a. (i) Basis of preparation
 
 The financial statements have been prepared to comply in all material
 respects with the Accounting Standards, notified by the Companies
 (Accounting Standards) Rules, 2006 (as amended) and the relevant
 provisions of the Companies Act, 1956. The financial statements have
 been prepared under the historical cost convention except in case of
 assets for which provision for impairment is made and revaluation is
 carried out, on an accrual basis. The accounting policies have been
 consistently applied by the Company and are consistent with those used
 in the previous year except where a newly issued accounting standard is
 initially adopted or a revision to an existing accounting standard
 requires a change in accounting policy hitherto in use.
 
 For the purpose of administration of the employee stock option plans of
 the Company, the Company has established the Biocon India Limited
 Employee Welfare Trust (ESOP Trust). In accordance with the
 guidelines framed by the Securities and Exchange Board of India
 (SEBI), financial statements of the Company have been prepared as if
 the Company itself is administering the ESOP Scheme.
 
 (ii) Use of estimates
 
 The preparation of financial statements in conformity with generally
 accepted accounting principles requires management to make estimates
 and assumptions that affect the reported amounts of assets and
 liabilities and disclosure of contingent liabilities at the date of the
 financial statements and the results of operations during the reporting
 period. Although these estimates are based upon managements best
 knowledge of current events and actions, actual results could differ
 from these estimates.
 
 b.  Fixed assets and depreciation
 
 Fixed assets are stated at cost, except for revalued freehold land and
 buildings, which are shown at estimated replacement cost as determined
 by valuers less impairment loss, if any, and accumulated depreciation.
 The Company capitalises all costs relating to the acquisition and
 installation of fixed assets. Assets partly funded by third parties are
 capitalised at gross value and the funds so received are recorded as
 deferred revenue and amortised over the useful life of the assets.
 
 Fixed assets, other than freehold land, but including revalued
 buildings, are depreciated pro rata to the period of use, on the
 straight line method at the annual rates based on the estimated useful
 lives, or at the rates prescribed under schedule XIV of the Companies
 Act, 1956 whichever is higher as follows:
 
 Leasehold land on a lease-cum-sale basis are capitalised at the
 allotment rates charged by the Municipal Authorities. Leasehold
 improvements are being depreciated over the lease term or useful life
 whichever is lower. Used assets acquired from third parties are
 depreciated on a straight line basis over their remaining useful life
 of such assets.
 
 The depreciation charge over and above the depreciation calculated on
 the original cost of the revalued assets is transferred from the
 revaluation reserve to the profit and loss account.
 
 Assets individually costing less than Rs. 5 are fully depreciated in
 the year of purchase.
 
 c. Impairment of assets
 
 The carrying amounts of assets are reviewed at each balance sheet date
 if there is any indication of impairment based on internal/external
 factors. An impairment loss is recognised wherever the carrying amount
 of an asset exceeds its recoverable amount. The recoverable amount is
 the greater of the assets net selling price and value in use. In
 assessing value in use, the estimated future cash flows are discounted
 to their present value using a pre-tax discount rate that refects
 current market assessments of the time value of money and risks
 specific to the asset. After impairment, depreciation is provided on
 the revised carrying amount of the asset over its remaining useful
 life. A previously recognised impairment loss is increased or reversed
 depending on changes in circumstances. However the carrying value after
 reversal is not increased beyond the carrying value that would have
 prevailed by charging usual depreciation if there was no impairment.
 
 d.  Intangible assets
 
 Intellectual Property rights/marketing rights
 
 Costs relating to intellectual property/marketing rights are
 capitalised and amortised on a straight-line basis over the period of
 expected future sales from the use of the said intangible asset, i.e.
 over their estimated useful lives not exceeding ten years.
 
 Computer Software
 
 Software which is not an integral part of the related hardware is
 classified as an intangible asset and is being amortised over a period
 of three - five years, being its estimated useful life.
 
 Research and Development Costs
 
 Research and development costs, including technical know-how fees,
 incurred for development of products are expensed as incurred, except
 for development costs which relate to the design and testing of new or
 improved materials, products or processes or for existing products in
 new territories which are recognised as an intangible asset to the
 extent that it is expected that such assets will generate future
 economic benefits. Research and development expenditure of a capital
 nature is added to fixed assets. Development costs carried forward is
 amortised on a straight line basis, over the period of expected future
 sales from the related project, not exceeding ten years.
 
