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Directors Report of Torrent Pharmaceuticals Ltd.

Mar 31, 2014

The Shareholders

The Directors have the pleasure of presenting the Forty First Annual Report of your Company together with the audited accounts for the year ended 31st March, 2014.

FINANCIAL RESULTS

The summary of consolidated (Company and its subsidiaries) and standalone (Company) operating results for the year and appropriation of divisible profits is given below:

(Rs.in crores except per share data)

Consolidated Standalone 2013-14 2012-13 2013-14 2012-13

Sales & Operating Income 4185 3212 3365 2766

Profit Before Depreciation, Finance Cost, Exceptional Items & Tax 990 736 1096 811

Less Depreciation 87 83 79 72

Less Finance Cost 59 34 58 37

Profit Before Exceptional Items & Tax 844 619 958 702

Less Exceptional Items - 37 - 37

Less Tax Expense 180 147 196 119

Less Minority Interest - 2 - -

Net Profit for the Year 664 433 762 547

Balance brought forward 317 167 538 274

Distributable Profits 981 600 1300 821

Appropriated as under:

Transfer to General Reserve 76 55 76 55

Interim Dividend 85 51 85 51

Proposed Final Dividend 85 144 85 144

Tax on Distributed Profits for Interim Dividend 14 8 14 8

Tax on Distributed Profits for Final Dividend 14 25 14 25

Balance Carried Forward 707 317 1026 538

Earnings Per Share (Rs.per share) 39.23 25.58 45.05 32.29

Consolidated Operating Results

The consolidated sales and operating income increased to Rs. 4185 crores from Rs. 3212 crores in the previous year yielding a growth of 30.29%. The consolidated operating profit for the year was Rs. 990 crores as against Rs. 736 crores in the previous year registering an increase of 34.51%. The consolidated net profit increased to Rs. 664 crores from Rs. 433 crores in the previous year registering a growth of 53.35%. Adjusted for the exceptional item during the last year, consolidated net profit has grown by 41.28%.

Standalone Operating Results

The sales and operating income increased to Rs. 3365 crores from Rs. 2766 crores in the previous year yielding a growth of 21.66%. The operating profit for the year under review increased to Rs. 1096 crores as against Rs. 811 crores in the previous year registering a growth of 35.14%. The profits after tax for the year under review increased to Rs. 762 crores as against Rs. 547 crores in the previous year registering a growth of 39.31%. Adjusted for the exceptional item during the last year net profit has grown by 32.06%.

Merger and Acquisition:

1. During the year under review, the Company had entered into a defnite binding Business Transfer Agreement with Elder Pharmaceuticals Limited ("Elder"), for acquisition of Identified Indian Branded Formulation Business ("Identified Business") in India and Nepal on slump sale basis for a total consideration of Rs. 2004 crores on a debt free & cash free basis. Elder''s Identified Business comprises a portfolio of 30 brands including market leading brands in the Women''s Healthcare, Pain Management, Wound Care and Nutraceuticals therapeutic segments. The final closing of the transaction is subject to satisfactory completion of all terms and conditions laid down in the Business Transfer Agreement. This acquisition shall strengthen the Company''s position in said segments by enhancing & accelerating market access. It is also expected to enable cost & revenue synergies in the Company''s domestic formulations business.

2. The Company has also acquired portfolios of marketing authorisations in UK (through Torrent Pharma (UK) Ltd) and in France. This will speed up the Company''s efforts to strength its position in the respective markets.

Management Discussion and Analysis (MDA)

The detailed analysis of the operating performance of the Company for the year, the state of affairs and the key changes in the operating environment have been included in the Management Discussion and Analysis section which forms a part of the Annual Report.

APPROPRIATIONS

Dividend

As a policy, the Company endeavours to distribute 30% of its annual consolidated net profit after tax as dividend in one or more tranches.

Normal annual dividend of Rs. 5.00 per equity share of fully paid up face value of Rs. 5.00 amounting to Rs. 84.61 crores was paid to the shareholders as interim dividend during the year under review. The tax on distributed profits was Rs. 14.38 crores making the aggregate distribution to Rs. 98.99 crores. Further, the Board has recommended a special dividend as final dividend of Rs. 5.00 per equity share amounting to Rs. 84.61 crores. Total distribution including tax of Rs. 14.38 crores works out to be Rs. 98.99 crores towards such final dividend. Aggregate dividend for the year under review works out to be Rs. 10.00 (previous year Rs. 13.00) per equity share, post issue of bonus shares in the ratio of 1:1 on 25th July, 2013. In addition, Rs. 10.00 per share was also paid as special dividend in previous year for commemorating four decades of business operations of the Company, taking the total dividend for the year 2012-13 to Rs. 23.00 per share. The aggregate distribution amount including tax on distributed profit works out to be Rs. 197.98 crores (previous year Rs. 227.30 crores) post issue of bonus shares. These dividends are tax free in the hands of the shareholders.

Transfer to Reserves

The Board has recommended a transfer of Rs. 76.00 crores to the general reserve and an amount of Rs. 1026.00 crores is retained in the Statement of profit and Loss of Standalone financials.

SHARE CAPITAL

During the year, pursuant to the approval of shareholders by passing requisite resolutions through postal ballot, the Authorised Capital of the Company was increased from Rs. 100 crores, divided into 15 crores Equity Shares of Rs. 5/- each and 25 lacs Preference Shares of Rs. 100/- each, to Rs. 125 crores, divided into 20 crores Equity Shares of Rs. 5/- each and 25 lacs Preference Shares of Rs. 100/- each, by creation of 5 crores Equity Shares of Rs. 5/- each ranking pari passu with the existing Equity Shares.

Shareholders have also approved, by passing requisite resolution through postal ballot, issue of Bonus Shares in the proportion of 1:1 i.e. 1 (one) new fully paid-up Equity Share of Rs. 5.00 each for every 1 (one) fully paid-up Equity Share of Rs. 5.00 each.

Pursuant to above, 8,46,11,360 Bonus Equity Shares of Rs. 5.00 each fully paid-up were issued and allotted to the eligible shareholders by way of capitalization of Rs. 38.46 crores from the securities premium account and Rs. 3.85 crores from capital redemption reserve. Post bonus issue, the issued and paid up capital of the Company was increased from Rs. 42.31 crores to Rs. 84.61 crores. The Net worth (stand alone) stands at Rs. 2289.81 crores as at 31st March, 2014 resulting an increase of Rs. 638.72 crores, on account of retained earnings.

DIRECTORS'' RESPONSIbILITy STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, in relation to financial statements of the Company for the year ended 31st March, 2014, the Board of Directors state that:

i the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2014 and of the profit for the year ended on that date;

iii proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv the financial statements have been prepared on a going concern basis.

SUbSIDIARIES

Brief review of the important subsidiaries is given below:

Torrent Pharma Inc., USA (Torrent USA)

During the year, Torrent USA earned revenues of USD 124.25 million (Rs. 756.92 crores), as compared with USD 57.90 million (Rs. 315.12 crores) in previous year registering a growth of 140.20% in Rupees. Net profit for the year was at USD 2.32 million (Rs. 39.10 crores) as against a net profit of USD 1.05 million (Rs. 7.95 crores) for the previous year. The Company received 5 ANDA approvals in 2013-14. Company plans to launch 8-12 products every year. The Company has 48 ANDA''s approvals (including 5 tentative approvals), 22 pending approvals and 47 flings under development. Steady fow of product approvals from this pipeline is expected to sustain growth momentum.

Torrent do brasil Ltda., brazil (Torrent brazil)

During the year, Torrent Brazil achieved revenues of Reais 195.01 million (Rs. 524.18 crores), as compared with Reais 180.29 million (Rs. 488.58 crores) in the previous year, registering a growth of 7.29% in Rupees. Torrent Brazil has incurred a net loss after tax of Reais 15.67 million (Rs. 41.50 crores), as compared to a net loss after tax of 2.47 million (Rs. 9.23 crores) in the previous year. The losses during the year are largely attributable to the provisions made with respect to certain labour law related litigations.

