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Directors Report of Piramal Phytocare Ltd.

Mar 31, 2013

Dear Shareholders,

The take pleasure in presenting the 12th Annual Report and Audited Accounts for the financial year ended March 31,2013.

PERFORMANCE HIGHLIGHTS

(Rs. in Million)

Particulars FY 2012-13 FY 2011-12

Income

Net Sales 52.4 28.5

Other Income 7.1 3.3

Expenditure

Total Operating Expenses 76.5 56.7

(Loss) before Depreciation and Tax (17.4) (24.9)

Less: Depreciation 46.2 46.2

(Loss) before Tax (63.6) (71.1)

Less: Provision for Taxation

(Loss) for the year (63.6) (71.1)

Earnings / (Loss) per share (Basic / Diluted) (Rs.) (Face Value ofRs.10/- each) (2.4) (2.7)

DIVIDEND

In view of the losses incurred by the Company, the Directors do not recommend any dividend for the Financial Year ended March 31,2013.

OPERATIONS REVIEW

Net sales for the year were at Rs. 52.4 million as against Rs. 28.5 million for FY2012. The operating expenditure increased to Rs. 76.5 million as compared with Rs. 56.7 million for FY2012. Loss before interest, depreciation and taxes was lower at Rs. 17 million for FY2013 as compared with Rs. 24.9 million for FY2012. Loss for the year was lower at Rs. 63.6 million as compared with Rs. 71.1 million for FY2012 and EPS for the year was at Rs. (2.4) per share. During the year, the Company focussed on product development in the herbal segment and incurred costs towards higher promotion and marketing initiatives in global markets, in addition to registration costs and professional fees, which also resulted in the Company incurring cash losses. A detailed discussion of operations for the year ended March 31, 2013 is given in the Management Discussion and Analysis.

SECRETARIAL AUDIT

As a measure of good Corporate Governance practice and as recommended by the MCA Corporate Governance Voluntary Guidelines, 2009, the Company has voluntarily subjected itself to a secretarial audit for FY2013, which was carried out by M/s. Bharat R. Upadhyay & Associates, Practicing Company Secretaries. The secretarial audit report forms part of this annual report.

The said secretarial audit report confirms that the Company has complied with all the applicable provisions of the Companies Act, 1956, Equity Listing Agreements with the Stock Exchanges and all the regulations of Securities and Exchange Board of India (SEBI) as applicable to the Company, including the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and the SEBI (Prohibition of Insider Trading) Regulations, 1992.

DIRECTORS'' RESPONSIBILITY STATEMENT

As required under section 217(2AA) of the Companies Act, 1956 we hereby state:

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

b) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2013 and its loss for the year ended on that date;

c) 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;

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

DIRECTORS

Mr. Gautam Doshi retires by rotation at the ensuing Annual General Meeting and is eligible for re-appointment, which the Board recommends.

Mr. N.L. Bhatia and Mr. Rajesh Laddha were appointed as Directors of the Company, liable to retire by rotation, with effect from February 2,2012, in the casual vacancies caused by the resignation of Sir Ravinder Maini and Prof. Goverdhan Mehta respectively. They hold office upto the date of the ensuing Annual General Meeting and are eligible for appointment as Directors, which the Board recommends.

APPOINTMENT OF MANAGER

Consequent to the resignation of Mr. Prashant Surana as Manager of the Company, Dr. Ashish Suthar has been appointed as Manager of the Company with effect from May 22, 2013 in compliance with the requirements of section 269 of the Companies Act, 1956.

CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

Applicable particulars required under section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given as Annexure I to this Report.

CORPORATE GOVERNANCE

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite Certificate from M/s. Bharat R. Upadhyay & Associates, Practicing Company Secretaries, confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is annexed hereto as Annexure II and forms part of this report.

HUMAN RESOURCES

The Company continues to focus on its core values of Knowledge, Action and Care and these are reflected in the action and behaviour of our employees. The Company has a formal Reward and Recognition program.

