Dishman Pharmaceuticals & Chemicals

The Directors have pleasure in presenting their Report along with the
 Audited Accounts of the Company for the year ended March 31, 2008.
 
 FINANCIAL RESULTS
 
                                                     (Rs. in Lakhs)
 Particulars                                       2007-2008   2006-2007
 
 Net Sales                                          35920.03   27524.44
 Profit before Tax & other Adjustments               7261.17    6479.92
 Less :- Current tax                                  800.00      82.00
 Add :- MAT Credit Entitlement                        161.11         --
 Less :- Deferred Tax                                 459.95     182.88
 Less :- Fringe Benefit tax                            24.22      24.07
 Profit after tax                                    6138.11    6190.97
 Less :- Prior period adjustments (Net)                 9.23       7.23
 Less:-Short Provision of Income tax in earlier years 173.06      96.74
 Net Profit                                          5955.82    6087.00
 Balance of profit brought forward                   4848.99    9654.25
 Amount available for appropriations                10804.81   15741.25
 
 Appropriations :
 Transfer to General Reserve                         5000.00   10000.00
 Proposed Dividend                                    806.97     762.65
 Tax on Proposed Dividend                             137.14     129.61
 Balance carried to Balance Sheet                    4860.70    4848.99
 
 DIVIDEND
 
 For the financial year 2007-2008, your Directors are pleased to
 recommend a final dividend of 50% on the paid-up equity share capital
 of Rs.1613.94 lakhs (Rs.1/- per equity share of Rs.2/- each) (previous
 year 50% on the paid-up equity share capital of Rs.1525.30 lakhs, i.e.
 Rs.1.00/- per equity share of Rs.2/- each), which if approved at the
 forthcoming Annual General Meeting will be paid out of the profits of
 the Company for the year to all those equity shareholders whose names
 appear in the Register of Members as on 18th July, 2008.
 
 PERFORMANCE AND OPERATIONS REVIEW
 
 During the year, your company achieved a turnover of Rs.35920 lakhs as
 against Rs.27524 lakhs during the previous year reflecting a growth of
 30.5%. Exports constitute Rs.24508 lakhs or 68% of sales for 2007-08.
 Other income earned during the year stood at Rs.457.89 lakhs as against
 Rs.1366.58 lakhs in the previous year. Profit before tax grew by about
 12% (Rs. 7261.17 lakhs during the year as against Rs.6479.92 lakhs in
 the previous year). Profit after tax for the year was Rs.6138.11 lakhs
 as against Rs.6190.97 lakhs during previous year.
 
 The consolidated turnover, which includes results of all its wholly
 owned subsidiaries, proportionate share in the joint ventures (Schutz
 Dishman Biotech Ltd., CAD Middle East Pharmaceutical Inds., and Dishman
 Japan Ltd.) and associate (Bhadra- Raj Holdings Pvt. Ltd.) reported 39%
 rise in sales to Rs.80,307.62 lakhs for the current financial year
 2007-08 compared to the previous years sales of Rs.57,857.20 lakhs.
 
 Consolidated Profit before tax & other adjustment of the Company stood
 at Rs.12284.51 lakhs (previous year: Rs.9586.76 lakhs) and profit after
 tax for the year at Rs.12151.19 lakhs (Previous year: Rs.9267.10 lakhs)
 for the financial year 2007-08.
 
 The consolidated Earning per share for the year works out to Rs.15.70
 per share as against Rs.13.15 per share on absolute basis and Rs.14.69
 on diluted basis.
 
 Your Company could achieve sustained growth in business due to
 continued pursuit of our strategy to work with innovator companies,
 developing new compounds and reducing cost of existing products through
 process innovation.
 
 A detailed analysis of the financial results is given in the Management
 Discussion and Analysis Report, which forms part of this Report.
 
 Expansion of Companys Capacity (Project Taurus)
 
 You are aware, your company is aggressively investing in new capacities
 to create four new API facilities at Bavla. Out of these four
 facilities, operations commenced in two units and one more unit is
 ready to start commercial operations. The fourth unit for manufacture
 of cytotoxic compounds will be commissioned in 2008-09.
 
 China project
 
 The work at companys new plant at Shanghai chemical zone is
 progressing as per schedule and will be ready for commercial operations
 by Sept. 2008. Your company is investing approximately US$ 10.00 mn. in
 this new facility.
 
