Nectar Lifesciences

The Directors have pleasure in presenting the 13th Annual Report
 together with the audited accounts of Nectar Lifesciences Limited
 (Neclife or Nectar or the Company) for the financial year ended
 March 31, 2008.
 
                                             (Rs. in million)
                               As on March 31, 2008 As on March 31, 2007
 
 Sales and other income                  7,874.44           4,873.42
 
 Profit before interest and depreciation 1,384.26             913.97
 
 Interest                                  273.67             186.98
 
 Depreciation                              193.43             104.45
 
 Profit before tax                         917.16             622.53
 
 Provision for tax                         104.38              64.61
 
 Provision for deferred tax                 81.96              73.36
 
 Provision for FBT                           1.58               0.98
 
 Income tax relating to earlier years       (3.41)            (15.43)
 
 MAT credit entitlement                   (104.38)             63.46)
 
 Profit after tax available for 
 appropriation                             837.03             562.47
 Appropriations:
 
 Proposed final dividend 40% (P/Y 20%)      60.90              29.77
 
 Tax on proposed dividend                   10.35               5.06
 
 Transfer to general reserve                85.00              57.00
 
 Balance c/f to balance sheet              680.77             470.64
 
 Operations
 
 During the year 2007-08, your Company achieved a sales turnover and
 other income of Rs. 7,874.44 mn, registering 61.58% increase over the
 previous year (Rs. 4,873.42 mn).  Income before interest and
 depreciation increased to Rs. 1,384.26 mn, registering 51.46% increase
 over the previous year (Rs. 913.97 mn). The net profit increased to Rs.
 837.03 mn registering 48.81% increase over the previous year (Rs.
 562.47 mn). Your Directors expect a consistent growth in the Companys
 performance in the years to come.
 
 The details of the various facilities of the Company are as under.
 
 1. API Facilities
 
 Nectar Lifesciences Limited is one of the leading manufacturers of the
 Cephalosporin range of products in India with a leadership in
 cephalosporins derived from 7-ACA and GCLE. The Companys core strength
 lies in manufacturing oral and sterile APIs, one of the few Indian
 companies to enjoy this flexibility.  The Company also has
 lyophilisation and crystallisation facilities, a distinct edge over its
 peers. Neclife possesses world-class API manufacturing facilities built
 in compliance with US-FDA guidelines, certified by the WHO GMP and
 awarded the ISO 9001:2000 quality management system certification by
 DNV Holland.
 
 The Companys principal production facility is located at Derabassi,
 Punjab, India and produces oral and sterile forms of Cephalosporins.
 
 Our current API capacity is as follows: Non-steriles: 500 MT/ Annum
 Steriles: 250 MT/ Annum Lyophilisation: 50 MT/ Annum Crystalline: 200
 MT/ Annum
 
 The Company is a recognised export house by the Indian Director
 General of Foreign Trade and also received WHO GMP certificate from the
 State Drugs controlling Authority, Directorate of Health And Family
 Welfare, Punjab, for its products.
 
 Cephalosporin segment:
 
 Nectars APIs account for about US million and thus hold about 40%
 market share in the domestic market and exports in the entire 3rd and
 4th generation Cephalosporin segment.  Nectar thus is among a few major
 integrated Cephalosporin players.
 
 Capacity expansion:
 
 In the current year, Nectar will undergo capacity expansion for
 
 Cefuroxime Axetil by debottlenecking all constraints to increase from
 the existing 132 MT/ annum to raise it to 150 MT/ annum.  The
 additional spray dryer capacity for Axetil Amorphous can be raised to
 120 MT/ annum from the existing 50 MT/ annum. This will create an
 excess of 60MT/ annum, which Nectar will share with innovator, generic
 pharma companies as well as own DMF, which will be filed in the later
 half of the year.
 
 Nectar currently has 70% of capacity for Cefixime in the domestic
 market with 180 MT/ annum. It also marks a major share in Cefpodoxime
 Proxetil with a capacity close to 54 MT/ annum.
 
 The Company aims to file DMF for three products (Phase I) this year
 both with US-FDA (US Food & Drug Administration) and EDQM (European
 Directorate of Quality & Medicines).
 