There were no employees who were in receipt of remuneration exceeding the limits laid down under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

During the year under review, no Stock Options were granted, vested or exercised. No stock options are in force as on date. Hence, there are no disclosures required to be made pursuant to the applicable requirements of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

AUDITORS

M/s. Haribhakti & Co, retire as Auditors of the Company at the ensuing Annual General Meeting and are eligible for re-appointment.

ACKNOWLEDGMENTS

We take this opportunity to thank the employees for their dedicated service and contribution to the Company. We also thank our banks, business associates and our shareholders for their continued support to the Company.

By Order of the Board

Mumbai N.L. Bhatia Rajesh Laddha

May 8,2013 Director Director


Mar 31, 2012

The take pleasure in presenting the 11th Annual Report and Audited Accounts for the Year ended 31st March, 2012.

PERFORMANCE HIGHLIGHTS

(Rs. in Million)

Particulars FY 2010-11*

Income

Net Sales 28.5 23.3

Other Income 3.3 0.4

Expenditure

Total Operating Expenses 56.7 26.8

(Loss) before Interest, Depreciation and Tax (24.9) (3.1)

Less: Interest paid (Net) — —

(Loss) before Depreciation and Tax (24.9) (3.1)

Less: Depreciation 46.2 —

(Loss) before Tax (71.1) (3.1)

Less: Provision for Taxation — —

(Loss) for the year (71.1) (3.1)

Earnings / (Loss) per share (Basic / Diluted) (Rs.) (Face Value of Rs. 10/- each) (2.7) (0.1)

* Note: The NCE Research Unit was demerged into Piramal Healthcare Limited during 2012 with effect from 1st April, 2011 and consequently, the figures for year ended 31st March, 2012 exclude those relating to the NCE Research Unit. To facilitate comparison, the figures for year ended 31st March, 2011 as reflected in the above statement, are excluding those relating to the NCE Research Unit.

DIVIDEND

In view of the losses incurred by the Company, the Directors do not recommend any dividend for the Financial Year ended 31st March, 2012.

DEMERGER OF NCE RESEARCH UNIT INTO PHL

During the year, the NCE Research Unit of the Company was demerged into Piramal Healthcare Limited ('PHL') with effect from 1st April, 2011, under the Scheme of Arrangement sanctioned by the Hon'ble Bombay High Court. Under the demerger scheme, each shareholder was allotted one fully paid up equity share of Rs. 2 of PHL for every four equity shares of Rs. 10 each held in the Company. All assets and liabilities of the NCE division were transferred to PHL at book value.

Consequent to the demerger, the business of the Company mainly comprises marketing of herbal products.

OPERATIONS REVIEW

The financials of the year 2010-2011 have been restated above to exclude financials related to the NCE Research Unit which was demerged into Piramal Healthcare Limited with effect from 1st April, 2011. Net Sales for FY2012 grew by 22.3% to Rs. 28.5 million as compared to Rs. 23.3 million in FY2011. Loss before interest, depreciation and taxes was higher at Rs. 24.9 million as compared to Rs. 3.1 million in FY2011. A detailed discussion on operations for the year ended 31st March, 2012 is given in the Management Discussion and Analysis section.

The auditors, in para no. 10 of Annexure to the Auditors' Report have observed that the Company has incurred cash losses in the year under review and in the immediately preceding financial year. Cash losses in FY2011 were due to the operations of the NCE Research Unit. In the year under review i.e. FY2012, separate focus on the herbal segment has resulted in higher promotional and marketing costs, professional fees and increase in recruitments, contributing to the cash loss.

INDUSTRY OUTLOOK

The global nutritional supplements industry is quite fragmented, with many small and large companies operating in the sphere. The US, Europe and Japan collectively hold a major share in the global market. In the coming years, the share of Asia is expected to increase, mainly because of the supplement market's growth in China. The global herbal supplements market is estimated to reach US$ 93 billion by the year 2015, spurred by increasing incidence of ageing population and consumer awareness about general health and well being. The intrinsic benefits of herbal products include greater efficacy, little or no side effects and affordable prices. An increasing inclination towards healthier natural herbs and botanical derivatives is likely to lead to continued growth in this market. However, scientific research and clinical trials corroborating safety claims of herbal supplements and remedies remain a critical factor in determining long-term success in the market place.

