strides annual report final annual report 2007... · operations, auditors' report, financial...

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A n n u a l R e p o r t 2 0 0 7

STRIDESFocusing on the next frontier in global health

INFR

AST

RU

CTU

RE

MANUFACTURING INFRASTRUCTURE:

Strides has established a very strong manufacturing infrastructure spanning the entire globe and covering a range of dosage forms including orals, semi-solids and sterile injectables (Ampoules, Vials and Pre-Filled Syringes) with freeze drying capabilities. Its facilities employ the latest technology and over the years it has built a very strong team to establish and run these facilities .

Strides today has a total of fourteen plants of which seven are in India and the remaining spread across the globe in Latin America, Europe, Asia and Africa. These plants employ the latest technology and have obtained regulatory approvals from a number of agencies including the USFDA, TGA (Australia), MHRA (United Kingdom), Anvisa (Brazil), etc. Strides has a dedicated Oncology plant coming up in Bangalore as well as a second sterile injectables plant. In the last 3 years it has invested over US$ 130 million on creating additional capacity and has an annual capacity of 4.0 Billion injectables, 5.1 Billion tablets, 1.2 Billion hard gelatin capsules and 2.3 Billion soft gelatin capsules.

R&

DR&D INFRASTRUCTURE :

Strides has a very strong R&D infrastructure with a dedicated R&D facility employing around 300 scientists and has 'state of the art' equipment as well as two laboratories which are capable of taking pilot scale batches. The scope of services covered includes Formulation Development, Analytical Method Development, Technology Transfer, Regulatory Affairs, Intellectual property and Clinical Management in addition to engaging in work in bio-technology space.

In the last few years, the R&D centre has created a very strong pipeline of generic products and at any point in time has over 100 products under development. It has done over ninety filings in the regulatory markets and against which 23 approvals have already been received. It has also created patented technology and also is doing work in the nano technology space. The R&D centre continues to be one of the most significant drivers of Strides' business as Strides philosophy is to be an end-to-end service provider.

Bra

nded

Bus

ines

sBRANDED BUSINESS :

Strides made its entry into Indian retail market through the acquisition of Grandix Pharmaceuticals Limited, a company with a significant presence in the South and Central India and expanding it's footprint to other parts of the country. It currently has a sales force of over 400 people and is rapidly ramping up the team strength with the growing footprint and product portfolio. Despite being a relatively new player, Grandix has established some very strong brands in the markets .

Strides intends to use the capabilities of Grandix in the branded generics space to create a global branded generics and OTC business using the large product pipeline available in its global network and has initiated plans in that direction.

Euro

pe

Strides has a significant presence in Europe where it has three global plants – one

each in Milan and Poland for the manufacture of finished dosage forms of semi-

solids and sterile injectables (Ampoules, Vials and Pre-Filled Syringes) and one in

Milan for manufacture of API through the fermentation process. These plants are

meant to service Strides' global needs for its own products as well as for other

customers. These plants are currently doing business in Europe and Africa and over

time will start supplying into other regulated markets.

Strides has an alliance with a large Spanish hospital player, Laboratorios Lesvi /

Invent Farma, through which it has put in place a significant pipeline for launching

products in Spain and Portugal in the coming year. The two partners have also

invested in a Norwegian company that is engaged in marketing and distribution of

pharmaceutical products in the Scandinavian markets.

Strides also established a joint venture with Abdi Ibrahim, one of the largest

generic players in the Turkish market, for which a pipeline has been put in place and

commercialization is expected to commence from next year.

Strides separately acquired majority control in Co-Pharma Limited which is a Joint

Venture with Aspen Pharmacare Holdings, South Africa, engaged in selling

branded generic and OTC products in the UK market.

Strides presence in Europe is growing at a fast pace and with a number of

product filings done, will over time become a very significant contributor to

Strides global business.

Aus

tral

asia

Drug Houses of Australia (Asia) Pte. Ltd a wholly owned company of Strides, is one

of the biggest generic players in Singapore, Hong Kong, Malaysia and Brunei where

it has a front ending presence and has some very strong established brands in these

markets. It has a GMP approved plant in Singapore manufacturing oral and semi-

solids which currently services these markets. In addition, Strides has supplies

going into various other Asian markets as well as Australia.

Strides has made a binding bid for acquiring a 55% stake in Genepharm

Australasia, one of the largest generic players in Australia, which is engaged in

marketing and distribution of branded generic and OTC products. With this

acquisition which will help secure significant synergies across the region, Strides

will become one of the largest players in the Australasia region having a revenue of

A$ 100 million.

Lati

n A

mer

ica

Strides which is counted amongst the top five companies in Brazil in the hospital

market also has a significant presence in other parts of Latin America like Mexico,

Venezuela etc. It has over the years built some very strong brands in the generic and

OTC space and has its own sales force selling in these markets. The Latin America

business currently is the largest business for Strides outside India and is a

significant value driver for the group.

In addition, Strides also has a very strong manufacturing presence in the region

wherein it has plants in Brazil and Mexico manufacturing orals and semi solids

capable of servicing the Latin America markets and a global plant for Penicillins

and Penems which has come up recently in Brazil covering sterile injectables and

orals at a cost of over $ 50 million.

The Latin America operation has Aspen Pharmacare Holdings, South Africa, as an

equal partner and is expected to achieve significant growth in the near future with

the combined manufacturing and marketing capabilities of the two partners.

Nor

th A

mer

ica

In North America, as in some other regulated markets, Strides has strategically

decided to partner with companies having strong sales, marketing and distribution

capabilities. This is meant to serve as a de-risking strategy as also helps improve its

time to market.

Towards this, Strides has established four very significant partnerships, through

which over 38 product filings have been submitted in the last two years and 7

approvals received till date. These partnership have grown over time where more

products have been added and will go into commercial operations in 2008. This

region will be a significant contributor to the revenue and profitability of the group

in the future.

Afr

icaThis region is one of Strides' earliest and very successful forays in the global arena.

Strides has established a number of successful brands in the market and is one of

the most respected players in Central and Western Africa and is now expanding its

footprint to cover other parts of Africa. In recognition of the importance of this

region, Strides has through Strides Vital Nigeria Limited, a JV where it has majority

holding, also established a plant in Nigeria manufacturing orals and semi-solids

which will give a significant boost to revenue in that region.

Strides also has a front-ending presence in South Africa wherein it acquired a

majority stake in Formule Naturelle (Pty.) Ltd, a company engaged in marketing

and selling nutritional products in a majority partnership with Aspen. This business

will benefit tremendously from group synergies in terms of both products and

manufacturing.

Con

tent

s

Section 1

Board of Directors, Management Team, Management Review, Directors' Report, Corporate Governance Report, Management Discussion & Analysis of Operations, Auditors' Report, Financial Statements prepared in accordance with Indian Generally Accepted Accounting Principles (Indian GAAP),

Section 2

Auditors' Report on Consolidated Financial Statement, Consolidated Financial Statements, Statement Pursuant to Section 212 of the Companies Act, 1956, relating to Subsidiary Companies, Additional Information, Addresses.

Sect

ion

1

Board of Directors 1.02

Management Team 1.04

Management Review 1.06

Directors' Report 1.09

Corporate Governance Report 1.19

Management Discussion & Analysis of Operations 1.28

Auditors' Report 1.33

Financial statements prepared in accordance withIndian Generally Accepted Accounting Principles(Indian GAAP) 1.36

Balance Sheet Abstract 1.70

Mr. Deepak VaidyaAppointed to the Board in January, 1998 and Chairman of the Board in December, 2005.Mr. Vaidya was country head of Schroder Capital Partners (Asia) Pte., Ltd., for over 12 years and now Chairman of Arc Advisory Services Pvt. Ltd. He has got valuable corporate experience in the financial services Industry in India and abroad.

Mr. Arun KumarFounder and Promoter Director of Strides, Mr. Arun Kumar is on the Board as Managing Director since inception. He has rich experience and deep knowledge of the pharmaceutical industry and his earlier stints include being the General Manager of British Pharmaceuticals Laboratories Ltd.

Mr. K.R. RavishankarOn the Board since March 1994. Mr. Ravishankar was an entrepreneur before he joined the Board and carries with him nearly two decades of experience in the pharmaceutical industry.

Mr. Virtanes SaatciHas served as Director since February, 1995 Mr. Virtanes Saatci carries with him over four decades of experience in pharmaceutical industry and has contributed significantly in developing the overseas market of the Company.

Mr. Elcemar AlmeidaA first generation entrepreneur, Mr. Almeida brings nearly two decades of experience in the Pharma Industry. Based at Rio De Janeiro, Brazil, he has been associated with Strides when Strides acquired Infabra and set up Cellofarm in Brazil. He is a key contributor to the development of business strategy for Latin American Markets and plays a significant strategic and leadership role.

Boa

rd o

f D

irec

tors

1.02

Mr. M. R. UmarjiA Consummate banking professional, Mr. Umarji has held key positions at the Reserve Bank of India, Corporation Bank and Dena Bank. He is the Chief Legal Advisor to the Indian Banks Association, and also a Director of UTI Advisory Services Limited.

Mr. P.M. ThampiHas over 43 years of working experience in the Indian chemical Industry. 29 years with ICI India, and 14 years as Chairman and Managing Director with BASF India. Currently Mr. Thampi is the Chairman of Pioneer Balloon India Pvt. Limited and Director of several leading companies including HDFC Asset Management Company Limited. An active member of Indo German Chamber of Commerce, he has served as its Vice President and President.

Mr. A.K. NairAn Engineer by profession and a Management Graduate from Cochin University, Mr. Nair is a Director of Kerala Chemicals and Proteins Limited, a joint venture of KSIDC and Nitta Gelatin Inc. & Mitsubishi Corporation, Japan. Previously he was Executive Director & Managing Director of KSIDC and was also Managing Director of Kerala Chemicals and Proteins Limited.

Dr. Ronald LingNominee of Symphony Capital Partners (Asia) Pte Ltd. (previously known as Schroder Capital Partners (Asia) Pte. Ltd.). Dr. Ling has more than 16 years of rich experience in the pharma and the health care industries and in management consultancy. Dr. Ling has been associated with Symphony Capital Partners (Asia) Pte. Ltd since 2001. He has also held leadership positions at Eastman Kodak Company, Singapore, McKinsey & Company, F. Hoffmann - La-Roche AG, Switzerland.

Mr. D G PrasadHas been a career banker for over 32 years. After being with Canara Bank for over 8 years, Mr. Prasad joined Exim Bank in 1983, in its formative phase. He holds considerable expertise in trade finance, international finance, merchant banking, corporate strategies, mergers and acquisitions, loan syndications, forfaiting, international negotiations and co-financing with multilateral agencies. He was trained in ‘Treasury Management’ at Credit Suisse, Switzerland; ‘International Banking and Development’ at the International Development Ireland at Dublin and London and ‘Advanced Agribusiness Management’ at Cornell University, Ithaca, New York, USA. He has been a guest faculty at business schools on international finance and international marketing.

1.03

Man

agem

ent

Team

Mr. Ravi SethCEO - International Operations

Mr. V.S. IyerCEO - India Operations

Mr. Anil GuptaPresident - Global Manufacturing

Mr. M. S. MohanChief Scientific Officer

1.04

Mr. S. A. ManikandanCEO - Brands

Mr. T. S. RanganGroup CFO

Mr. Mohan Ram PrasadPresident - Technical Services

Latin American Operations

Mr. V. MadhusudhanCEO - Cellofarm and Regional

Director - Latin American Operations

Mr. Mark BissetCEO & Regional Director - Asia

Mr. Sridhar S. RaoPresident - QA

Mr. Adam LevittCEO - North America Operations

Ms. Aloka SenguptaPresident - Business Development

India Operations

1.05

To our Shareholders,

2007 has been yet another year for Strides having

achieved significant progress in its strategic

pathways. The company achieved a consolidated

net revenue of Rs.8,648 Million registering an

increase of 13.75% over the previous year.

Man

agem

ent

and

Prom

oter

s R

evie

w

1.06

Growth Review

As previously stated we continue to embark

both on organic and inorganic growth

strategies in clinically existing business that

did not add to our growth going forward, and

have made investments in new manufacturing

capabilities.

We also concluded a significant partnership

with Aspen Pharma, South Africa's largest

pharmaceutical company and through a series

of transaction we have already cemented our

excellent partnership by taking it to our next

level that includes;

?A Joint Venture in Oncology

?An equal partnership in our Latin

American operations

?An acquisition of major stake by Strides of

Co-pharma Ltd., Aspen's UK based

generics subsidiary and

?Formule Naturelle (Pty) Ltd – Aspen South

Africa's OTC business.

The transaction cements the leadership by

partnering philosophy of Strides

The year also witnessed traction of our

expansion in the regulated markets with

product and plant approvals commencing

from the USFDA.

Going forward:

We believe our established regional leadership

strategy and partnering philosophy in US and

Europe will continue to yield positive results

New Management Team

The promoters in order to focus on overall

growth strategies have put in place a new

Management team in all key verticals to lead

the Company to its next level of growth.

This also enables Ravishankar; one of the

founder Directors to focus on the Promoter's

other interests. Ravishankar, however, will

continue on the Board of Directors and will

enable the company to leverage on his

experience.

1.07

GRO

WTH

Figures in USD Millions(Exchange rate: 1 USD = 39.40 INR)

CONSOLIDATED INCOMEOVER LAST FIVE YEARS

-

50

100

150

200

250

2003 * 2004 * 2005 2006 2007

72.36 93.90

134.35

192.94

219.50

* Annualised

1.08

Strides Arcolab Limited - Annual Report 2007

Dear Shareholders,

We present herewith the Seventeenth Annual Report together with the Audited Accounts for the year ended December 31, 2007.

1. Financials (figures in millions)

For the year ended

December 31, 2007 December 31, 2006

Rupees US $ * Rupees US $ *

1.1 Financial Results

Income 4,031.68 102.33 4,550.88 102.82

Operating Profit (EBIDTA) 141.69 3.60 780.41 17.63

Cash Profit / (Loss) (991.38) (25.61) 581.53 12.71

Profit After Tax [PAT] / (Loss) (1,152.14) (29.24) 361.84 8.18

Retained earnings NIL NIL 148.48 3.35

1.2 Profits

Operating Profit (EBIDTA) 141.69 3.60 780.41 17.63

Less : Interest 317.75 8.06 198.88 4.49

Less: Depreciation & amortization 188.88 4.79 164.07 3.71

Less: Exceptional items 815.32 20.69 - -

Profit Before tax (1,180.26) (29.26) 417.46 9.43

Less: Provision for Tax

Current 35.00 0.89 13.43 0.30

Deferred (Net) (66.70) (1.69) 36.70 0.83

Fringe Benefit Tax 3.58 0.09 5.49 0.12

Profit After Tax (1,152.14) (29.24) 361.84 8.18

Add : Balance in Profit & Loss account

1,045.19 26.53 896.71 20.26

Differential tax on equity dividend of previous year

(2.08) (0.05) - -

Surplus available for appropriation - - 1,258.55 28.44

1.3 Appropriations

Dividend

on Equity Shares - - 69.90 1.58

on Preference Shares - - 29.51 0.67

Dividend Tax - - 13.95 0.09

Transfer to General Reserve - - 100.00 2.26

Balance carried forward (109.03) (2.77) 1,045.19 23.61

Note: * 1 US$ = Rs.39.40 (Exchange Rate as on December 31, 2007).

1 US$ = Rs.44.26 (Exchange Rate as on December 31, 2006).

Previous year figures have been regrouped/ restated wherever necessary to make them comparable with those of the current year.

Directors’ Report

1.09


2. Turnover and ProfitsThe total income during the year under review was Rs. 4,031.68 Million as against Rs. 4,550.88 Million in the previous year. The Company has incurred a net Loss after Tax of Rs. 1,152.14 Million for the year ended December 31, 2007 as against a Profit after Tax of Rs.361.84 Million for the year ended December 31, 2006.

The major reason for the loss during the year was a ‘one off’ write down consequent to shut down of the plant in USA (on account of continued losses due to change in regulation having a major impact on operating cost ), loss on sale of non-core specialty chemicals division, loss on account of foreign exchange transactions, reversal of R & D revenue due to contractual changes, impairment of brands and registration and impairment of investment in its subsidiary based in Switzerland. Appreciating rupee also had a major impact on the overall operations of the Company.

3. DividendIn view of the loss incurred during the year, the Board has not recommended any dividend on the Equity / Preference shares for the year ended December 31, 2007.

4. CapitalAuthorized Share CapitalDuring the year under review, the authorized share capital remained unchanged at Rs.1,320 Million consisting of 70,000,000 equity shares of Rs.10/- each and 620,000 cumulative redeemable preference shares of Rs.1,000/- each.

Issued and Paid-up Share CapitalOn July 5, 2007, the Company allotted 50,000 equity shares of Rs.10/- each at a premium of Rs.332.10 per equity share to Agnus Holdings Private Limited, a promoter group company, on conversion of warrants. Consequent to this issue of shares, as on December 31, 2007, the issued, subscribed and paid up share capital stood at Rs. 841,648,890 constituting 35,004,289 equity shares of Rs.10/- each and 491,606 cumulative redeemable preference shares of Rs.1,000/- each.

On March 8, 2008, the Company allotted 4,000,000 equity shares of Rs.10/- each at a premium of Rs.390.00 per equity share to Dobliss Holdings Limited (3,111,440 shares) and Blissup Holdings Limited (888,560 shares). The said shares were issued on conversion of fully convertible debentures. Consequent to this issue of shares, as on date, the issued, subscribed and paid up share capital of the Company is Rs.881,648,890 constituting 39,004,289 equity shares of Rs.10/- each and 491,606 cumulative redeemable preference shares of Rs.1,000/- each.

Allotment of convertible warrantsOn May 23, 2007, the Company issued 5,600,000 warrants convertible into equivalent number of fully paid-up equity shares at a price of Rs.342.10 per warrant, on preferential basis to Agnus Holdings Private Limited, a promoter group company. Each warrant entitles the holder to apply for an equivalent number of fully paid-up equity shares of Rs.10 each at any time during 18 months from the date of issue. On July 5, 2007, 50,000 warrants out of the 5,600,000 warrants were converted into equity shares.

During the year, the Company forfeited the upfront money received against 1,835,826 warrants allotted on February 2, 2005, to the promoter group, as these warrants were not converted to equity shares.

Allotment of Fully Convertible DebenturesOn June 8, 2007, the Company allotted 5,045,725 Fully Convertible Debentures (FCDs) at a price of Rs. 400.00 per FCDs, on preferential basis, to Dobliss Holdings Limited (3,111,440 FCDs) and Blissup Holdings Limited (1,934,285 FCDs). These FCD’s carry a coupon of 5 per cent per annum and are convertible into an equivalent number of fully paid-up equity shares of Rs.10 each, in one or more tranches, at any time within a period of 18 months from the date of issue.

On March 8, 2008, 4,000,000 FCDs out of the 5,045,725 FCDs were converted into equivalent number of equity shares.

Issue of Foreign Currency convertible bondsOn June 27, 2007, the Company issued US$ 100 Million ‘Zero Coupon Convertible Bonds due 2012’ (‘Bonds’). The Bonds which will be due in 2012, were issued at an initial conversion price of Rs. 461.553 per share with a fixed rate of exchange on conversion of Rs. 40.70 = 1 US$. The yield to maturity has been set at 7.575 percent and the Bonds are listed at the Singapore Exchange Securities Trading Limited.

5. Business & Outlook The Company’s core business model of focussing on niche and difficult to develop and manufacture products will continue to drive growth and profitability.

Key challenges have been addressed to position the Company to be an important player with a mix of niche products, regional leadership strategies and building a branded business.

While the results of the Company were impacted by certain one off items, the business model continues to be strong and sustainable and will continue to drive profitability. The Company has exited from all unviable / non-core operations while focusing on its core strategy to build niche hospitals and generic play and investing in new brand business in various regions.

The major driver of business will be a strong and steady product pipeline supported by a strong global manufacturing infrastructure. Filings made earlier in various regulated markets have started getting approvals and supplies have already commenced. This will lead to significant improvement in margins and will establish the presence of the company in the regulated markets.

The Company also continues to drive business in the regulated markets through a partnership approach which helps it to improve ‘time to market’ and mitigate risk. During the year, the Company strengthened its partnerships through additions to the product pipeline.

1.10


The Company has made significant investments in capacity upgradation and expansion (particularly in the area of sterile injectibles) which will largely be completed during the current year and this will result in a significant enhancement in income and profitability as these plants will be approvable for supplies into all the major regulated markets.

A renewed focus on driving the international business by creating regional verticals with responsibility for enhancing income and profitability will help generate demand growth and fill up the new manufacturing capacities.

The Company has commenced the process of putting in place a branded strategy for its prescription and OTC products which is expected to drive significant profitability in the less regulated markets.

6. Acquisitions / Investments / Subsidiaries / Joint Ventures(a) Broad and strategic partnership entered into with Aspen Group of South Africa.

During the year, the Company closed a vital and strategic partnership with Aspen Group in a four way deal.

• Aspenbecameastrategic,equalandregionalpartnerinitsLatinAmericaOperationsbytaking50%stakeinLakeroseLimited, Cyprus, the holding Company for Latin America operations.

• Aspenbecameaglobalpartnerforthedevelopment,manufacturingandsales/marketingofOncologyproductsbytakinga50%stakeinPowercliffLimited,Cyprusanda49%stakeinOncoTherapiesLimited,India.

• TheCompanyacquired51%interestinCoPharmaLtd.,Aspen’sUKbasedsubsidiaryengagedinsalesandmarketingofgeneric and OTC products.

• TheCompanyacquired80%interestinFormuleNaturelle[Pty]Ltd.,SouthAfrica,whichwillownabasketofnutraceuticalproducts currently marketed by Aspen in South Africa.

(b) Genepharm transaction

In February 2008, the Company entered into Heads of Agreement with Genepharm Australasia Limited [Genepharm], an entity listed on the Australian Stock Exchange, under which the Company will vend its Australian and Asian business in exchange for the issue of shares in Genepharm, subject to approval of Genepharm shareholders. The Company also acquired a relevant interest over 17.7%of the issued shares inGenepharmunder a share acquisition agreementwith a groupofGenepharmshareholders. On successful completion of the Genepharm Transaction, the Company may emerge with a shareholding of approximately55%oftheexpandedcapitalbaseofGenepharm.

The combined regional businesses are expected to have revenues of approximately AS$ 100 Million on closing of the Genepharm Transaction.

The transaction is tentatively scheduled to close by 1st week of July 2008.

(c) Acquisitions

• TheCompanyacquireda99.59%stakeinGrandixPharmaceuticalsLimited,abrandedpharmaceuticalcompanyinIndia.This acquisition provided an Indian footprint for the Company and given Grandix competency in creating strong brands will spearhead the Company’s strategy to create an international branded business.

• TheCompanycompletedacquisitionofDiaspaS.p.AUSFDAapprovedfermentationfacilityincludingitsongoingbusiness.This acquisition was carried out through Strides Italia s.r.l., Italy. This acquisition represents backward integration for significant part of Strides’ dosage form business.

(d) Investments

During the year, the Company made the following investments.

• Rs. 1,050.03 Million in the equity share capital of Grandix Pharmaceuticals Limited, Chennai

• Rs. 0.12 Million in the share capital of Starsmore Limited, Cyprus, a wholly owned subsidiary of the Company.

• Rs. 246.85 Million in the share capital of Onco Therapies Limited, a subsidiary of the Company. This investment was made by way of transfer of assets pertaining to Oncology plant which is under construction.

(e) Subsidiaries

The Company has incorporated the following subsidiaries in Asia through Strides Arcolab International Limited, UK, primarily for holding the registrations / licenses of products in those countries.

• StridesArcolabHongKongLimited,HongKong

• StridesArcolabMalaysiaSDN.BHD.,Malaysia

• StridesArcolabSDN BHD., Brunei

Strides Italia s.r.l. was incorporated as a wholly owned subsidiary of Strides Arcolab International Limited, UK for acquiring the USFDA approved fermentation facility of Diaspa s.p.a., Italy.

As part of the international restructuring of operations, the Company has set up Starsmore Limited (wholly owned subsidiary of the Company) and Linkace Limited (wholly owned subsidiary of Starsmore Limited) in Cyprus which will be the holding Companies for international investments.

ConsequenttoAspenGroupacquiring50%shareholdinginLakeroseLimited,thefollowingcompaniesceasedtobesubsidiariesof the Company in March 2008.

• Strides Latina SA, Uruguay

1.11


• CellofarmLtda.,Brazil

• SolaraSADeCV,Mexico

• CasadeRepresentacionesSumifarmaCA,Venezuela

TheCompanyalsoacquired74%stakeinStridesVitalNigeriaLimited,Nigeria,throughitswhollyownedsubsidiaryStridesAfrica Limited.

As part of the broad and strategic partnership entered into with the Aspen Group of South Africa, the following companies also became the subsidiaries of the Company.

• Co-Pharma Limited, UK,where the Company has a 51% stake through Linkace Limited, Cyprus and Strides ArcolabInternational Limited, UK.

• FormuleNaturelle(Proprietary)Limited,SouthAfrica,inwhichtheCompanyhasacquiredan80%stakethroughLinkaceLimited, Cyprus.

Grandix Pharmaceuticals Limited and Grandix Laboratories Limited (a subsidiary of Grandix Pharmaceuticlas Limited) also became subsidiaries of the Company.

OncoTherapiesLimited,acompanyincorporatedforoncolyticsbusinessinIndia,inwhichtheCompanyholds51%stakewith49%beingheldbyAspenGroup,alsobecameasubsidiaryoftheCompanyduringtheyear.

Sequent Scientific Limited, which was engaged in the non-core specialty chemicals business, ceased to be a subsidiary of the Company consequent to the sale of entire shareholding.

Strides Polska s.p. z.o.o., Poland merged with its subsidiary Strides Arcolab Polska s.p. z.o.o, Poland during the year.

(f) JointVentures

• StridesArcolabInternationalLimited,UK,(SAIL)awhollyownedsubsidiaryoftheCompany,partneredwithInventFarmaGroup,whichincludesLaboratoriosLesvi,aleadingSpanishcompany,tosetupa50:50JointVentureCompanycalled‘Laboratorios Domac, S.L., to develop a range of products mainly focused for hospitals in the Spain and Portugal region.

• SAILpartneredwithInventFarmaehf.,Icelandtosetupa50:50jointventureCompanycalled‘PlusFarmaehf’,toacquirethe entire shareholding in ‘Farma Plus, Norway’, which sells and markets hospital products in Scandinavian markets.

• SAILpartneredwithSagentPharmaceuticalsInc.,USA,tosetupa50:50JointVentureCompanycalled‘SagentStridesLLC’ in USA to develop, supply and market injectible products for the U.S. market. The agreement initially targets over 25 products. Under the agreement, Strides will develop and supply injectible products that Sagent will market in USA.

• AspartofthebroadandstrategicpartnershipenteredintowithAspengroupofSouthAfrica,thefollowingjointventureCompanies were formed /established during the year:

• Powercliff Limited, Cyprus – a 50:50 Joint Venture company for development and global marketing of oncolyticproducts.

