Ten Years Highlights

(Rs. Crores)
1998-99 1999-2000 Total Income* 316.32 340.10 2000-01 358.64 2001-02 416.89 2002-03 484.32 2003-04 622.74 2004-05 685.45 2005-06 752.82 2006-07 924.84 2007-08 1085.14

Domestic Income*

155.58

159.04

183.96

185.61

206.31

265.26

274.87

350.99

440.38

549.14

Export Income

160.74

181.06

174.68

231.28

278.01

357.48

410.58

401.83

484.46

536.00

Earning before Interest, Depreciation & Tax

44.31

50.45

48.35

68.01

96.39

128.51

134.48

116.62

202.52

229.16

Profit before Tax

25.44

26.92

22.09

42.95

79.32

108.00

101.55

78.39

151.24

176.87

Net Profit after Tax

21.42

26.12

20.47

32.02

61.86

79.25

80.71

63.98

122.23

141.12

Cash Profit

28.45

34.30

30.65

42.97

73.03

93.75

99.73

88.59

151.39

173.33

Share Capital

12.50

12.50

12.50

12.50

12.50

12.50

**25.00

25.00

25.00

25.09

Reserves & Surplus

138.31

150.75

163.23

144.54

199.30

263.17

312.59

360.89

461.02

582.57

Net Worth

150.81

163.25

175.73

157.04

211.80

275.67

337.59

385.89

486.02

607.66

Net Block

117.81

135.14

154.86

143.27

149.88

195.92

322.46

373.52

431.48

541.04

Net Current Assets

128.53

135.01

177.67

179.96

210.11

248.27

268.52

243.23

319.79

445.12

Dividend (%)

50%

55%

50%

55%

90%

110%

**55%

55%

75%

80%

Earnings per share (Rs.)

17.14

20.89

16.38

25.62

49.49

63.41

**32.28

25.59

48.89

56.38

Book Value per share (Rs.)

120.65

130.60

140.58

125.63

169.44

220.54 **135.04

154.36

194.41

242.19

* Net of Excise duty and Sales tax ** Post 1:1 Bonus Issue

BOARD OF DIRECTORS R. S. Hugar Premchand Godha M. R. Chandurkar A. K. Jain T. Ramachandran Babulal Jain Dr. V. V. Subba Rao V. A. Gore Executive Director Chairman Managing Director

REGISTERED OFFICE & INTERNATIONAL DIVISION 48, Kandivli Industrial Estate, Kandivli (West), Mumbai - 400 067. Maharashtra. Tel: (022) 6647 4444 Fax : 2868 6613 CORPORATE OFFICE 142-AB, Kandivli Industrial Estate, Kandivli (West), Mumbai - 400 067. Maharashtra. Tel: (022) 6647 4747; Fax: 2868 6954/ 2875 DOMESTIC MARKETING DIVISION Ipca House, 63 E, Kandivli Industrial Estate, Kandivli (West), Mumbai - 400 067. Maharashtra. Tel: (022) 6647 4222 ; Fax: 6647 4114 RESEARCH & DEVELOPMENT CENTRE 123-AB, Kandivli Industrial Estate, Kandivli (West), Mumbai - 400 067. Maharashtra. Tel: (022) 6647 4755; Fax: 6647 4757 WORKS 1. P Sejavata, .O. Ratlam - 457 002. Madhya Pradesh. Tel: (07412) 279079 Fax: 279083 2. Plot No. 89-A-D/90/91, Industrial Estate, Pologround, Indore - 452 003, Madhya Pradesh. Tel: (0731) 2421172/2081; Fax: 2422082 Plot No. 69 to 72 (B), Sector II, Kandla Free Trade Zone, Gandhidham - 370 230, Gujarat. Tel: (02836) 252385/389; Fax: 252313 Plot No. 255/1, Village Athal, Silvassa - 396 230. Dadra & Nagar Haveli (U.T.). Tel : (0260) 2640301; Fax 2640303 Plot No. 65 & 99 Danudyog Industrial Estate, Silvassa - 396 230. Dadra & Nagar Haveli (U.T.). Tel: (0260) 2640850; Fax: 2640646 H-4, MIDC, Waluj, Aurangabad-431 136. Maharashtra. Tel: (0240) 2564993; Fax: 2564113 C-6, Sara Industrial Estate, Chakrata Road, Rampur, Dehradun - 248 197. Uttarakhand. Tel: (0135) 6542228; Fax: 2728766

AUDIT COMMITTEE Babulal Jain Dr. V. V. Subba Rao V. A. Gore

CORPORATE MANAGEMENT TEAM Premchand Godha A. K. Jain J. L. Nagori Dr. Ashok Kumar M. D. Sharma Y. K. Bansal Prakash Shanware Pranay Godha N. Guhaprasad Managing Director Executive Director President Operations President R & D (Chemicals) President Domestic Marketing President R & D (Formulations) President HR President APIs & Generics President International Marketing

VICE PRESIDENT - LEGAL & COMPANY SECRETARY Harish P Kamath .

3.

BANKERS Canara Bank Corporation Bank ICICI Bank Exim Bank of India

4.

5.

AUDITORS Natvarlal Vepari & Co. Chartered Accountants REGISTRARS & SHARE TRANSFER AGENTS Intime Spectrum Registry Ltd. C-13, Pannalal Silk Mills Compound, L.B.S. Marg, Bhandup (W), Mumbai- 400 078. Tel.: (022) 2596 3838 Fax: 2567 2693 7. 6.

NOTICE
NOTICE is hereby given that the 58th ANNUAL GENERAL MEETING of lpca Laboratories Limited will be held at Shri Bhaidas Maganlal Sabhagriha, Swami Bhaktivedanta Marg, J.V.P Scheme, Vile Parle (W), Mumbai 400 056 on Friday, 25th July, 2008 at 3.30 p.m. to transact the following .D. business. ORDINARY BUSINESS: 1. 2. 3. 4. 5. 6. To receive, consider and adopt the Balance Sheet of the Company as at 31st March, 2008 and the Profit & Loss Account for the year ended on that date and the Reports of the Directors and Auditors thereon. To declare / note payment of dividend on equity shares. To appoint a Director in place of Mr. T. Ramachandran who retires by rotation and being eligible, offers himself for re-appointment. To appoint a Director in place of Mr. Babulal Jain who retires by rotation and being eligible, offers himself for re-appointment. To appoint a Director in place of Mr. V. A. Gore who retires by rotation and being eligible, offers himself for re-appointment. To appoint Auditors to hold office until the conclusion of the next Annual General Meeting and to fix their remuneration.

SPECIAL BUSINESS: 7. To consider and, if thought fit, to pass, with or without modification, the following resolution as an Ordinary Resolution : RESOLVED that pursuant to Sections 198, 269, 309 and Schedule XIII and any other applicable provisions, if any, of the Companies Act, 1956, the Company hereby accord its approval to the appointment of and remuneration payable to Mr. Premchand Godha as the Managing Director of the Company for a period of 5 years commencing 1st April, 2008 on the terms and conditions as set out in the agreement dated 21st March, 2008, entered between the Company and Mr. Premchand Godha, a copy whereof initialled by the Chairman for the purpose of identification is placed before the meeting, which agreement is hereby specifically sanctioned. NOTES (1) A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND A PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXIES, IN ORDER TO BE EFFECTIVE MUST BE RECEIVED AT THE REGISTERED OFFICE OF THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING. Explanatory statement pursuant to Section 173 (2) of the Companies Act, 1956 relating to special business is annexed hereto. The Register of Members and Share Transfer Books of the Company will remain closed from Wednesday, 16th July, 2008 to Friday, 25th July, 2008 (both days inclusive). The dividend if sanctioned at the meeting will be paid to those Members whose names appear in the Register of Members on 25th July, 2008 and to those beneficial owners whose names are provided by National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) as at the close of business hours on 15th July, 2008. The information required to be provided under the Listing Agreement with the Stock Exchanges regarding the Directors retiring by rotation and eligible for re-appointment is furnished in the Report on Corporate Governance. Members are requested to: (a) intimate to the Company / their Depository Participant (DP), changes, if any, in their registered address at an early date; (b) quote their Registered Folio No. and/or DP Identity and Client Identity number in their correspondence; (c) bring their copy of the Annual Report and the Attendance Slip with them at the Annual General Meeting; and (d) encash their Dividend Warrants on their receipt as Dividend remaining unclaimed for seven years are now required to be transferred to the Investor Education and Protection Fund established by the Central Government under the amended provisions of the Companies Act, 1956 and the members shall not be able to claim any unpaid dividend from the said fund or from the Company thereafter. Pursuant to Section 205A(5) of the Companies Act, 1956, all unclaimed dividend for the calendar year upto 2000 have been transferred by the Company to the Investor Education and Protection Fund. Members who have not encashed their dividend warrants for subsequent period are requested to encash the same immediately. (7) All documents referred in the Notice will be available for inspection by the members at the Registered Office of the Company during working hours on all working days upto the date of the Annual General Meeting and shall also be placed before the members at the said Annual General Meeting. By Order of the Board For Ipca Laboratories Ltd. Mumbai 29th May, 2008 Registered Office: 48, Kandivli Industrial Estate, Kandivli (West), Mumbai 400 067. Harish P Kamath . Vice President - Legal & Company Secretary

(2) (3) (4)

(5) (6)

ANNEXURE TO NOTICE
EXPLANATORY STATEMENT PURSUANT TO SECTION 173 OF THE COMPANIES ACT, 1956 Item No. 7 At the meeting of the Board of Directors of the Company held on 21st March, 2008, Mr. Premchand Godha has been re-appointed as the Managing Director of the Company for a further period of 5 years with effect from 1st April, 2008. Mr. Premchand Godha aged 61 years is a qualified Chartered Accountant and a Commerce Graduate and apart from being a Promoter of the Company is also on the Board of the Company since 31st March, 1975 and has been the Managing Director of the Company since March, 1983. He has over 36 years of experience including 33 years in the Pharmaceutical Industry. This appointment is subject to compliance with Sections 198, 269, 309 and Schedule XIII and any other applicable provisions, if any, of the Companies Act, 1956 and also subject to the approval of the shareholders. Accordingly, Agreement setting out his terms and conditions of the appointment including remuneration payable to him was entered into by the Company with Mr. Premchand Godha, Managing Director on 21st March, 2008. The agreement referred to in the resolution at item No.7 of the accompanying notice sets out the remuneration and other terms and conditions applicable to Mr. Premchand Godha upon his re-appointment as the Managing Director. The material terms of the said agreement is as follows: 1. 2. a) b) Period : 5 years with effect from April 1, 2008. Remuneration : Salary of Rs.9,00,000/- (Rupees Nine Lacs only) per month with such increments as may be decided by the Board subject to a ceiling of Rs.15,00,000/- (Rupees Fifteen Lacs Only) per month. Commission: Such remuneration by way of commission, in addition to the above salary and perquisites, calculated with reference to the net profit of the Company in a particular financial year and as may be determined by the Board of Directors of the Company, subject to the overall ceiling stipulated under Sections 198 and 309 of the Companies Act, 1956. The specific amount payable to the Managing Director will be based on certain performance criteria to be laid down by the Board and will be payable annually after annual accounts have been adopted by the shareholders. Perquisites: In addition to the salary and commission the Managing Director shall be entitled to the following perquisites:

c)

The perquisites are classified into three categories as under: CATEGORY 'A' i) Housing I : The expenditure incurred by the Company on hiring furnished accommodation for the Managing Director will be subject to the following ceiling : Thirty per cent of the salary, over and above ten per cent payable by the Managing Director. Housing II: In case the accommodation is owned by the Company, ten per cent of the salary of the Managing Director shall be deducted by the Company. Housing III: In case no accommodation is provided by the Company, the Managing Director shall be entitled to House Rent Allowance subject to the ceiling laid down in Housing I. Explanation: The expenditure incurred by the Company on gas, electricity, water and furnishings shall be valued as per the Income-Tax Rules, 1962. This shall, however, be subject to a ceiling of ten per cent of the salary of the Managing Director. ii) iii) iv) v) Medical, Hospitalization and Health-care expenses Reimbursement: Actual expenses incurred for the Managing Director and his family including mediclaim policy premium to be paid by the Company. Leave Travel Concession: For the Managing Director and his family, once in a year incurred in accordance with any rules specified by the Company subject to a ceiling of one month salary. Club Fees: Fees of Clubs subject to a maximum of two clubs. This will not include admission and life membership fee. Personal accident insurance: As per the rules specified by the Company.

CATEGORY 'B' i) ii) Provident Fund: Company's contribution to Provident Fund shall be as per the scheme applicable to the employees of the Company. Superannuation Fund: Company's contribution to Superannuation Fund shall be in accordance with the rules of the scheme as may be framed by the Company. Contribution to provident fund and superannuation fund will not be included in the computation of perquisites to the extent these either singly or put together are not taxable under the Income-tax Act.

iii) iv)

Gratuity : As per the rules of the Company, payable in accordance with the Approved Gratuity Fund and which shall not exceed half a month's salary for each completed year of service. Encashment of Leave: Encashment of Leave at the end of the tenure of the appointment will not be included in the computation of perquisites.

CATEGORY 'C' i) ii) 3. 4. 5. a) Car: Provision of car with driver for use on Company's business is not to be considered as perquisites. Use of car for private purpose shall be billed by the Company to the Managing Director. Telephone: Telephone(s) at the residence of the Managing Director and Mobile phone(s) for official use is not to be considered as perquisites. Personal long distance calls on telephone(s) / mobile phone(s) shall be billed by the Company to the Managing Director. In the event of no profit or inadequacy of profit, the Company shall pay the aforesaid remuneration by way of salary and perquisites as minimum remuneration. The Managing Director shall be entitled to annual privilege leave on full salary for a period of thirty days and such leave shall be allowed to be accumulated for not more than One Hundred Twenty days during his tenure of appointment. The Managing Director shall be entitled to : the reimbursement of entertainment expenses actually and properly incurred by him in the course of the legitimate business of the Company in accordance with the rules and regulations of the Company in force from time to time or as may be approved by the Board of Directors; and b) 6. the reimbursement of travelling, hotel and other expenses incurred by him in India and abroad exclusively on the business of the Company in accordance with the rules and regulations of the Company in force from time to time or as approved by the Board of Directors. As long as Mr. Premchand Godha functions as the Managing Director, he shall not be paid any sitting fee for attending the meetings of the Board of Directors or Committees thereof. Except Mr. Premchand Godha, Managing Director, none of the other Director of the Company may be considered to be interested or concerned in this appointment.

By Order of the Board For Ipca Laboratories Ltd. Harish P Kamath . Vice President - Legal & Company Secretary

Mumbai 29th May, 2008 Registered Office: 48, Kandivli Industrial Estate, Kandivli (West), Mumbai 400 067.

DIRECTORS REPORT
TO THE MEMBERS Your Directors have pleasure in presenting the 58th Annual Report and Audited Accounts for the year ended 31st March, 2008. FINANCIAL RESULTS For the year ended 31.3.2008 (Rs. crores) Sales and other Income (net of Excise duty & Sales tax) Profit before financial cost & depreciation Less : Financial cost Depreciation and Amortisation Profit before tax Less : Provision for taxation Current Deferred Fringe Benefit Add : Excess provision of taxation/ Income-tax refund of earlier year Profit after tax (before exceptional item) Exceptional item Insurance claim on assets damaged in flood Net Profit (after exceptional item) ADJUSTMENTS Balance of profit brought forward Amount available for appropriation YOUR DIRECTORS RECOMMEND THE FOLLOWING APPROPRIATIONS General Reserve Interim dividend Proposed final dividend Tax on dividends Surplus transferred to Balance Sheet MANAGEMENT DISCUSSION AND ANALYSIS a) Industry Structure and Development 1085.14 229.16 20.08 32.21 176.87 24.50 6.17 5.30 0.22 141.12 141.12 For the year ended 31.3.2007 (Rs.crores) 924.84 201.68 22.12 29.16 150.40 23.00 4.37 2.80 1.16 121.39 0.84 122.23

132.59 273.71

84.15 206.38

100.53 8.75 11.29 3.41 149.73 273.71

52.11 8.75 10.00 2.93 132.59 206.38

The global pharmaceutical market is estimated to be worth about US $660 billion and is growing at a rate of about 6% per annum. US, Japan and Europe constitute about 85% of the global pharmaceutical market and are growing at a slower rate of about 5% per annum mainly due to loss of exclusivity and lesser new product approvals. In contrast, pharmaceutical market of emerging economies like India, Brazil, Mexico, Russia, etc are growing at a much faster rate of over 12% per annum backed by improving per capita income and increased access and rising awareness of modern medicines. b) Opportunities, threat and concerns

Though in the world pharmaceutical market, India has a share about 2% by value and 8% by volume, India today is recognized as one of the leading global players with large number of drug master file registrations and regulatory approved manufacturing facilities. The Indian pharmaceutical industry is poised to grow to a staggering US$ 25 billion by 2010. Indian companies are today focusing on global generic business, R & D activities and contract research and manufacturing alliances with multinational companies. India is also fast emerging as a preferred pharmaceuticals manufacturing location. These shall act as future growth drivers for Indian Pharmaceutical Industry. However, poor public healthcare funding and infrastructure, low per capita consumption of medicines in developing and under developed countries are a few causes of concern. c) Financial Performance and Operations Review

Your Company had another successful financial year with a net total income of Rs.1085.14 crores as against Rs.924.84 crores in the previous year, a growth of 17%.

The Companys focus on formulations business resulted into increase in overall formulation sales to Rs.773.59 crores, an increase of 23% over previous year formulations sales of Rs.627.24 crores. The company further expanded its therapeutic coverage with introduction of new formulations, both in the domestic and export markets, especially in the fast growing life style related segments. However, the Active Pharmaceutical Ingredients (APIs) & Drug Intermediates business declined by 5% to Rs.268.35 crores mainly on account of lower Drug Intermediates sales. The operations have resulted in a net profit of Rs.141.12 crores during the financial year under report as against a net profit of Rs.122.23 crores in the previous financial year, a growth of 15%. Break-up of pharmaceutical sales Rs.crores (net of excise duty & sales tax) 2007-08 Domestic Formulations APIs & Intermediates Net Total Sales Growth d) International business 431.85 74.09 505.94 19% Exports 341.74 194.26 536.00 11% Total 773.59 268.35 1041.94 15% Growth 23% -5% 15% Domestic 354.03 70.65 424.68 22% 2006-07 Exports 273.21 211.25 484.46 21% Total 627.24 281.90 909.14 21% Growth 25% 14% 21%

The products of your Company are now exported to over 110 countries across the globe. During the financial year under report, inspite of nearly 12% appreciation in the Rupee vis--vis US $, the international business increased by 11% to Rs.536.00 crores as against Rs.484.46 crores in the previous year. Formulation exports of your Company increased by 25% to Rs.341.74 crores. However exports of APIs and Drug Intermediates decreased by 8% to Rs.194.26 crores. The decline in APIs and Drug Intermediates exports is mainly on account of lower Drug Intermediates exports. The appreciation of Rupee vis-vis major currencies also hit hard the APIs and Drug Intermediates Business. Continent-wise exports (Rs. Crores) 2007-08 Formulations Europe Americas CIS Asia Africa Australasia Total 187.34 3.13 55.67 20.44 69.62 5.54 341.74 APIs and Intermediates 67.51 53.29 1.17 55.98 12.78 3.53 194.26 Total 254.85 56.42 56.84 76.42 82.40 9.07 536.00 % to exports 48% 10% 11% 14% 15% 2% 100% Formulations 119.14 1.19 69.09 16.99 62.75 4.05 273.21 2006-07 APIs and Intermediates 96.13 51.37 1.75 49.89 7.15 4.96 211.25 Total 215.27 52.56 70.84 66.88 69.90 9.01 484.46 % to exports 44% 11% 15% 14% 14% 2% 100%

Formulation Exports - Therapeutic contribution Therapeutic Group Cardiovasculars & Anti-diabetics Non steroidal anti-inflammatory drugs (NSAID) Anti-bacterials Anti-malarials Gastro Intestinal (G.I) products Cough Preparations CNS Anthelmintics Others TOTAL 2007-08 35% 15% 29% 10% 2% 2% 2% 2% 3% 100% 2006-07 35% 16% 21% 15% 2% 2% 3% 2% 4% 100%

Europe Your Company achieved European export sales of Rs.254.85 crores during the financial year under report as against sales of Rs.215.27 crores in the previous year. Your Company has developed and submitted 44 generic formulation dossiers for registration in UK out of which 29 dossiers are already registered. 20 more generic formulations are under development at various stages for European market. Your Company has also stepped up the activity of registering products in other main EU markets. Business from these markets are expected to contribute to the formulations exports of your Company to Europe in the coming years. Americas Your Company mainly exports its APIs to USA, Canada and Latin American countries and formulations to Panama, West Indies and few Latin American countries in this sub-continent. Your Company achieved sales of Rs.56.42 crores in this continent as against Rs.52.56 crores in the previous year. Your Company is working on a list of formulations for development and filing of ANDAs with US FDA. Most of these formulations are from own APIs for which the Company has filed/ in the process of filing Drug Master Files (DMFs). Your Company has already signed agreements with marketing partners for sale of generic formulations on a profit sharing arrangement in the US market. 10 ANDA applications in respect of generic formulations developed by your Company are already filed with US FDA out of which 5 ANDA applications are granted till date. In April, 2008, US FDA authorities have inspected your Companys Piparia (Silvassa) formulations manufacturing facility and its approval is expected shortly. Your Companys US formulations business is expected to start from second half of the financial year 2008-09. Your Company has incorporated a wholly owned subsidiary in Mexico in May, 2008 and shall start filing formulations dossiers for registration in that country. Your Company has also started marketing its branded formulations in Venezuela, Columbia and Peru in the Latin American market with a few product registrations. Several more formulations dossiers are in the process of being submitted for registration in all these markets of Latin America. Confederation of Independent States (CIS) Your Companys CIS business recorded a sales of Rs.56.84 crores as against Rs.70.84 crores in the previous year, most of which is from branded formulations business from Russia, Ukraine, Belarus and Kazakhstan. The Companys branded formulations are marketed by its own field force appointed through its non-trading offices at Moscow in Russia, Kiev in Ukraine and Almaty in Kazakhstan. Your Company is continuously expanding its product range and geographical reach in the CIS market. The decline in the CIS sales is mainly on account of formulation Dossier re-registration issues in Russia and Kazakhstan due to changes in the regulatory requirements. Asia The Asian business (excluding India) recorded a sales of Rs.76.42 crores as against Rs.66.88 crores in the previous year. The Company exports

formulations as well as APIs to several Asian countries. In countries like Srilanka, Myanmar, Philippines and Vietnam, the Company markets its branded formulations through dedicated field force. The product range of the Company in Asian market is also being expanded. Your Company is operating in Asian market through non-trading offices in Vietnam, Srilanka and Philippines and in other countries through distributors Africa Your Company achieved export sales of Rs.82.40 crores to Africa during the financial year under report as against Rs.69.90 crores in the previous year. The Company exports formulations as well as APIs to several African countries. Your Company markets branded formulations in countries like Uganda, Sudan, Tanzania, Kenya and Nigeria through dedicated field force. Your Company is expanding its branded formulations business across this continent through expansion of field force and geographical coverage and increase in the number of branded formulations marketed. 33 generic formulations dossiers developed by your Company are registered in South Africa and another 13 dossiers are under registration. Australasia Your Company exports APIs to Australia and formulations to Australia and New Zealand in this sub-continent. The business from this continent was Rs.9.07 crores during the financial year under report as against Rs.9.01 crores in the previous year. Your Company is focusing on registering more formulation dossiers in Australia and New Zealand through its wholly owned subsidiary Company Ipca Pharma (Australia) Pty Ltd., Australia and its wholly owned subsidiary Ipca Pharma (NZ) Pty Ltd., New Zealand. e) Domestic formulations business

Your Companys formulations business in India now comprises of eight marketing divisions focusing on key therapeutic segments. The brand building was in evidence especially in chronic therapy segments such as cardiovasculars, anti-diabetics, newer anti-malarials, central nervous system (CNS) and non steroidal anti-inflammatory drugs (NSAID). During the year under report, the Company introduced 9 new products in the domestic market. New products introduced during the last four financial years now constitute nearly 26% of the Companys domestic formulations sales. Some of the new formulations introduced by your Company in the financial year under Report such as formulations of Etodolac under the brand ETOVA, Metoprolol Succinate & Amlodipine under the brand REVELOL-AM, a novel injectable anti-biotic combination of Ceftazidime & Sulbactum under the brand GARDCEF have done well in the domestic formulations market. During the financial year under report, the domestic formulations business recorded a growth of 22% at Rs.431.85 crores as against Rs.354.03 crores in the previous year. As per MAT March08 ORG IMS, your Company recorded a sales growth of 11% as against industry growth of 14.8% and the overall rank of your Company is at 26 with a market share of 1.25%.