DIRECTORS' RESPONSIBILITY STATEMENT

As required under section 217(2AA) of the Companies Act, 1956, ('the Act') we hereby state:

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

b) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and its loss for the year ended on that date;

c) 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;

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

DIRECTORS

Dr. Somesh Sharma retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment, which the Board recommends.

Changes during the year

Consequent to the Demerger of the NCE Research Unit of the Company into PHL, following changes took place in the Board of Directors during the year:

1. Mr. Ajay G. Piramal, Dr. (Mrs.) Swati A. Piramal, Dr. R.A. Mashelkar, Mr. N. Santhanam, Prof. Goverdhan Mehta and Sir Ravinder Maini resigned as Directors of the Company with effect from 2nd February, 2012;

2. Mr. Rajesh Laddha and Mr. N.L. Bhatia were appointed as Directors in the resultant casual vacancies with effect from 2nd February, 2012;

3. Dr. Somesh Sharma ceased to be the Managing Director of the Company with effect from 2nd February, 2012. However, he continues to be a member of the Board as a Non-Executive Director. He has also been appointed as Chairman of the Board of Directors.

APPOINTMENT OF MANAGER

In compliance with the requirements of section 269 of the Companies Act, 1956, Mr. Prashant Surana has been appointed as Manager with effect from 3rd February, 2012.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

Applicable particulars required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given as Annexure I to this Report.

CORPORATE GOVERNANCE

The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms part of the Annual Report. The requisite Certificate from Mr. Bharat R. Upadhyay, Practicing Company Secretary, confirming compliance with the conditions of Corporate Governance as stipulated under the aforesaid Clause 49, is annexed hereto as Annexure II and forms part of this report.

HUMAN RESOURCES

The Company continues to focus on its core values of Knowledge, Action and Care and these are reflected in the action and behaviour of our employees. The Company has a formal Reward and Recognition program.

Consequent to the demerger of the NCE Research Unit of the Company into PHL, there were no employees who were in receipt of remuneration exceeding the limits laid down under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

Stock Options disclosures pursuant to the applicable requirements of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are given as Annexure III to this Report.

AUDITORS

The current Auditors, M/s. Price Waterhouse & Co., Chartered Accountants, have expressed their unwillingness for their re- appointment as Statutory Auditors of the Company at the ensuing Annual General Meeting.

M/s. Haribhakti &Co., Chartered Accountants, Vadodara are proposed to be appointed as the Auditors of the Company. Requisite special joint notice under Section 225(1) of the Companies Act, 1956, has been received from members signifying their intention to appoint them as Auditors.

M/s. Haribhakti & Co., Chartered Accountants, Vadodara are eligible for appointment as Auditors, which your Board recommends for your approval.

ACKNOWLEDGEMENTS

We take this opportunity to thank the employees for their dedicated service and contribution to the Company. We also thank our banks, financial institutions, business associates and our shareholders for their continued support to the Company.

By Order of the Board

Mumbai N.L. Bhatia Rajesh Laddha

19th May, 2012 Director Director


Mar 31, 2011

We take pleasure in presenting the Annual Report and Audited Accounts for the Year ended 31st March 2011 being 4th Annual Report after the Companys shares were listed on 29th May, 2008.

PERFORMANCE HIGHLIGHTS :

(Rs. in Million)

Year ended March 31 2011 2010 Growth

Income

Sales and Services 158.1 47.4 233.5%

Other Income 0.9 14.7 (93.9%)

Expenditure

Total Operating Expenses 1,090.0 1,071.8 1.7%

(Loss) Before Interest, Depreciation and Tax (931.0)(1,009.7) 7.8%

Less: Interest Paid (Net) 385.5 249.0 --

(Loss) Before Depreciation and Tax (1,316.5) (1,258.7) (4.6)

Less: Depreciation 113.3 106.2 6.7%

(Loss) Before Tax (1,429.8) (1,364.9) (4.8)

Less: Provision for Taxation

Deferred Tax -- (67.0) --

(Loss) For the Year (1,429.8)(1,297.9) (10.2)

(Loss) Balance brought forward from previous year (3,323.5)(2,025.6) --

Net (Loss) (4,753.3)(3,323.5) (43.0)

Balance carried to Balance Sheet (4,753.3)(3,323.5) --

Earning/(Loss) Per Share (Basic/ Diluted) (Rs.) (Face value of Rs. 10/-each) (56.2) (51.0) --

DIVIDEND:

In view of the losses incurred by the Company, the Directors do not recommend any dividend for the Financial Year ended 31st March 2011.