 After these filings, the Company expects to get inspected by the
 concerned authorities for further approvals and business initiation in
 regulated markets.
 
 New products:
 
 Nectar is committed to growth by penetration into new markets, as well
 as the introduction of new products in product baskets
 
 Some of the new products to be shortly introduced are:
 
 1) Cefditorin Pivoxil
 
 2) Cefcapene Pivoxil
 
 3) Cefdinir
 
 4) Cefpodoxime Acid
 
 2. Phytochemicals / herbal products
 
 The Company has a wide range of products like menthol crystals (BP/
 USP/IP/JP), distilled menthol oil (all grades), peppermint oil,
 dementholised peppermint oil, liquid menthol, menthol flakes/ powder,
 terpenes, menthones and CIS 3 hexanol.
 
 Till 2007-08, we had two plants, one in Jammu and the other in
 Derabassi. As per a market survey conducted by the Company, the market
 is expanding by 20-25% per annum and the Company is producing only
 about 15% of the total requirement which reflects the huge value to be
 unlocked from this sector.  Hence, Neclife took an ambitious decision
 of ramping up its scale and raise new a state-of-the-art facility,
 which marks building of the new facility Unit X, Derabassi. Unit X was
 commissioned on April 17, 2008 with additional capacity.
 
 Demand is rising and 2008-09 would see Nectar capturing a strong
 foothold in the market with its new facility, hoping to captures
 approximately 25% of the global market share, which increased the
 production capacity and value-added marketing.
 
 Practically all the other competitors manufacture and market menthol as
 a commodity except Nectar which for the first time created a unique
 “Pharma Centric” concept. All the products and derivatives made out of
 Mentha oil go through a series of cGMP manufacturing practices and
 processes followed by very stringent and rigorous quality control &
 quality assurance procedures and SOPs. This ensures that our final
 product is qualitatively the best in the world available at very
 competitive prices.
 
 Nectar will be the only Company to file a US Drug Master File (DMF) in
 2008 for pharmaceutical applications of menthol. This will help Nectar
 to enhance its realisation of menthol for pharmaceutical applications
 in the regulated markets and this will virtually become an assured
 business.
 
 3.  Empty Hard Gelatine Capsule
 
 The empty hard gelatine capsule unit is located at Baddi, Himachal
 Pradesh. Since there is no unit located in the tax- free zone either in
 Himachal Pradesh i.e. the state where this facility is located, or in
 the adjoining state of Uttaranchal right from day one of production,
 the entire production has always been completely sold out at relatively
 attractive prices during 2007- 08. Nectar is the only unit in
 Uttaranchal and Himachal Pradesh with fiscal benefits being passed on
 to the customer along with just-in-time (JIT) delivery. This reduces
 the operating cost for customers and secures capsule availability in a
 hilly terrain like Baddi. The facility would attain 100% production in
 the current year 2008-09 with installation of eighth machine which is
 currently under way.
 
 With the first phase of eight high-end automatic machines, the
 installed capacity is of producing three billion capsules per annum.
 
 Currently, Nectar is taking trials with the US and Europe- approved
 gelatine, which is available at very cost- competitive prices from two
 large Indian gelatine manufacturers.
 
 The most critical aspect for qualification for the overseas market is
 the compliance of gelatine which is most critical raw material.
 
 The Company will, accordingly, file EHGC DMF for all the markets and in
 particular, the regulated markets for the US, Europe and Japan within
 the current year and the benefits of this would accrue in the next FY
 2009-10. The realisations from regulated markets are very attractive
 and the pricing and the bottomline is 1.5-2 times, as compared to the
 Indian market.
 
 4.  Finished dosage facilities
 
 In Nectar, we possess both dedicated facilities in APIs as well as
 formulations on a global scale; the Finished Dosage Form (FDF) facility
 is located in Baddi in Himachal Pradesh (India). The facility is
 located across five acres i.e. 20000 sq. meters. The Nectar formulation
 facility has been designed in such a manner to comply with the cGMP
 requirements/guidelines of the US Food & Drug Association (FDA, UK
 MHRA, World Health Organisation (WHO), European Union regulations,
 Schedule-M requirements of the Indian Drugs & Cosmetics Act and other
 relevant regulations.
 
