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Directors Report of Hikal Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present the 27th Annual Report with the Audited Accounts for the financial year ended March 31,2015.

Rs in Millions

1. FINANCIAL RESULTS

2014-15 2013-14

Turnover 8,719 8,292

Operating profit before interest 1.841 1,883

Interest 600 680

Profit before depreciation 1,241 1,203

Depreciation 642 550

Exceptional Income - 331

Profit before taxation 599 983

Provision for taxation

- Current tax 218 208

- Less MAT tax credit - (105)

- Deferred tax liability/(assets) (24) 239

Profit after tax 405 641

Reserves and surplus 5,170 4,895

Dividend on equity share 82 74

Tax on dividend 17 13

Transfer to general reserve 50 100

COMPANY'S PERFORMANCE

Hikal's total revenue grew to Rs 8,719 million, a 5% increase over the last year. The growth was driven by a 13% increase in the pharmaceutical division with higher offtake of our key products. We expect growth in the pharmaceutical division to continue in the future.

The pharmaceutical division registered a 28% increase in volume year on year. However, fierce competition in our product segments led to price erosion of some of our key products which offset the volume gain we experienced. Pricing for some of our key products is expected to stabilize in the coming year which will help arrest the drop in margins. We will de-risk some of the portfolio with the introduction of new products this year.

In the crop protection division, there was erosion in volume as well as value primarily caused by inventory cuts by our major clients. Volume was down by 6% as compared to the previous year. Sales were down by 5%, which partially offset the gain in the pharmaceutical division. The agricultural industry is experiencing a downturn after having several years of high single digit growth. We expect impact to reverse itself in the second half of the current financial year. We are working towards diversifying our product portfolio and customer base which would ease the effects of the global downturn. Our EBITDA margin was down by 2% Rs 1,841 million due to lower pricing for increased volumes as well as increased pricing competition. In this challenging market, we still operate at a healthy EBITDA margin of 21%. We introduced several cost rationalization initiatives in the current year. Cost savings from our co-generation plant, purchasing power at discounted tariffs and process improvements will protect our margins going forward. We have instituted strict working capital norms which will help free up cash reserves and reduce our overall working capital costs.

Depreciation was higher at Rs 642 million from Rs 550 million last year due to capitalization of additional assets in the pharmaceutical and R&D divisions. Significant investments were made to debottleneck and increase capacities of some of our manufacturing plants.

During the year, gross fixed assets increased by Rs 640 million due to an increase in capital assets (buildings, plants and equipment) in the pharmaceutical division and R&D. We invested a significant amount of money to set up our new development and launch plant and a co-generation plant at Jigani, Bangalore. We also invested in several de- bottlenecking initiatives across our sites.

Our financing cost was lower at Rs 600 million vs. Rs 680 million last year due to a reduction in the outstanding long term debt. Our total debt outstanding as on March 31,2015 was Rs 5,471 million, slightly up from Rs 5,458 million on March 31,2014. Our debt/equity ratio has improved to 0.81 vs. 0.93 last year. We expect to further improve our financial leverage with repayments scheduled this year. We are actively working on strengthening our balance sheet.

The tax expense decreased from Rs 342 million to Rs 193 million this year due to tax on exceptional income last year (one time sale of ESOP shares as per SEBI rules).

Our operational net profit after tax was down by 4% YOY at Rs 405 million.

Hikal has undertaken several measures to ensure sustainability in the short as well as long term. We filed two DMFs for which products are expected to be commercialized during the year. We plan to file five to six DMFs every year for products that have significant commercial potential. It will increase our product portfolio and reduce our dependence on several legacy products. It will also help us phase out saturated products with declining margins. In crop protection, we aspire to grow our proprietary products to safeguard our division from volatile demand for some of our key contract manufactured molecules.

This year we refined our business strategy. We strengthened our business development teams for crop protection as well as the pharmaceutical divisions. Our primary objective is to develop a robust and diversified product pipeline mix of commercialized products. We recruited talent for R&D and set up new labs in allied but new business areas such as steroids. We debottlenecked our scale up facilities last year with the addition of a development and launch plant in Jigani which will enable a larger throughput of products from development into commercialization.

In a challenging environment, we increased our revenues and achieved a healthy EBITDA margin of 21%. We are well positioned to reap the benefits of our capital investments and benefit from our product pipeline. The Board of Directors has recommended a dividend of 50% as against 45% last year.

2. EXPORTS

Exports for the year is Rs 6,890 millions (79%of total sales) as compared to Rs 7,056 millions (85% of total sales) in the previous year. We have diversified our customers base which include more local customers who in turn re-export our manufactured products.

3. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis on the operations of the company is provided in a separate section and forms a part of the report.

4. DIVIDEND

The Board had recommended an interim dividend of 25% (previous year:20%) and a final dividend of 50% including the interim dividend for the year (previous year:45%). During the year your Company has transferred Rs 50 Million to General Reserve.

5. SHARE CAPITAL

The paid up Equity Share Capital as at March 31,2015 stood at Rs 16.44 crores. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity. As on March 31,2015, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

The Board of Directors in their meeting held on December 17, 2014 approved the sub -division of each fully paid equity share of the face value of INR 10/- into 5 (five) equity shares of face value of INR 2/- each fully paid up and the consequent amendment to the clause V of the memorandum of association & clause 3 of the articles of association of the company. Shareholders' approval by way of special resolution was obtained through postal ballot the result of which was declared on February 16, 2015.

6. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as Annexure - D and forms an integral part of this Report.

7. SUBSIDIARY ACCOUNTS

In terms of the approval granted by the Government of India, Ministry of Company Affairs under Section 129(3) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Directors' Report and the Report of the Auditors of the subsidiary companies viz., Hikal International B.V and Acoris Research Limited have not been attached with the Balance Sheet of the company. The company will make available these documents / details upon request made by any shareholder of the company interested in obtaining the same and the same can also be inspected at the Registered Office of the company as well as of the subsidiaries. Pursuant to the approval, a statement of the summarized financials of all the subsidiaries is attached along with the Consolidated Financial Statements. Pursuant to Accounting Standard (AS) - 21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the company includes the financial information of its subsidiaries.

8. DIRECTORS

During the year under review, the Company appointed Mr. Shivkumar Kheny, Dr. Wolfgang Welter and Dr. Axel Kleemann as Independent Directors of the Company with effect from May 5, 2015 for a period of three consecutive years.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Mrs. Sugandha Hiremath, Director retires by rotation at the forthcoming Annual General Meeting and being eligible offers herself for re-appointment.

During the year under review, Dr. Peter Pollak retired as a Director of the Company with effect from September 12, 2014. The Board places on record its appreciation for the services rendered by Dr. Peter Pollak during his tenure as a Director.

Details of number of Board meeting held during 2014-15 forms part of Corporate Governance Report.

9. BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration the various aspects of the Board's functioning like composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

10. WHISTLE BLOWER POLICY

The Company has a whistle blower policy to report genuine concerns or grievances. The Whistle Blower policy has been posted on the website of the Company (www.hikal.com).

11. REMUNERATION AND NOMINATION POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. The details of this policy is explained in the Corporate Governance Report.

12. RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained on a quarterly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transaction is placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis

The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website.

None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company.

13. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations.

14. RISK MANAGEMENT

Company has a robust business risk management framework in place to identify and evaluate all business risks. The company recognizes that risk management is a crucial aspect of the management of the Company and is aware that identification & management of risk effectively is instrumental to achieving its corporate objectives.

The Company has identified the business risks and the business heads who are termed as risk owners assess, monitor and manage these risks on an ongoing basis. The risk owners assess the identified risks and continuously identify any new risks that can affect the business. Different risks such as technological, operational, maintenance of quality, reputational, competition, environmental, foreign exchange, financial, human resource, legal compliances among others are assessed on continuous basis. The risk management committee and audit committee review and submit to the Board of Directors their finding in the form of risk register at regular intervals. At the Board meetings, the committee has a detailed discussion to assess each risk and the measures that are in place to bring them to acceptable limits.

The strategies are reviewed, discussed and allocation of appropriate resources is done as and when necessary. The risk management programme, internal control systems and processes are monitored and updated on an ongoing basis. A built mechanism has been established to identify, measure, control, monitor and report the risks. Business heads are responsible for rolling out the risk assessment and management plan within entire organisation.

15. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism.

16. KEY MANAGERIAL PERSONNEL

During the year, the Company appointed/ designated the following persons as Key Managerial Personnel.

