, resulting in a total outflow of Rs. 293.32 lakhs. Under the Income Tax Act, 1961, the dividend will be tax free in the hands of the shareholders.

During the year under review, the Company was not required to transfer any unpaid / unclaimed dividends pertaining to the previous years to the Investor Education and Protection Fund.

3. Transfer to Reserves

The Company proposes to transfer Rs. 60.00 lakhs to the General Reserve out of the amount available for appropriations. After the appropriations, it is proposed to retain Rs.2,041.53 lakhs from the current years profits.

4. Operating Results

The Company achieved a turnover of Rs.38,619.49 lakhs showing a growth of 14.1% compared to the previous year. The operating profit during the year was Rs.10,103 lakhs.

5. Funding

During the year under review, the Company has not obtained any external funding.

6. Research and Development

R & D activity at Granules India is a two-fold strategy with research on the API front and development of finished dosages.

The Company is taking specific steps in developing new processes for the production of various APIs to build on its strength as a cost leader. During the fiscal year 2009-10, API activity has been strengthened due to the addition of new members, developing a provision for new infrastructure and building relationships with various academic and research organisations. The Company’s API laboratory has been approved by the Department of Science & Technology, Government of India. This will enable the Company to forge new relationships with academic and research institutions.

The Company has also been making significant efforts on the R & D activity in the finished dosage space. Our first ANDA was approved in April 2010 and we expect the other ANDAs to be approved during the current financial year. With this, we can proudly state that your Company has the capability of launching new drugs in regulated markets. The efforts continue to build strength in the formulations R & D.

7. Directors

During the year under review, Mr. Philip Herbert Strenger was appointed as an Additional Director of the Company w.e.f December 23, 2009, to hold office up to date of the forthcoming Annual General Meeting.

Changes in Directorate after Balance Sheet date:

a. Mr.Arun Rao Akinepally was appointed as Additional Director by resolution of the Board passed by circulation on April 27,

2010. Mr.Arun Rao is an Independent Director.

b. Mr.Harsha Chigurupati was appointed as an Additional Director w.e.f July 26, 2010 and subsequently as Executive Director w.e.f August 1, 2010. Mr.Harsha Chigurupati is a Non-Independent, Executive Director

Notice was received from the Companys members under Section 257 of the Companies Act, 1956 proposing the candidature of Mr. Philip Herbert Strenger, Mr.Arun Rao Akinepally and Mr.Harsha Chigurupati for appointment as the Company’s Directors. Resolutions seeking your approval to their appointment are in the Notice convening the 19th Annual General Meeting of the Company.

Pursuant to Article 51 of the Articles of Association of the Company, Mr.A.P.Kurian will retire by rotation at the forthcoming Annual General Meeting and being eligible offers himself for re- appointment as Director. Your Board of Directors recommend his re-appointment.

Brief profiles of Mr.Philip Herbert Strenger, Mr.Arun Rao Akinepally, Mr.Harsha Chigurupati and Mr.A.P.Kurian; the nature of their expertise in specific functional areas and the number of companies in which they hold directorships and memberships/chairmanships of Committees of the Board, as stipulated under Clause 49 of the Listing Agreement with the stock exchanges, are provided in the section on Corporate Governance in this Annual Report.

8. Corporate Governance Report and Management Discussion and Analysis Statement

A Report on Corporate Governance and a Management Discussion and Analysis statement are attached to this Report, which form part of this Annual Report.

9. Directors Responsibility Statement

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 and based on the representations received from the operating management, the Directors hereby confirm that:

i. The applicable accounting standards issued by the Institute of Chartered Accountants of India were followed

ii. Appropriate accounting policies were applied consistently. Judgment and estimates that were reasonable and prudent were made so as to give a true and fair view of the Companys state of affairs as at the end of the financial year and of the Companys profits for the year.

iii. Proper and sufficient care was taken to maintain adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the Companys assets and for preventing and detecting fraud and other irregularities.

iv. The annual accounts were prepared on a going concern basis.

10. Subsidiary Companies Granules USA Inc.

Granules USA Inc., a wholly-owned subsidiary company, operates for the marketing requirements of the Company in the U.S. During 2009-10, the subsidiary company achieved a turnover of Rs. 10,486 lakhs.

The relevant particulars of Granules USA Inc. and the consolidated final accounts for the period ended March 31, 2010, in accordance with the Accounting Standard AS-21 on Consolidated Financial Statements, read with Accounting Standard AS-23 on Accounting for Investment in Associates are appended to this Report.

GIL Lifesciences Private Limited

GIL Lifesciences Private Limited, a wholly-owned subsidiary of the Company has acquired land for setting up a unit for manufacture of APIs. The feasibility of setting up a project at this land is being examined.

Granules Singapore Pte Ltd.

The Company has not commenced any activity from this wholly- owned subsidiary company.

11. Joint Venture Company

Granules-Biocause Pharmaceutical Co. Ltd.

During 2009-10, Granules-Biocause Pharmaceutical Co. Ltd, the joint venture company achieved a total turnover of Rs.13,830 lakhs.

