Elder Pharmaceuticals

The Directors are pleased to present this the Twenty Fifth Annual
 Report of the Company together with the audited Accounts for the year
 ended 31st March 2008. The working results of the Company for the year
 ended 31st March 2008 vis-a-vis those of the previous year are
 summarized below:
 
 FINANCIAL RESULTS                  Year ended     Year ended
                                    31.03.2008     31.03.2007
                                  (Rs. In Lacs)  (Rs. In Lacs)
 
 1.  Sales and other Income            55636.33       45395.92
 
 2.  Profit before Tax                  7857.89        6109.56
 
 3.  Less: Provision for Tax
 
     Current Year                        875.00         625.00
 
     Deferred Tax                        (31.69)         57.55
 
     Fringe Benefit Tax                  150.00         150.00
 
 4.  Profit after Tax                   6864.58        5277.01
 
 5.  Less: Prior year Tax adjustments   (105.19)        354.10
 
 6.  Add: Profit as per the last
 
     Balance Sheet                     10073.30        6195.87
 
 7.  Profit available for appropriation 17043.07      11118.78
     Out of which Directors recommend 
     Appropriation as under:
 
 a) Proposed Dividend                     471.44       464.24
 
 b) Tax on Dividend                        80.12        79.24
 
 c) Transfer to General Reserve           500.00       500.00
 
 d) Surplus carried forward to
    Balance Sheet                       15991.51     10073.30
 
 Your Company reached Sales Turnover of Rs. 55636.33 lacs during the
 year under review which represents increase of Rs. 10240.41 lacs over
 the previous year which increase is equivalent to 22.56%. The pre and
 post tax profits were also higher at Rs.7857.89 lacs and Rs. 6864.58
 lacs marking an increase of 28.62 and 30.08% respectively over the
 previous year.
 
 During the year under review the Company got associated with Cymbiotics
 of California, USA for marketing six of their patented products for
 Diabetes, Chronic pain, Skin Care, etc. and GNOSIS of Italy for
 marketing of SAMPURE an anti-arthritic product.  Additionally, the
 products in the therapeutic categories of anti- osteoporotic,
 antioxidant and cardiac care have also been licenced by GNOSIS to the
 Company.
 
 The Company, in January 2008, launched an in-licensed product HIBOR,
 a low molecular weight heparin for thromboembolic diseases, Deep Vein
 Thrombosis and prevention of clotting during hemodialysis. HIBOR is a
 research product of M/s. Rovi Pharmaceutical Laboratories of Spain and
 has received global acceptance.
 
 Another product called SHELCAL CT was launched by the Company in
 January 2008. A line extension of SHELCAL, it is indicated for patients
 with severe established osteoporosis with a pre-existing fracture with
 low levels of calcitriol.
 
 In February 2008, the Company launched another in-licensed product
 Phytomega, a patented conjugation of Phytosterols, Eicosapentaenoic
 Acid and Decosahexaenoic Acid for lifestyle changes in cases with risk
 factors for Coronary Heart Disease like Diabetes, Hypertension,
 Obesity, Metabolic Syndrome and symptomatic Carotid Artery Disease. It
 is also used as an adjunct to Statin or Fibrate therapy. It is worth
 noting that Phytomega has been given a new ingredient status by US FDA
 and has also won the Excellence award for its efficacy, safety,
 innovativeness and scientific merit.
 
 All the products of the Company including new introductions have been
 well accepted by the medical fraternity in India. The main therapeutic
 areas of interest to the Company continue to be Womens healthcare,
 Wound care, Neutraceuticals / Vitamin Supplements, Cardiology,
 Diabetes, Dermatology, Antibiotics and CNS.
 
