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Directors Report of Strides Shasun Ltd.

Mar 31, 2015



Dear Members,

The Company's directors are pleased to present the Twenty-Fourth Annual Report together with audited financial statements for the financial year ended March 31, 2015.

1. FINANCIAL SUMMARY (STANDALONE)

Figures in Millions

Year ended

March 31, 2015 (12 Months Period)

Rupees USD *

1.1 Financial Results

Income 10,295.94 164.74

Operating Profit (EBIDTA) 2,340.96 37.46

Net Profit (PAT) / (Loss) 5,323.19 85.17

Reserves and Surplus 14,148.07 226.37

1.2 Profits

Operating Profit (EBIDTA) 2,340.96 37.46

Less : Interest 344.23 5.51

Depreciation & Amortization 492.54 7.88

Exceptional items (Gain)/Loss (5,186.14) (82.98)

Profit before tax 6,690.33 107.05

Less: Provision for Tax

Current tax expenses 1,425.72 22.81

Current tax expense relating to prior years (11.87) (0.19)

Deferred tax expenses (46.71) (0.75)

MAT credit entitlement - -

Profit / (Loss) after tax 5,323.19 85.17

Opening balance of Profit and Loss 1,085.82 17.37

Add: Transferred from General reserve 560.72 8.97

Available for appropriation 6,969.73 111.52

1.3 Appropriations

Depreciation on transition to Schedule II of the Companies Act, (28.79) (0.46)

2013 on tangible fixed assets

Dividend on Equity Shares:

Interim Dividend Paid (6,254.39) (100.07)

Proposed Dividend (178.85) (2.86)

Dividend Tax:

On Interim Dividend (460.44) (7.37)

On proposed Dividend - -

Transfer to General Reserve - -

Balance carried to Balance Sheet 47.26 0.76

Figures in Millions

Year ended

March 31, 2015 March 31, 2014 (12 Months Period) (15 Months Period)

Rupees USD * RupeesUSD *

1.1 Financial Results

Income 11,847.81 198.39

Operating Profit (EBIDTA) 2,693.84 45.11

Net Profit (PAT) / (Loss) 35,129.25 588.23

Reserves and Surplus 15,713.55 263.12

1.2 Profits

Operating Profit (EBIDTA) 2,693.84 45.11

Less : Interest 1,050.31 17.59

Depreciation & Amortization 472.49 7.91

Exceptional items (Gain)/Loss (44,948.42) (752.65)

Profit before tax 46,119.46 772.26

Less: Provision for Tax

Current tax expenses 11,092.44 185.74

Current tax expense relating to prior years (35.00) (0.59)

Deferred tax expenses 43.90 0.74

MAT credit entitlement (111.13) (1.86)

Profit / (Loss) after tax 35,129.25 588.23

Opening balance of Profit and Loss 2,363.70 39.58

Add: Transferred from General reserve - -

Available for appropriation 37,492.95 627.81

1.3 Appropriations

Depreciation on transition to Schedule II of the Companies Act, - -

2013 on tangible fixed assets

Dividend on Equity Shares:

Interim Dividend Paid (29,783.30) (498.72)

Proposed Dividend (297.83) (4.99)

Dividend Tax:

On Interim Dividend (2,762.46) (46.26)

On proposed Dividend (50.62) (0.85)

Transfer to General Reserve (3,512.92) (58.82)

Balance carried to Balance Sheet 1,085.82 18.18

Note * 1 US$ = Rs. 62.50 (Exchange Rate as on March 31, 2015)

* 1 US$ = Rs. 59.72 (Exchange Rate as on March 31, 2014)

Previous year figures have been regrouped/ restated wherever necessary to make them comparable with those of the current year.

2. BUSINESS OVERVIEW

Financial year 2014-15 was a eventful year for the Company. The quality of the business improved with enhanced topline and bottom-line.

Regulated Market Business

* Contributed 35% of group revenue for the period ended March 31, 2015

* Revenues stood at Rs. 4,255 Million, grew by 7% over last year

* Completed first full year of front end operations in North America

* Successfully launched 5 new products in the US - Calcitriol, Buspirone, Tacrolimus, Imiquimod Cream and Methoxsalen

* Vancomycin maintained a consistent market share

* Strong R&D capabilities with consistent product pipeline.

Emerging Market Business

* Contributed 33% of group revenue for the period ended March 31, 2015

* Revenues at Rs. 4,070 Million, growth of 41% over last year, despite adverse currency volatilities

* The Renerve brand clocked global Revenues of Rs. 750 Million

Africa

* Registered strong performance in French Africa through significant investments in sales force and newly commissioned manufacturing facilities

* Initiated E-detailing through iPads to doctors in Africa, one of the very few companies to do so in Africa

* Continued pipeline, registration and launches - Renerve achieved volume growth * Entered into new countries - Angola and Namibia

India

* Indian brand business crossed the Rs. 1 billion revenue

* ReNerve maintained the market leader position in South India.

* Acquired the global rights of Raricap strengthening the women's health portfolio * Integrated the field force of Raricap business, leading to pan-India presence

Institutional Business

* Contributed 32% of group revenue for the period ended March 31, 2015

* Revenues stood at Rs. 3,865 Million, growth of 16% over last year

* Growth driven by first full year of Anti-Malarial business despite delay in orders due to change in procurement mechanism

* Entered into an agreement with Gilead Sciences, Inc. to bring generic Sofosbuvir(Sovaldi®) and Harvoni to 91 developing countries and expanded to include Investigational Pan-Genotypic Agent

* Entered into an Agreement with Gilead Sciences, Inc. to manufacture and distribute TenofovirAlafenamide(TAF) based HIV treatments in 112 developing countries

* Collaborated with Medicines for Malaria Venture (MMV) for the development of rectal artesunate for pre-referral treatment of children with severe malaria

Bio Generics

* Biotech business has been branded as 'Stelis Biopharma'. We commenced R&D activities in its new center in Bengaluru with two products have reached the Animal Toxicity Study stage.

Corporate Actions

* During the year under review, the Board of Directors and the Shareholders of the Company and Shasun Pharmaceuticals Limited ('Shasun') approved a Scheme of Amalgamation between the two companies. The combination will create a vertically integrated pharma company of scale with strong presence in Front-ended Regulated Markets Finished Dosages, Emerging Markets Branded Generics, Institutional Business, Active Pharmaceutical Ingredients and Contract Research and Manufacturing Services.

* In May 2015, the Company announced that Strides Pharma Global Pte. Ltd, Singapore and Strides (Australia) Pharma Pty Ltd, Australia, both wholly owned subsidiaries of the Company signed definitive agreements with certain wholly owned subsidiaries of Aspen Pharmacare Holdings Limited, a company listed on the Johannesburg Stock Exchange (Aspen), to acquire a generic pharmaceutical business in Australia together with

The business and assets being acquired from Aspen have a current prescription market share that will rank Strides and its group entities as one of the top 3 generic pharmaceutical suppliers in Australia and among the top 10 pharmaceutical companies in the Australian pharma market.

* The company entered into an arrangement with GMS Holdings, a privately owned investment company, based in Jordan, for an investment of USD 21.90 Million for a 25.1% stake in Stelis Biopharma to fund its Greenfield Project subject to obtaining requisite regulatory approvals.

3. SHARE CAPITAL

The Authorized share capital of the Company as at March 31, 2015 is Rs. 1,517,500,000 divided into 89,750,000 equity shares of Rs. 10/- each and 620,000 Cumulative Redeemable Preference shares of Rs. 1,000/- each.

The Issued, Subscribed and Paid-Up Capital of the Company as at March 31, 2015 is Rs. 596,156,210 divided into 59,615,621 equity shares of Rs. 10/- each.

During the year there has been an increase in the equity Paid-Up Capital of the Company on account of allotment of 50,000 equity shares consequent to exercise of stock options.

4. DIVIDENDS

Your Directors are pleased to recommend a Final Dividend of Rs. 3 (Three) per equity share of face value Rs. 10/- each for the year ended March 31, 2015.

During the year under review, a Special Dividend of Rs. 105 (One hundred five) per equity share of face value Rs. 10/- each was declared by the Board of Directors of the Company on October 7, 2014 and paid to shareholders as on record date of October 17, 2014.

