performance highlights & growth

Board of Directors

Promoter-Directors

Mr. Soshil Kumar Jain Chairman

Mr. Ravinder Jain Managing Director

Dr. Rajesh Jain Joint Managing Director

Mr. Sandeep Jain Joint Managing Director

Mr. Sumit Jain Director - Operations &

Projects

Independent Directors

Mr. R.L. Narasimhan

Mr. N.N. Khamitkar

Mr. Sunil Kapoor

Mr. Gurmeet Singh

Mr. K.M. Lal

Dr. A.N. Saksena

G.M. Legal & Company Secretary

Mr. Vinod Goel

Registered Office

Ambala-Chandigarh Highway

Lalru – 140 501, Punjab, India

Corporate Offices

• B-1 Extn./G-3, Mohan Co-operative Indl. Estate

Mathura Road, New Delhi – 110 044, India

• B-1 Extn./A-27, Mohan Co-operative Indl. Estate


Works

• Ambala-Chandigarh Highway


• Malpur, Baddi, Dist. Solan

Himachal Pradesh – 173 205, India

• B-1/E-12, Mohan Co-operative Indl. Estate


• A-241/242, Okhla Indl. Area, Phase – I

New Delhi – 110 020, India

R & D Centers

• Ambala-Chandigarh Highway


• B-1/E-12, Mohan Co-operative Indl. Estate


• A-224, Okhla Indl. Area, Phase – I

New Delhi – 110 020, India

• Plot No. E-4, Phase II, Indl. Area

Mohali – 160 055, Punjab, India

• Plot No. 72/3, Gen Block, T.T.C. Indl. Area

Mahape, Navi Mumbai – 400 710, India

Sales & Marketing Office

701, Sagar Tech Plaza, ‘A’ Wing, Saki Naka,

Andheri (East), Mumbai – 400 072, India

Statutory Auditors

M/s. S.R. Batliboi & Co.

Chartered Accountants, Gurgaon, India

Cost Auditors

M/s. J.P. Gupta & Associates

Cost Accountants, New Delhi, India

Registrar & Transfer Agents

M/s. Skyline Financial Services Pvt. Ltd.

246, Sant Nagar, 1st Floor, Main ISKCON Temple Road,

East of Kailash, New Delhi – 110 065, India

Banks

Axis Bank Ltd.

IDBI Bank Ltd.

Indian Overseas Bank

State Bank of India

State Bank of Mysore

State Bank of Travancore

Union Bank of India

Website

www.panaceabiotec.com

(As on 30th July, 2009)

Corporate Information

It’s the time of the year when I look forward to speak to you all about your company’s performance. Our principles and values continue to propel us towards our vision to become the largest and most admired health management company, leading the industry in developing brands and vaccines that preserve and improve human life across the globe.

In February, 2009, your company completed 25 years of spectacular growth & success. It is a significant milestone. We have grown from a small establishment located in Delhi to a major player in the health management industry and have created a significant shareholders’ value.

We have continuously introduced new brands and nourished our existing brands with appropriate focus for growth. We have begun exploring alternative ways to create value and to infuse our products and services with even better innovative technology. Going forward, we intend to build our portfolio of brands in a way that gives customers multiple reasons to continue their engagement with us. R & D is where we seed and nurture new growth platforms and this year too we continued to invest in it. This will help our Company to deliver sustainable growth for many years to come.

Throughout the year, initiation of major and highly innovative projects highlighted our team’s ability to carry ambitious projects through to successful

completion. Responding quickly to the global need, Panacea Biotec is partnering with WHO for manufacturing the vaccine candidate for protection against H1N1 virus (swine flu), a major global threat.

The financial storm that swept across the world impacted businesses across the globe. Uncharacteristic forex losses due to unprecedented international currency imbalance, manifested in the aftermath of global financial crisis. Forex losses were a bane for many Indian companies and Panacea Biotec too was saddled with its fair share.

Risk has become an integral part of all business activities. It becomes our foremost responsibility to manage it effectively and to ensure that our business activities are beneficial to our customers & other stake holders To mitigate it, we shall continue to focus on rigorous investment discipline, operational excellence and pursuing all opportunities to enhance the underlying performance of our business.

On behalf of the Board, my sincere thanks to every member and employee of Panacea Biotec for their commitment, enthusiasm and unstinting efforts as well as to all our partners and associates for their encouragement & support, which we continue to count on as we forge ahead.

Best wishes to you all!!

Chairman’s Message

Soshil Kumar Jain

In the year under review, we have experienced both change and continuity. What remained unchanged is our tradition - commitment to innovation, consistency and integrity - the distinct hallmarks of Panacea Biotec.

A strong financial standing, impressive and dedicated customer service and technological progress at all levels reflect the steady and dynamic nature of your company.

Panacea Biotec has been focusing its R&D efforts on preventive as well as therapeutic healthcare solutions. We have launched world’s first fully liquid vaccines - EasyFour & EasyFive and have partnered with WHO & UNICEF in their effort to maximize coverage of vaccines under the expanded program on immunization.

The day is not far away when Panacea Biotec would be known as a truly global organization.

As a leading health management company, we can deal with future challenges most effectively by exhibiting innovation in all our systems, processes

and strategies. We are committed to introducing a steady flow of innovative health care and vaccine products to fulfill the unmet healthcare needs of the masses.

Our excellence lies in execution. On the basis of

our strengths, a significant portfolio of projects,

robust pipeline of products, solid financials and the

confidence of our stakeholders, your company is

looking ahead to pursue steady and well balanced

growth and exhibit significant global presence.

Our goal remains to create long term wealth for

our shareholders. We’ll continue to build a multi-specialty company with a goal to become a leading health management company across the world.

I express my heartily thanks and look forward to your continued support as stakeholders of the company. It is with your valuable support that we can achieve our vision to be a global health management Company.

With best wishes!!

Managing Director’s Message

Ravinder Jain

Financial Highlights (Rs. in million)

Particulars 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-00

Financial Performance Summary

Net Turnover 7,734.2 8,304.4 8,315.5 5,363.5 3,255.4 2,616.2 2,691.5 2,739.3 2,176.7 1,866.3

Total Income 7,993.9 8,676.2 8,615.1 5,434.5 3,309.9 2,686.7 2,733.0 2,763.4 2,251.7 1,873.8

EBITDA 2,444.6 2,177.6 2,298.8 1,233.8 652.3 389.2 520.5 547.0 480.0 412.7

PBT (923.7) 1,903.9 2,091.0 1,002.1 429.4 217.6 336.3 406.4 426.1 329.3

PAT (690.5) 1,331.7 1,468.1 609.4 300.7 164.5 214.2 249.3 228.8 259.3

Cash Accruals 2,001.4 1,802.2 1,823.2 791.6 463.1 283.2 310.5 314.5 287.6 291.0

Balance Sheet Summary

Equity Share Capital 66.8 66.8 65.8 57.2 57.2 57.2 57.2 57.2 57.2 57.2

Preference Share Capital - - - 904.3 904.3 957.8 53.5 63.0 68.0 100.0

Reserves & Surplus 6,084.7 6,905.3 5,325.1 1,546.0 1,192.4 1,039.0 948.1 805.8 701.6 546.0

Net Worth 6,147.9 6,966.7 5,383.9 1,593.6 1,235.1 1,076.9 981.2 839.9 754.5 603.2

Loan Funds 7,002.9 3,982.4 2,134.2 5,866.5 1,610.4 1,680.2 1,292.2 1,060.1 719.8 681.3

Deferred Tax Liability 333.8 595.0 383.9 246.8 135.1 74.8 60.6 73.5 - -

Total Liabilities 13,488.2 11,549.5 7,909.0 8,620.9 3,899.3 3,808.9 2,411.6 2,059.5 1,546.6 1,384.5

Net Fixed Assets 6,938.7 5,343.7 4,136.1 2,337.1 1,376.8 1,054.5 963.0 893.5 565.3 408.4

Investments 2,165.7 2,049.3 229.5 61.4 61.4 39.1 52.6 52.6 47.1 18.1

FCMITDA† 96.0 - - - - - - - - -

Net Current Assets 4,284.2 4,151.2 3,536.4 6,212.8 2,446.7 2,696.0 1,371.8 1,090.4 929.9 958.0

Miscellaneous Expenditure 3.6 5.3 7.0 9.6 14.4 19.3 24.1 23.1 4.3 -

Total Assets 13,488.2 11,549.5 7,909.0 8,620.9 3,899.3 3,808.9 2,411.6 2,059.5 1,546.6 1,384.5

Key Performance Indicators

Profitability Ratios

EBITDA Margin 32% 26% 28% 23% 20% 15% 19% 20% 22% 22%

PBT Margin (12%) 23% 25% 19% 13% 8% 12% 15% 20% 18%

PAT Margin (9%) 16% 18% 11% 9% 6% 8% 9% 11% 14%

Shareholders related Ratios

Equity Dividend - 100% 100% 100% 150% 100% 100% 100% 100% 100%

EPS (Basic)* (in Rs.) (10.3) 20.1 23.7 9.9 4.4 2.7 3.6 4.2 3.8 4.4

Cash EPS (Basic)* (in Rs.) 30.0 27.0 29.5 13.1 7.2 4.8 5.3 5.4 4.9 4.9

Book Value* (in Rs.) 92.1 104.3 81.9 27.9 21.6 18.8 17.2 14.7 13.2 10.6

Return on Net Worth (11%) 19% 27% 35% 19% 14% 20% 29% 28% 40%

Other Ratios

Current Ratio 1.6 2.8 3.0 2.8 1.4 1.7 1.3 1.3 1.3 1.4

Debt Equity Ratio 0.9 0.5 0.4 2.9 0.3 0.5 0.4 0.4 0.1 0.2

Return on Capital Employed (6%) 13% 20% 8% 10% 8% 14% 17% 19% 23%

Interest Coverage Ratio 7.6 18.7 15.1 10.4 6.6 3.2 4.0 5.5 6.8 7.0

Debt Service Coverage Ratio 7.2 16.2 6.8 4.1 2.3 1.6 2.8 3.5 1.8 5.9†Foreign Currency Monetary Item Translation Difference Account*Per Equity Share of Re.1 each.

Setting the Scene 2

Management Discussion & 3 Analysis Report

• Industry Structure & Developments

• Panacea Biotec - Innovation in Support of Life

• Business Segments

• Pharmaceutical Formulations

• Vaccines

• Manufacturing Facilities

• Research & Development

• Subsidiaries, Joint Ventures, Collaborations

and Tie-ups

• Financial Performance

• Opportunities & Outlook

• Future Growth Drivers

• Risks, Challenges & Threats

• Corporate Social Responsibility

Directors’ Report 43 Corporate Governance Report 53

Auditors’ Report 66

Financial Statements 68

• Balance Sheet

• Profit & Loss Account

• Schedules to Balance Sheet and

Profit & Loss Account

• Cash Flow Statement

• Statement u/s 212 in respect of

Subsidiary Companies

• Financial details of Subsidiary Companies

Auditors’ Report on Consolidated 99 Financial Statements

Consolidated Financial Statements 100

• Consolidated Balance Sheet

• Consolidated Profit & Loss Account

• Schedules to Consolidated Balance Sheet and


• Consolidated Cash Flow Statement

Contents

Panacea Biotec • Annual Report 2008-091

Setting the Scene

• Panacea Biotec is the 2nd Largest Vaccine producer in India

• 3rd Largest Biotechnology Company in India (ABLE Survey 2009)

• Panacea Biotec has been pre-qualified by WHO to supply Oral Polio, Hepatitis B, Ecovac4 (DTwP-Hep B), Easyfour (DTwP-Hib) and Easyfive (DTwP-Hep B-Hib) Vaccines

• First Indian company to develop and launch innovative combination vaccines viz. Ecovac4, Easyfour and Easyfive in India

• Ranked 48th amongst Pharmaceutical Companies in India (ORG IMS MAT March’09)

• Pharmaceutical formulation facility at Baddi certified as cGMP compliant by various regulatory authorities including the German Regulatory Authority and ANVISA (Brazil)

• 26 product patents valid in more than 60 countries world wide

• 1,158 patent applications filed, 325 granted/accepted for grant globally as on 31.03.2009

• Company’s Products reach more than 35 countries globally

• Played a key role in eradicating polio by supplying more than 6 billion doses of Oral Polio Vaccine to Govt. of India & UNICEF

• Millions of patients enjoying happy & healthy life through our well established brands in niche therapeutic areas like pain management, diabetes management, organ transplant

• Stupendous contribution to Shareholders’ value

• Continuous investment in Research & Development activities - around 14% of net turnover invested during fiscal 2009

• Over 260 Scientists working in 5 state-of-the art R&D Centers

• A family of around 3,200 people working relentlessly in improving quality of life of billions of people across the globe

Management Discussion and AnalysisIndustry Structure & DevelopmentsGlobal Vaccine Industry

The global market for vaccines is expected

to grow at a CAGR of more than 16% in the

next five years and is expected to reach US$

30 billion by 2012, as per various industry

estimates. The vaccine industry will emerge

as the fastest growing therapeutic area.

The US and Europe represents the two

largest vaccine markets and will continue to

experience healthy growth in future.

Presently, Paediatric vaccines dominate

the global vaccines market but the share

of adult and therapeutic vaccines is likely

to increase significantly and will fuel the

future growth in the global vaccines market.

The cancer vaccine market, led by cervical

cancer vaccines, is presently one of the most

lucrative areas for vaccine manufacturers.

Overall, cancer vaccines are expected to

account for nearly 27% of the total vaccine

revenues by 2012. Successful development

of vaccines against pandemic flu, Pneumo,

Dengue, HIV & TB in addition to the

Hexavalent paediatric combination vaccines

would add to the growth of the vaccine

industry.

Immunization is the most important and

cost-effective way of eliminating child

mortality. The development of combination

vaccines has resulted in lower cost of

immunization and simplified the current

immunization schedule as it offers an

opportunity of fighting against multiple

diseases with a single injection.

WHO and UNICEF have taken a number

of measures to boost the awareness and

access to vaccines in their efforts to meet

the challenges in global immunization. One

of them being, the Global Immunization

Vision and Strategy (GIVS), launched in

2005. In brief, GIVS aims to assist countries

to immunize more people, from infants to

seniors, with a greater range of vaccines.

GIVS is the first ever global ten-year

framework to fight vaccine-preventable

diseases through immunization and covers

the period 2006 to 2015.

GIVS has four main aims:

• to immunize more people against more

diseases, to reduce childhood morbidity

and mortality;

• to introduce a range of newly available

vaccines and technologies;

• to integrate other critical health

interventions with immunization; and

• to manage vaccination programmes

within the context of global

interdependence.

Indian Vaccine Market

India represents one of the fastest

growing vaccine markets in the world.

With the national immunization program

(NIP) gaining more importance, several

multinational companies now see India as

a key market for their vaccine business. As

per industry estimates, the Indian vaccine

market was US$665 million in 2007-08

and is growing at over 20%. This market is

primarily driven by exports worth more than

US$360 million. The domestic market for

vaccines is around US$300 million with the

private sector accounting for around half

of it.

Domestic companies presently dominate

this market with around seven out of top

ten players being domestic companies. But

with India’s IPR (Intellectual Property Right)

The global market for vaccines is expected to grow at a CAGR of more than 16% in the next five years and is expected to reach US$ 30 billion by 2012.


laws improving considerably and healthcare

expenditure increasing, foreign companies

have started to acknowledge India’s

potential as a vaccine hub.

Owing to the factors like increasing public

and private healthcare spending, birth of

around 25 million babies each year and

a large prevalence of both infectious and

chronic diseases, the domestic demand

for vaccines in India will continue to grow

at double-digit growth rate, offering

vaccine players enough challenges and

opportunities to expand their horizon in the

country.

Apart from the domestic market, India is

also emerging as a center for exports. Both

research and manufacturing of vaccines can

be undertaken in India at much lower cost

than in the west. Exports presently account

for more than 50% of the country’s vaccine

market and with growing investment by

both domestic and international players,

India is expected to fulfill the vaccine

demand of both developing and developed

countries alike.

Polio Eradication in India

The goal of Global Polio Eradication Initiative

(GPEI) is to ensure that no child will ever

again know the crippling effects of polio.

Polio is a highly infectious disease which

invades the nervous system and can cause

total paralysis in a matter of hours. It can

strike at any age, but affects mainly children

under five. Polio is mainly passed through

person-to-person (i.e. fecal-oral) contact,

and infects those who do not have immunity

against the disease. There is no cure for

polio, but the disease can be prevented by

immunization with polio vaccine.

Polio Cases Data Year No. of Polio Cases 1998 1934 1999 1126 2000 265 2001 268 2002 1600 2003 225 2004 134 2005 66 2006 676 2007 874 2008 559 2009 206*

(Source: www.npspindia.org) *data as on July, 2009

As per WHO guidelines, a WHO region can be

certified polio free only if it does not record

any case of polio during three consecutive

years following the year in which zero case

is registered first time. Assuming that India

achieves zero case for the first time in 2010

and thereafter, if it does not record any case

of polio in 2011, 2012 and 2013, India can

achieve its target of becoming polio free and

become eligible for being declared as a polio

free nation by WHO. However, immunization

activities will continue until the entire region

(Pakistan & Afghanistan) becomes polio free.

Immunization against Polio to

Continue: In developing countries, low

OPV effectiveness in the highest-risk

communities (believed to be caused by a

combination of high incidence of diarrheal

diseases, malnutrition and the high force

of Wild Polio Virus infection attributed to

crowding) has been identified as the key

challenge to interrupting Wild Polio Virus

transmission. Responses being explored,

include inactivated poliovirus vaccine as a

supplement to Oral Polio Vaccine (mOPV) &

development of a bivalent OPV containing

both type 1 and type 3 virus.

The immunization against polio will

continue in the post polio eradication

era. It is expected that the mode of

immunization may change from Oral Polio

Vaccine to Inactivated Polio Vaccine (IPV).

In those countries, where polio has been

eradicated, IPV is being used. The world

health regulatory bodies suggest that the

vaccination against polio must continue even

after achieving polio eradication.

Global Pharmaceutical Market

The global pharmaceutical market audited

sales grew by approximately 5.1% (at

constant exchange rate) to reach US$726

billion in 2008. (Source: IMS MAT Sept.’08),

largely as a result of strong sales for new

innovative products and high market growth

in emerging pharmaceutical markets such as

India and China.

The global pharmaceutical market is

expected to grow 4.5 - 5.5 percent in 2009 (a

pace similar to 2008) and reach the level of

more than US$820 billion and is expected to

reach US$929 billion in 2012.

North America, Europe and Japan continued

to remain the key markets accounting for

85% of the global pharmaceutical market

in 2008. The emerging economies further

consolidated their position in the global

arena with growth in countries like India,

China, Russia, Brazil and Turkey exceeding

the growth in developed markets and are

expecting to continue with the trend.

The global pharmaceutical market is expected to grow 4.5 - 5.5 percent in 2009 (a pace similar to 2008) and will reach the level of more than US$820 billion and is expected to reach US$929 billion in 2012.

Region-wise Global Pharmaceutical Sales, 2008

Audited Market 2008 Sales* % Growth

US $ bn % Mkt Share (Constant US$)

North America 312 43 1.5Europe 242 33 6.2Asia, Africa & Australia 72 10 15.0Japan 65 9 4.4Latin America 35 5 12.0

Total Audited 726 100 6.1*Excludes unaudited markets and Russia, Ukraine and Belarus audited data. Sales cover direct and indirect

pharmaceutical channel purchases in U.S. dollars from pharmaceutical wholesalers and manufacturers. The figures above include prescription and certain over-the-counter data and represent manufacturer prices.

Total may not add due to rounding off.

As a result of the pharmaceutical industry’s increased focus on these high-growth markets, the

developing countries are benefiting from greater government spending on healthcare and

broader public and private healthcare funding - which is driving greater access to, and demand

for, innovative medicines.


The cost of research and development is

continuously increasing due to multiple

reasons including the cost of failure but

in the year 2007 there is a decline in R&D

expenditure. The continuous R&D spending

has increased but the number of New

Molecular Entities (NMEs) and biologics

approved by FDA is down.

The pharmaceutical industry has, in the

recent past, seen a trend of alliances and

deals between innovators and generic

companies creating a collaborative business

model. The generic partner gets access to

rich product pipeline under development &

the research capabilities of the innovator and

the innovator benefits from lower research

& development cost and reach in emerging

markets of the generic partner, hence

realizing higher gains from existing portfolio.

With competitive advantages in terms of

R&D, manufacturing and marketing, Indian

companies are today in a strong position

to partner with innovator pharmaceutical

companies.

Indian Pharmaceutical Market

The Indian pharmaceutical industry is one

of the fastest growing and the safest sectors

in Indian economy. It is one of the world’s

largest and most developed, ranking 4th in

volume terms and 13th in value terms. India

accounted for 8% of global production and

2% of world markets in pharmaceuticals. The

Indian Pharmaceutical market is valued at

The Indian pharmaceutical industry is one of the fastest growing and the safest sectors in Indian economy. It is one of the world’s largest and most developed, ranking 4th in volume terms and 13th in value terms.

Rs.353.7 billion and growing at 10.1% as per

ORG MAT Mar’09.

The Indian Pharmaceutical Market is

expected to treble in the next decade and

catapult the country into top 10 markets

in the World by 2015, overtaking Mexico,

Turkey & South Korea.

The chronic therapy segment recorded a

growth of 13.1% and contributed 28.3%

of the total market while acute therapy

segment grew at a rate of 8.6%. The

overall market growth was a mix of higher

volumes of existing products, new product

introductions and price increases with all

three witnessing a positive trend. Around

75% of the overall market growth was led by

volume increases in existing products.

Semi-urban and rural markets are becoming

an important driver for growth in the Indian

market. Extra-urban markets accounted

for 40% of the total sales in 2008. Acute

therapies dominate the extra-urban markets

with 80% contribution while chronic

therapies are also growing especially in

cardiac therapy (8%).

In the coming years, upcoming small cities

and rural areas will contribute almost as

much to the pharma market growth as

metros and top-tier towns.

Amongst the markets where the Company

operates the highest contributing group is

anti-biotics (contributing around 18% to IPM)

and growing at par as compared to IPM and

has added an incremental value of Rs.5.6

billion last year.

The second largest group in terms of

value contribution to IPM, Cardio Vascular

system has recorded 13% growth with an

incremental value of Rs.4.6 billion. The anti-

diabetics category has recorded the highest

growth at 16% adding an incremental

value of Rs.2.6 billion. Other categories

with substantial presence of the Company,

viz. Pain & Analgesic and GI & Respiratory

have shown decent growth of 9% and 8%

respectively.

With higher per capita income, increasing

access to modern medicines, the emergence

of an organised retail segment and the fast

growing area of medical insurance, this

segment is expected to continue its strong

growth momentum and is estimated to

be worth US$30 billion by 2020, growing

at about 8% annually as compared to an

increase of 6% in the world as a whole.

But, even then, India’s share in the world

pharmaceutical market would only come to

slightly over 2%.

Playing a key role in promoting and

sustaining development in the vital field of

medicines, Indian Pharma Industry boasts of

quality producers and many units approved

by regulatory authorities in USA and UK.

The Indian Pharmaceutical sector is

highly fragmented with more than

20,000 registered units. The leading 250

pharmaceutical companies control around

70% of the market with market leader

holding nearly 7% of the market share. It is

an extremely fragmented market with severe

price competition and government price

control.

The pharmaceutical industry in India meets

around 70% of the country’s demand

for bulk drugs, drug intermediates and

pharmaceutical formulations. There are

about 250 large units and about 8,000

Small Scale Units, which form the core

of the pharmaceutical industry in India

(including 5 Central Public Sector Units).

These units produce the complete range of

pharmaceutical formulations, i.e., medicines

ready for consumption by patients and

about 350 bulk drugs, i.e., chemicals having

therapeutic value and used for production of

pharmaceutical formulations.


Panacea Biotec – Innovation in Support of LifePanacea Biotec occupies a distinct

position in the Indian pharmaceutical and

biotechnology industry with its business

model focussing on innovation, collaboration

and brand building. The Company has

endeavoured to provide research based

products to fulfil the unmet medical needs.

The Company has established infrastructure

and capabilities in research & development,

manufacturing and marketing of vaccines,

pharmaceuticals and biopharmaceuticals.

Panacea Biotec occupies the position of the

2nd largest vaccine producer in India and has

been ranked as the 3rd largest biotechnology

Company (ABLE Survey 2009). Based on

the finished pharmaceutical formulations

business, the Company is placed at 48th rank

amongst pharmaceutical companies in India

(ORG IMS MAT March 2009).

The Company has also moved ahead towards

diversification in the field of healthcare

through its subsidiaries as part of its

corporate vision to become a leading Health

Management Company.

Core Strengths at a glance

Panacea Biotec is well positioned and

recognized as a leading, research based

Health Management Company with

an objective to discover, develop and

successfully market innovative products to

meet unmet medical needs. To achieve these

objectives, Panacea Biotec has:

Established capabilities in R&D: Panacea

Biotec has established five state-of-the-art

R&D Centers with each center dedicated

to specific research areas, driven by the

intellectual capabilities of over 260 scientists.

The research facilities are self-reliant with

cross-functional capabilities for research and

development of drugs starting right from

lead identification to pre-clinical and clinical

development and product registration. The

current research strengths of Panacea Biotec

are focused, inter-alia, on:

• Drug delivery system design and

optimization;

• Discovery and synthesis of new chemical

and biological entities;

• Design and development of new

generation prophylactic and therapeutic

vaccines; and

• Development of humanized and

fully human therapeutic monoclonal

antibodies.

The Company has been granted 26 product

patents worldwide valid in more than 60

countries including the U.S., E.U. Member

State, Russia, Japan, China, South Korea,

Australia and Brazil.

State-of-the-art manufacturing

facilities: Panacea Biotec has state of the

art manufacturing facilities for vaccines

and pharmaceuticals complying to cGMP

standards. The Company is setting up

bulk vaccine manufacturing facility for cell

culture based vaccines, biopharmaceuticals,

recombinant and viral vaccines at Lalru,

Punjab.

The vaccine formulation facility at New

Delhi is approved by WHO for Oral Polio

and Recombinant Hepatitis B vaccines and

Combination vaccines Ecovac-4 (DTwP-

HepB), Easyfour (DTwP-Hib) and Easyfive

(DTwP-HepB-Hib). The Pharmaceutical

Formulations facility at Baddi has been

audited and certified as cGMP compliant by

various regulatory agencies, including the

German Regulatory Authority and ANVISA

(Brazil).

WHO Pre-qualification Status: The

pre-qualified supplier status enables the

Company to participate in UN Organizations

procurement process around the world. The

Company has been pre-qualified by WHO to

supply Oral Polio (mOPV and tOPV), HepB,

Ecovac-4, Easyfour and Easyfive Vaccines.

Panacea Biotec occupies the position of the 2nd largest vaccine producer in India and has been ranked as the 3rd largest biotechnology Company (ABLE Survey 2009).


The Company is currently supplying Oral Polio, Hepatitis B and Easyfive Vaccines to UNICEF. The Company has also commenced supplying Easyfive Vaccines to Pan American Health Organization (PAHO) during fiscal 2009.

Established Brand Equity: Panacea Biotec has established brand equity in a number of therapeutic areas like diabetes management, pain management, organ transplantation and paediatric immunization. Its leading brands including Glizid-M, Nimulid, Panimun Bioral, Pangraf and Mycept are amongst the top five positions in their respective therapeutic segments. Its flagship brand, Glizid-M is ranked at 171 amongst the top brands in Indian Pharmaceutical Market, according to the stockists secondary audit by ORG IMS (MAT Mar’09).

International Presence: In addition to the strategic alliances with leading regional companies in Latin America, South East Asia, CIS and Africa; Panacea Biotec has created a global presence through its wholly-owned subsidiaries in strategic markets including US, Germany, Switzerland and UAE.

Relationship with Key Business Associates: Panacea Biotec has a long-standing relationship with its key customers and business partners including successful business record of 10 years with UNICEF. It

has been supplying oral polio vaccines to

UNICEF since fiscal 2000 and has steadily

expanded and grown on this relationship

with the commencement of supply of

Easyfive vaccines during fiscal 2009. In

addition to long-standing relationship

with its customers, the relationships with

key suppliers like Novartis Vaccines, Sanofi

Pasteur and PT Bio Farma are also a source of

its competitive strength.

Collaborations & Joint Ventures with Key

Industry Players: Panacea Biotec has a

rich history of collaborations and ventures

with various industry players and has

several business relationships with various

national/international research institutes,

academic universities and commercial

corporations including National Institutes

of Health (USA), Novartis Vaccines, Sanofi

Aventis, Biotech Consortium India Ltd.,

Nederland Vaccin Institut (NVI), PT Bio Farma,

etc. These collaborations, ventures and

relationships enable the Company to secure

in-licensing, out-sourcing and other business

opportunities.

Qualified & Experienced Manpower:

Panacea Biotec has 3,196 employees

including 261 scientists engaged in R&D,

1,006 in production and 1,213 in sales &

marketing.


Business SegmentsDomestic Sales & Marketing Network

Panacea Biotec has successfully established

leading brands through a focused scientific

marketing approach. To cater to the

individual nuances of specific therapeutic

segments, Panacea Biotec operates through

seven strategic business units (SBUs).

The domestic pharmaceutical business

is organised into three classes – Super-

speciality i.e., Critical Care & OncoTrust,

Speciality i.e., Diacar Alpha & Diacar Delta

and Multi-specialty i.e., Procare & Growcare.

To cater to the large and voluminous

bottom of the Indian Pharmaceutical Market

pyramid, the Company has taken an initiative

by launching a new SBU, viz. Value India

Healthcare.

The aim of each SBU is to attain leadership

position in its chosen markets and establish

brand equity in respective therapeutic

segment by way of innovative products as

well as innovative marketing approach with

differentiated products. The SBUs promote

a portfolio of brands with a special focus on

Orthopedicians, Cardiologists, Diabetologists,

Physicians, Nephrologists, Chest Physicians,

Surgeons, Dentists, Consulting Physicians,

Paediatricians and Gastro-enterologists.

Diacar Alpha & Diacar Delta

Diacar Alpha & Diacar Delta together

are the highest contributing SBU of the

Company with dedicated marketing

and sales infrastructure for Diabetes and

Cardiovascular management. These SBUs

are committed to provide new therapies

and innovations in drug delivery and overall

diabetes disease management. India’s

diabetic population is estimated to be

around 41 million and growing rapidly. WHO

estimates that diabetes related mortality

could increase to 35% by 2015.

These SBU promote the brands to

target specialists viz. Endocrinologists,

Diabetologists, Cardiologists and Physicians

in a fiercely competitive scenario and have

achieved significant leadership position

in oral anti-diabetic segment. Of late

the SBU has also started focusing on the

Nephrologists.

To tap the growing cardiology segment

the SBU now has sharpened its focus on

Cardiology by having an additional team

which would have a dual focus on Cardiology

and Diabetology.

The flagship brand of the SBU, Glizid-M

(Gliclazide + Metformin) is the No. 1 brand

while Glizid (Gliclazide) is the no. 2 brand in

their respective categories. Glizid-M apart


from the above is ranked at 171st position

amongst 30,000 odd pharmaceutical brands.

Apart from Glizid-M and Glizid, the brand

portfolio of this SBU includes:

Oral Hypoglycemic agents: Glizid MR

(Gliclazide modified release), Betaglim

(Glimepiride), Betaglim M (Glimepiride

+ Metformin), Metlong & Metlong DS

(Metformin), Pioryl (Pioglitazone +

Glimepiride), Oglo (Pioglitazone), Gliben

Total, Glizid Total, Glim Total and Myelogen

Forte.

Cardiovascular: Lower A (Atorvastatin),

Lower EZ (Atorvastatin + Ezetimibe), Lower

TG (Atorvastatin + Fenofibrate), Kingbeta

(Metoprolol) and Hitarget (Telmisartan)

range.

New product launches during the year

include the Hitarget (Telmisartan) range of

Products.

Critical Care

Critical Care SBU consolidated and

strengthened its leadership status in

Nephrology and Organ Transplantation in

the year 2008-09 by organic growth as well

as by entering newer markets with new

brand introductions.

Aided by a dominant penetration in

the Transplantation segment, PanGraf

(Tacrolimus) continued to be the

most preferred and trusted brand of

Tacrolimus in the country. Panimun Bioral

(Cyclosporine) maintained its position

in the Cyclosporine market owing to the

wealth of experience and confidence in

it. Mycept-S (Mycophenolate sodium)

surging ahead, provided valuable support

to Mycept (Mycophenolate mofetil). Fosbait

(Lanthanum carbonate) grew significantly in

the year, as also did Siropan (Sirolimus).

The year under review was also a

momentous year for the Critical Care SBU.

It entered into Rs.1.2 billion Erythropoietin

market with EPOTrust, which since its

launch has been able to establish itself

as a prominent player in the market. The

introduction of K-Bait (Calcium Polystyrene

Sulphonate) a treatment for Hyperkalemia in

Chronic Kidney Disease (CKD) patients also

complemented the thrust in the Nephrology

portfolio.

Standalone conferences like Renal Summit

III and participation in various conferences

re-inforced the scientific image and

enhanced the reputation of Critical Care

SBU throughout the year. Fully aware that

newer specialities like Rheumatology and

Haematology provide opportunity for the

growth of existing brands, it is consciously

working on making these opportunities

into viable business propositions. In the


coming years, Critical Care SBU proposes to

launch molecules aimed at satisfying unmet

medical needs, thereby aiming to grow faster

and become bigger in the Nephrology and

Transplantation market.

Procare

Procare SBU of the Company endeavours to

consolidate and strengthen its image in the

field of chronic health care management

with specific focus on Osteoarthritis, Pain

management and Gastrointestinal disorders.

Pain is a frequent cause for clinical visits

with around 45% of the population seeking

medical help for pain at some point in their

lives. Pain occurs across the life span, and

it has been estimated that 4 out of every

10 people with moderate or severe pain

do not get adequate relief. Chronic pain is

widely believed to represent a disease itself

causing long-term detrimental changes in

musculoskeletal and nervous system. Pain

interferes with sleep, activities of daily living

and productivity. In order to help millions

of patients suffering from various painful

inflammatory disorders, Procare SBU is

marching ahead to provide therapeutic

modalities to these patients and has recently

launched JAIHO (Lornoxicam + Paracetamol)

in pain management segment.

Procare has taken definite steps towards

making significant inroads in the

Gastroenterology segment with two

important launches of Livoluk Fibre

(Lactulose + Isapghula) and Sitcom

(Euphorbia Prostata) during the year.

This SBU promotes a portfolio of brands with

special focus on Orthopedicians, Surgeons,

Dentists & Gastroenterologists apart from

Consulting Physicians & General Physicians.

Some of the major brands of Procare across

different therapeutic segments are:

Anti-arthritis: Willgo, Kondro OD,

KondroAcute

Pain relievers: Nimulid, Nimulid SP, Nimulid

MR, Nimulid HF

Gastrointestinals: Livoluk, Livoluk Fibre,

OD-pep, Sitcom

Anti-osteoporosis: Alphadol, Alphadol-C,

Kingcal.

On the prescription front there has been gain

in equity from Specialties like Gastro and

Ortho during the year under review.

Growcare

Growcare is the Multi-Specialty business

of Panacea Biotec with special focus

in Respiratory Disorders. The different


The overall size of the domestic oncology market is around Rs.9.6 billion and is growing at around 22%. More than 50% of the world’s cancer burden, in terms of both number of cases and deaths, occurs in developing countries.

specialties covered are Chest physicians,

Consulting Physicians, General Physicians,

ENT, Paediatricians, Surgeons and

Orthopedicians. 37 different products are

marketed by this SBU with presence in

multiple therapy areas.

Some of the popular brands of Growcare are:

Anti-infective: Cefmentin (Cefixime+

Lactobacillus), Ocimix (Ornidazole+Ofloxacin)

Anti-Allergic: Zomont Range

Cough, Cold and Fever: Toff MD, Toff DC &

Toff expectorant, Orangemol Suspension

Pain Management: Nimulid MD & Nimulid

MD Kid (Mouth dissolving) tablets, Nimulid

Suspension, Nimulid Transgel.

Anti TB: Xeed 2, Xeed 3E & Xeed 4 tablets

fixed dose combinations, Myser (Cycloserine)

& Myobid (Ethionamide).

Anti haemmorohidal: Thank OD Tablets.

OncoTrust

Panacea Biotec made its maiden entry into

the rapidly growing field of Oncology in

fiscal 2008 with launch of a new SBU called

‘OncoTrust’. Oncology as a therapeutic

segment is rated as one of the fastest

growing fields globally and in India also.

The Oncology market is well poised for a

promising future ahead with steady increase

in cancer incidence rate, superior and more

accessible diagnostic facilities, increased

awareness about the disease and feverish

pace of new molecule introduction. The

overall size of the domestic oncology market

is around Rs.9.6 billion and is growing at

around 22%. More than 50% of the world’s

cancer burden, in terms of both number

of cases and deaths, occurs in developing

countries.

The current product portfolio of OncoTrust

comprises of Cytotoxic chemotherapy

covering indications therapeutic segments

such as Breast Cancer, Lung Cancer,

Pancreatic Cancer, Ovarian Cancer and Brain

Tumor and a supportive therapy for patients

suffering from bone metastases.

The Brand Portfolio includes PacliTrust

(Paclitaxel Injection); DoceTrust (Docetaxel

Injection); GemTrust (Gemcitabine injection);

TemoTrust (Temzolomide Capsules) and

ZoleTrust (Zoledronic Acid Injection). Two

new brands, viz. GefiTrust (Gefitinib) and

OxiTrust (Oxaliplatin) were launched during

the year under review. The ‘Trust’ umbrella

branding has gained recognition amongst

the oncologist community and is helping

build OncoTrust as a big brand.

Value India Healthcare

Value India Healthcare is the SBU launched

to cater to mass markets. This SBU’s main

aim is to provide a unique ‘value for money’

proposition in its offering to the General

Physicians practicing mainly in semi-urban

and rural set up.

This SBU is setting a trend in offering

significant innovative brands to fight pain,

allergy and gastro-intestinal disorders to

the semi urban and rural markets. The

main brands are TwoWks, Combipunch,

Instanim MD, TwinEase ER, RojOD, Takecal,

Kofzero and Koldzero. Anti-infectives as a

class is a fast growing market. The Value

range of anti-infectives offered by the SBU,

ValueCef, ValueOrni, ValueMox, ValueMentin,

ValueLevo and ValueThral are steadily

gaining acceptance.

This SBU currently operates in Rest of

Maharashtra region, Madhya Pradesh and

Chattisgarh with plans for expansion to other

states in due course of time.

Brands Review

Over the years, Panacea Biotec has

established leading brands that enjoy top

of the mind recall by the medical fraternity.

The Company’s brands command excellent

market share in their therapeutic segments.

By ORG (MAT Mar’09) Sales value, Panacea


Biotec is the 50th ranked company in

the Indian Pharmaceutical Market with

Nephrologists, Dentists, Orthopaedicians and

Diabetologists giving the best support. As

per Stockist Secondary Audit of ORG (MAT

Mar’09), Glizid-M stands at 171st rank among

Top brands in the Indian Pharmaceutical

market and retain number one position

within its category.

The following table set forth the key

brands of the Company across therapeutic

categories and their ranking/ market share in

India as per ORG IMS audit:

Brand Standing and Market share

Brands Market Ranking Share %

Diabetes and Cardiac Care:Glizid M 24 1Glizid 80mg 23 1Glizid 40 mg 31 1Glizid MR 60mg 13 2Glizid MR 30mg 16 2Glizid Total 21 2Pain Management:Willgo 60 1Nimulid MD 28 1Nimulid 100mg 7 2Nimulid Suspension 14 2Nimulid Safeinject 15 2Nimulid Transgel 17 2Nimulid Nugel 11 2Nimulid SP 10 4Nimulid MR 12 4Softdiclo 11 3Kondro OD 21 3Tuberculosis Management:Myser 19 3Gastro-intestinal:Livoluk 8 4

• Source of the data is ORG IMS SSA audit MAR 2009.

• Market Share and rank is calculated within its immediate operating market i.e the strength or the immediate market (wherever applicable).

Critical care brands, Panimun Bioral, Mycept

and Pangraf are also the leading brands in

the Organ Transplantation segment but have

a poor reflection in ORG IMS audit, as ORG

IMS SSA audit does not track institutional

sales or Direct to patient sales.

International Pharmaceuticals Business The year under review marked the

achievement of landmark initiatives &

accolades for the Company’s international

formulations business. The Company clocked

a robust sales growth of 27% over previous

year and reached to a level of Rs.426.1

million. The major markets continue to do

well inspite of recessionary trends in the later

part of the year. In addition to this, successful

commercialization happened in newer

markets across Central America, Africa and

Asia.

The Company has identified Organ

Transplantation, Nephrology, Metabolic

Disorders, Pain management, Oncology,

Gastro-intestinal & Anti-infective products

as major thrust areas for the future. The

Company is currently in the process of

registering its products in key new markets

including US, European Union, Switzerland,

South Africa, Turkey, Brazil, Mexico,

Columbia, Venezuela, Chile, Philippines

& Malaysia. The Company has set-up

international subsidiaries in US, Germany,

Switzerland and UAE to steer product

registration.

The Company focuses on brand building

primarily leveraging its portfolio of novel

patented products in key segments. The

major achievements in terms of international

formulation business during the year have

been:

• Supply of Kidney Transplant

product, Mycept in the 1st year of

commercialization to Russian Ministry of

Health.

• Introduction of 10 products especially

in the Nephrology & Organ Transplant

category in various markets.

• Approval of Manufacturing facilities from

main regulatory agencies viz. German

Regulatory Authority and ANVISA (Brazil),

paving the way for entry into nearly US$

600 million Nephrology space in the

The Company is currently in the process of registering its products in key new markets including US, European Union, Switzerland, South Africa, Turkey, Brazil, Mexico, Columbia, Venezuela, Chile, Philippines & Malaysia.


represented markets. In addition, this

approval allows the Company an entry

into markets of CIS (Ukraine), Africa

(Tanzania, Ethiopia, Uganda) and Middle

East (Syria).

In its efforts to build brands, Panacea Biotec

has continued to chase its commitment

of working closely with the leading

Nephrologists & Transplant Surgeons in

represented/planned markets. Due to

these efforts, the Company’s products are

being routinely procured & purchased by

the Ministries of Health in Asia (Sri Lanka,

Vietnam, Mongolia) and in CIS (Ukraine).

The Company has initiated a series of

unique promotional activities in represented

markets; thereby re-affirming its credentials

as a scientifically focused company. Some of

them are “Free Blood level for patients taking

Tacrolimus (in Sri Lanka)” and “Bone Mineral

Density (BMD) estimation for patients to

detect & manage early onset of Osteoporosis

patients (in Sri Lanka & other markets)”.

In addition, the Company’s products are in

the advanced stage of registration in majority

of the potential markets viz: Latin America

(Brazil and other MERCOSUR markets), Africa

(South Africa, Nigeria, Kenya), Middle East

(Jordan, Egypt, Yemen) and Asia (Philippines,

Malaysia, Singapore). These commercial

realizations is expected to enable the

Company to register quantum increases in

the business outlook in the coming 2-3 years.

Vaccines

Panacea Biotec has an excellent portfolio

of innovative paediatric vaccines which

protect children against dreadful diseases

such as polio, hepatitis, diphtheria, tetanus,

pertusis & haemophilus influenza. The

portfolio of vaccines includes the Trivalent

Oral Polio Vaccine (tOPV), Monovalent

(Type I and Type III) Oral Polio Vaccine

(mOPV), Enivac HB (Hepatitis B) Vaccine

and innovative Combination Vaccines such

as Ecovac4 (Diphtheria-Tetanus-wholecell

Pertusis (DTwP)-Hepatitis B), Easyfour

(DTwP-Haemophilus Influenza type B (Hib))

and Easyfive (DTwP-Hepatitis B-Hib). The

Company has WHO pre-qualification for all

these vaccines and is currently supplying oral

polio, Hepatitis B and Easyfive Vaccines to

UNICEF for their global requirements.

The Company also received an award for

supply of Easyfive Vaccines from PAHO and

has initiated supplies of Easyfive vaccines

during the current year.

The vaccines, Ecovac4, Easyfour and Easyfive

are also being marketed in India through

its joint venture Company Chiron Panacea

Vaccines Pvt. Ltd. (CPV). The Company

has gained significant market share in the

combination vaccine segment in domestic

market.

During the year, the Company has launched

PolProtec, an innovative injectable polio

vaccine, in the Indian market in pre-filled

syringe, NovoHib (monovalent Hib) vaccine

and PrimOpol, triavalent Oral Poliomyelitis

Vaccine in multi-dose through CPV.

As regards combination vaccines, developing

countries would need these vaccines to the

tune of around 300 million doses annually.

The combined demand of all combination

paediatric vaccines worldwide was valued at

US$ 600 million in 2005 and is estimated to

grow to US$ 1.6 billion by 2012. Pentavalent

vaccine market is estimated to cross a mark

of US$ 1 billion out of which UN agencies

are likely to procure this vaccine worth more

than US$ 350 million (around Rs.17 billion) by

2009 itself.

As regards Polio Vaccines, Panacea Biotec

has made dynamic progress in the field of

Polio protection with many new vaccines

coming into medical practice in recent times.

Under current circumstances, it is imperative

for the Company to be in harmony with

the Government’s policies & the medical

fraternity.

Hence, the Company has adopted a unique

strategy which harness with the government

The Company has launched PolProtec, an innovative injectable polio vaccine, in the Indian market in pre-filled syringe, NovoHib (monovalent Hib) vaccine and PrimOpol, triavalent Oral Poliomyelitis Vaccine in multi-dose through CPV.


in their fight against polio known as

“Sequential dosing strategy”. This sequential

dosing strategy is OPV followed by

Inactivated Polio Vaccine (IPV). This strategy

is intended to decrease the incidence of

Polio, while maintaining high levels of

population immunity to poliomyelitis

outbreaks. It is expected to remain until

further progress towards global eradication

is achieved.

International Vaccines Business

Immunization has become one of the most important & cost effective ways of reducing child mortality. keeping this trend in mind, Panacea Biotec has adopted a strategy by the development of enhanced combination vaccines; opening a whole new dimension towards protecting multiple diseases with just single injection.

The company is poised to make inroads into global Vaccine markets and has deployed specialized team for its Vaccine Business in emerging (ROW) markets.

The Company has started establishing its ground work in various potential vaccine markets & also obtained registration in Nepal & Pakistan.

Panacea Biotec is all set to launch GeneratioNext vaccines such as Easyfive - a WHO pre-qualified pentavalent vaccine,

which is also amongst the world’s first fully

liquid vaccine & WHO stated high priority

vaccine, Polprotec (enhanced Inactivated

Polio vaccine, eIPV) & NovoHib (Haemophilus

influenzae type b conjugate - mono Hib

vaccine), in the emerging markets in years to

come. The International Vaccines Business is

well poised for a promising future ahead with

a steady increase in preventive healthcare

spending.

Logistics Network

Panacea Biotec has an advanced professional

logistics network throughout the country.

The Company has a nationwide sales and

marketing network covering approximately

450 districts in India and targets more than

1.1 million customers through a field force of

more than 1000 trained marketing and sales

professionals and 23 sales depots/carrying

and forwarding agents all over India. The

Company through its efficient sales force

reaches more customers more effectively.

The Company has its Central Warehouse at

Delhi. Besides this the Company also has

expertise in cold chain management for

storage and distribution of Vaccines under

monitored conditions using a system of

Vaccine Vial Monitors, Data Loggers, Ice

Boxes, Coolant, Cold Rooms and Refrigerated

Vehicles. This ensures that the Vaccines

remain safe and effective against changes in

the variant temperature conditions.


Manufacturing Facilities Panacea Biotec has its manufacturing

facilities for vaccines and pharmaceutical

formulations in India in Delhi, at Lalru in

Punjab and at Baddi in Himachal Pradesh.

The Company is in the process of setting

up new manufacturing facilities for Cell

Culture based Vaccines in bulk form at Lalru,

which is expected to be completed in the

current financial year. The manufacturing

facilities have been set up in compliance with

international regulatory standards including

WHO-cGMP, US-FDA, European Union

standards for GMP and Good Laboratory

Practices (GLP).

The Company’s manufacturing expertise

lies in various solid, semi solid & liquid oral

dosage forms and vaccines such as:

• Oral-solids - Conventional tablets/

capsules, Controlled/delayed release/

enteric coating tablets and capsules,

Tablet in Tablet, Tablet in Capsule, Multi

Layered Capsules, Hard gelatin/ Soft

Gelatin capsules, Mouth Dissolving/

Chewable Tablets, Beads Encapsulation,

Coating: film, sugar & functional, Taste

masking and fast-dissolving tablets.