Heumann Pharma GmbH & Co Generica KG, Heunet Pharma GmbH and Norispharm GmbH at Germany (Torrent Germany)

Torrent Germany posted revenues of Euro 71.32 million (Rs. 580.49 crores) for the financial year 2013-14 as compared with Euro 55.96 million (Rs. 392.28 crores) for the previous year, registering a growth of 47.98% in Rupees. Net loss for the year was Euro 8.79 million (Rs. 40.89 crores) as against a net loss of Euro 0.97 million (profit of Rs. 2.93 crores in Rupee) for the previous year. The increase in loss was due to legal claims and damages.

Laboratorios Torrent S.A. de C.V. (Torrent Mexico)

During the year, Torrent Mexico earned revenues of Mexican Peso 86.63 million (Rs. 40.51 crores) as compared with Mexican Peso 78 million (Rs. 32.51 crores) for the previous year registering a growth of 24.61% in Rupees. Net profit for the year was at Mexican Peso 7.63 million (Rs. 3.75 crores) as against a loss of Mexican Peso 2.71 million (Rs. 1.09 crores) for the previous year.

HUMAN RESOURCES

Committed and motivated employees are one of the most important assets for the Company. The Company is committed towards excellence in action through development and administration of opportunities for its employees that helps attract, retain and develop a diverse workforce.

Performance management area was also given prime attention. Contribution of each individual employee in the organization''s growth was evaluated and their efforts were rewarded. The Company is committed to creating a healthy, conducive and safe working environment. During the year, there were significant areas of achievement around processes and policy development. Continuous efforts were taken to implement Gender Diversity initiatives, undertaken by the Company, in various areas to ensure enhanced representation of women employees. On the industrial front, the Company continued to strengthen cordial industrial relations during the year.

The Company has taken special initiatives to communicate more with its employees and to foster unity on occasions like Independence Day, Republic Day and Founder''s Day.

The Company has a diverse workforce of 8,628 employees as on 31st March, 2014 vis-a-vis 8,719 as on 31st March 2013.

CORPORATE SOCIAL RESPONSIbILITy

Concern for Society and Environment is a deeply rooted core value of the Company. As a part of its CSR, the Company makes concentrated efforts in the felds of Community Healthcare, Sanitation and Hygiene, Education and Knowledge Enhancement and Social Care and Concern. During the year, the Company was involved in following CSR activities taken up on its own or along with other Torrent group companies:

On its own

Initiated Sanitation Health Education at "Sharda Mandir" Primary school at Indrad village which focused on importance of personal hygiene. Besides this, art and craft activities were also promoted.

Conducted various personality development programmes among the students at Middle School at Bhud, Baddi Plant through employee volunteers.

At Group level

Shiksha Setu: Teaching Learning Enhancement Programme in its third year included more than 4800 students and 250 teachers as benefciaries. Outcomes included increase in participation of parents in parents-teachers meetings especially in rural areas, 55% cumulative learning level improvement over baseline year, enhanced learning interest in ICT based adaptive tool and improvement in attendance. 523 employee volunteers contributed towards implementation of the project activities effectively during the year.

Construction work is in progress for new building for high school comprising 24 class rooms, science & computer lab, library, administrative block, assembly & dining hall, kitchen area, sports complex, etc. for accommodating 1500 students of class 9 - 12 at Chhapi village in Gujarat.

Reconstruction activities at Memadpur school were completed during the year, which included renovation of existing school building and construction of new facilities including assembly hall and utility facility.

A survey of 1769 households was conducted by 154 employee volunteers to understand women health issues and child health aspects, in order to conceptualize and design a community health care programme in the vicinity of Sabarmati area in Ahmedabad.

Besides the above, the Company has also made donations to various organizations involved in education, healthcare, providing relief to disaster victims and promotion of social welfare, harmony & nationalism.

In line with the provisions of the Companies Act, 2013 and rules made thereunder ("the Act"), a Corporate Social Responsibility (CSR) Committee has been formed by the Board of Directors through circular resolution dated 3rd May, 2014. Shri Pradeep Bhargava, Shri Markand Bhatt and Dr. Chaitanya Dutt are the members of the CSR Committee. The Board of Directors at their meeting held on 9th May, 2014 approved a CSR policy as recommended by the CSR Committee which include, inter alia, the CSR activities falling under the purview of Schedule VII of the Act.

ENVIRONMENT, HEALTH & SAFETy

The ''Conviction for Safety Policy'' implemented during 2012-13 has been very successful in creating awareness about the safety at work place and compliances of safety norms. Also the personnel affected adversely were paid substantially higher compensation under this Policy.

The Company has continued with OHSAS 18001 and ISO 14001 for occupational health, safety & environment management system & ISO 9001 for quality management.

INSURANCE

The Company''s plant, property, equipments and stocks are adequately insured against major risks. After taking into account all the relevant factors, including the risk benefit trade-off, the Company has consciously decided not to take insurance cover for loss of profit under the Consequential Loss (Fire) Policy. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors'' and officers'' Liability Policy to provide coverage against the liabilities arising on them.

DIRECTORS / KEY MANAGERIAL PERSONNEL

During the year under review, Dr. Prasanna Chandra and Shri Sanjay Lalbhai retired from the Board with effect from 26th July, 2013 (i.e. date of last Annual General Meeting). Dr. Leena Srivastava resigned as a member on the Board of Directors with effect from 26th April, 2014.

The Board at its meeting held on 9th May, 2014, subject to approval of the shareholders, appointed Shri Pradeep Bhargava (holding DIN 00525234), Shri Shailesh Haribhakti (holding DIN 00007347) and Shri Haigreve Khaitan (holding DIN 00005290), existing Independent Directors, as Independent Directors on the Board of Directors of the Company, for a period of five consecutive years from 1st April, 2014 upto 31st March, 2019, pursuant to the provisions of Sections 149, 150, 152, 178 and other applicable provisions of the Companies Act, 2013 and the rules made thereunder ("the Act") read with Schedule IV of the Act.

The Board has also recommended to shareholders the appointment of Shri Ashish Nanda and Smt. Bhavna Doshi as Independent Directors on the Board of the Company for a period of five years effective from the date of ensuing Annual General Meeting.

Brief resume, area of expertise and other details of terms of appointment of these Directors forms integral part of the Notice of the Annual General Meeting.

All the Independent Non-Executive Directors of the Company have furnished declarations that they qualify the conditions of being Independent as per Section 149(6) & (7) of the Companies Act, 2013.

Shri Sudhir Mehta, at the meeting of the Board of Directors held on 9th May, 2014, communicated to the Board his desire to relinquish the position as the Chairman of the Board and the Company, with a view to spend more time on social activities in which he is already involved and also spare more time for himself. The Board has agreed to his request with great reluctance, in view of Shri Sudhir Mehta continuing as a permanent member of the Board of the Company and accepting the position of Chairman Emeritus, so that his counsel and advise emanating from his vast experience would continue to be available to the Board and the Company.

The Board has further at their aforesaid meeting, subject to the approval of the shareholders, appointed Shri Samir Mehta, Executive Vice Chairman, as Executive Chairman of the Company.

The above arrangements would be effective from the conclusion of the Annual General Meeting of the Company scheduled on 30th July 2014.

This step of Shri Sudhir Mehta assuming the role of Chairman Emeritus, while continuing to be permanent member on the Board and elevating Shri Samir Mehta as Executive Chairman, has been taken as part of good governance initiative to achieve the objective of smooth succession to younger leadership.

Pursuant to the provisions of Sections 203, 178 and other applicable provisions of the Companies Act, 2013 and Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014, the Board at its aforesaid meeting also appointed Shri Samir Mehta, Executive Vice Chairman, Shri Ashok Modi, Executive Director and Chief Financial officer (CFO) & Shri Mahesh Agrawal, Vice President (Legal) and Company Secretary, as Whole-time Key Managerial Personnel of the Company.

CORPORATE GOVERNANCE

As required by Clause 49 of the Listing Agreement, a separate Report on Corporate Governance forms part of the Annual Report. A certifcate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance forms part of this report as Annex 3.

AUDITORS

- Statutory Auditors

The term of appointment of Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W), Statutory Auditors of the Company will expire at the ensuing Annual General Meeting. The Company has received a certifcate from them about their eligibility for appointment as Statutory Auditors in accordance with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 read with third proviso of Section 139(2) of the Companies Act, 2013. The Board has recommended to the shareholders their appointment for the year 2014-15 at the ensuing Annual General Meeting.