Domestic branded formulations -Therapeutic contribution Therapeutic segment Cardiovasculars & Anti-diabetics Non steroidal anti-inflammatory drugs (NSAID) Anti-malarials Anti-bacterials Gastro Intestinal (G I) products CNS & Dermatology Cough Preparations Others Total f) Active Pharmaceutical Ingredients (APIs) and Intermediates business 2007-08 % to sales 28% 23% 17% 11% 8% 7% 3% 3% 100% 2006-07 % to sales 27% 20% 22% 12% 7% 6% 4% 2% 100%

During the financial year under report, the APIs and Intermediates business recorded a sales of Rs.268.35 crores as against Rs.281.90 crores in the previous financial year. Nearly 72% of the APIs and Intermediates business is from exports. 5 new APIs were commercialised, both for domestic and international markets, during the financial year under report. The decline in APIs and Drug Intermediates business is mainly on account of lower Drug Intermediates exports. Your Company has also stepped up Drug Master File (DMF) registration activities. 30 DMFs of your Company are currently filed with US FDA. Your Company has also obtained Certificate of Suitability (COS) for 19 APIs from European Directorate for Quality Medicines (EDQM) for EU countries. g) Subsidiary companies

During the year under report, your Company acquired 100% shareholding of a formulations registration and distribution Company in Australia, the name of which company was subsequently changed as Ipca Pharma (Australia) Pty Ltd. This Company had a wholly owned formulations registration and Distribution Company in New Zealand and the name of that company is now changed as Ipca Pharma (NZ) Pty Ltd. In terms of the approval granted by Central Government under section 212(8) of the Companies Act, 1956, copy of the Balance Sheet, Profit and Loss Account and Report of the Board of Directors and Auditors of the Companys wholly owned subsidiaries have not been attached with the Balance Sheet of the Company. Any member interested in obtaining the same may write to the Company Secretary at the Corporate Office of the Company. These documents are available for inspection by Members at the registered office of the Company on all days during business hours till the date of the forthcoming Annual General Meeting and will also be placed before the said meeting. However, as directed by the Central Government, the financial data of the subsidiaries have been furnished under Details of Subsidiaries forming part of the Annual Report. h) Consolidated financial statements In accordance with Accounting Standard AS-21, the audited consolidated financial statements are provided in the Annual Report. i) Research & Development R&D

Your Company has always considered Research and Development (R&D) as crucial for the sustained growth of the Company. The global challenges for the Indian pharma industry at large have increased several folds in the face of the transition from process to product patent regime in India from 2005. Your Company has stepped-up investments in R&D to keep pace with the changing domestic and global scenario. Your Company has R&D centers at Mumbai, Ratlam, Athal and Indore, duly recognized by the Government of India, Ministry of Science and Technology, Department of Scientific & Industrial Research (DSIR). These R&D centers are also duly approved by the prescribed authority under Section 35 (2AB) of the Income Tax Act, 1961 for availing 150% weighted tax benefit on the R&D expenditure. Your Company has stepped up its R&D expenditure from Rs.32.83 (3.61% of the turnover) in the previous year to Rs.42.92 crores (4.12% of the turnover) in the year under report. The revenue R&D expenditure has substantially increased to Rs.33.05 crores as against Rs.26.19 crores in the previous year, mainly on account of product development and filing cost. With qualified and experienced research scientists and engineers manning the research and development activities, your Company has focused its thrust on new and innovative process and product development for the manufacture of APIs with non-infringing processes. Development of new dosage forms and new drug delivery systems as well as cost reduction is also a focus area. The company has also stepped up formulation dossier registration activities in several countries across the globe.

j)

Intellectual property protection

Your company has created intellectual property management group within the Research and Development centers to deal with management and protection of intellectual property. Your company has filed as many as 152 patent applications till date as against 123 patent applications a year ago in India, USA and other countries. These applications relate to novel and innovative manufacturing processes for the manufacture of APIs and pharmaceutical formulations. Your directors have pleasure in informing you that 27 patent applications of your Company are since registered, 25 in Indian Patent Office and 2 in the US Patent Office. k) Manufacturing facilities

During the financial year under Report, formulations manufacturing facility of your Company situated at Piparia (Silvassa) was inspected and earned the certificate of GMP compliance of a manufacturer from MHRA-UK. The said manufacturing facility was also inspected in April, 2008 by US FDA authorities and its approval is expected shortly. Your Companys new formulations manufacturing unit at Special Economic Zone (SEZ) Indore meeting current Good Manufacturing Practices (cGMP) and regulatory requirements of developed countries such as USA, UK, Australia, etc is expected to commence commercial production in the second half of the financial year 2008-09. The new formulations manufacturing unit set up at Village Shankarpur Hakumatpur (Dist. Dehradun), Uttarakhand is further expanded. A new manufacturing block for manufacturing of Cephalosporin formulations at Dehradun is expected to commence manufacturing operations in July, 2008. Your Company has acquired leasehold land in Sikkim to set up a new formulations manufacturing unit to cater to future manufacturing needs of growing formulations business. l) Internal control systems

The Company has an adequate internal control system including suitable monitoring procedures commensurate with its size and the nature of the business. The internal control systems provide for all documented policies, guidelines, authorisation and approval procedures. The Company has an internal audit department which carries out audits throughout the year. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit committee of the Board. m) Human Resources The human resource plays an important and vital role in the growth and success of an organization. Your Company has maintained cordial and harmonious relations with all employees across various locations. During the year, your Company has implemented various measures to build a strong, adaptive and mature corporate structure which is flexible, responsive and simple. During the year under review, various development workshops were organized to improve the overall competency level of employees with an objective to improve the operational performance of individuals. Your Company has also taken efforts to build competent team to handle challenging assignments and for developing relationship with educational institutes with a view to attract and build a talent pool. The involvement of employees at all levels has been achieved through continued promotion of TQM activities across the organization with the involvement of top management team. To generate general managerial skills to the successful functional managers, your Company has sponsored its 20 functional managers to a customised 28 days inhouse residential management development programme at IIM Indore. Your Company has 5051 permanent employees as on 31st March, 2008. n) Employees Stock Options Scheme (ESOS) During the year under Report, Your Company issued further 1,10,000 options to selected employees under Employees Stock Option Scheme2006 (ESOS). The Company allotted 88,750 fully paid up equity shares of Rs.10/- each at a exercise price of Rs.200/- on 26th November, 2007 to the option grantees upon exercise of stock options granted on 23rd September, 2006 and accordingly, the paid up share capital of the Company increased to Rs.25,08,87,500/-. Disclosure pursuant to the provisions of SEBI (ESOS and ESPS) Guidelines, 1999 is annexed to this report as Annexure I. o) Cautionary statement

Certain statement in the management discussion and analysis may be forward looking within the meaning of applicable securities law and regulations and actual results may differ materially from those expressed or implied. Factors that would make differences to Companys operations include competition, price realisation, changes in government policies and regulations, tax regimes, economic development within India and the countries in which the Company conducts business and other incidental factors.

10

TONIRA PHARMA LIMITED During the year under Report, your Company had made an open offer to the shareholders of M/s Tonira Pharma Ltd. under Regulation 10 (Substantial Acquisition of shares) and Regulation 12 (Acquisition of control over a Company) of SEBI (SAST) Regulations, 1997. The said open offer process was completed in April, 2008 and your Company has now gained management control over the said Company as the single largest shareholder holding 32.30% of the voting rights of the said M/s Tonira Pharma Ltd. Tonira Pharma Ltd., is a listed company engaged in the manufacturing and marketing of Active Pharmaceutical Ingredients and Drug Intermediates. It has 2 manufacturing units and 1 Research & Development centre in the state of Gujarat. For the financial year ended 31st March, 2007, it recorded a income of Rs.36.76 crores most of which is from exports and a Net Profit of Rs.2.65 crores. DIVIDEND Your Directors had declared an interim equity dividend of Rs.3.50 per share (35%) at the meeting of the Board of Directors of the Company held on 29th October, 2007. The said interim dividend was paid on 13th November, 2007 to those shareholders, whose names appeared on the register of members of the Company on 7th November, 2007. Your directors are now pleased to recommend a final dividend of Rs.4.50 per share (45%), making the total dividend recommended to 80% on equity capital. The dividend will be tax free in the hands of the shareholders. The dividend (inclusive of interim dividend already paid) amounting to Rs.20.04 crores and dividend tax amounting to Rs.3.41 crores, if approved at the ensuing Annual General Meeting, will be appropriated out of the profits for the year. DIRECTORS Mr. T. Ramachandran, Mr. Babulal Jain and Mr. V. A. Gore retire by rotation at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment. A brief note on Directors retiring by rotation and eligible for re-appointment is furnished in the Report on Corporate Governance. Mr. M. R. Chandurkar, who has completed 70 years of age, had informed to the Company that he would not continue as the Managing Director of the Company after his tenure of appointment as Managing Director came to an end on 31st March, 2008. Accordingly, he ceased to be the Managing Director of the Company from 1st April, 2008. However, he continues to be Non Executive Director on the Board of the Company. The Board places on record its sincere appreciation for over 3 decades of services rendered by Mr. M. R. Chandurkar as whole time working Director of the Company. DIRECTORS RESPONSIBILITY STATEMENT Your Directors confirm: i) ii) that in the preparation of the annual accounts, the applicable accounting standards have been followed; that the Directors have selected such accounting policies and applied them consistently and made judgements 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 March 31, 2008 and of the profit of the Company for the year; 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; that the Directors have prepared the annual accounts on a going concern basis.

iii)

iv)

CORPORATE GOVERNANCE As per the requirement of listing agreement with the Stock Exchanges, your Company has complied with the requirements of Corporate Governance in all material aspects. A report on Corporate Governance together with a certificate of its compliance from Statutory Auditors forms part of this report. FIXED DEPOSITS During the year under review, the Company has not accepted any fixed deposits. AUDITORS, AUDIT REPORT AND AUDITED ACCOUNTS M/s Natvarlal Vepari & Co., Chartered Accountants, retire as auditors and, being eligible, offer themselves for re-appointment. The Auditors Report read with the notes to the accounts referred to therein are self-explanatory and, therefore, do not call for any further comments.

11

EMPLOYEES Information under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 forms part of this report. However, as per the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956, the Report and the Accounts is being sent to all shareholders of the Company excluding the aforesaid information. Shareholders interested in obtaining this information may write to the Company Secretary at the Corporate Office of the Company. CORPORATE SOCIAL RESPONSIBILITY Your Company is committed to good corporate citizenship. As a part of its corporate social responsibility, your Company has undertaken a range of activities in respect of healthcare and education to improve living conditions of people living in the neighborhood of its manufacturing facilities. During the year under report, your Company has also supported several healthcare and educational projects undertaken by charitable institutions and organizations. The Company considers safety, environment and health as the management responsibility, Regular employee training programmes are carried out in the manufacturing facilities on safety and environment. AWARDS AND RECOGNITIONS Your Directors are pleased to inform you that your Company was awarded Forbes Asias Annual Best under a Billion Award in 2007 by Forbes Asia, a leading global business magazine. Ratlam manufacturing unit of your Company received second prize in the National Energy Conservation Award 2007 in the Drugs and Pharmaceuticals sector from the Bureau of Energy Efficiency under the Ministry of Power, Government of India. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO In accordance with the requirements of 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, statement showing particulars with respect to conservation of energy, technology absorption and foreign exchange earnings and outgo is given in the enclosed Annexure. ACKNOWLEDGEMENTS Your Directors place on record their appreciation for the continued co-operation and support extended to the Company by the Consortium of Banks and Financial Institutions. Your Directors also thank the Medical Profession, the Trade and Consumers for their patronage of the Companys products. Your Directors also place on record their profound admiration and sincere appreciation of the continued hard work put in by employees at all levels. For and on behalf of the Board Mumbai 29th May, 2008 R. S. Hugar Chairman

12

ANNEXURE I TO THE DIRECTORS REPORT

Disclosure pursuant to the provisions of Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999
a. b. c. d. e. f. g. h. i. j. Employees Stock Option Scheme 2006 (Grant I) 3,99,000 (on 23rd September, 2006) Closing market price on the day prior to grant of options Rs.367.10 and exercise price Rs.200 Options vested 88,750 Options exercised 88,750 The total number of shares arising as a result of 88,750 exercise of options Options lapsed (as at March 31, 2008) 62,750 Variation of terms of options (as at March 31, N/A 2008) Money realized by exercise of options Rs.177.50 lacs including share premium of Rs.168.62 lacs Total number of options in force (as at March 31, 2,47,500 2008) Director / Employee wise details of options granted to: i) Directors Mr. R. S. Hugar Chairman 5,000 Mr. Babulal Jain Director 5,000 Dr. V. V. Subba Rao Director 5,000 Mr. V. A. Gore Director 5,000 Mr. T. Ramachandran Director 5,000 Mr. A. K. Jain Executive Director 12,000 ii) Senior Managerial personnel Mr. M. D. Sharma President Marketing 10,000 Mr. Prakash Shanware President HR 10,000 Dr. Ashok Kumar President - R&D 10,000 (Chemicals) Mr. Y. K. Bansal President - R&D 10,000 (Formulations) Mr. Jeevan Lal Nagori President Operations 10,000 Nil iii) any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year Options granted The pricing formula Employees Stock Option Scheme- 2006 (Grant II) 1,10,000 (on 29th October, 2007) Closing market price on the day prior to grant of options Rs.619.35 and exercise price Rs.315 Nil Nil Nil 4,000 N/A Nil 1,06,000

Mr. N. Guhaprasad

President Intl. Marketing 10,000

k.

l.

m. n.

Nil iv) Identified employees who were granted option during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant of options Rs.56.20 Rs.56.20 Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of options calculated in accordance with Accounting Standard (AS) 20 Earnings Per Share i) Method of calculation of employee The Company has calculated the employee The Company has calculated the employee compensation cost compensation cost using the intrinsic value method of compensation cost using the intrinsic value method accounting to account for options issued under the of accounting to account for options issued under the ESOS. The intrinsic value is Rs.304.35 ESOS. The intrinsic value is Rs.167.10 ii) Difference between the employee The employee compensation cost would have been higher by Rs.2,43,90,202/- had the Company used fair value compensation cost so computed at (i) above method for accounting the options issued under ESOS. and the employee compensation cost that shall have been recognized if it had used the fair value of the Options iii) The impact of this difference on profits and on The profit would have been lower by Rs.2,43,90,202 and the earnings per share would have been lower by Rs.0.97 EPS of the Company per share had the Company used fair value method for accounting the options issued under ESOS. Weighted average exercise price Rs.200 Rs.315 Weighted average fair value Rs.342.60 Rs.357.27 Fair value of options based on Black Scholes Rs.342.60 Rs.357.27 methodology Assumptions Risk Free rate 7.00% 8.00% Expected life of options Average time for expiry of option is taken as 2.5 years Average time for expiry of options is taken as 2.5 years Expected Volatility 18.25% 17.71% Expected Dividends In the calculation of fair value of the options, expected dividend have been ignored as the weighted average life of the option is more than 1 year and hence the estimation of the future dividend is difficult. Closing market price of share on a date prior to Rs.367.10 Rs.619.35 option grant

Mr. N. Guhaprasad Mr. Rajesh Bahal Mr. P B. Nair . Mr. L. K. Gupta Ms. Pradnya Deshmukh

President Int. Marketing V. P - Sales . V. P Mfg . V. P - Bulk Drugs . Sr. G. M. Quality Nil

10,000 8,000 8,000 8,000 6,000

AUDITORS CERTIFICATE ON EMPLOYEE STOCK OPTION SCHEME To The members of IPCA LABORATORIES LIMITED We have examined the books of account and other relevant records and based on the information and explanations given to us, certify that in our opinion, the Company has implemented the Employee Stock Option Scheme in accordance with SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the resolution of the Company passed in General Meeting held on 28th July 2006 and 20th July 2007. For Natvarlal Vepari & Co. Chartered Accountants Mumbai May 29, 2008 N. Jayendran Partner M. No. 40441

13

ANNEXURE II TO THE DIRECTORS REPORT

Information pursuant to the Companies (Disclosure of particulars in Report of the Board of Directors) Rules, 1988 1. CONSERVATION OF ENERGY (i) Energy conservation measures taken : The Company continues its policy of giving priority to energy conservation measures including regular review of energy generation and consumption and effective control on utilisation of energy. The following energy conservation methods were implemented during the year: a. optimization in use of cooling water pumps. b. Use of energy efficient pumps and motors. c. Chemical dosing of cooling/chilling water system. d. Installation of electro flow unit. e. installation of energy savers. f. installation of VFD of different fluctuating load motors. g. natural cooling systems at stores. h. replacement of ML transfer pumps by energy efficient pumps. (ii) Additional investments and proposals being implemented for reduction of energy consumption : The Company is continuously installing electroflow and other devices to improve quality of power through voltage improvement. (iii) Impact of the above measures : The adoption of energy conservation measures have resulted in considerable savings and increased level of awareness amongst the employees. The energy conservation measures have also resulted in improvement of power factor and consequential tariff benefit. (iv) A. Power and fuel Consumption: 2007-08 a) Electricity : (i) Purchased : Units (KWH) Total Amount (Rs. in lacs) Rate / Unit (Rs.) (ii) Own Generation : Through Diesel Generator Units (KWH) Units per Ltr. 0f Diesel Oil (KWH) Cost of Diesel per KWH (Rs.) b) Light Diesel Oil (LDO) : Quantity (K.Ltrs.) Total Amount (Rs. in lacs) Average Rate/Ltr. (Rs.) c) Others (Rs. in lacs) : HSD LSHS Coal Furnace Oil Others B. Consumption per unit of Production: In view of the varied nature of the products and packs, the compilation of accurate consumption per unit of production is not feasible. 59.80 97.51 929.28 152.84 20.80 60.23 24.92 845.30 97.98 246.854 76.70 31.07 296.675 90.39 30.47 10,65,734 3.27 9.82 12,34,422 3.25 10.15 5,11,03,996 1883.12 3.68 4,47,26,824 1701.96 3.81 2006-07

14

2.

TECHNOLOGY ABSORPTION Research & Development (A) Specific areas in which R&D work was carried out by the Company: The Companys R&D Centres at Mumbai, Ratlam and Indore are approved by Department of Scientific and Industrial Research, Government of India. These centres are also approved U/s 35 (2AB) of Income Tax Act, 1961 for purposes of weighted tax deduction. The Company carries out R&D in several areas including: (i) Development of indigenous technologies for major bulk drugs and intermediates, technology absorption and optimisation of basic drugs, process simplification, etc. (ii) Improvement of existing processes to improve yields and quality, reduce cost and lead to eco friendly process. (iii) Development of newer dosage forms and new drug delivery systems. (iv) Development of non-infringing processes for APIs. (B) Benefits derived as a result of the above R & D : (i) R&D efforts have helped bring out an improvement in processes, product design and operating efficiencies. (ii) Development of new formulations and line extensions. (iii) Development of various APIs and Intermediates. (iv) Development of new markets, adaptation to meet export requirements, quality upgradation and cost reduction. (i) (ii) (iii) (iv) Development of various APIs/intermediates having good potential for exports and local market. Additional investment in manpower, latest instrumentation to upgrade and strengthen R & D facilities. Development of newer drug delivery systems. Development of formulations for developed market and bio-equivalence studies of the same.

(C) Future Plan of Action :

(D) Expenditure on R & D: 2007-08 (Rs.Crores) 9.87 33.05 42.92 4.12% 2006-07 (Rs.Crores) 6.64 26.19 32.83 3.61%

a) b) c) d) (E)

Capital Revenue Total R & D expenditure as a percentage of turnover

Imported technology (imported during last 5 years): The Company has not imported any technology during the last 5 years.

3.

FOREIGN EXCHANGE EARNINGS AND OUTGO A. Earnings The CIF value of exports of the Company during the year aggregated to Rs.536.00 crores as against Rs.484.46 crores in the previous year. B. Outgo Detailed information is furnished in the Notes to the Accounts. For and on behalf of the Board

Mumbai 29th May, 2008

R. S. Hugar Chairman

15

ANNEXURE
REPORT ON CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement, given below is a report on the Corporate Governance in the Company: 1. Companys philosophy of Corporate Governance is to ensure : i) that the Board and top management of the Company are fully appraised of the affairs of the Company that is aimed at assisting them in the efficient conduct of the Companys business so as to meet Companys obligation to the shareholders. ii) iii) iv) 2. that the Board exercises its fiduciary responsibilities towards shareholders and creditors so as to ensure high accountability. that all disclosure of information to present and potential investors are maximised. that the decision making process in the organisation is transparent and are backed by documentary evidences.

Board of Directors The present strength of the Board of Directors of the Company is 8 directors of which one is promoter Managing Director, one professional non-promoter Executive Director, one promoter non executive Director and five non-executive independent directors with independent judgment in the deliberation and decision of the Board. The Chairman of the Board is a non-executive independent Director. 7(seven) board meetings were held during the Financial Year 2007-08. The date on which the said meetings were held are as follows: 20th April, 2007 25th May, 2007 20th July, 2007 29th October, 2007 26th November, 2007 19th January, 2008 21st March, 2008

The last Annual General Meeting of the Company was held on 20th July, 2007. Details of attendance at the Board meetings, Annual General meeting and shareholding of each Director are as follows: Name of the Director Category No. of board meetings Held Attended Attendance at last AGM (20.07.2007) Yes Yes Yes No. of Equity shares held in the Company (*) 1,250 5,70,268 4,30,200 No. of options held under ESOS 2006 3,750 Nil Nil

Mr. R. S. Hugar Mr. Premchand Godha Mr. M. R. Chandurkar

Chairman, Non-Executive, Independent Director Managing Director Non-Executive, Non Independent Director (Managing Director upto 31.03.2008) Executive Director Non-Executive, Independent Director Non-Executive, Independent Director Non-Executive, Independent Director Non-Executive, Independent Director

7 7 7

5 7 7

Mr. A. K. Jain Mr. T. Ramachandran Mr. Babulal Jain Mr. V. A. Gore Dr. V. V. Subba Rao

7 7 7 7 7

7 6 6 7 5

Yes Yes Yes Yes No

4,000 9,891 2,250 1,250 1,250

9,000 3,750 3,750 3,750 3,750

Notes: None of the Directors are related to each other. Mr. Premchand Godha is re-appointed as the Managing Director of the Company for a further period of 5 years w.e.f. 1st April, 2008 at the meeting of the Board of Directors held on 21st March, 2008. Mr. M. R. Chandurkar has ceased to be the Managing Director of the Company w.e.f. 1st April, 2008. However he will continue as the non executive Director of the Company. (*) The above shareholding as at 31st March, 2008 is in respect of shares which are held by Directors as a first holder and in which shares they have beneficial interest.

