Dear Shareholders,
 
 It gives me immense pleasure to share with you the key developments of
 Piramal Groups flagship company - Piramal Healthcare for the year gone
 by. FY2011 marked a turning point in the history of Piramal Healthcare
 Limited.
 
 2011 - A landmark year
 
 To begin with, we did the most profitable deal in the history of global
 pharma with the sale of our Healthcare Solutions business for $ 3.8
 billion.  The transaction at 9 times FY10 sales has created new
 industry benchmarks
 
 for valuation. Moreover, what is truly satisfying is that the deal has
 been a win-win proposition: for the business, for the shareholders and
 for the employees who moved to Abbott as well as for those who stayed
 back at Piramal Healthcare.
 
 Piramal Healthcares history dates back to 1988 when we entered the
 pharmaceutical industry via an acquisition. From being a marginal
 player ranked 48th, Piramal Healthcare steadily consolidated its
 position to become a formidable force in the industry, rising to Top 3
 with a market share of 4.2% in a highly fragmented Indian
 pharmaceutical market.  So then why did we divest the Healthcare
 Solutions business after reinforcing its strength and reach for 22
 yearsRs.
 
 The answer lies in our guiding principle of conducting business. At
 Piramal Healthcare, we derive strength from our core values of
 knowledge, action and care that give us purpose to create real value
 for all our stakeholders including our investors, our employees and our
 partners. Therefore the Board unanimously agreed that the divestment
 was a strategic move to maximize the businesss value and was in the
 best interest of all our stakeholders.
 
 Another important event during FY2011 was the sale of our shareholding
 in our subsidiary, Piramal Diagnostic Services Private Limited (PDSL)
 to Super Religare Labs (SRL) for Rs. 6 billion. This valuation at 3
 times FY10 sales and ~ 16 times FY10 EBITDA was one of the highest in
 the industry. From a single diagnostic centre in Kolkata in 1999, we
 went on to become the leading player in diagnostic services with a
 network of 107 laboratories across the nation in 2010. Again, the
 intention behind the deal was to unlock value for our shareholders and
 provide the business with the scale and size it needed to serve a
 larger base of Indian consumers to help them fight disease with timely
 and accurate diagnosis.
 
 Rewarding our shareholders
 
 Having created value through divestments of Healthcare Solutions
 business and our subsidiary - PDSL, we have also rewarded the
 shareholder by
 way of buy back of shares. The Board believed that buyback was the most
 efficient means of returning money to shareholders. Hence, during the
 year, we have bought back 41.8 million equity shares, representing 20%
 of equity share capital of PHL at a price of Rs. 600 per share. The
 buyback price represented a premium of 19% over the average share price
 of three months prior to announcement of buyback. The board has also
 proposed dividend of Rs. 12 per share (Rs. 6 ordinary dividend and Rs.6
 as one time special dividend on sale of healthcare solutions business).
 
 Our company has become financially robust with proceeds from these two
 deals. As on 31st March, we had cash and investments (including cash
 receivable and loans & advances) of Rs. 104.0 billion. The quantum of
 funds available is more than what can be efficiently deployed in our
 existing businesses.  Hence, we will explore growth opportunities in
 new sectors. With a sustained GDP growth rate of 8-9%, rising
 disposable income of Indian consumers and a young demographic
 population profile, we are at a time where opportunities to create new
 businesses are enormous.
 
 Continued commitment to pharmaceutical sector
 
 The Pharma Solutions (Custom Manufacturing) business is regaining its
 growth trajectory with destocking issues of the industry behind us.
 Indian companies with their low cost, high quality manufacturing
 capabilities will benefit from the increasing cost pressures being
 faced by big pharma companies due to patent expiry of large blockbuster
 drugs and fewer new product approvals. Our Company with a flawless
 execution and regulatory track record combined with strong
 relationships with big pharma companies is well positioned to benefit
 from this trend.
 
 The Critical Care business now has a well established infrastructure to
 serve the increasing global demand from hospitals. With a presence in
 102 countries and a strong portfolio of products comprising inhalation
 and injectable anesthetics, this business is poised to scale newer
 heights as we consolidate our existing presence by entering untapped
 geographies and by adding newer products to our portfolio.
 
 Our Consumer Products business has grown from a fledgling one to one
 amongst the fastest growing Over-The-Counter businesses in India. With
 the expansion of the field force this year, we have established a
 strong sales, marketing and distribution network that reaches out to
 all 485 one lakh plus towns in India and 2.4 lakh retail outlets. With
 increasing disposable income of the Indian consumer, this business is
 geared for sustained accelerated growth, given our strong brand
 portfolio.
 
 To further reinforce our presence in the healthcare space, the Board of
 Directors has also approved the de-merger of the New Chemical Entity
 research unit of Piramal Life Sciences into Piramal Healthcare.  With a
 pipeline of 24 programs across different phases of development,
 state-of-the-art facilities, world class personnel and a growing
 network of clinical collaborations in India and abroad, this unit will
 provide a strong innovation platform for us to build upon. This move is
 synergistic with our strategic intent to re-establish our Company as
 research driven.
 
 Exploring new growth opportunities
 
 We have been evaluating various sectors to invest some of this capital
 in a way that optimizes our strengths and results in long term value
 creation for our shareholders. With this in mind, we have announced our
 venture into the Financial Services sector. The Financial Services
 sector in India will
 
 benefit tremendously from the strong 8%+ GDP growth rate, has exciting
 expansion prospects and an attractive return profile.
 
 To begin with Piramal Healthcare will set up a Non Banking Financial
 Company for lending to infrastructure and other sectors and will foray
 into fund management for real estate. Towards building a strong
 Financial Services business, the Board of Directors has approved the
 acquisition of Indiareit Investment Management Company and Indiareit
 Fund Advisors Private Limited, a leading Real Estate Asset Management
 Company in India, for a consideration of Rs. 2.3 billion. These
 developments along with the devotion to strengthen our existing
 businesses will equip us to build a flourishing organization that
 benefits all our stakeholders.
 
 Caring for the world we share and serve
 
 It is rightly said that we make a living by what we get but we make a
 life by what we give. The joy of giving from selfless service leads us
 to a higher sense of purpose and fulfillment. Business conglomerates
 such as ours are in a far more privileged position to give. We are
 committed to building sustainable, empowered communities at the grass
 root level.  This year, Piramal Healthcare has earmarked a corpus of
 Rs. 200 crores for our various community development initiatives.
 
 To summarize, I would like to re-iterate that we are at a time when the
 business environment is dynamic than ever before. And those who embrace
 change can create enormous business opportunities.  In our pursuit of
 growing existing business and creating new business, we remain firmly
 committed
 
 to our guiding principle of creating shareholder value o ver long term.
 
 I thank you for your continued faith in us over the past years. As we
 embark upon a new journey, we look forward to your support in the
 coming years.
 
 Warm Regards,
 
                                                        Ajay G. Piramal
                                                             Chairman
                                                   Date: 21st June 2011