The total dividend for the financial year, including the proposed Final Dividend, amounts to Rs. 108 per equity share and will absorb Rs. 6,893.68 Million of reserves, including Dividend Distribution Tax of Rs. 460.44 Million.

5. DEPOSITS

The Company has not accepted any deposits and accordingly no amount is outstanding as on the balance sheet date.

6. SUBSIDIARY COMPANIES

As at March 31, 2015, the Company had 24 subsidiaries overseas and 4 subsidiaries in India and 1 Joint Venture entity overseas.

During the year under review:

a) Fagris Medica Private Limited, India and Altima Innovation Inc, USA became subsidiaries of the Company;

b) Stelis Biopharma Private Limited, India merged with Inbiopro Solutions Private Limited, India; and

c) Plus Farma ehf, Iceland, Strides Australia Pty Ltd, Australia and Strides S.A Pharmaceuticals Pty Ltd., South Africa were wound up.

Accounts of Subsidiaries

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. Statement containing salient features of the financial statements of the subsidiary companies/ joint venture as required in Form AOC 1 is enclosed as Annexure 1 to this Report.

7. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities & Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate "Report on Corporate Governance" forms part of the Annual Report of the Company.

A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

8. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, "Management Discussion and Analysis" is given separately forming part of this Report.

9. EMPLOYEE STOCK OPTION SCHEME

The Company has four employee stock option schemes viz., Strides Arcolab ESOP 2006, Strides Arcolab ESOP 2008, Strides Arcolab ESOP 2011 and Strides Arcolab ESOP 2008 (Directors) Schemes.

Statement giving detailed information on stock options granted to Employees under the Company's Employee Stock Option Schemes as required under the SEBI Regulation is enclosed as Annexure 2 to this Report.

10. BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL Board Composition

The Board comprises of adequate number of Executive and Non-Executive Directors as required under the Companies Act, 2013 read with Rules made thereunder and the Listing Agreement entered into with the Stock Exchanges.

As on date of this Report, the Board comprises of 8 Directors comprising of 1 Executive Director, 4 Independent Directors and 3 Non-Executive Directors. Chairman of the Board is a Non-Executive Director.

Meetings of the Board

During the year ended March 31, 2015, the Board met 6 times. These meetings were held on May 23, 2014, July 25, 2014, September 29, 2014, October 7, 2014, November 7, 2014 and February 2, 2015. Further, the Twenty-Third Annual General Meeting (AGM) of the Company was held on Tuesday, September 09, 2014.

Policy on Directors Appointment and Remuneration

The Directors of the Company are appointed by shareholders at the General Meetings.

As regards the appointment and tenure of Independent Directors, the Company has adopted the provisions of the Companies Act, 2013 read with Clause 49 of the Listing Agreement.

The Company's Remuneration Policy for Directors, Key Managerial Personnel and Senior Management is enclosed as Annexure 3 to this Report.

Board Evaluation

Pursuant to Clause 49 of the Listing Agreement, the Companies Act, 2013, and Schedule IV of the Companies Act, 2013, the evaluation of the Board as a whole and all directors was conducted based on identified criteria and framework.

The performance evaluation of the Chairman, Managing Director and the Non-Independent Directors was carried out by the Independent Directors and the performance evaluation of the Independent Directors was carried out by the entire Board excluding the director being evaluated.

Declaration by Independent Directors

The Company has received necessary declaration from each Independent Director that he/ she meets the criteria of independence laid down in Section 149 (6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Retirements and Resignations

Mr. Bharat Shah, non-executive Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Your directors recommend his re-appointment to the Board.

None of the Independent Directors are due for reappointment.

During the year Mr. Mukul Sarkar, Nominee Director ceased to be a Director of the Company consequent to withdrawal of his nomination by Exim Bank with effect from December 15, 2014.

Key Managerial Personnel

During the year under review, Mr. Arun Kumar, Managing Director and Mr. Badree Komandur, Chief Financial Officer and the Company Secretary were designated as Key Managerial Personnel of the Company pursuant to Section 203 of the Companies Act, 2013.

11. SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Gopalkrishnaraj HH & Associates, a firm of Company Secretaries in Practice (Certificate of Practice No: 4152) to undertake Secretarial Audit. The Secretarial Audit Report is annexed as Annexure 4 to this Report. There are no qualifications, observations or adverse remarks in the Secretarial Audit Report.

12. EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT 9 is enclosed as Annexure 5 to this Report.

13. PARTICULARS OF EMPLOYEES

Particulars as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, is annexed as Annexure 6 to this Report.

Further, the particulars of employees required under Rule 5(2) and 5(3), showing a statement of names and other particulars of employees drawing remuneration in excess of the limits as set out in the said rules is provided in a separate annexure forming part of this Report. The report and the accounts are being sent to the members excluding the said annexure. In terms of Section 136 of the Act, the said annexure is open for inspection at the Registered Office of the Company. Any shareholder interested in obtaining a copy of the same may write to the Company Secretary.

14. CORPORATE SOCIAL RESPONSIBILITY

The Company has undertaken "Corporate Social Responsibility" (CSR), initiatives in areas of Health, Education and Livelihood which are projects in accordance with Schedule VII of the Companies Act, 2013. The Annual Report on CSR activities, is enclosed as Annexure 7 to this Report.

15. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has a vigil mechanism pursuant to which a Whistle Blower Policy is in place. The Policy ensures that strict confidentiality is maintained whilst dealing with concerns and also that no discrimination will be meted out to any person for a genuinely raised concern.

The Policy covering all employees, Directors and other persons having association with the Company is hosted on the Company's website (http://www.stridesarco.com/ investor-committeboard.html)

16. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All the transactions with related parties are in the ordinary course of business and on arm's length basis. There are no material contracts or arrangement or transactions at arm's length basis.

The Company has formulated a policy for transacting with Related Parties, which is uploaded on the website of the Company (http://www.stridesarco.com/investor- committeboard.html)

Further, there are no materially significant related party transactions with its promoters, the directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large.

Transactions with the related parties are disclosed in Note No. 47 to the financial statements in the Annual Report.

17. INSURANCE

The assets/ properties of the Company are adequately insured against loss due to fire, riots, earthquake, terrorism, etc., and against other perils that are considered necessary by the management.

18. ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company has designed and implemented a framework for Internal Financial Controls ("IFC") within the meaning of explanation to Section 134 (e) of the Companies Act, 2013.

For the Year ended March 31, 2015, the Board believes that the Company has sound IFC commensurate with the nature and size of its business operations; wherein controls are in place and operating effectively and no material weaknesses exist.

The Company has a process in place to continuously monitor the existing controls and identify gaps, if any, and implement new/ improved controls.

19. PARTICULARS OF INVESTMENTS, LOANS AND GUARANTEES

Particulars of investments made, loans given and guarantees provided is as per details given below:

Name of the Relationship Investment * Loan Guarantee entity

Stelis Biopharma Wholly Owned Rs.146.13 - - Private Limited, Subsidiary Million India

Strides Subsidiary Rs.481.06 Rs.27.18 - Healthcare Million Million Private Limited, India

Fagris Medica Subsidiary Rs.9.20 Rs.10.50 - Private Limited, Million Million India

Strides Pharma Wholly Owned Rs.90.38 - USD Asia Pte., Ltd, Subsidiary Million 55.00 Singapore Million

Stelis Biopharma Wholly Owned - - USD (Malaysia) Subsidiary 29.50 Sdn Bhd Million Note: *Does not include share application money. Refer notes forming part of the financial statements

20. RISK MANAGEMENT

Company has a risk management framework for identification and managing risks. Please refer the 'Management Discussion and Analysis' report forming part of the Annual Report for additional details.

21. DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with Section 134(5) of the Companies Act, 2013, the Board of Directors of your company confirms that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had 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 and loss of the company for that period;

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

(d) the annual accounts of the Company have been prepared on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

22. CONSERVATION OF ENERGY, R&D, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/ OUTGO

Particulars of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo required under the Companies (Accounts) Rules, 2014 is enclosed as Annexure 8 to this Report.

23. STATUTORY AUDITORS

At the Annual General Meeting held on September 9, 2014, M/s. Deloitte Haskins & Sells, Chartered Accountants, (ICAI Registration Number 008072S) were appointed as statutory auditors of the Company for a period of 3 years viz., till the conclusion of 26th Annual General Meeting. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Deloitte Haskins & Sells, 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 reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

24. AUDIT REPORT

There are no qualifications, observations or adverse remarks in the Audit Report issued by the Statutory Auditors of the Company for financial year ended March 31, 2015.

