Dear Members,
 
 The Directors are pleased to present the Annual Report and the Audited
 Accounts for the financial year ended March 31, 2011.
 
 Summary of the Financial Results
 
                                                   Rs million 
                                             2010-2011      2009-2010
 
 Net Sales                                        7086           6241
 
 Operating Profits
 
 Profit before tax                                2189           1798
 
 Profit after tax                                 1467           1160
 
 Balance brought forward from previous year       2588           1917
 
 Available for appropriation                      4055           3077
 
 The Directors have made the following 
 appropriations:
 
 Dividend (Proposed)                              320            320
 
 Tax on distributed profits                        52             53
 
 General Reserve                                  146            116
 
 Carry forward                                   3537           2588
 
                                                 4055           3077
 
 Dividend
 
 The Board has recommended payment of dividend at Rs 10 per equity share
 of Rs 5 each for the financial year 2010-11. The dividend, if approved
 by the members at the Annual General Meeting, will result in a cash
 outflow of Rs 372 million including dividend tax.
 
 Management Discussion and Analysis
 
 The business operations of the company comprise Pharmaceuticals,
 Generics, Over-The- Counter (OTC) and Animal Health. This segmentation
 forms the basis for review of operational performance by the
 management.
 
 a.  Industry structure and developments
 
 Pharmaceuticals and Generics
 
 The Indian Pharmaceuticals market valued at around US $ 10.4 billion
 (IMS March 2011 SSA data) is the third largest market by volume and
 13th largest in terms of value, growing at -15.3 per cent per annum. It
 is one of the fastest growing markets in the world and is expected to
 become US $ 20 billion by 2015 and US $ 50 billion by 2020, as per a
 report produced by McKinsey & Company.
 
 It continues to be predominantly a branded generics market with more
 than 5,000 players and several thousand brands. The pharmact;utical
 industry is increasingly looking at innovative ways to broaden access
 and grow the market.
 
 While key health indicators are still poor they have improved
 significantly over the past 10-15 years. Rising longevity, alongside
 lifestyle changes resulting from rapid urbanisation has however begun
 to present new healthcare challenges with chronic age-related
 conditions being reported more widely resulting in increasing demand
 for products to treat these conditions. Cardiovascular disease is now
 responsible for one-third of all deaths
 
 with diabetes and cancer contributing significantly to overall
 mortality. Demographic and epidemiological trends will have major
 implications for the pharmaceutical industry in the long term.
 
 Introduction of a product patent regime a few years ago was widely
 acclaimed by the industry but we need an ecosystem that encourages
 innovation for the research oriented pharmaceutical industry to grow
 and make its mark on global health.
 
 OTC
 
 The Indian market for OTC products, valued at over US$ 2.1 billion is
 the 12th largest in the world. It is the third fastest growing market
 (among top 20 markets) globally with a growth rate of nine per cent per
 annum with potential for further growth. The Cough, Cold and Allergy
 category was boosted by the removal of drugs dextromethorphan and
 chlorpheniramine from Rx Schedule H, which had restricted sale against
 doctor''s prescription only, in August 2010.
 
 Growth continues to be impeded by several factors including low OTC per
 capita spend due to low disposable income, regulatory restrictions, low
 spread of pharmacies in rural areas and presence of counterfeit
 products among others.
 
 Animal Health
 
 During this financial year, the Animal Health market is estimated to
 have grown by seven to eight per cent. Cross-breeding, artificial
 insemination and Government initiatives to increase milk production
 have continued to boost the growth of the cattle segment. Despite
 increased costs, the poultry segment has had another good year due to
 consolidation in the industry and increased demand for poultry produce.
 
 b.  Performance
 
 Net Sales for the year ended March 31, 2011 were at Rs 7,086 million
 representing a growth of 13.6 per cent over the previous year.
 
 Profit before tax for the year was at Rs 2,189 million representing a
 growth of 21.8 per cent over the previous year due to improved product
 mix and better price realizations.
 
 After providing for income tax of Rs 722 million, profit after tax was
 Rs 1,467 million representing a growth of 26.5 per cent over the
 previous year.
 
 c.  Segment-wise operational performance
 
 Pharmaceuticals
 
 The Pharmaceuticals business registered sales of Rs 4,898 million
 representing a growth of 12.0 per cent over the previous year. Higher
 sales of its flagship brand Voveran continue to be the primary
 contributor of this growth.
 
 New product introduced during the period under review was:
 
 Therapeutic Area              Product
 
 Anti Infective                Pactel™
 
 The business continues to hold leadership position in major therapeutic
 areas such as:
 
 Therapeutic Area              Rank          Product
 
 Pain and Inflammation          1            Voveran®
 
 Transplantation/Immunology     1            Sandimmun® Neoral®
 
 Central Nervous System         3            Tegrital®
 
 Generics
 
 The Generics business recorded sales of Rs 473 million representing a
 growth of 18.6 per cent over the previous year. The growth was
 primarily driven by increased sales of Regestrone and PZA-Ciba Inspira.
 