16

Number of other Companies or Committees of which the Director is a Director/Member/Chairman : Name of Director No. of other public limited Companies in which he is Director 3 3 1 Nil Nil Nil 2 Nil No. of Committees in which he is Member (other than Ipca) 2 1 Nil Nil Nil Nil 3 Nil No. of Committees of which he is Chairman (other than Ipca) 2 Nil Nil Nil Nil Nil 2 Nil

Mr. R. S. Hugar Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain Mr. T. Ramachandran Mr. Babulal Jain Mr. V. A. Gore Dr. V. V. Subba Rao

Directorship held by Directors mentioned above does not include Directorship of foreign companies and private limited companies. The Company has a process to provide, inter-alia, the information to the Board as required under Annexure IA to Clause 49 of the listing agreement pertaining to Corporate Governance. None of the Directors on the Board is a member of more than 10 committees and Chairman of more than 5 committees across all the companies in which they are Directors. All the Directors have made necessary disclosures in this regard to the Company. The Company has not entered into any materially significant transactions during the year under report with promoters, directors, senior management personnel, etc. other than the transactions entered into in the normal course of Companys business. Transactions with related parties are disclosed under notes forming part of the accounts. Code of Conduct The Board has laid down a code of conduct for Board members and senior management personnel of the Company. The said code of conduct is posted on Companys website. The Board members and senior management personnel have affirmed compliance with the said code of conduct. Information required under clause 49IV (G) of the listing agreement on Directors seeking appointment/ re-appointment Mr. T Ramachandran Mr. T. Ramachandran aged 59 years is a non-executive independent Director of the Company. He is a graduate in commerce and is also accredited with a Diploma in Export Management. He was in the employment of the Company from 1973 till he ceased to be the Executive Director of the Company in August, 2004 on completion of his appointed tenure. His knowledge of pharma industry and international business will be of immense benefit to the Company. He is also a Director of the following companies: 1. 2. 3. Haysinth Investments & Traders P Ltd. . Ipca Pharma Nigeria Ltd., Nigeria National Druggists (Pty) Ltd., South Africa 4. 5. 6. Laboratories Ipca Do Brasil Ltda, Brazil Solway Investments Ltd., Mauritius (under winding up) Sundridge Management Ltd., Mauritius (under winding up)

Mr. Babulal Jain Mr. Babulal Jain aged 57 years is a non-executive independent Director of the Company since 1988. He is a practicing Chartered Accountant by profession. He is also the Chairman of the Audit Committee, Remuneration Committee and Investors Grievance Committee of the Board of Directors of the Company. He has professional experience of nearly 33 years in the field of Audit, Finance, Company Law and Taxation. His professional knowledge and vast experience will be of immense benefit to the Company. He does not hold directorship in any other Company. Mr. V. A. Gore Mr. V. A. Gore aged 69 years is a graduate in Commerce from University of Bombay. He also holds a Masters Degree in Financial Management from the Jamnalal Bajaj Institute of Management, Mumbai. He started his career as an Asst. Administrative Officer with Life Insurance Corporation of India where he worked in different positions from 1964 to 1981. Thereafter, he joined ICICI Ltd. and worked with them in various capacities till his retirement in 1997. Mr. Gore has vast experience of nearly 4 decades in the field of finance and general

17

management. He has been an independent Director on the Board of the Company since April 2003. Prior to that, he was a nominee Director of ICICI bank on the Board of the Company from April 2000. He is also a Director of the following companies: 1. Apar Industries Ltd. 2. Gujarat Borosil Ltd.

He is Chairman of Audit Committee and Investor Grievance Committee of Apar Industries Ltd. He is a Member of Audit Committee of Gujarat Borosil Ltd. 3. Audit Committee Terms of Reference & Composition, Name of Members and Chairman : The Audit Committee of the Company comprises of Mr. Babulal Jain, Chairman of the Committee and Mr. V. A. Gore and Dr. V. V. Subba Rao, all being Independent Directors with independent judgment in the deliberation and decisions of the Board as well as Audit Committee. All members of the Audit Committee have knowledge on financial matters and the Chairman of the Audit Committee is a Senior Chartered Accountant in practice having accounting and financial management expertise. The Executive Director in-charge of Finance along with Statutory Auditors, Cost Auditors and General Manager (Internal Audit) are invitees to the meetings of the Audit Committee. Mr. Harish P Kamath, Vice President - Legal and Company Secretary is the Secretary of this . Committee. The terms of Reference to this Committee, inter-alia, covers all the matters specified under Section 292 (A) of the Companies Act, 1956 and also all the matters listed under Clause 49 of the Listing Agreement with Stock Exchanges such as oversight of the Companys financial reporting process; recommending the appointment/re-appointment of statutory auditors; reviewing with the management annual financial statements, quarterly financial statements and other matters as covered under role of audit committee in clause 49. The Audit Committee has powers, inter-alia, to investigate any activity within its terms of reference and to seek information from any employee of the Company / Companys subsidiaries as well as seek outside legal and professional advice. The Audit committee reviews all the information that are required to be mandatorily reviewed by it under the corporate governance. Audit Committee meetings and the attendance during the financial year 2007-08. There were 6 (Six) meetings of the Audit Committee during the Financial Year 2007-08. The dates on which the said meetings were held are as follows: 20th April, 2007 25th May, 2007 20th July, 2007 29th October, 2007 19th January, 2008 21st March, 2008

The attendance of each member of the Audit Committee in the committee meetings is given below: Name of the Director Mr. Babulal Jain Mr. V. A. Gore Dr. V. V. Subba Rao Subsidiary Companies The Company has no material non-listed Indian subsidiary company. The Company has 8 overseas wholly owned subsidiary companies (including 2 companies under voluntary winding up) and one wholly owned subsidiary Company of a wholly owned subsidiary, the financial statements of which are regularly reviewed by the Audit Committee. 4. Remuneration and Compensation Committee The Company has a Remuneration and Compensation Committee of the Board which comprises of Mr. Babulal Jain (Chairman of the Committee), Mr. V. A. Gore and Dr V. V. Subba Rao all independent directors to function in the manner and to deal with the matters specified in the clause 49 of the listing agreement and also to review the overall compensation structure and policies of the Company to attract, motivate and retain employees as well as to consider grant of stock options to permanent employees and Directors of the Company and Companys subsidiaries. There were 3 (Three) meetings of this Committee during the Financial Year 2007-08. The dates on which the said meetings were held are as follows: 25th May, 2007 29th October, 2007 21st March, 2008 No. of meetings held 6 6 6 No. of meetings attended 5 6 5

18

The attendance of each member of the Remuneration and Compensation Committee in the committee meetings is given below: Name of the Director Mr. Babulal Jain Mr. V. A. Gore Dr. V. V. Subba Rao
l

No. of meetings held 3 3 3

No. of meetings attended 3 3 3

The details of the remuneration payable to Whole-time Directors for the Financial Year 2007-08 are given below : (Rs.lacs) Name of the Director Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain Salary 33.60 33.60 22.80 Benefits and Perquisites 42.28 96.56 25.86 Commission* 134.40 45.60 Total 210.28 130.16 94.26

*As provided in the Annual Accounts 2007-08 and payable subject to shareholders approval. The appointment of Whole-time Directors are contractual and is generally for a period of 5 years. Either party is entitled to terminate agreement by giving not less than two months notice in writing to the other party. At the end of the financial year as on 31st March, 2008, the Company had a scheme for grant of stock options to the Directors and to the selected Employees of the Company and its subsidiaries under Ipca Laboratories Limited Employees Stock Option Scheme 2006 (ESOS). Under this ESOS, the Remuneration and Compensation Committee till date has granted following options: Grant Date 23.09.2006 29.10.2007 No. of options granted 3,99,000 1,10,000 Exercise Price Rs.200 Rs.315

Each option represent a right to the option grantee but not an obligation to apply for 1 fully paid equity share of Rs.10/- each of the Company at the Exercise Price. The options granted would be vested equally over a period of 4 years from the date of grant of options. Details of number of options granted to Directors and the Senior Management personnel of the Company is given under Annexure to the Directors Report. Disclosure pursuant to SEBI (ESOS and ESPS) Guidelines, 1999 is annexed to the Directors Report forming part of this Annual Report.
l

Details of payments made to Non-Executive Directors in the Financial Year 2007-08 are as under: The Non-Executive Directors are paid only sitting fees for attending the meetings of the Board of Directors and Committees thereof. Name of the Director Mr. R. S. Hugar Mr. Babulal Jain Mr. V. A. Gore Dr. V. V. Subba Rao Mr. T. Ramachandran Sitting fees Paid (Rs) 50,000 1,50,000 1,60,000 1,30,000 60,000 Commission paid (Rs) Nil Nil Nil Nil Nil

5.
l

Shareholders / Investors Grievance Committee Details of the Members, Compliance Officer, No. of complaints received and pending, No. of transfers pending as on close of the financial year. This Committee functions under the Chairmanship of Mr. Babulal Jain, the non-executive independent Director. Mr. Premchand Godha, Managing Director and Mr. M. R. Chandurkar, Director (Managing Director upto 31.03.2008) are the other Members of this Committee. This committee met once during the financial year 2007-08 on 29th October, 2007. The meeting was attended by all the Committee members.

19

Mr. Harish P Kamath, Vice President Legal & Company Secretary is the Compliance Officer of the Company. . This Committee monitors share transfers, transmissions and other shareholders related activities including redressal of investor grievances. During the year, the Company received 146 complaints/communications from the shareholders, mostly regarding non-receipt of dividend warrants posted/request for revalidation of date expiry warrants, bonus shares issue related queries, etc. all of which are attended to. The Company had no unattended request pending for transfer of its equity shares at the close of the financial year. 6. General Body Meetings l Details of the location where the last three AGMs were held and the details of the resolutions passed or proposed to be passed by Postal Ballot. AGM for Date & time the F.Y. ended of AGM 31-3-2007 Place of AGM Special Resolutions Passed

20-7-2007 at 3.30 p.m. Bhaidas Hall, Vile Parle, Mumbai 1. Amendment to Employees Stock Option Scheme (ESOS). 2. Extension of benefit of Employees Stock Option Scheme to employees and Directors of subsidiary Companies. 3. Increase in the remuneration payable to Mr. Pranay Godha under Section 314(1B) of the Companies Act, 1956. 28-7-2006 at 3.30 p.m. Bhaidas Hall, Vile Parle, Mumbai 29-9-2005 at 3.30 p.m. Bhaidas Hall, Vile Parle, Mumbai Grant of stock options to selected employees and Directors under ESOS. None

31-3-2006 31-3-2005

All the resolutions including special resolutions set out in the respective notices calling the AGM were passed by the shareholders. No postal ballots were used for voting at these meetings. There is no proposal to pass any Special Resolution through postal ballot at the ensuing Annual General Meeting. 7. Disclosures i) Disclosure on materially significant related party transactions that may have potential conflict with the interest of the Company at large. None The Register of Contracts containing the transactions in which Directors are interested is placed before the Board regularly for its approval. Transactions with the related parties are disclosed in the notes to the accounts forming part of the Annual Report. ii) Details of non-compliance by the Company, penalties and strictures imposed on the Company by SEBI, ROC, Stock Exchanges or any other statutory authorities on any matter related to capital market during the last 3 financial years. None iii) iv) There is a whistle blowing policy in the Company and that no personnel has been denied access to the Audit Committee. The Company has complied with all the mandatory requirements of Corporate Governance under Clause 49 of the Listing Agreement. The Company has adopted the non-mandatory requirements of the Clause 49 of the Listing Agreement pertaining to Corporate Governance such as whistle blower policy, remuneration committee, etc. The CEO/CFO certification form part of this Annual Report.

v) 8.

Means of Communication Quarterly Results Newspapers in which results are generally published Website, where displayed Whether website also displays official news releases Presentation made to institutional investors or to the analysts : : : : : The results of the Company are published in the Newspapers. The Economic Times, The Business Standard, Free Press Journal, and Nav Shakti. At http://www.ipcalabs.com Yes. The website includes all the information on presentations made to the investors and analysts.

20

9. Shareholders Information AGM : Date, Time and Venue Financial Year First quarter results Second quarter results Third quarter results Annual results Date of Book closure Dividend Payment date(s) : : : : : : : : Friday, 25th July, 2008 at 3.30 p.m. at Shri Bhaidas Maganlal Sabhagriha, Swami Bhaktivedanta Marg, J.V.P Scheme, Vile Parle .D. (W), Mumbai 400 056. 1st April 31st March Last week of July.* Last week of October* Last week of January* Last week of June* * Tentative Wednesday, 16th July, 2008 to Friday, 25th July, 2008 (both days inclusive). The Company has already paid on 13th November, 2007 interim Dividend of Rs.3.50 per share (35%) on equity share capital for the financial year 2007-08. It is now proposed to declare final dividend of Rs.4.50 per share (45%) on equity share capital for the financial year 2007-08 which if sanctioned will be paid on or before 12th August, 2008. The Stock Exchange, Mumbai (BSE) and The National Stock Exchange (NSE). Listing fees have been paid to both the Stock Exchanges for the financial year 2008-09 in April, 2008. 524494 on BSE; IPCALAB on NSE INE 571A01012 L24239MH1949PLC007837 Please see Annexure A Please see Annexure B Intime Spectrum Registry Ltd. C-13, Pannalal Silks Mills Compound L B S Marg, Bhandup (W), Mumbai 400 078 Tel. No. (022) 2596 3838 Fax. No.(022) 2567 2693 All share transfers, subject to correctness and completion of all documents would normally be registered and returned within 2 weeks from the date of receipt. Please see Annexure C 97.25% of the paid-up share capital has been dematerialised as on 31st March, 2008. 3,53,500 options issued under Ipca Laboratories Ltd- Employees Stock Option Scheme 2006 (ESOS) are outstanding as at 31st March, 2008. Each option represent a right to the option grantee but not an obligation to apply for 1 equity share of Rs.10 each of the Company at the Exercise Price over a period of 4 years from grant date. 1. Ratlam, Madhya Pradesh. 2. Pologround, Indore, Madhya Pradesh. 3. Gandhidham, Gujarat. 4. Athal, Silvassa. 5. Dandudyog Industrial Estate, Silvassa. 6. Aurangabad, Maharashtra. 7. Dehradun, Uttarakhand. Intime Spectrum Registry Ltd. C-13, Pannalal Silks Mills Compound L B S Marg, Bhandup (W), Mumbai 400 078 Tel. No. (022) 2569 3838 Harish P Kamath V. P Legal & Company Secretary .Ipca Laboratories Limited 142-AB, Kandivli Indl.Est Kandivli (W), Mumbai 400 067 Tel. No. (022) 6647 4644 E-mail : investors@ipca.co.in

Listing on Stock Exchanges Stock code Physical ISIN Number for NSDL & CDSL Corporate Identity Number allotted by Ministry of Corporate Affairs Market price data: High, Low during each month in last financial year Stock performance in comparison to BSE Sensex Registrars and Share Transfer Agents

: : : :

Share Transfer system Distribution of shareholding/ shareholding pattern as on 31.3.2008 Dematerialisation of shares and liquidity Outstanding GDRs/ADRs/warrants/ convertible instruments etc

: : : :

Plant Location

Share Transfer and other communications may be addressed to the Registrars and Share Transfer Agents

Investors complaint may be addressed to

21

Annexure A High/Low of Market price of the Companys shares traded on Bombay Stock Exchange (BSE) during the financial year 2007-08 furnished below: Year 2007 Month April May June July August September October November December January February March Highest (Rs.) 680 695 735 794 715 720 700 710 685 760 665 634 Lowest (Rs) 575 575 630 685 631 642 563 577 555 600 590 451

2008

Annexure B Graph of Share Price/ BSE Sensex

BSE Sensex / Share Price

Ipca Share Price

BSE SENSEX

22

Annexure C The distribution of shareholding as on March 31, 2008 is as follows : No. of equity shares held Upto 501 1001 2001 3001 4001 5001 10001 to to to to to to to Grand Total No. of shareholders in Physical Mode No. of shareholders in Electronic Mode 500 1000 2000 3000 4000 5000 10000 above No. of shareholders 13874 304 139 49 17 16 38 78 14515 2843 11672 % 95.58 2.09 0.96 0.34 0.12 0.11 0.26 0.54 100.00 19.59 80.41 No. of shares 1731332 237738 219377 124991 64415 74475 281315 22355107 25088750 688733 24400017 % 6.90 0.95 0.87 0.50 0.26 0.30 1.12 89.10 100.00 2.75 97.25

Shareholding pattern as on March 31, 2008 is as follows : Category Indian Promoters Banks and Insurance Companies UTI and Mutual Funds FIIs and NRIs Domestic Companies Resident Individuals No. of shareholders 22 1 49 154 357 13932 14,515 No. of shares 1,15,52,520 200 80,66,207 4,04,607 22,40,914 28,24,302 2,50,88,750 % holding 46.05 32.15 1.61 8.93 11.26 100.00

23

ANNEXURE 1
AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE To The members of IPCA LABORATORIES LIMITED 1. We have examined the compliance of conditions of Corporate Governance by IPCA LABORATORIES LIMITED for the period ended on 31st March, 2008 as stipulated in clause 49 of the Listing Agreement of the said Company with stock exchanges. 2. 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. 3. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has generally complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. 4. 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. For Natvarlal Vepari & Co. Chartered Accountants Mumbai, May 29, 2008 To, All the Members of IPCA LABORATORIES LTD. It is hereby certified and confirmed that as provided in Clause 49 I (D) of the listing agreement with the stock exchanges, the Board members and the Senior Management personnel of the Company have affirmed compliance with the Code of Conduct of the Company for the financial year ended 31st March, 2008. For Ipca Laboratories Limited Mumbai, 29th May, 2008 The Board of Directors Ipca Laboratories Limited 142-AB, Kandivli Industrial Estate, Kandivli - West Mumbai 400 067 Premchand Godha Managing Director / CEO N. Jayendran Partner M. No. 40441

CEO/CFO CERTIFICATION
We hereby certify that: (a) We have reviewed financial statements and the cash flow statement for the year ended 31st March, 2008 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 Companys affairs and are in compliance with existing accounting standards, applicable laws and regulations. (b) No transaction is entered into by the company during the year which is fraudulent, illegal or violative of the Companys code of conduct. (c) We accept responsibility for establishing and maintaining internal controls for financial reporting and that we have evaluated the effectiveness of the internal control systems of the Company pertaining to financial reporting and we have disclosed to the auditors and the Audit Committee, deficiencies in the design or operation of such internal controls, if any, of which we are aware 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 over financial reporting 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 have become aware and the involvement therein, if any, of the management or an employee having a significant role in the Companys internal control system over financial reporting. For Ipca Laboratories Ltd. Mumbai, 29th May, 2008 Premchand Godha Managing Director / CEO A. K. Jain Executive Director / CFO

24

AUDITORS REPORT
To The members of IPCA LABORATORIES LIMITED We have audited the attached Balance Sheet of Ipca Laboratories Limited as at 31st March, 2008 and the Profit and Loss Account of the Company for the year ended on that date annexed thereto and the Cash Flow Statement for the period ended on that date. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 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. 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 Statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to above, we report that: i) ii) iii) iv) v) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our Audit. In our opinion, proper books of accounts as required by law have been kept by the company so far as it appears from our examination of the books. The Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of accounts. In our opinion, the Balance Sheet, Profit and Loss Account and the 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. On the basis of the written representation received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2008 from being appointed as a director in terms of Clause (g) of Sub-section (1) of section 274 of the Companies Act, 1956. In our opinion and to the best of our information and according to the explanation given to us, the accounts and the other notes thereon give the information required by the Companies Act, 1956 in the manner so require and give a true and fair view: (a) in the case of Balance Sheet, of the State of Affairs of the Company as at 31st March, 2008 and (b) in the case of Profit and Loss Account, of the Profit for the year ended on 31st March 2008. (c) in the case of the Cash Flow Statement, of the cash flow for the year ended on that date. For NATVARLAL VEPARI & CO. Chartered Accountants N. Jayendran Partner M.No. 40441 MUMBAI, May 29, 2008

vi)

25

ANNEXURE TO THE AUDITORS' REPORT

(Referred to in our report of even date) (i) (a) The Company is maintaining proper records showing full particulars, including quantitative details and situation of fixed assets. (b) (c) (ii) The fixed assets have been physically verified by the management at reasonable intervals and any material discrepancies noticed on such verification have been properly dealt with in the books of account. The Company has not disposed off any substantial part of fixed assets.

(a) Stock of finished goods, stores, spare parts and raw materials has been physically verified by the management at reasonable intervals during the year. (b) In our opinion and according to the information and explanations given to us, the procedure of physical verification of stock followed by the management is reasonable and adequate in relation to the size of the company and the nature of its business. (c) The valuation of stock has been done on the basis of physically verified quantity. Therefore Shortage / Excess automatically get adjusted and the same is properly dealt in the books of accounts.

(iii)

(a) There are six parties covered in the register maintained under section 301 of the Companies Act, 1956 including the wholly owned subsidiaries to which the company has granted loans. The maximum amount involved during the year was Rs.3.77 crores and at the end of the year balance of loans granted to such parties were Rs.3.47 crores. (b) In our opinion the rate of interest wherever charged and the other terms and conditions of such loans are not prima-facie prejudicial to the interest of the company. (c) The Principal is not due for repayment and the interest wherever charged is being received in time and there are no overdue amounts of interest. (d) The Company has not taken loan from any party listed in the register maintained under section 301.

(iv) In our opinion and according to the information and explanations given to us there is an adequate internal control procedure 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. We have not come across any continuing failure to correct major weaknesses in internal control. (v) (a) In our opinion and according to the information and explanations given to us the transactions that need to be entered into a register in pursuance of section 301 of the Act has been properly entered. (b) All the transactions have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time and the nature of services rendered by such parties. (vi) The Company has not accepted any deposits from the public during the year under review, and consequently the directives issued by the Reserve Bank of India and the provisions of sections 58A and 58AA of the Act and the rules framed there under are not applicable. (vii) In our opinion the Company has an Internal Audit system commensurate with the size of the company and the nature of its business. (viii) According to the records produced and information given to us, the cost records and accounts as prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 have been made and maintained by the company but no examination of such records and accounts has been carried out by us. (ix) (a) The Company is regular in depositing Provident Fund, Employees State Insurance, income tax, sales tax, service tax, customs duty and excise duty dues with the appropriate authorities and there are no arrears of outstanding statutory dues as at the last day of the financial year for a period of more than six months from the date they became payable. (b) According to the information and explanation given to us, the following Tax / duty etc, has not been deposited on account of dispute: Name of the Statute Excise Duty Excise Duty Excise Duty Nature of Dues Clearance of goods without payment of duty under bonus scheme Valuation of Inputs Payment of Duty on intermediate inputs Amount (Rs) 3,91,836 12,00,441 32,71,485 Period to which the amount relates 2002-03 2001-02 & 2002-03 2003-04 to 2007-08 Forum where dispute is pending Asst. Commissioner Central Excise of

Commissioner of Central Excise Commissioner of Central Excise

26

Name of the Statute Excise Duty

Nature of Dues Clearance of goods to Enterprise of Govt. of India before submission of Exemption certificate Availment of Cenvat Credits on Input

Amount (Rs) 47,44,807

Period to which the amount relates 2006-07

Forum where dispute is pending Commissioner of Central Excise

Excise Duty

5,09,365

2006-07

Commissioner of Central Excise Sales Tax authority- Patna Sales Tax authority- Bilaspur High Court, Bilaspur Sales Tax authority Jaipur

Sales Tax Sales Tax Sales Tax Sales Tax (x) (xi) (xii)

Disputed demand Disputed demand Disputed demand Disputed demand

67,846 5,277 26,50,695 2,98,219

2001-02 2001-02 2002-03 2004-05

The Company does not have any accumulated losses and has not incurred cash losses in current year and the previous year. We are informed that the Company has not defaulted in repayment of dues to any financial institution or bank or debenture holders. On the basis of the audit procedures followed, the test checks of the transactions during and the representations from the management, the Company has not granted loans or advances on the basis of security by way of pledge of shares, debentures and other securities. The Company is not a nidhi/ mutual benefit fund/societies and accordingly clause (xiii) is not applicable. The company has maintained proper records of securities and other investments, which it has traded in and also in respect of shares and other securities, held as investments and the said investments are in the name of the company. According to the information and explanations, the company has not given guarantee for loans taken by others from bank or financial institutions. The term loans which are in nature of External Commercial Borrowings taken during the year have been applied for the purpose for which the loans were obtained. According to the information and explanation given to us, on an over all examination of the Balance sheet of the company and the necessary representations from the management, we report that no short term funds raised by the company have been applied towards Long term assets / investments.