- Cost Auditors

The Company has appointed Kirit Mehta & Co., Cost Accountants, Mumbai (Firm Registration No. 000353) as the Cost Auditor of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year ended 31st March, 2014. Further, due date of fling the Cost Audit Report to the Central Government for the financial year ended 31st March, 2013 was 27th September, 2013 and the same was fled on 11th September, 2013. The Board of Directors has, on recommendation of the Audit Committee, at its meeting held on 21st January, 2014 appointed Kirit Mehta & Co. as the Cost Auditor of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year 2014-15 and has also fixed the remuneration for audit of cost accounting records for the said financial year. In terms of Section 148(3) of the Companies Act, 2013 and Rule 14 of the Companies (Audit & Auditors) Rules, 2014, it is proposed by the Board to recommend the remuneration approved in its meeting, for ratifcation by the shareholders in the ensuing Annual General Meeting of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed to this report as Annex 1.

PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975 as amended, forms part of this report as Annex 2. Having regards to the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, this Annual Report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain it by writing to the Company Secretary at the registered office of the Company.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Government of Gujarat, Government of Himachal Pradesh, Government of Sikkim, Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and employees of the Company.

For and on behalf of the Board

Ahmedabad Sudhir Mehta

9th May, 2014 Chairman


Mar 31, 2013

To The Shareholders

The Directors have the pleasure of presenting the Fortieth Annual Report of your Company together with the audited accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS

The summary of consolidated (Company and its subsidiaries) and standalone (Company) operating results for the year and appropriation of divisible profits is given below:

(Rs. in crores except per share data)

Consolidated Standalone

2012-13 2011-12 2012-13 2011-12

Sales & Operating Income 3212 2696 2766 2076

Profit Before Depreciation, Finance Cost,Exceptional Items & Tax 736 544 811 536

Less Depreciation 83 82 72 64

Less Finance Cost 34 39 37 40

Profit Before Exceptional Items & Tax 619 423 702 432

Less Exceptional Items 37 65 37 61

Less Tax Expense 147 72 119 60

Less Minority Interest 2 2 0 0

Net Profit for the Year 433 284 547 311

Balance brought forward 167 158 274 237

Distributable Profits 600 442 821 548

Appropriated as under:

Transfer to General Reserve 55 191 55 191

Interim Dividend 51 51 51 51

Proposed Final Dividend 144 21 144 21

Tax on Distributed Profits for Interim Dividend 8 8 8 8

Tax on Distributed Profits for Final Dividend 25 4 25 3

Balance Carried Forward 317 167 538 274

Earnings Per Share (Rs. per share) 51.15 33.57 64.58 36.79

Consolidated Operating Results

The consolidated sales and operating income increased to Rs. 3212 crores from Rs. 2696 crores in the previous year yielding a growth of 19.14%. The consolidated operating profit for the year was Rs. 736 crores as against Rs. 544 crores in the previous year registering an increase of 35.29%. The consolidated net profit increased to Rs. 433 crores from Rs. 284 crores in the previous year registering a growth of 52.46%. During the current year, exceptional item pertaining to provision for diminution in the value of long term investment amounting to Rs. 37 crores is charged to the Statement of Profit and Loss. Adjusting for the exceptional item (net of tax), consolidated net profit has grown by 39.88%.

Standalone Operating Results

The sales and operating income increased to Rs. 2766 crores from Rs. 2076 crores in the previous year yielding a growth of 33.24%. The operating profit for the year under review increased to Rs. 811 crores as against Rs. 536 crores in the previous year registering a growth of 51.31%. The profits after tax for the year under review increased to Rs. 546 crores as against Rs. 311 crores in the previous year registering a growth of 75.56%. During the current year, exceptional item pertaining to provision for diminution in the value of long term investment amounting to Rs. 37 crores is charged to the Statement of Profit and Loss. Adjusting for the exceptional item (net of tax), net profit has grown by 61.94%.

Management Discussion and Analysis (MDA)

The detailed analysis of the operating performance of the Company for the year, the state of affairs and the key changes in the operating environment have been included in the Management Discussion and Analysis section which forms a part of the Annual Report.

APPROPRIATIONS

Dividend

As a policy, the Company endeavours to distribute 30% of its annual consolidated net profit after tax as dividend in one or more tranches.

Normal annual dividend of Rs. 6.00 per equity share of fully paid up face value of Rs. 5.00 amounting to Rs. 50.77 crores was paid to the shareholders as interim dividend during the year under review. The tax on distributed profits was Rs. 8.24 crores making the aggregate distribution to Rs. 59.00 crores. Further, the Board has recommended an additional dividend of Rs. 7.00 per equity share (pre bonus) amounting to Rs. 59.23 crores. Commemorating four decades of business operations, the Board has also recommended a special dividend of Rs. 10.00 per equity share (pre bonus) amounting to Rs. 84.61 crores. Total distribution including tax of Rs. 24.45 crores works out to be Rs. 168.29 crores towards such additional and special dividend. Aggregate dividend works out to be Rs. 23.00 per share (previous year Rs. 8.50 including special dividend of Rs. 2.50 per share) and distribution amount including tax on distributed profit works out to be Rs. 227.30 crores (previous year Rs. 83.58 crores). These dividends are tax free in the hands of the shareholders.

Transfer to Reserves

The Board has recommended a transfer of Rs. 55.00 crores to the general reserve and an amount of Rs. 538.00 crores is retained in the Statement of Profit and Loss of Standalone financials.

BONUS ISSUE

The Board has recommended the issue of Bonus Shares in the proportion of 1:1 i.e. 1 (one) new fully paid-up Equity Share of Rs. 5.00 each for every 1 (one) fully paid-up Equity Share of Rs. 5.00 each, to the eligible shareholders of the Company as on the Record Date as may be fixed by the Board or a Committee thereof authorized for the purpose and for approving the increase in the Authorized Share Capital & consequent amendment to Capital clause of the Memorandum of Association of the Company. Pursuant to Section 192A(2) of the Companies Act,1956 read with the Companies (Passing of the Resolution by Postal Ballot) Rules, 2011, the Board seeks shareholders'' approval through passing of necessary resolutions by Postal Ballot for the above.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, in relation to financial statements of the Company for the year ended 31st March, 2013, the Board of Directors state that:

i the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the profit for the year ended on that date;

iii proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv the financial statements have been prepared on a going concern basis.

SUBSIDIARIES

Brief review of the important subsidiaries is given below:

Heumann Pharma GmbH & Co Generica KG (Heumann), Heunet Pharma GmbH and Norispharm GmbH at Germany

Heumann along with Heunet Pharma GmbH and Norispharm GmbH at Germany posted revenues of Euro 58.76 million (Rs. 412.07 crores) for the financial year 2012-13 as compared with Euro 55.43 million (Rs. 365.33 crores) for the previous year, registering a growth of 12.79% in Rupees. Net loss for the year was Euro 0.97 million (Rs. 2.93 crores) as against a net loss of Euro 0.13 million (profit of Rs. 7.41 crores in Rupee) for the previous year. The increase in loss was due to one-time penalty and legal cost.

Torrent do Brasil Ltda.(TdBL), Brazil

During the year, TdBL achieved revenues of Reai 180.29 million (Rs. 488.58 crores), as compared with Reai 165.88 million (Rs. 467.80 crores) in the previous year, registering a growth of 4.44% in Rupees. TdBL has incurred a net loss after tax of Reai 2.47 million (Rs. 9.23 crores), as compared to a net profit after tax of Reai 8.46 million (Rs. 26.27 crores) in the previous year. The losses during the year are largely attributable to price reduction of one of key product and field force expansion.

Torrent Pharma Inc. (TPI), USA

During the year, TPI earned revenues of USD 57.90 million (Rs. 315.12 crores), as compared with USD 44.50 million (Rs. 214.57 crores) in previous year registering a growth of 46.86% in Rupees. Net profit for the year was at USD 1.05 million (Rs. 7.95 crores) as against a net profit of USD 0.89 million (Rs. 10.39 crores) for the previous year. The Company has 43 ANDA''s approvals, 24 pending approvals and 33 filings under development. Steady flow of product approvals from this pipeline is expected to sustain growth momentum.