25. DISCLOSURES

(a) There has been no change in the nature of business of the Company during the year under review.

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

(c) There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of Financial year and the date of this Report.

26. ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust and confidence reposed on us by the medical profession and trade.

We also acknowledge the support and wise counsel extended to us by the bankers, financial institutions, Government agencies, analysts, shareholders and investors at large.

For and on behalf of the Board of Directors

Date: May 22,2015 Deepak Vaidya Arun Kumar Place: Bengaluru Chairman Executive Vice Chairman & Managing Director


Mar 31, 2014

DEAR MEMBERS,

The Company''s directors are pleased to present the twenty-third Annual Report together with audited fnancial statements for the 15 months period ended March 31, 2014.

1. STANDALONE FINANCIALS

(Figures in Million)

Period ended

March 31, 2014 December 31, 2012 (15 Months period) (12 Months period)

Rs. US$ * Rs. US$ *

1.1 Financial Results

Income 11,847.81 201.70 8,309.15 155.03

Operating Profit (EBITDA) 2,693.84 45.86 2,146.14 40.04

Net Profit (PAT) / (Loss) 35,129.25 598.05 559.86 10.45

Reserves and Surplus 15,713.55 267.51 13,126.10 244.90

1.2 Profits Operating Profit (EBITDA) 2,693.84 45.86 2,146.14 40.04

Less : Interest (1,050.31) (17.88) (712.20) (13.29)

Depreciation & Amortisation (472.49) (8.04) (190.99) (3.56)

Exceptional items incl. AS 30 44,948.42 765.22 (644.09) (12.02)

Profit before tax 46,119.46 785.15 598.86 11.17

Less: Provision for Tax

Current tax expenses 11,092.44 188.84 206.5 3.85

Current tax expense relating (35.00) (0.60) - - to prior years

Deferred tax expenses 43.90 0.75 - -

MAT credit entitlement (111.13) (1.89) (167.50) (3.13)

Profit / (Loss) after tax 35,129.25 598.05 559.86 10.45

Available for appropriation 35,129.25 598.05 559.86 10.45

1.3 Appropriations

Dividend on Equity Shares

Interim Dividend Paid (29,783.30) (507.04) - -

Proposed Dividend (297.83) (5.07) (117.99) (2.20)

Dividend Tax

On Interim Dividend (2,762.46) (47.03) - -

On proposed Dividend (50.62) (0.86) (19.14) (0.36)

Transfer to General Reserve (3,512.92) (59.81) (43.00) (0.80)

Balance Carried to Balance Sheet (1,277.88) (21.76) 379.73 7.08

Note * 1 US$ = Rs. 58.74 (Exchange Rate as on March 31, 2014)

* 1 US$ = Rs. 53.60 (Exchange Rate as on December 31, 2012)

Previous year fgures have been regrouped/restated wherever necessary to make them comparable with those of the current year.

2. busIness oVerVIew

The year 2013-14 was very eventful at Strides. We successfully completed the Agila sell-off to Mylan and distributed value among shareholders and employees. Our continued pharmaceutical business demonstrated improvements in EBITDA margins and cash flows.

Your Company operates in two major segments namely pharmaceuticals and Biogenerics.

Pharma Generics

- Contributed 37% of group revenue for the period ended March 31, 2014

- Leading generics platform focused on the regulated markets with strong partnerships and front - ending presence

- Two State-of-the-art manufacturing facilities approved by key global regulatory authorities including US FDA

- Strong R&D capabilities with pipeline focused on high entry barriers products.

BRANDED GENERICS

- Contributed 24% of group revenue for the period ended March 31, 2014

- Regional player in Africa with manufacturing, sales and marketing platform for branded generic pharmaceuticals and OTC medicines

- Established regional player in Southern India in niche branded pharmaceutical products

- "Renerve" is the fagship brand with leading market position

Institutional business

- Contributed 39% of group revenue for the period ended March 31, 2014

- Sales of antiretroviral and anti-Malaria medicines to African government programmes backed by large donor agencies providing highly visible and reliable funding

- Key supplier to programs funded by Global fund, PFSCM, USAID, UNITAID, WHO, UNICEF, PEPFAR & Clinton Foundation

BIO GENERICS

-Biotech business has been branded as ''Stelis Biopharma''. R&D initiatives have commenced at our state-of-the-art R&D facility in Bangalore, which is dedicated to bio-pharmaceuticals, catering to an internal pipeline as well as partnering activities.

3. SHARE CAPITAL

The Authorised share capital of the Company as at March 31, 2014 is Rs. 1,517,500,000.00 divided into 89,750,000 equity shares of Rs. 10.00 each and 620,000 Cumulative Redeemable Preference shares of Rs. 1,000.00 each.

The Issued, Subscribed and Paid-Up Capital of the Company as at March 31, 2014 is Rs. 595,656,210.00 divided into 59,565,621 equity shares of Rs. 10.00 each.

During the period under review there has been an increase in the equity Paid-Up Capital of the Company on account of allotment of 761,900 shares consequent to exercise of stock options.

4. DIVIDENDS

Your Directors are pleased to recommend a Final Dividend of Rs. 5.00 per equity share of face value ofRs. 10.00 each for the year ended 31st March, 2014.

During the period under review , a Special Dividend of Rs. 500.00 per equity share was declared on December 10, 2013 and paid to shareholders as on record date of December 20, 2013.

The total dividend for the 15 months period, including the proposed Final Dividend, amounts to Rs. 505.00 per equity share and will absorb Rs. 3,289.42 Crores, including Dividend Distribution Tax of Rs. 281.30 Crores.

5. FIXED DE POSITS

The Company has not accepted any fixed deposits and accordingly no amount is outstanding as on the balance sheet date.

6. DIvestment of entitles in specialties business (AGILA) & Crystallizing significant Value created at AGILA

In February 2013, the Company and its wholly-owned subsidiary, Strides Pharma Asia Pte. Limited, Singapore (then known as Agila Specialties Asia Pte. Limited), had entered into defnitive agreements with Mylan Inc. USA for hiving off entities in Specialties Business.

The hive off of the Specialties Business was by way of sale of shares (a) held by Strides Arcolab, India in its wholly-owned subsidiary, Agila Specialties Private Limited, India; and (b) held by Strides Pharma Asia Pte Ltd., Singapore in its wholly-owned subsidiary, Agila Specialties Global Pte Ltd, Singapore.

Vide Share Purchase Agreement dated December 5, 2013, the Company and Strides Pharma Asia Pte Ltd completed the sale of shares in Agila Specialties Private Limited to Mylan Laboratories Limited, India a subsidiary of Mylan Inc and that of Agila Specialties Global Pte Ltd to Mylan Institutional Inc., USA. a subsidiary of Mylan Inc respectively.

The Enterprise Value for the Specialties Business was US$ 1,750 (including a hold back of US$ 250 Million).

The proceeds of the transaction was used to:

- Reduce debt and incur costs related to the satisfaction of certain contingent conditions

- Pay out a special dividend of Rs. 500.00 per share, resulting in a pre-tax distribution of US$ 525 Million, thus returning 88% of the free cash available with the company

- Retained US$75 Million for growth capital.

The Company''s transaction with Mylan received the M&A Atlas Global Major Markets Award as one of the top Cross Border Deal of the Year.

7. CREDIT RATING

During the year under review, Rating Agencies reaffrmed/issued credit ratings to Strides as under:

- Fitch: from BBB to A on the overall company performance. The Outlook is Stable.

- ICRA: Long term debt: A and Short term debt: from A2 to A1 which is the highest in its category.

8. RESEARCH & DEVELOPMENT

Detailed write-up on Research & Development activity forms part of the annexure to the Directors'' report.

9. CHANGE OF FINANCIAL YEAR

Board of directors of the Company in their meeting held on December 10, 2013 approved change of fnancial year of the Company from January-December to that of April-March. Consequently, the current fnancial year is for a period of 15 months i.e., from January 1, 2013 to March 31, 2014. The change in fnancial year is in line with the requirement of Companies Act, 2013.