(xiii) (xiv)

(xv)

(xvi)

(xvii)

(xviii) The Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under section 301 of the Act. Accordingly clause (xviii) of the Companies (Auditors Report) Order, 2003 is not applicable. (xix) The Company has not raised any debenture and accordingly clause (xix) of Companies (Auditors Report) Order, 2003 is not applicable. The Company has not raised any money by public issues during the year and accordingly clause (xx) of Companies (Auditors Report) Order, 2003 is not applicable. Based on the audit procedures performed and the information and explanation given by the management we report that no fraud on or by the company has been noticed or reported during the year. For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner M. No. 40441

(xx)

(xxi)

MUMBAI, May 29, 2008

27

BALANCE SHEET AS AT 31ST MARCH, 2008

Schedule 31st March,2008 Rupees in Crores Rupees in Crores SOURCES OF FUNDS Shareholders' Funds Share Capital Share Application money pending allotment (Refer Note No. 19) Reserves and Surplus Loan Funds Secured Loans Unsecured Loans Provision for Deferred Taxation (Net) (Refer Note No. 7) APPLICATION OF FUNDS Fixed Assets Gross Block Less : Depreciation/Amortisation/Impairment Net Block Construction Work-in-Progress and Capital Advances Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances Less : Current Liabilities and Provisions Current Liabilities Provisions Net Current Assets Notes to the Accounts 17 6 7 8 9 10 137.14 23.16 160.30 445.12 1,018.07 120.89 19.54 140.43 319.79 776.19 259.52 271.81 7.59 66.50 605.42 232.21 180.98 5.57 41.46 460.22 5 127.61 541.04 31.91 57.00 431.48 24.92 4 577.09 163.66 413.43 509.23 134.75 374.48 3 3 300.27 52.74 353.01 57.36 1,018.07 215.39 23.55 238.94 51.19 776.19 2 582.57 607.70 461.02 486.06 1 25.09 0.04 25.00 0.04 31st March,2007 Rupees in Crores Rupees in Crores

As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

28

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008
Schedule INCOME Sales Less : Excise duty Sales tax Income from Operations Other Income EXPENDITURE Material Cost and Inventory Adjustments Personnel Cost Manufacturing and Other Expenses Financial Cost Depreciation and Amortisation PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS Less : Provision for Taxation - Current - Deferred (Net) - Fringe Benefit Add : Excess Provision for Taxation (net) / Income Tax Refund of Earlier Year PROFIT AFTER TAXATION BEFORE EXCEPTIONAL ITEMS EXCEPTIONAL ITEMS Insurance Claim on assets damaged in flood NET PROFIT Balance brought forward AMOUNT AVAILABLE FOR APPROPRIATION APPROPRIATIONS General Reserve Interim Dividend Proposed Final Dividend Tax on Dividend Balance carried forward to Balance Sheet EARNINGS PER SHARE (In Rupees) [Refer Note No.17] (Nominal value of each share Rs. 10/-) Basic Before Exceptional Items After Exceptional Items Diluted Before Exceptional Items After Exceptional Items Notes to the Accounts As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008 24.50 6.17 5.30 11 12 2007-2008 Rupees in Crores Rupees in Crores 1,088.37 21.96 24.47 40.39 2.81 46.43 1,041.94 43.20 1,085.14 32.36 24.62 11.97 3.73 2006-2007 Rupees in Crores Rupees in Crores 966.12 56.98 909.14 15.70 924.84

13 14 15 16 4

463.10 143.88 249.00 20.08 32.21

908.27

397.90 114.65 210.61 22.12 29.16

774.44 150.40

176.87 23.00 4.37 2.80

35.97 0.22

30.17 1.16 121.39 0.84 122.23 84.15 206.38

141.12 141.12 132.59 273.71

100.53 8.75 11.29 3.41 149.73 273.71

52.11 8.75 10.00 2.93 132.59 206.38

56.38 56.38 56.20 56.20 17

48.56 48.89 48.39 48.72

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

29

CASH FLOW FOR THE YEAR ENDED 31ST MARCH, 2008

2007-2008 Rupees in Crores A CASH FLOW FROM OPERATING ACTIVITIES 1 Net profit before taxation and extraordinary item Adjustments for : Depreciation , amortisation and Impairment Reversal of Impairment loss of assets Provision for leave encashment Provision for leave travel assistance Profit on sale of assets Profit on sale of investments Loss on sale of investments Loss on sale of assets Assets scrapped Miscellaneous balance written off /(back) Provision for doubtful debts/advances Provision for diminution in value of investment Provision for doubtful loans/debts written off /(back) Employee Stock Option Compensation expenses Foreign exchange (gain) / loss Interest income Dividend income Interest expense 2 Operating profit before working capital changes Increase / (Decrease) in short term borrowings Decrease/(Increase) in Receivables Decrease/(Increase) in Inventories Increase/(Decrease) in Sundry creditors 3 Cash generated from operation Income tax paid (Net) Gratuity paid to LIC 4 Net cash from operating activities before extraordinary items Insurance Claim on assets damaged in flood Net cash from operating activities B CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Investment in subsidiaries Purchase of Investments Capital subsidy received Purchase/redemption of mutual fund units - Purchases - Redemption Proceeds from sale of assets Interest received Dividend received Net cash from / (used) in investing activities C CASH FLOW FROM FINANCING ACTIVITIES ESOS Commitment Deposit Proceeds from Issuance of Share Capital including premium Proceeds from long-term borrowings Repayment of long-term borrowings Interest paid Dividend & dividend tax paid Net cash used in financing activities Net increase in cash and cash equivalents ( A + B + C ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008 176.87 32.21 (0.72) 0.34 1.42 (0.08) 0.01 1.02 0.54 0.07 0.68 2.90 (42.72) (3.58) (1.13) 18.61 55.91 (90.27) (27.31) 15.62 29.16 (0.09) 0.27 (0.05) (0.01) 0.01 0.41 0.49 (0.40) 0.13 (0.69) 1.69 (9.78) (2.22) (2.37) 20.87 29.08 (45.51) (48.89) 14.64 150.40 2006-2007 Rupees in Crores

9.57 186.44

37.42 187.82

(46.05) 140.39 (29.02) (1.06) 110.31 110.31

(50.68) 137.14 (23.67) (1.06) 112.41 0.84 113.25

(143.70) (2.51) (4.48) 0.29 (570.49) 570.48 (0.01) 0.89 3.09 1.13 (145.30) 0.01 1.77 88.82 (14.79) (16.86) (21.94) 37.01 2.02 5.57 7.59 (499.19) 499.19

(89.11) (2.43) (5.09) 1.23 2.21 2.37

(90.82)

0.04 32.07 (12.97) (21.13) (18.54)

(20.53) 1.90 3.67 5.57

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

30

SCHEDULES TO THE ACCOUNTS

Schedules 1 to 17 forming part of the Balance Sheet as at 31st March, 2008 and Profit and Loss Account for the year ended 31st March, 2008 31.03.2008 31.03.2007 Rupees in Crores Rupees in Crores Rupees in Crores Rupees in Crores SCHEDULE 1 SHARE CAPITAL Authorised : 4,50,00,000 Equity Shares of Rs.10 each Issued and Subscribed : 2,50,88,750 (previous year 2,50,00,000) Equity Shares of Rs. 10 each fully paid-up PER BALANCE SHEET Of the above : (i) 48,200 Equity Shares have been issued as fully paid for consideration other than cash (ii) (a) 84,00,000 Equity Shares fully paid have been issued as Bonus Shares by capitalisation of General Reserve (b) 1,25,00,000 Equity Shares fully paid have been issued as Bonus Shares by capitalisation of Share Premium. (iii) 88,750 Equity Shares issued on exercise of options under Employees Stock Option Scheme SCHEDULE 2

45.00

45.00

25.09 25.09

25.00 25.00

RESERVES AND SURPLUS Capital Reserve Per last Balance Sheet Share Premium Account Per last Balance Sheet Add : On issue of Employee stock options General Reserve Per last Balance Sheet Less : Add: Add: Transitional charge for Gratuity / LTA (Net of Deferred Tax) (Refer Note No.20) On forfeiture of Employee stock option Transferred from Profit and Loss Account

0.04

0.04

26.70 3.16

29.86

26.70 -

26.70

300.00 0.69 0.16 100.53

250.00 2.11 52.11

400.00

300.00

Employee Stock Options Employee stock option outstanding Less : Deferred Employee compensation expenses (Refer Note No.19) Profit and Loss Account PER BALANCE SHEET

7.36 4.42 2.94

6.22 4.53 1.69

149.73 582.57

132.59 461.02

31

31.03.2008 Rupees in Crores SCHEDULE 3 LOANS a) Secured Loans - Working Capital Loan - Canara Bank-Consortium-Secured by first charge by way of hypothecation of raw materials, packing materials, work-in process, finished goods, stores and spares,book debts and all other moveable current assets of the Company and second charge by way of mortgage of the immovable properties of the Company and hypothecation of machinery of the Company Rupee Term Loan HDFC Bank Ltd. - Secured by first pari passu charge by way of hypothecation of moveable fixed assets both present and future except on movable fixed assets at Pithampur, Indore. Foreign Currency Term Loans Cooperatieve Centrale Raiffeisen - Boerenleen Bank B.A. (Rabobank, Singapore Branch) - Secured by first pari passu charge by way of hypothecation of moveable fixed assets both present and future except on movable fixed assets at Pithampur, Indore. ICICI Bank Singapore - Secured by first pari passu charge by way of hypothecation of all the moveable fixed assets both present and future except on movable fixed assets at Pithampur, Indore. ICICI Bank Offshore Banking Unit - Secured by first pari passu charge by way of hypothecation of all the moveable fixed assets both present and future except on movable fixed assets at Pithampur, Indore. Secured by exclusive charge on the entire moveable fixed assets at SEZ, Indore, Pithampur and pari passu first charge on moveable fixed assets at Kandla

31.03.2007 Rupees in Crores

118.63

93.60

40.00

10.03

21.75

32.10

43.49

19.26

26.10

48.15

30.45

BNP PARIBAS - Secured by first pari passu charge by way of hypothecation of moveable fixed assets both present and future except on movable fixed assets at Pithampur, Indore. PER BALANCE SHEET ( Refer Note No. 5) Unsecured Loans Short Term Loans from Banks : - ICICI Bank Offshore Banking Unit - Barclays Bank - Calyon Bank Deposits from dealers Madhya Pradesh State sales tax loan PER BALANCE SHEET (Refer Note No.5)

32.10 300.27

215.39

b)

12.04 40.00 0.51 0.19 52.74

13.05 9.80 0.40 0.30 23.55

32

SCHEDULE 4 FIXED ASSETS (Rs. in Crores)

SR. DESCRIPTION NO. OF ASSETS As on 01.04.2007 GROSS BLOCK Additions during the year Sales, w/off, adjustments during the year As on 31.03.2008 DEPRECIATION AND AMORTISATION Up to 31.03.2007 For the year Sales, w/back, adjustments during the year Up to 31.03.2008 IMPAIRMENT Up to 31.03.2008 Up to 31.03.2007 NET BLOCK As on As on 31.03.2008 31.03.2007

A Tangible Assets 1 Land - Freehold - Leasehold 2 Buildings 3 Plant & machinery 4 Effluent treatment plant 5 Furniture & fixtures 6 Vehicles 7 R & D assets - Building - Equipments - Furniture B Intangible Assets 1 Software 2 Know - how 3 Brands and trademarks Total Previous Year 0.95 3.84 2.16 509.23 453.13 0.13 73.55 63.46 (5.69) (7.36) 1.08 3.84 2.16 577.09 509.23 0.46 2.13 1.86 132.19 106.68 0.25 0.96 0.13 32.30 29.23 (2.67) (3.72) 0.71 3.09 1.99 161.82 132.19 1.84 2.56 2.56 0.37 0.75 0.17 413.43 374.48 0.49 1.71 0.30 6.09 46.02 0.69 0.33 9.27 0.27 0.16 (0.26) 6.58 55.03 0.96 0.86 14.86 0.31 0.21 4.93 0.08 0.10 (0.12) 1.17 19.67 0.39 0.04 0.04 5.41 35.32 0.57 5.23 31.12 0.38 9.92 8.35 93.62 316.61 5.03 8.86 7.09 0.04 4.21 6.66 49.74 0.03 1.99 0.88 (0.16) (4.77) 0.03 (0.03) (0.66) 9.96 12.56 100.12 361.58 5.09 10.82 7.31 0.17 15.20 87.09 1.70 4.47 3.08 0.09 2.90 20.47 0.31 0.94 1.03 (0.19) (1.90) (0.02) (0.54) 0.26 17.91 105.66 2.01 5.39 3.57 0.03 0.47 1.29 0.01 0.03 0.47 2.01 0.01 9.93 12.30 81.74 3.08 5.42 3.74 9.89 8.18 77.95 3.33 4.38 4.01

254.63 227.51

C Construction work-in-progress & capital advances including project expenses pending allocation PER BALANCE SHEET Notes: 1. The Company has constructed a residential premises at Silvassa. Land document in favour of the Company is pending to be executed. 2. Buildings include cost of shares in Co-operative societies. 3. Depreciation is charged on assets impaired on revised adjusted value over its remaining estimated useful life of five years.

127.61

57.00

541.04 431.48

4.Out of depreciation and amortisation for the year of Rs.32.30 crores (Previous year Rs.29.23 crores), Rs.0.09 crore (Previous year Rs.0.07 crore) relating to projects under execution is transferred to project expenses pending allocation. 5.Cost of Borrowing of Rs.3.64 crore (Previous year Rs.0.46 crore) is capitalised to the projects.

33

No. of Shares 31.03.2008 31.03.2007

Face Value Rupees

31.03.2008 Rupees in Crores

31.03.2007 Rupees in Crores

SCHEDULE 5 INVESTMENTS - At cost A) Unquoted : Long Term (Trade) (i) Government Securities National Saving Certificates (ii) Subsidiary Companies Equity Shares (Fully paid) 10000 10000 US $ 1 Solway Investments Ltd.,Mauritius 10000 10000 US $ 1 Sundridge Management Ltd.,Mauritius 4228395 4228395 R$1 Laboratories Ipca Do Brasil Ltda.,Brasil (Quotas of Brazilian Real of 1 each ) Ipca Pharmaceuticals, Inc. USA 1000 1000 No Par Value 460955 318630 STG 1 Ipca Laboratories U.K. Ltd.,U.K. 51589190 51589190 Naira 1 Ipca Pharma Nigeria Ltd. Nigeria National Druggist (PTY) Ltd. South 1059732 1059732 Rand 1 Africa Ipca Pharma (Australia) Pty Ltd. 26944 AUS $ 1 Australia (iii) Joint Venture Company 3670 3670 AED 100 Activa Pharmaceuticals (FZC).,UAE [Refer Note No.18] (iv) Trade Investments Equity Shares ( Fully paid ) 6690 6690 100 Paschim Chemicals Pvt. Ltd. 439000 439000 10 Exon Laboratories Pvt. Ltd. 55000 55000 100 CCPL Software Pvt.Ltd. # Ipca Traditional Remedies Pvt. Ltd. 49000 10 # Cost fully written off in books B) Quoted : Long Term (Trade) Equity Shares ( Fully paid ) 1633417 1633417 10 Mangalam Drugs & Organics Ltd. (Refer Note No. 15(a)) 1583754 10 Tonira Pharma Ltd. (Refer Note No.15(b)) C) Quoted : Current (Non - Trade) Aurobindo Pharma Ltd. 5000 10 PER BALANCE SHEET Note - For details of securities purchased and sold during the year Refer Note No.14 Aggregate Book Value of Investments Unquoted Quoted Aggregate Market Value of Quoted Investments

0.05 0.05 6.38 6.03 3.76 2.82 0.64 0.17 19.90 0.43

0.05 0.05 6.38 4.83 2.62 2.82 0.64 17.39 0.43

2.01 0.05

2.06

2.01 -

2.01

5.09 4.28 9.37

5.09 5.09

0.15 31.91

24.92

22.39 9.52 6.53

19.83 5.09 2.68

SCHEDULE

INVENTORIES (As taken, valued and certified by the Management) Stock in Trade Raw materials Packing materials Stores and spares Work-in-process Finished goods PER BALANCE SHEET

99.52 14.08 2.37 46.71 96.84 259.52

95.75 13.21 2.31 34.09 86.85 232.21

34

31.03.2008 Rupees in Crores Rupees in Crores SCHEDULE 7 SUNDRY DEBTORS (Unsecured-considered good, unless otherwise stated) Outstanding for more than six months - Considered good - Considered doubtful Less : Provision for doubtful debts Other debts PER BALANCE SHEET SCHEDULE 8 CASH AND BANK BALANCES Cash on hand Cheques on hand Margin money with banks Balances with scheduled banks On current accounts On deposit accounts Balances with non scheduled banks PER BALANCE SHEET (Refer Note No. 9) SCHEDULE 9 LOANS AND ADVANCES (Unsecured-considered good unless otherwise stated) Advances recoverable in cash or in kind or for value to be received - Considered good - Considered doubtful Less : Provision for doubtful advances Loans given to : - Subsidiaries - Employees - Others Deposits PER BALANCE SHEET SCHEDULE 10 CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry creditors : (Refer Note No. 10) -Small scale industrial undertakings -Micro,Small,Medium Enterprise -Others Against acceptance of import documents Unpaid dividends (Refer Note No.13) Other liabilities Advances from customers Interest accrued but not due on loans Provisions Proposed final dividend Provision for tax on dividend Provision for gratuity Provision for leave encashment Provision for leave travel assistance Provision for taxation Prepaid taxes PER BALANCE SHEET

31.03.2007 Rupees in Crores Rupees in Crores

34.37 0.78 0.78 237.44 271.81 0.13 0.13

20.24 160.74 180.98

0.22 1.90 3.20 1.85 3.20 -

0.27 1.40 0.34

5.05 0.42 7.59

3.20 0.36 5.57

44.20 0.03 0.03 3.27 2.30 12.01 0.41 0.41 3.42 2.43 2.45

28.91 -

17.58 4.72 66.50

8.30 4.25 41.46

66.69 27.72 0.86 30.95 7.01 3.91 11.29 1.92 1.18 3.79 2.11 101.37 (98.50)

137.14

1.03 64.39 23.15 0.86 26.81 2.48 2.17 10.00 1.70 2.12 3.42 71.57 (69.27)

120.89

23.16 160.30

19.54 140.43

35

2007 - 2008 Rupees in Crores Rupees in Crores SCHEDULE 11 INCOME FROM OPERATIONS Duty Free Entitlement Credit under target plus and other schemes Other income from operations PER PROFIT AND LOSS ACCOUNT SCHEDULE 12 OTHER INCOME Profit on sale of assets Profit on sale of Investments Dividend income from : - Joint Venture - Others Provision for doubtful debts written back Reversal of Impairment loss of assets Miscellaneous income PER PROFIT AND LOSS ACCOUNT SCHEDULE 13 MATERIAL COST AND INVENTORY ADJUSTMENTS Raw materials consumed Opening stock Add: Purchases Raw material conversion charges Less: Closing stock Packing materials consumed Opening stock Add: Purchases Less: Closing stock Finished goods purchased Inventory adjustments Stock at commencement Finished goods Work-in-process Less : Stock at close Finished goods Work-in-process

2006 - 2007 Rupees in Crores Rupees in Crores

7.19 33.20 40.39

6.24 5.73 11.97

0.08 0.61 0.52 1.56 0.81

0.05 0.01

1.13 0.72 0.88 2.81

2.37 0.69 0.09 0.52 3.73

95.75 375.03 13.32 484.10 99.52 13.21 77.73 90.94 14.08

384.58

71.86 332.74 11.17 415.77 95.75 8.99 64.72 73.71 13.21

320.02

76.86 43.62

60.50 50.46

86.85 34.09 120.94 96.84 46.71 143.55

74.60 25.94 100.54 86.85 34.09 120.94

(22.61)

(20.40)

Neutralisation of duties and taxes on inputs on exports - DEPB/Drawback benefits Variation in excise duty on : Closing stock of finished goods Less : Opening stock of finished goods PER PROFIT AND LOSS ACCOUNT SCHEDULE 14 PERSONNEL COST Payment to and provision for salaries, wages and bonus Contribution to provident fund, employees state Insurance and other funds Employee Stock Option Compensation expenses Provision for leave encashment Welfare expenses Recruitment and training PER PROFIT AND LOSS ACCOUNT 5.47 7.64

(17.18) 7.64 9.77

(10.55)

(2.17) 463.10

(2.13) 397.90

127.23 7.50 2.90 0.34 3.26 2.65 143.88

102.33 5.67 1.69 0.27 2.52 2.17 114.65

36

2007-2008 Rupees in Crores Rupees in Crores SCHEDULE 15 MANUFACTURING AND OTHER EXPENSES Consumption of stores Power, fuel, gas & water charges Repairs : - Building - Machinery - Others Insurance Rent Rates and taxes Freight, forwarding and transportation Commission Royalty Field staff expenses Auditors remuneration : Audit fees (Including tax audit) Tax Matters Certification Fees Reimbursement of expenses Expenditure on scientific research (Refer Note No . 11) Loss on sale of assets Fixed assets scrapped Outside manufacturing charges Laboratory expenses and analytical charges Communication expenses Travelling expenses Professional charges Printing and stationery Books,Subscription & Software Product information catalogue Sales & marketing expenses Net miscellaneous balance written off /(back) Provision for doubtful debts/advances Loss on sale of investments Intellectual property right expenses Product registration expenses Excise duty (Profit)/Loss on foreign exchange translations Miscellaneous expenses PER PROFIT AND LOSS ACCOUNT SCHEDULE 16 FINANCIAL COST Interest On fixed loans Others Less: Interest income on short term deposits with banks and others [Including tax deducted at source Rs.0.18 crore (Previous year Rs.0.17 crore)] Bank charges PER PROFIT AND LOSS ACCOUNT 3.58 15.03 5.05 20.08

2006-2007 Rupees in Crores Rupees in Crores

9.67 37.07 3.67 15.25 0.45 2.87 11.04 0.44

7.80 32.41

19.37 4.66 2.74 4.47 34.44 8.06 0.12 20.10

14.35 4.89 2.29 3.06 30.51 8.41 0.15 14.95

0.20 0.07 0.05 0.01

0.33 14.27 1.02 0.54 13.68 5.19 4.78 10.48 3.34 3.43 1.24 9.19 41.80 0.07 0.68 0.01 1.15 2.17 5.48 (16.74) 6.19 249.00

0.16 0.11 0.01 0.01

0.29 10.40 0.41 0.49 13.31 4.12 3.68 9.64 3.00 2.89 1.24 8.20 28.64 (0.40) 0.13 0.01 0.83 1.12 4.01 (6.18) 5.96 210.61

10.81 7.80 18.61

9.83 11.04 20.87

2.22 18.65 3.47 22.12

37

SCHEDULE 17 ACCOUNTING POLICIES AND NOTES FORMING PART OF THE ACCOUNTS 1. ACCOUNTING POLICIES a) System of Accounting The Company follows accrual system of accounting for all items of revenue and cost. b) Use of Estimates The preparation of the financial statements in conformity with the Generally Accepted Accounting Principles applicable in India and the provisions of the Companies Act, 1956 requires that the management makes estimates and assumptions that affect the reported amounts of the assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reported year. Actual results could differ from those estimates. c) Inflation Assets and liabilities are shown at historical cost except revalued assets, which are shown at revalued amounts. No adjustments are made for changes in purchasing power of money. d) Fixed Assets i. ii. iii. iv. v. e) Fixed assets are recorded at cost of acquisition or construction less CENVAT/Service Tax/VAT credit availed. Revalued assets are recorded at revalued amounts. Project expenses pending allocation are apportioned to the fixed assets of the project proportionately. Cost of borrowing for assets taking substantial time to be ready for use is capitalised for the period up to the time the asset is ready for use. Intangible Assets are recorded at cost of acquisition. Leasehold land is amortised over leasehold period.

Investments Long term Investments are stated at cost. Provisions are made for diminution in value of investments other than temporary in nature. Current Investments are stated at cost or market value which ever is lower.

f)

Depreciation, Amortisation and Impairment i) Depreciation on all assets of the Company is charged on straight line method over the useful life of assets estimated by the management in the manner provided in Schedule XIV of the Companies Act, 1956 for the proportionate period of use during the year. Intangible assets are amortised over the economic useful life estimated by the management. The management has estimated the useful life for the various fixed assets as follows. Assets Buildings Plant and Machinery and R&D Equipments Computers Furniture and Fixtures Vehicles Brands and Trademarks Technical Know how Software for internal use ii) Estimated useful life (Years) 28 to 58 9 to 20 6 10 6 4 4 4

The Company carries out exercise of assessment of any impairment to its fixed assets as at each balance sheet date. Changes in level of impairment are accounted in Profit and Loss Account separately. Impairment loss in respect of assets sold / scrapped are reversed and consequent profit or loss on such sale is accounted. Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverable amount. Recoverable amount is higher of an assets net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Depreciation charged on assets impaired is adjusted in future period over its remaining useful life.

