To the Shareholders
 
 The Directors have pleasure in presenting the Seventeenth Annual Report
 together with the Audited Accounts for the year ended 31st December
 2000.  
 
 Financial Performance
 
                                                         (Rs in Lakhs)
                                                      2000         1999
 
 Net Sales, Services and other Income               33464.92    33975.13
 Earnings before Tax                                 4382.12     3356.49
 Tax                                                 1335.00      885.00
 Earnings after Tax                                  3047.12     2471.49
 Proposed Dividend                                   1176.00      882.00
 Income Tax on proposed dividend                      265.78      105.84
 Transfer to General Reserves                         800.00      800.00 
 Balance carried forward                             1488.99      683.65
 
 Operations
 
 As a result of government mandated price reductions and import tariff
 imposition on Hepatitis - B vaccine, the Company has experienced for
 the first time in its history a reduction in net sales and other income
 albeit by a small margin during 2000. However, the management has taken
 steps to ensure that profitability is maintained under the most
 difficult circumstances. This is made possible by rigorous scrutiny of
 the cost base and working capital management. The post tax profit of
 your company has shown a healthy improvement of 23.3%.
 
 Exports
 
 The Company continued to lay emphasis on exports and this has resulted
 in export earnings of Rs. 2552.07 Lakhs as compared to Rs. 2054.25 Lakhs
 in the previous year.
 
 Efficiency Improvements
 
 During the last couple of years, the company has taken some major
 initiatives to enhance the profitability through efficiency
 improvements. This involves streamlining processes, right sizing cost
 and managing the trading asset base. ERP systems have been implemented
 and were audited for compliance during the year. The Company was
 declared the first compliant company in SB International. The company
 rolled out a Zero Based Budgeting System (ZBB) to redefine cost basis
 in all areas of operations. Steps have been taken to introduce on-line
 bidding in the area of procurement and results have been encouraging.
 
 Dividend
 
 For the year under review, the Directors are pleased to recommend a
 dividend of Rs. 4.00 per equity share (40%) amounting to Rs. 1176 Lakhs
 on the paid up share capital.
 
 Research & Development
 
 The Company while engaged in in-house Research and Development
 activities, plays an active role in helping the SB Group by doing a
 part of R&D work in the areas of tropical medicines and clinical data
 management in India. It continues to have the benefit of the parent
 company's global Research & Development activities.
 
 Directors
 
 The Board was reconstituted during the year under review :
 
 Mr. P. C. Roache resigned as the Chairman with effect from 27th April
 2000 after the last Annual General Meeting. Mr. John Squires resigned
 as the Managing Director of the Company with effect from 22nd January
 2001 due to his being relocated to another GlaxoSmithKline group
 entity. Mr. Ramon Jacobs and Mr. M. P. Cybulski have also vacated the
 offices of Director with effect from 9th February 2001. Mr. N.
 Ahmedali, Wholetime Director resigned with effect from the same date.
 The Directors place on record their deep appreciation for the yeomen
 services rendered by the outgoing Directors towards the growth of the
 Company.  
 
 Mr. P. Murari and Mr. T. R. Satish Chandran were appointed as
 Additional Directors during the year under review.  Mr. V. Thyagarajan
 Managing Director of Glaxo India Ltd. assumed the office of Managing
 Director of your Company with effect from 22nd Jan 2001.
 
 Dr. Shailesh Ayyangar was inducted into the Board as Additional
 Director and also as Wholetime Director with effect from Feb 9th 2001.
 In the casual vacancies caused by the resignations of Mr. Ramon Jacobs,
 Mr. M. P. Cybulski and Mr. N. Ahmedali, the Board appointed Mr. S.
 Kalyanasundaram, Mr. Simon Scarffand Mr. P.V. Nayak respectively as
 Directors with effect from February 9th 2001. The Board further
 appointed Mr. N. Ranthi Dev as Additional Director on the same date.
 
 Dr. K. S. Krishnaswamy retires by rotation and is eligible for
 reappointment. Approval of the members is sought for the reappointments
 / appointments of Directors as enumerated in the notice convening the
 Seventeenth Annual General Meeting.
 
 Notices have been received from members pursuant to section 257 of the
 Companies Act, 1956 together with the requisite fee proposing the
 candidatures of the Directors whose appointments will be placed before
 you at the meeting.
 
 Merger with Glaxo India Ltd.
 
 Glaxo Wellcome plc and SmithKline Beecham pie have merged under an
 arrangement, which became effective on 27th December 2000 to form a new
 Company called Glaxo SmithKline plc. The new Company is well placed to
 respond to the healthcare challenges of twenty-first century with
 market leadership in major therapeutic categories. In India, the
 Company and Glaxo India Ltd. are now affiliates of Glaxo SmithKline
 plc.
 
 The process of merging the two Indian Companies has commenced. Based on
 the proposal as approved by your Board and Board of Directors ofGlaxo
 India Ltd., Glaxo shall issue and allot at par, to the shareholders of
 the company, one (1) Equity Share of Rs. 10/- each credited as fully
 paid in their capital for every two (2) Equity Shares of Rs. 10/- each
 held by the shareholders of SmithKline Beecham Pharmaceuticals (India)
 Limited. The Company is proceeding with the procedural requirements
 seeking the approval and of the Hon'ble High Court at Bangalore.
 
