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Directors Report of Panacea Biotec Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present the 31st Annual Report on the business and operations together with the Company's audited financial statements and the auditors' report thereon for the financial year ended March 31, 2015. The financial highlights for the year under review are given below:

Financial Results

(Rs. in million)

Particulars March 31, March 31, 2015 2014#

Revenue from operations 6,792.0 4,975.7

Other Income 280.5 171.0

Total Income 7,072.5 5,146.7

Earning Before Interest, Depreciation & Tax (EBITDA) 943.6 (922.3)

Profit/ (Loss) before tax and exceptional items (633.4) (2,974.4)

Exceptional items - 2,970.2

Profit/(Loss) before Tax (PBT) (633.4) (4.2)

Provision for Taxation 18.9 -

Profit/(Loss) after Tax (PAT) 652.3) (4.2)

Basic EPS (Rs.)* (10.7) (0.1)

Cash EPS (Rs)* 0.1 11.2

* Face value Re.1 per share

# Previous year's figures have been re-grouped/re-classified wherever necessary

Business Performance

During the year, your Company registered a growth of 36.5% with turnover of Rs.6,792.0 million as against Rs.4,975.7 million during the corresponding financial year. The vaccines segment registered a growth of more than 115.9% with turnover of Rs.2,763.0 million as against Rs.1,279.5 million during the previous financial year. The formulations segment registered a growth of 7.6% with turnover of Rs.3,790.7 million as against Rs.3,523.2 million during the previous financial year. The Research & Development segment registered a growth of 37.7% with turnover of Rs.238.3 million as against Rs.173.0 million during the previous year. During the year, your Company registered positive EBITDA of Rs.943.6 million as against the negative EBITDA of Rs.922.3 million in the previous financial year, with overall losses before tax & exceptional items reduced significantly from Rs.2,974.4 million to Rs.633.4 million.

During the year under review, your Company has continued to supply Easyfive-TT Vaccines against long-term supply order received from UNICEF during previous financial year, for supply of vaccines for the calendar years 2014 to 2016. The Company has also won a national tender in Philippines for supply of Easyfive-TT vaccine and an order from Government of India for supply of Oral Polio Vaccines which have been the leading key drivers in the improved performance of the Company during the year under review. During the year, your Company has entered into a strategic alliance with Canada's largest pharma company, Apotex Inc., for research, development, license and supply of two drug delivery-based generic products in the US, Canada, Australia and New Zealand markets and also entered into similar deal with US-based Rising Pharmaceuticals Inc. for an oral controlled release product in the CNS space. Similar collaboration has also been entered into with a leading Indian pharma company with extensive global operations, for the development and supply of a modified release immuno- suppressant generic product for the US market. A detailed discussion on operations for the year ended March 31, 2015 is given in the Management Discussion and Analysis section forming part of the Annual Report.

Corporate Debt Restructuring Scheme (CDR Scheme)

As the members are aware, during previous financial year, the Company had made a reference to the Corporate Debt Restructuring (CDR) Cell for comprehensive restructuring of Company's debts from consortium banks in view of difficult financial situation mainly due to the delisting of company's vaccine from WHO's list of pre-qualified vaccines in the financial year 2011-12. The CDR Empowered Group ("CDR EG") in its meeting held on September 9, 2014 has approved the CDR proposal and issued provisional Letter of Approval (LOA) dated September 24, 2014 which was later on confirmed vide letter dated October 11, 2014.

Pursuant to the said LOA, the Company had executed a Master Restructuring Agreement (MRA) with all the consortium banks (except State Bank of Travancore ("SBT") which has given a negative mandate) on December 27, 2014, with cut- of date of October 1, 2013. The MRA, inter-alia, provides for waiver of certain existing obligations of the Company, restructuring of repayment terms for principal and interest, reduction in interest rates, conversion of outstanding interest amounts to Working Capital/ Funded Interest Term Loans, pledge of promoters' shareholding as additional security to lenders, promoters' undertaking to bring additional funds as promoters' contribution, monitoring oversight and certain restrictive covenants. The debt obligations, including interest thereon, have been measured, classified and disclosed in these financial statements in accordance with the MRA, as agreed by seven out of nine lender banks. As on March 31, 2015, some of the terms of CDR package were implemented and creation of security has been completed partly and the balance was in process. The Company had approached the banks for extension of time for implementation of few conditions which was considered by the banks. The banks and CDR EG had accepted few requests for modifications/ waivers and with the acceptance of such modifications/ waivers, the CDR Scheme shall stand implemented by all the banks accept S BT.

The SBT, which had given a negative mandate in the CDR scheme had sent legal notices for recovery of its debts & winding up of the Company, which have suitably been replied. Simultaneously, they have been requested for reconsidering their decision. The CDR mechanism operates on the principles of super majority of 75% of the creditors by value and 60% of the creditors in number. The CDR Scheme has been approved with the consent of all the banks except one forming such super majority.

The implementation of CDR scheme gives your Company critical support to tide over the present difficult financial situation and business environment. The decision of the banks to consider and approve CDR Scheme also reflects the faith these institutions have in the long term business model of the Company.

Dividend

In view of the losses during the year, the Board of Directors did not recommend any dividend on the Equity Shares of the Company.

Transfer of Amounts to Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the dividend for the year 2006-07, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.2 million has been transferred by the Company to the Central Government's Investors Education and Protection Fund on November 26, 2014. Similarly, the dividend for the year 2007-08, which shall remain unpaid or unclaimed for a period of 7 years, shall be transferred by the Company to the Central Government's Investors Education and Protection Fund by the due date, i.e. November 25, 2015.

Details of significant and material orders impacting the going concern status and company's operations in future

During the year under review, no significant and material orders were passed by any regulator or court or tribunal which may impact the going concern status and your Company's operations in future.

A search operation was conducted by Income Tax department in the premises of the Company in January, 2012 and hence Company has fled the income tax returns for the Assessment Year 2006-2007 to Assessment year 2012-2013. The Income Tax department has competed the Income Tax assessment of said years and income tax demand of Rs.3,294.9 million (including interest) has been raised on various grounds. The Company has preferred appeals before the CIT (Appeals) against the Orders of Income Tax department. Your directors are pleased to inform that after several hearings in the matter and on the basis of facts of the matter, the CIT (Appeals) has granted the relief to the Company from such demand and the entire income tax demand of Rs.3,294.9 million stands dismissed except certain disallowances made in Assessment year 2010- 11 and Assessment year 2011-12 pursuant to the Orders issued by CIT (Appeals).

Share Capital and Net Worth

The issued, subscribed and paid up Share Capital of the Company as on March 31, 2015, was Rs.224.3 million comprising of Rs.61.3 million equity share capital divided into 61,250,746 Equity Shares of Re.1 each and Rs.163.0 million preference share capital divided into 1,63,00,000, 0.5% Non- Convertible Cumulative Redeemable Preference Shares of Rs.10 each. During the year, the Company had issued and allotted 1,63,00,000 (One Crore Sixty Three Lac Only) 0.5% Non-Convertible Cumulative Redeemable Preference Shares ("NCCRPS") of Rs.10 each at par by converting the existing unsecured loan and/or fixed deposits (including outstanding interest thereon) aggregating to Rs.163.0 million to some of the promoters of the Company to meet the requirements of the promoters' contribution pursuant to the CDR Scheme approved by CDR EG. During the year under review, the Company had not issued any equity shares with differential rights/sweat equity shares under Rule 4 & Rule 8 of Companies (Share Capital and Debentures) Rules, 2014.

As the members are aware, in view of the fact that the Company's accumulated losses as at March 31, 2013 had resulted into erosion of more than 50% of its peak net worth during the immediately preceding four financial years (as computed as per the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA")), the Company had made necessary reference on November 22, 2013 to the Board for Industrial and Financial Reconstruction (BIFR) pursuant to the provisions of SICA. The Company's accumulated losses as at March 31, 2015 continue to remain more than 50% of its peak net worth during the immediately preceding four financial years, as computed as per the provisions of SICA. As at the end of year under review, the net worth of the Company calculated as per section 2(57) of the Companies Act, 2013 ("the Act") stood at Rs.1,296.2 million as compared to Rs.1,790.9 as at the end of the previous financial year.

Report on Corporate Governance

Your company has always placed thrust on managing its affairs with diligence, transparency, responsibility and accountability. Your Directors support the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. The report on Corporate Governance as stipulated under Clause 49 of the listing agreement entered with the stock exchanges ("Listing Agreement") together with a certificate from the Practicing Company Secretary confirming compliance is attached and forms part of this Annual report.

Management Discussion & Analysis Report

As required pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report is attached herewith and forms part of the Annual Report.

Information about the Subsidiaries / Associates/ Joint Ventures

A. Subsidiaries

As on the date of this report, your Company has 4 wholly owned subsidiary (WOS) companies, viz. Radhika Heights Limited, Panacea Biotec (International) S.A., Rees Investments Limited and Panacea Biotec GmbH (under liquidation) and one subsidiary, viz. NewRise Healthcare Private Limited. Your Company also has 8 indirect WOS companies, as under:

Cabana Construction Private Limited, Radicura Infra Limited, Nirmala Buildwell Private Limited, Sunanda Infra Limited, Cabana Structures Limited and Nirmala Organic Farms Resorts Private Limited; all being WOS of Radhika Heights Limited;

Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International) S.A.; and Kelisia Holdings Limited, the WOS of Rees Investments Limited. Radhika Heights Limited ("RHL") inter-alia, owns a prime immovable property which is being used by the Company as its Corporate Office at New Delhi and land at Pataudi Road, Gurgaon (along with its 5 WOSs). It has diversified its activities in construction and development of township as part of its growth plans. Accordingly, RHL along with its 5 WOS has signed a term sheet with a developer for development of the integrated township on its land at Pataudi Road, Gurgaon, however, a dispute has emerged among the parties and the matter is under arbitration. The Company holds 47,76,319 equity shares in RHL with an investment of Rs.3,385.6 million as on March 31, 2015.

Panacea Biotec (International) S.A., Switzerland (PBS), is engaged in the business of trading of pharmaceutical products. The Company holds 6,000 equity shares of CHF 100 each with an investment of Rs.34.4 million as on March 31, 2015. Panacea Biotec Germany GmbH, WOS of PBS, is engaged in marketing of the Company's products in Germany. NewRise Healthcare Private Limited ("NewRise") has set-up a 224 bedded state-of-the-art multi super-specialty hospital at Gurgaon, Haryana. It had planned to have the full-fedged operations during the year under review and started hiring the required personnel to start operations and also obtained the necessary licenses & permissions for such operations. However, since it was requiring additional funds to start the operations as well as to fund the initial losses and working capital requirements but the funds were not available; it has decided to put the operations of hospital on hold for the time being. The efforts are also being made to dispose of the Company's stake in NewRise either in full or in part. During the year under review, NewRise had issued and allotted 33,94,915 equity shares of Rs.10 each for cash at a price of Rs.59 per share on May 28, 2014, aggregating Rs.200.3 million against the share application money pending allotment as at the end of previous financial year. The Company has also purchased 1,82,900 equity shares in NewRise at an aggregate value of Rs.15.5 million pursuant to the agreement entered into with other shareholders of NewRise during previous financial year. Your Company holds 87.4% stake in NewRise with an investment of Rs.497.8 million therein as on March, 2015.

During the year under review, the Company's indirect subsidiary, Kelisia Investment Holding AG (step down subsidiary of Rees Investments Limited) has been liquidated effective as on October 7, 2014.

B. Joint Ventures and Associates

PanEra Biotec Private Limited ("PanEra"): PanEra, the Company's associate Company, is continuing to meet requirement of bulk antigens for the manufacture of Hib and Pentavalent Vaccines by your Company. During the year under review, PanEra has achieved a net turnover of Rs.152.3 million as compared to Rs.391.8 million during previous year. It has incurred a loss of Rs.116.3 million as compared to loss of Rs.11.5 million in previous financial year. Chiron Panacea Vaccines Private Limited (CPV) (Under Liquidation): CPV had discontinued its operations during the financial year 2012-13 pursuant to dissolution of joint venture and is currently in the process of voluntary winding up. Adveta Power Private Limited ("Adveta"): Adveta the Company's 50:50 joint venture with PanEra, has been granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh in financial year 2012-13. Adveta is in the process of taking preliminary steps in connection with the implementation of projects. However, no major investment is envisaged in this regard during the current financial year. Pursuant to the provisions of Section 129, 134 and 136 of the Act read with rules framed thereunder and pursuant to clause 41 of the Listing Agreement, the Company had prepared consolidated financial statements of the Company and its subsidiaries and a separate statement containing the salient features of financial statements of subsidiaries, joint ventures and associates, in Form AOC-1, which is forming part of the Annual Report and hence not repeated here for the sake of brevity.

The annual financial statements and related detailed information of the subsidiary companies shall be made available to the shareholders of the holding and subsidiary companies seeking such information on all working days during business hours. The financial statements of the subsidiary companies shall also be kept open for inspection by any shareholder/s during working hours at the Company's registered/corporate office and that of the respective subsidiary companies concerned.