• LakeroseLimited,Cyprus–a50:50JointVenturecompanyforLatinAmericaOperations.

7. Manufacturing• TheCompany’sSterileInjectiblesfacilitiesinIndiawereapprovedbytheUSFDA,MHRA&TGAduringtheyear.

• The Oral Dosage Forms (ODF) facility which is already FDA approved was additionally inspected and approved by MHRA, EU & TGA.

• AnewfacilityfororalsandsemisolidsinLagos,Nigeria,commencedoperationinMarch2008,underStridesVitalNigeriaLimited.

• Anewstate-of-the-artsterileinjectiblefacilityforPenemsandPenicillinsatComposinRiodeJaneiro,Brazil,wassetupbyCellofarm Ltda., Brazil and commenced operations in March 2008.

8. Research & DevelopmentThe product pipeline of the Company continued to create additional value and during the year, the company did additional filings in the regulated markets as below:

• USA-1

• Others-48

In relation to filings done till date, approvals started to come through and the Company received a total of 13 approvals for regulated markets as at April 28, 2008. The Company expects to commence supplies into North America in the 2nd quarter of 2008.

The Company has a strong and dedicated scientific talent pool of over 300 people and is engaged in a range of services such as formulation development, analytical method development and validation, regulatory affairs, technology transfer, clinical, quality assurance etc.

9. Consolidated financialsIn accordance with Accounting Standard AS-21 on consolidated financial statements read with Accounting Standard AS-27 on AccountingforJointVentures,theauditedconsolidatedfinancialstatementsareprovidedinthisAnnualReport.

The Company has received approval under Section 212 (8) of the Companies Act, 1956 from the Ministry of Corporate Affairs, New Delhi, granting exemption from the provisions of Section 212 (1) of the said Act and accordingly the Annual Report does not

1.12


contain the financial statements of the subsidiaries. The Company will make available the audited annual accounts and related information of the subsidiary companies, upon request by any investor of the Company/Subsidiary. These documents will also be available for inspection by any investor during business hours at the Registered Office and Corporate Office of the Company.

10. Corporate GovernanceThe Company has complied with all the mandatory requirements of Corporate Governance specified by the Securities & Exchange Board of India through clause 49 of the Listing Agreement. As required by the said clause, a separate Report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Statutory Auditors of the Company regarding compliance with the conditions of Corporate Governance also forms part of this Report.

11. Management Discussion and AnalysisPursuant to clause 49 of the Listing Agreement entered into with the Stock Exchanges, Management Discussion and Analysis Report forms part of this Report.

12. Fixed DepositsThe Company has not accepted any fixed deposits and accordingly no amount is outstanding as on the balance sheet date.

13. Employee Stock Option SchemeStrides Arcolab ESOP 2006The Company has during the year ended December 31, 2007, granted 400,000 options under the Strides Arcolab ESOP 2006, as under:

• OnApril10,2007,200,000optionsweregrantedtoeligibleemployeesatRs.297.70peroption(exerciseprice).

• OnOctober30,2007,200,000optionsweregrantedtoeligibleemployeesatRs.215.00peroption(exerciseprice).

The shares covered by such options are 400,000 and will vest in a phased manner over a period of four years from the date of grant of option.

Statement giving additional information in terms of Regulation 12 of Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is annexed to this Directors Report.

Further, on March 31, 2008, 600,000 options were granted to eligible employees at Rs. 133.00 per option (exercise price).

Strides Arcolab ESOP 2008On March 8, 2008, the Board of Directors of the Company approved introduction of a new Employee Stock Option Scheme titled ‘Strides Arcolab ESOP-2008’ for issuance of upto 1,500,000 options, subject to applicable statutory / regulatory requirements.

The Company has not granted any options under the said scheme as on date.

14. Board of DirectorsMr. K.R. Ravishankar ceased to be an Executive Director w.e.f. January 1, 2008, however, he continues to be a Director of the Company.

Mr.K.R.Ravishankar,Mr.DeepakVaidyaandMr.M.R.Umarjiare theDirectorswho retireby rotationandbeingeligible,offerthemselves for reappointment.

15. PersonnelYour Directors place on record, their appreciation of the good work of all the employees. Information pursuant to Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars relating to Employees) Rules, 1975 will be provided on request.

16. Directors’ Responsibility StatementIn terms of Section 217 (2AA) of the Companies Act 1956, the Directors state that they have:

a) followed the applicable accounting standards in the preparation of annual accounts, with proper explanation relating to material departures.

b) selected such accounting policies and applied them consistently and made adjustments 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 loss of the Company for that year.

c) 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

d) prepared the annual accounts on a going concern basis.

17. Conservation of Energy, R & D, Technology Absorption and Foreign Exchange Earning / OutgoThe particulars as prescribed 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 are set out in the Annexure to the Directors’ Report.

18. Statutory AuditorsThe Statutory Auditors viz., Deloitte Haskins & Sells, Chartered Accountants, Bangalore, retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. Your Directors recommend their reappointment.

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19. Depository SystemAs the Members are aware, your Company’s shares are tradable compulsorily in electronic form and your Company has established connectivity with both the depositories, i.e., National Securities Depository Limited and Central Depository Services (India) Limited. In view of the numerous advantages offered by the Depository system, members are requested to avail the facility of dematerialization of the Company’s shares on either of the Depositories as aforesaid.

20. AcknowledgementYour Directors place on record their sincere appreciation for the significant contribution made by the employees through their dedication, hard work and commitment and the trust and confidence reposed on us by the medical profession and trade.

We also acknowledge the support and wise counsel extended to us by the bankers, financial institutions, government agencies, analysts, shareholders and investors at large.

For and on behalf of the Board of Directors

ArunKumar – ViceChairman&ManagingDirector

K.R.Ravishankar – Director

Place: Bangalore, India

Date: April 28, 2008

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1. Conservation of Energy(a) Measures taken during the period for conservation of energy

• SustainedthePFat0.97throughouttheyear.• ThyristorbasedPFboosterinstalledintrfo-2toimprovePFfurther.• Solid waste management and rain water recycling study was conducted by an expert. The report is ready for

implementation. • Commonheaderinstalledfornitrogengassharingbetweenallthesterileplants,henceeliminatingnitrogencylinders.

• ImprovedD.Gefficiencyfrom3.0kwh/ltrto3.2Kwh/ltr.(b) Plans for the future for conservation of energy

• ImprovingtheaveragePFfrom0.97to0.99.• ReductioninROrejectfromexisting55%to20%byreplacingexistingROsystemwithimprovedones.• NoregenerantchemicaldischargesystembyreplacingtheexistingDMwatersystemwithEDI.• Feasibilitystudyonbiogasgenerationwithgelatinnet.• Reduction in Aluminum foil waste generation by introduction of online printing of Aluminum foil in strip packing

machine.• CommonheaderforsteamandcompressedairplannedforSterilecomplex.• CondensaterecoveryfortheSterileProductDivisionplant.

2. R & D ActivitiesAreas of R & D activitiesR & D at Strides was designed primarily to develop various dosage forms like tablets, capsules, ointment, oral liquids and injectables for both regulated and emerging markets. Presently, most of the activity is pivoted around developing generic drugs for all regulated markets with primary focus being US and Europe. Product Formulation development involves various stages like the identification and characterization of the reference drug, the patent and regulatory review apart from the collection of information on the drug product, pre-formulation studies, formula development, stability studies, analytical method development, analytical method validation, packaging development support for the product, progress of development from lab scale to scale-up to pilot / exhibit stage followed by the respective stability data, bio-study wherever applicable and finally the preparation and submission of the technical dossier. The R & D centre has been focusing on all dosage forms and has successfully completed development of various niche products. The R & D Centre has successfully completed many filings for the regulated markets and also has been successful in getting few approvals during the year 2007.The R & D Centre has made significant progress in the area of Novel Drug Delivery Systems (NDDS) in select therapeutic categories. Fewoftheactivitiescontinuedduringtheyear2007wereproof–of-conceptstudies,co-developmentpartnershipsandin-licensingof technologies.Benefits derived out of R & D activities• Increaseitsglobalpresence.• Increaseforeignexchangeearnings.• Creationofintellectualproperty.• Generationofhighqualitydatacomplyingwiththeinternationalregulatoryrequirementsforregistrationofgenericdosage

forms.• Improvementinproductivityandsafermethodologyduetoabetterformulationprocedure.• Employmentofbettertechnologytomanufacturevariousdosageforms.

• Betterpatientconvenienceandcompliancewithrespecttothedosageform.The future plan is to• Developplatformtechnologiesthatareapplicabletoavarietyofmoleculesfordrugdelivery.• Increasein-licensingoftechnologies.• Scalingthesizeofresearchdelivery.• Increaseoffocusonnicheareastobuildthebusiness.

Expenditure on R & D (Rupees in millions)

NatureFor the year ended December 31, 2007

For the year ended December 31, 2006

Capital 26.69 46.95

Revenue 348.30 260.35

Total 374.99 307.30

%toturnover 9.30% 6.75%

Annexture to the Directors’ Report{Particulars required by the Companies (Disclosure of Particulars in the Report of the Board of Directors’) Rules, 1988

forming part of the Directors’ Report for the year ended December 31, 2007.}

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FORM AForm of Disclosure of Particulars with respect to Conservation of Energy

A. Power and Fuel Consumption Current Year Previous Year

1. Electricity

(a) Purchased

Units 16,270,782 14,808,559

Total Amount (Rs. in million) 77.30 77.01

Rate / Unit (Rs.) 4.75 5.20

(b) Own generation

(i) Through diesel generator

Units 1,747,637 1,622,666

Diesel consumed in litres 680,561 537,161

Unit per ltr., of diesel oil 2.57 3.02

Cost / Unit (Rs.) 20.34 19.85

(ii) Through steam turbine / generator

Units Nil Nil

Units per ltr., of fuel oil / gas Nil Nil

Cost / Units Nil Nil

2. Coal (specify quality and where used)

Quantity Nil Nil

Total Cost Nil Nil

Average Rate Nil Nil

3. Furnace Oil

Quantity (k. ltrs) 473.21 1,060.45

Total amount (Rs.) 12.29 26.37

Average Rate 25.97 24.87

4. Others (Diesel)

Quantity (in k. litres) -- 249.00

Total Amount (Rs.) -- 9.38

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(Rupees in million)

B. Consumption per unit of production (with details) Current Year Previous Year

a) Softgel & Tablets Division

Electricity units per million 6,978 5,132

Furnace oil units per million 0 0

Diesel units per million 326 471

b) Sterile Products Division


Furnace oil units per million - 25

Diesel units per million 32,462 19,608

c) Antibiotics Division


Furnace oil units per million Nil Nil

Diesel units per million 2,560 2,274

FORM BForm of Disclosure of Particulars with respect to Energy Absorption

1. Technology Absorption, Adaptation and Innovation & Benefits derived as a result of the above efforts• FullyintegratedhighspeedbottlepackinglinecommissionedatKRSGwithonlinevisioninspectionsystem.

• TwoBlisterlineshavebeenfullyintegratedwithcartonatorsandonlineinspectionsystems,reducingthethruputtimeandimproving quality.

• OnlinelabelverificationsystemthroughvisiontechnologyhavebeenintroducedinSterileandKRSG.

• HighspeedprintingandinspectionsystemforSoftgelsplanned.

These initiatives have led to increase in capacity and much higher level of quality assurance in our products.

2. Pollution Control MeasuresThe Company accords utmost priority to ensure a clean and pollution free environment in all its operations. The Company’s manufacturing activities do not result in any significant release of effluent in the environment. The Company has proactively taken steps to augment ETP at Bilekahalli for further improvement in treated effluent quality. Company has also taken initiative for noise reduction in the area by completely sound proofing the DG room.

2. Foreign Exchange Earnings and OutgoForeign exchange earned on FOB basis Rs.3,832.50 Million

Foreign exchange used Rs.1,265.91 Million

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Details of Stock Option under Strides Arcolab ESOP 2006 is as under:

Sl.No. Description Details

A Options granted as on December 31, 2007 400,000

B The pricing formula; Decided by the Compensation Committee from time to time, which shall not be less than85%of theMarket Price of the shares on the date of grant of option.

C Options vested NIL

D Options exercised NIL

E The total number of shares arising as a result of exercise of option NIL

F Options lapsed NIL

G Variationoftermsofoptions None

H Money realised by exercise of options NIL

I Total number of options in force 400,000

J Employee wise details of options granted to

(i) Senior managerial personnel

Mr.V.S.Iyer 100,000

Mr. Ravi Seth 100,000

Mr. Mark Bisset 100,000

Mr. S.A. Manikandan 100,000

(ii)Any other employee who receives a grant in any one year of option amounting to 5%ormoreofoptiongrantedduringthatyear

None

(iii)Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants andconversions) of the company at the time of grant

None

K Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’

Anti dilutive as on December 31, 2007

L Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the Company shall also be disclosed

Net Loss Rs.1,154.66 MillionBasic EPS: (33.98)

Diluted EPS (34.06)

M Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock

None of the options were exercised.

N A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:(i) risk-free interest rate,(ii) expected life,(iii) expected volatility,(iv) expected dividends, and(v) the price of the underlying share in market at the time of option grant

6.03%3 years32.98%0.38%

Rs.350.23 / Rs.252.94

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Annexture to the Directors’ ReportDetails as per SEBI (Employees Stock Options Scheme and Employees Stock Purchase Scheme) Guidelines, 1999

forming part of the Directors’ Report for the year ended December 31, 2007.


Corporate Governance Report (pursuant to Clause 49 of Listing Agreement with Stock Exchanges)

1. Company’s philosophy on Corporate Governance

Corporate Governance at Strides is not just the adherence to mandatory rules and guidelines. The Company has been committed to the highest standards of corporate governance practices right from its inception. The Company believes that good governance is a sine qua non to healthy business growth and a robust and vibrant capital market, besides being an important instrument of investor protection.

2. Board of DirectorsComposition:The Board currently comprises of 10 Directors, out of which 1 is an executive director and 9 are non-executive directors. Out of the 9 non-executive directors, 4 are independent directors. The Chairman of the Board is a Non-Executive Director.

The Board represents a mix of professionalism, knowledge and experience. All the non-executive directors on the Board are highly experienced professionals in their respective fields and known figures in the corporate world.

Board Meetings:During the year the board met on 7 occasions. These were on January 29, 2007, February 15, 2007, April 10, 2007, April 26, 2007, July 27, 2007, October 30, 2007 and November 19, 2007.

Directors’ attendance record and directorships held

Name Category of Directorship*

Board meetings attended

during the year

Whether attended last

AGM

No. of other Directorships

held

No. of other Committees of

which Chairman / Member

Mr. Deepak Vaidya (Chairman) NED 7 Y 128

(Chairman of 2)

Mr. Arun Kumar(Executive Vice Chairman & Managing Director)

P & ED 7 Y 10 1

Mr. K.R. Ravishankar PD# 6 Y 142

(Chairman of 1)

Mr. Virtanes Saatci NED 2 N Nil Nil

Dr. Ronald Ling NED 6^ N Nil Nil

Mr. Elcemar Almeida NED 2 N Nil Nil

Mr. D.G. Prasad** NED & ID 6 N 3 1(Chairman of 1)

Mr. M.R. Umarji NED & ID 6 Y 1 Nil

Mr. A.K. NairNED & ID 5 Y 10

2 (Chairman of 1)

Mr. P.M. Thampi NED & ID 6 N 55

(Chairman of 2)

Dr. Francis J. Pinto*** NED 1 NA NA NA

* P = Promoter; NED = Non-Executive Director; ED = Executive Director; ID = Independent Director

** = Nominee Director of Export Import Bank of India.

*** Ceased to be a Director on April 10, 2007

# Was an Executive Director till December 31, 2007.

^ includes two meetings attended through conference call

Notes: For the purpose of considering the limit of directorship, foreign companies have been excluded. Further, for the purpose of considering limit of Committee membership, private limited companies, foreign companies and companies under section 25 of the Companies Act, 1956 have been excluded

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3. Audit Committeei) Brief description of terms of reference

The Audit Committee has been constituted in accordance with the requirements of Clause 49 of the Listing Agreement and Section 292A of the Companies Act, 1956 and the terms of reference of the Audit Committee include:1. Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the

financial statements are correct, sufficient and credible. 2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removal of the

statutory auditor and the fixation of audit fees. 3. Approval of payment to statutory auditors for any other services rendered by the statutory auditors. 4. Reviewing, with the management, the annual financial statements before submission to the Board for approval, with

particular reference to:a. Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in

terms of clause (2AA) of section 217 of the Companies Act, 1956 b. Changes, if any, in accounting policies and practices and reasons for the same c. Major accounting entries involving estimates based on the exercise of judgment by management d. Significant adjustments made in the financial statements arising out of audit findings e. Compliance with listing and other legal requirements relating to financial statements f. Disclosure of any related party transactions g. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission to the Board for approval. 6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control

systems. 7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department,

staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

8. Discussion with internal auditors on any significant findings and follow up there on.9. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud

or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit

discussion to ascertain any area of concern. 11. Investigation of any activity within its terms of reference.12. Seek information from any employee.13. Obtain outside legal or other professional advice.14. Secure attendance of outsiders with relevant expertise, if it considers necessary. 15. Look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case

of non payment of declared dividends) and creditors. 16. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

ii) Composition and attendance details:The Audit Committee comprises of Mr. M.R. Umarji, Chairman and Mr. D.G. Prasad, Mr. A.K.Nair, Mr. P.M. Thampi, Mr. Deepak Vaidya and Dr. Ronald Ling as Members.The Audit Committee met four times during the year, i.e., on January 29, 2007, April 26, 2007, July 27, 2007 and October 30, 2007.The details of attendance at the audit committee

Sl. No. Name Designation & Category Meetings attended1 Mr. M.R. Umarji Chairman & Member (NED & ID) 4

2 Mr. D.G. Prasad Member (NED & ID) 4

3 Mr. A.K. Nair Member (NED & ID) 4

4 Mr. P.M. Thampi Member (NED & ID) 3

5 Mr. Deepak Vaidya Member (NED) 4

6 Dr. Ronald Ling Member (NED) 4

Mr. Kannan. N, the Company Secretary is the Secretary of the Committee.

4. Remuneration Committeei) Brief description of terms of reference

Although a non-mandatory item, the Company has constituted a Remuneration Committee. The terms of reference of the Committee is to recommend the remuneration by way of salary, perquisites, allowances and commission for executive directors including pension rights and any compensation payment.

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The Committee also functions as the Compensation Committee as prescribed under SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999.

ii. CompositionMr. M.R.Umarji chairs the Remuneration Committee. Other members of the committee during the year were Mr. Deepak Vaidya and Mr. Virtanes Saatci. The Remuneration Committee met two times during the year, on April 10, 2007 and October 30, 2007. All the members were present during the meetings except Mr. Virtanes Saatci who could not attend the meeting held on April 10, 2007.On March 7, 2008, the Remuneration Committee was reconstituted and the committee members as on date are Mr. M.R.Umarji (Chairman), Mr. Deepak Vaidya and Mr. P.M. Thampi, Mr. A. K. Nair.

iii. Remuneration PolicyThe remuneration of the employees consists of fixed pay i.e., Basic pay, allowances, perquisites etc. and a variable pay and varies with different grades and is related to the industry pattern, qualification, experience and responsibilities handled by the employee etc., The objective of the remuneration policy is to motivate employees and recognise their contribution, reward merit and to attract and retain talent in the organisation.

iv. Details of remuneration to all DirectorsDetails of remuneration paid / payable to Directors for the year ended December 31, 2007 are as follows:

Name of the Director Position Sitting feeSalary &

PerquisitesTotal

Mr. Deepak Vaidya Chairman 2,20,000 Nil 2,20,000

Mr. Arun KumarExecutive Vice Chairman & Managing Director

Nil 4,800,000**

Mr. K. R. Ravishankar Director ** Nil 4,800,000**Mr. Virtanes Saatci Director 40,000 Nil 40,000Dr. Francis J. Pinto* Director 20,000 Nil 20,000Dr. Ronald Ling Director 1,60,000 Nil 1,60,000Mr. Elcemar Almeida Director 40,000 Nil 40,000Mr. D.G. Prasad Director 2,00,000 Nil 2,00,000Mr. M.R. Umarji Director 2,00,000 Nil 2,00,000Mr. A.K. Nair Director 1,80,000 Nil 1,80,000Mr. P.M. Thampi Director 1,80,000 Nil 1,80,000

Note : * * Total managerial remuneration paid to the executive directors during the year amounts to Rs. 36.65 Million. The excess remuneration amounting to Rs. 27.05 million (Mr. Arun Kumar - Rs. 18.30 Million, Mr. K.R. Ravishankar - Rs. 8.75 Million) is subject to approval of the Central Government for which a waiver application has been made.

5. Shareholders’ / Investors’ Grievances Committeei. Composition

The Shareholders / Investors Grievances Committee has been constituted to operate in terms of the provisions related thereto in the Listing Agreements with the Stock Exchanges and comprises of Mr. Deepak Vaidya, Chairman, Mr. M.R. Umarji and Mr. K.R. Ravishankar as Members.The Shareholders / Investors’ Grievance Committee met four times during the year, January 29, 2007, April 26, 2007, July 27, 2007 and October 30, 2007. All the Members of the Committee attended all the four meetings conducted during the year.Mr. Kannan. N, the Company Secretary acts as the Compliance Officer.

ii. Investor / Shareholder ComplaintsDuring the year ended December 31, 2007, there were 88 complaints from shareholders, all of which were resolved to the satisfaction of the shareholders.

6. General Body MeetingsThe venue and time of the Annual General Meetings held during the last three years are as follows:

Meeting / Date Time Venue No. of Special Resolutions passed

14th Annual General Meeting 22nd June, 2005

11.00 a.m.,Hotel Days Inn, Plot No. L-1, Sector-19, Vashi, Navi Mumbai - 400 705.

3

15th Annual General Meeting 15th June, 2006

12.00 noonHotel Days Inn, Plot No. L-1, Sector-19, Vashi, Navi Mumbai - 400 705.

5

16th Annual General Meeting20th June 2007

11.00 a.m.Hotel Tunga Regency, Plot No. 37, Sector 30-A, Vashi, Navi Mumbai 400 703

0

During the year, one special resolution was passed with requisite majority by the shareholders through postal ballot on April 23, 2007, under section 372A of the Companies Act, 1956 for confirming Corporate Guarantee issued by the Company for an amount

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of USD 3.0 Million in favour of State Bank of India, New York Branch for the facilities availed by Strides Inc., a subsidiary of the Company in USA

Mr. Giji Joseph K.J., Company Secretary in Wholetime Practice was appointed as Scrutinizer for overseeing the postal ballot process. The Company has complied with the procedures for the postal ballot in terms of the Companies (Passing of Resolution by Postal Ballot) Rules, 2001 and the amendments thereto.

7. Disclosures

i) There are no materially significant related party transactions i.e. transactions of the Company of material nature, with its promoters, the directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large.

Transactions with the related parties are disclosed in Note 21 of “Schedule P” to the financial statements in the Annual Report.

ii) The Company has complied with the requirements of the Stock Exchanges, SEBI and other statutory authorities on matters relating to capital markets during the last 3 years. No penalties or strictures have been imposed on the Company by the Stock Exchange or SEBI or any statutory authorities relating to the above.

iii) The Company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement.

iv) As regards the adoption of non-mandatory requirements as contained in Annexure I-D to clause 49 of the Listing Agreement, the Company has implemented the requirements with relation to constitution of Remuneration Committee and matters related therewith.

8. Reappointment of Directors

The requisite details in terms of clause 49(IV)(G) of the Listing Agreement in respect of the Directors getting reappointed at the ensuing AGM are as under:

Mr. K.R. Ravishankar

• Agraduate,wasanentrepreneurbeforehejoinedStrides

• ApromoterDirectoroftheCompany–ontheBoardsinceMarch1994

• Carrieswithhimovertwodecadesofexperienceinpharmaindustry

Mr. Ravishankar holds 1232406 shares representing 3.16% of the paid up share capital of the Company.

Details of companies in which Mr. K.R. Ravishankar holds directorships and memberships in committees:

S.No. Name of the Companies Committee Membership

1 Quantum Life Sciences Private Limited Chairman of Audit Committee

2 Sequent Scientific Limited

3 Medgene Pharmaceuticals Private Limited

4 Vedic Elements Private Limited

5 Arcolab (India) Private Limited

6 Nous Infosystems Private Limited

7 Fraxis Life Sciences Limited

8 Grandix Pharmaceuticals Limited

9 Agnus Holdings Private Limited

10 PI Drugs & Pharmaceuticals Limited Audit Committee

11 Patsys Consulting Private Limited

12 Chayadeep Properties Private Limited

13 Caryl Pharma Private Limited

14 Sequent Research Limited

Mr. Deepak Vaidya• HoldsacommercedegreefromtheUniversityofMumbaiandisaFellowMemberofInstituteofCharteredAccountantsof

England & Wales, UK.• WascountryheadofSchroderCapitalPartners(Asia)Pte.Ltd.forover12yearsandisnowChairmanofArcAdvisoryServices

Private Limited• HehasvaluablecorporateexperienceinthefinancialfieldinIndiaandabroad• AppointedtotheBoardinJanuary1998andChairmanoftheBoardsinceDecember2005.

Mr. Deepak Vaidya does not hold any shares in the Company

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Details of his Directorships and Memberships in Committies:


1 Apollo Hospitals Enterprise Limited Audit Committee Remuneration & Nomination Committee

2 Orchid Chemicals & Pharmaceuticals Limited Audit Committee

3 Hotel Scopevista Limited

4 PPN Power Generating Company Limited

5 PI Drugs & Pharmaceuticals Limited

6 Arc Advisory Services Private Limited Audit Committee (Chairman), Remuneration Committee

7 Apollo Gleneagles Hospital Limited Audit Committee (Chairman)

8 Suntec Business Solutions Private Limited Audit Committee

9 GTL Infrastructure Limited Remuneration & Nomination Committee

10 Lodhi Property Company Limited

11 Heritage Resorts Private Limited

12 Sequent Scientefic Limited

Mr. M.R. Umarji• ApostgraduateinLawfromBombayUniversityandaconsummatebankingprofessional.• HasheldkeypositionsatReserveBankofIndia,CorporationBankandDenaBank.• ChiefLegalAdvisortotheIndianBanksAssociation.• Hasnumerousarticlespublishedinthepresstohiscredit.

Mr. M.R. Umarji does not hold any shares in the Company.

Details of his Directorships and Memberships in Committee:


1 Unit Trust of India Advisory Services Limited NIL

9. Disclosure of shareholding of non-executive directors

In terms of Clause 49(IV)(E)(iv) of the Listing Agreement, it may be noted that none of the Non-Executive Directors (except Mr. Virtanes Saatci who holds 175,000 equity shares and Mr. P.M. Thampi who holds 1000 equity shares) hold any shares and / or convertible instruments in the Company. Further M/s. Zenox Limited, British Virgin Islands and Goodlanza SA, Uruguay, hold 7,48,192 shares and 3,16,470 shares respectively in the Company. Dobliss Holdings Limited, Hong Kong and Blissup Holdings Limited, Hong Kong, held 3,111,440 and 1,934,285 fully convertible debentures (FCDs) respectively as on December 31, 2007; all entities in which Mr. Elcemar Almeida is interested. On March 8, 2008, 3,111,440 equity shares were issued to Dobliss Holdings Limited and 888,560 shares were issued to Blissup Holdings Limited on conversion of FCDs.

