Panacea Biotec

We are pleased to present the 24th Annual Report on business and
 operations together with the audited financial statements and the
 auditors report of your Company for the financial year ended March
 31,2008.The financial highlights for the year under review are given
 below:
 
 Performance Highlights
                                                   (Rs.in million)
 Particulars                              For the         For the
                                       year ended      year ended
                                      March 31,08     March 31,07
 
 Turnover (Net)                           8,304.4         8,315.5
 
 Other Income                               331.2           299.6
 
 Total Income                             8,635,7         8,615.1
 
 Profit before Interest,                  2,484.8         2,616.6
 
 Depreciations Tax
 
 Financial Expenses                         150.1           170.5
 
 Depreciation                               430.0           355.1
 
 Profit before Tax                        1,904.7         2,091.0
 
 Provision for Taxation                     573.0           622.9
 
 Profit after Tax                         1,331.7         1,468.1
 
 Surplus b/f from the                     1,725.2           649.2 
 previous year
 
 Profit available for                     3,056.9         2,117.3 
 appropriation
 
 Appropriations:
 
 Dividend Paid/Proposed
 
 - On Equity Shares                          66.7            65.7
 
 - On Preference Shares                         -            20.4
 
 Tax on Dividend                             11.3            14.0
 
 Transfer to Capital                            -           145.2 
 
 Redemption Reserve
 
 Transfer to General                        133.1           146.8 
 
 Reserve
 
 Balance in Profit &                      2,845.7         1,725.2
 Loss Account
 
 Basic EPS (Rs.)*                            20.1            23.7
 
 Cash EPS (Rs.)*                             26.6            29.5
 
 Book Value per Share (Rs.)*                104.3            81.9
 
 Dividend on Equity Shares                   100%            100%
 Per Equity Share of Re. 1/- 
 
 Operations Review
 
 The total income during the year under review was Rs.8,304.4 million as
 against Rs.8,315.5 million in the previous year.The Company has earned
 net profit after tax of Rs.1,331.7 million for the year ended March
 31,2008 as against Rs.1,468.1 million for the year ended March 31,2007.
 
 A detailed discussion on operations for the year ended 31st March 2008
 is given in the Management Discussion and Analysis section.
 
 Appropriations
 
 Dividend: Continuing with the trend of rewarding its shareholders and
 simultaneously keeping in view the requirement of funds for the
 operations and future growth of the Company, your Directors are pleased
 to recommend a dividend of 100% on Equity Share Capital of the Company
 for the financial year ended 31st March, 2008.
 
 The Company has made a provision for dividend in the books of accounts
 after considering the application for conversions received, if any, as
 at the date of the Board Meeting for approval of Financial Statements.
 The Company is obliged to pay dividend to those bond holders who
 convert their bonds into Equity Shares after approval of the financial
 statements by the Board of Directors and upto the book closure date for
 dividend purposes. Incremental dividend, if any and dividend
 distribution tax thereon will be paid out of the balance available in
 the Profit & Loss Account.
 
 The dividend on Equity Shares is placed before you for approval at the
 ensuing Annual General Meeting and if approved, will absorb an amount
 of Rs.66.7 million. However, the amount of dividend on Equity Shares
 may increase in case any bonds are converted into Equity Shares before
 the book closure date.
 
 Transfer to General Reserve: We propose to transfer Rs.133.2 million to
 the General Reserve. An amount of Rs.2,845.7 million is proposed to be
 retained in the Profit and Loss Account.
 
 Share Capital
 
 During the year under review, the Equity Share Capital has increased to
 Rs.66.8 million as on 31st March, 2008 as a result of allotment of
 24,688 and 987,554 Equity Shares of Re.1/- each at a premium of
 Rs.356.57 per share, on 17th May 2007 and 31st October 2007,
 respectively, upon conversion of Zero Coupon Foreign Currency
 Convertible Bonds (Tranche 2) (FCCBs).
 