Consolidated Financial Statements

The consolidated financial statements of the Company and its subsidiaries, joint ventures and associates, prepared in terms of Section 129 of the Act and Clause 32 & 41 of the Listing Agreement and in accordance with Accounting Standard 21 on 'Consolidated Financial Statements' read with Accounting Standard AS-27 on 'Financial Reporting of Interest in Joint Ventures' and Accounting Standard AS-23 on 'Accounting for Investments in Associates', as issued by the Institute of Chartered Accountants of India and in accordance with the provisions of schedule III of the Act, are attached herewith and the same, together with Auditors' Report thereon, forms part of the Annual Report of the Company.

Listing of Equity Shares

The Equity Shares of the Company continue to be listed on National Stock Exchange of India Limited ("NSE") and Bombay Stock Exchange ("BSE"). The requisite annual listing fees have been paid to these Exchanges.

Public Deposits

During the year under review, your Company has not invited or accepted any deposits from the public/ members pursuant to the provisions of Section 73 and 76 of the Act. Further, the Company had paid/adjusted the outstanding balances of deposits from the Company's Directors & their relatives amounting to Rs.142.0 million as on March 31, 2014 along with interest thereon in compliance with the provisions of the Act and the Companies (Acceptance of Deposits) Rules, 2014.

Directors and Key Managerial Personnel

During the year under review, Mr. Sunil Kapoor(DIN: 00029133) who was earlier appointed as an independent director was not satisfying the criteria of independent director as per the provisions of the revised Clause 49 of the Listing Agreement effective from October 1, 2014 and therefore resigned from the directorship of the Company w.e.f. August 4, 2014. The Board places its sincere appreciation towards the valuable contribution received from Mr. Sunil Kapoor during his tenure as a Director of the Company.

Further, pursuant to the provisions of Section 149 of the Act, Mr. Raghava Lakshmi Narasimhan (DIN: 000738736), Mr. Namdeo Narayan Khamitkar (DIN: 00017154), Mr. A.N. Saksena (DIN: 00016107) and Mr. Krishna Murari Lal (DIN: 00016166) Independent Directors were appointed as Independent Directors of the Company not liable to retire by rotation for a period of five years i.e. till March 31, 2020, in the 30th Annual General Meeting held on September 25, 2014. The terms and conditions of appointment of Independent Directors are as per Schedule IV to the Act. Your Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence provided in Section 149(6) of the Act and Clause 49 of the Listing Agreement and there has been no change in the circumstances which may affect their status as Independent Director during the year under review. Further, as required pursuant to the provisions of Section 149 of the Act, Mr. Om Prakash Kelkar (DIN:00943362) and Mrs. Manjula Upadhyay (DIN: 07137968) have been appointed as Additional Directors of the Company in the category of Independent Directors with effect from October 30, 2014 and March 30, 2015, respectively, to hold office upto the ensuing Annual General Meeting.

Mr. Om Prakash Kelkar (DIN:00943362) was subsequently appointed by the shareholders by passing resolution through Postal Ballot the result whereof was declared on December 23, 2014, as an Independent Director for a period of five years, as per the provisions of Section 149 of the Act and Clause 49 of the Listing Agreement, not liable to retire by rotation and shall hold such office for the period upto October 30, 2019. Further, the Company has received a notice in writing along with requisite deposit, from a member under Section 160 of the Act, signifying his intention to propose candidature of Mrs. Manjula Upadhyay for the office of Director of the Company. Your directors recommend her appointment as an Independent Director in the ensuing Annual General Meeting of the Company for a period of five years, as per the provisions of the Act and Clause 49 of the Listing Agreement, not liable to retire by rotation and to hold office for a period of five years upto March 29, 2020.

Further, on the recommendation of Nomination & Remuneration Committee, the Board of Directors of the Company had in its meeting held on July 17, 2015, re- appointed Mr. Sumit Jain (DIN: 00014236) as a Whole time Director designated as Director Operations & Projects for a period of 3 years with effect from July 22, 2015, subject to the approval of shareholders in their general meeting. The terms and conditions for his re-appointment are contained in the explanatory statement forming part of the notice of the ensuing Annual General Meeting.

Further, in accordance with Section 152 of the Act and Article 112 of the Articles of Association of the Company, Mr. Soshil Kumar Jain (DIN: 00012812) & Mr. Sumit Jain (DIN: 00014236), directors of the Company are also liable to retire by rotation. Being eligible, they have offered themselves for re-appointment as director.

The brief resumes of the Directors who are to be appointed/ re-appointed in the ensuing Annual General Meeting, the nature of their expertise in specific functional areas, names of companies in which they have held directorships, committee memberships/chairmanships and their shareholding, etc. are furnished in Corporate Governance Report forming part of the Annual Report.

The Board recommends their appointment / re-appointment of the above said directors in the ensuing Annual General Meeting.

During the year under review, Mr. Partha Sarathi De resigned from the position of Chief Financial Offer of the Company with effect from November 30, 2014. Mr. Devender Gupta has been appointed as Chief Financial Offer and Head Information Technology of the Company with effect from May 29, 2015. Mr. Vinod Goel, Company Secretary of the Company has also been elevated as Group Chief Financial Offer and Head Legal & Company Secretary of the Company with effect from May 29, 2015.

Board Meetings

During the year under review, six (6) Board Meetings were held on May 30, 2014, August 1, 2014, October 31, 2014, December 9, 2014, February 13, 2015 and March 30, 2015. The details pertaining to the attendance are provided in the Corporate Governance Report. The intervening gap between two Board Meetings was within the period prescribed under the Act.

Audit Committee

The Audit Committee of the Board of Directors consists entirely of Independent Directors. The details of the constitution, composition and number of meetings of the Audit Committee are furnished in the Corporate Governance Report. During the year, all recommendations made by the Audit Committee were accepted by the Board.

Policy on Directors' appointment & remuneration

Pursuant to the provisions Section 178(3) of the Act and Clause 49(IV)(B) of the Listing Agreement and as per the recommendations of the Nomination and Remuneration Committee, the Board has adopted a policy for selection & appointment of Directors and Key Managerial Personnel of the Company and their remuneration. The components of remuneration policy are briefly stated in the Corporate Governance Report.

Board Evaluation

In terms of the provisions of the Act and Clause 49 of the Listing Agreement, the Board had adopted a formal mechanism for evaluating its performance as well as that of its Committees and individual Directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects such as Board composition & quality, strategic & risk management, board functioning, etc. Performance evaluation of Independent Directors was conducted by the Board of Directors excluding the Director being evaluated on the criteria such as ethics and values, knowledge and proficiency, behavioural traits, etc.

Auditors

Pursuant to the provisions of Section 139 of the Act and the rules framed thereunder, M/s. Walker Chandiok & Co. LLP, Chartered Accountants (Regn. No. 001076N/N500013), were appointed as statutory auditors of the Company for a period of five years to hold office from the conclusion of the 30th Annual General Meeting ("AGM") of the Company held on September 25, 2014 till the conclusion of the 35th AGM, subject to ratification of their appointment at every AGM. Accordingly, the appointment of M/s. Walker Chandiok & Co. LLP, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. in this regard, the Company has received a certificate from the auditors to the effect that if they are re-appointed, it would be in accordance with the provisions of Section 141 of the Act.

Auditors' Report

The management response to the matters of emphasis and observations/ comments contained in the Auditors' Report and Annexure thereto, are given below:

i. Amount of advance received as research fees from a customer amounting to Rs.197.2 million which has been accounted for as income from research and development: In Auditor's opinion, the recognition of such advances as income is not consistent with the revenue recognition principles as prescribed under the Accounting Standard – 9 (AS-9) 'Revenue Recognition'. Had the Company followed the principles of AS-9 with respect to these amounts, the revenue for the year ended March 31, 2015 would have been lower by Rs.197.2 million and the loss would have been higher by Rs.197.2 million. Further, the reserves and surplus as at that date would have been lower by Rs.197.2 million and current liabilities as at that date would have been higher by Rs.197.2 million. The Company has received Research & Development (R&D) fees from a customer and such fees is non- refundable subject to certain pre-conditions (as defend in the agreement) and most of the conditions are being compiled by the Company. As the product is already available in the domestic market, the management is reasonably certain of meeting the remaining pre- conditions and therefore believes that the said fees should be accounted for as income.

ii. Payment of managerial remuneration exceeding the limits prescribed under Section 198 and 309 read with Part II of Schedule XIII to the Companies, Act, 1956 by Rs.13.5 million and Rs.13.2 million in previous financial years ended March 31, 2014 and 2013 respectively, (Emphasis of Matter in the Auditors' Report): The Company has incurred losses in the respective years mainly due to the delisting of company's vaccine from WHO's list of pre-qualified vaccines in the financial year 2011-12. The Managerial Personnel have already voluntarily reduced their salary by 30-53% in the referred years. The Company has taken various measures as explained elsewhere in this report to regain its business. Further, the Company has already fled applications with Ministry of Corporate Affairs to obtain requisite approvals from Central Government in respect of such excess remuneration and requisite approvals are awaited.

iii. The Company has incurred a net loss of Rs.652.3 million during the year ended March 31, 2015. Further as of that date, the Company's current liabilities exceeded its current assets by Rs.3,835.3 million. These conditions along with other matters as set forth in aforesaid note indicate the existence of a material uncertainty that may cast significant doubt about the Company's ability to continue as a going concern. (Emphasis of Matter - clause 11 of Auditors Report):

The Company has undertaken several measures to mitigate this risk, which include supply to UNICEF/other customers of pentavalent vaccine; certain strategic alliances with foreign collaborators for supply of vaccines and pharma products including 3 collaboration agreements signed during the year under review. The Company has also successfully executed the Master Restructuring Agreement (MRA) with the lenders of the Company and has complied with the key conditions and successfully implemented the MRA. Based on above measures and continuous efforts to improve the business, the management believes that it would be able to generate sustainable cash flow, recover and recoup the erosion in its net worth through profitable operations, discharge its obligations as they fall due and continue as a going concern.

Further, with regard to the Emphasis of Matters and observations contained in the Auditors' Report on the Consolidated Financial Statements & the management's explanations are given below:

i. The Auditors' report on the financial statements of Subsidiary/Associate Company viz. NewRise Healthcare Private Limited and PanEra Biotec Private Limited, contains a qualification with respect to non-receipt of confirmations from the foreign and domestic vendors: The respective companies are in the process of reconciling these balances with its vendors and the management is of the opinion that the result of reconciliations will not have any material impact on the consolidated financial statements of the Company.

ii. Unaudited Annual Accounts of the Subsidiary, Rees Investments Limited: Though the Annual Accounts were duly finalized & signed by its Board of Directors, the audit thereof could not be completed till the date on which the Company's consolidated accounts were finalized. Its auditors have since completed their audit and given their audit report on such accounts and there is no difference in the audited annual accounts thereof.

iii. Slight delay in deposition of tax with appropriate authority in one case: There has been a delay of 1 day in deposition of VAT of Rs.2.3 million with concerned VAT authority at Kochi in the state of Kerala due to last day being holiday in Kerala.

The notes to accounts and other observations, if any, in the Auditors' Report are self-explanatory and therefore, do not call for any further comments.

Cost Auditors

Pursuant to the provisions of Section 148 of the Act, M/s J.P. Gupta & Associates, Cost Accountants, were appointed as the Cost Auditors to conduct the audit of the Company's Cost Records for the year ended March 31, 2015 and the remuneration has been ratified by the shareholders in the 30th Annual General Meeting of the Company held on September 25, 2014.

The cost audit for the said period has been completed and the Cost Auditors' Report will be submitted with the Central Government within the prescribed time.

Based on the recommendations of the Audit Committee, the Board of Directors has appointed M/s G.T. & Co., Cost Accountants (Firm's Registration Number: 000253), (a firm formed by Mr. J.P. Gupta, proprietor of the existing cost auditors, viz. M/s. J.P. Gupta & Associates, Cost Accountants), as cost auditors of the Company for the financial year 2015-16 pursuant to Section 148 of the Act. As required, the resolution for ratification of remuneration of cost auditor has been included in the notice of the AGM for shareholders' approval. The Cost Audit Report for the financial year 2013-14 was fled on September 12, 2014, well before the last date of fling being September 30, 2014.

Secretarial Audit

Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of M/s R&D Company Secretaries, Practicing Company Secretaries, to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2015. The Secretarial Audit Report (in Form MR-3) is attached as Annexure F to this Report.

The Secretarial Audit Report contains observation in respect of excess remuneration paid to Managing Director during the financial year 2014-15 and in this respect, the Company has decided to seek the approval of Central Government pursuant to shareholders' approval being sought in the ensuing Annual General Meeting of the Company.