• Semi-solids - Ointments/Creams/Gels,

Transdermal Drug Delivery System.

• Liquids - Suspensions/Syrups/Solutions.

• Vaccines - Recombinant Vaccines,

Combination Vaccines and Cell culture

Vaccines and live vaccines.

Manufacturing Facilities for Vaccine

Antigens at Lalru, Punjab

The Company has three separate dedicated

bulk vaccine manufacturing facilities for

Recombinant, Bacterial and Tetanus Vaccines

at Lalru in Punjab. In addition to the existing

bulk vaccine manufacturing facilities, the

Company is setting up one more state of the

art bulk manufacturing facility comprising of

three suites at Lalru in Punjab, which have

been designed, constructed, adapted and

maintained for production of bulk vaccines

and cell culture based biopharmaceutical

products following current Good

Manufacturing Practices (cGMPs) prescribed

by WHO and US FDA with an investment

of around Rs.1 billion. One of the suites will

cater to the biopharmaceutical / vaccine

on mammalian cell culture system with the

option of conventional as well as disposable

bioreactors. The second facility would be

multi-product facility for microbial products

and the third facility will be for viral vaccines.

The Company expects these facilities to be

commissioned in the current financial year.

Two bulk vaccines manufactured at

Company’s Lalru unit (Recombinant

Hepatitis B Vaccine and Haemophilus

influenzae type b conjugate vaccine) are

WHO pre-qualified which are being used

for manufacture of innovative combination

vaccines for supply to UNICEF and PAHO.

Pharmaceutical Formulations facility at

Baddi

The Company’s state of the art

pharmaceuticals formulations manufacturing

facility at Baddi, built in compliance with

USFDA standards, received encouraging

acclaim and numerous plant approvals from

various regulatory authorities. The facility is

now approved for Brazil as well as for several

other markets like Yemen, Syria, Ukraine

& Ethiopia. The Company’s soft gelatin

manufacturing facility is also approved for

markets in European Union. The Company is

expecting clearances from other regulatory

agencies like MCC South Africa and UK

MHRA in the current fiscal. The facility has

annual capacity for producing 900 million

tablets, 120 million hard gelatin capsules, 12

million tubes and bottles each, 150 million

soft gelatin capsules and 60 million herbal

tablets.

Vaccines Formulation facility at Baddi

The Vaccine Formulation plant (VFP) at Baddi

in Himachal Pradesh, has two filling lines for

bacterial and viral vaccines complying with

WHO-cGMP norms for liquid Vaccines in pre-

The Company is in the process of setting up new manufacturing facilities for Cell Culture based Vaccines in bulk form at Lalru, which is expected to be completed in the current financial year.


filled syringes, liquid & lyophilized Vaccines

in vials. The total production capacity of

this facility is 600 million doses per annum

which is scheduled to be increased by the

addition of third line to one billion doses per

annum by the end of current financial year.

This facility has increased the production

capacity of vaccines substantially in scale

and size. It would significantly improve our

market presence globally and augment our

plans to become a global leader in this field.

The three-storey main building consisting

of production, quality control and quality

assurance departments is spread over

approx. 2800 M² construction area at each

floor. The plant also has a five-storey block

of Warehouse-cum-Cold Storage facility

admeasuring approx. 2500 M² on each floor.

Vaccines Formulation facility in Delhi

Vaccines formulation facility in Delhi is a

WHO cGMP approved facility with WHO Pre-

qualification for Oral Polio and Recombinant

Hepatitis B Vaccine and combination

vaccines Ecovac-4, Easyfour & Easyfive. The

facility has been designed, constructed

and maintained to suit production of

vaccines following Good Manufacturing

Practices. It has three vial filling lines - two

lines dedicated to Oral Polio Vaccines

both Trivalent & Monovalent and one line

dedicated to Hepatitis B & Combination

Vaccines.

Manufacturing Facility for Anti-Cancer

Products at Navi Mumbai

The Company is setting up a manufacturing

facility for anti-cancer products at Mahape,

Navi Mumbai. This manufacturing plant will

have a state-of-the-art containment facilities

for clinical / commercial production of high-

end anti-cancer range of products.

Production facility at Baddi, Himachal Pradesh

Research & Development Panacea Biotec has built a strong R&D

base over the last decade to support its

business segments, vaccines, formulations

and biopharmaceuticals. It has five highly

sophisticated ultra-modern R&D centers

with 391 employees including 261 qualified

and experienced scientists for its various

research projects. The core area of research

& development includes new Vaccine

Development, Biopharmaceuticals, proteins,

peptides, monoclonal antibodies, Novel

Drug Delivery Systems projects, Advanced

Drug Delivery System projects and Drug

Discovery (small molecules), in compliance

with international regulatory standards. All

the five R&D Centers have been accorded

registration by Department of Scientific and

Industrial Research, Ministry of Science &

Technology, New Delhi.

As a result of its research efforts, the

Company has been granted more than 300

patents in India and worldwide including

major countries like U.S., Europe, Australia,

Canada, China, Japan, Russia etc.

For carrying out pre-clinical research, the

Company has a state-of-the-art animal house

and facilities for undertaking in-vitro and

in-vivo microbiology, pharmacology, safety,

efficacy, proof of concept and toxicology

studies.

The Company has been steadily increasing

its expenditure on R&D, both revenue and

capital expenditure, and has spent Rs.500.9

million (6.5% of net turnover) in fiscal 2009,

as compared to Rs.410.5 million (4.9% of net

turnover) in fiscal 2008, an increase of around

22% in value terms. Further, the Company

has also invested an amount of Rs.578.42

million as capital expenditure on R&D as

compared to Rs.666.2 million in previous

year.

The total R&D Expenditure has been

Rs.1,079.3 million (14.0% of net turnover)

as against Rs.1,076.7 million (13.0% of the

net turnover) in previous financial year. The

Company has plans to further strengthen

the R&D base to cater to more profitable

and expanding niches in vaccine and

formulations segments, both in domestic as

well as international markets.

LAKSH Drug Discovery R&D Center at

Mohali in Punjab

Laksh, the Company’s state-of-the art

Research Center for development of New

Chemical Entities (small molecules) at

Mohali, Punjab is spread over 70,000 sq.

ft. of Laboratory Space and employs more

than 70 scientists including 9 PhDs. Laksh

has expertise to carry out work on different

aspects of drug discovery which include

medicinal chemistry, in vitro and in vivo

biology, analytical & bio-analytical research,

pharmacokinetics and drug metabolism and

toxicology studies. The focus of research is

on development of NCEs for the treatment

of metabolic disorders, CNS and infectious

diseases.

Sampann R&D Center at Lalru in Punjab

The R&D Centre at Lalru named as SAMPANN

Drug Delivery is one of the major part of

Panacea Biotec’s Pentagon of R&D centers

which spread across 40,000 sq. ft. of

laboratory space with superior infrastructure,

specialized machinery, adequate resources

and skilled manpower to conduct research

in the areas of Formulation Development,

Novel Drug Delivery, Pharmacology,

Analytical Chemistry, Medicinal Chemistry

and Natural Products. The said research

facility also boasts of an in-house IPR

Management Department and Information

Science Department.

The primary focus of the Sampann Drug

Delivery is to develop value added drug

delivery products that would address unmet

medical needs, focus on patient convenience

and compliance, augment the intellectual

capital and contribute towards achieving

the organizational business goals. A large

number of high potential drug delivery

based projects have been selected for

The Company has been granted more than 300 patents in India and worldwide including major countries like U.S., Europe, Australia, Canada, China, Japan, Russia etc.


development based on highly specialized

drug delivery technologies including Site

Specific Drug Delivery, Topical System, Depot

Injectable Preparations, Nanoparticulate

Drug Delivery, Pulmonary Drug Delivery

and Oral Controlled Release Systems. These

projects are targeted towards both the

domestic and global markets. In addition

to above mentioned differentiated drug

delivery systems, biopharmaceutical product

development to deliver stable and robust

formulations, has been initiated.

In year 2008-09, Product development

has been done for different categories of

drugs which include Anti-inflammatory,

Anti-allergics, Anti-tubercular, Anti-

haemmorrhoidal, Anti-emetics,

Anti-psychotics, Anti-bacterials, Anti-

hypertensives, Anti-depressants,

Immunosuppressants, Anti-arrhythmics, Anti-

retrovirals, Anti-diabetics etc. and various

combinations thereof the above category of

drugs.

Saha Vaccine Research Center in Delhi

The Saha Vaccine Research Center (SVRC) in

Delhi, spread across 24,000 Sq ft of laboratory

space has been established with an objective

to develop novel, effective and affordable

vaccines against various epidemic /endemic

life threatening diseases for global market.

SVRC has the infrastructure and expertise

to take an ‘idea’ through different stages of

product development towards a successful

commercialization. In view of company’s

strategy for expanding its scientific strength

to innovate more vaccines, this center is

carrying out extensive research in vaccines

and biologicals using genetic engineering,

animal cell culture, fermentation,

purification, serology, analytical and bio-

analytical development.

Specific areas in which Research &

Development being carried out include:

• Development of conjugate vaccine

against Streptococcus pneumoniae and

Neisseria meningitides

• Development of a novel recombinant

protein based vaccine for Anthrax

• Development of Vero cell derived

inactivated Japanese encephalitis vaccine

using animal component free media

GRAND R&D Center at Navi Mumbai

This R&D Centre is inter-alia, focused in

respect of:

• Development and improvement in

existing conjugation technology for

better yield and clinical application.

• IND submission for recombinant Anthrax

vaccine to US FDA for initiation of clinical

trials for providing a competitive edge

based on quality and pricing.

• Further development of recombinant,

polysaccharide conjugate and cell culture

based vaccines. The candidate vaccines

would be taken forward for scale up,

followed by pre-clinical and clinical

studies.

• Initiating the development of vaccine for

pertussis using a genetically modified

strain of B. pertussis.

Biopharmaceutical R&D Center in Delhi

The Biopharmaceutical R&D center (BRC) has

around 40 scientists working in the area of

molecular biology, cell biology, immunology

and peptides. The centre has been working

on different discovery and developmental

projects. Development of novel preventive

& therapeutic vaccines, novel therapeutic

peptides and therapeutic fully human

monoclonal antibodies for treating infectious

diseases and life style related disorders are

the focus of discovery projects. BRC is also

actively involved in developing different

biosimilar products.

During the year 2008-09 the centre has made

significant progress in the following fields:

• Optimisation of the process for the scale-

up production of hair growth peptide,

a technology for alopecia (hair loss)

management in-licensed from National

Institute of Health, USA. A pre-clinical

toxicological study has been planned.

• Identification of a novel peptide for the

treatment of Rheumatoid Arthritis. Proof

of concept has been established. The

synthetic process for this molecule has

been developed and optimized.

• Generation of recombinant clones for

several biosimilars. The technology for

one of the biosimilar molecule is ready

for transfer to the production unit.

Several in vitro assays for determining

bioactivity, binding and functionalities of

various biosimilars have been developed

and validated.

• In an attempt to develop vaccine to

control Dengue virus infection, a suitable

cell line for the assay and amplification

technology of recombinant chimeric

Dengue virus has been prepared.

Appropriate Dengue viruses have been

amplified and immunogenicity of the

candidate virus has been planned.

• A unique recombinant inactivated H5N1

candidate vaccine has been designed.

The immunogenicity of this candidate

has shown promising results.

• In order to identify appropriate clone

for fully human monoclonal antibodies,

a library of human antibodies has been

developed. The library is being screened

against various targets.

Further, responding to the threat of

widespread deadly disease of swine flu,

the Center has expedited development of

candidate vaccine for H1N1 swine flu.

GRAND R&D Center at Navi Mumbai

Global Research and Development (GRAND)

Center at Mahape, Navi Mumbai which

was inaugurated in February, 2008, is fully

functional. There is a team of around 50

highly skilled and committed research

scientists working relentlessly to discover

better therapeutic alternates for unmet

medical needs of the society. Broadly,

the Center is working on drug delivery

technologies based on:

• Nano-particle systems for targeted

delivery and reduced side effect with

improved bioavailability

• Microparticulate systems for depot

injections with reduced frequency of

dosing

Responding to the threat of widespread deadly disease of swine flu, the Center has expedited development of candidate vaccine for H1N1 swine flu.


• Micellar systems for bioactive targeting

and bioavailability enhancement,

specially for cancer targeted drug

delivery

• Stealth liposomes for prolonged systemic

circulation to achieve better therapeutic

effects

• Controlled drug delivery for oral

application by utilizing the concept of

Gastroretentive systems, zero order

release systems and site specific delivery

system in gastrointestinal tract

• Nanoparticle for topical delivery with

better patient compliance and reduced

frequency of application

Few concepts based on above mentioned

technology platforms have cleared proof

of concept studies and are entering clinical

trials. Center has emerged as a strong

intellectual property earning member of

Panacea Biotec family with many patent

filings last year and few are in process.

Quality Assurance

Quality is among the most important reasons

to persuade a customer to buy a product.

Total Quality Management has always been

the cornerstone of your Company which has

resulted in achieving greater milestones in

the past couple of years. At Panacea Biotec,

Quality is in-built in products & services and it

is integrated in each step of R&D, Production,

Packaging, Storage, Marketing, Sales &

Distribution. Your Company is committed to

adhere to the highest quality standards for

products it manufactures and is ensuring this

through a highly qualified, techno-innovative

& dedicated team.

Clinical Research Operations

Clinical Research plays a pivotal role in

the drug development process. Clinical

development establishes the safety and

efficacy of a new drug product involving

significant expertise, time and investment.

The Company also successfully completed

clinical part of trial of bOPV, aimed towards

the planned application for WHO pre-

qualification.

The year 2008-09 witnessed several

milestone achievements for Clinical Research

Operations of the Company, including:

• a large randomized controlled trial

in ~1,800 subjects across 40 centers

for a novel drug delivery product for

osteoarthritis;

• a multinational trial, spread across two

geographical regions (Asia/EU) & three

countries (India/Germany/Poland) for a

GI product;

• a long duration trial with a 2-year follow-

up to evaluate the relapse rate 24 months

after the completion of therapy for an

anti-infective product;

Panacea Biotec is the first Indian

pharmaceutical company to indigenously

implement the Oracle Remote Data Capture

(RDC) enabling it to conduct e-clinical trials.

Intellectual Property

Panacea Biotec has its full fledged Intellectual

Property Rights department which manages

all the Intellectual Property from inception to

enforcement.

As at the end of fiscal 2009, the Company

has filed over 1,150 patent applications

worldwide including 189 Indian patent

applications and 67 applications have been

filed through the PCT (Patent Cooperation

Treaty) route.

Out of the total number of patent

applications filed, 325 patents had been

granted / accepted for grant. Apart from

this, the Company had in-licensed several

patent applications, some of which are under

prosecution in different countries of the

world.

During fiscal 2009, the Company had

filed 17 new Provisional Indian patent

applications relating to various drug delivery

technologies, synthetic processes, new

chemical entities, improved chemical entities,

vaccines, pharmaceutical compositions and

natural product compositions out of which

11 applications were filed through the PCT

route.

Till date Panacea Biotec has been granted

10 patents in India and 26 product

patents worldwide for different products/

technologies during the year under review

Some of the key patents granted to Panacea

Biotec during the fiscal 2009 are: Euphorbia

Prostrata (Thank OD & Sitcom) granted in

India, Mexico, New Zealand, South Africa &

USA; Nimesulide Controlled Release (Willgo)

granted in Indonesia & Israel; Domperidone &

Pantoprazole Combination (OD-PEP) granted

in New Zealand & South Africa; Nimesulide

Gel (Nimulid Transgel) two patents granted

in India & one in Kenya; Nimesulide Injection

(Nimulid Safeinject) granted in India;

Amoxicillin (Modified Release) granted

in Australia & South Africa; Nimesulide

Effervescent Tablets granted in India; and

Paclitaxel granted in Morocco.

Besides this, the Company had filed

123 applications for the registration of

Copyrights (41 applications in 2008-09)

of which 80 had been granted. So far the

company has filed over 566 applications for

registration of Trade Marks (25 applications

in 2008-09) of which 273 have been

registered. In addition to this, the Company

has also filed 55 International Trade Mark

Applications in various countries of which 24

have been granted. The company has so far

filed 4 Design Applications (1 application in

2008-09) and 3 of them have already been

registered.

Human Resources

Human Resources have been a strategic

partner in the organization in its endeavour

to lead market with its differentiated

products. Human resources have been taking

The Company has filed over 1,150 patent applications worldwide including 189 Indian patent applications and 67 applications have been filed through the PCT (Patent Cooperation Treaty) route.


up challenges and initiatives for bringing in a

remarkable change in its mode of operation

and decision making and to bring in a new

paradigm to ensure a hassle free transaction

of HR services. Along with this, the Company

took great strides in strengthening

connectivity with all the cross section of

employee.

The Company has 3,196 permanent

employees which include corporate and

managerial staff, sales staff and staff located

at its manufacturing facilities. Of these

permanent employees, 391 are engaged

in R&D Centers, 1,006 are engaged in

manufacturing, around 1,213 are engaged

in sales and marketing and rest are engaged

in support functions. Panacea Biotec’s

human capital constitutes a diverse pool of

knowledge & expertise, a judicious blend of

youth, imagination, risk-taking ability and

experience. The Company enjoys excellent

industrial relations and there have been no

work disruptions, strikes, lock-outs or other

employee unrest.

In order to make its human capital as the

differentiator for its long term business

objectives, your Company has embarked

upon number of initiatives, including:

Annual Day Celebration: 13th Annual

Day Celebrations were organised on 25th

September with a new innovative turn,

where all employees of the Company at all

2004-05

236

319 350

1,318

1,105

2,77

3

393

1,200

1,220

2,82

1

391

1,006 1,2

133,1

96

1,029

612

2,22

0

1,105

661

2,162

2005-06 2006-07

Manpower Strength

2007-08 2008-09R&D Manufacturing Sales Total

locations were involved. A video recording of

warm and inspiring messages voiced by

Dr. Rajesh Jain, Joint Managing Director

and Mr. Sumit Jain, Director-Operations &

Projects was created and shown to all the

employees at all locations, followed by our

corporate Anthem.

The audio-video presentation was followed

by the awe-inspiring performances of our

employees made the day all the more

Scientists in a brainstorming session at Sampann, Lalru


colorful and memorable across locations to

celebrate the “Spirit of Togetherness”. With

enthusiastic participation, the Annual Day

was a great success.

Company Newsletter: A quarterly Company

Newsletter has been launched with the

main objective to internally connect the

employees which can ignite the true spirit of

togetherness and bring in a sense of pride for

our achievements.

HR Buddy: HR4U to help employees with an

instant answer to their ‘pain area’, an email

based employee connect initiative has been

rolled out this year. The ‘HR4U’ mailbox is

an efficient and friendly channel to answer

every query within a short span of time by

the HR Buddy.

HR SAP Blitz - Go Live and ESS Online:

Going Live on HR SAP across all business

function was a

major success

during the year.

It has helped

the Company in

way of having

a time effective

and cost effective

operational

process in HR.

The launch of ESS

has curtailed the

manual processes

and has taken

the Company

to an improved

information edge

which successfully promotes the

concept of having a paperless HR

in the years to come.

Baddi Housing: To bring in a

healthy work/life balance for

employees of the Company at

Baddi and to provide employees

with quality accommodation in

areas where there is a shortfall

of rented accommodation, the

Company has come up with its

own housing of 80 residential

flats with all modern amenities at moderate

rentals for its employees.

Learning and Performance management:

Continuous development of its human

resources has always been the focus of the

Company. Panacea Biotec continuously

strives to provides seminars and training

programs to meets of employees. Proper

training schedule was formed up during

the year including Creativity Retreat, People

Leadership, Zero Defect and Cost Reduction

to name a few. The leadership team of

Panacea Biotec underwent a 3-day workshop

on the ‘7 Habits of Highly Effective People’

as part of their Leadership Development

Programme.

Information Technology

As a research based organization, your


Company believes in accelerating value

realization and delivering operational

efficiencies in healthcare. Panacea Biotec has

been continuously investing in information

technology to enhance communication

facilities with a view to provide a strong

knowledge base to its employees, enable

faster scanning & monitoring of external

environment and improve the knowledge

of best practices and relevant leading-edge

technologies.

As an effort towards implementation

and leveraging of technology initiatives

to improve the efficiency of various

departments, your Company has already

implemented System Analysis and Product

in Data Processing (SAP) covering Financial

Accounting, Controlling, Asset Management,

Materials Management, Production Planning

and Sales Distribution. SAP HR Module

has also been successfully implemented.

Implementation of some other modules

like Project Systems, Plant Maintenance,

Business process consolidation & Strategy

management are in pipeline.

The Company has also adopted Oracle

clinical trial software and SAS analysis tool

to manage, standardize and control clinical

data for fast study set-up and consistent

interpretation of data in compliance with

regulatory requirements.

Microsoft Exchange and Share point

portal solution is available for messaging

& collaboration, addressing the internal

& external communication and workflow

needs. The Company’s sales depots &

manufacturing facilities are well connected

through secure and robust Virtual Private

Network (VPN)

BestOnHealth Portal: The Company’s health

portal “www.bestonhealth.com”, developed

and launched in the year 2002 with an

objective to provide comprehensive health

related information & services to common

man & medical practitioners.

It offers a unique interactive ‘Individualized

Health Management plan’ which links

individual health record with investigations,

diet, exercise, yoga & medication; knowledge

base of Holistic healing with focus on

Ayurveda, Homeopathy & Yoga apart

from Allopathy; Health Calculators & ready

reckoners; Path finders to various common

illnesses and disease; Comprehensive health

information with focus on children & elderly;

and Neighborhood Resources for doctors,

labs, chemists etc.

It also offers unique interactive facility for

Medical practitioners, including creation

of their own Information & Resource

Centre; tools to create and maintain patient

records & interact with them online; latest

information on diseases & therapeutic areas

of their interest; attend Continuing Medical

Education (CME) programs online and in

person; interface with peers and specialists

from related fields online; explore placement

opportunities; opportunities for participation

in clinical trials; and holding patient/public

awareness programs.

As a member of BestOnHealth.com portal,

one can also order disease-specific patient

education corners and regular supply of

offline material like brochures, leaflets,

booklets etc. and can also keep a track

of events and appointments through

interactive reminder service.

For Patients & Healthy individuals, this portal

is one of a kind, individualized management

tool in investigation, medication, diet,

exercise, yoga. It offers information on

customized diets that compliment health as

well as the taste buds; different treatment

options and new diagnostic techniques;

specific information about investigations,

preparation required before hand and what

the test reports mean.

This Portal also provide a customized,

disease-specific bi-monthly newsletters

providing contemporary knowledge about

diseases & their treatment; information on

novel researches & seminars; information

about the “BestOnHealth” patient education

programs; schedulers to remind about daily

The Company’s health portal “www.bestonhealth.com” provides comprehensive health related information & services to common man & medical practitioners and offers a unique interactive ‘Individualized Health Management plan’.


or important events; and interactive exercise

& yoga plans.

The portal also provides an interactive

Address book to keep track of contacts and

a common platform to share experiences in

tackling disease with other patient groups.

The portal is becoming widely popular

and is being regularly accessed by healthy

individuals, patients & medical practitioners

from all across the globe. During last 4

months, the average number of hits (attempt

to access the site) is around 3000/day. The

number of visitors who read the contents is

more than 300/day. The visitors are coming

from various parts of the world, including

40% from US, 23% from India, 17% from

China and rest from UK, Korea, Japan,

Sweden, Singapore, France, Canada, etc. A

significant percentage of visitors are Medical

practitioners.

Future Perspectives: It will continue to

address the needs of medical fraternity

& patients and be an excellent source

of patient education and furthering the

ultimate objective of a healthy world. The

Company has planned to enhance the

coverage of the health portal in current

financial year and expects the portal:

• To add value to Panacea Biotec’s

perception amongst doctors as a leading

health management company;

• To benefit doctors to enhance their

practice with IT enabled services & form

closer ties with our organization

• To publish medical practitioner’s articles,

quotes, photos in the portal periodically;

• Information sharing regarding various

healthcare/ medical conferences/

exhibits calendar based;

• To show patient’s opinion about the

doctors;

• To include Specialty & city-wise contact

details database of our member medical

practitioners;

• To show doctors achievement & the

content they wanted to put about

themselves; and

• To be the online interface of the

Company’s upcoming healthcare facility.

Internal Audit and Control

The Company believes that its internal

control systems and procedures are

in line with its size of operations and

provide, among other things, a reasonable

assurance that transactions are executed

with Management authorization and they

are recorded in all material respects to

permit preparation of financial statements

in conformity with established accounting

principles and that the assets of your

Company are adequately safeguarded

against significant misuse or loss. The

internal control systems are supplemented

through an extensive internal audit

programme and periodic review by Audit

Committee.

M/s. Dass Gupta & Associates, Chartered

Accountants, M/s. S.K. Badjatya & Co.,

Chartered Accountants and M/s. K.K. Garg

& Associates, Chartered Accountants,

continue to act as the Internal Auditors

of the Company. The internal auditors

independently evaluate adequacy of

internal controls and audit the majority of

the transactions in value terms. Post audit

reviews are carried out to ensure that audit

recommendations have been implemented.

The Audit Committee of the Board of

Directors comprising of three non-

executive independent Directors viz.

Mr. R.L. Narasimhan, Mr. N.N. Khamitkar

and Mr. Sunil Kapoor, reviews Internal Audit

Reports and the adequacy of the Internal

Controls. The Auditors, Joint Managing

Director, Associate Director, Chief Financial

Officer, D.G.M. (Accounts & Finance) and

other senior officials are invited to attend the

Audit Committee Meetings.

The number of visitors who read the content of health portal is more then 300/day. The visitors are coming from various parts of the world, including 40% from US, 23% from India, 17% from China and rest from UK, Korea, Japan, Sweden, Singapore, France, Canada, etc.


Subsidiaries, Joint Ventures, Collaborations & Tie-upsSubsidiaries

Best On Health Limited - The Company’s

wholly-owned subsidiary (WOS) namely

Best On Health Ltd. (“BOH”), which owns

a prime immovable property being used

by the Company as its Corporate Office,

has charted out a plan for diversification in

related health management space as part

of its future growth plans. The Company

has so far invested Rs.2,013.9 million in BOH

including Rs.1,991 million as 0.5% optionally

convertible Non Cumulative Preference

Shares to finance its foray into healthcare

industry. BOH has four WOS namely Radicura

& Co. Ltd, Panacea Hospitality Services Pvt

Ltd., Sunanda Steel Company Ltd & Panacea

Educational Institute Pvt. Ltd.

Umkal Medical Institute Pvt. Ltd. - The

Company is expanding its portfolio by

entering the fast growing healthcare

sector and has entered into collaboration

with Umkal Group to set-up a multi

super-specialty hospital with the modern

equipments in the NCR of Delhi at Gurgaon.

With your Company’s leadership in

providing innovative medical therapies and

Umkal’s long term experience in providing

specialized healthcare, the collaboration

would be unique and one of its kind. Your

Company has invested an amount of

Rs.76.14 million for acquiring 75.2% stake

(27% paid-up) in Umkal Medical Institute

Private Limited, during the year under

review. Further, during the current fiscal, the

Company has also paid second call money of

Rs.24.0 million (representing 8.5% payment).

Panacea Biotec Inc. - During the year under

review, the Company has incorporated a

wholly owned subsidiary (WOS), Panacea

Biotec Inc. in US with its main objects

of, inter-alia, research, development,

manufacture, register, market, distribute,

import and export pharmaceutical and

biological products etc. in United States. The

Company has remitted an amount of Rs.2.4

million (US$ 50,000) as a capital contribution,

during the current financial year.

Panacea Biotec FZE – This WOS was

incorporated in UAE to perform the activities

relating to registration and marketing of the

Company’s patented products worldwide

and an amount of Rs.5.5 million (AED

500,000) had been remitted towards its

capital contribution.

Panacea Biotec GmbH - During the year

under review, your Company had remitted

an amount of Rs.1.6 million (Euro 25,000) for

setting-up WOS in Germany, namely Panacea

Biotec GmbH, with a view to perform

activities relating to registration of the

Company’s products in European Union.

Rees Investments Limited – It has been

set-up as a Company’s WOS in Islands

of Guernsey with its main objects of

manufacture, marketing and/or import/

export of pharmaceutical formulations,

vaccines and other products, making

strategic investments in other entities,

entering into joint venture and

collaborations and/or for carrying out such

other permissible activities. The Company

has given a loan of Rs.710.8 million (US$ 14

million) to it. Rees Investments has further

established its WOS company namely,

Kelisia Holdings Limited, Cyprus whose

principal activity is holding of Investments.

Kelisia Investment Holding AG and Panacea

Biotec (International) SA had been set-up in

Switzerland as step-down WOS companies

of Rees Investments Ltd., with the purpose of

carrying out investment activity as well as to

engage in all other related activities.

During the year, Kelisia Holdings Ltd.

has made a strategic equity investment

of US$13.1 million in PharmAthene, Inc.,

Annapolis, MD, US, a biodefense company

developing medical countermeasures

against biological and chemical threats, in

exchange for the purchase of common stock

and warrants in PharmAthene.

The Company is expanding its portfolio by entering the fast growing healthcare sector and has entered into collaboration with Umkal Group to set-up a multi super-specialty hospital with the modern equipments in the NCR of Delhi at Gurgaon.


Joint Ventures & Associates

Panacea Biotec has the following Joint

Venture and Associate Companies:

Chiron Panacea Vaccines Pvt. Ltd. - Your

Company’s Joint Venture Company (JV

Company), Chiron Panacea Vaccines Pvt. Ltd.

(“CPV”), was incorporated in fiscal 2005 in

India with Chiron Vaccines Holding Srl., Italy

(now Novartis Vaccines and Diagnostics),

a division of Novartis, world’s fifth largest

vaccines manufacturer, for marketing of

innovative combination and other vaccines

in India. The Company has invested Rs.23.0

million in CPV for a 50% equity stake. With

the launch of Hepatitis A vaccine HAVpur,

a new generation vaccine with virosome

technology in collaboration with Berna

Biotech Ltd., Switzerland and the Company’s

Injectable Polio Vaccine (PolProtec),

monohib vaccine (novoHib), Triavalent Oral

Poliomyelitis Vaccine (PrimOpol) in the

Indian market, CPV has a strong portfolio of

innovative paediatric vaccines, which in short

span has taken significant position at market

place. CPV achieved a turnover of Rs.538.4

million and net profit of Rs.41.6 million

during the year under review and commands

a significant market share in the paediatric

combination vaccines segment in India. It has

introduced innovative concepts like Peel off

stickers, Easy Track SMS service and Pre-filled

Syringes with Plastic Rigid Tip Cap.

Cambridge Biostability Ltd. - The Company’s

another JV Company, Cambridge Biostability

Ltd. (CBL), a U.K. based Company, in which

the Company acquired 10% stake and also

given a convertible loan of £ 1.5 million

during earlier years, has gone into creditors’

voluntary liquidation proceedings due to its

adverse financial position.

PanEra Biotec Private Limited - Your

Company’s associate Company, PanEra

Biotec Pvt. Ltd. (PanEra) is continuing to

meet the Company’s requirement of bulk

vaccines and antigens for the manufacture

of Hepatitis B and Combination Vaccines

by your Company. PanEra has become

a specialized company focused on bulk

manufacture of vaccines and plans to

venture into new products and technologies.

It has also launched its web-site namely

www.panerabiotec.com.

Lakshmi & Manager Holdings Limited

- During the year under review, the

Company’s associate firm, viz. M/s Lakshmi

& The Manager, in which the Company

had invested Rs.40.0 million (40% share),

has been taken over by a newly formed

company, Lakshmi & Manager Holdings

Limited. As a result of takeover of the said

firm, the Company has been allotted Equity

Shares for an amount of Rs.41.26 million in

the said company.

Collaborations and Tie-ups

Apart from the above, Panacea Biotec has

important business relationships with various

research institutes, academic universities &

commercial corporations, including:

National Institute of Immunology, India:

The Company has an exclusive ten-year

license agreement with National Institute

of Immunology, India for in-licensing of

technology and processes for production of

tissue culture derived formalin inactivated,

Japanese encephalitis vaccine. The

technology has been further modified

significantly at our research center to yield a

commercially viable and safer vaccine.

Biotech Consortium India Ltd.: The Company

has a ten-year in-licensing arrangement

with Biotech Consortium India Ltd. for the

development, manufacture and marketing

of anthrax vaccine developed by Jawahar Lal

Nehru University, India. Phase I/IIa of human

trials have been successfully completed

and the Phase-IIb clinical trials are to begin

shortly, subsequent to which the company

plan to make IND submission to US FDA for

initiation of clinical trials in US and supply the

anthrax vaccine to the U.S. Government.


National Institutes of Health (NIH), USA.: The

Company has an in-licensing arrangement

with NIH, USA, for use of a peptide based

product for generation of hair follicles

and hair growth for alopecia (hair loss)

management. Process for the scale-up

production of hair growth peptide has been

optimized. A pre-clinical toxicological study

has been planned.

Dr. Reddy’s Laboratories Ltd.: The Company

has a License and Supply Agreement with

Dr. Reddy’s for the supply of its patented

product, Nimesulide Injection, for marketing

in India. The Company has another License

and Supply Agreement with Dr. Reddy’s

for another patented product, Nimesulide

Transdermal Gel, for marketing, distribution

and sale in Russian Federation.

Nederlands Vaccine Institute (NVI),

Netherlands: The Company has an

agreement with NVI for manufacturing

and marketing of Inactivated Polio Vaccine

(PolProtec) in global markets except

Netherlands, Denmark, Norway and Finland.

National Research Development Corporation

(NRDC), India: The Company had in-licensing

arrangement with NRDC for manufacturing

the Foot and Mouth Disease (FMD) Vaccine

developed by Indian veterinary Research

Institute (IVRI).

PT BioFarma, Indonesia : The Company has

an agreement with PT BioFarma, Indonesia to

manufacture & market the Measles Vaccine

and plans to supply the vaccine to UNICEF,

PAHO and CIS, African, LATAM and Asian

Countries in furtherance to Global Measles

Reduction Strategy of WHO and UNICEF.

Punjab University, Chandigarh: The

Company has a MoU with Punjab University,

Chandigarh for a Drug Discovery Project

to identify lead molecules with an aim to

bring a New Chemical Entity (NCE) superior

to existing marketed products in the

therapeutic area of Psychiatric Disorders.

Panacea Biotec will undertake their pre-

clinical and clinical development leading to

their launch worldwide.

Dr. Rajesh Jain, Mr. Vinod Goel, Mr. Ankesh Jain (4th, 7th & 8th from left) with European Partners and competency team (from Left to Right) Dr. Konstanze Kral, Dr. Wolfgang Klotz, Mr. Gerd-Peter Heberling, Mr. Hartmurt Bannert,

Mr. Klaus Manlik and Dr. Bernd G. Ruttger, during a recent meeting in Munich, Germany


Financial PerformanceSummarised Balance Sheet

(Rs. in million)

Particulars As on As on 31.03.09 31.03.08

Sources of Funds:

Shareholders Funds 6,151.5 6,972.1

Loan Funds 7,002.9 3,982.4

Deferred Tax Liability 333.8 595.0

Total Liabilities 13,488.2 11,549.5

Application of Funds:

Net Fixed Assets 6,938.7 5,343.7

Investments 2,165.7 2,049.3

FCMITDA† 96.0 -

Net Current Assets 4,284.2 4,151.2

Miscellaneous Expenditure 3.6 5.3

Total Assets 13,488.2 11,549.5

†Foreign Currency Monetary Item Translation Difference Account

Net Worth: The Net Worth of your Company

is Rs. 6,147.9 million during the year under

review as compared to Rs.6,966.7 million as

at the end of previous year.

Loan Funds: The total loan funds as at 31st

March, 2009, has increased to Rs.7,002.9

million as against Rs.3,982.4 million as a

result of raising of Foreign Currency Term

Loans to part finance its expansion projects

including setting up of manufacturing

facilities at Baddi & Lalru and R&D Center at

Mumbai and other ongoing expansion/ New

projects.

Deferred Tax Liability: The deferred tax

liability has decreased to Rs.333.8 million

as at the end of fiscal 2009 as compared to

Rs.595.0 million as at the end of the previous

year.

Fixed Assets: The net fixed assets have grown

to Rs.6,938.7 million as against Rs.5,343.7

million as at the end of the previous year on

account of capital expenditure on ongoing

expansion/ new projects and capitalization

of forex exchange losses as per option given

by the Companies (Accounting Standards)

Amendment Rules, 2009.

Investments: The investments have increased

to Rs.2,165.7 million from Rs 2,049.3 million

as at the end of previous year primarily on

account of investment of Rs.200.0 million

in its WOS Best on Health Ltd. and Rs.76.1

million in its subsidiary Umkal Medical

Institute Pvt. Ltd. to finance its foray in

healthcare industry. Further, a provision

on account of permanent diminution in

value of investment of Rs.168.1 million in

the Company’s joint venture Cambridge

Biostability Ltd. was made during the year.

Net Current Assets: The Company’s net

current assets have improved to Rs.4,284.2

million as against Rs.4,151.2 million as at

the end of previous financial year. The

inventories have increased to Rs.4,478.0

million from Rs.2,116.4 million and the

inventories to net turnover ratio increased to

58% from 25% during previous year mainly

on account of postponement of deliveries

of finished products and purchase of raw

materials as per commitments in the existing

agreements. The receivables decreased

to Rs.1,238.8 million as against Rs.1,482.6

million as at the end of previous financial

year and the receivables to net turnover ratio

decreased to 16% from 18% during previous

year. The Cash and bank balances declined to

Rs.594.8 million as against Rs.1,411.8 million

as at the end of previous financial year. Other

current assets increased to Rs.1,358.2 million

as against Rs.434.1 million due to advances

of Rs.710.8 million to the Company’s WOS,

Rees Investments Ltd. and advances of

Rs.108.8 million to the Company’s Joint

Venture, CBL as against Rs. Nil and Rs.39.78

million respectively as at the end of the

previous year.

The current liabilities increased to Rs.1,528.1

million as compared to Rs.1,078.0 million

as at the end of previous financial year.

Increase in current liabilities is mainly on

account of increase in amount payable

to vendors for vaccines raw material. The

Provisions increased to Rs.1,857.5 million as

against Rs.215.8 million mainly on account

The net fixed assets have grown to Rs.6,938.7 million as against Rs.5,343.7 million as at the end of the previous year.


of increase in provision for Open Derivative

Contracts to Rs.1,743.1 million as compared

to Rs.40.5 million as at the end of previous

financial year.


Summarised Profit & Loss Account (Rs. in million)

Particulars As on As on 31.03.09 31.03.08

Gross Turnover 7,753.0 8,342.2

Less : Excise Duty 18.8 37.8

Net Turnover 7,734.2 8,304.4

Materials & Finished Goods Purchases 2,660.9 3,658.4

Operating & Other Expenses 806.4 705.0

Personnel Expenses 916.1 924.9

Selling & Distribution Expenses 434.5 451.1

Research & Development Expenses 500.9 410.5 (Excl. Depreciation)

Misc. Expenses 1.7 1.7

Earnings Before Interest, Depreciation, 2,444.6 2,177.6 Taxes & Amortization (EBITDA)

Foreign Exchange Fluctuation 2,260.4 40.5

Financial Expenses 347.4 150.1

Depreciation 705.1 430.0

Other Income 259.7 371.7

Provision for impairment 284.2 -

Profit/ (Loss) Before Tax (PBT) (923.7) 1,903.9

Provision for Taxes – current - 330.0

Provision for Taxes – deferred (261.2) 211.2

Provision for FBT 28.0 31.0

Profit/ (Loss) After Tax (PAT) (690.5) 1,331.7

Turnover: The Company has achieved net

turnover of Rs.7,734.2 million during financial

year 2008-09 as compared to Rs.8,304.4

million during financial year 2007-08.

The decline in Net Turnover is mainly on

account of lower sales of vaccines due

to postponement of supplies to UNICEF,

which is down by 15% as compared to

previous year, whereas overall decline in Net

Turnover is by 7% as compared to previous

year. Balance growth comes from Pharma

segment. In other words, the Company’s

dependence on vaccines in general and

oral polio vaccine in particular is gradually

shifting towards other vaccines and

Pharmaceutical formulation products.

Segment-wise Turnover

Fiscal 2009 2008

Rs. Million % Rs. Million %

Vaccines 5,470.17 70.7 6,324.5 76.1

Pharmaceutical

Formulations* 2,262.30 29.2 1,976.0 23.8

Research &

Development 1.7 0.1 3.9 0.1

Total 7,734.17 100.0 8,304.4 100.0

* Net of excise duty of Rs.18.8 million and Rs.37.8 million

during fiscal 2009 & 2008, respectively.

Vaccines

In fiscal 2009, the vaccines segment’s turnover

contributed Rs.5,470.2 or 70.7% of net

turnover, as compared to Rs.6,324.5 million or

76.1% of net turnover for fiscal 2008.

The institutional vaccine business contributed

Rs.5,186.9 million as against Rs.6,106.3 million

during the fiscal 2008.

The vaccine sales to JV company for domestic

market increased by 11.4% to Rs.243.3 million

as against Rs.218.3 million during fiscal 2008.

Despite having pricing pressure from entry of

generic players, the JV company continued to

grow and maintained leadership position in

the paediatric combination vaccine segment.

Pharmaceutical formulations

The pharmaceutical formulations segment’s

turnover grew by 14% and contributed

Rs.2,262.3 million or 29.2% of net turnover

during fiscal 2009, as compared to Rs.1,976.0

million or 23.8% of the net turnover for fiscal

2008.

In the Pharmaceutical Formulations segment

the domestic net turnover increased by

10.7% to Rs.1,815.3 million during fiscal 2009

from Rs.1,639.5 million during fiscal 2008.

The export turnover of formulations

increased significantly by 26.7% to Rs.426.0

million during fiscal 2009 from Rs.336.5

million during fiscal 2008.

The following table sets forth the Company’s

The pharmaceutical formulations segment’s turnover grew by 14% and contributed Rs.2,262.3 million or 29.2% of net turnover during fiscal 2009.


gross turnover (inclusive of excise duty)

from pharmaceutical formulations in various

categories:

Fiscal 2009 2008

Rs. in Rs. in million % million %

Renal Disease 658.6 30% 487.6 24% Management

Diabetes & Cardiovascular 619.6 28% 547.0 27% Management

Pain Management 397.9 18% 554.4 28%

Anti-Osteoporosis 144.9 7% 57.5 3%

Gastro-Intestinal & 127.6 6% 105.4 5% constipation

Oncology 45.0 2% 29.6 1%

Anti-Tubercular 50.7 2% 54.0 3%

Other Segments 172.9 7% 178.2 9%

Total 2,217.2 100% 2,013.7 100%

Expenditures:

Materials & Finished Goods Purchases:

The raw and packing materials consumed

and finished goods purchased during the

year under review has decreased by 27.3%

at Rs.2,660.9 million as against Rs.3,658.4

million during the previous financial year.

The materials consumption ratio as a

percentage to net turnover has improved to

34.4% from 44.1% during previous year.

Operating & Other Expenses: The operating

& other expenses increased by 14.4% to

Rs.806.4 million for fiscal 2009 from Rs.705.0

million for fiscal 2008. As a percentage of

net turnover, the said expenses increased

by 1.9% in fiscal 2009 to 10.4% from 8.5% in

fiscal 2008. The increase in these expenses

was mainly on account of increase in various

operating expenses like power & fuel,

insurance, legal & professional charges and

travelling costs, etc.

Personnel Expenses: The personnel expenses

decreased by 0.9% to Rs.916.1 million for

fiscal 2009 from Rs.924.9 million for fiscal

2008. As a percentage of net turnover, these

expenses marginally increased to 11.8% in

fiscal 2009 from 11.1% in fiscal 2008.

Selling & Distribution Expenses: The Selling &

Distribution expenses decreased by 3.7% to

Rs.434.5 million for fiscal 2009 from Rs.451.1

million for fiscal 2008. As a percentage of net

turnover, these expenses increased to 5.6%

in fiscal 2009 from 5.4% in fiscal 2008.

Research & Development (R&D) Expenses:

The R&D expenses, excluding depreciation

on R&D assets, increased by 22.0% to

Rs.500.9 million as against Rs.410.5 million

during fiscal 2008. The increase is mainly

on account of expenses of new R&D

Centers which got operational during the

previous year and increase in personnel

cost of existing R&D Centers and research

related costs. Depreciation on R&D assets

increased by 28.7% at Rs.169.0 million as

against Rs.131.4 million during previous

financial year. Total R&D expenses (including

depreciation) increased to 8.7% of net

turnover during fiscal 2009 as against 6.5%

during previous year.

Interest: Interest charges increased to

Rs.321.1 million during fiscal 2009 as against

Rs.116.3 million during fiscal 2008. The

increase in interest charges is attributable

to overall increase in interest rates, higher

utilization of borrowed funds on account

of Foreign Currency Loan and utilisation of

increased working capital limits from Banks.

As a percentage of net turnover, the interest

charges increased to 4.1% from 1.4% in fiscal

2008.

Finance & Miscellaneous Charges: Finance

and miscellaneous charges decreased to

Rs.28.0 million during fiscal 2009 from Rs.35.5

million during fiscal 2008. As a percentage of

net turnover, these expenses were at 0.4%.

Depreciation: Depreciation increased by

64.0% to Rs.705.1 million as compared to

Rs.430.0 million during fiscal 2008 due to

capitalization of new production facilities

and R&D Centers, increase in other fixed

assets and capitalization of exchange

fluctuation losses in terms of the Companies

(Accounting Standards) Amendment Rules,

2009. Depreciation as a percentage of net

turnover increased to 9.1% in fiscal 2009

from 5.2% in fiscal 2008.

Total R&D expenses increased to Rs.669.9 or 8.7% of net turnover during fiscal 2009 as against Rs.541.9 or 6.5% of net turnover during previous year.


Profitability Margins:

Earnings Before Interest, Tax, Depreciation

& Amortisations (EBITDA): The Company

registered EBITDA of Rs.2,444.6 million for

fiscal 2009 as compared to Rs.2,177.6 million

for fiscal 2008. The EBITDA margin was 31.6%

during fiscal 2009 as against 26.2% during

fiscal 2008.

Profit / (Loss) Before Tax (PBT): The Company

suffered a loss before tax of Rs.923.7 million

for fiscal 2009 as against profit before tax

of Rs.1,903.9 million for fiscal 2008, mainly

on account of foreign exchange fluctuation

losses of Rs.2,260.4 million, provisioning

due to permanent diminution of investment

made and doubtful loans/ advances

including interest thereon aggregating

Rs.284.2 million and also partially due to

increase in depreciation and other expenses.

Profit/ (Loss) After Tax (PAT): The PAT turns

to negative at Rs.690.5 million for fiscal year

2009 from positive of Rs.1,331.7 million for

fiscal 2008.

Earning per Share (EPS): The basic EPS and

diluted EPS stood at negative Rs.10.35 per

share of Re.1 as compared to Rs.20.14 and

Rs.18.85 per share respectively during fiscal

2008.

Cash Flow Statement

The following table summarizes our

statements of cash flows:

(Rs. in million)

Fiscal 2009 Fiscal 2008

Cash Flows from:

- Operating Cash Profit 1,917.7 2,301.2

- Changes in Working (1,632.6) (812.0) Capital

- Net Direct Taxes Paid (235.2) (336.5)

- Operating Activities 49.9 1,152.6

- Investing Activities (1,261.9) (4,270.8)

- Financing Activities 1,571.3 2,109.0

Net Cash Flows 359.3 (1,009.2)

Cash Flow from Operating Activities: The

liquidity position of the Company remained

almost constant with just 16.7% decline in

Operating Cash Profit during fiscal 2009 to

Rs.1,917.7 million as compared to Rs.2,301.2

million during fiscal 2008.

The net cash from operating activities

declined by 95.7% during fiscal 2009

primarily on account of increase in

inventories, trade and other receivables and

decline in current liabilities.

Cash Flow from Investing Activities: Net

cash used in investing activities amounting

to Rs.1,261.9 million was primarily used for

acquiring fixed assets for various ongoing

expansion/ new projects and loans/

investment in subsidiaries/joint ventures

during the year under review.

Cash Flow from Financing Activities: The

Cash Flow from Financial Activities had

declined by 25.5% to Rs.1,571.3 million,

which basically consists of funds raised by

way of long term / working capital loans to

fund various ongoing projects / working

capital requirement.