10. SUBSIDIARY COMPANIES

The Company has 25 subsidiaries overseas and 3 subsidiaries in India as on March 31, 2014

In accordance with Accounting Standard AS-21 on consolidated fnancial statements read with Accounting Standard AS-27 on Accounting for Joint Ventures, the audited consolidated fnancial statements are provided in this Annual report.

New entities incorporated during the year under strides Group

1) Strides Pharma Inc., USA

2) Strides Actives Private Limited, India

Entities wound up in strides Group

1) Strides Pharmaceuticals (Holdings) Limited, Mauritius

2) Strides Pharmaceuticals (Mauritius) Limited, Mauritius

Entities divested from strides Group

Pursuant to the sale of shares in Agila Specialties Private Limited to Mylan Laboratories Limited, India a subsidiary of Mylan Inc., and that of Agila Specialties Global Pte Ltd to Mylan Inc., respectively, the following entities ceased to be subsidiaries of the Company:

1) Agila (NZ) Pty Ltd, New Zealand

2) Agila Australia Pty Ltd, Australia

3) Agila Especialidades Farmaceuticas Ltda, Brazil

4) Agila Farmaceutica Participacoes Ltd, Brazil

5) Agila Jamp Canada Inc., Canada

6) Agila Marketing e Distribuicao De Producos Hospitalares Ltda, Brazil

7) Agila Specialties (Holdings) Cyprus Limited, Cyprus

8) Agila Specialties Americas Ltd, Cyprus

9) Agila Specialties Global Pte Ltd, Singapore

10) Agila Specialties Inc, USA

11) Agila Specialties Investments Limited, UK

12) Agila Specialties Pharma Corporation, Canada

13) Agila Specialties Polska Sp.Z.o.o, Poland

14) Agila Specialties Private Limited, India

15) Agila Specialties UK Limited, UK

16) Catalist Pty Ltd, Australia

17) Farma Plus AS, Norway

18) Onco Laboratories Ltd, Cyprus

19) Onco Therapies Limited, India

20) Sagent Agila LLC, USA

ACCOUNTS OF SUBSIDIARIES

A statement pursuant to Section 212 of the Companies Act, 1956 relating to Subsidiary Companies, is attached to the Accounts. In terms of General Exemption, under Section 212 (8) of the Companies Act, 1956, granted by Ministry of Corporate Affairs vide its circular no. 02/2011 dated February 8, 2011, and in compliance with the conditions enlisted therein, the Audited Statement of Accounts, Auditors'' Reports thereon and the Reports of the Board of Directors of the Company''s subsidiaries for the fnancial year ended March 31, 2014, have not been annexed.

The Annual Accounts and related documents of the Subsidiary Companies shall be kept open for inspection at the Registered Office and Corporate Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same. However, as directed by the said circular, the fnancial data of the subsidiaries have been furnished under ''subsidiary companies particulars'' forming part of the Annual Report.

11. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specifed by the Securities & Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate "Report on Corporate Governance" forms part of the Annual Report of the Company. A certifcate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

12. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, "Management Discussion and Analysis" is given separately forming part of this Report.

13. EMPLOYEE STOCK OPTION SCHEME

The Company has granted ESOPs to eligible employees under the Strides Arcolab ESOP 2006, Strides Arcolab ESOP 2008, Strides Arcolab ESOP 2011 and to Directors under Strides Arcolab ESOP 2008 (Directors) Schemes.

No employee has been issued stock options during the year equal to or exceeding 1% of the issued capital of the company at the time of grant.

Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed to this Report.

14. BOARD OF DIRECTORS

- The term of Office of Mr. Arun Kumar, Managing Director expired on May 23, 2014. The Board of Directors of the Company in their meeting held on May 23, 2014 approved reappointment of Mr. Arun Kumar for a further period of 5 years. In accordance with Section 196, 197, 198 and other applicable provisions of the Companies Act, 2013, approval of the members will be sought at the ensuing Annual General Meeting of the Company for his reappointment for a further term of 5 years, i.e., upto May 23, 2019. Your directors recommend his reappointment as Managing Director.

- Mr. M R Umarji ceased to be an Independent Director with effect from April 1, 2014 in terms of Clause 49 of the Listing Agreement and Section 149 (6) of the Companies Act, 2013. He continues to be on the Board of Strides as Non-Executive Director.

Mr. Umarji retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

Your directors recommend his re-appointment as Non-Executive Director, liable to retire by rotation.

- Mr. Deepak Vaidya was appointed as a Director in January 1998 and as Chairman of the Board of Directors (Board) in February 2006. He became an Independent Director in February 2010. Mr. Vaidya has served as a member of the Board of Directors for over 16 years. Considering his long tenure in Office and as a measure of good corporate governance, Mr. Vaidya has opted to be considered as Non-Independent Director with effect from July 25, 2014 and he will continue to be the Chairman of the Board.

Mr. Vaidya retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Your directors recommend his re-appointment to the Board.

- Ms. Sangita Reddy was appointed to the Board of the Company as an Additional Director on February 7, 2014. Being appointed as an Additional Director in the Board, Ms. Sangita Reddy will hold Office till the conclusion of the ensuing Annual General Meeting of the Company.

The requisite notices together with necessary deposits have been received from a member pursuant to Section 160 of the Companies Act, 2013 proposing the election of Ms. Sangita Reddy as a Director of the Company.

Your directors recommend her appointment as Independent Director, not liable to retire by rotation, for five consecutive years from the date of passing of the resolution by the members approving her appointment.

- Mr. Bharat Shah was appointed to the Board of the Company as an Additional Director on July 25, 2014. Being appointed as an Additional Director in the Board, Mr. Bharat Shah will hold Office till the conclusion of the ensuing Annual General Meeting of the Company.

The requisite notices together with necessary deposits have been received from a member pursuant to Section 160 of the Companies Act, 2013 proposing the election of Mr. Bharat Shah as a Director of the Company.

Your directors recommend his appointment as Non-Executive Director, liable to retire by rotation.

- As per the provisions of the Companies Act, 2013, Independent Directors are required to be appointed for a term of five consecutive years and shall not be liable to retire by rotation. Accordingly, resolutions proposing appointment of Mr. S. Sridhar, Mr. P.M. Thampi and

Mr. AK. Nair as Independent Directors form part of the Notice of the Annual General Meeting.

- Mr. K R Ravishankar, Promoter and Non-Executive Director of the Company vacated Office pursuant to Section 283

(1) (g) of the Companies Act, 1956 w.e.f February 7, 2014. The Board places on record its appreciation for the distinguished service and contribution made by Mr. K R Ravishankar as Promoter and Director of the Company.

15. PERSONNEL

Information pursuant to Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, forms part of this Report. However, as per the Provisions of Section 219(1) (b)(iv) of the Act, the Report and Accounts are being sent excluding the statement containing the particulars to be provided under Section 217(2A) of the Act. Any member interested in obtaining a copy of such particulars may write to the Company Secretary.

16. CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your company knowing its responsibility towards the society and environment in which it operates and accordingly had been working towards CSR initiatives. In terms of Section 135 of the Companies Act, 2013, the Company has constituted Corporate Social Responsibility Committee to monitor the CSR activities of the Company in terms of the provisions of the Act.

17. INSURANCE

The assets / properties of the Company are adequately insured against loss due to fre, riots, earthquake, terrorism, etc., and against other perils that are considered necessary by the management.

18. DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act 1956, the Directors state that they have:

a) Followed the applicable accounting standards in the preparation of annual accounts have been followed and no material departure have been made from the same.

b) Selected such accounting policies and applied them consistently and made adjustments 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 fnancial year and of the Profit of the Company for that period.

c) taken proper and suffcient 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

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

19. AUDITORS REPORT

Refer Paragraph 4 of the Auditor''s Report on Consolidated Financial Statements:

The unaudited fnancial information included in the consolidated fnancial statements primarily relate to entities which are part of the discontinued operations of the Group.

The Company is of the view that the operations of other entities which were not subjected to audit is not material to the Consolidated Financial Statement for the period ended March 31, 2014

20. Conservation of Energy, R&D, Technology Absorption and Foreign Exchange Earnings/ Outgo

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

21. STATUTORY AUDITORS

The Statutory Auditors viz., Deloitte Haskins & Sells, Chartered Accountants, Bangalore (Registration Number 008072S) retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

The Company has received a letter from Deloitte Haskins and Sells to the effect that their appointment, if made, would be in accordance with Section 139 of the Companies Act, 2013 and that, they are not disqualified for such appointment within the meaning of Section 141 of the Companies Act, 2013.