38

g)

Inventories Items of inventories are valued on the basis given below : Raw Materials and Packing Materials Work-in-process and Finished Goods a) At Cost net of CENVAT/VAT computed on First-in-First-out method. b) Bulk drugs produced for captive consumption are valued at cost. At cost including material cost net of CENVAT, labour cost and all overheads other than selling and distribution overheads for work-in-process and the same or realisable value, whichever is lower in case of finished goods except physicians samples which are valued at cost as computed above. Excise duty is considered as cost for finished goods wherever applicable. Stores and spare parts are valued at purchase cost.

Stores and Spares h) Retirement Benefits i. ii. iii. i)

Gratuity is charged to Profit and Loss Account based on actuarial valuation by Life Insurance Corporation of India under Employees Group Gratuity Policy. Leave encashable on retirement has been provided on the basis of actuarial valuation. Leave Travel Assistance (LTA) liability has been provided on the basis of actual accumulated obligation.

Excise Duty and CENVAT Credit i. The excise duty expenses are bifurcated into three components: excise duty expenses related to sales is reduced from Gross Sales, excise duty relating to the difference between the closing and opening stock of finished goods is recognized in the material cost and inventory adjustments and the un-recovered excise duty is recognized under manufacturing and other expenses. CENVAT credit utilised during the year is accounted in excise duty and unutilised CENVAT balance at the year end is considered as advance excise duty.

ii. j)

Service Tax Credit Service tax credit utilised during the year towards excise liability is accounted in excise duty and unutilised service tax credit at the year-end is considered as advance Excise Duty.

k)

Sales Local sales include excise duty and sales tax.

l)

Foreign Exchange Transactions Transactions denominated in foreign currency are recorded at the exchange rate on the date of transaction. The exchange gain/ loss on settlement / negotiation during the year is recognised in the Profit and Loss Account. Foreign currency transactions remaining unsettled at the end of the year are converted at year-end rates. Gain or loss arising on account of transactions covered by forward contract is recognised over the period of contracts. Current assets and current liabilities at the end of the year not covered by forward contracts are converted at the year end rate and the resultant gain and loss are accounted for in the Profit and Loss Account. Gain or loss on foreign exchange transactions related to sales is grouped under income from operations and other exchange gain or loss on fluctuation is grouped under manufacturing & other expenses in the Profit and Loss Account.

m)

Research and Development Revenue expenditure on research and development is charged to Profit and Loss Account in the year in which it is incurred. Capital expenditure on research and development is considered as an addition to fixed assets.

n)

Revenue Recognition i. In respect of incentives attributable to the export of goods, the Company following the accounting principle of matching revenue with the cost has recognised export incentive receivable when all conditions precedent to the eligibility of benefits have been satisfied and when it is reasonably certain of deriving the benefit. Since these schemes are meant for neutralisation of duties and taxes on inputs pursuant to exports, the same are grouped under material costs. The other export incentives that do not arise out of neutralisation of duties and taxes are disclosed under income from operations. Revenue in respect of insurance/other claims, interest, commission, etc. are recognised only when it is reasonably certain that the ultimate collection will be made.

ii. iii.

39

o)

Employee Stock Option Scheme Employee stock options are evaluated as per the accounting treatment prescribed by SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 issued by Securities and Exchange Board of India. Accordingly the excess of market value of the stock options as on the date of grant over the exercise price of the options is recognized as deferred employee compensation and is charged to profit and loss account on graded vesting basis over the vesting period of the options. The unamortized portion of the deferred employee compensation is reduced from Employee Stock Option Outstanding which is shown under Reserves and Surplus.

p)

Taxation Tax expenses comprise Current Tax, Deferred Tax and Fringe Benefit Tax. Current Tax: Current Tax is calculated as per the provisions of the Income tax Act, 1961. Deferred Tax: Deferred Tax is recognized on timing differences being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax Assets, subject to the consideration of prudence are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized. The tax effect is calculated on the accumulated timing difference at the year-end based on the tax rates and laws enacted or substantially enacted on balance sheet date. Fringe Benefit Tax: Tax on Fringe Benefits is measured at the specified rates on the value of Fringe Benefits in accordance with the provisions of the section 115 WC of the Income Tax Act, 1961. Accounting for Fringe Benefit Tax is done as per the guidance note issued by ICAI. In view of judicial pronouncements and in accordance with advice of the Companys Tax Advisor, no provision has been made for the completed assessments, which are in appeal.

q)

Contingent Liabilities These are disclosed by way of notes to the Accounts. Provision is made in respect of those liabilities, which are likely to materialise after the year end till the finalisation of Accounts and have material effect on the position stated in the Balance Sheet.

r)

Overseas Branch Transactions Transactions pertaining to overseas branch in capital and revenue accounts are recorded at exchange rates at which the remittances were made to the said branch. Current assets at the end of the year are recorded at the year-end exchange rates. Exchange difference on this account is recognised in the Profit and Loss Account.

s)

Government Grants The Company accounts government grants relating to specific fixed assets as deferred income and recognises the same proportionately over the useful life of the asset. 31.03.2008 Rupees in Crores 31.03.2007 Rupees in Crores

2.

Estimated amount of contracts remaining to be executed on capital account. - Tangible Assets - Intangible Assets 5.27 5.60 38.15 1.12

3.

Contingent liabilities not provided for in respect of : a) Bills discounted with banks. Since realized b) Other moneys for which the Company is contingently liable for tax, excise, customs and other matters not accepted by the Company. c) Claims against the Company not acknowledged as debts. 43.54 16.68 67.33 4.80

1.31 0.10

3.32 -

40

4.

Additional information pursuant to paragraphs 3, 4, 4A, 4C and 4D of Part II of Schedule VI to the Companies Act, 1956 (Value in Rupees Crores) Purchases Quantity Value 1361 25.22 (1657) (32.01) 24 4.41 (19) (4.13) 52 8.84 (64) (11.43) 188 3.33 (13) (0.51) 1.82 (-) (2.38) 43.62 (50.46) Sales Closing Stock Quantity Value Quantity Value 75447 652.10 7546 37.35 (57084) (519.49) (7380) (40.00) 327 48.75 84 7.17 (293) (39.30) (68) (6.56) 682 72.77 193 10.99 (659) (68.52) (142) (9.37) 2178 265.23 360 41.20 (2250) (279.43) (308) (30.86) 3.09 0.13 (-) (2.40) (-) (0.06) 1041.94 96.84 (909.14) (86.85) Units Lacs Lacs Lacs Basis Single Shift Single Shift Single Shift Triple Shift Installed Actual Capacity Production 93094 (68524) 163 (163) 96 (96) 3160 (3155) 74252 (57102) 319 (295) 681 (617) 3167 (2885) Opening Stock Quantity Value 7380 40.00 (5705) (33.71) 68 6.56 (47) (3.24) 142 9.37 (120) (6.76) 308 30.86 (387) (30.89) 0.06 (-) (-) 86.85 (74.60)

(A) Installed Capacity, Actual Production, Purchases, Sales and Stock: Class of Goods Tablets / Capsules Orals/ Liquids Injectables

Basic Drugs/ Tonnes Intermediates Others Total Notes :a) b) c) d) e) (B)

As the industrial licensing in respect of drugs and pharmaceuticals produced by the Company has been abolished under the Industrial Policy, the particulars of licensed capacity are not stated. Installed capacity, being of a technical nature is not verified by the Auditors. Production of basic drugs/intermediates includes 1125 tonnes (Previous year 727 tonnes) used for captive consumption. Production includes production under contract manufacturing. Previous year figures are given in bracket.

Raw Materials Consumed: Units 2007-2008 Quantity Rupees in Crores 16 287 712 720 173 11.72 12.61 11.72 15.23 35.12 298.18 2006-2007 Quantity Rupees in Crores 10 225 558 635 66 16.10 10.40 9.98 14.52 7.79 261.23

Artemisinin Novaldiamine Ethoxymethylene Malonic Acid Ester Para Hydroxy Acetophenone Amoxycillin Trihydrate Others (None of which individually forms more than 10% of the total consumption.)

Tonnes Tonnes Tonnes Tonnes Tonnes

384.58 (C) Imported & Indigenous Consumption: 2007-2008 Rupees in Percentage Crores (a) Raw materials : Imported Indigenous (b) Packing materials : Imported Indigenous (c) Stores and spares : Imported Indigenous 141.73 242.85 384.58 2.40 74.46 76.86 9.67 9.67 36.85 63.15 100.00 3.12 96.88 100.00 100.00 100.00

320.02 2006-2007 Rupees in Percentage Crores 130.70 189.32 320.02 1.71 58.79 60.50 0.02 7.78 7.80 40.84 59.16 100.00 2.83 97.17 100.00 0.26 99.74 100.00

41

(D)

Value of Imports on CIF basis : 2007-2008 Rupees in Crores 121.50 2.66 1.62 15.38 0.40 0.38 9.71 46.66 516.41 0.26 0.61 2.56 2006-2007 Rupees in Crores 117.90 1.70 0.51 10.23 0.23 0.56 11.09 44.91 467.31 1.56 -

Raw materials Packing Materials Traded goods Capital goods Stores and machine components (E) Expenditure in Foreign Currency : Professional charges Interest on foreign currency loan Other matters (F) Earnings in Foreign Currency : FOB value of exports Royalty Dividend Other Service charges 5. 6. 7.

Amount of long term loans repayable in the following 12 months aggregate to Rs.41.83 crores (Previous year Rs.24.91 crores). Provision for taxation includes provision for wealth tax of Rs.0.04 crore (Previous year Rs.0.05 crore). Break-up of Deferred tax assets and liabilities are as under : Particulars Deferred tax liability on account of Depreciation including on R & D Assets, amortisation and impairment Deferred tax asset on account of Provision for leave encashment Provision for Gratuity Net deferred tax liability As at 31.03.2008 Rupees in Crores As at 31.03.2007 Rupees in Crores

59.01 1.29 0.36 57.36

53.07 1.16 0.72 51.19

8. 9.

Net foreign exchange gain credited to the Profit and Loss Account during the year is Rs.42.72 crores (Previous year Rs.9.78 crores). Exchange loss relating to forward contracts to be recognised in the next year amounts to Rs.1.56 crores (Previous year gain Rs.0.50 crore). Bank balances : a) b) Balances with scheduled banks in Schedule 8 include Rs.0.86 crore (Previous year Rs.0.86 crore) in unpaid dividend account. Balances with non-scheduled banks in Schedule 8 : Name of the Bank Maximum Balance 2007-2008 Rupees in Crores Moscow Indus Bank, Russia Vietcom Bank, Vietnam First Ukranian Int. Bank, Ukraine Texaka Bank, Kazakhstan Bank of Baroda (Kenya) Ltd. Union Bank of Phillippines ICICI Bank, Srilanka Bank of Credito,Columbia c) 1.42 0.10 0.26 0.30 0.09 0.11 0.12 0.30 2006-2007 Rupees in Crores 1.17 0.07 0.34 0.14 0.08 0.08 0.11 Balance As On 31.03.2008 Rupees in Crores 0.01 0.05 0.21 0.04 0.07 0.04 31.03.2007 Rupees in Crores 0.11 0.01 0.10 0.05 0.04 0.05 -

Total 0.42 0.36 Includes Rs.1.85 Crores placed in escrow account for the open offer for acquisition of the equity shares of Tonira Pharma Ltd.

42

10. The Company has initiated the process of obtaining details from creditors who are registered under the Micro, Small and Medium Enterprises Development Act 2006. To the extent that the Company has received information it has evaluated that there are no amount due to the creditors who are registered under the said act beyond the period of 45 days. In view of the amendment in the Schedule VI of the Companies Act, 1956, outstanding dues of SSI units as on 31st March,2008 are clubbed with other creditors. 2007-2008 Rupees in Crores 11. Total expenditure on R & D is included in respective heads of accounts as under: Expenditure on Scientific Research (Includes stores and chemicals, Bio-availability, Bioequivalence and Toxicity Studies) Material Cost Personnel cost Other overheads Depreciation 2006-2007 Rupees in Crores

14.27 0.04 10.25 8.49 5.22 38.27

10.40 0.18 8.53 7.08 4.40 30.59

12. Managerial Remuneration : i) Managerial remuneration under Section 198 of the Companies Act, 1956. Salary Commission Contribution to provident fund and other funds Perquisites and benefits Sitting fees Managerial Remuneration does not include Stock Option Compensation cost relating to Executive Director & Independent Directors of Rs.0.27 crore (previous year Rs. 0.17 crore) charged to Profit & Loss Account. ii) Computation of Net Profit as per Section 349 read with Section 309(5) of the Companies Act, 1956. Profit after taxation as per Profit and Loss Account Add : Provision for taxation Depreciation / Amortisation / Impairment as per Accounts Directors remuneration (Including sitting fees) Commission to Directors Less : Depreciation and Amortisation under Section 350 Excess provision for taxation (net) / Income Tax refund of earlier years Insurance claim on assets damaged in flood Reversal of Impairment loss of assets Net Profit Overall ceiling on Managerial remuneration under Section 198 of the Companies Act, 1956. Total Managerial remuneration paid/payable during the year 13. 14. 0.90 1.80 0.20 0.93 0.06 3.89 0.83 1.66 0.18 0.65 0.06 3.38

141.12 30.67 32.21 2.09 1.80 207.89 32.21 0.22 0.72 174.74 17.47 3.89

122.23 27.37 29.16 1.72 1.66 182.14 29.16 1.16 0.84 0.09 150.89 15.09 3.38

Unpaid dividend does not include any amount to be credited to Investor Education and Protection fund. Investments purchased and sold during the year : Mutual Fund Canliquid Fund Dividend Reinvestment- Daily Dividend ICICI Prudential Institutional Liquid plan Super Inst. Daily Dividend ICICI Prudential Floating Rate Plan D Daily Dividend Reliance Liquid Fund -Daily Dividend-Reinvestment Option Reliance Liquid Plus Institutional Option - Daily Dividend Plan Kotak Liquid (Institutional Premium) Daily Dividend DWS Insta Cash Plus Fund Institutional Plan Dividend Option Face Value (Rupees) 10/10/10/10/10/10/10/No. of Units ( In Lacs) 1005.46 3696.69 100.16 757.84 0.40 24.54 69.91 Cost (Rupees in Crores) 100.96 369.68 10.02 75.81 4.01 3.00 7.00

43

15.

a)

The diminution in the value of investment in shares of Mangalam Drugs & Organics Ltd. determined on the basis of market price as at 31st March 2008 is not considered permanent based on the intrinsic value of the company. Consequently no provision for diminution in the value of investment is considered necessary.

b)

The Company has made an open offer for the acquisition of equity shares from the shareholders of Tonira Pharma Ltd. @ Rs.29/- per share aggregating to Rs.6.91 Crores. As on the date of Balance Sheet, offer was open and the Company has deposited an amount of Rs.1.85 Crores in an escrow account in accordance with extant SEBI guidelines.

16.

Disclosure under Accounting Standard -29 Provisions, Contingent Liabilities and Contingent Assets. (Rupees in Crores) Sr.no. Particulars Balance as on 1st April 2007 3.42 71.57 10.00 1.70 2.12 Additions during the year 1.47 29.80 11.29 1.92 0.94 2.11 Amounts paid / reversed during the year 1.10 10.00 1.70 1.88 Balance as on 31st March 2008 3.79 101.37 11.29 1.92 1.18 2.11

a. b. c. d. e. f. g.

Leave Encashment Taxation Proposed Dividend Tax on Proposed dividend Provision for Gratuity Leave Travel Assistance Provision for wage revision under negotiation

0.17

0.17

17.

Earning per share The earning per share is calculated by dividing the profit after tax by weighted average no. of shares outstanding for basic & diluted EPS. Sr.no a. Particulars Profit after tax before Exceptional Item (Rs. In Crores) No. of shares outstanding Weighted Average no. of shares outstanding (Nos.) - Basic Weighted Average no. of shares outstanding (Nos.) - Diluted Nominal value of equity share (Rs.) Earning per share before Exceptional Item (Rs.) Basic Diluted b. Profit after tax and exceptional Items (Rs. In Crores) No. of shares outstanding Weighted Average no. of shares outstanding (Nos.) - Basic Weighted Average no. of shares outstanding (Nos.) - Diluted Nominal value of equity share (Rs.) Earning per share after Exceptional Item (Rs.) Basic Diluted 2007-08 141.12 2,50,88,750 2,50,30,796 2,51,10,170 10 56.38 56.20 141.12 2,50,88,750 2,50,30,796 2,51,10,170 10 56.38 56.20 2006-07 121.39 2,50,00,000 2,50,00,000 2,50,88,145 10 48.56 48.39 122.23 2,50,00,000 2,50,00,000 2,50,88,145 10 48.89 48.72

Note :- The weighted average no. of shares is computed on the basis of the date of allotment being 26th November,2007 for the new shares issued during the year. 18. Interest in Joint Venture : a) The Company has a Joint Venture Company in Middle East by name of Activa Pharmaceuticals (FZC), SAIF Zone, Sharjah in which it has a control of 50%. In the standalone Balance Sheet of the Company, Joint Venture interest is reported under Long term

44

Investment at Cost. The Proportionate share of the Company as on 31st March 2008 in the assets, liabilities, income, expenditure, contingent liability and capital commitments of the Joint Venture company is as follows: (Rupees in crores) Description Assets Non Current Assets Current Assets Accumulated Losses Total Liabilities Share Capital Reserves & Surplus Current Liabilities (Previous year Rs.8,603) Provisions Total Income Sales and Other Income Expenditure Cost of Sales Other Expenses Total Contingent Liabilities Capital Commitments b) 31.03.2008 0.01 2.30 2.31 0.43 0.59 1.28 0.01 2.31 9.49 8.37 0.31 8.68 31.03.2007 0.02 0.87 0.89 0.43 0.45 0.01 0.89 12.80 9.50 1.18 10.68 -

The above figures for the year ended 31st March, 2008 are extracted from the audited financial statement of Activa Pharmaceuticals (FZC) SAIF Zone, Sharjah for the year ended 31st December, 2007 and unaudited accounts for the period 1st January, 2008 to 31st March, 2008 as certified by the management. The Compensation Committee of the Board at its meeting held on 29th October,2007 has granted further 1,10,000 options to the selected employees of the Company under Ipca Laboratories Employees Stock Option Scheme 2006 (ESOS). Each Option is convertible into one equity share of Rs.10/- each of the Company at a price of Rs.315/- per share, being the exercise price determined by the Compensation Committee. The options granted would be vested over a period of 4 years from the date of the grant. The company has considered the closing market price being Rs.619.35 per share on the date prior to the date of grant of options as per the fair value of shares in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines,1999 and has determined the intrinsic value of each option at Rs.304.35. The total deferred compensation cost on account of this grant of Rs.3.35 crores computed in accordance with the SEBI guidelines is amortised over the vesting period. The impact of the same on its earning per share is disclosed separately as required by AS-20 on Earnings Per Share. The details of options as at 31st March,2008 are as under: Options At the beginning of the year Granted Exercised Forfeited / lapsed Outstanding at the end of the year Outstanding exercisable at the end of the year Exercise price for outstanding options Grant I Grant II 31.03.2008 3,72,000 1,10,000 88,750 39,750 3,53,500 Rs.200 Rs.315 31.03.2007 3,99,000 27,000 3,72,000 Rs. 200 -

19.

a)

b)

c)

d)

20.

a)

ESOS Commitment Deposit: Amount received from employees/directors on grant of stock options pending exercise/allotment of shares is shown as share application money pending allotment. From the current year, the Company has assessed its liability for leave travel assistance (LTA) which is accrued to the employees as part of their service condition. The amount pertaining to the liability accrued as on 1st April,2007 is Rs.0.69 crore which has been charged to the General Reserve in accordance with the transitional provision of AS-15 Employees Benefits and the liability relating to the service rendered in the current year of Rs.1.42 crores is debited to the Profit and Loss Account. Consequently profit before tax for the current year is lower to the extent of Rs.1.42 crores and the opening balance of the reserve is lower by Rs.0.69 crore.

45

b)

As per Accounting Standard -15 Employee Benefits and as defined in the accounting standard the summarised components of net benefit expense recognized in the profit and loss account and the funded status and amounts recognized in the balance sheet are given herein below. (Rs. In Crores) Particulars Gratuity 2007-08 I. Change in Benefit Obligation Liability at the beginning of the year Interest cost Current Service Cost Past Service Cost (Non Vested Benefit) Past Service Cost (Vested Benefit) Benefit Paid Actuarial (gain)/loss on obligations Curtailments and Settlements Liability at the end of the year Fair Value of Plan Assets Fair Value of Plan Assets at the beginning of the year Expected Return on Plan Assets Contributions Benefit paid Actuarial gain/(loss) on Plan Assets Fair Value of Plan Assets at the end of the year Total Actuarial gain/(loss) to be Recognised Actual Return on Plan Assets Expected Return on Plan Assets Actuarial gain/(loss) on Plan Assets Actual Return on Plan Assets Amount Recognised in the Balance Sheet Liability at the end of the year Fair Value of Plan Assets at the end of the year Difference Unrecognised Past Service Cost Amount Recognised in the Balance Sheet Expenses Recognised in the Income Statement Current Service Cost Interest Cost Expected Return on Plan Assets Net Actuarial (gain)/loss To Be Recognised Past Service Cost (Non Vested Benefit) Recognised Past Service Cost (Vested Benefit) Recognised Effect of Curtailment or Settlements Expense Recognised in Profit and Loss Account Balance Sheet Reconciliation Opening Net Liability Expense as above Employers Contribution Effect of Curtailment or Settlements Amount Recognised in Balance Sheet Actuarial Assumptions Discount Rate Current 5.73 0.43 0.83 (0.65) 0.51 6.85 3.94 0.50 1.88 (0.65) 5.67 1.18 0.50 0.50 6.85 5.67 1.18 1.18 0.83 0.43 (0.50) 0.51 1.27 1.79 1.27 (1.88) 1.18 8% Leave Encashment 2007-08 3.42 0.29 0.84 (1.10) 0.34 3.79 (0.34) 3.79 3.79 0.84 0.29 0.34 1.47 3.42 1.47 (1.10) 3.79 8%

II.

III.

IV.

V.

VI.

VII

Note : i) Employers contribution includes payments made by the Company directly to its past employees. ii) 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. iii) The Companys Gratuity fund is managed by Life Insurance Corporation of India. The plan assets under the fund are deposited under approved securities.

46

21.

Disclosure under Accounting Standard 19 Leases, issued by the Institute of Chartered Accountants of India The Company has taken various residential / godowns / office premises (including Furniture and Fittings if any) under leave and licence agreements for periods which generally range between 11 months to 3 years. These arrangements are renewable by mutual consent on mutually agreed terms. Under some of these arrangements the Company has given refundable security deposits. The lease payments are recognized in the Profit and Loss Account under Rent.

22.

The Company has filed claims for loss on account of fire at the manufacturing locations which is fully insured and has passed accounting entries consequently. The said claims are under survey and pending for acceptance by the insurance company. a) The Company has entered into various derivatives transactions, which are not intended for trading or speculative purpose but to hedge the export receivable including future receivables and foreign currency loan interest rate risks. The Company as on 31st March 2008 has the following derivatives instruments outstanding. Sr.No Type of Transaction Purpose Amount Outstanding (In Million) 31.03.2008 i. ii. iii. iv. v. USD Put Options (Purchase) USD Call Option (Sold) GBP Put Options (Purchase) GBP Call Options (Sold) Constant Maturity Swap To hedge export receivable To hedge export receivable To hedge export receivable To hedge export receivable To reduce the Interest cost To hedge the currency risk and interest rate risk of JPY Loan USD 7.00 USD 7.75 GBP 6.00 GBP 12.29 JPY 1259.95 (outstanding) 31.03.2007 USD 24.25 USD 33.85 USD 6.00 (Loan Amt) JPY 608.30 (outstanding)

23.

vi. b)

JPY/ USD full Currency swap

In respect of the aforesaid derivative contracts, although there are some contracts in which the mark to market value is a loss of Rs.0.45 crore, the aggregate mark to market value of all these derivative contracts results in gain to the Company which it has not recognised since the underlying transactions are of a future date. The Company has following unhedged foreign exchange risk. Sr.No i. ii. iii. Term loan Short term working capital loan/PCFC Sundry creditors for imports Particulars 31.03.2008 USD (Million) 35.30 20.70 6.91 31.03.2007 USD (Million) 28.00 16.00 5.32

c)

d)

The Company has an annual average exports of USD 134 Million of which the Company has partially hedged its receivables by the aforesaid options disclosed in para (a) above. The unhedged currency risk detailed in para (c) ii & (c) iii above has a natural hedge against the unhedged exports. Foreign currency term loans outstanding as on 31st March, 2008 carries floating USD Libor interest rate risk and are unhedged.

e) 24.

