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Directors Report of Zenotech Laboratories Ltd.

Mar 31, 2014

Dear Members,

The Directors are pleased to present the twenty fifth Annual Report together with the audited accounts of the Company for the year ended March 31, 2014.

Standalone results

(Rs. in thousands)

Particulars 2013-14 2012-13

Sales (net) 27,557 30,441

Other Income 23,868 1,719

Depreciation 35,561 35,150

Loss before tax (228,554) (255,219)

Exceptional Items - -

(Loss) after tax (228,554) (255,219)

Loss brought forward from previous year (12,47,557) (992,338)

Profit/(Loss) carried forward to Balance Sheet (1,476,111) (1,247,557)

OPERATIONS

The year under review was challenging for your Company in the absence of technical documents, as it strived to revive the bio-technology division to manufacture products such as Rituximab with the available cell lines. After repeated trials on bacterial cell lines, your Company was able to manufacture products such as GCSF and GMCSF on commercial lines. It was however observed that expressions of the mammalian products was exceptionally low demonstrating that the available cell lines were weak. Your Company recognized that manufacturing of products with minimal yield would lead to unacceptable commercial viability, leading to further losses. Therefore, the limited operations at Unit-II are temporarily suspended.

As members are aware, there are legacy issues that inhibit your Company from delivering commercially viable products. Most vital technical information and essential lab records have not been accessible since 2011, the time when the present management took over the actual control of the affairs of your Company. All the DNA clones relating to the biotech products and projects on which your Company was working upon have been unavailable.

Team Zenotech is committed to strengthen the business performance, create and rebuild product pipeline and deliver superior results despite the constraints and hence has been focused on the core business of chemo oncological range. The team has commenced work on technical and clinical data collection for preparation of regulatory approval applications for building a product range with market opportunities in emerging markets.

While your Company has been vigorously pursuing the erstwhile promoter with criminal law suits and is confident of positive outcome, the management is fully committed to develop products that are in demand in commercially attractive therapeutic segments.

In the meantime, your Company is streamlining, cost cutting and turning cost competitive and as part of the action plan aims to improve the operational efficiency. At the same time, care is also being taken not to compromise on quality of both processes and products and to gear Zenotech to meet the demands of a highly competitive market.

During the year under review, WHO GMP approval was received for the range of products manufactured in the Company''s facility. Operations in chemo-oncologicals were continued and supplies were made in the domestic market. Your Company participated in select tenders and it is gratifying that orders from institutional supplies, though of small volumes, are being received.

OUTLOOK

Looking ahead, your Company aims to explore opportunities in the international markets and has generated interest among a few customers. It must be appreciated that such rebuilding exercise of a pharmaceutical organization has to be calibrated carefully which is inherently a time consuming process, with probable under utilization of manufacturing capacity. Efforts are hence, being made to seek business by offering in-house facilities to reputed companies to outsource their requirements by manufacturing at Zenotech''s production units. Overall, your Company is positive that revenue streams would improve in the foreseeable future.

RESEARCH & DEVELOPMENT

A detail on Research & Development has been provided in form B to annexure-C attached and forms part of this report.

BIFR

The Company became a Potential Sick Company as defined under Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) in the year ended March 31, 2011. The Company continues to be a potentially sick company under the said provisions. The matter has been intimated to Board for Industrial and Financial Reconstruction (BIFR). A report on the foregoing is provided as annexure - A to this report.

PUBLIC ANNOUNCEMENT BY SUN PHARMA UNDER SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVER) REGULATIONS, 2011

On April 6, 2014, the Board of Directors of Sun Pharmaceutical Industries Limited have communicated that they (''Sun Pharma/Acquirer'') and Ranbaxy Laboratories Limited (''Ranbaxy''), have approved a Scheme of Arrangement under the provisions of Sections 391 to 394 and other applicable provisions of the Companies Act, 1956 and corresponding provisions of the Companies Act, 2013 (''Scheme'') whereby Ranbaxy shall merge into Sun Pharma (''Primary Acquisition'').

By virtue of Ranbaxy holding 16,127,293 equity shares representing 46.79% of the fully diluted equity and voting capital of Zenotech Laboratories Limited (Zenotech), post consummation of the Primary Acquisition and the consequential implementation of the Scheme, the merger of Ranbaxy into Sun Pharma pursuant to the Scheme will result in Sun Pharma indirectly acquiring 46.79% of the voting rights held by Ranbaxy in, and control over Zenotech, although the acquisition of voting rights in or control over Zenotech is not the objective of the Primary Acquisition.

Accordingly, a public announcement has been issued pursuant to Regulation 3(1) and Regulation 4 read with Regulation 5(1) and Regulation 13(2)(e) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 for and on behalf of the Acquirer to the public shareholders of Zenotech excluding the Acquirer, person acting in concert with the Acquirer, Ranbaxy, person acting in concert with Ranbaxy or such other persons as are excluded by law.

However, in terms of the explanation to the proviso to Regulation 13(4) of the SEBI (SAST) Regulations, this Open Offer is subject to the completion of the Primary Acquisition as provided in the Scheme and other executed documents. Therefore, it is hereby clarified that in the event the Acquirer is unable to exercise or direct the exercise of voting rights in, or control over, Zenotech on account of the Primary Acquisition having failed, the Acquirer shall not proceed with this Open Offer.

SHARE CAPITAL

The authorized share capital of the Company has been increased from Rs. 35 crores to Rs. 100 crores during the year under review, while the subscribed and the paid up capital remain unchanged.

AUDITORS'' QUALIFICATIONS/REMARKS

With regard to qualifications/remarks contained in the Auditors'' Report and Annexure thereto, your Directors'' wish to state as under:

a. Regarding Para No. 1 in the Basis for Qualified Opinion of the Audit report: Reconstructed books of account for the financial years ended March 31, 2011 and 2012, differences between the current management and the then Co-Managing Director, non resolution of the above, inability of the auditors to determine the adjustments/disclosures which may become necessary etc.: As has been reported in the annual report for the previous year, it is reiterated that your Company, under the current management, has initiated appropriate steps to recover various missing assets and properties, valuable information and records of the Company and the matters are currently being investigated or sub-judice.

Post November 12, 2011, the reconstruction of the books of account for the years ended March 31, 2011 and March 31, 2012 were carried out by the present management with the best of its ability within the constraints. Any further adjustments/disclosures to the financial statements, if required, would be made in the financial statements as and when the outcome of the uncertainties related to those years become known and the consequential adjustments/ disclosures are identifiable/determinable.

b. Regarding Para No. 2 in the Basis for Qualified Opinion of the Audit report: Contravention of the provisions of Companies Act, 1956 with respect to payment of Rs. 7,980 thousands towards managerial remuneration for the period from October 1, 2007 to March 31, 2011: It is informed that your Company in order to recover the excess amount paid, has filed money suit before the Hon''ble Court of Chief Judge, City Civil Court, Hyderabad, and the matter is currently sub-judice.

c. Regarding Para No. 3 in the Basis for Qualified Opinion of the Audit report: Application made to the Ministry of Corporate Affairs, Government of India (MCA) seeking approval to pay remuneration to Mr. B. K. Raizada, former Managing Director of the Company: The management wishes to inform that MCA vide letter dated February 27, 2012 conveyed approval to the Company to pay remuneration to Mr. B. K. Raizada subject to the condition that the Company cleared its outstanding dues to Technology Development Board (TDB) and file a compliance report with MCA by February 29, 2012. As the Company is unable to repay the outstanding dues towards the loan assistance granted by TDB, the Company has not been able to pay remuneration to Mr. B. K. Raizada, former Managing Director of the Company.

d. Regarding Para No. 4 in the Basis for Qualified Opinion of the Audit report: Notice by ex-Director pursuant to Section 299 of Companies Act, 1956 for the year ended March 31, 2013, non availability of complete information etc.: This is to inform you that the ex Director ceased to be a Director of the Company effective from December 28, 2012 and there was no business transaction with him during the year ended March 31, 2014.

e. Regarding Point no. (x) of Annexure to the Audit Report: Accumulated losses exceeding fifty percent of Company''s net worth: Appropriate intimation has been made to Board for Industrial and Financial Reconstruction under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 and a more detailed report has been attached as annexure - A to this report.

f. Regarding Point no. (xi) of Annexure to the Audit Report: Outstanding dues that included interest on the loan assistance granted by Technology Development Board was overdue. The Company has no other outstanding loans from any bank/financial institution.

g. Regarding Point no. (xvii) of Annexure to the Audit Report: Money raised on short-term basis utilized for long-term uses: The utilization was made due to losses suffered by the Company. The management is taking all the requisite steps to minimize costs and increase revenue to meet its short-term fund requirements.

CONSOLIDATED FINANCIAL STATEMENTS

As has been reported in annual reports for the financial years ended March 31, 2012 and 2013, it is reiterated that the overseas subsidiaries of the Company do not exist anymore. Due to the missing and non-availability of the books of account and other related records and documents of those overseas subsidiaries, the Company is unable to prepare consolidated accounts and attach the required statements and particulars in terms of the provisions of Section 212 of the Companies Act, 1956 and the listing agreement with BSE Ltd.