Mr. Jai Hiremath, Chairman & Managing Director

Mr. Sameer Hiremath, President & Joint Managing Director (Whole Time Director)

Mr. Sham Wahalekar, Chief Financial Officer & Company Secretary

17. PARTICULARS OF LOANS, GUARANTEES & INVESTMENTS BY THE COMPANY

The details under section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

18. DIRECTOR'S RESPONSIBILITY STATEMENT

Your Directors state that:

(i) In the preparation of the annual accounts, 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;

(ii) 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 at the end of the financial year ended March 31,2015 and of the profit of the company for that year;

(iii) 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;

(iv) The annual accounts have been prepared on a going concern basis;

(v) 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

(vi) The Directors have devised a proper system to ensure compliance with the provision of all applicable laws and that such systems are adequate and are operating effectively.

19. AUDITOR

M/s B S R & Co. LLP Chartered Accountants is the retiring auditor, offer themselves for re-appointment

20. COST AUDITOR

The company has re-appointed Prof. VJ.Talati of VJ.Talati & Co., as the Cost Auditor to carry out the audit of Cost Accounts for the financial year 2015-16. The Cost Audit report for the financial year 2013-14 was filed with Ministry of Corporate Affairs, Government of India on September 24, 2014.

21. SECRETARIAL AUDITOR

The Board has appointed Ms. Ashish Bhatt & Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2014-15.

The Secretarial Audit Report for the financial year ended March 31,2015 is annexed herewith marked as Annexure B to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

22. 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 CSR Policy may be accessed on the Company's website at the below link:

http://www.hikal.com/investors/pdf/Corporate Social Responsibility.pdf

Policy Statement

As a socially responsible corporate member of the world community, with long enduring relationships we believe that the future of our business is best served by respecting the interests of the Society at large.Through our efforts we shall strive to improve the living standards of the surrounding community. Our CSR activities shall aim to bring a difference in the lives of the needy, under privileged persons of the society including children, women and senior citizens and the environment.

The key philosophy of all CSR initiatives of the Company is guided by three core commitments of Scale, Impact and Sustainability. The Company has identified six focus areas of engagement which are as under:

* Health: Affordable solutions for healthcare through improved access, awareness and sanitation

* Education: Access to quality education, training, skill enhancement, enhancement of vocation skills

* Environment: Environmental sustainability, ecological balance, conservation of natural resources

* Protection of National Heritage, Art and Culture: Protection and promotion of traditional art, culture and heritage

* Overall development activities in surrounding areas of Hikal's manufacturing sites for the benefit of the society

* Contribution to Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio economic development or welfare

Implementation of the CSR Program

1. Project activities identified under CSR are to be implemented either by personnel of the Company or through registered trust or a registered society.

2. The time duration of each project / program shall depend on its nature and intended impact.

The Company would also undertake other need based initiatives in compliance with Schedule VII to the Act. During the year, the Company has spent '0.87 Million on CSR activities. Pursuant to the provisions of the Companies Act 2013, the Company should have spent Rs 12.8 Million (being 2% of the average net profits of last three financial years), during the financial year 2014-15. Your Company has taken progressive steps to formulate a policy, identified the activities and is confident of spending the stipulated amount on selected programs in near future along with the shortfall in CSR expenditure for this financial year.

The Annual Report on CSR activities is annexed herewith marked as Annexure A.

23. SAFETY &ENVIRONMENT

The company continued to maintain the highest standards of environment, health and safety. The company has become the first Indian life sciences company to receive the Responsible Care certification. It is applicable to all manufacturing and research sites of the company. Continuous training and awareness programs for the employees are undertaken on a frequent basis.

24. PUBLIC DEPOSITS

The company has not accepted any deposits and as such there are no overdue deposits outstanding as on March 31,2015.

25. EMPLOYEES

The company considers its human capital as an invaluable asset. The company continued to have cordial relationships with all its employees. Management and employee development programs and exercises were conducted at all sites. Employees had various team building exercises and were sponsored for various external seminars and other developmental programs to enhance their skill sets. The total workforce of the company stood at 1164 as on March 31,2015.

As required by the provisions of the section 197 (12) of the Companies Act, 2013, read with Companies (Appointment and Remuneration of Management Personnel) Rules, 2014, as amended, the names and other particulars of the employees form part of the Directors' Report. However, as per the provisions of the Sec. 136 of the Companies Act, 2013, the report and accounts are being sent to all shareholders of the company excluding the aforesaid information, any shareholders interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company.

26. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of Section 134 (3) (m) of the Companies Act, 2013, read with rule 8 (3) of the Companies (Accounts) Rules, 2014, a statement showing particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo forming part of the Directors' Report, is given in the enclosed annexure c which forms part of this report.

27. CORPORATE GOVERNANCE

A report on the Corporate Governance Code along with a certificate from the Auditors of the company regarding the compliance of the code of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under clause 49 of the Listing Agreements are annexed to this Report.

28. ACKNOWLEDGEMENTS

The Board of Directors place on record their appreciation of the contribution and sincere support extended to the company by our bankers, financial institutions and valued customers and suppliers.

The Board also places on record its appreciation for the impeccable service and generous efforts rendered by its employees at all levels, across the board towards the overall growth and success of the company.

29. CAUTIONARY STATEMENT

Statements in the Board's Report and the Management Discussion & Analysis describing the Company's objectives, expectations or forecasts may be forward-looking within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other factors such as litigation and industrial relations.

For and on behalf of the Board of Directors

Date: May 5, 2015 Jai Hiremath Place: Mumbai Chairman & Managing Director








Mar 31, 2013

To The Members,

The Directors are pleased to present the 25th Annual Report with the Audited Accounts for the financial year ended March 31,2013.

Rs. in Millions

1. FINANCIAL RESULTS

2012-13 2011-12

Turnover 6,604 6,942

Profit before interest and depreciation and exceptional items 1,907 1,884

Interest 599 640

Profit before depreciation 1,308 1,243

Depreciation 491 424

Profit after depreciation before exceptional items 817 819

Exchange loss 484 256

Reversal of cashflow hedge reserve - (37)

Profit before taxation after exceptional items 333 601

Provision for taxation

-Current tax 66 123

-Less MAT tax credit (66) (123)

- Deferred tax liability 78 60

Profit after tax 255 541

Reserves and surplus 4,512 4,434

Dividend on equity share 41 99

Tax on dividend 7 16

Transfer to general reserve 30 100

COMPANY''S PERFORMANCE

After a significant growth in revenues and profitability in 2012, we experienced a challenging year at Hikal. Company revenues were lower by 4.9%. On a positive note, the Crop Protection business grew by 17%, continuing the upward trend from the past year. The Pharmaceutical business experienced price pressure and delays in off take from our customers, which resulted in a revenue decline of 17%.

Despite the difficult economic environment, EBIDTA of the company increased by 1.2% to Rs.1,907 millions from Rs.1,884 millions. The company added new products on a commercial scale. The profit before tax and before extraordinary items was Rs.817 millions, which was comparable to the prior year despite lower revenues. The profit after tax decreased to Rs.255 millions from Rs.541 millions primarily due to a loss on foreign exchange hedges amounting to Rs.484 millions. Based on the results, we recommend a dividend of 25%. On a positive note, the old forward contracts we entered into have been settled and there will be no further losses as a result of these old contracts. Despite the challenging economic environment, the company has increased its operational margins.

2. EXPORTS

Exports for the year increased to Rs.5,818 millions (88% of total sales) fromRs.5,572 millions (80% of total sales) in the previous year; an increase of 4% versus the last fiscal year. This is due to the new customers added in overseas geographies and domestic customers for products that are re-exported.

3. OPERATIONS

Crop Protection Division:

Our crop protection division revenues are primarily driven from contract manufacturing products for multinational innovator companies. The past year saw a volume increase of a fungicide produced for a major European multinational company. An intermediate for the same customer produced at our Mahad facility has grown in volume and based on future forecasts given by the customer, we expect it to grow further.

We have added two customers for commercial manufacturing which is expected to commence next year. The lab trials for these molecules have been completed. We worked on multiple late stage research projects for Japanese Crop Protection companies which are expected to fructify over the next two years. This will lead to additional revenues in the Crop Protection division. We are currently working on an intermediate to be manufactured at our Mahad facility for the Japanese market. This is a solvent for the electronic chemical market with extremely stringent quality requirements. The success of this project along with others has opened up a new market in the fast growing specialty chemicals field for the company.

We have invested incrementally in debottlenecking our plants at Taloja and Mahad to cater to the additional demand of our customers. Going forward, we are focusing on maximum capacity utilization at our manufacturing facilities which will improve our profitability. We have successfully completed Safety, Health and Environment audits with our multinational customers who have reinforced our high standards and quality systems. This should lead to additional business in the years to come. In addition, we have invested in increasing the capacity of our R&D personnel and equipment at our Taloja plant which focuses on process improvements and new product development. The on-patent molecule that we are contract manufacturing for a European multinational innovator customer has grown substantially over last year''s volume. Based on our customer''s forecast, we expect that this molecule will further grow as our customer''s registration gets approved in new markets for this new generation product.

