Cipla

The Directors take pleasure in presenting the Seventy-Second Annual
 Report of the Company and Audited Accounts for the year ended 31st
 March 2008.
 
 Financial Summary
 
                                         Year ended   Year ended
                                                      Increase over
 31st March 2007                    31st March 2008 
                                     previous year         (%)
 
 3,764   Sales and other income        4,429                18
 911   Gross profit before               969                 6
 depreciation and tax
 668   Net profit for the year           702                 5
 304   Surplus brought forward           390
 from last balance sheet
 972   Profit available for            1,092
 appropriation
 Appropriations:
 156   Dividend
                                         156
 26   Tax on dividend
                                          26
 400   Transfer to general reserve
                                         400
 390   Surplus carried forward           510
 
 
 Dividend
 
 The Directors recommend a dividend of Rs. 2 per share on 77,72,91,357
 equity shares of Rs. 2 each for the year 2007-08 amounting to Rs.
 155.46 crore.
 
 Management Review: 2007-08
 
 Industry Structure and Development
 
 The Indian economy continued to perform well in the current year. The
 actual growth was around 9 per cent.  However, inflation is now the
 biggest concern and there are all the signs of a slowdown in industrial
 growth.
 
 The present period is critical, for both India and the world economy.
 This is because of mounting problems like the impact of sub-prime
 losses, spiralling oil prices and a slowdown in the economy worldwide.
 
 Overall, this has been a satisfactory year for the Indian
 pharmaceutical industry. The total domestic market grew by 15 per cent
 according to ORG-IMS statistics. However, exports were hit by an
 appreciating rupee and declining margins. As the U.S. dollar begins to
 pick up strength, it is hoped that the pressure on export will ease in
 the near term.
 
 Performance Review
 
 The Company’s turnover at Rs. 4429 crore crossed the USD 1 billion mark
 for the first time.  Inspite of a sluggish start in the first quarter,
 the overall turnover (including other income) of the Company grew by 18
 per cent. Although, the export figure was reduced by the appreciating
 rupee, total exports recorded a healthy growth of 18 per cent and
 domestic sales grew by 13 per cent. Notably, earnings on account of
 technology fees crossed Rs. 150 crore.
 
 On the domestic front, the Company’s continued emphasis on expansion
 and greater market penetration contributed to its growth. During the
 year, Cipla was ranked number one in India in terms of domestic market
 share by ORG-IMS (MAT March 2008).
 
 Awards
 
 The Company received two honours during the year from the Forbes
 Magazine, Asia. Cipla was named the Best Pharmaceutical Company and
 also the Most Profitable Company overall among those “Under a Billion
 in the Region’s Top 200 Small and Mid Size companies.”
 
 Products
 
 The Company is focused in developing new formulations for existing and
 new drug substances. Some of the significant introductions during the
 year were:
 
 - Ritomune (ritonavir tablets) – new antiretroviral for booster therapy
 in HIV/AIDS
 
 - Adlube (lubricating eye ointment with white petrolatum and mineral
 oil) – for dry eye
 
 - Olmecip (olmesartan tablets) – new angiotensin blocker for
 hypertension
 
 - Ston 1 (potassium citrate and magnesium citrate solution) – for
 urinary stones
 
 - Nova (pregabalin capsules) – for neuropathic pain
 
 - Riomont (rimonabant tablets) – for obesity management
 
 - Imicrit (imipenem-cilastatin intravenous injection) – broad-spectrum
 combination antibiotic for serious infections
 
 - Fullform (beclomethasone dipropionate and formoterol fumarate
 inhaler/rotacaps) - combination therapy for asthma control
 
 - Junior Lanzol(lansoprazoleorally disintegrating tablets) – for reflux
 oesophagitis in children
 
 - Amlopres-NB (amlodipine and nebivolol tablets) – new beta-blocker
 combination therapy for hypertension
 
 - Fit Eye (antioxidant tablets) – for eye protection
 
 - Alfusin-D (alfuzosin hydrochloride and dutasteride tablets) – new
 combination therapy for prostate enlargement
 
 - EG1 (gemifloxacin mesylate tablets) – new quinolone antibacterial
 
 - Enclex (enoxaparin pre-filled injection) – anticoagulant for deep
 vein thrombosis
 
 - Assurans (sildenafil tablets) – for pulmonary hypertension
 
 - Crisanta (drospirenone and ethinyl estradiol tablets) – latest oral
 contraceptive pill
 
 - Ciclospray (ciclesonide aqueous nasal spray) – new steroid spray for
 allergic rhinitis
 
 - Vanlid (vancomycin hydrochloride capsules) – for treatment of
 enterocolitis
 
 - Zordox (doxofylline tablets) – new oral bronchodilator for asthma and
 COPD
 
 - Ceftorin (cefditoren pivoxil tablets) – advanced cephalosporin
 antibiotic
 
 - Levorid-AX (levocetrizine and ambroxol capsules) – non-sedating cough
 expectorant
 
 - Triohale (tiotropium bromide, formoterol fumarate and ciclesonide
 inhaler) – first triple-drug combination inhaler for COPD
 
 - Ziprax-CL (cefixime and clavulanic acid tablets) – new combination
 for resistant infection.
 
