Aurobindo Pharma

The Directors are pleased to present the Twenty First Annual Report of
 the Company together with the Audited Accounts for the financial year
 ended March 31, 2008.
 
 FINANCIAL RESULTS
 
                                                        Rs. Millions
                                               2007-2008    2006-2007
 
 Gross Sales                                     23511.2      19797.2
 
 Profit before Depreciation, Interest and Tax
 including Extraordinary Income                   4355.5       3217.3
 
 Depreciation/Amortisation                         746.0        718.4
 
 Interest (Net)                                    161.1        187.3
 
 Profit before Tax                                3448.4       2311.6
 
 Provision for Tax/Deferred Tax                    540.6         20.8
 
 Net Profit                                       2907.8       2290.8
 
 Balance brought forward from previous year       3207.9       1303.1
 
 Balance of Profit and Loss Account taken 
 over on amalgamation                                -            0.1
 
 Balance available for appropriation              6115.7       3594.0
 
 Appropriations
 
 Dividend on Equity Shares                         175.7        133.4
 
 Tax on Dividend                                    29.8         22.7
 
 Transfer to General Reserve                       290.8        230.0
 
 Balance carried to Balance Sheet                 5619.4       3207.9
 
 DIVIDEND
 
 Your Directors have proposed a dividend of 65% on the equity shares of
 Rs.5 each for the financial year 2007-08 against 50% paid in the
 previous year.
 
 REVIEW OF OPERATIONS
 
 Members would be happy to know that the revenues and net earnings were
 the highest in the history of the Company.  Revenues were higher by
 18.76% at Rs.23511.2 million over the previous year, while the net
 earnings were Rs.2907.8 million as compared to Rs.2290.9 million in the
 previous year. The impact of the volatility in the dollar affected both
 the top and bottom line, despite the hedging done to cushion the
 movements.
 
 The financial results, however, do not reflect all the strides the
 business has made and the improvements in the product mix.  Most of the
 initiatives have been in the nature of creating a marketing
 infrastructure as well as launching of large product portfolio built
 over a decade of R&D efforts.
 
 Your Company made significant progress during the year under review
 gaining market presence, volume growth and visibility for its
 formulation products in all the addressable markets. Larger number of
 products were launched and there was good traction for most of them.
 Formulation revenues were higher by approximately 40% over the previous
 year and more important, a platform was created for future growth. Your
 Companys growth in U.S. and Europe was heartening considering the
 competitive pressures.
 
 Marketing efforts during the year were focused on widening the reach as
 well as deepening them in the established markets.  Indeed, for several
 products your Company improved market shares both in the U.S. and in
 Europe. Your Companys ARV products have gained leadership in the
 market and are now the preferred source for prestigious agencies under
 the PEPFAR and WHO programs.
 
 Generally, the prices tended to be lower primarily on account of the
 competitive pressures, as well as due to increasing efforts by several
 governments to procure drugs under the health care programs. There was
 a marked preference for the generic products, a market segment in which
 your Company has been successful.
 
 The challenges of the market were managed better by Aurobindo because
 of the vertically integrated manufacturing platform.  The ability to
 support formulations from the fermentation stage in some of the key
 products, and the strategically built manufacturing strength in active
 pharma ingredients added to certainty of supplies, improved
 flexibility, shortened the time to market and kept the costs lower.
 Orders from customers with short lead times were accepted and executed.
 
 Your Company also coped satisfactorily with the volatility in the raw
 material availability and price movements. Productivity improvements
 and better yields helped to moderate the price impact. The facility at
 China showed huge improvement with better quality strains and larger
 production. The year also saw higher capacity utilization at all the
 manufacturing facilities while maintaining top end product quality.
 
 OUTLOOK
 
 The Company has begun to see the benefits of its investment in R&D,
 technology and manufacturing facilities. There are larger product
 approvals on hand, and your Company is able to transfer the technology
 and commercialise the products at significantly rapid rate. The
 timelines from approval to launch in the market have been reduced,
 offering enormous strength to the marketing team. The pipeline is being
 further strengthened with the recent approvals and large product
 portfolio on hand.
 
 Your Company has a well structured marketing team that is able to
 convert approvals into invoicing. The investment made in the market
 place and the expertise of the team will be leveraged to differentiate
 Aurobindo from competition.  Channels to market have been broadened to
 increase revenue.  These efforts allow the marketing team to better
 anticipate opportunities and shifts in the market and understand
 changing customer and market needs. With such knowledge, your Company
 is able to effectively manage the product mix to achieve highest
 possible market share and margins.
 
