Biocon

1.  Background
 
 a. Incorporation and history
 
 Biocon Limited (Biocon or the Company), was incorporated at
 Bangalore in 1978 for manufacture of biotechnology products. Syngene
 International Limited (Syngene), promoted by Dr. Kiran Mazumdar Shaw,
 was incorporated at Bangalore in 1993. In March 2002, Biocon acquired
 99.99 per cent of the equity shares of Syngene and, resultantly,
 Syngene became the subsidiary of Biocon. Clinigene International
 Limited (Clinigene) was incorporated on August 4, 2000 at Bangalore
 and became a wholly owned subsidiary of Biocon on March 31.  2001.
 Biocon entered into an agreement to set up a Joint Venture Company
 Biocon Biopharmaceuticals Private Limited (BBPL) with CIMAB SA
 (CIMAB), to manufacture and market products using technology and to
 carry out research activities. BBPL was incorporated on June 17, 2002.
 On April 18, 2003, Biocon acquired a 51 per cent shareholding in BBPL.
 
 On January 10, 2008, Biocon entered into an agreement to set up a Joint
 Venture Company with Dr. B.R. Shetty to form a joint venture company
 NeoBiocon FZ-LLC, incorporated in Dubai (NeoBiocon).
 
 The Company has also established Biocon Research Limited, a subsidiary
 of the Company to undertake research in novel and innovative drug
 initiatives.
 
 Effective April 30, 2008, Biocon acquired 71 % equity interest in
 AxiCorp GmbH, Germany through its newly incorporated wholly owned
 subsidiary company Biocon SA, Switzerland. In February 2009, Biocon SA
 acquired an additional 7.4% equity interest in AxiCorp GmbH.
 
 Biocon is engaged in the manufacture of biotechnology products in the
 pharmaceutical sector through fermentation based technology and is also
 engaged in the formulation business. During the year ended March 31,
 2007, the Company has received an approval as the developer as Biocon
 SEZ at the Biocon Park facility at also received an approval for SEZ
 unit to be located within Biocon SEZ.
 
 2. Share capital March 31, 2009_ March 31. 2008
 
 Authorised:
 
 220,000,000 (March 31, 2008 - 120,000,000) equity shares of Rs 5 each
 
 (March 31,2008 - Rs 5 each) 1,100,000 600,000
 
 Issued, subscribed and paid-up:
 
 200,000,000 (March 31, 2008 - 100,000,000) equity shares of Rs 5 each
 
 (March 31, 2008 - Rs 5 each), fully paid|_1,000,000 [_500,000
 
 (a) Of the above equity shares:
 
 (i) 30,800 equity shares of Rs 100 each were allotted as fully paid
 bonus shares by capitalisation of general reserve in the year ended
 
 March 31, 1997.
 
 (ii) 23,471 equity shares of Rs 100 each were allotted as fully paid-up
 shares in the year ended March 31, 2000 pursuant to a contract for
 
 consideration other than cash.
 
 (iii) On March 30, 2002, the Company acquired 99.9 per cent equity in
 Syngene through the issue of 202,780 equity shares of Rs 10 each.
 
 The consideration was determined on the basis of a fair valuation, as
 approved by the statutory authorities in India. The related securities
 
 premium at Rs 403.8 per equity share has been credited to securities
 premium account.
 
 (b) Also refer to Note 19 for shares allotted under the Employees Stock
 Option Plan.
 
 (c) On November 11, 2003, the Company issued 86,324,700 equity shares
 of Rs 5 each as fully paid-up bonus shares by capitalisation of balance
 in the profit and loss account of Rs 431,624.
 
 (d) On September 15, 2008 the Company issued 100,000,000 equity shares
 of Rs 5 each as fully paid bonus shares by capitalisation of balance in
 the securities premium account of Rs 500,000.
 
 3. Secured loans                     March 31,2009        March 31,2008
 
 From banks
    Cash credit, packing credit, etc.  1,014,565             892,634
 
                                       1,014,565             892.634
 
 (a) Cash credit, packing credit, etc.
 
 (i) The Company has fund based working capital facilities with State
 Bank of India (SBI). These facilities are repayable on demand, secured
 by a pari-passu first charge on current assets. The Company has
 utilised Rs 291 [March 31, 2008 - Rs 443,148 inclusive of foreign
 currency loans of Rs Nil (US$ Nil) (March 31, 2008 - Rs 432,944) (US$
 10,841)].
 
 (ii) The Company has fund based working capital facilities with
 Hongkong and Shanghai Banking Corporation (HSBC). These facilities are
 repayable on demand, secured by pari-passu first charge on current
 assets. As on March 31, 2009, the Company has utilised fund based
 limits of Rs 784,274 (March 31,2008 - Rs 242,738), inclusive of foreign
 currency denominated loans of Rs 763,050 (US$ 15 Million) [March 31,
 2008 - Rs 239,820 (US$ 6,000)].
 