 The Company continued to lay stress on introducing several new products
 and line extensions, along with new drug delivery systems.
 
 During the current year, the Company successfully launched an oral
 emergency contraceptive pill under the brand name i-pill in the OTC
 segment.
 
 INFRASTRUCTURE
 
 Manufacturing Facilities
 
 The Company’s Rs. 250 crore project in Sikkim for manufacture of
 formulations including capsules, tablets, liquid orals, nasal spray,
 inhalers, injectables using form-fill-seal technology, etc. is nearing
 full completion. The Company has already commenced commercial
 production in some of these facilities in the first quarter of the
 current financial year.
 
 Commercial production also commenced in January 2008 at the Rs. 100
 crore new export oriented unit (EOU) for the manufacture of API’s and
 intermediates at Kurkumbh.
 
 The Company’s Special Economic Zone (SEZ) project at Kerim, Goa
 continues to be suspended due to the stop-work order issued by the
 State Government. The Company has just received an order dated 11th
 July 2008 from the State Government revoking the stop-work order
 consequent to a petition filed by the developer of the SEZ against this
 order.
 
 Construction work at the Company’s SEZ project for pharmaceutical
 formulations, at Indore, Madhya Pradesh, is ongoing and will be
 completed in stages starting from 2009.
 
 Regulatory Approvals
 
 Several dosage forms and API’s manufactured in the Company’s plants
 continue to enjoy the approval of most major international regulatory
 agencies. These agencies include the US FDA, MHRA (UK), PIC (Germany),
 MCC (South Africa), TGA (Australia), Department of Health (Canada),
 ANVISA (Brazil), SIDC (Slovak Republic), Ministry of Health (Kingdom of
 Saudi Arabia), the Danish Medical Agency and the WHO.
 
 Safety and Environment Care
 
 Various health, safety and environment awareness programmes were
 organised for neighbouring villages and school children living around
 the Company’s units at Baddi (Himachal Pradesh), Patalganga
 (Maharashtra), Kurkumbh (Maharashtra), Verna (Goa) and Bangalore
 (Karnataka).
 
 As always, the Company maintained high standards of occupational
 health, safety and environment preservation practices at all its
 manufacturing units.
 
 In addition, the Kurkumbh, Bangalore and Patalganga plants have been
 certified for compliance with ISO 14001 and OHSAS 18001 standards. The
 Company continued to maintain its modern, well-designed effluent
 treatment plants at its factories. The “zero discharge” treated water
 is used for maintaining a green belt at all the locations.
 
 Internal Control Systems
 
 The Companys internal control procedures are tailored to match the
 organisation’s pace of growth and increasing complexity of operations.
 These ensure compliance with various policies, practices and statutes.
 Cipla’s internal audit team carries out extensive audits throughout the
 year, across all functional areas and submits its reports to the Audit
 Committee of the Board of Directors.
 
 Human Resources
 
 Particulars of employees required to be furnished under section 217(2A)
 of the Companies Act, 1956 forms part of this report. Any shareholder
 interested in obtaining a copy may write to the Company Secretary at
 the Registered Office of the Company.
 
 THREATS, RISKS, CONCERNS Patents
 
 In a significant development, on 19th March 2008, the Delhi High Court
 rejected an injunction plea by Roche to prevent Cipla from
 manufacturing and selling generic versions of the anti-cancer drug
 erlotinib (Erlocip, Cipla) in India. According to The Economic Times,
 “the Indian drug maker’s generic version of Tarceva is priced at
 one-third the price of Tarceva and the HC rejected Roche appeal in
 public interest given the huge cost difference between the two drugs”.
 This ruling vindicates Cipla’s constant appeal to modify the patent
 laws of the country to safeguard the Indian consumer from monopolistic
 pricing by patent holders. Such disputes in the interpretation of the
 new patent laws are likely to remain a major area of concern to
 millions of patients in India. We remain hopeful that the government
 would pay heed and take the right steps in order to ensure that
 monopolistic forces do not prevail in the Indian market and essential
 as well as vital drugs remain within the reach of masses.
 
 Drug Pricing
 
 As always, the health of the domestic pharmaceutical industry is very
 much dependent on the government’s drug pricing policy. We appeal to
 the Group of Ministers, which is reportedly considering the policy, to
 let free and fair competition rather than arbitrary drug control
 measures decide prices of essential drugs.
 
 Cipla is at all times willing to extend all co-operation and support to
 the government to achieve this objective. The Company would like to
 reiterate that it is willing to share its pharmaceutical technology
 with the Government of India, free of charge, so that the public sector
 pharmaceutical undertakings can also manufacture and market all vital
 and life saving drugs at economical prices.
 
