It gives me much pleasure to extend to all of you here this afternoon a
cordial welcome to this, the 22nd Annual General Meeting of your
The Directors' Report and the Audited Accounts for the year ended 31st
March, 2001 have been with you for some time. With your kind
permission, I will take them as read. The Annual Report, you will have
noticed, contains some useful information by way of graphics, which, it
is hoped, will enable shareholders to obtain a better perspective of
your Company and make a better assessment of its overall performance.
Incidentally, this is the first Annual Report of the company bearing
its new name.
INCREASE IN SHARE HOLDING OF ASTRA PHARMACEUTICALS AB, SWEDEN AND
CHANGE OF NAME
As you know, Astra Pharmaceuticals AB, Sweden (Astra) acquired
earlier this year all of the 25.% equity shareholding in the Company of
IDL Industries Ltd., (IDL), its co-promoter. With this acquisition,
your Company has become a direct subsidiary of Astra and an indirect
subsidiary of AstraZeneca Plc.
Astra has also acquired a further 4.99%, shares in the Company. As a
result, Astra's shareholding in the Company is presently 56.49% .
At the Extra-Ordinary General Meeting of the Company held on 29th
March, 2001, shareholders were pleased to approve the change of the
name of the company from Astra-IDL Limited to AstraZeneca Pharma
India Limited, subject to the change being approved,by Central
Government. Government's approval having being obtained, a fresh
Certificate of Incorporation with the new name embodied therein was
issued by the Deputy Registrar of Companies, Karnataka, on 31st May,
2001, from which date the change of name became effective.
The growth rate of the Indian economy expressed in terms of gross
DOMESTIC product (DP) during the year 000-2001 declined to 5.2% from
6.4% during 1999-2000 and 6.6% during 1998-1999. This was in large
measure due to the poor performance of the agricultural and
manufacturing sectors. The agricultural sector grew by a mearge 0.2%
in 2000-2001 as against 0.7% in 1999-2000. The manufacturing sector
growth declined to 5.6% during 2000- 2001 compared to the previous
year's 6.8%. The services sector also experienced slowdown during
2000-2001. The growth was 9.1% compared to 10.1% in 1999-2000. The
capital markets, particularly the primary market, showed a depressed
trend during the year due to the economic slow down and serious
irregularities committed by certain market participants. The export
sector however manifested healthy growth during the year.
The Union Budget 2001-2002 introduced the second generation economic
reform, including bankruptcy and foreclosure laws, in addition to
providing Incentives for economic growth. The Export-Import Policy has
further liberalised the economy, at the same time providing adequate
protection to Indian industry and encouraging exports.
The overall macro-economic indicators such as low interest rates, good
export performance, comfortable balance of payments position and
increased foreign exchange reserves coupled with low core inflation,
are all conducive to the revival of growth in the economy. A
countrywide good monsoon as per expectations and meaningful progress on
economic reforms, particularly in the infrastructure sector, will be
key factors in the resurgence of the Indian economy.
The pharmaceutical industry is one of the vital sectors in the Indian
economy. It is probably ranked next only to the Information Technology
industry in terms of potential and degree of technology sophistication.
According to International Medical Statistic, an internationally
reputed market research agency, the Indian Pharmaceutical industry has
registered an annual growth rate of about 7% .
India is gradually positioning itself a global manufacturing centre for
the pharmaceutical industry, its main strengths being low costs allied
to excellent production quality, plus highly trained scientific and
other staff, language skills. a well-developed legal system and a
rapidly improving infrastructure. Coupled with the above, the Indian
government, earlier this year, decided that it would henceforth grant
automatic approval for foreign direct investment of up to 100% of
equity capital new pharmaceutical joint ventures (the previous ceiling
The Union Budget 2001-2002 has been well received by the pharmaceutical
sector. There has been no change in the excise duty structure; there is
an extension of the 150 percent weighted deduction to biotechnology,
clinical trial, filing patents and regulatory approvals. This would
encourage R&D in the pharmaceutical sector. The reduction in corporate
surcharge and dividend tax would also benefit subsidiaries of
The much awaited draft pharmaceutical policy was announced in June
2001. It has recommended price control on bulk drugs with a turnover
of over Rs. 200 million and 50% market share. In case of drugs with
turnover of between Rs. 50 to Rs. 200 million, a 90% share with a
single formulator will invite price controls. The pharmaceutical
industry would favour higher turnover limit in the range of Rs. 300 to
Rs. 350 million. The draft policy has proposed the removal of the
present provision limiting profitability of pharmaceutical companies.
