Piramal Healthcare

We take pleasure in presenting the 61st Annual Report and Audited
 Accounts for the Year ended 31st March 2008.
 
 At the outset, we are pleased to inform you that pursuant to your
 approval by Special Resolution which was passed through Postal Ballot
 and the Fresh Certificate of Incorporation consequent upon Change of
 Name issued by the Registrar of Companies, Maharashtra, the name of
 the Company has been changed from Nicholas Piramal India Limited to
 Piramal Healthcare Limited (PHL).
 
 PERFORMANCE HIGHLIGHTS: (Standalone)              (Rs. in Million)
 
 Year ended March 31                            2008    2007     %Growth
 
 Total operating income                      19,300.2  16,379.0    17.8
 OPBIDTA                                      4,124.9   3,018.6    36.6
 % margin                                        21.4      18.4
 Non-operating other income                      80.5      19.8   306.6
 EBIDTA                                       4,205.4   3,038.4    38.4
 Less:
 Interest (Net)                                 173.0     109.0    58.7
 Depreciation                                   704.8     705.0    (0.0)
 Profit before tax and Exceptional items      3,327.6   2,224.4    49.6
 Less:
 Income tax provision                           312.8     341.6    (8.4)
 -     Current                                  400.3     265.5
 -     Deferred                                  52.7     166.0
 -     MAT Credit Entitlement                  (170.2)   (111.6)
 
 -     Fringe Benefits Tax                       30.0      21.7
 Profit after tax                             3,014.8   1,882.8    60.1
 % margin                                        15.6      11.5
 Add:                                         
 Profit brought forward from previous year    3,208.6   3,039.3
 Profit available for appropriation           6,223.4   4,922.1
 Appropriation:
 Interim Dividend Paid
 -     Preference Share (On Redemption)          13.4       3.7
 -     Equity Shares                              --      627.1
 -     Preference Shares                          --       19.2
 -     Dividend Distribution Tax thereon          2.3      91.2
 Proposed Dividend
 -     Equity Shares                            877.9     104.5
 -     Dividend Distribution Tax thereon        149.2      17.8
 Transfer to General Reserve                  1,626.7     700.0
 Transfer to Capital Redemption Reserve         345.3     150.0
 Balance carried to Balance Sheet             3,208.6   3,208.6
 Earnings per share (Basic / Diluted) (Rs.)      14.3       8.9
 
 DIVIDEND
 Preference Shares:
 
 The Company had on 9th January, 2008 redeemed the following Preference
 Shares alongwith pro-rata dividend @5% from 1st April 2007 upto i 9th
 January 2008, being the date of redemption, which is confirmed as final
 dividend:
 
 a) 15,00,000 - 5% Cumulative Redeemable Preference Shares of Rs.100
 each (Series I Preference Shares).
 
 b) 2,33,72,280 - 5% Cumulative Redeemable Preference Shares of Rs.10
 each (Series II Preference Shares).
 
 Equity Shares:
 
 The Board has recommended final Equity Dividend at 210% (i.e. Rs. 4.20
 per share) on 20,90,13,144 equity shares of Rs.2A each, which will be
 paid to eligible members on June 27, 2008, after approval by the
 shareholders at the forthcoming Annual General Meeting.
 
 The total cash outflow on account of equity dividend & preference
 dividend payments, including distribution tax, will be Rs. 1,042.8
 million.  (FY2007 Rs.863.5 million)
 
 The Board recommends the above dividends for declaration/confirmation
 by the members.
 
 CORPORATE RESTRUCTURING:
 
 De-Merger of New Chemical Entity (NCE) Research Unit:
 
 During the year, the Companys NCE Research Unit was demerged to
 Piramal Life Sciences Limited (TLSL) [formerly known as NPIL Research
 and Development Limited] under a Composite Scheme of Arrangement
 (Demerger Scheme) duly sanctioned by the Honble Bombay High Court.
 The Appointed Date under the Demerger Scheme was 1st April, 2007 and
 the Effective Date was 21st January, 2008.
 
 Members of the Company have been issued and allotted on 25th February,
 2008, one PLSL share of Rs.10 for every 10 equity shares of Rs.2/- each
 held in the Company as on 22nd February, 2008, which was the Record
 Date. The shares of PLSL are in the process of being listed on the
 Exchanges where the Company is listed i.e. BSE and NSE.
 
 Merger of Diagnostic Services (Pathlabs) subsidiaries
 
 During the year, all the pathlabs operations were consolidated in one
 subsidiary, viz. NPIL Laboratories and Diagnostics Pvt. Ltd., which
 name has now been changed to Piramal Diagnostic Services Private
 Limited (PDSL). Accordingly, NPIL Dr. Phadke Pathology Laboratory and
 Infertility Center Pvt Ltd (wholly-owned subsidiary of the Company) and
 Rana Diagnostics Pvt Ltd (which was acquired by PDSL during FY08 and
 was its wholly- owned subsidiary) merged with PDSL under a Scheme of
 Arrangement and Amalgamation sanctioned by the Honable Bombay High
 Court.
 