 Aimed at the advanced markets of the US, Europe and other regulated
 markets, the facility is well-equipped with the latest sophisticated
 equipment to produce and deliver products of high and consistent
 quality, adhering to stringent systems and processes for regulatory
 compliance. This highly specialised operation is handled by an
 experienced team delivering high performance.
 
 The installed production capacities for various Cephalosporin dosage
 forms are as under:
 
 Tablets (Coated/ Uncoated): 150 million* Capsules (Hardshell): 150
 million* Dry Oral Suspension (Bottles):15 million* Injectables (vials
 and amps): 30 million* *Capacity per annum considering single shift per
 day.
 
 Since Nectar is into high-quality APIs in GMP-compliant facility, the
 FDF venture is a logical step and completes its forward integration,
 acting as a one-stop for all our customers.
 
 We have got firm contracts and commitments with six top Indian pharma
 companies for manufacturing brands which were hitherto manufactured by
 our competitors, who undertake similar Principle to Principle (P2P)
 business both in the oral and sterile formulations of Cephalosporins.
 We have a unique position in the market with a differentiated value
 proposition and a robust business model. Currently in this P2P
 business, we stand out to be the best available partner for leading
 most domestic players, due to our core strengths:
 
 1) Best available infrastructure in industry.
 
 2) QA support with USFDA compliant facility for domestic players.
 
 Nectar will file two ANDAs (Abbreviated New DRUG Applications) in
 regulated markets of both USFDA and ECTD in the current year; many more
 are planned in a phased manner for the next year. As a way to enter the
 semi-regulated markets or ROW markets, Nectar will file almost close to
 50 or more dossiers, followed by registration in those countries.
 
 5.  Captive power plant
 
 The Company has put up an agro-based captive power generation plant at
 Derabassi (Unit II) which runs on husk and can be switched over to wood
 chips, saw dust, leaf cuttings, etc., with a capacity to generate 6-MW
 electricity power. The in-house captive power plant (co-generation of
 steam) commenced during Q2, 2007 has a tremendous energy saving
 potential for the Company. The energy bill is poised to reduce by 20%.
 
 6.  Corporate Quality Control and Research and Development Centre
 
 R&D is a vital and the backbone of every growing organisation, driving
 it towards innovation, project planning and implementation. To meet the
 R&D challenges in this industry, Neclife has set up an ultra-modern R&D
 centre to support the manufacturing facilities at Derabassi Unit II.
 
 Key prominent features of R&D are:
 
 - Ever-improving production processes being developed to obtain better
 yield and quality parameters.
 
 - State-of-the-art facility with requisite instruments.
 
 - Strong process development R&D capabilities.
 
 - Qualified scientists including PhDs and post graduates in analytical
 chemistry include patent holders in the Cephalosporin range
 
 Since R&D activities are done on a regular basis, more improvements and
 reduction in the cost in production would follow in with the passage of
 time.
 
 During the year, our R&D has developed the following technologies:
 
 1) NIP (Non-infringing route) for Cefuroxime Axetil DMF filling
 
 2) NIP for Ceftriaxone Na
 
 3) NIP for Cefixime Trihydrate
 
 Nectar aims to file for all the above DMFs in the current fiscal year.
 
 Through dedicated QA/QC cell and stringent quality parameters and
 checks, we have tremendously reduced customer rejections and customer
 complaints. Due to a focused and quality-centric approach, Nectar has
 been successful to retain key clients, in spite of heavy competition
 and has in fact broadened the customer base manifold.
 
 We had witnessed some successful audits from big customers during this
 year, who have committed and signed on dotted lines for continuous
 business in the times to come both in API, FDF and phytochemicals.
 
 Foreign Currency Convertible Bonds
 
 The Company has raised funds to the tune of US,000,000 by way of
 Foreign Currency Convertible Bonds (FCCBs), on 25.04.2006. The details
 of utilisation of such proceeds are disclosed to the Audit Committee.
 The Company has utilised these funds for purposes as stated in the
 Notice for convening the Extraordinary General Meeting held on
 15.12.2005, vide which approval of Members has been received for the
 issue of the said FCCBs. During the year, the conversion price has been
 adjusted to Rs. 263.22 w.e.f. 20.09.2007, upon declaration of the final
 dividend of 20% by the members in their Annual General Meeting held on
 28.09.2007.
 