10. Means of Communication

Apart from being published in ‘The Economic Times’ and “Maharashtra Times” the quarterly and half-yearly results of the Company were also submitted to the Stock Exchanges where the Company’s shares are listed. These were also put up on the Company’s website www.stridesarco.com. The website of the Company also displays the official news releases and presentations made to the institutional investors and analysts from time to time.

11. General Shareholders Informationi. Annual General Meeting – Day / Date / Time / Venue

Day / Date Friday, June 27, 2008

Time 11.00 a.m.

Venue Hotel Tunga Regency, Plot No. 37, Sector 30-A, Vashi, Navi Mumbai 400 703

ii. Financial Calendar

Financial Reporting for Quarter / Half Year ended During

March 31, 2008 April, 2008

June 30, 2008 July, 2008

September 30, 2008 October, 2008

December 31, 2008 March, 2009

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iii. Date of Book closure : June 20, 2008 to June 27, 2008 (both days inclusive)

iv. Listing of Equity shares in Stock Exchanges

The equity shares of the Company are listed ona) The Bombay Stock Exchange Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai - 400 023 and b) The National Stock Exchange of India Ltd., Exchange Plaza, 5th Floor, Bandra Kurla Complex, Bandra (East),

Mumbai–400051.The Company has paid listing fees to all the above stock exchanges and there is no outstanding payment as on date.

v. Stock CodeNational Stock Exchange of India Limited : STARBombay Stock Exchange Limited : 532531

vi. Market Price DataThe High and Low prices of the shares of the Company at National Stock Exchange of India Limited, Mumbai (NSE) and The Stock Exchange, Mumbai (BSE) for the year ended December 31, 2007 is as under.

MonthNSE BSE

High (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

January, 2007 400.00 340.10 395.00 342.05

February, 2007 396.00 300.30 396.50 285.00

March, 2007 357.45 332.05 355.00 302.00

April, 2007 364.00 310.15 361.00 314.50

May, 2007 351.00 305.00 346.00 299.80

June, 2007 400.00 320.10 372.00 320.50

July, 2007 350.00 294.00 349.70 295.00

August, 2007 302.95 250.05 305.05 254.10

September, 2007 309.70 263.70 310.00 271.00

October, 2007 292.00 234.00 291.00 237.00

November, 2007 320.00 221.00 324.00 225.00

December, 2007 335.00 263.00 328.00 263.30

vii. Performance of Strides Arcolab Limited Share Price to Broad Based Index (BSE Sensex)

Strides

Sensex

viii. Registrar and Transfer Agent: Karvy Computershare Private Limited,

Plot No. 17 to 24, Vittalrao Nagar Madhapur, Hyderabad - 500 081 Tel: 040 - 23420815 to 824,

Fax 040 - 23420814 Email id: [email protected]. Share Transfer System

The Company has appointed Karvy Computershare Private Limited, Bangalore, as its Registrar and Share Transfer Agents to expedite the process of share transfers. The share transfers lodged are being processed on a day-to-day basis and Memorandum of Transfers is generated on a fortnightly basis.

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x. i) Distribution of Shareholding as on December 31, 2007

Slab of shareholding No. of shareholders % to total number of shareholders Amount (Rs) % to paid up capital

1-5000 19328 96.82 10,432,530.00 2.98

5001 - 10000 319 1.60 2,546,260.00 0.73

10001 - 20000 142 0.71 2,109,190.00 0.60

20001 - 30000 51 0.26 1,278,250.00 0.37

30001 - 40000 18 0.09 647,520.00 0.18

40001 - 50000 10 0.05 468,490.00 0.13

50001 - 100000 32 0.16 2,187,560.00 0.62

100001 & Above 61 0.31 330,373,090.00 94.39

Total 19961 100.00 350,042,890.00 100.00

ii) Shareholding Pattern as on December 31, 2007

S.No. Category No. of shares held

% to total shareholding

1 Indian Promoters 6,586,694 18.83

2 Mutual Funds & UTI 1,720,553 4.92

3 Banks, Financial Institutions, Insurance Companies 49,812 0.14

4 Foreign Institutional Investors 9,948,104 28.42

4 Private Corporate Bodies 540,411 1.54

5 Indian Public 1,985,991 5.67

6 Non Resident Indians / Overseas Corporate Bodies 1,720,167 4.91

7 Foreign Venture Capital 12,452,557 35.57

TOTAL 35,004,289 100.00

xi. Dematerialization of Shares & Liquidity

The Company shares are compulsorily traded in dematerialized form. The Company has established connectivity with both the

Depositories viz., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) through

the Registrars, Karvy Computershare Private Limited. As on 31st December, 2007, 98.39% of the paid-up share capital of the

Company representing 34,442,855 shares have been dematerialized.

xii. Outstanding Warrants or Convertible Instruments

Foreign Currency Convertible Bonds

(a) The Company had on April 12, 2005 issued US$ 40 Million, 0.5% Foreign Currency Convertible Bonds, due 2010 (FCCBs)

at an initial conversion price of Rs. 358.70 per share with a fixed rate of exchange on conversion of Rs. 43.7767 = US$

1.00 and upon the terms and conditions as specified in the FCCB Offering Circular. The FCCBs are listed at the Singapore

Exchange Securities Trading Limited.

(b) The Company had on June 26, 2007 issued US$ 100 Million, Zero Coupon Convertible Bonds due 2012 at an initial

conversion price of Rs.461.553 per share with a fixed rate of exchange on conversion of Rs. 40.70 = US$ 1.00 and upon

the terms and conditions as specified in the FCCB Offering Circular. The FCCBs are listed at the Singapore Exchange

Securities Trading Limited.

None of the Bonds under (a) and (b) above had been offerred for conversion.

Warrants

A total of 5,600,000 warrants were allotted to the Promoter Group Company on preferential basis on May 23, 2007 at

Rs.342.10 per warrant, being the price calculated as specified in Chapter XIII of the SEBI (Disclosure and Investor Protection)

Guidelines, 2000. Out of the 5,600,000 warrants, 50,000 warrants were converted into equity shares on July 5, 2007 and the

balance 5,550,000 warrants are outstanding. Such warrants are exercisable within a period of 18 months from the date of

allotment, into an equal number of fully paid-up equity shares of the Company

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Employee Stock Optionsa) Strides Arcolab ESOP 2006

Under the Strides Arcolab ESOP 2006 scheme, which has a corpus of 1,000,000 options, the Company has during the year ended December 31, 2007, issued 400,000 options to eligible employees. The Exercise price for 2,00,000 options issued on April 10, 2007 would be Rs.297.70 and the exercise price for 200,000 options issued on October 30, 2007 would be Rs.215.00. These options will vest in a phased manner over a period of four years.Further, on March 31, 2008, additional 600,000 options were issued to eligible employees at an exercise price of Rs.133.00 per share.

b) Strides Arcolab ESOP 2008On March 8, 2008, the Board of Directors approved another ESOP Scheme titled ‘Strides Arcolab ESOP 2008’ with a corpus of 1,500,000 options. The scheme would be subject to applicable statutory / regulatory approvals.

Fully Convertible Debentures

A total of 5,045,725 fully convertible debentures (FCDs) were issued on June 8, 2007 to Dobliss Holdings Limited (3,111,440

FCDs) and Blissup Holdings Limited, (1,934,285 FCDs) at a price of Rs.400.00 on preferential basis. These FCDs carry a coupon

of 5 percent per annum and are convertible into an equivalent number of our fully paid-up equity shares of Rs.10 each, in one

or more tranches, at any time within a period of 18 months from the date of issue.

On March 8, 2008, the Company issued 4,000,000 equity shares on conversion of equivalent number of FCDs out of the

5,045,725 FCDs issued as above. The shares were issued to Dobliss Holdings Limited (3,111,440 shares) and Blissup Holdings

Limited (888,560 shares).

As on date, 1,045,725 FCDs are outstanding which are held by Blissup Holdings Limited.

xiii. Plant Locations

(a) KRSGardens,Suragajakkanahalli,KasabaHobli,AnekalTaluk,Bangalore–560106(SoftGelatincapsules,Tables&hard

Gelatin Capsules

(b) Bilekahalli, Bannerghatta Road, Bangalore – 560 076 (Sterile Products, Antibiotics Plant and Strides Technology &

Research Centre [STAR])

xiv. Investors’ Correspondence

To the Registrars & Share Transfer Agents:Karvy Computershare Private Limited,Plot No. 17 to 24, Vittalrao NagarMadhapur, Hyderabad - 500 081Tel: 040 - 23420815 to 824, Fax 040 - 23420814Email id: [email protected], [email protected]

Contact Persons:Mr. S.V. Raju or Mr. Mohan

To the Company:Mr. Kannan. NCompany SecretaryCorporate Office : ‘Strides House’, Bilekahalli, BannerghattaRoad,Bangalore–560076Tel. No. 91-80-66580751 Fax No. 91-80-66580800e-mail id. : [email protected]

Regd. Office: No. 201, ‘Devavrata’Sector 17, Vashi, Navi Mumbai - 400 705.Tel. No. 91-22-27895247Fax No. 91-22-27892924

The Company’s designated email id for investor complaints is [email protected]

12. Code of Conduct

The Board has prescribed Code of Conduct (‘Code’) for all Board Members and Senior Management of the Company, which is also put on the website of the Company.

All Board Members and senior management personnel have confirmed compliance with the Code for the year 2007. A declaration to this effect signed by the Managing Director of the Company is reproduced hereunder.

“I confirm that the Company has in respect of the year ended December 31, 2007, received from its Board Members as well as senior management personnel affirmation as to compliance with the code of conduct.”

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CERTIFICATETo the members of Strides Arcolab Limited

We have examined the compliance of conditions of corporate governance by Strides Arcolab Limited (‘the Company’), for the year ended on December 31, 2007, as stipulated in clause 49 of the Listing Agreement of the said Company with the stock exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has been limited to a review of the procedures and implementations thereof, adopted by the Company for ensuring compliance with the conditions of Corporate Governance. It is neither an audit nor an expression of opinion of the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, and the representations made by the Directors and the management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in clause 49 of the above-mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For DELOITTE HASKINS & SELLS Chartered Accountants

V. Srikumar Partner

Membership No. 84494

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Place : Bangalore, India

Date : April 28, 2008


1. Industry Structure and Developments

The Pharmaceutical Industry is characterized by an enormously lengthy and risk prone research and development process, intense competition for intellectual property and stringently regulated by the governments; at the same time, balancing between the margin needs of the industry players and the affordability needs of the society. Spurred on by the major discovery of Penicillin, the industry expanded rapidly in the 1960s from significant new discoveries, with Research and Development (R&D) entrenched firmly as the foundation and lifeline of the industry. The 1970s brought a legislation fixing a typical 20 year period on patent protection from the initial filing as a new discovery, which acted as the “birth” of generic medicines. Having the same active ingredients as the original product, as well as the same bioequivalence, generics brought competitiveness to the market place, providing alternatives to the medical practitioners and patients. The 1980s saw various governments bring about regulatory control over the prices in their efforts to control healthcare expenditure, which brought R&D into greater focus, to bring into the market cheaper versions of patented products. The R&D product pipeline continues to be the most valuable aspect of the pharmaceutical industry. By the turn of the millennium, the pharmaceutical industry has made tremendous progress and contribution to the human well-being, raising the average life expectancy. The R&D costs have risen sharply whereas the product life cycle has reduced. Product pricing, approvals and promotion are being subjected to increasingly onerous regulations.

The pharmaceutical industry comprises of Active Pharmaceutical Ingredients (API) or Bulk Drugs and Finished Dosage Forms or Formulations. The latter are further categorized as “Ethical”, which are the prescription products, and “Over the Counter” (OTC), which can be sold without a prescription of a medical practitioner. The Ethical products comprise of various therapeutic segments like Immunosuppresants, Anti-biotics, Anti-Infectives, Anti-Bacterial, Anti-Diabetic, Cardio-Vascular, Neurological, Gastro-Intestinal, Dermatology, etc. The total size of the global pharmaceutical industry was US$ 712 Billion in 2007, the biggest share in which was that of United States of America at US$ 286.50 Billion (source: IMS health reports).

The Indian Pharmaceutical Industry, from being an import dependent industry in the 1950s, has achieved self-sufficiency and gained global recognition as a producer of low cost high quality bulk drugs and formulations. Leading Indian companies have developed infrastructure in over 60 countries including developed markets like US and Europe. In the recent past, several pharmaceutical companies have demonstrated that they possess the ability to engage in commercially viable research and development activities and become significant players in the international market.

Though considered to be one of the fastest growing industries, it is still largely unregulated and has grown 13% in the year 2007. While in terms of volume, given the size of its population, the Indian Pharmaceutical Industry ranks fourth and accounts for 8% of the world’s production and ranks thirteenth in terms of value. The Indian Pharmaceutical Industry, backed by a strong scientific talent pool is, however, emerging as one of the major investment destinations of big pharmaceutical companies. In addition to its strong scientific capabilities, it also provides a low cost manufacturing base and has the largest USFDA approved plants outside the US (source: indiainbusiness.nic.in). From being an industry focused only on generics, engaged in reverse engineering of a number of products on account of lack of product patent protection till 2004, it has now made major strides into all areas covering discovery, clinical trials, analytical development, dossier preparation and high quality manufacturing capabilities. The Indian Pharmaceutical Industry currently exports API and Finished Dosage Forms worth about USD 3.8 Billion and ranks 17th in terms of export value with exports covering both regulated/ semi-unregulated markets.

2. Opportunities and Threats

Globally,theIndianPharmaceuticalindustryranks4thintermsofvolume,and13thintermsofvalueandproduces20–24%ofthe world’s generic drugs. The industry has developed Good Manufacturing Practices (GMP) facilities for the production of different dosage forms (Source: www.indiainbusiness.nic.in, a Govt. of India website). India's pharmaceutical industry has grown at a CAGR of 13 percent from 2002-2007 and is expected to grow at a CAGR of 16 percent over 2007-2011. Over the last couple of years, the pharmaceuticals industry has grown at approximately 1.5-1.6 times the growth of the economy. The rise in disposable income has a positive impact on healthcare spend. In 2005, 6.2 percent of disposable income was spent on healthcare as compared to 2.8 percent in 1995. This augurs well for the pharmaceutical industry, as the strong economic momentum is likely to continue with the Indian economyexpectedtogrowby8–9percentinthenextfewyears.andiswellpositionedforsustainablegrowthandexpansion.(source:KPMG–CIIReporttitled,“IndianPharmaInc.–AContinuingSuccessStory”)

India is emerging as the global hub for contract research and manufacturing services due to a combination of low-cost and world-class quality standards. According to a study by Ernst & Young, the total market for clinical research activities in India is expected to touch $1.5-2 billion by 2010. Also, India has been listed second (just after China) for attractiveness as a clinical trials centre. With pharmaceutical majors facing increased pressure on profit margins, spiraling R&D costs and increasing overheads, outsourcing of clinical research processes to third parties in developing countries seems a viable option. By contracting such work to India, they save 40-60 percent in new drug development.

India has the capability to become a global pharmaceutical hub by exporting domestically produced generic products and positioning

Management Discussion and Analysis

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itself as an off shoring destination for clinical and pre-clinical research and other support services. There is tremendous potential in the Indian Pharmaceutical market itself. Consumer spending on healthcare went up from 4 percent of GDP in 1995 to 7 percent in 2007. That number is expected to rise to 13 percent of GDP by 2015.

The greatest strengths of the Indian Pharmaceutical Industry are its cost advantage, high standards in terms of quality, stability and international safety, health and environment protection, strong scientific and technical manpower, excellent centre for clinical trials and a tremendous export potential.

However, with the increasing costs of manpower and competition from emerging countries in South Asia, and the stringent regulatory framework of the regulated markets, the Indian Pharmaceutical Industry will have to strive in achieving technical excellence ensuring compliance with highest standards of GMP.

The Company, with its vision to become a global Life Sciences Company, focuses on niche and difficult to manufacture products. Having a strong and cost efficient R&D product pipeline, the Company provides competitive advantage to its partners in the global space. Operating only in the generic space, the Company has increased its presence in the global markets with manufacturing capabilities in Europe, Latin America, Asia and Africa, with a dedicated Research & Development Centre in India.

To tap the potential in the Indian market, the Company also made an entry into the Indian Branded Pharmaceutical market through its acquisition of Grandix Pharmaceuticals Limited, Chennai. This company is engaged in ethical selling of prescription products and over the years, has built a formidable portfolio of products spanning across various therapeutic segments with some very strong brands. This company has a large sales force and its geographical footprint currently spans South and Central India and is expanding at a rapid pace.

3. Outlook

The Company has effected some significant changes in its business model for driving efficiencies in revenue and cost as also to take advantage of the opportunities that are available. Towards this, it decided to split its business into India Operations (focused on manufacturing and research & development and driving operating efficiencies therein) and International Operations (focused on driving global opportunities and customer relationships with the globe divided into regions). The organization structure was also realigned with this new business model and necessary action was initiated on filling up the identified gaps in leadership to drive this .

During the year, the Company expects the following to be the drivers of its business and profitability:• SignificantimprovementsinoperatingefficienciesinbothmanufacturingandR&D,resultinginincreasedrevenuesand

improved profitability.• Approvalsforanumberoffilingsintheregulatedmarketsandcommencementofsupplies.

• Creationofbrandedbusinessstrategytobedrivenacrossthegroup.

• Completionofcapacityupgradationandexpansionlargelyinthespaceofsterileinjectables.

• ImprovedbusinessandprofitabilityonaccountofcommencementofthenewplantsinBrazilandNigeria.

• BetterprofitabilitywithclosureofthelossmakingplantinUSAandthehiveoffofthespecialitychemicalsbusiness.

During 2008, the Company completed the transaction entered into with Aspen Pharmacare Holdings Limited of South Africa for the strategic / financial partnership in the Latin America operations, which is expected to give a boost to business there both through organic and inorganic means.

The Company also made a binding bid for the acquisition of a 55% stake in Genepharm Australasia Ltd, a very significant generics business player in Australia and one which will help the Company to acquire a sizeable presence in the Australasia region.

4. Risks and Concerns

Any large size company, with a significant geographical footprint and which is knowledge based, faces significant risks in all facets of its business. The challenge therefore lies in creating a risk management framework which will enable the company to recognize the risk it faces and to develop mitigation and monitoring plans to enable it to bring down its risk exposure significantly.

The Company’s operations are global in nature with manufacturing plants in Brazil, Mexico, Poland, Italy, Singapore, Nigeria and India, and marketing presence in more than 50 countries across the globe. These global operations bring with them inherent risk which are economic, political, geographical and financial.

The Company has, with the help of external consultants, put in place a risk management framework, which will allow it to take advantage of opportunities that become available while being aware of and managing the risks related to those opportunities. The exercise that was carried out covered the entire range of risks from strategic to operational, financial, compliance and reporting related.

Strategic risk management is very critical in any company and more so to a company which is on a high growth path. It is, therefore,

1.29


very important that the entire organic and in-organic growth strategy of the Company considers the risk it faces and tries to achieve a balance. On the operations side, the Company faces risks both in terms of selection of the product pipeline and the subsequent timely development and regulatory approvals for the selected products. Given the pace at which the Company is growing, the execution risks on the manufacturing side are critical and correct assessment of manufacturing capacities and acquisition of appropriate technology will be a critical determinant of the success of the growth plans of the Company.

As the Company acquires large scale and enhanced global presence, the financial risks that the Company faces also continue to increase and it is essential for the Company to create systems and processes which will enable it to manage its risks effectively. The financial risks are wide ranging, from capital structure to management of forex exposure and interest rates and given the expertise required, would need to be managed on a centralised basis.

Compliance and Reporting related risks also present significant challenges to a fast growing company and the company is increasing work on enhancement of the monitoring and controls mechanism to ensure that these risks are minimised.

5. Internal Control Systems and their Adequacy

The Company has in place a strong internal control system in order to ensure that all transactions are authorised, recorded and reported correctly and that all assets are protected against losses from unauthorised use or disposition.

Towards enhancing the controls in the Company, services of external consultants were obtained for carrying out complete review of the control system in operation and suggest changes for its enhancement incorporating amendments to standard operating procedures, which will help support in the controls environment. This exercise was completed during the year and the process of implementing the recommendations of the consultants has been commenced. Additionally the Company has also put in a policy for managing its global foreign exchange exposure which will help maintain its competitiveness.

The Company also has in place an Internal Audit system, whereby a firm of Internal Auditors conducts regular audits across the Company and their agenda as well as findings, is reviewed by Management and the Audit Committee on a regular basis.

As required under the revised Clause 49 of the Listing Agreement, the Audit Committee comprises of six Directors of which, four are Independent and two are Non-Executive. The Audit Committee, among other things, reviews the adequacy of the internal control system and the findings of the Internal Auditor and directs appropriate action accordingly.

6. Financial Performance

The Company registered a total income of Rs. 4,032 Million as compared to Rs. 4,551 Million last year. The decrease in total income was an outcome of various factors like unprecedented appreciation in INR, reversal of R&D revenue on account of contractual realignment, competitive pressure on the prices of ATM (AIDS, TB and Malaria) products and slowdown of business of the Latin America subsidiaries which source a large part of their products from India.

Rising material costs and pressure on margins of ATM business together with rationalization of personnel costs by aligning them to market had an adverse impact on the margins. This was further compounded by the recognition of impairment in relation to value of some of the brands and slow moving stock, adjustments in relation to the Latin America business consequent to the induction of Aspen Pharmacare as a strategic and financial partner in that business and loss on account of foreign exchange derivative contracts. As a consequence, the EBITDA margin was negative.

The increase in working capital rates by bankers, along with interest on Fully Convertible Debentures issued to the strategic partner in Latin America led to higher interest costs.

Consequent to the decision to exit all non-core businesses, the specialty chemicals business was hived off resulting in a loss of Rs. 95.30 Million to the Company. It was also decided to write-down the investment in the subsidiary in USA as a consequence of the closure of the plant announced by the Board. As a consequence of change in the regulatory requirements of the USFDA in relation to plants manufacturing nutraceutical products, the operations had become unviable and as other options to revive the plant were not available, it was considered best to shut down the plant and reduce the workforce to a bare minimum. This amounted to a write-down of Rs. 815.32 Million. As a result, the Company incurred a loss of Rs. 1,152 Million as against profit of Rs. 362 Million last year.

The Company continued to expand its asset base and the spend on capital expenditure was Rs. 322 Million. The construction of the oncology plant which was commenced in late 2006 is nearing completion and one line was validated in March 2008. Construction of a new Steriles Plant at Bommasandra, Bangalore was also commenced and is expected to be complete by the end of 2008.

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Tablets 39% (58%) 20062007

Others 12% (8%)

Soft Gelatin Capsules 13% (10%)

Liquid Injections 11% (5%)

Hard Gelatin Capsules 6% (3%)

Dry Powder Injections 19% (16%)

0% 20% 40% 60% 80%

DOSAGE FORM DISTRIBUTION

West Africa 8% (2%)

South Central America 28% (43%)

North America 10% (13%)

India 5% (6%)

Europe 15% (3%)

South East Asia 5% (3%)

South Africa 12% (3%)Multiaid 2% (14%)

French Africa 3% (5%)

East Africa 1% (4%)

Australia 11% (4%)

GEOGRAPHICAL DISTRIBUTION 2007 (2006)

7. Performance geographical representation

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VITAMINS & NUTRACEUTICALS

STEROIDS

NSAIDS

IMMUNOSUPPRESSANTS

HERBAL DRUGS

CEPHALOSPORINS

CARDIOVASCULARS

ANTIULCER DRUGS

ANTI TB DRUGS

ANTI RETROVIRALS

ANTI MALARIALS

ANTI DIABETICS

ANTI BIOTICS

ANTI BACTERIALS

ANTHELMINTIC

ANALGESICS

OTHERS

0% 10% 20%5% 15% 25% 30%

THERAPEUTIC DISTRIBUTION20062007

8. Development of Human Capital

The Company realizes that human capital is one of the most important drivers of business in this industry and hence continuously works on creating an environment which will attract and retain high quality resources.

Towards this objective, it has put in place a number of processes such as in-house and sponsored training and development programmes, competency mapping and career path planning, robust performance appraisal system and reward mechanism. As part of its ongoing process of enahancing the skills of its R&D and management talent pool, it continues to work on strengthening its relationship with BITS Pilani and IIM-Bangalore. The second batch of candidates who participated in the Masters programme conducted by BITS Pilani graduated during the year. Additionally, the Company introduced the concept of balanced scorecard as a tool for performance measurement.

During the year, the Company engaged the services of an external consultant to review the entire operational structure from a global perspective with a view to aligning it with the business model of the Company. The recommendations of the consultants were used to develop a new structure which is put into operation in the year 2008.

The Stock options were also granted to few employees from the existing Strides Arcolab ESOP 2006 scheme and the Board also approved a new ESOP scheme titled ‘Strides Arcolab ESOP 2008.

As of December 31, 2007, the Company had 1251 permanent employees, which has grown from 1177 from the beginning of the year; this included corporate and managerial staff and staff located at our several manufacturing facilities, including 8 doctorates and 329 post graduates. Of these, 291 were engaged in research and development activites.

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Auditors’ Report

TO THE MEMBERS OF STRIDES ARCOLAB LIMITED

We have audited the attached Balance Sheet of STRIDES ARCOLAB LIMITED as at December 31, 2007, the Profit and Loss Account and

the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements are the

responsibility of the Management of the Company. Our responsibility is to express an opinion on these financial statements based on

our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. These Standards require that we plan and

perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes,

examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by the Management as well as evaluating the overall financial statement

presentation. We believe that our audit provides a reasonable basis for our opinion.

As required by the Companies (Auditor’s Report) Order, 2003 issued by the Government of India in terms of Section 227 (4A) of the

Companies Act, 1956, we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the

purposes of our audit;

(b) in our opinion, proper books of account as required by law have been kept by the Company, so far as it appears from our examination

of the books;

(c) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the

books of account;

(d) in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with

the Accounting Standards referred to in Sub-Section (3C) of Section 211 of the Companies Act, 1956:

(e) on the basis of the written representations received from the directors, as on December 31, 2007, and taken on record by the Board

of Directors, we report that none of the directors are disqualified as on December 31, 2007 from being appointed as a director in

terms of clause (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956;

(f) attention is invited to Note B.17.1 of Schedule P regarding the excess managerial remuneration paid and the Company’s proposal

regarding the same:

(g) in our opinion, and to the best of our information and according to the explanations given to us, the said accounts read together

with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required, and give a true and

fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2007;

(ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

For DELOITTE HASKINS & SELLS

Chartered Accountants

V.Srikumar

Partner


Place : Bangalore

Date : March 7, 2008

1.33

(i) The nature of the Company’s business/activities during the year is such that clauses i(c), iii (d) to (g), vi, xii. xiii, xiv and xix and xx

of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 are not applicable to the Company.

