1.  Company overview
 
 NATCO Pharma Limited (the Company or NATCO) incorporated on 19
 September 1981 in accordance with the provisions of the Indian
 Companies Act, 1956 (the Act) is a limited liability company. The
 Company was originally incorporated as Natco Fine Pharmaceuticals
 Private Limited changed its name to NATCO Pharma Limited, in 1994.
 
 The Company is primarily engaged in manufacturing of active
 pharmaceuticals ingredients and finished dosage formulations.
 
 2.  Commitments and contingent liabilities
 
                                                 As at             As at
                                        31 March, 2011    31 March, 2010
 
 Commitments
 
 Estimated amount of contracts 
 remaining to be executed on 
 capital account and not 
 provided for (net of advances)            380,896,183        95,245,770
 
 Contingent liabilities
 
 Disputed statutory liabilities            147,407,308        51,883,190
 
 Claims against the Company not 
 acknowledged as debts                     156,290,615       157,052,546
 
 3. The Company has not recognized MAT credit available to it as it
 opines that it would not be in a position to utilize such credit in
 view of the continued tax holiday being available for the profits
 arising out of manufacture and sales made from two of its manufacturing
 facilities. In the eventuality of the Company being made to pay tax on
 a regular basis, it would make suitable adjustments by taking credit
 for the MAT entitlement available at such point of time.
 
 4.  Secured loans
 
 Loans availed from the financial institutions and banks are fully
 secured by way of hypothecation of fixed assets, capital work in
 progress and other assets of the Company. The term loans from banks are
 further guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing
 Director in his personal capacity.
 
 5.  Unsecured loans
 
 Unsecured loans represent loans taken from Citibank amounting to Rs.Nil
 (2010: Rs.50,000,000) and interest free sales tax deferment amounting to
 Rs.4,103,934 (2010: Rs.4,868,571), availed under the ''TARGET 2000'' Scheme
 of the State Government of Andhra Pradesh. The unsecured loan from
 Citibank is guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing
 Director in his personal capacity.
 
 6.  Government grants
 
 The Company has received Rs.200,000 (2010: Rs.3,000,000) towards the
 investment subsidy for the purpose of setting up and expansion of an
 industrial unit in the State of Uttaranchal.
 
 7.  Employee stock options
 
 The Company had instituted NATCO Stock Option Plan 2010 (ESOP 2010).
 The scheme was formulated in accordance with the Securities and
 Exchange Board of India (Employee Stock Option Scheme and Employee
 Stock Purchase Scheme) Guidelines, 1999 (SEBI Guidelines) issued by
 the Securities and Exchange Board of India (SEBI) and pursuant to the
 provisions of Section 81 (1A) and all other applicable provisions of
 the Act, and was duly approved by way of a special resolution passed in
 the annual general meeting of the members held on 30 September 2010,
 authorizing the Board to issue employee stock options, that are
 exercisable into not more than 600,000 equity shares of the Company to
 eligible employees based on specific recommendations of the
 Remuneration Committee under the plan. Each option comprises of one
 underlying equity share of Rs.10 each, however, no options were granted
 under the said plan as of 31 March 2011.
 
 8.  Employee benefits
 
 Provident fund
 
 During year ended 31 March 2011 the Company contributed Rs.27,822,377
 (2010: Rs.21,818,451) to the Provident Fund.
 
 Employee state insurance
 
 During year ended 31 March 2011 the Company contributed Rs.4,978,299
 (2010: Rs.2,752,233) to the Employee''s State Insurance Corporation.
 
 Gratuity
 
 The Company has obtained the actuarial valuation report in line with
 the requirements of Accounting Standard -15 ''Employee Benefits'', in
 respect of gratuity liability and the estimated liability as at 31
 March 2011 is provided in the books of accounts. The details of present
 value of obligations, current service cost and actuarial assumptions
 are given hereunder:
 
 The estimates of future salary increase, considered in actuarial
 valuation, take account of inflation, seniority, promotions and other
 relevant factors such as supply and demand in the employment market.
 The Company evaluates these assumptions annually based on its long term
 plans of growth and industry standards.
 
 Information relating to amounts recognized in the profit and loss
 account, change in fair value of plan assets was not disclosed in the
 report issued by the Life Insurance Corporation of India, hence the
 comparative information could not be disclosed.
 
 9. Segment reporting
 
 In accordance with AS 17 - Segment Reporting, segment information has
 been given in the consolidated financial statements of NATCO Pharma
 Limited and therefore no separate disclosure on segment information is
 given in these financial statements.
 
 10. Investments
 
 Investment in Time Cap Overseas Limited, Mauritius
 
 During the year ended 31 March 2011, the Company has entered into an
 arrangement with LevoMed Inc, (''LevoMed'') New Jersey, USA and has
 established a company viz., Time Cap Overseas Limited (''Time Cap), in
 the Republic of Mauritius. Pursuant to the terms of arrangement, the
 Company has paid and / or incurred preliminary expenses aggregating of
 Rs.30,770,188 to be adjusted towards subscription to the common stock of
 Time Cap. Pending allotment of shares, investment, by way of share
 application money has been accounted as investment in subsidiaries and
 has been considered for the purposes of preparation of consolidated
 financial statements of the Company and its subsidiaries for the year
 ended 31 March 2011.
 
 Investment in portfolio management services
 
 As at 31 March 2011 the Company has made an investment, aggregating to
 Rs.15,000,000 in the private equity opportunities fund of Anand Rathi
 Financial Services Limited (ARFSL). By virtue of shareholders''
 agreement and share subscription agreement, both dated 29 November
 2010, ARFSL has invested, among others, the investment made by the
 Company, in the Compulsorily Convertible Preference Shares of
 Ravindranath GE Medical Associates Private Limited. The company''s
 investment in the private equity opportunities fund of ARFSL provides
 for a return of 20% in excess of 16% on a gross pre-tax IRR basis.  In
 the absence of reasonable certainty of realization of return, no income
 was accrued on such investment for the year ended 31 March 2011.
 
 Sale of partnership interest in K & C Pharmacy, United States of
 America
 
 On 6 December 2010, K & C Pharmacy, USA, a general partnership firm, in
 which the Company has a substantial interest, has sold its only Drug
 Store to Crystal Drugs, Inc. Pending formal dissolution of the said
 firm, remaining investment in the firm is carried at cost based on the
 net assets of the firm as at 31 March 2011.
 
 11.  Payable to micro enterprises and small enterprises
 
 On the basis of the information and records available with management,
 there are no dues/ overdue principal amounts payable to micro and small
 enterprises as at 31 March 2011 and there is no interest is paid /
 payable for the year ended 31 March 2011.
 
 12.  Prior year comparatives
 
 The previous year figures are regrouped /rearranged to confirm to
 current period presentation.