Consolidated Financial Statements

The consolidated net turnover of the

Company as a group has been Rs.7,881.7

million during financial year 2008-09 as

compared to Rs.8,413.4 million during

financial year 2007-08.

The consolidated EBITDA was Rs.2,473.0

million for fiscal 2009 as compared to

Rs.2,175.0 million for fiscal 2008. On

consolidated basis, the Company suffered

a loss before tax of Rs.866.7 million for fiscal

2009 as against profit before tax of Rs.1,876.0

million for fiscal 2008, in line with the

profitability on stand-alone basis.

The consolidated PAT also turned to negative

at Rs.659.9 million for fiscal year 2009 from

positive of Rs.1,289.8 million for fiscal 2008.

The Company registered EBITDA of Rs.2,444.6 million for fiscal 2009 as compared to Rs.2,177.6 million for fiscal 2008. The EBITDA margin was 31.6% during fiscal 2009 as against 26.2% during fiscal 2008.


Despite all hue and cries about financial turmoil across the globe in recent times, Indian CRAMS with their ready infrastructure and R&D capability in hand stands strong to deliver better growth.

Opportunities and OutlookIndia accounts for over one-third of drug

master files (DMFs) in biggest market, viz.

US and ranks 2nd in approved Abbreviated

New Drug Applications (ANDAs) with a major

share of 30% of total approvals in US.

Despite all hue and cries about financial

turmoil across the globe in recent times,

Indian Contract Research and Manufacturers

(CRAMS) with their ready infrastructure and

R&D capability in hand stands strong to

deliver better growth.

India has the highest number of US

FDA approved plants outside the US.

Pharmaceutical production costs in India are

almost 50% lower as compared with western

nations.

Cost of conducting clinical trials in India is

also around 50-60% lower than the cost in

the US. Hence, global Pharma Innovators

who are already facing tremendous pressure

to protect their profitability are focusing

on cost rationalization activities and are

switching for outsourcing facilities from India

which would boost the earning potential of

Indian CRAMS.

The Indian Pharmaceutical sector is emerging

as one of the major contributors to Indian

exports with export earnings rising from a

negligible amount in early 1990s to Rs.291

billion (US$7.24 bn) by 2007-08. The exports

have grown at a CAGR of 17.8% during the

five-year period 2003-04 to 2007-08.

At present, India is among the top 20

pharmaceutical exporters world-wide. As per

industry estimates, pharmaceutical exports

will continue to grow at a CAGR of 18.5%

between 2008-09 and 2011-12.

SWOT Analysis

Strengths:

• Cost competitiveness

• Well Developed industry with strong

manufacturing base

• Third largest English speaking scientific

and technical manpower in the world

• Strong marketing and distribution

network.

Weakness:

• Highly fragmented industry

• Low investments in innovative R&D

• High Price Regulation

• Production of spurious and low quality

drugs

• Strong linkages between industry and

academia is lacking

Opportunities:

• Significant export potential

• Marketing alliances with MNCs to sell

their products in domestic market

• Opening up of the health insurance

sector

• Potential for developing India as a centre

for international clinical trials.

• Niche player in global pharmaceutical

R&D.

• Increased expenditure on healthcare

due to inter-alia, the ageing population,

emergence of “life-style” drugs, a shift

to newer and more expensive drugs, an

increase in therapeutic coverage (i.e. new

drugs for diseases that previously could

not be treated).

• Innovation in Biotechnology

• Emerging geographical markets

• Huge unmet need for medication.

• Rapidly increasing global population of

seniors and obese patients leading to

higher risks for cardiovascular diseases,

certain types of cancer, diabetes and

arthritis.

Threats, Risks and Concerns

Risks, challenges and threats are inherent

in any type of industry and needs to be

mitigated through well planned strategies.

The major risks associated to the industry as

a whole are as under:


• Global meltdown – The recent global

meltdown has resulted in lower

investments both in existing business

and new drug research. However, this has

not impacted your Company much.

• Pricing pressure imposed by DPCO

• Foreign Exchange fluctuations due to the

unprecedented international currency

imbalances in the aftermath of the global

financial crisis.

• Increased competition from low cost

manufacturing base such as China, Korea

and Taiwan.

• FDA Compliance – Rising audit burdens,

inspections and fines

• Risk of Product failure

Apart from the above, there are a few risk

factors that are relevant to the Company’s

operations and business. While the Company

takes effective measures to minimize or

eliminate the impact of these risks on its

business performance, they nonetheless

exist.

Some such risks, challenges or threats are

outlined below:

• The Company operates in a highly

regulated industry and must comply with

a broad range of dynamic regulatory

controls.

• In an industry where R&D is of critical

importance, the Company faces a risk

of all R&D initiatives not leading to

commercially viable and successful

products.

• Patent challenges or delay in receipt of

regulatory approvals could delay product

launch in key markets. Moreover, failure

to obtain regulatory approval for new

drugs under development could affect

long term business opportunities.

• The Company has several joint ventures

and collaborations with varied partners.

Any adverse developments in such

JVs and collaborations may impact the

Company.

• The Company also faces competition

from other players in the industry.

• Delay in approvals from regulatory

agencies in various international markets.

Apart from these, other risks faced by the

Company include rise in input costs, rise

in interest rates, loss of key personnel,

exchange rate fluctuations, environmental

liabilities, tax laws, litigation, labour relations

and significant changes in the global political

and economic environment.

Way Forward:

With a number of countries in recession

and drugs becoming almost a necessity

and Indian drug companies being generic

manufacturers, export growth is unlikely to

fall.

Domestic growth is expected to remain

healthy especially with the Government

expected to open more Jan Aushadhis (a

new low-priced medicine store chain). The

outbreak of swine flu is also expected to aid

the sales growth of Indian drug companies.

Further, this industry has witnessed a

tremendous growth in consumer spending

on healthcare and is expected to continue

the same.

There is no doubt about the capacity of

Indian pharmaceutical sector in taking the

big leap forward. Therefore, with the rise in

disposable income, tremendous growth in

exports, edge in CRAMS, stunning interest of

global investors in Indian pharma and large

number of USFDA approved plants, Indian

pharmaceuticals industry’s growth is vast

and is expected to materialize soon.

With the rise in disposable income, tremendous growth in exports, edge in CRAMS, stunning interest of global investors in Indian pharma and large number of USFDA approved plants, Indian pharmaceuticals industry’s growth is vast and is expected to materialize soon.


• Global launch of a NCE of herbal origin in GI segment.

• Launch of Vaccine for Swine flu (H1N1)

• Launch of organ transplantation products in ICH regions and key emerging markets.

• Launch of drug delivery based products in anti-cancer, CVD, GI and Pain Management therapeutic segments in key markets across the world.

• Diversification in related healthcare segment.

• Launch of new combination and other Vaccines currently under development for pediatric and adults.

• Supply of anti-TB and ARV products to WHO/UNICEF.

• Launch of biosimilars

• Global Launch of NCEs and NBEs.

• Launch of thermostable vaccines.

• Potential supply of Anthrax Vaccine to US for national stockpiling program.

• Expansion of healthcare segment.

Short-term < 2 years Medium-term 2-5 years Long-term > 5 years

In addition to above identified growth factors, the Company will continue to explore in-

licensing of technologies/products from national/international research agencies/institutions

to fasten its growth strategy

Future Growth DriversPanacea Biotec aims to become a leading

global research based health management

company with an established leadership in

niche therapeutic areas. The Company has well

laid strategy for its future growth with clearly

identified growth drivers to sustain and boost

its revenues and profitability over the short,

medium to long term. The key growth drivers

are as under:

Corporate Social ResponsibilitySafety, Health and Environment Protection

Panacea Biotec undertakes all its operations

with a high concern for safety, health

and environment and is committed to

maintaining high standards in these areas.

Substantial investments have been made

in setting up Effluent Treatment Plants and

in developing a “Green Belt” and green

land scapping at the manufacturing sites at

Lalru & Baddi to prevent possible adverse

environmental impact on the community.

The vaccine R&D facility has been created

with classified laboratories including BL-3

facility for carrying out certain R&D activities

which require containment. All personnel

working in R&D are vaccinated as per the

Vaccination Policy. Bio-waste is disposed

off as per the bio-waste management

system. All the bio-safety measures in R&D

are periodically reviewed by Bio-safety

Committee.

The Company has installed Modern Fire

Hydrant System with sprinkler system and

smoke detection & sensing devices at its all

major facilities, for an early detection and

extinguishing of accidental fire. Surprised

mock fire-fighting drills are also undertaken

to create awareness amongst the employees

to meet any challenge which may arise out of

such incidents.

Regular training is also provided to the

Company’s employees about the importance

of safety in day-to-day life in general

and work in particular. The integration

of environment friendly measures and

cleaner production practices in the business

process has resulted in better efficiency of

operations.

The key growth drivers during short term inter-alia, include global launch of a NCE of herbal origin in GI segment, launch of Vaccine for Swine flu (H1N1) and launch of organ transplantation products in ICH regions and key emerging markets.


Social Responsibility

Panacea Biotec works closely towards the

development of society, in line with its

philosophy of creating happier and healthier

society. Health, education, disaster relief and

patient awareness have been identified as

the areas of priority. The emphasis has been

to provide assistance on a need basis, and

that too, assistance at a local level.

The Company is regularly providing financial

assistance/ sponsorship for pursuing post

graduates/ doctorate studies, attending

International Conferences and carrying

out Research Projects being undertaken by

Research Associates in various Institutes &

Universities.

The Company regularly takes initiatives

towards fulfilling its corporate social

responsibility including:

• Patient Home delivery for Transplant

drugs.

• Donation of life saving drugs to hospitals

as per their need.

• Transplant Fortnight - Patient awareness

activities spread across India covering

72 Organ Transplant centers and

drawing more than 3500 patients. Major

emphasis has been on ways and means

to improve the Post-transplant life of

transplant recipients

• Organized a symposium on “Challenges

in Prevention and Management of

Dengue” at Delhi, which was well

attended by Doctors, experts on this

field and media personnel, with a view

to provide a global snap shot of Dengue

to the medical fraternity and facilitate

deep insights about prevention and

management of Dengue.

• Organized various renal function

detection camps as part of the awareness

towards prevention of Chronic Kidney

Disease on World Kidney Day.

• Diacar SBU was vigorously involved in

spreading awareness and facilitating

detection for diabetes and neuropathic

complications of diabetes through

regular diabetes detection and

neuropathy screening initiatives.

• The company uses its BMD machines

to conduct highly subsidized tests

to measure bone mineral density of

patients for facilitating early diagnosis of

osteoporosis, which not only has a huge

morbidity burden but also is a leading

cause of death in older patients due to

hip fractures. In last 12 months, Panacea

Biotec has screened more than 1 lac

patients.

• On the occasion of ‘World Piles Day‘

on November 20th, the Company

conducted 145 Piles Detection Camps

across geographies in India with a view

to facilitate piles detection across all

strata of patient population and to bring

awareness for piles, which is highly under

diagnosed in India.

• One of the first Indian companies to

successfully run a month long Breast

Cancer Awareness Program to create

awareness on Importance of Early

Detection in Breast Cancer.

• To keep pace with the rapidly advancing

field of Oncology, 3 therapy specific

symposiums were conducted on Breast

Cancer, Lung Cancer and Radiation

Oncology.

Doctor’s Day: Continuing the gesture of

showing it’s gratitude towards the medical

fraternity, your company wished all the

doctors a happy Doctor’s Day on 1st July.

Messages of good wishes from the Chairman

Mr. Soshil Kumar Jain for the doctors were

released through Newspapers, SMS as well as

FM Radio.

The patients were also encouraged to

show their gratitude towards their doctors

The Company is regularly providing financial assistance/ sponsorship for pursuing post graduates/ doctorate studies, attending International Conferences and carrying out Research Projects.


by wishing them on the occasion. Many

doctors responded to the message of the

Chairman by sending e-mails and SMS. This

pioneering activity from Panacea Biotec

would strengthen the relationship between

the doctors and the people at large.

CHINH: As in the past, during the current

year, the Company continued to support

CHINH to make a difference in lives of

nomads in foothills of Aravali and began a

tradition of development that must continue.

CHINH is an NGO’s initiative to support

Nomadic communities in generating

livelihood through harnessing their

traditional wisdom, art and culture.

Dedicated to nomads of India, this initiative’s

prime focus is helping future generation of

nomads in creating space for them in civil

society and encouraging them to lead a life

of dignity.

People for Animals: During the year under

review, the Company also supported People

for Animals an NGO based at Delhi to bring

help and hope to thousands of needy

animals around the Country.

Cautionary Note

Certain statements in the “Management Discussion and Analysis” and other sections in the Annual

Report are forward-looking statements. These statements and expectations envisaged by the

management are only estimates in nature and are based on current expectations and forecasts

about future events. Such statements involve known/unknown risks, uncertainties and other

factors and may cause and defer the actual results materially. Such factors include, but are not

limited to, changes in local and global economic conditions, the Company’s ability to successfully

implement its strategies, the market acceptance and demand of the Company’s products and

services, the Company’s growth rates, expansion, technological changes and the Company’s

exposure to market risks. By this nature, these indications and forecasts/projections are only

estimates and actual results could differ from these in future. The Company does not undertake any

obligation to update forward-looking statements to reflect events or circumstances after the date

hereof.

Note: As a result of rounding-off adjustments, the figures/percentages in a column in various sections in the Annual Report may not add up to the total for such column.



Directors’ Report

Dear Members,

We are pleased to present the 25th Annual Report on business and operations together with the audited financial statements and the auditors’ report of your Company for the financial year ended March 31, 2009. The financial highlights for the year under review are given below:

a growth of 12%. The PBT and PAT for the year under review turned negative at Rs.923.7 million and Rs.690.5 million respectively as compared to profits of Rs.1,903.9 million and Rs.1,331.7 million respectively inter-alia, on account of drastic reduction of exchange rate of Indian Rupee vis-a-vis US dollar from Rs.40.11 per dollar as on 31.03.2008 to Rs.50.72 per dollar as at 31.03.2009, provisioning of unrealized foreign exchange loss of Rs.1,702.6 million on open forward contracts for the unexpired period of contracts and provisioning of Rs.168.0 million on account of permanent diminution of investment (representing 10% stake) in Cambridge Biostability Ltd. (CBL) and of Rs.116.2 million as doubtful on account of Convertible Loan and interest accrued thereon due from CBL.

In terms of revised AS-11, the Company has opted for change in accounting policy in respect of foreign exchange fluctuation difference relating to translation of long term foreign currency monetary liabilities. Consequently foreign exchange fluctuation gain of Rs.131.7 million up to March 31, 2008 and foreign exchange fluctuation loss of Rs.994.7 million during the year under review, has been adjusted to the cost of depreciable asset or transferred to the Foreign Currency Monetary Item Translation Difference Account, depending upon nature of utilization. This has resulted into reduction in losses during the year by Rs.850.1 million.

Nevertheless, the Company was still able to earn operating profit of Rs.1,244.6 million during financial year 2008-09 as against Rs.1,836.7 million during the corresponding previous financial year.

Your Company continues to focus on sustaining growth in emerging markets, cost optimization and efficient management of working capital.

A detailed discussion on operations for the year ended 31st March, 2009 is given in the Management Discussion and Analysis section.

Dividend

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

Share Capital

During the year under review, the Issued Equity Share Capital of the Company remained unchanged at

Financial Results

(Rs. in million)

Particulars For the For the year ended year ended March 31, 09 March 31, 08

Net Turnover 7,734.2 8,304.4

Other Income 259.7 371.7

Total Income 7,993.9 8,676.1

Profit before Interest, 2,444.6 2,177.6 Depreciation, Exceptional items & Tax (EBITDA)

Depreciation 705.1 430.0

Financial Expenses 347.4 150.1

Unrealised Foreign 1,750.7 40.5 Exchange Fluctuation Loss

Profit/(Loss) before (639.5) 1,903.9 Exceptional items & Tax

Exceptional item 284.2 -

Profit/(Loss) before Tax (PBT) (923.7) 1,903.9

Provision for Taxation (233.2) 572.2

Profit/ (Loss) after Tax (PAT) (690.5) 1,331.7

Dividend Paid/Proposed - 66.7 on Equity Shares

Tax on Dividend - 11.3

Transfer to General Reserve - 133.1

Balance in Profit & Loss 2,155.2 2,845.7 Account

Basic EPS (Rs.)* (10.3) 20.1

Cash EPS (Rs.)* 30.0 27.0

Book Value per Share (Rs.)* 92.1 104.3

Dividend per Equity Share (Rs.) - 1.0

* Face value Re.1/- per share

Operations Review

During the year ended March 31, 2009, the Company registered net turnover of Rs.7,734.2 million as against Rs.8,304.4 million during the corresponding financial year. The Company registered EBITDA of Rs.2,444.6 million as compared to Rs.2,177.6 million during the corresponding previous financial year, registering



Rs.66.8 million consisting of 66,842,746 Equity Shares of Re.1 each.

Corporate Governance

The Company has duly complied with the provisions of the Corporate Governance Code as prescribed under Clause 49 of the listing agreement with the Stock Exchanges. A separate section on Corporate Governance Report along with a certificate from M/s. Dass Gupta & Associates, Chartered Accountants confirming the level of compliance is annexed and forms a part of the Directors’ Report.

Management Discussion & Analysis

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

Subsidiaries

The Company, as on March 31, 2009, has 5 wholly owned subsidiaries (WOS), viz. Best On Health Ltd., Panacea Biotec, Inc., Panacea Biotec FZE, Panacea Biotec GmbH and Rees Investments Ltd. and a subsidiary, viz Umkal Medical Institute Pvt. Ltd., in terms of Section 4(1)(b)(ii) of the Companies Act, 1956. Besides, Radicura & Co. Ltd., Panacea Hospitality Services Pvt. Ltd., Sunanda Steel Company Ltd. & Panacea Educational Institute Pvt. Ltd. are the WOS of Best On Health Ltd.; Kelisia Holdings Limited, Cyprus is the WOS of Rees Investments Ltd. and Kelisia Investment Holdings AG, Switzerland & Panacea Biotec (International) SA, Switzerland are step-down subsidiaries of Rees Investments Ltd. In terms of Section 4(1)(c) of the Companies Act, 1956, these 7 companies are the subsidiaries of the Company.

In terms of the approval granted by the Central Government under Section 212(8) of the Companies Act, 1956, copies of the Balance Sheet, Profit and Loss Account and Reports of the Board of Directors and Auditors of the Subsidiaries have not been attached with the Balance Sheet of the Company. However, these documents will be made available upon request by any investor of the Company/ subsidiary, interested in obtaining the same. As directed by the Central Government, the financial data of the subsidiaries has been furnished elsewhere in the Annual Report. The annual accounts of the subsidiary companies will be kept for inspection by any investor at the Company’s Corporate Office at B-1 Extn./G-3, Mohan Co-operative Industrial Estate, Mathura Road, New Delhi – 110044, India and at the office of the respective subsidiary companies during business hours of the Company.

Joint Ventures

Chiron Panacea Vaccines Pvt. Ltd. - During the year under review, your Company’s Joint Venture Company (JV Company), Chiron Panacea Vaccines Pvt. Ltd. (“CPV”), set-up for marketing of innovative combination and other vaccines in India has launched Hepatitis A vaccine HAVpur, a new generation vaccine with virosome technology in collaboration with Berna Biotech Ltd., Switzerland and the Company’s Injectable Polio Vaccine “PolProtec” and monohib Vaccine (novoHib) in the Indian market. With these launches, CPV has a strong portfolio of innovative paediatric vaccines and in short span has taken significant position at market place. CPV achieved a turnover of Rs.538.4 million and net profit of Rs.41.6 million during the year under review. CPV continues to maintain a significant market share in the pediatric combination vaccines segment in India.

Cambridge Biostability Ltd. - The Company’s another JV Company, Cambridge Biostability Ltd. (CBL), a U.K. based Company, in which the Company acquired 10% stake and also lent a Convertible Loan of £ 1.5 million during earlier years, has gone into Creditors’ Voluntary Liquidation proceedings during current fiscal, due to its adverse financial position.

Associates

Your Company’s Associate Company, PanEra Biotec Pvt. Ltd. is continuing to meet requirement of bulk vaccines and antigen for the manufacture of Hepatitis B and Combination Vaccines by your Company. PanEra has become a specialised company focused on bulk manufacture of vaccines and plans to venture into new product and technologies.

During the year under review, the Company’s associate firm, viz. M/s Lakshmi & The Manager, in which the Company had invested Rs.40.0 million (40% share), has been taken over by a newly formed company, Lakshmi & Manager Holdings Limited. As a result of takeover of the said firm, the Company has been allotted Equity Shares for an amount of Rs.41.3 million in the said company.

Consolidated Financial Statements

As required under clause 41 of the Listing Agreement with the stock exchanges, a consolidated financial statement of the Company and its subsidiaries, joint venture and associates, as prepared in accordance with the Accounting Standard AS-21 on ‘Consolidated Financial Statements’ read with Accounting Standard AS-27 on ‘Financial Reporting of Interest in Joint Ventures’ and Accounting Standard AS-23 on ‘Accounting for Investments in Associates’, as issued



by the Institute of Chartered Accountants of India, is attached herewith and the same together with Auditors’ Report thereon forms part of the Annual Report of the Company.

Listing of Equity Shares / Bonds

The Equity Shares of the Company continue to be listed on National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE). The Foreign Currency Convertible Bonds (FCCBs) are listed at Singapore Stock Exchange. The annual listing fees for the year 2009-10 have been paid to these Exchanges.

Public Deposits

During the year under review, your Company has not invited or accepted any deposits from the public pursuant to the provisions of Section 58A of the Companies Act, 1956 and no amount of principal or interest was outstanding in respect of deposits from the public as of the date of Balance Sheet. However, during the year under review, the Company has continued to accept deposits from the Company’s Directors, their relatives, associates and the Company’s employees without inviting deposits from them.

Insurance

The Company’s properties and insurable assets like building, plant & machinery, stocks and upcoming projects have been adequately insured, against major risks. The Company has also taken appropriate product liability insurance policies for conducting clinical trials and for insuring its products (manufactured & sold) with an add on cover of pollution liability and limited unnamed vendor extension liability to cover the risk on account of claims, if any, filed against the company.

Internal Control System

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

Directors

There was no change in the composition of the Board of Directors of the Company during the year under review.

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company,

Mr. R. L. Narsimhan, Mr. N. N. Khamitkar and Mr. Sunil Kapoor, Directors of the Company, are liable to retire by rotation and being eligible, offer themselves for re-appointment.

A brief resume, expertise, shareholding in the Company and details of other directorships of these directors as stipulated under clause 49 of the Listing Agreement with the Stock Exchange forms part of the Notice of ensuing Annual General Meeting.

The Board recommends the appointment of Mr. R. L. Narsimhan, Mr. N. N. Khamitkar and Mr. Sunil Kapoor.

Auditors

As per the provisions of the Companies Act, 1956, M/s. S.R. Batliboi & Co., Chartered Accountants, hold office as Statutory Auditors of your Company till the conclusion of the ensuing Annual General Meeting and have shown their willingness to be re-appointed as the Auditors of the Company.

Based on the recommendation of the Audit Committee, the Board of Directors of the Company proposes the re-appointment of M/s. S.R. Batliboi & Co., Chartered Accountants, as the Auditors of the Company. Further, as required under Section 224(1B) of the Companies Act, 1956, they have confirmed that the said appointment, if made, will be within the limits as prescribed under the provisions thereof.

Auditors’ Report

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

a. Non-provision of proportionate premium on redemption of ‘US$ 50 million Zero Coupon Convertible Bonds due 2011’ amounting to Rs.470,992,269: The Board of directors are of the opinion that since the bonds are redeemable only if there is no conversion of bonds earlier, the probability of which cannot be presently ascertained, hence, the payment of premium on redemption is contingent in nature, the outcome of which is dependent upon uncertain future events. Therefore, the same has been disclosed as a contingent liability. Moreover, in case of redemption, the redemption premium will be offset against the Securities Premium Account, thus having no impact on the Profit & Loss Accounts.

b. Capitalization of expenditure on clinical trials amounting to Rs.123,978,449 for the purpose of registration of Company’s products in US and/or Europe: The expenditure is not towards basic research and there is no experience to suggest that the studies conducted by CRO on



behalf of the Company would lead to or make it difficult for the Company to obtain regulatory approval. Hence, the management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from regulatory authorities in US and/or Europe.

c. Payment of managerial remuneration of approximately Rs.38,169,706 for the current year in excess of limits prescribed as per Part II of Schedule XIII to the Companies Act, 1956, without Central Government approval: The Company had adequate profits for past many years and thus has been paying remuneration to its managerial personnel as per shareholders approval within overall limits as specified under the Companies Act, 1956. However, since in view of the reasons explained elsewhere in this Report the Company has incurred losses during the year under review, the managerial remuneration paid during the year amounting to Rs.63,035,463 exceeded the limits prescribed under the Act by Rs. 38,169,706. The Company has sought approval of the Central Government for protection of such remuneration.

d. Slight delay in deposition of Value Added Tax (VAT), Employees’ State Insurance (ESI) and Service Tax in few cases: The amount involved was not significant and the said delays were due to normal operational difficulties. The total amount of such VAT, ESI and Service Tax was Rs.2,163,478, Rs.379,832 and Rs.436,256, respectively only and the Company had already deposited the said amount. Interest amounting to Rs.447,675 was also paid in respect of delay in payment of Service Tax for the delayed period.

Further, with regard to the matter of emphasis and observation contained in the Auditors’ Report on the Consolidated Financial Statement as regards Unaudited Annual Accounts of Subsidiaries – Panacea Biotec GmbH, Germany, Kelisia Investment Holdings AG, Switzerland and Panacea Biotec (International) SA, Switzerland, though the Annual Accounts of these subsidiaries were prepared by their respective Board of Directors but the audit thereof could not be completed till the date on which the Company’s Accounts were finalised. The audit exercise had since been completed and there is no change in the assets, revenues and cash flows thereof.

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

Cost Auditors

Pursuant to the provisions of Section 233B of the

Companies Act, 1956, M/s J.P. Gupta & Associates, Cost Accountants, have been appointed as the Cost Auditors to conduct the audit of the Company’s Cost Records in respect of formulations for the year ended 31st March, 2009 with the approval of the Central Government. The cost audit is under process and the Company will submit the Cost Auditors’ Report to the Central Government in time. M/s J.P. Gupta & Associates, have also been appointed by the Board as the Cost Auditors for the financial year 2009-10 subject to the approval of Central Government.

Disclosures under Section 217 of the Companies Act, 1956

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

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

• in the nature of Company’s business,

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

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

Energy Conservation, Technology Absorption & Foreign Exchange

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

Information regarding Employees

The information required to be furnished under section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules,1975 as amended, the names and other particulars of employees covered under these Rules are set out in Annexure B, forming part of this Report.

Directors’ Responsibility Statement

The Directors hereby confirm:

i. that in the preparation of the annual accounts, the applicable accounting standards had been



followed along with proper explanation relating to material departures;

ii. that 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;

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

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

Acknowledgments

Your Directors take this opportunity to express sincere thanks to the medical fraternity and patients for their

continued co-operation, patronage and trust reposed on the Company and its products. The Directors place on record their gratitude to the government, other statutory bodies, our strategic partners, business associates, banks, financial institutions and shareholders for their assistance, co-operation and encouragement they extended to the Company.

Your Directors also place on record their sincere appreciation for significant contribution made by the employees at all levels through their dedication, hard work and commitment and look forward to their continued support and unstinting efforts in ensuring an excellent all round operational performance. It is this unity of purpose that breeds success and your Directors look forward to receiving similar support and encouragement from the larger Panacea family in the years ahead.

For and on behalf of the Board

New Delhi Soshil Kumar Jain

30th July, 2009 Chairman

I. Conservation of Energy

1. Energy Conservation measures taken

The Company accords highest priority to energy conservation and is committed for energy conservation measures including regular review of energy consumption and effective control on utilization of energy. The Company had devised its production lines and other facilities keeping in view the objective of minimum energy losses.

The following are the major energy conservation measures implemented during the financial year 2008-09 with an objective to substantially reduce power consumption:

• Stoppage of Chilled Brine Refrigeration plants during night shifts at Pharma Formulation Plant, Baddi and maintaining the required Facility conditions by running them in day shift operations. Also increased Cut off Set point temperature.

• Increased Chilled Water Evaporator temperature and reduced Air Compressor Working Pressure for Vaccine Formulation Plant, Baddi to reduce the Power consumption.

• Installed Variable Frequency Drive (VFD) on Chilled Water Transfer Pump of Refrigeration Plant at Pharma Formulation Plant, Baddi.

• Discontinued the operation of Primary Chilled water circulation pumps of Refrigeration plants by taking Secondary Chilled water transfer pumps also in the Primary Circuit by carrying out the Chilled water line modification.

• Stoppage of Electrical Heaters as well as Hot Water Circulation to Dehumidifiers of Pharma Formulation Plant, Baddi by maintaining the required RH (Relative Humidity) with the help of Chilled Brine only.

• Operating Hours of AHUs have been optimized at various sections at Lalru and Baddi.

• Started stopping of hot water circulation pump for HVAC operations during night hours at Vaccine Formulation Plant, Baddi.

• Started stoppage of Cooling Tower dedicated pumps to Air Compressors and Diesel Gen Sets and the same was optimized with Cooling Tower pumps of

Annexure to the Directors’ Report

Annexure A

Statement of Particulars pursuant to the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.



Refrigeration plants of Pharma Formulation Plant, Baddi.

• Optimized Air Compressor running hours at Vaccine Block-1, Lalru by providing lower capacity Air Compressor during Night Hours.

• Optimized Hot Water circulation by replacing Pump set with lower capacity at Vaccine Block-2, Lalru.

• Optimized Lighting circuits at Lalru.

• Provided Timer Circuit to Animal House Exhaust Air Units, Lalru Plant.

• Started stopping Raw Water Boosting Pump during night hours at Lalru Plant.

• Installed Temperature controllers for all Cooling Tower Fans with respect to Wet Bulb Temperatures.

• Installed Level Controller on Soft Water storage tank to prevent the overflow of water and atomized the Soft Water Pump.

• Started stoppage of Split Air Conditioning Units during winter season at various sections in Vaccine Formulation Plant at Okhla, New Delhi.

• Optimized running hours of AHUs of non critical areas of Okhla Vaccine Formulation plant.

• Optimized running hours of Machine Room AHUs of GRAND, Mumbai.

• Optimized Lift working hours at GRAND, Mumbai.

• Installed Motion sensors for lighting at all Toilets of GRAND, Mumbai.

• Increased the Power Factor across all locations to reduce the Power Consumption.

• Reduced Boiler working pressure and Compressed Air Pressure at vaccine facility at Okhla.

• Reusing the R.O. reject water for non critical use like feed for cooling towers.

• Incorporated temp. controller in CT fan for the Chiller.

• Reduced/replaced the GLS, flouroscent tube lights with CFL at all locations.

• De-scaled indoor & outdoor units of AC’s so as to reduce the electrical load.

• Modified the needles of Vial washing M/c OPV & Line III reducing the consumption of DM water.

• Inbuilt battery charger installed in the D.G. sets.

• Introduction of light control device

for controlling street lamps so that it automatically gets off in the morning.

• Installed PRV for oxygen generation plant and there running of only one air compressor in place of 2 Air Compressors.

• Modified the Brine water lines and removed the primary pump concept.

• Effective running of Air Compressor and removed all air leakages.

• Throttling of Chilled water discharge valves and decreased the motor loads.

• Ensure switching off all corridors lights in day time.

• Close monitoring of FO consumption in Boilers and reduced its working pressure

• Close Monitoring of HSD consumption for DG

• Hot water system replaced the 3.7 KW motor with 2.2 KW for HVAC system

2. Additional Investments/ Proposals, if any, for reduction of Energy Consumption

Continuous efforts are being made to further reduce the expenditure on power & fuel in the time to come. Continuous Energy Conservation Campaign is going on at all locations and based on that steps are being taken related to optimization in existing as well as new system implementation. Many Techniques have already been introduced during the financial year 2008-09:

• Modification of Cold rooms so as to increase the efficiency of the cold rooms & to reduce the electrical load.

• Installation of the ETP to comply the statutory compliance against Pollution control board norms.

• New central dispatch facility to carry out the dispatch activities includes secondary packing material storage.

Further, a few new Energy Conservation technologies including Earth Air Tunnel, Thermal Refrigeration Storage, Side Stream Cooling Tower Water Cleaning on-line Technology etc. are in pipeline for future implementation.

3. Impact of measures taken and impact on cost of production of goods

The energy conservation measures indicated above have helped the Company to restrict the impact of increase in the cost of energy thereby reducing the cost of production of goods to that extent.



The particulars of consumption of energy, are given below:

Current Year Previous Year

A. Power and Fuel Consumption 1. Electricity (a) Purchased Units (Nos.) 15,011,387 8,624,456 Total Amount (Rs.) 67,830,374 38,257,058 Rate/Unit (Rs.) 4.52 4.44 (b) Own generation (i) Through Diesel Generator Units (Nos.) 3,397,584 2,827,525 Unit per litre of Diesel Oil 3.49 3.49 Cost/Unit (Rs.) 8.91 8.07 (ii) Through Steam/Turbine Generator Nil Nil Units (Nos.) Unit per litre of Fuel Oil/ Gas Cost/Unit 2. Coal Nil Nil Quantity (tonnes) Total Cost Average Rate 3. Furnace Oil Quantity (Litres) 505,115 - Total Amount 11,824,571 - Average Rate/litre 23.41 - 4. Others/Internal generation Nil Nil Quantity Total Cost Rate/Unit

B. Consumption per unit of production Tablets Production (Nos. in thousand) 504,389 420,871 Electricity Consumption (Units per thousand) 4.52 3.67 Capsules Production (Nos. in thousand) 61,027 51,414 Electricity Consumption (Units per thousand) 24.33 66.55 Syrups Production (in litres) 283,921 246,057 Electricity Consumption (Units per thousand) 0.76 1.41 Gels Production (in kilograms) 23,475 65,586 Electricity Consumption (Units per thousand) 2.62 3.05 Vaccines Production (No. of vials in thousand) 50,554 69,507 Electricity Consumption (Units per thousand) 65.44 46.52 Pre-filled Syringe (PFS) Production (Ml. in thousand) 1,680 - Electricity Consumption (Units per thousand) 244.15 - Granules Production (Packs in thousand) 17,639 - Electricity Consumption (Units per thousand) 17.07 -

FORM A

FORM B

II. Technology Absorption

Form for disclosure of particulars with respect to Technology AbsorptionThe areas of research being pursued by the Company include:• Development of novel preventive & therapeutic

vaccines, novel therapeutic peptides and therapeutic fully human monoclonal antibodies.

• Development of advanced drug delivery technologies.

Research & Development (R&D)

1. Specific areas in which R & D carried out by the CompanyThe Company is a research focused & IPR oriented company whose one of the end objectives is innovation and development of patentable products and technologies.



• Discovery & synthesis of new chemical and biological entities.

• Development of recombinant clones for biosimilars.

• Product development for different categories of drugs.

2. Benefits derived as a result of above R&D• Improved product quality leading to customer

satisfaction• Vaccine against bioterrorism • Safe and environment friendly process • Novel drug delivery products• Competitively priced products• Waste minimisation• Grant of Product/Process Patents• Import substitution leading to lower cost of

goods• Enhanced global presence• Export of Quality Products

3. Future plan of ActionThe Company will continue to focus its Research &

Technology absorption, adaptation and Innovation

1. Efforts, in brief, made towards technology adaptation and innovation: The Company has built a strong R&D base to support its business segments, vaccines, formulations and biopharmaceuticals. It has five highly sophisticated ultra-modern R&D centers with 391 employees including 261 qualified and experienced scientists for its various research projects. The core area of research & development includes new Vaccine Development, Biopharmaceuticals, proteins, peptides, monoclonal antibodies, Novel Drug Delivery Systems projects, Advanced Drug Delivery System projects and Drug Discovery (small molecules), in compliance with international regulatory standards.

The Company has developed indigenous technologies in respect of various products being manufactured by it and at present working on several novel products and technologies. Further, the Company has made in-licensing arrangements for technologies and development of (a) Vero cell adapted Japanese encephalitis (JE) Vaccine, (b) Peptide based product for generation of hair follicles and hair growth, and (c) Recombinant Chimeric Dengue Vaccine, during earlier financial years. The technology in-licensed for JE Vaccine, has been further modified significantly at our research center to yield a commercially viable and safer product. The candidate vaccine is in trial stages of development and should enter preclinical/clinical development by next year.

2. Benefit derived as a result of the above efforts, e.g., product improvement, cost reduction, product development, import substitution, etc.: Competitive products, Product quality improvement, Product Development and Import Substitution and with in-licensing arrangements, the Company will be able to commercialize these products in domestic and international markets.

3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished;

Technology imported Year of Has technology If not fully absorbed, areas where this import been fully has not taken place, reasons thereof absorbed and future plan(s) of action

(a) (b) (c) (d)

1. Technology for use of 2004-05 No The technologies are being worked upon. The process peptide based products for the scale-up production of hair growth peptide has for generation of hair been optimized. A pre-clinical toxicological study follicles and hair growth has been planned. 2. Tetravalent Dengue 2006-07 No The technologies are being worked upon. A suitable cell Virus Vaccine line for the assay and amplification technology of recombinant chimeric Dengue virus has been prepared. Appropriate Dengue viruses have been amplified and immunogenicity of candidate virus has been planned.

3. Technology for 2007-08 Yes NA manufacture of Hep B Antigen & Bulk Vaccines

Development activities for growing the revenues & profitability, inter-alia, in the following areas:• Development and improvement in existing

conjugation technology for better yield and quality.

• Drug Discovery Research• Advanced Drug Delivery Research• Research for development of novel preventive

& therapeutic vaccines, therapeutic fully human monoclonal antibodies and therapeutic peptides.

• Development of thermostabilised vaccines.• Natural Products Research• Chemical Research & Development

4. Expenditure on R&D (Rs. in million) 2008-09 2007-08a) Revenue 500.9 410.5b) Capital 578.4 666.2c) Total 1,079.3 1,076.7d) Total (as a % of net sales) 14.0% 13.0%



III. Foreign Exchange Earnings and Outgo

1. Activities relating to exports

The total export turnover of the Company was Rs.5,612.9 million (including deemed exports of Rs.3,708.4 million) during the year under review as against Rs.6,442.8 million (including deemed exports of Rs.5,797.3 million) during fiscal 2008.

The Company is supplying Oral Polio and Combination Vaccines to various countries through UNICEF against its global tenders and achieved an export turnover of Rs.1,478.4 million by way of supplies of vaccines to various countries including Afghanistan, Central Africa, Kenya, Sudan, Myanmar, Namibia, Nigria, Pakistan, Russia, Tanzania, Uganda Uzbekistan through UNICEF, as against Rs.309 million during the previous year, achieving an excellent growth of more than 370%.

As regards formulations, the Company is continuously expanding its global aspirations by improving its international marketing efforts into various markets across the globe and is currently exporting its branded formulations in CIS countries, Asia, Eastern Europe and African region. Today the Company’s products are available to people in various countries across the globe.

The export turnover of formulations during fiscal 2009 increased by 27% to Rs.426.0 million from Rs.336.5 million during fiscal 2008.

The major markets continue to do well inspite of recessionary trends in the later part of the year. In addition to this, successful commercialization happened in newer markets across Central America, Africa and Asia. The exports to Russia & Thailand have shown excellent growth of 77% & 53%, respectively over the previous fiscal.

2. Initiatives taken to increase export

The year under review marked the achievement of landmark initiatives & accolades for the Company’s international formulations business.

The company has identified Organ Transplantation, Nephrology, Metabolic Disorders, Pain management, Oncology, Gastro-intestinal, Anti-infectives products as major thrust areas for the future. The Company has been adopting a strategy of increasing its international brand image and is rapidly expanding to reach out to more and more countries. It has also obtained brand registration for various brands in different countries and is actively exploring opportunities for launching as well as licensing out some of its patented products for manufacture/ marketing in Europe, North America, Latin America, etc.

The Company is also currently in the process of registering its products in key new markets including US, European Union, Switzerland, South Africa, Turkey, Brazil, Mexico, Columbia, Venezuela, Chile, Philippines & Malaysia.

3. Development of new export markets for products and Export Plans

With a view to increase opportunities, the efforts on international marketing have been further intensified. The Company has been adopting a strategy of increasing its international brand image and is actively exploring opportunities for launching as well as licensing out some of its patented products for manufacture/ marketing in key new markets including US, European Union, Switzerland, South Africa, Turkey, Brazil, Mexico, Columbia, Venezuela, Chile, Philippines & Malaysia.

The company is also poised to make inroads into global vaccine markets by deploying specialized team for its Vaccine Business in emerging (ROW) markets. The Company has started establishing its ground work in various potential vaccine markets & also obtained registration in Nepal & Pakistan. The Company is all set to launch GeneratioNext vaccines in the emerging markets in years to come.

4. Total foreign exchange earned and used (Rs. in million)

2008-09 2007-08

Foreign Exchange Earned F.O.B. value of Exports 5,589.0 6,414.1 (including deemed export of Rs.3,708.4 million (Previous Year Rs.5,797.3 million)) R & D Services (Know-how) income 1.7 3.9 Interest on Exchange Earners’ Foreign Currency Deposits - 0.6 Interest received on loan from 16.9 2.0 Joint Venture Company Interest accrued but not due on 28.9 - loan from subsidiary company Total 5,636.5 6,420.6

Foreign Exchange Used Raw Materials & Packing 4,571.3 2,743.0 MaterialsCapital Goods 457.2 193.1 Know-how Fee 12.8 8.6Royalty 0.0 0.3Interest 206.2 59.4Professional & Consultation Fees 54.7 29.8Other Expenses - Patents, Trade marks & 26.3 23.4 Product registration - Advertising and Sales Promotion 5.3 33.2 - Printing & Stationary 0.1 3.3 - Commission on Sales 65.8 44.7 - Market Research 30.3 - - Others 39.6 27.5Total 5,469.6 3,166.3


New Delhi Soshil Kumar Jain30th July, 2009 Chairman



Annexure B

Statement pursuant to Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended 31st March, 2009.

Notes: 1. Remuneration includes salary, commission on profits, house rent allowance, bonus, Company’s contribution to Provident Fund, Leave Travel Allowance, Medical Assistance and all allowances

paid in cash and monetary value of taxable perquisites wherever applicable and also includes Gratuity/ Retirement Benefit. 2. There was no employee who was employed either throughout the financial year or part thereof, who was holding either by himself or along with the spouse and dependent children 2% or

more of the Shares of the Company and drawing remuneration in excess of the remuneration drawn by Managing Director / Joint Managing Director / Whole-time Director. 3. The terms and conditions of employees at Sl. No. 1 to 5 are as approved by the Board of Directors and Shareholders. The employees at Sl. No. 6 to 34 are paid remuneration as per the policy/

rules of the Company. 4. All the above said appointments are contractual. 5. None of the above employees is related to any of the Directors except that Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain, Mr. Sandeep Jain and Mr. Sumit Jain are related to each

other. 6. The nature of duties of Chairman, Managing Director and Joint Managing Directors is as under: Mr. Soshil Kumar Jain, Chairman - Strategic planning, vision and formulation of strategies.

Mr. Ravinder Jain, Managing Director - Overall supervision of day-to-day operations with emphasis on strategic planning and business development. Dr. Rajesh Jain, Joint Managing Director - Overall supervision of day-to-day operations with emphasis on R&D, business development and marketing. Mr. Sandeep Jain, Joint Managing Director - Overall supervision of day-to-day operations with emphasis on finance, international marketing and regulatory affairs.


New Delhi Soshil Kumar Jain30th July, 2009 Chairman

S. Name Designation and Remuneration Qualifications Experience Date of Age Particulars of Last Employment No. Nature of Duties (Rs.) (Years) Commencement (Yrs.) Name of Employer, Designation, of Employment Period of Service (Years)

A. Persons employed throughout the Financial Year ended 31st March, 2009, who were in receipt of remuneration for the year in which the aggregate was not less than Rs.2,400,000.

1. Mr. Soshil Kumar Jain Chairman 17,673,850 Pharmacist 54 02.02.1984 76 None, NA, NA2. Mr. Ravinder Jain Managing Director 21,770,429 Matriculate 29 15.11.1984 52 None, NA, NA3. Dr. Rajesh Jain Joint Managing Director 14,688,440 B. Sc., PGDBM & 25 15.11.1984 45 None, NA, NA Advanced Mgmt. Diploma in Market Research, Ph.D.4. Mr. Sandeep Jain Joint Managing Director 14,688,440 B. Com 24 15.11.1984 43 None, NA, NA5. Mr. Sumit Jain Director - Operations & Projects 3,520,582 B. Com, MBA 6 16.05.2003 28 None, NA, NA6. Mr. Narayan B. Gad Chief Executive 7,950,003 B. Sc, D. Pharma, MBA 33 26.10.2005 58 Nicholas Piramal India Ltd. Formulations (Marketing) President Mktg. & Org. Dev., 4 years7. Dr. V.K. Vinayak President BRC- (R&D) 3,735,453 Ph.D., M. Sc, FICAI, 38 01.10.2005 66 Dept. of Biotechnology, Govt. of India, FRSTMH (London) Sr. Advisor, 11 years8. Dr. Sanjay Trehan Sr. Vice President - 6,535,395 Ph.D., M.Sc. (H) 21 01.07.2004 50 Dr. Reddy’s Laboratories Ltd., Drug Discovery Research Research Director, 3 years9. Mr. R.K. Suri Sr. V.P. - New Initiative 3,409,552 M.Sc. (Hons) 31 12.11.2007 54 Sanofi Aventis, Sr. Dir.-Bus. Effect., 9 years10. Dr. M. Sitaram Kumar Vice President - 5,589,053 M. Sc, Ph.D. 33 17.06.2005 59 Dr. Reddy’s Laboratories Ltd. Drug Discovery Research Sr. Director, 4.5 years11. Mr. Kallol Chakraborty Vice President (HR) 4,746,091 PG Dip. In Pers. Mgmt., LLB 19 19.11.2007 45 Federal Mogul Goetze (India) Ltd. Director HR, 8 months12. Mr. Sukhjeet Singh Vice President (R&D) 4,136,027 Post Graduate 15 17.08.2006 40 Strides Acrolabs Ltd., VP - Formulations & Development, 1 year13. Dr. Ashok Panwar Vice President - Quality & 3,999,329 M. Sc., Ph.D. 15 01.05.2001 41 Dishman Pharmaceuticals & Chemicals Compliance Ltd., AGM-Q.C., 2 years14. Mr. Kulvinder Sarao V.P. - Audit & Compliance (HR) 3,967,750 PGDPMIR 24 14.01.2005 47 Hero Honda Motors Ltd, DGM-HR, 5 Mths15. Dr. Arani Chatterjee V.P. - Clinical Research 3,942,092 MBBS, M. Phil. 18 24.07.2004 41 Dr. Reddy’s Labs Ltd., Principal Physician, 6 yrs.16. Mr. Sunil K. Bajaj Vice President - Sales & Mkg. 3,688,850 B.Sc. 29 15.09.2004 48 Novartis India Ltd., NSM, 20 years17. Mr. Ganesh R. Kumraj Vice President Bio. Oper. 3,529,921 Post Graduate 21 15.01.1992 42 National Facility for Animal Tissue & Cell, DGM, 3 years18. Dr. Jagattaran Das G.M. (R&D) 3,397,241 M.Sc., Ph.D. 15 01.07.2005 45 Dr. Reddy’s Labs Ltd., Sr. Scientist, 6 years19. Ms. Neeta S. Sanghi Head-Value India Healthcare 4,038,198 B.Sc. (Hons) 24 01.06.2007 50 Nicholas Piramal (I) Ltd. V.P. Dom. Form. Supply Chain, 11 years20. Mr. Syed Sadir Ahmed Head - International 3,424,243 B Pharma, MBA 15 14.01.2006 39 Nicholas Piramal India Ltd.., GM. S&M, Vaccine Business 2 years21. Mr. Karunakar J. Shetty Head of Operations-India 4,963,887 B.Com 24 01.01.2006 50 Nicholas Piramal India Ltd. (Marketing) President Mktg. & Org. Dev., 4.5 years

B. Persons employed for a part of the Financial Year ended 31st March, 2009, who were in receipt of remuneration for any part of the year, at the rate which in the aggregate was not less than Rs.200,000 per month.