Material changes and commitments affecting the financial position of the Company which have occurred between March 31, 2015 and date of the Report Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of report. As required under Section 134(3) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in report: in the nature of Company's business, in the Company's subsidiaries or in the nature of business carried out by them, and in the classes of business in which the Company has an interest.

Energy Conservation, Technology Absorption & Foreign Exchange

Particulars required pursuant to Section 134(3)(m) of the Act, read with Rule 8(3) of the Companies (Accounts) Rules, 2014, regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A hereto and forms part of this Report.

Extract of Annual Return

In accordance with the provisions of section 134(3)(a) of the Act, the extract of Annual Return in Form MGT-9 as on March 31, 2015 is attached as Annexure B hereto and forms a part of this Report.

Directors' Responsibility Statement

The Directors hereby confirm:

a) that in the preparation of the annual financial statements for the financial year ended March 31, 2015 the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

b) that for the financial year ended March 31, 2015, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for the year ended March 31, 2015;

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

d) that the annual accounts have been prepared on a going concern basis;

e) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

Particulars of loans, guarantees or investments under Section 186 of the Act

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Act are given in the notes to the financial statements.

Risk management

The Company has formulated a Risk Management Policy and monitors the risk management plan on a periodic basis. The Company has defend a structured approach to manage uncertainty and to make use of these in the decision making in all business decisions and corporate functions.

Insurance

Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Company's stocks and insurable assets like building, plant & machinery, computer equipments, office equipments, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, fled against the Company.

Internal Control System

Your Company has established a system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorised, recorded and reported. The Company's internal control system comprises internal audit carried out by independent firms of Chartered Accountants and periodical review by the management. The Audit Committee of the Board of Directors addresses significant issues raised by both the Internal Auditors and the Statutory Auditors.

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial disclosures.

The management believes that the overall internal control system is dynamic and reflects the current requirements at all times, hence ensuring that appropriate procedures and controls are in place. Your Company is proactively identifying the areas for further improvement which shall remain an ongoing process.

Vigil Mechanism/Whistle Blower Policy

Your Company has adopted a Whistle Blower Policy with a view to provide its employees an avenue to raise any sensitive concerns regarding any unethical behaviour or wrongful conduct and to provide adequate safeguard for protection from any victimization.

Further, the Act and revised Clause 49 of the Listing Agreement mandated every listed Company to establish a vigil mechanism, accordingly the Company has amended the policy to align the same with the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement and the same is available on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee.

Your Company hereby affirms that no Director/ employee have been denied access to the Chairman of the Audit Committee and that no complaints were received during the year.

Corporate Social Responsibility

The provisions of Section 135 of the Act, regarding Corporate Social Responsibility are not attracted to the Company as the Company does not fall under the threshold limit of networth of Rs.500 crore or turnover of Rs.1,000 crore or a net profit of Rs.5 crore during the financial year. However, the Company has been, over the years, pursuing Corporate Social Responsibility by putting continuous efforts in the areas of health, education and patient awareness/assistance programs towards the development of happier and healthier society.

Related Party Transactions

As per the provisions of the Act and the Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is also available on Company's website at http://www.panacea-biotec.com/statutorypolicies. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

This Policy specifically deals with the review and approval of Material Related Party Transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All Related Party Transactions are placed before the Audit Committee for review and approval. Wherever applicable, prior omnibus approval is obtained for related party transactions on a quarterly basis for transactions which are of repetitive nature and / or entered in the ordinary course of business and are at arm's length basis. During the year, all the related party transactions entered into were on an arm's length basis. The Company has not entered into any material related party transactions, i.e. transactions exceeding 10% of the annual consolidated turnover as per the last audited financial statements. Suitable disclosures as required under AS-18 have been made in the notes to the financial statements.

Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure C as per the prescribed Form AOC-2 and the same forms part of this report.

Particulars of Employees and Related disclosures

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

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure E forming part of the Annual Report.

Prevention of Sexual Harassment at Workplace

As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressed) Act, 2013 ('Act') and Rules made thereunder, your Company has constituted Internal Complaints Committees (ICC). During the year, one complaint was received and the same has been satisfactorily resolved by the said Committee.

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company. Your Directors also thank the shareholders, Financial Institutions, Banks/ other lenders Customers, Vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support. The Board wishes to place on record its appreciation for the dedication and commitment of your Company's employees at all levels which has continued to be our major strength.

For and on behalf of the Board

Dated: August 13,2015 Soshil Kumar Jain

Place: New Delhi Chairman


Mar 31, 2014

Dear Members,

The Directors are pleased to present the 30th Annual Report on business and operations together with the audited financial statements and the auditors'' report of your Company for the financial year ended March 31, 2014. The financial highlights for the year under review are given below:

Financial Results (Rs. in million) Particulars March 31, March 31, 2014 2013

Revenue from operations 5,030.3 5,959.2

Other Income 116.4 54.3

Total Income 5,146.7 6,013.5

Earning before Interest,

Depreciation & Tax (EBITDA) (922.3) (840.9)

Profit/ (Loss) before Tax and exceptional items (2,974.4) (2,679.4)

Profit/(Loss) before Tax (PBT) (4.2) (2506.3)

Provision for Taxation - (205.0)

Profit/(Loss) after Tax (PAT ) (4.2) (2301.3)

Basic EPS (Rs.)* 0.07 (37.6)

Cash EPS (Rs)* 11.2 (23.9)

Book Value per share (Rs.)* (%) 91.7 91.6

* Face value Re.1 per share

Operating Results and Profits

During the year, your Company registered a turnover of Rs.4,671.4 million as against Rs.5,304.2 million during the corresponding financial year.

The formulations segment registered turnover of Rs.3,392.9 million as against Rs.3,581.3 million during the previous financial year. The vaccines segment registered a turnover of Rs.1,278.9 million as against Rs.1,722.9 million during the previous financial year, a decline of 27.4%. The decline was mainly on account of decline in institutional business primarily on account of reduced supplies of oral polio vaccine against tenders from Government of India and delisting of Easyfive vaccines from the WHO''s list of prequalified vaccines for supply to UNICEF and other UN Agencies in financial year 2011-12, which continued to have a negative impact on current year''s sales.

Your Company pursued several corrective and preventive measures to ensure the compliances with the WHO pre- qualification guidelines and your directors are happy to report that inspite of all the challenges, WHO has completed the evaluation process of pre-qualification (PQ) of Pentavalent Vaccine (Easyfive-TT) and has now pre-qualified the said vaccine for supply to UNICEF and UN Agencies w.e.f. 2nd October, 2013.

The Company has received long term award for supply of such vaccine to UNICEF during the period 2014 to 2016 and has started supplying the same during the year under review.

A detailed discussion on operations for the year ended March 31, 2014 is given in the Management Discussion and Analysis section forming part of the Annual Report.

Dividend

In view of the losses during the year, the Board of Directors did not recommend any dividend on the Equity Shares of the Company.

Transfer of Amounts to Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, dividend for the year 2005-06, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.2 million has been transferred by the Company to the Central Government''s Investors Education and Protection Fund during November, 2013.

Share Capital and Net Worth

The issued, subscribed and paid up Equity Share Capital of the Company remains at Rs.61.3 million divided into 61,250,746 Equity Shares of Re.1 each on 31.03.2014. The net worth of the Company stood at Rs.5,622.9 million as compared to Rs.5,612.6 in previous year.

As the members are aware, the Company''s accumulated losses as at March 31, 2013 had resulted into erosion of more than fifty percent of its peak net worth during the immediately preceding four financial years (as computed as per the provisions of Sick Industrial Companies (Special Provisions) Act, 1985) ("SICA"). The Company had made necessary reference on November 22, 2013 to the Board for Industrial and Financial Reconstruction (BIFR) pursuant to the provisions of SICA. The Company''s accumulated losses as at March 31, 2014 continue to remain more than 50% of its peak net worth during the immediately preceding four financial years, as computed as per the provisions of SICA.

Report on Corporate Governance

Your company has always placed major thrust on managing its afairs with diligence, transparency, responsibility and accountability. Your Directors support the broad principles of Corporate Governance and lays emphasis on its role to align and direct the actions of the Company in achieving its objectives. The necessary report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is attached herewith and forms part of this Annual Report.

Management Discussion & Analysis Report

As required pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report is attached herewith and forms a part of the Annual Report.

Subsidiaries

The Company has 4 wholly owned subsidiaries (WOS), viz. Panacea Biotec (International) S.A., Radhika Heights Ltd. (formerly known as Best On Health Ltd.), Rees Investments Ltd. and Panacea Biotec GmbH (under liquidation). NewRise Healthcare Pvt. Ltd. is also a subsidiary in terms of Section 2(87) (ii) of the Companies Act, 2013.

The Company has 9 other indirect subsidiaries, as under:

Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International) S.A.Cabana Constructions Ltd. (formerly known as Panacea Educational Institute Pvt. Ltd.), Radicura Infra Ltd. (formerly known as Radicura & Co. Ltd.), Nirmala Buildwell Pvt. Ltd. (formerly known as Panacea Hospitality Services Pvt. Ltd.), Sunanda Infra Ltd. (formerly known as Sunanda Steel Company Ltd.), Cabana Structures Ltd. (formerly known as Best on Health Foods Ltd.) and Nirmala Organic Farms Resorts Pvt. Ltd.; all being WOS of Radhika Heights Ltd.;

Kelisia Holdings Ltd., the WOS of Rees Investments Ltd.; and

Kelisia Investment Holding AG (under liquidation), being the step-down WOS of Rees Investments Ltd.

Radhika Heights Limited ("RHL") inter-alia, owns a prime immovable property being used by the Company as its Corporate Office at New Delhi and land at Pataudi Road, Gurgaon (along with its 5 WOSs). It has a plan for diversifcation in construction and development of township as part of its future growth plans.

RHL had issued during the year under review, 28,74,159 equity shares of Re.1 each at a price of Rs.1,170 per share, upon conversion of 7,211,666 0.5% Optionally Convertible Non-Cumulative Redeemable Preference Shares of Re.1 each aggregating Rs.3,362.8 million. With such allotment of equity shares, the Company now holds 47,76,319 equity shares in RHL and the value of such investment as on 31st March, 2014 stands at Rs.3,385.6 million.

NewRise Healthcare Pvt. Ltd. ("NewRise") has set-up a 224 bedded state-of-the-art multi super-specialty hospital at Gurgaon, Haryana. It had planned to have the full-fedged operations during the year under review and started hiring the required personnel to start operations. It also obtained the necessary licenses & permissions for such operations. However, since it was requiring additional funds to start the operations as well as to fund the initial losses and working capital requirements but the funds were not available, the management has decided to put it on hold for the time being.

Further, NewRise has issued and allotted to the Company 33,94,915 equity shares of Rs.10 each for cash at a price of Rs.59 per share on May 28, 2014, aggregating to Rs.200.3 million. During the year under review, the Company has also entered into an agreement with other shareholders of NewRise to acquire the remaining stake therein, pursuant to which 1,82,900 shares have been purchased at an aggregate value of Rs.15.5 million. The Company''s stake in NewRise has increased from 75.2% to 87.4% as on 30.06.2014.

During the year under review, the Company''s WOS Panacea Biotec FZE was liquidated on 18.06.2013. Further, the Company has disposed of its entire shareholding in its erstwhile WOS, Lakshmi & Manager Holdings Ltd. ("LMH") to a related party at its fair value of Rs.123.8 million. Post such disposal, LMH and its WOS Trinidhi Finance Pvt. Ltd. and subsidiary Best General Insurance Company Ltd. have ceased to be the subsidiaries of the Company w.e.f. 25.01.2014.

As per the provisions of Section 212 of the Companies Act, 1956 your Company is required to attach the Directors'' Report, Balance Sheet, Profit and Loss Account and other information of the subsidiary companies to its Balance Sheet. However, Ministry of Corporate Afairs, Government of India, vide General Circular No. 2 and 3 dated 8th February, 2011 and 21st February, 2011, respectively has granted a general exemption from compliance with Section 212(8) of the Companies Act, 1956 from attaching the Annual Accounts of subsidiaries in the annual published accounts of the Company subject to fulfllment of conditions stipulated in the circular. The Company has satisfed the conditions stipulated in the circular and hence is entitled to the exemption.

In compliance of the above said circulars, the Annual Accounts will be made available upon request by any investor of the Company/ Subsidiary, interested in obtaining the same. The annual accounts of the Subsidiary companies will be kept for inspection by any investor at the Company''s Corporate Office at B-1 Extn./G-3, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi – 110044, India and at the Office of the respective subsidiary companies during business hours of the respective company. Further, the following information, for each subsidiary is also being disclosed at some other place herein and forms part of the Annual Report (a) Share Capital, (b) Reserves & Surplus, (c) Total Assets, (d) Total Liabilities, (e) Details of investment (except in case of investment in subsidiaries), (f) Turnover including other income, (g) Profit/(Loss) before Tax, (h) Provision for Tax, (i) Profit/(Loss) after Tax, and (j) Proposed Dividend, if any.