 Utilisation of FCCBs proceeds
 
 As per the requirements of FEMA guidelines, out of the net proceeds of
 the bond issue amounting to US$ 96.9 million, balance amount of US.0
 million was remaining parked overseas in Fixed Deposits as at the end
 of previous financial year in foreign currency account with State Bank
 of India, London.The said amount has been remitted to India and
 utilized during the year under review for capital expenditure. With
 this, now the Company has fully uitilized the issue proceeds of Foreign
 Currency Convertible Bonds. Following are the details of utilization of
 amount during the year:
 
                                                 (Rs.in million)
 Particulars                              Current      Previous
                                             Year          Year
 
 Capital expenditure                        188.2       1,495.7
 
 Overseas investment                            -         168.1
 
 Repayment of loans and                         -       2,497.7
 general corporate purpose
 
 Issue expenses                                 -         136.2
 
 Total                                      188.2       4,297.6
 
 
 Report on Corporate Governance
 
 Your Company strives to attain high standards of corporate governance
 while interacting with all the stakeholders. The Company has duly
 complied with the provisions of the Corporate Governance Code as
 prescribed under Clause 49 of the listing agreement with the stock
 exchanges. A separate section on Corporate Governance Report along with
 a certificate from the Chartered Accountants confirming the level of
 compliance is annexed and forms a part of the Directors Report.
 
 Management Discussion & Analysis Report
 
 As required by Clause 49 of the Listing Agreement with the Stock
 Exchanges, a detailed Management Discussion and Analysis Report forms
 part of the Annual Report.
 
 Joint Ventures and Subsidiaries
 
 Your Companys Joint Venture Company (JV Company), Chiron Panacea
 Vaccines Pvt. Ltd. (CPV), was incorporated in fiscal 2005 in India
 with Chiron Vaccines Holding Srl., Italy (now Novartis Vaccines and
 Diagnostics), a division of Novartis, worlds fifth largest vaccines
 manufacturer, for marketing of innovative combination and other
 vaccines in India.The Company has invested Rs.23.0 million in CPV for a
 50% equity stake. CPV has launched Hepatitis A vaccine HAVpur, a new
 generation vaccine with virosome technology in collaboration with Berna
 Biotech Ltd., Switzerland.  CPV has also launched the Companys
 Injectable Polio VaccinePolProtec in the Indian market and plans to
 launch novoHib (mono Hib) vaccine in the current financial year. CPV
 achieved a turnover of Rs.459.9 million and net profit of Rs.35.3
 million during the year under review. CPV now commands an estimated
 market share of around 45% in the pediatric combination vaccines
 segment in India.
 
 The Companys another JV Company, Cambridge Biostability Ltd.(CBL),a
 U.K.based Company,which is progressing further on development of
 thermostable vaccines applying CBLs patented Stable Liquid
 Technology over the Companys existing range of vaccines.The Company
 has around 10% stake in CBL and has invested an amount of Rs.207.8
 million (£ 2.4 million) therein including Rs.39.8 million (£ 0.5
 million) given during the year as loan convertible into ordinary
 shares.The Company has further given a loan of Rs.79.8 million (£1
 million) during the current financial year on similar terms.
 
 Your Companys associate Company, PanEra Biotec Pvt. Ltd. (formerly
 known as Panheber Biotec Pvt. Ltd.) (PanEra), set-up in joint venture
 with M/s. Heber Biotec S.A.,Cuba,an arm of the world renowned
 bio-technology research facility. Center for Genetic Engineering and
 Biotechnology, is continuing to meet requirement of bulk vaccines and
 antigen for the manufacture of Hepatitis B and Combination Vaccines by
 your Company. Due to strategic reasons, Heber Biotec has withdrawn
 itself from the joint venture and transferred its entire stake in
 Panheber to the promoter-directors of the Company. As a result and
 consequent upon the extinction of Joint Venture, PanEra has become an
 associate company w.e.f.  21.11.07 and has changed its name to PanEra
 Biotec Private Limited w.e.f. 2nd July 2008.
 