 OTC
 
 During the year under review, the OTC business registered sales of Rs
 1.009 million representing a growth of 17.3 per cent over the previous
 year. The improved performance can be attributed mainly to the strong
 performance of the Cough, Cold, and Allergy range of products driven by
 Otrivin® and T-minic®.
 
 New line extensions introduced during the period under review was:
 
 Market Segment               Product
 
 Nasal Decongestant        Otrinoz® Saline
 
 Animal Health
 
 During the year under review, the Animal Health business achieved sales
 of Rs 707 million representing a growth of 16.0 per cent over the
 comparable previous period. Flagship brands of Denagard, Larvadex,
 Fasinex/Endex and Protexin along with the Calcium group of products
 were primary contributors to this growth. Successful implementation of
 Sales Force Optimisation Project and Amplified Rural Penetration
 Programs have also played a role.
 
 New products introduced during the year were:
 
 Market Segment Product
 
 Poultry Multi-Vitamin Premix and AD3EC Oral
 
 d.  Concerns
 
 Pharmaceuticals and Generics
 
 India''s health infrastructure remains largely inadequate to meet the
 needs of a population that now numbers almost 1.2 billion. Per capita
 health spend continues to be abysmally low with the Indian
 pharmaceutical market being largely a self-pay market and health
 insurance as yet being the preserve of the privileged few. This serves
 as an impediment for consumers/patients to resort to long-term
 treatment of chronic conditions regardless of the value proposition.
 
 Government appears to be oriented towards higher levels of price
 control. Your company is hopeful that deregulation in the form of price
 monitoring becomes the norm.
 
 While introduction of product patents in 2005 offered renewed hope to
 the pharmaceutical industry, the areas of concern such as lack of well
 defined criteria for patentability and the absence of Regulatory Data
 Protection still need to be addressed. Your company hopes that
 legitimate innovation will be respected and rewarded and that
 government will take cognizance of the various representations made to
 it on the subject by industry representatives.
 
 OTC
 
 The OTC business is subjected to challenges in the distribution system
 thus limiting its reach. Promotional costs continue to be high putting
 undue pressure on margins.
 
 Animal Health
 
 Generic competition, scare of outbreak of bird flu, increasing feed
 cost and inflationary pressures continue to be areas of concern.
 Inadequate infrastructure and cold storage facilities impact prospects
 for exports and cause price fluctuations in the poultry segment.
 
 e.  Outlook
 
 Pharmaceuticals and Generics
 
 India remains a market with a huge long-term potential. With the Indian
 Pharmaceuticals market growth set to remain at double-digits for the
 next five years at least, India is an important market for the
 pharmaceutical industry. Increasing literacy rates and access to
 information will contribute to the overall growth of the industry. A
 progressive trend is seen from a product centric approach to patient
 centric initiatives.
 
 Rising incomes combined with constrained increase in drug prices will
 drive consumption.  Market growth will also be driven partly by the
 efforts of more companies to broaden their geographic coverage.
 
 OTC
 
 The Indian economy is on the rise and greater health awareness coupled
 with increasing disposable incomes will result in higher spend on OTC
 products. Given this backdrop, the future of the OTC market looks
 promising.
 
 Animal Health
 
 The poultry segment is expected to continue to grow at previous year''s
 levels while the livestock industry is expected to continue to be in
 the growth phase. Productivity in the dairy segment is likely to see
 good growth given the favourable government policies for the sector.
 Overall demand for animal health products is projected to grow at a
 healthy pace.
 
 f.  Internal control systems and their adequacy
 
 The Company maintains appropriate systems of internal control,
 including monitoring procedures, to ensure that all assets are
 safeguarded against loss from unauthorised use or disposition. Company
 policies, guidelines and procedures are in place to ensure that all
 transactions are authorised, recorded and reported correctly as well as
 provide for adequate checks and balances.
 
 The internal audit department together with an independent firm of
 Chartered Accountants reviews the effectiveness and efficiency of these
 systems and procedures. Audits are finalised and conducted based on
 internal risk assessment. Significant deviations are brought to the
 notice of the Audit Committee of the Board periodically and corrective
 measures are recommended for implementation. All these steps facilitate
 timely detection of any irregularities and early remedial measures with
 no monetary loss.
 
 g.  Personnel
 
 The Industrial Relations scenario continued to be amicable. People are
 the strength of your company and high priority is accorded to training
 and development of employees.
 
 Number of employees as on March 31, 2011 was 1220.
 
 Information as per Section 217(2A) of the Companies Act, 1956, read
 with the Companies (Particulars of Employees) Rules, 1975, and
 Companies (Particulars of Employees) Amendment Rules, 2011 can be
 obtained by an interested shareholder, by submitting a written request
 to the Company Secretary. This practice is followed as per the
 provisions of Section 219(l)(b)(iv) of the Companies Act, 1956. Thus,
 the Report and the Accounts are being sent to all shareholders,
 excluding the Statement of Particulars under Section 217(2A).
 
 Corporate Citizenship
 
 The Company continues to focus its attention on health and education of
 the underprivileged through various programs. During the year under
 review, the Company continued its support to the NGO Akanksha, which
 works with slum children. The scholarship to three deserving women at
 the Indian School of Business Hyderabad continues.
 
