The Directors are please to present their Twenty Eighth Annual Report
 of your Company and the audited statement of accounts for the year
 ended March 31, 2012.
 
 FINANCIAL RESULTS                                      Rs in Million
 
 (Standalone financials)
 
                                             2011-12       2010-11
 
 Profit before Depreciation and Tax           150.73        201.06
 
 Less: Depreciation                           148.91        154.11
 
 Profit/(Loss) before Tax                       1.82         46.95
 
 Prior period adjustments                        –             –
 
 Provision for current tax and
 deferred Tax                                  (18.5)        (3.74)
 
 Profit after Tax                              20.32          50.69
 
 Add: Balance brought forward from
 the previous year                             61.84          11.15
 
 Profit available for appropriation            82.16          61.84
 
 Appropriation
 
 Balance carried forward to
 
 Balance Sheet                                 82.16          61.84
 
 Previous year figures have been regrouped wherever necessary as per the
 Revised
 
 Schedule VI.
 
 BUSINESS REVIEW
 
 Despite the challenges of the global and domestic economy, your
 Company''s revenue for the year was the highest ever at Rs4540.5 million,
 an increase of 13% over the previous year revenue of Rs4017.6 million, a
 record being achieved for the second consecutive year. Remarkably, the
 growth is on a base of 41.2% increase in the previous year.
 
 Raw materials as a percentage of income at Rs2898.6 million constituted
 64.4% of income, while it was lower at 63.3% in 2010-11. With marginal
 increases in manufacturing and employee costs, the operating margin was
 lower at 10.7% as against 12.5% reported in the previous year. The
 operating profit was hence lower at Rs483.5 million as against Rs499.6
 million.
 
 Members would appreciate that the year witnessed inflationary pressures
 which impacted raw material prices, all of which could not be passed on
 to the customers. The tight money policy followed by the central bank,
 tended to firm up the interest rates affecting finance costs. Your
 Company incurred finance costs of Rs332.7 million, approximately 11.5%
 higher than the previous year. The higher incidence was despite
 repayment of Rs368.3 million during the financial year, over and above
 an amount of Rs259.7 million repaid in the previous year.
 
 The impact of the prevailing external challenging conditions did impact
 your Company''s business, and despite being productivity oriented and
 raising the level of cost consciousness, the profit after tax was Rs20.3
 million for the year, lower than Rs50.7 million reported in 2010-11.
 
 Your Company has taken several systemic initiatives which are
 favourably impacting the efficiencies, profit margins and overall
 profitability, most of which were visible from the last quarter of the
 financial year 2011-12. The focus is on what adds value to the
 customers and optimize results for Neuland. The management is striving
 to make the transformation enduring while shaping the future.
 
 DIVIDEND
 
 Members will appreciate that in view of the liquidity situation of your
 Company, the Board of Directors has decided not to recommend any
 dividend for the year under review.
 
 OUTLOOK
 
 Neuland has extraordinary assets for growth: your Company''s people,
 products, pipeline and relationship with some of the big pharma
 companies across the globe. The Company has a common set of values
 inspired by The Neuland Way and a restructured, streamlined operating
 model with a commitment to respond to customers, even as it is bottom
 line focused.
 
 There is a increased emphasis on marketing niche products, keeping
 costs under control and an organization wide culture that seeks to
 improve the due date delivery of products and services. The high-value
 products have already started enhancing the revenue stream, while there
 is a commitment to shed products that tend to lower the contribution.
 The order book for API is robust with visibility of healthy earnings
 for several months ahead.
 
 While growing the business, the teams are working on thoughtful,
 disciplined actions to streamline and improve on cost structure,
 realize savings and de-risk the business. There is substantial progress
 in increasing the strategic focus of the Company. From early 2012,
 there is perceptible savings from standardization initiatives, which
 over the ensuing quarters is likely to manifest in rising free cash
 flow. Higher margins, lower costs, improved cycle-time on the
 production floor and lowering of debt are estimated to sustainably
 enhance the bottom line commencing with the financial year 2012-13.
 
 CONSOLIDATED FINANCIAL STATEMENTS
 
 The reports and accounts of the subsidiary companies are not annexed to
 this Report. The Board of Directors of the Company have approved and
 passed a resolution in this regard.  A statement pursuant to Section
 212 of the Companies Act, 1956 is annexed.
 
 The Consolidated Financial Statements for the year ended March 31, 2012
 for part of the Annual Report. Annual accounts of the subsidiary
 companies are kept for inspection by any investor at the Registered
 Office of the Company as well as at the Registered Office of the
 respective subsidiary companies.  Any investor interested in a copy of
 the accounts of the subsidiaries may write to the Company Secretary at
 the Registered Office of the Company.
 
 SUBSIDIARIES
 
 Your Company''s subsidiaries, Neuland Laboratories K.K., Japan and
 Neuland Laboratories Inc. USA, have come into operation and started
 working aggressively on market development. The efforts have been to
 build Neuland''s business by being close to the customers and market the
 products as well as respond immediately to their needs. During the year
 under review, contract manufacturing business was given an additional
 thrust, with encouraging response in Japan as well as at North America.
 Your Company sees long term sustainable opportunities in these regions
 and is further strengthening the organizational resources.
 