Pharmaceutical Division:

Our pharmaceutical division recorded a turnover of Rs. 3,716 millions as compared to Rs. 4,477 millions in the previous year, a decline of 17%. While we managed to successfully diversify the geographies in which we sell and our customer base, much of the decline in revenues was due to delayed orders of products from our existing customers and the decline in selling prices.

We have signed a long term contract manufacturing agreement with a European innovator customer to commercially manufacture pharmaceutical products for human health. Commercial production of one of these large volume products has commenced late last year and we expect the benefit of full ramp up in 2014. We have also completed the validation of another important API for this customer and we expect commercial production to also commence in 2014. These products will be contract manufactured exclusively for this customer through a technology transfer process as it is one of their largest molecules. The benefits of this agreement will reap rewards over the next few years as we mutually expand the relationship encompassing additional services and products. During the year we signed another manufacturing agreement with a specialty US based food ingredient company. The long term manufacturing agreement is for a specialty food ingredient product manufactured under pharmaceutical grade conditions. Commercial supplies have begun and we expect to ramp up to full production in the upcoming year. This new business is a diversification in terms of products and customers that the company has traditionally garnered. We have completed the validation of a new molecule for an important Japanese customer through a technology transfer. This product will be registered by the customer and we expect to start production once all the regulatory approvals are completed in 2014. This is an important step for the company as we have been operating in the Japanese market for over a decade and have had varied levels of success on the commercial manufacturing side. We expect this commercial manufacturing business to expand over the next few years in Japan as we have an established track record of supplying products in line with the expectations of our customers on specifications and quality.

Some of our existing API''s that have been manufactured over a period of time are experiencing both stable volumes and prices. As there are fewer competitors, we expect these molecules to diversify the current product pipeline while serving as a business development tool for adding newer customers.

Hikal has a valuable role to play by providing options across the pharmaceutical value chain from early stage support on research to flexible manufacturing solutions on the commercial scale. The past year we have diversified our customers and geographies. This has brought along a larger product portfolio which is less dependent on a few major products as has been seen in the past. Additionally new regulated capacity in terms of the Panoli site has increased our offerings and services. We should see these factors drive growth for the division in the years to come.

Research & Development:

This year, we refocused our efforts in Research & Development at the company. Acoris, our contract research site has concentrated on multinational, midsize biotech and innovator customers looking to use new and improved technologies to reduce and make more efficient their processes for their new drugs under development. As part of our integration efforts, Acoris Research formerly a 100% subsidiary is now a division of Hikal. It will enable a smoother transition from contract R&D to scale up and manufacturing at any one of our commercial sites. Our R&D centre in Bangalore continues to implement technology transfer projects and process improvement projects for our own internal development pipeline.

We successfully completed initial supplies for advanced intermediates to one of the largest U.S. biotech companies. These molecules are in phase I & II and are progressing well in clinical trials. The company has a good chance to supply future commercial quantities for this new molecule. The process for these molecules was worked on and improved at Acoris and small volume commercial supplies were provided from the Hikal manufacturing facilities.

During the year we signed a contract with a leading Japanese company to develop different peptides using their proprietary technology. This will enable Hikal enter into a new area of peptide development and possibly manufacturing. The experience and capabilities gained from this project has opened up a new avenue of customers for the company.

We extended a long term process development contract with a leading Japanese company which will yield some molecules for manufacturing in the future. Process development was successfully carried out on a small scale for a product used in wide view film technology. This product sample was approved by our customer and we are in commercial discussions for future supplies.

Several lab scale projects are in progress with different divisions of a large multinational company and these are expected to yield some manufacturing returns. We successfully completed process development for two anti malarial drugs and have supplied samples on a kilo scale to the customer. These products are part of the company''s initiatives to supporting, "World Health Organization''s" initiative to supply quality medicines at an affordable cost to affected people.

Our Animal health initiatives continue to gain traction. We completed process development for a key product for our customer and supplied kilo quantities for their formulation studies. Commercial quantities are expected in the next year. Pilot scale trails have been completed and supplied for a key active ingredient. Discussions are in progress for commercial supplies of this product

Hikal''s R&D has developed a non-infringing and economically viable process for an advanced intermediate for a large volume molecule where kilo lab samples were approved by the customer and pilot plant batches are in currently under progress. Hikal has filed a patent for this non-infringing route. Several non-infringing API processes have been developed for the internal product pipeline of the company. We have filed and received patents on the innovative processes developed to support Hikal''s new product portfolio which are in the pilot scale and will progress to the commercialization phase in the latter half of this fiscal year.

We filed 3 DMF''s in the past year for products that will be commercially manufactured and sold in the near future. This is part of our strategy to diversify our existing customer base and product pipeline. The company''s R&D initiatives are ongoing using bio catalysis to minimize the use of chemicals in our manufacturing processes. Enzyme catalysed transformation help us develop environment-friendly processes for our new product pipeline. In order to ensure that our current manufacturing processes are environment-friendly and sustainable, consumption of organic solvents have been reduced and in certain cases eliminated. Effluent streams were processed to recover valuable products that can be recycled. These initiatives have been transferred and implemented in commercial production. It is part of the companies'' initiative to create and maintain a sustainable business.

Our strategy to offer full development and scale up services to innovator, generic and biotech companies is leading to new possibilities for long-term contract manufacturing opportunities for the Hikal group. A healthy product pipeline in the development phase, new technologies that have been absorbed and developed internally along with strong regulatory governance has created a niche for the company which will lead to many opportunities in the future.

4. DEMERGER OF SUBSIDIARY OPERATIONS

In terms of the Scheme of Arrangement ("the Scheme") under Sections 391 to 394 read with Section 78,100 to 103 of the Companies Act, 1956 sanctioned by Order dated March 30, 2012 of Hon''ble High Court of Judicature at Bombay and filed with the Registrar of Companies, Maharashtra on May 10, 2012, all the assets and liabilities of the research business of Acoris Research Limited (''Transferor Company'') has been taken over by the Company with effect from April 1,2012. Acoris formerly a subsidiary is now be a division of Hikal.

During the year, Acoris has further strengthened its capabilities, both in terms of manpower as well as technical capabilities. We have a qualified group of approximately 118 people, most of them highly trained scientists, Acoris helps customers innovate during the early lifecycle of products with a comprehensive suite of offerings. Acoris provides customized services, from Route Scouting, Contract Research, Process Development, Scale up, Analytical Method Development and cGMP (kilo scale) Manufacturing under Full Time Equivalent (FTE) to Fee for Service (FFS) contracts. With the demerger of operation, the scale up and technology transfer from Acoris to one of Hikal''s manufacturing sites will be seamless and customers will experience a smooth transition of their products.

5. DIVIDEND

The Board has recommended a final dividend of 25% for the year (previous year 60%).

6. AWARDS

During the year, the company received the following awards:

Aditya Birla Award for the "Best Responsible Care Company" in India US FDA audit and approval of second pharmaceutical manufacturing site in Panoli Japanese Pharmaceutical & Medical Devices Authority (PMDA) approval at our Panoli & Jigani Pharmaceutical Commercial Manufacturing sites

7. SUBSIDIARY ACCOUNTS

In terms of the approval granted by the Government of India, Ministry of Company Affairs under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Directors'' Report and the Report of the Auditors of the subsidiary companies viz., Hikal International B.V. and Acoris Research Limited have not been attached with the Balance Sheet of the company. The company will make available these documents / details upon request made by any shareholder of the company interested in obtaining the same and the same can also be inspected at the Registered Office of the company as well as of the subsidiaries. Pursuant to the approval, a statement of the summarized financials of all the subsidiaries is attached along with the Consolidated Financial Statements. Pursuant to Accounting Standard (AS) -21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the company includes the financial information of its subsidiaries.

8. DIRECTORS

Mr. B.N. Kalyani, Mr. S.M.Kheny and Mr. Wolfgang Welter Directors on Board retire by rotation and being eligible, offer themselves for re-appointment.

9. DIRECTOR''S RESPONSIBILITY STATEMENT

In accordance with Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

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

(ii) 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 at the end of the financial year ended March 31, 2013 and of the profit of the company for that year.

(iii) Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

10. AUDITOR''S REPORT

With regard to the qualified opinion contained in the Auditors'' Report, explanations are given below:

Refer Note 28

The Company has entered into swap contracts with the banks against long term loans which will mature year on year upto August 2016. The Company has MTM losses of Rs. 116.17 milions on March 31, 2013 on these swap contracts for the future years which have not been provided for in the books. The Company is of the opinion that the "Mark to Market" loss of these transactions represent unrealised losses that are notional in nature and will not affect the ongoing business or operations of the company. The company has adequate long-term export contracts to cover the entire value of these contracts. The losses on these contracts are being accounted for as and when they fall due. The company is also of the opinion that these losses are not actual losses as the US dollar is highly volatile and unpredictable versus the Indian Rupee.