 The carrying value of intellectual property/marketing rights and
 development costs is reviewed for impairment annually when the asset is
 not yet in use, and otherwise when events or changes in circumstances
 indicate that the carrying value may not be recoverable.
 
 e.  Inventories
 
 Inventories are valued as follows:
 
 Raw materials and packing   Lower of cost and net realizable value.
 materials                   However, materials and other items held 
                             for use in the production of inventories 
                             are not written down below cost if the
                             finished products in which they will be
                             incorporated are expected to be sold at 
                             or above cost. Cost is determined on a 
                             first-in-frst-out basis. Customs duty 
                             on imported raw materials (excluding 
                             stocks in the bonded warehouse) is 
                             treated as part of the cost of the 
                             inventories.  
 
 Work-in-progress and        Lower of cost and net realizable value. 
 finished goods              Cost includes direct materials and labour 
                             and a proportion of manufacturing 
                             overheads based on normal operating
                             capacity. Cost of finished goods includes 
                             excise duty.  
 
 Traded goods                Lower of cost and net realizable value. 
                             Cost includes the purchase price  and 
                             other associated costs directly incurred 
                             in bringing the inventory to its present 
                             location.
 
 Net realizable value is the estimated selling price in the ordinary
 course of business, less estimated costs of completion and estimated
 costs necessary to make the sale.
 
 f. Revenue recognition
 
 Revenue is recognised to the extent that it is probable that the
 economic benefits will flow to the Company and the revenue can be
 reliably measured.
 
 (i) Revenue is recognised when the significant risks and rewards of
 ownership of the goods have passed to the buyer and are recorded net of
 excise duty, sales tax and other levies. For the purposes of disclosure
 in these financial statements, sales are refected gross and net of
 excise duty in the profit and loss account.
 
 (ii) The Company enters into certain dossier sales, licensing and
 supply agreements relating to various products. Revenue from such
 arrangements is recognised upon completion of performance obligations
 or on a proportional performance basis over the period the
 
 Company performs its obligations, under the terms of the agreements.
 Proportionate performance is measured based upon the efforts incurred
 to date in relation to the total estimated efforts to complete the
 contract. The Company monitors estimates of the total contract revenue
 and cost on a routine basis throughout the contract period. The
 cumulative impact of any change in estimates of the contract revenue or
 costs is refected in the period in which the changes become known. In
 the event that the loss is anticipated on a particular contract,
 provision is made for the estimated loss.
 
 (iii) Interest income is recognised on an accrual basis. Dividends are
 accounted for when the right to receive the payment is established.
 
 g. Investments
 
 Investments that are readily realisable and intended to be held for not
 more than twelve months are classified as current investments. All
 other investments are classified as long-term investments. Long-term
 investments are stated at cost. However, provision for diminution in
 value is made to recognise a decline other than temporary in the value
 of the investments. Current investments are carried at lower of cost
 and fair value and determined on an individual investment basis.
 
 h. Retirement benefits
 
 (i) Retirement benefit in the form of Provident Fund is a defined
 contribution scheme and the contributions are charged to the Profit and
 Loss Account of the year when the contributions to the government funds
 are due.
 
 (ii) Gratuity liability is a defined benefit obligation and is provided
 for on the basis of an actuarial valuation on projected unit credit
 method made at the end of each financial year. The gratuity benefit of
 the Company is administered by a trust formed for this purpose through
 the group gratuity scheme.
 
 (iii) Short-term compensated absences are provided for based on
 estimates. Long-term compensated absences are provided for based on
 actuarial valuation made at the end of each financial year. The
 actuarial valuation is done as per projected unit credit method made at
 the end of each financial year.
 
 (iv) Actuarial gains/losses are immediately taken to profit and loss
 account and are not deferred.
 
 i.  Foreign currency transactions
 
 Initial Recognition
 
 Foreign currency transactions are recorded in the reporting currency,
 by applying to the foreign currency amount the exchange rate between
 the reporting currency and the foreign currency at the date of the
 transaction.
 
 Conversion
 
 Foreign currency monetary items are reported using the closing rate.
 Non-monetary items which are carried in terms of historical cost
 denominated in a foreign currency are reported using the exchange rate
 at the date of the transaction; and non-monetary items which are
 carried at fair value or other similar valuation denominated in a
 foreign currency are reported using the exchange rates that existed
 when the values were determined.
 