 The Company has carried out expansion in its new manufacturing unit at
 Sela Qui near Dehradun in Uttarakhand. This plant is equipped for the
 manufacture of tablets and capsules. The said plant is now being
 upgraded as per UK MHRA specifications.  Another plant for manufacture
 of topical formulations at Paonta Sahib in Himachal Pradesh has
 commenced commercial production during the accounting year under
 review. However, the completion of the other unit in Uttarakhand at
 village Charba, Langha Road, near Dehradun for manufacture of
 formulations in injectibles in liquid ampoules form, oral liquids,
 tablets and Soft Gelatin dosage forms, is delayed because of lack of
 clarity to pollution clearance authorities in the state of Uttarakhand
 on special provisions applicable to the industries in Doon Valley and
 therefore, the work on the project was required to be stopped midway.
 The Company eventually had to obtain environmental clearances for the
 said unit from the Central Government and only thereafter the project
 work could be resumed after considerable lapse of time. The said plant
 is now being completed at additional costs as the same is also being
 made US FDA compliant. This plant is likely to be commissioned during
 the current financial year. Central Governments excise and income tax
 incentives continue to be available to all these units in the States of
 Uttarakhand and Himachal Pradesh.
 
 ALTERATION TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION:
 
 As per the decision of the shareholders at the 24th Annual General
 Meeting of the Company held on 27th September 2007 the Authorised Share
 Capital of the Company was increased from Rs.20.00 crores to Rs.30.00
 crores by creation of one crore new equity shares of a face value of
 Rs. 10/- each. Consequent upon this the Memorandum and Articles of
 Association of the Company were also amended.
 
 GLOBAL DEPOSITORY RECEIPTS:
 
 The Company had made an issue of Global Depository Receipts (GDRs) in
 the year 2004-05. Out of the total GDRs issued most of the GDRs have
 been converted into shares leaving only 71300 GDRs to be converted as
 on 31st March 2008. These GDRs of the Company continue to be quoted on
 the Luxembourg Stock Exchange, their quotation as on 31st March 2008
 being US$ 18.51.
 
 FURTHER ISSUE OF SHARE CAPITAL:
 
 At the 21st Annual General Meeting of the Company held on 28th
 September 2004 the Shareholders of the Company had approved Employees
 Stock Option Scheme called Elder ESOP 2004. On 28th March 2006 the
 Compensation Committee allotted 3,99,250 Options to eligible Grantees
 entitling them to subscribe for cash to one equity share of Rs.10/-
 each per Option granted at an Exercise Price of Rs.209/- per share
 inclusive of Rs.199/- per share as premium. These Options were to be
 exercised in four equal parts every three months upto 27th March 2008
 after initial Vesting Period of one year. Accordingly, Grantees have
 exercised their Options in respect of 285,748 equity shares of Rs.10/-
 each from 28th March 2007 to 27th March 2008. The paid up share capital
 of the Company after the last of the allotments of equity shares under
 ESOP made on 30th April 2008 stands increased to Rs.188,574,860/-.
 There are no Options outstanding as at 31st March 2008 and the Options
 that were granted but were not exercised within the prescribed period
 have lapsed. However, Elder ESOP 2004 still has a balance of 1,153,526
 shares for which Options can be issued to Employees.
 
 DIVIDEND.
 
 The Directors recommend a dividend of 25% for the year ended 31st March
 2008 and the same will be paid on or before 21st October 2008 to those
 shareholders whose names appear in the Register of Members as on 22nd
 September 2008.
 
 DIRECTORS.
 
 During the year under review the shareholders, at the 24th Annual
 General Meeting of the Company held on 27th September 2007, appointed
 Mr. Michael Bastian to the Office of Director whose period of office is
 liable to retirement by rotation.
 
 During the accounting year under review Mr. V. N. Paranjpe, Jt.
 Managing Director of the Company, resigned from the services of the
 Company for better prospects. He was relieved from the services of the
 Company from the close of business hours on 31st July 2007. The
 Directors wish to put no record their appreciation of the services
 rendered by Mr. Paranjpe to the Organisation.
 
 Dr. R. Srinivasan, an Independent Director, is due to retire by
 rotation at the ensuing Annual General Meeting of the Company but being
 eligible has offered himself for re-appointment.
 
 Dr. Joginder Singh Juneja, an Independent Director, is due to retire by
 rotation at the ensuing Annual General Meeting of the
 
 Company but being eligible has offered himself for re- appointment.
 