11. AUDITOR

The members have appointed M/s B S R & Company Chartered Accountants as the auditor of the company in the last Annual General Meeting of the company.

M/s B S R & Company Chartered Accountants is the retiring auditor, offer themselves for re-appointment.

12. COSTAUDIT

The company has re-appointed Prof. V.J.Talati ofV.J.Talati &Co., as the Cost Auditor to carryout the audit of Cost Accounts for the financial year 2012-13. The Cost Audit report for the financial year 2011-12 was filed with Ministry of Corporate Affairs, Government of India on January 31,2013 by the cost auditors.

13. PUBLIC DEPOSITS

The company has not accepted any deposits and as such there are no overdue deposits outstanding as on March 31,2013.

14. LISTING FEES

The company has paid requisite annual listing fees to Bombay Stock Exchange and National Stock Exchange where its securities are listed.

15. EMPLOYEES

The company considers its human capital as an invaluable asset. The company continued to have cordial relationships with all its employees. Management and employee development programs and exercises were conducted at all sites. Employees had various team building exercises and were sponsored for various external seminars and other developmental programs to enhance their skill sets. The total workforce of the company stood at 1,065 as on March 31,2013.

As required by the provisions of the section 217 (2A) of the Companies Act, 1956, read with companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees form part of the Directors'' Report. However, as per the provisions of the Sec. 219 (1) (b) (iv) of the Companies Act, 1956, the report and accounts are being sent to all shareholders of the company excluding the aforesaid information, any shareholders interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company.

16. CONSERVATION OF ENERGY RESEARCH & DEVELOPMENT TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of 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, a statement showing particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo forming part of the Directors'' Report, is given in the enclosed annexure which forms part of this report.

17. SAFETY & ENVIRONMENT

The company continued to maintain the highest standards of safety and environment control. The company has become the first Indian life sciences company to receive the Responsible Care certification. It is applicable to all manufacturing and research sites of the company. Continuous training and awareness programs for the employees are undertaken on afrequent basis.

18. CORPORATE GOVERNANCE

A report on the Corporate Governance Code along with a certificate from the Auditors of the company regarding the compliance of the code of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under clause 149 of the Listing Agreements are annexed to this Report.

19. ACKNOWLEDGEMENTS

The Board of Directors place on record their appreciation of the contribution and sincere support extended to the company by our bankers, financial institutions and valued customers and suppliers.

The Board also places on record its appreciation for the impeccable service and generous efforts rendered by its employees at all levels, across the board towards the overall growth and success of the company.

For and on behalf of the Board of Directors

Place: Mumbai Jai Hiremath Kannan K.Unni

Date: May16,2013 Chairman & Managing Director Director


Mar 31, 2012

The Directors are pleased to present the 24th Annual Report with the Audited Accounts for the financial year ended March 31,2012.

Rs. in Millions

1.FINANCIAL RESULTS

2011-12 2010-11

Turnover 6,942 4,935

Profit before interest and depreciation and exceptional items 1,884 1,282

Interest 640 412

Profit before depreciation 1,243 870

Depreciation 424 382

Profit after depreciation before exceptional items 819 488

Exchange loss 256 127

Reversal of cash flow hedge reserve (37) (96)

Profit before taxation after exceptional items 601 457

Provision for taxation -

- Current tax 123 90

- Less MAT tax credit (123) (90)

- Deferred tax liability 60 14

Profit after tax 541 443

Reserves and surplus 4,434 4,052

Dividend on equity share 99 99

Tax on dividend 16 16

Transfer to general reserve 100 100

2011 -12 was a successful year for Hikal, with an overall sales growth of 41 %. Total revenues stood at Rs.6,942 million versus Rs.4,935 million from the year before. The company has achieved a net profit of Rs.541 million compared to Rs.443 million in the previous year, an increase of 22%. The increase in profit can be attributed to the larger sales volumes of existing products and operational efficiencies in the manufacturing plants. EBIDTA increased by 47% to Rs.1,884 million from Rs.1,282 million. The shareholders' funds of the company increased from Rs.4,217 million to Rs.4,598 million, an increase of 9%. The long-term debt has decreased by Rs.57 million despite the revaluation of our dollar denominated loans due to the depreciation of the Rupee versus the US dollar. The debt to equity ratio has improved from 0.99 to 0.92.

In 2011-12, the revenues of the Crop Protection division increased substantially by 42% to Rs.2,465 million as compared to Rs.1,734 million from the year before. The increase in sales was primarily due to the larger off take of products by our customers. Our new products which were in the R&D stage are expected to be commercialized in the next financial year leading to additional growth in the years to come.

Our Pharmaceutical division recorded its highest turnover at Rs.4,477 million as compared to Rs.3,201 million in the previous year, a growth of 40%. Much of the growth can be attributed to the increase in sales of our existing product portfolio as we captured a larger market share and added new customers.

One of our leading API products in the Pharmaceutical division experienced higher than expected volumes from existing customers as well as from newer indications that have been approved for the product. We received clearance to manufacture two contract manufacturing products which are expected to grow in volume over the next few years. This will further improve the capacity utilization at our Panoli and Jigani facilities considerably.

The contract manufacturing of these molecules will add stable revenues and margins for the division over the next few years.

The construction of our newest multipurpose API plant which is capable of manufacturing 4 APIs simultaneously is underway at our USFDA facility in Bangalore. This plant is expected to be ready in 2013 and will cater to the new products under development at Hikal R&D and contract manufacturing requirements of our existing customers.

2. EXPORTS

Exports for the year increased to Rs.5,572 million (80% of total sales) from Rs.3,463 million (70% of total sales) in the previous year; an increase of 61% versus the last fiscal year. It is due to the increase in overall revenues and the addition of customers in different geographies as compared to last year.

3. OPERATIONS

Crop Protection Division:

Our Crop Protection division revenues are primarily driven from contract manufacturing products for multinational innovator companies. The past year saw a volume increase of a fungicide produced for a major European multinational company. An intermediate for the same customer produced at our Mahad facility has grown in volume and based on future forecasts given by the customer, we expect it to grow further.

We have added two customers for commercial manufacturing which is expected to commence next year. The lab trials for these molecules have been completed. We worked on multiple late stage research projects for Japanese Crop Protection companies which are expected to fructify over the next two years. It will lead to additional revenues in the Crop Protection division. We are currently working on an intermediate to be manufactured at our Mahad facility for the Japanese market. It is a solvent for the electronic chemical market with extremely stringent quality requirements. The success of this project along with others has opened up a new market in the fast growing specialty chemicals field for the company.

We have invested incrementally in debottlenecking our plants at Taloja and Mahad to cater to the additional demand of our customers. Going forward, we are focusing on maximum capacity utilization at our manufacturing facilities which will improve our profitability. We have successfully compleied Safety, Health and Environment audits with our multinational customers who have reinforced our high standards and quality systems. It should lead to additional business in the years to come. In addition, we have invested in increasing the capacity of our R&D personnel and equipment at our Taloja plant which focuses on process improvements and new product development. The on-patent molecule that we are contract manufacturing for a European multinational innovator customer has grown substantially over last year's volume. Based on our customer's forecast, we expect that this molecule will further grow as our customer's registration gets approved in new markets for this new generation product.

Pharmaceutical Division:

One of our leading API products in the Pharmaceutical division experienced higher than expected volumes from existing customers as well as from newer indications that have been approved for the product. As one of the largest suppliers of this product in the world, our R&D has worked tirelessly to improve the process and reduce the production cost of this product in the face of increased competition and declining market prices.

We received final clearances from a European innovator multinational company to commence commercial production of multiple products at our Panoli and Jigani facilities. We had built dedicated facilities for the production of these molecules which are expected to be commercialized in the second quarter of the next financial year. These are both large volume products and are expected to grow in volume over the next few years. This will further improve the capacity utilization of both sites considerably.

Commercial quantities of an API product that we had under development has been successfully manufactured and approved by an innovator company in the US. This product will be contract manufactured at our USFDA plant in Bangalore and supplies are expected to start in the second quarter of the next financial year.

Validation trials of two new APIs under development have been completed. We expect commercial quantities to begin in the next financial year. These products are in the process of being approved by our customers as they go off patent.

Construction of our newest multipurpose API plant which is capable of manufacturing 4 APIs simultaneously is underway at our USFDA facility in Bangalore. This plant is expected to be ready in 2013 and will cater to the new products and contract manufacturing requirements of our existing customers.