 Exchange Differences
 
 Exchange differences arising on a monetary item that, in substance,
 form part of the Companys net investment in a non-integral foreign
 operation is accumulated in a foreign currency translation reserve in
 the financial statements until the disposal of the net investment, at
 which time they are recognised as income or as expenses.
 
 Exchange differences, in respect of accounting periods commencing on or
 after December 7, 2006, arising on reporting of long-term foreign
 currency monetary items at rates different from those at which they
 were initially recorded during the period, or reported in previous
 financial statements, in so far as they relate to the acquisition of a
 depreciable capital asset, are added to or deducted from the cost of
 the asset and are depreciated over the balance life of the asset, and
 in other cases, are accumulated in a Foreign Currency Monetary Item
 Translation Difference Account in the financial statements and
 amortized over the balance period of such long-term asset/liability but
 not beyond accounting period ending on or before March 31, 2011.
 
 Exchange differences arising on the settlement of monetary items not
 covered above, or on reporting such monetary items at rates different
 from those at which they were initially recorded during the year, or
 reported in previous financial statements, are recognised as income or
 as expenses in the year in which they arise.
 
 Forward Exchange Contracts not intended for trading or speculation
 purposes
 
 The premium or discount arising at the inception of forward exchange
 contracts is amortised as expense or income over the life of the
 contract. Exchange differences on such contracts are recognised in the
 statement of profit and loss in the year in which the exchange rates
 change. Any profit or loss arising on cancellation or renewal of
 forward exchange contract is recognised as income or as expense on the
 date of such cancellation/renewal. However, exchange difference in
 respect of accounting period commencing on or after December 7, 2006
 arising on the forward exchange contract undertaken to hedge the long
 term foreign currency monetary item, in so far as they
 
 relate to the acquisition of depreciable capital asset, are added to or
 deducted from the cost of asset and in other cases, are accumulated in
 Foreign Currency Monetary Item Translation Difference Account and
 amortised over the balance period of such long-term asset / liability
 but not beyond March 31, 2011.
 
 j. Income tax
 
 Tax expense comprises current and deferred tax. Current income tax is
 measured at the amount expected to be paid to the tax authorities in
 accordance with the Indian Income Tax Act 1961. Deferred income taxes
 refects the impact of current period timing differences between taxable
 income and accounting income for the year net of reversals of timing
 differences of earlier years.
 
 Deferred tax is measured based on the tax rates and the tax laws
 enacted or substantively enacted at the balance sheet date. Deferred
 tax assets are recognised only to the extent that there is reasonable
 certainty that sufficient future taxable income will be available
 against which such deferred tax assets can be realised. In situations
 where the Company has unabsorbed depreciation or carry forward tax
 losses, all deferred tax assets are recognised only if there is virtual
 certainty supported by convincing evidence that they can be realised
 against future taxable profits. At each balance sheet date the Company
 re-assesses unrecognised deferred tax assets. It recognises
 unrecognised deferred tax assets to the extent that it has become
 reasonably certain or virtually certain, as the case may be that
 sufficient future taxable income will be available against which such
 deferred tax assets can be realised.
 
 The carrying amount of deferred tax assets are reviewed at each balance
 sheet date. The Company writes-down the carrying amount of a deferred
 tax asset to the extent that it is no longer reasonably certain or
 virtually certain, as the case may be, that sufficient future taxable
 income will be available against which deferred tax asset can be
 realised. Any such write-down is reversed to the extent that it becomes
 reasonably certain or virtually certain, as the case may be, that
 sufficient future taxable income will be available.
 
 Minimum Alternative Tax (MAT) credit is recognised as an asset only
 when and to the extent there is convincing evidence that the Company
 will pay normal income tax during the specified period. In the year in
 which the MAT credit becomes eligible to be recognised as an asset in
 accordance with the recommendations contained in the Guidance Note
 issued by the Institute of Chartered Accountants of India, the said
 asset is created by way of a credit to the profit and loss account and
 shown as MAT Credit Entitlement. The Company reviews the same at each
 balance sheet date and writes down the carrying amount of MAT Credit
 Entitlement to the extent there is no longer convincing evidence to the
 effect that Company will pay normal Income Tax during the specified
 period.
 
 k. Borrowing costs
 
 Borrowing costs that are attributable to the acquisition and
 construction of a qualifying asset are capitalised as a part of the
 cost of the asset. Other borrowing costs are recognised as an expense
 in the year in which they are incurred.
 