 Merger of NPCPPL and NPIL Healthcare:
 
 During the year, the Companys wholly-owned subsidiaries, Nicholas
 Piramal Consumer Products Private Limited (NPCPPL) and NPIL Healthcare
 Private Limited (NHPL) merged with the Company under a Scheme of
 Amalgamation sanctioned by the Honable Bombay High Court with effect
 from 1st April, 2007 which was the Appointed Date under the Scheme.
 They being wholly owned subsidiaries, no new shares have been issued by
 the Company pursuant to the Scheme.
 
 OPERATIONS REVIEW:
 
 Total Operating income for the year grew 17.8% to Rs 19.3 billion
 compared with Rs. 16.4 billion for the year ended 31 March 2007.
 Operating Profit (OPBIDTA) grew 36.6% to Rs.4.1 billion.
 
 Profit After Tax grew by 60.1% to Rs. 3.0 billion compared to Rs. 1.9
 billion for the previous year. Earnings per share for the year was Rs.
 14.3 per share vs. Rs. 8.9 in FY2007.
 
 A detailed discussion of operations for the year ended 31st March 2008
 is given in the Management Discussion and Analysis section.
 
 RESEARCH & DEVELOPMENT:
 
 With the de-merger of the Companys New Chemical Entity (NCE) R&D
 division, the Company has discontinued all its activities relating to
 NCE R&D. The Company however, continues to conduct Research and
 Development related to:
 
 - Development of conventional and novel dosage forms for drug products
 across all the major therapeutic areas for the domestic market;
 
 - Preformulation and formulation development and clinical manufacturing
 of NCEs for external clients;Process optimisation / research and scale
 up, for the early phase projects from clients;
 
 - Development of cost effective and environmentally friendly process
 for commercial manufacturing of active pharmaceutical ingredients
 (APIs) 6k / or their intermediates.
 
 As a result, Total R&D expenditure during the year has come down
 significantly during the year. It was Rs. 352.8 million, including
 capital expenditure of Rs. 76.9 million. The corresponding previous
 year spends were Rs. 1,074.0 million and Rs. 195.1 million
 respectively. The research and development staff has also accordingly
 reduced to 131 people in FY2008 from 386 in FY2007.
 
 SUBSIDIARY COMPANIES:
 
 Piramal Diagnostic Services Private Limited (PDSL):
 
 We are aggressively building up this business. During the year we
 acquired 16 new laboratories and completed a three-way merger between
 Rana Diagnostics, Dr. Phadkes Laboratories and PDSL. PDSL also
 received during the year the prestigious certification from College of
 American Pathologists (CAP). The company can now take on pathology work
 related to Clinical Research Organisations.
 
 The Total Operating Income for Pathlabs grew by 71.8% from Rs. 695.0
 million in FY2007 to Rs. 1.2 billion in FY2008. Operating Profit for
 the year was up by 112.5% to Rs 251.2 million from Rs. 118.2 million in
 FY2007. Acquisition of new labs and setting up Greenfield facilities
 have resulted in higher interest costs and depreciation.
 
 NPIL Pharmaceuticals (UK) Ltd.:
 
 Starting from this year, we have increased our focus on improving
 profitability in this business. The net sales for FY2008 for NPIL
 Pharmaceuticals (UK) Ltd. grew by 14.3% to Rs. 7.2 billion as against
 Rs. 6.3 billion for FY07. Operating profit for the year was up by 23.8%
 to Rs. 876.3 million as compared to an operating profit of Rs. 707.9
 million in FY07. We have incurred one-time exceptional charge of Rs.
 341.8 million during the year.  As a result, PAT for the year was lower
 at 365.2 million, as compared to Rs. 515.0 million FY07.
 
 Torcan Chemical Limited:
 
 Adverse movement of Canadian Dollar against the US Dollar has
 significantly affected Torcans performance this year. Canadian Dollar
 had appreciated by 11% during the year. As a result, Net Sales for FY08
 for Torcan was lower at Rs. 917 million as compared to Rs. 1.1 billion
 for FY07, Operating loss for the year was Rs. 9.2 million as compared
 to the operating profit of Rs. 106.1 million for FY07 and Net Loss for
 the year was Rs.68.2 million as compared to Net Profit of Rs. 65.2
 million for FY07. We are now utilizing our Ennore facilities to
 complement Torcans offerings and to make it more competitive.
 