 JOINT VENTURE
 
 The outlook is positive for the joint venture, Cato Research Neuland
 India Private Limited formed in collaboration with Cato Research Israel
 Limited, a wholly owned subsidiary of Cato Research Limited, a global
 contract research and development organization based in USA. As already
 known to Members, your Company''s share in the joint venture is 70% as
 per the Share Subscription and Shareholder Agreement.
 
 The joint venture company commenced operation and your Company is
 excited with the prospects for the business, primarily in clinical
 research in India. Global health care companies have been reaching out
 to competent research-led companies to bring innovative drugs to the
 market in the shortest possible time span, using high quality and
 cost-effective resources available in India. Neuland is confident for
 the long term since it has the best available partner in Cato Research.
 
 RESEARCH & DEVELOPMENT
 
 One of the key priorities of the R&D team during the year under review
 was to create a portfolio of niche products that are in demand that
 would facilitate customers to meet their need to launch new products. A
 focused detailed approach to product selection led to a healthy product
 development portfolio. The R&D team took care to ensure that each of
 the products in the portfolio underwent a rigorous test of preliminary
 analysis, market and customer feedback and fitment with chemistry and
 technological profile. 20 molecules/APIs were created for launch
 between 2013 and 2016.
 
 Further, existing eight products were taken up for process improvement
 involving cycle time reduction, recovery & reuse of solvents, adoption
 of green chemistry and yield improvement.  Of these in seven products,
 R&D realized savings and enhanced quality in all eight of them. The
 teams are working on 24 products for such enhancements/savings in
 2012-13.
 
 R&D has set for itself a few key focus areas apart from creating new
 molecules and process improvements with intent on quality and
 optimization for competitiveness. Significant success was evident in
 such areas including, designing & developing manufacturing processes,
 route scouting as per customer requirement, filing of DMF/CMC for the
 API and patent protection for non-infringing processes.
 
 ENVIRONMENT, HEALTH & SAFETY (EHS)
 
 Your Company has a systemic approach to environment protection and
 employees'' health and safety with rigorous implementation, measurement
 and reporting, with strong programs in place to maintain a high level
 of awareness and conformity with best-in class industry standards.
 Neuland has made significant progress over the past five years in
 improving the systems, training and participative response from all
 employees.
 
 Environmental aspect and impact analysis are carried out at both
 manufacturing units with an aim to minimize environmental impacts from
 our manufacturing activities. The units are provided with pollution
 control facilities like stripper, multi effect evaporator, reverse
 osmosis facilities for treating effluent generated in our processes and
 recycling the treated effluent within plant premises.
 
 Your Company has undertaken a number of process improvement
 initiatives, which has helped consume less raw materials, solvents,
 water and energy in the manufacturing processes, thus making them less
 consumptive and sustainable. Neuland stands committed to resource
 usages in environmentally sound, operationally safe and socially
 responsible manner.
 
 Occupational health surveillance study was carried out with the support
 of external experts. Quantitative exposure assessment and work place
 monitoring is carried out to watch over industrial hygiene exposure
 levels and ensure environments are comfortable, safe and healthy for
 the employees. Hazard identification and risk assessment studies were
 carried out in the units targeted to minimize health and safety risks
 from the manufacturing activities.
 
 The Companies facilities at Bonthapally facility (Unit-I) and
 Pashamylaram (Unit-II) have been successfully audited and certified for
 ISO 14001:2004 and OHSAS 18001:2007.
 
 INFORMATION MANAGEMENT SYSTEMS
 
 Your Company is aware that all assets of the Company generate
 confidential information and hence, information security is viewed with
 great importance. Neuland appreciates the importance of intellectual
 property rights and has put in place standard operating procedures to
 strictly protect intellectual properties.
 
 The initiatives taken to manage risk and institutionalize them Include:
 
 - Employees have been trained through orientation programmes, with
 refresher training programmes on ISMS standards on a regular basis.
 
 - Neuland signs confidentiality disclosure agreements with all its
 customers, employees, suppliers and consultants.
 
 - Neuland is certified for ISO 27001:2005 standard and has very
 recently completed its first surveillance audit successfully.
 
 The IT Infrastructure is on the SAP ERP platform for effective
 information transfer across functions while ensuring high security
 standards. A robust web-based intranet application has been developed
 in-house and used for key business processes to infuse transparency,
 speedier communication and review.
 
 MANAGEMENT DISCUSSION AND ANALYSIS
 
 Management Discussion and Analysis as required under the Listing
 Agreement with the stock exchanges forms part of the Annual Report.
 
 LISTING AT STOCK EXCHANGES
 
 The equity shares of your Company continue to be listed and traded on
 the BSE Limited and National Stock Exchange of India Limited. The
 Annual Listing fee for the year 2012-13 has been paid to both the stock
 exchanges.
 