22. Dr. Lallan Giri President & Chief Operating 7,752,060 B.S., M.S., Ph.D. 26 01.07.2008 63 Oshiva Enterprise LLC, USA. CEO/ M.D., Officer 3 years23. Mr. S. C. Marwah CEO - Healthcare Venture 3,248,822 MBBS, Dip. Av. PGADHM, MBA 38 16.06.2008 62 Fortis Health Care Ltd., Head Medical Edu. & Facility Planning, 4.5 Months24. Mr. Partha Sarathi De C.F.O and Head IT & BPR 4,702,177 B.Sc. (Econ.), ACA, AICWA 21 02.06.2008 47 Gujarat Glass Ltd., President Finance Glass Group, 2.5 years25. Dr. Goutam Ghosh V.P. - Tech Mgmt Group 2,284,676 M.Tech, Ph.D. 23 02.06.2008 48 The Pearey Lal Group, CEO., 1 year26. Dr. Sanjiv Sharma Vice President-Regulatory 3,389,186 Ph.D. Org. Chem. 20 30.06.2008 43 Orchid Chemicals & Pharma Ltd., VP-RA., Affairs 4 years27. Mr. Abhay N. Lonkar Country Head - India 3,940,026 B.Sc., MMS 20 11.06.2008 49 Unichem Labs Ltd., VP, 5 years28. Dr. S. Mahender Rao Vice President-CRD 1,323,978 Ph.D. - Doctor of Philosophy 13 08.12.2008 43 Orchid Chemicals & Pharma Ltd., Vice President, 4.5 years29. Dr. Amarjit Singh President R&D 1,920,275 M. Pharma, Ph.D. 29 01.03.2005 51 Sun Pharmaceutical Industries Ltd., CSO & EVP (R&D), 2 years30. Mr. Mahesh Shrihari Head - Strategy 1,786,861 B.Pharma, MMS 17 01.07.2008 38 ORG - IMS Research Pvt. Ltd., Kalsekar Manager- Engagement, 11.5 years31. Mr. Govind Pandey V.P.- Pharma Operations 1,728,805 M.Pharma 18 10.05.2007 42 Alkem Labs Ltd, VP Operations, 2 years32. Mr. S. Anuj Readdy Head Sales & Marketing 1,616,563 MBA 12 02.05.2007 36 Novo Nordisk Pharma India Ltd., Mktg. Dir., 10 years33. Dr. Anil Chawla Vice President (R&D) 1,540,021 Ph.D. 22 15.01.1992 41 Bharat Immunological & Biological Corporation Ltd., DGM, 4.5 years

34. Mr. Maheshh Jain G.M. - Accounts, Finance, 391,523 CA, CS 20 04.12.2007 45 Jubilant Organosys Ltd., GM Accounts, Budget & Cost 4.5 years.



1. Philosophy on Corporate Governance The Company’s philosophy on Corporate Governance originates from its belief that attainment of the highest levels of transparency, disclosure, financial controls, accountability and equity are the pillars of any good system of corporate governance. Panacea Biotec is committed to continuously evolving and adopting corporate governance’s best practices in all facets of its operations and in all interactions with its stakeholders including shareholders, employees, consumers, lenders and the community at large.At Panacea Biotec, good Corporate Governance process includes independence, integrity, commitment to values, ethical business conduct and a high degree of transparency directing the intellectual capabilities and moral authority of its independent Board that go a long way in preserving stakeholders trust while maximizing long-term corporate values.

2. Board of DirectorsComposition & size of the BoardPanacea Biotec’s Board consists of an optimal combination of Executive Directors and Independent Non-executive Directors which represents a mix of professionalism, thorough knowledge and experience. The Directors bring in expertise in the fields of human resource development, strategy, management, finance and economics among others. The Board provides leadership, strategic guidance, objective and independent view to the Company’s management while discharging its fiduciary responsibilities, thereby ensuring that the management adheres to high standards of ethics, transparency and disclosure. At present, the Board comprise of 5 (Five) Executive Directors and 6 (Six) Non-Executive Directors. All the Executive Directors are promoter-directors (1 Executive Chairman, 1 Managing Director, 2 Joint Managing Directors and 1 Whole-time Director). The non-executive Directors bring external and wider perspective in the Board’s deliberations and decisions. The size and composition of the Board exceeds the requirements of the Clause 49 of the Listing Agreement (Corporate Governance Guidelines) with the Stock Exchanges.

Board Functioning & Procedure Panacea Biotec’s board is committed to ensuring good governance. Its style of functioning is self-governing. The members of the Board always have complete liberty to express their opinion and decisions are taken on the basis of consensus arrived at after detailed discussion. They are also free to bring up any matter for discussion at the Board Meetings. Panacea Biotec’s Board meets at least once in every quarter to discuss and review the quarterly results and other items of agenda including the information required to be placed before the Board as required under Annexure 1A of Clause 49 of Listing Agreement and additional meetings are held as and when required. Dates for the Board Meetings are decided well in advance and communicated to the Directors. The Chairman of the Board and the Company Secretary discuss the items to be included in the agenda and the agenda is sent in advance to the Directors along with the draft of relevant documents and explanatory notes. During the financial year 2008-09, 5 (Five) Board Meetings were held on 30th April, 2008, 26th June, 2008, 28th July, 2008, 31st October, 2008 (which was originally called on 17th October, 2008 but was adjourned due to lack of quorum) and 29th January 2009.

Attendance of Directors at the Board Meetings & last Annual General Meeting and number of other Directorships & Committee membership as on 31st March, 2009

Report on Corporate Governance

Note: WTD = Whole-time Director, MD = Managing Director, JMD = Joint Managing Director, ID = Independent Director.$ Excludes directorships in Private Limited Companies, Foreign Companies, membership of managing committees of various chambers/bodies/section 25 companies.* Membership in Audit and Shareholders’ Grievance Committees.

Sl. Name of Director Category of No. of No. of Attendance No. of other Directorships$ No. Directorship Board Board at last & Committee Memberships/ Meetings Meetings AGM Chairmanships* held attended Other Committee Committee Directorships Memberships Chairmanships

1. Mr. Soshil Kumar Jain Promoter – 5 5 No 1 - - WTD Chairman2. Mr. Ravinder Jain Promoter – MD 5 4 No 3 1 Nil3. Dr. Rajesh Jain Promoter –JMD 5 3 No - - -4. Mr. Sandeep Jain Promoter –JMD 5 4 Yes 1 - -5. Mr. Sumit Jain Promoter –WTD 5 3 No 1 - -6. Mr. Sunil Kapoor Non–Executive–ID 5 5 Yes 6 - -7. Mr. R.L. Narasimhan - do - 5 4 Yes 1 - -8. Mr. N.N. Khamitkar - do - 5 5 Yes 1 - -9. Mr. Gurmeet Singh - do - 5 0 Yes - - -10. Mr. K.M. Lal - do - 5 4 No 7 5 Nil11. Dr. A.N. Saksena - do - 5 5 Yes - - -



None of the Directors on the Board is a member in more than ten committees and/or acts as chairman of more than five committees across all the companies in which he is a Director.Brief information on Directors proposed for re-appointment

The brief resume, experience and other details pertaining to the Directors seeking appointment / re-appointment in the ensuing Annual General Meeting, to be provided in terms of Clause 49 of the Listing Agreement with the Stock Exchanges, are furnished below:

a) Mr. R.L. Narasimhan Age : 68 Years Qualification : Post Graduate degree in Science from Madras University Professional Expertise : He retired as the Deputy Director General, Central Statistical Organization, to the

Government’s Ministry of Statistics & Programme Implementation in New Delhi and has held various senior and middle level positions in various Government ministries. Prior to his positions with the Government, Mr. R.L. Narasimhan has also worked with Hoechst Pharmaceuticals Ltd., Chennai, a multinational pharmaceutical company. His expertise lies in the field of budgeting, data management, programme evaluation & research and marketing.

Directorships : He is a director of Best On Health Ltd. Shareholding in : Nil the Company

b) Mr. N.N. Khamitkar Age : 68 Years Qualification : B.E. – Electrical and Mechanical (Pune University), MBA (University of District

of Columbia, Washington DC, USA) and Post Graduate Diploma in Public Administration, Indian Institute of Public Administration.

Professional Expertise : He is a retired Govt. Official belonging to Indian Engineering Service and retired as Dy. Director General, Ministry of Home Affairs, Govt. of India, New Delhi.

He has held various senior and middle level positions in various Govt. Ministries and Offices before his retirement. His expertise lies in the field of administration, planning & procurement.

Directorships : He is a director of Best On Health Limited. Shareholding in : Nil the Company

c) Mr. Sunil Kapoor Age : 52 Years Qualification : Commerce graduate from Shri Ram College of Commerce, University of Delhi and

holds a LL.B. degree from Law Faculty, University of Delhi. Professional Expertise : He practices as an advocate and is a member of the Delhi High Court Bar

Association and Bar Association Income Tax, New Delhi. Directorships : He is a director of Golden Peakock Overseas Ltd., Stross Crystals Ltd., Residency

Resorts Pvt. Ltd., Indo-dan Lamp Shade Ltd., GPL Exports Ltd, Hitkari Industries Ltd., Best On Health Ltd., Residency Hospitality Services (P) Ltd., Reis Magos Fort Restors (Pvt.) Ltd. and Raihl Estate (Pvt.) Ltd.

Shareholding in : Nil the Company

Information supplied to the BoardIn addition to the regular business items, the Company provides the following information to the Board and Board Committees as and when required. Such information is submitted either as part of the agenda papers in advance of the meetings or by way of presentations and discussions material during the meetings:1. Annual operating plans and budgets and any updates. 2. Capital budgets and any updates. 3. Quarterly results for the company and its operating divisions or business segments. 4. Minutes of meetings of audit committee and other committees of the Board. 5. The information on recruitment and remuneration of senior officers just below the Board level, including

appointment or removal of Chief Financial Officer and the Company Secretary.6. Show cause, demand, prosecution notices and penalty notices which are materially important. 7. Fatal or serious accidents, dangerous occurrences, any material effluent or pollution problems. 8. Any material default in financial obligations to and by the company, or substantial non-payment for goods

sold by the company.



9. Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the company or taken an adverse view regarding another enterprise that can have negative implications on the company.

10. Details of any joint venture or collaboration agreement. 11. Transactions that involve substantial payment towards goodwill, brand equity or intellectual property. 12. Significant labour problems and their proposed solutions. Any significant development in Human Resources/

Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme, etc.

13. Sale of material nature of investments, subsidiaries, assets, which is not in normal course of business. 14. Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of

adverse exchange rate movement, if material. 15. Non-compliance of any regulatory, statutory or listing requirements and shareholders service such as non-

payment of dividend, delay in share transfer etc., if any.Statutory Compliance of LawsThe Board periodically reviews the compliance report of the laws applicable to the Company as well as steps taken by the Company to rectify the instances of non-compliances, if any.Code of ConductThe Board has laid down a code of conduct for all Board Members and senior management of the Company. The said Code has been communicated to the Directors and Senior Management Personnel and is also posted on the web-site of the company viz. www.panaceabiotec.com.Declaration from the Managing Director confirming that the Company has received affirmations from the Board Members and the Senior Management Personnel regarding compliance of Code of conduct during the year under review, is attached as Annexure-I.

3. Audit CommitteeComposition & Terms of ReferenceThe Audit Committee of the Company has been constituted as per Section 292A of the Companies Act, 1956 and the guidelines set out in the Listing Agreements with the Stock Exchanges. The Audit Committee of the Company comprises of three non-executive directors, all of them being independent Directors viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor. Mr. R.L. Narasimhan is the Chairman of the Committee. All the members are financially literate and one member is having requisite accounting and financial management expertise. The management is responsible for the Company’s internal controls and the financial reporting process while the statutory auditors are responsible for performing independent audits of the Company’s financial statements in accordance with generally accepted auditing practices and for issuing reports based on such audits. The Board of Directors has entrusted the Audit Committee to supervise these processes and thus ensure accurate and timely disclosures that maintain the transparency, integrity and quality of financial control and reporting. The terms of reference and scope of the activities of the Audit Committee is as set out in Clause 49 of the Listing Agreements with the Stock Exchanges as well as in Section 292A of the Companies Act, 1956, including the following:• To review compliance with internal control systems;• To review the findings of the Internal Auditor relating to various functions of the Company;• To hold periodic discussions with the Statutory Auditors and Internal Auditors of the Company concerning the

accounts of the Company, internal control systems, scope of audit and observations of the Auditors/Internal Auditors;

• To review the quarterly, half-yearly and annual financial results of the Company before submission to the Board;

• To make recommendations to the Board on any matter relating to the financial management of the Company, including Statutory & Internal Audit Reports;

• Recommending the appointment of statutory auditors and internal auditors and fixation of their remuneration.

Review of information by Audit CommitteeApart from other matters, as per Clause 49 of the Listing Agreement the Audit Committee reviewed, to the extent applicable, the following information:i) Management discussion and analysis of financial condition and results of operations;ii) Statement of significant transactions, submitted by the Management;iii) Management letters/letters of internal control weakness issued by statutory auditors;iv) Internal Audit Reports relating to internal control weakness;v) The appointment, removal and terms of remuneration of the Internal Auditors; vi) Related party transactions. Meetings of Audit Committee and attendance of members during the yearDuring the year, 5 (five) Audit Committee meetings were held on 29th April, 2008, 25th June, 2008, 28th July, 2008, 16th October, 2008 and 28th January, 2009.



The attendance of members of the Audit Committee at these meetings were as follows:

Sl. Name of the Member Designation Category of Directorship No. of No. of No. Meetings Meetings held attended

1. Mr. R. L. Narasimhan Chairman Independent Director 5 52. Mr. N. N. Khamitkar Member Independent Director 5 53. Mr. Sunil Kapoor Member Independent Director 5 5

The Statutory Auditors, Internal Auditors, Cost Auditors, Chief Financial Officer, DGM (Accounts & Finance), AGM (Finance), AGM Audit & Compliances are the permanent invitees of the meetings of Audit Committee. Apart from them, Joint Managing Director(s), Director (Operations and Projects), Associate Director, General Manager (HR), V.P. (HR), V.P. Audit & Compliance (HR) etc. attended one or more of the Audit Committee Meetings.The Company Secretary is acting as the Secretary to the Audit Committee. The Chairman of the Audit Committee, Mr. R.L. Narasimhan, was present at the Annual General Meeting of the Company held on 27.09.2008.

Subsidiary CompaniesDuring the year, the Company’s wholly owned subsidiary, Best On Health Limited acquired the status of a material non-listed Indian subsidiary of the Company as its net worth (i.e. paid-up capital and free reserves) exceeded 20% of the consolidated net worth of the Company and its subsidiaries in the immediately preceding accounting year i.e. financial year 2007-08. The Company’s independent Directors, Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor are directors on the Board of Directors of Best on Health Limited w.e.f. 1st January 2008.The Audit Committee of the Company reviewed the financial statements, in particular, the investments made by all unlisted subsidiary companies except the financial statements of two of its subsidiaries namely Kelisia Investment Holdings AG & Panacea Biotec (International) SA as the first financial year of these companies will end on 31st March 2010.The Board minutes of unlisted subsidiary companies are placed at the Board Meeting of the Company and the significant transactions or arrangements entered into by the unlisted subsidiary companies are periodically informed to the Board.

4. Remuneration Committee

Brief description of terms of referenceThe Company has constituted a Remuneration Committee. The terms of reference of the Committee include:

- to decide elements of remuneration package of all the directors;- to decide the service contracts, notice period and severance fees of executive directors.

Composition

Remuneration Committee comprises of three non-executive independent Directors viz. Mr. R.L. Narasimhan, Mr. N.N. Khamitkar and Mr. Sunil Kapoor, Mr. R.L. Narasimhan is the Chairman of the Committee. The Company Secretary is acting as the Secretary to the Remuneration Committee. No meeting of the Remuneration Committee was held during the year.

Remuneration Policy

The Directors’ Remuneration Policy of your Company is in conformity with the provisions under the Companies Act, 1956. Subject to the approval of the Company’s shareholders in general meeting and such other approvals as may be necessary, the Managing/Joint Managing Directors and the Whole-time Directors are paid remuneration as per the terms of remuneration decided by the Board/ Remuneration Committee and approved by the Shareholders. The remuneration payable to the executive Directors is decided from time to time keeping in view the overall performance of the Company, the performance of the concerned Director and the industry trends. The key components of the Company’s Remuneration Policy are:• Compensation will be a major driver of performance. • Compensation will be competitive and benchmarked with a select group of companies from the pharmaceutical

sector. • Compensation will be fully transparent and tax compliant.

Directors’ remuneration

In view of the loss incurred by the Company for the financial year ended 31st March 2009, the Company has applied to the Central Government for protection of the remuneration paid for the financial year 2008-09 to Mr. Soshil Kumar Jain, Chairman, Mr. Ravinder Jain, Managing Director, Dr. Rajesh Jain, Joint Managing Director and Mr. Sandeep Jain, Joint Managing Director and the approval is awaited. The details of the remuneration of Executive Directors for the year ended 31st March, 2009 are as under:



i) Executive Directors (Managing/Joint Managing/Whole-time Directors)

(Rs. in Lac)S. No. Name Salary Allowances Perquisites Total

1. Mr. Soshil Kumar Jain 144.00 6.46 1.09 151.552. Mr. Ravinder Jain 144.00 6.46 42.76 193.223. Dr. Rajesh Jain 120.00 5.38 1.10 126.484. Mr. Sandeep Jain 120.00 5.38 1.10 126.485. Mr. Sumit Jain 27.00 1.21 4.75 32.96

Notes:1. The tenure of office of Mr. Soshil Kumar Jain, Chairman, Mr. Ravinder Jain, Managing Director, Dr. Rajesh Jain and Mr. Sandeep Jain, Joint

Managing Directors of the Company is for 5 years w.e.f.1st April, 2006.The tenure of office of Mr. Sumit Jain, Director (Operations and Projects) is for 5 years w.e.f. 22nd July, 2005.

2. Notice period for termination of appointment of Managing/Joint Managing/ Whole time Directors is three months by either party or a shorter period decided mutually. No severance fee is payable on termination of contract.

3. The Company does not have any Stock Option Scheme. 4. All elements of remuneration of the Managing/Joint Managing/ Whole-time Directors, i.e., Salary, Perquisites and other benefits, etc. are

given in Schedule XX C annexed to and forming part of Balance Sheet and Profit & Loss Account of the Company.5. Provision for Gratuity and Leave Encashment amounting to Rs.60.08 Lac and Rs.32.64 Lac respectively, made during the year, has not

been included above.

ii) Non-Executive DirectorsPayment Criteria:The Board of Directors determines the remuneration of the non-executive Directors within the limits approved by the shareholders. Apart from the sitting fees for attending meetings of the Board or Committee thereof, the remuneration is paid to the non-executive Directors (other than Mr. Gurmeet Singh) by way of monthly allowances for telephone, mobile, conveyance expenses, etc. @ Rs.15,500 p.m. (with the confirmation obtained from Central Government) to enable them to meet their expenses for attending to their responsibilities as non-executive director. As approved by the Board in their Meeting held on 31st October 2008, the sitting fees payable to the Independent Directors of the Company for attending meetings of the Board and Audit Committee was increased to Rs.10,000 per meeting from Rs.5,000 payable earlier for meetings held on or after 1st November 2008. Such increase is within the statutory limits prescribed under rule 10-B of the Companies (Central Govt.’s) General Rules & Forms, 1956. The details of remuneration paid to the non-executive directors during financial year ended 31st March, 2009 are as under: (Rs. in Lac)

Sl. No. Name Allowances Sitting Fees Total1 Mr. R.L. Narasimhan 1.86 0.60 2.462. Mr. N.N. Khamitkar 1.86 0.65 2.513. Mr. Sunil kapoor 1.86 0.60 2.464. Mr. Gurmeet Singh - 0.50 0.505. Mr. K.M. Lal 1.86 0.20 2.066. Dr. A.N. Saksena 1.86 0.90 2.76

None of the non-executive Directors hold any shares/ convertible securities of the Company.

5. Share Transfer cum Investors’ Grievance Committee The Investors Grievance Committee aims at redressal of shareholder complaints and overseeing investor services.The Board of Directors of the company has, with a view to expedite the process of share transfers, delegated the power of share transfer to the Company Secretary who attends to share transfer formalities on weekly basis.Terms of referenceThe terms of reference of Share Transfer cum Investors’ Grievance Committee include transfer or transmission of shares, dematerialisation of shares, issue of duplicate share certificates, review or redressal of investors’ grievances and other areas of investor service. CompositionThe Share Transfer-cum-Investors’ Grievance Committee comprises of three Directors viz. Dr. A.N. Saksena, Mr. Ravinder Jain and Mr. Gurmeet Singh. Dr A.N. Saksena, an independent non-executive Director acts as Chairman of the Committee.The Company Secretary is acting as the Secretary to the Committee as well as the Compliance Officer pursuant to Clause 47(a) of the Listing Agreement with Stock Exchanges:

Sl. Name of the Member Designation Category of Directorship No. of No. of No. Meetings Meetings held attended 1. Dr. A. N. Saksena Chairman Independent Director 12 122. Mr. Ravinder Jain Member Promoter Director 12 93. Mr. Gurmeet Singh Member Independent Director 12 10



Details of investors’ complaints received during the year 2008-09:

Sl. No. Nature of Complaints Received Resolved Pending 1. Non-receipt of Dividend 2 2 0 Warrants in respect of Shares2. Non-receipt of share certificate(s) lodged 4 4 0 for transfer/sub-division/duplicate etc.3. Total 6 6 0

The Company put utmost priority to the satisfaction of its shareholders which is evident from the fact that only very few complaints were received by the Company. The Company addresses all complaints, suggestions and grievances expeditiously and replies have been sent/issues have been resolved expeditiously except in case of dispute over facts or other legal constraints. There were no share transfers lying pending as on 31st March, 2009.

6. CEO/CFO Certification The Managing Director and DGM (Accounts & Finance) have certified in terms of revised clause 49 of the Listing Agreement to the Board that the financial statements present a true and fair view of the Company’s affair and are in compliance with existing accounting standards.The CEO and CFO certification of the financial statements and the cash flow statement for the year is enclosed as Annexure – II to this report.

7. General Body Meetings The last three Annual General Meetings were held as under:

Financial Date Time Venue Special Resolutions passed Year

2007-08 27.09.08 11:00 AM Regd. Office at Ambala- No Special Resolution was passed. Chandigarh Highway, Lalru 140501, Punjab.

2006-07 29.09.07 10:30 AM - do - • Approval for promotion of Mr. Shagun Jain, as Deputy General Manager Systems and increase in remuneration w.e.f. 1st April 2007 under section 314 of the Companies Act, 1956(“Act”). • Approval for promotion of Mrs. Radhika Jain as Sr. Manager w.e.f 1st April 2007 under section 314 of the Act. • Approval for increase in remuneration to Ms. Shilpy Jain, as Manager- Food & Beverages, under section 314 of the Act.

2005-06 30.09.06 12.00 - do - • Approval for payment of remuneration to Dr. Aditya Narain Noon Saksena, non-executive independent Director. • Approval for payment of monthly remuneration to Non-Executive Directors. • Re-appointment of Mr. Soshil Kumar Jain as Whole-Time Director designated as Chairman. • Appointment of Mr. Ashwani Jain as Associated Director (Corporate Affairs) w.e.f. 1st October, 2006. • Appointment of Mr. Shagun Jain as Manager Systems w.e.f. 1st October, 2006. • Approval for appointment of Ms. Radhika Jain as Scientific Officer w.e.f. 2nd June, 2006. • Approval for appointment of Ms. Shilpy Jain as Manager Food & Beverages w.e.f. 1st August, 2006.

Postal BallotDuring the year, the Company had conducted voting through two Postal Ballots on 14th July 2008 & 27th September 2008 respectively. The Company complied with the procedures for the postal ballot in terms of the Companies (Passing of Resolution by Postal Ballot) Rules, 2001 and the amendments thereto. Mr. Umesh Singhal of M/s U.S. & Associates, Company Secretaries acted as scrutinizer for first Postal Ballot whose results were announced on 14th July 2008 and voting pattern of the same was as under:

S. Item Votes castNo. For Against

1 Special Resolution under Section 17 of the Companies Act, 1956 seeking 34,607,503 1,783 members consent for alteration in the object clause by way of inserting new sub-clauses 39, 40 and 41 after the existing sub-clause 38 of Clause III-C (Other Objects);2 Special Resolution under Section 149(2A) seeking members’ consent for 34,595,863 1,783 commencement of business as specified in the said sub-clauses 39, 40 and 41 of Clause III-C (Other Objects).



Mr. U. K. Singhal of M/s Singhal Law Associates, Advocates acted as scrutinizer for second postal ballot and the results of the same were announced on 27th September, 2008 and voting pattern for the resolutions was as under:

S. Item Votes castNo. For Against

1 Ordinary Resolution under Section 293(1)(d) of the Companies Act ,1956 for 34,247,228 1,720 increase in borrowing powers of Board upto Rs.1500 Crore;

2 Ordinary Resolution under Section 293(1)(a) of the Companies Act, 1956 34,240,774 3,720 authorizing the Board of Directors to mortgage and/or charge/hypothecate any of its movable and/or immovable properties or the whole or substantially the whole of an undertaking or undertakings of the Company.

Thus, all the resolutions were passed with overwhelming majority.

Procedure for voting by Postal Ballot:

The Postal Ballot Forms and the draft Resolution(s) along with the Explanatory Statement pertaining the said Resolution(s) explaining in detail the material facts and the self-addressed, postage prepaid envelope, are sent to all the members, under Certificate of Posting.The members are required to carefully read the instructions printed in the Postal Ballot Form, give their assent or dissent on the resolution(s) at the end of the Form and sign the same as per the specimen signatures available with the Company or Depository Participant, as the case may be, and return the form duly completed in the attached self-addressed postage prepaid envelope so as to reach the scrutinizer before the close of working hours of the last date fixed for the purpose. Postal Ballot Forms received after this date are strictly treated as if the form has not received from the member.The scrutinizer appointed for the purpose scrutinizes the postal ballots received and submit his report to the Company.Voting rights are reckoned on the basis of number of shares and paid-up value of shares registered in the name of the shareholders as on the date of dispatch of the postal ballot notice. A resolution is deemed to have been passed as special resolution if the votes cast in favour are at least three times than the votes cast against and in case of ordinary resolution, the resolution is deemed to have been passed, if votes cast in favour are more than the votes cast against.

8. Disclosurea) Related Party Transactions – During the year, there were no materially significant related party transactions

with the promoters, the directors or the management, their subsidiaries or relatives, etc. that may have potential conflict with the interests of the Company at large. The other related party transactions are given in Note No.9 of Schedule XXC annexed to and forming part of Balance Sheet and Profit & Loss Account of the Company.

b) Disclosure of Accounting Treatment - There has not been any change in accounting policies of the Company during the year except as stated in Note No.2 of Schedule XXB annexed to and forming part of Balance Sheet and Profit & Loss Account of the Company.

c) Risk Management - The Company has a procedure to inform the Board about the risk assessment and minimization procedures. The Board of Directors periodically reviews the risk management framework of the Company.

d) Compliances by the Company - During the last three years, there were no strictures or penalties imposed by either SEBI or the Stock Exchanges or any other statutory authority for non-compliance of any matter related to the capital markets.

e) The Company has complied with all the mandatory requirements of clause 49 of the listing Agreement. As regards, the adoption of non-mandatory requirements as contained in Annexure I-D to clause 49 of the listing agreement, the Company has implemented the requirements as per details give below:

i) Chairman of the Board - The Chairman of Panacea Biotec is an Executive Director and he maintains the Chairman’s Office at the Company’s expenses.

ii) Remuneration Committee - The Board of Directors has constituted a Remuneration Committee, which is composed of independent Directors. The details of the Remuneration Committee and its powers have already been discussed in this Report.

iii) Shareholders rights - The quarterly/ half-yearly results, after they are approved by the Board of Directors, are sent forthwith to the Stock Exchanges where the Company’s shares are listed, published in the newspapers as mentioned under the heading “Means of Communication” at Sl. No. 10 hereinbelow and also displayed on the Company’s web-site www.panaceabiotec.com. The results are not separately circulated to the shareholders.

iv) Training of Board Members - No specific training programme was arranged for Board members. However,



at the Board/Committee meetings detailed presentations are made by Professionals, Consultants as well as Senior Executives of the Company on the business related matters, risk assessment, strategy, effect of the regulatory changes, etc.

v) Mechanism for evaluating non-executive Board members - The Company has not adopted any mechanism for evaluating individual performance of Non- Executive Directors.

vi) Whistle Blower Policy - The Company has implemented a Whistle Blower Policy in the Company and no personnel is denied access to the Audit Committee of the Company.

9. Prohibition of Insider TradingIn compliance with the SEBI Regulations on Prevention of Insider Trading, the Company has instituted a comprehensive Code of Conduct for its management, staff and relevant business associates. The Code lays down guidelines, which advises them on procedures to be followed and disclosures to be made, while dealing with Shares of the Company.

10. Means of communication1. The Quarterly and Half-Yearly results are published in one or more of the prominent daily newspapers, viz.

Business Line and Business Standard, All editions, Hindustan Times, New Delhi, Chandigarh, Lucknow, Kolkata, Patna, Ranchi and Bhopal; DNA Money, Mumbai; Financial Express, Delhi, Mumbai and in Punjabi Tribune, Chandigarh, the local newspaper published in the language of the region in which Registered Office is situated.

2. The Company also intimate the Stock Exchanges all price sensitive matters or such matters which in its opinion are material and of relevance to the shareholders and subsequently issues a Press Release on the matter, wherever necessary.

3. The Annual Results (Annual Report containing Balance Sheet etc.) are posted to every shareholder of the Company.

4. The Company’s web-site, viz. www.panaceabiotec.com, is regularly updated with the financial results, annual report and other important events.

5. Pursuant to clause 51 of the listing agreement, financial information like annual and quarterly financial statements, segment-wise results, shareholding pattern(s) and annual report(s) are made available on the SEBI’s web-site www.sebiedifar.nic.in.

6. Management’s Discussion and Analysis Report has been included in the Annual Report being sent to the shareholders of the Company.

11. General Shareholder Information i) Date of AGM

The Annual General Meeting is proposed to be held on Friday, the 25th day of September, 2009, at 11:00 A.M. at the registered office of the Company at Ambala-Chandigarh Highway, Lalru - 140 501, Punjab.

Posting of Annual Report On or before 1st September, 2009

Last date of receipt of Proxy Form 23rd September, 2009 before 11.00 A.M.

ii) Financial Calendar 2009-10 (tentative)

S. No. Tentative Schedule Tentative Date

1. Financial reporting for the quarter ended 30th June, 2009 30th July, 2009 (Actual)

2. Financial reporting for the half year ending 30th September, 2009 End of October, 2009

3. Financial reporting for the quarter ending 31st December, 2009 End of January, 2010

4. Financial reporting for the quarter ending 31st March, 2009 End of April, 2010*

5. Annual General Meeting for the year ending 31st March, 2010 End of September, 2010

*As provided in clause 41 of Listing Agreement, Board may also consider publishing Audited Results for the year 2009-10 in lieu of Unaudited Results for fourth quarter, by 30th June, 2010 (or such other period as may be stipulated from time to time).

iii) Date of Book ClosureThe Share Transfer Books and Register of Members of the Company will remain closed from Wednesday, 23rd September, 2009 to Friday, 25th September, 2009 (both days inclusive).

iv) No DividendIn view of non-availability of profits during the current financial year, the Board of Directors has not recommended any dividend on the Equity Shares of the Company.

v) Unclaimed DividendsAs provided in Section 205A and 205C of the Companies Act, 1956, dividend for the financial year ended 31st March, 2002 and thereafter, which remain unpaid or unclaimed for a period of 7 years, will be transferred to the



Investor Education and Protection Fund (IEP Fund) established by the Central Government and no payments shall be made in respect of any such claims by the IEP Fund.

During the year, the Company had transferred Rs.143,640 lying unclaimed in Unpaid Dividend Account in respect of Dividend for the Year 2000-2001 to the said Fund on 18th October, 2008.

Information in respect of other unclaimed dividend when due for transfer to the said Fund is given below:

Financial Year Date of declaration Last date for claiming Due date for of Dividend unpaid Dividend transfer to IEP Fund

2001-02 24.08.2002 21.09.2009 20.10.2009

2002-03 20.09.2003 18.10.2010 16.11.2010

2003-04 18.09.2004 16.10.2011 14.11.2011

2004-05 20.08.2005 17.09.2012 16.10.2012

2005-06 30.09.2006 29.10.2013 28.11.2013

2006-07 29.09.2007 28.10.2014 27.11.2014

2007-08 27.09.2008 26.10.2015 25.11.2015

Shareholders who have not yet encashed their dividend warrant(s) for the above said financial year(s) may send their request for revalidation of Dividend Warrant(s) or issue of duplicate Dividend Warrant(s), as the case may be, to the Company’s Corporate Office immediately. Shareholders are requested to note that no claims shall lie against the Company or the said Fund in respect of any amounts, which were unclaimed or unpaid for a period of 7 years from the dates on which they first became due for payment and no payment shall be made in respect of any such claims.

vi) Listing on Stock ExchangeThe Company’s Equity Shares are listed on the following Stock Exchanges:

• National Stock Exchange of India Ltd. (NSE), Bandra Kurla Complex, Bandra (E), Mumbai.

• Bombay Stock Exchange Ltd. (BSE), P J Tower, Dalal Street, Fort, Mumbai.

The Foreign Currency Convertible Bonds (FCCBs) of the Company are listed on Singapore Exchange Ltd. (SGX), 2 Shenton Way, #19-00 SGX Centre 1, Singapore 068804, under the BONDS Sector.

The Company has paid listing fees to all the above stock exchanges and there is no outstanding payment as on date.

vii) Stock Code of Equity Shares / FCCBsTrade symbol at National Stock Exchange is PANACEABIO.

Stock Code at Bombay Stock Exchange is 531349.

ISIN No. for Dematerialisation : INE922B01023.

Stock Code of FCCBs : XS0243888830

Panacea Biotec • Annual Report 2008-09Panacea Biotec • Annual Report 2008-0961


ix) Registrar and Transfer Agents

Skyline Financial Services Pvt. Ltd., are acting as Registrar & Transfer Agents (RTA) for handling the shares related matters both in physical as well as dematerialised mode. All works relating to Equity Shares are being done by them. The Shareholders are therefore, advised to send all their correspondence to the RTA.

However, for the convenience of shareholders, documents relating to shares received by the Company are forwarded to the RTA for necessary action thereon.

x) Nomination Facility

The shareholders holding shares in physical form may, if they so want, send their nominations in prescribed Form 2B of the Companies (Central Government’s) General Rules and Forms, 1956, (which can be either obtained from the Company’s RTA or downloaded from the Company’s website www.panaceabiotec.com under the section ‘Investor Zone’) to the Company’s RTA. Those holding shares in dematerialised form may contact their respective Depository Participant (DP) to avail the nomination facility.

xi) Share Certificates in respect of sub-divided Shares

After the sub-division of the Company’s Equity Shares of Rs.10 each into shares of Re.1 each, in the year 2003, the Company had sent letters to all shareholders holding shares of the face value of Rs.10 in physical form, requesting them to exchange their share certificates into new share certificate(s) in respect of shares of face value of Re.1 each.

All the shareholders who have not yet sent their request for exchange of share certificates, are requested to forward their old share certificates in respect of shares of face value of Rs.10 each (which are no longer tradable) to the Company, along with a request letter duly signed by all the joint holders.

xii) Elimination of Duplicate Mailing

The shareholders who are holding Shares in more than one folio in identical name or in joint holders’ name in similar order, may send the share certificate(s) along with request for consolidation of holding in one folio to avoid mailing of multiple Annual Reports.

xiii) Share Transfer System

The Company’s shares transfer authority has been delegated to the Company Secretary. The delegated authority generally attends the share transfer formalities on weekly basis and as and when required to expedite all matters relating to transfer, transmission, transposition and dematerialisation of shares and redressal of Investors’ grievance, etc., if any. The shares received by the Company/ RTA for registration of transfers, are processed by RTA (generally within a week of receipt) and transferred expeditiously and the Share Certificate(s) are returned to the shareholder(s) by registered post.

viii) Market Price data:

The High and Low prices of the shares of the Company at Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Ltd. (NSE) for the year ended 31st March, 2009 are as under:

Month Share Prices (Rs.) at BSE Share Prices (Rs.) at NSE

High Low High Low

April,2008 405.00 340.05 400.00 330.05

May, 2008 413.00 345.00 412.00 368.00

June, 2008 392.00 292.00 395.60 295.00

July, 2008 363.40 273.05 363.60 270.25

August, 2008 340.00 247.50 365.00 269.00

September, 2008 308.50 214.50 310.00 216.10

October, 2008 249.00 144.00 248.50 141.00

November, 2008 197.00 123.20 198.00 123.45

December, 2008 151.00 126.00 147.00 124.20

January,2009 138.95 51.95 139.50 51.70

Februray,2009 77.20 51.00 78.40 50.00

March,2009 62.10 52.00 62.30 51.10



As per the requirement of clause 47 (c) of the Listing Agreement with the Stock Exchanges, the Company has obtained the half yearly certificates from a Company Secretary in Practice for due compliance of share transfer/ consolidation/ exchange formalities.

The Securities and Exchange Board of India (SEBI) vide circular ref. no. MRD/DoP/Cir-05/2009 dated 20th May, 2009 directed that for securities market transactions and off-market/private transactions involving transfer of shares in physical form of listed companies, it shall be mandatory for the transferee(s) to furnish copy of PAN card to the Company/ RTA for registration of such transfer of shares.

xiv) Secretarial Audit

A Practising Company Secretary carries out secretarial audit in each of the quarter to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Ltd. (CDSL) and total issued and listed capital. The audit reports confirm that the total issued/ paid up capital is in agreement with the total number of shares in physical form and the total number of dematerialised shares held with NSDL and CDSL. The Secretarial Audit Reports for each quarter of the Financial Year ended March 31, 2009 has been filed with Stock Exchanges within one month of end of each quarter.

xv) Dematerialisation of Shares and its liquidity

The Company has been among the few top-most companies in India in which maximum number of shares have been dematerialised. As on 31st March, 2009, 99.05% of the Company’s total Equity Share Capital representing 66,204,985 Equity Shares were held in dematerialised form and only 637,761 Equity Shares were in paper/physical form.

The shareholders holding shares in physical form are requested to get their shares dematerialised at the earliest, as the Company’s Shares are required to be compulsorily traded at Stock Exchanges in dematerialised form only.

The shares of the Company are regularly traded at the National Stock Exchange and the Bombay Stock Exchange.

xvi) Share Dematerialisation System

The requests for dematerialisation of shares are processed by RTA expeditiously and the confirmation in respect of dematerialisation of shares is entered by RTA in the depository system of the respective depositories, by way of electronic entries for dematerialisation of shares generally on weekly basis. In case of rejections, the documents are returned under objection to the Depository Participant with a copy to the shareholder and electronic entry for rejection is made by RTA in the Depository System.

xvii) Distribution of Shareholding as on 31st March, 2009

No. of Shares No. of Shareholders No. of Shares

0-2500 8,190 2,021,221

2501-5000 111 407,293

5001-10000 29 215,713

10001-100000 42 1,323,499

100001 and above 39 62,875,020

Total 8,411 66,842,746

xviii) Pattern of Shareholding as on 31st March, 2009

S. No. Category No. of Shares %

1. Promoters, Relatives & 45,451,699 68.00 Associates2. Institutional Investors (FIIs, 11,554,491 17.29 Banks & Mutual Funds)3. Domestic Companies 5,403,079 8.084. Indian Public 2,876,080 4.305. NRIs / OCBs / Foreign 1,527,450 2.29 Corporate Bodies6. Others 29,947 0.04

Total 66,842,746 100.00

Shareholding Pattern



xix) GDRs / ADRs / Warrants or other convertible instruments

No GDRs/ADRs/Warrants were outstanding as on 31st March, 2009. However, Foreign Currency Convertible Bonds (FCCBs) (US$ 50,000,000 Zero coupon Convertible Bonds due 2011) aggregating US$ 36.8 million (Rs.1,866,496,000) were outstanding as on 31st March, 2009.

xx) Plant Locations

• Bulk Vaccine facilities at Village Samalheri, Ambala-Chandigarh Highway,Lalru-140 501, Punjab.

• Pharmaceutical Formulations facility at Malpur, Baddi, Dist. Solan, Himachal Pradesh-173 205.

• Vaccines Formulations facility at Malpur, Baddi, Dist. Solan, Himachal Pradesh-173 205.

• Vaccines Formulations facility at A-241/242, Okhla Indl. Area, Phase I, New Delhi - 110 020.

• Pharmaceutical Formulations facility at B-1/E-12, Mohan Co-operative Indl. Estate, Mathura Road, New Delhi - 110 044.

xxi) Address for correspondence

For transfer/ Skyline Financial Services Pvt. Ltd. dematerialisation of shares, 246, Sant Nagar, 1st Floor, ISKCON Temple Road, payment of dividend and any East of Kailash, New Delhi – 110 065, India.other query relating to shares Phone : +91-11-26292681-84 Tele-fax : +91-11- 26292681 E-mail : [email protected], [email protected] investors assistance The Company Secretary Panacea Biotec Limited B-1 Extn./G-3, Mohan Co-operative Indl. Estate, Mathura Road, New Delhi - 110 044, India.

Phone : +91-11-41679000 Extn. 2081 (D) 41578024 Fax : +91-11-41679075, 41679070 E-mail : [email protected] [email protected]

Contact Person : Mr. Vinod Goel, G.M. Legal & Company Secretary/ Ms. Sangeeta Nagpal, Deputy Manager-Secretarial.

For query relating to : Mr. Chandresh Ohrifinancial matters Manager - Banking & Treasury Phone : +91-11-41679000 Fax : +91-11-41679066, 41679070 E-mail : [email protected]

Annexure - I

Declaration under Clause 49-I (D) of the Listing Agreement

To

The Members of Panacea Biotec Ltd.

I hereby declare that all the Board Members and the Senior Management Personnel of the Company have affirmed the compliance with the provisions of the Code of Conduct for the period ended 31st March, 2009.

For Panacea Biotec Ltd.

Date : 27th May, 2009 Ravinder JainPlace : New Delhi Managing Director


Place : New Delhi Soshil Kumar JainDate : 30th July, 2009 Chairman



Annexure - II

Certificate from Managing Director & Chief Financial Officer

To

The Board of DirectorsPanacea Biotec Limited

We do hereby confirm and certify that:

(a) We have reviewed financial statements and the cash flow statement for the year and that to the best of our knowledge and belief:

i) These statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

ii) These statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards, applicable laws and regulations.

(b) There are, to the best of our knowledge and belief, no transactions entered into by the company during the year which are fraudulent, illegal or violative of the company’s code of conduct.

(c) We accept responsibility for establishing and maintaining internal controls and that we have evaluated the effectiveness of the internal control systems of the company and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of internal controls, if any, of which we are aware of and the steps we have taken or propose to take to rectify these deficiencies.

(d) We have indicated to the auditors and the Audit committee:

i) significant changes in internal control during the year;

ii) significant changes in accounting policies during the year and that the same have been disclosed in the notes to the financial statements; and

iii) instances of significant fraud of which we are aware and the involvement therein, if any, of the management or an employee having a significant role in the company’s internal control system.

For Panacea Biotec Ltd.

Date : 27th May, 2009 Ravinder Jain I.K. SharmaPlace : New Delhi Managing Director DGM (Accounts & Finance)

AUDITORS’ CERTIFICATE

To

The Members of Panacea Biotec Limited

We have examined the compliance of conditions of Corporate Governance by Panacea Biotec Limited, for the year ended on 31st March 2009, as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchange(s).

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement.

We state that no investor’s grievance is pending for a period exceeding one month against the Company as per the records maintained by the Shareholders/ Investors’ Grievance Committee.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

Dass Gupta & AssociatesChartered Accountants

Per

Raaja JindalPlace : New Delhi PartnerDate : 30th July, 2009 Membership No. 504111



To the Members of Panacea Biotec Limited

1. We have audited the attached balance sheet of Panacea Biotec Limited (“the Company”) as at March 31, 2009 and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Without qualifying our opinion, we draw attention to:

a) Note 3(ii) of Schedule XXC to the financial statements regarding non-provision of proportionate premium on redemption of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ amounting to Rs.470,992,269. The same has been disclosed as a contingent liability. Management has represented, that the redemption premium will be offset against the securities premium account and, hence, no adjustments have been considered in the accounts.

b) Note 17 of Schedule XXC to the financial statements regarding capitalization of expenditure on clinical trials amounting to Rs.123,978,449. The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the Company. Pending such final approval, no adjustments have been made to the accompanying financial statements.

c) Note 5(b) of Schedule XXC to the financial statements, The Company has incurred managerial remuneration of Rs.63,035,463 during the year, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs.38,169,706. The Company has made an application to the appropriate regulatory authorities in this regard, for payment of such excess remuneration to managerial personnel. Pending the final outcome of the Company’s application, no adjustments have been made to the accompanying financial statements in this regard.

5. Further to our comments in the annexure referred to in para 3 above, we report that: -

i) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit;

ii) in our opinion, proper books of account as required by law, have been kept by the Company, so far as appears from our examination of the books;

iii) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;

iv) in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report, comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956;

v) on the basis of written representations received from the

directors, as on March 31, 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

vi) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the balance sheet, of the state of the affairs of the Company as at March 31, 2009;

b) in the case of the profit and loss account, of the loss for the year ended on that date; and

c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

For S.R. Batliboi & Co. Chartered Accountants

per Manoj Gupta New Delhi PartnerMay 27, 2009 Membership No. 83906

Annexure referred to in paragraph [3] of our report of even date, Re: Panacea Biotec Limited

i) a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

b) All fixed assets have not been physically verified by the management during the year but there is a regular program of verification, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed in respect of the fixed assets physically verified during the year.

c) There was no substantial disposal of fixed assets during the year.

ii) a) The management has conducted physical verification of inventory at reasonable intervals during the year.

b) The procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company is maintaining proper records of inventory and no material discrepancies were noticed on physical verification.

iii) a) The Company has granted loan to three companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.819,644,921 and the year-end balance of loans granted to such parties was Rs.819,644,921.

b) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

c) The loans granted are re-payable on demand. As informed, the company has not demanded repayment of any such loan during the year, thus, there has been no default on the part of the parties to whom the money has been lent. The payment of interest (whenever due) for loans has been regular.

d) There is no overdue amount of loans granted to companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956.

e) The Company has taken loan from one partnership

AUDITORS’ REPORT



firm covered in the register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs.533,428,059 and the year-end balance of loans taken from such parties was Rs.300,000,000.

f ) In our opinion and according to the information and explanations given to us, the rate of interest and other terms and conditions for such loans are not prima facie prejudicial to the interest of the Company.

g) In respect of loans taken, repayment of the principal amount is as stipulated and payment of interest has been regular.

iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas.

v) a) According to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Act that need to be entered into the register maintained under section 301 have been so entered.

b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rupees five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of sections 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under, to the extent applicable, have been complied with. We are informed by the management that no order has been passed by the Company Law Board, National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

viii) We have broadly reviewed the books of account maintained by the Company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained.

ix) a) Undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, custom duty, excise duty, cess have generally been regularly deposited with the appropriate authorities except for slight delay in few cases, where amount involved is not significant, in the depositing of Value added tax (VAT), employees’ state insurance and service tax.

b) According to the information and explanations given to us there are no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

c) According to the records of the Company, the dues

outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute, are as follows:

x) The Company has no accumulated losses at the end of the financial year and it has not incurred cash losses in the current and immediately preceding financial year.

xi) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

xii) According to the information and explanations given to us and based on the documents and records produced to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the Company is not a chit fund or a nidhi/ mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Order are not applicable to the Company.

xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.

xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi) Based on information and explanations given to us by the management, term loans were applied for the purpose for which the loans were obtained.

xvii) According to the information and explanations given to us and on overall examination of the balance sheet and cash flow statement of the Company, we report that no funds raised on short-term basis have been used for long term investments.

xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under Section 301 of the Companies Act, 1956.

xix) The Company has unsecured ‘Zero Coupon Convertible Bonds due 2011’ outstanding during the year on which no security or charge is required to be created.

xx) We have verified that the end use of money raised by public issues is as disclosed in the notes to the financial statements (Refer Note 3(iii) of Schedule XXC to Financial Statements).

xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.

For S.R. Batliboi & Co.