The draft policy also specifies that in case of drugs which are not
included in the price control list, but are part of the essential drug
list or are used in national health programmes, the National
Pharmaceutical Pricing Authority (NPPA) will monitor the price
movement and consumption pattern. It has been. proposed that research
and development intensive companies who have achieved the 'gold
standard', should qualify for an additional cost of 5% of ex-factory
cost in determination of prices of scheduled formulations manufactured
by it. Exemption from price control would be provided for a 15 year
period to manufacturers producing new drugs developed through
indigenous R & D. Drugs and new delivery systems patented under the
Indian Patents Act, 1970 would also be eligible for exemption from
price control till expiry of the patent.
As you will have observed from the Notes to the Annual Accounts, there
has been a significant departure from the practice hitherto followed of
reporting the sales figures inclusive of excise duty and sales tax.
Henceforth, the sales figures reported shall be the net sales i.e.
excluding excise duty and sales tax. This, it is felt, reflects a truer
sales picture and is in line with AstraZeneca's worldwide practice.
The Company has provided for deferred taxation in the year under review
and also for earlier years. The deferred taxation provision has become
mandatory from 1st April 2001. Accordingly a sum of Rs. 29.11 million
has been provided as deferred tax liability for earlier years. For the
year under review, the treatment for deferred tax liability has
resulted in a asset of Rs. 8.86 million which has been used to offset
current year's provision. After so providing, the profit for the year
was Rs. 113.62 million.
The gross revenue comprising sales and other income increased from Rs
1,003.57 million to Rs. 1,117.34 million, despite stiff competition and
slowing down of the industrial growth rate.
You will be pleased to note that material cost as a percentage of sales
registered a further reduction of 2.8% over last year, despite the
erosion in the rupee value and additional customs duties. This was
achieved through a sustained thrust on import substitution, innovative
packaging design and improvements in vendor development of critical raw
Your Company continues to maintain its zero debt status. Its fixed
deposit programme was upgraded during the year to 'FAA+' by Credit
Rating Information Services of India Ltd. (CRISIL). The upgraded
rating will continue in force till 18th April, 2002.
Despite the Company's not too satisfactory performance during the year
under review, the Board has recommended a dividend of 40% i.e. at the
same level as last year. The Dividend will not suffer tax in the hands
of the shareholders.
On a brighter note,the year under review has been one where your
Company has been the proud recipient of several prestigious awards.
The Company's Formulation Plant won the prestigious Gold Award for
Quality Excellence. The Bulk Drugs Plant won the Silver Award. Your
Company also won the golden Peacock National Quality Award from The
Institute of Directors. It was adjudged third in the category of
'Large Manufacturing Organizations' across all industries in
recognition of the high quality practices followed in providing goods
and services to its customers.
NEW PRODUCT INTRODUCTIONS
With the Company's integration into the AstraZeneca Group, a
comprehensive review of the entire portfolio of the Company's products
is under way so as to gain a better understanding of the Company's
distribution network, the market and its trends. The lack of adequate
patent protection continues to be a significant inhibiting factor for
multinational companies to introduce major original research products
in India. However, steps are being taken to register a few AstraZeneca
products. The Formulation Development department is also currently
involved in developing products for the Maternal Health Care and
CURRENT YEAR'S PERFORMANCE
Your Company's performance during the past three months of the current
financial year has fallen short of expectations, showing a dip in sales
compared to the same period last year. This has been mainly due to
increased competition and a general sluggishness in secondary market
conditions. The Company is hopeful that the current scenario will show
improvement during the next six months; though the overall growth rate
for the year may not be of the same order a during the last two years.
MODERNISATION AND EXPANSION
In its continuing pursuit of enhancing the level of Good Manufacturing
Practices followed, a new monolithic flooring was laid in the Tablet,
Liquid and Aerosol departments of the Formulation Plant; The company
also undertook the upgradation of its Microbiology laboratory to meet
latest international regulatory norms. Another state-of-the-art
de-mineralised water plant with a loop system as per present USP norms
was commissioned in the Bulk Drugs plant at a cost of Rs. 4 million.