Further, as per the provisions of Section 212 of the Companies Act, 1956 a statement of the Company''s interest in the subsidiary companies is attached herewith and forms part of the Annual Report.

Pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial statements of each of its Subsidiaries.

Joint Ventures & Associates

PanEra Biotec Pvt. Ltd ("PanEra"): PanEra, the Company''s associate company, is continuing to meet requirement of bulk vaccines and antigens for the manufacture of Hepatitis B and Combination Vaccines by your Company. During the year under review, it has achieved a net turnover Rs.391.8 million as compared to Rs.175.9 million of previous year. It has incurred a loss of Rs.11.5 million as compared to Profit before tax of Rs.2.1 million during previous year.

Chiron Panacea Vaccines Pvt. Ltd. ("CPV"): CPV had discontinued its operations during previous financial year pursuant to dissolution of joint venture and is currently in the process of voluntary winding up.

Adveta Power Pvt. Ltd ("Adveta"): Adveta, the Company''s 50:50 joint venture, with PanEra, has been granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh during previous financial year.

Consolidated Financial Statements

The consolidated financial statements of the Company and its

subsidiaries, joint ventures and associates, prepared in terms of Section 129 of the Companies Act, 2013 and Clause 32 & 41 of the Listing Agreement and in accordance with Accounting Standard 21 on ''Consolidated Financial Statements'' read with Accounting Standard AS-27 on ''Financial Reporting of Interest in Joint Ventures'' and Accounting Standard AS-23 on ''Accounting for Investments in Associates'', as issued by the Institute of Chartered Accountants of India, is attached herewith and the same, together with Auditors'' Report thereon, forms part of the Annual Report of the Company.

Listing of Equity Shares

The Equity Shares of the Company continue to be listed on NSE and BSE. The requisite annual listing fees have been paid to these Exchanges.

Public Deposits

During the year under review, your Company has not invited or accepted any deposits from the public pursuant to the provisions of Section 58A of the Companies Act, 1956. However, the Company has continued to accept deposits from the Company''s Directors, their relatives, associates and the Company''s employees without inviting deposits from them.

Due to the liquidity constraints, the Company could not service on time the interest on the deposits for last two quarters of the year under review. However, the major part of the dues has subsequently been paid during current financial year.

Insurance

Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Company''s stocks and insurable assets like building, plant & machinery, computer equipments, Office equipments, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, fled against the Company.

Internal Control System

Your Company has established a robust system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported. The Company''s internal control system comprises internal audit carried out by independent firms of Chartered Accountants and periodical review by the management. The Audit Committee of the Board of Directors addresses significant issues raised by both the Internal Auditors and the Statutory Auditors.

The Company believes that the overall internal control system is dynamic and refects the current requirements at all times, hence ensuring that appropriate procedures and controls are in place. Your Company is proactively identifying the areas for further improvement which shall remain an ongoing process.

Directors

The Board recommends appointment of the existing Independent Directors viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar, Dr. A.N. Saksena and Mr. K.M. Lal as independent directors for a period of five years, as per the provisions of the Companies Act,2013 and Clause 49 of the Listing Agreement, not liable to retire by rotation and to hold office for the period upto 31st March, 2019.

Mr. Sunil Kapoor who was an independent director appointed earlier as per clause 49 of the listing agreement is not satisfying the criteria of independent director as per the provision of the Companies Act, 2013 efective from 01.04.2014 and hence now regarded as non-independent non-executive director.

Further, in accordance with section 152 of the Companies Act, 2013 and Articles of Association of the Company, Mr. Soshil Kumar Jain, Director of the Company is liable to retire by rotation. Being eligible, Mr. Soshil Kumar Jain ofers himself for reappointment.

Approval of shareholders is also being sought for variation in terms of appointment of Mr. Ravinder Jain, Managing Director and Dr. Rajesh Jain & Mr. Sandeep Jain, Joint Managing Directors for making their Office liable to retire by rotation. All other terms and conditions of their appointment shall remain unchanged. In order to enable such change, the relevant articles of Articles of Association are also proposed to be amended by passing suitable resolution in the forthcoming Annual General Meeting (AGM) of shareholders.

The brief resumes of the Directors who are to be re-appointed / appointed, the nature of their expertise in Specific functional areas, names of companies in which they have held directorships, committee memberships/chairmanships, their shareholding, etc. are furnished in Corporate Governance report forming part of the Annual Report.

The Board recommends their appointment / re-appointment of the above said directors at the ensuing AGM.

Auditors

The term of Office of M/s. S.R. Batliboi & Co. LLP, as Statutory Auditors of the Company will expire with the conclusion of forthcoming Annual General Meeting of the Company. M/s. S.R. Batliboi & Co. LLP has been Statutory Auditors of your Company since 2001. The Board of Directors of the Company has, subject to approval of the Members, decided to make a change in the Statutory Auditors. This change is in order to remain at the forefront of good corporate governance and in recognition of regulatory changes in India which has made rotation of auditors mandatory after a period of 10 years.

As recommended by Audit Committee, the Board has proposed a resolution at the forthcoming Annual General Meeting for appointment of M/s Walker Chandiok & Co. LLP as Statutory Auditors of the Company in place of M/s. S.R. Batliboi & Co. LLP, being the retiring Auditors (who have shown their unwillingness for re-appointment) pursuant to Section 139 of the Companies Act, 2013 and forms part of the Notice. The Company has received a letter from them to the efect that their appointment, if made, shall be in accordance with the conditions laid down by section 139 of the Companies Act, 2013.

The Board also places on record its appreciation for the services rendered by M/s. S.R. Batliboi & Co. LLP as the Statutory Auditors of the Company.

Auditors'' Report

The management response to the matters of emphasis and observations/ comments contained in the Auditors Report and Annexure thereto, are given below:

i. Payment of Managerial remuneration exceeding the limits prescribed under Section 198 and 309 read with Part II of Schedule XIII to the Companies, Act, 1956 by Rs.13.5 million and Rs.13.2 million in current and previous financial years, respectively (Emphasis of Matter - clause (a) of Auditors Report): The Company has incurred losses in the respective years mainly due to the delisting of company''s vaccine from WHO''s list of prequalified vaccines in the FY 2011-12. The Managerial Personnel have already voluntarily reduced their salary by 30-53% in the referred years. The Company has taken various measures as explained elsewhere in this report to regain its business. Further, the Company has already fled applications with Ministry of Corporate Afairs to obtain requisite approvals from Central Government in respect to such excess remuneration and requisite approvals are awaited.

ii. The existence of a material uncertainty that may cast significant doubt about the Company''s ability to continue as a going concern (Emphasis of Matter - clause (b) of Auditors Report): The Company has undertaken several measures to mitigate the risk of going concern as explained in Note 47 of the Financial Statements which include supply to UNICEF/other customers of pentavalent vaccine, certain strategic alliances with foreign collaborators for supply of vaccines and pharma products, etc., comprehensive debt restructuring (CDR) proposal which has already been admitted by CDR cell for further processing, launch of its frst product Tacrolimus in USA in December, 2012 and fling of more ANDAs with USFDA. Accordingly, the management is confdent that with the above measures and continuous eforts to improve the business, the Company would be able to generate sustainable cash fow, recover and recoup the erosion in its net worth through Profitable operations, discharge its short-term & long term liabilities and continue as a going concern.

iii. Delay in payment of interest on borrowings, repayment of loan installments and overdrawing in cash credit facilities (Clause (iii)(g) and (xi) of the Annexure to the Auditors'' Report): The Company is facing cash fow problems due to continuous losses resulting, inter-alia, into delay in repayment of loan installments, payment of interest on borrowings and overdrawing in cash credit facilities. However, during the current year, the Company has paid part of interest on borrowings from banks and public deposits. Moreover, the Company''s proposal for CDR has already been admitted with CDR Cell and with the approval of such proposal, a significant part of such installments would be deferred as the Company would get a moratorium for such payments and the penal interest accounted for in the books of accounts due to delays/ defaults in payment of interest would also be reversed. The Company is also actively pursuing further measures to strengthen the financial position as explained in point (ii) above and note no. 47, 48 and 49 of the financial

statements and expects to overcome the situation in next 2-3 years.

iv. Slight delays in depositing statutory dues in a few cases of TDS, service tax and wealth tax and non-deposit of custom duty dues (clause (ix) of the Annexure to the Auditors'' Report): There was a delay of 1-7 days in 7 cases for deposit of TDS and the due amount has been deposited with applicable interest of Rs.30,718. Similarly, there was a delay of 147 days in deposit of wealth tax of Rs.3.8 million and the due amount has been deposited along with interest of Rs.0.2 million on May 27, 2014. The delay in deposition of service tax (payment on reverse mechanism basis) was due to late receipt of invoices and/or delay/non-payment to vendors. The Company has duly paid the due amount of Rs.16.0 million along with applicable interest of Rs.1.9 million within the stipulated period as per applicable laws. Further, the pending amount of customs duty of Rs.20.7 million (including interest upto 31st March, 2014) with respect to 2 expired advance licenses (pending for export obligation of Easyfive vaccine on account of WHO delisting thereof) has been paid subsequently in June/July, 2014 along with applicable interest thereon amounting to Rs.0.5 million for the period from 1st April, 2014 until the date of payment.

v. Accumulated losses at the end of the financial year being more than 50% of its net worth and incurring cash losses in the current and immediately preceding financial year (clause (x) of the Annexure to the Auditors'' Report): The Company has been continuously incurring cash losses over the past few years which were mainly due to the delisting of Company''s DTP based combination Vaccine by WHO from its list of pre-qualified vaccines. Though the product has now been relisted, as explained elsewhere in this report, the continuous losses have resulted in accumulated losses and consequently erosion of more than 50% of its peak net worth calculated as per the provisions of SICA. The Company has already fled the necessary reference with BIFR on 22nd November, 2013. The Company has also taken various measures to recoup the erosion in its net worth as explained in point (ii) above and note 47 of the financial statements.

vi. Utilization of short-term borrowings and increase in current liabilities amounting to Rs.3,851.0 million having been used for long-term investment representing acquisition of fixed assets, funding of losses and investment in subsidiaries companies (Clause (xvii) of the Annexure to the Auditors'' Report): The Company has incurred cash losses of Rs.3,107.6 million in last 3 financial years due to the reasons mentioned elsewhere in this report. The Company has attempted to raise long-term funds in the past but due to decline in turnover & continuous losses, the Company could not arrange the same. Therefore, in order to ensure continuity of business operations, the Company had to temporarily use the short-term funds (in the form of increase in short-term borrowings and current liabilities) for funding of losses and other long-term investment representing acquisition of fixed assets and investment in subsidiaries companies. With the improving financial conditions as a result of relisting of pentavalent

vaccine and overall improvement in the economy & capital markets, the Company is pursuing diferent options to raise long-term funds including issue of securities, etc. The Company expects to overcome the situation in near future.

Further, with regard to the matters of emphasis and observations contained in the Auditors'' Report on the Consolidated Financial Statement, the management''s explanations are given below:

Unaudited Annual Accounts of Subsidiary, Rees Investments Ltd.: Though its Annual Accounts were prepared by its Board of Directors, the audit thereof could not be completed till the date on which the Company''s Consolidated Accounts were finalised. The audited annual accounts of Rees Investments Ltd. were signed on June 5, 2014.

The notes to accounts and other observations, if any, in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments.

Cost Auditors

Pursuant to the provisions of Section 233B of the Companies Act, 1956, M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as the Cost Auditors to conduct the audit of the Company''s Cost Records for the year ended 31st March, 2014, with the approval of the Central Government. The cost audit for the said period is under process and the Company will submit the Cost Auditors'' Report to the Central Government within the prescribed time.

Based on the recommendations of the Audit Committee, the Board of Directors has re-appointed M/s J.P. Gupta & Associates, as cost auditors of the Company for FY 2014-15 in pursuance of section 148 of the Companies Act, 2013. As required, the resolution for ratifcation of remuneration of cost auditor is included in the notice of the AGM for shareholders'' approval.

The Cost Audit Report for the financial year 2012-13 was fled on September 23, 2013, well before the last date of fling being September 30, 2013.

Disclosures under Section 217

Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments which can afect the financial position of the Company between the end of the financial year and the date of report.

As required under Section 217(2) of the Companies Act, 1956, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in this report:

In the nature of Company''s business,

In the Company''s subsidiaries or in the nature of business carried out by them, in the classes of business in which the Company has an interest.

Energy Conservation, Technology Absorption & Foreign Exchange

Particulars required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A, forming part of this Report.

Directors'' Responsibility Statement

The Directors hereby confirm:

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

ii) that 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 afairs of the Company at the end of the financial year and of the Profit or loss of the Company for that period;

iii) that the directors have taken proper and sufcient 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; and

iv) that the directors have prepared the annual accounts on a going concern basis

Particulars of Employees

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors'' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956 , the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company. Your Directors also thank the shareholders, Financial Institutions, Banks/ other lenders, customers, vendors and other business associates for their confdence in the Company and its management and look forward for their continuous support. The Board wishes to place on record its appreciation for the dedication and commitment of your Company''s employees at all levels which has continued to be our major strength.