Overseas subsidiaries were apparently created, investments and loans were made during the period from 2006-07 to 2010-11 under the erstwhile management. It was the responsibility of that management to handover those details to the present management during the transition. However, no details on those subsidiaries were made available to your Company. Despite several attempts by the current management to recover them, details concerning those subsidiaries including the documents and certificates related to the foreign exchange transactions which included loans and investments made to those foreign subsidiaries, could not be obtained.

The erstwhile management deliberately ignored and has so far remained non-compliant to the directions of your Company. Your Company therefore has filed a complaint before the Hon''ble Economic Offences Court, Nampally, Hyderabad, under the provisions of Section 630 of the erstwhile Companies Act, 1956 against the former Managing Director, who was in complete control over the Company affairs during the period of these events. The matter is currently sub-judice.

DIRECTORS'' RESPONSIBILITY STATEMENT

In terms of provisions of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, wherever applicable;

b. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period;

c. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities to the extent possible in the circumstances;

d. they have prepared the annual accounts on a going concern basis.

EMPLOYEE STOCK OPTION SCHEME

Disclosures as on March 31, 2014 as required to be made in accordance with Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided in the Annexure B to this Report.

REPORT ON CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS

Report on Corporate Governance together with the compliance certificate of Mr. Mahadev Tirunagari, Company Secretary in Practice, Hyderabad, on the status of compliance of conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement and the Management Discussion & Analysis form part of this Annual Report.

DEPOSITS

The Company has not accepted any deposit under Section 58A of the Companies Act, 1956 during the year under review.

AUDITORS

M/s. BSR & Associates, Chartered Accountants, Statutory Auditors of your Company, hold office until the conclusion of the ensuing Annual General Meeting and are proposed to be appointed as statutory auditors for a period of one year to hold office from the conclusion of the 25th Annual General Meeting till the conclusion of 26th Annual General Meeting of the Company, according to the provisions of Companies Act, 2013.

COST AUDIT

For the financial year ended March 31, 2014, the Board of Directors had appointed M/s. K.C. Kohli & Co., Cost Consultant & Advisor, Delhi, as Cost Auditor and the audit report for the year shall be submitted to the Central Government in the due course.

For the financial year ending March 31, 2015 it has been advised that the Company is exempted from cost audit in terms of the provisions of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014. Accordingly, your Company has not appointed Cost Auditor for the financial year 2014-15.

DIRECTORS

As members are aware, 24th Annual General Meeting of your Company was held on August 13, 2013. Dr. N. K. Ganguly and Dr. R. S. Bakshi who retired by rotation and were re-appointed as Directors, liable to retire by rotation.

During the year, restructuring of the Board was made on November 6, 2013. Dr. Junichi Koga, nominee of Daiichi Sankyo Company Limited, was appointed as Additional Director of the Company. Dr. Sudershan Kumar Arora and Dr. N. K. Ganguly resigned from the Board of Directors while Mr. B. K. Raizada resigned from the office as Managing Director of the Company. Dr. Sudershan Kumar Arora was appointed as Alternate Director to Dr. Junichi Koga.

Mr. Rajiv Gulati was appointed as Additional Director on February 14, 2014 and is proposed to tbe appointed as Director at the ensuing Annual General Meeting. Mr. B. K. Raizada resigned from the office as Director effective from February 24, 2014. Dr. Junichi Koga also resigned from the office as Director effective from June 10, 2014. According to the provisions of the Companies Act, 2013, Dr. Sudershan Kumar Arora vacated his office as Alternate Director from the date.

In terms of the provisions of the Companies Act, 2013, Mr. K. L. Khurana and Dr. R. S. Bakshi, Independent Directors, are being proposed for appointment as Independent Directors for a period of five years. Mr. Rajiv Gulati is being proposed to be appointed as Director liable to retire by rotation. Appropriate resolutions with the requisite information are being placed before the members for their approval at the meeting.

PARTICULARS OF EMPLOYEES

Statement of particulars of employees as required under Section 217(2A) of the Companies Act, 1956 (''Act'') and Rules framed there under forms part of the Annual Report. However, in terms of the provisions of Section 219(1)(b)(iv) of the Act, this Report and Accounts are being sent to all the members excluding the Statement of particulars of employees under Section 217(2A) of the Act. Any Member interested in obtaining a copy of the statement may write to the Company Secretary at the Registered Office of the Company.

LISTING AT STOCK EXCHANGE

The Equity Shares of the Company continue to be listed on BSE. The annual listing fee for the year 2014-15 has been paid to the exchange.

ENERGY CONSERVATION, RESEARCH AND DEVELOPMENTS, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure C to this report.

ACKNOWLEDGEMENT

The Board of Directors would like to express their grateful appreciation for the assistance and co-operation received from the banks, various government authorities, customers, vendors and members of the Company during the period.

Your Directors also wish to place on record the sincere efforts and committed services put in by the employees across all levels, who continued to stand and support the Company and its management in the difficult times.

For and on behalf of the Board

Place : Gurgaon K. L. Khurana Date : August 13, 2014 Chairman


Mar 31, 2013

The Directors are pleased to present the twenty fourth Annual Report together with the audited annual accounts of the Company for the year ended March 31, 2013.

Standalone working results under Indian GAAP

(Rs. in thousands)

Particulars 2012-13 2011-12

Sales(net) 30,441 21,842

Other Income 1,719 1,337

Operating expenses 2,22,718 61,341

Research & development expenses 14,797 8,744

Finance costs 14,714 5,051

Depreciation 35,150 34,927

Loss before tax (255,219) (86,884)

Exceptional Items 15,735

(Loss) after tax (255,219) (102,619)

Loss brought forward from previous year (992,338) (889,719)

Profi t/(Loss) carried forward to balance sheet (1,247,557) (992,338)

Earnings Per Share (Rs..) - Basic (7.41) (2.98)

Operations

The management recruited new manpower and commenced implementation and training to ensure that the plants would meet GMP standards. In the last one year, while all the necessary steps have been taken by the Company to resume operations at plants, production of trial batches aimed at meeting quality specifi cations and standards, was commenced in October 2012 for some of the products range. The renewal applications were fi led for all expired drug licenses and by September 2012 the applications for oncology range were approved by the Drug Authorities after completing inspections/ audits by both the State and Central Drug Regulators. All equipments'' validation was also undertaken and extensive repairs and maintenance work have been undertaken to ensure that the plants are geared to commence production up to their installed capacities. Approval of central authorities for biologics licences is expected shortly as all inspections and enquiries are completed. Further, steps have been initiated for certifi cations under WHO GMP and inspections in this regard by the regulatory authorities concerned, have been completed. . Since October 2012, market seeding of your Company''s products has been undertaken with assistance from our largest shareholder. We have also commenced quoting for our products in various tenders in the new fi scal.

BIFR

Your Company had become a potentially sick Company in terms of the provisions of Section 23 of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and the matter was intimated to Board for Industrial and Financial Reconstruction (BIFR) in August 2012 after approval of the Accounts for the year ended March 2011. Your Company had received a communication from BIFR seeking information and the course of action contemplated by the Company to increase its Networth. The Board of Directors has initiated actions to engage an independent fi nancial agency to review and recommend a revival strategy including steps required for increasing the Networth of the Company.

A report to the shareholders detailing the reasons for such erosion and the steps taken/ proposed to be taken as required under the above-mentioned provisions of SICA is provided as Annexure A to this Report.

Share Capital

There has been no change in the share capital of the Company during the year.

Board''s responses to Auditors Qualifi cations/Remarks

With regard to qualifi cations/remarks contained in the Auditors'' Report and Annexure thereto, your Directors'' wish to state as under:

a. Paragraph No. 1 in the Basis for Qualifi ed Opinion of the said Auditors'' report as to recognition of certain expenditures during the years ended 31 March 2011 and 31 March 2012 and outcome of the uncertainties, related to several nancial and non fi nancial irregularities, which are sub judice and various ongoing legal proceedings, current Management has initiated necessary steps to recover various missing assets, valuable information and records before CLB as well as appropriate court of law. The current Management had carried out reconstruction of books of account for the year ended 31 March 2011 and 31 March 2012 with the best of its ability, given the limitations, and any further adjustments / disclosures to the fi nancial statements, if required, would be made in the fi nancial statements of the Company as and when the outcome of the uncertainties related to those years is known and the consequential adjustments / disclosures are identifi able/ determinable.

b. Paragraph No. 2 in the Basis for Qualifi ed Opinion of the said Auditors'' report as to recovery of amount paid to Dr. Jayaram Chigurupati as Managerial Remuneration from October 1, 2007 to March 31, 2011 in contravention of provisions of the Companies Act, 1956 along with Interest thereon. The said matter is pending before the Court of the Hon''ble Chief Judge City Civil Court at Hyderabad. As the matter remains sub-judice, no adjustments have been made to the fi nancial results for years ended March 31, 2013 as well as March 31, 2012.