 Mr. Edoardo Richter, an Independent Director, is due to retire by
 rotation at the ensuing Annual General Meeting of the Company but being
 eligible has offered himself for re-appointment.
 
 As required under Clause 49 of the Listing Agreement the details of Dr.
 R. Srinivasan, Dr. Joginder Singh Juneja and Mr. Edoardo Richter,
 Directors due to retire by rotation at the ensuing Annual General
 Meeting but having offered for their re-appointment are given in the
 Report on Corporate Governance.
 
 AUDITORS:
 
 M/s. S. S. Khandelwal & Co., Chartered Accountants, Mumbai retire as
 the Auditors of the Company at the conclusion of the ensuing Annual
 General Meeting. They have signified their willingness to get
 re-appointed and have given a declaration that if re-appointed their
 appointment will be within the limits specified under Section 224(1
 )(B) of the Companies Act, 1956. On the recommendation of the Audit
 Committee, the Board proposes the re-appointment of M/s. S. S.
 Khandelwal & Co. as Auditors of the Company for the financial year
 2008-09. You are requested to appoint Auditors and fix their
 remuneration.
 
 The Directors have appointed M/s. Sevekari, Khare and Associates, Cost
 Accountants, Mumbai as Cost Auditors of the Company for the financial
 year 2008-09 and their appointment has been approved by the Central
 Government.
 
 JOINT VENTURES /SUBSIDIARIES/ INVESTMENTS
 
 The Company has decided to increase its stake from the existing 40% to
 49% in the Nepal Joint Venture which will at suitable time be further
 increased to 51%. It is proposed to change the name of the Joint
 Venture Company from existing Elder Universal Pharmaceuticals (Nepal)
 Private Limited to Elder Pharmaceuticals (Nepal) Private Limited.
 The said Joint Venture has one WHO GMP approved manufacturing facility
 for Cephalosporin formulations in oral solid form at Bahirawa in Nepal.
 Commercial production of the said manufacturing unit has already
 commenced and the products are already in the market. It is proposed to
 use this manufacturing site for procuring the Companys requirement of
 cephalosporin formulations in India. The second WHO GMP compliant
 manufacturing unit for general pharmaceutical formulations, also at
 Bahirawa adjoining the existing Cephalosporin plant, is ready and trial
 runs and mandatory stability studies are being conducted thereat. The
 said unit is likely to commence commercial operations in six months
 time.
 
 In both the above facilities the Company has apart from financial
 participation has also provided technical know-how and support for the
 project, WHO GMP procedures & records and for manufacturing and
 marketing of the products. While the Company extends its support to the
 local sales & marketing of the products in Nepal, export possibilities
 to nearby countries is also being explored.
 
 During the last accounting year the Company established a wholly owned
 subsidiary in the Jebel Ali Free Trade Zone, Dubai, U.A.E.  called
 ELDER INTERNATIONAL FZCO. The Company was incorporated in January 2007
 and its trading license was issued in March 2007 for para
 pharmaceuticals marketing. The Company has, through this subsidiary
 acquired 21% stake in NeutraHealth PLC, U.K., made investment in Vincom
 Pharmaceuticals Limited, Ghana, a 50% Joint Venture and has floated
 Elder Biomeda EAD, Bulgaria, a wholly owned subsidiary.
 
 During the year under review the Company, through its wholly owned
 subsidiary in Dubai, has acquired a 21% stake in Neutrahealth PLC, an
 AIM London Stock Exchange listed company. The said company has been a
 leading provider of neutraceutical products to the UK retail and
 practitioner markets.  This sector consisted of vitamins, minerals and
 supplements, functional foods, organic foods and alternative remedies.
 
 Neutrahealth PLC is a 23 million Sterling Pound turnover Company for
 the calendar year 2007. Recently, the said company acquired a
 manufacturing unit and has sold its OTC business.  The Company expects
 a lot of synergy between Neutrahealth and the Company by way of back
 end manufacturing of their products, introduction of some of the
 Companys major brands in the UK market and opening of some newer
 markets for Neutrahealths products through the Companys strategic
 partners.
 