 The Central Government has granted exemption under section 212(8) of
 the Companies Act 1956, from attaching to the Balance Sheet of the
 Company, the Accounts and other documents of its subsidiaries. However,
 the Consolidated Financial Statements of the Company, which include the
 results of the said subsidiaries, are included in this Annual Report,
 Further, a statement containing the particulars prescribed under the
 terms of the said exemption for each of the Companys subsidiaries is
 also enclosed. Copies of the audited annual accounts of the Companys
 subsidiaries, can also be sought by any investor of the Company or its
 subsidiaries on making a written request to the Company Secretary at
 the registered office of the Company in this regard. The Annual
 Accounts of the subsidiary companies are also available for inspection
 for any investor at the Companys and/or concerned subsidiaries
 registered office.
 
 JOINT VENTURES:
 
 Allergan India Limited (AIL)
 
 AIL is a 51:49 Joint Venture between Allergan Inc., USA and Piramal
 Healthcare Limited. Net Sales of AIL grew by 19.0% to Rs. 913.3 million
 (FY2007 Net Sales; 767.1 million) PBIDT for FY2008 was up by 102% to
 Rs.211.7 million as compared to Rs.104.6 million in FY2007. Profit
 after tax for FY2008 was up by 150.0% to Rs. 109.8 million as compared
 to Rs. 43.9 million for FY2007.
 
 INDUSTRY OUTLOOK:
 
 The domestic pharmaceutical market continued to grow well as a result
 of rising income levels. As per ORG-IMS MAT March, the growth for the
 year was 14.8%. Chronic therapies continue to grow faster than acute.
 The year has seen players making investment in field-force to tap the
 rural markets. No major price increases were seen during the year,
 instead the focus has been on penetrating the markets.
 
 The Global Custom Manufacturing market continued to show good growth.
 Increased acceptance of Indian companies as manufacturing partners has
 resulted in higher growth. Larger pharmaceutical companies are now
 increasingly looking at outsourcing their manufacturing operations;
 faced by rising cost-pressures and patent expiry of blockbuster drugs.
 The year also marked the entrance of some Indian companies in the
 custom manufacturing business. However, custom manufacturing market is
 large and growing. The lead-times are also longer in this business
 which create a significant entry barrier.
 
 INTERNAL CONTROL SYSTEM:
 
 The Company has a sound internal control system, which ensures that all
 assets are protected against loss from unauthorized use and all
 transactions are recorded and reported correctly. The internal control
 systems are further supplemented by internal audit carried out by an
 independent firm of Chartered Accountants and periodical review by
 management. The Audit Committee of the Board addresses significant
 issues raised by both, the Internal Auditors and the Statutory
 Auditors.
 
 HUMAN RESOURCES MANAGEMENT:
 
 Employees are vital to our Company. We have created a favorable work
 environment that encourages innovation and meritocracy. We had staff
 strength of 7,061 employees (31 March 2007: 6,745 employees) as at 31
 March 2008.
 
 Function                  March 200  8 31 March 2007    +/(-)
 
 Total Manpower              7,061      6,745             316
 (a) Field staff             3,789      3,154             635
 (b) R&D staff                 131        387            -256*
 (c) Others                  3,141      3,204             -63
 
 *Reduction is on account of transfer to Piramal Life Sciences Limited
 on Demerger.
 
 Any shareholder interested in obtaining a copy of the statement of
 particulars of employees referred to in section 217 (2A) of the
 Companies Act 1956, may write to the Company Secretary at the
 Registered Office of the Company.
 
 Stock Options disclosures pursuant to the applicable requirements of
 the Securities and Exchange Board of India (Employee Stock Option
 Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are given
 in the Annexure to this Report.
 
 CORPORATE SOCIAL RESPONSIBILITY:
 
 In the Piramal Group, we believe we exist to care for the world we
 share and serve. We aim to offer sustainable support to populations in
 need through programmes in disease prevention, education, development,
 hygiene and access to healthcare. As a Group, our Corporate Social
 Responsibility initiatives, channelled through the Piramal Foundation,
 are focused on the search for solutions to the most pressing challenges
 in India.
 
 In partnership with Indicorps, the Piramal Foundation has established a
 Grassroots Development Laboratory (GDL) in the village of Bagar,
 Rajasthan.  Talented young change makers from around the world are
 empowered to implement scaleable and sustainable innovations in
 healthcare, education, livelihood, technology utilization, rural
 enterprise and community development - some of Indias toughest
 development challenges. This has resulted in the establishment of the
 Bagar Employment Institute, the Bagar Employment Exchange, an
 award-winning women-staffed rural BPO and an entrepreneurial,
 sustainable pilot programme for affordable, purified drinking water in
 rural areas. The Indian School of Education implements programmes such
 as a principals training programme in Rajasthan, and the Gandhi
 Fellowship, which will place highly talented new graduates in roles
 that assist government schools in effecting educational improvement in
 rural India.
 