OPERATIONS REVIEW:

During the year, PLSL received initial milestone payment for P2202 from Eil Lilly of Rs. 132.9 million; as a result sales for the year grew by 233.5% to Rs. 158.1 million. PLSL incurred Operating expenditure of Rs. 1,090.0 million as compared to Rs. 1,071.8 million in FY2010. Net capital expenditure was Rs. 68.9 million in FY2011 where as Rs. 99.8 million in FY2010.

AUDITORS OBSERVATIONS:

The observations by the auditors at para no.10 of Annexure to the Auditors Report are appropriately dealt with in note no.3 of Schedule 18 "Notes to Financial Statements".

RESEARCH & DEVELOPMENT:

Details about our Research & Development (R&D) programme can be found in our Management Discussion and Analysis (MDA) section.

INDUSTRY OUTLOOK:

The global pharmaceutical industry is going through a transformation at every stage of drug development. Patent expiries of blockbuster drugs in recent years, challenge by generic drug manufacturers and diminishing success in new drug approvals along with high drug development costs have raised a question on the flow of innovative drugs for future. In recent years, more stringent regulatory environment has created new and challenging hurdles for a new drug to enter the market.

These factors have forced the drug companies to consider alternate strategies. Companies are mending ways by shifting from fully integrated pharmaceutical company model towards a network model of fully integrated pharmaceutical network. The approach is to engage all major stakeholders in the drug development process, melding core competencies of each component to leverage capabilities, enhance efficiency and improve output. This is evidenced by growing number of partnerships and alliances in the pharmaceutical industry. The recent trend in world economy has changed the focus of pharmaceutical companies towards eastern countries like India which has necessary infrastructure, skills and expertise.

INTERNAL CONTROL SYSTEM:

The Company has a sound internal control system, which ensures that all assets are protected against loss from unauthorized use and all transactions are recorded and reported correctly. The internal control systems are further supplemented by internal audit carried out by an independent firm of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses issues raised by both, the Internal Auditors and Statutory Auditors.

PROPOSED DE-MERGER OF THE COMPANYS NCE RESEARCH UNIT INTO PHL

Your Directors have approved the scheme for De-merger of the NCE Research Unit of the Company into Piramal Healthcare Limited (PHL) (De-merger Scheme). Under the proposed De-merger scheme, each shareholder of the Company will be entitled to one fully paid up equity share of Rs. 2/- of PHL for every four equity shares of Rs. 10/- each held in the Company. All assets and Liabilities of the NCE Research Unit will be transferred to PHL at book value. The Scheme also contemplates utilizing the share premium account to adjust the debit balance in the Profit & Loss account to the extent feasible.

The De-merger Scheme is subject to the consent of requisite majority of shareholders and creditors of the Company and of PHL. The De-merger Scheme is also subject to the sanction of the High Court of Judicature at Bombay and all other regulatory approvals as may be necessary for the implementation of the De-merger Scheme.

HUMAN RESOURCES:

Our people are the most important asset at Piramal Life Sciences Limited (PLSL). We value their talent, integrity and dedication. PLSL has been highly successful in attracting scientists trained abroad with significant drug development experience in big pharmaceutical and biotech companies. Dr. Somesh Sharma leads the team and has over 35 years experience in academia, biotech, and pharmaceutical industry, in the US. Similarly, critical departments such as Medicinal Chemistry, Pharmacology, Analytical Sciences, Clinical, Process Research, Translational Research and more are led by scientists with decades of drug development experience in multi-national corporations. Over 15% of our scientists have been trained abroad and have global experience. As on 31st March 2011, we had 362 employees focused on drug discovery and development. The company continues to focus on its core values of Knowledge, Action and Care and these are reflected in the action and behavior of our employees.