The entire operations of the Company relate to only one segment viz. pharmaceuticals. As such, there is no separate reportable segment under Accounting Standard - 17 on Segment Reporting.

47

25.

Related Party Disclosure as required by Accounting Standard 18 issued by the Institute of Chartered Accountants of India. Relationships: A. Entities where control exists Shareholders of Ipca Laboratories Ltd Kaygee Investments Pvt. Ltd. Chandurkar Investments Pvt. Ltd. Subsidiaries Solway Investments Ltd., Mauritius. Sundridge Management Ltd., Mauritius. Laboratories Ipca Do Brasil Ltda Ipca Pharmaceuticals, Inc., USA Ipca Laboratories U.K. Ltd., United Kingdom Ipca Pharma (Australia) Pty Ltd., Australia Ipca Pharma Nigeria Ltd., Nigeria National Druggists (Pty) Ltd., South Africa Step-down Subsidiaries Ipca Pharma (NZ) Pty Ltd., New Zealand. Joint Venture Company Activa Pharmaceuticals (FZC), UAE. Others Exon Laboratories Pvt. Ltd. CCPL Software Pvt. Ltd. Ipca Traditional Remedies Pvt. Ltd. B. Key Management Personnel Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain C. Associates Halewood Laboratories Pvt. Ltd. Harleystreet Pharmaceuticals Ltd. Makers Laboratories Ltd. Mexin Medicaments Pvt. Ltd. Paschim Chemicals Pvt. Ltd. D. Other Related Parties (Entities in which Directors or their relatives have significant influence) Nipra Industries Pvt. Ltd. Keymed Oscar Industries Priti Packaging Pvt. Ltd. Nipra Drums Pvt. Ltd. Mr. Pranay Godha Mrs. Usha P Godha . Vandhara Resorts Pvt. Ltd. Jain Packaging Pvt. Ltd. Great Heights Trade lines Pvt. Ltd. Managing Director Managing Director Executive Director

48

Transactions with Related Parties (Rupees in Crores) Description Entities where control exists Key Management Personnel Others 21.43 10.10 0.07 0.09 0.03 0.14 0.07 25.36 20.30 4.88 3.24 0.03 0.02 0.10 0.28 0.05 0.03 2.24 2.19 51.04 33.42 47.23 39.39 0.03 0.02 0.19 0.31 0.19 0.10 Associates Other Related Parties Total

Subsidiaries Purchase of goods and services (Previous year) Sales of goods and services (Previous year) Interest received (Previous year) Purchase of fixed assets (Previous year) Sale of fixed assets (Previous year) Excise duty, Rent and other expenses (Previous year) Rent income (Previous year) Dividend Income (Previous year) Net loans and advances given/(Recovered) (Previous year) Investments made (Previous year) Remuneration to Directors (Previous year) Salary (Previous year) Balance as on 31/03/08 Receivables Payables Balance as on 31/03/07 Receivables Payables 27.71 17.08 -

Joint Venture Co. 2.01 0.83 14.57 19.07 -

0.16 -

(0.07) 0.61 1.56

0.01 0.04 0.04 0.04

2.22 5.49 0.03 -

0.23 0.21 -

2.62 5.67 0.03 0.65 1.60

0.03 (3.01) 2.51 7.44

0.11 4.57 0.05 -

1.04 (1.36) -

1.18 0.20 2.56 7.44

3.83 3.32 -

0.20 0.05

3.83 3.32 0.20 0.05

16.33 0.09

1.51

4.68 -

1.97

4.88 1.94

0.12

25.89 5.63

13.82 -

4.57 -

1.66

3.58 0.80

0.27

21.97 2.73

49

Disclosure in respect of transactions which are more than 10% of the total transactions of the same type with related parties during the year. (Rupees in crores) 2007-08 2006-07 2007-08 2006-07

Purchase of Goods & Services: Activa Pharmaceuticals (FZC) Exon Laboratories Pvt. Ltd. Halewood Laboratories Pvt. Ltd. Harleystreet Pharmaceuticals Ltd. Makers Laboratories Ltd. Paschim Chemicals Pvt. Ltd. Sale of Goods & Services: National Druggist (Pty) Ltd. Ipca Pharma Nigeria Ltd. Makers Laboratories Ltd. Activa Pharmaceuticals (FZC) Ipca Pharmaceuticals, Inc. USA 4.07 15.32 3.42 14.57 5.63 3.03 11.82 3.07 19.07 2.23 2.01 21.43 2.59 3.69 5.54 12.42 0.83 10.10 4.33 4.05 4.88 5.63

Net Loans & Advances Given/ (Recovered): Laboratories Ipca Do Brazil Ltda. Solway Investments Ltd. Sundridge Management Ltd. Exon Laboratories Pvt. Ltd. Paschim Chemicals Pvt. Ltd. Halewood Laboratories Pvt. Ltd. Investments Made: Ipca Pharma Nigeria Ltd. Ipca Pharmaceuticals, Inc. USA Ipca Laboratories U.K. Ltd. 1.20 1.14 2.82 1.36 2.61 0.13 (0.05) (0.05) 0.11 0.74 0.27 0.76 (1.88) (1.88) 4.57 (2.06) 0.50

Interest Income Halewood Laboratories Pvt. Ltd. 0.03 0.02

Purchase of Fixed Assets: Exon Laboratories Pvt. Ltd. Makers Laboratories Ltd. Paschim Chemicals Pvt. Ltd. 0.09 0.01 0.09 0.03 0.06 0.21 Remuneration to Directors: Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain Sale of Fixed Assets: Exon Laboratories Pvt. Ltd. Makers Laboratories Ltd. Paschim Chemicals Pvt. Ltd. 0.14 0.05 0.07 0.01 0.02 Receivables: Excise Duty, Rent & Other Exp.: Exon Laboratories Pvt. Ltd. Halewood Laboratories Pvt. Ltd. Harleystreet Pharmaceuticals Ltd. Makers Laboratories Ltd. 0.78 1.43 (0.01) 0.04 1.70 1.42 2.36 Laboratories Ipca Do Brazil Ltda. National Druggist (Pty) Ltd. Ipca Pharma Nigeria Ltd. Paschim Chemicals Pvt. Ltd. Exon Laboratories Pvt. Ltd. 4.32 3.22 6.93 3.40 4.68 4.46 6.40 2.66 4.57 Salary: Mr. Pranay Godha 0.20 0.05 2.10 0.78 0.95 1.23 1.25 0.84

Rent Income: Makers Laboratories Ltd. Halewood Laboratories Pvt. Ltd. 0.02 0.01

Payables: Activa Pharmaceuticals (FZC) Makers Laboratories Ltd. Mr. Premchand Godha 1.51 1.94 1.42 0.08 0.47 0.73 0.60 0.60 0.41

Dividend Income: Exon Laboratories Pvt. Ltd. Activa Pharmaceuticals (FZC) 0.04 0.61 0.04 1.56

Mr. M. R. Chandurkar Mr. A. K. Jain

50

26.

a)

Details of loans and advances in the nature of loan to subsidiaries, associates etc. as required under clause 32 of the listing agreement: (Rupees in Crores) Name of the company Relationship Balance as on 31.03.2008 Solway Investments Ltd. (Previous year Rs. 34,788/- ) Sundridge Management Ltd. (Previous year Rs. 34,788/- ) Laboratories Ipca Do Brasil Ltda. Ipca Pharmaceuticals, Inc. USA (Rs.24,069/- Previous year Rs.26,091/-) Maximum outstanding (Rs.26,091/Previous year Rs.26,772/-) Ipca Traditional Remedies Pvt. Ltd. (Rs 34,776/- previous year Nil) Halewood Laboratories Pvt. Ltd. Harleystreet Pharmaceuticals Ltd. 100% Subsidiary 100% Subsidiary 100% Subsidiary 100% Subsidiary 3.27 31.03.2007 3.41 Maximum outstanding During 2007-2008 3.54 During 2006-2007 1.89 1.89 3.41

Sr. No. i) ii)

iii) iv)

v) vi) vii)

Associate Associate Associate

0.20 -

0.20 -

0.03 0.20 -

0.20 0.15

Loans and advances to subsidiary/associate companies (Sr. No. i to v) are without interest and there is no repayment schedule fixed. Loans and advances to Associates and other related parties (Sr. No. vi to vii) are interest bearing loans subject to repayment within three years. b) Investment by the loanee in the shares of the Company None of the loanees have, per se , made investments in the shares of the Company. 27. 28. In the opinion of the Board of Directors, all the current assets, loans & advances have value on realisation atleast of an amount equal to the amount at which they are stated in the Balance Sheet. Details of rounded off amounts

The financial statements are represented in Rupees crore. Those items which were not represented in the financial statement due to rounding off to the nearest Rs. Crore are given below: i) Balance Sheet items (Rupees) Refer Cash flow Statement Description Purchase/Redemption of Mutual fund units (Net) Provision for diminution in value of investment Impairment : Effluent treatment plant Vehicles Depreciation-Sales, write back, adjustments Effluent treatment plant Government Securities : National Saving Certificates Trade Investments : Paschim Chemicals Pvt. Ltd. Profit on sale of investments As at 31st March 2008 -(*) 11,207 As at 31st March 2007 14,666 -

Schedule 4

35,245 11,961 32,229 26,000 6,690 300

35,245 11,961 26,000 6,690 71,380

Schedule 5

ii) Profit & Loss Account items Schedule 12 (*) Current year figures are represented in financial statement.

51

iii) Notes to the Accounts Refer Note No. 9 Description Balances with non-scheduled banks in Schedule 8 First Ukranian Int.Bank, Ukraine Bank of Baroda (Kenya) Ltd. Sales of goods and services Associates Excise duty, Rent and other expenses Other Related parties Sale of fixed Assets Others (entities where control exists) Excise duty, Rent and other expenses Others (entities where control exists) Excise duty, Rent and other expenses Associates Excise duty, Rent and other expenses Joint Venture (entities where control exists) Year ended 31.03.2008 14,694 12,540 1,864 4,739 38,453 (22,539) 12,340 (30,000)

(Rupees) Year ended 31.03.2007 90,337 5,07,070 257 6,98,183 3,60,436 52,564 (6,66,948)

Note No. 25

29.

Previous years figures have been regrouped and rearranged wherever necessary.

As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

52

30. BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE Additional information pursuant to Part IV of Schedule VI to the Companies Act, 1956. I. Registration details. Registration No. Balance Sheet 3 1 Date 7 8 3 2 7 0 Year 0 8 State Code 1 1

0 3 Month

II. Capital raised during the year (Amount in Rs. Thousands) Public Issue N I L Bonus Issue N I L III. Position of mobilisation and deployment of funds (Amount in Rs. Thousands) Total Liabilities 1 1 7 8 3 6 3 7 Sources of Funds Paid-Up Capital 2 5 0 8 8 8 Reserves & Surplus 5 8 2 5 8 1 0 Unsecured Loans 5 2 7 3 6 5 Application of Funds Net Fixed Assets 5 4 1 0 4 1 0 Net Current Assets 4 4 5 1 2 5 5 Accumulated Losses N I L IV. Performance of Company (Amount in Rs. Thousands) Turnover 1 0 8 5 1 4 1 6 + Profit /Loss Before Tax 1 7 6 8 6 9 3 (Please tick appropriate box + for Profit, - for Loss) Earning Per Share in Rs. 5 6 = 3 8 V.

Rights Issue N I L Private Placement 8 8 8

Total Assets 1 7 8

Share Application money 3 Secured Loans 3 0 0 2 7 Deferred Tax Liability 5 7 3 6 Investments 3 1 9 Misc. Expenditure N I L

5 1 0

3 7 5

Total Expenditure 9 0 8 2 7 Profit/Loss After Tax 1 4 1 1 1 Dividend Rate %

2 7 8

3 1 0

Generic names of three principal products/services of the Company. (as per monetary terms) Item Code No. 3 0 0 4 (ITC Code) Product Description A T E N O L O L Item Code No. (ITC Code) Product Description 3 C P H H L O O S R P 0 O H 0 Q A 4 U T

9 I E

0 N

3 E

Item Code No. 3 0 0 4 1 0 3 0 (ITC Code) Product A M O X Y C I C I L I N Description T R I H Y D R A T E Note : Classification of products/services under ITC code being of a technical nature is not verified by the Auditors. For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Mumbai Harish P Kamath . Dr. V. V. Subba Rao Director th 29 May, 2008 Company Secretary V. A. Gore Director

53

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES

PARTICULARS IPCA PHARMA NIGERIA LIMITED, NIGERIA Financial year/period of the subsidiary companies ended on No. of Equity shares held by Ipca Laboratories Limited in the subsidiary as at 31st March,2008 Extent of interest of Ipca Laboratories Limited in the capital of the subsidiary Net aggregate amount of the profits/(losses) of the subsidiaries so far it concerns to the members of Ipca Laboratories Limited as it is not dealt with the Companys Accounts for the year ended 31st March, 2008 of the subsidiaries Net aggregate amount of the profits/(losses) of the subsidiaries so far as dealt with or provision is made for those losses in the Accounts of Ipca Laboratories Limited for the subsidiarys Financial year ended 31st March,2008 31st March, 2008 5,15,89,190 Equity shares of Naira 1 each fully paid 100% NATIONAL DRUGGIST (PTY) LIMITED, SOUTH AFRICA 31st March, 2008 10,59,732 Equity shares of Rand 1 each fully paid 100%

NAME OF THE SUBSIDIARY IPCA PHARMA (AUSTRALIA) PTY LTD, AUSTRALIA 31st March, 2008 26,944 Equity shares of Aus $ 1 each fully paid 100% LABORATORIES IPCA DO BRASIL LTDA. BRAZIL 31st March, 2008 42,28,395 Quotas of Brazilian Real of 1 each 100% IPCA PHARMACEUTICALS INC., USA 31st March, 2008 1000 Shares of no par value IPCA LABORATORIES UK LTD., UK 31st March, 2008 4,60,955 Shares of STG 1 each

100%

100%

(N 46,51,520) (Rs.14.52 Lacs)

(R 11,974) (Rs. 0.68 Lacs)

Aus $ 29,479 Rs. 10.31 Lacs

R$ 2,17,619 Rs. 47.42 Lacs

(US$ 3,41,450) (Rs. 137.55 Lacs)

(STG 1,45,114) (Rs. 117.36 Lacs)

Nil

Nil

Nil

Nil

Nil

Nil

Note: 1. 2.

3.

Figures in Indian Rupees, wherever it appears in respect of overseas subsidiaries, have been given only as additional information. Solway Investment Ltd. and Sundridge Management Ltd., Companys wholly owned subsidiaries in Mauritius are under voluntary winding up with effect from close of their business on January 31st, 2007. No objection certificates from Mauritius Revenue Authority is received for winding up of both these companies on April 24th ,2008 and the final winding up process is eventually going on. Currently these companies have no assets or liabilities. The Companys wholly owned subsidiary, Ipca Pharma (Australia) Pty Ltd., has a wholly owned subsidiary by the name Ipca Pharma (NZ) Pty Ltd, New Zealand. Ipca Pharma (NZ) Pty Ltd., has a paid up capital of NZ$ 100 and no other assets or liabilities nor it is currently doing any business. For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director (Rs. In thousands)

Mumbai 29th May, 2008 Details of Subsidiaries PARTICULARS

Harish P Kamath . Company Secretary

IPCA PHARMA NATIONAL IPCA PHARMA LABORATORIES IPCA IPCA NIGERIA DRUGGIST (PTY) (AUSTRALIA) IPCA DO BRASIL PHARMACELABORATORIES LIMITED, LIMITED, PTY LTD., LTDA. UTICALS INC., UK LTD., NIGERIA SOUTH AFRICA AUSTRALIA BRAZIL USA UK Capital 18,894 4,572 1,298 63,760 60,335 37,598 Reserves 72,881 3,052 913 (1,06,130) (58,574) (26,699) Total Assets 1,37,133 35,105 15,448 1,07,864 66,186 39,225 Total Liabilities 1,37,133 35,105 15,448 1,07,864 66,186 39,225 Investments NIL NIL 3 NIL NIL NIL Total Income 2,15,952 41,741 45,009 10,793 70,063 NIL Profit / (loss) Before Taxation (1452) 32 1,452 4,742 (13,755) (11,736) Provision for Taxation NIL 100 421 NIL NIL NIL Profit / (loss) After Taxation (1452) (68) 1,031 4,742 (13,755) (11,736) Proposed Dividend NIL NIL NIL NIL NIL NIL Exchange rate considered as on 31st March, 2008: 1 USD = Rs.39.90, 1R$ = Rs. 22.9786, 1 STG = Rs.79.6049, 1 N = Rs.0.3459, 1R = Rs.4.9296, 1Aus $ = Rs.36.6182, 1NZ $ = Rs.31.8278 The Company owns 100 % interest in all the above subsidiaries.

54

AUDITORS REPORT TO THE BOARD OF DIRECTORS OF IPCA LABORATORIES LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF IPCA LABORATORIES LIMITED, ITS SUBSIDIARIES AND ITS JOINT VENTURE We have examined the attached consolidated Balance Sheet as at 31st March 2008, the Consolidated Profit and Loss Account and the consolidated cash flow statement for the year then ended of Ipca Laboratories Limited, its subsidiaries and its joint venture. These financial statements are the responsibility of the Ipca Laboratories Limited management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principle used and significant estimates made by management, as well as evaluating the overall financial statements. We believe that our audit provides a reasonable basis for our opinion. We have audited the financial statements of the subsidiaries for the purposes of complying with the requirements of the Companies Act 1956 relating to the subsidiaries and holding company disclosures relying on the Financial Statements which were audited by other auditors. The Financial Statements of the subsidiaries including the step down subsidiary and the joint venture company which were audited by other auditors reflect total assets of Rs.42.67Crores as at 31st March 2008 and total revenues of Rs.47.85 Crores for the year then ended. In respect of the joint venture company Activa Pharmaceuticals (FZC), the above figures include total assets of Rs.11.66 crores and total revenues of Rs.2.73 crores for the three month period from 1st January 2008 to 31st March 2008 which are as per the un-audited accounts certified by the management. The financial statements of the joint venture are audited upto 31st December 2007. Further in case of IPCA Pharma (NZ) Pty Ltd the accounts for the period 1st April 2007 to 31st March 2008 are based on un-audited data as certified by the management. Similarly in respect of subsidiaries Sundridge Management Limited & Solway Investments Limited the accounts are audited upto 31st January 2007 and for the fourteen month period from 1st February 2007 to 31st March 2008 are based on un-audited data as certified by the management as these companies are already in the process of winding up. Excepting the aforementioned information relating to management accounts, the aforesaid financial statements have been audited by other auditors whose report(s) have been furnished to us, and our opinion, in so far as they relates to the amounts included in respect of the subsidiaries and joint venture company, are based on the reports of the other auditors. We report that the consolidated financial statements have been prepared by the Company in accordance with the requirement of Accounting Standard (AS) 21, Consolidated Financial Statements, Accounting Standard - 23 Accounting for Investment in associates in consolidated financial statements and Accounting Standard - 27 Financial Reporting of Interest in Joint Ventures issued by the Institute of Chartered Accountants of India and on the basis of the separate audited financial statements of Ipca Laboratories Ltd., its subsidiaries including step down subsidiaries and joint venture company included in the consolidated financial statements. On the basis of the information and explanation given to us and on the consideration of the separate audit reports on individual audited financial statements of Ipca Laboratories Ltd., its aforesaid subsidiaries and its joint venture, we are of the opinion that : a) b) c) the Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of Ipca Laboratories Limited, its subsidiaries including step down subsidiaries and its joint venture as at 31st March 2008 and the Consolidated Profit and Loss Account gives a true and fair view of the consolidated results of operations of Ipca Laboratories Limited, its subsidiaries including step down subsidiary and its joint venture for the year then ended. the Consolidated Cash Flow Statement, gives a true and fair view of the cash flows of Ipca Laboratories Limited, its subsidiaries including step down subsidiary and its joint venture for the year then ended.

For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner M.No. 40441

Mumbai Dated : May 29, 2008

55

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2008

31st March,2007 Rupees in Crores Rupees in Crores

Schedule SOURCES OF FUNDS Shareholders Funds Share Capital Share Application money pending allotment (Refer Note No. 13) Reserves and Surplus Loan Funds Secured Loans Unsecured Loans Provision for Deferred Taxation ( Net ) ( Refer Note No. 10) 3 3 2 1

31st March,2008 Rupees in Crores Rupees in Crores

25.09 0.04 564.11 589.24

25.00 0.04 448.75 473.79

300.27 52.74 353.01 57.36 999.61

215.39 23.55 238.94 51.19 763.92

APPLICATION OF FUNDS Fixed Assets Gross Block Less : Depreciation/ Amortisation/Impairment Net Block Construction Work-in-Progress and Capital Advances Investments Current Assets, Loans and Advances Inventories Sundry Debtors Cash and Bank Balances Loans and Advances 7 8 6 267.59 267.59 9.41 64.21 608.80 Less : Current Liabilities and Provisions Current Liabilities Provisions 9 137.10 23.57 160.67 Net Current Assets Notes to the Consolidated Accounts As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008 16 For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director 448.13 999.61 122.91 19.91 142.82 322.89 763.92 236.25 180.72 10.12 38.62 465.71 5 127.61 541.95 9.53 57.00 432.39 8.64 4 578.92 164.58 414.34 510.89 135.50 375.39

Harish P Kamath . Company Secretary

56

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008
2006-2007 Rupees in Crores Rupees in Crores 32.36 24.62 11.97 2.47 401.28 117.20 218.00 22.47 29.45 985.25 56.98 928.27 14.44 942.71

Schedule Rupees in Crores INCOME Sales Less-Excise Duty Sales Tax Income from Operations Other Income EXPENDITURE Material Cost and Inventory Adjustments Personnel Cost Manufacturing and Other Expenses Financial Cost Depreciation and Amortisation 10 11 12 13 14 15 4 21.96 24.47 40.39 2.80 463.88 147.04 255.15 20.39 32.51

2007-2008 Rupees in Crores 1,097.47 46.43 1,051.04 43.19 1,094.23

918.97 175.26

788.40 154.31

PROFIT BEFORE TAXATION AND EXCEPTIONAL ITEMS Less : Provision for Taxation - Current - Deferred (Net) - Fringe benefit Add: Excess Provision for taxation (Net) / Income Tax Refund of earlier years PROFIT AFTER TAXATION Share of profits/ (loss) from Investments in Associates Proportionate share of dividend received by Associates from cross-holding PROFIT AFTER TAXATION BEFORE EXCEPTIONAL ITEMS EXCEPTIONAL ITEMS Insurance Claim on assets damaged in flood NET PROFIT Balance brought forward AMOUNT AVAILABLE FOR APPROPRIATION APPROPRIATIONS General Reserve Interim Dividend Proposed Final Dividend Tax on Dividend Balance carried forward to Balance Sheet EARNINGS PER SHARE (In Rupees) [Refer Note No.20] (Nominal value of each share Rs.10/-) Basic Before Exceptional Items After Exceptional Items Diluted Before Exceptional Items After Exceptional Items Notes to the Consolidated Accounts As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008