 The Piramal Prize for Innovations that Democratize Healthcare is a
 competitive initiative in partnership with the Indian Institute of
 Management, Ahmedabad, that encourages innovators to explore and
 implement breakthrough ideas. It will incubate sustainable, scaleable
 business models that will make the highest standards of health
 accessible to Indias rural and marginalized urban communities.
 
 The Pratham India Education Initiative, seeded by UNICEF and the Mumbai
 Municipal Corporation, was initiated in 1994 to spread primary
 education. The societal mission, Every child in school and learning,
 and its replication in other parts of the country has attracted diverse
 supporters and volunteers.
 
 The Gopikrishna Piramal Memorial Hospital, built in 1982, focuses on
 serving handicapped children and those with chronic conditions, such as
 arthritis or kidney disease. This facility also conducts ophthalmology
 and pediatrics camps in slum areas. The Dialysis Training Institute,
 where dialysis technicians are certified and trained, has received
 major acclaim from the government.
 
 Give India is a non-profit organization dedicated to help the public
 contribute to causes of their choice. Through the Piramal Groups
 association with Give India, our employees are provided the opportunity
 to donate part of their monthly salary to abet and champion one of the
 diverse social causes espoused and listed by the NGO. The Piramal Group
 then matches this contribution.
 
 DIRECTORS RESPONSIBILITY STATEMENT:
 
 As required under section 217(2AA) of the Companies Act, 1956 we hereby
 state:
 
 a) that in the preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures, if any;
 
 b) that the Directors have 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 as at 31 March 2008 and its profit for the
 year ended on that date;
 
 c) that the Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Act, for safeguarding the assets of the Company and
 for preventing and detecting fraud and other irregularities.
 
 d) that the Directors have prepared the annual accounts on a going
 concern basis.  DIRECTORS:
 
 Mr. Y.H. Malegam and Mr. Deepak Satwalekar retire by rotation at the
 ensuing Annual General Meeting and are eligible for re-appointment,
 which the Board recommends.
 
 The following changes in the Board of Directors took place during FY08:
 
 * Mr. Rajesh Khanna - Director and Mr. Michael J. Fernandes - Executive
 Director (CMG) ceased to be Directors of the Company. Your Board places
 on record its appreciation of the contributions made by these Directors
 during their tenure with the Company;
 
 * Mr. N. Santhanam - Group President Finance & Legal and Chief
 Financial Officer was elevated to the Board and appointed as Executive
 Director & CFO for a period of 3 years w.e.f.25th October 2007;
 
 Dr. Swati A. Piramal was re-appointed as Director - Strategic Alliances
 & Communications during the year, for a further period of five years
 w.e.f.20th November 2007.
 
 The re-appointment / appointment of Dr. Swati A. Piramal and Mr. N.
 Santhanam were approved by members at the Extra Ordinary General
 Meeting held on 23rd November 2007.
 
 CORPORATE GOVERNANCE:
 
 The Company has complied with the applicable provisions of Corporate
 Governance under clause 49 of the Listing Agreement with the Stock
 Exchanges. A separate report on Corporate Governance compliance is
 included as a part of the Annual Report alongwith the Certificate from
 Mr.  N.L. Bhatia, Practicing Company Secretary.
 
 In compliance with the Corporate Governance requirements, the Company
 has implemented a Code of Conduct for all its Board members, who have
 affirmed compliance thereto. A Code of Conduct has also been formulated
 and implemented for the senior management of the Company.  The said
 Codes of Conduct have been posted on the Companys website.
 
 FIXED DEPOSIT:
 
 We had discontinued accepting / renewing fixed deposits. Unclaimed
 Fixed Deposits from the public / shareholders as on 31st March 2008
 amounted toRs. 175,000 (FY2007: Rs.199,000)
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION:
 
 Particulars required under Section 217 (1) (e) of the Companies Act,
 1956 read with Rule 2 of the Companies (Disclosure of Particulars in
 the Report of Board of Directors) Rules, 1988 is given in the Annexure
 to this Report.
 
 AUDITORS:
 
 Shareholders are requested to appoint the Auditors. Messrs. Price
 Waterhouse, Mumbai retire as Auditors of the Company at the ensuing
 Annual General Meeting and are eligible for reappointment.
 
 ACKNOWLEDGEMENTS:
 
 We take this opportunity to thank the employees for their dedicated
 service and contribution to the Company. Our sincere appreciation is
 also due to the Medical Profession and Distributors for the patronage
 of our products.
 
 We also thank our strategic alliance and joint venture partners, banks,
 financial institutions, business associates and our shareholders for
 their continued support towards conduct of efficient operations of the
 Company.
 
                                             By Order of the Board
 
                                                Ajay G. Piramal
                                                   Chairman
 
 16 May 2008