 Mr. J. Saxena, Chairman and Managing Director of the Company has been
 appointed a Director on the Board of Neutrahealth PLC w.e.f. 20th
 August 2007.
 
 The Company has formed a wholly owned subsidiary in Cyprus by the name
 Somerta Holdings Co. Limited with a capital of Euro 5,000. During the
 year under review there was no activity carried out in the said
 subsidiary.
 
 The Company through the Dubai subsidiary has established a wholly owned
 subsidiary in Bulgaria by the name Elder Biomeda EAD with the object
 of acquiring 100% stake in three Biomeda Group companies for a total
 investment of Euro 3.12 million. The Biomeda Group has a manufacturing
 company having a unit for manufacture of tablets, a distribution
 company for pharmaceutical and allied products and a logistics support
 company. The existing owners of Biomeda Group companies will in
 exchange be given 49% shares of Elder Biomeda EAD.  Bulgaria being a
 part of European Union now it offers an excellent opportunity for the
 Company to enter Eastern European as well as CIS countries.
 
 BANKERS AND FINANCIAL INSTITUTIONS:
 
 The consortium of banks for working capital comprising State Bank of
 India, Axis Bank Ltd., Development Credit Bank Ltd., Syndicate Bank,
 Standard Chartered Bank and DBS Bank Ltd.  with State Bank of India as
 its leader have sanctioned additional working capital facilities to the
 Company during the current accounting year.
 
 During the year under review the Company has availed an External
 Commercial Borrowing of USD 15 million from DBS Bank Ltd. which amount
 has been utilized for lending to Companys Dubai Subsidiary through
 which overseas investments and acquisitions are being made.
 
 During the year under review State Bank of India, London Branch, has
 sanctioned a loan of USD 15 million to Companys Dubai Subsidiary for
 which the Company has given its Corporate Guarantee for an amount of
 USD 35 million.
 
 Your Directors are thankful to the Banks and Financial Institutions for
 their continued and timely support to the Company.
 
 EXPORT HOUSE STATUS:
 
 The Company continues to enjoy Export House status. The Companys
 products are exported to African and South Asian markets. The
 registration procedures are presently going on in a number of countries
 and once registration formalities are completed, the Companys exports
 are expected to increase.
 
 CREDIT RATING BY CARE:
 
 The Commercial Paper (CP) programme of the Company continues to be
 rated by Credit Analysis and Research Limited (CARE) and has allotted a
 rating as PR1 +  (PR One Plus) for an increased amount of Rs.75.00
 crores. As at 31st March 2008 the Company had issued CPs to the extent
 of Rs.50.00 crores and placed them with investors at the most
 competitive rates of interest. The subscription amount of the
 Commercial Papers is utilized for earmarking working capital limits.
 This has helped your Company to reduce the interest cost.
 
 ISO / WHO GMP ACCREDITATION:
 
 The Company continues to be certified as conforming to ISO 9001 : 2000
 for development, manufacturing and marketing of pharmaceutical
 products.
 
 The Companys Bulk Drug plant at Patalganga continues to be accredited
 as WHO-GMP compliant.
 
 DIRECTORS RESPONSIBILITY STATEMENT: The Directors declare and confirm:
 
 a) that in preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures;
 
 b) that the Directors had 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 on 31st March
 2008 and the profit of the Company for that year.
 
 c) That the Directors had taken proper and sufficient care for
 maintenance of adequate accounting records for the year ended 31st3
 March 2008 in accordance with the provisions of the Companies Act, 1956
 for safeguarding the assets of the Company and for prevention and
 detection of fraud and other irregularities.
 
 d) That the Directors had prepared the accounts for the financial year
 ended 31st march 2008 on a going concern basis.
 
 CORPORATE GOVERNANCE:
 
 In pursuance of the system of Corporate Governance instituted by SEBI
 and forming part of the Listing Agreement with the Stock Exchanges, a
 report thereon is separately attached to this report.
 