Chartered Accountants

per Manoj Gupta

New Delhi Partner

May 27, 2009 Membership No. 83906

ANNEXURE TO THE AUDITORS’ REPORT

Name of Nature Amount (Rs.) Period to Forum where the statute of dues which the dispute amount relates is pending

Income Tax Demand raised by 50,000 Assessment Appeal pending Act, 1961 Assessing Officer Year 2005-06 with CIT (Appeals)

Income Tax Demand raised by 60,557 Assessment Appeal pending Act, 1961 Assessing Officer Year 2006-07 with CIT (Appeals)The Finance Demand raised by 29,789,842 Financial Year Pending with Act, 1994 Assessing Officer 2003-04 to 2007-08 Assessing Officer



Amount in Rs.

Schedule As at As at No. 31st March, 2009 31st March, 2008

BALANCE SHEET AS AT 31st MARCH, 2009

The Schedules referred to above and notes thereon form an integral part of the Balance Sheet.

As per our attached report of even date

S.R. Batliboi & Co. For and on behalf of the BoardChartered Accountants Ravinder Jain Managing Directorper Manoj GuptaPartner I.K. Sharma Dr. Rajesh JainMembership No. 83906 D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod GoelDated : May 27, 2009 G.M. Legal & Company Secretary

SOURCES OF FUNDS

1 Shareholders’ Funds

Share Capital I 66,786,312 66,786,312

Reserves and Surplus II 6,084,706,629 6,151,492,941 6,905,260,347 6,972,046,659

2 Loan Funds

Secured Loans III 4,835,939,044 2,070,352,415

Unsecured Loans IV 2,166,996,000 7,002,935,044 1,912,075,828 3,982,428,243

3 Deferred Tax Liability (Net) 333,785,665 595,029,653

(Refer note no.7 of Schedule XXC)

Total 13,488,213,650 11,549,504,555

APPLICATION OF FUNDS

1 Fixed Assets V

Gross Block 7,411,174,436 4,658,106,038

Less : Depreciation/Amortisation 2,170,081,361 1,476,040,319

Net Block 5,241,093,075 3,182,065,719

Capital Work-in-Progress (including Capital Advances) 1,697,610,032 6,938,703,107 2,161,628,242 5,343,693,961

2 Investments VI 2,165,697,596 2,049,308,818

3 Foreign Currency Monetary item Translation 95,961,134 - Difference Account (net of amortisation) (Refer note no.2 of Schedule XXB and note no.19 of Schedule XXC)

4 Current Assets, Loans & Advances VII

Inventories 4,478,012,741 2,116,423,533

Sundry Debtors 1,238,801,509 1,482,608,423

Cash and Bank Balances 594,809,396 1,411,802,807

Other Current Assets 54,409,736 29,548,820

Loans and Advances 1,303,765,120 404,505,998

Sub-total (A) 7,669,798,502 5,444,889,581

Less : Current Liabilities and Provisions VIII

Current Liabilities 1,528,090,478 1,077,957,657

Provisions 1,857,508,130 215,764,467

Sub-total (B) 3,385,598,608 1,293,722,124

Net Current Assets (A)-(B) 4,284,199,894 4,151,167,457

5 Miscellaneous Expenditure IX 3,651,919 5,334,319

(To the extent not written off or adjusted)

Total 13,488,213,650 11,549,504,555

Significant Accounting Policies and Notes XX to Accounts



PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED ON 31st MARCH, 2009 Amount in Rs.

Schedule For the year ended For the year ended No. 31st March, 2009 31st March, 2008

The Schedules referred to above and notes thereon form an integral part of the Profit & Loss Account.




INCOME

Turnover (Gross) X 7,753,017,108 8,342,198,952

Less: Excise Duty 18,845,112 7,734,171,996 37,756,574 8,304,442,378

Other Income XI 259,677,471 371,741,692

Total 7,993,849,467 8,676,184,070

EXPENDITURE

Purchases of Traded Goods 155,870,989 172,969,336

Raw and packing material consumed XII 2,951,977,608 3,463,719,981

Operating and other expenses XIII 3,350,885,603 745,519,847

(Increase)/ Decrease in inventories XIV (446,904,922) 21,787,534

Personnel Expenses XV 916,095,844 924,897,239

Selling and Distribution Expenses XVI 434,544,751 451,093,211

Research and Development Expenses XVII 669,944,045 541,856,120

Financial Expenses XVIII 347,420,187 150,139,383

Depreciation/ Amortisation V 536,073,835 298,660,739

Miscellaneous Expenditure written off IX 1,682,400 1,682,400

during the year

Total 8,917,590,340 6,772,325,790

Profit / (Loss) before tax (923,740,873) 1,903,858,280

Provision for Income Tax - 330,000,000

Deferred Income Tax (Credit)/ Charge (261,243,988) 211,160,506

(Refer note no.7 of Schedule XXC)

Provision for Fringe Benefit Tax 28,000,000 31,000,000

Profit / (Loss) after Tax (690,496,885) 1,331,697,774

Add : Balance brought forward from previous year 2,845,720,793 1,725,221,144

Profit available for Appropriations 2,155,223,908 3,056,918,918

APPROPRIATIONS

Dividend

Equity Shares - Proposed (not liable to TDS) - 66,693,746

Dividend Distribution Tax - 11,334,602

Transfer to General Reserve - 133,169,777

Balance carried to Balance Sheet 2,155,223,908 2,845,720,793

Basic Earnings per Share XIX (10.35) 20.14

Diluted Earnings per Share XIX (10.35) 18.85

Face/ Nominal Value per Share 1.00 1.00

Significant Accounting Policies and Notes XX

to Accounts



Amount in Rs.

As at As at 31st March, 2009 31st March, 2008

SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT

Schedule I - Share CapitalAuthorisedComprising of

i. 125,000,000 (Previous Year 125,000,000)

Equity Shares of Re.1 each 125,000,000 125,000,000

ii. 110,000,000 (Previous year 110,000,000)

Preference Shares of Rs.10 each 1,100,000,000 1,100,000,000

1,225,000,000 1,225,000,000

Issued and Subscribed66,842,746 (Previous Year 66,842,746)

Equity Shares of Re.1 each 66,842,746 66,842,746

66,842,746 66,842,746

Paid up66,693,746 (Previous Year 66,693,746) Equity Shares

of Re.1 each fully paid up 66,693,746 66,693,746

Add: Forfeited Shares

(14,900 Shares @ Rs.10 each forfeited on May 15, 1999,

which were later on sub-divided into 149,000 Equity

Shares of Re.1 each on February 12, 2003) 92,566 66,786,312 92,566 66,786,312

(149,000 Forfeited Shares have been allotted on 24th August, 2005 in the name of

employees of the Company (in their capacity as Company’s nominees/trustees) for sale

thereof at the prevailing market prices through recognised Stock Exchanges on the

terms & conditions as specified by Managing/ Joint Managing Directors or Director of

the Company and reimbursement of net sales proceeds to the company account)

(Out of the above shares, 1,814,240 Equity Shares of Rs.10 each were issued as fully paid up

bonus shares by capitalisation of General Reserves in earlier years, which were later on

sub-divided into 18,142,400 Equity Shares of Re.1 each on February 12, 2003)

66,786,312 66,786,312

Schedule II - Reserves and SurplusCapital Redemption Reserve 1,016,849,140 1,016,849,140

Securities Premium

Amount as per last Balance Sheet 2,762,712,068 2,436,230,310

Add: Credited Upon Issue of Equity Shares on - 2,762,712,068 326,481,758 2,762,712,068

conversion of FCCBs

General Reserve

Amount as per last Balance Sheet 279,978,346 146,808,569

Add: Transfer from Profit & Loss Account - 133,169,777

Less: Exchange Differences of earlier years capitalised to 37,586,515 -

Fixed Assets (Net of Depreciation Rs.1,609,882) (Refer

note no. 2 of Schedule XXB and note no. 19 of

Schedule XXC)

Less: Exchange Differences of Earlier Years Transferred to 92,470,318 149,921,513 - 279,978,346

the “Foreign Currency Monetary Item Translation

Difference Account” (Refer note no. 2 of Schedule XXB

and note no. 19 of Schedule XXC)

Balance in Profit & Loss Account 2,155,223,908 2,845,720,793

6,084,706,629 6,905,260,347



SCHEDULES TO BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs.


Schedule III - Secured Loans1. Foreign Currency Term Loans (from Banks)

i) State Bank of India 2,028,800,000 802,100,000

(Due within one year Rs. nil (Previous Year Rs. nil))

Interest Accrued and Due 12,416,668 4,974,265

ii) State Bank of Travancore 1,272,932,614 1,006,525,285


2. Working Capital Loans from Scheduled Banks 1,521,789,762 256,752,865

4,835,939,044 2,070,352,415

Notes:

1. Foreign Currency Term Loans from State Bank of India and State Bank of Travancore are secured by way of first pari-passu charge by hypothecation

of the Company’s entire movables fixed assets, both present and future and mortgage of immovable properties of the Company being land

admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali)

(formerly Tehsil Rajpura, District Patiala), Punjab.The process for creation of first pari-passu charge by way of mortgage of immovable properties

situated at Baddi, Himanchal Pradesh is in progress. Foreign Currency Term Loans from State Bank of India is also collaterally secured by personal

guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep Jain.

2. Working Capital Loans from Scheduled Banks are secured by way of first pari-passu charge by hypothecation of all current assets and also by way of

2nd pari-passu charge on all the movable fixed assets(including machinery and spares) of the company and existing immovable fixed assets of the

Company being land admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District

S.A.S. Nagar (Mohali) (formerly Tehsil Rajpura, District Patiala), Punjab. The process for creation of second pari-passu charge by way of mortgage

of immovable properties situated at Baddi, Himanchal Pradesh is in progress. These are also collaterally secured by personal guarantees of the

Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr. Rajesh Jain and Mr. Sandeep Jain.

Schedule IV - Unsecured LoansFixed Deposits* 300,500,000 436,110,000

(Due within one year Rs.55,000,000

(Previous year Rs.432,500,000))

Interest accrued and due - 101,828

Other Loans:

Foreign Currency Convertible Bonds**

US$ 36,800,000 (Previous Year US$ 36,800,000) 1,866,496,000 1,475,864,000

Zero Coupon Convertible Bonds due 2011


2,166,996,000 1,912,075,828

Note:

* includes Rs.300,000,000 (Previous Year Rs.432,500,000) from partnership firm in which some directors and their relatives are partner.

** Unless previously converted, redeemed or repurchased & cancelled, the remaining FCCBs of US $ 36,800,000,which were issued on 13.02.2006, will

be redeemed on Feb 14, 2011 at 142.80% of their outstanding principal amount.



Sche

dule

V -

Fix

ed A

sset

s

(Am

ount

in R

s.)

DESC

RIPT

ION

GROS

S BLO

CK

DEPR

ECIA

TION

/AM

ORTI

SATI

ON

NET B

LOCK

As

At

Addi

tions

Sa

le/A

djus

tmen

t Ot

her

As A

t As

At

Prov

ided

Sa

le /

Othe

r As

At

As A

t As

At

01

/04/

2008

du

ring

durin

g M

ovem

ents

**

31/0

3/20

09

01/0

4/20

08

durin

g Ad

just

men

ts

Mov

emen

ts**

31

/03/

2009

31

/03/

2009

31

/03/

2008

th

e Yea

r*

the Y

ear

th

e Yea

r du

ring

the Y

ear

A. Ta

ngib

le A

sset

s

Land

- Fr

eeho

ld

211,

268,

961

109,

797,

298

27,5

29,9

75

(45,

339)

29

3,49

0,94

5 -

- -

- -

293,

490,

945

211,

268,

961

Land

- Le

aseh

old

16,3

95,6

90

38,4

36,5

40

- -

54,8

32,2

30

461,

198

371,

417

- -

832,

615

53,9

99,6

15

15,9

34,4

92

Build

ings

93

5,35

9,58

0 80

1,20

8,23

4 1,

299,

258

(1,5

52,9

44)

1,73

3,71

5,61

2 19

5,40

1,78

1 11

6,14

7,31

3 22

,185

(1

55,2

94)

311,

371,

615

1,42

2,34

3,99

7 73

9,95

7,79

9

Leas

edho

ld Im

prov

emen

t 76

,765

,577

1,

717,

923

- (5

56)

78,4

82,9

44

64,2

83,5

01

7,06

2,58

6 -

(56)

7

1,34

6,03

1 7,

136,

913

12,4

82,0

76

Plan

t & M

achi

nery

2,

562,

816,

962

1,69

2,78

9,32

5 7,

260,

437

(9,6

74,5

42)

4,23

8,67

1,30

8 78

7,19

7,23

8 45

9,04

4,57

7 3,

865,

000

(1,3

45,7

29)

1,24

1,03

1,08

6 2,

997,

640,

222

1,77

5,61

9,72

4

Furn

iture

& Fi

tting

s 22

7,96

5,25

7 60

,175

,931

76

,076

(1

79,8

70)

287,

885,

242

101,

858,

862

33,1

41,3

24

(60,

741)

(3

2,55

6)

135,

028,

371

152,

856,

871

126,

106,

395

Vehi

cles

119,

594,

971

27,6

78,9

65

8,42

9,47

6 (3

2,53

8)

138,

811,

922

58,6

10,4

49

19,1

19,9

52

5,46

1,66

7 (8

,424

) 72

,260

,310

66

,551

,612

60

,984

,522

Offic

e Equ

ipm

ents

17

9,87

3,88

2 25

,174

,489

-

(61,

083)

20

4,98

7,28

8 65

,137

,502

19

,191

,198

51

,289

(8

,497

) 84

,268

,914

12

0,71

8,37

4 11

4,73

6,38

0

Com

pute

r Equ

ipm

ents

14

3,23

5,78

4 24

,015

,362

19

6,66

6 (1

48,3

14)

166,

906,

166

98,1

88,4

98

24,3

92,9

65

112,

023

(59,

326)

12

2,41

0,11

4 44

,496

,052

45

,047

,286

TOTA

L 4,

473,

276,

664

2,78

0,99

4,06

7 44

,791

,888

(1

1,69

5,18

6)

7,19

7,78

3,65

7 1,

371,

139,

029

678,

471,

332

9,45

1,42

3 (1

,609

,882

) 2,

038,

549,

056

5,15

9,23

4,60

1 3,

102,

137,

635

Capi

tal W

ork i

n Pr

ogre

ss

1,04

9,89

1,10

6 1,

730,

414,

107

PREV

IOUS

YEAR

3,

686,

176,

073

802,

170,

149

15,0

69,5

58

4,

473,

276,

664

973,

362,

236

405,

079,

585

7,30

2,79

2 -

1,37

1,13

9,02

9 3,

102,

137,

635

2,71

2,81

3,83

7

B. In

tang

ible

Ass

ets

Pate

nts, T

rade

mar

ks &

Des

igns

53

,618

,444

4,

584,

400

- -

58,2

02,8

44

43,3

90,5

36

3,03

0,79

0 -

- 46

,421

,326

11

,781

,518

10

,227

,908

Softw

ares

77

,328

,159

8,

076,

565

- -

85

,404

,724

40

,861

,450

13

,254

,435

(3

,105

) -

54,1

18,9

90

31,2

85,7

34

36,4

66,7

09

Web

site

9,20

2,69

5 -

- -

9,20

2,69

5 9,

202,

695

- -

- 9,

202,

695

- -

Prod

uct D

evel

opm

ent

44,6

80,0

76

15,9

00,4

40

- -

60,5

80,5

16

11,4

46,6

09

10,3

42,6

85

- -

21,7

89,2

94

38,7

91,2

22

33,2

33,4

67

TOTA

L 18

4,82

9,37

4 28

,561

,405

-

- 21

3,39

0,77

9 10

4,90

1,29

0 26

,627

,910

(3

,105

) -

131,

532,

305

81,8

58,4

74

79,9

28,0

84

Capi

tal W

ork i

n Pr

ogre

ss

647,

718,

926

431,

214,

135

PREV

IOUS

YEAR

14

0,38

7,00

5 44

,442

,369

-

- 18

4,82

9,37

4 79

,971

,960

24

,929

,330

-

- 10

4,90

1,29

0 79

,928

,084

60

,415

,045

TOTA

L (A+

B)

4,65

8,10

6,03

8 2,

809,

555,

472

44,7

91,8

88

(11,

695,

186)

7,

411,

174,

436

1,47

6,04

0,31

9 70

5,09

9,24

2 9,

448,

318

(1,6

09,8

82)

2,17

0,08

1,36

1 5,

241,

093,

075

3,18

2,06

5,71

9

Capi

tal W

ork i

n Pr

ogre

ss

1,69

7,61

0,03

2 2,

161,

628,

242

PREV

IOUS

YEAR

3,

826,

563,

078

846,

612,

518

15,0

69,5

58

- 4,

658,

106,

038

1,05

3,33

4,19

6 43

0,00

8,91

5 7,

302,

792

- 1,

476,

040,

319

3,18

2,06

5,71

9 2,

773,

228,

882

Note

s:

1. Fr

eeho

ld La

nd in

clude

s Lan

d am

ount

ing

to R

s.17,

285,

690

(Pre

vious

Year

Rs.

17,2

85,6

90) p

endi

ng re

gist

ratio

n in

the n

ame o

f the

Com

pany

.2.

Build

ing

inclu

des O

ffice

Pre

mise

s am

ount

ing

to R

s. 15

5,89

2,40

0(Pr

evio

us Ye

ar R

s. 1,

429,

032)

pen

ding

regi

stra

tion

in th

e nam

e of t

he Co

mpa

ny.

3. Pl

ant &

Mac

hine

ry in

clude

s Pla

nt &

Mac

hine

ry a

mou

ntin

g to

Rs.4

,543

,083

(Pre

vious

Year

Rs.5

,277

,132

) (N

et B

lock

) lyin

g w

ith th

ird p

artie

s.4.

Depr

ecia

tion

for t

he ye

ar in

clude

s Dep

recia

tion

on R

esea

rch &

Dev

elop

men

t Ass

ets a

mou

ntin

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Schedule VI - InvestmentsLong Term Investments (at cost)

Trade - Unquoted

1) Subsidiary Companies :

a) 1,902,160 (Previous Year 1,902,160) Equity Shares of Re.1 each fully paid in Best On Health Ltd. 22,883,050 22,883,050

b) 6,636,666 (Previous Year 5,970,000), 0.5% Optionally Convertible Non-Cumulative Redeemable Preference Shares of Re.1 each fully paid in Best On Health Ltd. 1,990,999,800 1,791,000,000

c) 5 (Previous Year Nil) Equity Shares of AED 100,000 each fully paid in Panacea Biotec FZE. 5,474,520 -

d) 3,765,701(Previous Year Nil) Equity Shares of Rs.10 each Rs.2.70 paid up in Umkal Medical Institute Pvt. Ltd. 76,143,604 -

e) Investment in Equity Shares (Previous Year Nil) of Panacea Biotec GmbH 1,582,250 -

f ) 1,000 (Previous Year Nil) Equity Shares of US $0.01 each fully paid up in Rees Investments Limited 476 2,097,083,700 - 1,813,883,050

2) Joint Venture Companies :

a) 2,295,910 (Previous Year 2,295,910) Equity Shares of Rs.10 each fully paid up in Chiron Panacea Vaccines Pvt. Ltd. 22,959,100 22,959,100

b) 4,608,608 (Previous Year 4,608,608) Ordinary Shares of GBP 0.01 (Face Value) each fully paid up in Cambridge Biostability Limited, U.K. 168,068,998 168,068,998

Less : Provision for Permanent Diminution in the value of Investments [Refer note no.13 (e) of Schedule XX C] 168,068,998 22,959,100 - 191,028,098

3) 419,767 (Previous Year 419,767) Equity Shares of Rs.10 each fully paid in PanEra Biotec Pvt. Ltd. (formerly known as Panheber Biotec Pvt. Ltd.) 4,197,670 4,197,670

4) 20,000 (Previous Year 20,000) Equity Shares of Rs.10 each fully paid up in Shivalik Solid Waste Management Ltd. 200,000 200,000

Non-Trade - Unquoted

1) Investment in Capital of Partnership Firm - 40,000,000

Lakshmi & The Manager

2) 41,257,126 (Previous Year Nil) Equity Shares of Re.1 each fully paid up in Lakshmi & Manager Holdings Ltd* 41,257,126 -

2,165,697,596 2,049,308,818

*Company under the same management as defined under section 370 (1B) of the Companies Act, 1956

Notes: 1. The aggregate amount of unquoted investments is Rs.2,165,697,596 (net of Provision for Permanent Diminution in the value of Investments of

Rs.168,068,998) (Previous year Rs.2,049,308,818).2. The Company has formed a new subsidiary Panacea Biotec Inc. in USA. Even though the subsidiary has been incorporated, no investment has yet

been made as on March 31, 2009.3. The names of all the partners of the Partnership Firm, ‘Lakshmi & The Manager’, total capital of the firm and the share of each partner was as under: Partners Capital Sharing Ratio Panacea Biotec Ltd. 40,000,000 40% Mr. Ravinder Jain 19,000,000 19% Mrs. Radhika Jain 20,000,000 20% Mrs. Sunanda Jain 18,000,000 18% Mrs. Meena Jain 2,000,000 2% Mrs. Shilpy Jain 1,000,000 1% Total 100,000,000 100%





Schedule VII - Current Assets, Loans & AdvancesInventoriesi) Raw Materials (including Packing Materials) 3,206,780,619 1,320,981,788 (Including lying with third parties Rs.34,062,940 (Previous Year Rs.57,098,748))ii) Finished Goods 985,858,105 684,208,806 (Including goods in transit of Rs.1,192,568 (Previous Year Rs. Nil) & lying with third parties Rs.844,654 (Previous Year Rs.187,528)iii) Work in Progress (Including lying with third parties 202,833,537 57,577,914 Rs.67,135,348 (Previous Year Rs.9,268,214))iv) Stores & Spare Parts 82,540,480 4,478,012,741 53,655,025 2,116,423,533Sundry Debtors (Refer note no 8 (i) & (iii) of Schedule XX C) (Unsecured, Considered good, unless otherwise stated) Over six months (including Rs.3,108,712 considered doubtful of recovery (Previous year Rs.2,858,916)) 83,409,270 9,572,864Others Debts 1,158,500,951 1,475,894,475 1,241,910,221 1,485,467,339Less : Provision for Bad & Doubtful Debts 3,108,712 1,238,801,509 2,858,916 1,482,608,423Cash and Bank Balancesi) Cash balance on hand 579,589 1,449,297ii) Balance with scheduled banks a) On Current Accounts 25,557,539 33,723,242 b) On Unpaid Dividend Accounts* 1,583,956 1,536,608 c) On Fixed Deposits** 70,467,843 1,250,968,300 d) On Exchange Earner Foreign Currency 496,620,469 594,809,396 124,125,360 1,411,802,807 Current Accounts *Not available for use by the company as they represent corresponding unpaid dividend liabilities**Fixed Deposits amounting to Rs.1,024,123 (previous year Rs.968,300) are pledged with Banks and various Government Authorities.

Other Current AssetsExport Benefits receivable 25,521,973 19,402,794Interest accrued but not due on Loans & Deposits 36,163,233 10,146,026Less : Provision for doubtful of recovery (Refer note no.13 (e) 7,275,470 54,409,736 - 29,548,820 of Schedule XX C)) Loans and Advances(Unsecured, considered good, unless otherwise stated)Advances recoverable in cash or in kind or for value to 116,431,593 103,463,997 be received (Including Rs.818,322 (Previous Year Rs.818,322 ) considered doubtful))Due from PanEra Biotec Pvt. Ltd. (Formerly known as 153,950,194 135,532,654 Panheber Biotec Private Ltd.) * (Including Rs.135,532,654 (Previous Year Rs.135,532,654) considered doubtful))Balance with Excise, Custom etc. 15,027,362 24,870,402Loans & Advances to Subsidiary Company ** 710,811,071 -Loan to Joint Venture Company 108,833,850 39,778,050Staff Loans & Advances (including Rs.4,191,959 16,333,010 18,245,508 (Previous Year Rs.4,191,959) considered doubtful)) 1,121,387,080 321,890,611Less : Provision for Doubtful Loans & Advances (Refer note 108,833,850 - no.13 (e) of Schedule XX C)Less : Provision for Bad & Doubtful Advances 140,542,935 140,542,935 872,010,295 181,347,676Security Deposits 20,534,409 21,892,190Advance Income Tax (Net of Provision of Rs.1,168,500,000 411,220,416 1,303,765,120 201,266,132 404,505,998 (Previous year Rs.1,168,500,000)) 7,669,798,502 5,444,889,581

*Company`s two Directors are also directors in PanEra Biotec Private Limited (Formerly Known as Panheber Biotec Pvt. Ltd.). **Advances include due from Company under the Same Management (wholly owned subsidiary company) as defined under section 370(1B) of the Companies Act, 1956. Refer note no.8(i) & (ii) of Schedule XX C.



Amount in Rs.



Amount in Rs.

For the year ended For the year ended 31st March, 2009 31st March, 2008

Schedule X - TurnoverSales 7,730,417,599 8,338,331,922Services (R&D Income) 1,699,562 3,867,030Income from Contract Manufacturing 20,899,947 - 7,753,017,108 8,342,198,952

Schedule VIII - Current Liabilities & ProvisionsA. Liabilities

i) Acceptances 1,115,093,540 336,979,264

ii) Sundry Creditors

a) Dues to Micro & Small Enterprises 1,274,843 1,177,455 (Refer note no.6 of Schedule XX C)

b) Dues to other than Micro & Small Enterprises 358,326,378 631,043,756

iii) Payable to Subsidiary Company 202,620 3,079,105

iv) Advances from Customers 5,367,817 7,595,465

v) Deposits from C & F Agents 15,195,000 15,158,000

vi) Unpaid dividend on Equity Shares* 1,585,056 1,536,608

vii) Other Liabilities 31,002,816 81,388,004

viii) Interest accrued but not due on Loans / Deposits 42,408 1,528,090,478 - 1,077,957,657 * This amount does not include amount due/outstanding

to be credited to Investor Education & Protection Fund, same shall be credited as and when due

B. Provisions

i) Provision for Wealth Tax 913,479 832,746

ii) Provision for Fringe Benefit Tax (Net of Advance 5,045,455 2,349,330 payment of Rs.100,954,545 (Previous year Rs.75,650,670))

iii) Proposed Dividend on Equity Shares - 66,693,746

iv) Provision for Dividend Distribution Tax - 11,334,602

v) Provision for Gratuity 56,754,771 57,679,075

vi) Provision for Leave Encashment 51,690,425 36,374,968

vii) Provision for Open Derivative Contracts 1,743,104,000 1,857,508,130 40,500,000 215,764,467

3,385,598,608 1,293,722,124

Schedule IX - Miscellaneous Expenditure(To the extent not written off or adjusted)

i) License fees

As per last Balance Sheet 5,334,319 7,016,719

Less: Written off during the year 1,682,400 3,651,919 1,682,400 5,334,319

3,651,919 5,334,319





Schedule XI - Other IncomeInterest received - - from Banks (Tax deducted at source Rs.25,897,168 (Previous year Rs.8,955,419)) 121,771,587 42,725,158 - from Inter Company Loans / Deposits (Tax deducted at 45,756,516 3,093,565 source Rs. Nil (Previous year Rs.226,646)) - on Income Tax Refund - 6,527,472 - from others* (Tax deducted at source Rs. Nil (Previous year Rs. Nil)) 534,417 189,117Export Incentives 30,855,454 24,814,711Miscellaneous Balances/ Provisions written back - 123,151,118Sale of Scrap 1,779,942 1,769,296Lease Rent 17,823,031 1,138,945Profit on Sale of Fixed Assets (Net of loss Rs.2,039,733 7,171,144 22,887,632 (Previous year Rs.770,491))Foreign Exchange Fluctuation Gain (Net of loss Rs. Nil (Previous year Rs.125,552,613)) - 124,807,357 Profit on Sale of Long Term Trade Investments - 8,062,060Share of Profit From Partnership Firm, in which Company was Partner 1,257,126 -Insurance Claim Received 4,430,371 8,283,596Royalty Income 9,266,380 1,235,464Dividend Received From Long Term Trade Investments (Joint Venture) 18,367,280 -Miscellaneous Income 664,223 3,056,201 259,677,471 371,741,692*Interest from others includes Rs.87,800 (Previous year Rs.64,500) from employees, Rs.188,248 (Previous year Rs.124,617) from debtors Rs.258,369(Previous year Rs. Nil) from Excise department.

Schedule XII - Raw & Packing Material ConsumedRaw & Packing Materials consumed Opening Stock 1,320,981,788 1,256,131,191 Add : Material purchased during the year 4,857,397,558 3,561,460,905 6,178,379,346 4,817,592,096 Less : Closing Stock 3,206,780,619 1,320,981,788 2,971,598,727 3,496,610,308 Less: Material consumed for Research & Development 19,621,119 32,890,327 2,951,977,608 3,463,719,981

Schedule XIII - Operating and other ExpensesProcessing Charges 35,289,443 5,843,974Analytical Testing & Trial Charges 6,995,652 11,026,412Stores & Spare Parts consumed (Refer note no.4 of Schedule XX C) 57,939,559 45,981,822Power & Fuel (Refer note no.4 of Schedule XX C) 112,167,409 96,918,851Repair & Maintenance (Refer note no.4 of Schedule XX C) -Buildings 16,628,948 19,041,472 -Plant & Machinery 22,609,114 23,277,261 -Others 28,139,583 67,377,645 26,284,547 68,603,280Rent (Refer note no.4 of Schedule XX C) 53,248,013 51,749,980Royalty 14,742,764 4,385,550Directors’ Sitting Fees 345,000 340,000Printing & Stationery 40,206,382 31,434,720Postage & Communication expenses 45,366,215 39,061,671Insurance 41,379,420 42,761,472Travelling & Conveyance expenses (Refer note no.4 of Schedule XX C) 103,288,987 101,364,603Books & Periodicals 2,240,467 1,505,062Legal & Professional charges (Refer note no.4 of Schedule XX C) 108,984,641 72,094,552Vehicle Running & Maintenance 17,147,781 14,765,877Auditors’ Remuneration: (Refer note no.14 of Schedule XX C) -Statutory Audit Fee 3,309,000 3,400,060 -Limited Review Fees 1,685,400 1,348,320 -Out of pocket expenses 161,721 69,317 -Others 134,832 5,290,953 113,217 4,930,914Rates & Taxes (Refer note no.4 of Schedule XX C) 15,252,931 9,486,175Donation 3,408,970 6,550,004Subscription 13,700,941 12,226,353Staff Training & Recruitment 31,477,974 29,976,294Bad Debts & Advances written off 72,285 -Provision for Doubtful Debts & Advances 116,494,114 27,044,708Wealth Tax 936,368 832,746Foreign Exchange Fluctuation Loss {Net of Gain 557,888,608 - Rs.214,791,328 (Previous year Rs. Nil)}Provision for Loss on Open Derivative Contracts 1,702,604,000 40,500,000Provision for Permanent Diminution in the value of 168,068,998 - Investments (Refer note no.13 (e) of Schedule XX C))Miscellaneous expenses (Refer note no.4 of Schedule XX C) 28,970,083 26,134,827 3,350,885,603 745,519,847



Amount in Rs.



Schedule XIV - (Increase)/ Decrease In InventoriesClosing Stock: Finished Goods 985,858,105 684,208,806 Work in Progress 202,833,537 1,188,691,642 57,577,914 741,786,720Less: Opening Stock Finished Goods 684,208,806 713,506,988 Work in Progress 57,577,914 741,786,720 50,067,266 763,574,254 (446,904,922) 21,787,534

Schedule XV - Personnel ExpensesSalary, Wages and Bonus* (Refer note no.4 of Schedule XX C) 837,086,165 834,390,802Contribution to Provident and other Funds 26,949,018 22,070,028Workmen/Staff Welfare expenses 39,995,607 35,339,196Gratuity 12,065,054 33,097,213 916,095,844 924,897,239* For Director’s Remuneration refer note no.5(a)

of Schedule XX C

Schedule XVI - Selling & Distribution ExpensesAdvertising & Sales Promotion 226,910,009 238,368,058Meetings & Conferences 62,306,063 93,088,068Freight & Cartage 64,098,422 61,294,777Commission on Sales (other than sole selling agents) 81,230,257 58,342,308 434,544,751 451,093,211

Schedule XVII - Research & Development ExpensesRaw Material & Packing Material consumed 19,621,119 32,890,327Stores & Spare Parts consumed 134,104,256 91,423,646Salary, Wages and Bonus 182,045,564 155,895,586Contribution to Provident & other Funds 4,096,340 3,607,381Workmen/Staff Welfare expenses 9,504,657 7,046,234Gratuity 1,062,491 3,287,690Analytical Testing & Trial charges 26,736,975 15,803,303Rent 6,401,077 7,569,467Printing & Stationery 2,212,425 2,591,736Postage & Communication 3,151,204 2,794,844Travelling expenses 15,897,191 12,638,102Books & Periodicals 6,317,043 3,966,683Legal & Professional expenses 12,052,167 9,158,686Vehicle Running & Maintenance 2,424,344 2,044,023Donation 30,251 1,880,651Repair & Maintenance : - Buildings 5,726,552 2,386,093 - Plant & Machinery 14,628,824 17,360,639 - Others 3,728,604 24,083,980 1,740,037 21,486,769Rates, Fees & Taxes 622,995 335,366Subscription 9,467,437 4,980,114Electricity & Water charges 33,714,494 22,390,252Meeting & Conferences 2,460,794 4,191,618Staff Training & Recruitment 765,564 815,807Bank charges - 65,407Depreciation 169,025,407 131,348,176Sundry expenses 4,146,270 3,644,252 669,944,045 541,856,120





Schedule XVIII - Financial ExpensesInterest on: a) Fixed Loans 206,237,568 88,284,701b) Others (Including interest on Working Capital Loans) 114,833,232 321,070,800 28,039,320 116,324,021Bank charges 26,349,387 33,815,362 347,420,187 150,139,383

Schedule XIX - Earning Per ShareCalculation of Profit/ (Loss) for Basic EPSNet profit/ (Loss) before Tax (923,740,873) 1,903,858,280Less: Adjustment for Tax Expense (233,243,988) 572,160,506Net profit/ (Loss) for calculation of Basic EPS (690,496,885) 1,331,697,774Weighted average number of Equity Shares in 66,693,746 66,115,919 calculating basic EPSCalculation of Profit/ (Loss) for Diluted EPSNet profit/ (Loss) for calculation of basic EPS (690,496,885) 1,331,697,774Adjusted Net Profit/ (Loss) for calculating Diluted EPS (690,496,885) 1,331,697,774No. of Equity Shares resulting from conversion of Foreign Currency Convertible Bonds‘US$50 Million Zero Coupon Convertible Bonds due 2011’ 4,542,752 4,542,752 (Outstanding US$36.8 Million) at conversion price Rs.357.57Add: Weighted average number of Equity Shares in 66,693,746 66,115,919 calculating basic EPSWeighted average number of Equity Shares in 71,236,498 70,658,671 calculating diluted EPSBasic Earnings per Share (10.35) 20.14Diluted Earnings per Share (10.35) 18.85Face / Nominal Value per Share 1.00 1.00

Schedule XX - Significant Accounting Policies and Notes on Accounts

A. Nature of OperationsPanacea Biotec Limited is one of the India’s leading research based companies engaged in the business of research, development, manufacture and marketing of Vaccines and Branded Pharmaceutical Formulations. The Company has products for various segments, which include paediatric vaccines, pain management, diabetes management and organ transplantation.

B. Significant Accounting Policies1. Basis of Preparation

The financial statements have been prepared to comply in all material respects with the Notified Accounting Standards pursuant to Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and except for the changes in accounting policies discussed more fully below, are consistent with those used in the previous year.

2. Change in Accounting Policy

For the financial year ended 31st March, 2008, the Company was charging off exchange differences arising on foreign currency monetary assets and liabilities to profit and loss account. Pursuant to Companies (Accounting Standards) Amendments Rules, 2009, the Company has exercised the option of deferring the charge of exchange difference to the Profit and Loss Account, in respect of accounting periods commencing on or after 7th December, 2006, on long-term foreign currency monetary items (i.e. monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination). As a result, such exchange differences so far as they relate to the acquisition of a depreciable capital asset have been adjusted with the cost of such asset and are being depreciated over the balance life of the asset, and in other cases, have been accumulated in Foreign Currency Monetary Item Translation Difference Account and are being amortized over the balance period of such long term asset/liability but not beyond, accounting period ending on or before 31st March 2011.

In the current year, such exchange differences, pertaining to accounting periods commencing on 1st April, 2007 and ending on 31st March, 2008 are transferred from General Reserve, to the extent they related to acquisition of depreciable capital assets are adjusted with the cost of such assets Rs.24,810,859 (net of depreciation of Rs.1,609,882) (net of tax of Rs.12,775,656) and in other cases, are transferred to the Foreign Currency Monetary Item Translation Difference Account Rs.61,039,657 (net of tax of Rs.31,430,661).



Had the Company continued to use the earlier basis of accounting for exchange differences arising on long-term foreign currency monetary items, the loss after tax for the current period would have been higher by Rs.561,174,198 (net of tax of Rs.288,960,930), the net block of fixed assets would have been lower by Rs.624,117,162 (net of depreciation of Rs.94,952,131) and general reserve would have been higher by Rs.130,056,833.

3. Use of Estimates

The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date on the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and estimates are recognized in the period in which the results are known/ materialized.

4. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have

passed to the buyer and is stated net of trade discounts, returns and Sales Tax /VAT but includes Excise Duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arisen during the year.

Research & Development - Income from Research & Development Services is accounted for as per the stage of completion.

Contract Manufacturing - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.

Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividends - Revenue is recognized when the shareholders’ right to receive payment is established by the balance sheet date. Dividend from subsidiaries is recognized even if same are declared after the Balance Sheet date but pertains to the period on or before the date of Balance Sheet, as per the requirements of Schedule VI to the Companies Act, 1956.

Royalties - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.

Export Benefits - Export entitlements under Duty Entitlement Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

5. Fixed Assets

Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

As a result of change in Accounting Policy during the year (refer note no. 2 above) in respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

6. Impairment of Fixed Assets

The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

7. Intangibles

Patents, Trademarks & Designs - Costs relating to patents, trademarks and designs, which are acquired, are capitalized.

Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Product Development – Product Development is capitalized on successful completion of development activities and commercial launch of developed products.

Technical Know how - Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.

Software and Website - Software and website is stated at cost of acquisition and includes all attributable costs of bringing them to their working condition for their intended use.

The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.

8. Depreciation / amortization

a) Depreciation on fixed assets is provided on written down value method as per the rates based on the useful life of the assets estimated by the management, or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates:




b) Amortization on intangibles is provided on the basis of the estimated useful lives as follows:-Software - Amortized on straight line basis over a period of 5 years.Websites - Amortized on straight line basis over a period of 2 years.Patents, Trade Marks & Designs - Amortized on straight line basis over a period of 7 years.Product Development - Amortized on straight line basis over a period of 5 years.Technical Know-how - Amortized on straight line basis over a period of 5 years.

c) Leasehold Land is depreciated over the period of lease or useful life, whichever is shorter.

d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.

9. Borrowing Costs

Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.

10. Leases

Where the Company is the Lessee

Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.

Where the Company is the Lessor

Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.

11. Deferred Revenue Expenditure

Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year is charged off to revenue.

12. Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments.

13. Inventories

Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.

‘Cost’ of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spares is arrived at by using ‘Moving Average Price’ method.

Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using ‘Moving Average Price’ method. Cost of finished goods includes Excise Duty.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.

14. Retirement and Other Benefits

a) Retirement benefits in the form of Provident Fund are defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for.

c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method.

Leave encashment payable /adjustable during the year is provided on the basis of last salary drawn by employees.

Actuarial gains/losses are adjusted in Profit & Loss Account and are not deferred.


Tangibles Assets WDV %

Building – Factory 10.00Building – Office Premises 5.00Plant & Machinery 13.91Furniture & Fittings 18.10Vehicles 25.89Office Equipments 13.91Computer Equipments 40.00



15. Foreign Currency Transactions

Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting such monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those monetary items as mentioned below.

Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” in the financial statements and amortized over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31st March, 2011.

Exchange differences arising on a monetary item that, in substance, form part of company’s net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses.

Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

16. Income Taxes

Tax expense comprises of current, deferred and fringe benefit tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred Income Taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.

At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

17. Earnings Per Share

Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to Equity Shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of Equity Shares outstanding during the period. Partly paid Equity Shares, if any are treated as a fraction of an Equity Share to the extent that they were entitled to participate in dividends relative to a fully paid Equity Share during the reporting period. The weighted average number of Equity Shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split, and reverse share split (consolidation of shares), if any.

For the purpose of calculating diluted Earnings per Share, the net profit or loss for the period attributable to Equity Shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential Equity Shares.

18. Provisions

A provision is recognized when the company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.




19. Segment Reporting Policies

(a) Identification of Segments:

Primary Segment

Business Segment: The Company’s operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations and Research & Development Activities.

Secondary Segment

Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.

The geographical segments considered for disclosure are as follows:

• Revenue from domestic market includes sales to customers located within India.

• Revenue from overseas market includes sales to customers located outside India.

(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.

(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.

20. Derivative Instruments

As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis, and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Profit & Loss Account. Net Gains are ignored.

21. Cash & Cash Equivalent

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

22. Expenditure on new projects and substantial expansion

Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Other indirect expenditure (including borrowing costs) incurred during the construction period which is not related to the construction activity nor is incidental thereto is charged to the Profit and Loss Account. Income earned during construction period is deducted from the total of the indirect expenditure.

All direct capital expenditure on expansion are capitalized. As regards indirect expenditure on expansion, only that portion is capitalized which represents the marginal increase in such expenditure involved as a result of capital expansion. Both direct and indirect expenditure are capitalized only if they increase the value of the asset beyond its original standard of performance.

C. Notes to Accounts (All amounts are in Rs. unless otherwise stated)

1. Contingent Liabilities (to the extent not provided for)

Particulars Current Year Previous Year

Disputed demands/ show-cause notices under:-

a) Sales Tax Cases - 13,809

b) Income Tax Cases 110,557 2,863,251

c) Customs Duty Cases 3,999,923 3,999,923

d) Central Excise Duty Cases 6,596,620 6,596,620

e) Service Tax 29,789,842 -

Total 40,496,942 13,473,603

Labour cases (in view of large number of cases, it is impracticable to 2,803,586 4,143,107 disclose each of them)

Other claims against the Company not acknowledged as debts - 64,000

Premium on Redemption of ‘US$ 50 Million Zero Coupon 470,992,269 243,706,599 Convertible Bonds due 2011’ (Refer note 3(ii) below)

Notes:

a) Sales Tax liability of Rs.13,809 was on account of non-receipt of C forms from customers for inter-state sales. No provision was required for

the same as the management was hopeful of receiving the forms before the due date of filing of Sales Tax Returns.

b) In respect of Income Tax, in Assessment Year 2005-06 the department disallowed ‘Club Expenses’ of Rs.255,800 on the ground that these

expenses were incurred in the personal names and not in the name of the company, hence not related to the business of the company in the

order under section 143(3) of the Act. The company preferred appeal before the CIT (Appeals). The CIT (Appeals) restricted the disallowance

to Rs.50,000 from Rs.2,55,800. In Assessment Year 2006-07 the department disallowed depreciation on LAN of Rs.60,557 on the ground

that depreciation on the same is allowable @25% and not @60% in the order under section 143(3) of the Act. No provision is considered

necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it.





c) In respect of Customs Duty demand of Rs.3,999,923 towards Customs Duty on certain items imported as exempted by the Company, the

Company has deposited the entire amount under protest. The matter is pending before the Honorable Supreme Court of India. No provision

is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained

by it.

d) In respect of Central Excise Duty demand of Rs.6,596,620 towards Excise Duty on common inputs used in manufacture of exempted and

taxable products, the Company has deposited the entire amount under protest. The matter is pending before Central Excise and Customs

Tribunal. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and

legal advice obtained by it.

e) In respect of service tax demand of Rs.29,789,842/- relating to foreign services rendered & delivered outside India & others services, which

were brought in service tax net w.e.f. 18.04.06 and against which numerous decisions/ judgments have been pronounced by the competent

courts/judicial authorities, the Company has sent suitable reply to the concerned authority. No provision is considered necessary in this

regard since the Company believes it has a good case based on nature of the demand and legal advice obtained by it.

2. Estimated amount of contracts remaining to be executed on Capital Account, net of advances and not provided in the books are as follows:-

S. No. Particulars Current Year Previous Year

1. Tangibles Assets 420,258,712 306,726,1082. Intangible Assets 21,946,833 90,701,180 Total 442,205,545 397,427,288

3. Foreign Currency Convertible Bonds

i) Conversion price of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ (FCCBs) has already been fixed at Rs.357.57 per Share. This Rate is used to determine dilutive Equity Shares against outstanding Bonds.

ii) ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ amounting to US$ 36,800,000 are pending for redemption as on 31st March 2009. Unless these Bonds have been previously converted, redeemed, repurchased and cancelled, the Company will redeem these Bonds at a price equal to 142.80% of the outstanding principal amount on the maturity date i.e. February 14, 2011 (including premium amounting to Rs.798,860,288). Since the redemption of bonds is contingent upon its non-conversion into Equity Shares and the probability of redemption cannot presently be ascertained, the Company has not provided for the proportionate premium on redemption for the period upto 31st March, 2009 amounting to Rs. 470,992,269 (Previous Year Rs.243,706,599). Such premium has been disclosed as contingent liability. These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date.

iii) The Company has fully utilized the issue proceeds of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ in earlier years.

Particulars As at Additions during Capitalised during As at April 1, 2008 the year the year March 31, 2009

Legal & Professional 3,681,923 168,360 3,850,283 - (2,941,783) (2,059,204) (1,319,064) (3,681,923)Store & Spares consumed 22,419,030 50,376 22,469,406 - (2,325,569) (22,126,744) (2,033,283) (22,419,030)Power & Fuel 31,254,050 357,323 31,529,249 82,124 (4,219,189) (27,922,199) (887,338) (31,254,050)Rates & Taxes 9,857,569 - 9,572,561 285,008 (285,008) (9,572,561) - (9,857,569)Repair & Maintenance : - Plant & Machinery 4,452,852 - 4,452,852 - (120,255) (4,362,741) (30,144) (4,452,852) - Others 5,861,464 773,882 6,545,065 90,281 (157,267) (5,713,075) (8,878) (5,861,464)Salary & Wages 13,191,507 - 13,191,507 - (2,335,791) (10,906,537) (50,821) (13,191,507)Office Expenses 2,733,205 73,934 2,807,139 - - (2,733,205) - (2,733,205)Travel & Conveyance Expenses 3,736,531 764,537 3,731,531 769,537 (1,003,717) (2,732,814) - (3,736,531)Rent 25,800 - 25,800 - - (25,800) - (25,800)Miscellaneous Expenses 4,444,120 4,310,572 8,754,693 - (347,310) (4,311,298) (214,488) (4,444,120)

Total 101,658,051 6,498,984 106,930,086 1,226,949 (13,735,889) (92,466,178) (4,544,016) (101,658,051)

Note: Figures in brackets represent previous year figures (2007-08)

4. Details of pre-operative expenses (included in Capital Work in Progress) relating to Fixed Assets are as follows:




5. a) Directors’ Remuneration:


Managing / Joint Managing Directors/ Whole-time Directors Salary and Allowances* 58,346,813 57,990,386Commission on Profits to Chairman/Managing Director/Joint Managing Directors - 132,000,000Perquisites (taxable value) 4,679,290 12,154,671Contribution to Provident Fund 9,360 9,360Total 63,035,463 202,154,417Non Whole-time Directors Allowances 930,000 1,072,000Sitting Fees 345,000 340,000Total 1,275,000 1,412,000Grand Total 64,310,463 203,566,417

* Provision for leave encashment and gratuity amounting to Rs.3,263,596 (Previous year Rs.3,741,971) and Rs.6,007,834 (Previous year Rs.18, 499,505) respectively, made during the year, is not included above.

b) Computation of net profit in accordance with Section 198 read with section 309(5) of the Companies Act, 1956 (“the Act”) and maximum amount permissible for managerial remuneration.