c. Paragraph No. 3 in the Basis for Qualifi ed Opinion of the said Auditors'' report as to pending approval of managerial remuneration to another co-Managing Director, the Management wishes to state that MCA had granted its approval for payment of remuneration to Mr. Raizada, subject to the condition that the company makes payment of its outstanding dues towards the loan assistance granted by TDB by February 29, 2012. The company, while citing the Arbitration proceedings pending with TDB requested MCA to modify the above date to "within 30 days of the Arbitration Award". The company is yet to receive the Ministry''s response in this regard. In the meantime, the Arbitration Award has been announced on February 28, 2013 which TDB is unable to enforce, including action on the personal guarantees of Dr. Chigurupati, as there is a stay granted by the Hon''ble High Court of Andhra Pradesh.

d. Point no. (ix) (a) of Annexure to Auditors'' Report with regard to few instances of delay in depositing provident fund, employees'' state insurance, service tax and income tax deposit with the departments: Company was generally regular in depositing material statutory dues during the year. However, due to heavy losses incurred by the Company during the last few years including in the current year due to the reasons as indicated in this Annual Report few instances of delay occurred. Your Company is taking all the required steps to resume production and increase revenues and ensure timely deposit of the statutory dues.

e. Point no. (x) of Annexure to Auditors'' Report with regard to accumulated losses being more than fi fty percent of its net worth and cash losses incurred during the current year and immediately preceding fi nancial year ; Appropriate intimation as required under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 have been made to Board of Industrial and Financial Reconstruction and necessary steps are being taken to revive the Company which includes decision to engage an independent fi nancial agency to review and recommend a rehabilitation scheme and suggest ways to increase the net worth of your Company.

f. Point no. (xi) of Annexure to Auditors'' Report with regard to delay in payment of certain dues (including interest ) to fi nancial institutions; Interest and loan taken from Technology Development Board was overdue and was subject matter of Arbitration proceedings. Award has been pronounced by Arbitrator on February 28, 2013 which is currently subject to stay order granted by the Hon''ble High Court of Andhra Pradesh in pursuance to a petition fi led by Dr. Jayaram Chigurupati. It is further informed that as on date, the Company has no outstanding loans from Banks/ Financial institutions except loan outstanding from TDB.

g. Point no. (xvii) of Annexure to Auditors Report with regard to utilization of money raised on short term basis to long- term: Utilization of money raised on short term basis to long term was made due to losses suffered by your Company during the period, which was in turn, due to the reasons indicated in this Annual Report. Your Company is taking all required steps to resume production and increase revenue to meet to its short term requirements of the funds.

Consolidated Financial Statements

On getting possession of the premises in 2011, the new management noticed that no books of account and records of the overseas subsidiaries of the company were available. As part of efforts to obtain relevant information, the management had approached the consultants and advisors of the subsidiaries in the respective countries, and tried to retrieve the relevant information. However the company has been unsuccessful and was unable to retrieve any relevant information, books and records. Under the circumstances, it is fi rmly believed that the entities were sham entities and do not exist anymore.

After evaluating the extent of the missing information and the regulatory non compliances etc., relating to the above subsidiaries, your Company had issued a legal notice to Dr. Jayaram Chigurupati, former Managing Director, to immediately release all the details pertaining to these subsidiaries including the documents / certifi cates related to all the foreign exchange transactions which include certain loans and investments made in those subsidiaries. He has further been instructed to complete audit of those subsidiaries and submit the fi nancial statements to the Company. However, it is unfortunate that in spite of reminders no response was received from Dr. Chigurupati. Accordingly the Company approached Company Law Board for issuing directions to Dr. Chigurupati to return and produce all the missing records.

Even after the directions from CLB, no proper response has been forthcoming from Dr. Chigurupati. In view of the same, the Company has now initiated contempt proceedings before the Hon''ble High Court of Andhra Pradesh, which are currently pending.

In view of the above, consolidated accounts could not be prepared. Further, your company has not been able to attach and provide the statements and particulars as required under the provisions of Section 212 of the Companies Act, 1956, relating to subsidiary companies.

Directors'' Responsibility Statement

In terms of provisions of Section 217(2AA) of the Companies Act, 1956("Act"), your Directors confi rm that:

- in the preparation of the Annual Accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, wherever applicable;

- the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the fi nancial year and of the loss of the company for that period;

- the Directors have taken proper and suffi cient care for the maintenance of adequate accounting records in accordance with the provisions of the act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- the Directors have prepared the annual accounts on a going concern basis.

Employee Stock Option Scheme

Disclosures as on March 31, 2013 as required to be made in accordance with Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided as Annexure B to this Report.

Energy Conservation, Research and Developments, Technology Absorption, Foreign Exchange Earnings and Outgo

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988; prepared based on the information to the extent available are provided as Annexure B to this report.

Report on Corporate Governance and Management''s Discussion Analysis

Reports on Corporate Governance together with the certifi cate of Mr. Mahadev Tirunagari, Company Secretary in Practice, Hyderabad, on the status of compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement and Management Discussion and Analysis form part of this Annual Report and enclosed to this report.

Deposits

The Company has not accepted any deposit under Section 58A of the Companies Act, 1956, during the year under review.

Auditors

M/s. BSR & Associates, Chartered Accountants, Statutory Auditors of your Company hold offi ce until the conclusion of the ensuing Annual General Meeting and are proposed to be reappointed. The Company has received a certifi cate from them to the effect that their reappointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956.

Cost Audit:

The Board of Directors of the Company appointed M/s. K.C. Kohli & Co., Cost Consultant & Advisor, Delhi, as Cost Auditor of the Company for the fi nancial year ended March 31, 2014. The audit report for the cost accounts of the Company for the year ended March 31, 2013, will be submitted to the Central Government in the due course.

Directorate

At the 22nd Annual General Meeting of the Company held on July 25, 2012:

i) Mr. Udbhav Ganjoo term as Additional Director of the Company expired and since he sought not to be appointed as Director at the said AGM, he ceased to be a Director from that date;

ii) Dr. R. S. Bakshi and Mr. K.L. Khurana were appointed as Directors of the Company;

iii) Mr. Ranjit Kohli, who sought not to be reappointed, retired by rotation and the members decided not to fi ll the resultant vacancy;

At the 23rd Annual General Meeting of the Company held on December 28, 2012:

i) Dr. Jayaram Chigurupati retired by rotation and sought his reappointment as Director of the Company. However, the resolution for his reappointment as Director was not passed at the AGM and the members resolved not to fi ll the resultant vacancy.

ii) Mr. B. K. Raizada was reappointed as the Managing Director of the company for a further period of 2 years effective October 1, 2012.

Prof. N. K. Ganguly and Dr. R.S. Bakshi retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Particulars of Employees

None of the employees of the Company have drawn remuneration in excess of the limits contemplated under the provisions of the said section.

Listing at Stock Exchange

The Equity Shares of the company continue to be listed on Bombay Stock Exchange Ltd. (BSE). The annual listing fees for the year 2013–2014 have been paid to the Exchange.

Energy Conservation, Research and Developments, Technology Absorption, Foreign Exchange Earnings and Outgo

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are provided as Annexure C to this report.

Acknowledgement

The Board of Directors would like to express their grateful appreciation for the assistance and co-operation received from the fi nancial institutions, banks, various Government Authorities, customers, vendors and members of the Company during the period.

Your Directors also wish to place on record the sincere efforts and committed services put in by the employees across all levels, who continued to stand and support the Company and its Management in these diffi cult times.

For and on behalf of the Board

Place : Gurgaon Dr. Sudershan K. Arora

Date : May 25, 2013 Chairman


Mar 31, 2011

The Directors herewith present the Twenty Second Annual Report together with the audited accounts of the Company for the year ended March 31, 2011.

Standalone Working Results under Indian GAAP

(Rs. in thousands)

Particulars 2010-11 2009-10

Sales(net) 70,014 65,651

Other Income 8,633 21,126

Depreciation 35,378 32,434

Amortisation of Misc. expenditure 15,232 11,942

(Loss)/Profit before tax (148,278) (124,749)

Exceptional Items 230,103 -

Current tax for earlier year written back - (203)

(Loss)/Profit after tax (378,381) (124,546)

(Loss)/Profit brought forward from previous year (511,338) (386,792)

(Loss)/Profit carried forward to Balance Sheet (889,719) (511,338)

Earnings Per Share (Rs.) - Basic (10.99) (3.62)

At the last Annual General Meeting (AGM) of the Company held on January 18, 2011, Dr. Sudershan K. Arora, Mr. Ranjit Kohli and Prof. N.K.Ganguly were appointed as Directors of the Company. Subsequently, Hon'ble High Court of Andhra Pradesh dismissed the appeal of Dr. Jayaram Chigurupati, Managing Director filed against the orders of the Hon'ble Company Law Board (CLB) for inclusion of the items for appointment of said Directors in the Notice of the AGM.