 Acquisition of Fine Chemicals And Vitamin D Business From Solvay
 
 Your company through its subsidiaries acquired fine chemicals, vitamin
 D and vitamin D analogues business of Solvay Pharmaceuticals BV
 (Solvay) in Netherlands in October, 2007. As part of this deal, all
 facilities, people and activities located at Solvays Veenendaal site
 in the Netherlands and technology, patent and intellectual property
 rights for fine chemicals, vitamin D and vitamin D analogues business
 were transferred to Dishman.
 
 The Veenendaal site of Solvay Pharmaceuticals houses the business group
 of Vitamins & Chemicals. The manufacturing of vitamin D analogues takes
 place at Solvays site in Weesp, the Netherlands. Cholesterol is used
 in pharmaceutical, cosmetic and crustacean feed applications. Vitamin D
 analogues are used for food and pharmaceutical applications and fall in
 the category of high potency products.
 
 Dishman has a pre-existing long-term relationship with Solvay for
 contract manufacturing of patented API and intermediates.  Further, in
 2001, Dishman and Solvay had entered into Toll Manufacturing Agreement
 to convert a raw material supplied by Solvay into an intermediate of
 vitamin D3. With the experience gained and technology available with
 Dishman, the acquired business will considerably add value to Dishmans
 business.
 
 Acquisition of cholesterol, vitamin D and vitamin D analogues business
 will not only increase the basket of products of Dishman, but will also
 bring new customer relationships.
 
 Dishman Australasia Pty. Ltd.
 
 Your Company has invested Australian Dollar 1,00,000 in the equity of
 Dishman Australasia Pty. Ltd., which has been established as wholly
 owned subsidiary of the Company in Australia, in April, 2008.
 
 RESEARCH AND DEVELOPMENT
 
 Research is the foundation of your Company upon which its strategy of
 manufacturing and marketing of Bulk Drugs & Intermediates (including
 contract manufacturing) and Fine Chemicals, Quats & Speciality
 chemicals stands. At Bavla facility, your Company has created a
 state-of-the-art R & D center comprising three floors and having total
 built up are of 4500 Sq. Mtrs. There are eight independent Chemical
 laboratories, Kilo lab, Analytical development laboratories, Technical
 Library and cGMP Pilot Plant.
 
 Looking at the need of developing expertise in chromatographic
 separation, during the year under review, a glass chromatographic
 column for small-scale separation in cGMP pilot facility and 2
 Stainless Steel chromatographic columns for large-scale separations
 have been installed and are operational.
 
 Analytical Development Lab is equipped with all modern equipments for
 the analysis of raw materials, intermediates and finished products.
 These include HPLC, GC, LC–MASS, GC-MASS, ICP, NMR, CHN Analyser,
 HPTLC, XRD, Spectrophotometer etc. At present more than 180 scientists
 are working in two shifts. At its full capacity, around 260 scientists
 will be working on a 3-shift basis. This center focuses on contract
 research at lab, kilo and Pilot Plant scales. In addition to R&D
 Center, there are three pilot plant facilities.
 
 The Company’s R & D orientation and understanding of synthetic routes
 of process innovation have resulted in development work for customers
 under CDA and with the intention of getting long-term manufacturing
 contracts. Further, to give impetus to the contract manufacturing
 assignments - both in the pharma and non-pharma segment and to
 capitalize on the potential outsourcing market related to the
 pharmaceutical and chemical industries, Company has developed and
 strengthened its contract research capabilities of APIs and
 intermediates. As a result of this, the technology for the production
 of the most of the 20 APIs has been developed or is under final stages
 of development. The technology for manufacturing these APIs would then
 be transferred to the production facility coming up in Saudi Arabia.
 
 Besides these APIs, about 60 new products have been developed in the
 R&D in this year.
 
 QUALITY, HEALTH, SAFETY & ENVIRONMENT (QHSE) & RESPONSIBLE CARE
 
 To ensure the safety and Health of workers as well as the environment,
 your Company’s products and processes are developed in accordance with
 strictly defined rules. This is achieved by conducting the Risk
 Assessment, Safety Audits, customer audits, HAZOP study and Environment
 audits. All manufacturing plants follow responsible care.
 