Particulars Current year Previous Year

Profit/ (Loss) as per Profit & Loss Account (before taxes & extraordinary items) (923,740,873) 1,903,858,280Add:Directors’ Remuneration 64,310,463 203,566,417Loss/ (Profit) on sale of fixed assets (net) (7,171,144) (22,887,632)Provision/ (Write back) for Doubtful Debts and Advances 384,794 27,044,708Loss/ (Profit) on Sale of Investment - (8,062,060)Net profit/ (Loss) in accordance with Section 198 of the Act (866,216,760) 2,103,519,713 Maximum amount permissible under Section 309 read with Section II of Part II of 24,865,757 210,351,971 Schedule XIII to the Act for payment to Managing/Joint Managing Directors and Whole-time DirectorsMaximum amount permissible under Section 309 of the Act for payment to 930,000* 21,035,197 Non Whole-time DirectorsTotal Allowable to Managing/ Joint Managing/ Whole-time and 25,795,757 231,387,168 Non Whole-time Directors

*This amount is as per the approvals of Ministry of Corporate Affairs , New Delhi vide their letters no. 12/301/2006-CL.VII dated 08.02.2007, F.No. 2/119/2005-CL.VII dated 16.01.2005 and 12/304/2006-CL.VII dated 08.02.2007

6. Disclosure of Micro & Small Enterprises

Details of dues to Micro, Small and Medium Enterprises as per Micro Current Year Previous Year Small and Medium Enterprise Development Act, 2006 (MSMED Act) Principal Interest Principal Interest

Principal amount and interest due thereon remaining unpaid to any supplier as at year end. 1,274,843 Nil 1,177,455 NilInterest paid by the Company in terms of section 16 of the MSMED Act along with the amounts of the payment made to the supplier beyond the appointed day during accounting year 3,552,413 68,868 4,703,195 78,680Interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under MSMED Act Nil Nil Nil NilInterest accrued and remaining unpaid at the end of the year. Nil Nil Nil NilFurther interest remaining due and payable in succeeding years, until such date when the interest dues as above are actually paid to the small enterprises for the purpose of disallowance as a deductible expenditure under section 23 of the MSMED Act Nil Nil Nil Nil



7. Deferred Tax Liabilities (Net):

The break-up of deferred tax liability is as follows:- Current Year Previous Year

Deferred Tax Liabilities:Differences in depreciation and amortization in block of fixed assets as 498,736,734 373,239,618 per Income Tax Act and books of accountsDeferred revenue expenditure 1,241,287 1,813,135Capital expenditure on research & development 267,365,739 262,159,287Forex Loss (revenue) deferred as per notification on AS-11 (Revised) 50,254,492 -Gross Deferred Tax Liabilities 817,598,252 637,212,040Deferred Tax Assets: Effect of expenditure debited to Profit and Loss Account in the current year but 47,441,741 42,182,387 allowed for tax purposes in following yearsLoss as per Income Tax Act carried forward 364,509,363 -Unabsorbed Depreciation as per Income Tax Act carried forward 71,861,483 -Gross Deferred Tax Assets 483,812,587 42,182,387Net Deferred Tax Liability 333,785,665 595,029,653

Note: The Company has recorded a loss before tax of Rs.923,740,873 in year ended March 2009 which is mainly on account of foreign currency loss of Rs.1,702,604,000 on open derivative contracts. The Company is otherwise earning good operating margin and based on orders on hand, it is virtually certain that it will earn sufficient margins to generate income to reverse book losses and will generate taxable profits to set-off the unabsorbed depreciation and carry-forward losses and other timing differences resulting into deferred tax assets. Hence, the Company has recognised deferred tax asset as at March 31, 2009 on carry-forward losses component also.


8. i) Amounts due from/ payable to group companies (including companies under the same management as defined under section 370 (1B) of the Companies Act, 1956), are as follows–


a) Loans and Advances to wholly owned subsidiaries - Best On Health Ltd. Balance recoverable - - Maximum amount due at any time during the year - 1,791,000,000 - Panacea Educational Institute Pvt. Ltd. Balance recoverable - - Maximum amount due at any time during the year - 320,000,000 - Panacea Hospitality Services Pvt. Ltd. Balance recoverable - - Maximum amount due at any time during the year - 320,000,000 - Sunanda Steel Company Ltd. Balance recoverable - - Maximum amount due at any time during the year - 140,000,000 - Radicura & Co. Ltd. Balance recoverable - - Maximum amount due at any time during the year - 620,000,000 - Rees Investments Ltd. Balance Recoverable 710,717,916 Maximum amount due at any time during the year 716,413,472 - Accrued Interest on loan but not due 28,887,763 - - Panacea Biotec, Inc. Balance Recoverable 93,154 - Maximum amount due at any time during the year 93,154 -b) Dues from associates - PanEra Biotec Pvt. Ltd. (Previously known Panheber Biotec Pvt. Ltd. ) Balance Recoverable (including Rs.41,137,053 on account of sale of raw material grouped as sundry debtors under Schedule VII ) 195,087,247 135,532,654 Maximum amount due at any time during the year 195,087,247 135,532,654c) Amount payable to wholly owned subsidiaries - Best On Health Ltd. Balance Payable - 3,079,105 Maximum amount due at any time during the year 3,079,105 3,079,105 - Radicura & Co. Ltd. Balance Payable - - Maximum amount due at any time during the year - 5,214,925 - Panacea Biotec GmbH Balance Payable 202,620 - Maximum amount due at any time during the year 202,620 -

ii) Loans and advances include Rs.116,109,320 (Previous Year Rs.40,312,505) due from Joint Venture Company, in which Company’s director was inter alia director till 1st December, 2008.



iii) Debtors include Rs.78,154,432 (Previous Year Rs.55,117,691) receivable from Joint Venture Company in which company’s directors are, inter-alia, directors.

iv) Details of Loans and advances to subsidiaries, associates and parties in which directors are interested (as required by clause 32 of listing agreement):


a) Loans and Advances to wholly owned subsidiaries (Refer note no. 8 (i) above) - -

b) Loan to Joint Venture Company

- Cambridge Biostability Ltd. 108,833,850 39,778,050

Maximum amount due at any time during the year 133,075,781 41,784,182

Accrued interest receivable on loan 7,275,470 534,455

c) Dues from associates (Refer note no. 8 (i) above) - -

9. Related Party Disclosures

A. Names of Related Parties

Names of related parties where control exists irrespective of whether transactions have occurred or not

(a) Joint Ventures Chiron Panacea Vaccines Private Limited; Cambridge Biostability Limited

(b) Subsidiaries BestOnHealth Ltd. (BOH) (Wholly-owned subsidiary (WOS)); Radicura & Co. Ltd. (Indirect WOS through BOH); Panacea Hospitality Services Pvt. Ltd. (Indirect WOS through BOH); Panacea Educational Institute Pvt. Ltd. (Indirect WOS through BOH); Sunanda Steel Company Ltd. (Indirect WOS through BOH); Rees Investments Ltd. (Rees) (Guernsey): (WOS w.e.f. 16th September 2008); Kelisia Holdings Ltd. (Cyprus): (Indirect WOS w.e.f 18th September 2008 through Rees); Kelisia Investment Holding AG (KIH) (Switzerland):(Indirect WOS w.e.f. 22nd October 2008 through Kelisia Holdings Ltd); Panacea Biotec (International) SA (Switzerland) (Indirect WOS w.e.f. 19th Feb. 2009 through KIH); Panacea Biotec FZE, (UAE) ( WOS w.e.f. 16th March 2008); Panacea Biotec GmbH (Germany) ( WOS w.e.f. 11th June 2008); Panacea Biotec, Inc. (USA) (WOS w.e.f. 15th July 2008); Umkal Medical Institute Pvt. Ltd. (Subsidiary w.e.f. 30th June 2008);

(c) Associates PanEra Biotec Private Limited; Lakshmi & The Manager (upto 30th June 2008); Lakshmi & Manager Holdings Ltd. (LMH) (w.e.f. 1st July 2008); Best General Insurance Co.Ltd (Indirect associate- subsidiary of LMH)

(d) Key Management Mr. Soshil Kumar Jain - Chairman and Whole-time Director Personnel Mr. Ravinder Jain - Managing Director Dr. Rajesh Jain - Joint Managing Director Mr. Sandeep Jain - Joint Managing Director Mr. Sumit Jain - Whole-time Director


(e) List of Persons having controlling interest together with their relatives*:

Key Father Mother Wife Brother Sister Son Daughter Management Personnel

Soshil Kumar Jain - - Nirmala Jain - - Ravinder Jain, - Rajesh Jain, Sandeep Jain -Ravinder Jain Soshil Kumar Jain Nirmala Jain Sunanda Jain Rajesh Jain, - Sumit Jain, Radhika Jain Sandeep Jain Nipun JainRajesh Jain Soshil Kumar Jain Nirmala Jain Meena Jain Ravinder Jain, - Ankesh Jain, - Sandeep Jain Harshet Jain Sandeep Jain Soshil Kumar Jain Nirmala Jain Pamilla Jain Ravinder Jain, - Priyanka Jain Rajesh JainSumit Jain Ravinder Jain Sunanda Jain Nipun Jain Radhika Jain - -

*Relatives holding Equity shares in the Company have been disclosed

(f ) Relatives of Key Management personnel having transactions with the Company: Mr. Ashwani Jain, Son-in-law of Mr. Soshil Kumar Jain Mr. Shagun Jain, Son-in-law of Mr. Ravinder Jain Mrs. Radhika Jain, Daughter of Mr. Ravinder Jain Mrs. Shilpy Jain, Wife of Mr. Sumit Jain

(g) Enterprises over which Person(s) having control or significant influence over the Company / Key management personnel(s), along with their relatives, are able to exercise significant influence:

i) Neophar Alipro Ltd.; ii) All India S. L. Jain Charitable Foundation; iii) First Lucre Partnership Co.*; iv) Second Lucre Partnership Co.*; v) Radhika Associates; vi) Sumit Nipun & Co.; vii) Rattan Sons; viii) Tahir & Co.; ix) Best On Health Foods Ltd. ; x) Soshil Kumar Jain (HUF)*; xi) Ravinder Jain (HUF)*; xii) Rajesh Jain (HUF)*; xiii) Sandeep Jain (HUF)*.

*These enterprises are also holding Shares in the Company.



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nt of

Expe

nses

27

3,197

-

- -

- -

- -

- -

- -

- 66

,962,8

22

- -

- -

- 67

,236,0

19

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(33,5

55,53

0)

(-)

(-)

(19,2

89,72

5)

(-)

(-)

(-)

(-)

(-)

(52,8

45,25

5)

Reim

burse

men

t on A

ccou

nt of

Expe

nses

-

- -

- -

- -

202,6

20

- -

- -

- -

- -

- -

- 20

2,620

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

Re

nt pa

id 5,3

85,04

0 -

- -

- -

- -

- -

- -

- -

-

- -

- 5,3

85,04

0

(5

,195,5

20)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(7,07

8,680

) (-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(1

2,274

,200)

Re

nt re

ceive

d -

- -

- -

- -

- -

- -

- -

17,77

2,031

-

- -

- -

17,77

2,031

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(5

6,000

) (-)

(-)

(1

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45)

(-)

(-)

(-)

(-)

(-)

(1,13

8,945

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Rem

unera

tion

- -

- -

- -

- -

- -

- -

- -

- -

63,03

5,463

4,8

43,88

5 0

67,87

9,348

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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(-)

(-)

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(-)

(-)

(-)

(-)

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(2

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iven

200

- -

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- -

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00

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(6

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52,00

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) (-)

(-)

(-)

(-)

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(4

0,325

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(-)

(-)

(-)

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(1

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1)

Loan

s/Fixe

d Dep

osits

rece

ived

- -

- -

- -

- -

- -

- -

- -

- -

- -

300,0

00,00

0 30

0,000

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(-)

(-)

(-)

(-)

(-)

(-)

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(-)

(-)

(-)

(-)

(-)

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(-)

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(612

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00)

(612

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ans/F

ixed D

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its re

paid

- -

- -

- -

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- -

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432,5

00,00

0 43

2,500

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(-)

(5,10

0,000

) (-)

(-)

(-)

(-)

(-)

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(-)

(-)

(-)

(-)

(-)

(-)

(-)

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st pa

id on

Dep

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/ loa

ns

- -

- -

- -

- -

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- -

- -

- -

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35,89

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35

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14

(-)

(145

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(-)

(-)

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(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(2

5,935

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(2

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viden

d paid

- Eq

uity S

hares

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- -

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- -

- -

- -

- -

- 19

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00

24,13

7,900

-

43,64

1,600

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(1

9,503

,700)

(2

4,137

,900)

(-)

(4

3,641

,600)

Inv

estm

ents

mad

e 19

9,999

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- -

- -

476

- 1,5

82,25

0 76

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- -

- -

- 41

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26

- -

- 32

4,457

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(1,79

1,000

,000)

(-)

(1

00,00

0)

(100

,000)

(5

00,00

0)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(40,0

00,00

0)

(-)

(-)

(-)

(-)

(1,83

1,700

,000)

Pu

rchas

e of S

hare

- -

- -

- -

- -

- -

- -

- -

- -

- -

- -

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(1

00,00

0)

(590

,000)

(-)

(6

90,00

0)

Sale

of Inv

estm

ent/C

onve

rsion

of Lo

an

- -

- -

- -

- -

- -

- -

- -

41,25

7,126

-

- -

- 41

,257,1

26

into S

hare

Capit

al (2

0,128

,500)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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(2

0,128

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Re

paym

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f Loa

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vanc

e give

n 20

0 -

- -

- -

- -

- -

- -

- -

- -

- -

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0

(-)

(6

20,00

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20,00

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) (3

20,00

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) (3

52,00

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) (-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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(1

,612,0

00,00

0)

Intere

st rec

eived

-

- -

- -

- -

- -

- -

- 16

,868,7

53

- -

- -

- -

16,86

8,753

(1

,100,2

19)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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(1,99

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) (-)

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(3

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Do

natio

n -

- -

- -

- -

- -

- -

- -

- -

- -

- 30

0,000

30

0,000

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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(-)

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(5

00,00

0)

(500

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Ins

uran

ce cl

aim re

ceive

d 12

,089

- -

- -

- -

- -

- -

- -

- -

- -

- -

12,08

9

(-)

(-)

(-)

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(-)

(-)

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(-)

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Ins

uran

ce cl

aim pa

id 12

,089

- -

- -

- -

- -

- -

- -

- -

- -

- -

12,08

9

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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B. Ye

ar en

d bala

nces

Inv

estm

ents

2,013

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50

- (-)

(-)

(-)

47

6 -

1,582

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76,14

3,604

5,4

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0 (-)

22

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00

168,0

68,99

8 4,1

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0 -

41,25

7,126

-

- -

2,333

,566,5

94

(1,81

3,883

,050)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(2

2,959

,100)

(1

68,06

8,998

) (4

,197,6

70)

(40,0

00,00

0)

(-)

(-)

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(2

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08,81

8)

Intere

st ac

crued

and d

ue on

Loan

-

- -

- -

0 -

- -

- -

- -

- -

- -

- -

-

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

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(-)

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Int

erest

accru

ed bu

t not

rece

ivable

-

- -

- -

28,88

7,763

-

- -

- -

- 7,2

75,47

0 -

- -

- -

- 36

,163,2

33

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(534

,455)

(-)

(-)

(-)

(-)

(-)

(-)

(5

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5)

Outst

andin

g rec

eivab

le

- -

- -

- -

93,15

4 -

- -

- 78

,154,4

32

- 19

5,087

,247

- -

- -

- 27

3,334

,833

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(55,1

17,69

1)

(-)

(135

,532,6

54)

(-)

(-)

(-)

(-)

(-)

(190

,650,3

45)

Pro

vision

for b

ad an

d dou

btfu

l adv

ance

s -

- -

- -

- -

- -

- -

- -

135,5

32,65

4 -

- -

- -

135,5

32,65

4

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(1

35,53

2,654

) (-)

(-)

(-)

(-)

(-)

(1

35,53

2,654

)

Outst

andin

g Loa

n -

- -

- -

710,7

17,91

6 -

- -

- -

- 10

8,833

,850

- -

- -

- -

819,5

51,76

6

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(3

9,778

,050)

(-)

(-)

(-)

(-)

(-)

(-)

(3

9,778

,050)

Ou

tstan

ding F

ixed d

epos

its

- -

- -

- -

- -

- -

- -

- -

- -

- -

300,0

00,00

0 30

0,000

,000

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(432

,500,0

00)

(432

,500,0

00)

Ou

tstan

ding p

ayab

le -

- -

- -

- -

202,6

20

- -

- -

- -

- -

- -

- 20

2,620

(3

,079,1

05)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(-)

(3,07

9,105

)




10. Derivative Instruments and Hedged/Unhedged Foreign Currency Exposure i) Forward contract outstanding as at Balance Sheet date Sell - Nil; Buy - Nil ii) Particulars of Hedged Export Receivables at applicable exchange rates in respect of Options Contracts outstanding as at Balance Sheet date

Currency Exchange Amount in Foreign Amount in Amount in Amount in Purpose rates Currency Indian Rupees Foreign Currency Indian Rupees

Current Year Current Year Previous Year Previous Year

USD 41.00 - - 28,000,000 1,148,000,000 To hedge

USD 40.55 - - 30,000,000 1,216,500,000 Export

USD 40.00 58,000,000 2,320,000,000 84,000,000 3,360,000,000 Receivables

USD 39.00 48,000,000 1,872,000,000 48,000,000 1,872,000,000

USD 39.60 36,000,000 1,425,600,000 36,000,000 1,425,600,000

142,000,000 5,617,600,000 226,000,000 9,022,100,000

Accordingly, exchange fluctuation loss on marking them to market as of year end amounting to Rs.1,702,604,000 Previous Year Rs.40,500,000) has been accounted for and included in “Provision for Loss on Open Derivative Contracts” under Schedule XIII - Operating and Other Expenses.

iii) Particulars of Hedged Foreign Currency Exposure as at Balance Sheet date

Particulars Amount as at Currency Closing Amount as at Amount as at Currency Closing Amount as at 31st March’09 Exchange 31st Mar’09 31st March’08 Exchange 31st Mar’08 (in Foreign Currency) Rate* (INR) (in Foreign Currency) Rate* (INR)

Export Debtors 15,038,066 USD 50.71 762,580,345 28,387,626 USD 40.12 1,138,769,629

iv) Particulars of Unhedged Foreign Currency Exposure as at Balance Sheet date


Import Creditors 5,542,275 USD 50.72 281,104,206 5,332,130 USD 40.11 213,845,059 12,841,668 Euro 67.54 867,327,519 887,098 Euro 63.35 56,197,580 33,538 CHF 44.56 1,494,481 35,692 CHF 39.89 1,423,840 12,289 GBP 72.60 892,159 17,355 GBP 79.52 1,380,106 1,217,220 JPY / 100 51.55 627,521 2,576,200 JPY / 100 39.99 1,030,086 16,820 SEK 6.13 103,140 16,820 SEK 6.74 113,399 1,010 CAD 40.47 40,856 - - - -Export Debtors 2,990,037 Euro 67.50 201,827,823 2,589,747 Euro 63.38 164,142,548Foreign Currency Loans 65,097,252 USD 50.72 3,301,732,614 45,221,166 USD 40.11 1,813,599,550Balance with Banks 9,652,566 USD 50.71 489,481,613 874,867 USD 40.12 35,095,290 105761 Euro 67.50 7,138,856 1,404,665 Euro 63.38 89,030,070FCCBs 36,800,000 USD 50.72 1,866,496,000 36,800,000 USD 40.11 1,475,864,000Investment in Subsidiary 10 USD 47.62 476 - - - - 137,000 USD 39.96 5,474,520 - - - - 25,000 Euro 63.29 1,582,250 - - - -Investment in JV 1,935,615 GBP 86.83 168,068,998 1,935,615 GBP 86.83 168,068,998Loan to JV 1,500,000 GBP 72.56 108,833,850 500,000 GBP 79.56 39,778,050Loan to Subsidiaries 14,015,340 USD 50.71 710,717,916 - - - -*Closing Exchange rate has been rounded off to two decimal places.

3. Material related party transactions (More than 10% of aggregate) with individual parties are as follows:

Unsecured Loans/ Fixed Interest Managerial Remuneration Equity Dividend Deposit received/(repaid)

Current Year Previous Year Current Year Previous Year Current Year Previous Year Current Year Previous Year

Key Management personnel

Mr. Soshil Kumar Jain - - - - 15,155,738 48,153,429 5,000,000 5,000,000

Mr. Ravinder Jain - - - - 19,321,956 59,771,725 4,646,200 4,646,200

Dr. Rajesh Jain - - - - 12,648,046 45,645,737 4,706,900 4,706,900

Mr. Sandeep Jain - - - - 12,648,046 45,645,737 4,792,100 4,792,100

Enterprises over which Person(s) having control or significant influence over the Company / Key management personnel(s), along with their relatives, are able to exercise significant influence

First Lucre Partnership Co. 300,000,000 612,500,000 35,893,714 25,405,853 - - - -

(432,500,000) (330,000,000) - - - - - -

All India S.L. Jain Charitable Foundation - - - 415,993 - - - -

Year end Balances

First Lucre Partnership Co. 300,000,000 432,500,000 - - - - - -




11. Segmental Information

A. Information about Primary Segments

Particulars Vaccines Formulations Research & Development Total

2008 – 09 2007 – 08 2008 – 09 2007 – 08 2008 – 09 2007 – 08 2008 – 09 2007 – 08

Revenue

Segment Revenue 5,470,170,035 6,324,557,852 2,262,302,399 1,976,017,496 1,699,562 3,867,030 7,734,171,996 8,304,442,378

Other Income 5,952,196 40,218,416 24,950,226 32,517,814 - - 30,902,422 72,736,230

Total 5,476,122,231 6,364,776,268 2,287,252,625 2,008,535,310 1,699,562 3,867,030 7,765,074,418 8,377,178,608

Segment Result 2,661,847,455 2,861,717,201 466,882,428 220,394,689 (668,244,483) (537,989,091) 2,460,485,400 2,544,122,799

Unallocated Corporate Expenses 3,291,930,523 792,637,757

Operating Profit / (Loss) (831,445,123) 1,751,485,042

Interest & Finance charges (321,070,800) (146,632,224)

Other Income 228,775,049 299,005,462

Income Taxes 233,243,988 (572,160,506)

Net Profit / (Loss) (690,496,886) 1,331,697,774

Other Information

Segment Assets 8,164,022,933 4,555,500,911 1,757,286,755 1,914,995,988 2,143,579,827 1,944,924,347 12,064,889,515 8,415,421,246

Unallocated Corporate Assets 4,808,922,747 4,427,805,432

Total Assets 8,164,022,933 4,555,500,911 1,757,286,755 1,914,995,988 2,143,579,827 1,944,924,347 1,6873,812,262 12,843,226,678

Segment Liabilities 812,019,662 469,524,505 391,402,477 257,279,313 65,696,536 88,134,533 1,269,118,675 814,938,351

Unallocated Corporate Liabilities 9,453,200,641 5,056,241,670

Total Liabilities 812,019,662 469,524,505 391,402,477 257,279,313 65,696,536 88,134,533 10,722,319,316 5,871,180,021

Capital Expenditure – Additions 1,948,866,420 372,154,760 123,752,797 82,121,704 578,593,601 175,826,431

Depreciation 350,826,118 111,412,186 125,068,119 129,116,679 169,025,407 131,348,176

B. Information about Secondary Segments

a) Revenue as per Geographical Markets

Segment Domestic* Overseas

Current Year Previous Year Current Year Previous Year

Vaccines 3,991,735,243 6,015,579,612 1,478,434,793 308,978,240Formulations 1,798,741,628 1,604,484,560 463,560,771 371,532,936R & D - - 1,699,562 3,867,030Total 5,790,476,871 7,620,064,172 1,943,695,126 684,378,206

* Domestic revenue includes revenue from deemed exports of Rs.3,708,466,456 (Previous Year Rs.5,797,333,245)

b) Sundry debtors as per Geographical Markets

Segment Domestic Overseas


Vaccines 336,012,170 1,190,336,164 536,329,974 -Formulations 140,405,116 112,388,470 226,054,249 179,883,789Total 476,417,286 1,302,724,634 762,384,223 179,883,789

c) The Company has common fixed assets for producing goods for Domestic Market and Overseas Markets. Hence, separate figures for segment assets / additions to segment assets cannot be furnished.

12. Leases

i. For assets given under Operating Lease agreements:

a) The Company has leased out the assets situated at Lalru, Punjab on operating lease to its Associate, PanEra Biotec Private

Limited.

Particulars Gross Block Accumulated Depreciation Depreciation charged

to P&L Account

Current Year Previous Year Current Year Previous Year Current Year Previous Year

Building 89,955,066 18,352,562 33,159,226 6,605,854 5,327,263 1,305,186

Furniture and Fixture 10,659,476 6,750,149 5,639,670 3,861,199 1,151,292 638,461

Office Equipment 1,904,239 512,602 769,438 244,331 270,436 43,346

Plant & Machinery 663,486,845 316,043,799 247,986,666 146,532,544 66,307,911 27,388,797

Computer Equipment 5,950,080 671,976 1,549,742 557,752 688,492 76,149

Total 771,955,706 342,331,088 289,104,742 157,801,680 73,745,394 29,451,939




The total of Minimum Future Lease Payments under non-cancelable operating lease for various periods for assets stated above is as follows:

As at As at March 31, 2009 * March 31, 2008

a) Receivable within 1 year 67,600,000 9,600,000b) Later than 1 year but not later than 5 years 67,600,000 -c) Later than 5 years - -

* The Lease term for the assets given on lease vide Agreement for providing Manufacturing Facility, Utilities and Services of Employees with PanEra Biotec Pvt. Ltd. is valid till 31.03.2011. As per the said Agreement, during the period of usage, if any, Facility is used for manufacture of the Company’s Vaccines other than those mentioned therein or the facility remains idle due to insufficiency of orders from the Company, no lease rental shall be payable by PanEra Biotec Pvt. Ltd. during the relevant period.

b) The Company has also given an office space in its building situated at B-1 Extn./A-27, Mohan Co-operative Industrial Estate, New Delhi on operating lease to PanEra Biotec Pvt. Ltd.

Total of future minimum lease payments under operating lease mentioned above:

As at As at March 31, 2009 March 31, 2008

a) Receivable within 1 year 14,000 21,000b) Later than 1 year but not later than 5 years - -c) Later than 5 years - -

ii. For assets taken on Lease

a) The Company has taken various residential, office and godown premises under operating lease agreements. These are generally not non-cancelable and are renewable by mutual consent on mutually agreed terms. There is no sublease payments expected to be received under non-cancellable subleases at the balance sheet date and no restrictions is imposed by lease arrangements.

b) Lease payments for the year are Rs.59,649,090 (Previous Year Rs.59,319,447).

c) Total of future minimum lease payments under Non Cancelable operating lease:


a) Payable within 1 year 4,796,232 4,578,616b) Later than 1 year but not later than 5 years 402,737 5,198,969c) Later than 5 years - -

13. a) The Company’s interest in Joint Venture Companies is as follows:

S. No. Name of the Company Nature of Country of (%) Holding as on relationship Incorporation March 31, 2009

1. Chiron Panacea Vaccines Private Limited Joint Venture India 502. Cambridge Biostability Limited* Joint Venture UK 10

* Cambridge Biostability Limited, UK has not been considered while giving the disclosures relating to joint ventures in the current year as the investee company is in the process of filing for liquidation.

b) Aggregate interest of the Company in Assets, Liabilities, Revenue & Expenses in the jointly controlled entities are as follows:

Particulars Current Year Previous Year Audited Audited

Fixed Assets 3,209,287 16,434,549 Current Assets 143,485,483 122,905,261 Secured Loans 163,121 406,220 Current Liabilities 78,995,574 53,831,022 Revenue 274,923,479 254,384,438 Expenses 241,498,029 244,192,539

c) Following are reimbursement of expenses from PanEra Biotec Pvt. Ltd. (formerly known as Panheber Biotec Pvt. Ltd.) which have been netted off with related expense head:

Particulars Current Year* Previous Year

Salaries, Wages & Bonus - 21,834,225Power & Fuel etc. - 20,392,622Repair & Maintenance – Plant & Machinery - 1,635,498Repair & Maintenance – Others - 8,982,910Total - 52,845,255

* Current year figures have not been furnished since PanEra Biotec Pvt. Ltd. ceased to be joint venture company w.e.f. 20th Nov. 2007.




d) The purchase commitments for fixed assets incidental to the ordinary course of business of companies with which the Company has a joint venture, are as follows :

Name of Company Current Year Previous Year

Chiron Panacea Vaccines Pvt. Ltd. (50% interest) - -Cambridge Biostability Ltd. (10% interest) - -Total - -

e) Subsequent Event: The Company’s Joint Venture Cambridge Biostability Limited (CBL), having regard to its financial position, has initiated steps to place it into creditors’ voluntary liquidation, subsequent to the Balance Sheet date. Due to the financial position of CBL, the Company considers its investments in CBL as well as loan given to it, doubtful of recovery. Accordingly, the following have been provided for in the books of accounts of current year.

Particulars Amount

Investment made 168,068,998 Loan given 108,833,850 Interest accrued on above Loan 7,275,470 Total 284,178,318

14. Auditors` Remuneration includes the following


Statutory Auditors - Statutory Audit 3,309,000 3,400,060 - Quarterly Limited Reviews 1,685,400 1,348,320 - Certificates 134,833 113,217 - Out of Pocket Expenses 161,720 69,317 5,290,953 4,930,914Tax Auditors* 140,450 140,450Cost Auditors* 44,944 33,708

* included in Legal & Professional charges given in Schedule XIII.

15. Additional information as required under Para 3 & 4 of Part II of Schedule VI of the Companies Act, 1956.

A. Particulars of Licensed Capacity, Installed Capacity & Production.

a) Licensed Capacity per annum

Recombinant Bulk Vaccine – 180 lac doses Others – Not Applicable

b) Installed Capacity per annum*

Products Units of Measurement Current year Previous Year

Tablets Nos./ Million 1,684.0 1,684.0Capsules Nos. / Million 370.0 370.0Syrups/Liquids Bottles / Million 15.8 15.8Gels Tubes / Million 21.2 21.2Vaccines (Finished Doses) Doses / Million 861.5 820.0Pre-filled Syringes Doses/ Million 17.0 -Recombinant Bulk Vaccines** Doses / Million 12.5 12.5Tetanus Bulk Vaccines*** Doses/ Million 75.0 75.0Bacterial Bulk Vaccines*** Doses/ Million 68.75 50.0

* As Certified by the management** This facility has been leased to Associate Company, PanEra Biotec Pvt. Ltd. and is capable of manufacturing various bulk vaccines including Hep B, Hib TT and Anthrax.*** These facilities have been leased to Associate Company, PanEra Biotec Pvt. Ltd. Bacterial Bulk Vaccines Plant is capable of manufacturing various bulk vaccine including Diphtheria, Whole Cell Pertussis (wP), Acellular Pertussis(aP) and its capacity will come down by 5 million doses to 63.75 million doses in case of production of Acellular Pertussis (aP).

c) Actual Production during the year.

Products Units of Measurement Current Year * Previous Year*

Tablets Nos. 504,389,489 ** 425,555,706 **Capsules Nos. 64,354,858 55,436,411Syrups / Liquids Ml 283,920,530 246,056,820Gels Gms 23,474,760 65,585,870Vaccines Vials 50,553,815 69,507,387 Pre Fill Syringe PFS 1,679,769 -Injection Nos. 456,656 588,105 Other Products Gms. 17,638,965 -

* Actual Production includes production at Loan Licensee locations meant for sale by the Company.** Actual Production includes 155,993,730 (Previous Year 8,104,220) Tablets manufactured for others under Loan License basis.




B. Particulars of Stocks & Sales

Units Opening Stock Closing Stock Sample / Destroyed / Sales Expired / Shortages

Current Previous Current Previous Current Previous Current Previous Year Year Year Year Year Year Year Year

a) Own ManufacturingTablets Nos. 78,301,586 116,699,523 59,005,305 78,301,586 4,550,993 9,204,439 519,134,777 454,749,204 Rs. 63,382,524 74,352,761 46,940,103 63,382,524 - - 1,210,177,962 1,051,472,608Capsules Nos. 14,547,473 11,841,247 9,873,246 14,547,473 2,091,314 4,122,595 66,937,771 48,607,590 Rs. 63,436,317 96,557,062 40,651,005 63,436,317 - - 557,856,427 453,957,048Syrups/ Liquids Ml 50,579,060 90,520,100 66,737,470 50,579,060 2,183,150 13,309,190 265,578,970 272,688,670 Rs. 15,939,607 16,910,186 17,837,248 15,939,607 - - 110,582,967 125,338,987Gels Gms 16,354,230 28,407,220 8,458,210 16,354,230 1,132,500 1,144,810 30,238,280 76,494,050 Rs. 7,689,660 13,877,073 3,873,051 7,689,660 - - 35,179,463 76,635,951Vaccines Vials 9,372,994 8,006,588 14,913,671 9,372,994 295,038 576,035 44,718,100 67,564,946 Rs. 477,630,816 469,048,675 733,972,132 477,630,816 - - 5,277,342,364 6,324,557,847Pre Fill Syringe PFS - - 723,796 - 46,492 - 909,481 - Rs. - - 92,961,982 - - - 142,003,221 -Injections Vials 122,833 278,932 66,104 122,833 45,449 182,731 467,936 561,473 Rs. 309,429 715,923 23,805 309,429 - - 3,278,010 6,050,327Husk Gms 9 13,249 - 9 85 13,736 (76) (496) Rs. 203 402,623 - 203 - - (2,097) (15,465)Kit Nos. - 5,663 - - - 5903 - (240) Rs. - 1,400,800 - - - - - (56,165)Granules Nos. - - 4,244,340 - 102,225 - 13,292,400 - Rs. - - 4,872,951 - - - 16,494,980 -Total Rs. 628,388,556 673,265,103 941,132,277 628,388,556 - - 7,352,913,297 8,037,941,138

b) Trading Activities

Tablets Nos. 12,708,601 14,955,314 14,665,408 12,708,601 4,149,231 5,928,120 49,202,158 42,365,574 Rs. 27,372,156 27,768,077 23,835,584 27,372,158 - - 240,420,372 208,427,041Capsules Nos. 3,449,624 3,770,084 2,454,871 3,449,624 1,404,069 1,085,246 6,654,519 7,600,364 Rs. 12,941,050 9,383,668 6,923,483 12,941,050 - - 35,693,185 43,880,361Syrups / Liquids Ml 23,796,760 12,302,790 11,143,960 23,796,760 4,201,200 9,460,820 39,995,770 35,583,300 Rs. 3,171,290 1,985,763 1,559,658 3,171,290 - - 12,547,652 11,218,568Gels Gms 89,460 - 1,830 89,460 5,700 5,520 (80,880) 1,329,420 Rs. 48,430 - 876 48,430 - - (102,920) 1,681,810Injections Vials 15,422 10,272 58,533 15,422 2,819 1,129 105,112 84,006 Rs. 12,210,592 1,075,732 11,716,770 12,210,592 - - 47,473,275 33,496,655Biscuits Nos. 3,659 1,431 - 3,659 7,867 60,066 (4,208) 30,375 Rs. 76,730 28,645 - 76,730 - - (162,354) 1,314,545Granules Nos. - - 1,330,725 - - - 505,005 - Rs. - - 689,458 - - - 1,640,666 -Total Rs. 55,820,248 40,241,885 44,725,829 55,820,250 - - 337,509,876 300,018,980c) Others* Nos. - - - - - - - - Rs. - - - - - - 39,994,426 3,71,804Total Rs. - - - - - - 39,994,426 3,71,804Grand Total Rs. 684,208,804 713,506,988 985,858,106 684,208,806 - - 7,730,417,599 8,338,331,922

*Sales of Raw Material

C. Purchase of Finished goods

Products Units Current Year Previous Year

Tablets Nos. 55,308,196 46,046,980 Rs. 100,757,694 104,564,041Capsules Nos. 7,063,835 8,365,150 Rs. 19,211,568 28,797,661Syrups/Liquids Ml. 31,544,170 56,538,090 Rs. 4,920,952 8,599,667Gel Gms. (162,810) 1,424,400 Rs. (75,949) 663,533Injections Vials 151,042 90,285 Rs. 29,913,166 29,088,706Biscuits Nos. - 92,668 Rs. - 1,255,728Others Gms. 1,835,730 - Rs. 1,143,558 -Total Rs. 155,870,989 172,969,336




D. Consumption of Raw materials & Packing materials

Products Current Year Previous Year Oty. (In doses) Value Oty. (In doses) Value

Polio Virus 879,425,400 1,824,633,064 1,355,217,338 2,729,473,985Others* 1,146,965,663 767,136,323Total 2,971,598,727 3,496,610,308

* Items comprised in others are individually less than 10% of total value

E. Value of Imports on CIF basis (on accrual basis)


Raw Materials & Packing Materials 4,571,336,927 2,742,992,185

Capital Goods 457,267,055 193,149,620

F. Expenditure in Foreign Currency (on accrual basis)


Know-how Fee 12,847,257 8,619,193

Royalty 38,025 272,321

Interest 206,189,558 59,439,075

Professional & Consultation Fees 54,682,275 29,761,306

Other Expenses

- Patents, Trade Marks & Product Registration 26,319,097 23,392,134

- Advertising and Sales Promotion 5,258,076 33,165,756

- Printing & Stationery 110,588 3,337,007

- Commission on Sales 65,806,641 44,655,446

- Market Research 30,286,500 -

- Others 39,604,033 27,471,615

G. Earnings in Foreign Exchange (on accrual basis)


F.O.B. value of Exports (including deemed export of Rs.3,708,466,456 5,588,991,868 6,414,111,800 (Previous Year Rs.5,797,333,245)

R & D Services (Know-how) Income 1,699,562 3,867,030

Interest on Exchange Earners Foreign Currency Deposits - 637,893

Interest received on loan from Joint Venture Company 16,868,753 1,993,346

Interest accrued but not dueon loan from subsidiary company 28,887,763 -

H. Value of Imported/Indigenous Raw Materials & Packing Materials consumed

Particulars Current Year Previous Year Amount in Rs. % age Amount in Rs. % age

Indigenous 605,547,690 20.38 493,086,486 14.10

Imported 2,366,051,037 79.62 3,003,523,822 85.90

Total 2,971,598,727 100.00 3,496,610,308 100.00

I. Value of Imported/Indigenous Stores & Spares consumed

Particulars Current Year Previous Year Amount in Rs. % age Amount in Rs. % age

Indigenous 163,479,798 85.13 117,958,440 86.00

Imported 28,564,016 14.87 19,447,028 14.00

Total 192,043,814 100.00 137,405,468 100.00

J. Remittance in foreign currency on account of dividend


Dividend on Equity Shares * 1,045,000 1,045,000

Number of Non-resident Equity Shareholders 1 1

No. of Equity Shares held by them 1,045,000 1,045,000

* Dividend of Rs.1,045,000 pertains to 2007-08 (Previous year Rs.1,045,000 pertains to 2006-07).




16. The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service subject to maximum of Rs.350,000 (except in case of Managing/ Joint Managing/ Whole-time Director). The scheme is funded with an insurance company in the form of a qualifying insurance policy.The following tables summarize the components of net benefit expense recognized in the Profit & Loss Account and the funded status and amounts recognized in the Balance Sheet for the respective plans:

Profit and Loss Account

Net employee benefit expense - Gratuity (recognized in Employee Cost)

2008-09 2007-08

Current service cost 13,052,834 8,588,570Interest cost on benefit obligation 65,18,123 4,289,016Expected return on plan assets (27,03,704) (1,969,518)Net actuarial (gain)/loss recognized in the year on account of return on plan assets (3,739,708) 25,476,835Net benefit expense* 13,127,545 36,384,903Actual return on plan assets (3,501,808) (2,320,968)

*Includes Gratuity expense of Rs.1,062,491 (Previous Year Rs.3,287,690) accounted under Research & Development Expenses.

Balance Sheet

Details of Provision for gratuity

2008-09 2007-08

Defined benefit obligation 99,512,513 86,908,312Fair value of plan assets 42,757,742 29,229,237 56,754,771 57,679,075 Less: Unrecognized past service cost Plan (liability) (56,754,771) (57,679,075)

Changes in the present value of the defined benefit obligation for gratuity are as follows:

2008-09 2007-08

Opening defined benefit obligation 86,908,312 53,612,703Interest cost 6,518,123 4,289,016Current service cost 13,052,834 8,588,570Actual return on plan assets - -Benefits paid (4,025,152) (5,410,262)Actuarial (Gain)/losses on obligation (2,941,604) 25,828,285Closing defined benefit obligation 99,512,513 86,908,312

Changes in the fair value of plan assets for gratuity are as follows:

2008-09 2007-08

Opening fair value of plan assets 29,229,237 21,292,086Expected return 2,703,704 1,969,518Contributions by employer 14,051,849 11,026,445Benefits paid (4,025,152) (5,410,262)Actuarial Gain /(losses) 798,104 351,450Closing fair value of plan assets 42,757,742 29,229,237

The Company has since contributed Rs.14,809,973 to the gratuity fund.

The major categories of plan assets as a percentage of the fair value of total plan assets for gratuity are as follows:

2008-09 2007-08

Investments with insurer 100.00% 100.00%Cash and bank balance with the insurer - -

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to the improved debt market scenario.The principal assumptions used in determining gratuity for the Company’s plans are shown below:

2008-09 2007-08Discount rate 7.50% 8.00%Expected rate of return on plan assets 9.25% 9.25%Increase in compensation cost 5.00% 5.50%Employee turnover upto 30 years 10.00% 10.00%above 30 years but upto 44 years 5.00% 5.00%above 44 years 1.00% 1.00%



The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Gratuity amounts for the current and previous three periods are as follows:

2008-09 2007-08 2006-07

Defined benefit obligation 99,512,513 86,908,312 53,612,703Plan assets 42,757,742 29,229,237 21,292,086Deficit 56,754,771 57,679,075 32,320,617Experience adjustments on plan liabilities - (gain)/Loss (3,269,245) - -Experience adjustments on plan assets - (gain)/Loss (798,104) - -

Note: The revised accounting standard AS-15 – Employee Benefits which provides for Actuarial Valuation of Gratuity Liability was adopted in the year 2006-07. In the earlier years, actuarial valuation was done in accordance with the pre-revised Accounting Standard, AS-15. Accordingly, comparative numbers of two years earlier than the year 2006-07 have not been furnished.

Defined Contribution Plan:

2008-09 2007-08

Contribution to Provident Fund Charged to Profit and Loss Account 31,045,359 25,677,410

The Company expects to contribute Rs.17,500,000 to gratuity fund in the year 2009-10.

17. The Company has incurred expenditure on Pre-Clinical Development studies amounting to Rs.123,978,449 during the year (Previous Year Rs.185,575,387). This expenditure relates to studies carried out by Clinical Research Organization (CRO) towards obtaining registration of Company’s products in US and / or Europe. The expenditure incurred has been capitalized and carried in Capital Work in Progress. Management believes that it is in the nature of development expenditure and meets the capitalization criteria set out in Accounting Standard 26 on Intangible Assets notified by the Companies (Accounting Standards) Rules, 2006 due to the following reasons:

• the expenditure is not towards basic research and therefore no New Chemical Entity comes into being. Basic research is conducted by the Company in its own R&D centers, but such developmental work is performed through external agencies (CROs). Safety profile of the basic molecule is well established in several countries in Europe and in India and the product is being marketed successfully in several countries under different brand names.

• there is no experience to suggest that the studies conducted by CROs on behalf of the Company would lead to or make it difficult for the Company to obtain regulatory approvals in US and / or Europe.

The management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from regulatory authorities in US and / or Europe.

18. In accordance with Accounting Standard 9 on ‘Revenue Recognition’ notified by the Companies (Accounting Standards) Rules, 2006, Excise Duty on turnover amounting to Rs.18,845,112 (Previous year Rs.37,756,574) has been reduced from turnover in Profit & Loss Account and differential Excise Duty on opening and closing stock of finished goods amounting to Rs. Nil (Previous year Rs. Nil) has been adjusted from Raw Materials, Finished Goods, Work in Progress and Job Processing charges in Schedule XIII.

19. The Company has exercised the option as per the Companies (Accounting Standards) Amendment, Rules, 2009. As per the option exchange differences related to long term foreign currency monetary items so far as they relate to the acquisition of a depreciable capital assets are capitalized and depreciated the same over the useful life of the assets and in other cases, have transferred to Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term assets/liabilities but not beyond accounting period ending on or before 31st March 2011, the unamortized balance in this account is Rs.95,961,134 (Previous year Rs. Nil).

20. The Company is in the process of appointing independent consultants for conducting a Transfer pricing study to determine whether the transactions with associated enterprises were undertaken at “arms length basis”. The management confirms that all international transactions with associated enterprises are undertaken at negotiated contracted prices on usual commercial terms. Further there has been no change in the terms of such international transactions till March 31, 2009.

21. Previous year’s figures have been rearranged and reclassified wherever necessary to make them comparable with the current year’s figures.







ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956

1. Registration Details

Registration No. 22350 State Code 16

Balance Sheet Date 31/03/2009

2. Capital raised during the year (Amount in Rs. Thousand)

Public Issue Nil Right Issue Nil

Bonus Issue Nil Private Placement Nil

3. Position of mobilization and deployment of Funds (Amount in Rs. Thousand)

Total Liabilities 13,488,214 Total Assets 13,488,214

Source of Funds

Paid up Capital 66,786 Reserves & Surplus 6,084,707

Secured Loans 4,835,939 Unsecured Loans 2,166,996

Deferred Tax Liability 333,786

Application of Funds

Net Fixed Assets 6,938,703 Investments 2,165,698

Net Current Assets 4,284,200 Foreign Currency Monetary

Misc. Expenditure 3,652 Item Translation Difference Account 95,961

(to the extent not W/off )

Accumulated Losses Nil

4. Performance of Company (Amount in Rs. Thousand)

Turnover (Including Other Income) 7,993,849 Total Expenditure 8,917,590

Profit/Loss Before Tax 923,741 Profit/Loss after Tax 690,497

Earnings per share (Rs.) 10.35 Dividend @ Nil

5. Generic Name of Three Principal Products/ Services of Company

Item Code No. (ITC Code) 3002 20 14

Product Description Vaccine-Polio


Product Description Gliclazide Tab


Product Description Nimesulide Tab


Ravinder Jain Managing Director

I.K. Sharma Dr. Rajesh Jain D.G.M. (Accounts & Finance) Joint Managing Director




Amount in Rs.


CASH FLOW STATEMENT ANNEXED TO BALANCE SHEET FOR THE YEAR ENDED 31ST MARCH, 2009




A. Cash Flow from Operating Activities: Net Operating Profit/(Loss) before Tax & Extraordinary Items (923,740,873) 1,903,858,280 Adjustments for: Depreciation 705,099,242 430,008,915 Interest Expenses 321,070,800 116,324,021 Provision for Doubtful Debts & Advances 384,794 27,044,708 Interest Income (168,062,520) (46,007,840) Dividend Income (18,367,280) - (Profit)/ Loss on sale of Fixed Assets (Net) (7,171,144) (22,887,632) (Profit)/ Loss on sale of Investments (1,257,126) (8,062,060) Intangibles written off - 2,103,721 Unrealized foreign exchange loss/(gain) (net) 1,675,903,989 (102,855,667) Amortised exchange differences 47,980,567 - Deferred Revenue Expenditure written off during the year 1,682,400 1,682,400 Provision for Impairment & Doubtful Loan 284,178,318 2,841,442,040 - 397,350,566 Operating Profit before Working Capital changes 1,917,701,167 2,301,208,846 (Increase)/ Decrease in Trade and Other Receivables 221,686,892 (489,944,478) (Increase)/ Decrease in Inventories (2,361,589,208) (34,819,396) Increase/ (Decrease) in Current Liabilities & Provisions 507,284,405 (1,632,617,911) (287,252,490) (812,016,364) Cash generated from Operations 285,083,256 1,489,192,482 Net Income Taxes Paid 235,177,426 336,539,746 Net cash from Operating Activities 49,905,830 1,152,652,736B. Cash flow from Investing Activities: Purchase of Fixed Assets (1,614,772,785) (1,647,516,871) Proceeds of deposits matured (with maturity 1,250,968,300 402,060,214 more than three months) Deposits (with maturity more than three months) (70,467,843) (1,250,968,300) Trade Investment in Shares of Joint Venture/ Subsidiary Companies (283,200,650) (1,791,200,000) Non-trade Investment in Shares of Associate (41,257,126) (40,000,000) Loan to Joint Venture & Subsidiary Companies (747,317,829) (39,778,050) Sale of Non-trade Investments in Partnership Firm 41,257,126 19,428,500 Sale of Fixed Assets 42,514,714 30,654,398 Interest Received 142,045,313 46,499,370 Dividends received 18,367,280 - Net cash used in investing activities (1,261,863,500) (4,270,820,739) Net cash from Operating and Investing Activities (1,211,957,670) (3,118,168,003)C. Cash flow from Financing Activities: Net increase / (Decrease) in Working Capital Borrowings 1,265,036,897 251,094,912 Long Term Borrowings raised 840,998,055 1,787,500,000 Fixed Deposits received 300,500,000 436,110,000 Fixed Deposits repaid (436,110,000) (169,390,000) Interest paid (321,130,220) (119,446,466) Dividend paid (66,693,746) (65,706,192) Tax paid on Dividend Distribution (11,334,602) (11,166,767) Net Cash from Financing activities 1,571,266,384 2,108,995,487 Net Cash from Operating, Investing & Financing Activities 359,308,714 (1,009,172,516) Net increase in Cash & Cash equivalent 359,308,714 (1,009,172,516) Opening balance of Cash & Cash equivalent 160,834,507 1,169,181,050 Closing balance of Cash & Cash equivalent 520,143,221 160,008,534 Components of cash and cash equivalents: i) Cash Balance on Hand 579,589 1,449,297 ii) Balance with Scheduled Banks : a) In Current Accounts 25,557,539 33,723,242 b) In Unpaid Dividend Accounts* 1,583,956 1,536,608 c) On Fixed Deposits 70,467,843 1,250,968,300 d) In Exchange Earner Foreign Currency Current Accounts 496,620,469 124,125,360Cash & Bank Balances as per Schedule VII 594,809,396 1,411,802,807Less: Fixed deposits for maturity period more than 3 months (70,467,843) (1,250,968,300) 524,341,553 160,834,507Less: Effect of Exchange Differences on Cash & Cash Equivalents held in foreign currency (4,198,332) (825,973)Cash & Cash Equivalents in Cash Flow Statement 520,143,221 160,008,534

* These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities.