 Personnel
 
 Industrial relations in the Company were cordial throughout the year
 under review.
 
 The company recognises the importance of the quality of its employees
 and continues to invest significantly in the personal and professional
 development of its staff.
 
 The Board of Directors wishes to place on record its sincere
 appreciation for the continued support and good work of all the
 employees.
 
 Information required to be furnished under Section 217(2A) of the
 Companies Act, 1956, read with the Companies (Particulars of Employees)
 Rules, 1975, as amended, is annexed to the Report.
 
 Corporate Governance
 
 Although the guidelines prescribed by SEBI on Corporate Governance are
 not applicable to the Company for the year under report, effective
 steps have been initiated to comply with the guidelines. A report on
 this is annexed herewith.
 
 Auditors
 
 The Auditors Messers. Price Waterhouse retire at the forthcoming Annual
 General Meeting and are eligible for appointment.
 
 Auditors  Report
 
 In respect of para No. 2.2 of the Auditor's Report, attention of the
 members is drawn to Note No. 17 in the Notes on Accounts which is self
 explanatory.
 
 Conservation of Energy, Technology Absorption and Foreign Exchange
 Earnings/Outgo
 
 In pursuance of the provisions of 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, the particulars
 relating to conservation of energy, technology absorption and foreign
 exchange earnings and outgo are annexed to the Report.
 
 Acknowledgment
 
 The Directors wish to place on record their thanks for the continued
 support of the Medical Profession, Stockists, Drug Control Authorities,
 Government Agencies, Business Associates, our Bankers, Collaborators
 and Shareholders.
 
                                               For and on behalf of the
                                                   Board of Directors
 Date : 23rd February 2001        V. Thyagarajan       B.S. Shantharaju
 Place : Bangalore               Managing Director     Director-Finance 
 
 
 Annexure to the Directors' Report
 
 Information under Section 217(1)(e) of the Companies Act, 1956 read
 with the Companies (Disclosure of Particulars in the Report of the
 Board of Directors) Rules, 1988 and forming part of the Directors'
 Report for the year ended December 31, 2000.
 
 I. CONSERVATION OF ENERGY
 
 The Company continues to explore measures which will help in
 conservation and saving of energy.
 
 FORM-B
 
 II. RESEARCH AND DEVELOPMENT AND TECHNOLOGYABSORPTION
 
 A. Research and Development
 
 1. Besides developing several formulations for the Healthcare Solutions
 Africa (HSA) and the Export market, OXIBENDAZOLE (Human Grade)
 Suspension has been exclusively developed for SB Tropicals, U.K. This
 product is ready for launch and the technology will be transferred to
 one of the identified sites in Europe.
 
 2. Benefits derived: Development and subsequent introduction of FEFOL-Z
 Capsules with Carbonyl Iron in the form of pellets as a source of
 elemental iron is a pioneering contribution to the hematinic product
 category in the country. The product has earned a warm welcome from the
 prescribing community. In addition, the company has been adequately
 poised to comply with all the regulatory amendments (DPCO & NPPA) that
 came into force in the later half of the year 2000.
 
 3. Future plan of action: As the business complexity of the
 Organisation increased with the advent of new product launches and the
 widening of market base - particularly Exports, Product Development
 Department has been transformed into a substantially self-reliant unit
 in the Technical Operations Division. The department now has a
 state-of-the-art infrastructure to handle pilot-scale batches of most
 of the oral and topical dosage forms.
 
 Brisk developmental activity was taken up on the new oral anti-diabetic
 agent, AVANDIA (Rosiglitazone) - a product of strategic importance
 globally. This product has been developed in 3 strengths with
 satisfactory results of the stability studies that are in progress.
 Another major new product in developmental stage is HIDRASEC a proven
 choice-drug for treatment of acute diarrhoea. Capsules for adults and
 Flavoured Granules for Paediatric use have been developed and are
 undergoing the mandatory accelerated stability studies.
 
 Line-extension products for popular brands such as Crocin and Zevit
 have been developed and are in the pipeline for launch during 2001.
 Indigenous manufacturers / vendors are being developed and evaluated as
 an alternative source for few of the imported raw materials to minimise
 the cost of goods supplied. Several projects are underway to implement
 environment—friendly manufacturing practices, which is one of the
 prominent societal commitments of the Organisation.
 
 4.  Expenditure on Research & Development
                                                         Rs. in Lakhs
 
 a) Capital                                                  84.38
 b) Recurring                                               223.91
 c) Total                                                   308.29
 d) Total R & D expenditure as percentage 
 of total turnover                                            0.97%
 
 B.  Technology absorption, adaptation and innovation
 
 The R&D team is now strengthened and is actively involved in projects
 of focussed strategic significance. Several projects have been
 undertaken for reductions in cycle time, waste elimination, process
 development and validation. These projects will compliment the benefits
 to the company to develop and manufacture new bulk drugs and
 formulations for domestic and export markets.
 
 III. FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 During the year foreign exchange outgo was Rs. 4273.23 Lacs. The
 foreign exchange earned during the year was Rs. 2161.62 Lacs.