On the regulatory front, we had two milestones. Our Bangalore USFDA facility passed its third audit successfully receiving zero 483s (zero regulatory deviances). It is an accomplishment for the company from a regulatory, quality, environment, and health and safety perspective. It bears testimony to the high standards that we uphold. As part of the company's initiative to become an integral component of the global supply chain, we were audited and certified by the globally recognized voluntary supply chain consortium, Rx360. We are the first Indian life sciences company to be successfully audited by this organization. A significant number of leading multinational innovator, biotech and chemical companies are members of this supply chain which is a clear differentiator to become a supplier to these companies.

Bangalore R&D

In continuation of our efforts to develop a strong pipeline, our R&D team at Bangalore concluded several new projects successfully during the year. Novel manufacturing processes were developed for 2 APIs, which were validated and the corresponding DMFs are in the process of being filed. One of these APIs is aimed at supporting World Health Organization (WHO) initiatives in treating Lymphatic Filariasis. In the area of contract manufacturing, technology transfers by our customers were successfully transferred to our production facilities and small quantities were validated. Efficient manufacturing processes were also utilized for a number of pharmaceutical advanced intermediates and transferred to the respective production units.

In order to ensure that our current manufacturing processes are environment-friendly and sustainable, consumption of organic solvents was reduced and in certain cases eliminated. Effluent streams were processed to recover valuable products that can be recycled. These initiatives have been transferred and implemented in commercial production. It is part of the company's initiative to become a sustainable business. Capacity building in the area of scale up has also been undertaken and new equipment and reactors have been added to R&D labs. These initiatives are expected to translate into new business opportunities and leads in the near future.

4. DEMERGER OF SUBSIDIARY OPERATIONS

As per the scheme of arrangement approved by the Registrar of High Court Judicature of Bombay High Court, with effect from 151 April 2012, the Research and Development activity of Acoris has been demerged with Hikal.

During the year, Acoris has further strengthened its capabilities, both in terms of manpower as well as technical capabilities. With a professional team of approximately 116 people, most of them qualified scientists, Acoris helps customers innovate during the early lifecycle of products with a comprehensive suite of offerings. Acoris provides customized services, from Route Scouting, Contract Research, Process Development, Scale up, Analytical Method Development and cGMP (kilo scale) Manufacturing under Full Time Equivalent (FTE) to Fee for Service (FfS) contracts.

Acoris registered significant growth in the year and has added a number of major multinational clients from Western Europe and Japan. Acoris has completed over fifty laboratory scale projects and five major pilot plant developments on behalf of clients during 2011 -12 and has a strong pipeline of projects for the coming year. These projects range from Phase I to Phase III in the life sciences value chain. The success of these projects depends on the regulatory approvals from the USFDA. A majority of these projects are from repeat customers which highlights the successful track record of the company.

The Japanese market has been a lead source of enquiries and projects for Acoris. We have signed contracts for process development, process intensification and scale up with several companies for new chemical entities and molecules going off patent in the next few years. Our strategy to offer a full development and scale up service to innovator companies, generic and biotech companies is leading to new possibilities for future long-term contract manufacturing opportunities for the Hikal group. These development contracts will translate into revenues in the years to come.

Acoris has received ISO certification for its Quality Management System as well as the local Drug Manufacturing License and the GMP certificate for its cGMP kilo lab for small scale manufacturing. The system has been successfully audited by clients and has already manufactured small volume of products under cGMP conditions.

The underlying concept of the value proposition to potential clients by creating a long-term relationship starting at early development at Acoris all the way through to manufacturing at Hikal has been established with several examples, where products developed at Acoris were successfully scaled up at Hikal manufacturing sites. This is a future source of revenue for the Hikal group and the demerger will only increase business opportunities.

5. DIVIDEND

The Board has recommended a final dividend of 60% (previous year interim dividend of 30% and final dividend of 60% including interim dividend).

6 AWARDS

During the year, the company received the following awards:

3rd USFDA audit was completed successfully at Bangalore 'Responsible Care' certification - First Indian Life Sciences company

Hikal is the first Indian company to receive the Rx-360 certification, a global supply chain consortium Hikal Acoris has won the 2011 Bloomberg UTV CXO award for implementation of Green IT

7 SUBSIDIARY ACCOUNTS

In terms of the approval granted by the Government of India, Ministry of Company Affairs under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Directors' Report and the Report of the Auditors of the subsidiary companies viz., Hikal International B.V. and Acoris Research Limited have not been attached with the Balance Sheet of the company. The company will make available these documents / details upon request made by any shareholder of the company interested in obtaining the same and the same can also be inspected at the Registered Office of the company as well as of the subsidiaries. Pursuant to the approval, a statement of the summarized financials of all the subsidiaries is attached along with the Consolidated Financial Statements. Pursuant to Accounting Standard (AS) -21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the company includes the financial information of its subsidiaries.

8. DIRECTORS

Mr. B.N.Kalyani, Chairman of Hikal since 1992, has expressed his desire to step down as Chairman of the Board. He will continue as a Board Member. The Board of Directors places on record the valuable guidance and remarkable progress made by company under his leadership. The Board of Directors appointed Mr. Jai Hiremath as Chairman and Managing Director.

Mr. Sameer Hiremath was designated as President and Joint Managing Director w.e.f. 10th November 2011

Mr. Amit B. Kalyani, who is alternate director to Dr. Peter Poliak, was appointed as additional Director w.e.f. 9th February 2012. The shareholder's approval will be sought in the forthcoming Annual General Meeting.

Mr. Prakash Mehta. Mr. K.K.Unni and Mrs. Sugandha Hiremath, Directors on Board retire by rotation and being eligible, offer themselves for re-appointment.

9. DIRECTOR'S RESPONSIBILITY STATEMENT

In accordance with Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:

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

ii) 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 at the end of the financial year ended March 31,2012 and of the profit of the company for that year.

iii) Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities, iv) The annual accounts have been prepared on a going concern basis.

10. AUDITOR'S REPORT

With regard to the emphasis of matters and qualification contained in the Auditors' Report, explanations are given below:

i) Note no 4 of the Auditor's Report - Refer Note no. b to Note 27

The company has entered into certain forward / option contracts with the banks to hedge its exposure against fluctuations in foreign exchange. 80% of the company's revenues are exports realized in foreign currencies. Majority of these exports are in US dollars. These contracts account for approximately 20% of its total exports.

The forward covers have been spread over the next one year. These covers were taken to ease the effects of volatile movements in foreign currency, as a major percentage of the company's turnover is realized from exports in foreign currencies.

The company has MTM losses of Rs.453 Million as on March 31, 2012 and for the future years which have not been provided for in the books. The company is of the opinion that the unrealized losses as a result of these transactions are notional in nature and will not affect the ongoing business or operations of the company. The company has adequate long-term export contracts to cover the entire value of the forward covers. The losses on these contracts are being accounted for as and when they fall due.

The company is also of the opinion that these losses are not actual losses as the US dollar is highly volatile and unpredictable versus the Indian Rupee. For the FY 2012, the US dollar has appreciated by 15% versus the Indian Rupee.

11. AUDITOR

The members have appointed M/s B S R & Company Chartered Accountants as the auditor of the company in the last Annual General Meeting of the company.

M/s B S R & Company Chartered Accountants is the retiring auditor, offer themselves for re-appointment

12. COST AUDIT

The company has re-appointed Prof. V. J. Talati of V.J. Talati & Co., as the Cost Auditor.

13. PUBLIC DEPOSITS

The company has not accepted any deposits and as such there are no overdue deposits outstanding as on March 31,2012.

14. LISTING FEES

The company has paid requisite annual listing fees to Bombay Stock Exchange and National Stock Exchange where its securities are listed.

15. EMPLOYEES

The company considers its human capital as an invaluable asset. The company continued to have cordial relationships with all its employees. Management and employee development programs and exercises were conducted at all sites. Employees had various team building exercises and were sponsored for various external seminars and other developmental programs to enhance their skill sets. The total workforce of the company stood at 1,015 as on March 31,2012.

As required by the provisions of the section 217 (2A) of the Companies Act, 1956, read with companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees form part of the Directors' Report. However, as per the provisions of the Sec. 219 (1) (b) (iv) of the Companies Act, 1956, the report and accounts are being sent to all shareholders of the company excluding the aforesaid information, any shareholders interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company

16. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of 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, a statement showing particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo forming part of the Directors' Report, is given in the enclosed annexure which forms part of this report.

17. SAFETY & ENVIRONMENT

The company continued to maintain the highest standards of safety and environment control. The company has become the first Indian life sciences company to receive the 'Responsible Care' certification. It is applicable to all manufacturing and research sites of the company. Continuous training and awareness programs for the employees are undertaken on a frequent basis.