For and on behalf of the Board

Dated: 1st August, 2014 Soshil Kumar Jain Place: New Delhi Chairman


Mar 31, 2013

Dear Members,

The Directors present the 29th Annual Report on business and operations together with the audited fnancial statements and the auditors'' report of your Company for the fnancial year ended March 31, 2013. The fnancial highlights for the year under review are given below:

Financial Results

(Rs. in million) Particulars March 31, March 31, 2013 2012

Revenue from Operations 5,959.2 7,005.8

Other Income 54.3 74.6

Total Income 6,013.5 7,080.4

Earning Before Interest, Depreciation & Tax (EBITDA) (840.9) (939.1)

Proft/(Loss) before Tax (PBT) (2,506.3) (2,629.5)

Provision for Taxation (205.0) (551.6)

Proft/(Loss) after Tax (PAT) (2,301.3) (2,077.9)

Balance in Proft & Loss Account (359.7) 1,941.6

Basic EPS (Rs.)* (37.6) (33.9) Cash EPS (Rs.)* (23.9) (21.6)

Book Value per Share (Rs.)* 91.6 132.5

* Face value Re.1/- per share

Operating Results and Profts

During the year ended March 31, 2013, your Company registered a net turnover of Rs.5,304.2 million as against Rs.6,883.8 million during the corresponding fnancial year.

The formulations segment registered a growth of 8.4% with a net turnover of Rs.3,581.3 million as against Rs.3,304.3 million during the previous fnancial year. The vaccines segment registered a net turnover of Rs.1,722.9 million as against Rs.3,579.5 million during the previous fnancial year, a decline of 52% mainly on account of delisting of its vaccines from the WHO''s list of prequalifed vaccines for supply to UNICEF and other UN Agencies in previous fnancial year, impacting the performance negatively in the current fnancial year.

Since then, your Company has taken several corrective and preventive measures to ensure compliance with the WHO pre- qualifcation guidelines. During the period under review, the auditors from WHO and UNICEF visited the vaccine facilities at Lalru (Punjab) and Baddi (H.P.) in Feb-Mar 2013 with the objective of re-evaluation of the acceptability in principle of combination vaccine (DTP-Hep B-Hib) produced by Panacea Biotec for purchase by United Nations Agencies. There were no critical observations and the Audit Team acknowledged the continuing improvements that have been made in this regard. Your Company is confdent that with the post audit activities, it will be able to get re-listing of Pentavalent vaccine in the list of WHO pre-qualifed vaccines in due course of time.

Your Company however, continues to focus on cost optimization and efcient management of working capital. Panacea Biotec is constantly striving to enhance its reputation as one of the India''s leading research-based health management companies with established research, manufacturing and marketing capabilities and is confdent of overcoming the current adverse situation.

A detailed discussion on operations for the year ended March 31, 2013 is given in the Management Discussion and Analysis section forming part of the Annual Report.

Dividend

In view of the losses during the year under review, the Board of Directors did not recommend any dividend on the Equity Shares of the Company.

Transfer of Amounts to Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956 ("the Act”), dividend for the year 2004-05, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.2 million has been transferred by the Company to the Central Government''s Investors Education and Protection Fund.

Transfer to Reserves

In view of the current year losses incurred by the Company, no amount has been transferred to the general reserves, pursuant to Companies (Transfer of Profts to Reserves) Rules, 1975.

Share Capital and Net Worth

The Issued, Subscribed and Paid up Equity Share Capital of the Company remains at Rs.61.3 million divided into 61,250,746 Equity Shares of Re.1 each on 31.03.2013. The net worth of the Company has reduced to Rs.5,612.6 million as compared to Rs.8,140.9 in previous year.

Since the Company''s accumulated losses had resulted into erosion of more than ffty percent of its peak net worth during the immediately preceding four fnancial years, the Company proposes to make necessary reference to the Board for Industrial and Financial Reconstruction (BIFR) in due course of time pursuant to the provisions of Sick Industrial Companies (Special Provisions) Act, 1985

Report on Corporate Governance

An organization''s Corporate Governance philosophy is directly linked to its excellence in performance. Keeping this important dictum in view, your company has always placed major thrust on managing its afairs with diligence, transparency, responsibility and accountability.

Your Directors support the broad principles of Corporate Governance and lays strong emphasis on its role to align and direct the actions of the Company in achieving its objectives.

The necessary report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is attached herewith and forms part of this Annual Report.

Management Discussion & Analysis Report

As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report is attached herewith and forms a part of the Annual Report.

Subsidiaries

Driven by prudent operational strategy and aimed at facilitating ease of functioning, the Company has put in place a network of Subsidiaries.

The Company has 6 wholly owned subsidiaries (WOS), viz. Best On Health Ltd., Lakshmi & Manager Holdings Ltd., Panacea Biotec FZE, Panacea Biotec GmbH, Rees Investments Ltd and Panacea Biotec (International) S.A. (w.e.f. 1st April, 2012, previously step down WOS). NewRise Healthcare Pvt. Ltd. is also a subsidiary in terms of Section 4(1)(b)(ii) of the Act.

The Company has 11 other subsidiaries in terms of Section 4(1) (c) of the Act, as under:

Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda Steel Company Ltd., Panacea Educational Institute Pvt. Ltd., Best on Health Foods Ltd. and Nirmala Organic Farms & Resorts Pvt. Ltd. all being WOS of Best On Health Ltd.

Trinidhi Finance Pvt. Ltd and Best General Insurance Company Ltd being WOS and subsidiary respectively of Lakshmi & Manager Holdings Ltd.

Kelisia Holdings Ltd., the WOS of Rees Investments Ltd.;

Kelisia Investment Holding AG, being the step-down WOS of Rees Investments Ltd.

Panacea Biotec Germany GmbH, the WOS of Panacea Biotec (International) S.A.

As per the provisions of Section 212 of the Act, your Company is required to attach the Directors'' Report, Balance Sheet, Proft and Loss Account and other information of the subsidiary companies to its Balance Sheet. However, Ministry of Corporate Afairs, Government of India, vide General Circular No. 2 and 3 dated 8th February, 2011 and 21st February, 2011 respectively has granted a general exemption from compliance with section 212(8) of the Act, from attaching the Annual Accounts of subsidiaries in the annual published accounts of the Company subject to fulfllment of conditions stipulated in the circular. The Company has satisfed the conditions stipulated in the circular and hence is entitled to the exemption.

In compliance of the above said circulars, the Annual Accounts will be made available upon request by any investor of the Company/ Subsidiary, interested in obtaining the same. The annual accounts of the Subsidiary companies will be kept for inspection by any investor at the Company''s Corporate Ofce at B-1 Extn./G-3, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi – 110044, India and at the ofce of the respective subsidiary companies during business hours of the respective company. Further, the following information, for each subsidiary is also being disclosed at some other place herein and forms part of the Annual Report (a) Capital, (b) Reserves & Surplus, (c) Total Assets, (d) Total Liabilities, (e) Details of investment (except in case of investment in subsidiaries), (f) Turnover including other Income, (g) Proft/Loss Before Tax, (h) Provision for Tax, (i) Proft After Tax and (j) Proposed Dividend.

Further as per the provisions of Section 212 of the Act, a statement of the Company''s interest in the subsidiary companies is attached herewith and forms part of the Annual Report.

Pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the fnancial statements of each of its Subsidiaries.

Joint Ventures & Associates

PanEra Biotec Pvt. Ltd: Your Company''s associate Company, PanEra Biotec Pvt. Ltd. is continuing to meet requirement of bulk vaccines and antigens for the manufacture of Hepatitis B and Combination Vaccines by your Company. During the year under review, it has achieved a net turnover and proft before tax of Rs.175.6 million and Rs.2.1 million respectively.

Chiron Panacea Vaccines Pvt. Ltd. (CPV): During the year under review, CPV achieved a turnover of Rs.325.7 million as compared to Rs.531.8 million during previous year During the year under review, the Joint Venture partners have executed a ‘dissolution of Joint Venture Aggrement''. As per the dissolution Aggrement, Joint Venture has discontinued its operations and the process of voluntarily winding up has recently been initiated.

Adveta Power Pvt Ltd: The Company''s 50:50 joint venture Adveta Power Pvt. Ltd with its associate PanEra Biotec Pvt. Ltd, incorporated with a purpose to generate and distribute power or any other energy from conventional / non-conventional energy sources on a commercial basis. During the fnancial year, Adveta Power has been granted in-principle approval by Govt. of Arunachal Pradesh for allotment of two Power Projects of 80 MW and 75 MW in Arunachal Pradesh.

Consolidated Financial Statements

As required under clause 41 of the Listing Agreement with the stock exchanges, a consolidated fnancial statement of the Company and its subsidiaries, joint ventures and associates, as prepared in accordance with the Accounting Standard AS-21 on ‘Consolidated Financial Statements'' read with Accounting Standard AS-27 on ‘Financial Reporting of Interest in Joint Ventures'' and Accounting Standard AS-23 on ‘Accounting for Investments in Associates'', as issued by the Institute of Chartered Accountants of India, is attached herewith and the same, together with Auditors'' Report thereon, forms part of the Annual Report of the Company.

Listing of Equity Shares

The Equity Shares of the Company continue to be listed on NSE and BSE. The requisite annual listing fees have been paid to these Exchanges.

Public Deposits

During the year under review, your Company has not invited or accepted any deposits from the public pursuant to the provisions of Section 58A of the Act and no amount of principal or interest was outstanding in respect of deposits from the public as of the date of Balance Sheet. However, during the year under review, the Company has continued to accept deposits from the Company''s Directors, their relatives, associates and the Company''s employees without inviting deposits from them.

Insurance

Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Company''s stocks and insurable assets like building, plant & machinery, computer equipments, ofce equipments, furniture & fxtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, fled against the Company.

Internal Control System

Your Company has established a robust system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported.

The Company''s internal control system comprises internal audit carried out by independent frms of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses signifcant issues raised by both, the Internal Auditors and the Statutory Auditors.

The Company believes that the overall internal control system is dynamic and refects the current requirements at all times, hence ensuring that appropriate procedures and controls, in operating and monitoring practices are in place.

Your Company is proactively identifying the areas for further improvement which shall remain an ongoing process.

Directors

In accordance with the provisions of the Act and Articles of Association of the Company, Mr. K.M. Lal, Dr. A.N. Saksena and Mr. Sumit Jain, Directors of the Company are liable to retire by rotation and being eligible, ofer themselves for re- appointment.

The brief resumes of the Directors who are to be re-appointed, the nature of their expertise in specifc functional areas, names of companies in which they have held directorships, committee memberships/chairmanships, their shareholding, etc. are furnished in Corporate Governance report forming part of the Annual Report.

The Board recommends their re-appointment at the ensuing Annual General Meeting.

Auditors

M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, Statutory Auditors of your Company, will retire at the conclusion of the ensuing Annual General Meeting and being eligible, ofer themselves for reappointment as statutory auditors for the fnancial year 2013-14. The Company has received a letter from them to the efect that their re-appointment, if made, would be within the limit prescribed under section 224(1B) of the Act and that they are not disqualifed for such re-appointment within the meaning of Section 226 of the Act.

Based on the recommendation of the Audit Committee, the Board of Directors of the Company proposes the re- appointment of M/s. S.R. Batliboi & Co. LLP, Chartered Accountants, as the Statutory Auditors of the Company.

Auditors'' Report

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

i. With regards to the managerial remuneration which has exceeded the limits as specifed under section 198 and 309 read with Part II of Schedule XIII of the Act by Rs.13.2 million on account of losses incurred during the current year. The Company had adequate profts in the past and thus it was paying remuneration to its managerial personnel within the overall limits as specifed under the Act. However, on account of the losses during the year under review, the managerial remuneration exceeded the limit even after voluntary reduction in their salary by managerial personnel in the range of 30%-53%. The Company has already initiated necessary steps to obtain necessary approval from Central Government in respect of protection/payment of such remuneration.

ii. With regards to the delisting of Company''s DTP-based combination and monovalent hepatitis B vaccines by World Health Organization (WHO) from its list of pre- qualifed vaccines: During the year, the Auditors from WHO and UNICEF visited the Company''s vaccine facilities at Lalru (Punjab) and Baddi (H.P.) with the objective of re- evaluation of the acceptability in principle of Pentavalent Vaccine (DTP-Hep B-Hib) produced by Panacea Biotec for purchase by United Nations Agencies. The Company has completed implementation of Corrective and Preventive Action (CAPA) subsequent to the visit by WHO Auditors and also submitted additional data pertaining to product''s stability studies to WHO. The Company has a stock of Rs.324.6 millions and Rs.394.2 milions of raw & packing material and fnished goods, respectively as at March 31, 2013 pertaining to these vaccines. Fixed assets relating to above products cannot be quantifed separately. The Company is confdent that with the post audit activities, it will be able to get re-listing of Pentavalent vaccine in the list of WHO pre-qualifed vaccines in due course and would do it''s best to use/sell/liquidate these stocks in domestic and international markets.

iii. As regards to default in repayment of dues to banks amounting to Rs.994 million during the year. These loans have been subsequently rescheduled and the moratorium period of 1 year & 9 months have been granted by the banks. The Company did not have any outstanding dues towards any fnancial institution/banks or debentures as at the end of year under review.

iv. As regards slight delay in deposition of undisputed statutory dues in few cases: The auditors'' observation is self-explanatory as the amount involved and the delay was not signifcant and delay was due to normal operational difculties. The total amount of such dues (VAT) was Rs.206,327 only and there was a delay of one day due to postal delays. The Company had already deposited the said amount.

v. As regards cash loss incurred by the Company : The Company has incurred cash loss in the current and immediately preceding fnancial year due to the decline in turnover of vaccine segment by 51% in current year and 57% in previous year mainly on account of unexpected delisting of Company''s DTP-based combination vaccines by World Health Organization (WHO) from its list of pre- qualifed vaccines and foreign exchange loss due to depreciation of Indian Rupee. The Company has taken several corrective and preventive actions to address these issues efectively.