24.54 6.17 5.30

36.01 0.22 139.47

23.37 4.37 2.80

30.54 1.16 124.93

(3.93) 0.39 (3.54) 135.93

0.12 0.28 0.40 125.33

135.93 121.96 257.89

0.84 126.17 69.80 195.97

100.53 8.75 11.29 3.41 133.91 257.89

52.33 8.75 10.00 2.93 121.96 195.97

54.31 54.31 54.13 54.13 16

50.13 50.47 49.96 50.29

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

57

STATEMENT OF CONSOLIDATED CASH FLOW FOR THE YEAR ENDED 31ST MARCH 2008
2007-08 Rupees in Crores A CASH FLOW FROM OPERATING ACTIVITIES 1 Net profit before taxation and extraordinary item Adjustments for : Depreciation and Amortisation Reversal of Impairment Loss of Assets Provision for leave encashment Provision for Leave Travel Assistance Profit on sale of assets Profit on sale of investments Loss on sale of investments Loss on sale of assets Fixed Assets scrapped Miscellaneous Balance Written off / (back) Provision for diminution in value of investment Provision for Doubtful Debts Employee Stock Option Compensation expenses Foreign exchange (gain) / loss Provision for doubtful debts written back Interest income Dividend income Interest expense 2 Operating profit before working capital changes (Decrease) / Increase in short term borrowings (Increase) / Decrease in Receivables (Increase) in inventories Increase in sundry creditors 3 Cash generated from operation Income tax paid (Net) Gratuity Paid to LIC 4 Net cash from operating activities before extraordinary items Insurance Claim on assets damaged in flood Net cash from operating activities B CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Purchase of Investment Investment in Associates Goodwill paid on Acquisition of Subsidiary Purchase / Redemption of mutual fund units - Purchases - Redemption Proceeds from sale of assets Interest received Dividend received from associates Dividend received from others Net cash from / (used) in investing activities C CASH FLOW FROM FINANCING ACTIVITIES ESOS Commitment Deposit Proceeds from Issuance of Share Capital Including Premium Proceeds from long-term borrowings Repayment of long-term borrowings Interest paid Dividend Paid Net cash used in financing activities Net increase in cash and cash equivalents ( A + B + C ) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008 (143.78) (4.42) (0.05) (0.04) (570.49) 570.48 (0.01) 0.99 3.09 0.04 0.48 (143.70) 0.01 1.77 88.82 (14.79) (16.86) (21.94) 37.01 (0.71) 10.12 9.41 0.04 32.07 (12.97) (21.17) (18.54) (499.19) 499.19 175.26 32.51 (0.72) 0.34 1.41 (0.08) 0.01 1.02 0.57 0.07 0.02 2.90 (43.63) (3.58) (0.48) 18.61 55.91 (84.61) (31.35) 11.88 29.45 (0.09) 0.27 (0.05) (0.01) 0.01 0.41 0.49 (0.40) 0.13 1.69 (9.82) (0.69) (2.22) (0.76) 20.91 29.08 (50.29) (49.11) 16.01 2006-2007 Rupees in Crores 154.31

8.97 184.23

39.32 193.63

(48.17) 136.06 (29.02) (1.06) 105.98 105.98

(54.31) 139.32 (23.67) (1.06) 114.59 0.84 115.43

(89.46) (5.09) 1.32 2.21 0.04 0.76

(90.22)

(20.57) 4.64 5.48 10.12

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

58

SCHEDULES TO THE CONSOLIDATED ACCOUNTS

Schedules 1 to 16 forming part of the Consolidated Balance Sheet as at 31st March, 2008 and Consolidated Profit & Loss Account for the year ended 31st March, 2008. 31.03.2008 Rupees in Crores Rupees in Crores SCHEDULE 1 31.03.2007 Rupees in Crores Rupees in Crores

SHARE CAPITAL Authorised : 4,50,00,000 Equity Shares of Rs.10 each Issued and Subscribed : 2,50,88,750 (previous year 2,50,00,000) Equity Shares of Rs.10 each fully paid-up PER BALANCE SHEET Of the above : (i) 48,200 Equity Shares have been issued as fully paid for consideration other than cash 45.00

45.00

25.09 25.09

25.00 25.00

(ii) (a) 84,00,000 Equity Shares fully paid have been issued as Bonus Shares by capitalisation of General Reserve (b) 1,25,00,000 Equity Shares fully paid have been issued as Bonus Shares by capitalisation of share premium. (iii) 88,750 Equity Shares issued on exercise of options under Employees Stock Option Scheme 2

SCHEDULE

RESERVES AND SURPLUS Capital Reserve Per last Balance Sheet Share Premium Account Per last Balance Sheet Add : On issue of Employee stock options General Reserve Per last Balance Sheet Less: Transitional charge for Gratuity / LTA (Net of Deferred Tax) (Refer Note No.14) Less: Change in carrying value of Investments in Associates due to change in share holding Less: Goodwill on Acquisition of Subsidiary (Refer Note No.11a) Add: Add: On Forfeiture of Employee stock option Transferred from Profit and Loss Account 0.04 26.70 249.62 2.11

0.04

26.70 3.16

29.86

26.70

299.43 0.69

0.04 0.16 100.53 399.39

0.41 52.33 6.22 2.94 4.53 1.69 299.43

Employee Stock Options Employee stock option outstanding Deferred Employee compensation expenses Less : (Refer Note No.13) Foreign Currency Translation Reserve Per last Balance Sheet Add/(Less) : Movements during the year Profit and Loss Account PER BALANCE SHEET

7.36 4.42

(1.07) (0.96)

(2.03) 133.91 564.11

(0.66) (0.41)

(1.07) 121.96 448.75

59

31.03.2008 Rupees in Crores SCHEDULE 3

31.03.2007 Rupees in Crores

LOANS a) Secured Loans Canara Bank - Consortium - Secured by first charge by way of hypothecation of raw materials, packing materials, work - in process, finished goods, stores & spares, book debts and all other moveable current assets of the company and second charge by way of mortgage of the immovable properties of the Company and hypothecation of machinery of the Company. Rupee Term Loan HDFC Bank Ltd. Secured by first pari passu charge by way of hypothecation of moveable fixed assets both present and future except on moveable fixed assets at Pithampur, Indore. Foreign Currency Loans Cooperatieve Centrale Raiffeisen - Boerenleen Bank B.A. (Rabobank, Singapore Branch) Secured by first pari passu charge by way of hypothecation of moveable fixed assets both present and future except on moveable fixed assets at Pithampur, Indore.

118.63

93.60

40.00

10.03

21.75

ICICI Bank Singapore Secured by first pari passu charge by way of hypothecation of all the moveable fixed assets both present and future except on moveable fixed assets at Pithampur, Indore. ICICI Bank Offshore Banking Unit Secured by first pari passu charge by way of hypothecation of all the moveable fixed assets both present and future except on moveable fixed assets at Pithampur, Indore. Secured by exclusive charge on the entire moveable fixed assets at SEZ, Indore, Pithampur and pari passu first charge on moveable fixed assets at Kandla

32.10

43.49

19.26

26.10

48.15

30.45

BNP PARIBAS Secured by first pari passu charge by way of hypothecation of moveable fixed assets both present and future except on moveable fixed assets at Pithampur, Indore. PER BALANCE SHEET (Refer Note No. 6 ) b) Unsecured Loans Short Term Loans from Banks: - ICICI Bank Offshore Banking Unit - Barclays Bank - Caylon Bank Deposits from dealers Madhya Pradesh State sales tax loan PER BALANCE SHEET (Refer Note No. 6 )

32.10 300.27

215.39

12.04 40.00 0.51 0.19 52.74

13.05 9.80 0.40 0.30 23.55

60

SCHEDULE

FIXED ASSETS
(Rs. in Crores) SR. DESCRIPTION OF ASSETS NO. As on 01.04.2007 GROSS BLOCK Additions during the year Sales,w/off, adjustments during the year As on 31.03.2008 DEPRECIATION AND AMORTISATION Up to 31.03.2007 For the Year Sales,w/off, adjustments during the year Up to 31.03.2008 IMPAIRMENT As on 31.03.2008 31.03.2007 NET BLOCK As on 31.03.2008 As on 31.03.2007

A. Tangible Assets 1 Land : Freehold Leasehold 2 3 4 5 6 7 Buildings Plant & Machinery Effluent Treatment Plant Furniture & fixtures Vehicles R & D assets - Building - Equipments - Furniture B. Intangible Assets 1 2 3 Software Know-how Brands & Trademarks Total Previous Year 0.95 3.84 2.16 510.89 454.63 0.13 73.98 63.82 (5.95) (7.56) 1.08 3.84 2.16 578.92 510.89 0.46 2.13 1.86 132.94 107.25 0.25 0.96 0.13 32.60 29.52 (2.80) (3.83) 0.71 3.09 1.99 162.74 132.94 1.84 2.56 2.56 127.61 Per Balance Sheet 541.95 0.37 0.75 0.17 414.34 375.39 57.00 432.39 0.49 1.71 0.30 6.09 46.01 0.69 0.33 9.27 0.27 0.16 (0.26) 6.58 55.02 0.96 0.87 14.86 0.31 0.21 4.93 0.08 0.10 (0.12) 1.18 19.67 0.39 0.04 0.04 5.40 35.31 0.57 5.22 31.11 0.38 9.92 8.34 93.85 317.23 5.03 8.75 8.03 0.04 4.21 6.66 49.79 0.03 2.00 1.25 (0.19) (4.80) 0.03 0.37 (1.26) 9.96 12.55 100.32 362.22 5.09 11.12 8.02 0.17 15.29 87.43 1.70 3.33 4.53 0.09 2.92 20.55 0.31 0.99 1.18 (0.21) (1.92) 1.25 (1.90) 0.26 18.00 106.06 2.01 5.57 3.81 0.03 0.47 1.29 0.01 0.03 0.47 2.01 0.01 9.93 12.29 81.85 254.87 3.08 5.54 4.21 9.89 8.17 78.09 227.79 3.33 5.41 3.50

C. Construction work-in-progress & capital advances including project expenses pending allocation

Notes:
1. The Company has constructed a residential premises at Silvassa. Land document in favour of the Company is pending to be executed. 2. Buildings include cost of shares in Co-operative societies. 3. Depreciation is charged on assets impaired on revised adjusted value over its remaining estimated useful life of five years. 4. Out of depreciation and amortisation for the year of Rs.32.60 crores(previous year Rs.29.52 crores) , Rs.0.09 crore (previous year Rs. 0.07 crore) relating to projects under execution is transferred to project expenses pending allocation. 5. Cost of Borrowing of Rs.3.64 crore (Pervious year Rs. 0.46 crore) is capitalised to the projects.

61

No. of Shares 31.03.2008 31.03.2007 SCHEDULE 5

Face Value Rupees

31.03.2008 Rupees in Crores

31.03.2007 Rupees in Crores

INVESTMENTS-At cost A) Unquoted : Long Term (Trade) (i) Government Securities National Saving Certificates (ii) Trade Investments Equity Shares ( Fully paid ) In Associates using Equity Method (Refer Note No. 5) Paschim Chemicals Pvt. Ltd. Exon Laboratories Pvt. Ltd. CCPL Software Pvt.Ltd. # Ipca Traditional Remedies Pvt. Ltd. # Cost fully written off in books 6,690 439,000 55,000 49,000 6,690 439,000 55,000 100 10 100 10 0.01 0.01 0.11 3.44 3.55 -

B)

Quoted : Long Term (Trade) Equity Shares ( Fully paid ) Mangalam Drugs & Organics Ltd. (Refer Note No. 11(b)) Tonira Pharma Ltd. (Refer Note No. 11(c)) 1,583,754 10 4.28 9.37 5.09 1,633,417 1,633,417 10 5.09 5.09

C)

Quoted : Current (Non - Trade) Aurobindo Pharma Ltd. PER BALANCE SHEET 5,000 10 0.15 9.53 8.64

SCHEDULE

INVENTORIES (As taken, valued and certified by the Management) Stock in Trade Raw materials Packing materials Stores and spares Work-in-process Finished goods PER BALANCE SHEET 99.51 14.08 2.37 46.71 104.92 267.59 95.75 13.21 2.31 34.08 90.90 236.25

62

31.03.2008 Rupees in Crores Rupees in Crores SCHEDULE 7 0.27 1.90 7.24 9.41 CASH AND BANK BALANCES Cash on hand Cheques on hand Margin money with Banks Balances with banks PER BALANCE SHEET SCHEDULE 8

31.03.2007 Rupees in Crores Rupees in Crores

0.46 1.40 0.34 7.92 10.12

LOANS AND ADVANCES (Unsecured-considered good unless otherwise stated) Advances recoverable in cash or in kind or for value to be received Loans to employees Other loans Deposits PER BALANCE SHEET SCHEDULE 9 45.18 2.30 12.01 4.72 64.21 29.47 2.44 2.45 4.26 38.62

CURRENT LIABILITIES AND PROVISIONS Current Liabilities Sundry creditors Against acceptance of import documents Unpaid dividends Other liabilities Advances from customers Interest accrued but not due on loans Provisions Proposed final dividend Provision for tax on dividend Provision for gratuity Provision for leave encashment Provision for leave travel assistance Provision for taxation Prepaid Taxes PER BALANCE SHEET SCHEDULE 10 11.29 1.92 1.18 3.79 2.11 101.82 (98.54) 23.57 160.67 2007-2008 10.00 1.70 2.12 3.42 71.94 (69.27) 19.91 142.82 2006-2007 6.24 5.73 11.97 67.98 26.21 0.86 31.13 7.01 3.91 137.10 67.02 23.15 0.86 27.25 2.47 2.16 122.91

INCOME FROM OPERATIONS Duty Free Entitlement Credit under target plus and other schemes Other Income from operations PER PROFIT AND LOSS ACCOUNT 7.19 33.20 40.39

63

2007- 2008 Rupees in Crores Rupees in Crores SCHEDULE 11 OTHER INCOME Profit on sale of assets Profit on sale of investments Dividend income Provision for doubtful loans/debts written back Reversal of Impairment loss of Assets Miscellaneous income PER PROFIT AND LOSS ACCOUNT SCHEDULE 12 MATERIAL COST AND INVENTORY ADJUSTMENTS Raw materials consumed Opening stock Add: Purchases Raw material conversion charges Less: Closing stock Packing materials consumed Opening stock Add: Purchases Less: Closing stock Finished goods purchased Inventory adjustments Stock at commencement Finished goods Work-in-process Less : Stock at close Finished goods Work-in-process Neutralisation of duties and taxes on inputs on exports-DEPB/Drawback Benefits Variation in excise duty on : Closing stock of finished goods Less : Opening stock of finished goods PER PROFIT AND LOSS ACCOUNT SCHEDULE 13 PERSONNEL COST Payment to and provision for salaries, wages and bonus Contribution to provident fund, employees' state Insurance and other funds Employee stock option compensation expenses Provision for leave encashment Welfare expenses Recruitment and training PER PROFIT AND LOSS ACCOUNT 5.47 7.64

2006-2007 Rupees in Crores Rupees in Crores

0.08 0.48 0.72 1.52 2.80

0.05 0.01 0.76 0.69 0.09 0.87 2.47

95.75 374.02 13.32 483.09 99.51

383.58

71.85 332.32 11.17 415.34 95.75 8.99 64.72 73.71 13.21

319.59

13.21 77.73 90.94 14.08

76.86 49.44

60.50 54.47

90.90 34.08 124.98 104.92 46.71 151.63

78.45 25.93 104.38 90.90 34.08 124.98

(26.65)

(20.60) (10.55)

(17.18) 7.64 9.77

(2.17) 463.88

(2.13) 401.28

130.07 7.50 2.90 0.34 3.58 2.65 147.04

104.74 5.66 1.69 0.27 2.67 2.17 117.20

64

2007-2008 SCHEDULE 14 Rupees in Crores

2006-2007 Rupees in Crores 7.80 32.49 14.50 5.10 3.23 3.61 30.91 8.41 0.15 15.56 0.29 10.40 0.41 0.49 13.31 4.12 3.90 10.44 3.37 2.95 8.06 29.87 (0.40) 1.24 0.83 0.13 0.01 1.47 4.01 (6.22) 7.56 218.00

MANUFACTURING AND OTHER EXPENSES Consumption of stores Power, fuel, gas & water charges Repairs & Maintenance Insurance Rent Rates and taxes Freight, forwarding and transportation Commission Royalty Field staff expenses Auditors' remuneration Expenditure on scientific research Loss on sale of assets Fixed assets scrapped Outside manufacturing charges Laboratory expenses and analytical charges Communication expenses Travelling expenses Professional charges Printing and stationery Product information catalogue Sales and Marketing expenses Miscellaneous balance written off/(back) Books,Subscription & Software Intellectual property right expenses Provision for doubtful debts / advances Loss on sale of investments Product registration expenses Excise duty (Profit)/Loss on foreign exchange translations Miscellaneous expenses PER PROFIT AND LOSS ACCOUNT SCHEDULE Interest Less: Interest income on short term deposits with banks and others Bank Charges PER PROFIT AND LOSS ACCOUNT 15 20.91 2.22 18.69 3.78 22.47 9.67 37.19 19.48 4.78 3.61 4.97 34.81 8.11 0.12 20.87 0.33 14.27 1.02 0.57 13.68 5.19 5.02 11.38 3.71 3.49 9.48 42.42 0.07 1.24 1.15 0.02 0.01 3.07 5.48 (17.44) 7.38 255.15

FINANCIAL COST 18.61 3.58 15.03 5.36 20.39

65

SCHEDULE 16 ACCOUNTING POLICIES AND NOTES FORMING PART OF THE CONSOLIDATED ACCOUNTS 1. Principles of Consolidation: The consolidated financial statements relates to Ipca Laboratories Ltd. and its Subsidiary Companies and Joint Venture. The consolidated financial statements have been prepared in accordance with Accounting Standard - 21 Consolidated Financial Statement, Accounting Standard - 23 Accounting for Investment in associate in consolidated financial statements and Accounting Standard - 27 Financial Reporting of Interest in Joint Venture issued by the Institute of Chartered Accountants of India. The Consolidated Financial Statements have been prepared on the following basis: The Financial Statements of the 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 inter group transactions resulting in unrealized profits and losses. In case of foreign subsidiaries, revenue items are consolidated at average rate prevailing during the year. All Assets and Liabilities are converted at the rates prevailing at the end of the year. Exchange gain or loss on conversion arising on consolidation are recognized under foreign currency translation reserve. Investments in Associate Companies have been accounted under equity method as per Accounting Standard - 23. Interest in Joint Venture has been accounted using proportionate consolidation method as per Accounting Standard - 27. The financial statements of the subsidiaries, associate and Joint Venture used in consolidation are drawn up to the same reporting date as that of the Company i.e. 31st March. The difference between the cost to the Company of its investments in the subsidiary companies and joint venture over the Companys portion of equity is recognized in the financial statement as Goodwill or Capital Reserve. The list of subsidiary companies, joint venture and associate companies included in consolidation and Companys holding therein are as under: Name of the Subsidiaries Solway Investments Ltd. Sundridge Management Ltd. Laboratories Ipca Do Brasil Ltda. Ipca Pharmaceuticals, Inc. USA Ipca Laboratories U.K. Ltd. National Druggists (Pty) Ltd. Ipca Pharma Nigeria Ltd. Ipca Pharma (Australia) Pty. Ltd. Ipca Pharma (NZ) Pty. Ltd.* [* Step down subsidiary -refer note no.11(a)] Joint Venture Activa Pharmaceuticals (FZC) Name of the associate companies Exon Laboratories Private Ltd. CCPL Software Private Ltd. Paschim Chemicals Private Ltd. Ipca Traditional Remedies Private Ltd. 2. ACCOUNTING POLICIES a) System of Accounting The Company follows accrual system of accounting for all items of revenue and cost. b) Use of Estimates The preparation of the financial statements in conformity with the Generally Accepted Accounting Principles applicable in India and the provisions of the Companies Act, 1956 requires that the management makes estimates and assumptions that affect the reported amounts of the assets and liabilities, disclosure of contingent liabilities as at the date of the financial statements and the reported amounts of revenue and expenses during the reported year. Actual results could differ from those estimates. India India India India 39.20 28.95 4.75 49 43.90 28.95 7.43 Sharjah(UAE) 50 50 Country of Incorporation Mauritius Mauritius Brasil USA UK South Africa Nigeria Australia New Zealand % of ultimate holding 2007-08 2006-07 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

66

c)

Inflation Assets and liabilities are shown at historical cost except revalued assets, which are shown at revalued amounts. No adjustments are made for changes in purchasing power of money.

d)

Fixed Assets i. ii. iii. iv. v. vi. Fixed assets are recorded at cost of acquisition or construction less CENVAT/ Service Tax/ VAT credit availed. Revalued assets are recorded at revalued amounts. Project expenses pending allocation are apportioned to the fixed assets of the project proportionately. Cost of borrowing for assets taking substantial time to be ready for use is capitalised for the period up to the time the asset is ready for use. Goodwill on acquisition of shares representing excess of cost of investment over its share of equity is charged to the reserves in the first year of such acquisition. Intangible assets are recorded at cost of acquisition. Leasehold land is amortised over leasehold period. Long term Investments are stated at cost. Provisions are made for diminution in value of investments other than temporary in nature. Current Investments are stated at Cost or market value whichever is lower. Investments in associates are accounted for using equity method. The difference between the cost of investment in the associates and the share of net assets at the time of acquisition of shares in the associates is identified in the financial statements as Goodwill or Capital Reserve as the case may be. Depreciation on all assets of the Company is charged on straight line method over the useful life of assets estimated by the management in the manner provided in Schedule XIV of the Companies Act,1956 for the proportionate period of use during the year. Intangible assets are amortised over the economic useful life estimated by the management. The management has estimated the useful life for the various fixed assets as follows. Assets Buildings Plant and Machinery and R&D Equipments Computers Furniture and Fixtures Vehicles Brands and Trademarks Technical Know how Software for internal use ii. Estimated useful life (Years) 28 to 58 9 to 20 6 10 6 4 4 4

e)

Investments i. ii.

f)

Depreciation, Amortisation and Impairment i.

The Company carries out exercise of assessment of any impairment to its fixed assets as at each balance sheet date. Changes in level of impairment are accounted in Profit and Loss Account separately. Impairment loss in respect of assets sold / scrapped are reversed and consequent profit or loss on such sale is accounted. Impairment loss, if any, is provided to the extent, the carrying amount of assets exceeds their recoverable amount. Recoverable amount is higher of an assets net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. Depreciation charged on assets impaired is adjusted in future period over its remaining useful life.

iii. g)

In respect of assets belonging to foreign subsidiaries including step down subsidiaries, depreciation is charged at the rates and in the manner provided under the respective local laws.

Inventories Items of inventories are valued on the basis given below: Raw Materials and Packing Materials Work-in-process and Finished Goods a) b) At Cost net of CENVAT / VAT computed on First-in-First-out method. Bulk drugs produced for captive consumption are valued at cost. At cost including material cost net of CENVAT, labour cost and all overheads other than selling and distribution overheads for work-in-process and the same or realisable value, whichever is lower in case of finished goods except Physicians Samples which are valued at cost as computed above. Excise duty is considered as cost for finished goods wherever applicable. Stores and spare parts are valued at purchase cost.

Stores and Spares

67

h)

Retirement Benefits i. ii. iii. Gratuity is charged to Profit and Loss Account based on actuarial valuation by Life Insurance Corporation of India under Employees Group Gratuity Policy. Leave encashable on retirement has been provided on the basis of actuarial valuation. Leave Travel Assistance (LTA) liability has been provided on the basis of actual accumulated obligation. The excise duty expenses are bifurcated into three components: excise duty expenses related to sales is reduced from Gross Sales, excise duty relating to the difference between the closing and opening stock of finished goods is recognized in the material cost and inventory adjustments and the un-recovered excise duty is recognized under manufacturing and other expenses. CENVAT credit utilised during the year is accounted in excise duty and unutilised CENVAT balance at the year-end is considered as advance excise duty.

i)

Excise Duty and CENVAT Credit i.

ii. j)

Service Tax Credit Service tax credit utilised during the year towards excise liability is accounted in excise duty and unutilised service tax credit at the year-end is considered as advance excise duty.

k) l)

Sales Local sales include excise duty and sales tax. Foreign Exchange Transactions Transactions denominated in foreign currency are recorded at the exchange rate on the date of transaction. The exchange gain/ loss on settlement / negotiation during the year are recognised in the Profit and Loss Account. Foreign currency transactions remaining unsettled at the end of the year are converted at yearend rates. Gain or losses arising on account of transactions covered by forward contract are recognised over the period of contracts. Current assets and current liabilities at the end of the year not covered by forward contracts are converted at the yearend rate and the resultant gain and loss are accounted for in the Profit and Loss Account. Gain or loss on foreign exchange transactions related to sales is grouped under income from operations and other exchange gain or loss on fluctuation is grouped under manufacturing & other expenses in the Profit and Loss Account. In case of foreign subsidiaries, revenue items are translated at the average rate prevailing during the year. All assets and liabilities are converted at rates prevailing at the end of the year. Exchange loss or gain on translations of the accounts for consolidation is accounted for in the Foreign Currency Translation Reserve Account as a part of Reserves & Surplus.

m)

Research and Development Revenue expenditure on research and development is charged to Profit and Loss Account in the year in which it is incurred. Capital expenditure on research and development is considered as an addition to fixed assets.

n)

Revenue Recognition i. In respect of incentives attributable to the export of goods, the Company following the accounting principle of matching revenue with the cost has recognised export incentive receivable when all conditions precedent to the eligibility of benefits have been satisfied and when it is reasonably certain of deriving the benefit. Since these schemes are meant for neutralisation of duties and taxes on inputs pursuant to exports, the same are grouped under material costs. The other export incentives that do not arise out of neutralisation of duties and taxes are disclosed under income from operations. Revenue in respect of insurance/other claims, interest, commission, etc. are recognised only when it is reasonably certain that the ultimate collection will be made.

ii. iii. o)

Employee Stock Option Scheme Employee stock options are evaluated as per the accounting treatment prescribed by SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines,1999 issued by Securities and Exchange Board of India. Accordingly the excess of market value of the stock options as on the date of grant over the exercise price of the options is recognized as deferred employee compensation and is charged to profit and loss account on graded vesting basis over the vesting period of the options. The unamortized portion of the deferred employee compensation is reduced from Employee Stock Option Outstanding which is shown under Reserves and Surplus.

p)

Taxation Tax expenses comprise Current Tax, Deferred Tax and Fringe Benefit Tax.: Current Tax: Current Tax is calculated as per the provisions of the Income tax Act, 1961.