18. CORPORATE GOVERNANCE

A report on the Corporate Governance Code along with a certificate from the Auditor of the company regarding the compliance of the code of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under clause 149 of the Listing Agreements are annexed to this Report.

19.. ACKNOWLEDGEMENTS

The Board of Directors place on record their appreciation of the active involvement and sincere support extended to the company by our bankers, financial institutions and esteemed customers and suppliers.

The Board also places on record its appreciation for the impeccable service and generous efforts rendered by its employees at all levels, across the board towards the overall growth and success of the company.

For and on behalf of the Board of Directors

Place: Mumbai Jai Hiremath Kannan Unni

Date: May 14,2012 Chairman & Managing Director Director


Mar 31, 2011

The Members,

The Directors are pleased to present the 23rd Annual Report with the Audited Accounts for the financial year ended March 31,2011.

1. FINANCIAL RESULTS

Rs.in Millions

2010-11 2009-10

Turnover 4,935 5,360

Profit before interest, depreciation and exceptional items 1,282 1,790

Interest 412 348

Profit before depreciation 870 1,442

Depreciation 382 330

Profit after depreciation, before exceptional items 488 1112

Exchange loss 128 264

Reversal of cash flow hedge reserve (96) 283

Profit before taxation after exceptional items 457 565

Provision for taxation

-Current tax 90 102

- Less: MAT tax credit (90) (102)

- Deferred tax liability/(assets) 14 (37)

Profit after tax 443 602

Reserves and surplus 4,052 3,826

Dividend on equity share 99 132

Tax on dividend 16 22

Transfer to general reserve 100 125

2010-11 was a challenging year for Hikal as we were affected by continued de-stocking of inventory by our customers. The turnover of the company has decreased to Rs. 4,935 million from Rs. 5,360 million in the previous year; resulting in a decrease of 8%. It is mainly due to reduced off take of our products by customers who were trying to cope with the economic slowdown in Europe and USA. Despite a challenging business environment, the company has achieved a net profit of Rs. 443 million compared to Rs. 602 million in the previous year, a decrease of 26%. Our fourth quarter financial results have signaled a recovery with a strong order book indicating increased business both in pharmaceuticals and crop protection for existing and new products.

Our pharmaceuticals business was affected by the withdrawal from the market of a major customer who faced internal regulatory issues. As a division, our sales were down 10.4% to Rs. 3,201 million from Rs. 3,574 million a year ago. We expect our pharmaceuticals business which also suffered a setback due to de-stocking of inventory to register robust growth this year backed by positive indications of orders from our existing customers. This year, we are building capacity in our pharmaceuticals division at the intermediate and active pharmaceutical manufacturing sites to cater to the additional demand of our customers. Our agrochemical sales were down 3% to Rs. 1,734 million compared to Rs. 1,791 million from the year before. The decrease in sales was primarily due to the inventory correction of major multinational crop protection companies. We expect FY 2011-12 to yield better prospects from the agrochemical division once the inventory de-stocking cycle comes to an end. We expect to sell additional quantities of our existing products to our customers in the next financial year.

Hikal has the vision and ability to be an end-to-end solutions provider for the CRAMS industry. We have successfully become a leading global supplier for API products in developed markets such as Europe and USA. The company believes that it has the ability to continuously deliver value and sustain long-term growth. We expect the pharmaceuticals division backed by our increasing R&D strength and capabilities to lead the growth of the company in the coming years.

2. EXPORTS

Exports for the year decreased to Rs. 3,463 million (70% of total sales), compared to the previous year of Rs. 4,700 million (88% of total sales); a decrease of 26% versus last fiscal year. We have increased our geographical distribution of products and have increased sales to the fast growing companies in the local market. This is in line with our strategy to diversify our customer base and broaden the supplies to domestic companies who have a growing market share in varied geographies including developed markets.

3. OPERATIONS Taloja Site:

In our last annual report, we discussed the construction of a new multi-purpose plant. The plant construction and validation was completed in this financial year and the second production campaign of an 'on patent active ingredient1 was successfully commercialized. Our pilot plant successfully completed small quantity manufacturing of six molecules intended for commercial production at different Hikal sites. Of these molecules, one was a pharma intermediate and the remaining five were for the crop protection industry.

Mahad Site:

Our Mahad site is currently manufacturing intermediates and herbicides for the crop protection industry. We have upgraded one of our manufacturing plants which will be used to manufacture pharma intermediates for the domestic market. We also have plans to utilize this plant for captive consumption for some of our active pharmaceutical ingredients.

We have upgraded our effluent treatment system on site and would be recycling a large part of effluent waste is line with our environmental, health and safety policy.

Panoli Site:

We have introduced two new pharma intermediate products at our Panoli site. These have been validated at the plant scale and successfully passed the customer audits. We expect to start commercialization of these products towards the end of this fiscal year. Commercial trials of a new product from R&D were successfully initialized at the plant level. To meet GMP requirements, the existing manufacturing block and warehouse were refurbished. We have also submitted an application to get approval from the Japanese regulatory authority (PMDA) for this site. At our new multipurpose plant, several measures have been taken to reduce the carbon footprint at the site in lieu of the increased production at the site.

Under the internal Project Upgradation on Safety Health and environment (PUSHe) program, we have undertaken measures to strengthen safety awareness and social responsibility at each site.

Bangalore USFDA Site:

Our Bangalore site manufactures Active Pharmaceutical Ingredients for regulated markets. We have completed construction and commissioning of a new multi product manufacturing block this year. We expect to start contract manufacturing of a product for a leading innovator company by the end of this fiscal year. We are in the process of upgrading some of our API plants in Bangalore to increase production. We have refurbished an existing API block to run to parallel streams of APIs simultaneously which will increase our overall output for different products and give us flexibility in the way we operate. We are in the process of increasing the production capacity of our key products as per the indications received from our customers for this fiscal year. Civil work on yet another multi product manufacturing block is under progress and when completed, we will have multiple product streams to cater to new products that are underdevelopment.

Our Bangalore site hascommitted to adopt the 'Responsible Care' logo under PUSHe activities. The site is a 'zero discharge facility', complying with environmental norms.

Hikal has initiated a 'Total Quality Management' (TQM) program with the goal of improving awareness and productivity across various departments at all sites. Hikal has engaged external consultants to organize several training programs for its employees.

As part of the Corporate Social Responsibility program at Hikal, employees from our Bangalore site have voluntarily participated in several community programs in and the around the Jigani site.

Bangalore R&D:

As part of our strategy to increase our product portfolio and streamline the development process, we have hired new scientists for our R&D center. This year, we have also added a new synthetic lab and refurbished a kilo lab on site.

Our existing R&D center in Bangalore is fully utilized and is focusing on improving processes of existing products as well as developing new DMFs and processes for new products in our portfolio. Validation of processes for three new products has been done in the kilo lab which is ready for validation in our commercial plants.

During 2010-2011, one process patent of a new API was filed and one Canadian patent on our existing API has been granted. We have drafted three process patents for our products and will be filed during 2011-12 continuing our drive for creating Intellectual Property.

We have filed one new US DMF and received approvals for two existing products from the European regulatory authorities (EDQM).

4. SUBSIDIARY OPERATIONS

Acoris Research Limited, our 100% subsidiary, has continued its efforts to establish itself as a reputed contract research service provider targeting early stage research of innovator and mid size pharmaceutical companies. Acoris helps customers innovate during the early lifecycle of products with a comprehensive suite of offerings. Acoris provides customized services, from Full Time Equivalent (FTE) to Fee for Service (FfS) contracts, Route Scouting, Contract Research, Process Development, Scale up, Analytical Method Development and cGMP(kilo) Manufacturing, among other services.

Acoris has registered a considerable increase in its turnover for 2010-11 as compared to the last fiscal year. The strategy of targeting large innovators and small to medium size companies in the early lifecycle of their pharmaceutical product development has been successful. The ongoing marketing efforts of Acoris have started to yield results. Acoris has successfully delivered a few test projects which have resulted in inquiries from existing clients.

The easing of the credit situation which many pharmaceutical companies depend on to fund new projects in research and development has resulted in Acoris winning some projects from new customers. Acoris has successfully penetrated the Japanese market to provide cost-effective solutions for Japanese pharmaceutical companies. Successful scale up of Acoris-developed processes on a few projects from gram scale to a few hundred kilograms has resulted in repeat orders for Hikal.

The strategy of Acoris targeting the early stage development pipeline of the innovator pharmaceutical and biotech companies to ultimately secure part of the contract manufacturing opportunity for Hikal's manufacturing plants is proving to be successful, albeit slowly. Ultimately, there are many regulatory hurdles which pharmaceutical companies must go through before the candidate drug gains approval. In the event of the molecule which Acoris has worked on succeeds, there is a very good chance that Hikal will manufacture the product in one of its state-of-the-art US FDA plants. To realize a higher strike ratio, Acoris has been expanding and continues to expand its technology toolbox, offerings and customer base.