The notes to accounts and other observations, if any, in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments.

Cost Auditors

Pursuant to the provisions of Section 233B of the Act, M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as the Cost Auditors to conduct the audit of the Company''s Cost Records for the year ended 31st March, 2013, with the approval of the Central Government. The cost audit for the said period is under process and the Company will submit the Cost Auditors'' Report to the Central Government within the prescribed time. They have also been appointed as the Cost Auditors for the fnancial year 2013-14, with the approval of the Central Government.

The Cost Audit Report for the fnancial year 2011-12 was fled on December 11, 2012. The last date of fling of said report was February 28, 2013 in terms of General Circular No. 2/2013 of Ministry of Corporate Afairs, Cost Audit Branch.

Disclosures Under Section 217 of the Act

Except as disclosed elsewhere in the report, there have been no material changes and commitments which can afect the fnancial position of the Company between the end of the fnancial year and the date of report.

As required under Section 217(2) of the Act, the Board of Directors inform the members that during the fnancial year, there have been no material changes, except as disclosed elsewhere in this report:

in the nature of Company''s business,

in the Company''s subsidiaries or in the nature of business carried out by them,

in the classes of business in which the Company has an interest.

Energy Conservation, Technology Absorption & Foreign Exchange

Particulars required under Section 217(1)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A, forming part of this Report.

Directors'' Responsibility Statement

The Directors hereby confrm:

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

ii) that 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 afairs of the Company at the end of the fnancial year and of the proft or loss of the Company for that period;

iii) that the directors have taken proper and sufcient 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; and

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

Particulars of Employees

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Act and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors'' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956 the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company.

Your Directors also thank the shareholders, Financial Institutions, Banks/ other lenders Customers, Vendors and other business associates for their confdence in the Company and its management and look forward for their continuous support.

The Board wishes to place on record its appreciation for the dedication and commitment of your Company''s employees at all levels which has continued to be our major strength.

For and on behalf of the Board

Dated: 8th August, 2013 Soshil Kumar Jain

Place: New Delhi Chairman


Mar 31, 2012

The Directors present the 28th Annual Report on business and operations together with the audited financial statements and the auditors' report of your Company for the financial year ended March 31, 2012. The financial highlights for the year under review are given below:

Financial Results

(Rs. in million)

Particulars For the For the year ended year ended March 31,12 March 31,11

Revenue from Operations 7,005.8 11,498.3

Other Income 74.6 156.8

Total Income 7,080.4 11,655.1

Earning Before Interest, Depreciation & Tax (EBITDA) (939.1) 2,689.1

Profit/(Loss) before Tax (PBT) (2,629.5) 1,554.9

Provision for Taxation (551.6) (204.4)

Profit/(Loss) after Tax (PAT) (2,077.9) 1,350.5

Dividend proposed on Equity Shares - 45.9

Dividend Distribution Tax - 7.5

Transfer to General Reserve - 135.0

Balance in Profit & Loss Account 1,941.6 4,019.5

Basic EPS (Rs.)* (33.9) 21.4

Cash EPS (Rs.)* (21.6) 30.4

Book Value per Share (Rs.)* 132.5 103.9

Dividend per Equity Shares (%) - 75%

* Face value Re.1- per share

Operating Results and Profits

During the year ended March 31, 2012, the Company registered a net turnover of Rs.6,883.8 million as against Rs.11,304.6 million during the corresponding financial year.

The Formulations Segment registered a growth of 11.1% with a net turnover of 3,304.3 million as against 2,972.3 million during the previous financial year. The Vaccines Segment registered a decline of 57% with a net turnover of Rs.3,579.5 million as against Rs.8,332.3 million during the previous financial year mainly on account of delisting of its vaccines from the WHO's list of pre-qualified vaccines for supply to UNICEF and other UN Agencies during the year, impacting the performance negatively.

During the year under review, following a routine site audit, WHO has delisted the company's DTP based combination and monovalent Hepatitis B vaccines from its list of pre-qualified vaccines on account of deficiencies in quality management system. The company has taken several corrective and preventive measures to ensure compliance with the WHO pre-qualification guidelines and is confident that with these corrective and preventive measures, the company will be able to get the above said vaccines relisted in the list of WHO pre- qualified vaccines in due course of time.

During the year under review, considering the series of changes made to the vaccines formulation facility at New Delhi and WHO assessment that further corrective measures need to be implemented, the company had voluntarily withdrawn its oral polio vaccines from the WHO list of pre- qualified vaccines. The National Regulatory Authority of India (NRA) has since approved this facility and the Company has started manufacturing vaccines for supplies to other than UN agencies.

Your Company however, continues to focus on sustaining growth in emerging markets, cost optimization and efficient management of working capital. These strategic initiatives are expected to fuel the Company's growth across its business operations.

A detailed discussion on operations for the year ended March 31, 2012 is given in the Management Discussion and Analysis section forming part of the Annual Report.

Dividend

In view of the non-availability of profits during the year under review, the Board of Directors has not recommended any dividend on the Equity Shares of the Company.

Transfer of Amounts to Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) of the Companies Act,1956, dividend for the year 2003-04, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.16 million has been transferred by the Company to the Central Government's Investors Education and Protection Fund.

Transfer to Reserves

In view of the current year losses incurred by the Company, no amount was transferred to the general reserves, pursuant to Companies (Transfer of Profits to Reserves) Rules, 1975.

Share Capital

The Issued, Subscribed and Paid-up Equity Share Capital of the Company stands at Rs.61.2 million divided into 61,250,746 Equity Shares of Re.1 each on 31.03.2012.

Revised Schedule VI

The Company was using pre-revised Schedule VI to the Companies Act, 1956, for preparation and presentation of its financial statements till the year ended March 31, 2011. During the year ended March 31, 2012, the revised Schedule VI notified under the Companies Act, 1956, has become applicable to the Company. The Company has reclassified previous year figures to conform to this year's classification. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However, it significantly impacts presentation and disclosures made in the financial statements, particularly presentation of Balance Sheet.

Report on Corporate Governance

Your Company strives to attain high standards of corporate governance while interacting with all the stakeholders. The increasing diversity of the investing community and the integrated nature of global capital markets render corporate governance a vital issue for investors The Company believes that timely disclosures, transparent accounting policies and a strong independent Board go a long way in maintaining good corporate governance, preserving shareholders trust and maximizing long term corporate value. In pursuit of corporate goals, the Company accords high importance to transparency, accountability and integrity in its dealings. Our philosophy on Corporate Governance is driven towards welfare of all the Stakeholders and the Board of Directors remains committed towards this end.

The Board of Directors supports the broad principles of Corporate Governance and lays strong emphasis on its role to align and direct the actions of the Company in achieving its objectives.

The compliance report on Corporate Governance and a certificate regarding compliance of the conditions of Corporate Governance, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is attached herewith and forms part of this Annual Report.

Certificate from Managing Director and Chief Financial Officer, inter-alia, confirming the correctness of the financial statements, compliance with Company's Code of Conduct, adequacy of the Internal Control measures and reporting of matters to the Audit Committee in terms of Clause 49 of the Listing Agreement with the Stock Exchanges, is also enclosed as a part of the Annual Report.

Revaluation of Fixed Assets

The Company has revalued its land and buildings as at 1st April 2011, at the fair values determined by an independent external valuer by reference to market-based evidence based on active market prices adjusted for any difference in the nature, location or condition of the specific property. The revaluation has resulted in an increase in the book value of land and building by Rs.3,946.5 million which has been credited to revaluation reserve. In accordance with the option given in the guidance note on accounting for depreciation in companies, the Company has recouped depreciation on revaluation of these assets out of revaluation reserve.

Management Discussion & Analysis Report

As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report forms a part of the Annual Report.

Subsidiaries

The Company has 5 wholly owned subsidiaries (WOS), viz. Best On Health Ltd., Lakshmi & Manager Holdings Ltd. (w.e.f. November 24, 2011), Panacea Biotec FZE, Panacea Biotec GmbH and Rees Investments Ltd. NewRise Healthcare Pvt. Ltd. is also a subsidiary in terms of Section 4(1)(b)(ii) of the Act.

The Company has 12 other subsidiaries in terms of Section 4(1)(c) of the Act, as under:

- Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda Steel Company Ltd., Panacea Educational Institute Pvt. Ltd., Best on Health Foods Ltd. and Nirmala Organic Farms & Resorts Pvt. Ltd., all being WOS of Best On Health Ltd.

- Trinidhi Finance Pvt. Ltd. and Best General Insurance Company Ltd. both being indirect WOS through Lakshmi & Manager Holdings Ltd. w.e.f. November 24, 2011.

- Kelisia Holdings Ltd., Cyprus, the WOS of Rees Investments Ltd.

- Kelisia Investment Holding AG, Switzerland, Panacea Biotec (International) SA, Switzerland and Panacea Biotec Germany GmbH, all being the step-down subsidiaries of Rees Investments Ltd.

During the year under review, the Company's step-down WOS, Panacea Biotec (Europe) AG, Switzerland was liquidated on December 15, 2011.

As per the provisions of Section 212 of the Companies Act, 1956, your Company is required to attach the Directors' Report, Balance Sheet, Profit and Loss Account and other information of the subsidiary companies to its Balance Sheet. However, Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February, 2011 and 21st February, 2011 respectively has granted a general exemption from compliance with section 212(8) of the Companies Act, 1956, from attaching the Annual Accounts of subsidiaries in the annual published accounts of the Company subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to the exemption.

In compliance of the above said circular, the Annual Accounts will be made available upon request by any investor of the Company/ Subsidiary, interested in obtaining the same. The annual accounts of the Subsidiary companies will be kept for inspection by any investor at the Company's Corporate Office at B-1 Extn./G-3, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi - 110044, India and at the office of the respective Subsidiary companies during business hours of the respective company. Further, the following information, in aggregate, for each Subsidiary is also being disclosed at some other place herein and forms part of the Annual Report (a) Capital, (b) Reserves & Surplus, (c) Total Assets, (d) Total Liabilities, (e) Details of investment (except in case of investment in subsidiaries), (f) Turnover including other Income, (g) Profit/ Loss Before Tax, (h) Provision for Tax, (i) Profit After Tax, and (j) Proposed Dividend.

Further as per the provisions of Section 212 of the Act, a statement of the holding Company's interest in the Subsidiary companies is attached herewith and forms part of the Annual Report.

Pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial statements of each of its Subsidiaries.

Joint Ventures & Associates

Panacea Biotec's belief in collaborative growth makes it an ideal joint venture partner for Indian and global companies. The Company has nurtured several important JVs that enable it to strengthen its growth fundamentals and to enhance its customer value.

Chiron Panacea Vaccines Pvt. Ltd.: The company's joint venture Chiron Panacea Vaccines Pvt. Ltd. (CPV) is marketing vaccines in the domestic private market and achieved a turnover of Rs.531.8 million during the year under review. CPV has a significant market share in the DTwP based pediatric combination vaccine with Easyfour at 62% and Easyfive at 43% market share as per the March 2012 report of multi-clients study conducted by Frost & Sullivan.

Adveta Power Pvt. Ltd.: During the year under review, the Company has formed a 50:50 joint venture company Adveta Power Pvt. Ltd. w.e.f. July 4, 2011, with its associate company PanEra Biotec Pvt. Ltd. being the other partner with an object to engage in the business of power generation mainly from renewable resources like Hydro, Solar and Wind.

During the year under review Company's joint venture Cambridge Biostability Ltd. liquidated on September 16, 2011.