 The Allotment Committee in its meeting held on 07.01.2008 has allotted
 339,430 equity shares of Rs. 10 each, upon conversion of Zero Coupon
 Convertible Bonds due 2011 (FCCBs) of US$ 2,000,000. Consequently, the
 paid-up equity share capital stand increased from Rs. 148,866,670
 (comprising 14,886,667 equity shares of Rs. 10 each) to Rs. 152,260,970
 (comprising 15,226,097 equity shares of Rs. 10 each.
 
 The equity share capital of the Company would further increase by
 5,600,609 equity shares to 20,826,706 equity shares, if the balance
 FCCBs of US million are converted at an adjusted price of Rs. 263.22
 at a predetermined exchange rate of US = Rs. 44.6725.
 
 Subsidiary Company
 
 The Company has the wholly owned subsidiary M/s Chempharma Private
 Limited incorporated in Sri Lanka. The operations of the said
 subsidiary remain suspended throughout the year and your Directors have
 decided to wind up its operations, because of its profitability in
 changed circumstances.
 
 A copy of Balance Sheet, a copy of Profit & Loss Account, a copy of
 Directors Report and a copy of Auditors report of its subsidiary
 company is attached. However, the statement pursuant to Section 212 of
 the Companies Act, 1956, in respect of the subsidiary is given on the
 next page:
 
 1.  Name of Subsidiary M/s Chempharma Private Limited
 
 2.  Financial year of subsidiary ended on March 31, 2008
 
 3.  Date from which it become subsidiary October 18, 2002
 
 4.  Shares of subsidiary held by the Company as on 31.03.2008:
 
 a.  Number and face value 9,614,165 shares of SLR. 10/- each
 
 b.  Extent of holding 100%
 
 5.  The net aggregate amount of subsidiary companys profit (loss) so
 for as it concerns the members of holding company
 
 a.  Not dealt with in holding companys accounts
 
 i.  For the financial year ended 31.03.2008 (Rs. 36/-)
 
 ii. Up to previous financial year of the subsidiary company Rs. 54/-
 
 b.  Dealt with in holding companys accounts
 
 i.  For the financial year ended 31.03.2008 Rs. 1,992,828/-
 
 ii. Up to previous financial year of the subsidiary company Rs.
 7,889,531/-
 
 Consolidated financial results
 
 As required under the Listing Agreement with the stock exchanges, the
 consolidated financial statements for the year ended on 31.03.2008 of
 the Company are attached. The consolidated financial statements include
 the financial statements of Nectar Lifesciences Limited, the parent
 Company and its subsidiary Company Chempharma (Private) Limited, Sri
 Lanka.
 
 Dividend
 
 During the current financial year, the Board of Directors has
 recommended the final dividend at 40% i.e. Rs. 4 per equity share
 aggregating to Rs. 60,904,388 of the Company, subject to the approval
 by the shareholders in the forthcoming Annual General Meeting. After
 the approval of the shareholders at the ensuing Annual General Meeting,
 the dividend would be paid to those shareholders, whose names appear on
 the Register of members as on 19.09.2008.
 
 As per the requirements of Section 205(2A) of the Companies Act, 1956,
 read with the Companies (Transfer of Profit to Reserve) Rules, 1975,
 your Directors proposed to transfer an amount of Rs. 85,000,000 from
 the net profit to the general reserve account.
 
 Directors
 
 Mrs. Raman Goyal has resigned from the Board on June 20, 2008. The
 Board while accepting her resignation recorded her contribution during
 her tenure on the Board with appreciation.
 