Human Resources Highlights

Strengthening The Development Departments:

In our quest to develop a strong clinical pipeline, the emphasis has been towards strengthening the development departments like Clinical, Toxicology, Translational Research. We have brought in expertise in the areas of clinical and translational activities, to further strengthen our inhouse capabilities.

Developing Campus Relationship And Structured Training Programs:

In order to nurture home-bred scientific talent, whocould be potential future employees, PLSL has developed a relationship with several scientific institutes of repute in India. The scientific student community vies for a training opportunity at PLSL. The best talent is picked up for available training/employment opportunities. PLSL has also been providing training to students from several renowned international universities of repute, who apply and wish to train at our world class R&D facility.

Collaborative Projects Under Public-Private Partnership:

PLSL is involved in projects along with government bodies such as Department of Biotechnology (DBT), Government of India. Many young scientists are receiving scientific and project management training and experience through this initiative.

Opportunities For Development Including Further Studies:

People Development is an important agenda for the organization. Employees wishing to pursue further studies in related fields/ discipline are encouraged to do so. PLSL has tied up with Mumbai University and Vellore Institute of Technology and offers in- house Ph.D programs. To improve knowledge and skills, employees are sponsored for international conferences and seminars. Employees are also encouraged to present their work in scientific conferences and publish their work in peer reviewed journals.

Awards and Recognition:

The Company has initiated a formal Reward and Recognition program. Teams or individuals with exceptional contribution are felicitated by means of cash award and certificates.

Any shareholder interested in obtaining a copy of the statement of particulars of employees referred to in section 217(2A) of the Companies Act 1956, may write to the Company Secretary at the registered office of the Company. The statement is also available for inspection by the members on any working day (except Saturday) upto one day prior to the date of the meeting at the registered office of the Company between 10.00 a.m. to 5.00 p.m.

Stock Options disclosures pursuant to the applicable requirements of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are given in the Annexure to the Report. The Company has received a certificate from the Companys Auditors that the Piramal Life Sciences Limited-Employee Stock Options Scheme has been implemented in accordance with the said Guidelines and the resolution passed by the shareholders. The Certificate would be placed at the Annual General Meeting for inspection by members.

DIRECTORS RESPONSIBILITY STATEMENT:

As required under section 217(2AA) of the Companies Act, 1956 we hereby state:

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

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

c) 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 forpreventing and detecting fraud and other irregularities.

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

GROUP:

As per the intimations from the Promoters, the names of the Promoters and the entities comprising group as defined in the Monopolies and Restrictive Trade Practices Act,1969 (MRTP) are given for the purpose of SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 1997 in the Annexure to this Report.

DIRECTORS:

Prof. Goverdhan Mehta and Sir Ravinder Maini retire by rotation at the ensuing Annual General Meeting and are eligible for re- appointment which the Board recommends.

Dr. Somesh Sharma was appointed as Managing Director for a period of 2 years with effect from 9th May, 2010, subject to requisite approvals from Central Government which has been received vide its letter dated 12th May, 2011.

CORPORATE GOVERNANCE:

The Company has complied with the applicable provisions of Corporate Governance under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate report on Corporate Governance compliance is included as a part of the Annual Report alongwith the Certificate from Mr. N.L. Bhatia, Practicing Company Secretary.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION :

Particulars required under Section 217 (1) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annexure to this Report.

AUDITORS:

Shareholders are requested to appoint the Auditors. Messrs. Price Waterhouse & Co., Mumbai retire as Auditors of the Company at the ensuing Annual General Meeting and are eligible for reappointment.

ACKNOWLEDGEMENTS:

We take this opportunity to thank the employees for their dedicated service and contribution to the Company. We also thank our bankers, business associates and shareholders for their support towards conduct of operations of the Company.

By Order of the Board

Ajay G. Piramal

Chairman

Mumbai: 21st June, 2011


Mar 31, 2010

We take pleasure in presenting the Annual Report and Audited Accounts for the Year ended 31st March 2010 being 3rd Annual Report after the Companys shares were listed on 29th May, 2008.