Laboratorios Torrent S.A. de C.V. (LTSA)

During the year, LTSA earned revenues of Mexican Peso 78 million (Rs. 32.51 crores) as compared with Mexican Peso 70.93 million (Rs. 26.85 crores) for the previous year registering a growth of 21.08% in Rupees. Net loss for the year was at Mexican Peso 2.71 million (Rs. 1.09 crores) as against a loss of Mexican Peso 1.33 million (Rs. 0.56 crores) for the previous year.

HUMAN RESOURCES

To enhance the effectiveness & efficiency of human resources towards better productivity and competitiveness, the Company during the year undertook focused recruitment & induction of management trainees as well as lateral hires in middle & upper management levels and up-gradation of technical & marketing skills. The performance management area also received requisite attention at individual as well as organizational levels. On the industrial relations front, the Company enjoyed a cordial rapport during the year.

The Company makes an effort to bring together (including through webcast), all the employees across all locations as well as the Senior Management team, on various occasions. Such occasions during the year were:

- The Founder''s Day, 2013 - The employees of Torrent pay respect to the legendary and visionary founder Chairman, Shri U. N. Mehta. Also, on this day, two employees selected from across the group are awarded the "Torrentian" title for their dedication, commitment and contribution in the overall development of the organization and the society.

- Independence Day 2012 - The Vice Chairman, addressed all the employees on the theme of "Understanding Past, Interpreting Present and Decoding Future" in the context of Group''s business.

- Republic Day 2013-The Chairman in his address on the theme "Unity in Diversity", solicited views from all employees on various significantly important matters including but not limited to core values and steps needed to achieve equal involvement and participation of both genders at all levels.

CORPORATE SOCIAL RESPONSIBILITY

Concern for Society and Environment is a deeply rooted core value of the Company. As a part of its CSR, the Company makes concentrated efforts in the fields of Community Healthcare, Sanitation and Hygiene, Education and Knowledge Enhancement and Social Care and Concern. During the year, the Company was mainly involved in the following CSR activities:

- Getting a new High School building constructed with total outlay of Rs. 1500 lacs and an existing School building reconstructed at a total outlay of Rs. 155 lacs at group level out of which Company''s contribution is expected to be 30%.

- Shiksha Setu - Teaching Learning Enhancement Programme in its second year included more than 3400 students and 150 teachers as beneficiaries. Relevant outcomes observed include increase in attendance, 10% learning level improvement and enhanced learning interest through ICT based adaptive tool.

- Shardashish Scholarship Programme provided scholarship support to 32 meritorious students from economically weak background.

- Holistic Psychometric Test and Counseling for 685 students of 9th standard focusing on their career paths in three schools were conducted.

- More than 70 teachers were trained with the purpose of developing them as Counselors for further counseling & development of students.

- Primary Dental Health check up Camp was organized for 865 students of Sharda Mandir Primary School at Indrad, which ensured secondary and tertiary treatment for needy students.

ENVIRONMENT, HEALTH & SAFETY

The Company provides the highest importance to safety in its various operations. In line with that philosophy, last year the Company implemented "Conviction for Safety" policy which was first of its kind in the country. This has resulted into better awareness at the work place about safety and compliance of safety norms and substantially higher compensation to the personnel and their families adversely affected by any accident.

The Company was awarded ''Sword of Honor'' along with Five Star rating by British Safety Council. HSE audit is conducted by the Company not only for its own plants but also for its loan licensees. The Company has also successfully commissioned solar evaporation pond with improved evaporation efficiency of high TDS water and new ETP exclusively for API with latest energy saving concept and efficiently removal of COD/ BOD/ammonical nitrogen by two stage bio-reaction.

The Company has received ISO-50001-2011 certification for Energy Management System at its Indrad Plant, which is helping to achieve continual improvement in energy use and consumption.

INSURANCE

The Company''s plant, property, equipments and stocks are adequately insured against major risks. After taking into account all the relevant factors, including the risk benefit trade-off, the Company has consciously decided not to take insurance cover for loss of profit under the Consequential Loss (Fire) Policy. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors'' and Officers'' Liability Policy to provide coverage against the liabilities arising on them.

DIRECTORS

During the year under review, Shri Shashikant Bhojani retired from the Board with effect from 23rd July, 2012 (i.e. date of last Annual General Meeting).

During the year, Shri Pradeep Bhargava was appointed as Additional Director of the Company with effect from 26th October, 2012. It is proposed to appoint him as Director of the Company, liable to retire by rotation, at the ensuing Annual General Meeting. Brief resume of Shri Pradeep Bhargava forms part of the Notice of the ensuing Annual General Meeting. The Board recommends his appointment.

Dr. Prasanna Chandra and Shri Sanjay Lalbhai retire by rotation at the ensuing Annual General Meeting. Dr. Chandra and Shri Lalbhai have expressed their intention to retire and consequently not getting re-appointed. The Directors place on record their deep appreciation for the able guidance & support provided and invaluable contributions made by Dr. Chandra and Shri Lalbhai for the overall growth of the Company during their long tenure on the Board and fruitful association for more than a decade.

As per the provisions of Section 255 of the Companies Act, 1956 and subject to approval of the shareholders at the ensuing Annual General Meeting, it is proposed by the Board to make Shri Sudhir Mehta, Non-Executive Chairman of the Company as permanent member on the Board not liable to retire by rotation.

CORPORATE GOVERNANCE

As required by Clause 49 of the Listing Agreement, a separate Report on Corporate Governance forms part of the Annual Report. A certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance forms part of this report as Annex 3.

AUDITORS

- Statutory Auditors

The term of appointment of Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W), Statutory Auditors of the Company will expire at the ensuing Annual General Meeting. The Company has received a certificate from them about their eligibility for appointment as Statutory Auditors as per Section 224(1B) of the Companies Act, 1956. The Audit Committee in their meeting held on 30th May, 2013 has recommended their appointment for the year 2013-14.

- Cost Auditors

The Company has appointed Kirit Mehta & Co., Cost Accountants, Mumbai (Firm Registration No. 000353) as the Cost Auditor of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year ended 31st March, 2013. Further, due date of filing the Cost Audit Report for the financial year ended 31st March, 2012 was 28th February, 2013 and the same was filed on 11* January, 2013. Subject to the approval of the Central Government under Section 233B of the Companies Act, 1956, Kirit Mehta & Co. were appointed as the Cost Auditor of the Company for audit of cost accounting records of its activities (Formulation & Bulk Drugs activities) for the financial year 2013-14.

CONSERVATION OF ENERGY,TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed to this report as Annex 1.

PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975 as amended, forms part of this report as Annex 2. Having regards to the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, this Annual Report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain it by writing to the Company Secretary at the registered office of the Company.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Government of Gujarat, Government of Himachal Pradesh, Government of Sikkim, Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and employees of the Company.

For and on behalf of the Board

Ahmedabad Sudhir Mehta

30th May,2013 Chairman


Mar 31, 2012

To

The Shareholders

The Directors have the pleasure of presenting the Thirty Ninth Annual Report of your Company together with the audited accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS

The summary of consolidated (Company and its subsidiaries) and standalone (Company) operating results for the year and appropriation of divisible Profits is given below:

(Rs. in crores except per share data)

Consolidated Standalone

2011-12 2010-11 2011-12 2010-11

Sales & Operating Income 2696 2198 2076 1752

Profit Before Depreciation, Finance Cost, Exceptional Items & Tax 544 443 536 455

Less Depreciation 82 62 64 58

Less Finance Cost 39 39 40 39

Profit Before Exceptional Items & Tax 423 342 432 358

Less Exceptional Items 65 0 61 0

Less Tax Expense 72 72 60 67

Less Minority Interest 2 0 0 0

Net Profit for the Year 284 270 311 291

Balance brought forward 158 119 237 178

Distributable Profits 442 389 548 469

Appropriated as under:

Transfer to General Reserve 191 153 191 153

Interim Dividend 51 0 51 0

Proposed Final Dividend 21 68 21 68

Tax on Distributed Profits for Interim Dividend 8 0 8 0

Tax on Distributed Profits for Final Dividend 3 11 3 11

Balance Carried Forward 167 157 274 237

Earnings Per Share (Rs.per share) 33.57 31.93 36.79 34.38

Consolidated Operating Results

The consolidated sales and operating income increased to Rs. 2696 crores from Rs. 2198 crores in the previous year yielding a growth of 22.66%. The consolidated operating Profit for the year was Rs. 544 crores as against Rs. 443 crores in the previous year registering an increase of 22.80%. The consolidated net Profit increased to Rs. 284 crores from Rs. 270 crores in the previous year registering a growth of 5.19%. During the current year, exceptional item pertaining to sales returns provision amounting to Rs. 65 crores is charged to the statement of profi t and loss. Adjusting for the exceptional item (net of tax), consolidated net Profit has grown by 24.44%.