(ii) In respect of its fixed assets:

(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed

assets.

(b) The fixed assets were physically verified during the year by the management in accordance with a programme of verification,

which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the

information and explanations given to us no material discrepancies were noticed on such verification.

(iii) In respects of its inventories:

(a) As explained to us, inventories were physically verified during the year by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the documentation of procedures and results of

physical verification of inventories followed by the management need to be strengthened to make it commensurate in relation

to the size of the Company and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of

its inventories and no material discrepancies were noticed on physical verification.

(iv) In respect of loans, secured or unsecured, granted by the Company to companies, firms or other parties covered in the register

maintained under Section 301 of the Companies Act, 1956, according to the information and explanations given to us:

(a) Company has granted loans to 5 parties. As at the year-end, the outstanding balances of such loans granted aggregated to

Rs.604.22 Million (number of parties -4) and the maximum amount involved during the year was Rs.964.04 Million.

(b) The rate of interest and other terms and conditions of such loan are in our opinion, prima facie, not prejudicial to the interests

of the Company.

(v) In our opinion and according to the information and explanations given to us, having regard to the explanations that some of the

items purchased are of a special nature and suitable alternative sources do not exist for obtaining comparable quotations, there are

adequate internal control systems commensurate with the size of the Company and the nature of its business, for the purchase of

inventory and fixed assets and for the sale of goods and services and we have not observed any continuing failure to correct major

weaknesses in the internal control systems.

(vi) In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act,1956,

to the best of our knowledge and belief, and according to the information and explanations given to us:

(a) The particulars of contracts or arrangements referred to in Section 301 that needed to be entered into the register maintained

under the said section have been so entered.

(b) In our opinion and having regard to our comments in paragraph (v) above, transactions (excluding loans covered by our

comments under paragraph (iv) above) made in pursuance of such contracts or arrangements, in excess of Rs. 5 lakhs in

respect of any party, have been made at prices which are, prima facie, reasonable having regard to the prevailing market prices

at the relevant time.

(vii) In our opinion, the internal audit function carried out during the year by a firm of Chartered Accountants appointed by the management

has been commensurate with the size of the Company and the nature of its business.

(viii) We have broadly reviewed the books of account and records maintained by the Company pursuant to the order made by the Central

Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and are of the opinion

that, prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed

examination of the records with a view to determining whether they are accurate or complete.

(ix) In respect of statutory dues:

(a) According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory

dues including Provident Fund, Employees’ State Insurance, Investor Education and Protection Fund, Income Tax, Sales Tax,

Wealth Tax, Service Tax, Customs Duty, Excise Duty, cess and any other material statutory dues with the appropriate authorities

during the year and there are no undisputed statutory dues as noted above which are outstanding for a period more than six

months from the date they became payable.

Annexure to the Auditors’ Report(Referred to in our report of even date)

1.34

(b) According to the information and explanations given to us, details of disputed income tax, sales tax, wealth tax, service tax,

customs duty, excise duty and cess, which have not been deposited as on December 31, 2007 on account of any dispute are

given below:

Name of Statute Nature of the DuesAmount

(Rs.in Million)Period to which

the amount relatesForum where dispute is pending

Income Tax Laws Income Tax (incl. interest) 14.57 AY 1996-97 Commissioner Income Tax (Appeals)




Income Tax Laws Income Tax (incl. interest) 72.33 AY 2002-03 Income Tax Appelate Tribunal


Income Tax Laws Income Tax (incl. interest) 39.96 AY 2003-04 Income Tax Appelate Tribunal


Customs and Excise Laws

Excise Duty 3.86 August 2005Customs and Excise Service Tax Appelate Tribunal

(x) The accumulated losses of the Company have not exceeded fifty per cent of its net worth as at the end of the year. The Company

has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.

(xi) Based on our audit procedures and the information and explanations given by the management, Company has defaulted in repayment

of principal and interest, due to financial institutions and banks aggregating to Rs.O.54 Million during the year. The period of default

is 3 days. As at December 31, 2007 there are no continuing defaults.

(xii) We draw attention to note B.2.1 of Schedule P to the financial statements regarding the Company providing guarantees in respect

of loans given by third parties to Sequent Scientific Limited, a company which was a wholly owned subsidiary of the Company at

the time such guarantees were given. Consequent to disposal of the investment in Sequent Scientific Limited during the year ending

December 31, 2007, the Company has initiated procedures to cancel the above referred guarantees.In our opinion and according to the information and explanations given to us, the terms and conditions of the other guarantees given by the Company for loans taken by subsidiary companies from financial institutions, are not prima facie prejudicial to the interests of the Company.

(xiii) To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, prima facie, applied by the Company during the year for the purposes for which the loans were obtained, other than temporary deployment pending application.

(xiv) According to information and explanations given to us, and on an overall examination of Balance Sheet of the Company, funds raised on short term basis have, prima facie, not been used during the year for long term investment.

(xv) According to the information and explanations given to us, the price at which the Company has made preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956 was not prima facie prejudicial to the interests of the Company.

(xvi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year.

For DELOITTE HASKINS & SELLS


V.Srikumar

Partner


Place : Bangalore


1.35

(Rupees in Millions)


I. SOURCES OF FUNDS 1. Shareholders’ funds

a) Share capital A 841.65 841.15b) Monies pending allotment 189.87 354.31

(Refer Note B.7, Schedule ‘P’)c) Employees stock options outstanding account B 4.73 -d) Reserves & surplus C 1,712.32 2,784.68

2,748.57 3,980.14

2. Loan funds Da) Secured loans 2,993.97 1,452.46b) Unsecured loans 7,633.72 1,870.36

10,627.69 3,322.82

3. Deferred tax liability (Net) 79.50 146.20 (Refer Note B.20, Schedule ‘P’)

Total liabilities 13,455.76 7,449.16

II. APPLICATION OF FUNDS1. Fixed assets E

a) Gross block 2,541.81 2,344.33 Less: Accumulated depreciation 886.30 725.70 Net block 1,655.51 1,618.63b) Capital work-in-progress & advances 504.62 379.82 2,160.13 1,998.45

2. Investments F 8,361.69 3,097.363. Current assets, loans and advances G

a) Inventories 722.07 638.30 b) Sundry debtors 1,802.20 1,669.27 c) Cash & bank balances 1,255.92 157.40 d) Loans and advances 1,662.49 1,542.69

5,442.68 4,007.66

Less: Current liabilities & provisions H a) Current liabilities 2,325.07 1,338.78 b) Provisions 292.70 315.53

2,617.77 1,654.31

Net current assets 2,824.91 2,353.35

4. Profit & loss account 109.03 -

Total assets 13,455.76 7,449.16

Accounting policies and notes on accounts P The above schedules form an integral part of the financial statements.

Balance Sheet as at

For and on behalf of the BoardArun Kumar - Vice Chairman & Managing DirectorK.R.Ravishankar - DirectorKannan.N - Company Secretary

As per our report of even date

For DELOITTE HASKINS & SELLSChartered Accountants

V. Srikumar PartnerMembership No.84494

Bangalore, March 7, 2008

Schedule Dec 31, 2007 Dec 31, 2006

1.36



I. INCOME1. Sales & services (including export incentives) I 3,929.15 4,550.882. Other income J 102.53 0.001

Total 4,031.68 4,550.88

II. EXPENDITURE1. Materials consumed K 2,418.65 2,378.432. (Increase)/Decrease in stock L (93.72) 55.733. Personnel cost M 516.69 418.434. Operating and other expenses N 953.07 917.885. Finance charges O 317.75 198.886. Loss on sale of long term investment 95.30 - (Refer Note B.10 c (ii), Schedule ‘P’)

Total 4,207.74 3,969.35

III. PROFIT/ (LOSS) BEFORE DEPRECIATION, (176.06) 581.53 EXCEPTIONAL ITEMS AND TAX 7. Depreciation E 188.88 164.07

IV. PROFIT / (LOSS) BEFORE TAX AND EXCEPTIONAL ITEMS (364.94) 417.468. Impairment in investment in subsidiaries 815.32 -

(Refer Note B.10 c (i) & (iii), Schedule ‘P’)

V. PROFIT / (LOSS) BEFORE TAX (1,180.26) 417.46 Less: Provision for tax - Current 35.00 13.43

- Deferred [Net] (66.70) 36.70 - Fringe Benefit Tax 3.58 5.49

VI. PROFIT / (LOSS) AFTER TAX (1,152.14) 361.84Balance brought forward 1,045.19 896.71Differential tax on equity dividend of previous year 2.08 -

1,043.11 896.71

VII. PROFIT / (LOSS) AVAILABLE FOR APPROPRIATION (109.03) 1,258.55 VIII. APPROPRIATIONS

Proposed dividend on equity shares - 69.90Tax on equity dividends - 9.80Dividend on preference shares - 29.51Tax on preference dividends - 4.15Transfer to general reserve - 100.00Balance carried to balance sheet (109.03) 1,045.19

Total (109.03) 1,258.55

IX. EARNINGS / (LOSS) PER SHARE(Face value of Rs.10 each)

– Basic (in Rs.) (33.98) 9.39 – Diluted (in Rs.) (33.98) 8.34

(Refer Note B.30, Schedule ‘P’) Accounting policies and notes on accounts P The above schedules form an integral part of the financial statements.

Profit & Loss Accountfor the year ended




V. Srikumar Partner Membership No.84494


Schedule Dec 31, 2007 Dec 31, 2006

1.37



A. Cash flow from Operating Activities

Net Profit / (Loss) before tax (1,180.26) 417.46

Adjustments for:

Add: Depreciation and amortisation 188.88 164.07

Provision for doubtful debts 2.57 10.91

Loss on sale of investments 95.30 -

Impairment in Long term investments 815.32 -

Impairment in Brands & Registrations 13.24 -

Loss on sale of assets 3.27 1.09

Interest Expenses 454.96 273.59

Exchange loss (net) - 27.08

Compensation under ESOP Scheme 4.73 -

Less: Dividend received 23.00 -

Unrealised Exchange gain (net) 40.94 -

Interest received 137.21 74.71

Operating profit before working capital changes 196.86 819.49

Changes in working capital

(Increase) / Decrease in Trade and other receivables (364.52) (1,270.68)

(Increase) / Decrease in Inventories (83.76) (135.52)

Increase / (Decrease) in Trade and other payables 831.48 485.01

(Increase) / Decrease in Margin money (17.94) (8.23)

Net change in working capital 365.26 (929.42)

Cash generated from operations 562.12 (109.93)

Direct taxes paid (31.95) (58.23)

Net cash from Operating Activities A 530.17 (168.16)

B. Cash flow from Investing Activities

Purchase of fixed assets / CWIP (657.40) (447.93)

Investment in subsidiaries / Joint Ventures (5,983.80) (192.76)

Sale of Long term Investments 55.20 -

Sale of fixed assets 2.53 1.76

Dividend / Interest received 160.21 74.71

Net cash used in Investing Activities B (6,423.26) (564.22)

C. Cash flow from Financing Activities

Proceeds from issue / (Repayment) of Share / Warrants (Net) (111.60) 318.58

Proceeds from Foreign Currency Convertible Bonds 3,998.70 -

Proceeds from 5% Fully Convertible Debentures 2,018.29 -

Proceeds from long term borrowings 591.00 350.55

Proceeds from / (Repayment of) short term borrowings 1,183.28 186.56

Repayment of long term borrowings (233.30) (372.53)

Equity Dividend paid (69.10) (69.15)

Tax paid on dividends (16.02) (11.98)

Interest paid on borrowings (425.45) (282.32)

Net cash generated from Financing Activities C 6,935.80 119.71

Cash Flow Statementfor the year ended

Dec 31, 2007 Dec 31, 2006

1.38



Net Increase / (Decrease) in cash and cash equivalents during the year (A+B+C) 1,042.71 (612.67)

Effect of exchange differences on restatement of foreign 37.87 (15.67)

Currency cash and cash equivalents

Cash and cash equivalents at the beginning of the year 73.47 701.82

Cash and cash equivalents at the end of the year 1,154.05 73.47

Note: Refer Note B.31, Schedule ‘P’ for notes on Cash Flow Statement

Cash Flow Statementfor the year ended

For and on behalf of the BoardArun Kumar - Vice Chairman & Managing DirectorK.R.Ravishankar - DirectorKannan. N - Company Secretary





Dec 31, 2007 Dec 31, 2006

1.39



A SHARE CAPITAL

1. Authorised

a) Equity

70,000,000 equity shares of Rs.10 each 700.00 700.00

b) Preference

620,000 cumulative redeemable preference shares of Rs.1,000 each 620.00 620.00

1,320.00 1,320.00

2. Issued, subscribed and paid-up

a) Equity

35,004,289 (Previous year 34,954,289) equity shares of Rs.10 each fully paid, of these: 350.04 349.54

i) 3,118,875 (Previous year 3,068,875) equity shares of Rs.10 each were allotted to

the Promoters and their associate companies on exercising of the Warrants.

ii) 210,955 equity shares of Rs.10 each were allotted to the erstwhile share holders of

Bombay Drugs & Pharmas Ltd. consequent to amalgamation with the Company

iii) 1,251,000 equity shares of Rs.10 each were issued as bonus shares by

capitalisation of General Reserve

iv) 1,912,500 equity shares of Rs.10 each were issued consequent to amalgamation

to the shareholders of erstwhile Remed Laboratories (India) Ltd and Plama

Laboratories Ltd

b) Preference

491,606, 6% cumulative redeemable preference shares of Rs.1,000 each fully paid 491.61 491.61

(Refer Note B.5, Schedule ‘P’)

Total 841.65 841.15

B EMPLOYEE STOCK OPTIONS OUTSTANDING

Employee Stock Options Outstanding 18.08 -

(Refer Note B.8,Schedule ‘P’)

Less: Deferred employee compensation expenses 13.35 -

Closing Balance 4.73 -

C RESERVES AND SURPLUS

1. General ReserveOpening Balance 255.56 155.56Add: Transfer from Profit and Loss account - 100.00Less: Adjustment under transitional provisions of AS-15 (Revised) 4.22 -(Refer Note B.9, Schedule ‘P’)

Closing Balance 251.34 255.56

2. Capital ReserveForfeiture of amount received towards Share Warrants 35.74 -

(Refer Note B.7, Schedule ‘P’)

3. Capital Redemption Reserve 60.00 60.00

Dec 31, 2007 Dec 31, 2006

Schedules forming part of the Balance Sheet as at Schedules forming part of the Balance Sheet as at

1.40



4. Debenture Redemption Reserve (Refer Note B.4, Schedule ‘P’)Opening Balance 651.15 662.78Add: Transfer from Securities Premium account (Refer Note B.4, Schedule ‘P’) 355.06 -Less: Adjustment for exchange fluctuation on restatement of Debenture Redemption 71.50 11.63

Premium (transferred to Securities Premium Account)


5. Securities Premium

Opening Balance 772.78 761.15

Add: Additions during the year on fresh issue of shares 16.61 -

Add: Transfer from Debenture Redemption Reserve Account 71.50 11.63

(Refer Note B.4,Schedule ‘P’)

Less: Expenses relating to issue of Foreign Currency Convertible Bonds 75.30 -

Less: Transferred to Debenture Redemption Reserve (Refer Note B.4, Schedule ‘P’) 355.06 -


6. Profit & Loss Account - 1,045.19

Total 1,712.32 2,784.68

D LOAN FUNDS SECURED LOANS

1. Long term loansa) From banks 928.59 460.92

b) From others 25.00 35.01

953.59 495.93

2. Short term loansa) From Banks 2,040.38 956.53

Total 2,993.97 1,452.46

UNSECURED LOANS 1. Long term loans

a) Foreign currency convertible bonds 5,516.00 1,770.40b) Fully Convertible Debentures 2,018.29 -

7,534.29 1,770.40

2. Short term loansa) From banks 99.43 99.96

Total 7,633.72 1,870.36

Total 10,627.69 3,322.82

Notes on above:a) Long term loans (other than hire purchase loans) are secured by a pari passu first charge on all movable properties and the

immovable properties at certain facilities of the Company. Hire purchase loans from Banks are secured by hyphothecation of asset acquired thereunder.

b) Long term loans (other than hire purchase loans) due within one year Rs.50.93 Million (Previous year Rs.94.14 Million). Hire purchase loans from banks due within one year Rs.2.93 Million (Previous year Rs.2.08 Million)

c) Short term loans from banks are working capital loans, which are secured by a pari passu first charge on the Company’s immovable property located at Navi Mumbai and the current assets of the Company and by a pari passu second charge of certain other immovable properties.

d) Some of the above loans amounting to Rs.268.86 Million (Previous year Rs.792.28 Million) are guaranteed by some of the Directors of the Company in their personal capacities.

e) Unsecured loans from Banks represents Short term loans payable within a year.

Dec 31, 2007 Dec 31, 2006


1.41


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1.42



Schedules forming part of the Balance Sheet as at

Dec 31, 2007 Dec 31, 2006

FINVESTMENTS(Unquoted)

Face Value Nos Value Nos Value

1. Long term investments Trade investments [at cost less permanent diminution in value (if any)]

A) Subsidiariesi) Global Remedies Ltd Equity Rs.10/- 10,579,876 119.40 10,579,876 119.40 ii) Sequent Scientific Ltd Equity Rs.10/- - - 3,050,000 150.50 (formerly known as Strides Research &

Specialty Chemicals Ltd) (Refer Note B.10 c (ii), Schedule ‘P’)iii) Quantum Life Sciences Pvt. Ltd Equity Rs.10/- 12,600,000 126.00 12,600,000 126.00 iv) Arcolab SA, Switzerland Equity SFR 1000 1,000 27.78 1,000 45.00 (Refer Note B.10 c (iii), Schedule ‘P’) v) Strides Africa Ltd, British Virgin Islands Equity US$ 1/- 4,522,911 198.69 4,522,911 198.69 vi) Strides Arcolab International Ltd, UK Equity GBP 1/- 1,000,000 78.38 1,000,000 78.38 vii) Strides Arcolab International Ltd., UK - 2,458.46 - 114.45 (formerly known as Strides Arcolab (UK)

Ltd., UK) (Share application money) viii) Quantum Life Sciences Pvt. Ltd. 0.1% Redeemable Rs.100/- 200,000 200.00 200,000 200.00 Preference shares ix) Medgene Pharmaceuticals Private Ltd Equity Rs.10/- 90,000 5.25 90,000 5.25 x) Strides Latina SA, Uruguay Equity US$ 1/- 1,959,918 1,191.34 1,959,918 1,191.34 xi) Strides SA Pharmaceutical Pty.Ltd., Equity Rand 1/- 510 4.69 510 4.69

South Africa xii) Strides Inc,USA Equity US$ 1/- 13,605,000 - 13,605,000 614.23 (Refer Note B.10 c (i), Schedule ‘P’)xiii) Strides Inc, USA 6% Redeemable US$ 1/- 4,010,883 - 4,010,883 183.87 (Refer Note B.10 c (i), Schedule ‘P’) Preferencexiv) Grandix Pharmaceuticals Limited Equity Rs.10/- 4,615,900 1,050.03 - -

(Refer Note B.10 a, Schedule ‘P’)xv) Starsmore Limited Equity EUR 1 2,000 0.12 - -xvi) Starsmore Limited - 2,589.14 - - (Share application money)xvii) Onco Therapies Limited Equity Rs.10/- 478,429 246.85 - - (Refer Note B.10 b, Schedule ‘P’)

B) Joint Venturesi) Akorn Strides LLC, USA Equity - 65.56 - 65.56 (Refer Note B.11, Schedule ‘P’)

8,361.69 3,097.36

Aggregate value of unquoted investments 8,361.69 3,097.36

Nos Cost Sale Loss on Impaired Value Sale Value Additions during the year :

i) Grandix Pharmaceuticals Limited Equity 4,615,900 1,050.03ii) Starsmore Limited Equity 2,000 0.12iii) Onco Therapies Limited Equity 478,429 246.85iv) Strides Arcolab International Limited Application Money 2,344.01v) Starsmore Limited Application Money 2,589.14

Deletion during the year :i) Sequent Scientific Limited Equity 3,050,000 150.50 55.20 95.30

Permanent impairment in investments recognised :i) Arcolab SA, Switzerland Equity 1,000 17.22ii) Strides Inc, USA Equity 13,605,000 614.23 iii) Strides Inc, USA 6% Redeemable 4,010,883 183.87

PreferenceNOTES : All the investment in shares are fully paid.

1.43



G CURRENT ASSETS, LOANS & ADVANCESA. Current assets

1. Inventories

a) Raw materials and packing materials 548.72 558.67

[Includes Goods-in-transit of Rs.Nil (Previous year Rs.3.61 Million)]

b) Work-in-process 107.87 45.93

c) Finished goods 65.48 33.70

722.07 638.30

2. Sundry debtors

(Unsecured)

a) More than Six months

- Considered Good 226.25 249.98

- Considered Doubtful 15.25 13.03

b) Others

- Considered Good 1,575.95 1,419.29

[Others includes Unbilled Revenue of Rs.560.59 Million

(Previous year Rs.605.77 Million )]

1,817.45 1,682.30

Less: Provision for Doubtful Debts 15.25 13.03

1,802.20 1,669.27

3. Cash and bank balances

a) Cash in hand 0.73 0.55

b) Balance with scheduled banks

i) In current account 1,108.78 57.25

ii) in margin money account 101.87 83.93

iii) in fixed deposit account 40.53 -

c) Balance with other banks

i) In current account (Deutsche Bank, Singapore - Maximum amount outstanding

during the year Rs.48.92 Million (Previous year Rs.488.21 Million) 4.01 15.67

1,255.92 157.40

B. Loans and advances(Unsecured, considered good)

a) Advance recoverable in cash or in kind or for value to be received 253.36 82.81

(Refer Note B.10 b, Schedule ‘P’)

b) Advance income tax and tax deducted at source 232.55 200.60

c) Deposits with and dues from Government departments 216.23 129.96

d) Deposits with others 163.86 72.35

e) Loan to an erstwhile subsidiary 72.36 -

f) Loans and Advances to subsidiaries 724.13 1,056.97

1,662.49 1,542.69

Total 5,442.68 4,007.66

Dec 31, 2007 Dec 31, 2006


1.44



H CURRENT LIABILITIES AND PROVISIONSA. Current liabilities

a) Sundry Creditors 1,687.09 1,283.57

[Includes amount due to Micro & Small enterprises Rs. Nil (Previous year Rs. Nil)

Refer Note B.24, Schedule ‘P’ ]

b) Unclaimed dividend 1.59 0.79

c) Interest accrued but not due 41.98 3.86

d) Other Liabilities 44.97 13.73

e) Advances received from customers 549.44 36.83

2,325.07 1,338.78

B. Provisionsa) Leave salary 37.73 25.15

b) Income taxes including FBT 196.17 157.59

c) Proposed equity dividend - 69.90

d) Tax on proposed equity dividend - 9.80

e) Gratuity 13.01 3.15

f) Preference Dividend (Refer Note B.5, Schedule ‘P’ ) 45.79 45.79

g) Tax on preference dividend - 4.15

292.70 315.53

Total 2,617.77 1,654.31

Dec 31, 2007 Dec 31, 2006


1.45



I SALES & SERVICES

a) Sale of products [including sale of traded goods 3,476.04 4,180.01 Rs.306.92 Million (Previous year Rs.623.80 Million)]

Less: Excise duty on domestic sales 2.29 3.22

Net sales 3,473.75 4,176.79b) Sale of Dossiers 113.04 -c) Development Income 314.95 318.14d) Contract manufacturing services 23.85 55.95e) Export licences & incentives (Net) 3.56 -

Total 3,929.15 4,550.88

JOTHER INCOME

a) Dividend from Long Term Investments 23.00 0.001b) Exchange fluctuation gain (Net) 59.53 -c) Other Income (Refer Note B.10.b, Schedule ‘P’) 20.00 -

Total 102.53 0.001

KMATERIALS CONSUMED

(Refer Note B.14, Schedule ‘P’)Raw materials & packing materials

Opening stock 558.67 367.42Add: Purchases including purchase of traded goods 2,408.70 2,569.68

Rs.283.62 Million (Previous year Rs.552.39 Million)Less: Closing stock 548.72 558.67

Total 2,418.65 2,378.43

L(INCREASE) / DECREASE IN STOCK

i) Opening stockWork in process 45.93 90.00Finished goods 33.70 45.36

79.63 135.36

ii) Closing stockWork in process 107.87 45.93Finished goods 65.48 33.70

173.35 79.63

Total (93.72) 55.73

MPERSONNEL COST

(Refer Note B.17.5 & 19, Schedule ‘P’)Salaries, wages and allowances 440.61 351.29Contribution to provident and other funds 30.51 27.85Staff welfare expenses 45.57 39.29

Total 516.69 418.43

Dec 31, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006

Schedules forming part of the Profit & Loss Account for the year ended

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NOPERATING AND OTHER EXPENSES

( Refer Note B.17.5 & 19, Schedule ‘P’)Power, fuel & water 131.08 113.58Consumables 125.05 108.72Conversion & Processing charges 98.68 101.25Freight & forwarding 128.38 146.89Rent 47.59 48.15Rates & taxes 11.85 20.98Communication charges 12.18 12.32Repairs & maintenance

- Buildings 10.40 8.71- Machinery 12.45 15.70- Others 56.30 47.56

Insurance 9.23 9.93Travelling & conveyance 57.15 59.16Advertisement & Selling expenses 56.59 61.50Commission on sales 11.93 24.61Legal & Professional fees 106.75 44.67Other expenses 53.01 39.62Impairment in brands 13.24 -Assets written off 8.64 -Provision for Doubtful Debts 2.57 10.93Exchange fluctuation Loss (Net) - 43.60

Total 953.07 917.88

OFINANCE CHARGES

( Refer Note B.17.5 & 19, Schedule ‘P’)Bank charges & commission 48.20 44.06 Interest on working capital & other facilities 251.92 149.17 Interest on Fixed loans and Foreign Currency Convertible Bonds 154.84 80.36

454.96 273.59 Less: Interest received [TDS Rs 4.61 Million (Previous year Rs. 8.35 Million)] 137.21 74.71

Total 317.75 198.88

PACCOUNTING POLICIES AND NOTES ON ACCOUNTSA. Significant Accounting Policies

1.1 Basis for preparation of financial statementsThe financial statements are prepared under the historical cost convention and on accrual basis, in accordance with the Generally Accepted Accounting Principles in India, the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.

1.2 Revenue1.2.1 Revenue from export sales is recognized on the basis of the shipping bills for exports. Revenue from domestic sales

is recognized based on the passage of title to goods which generally coincides with despatch. Sales are stated net of discounts, taxes, excise duty and sales returns.

1.2.2 Revenue from development services :a) In respect of contracts which require development on end to end basis, revenue is recognised based on technical

estimates made by the Company of the stage of work,b) In respect of other development contracts, revenue is recognised on the basis of the performance milestones

provided in the contract.

Dec 31, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006

Schedules forming part of the Profit & Loss Account for the year ended

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1.2.3 Revenue from sale of dossiers is recognised on percentage completion method. The extent of completion is determined based on costs incurred and confirmed by technical estimates made by the Company of the stage of completion of work.