PanEra Biotec Pvt. Ltd.: Your Company's associate Company, PanEra Biotec Pvt. Ltd. is continuing to meet requirement of bulk vaccines and antigens for the manufacture of Hepatitis B and Combination Vaccines by your Company. During the year under review, it has achieved a net turnover and profit before tax of Rs.274.4 million and (Rs.107.9) million as compared to Rs.721.8 million and Rs.236.1 million respectively during last financial year.

Consolidated Financial Statements

As required under clause 41 of the Listing Agreement with the stock exchanges, a consolidated financial statement of the Company and its subsidiaries, joint ventures and associates, as prepared in accordance with the Accounting Standard AS-21 on 'Consolidated Financial Statements' read with Accounting Standard AS-27 on 'Financial Reporting of Interest in Joint Ventures' and Accounting Standard AS-23 on 'Accounting for Investments in Associates', as issued by the Institute of Chartered Accountants of India, is attached herewith and the same, together with Auditors' Report thereon, forms part of the Annual Report of the Company.

Listing of Equity Shares

The Equity Shares of the Company continue to be listed on NSE and BSE. The requisite annual listing fees have been paid to these Exchanges.

Public Deposits

During the year under review, your Company has not invited or accepted any deposits from the public pursuant to the provisions of Section 58A of the Act and no amount of principal or interest was outstanding in respect of deposits from the public as of the date of Balance Sheet. However, during the year under review, the Company has continued to accept deposits from the Company's Directors, their relatives, associates and the Company's employees without inviting deposits from them.

Insurance

Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Company's stocks and insurable assets like building, plant & machinery, computer equipments, office equipments, furniture & fixtures, lease hold improvements and upcoming projects have been adequately insured against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company.

Internal Control System

Your Company has established a robust system of internal controls to ensure that assets are safeguarded and transactions are appropriately authorized, recorded and reported.

The Company's internal control system comprises internal audit carried out by independent firms of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses significant issues raised by both, the Internal Auditors and the Statutory Auditors.

The Company believes that the overall internal control system is dynamic and reflects the current requirements at all times, hence ensuring that appropriate procedures and controls, in operating and monitoring practices are in place.

Your Company is proactively identifying the areas for further improvement which shall remain an ongoing process.

Directors

In accordance with the provisions of the Act and Articles of Association of the Company, Mr. Soshil Kumar Jain, Mr. N.N. Khamitkar and Mr. Sunil Kapoor, Directors of the Company, are liable to retire by rotation and being eligible, offer themselves for re-appointment.

The brief resumes of the Directors who are to be re-appointed, the nature of their expertise in specific functional areas, names of companies in which they have held directorships, committee memberships/chairmanships, their shareholding, etc. are furnished in the Corporate Governance Report, forming part of the Annual Report.

The Board recommends their re-appointment at the ensuing Annual General Meeting.

Auditors

M/s. S.R. Batliboi & Co., Chartered Accountants, Statutory Auditors of your Company, will retire at the conclusion of the ensuing Annual General Meeting and being eligible; offer themselves for reappointment as statutory auditors for the financial year 2012-13. The Company has received a letter from them to the effect that their re-appointment, if made, would be within the limit prescribed under section 224(1 B) of the Act, and that they are not disqualified for such re-appointment within the meaning of Section 226 of the Act.

Based on the recommendation of the Audit Committee, the Board of Directors of the Company proposes the re- appointment of M/s. S.R. Batliboi & Co., Chartered Accountants, as the Statutory Auditors of the Company.

Auditors' Report

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

- With regard to capitalization of expenditure on clinical trials for the purpose of registration of Company's products outside India, the management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from the regulatory authorities. An amount of Rs.186.5 million towards the above said expenditure on clinical trials during the year ended March 31, 2012, has been capitalized.

- On account of the unexpected inadequacy of profits during the year ended March 31, 2012, the managerial remuneration of Rs.65.9 million has exceeded the limits prescribed under Section 198 and 309 read with Part II of Schedule XIII of the Companies, Act, 1956. The Company had adequate profits for past many years and thus was paying remuneration to its managerial personnel within overall limits as specified under the Act. However, in view of the losses incurred during the financial year 2011-12, the managerial remuneration paid during that year exceeded the limits prescribed under the Act. The company has initiated steps to obtain approval from Central Government for the excess remuneration paid.

- As regards the stock of raw material and finished goods inventories of Rs.1,526.7 million and Rs.363.0 million, respectively, as at March 31, 2012, of the Company's DTP based combination vaccines and oral polio vaccines delisted by WHO from its list of pre-qualified vaccines, the management is confident that with the corrective & preventive measures being taken to ensure compliance with the WHO pre-qualification guidelines,the Company will be able to get re-listing of these vaccines in the WHO's list of pre-qualified vaccines in due course and these stock would be utilized/sold accordingly. Further as fixed assets relating to above vaccines cannot be quantified separately, hence, impact, if any, on such fixed assets cannot be ascertained. Pending outcome of above measures, no adjustment has been made to the financial statements.

Cost Auditors

Pursuant to the provisions of Section 233B of the Act, M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as the Cost Auditors to conduct the audit of the Company's Cost Records for the year ended 31st March, 2012, with the approval of the Central Government. The cost audit is under process and the Company will submit the Cost Auditors' Report to the Central Government in time. They have also been appointed as the Cost Auditors for the financial year 2012-13, subject to the approval of Central Government.

Disclosures Under Section 217 of the Act

Except as disclosed elsewhere in the report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of report.

As required under Section 217(2) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in this report:

- in the nature of Company's business,

- in the Company's subsidiaries or in the nature of business carried out by them,

- in the classes of business in which the Company has an interest.

Energy Conservation, Technology Absorption & Foreign Exchange

Particulars required under Section 217(1 )(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding conservation of energy, technology absorption and foreign exchange earnings & outgo, are given in Annexure A, forming part of this Report.

Directors' Responsibility Statement

The Directors hereby confirm:

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

ii) that 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 and of the profit or loss of the Company for that period;

iii) that 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; and

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

Particulars of employees

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956 the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary.

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company.

Your Directors also thank the shareholders, Financial Institutions, Banks/ other lenders Customers, Vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support.

The Board wishes to place on record its appreciation for the dedication and commitment of your Company's employees at all levels which has continued to be our major strength.

For and on behalf of the Board New Delhi Soshil Kumar Jain

7th August, 2012 Chairman


Mar 31, 2011

Dear Shareowners,

Backed by strong credentials and expanding footprints, the Company has reported excellent business and operational performance during the fiscal 2010-11.

The Directors have pleasure in presenting here the 27th Annual Report on the Company's business and operations along with the audited standalone and consolidated financial accounts and the auditors' report thereon for the financial year ended March 31, 2011. The financial highlights for the year under review are given below:

Financial Results

(Rs.in million)

Particulars For the For the

year ended year ended

March 31,11 March 31,10

Net Turnover 11,304.6 8,843.7

Other Income 350.5 934.8

Total Income 11,655.1 9,778.5

Profit Before Interest, 2,648.7 1,582.5

Depreciation &Tax (EBITDA)

Financial Expenses 521.1 423.5

Depreciation 731.1 664.5

Profit before Tax (PBT) 1,554.9 1,181.0

Provision for Taxation (204.4) (380.6)

Profit after Tax (PAT) 1,350.5 800.4

Dividend proposed on Equity 45.9 16.7

Shares

Dividend Distribution Tax 7.5 2.8

Transfer to General Reserve 135.0 80.0

Balance in Profit & Loss Account 4,019.5 2,856.1

Basic EPS (Rs.)* 21.4 12.0

Cash EPS (Rs.)* 30.4 19.3

Book Value per Share (Rs.)* 103.9 104.2

Dividend per Equity Shares (%) 75% 25%

* Face value Re. 1/- per share

Operating Results and Profits

The exemplary performance of the Company is manifest in the numbers posted for the year under review. During the year ended March 31,2011, the Company registered a record net turnover of Rs.11,304.6 million as against Rs.8,843.7 million during the corresponding previous financial year, a spectacular growth of 27.8%.The Company registered EBITDA of Rs.2,648.7 million as compared to Rs.1,582.5 million during the corresponding previous financial year,a growth of 67.4%. Likewise,thePBTand PATfortheyear under review have grown by 31.7% and 68.7% respectively and stood at Rs.1,554.9 million and Rs.1,350.5 million respectively, as compared to the PBT and PAT at Rs.1,181.0 million and Rs.800.4 million respectively in the previous fiscal.

This growth was recorded across our both business segments. The Vaccines Segment grew by 29.3% and registered a net turnover of Rs.8,332.3 million as against Rs.6,443.9 million during previous financial year. The Formulations Segment registered a growth of 23.9% with a net turnover of Rs.2,972.3 million as compared to Rs.2,398.8 million during the previous financial year.

Your Company strives to remain globally and regionally attractive to customers and investors by continuing to focus on sustained growth, cost optimization and efficient management of working capital.These strategic initiatives are continually fueling the Company's growth across its business operations.

A detailed discussion on operations for the year ended March 31,2011 is given in the Management Discussion and Analysis section.

Dividend

The Directors are pleased to recommend a dividend of 75% which translates to Re.0.75 per equity share of the Company for the financial year 2010-11 as against 25% dividend during last year.

The dividend on Equity Shares is placed before you for approval at the ensuing Annual General Meeting and, if approved, will absorb an amount of Rs.45.9 million (excluding dividend distribution tax).

The proposed Final Dividend will be paid to the members:

i) whose names appear on the Register of Members of the Company as on 24th September, 2011; and

ii) whose names appear as beneficial owners as at the close of business on 20th September, 2011 as per details to be furnished by the National Securities Depository Limited and Central Depository Services (India) Limited.

Transfer of Amounts to Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956 ("the Act"), dividend for the year 2002-03, which remained unpaid or unclaimed for a period of 7 years, amounting to Rs.0.16 million has been transferred by the Company to the Central Government's Investors Education and Protection Fund.

Transfer to Reserves

An amount of Rs.135.0 million is proposed to be transferred to the general reserves of the Company out of the profits of the Company for the year.

Buyback of Shares

During the year under review, the Company commenced its Buy-back offer on 21 st July,2010 for purchase of not more than 5,592,000 Equity Shares at a maximum price of Rs.229 per share from its existing shareholders from the open market through Stock Exchanges. The Company bought back the entire 5,592,000 Equity Shares at an average price of Rs.196.39 per share by utilising an amount of Rs.1,098.2 million under such Buy-back offer.The said Buy-back offer closed on 15th October, 2010.

Share Capital

The Issued, Subscribed and Paid-up Equity Share Capital of the Company after extinguishment of shares bought back under the above referred Buy-back offer has been reduced to Rs.61.3 million divided into 61,250,746 Equity Shares of Re.1 each on 31.03.2011 as against Rs.66.8 million divided into 66,842,746 Equity Shares of Re.1 each on 31.03.2010.

Foreign Currency Convertible Bonds (FCCBs)

During the year under review, outstanding Zero Coupon Convertible Bonds (Tranche 2) with Nominal Value of USD 36.8 million which were due for redemption on Maturity Date i.e., 14th February, 2011, have been redeemed in full at the redemption price as perthe terms and conditions of the Bonds. Consequently,Tranche 2 Bonds have been extinguished and no bonds remain outstanding.

Credit Rating

During the year under review, CARE has revised the ratings assigned to the Company with respect to the various bank facilities availed by the Company and assigned 'CARE A-'(Single A Minus) to Long-term Bank Facilities,'PR2 '(PR Two Plus) to the Long-term/Short-term Bank Facilities and'PR1'(PR one) to the CP/Shortterm NCD (within working capital limits from the Banks).

Implementation of IFRS/IND-AS

As a part of the exercise for preparing for implementation of IFRS/IND-AS earlier scheduled to be implemented by the Ministry of Corporate Affairs (MCA), Government of India w.e.f. 1st April, 2011 for convergence of Indian Accounting Standards with International Financial Reporting Standards (IFRS), the Company has carried out fair valuation of its Fixed Assets as on 01.04.2010. Your Directors are pleased to inform that the fair value of the Company's fixed assets has been arrived at Rs.8,330.2 million as against the written down value (WDV) of Rs.5,034.1 million as on that date. However, as a prudent accounting policy, the revaluation of fixed assets in its books of accounts has not been considered. Moreover, as the implementation of IFRS/IND-AS has now been postponed by MCA and is now proposed to be effective w.e.f. 1st April, 2012, the fair valuation of fixed assets will be carried out at appropriate time in future in order to take effect of fair valuation thereof into the books of accounts.

Report on Corporate Governance

An organization's Corporate Governance philosophy is directly linked to its excellence in performance. Keeping this important dictum in view, your Company has always placed major thrust on managing its affairs with diligence, transparency, responsibility and accountability.

The Company is committed to adopting and adhering to the best corporate governance practices recognized globally. The Company understands and respects its fiduciary role and responsibility towards stakeholders and the society at large and strives hard to serve their interests, resulting in creation of value and wealth for all stakeholders at all times.

The compliance report on Corporate Governance and a certificate regarding compliance of the conditions of Corporate Governance, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges,is attached herewith and forms part of this Annual Report.