The reconstituted Board of Directors reviewed the state of affairs of the Company and being completely dissatisfied with the performance of Dr. Chigurupati, decided to appoint Mr. B.K.Raizada as another Managing Director for a period of two years effective March 19, 2011 subject to requisite approvals. The Board also allocated the responsibilities between the two Managing Directors. The CLB dismissed the appeal filed by Dr. Chigurupati against the said decision of the Board, and held that the appointment of Mr. Raizada was legal and he could perform his allocated duties as Managing Director. In view of Dr. Chigurupati continuing to act in total disregard to the directions of the Board and his performance continuing to be unsatisfactory, the Board of Directors in its meeting held on July 21, 2011, removed him from the position of Managing Director of the Company subject to approval of CLB, which is currently pending.

Despite the best efforts, Mr. Raizada and his Management team were not able to access the premises of Company's Registered Office and the plant in view of the Registered Office of the Company being locked and illegal strike by some of the employees of the Company. Finally in November 2011, pursuant to the orders of the CLB, the Management was able to get possession of the Plant facilities in the presence of Advocate Commissioner appointed by CLB.

Once the access, as explained above was provided, the Management began exercise for retrieval of assets, including a detailed technical and business assessment of the status of entire manufacturing facilities, fixed assets, inventories, key records and books of accounts of the Company. To the utter shock of the management, it was discovered that key records, assets, books of accounts and statutory records were missing. Appropriate action, including filing of criminal complaints against the persons responsible including Dr. Chigurupati, has already been initiated by the Management.

Due to non availability of the records, a comprehensive exercise was carried out to reconstruct the books of accounts and other financial information by obtaining requisite information from external sources including previous Auditors, banks and financial institutions, customers, suppliers, tax authorities, Registrar of the Companies, employees and other relevant sources as detailed in Schedule 22 in the notes to Accounts and forming part of the aforesaid financial statements (herein after "Schedule 22"). The said mechanism is also based on the announcement / guidance notes of Institute of Chartered Accountants of India.

The shareholders are further requested to note that in view of the non-availability of records, these accounts have been prepared on the basis of certain inferences based on the availability of information and in case, if the actual records are later found to be inconsistent with the present information, the accounts may be required to be redrawn.

Operations

The Company recorded a total loss after tax of Rs. 37.84 crores for the year ended March 31, 2011. Included in this figure is a loss from exceptional items of Rs 23.01 crores, mainly on account of provisions for impairment and doubtful debts/ advances, and a loss of Rs.14.83 crores being incurred from operations.

Since April 2011, there has been no production in the plant as employees of the Company were on an illegal strike. The Management after taking over the possession of the plant premises published an advertisement in English and local dailies advising employees to report for duty on or before November 23, 2011. While, some of the employees have joined back the duties, others have submitted their resignations which are being processed in accordance with the legal provisions. Necessary steps are being taken by the Company to resume operations at the plant.

Sale of the Company's products in Oncology has been resumed though Licenced production after necessary approvals from the various authorities. This has been done to ensure continued availability of your Company's products to meet tender commitments and demand for life saving drugs from the market. Soon after taking over the possession of premises in November, 2011, the Management reviewed matters relating to Technical viability and further steps required to be taken to restart the Company's facilities related to Bio-tech, Oncology Injectables manufacturing plant and FDA approved Injectables manufacturing Plant including the manpower requirements etc. Presently cleaning and validation of the process of all the facilities has started including training of new personnel, on completion of which, the Management is confident of restarting the operations. The Company has applied for renewal of all expired Drug licenses.

Share Capital

As per the intimation made earlier by the Company to BSE, it is learnt that 4,250 equity shares were allotted to four employees on November 16, 2009 under Company's ESOPs Scheme, which was subject to leave of CLB. CLB vide its order dated 06.08.2010 approved the allotment of 2500 shares and accordingly, an intimation to this effect was sent to BSE from Company stating that these shares are issued proportionately to the said four employees.

Auditors Qualifications/Remarks

With regard to qualifications/remarks contained in the Auditors' Report and Annexure thereto, your Directors' wish to state as under:

a. Point No. 3(a), (b) and (c) of the main report as to recognition of certain expenditure and exceptional charges as well as non-recognition of potential financial consequences, the Management, for the reasons as explained in various foregoing paragraphs i.e. missing of books and records including supporting documents etc., read with Schedule 22, was not in a position to:

- produce any document to support the nature, completeness validity and accuracy of the expenditure as quantified in 3(a) of the said report;

- not able to make provision for potential financial implications of non-compliances.

- justify the carrying value of respective fixed assets, capital work in progress etc., as detailed in Schedule 21 to the stated financials.

The Management, as mentioned above, has initiated necessary steps to recover various missing assets, valuable information and records before CLB as well as appropriate court of law.

Considering the un-audited financial results, as submitted under signature of Dr. Chigurupati to Bombay Stock Exchange upto the quarter ended December 31, 2010; reasonability of carrying value of certain fixed assets and the state of affairs of subsidiaries as more detailed in Schedule 22 etc., the management exercised its best judgment in recognition / non recognition of aforesaid expenses.

b. Point No. 3 (d) of the main report as to completeness of disclosures on related parties, as required under Accounting Standard 18; despite best efforts, two of the Directors viz. Dr. Chigurupati and Mr. Raghu Vasu have chosen not to submit information as required under Sections 274 and 299 of the Companies Act as mentioned in Note no. 3(d) and 7 (v) of the Auditors report. The Management therefore has been unable to provide complete information as required under the said Accounting Standard.

c. Point No. 5 of the main report as to recovery of amount paid to Dr. Jayaram Chigurupati as managerial remuneration from October 1, 2007 to March 31, 2011 in contravention of provisions of the Companies Act, 1956 along with Interest thereon; the Management wishes to reaffirm that the said matter is pending before the Court of the Hon'ble Chief Judge City Civil Court at Hyderabad. As the recovery of the claim is dependent of the outcome of the judicial action, no adjustments have been made to the financial statements.

d. Point No. 4, 7(i) and 7(ii) of the main report as to significance of material misstatement of reconstructed books of accounts; the inability of Auditors' to obtain all the information and explanations necessary for the purpose of audit and thus to express their opinion on the financial statements, the Management wishes to state the following, in addition to what has been already mentioned either in this report or Schedule 22:

i. Your Company has been unable to comply with various statutory requirements, the latest one being the Accounts for the year ended 31st March 2011, completion of statutory Audit and conducting the 22nd AGM of the Company due for the aforesaid financial year of the Company. It may be mentioned here that the present Management approached the Registrar of Companies, Andhra Pradesh, to grant extension of time for holding the aforesaid AGM on or before December 31, 2011. But, when the Management got the access to the premises and tried to set right the issues as explained above, inter-alia, books of accounts, records including vouchers and other information necessary to complete the statutory audit for 2010-11 was not available.

ii. the Management was unable to commence preparation of the Accounts for the year ended 31st March 2011 till December 2011, as a result of which the Company was unable commence the Statutory Audit and conduct the AGM on or before December 31, 2011.

iii. Due to non availability of all relevant books of account and records the present Management, was left with no other choice, but to carry out a detailed exercise to reconstruct whole of the books of accounts and other financial information by obtaining requisite information from external sources including previous Auditors, banks and financial institutions, customers, suppliers, tax authorities, Registrar of the Companies, employees and other relevant sources as detailed in Schedule 22.

iv. The management further wishes to emphasize that the process of Reconstruction of Books undertaken by the present management should be seen as a positive move to reconstruct value of each item of Balance Sheet based on widest possible data to check its veracity from a true and fair viewpoint and subject to certain implications and inferences etc, to be made in that connection. The said mechanism is supported by the announcement / guidance notes of Institute of Chartered Accountants of India and since, no other option was available to comply with the requirements of statutory Audit, the present Management, after much deliberation, had agreed to reconstruct the same and to complete the statutory Audit.

v. The shareholders are further requested note that the period under review was in total control of previous Management and as the present Management did not have any knowledge of the factual position, it had to make certain inferences based on the availability of above information.

vi. The Management would once again emphasize that as the present management completed the statutory Audit by complete reconstruction of books as explained above, the information provided in financial statements having its own limitations in so far as it relates to the financial year 2010-11 and in case, later on, if actual data is found, the same may force us to change the accounts may be required to be redrawn.

e. Appointment of Internal Auditors as mentioned in Annexure, the Management wishes to state that the Company is in process of implementing a robust internal control system regarding inventory movements and has initiated institution of certain internal controls over purchases of goods and fixed assets and sale of goods and services post year-end. The Company has also started working to improve the system of internal controls by issuing necessary Standard Operating Procedures. Further, management is also contemplating to appoint an Internal Auditor, commensurate with the size of its operations, to review and strengthening of internal controls.

f. Maintenance of cost records as required under Section 209(1)(d) of the Companies Act, 1956 as mentioned in Annexure, the Management wishes to state that the Company has now appointed M/s. K.C.Kohli & Co., Cost Accountants as Cost Auditor of the Company for audit of the cost accounts pertaining to Bulk Drugs and Formulations for the year 2011-12 & 2012-13. The Company is in the process of making requisite applications with the Central Government for seeking their approval for the aforesaid appointment of Cost Auditors.