 (iii) The Company has working capital facilities with Canara Bank
 CCB). These facilities are repayable on demand, secured by a
 pari-passu first charge on current assets of the Company. As on March
 31, 2009, the Company has utilised Rs Nil (March 31, 2008 - Rs 206,748)
 inclusive of foreign currency denominated loans of Rs Nil (US$ Nil)
 [March 31, 2008 - Rs 196,372 (US$ 4,913)].
 
 (iv) The Company has fund based working capital facility with ABN Amro
 Bank . These facilities are repayable on demand, secured by a
 pari-passu first charge on the current assets of the Company. As on
 March 31, 2009 the Company has utilised Rs 230,000 (March 31, 2008 - Rs
 Nil).
 
 (v) All the above banks have entered into an inter-se agreement for
 operational convenience for the above working capital limits effecting
 the modification of the above charge and creation of a pari-passu
 charge on the current assets of the Company in favour of all the above
 banks.
 
 4.  Unsecured loans               March 31, 2009       March 31, 2008
 
 Deferred payment liability             611,550              543,039
 NMITLI - CSIR Loan                       3,312                3,180
 Financial assistance from DSIR          10,000                  -
                                        624,862              546,219
 
 (i) Under the Industrial Policy of the Government of Karnataka, the
 Company on February 4, 1998 obtained an order from the Karnataka Sales
 Tax Authority for allowing deferment of sales tax (including turnover
 tax) for a period upto 8 years with respect to sales from its
 Bommasandra manufacturing facility for an amount not exceeding Rs
 24,375. As at March 31, 2009, the Company has utilised Rs 354 (March
 31, 2008-Rs 354).
 
 (ii) Under the Agra Food Processing Industrial Policy of the Government
 of Karnataka, the Company on February 9, 2000 obtained an order from
 the Karnataka Sales Tax Authority for allowing deferment of sales tax
 (including turnover tax) for a period upto 12 years with respect to
 sales from its Hebbagodi manufacturing facility for an amount not
 exceeding Rs 648,938. As at March 31, 2009, the Company has utilised Rs
 611,196 (March 31, 2008 - Rs 542,685).
 
 (iii) On March 31, 2005, the Company entered into an agreement with the
 Council of Scientific and Industrial Research (CSIR), for an
 unsecured loan of Rs 3,312 for carrying out part of the research and
 development project under the New Millennium Indian Technology
 Leadership Initiative (NMITLI) Scheme. The loan is repayable over 10
 annual equal installments starting from April 2009 and carry an
 interest rate of 3 per cent per annum. The amount due for repayment
 within one year is Rs 331.
 
 (iv) During the year ended March 31, 2009, the Department of Scientific
 and Industrial Research (DSIR) has sanctioned financial assistance
 for a sum of Rs 17,000 to the Company for part financing one of its
 research projects. Of the said sanctioned amount, the Company has
 received the first installment of Rs 10,000 during the year. The
 research project is ongoing and is expected to be completed in June
 2009. The assistance is repayable in the form of royalty payments post
 commercialisation of the project in five annual installments.
 
 5. Research and development expenses
 
 Research and development expenses aggregate to Rs 743,717 (March 31,
 2008 - Rs 646,459) and include Rs 139,604 (March 31, 2008 - Rs 170,335)
 on research and development equipment and Rs 6,051 (March 31, 2008 - Rs
 5,003) on buildings and the remaining expenses incurred by the Company
 have been disclosed under the appropriate account heads.
 
 6. Employee stock compensation
 
 On September 27, 2001, Biocons Board of Directors approved the Biocon
 Employee Stock Option Plan (ESOP Plan 2000) for the grant of stock
 options to the employees of the Company and its subsidiaries. A
 Compensation Committee has been constituted to administer the plan
 through a trust established specifically for this purpose, called the
 Biocon India Limited Welfare Trust (ESOP Trust).
 
 The ESOP Trust shall make additional purchase of equity shares of the
 Company using the proceeds from the loan obtained from the Company,
 other cash inflows from allotment of shares to employees under the ESOP
 Plan and shall subscribe, when allotted to such number of shares as is
 necessary for transferring to the employees. The ESOP Trust may also
 receive shares from the promoters for the purpose of issuance to the
 employees under the ESOP Plan. The Compensation Committee shall
 determine the exercise price which will not be less than the face value
 of the shares.
 
 Grant I
 
 On September 27, 2001, the Company granted 71,510 options under the
 ESOP Plan 2000 to be exercised at a grant price of Rs 10 (before
 adjusting bonus and share split). The options vested with the employees
 equally over a four year period.
 
 7. Segmental information Business segments
 
 The primary reporting of the Company has been performed on the basis of
 business segment. For the year ended March 2009 consequent to the transfer 
 of the enzymes business, the Company operated in a single business segment 
 of pharmaceuticals. The Company is managed as one entity and is governed 
 by similar sets of risks and rewards. Accordingly no additional disclosures 
 are required as per Accounting Standard 17 on Segment Reporting for the year 
 ended March 31, 2009.