Standalone Operating Results

The sales and operating income increased to Rs. 2076 crores from Rs. 1752 crores in the previous year yielding a growth of 18.49%. The operating Profit for the year under review increased to Rs. 536 crores as against Rs. 455 crores in the previous year registering a growth of 17.80%. The Profits after tax for the year under review increased to Rs. 311 crores as against Rs. 291 crores in the previous year registering a growth of 6.87%. During the current year, exceptional item pertaining to sales returns provision amounting to Rs. 61 crores is charged to the statement of Profit and loss. Adjusting for the exceptional item (net of tax), net Profit has grown by 23.71%.

Management Discussion and Analysis (MDA)

The detailed analysis of the operating performance of the Company for the year, the state of affairs and the key changes in the operating environment have been included in the Management Discussion and Analysis section which forms a part of the Annual Report.

APPROPRIATIONS

Dividend

As a policy, the Company endeavours to distribute 30% of its annual consolidated net Profit after tax as dividend in one or more tranches.

Normal annual dividend of Rs. 6.00 per equity share of fully paid up face value of Rs. 5.00 amounting to Rs. 50.77 crores was paid to the shareholders as interim dividend during the year under review. The tax on distributed Profits was Rs. 8.24 crores making the aggregate distribution to Rs. 59.00 crores. Further, the Board has recommended a special dividend as final dividend of Rs. 2.50 per equity share amounting to Rs. 21.15 crores. Total distribution including tax of Rs. 3.42 crores works out to be Rs. 24.58 crores towards such final dividend. Aggregate dividend works out to be Rs. 8.50 per share (previous year Rs. 8.00 including special dividend of Rs. 2.00 per share) and distribution amount including tax on distributed Profit works out to be Rs. 83.58 crores (previous year Rs. 78.67 crores). These dividends are tax free in the hands of the shareholders.

Transfer to Reserves

The Board has recommended a transfer of Rs. 191.00 crores to the general reserve and an amount of Rs. 274.04 crores is retained in the Statement of Profit and Loss of Standalone financials.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 217(2AA) of the Companies Act, 1956, in relation to financial statements of the Company for the year ended 31st March, 2012, the Board of Directors state that:

i the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2012 and of the Profit for the year ended 31st March, 2012;

iii proper and suffi cient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv the financial statements have been prepared on a going concern basis.

SUBSIDIARIES

Brief review of the important subsidiaries is given below:

Heumann Pharma GmbH & Co Generica KG (Heumann), Heunet Pharma GmbH and Norispharm GmbH at Germany

Heumann along with Heunet Pharma GmbH and Norispharm GmbH at Germany posted revenues of Euro 55.43 million (Rs. 365.33 crores) for the fi nancial year 2011-12 as compared with Euro 50.29 million (Rs. 303.53 crores) for the previous year, registering a growth of 20.35% in Rupees. Net loss for the year was Euro 0.13 million (Rs. 7.41 crores) as against a net Profit of Euro 2.30 million (Rs. 9.73 crores) for the previous year. Current year losses are on account of two one off items i.e. actuarial losses on pension liability and provision for sales returns.

Torrent do Brasil Ltda. (TdBL), Brazil

During the year, TdBL achieved revenues of Reai 165.88 million (Rs. 467.80 crores), as compared with Reai 131.27 million (Rs. 346.28 crores) in the previous year, registering a growth of 35.09% in Rupees. TdBL earned a net Profit after tax of Reai 8.46 million (Rs. 26.27 crores), as compared to a net Profit after tax of Reai 2.98 million (Rs. 8.06 crores) in the previous year.

ZAO Torrent Pharma (ZAO TP), Russia

During the year, ZAO TP achieved revenue of RRU 293.37 million (Rs. 47.62 crores) as compared with RRU 238.88 million (Rs. 36.02 crores) in the previous year, registering a growth of 32.20% in Rupees. Net loss for the year was at RRU 27.85 million (Rs. 2.74 crores) as against a net Profit after tax of RRU 92.08 million (Rs. 12.99 crores) for the previous year. Previous year Profits were exceptionally high on account of loan write back from parent and hence not strictly comparable. Efforts are on to improve sales performance and to turnaround.

Torrent Pharma Inc. (TPI), USA

During the year, TPI earned revenues of USD 44.50 million (Rs. 214.57 crores), as compared with USD 22.88 million (Rs. 104.13 crores) in previous year registering a growth of 106.06% in Rupees. Net Profit for the year was at USD 0.89 million (Rs. 10.39 crores) as against a net Profit of USD 0.30 million (Rs. 0.12 crores) for the previous year. The Company has 37 ANDA's approvals, 29 pending approvals and 16 fi lings under development. Steady fl ow of product approvals from this pipeline is expected to sustain growth momentum.

Laboratorios Torrent S.A. de C.V. (LTSA), Mexico

During the year, LTSA earned revenues of Mexican Peso 70.93 million (Rs. 26.85 crores) as compared with Mexican Peso 69.45 million (Rs. 25.52 crores) for the previous year. Net loss for the year was at Mexican Peso 1.33 million (Rs. 0.56 crores) as against a loss of Mexican Peso 2.00 million (Rs. 0.66 crores) for the previous year.

CORPORATE SOCIAL RESPONSIBILITY

The Company's Corporate Social Responsibility (CSR) initiatives are highly infl uenced by the philosophies of its group Founder Chairman, Shri U. N. Mehta. He fi rmly believed that it was the responsibility of every member of the society to give back for all the good that the society has bestowed upon us. The Company continues to make focused efforts for fulfilling its CSR, with the thrust areas being education, health & sanitation and public awareness.

During the year, the Company was involved in the following CSR activities:

- Shiksha Setu, the programme spread over 5 years for Teaching Learning Enhancement in all 20 project schools covering approximately 2700 students in the financial year ended 31st March, 2012 which comprise four components viz.

- Low Stakes Learning Assessment of students

- Post-Assessment Analysis Workshop

- Continuous Teachers' Support Programme

- Individualized ICT-based learning support

- Completion of Sharda Mandir School project, which was to the populace of Indrad Village.

- Shardashish Scholarship Programme which provided scholarship support to 46 meritorious students from economically weak background.

ENVIRONMENT, HEALTH AND SAFETY

In line with its philosophy of highest importance to safety in its various operations and in an effort to create more awareness at the work place about safety and compliance of safety norms so as to avoid accidents at the workplace as also to substantially compensate the personnel and their families who have been adversely affected by accidents, the "Conviction for Safety" policy has been implemented by the Company which is fi rst of its kind in the country. Safety campaigns and public awareness programs have also been enhanced.

INSURANCE

The Company's plant, property, equipments and stocks are adequately insured against major risks. After taking into account all the relevant factors, including the risk benefit trade-off, the Company has consciously decided not to take insurance cover for loss of Profit under the Consequential Loss (Fire) Policy. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors' and Offi cers' Liability Policy to provide coverage against the liabilities arising on them.

DIRECTORS

During the year under review, the Board of Directors re-appointed Dr. Chaitanya Dutt, Director (Research & Development), whose terms of appointment expired on 31st December, 2011, for a period of three years with effect from 1st January, 2012 subject to the approval of shareholders at the ensuing Annual General Meeting.

During the year, Smt. Renu Sud Karnad was appointed as Additional Director with effect from 20th April, 2011 and as regular Director at the Annual General Meeting on 30th July, 2011. She has resigned from the directorship of the Company with effect from 10th October, 2011.