 The Companys wholly-owned subsidiary (WOS) namely Best On Health Ltd.
 (BOH), which owns a prime immovable property being used by the
 Company as its Corporate Office, has charted out a plan for
 diversification in related health management space as part of its
 future growth plans.The Company has invested Rs.1,813.9 million in BOH
 including Rs. 1,791.0 million as 0.5% optionally convertible Non
 Cumulative Preference Shares invested during the year, to finance its
 foray into healthcare industry.The Company has further invested
 Rs.200.0 million during the current financial year on similar terms.
 
 Due to strategic reasons, during the year under review, the Company has
 sold its entire stake in another WOS, Radicura & Co. Ltd. to BOH and
 the same has now become WOS of BOH. Further, during the year under
 review, your Company invested an amount of Rs.0.7 million towards
 acquisition of 100% stake in Panacea Educational Institute Private
 Limited, Panacea Hospitality Services Private Limited and Sunanda Steel
 Company Ltd. However, due to strategic reasons, the Company has sold
 its entire stake in these WOS to BOH and as such these WOS companies
 have become WOS of BOH.
 
 Further, with a view to perform the activities relating to registration
 and marketing of the Companys patented products worldwide, during the
 year under review, your Company had set-up a WOS namely Panacea Biotec
 FZE in UAE and remitted an amount of Rs.5.47 million (AED 500,000)
 towards its capital contribution, during the current financial year.
 
 During the current financial year, your Company had also remitted an
 amount of Rs.1.58 million (Euro 25,000) for setting-up another WOS in
 Germany, namely Panacea Biotec GmbH, with a view to perform activities
 relating to registration of the Companys products in European Union.
 
 Your Company is expanding its portfolio by entering the fast growing
 healthcare sector and has entered into collaboration with Umkal group
 to set-up a multi super-specialty hospital with the modern equipments
 in the National Capital Region of Delhi at Gurgaon.  Your Company has
 invested an amount of Rs.56.4 million as a 20% payment towards
 application & allotment money for acquiring 75.2 % stake in Umkal
 Medical Institute Private Limited, during the current financial year.
 With your Companys leadership in providing innovative medical
 therapies and Umkals long term experience in providing specialized
 healthcare, the collaboration would be unique and one of its kind.
 
 During the current financial year, a wholly owned subsidiary of the
 Company, Panacea Biotec Inc., US has been incorporated with its main
 objects of, inter-alia, research, development, manufacture, register,
 market, distribute, import and export pharmaceutical and biological
 products etc. in United States.
 
 During the year under review, the Company has also invested Rs.40.0
 million with a 40% share in a partnership firm viz. M/s Lakshmi and The
 Manager with an object of investing/purchasing land, stocks, etc.  The
 said firm has been taken over by a newly formed company, Lakshmi &
 Manager Holdings Limited with effect from 1st July, 2008. As a result
 of takeover of the said firm, the Company has been allotted 41,257,126
 Equity Shares of Re.1 each aggregating Rs.41.26 million in Lakshmi &
 Manager Holdings Limited.
 
 The Ministry of Corporate Affairs, Government of India, has vide its
 letter no 47/480/2008 CL-III dated 7th July, 2008, granted the approval
 to the Company for not attaching the Annual Reports of the subsidiary
 companies with the Annual Report of the Company for the financial year
 ended 31st March, 2008.The members, if they desire, may write to the
 Company Secretary at the Companys Corporate Office at B-1 Extn./G-3,
 Mohan Co-operative Industrial Estate, Mathura Road, New Delhi - 110044,
 India, to obtain the copies of the Annual Report of the subsidiary
 companies.
 
 Consolidated Financial Statements
 
 As stipulated in clause 41 of the Listing Agreement with the stock
 exchanges, the consolidated financial statements have been prepared by
 the Company in accordance with the Accounting Standard AS-21 on
 Consolidated Financial Statements read with Accounting Standard AS-27
 on Financial Reporting of Interest in Joint Ventures and Accounting
 Standard AS-23 on Accounting for Investments in Associates, as issued
 by the Institute of Chartered Accountants of India. The Consolidated
 Financial Statements of the Company includes therein Consolidated
 Audited Annual Accounts for the year ended 31st March, 2008 of its
 Wholly Owned Subsidiary (WOS), Best On Health Ltd. (by consolidating
 its Annual Accounts with those of its WOS, viz. Radicura & Co. Ltd,
 Panacea Educational Institute Pvt. Ltd., Panacea Hospitality Services
 Pvt. Ltd.
 