 At the same time, your Company is reducing the time it takes to realize
 returns by participating aggressively in the most advantageous markets
 and generating revenue more quickly.  Your Company uses fewer resources
 and spends less money to generate more value than the competition.
 
 At the market level, Aurobindo is building long term relationships with
 customers who rely on the Company for consistent supply of high quality
 products and services. All such efforts are creating sustainable long
 term growth and a more focused, more strategic and more profitable
 company of the future.
 
 RESEARCH & DEVELOPMENT
 
 The strengths of research at Aurobindo are primarily in its ability to
 offer what the market wants. Your Company has filed and received
 approvals for a very large number of products across several countries.
 With its research based chemistry capabilities and expertise in
 developing various dosage forms, your Company has product offers in six
 key therapeutic segments that have demand pull.
 
 The R&D Centre continues to file fresh ANDAs on an on-going basis, and
 strives to file for Paragraph IV challenges and seeks first to file
 status. Your Company has a technically competent team which ensures
 that all process controls and compliances are met.
 
 As soon as the approvals are received, your Company will continue to
 scale up and commercialize them. Product basket will continue to grow
 and your Company is presently focused on offering high value, high
 growth products.
 
 INVESTMENTS
 
 Your Company made fresh investments during the year to add value to its
 business operations. The details of additional investments
 made during the financial year 2007-2008 were as follows:
 
                                                      Rs. Millions
 Subsidiary                                              Country
 
 Helix Healthcare B.V.                               The Netherlands
 
 Aurobindo Pharma Produtos Farmaceuticos Limitada        Brazil
 
 APL Holdings (Jersey) Limited                           Jersey
 
 Aurobindo Shanghai (Trading) Co. Limited                China
 
 APL Reasearch Centre Limited                            India
 
 Form                             Amount
 
 Equity                           299.4
 
 Equity                             2.1
 
 Equity                            12.2
 
 Equity                            20.5
 
 Equity                             1.0
 
 SUBSIDIARIES/JOINT VENTURES
 
 The reports and accounts of the subsidiary companies are not annexed to
 this Report. The Company has obtained in writing an exemption in this
 regard from the relevant authority. A statement pursuant to Section
 212(8) of the Companies Act, 1956 is annexed.
 
 Annual accounts of the subsidiary companies are kept for inspection by
 any investor at the Registered Office of your Company as well as at the
 Registered Office of the respective subsidiary companies. Any investor
 interested in a copy of the accounts of the subsidiaries may write to
 the Company Secretary at the Registered Office of the Company.
 
 ENVIRONMENT & SAFETY
 
 Your Company is giving utmost priority to the environmental
 considerations. The Company is continuously upgrading effluent
 treatment facilities and waste disposal methods to safeguard the
 environs.
 
 Regular safety audits are carried out in the plants. No major incidents
 have occurred at any of the plants that have led to any environmental
 liabilities.
 
 Your Company as a responsible corporate citizen has been not only
 protecting the health of the employees but also safeguarding the
 environment. Health and safety of the employees are primary concern,
 and adequate training inputs as well as counseling are done to retain
 the awareness levels of the operating staff. Dedicated officials have
 been vested with the authority to follow through to ensure that
 employees protect themselves and those around them.
 
 DIRECTORS
 
 Mr. Srinivas Lanka ceased to be Director due to his resignation from
 the Board of the Company w.e.f. October 17, 2007. The Board places on
 record its appreciation for the services rendered by him as a Director
 during his association with the Company.
 
 Mr. K. Ragunathan has been appointed as Additional Director of the
 Company during the year. As per Article 37 of the Articles of
 Association of the Company, the appointment of Mr. K. Ragunathan
 requires approval of the Members at the ensuing Annual General Meeting.
 
 In accordance with the provisions of the Companies Act, 1956, read with
 the Articles of Association of the Company, Dr. S. Bimal Singh and Dr.
 K. Ramachandran, Directors retire at the ensuing Annual General Meeting
 and being eligible offer themselves for re-appointment.
 
 A brief profile of Dr. S. Bimal Singh, Dr. K. Ramachandran and Mr. K.
 Ragunathan are provided in the Report on Corporate Governance.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to the provisions of Section 217 (2AA) of the Companies Act,
 1956 as amended, the Board of Directors confirms that in the
 preparation of the Profit and Loss Account for the year ended March 31,
 2008 and the Balance Sheet as at that date:
 
 i.  the applicable accounting standards have been followed;
 
 ii. had 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 as
 at the end of the financial year and of the profits of the Company for
 the year;
 
 iii. proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the Company and for
 preventing and detecting fraud and other irregularities; and,
 
 iv. the annual accounts have been prepared on a going concern basis.
 