Dr. Leena Srivastava and Shri Haigreve Khaitan were appointed as Additional Directors of the Company with effect from 18th October, 2011 and 23rd January, 2012 respectively. It is proposed to appoint them as Directors of the Company, liable to retire by rotation, at the ensuing Annual General Meeting.

Shri Sudhir Mehta and Shri Shashikant Bhojani retire by rotation at the ensuing Annual General Meeting. Shri Mehta, being eligible, has been proposed for re-appointment. Shri Bhojani has expressed his intention to retire and consequently not getting re-appointed. The Directors place on record their appreciation for the contribution made by Shri Bhojani during his long tenure on the Board since 25th May, 2001.

Brief resumes of the Directors being appointed / re-appointed together with other relevant details form part of the Notice of the ensuing Annual General Meeting. The Board recommends their appointment / re-appointment.

CORPORATE GOVERNANCE

As required by Clause 49 of the Listing Agreement, a separate Report on Corporate Governance forms part of the Annual Report. A certifi cate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance forms a part of this report as Annex 3.

AUDITORS

- Statutory Auditors

The term of appointment of Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W), Statutory Auditors of the Company will expire at the ensuing Annual General Meeting. The Company has received a certifi cate from them about their eligibility for appointment as Statutory Auditors as per Section 224(1B) of the Companies Act, 1956. The Audit Committee in their meeting held on 18th May, 2012 has recommended the appointment of Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W) as Statutory Auditors of the Company for the year 2012-13.

- Cost Auditors

Pursuant to the approval of the Central Government under Section 233B of the Companies Act, 1956, the Company has appointed Kirit Mehta & Co., Cost Accountants, Mumbai (Firm Registration No. 00015) as the Cost Auditor of the Company for audit of cost accounting records of its Pharmaceutical activities (Formulation & Bulk Drugs activities) for the financial year ended 31st March, 2012. Further, due date of fi ling the Cost Audit Report in respect of Formulation activities of the Company for the financial year ended 31st March, 2011 was 30th September, 2011 and the same has been fi led on 17th September, 2011.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed to this report as Annex 1.

PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975 as amended, forms part of this report as Annex 2. Having regards to the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, this Annual Report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain it by writing to the Company Secretary at the registered offi ce of the Company.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Government of Gujarat, Government of Himachal Pradesh, Government of Sikkim, Gujarat Urja Vikas Nigam Limited, Himachal Pradesh State Electricity Board, other Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and employees of the Company.

For and on behalf of the Board

Gangtok, Sikkim Sudhir Mehta

18th May, 2012 Chairman


Mar 31, 2011

The Directors have the pleasure of presenting the Thirty Eighth Annual Report of your Company together with the audited accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS

The summary of consolidated (Company and its subsidiaries) and standalone (Company) operating results for the year and appropriation of divisible profits is given below:

(Rs. in Crores except per share data)

Consolidated Standalone

2010-11 2009-10 2010-11 2009-10

Sales & Operating Income 2226 1916 1778 1449

profit Before Depreciation, Interest and Tax (PBDIT) 417 430 430 422

Less Depreciation 62 66 58 54

Less Net Interest Expense 12 17 14 17

profit Before Exceptional Items & Tax 343 347 358 351

Less Exceptional Items 0 0 0 37

Less Tax Expense 73 116 67 107

Net profit for the Year 270* 231 291 207

Balance brought forward 119 3 178 86

Distributable profits 389 234 469 293

Appropriated as under:

Transfer to General Reserve 153 56 153 56

Proposed Equity Dividend 68 51 68 51

Tax on Distributed profits 11 8 11 8

Balance Carried Forward 157 119 237 178

Earnings Per Share (Rs. per share) 31.93 27.32 34.38 24.51

*Consolidated Net profit for the year is net of minority interest amounting to Rs. (0 .41) Lacs

Consolidated Operating Results

The consolidated sales and operating income increased to Rs. 2226.48 crores from Rs. 1916.04 crores in the previous year yielding a growth of 16.20%. The consolidated operating profit for the year was Rs. 417.29 crores as against Rs. 429.81 crores in the previous year registering a decrease of 2.91%. The consolidated net profit increased to Rs. 270.17 crores from Rs. 231.20 crores in the previous year registering a growth of 16.86%. During the previous year, MAT credit entitlement of Rs. 52.86 crores was written off. Adjusting for the same, consolidated net profi t has de-grown by 4.89%.

Standalone Operating Results

The sales and operating income increased to Rs. 1778.19 crores from Rs. 1448.96 crores in the previous year yielding a growth of 22.72%. The operating profit for the year under review increased to Rs. 430.52 crores as against Rs. 422.03 crores in the previous year registering a growth of 2.01%. The profits after tax for the year under review increased to Rs. 290.86 crores as against Rs. 207.37 crores in the previous year registering a growth of 40.26%. Growth in the net profit adjusted for the MAT write off as stated above is 11.77%.

Management Discussion and Analysis (MDA)

The detailed analysis of the operating performance of the Company for the year, the state of affairs and the key changes in the operating environment has been included in the Management Discussion and Analysis Section which forms a part of the Annual Report.

APPROPRIATIONS

Dividend

The Board of Directors has decided that the Company as a policy will endeavour to distribute 30% of its annual consolidated net profit after tax as dividend. The said distribution is expected to be in one or more tranches.

In line with the said policy, the Board has recommended a normal annual dividend of Rs. 6.00 per equity share and a special dividend of Rs. 2.00 per equity share (previous year dividend Rs. 6.00 per equity share) of fully paid up face value of Rs. 5, amounting to Rs. 67.69 crores (previous year Rs. 50.77 crores). The tax on distributed profits payable on this dividend shall be Rs. 10.98 crores (previous year Rs. 8.43 crores) making the aggregate distribution to Rs. 78.67 crores (previous year Rs. 59.20 crores). The distributed profits are 29% (previous year 26%) of the consolidated net profits for the year. The proposed dividend would be tax free in the hands of the shareholders.

Transfer to Reserves

The Board has recommended a transfer of Rs. 153 crores to the general reserve and an amount of Rs. 237 crores is retained in the profit and loss account of Standalone financials.

DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 217 (2AA) of the Companies Act, 1956, in relation to financial statements of the Company for the year 2010-11, the Board of Directors state that:

i the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2011 and of the profit for the year ended 31st March, 2011;

iii proper and suffi cient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv the financial statements have been prepared on a going concern basis.

SUBSIDIARIES

During the year under review, the Company incorporated three wholly owned subsidiaries, one each at United Kingdom, Romania and Malaysia under the names of Torrent Pharma (UK) Ltd, Torrent Pharma S.R.L. and Laboratories Torrent (Malaysia) Sdn. Bhd. respectively. Torrent Pharma Japan Co., Ltd, a wholly owned subsidiary at Japan, was wound up during the year.

Brief review of the important subsidiaries is given below:

Heumann Pharma GmbH & Co Generica KG (Heumann), Heunet Pharma GmbH and Norispharm GmbH at Germany

Heumann along with Heunet Pharma GmbH and Norispharm GmbH at Germany posted revenues of Euro 48.15 million (Rs. 290.65 crores) for the fi nancial year 2010-11 as compared with Euro 40.07 million (Rs. 267.87 crores) for the previous year, registering a growth of 8.51% in Rupees. Net profit for the year was Euro 2.07 million (Rs. 8.40 crores) as against a net profit of Euro 0.48 million (Rs. 4.63 crores) for the previous year. During the year, Heumann was successful in obtaining several tenders announced by the various health insurance funds.

Torrent do Brasil Ltda. (TdBL), Brazil

During the year, TdBL achieved revenues of Reai 131.27 million (Rs. 346.28 crores), as compared with Reai 118.04 million (Rs. 300.97 crores) in the previous year, registering a growth of 15.06% in Rupees.

TdBL earned a net profit after tax of Reai 2.90 million (Rs. 7.83 crores), as compared to a net profit after tax of Reai 4.84 million (Rs. 18.38 crores) in the previous year.