Pursuant to the provisions of Section 139 of the Companies Act, 2013 and Rules framed thereunder, it is proposed to appoint Deloitte Haskins & Sells as statutory auditors of the Company for a period of three (3) years from the conclusion of the forthcoming AGM till the conclusion of Twenty-Sixth Annual General Meeting to be held in the year 2017, subject to ratifcation of their appointment at every Annual General Meeting. Your Directors recommend their reappointment.

22. DEPOSITORY SYSTEM

As the Members are aware, your Company''s shares are tradable compulsorily in electronic form and your Company has established connectivity with both the depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). In view of the numerous advantages offered by the Depository system, members are requested to avail the facility of dematerialisation of the Company''s shares on either of the Depositories as aforesaid.

23. ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust and confdence reposed on us by the medical profession and trade.

We also acknowledge the support and wise counsel extended to us by the bankers, fnancial institutions, Government agencies, analysts, shareholders and investors at large.

For and on behalf of the Board of Directors

Place: Bangalore, India Deepak Vaidya – Chairman

Date: July 25, 2014 Arun Kumar – Executive Vice Chairman & Managing Director


Dec 31, 2012

Dear Members,

The Company''s directors are pleased to present the Twenty Second Annual Report together with audited financial statements for the financial year ended December 31, 2012.

1. CONSOLIDATED FINANCIALS

(Figures in Million)

Year ended

2012 2011 Rs. USD* Rs. USD*

1.1 Financial Results

Income 23,656.70 441.37 25,817.14 484.65

Operating Profit (EBIDTA) 5,936.65 110.76 5,223.50 98.06

Net Profit (PAT) / (Loss) 8,462.37 157.88 2,244.75 42.14

Reserves and Surplus 19,674.39 367.07 13,130.96 246.50

1.2 Profits

Operating Profit(EBIDTA) 5,936.65 110.76 5,223.50 98.06

Less : Interest 1,934.41 36.09 1,948.30 36.57

Depreciation & Amortisation 1,094.83 20.43 1,043.01 19.58

Exceptional items incl. AS 30 6,587.49 122.90 494.67 9.29

Profit before tax 9,494.90 177.15 2,726.86 51.19

Less: Provision for Tax

Current 843.01 15.73 709.79 13.32

Deferred 473.74 8.84 (158.49) (2.98)

MAT credit entitlement (295.30) (5.51) (164.50) (3.09)

Profit/(Loss) after tax 8,473.45 158.09 2,340.06 43.93

Less:Share of Profit of Minority 11.08 0.21 95.31 1.79

Interest

Profit after Minority Interest 8,462.37 157.88 2,244.75 42.14

Available for appropriation 12,919.90 241.05 4,682.61 87.90

1.3 Appropriations 87.90 65.41

2,924.28

Dividend on Equity Shares 117.99 2.20 117.37 2.20 (proposed)

Dividend Tax 19.16 0.36 18.71 0.35

Transfer to General Reserve 43.00 0.80 89.00 1.67

Balance carried to Balance Sheet 12,739.75 237.69 4,457.53 83.68

Note * 1 USD= Rs. 53.60 (Exchange Rate as on December 31, 2012)

* 1 USD= Rs. 53.27 (Exchange Rate as on December 31, 2011)

Previous year figures have been regrouped/ restated wherever necessary to make them comparable with those of the current year.

1. TURNOVER AND PROFITS

On a consolidated basis, the total income during the year stood at Rs. 23,656.70 Million against Rs. 25,817.14 Million in the previous year. The Company posted a net profit of Rs. 8,462.37 Million as against Rs. 2,244.75 Million in the previous year.

On a Standalone basis the total income during the year stood at Rs. 8,309.15 Million as against Rs. 7,692.19 Million in the previous year. TheStandalonenetprofitis Rs. 559.86 Million as against a net profit ofRs. 1,179.25 Million for the previous year.

Detailed analysis on financial performance is given in the Management Discussion and Analysis Report and CFO''s Review which forms part of the Annual Report.

2. DIVIDEND

The Board is pleased to recommend a dividend of 20% (i.e., Rs. 2/- per equity share of Rs. 10/- each for the year ended December 31, 2012.

The dividend, subject to approval of shareholders at the Annual General Meeting will be paid to those shareholders whose name appears in the Register of Members of the Company as on the date of Book Closure.

The dividend would be tax-free in the hands of the shareholders.

3. SHARE CAPITAL

The Authorised share capital of the Company as at December 31, 2012 is Rs. 1,517,500,000 divided into 89,750,000 equity shares of Rs. 10/- each and 620,000 Cumulative Redeemable Preference shares of Rs. 1,000/- each.

The Issued, Subscribed and Paid-Up Capital of the Company as at December 31, 2012 is Rs. 588,037,210 divided into 58,803,721 equity shares of Rs. 10/- each.

During the year there has been an increase in the equity Paid-Up Capital of the Company on account of allotment of 423,550 shares consequent to exercise of stock options.

4. BUSINESS OVERVIEW

2012 began and ended on an optimistic note for the Company. During the year, our revenues and EBIDTA increased considerably, compared to 2011, primarily driven by consistent new product launches and increase in operational scale.

Besides, both Agila and Pharma divisions demonstrated significant operating leverage across all global manufacturing facilities and consistent regulatory filings. Besides, there were significant corporate initiatives round the year.

Key Business Highlights for 2012 Pharma

Collaboration with Gilead Sciences

The Company entered into an in-licensing agreement to collaborate with Gilead Sciences, Inc. to promote access to high-quality, low-cost generic versions of Gilead''s HIV medicine emtricitabine (FTC) in developing countries - including fixed- dose combinations of emtricitabine co- formulated with other Gilead HIV medicines.

Funding from French Development Financing Institution

During the year the French Development Financing Institution Proparco invested USD12.5 Million in the form of equity participation for a 20% stake in Strides'' African front-end arm, valuing the African operations at about USD 60 Million. The proceeds will be used to create additional manufacturing infrastructure in key markets in Africa and to build a regional Company.

Biotech

Consolidation of stake in Inbiopro

During the year 2012, the Company consolidated its stake in Inbiopro Solutions Private Limited (Inbiopro) the Biotech arm of the Company from the initial holding of 70% to 96.79%.

As at the date of this report the Company further consolidated its stake to 100% and consequently Inbiopro is a wholly owned subsidiary of the Company.

Customised Biotech facility in Malaysia

In March 2013, the Company''s wholly owned subsidiary Agila Biotech (Malaysia) SDN BHD, Malaysia, entered into an arrangement with Bio-XCell Sdn Bhd (Malaysian Government undertaking) for the establishment of a customised biotech facility located in the Bio-XCell ecosystem in Johor, Malaysia.

The Company plans to incorporate into this facility, the "next-generation" technology platforms which revolutionise the way biomolecules are developed, manufactured and commercialised.

Specialties (Agila)

Brazil Sterile Penems Facility - US FDA approval

In February 2012, the Brazilian Sterile Penems facility received US FDA approval. This state-of-the-art facility manufactures sterile dry powder injectables of Penems. The plant has already been approved by other international regulatory agencies like MHRA and ANVISA.

Polish Facility - US-FDA approval

During the year, the Company''s polish sterile facility received US-FDA approval. This state-of-the-art facility located in Warsaw, Poland, manufactures vials, ampoules, pre-filled syringes and lyophilized injections. The approval offers significant flexibility to the manufacturing which is currently experiencing strong demand on a worldwide basis.

Acquisition of USFDA approved Sterile Manufacturing Facility

During the year, the Company through its wholly owned subsidiary, Agila Specialties Private Limited acquired a USFDA approved Sterile Formulations facility situated at Hosur, Tamil Nadu from Star Drugs and Research Labs Limited.

Joint Venture with Jamp Pharma Corporation

During the year, the Company through its wholly owned subsidiary Agila Specialties Pharma Corporation, Canada (part of injectable division of Strides), formed a joint venture with Jamp Pharma, a Canadian generic drug company, to introduce a variety of quality injectable generic drugs in Canada.

