The Directors have pleasure in placing before you the Twenty first
 Annual Report of the Company together with the Audited Accounts for the
 year ended 31st March 2011.
 
 FINANCIAL RESULTS
 
                                               (Rs. in Crores)
 
 Particulars                          2010-11          2009-10
 
 Net Sales                            1305.44          929.29
 
 Other operating income                 13.08           17.36
 
 Other income                           25.52           13.33
 
 Total Income                         1344.04          959.98
 
 Expenditure                           809.46          517.43
 
 PBDIT                                 534.58          442.55
 
 Finance charges                         2.18            2.76
 
 Depreciation                           53.35           51.45
 
 Profit before tax (PBT)               479.05          388.34 
 Provision for tax
 
 Current Tax                            39.20           31.20
 
 MAT Credit Utilisation                  1.28            9.60
 
 Deferred Tax                            3.00            3.34
 
 Profit after tax (PAT)                435.57          344.20 
 
 Earnings per Share (EPS)
 
 a) Basic                               32.90           26.40
 
 b) Diluted                             32.88           26.35
 
 During the year, Divi achieved a turnover of Rs.1305 crores as against
 Rs.929 crores during the previous year resulting in a growth of 41%.
 Exports constituted 93% of total turnover as against 91% during the
 last year. Profit after Tax (PAT) for the year amounted to Rs.436
 crores as against Rs. 344 crores during the last year, a growth of 27%.
 
 Business has grown satisfactorily across all the segments, especially
 during the second half. The issue of destocking of inventory at our
 customers seen during the last year is done with and we see normal flow
 of business across the product portfolio of the company.
 
 DIVIDEND
 
 Your Directors are pleased to recommend a dividend of Rs.10/- per
 equity share of Rs.2/- each, i.e., 500% for the year 2010-11 subject to
 approval of members.
 
 TAXATION
 
 We made a provision of Rs. 40.48 crores towards Income-tax this year
 (including MAT credit utilization of Rs.1.28 crores.  Provision for
 last year amounted to Rs.40.80 crores including a MAT credit
 utilization of Rs.9.60 crores.
 
 An amount of Rs. 3.00 crores has been provided towards Deferred Tax
 Liability during the year as against Rs. 3.34 crores during the
 previous year.
 
 EQUITY CAPITAL
 
 During the year, we allotted 4,50,965 equity shares of Rs.2 each to
 employees on exercise of their stock options.
 
 As a result of the the allotment of shares under ESOP scheme, the
 paid-up equity capital of the company has increased by Rs.0.09 crores
 to Rs.26.52 crores and an addition of Rs. 7.59 crores to the Share
 Premium Account.
 
 EMPLOYEE STOCK OPTION SCHEME
 
 The Employee Stock Option Scheme (ESOP 2006) approved by the company
 provided for vesting of stock options in 4 tranches. The fourth/last
 tranche under this Scheme was vested on 13th March, 2010 and a majority
 of the options have been exercised by the employees. There are 1,39,180
 outstanding options yet to be exercised as at the end of the year.
 
 As per the provisions of Securities and Exchange Board of India
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme),
 Guidelines, 1999, disclosures with respect to Scheme are given in the
 Annexure - I to this report.
 
 SUBSIDIARIES
 
 Your company has two wholly owned subsidiaries viz., M/s.  Divis
 Laboratories (USA) Inc., in USA and M/s. Divis Laboratories Europe AG
 in Switzerland for marketing its nutraceutical products and a greater
 reach to customers within these regions. While loss for current year at
 Divis Laboratories (USA) is Rs.0.63 crores, the loss at Divis
 Laboratories Europe is Rs.5.66 crores.
 
 Auditors of these subsidiaries have observed that they have negative
 networth and suffer from deficiency of cash for continuing operations
 as a going-concern without the support of the parent. The losses in the
 subsidiaries are on account of low level of operations at the
 subsidiaries. With the expected increase in the level of operations,
 the subsidiaries would be getting into cash profits shortly.
 
 During the year, we have enhanced the equity capital in Divis
 Laboratories (USA) Inc., by converting Rs.2.23 crores from out of the
 loans given to the subsidiary into equity capital. We would also be
 increasing the equity capital of Divis Laboratories Europe AG during
 the next fiscal.
 
 In accordance with the general circular issued by the Ministry of
 Corporate Affairs, Government of India, the Balance Sheet, Profit and
 Loss Account and other documents of the subsidiary companies are not
 being attached with the Balance Sheet of the Company. Shareholders who
 wish to have a copy of the full report and accounts of the subsidiaries
 will be provided the same on receipt of a written request from them.
 These documents will be put up on the website of the company viz.,
 www.divislaboratories.com and will also be available for inspection at
 the Registered Office of the Company and that of the respective
 subsidiary companies on any working day during business hours. The
 Consolidate Financial Statements presented by the Company include the
 financial results of its subsidiary companies.
 
