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AstraZeneca Pharma Chairman's Speech > Engineering - Heavy > Chairman's Speech from AstraZeneca Pharma - BSE: 506820, NSE: ASTRAZEN

AstraZeneca Pharma

BSE: 506820|NSE: ASTRAZEN|ISIN: INE203A01020|SECTOR: Pharmaceuticals
Dec 11, 11:12
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Dec 11, 11:13
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VOLUME 6,371
Chairman's Speech (AstraZeneca Pharma) Year : Dec '01
It gives me much pleasure to extend to all of you here this afternoon a
 cordial welcome to this, the 22nd Annual General Meeting of your
 The Directors' Report and the Audited Accounts for the year ended 31st
 March, 2001 have been with you for some time. With your kind
 permission, I will take them as read. The Annual Report, you will have
 noticed, contains some useful information by way of graphics, which, it
 is hoped, will enable shareholders to obtain a better perspective of
 your Company and make a better assessment of its overall performance.
 Incidentally, this is the first Annual Report of the company bearing
 its new name.
 As you know, Astra Pharmaceuticals AB, Sweden (Astra) acquired
 earlier this year all of the 25.% equity shareholding in the Company of
 IDL Industries Ltd., (IDL), its co-promoter. With this acquisition,
 your Company has become a direct subsidiary of Astra and an indirect
 subsidiary of AstraZeneca Plc.
 Astra has also acquired a further 4.99%, shares in the Company.  As a
 result, Astra's shareholding in the Company is presently 56.49% .
 At the Extra-Ordinary General Meeting of the Company held on 29th
 March, 2001, shareholders were pleased to approve the change of the
 name of the company from Astra-IDL Limited to AstraZeneca Pharma
 India Limited, subject to the change being approved,by Central
 Government.  Government's approval having being obtained, a fresh
 Certificate of Incorporation with the new name embodied therein was
 issued by the Deputy Registrar of Companies, Karnataka, on 31st May,
 2001, from which date the change of name became effective.
 The growth rate of the Indian economy expressed in terms of gross
 DOMESTIC product (DP) during the year 000-2001 declined to 5.2% from
 6.4% during 1999-2000 and 6.6% during 1998-1999.  This was in large
 measure due to the poor performance of the agricultural and
 manufacturing sectors.  The agricultural sector grew by a mearge 0.2%
 in 2000-2001 as against 0.7% in 1999-2000.  The manufacturing sector
 growth declined to 5.6% during 2000- 2001 compared to the previous
 year's 6.8%.  The services sector also experienced slowdown during
 2000-2001. The growth was 9.1% compared to 10.1% in 1999-2000. The
 capital markets, particularly the primary market, showed a depressed
 trend during the year due to the economic slow down and serious
 irregularities committed by certain market participants. The export
 sector however manifested healthy growth during the year.
 The Union Budget 2001-2002 introduced the second generation economic
 reform, including bankruptcy and foreclosure laws, in addition to
 providing Incentives for economic growth. The Export-Import Policy has
 further liberalised the economy, at the same time providing adequate
 protection to Indian industry and encouraging exports.
 The overall macro-economic indicators such as low interest rates, good
 export performance, comfortable balance of payments position and
 increased foreign exchange reserves coupled with low core inflation,
 are all conducive to the revival of growth in the economy.  A
 countrywide good monsoon as per expectations and meaningful progress on
 economic reforms, particularly in the infrastructure sector, will be
 key factors in the resurgence of the Indian economy.
 The pharmaceutical industry is one of the vital sectors in the Indian
 economy.  It is probably ranked next only to the Information Technology
 industry in terms of potential and degree of technology sophistication.
 According to International Medical Statistic, an internationally
 reputed market research agency, the Indian Pharmaceutical industry has
 registered an annual growth rate of about 7% .
 India is gradually positioning itself a global manufacturing centre for
 the pharmaceutical industry, its main strengths being low costs allied
 to excellent production quality, plus highly trained scientific and
 other staff, language skills.  a well-developed legal system and a
 rapidly improving infrastructure. Coupled with the above, the Indian
 government, earlier this year, decided that it would henceforth grant
 automatic approval for foreign direct investment of up to 100% of
 equity capital new pharmaceutical joint ventures (the previous ceiling
 was 74%).
 The Union Budget 2001-2002 has been well received by the pharmaceutical
 sector. There has been no change in the excise duty structure; there is
 an extension of the 150 percent weighted deduction to biotechnology,
 clinical trial, filing patents and regulatory approvals. This would
 encourage R&D in the pharmaceutical sector.  The reduction in corporate
 surcharge and dividend tax would also benefit subsidiaries of
 multinational companies.