Acoris has advanced facilities including a cGMP kilolab to meet the specific requirements for process and product development of customers. Its modern infrastructure is managed by a professional team of seasoned executives, chemical engineers and internationally trained scientists.

The addition of Acoris has increased Hikal's visibility by offering services to potential customers early in the product development phase all the way up to commercial manufacturing of the molecule. It enhances the value proposition to potential clients by creating a long-term relationship with clients starting at early development all the way through to manufacturing.

Acoris has been successful in penetrating the Japanese market as well the European and US markets.

We expect Acoris to increase its revenue substantially for FY 2011 and eventually create additional business opportunities for Hikal on the manufacturing side.

5. DIVIDEND

The Board has recommended an interim dividend of 30% (previous year, 40%) and final dividend of 60% (previous year, 80%) including interim dividend. The company is positive about the business environment going forward.

6. FCCB REPAYMENT

During the year, the company redeemed US$ 12 million FCCB issued in 2005 on the due date in October 2010 along with redemption premium as per agreed terms.

7. AWARDS

During the year, the company received the following awards:

- Deputy Managing Director, Mr. Sameer Hiremath was honored with a distinguished Alumni award 'Jewel of MIT (Maharashtra Institute of Technology), Pune in the Business category.

- Hikal Panoli received an award from Gujarat Gas for the best safety standards and practices adopted at the site.

- The Bangalore site was awarded a prize in the state-level Safety competition for the year 2011 under the Midsize Industry category.

- Hikal won prestigious IT awards for Customer Excellence from Red Hat, Linux and CIO100 award in Information Technology from IDG India.

- Hikal was nominated as a finalist in the 'Best Supplier' and 'Best Company' in the Emerging Market Region category at the AGROW Awards 2010.

- Hikal received the 50lhABCI award for our 2009 Annual Report for the fourth consecutive year.

8. SUBSIDIARY ACCOUNTS

In view of the general approval granted by the Government of India, Ministry of Company Affairs under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Directors' Report and the Report of the Auditors of the subsidiary companies viz.,Hikal International B.V. and Acoris Research Limited have not been attached with the Balance Sheet of the company. The company will make available these documents / details upon request made by any shareholder of the company interested in obtaining the same and the same can also be inspected at the Registered Office of the company as well as of the subsidiaries. Pursuant to the condition of general approval, a statement of the summarized financials of all the subsidiaries is attached along with the Consolidated Financial Statements. Pursuant to Accounting Standard (AS) 21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the company includes the financial information of its subsidiaries.

9. DIRECTORS

Mr. B.N. Kalyani and Dr. Peter Pollak, Directors on the Board retire by rotation and being eligible, offer themselves for re-appointment. Dr. Wolfgang Welter, former Head of Industrial operations at Bayer Cropscience AG., has been appointed to the Board as an additional director.

10. DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed.

(ii) 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 at the end of the financial year ended March 31,2011 and of the profit of the company for that year.

(iii) Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

11. AUDITORS REPORT

With regard to the emphasis of matters and qualification contained in the Auditors' Report, explanations are given below:

i) Note no 4 of the Auditors Report - Refer Note no. iii (b) to Schedule No 21

The company has entered into certain forward / option contracts with the banks to hedge its exposure against fluctuations in foreign exchange. 70% of the company's revenues consist of exports. Majority of these exports are in US dollars. These contracts account for approximately 20% of its total exports. The forward covers have been spread over the next two years and are decreasing over a period of time. These covers were taken to ease the effects of foreign currency fluctuations, as a major percentage of the company's turnover is realized from exports in foreign currency, primarily the US dollar.

The company has MTM losses of Rs. 295 million on March 31, 2011 as compared to 459 million as of the previous year. This amount has not been provided for in the books. The company is of the opinion that the unrealized losses as a result of these transactions are notional in nature and will not affect the ongoing business or operations of the company. The company has adequate long-term export contracts to cover the entire value of the forward covers.

The losses on these contracts are being accounted for as and when they fall due.

The company is also of the opinion that these losses are not actual losses as the US dollar is highly volatile and its movements are unpredictable.

12. AUDITORS

M/s B S R & Company Chartered Accountants are retiring auditors, being eligible, offer themselves for re-appointment.

13. COST AUDIT

The company has re-appointed Prof. V.J. Talati of V.J. Talati & Co., as the Cost Auditor.

14. PUBLIC DEPOSITS

The company has not accepted any deposits and as such there are no overdue deposits outstanding as on March 31,2011.

15. LISTING FEES

The company has paid requisite annual listing fees to Bombay Stock Exchange and National Stock Exchange where its securities are listed.

16. EMPLOYEES

The company considers its human capital as a valuable asset. The company has a harmonious relationship with employees. Management and employee development programs and exercises were conducted across all sites. Employees were sponsored for various external seminars and other developmental programs to enhance their skill sets. The total workforce of the company stood at 1023 as on March 31,2011.

As required by the provisions of the section 217 (2A) of the Companies Act, 1956, read with companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees form part of the Directors' Report. However, as per the provisions of the Sec. 219(1) (b) (iv) of the Companies Act, 1956, the report and accounts are being sent to all shareholders of the company excluding the aforesaid information, any shareholders interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company.

17. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of 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, a statement showing particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo forming part of the Directors' Report, is given in the enclosed annexure which forms part of this report.

18. SAFETY& ENVIRONMENT

The company continued to maintain the highest standards of safety and environment control. The company's commitment to 'Responsible Care' is ongoing at each site. Mandatory training and awareness programs for the employees are given on a consistent basis.

19. CORPORATE GOVERNANCE

A report on the Corporate Governance Code along with a certificate from the Auditors of the company regarding the compliance of the code of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under clause 149 of the Listing Agreements are annexed to this Report.

20. ACKNOWLEDGMENTS

The Board of Directors place on record their appreciation of the active involvement and sincere support extended to the company by our bankers, financial institutions and other esteemed customers and suppliers. The Board also places on record its appreciation for the impeccable service and unstinting efforts rendered by its employees at all levels, across the board towards its overall growth and success.

For and on behalf of the Board of Directors

Jai Hiremath Kannan Unni

Vice Chairman & Managing Director Director

Place: Mumbai

Date: May 12,2011


Mar 31, 2010

The Directors are pleased to present the 22nd Annual Report with the Audited Accounts for the financial year ended March 31,2010.

1. FINANCIAL RESULTS Rs.in Million

2009-10 2008-09

Turnover 5,429 4,828

Profit before interest and depreciation and exceptional items 1,790 1,326

Interest 348 248

Profit before depreciation 1,442 1,078

Depreciation 330 210

Profit after depreciation before exceptional items 1112 868

Exchange loss 264 244

Reversal of cashflow hedge reserve 283 --

Profit before taxation after exceptional items 565 624 Provision for taxation

-Current tax 102 --

- Less MAT tax credit (102) --

- Deferred tax liabi!ity/(assets) (37) 29

- Fringe benefit tax - 6 profit after tax 602 589

Reserves and surplus 3,826 3,138 Dividend on equity share 132 --

Tax on dividend 22 --

Transfer to general reserve 125 --

The turnover of the company has increased to Rs. 5,429 million from Rs. 4,828 million in the previous year; an increase of 12%. Our Pharmaceutical division has been the major driver of our growth registering an increase of 29% to Rs.3,570 million. We expect the pharmaceutical division to lead the growth of the company in the coming years.

In spite of the global recession which resulted in weak demand for pharmaceutical and agrochemcial products worldwide, the company has achieved a net profit of Rs. 602 million compared to Rs. 589 million in the previous year, an increase of 2%.

Our Agrochemical sales were down 11% to Rs.1,791 miliion compared to Rs.2,021 million from the year before.

The decrease in sales was primarily due to the inventory correction of the major multinational crop protection companies that continued into the last quarter of FY 2009. We expect FY 2010 to yield better prospects from the agrochemical division once the inventory destocking cycle comes to an end. We expect to sell additional quantities of our existing products to our customers in the next financial year.

2. EXPORTS

Exports for the year increased to Rs. 4,700 million, (88 % of total sales), previous year Rs. 4,393 million (92% of total sales); an increase of 7% versus last fiscal year. We have increased our geographic distribution of products and are selling more in the domestic market as part of our diversification strategy.

3. OPERATIONS

Taloja Site:

Our recently constructed new multipurpose plant at Taloja has been commissioned and production of an on patent active ingredient is underway. Our Taloja site is aiso being used a manufacturing facility for some small scale high value products where the research and development is done at Acoris, our 100% dedicated contract research center. This year we undertook four such scale up projects where the high value product was manufactured at the pilot plant in Taloja successfully. Mahad Site:

Our Mahad site is being used for captive consumption for the manufacture of intermediates for Taloja. We are in the process of upgrading one of our plants at the Mahad site which would be able to manufacture additional intermediates for sale in the domestic market and other markets.

