Jubilant Organosys

Leveraging the Integrated Business Solutions Model
 
 Dear Shareholders,
 
 The Financial Year 2008-09 has been an unprecedented year that has seen
 severe and sudden correction in the health of the world economy. Given
 the slowdown that has now spread across boundaries and industries, the
 growth engines of the world economy, India and China, are expected to
 post 5-8% growth this year. The response of Governments has been
 swift-there are a series of measures in place and on their way, to kick
 start growth and demand. The effects of the same will become apparent
 in the coming months.
 
 The Innovator companies are increasingly looking for outsourcing and
 India emerges as a preferred outsourcing destination, since these
 companies are facing multiple challenges such as high R&D cost,
 declining sales volumes, drying of product pipeline, growing patent
 expiry, increase in generic competition and low availability of funds.
 
 India as a cost-effective and high quality manufacturing and research
 hub offers multiple advantages like availability of a large talent
 pool, chemistry and biology skills, expertise in pre-clinical
 development, strengthened IPR environment, diverse patient profile and
 a large English speaking population. Indian Custom Research &
 Manufacturing Services (CRAMS) companies are expected to benefit from
 the global economic slowdown as big pharmaceutical companies step up
 outsourcing to cut costs and improve their operational efficiency in
 these challenging times.
 
 We are happy to conclude FY2009 with record topline growth, which is
 fuelled by the robust performance of our Pharmaceuticals and Life
 Sciences Products and Services (PLSPS) business. Despite the global
 economic slowdown, the Company has reported robust organic growth due
 to its strategic thrust on moving up the value chain in its PLSPS
 business. The earnings from this segment will be strengthened further
 with positive outcomes from the drug discovery and development
 services. Our focus on driving synergies in capacity utilisation and
 business collaboration with global pharmaceuticals and other life
 sciences companies will enable us to build future growth momentum.
 
 Jubilant Strategy for Growth The Companys core advantage is that it
 offers an integrated business model offering services at every stage of
 the pharmaceuticals value chain. Jubilant Organosys, the largest
 integrated Custom Research & Manufacturing Services (CRAMS) and a
 leading Drug Discovery and Development Services (DDDS) Company out of
 India has successfully translated the India advantages into value
 offerings for its customers.
 
 Jubilants main strategy for growth has been to move up the value chain
 in terms of both value of products & services and geography. We have
 achieved this through vertical & horizontal integration for products &
 services. In terms of geography, we have moved up to high value
 regulated markets of USA, EU & Japan.
 
 The Company has built a strong sustainable business model through
 consistent organic growth and in-organic expansion by acquiring niche
 businesses in developed markets like USA, Canada and Europe.
 
 Strategic Focus Areas
 
 - The Company is leveraging upon its cost leadership and in-house
 research capabilities to enhance its global leadership position in
 pyridine and its derivatives.
 
 - Jubilant is focusing on maximising capacity utilisation by becoming
 the preferred supplier to most of the major pharmaceutical and biotech
 companies by providing multi- location advantage.
 
 - The Company is well-positioned to fortify the radiopharmaceuticals
 business by expanding its geographical reach and its niche product
 portfolio. Sestamibi, the key product, is expected to be launched in
 USA during Q1, FY2010 and is also approved in Canada, where it will be
 launched after patent expiry in July 2009. The launch of this product
 is expected to provide a fillip to this business.
 
 - For allergenic products, the focus is on enhancing market share of
 the existing products and increasing the line-up of high margin
 products.
 
 - The Company is scaling up its filings for Active Pharmaceutical
 Ingredients (APIs) and generic business as it is well placed to
 manufacture a wide range of formulations at its world class
 manufacturing facilities in India and USA.
 
 - DDDS is being developed as the next growth engine. Jubilant has
 already partnered with several leading pharmaceutical companies such as
 Amgen, Lilly, AstraZeneca, and many others for research collaborations.
 We intend to offer integrated drug discovery solutions by providing
 cost efficiencies in managing research collaborations.
 
 The Company after establishing itself as an outsourcing partner of
 choice for pharmaceuticals and life sciences products is now leveraging
 its capabilities to position itself as an Innovation Partner of
 choice to the global innovator pharmaceutical companies to help them
 accelerate their quest for discovering medicines for unmet medical
 needs.
 
 Business Review
 
 Focus on pharmaceuticals- Jubilant approach to growth
 
 The all-round growth in outsourcing business is the outcome of our
 strategic focus on constantly moving up the value chain to offer value
 added Pharmaceuticals and Life Sciences Products and Services to our
 customers.
 
 For FY2009, Jubilant recorded a topline growth of 41.3% at Rs. 35,180
 million which was led by the robust performance of Pharmaceuticals and
 Life Sciences Products and Services (PLSPS) business which accounted
 for Rs. 23,237 million, recording a growth of 51.9%. Revenue from
 Industrial and Performance Products (IPP) business grew by 24.6% to Rs.
 11,943 million.  The operating EBITDA was at Rs. 6,148 million with
 operating EBITDA margin of 17.5% overall. The PLSPS EBITDA margin was
 23.9%, while IPP EBITDA margin was lower at 11.5%, as an outcome of the
 global slowdown.
 
 For FY2009, the Board of Directors of the Company recommended a
 dividend of 150% (same as in the previous year) on fully paid up equity
 shares of Rs. 1 each, for the year ended March 31, 2009.
 
 The growth of our Pharmaceuticals and Life Sciences business was
 largely driven by CRAMS business that grew by 50%. Despite the global
 challenges, our CRAMS business did not witness any slowdown during the
 year. The future of this business is assured as the Company has a
 strong order book position worth USD 750 million to be serviced over
 the next five years. We plan to invest Rs. 2,500 million to augment our
 capacities for APIs and Proprietary Products and to ensure the growth
 of this business.
 