 The Company successfully held its second Biotechnology Leadership Camp
 (BioCamp) in Hyderabad for students and nominated three participants to
 attend the Novartis International Biotechnology Leadership Camp in
 Basel, Switzerland, where two of the nominated students shone as
 individual and group winners respectively.
 
 Community Partnership Week continues to draw an increasing number of
 associates participating in activities ranging from field visits for
 less privileged children to spending time with the sick, the
 differently-abled and the elderly.
 
 The Company''s commitment to Health, Safety and Environment (HSE)
 Protection continues to be a priority and includes occupational safety
 and health protection; building safety; process safety; product
 stewardship; environmental protection and conservation of natural
 resources and energy. Managerial and operational responsibility for all
 HSE aspects lies with the businesses.
 
 Delisting of equity shares from Calcutta Stock Exchange Limited
 
 The shareholders of the Company had approved delisting of the equity
 shares of the Company from Calcutta Stock Exchange Limited, Kolkata at
 the 62nd Annual General Meeting of the Company. After due compliance
 with the SEBI (Delisting of Equity Shares) Regulations, 2009, the
 equity shares of the Company were delisted from Calcutta Stock Exchange
 Limited with effect from January 11, 2011.
 
 Fixed Deposits
 
 No fresh fixed deposits were accepted from the public during the year.
 However, deposits under the Voluntary Retirement Scheme, 1992,
 continued to be accepted. Total deposits as at March 31, 2011 stood at
 Rs 1.97 million. The Company does not have any unclaimed or overdue
 deposits as of date.
 
 Directors
 
 Mr R. Shahani retires by rotation at the ensuing Annual General Meeting
 and being eligible offers himself for re-appointment.
 
 Mr R. Shahani has been on the Board of the Company from November 1,
 2002. He is a mechanical engineer from IIT Kanpur and MBA from JBIMS,
 Mumbai. He started his career with ICI in India in their businesses of
 fibres and specialty chemicals. Later, he rose to the position of
 General Manager with ICI/Zeneca in the U.K., overseeing their Asia
 Pacific and LatAm operations for their petrochemicals and plastics
 division. This was followed by a period as CEO at Roche Products
 Limited after which he moved to Novartis India Limited in 1997.  Mr R.
 Shahani is also President of the Organisation of Pharmaceuticals
 Producers of India and the Swiss Indian Chamber of Commerce India.
 
 Auditors
 
 M/s Price Waterhouse, Chartered Accountants (Firm Registration No.
 007568S) have expressed their inability to be re-appointed as Statutory
 Auditors of the Company at the ensuing Annual General Meeting.
 
 M/s Lovelock & Lewes, Chartered Accountants (Firm Registration No.
 301056E) have signified their consent to act as Statutory Auditors of
 the Company and hold office from the conclusion of the ensuing Annual
 General Meeting to the conclusion of the next Annual General Meeting.
 
 Cost Auditors
 
 The Directors have appointed M/s N. I. Mehta and Co., Cost Accountants,
 as Cost Auditors to audit the accounts relating to drug formulations
 for the financial year ending March 31, 2012.
 
 Energy, Technology Absorption and Foreign Exchange
 
 Information required under Section 217(l)(e) of the Companies Act, 1956
 read with the Companies (Disclosure of Particulars in the Report of the
 Board of Directors) Rules, 1988, with respect to conservation of
 energy, technology absorption and foreign exchange earnings/ outgo is
 included in Annexures A and B.
 
 Directors'' Responsibility Statement
 
 Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors
 confirm that:
 
 (a) in the preparation of the Annual Accounts, the applicable
 Accounting Standards have been followed;
 
 (b) appropriate accounting policies have been selected and applied
 consistently and have 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 as at March 31, 2011 and of the profit of the Company
 for the year ended March 31, 2011;
 
 (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 have been prepared on a going concern basis.
 
 Corporate Governance
 
 The Company is committed to good corporate governance in line with the
 Listing Agreement and Novartis Group Corporate Governance norms. The
 Company is in compliance with the provisions on Corporate Governance
 specified in the Listing Agreement with the Bombay Stock Exchange
 Limited.
 
 A certificate of compliance from Dr K. R. Chandratre, a practising
 Company Secretary and the report on Corporate Governance form part of
 this Directors'' Report.
 
 Acknowledgement
 
 The Directors commend the contribution made by employees to the
 continued satisfactory business performance during the period under
 review and the unstinted management support received from the parent
 company, Novartis AG. The Board places on record its appreciation to
 all stakeholders particularly shareholders, customers, suppliers, the
 medical fraternity and business partners, who continue to contribute to
 the Company''s success.
 
 Cautionary Note
 
 The statements forming part of the Directors'' Report may contain
 certain forward looking remarks within the meaning of applicable
 securities laws and regulations. Many factors could cause the actual
 results, performances or achievements of the Company to be materially
 different from any future results, performances or achievements that
 may be expressed or implied by such forward looking statements.
 
                                    On behalf of the Board of Directors
 
                                                               C. SNOOK 
 Mumbai, May 24, 2011                                          Chairman