g. Accumulated losses at the end of the financial year are not less than fifty percent of its net worth and incurring of cash losses in the current year and immediately preceding financial year, as mentioned in Annexure, the Management wishes to state that necessary steps are being taken to revive the operations by management.

h. Delay in payment of Interest on Secured loans: Note 10 of schedule 22 to the financial statements, as mentioned in Annexure, the Management wishes to state that interest on loan taken from Technology Development Board is overdue and is subject matter of arbitration proceedings. The Company would take necessary steps on receipt of the final award in this regard.

i. Application for term loans taken by the Company, as mentioned in Annexure, the Management wishes to state that as on date, the Company has no outstanding loans from Banks/Financial institutions except loan outstanding from Technology Development Board (TDB) and in absence of the documents/records as explained above, your Directors are not in a position to comment further. Arbitration proceedings, started by TDB, are complete and the Award is awaited.

j. Notice/Reporting of fraud on or by the Company- note 1 of Schedule 22, as mentioned in Annexure, the Management wishes to state that the Company has already taken requisite steps including filing of criminal complaints for retrieval of the records. The Management is also trying to retrieve records to the extent possible by obtaining certified true copies from various sources. The irregularities noted are under investigation and financial consequences of the same are being ascertained.

Consolidated Financial Statements

Upon taking control of the Company, the Management observed that no books of account and records were available regarding its overseas subsidiaries. As part of efforts to obtain relevant information the Company through its consultants and local advisors in the respective countries above reached out to the overseas subsidiaries. The Company has been unable to retrieve any relevant information, books and records and based on all reasonable efforts that it could have made under the circumstances believes that information relating to the subsidiaries is missing and the entities are either delinquent or do not exist anymore. The Management is currently in the process of evaluating the extent of the missing information and the regulatory non compliances, if, any relating to the above subsidiaries. Provision has not been made for potential financial consequences arising out of such ongoing evaluations, the outcome of which will depend on the nature and extent of non compliances which is currently not determinable.

In view of the above, consolidated accounts could not be prepared. Further, for the same reason, the Company has not been able to attach / provide the statements / particulars as required pursuant to Section 212 of the Companies Act, 1956, relating to subsidiary companies.

Directors' Responsibility Statement

Subject to the limitations of the missing records and consequential reconstruction of the accounts as explained previously, the Board submits in compliance of Section 217 (2AA) of the Companies Act, 1956, as under:

- in the preparation of the Annual Accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

- 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 loss of the Company for that period;

- the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities to the extent possible in the circumstances;

- the Directors had prepared the annual accounts on a going concern basis.

Employee Stock Option Scheme

Disclosures in this regard upto March 31, 2011 as required to be made in accordance with Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided as Annexure A to this report.

Reports on Corporate Governance and Management's Discussion and Analysis

Reports on Corporate Governance alongwith the Certificate of Mr. Mahadev Tirunagari, practicing Company Secretary on the status of compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchange and Management Discussion and analysis forms part of the Annual Report and enclosed as Annexure B to this report.

Deposits

The Company has not accepted any deposit under Section 58A of the Companies Act, 1956, during the year under review.

Auditors

M/s BSR & Associates, Chartered Accountants, Statutory Auditors of your Company hold office until the conclusion of the ensuing Annual General Meeting and are proposed to be reappointed at the said meeting to hold office until conclusion of 23rd AGM of the Company. The Company has received a certificate from them to the effect that their appointment if made would be within the limits prescribed under Section 224(1) of the Companies Act, 1956.

Directors

At the Board Meeting held on March 19, 2011, Dr. Sudershan K.Arora was elected as Chairman of the Board of Directors of the Company and Mr. B.K.Raizada was appointed as another Managing Director of the Company. The shareholders of the Company in the Extra-ordinary General Meeting held on July 21, 2011 unanimously approved the appointment of Mr. Raizada as Managing Director for a period of two years effective March 19, 2011 and payment of remuneration subject to the approval of the Central Government. The Company has made requisite application in this regard.

Justice (Retd.) A.Gopal Rao, who was appointed as a Director of the Company by the Hon'ble Andhra Pradesh High Court (Court), has resigned as Director of the Company effective July 7, 2011. The Board of Directors appointed Mr. Udbhav Ganjoo as an Additional Director of the Company w.e.f. December 9, 2011 who holds office till the conclusion of the ensuing Annual General Meeting (AGM). Mr. Ganjoo has sought not to be appointed as Director at the AGM. Mr. Ranjit Kohli retires by rotation at the AGM and has expressed his intention not to seek reappointment. Further, in terms of the Hon'ble Court's order dated April 24, 2012, Mr. A. Raghu Vasu, who was also appointed as a Director of the Company by the Hon'ble Court, has vacated the office of the Director.

The Directors place on record their warm appreciation for the contribution made by Justice (Retd.) A.Gopal Rao, Mr. Raghu Vasu, Mr. Ranjit Kohli and Mr. Udbhav Ganjoo during their tenure as Directors of the Company.

Particulars of Employees

In absence of the records/information available with the Company, the Directors are unable to confirm if during the year under review, any of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

Listing at Stock Exchange

The Equity Shares of the Company continue to be listed on Bombay Stock Exchange Ltd (BSE). The annual listing fees for the year 2010-2011 has been paid to the Exchange. BSE had issued a circular in March 2012 suspending the trading in the shares of the Company in view of the non-compliances of the Listing Agreement. However, the Hon'ble High Court of Andhra Pradesh, on considering the submissions of the Company that the non-compliances were due to non-availability of records with the existing management, granted stay against the said order of the BSE.

Energy Conservation, Research and Developments, Technology Absorption, Foreign Exchange Earnings and Outgo

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not provided in view of non-availability of data in this regard for the afore stated reasons.

Acknowledgement

The Board of Directors would like to express their grateful appreciation for the assistance and co-operation received from the Financial Institutions, Banks, Government Authorities, Customers, Vendors and Members during the year under review.

Yours Directors also wish to place on record the sincere efforts and committed services put in by the employees who have stood by us in these difficult times.



For and on behalf of the Board

Place : New Delhi Dr. Sudershan K. Arora

Date : June 4, 2012 Chairman


Mar 31, 2010

The directors herewith present the Twenty first Annual Report together with the audited accounts of the company for the year ended March 31, 2010.

Financial Highlights

Rs. in lacs

2009-10 2008-09

Sales 691.58 655.02

Other Income 211.26 457.14

Profit/ (Loss) before interest, depreciation and amortization of Misc. expenditure (608.31) (1140.02)

Interest 195.42 143.48

Depreciation 324.34 294.07

Amortization of Misc. expenditure 119.42 119.41

Profit/(Loss) before tax (1247.49) (1696.98)

Provision for tax (including deferred taxes) (2.03) 4.61

Profit / (Loss) after tax (1245.46) (2167.07)

Loss brought forward from previous year (3867.92) (1700.85)

Profit/(Loss) carried forward to balance sheet (5113.38) (3867.92)

Earnings Per Share (Rs.) - Basic (3.62) (6.30)

Companys business and operating results

Revenues for the year were Rs. 902.84 lakhs, as against Rs. 1112.16 lakhs during the previous year. The revenues were mainly from the Indian market with about Rs.8.98 lakhs coming from the export markets. Due to losses the company does not propose any dividend.

Export market and strategical alliances:

During the year under review, your Company has made exports to Kenya and Vietnam. Your Company has several distribution agreements in place including distribution agreement with Ranbaxy for CIS and Latin American countries.

Share capital

Your company has not made any allotment during the year

Preferential allotment

Out of monies collected by way of issue of preferential allotment of Rs.87.83 Crores, the Company has utilized Rs.80.33 Crores as on December 11, 2010 towards, reimbursement of secured and unsecured loans, incurring of R&D expenditure, expansion activities and working capital needs of the Company. The balance amount of Rs.7.50 Crores is kept in fixed deposits with banks.

Internal audit and payment of Interest on Secured loans:

The Company is in the process of implementing the internal audit system. Further, the Company as on date has paid all amounts of loan and interest except loan availed from Technology Development Board (TDB), as was reported in point no. xi in annexure to the Auditors Report. In respect of the loan availed from TDB, the Company is pursuing the matter with their head office, for reschedulement of the installments.

Employee Stock Option Scheme

Disclosures in this regard upto March 31, 2010 as required to be made in accordance with Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided in the Annexure - A to this report.

Corporate Governance and Management Discussion and Analysis Report

Separate reports on Corporate Governance along with Certificate of practicing Company Secretary on its compliance and Management Discussion and analysis forming part of this report are given in separate sections in this Annual Report.

Status of Legal Cases filed against the Company

The original Promoters have filed a Company Petition No. 51 of 2009 dated 30.06.2009 before the Honble Company Law Board alleging oppression against Ranbaxy Laboratories Limited and its associates. Company is one of the Parties in this Company Petition.