 We have further expanded our offerings through Contract
 
 Manufacturing of sterile injectables & non-sterile products and
 radiopharmaceuticals in North America. This was made possible through
 the integration of our two entities, Hollister-Stier and Draxis into
 two business verticals. The Company is now placed amongst the top 5
 contract manufacturers of sterile injectables in North America.
 
 Our Active Pharmaceutical Ingredients (APIs) business focussing on key
 therapeutic areas of Central Nervous System (CNS),
 
 Cardiovascular System (CVS), Gastro- Intestinal (GI) and
 Anti-Infectives, recorded a remarkable growth of 36.6% during the year.
 This is expected to gain momentum on the back of 33 Drug Master Files
 (DMFs) and 17 European Drug Master Files (EDMFs) filed during the year
 in the US and Europe, respectively.
 
 Our Drug Discovery and Development Services (DDDS) business has been
 well positioned to collaborate with large global innovator
 pharmaceuticals, biotech and life sciences companies.  Through the
 integration of our three subsidiaries Jubilant Biosys Ltd., Jubilant
 Chemsys Ltd. and Clinsys Clinical Research Ltd. in this space, we have
 built robust capabilities in the areas of discovery technologies,
 discovery research and drug development. We offer functional
 capabilities to our partners and deliver outcomes in the most
 efficient, time effective and innovative manner with a focus on
 therapeutic value creation.  This business made noteworthy progress
 during the year by entering into several collaborations with leading
 global innovator pharmaceutical companies. The revenues from this
 business stood at Rs. 2,415 million during FY2009.  We are confident of
 DDDS business scaling up to become a powerful growth engine for the
 Companys pharmaceuticals and life sciences business.
 
 Our Generics business which grew at 68% during the year currently
 focuses only on highly regulated markets of USA and Europe. It is
 poised to scale up further by leveraging upon our backward integration
 capabilities and the Abbreviated New Drug Application (ANDA) pipeline.
 
 During the year, we have also made significant progress in the
 healthcare business, the highest end of the pharmaceuticals value
 chain. The revenue from this business, though small at this moment, is
 a good beginning. Besides two functional hospitals, a new multi super
 speciality 120 bed hospital is likely to be commissioned in the state
 of West Bengal, in the first half of FY2010.
 
 Industrial & Performance Products (IPP) Business
 
 Given our integrated presence in the field, we have been able to
 achieve revenue growth of 24.6% from the IPP business, despite the
 overall slowdown in the latter half of FY2009. This business comprises
 three sub- segments: Acetyls; Food Polymers, Animal Nutrition &
 Fertilizers and Performance Polymers. The Acetyls business that was
 impacted the most is showing signs of recovery. In Food Polymers,
 Animal Nutrition & Fertilizers business, we have expanded our
 capacities to fuel future growth. In performance products business, we
 are rationalising our product portfolio to target better margins from
 this business in FY2010.
 
 Outlook for FY2010
 
 The Company is well placed to report a steady top-line growth of over
 15% in FY2010, driven by the PLSPS business. The growth will be led by
 expected new product launches in the radiopharmaceuticals business, new
 customer approvals in the Contract Manufacturing Operations (CMO)
 business for sterile and non-sterile products and robust revenue stream
 from Drug Discovery & Development Services (DDDS).
 
 There will be a steady growth in EBITDA margin in FY2010 at 20% driven
 by higher capacity utilisation, expanded global customer reach,
 efficient supply chain management, focus on working capital
 rationalisation & various initiatives for cost reduction and
 productivity enhancement through six-sigma measures. Our PLSPS segment
 is expected to post an EBITDA margin of 27% led by CRAMS and DDDS
 businesses, whereas the IPP segment EBITDA is expected to be at 11%,
 due to the current economic slowdown. The Capital expenditure for
 FY2010 at Rs. 2,500 million is planned to augment the existing CRAMS
 business capacities.
 
 We stay committed to deliver value to our partners by leveraging upon
 innovation at every step of the pharmaceuticals value chain. We would
 like to thank our independent directors for their valuable contribution
 and our valued customers, vendors, bankers and shareholders for their
 continuous support.
 
 On behalf of the Board, we pay tribute to Mr. Bodhishwar Rai, one of
 the Directors of the Company, who passed away in October, 2008. He was
 associated with the Company for more than a decade. During his tenure
 as Director and Chairman of Audit Committee, the Company benefitted
 immensely from his vast experience and invaluable guidance.
 
 As we bid farewell to Mr S N Singh, Executive Director, Chemicals, we
 would like to appreciate the contribution made by him during his 28
 years of association with the Company and as a distinguished member of
 the board for the last ten years. He has played a significant role in
 shaping the Company as a leader in the Chemicals business. We would
 like to thank him for his valuable contribution towards the Companys
 remarkable growth during his tenure. We extend our best wishes to him
 for future and look forward to his continued association with the
 Company as a goodwill ambassador.
 
 The progress of the Company during challenging times is an outcome of
 the efforts of our global employee base of close to 6,000 people, who
 work diligently to charter the success story of Jubilant Organosys and
 all related entities operating in India, China, USA, Canada and Europe.
 We expect our people, the human assets of the Company, to stretch
 further and deliver in line with the Companys growth ambitions.
 
 Best Wishes & Regards,
 
 Shyam S Bhartia                       Hari S Bhartia
 
 Chairman & Managing Director          Co-Chairman & Managing Director