1.2.4 Revenue from contract manufacturing is recognised based on the services rendered in accordance with the terms of the contract.

1.2.5 Export incentives are accounted on accrual basis and include estimated realisable values/ benefits from special import licences and benefits under Duty Entitlement Pass Book schemes, wherever applicable.

1.2.6 Dividend income is recognized whenever the right to receive dividends is established. 1.2.7 Other income is recognised when such income accrue to the Company.

1.3 Fixed AssetsFixed assets and intangibles (other than in-house product development costs) are recorded at their acquisition cost and subsequent improvements thereto. Cost includes related pre-operative project expenditure and interest on borrowings attributable to the funds borrowed in respect of qualifying assets, for the period upto completion of construction or when the assets are ready to be put to use, as applicable. Inhouse product development costs are capitalised in accordance with Paragraph 1.8 below.

1.4 Impairment of AssetsAs at each Balance Sheet date, the carrying amount of fixed assets is tested for impairment. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is determined:(a) in the case of an individual asset, at the higher of the net selling price and value in use. (b) in the case of cash generating units, at the higher of the unit’s net selling price and the value in use.Value in use is determined as the present value of estimated future cash flows from the continuing use of an asset and from its disposal at the end of its useful life.

1.5 DepreciationDepreciation is provided under the straight line method at the rates and in the manner prescribed under Schedule XIV of the Companies Act, 1956, based on technical estimates that indicate the useful lives would be comparable with or higher than those arrived at using these rates.In the case of assets where the useful lives are estimated to be lower than those considered in determining the rates specified in that Schedule, depreciation is provided under the straight line method over the useful life of the assets as follows:Dies and Punches : 4 yearsRegistrations and Brands : 5 yearsSoftware Licences : 5 yearsIndividual assets costing less than Rs. 5,000 are depreciated in full in the year of purchase.

1.6 InventoriesInventories comprise raw materials, packing materials, work in process and finished goods. These are valued at the lower of cost and net realisable value. Cost is determined as follows:Raw materials, packing : on weighted average basis materials and ConsumablesWork in process : at material cost and an appropriate share of production overheadsFinished Goods : at material cost and an appropriate share of production overheads and excise duty,

wherever applicable1.7 Employee benefits

The Company’s contribution to Provident Fund is charged to revenue on accrual basis.

Leave balances standing to the credit to the employees that are expected to be availed in the short term are provided for on full cost basis. Liability for unavailed leave considered to be long term is carried based on an actuarial valuation.

Liability for gratuity is funded with SBI Life Insurance Company Limited. Gratuity expenses for the year are accounted based on actuarial valuation carried out as at the end of the fiscal year. The obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.

Short term employee benefits like medical, leave travel, etc are accrued based on the terms of employment on a time proportion basis.

1.8 Research & Development ExpenditureDevelopment expenses incurred on specific / identified in-house developed products are capitalised from the date on which the Company is able to demonstrate technical feasibility and probable future economic benefits in respect of the products. The amount capitalised comprises expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and making the asset ready for its intended use.

Other development and research expenses are charged to the Profit and Loss account.

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Fixed assets acquired for Research & Development activities are capitalised and depreciated in accordance with the policy of the Company in paragraph 1.3 and 1.5 above.

1.9 Foreign currency transactionsTransactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Receivables and payables in foreign currency as at the year-end are restated at the year-end rates. Exchange rate differences on settlement/restatement of foreign currency transactions are adjusted to the Profit and Loss Account.

Premium or discount on forward contracts is amortised over the life of such contract and is recognised as income or expense as the case may be. Any profit or loss arising on cancellation, renewal or restatement of forward contract is recognised in the Profit and Loss account.

1.10 InvestmentsCurrent investments are carried at lower of cost and fair market value. Provision is made to recognize decline, if any, in the carrying value. Long term investments are carried at cost and any decline, other than temporary, in the value of such investments is recognized in the Profit and Loss Account.

1.11 Income TaxIncome Tax comprises the current tax provision and the net change in the deferred tax asset or liability during the year. Deferred tax assets and liabilities are recognized for the future tax consequences arising out of temporary differences between the carrying values of the assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable on the Balance Sheet date. Deferred tax assets are recognised and carried forward to the extent that there is a reasonable / virtual certainty (as applicable) that sufficient future taxable income will be available against which such deferred tax asset can be realised. The effect on deferred tax assets and liabilities resulting from change in tax rates is recognized in the income statement in the period of enactment of the change.

1.12 Use of estimatesThe preparation of the financial statements in conformity with the accounting standards generally accepted in India requires the management to make estimates that affect the reported amount of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statement and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates.

1.13 Provisions and ContingenciesA provision is recognised when the Company has a present legal or constructive obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best estimate required to settle the obligation.

B. Notes on Accounts1. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) - Rs. 134.90 Million (Previous year - Rs. 324.28 Million)

2. Contingent Liabilities2.1 Corporate guarantees given to financial institutions and other parties towards credit facilities / advances, on behalf of

subsidiaries - Rs.1,140.13 Million (Previous year - Rs.1,531.47 Million). The Company’s fixed assets (pari-passu second charge) and some of investments in the respective subsidiaries have been offered as security in respect of some of these facilities

In addition to the above, the Company had provided guarantees of Rs.161.27 Million to third parties in connection with borrowings of Sequent Scientific Limited, which was a subsidiary at the time of granting of such guarantees. At December 31, 2007, consequent to disposal of Sequent Scientific Limited, the Company has initiated processes to withdraw the corporate guarantees.

2.2 Bills discounted with Banks which are outstanding as on December 31, 2007- Rs.651.04 Million (Previous year - Rs.1,094.55 Million)

2.3 The Company has, arising from the assessment proceedings relating to earlier years, received demands totaling to Rs.224.83 Million (Previous year - Rs. 143.75 Million) from the income tax authorities on account of certain disallowances considered by them. The Company has disputed the disallowances and has, preferred appeals against these demands. Pending resolution of the same, no provision has been made in the accounts for such disputed amounts.

2.4 Entry Tax paid under protest - Rs.Nil (Previous year- Rs.1.36 Million) relating to entry tax demanded as per Karnataka Special Tax on Entry of Certain Goods Act, 2004. The Company had preferred a Writ petition challenging the applicability of the Act to the Company. The Hon’ble High Court of Karnataka vide its order dated March 29, 2007 struck down the applicability of Act. However, the Government of Karnataka preferred a appeal challenging the Order of the single judge of Hon’ble High Court of Karnataka.The final adjudication on this matter is pending with the Hon’ble High Court of Karnataka.

2.5 Excise Duty paid under protest - Rs.Nil (Previous year-Rs.5.25 Million) relating to cenvat credits availed at the time of conversion of some of the divisions of the Company into Export Oriented Units.

1.49


2.6 The Company preferred appeal with the CESTAT against the order of the Commissioner of Central Excise for disallowing transfer of cenvat credit of Rs.3.86 Million (Previous year Rs Nil) as on the date of conversion of one of the units of the Company into a 100% EOU.

3. The Company entered into a strategic alliance with Aspen Pharmacare Holdings Limited Republic of South Africa (Aspen), under which Aspen becomes a 50% joint venture partner in respect of the Company’s Latin American operations effective March 1, 2008. As part of its obligations under the Joint venture, Aspen is required to buy from Starsmore Limited, Cyprus, (a subsidiary of the Company), a part of its share holding in Lakerose Limited (the holding Company for the Latin American operations) for a consideration of US$ 58.50 Million and invest a further sum of US$ 94 Million in Lakerose, against subscription to fresh shares such that the share holding in Lakerose in the aggregate comes to 50%.In respect of the above Joint venture, the Company has provided a warranty to Aspen that Earnings before Interest, Depreciation, Amortisation and Tax computed under the International Financial Reporting Standards (EBITDA), will not be less than US$ 28 Million in the 12 months period commencing from March 1, 2008, in respect of the Latin American operations. Under the agreement with Aspen, the Company is liable to 4.66 times of the shortfall, if any, between the actual EBITDA in the said period from the Latin American operations and the warranted EBITDA of US$ 28 Million.In connection with the above Joint venture, the Company has effective March 1, 2008, provided a guarantee of US$ 75 Million to Aspen, which shall, subject to approval from the appropriate authorities, be increased to US$ 152.5 Million.

4. Foreign currency convertible bonds:(a) The Company issued Foreign Currency Convertible Bonds ( FCCB ) amounting to US$ 100 Million ( Rs.4,070 Million) on

June 26, 2007. These bonds carry zero coupon and are to be redeemed on June 27, 2012 (unless converted into Equity Shares) at 145.058 per cent of the Principal amount.

The bonds may be redeemed in whole, but not in part at the option of the Company at any time on or after July 18, 2010 and on and prior to June 20, 2012 with a redemption premium of 7.575 per cent (which is identical to the gross yield in case of redemption at maturity) calculated on a semi annual basis. As at December 31, 2007, 1/5th of the premium payable on maturity (along with related exchange fluctuation as on December 31, 2007) has been transferred to the Debenture Redemption Reserve Account with a corresponding adjustment to the Securities Premium Account.

The Bonds are convertible at any time on or after August 6, 2007 and up to the close of business on June 20, 2012 by the holders of the Bonds into Shares at the option of the Bondholder, at an initial conversion price of Rs.461.553 per Share with a fixed rate of exchange of Rs.40.70 per US$ on conversion. The bonds are listed on Singapore Exchange Securities Trading Limited, Singapore.

(b) During the accounting year ending December 31, 2005, the Company had issued Foreign Currency Convertible Bonds (listed in the Singapore Exchange Securities Trading Limited, Singapore) to the extent of US$ 40 Million. These bonds carry an interest rate of 0.5 % p.a. and are to be redeemed on April 19, 2010 (unless converted into Equity Shares) at 136.78 percent of the Principal amount.

The Bonds may be redeemed in whole, but not in part, at the option of the Company at any time on or after April 18, 2008 but prior to April 19, 2010 with a redemption premium of 6.8% per annum (which is identical to the gross yield in case of redemption at maturity), calculated on bi-annual basis. The premium payable on maturity (along with related exchange fluctuation as at the end of the year) has been transferred to the Debenture Redemption Reserve with a corresponding adjustment to the Securities Premium Account.

The Bonds are convertible by the Bond holders into shares at any time on or after May 18, 2005 at an initial price of Rs. 358.70 per share with a fixed conversion rate of Rs.43.7767 = US $ 1.00. The initial conversion price will be subject to adjustment by the Company for Bonus issue, division, consolidation and reclassification of shares etc as defined in the terms of issue of the Bonds.

(c) As at December 31, 2007, none of the above bonds had been offered for conversion.5. Cumulative Redeemable Preference Shares:

During the year ending December 31,2005, the Company had issued 491,606 Cumulative Redeemable Preference shares of Rs.1,000/- each fully paid to K V Pharmaceuticals, USA (KV) The Cumulative Redeemable Preference shares carry dividend of 6% (Rs.60 per share) per annum. The Preference shares are redeemable at par along with accrued unpaid dividend on or before December 31, 2012. If any of these shares are not redeemed on the said date, the redemption price subsequent to December 31, 2012 shall contain an increasing default premium which shall be 10%, if redemption occurs in the year 2013 and an additional 10% per each year there after in which the shares are redeemed. These shares are entitled to dividends at the rate of 15%, (Rs. 150 per share) after 2012.Preference Dividend unpaid at December 31, 2007 represents dividends on these preference shares for the years 2005 and 2006. While these dividends have been declared, in accordance with the Share Purchase Agreement with KV, they are due and payable only on or after December 31, 2010, without interest thereon.No dividends were appropriated in 2007 in the absence of distributable profits.

6. Fully convertible debentures:On June 8, 2007, the Company allotted 5,045,725 fully convertible debentures (FCDs) at a price of Rs.400 per debenture, on preferential basis, to Dobliss Holdings Limited (3,111,440 FCDs) and Blissup Holdings Limited (1,934,285 FCDs), associate companies of Mr.Elcemar Almeida, a non resident and non executive director of the Company. These convertible debentures carry a interest @ 5% p.a. and are convertible into an equivalent number of fully paid up equity shares of Rs.10 each, in one or more tranches, at any time within a period of 18 months from the date of issue.As at December 31, 2007, none of the debentures has been offered for conversion.

1.50


7. Share Warrants: (a) As authorised by the shareholders of the Company in the Extra-Ordinary General meeting held on January 18, 2005,

the Board of Directors resolved on February 2, 2005 to allot 1,616,000 warrants to the promoters and 219,826 warrants to Agnus Holding Private Ltd. During 2006, the promoters, namely, Mr.Arun Kumar and Mr.K.R.Ravishankar transferred their rights in respect of 808,000 warrants each in favour of Agnus Holdings Pvt.Ltd., resulting in Agnus Holdings Private Ltd holding the entire 1,835,826 warrants. The warrants were convertible by August 1, 2006. During the current year the Company forfeited the upfront money of Rs.35.74 Million received, as these warrants were not converted into equity shares.

(b) As authorised by the shareholders of the Company in the Extra-Ordinary General meeting held on May 3, 2007, the Company, on May 23, 2007, issued 5,600,000 warrants convertible into an equivalent number of fully paid up equity shares of Rs.10 each at a price of Rs.342.10 per warrant, on preferential basis to Agnus Holdings Private Limited, a promoter group Company. These warrants are convertible, in one or more tranches, at any time within a period of 18 months from the date of issue.

On July 5, 2007, the Company allotted 50,000 shares to Agnus Holdings Private Limited, pursuant to conversion of an equivalent number of warrants (out of the warrants referred in (b) above). An amount of Rs.189.87 Million included in the Balance Sheet as at December 31, 2007 represents the upfront monies received towards the total of 5,550,000 warrants that are outstanding at the said date.

8. Employee Stock Option Scheme:In the extraordinary general meeting held on January 25, 2007, the shareholders approved the issue of 1,000,000 options under the scheme titled “Strides Arcolab ESOP 2006”. The Strides Arcolab ESOP 2006 replaces the existing option scheme, namely, Strides ESOP 2006, which was approved by the shareholders on June 15, 2006 but was never implemented.The Strides Arcolab ESOP 2006 allows the issue of options to employees of the Company and its subsidiaries (whether in India or abroad). Each option comprises one underlying equity share. As per the Scheme, the Compensation committee grants the options to the employees deemed eligible. The exercise price of each option shall not be less than 85 per cent of the “Market Price” as defined in the guidelines referred above. The options granted vest over a period of 3 years from the date of the grant in proportions specified in the Scheme.Under this scheme, 400,000 options have been granted to some of the eligible employees as at December 31, 2007, but none of these options had vested as at December 31, 2007. The difference between the fair price of the share underlying the options granted, on the date of grant of option and the exercise price of the option (being the intrinsic value of the option), is expensed over the vesting period. Consequently an amount of Rs. 4.40 Million (net of recoveries from subsidiaries of Rs. 0.32 Million) has been charged to the Profit and Loss account for the year under Personnel costs.Details regarding the options granted:Number of options granted during the year – 400,000Weighted average exercise price of the these options – Rs. 256.35The exercise prices for options outstanding: Rs.297.70 for 200,000 options and Rs.215 for the balance options. Weighted average remaining contractual life of the options – 2 years 7 monthsThe impact on the Earning per share -if the ‘fair value’ of the options (on the date of the grant) were considered instead of the ‘intrinsic value’ is as under:


Particulars Dec 31,2007

Net loss (as reported) 1,152.14

Less: stock based employee compensation (intrinsic value) 4.40

Add: stock based compensation expenses determined under fair value method for the grants issued (See note below)

6.92

Net loss ( proforma) 1,154.66

Rs.

Basic loss per share (as reported) (33.98)

Basic loss per share (proforma) (34.06)

Diluted loss per share (as reported) (33.98)

Diluted loss per share (proforma) (34.06)

Note: The fair value of the options have been determined under the Black-Scholes model. The assumptions used in this model for calculating fair value is: risk-free interest rate of 6.03%, expected life: 3 years, expected volatility of share: 32.98% and expected dividend yield: 0.38%.

1.51


9. The revised Accounting Standard 15 (AS-15)-“Employee Benefits” is applicable to the Company with effect from January 1, 2007. In line with the transitional provisions of revised AS–15, the net incremental liability towards employee benefits, (leave salary and gratuity) of Rs.4.22 Million has been adjusted to the opening balance of General Reserves.

10. During the year:

(a) The Company entered into a share purchase agreement with the shareholders of Grandix Pharmaceuticals Limited (Grandix), Chennai, India on June 9, 2007 for acquisition of 100% holding in that Company. As at December 31, 2007, the Company has acquired 99.59% of the total share holding in Grandix, making Grandix a subsidiary of the Company. With this acquisition, Grandix Laboratories Limited, a subsidiary of Grandix Pharmaceuticals Limited has become subsidiary of the Company. Pending satisfactory completion of certain conditions referred in the Share Purchase agreement, the Company has retained Rs.18.40 Million of the total consideration and the same is included under Sundry creditors as at December 31, 2007.

The Company has a commitment of Rs. 4.37 Million towards purchase of balance 0.41% of the outstanding capital in Grandix Pharmaceuticals Limited.

The investment in Grandix carried in the financial statements is net-off an amount of Rs.11.62 Million, relating to the dividends received post acquisition and to the extent considered to be a recovery of the investment cost.

(b) The Company entered into a Subscription and Shareholders agreement with Aspen Pharmacare Holdings Limited (Aspen) under which Aspen subscribed to 49% of the share capital of Onco Therapies Limited (Onco), a subsidiary of the Company. Onco is set up to operate in the Oncology products line of business that the Company is in the process of building up.

In accordance with the agreement referred above, the Company has assigned the voting rights relating to 1% of the share capital of Onco to Aspen under a Voting Rights assignment agreement. Under this agreement, the voting rights in respect of such 1% of the total issued and outstanding share capital of Onco shall be exercised by Aspen from the date of signing of such Voting Rights agreement, in a manner which it deems fit.

The Company has entered into another Agreement with Onco to transfer its Oncology manufacturing facility, being put up in Bangalore, for a consideration of US$ 32.50 Million (payable by Onco in equivalent Indian Rupees). Under this agreement the Company has:

• transferredthemoveableandimmovableassetsrelatingtotheOncologymanufacturingfacilityandthecontractsawarded to various suppliers in connection with the facility; and

• undertakentheobligationsofcompletingthefacility,includingallfinancialobligationsrelatedthereto.

At December 31, 2007, the Company has transferred the following assets and liabilities to Onco.


Particulars Amount

Asset:

Land 13.27

Building 136.57

Plant & Machinery 246.38

Furniture & Fixtures 1.07

Pre-operative expenses 62.28

Advances paid 133.25

Liabilities:

Sundry creditors 60.16

As at December 31, 2007, the Company has estimated the financial commitment to complete the Oncology facility to be about Rs. 568.13 Million.

Advances to suppliers at December 31, 2007 include an amount of Rs. 157.03 Million incurred in respect of Onco under the above referred arrangement, being the value of certain advances paid for machinery for the Oncology facility and certain machinery received that are pending to be transferred.

An amount of Rs.20 Million representing Project management fees under the above arrangement has been accrued in the current year under Other Income.

1.52


(c) Losses recognised in respect of Long term investments:(i) The soft gelatin manufacturing facility in Somerset, New Jersey, USA, owned by it’s subsidiary, Strides Inc, USA

has been shut down on account of changed regulations which made the operation of the facility unviable. As a consequence, the Company recognized a permanent impairment in its investment in Strides Inc and a provision has been made in the accounts for a sum of Rs 798.10 Million towards the impairment. The Company is in the process of locating a buyer for this facility.

(ii) The Company exited from the specialty chemicals business, a non-core business, as this was no longer considered operationally viable. Consequently, the Company sold its investment in it’s wholly owned subsidiary, Sequent Scientific Ltd (formerly known as Strides Research & Specialty Chemicals Limited) for a consideration of Rs.55.20 Million (as approved by the Board) and the resulting loss of Rs.95.30 Million has been accounted as loss on sale of long term investment.

(iii) As on December 31, 2007, the Company assessed the value of its investment in its wholly owned subsidiary, Arcolab SA, Switzerland for permanent diminution, if any. Based on such analysis, the Company estimated the permanent diminution in value of investment to the extent of Rs.17.22 Million and has accounted for the same.

11. Interest in Joint venturesIn terms of the Joint Venture agreement entered into between the Company and Akorn Inc., USA, the Company holds 50% of the total share capital of the joint venture, Akorn Strides LLC, USA. As at December 31, 2007 an investment of Rs.65.56 Million (Previous year- Rs.65.56 Million) was made by the Company towards its equity share in the Joint Venture. As on the balance sheet date, the pending capital commitment towards its share in the equity of the joint venture amounts to US$ 0.89 Million (Rs.39.31 Million).

The Company’s aggregate share of the Assets and Liabilities (as at December 31, 2007) in the above Joint Venture and the share in the income and expenses of the Joint Venture for the year ended December 31, 2007 is as follows:


Particulars Dec 31, 2007 Dec 31, 2006

A Assets 67.41 67.41

B Liabilities 1.08 1.12

C Expenses Nil 0.05

D Income Nil Nil

The above figures are based on the unaudited financial statements of the Joint Venture entity and have been compiled by the management and relied upon by the Auditors.

12. Unbilled revenue includes income recognised on development services contracts and contracts for production of dossiers, against which no invoices are raised, and are net of advances received against the respective contracts.

13. Previous year’s figures have been recast / restated, wherever necessary, to conform to the current year’s classification.

14. Particulars of materials consumed and percentage to total consumption of Imported and Indigenous materials.

Since none of the individual items of raw materials and packing materials constitute more than 10% of the consumption, quantitative details in respect of the same have not been given.

Percentage of total consumption of imported and indigenous materials

Particulars For the year ended Dec 31, 2007 For the year ended Dec 31, 2006

% Value (Rs.in Million) % Value (Rs.in Million)

Imported 34 722.42 42 771.72

Indigenous 66 1,412.61 58 1,054.32

Total 100 2,135.03 100 1,826.04

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15. Quantitative Details

15.1 Licensed and Installed Capacities

Particulars UnitsLicensed Capacity Installed Capacity

As at Dec 31, 2007

As at Dec 31, 2006

As at Dec 31, 2007

As at Dec 31, 2006

Soft Gelatin Plant Softgel Capsules

Numbers in Million

** N. A ** N. A 2,645 2,645

Hard Gelatin PlantCapsules

Numbers in Million

** N. A ** N. A 450 450

Tablet PlantTablets

Numbers in Million

** N. A ** N. A 2,160 2,160

Beta-lactam PlantCapsules and TabletsDry Powder Vials

Numbers in Million

** N. A ** N. A350

20

350

20

Sterile ProductsAmpoulesVialsPrefilled Syringes

Numbers in Million

** N. A ** N. A48487.5

48487.5

Installed capacities are as certified by the management and relied upon by the Auditors. The installed capacities serve multiple purposes and will vary according to product mix.

** Not applicable as the products have been delicenced.

15.2 Particulars of Production, Sales and Stock in Trade


ParticularsOpening Stock

Actual Production

Sales (gross of excise duty)

Closing Stock

Qty Value Qty Qty Value Qty Value

Tablets(in ‘000’s)

36,568(68,040)

18.19 (31.69)

1,301,321(1,597,210)

1,273,810(1,628,683)

1,326.16(2,134.57)

64,079(36,568)

29.01(18.19)

Capsules(in ‘000’s)

23,757(29,920)

12.42(6.99)

753,635(581,530)

754,242(587,693)

565.20(530.81)

23,150(23,757)

17.86(12.42)

Injectables (in ‘000’s)

2,120(370)

3.05(6.66)

49,485(34,620)

50,330(32,870)

1,164.61(869.15)

1,275(2,120)

18.61(3.05)

Others-

(-)0.04

(0.02)-

(-)-

(-)113.15(21.68)

-(-)

- (0.04)

Total 33.70(45.36)

3,169.12(3,556.21)

65.48(33.70)

Note: i) Actual production includes quantities produced by loan licensee on behalf of the Company as well as quantities produced by the Company as a loan licensee for others.

ii) Figures in brackets relate to previous year.

16. Particulars of Traded Goods

Sales of Traded goods under Schedule I of the financial statements includes sale of machinery purchased on behalf of subsidiaries amounting to Rs. 20.26 Million (Previous year Rs.1.31 Million).

None of the items individually account for more than 10% of the total value of the purchases, stock or turnover, hence quantitative details have not been furnished.

1.54


17. Other information :

17.1 Managerial remuneration

Computation of Net Profits in accordance with Section

349 of the Companies Act, 1956.

Profit / (Loss) before Tax as per Profit & Loss Account (1,180.26) 417.46

Add / (Deduct) :

Managerial Remuneration (9.60) 37.34

Contribution to Provident Fund & other funds (2.06) 3.03

Director’s Sitting Fees (1.24) 1.20

Profit from services rendered to Onco Therapies Limited

(refer Note B.10.b, Schedule ‘P’) 20.00 -

Loss on sale of Long term investments (95.30) -

Impairment in Investment in subsidiaries (815.32) -

(903.52) 41.57

Net Profit / (Loss) u/s 349 of the Companies Act, 1956 (276.74) 459.03

Maximum managerial remuneration available to the 9.60 45.90

Managing Director and other whole time Directors

(including Commission)

Commission payable to Managing Director and other - -

whole time Directors

Remuneration paid by the Company to the

Managing Director and Whole time Director

Salary & Allowances 36.65 37.34

Contribution to provident fund and other funds 2.06 3.03

Total (A) 38.71 40.37

Sitting Fees paid to Non-whole time Directors 1.24 1.20

Total (B) 1.24 1.20

Total [(A) + (B)] 39.95 41.57

The excess managerial remuneration paid to Whole time directors amounting to Rs. 27.05 Million in 2007, is subject

to the approval of the Central Government, for which an application is being made. The excess is included in advances

recoverable under Schedule G.B.(a) of the financial statements.

Note: The details of managerial remuneration included in the above table exclude leave encashment and gratuity costs

(for which separate actuarial valuations are not available).