Further Ranbaxy Laboratories Limited has filed another Company Petition No. 83 of 2009 on 07.10.2009 before the Honble Company Law Board counter alleging oppression and mismanagement against the original Promoters Dr. Jayaram Chigurupati, Mrs.Padmasree Chigurupati and Zenotech, L.L.C. The Company is one of the Respondents in this Petition also.

The Board of Directors have authorised Dr.Jayaram Chigurupati, Managing Director and Mr. Srivenkateswara Rao Sr. Manager- Finance to represent the Company before the Company Law Board and other courts and tribunals on May 21, 2010

Mr. D. Seshadri Naidu, Advocate was appointed as Counsel to represent the Company before the Honble Company Law Board and High Courts.

Mr. D. Seshadri Naidu, Advocate appeared before the Honble Company Law Board and filed the documents with the Company Law Board. Copy of the same is placed before the Board for its perusal.

Mr. D. Seshadri Naidu is appearing before the Honble High Court representing the Company.

When the matter stood thus, the Company through its Managing Director has issued a notice dated 13.02.2010 for termination of the Development, License and Supply Agreement for Marketing and Sales dated 31.01.2007 related to GCSF on 19.04.2010 for the breach of conditions by Ranbaxy Laboratories Limited. Ranbaxy Laboratories Limited replied to the same vide its letters dated 04.05.2010.

Ranbaxy Laboratories Limited has filed a Company Application No. 80 of 2010 in Company Petition No. 51 of 2009 dated 08.05.2010. The Honble Company Law Board passed an order dated 21.05.2010 and passed the following order:

i. the operation of the termination notice dated February 13, 2010 issued by Zenotech stands stayed

ii. Zenotech is restrained from acting on the termination notice dated 13.02.2010.

Aggrieved with the order of the Company Law Board the Company has filed an appeal against the order vide Company Appeal No. 12 of 2010 dated 19.07.2010, which is pending before the Honble High Court of Andhra Pradesh.

Meanwhile Ranbaxy filed a Company Application No. 150 of 2010 dated 24.09.2010 in Company Petition No. 83 of 2009 under Section 186 for convening an Extra Ordinary General Meeting in order to appoint three nominees on the board of the Company. The Honble Company Law Board allowed the Application and passed the orders allowing the calling of EGM for appointment of three directors on 24.11.2010.

The Original Promoters have challenged the order before the Honble High Court vide Company Appeal No. 20 of 2010 on 30.11.2010 which is pending for disposal.

The Company has initiated arbitration proceedings against Ranbaxy Pharmaceuticals, Inc, a subsidiary of Ranbaxy Laboratories Limited for breach and non-performance by Ranbaxy Pharmaceuticals, Inc pursuant to Development, Supply and Marketing Agreements dated March 3rd, 2007 in the week of October 18, 2010. This relates to seven ANDAs filed from Zenotech in December, 2007. Further the Company has issued a notice for Demand of Arbitration to Ranbaxy Laboratories Limited for breach and non-performance by Ranbaxy Pharmaceuticals, Inc pursuant to Development, Supply and Marketing Agreements dated January 31, 2007 related to GCSF on November 1, 2010.

Subsidiary Companies

1) The Company has a wholly owned subsidiary company, Zenotech Farmaceutica Do Brasil Limitada (ZFDBL), Brazil. The subsidiary company was acquired in January 2005. The subsidiary company has received ANVISA approval for its warehouse facility in Brazil. Further regulatory approvals are to be received before commencement of commercial business. The Company has consolidated the financials in accordance with the IGAAP.

2) The Company has a wholly owned subsidiary company, Zenotech Laboratories Nigeria Limited (ZLNL), Nigeria. The subsidiary company was established in August 2005. The Company has obtained regulatory clearances for its product range to commence commercial business and is already supplied with stocks, which are yet to be sold. The Company has consolidated the financials in accordance with the IGAAP.

3) The Company has a wholly owned subsidiary company, Zenotech Inc., New Jersey, USA. The subsidiary company has consolidated the financials in accordance with the IGAAP.

However, in view of serious software problem encountered in accounting packages used by the subsidiaries as mentioned at 1 to 3 above, they could submit only un-audited financial statements, as approved by their respective Board of Directors as per Indian GAAP and the directors of your company have relied upon the same. In terms of section 212 of the Companies Act, 1956 the said un-audited financial statements as approved by the respective boards of above subsidiaries as well as a statement prepared pursuant to Section 212 (1) (e) of the said Act are attached herewith.

Directors Responsibility Statement

In compliance of Section 217 (2AA) of the Companies Act, 1956, the Board submits as under:

— in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

— 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 or loss of the Company for that period;

— the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

— the Directors had prepared the annual accounts on a going concern basis.

Deposits

The Company has not accepted any deposit under Section 58A of the Companies Act, 1956 during the year under review.

Directors

The Board of Directors of the Company consists of three Directors one Managing Director and two independent Directors appointed by the Honble High Court of Andhra Pradesh vide its order dated 23.02.2010, hence none of the directors are liable to retire by rotation.

Auditors

M/s Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of your Company hold office until the conclusion of the ensuing Annual General Meeting. They have shown their inability to be re-appointed as the Statutory Auditors. Therefore, the Board of Directors has proposed the appointment of M/s. BSR & Associates, Chartered Accountants, as the Statutory Auditors. The Company has received a certificate from them to the effect that their appointment if made would be within the limits prescribed under Section 224(1) of the Companies Act, 1956.

Managements Response to Auditors Qualifications/Remarks:

1. In respect of observation made at point No. 4 (a) of the report, in the opinion of the Management, Zenotech Inc. in USA, a 100% subsidiary of the Company has many valuable IPRs, which were not considered and evaluated due to prevailing Accounting standards and norms. The Management further feels that at the consolidate level there is no erosion of monies utilised by the Zenotech Inc., USA for this purpose.

2. In respect of observation made at point No. 4 (b) of the report, the Company is holding 24% stake in Credence Organics Private Limited aggregating to Rs. 0.24 lakhs and has also advanced a loan of Rs. 14.71 lakhs for its business purpose and in the opinion of the management, Credence Organics Private Limited is in the process of building its factory and the loan will be recoverable once it commences its operations.

3. In respect of observation made at point No. 4 (c) of the report, the Expenditure of Rs. 1040.03 lakhs, being spent as capital work-in-progress, is represented by assets including buildings, plant & machinery and other assets. In the opinion of the Management, the stated value of these assets is realizable value and thus the same was appropriately stated.

4. In respect of observation made at point No. 4 (d) of the report, in the opinion of the Management the carrying cost of Plant and Machinery of Rs. 4,845.58 lakhs is appropriate considering the value of investment made to meet the objects of the company and the potential revenues can be generated there from over a period of time. Further, the management did not foresee any reason which may force the company to stop its business immediately.

5. In respect of observation made at point No. 4 (e) of the report, in the opinion of the Management, the Product Development Expenditure of Rs. 152.32 lakhs would be written off in the future years.

6. In respect of observation made at point No. 5 of the report, the disclosure relating to earning per shares as required in terms of the Guidance Note on Accounting for employee share based payment has been made in Directors Report for the year ended March 31, 2010.

7. In respect of observation made at point No. 6 of the report, the company did not owe any amounts to Micro and Small Enterprises as at the Balance Sheet date.

Energy Conservation, Research and Developments, Technology absorption, Foreign exchange earnings and Outgo

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1 )(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided as Annexure - B to this report.

Acknowledgement

The Board of Directors would like to express their grateful appreciation for the assistance and co-operation received from the Financial Institutions and Banks, like Andhra Pradesh State Financial Corporation (APSFC), Technology Development Board (TDB), Yes Bank, other banks, Government Authorities, Customers, Vendors and Members during the year under review.

Yours Directors also wish to place on record the sincere efforts and committed services put in by the employees at all levels.

For and on behalf of the Board

Place : Hyderabad Dr. Jayaram Chigurupati

Date : December 11, 2010 Managing Director


Mar 31, 2009

The directors herewith present the Nineteenth Annual Report together with the audited accounts of the company for the year ended March 31, 2009.

Financial Highlights

Rs. in lacs 2008-09 2007-08

Sales 655.02 857.03

Other Income 515.47 216.90

Profit/(Loss) before interest, depreciation and amortization of Misc. expenditure (1081.69) (1930.12)

Interest 201.81 270.91

Depreciation 294.07 290.45

Amortization of Misc. expenditure 119.41 133.41

Profit/(Loss) before tax (1696.98) (1235.35)

Provision for tax (including deferred taxes) 4.61 234.91

Profit / (Loss) after tax (2167.07) (1474.76)

Loss brought forward from previous year (1700.85) (226.09)

Profit/(Loss) carried forward to balance sheet (3867.92) (1700.85)

Earnings Per Share (Rs.) - Basic (6.30) (4.78)

Companys business and operating results

Revenues for the year were Rs. 1170.49 lakhs, as against Rs. 1073.93 lakhs during the previous year. The revenues were mainly from the Indian market with about Rs.39.94 lakhs coming from the export markets. Due to losses the company does not propose any dividend.