 RESEARCH AND DEVELOPMENT ACTIVITY:
 
 The Research and Development activities of the Company continue to be
 recognized by the Department of Science and Technology, Government of
 India. The Research and Development laboratory of the Company has
 successfully developed certain import substitute molecules and has been
 working on development of a number of other molecules. It has also been
 continuously working on process developments of the molecules already
 developed by it. The Company has applied for five process patents for
 various APIs during the year under review. The Company enjoys approval
 to its Research & Development Facility from the Secretary, DSIR, u/s 35
 (2AB) of the Income Tax Act, 1961 for claiming rebate on the expenses
 incurred by the Company on Research and Development.
 
 INSURANCE OF ASSETS:
 
 All the fixed assets, finished goods, semi-finished goods, raw
 materials, packing materials and other goods and assets of the Company
 lying at different locations and in-transit have been insured against
 fire, burglary, transit and allied risks.
 
 CAPITALISATION:
 
 During the year under review the Company has added fixed assets worth
 Rs. 3972.18 lacs whereas disposal and adjustment of fixed assets
 amounted to Rs. 56.77 lacs. The Company had capital work in progress
 amounting to Rs. 16335.57 lacs as at 31st March 2008 at various project
 sites.
 
 DEPOSITS:
 
 The Companys public deposit scheme has been receiving good response
 from depositors. The Company is regular in repayment of principal and
 payment of interest and has not defaulted therein.  The Company has
 been complying with the provisions of Section 58A of the Companies Act,
 1956 and the rules made thereunder.  As at 31st March 2008 the fixed
 deposits outstanding under the public deposit scheme were Rs. 1148.00
 lacs.
 
 AUDITORS REPORT:
 
 Note(s) on accounts as referred to in the Auditors Report is / are
 self-explanatory and therefore do not call for further comments or
 explanation.
 
 PARTICULARS OF EMPLOYEES:
 
 Particulars of remuneration paid to the employees as required by
 Section 217(2A) of the Companies Act, 1956 read with Companies
 (Particulars of Employees) Rules, 1975 as amended are set out in a
 separate statement attached hereto and forms part of this report for
 the year ended 31st March 2008.
 
 EMPLOYER / EMPLOYEE RELATIONS:
 
 The relationship with the workers of the Companys manufacturing units
 and other staff continues to be cordial. A new settlement reached with
 the workers of the Nerul plant of the Company effective 1st April 2006
 is operative for a period of four years. The Directors wish to place on
 record their sincere appreciation and gratitude for the services
 rendered by the workers and staff at all levels.
 
 EMPLOYEE STOCK OPTION PLAN:
 
 The Shareholders at the 21st Annual General Meeting of the Company
 passed a resolution approving the Employee Stock Option Plan called
 Elder ESOP 2004. A total of 1,439,274 equity shares of the Company
 are available under Elder ESOP 2004 for grant of Options at an exercise
 price of 15% discount to the market rate. The Company had granted
 Options in respect of 399,250 shares which were to be exercised in four
 equal parts every three months ending on 27m March 2008 at an exercise
 price of Rs.209/- per share inclusive of a premium of Rs.199/- per
 share. Out of the Options so granted 285,748 Options were exercised
 during the accounting year under review. Options that were not
 exercised within the stipulated period have lapsed.  However, there are
 1,153,526 shares still available for which Options can be granted to
 Employees under Elder ESOP 2004.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
 EARNINGS AND OUTGO:
 
 In accordance with Rule 2 of the Companies (Disclosure of Particulars
 in the Report of the Board of Directors) Rules, 1988 as applicable, the
 particulars relating to conservation of energy and technology
 absorption are given in Annexure 1 to this Report.
 
 The foreign exchange outgo during the year under review was Rs. 4557.27
 lacs for imports of raw materials / trading items, Rs.  22.59 lacs for
 foreign travel, Rs.190.92 lacs for interest paid on External Commercial
 Borrowing and Rs.40.77 lacs for professional fees. The foreign exchange
 earnings during the year were Rs.2330.94 lacs on account of exports.
 
                               For and on behalf of the Board
 
                                          J. Saxena
 Mumbai, 26th August, 2008                Chairman