Dec 31, 2007 Dec 31, 2006 Dec 31, 2007 Dec 31, 2006(Rupees in Millions)

1.55


17.2 CIF Value of Imports

ParticularsFor the Year ended

Dec 31, 2007 For the Year ended

Dec 31, 2006

Capital goods 265.71 256.54

Raw materials 713.94 800.23

Other goods 14.22 1.70

Total 993.87 1,058.47

17.3 Expenditure in foreign currency



Dec 31, 2006

Travel expenses 12.13 17.27

Commission 11.38 22.73

Interest 70.77 48.39

Brand fees 10.86 4.97

Professional fees 4.25 1.56

FCCB issue expenses (charged to Securities premium account) 70.88 -

Others 51.70 51.72

Business Development Expenses 40.07 -

Total 272.04 146.64

17.4 Earnings in foreign exchange



Dec 31, 2006

FOB Value of exports of goods 3,222.07 3,500.25

Development Income & Income from Dossier sales 427.99 318.14

Interest 42.55 53.08

Local sales (proceeds received/receivable in foreign currency) 139.89 464.64

Total 3,832.50 4,336.11

17.5 Expenditure debited to the Profit & Loss Account excludes the following expenditure capitalised



Dec 31, 2006

Interest 8.61 9.89

Traveling expenses - 0.06

Product development costs 41.53 27.97

Salaries 3.59 7.95

Others 1.73 4.56

Total 55.46 50.43

17.6 Remittance in Foreign Currency on account of dividend



Dec 31, 2006

Number of non-resident Shareholders 6 6

Number of equity shares held by them 13,870,532 13,870,532

Amount of dividend paid – gross (Rs.) 27,741,064 27,741,064

Year to which dividend relates 2006 2005


1.56


18. Remuneration to Auditors



Dec 31, 2006

Audit fees (including fees for undertaking Limited reviews) 3.00 3.00

Other matters 1.35 0.35

Certification work etc in connection with Issue of FCCBs (debited to Securities Premium)

3.50 -

Service tax 0.97 0.41

Out of pocket expenses 0.05 0.05

19. Details of Research and Development expenditure incurred



Dec 31, 2006

Salaries 122.54 84.69

Materials 75.25 43.34


Consumables 55.40 13.88

Interest 0.25 17.33

Traveling expenses 5.97 6.59

Advertisement expenses 0.78 3.32

Rent 18.16 15.49

Depreciation 24.53 19.85

Others 40.72 36.16

Total 348.30 260.35

The above include costs associated with the development services undertaken for customers and are as certified by the management and relied upon by the Auditors.

20. Taxationa. Provision for deferred tax has been made in accordance with the requirements of Accounting Standard 22

“Accounting for taxes on income”.

b. The net deferred tax liability comprises the tax impact arising from timing differences on account of :




Dec 31, 2006

Depreciation (530.29) (453.72)

Section 43B disallowances 8.09 19.38

Others 3.02 -

Business losses 285.29 -

(233.89) (434.34)

Deferred Tax liability (net) relating to the above 79.50 146.20

Recognition of Deferred tax assets with respect to Business losses (in the above table) has been done only in cases where there are corresponding timing differences creating Deferred tax liabilities and the amount of such assets recognised is restricted to the extent of such liabilities.


1.57


21. Related Party Transactions :Names of Related Parties:

Wholly Owned Subsidiaries

•GlobalRemediesLtd.,India•QuantumLifeSciencesPvt.Ltd.,India•SequentScientificLtd,IndiauptoNovember26,2007(Disposedincurrentyear)•MedgenePharmaceuticalsPvtLtd,India•ArcolabSA-Switzerland.•StridesAfricaLtd–BritishVirginIslands•StridesArcolabInternationalLtd,U.K,(SAIL)•StridesSingaporePteLtd.,Singapore(WhollyownedsubsidiaryofSAIL)•DrugHousesofAustralia(Asia)PteLtd.,Singapore(WhollyownedsubsidiaryofStridesSingaporePte.Ltd)•StridesPolskasp.zo.o,Poland,aWhollyownedsubsidiaryofSAIL,(MergedwithStridesArcolabPolskasp.zo.o

during the current year) •StridesArcolabPolskasp.zo.o,Poland,(WhollyownedsubsidiaryofSAIL)•StridesArcolabUKLtd.,UK(WhollyownedsubsidiaryofSAIL)•StarsmoreLimited,Cyprus•LakeroseLimited,Cyprus(WhollyownedsubsidiaryofStarsmoreLimited)•LinkaceLimited,Cyprus(WhollyownedsubsidiaryofStarsmoreLimited)•StridesArcolabHongKongLtd,Hongkong(WhollyownedsubsidiaryofSAIL)•StridesArcolabMalaysiaSDN.BHD,Malaysia(WhollyownedsubsidiaryofSAIL)•StridesLatina,SA,Uruguay(33%heldthroughLakeroseLimitedandbalance67%heldthrough

Strides Arcolab Limited)•CellofarmLtda.,Brazil(WhollyownedsubsidiaryofLakeroseLimited)•SolaraSADeCV,Mexico(WhollyownedsubsidiaryofStridesLatina,SA)•StridesAustraliaPtyLtd.,Australia(WhollyownedsubsidiaryofSAIL)•StridesItalias.r.l.,Italy(WhollyownedsubsidiaryofSAIL)•StridesArcolabSDN.BHD.,Brunei(WhollyownedsubsidiaryofSAIL)

Other Subsidiaries

•StridesS.A.PharmaceuticalsPtyLtd.SouthAfrica•StridesInc.USA•PharmaStridesCanadaCorporation,Canada(WhollyOwnedSubsidiaryofStrides,Inc.USA)•BeltapharmS.p.A,Italy(SubsidiaryofSAIL)•GrandixPharmaceuticalsLtd,India•OncoTherapiesLtd,India•GrandixLaboratoriesLimited,India(SubsidiaryofGrandixPharmaceuticalsLimited)•CoPharma,UK(InterestheldthroughLinkaceLimitedandSAIL)•StridesVitalNigeriaLimited,Nigeria(SubsidiaryofStridesAfricaLimited)•CasadeRepresentacionesSumifarmaCA,Venezuela(SubsidiaryofStridesLatina,SA)•FormuleNaturelle(Pty)Ltd,SouthAfrica,[formerlyknownasAspenPublicHealth(Pty)Ltd.]

(Subsidiary of Linkace Ltd)

Joint Venture •AkornStridesLLC,USA•LaboratoriosDomac,Spain•PlusFarmaehf.,Iceland•FarmaPlusAS,Norway(WhollyownedsubsidiaryofPlusFarmaehf,Iceland)•PowercliffLimited,Cyprus•SagentStridesLLC,USA

Associates •Albatross,anAssociateofPlusFarma(astepdownjointventureoftheCompany)

Key Management Personnel

•Mr.ArunKumar–ViceChairman&ManagingDirector•Mr.K.R.Ravishankar-Director,(CeasedtobeExecutiveDirectorw.e.fDecember31,2007)•Mr.RSPrasad(Resignedw.e.f.March31,2006)

Enterprises owned or significantly influenced by key management personnel and relatives of key management personnel

•ArcolabIndiaPvt.Ltd•KeerthapathiRavishankar–HUF•Mrs.DeepaArunkumar•Mrs.K.Saraswathi•VedicElementsPvt.Ltd•NetEquityVenturesPvt.Ltd•AgnusHoldingsPvt.Ltd•NousInfosystemsPvt.Ltd•EverronSystems(India)Ltd•ChayadeepPropertiesPvt.Ltd•PatsysConsultingPvt.Ltd•XlenseaProductsPvt.Ltd•CarylPharmaPvtLtd•FraxisLifeSciencesLtd•PIDrugs&PharmaceuticalsLtd•AtmaProjects•SequentScientificLtd,Indiaw.e.fNovember26,2007

1.58


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1.65


22. Leases

• TheCompany’ssignificantleasingarrangementsaremainlyinrespectoffactorybuildings,residentialandoffice

premises. The aggregate lease rentals payable on these cancelable leasing arrangements charged to the Profit and

Loss account is Rs.47.58 Million (Previous year Rs. 48.14 Million).

• TheCompanyhasgivenonleaseforainitialtermof5years,certainplantandmachinerytoitswhollyowned

subsidiary Strides Arcolab Polska sp. z.o o. Details relating these assets are as follows:

Particulars Rupees in Millions

Gross carrying amount of assets leased as at December 31, 2007 44.96

Accumulated depreciation as at December 31, 2007 0.99

Future minimum lease income under the initial term:

Not later than one year 0.79

Later than one year but not later than 5 years 26.00

Later than 5 years Nil

23. Loans and advances include amounts due from Directors, Rs.28.66 Million (Previous year Rs. 1.61 Million). Maximum amount

due during the year Rs.31.95 Million (Previous year Rs. 1.61 Million). The amount due from Directors of Rs. 28.66 Million at

December 31, 2007 includes Rs. 27.05 Million, being excess managerial remuneration referred in clause 17.1 above.

24. The information disclosed in Schedule H.A (a) to the financial statements with regard to Micro and Small enterprises is based

on information collected by the management based on enquiries made with the creditors which have been relied upon by the

auditors.

As on December 31, 2007, an amount of Rs.2.12 Million (Previous year Rs.Nil) is payable to Small scale industrial undertakings

(SSIs) that are outstanding for more than thirty days as on the Balance sheet date.

25. Development Income included under Schedule I to the financial statements are net of reversals of such income recognised in

prior years amounting to Rs.203.10 Million (Previous year Rs.Nil ). The reversal of such incomes have arisen due to cancellation

of some of the contracts with customers.

26. Disclosures in respect of Contracts in Progress (relating to Contracts for Production and Sale of Dossiers)

Aggregate amount of Costs incurred and recognised profits (less Losses) upto December 31, 2007, in respect of such contracts,–

Rs. 54.39 Million

Amount of Advances received in respect of such contracts – Rs. 591 Million

27. Investment in Grandix Pharmaceuticals Limited is net off dividends received post the date of acquisition which is considered

as a recovery of the investment cost under AS – 13, Rs.11.62 Million.

28. Since the Company prepares consolidated financial statements, segment information has not been provided in these financial

statements.

29. As required under Section 205(C) of the Companies Act, 1956 the Company has transferred Rs.0.07 Million (Previous Year

Rs.0.01 Million) to the Investor Education and Protection Fund (IEPF) during the year. As on December 31, 2007, no amount

was due for transfer to the IEPF.

30. Earnings / (Loss) per Share


Particulars For the Year ended Dec 31, 2007

For the Year ended Dec 31, 2006

Profit/(Loss) after tax as per the Profit & Loss Account (1,152.14) 361.84

Differential tax on equity dividend of previous year (2.07) -

Preference Dividend and tax there on (34.51) 33.66

Profit / (Loss) attributable to Equity Shareholders (1,188.72) 328.18

Interest on Foreign Currency Convertible Bonds (FCCBs) and Fully Convertible debentures (FCDs)

67.34 11.15

Profit / (Loss) attributable to Equity Shareholders (on dilution) (1,121.38) 339.33

1.66


Particulars For the Year ended Dec 31, 2007

For the Year ended Dec 31, 2006

Weighted Average number of Shares for Basic EPS 34,978,947 34,954,289

Add: Effect of Warrants, FCCB and FCDs outstanding 12,349,421 5,756,077

Weighted Average Number of equity shares for diluted EPS 47,328,368 40,710,366

Rs. Rs.

Nominal value of equity shares 10.00 10.00

Earnings / (Loss) Per Share

Basic (33.98) 9.39

Diluted (33.98) 8.34

Note:

• Intheabsenceofprofitsin2007,nopreferencedividendsandtaxthereonhasbeenaccruedforintheProfitandLoss account. However these have been considered for determining Loss per share in 2007.

• TheWarrants, FCCBsandFCDsoutstandingareantidilutiveandhence ignored for thepurposesof computingDiluted Loss per share in 2007.

31. Cash flow statement

a) The Cash Flow Statement has been prepared under the indirect method as set out in the Accounting Standard – 3 on “Cash Flow Statements”, issued by the Institute of Chartered Accountants of India.

b) Interest paid is inclusive of and purchase of Fixed Assets excludes, interest capitalised Rs. 8.60 Million (Previous year Rs. 9.89 Million).

c) Reconciliation of Cash and Cash Equivalents to Cash and bank balances included in Schedule G 3.


Particulars As at Dec 31, 2007 As at Dec 31, 2006

Cash in hand 0.73 0.55

Balance with Scheduled banks 1,108.78 57.25

Balance with other banks - represents unutilized monies out of the issue of Foreign Currency Convertible Bonds. These monies can be utilized for certain specified purposes for which the Bonds were issued.

4.01 15.67

Fixed Deposits 40.53 -

Cash and Cash equivalents 1,154.04 73.47

Margin money not included above 101.87 83.93

Cash and Bank balances as per Schedule G 1,255.92 157.40

32. Disclosure on Financial instruments that are outstanding at the Balance sheet date

(I) Derivative Instruments:

The Company has entered into the following derivative instruments:

(a) Forward Exchange Contracts [being a derivative instrument], which are not intended for trading or speculative purposes, but for hedge purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

The following are the outstanding Forward Exchange Contracts entered into by the Company as on December 31,2007:

Currency Amount Buy/Sell Cross Currency

US Dollar 17,500,000 Sell Rupees

US Dollar 5,000,000 Buy Rupees

Swiss Franc 7,524,000 Buy US Dollar

(b) Interest Rate Swaps to hedge against fluctuations in interest rate changes:

No. of contracts: 3

Notional Principal: USD 20 Million

(c) Currency Swaps (other than forward exchange contracts stated above) to hedge against fluctuations in changes in

1.67


exchange rate

No. of contracts: 6

Notional Principal: US$ 80 Million An amount of Rs. 155.48 Million (Previous Year Rs. Nil) has been accrued towards estimated losses incurred on

Derivative instruments that are outstanding at December 31, 2007.(II) The year end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given

below:

Receivable / (Payable) In Rupees

Receivable / (Payable)In Foreign currency

Receivable / (Payable) In Rupees

Receivable / (Payable)In Foreign currency

2007 2007 2006 2006

(4,961,657,240) USD (125,938,387) (1,150,975,976) USD (26,004,641)

269,295,462 EUR 4,644,627 212,818,472 EUR 3,652,282

60,257,249 AUD 1,742,546 28,220,834 AUD 807,926

(17,102,362) CND (426,706) (11,979,072) CND (330,642)

38,529,311 GBP 487,713

588,411 JPY 16,740,000

(III) Derivative Instruments (causing an unhedged foreign currency exposure):

Currency Amount Buy/Sell

US Dollar 8,000,000 Sell

33. Transfer Pricing

The Finance Act, 2001, has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulations (‘regulations’) for computing the income from ‘international transactions’ between ‘associated enterprises’ on an ‘arm’s length’ basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant which is to be filed with the Income tax authorities.

The Company has undertaken necessary steps to comply with the Transfer Pricing regulations the Management is of the opinion that the international transactions are at arm’s length, and hence the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

34. Employee Benefits


Sl. No.

Particulars Gratuity

I. Components of employer expense

1 Current Service cost 4.95

2 Interest cost 2.37

3 Expected return on plan assets (0.09)

4 Curtailment cost/(credit) -

5 Settlement cost/(credit) -

6 Past Service Cost -

7 Actuarial Losses/(Gains) (2.14)

8 Total expense recognised in the Statement of Profit & Loss 5.08

II. Actual Contribution and Benefits Payments for year ended December 31, 2007

1 Actual benefit payments 2.56

2 Actual Contributions 4.95

1.68


Sl. No.


III. Net asset/(liability) recognised in balance sheet as at December 31, 2007

1 Present value of Defined Benefit Obligation (DBO) 34.51

2 Fair value of plan assets 21.50

3 Funded status [Surplus/(Deficit)] (13.01)

4 Unrecognised Past Service Costs -

5 Net asset/(liability) recognised in balance sheet (13.01)

IV. Change in Defined Benefit Obligations during the year ended December 31, 2007

1 Present Value of DBO at beginning of period 29.62





6 Plan amendments -

7 Acquisitions -

8 Actuarial (gains)/losses 0.14

9 Benefits paid (2.56)

10 Present Value of DBO at the end of period 34.51

V. Change in Fair Value of Assets during the year ended December 31, 2007

1 Plan assets at beginning of period 16.74

2 Acquisition Adjustment -

3 Actual return on plan assets 2.37

4 Actual Company contributions 4.95


6 Plan assets at the end of period 21.50

VI. Assumptions

1 Discount Rate 8.00%

2 Expected Return on plan assets 8.00%

3 Salary escalation 7.00%

For and on behalf of the Board

Arun Kumar – Vice Chairman & Managing Director


Bangalore, March 7, 2008 Kannan. N – Company Secretary

1.69


1. Statement Pursuant to Part IV of Schedule VI to the Companies Act, 1956 I. Registration Details

Registration No. 11-57062

State Code 11

Balance Sheet Date 31.12.2007

(Rupees in thousands)

II. Capital Raised during the year

Public Issue Nil

Bonus Issue Nil

Rights Issue Nil

Private Placement (Equity & Preference) 17,105

III. Position of mobilisation and development of Funds

Total Liabilities 13,455,745

Total Assets 13,455,745

Sources of Funds

Share Capital 841,649

Monies pending allotment 189,866

Reserves and Surplus 1,712,320

Secured Loans 2,993,970

Unsecured Loans 7,633,717

Deferred Tax Liability 79,500

Application of Funds

Net Fixed Assets 2,160,125

Investments 8,361,683

Net Current Assets 2,824,910

Profit and Loss Account 109,027

Miscellaneous Expenditure Nil

IV. Performance of the Company

Turnover (Total Income) 4,031,683

Total Expenditure 5,211,939

Profit / (Loss) Before Tax (1,180,256)

Profit / (Loss) After Tax (1,152,136)

Earnings per share (Rs.) (on profit after taxes) (33.98)

Dividend Rate (%) -

V. Generic Names of three Principal Products / Service of the Company (as per monetary terms)

Item Code No. 30039090

Product Description Lamivudine


Product Description Efavirenz


Product Description Zidovudine

Balance Sheet Abstract and Company’s General Profile

1.70


2. Disclosure as per clause 32 of the listing agreement Loans and advances in the nature of loans given to subsidiaries, associates and others:


Name of the Company Relationship Amount outstanding at December 31, 2007

Maximum balance outstanding during

the year

Sequent Scientific LimitedErstwhile Wholly – Owned

subsidiary 72.36 78.89

Strides Arcolab International Limited Wholly – Owned subsidiary 228.38 503.08

Cellofarm Ltda Other Subsidiaries 257.73 330.68

Solara S.A de C.V Other Subsidiaries 45.75 51.39

3. Disclosure required in terms of clause 13.5A of Chapter XIII on Guidelines for preferential issues, SEBI (Disclosure and Investor Protection) Guidelines, 2000.


Particulars Amount Amount

Total amount received from issue of fully convertible debentures 2,018.29

Total amount received from issue of warrants 15.39

Amount utilized

Purpose for which the money received has been utilized :

a. Investment 1,204.79

b. Repayment of Warrants money received 111.60

c. Capital Expenditure 336.01

d. Working Capital 381.28

2,033.68

Unutilised monies as on December 31, 2007 - -

Unutilised monies has been invested in - -

Note: Upfront amount receivable against issue of 5,600,000 warrants of Rs.191.57 Million is adjusted against Rs.318.57 Million payable for non conversion of warrants into equity





1.71


Auditors’ Report on Consolidated Financial Statements 2.01

Consolidated Financial Statements 2.02

Statement Pursuant to Section 212 of the Companies Act, 1956, Relating to subsidiary Companies 2.32

Additional Information, Addresses 2.38

Sect

ion

2


Auditors’ ReportOn Consolidated Financial Statements

To The BoARd oF dIReCToRS oF STRIdeS ARCoLAB LImITed

1. We have audited the attached Consolidated Balance Sheet of STRIdeS ARCoLAB LImITed (“the Company”) and its subsidiaries, joint ventures and associates (“the Group“) as at December 31, 2007, the consolidated Profit and Loss account and the consolidated Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management and have been prepared by the management on the basis of separate financial statements and other financial information regarding components. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with generally accepted auditing standards in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. An audit includes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. We did not audit the financial statements of subsidiaries, joint ventures and associates, whose financial statements reflect total assets (net) of Rs. 7,693.59 Million as at December 31, 2007 and total revenues of Rs. 6,352.46 Million and cash flows amounting to (Rs.294.90 Million) for the year ended on that date. In respect of these subsidiaries, joint ventures and associates;

(a) the financial statements of the subsidiaries, whose financial statements reflect total assets (net) of Rs. 6,143.36 Million as at December 31, 2007 and total revenues of Rs. 5,842.98 Million and cash flows amounting to Rs. 3.91 Million for the year ended on that date, have been audited by other auditors whose audit reports have been furnished to us, and our opinion, in so far as it relates to amounts included in respect of these subsidiaries is based solely on the audit report of other auditors;

(b) the financial statements of the subsidiaries and joint venture and associates, whose financial statements reflect total assets (net) of Rs. 1,550.23 Million as at December 31, 2007 and total revenues of Rs. 509.48 Million and cash flows amounting to (Rs. 298.81 Million) for the year ended on that date, have been compiled by the management and have not been subject to audit by independent auditors.

4. We report that the consolidated financial statements have been prepared by the Company‘s management in accordance with the requirements of Accounting Standard 21, Consolidated Financial Statements‘ Accounting Standard 23, ‘Accounting for investments in Associates in Consolidated Financial Statements’ and Accounting Standard 27, ‘Financial reporting of interests in Joint ventures’, issued by the Institute of Chartered Accountants of India.

5. Attention is invited to Note C.23 of Schedule Q regarding the excess managerial remuneration paid and the company’s proposal regarding the same.

6. Subject to our comments in paragraph 3(b) above, based on our audit and on consideration of the reports of other auditors on separate financial statements and on the other financial information of the components, and to the best of our information and according to the explanations given to us, we are of the opinion that the attached consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India;

(i) in the case of the Consolidated Balance Sheet, of the consolidated state of affairs of the Group as at December 31, 2007;

(ii) in the case of the Consolidated Profit and Loss Account, of the loss of the Group for the year ended on that date; and

(iii) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date.

For deLoITTe hASKINS & SeLLS


V.Srikumar

Partner


Place : Bangalore


2.01


Consolidated Balance Sheet as at



For deLoITTe hASKINS & SeLLSChartered AccountantsV. Srikumar Partner Membership No.84494


I . SoURCeS oF FUNdS 1. Shareholders’ funds

a) Share capital A 841.65 841.15

b) Monies pending allotment 189.87 354.31

(Refer Note. C.7, Schedule ‘Q’)

c) Employees stock options outstanding account B 4.73 -

d) Reserves & surplus C 1,729.65 2,585.13

2,765.90 3,780.592. minority Interest 169.34 527.203. Loan funds d

a) Secured loans 4,904.88 3,598.86

b) Unsecured loans 7,869.01 1,919.70

12,773.89 5,518.564. deferred tax liability (Net) 104.26 196.22 (Refer Note.C.17, Schedule ‘Q’)

Total liabilities 15,813.39 10,022.57

II . APPLICATIoN oF FUNdS 1. Fixed Assets e

a) Gross block 5,947.48 5,667.18

Less: Accumulated Depreciation 1,659.75 1,427.63

Net block 4,287.73 4,239.55 b) Capital work-in-progress & advances 3,140.18 1,576.77

7,427.91 5,816.32 2. Goodwill (on consolidation) 5,527.48 1,695.12 3. Investments F 19.45 14.97 4. Current assets, loans and advances G

a) Inventories 2,011.11 1,232.58

b) Sundry debtors 2,098.36 2,226.88

c) Cash & bank balances 1,917.58 375.05

d) Loans and advances 1,326.23 900.11

7,353.28 4,734.62 Less: Current liabilities & provisions h

a) Current liabilities 3,720.23 1,770.88

b) Provisions 800.87 476.25

4,521.10 2,247.13 Net current assets 2,832.18 2,487.49 5. miscellaneous expenditure I 6.37 8.67 (To the extent not written off or adjusted)

Total assets 15,813.39 10,022.57Basis of Consolidation,

Accounting policies and notes on accounts Q

The above schedules form an integral part of the financial statements.

2.032.02


Schedule dec 31, 2007 dec 31, 2006



Consolidated Profit & Loss Accountfor the year ended

I . INCome1. Sales & services (including export incentives) J 7,256.12 7,429.84 2. Other income K 1,392.36 172.14

Total 8,648.48 7,601.98 II. eXPeNdITURe

1. Materials consumed L 4,210.18 3,356.32 2. (Increase) / Decrease in stock M (617.40) 19.15 3. Personnel cost N 1,625.47 1,241.44 4. Operating and other expenses O 2,262.17 1,575.51 5. Finance charges P 596.76 408.03

Total 8,077.18 6,600.45

III. PRoFIT BeFoRe dePReCIATIoN, AmoRTISATIoN & INCome TAX 571.30 1,001.53 6. Depreciation E 363.84 309.29 7. Amortisation of miscellaneous expenditure 13.30 26.89

IV. PRoFIT BeFoRe TAX ANd eXCePTIoNAL ITemS 194.16 665.35 8. Exceptional Items (Refer Note C.10, c (i) and (iii), Schedule ‘Q’) 539.85 -

V. PRoFIT / (LoSS) BeFoRe TAX (345.69) 665.35 Less : Provision for tax :

- Current 119.23 105.88 - Deferred (Net) (67.39) 61.14 - Fringe benefit tax 3.98 6.51 - Prior year taxes 115.03 -

VI. PRoFIT / (LoSS) AFTeR TAX BeFoRe ShARe oF mINoRITY INTeReST ANd ASSoCIATe (516.54) 491.82 Profit / (Loss) from Continuing operations (350.38) 654.30 Less: Tax expense 167.87 169.64

(518.25) 484.66

Profit / (Loss) from Discontinued operations (Refer Note C.15, Schedule ‘Q’) 4.69 11.06 Less: Tax expense 2.98 3.90

1.71 7.16

VI. PRoFIT / (LoSS) AFTeR TAX BeFoRe ShARe oF mINoRITY INTeReST ANd ASSoCIATe (516.54) 491.82 Less: Share of Profit / (Loss) of Minority Interest (15.27) 89.53 Add: Share of Profit in Associate (net) 0.06 -

PRoFIT / (LoSS) AFTeR mINoRITY INTeReST ANd ShARe FRom ASSoCIATe (501.21) 402.29 Balance brought forward 839.96 585.90 Consolidation adjustment (66.67) 65.13

VII. PRoFIT AVAILABLe FoR APPRoPRIATIoN 272.08 1,053.32 VIII. APPRoPRIATIoNS

Proposed dividend on equity shares 0.17 69.90 Tax on proposed equity dividend 8.78 9.80 Dividend on preference shares - 29.51Tax on preference dividends - 4.15 Transfer to general reserve 19.16 100.00 Balance carried to balance sheet 243.97 839.96

Total 272.08 1,053.32

IX. earnings per share(Face value of Rs.10 each)– Basic (in Rs.) (15.57) 10.55 – Diluted (in Rs.) (15.57) 9.33(Refer Note C.22, Schedule ‘Q’)Basis of Consolidation, QAccounting policies and notes on accountsThe above schedules form an integral part of the financial statements.