STATEMENT U/S 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES


Ravinder Jain

Managing Director

I.K. Sharma Dr. Rajesh Jain

D.G.M. (Accounts & Finance) Joint Managing Director

Place : New Delhi Vinod Goel

Dated : May 27, 2009 G.M. Legal & Company Secretary

Name of the Company Best On Radicura & Panacea Panacea Sunanda Umkal Panacea Panacea Panacea Rees Kelisia Kelisia Panacea Health Ltd. Co. Ltd.* Hospitality Educational Steel Medical Biotec Biotec, Biotec Investments Holdings investment Biotec Pvt. Ltd.* Institute Co. Ltd.* Institute GmbH# Inc. FZE Ltd. Ltd.† Holdings (International) Pvt. Ltd.* Pvt. Ltd. AG† †$ SA† † †$

As on 31st March, 2009Capital 8,538,826 1,982,500 100,000 100,000 500,000 16,984,817 1,688,503 5,072 6,947,930 507 67,525 4,450,198 4,450,197Reserves & Surplus 2,029,644,520 8,481,818 (95,257) (94,101) (172,808) 50,184,267 61548 (542,704) (92,209) (1,906,108) (42,574,383) (854,903) (332,354)Total Assets 2,068,018,228 324,467,400 299,018,440 319,630,000 213,235,206 67,169,084 1,817,591 532,741 7,007,767 738,063,847 716,433,985 5,540,015 4,804,013Total Liabilities 2,068,018,228 324,467,400 299,018,440 319,630,000 213,235,206 67,169,084 1,817,591 532,741 7,007,767 738,063,847 716,433,985 5,540,015 4,804,013Details of Investment - 100,000 - - - 76,354 - 649,777,352 - (except in case of Investment in Subsidiary)For the year/ period ended 31st March, 2009Turnover (including other 43,159,027 86,061 13,653 13,160 3,144 1,516,249 198,969 - 25,020,017 - - 9,306 income)Profit/ (Loss) before tax 36,917,373 (373,217) (91,038) (90,034) (40,345) 1,293,940 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (810,538) (314,915)Provision for Tax 13,660,268 (367) 4,219 4,067 6,023 481,247 - - 0 6,807 (1,939)Profit after Tax 23,257,105 (373,584) (95,257) (94,101) (46,368) 812,693 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (817,345) (312,976)Proposed Dividend - - - -

* Wholly owned subsidiary till 24.01.08 and became indirect subsidiary through Best On Health Ltd. from 25.01.08.† Indirect Subsidiary through Rees Investments Ltd.† † Indirect Subsidiary through Kelisia Holdings Ltd.† † † Indirect Subsidiary through Kelisia Investment Holdings AG.# Unaudited.$ The first financial year shall and on 31st March, 2010. For consolidation purposes the unaudited management accounts for the period upto 31st March, 2009 has been taken into account.Note: In terms of approval granted by the Central Government under section 212(8) of the Companies Act,1956, a copy of the Balance Sheet, Profit & Loss Account , Report of the Board of Directors and the report of the Auditors of the subsidiary companies have not been attached with the annual report of the Company. The Company will make available these documents and the related details upon request by any investor of the Company and of its subsidiary. These documents will also be available for inspection by any investor at the Head office of the Company and subsidiary company concerned.

FINANCIAL DETAILS OF SUBSIDIARY COMPANIES:


1. Name of the Company Best On Radicura & Panacea Panacea Sunanda Umkal Panacea Panacea Panacea Rees Kelisia Kelisia Panacea Health Ltd. Co. Ltd.* Hospitality Educational Steel Medical Biotec Biotec, Biotec Investments Holdings investment Biotec Pvt. Ltd.* Institute Co. Ltd.* Institute GmbH# Inc. FZE Ltd. Ltd.† Holdings (International) Pvt. Ltd.* Pvt. Ltd. AG† †$ SA† † †$

2. Date from which they became subsidiary company 15th March, 16th July, 23rd Aug, 23rd Aug, 5th Sep, 30 June, 11th June, 15th July, 16th March, 16th Sep., 18th Sep., 22nd Oct., 19th Feb., 2000 1999 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 20093. Financial Year of the subsidiary ended on 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, 31st March, - - 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 4. Shares of the subsidiary held by Panacea Biotec Ltd. on the above dates i) Number & 1,902,160 1,98,250 100,000 100,000 500,000 3,765,701 Nil Nil 5 1,000 1000 1000 1000 Face Value Re.1 Rs.10 Re.1 Re.1 Re.1 Rs.10 - - AED 100000 US $ 0.01 € 1 CHF 100 CHF 100 ii) Extent of holding 100% 100% 100% 100% 100% 75.2% 100% 100% 100% 100% 100% 100% 100%5. Net aggregate Profit or (Loss) for the current year (in Rs.) 23,257,105 (373,584) (95,257) (94,101) (46,368) 812,693 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (817,345) (312,976)6. Net aggregate amounts of the Profits or (Losses) of the subsidiary so far as it concerns the members of the holding company and is dealt with in the accounts of holding company: a. for the financial year of the subsidiary - - - - - - - - - - - - - b. for the previous financial years of the subsidiary since it became its subsidiary - - - - - - - - - - - - -7. Net aggregate amounts of the Profits or (Losses) of the subsidiary so far as it concerns the members of the holding company and is not dealt with in the accounts of holding company a. for the financial year of the subsidiary 23,257,105 (373,584) (95,257) (94,101) (46,368) 812,693 59,639 (485,926) (82,560) (1,706,647) (41,380,725) (817,345) (312,976) b. for the previous financial years of the subsidiary since it became its subsidiary 11,613,577 222,031 - - (126,440) - - - - - - - -

* Wholly owned subsidiary till 24.01.08 and became indirect subsidiary through Best On Health Ltd. from 25.01.08.† Indirect Subsidiary through Rees Investments Ltd.† † Indirect Subsidiary through Kelisia Holdings Ltd.† † † Indirect Subsidiary through Kelisia Investment Holdings AG.# Unaudited.$ The first financial year shall and on 31st March, 2010. For consolidation purposes the unaudited management accounts for the period upto 31st March, 2009 has been taken into account.


AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

To

The Board of Directors of Panacea Biotec Limited on Consolidated Financial Statements of Panacea Biotec Limited, its Subsidiaries, Associates and Joint Venture.

1. We have audited the attached consolidated balance sheet of Panacea Biotec Limited (“the Company”), its Subsidiaries, Associates and Joint Ventures (“the Group”), as at March 31, 2009 and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Panacea Biotec Limited’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. a) We have not audited the financial statements of the Subsidiaries, Associates & Joint Ventures, whose financial statements reflect Group’s share of total assets of Rs.3,148,633,765 as at 31st March 2009, the total revenue of Rs.193,833,144 and net cash outflows of Rs.12,648,424 for the year then ended as considered in the consolidated financial statements. These financial statements and other financial information of the Subsidiaries, Associates and Joint Ventures have been audited by other auditors whose report have been furnished to us,, and our opinion, in so far as it relates to the amount included in respect of these Subsidiaries, Associates and Joint Ventures, is based solely on the report of other auditors.

b) The consolidated financial statements of Panacea Biotec Limited include assets, revenues and cash flows of Rs.6,065,292, Rs.209,361 and Rs.6,056,017 respectively in relation to Group’s share in certain Subsidiaries (Panacea Biotec GmbH, Germany, Kelisia Investment Holding S.A.-Switzerland and Panacea Biotec (International) S.A.-Switzerland), based on unaudited financial statements. The effect of adjustments, if any, that may have been required to be made to the accompanying consolidated financial statements, had those component been audited, is not currently ascertainable.

4. We report that the consolidated financial statements have been prepared by the Company’s management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated financial statements, Accounting Standard (AS) 23, Accounting for Investments in Associates in Consolidated Financial Statements, and Accounting Standard (AS) 27, Financial Reporting of

Interests in Joint Ventures, notified pursuant to the Companies (Accounting Standards) Rules 2006.

5. Without qualifying our opinion, we draw attention to Note 3(ii) of Schedule XX B to the financial statements regarding non-provision of proportionate premium on redemption of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ amounting to Rs.470,992,269. The same has been disclosed as a contingent liability. Management has represented, that the redemption premium will be offset against the securities premium account and, hence, no adjustments have been made to the accompanying statement of results.

6. Without qualifying our opinion, we draw attention to Note 14 of Schedule XX B to the financial statements regarding capitalization of expenditure on clinical trials amounting to Rs.123,978,449. The ultimate approval of such products, which has been considered as highly likely by the management, is not within direct control of the entity. Pending such final approval, no adjustments have been made to the accompanying financial statements.

7. Without qualifying our opinion, we draw attention that the Company has incurre managerial remuneration of Rs.63,035,463 during the year, which is in excess of the limits specified by the relevant provisions of the Companies Act, 1956, by Rs.38,169,706. The Company has made an application to the appropriate regulatory authorities in this regard, for payment of such excess remuneration to managerial personnel. Pending the final outcome of the Company’s application, no adjustments have been made to the accompanying financial statements in this regard.

8. Based on our audit on consideration of reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to the explanation given to us, we are of the opinion that the attached consolidated financial statements, subject to matter referred to para 3(b), the effect of which is not currently ascertainable; give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the consolidated balance sheet, of the state of the affairs of the Panacea Biotec Limited, its Subsidiaries, Associates and Joint Ventures as at March 31, 2009;

b) in the case of the consolidated profit and loss account, of the loss for the year ended on that date; and

c) in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.

For S. R. Batliboi & Co.

Chartered Accountants

per Manoj Gupta

Partner

Membership No.: 83906

Place : New Delhi

Date : May 27, 2009



CONSOLIDATED BALANCE SHEET AS AT 31st MARCH, 2009 Amount in Rs.

Schedule As at As at No. 31st March, 2009 31st March, 2008

The Schedules referred to above and notes thereon form an integral part of the Balance Sheet.




SOURCES OF FUNDS

1. Shareholders’ Funds

Share Capital I 66,786,312 66,786,312

Reserves & Surplus II 6,100,715,573 6,167,501,885 6,894,296,288 6,961,082,600

2. Minority Interest 28,968,930 -

3. Loan Funds

Secured Loans III 4,836,102,165 2,073,841,714

Unsecured Loans IV 2,193,996,000 7,030,098,165 1,912,075,828 3,985,917,542

4. Deferred Tax Liability (Net) 334,786,544 595,503,862

(Refer note no. 7 of Schedule XX B)

Total 13,561,355,524 11,542,504,004

APPLICATION OF FUNDS

1. Fixed Assets

Gross Block V 9,025,576,963 6,064,572,427

Less : Depreciation/ Amortisation 2,213,043,241 1,561,222,398

Net Block 6,812,533,722 4,503,350,029

Capital Work-in-Progress (including Capital Advances) 1,777,023,749 8,589,557,471 2,221,722,544 6,725,072,573

2. Investments VI 700,599,288 152,667,042

3. Foreign Currency Monetary item Translation Difference Account (net of amortisation) 95,961,134 -

(Refer note no.2 of Schedule XXA and note no.16 of Schedule XXB)

4. Current Assets, Loans & Advances VII

Inventories 4,513,037,066 2,145,753,362

Sundry Debtors 1,201,730,208 1,458,848,178

Cash & Bank Balances 748,422,730 1,546,803,344

Other Current Assets 28,502,889 32,033,240

Loans and Advances 1,233,020,316 932,108,380

Sub-Total (A) 7,724,713,209 6,115,546,504

Less : Current Liabilities & Provisions VIII

Current Liabilities 1,692,582,309 1,237,386,042

Provisions 1,861,052,904 218,862,398

Sub-Total (B) 3,553,635,213 1,456,248,440

Net Current Assets (A)-(B) 4,171,077,996 4,659,298,064

5. Miscellaneous Expenditure IX 4,159,635 5,466,325

(To the extent not written off or adjusted)

Total 13,561,355,524 11,542,504,004

Significant Accounting Policies and Notes to

Accounts XX



CONSOLIDATED PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st MARCH, 2009 Amount in Rs.

Schedule For the Year Ended For the Year Ended No. 31st March, 2009 31st March, 2008

The Schedules referred to above and notes thereon form an integral part of the Profit & Loss Account.




INCOME

Turnover (Gross) X 7,900,564,192 8,451,191,934

Less: Excise Duty 18,845,112 7,881,719,080 37,756,574 8,413,435,360

Other Income XI 311,956,924 382,935,788

Total Income 8,193,676,004 8,796,371,148

EXPENDITURE

Purchases of Finished Goods 186,401,696 183,130,827

Raw and packing material consumed XII 2,952,548,877 3,469,053,324

Operating and other expenses XIII 3,393,917,326 780,786,184

(Increase) in inventories XIV (452,622,474) (4,589,126)

Personnel Expenses XV 956,778,484 980,414,224

Selling & Distribution Expenses XVI 458,230,492 482,787,420

Research & Development Expenses XVII 669,944,045 541,856,123

Financial expenses XVIII 348,181,812 150,677,689

Depreciation/ Amortisation V 545,172,635 334,533,723

Miscellaneous Expenditure written off during the year IX 1,787,071 1,695,701

Total Expenditure 9,060,339,964 6,920,346,089

Profit Before Tax (866,663,960) 1,876,025,059

Provision for Income Tax 24,396,207 340,994,978

Provision for Income Tax for earlier years 89,323 -

Deferred Income Tax (Credit)/Charge (260,618,147) 212,707,641 (Refer note no.7 of Schedule XX B)

Provision for Fringe Benefit Tax 29,393,489 32,505,702

Profit After Tax (659,924,832) 1,289,816,738

Add: Balance brought forward from previous year 2,806,000,020 1,675,618,296

Add: Share of Profit in Partnership Firm - 699,983

Add: Share of Profit/ (Loss) in Associate 5,306,590 (939,432)

Add: Share of Minority Interests in (Profit)/ Losses (188,030) -

Add: (Profit)/ Losses on the date of closure of Joint Venture - 52,002,560

Profit available for Appropriations 2,151,193,748 3,017,198,145

APPROPRIATIONS

Dividend

- Equity Shares-Proposed (not liable to TDS) - 66,693,746

- Preference Shares - Interim (not liable to TDS) 33,184 -

Dividend Distribution Tax 3,127,240 11,334,602

Transfer to General Reserve 2,300,000 133,169,777

Balance carried to Balance Sheet 2,145,733,324 2,806,000,020

Basic Earnings per Share XIX (9.90) 19.51

Diluted Earnings per Share XIX (9.90) 18.25

Face value per Share 1.00 1.00

Significant Accounting Policies and Notes to

Accounts XX



Amount in Rs.


SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT

Schedule I - Share CapitalAuthorisedComprising of i . 125,000,000 Equity Shares of Re.1 each (Previous 125,000,000 125,000,000 Year 125,000,000 Equity Shares of Re. 1 each)ii. 110,000,000 (Previous year 110,000,000) Preference Shares of Rs.10 each 1,100,000,000 1,100,000,000 1,225,000,000 1,225,000,000Issued and Subscribed66,842,746 Equity Shares of Re.1 each (Previous Year 66,842,746 66,842,746 66,842,746 Equity Shares of Re.1 each) 66,842,746 66,842,746Paid up66,693,746 (Previous Year 66,693,746) Equity Shares 66,693,746 66,693,746 of Re.1 each fully paid-upAdd: Forfeited Shares (14,900 Shares @ Rs.10 each forfeited on May 15, 1999, which were later on sub-divided into 149,000 Equity Shares of Re.1 each on February 12, 2003) 92,566 66,786,312 92,566 66,786,312

(149,000 Forfeited Shares have been allotted on 24th August, 2005 in the name of

employees of the company for sale thereof at the prevailing market prices through

recognised Stock Exchanges on the terms & conditions as specified by Managing /

Joint Managing Directors or Director of the company and reimbursement

of net sales proceeds to the company account)

(Out of the above shares, 1,814,240 Equity Shares of Rs.10 each were issued as fully paid up

bonus shares by capitalisation of General Reserves in earlier years, which were later on

sub-divided into 18,142,400 Equity Shares of Re.1/- each on February 12, 2003)

66,786,312 66,786,312

Schedule II - Reserves and Surplus1) Capital Redemption Reserve Amount as per last Balance Sheet 1,016,849,140 1,016,849,1402) Securities Premium Amount as per Last Balance Sheet 2,785,103,626 2,456,358,602 Add : Credited Upon Issue of Equity Shares on - 326,481,758 conversion of FCCBs Add : Credited Upon Issue of Equity Shares - 2,785,103,626 2,263,266 2,785,103,6263) General Reserve Amount as per last Balance Sheet 279,334,119 146,164,342 Add : Transfer from Profit & Loss Account 2,300,000 133,169,777 Less: Exchange Differences of Earlier Years capitalised 37,586,515 - to Fixed Assets (Net of Depreciation Rs.1,609,882) (Refer note no.2 of Schedule XX A and note no.16 of Schedule XX B) Less: Exchange Differences of Earlier Years Transferred 92,470,318 151,577,286 - 279,334,119 to the “Foreign Currency Monetary item Translation Differences Account” (Refer note no.2 of Schedule XX A and note no.16 of Schedule XX B)4) Foreign Currency Translation Reserve Amount as per last Balance Sheet 7,009,383 1,394,060 Less : Transfer to P&L Account 7,009,383 - Add : Additions during the year 1,452,197 1,452,197 5,615,323 7,009,3835) Balance in Profit & Loss Account 2,145,733,324 2,806,000,020 6,100,715,573 6,894,296,288



SCHEDULES TO CONSOLIDATED BALANCE SHEET AND PROFIT & LOSS ACCOUNT Amount in Rs.


Schedule III - Secured Loans1. Foreign currency term loans (from banks)

i) State Bank of India 2,028,800,000 802,100,000 (Due within one year Rs. nil (Previous year Rs. nil) Interest Accrued & Due 12,416,668 4,974,266

ii) State Bank of Travancore 1,272,932,614 1,006,525,285 (Due within one year Rs. nil (Previous year Rs. nil)

2. Working Capital Loans from Scheduled Banks 1,521,789,762 256,752,865

3. Finance Lease Obligation - 3,083,078

4. Loan against Hypothecation of Car 163,121 406,220

4,836,102,165 2,073,841,714

Notes:1. Foreign Currency Term Loans from State Bank of India and State Bank of Travancore are secured by way of first pari-passu charge by hypothecation

of the Company’s entire movables fixed assets, both present and future and mortgage of immovable properties of the Company being land admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali) (formerly Tehsil Rajpura, District Patiala), Punjab. The process for creation of first pari-passu charge by way of mortgage of immovable properties situated at Baddi, Himachal Pradesh is in progress. Foreign Currency Term Loan from State Bank of India is also collaterally secured by personal guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr Rajesh Jain and Mr. Sandeep Jain.

2. Working Capital Loans from Scheduled Banks are secured by way of first pari-passu charge by hypothecation of all current assets and also by way of 2nd pari-passu charge on all the movable fixed assets (including machinery and spares) of the company and existing immovable fixed assets of the Company being land admeasuring 96 bighas, 19 biswas & 93 bighas 12 biswas & 10 Biswasi situated at Village Samalheri, Tehsil Dera Bassi, District S.A.S. Nagar (Mohali), Punjab. The process for creation of second pari-passu charge by way of mortgage of immovable properties situated at Baddi, Himachal Pradesh is in progress. These are also collaterally secured by personal guarantees of the Promoter-Directors of the Company, viz. Mr. Soshil Kumar Jain, Mr. Ravinder Jain, Dr Rajesh Jain and Mr. Sandeep Jain.

Schedule IV - Unsecured LoansFixed Deposits* 300,500,000 436,110,000 (Due within one year Rs.55,000,000 (Previous year Rs.432,500,000)) Interest accrued & due - 101,828

Other Loans:

Foreign Currency Convertible Bonds**

US$ 36,800,000 (Previous Year US$ 36,800,000) 1,866,496,000 1,475,864,000 Zero Coupon Convertible Bonds due 2011

(Due within one year nil (Previous Year nil)

Loan from Lakshmi & Manager Holdings Ltd. 27,000,000 -


2,193,996,000 1,912,075,828

Note: * Includes Rs.300,000,000 (Previous Year Rs.432,500,000) from partnership firm in which some directors and their relatives are partners. ** Foreign Currency Convertible Bonds.- Unless previously converted, redeemed or repurchased & cancelled, the remaining FCCBs of US $ 36,800,000,which were issued on 13.02.2006, will

be redeemed on Feb 14, 2011 at 142.80% of their outstanding principal amount.




Sche

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(Am

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9,89

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790,

508,

410

Prev

ious

Year

3,

728,

463,

680

1,98

4,55

6,36

8 16

,503

,504

-

5,69

6,51

6,54

4 98

8,28

3,57

0 40

8,88

2,72

1 8,

033,

705

- 1,

389,

132,

586

4,30

7,38

3,95

8 2,

740,

180,

110

B. In

tang

ible

Ass

ets

Good

will

17

6,75

5,03

0 26

,217

,370

16

6,72

3,42

2 -

36,2

48,9

78

64,4

82,1

26

3,33

6,92

5 44

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-

22,9

01,2

79

13,3

47,6

99

112,

272,

904

Pate

nts, T

rade

mar

ks &

Des

igns

58

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,187

4,

584,

400

5,29

2,94

7 -

58,0

54,6

40

45,2

77,2

13

3,03

0,79

0 1,

442,

207

- 46

,865

,796

11

,188

,844

13

,485

,974

Softw

ares

78

,654

,895

8,

111,

565

19,9

87

- 86

,746

,473

41

,681

,169

13

,524

,682

12

,437

-

55,1

93,4

14

31,5

53,0

59

36,9

73,7

26

Web

site

9,20

2,69

5 -

- -

9,20

2,69

5 9,

202,

695

- -

- 9,

202,

695

- -

Prod

uct D

evel

opm

ent

44,6

80,0

76

15,9

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40

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60,5

80,5

16

11,4

46,6

09

10,3

42,6

85

- -

21,7

89,2

94

38,7

91,2

22

33,2

33,4

67

TOTA

L (B)

36

8,05

5,88

3 54

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,775

17

2,03

6,35

6 -

250,

833,

302

172,

089,

812

30,2

35,0

82

46,3

72,4

16

- 15

5,95

2,47

8 94

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19

5,96

6,07

1

Capi

tal W

ork i

n Pr

ogre

ss

647,

718,

926

431,

214,

135

Prev

ious

Year

32

4,14

6,92

2 43

,918

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9,

800

- 36

8,05

5,88

3 11

5,09

6,85

7 56

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6,

223

- 17

2,08

9,81

2 19

5,96

6,07

1 20

9,05

0,06

5

TOTA

L (A+

B)

6,06

4,57

2,42

7 3,

197,

041,

048

224,

341,

326

(11,

695,

186)

9,

025,

576,

963

1,56

1,22

2,39

8 71

4,19

8,04

2 60

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(1

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) 2,

213,

043,

241

6,81

2,53

3,72

2 4,

503,

350,

029

Capi

tal W

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n Pr

ogre

ss

1,77

7,02

3,74

9 2,

221,

722,

544

Prev

ious

Year

4,

052,

610,

602

2,02

8,47

5,12

9 16

,513

,304

-

6,06

4,57

2,42

7 1,

103,

380,

427

465,

881,

899

8,03

9,92

8 -

1,56

1,22

2,39

8 4,

503,

350,

029

2,94

9,23

0,17

5

Note

s:

1. Fr

eeho

ld La

nd in

clude

s Lan

d am

ount

ing

to R

s.17,

285,

690

(Pre

vious

Year

Rs.1

7,28

5,69

0) p

endi

ng re

gist

ratio

n in

the n

ame o

f the

Com

pany

.2.

Build

ing

inclu

des O

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Pre

mise

s am

ount

ing

to R

s.155

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,400

(Pre

vious

Year

Rs.1

,429

,032

) pen

ding

regi

stra

tion

in th

e nam

e of t

he Co

mpa

ny.

3. Pl

ant &

Mac

hine

ry in

clude

s Pla

nt &

Mac

hine

ry a

mou

ntin

g to

Rs.4

,543

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(Pre

vious

Year

5,2

77,1

32 )

(Net

Blo

ck) l

ying

with

third

par

ties.

4. De

prec

iatio

n fo

r the

year

inclu

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epre

ciatio

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Res

earch

& D

evel

opm

ent A

sset

s am

ount

ing

to R

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(Pre

vious

Year

Rs.1

31,3

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76).

5. Ca

pita

l Wor

k in

Prog

ress

inclu

des p

re-o

pera

tive e

xpen

ditu

re. R

efer

Not

e No.

4 of

sche

dule

XX

B.6.

Addi

tion

to Fi

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ts in

clude

s for

eign

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adju

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mou

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revio

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ar (R

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All I

ntan

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re in

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ally

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rate

d In

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* Inc

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hang

e diff

eren

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apita

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ear R

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(Pre

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Rs.

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** Ex

chan

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iffer

ence

s Los

s / (G

ain)

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arlie

r yea

rs ca

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ear.



Amount in Rs.



Schedule VI - InvestmentsLong Term Investments (at cost)A. Non-Trade - Quoted a) 10,000 Equity Shares of Rs.10 each 100,000 100,000 fully paid of Medicamen Biotec Ltd. - Unquoted a) Investment in Capital of Partnership Firm - 40,000,000 “Lakshmi & The Manager” * Add: Profit for the year - - 699,983 40,699,983 b) 41,257,126 (Previous Year Nil) Equity Shares 41,957,109 - of Re.1 each fully paid up in Lakshmi & Manager Holdings Ltd. Add: Profit/ (Loss) for the year (2,103,929) 39,853,180 - -B. Trade - Quoted 3,733,334 (Previous Year Nil) Equity Shares of 649,777,351 - US $ 0.0001 each fully paid up in PharmAthene Inc. - Unquoted a) 419,767 (Previous Year 419,767) Equity Shares of 3,258,238 4,197,670 Rs.10 each fully paid in PanEra Biotec Pvt. Ltd. (formerly known as Panheber Biotec Pvt. Ltd.) Add : Profit / (Loss) for the year 7,410,519 10,668,757 (939,432) 3,258,238 b) Investment in Shivalik Solid Waste Management 200,000 200,000 Ltd. 20,000 (Previous year 20,000) Equity Shares of Rs.10 each c) 4,608,608 (Previous Year 4,608,608) Ordinary 168,068,998 - Shares of GBP.0.01 (Face Value) each fully paid of Cambridge Biostability Limited Less : Provision for Permanent Diminution in the 168,068,998 - value of Investments (Refer note no. 12(b) of Schedule XX B) - -Current Investment (at lower of cost or market value) a) Nil Units (Previous Year 6,202,072.225) of - 62,216,088 Rs.10.0315 NAV in HDFC CMF - Savings Plus Plan - Whole Sale - Daily Dividend b) Nil Units (Previous Year 45,885.50) of - 46,192,733 Rs.1,001.1364 NAV in Reliance Liquid Plus Fund - Inst - Daily Dividend 700,599,288 152,667,042Notes:

*The names of all the partners of the Partnership Firm,

‘Lakshmi & The Manager’, total capital of the firm and

the share of each partner was as under:

Partners Capital Sharing Ratio

Panacea Biotec Ltd. 40,000,000 40%

Mr. Ravinder Jain 19,000,000 19%

Mrs. Radhika Jain 20,000,000 20%

Mrs. Sunanda Jain 18,000,000 18%

Mrs. Meena Jain 2,000,000 2%

Mrs. Shilpy Jain 1,000,000 1%

Total 100,000,000 100%

Aggregate value of Unquoted Investments 50,721,937 152,567,042

(net of Provision for Permanent Diminution in the value

of Investments of Rs.168,068,998)

Aggregate value of Quoted Investments 649,877,351 100,000

(Market value of Quoted Investment) 466,069,086 161,500





Schedule VII - Current Assets, Loans & AdvancesInventoriesi) Raw & Packing Materials 3,206,936,066 1,321,160,291 (Including lying with third parties Rs.34,062,940 (Previous Year Rs.57,098,748))ii) Finished Goods 1,020,726,983 713,360,132 (Including goods in transit of Rs.1,192,568 (Previous Year Rs. Nil)) & lying with third parties Rs.844,654 (Previous Year Rs.187,528)iii) Work in Progress 202,833,537 57,577,914 (Including lying with third parties Rs.67,135,348 (Previous Year Rs.9,268,214))iv) Stores & Spare Parts 82,540,480 4,513,037,066 53,655,025 2,145,753,362Sundry Debtors(Unsecured, Considered good, unless otherwise stated)Over six months (including Rs.3,146,023 considered 83,446,581 9,640,735 doubtful of recovery (Previous year Rs.2,858,916))Others Debts 1,121,429,650 1,452,066,359 1,204,876,231 1,461,707,094Less : Provision for Bad & Doubtful Debts 3,146,023 1,201,730,208 2,858,916 1,458,848,178Cash and Bank Balancesi) Cash balance on hand 9,243,607 2,653,554ii) Balance with Scheduled Banks a) On Current Accounts 100,130,657 104,179,993 b) On Unpaid Dividend Accounts* 1,583,956 1,536,608 c) On Fixed Deposits** 140,844,041 1,314,307,829 d) On Exchange Earner Foreign Currency 496,620,469 748,422,730 124,125,360 1,546,803,344 Current Accounts*Not available for use by the company as they represent corresponding unpaid dividend liabilities**Fixed Deposits amounting to Rs.1,024,123 (previous year Rs.9,718,300) are pledged with Banks and various Government Authorities. Other Current AssetsExport Benefits Receivable 25,521,973 19,402,794Interest accrued but not due on Loans & Deposits 10,256,386 12,630,446Less: Provision for doubtful of recovery 7,275,470 28,502,889 - 32,033,240 (Refer note no. 12(b) of Schedule XX B)Loans and Advances (Unsecured, Considered good, unless otherwise stated) Advances recoverable in cash or in kind or for value to be 749,656,508 611,875,467 received (Including Rs.818,322 (Previous Year Rs.818,322 ) considered doubtfulDue from PanEra Biotec Pvt. Ltd. (Formerly known as 153,950,194 135,532,654 Panheber Biotec Private Ltd.)** (Including Rs.135,532,654 (Previous Year Rs.135,532,654) considered doubtful) Balance with Excise, Custom etc. 15,042,362 24,870,402Loan to Joint Venture Company 108,833,850 35,746,800Staff Loans & Advances (including Rs.4,191,959 16,357,286 18,245,508 (Previous Year Rs.4,191,959) considered doubtful) 1,043,840,200 826,270,831Less : Provision for Doubtful Loans & Advances 108,833,850 - (Refer note no. 12(b) of Schedule XX B)Less : Provision for Bad & Doubtful Advances 140,542,935 140,542,935 794,463,415 685,727,896Security Deposits 23,446,850 43,242,929Advance Income Tax (Net of Provision of Rs.1,180,600,195 415,110,051 1,233,020,316 203,137,555 932,108,380 (previous year Rs.1,166,163,348)) 7,724,713,209 6,115,546,504

**Company’s two Directors are also directors in PanEra Biotec Private Limited (Formerly known as Panheber Biotec Pvt. Ltd.).



Amount in Rs.



Amount in Rs.


Schedule X - TurnoverSales 7,877,964,683 8,447,324,904

Services (R&D Income) 1,699,562 3,867,030

Income from Contract Manufacturing 20,899,947 -

7,900,564,192 8,451,191,934

Schedule VIII - Current Liabilities & ProvisionsA. Liabilities

i) Acceptances 1,140,108,339 345,202,563

ii) Sundry Creditors

a) Dues to Micro & Small Enterprises 1,274,843 1,177,455 (Refer note no.6 of Schedule XX B)

b) Dues to other than Micro & Small Enterprises 482,859,566 750,328,794

iii) Advances from Customers 7,060,675 8,155,762

iv) Deposits from C & F Agents 15,195,000 15,158,000

v) Unpaid Dividend on Equity Shares* 1,291,245 1,536,608

vi) Other Liabilities 44,401,611 115,478,633

vii) Book Overdraft - 345,960

vii) Interest accrued but not due on loans/ Deposits 391,030 1,692,582,309 2,267 1,237,386,042 * This amount does not include amount due/outstanding to be credited to Investor Education & Protection Fund,

same shall be credited as and when due.

B. Provisions

i) Provision for Wealth Tax 1,371,020 832,746

ii) Provision for Fringe Benefit Tax (Net of Advance 5,174,455 2,349,330 Payment of Rs.72,954,545 (Previous year Rs.75,650,670))

iii) Proposed Dividend on Preference Shares 33,184 -

iv) Proposed Dividend on Equity Shares - 66,693,746

v) Provision for Dividend Distribution Tax 5,640 11,334,602

vi) Provision for Gratuity 57,056,954 58,693,758

vii) Provision for Leave Encashment 54,307,651 38,458,216

viii) Provision for open Derivative Contracts 1,743,104,000 1,861,052,904 40,500,000 218,862,398

3,553,635,213 1,456,248,440

Schedule IX - Miscellaneous Expenditure(To the extent not written off or adjusted)

i) License Fees

As per last Balance Sheet 5,334,319 7,016,719

Less : Written off during the Year 1,682,400 3,651,919 1,682,400 5,334,319

ii) Preliminary Expenses

As per last Balance Sheet 132,006 5,960

Add : Addition during the year 480,381 126,046

Less : Written off during the year 104,671 507,716 - 132,006

4,159,635 5,466,325





Schedule XI - Other IncomeInterest Received -- from Banks (Tax deducted at source Rs.27,038,973 127,865,846 49,217,313 (Previous year Rs.9,029,244))- from Inter Company Loans/ Deposits (Tax deducted at source Rs. Nil (Previous year Rs. Nil)) 16,878,059 -- from Others (Tax deducted at source Rs.7,455,603 (Previous year Rs.2,323,740)) 35,037,872 7,268,691- on Income Tax Refund - 6,527,472Export Incentives 30,855,454 24,814,711Dividend on other than Trade Investments Long Term (Gross) 5,453,494 3,468,309Miscellaneous Balances/Provisions written back 123,707 123,151,118Sale of Scrap 1,779,942 1,769,296Lease Rent 17,823,031 180,133Profit on Sale of Fixed Assets {Net of loss Rs.2,039,733 (Previous year Rs.845,313)} 6,937,487 22,830,661Foreign Exchange Fluctuation Gain {Net of loss Rs. Nil (Previous year Rs.160,515,539} - 124,897,841Profit on Sale of Investment 1,257,126 -Insurance Claim Received 4,430,371 8,283,596Royalty Income 9,266,380 1,235,464Income from Derecognition of JV company 46,263,349 -Foreign Currency Translation Account 7,009,383 -Miscellaneous Income 975,422 9,291,183 311,956,924 382,935,788

Schedule XII - Raw & Packing Material ConsumedRaw Materials & Packing Materials Consumed Opening Stock 1,321,160,291 1,261,054,515 Add : Material purchased during the Year 4,857,945,771 3,562,049,427 6,179,106,062 4,823,103,942 Less : Closing Stock 3,206,936,066 1,321,160,291 2,972,169,996 3,501,943,651 Less: Material consumed for Research & Development 19,621,119 2,952,548,877 32,890,327 3,469,053,324

Schedule XIII - Operating and Other ExpensesProcessing Charges 35,289,443 5,843,974Analytical Testing & Trial Charges 6,995,652 11,135,528Ancillary Expenses - 7,473,173Stores & Spare Parts consumed (Refer note no.4 of Schedule XX B) 57,939,559 46,559,069Power & Fuel (Refer note no.4 of Schedule XX B) 112,861,694 100,327,742Repair & Maintenance (Refer note no.4 of Schedule XX B) Building 16,628,948 19,041,472 Plant & Machinery 22,609,114 23,646,625 Others 28,492,441 67,730,503 26,633,304 69,321,401Rent (Refer note no.4 of Schedule XX B) 53,624,943 50,223,655Royalty 14,742,764 4,385,550Directors’ Sitting Fees 345,000 350,000Printing & Stationery 40,222,731 31,487,310Postage & Communication Expenses 47,716,557 39,073,273Insurance 42,835,287 44,074,361Travelling & Conveyance expenses (Refer note no.4 of Schedule XX B) 116,933,775 114,284,121Books & Periodicals 2,240,467 3,448,613Legal & Professional charges (Refer note no.4 of Schedule XX B) 113,140,386 75,067,398Vehicle Running & Maintenance 17,155,503 14,853,710Auditors’ Remuneration: (Refer note no.5 of Schedule XX B) Statutory Audit Fee 4,093,231 3,972,119 Limited Review Fees 1,685,400 1,348,320 Others 136,332 376,394 Out of pocket expenses 251,124 6,166,087 78,074 5,774,907Rates & Taxes (Refer note no.4 of Schedule XX B) 15,615,884 11,260,858Donation 3,420,245 6,669,274Subscription 13,700,941 12,226,353Staff Training & Recruitment 31,477,974 29,976,294Miscellaneous expenses (Refer note no.4 of Schedule XX B) 33,473,390 28,592,166Bad Debts & Advances written off 115,891 -Provision for doubtful debts & doubtful advances 116,531,425 27,044,708Wealth Tax 1,393,909 832,746Foreign Exchange Fluctuation Loss (Net of Gain Rs.214,791,328 (Previous year Rs. Nil)) 571,574,318 -Provision for Loss on Open Derivative Contracts 1,702,604,000 40,500,000Provision for Permanent Diminution in the value of Investments (Refer note no.12(b) of Schedule XX B) 168,068,998 - 3,393,917,326 780,786,184





Schedule XIV - (Increase)/Decrease In StocksClosing Stock

Finished Goods 1,020,726,983 713,360,132

Work in Progress 202,833,537 1,223,560,520 57,577,914 770,938,046

Less: Opening Stock

Finished Goods 713,360,132 716,281,654

Work in Progress 57,577,914 770,938,046 50,067,266 766,348,920

(452,622,474) (4,589,126)

Schedule XV - Personnel ExpensesSalary, Wages and Bonus 874,951,893 884,576,690

Contribution to Provident and other Funds 27,589,020 23,749,623

Workmen Staff Welfare Expenses 42,098,929 38,990,698

Gratuity 12,138,642 33,097,213

956,778,484 980,414,224

Schedule XVI - Selling & Distribution ExpensesAdvertising & Sales Promotion 242,016,163 263,157,227

Meetings & Conferences 62,306,063 93,088,068

Freight & Cartage 67,411,807 63,494,250

Commission on Sales (Other than Sole Selling Agents) 86,496,459 63,047,875

458,230,492 482,787,420

Schedule XVII - Research & Development ExpensesRaw Material & Packing Material Consumed 19,621,119 32,890,327

Stores & Spare Parts Consumed 134,104,256 91,423,646

Salary, Wages & Bonus 182,045,564 155,895,586

Contribution to Provident & other Funds 4,096,340 3,607,381

Workmen/Staff Welfare expenses 9,504,657 7,046,234

Gratuity 1,062,491 3,287,690

Analytical Testing & Trial Charges 14,959,224 15,803,303

Rent 6,401,077 7,569,470

Printing & Stationery 2,212,425 2,591,736

Postage & Communication 3,151,204 2,794,844

Travelling Expenses 15,897,191 12,638,102

Books & Periodicals 6,317,043 3,966,683

Legal & Professional Expenses 12,052,167 9,158,686

Vehicle Running & Maintenance 2,424,344 2,044,023

Donation 30,251 1,880,651

Repair & Maintenance :

- Buildings 5,726,552 2,386,093

- Plant & Machinery 14,628,824 17,360,639

- Others 3,728,604 24,083,980 1,740,037 21,486,769

Rates, Fees & Taxes 622,995 335,366

Subscription 9,467,437 4,980,114

Electricity & Water Charges 33,714,494 22,390,252

Meeting & Conferences 2,460,794 4,191,618

Staff Training & Recruitment 765,564 815,807

Bank Charges - 65,407

Depreciation 169,025,407 131,348,176

Sundry Expenses 15,924,021 3,644,252

669,944,045 541,856,123





Schedule XVIII - Financial ExpensesInterest on:

a) Fixed Loans 206,260,720 88,760,734

b) Others (Including interest on working capital loans) 115,282,862 321,543,582 27,694,390 116,455,124

Bank Charges 26,638,230 34,222,565

348,181,812 150,677,689

Schedule XIX - Earning Per ShareCalculation of Profit for Basic EPS:

Net Profit/(Loss) before Tax (866,663,960) 1,876,025,059

Less: Adjustment for Tax Expense (206,739,128) 586,208,321

Less: Dividend on Redeemable Preference Shares 33,184 -

Less: Dividend Distribution Tax on Redeemable Preference Shares 5,640 -

Net Profit/(Loss) for calculation of Basic EPS (659,963,656) 1,289,816,738

Weighted average number of equity shares in calculating basic EPS 66,693,746 66,115,919

Calculation of Profit for Diluted EPS

Net Profit/(Loss) for calculation of basic EPS (659,963,656) 1,289,816,738

Adjusted Net Profit/(Loss) for calculating Diluted EPS (659,963,656) 1,289,816,738

No. of Weighted Equity Shares resulting from conversion of Foreign Currency Convertible Bonds

- ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ 4,542,752 4,542,752 (outstanding US$36.8 million) at conversion price Rs.357.57

Add: Weighted average number of Equity Shares in 66,693,746 66,115,919 calculating basic EPS

Weighted average number of Equity Shares in calculating 71,236,498 70,658,671 diluted EPS

Basic Earnings per Share (9.90) 19.51

Diluted Earnings per Share (9.90) 18.25

Face/ Nominal Value Per Share 1.00 1.00

Schedule XX - Significant Accounting Policies and Notes on Accounts (Consolidated Financial Statements)

A. Significant Accounting Policies

1. i) Basis of Preparation

The Consolidated Financial Statements relate to Panacea Biotec Limited (Parent Company), its Subsidiary Companies, Joint Ventures and Associates (hereinafter collectively referred as the “Group”).

The Consolidated Financial Statements (CFS) have been prepared to comply in all material respects with the notified Accounting Standards by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made and revaluation is carried out. The accounting policies have been consistently applied by the Company and except for the changes in accounting policies discussed more fully below, are consistent with those used in the previous year.

ii) Principles of Consolidation

The Consolidated Financial Statements have been prepared on the following basis:

a) The financial statements of the Parent Company and its Subsidiary Companies have been combined on a line by line basis by adding together the book values of like items of assets, liabilities, income and expenses after fully eliminating intra group balances and intra group transactions resulting in unrealized profits or losses, if any, as per Accounting Standard – 21, Consolidated Financial Statements.

b) Interest in assets, liabilities, income and expenses of the Joint Ventures have been consolidated using proportionate consolidation method. Intra group balances, transactions and unrealized profits/losses have been eliminated to the extent of Company’s proportionate shares as per Accounting Standard – 27, Financial reporting of interests in Joint Venture.



c) In case of Associates, where the company directly or indirectly through subsidiaries holds more than 20% of equity, investment in associate is accounted for by Equity Method in accordance with Accounting Standards 23, Accounting for Investment in Associates.

d) The financial statements of the Subsidiary Companies, Joint Ventures and Associates used in the consolidation are drawn for the same period as that of the Parent Company i.e. year ended March 31, 2009. Also, the Company’s Associate in earlier years, Lakshmi and the Manager, ceased to be an Associates w.e.f. June 30, 2008 the same has been accounted for as an Associates till the date of cessation.

e) Minorities’ interest in net profit/(loss) of consolidated Subsidiary Companies for the year has been identified and adjusted against the income in order to arrive at the net income attributable to the shareholders of the Parent Company. Minorities’ share of net assets has been identified and presented in Consolidated Balance Sheet separately. Where accumulated losses attributable to the minorities are in excess of their equity, in the absence of the contractual obligation on the minorities, the same is accounted for by the Parent Company.

f ) List of Subsidiaries, Joint Ventures and Associates considered for Consolidation:

S. No. Name of the Company Nature of Country of Extent of Holding/ relationship Incorporation Voting Power (%) as on March 31, 2009

1 Best On Health Ltd. Subsidiary India 100.0 2 Panacea Educational Institute Pvt. Ltd. Indirect Subsidiary* India 100.0 3 Radicura & Co. Ltd. Indirect Subsidiary* India 100.0 4 Panacea Hospitality Services Pvt. Ltd. Indirect Subsidiary* India 100.0 5 Sunanda Steel Company Ltd. Indirect Subsidiary* India 100.0 6 Umkal Medical Institute Pvt. Ltd. Subsidiary India 75.2 (w.e.f. June 30, 2008) 7 Panacea Biotec GmbH Subsidiary Germany 100.0 (w.e.f. June 11, 2008) 8 Panacea Biotec, Inc. (w.e.f. July 15, 2008) Subsidiary USA 100.0 9 Panacea Biotec FZE Subsidiary UAE 100.0 (w.e.f. March 16, 2008) 10 Rees Investments Ltd. Subsidiary Guernsey 100.0 (w.e.f. September 16, 2008) 11 Kelisia Holdings Ltd. Indirect Subsidiary† Cyprus 100.0 (w.e.f. September 18, 2008) 12 Kelisia Investment Holdings AG Indirect Subsidiary†† Switzerland 100.0 (w.e.f. October 22, 2008) 13 Panacea Biotec (International) SA Indirect Subsidiary††† Switzerland 100.0 (w.e.f. February 19, 2009) 14 Chiron Panacea Vaccines Pvt. Ltd. Joint Venture India 50.0 15 PanEra Biotec Pvt. Ltd. (Earlier Associate India 50.0 known as Panheber Biotec Pvt. Ltd.) 16 Lakshmi & the Manager Associate India 40.0 (up to June 30, 2008) 17 Lakshmi & Manager Holdings Ltd. Associate India 40.0 (w.e.f. July 1, 2008) 18 Best General Insurances Co. Ltd Indirect Associate** India 32.0 (w.e.f. September 19, 2008)

*Wholly Owned Subsidiary of Best on Health Ltd. **Subsidiary of Lakshmi & Manager Holdings Ltd. †Wholly Owned Subsidiary of Rees Investments Ltd. ††Wholly Owned Subsidiary of Kelisia Holdings Ltd. †††Wholly Owned Subsidiary of Kelisia Investment Holdings AG

g) Goodwill represents the difference between the Parent Company’s shares in the net worth of the Subsidiary / Joint Venture Company and the cost of acquisition at the time of making the investment in the Subsidiary / Joint Venture Companies. For this purpose, the Parent Company’s share of net worth of the Subsidiary/ Joint Venture Company is determined on the basis of the latest financial statements of the Subsidiary/ Joint Venture Company prior to acquisition, after making the necessary adjustments for material events between the date of such financial statements and the date of respective acquisition.

h) The Consolidated Financial Statements have been prepared using uniform accounting policies to the extent possible for like transactions and other events in similar circumstances and are presented in the same manner as the Parent Company’s separate financial statements.