 The Companys QHSE policy is being implemented, among others, through
 (i) Maintaining the zero discharge of waste water by series of
 treatment;
 
 (ii) Incineration of liquid and solid waste at site;
 
 (iii) Practicizing On-site emergency plan by conducting mock-drills; 
 
 (iv) Replacement of hazardous process / chemical to non-hazardous
 process and low hazards; 
 
 (v) Fire detection and protection system available at site; 
 
 (vi) Conducting intensive QHSE training programs including contractor
 employees;
 
 (vii) Participation of employees in Safety committee meetings at all
 levels and active role in National Safety Day, Fire Service Day, World
 Environment Day and World Earth Day activities; 
 
 (viii) Independent safety and environment audits at regular intervals
 in- house and third party;
 
 (ix) In-house medical and health facility at site for pre-employment &
 periodical medical check-up;
 
 (x) Blood Donation Camp at site for social cause; 
 
 (xi) Participation and paper presentation on good practices adopted by
 dishman on SHE management in National and International Conferences.
 
 * Your Companys efforts are recognized by State Level, National Level
 and International level Awards from time to time. This year Company has
 been awarded the most prestigious awards as:
 
 * State level winner Safety Award From Gujarat Safety Council in Drugs
 and pharmaceutical, Food and Dairy sector continuous for the fourth
 year.
 
 * National level Environment Excellence Award from Greentech Foundation
 in Chemicals Sector.
 
 * Prashansha Patra from National Safety Council of India, Mumbai in
 manufacturing sector.
 
 SPECIAL ECONOMIC ZONE (SEZ) PROJECT
 
 As you are aware, your Company has promoted the project of Special
 Economic Zone (SEZ), one for Pharmaceuticals & Fine Chemicals Segment
 and another for Engineering Segment through its subsidiary company
 namely Dishman Infrastructure Ltd.  (DIL), and provided a seed
 capital of Rs. 5.00 lakhs for the said SEZ project. During the year,
 DIL has received final permission from the Central Government for the
 said SEZ project.
 
 The total project cost for the said two SEZ segments will be around
 Rs.650 crores and will be funded partly by promoter of Dishman and
 partly by loan and private equity or public participation. Almost 90%
 of the total land as projected has already been acquired in a phased
 manner for both the sectors. The acquisition of the residual part of
 the land is expected to be completed by the end of June, 2008. DIL is
 getting good response from both domestic as well as overseas companies,
 wiling to set up their units in SEZ.
 
 LISTING ARRANGEMENT
 
 The equity shares of the Company are listed on the National Stock
 Exchange of India Ltd., Mumbai (NSE) and Bombay Stock Exchange Ltd.,
 Mumbai (BSE). Annual listing fees for the year 2008-09, as applicable,
 have been paid before due date to the concerned Stock Exchanges.
 
 FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)
 
 As the members are aware, in August, 2005, the Company accessed the
 international financial markets through an offering of 0.5% Foreign
 Currency Convertible Bonds (FCCBs / Bonds), due 2010 convertible into
 equity shares of the Company, for US$ 50 million. The FCCBs have been
 listed on the Singapore Exchange Securities Trading Ltd. (SGX-ST).
 
 During the year, the Company has received Notices from the Bondholders
 for conversion of Bonds into Equity Shares of the Company for the
 aggregate principal amount of Bonds of US$ 29,500,000. Upon exercise of
 the option for the conversion of FCCBs of the principal amount of US$
 29,500,000 the Company has allotted 74,71,037 equity shares of Rs.2/-
 each of the Company at a premium of Rs.170/- per share. Consequently,
 the paid-up equity share capital of the Company has increased from
 7,22,13,076 equity shares to 7,96,84,113 equity shares of Rs.2/- each.
 
 Subsequently, in the month of April, 2008, Company has received Notice
 from a Bondholder for conversion of Bonds into Equity Shares of the
 Company for the principal amount of Bonds of US$ 4,000,000. The Company
 has allotted 10,13,023 equity shares of Rs.2/- each of the Company at a
 premium of Rs.170/- per share. Consequently, the paid-up equity share
 capital of the Company has increased from 7,96,84,113 equity shares to
 8,06,97,136 equity shares of Rs.2/- each and with this 95% of the Bonds
 have been converted into shares.
 