For deLoITTe hASKINS & SeLLSChartered AccountantsV. Srikumar Partner Membership No.84494


2.032.02

Schedule dec 31, 2007 dec 31, 2006


Consolidated Cash Flow StatementFor the year ended

A. Cash flow from operating Activities

Net Profit/(Loss) before tax (345.69) 665.35

Adjustments for:

Add: Depreciation, amortisation & ESOP costs 371.10 324.90

Bad debts written off and Provision for doubtful debts 144.07 24.44

Impairment loss on assets 632.47 -

Loss on sale of assets 5.06 3.58

Interest on borrowings 698.87 446.46

Impairment in Long term investments 17.22 -

Less: Dividend received - 0.001

Unrealised Exchange gain/(Loss) (61.07) 49.42

Profit on sale of investments (net) 980.15 -

Profit on sale of assets 18.90 0.09

Interest received 102.11 38.43

operating profit before working capital changes 483.01 1,376.79

Changes in working capital

(Increase)/Decrease in Trade and other receivables (82.03) (491.66)

(Increase)/Decrease in Inventories (570.57) (239.75)

Increase/(Decrease) in Trade and other payables 1,223.42 528.10

(Increase)/Decrease in Margin money (16.13) (1.99)

Net change in working capital 554.69 (205.30)

Cash generated from operations 1,037.70 1,171.49

Direct taxes paid (50.69) (92.98)

Net cash from operating Activities A 987.01 1,078.51

B. Cash flow from Investing Activities

Purchase of fixed assets / CWIP (2,512.73) (1,584.46)

Sale of fixed assets 94.26 5.84

Subsidy received on investment 0.10 -

Purchase of investments (4,728.43) (1,041.80)

Sale/redemption of investments 1,130.76 -

Dividend / Interest received 102.11 38.43

Net cash used in Investing Activities B (5,913.93) (2,581.99)

C. Cash flow from Financing Activities

Proceeds from issue of share capital / Share warrants 206.97 318.58

Proceeds from issue of FCCB / Debentures 6,016.99 -

Refund of share application money to Minority shareholders - (4.43)

Proceeds from long term borrowings 591.00 1,220.84

Repayment of long term borrowings (244.38) (188.18)

Proceeds from short term borrowings - Net 787.55 59.08

Dividends paid (81.79) (69.92)

Tax paid on equity and preference dividend (49.60) (11.98)

Interest paid on borrowings (674.69) (445.10)

Net cash generated from Financing Activities C 6,552.05 878.89

2.04


dec 31, 2007 dec 31, 2006



Consolidated Cash Flow StatementFor the year ended

Net Increase / (decrease) in Cash and Cash equivalents (A+B+C) 1,625.13 (624.59)

Cash and cash equivalents at the beginning of the year 267.90 839.29

Effect of exchange differences on restatement of foreign currency cash and cash equivalents 37.87 (18.95)

Exchange Reserve on account of consolidation (282.56) (38.36)

Consolidation adjustment 145.96 110.51

Cash and cash equivalents at the end of the year 1,794.30 267.90

Note: Refer Note C.24, Schedule ‘Q’ for notes on Cash Flow Statement

Basis of Consolidation, Accounting policies and notes on accounts – Schedule ‘Q’


As per our report of even dateFor deLoITTe hASKINS & SeLLSChartered Accountants



2.05

dec 31, 2007 dec 31, 2006


Schedules forming part of the Consolidated Balance Sheet as at

AShARe CAPITAL1. Authorised

a) equity 70,000,000 equity shares of Rs.10 each (Previous year 70,000,000 equity shares of Rs.10 each ) 700.00 700.00

b) Preference 620,000 cumulative redeemable preference shares of Rs.1,000 each 620.00 620.00

1,320.00 1,320.00 2. Issued, subscribed and paid-up

a) equity 35,004,289 (Previous year 34,954,289) equity shares of Rs.10 each fully paid. Of these: 350.04 349.54 i) 3,118,875 (Previous year 3,068,875) equity shares of Rs.10 each were allotted to the Promoters and their associate companies on exercising of the Warrants.ii) 210,955 equity shares of Rs.10 each were allotted to the erstwhile share holders of Bombay Drugs & Pharmas Ltd consequent to amalgamation with the Company iii) 1,251,000 equity shares of Rs.10 each were issued as bonus shares by capitalisation of General Reserve iv) 1,912,500 equity shares of Rs.10 each were issued consequent to amalgamation to the shareholders of erstwhile Remed Laboratories (India) Ltd and Plama Laboratories Ltd

b) Preference 491,606, 6% cumulative redeemable preference shares of Rs.1,000 each fully paid 491.61 491.61

(Refer Note C.5, Schedule ‘Q’)

Total 841.65 841.15

BemPLoYee SToCK oPTIoNS

Opening Balance - -

Employee Stock Options Outstanding (Refer Note C.8, Schedule ‘Q’) 18.08 -

Less : Deferred employee compensation expenses 13.35 -

Closing Balance 4.73 -

CReSeRVeS ANd SURPLUS

1. General Reserve Opening Balance 250.26 150.26

Add: Transfer from Profit and loss account 19.16 100.00 Add: Additional subsidy received 0.10 - Less: Adjustment under transitional provision of AS - 15 (Refer Note C.9, Schedule ‘Q’) 3.67 -


2. Capital Redemption Reserve 60.00 60.00 3. debenture redemption reserve (Refer Note C.4, Schedule ‘Q’) Opening Balance 651.15 662.78 Add: Transfer from Security premium account (Refer Note C.4, Schedule ‘Q’) 355.06 - Less: Adjustment for exchange fluctuation on restatement of Debenture Redemption Premium

(transferred to Securities Premium Account) 71.50 11.63


dec 31, 2007 dec 31, 2006

2.06




4. Securities Premium Opening Balance 772.78 761.15

Add: Additions during the year on fresh issue of shares 16.61 -

Add: Transfer from Debenture Redemption Reserve Account (Refer Note C.4, Schedule ‘Q’) 71.50 11.63

Less : Expenses relating to issue of Foreign Currency Convertible Bonds 75.30 -

Less : Transfer to Debenture Redemption Reserve (Refer Note C.4, Schedule ‘Q’) 355.06 -

Closing Balance 430.53 772.78 5. exchange Reserve (on consolidation)

Opening Balance (52.87) (96.38)

Add: Transactions during the year (282.56) 43.51

Closing Balance (335.43) (52.87)6. Capital Reserve

On Consolidation 87.35 63.85

On acquisition 6.93 -

Forfeiture of Monies received towards Share Warrants 35.74 - (Refer Note C.7, Schedule ‘Q’)


7. Profit & Loss Account 243.97 839.96

Total 1,729.65 2,585.13

dSeCURed LoANS

1. Long term loans a) From financial institutions 788.85 532.27b) From banks 2,006.35 1,864.25c) From others 25.00 77.06

2,820.20 2,473.58

2. Short term loans From banks 2,084.68 1,125.28

2,084.68 1,125.28

Total 4,904.88 3,598.86

UNSeCURed LoANSa) From banks 108.33 144.96b) From others 226.39 4.34c) Foreign Currency Convertible Bonds 5,516.00 1,770.40d) Fully Convertible Debentures 2,018.29 -

Total 7,869.01 1,919.70 Notes on above :a) Loans under different categories are secured against certain moveable and immovable assets of the parent company or

concerned subsidiary.

b) Some of the above loans are guaranteed by some of the Directors of the Company in their personal capacities.

c) Long term loans from financial institutions and banks (other than hire purchase loans) due within one year Rs.773.18 Million (Previous year Rs.307.47 Million). Hire purchase loans due within one year Rs.3.23 Million (Previous year Rs.8.96 Million)

dec 31, 2007 dec 31, 2006


2.07


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2.092.08




FINVeSTmeNTS (Unquoted)

1. Long term investments

Trade investments [at cost less permanent dimunition in value (if any)]

Laboratories Domac - Share Application money - 14.66

Albatross - Investment in an Associate (including goodwill of Rs 0.69 Million 19.45 -

and is net of share of associate’s profits till date of Rs. 0.06 Million)

19.45 14.66

2. Current investments

Non trade investments

i) Government Securities (NSC/IVP) - 0.07 [Maturity value Rs.Nil, (Previous year Rs. 0.14 Million)]

ii) Panoli Enviro Tech Ltd - 0.24 [Nil (Previous year 23,700 ) equity shares of Rs.10 each fully paid]

- 0.31

Total 19.45 14.97

Aggregate value of unquoted investments 19.45 14.97

GCURReNT ASSeTS, LoANS & AdVANCeSA. Current assets

1. Inventories

a) Raw materials and packing materials 858.18 781.05 [includes Goods in transit of Rs.Nil (Previous year Rs.3.61 Million)]

b) Work-in-process 172.13 168.34

c) Finished goods 980.80 283.19

2,011.11 1,232.58

2. Sundry debtors (unsecured)

a) More than six months

- Considered Good 167.95 379.26

- Considered Doubtful 107.50 21.35

b) Others

- Considered Good 1930.41 1,847.62

- Considered Doubtful 45.71 -

2,251.57 2,248.23

Less: Provision for Doubtful Debts 153.21 21.35

[Others includes Unbilled Revenue of Rs.523.08 Million (Previous year Rs.659.03 Million)] 2,098.36 2,226.88

3. Cash and bank balances

a) Cash in hand 2.00 7.28

b) Balance with banks

i) In current accounts 1,707.38 260.62

ii) In margin money and deposit accounts 123.28 107.15

iii) In Fixed desposit account 84.92 -

1,917.58 375.05

dec 31, 2007 dec 31, 2006

2.092.08


B. Loans and advances (unsecured, considered good)

a) Advance recoverable in cash or in kind

or for value to be received 445.24 360.09

b) Advance income tax and tax deducted at source 286.79 240.07

c) Deposits with and dues from Government departments 316.81 187.15

d) Deposits with others 205.03 112.80

e) Loan to an erstwhile subsidiary 72.36 -

1,326.23 900.11

Total 7,353.28 4,734.62

hCURReNT LIABILITIeS ANd PRoVISIoNS

A. Current liabilities

a) Sundry creditors 3,394.92 1,655.35

b) Unclaimed dividend 1.90 0.79

c) Interest accrued but not due 50.29 17.50

d) Other liabilities 111.51 55.16

e) Advances received from customers 161.61 42.08

3,720.23 1,770.88

B. Provisions

a) Leave salary 61.25 56.04

b) Other provisions (Refer note C.2, Schedule ‘Q’) 93.12 -

c) Current taxes (include fringe benefit tax) 426.99 266.17

d) Proposed equity dividend 0.17 69.90

e) Tax on proposed equity dividend 6.72 9.80

f) Gratuity and other employee benefits 166.83 24.40

g) Preference dividend (Refer Note C.5, Schedule ‘Q’) 45.79 45.79

h) Tax on preference dividend - 4.15

800.87 476.25

Total 4,521.10 2,247.13

ImISCeLLANeoUS eXPeNdITURe

(To the extent not written off or adjusted)

a) Preliminary expenses - 0.01

b) Process and formulation development expenses - 2.28

c) Other development expenses 6.37 6.38

Total 6.37 8.67

dec 31, 2007 dec 31, 2006 dec 31, 2007 dec 31, 2006


2.10




JSALeS & SeRVICeS

a) Sale of products 6,884.52 7,105.58

Less: Excise duty 2.29 3.23

Net Sales 6,882.23 7,102.35

b) Sale of Dossiers 113.04 -

c) Development Income 203.41 270.80

d) Contract manufacturing services 53.86 56.69

e) Export licences & incentives (net) 3.58 -

Total 7,256.12 7,429.84

KoTheR INCome

a) Exchange fluctuation gain (net) 376.87 115.30

b) Dividend - 0.001

c) Miscellaneous income 17.64 56.75

d) Profit on Sale / Disposal of investments (net) (Refer Note C.10.c (ii) & C.15, Schedule ‘Q’) 978.95 -

e) Profit on Sale / Disposal of assets 18.90 0.09

Total 1,392.36 172.14

LmATeRIALS CoNSUmed

Raw materials & packing materials

Opening stock 781.05 462.18

Consolidation adjustment 9.22 59.64

790.27 521.82

Add: Purchases 4,278.09 3,615.55

Less: Closing stock 858.18 781.05

Total 4,210.18 3,356.32

m(INCReASe) / deCReASe IN SToCK

i) Opening stock

Work in process 168.34 153.63

Finished goods 283.19 255.89

451.53 409.52

ii) Consolidation adjustment

Work in process (57.71) 11.23


84.00 61.16

iii) Closing stock

Work in process 172.13 168.34


1,152.93 451.53

Total (617.40) 19.15

dec 31, 2007 dec 31, 2006 dec 31, 2007 dec 31, 2006

Schedules forming part of the Consolidated Profit & Loss Account for the year ended

2.11


NPeRSoNNeL CoST

Salaries, wages and allowances 1,336.85 1,017.54

Contribution to provident and other funds 163.64 121.35

Staff welfare expenses 124.98 102.55

Total 1,625.47 1,241.44

ooPeRATING ANd oTheR eXPeNSeS

Power, fuel & water 311.39 221.07


Conversion & Processing charges 36.88 50.51

Excise duty paid 8.82 0.03

Freight & forwarding 247.12 265.42

Rent 127.78 105.96

Rates & taxes 50.65 48.64

Communication charges 44.55 36.75

Repairs & maintenance

- Buildings 103.10 9.97

- Machinery 32.85 56.98

- Others 35.64 71.66

Insurance 34.82 34.32

Travelling & conveyance 125.85 101.00

Advertisement & Selling expenses 158.18 143.78

Commission on sales 48.28 49.83

Legal and Professional fees 219.44 79.41

Other expenses 275.06 76.67

Impairment in brands 13.24 -

Assets writtenoff 8.64 -

Provision for doubtful debts 144.07 10.93

Bad debts written off - 13.51

Total 2,262.17 1,575.51

PFINANCe ChARGeS

Bank charges & commission 94.00 70.07

Interest on working capital and other facilities 347.31 170.97

Interest on Fixed loans and Foreign Currency Convertible Bonds 257.56 205.42

698.87 446.46 Less: Interest received 102.11 38.43

Total 596.76 408.03

Schedules forming part of the Consolidated Profit & Loss Account for the year ended

2.12



QBasis of Consolidation, Significant Accounting Policies and Notes on Accounts:

A. Basis of ConsolidationThe Consolidated Financial Statements relate to Strides Arcolab Limited (the Company), its subsidiary companies, joint ventures and associates, together “the Group”. The Financial Statements of the entities in the Group used in the consolidation are drawn upto the same reporting date as of the Company, i.e. December 31, 2007.

1. Principles of Consolidation: The Consolidated Financial Statements have been prepared on the following basis:

a. The Financial Statements of the Company and its subsidiary companies have been consolidated on a line by line basis by adding together like items of assets, liabilities, income and expense. The intra-group balances, intra-group transactions and unrealized profits or losses have been eliminated fully.

b. Share of profit / loss, assets and liabilities in the jointly controlled entities have been consolidated on a line by line basis by adding together like items of assets, liabilities, incomes and expenses on a proportionate basis to the extent of the Company’s equity interest in such entity. The intra-group balances, intra-group transactions and unrealized profits or losses have been eliminated to the extent of the Company’s share in the entity.

c. The excess of cost to the Company of its investments in the subsidiary companies over its share of the equity of the subsidiary companies, at the dates on which the investments in the subsidiary companies were made, is recognized as ‘goodwill’, being an asset in the Consolidated Financial Statements. Where the share of the equity in the subsidiary companies as on the date of investment is in excess of cost of investment of the Company, it is recognized as ‘Capital Reserve’ and shown under the head ‘Reserves & Surplus’.

d. Minority interest in the net assets of consolidated subsidiaries consists of the amount of equity attributable to the minority shareholders at the dates on which investments are made by the Company in the subsidiary companies and further movements in their share in the equity, subsequent to the dates of investments as stated above.

e. Investment in Associates has been accounted under the equity method as per Accounting Standard -23, Accounting for investments in Associates in Consolidated Financial Statements.

2. Information on Subsidiary Companies, Associates & Joint Ventures:a. The following companies are considered in the consolidated financial statements:

Sl. No.

Name of the entityCountry of

Incorporation

% ownership held either directly or through

subsidiaries as at December 31,2007

% ownership held either directly or through subsidiaries as at

December 31,2006

1. Arcolab SA Switzerland 100% 100%

2. Global Remedies Ltd. India 100% 100%

3. Strides Inc. USA 84.53% 84.53%

4. Sequent Scientific Ltd. (Formerly known as Strides Research and Specialty Chemicals Ltd.)

India - 100%

5. Strides S.A. Pharmaceuticals Pty Ltd.Republic of South

Africa51% 51%

6. Medgene Pharmaceuticals Pvt Ltd. India 100% 90%

7. Quantum Life Sciences Pvt Ltd. India 100% 100%

8. Strides Africa Ltd. British Virgin Islands 100% 100%

9. Strides Latina, SA Uruguay 100% 67%

10. Pharma Strides Canada Corporation Canada 100% 100%

11. Solara SA De CV Mexico 100% 74%

12. Cellofarm Ltda. Brazil 100% 100%

13. Akorn Strides LLC USA 50% 50%

14. Strides Arcolab International Ltd. (Formerly known as Strides Arcolab (UK) Ltd.)

UK 100% 100%

15. Beltapharm S.p.A Italy 70% 70%

2.13


Sl. No.

Name of the entityCountry of

Incorporation

% ownership held either directly or through

subsidiaries as at December 31,2007

% ownership held either directly or through subsidiaries as at

December 31,2006

16. Strides Australia Pty Ltd. Australia 100% 90%

17. Strides Polska sp.z o.o Poland - 100%

18. Strides Arcolab Polska sp.z o.o Poland 100% 100%

19. Strides Singapore Pte Ltd. Singapore 100% 100%

20. Drug Houses of Australia (Asia) Pte Ltd.

Singapore 100% 100%

21. Strides Arcolab UK Ltd. UK 100% 100%

22. Laboratorios Domac Spain 50% -

23. Plus Farma ehf Iceland 50% -

24. Farma Plus AS Norway 50% -

25. Strides Arcolab Hong Kong Ltd. Hong Kong 100% -

26. Strides Arcolab Malaysia SDN. BHD Malaysia 100% -

27. Starsmore Ltd. Cyprus 100% -

28. Lakerose Ltd. Cyprus 100% -

29. Linkace Ltd. Cyprus 100% -

30. Powercliff Ltd. Cyprus 50% -

31. Casa de Representaciones Sumifarma CA

Venezuela 80% -

32. Strides Italia S.r.l Italy 100% -

33. Strides Vital Nigeria Ltd. Nigeria 74% -

34. Sagent Strides LLC. Wyoming, USA 50% -

35. Co Pharma Ltd. UK 51% -

36. Strides Arcolab SDN. BHD. Brunei 100% -

37. Formule Naturelle (Pty) Ltd. [formerly known as Aspen Public Health (Pty) Ltd.]

South Africa 80% -

38. Grandix Pharmaceuticals Ltd. India 99% -

39. Grandix Laboratories Ltd. India 99% -

40. Onco Therapies Ltd. India 51% -

41. Albatross Iceland 30% -

• For the purposes of Consolidation in terms of AS 21 – “Consolidated Financial statements” all the above are subsidiary

companies except ‘13’, ’22’, ’23’, ‘30’, ‘34’ and ‘40’ which are jointly controlled entities and ‘41’ which is an Associate. While

the holding company has 51% of the shares in ‘40’ it has assigned 1% of voting power to Aspen Pharmacare Holdings Ltd.

Accordingly it is treated as Joint venture in these financial statements (See Note C.10.b, Schedule Q).

• InrespectofPharmaStridesCanada,ownershipisheldthroughStridesInc.,andinrespectofSolaraSADeCV&Sumifarma,

ownership is held through Strides Latina, SA. Ownership in Cellofarm Ltda and 33% of Strides Latina SA is held through

Lakerose Ltd. Ownership in Drug Houses of Australia (Asia) Pte Ltd is held through Strides Singapore Pte Ltd (SSPL). In respect

of Strides Vital Nigeria Ltd, ownership is held through Strides Africa Ltd. Ownership in Lakerose Ltd and Linkace Ltd is held

through Starsmore Ltd. Co Pharma Ltd is held through Linkace Ltd (43.72%) and Strides Arcolab International Ltd (7.28%).

Formule Naturelle (Pty) Ltd [formerly known as Aspen Public Health (Pty) Ltd] is held through Linkace Ltd. In respect of ‘15’,

‘16’, ‘18’, ‘19’, ‘21’, ‘25’, ‘26’, ‘32’ and ‘36’, ownership is held through Strides Arcolab International Ltd. Grandix Laboratories Ltd

is held through Grandix Pharmaceuticals Ltd. In respect of Albatross associate share is held by Plus Farma. Farma Plus Norway

is fully held by Plus Farma.

2.14


• Inrespectof’2‘,‘5’,‘6’,’9’’,‘11,‘12’,‘15’,‘16’,‘18’,‘20’,‘24’,‘30’,‘31’,‘33’,‘35’,’37’,‘38’and‘39’(previousyear‘1’,’2‘,‘5’,’6’,

’9’, ‘10’, ‘12’, ‘15’, ‘17’ and ‘20’) the Company’s cost of investment is in excess of its share of equity on the date of investment

and the difference has been recognized as Goodwill. In respect of ‘40’ (Previous year ‘11’ & ‘18’) the companies net worth is in

excess of the cost of investment on the date of acquisition and the difference has been recognized as capital reserve.

• DuringtheyearStridesPolskaSp.z.o.o,PolandmergedwithStridesArcolabPolskaSp.z.o.oeffectivefromOctober24,2007.

The investment in Sequent Scientific Ltd was disinvested with effect from November 26, 2007.

• AspartoftheCompany’splanofrestructuringofitsLatinAmericanoperations,duringtheyear

(i) Strides Arcolab International Limited acquired the balance 33% holdings in Strides Latina and subsequently transferred

them to Lakerose limited, Cyprus.

(ii) Cellofarm Ltda, which was a wholly owned subsidiary of Strides Latina has now become a wholly owned subsidiary

of Lakerose Limited.

b. During the year, the Companies stated in the table below were acquired and the Consolidated Financial Statements include the

balances disclosed in the table relating to these companies. (Figures disclosed are as stated in the standalone financials of the

respective subsidiaries at the balance sheet date). (Rupees in Millions)

ParticularsFarma Plus

AS

Casa de Representaciones

Sumifarma CA

Strides Vital Nigeria Ltd

Co Pharma LtdGrandix

Pharmaceuticals Ltd

Grandix Laboratories Ltd

Date of Acquisition 31.01.07 01.04.07 02.11.07 01.12.07 09.06.07 09.06.07

Liabilities

Loans - 3.93 26.70 - - -

Current Liabilities & Provisions

70.07 149.04 249.61 225.40 110.56 15.85

Deferred tax liability (0.10) - - (2.50) 0.68 (0.05)

Assets

Fixed Assets 6.10 2.15 88.51 84.29 17.76 0.74

Current Assets 94.40 184.30 175.51 328.14 224.78 41.81

Profit / (Loss) after Tax

17.37 20.68 0.36 5.36 29.26 3.21

c. The following subsidiaries were set up during the year:

• LakeroseLimited,Cyprus• LinkaceLimited,Cyprus• StridesArcolabHongKongLimited,HongKong• StridesItalias.r.l,Italy• StridesArcolabSDNBHD,Brunei• OncoTherapiesLimited(Onco),India• FormuleNaturelle(Pty)Ltd,SouthAfrica

Note: For purposes of consolidation under AS21, Onco is treated as a Joint venture, since the Company (which holds 51% of the equity in Onco) has assigned its Voting rights relating to 1% of the outstanding capital of Onco to Aspen Pharmacare Holdings Limited, South Africa (Aspen), an entity that holds 49% equity in Onco. (See note C.10.b, Schedule Q).

d. Figures pertaining to the subsidiary companies have been reclassified wherever necessary to bring them in line with the Company’s financial statements.

e. The Consolidated Financial Statements include the share of assets, liabilities, income and expenses aggregating to amounts indicated below, which are included on the basis of un-audited financial statements in respect of the following:

• ArcolabSA,Switzerland,• StridesSAPharmaceuticalsPtyLtd,RepublicofSouthAfrica,• StridesAfricaLtd,BritishVirginIslands,• StridesAustraliaPtyLimited,Australia

2.15


• AkornStridesLLC,USA• StridesArcolabUKLtd,UK,• SagentStridesLLC,USA,• StridesItaliaS.r.l,Italy,• StridesArcolabHongKongLtd,HongKong,• StridesArcolabMalaysiaSDN.BHD,Malaysia,• LaboratoriosDomac,Spain,• PlusFarmaehf,Iceland,• FarmaPlusAS,Norway,• FormuleNaturelle(Pty)Ltd,SouthAfrica[formerlyknownasAspenPublicHealth(Pty)Ltd],• CoPharmaLtd,UK,• StridesArcolabSDN.BHD,Brunei• StridesVitalNigeriaLtd,Nigeria• StridesArcolabPolskaSp.z.o.o,Poland• Albatross,Iceland (Rupees in Millions)

Particulars Amount

Loans 845.20

Fixed Assets 1745.10

Current Assets 1206.04

Current Liabilities & Provisions 1400.91

Income 509.48

Expenditure 633.01

3. exchange Adjustments :On Consolidation,

• inthecaseofnon-integraloperations,assetsandliabilitiesaretranslatedattheexchangerateprevailingonthebalancesheet date. Revenue and expenses are translated at yearly average exchange rates prevailing during the year. Exchange differences arising out of these translations are included in ‘Exchange Reserve’ under Reserves and Surplus.

• inthecaseofintegraloperations,assetsandliabilities(otherthannon-monetaryitems),aretranslatedattheexchangerate prevailing on the balance sheet date. Non monetary items are carried at historical cost. Revenue and expenses are translated at yearly average exchange rates prevailing during the year. Exchange differences arising out of these translations are charged to the Profit and Loss account.

B. Significant Accounting Policies1.1. Basis for preparation of financial statements

The financial statements are prepared under the historical cost convention and on accrual basis, in accordance with the Generally Accepted Accounting Principles in India, the mandatory Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant provisions of the Companies Act, 1956.

1.2. Revenue1.2.1. Revenue from export sales is recognized on the basis of the shipping bills for exports. Revenue from domestic sales

is recognized based on the passage of title to goods which generally coincides with despatch. Sales are stated net of discounts, taxes, excise duty and sales returns.

1.2.2. Revenue from development services:

a) In respect of contracts which require development on end to end basis, revenue is recognised based on technical estimates made by the Company of the stage of work.

b) In respect of other development contracts, revenue is recognised on the basis of the performance milestones provided in the contract.

1.2.3. Revenue from sale of dossiers is recognised on percentage completion method. The extent of completion is determined based on costs incurred and confirmed by technical estimates made by the Company of the stage of completion of work.

1.2.4. Revenue from contract manufacturing is recognised based on the services rendered in accordance with the terms of the contract.

1.2.5. Export incentives are accounted on accrual basis and include estimated realisable values/ benefits from special import licences and benefits under Duty Exemption Pass Book schemes, wherever applicable.

1.2.6. Dividend income is recognized whenever the right to receive dividends is established.

2.16


1.2.7. Other income is recognised when such income accrue to the Company.1.3. Fixed Assets

Fixed assets and intangibles (other than in-house product development costs) are recorded at their acquisition cost and subsequent improvements thereto. Cost includes related pre-operative project expenditure and interest on borrowings attributable to the funds borrowed in respect of qualifying assets, for the period upto completion of construction or when the assets are ready to be put to use, as applicable. Inhouse product development costs are capitalised in accordance with Paragraph 1.8 below.

1.4. Impairment of AssetsAs at each Balance Sheet date, the carrying amount of fixed assets is tested for impairment. An impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is determined: (a) in the case of an individual asset, at the higher of the net selling price and value in use. (b) in the case of cash generating units, at the higher of the unit’s net selling price and the value in use.Value in use is determined as the present value of estimated future cash flows from the continuing use of an asset and from its disposal at the end of its useful life.