12. Explanation to Qualifications in Auditors’ Report

a. Dues to micro, small and medium enterprises (Clause 4(a) of the Auditors’ Report)

In view of its long standing relationship with these particular enterprises, your Company enjoys credit period higher than that prescribed by law and the outstanding dues are paid accordingly. However, your Company would ensure that the outstanding dues to these parties would be minimized over a period.

b. Confirmation of balances (Clause 4(b) of the Auditors’ Report)

Your Company has circulated letters to debtors and creditors for confirmation of balances. Your Company has received confirmation from 318 accounts and the same are in agreement with the balances as per the Companys books.

13. Statement under section 212 of the Companies Act, 1956

A statement pursuant to section 212 of the Companies Act, 1956 related to Subsidiary Companies has been given as Annexure to the Balance Sheet and forms part of this Annual Report.

14. Auditors

M/s.Kumar & Giri, Chartered Accountants, who are the statutory auditors of the Company hold office, in accordance with the provisions of the Companies Act, 1956, up to the conclusion of the forthcoming Annual General Meeting and have confirmed their eligibility and willingness for re-appointment.

15. Cost Auditors

M/s.EVS & Associates, Cost Accountants, were appointed as the Companys Cost Auditors subject to the consent of the Government of India to conduct cost audit of the bulk drugs division of the Company for 2009-10. The said appointment was approved by the Central Government.

16. Fixed Deposits

Your Company did not accept any public deposits and as such, no amount on account of principal or interest on public deposits was outstanding on the date of Balance Sheet.

17. Conservation of Energy and Technology Absorption, among others

The particulars as prescribed under Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are set out in Annexure I to this Report.

18. Human Resources

In your Company, we have a philosophy of respect, empowerment and continuous development that helps us enjoy sustained healthy employee relations. Towards this effort, your

Company has implemented numerous initiatives such as the introduction of a robust Performance Management System, Plant Performance Incentive Scheme, Level-Grade Restructuring, Lean Recruitment Process and Training programs across all levels of the Organisation for developing & improving its human capital.

19. Particulars of Employees

Information as required under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, is given in Annexure II to this Report.

20. Employee Stock Option Plan

Your Company implemented the Granules India Equity Option Plan 2002 with the objective of enhanced employee commitment.

The details of the stock options granted under the Granules India Equity Option Plan 2002, including grants to the senior management are given below:

Description Details

(a) Options granted during the year 1,39,000

(b) Pricing formula Market price as on the date of grant

(c) Options vested 3,000 options out of those granted during the financial year 2006-07

(d) Options exercised Nil

(e) Total number of shares arising as a result of exercise of options Not Applicable

(f) Options lapsed during the year Nil

(g) Variation in terms of options Nil

(h) Money realized by exercise of options during the year Nil

(i) Total number of options in force 1,54,000

(j) Employee wise details of options granted to:

(i) Senior Managerial Personnel 1. Mr. Jonathan Berlent (President, U.S Operations) - 70,000 options

2. Dr. A. Bhaskar Krishna (Chief Operating Officer) - 40,000 options

3. Mr. Pranesh Raj Mathur (Chief Finance Officer) - 10,000 options

4. Mr. I. Murali Prasad (GM, Operations) - 4,500 options

5. Mr. P. Srinivasa Reddy (GM, Operations) - 4,500 options



Description Details

(ii) Any other employee who receives a grant in any one year 1. Mr. Jonathan Berlent - 70,000 options of options amounting to 5% or more of options granted 2. Dr. A. Bhaskar Krishna - 40,000 options during the year 3. Mr. Pranesh Raj Mathur - 10,000 options

(iii) Identified employees who were granted option, during any Nil one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant

(k) Diluted Earnings per share (EPS) pursuant to issue of shares Rs.11.94

on exercise of options calculated in accordance with Accounting Standard (AS) 20 – Earning per share

(l) Where the Company has calculated the employee compensation Since the pricing formula adopted is the market price cost using the intrinsic value of the stock options, the difference of the shares prevailing on the date of grant, no between the employee compensation cost that shall have been intrinsic value is applicable and hence, no employee recognized if it had used the fair value of the options compensation on account of employee stock options is calculated

(m) Weighted-average exercise prices and weighted-average fair No such instances during the year values of options, whose exercise price either equals or exceeds or is less than the market price of the stock

(n) Description of the method and significant assumptions used Not Applicable

during the year to estimate the fair values of options



Pursuant to clause 14 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, certificate from M/s.Kumar & Giri, Statutory Auditors is given as Annexure III to this report.

21. Related Party Transactions

As a matter of policy, your Company carries out transactions with related parties on an arms length basis. Statement of these transactions is given in the Notes to Accounts in compliance of Accounting Standard AS - 18.

22. Acknowledgements

The Directors thank the Companys customers, vendors, investors, business associates, bankers and financial institutions for their support to the Company.

The Directors also thank the Government of India and the

governments of various countries, the concerned state governments and other government departments and governmental agencies for their cooperation.

The Directors place on record their appreciation of the contributions made by every member of the Granules family.

On behalf of the Board of Directors

Place: Hyderabad Dr. C. Nageswara Rao

Date: July 26, 2010 Chairman