 DEPOSITS
 
 The Company has not accepted any deposits as defined under Section 58A
 of the Companies Act, 1956 read with the Companies (Acceptance of
 Deposits) Rules, 1975, as amended, during the year under review.
 
 DIRECTORS
 
 Mr. Yagneshkumar B. Desai and Mr. Sanjay S. Majmudar, Directors of the
 Company retire by rotation at the forthcoming Annual General Meeting
 and being eligible offer themselves for reappointment.
 
 As you are aware, Mrs. Deohooti J. Vyas has been re-appointed as
 Whole-time Director of the Company for a further period of five years
 w.e.f. 3rd September, 2006 and her appointment as such and the
 remuneration of Rs.3.00 lacs per month with a power to the Board to
 increase or revise the remuneration subject to maximum of Rs.5.00 lacs
 per month during the tenure of said five years, were approved by the
 members at the Annual General Meeting held on 29th June, 2006.
 Considering the valuable contribution by Mrs. Deohooti J. Vyas, her
 remuneration has been increased from Rs.3.00 lacs to Rs.5.00 lacs per
 month w.e.f. 1st June, 2008 by the Board of Directors at its meeting
 held on 22nd May, 2008 upon the recommendation of Remuneration
 Committee held on 22nd May, 2008, which is well within the powers of
 Board of Directors and permissible as well as the same is in accordance
 with the provisions of Schedule XIII to the Companies Act, 1956 without
 approval of Members and Central Government.
 
 INSURANCE
 
 The Company has made necessary arrangements for adequately insuring its
 insurable interests.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 Pursuant to the requirement under Section 217(2AA) of the Companies
 Act, 1956 with respect to Directors Responsibilities Statement, the
 Directors, based on the representations received from the Companys
 operating management, hereby confirm:
 
 a) that in the preparation of the accounts for the financial year ended
 31st March, 2008, the applicable accounting standards have been
 followed along with proper explanation relating to material departures;
 
 b) that the Directors had adopted such accounting policies and applied
 them consistently and made judgments 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 and of the profit or
 loss of the Company for the year under review;
 
 c) that the Directors have taken proper and sufficient care 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;
 
 d) that the accounts for the financial year ended 31st March, 2008 have
 been prepared on a going concern basis.
 
 AUDITORS
 
 M/s. Deloitte Haskins & Sells, Chartered Accountants, Auditors of the
 Company hold office until the conclusion of the Twenty Fifth Annual
 General Meeting and are eligible for reappointment. M/s. Deloitte
 Haskins & Sells have informed the Company that, if appointed, their
 appointment as Auditors will be within the limits prescribed under
 Section 224(1B) of the Companies Act, 1956.  Accordingly, the members
 approval is being sought for their appointment as the Auditors of the
 Company and for fixation of their remuneration for the year 2008-09,
 at the ensuing Annual General Meeting.
 
 ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE
 
 Information of conservation of energy, technology absorption and
 foreign exchange earnings and outgo as required under Section 217(1)(e)
 of the Companies Act, 1956 read with Companies (Disclosure of
 Particulars in the Report of Board of Directors) Rules, 1988, is given
 in the Annexure - I and forms part of this Report.
 
 PARTICULARS OF EMPLOYEES
 
 Information as per Section 217 (2A) of the Companies Act, 1956 read
 with the Companies (Particulars of Employees) Rules, 1975, as amended,
 is given in the Annexure - II and forms part of this Report.
 