 The much awaited draft pharmaceutical policy was announced in June
 2001.  It has recommended price control on bulk drugs with a turnover
 of over Rs. 200 million and 50% market share. In case of drugs with
 turnover of between Rs. 50 to Rs. 200 million, a 90% share with a
 single formulator will invite price controls. The pharmaceutical
 industry would favour higher turnover limit in the range of Rs. 300 to
 Rs. 350 million. The draft policy has proposed the removal of the
 present provision limiting profitability of pharmaceutical companies.
 The draft policy also specifies that in case of drugs which are not
 included in the price control list, but are part of the essential drug
 list or are used in national health programmes, the National
 Pharmaceutical Pricing Authority (NPPA) will monitor the price
 movement and consumption pattern.  It has been.  proposed that research
 and development intensive companies who have achieved the 'gold
 standard', should qualify for an additional cost of 5% of ex-factory
 cost in determination of prices of scheduled formulations manufactured
 by it.  Exemption from price control would be provided for a 15 year
 period to manufacturers producing new drugs developed through
 indigenous R & D.  Drugs and new delivery systems patented under the
 Indian Patents Act, 1970 would also be eligible for exemption from
 price control till expiry of the patent.  
 As you will have observed from the Notes to the Annual Accounts, there
 has been a significant departure from the practice hitherto followed of
 reporting the sales figures inclusive of excise duty and sales tax.
 Henceforth, the sales figures reported shall be the net sales i.e.
 excluding excise duty and sales tax. This, it is felt, reflects a truer
 sales picture and is in line with AstraZeneca's worldwide practice.
 The Company has provided for deferred taxation in the year under review
 and also for earlier years.  The deferred taxation provision has become
 mandatory from 1st April 2001. Accordingly a sum of Rs. 29.11 million
 has been provided as deferred tax liability for earlier years. For the
 year under review, the treatment for deferred tax liability has
 resulted in a asset of Rs. 8.86 million which has been used to offset
 current year's provision.  After so providing, the profit for the year
 was Rs.  113.62 million.
 The gross revenue comprising sales and other income increased from Rs
 1,003.57 million to Rs. 1,117.34 million, despite stiff competition and
 slowing down of the industrial growth rate.
 You will be pleased to note that material cost as a percentage of sales
 registered a further reduction of 2.8% over last year, despite the
 erosion in the rupee value and additional customs duties.  This was
 achieved through a sustained thrust on import substitution, innovative
 packaging design and improvements in vendor development of critical raw
 Your Company continues to maintain its zero debt status. Its fixed
 deposit programme was upgraded during the year to 'FAA+' by Credit
 Rating Information Services of India Ltd. (CRISIL). The upgraded
 rating will continue in force till 18th April, 2002.  
 Despite the Company's not too satisfactory performance during the year
 under review, the Board has recommended a dividend of 40% i.e. at the
 same level as last year. The Dividend will not suffer tax in the hands
 of the shareholders.  
 On a brighter note,the year under review has been one where your
 Company has been the proud recipient of several prestigious awards.
 The Company's Formulation Plant won the prestigious Gold Award for
 Quality Excellence.  The Bulk Drugs Plant won the Silver Award. Your
 Company also won the golden Peacock National Quality Award from The
 Institute of Directors.  It was adjudged third in the category of
 'Large Manufacturing Organizations' across all industries in
 recognition of the high quality practices followed in providing goods
 and services to its customers.
 With the Company's integration into the AstraZeneca Group, a
 comprehensive review of the entire portfolio of the Company's products
 is under way so as to gain a better understanding of the Company's
 distribution network, the market and its trends. The lack of adequate
 patent protection continues to be a significant inhibiting factor for
 multinational companies to introduce major original research products
 in India. However, steps are being taken to register a few AstraZeneca
 products.  The Formulation Development department is also currently
 involved in developing products for the Maternal Health Care and
 Cardio-Vascular segments.
 Your Company's performance during the past three months of the current
 financial year has fallen short of expectations, showing a dip in sales
 compared to the same period last year. This has been mainly due to
 increased competition and a general sluggishness in secondary market
 conditions.  The Company is hopeful that the current scenario will show
 improvement during the next six months; though the overall growth rate
 for the year may not be of the same order a during the last two years. 
 In its continuing pursuit of enhancing the level of Good Manufacturing
 Practices followed, a new monolithic flooring was laid in the Tablet,
 Liquid and Aerosol departments of the Formulation Plant; The company
 also undertook the upgradation of its Microbiology laboratory to meet
 latest international regulatory norms. Another state-of-the-art
 de-mineralised water plant with a loop system as per present USP norms
 was commissioned in the Bulk Drugs plant at a cost of Rs. 4 million.  