 l. Employee stock compensation costs
 
 Measurement and disclosure of the employee share-based payment plans is
 done in accordance with SEBI (Employee Stock Option Scheme and Employee
 Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on
 Accounting for Employee Share-based Payments, issued by the Institute
 of Chartered Accountants of India. The Company measures compensation
 cost relating to employee stock options using the intrinsic value
 method. Compensation expense is amortized over the vesting period of
 the option on a straight line basis.
 
 m.  Earnings per share (EPS)
 
 Basic earnings per share are calculated by dividing the net profit or
 loss for the year attributable to equity shareholders by the weighted
 average number of equity shares outstanding during the year. Partly
 paid equity shares are treated as a fraction of an equity share to the
 extent that they were entitled to participate in dividends relative to
 a fully paid equity share during the reporting year. The weighted
 average number of equity shares outstanding during the year is adjusted
 for events of bonus issue; bonus element in a rights issue to existing
 shareholders; share split; and reverse share split (consolidation of
 shares).
 
 For the purpose of calculating diluted earnings per share, the net
 profit or loss for the year attributable to equity shareholders and the
 weighted average number of shares outstanding during the year are
 adjusted for the effects of all dilutive potential equity shares.
 
 n.  Operating lease
 
 Where the Company is a Lessee
 
 Leases of assets under which all the risks and rewards of ownership are
 effectively retained by the lessor are classified as operating leases.
 Lease payments under operating leases are recognised as an expense on a
 straight-line basis over the lease term.
 
 Where the Company is a Lessor
 
 Assets subject to operating leases are included in fixed assets. Lease
 income is recognised on a straight-line basis over the lease term.
 Costs, including depreciation are recognised as an expense. Initial
 direct costs such as legal costs, brokerage costs, etc are recognised
 immediately.
 
 o.  Segment reporting 
 
 Identification of segments
 
 The Companys operating businesses are organised and managed separately
 according to the nature of products manufactured/traded, with each
 segment representing a strategic business unit that offers different
 products to different markets. The analysis of geographical segments is
 based on the areas in which the Companys products are sold.
 
 Inter-segment Transfers
 
 The Company generally accounts for inter-segment sales and transfers at
 an agreed marked-up price.
 
 Allocation of common costs
 
 Common allocable costs are allocated to each segment according to the
 relative contribution of each segment to the total common costs.
 
 Unallocated items
 
 The Corporate and other segment include general corporate income and
 expense items which are not allocated to any business segment.
 
 Segment policies
 
 The Company prepares its segment information in conformity with the
 accounting policies adopted for preparing and presenting the financial
 statements of the Company as a whole.
 
 p. Provisions
 
 A provision is recognised when an enterprise has a present obligation
 as a result of past event; it is probable that an outflow of resources
 will be required to settle the obligation, in respect of which a
 reliable estimate can be made. Provisions are not discounted to its
 present value and are determined based on best estimate required to
 settle the obligation at the balance sheet date. These are reviewed at
 each balance sheet date and adjusted to refect the current best
 estimates.
 
 q. Expenditure on new projects and substantial expansion
 
 Expenditure directly relating to construction activity is capitalised.
 Indirect expenditure incurred during construction period is capitalised
 as part of the indirect construction cost to the extent to which the
 expenditure is directly related to construction or is incidental
 thereto.  Other indirect expenditure (including borrowing costs)
 incurred during the construction period which is not related to the
 construction activity nor is incidental thereto is charged to the
 Profit and Loss Account. Income earned during construction period is
 deducted from the total of the indirect expenditure. All direct capital
 expenditure on expansion is capitalised. As regards indirect
 expenditure on expansion, only that portion is capitalised which
 represents the marginal increase in such expenditure involved as a
 result of capital expansion. Both direct and indirect expenditure are
 capitalised only if they increase the value of the asset beyond its
 original standard of performance.
 
 r. Cash and Cash Equivalents
 
 Cash and cash equivalents for the purposes of cash flow statement
 comprise cash at bank and in hand and short-term investments with an
 original maturity of three months or less.
 
 s.  Derivative Instruments
 
 As per the ICAI Announcement, accounting for derivative contracts,
 other than those covered under AS-11, are marked to market on a
 portfolio basis, and the net loss after considering the offsetting
 effect on the underlying hedge item is charged to the profit and loss
 account. Net gains are ignored.