Your Company has initiated clinical trials for generic rituximab recently for non-hodgkins lymphoma. Your Company also completed toxicity studies for generic etanercept at National Institute of Nutrition, Hyderabad. The Company is filing application with the DCGI, New Delhi for conducting clinical trails in the Rheumatoid arthritis. Two other generic biologicals, interferon beta and generic darbepoetin are entering toxicity studies.

The Company has, so far, launched 15 generic chemical oncology products in India. Your Company has three generic biological products, recombinant human granulocyte macrophage-colony stimulating factor (GM-CSF), recombinant human granulocyte colony stimulating factor (G-CSF) and lnterlukin-2 (IL-2). All the three are used in cancer therapy.

Your Company is in the process of developing two more therapeutic synthetic peptides. Besides octreotide, the pipeline has now expanded to include goserelin and leuprolide as well.

Export market and strategical alliances:

During the year under review, your Company has made exports to Kenya and Vietnam. The Company has launched oncology products in Philippines. Your Company has several distribution agreements in place including distribution agreement with Ranbaxy for CIS and Latin American countries.

Share capital

Your company has made the following allotment during the year Allotment of 75,000 equity shares of Rs. 10/- each at a price of Rs.69.70 per share aggregating to Rs.52.28 lakhs under Part B of Zenotech Employee Stock Option Scheme, 2005 on May 31, 2008 and June 30, 2008 to directors of the Company.

In view of above, the issued and paid up equity capital of the Company as on March 31, 2009, stand increased to Rs.3,442.50 lakhs from 3,435.00 lakhs and its securities premium account increased to Rs. 11,641.76 lakhs from Rs. 11,596.98 lakhs.

Preferential allotment

Out of monies collected by way of issue of preferential allotment of Rs.87.83 Crores, the Company has utilized Rs.70.33 Crores as on November 16, 2009 towards, reimbursement of secured and unsecured loans, incurring of R&D expenditure, expansion activities and working capital needs of the Company. The balance amount of Rs. 17.50 Crores is kept in fixed deposits with banks.

Internal audit and payment of Interest on Secured loans:

The Company is in the process of implementing the internal audit system. Further, the Company as on date has paid all amounts of loan and interest except loan availed from Technology Development Board (TDB), as was reported in point no. xi in annexure to the Auditors Report. In respect of the loan availed from TDB, the Company is pursuing the matter with their head office, for reschedulement of the installments.

Employee Stock Option Scheme

Disclosures in this regard upto March 31, 2009 as required to be made in accordance with Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided in the Annexure - A to this report.

Corporate Governance and Management Discussion and Analysis Report

Separate reports on Corporate Governance along with Certificate of practicing Company Secretary on its compliance and Management Discussion and analysis forming part of this report are given in separate sections in this Annual Report.

Status of Legal Case filed against the Company

Core Promoters of the company have filed a Petition before Honble Company Law Board Chennai, alleging Oppression and Mis-Management against the largest single shareholder, its past Directors where the company is a party.

The Largest Shareholder also filed before Honble Company Law Board, Chennai alleging Oppression and Mis-Management against the Core Promoters, where company is a party.

The above proceedings are pending adjudication before Honble Company Law Board, Chennai

Subsidiary Companies

1) The Company has a wholly owned subsidiary company, Zenotech Farmaceutica Do Brasil Limitada (ZFDBL), Brazil. The subsidiary company was acquired in January 2005. The subsidiary company has received ANVISA approval for its warehouse facility in Brazil. Further regulatory approvals are to be received before commencement of commercial business. The Company has consolidated the financials in accordance with the IGAAP.

2) The Company has a wholly owned subsidiary company, Zenotech Laboratories Nigeria Limited (ZLNL), Nigeria. The subsidiary company was established in August 2005. The Company has obtained regulatory clearances for its product range to commence commercial business and is already supplied with stocks, which are yet to be sold. The Company has consolidated the financials in accordance with the IGAAP.

3) The Company has a wholly owned subsidiary company, Zenotech Inc., New Jersey, USA. The subsidiary company has consolidated the financials in accordance with the IGAAP.

However, in view of serious software problem encountered in accounting packages used by the subsidiaries as mentioned at 1 to 3 above, they could submit only un-audited financial statements, as approved by their respective Board of Directors as per Indian GAAP and the directors of your company have relied upon the same. In terms of section 212 of the Companies Act, 1956 the said un-audited financial statements as approved by the respective boards of above subsidiaries as well as a statement prepared pursuant to Section 212 (1) (e) of the said Act are attached herewith.

Directors Responsibility Statement

In compliance of Section 217 (2AA) of the Companies Act, 1956, the Board submits as under:

— in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

— 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 or loss of the Company for that period;

— the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

— the Directors had prepared the annual accounts on a going concern basis.

Deposits

The Company has not accepted any deposit under Section 58A of the Companies Act, 1956 during the year under review.

Directors

The Annual General Meeting could not be held on or before December 31, 2008 being the last date for holding the Annual General Meeting, despite the best of the efforts. In view of the same, Sri. Atul Sobti, Sri. Dipak Chattaraj and Sri. Omesh Sethi, who were appointed as additional Directors of the Company and holding the office till the December 31, 2008 have vacated the office as Directors on that date. Further Sri. M R Vikram and Sri. S Ravi who are liable to retire by rotation at the Annual General Meeting have retired as directors of the Company on that date.

Further, pursuant to the resignations submitted by Mr.S.M.Bhutani and Lt.Col. Sukhdev Singh Gill, in terms of clause No. 97 of Articles of Association of the Company, Mr.M.R. Vikram and Dr.K.Uma Devi have been appointed as the additional directors of the Company with effect from October 1, 2009, who holds the office of the directorships till the date of the 19th AGM to be held on February 26, 2010 at 10.00 A.M.

Auditors

M/s Deloitte Haskins and Sells, Chartered Accountants, the Statutory Auditors of the company retire at the conclusion of this Annual General Meeting and are eligible for re-appointment. The Company has received confirmation that their appointment, if made, would be within the limits prescribed under Sec. 224(1 B) of the Companies Act, 1956.

Managements Response to Auditors Qualifications/Remarks:

1. In the opinion of the Management Zenotech Inc. in USA, a 100% subsidiary has valuable IPRs which are not captured in that balance, due to present Accounting norms. However at the consolidate level there is no erosion of monies utilised by the Zenotech Inc., USA for this purpose.

2. In the opinion of the Management the Capital Expenditure, being capital -work-in-progress of Rs. 1041.65 lakhs is represented by assets including buildings, plant & machinery and other assets. The value of these assets is realizable value at the stated value in the Balance Sheet.

3. There are very few operations during the year; however the Company proposes internal audits/control systems during the year.

Particulars of Employees

During the year under review, none of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

Energy Conservation, Research and Developments, Technology absorption, Foreign exchange earnings and Outgo

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided as Annexure - B to this report.

Acknowledgement

The Board of Directors would like to express their grateful appreciation for the assistance and co-operation received from the Financial Institutions and Banks, like Andhra Pradesh State Financial Corporation (APSFC), Technology Development Board (TDB), Yes Bank, other banks, Government Authorities, Customers, Vendors and Members during the year under review.

Yours Directors also wish to place on record the sincere efforts and committed services put in by the employees at all levels.

For and on behalf of the Board

Place : Hyderabad Dr. Jayaram Chigurupati

Date : November 16, 2009 Managing Director


Mar 31, 2008

The directors herewith present the Nineteenth Annual Report together with the audited accounts of the company for the year ended March 31, 2008.

Financial Highlights

Rs. in lacs 2007-08 2006-07

Sales 857.03 2264.64

Other Income 216.90 29.49

Profit/(Loss) before interest, depreciation and amortization of Misc. expenditure (1929.97) 573.32

Interest 270.91 211.14

Depreciation 290.45 182.10

Amortization of Misc. expenditure 133.41 91.26

Profit/(Loss) before tax (1235.20) 88.82

Provision for tax (including deferred taxes) 235.06 (273.65)

Profit / (Loss) after tax (1474.76) 362.47

Loss brought forward from previous year (226.09) (588.56)

Profit/(Loss) carried forward to balance sheet (1700.85) (226.09)

Earnings Per Share (Rs.) - Basic (4.78) 1.29

Companys business and operating results

Revenues for the year were Rs. 1073.93 lakhs, as against Rs. 2294.13 lakhs (including the license fee of Rs.900.00 lakhs) during the previous year. The revenues were mainly from the Indian market with about Rs. 17.81 lacs coming from the export markets.

Your Company has filed 7 ANDAs for general injectables. The US FDA has inspected your companys facility in Jan, 2009. Your Company is expecting US FDA approval in the next few months. The ANDAs are being reviewed by the US FDA.