 CORPORATE GOVERNANCE
 
 The certificate of the Practicing Company Secretaries M/s. S.
 Chidambaram & Associates confirming compliance of conditions of
 Corporate Governance as stipulated under Clause 49 of the Listing
 Agreement with the stock exchanges is annexed.
 
 AUDITORS
 
 M/s. S.R. Batliboi & Co., Chartered Accountants are not seeking
 re-appointment as Statutory Auditors of the Company.  M/s. S.R.
 Batliboi & Associates, Chartered Accountants, have expressed their
 willingness to act as Statutory Auditors of the Company. The Audit
 Committee and the Board of Directors recommend M/s. S.R. Batliboi &
 Associates as Statutory Auditors of the Company for the financial year
 2008-2009.
 
 COST AUDITORS
 
 M/s. Sagar & Associates, Cost Accountants, have been re- appointed as
 Cost Auditors of the Company with the consent of the Central Government
 of India to conduct cost audit of both the bulk drug and formulations
 divisions of the Company for the year 2007-2008.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.
 
 Information in accordance with the provisions of Sec. 217 (1) (e) of
 the Companies Act, 1956 read with the Companies (Disclosure of
 Particulars in the Report of Board of Directors) Rules, 1988 is given
 in Annexure-I forming part of this Report.
 
 FIXED DEPOSITS
 
 Your Company has not accepted any fixed deposits during the year under
 review. As such no amount of principal or interest was outstanding on
 the date of the Balance Sheet.
 
 HUMAN RESOURCES
 
 A knowledge company is built on the strength of the people.  Aurobindo
 has been consciously adding skilled and experienced professionals on a
 regular basis. In the year under review, resources were added to the
 technical and research teams.  They function in a decentralised
 environment, and are encouraged to produce the best results. It is an
 empowered team.
 
 Aurobindo is a result oriented organisation, with tasks and milestones
 set in consultation with the team members. Results are achieved always
 on time, and the satisfaction of challenges and being part of a winning
 team motivates the staff.
 
 Your Company recognises the need for formal human resources planning
 and strategy, and has initiated steps to create systems and procedures
 that will further enhance the work environment.
 
 Your Company values the resources and will add to their satisfiers.
 
 There was cordial relationship with employees at all levels.
 
 PARTICULARS OF EMPLOYEES
 
 The particulars of employees as required to be disclosed in accordance
 with the provisions of Sec. 217 (2A) of the Companies Act, 1956 and the
 Companies (Particulars of Employees) Rules, 1975 as amended are annexed
 to the Directors Report. However, as per the provisions of Sec. 219
 (l)(b)(iv) of the Companies Act, 1956, the Report and Accounts are
 being sent to all the shareholders of the Company excluding the
 aforesaid information. Any shareholder interested in obtaining such
 particulars may write to the Company Secretary.
 
 EMPLOYEE STOCK OPTION SCHEME
 
 At the Annual General Meeting of the Company held on July 31, 2004 the
 Memebrs approved formulation of Employee Stock Option Scheme - 2004
 (ESOP 2004) for the eligible employees and Directors of the Company
 and its subsidiaries.
 
 Further, the Members at the Annual General Meeting of the Company held
 on September 18, 2006 approved formulation of Employee Stock Option
 Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of
 the Company and its subsidiaries.
 
 During the year 23000 options were granted under ESOP- 2006.  Under
 ESOP - 2004, total of 42,060 options were exercised and 42,585 Equity
 Shares were issued and allotted (including 525 shares allotted for the
 options exercised last year) under the Scheme.
 
 Details of the options granted upto March 31, 2008 are set out in the
 Annexure-II to this Report, as required under Clause 12 of the
 Securities and Exchange Board of India (Employee Stock Options Scheme
 and Employee Stock Purchase Scheme) Guidelines, 1999.
 
 ACKNOWLEDGEMENTS
 
 Your Directors wish to place on record their appreciation and
 acknowledge with gratitude the support and co-operation extended by
 banks, financial institutions, central and state governments,
 customers, medical fraternity and others and thank the shareholders for
 their continued confidence reposed in the Company.
 
                                          For and on behalf of the Board
 
 Hyderabad                                   P. V. RAMPRASAD REDDY
 June 18, 2008                                      Chairman