 Further, on June 20, 2008, Mr. Saurabh Goyal has been appointed as
 Additional Director and vacates his office at the ensuing Annual
 General Meeting. However, the Company has received a notice under
 Section 257 of the Companies Act, 1956, from a member signifying his
 intention to propose the candidature of Mr. Saurabh Goyal as a Regular
 Director of the Company.  Further, Mr. Saurabh Goyal has also been
 appointed as an Executive Director, subject to the approval of the
 shareholders in their General Meeting. Thus, your Directors recommend
 his appointment as a regular as well as Executive Director.
 
 Dr. S. P. Singh retires by rotation and being eligible, offers himself
 for re-appointment. The Board recommends his re- appointment.
 
 Directors responsibility statement
 
 Pursuant to the requirement under Section 217(2AA) of the Companies
 Act, 1956, with respect to the Directors Responsibility Statement,
 your Directors confirm:
 
 (i) That in the preparation of the accounts for the financial year
 ended March 31, 2008, the applicable accounting standards have been
 followed along with proper explanation relating to material departures,
 if any;
 
 (ii) That the Directors have selected such accounting policies and
 applied them consistently and made judgements and estimates that were
 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;
 
 (iii) 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; and
 
 (iv) That the Directors have prepared the accounts for the financial
 year ended March 31, 2008 on a `going concern basis.
 
 Auditors
 
 M/s Datta Singla & Co., chartered accountants, statutory auditors of
 the Company retire at the conclusion of the forthcoming Annual General
 Meeting and being eligible, offer themselves for re-appointment.
 
 The Audit Committee and Board of Directors recommend their
 re-appointment as auditors.
 
 Auditors Report
 
 Observations made in the Auditors Report are self-explanatory and
 therefore do not call for any further comments.
 
 Audit Committee
 
 The Company has constituted the Audit Committee as per the provisions
 of Section 292A of the Companies Act, 1956 and Clause 49 of the Listing
 Agreement. The composition, powers and duties of the Audit Committee
 are detailed out in the Corporate Governance Report. The Board of
 Directors has accepted all recommendations of the Audit committee.
 
 Energy, Technology and Foreign Exchange
 
 Information required under Section 217(1)(e) of the Companies Act,
 1956, read with the Companies (Disclosure of Particulars in the Report
 of Board of Directors) Rules, 1988, with respect to conservation of
 energy, technology absorption and foreign exchange earnings and outgo
 are given in Annexure I and form part of this report.
 
 Personnel
 
 Information pursuant to Section 217(2A) of the Companies Act, 1956,
 read with the Companies (Particulars of Employees) Rules, 1975, as
 amended, form part of the report. However, as per the provisions of
 Section 219(1)(b)(iv) of the Companies Act, 1956, the report and
 accounts are being sent to the shareholders, excluding statement of
 particulars of employees under Section 217(2A) of the act. Any
 shareholder interested in obtaining the copy of the said statement may
 write to the Secretarial Department at the corporate office of the
 Company.
 
 The Company enjoyed cordial relations with its employees at all levels.
 
 Fixed Deposits
 
 During the year under report, your Company did not accept any deposits
 from the public in terms the provisions of Sections 58A and 58AA of the
 Companies Act, 1956.
 
 Corporate Governance
 
 The Company has aimed to conduct its affairs in an ethical manner. A
 separate report on Corporate Governance forms a part of the annual
 report. A certificate from the auditors of the Company regarding the
 compliance of conditions of Corporate Governance as stipulated under
 Clause 49 of the Listing Agreement is given in Annexure II.
 
 Management Discussion and Analysis Report
 
 Management discussion and analysis of the financial condition and
 results of operations of the Company for the financial year 2007-08 as
 required under Clause 49 of the Listing Agreement with the stock
 exchanges is given as a separate statement in the Annual Report.
 
 Acknowledgement
 
 Your Directors would like to express their sincere and grateful
 appreciation for the assistance and co-operation received from the
 bankers and government authorities and also thank the shareholders for
 the confidence reposed by them in the Company and look forward to their
 valuable support in the future plans of the Company.
 
 Your Directors also thank its agents, the medical professionals and its
 customers for their continued patronage to the Companys products.
 
 
                          For and on behalf of the Board of Directors 
                                       of Nectar Lifesciences Limited
 
 Chandigarh                                              Sanjiv Goyal
 June 20, 2008                           Chairman & Managing Director