PERFORMANCE HIGHLIGHTS : (Rs. in Million) Year ended March 31 2010 2009 Growth Income Sales 47.4 21.3 122.6% Other Income 14.7 1.6 818.8%

Expenditure Total Operating Expenses 1,071.8 930.1 15.2%

(Loss) Before Interest, Depreciation and Tax (1,009.7) (907.2) (11.3%)

Less : Interest Paid (Net) 249.0 95.2 —

(Loss) Before Depreciation and Tax (1,258.7) (1,002.4) (25.6%)

Less : Depreciation - 106.2 98.0 8.4%

(Loss) Before Tax (1,364.9) (1,100.4) (24.0%)

Less: Provision for Taxation

Deferred Tax (67.0) — —

Fringe Benefit Tax — 8.1 —

(Loss) For the Year (1,297.9) (1,108.5) (17.1%)

(Loss) Balance brought forward from previous year (2,025.6) (917.1) —

Net (Loss) (3,323.5) (2,025.6) (64.1%)

Balance carried to Balance Sheet(3,323.5) (2,025.6) —

Earning / (Loss) Per Share (Basic/Diluted) (Rs.) (Face value of Rs. 10/- each) (51.0) (43.6) —

DIVIDEND:

In view of the losses incurred by the Company, the Directors do not recommend any dividend for the Financial Year ended 31st March 2010.

OPERATIONS REVIEW:

During the year, the total sales was Rs. 47.4 million registering growth of 122.6%. This was mainly towards exports of neutraceutical products. The Operating Loss before Interest Depreciation and Tax was Rs. 1,009.7 million as compared to Rs. 907.2 million in FY2009. Net capital expenditure was Rs. 99.8 million in FY2010 whereas it was Rs. 138.5 million in FY2009.

AUDITORS OBSERVATIONS:

The observations by the auditors at para no. 10 of Annexure to the Auditors Report are appropriately dealt with in note no. 3 of Schedule 17 "Notes to Financial Statements" read with para 4 (a) of Auditors Report which are self explanatory.

RESEARCH & DEVELOPMENT:

Details about our Research & Development (R&D) programme can be found in our Management Discussion and Analysis (MDA) section.

INDUSTRY OUTLOOK:

The global pharmaceutical industry is experiencing a challenging business environment due to drying R&D pipeline, poor productivity, rising cost of research and increased regulatory scrutiny. Governments across the world are encouraging generic drugs due to spiraling healthcare budgets. The current global economic climate has now intensified this pressure, creating new imperatives for drug development companies to cut costs.

However, these factors have aided India in emerging as a favorable country for conducting drug discovery and development. India has a vast pool of treatment naive patients that can help in crunching development timelines. Cost of conducting research in India is also considerably lower than western geographies. This combined with the trend of US & European trained Indian scientists returning to India has resulted in tremendous advancement of India drug discovery industry in a short time span.

INTERNAL CONTROL SYSTEM:

The Company has a sound internal control system, which ensures that all assets are protected against loss from unauthorized use and all transactions are recorded and reported correctly. The internal control systems are further supplemented by internal audit carried out by an independent firm of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses issues raised by both, the Internal Auditors and Statutory Auditors.

HUMAN RESOURCES:

Our people are the most important asset. We value their talent, integrity and dedication. PLSL has been highly successful in attracting scientists trained abroad with significant drug development experience in big pharmaceutical and biofech companies. Dr. Somesh Sharma leads the team and has over 35 years experience in academia, biotech, and pharmaceutical industry, in the US. Similarly, critical drug development departments such as Medicinal Chemistry, Pharmacology, Analytical Sciences, Clinical Development and IPR are headed by scientists with decades of drug development experience in multi-national corporations. 10% scientists with global drug development experience form a part of PLSLs senior and mid-level management positions. As on 31st March 2010 we had 335 employees focused on drug discovery. The company continues to focus on its core values of Knowledge, Action and Care and these are reflected in our employees actions and behavior.

Human Resources Highlights

Creation of New Departments:

A few departments were set up last year to augment the research activities and also to further internal capabilities. The new departments set up were Integrated Projects and Polymer Chemistry.

Strengthening the Development Departments:

In our quest to develop a strong clinical pipeline, the emphasis has been towards strengthening the development departments like Process Research, Chemistry Manufacturing & Control, Clinical Development. We have brought in expertise in the area of Toxicology, to strengthen our in-house capabilities.