Panoli Site :

Our Panoli site has been primarily utilized for captive consumption this year due to the increased demand of existing APIs. We have installed a multiple effect evaporator which recycles key materials in the manufacture of one of our best selling products. This has increased the gross margin of the product and has also considerably reduced the effluents which could potentially harm the environment.

We have introduced a new small volume high value product for a Japanese company in Panoli where the initial process development was done at Acoris. We expect the volumes of this product to eventually increase resulting in potential commercial manufacture.

Bangalore USFDA Site:

We are in the process of upgrading some of our API plants in Bangalore to increase production. We have refurbished an existing API block to run to parallel streams of APIs simultaneously. We are constructing an additional API block for multiproduct manufacture.

The company has completed and commercialized a state-of-the-art Solvent Recovery Unit (SRU). From April of this financial year, the SRU has been brought on stream and is being fully utilized to recover valuable solvents and contributing to a greener environment.

The production of a veterinary drug from this site has been successfully commercialised, we expect higher sales for this product in the coming years.

As a signatory to the "Responsible Care" initiative, our Bangalore site is a "zero discharge facility". We are focused on reducing our impact on the environment.

As a part of our future growth strategy, we have acquired additional land adjoining our USFDA facility which will facilitate future expansion for manufacture of active ingredients.

Bangalore R&D

Our existing R&D centre at Bangalore is fully utilized and is focusing on improving processes of existing products as well developing processes for new products in our portfolio. In line with the companys plan, we have filed 2

DMFs in the US and 1 COS in Europe.

During the year 2009-10, we have been granted 5 patents which were applied for in the previous years. We have also applied for 4 additional patents in the US & Europe.

We have received 3 patents from the US and European authorities for three of our key products. We also received a COS (Certificate of Suitability: marketing authorization by the European Regulatory Authorities) to sell one of our key APIs in Europe

During the year, the company also filed 1 process patent with the regulatory authorities, continuing its drive of creating intellectual property.

4. SUBSIDIARY OPERATIONS

Our R&D center, M/s Acoris Research Limited, Pune (100% subsidiary) is fully operational. Acoris has initiated staited establishing itself as a service provider of contract research services targeting small biotech to multinational pharmaceutical and agrochemical companies.

Acoris helps customers innovate during the early lifecycle of products with a comprehensive suite of offerings. Acoris provides customized services, from Full Time Equivalent (FTE) to Fee for Service (FfS) contracts, Route Scouting, Contract Research, Process Development, Scale up, Analytical Method Development and cGMP (kilo) Manufacturing among other things.

Acoris has advanced facilities including a cGMP kilolab to meet the specific requirements for process and product development of customers. Its modern infrastructure is managed by a professional team of seasoned executives, chemical engineers and internationally trained scientists.

The addition of Acoris has increased the Hikal groups visibility by offering services to potential customers early on in the product development phase all way up to commercial manufacturing of the molecule. This enhances the value proposition to the potential client by creating a long term relationship with the client starting at early development all the way through to manufacturing.

Acoris has been successful at penetrating the Japanese market as well the European and US markets. We expect Acoris to increase revenue substantially for FY 2010 and eventually create additional business opportunities for Hikal on the manufacturing side.

5. DIVIDEND

The Board has recommended an interim dividend of 40 % and final dividend of 80 % including interim dividend for the year. (Previous year Nil)

6. AWARDS

During the year, the company received the following awards:

An award for the Best Supplier at the prestigious AGROW Awards 2009 held in London

Top three finalists at the Information Technology CNBC TV 18 Awards for the IT setup at Acoris Research Ltd.

Our Mahad site received the National Safety Council award for Safety.

The company also received a Silver Medal for the Best Annual Report from the Association of Business Communicators of India.

7. SUBSIDIARY ACCOUNTS

In terms of the approval granted by the Government of India, Ministry of Corporate Affairs under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account, Directors1 Report and the Report of the Auditors of the subsidiary companies viz., Hikal International B.V. and Acoris Research Limited have not been attached with the Balance Sheet of the company. The company will make available these documents / details upon request made by any members of the company interested in obtaining the same and the same can also be inspected at the Registered Office of the company as well as of the subsidiaries. Pursuant to the approval, a statement of the summarized financials of all the subsidiaries is attached along with the Consolidated Financial Statements. Pursuant to Accounting Standard (AS) - 21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the company includes the financial information of its subsidiaries. 8 DIRECTORS

Mr. Shiv Kumar Kheny and Ms.Sugandha Hiremath Directors on the Board, retire by rotation and being eligible, offer themselves for re-appointment.

9. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that: (i) In the preparation of the annual accounts, the applicable accounting standards have been followed. (ii) 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 at the end of the financial year ended March 31,2010 and of the profit of the company for that year.

(iii) Proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

(iv) The annual accounts have been prepared on a going concern basis.

10. AUDITORS REPORT

With regard to the emphasis of matters and qualification contained in the Auditors Report, explanations are given below:

i) Note no 4 of the Auditors Report - Refer Note no. iii (b) to Schedule No 21

The company has entered into certain forward / option contracts with the banks to hedge its exposure against fluctuations in foreign exchange. 90% of the companys revenues consist of exports. Majority of these exports are in US dollars. These contracts account for approximately 30% of its total exports.

The forward covers have been spread over the next two years. These covers were taken to ease the effects of the foreign currency fluctuations, as a major percentage of the companys turnover is realized from exports in foreign currencies.

The company has MTM losses of Rs.459 Million as on March 31, 2010 for the future years which have not been provided for in the books. The company is of the opinion that the unrealized losses as a result of these transactions are notional in nature and will not affect the ongoing business or operations of the company. The company has adequate long-term export contracts to cover the entire value of the forward covers. The losses on these contracts are being accounted for as and when they fall due.

The company is also of the opinion that these losses are not actual losses as the US dollar is highly volatile and unpredictable. For the FY 2009, the US Dollar has appreciated by 11 % versus the Indian Rupee.

11. AUDITORS

The member have appointed M/s B S R & Company Chartered Accountants as the Auditors of the company in the last Annual General Meeting of the company.

M/s B S R & Company Chartered Accountants is retiring auditors, being eligible offer themselves for reappointment.

12. COST AUDIT

The company has re-appointed Prof. V.J. Talati of V.J. Talati & Co., as the Cost Auditor.

13. PUBLIC DEPOSITS

The company has no overdue deposits outstanding other than those unclaimed as on March 31,2010.

14. LISTING FEES

The company has paid requisite annual listing fees to Bombay Stock Exchange and National Stock Exchange where its securities are listed.

15. EMPLOYEES

The company considers its human capital as a valuable asset. The company continued to have cordial relationships with ail its employees. Management and employee development programs and exercises were conducted across all its sites. Employees were sponsored for various external seminars and other developmental programs which enhance their skill sets. The total workforce of the company stood at 848 as on March 31,2010.

As required by the provisions of the section 217 (2A) of the Companies Act, 1956, read with companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees form part of the Directors Report. However, as per the provisions of the Sec. 219 (1) (b) (iv) of the Companies Act, 1956, the report and accounts are being sent to all shareholders of the company excluding the aforesaid information, any shareholders interested in obtaining such particulars may write to the Company Secretary at the corporate office of the company

16. CONSERVATION OF ENERGY, RESEARCH & DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In accordance with the requirements of 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, a statement showing particulars with respect to conservation of energy, technology absorption and foreign earnings and outgo forming part of the Directors Report, is given in the enclosed annexure which forms part of this report.

17. SAFETY & ENVIRONMENT

The company continued to maintain the highest standards of safety and environment control. The companys commitment to responsible care is ongoing at each site. Mandatory training and awareness programs for the employees are given on consistent basis.

18. CORPORATE GOVERNANCE

A report on the Corporate Governance Code along with a certificate from the Auditors of the company regarding the compliance of the code of Corporate Governance as also the Management Discussion and Analysis Report as stipulated under clause 49 of the Listing Agreements are annexed to this Report.

19. ACKNOWLEDGMENTS

The Board of Directors place on record their appreciation of the active involvement and sincere support extended to the company by our Bankers, Financial Institutions and other esteemed customers and suppliers. The Board also places on record its appreciation for the impeccable service and unstinting efforts rendered by its employees at all levels, across the board towards its overall success.

For and on behalf of the Board of Directors

Place: Mumbai Jai Hiremath Kannan Unni

Date: April 30,2010 Vice Chairman & Managing Director Director

 
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