Collaboration with Eli Lilly

In December 2012, the Company along with its subsidiary Agila Specialties Private Limited collaborated with Eli Lilly to expand delivery of cancer medicines in the emerging markets. As a part of this arrangement, Lilly will in-license a portfolio of high-quality, branded generic injectable and oral cancer medicines from

Agila Specialties, the specialties division of Strides.

5. DIVESTMENTS

Sale of "Agila specialties" division to Mylan Inc., USA

In February 2013, the Company entered into a definitive agreement with Mylan Inc., USA for the sale of its Specialties Division to Mylan Inc., USA.

This will be effected through the sale of shares of the Company held in its subsidiary, Agila Specialties Private Limited in India and the shares of Agila Specialties Global Pte Limited, Singapore held by the overseas subsidiary, Agila Specialties Asia Pte., Limited, Singapore.

Under the terms of the agreement, the Company and its subsidiary (Agila Specialties Asia Pte Limited, Singapore) will receive an aggregate sum of USD 1,600 Million in cash on closing and a potential additional consideration of up to USD 250 Million subject to the satisfaction of certain conditions by Strides.

Sale of Australia and South East Asian Business division to Watson Pharmaceuticals Inc., USA

In a transaction that was closed on January 24, 2012, the Company sold its Australia and South East Asian Business to Watson Pharmaceuticals Inc., USA for AUD 375 Million resulting in divestment of its stake in Ascent Pharmahealth Limited, Australia and its subsidiaries.

6. RESEARCH & DEVELOPMENT

Detailed write-up on Research & Development activity forms part of the annexure to the Directors'' report.

7. SUBSIDIARY COMPANIES

The Company has 46 subsidiaries (Overseas & India) as on December 31, 2012

In accordance with Accounting Standard AS-21 on consolidated financial statements read with Accounting Standard AS-27 on Accounting for Joint Ventures, the audited consolidated financial statements are provided in this Annual report.

Material Unlisted Subsidiary

During the year 2012, Agila Specialties Private Limited, a wholly owned subsidiary of the Company became a Material Unlisted Subsidiary and in term of Clause 49 (III) of the Listing Agreement, Mr. PM Thampi, Independent Director on the Board of the Strides Arcolab, the holding Company of Agila Specialties, services as a director on the Board of Agila Specialties.

Subsidiaries added to the Group during the year

a) Agila (NZ) Pty Ltd, New Zealand.

b) Agila Australasia Pty Limited, Australia

c) Agila Biotech Private Limited, Bangalore

d) Agila Specialties Americas Ltd, Cyprus

e) Agila Specialties Global Pte. Ltd, Singapore

f) Agila Specialties UK Limited, UK

g) Strides Emerging Markets Private Limited, Bangalore

Subsidiaries which ceased to be part of the Group during the year

a) Ascent Pharmahealth Limited,

Australia

b) Ascent Pharma Pty Limited, Australia

c) Ascent Pharmaceutical Limited, New Zealand

d) Ascent Pharmacy Service Pty Limited, Australia

e) Ascent Pharmahealth (Asia) Pte. Limited, Singapore

f) Ascent Pharmahealth Asia (Hong Kong) Limited, Hong Kong

g) Ascent Pharmahealth Asia (Malaysia) SDN.BHD, Malaysia

h) Drug Houses of Australia (Asia) Pte. Limited, Singapore

i) Pharmasave Australia Pty Limited, Australia

j) Scentia Pharmaceuticals Pty Ltd., Australia

Accounts of Subsidiaries:

In terms of the General Circular 2 of 2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs, the audited Financial Statements of the Company''s subsidiaries have not been attached to this Report. The Financial Statements of the subsidiaries shall be made available to the shareholders of the Company/ the Company''s subsidiaries seeking such information any point of time and such Financial Statements will also be kept for inspection during business hours by any shareholder at the registered office and the corporate office of your Company/ the Company''s subsidiaries. The Company will also make available the audited annual accounts and related information of the subsidiary companies, upon request by any shareholder of the Company.

8. CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities & Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of the Annual Report ofthe Company. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

9. MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, Management Discussion and Analysis report forms part of this Report.

10. FIXED DEPOSITS

The Company has not accepted any fixed deposits and accordingly no amount is outstanding as on the balance sheet date.

11. EMPLOYEE STOCK OPTION SCHEME

The Company has granted ESOPs to few eligible employees under the Strides Arcolab ESOP 2006 and Strides Arcolab ESOP 2008 and to Directors under Strides Arcolab ESOP 2008 (Directors), particulars of which are provided in the Corporate Governance Report forming part of this report.

No options have been granted to employees under Strides Arcolab ESOP 2011 scheme yet.

No employee has been issued stock options during the year equal to or exceeding 1% of the issued capital of the Company at the time of grant.

Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed to this Report.

12. REDEMPTION OF FCCBS

During the year, the Company redeemed the outstanding USD 80 Million Foreign Currency Convertible Bonds (FCCBs) on June 27, 2012. The Company had originally raised USD 100 Million FCCBs in the year 2007 and had bought back USD 20 Million during the year 2009.

The total payout for redeeming the outstanding bonds was USD 116 Million including the redemption premium of 145.058%. Post this redemption, there are no outstanding FCCBs.

13. BOARD OF DIRECTORS

Mr. Deepak Vaidya and Mr. M.R Umarji are directors who retire by rotation and being eligible, offer themselves for reappointment. Your directors recommend their re-appointment to the Board.

Mr. Sridhar S joined the Board of the Company as an Independent Director on July 27, 2012. Mr. Sridhar would also serve as a member of the Audit Committee of the Board. In his earlier engagement, Mr. Sridhar served as Chairman and Managing Director of Central Bank and has around 38 years of rich experience in commercial and development banking.

Mr. Virtanes Saatci, Non-Executive Director, resigned from the Board of the Company with effect from 24.04.2012. Mr. Saatci was associated with the Company since February 1995 and has contributed immensely to its growth and success. Your Directors record their deep appreciation for the valuable contribution made by Mr. Saatci during his tenure.

Mr. V.S Iyer, Executive Director, resigned from the Board of the Company with effect from May 25, 2012. Mr. V.S Iyer continues to be engaged with the Company in his role as CEO - Agila. Your Directors record their appreciation for the services of Mr. V S Iyer as Executive Director of the Company.

14. PERSONNEL

Information pursuant to Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 will be provided on request.

15. DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act 1956, the Directors state that they have:

a) followed the applicable accounting standards in the preparation of annual accounts. However, deviations from accounting standards has been carried out with reference to the scheme of arrangement sanctioned in earlier years by the Hon''ble High Court of Bombay for amalgamation of the Company''s subsidiaries Global Remedies Limited, Grandix Pharmaceuticals Limited, Grandix Laboratories Limited and Quantum Remedies Private Limited (the transferor companies) with Strides Arcolab Limited (the transferee company). Refer notes to accounts for details of the same.

b) selected such accounting policies and applied them consistently and made adjustments 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 ofthe profit ofthe Company for that period.

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

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

16. AUDITORS REPORT

Refer Paragraph 5(b) of the Auditor''s Report with reference to Note 2(g) in the consolidated financial statements : The Company is of the view that the operations of these entities are not material and hence have not been subjected to audit.

17. CONSERVATION OF ENERGY, R&D, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/ OUTGO

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

18. STATUTORY AUDITORS

The Statutory Auditors viz., Deloitte Haskins & Sells, Chartered Accountants, Bangalore (ICAI registration number 008072S) retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. Your Directors recommend their reappointment.

19. DEPOSITORY SYSTEM

As the Members are aware, your Company''s shares are tradable compulsorily in electronic form and your Company has established connectivity with both the depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). In view of the numerous advantages offered by the Depository system, members are requested to avail the facility of dematerialisation of the Company''s shares on either of the Depositories as aforesaid.

20. ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust and confidence reposed on us by the medical profession and trade.

We also acknowledge the support and wise counsel extended to us by the bankers, financial institutions, Government agencies, analysts, shareholders and investors at large.

For and on behalf of the Board of Directors

Deepak Vaidya - Chairman

Arun Kumar - Vice Chairman & Managing Director

Place : Bangalore, India

Date: April 25, 2013


Dec 31, 2010

We are pleased to present the Twentieth Annual Report together with the Audited Accounts for the year ended December 31, 2010.