Your Company has initiated clinical trials for generic rituximab recently for non-hodgkins lymphoma. Ranbaxy is conducting the trials as a CRO. Your Company also completed toxicity studies for generic etanercept at National Institute of Nutrition, Hyderabad. The Company is filing application with the DCGI, New Delhi for conducting clinical trails in the Rheumatoid arthritis. Two other generic biologicals, interferon beta and generic darbepoetin are entering toxicity studies.

The Company has, so far, launched 15 generic chemical oncology products in India. Your Company has three generic biological products, recombinant human granulocyte macrophage-colony stimulating factor (GM-CSF), recombinant human granulocyte colony stimulating factor (G-CSF) and lnterlukin-2 (IL-2). All the three are used in cancer therapy.

Your Company is in the process of developing two more therapeutic synthetic peptides. Besides octreotide, the pipeline has now expanded to include goserelin and leuprolide as well.

Export market and strategical alliances:

During the year under review, your Company has made exports to Kenya and Vietnam. The Company has launched oncology products in Philippines. Your Company has several distribution agreements in place including distribution agreement with Ranbaxy for CIS and Latin American countries.

Share capital

Your company has made the following allotments during the year

1. Allotment of 54,89,536 equity shares of Rs.10/- each on a preferential basis, at a price (including premium) of Rs.1607- each on November 23, 2007 to Ranbaxy Laboratories Limited.

2. Allotment of 50,000 equity shares of Rs. 10/- each at a price of Rs.69.70 per share aggregating to Rs.34.85 lakhs under Part B of Zenotech Employee Stock Option Scheme, 2005 on January 30, 2008 to directors of the Company.

In view of above, the issued and paid up equity capital of the Company as on March 31, 2008, stand increased to Rs.3435.00 lacs from 2881.05 lakhs and its securities premium account increased to Rs. 11,596.98 Lacs from Rs.3,332.82 lakhs.

Further, the Company has alloted 75,000 equity shares of Rs. 10/- each at a price of Rs.69.70 per share aggregating to Rs.52.28 lakhs under Part B of Zenotech Employee Stock Option Scheme, 2005 on May 31, 2008 and June 30, 2008 to directors of the Company. As a result, the issued and paid up equity capital of the Company as on date stood at Rs. 3442.50 lakhs comprising of 3,44,25,000 equity shares of Rs. 10/- each.

Preferential allotment

Out of monies collected by way of issue of preferential allotment of Rs.87.83 Crores, the Company has utilized Rs. 66.21 Crores as on October 31, 2009 towards, reimbursement of secured and unsecured loans, incurring of R&D expenditure, expansion activities and working capital needs of the Company. The balance amount of Rs.21.62 Crores is kept in fixed deposits with banks.

Internal audit system and payment of Interest on Secured loans:

The Company is in the process of implementing the internal audit system. Further, the Company as on date has paid all amounts of loan and interest except loan availed from Technology Development Board (TDB), as was reported in point no. xi in annexure to the Auditors Report. In respect of the loan availed from TDB, the Company is pursuing the matter with their head office, for reschedulement of the installments.

Employee Stock Option Scheme

Disclosures in this regard upto March 31, 2008 as required to be made in accordance with Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are provided in the Annexure - A to this report.

Further, 42,500 stock options were granted on July 30, 2008 to the eligible employees of the Company at a excersiable option price of Rs. 103.65 per share.

Delisting

The application made by the Company for delisting of its shares from Calcutta Stock Exchange Association Limited (CSE) has been approved by the said stock exchange vide its letter dated July 18, 2008. However, the Companys equity shares continue to remain listed on the Bombay Stock Exchange Limited (BSE).

Corporate Governance and Management Discussion and Analysis Report

Separate reports on Corporate Governance along with Certificate of practicing Company Secretary on its compliance and Management Discussion and analysis forming part of this report are given in separate sections in this Annual Report.

Status of Legal Case filed against the Company

Core Promoters of the company have filed a Petition before Honble Company Law Board Chennai, alleging Oppression and Mis-Management against the largest single shareholder, its past Directors where the company is a party.

The Largest Shareholder also filed before Honble Company Law Board, Chennai alleging Oppression and Mis-Management against the Core Promoters, where company is a party.

The above proceedings are pending adjudication before Honble Company Law Board, Chennai.

Subsidiary Companies

1) The Company has a wholly owned subsidiary company, Zenotech Farmaceutica Do Brasil Limitada (ZFDBL), Brazil. The subsidiary company was acquired in January 2005. The subsidiary company has received ANVISA approval for its warehouse facility in Brazil. Further regulatory approvals are to be received before commencement of commercial business. The Company has consolidated the financials in accordance with the IGAAP.

2) The Company has a wholly owned subsidiary company, Zenotech Laboratories Nigeria Limited (ZLNL), Nigeria. The subsidiary company was established in August 2005. The Company has obtained regulatory clearances for its product range to commence commercial business and is already supplied with stocks, which are yet to be sold. The Company has consolidated the financials in accordance with the IGAAP.

3) The Company has a wholly owned subsidiary company, Zenotech Inc., New Jersey, USA. The subsidiary company has consolidated the financials in accordance with the IGAAP.

However, in view of serious software problem encountered in accounting packages used by the subsidiaries as mentioned at 1 to 3 above, they could submit only un-audited financial statements, as approved by their respective Board of Directors as per Indian GAAP and the directors of your company have relied upon the same. In terms of section 212 of the Companies Act, 1956 the said un-audited financial statements as approved by the respective boards of above subsidiaries as well as a statement prepared pursuant to Section 212 (1) (e) of the said Act are attached herewith.

Directors Responsibility Statement

In compliance of Section 217 (2AA) of the Companies Act, 1956, the Board submits as under:

— in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

— 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 or loss of the Company for that period;

— the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

— the Directors had prepared the annual accounts on a going concern basis.

Deposits

The Company has not accepted any deposit under Section 58A of the Companies Act, 1956 during the year under review.

Audit committee of the Board

The Audit Committee of the company met five times, during the year and the Chairman of the Audit Committee was present at the previous Annual General Meeting held on November 8, 2007.

Directors

During the period under review, Dr. Ranganadha Rao, Sri. Rama Krishna Prasad, Dr. Denis Broun, Prof. Vithala R Rao, Sri. Rajiv Sahai Endlaw and Sri. Sanjeev Puri have resigned from the Board. The Board places on record its appreciation of the services rendered by them during their tenure as Directors.

During the period under review, Dr. Ranganadha Rao, Sri. Rama Krishna Prasad, Dr. Denis Broun, Prof. Vithala R Rao, Sri. Rajiv Sahai Endlaw and Sri. Sanjeev Puri have resigned from the Board. The Board places on record its appreciation of the services rendered by them during their tenure as Directors.

The Company has been granted extension upto December 31, 2008 to hold the Annual General Meeting for the financial year ended March 31, 2008. However due the circumstances beyond the control of the Management the said Annual General Meeting could not be held on or before December 31, 2008 being the last date for holding the Annual General Meeting, despite the best of the efforts. In view of the same, Sri. Atul Sobti, Sri. Dipak Chattaraj and Sri. Omesh Sethi, who were appointed as additional Directors of the Company and holding the office till the December 31, 2008 have vacated the office as Directors on that date. Further Sri. M R Vikram and Sri. S Ravi who are liable to retire by rotation at the Annual General Meeting have retired as directors of the Company on that date.

Further, pursuant to the resignations submitted by Mr.S.M.Bhutani and Lt.Col. Sukhdev Singh Gill, in terms of clause No. 97 of Articles of Association of the Company, Mr.M.R. Vikram and Dr.K.Uma Devi have been appointed as the additional directors of the Company with effect from October 1, 2009, who holds the office of the directorships till the date of the ensuing AGM.

The Company has received representations from the shareholders under Section 257 along with the deposit amount for appointment of Mr. M.R. Vikaram and Dr. K. Uma Devi. Board recommends their appointment as directors and the notice calling the ensuing annual general meeting contains the appropriate resolutions in this regard.

Auditors

M/s Deloitte Haskins and Sells, Chartered Accountants, the Statutory Auditors of the company retire at the conclusion of this Annual General Meeting and are eligible for re-appointment. The Company has received confirmation that their appointment, if made, would be within the limits prescribed under Sec. 224(1 B) of the Companies Act, 1956.

Particulars of Employees

During the year under review, none of the employees of the Company have drawn remuneration as specified under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

Energy Conservation, Research and Developments, Technology absorption, Foreign exchange earnings and Outgo

The particulars relating to energy conservation, research and development, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1 )(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided as Annexure - B to this report.

Acknowledgement

The Board of Directors would like to express their grateful appreciation for the assistance and co-operation received from the Financial Institutions and Banks, like Andhra Pradesh State Financial Corporation (APSFC), Technology Development Board (TDB), Yes Bank, other banks, Government Authorities, Customers, Vendors and Members during the year under review.

Yours Directors also wish to place on record the sincere efforts and committed services put in by the employees at all levels.

For and on behalf of the Board

Place : Hyderabad Dr. Jayaram Chigurupati

Date : November 16, 2009 Managing Director