 and Sunanda Steel Company Ltd.); the Audited Annual Accounts for the
 year ended 31st March, 2008 of the JV Company, Chiron Panacea Vaccines
 Private Limited; the Audited Annual Accounts for the year ended 31st
 December, 2007 of another JV Company, Cambridge Biostability Ltd.; the
 Audited Annual Accounts for the year ended 31st March, 2008 of its
 associate company, Panheber Biotec Private Limited (now known as PanEra
 Biotec Pvt. Ltd.) and the Audited Accounts for the period ended 31st
 March, 2008 of its associate Lakshmi &The Manager.The audited
 consolidated financial statements together with Auditors Report
 thereon form part of the Annual Report of the Company.
 
 Listing of Equity Shares / Bonds
 
 The Equity Shares of the Company are listed in India on the National
 Stock Exchange (NSE) and Bombay Stock Exchange (BSE). Listing Fees for
 the financial year 2008-09 has been paid to these Stock Exchanges.
 
 The Foreign Currency Convertible Bonds are listed at Singapore Stock
 Exchange.
 
 Public Deposits
 
 During the year under review, your Company has not invited or accepted
 any deposits from the public pursuant to the provisions of Section
 58Aofthe Companies Act, 1956 and no amount of principal or interest was
 outstanding in respect of deposits from the public as of the date of
 Balance Sheet. However, during the year under review, the Company has
 continued to accept deposits from the Companys Directors, their
 relatives, associates and the Companys employees without inviting
 deposits from them.
 
 insurance
 
 All properties and insurable assets of the Company like building, plant
 & machinery, stocks and upcoming projects have been adequately insured,
 wherever necessary.The Company has also taken product liability
 insurance policies for conducting clinical trials and for insuring its
 products (manufactured & sold) with an add on cover of pollution
 liability and limited unnamed vendor extension liability to cover the
 risk on account of claims, if any, filed against the company.
 
 Directors
 
 Mr. M.L. Kalra, Director of the Company demised on 6th January, 2008.
 He was appointed as a non- executive Director of the Company in July
 2001 and has contributed to the growth of the Company in his position
 as Director and member of various Committees of the Board of Directors
 of the Company.  The Board wishes to accord its sincere appreciation
 for the valuable services and support rendered by him during his tenure
 as a Director of the Company.
 
 Mr. Rajesh Jain, the Joint Managing Director of your Company has been
 ranked amongst the top 40 global, most influential persons who would
 determine the future course of pharmaceutical industry by an
 internationally reputed organization, World Pharmaceutical Frontiers.
 It is a matter of great pride and honour for the medical fraternity,
 members and employees of the Company to see the name of Mr. Rajesh Jain
 in the selection. Your Directors wish to place on record their
 appreciation for the able guidance, vision and motivation extended by
 Mr. Rajesh Jain as the Joint Managing Director of the Company.
 
 In accordance with the provisions of the Companies Act, 1956, Mr.
 Soshil Kumar Jain, Mr. Sumit Jain and Dr. A.N.Saksena, Directors of the
 Company, are liable to retire by rotation and being eligible, offer
 themselves for re-appointment.
 
 Statutory Auditors
 
 As per the provisions of the Companies Act, 1956, M/s. S.R. Batliboi &
 Co., Chartered Accountants, hold office as Statutory Auditors of your
 Company till the conclusion of the ensuing Annual General Meeting and
 have shown their willingness to be re-appointed as the Auditors of the
 Company.
 
 Your Company has received the Certificate from M/s. S.R. Batliboi &
 Co., Chartered Accountants, as required under Section 224(1 B) of the
 Companies Act, 1956, to the effect that their re-appointment, if made,
 will be within the limits as prescribed under the provisions thereof.
 Your Directors recommend their re- appointment as the Auditors of the
 Company for the financial year 2008-09.
 