1 CONSOLIDATED FINANCIALS

(Figures in Million)

Year ended December 2010 Year ended December 2009 Rupees USD * Rupees USD *

1.1 Financial Results

Income 17,655.43 394.89 13,283.41 285.54

Operating Profit (EBIDTA) 3,963.21 88.64 2,105.04 45.25

Cash Profit/ (Loss) 2,044.77 45.73 1,126.98 24.23

Net Profit (PAT)/ (Loss) 1,224.47 27.39 1,096.83 23.58

Retained earnings 12,229.51 273.53 7,240.92 155.65

1.2 profits

Operating Profit (EBIDTA) 3,963.21 88.64 2,105.04 45.25

Less : Interest 1,466.50 32.80 759.07 16.32

Depreciation & amortization 638.98 14.29 491.90 10.57

Exceptional items incl. AS 30 5.99 0.13 (575.30) (12.37)

Profit before tax 1,863.72 41.68 1,429.37 30.73

Less: Provision for Tax

Current 451.67 10.10 285.82 6.14

Deferred 0.27 0.01 (60.71) (1.31)

Fringe Benefit Tax - - 3.38 0.07

MAT credit entitlement - - (9.50) (0.20)

Profit/(Loss) after tax 1,411.78 31.58 1,210.38 26.02

Available for appropriation 2,924.28 65.41 1,941.73 41.74

1.3 Appropriations

Dividend

on Equity Shares (proposed) 91.59 2.05 60.32 1.30

on Preference Shares - - 88.49 1.90

Dividend Tax 14.98 0.34 25.29 0.54

Transfer to General Reserve 36.78 0.82 52.76 1.13

Transfer to Capital Redemption Reserve 491.61 11.00 - -

Reversal of dividend and tax on preference shares (148.54) (3.32) - - no longer payable

Balance carried to Balance Sheet 2,437.86 54.53 1,714.87 36.86

Note: *1 USD = Rs.46.52 (Exchange Rate as on December 31, 2009).

1 USD = Rs.44.71 (Exchange Rate as on December 31, 2010).

Previous year figures have been regrouped/ restated wherever necessary to make them comparable with those of the current year.

2 TURNOVER AND PROFITS

On a consolidated basis, the total income during the year stood at Rs.17,655 Million against Rs.13,283 Million in the previous year, growth of 33%. The Company posted a net profit of Rs.1,224 Million as against Rs.1,097 Million in the previous year.

On a Standalone basis, the total income during the year stood at Rs.5,294 Million as against Rs.4,879 Million in the previous year. The Standalone net profit is Rs.736 Million as against a net profit of Rs.616 Million for the previous year.

Detailed analysis on financial performance is given in the Management Discussion and Analysis Report which forms part of this Directors Report.

3 DIVIDEND

The Board is pleased to recommend a dividend of 15 % (i.e., Rs.1.50/- per equity share of Rs.10/- each for the year ended December 31, 2010

4 CAPITAL

The Authorised share capital of the Company as at December 31, 2010 is Rs.1,517,500,000 divided into 89,750,000 equity shares of Rs.10/- each and 620,000 Cumulative Reedemable Preference Shares of Rs.1,000/- each.

The Issued, Subscribed and Paid-Up Capital of the Company as at December 31, 2010 is Rs.577,446,710 divided into 57,744,671 equity shares of Rs.10/- each.

During the year:

. There has been an increase in the Equity Capital of the Company on account of allotments consequent to amalgamation, exercise of stock options, conversion of warrants and allotment to Qualified Institutional Buyers (QIBs). Please refer to Equity History of the Company for allotment details.

. There has been reduction in the Preference Capital of the Company on account of redemption of 491,606 Cumulative Redeemable Preference Shares of Rs.1,000/- each issued to K.V Pharmaceuticals Company, USA in the year 2005.

5 BUSINESS OVERVIEW

2010 was a game changing year for us as we saw the fructification of many of our plans in our goal to become a global sterile powerhouse. Our partnership with Pfizer and entry into the biologics space has strengthened and consolidated our position in the specialty segment. Ray of Life, our critical care offering for the domestic market, has also made significant progress with a wide range of high quality Oncology products at an affordable price for Indian consumers.

The Company re-branded its specialties division, Strides Specialties Private Limited as Agila Specialties Private Limited. The name Agila was chosen to reflect the brand ethos of the Companys specialised product offering which is smart, agile, determined and pragmatic. Agila carves out a new identity to the specialties division in the rapidly changing segment of the healthcare industry.

The Company had a very stable year of operation post restructuring of its business into two divisions viz. Pharma and Specialties.

The key business highlights of 2010 include:

Specialties

. Performance boosted by new product launches in regulated markets and additional revenue generated by new facilities

. Significant ramp up in capacity utilization

. Acquisition of Penem and Penicillin facility in Campos, Brazil

. Acquisition of complete ownership in Oncology business

. 16 new product launches in regulated market, 5 in USA and 11 in other regulated markets

Pharma and Branded Generics

India Pharma

. Prequalification from WHO for Strides H1N1 generic drug Oseltamivir 75mg capsules

. Commercialization of Ergocalciferol in Q3 of 2010 in USA

Australasia Region

. The sales growth in Australia was influenced by the Pfizer distribution agreement which saw Ascent Pharma health Limited, the Companys subsidiary, promote and distribute a range of Pfizers branded Established Products throughout the year.

. The Asia business successfully registered a number of new pharmaceuticals during the year into several of these markets and succeed in gaining some new contracts

Africa Region

. Added 4 new markets, Congo, Mali, Mozambique, Malawi

. 57 new products registered in Africa

. Commenced full-fledged production of tablets in Nigerian facility

India Brands

. India Brands (Grandix) operations integrated into Strides with flagship brand Renerve, consolidating its leadership position

. Ray of Life launched 3 therapeutic segments in India, i.e., Oncology, Nephrology and Hi-end Antibiotics

. Ray of Life launched over 15 brands in the cancer chemotherapy segment in Oncology and around 10 top molecules introduced in Hi-end antibiotics

Merger and business Restructuring update

The Company has successfully completed consolidation of its operations into two different business verticals viz Specialties Business, Pharmaceutical Business pursuant to the Scheme of Amalgamation sanctioned by the Honble High Court of Mumbai, Chennai and Karnataka and pursuant to the hive-off of Specialties and Research and Development business of the Company to Agila Specialties Private Limited, a wholly owned subsidiary of the Company.

Medgene Pharmaceuticals Private Limited, a wholly owned subsidiary of the Company merged with Agila Specialties Private Limited in the Specialties Vertical pursuant to the Order of the Honble High Court of Karnataka passed on February 6, 2010.

Strengthened partnership with Pfizer

i) Collaboration with Pfizer for the US market

Strides entered into a collaboration with Pfizer, wherein Pfizer will commercialise 40 off-patent sterile injectable and oral products in the United States through its Established Products Business Unit. These finished dosage form products will be licensed and supplied by Strides, Onco Laboratories Limited and Onco Therapies Limited.

ii) Extended collaboration with Pfizer in additional geographies

The Company strengthened its partnership with Pfizer by signing two additional License and Supply Agreements pursuant to which, Strides will license and supply upto 38 generic Oncology products to Pfizer for markets in the European Union, Canada, Australia, New Zealand, Japan and Korea and supply niche sterile injectables for the U.S. market. With the additional agreements signed, the collaboration between Pfizer and Strides Arcolab now extends to a total of 45 products addressing countries around the globe.

iii) Sale of product portfolio by Akorn-Strides llc to Pfizer Inc.

During the year, Akorn-Strides LLC, a Joint Venture (JV) between the Company and Akorn Inc., USA entered into an agreement with Pfizer to sell 22 abbreviated New Drug Approvals (ANDAs) owned by the JV.

The gross sale consideration of USD 63.20 Million was divided between Akorn Inc., USA and the Company in the agreed ratio of 55.3797% and 44.6203%. The Company was entitled to USD 28.20 Million in cash as its share of the consideration in addition to entering into supply agreement with Pfizer for manufacture and supply of these products.

Settlement with K. V. pharmaceuticals company, USA.