2. Change in Accounting Policy

For the Financial Year ended 31st March, 2008, the Company was charging off exchange differences arising on foreign currency monetary assets and liabilities to profit and loss account. Pursuant to Companies (Accounting Standards) Amendments Rules, 2009, the Company has exercised the option of deferring the charge of exchange difference to the Profit and Loss Account, in respect of accounting periods commencing on or after 7th December, 2006, on long-term foreign currency monetary items (i.e.




monetary assets or liabilities expressed in foreign currency and having a term of 12 months or more at the date of origination). As a result, such exchange differences so far as they relate to the acquisition of a depreciable capital asset have been adjusted with the cost of such asset and are being depreciated over the balance life of the asset, and in other cases, have been accumulated in Foreign Currency Monetary Item Translation Difference Account and are being amortized over the balance period of such long term asset/liability but not beyond, accounting period ending on or before 31st March 2011.

In the current year, such exchange differences, pertaining to accounting periods commencing on 1 April, 2007 and ending on 31 March, 2008 are transferred from General Reserve, to the extent they related to acquisition of depreciable capital assets are adjusted with the cost of such assets Rs.24,810,859 (net of depreciation of Rs.1,609,882) (net of tax of Rs.12,775,656) and in other cases, are transferred to the Foreign Currency Monetary Item Translation Difference Account Rs.61,039,657 (net of tax of Rs.31,430,661).

Had the Company continued to use the earlier basis of accounting for exchange differences arising on long-term foreign currency monetary items, the Loss after tax for the current period would have been higher by Rs.561,174,198 (net of tax of Rs.288,960,930), the net block of fixed assets would have been lower by Rs.624,117,162 (net of depreciation of Rs.94,952,131) and general reserve would have been higher by Rs.130,056,833.

3. Uses of Estimates

The presentation of financial statements in conformity with the Generally Accepted Accounting Principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual result and estimates are recognized in the period in which the results are known/materialized.

4. Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.

Sale of Goods - Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and is stated net of trade discounts, free quantities, returns and sales tax but includes excise duty. Excise Duty deducted from turnover is the amount that is included in the amount of turnover (gross) and not the entire amount of liability arise during the year.

Research & Development - Income from Research & Development Services is accounted for as per the stage of completion.

Contract Manufacturing- Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.

Interest - Revenue is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable.

Dividends - Revenue is recognized when the shareholders’ right to receive payment is established by the Balance sheet date.

Dividend from subsidiaries is recognized even if same are declared after the balance sheet date but pertains to the period on or before the date of balance sheet as per the requirements of schedule VI of the Companies Act, 1956.

Royalties - Revenue is recognized on an accrual basis in accordance with the term of the relevant agreement.

Export Benefits - Export entitlements under Duty Entitlement Pass Book Schemes and Advance Licenses are recognized in the Profit & Loss Account when the right to receive credit as per terms of scheme is established in respect of export made and where there is no significant uncertainty regarding the ultimate collection of the relevant export proceeds.

5. Fixed Assets

Fixed assets are stated at cost less accumulated depreciation and impairment losses, if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.

In respect of accounting periods commencing on or after 7th December, 2006, exchange differences arising on reporting of the long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in the previous financial statements are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, if these monetary items pertain to the acquisition of a depreciable fixed asset.

6. Impairment of Fixed Assets

The carrying amounts of assets are reviewed at each Balance Sheet date as to whether if there is any indication of impairment based on internal/external factors. An impairment loss is recognized wherever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital.

After impairment, depreciation is provided on the revised carrying amount of the assets over its remaining useful life.

7. Expenditure during Construction Period

Expenditure directly relating to construction activity is capitalized. Indirect expenditure incurred during construction period is capitalized as part of the indirect construction cost to the extent to which the expenditure is indirectly related to construction or is incidental thereto. Income earned during construction period is deducted from the total of the indirect expenditure.

8. Intangibles

Patents and Trademarks - Costs relating to patents and trademarks, which are acquired, are capitalized.

Research and Development Costs - Research costs are expensed as incurred. Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Product Development – Product Development is capitalized on successful completion of development activities and commercial




launch of developed products.

Technical Know how - Technical Know how is being capitalized on successful transfer of technology when its future recoverability can reasonably be regarded as assured.

Software and Website - Software is stated at cost of acquisition and includes all attributable costs of bringing the software to its working condition for its intended use.

Goodwill – Goodwill on consolidation is amortized over a period of 5 years.

The carrying value of intangible assets is reviewed for impairment annually when the asset is not yet in use, and otherwise when events or changes in circumstances indicate that the carrying value may not be recoverable.

9. Depreciation/ Amortization

a) Depreciation on fixed assets is provided on written down value method as per the rates based on the estimated useful life or as per rates prescribed in Schedule XIV to the Companies Act, 1956 whichever is higher. Depreciation is provided on the following rates:

Tangibles Assets WDV %

Building – Factory 10.00 Building – Office Premises 5.00 Plant & Machinery 13.91 Furniture & Fittings 18.10 Vehicles 25.89 Office Equipments 13.91 Computer Equipments 40.00

b) Depreciation on intangibles is provided on the basis of the estimated useful lives as follows:-

Software - Depreciated on Straight Line basis over a period of 5 years.Websites - Depreciated on Straight Line basis over a period of 2 years.Patents, Trade Mark & Designs - Depreciated on Straight Line basis over a period of 7 years.Product Development - Depreciated on Straight Line basis over a period of 5 years.Technical Know-how - Amortized on straight line basis over a period of 5 years.

c) Leasehold Land is depreciated over the period of lease or useful life, whichever is shorter.

d) Leasehold Improvements are amortized over the initial period of lease or useful life, whichever is shorter.

10. Borrowing Costs

Borrowing costs attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Borrowing costs, which are not relatable to qualifying assets, are recognized as an expense in the period in which they are incurred.

11. Leases

Where the Company is the Lessee

Leases, where the lessor effectively retains substantially all the risks and benefits of ownership of the leased term, are classified as operating leases. Operating lease payments are recognized as an expense in the Profit and Loss account on a straight-line basis over the lease term.

Where the Company is the Lessor

Assets subject to operating leases are included in fixed assets. Lease income is recognized in the Profit and Loss Account on a straight-line basis over the lease term. Costs, including depreciation are recognized as an expense in the Profit and Loss Account. Initial direct costs such as legal costs, brokerage costs, etc. are recognized immediately in the Profit and Loss Account.

12. Deferred Revenue Expenditure

Expenditure incurred prior to April 1, 2003 towards procuring license for new products is written off over the period of agreement or ten years whichever is shorter. Expenditure of the similar nature incurred during the year is charged off to revenue.

13. Investments

Investments that are readily realizable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution, if any, in value is made to recognize a decline other than temporary in the value of the investments.

14. Inventories

Finished Goods, Work in Progress, Goods held for Resale, Raw Materials, Packing Materials and Stores & Spares are stated at lower of cost and net realizable value. However, materials and other items held for use in the production of inventories are not written down below cost if the finished goods in which they will be incorporated are expected to be sold at or above cost.

‘Cost’ of Finished Goods, Work in progress, Raw Materials, Packing Materials and Stores & Spares is arrived at by using ‘Moving Average Price’ method.

Cost of Work in Progress and Finished Goods is determined by considering direct material cost and appropriate portion of manufacturing overheads based on normal operating capacity. Cost of traded goods is arrived at by using ‘Moving Average Price’ method and for one of the Joint Ventures as first in first out basis. Cost of finished goods includes Excise Duty.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and to make the sale.




15. Retirement and Other Employees Benefits

a) Retirement benefits in the form of Provident Fund and Pension Schemes are defined contribution schemes and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

b) The contribution to Gratuity Fund, which is a defined benefit plan, is expensed on the basis of funding claims of the fund manager, Life Insurance Corporation of India. At the end of the accounting year, actuarial valuation is done as per projected unit credit method by an independent Actuary and any shortfall in the fund balance is further provided for.

c) Short term compensated absences are provided for based on estimates. Long term compensated absences are provided for based on actuarial valuation done as per projected unit credit method.

d) Leave encashment payable/ adjustable during the year is provided on the basis of last salary drawn by employees.

e) Actuarial gains/losses are adjusted in Profit & Loss Account and are not deferred.

16. Foreign Currency Transaction

Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount, the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

Conversion

Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction and non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.

Exchange Differences

Exchange differences arising on the settlement of monetary items or on reporting such monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognized as income or as expenses in the year in which they arise except those monetary items as mentioned below.

Exchange differences, in respect of accounting periods commencing on or after 7th December, 2006, arising on reporting of long-term foreign currency monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, in so far as they relate to the acquisition of a depreciable capital asset, are added to or deducted from the cost of the asset and are depreciated over the balance life of the asset, and in other cases, are accumulated in a “Foreign Currency Monetary Item Translation Difference Account” in the financial statements and amortized over the balance period of such long-term asset/liability but not beyond accounting period ending on or before 31st March, 2011.

Exchange differences arising on a monetary item that, in substance, form part of company’s net investment in a non-integral foreign operation is accumulated in a foreign currency translation reserve in the financial statements until the disposal of the net investment, at which time they are recognized as income or as expenses.

Forward Exchange Contracts not intended for trading or speculation purposes

The premium or discount arising at the inception of forward exchange contracts is amortized as an expense or income over the life of the contract. Exchange differences on such contracts are recognized in the statement of Profit and Loss Account in the year in which the exchange rates change. Any profit or loss arising on cancellation or renewal of forward exchange contract is recognized as income or as expense for the year.

17. Income Taxes

Tax expense comprises of current, deferred and fringe benefit tax. Current Income Tax and Fringe Benefit Tax is measured at the amount expected to be paid to the tax authorities in accordance with the Income Tax Act, 1961, enacted in India. Deferred Income Taxes reflect the impact of current year timing differences between taxable income and accounting income for the year and reversal of timing differences of earlier years.

Deferred Income Tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the balance sheet date. Deferred tax assets are recognized only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realized. If the Company has unabsorbed depreciation or carry forward tax losses, deferred tax assets are recognized only if there is virtual certainty supported by convincing evidence that such deferred tax assets can be realized against future taxable profits.

At each Balance Sheet date the Company re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

The carrying amount of deferred tax assets are reviewed at each balance sheet date. The Company writes down the carrying amount of a deferred tax assets to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax assets can be realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available.

18. Earnings Per Share

Basic Earnings per Share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. Partly paid equity shares, if any, are treated as a fraction of an equity share to the extent that they were entitled to participate in dividends relative to a fully paid equity share during the reporting period. The weighted average number of





equity shares outstanding during the period is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders, share split and reverse share split (consolidation of shares), if any.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted average number of Shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

19. Provisions

A provision is recognized when the Company has a present obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on management’s best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

20. Segment Reporting Policies

(a) Identification of Segments:

Primary Segment

Business Segment: The Company’s operating businesses are organized and managed separately according to the nature of products, with each segment representing a strategic business unit that offers different products. The identified segments are Vaccines, Formulations, Research & Development and Healthcare Activities.

Secondary Segment

Geographical Segment: The analysis of geographical segment is based on the geographical location of the customers.

The geographical segments considered for disclosure are as follows:

• Revenue from domestic market includes sales to customers located within India.

• Revenue from overseas market includes sales to customers located outside India.

(b) Allocation of Common Costs: Common allocable costs are allocated to each segment on a rational basis based on nature of each such common cost.

(c) Unallocated Items: Corporate income and expenses are considered as a part of unallocable income & expense, which are not identifiable to any business segment.

21. Derivative Instruments

As per announcement of Institute of Chartered Accountants of India, accounting for derivative contracts, other than those covered under AS-11, are marked to market on a portfolio basis and the net loss after considering the offsetting effect on the underlying hedge item is charged to the Profit and Loss Account. Net gains are ignored.

22. Cash & Cash Equivalent

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.

23. Preliminary Expenses

Costs incurred are amortized equally over a period of 5 years after the commencement of commercial operations.

B. Notes To Accounts (All amounts are in Rs. unless otherwise stated)

1. Contingent Liabilities (to the extent not provided for)


Disputed demands/ show-cause notices under:-

a) Sales Tax Cases - 13,809

b) Income Tax Cases 110,557 2,863,251

c) Customs Duty Cases 3,999,923 3,999,923

d) Central Excise Duty Cases 6,596,620 6,596,620

e) Service Tax 29,789,842 -

Total 40,496,942 13,473,603

Labour cases (in view of large number of cases, it is impracticable to 2,803,586 4,143,107 disclose each of them)

Other claims against the Company not acknowledged as debts - 64,000

Premium on Redemption of ‘US$ 50 Million Zero Coupon 470,992,269 243,706,599 Convertible Bonds due 2011’ (Refer note 3(ii) below)

Notes:a) Sales Tax liability of Rs.13,809 was on account of non-receipt of C forms from customers for inter-state sales. No provision was required for the

same as the management was hopeful of receiving the forms before the due date of filing of Sales Tax Returns. b) In respect of Income Tax, in Assessment Year 2005-06 the department disallowed ‘Club Expenses’ of Rs.255,800 on the ground that the these

expenses were incurred in the personal names and not in the name of the company, hence not related to the business of the company in the order under section 143(3) of the Act. The company preferred appeal before the CIT (Appeals). The CIT (Appeals) restricted the disallowance to Rs.50,000 from Rs.255,800. In Assessment Year 2006-07 the department disallowed depreciation on LAN of Rs.60,557 on the ground that depreciation on the same is allowable @25% and not @60% in the order under section 143(3) of the Act. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it.

c) In respect of Customs Duty demand of Rs.3,999,923 towards Customs Duty on certain items imported as exempted by the Company, the Company has deposited the entire amount under protest. The matter is pending before the Hon’ble Supreme Court of India. No provision is




considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it.

d) In respect of Central Excise Duty demand of Rs.6,596,620 towards Excise Duty on common inputs used in manufacture of exempted and taxable products, the Company has deposited the entire amount under protest. The matter is pending before Central Excise and Customs Tribunal. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the case and legal advice obtained by it.

e) In respect of service tax demand of Rs.29,789,842 relating to foreign services rendered & delivered outside India & others services, which were brought in service tax net w.e.f. 18.04.06 and against which numerous decisions/ judgments have been pronounced by the competent courts/judicial authorities, the Company has sent suitable reply to the concerned authority. No provision is considered necessary in this regard since the Company believes it has a good case based on nature of the demand and legal advice obtained by it.

2. Estimated amount of contracts remaining to be executed on capital account, net of advances and not provided in the books are as follows:-

S. No. Particulars Current Year Previous Year

1. Tangibles Assets 529,633,712 306,726,108

2. Intangible Assets 21,946,833 90,701,180

Total 551,580,545 397,427,288

3. Foreign Currency Convertible Bonds

i) Conversion price of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ (FCCBs) has already been fixed at Rs.357.57 per Share. This Rate is used to determine dilutive Equity Shares against outstanding Bonds.

ii) ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ amounting to US$ 36,800,000 are pending for redemption as on 31st March 2009. Unless these Bonds have been previously converted, redeemed, repurchased and cancelled, the Company will redeem these Bonds at a price equal to 142.80% of the outstanding principal amount on the maturity date i.e. February 14, 2011 (including premium amounting to Rs.798,860,288). Since the redemption of bonds is contingent upon its non-conversion into Equity Shares and the probability of redemption cannot presently be ascertained, the Company has not provided for the proportionate premium on redemption for the period upto 31st March, 2009 amounting to Rs.470,992,269 (Previous Year 243,706,599). Such premium has been disclosed as contingent liability. These Bonds are considered a monetary liability and are redeemable only if there is no conversion before maturity date.

iii) The Company has fully utilized the issue proceeds of ‘US$ 50 Million Zero Coupon Convertible Bonds due 2011’ in earlier years.

4. Details of pre-operative expenses (included in Capital Work in Progress) relating to Fixed Assets are as follows:

Note: Figures in brackets represent previous year figures (2007-08)

Particulars As at Additions Capitalised As at April 1, 2008 during the year during the year March 31, 2009

Legal & Professional 53,548,946 11,434,122 3,862,283 61,120,785 (2,941,783) (51,926,227) (13,190,164) (53,548,946)

Store & Spares consumed 22,419,030 50,376 22,469,406 - (2,325,569) (22,126,744) (2,033,283) (22,419,030)

Power and Fuel 31,254,050 357,323 31,529,249 82,124 (4,219,189) (27,922,199) (887,338) (31,254,050)

Rates & Taxes 9,860,525 4,872 9,575,517 289,880 (285,008) (9,575,517) (-) (9,860,525)

Repair & Maintenance:

Plant and Machinery 4,452,852 - 4,452,852 - (120,255) (43,627,41) (30,144) (4,452,852)

Others 6,222,930 7,73,882 6,545,065 451,747 (157,267) (60,74,541) (8,878) (6,222,930)

Salary and Wages 14,399,373 4,580,192 13,191,507 5,788,058 (2,335,791) (12,114,403) (50,821) 14,399,373

Office Expenses 2,733,205 73,934 2,807,139 - (-) (2,733,205) (-) (2,733,205)

Travel and Conveyance 3,855,848 1,857,383 3,731,531 1,981,700 (1,003,717) (2,852,131) (-) (3,855,848)

Rent 1,038,300 3,081,945 25,799 4,094,446 (-) (1,038,300) (-) (1,038,300)

Miscellaneous Expenses 4,595,999 7,215,152 8,802,924 3,008,227 (347,310) (4,463,177) (214,488) (4,595,999)

Total 154,381,058 29,429,181 106,993,272 76,816,967 (13,735,889) (145,189,185) (4,544,016) (154,381,058)




5. Auditor’s Remuneration:

Particulars Year ended March 31, 2009 Year ended March 31, 2008

Parent Subsidiaries Joint Parent Subsidiaries Joint Company Ventures Company Venture

Statutory Auditors

- Statutory Audit 3,309,000 382,919 4,68,762 3,400,060 57,304 514,755

- Quarterly Limited Reviews 1,685,400 - - 1,348,320 - -

- Certificates 134,832 1,500 - 113,217 - -

- Other Advisory - 15,000 - - 15,000 248,177

- Out of Pocket Expenses 161,721 - 6,953 69,317 - 8,757

5,290,953 399,419 475,715 4,930,914 72,304 771,689

Tax Auditor* 140,450 - 93,038 140,450 - 84,270

Cost Auditor* 44,944 - 33,708 - -

* included in the Legal & Professional charges given in Schedule XIII

6. Disclosure of Micro & Small Enterprises

Details of dues to Micro, Small and Medium Enterprises as per Micro, Small and Medium Enterprise Development Act, 2006

(“MSMED Act”).


Principal Interest Principal Interest

Principal amount and interest due thereon 1,274,843 Nil 1,177,455 Nil

remaining unpaid to any supplier as at

31st March 2009.

Interest paid by the Company in terms of 3,552,413 68,868 4,703,195 78,680

section 16 of the MSMED Act along with

the amounts of the payment made to the

supplier beyond the appointed day during

accounting year

Interest due and payable for the period of Nil Nil Nil Nil

delay in making payment (which have been

paid but beyond the appointed day during

the year) but without adding the interest

specified under MSMED Act

Interest accrued and remaining unpaid at the Nil Nil Nil Nil

end of the year

Further interest remaining due and payable in Nil Nil Nil Nil

succeeding years, until such date when the

interest dues as above are actually paid to the

small enterprises for the purpose of

disallowance as a deductible expenditure

under section 23 of the MSMED Act




8. Related Party DisclosuresA. Names of Related Parties

(a) Key Management Personnel: Mr. Soshil Kumar Jain - Chairman and Whole-time Director Mr. Ravinder Jain - Managing Director Dr. Rajesh Jain - Joint Managing Director Mr. Sandeep Jain - Joint Managing Director Mr. Sumit Jain - Whole-time Director

* Relatives/associates holding Equity Shares in the Company have been disclosed

(b) List of Persons having controlling interest together with their relatives*

Key Management Father Mother Wife Brother Sister Son Daughter Personnel

Soshil Kumar Jain - - Nirmala Jain - - Ravinder Jain, - Rajesh Jain, Sandeep Jain

Ravinder Jain Soshil Kumar Jain Nirmala Jain Sunanda Jain Rajesh Jain, - Sumit Jain, Radhika Jain Sandeep Jain Nipun Jain

Rajesh Jain Soshil Kumar Jain Nirmala Jain Meena Jain Ravinder Jain, - Ankesh Jain, - Sandeep Jain Harshet Jain

Sandeep Jain Soshil Kumar Jain Nirmala Jain Pamilla Jain Ravinder Jain, - - Priyanka Jain Rajesh Jain

Sumit Jain Ravinder Jain Sunanda Jain - Nipun Jain Radhika Jain - -

* Relatives holding Equity shares in the Company have been disclosed

(c) Relatives of Key Management personal having transactions with the Company

Mr. Ashwani Jain, Son-in-law of Mr. Soshil Kumar Jain

Mr. Shagun Jain, Son-in-law of Mr. Ravinder Jain

Mrs. Radhika Jain, Daughter of Mr. Ravinder Jain

Mrs. Shilpy Jain, Wife of Mr. Sumit Jain

(d) Enterprises over which person(s) having controlling interest in Company / Key management personnel(s) along with

their relatives are able to exercise significant influence;

(i) Neophar Alipro Limited, (ii) All India S. L. Jain Charitable Foundation, (iii) First Lucre Partnership Co.* , (iv) Second Lucre

Partnership Co.* , (v) Radhika Associates, (vi) Sumit Nipun & Co., (vii) Rattan Sons, (viii) Tahir & Co., (ix) Best On Health

Foods Ltd. , (x) Soshil Kumar Jain (HUF)*, (xi) Ravinder Jain (HUF)*, (xii) Rajesh Jain (HUF)*, (xiii) Sandeep Jain (HUF)*

* These enterprises are also holding Shares in the Company.

7. Deferred Tax Liabilities (Net): The break-up of deferred tax liability is as follows:-


Deferred Tax Liabilities:

Differences in depreciation and amortization in block of fixed assets as per tax books 501,434,945 375,059,972 and financial books

Deferred Revenue Expenditure 1,241,287 1,786,309

Capital expenditure on Research & Development 267,365,738 262,159,287

Forex Loss (revenue) deferred as per notification on AS-11 (Revised) 50,254,492 -

Gross Deferred Tax Liabilities 820,296,462 639,005,568

Deferred Tax Assets:

Effect of expenditure debited to Profit and Loss Account in the current year but 49,139,072 43,501,706 allowed for tax purposes in following years

Loss as per Income Tax Act carried forward 364,509,363 -

Unabsorbed Depreciation as per Income Tax Act carried forward 71,861,483 -

Gross Deferred Tax Assets 485,509,918 43,501,706

Net Deferred Tax Liability 334,786,544 595,503,862

Note: The Group has recorded a loss before tax of Rs.877,492,204 in year ended March 2009 which is mainly on account of foreign currency loss of Rs.1,702,604,000 on open derivative contracts. The group is otherwise earning good operating margin and based on orders on hand, it is virtually certain that it will earn sufficient margins to generate income to reverse book losses and will generate taxable profits to set-off the unabsorbed depreciation and carry-forward losses and other timing differences resulting into deferred tax assets. Hence, the group has recognised deferred tax asset as at March 31, 2009 on carry-forward losses component also.




B. Details of Transactions with the Related Parties

Particulars Joint Ventures Associates Key Relatives and Total PanEra Biotec Chiron Panacea PanEra Biotec Lakshmi & Lakshmi & Management Associates of Key Pvt. Ltd. (Upto Vaccines Pvt. Ltd. (w.e.f. The Manager Manager Personal Management 20.11.2007) Pvt. Ltd. 21.11.2007) Holdings Ltd. PersonalA. During the yearPurchase of - - 63,092,690 - - - - 63,092,690 raw materials (7,797,679) (-) (12,824,361) (-) (-) (-) (-) (20,622,040)Sale - 121,638,985 20,568,527 - - - - 142,207,512 (-) (109,172,953) (-) (-) (-) (-) (-) (109,172,953)Processing Charges paid - - 12,578,568 - - - - 12,578,568 (-) (-) (-) (-) (-) (-) (-) (-)Recovery of dues on - - 33,481,411 - - - - 33,481,411 Account of Expenses (16,777,765) (-) (9,644,863) (-) (-) (-) (-) (26,422,628)Rent paid - - - - - - - - (3,539,340) (-) (-) (-) (-) (-) (-) (3,539,340)Rent received - - 8,886,016 - - - - 8,886,016 (28,000) (-) (541,473) (-) (-) (-) (-) (569,473)Investments made - - - - 24,754,276 - - 24,754,276 (-) (-) (-) (24,000,000) (-) (-) (-) (24,000,000)Sale of Investment - - - 24,754,276 - - - 24,754,276 (-) (-) (-) (-) (-) (-) (-) (-)Remuneration - - - - - 63,035,463 4,843,885 67,879,348 (-) (-) (-) (-) (-) (202,154,417) (4,842,137) (206,996,554)Loan/Fixed Deposits Received - - - - - - 300,000,000 300,000,000 (-) (-) (-) (-) (-) (-) (612,500,000) (612,500,000)Loan/Fixed Deposits Repaid - - - - - - 432,500,000 432,500,000 (-) (-) (-) (-) (-) (-) (348,390,000) (348,390,000)Interest Paid on Deposits/Loans - - - - - - 35,893,714 35,893,714 (-) (-) (-) (-) (-) (-) (25,935,713) (25,935,713)Dividend Paid- Equity Shares - - - - - 19,503,700 24,137,900 43,641,600 (-) (-) (-) (-) (-) (19,503,700) (24,137,900) (43,641,600)Purchase of Shares - - - - - - - - (-) (-) (-) (-) (-) (100,000) (590,000) (690,000)Donation made - - - - - - 300,000 300,000 (-) (-) (-) (-) (-) (-) (500,000) (500,000)B. Year end balancesInvestments - 11,479,550 2,098,835 - 24,754,276 - - 38,332,661 (-) (11,479,550) (2,098,835) (24,000,000) (-) (-) (-) (37,578,385)Outstanding receivable - 39,077,216 97,543,624 - - - - 136,620,840 (-) (27,558,846) (67,766,327) (-) (-) (-) (-) (95,325,173)Provision for bad and - - 67,766,327 - - - - 67,766,327 doubtful advances (-) (-) (67,766,327) (-) (-) (-) (-) (67,766,327)Outstanding Fixed - - - - - - 300,000,000 300,000,000 Deposits/Loan (-) (-) (-) (-) (-) (-) (432,500,000) (432,500,000)

Notes: 1. Figures in Brackets represent previous year figures. 2. In respect of personal guarantee given by Promoter-Directors refer Note no 2 of Schedule III. 3. In respect of Joint Venture & Associates figures represents other than Panacea Biotec Ltd.’s share. 4. Material related party transactions (More than 10% of aggregate) with individual parties are as follows:

Particulars Unsecured Loans/ Fixed Interest Managerial Remuneration Equity Dividend Deposits received/(repaid)

During the year Current Year Previous Year Current Year Previous Year Current Year Previous Year Current Year Previous Year

Key Management personnel

Mr. Soshil Kumar Jain - - - - 15,155,738 48,153,429 5,000,000 5,000,000

Mr. Ravinder Jain - - - - 19,321,956 59,771,725 4,646,200 4,646,200

Dr. Rajesh Jain - - - - 12,648,046 45,645,737 4,706,900 4,706,900

Mr. Sandeep Jain - - - - 12,648,046 45,645,737 4,792,100 4,792,100

Enterprises over which Person(s) having control or significant influence over the Company / Key management personnel(s), along with their relatives, are able to exercise significant influence

First Lucre Partnership Co. 300,000,000 612,500,000 35,893,714 25,405,853 - - - -

(432,500,000) (330,000,000) - - - - - -

All India S.L. Jain Charitable Foundation - - 415,993 - - - -

Year end Balances

First Lucre Partnership Co. 300,000,000 432,500,000 - - - - - -




9. Derivative Instruments and Hedged/Unhedged Foreign Currency Exposure

i) Forward contract outstanding as at Balance Sheet date

Sell - Nil

Buy - Nil

ii) Particulars of Hedged Export Receivables at applicable exchange rates in respect of Options Contracts outstanding as at Balance Sheet date

Accordingly, exchange fluctuation loss on marking them to market as of year end amounting to Rs.1,702,604,000 (Previous Year Rs.40,500,000) has been accounted for and included in “Provision for Loss on Open Derivative Contracts” under Schedule XIII - Operating and Other Expenses

iii) Particulars of Hedged Foreign Currency Exposure as at the Balance Sheet date


Export Debtors 15,038,066 USD 50.71 762,580,345 28,387,626 USD 40.12 1,138,769,629

iv) Particulars of Unhedged Foreign Currency Exposure as at the Balance Sheet date


Import Creditors 6,035,469 USD 50.72 306,119,006 5,332,130 USD 40.11 213,845,059

- - - - 203850 USD 40.34 8,223,309

12,841,668 EURO 67.54 867,327,519 887,098 Euro 63.35 56,197,580

33,538 CHF 44.56 1,494,481 35,692 CHF 39.89 1,423,840

12,289 GBP 72.60 892,159 17,355 GBP 79.52 1,380,106

1,217,220 JPY/100 51.55 627,521 2,576,200 JPY/100 39.99 1,030,086

16,820 SEK 6.13 103,140 16,820 SEK 6.74 113,399

1,010 CAD 40.47 40,856 - - - -

Export Debtors 2,990,037 EURO 67.50 201,827,823 2,589,747 Euro 63.38 164,142,548

Foreign Currency Loans 65,097,252 USD 50.72 3,301,732,614 45,221,166 USD 40.11 1,813,595,469

Balance with Banks 9,652,566 USD 50.71 489,481,613 874,867 USD 40.12 35,095,289 10,5761 EURO 67.5 7,138,856 1,404,665 Euro 63.38 89,030,070

FCCBs 36,800,000 USD 50.72 1,866,496,000 36,800,000 USD 40.11 1,475,864,000

*The amount converted in INR is being round off to two decimal places.

Currency Exchange Amount in Amount in Amount in Amount in Purpose rates Foreign Currency Indian Rupees Foreign Currency Indian Rupees

Current Year Current Year Previous Year Previous Year

USD 41.00 - - 28,000,000 1,148,000,000 To

USD 40.55 - - 30,000,000 1,216,500,000 hedge

USD 40.00 58,000,000 2,320,000,000 84,000,000 3,360,000,000 Export

USD 39.00 48,000,000 1,872,000,000 48,000,000 1,872,000,000 Receivables

USD 39.60 36,000,000 1,425,600,000 36,000,000 1,425,600,000

142,000,000 5,617,600,000 226,000,000 9,022,100,000



10. Segmental Information

A. Information about Primary Segments

Particulars Vaccines Formulations Research & Development Healthcare Total

2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08

Revenue

Segment Revenue 5,617,717,120 6,432,222,552 2,262,302,398 1,976,017,495 1,699,562 5,195,312 - - 7,881,719,080 8,413,435,359

Other Income 5,952,196 40,218,416 24,950,226 32,517,814 - - - - 30,902,422 72,736,230

Total 5,623,669,316 6,472,440,968 2,287,252,624 2,008,535,309 1,699,562 5,195,312 - - 7,912,621,502 8,486,171,589

Segment Results 2,689,749,974 2,874,003,726 466,882,428 220,745,751 (668,244,483) (587,118,431) (5,658,514) - 2,482,729,405 2,507,631,046

Unallocated Corporate - 3,308,904,285 (744,741,593) Expenses

Operating Profit - (826,174,880) 1,762,889,453 /(Loss)

Interest & Finance - 321,543,582 (152,290,601) Charges

Other Income - 281,054,503 266,258,952

Income Taxes - (206,739,127) (587,041,067)

Net Profit/(Loss) - (659,924,832) 1,289,816,737

Other Information

Segment Assets 8,242,804,702 4,673,939,748 1,757,286,755 1,914,995,988 2,143,579,827 1,961,794,070 2,305,499,096 1,967,257,711 14,449,170,380 10,517,987,517

Unallocated Corporate 2,680,016,136 2,483,391,743 Assets

Total Assets 8,242,804,702 4,673,939,748 1,757,286,755 1,914,995,988 2,143,579,827 1,961,794,070 2,305,499,096 1,967,257,711 17,129,186,516 13,001,379,260

Segmental Liabilities 852,101,141 469,524,505 391,402,477 257,279,313 65,696,536 95,572,596 167,893,005 140,880,983 1,477,093,159 963,257,397

Unallocated Corporate 9,455,622,542 5,077,039,261 Liabilities

Total Liabilities 852,101,141 469,524,505 391,402,477 257,279,313 65,696,536 95,572,596 167,893,005 140,880,983 10,932,715,701 6,040,296,658

Capital Expenditure- 1,950,193,086 372,154,760 123,752,797 82,121,704 578,593,601 175,826,431 375,658,708 1,185,014,759 Additions

Non Cash Expenses

Depreciation 351,933,819 112,965,480 125,068,119 129,116,679 169,025,407 131,914,637 7,991,099 2,315,094


B. Information about Secondary Segments

a) Revenue as per Geographical Markets

Segment Domestic* Overseas


Vaccines 4,139,282,326 6,123,244,312 1,478,434,793 308,978,240Formulation 1,798,741,628 1,604,484,560 463,560,771 371,532,936Healthcare - - - -R&D - - 1,699,562 5,195,312Total 5,938,023,954 7,727,728,872 1,943,695,126 685,706,488

* Domestic revenue includes revenue from deemed exports of Rs.3,708,466,456 (Previous Year Rs.5,797,333,245)

b) Debtors as per Geographical Segment

Segment Domestic Overseas


Vaccines 298,940,869 1,163,295,364 536,329,974 Formulation 140,405,116 109,309,365 226,054,249 179,883,788Healthcare - - - -R&D - 6,359,660Total 439,345,985 1,272,604,729 762,384,223 186,243,448

c) The Company has common fixed assets for producing goods for Domestic Market and Overseas Market. Hence, separate figures for fixed assets / additions to fixed assets cannot be furnished.



11. Leases

i) For assets given under Operating Lease agreements:

a) The Company has leased out the assets situated at Lalru, Punjab on operating lease to its Associate, PanEra Biotec Private Ltd.

Gross Block Accumulated Depreciation Depreciation charged to P&L Account

Particulars Current Previous Current Previous Current Previous Year Year Year Year Year Year

Building 89,955,066 18,352,562 33,159,226 6,605,854 5,327,263 1,305,186

Furniture and Fixture 10,659,476 6,750,149 5,639,670 3,861,199 1,151,292 638,461

Office Equipment 1,904,239 512,602 769,438 244,331 270,436 43,346

Plant & Machinery 663,486,845 316,043,799 247,986,666 146,532,544 66,307,911 27,388,797

Computer Equipment 5,950,080 671,976 1,549,742 557,752 688,492 76,149

Total 771,955,706 342,331,088 289,104,742 157,801,680 73,745,394 29,451,939


The total of Minimum Future Lease Payments under non-cancelable operating lease for various periods for assets stated above is as follows:

As at March 31, 2009* As at March 31, 2008

a) Receivable within 1 year 67,600,000 9,600,000

b) Later than 1 year but not later than 5 years 67,600,000 -

c) Later than 5 years - -

* The Lease term for the assets given on lease vide Agreement for providing Manufacturing Facility, Utilities and Services of Employees and transfer of raw material with PanEra Biotec Pvt. Ltd. is valid till 31.03.2011. As per the said Agreement, during the period of usage, if any, Facility is used for manufacture of the Company’s Vaccines other than those mentioned therein or the facility remains idle due to insufficiency of orders from the Company, no lease rental shall be payable by PanEra Biotec Pvt. Ltd. during the relevant period.

The Company has also given an office space in its building situated at B-1 Extn./A-27, Mohan Co-operative Industrial Estate, New Delhi on operating lease to PanEra Biotec Pvt. Ltd.

b) Total of future minimum lease payments under operating lease mentioned above:

As at March 31, 2009 As at March 31, 2008

a) Receivable within 1 year 14,000 21,000

b) Later than 1 year but not later than 5 years - -

c) Later than 5 years - -

ii. For assets taken on Lease

a) The Company has taken various residential, office and godown premises under operating lease agreements. These are generally not non-cancelable and are renewable by mutual consent on mutually agreed terms. . There is no sublease payments expected to be received at the balance sheet date and no restrictions is imposed by lease arrangements.

b) Lease payments for the year are Rs.63,107,965 (Previous Year Rs.63,056,022).

c) Total of future minimum lease payments under Non Cancelable operating lease:

Particulars As at March 31, 2009 As at March 31, 2008

a) Payable within 1 year 9,714,882 9,357,368

b) Later than 1 year but not later than 5 years 12,721,625 28,116,760




12. (a) Details of Company’s share in Joint Ventures included in the Consolidated Financial Statements are as follows:


Sources of Funds1. Shareholders’ Funds a) Share Capital b) Reserves & Surplus 46,571,024 53,137,5402. Loan Funds a) Secured Loans 163,121 7,813,063 b) Unsecured Loans - -

Application of Funds1. Fixed Assets a) Gross Block 11,000,281 20,522,254 Less : Depreciation 7,790,995 11,459,002 Net Block 3,209,287 90,63,252 b) Capital Work-in-Progress - 7,371,2972. Deferred Tax Assets 1,994,049 1,723,3713. Current Assets, Loans & Advances A. Current Assets 143,485,483 122,905,261 B. Current Liabilities & Provisions 78,995,574 53,485,062 Net Current Assets (A)-(B) 64,489,909 69,420,1994. Miscellaneous Expenditure - -

Year ended Year ended March 31, 2009 March 31, 2008

Income Turnover 269,186,069 238,787,974 Other Income 5,737,410 15,596,464 Total Income 274,923,479 254,384,438

Expenditure Manufacturing & Administrative Expenses 175,809,060 192,195,864 Personnel Expenses 40,530,528 48,998,905 Interest & Finance Expenses 289,382 878,015 Selling & Distribution Expenses 23,761,359 2,119,755 Total Expenditure 240,390,329 244,192,539

b) Subsequent Event: The Company’s Joint Venture Cambridge Biostability Limited (CBL), having regard to its financial position, has initiated steps to place it into creditors’ voluntary liquidation, subsequent to the balance sheet date. Due to the financial position of CBL, the Company considers its investments in CBL as well as loan given to it, doubtful of recovery. Accordingly, the following have been provided for in the books of accounts of current year:

Particulars Amount (INR) Investment made 168,068,998 Loan given 108,833,850 Interest accrued on above Loan 7,275,470 Total 284,178,318

In view of the above development and consequent inability of the Joint Venture Company with regard to transfer of funds to the Venturer, the Company has discontinued proportionate consolidation of the Joint Venture Company. Consequently, net assets and goodwill amounting to Rs.9,532,746 and Rs.157,190,676 respectively has been adjusted in the books of accounts in the current year. Also due to discontinuation of non-integral foreign operations, cumulative amount of gain on exchange differences (Foreign Currency Translation Reserve) on these operations amounting to Rs.7,009,383 have been recognized as income in the current year.

13. The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service subject to maximum of Rs.3,50,000. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following tables summarize the components of net benefit expense recognized in the Profit & Loss Account and the funded status and amounts recognized in the Balance Sheet for the respective plans.



Balance sheet

Details of Provision for Gratuity:

Particulars 2008-09 2007-08

Defined benefit obligation 100,695,065 87,922,995

Fair value of plan assets 43,638,111 30,002,106 57,056,954 57,920,889 Less: Unrecognized past service cost Plan (liability) (57,056,954) (57,920,889)

Changes in the fair value of plan assets are as follows:


Opening fair value of plan assets 30,002,106 21,981,664

Expected return 2,770,184 2,026,934Contributions by employer 14,109,975 11,054,570Benefits paid (4,025,152) (5,410,262)Actuarial Gain /(losses) 780,999 349,200Closing fair value of plan assets 43,638,111 30,002,106

The Company has since contributed Rs.14,809,973 to the gratuity fund.

Changes in the present value of the defined benefit obligation are as follows:


Opening defined benefit obligation 87,922,995 54,165,505Interest cost 6,643,369 4,381,877Current service cost 13,648,636 9,196,529Actual return on plan assets Benefits paid (4,025,152) (5,410,262)Actuarial losses on obligation (3,494,783) 25,589,347Closing defined benefit obligation 100,695,065 87,922,996

The major categories of plan assets as a percentage of the fair value of total plan assets are as follows:


Investments with insurer 100% 100%

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled. There has been significant change in expected rate of return on assets due to the improved debt market scenario.

The principal assumptions used in determining gratuity obligations for the Company’s plans are shown below:


Discount rate 6.50% to 7.50% 8.00%Expected rate of return on plan assets 8.00% to 9.25% 8.00 to 9.25%Increase in compensation cost 5.00% to 12.00% 5.50 to 10.00%Employee turnover upto 30 years 10.00% 10.00%above 30 years but upto 44 years 5.00% 5.00%above 44 years 1.00% 1.00%

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.



Current service cost 13,648,636 9,196,529Interest cost on benefit obligation 6,643,369 4,381,877Expected return on plan assets (2,770,184) (2,026,934)Net actuarial gain recognized in the year on account of return on plan assets (4,275,782) -Net actuarial loss recognized in the year - 25,240,147Net benefit expense* 13,246,040 36,791,619Actual return on plan assets (3,452,434) (2,265,802)

* Includes Gratuity expense of Rs.3,439,471 (Previous Year Rs.3,287,690) accounted under Research & Development Expenses.

Profit and Loss Account

Net employee benefit expense - Gratuity (recognized in Employee Cost)



14. The Company has incurred expenditure on Pre-Clinical Development studies amounting to Rs.123,978,449 during the year (Previous Year Rs.185,575,387). This expenditure relates to studies carried out by Clinical Research Organization (CRO) towards obtaining registration of Company’s products in US and / or Europe. The expenditure incurred has been capitalized and carried in Capital Work in Progress. Management believes that it is in the nature of development expenditure and meets the capitalization criteria set out in Accounting Standard 26 on Intangible Assets issued by the Institute of Chartered Accountants of India due to the following reasons:

• the expenditure is not towards basic research and therefore no New Chemical Entity comes into being. Basic research is conducted by the Company in its own R&D centers, but such developmental work is performed through external agencies (CROs). Safety profile of the basic molecule is well established in several countries in Europe and in India and the product is being marketed successfully in several countries under different brand names.

• there is no experience to suggest that the studies conducted by CROs on behalf of the Company would lead to or make it difficult for the Company to obtain regulatory approvals in US and / or Europe.

The management believes that these products would be commercially viable and there is no reason to believe that there is any uncertainty that may lead to not securing registration for the products from regulatory authorities in US and / or Europe.

15. In accordance with Accounting Standard 9 on ‘Revenue Recognition’ notified by the Companies (Accounting Standards) Rules, 2006, Excise Duty on turnover amounting to Rs.18,845,112 (Previous year Rs.37,756,574) has been reduced from turnover in Profit & Loss Account and differential Excise Duty on opening and closing stock of finished goods amounting to Rs.Nil (Previous year Rs.Nil) has been adjusted from Raw Materials, Finished Goods, Work in Progress and Job Processing charges in Schedule XII.

16. The Company has exercised the option as per the Companies (Accounting Standards) Rules, 2009. As per the option exchange differences related to long term foreign currency monetary items so far as they relate to the acquisition of a depreciable capital assets are capitalized and depreciated the same over the useful life of the assets and in other cases, have transferred to Foreign Currency Monetary Item Translation Difference Account and amortized over the balance period of such long term assets/liabilities but not beyond accounting period ending on or before 31st March 2011, the unamortized balance in this account is Rs. 95,961,134 (Previous year Rs. Nil).

17. The Company is in the process of appointing independent consultants for conducting a Transfer pricing study to determine whether the transactions with associated enterprises were undertaken at “arms length basis”. The management confirms that all international transactions with associated enterprises are undertaken at negotiated contracted prices on usual commercial terms. Further there has been no change in the terms of such international transactions till March 31, 2009.

18. Details of Loans and Advances to Associates and Parties in which directors are interested (as required by clause 32 of listing agreement) to the extent of the share of balances outside group:





2008-09 2007-08

Contribution to Provident FundCharged to Profit and Loss Account 31,045,359 25,677,410

The Company expects to contribute Rs.17,575,000 to gratuity fund in the year 2009-10.

Defined Contribution Plan:


Dues from Associates - PanEra Biotec Pvt. Ltd. (Previously known as Panheber Biotec Pvt. Ltd.) Balance Recoverable (including Rs. 20,568,527 on account of sale of raw material 97,543,624 67,766,327 grouped as sundry debtors under Schedule VII) Maximum amount due at any time during the year 97,543,624 67,766,327

19. Previous year’s figures have been rearranged and reclassified wherever necessary to make them comparable with the current year’s figures.

Particulars 2008-09 2007-08 2006-07

Defined benefit obligation 100,695,065 87,922,995 54,165,505Plan assets 43,638,111 30,002,106 21,981,664Deficit 5,705,6954 57,920,889 32,183,841Experience adjustments on plan liabilities (3,286,351) (236,689) (21,981)Experience adjustments on plan assets (743,588) (238,939) (7,984)

Gratuity amounts for the current and previous periods are as follows:



A. Cash Flow from Operating Activities: Net operating profit before tax (866,663,960) 1,876,025,059 Depreciation 714,198,042 465,881,899 Interest Expenses 321,543,582 116,455,124 Provison for Doubtful Debts & Advances 422,105 27,044,708 Interest Income (179,781,777) (56,486,004) (Profit)/Loss on sale of Fixed Assets (6,937,487) (22,830,661) Intangibles written off (46,263,349) 2,103,721 Provision for Impairment & doubtful Loans 284,178,318 - Unrealized Foreign Exchange (Gain)/Loss 1,689,589,699 (102,855,667) Amortised exchange differences 47,980,567 - Deferred Revenue Expenditure written off during the year 1,306,690 2,826,236,390 1,556,353 430,869,473 Operating profit before working capital changes 1,959,572,430 2,306,894,532 (Increase) / Decrease in Trade and Other Receivables 74,223,324 (1,052,606,073) (Increase)/Decrease in Inventories (2,367,283,704) (53,828,110) Increase / (Decrease) in Current Liabilities & Provisions 527,604,285 (1,765,456,095) (148,473,118) (1,254,907,301) Cash generated from operations 194,116,335 1,051,987,231 Net Direct Taxes paid (262,488,116) (349,052,477) Net cash from operating activities (68,371,781) 702,934,754B. Cash flow from investing activities: Purchase of Fixed Assets (2,025,133,881) (2,926,138,709) Proceeds of deposits matured (with maturity more than three months) 1,250,968,300 402,060,214 Deposits (with maturity more than three months) (70,376,198) (1,250,968,300) Sale of Fixed Assets 52,261,957 31,304,037 Interest Received 182,155,836 57,774,295 Invetsment made (691,734,460) (152,806,491) Invetsments sold 149,108,804 (1,152,749,642) - (3,838,774,954) Net cash used in investing activities (1,221,121,423) (3,135,840,200) Net cash from operating and investing activitiesC. Cash flow from financing activities: Net increase in Working Capital Borrowings 1,292,036,897 256,194,912 Long Term Borrowings raised 837,914,977 2,057,104,157 Fixed Deposits received 300,500,000 - Fixed Deposits repaid (436,110,000) - Long Term Borrowings repaid (243,100) - Movement in Securities Premium Account - 2,263,266 Portion of (profit)/ loss in Associates - 52,002,560 Interest paid (313,814,246) (114,515,280) Dividend & Tax on Dividend paid (81,149,949) (76,872,959) Net Cash from Financing activities 1,599,134,579 2,176,176,656 Net cash from operating, investing & financing activities 378,013,156 (959,663,544) Net increase/ (decrease) in Cash & Cash equivalent 378,013,156 (959,663,544) Opening balance of Cash & Cash equivalent 295,835,044 1,254,672,615 Closing balance of Cash & Cash equivalent 673,848,200 295,009,071

Note: Components of Cash and cash equivalent: i) Cash Balance on Hand 9,243,607 2,653,554 ii) Balance with Scheduled Banks : a) In Current Accounts 100,130,657 104,179,993 b) In Unpaid Dividend Accounts* 1,583,956 1,536,608 c) In Fixed Deposits 140,844,041 1,314,307,829 d) In Exchange Earner Foreign Currency Current Accounts 496,620,469 124,125,360 Cash & Bank Balances as per Schedule VI 748,422,730 1,546,803,344 Less: Fixed deposits for maturity period more than 3 months 70,376,198 1,250,968,300 678,046,532 295,835,044 Less: Effect of Exchange Differences on Cash and Cash 4,198,332 825,973 Equivalents held in foreign currency Cash & Bank Balances as per Cash Flow Statements 673,848,200 295,009,071

* These balances are not available for use by the Company as they represent corresponding unpaid dividend liabilities.

Amount in Rs.


CASH FLOW STATEMENT ANNEXED TO CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 31ST MARCH, 2009





Panacea Biotec Ltd.Corporate OfficeB-1 Extn./G-3, Mohan Co-op. Indl. Estate,Mathura Road, New Delhi - 110 044, India

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