 SUBSIDIARY COMPANIES
 
 The Ministry of Corporate Affairs, Government of India vide its order
 No.47/39/2008-CL-III dated 22nd February, 2008, has granted an
 exemption to the Company under section 212(8) of the Companies Act,
 1956 from attaching the accounts along with the report of the Board of
 Directors as required by section 212(1) of the Companies Act, 1956, of
 its 16 (sixteen) subsidiary companies namely Dishman Europe Limited,
 Dishman U.S.A. Inc., Dishman International Trading (Shanghai) Co. Ltd.,
 Dishman FZE, Dishman Switzerland Ltd., Dishman Pharma Solutions AG.,
 Dishman Infrastructure Ltd., Dishman Pharmaceuticals & Chemicals
 (Shanghai) Co. Ltd., Carbogen Amcis AG., Carbogen Amcis Limited (Name
 was changed from Synprotec DCR Limited w.e.f. 05/07/2007), Dishman
 Africa (Pty.) Ltd., Innovative Ozone Service Inc. (IO3S), Dishman
 Netherlands B.V. (Name was changed from Pharma Syn. B.V. w.e.f.
 08/11/2007), Dishman Holland B.V., Dishman Japan Ltd., and Carbogen
 Amcis (India) Ltd., to the balance sheet of the company for the
 financial year ended on 31st March, 2008. The Company will provide the
 annual accounts of its subsidiary companies and the related detailed
 information on the specific request made by any investor and the said
 annual accounts are open for the inspection at the registered office of
 the Company during office hours on all working days, except Sundays and
 holidays, between 2.00 p.m. and 4.00 p.m. Particulars relating to the
 Subsidiary Companies, as per the condition (iii) of the above mentioned
 order of the Ministry of Company Affairs, are annexed to the Accounts
 of the Company.
 
 As required under Clause 32 of Listing Agreement with the Stock
 Exchange(s) and in accordance with the requirements of Accounting
 Standard AS-21 issued by the Institute of Chartered Accountants of
 India, the Company has prepared Consolidated Financial Statements of
 the Company and its subsidiaries and are included in the Annual Report.
 
 While preparing the consolidated financial statements, Company has
 consolidated the accounts of two Joint Venture companies namely Schutz
 Dishman Biotech Ltd. (22.33% holding by the Company) and CAD Middle
 East Pharmaceutical Industries (30% holding by the Company) and one
 associate company namely, Bhadra Raj Holdings Pvt. Ltd. (40% holding by
 the Company), as per the requirements of Accounting Standard 27 (AS-27)
 and Accounting Standard 23 (AS-23) respectively.
 
 During the year, the name of Companys stepdown subsidiary company,
 namely Synprotec DCR Limited has been changed to Carbogen Amcis Limited
 w.e.f. 05/07/2007 and the name of another step down subsidiary company,
 namely Pharma Syn. B.V. has been changed to Dishman Netherlands B.V.
 w.e.f. 08/11/2007.
 
 During the year, Company has formed an Indian wholly owned subsidiary,
 namely Carbogen Amcis (India) Ltd. (CAIL), and invested an amount of
 Rs.5.00 lacs (Rupees Five Lacs only) into equity shares of CAIL.
 
 During the year, Company has invested total amount of JPY 60.00 million
 (Japanese Yen Sixty Million only) into the share capital of its
 subsidiary company, namely Dishman Japan Ltd. (DJL), incorporated in
 Japan. Thus, total investment into share capital of DJL at the year end
 stood at JPY 66.8 million (Japanese Yen Sixty Six Million Eight lakhs
 only).
 
 CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS REPORT
 
 Your Company follows the principles of effective corporate governance.
 The Company has complied with the mandatory provisions of Corporate
 Governance as prescribed in the revised Clause 49 of the Listing
 Agreement with the Stock Exchanges. A separate report on Corporate
 Governance compliance and a Management Discussion and Analysis Report
 as stipulated by the said Clause 49 form part of the Annual Report
 along with the required Certificate from the Auditors of the Company
 regarding compliance of the conditions of Corporate Governance as
 stipulated by revised Clause 49 of the Listing Agreement.
 
 In compliance with one of the Corporate Governance requirements as per
 the revised Clause 49 of the Listing Agreement, the Company has
 formulated and implemented a Code of Conduct for all Board members and
 senior management personnel of the Company, who have affirmed
 compliance thereto.
 
 ACKNOWLEDGEMENTS
 
 Your Directors would like to express their grateful appreciation for
 the continued assistance and cooperation received from the Indian and
 International Financial Institutions, Banks, Government Authorities and
 Shareholders. Your Directors are also grateful to the customers,
 suppliers and business associates of your Company for their continued
 co-operation and support. Your Directors wish to place on record their
 deep sense of appreciation to all the employees for their commendable
 teamwork and enthusiastic contribution to the growth of Company’s
 business during the year.
 
                                    For and on behalf of the Board
 
 Place : Ahmedabad                       Rajnikant          T. Vyas
 Date  : 22nd May, 2008                 Chairman & Managing Director