 CONSOLIDATED ACCOUNTS
 
 As stipulated in the listing agreement with the stock exchanges, the
 consolidated financial statements have been prepared by the Company in
 accordance with the relevant accounting standards under the Companies
 Act, 1956. The audited consolidated financial statements together with
 Auditors Report thereon form part of the Annual report. The
 consolidated net profits after tax of the company and its subsidiaries
 for the year amounted to Rs.429.27 crores as compared to Rs.340.33
 crores in the previous year representing a basic earning per share of
 Rs.32.42 and Rs.32.41 per share on diluted basis for the current year
 as against Rs. 26.11 and Rs. 26.06 respectively for the previous year.
 
 DIRECTORS
 
 Sri G.Venkata Rao, Dr. G. Suresh Kumar and Sri Madhusudana Rao Divi
 will retire by rotation at the ensuing Annual General Meeting and,
 being eligible, offer themselves for re- appointment.
 
 Dr. P. Gundu Rao has resigned from his whole-time employment with the
 company as he wishes to relocate to the U.S.A. to spend time with his
 family. Dr. Gundu Rao will, however, continue as a Non-Executive
 Director of the company.
 
 DIRECTORS RESPONSIBILITY REPORT
 
 As required under Section 217 (2AA) of the Companies Act, 1956,
 Directors of your company hereby state and confirm that:
 
 a) the applicable accounting standards have been followed in the
 preparation of the annual accounts
 
 b) the accounting policies selected were applied consistently and the
 judgements and estimates made are reasonable and prudent so as to give
 a true and fair view of the state of affairs of the Company as at 31st
 March, 2011 and its profit for the year ended on that date;
 
 c) proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Act for safeguarding the assets of the Company and for preventing and
 detecting fraud and other irregularities.
 
 d) the annual accounts have been prepared on a going concern basis.
 
 AUDITORS
 
 The Auditors, M/s. P.V.R.K. Nageswara Rao & Co., Chartered Accountants,
 Hyderabad retire at the ensuing Annual General meeting and, being
 eligible, offer themselves for reappointment.
 
 COST AUDIT
 
 Pursuant to Section 233B of the Companies Act, 1956, the Central
 Government has prescribed Cost Audit for the company.  Based on
 recommendations of the audit committee and subject to the approval of
 the Central Government, M/s. EVS & Associates, Cost Accountants,
 Hyderabad have been appointed as Cost Auditors for the year.
 
 The relevant cost audit report for the financial year 2009-10 was filed
 within the due date on 20th August, 2010. The due date for filing the
 report was 27th September, 2010.
 
 MANAGEMENT DISUCSSION AND ANALYSIS
 
 A report on Management Discussion & Analysis is provided as part of
 this Annual Report.
 
 CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION
 
 A report on Corporate Governance is included as a part of this Annual
 Report.
 
 RELATED PARTY TRANSACTIONS
 
 As a matter of policy, your Company carries out transactions with
 related parties on an arms-length basis. Statement of these
 transactions is given in the Notes to Accounts attached in compliance
 of Accounting Standard No. AS-18.
 
 FIXED DEPOSITS
 
 Your Directors wish to inform that the Company has not accepted any
 deposits from public covered by provisions of Section 58A of the
 Companies Act, 1956.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION
 
 Particulars required under Section 217 (1) (e) of the Companies Act,
 1956 read with Rule 2 of the Companies (Disclosure of Particulars in
 the Report of Board of Directors) Rules, 1988 is given in the Annexure
 - II to this report.
 
 HUMAN RESOURCES
 
 Particulars of employees required to be furnished under Section 217
 (2A) of the Companies Act, 1956 read with the Companies (Particulars of
 Employees) Rules, 1975 are given in the Annexure - III attached and
 forms part of this Report.
 
 ACKNOWLEDGEMENTS
 
 We thank all our customers, suppliers and investors for their continued
 support. We also gratefully acknowledge the continued assistance and
 co-operation extended by Government authorities, financial institutions
 and banks to the company. The Board expresses its appreciation for the
 dedication and commitment extended by its employees and their
 contribution to the growth and progress of the company.
 
                            For and on behalf of the Board of Directors
 
 Hyderabad                                   Dr. Murali K. Divi
 
 20th May, 2011                         Chairman & Managing Director