 Auditors Observations
 
 As regards the Auditors observation in their report regarding
 non-provision of proportionate premium on redemption of US $ 50
 million Zero Coupon Convertible Bonds due 2011 amounting to
 Rs.243,706,599,the directors are of the opinion that the bonds are
 redeemable only if there is no conversion of bonds earlier, the
 likelihood of which cannot be ascertained presently. Hence, the payment
 of premium on redemption is contingent in nature, the outcome of which
 is dependent upon uncertain future events.Therefore,same has been
 disclosed as a contingent liability.
 
 As regards the Auditors observation in their report regarding
 capitalization of expenditure on clinical trials amounting to Rs.
 185,575,387 for the purpose of registration of Companys products in US
 and/or Europe, the management believes that these products would be
 commercially viable and there is no reason to believe that there is any
 uncertainty that may lead to not securing registration for the products
 from regulatory authorities in US and/or Europe.
 
 As regards the Auditors observation in their report regarding slight
 delay in deposition of tax deducted at source in few cases, where
 amount involved was not significant, the said delays were due to normal
 operational difficulties. The total amount of such tax deducted at
 source was Rs.1,310,138 only and the Company had deposited the said
 amount along with applicable interest thereon amounting to Rs.31,718
 for such delayed period.
 
 The notes to the accounts and other observations, if any, in the
 Auditors Report are self-explanatory and, therefore, do not call for
 any further comments.
 
 Cost Auditors
 
 In terms of the provisions of Section 233B of the Companies Act, 1956,
 M/s J.P.Gupta & Associates, Cost Accountants, have been appointed as
 the Cost Auditors to conduct the audit of the Companys Cost Records in
 respect of formulations for the year ended 31st March, 2008 with the
 approval of the Central Govemment. They have also been appointed as the
 Cost Auditors for the financial year 2008-09 subject to the approval of
 Central Government.
 
 Disclosures under Section 217 of the Companies Act 1956
 
 Except as disclosed elsewhere in the report, there have been no
 material changes and commitments, which can affect the financial
 position of the Company between the end of financial year and the date
 of report.
 
 As required under Section 217(2) of the Companies Act, 1956, the Board
 of Directors inform the members that during the financial year there
 has been no material changes, except as disclosed elsewhere in this
 report:
 
 in the nature of Companys business, in the Companys subsidiaries or
 in the nature of business carried out by them, in the classes of
 business in which the Company has an interest.  Energy
 Conservation,Technology Absorption & Foreign Exchange
 
 Particulars 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, regarding conservation of energy,
 technology absorption and foreign exchange earnings & outgo, is given
 in Annexure A, forming part of this Report.
 
 Information regarding Employees
 
 The information required to be furnished under section 217(2A) of the
 Companies Act, 1956, read with Companies (Particulars of Employees)
 Rules, 1975 as amended, the names and other particulars of employees
 covered under these Rules are set out in Annexure B, forming part of
 this Report.
 
 Directors Responsibility Statement
 
 The Directors hereby confirm:
 
 i.  that in the preparation of the annual accounts, the applicable
 accounting standards had been followed along with proper explanation
 relating to material departures;
 
 ii. that the directors had selected such accounting policies and
 applied them consistently and made judgments and estimates that are
 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 that period;
 
 iii.  that the directors had 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 had prepared the annual accounts on a going
 concern basis.
 
 Acknowledgments
 
 Your Directors place on record their sincere appreciation for
 significant contribution made by the employees at all levels through
 their dedication, hard work and commitment and look forward to their
 continued support. Your Directors also take this opportunity to express
 sincere thanks to the medical fraternity and patients for their
 continued co-operation, patronage and trust reposed on the Company and
 its products.
 
 Your Directors also wish to place on record their appreciation and
 acknowledge with gratitude the support and co-operation extended by
 banks, financial institutions, government and shareholders and look
 forward to having the same support in all our future endeavors.
 
                                      For and on behalf of the Board
 
 New Delhi                                         Soshil Kumar Jain
 28th July,2008                                             Chairman