Certificate from Managing Director and Chief Financial Officer, inter-alia,confirming the correctness of the financial statements, compliance with Company's Code of Conduct,adequacy of the Internal Control measures and reporting of matters to the Audit Committee in terms of Clause 49 of the Listing Agreement with the Stock Exchanges, is also enclosed as a part of the Annual Report.

Management Discussion & Analysis Report

As required by Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report forms a part of the Annual Report.

Subsidiaries

Driven by prudent operational stratagem and aimed at facilitating ease of functioning, the Company has put in place a network of Subsidiaries.

The Company has 4 wholly owned subsidiaries (WOS), viz. Best On Health Ltd., Panacea Biotec FZE, Panacea Biotec GmbH and Rees Investments Ltd. NewRise Healthcare Private Limited (formerly known as Umkal Medical Institute Pvt. Ltd.) is also a subsidiary in terms of Section 4(1)(b)(ii) of the Act.The Company has 11 other subsidiaries in terms of Section 4(1)(c) of the Act,as under:

Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda Steel Company Ltd., Panacea Educational Institute Pvt. Ltd., Best on Health Foods Limited (w.e.f. 6th December,2010)and Nirmala Organic Farms & Resorts Pvt. Ltd. (formerly known as Sugandh Agri. Development Pvt. Ltd.) (w.e.f. 22nd February, 2011),all being WOS of Best On Health Ltd.;

Kelisia Holdings Ltd., Cyprus, the WOS of Rees Investments Ltd.; and Kelisia Investment Holding AG,Switzerland,Panacea Biotec (International) SA, Switzerland, Panacea Biotec (Europe) AG, Switzerland and Panacea Biotec Germany GmbH, all being the step-down subsidiaries of Rees Investments Ltd.

During the current financial year, the Company's WOS Panacea Biotec Inc. has been wound up.

As per the provisions of Section 212 of the Act,your Company is required to attach the Directors'Report, Balance Sheet, Profit and Loss Account and other information of the subsidiary companies to its Balance Sheet. However, Ministry of Corporate Affairs, Government of India has, vide its General Circular No. 2 and 3 dated 8th February, 2011 and 21st February, 2011 respectively, granted a general exemption from compliance with section 212(8) of the Act, from attaching the Annual Accounts of subsidiaries in the annual published accounts of the Company subject to fulfillment of conditions stipulated in the circulars.

In compliance of the above said circular, the Annual Accounts will be made available upon request by any investor of the Company/ Subsidiary, interested in obtaining the same. The annual accounts of the Subsidiary companies will also be kept for inspection by any investor at the Company's Corporate Office at B-1 Extn./G-3, Mohan Cooperative Industrial Estate, Mathura Road, New Delhi - 110 044, India and at the office of the respective Subsidiary companies during business hours of the respective company and shall also be available on the Company's website www.panaceabiotec.com. Further, the following information, in aggregate, for each Subsidiary is being disclosed at some other place herein and forms part of the Annual Report (a) Capital, (b) Reserves & Surplus, (c) Total Assets, (d) Total Liabilities, (e) Details of investment (except in case of investment in subsidiaries), (f) Turnover including other Income, (g) Profit/Loss Before Tax, (h) Provision for Tax, (i) Profit AfterTax,and (j) Proposed Dividend.

Further as per the provisions of Section 212 of the Act, a statement of the holding Company's interest in the Subsidiary companies is attached herewith and forms part of the Annual Report.

However, pursuant to Accounting Standard AS-21 issued by the Institute of Chartered Accountants of India, Consolidated Financial Statements presented by the Company include the financial statements of each of its Subsidiaries.

Joint Venture

Chiron Panacea Vaccines Pvt. Ltd.

Panacea Biotec's strong legacy of growth and excellence makes it an ideal Joint Venture partner for Indian and global companies.The Company has nurtured several important JVs that enable it to strengthen its growth fundamentals and to enhance its customer value.

During the year under review, your Company's Joint Venture Company (JV Company), Chiron Panacea Vaccines Pvt. Ltd. ("CPV"), has grown its business in DTwP based Pediatric combination vaccines, Polio and Flu franchisee by 24% over last year in spite of intense competitive price pressure within the pediatric vaccine market and has a significant market share in the DTwP-Hib combination vaccines, IPV vaccines and Trivalent Flu vaccines.

CPV has retained its customers by offering value added services by introducing novel concept of pre-booking for flu vaccines and flu protection clinic and arranging for international speakers, thereby creating awareness and benefit of a flu vaccination.

CPV has also lead a partnering program with the Pediatricians on the World Polio Day through various activities conducted across the Country like CME's, creating awareness on synergestic role of IPV OPV in polio eradication, vaccination camp, with a drive to protect maximum children against Polio.lt has also carried out a Trust campaign to re-emphasise the role of Easyrange vaccines in the Hib segment over past five years.

CPVcontinuestohavea strong portfolio of innovative pediatric vaccines and enjoy its significant position at market place. CPV achieved a turnover of Rs.555.4 million and net profit of Rs.21.2 million during the year under review and commands a significant market share in the pediatric combination vaccines segment in India.

Associates

Your Company's associate Company, PanEra Biotec Pvt. Ltd. is continuing to meet requirement of bulk vaccines and antigens for the manufacture of Hepatitis B and Combination Vaccines by your Company. During the year under review, it has achieved a net turnover and profit after tax of Rs.721.7 million and Rs.236.1 million recording a spectacular growth of 18.4% & 31.6% respectively.The Company's another Associate Company, Lakshmi & Manager Holdings Ltd. is mainly engaged in the business of making investments.

Consolidated Financial Statements

As required under clause 41 of the Listing Agreement with the stock exchanges, a consolidated financial statement of the Company and its subsidiaries, joint ventures and associates, as prepared in accordance with the Accounting Standard AS-21 on 'Consolidated Financial Statements' read with Accounting Standard AS-27 on 'Financial Reporting of Interest in Joint Ventures' and Accounting Standard AS-23 on 'Accounting for Investments in Associates', as issued by the Institute of Chartered Accountants of India, is attached herewith and the same, together with Auditors'Report thereon, forms part of the Annual Report of the Company.

Listing of Equity Shares / Bonds

The Equity Shares of the Company continue to be listed on NSE and BSE.The Foreign Currency Convertible Bonds (FCCBs) were listed at Singapore Stock Exchange (SGX) till their Maturity Date i.e., 14th February, 2011 only. The requisite annual listing fees have been paid to these Exchanges.

Public Deposits

During the year under review, your Company has not invited or accepted any deposits from the public pursuant to the provisions ofSection58Aofthe Act and no amount of principal or interest was outstanding in respect of deposits from the public as on the date of Balance Sheet. However,during the year under review, the Company has continued to accept deposits from the Company's Directors, their relatives, associates and the Company's employees without inviting deposits from them.

Insurance

Risk mitigation continues to be a key area of concern for the Company, which has regularly invested in insuring itself against unforeseen risks. The Company's Stocks and insurable assets like Building, Plant & Machinery, Computer Equipments, Office Equipments, Furniture & Fixtures, Lease Hold Improvements and upcoming projects have been adequately insured against major risks.The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an extension of unnamed vendor liability and add on cover of Public liability inclusive of pollution liability to cover the risk on account of claims, if any, filed against the Company.

Internal Control System

The Company has devised a strong Internal Control System through its extensive experience that ensures control over various functions in its business.

The Company has a well placed, proper and adequate Internal Control System, which ensures that all assets are protected against loss from unauthorized use and all transactions are recorded and reported correctly.The Company's internal control system comprises internal audit carried out by independent firms of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses significant issues raised by both, the Internal Auditors and the Statutory Auditors.

Directors

During the year under review, Mr. Gurmeet Singh ceased to be the director of the company, w.e.f. 25th September, 2010. The Board places on its record its appreciation for valuable services rendered by him as a Director during his tenure of more than 14 years.

Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep Jain were re-appointed by the Board as Chairman, Managing Director, Joint Managing Director and Joint Managing Director respectively for a period of five years from 01.04.2011, subject to the approval of Shareholders in the forthcoming general meeting.

In accordance with the provisions of the Act and Articles of Association of the Company, Dr. A.N. Saksena, Mr. Sumit Jain, Director Operations & Projects and Mr. R.L. Narasimhan, Directors of the Company, are liable to retire by rotation and being eligible, offer themselves for re-appointment.

The brief resumes of the Directors who are to be re-appointed, the nature of their expertise in specific functional areas, names of companies in which they have held directorships,committee memberships/chairmanships, their shareholding, etc. are furnished in the explanatory statement to the notice of the ensuing Annual General Meeting.

The Board recommends their re-appointment at the ensuing Annual General Meeting.

Auditors

M/s. S.R. Batliboi & Co., Chartered Accountants, Statutory Auditors of your Company, will retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment as statutory auditors for the financial year 2011-12.The Company has received a letter from them to the effect that their re-appointment, if made, would be within the limits prescribed under section 224(1 B) of the Act,and that they are not disqualified for such re-appointment within the meaning of Section 226 of the Act.

Based on the recommendation of the Audit Committee, the Board of Directors of the Company proposes the re- appointment of M/s. S.R. Batliboi & Co., Chartered Accountants, as the Statutory Auditors of the Company.

Auditors'Report

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

Capitalization of expenditure on clinical trials amounting toRs.67.2 million for the year ended March 31,2011 for the purpose of registration of Company's products in US and/ or Europe.The expenditure is not towards basic research and therefore no new chemical entity comes into being. Basic Research is conducted by the Company in its own R&D Centres but such developmental work is performed through external agencies (CROs). Safety profile of the basic molecule is well established in several countries in Europe and in India and the products are being marketed successfully in several countries. There is no experience to suggest that the studies conducted by CROs on behalf of the Company would lead to or make it difficult for the Company to obtain regulatory approvals in US and/or Europe. The management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from regulatory authorities in US and/or Europe.

Payment of managerial remuneration of approx. Rs.38.2 million during financial year 2008-09,in excess of the limits prescribed under Section 198 and 309 read with Part II of Schedule XIII to the Act, without obtaining approval of Central Government:The Company had adequate profits for past many years and thus was paying remuneration to its managerial personnel within overall limits as specified undertheAct.However,in view of the losses incurred during the financial year 2008-09, the managerial remuneration paid during that year exceeded the limits prescribed under the Act. The Company has sought approval of the Central Government for such remuneration. While the approvals in respect of remuneration to Dr. Rajesh Jain and Mr.SandeepJainJointManaging Directors of the Company, were received in full during financial year 2009-10, the requisite approvals permitting waiver of recovery of excess remuneration paid to Mr.Soshil KumarJain,Chairman and Mr. Ravinder Jain, Managing Director have been received vide letters dated 20th May, 2011.

Slight delay in deposition of Income Tax in few cases: Only three instances occurred during the financial year in which there was slight delay in deposition of Income Tax. Further, the amount involved was not significant and the said delays were due to normal operational difficulties.The total amount of such Income Tax was Rs.34,689/- only and the Company has already deposited the said amount.

Cost Auditors

Pursuant to the provisions of Section 233B of the Act, M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as the Cost Auditors to conduct the audit of the Company's Cost Records in respect of formulations for the year ended 31 st March, 2011, with the approval of the Central Government.The cost audit is under process and the Company will submit the Cost Auditors' Report to the Central Government in time.They have also been appointed by the Board as the Cost Auditors for the financial year 2011-12.

Disclosures Under Section 217 of the Act

Except as disclosed elsewhere in the report, there have been no material changes and commitments which can affect the financial position of the Company between the end of the financial year and the date of report.

As required under Section 217(2) of the Act, the Board of Directors inform the members that during the financial year, there have been no material changes, except as disclosed elsewhere in this report:

in the nature of Company's business,

in the Company's subsidiaries or in the nature of business carried out by them,

in the classes of business in which the Company has an interest.

Energy Conservation, Technology Absorption & Foreign Exchange

Particulars required under Section 217(1)(e) of the Act, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding conservation of energy, technology absorption and foreign exchange earnings &outgo,are given in Annexure A, forming part of this Report.

Particulars of Employees

Particulars of employees as required under Section 217(2A) of the Act, read with the Companies (Particulars of Employees) Rules, 1975 as amended,are given in Annexure B,forming part of this Report.

Directors' Responsibility Statement

The Directors hereby confirm:

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

ii) that 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 and of the profit or loss of the Company for that period;

iii) that 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; and

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

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received from the UN Agencies, Central Government, State Governments and all other Government agencies and encouragement they have extended to the Company.

Your Directors also thank the shareholders, Financial lnstitutions,Banks/other lenders,Customers,Vendors and other business associates for their confidence in the Company and its management and look forward for their continuous support.

The Board wishes to place on record its appreciation for the dedication and commitment of your Company's employees at all levels which has continued to be our major strength.

Forand on behalf of the Board

New Delhi Soshil Kumar Jain

27th July, 2011 Chairman



 
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