Developing Campus Relationship and Structured Trainee Programmes:

In order to nurture home-bread scientific talent, who could be potential future employees, PLSL has developed a relationship with several scientific institutes of repute in India. The scientific student community vies for a training opportunity at Piramal Life Sciences. The best talent is picked up for available training/employment opportunities. PLSL has also been providing training to students from several renowned international universities of repute who apply and wish to train at our world class R&D facility.

Collaborative Projects Under Public-Private Partnership:

PLSL is involved in projects along with government bodies such as Department of Biotechnology (DBT), Government of India. Many young scientists are receiving scientific and project management training and experience through this initiative.

Opportunities for Development Including Further Studies:

People Development is an important agenda for the organization. Employees wishing to pursue further studies in related fields/ discipline are encouraged to do so. In many cases, the course fee is reimbursed. Employees have enrolled for Masters/Ph.D. programmes with several institutions, with the company not only providing permission but also adequate resources to carry out these programmes successfully. PLSL has tied up with Mumbai University and Vellore Institute of Technology and offers in-house Ph.D. programmes. To improve knowledge and skills, employees are sponsored for international conferences and seminars. Employees are also encouraged to present their work in scientific conferences and publish their work in peer reviewed journals.

Rewards and Recognition:

The company has initiated a formal Reward and Recognition program. Teams or individuals with exceptional contribution are felicitated by means of cash award and certificates.

Any shareholder interested in obtaining a copy of the statement of particulars of employees referred to in section 217(2A) of the Companies Act 1956, may write to the Company Secretary at the Registered Office of the Company.

Stock Options disclosures pursuant to the applicable requirements of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are given in the Annexure to the Report. The Company has received a certificate from the Companys Auditors that the Piramal Life Sciences Limited- Employee Stock Option Scheme has been implemented in accordance with the said Guidelines and the resolution passed by the shareholders. The Certificate would be placed at the Annual General Meeting for inspection by members.

CHANGE IN SHARE TRANSFER AGENT:

M/s Link Intime India Pvt. Ltd. (Link Intime) has been appointed as the new Share Transfer Agent of the Company with effect from February 1, 2010. Necessary communication in this regard was mailed individually to all the Shareholders as well as bv advertisement in the newspapers. Contact details of Link Intime have been provided under the Corporate Governance Section of this Annual Report and the same are also available on the website of the Company.

DIRECTORS RESPONSIBILITY STATEMENT:

As required under section 217(2AA) of the Companies Act, 1956 we hereby state:

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

b) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March. 2010 and its loss for the year ended on that date;

c) 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.

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

GROUP:

As per the intimation from the Promoters, the names of the Promoters and the entities comprising group as defined in the Monopolies and Restrictive Trade Practices Act,1969 (MRTP) are given for the purpose of SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 1997 in the Annexure to this Report.

DIRECTORS:

Mr. Gautam Doshi and Dr. R. A. Mashelkar retire by rotation at the ensuing Annual General Meeting and are proposed for re- appointment.

Dr. Somesh Sharma has been re-appointed as Managing Director of the Company for a period of 2 years with effect from 9th May. 2010, subject to requisite approvals.

The Board recommends their re-appointment at the ensuing AGM.

CORPORATE GOVERNANCE:

The Company has complied with the applicable provisions of Corporate Governance under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate report on Corporate Governance compliance is included as a part of the Annual Report alongwith the Certificate from Mr. N. L. Bhatia, Practicing Company Secretary.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION:

Particulars required under Section 217 (1) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in the Annexure to this Report.

AUDITORS:

Shareholders are requested to appoint the Auditors. Messrs. Price Waterhouse & Co., Mumbai retire as Auditors of the Company at the ensuing Annual General Meeting and are eligible for reappointment.

ACKNOWLEDGEMENTS:

We take this opportunity to thank the employees for their dedicated service and contribution to the Company. We also thank our bankers, business associates and shareholders for their support towards conduct of operations of the Company.

By Order of the Board

Ajay G. Piramal

Chairman

Mumbai : 27th April, 2010