 Rising Costs and Availability of Materials
 
 The prices of many API’s and input materials have risen significantly
 due to restriction in production by Chinese chemical manufacturers,
 rise in price of petroleum-based products, frequent shortages and
 general inflationary conditions. The Company is looking at alternative
 arrangements and has also increased its stock levels. However, the
 increased prices and shortages of materials will adversely affect
 production schedules and overall margins on all the Company’s products.
 
 OPPORTUNITIES
 
 Domestic Markets
 
 The Company has among the widest range of pharmaceutical products in
 its portfolio. A focused approach and increased marketing efforts, in
 recent years, has resulted in the growth of the Company. In the coming
 years, the Company would continue to build its reputation and strong
 brand equity in order to maintain its leadership position.
 
 International Markets
 
 The Company continues to lay emphasis on its overseas business. Almost
 55 per cent of the overall income from operations comes from outside
 India. The Company works closely with all its overseas partners in over
 180 countries to maintain its export growth. As on date, the Company
 has registered about 5500 products in various countries. Recently, a
 leading European advisory firm, after due research, ranked Cipla 14th
 among all pharmaceutical companies worldwide as a provider of access to
 medicines with a corporate social responsibility.
 
 COMMUNITY CARE
 
 The Company continues to work closely with several reputed non-profit
 organisations such as Drugs For Neglected Diseases Initiative, Médecins
 Sans Frontières and the Clinton Foundation in order to make drugs for
 malaria, HIV/AIDS and several neglected diseases available at
 affordable prices. Cipla also provides medicines to treat over a
 million poor, aged patients in slums and villages through Helpage
 India, the Umeed Foundation, etc. These initiatives are part of Cipla’s
 endeavour to fulfil its corporate social responsibility.
 
 The Cipla Palliative Care and Training Centre in Pune continues to
 provide care to terminally ill cancer patients.  As of date, the Centre
 has provided comfort and solace to nearly 5700 patients. The focus is
 on integrating palliative medicine with curative therapy.
 
 In addition, the Company continued to support the promotion of
 education and community welfare, both directly and through its
 charitable trusts.
 
 CORPORATE MATTERS
 
 Responsibility Statement
 
 Pursuant to section 217(2AA) of the Companies Act, 1956 it is confirmed
 that the Directors have:
 
 i. followed applicable accounting standards in the preparation of the
 annual accounts;
 
 ii. 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 ended 31st March 2008 and of the profit or
 loss of the Company for that period;
 
 iii. taken proper and sufficient care for 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. prepared the annual accounts on a going concern basis.
 
 Subsidiary Company
 
 As per the exemption order no. 47/90/2008-CL-III dated 29th February
 2008, passed by Ministry of Corporate Affairs, Government of India
 under section 212(8) of the Companies Act, 1956, the audited financial
 statements of the subsidiary company viz. Cipla FZE have not been
 attached. The consolidated financial statements presented in this
 Annual Report include financial information of the subsidiary company.
 A statement under section 212(3), which contains information in terms
 of the exemption order, is also attached.
 
 Corporate Governance
 
 Your Company is committed to good corporate governance practices. The
 report on corporate governance as stipulated under Clause 49 of the
 Listing Agreement forms part of this report.
 
 Fixed Deposits
 
 The Company neither accepted nor renewed any fixed deposits from the
 public during the year.
 
 Disclosure of Particulars
 
 As required by the Companies (Disclosure of Particulars in the Report
 of Board of Directors) Rules, 1988, the relevant information and data
 are annexed to this report.
 
 Directors
 
 Subject to the approval of shareholders, Dr. Y. K. Hamied and Mr. M. K.
 Hamied were re-appointed by the Board of Directors as Managing Director
 and Joint Managing Director respectively for a period of five years
 with effect from 1st August 2008. As required under Schedule XIII to
 the Companies Act, 1956 an application will be made to the Central
 Government for the approval of re-appointment of Dr. Y. K. Hamied as
 Managing Director.
 
 Mr. M.R. Raghavan retires by rotation and being eligible, offers
 himself for re-appointment.
 
 Dr. M. K. Gurjar resigned from the Board of Directors effective 27th
 August 2007. The Directors place on record their appreciation of his
 contribution as a member of the Board. Mr. Pankaj Patel has been
 appointed as a Director of the Company effective 5th March 2008 to fill
 the casual vacancy caused by the resignation of Dr. M. K. Gurjar. Mr.
 Pankaj Patel holds office up to the date of the ensuing Annual General
 Meeting of the Company and being eligible, offers himself for
 re-appointment as a Director.
 
 A brief resume of the said Directors is provided in the Notice.
 
 Auditors
 
 Messrs. R.S. Bharucha & Co. and Messrs. R.G.N. Price & Co., joint
 auditors of the Company, retire at the conclusion of the forthcoming
 Annual General Meeting and are eligible for re-appointment.
 
                                               On behalf of the Board,
                                                         Y. K. Hamied
 Mumbai, 18th July 2008                  Chairman & Managing Director