RESEARCH AND DEVELOPMENT
Your Company's R&D laboratory. recognised by the Department of
Scientific and Industrial Research, Government of India, continues to
actively pursue product innovation, process simplification, import
substitution, cost reduction and enhanced quality control.
Strengthening of R&D facilities will help contribute to further cost
reduction and successful introduction of new products.
In the coming years, the major thrust of R&D will be in the areas of
custom synthesis, synthesis of intermediate for phase-I and 11 clinical
Recognising the importance of R&D activities to the health and growth
of the Company, the expenditure on R&D during the year under review was
increased. The increased expenditure represented 4.27% of total sales
as compared 3.31% in the previous year. Your Company will continue to
make substantial investments in R&D activities.
CHANGE OF ACCOUNTING YEAR
The Companys Accounting Year, since its incorporation, has been April
to March of every year. Following the Company's integration into the
AstraZeneca Group which has resulted in it becoming an indirect
subsidiary of AstraZeneca Plc, your Directors have decided to change
the Company's Accounting Year from April to March to the calendar year,
namely, January to December, in line with the reporting requirements of
AstraZeneca Plc. Accordingly, the current financial year will be for a
nine months period only, i.e. April to December, 2001. The following
Accounting Years will be January to December of every year.
ENVIRONMENT PROTECTION AND SAFETY
A safe and healthy environment is integral to your Company's
operations. Your Company has a comprehensive Safety, Health and
Environment management policy embracing air, water and noise pollution
and disposal of waste. Every employee has a personal responsibility
for ensuring that quality and environment aspects are taken into
account in the production units as well as the laboratories. Efforts
are continuously being made to improve the environment by developing
and employing cleaner technology in all of the Company's activities.
The devastating earthquake in Gujarat earlier this year left thousands
dead and many more disabled an homeless. It was, by any standards, a
horrific disaster. The Company, on its part, contributed life saving
medicines though the Indian Drug Manufacturers Association. The
employees of your Company also willingly contributed a day's wages to
the Prime Minister's Relief Fund.
Your Company has also contributed towards the beautification of Hebbal
Lake. It organised a free medical check up camp at Kattigenahalli and
installed a solar powered Bus Stop at Bagalur Cross.
AstraZeneca celebrate, its Foundation Day on 1st of June every year.
Consequently, Foundation Day was also observed on 1st June, 2001 to
mark the change of name from Astra-IDL Limited to AstraZeneca Pharma
India Limited. The Foundation Day function in Bangalore was
inaugurated by the Hon'ble Chief Minister of Karnataka, Mr.S.M Krishna.
The function was well attended by employee,, the medical fraternity and
many distinguished guests.
Your Company's Marketing activities, including Medical Service, have
recently obtained ISO 9002 certain from Bureau Veritas Quality
International. This is a significant achievement and I am sure all of
you will join my colleague on the Board and me in congratulating the
management and employees at all level for this.
Following the expiry of the Memorandum of Settlement between the
Management and the Union representing the Professional Service
Representatives (PSRs), a fresh charter of demands is under
Employee relations at all levels continue to be cordial.
The current year represents an important milestone in the history of
your Company. It is the first year of the new century and also the new
millenium. It also marks the end of the long association with your
Company of IDL Industries Ltd.(IDL'), one of the two founder
promoters. the same time, it heralds the entry of your Company into the
AstraZeneca fold, an internationally renowned pharmaceutical Group; the
fourth largest in the world.
I wish to avail myself of this opportunity to thank IDL and its
erstwhile representatives on the Board of Directors of the company for
their contribution to the steady growth and development of your
Company. I also wish to extend a warm welcome to AstraZeneca and their
representatives on the Board of Directors of the Company. I am
confident that with AstraZeneca's experience, technological expertise,
knowledge of the pharmaceutical business and able management, your
Company will over time be one of the leading pharmaceutical companies
Last, but not the least, I thank all, my colleagues on the Board for
their continued support and wise counsel. The employees at all levels
merit highest appreciation for their strong commitment and devotion.
Their contribution has been as always, significant. Before I conclude,
my thanks go to you dear shareholders for the unfailing support, trust
and confidence you have throughout reposed, which will, I am certain,
be amply rewarded in the years ahead.
Place : Bangalore
Date : 09.07.2001