 Your Company's R&D laboratory. recognised by the Department of
 Scientific and Industrial Research, Government of India, continues to
 actively pursue product innovation, process simplification, import
 substitution, cost reduction and enhanced quality control.
 Strengthening of R&D facilities will help contribute to further cost
 reduction and successful introduction of new products.  
 In the coming years, the major thrust of R&D will be in the areas of
 custom synthesis, synthesis of intermediate for phase-I and 11 clinical
 Recognising the importance of R&D activities to the health and growth
 of the Company, the expenditure on R&D during the year under review was
 increased.  The increased expenditure represented 4.27% of total sales
 as compared 3.31% in the previous year.  Your Company will continue to
 make substantial investments in R&D activities.  
 The Companys Accounting Year, since its incorporation, has been April
 to March of every year.  Following the Company's integration into the
 AstraZeneca Group which has resulted in it becoming an indirect
 subsidiary of AstraZeneca Plc, your Directors have decided to change
 the Company's Accounting Year from April to March to the calendar year,
 namely, January to December, in line with the reporting requirements of
 AstraZeneca Plc.  Accordingly, the current financial year will be for a
 nine months period only, i.e. April to December, 2001. The following
 Accounting Years will be January to December of every year.  
 A safe and healthy environment is integral to your Company's
 operations.  Your Company has a comprehensive Safety, Health and
 Environment management policy embracing air, water and noise pollution
 and disposal of waste.  Every employee has a personal responsibility
 for ensuring that quality and environment aspects are taken into
 account in the production units as well as the laboratories. Efforts
 are continuously being made to improve the environment by developing
 and employing cleaner technology in all of the Company's activities.  
 The devastating earthquake in Gujarat earlier this year left thousands
 dead and many more disabled an homeless. It was, by any standards, a
 horrific disaster.  The Company, on its part, contributed life saving
 medicines though the Indian Drug Manufacturers Association. The
 employees of your Company also willingly contributed a day's wages to
 the Prime Minister's Relief Fund.  
 Your Company has also contributed towards the beautification of Hebbal
 Lake.  It organised a free medical check up camp at Kattigenahalli and
 installed a solar powered Bus Stop at Bagalur Cross.
 AstraZeneca celebrate, its Foundation Day on 1st of June every year.
 Consequently, Foundation Day was also observed on 1st June, 2001 to
 mark the change of name from Astra-IDL Limited to AstraZeneca Pharma
 India Limited.  The Foundation Day function in Bangalore was
 inaugurated by the Hon'ble Chief Minister of Karnataka, Mr.S.M Krishna.
 The function was well attended by employee,, the medical fraternity and
 many distinguished guests.
 Your Company's Marketing activities, including Medical Service, have
 recently obtained ISO 9002 certain from Bureau Veritas Quality
 International. This is a significant achievement and I am sure all of
 you will join my colleague on the Board and me in congratulating the
 management and employees at all level for this.
 Following the expiry of the Memorandum of Settlement between the
 Management and the Union representing the Professional Service
 Representatives (PSRs), a fresh charter of demands is under
 Employee relations at all levels continue to be cordial.
 The current year represents an important milestone in the history of
 your Company.  It is the first year of the new century and also the new
 millenium. It also marks the end of the long association with your
 Company of IDL Industries Ltd.(IDL'), one of the two founder
 promoters. the same time, it heralds the entry of your Company into the
 AstraZeneca fold, an internationally renowned pharmaceutical Group; the
 fourth largest in the world.
 I wish to avail myself of this opportunity to thank IDL and its
 erstwhile representatives on the Board of Directors of the company for
 their contribution to the steady growth and development of your
 Company. I also wish to extend a warm welcome to AstraZeneca and their
 representatives on the Board of Directors of the Company.  I am
 confident that with AstraZeneca's experience, technological expertise,
 knowledge of the pharmaceutical business and able management, your
 Company will over time be one of the leading pharmaceutical companies
 in India.
 Last, but not the least, I thank all, my colleagues on the Board for
 their continued support and wise counsel. The employees at all levels
 merit highest appreciation for their strong commitment and devotion.
 Their contribution has been as always, significant.  Before I conclude,
 my thanks go to you dear shareholders for the unfailing support, trust
 and confidence you have throughout reposed, which will, I am certain,
 be amply rewarded in the years ahead.
                                                        D.E. UDWADIA
 Place : Bangalore
 Date  : 09.07.2001
Source : Dion Global Solutions Limited
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