ZAO Torrent Pharma (ZAO TP), Russia

During the year, ZAO TP achieved revenue of RRU 238.88 million (Rs. 36.02 crores) as compared with RRU 195.27 million (Rs. 30.06 crores) in the previous year, registering a growth of 19.83% in Rupees. Net profit after tax for the year was at RRU 92.08 million (Rs. 13.05 crores) as against a net loss after tax of RRU 56.88 million (Rs. 9.09 crores) for the previous year.

Torrent Pharma Inc. (TPI), USA

During the year, TPI earned revenues of USD 24.47 million (Rs. 111.36 crores), as compared with USD 19.66 million (Rs. 93.10 crores) in previous year registering a growth of 19.61% in Rupees. Net profit for the year was at USD 0.30 million (Rs. 0.12 crores) as against a net profi t of USD 0.21 million (Rs. 0.14 crores) for the previous year. The Company has 25 ANDAs approvals, 30 pending approvals and 30 fi lings under development. Steady flow of product approvals from this pipeline is expected to sustain growth momentum.

Laboratorios Torrent S.A. de C.V. (LTSA)

During the year, LTSA earned revenues of Mexican Peso 69.50 million (Rs. 25.54 crores) as compared with Mexican Peso 1.68 million (Rs. 0.60 crores) for the previous year. Net loss for the year was at Mexican Peso 2 million (Rs. 0.66 crores) as against a loss of Mexican Peso 17.23 million (Rs. 6.20 crores) for the previous year.

CORPORATE SOCIAL RESPONSIBILITY

The Company is conscious about its social obligations and has been taking various social and community initiative with special focus on health and education. The Company has actively supported the Torrent Groups initiatives to expand the U N Mehta Institute of Cardiology and Research Centre and to take patient care effectively. The Company has contributed Rs. 275 lacs during the year and cumulatively Rs. 675 lacs toward this project.

In education fi eld, your Company has taken up a project to re-build & expand primary & middle school infrastructure & improve the quality of education imparted by the school at village Indrad, Gujarat with an outlay of Rs. 400 lacs. It has also adopted a primary school at village Bhud, Baddi, Himachal Pradesh.

INSURANCE

The Companys plant, property, equipments and stocks are adequately insured against major risks. After taking into account all the relevant factors, including the risk benefit trade-off, the Company has consciously decided not to take insurance cover for loss of profit under the Consequential Loss (Fire) Policy. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials. The Company has also taken Directors and Offi cers Liability Policy to provide coverage against the liabilities arising on them.

DIRECTORS

During the year under review, Samir Mehta was appointed as Executive Vice Chairman of the Company with effect from 1st August, 2010 for a period of fi ve years by pre closing his earlier terms of appointment as Managing Director of the Company.

Kiran Karnik has resigned from the directorship of the Company with effect from 23rd October, 2010. The Board places on records its appreciation for the contribution made by Mr. Karnik during his tenure as a Director.

Shailesh Haribhakti and Renu Sud Karnad were appointed as Additional Directors of the Company with effect from 23rd October, 2010 and 18th April, 2011 respectively. It is proposed to appoint them as directors of the Company, liable to retire by rotation, at the ensuing Annual General Meeting.

Markand Bhatt and Sanjay Lalbhai are liable to retire by rotation at the ensuing Annual General Meeting and being eligible have been proposed for re-appointment.

Brief resumes of the directors being appointed/ re-appointed together with other relevant details form part of the Notice of the ensuing Annual General Meeting. The Board recommends their appointment/ reappointment.

CORPORATE GOVERNANCE

As required by Clause 49 of the listing agreement, a separate report on corporate governance forms part of the Annual Report. A certifi cate from the statutory auditors of the Company regarding compliance of conditions of corporate governance forms a part of this report as Annex 3.

AUDITORS

The term of appointment of Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W), statutory auditors of the Company will expire at the ensuing Annual General Meeting. The Company has received a certifi cate from them about their eligibility for appointment as statutory auditors as per Section 224(1B) of the Companies Act, 1956. The Audit Committee in their meeting held on 28th May, 2011 has recommended the appointment of Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 117365W) as statutory auditors of the Company for the year 2011-12.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is annexed to this report as Annex 1.

PARTICULARS OF EMPLOYEES

The information required under Section 217(2A) of the Companies Act, 1956, read with Companies (Particular of Employees) Rules, 1975 as amended, forms part of this report as Annex 2. Having regards to the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, this Annual Report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain it by writing to the Company Secretary at the registered offi ce of the Company.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Government of Gujarat, Government of Himachal Pradesh, Government of Sikkim, Gujarat Urja Vikas Nigam Limited, Himachal Pradesh State Electricity Board, other Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and employees of the Company.

For and on behalf of the Board

Ahmedabad Sudhir Mehta

28th May, 2011 Chairman


Mar 31, 2010

The Directors have the pleasure of presenting the Thirty Seventh Annual Report of your Company together with the audited accounts for the year ended 31st March, 2010.

FINANCIAL RESULTS

The summary of consolidated (Company and its subsidiaries) and standalone (Company) operating results for the year and appropriation of divisible profits is given below:

(Rs. in Crores except per share data)

Consolidated Standalone 2009-10 2008-09 2009-10 2008-09

Sales & Operating Income 1916 1631 1449 1185

Profit Before Depreciation Interest and Tax (PBDIT) 430 262 422 257

Less Depreciation 66 42 54 37

Less Net Interest Expense 17 19 17 20

Profit Before Exceptional Items & Tax 347 201 351 200

Less Exceptional Items 0 9 37 9

Less Tax Expense 116 7 107 4

Net Profit for the Year 231 185 207 187

Balance brought forward 3 3 86 84

Distributable Profits 234 188 293 271

Appropriated as under:

Transfer to General Reserve 56 145 56 145

Proposed Equity Dividend 51 34 51 34

Tax on Distributed Profits 8 6 8 6

Balance Carried Forward 119 3 178 86

Earnings Per Share (Rs. per share) 27.32 21.79 24.51 22.07

Consolidated Operating Results

The consolidated sales and operating income increased to Rs. 1916.04 crores from Rs. 1630.66 crores in the previous year yielding a growth of 1 7.50%. The consolidated operating profit for the year increased to Rs. 429.81 crores as against Rs. 262.24 crores in the previous year registering a growth of 63.90%. The consolidated net profit increased to Rs. 231.20 crores from Rs. 1 84.37 crores in the previous year registering a growth of 25.40%. The Company has reviewed realisability of MAT credit entitlement, recognized in earlier years. Based on the review, such MAT credit entitlement, amounting to Rs. 52.86 crores, has been written off during the year. Adjusted for this, the growth in consolidated net profit is 54.00%.

Standalone Operating Results

The sales and operating income increased to Rs. 1448.96 crores from Rs. 1184.89 crores in the previous year yielding a growth of 22.29%. The operating profit for the year under review increased to Rs. 422.03 crores as against Rs.256.75 crores in the previous year registering a growth of 64.37%. The profits after tax for the year under review increased to Rs. 207.37 crores as against Rs. 1 86.73 crores in the previous year registering a growth of 1 1.05 %. Growth in net profit adjusted for MAT credit write off as stated above, is 39.00%.

Management Discussion and Analysis (MDA)

The detailed analysis of the operating performance of the Company for the year, the state of affairs and the key changes in the operating environment has been included in the Management Discussion and Analysis Section which forms a part of the Annual Report.

APPROPRIATIONS

Dividend

The Board has recommended a dividend of Rs. 6.00 per equity share (previous year dividend Rs. 4.00 per equity share) of fully paid up face value of Rs. 5, amounting to Rs. 50.77 crores (previous year dividend Rs. 33.84 crores). The tax on distributed profits payable on this dividend is Rs. 8.43 crores (previous year Rs. 5.75 crores) making the aggregate distribution to Rs. 59.20 crores (previous year Rs. 39.60 crores). The distributed profits are 29.00% (previous year 21.00%) of the net profits for the year.

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

Transfer to Reserves

The Board has recommended a transfer of Rs. 56.00 crores to the general reserve and an amount of Rs. 1 78.1 9 crores is retained in the profit and loss account of Standalone financials.

DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 21 7 (2AA) of the Companies Act, 1956, in relation to financial statements of the Company for the year 2009-1 0, the Board of Directors state that:

i the applicable Accounting Standards have been followed in preparation of the financial statements and there are no material departures from the said standards;

ii reasonable and prudent accounting policies have been used in preparation of the financial statements and that they have been consistently applied and that reasonable and prudent judgments and estimates have been made in respect of items not concluded by the year end, so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2010 and of the profit for the year ended 31st March, 2010;

iii proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1 956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv the financial statements have been prepared on a going concern basis.

SUBSIDIARIES

During the year under review, the Company incorporated two wholly owned subsidiaries, one each at Canada and Thailand under the names of Torrent Pharma Canada Inc. and Torrent Pharma (Thailand) Co., Ltd. respectively. Further, the wholly owned subsidiary of the Company, Torrent Pharma GmbH (TPG) at Germany, incorporated two subsidiaries namely Heunet Pharma GmbH and Norispharm GmbH at Germany.

Brief review of the important subsidiaries is given below:

Heumann Pharma GmbH & Co Generica KG (Heumann), Heunet Pharma GmbH and Norispharm GmbH at Germany

Heumann along with Heunet Pharma GmbH and Norispharm GmbH at Germany posted revenues of Euro 41.01 million (Rs. 273.88 crores) for the financial year 2009-10 as compared with Euro 40.24 million (Rs. 261.68 crores) for the previous year, registering a growth of 4.66 % in terms of rupees. Net profit for the year was Euro 0.48 million (Rs. 4.63 crores) as against a net profit of Euro 2.22 million (Rs. 18.84 crores) for the previous year. Charge on account of impairment of product licenses and increase in employee costs due to revision in actuarial value of pension liability were the primary reasons for lower profitability. During the year Heumann along with its subsidiaries was successful in several tenders and the sales toward these will flow in the coming years.

Torrent do Brasil Ltda. (TdBL), Brazil

During the year, TdBL achieved revenues of Reai 118.04 million (Rs. 300.97 crores), as compared with Reai 108.60 million (Rs. 256.79 crores) in the previous year, registering a growth of 9.00% in Reai and 17.00% in rupees.

TDBL earned a net profit aftertax of Reai 4.84 million (Rs. 18.38 crores), as compared to a net profit after tax of Reai 2.48 million (Rs. 6.25 crores) in the previous year. The increase in the profit is primarily due to reduction in overall spend level.

Zao Torrent Pharma (ZAO TP), Russia

During the year, ZAO TP achieved revenue of RRU 195.27 million (Rs. 30.06 crores) as compared with RRU 312.83 million (Rs. 52.69 crores) in the previous year, registering a decrease of 42.95% in terms of rupees. Net loss after tax for the year was at RRU 56.88 million (Rs.9.09 crores) as against a net loss after tax of RRU 113.79 million (Rs. 1 9.52 crores) for the previous year. Operations in Russia were affected by adverse economic conditions and dampened demand resulting in the de-growth in revenues.

Torrent Pharma Inc. (TPI)r USA

During the year, TPI earned revenues of USD 1 9.66 million (Rs. 93.10 crores), as compared with USD 7.1 3 million (Rs. 33.59 crores) in previous year registering a growth of 177.17% in terms of rupees. Net profit for the year was at USD 0.21 million (Rs. 0.14 crores) as against a net profit of USD 0.22 million (Rs. 2.20 crores) for the previous year. The Company has 13 ANDAs approvals, 29 pending approvals and 28 filings under development. Steady flow of product approvals from this pipeline is expected to sustain growth momentum.

Torrent Pharma GmbH (TPG), Germany

During the year, TPG earned revenues of Euro 2.51 million (Rs. 16.86 crores) as compared with Euro 2.94 million (Rs. 1 9.09 crores) for the previous year. Net loss for the year was at Euro 1.69 million (Rs. 11.10 crores) as against a profit of Euro 0.63 million (Rs. 4.09 crores) for the previous year. Significant expenditure was incurred in obtaining product registrations during 2009-1 0. Revenue against these will flow once the regulatory approvals come through.

Torrent Pharma Philippines Inc. (TPPI), Philippines

During the year, TPPI earned revenues of Pesos 230.94 million (Rs. 23.18 crores) as compared with Pesos 172.23 million (Rs. 17.18 crores) for the previous year. Net profit for the year was at Pesos 0.86 million (Rs. 0.02 crores) as against a profit of Pesos 5.81 million (Rs. 0.88 crores) for the previous year.

Laboratories Torrent S.A. de C.V is still to start its field promotion. Torrent Australasia Pty. Ltd, Torrent Pharma Japan Co. Ltd and Torrent Pharma Canada Inc. are at their formative stages and have not commenced any revenue generating activities.

CORPORATE SOCIAL RESPONSIBILITY

The Company is conscious about its social obligations and has been taking various social and community initiative with special focus on health and education. The Company is actively supporting the Torrent Groups initiatives to expand the U N Mehta Institute of Cardiology and Research Centre and to take patient care effectively.

In education field, your Company has adopted a primary school at village Bhud, Baddi, Himachal Pradesh. It has constructed additional class rooms and enhancing number of teachers to ensure the quality of the education. Similar initiatives are taken at village Indrad, Gujarat.

INSURANCE

The Companys plant, property, equipments and stocks are adequately insured against major risks. After taking into account all the relevant factors, including the risk benefit trade-off, the Company has consciously decided not to take insurance cover for loss of profit under the Consequential Loss (Fire) Policy. The Company also has appropriate liability insurance covers particularly for product liability and clinical trials.

DIRECTORS

S. H. Bhojani and Dr. Prasanna Chandra are liable to retire by rotation at the ensuing Annual General Meeting and being eligible have been proposed for re-appointment. The details of their re-appointment together with nature of their expertise in specific functional areas and names of the companies in which they hold office as Director and/or the Chairman/Membership of Committees of the Board, are provided in the Notice of the ensuing Annua! General Meeting.

CORPORATE GOVERNANCE

As required by Clause 49 of the listing agreement, a separate report on corporate governance forms part of the Annual Report. A certificate from the statutory auditors of the Company regarding compliance of conditions of corporate governance forms a part of this report as Annex 3.

AUDITORS

The term of appointment of statutory auditors C. C. Chokshi & Co. will expire at the ensuing Annual General Meeting. C.C.Chokshi & Co. is a part of network of firms of Chartered Accountants registered with The Institute of Chartered Accountants of India (ICAI) under the Rules of Network issued by the ICAI. Deloitte Haskins & Sells, Ahmedabad (Firm Registration No. 11 7365W) is a part of the Network. The Company proposes to appoint Deloitte Haskins & Sells, Ahmedabad as its statutory auditors at the ensuing Annual General Meeting. C. C. Chokshi & Co. has expressed their unwillingness to be re-appointed as statutory auditors of the Company and Deloitte Haskins & Sells, Ahmedabad has expressed their willingness io be appointed as the statutory auditors of the Company. The Company has received a certificate from Deloitte Haskins & Sells, Ahmedabad to the effect that the appointment, if made at the ensuing Annual General Meeting, will be in accordance with the limits specified in section 224(1 B) of the Companies Act, 1 956. The Audit Committee in their meeting held on 6* May, 2010 has recommended the appointment of Deloitte Haskins & Sells, Ahmedabad as statutory auditors of the Company for the year 201 0-11.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC.

A statement containing the necessary information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1 988 is annexed to this report as Annex 1.

PARTICULARS OF EMPLOYEES

The information required under section 21 7(2A) of the Companies Act, 1 956, read with Companies (Particular of Employees) Rules, 1975, forms part of this report as Annex 2. However, as permitted by section 219(1) (b)(iv) of the Companies Act, 1956, this Annual Report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain it by writing to the Company Secretary at the registered office of the Company.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors appreciate the trust reposed by the medical fraternity and patients in the Company and look forward to their continued patronage. The Directors are also grateful and pleased to place on record their appreciation for the excellent support, guidance and cooperation extended by the Government of India, Government of Gujarat, Government of Himachal Pradesh, Government of Sikkim, Gujarat Urja Vikas Nigam Ltd, Himachal Pradesh State Electricity Board, other Central and State Government Bodies and Authorities, Financial Institutions and Banks. The Board also expresses its appreciation of the understanding and support extended by the shareholders and employees of the Company.

For and on behalf of the Board

Ahmedabad Sudhir Mehta

6th May, 2010 Chairman

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