68

Deferred Tax: Deferred Tax is recognized on timing differences being the differences between the taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred Tax Assets, subject to the consideration of prudence are recognized and carried forward only to the extent that there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized. The tax effect is calculated on the accumulated timing difference at the year-end based on the tax rates and laws enacted or substantially enacted on balance sheet date. Fringe Benefit Tax: Tax on Fringe Benefits is measured as the specified rates on the value of Fringe Benefits in accordance with the provisions of the section 115 WC of the Income Tax Act, 1961. Accounting for Fringe Benefit Tax is done as per the guidance note issued by ICAI. In view of judicial pronouncements and in accordance with advice of the Companys Tax Advisor, no provision has been made for the completed assessments, which are in appeal. q) Contingent Liabilities These are disclosed by way of notes to the Accounts. Provision is made in respect of those liabilities, which are likely to materialise after the year end till the finalisation of Accounts and have material effect on the position stated in the Balance Sheet. r) Overseas Branch Transactions Transactions pertaining to overseas branch in capital and revenue accounts are recorded at exchange rates at which the remittances were made to the said branch. Current assets at the end of the year are recorded at the yearend exchange rates. Exchange difference on this account is recognized in the Profit and Loss Account. s) Government Grants The Company accounts government grants relating to specific fixed assets as deferred income and recognises the same proportionately over the useful life of the asset. 31.03.2008 Rupees in Crores 3. Estimated amount of contracts remaining to be executed on capital account. - Tangible Assets - Intangible Assets 4. Contingent liabilities not provided for in respect of: a) Bills discounted with banks. Since realised Other moneys for which the Company is contingently liable for tax, excise, customs and b) other matters not accepted by the Company. c) Claims against the Company not acknowledged as debts. The associates of the Company and the ownership interest are as follows:Name of the Associate % of Share held Original (Goodwill)/ cost of Capital Investment Reserve (Rs. In Crores) Accumulated Share of Dividend Carrying Profit/ (Loss) up to Profit / (Loss) received value of 31/03/07 for the year from Investment (Including associates on proportionate 31/03/08 Dividend received by associates from cross holdings) 1.50 (0.51)* 0.11 (3.39) (0.11) (0.04) (3.54) (0.12) NIL NIL (0.12) NIL NIL** NIL 0.01 0.01 5.27 5.60 43.54 16.68 1.31 0.10 38.15 1.12 67.33 4.80 3.32 31.03.2007 Rupees in Crores

5.

Exon Laboratories Private Ltd. CCPL Software Private Ltd. Paschim Chemicals Private Ltd. Ipca Traditional Remedies Pvt. Ltd. Total * 1) 2) **

39.20% 28.95% 4.75% 49%

2.01 1.31 0.05 3.37

0.04 (0.79) -

No effect of share of loss from CCPL is taken since 01.04.2004, as the Company has no further commitment towards its share of loss in the Associate. The Share of loss in associates is limited to carrying value of the respective investment, since the Company does not have further commitment to invest in the associates.

Balance cost is fully written off in books.

69

6. 7. 8. 9.

Amount of long term loans repayable in the following 12 months aggregate to Rs.41.83 crores (Previous year Rs.24.91 crores). Provision for taxation includes provision for wealth tax of Rs.0.04 crore (Previous year Rs.0.05 crore). Remuneration to auditors of the subsidiaries including the step down subsidiaries and Joint Venture are grouped with the professional charges. Significant accounting policies and notes to this consolidated financial statement are intended to serve as a means of informative disclosure and a guide to better understanding the consolidated position of the companies. Recognising this purpose, the Company has disclosed only such policies and notes from the individual financial statements, which fairly presents the needed disclosures. Lack of homogeneity and other similar considerations made it desirable to exclude some of them, which in the opinion of the Management could be better viewed when referred from the individual financial statements. a) Break-up of Deferred tax assets and liabilities are as under : Particulars Deferred tax liability on account of Depreciation including on R & D Assets, amortisation and impairment Deferred tax asset on account of Provision for leave encashment Provision for Gratuity Net deferred tax liability b) As at 31.03.2008 Rupees in Crores 59.01 1.29 0.36 57.36 As at 31.03.2007 Rupees in Crores 53.07 1.16 0.72 51.19

10.

No credit for deferred tax assets is taken in the consolidated financial statements of the loss making foreign subsidiaries since in the opinion of the Management there is no virtual certainty supported by convincing evidence to assess fairly the future business prospects and the likely tax assessments. Goodwill representing excess of cost of investment over the share of equity arising on acquisition of the subsidiary Ipca Pharma (Australia) Pty Ltd. during the year of Rs.0.04 crore has been fully charged to the General Reserve in the consolidated Accounts. The diminution in the value of investment in shares of Mangalam Drugs & Organics Ltd. determined on the basis of market price as at 31st March 2008 is not considered permanent based on the intrinsic value of the company. Consequently no provision for diminution in the value of investment is considered necessary. The Company has made an open offer for the acquisition of equity shares from the shareholders of Tonira Pharma Ltd. @ Rs.29/- per share aggregating to Rs.6.91 Crores. As on the date of Balance Sheet, offer was open and the Company has deposited an amount of Rs.1.85 Crores in an escrow account in accordance with extant SEBI guidelines. The Company has a Joint Venture Company in Middle East by name of Activa Pharmaceuticals (FZC), SAIF Zone, Sharjah in which it has a control of 50%. The Proportionate share of the Company, as on 31st March 2008 included under the respective heads of the assets, liabilities, income, expenditure, contingent liability and capital commitments of the Joint Venture company in the consolidated financial statements is as follows : (Rupees in crores) Description Assets Non Current Assets Current Assets Accumulated Losses Total Liabilities Share Capital Reserves & Surplus Current Liabilities (Previous year Rs.8,603) Provisions Total Income Sales and Other Income Expenditure Cost of Sales Other Expenses Total Contingent Liabilities Capital Commitments 31.03.2008 0.01 2.30 2.31 0.43 0.59 1.28 0.01 2.31 9.49 8.37 0.31 8.68 31.03.2007 0.02 0.87 0.89 0.43 0.45 0.01 0.89 12.80 9.50 1.18 10.68 -

11.

a) b)

c)

12.

Interest in Joint Venture : a)

70

b)

The above figures for the year ended 31st March, 2008 are extracted from the audited financial statement of Activa Pharmaceuticals (FZC) SAIF Zone, Sharjah for the year ended 31st December, 2007 and unaudited accounts for the period 1st January, 2008 to 31st March, 2008 as certified by the management. The Compensation Committee of the Board at its meeting held on 29th October,2007 has granted further 1,10,000 options to the selected employees of the Company under Ipca Laboratories Employees Stock Option Scheme 2006 (ESOS). Each Option is convertible into one equity share of Rs.10/- each of the Company at a price of Rs.315/- per share, being the exercise price determined by the Compensation Committee. The options granted would be vested over a period of 4 years from the date of the grant. The company has considered the closing market price being Rs.619.35 per share on the date prior to the date of grant of options as per the fair value of shares in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines,1999 and has determined the intrinsic value of each option at Rs.304.35. The total deferred compensation cost on account of this grant of Rs.3.35 crores computed in accordance with the SEBI guidelines is amortised over the vesting period. The impact of the same on its earning per share is disclosed separately as required by AS-20 on Earnings Per Share. The details of options as at 31st March,2008 are as under: Options At the beginning of the year Granted Exercised Forfeited / lapsed Outstanding at the end of the year Outstanding exercisable at the end of the year Exercise price for outstanding options Grant I Grant II 31.03.2008 3,72,000 1,10,000 88,750 39,750 3,53,500 Rs.200 Rs.315 31.03.2007 3,99,000 27,000 3,72,000 Rs.200 -

13.

a)

b)

c)

d)

ESOS Commitment Deposit: Amount received from employees/directors on grant of stock options pending exercise/allotment of shares is shown as share application money pending allotment.

14.

a)

From the current year, the Company has assessed its liability for leave travel assistance (LTA) which is accrued to the employees as part of their service condition. The amount pertaining to the liability accrued as on 1st April,2007 is Rs.0.69 crore which has been charged to the General Reserve in accordance with the transitional provision of AS-15 Employees Benefits and the liability relating to the service rendered in the current year of Rs.1.42 crores is debited to the Profit and Loss Account. Consequently profit before tax for the current year is lower to the extent of Rs.1.42 crores and the opening balance of the reserve is lower by Rs.0.69 crore. As per Accounting Standard -15 Employee Benefits and as defined in the accounting standard the summarised components of net benefit expense recognized in the profit and loss account and the funded status and amounts recognized in the balance sheet are given herein below: (Rupees in Crore) Particulars I Change in Benefit Obligation Liability at the beginning of the year. Interest cost. Current Service Cost. Past Service Cost (Non Vested Benefit) Past Service Cost (Vested Benefit) Benefit Paid Actuarial (gain)/loss on obligations Curtailments and Settlements Liability at the end of the year Fair Value of Plan Assets Fair Value of Plan Assets at the beginning of the year Expected Return on Plan Assets Contributions Benefit paid Actuarial gain/(loss) on Plan Assets Fair Value of Plan Assets at the end of the year Total Actuarial gain/(loss) to be Recognised. 3.94 0.50 1.88 (0.65) 5.67 1.18 (0.34) Gratuity 2007-08 5.73 0.43 0.83 (0.65) 0.51 6.85 Leave Encashment 2007-08 3.42 0.29 0.84 (1.10) 0.34 3.79

b)

II.

71

(Rupees in Crore) Particulars III. Actual Return on Plan Assets Expected Return on Plan Assets Actuarial gain/(loss) on Plan Assets Actual Return on Plan Assets IV. Amount Recognised in the Balance Sheet. Liability at the end of the year Fair Value of Plan Assets at the end of the year. Difference Unrecognised Past Service Cost. Amount Recognised in the Balance Sheet. V. Expenses Recognised in the Income Statement Current Service Cost Interest Cost. Expected Return on Plan Assets Net Actuarial (gain)/loss To Be Recognised Past Service Cost (Non Vested Benefit) Recognised Past Service Cost (Vested Benefit) Recognised Effect of Curtailment or Settlements. Expense Recognised in Profit and Loss Account VI. Balance Sheet Reconciliation Opening Net Liability Expense as above Employers Contribution Effect of Curtailment or Settlements Amount Recognised in Balance Sheet VII Note: i) ii) Actuarial Assumptions Discount Rate Current 1.79 1.27 (1.88) 1.18 8% 3.42 1.47 (1.10) 3.79 8% 0.83 0.43 (0.50) 0.51 1.27 0.84 0.29 0.34 1.47 6.85 5.67 1.18 1.18 3.79 3.79 0.50 0.50 Gratuity 2007-08 Leave Encashment 2007-08

15. 16. 17. 18.

Employers contribution includes payments made by the Company directly to its past employees. 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. ii) The Companys Gratuity fund is managed by Life Insurance Corporation of India. The plan assets under the fund are deposited under approved securities. Sundry debtors are unsecured and considered good. The Company has filed claims for loss on account of fire at the manufacturing locations which is fully insured and has passed accounting entries consequently. The said claims are under survey and pending for acceptance by the insurance company. The entire operations of the Company relate to only one segment viz. pharmaceuticals. As such, there is no separate reportable segment under Accounting Standard - 17 on Segment Reporting. Related Party Disclosure as required by Accounting Standard 18 issued by the Institute of Chartered Accountants of India Relationships: A) Entities where control exists Shareholders of Ipca Laboratories Ltd. Kaygee Investments Pvt. Ltd. Chandurkar Investments Pvt. Ltd. Others - Associate Exon Laboratories Pvt. Ltd. CCPL Software Pvt. Ltd. Ipca Traditional Remedies Pvt. Ltd. B) Key Management Personnel Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain

Managing Director Managing Director Executive Director

72

C)

D)

Associates Halewood Laboratories Pvt. Ltd. Harleystreet Pharmaceuticals Ltd. Makers Laboratories Ltd. Mexin Medicaments Pvt. Ltd. Paschim Chemicals Pvt. Ltd. Other Related Parties (Entities in which Directors or their relatives have significant influence) Nipra Industries Pvt. Ltd. Keymed Oscar Industries Priti Packaging Pvt. Ltd. Nipra Drums Pvt. Ltd. Mr. Pranay Godha Mrs. Usha P Godha . Vandhara Resorts Pvt. Ltd. Jain Packaging Pvt. Ltd. Great Heights Trade Lines Pvt. Ltd.

Transactions with Related Parties (Rupees in Crores) Description Purchase of Goods & Services (Previous Year) Sale of Goods & Services (Previous Year) Interest Received (Previous Year) Purchase of Fixed Assets (Previous Year) Sale of Fixed Assets (Previous Year) Excise Duty, Rent & other Expenses (Previous Year) Rent Income (Previous Year) Net Loans & Advances Given / (Recovered) (Previous Year) Remuneration to Directors (Previous Year) Salary (Previous Year) Balances as on 31/03/08 Receivables Payables Balances as on 31/03/07 Receivables Payables 4.57 1.66 3.58 0.79 0.27 8.15 2.72 4.68 1.97 4.88 1.94 0.12 9.56 4.03 Entities where control Exists 21.43 10.10 0.07 0.09 0.03 0.14 0.07 0.01 0.04 0.11 4.57 Key Management Personnel 3.83 3.32 Associates 25.36 20.30 4.88 3.24 0.03 0.02 0.10 0.28 0.05 0.03 2.22 5.49 0.03 1.04 (1.36) Other Related Parties 2.24 2.19 0.23 0.21 0.20 0.05 Total 49.03 32.59 4.95 3.24 0.03 0.02 0.19 0.31 0.19 0.10 2.46 5.74 0.03 1.15 3.21 3.83 3.32 0.20 0.05

73

Disclosure in respect of transactions which are more than 10% of the total transactions of the same type with related parties during the year. (Rupees in crores) 2007-08 Purchase of Goods & Services: Exon Laboratories Pvt. Ltd Halewood Laboratories Pvt. Ltd Harleystreet Pharmaceuticals Ltd Makers Laboratories Ltd Paschim Chemicals Pvt. Ltd Sale of Goods & Services: Makers Laboratories Ltd Purchase of Fixed Assets: Exon Laboratories Pvt. Ltd Makers Laboratories Ltd Paschim Chemicals Pvt. Ltd Sale of Fixed Assets: Exon Laboratories Pvt. Ltd Makers Laboratories Ltd. Paschim Chemicals Pvt. Ltd Excise Duty, Rent & Other Exp.: Exon Laboratories Pvt. Ltd Halewood Laboratories Pvt. Ltd Harleystreet Pharmaceuticals Ltd Makers Laboratories Ltd Rent Income: Makers Laboratories Ltd Halewood Laboratories Pvt. Ltd 19. 21.43 2.59 3.69 5.54 12.42 3.42 0.09 0.01 0.09 0.14 0.05 0.78 1.43 (0.01) 2006-07 10.10 4.33 4.05 4.88 5.63 3.07 0.03 0.06 0.21 0.07 0.01 0.02 0.04 1.70 1.42 2.36 0.02 0.01 (Rupees in Crores) Sr. Particulars no. a. b. c. d. e. f. g. 20. Leave Encashment Taxation Proposed Dividend Tax on Proposed dividend Provision for gratuity Leave Travel Assistance Provision for wage revision under negotiation Balance as on 1st April 2007 3.42 71.94 10.00 1.70 2.12 Additions during the year 1.47 29.88 11.29 1.92 0.94 2.11 0.17 Amounts paid / reversed during the year 1.10 10.00 1.70 1.88 Balance as on 31st March 2008 3.79 101.82 11.29 1.92 1.18 2.11 0.17 Net Loans & Advances Given/ (Recovered): Harlystreet Pharmaceuticals Ltd. Exon Laboratories Pvt. Ltd Paschim Chemicals Pvt. Ltd Halewood Laboratories Pvt. Ltd. Remuneration to Directors: Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain Salary: Mr. Pranay Godha Receivables: Exon Laboratories Pvt. Ltd Paschim Chemicals Pvt. Ltd Payables: Makers Laboratories Ltd Mr. Premchand Godha Mr. M. R. Chandurkar Mr. A. K. Jain 2007-08 0.11 0.74 0.27 2.10 0.78 0.95 2006-07 0.20 4.57 (2.06) 0.50 1.23 1.25 0.84

0.20 4.68 3.40 1.94 1.42 0.08 0.47

0.05 4.57 2.66 0.73 0.62 0.62 0.41

Disclosure under Accounting Standard -29 Provisions, Contingent Liabilities and Contingent Assets.

Earning per share The earning per share is calculated by dividing the profit after tax by weighted average no. of shares outstanding for basic & diluted EPS. Sr. No. a. Particulars 2007-08 2006-07 Profit after tax before Exceptional Item (Rs. In Crores) 135.93 125.33 No. of shares outstanding 2,50,88,750 2,50,00,000 Weighted Average no. of shares outstanding (Nos.) - Basic 2,50,30,796 2,50,00,000 2,51,10,170 2,50,88,145 Weighted Average no. of shares outstanding (Nos.) - Diluted 10 10 Nominal value of equity share (Rs.) Earning per share before Exceptional Item (Rs.) Basic 54.31 50.13 Diluted 54.13 49.96 135.93 126.17 b. Profit after tax and exceptional Items (Rs. In Crores) No. of shares outstanding 2,50,88,750 2,50,00,000 Weighted Average no. of shares outstanding (Nos.) - Basic 2,50,30,796 2,50,00,000 2,51,10,170 2,50,88,145 Weighted Average no. of shares outstanding (Nos.) - Diluted Nominal value of equity share (Rs.) 10 10 54.31 50.47 Earning per share after Exceptional Item (Rs.) Basic 54.13 50.29 Diluted Note :- The weighted average no. of shares is computed on the basis of the date of allotment being 26th November,2007 for the new shares issued during the year.

74

21. 22.

In the opinion of the Board of Directors all the current assets, loans & advances have value on realisation atleast of an amount equal to the amount at which they are stated in the Balance Sheet. Disclosure under Accounting Standard - 19 Leases, Issued by the Institute of Chartered Accountants of India: a. The Company has taken various residential / godowns / office premises (including Furniture and Fittings if any) under leave and licence agreements for periods which generally range between 11 months to 3 years. These arrangements are renewable by mutual consent on mutually agreed terms. Under some of these arrangements the Company has given refundable security deposits. The lease payments are recognized in the Profit and Loss Account under Rent. Ipca Pharmaceuticals Inc. (USA), the wholly owned subsidiary of the Company, has two lease commitments for its office and guest house under non- cancelable operating lease, which expires on February 2011 & February 2010 respectively. The total lease commitments are Rs.0.73 crore (USD 1,83,385) (Previous year Rs.0.27 crore (USD 62,287)). Ipca Laboratories UK Limited, the wholly owned subsidiary of the Company, has annual commitments under non-cancelable operating lease. Lease commitments between one and five years is Rs.0.26 crore (UK Pound 32,470) (Previous year Rs.0.25 crore (UK Pound 29,666)). The Company has entered into various derivatives transactions, which are not intended for trading or speculative purpose but to hedge the export receivables including future receivables and foreign currency loan interest rate risks. The Company as on 31st March 2008 has the following derivatives instruments outstanding. Sr. No Type of Transaction Purpose Amount Outstanding (In Million) 31.03.2008 i. ii. iii. iv. v. vi. b) USD Put Options (Purchase) USD Call Option (Sold) GBP Put Options (Purchase) GBP Call Options (Sold) Constant Maturity Swap JPY/ USD full Currency swap To hedge export receivable To hedge export receivable To hedge export receivable To hedge export receivable To reduce the Interest cost To hedge the currency risk and interest rate risk of JPY Loan USD 7.00 USD 7.75 GBP 6.00 GBP 12.29 JPY 1259.95 (outstanding) 31.03.2007 USD 24.25 USD 33.85 USD 6.00 (Loan Amt) JPY 608.30 (outstanding)

b.

c.

23.

a)

In respect of the aforesaid derivative contracts, although there are some contracts in which the mark to market value is a loss of Rs.0.45 crore, the aggregate mark to market value of all these derivative contract results in gain to the Company which it has not recognised since the underlying transactions are of a future date. The Company has following unhedged foreign exchange risk. Sr.No i ii. iii. Term loan Short term working capital loan/PCFC Sundry creditors for imports Particulars 31.03.2008 USD (Million) 35.30 20.70 6.91 31.03.2007 USD (Million) 28.00 16.00 5.32

c)

d)

The Company has an annual average exports of USD 134 Million of which the Company has partially hedged its receivables by the aforesaid options disclosed in para (a) above. The unhedged currency risk detailed in para (c) ii & (c) iii above has a natural hedge against the unhedged exports. Foreign currency term loans outstanding as on 31st March, 2008 carries floating USD Libor interest rate risk and are unhedged.

e) 24.

The figures of the subsidiaries including the step down subsidiaries & proportionate share in Joint Venture are appropriately grouped along with the figures of the parent Ipca Laboratories Ltd.

75

25.

Details of rounded off amounts The financial statements are represented in Rupees crore. Those items which were not represented in the financial statement due to rounding off to the nearest Rs. Crore are given below. i) Balance Sheet items Refer Cash flow Statement Description Purchase/Redemption of Mutual fund units (Net) Provision for diminution in value of investment Schedule 4 Impairment Effluent treatment plant Vehicles Depreciation- Sales, write back, adjustments Effluent treatment plant Schedule 5 Government Securities National Saving Certificates 35,245 11,961 32,229 26,000 35,245 11,961 26,000 As at 31st March 2008 -(*) 11,207 (Rupees) As at 31st March 2007 14,666 -

ii) Profit & Loss Account items Profit on sale of investments (*) Current year figures are represented in financial statement. (Rupees) Description The Associates of the Company and the ownership Interest : Paschim Chemicals Pvt. Ltd: Original cost of Investment Sales of goods and services - Associates Excise duty, Rent and other expenses - Other Related parties Sale of fixed Assets - Others (entities where control exists) Excise duty, Rent and other expenses - Others (entities where control exists) Excise duty, Rent and other expenses - Associates Excise duty, Rent and other expenses - Joint Venture (entities where control exists) Year ended 31.03.2008 Year ended 31.03.2007 300 71,380

iii) Notes to the Accounts Refer Note No. 5

Note No. 6

6,690 1,864 4,739 38,453 (22,539) 12,340 (30,000)

6,690 257 6,98,183 3,60,436 52,564 (6,66,948)

26.

Previous years figures have been regrouped and rearranged wherever necessary

As per our Report of even date attached For Natvarlal Vepari & Co. Chartered Accountants N. Jayendran Partner Mumbai 29th May, 2008

Harish P Kamath . Company Secretary

For and on behalf of the Board of Directors R. S. Hugar Chairman Premchand Godha Managing Director A. K. Jain Executive Director T. Ramachandran Director Babulal Jain Director Dr. V. V. Subba Rao Director V. A. Gore Director

76