 CORPORATE GOVERNANCE
 
 The report on Corporate Governance as per Clause 49 of the Listing
 Agreement with the Stock Exchange forms part of the Annual Report.
 Certificate from the Statutory Auditors of the Company M/s. K.S. Aiyar
 & Co., Chartered Accountants confirming the compliance with the
 Corporate Governance is attached to this report.
 
 DIRECTORS
 
 Mr. G.V.K. Rama Rao and Dr. Christopher M. Cimarusti retire as
 Directors by rotation at the forthcoming Annual General Meeting and
 being eligible, offer themselves for re-appointment. The profiles of
 the Directors are included in the Report on Corporate Governance and
 the Notice of the AGM.
 
 DIRECTORS'' RESPONSIBILITY STATEMENT
 
 Pursuant to Section 217(2AA) of the Companies (Amendment) Act, 2000,
 your Directors confirm that to the best of their knowledge and belief
 and according to the information and explanation obtained by them,
 
 a.  in preparation of the annual accounts for the year ended March 31,
 2012 the applicable accounting standards have been followed;
 
 b.  such accounting policies as mentioned in the notes to the financial
 statement have been selected and applied consistently and judgments and
 estimates that are reasonable and prudent made so as to give a true and
 fair view of the state of the affairs of the Company for the year ended
 March 31, 2012 and of the profit of your Company for the year;
 
 c.  proper and sufficient care has been taken 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;
 
 d.  the annual accounts for the year ended March 31, 2012 has been
 prepared on a going concern basis.
 
 EMPLOYEE STOCK OPTION
 
 As per the resolution passed at the Annual General Meeting on July 20,
 2007 your Company had granted 34,500 stock options to its employees
 under the Employee Stock Options Scheme.  However 25,500 vested options
 have been terminated by the Compensation Committee on account of
 retirement/resignation of the employees from the Company. The fair
 value as on March 31, 2012 worked out to Rs25.44 per share.
 
 Details of the options granted and terminated are set out in the
 annexure to this report as required under Clause 12 of the Securities
 and Exchange Board of India (Employee Stock Options Scheme and Employee
 Stock Purchase Scheme) Guidelines, 1999.
 
 AUDITORS
 
 The financial statements have been audited by M/s. K.S. Aiyar & Co.,
 Chartered Accountants, the Statutory Auditors.
 
 The Audit Committee of your Company meets periodically with the
 Statutory Auditors M/s. K.S. Aiyar & Co. and Internal Auditors, M/s.
 Grant Thornton & Co., to review the performance of internal audit, to
 discuss the nature and scope of the statutory auditor''s functions, and
 to discuss auditing, internal control and financial reporting issues.
 To ensure complete independence, the statutory auditor and the internal
 auditor have full and free access to the Members of the Audit Committee
 to discuss any matter of substance.
 
 Cost Audit under Section 233B of the Companies Act, 1956, is a regular
 annual audit. The cost audit for the current financial year is under
 progress.
 
 The Auditors M/s. K. S. Aiyar & Co, Chartered Accountants, retire at
 the ensuing Annual General Meeting and have confirmed their eligibility
 and willingness to accept office for the financial year ended March 31,
 2013.
 
 INSURANCE
 
 Your Company has taken reasonable steps to prevent risks and the Board
 is kept appraised of the risk assessment and minimization procedures.
 
 The assets of the Company have been adequately covered under insurance.
 The policy values have been enhanced taking into consideration the
 expanded and upgraded facilities of the Company.
 
 FIXED DEPOSITS
 
 There are no fixed deposits outstanding with the Company as on March
 31, 2012. The matured but unclaimed fixed deposits amounting to Rs0.07
 million, which have become due for transfer to the Investor Education
 and Protection Fund (IEPF) have been transferred to IEPF during the
 year under review.
 
 DISCLOSURE PARTICULARS
 
 As required by your Company (Disclosure of Particulars in the Report of
 Board of Directors) Rules, 1988, the relevant information and data are
 given in Form - A & B to this report.
 
 INDUSTRIAL RELATIONS
 
 Your Company''s relations with its employees continue to be cordial.
 Dedicated work by the workmen, supervisors and executives of your
 Company made it possible to achieve success under trying and difficult
 circumstances.
 
 PARTICULARS OF EMPLOYEES
 
 As required under the provisions of Section 217(2A) of the Companies
 Act, 1956 read with Companies (Particulars of employees) Rules 1975 as
 amended, there are no employees drawing remuneration in excess of
 Rs500,000 per month during the year under review.
 
 ACKNOWLEDGEMENT
 
 Your Directors place on record their deep appreciation for the hard
 work, commitment and dedication of the employees at all levels. The
 Company did well on several fronts only because of their enthusiasm and
 efforts. The Board appreciates the support and co-operation received
 from the customers, vendors, business partners and others associated
 with the Company. The Directors take the opportunity to thank the
 bankers and financial institutions, regulatory and government
 authorities and the stock exchanges for their continued support.
 
                                       For and on behalf of the board
                                                        Dr. D. R. Rao
 
 Hyderabad, May 3, 2012                  Chairman & Managing Director