The Company executed a settlement agreement with KV Pharmaceuticals Company, USA (K.V Pharma) pursuant

to which the Company has retained all rights in relation to the products developed under the License and Supply Agreement executed earlier with K. V Pharma.

The settlement also provided for redemption of preference shares issued to K.V Pharma.

Qualified Institutional Placement

During the year, the Company raised Rs.4,550 Million by way of private placement of equity shares to Qualified Institutional Buyers. The Company allotted 10,742,533 equity shares of Rs.10/- each at a price of Rs.423.55 per share.

Redemption of FCCBs

During the year, the Company redeemed outstanding USD 34 Million of the USD 40 Million FCCBs raised by the Company in the year 2005. USD 6 Million of the above was bought back during the year 2009. The total payout for redeeming the Bonds was USD 46.50 Million as the Bonds were redeemable at a premium of 136.78%.

Acquisitions/Investments/Joint Ventures

Acquisitions:

The Company completed consolidation of the Oncology Business by restructuring the Oncology arrangements with Aspen. Consequently, the Company now holds 100% stake in Onco Therapies Limited, India and Onco Laboratories Limited, Cyprus which were earlier 50:50 Joint Venture with Aspen.

As a part of well-articulated strategy to focus on core speciality injectable business, the Company entered into an understanding with Aspen to acquire the Penems and Penicillin facility in Campos, Brazil with related products. This acquisition is subject to obtaining necessary regulatory approval which are pending as of December 31, 2010.

The Company acquired 70% stake in Inbiopro Solutions Private Limited, a Bangalore based bio-technology company. This acquisition made through the Companys wholly owned subsidiary Agila Specialties Private Limited marks the Company entry into the biologics space. The acquisition enhances Companys Specialty portfolio while giving the Company a leap start of at least 3 years in the fast growing and complex biopharmaceutical industry. This acquisition consolidates the Companys Specialty portfolio. The acquisition gives the Company immediate access to a pipeline of 8 products estimated to have global sales of

over USD 28 Billion. Commercialization of these products is expected to begin in 2013.

Investments:

During the year, Agila Specialties Private Limited (Agila), a wholly owned subsidiary of the Company, allotted further shares to the Company for a non-cash consideration equivalent to Rs.1,000 Million. The allotment was pursuant to the hive-off of the Specialties business and the Research and Development business of the Company to Agila.

Linkace Limited, Cyprus, a wholly owned subsidiary of the Company acquired 100% stake in Strides Inc., USA, a subsidiary of the Company, by acquiring 84.53% interest held by the Company, 11.18% interest held by Strides Arcolab International Limited, United Kingdom, a wholly owned subsidiary of the Company and balance 4.29% interest held by a minority shareholder.

Linkace Limited, Cyprus, acquired additional 3 % stake in Ascent Pharmahealth Limited (Ascent), a subsidiary of the Company listed in the Australian Stock Exchange. Pursuant to this investment, the Company now holds 60.33% shareholding interest in Ascent. During early 2010, the Company made a non-binding and indicative offer for acquiring the minority shareholding of Ascent at AUD 0.35 per share (later revised to AUD 0.40 per share) to be resulting in privatization of Ascent. The privatization process is expected to be completed in 2011.

Linkace Limited, Cyprus, acquired the residual 49% stake in Co-Pharma Limited, UK, from Aspen Global Incorporated, Mauritius, thereby Co-Pharma became a wholly owned subsidiary of the Company.

Linkace Limited, Cyprus transferred its 80% stake in Formulle Naturelle (Proprietary) Limited, South Africa to Aspen Pharmacare Holdings Limited, South Africa.

Joint Ventures:

During the year, the Company restructured its US operations and identified Strides Inc, USA as a holding entity for all its investments in US. Consequently, the interest of the Company in Akorn-Strides LLC, USA (a 50:50 JV between the Company and Akorn Inc., USA) and Sagent-Strides LLC, USA (a 50:50 JV between SAIL, UK and Sagent Inc., USA) have been consolidated under Strides Inc.

6 SUBSIDIARIES

During the year, the following companies became subsidiaries of the Company: African Pharmaceutical Development Company, Cameroon, Agila Specialties (Malaysia) SDN BHD, Malaysia, Ascent Pharmacy Services Pty Limited, Australia, Inbiopro Solutions Private Limited, India, Linkace Investments Pty Ltd, Australia, Onco Laboratories Limited, Cyprus, Strides Farmaceutica Participacoes Ltda, Brazil, Strides Pharmaceuticals (Holding) Limited, Mauritius and Strides Pharmaceuticals (Mauritius) Limited, Mauritius

7 RESEARCH & DEVELOPMENT

Detailed write-up on Research & Development activity forms part of the annexure to the Directors report.

8 CONSOLIDATED FINANCIALS

In accordance with Accounting Standard AS-21 on consolidated financial statements read with Accounting Standard AS-27 on Accounting for Joint Ventures, the audited consolidated financial statements are provided in this Annual report.

In terms of the Central Government approval under Section 212(8) of the Companies Act, 1956, the audited Financial Statements of the Companys subsidiaries have not been attached to this Report. The Financial Statements of the said subsidiaries will be kept for inspection during business hours by any investor at the registered office and the corporate office of the Company. The Company will also make available the audited annual accounts and related information of the subsidiary companies, upon request by any investor of the Company.

9 CORPORATE GOVERNANCE

The Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities & Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

10 MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, Management Discussion and Analysis report forms part of this Report.

11 FIXED DEPOSITS

The Company has not accepted any fixed deposits and accordingly no amount is outstanding as on the balance sheet date.

12 EMPLOYEE Stock option SCHEMES

The Company has granted ESOPs to few eligible employees under the Strides Arcolab ESOP 2006 and Strides Arcolab ESOP 2008 and to Directors under Strides Arcolab ESOP 2008 (Directors), particulars of which are provided in the Corporate Governance Report forming part of this report. Further, Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed to this Directors Report.

13 BOARD OF DIRECTORS

Mr. Deepak Vaidya and Mr. M.R Umarji are the Directors who retire by rotation and being eligible, offer themselves for reappointment.

Mr. John Mathew, nominee director representing Export Import Bank of India ceased to be a director of the Company w.e.f August 31, 2010 and Mr. Mukul Sarkar has been nominated by Export Import Bank of India to his position effective that date.

Dr. Ronald Ling, a non-executive director on the Board of the Company resigned from the Company with effect from October 14, 2010. Dr. Ling was a nominee of Zenith Pharmaceuticals Limited, Mauritius, a Foreign Venture Capital Investor and his exit is pursuant to sale of investments held by Zenith.

14 PERSONNEL

Information pursuant to Section 217 (2A) of the Companies act, 1956 read with Companies (Particulars of Employees) Rules, 1975 will be provided on request.

15 DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the companies Act 1956, the Directors state that they have:

a) followed the applicable accounting standards in the preparation of annual accounts. However the deviation on the accounting standard has been with reference to the scheme of arrangement sanctioned by the Honble High Court of Mumbai for amalgamation of the Companys subsidiaries Global Remedies Limited, Grandix Pharmaceuticals Limited, Grandix Laboratories Limited and Quantum Remedies Private Limited (the transferor companies) with Strides Arcolab Limited (the transferee company). Refer notes to accounts for details of the same.

b) selected such accounting policies and applied them consistently and made adjustments 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 of the Company for that period.

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

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

16 CONSERVATION OF ENERGY, R & D, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING/OUTGO

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

17 STATUTORY AUDITORS

The Statutory Auditors viz., Deloitte Haskins & Sells, Chartered Accountants, Bangalore (ICAI registration number 008072S) retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. Your Directors recommend their reappointment.

18 DEPOSITORY SYSTEM

As the Members are aware, your Companys shares are tradable compulsorily in electronic form and your Company has established connectivity with both the depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited. In view of the numerous advantages offered by the Depository system, members are requested to avail the facility of dematerialization of the Companys shares on either of the Depositories as aforesaid.

19 ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust and confidence reposed on us by the medical profession and trade.

We also acknowledge the support and wise counsel extended to us by the bankers, financial institutions, Government agencies, analysts, shareholders and investors at large.

For and on behalf of the board of Directors

Arun Kumar - Vice Chairman & Managing Director

K.R. Ravishankar -Director

Place: Bangalore, India Date : April 25, 2011

 
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