1.5. depreciationDepreciation is provided under the straight line method at the rates and in the manner prescribed under Schedule XIV of the Companies Act, 1956, based on technical estimates that indicate the useful lives would be comparable with or higher than those arrived at using these rates.In the case of assets where the useful lives are estimated to be lower than those considered in determining the rates specified in that Schedule, depreciation is provided under the straight line method over the useful life of the assets as follows: Dies and Punches : 4 years Registrations and Brands : Not exceeding 10 years Software Licences : 5 YearsIndividual assets costing less than Rs. 5,000 are depreciated in full in the year of purchase.

1.6. InventoriesInventories comprise raw materials, packing materials, work in progress and finished goods. These are valued at the lower of cost and net realisable value. Cost is determined as follows:

Raw materials, packing materials and consumables on weighted average basis

Work in progress at material cost and an appropriate share of production overheads

Finished Goodsmaterial cost and an appropriate share of production overheads and excise duty, wherever applicable

1.7. employee benefits

Contributions to defined contribution schemes are charged to revenue on accrual basis.

Leave balances standing to the credit to the employees that are expected to be availed in the short term are provided for on full cost basis. Liability for unavailed leave considered to be long term is carried based on an actuarial valuation.

Liability for gratuity in respective of Employees in entities within India are accounted based on actuarial valuation carried out as at the end of the fiscal year. The obligation recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.

Short term employee benefits like medical, leave travel, etc are accrued based on the terms of employment on a time proportion basis.

In respect of foreign subsidiaries, liabilities with respect to Employee benefits are accrued based on the laws applicable in those Countries.

1.8. Research & development expenditureDevelopment expenses incurred on specific / identified in-house developed products are capitalised from the date on which the Company is able to demonstrate technical feasibility and probable future economic benefits in respect of the products. The amount capitalised comprises expenditure that can be directly attributed, or allocated on a reasonable and consistent basis, to creating, producing and making the asset ready for its intended use.

Other development and research expenses are charged to the Profit and Loss account.

Fixed assets acquired for Research & Development activities are capitalised and depreciated in accordance with the policy of the Company in paragraph 1.3 and 1.5 above.

1.9. Foreign currency transactionsTransactions in foreign currencies are recorded at the exchange rate prevailing on the date of transaction. Receivables and payables in foreign currency as at the year-end are restated at the year-end rates. Exchange rate differences on settlement/restatement of foreign currency transactions are adjusted to the Profit and Loss Account.Premium or discount on forward contracts is amortised over the life of such contract and is recognised as income or expense as the case may be. Any profit or loss arising on cancellation, renewal or restatement of forward contract is recognised in the

2.17


Profit and Loss account.1.10. Investments

Current investments are carried at lower of cost and fair market value. Provision is made to recognize decline, if any, in the carrying value. Long term investments are carried at cost and any decline, other than temporary, in the value of such investments is recognized in the Profit and Loss Account.

1.11. Income TaxIncome Tax comprises the current tax provision and the net change in the deferred tax asset or liability during the year. Deferred tax assets and liabilities are recognized for the future tax consequences arising out of temporary differences between the carrying values of the assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applicable on the Balance Sheet date. Deferred tax assets are recognised and carried forward to the extent that there is a reasonable / virtual certainty (as applicable) that sufficient future taxable income will be available against which such deferred tax asset can be realised. The effect on deferred tax assets and liabilities resulting from change in tax rates is recognized in the income statement in the period of enactment of the change.

1.12. Segment ReportingThe accounting policies adopted for the segment reporting are in line with the accounting policies of the Group. Revenue and expenses have been identified to segments on the basis of the nature of their relationship to the business and operating activities of the segment. Revenue and expenses, which relate to the Group as a whole and are not allocable to segments on a reasonable basis, have been included under ‘Unallocable income / expenses’. Intersegment sales are made at prevailing market prices.

1.13. Use of estimatesThe preparation of the financial statements in conformity with the accounting standards generally accepted in India requires the management to make estimates that affect the reported amount of assets and liabilities, disclosure of contingent liabilities as at the date of the financial statement and reported amounts of revenues and expenses for the year. Actual results could differ from these estimates.

1.14. Provisions and ContingenciesA provision is recognised when the Company has a present legal or constructive obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best estimate required to settle the obligation.

1.15. miscellaneous expenditurea. Preliminary and share issue expenses existing prior to September 30, 2003 are amortised over a period of ten years.b. Expenditure on formulation development existing prior to September 30, 2003 are amortised over appropriate periods

based on the estimated future revenues and market and other information available with the company.c. Other Market development expenses existing prior to September 30, 2003 are amortised over a period of five years.

C. Notes on Accounts1. Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of Advances) Rs. 319.34 Million (Previous year Rs 567.26 Million).

2. Contingent Liabilities• TheCompanyhadprovidedguaranteesofRs.161.27MilliontothirdpartiesinconnectionwithborrowingsofSequent

Scientific Limited, which was a subsidiary at the time of granting of such guarantees. At December 31, 2007, consequent to disposal of Sequent Scientific Limited, the Company has initiated processes to withdraw the corporate guarantees.

• BillsdiscountedwithBankswhichareoutstandingasonDecember31,2007Rs.1,471.81Million(PreviousyearRs1,928.82Million).

• TheCompanyhas,arisingfromassessmentproceedingsrelatingtoearlieryears,receiveddemandstotalingtoRs224.83Million (Previous year Rs 143.75 Million) from the income tax authorities on account of disallowances considered by them. The Company has preferred appeals against these demands and, pending resolution of the same, no provision has been made in the accounts for such disputed amounts.

• Entry TaxpaidunderprotestRs.Nil (Previous yearRs.1.36Million) relating to entry taxdemandedasperKarnatakaSpecial Tax on Entry of Certain Goods Act, 2004. The Company had preferred a Writ petition challenging the applicability of the Act to the Company. The Hon’ble High Court of Karnataka vide its order dated March 29, 2007 struck down the applicability of Act. However, the Government of Karnataka preferred a appeal challenging the Order of the single judge of Hon’ble High Court of Karnataka. The final adjudication on the matter is pending before the Hon’ble High Court of Karnataka.

• ExciseDutypaidunderprotest-Rs.Nil(Previousyear-Rs.5.25Million)relatingtocenvatcreditsavailedatthetimeofconversion of some of the divisions of the Company into Export Oriented Units during the relevant accounting years.

• TheCompanypreferredappealwiththeCESTATagainsttheorderoftheCommissionerofCentralExcisefordisallowingtransfer of cenvat credit of Rs.3.86 Million (Previous year Rs. NIL) as on the date of conversion of one of the units of the Company into a 100% EOU.

• TheGrouphasreceiveddemandsamountingtoRs.Nil(PreviousyearRs.0.16Million)towardssalestaxandRs.Nil(Previousyear Rs.6.40 Million) towards central excise. Out of the above Rs.5.25 Million has been paid under protest. The Company has preferred appeals against these demands and pending resolution of the same, no provision has been made in these accounts.

2.18


• Claimsnotacknowledgedasdebt(employeerelated)-Rs.23.24Million(PreviousyearRs.1.47Million).• TheCompany’ssubsidiaryhadenteredintoaSharePurchaseAgreement(SPA)withthepromotersofBeltapharmS.p.A,

which, inter alia, includes a put option clause. As per this clause, the promoters have an option to exercise a Put option requiring the Company to acquire the balance 30% of the shares held by the promoters after the expiry of three years from January 1, 2006. Such put option may be exercised by the promoters at any time during twelve months succeeding the end of the three year period. The price payable for the purchase of the put option shares shall be computed in the manner provided for in the SPA. On exercise of the option by the promoters, the minimum capital commitment would be Euro 1.15 Million – ( Rs. 67.01 Million).

• QuantumLifeSciencesLimitedacquired10%equityinMedgenePharmaceuticalsPvtLtdforRs.30.00Millionaspersharepurchase agreement dated October 17, 2007. As per terms of the agreement, the consideration payable is as under:a. Rs. 5.00 Million in October 2007.b. Rs. 2.50 Million in December 2008.c. Rs. 2.50 Million in December 2009.d. Rs. 10.00 Million on successfully achieving certain level of commercialization as per the agreement.e. Rs. 10.00 Million in December 2011.

During the year, Rs.5.00 Million was paid in accordance with the agreement.• StridesArcolabInternationalLimited(SAIL)acquired33%stakeinStridesLatinaSA.,foraconsiderationofUS$66.66

Million. The Share purchase agreement provides for additional consideration to be paid based on the results of operations in Cellofarm Ltda, which was earlier, a subsidiary of Strides Latina SA. Consequent to the reorganization of the Latin American operations of the Group, the contingency with regard to the additional consideration has been transferred to Lakerose Limited, Cyprus. The additional consideration is to be determined in accordance with the agreement referred aboveandcannotbeinexcessofUS$32Million.

• ThebusinessassetsofDiaspaSpA,Milan,anentityoperating in Italywascontributed inkind intoStrides ItaliaS.r.L(Strides Italia), a wholly owned subsidiary of SAIL on August 2, 2007. As consideration, Strides Italia issued new quotas of its capital to Diaspa, which were subsequently purchased by SAIL.

• Movementinotherprovisions; Other provisions of Rs.93.12 Million created during the year represents provisions towards contingencies and includes

Rs.68.38 Million towards contingencies expected to arise in connection with the shutting down of the facility in Somerset, New Jersey, USA owned by the subsidiary Strides Inc.

3. The Company entered into a strategic alliance with Aspen Pharmacare Holdings Limited, Republic of South Africa (Aspen), under which Aspen becomes a 50% joint venture partner in respect of the Company’s Latin American operations effective March 1, 2008. As part of its obligations under the Joint venture, Aspen is required to buy from Starsmore Limited, Cyprus, (a subsidiary of the Company), a part of its shareholding in Lakerose Limited (the holding Company for the Latin American operations)forUS$58MillionandinvestafurthersumofUS$94MillioninLakeroseLimited,againstsubscriptiontofreshshares such that the shareholding in Lakerose Limited in the aggregate comes to 50%.In respect of the above Joint venture, the Company has provided a warranty to Aspen that Earnings before Interest, Depreciation, AmortisationandTaxcomputedundertheInternationalFinancialReportingStandards(EBITDA),willnotbelessthanUS$28Million in the 12 months period commencing from March 1, 2008, in respect of the Latin American operations. Under the agreement with Aspen, the Company is liable to 4.66 times of the shortfall, if any, between the actual EBITDA in the said period fromtheLatinAmericanoperationsandthewarrantedEBITDAofUS$28Million.InconnectionwiththeaboveJointventure,theCompanyhaseffectiveMarch1,2008,providedaguaranteeofUS$75MilliiontoAspen,whichshall,subjecttoapprovalfromtheappropriateauthorities,beincreasedtoUS$152.5Million.

4. Foreign currency convertible bonds:(a) TheCompanyissuedForeignCurrencyConvertibleBonds(FCCB)amountingtoUS$100Million(Rs.4,070Million)on

June 26, 2007. These bonds carry zero coupon and are to be redeemed on June 27, 2012 (unless converted into Equity Shares) at 145.058 per cent of the Principal amount.The bonds may be redeemed in whole, but not in part at the option of the Company at any time on or after July 18, 2010 and on and prior to June 20, 2012 with a redemption premium of 7.575 per cent (which is identical to the gross yield in case of redemption at maturity) calculated on a semi annual basis. As at December 31, 2007, 1/5th of the premium payable on maturity (along with related exchange fluctuation as on December 31, 2007) has been transferred to the Debenture Redemption Reserve Account with a corresponding adjustment to the Securities Premium Account. The Bonds are convertible at any time on or after August 6, 2007 and up to the close of business on June 20, 2012 by the holders of the Bonds into Shares at the option of the Bondholder, at an initial conversion price of Rs.461.553 per Share withafixedrateofexchangeofRs.40.70perUS$onconversion.ThebondsarelistedonSingaporeExchangeSecuritiesTrading Limited, Singapore.

(b) During the accounting year ending December 31, 2005, the Company had issued Foreign Currency Convertible Bonds (listed in the Singapore ExchangeSecurities Trading Limited) to the extent ofUS$40Million. These bonds carry aninterest rate of 0.5 % p.a. and are to be redeemed on April 19, 2010 (unless converted into Equity Shares) at 136.78 percent of the Principal amount.The Bonds may be redeemed in whole, but not in part, at the option of the Company at any time on or after April 18, 2008 but prior to April 19, 2010 with a redemption premium of 6.8% p.a. (which is identical to the gross yield in case of redemption at maturity), calculated on bi-annual basis. The premium payable on maturity (along with related exchange fluctuation as at the end of the year) has been transferred to the Debenture Redemption Reserve with a corresponding adjustment to the Securities Premium Account.

2.19


The Bonds are convertible by the Bond holders into shares at any time on or after May 18, 2005 at an initial price of Rs.358.70persharewithafixedconversionrateofRs.43.7767=US$1.00.Theinitialconversionpricewillbesubjectto adjustment by the Company for Bonus issue, division, consolidation and reclassification of shares etc as defined in the terms of issue of the Bonds.

(c) As at December 31, 2007, none of the above bonds had been offered for conversion.5. Cumulative Redeemable Preference Shares:

During the year ending December 31, 2005, the Company had issued 491,606 Cumulative Redeemable Preference shares of Rs.1,000/- each fully paid to K V Pharmaceuticals, USA (KV). The Cumulative Redeemable Preference shares carry dividend of 6% (Rs.60 per share). The Preference shares are redeemable at par along with accrued unpaid dividend on or before December 31, 2012. If any of these shares are not redeemed on the said date, the redemption price subsequent to December 31, 2012 shall contain an increasing default premium which shall be 10%, if redemption occurs in the year 2013 and an additional 10% per each year there after in which the shares are redeemed. These shares are entitled to dividends at the rate of 15%, (Rs. 150 per share) after 2012.Preference Dividend unpaid at December 31, 2007 represents dividends on these preference shares for the years 2005 and 2006. While these dividends have been declared, in accordance with the Share Purchase Agreement with KV, they are due and payable only on or after December 31, 2010, without interest thereon.No dividends were appropriated in 2007 in the absence of distributable profits.

6. Fully convertible debentures:On June 8, 2007, the Company allotted 5,045,725 fully convertible debentures at a price of Rs.400 per debenture, on preferential basis, to associate companies of Mr.Elcemar Almeida, a non resident and non executive director of the Company. These convertible debentures carry a interest @ 5% p.a. and are convertible into an equivalent number of fully paid up equity shares of Rs.10 each, in one or more tranches, at any time within a period of 18 months from the date of issue.As at December 31, 2007, none of the debentures has been offered for conversion.

7. Share Warrants: (a) As authorised by the shareholders of the Company in the Extra-Ordinary General meeting held on January 18, 2005,

the Board of Directors resolved on February 2, 2005 to allot 1,616,000 warrants to the promoters and 219,826 warrants to Agnus Holding Private Ltd. During 2006, the promoters, namely, Mr.Arun Kumar and Mr.K.R.Ravishankar transferred their rights in respect of 808,000 warrants each in favour of Agnus Holdings Pvt.Ltd.,resulting in Agnus Holdings Private Ltd holding the entire 1,835,826 warrants. The warrants were convertible by August 1, 2006. During the current year the Company forfeited the upfront money of Rs.35.74 Million received, as these warrants were not converted into equity shares.

(b) As authorised by the shareholders of the Company in the Extra-Ordinary General meeting held on May 3, 2007, the Company, on May 23, 2007, issued 5,600,000 warrants convertible into an equivalent number of fully paid up equity shares of Rs.10 each at a price of Rs.342.10 per warrant, on preferential basis to Agnus Holdings Private Limited, a promoter group Company. These warrants are convertible, in one or more tranches, at any time within a period of 18 months from the date of issue. On July 5, 2007, the Company allotted 50,000 shares to Agnus Holdings Private Limited, pursuant to conversion of an equivalent number of warrants (out of the warrants referred in (b) above). An amount of Rs.189.87 Million included in the Balance Sheet as at December 31, 2007 represents the upfront monies received towards the total of 5,550,000 warrants that are outstanding at the said date.

8. employee Stock option Scheme:In the extraordinary general meeting held on January 25, 2007, the shareholders approved the issue of 1,000,000 options under the scheme titled “Strides Arcolab ESOP 2006”. The Strides Arcolab ESOP 2006 replaces the existing option scheme, namely, Strides ESOP 2006, which was approved by the shareholders on June 15, 2006 but was never implemented.

The Strides Arcolab ESOP 2006 allows the issue of options to employees of the Company and its subsidiaries (whether in India or abroad). Each option comprises one underlying equity share. As per the Scheme, the Compensation committee grants the options to the employees deemed eligible. The exercise price of each option shall not be less than 85 per cent of the “Market Price” as defined in the guidelines referred above. The options granted vest over a period of 3 years from the date of the grant in proportions specified in the Scheme.

Under this scheme, 400,000 options have been granted to some of the eligible employees as at December 31, 2007, but none of these options had vested as at December 31, 2007. The difference between the fair price of the share underlying the options granted, on the date of grant of option and the exercise price of the option (being the intrinsic value of the option), is expensed over the vesting period. Consequently an amount of Rs. 4.40 Million (net of recoveries from subsidiaries of Rs. 0.32 Million) has been charged to the Profit and Loss account for the year under Personnel costs.

Details under the above scheme:Number of options granted during the year – 400,000Weighed average exercise price of the these options – Rs. 256.35The exercise prices for options outstanding: Rs.297.70 for 200,000 options and Rs.215 for the balance options. Weighted average remaining contractual life of the options – 2 years 7 monthsThe impact on the Earning per share if the ‘fair value’ of the options (on the date of the grant) were considered instead of the ‘intrinsic value’ is as under:

2.20



Particulars Dec 31, 2007

Net loss (as reported) 501.21

Less: stock based employee compensation (intrinsic value) 4.40

Add: stock based compensation expenses determined under fair value method for the grants issued (See note below)

6.92

Net loss (proforma) 503.73

Rs.

Basic loss per share (as reported) (15.57)

Basic loss per share (proforma) (15.64)

Diluted loss per share (as reported) (15.57)

Diluted loss per share (proforma) (15.64)

Note: The fair value of the options have been determined under the Black-Scholes model. The assumptions used in this model for calculating fair value is: risk-free interest rate of 6.03%, expected life: 3 years, expected volatility of share: 32.98% and expected dividend yield: 0.38%.

9. The revised Accounting Standard 15 ( AS-15 ) – “Employee Benefits“ is applicable to the Company with effect from January 1, 2007. In line with the transitional provisions of revised AS–15, the net incremental liability towards employee benefits, (leave salary and gratuity) of Rs.3.67 Million has been adjusted to the opening balance of General Reserves.

10. during the year ended december 31, 2007a. The Company entered into a share purchase agreement with the shareholders of Grandix Pharmaceuticals Limited

(Grandix), Chennai, India on June 9, 2007 for acquisition of 100% holding in that Company. As at December 31, 2007, the Company has acquired 99.59% of the total share holding in Grandix, making Grandix a subsidiary of the Company. With this acquition, Grandix Laboratories Limited, a wholly owned subsidiary of Grandix Pharmaceuticals Limited has become subsidiary of the Company. Pending satisfactory completion of certain conditions referred in the Share Purchase agreement, the Company has retained Rs.18.40 Million of the total consideration and the same is included under Sundry creditors as at December 31, 2007.

The Company has a commitment of Rs.4.37 Million towards purchase of balance 0.41% of the outstanding capital in Grandix Pharmaceuticals Limited.

b. The Company entered into a Subscription and Shareholders agreement with Aspen under which Aspen subscribed to 49% of the share capital of Onco Therapies Limited (Onco). Onco is set up to operate in the Oncology products line of business that the Company is in the process of building up.In accordance with the agreement referred above, the Company is required to sell to Aspen at a future date, 1% of the total issued and outstanding equity share capital of Onco on terms as documented in a Voting rights assignment agreement dated November 26, 2007. Under this agreement, any voting rights that may accrue in respect of such 1% of the total issued and outstanding share capital of Onco shall be exercised by Aspen from the date of signing of such Voting Rights agreement, in a manner which it deems fit.The Company has entered into another Agreement with Onco to transfer its Oncology manufacturing facility, being put up inBangalore,foraconsiderationamountingtoUS$32.50Million(payablebyOncoinequivalentIndianRupees).Underthis agreement the Company has:• transferredthemoveableandimmoveableassetsrelatingtotheOncologymanufacturingfacilityandthecontracts

awarded to various suppliers in connection with the facility; and• undertakentheobligationsofcompletingthefacility,includingallfinancialobligationsrelatedthereto.As at December 31, 2007, the Company has estimated the financial commitment to complete the Oncolgy facility to be about Rs. 568.13 Million.

c. (i) The soft gelatin manufacturing facility in Somerset, New Jersey, USA, owned by it’s subsidiary, Strides Inc, USA has been shut down on account of changed regulations which made the operation of the facility unviable. Consequential adjustments has been made in the subsidiary’s assets and liabilities, resulting in a charge of Rs.522.63 Million.

(ii) Starsmore Limited, a step subsidiary, entered into an agreement with Aspen Pharmacare Holdings Ltd (Aspen) for a saleof50%ofitsholdinginPowercliffLimitedforaconsiderationofUS$25.75Million(approximatelyRs.1,014.55Million).AspenhaspaidanamountofUS$15.00Million(Rs.591.00Million)atthebalancesheetdateandthebalanceis payable by Aspen in terms of the agreement over the period ending Decemeber 31, 2009. The profit of Rs.1,075 Million arising from such sale has been included under Other Income.

(iii) As on December 31, 2007, the Company assessed the investment in its wholly owned subsidiary, Arcolab SA, Switzerland for permanent diminution, if any. Based on such analysis, the Company estimated the permanent diminution in value of investment to the extent of Rs.17.22 Million.

2.21


11. Interest in Joint venturesThe Company’s aggregate share of the Assets and Liabilities (as at December 31, 2007) in the above Joint Venture and the share in the income and expenses of the Joint Venture for the year ended December 31, 2007 is as follows:


ParticularsAkorn Strides

LLCSagent Strides

LLCOnco Therapies

LimitedPowercliff

LimitedPlus Farma ehf

A Assets 67.41(67.41)

49.91(-)

397.57(-)

295.50(-)

219.70(-)

B Liabilities 1.08(1.12)

2.40(-)

131.51(-)

0.41(-)

225.86(-)

C Expenses -(0.05)

-(-)

-(-)

0.47(-)

68.16(-)

D Income -(-)

-(-)

-(-)

-(-)

62.60(-)

The figures pertaining to Akorn Strides LLC, Sagent Strides LLC and Plus Farma ehf, are based on the unaudited financial statements of the respective entities compiled by the management of the parent Company and relied upon by the Auditors.

12. Unbilled revenue includes income recognised on development services contracts and contracts for production of dossiers, against which no invoices are raised, and are nett off advances received against the respective contracts.

13. Previous year’s figures have been recast / restated, wherever necessary, to conform to the current year’s classification.

14. Details of Research and Development expenditure incurred:


Particulars For the Year ended dec 31, 2007

For the Year ended dec 31, 2006

Salaries 130.88 92.37

Materials 79.45 47.76



Interest 0.57 17.33

Travelling expenses 5.99 7.34

Advertisement expenses 0.78 3.37

Rent 18.16 15.49

Depreciation 26.11 21.26

Others 40.78 36.22

Total 364.85 276.92

The above include costs associated with the development services undertaken for customers and are as certified by the management, and relied upon by the Auditors.

15. During the year pursuant to the approval of the Board of Directors, the Company decided to dispose of its subsidiary Sequent Scientific Ltd, Mangalore for a consideration of Rs.55.20 Million resulting in a loss of Rs. 95.30 Million. The loss on disposal has been netted off under Other income.

The subsidiary formed part of a separate business segment, Contract Research & Manufacturing, under AS 17 (Segment Reporting), prior to the sale. The entire sale consideration was received in cash and the discontinuance of the business was completed on November 26, 2007.

2.22


The results of the discontinued business were as under: (Rupees in Millions)



Revenue 421.14 420.19

Operating expenses 416.45 409.13

Profit / (Loss) before tax 4.69 11.06

Tax expense 2.98 3.90

Profit / (Loss) after tax 1.71 7.16

The net cash flows from the discontinued operations were as under:

Operating activities Rs 49.96 Million

Financing activities Rs 225.96 Million

Investing activities Rs 270.57 Million

16. Consolidated Segment InformationThe primary reportable segments have been classified based on the nature of business broadly into two, i.e. Pharmaceuticals and Contract Research and Manufacturing (CRAM). These business segments have been identified considering:a) the nature of products and servicesb) the organisational structure, andc) the internal financial reporting system.

Information about Primary Segments (Rupees in Millions)

Particulars Pharma CRAMInter-segment adjustments

Consolidated

Sales to external customers6,839.25

(7,098.72)416.87

(331.12)7,256.12

(7,429.84)

Other allocable segment income-0.23

(3.44)-0.23 (3.44)

Inter-segment sales-

(13.11)4.50

(85.63)-4.50

(-98.74)-

(-)

Total Revenue 6,839.25(7,111.83)

421.14(420.19)

-4.50(-98.74)

7,255.89(7,433.28)

Segment result before interest & taxes after excluding other unallocable income and exceptional items

-631.14 (869.87)

29.46 (34.81)

-601.68 (904.68)

Unallocable income net of Unallocable expenses1,392.60 (168.70)

Interest expense-596.76(408.03)

Exceptional items [Refer Note.C.10.c (i) & (iii)]-539.85

(-)

Profit / (-) Loss before tax and minority interest-345.69

(665.35)

Provision for taxation :

- Current-119.23

(-105.88)

- Deferred67.39

(-61.14)

- Fringe benefit tax -3.98 (-6.51)

- Prior year taxes -115.03(-)

Profit / (-) after tax before minority interest-516.54 (491.82)

Note: Figures in brackets relate to previous year

2.23


Particulars of Segment Assets & Liabilities(Rupees in Millions)

Particulars Pharma CRAm Consolidated

Segment Assets14,494.40

(9,593.56)-

(717.31)14,494.40

(10,310.87)

Segment Liabilities4,039.55

(1,721.47)-

(129.05)4,039.55

(1,850.53)

other Information

Depreciation347.50

(291.83)16.31

(17.46)363.81

(309.29)

Amortization11.63

(25.00)1.69

(1.89)13.32

(26.89)

Other Non-cash expenditure 244.43(27.88)

-(0.13)

244.43(28.01)

Capital expenditure2,708.27

(1,453.80)1.28

(169.16)2,709.55

(1,622.96)

Unallocable Assets

Goodwill (on consolidation)5,527.48

(1,695.12)

Investments19.45

(14.97)

Advance payment against taxes286.79

(240.07)

Miscellaneous Expenditure (to the extent not written off or adjusted)

6.37 (8.67)

Total 5,840.09 (1,958.83)

Unallocable Liabilities

Minority Interest [includes Monies pending allotment of shares Rs.Nil (Previous year Rs.Nil)]

169.34 (527.20)

Loans - secured4,904.88

(3,598.86)

Loans - unsecured7,869.01

(1,919.70)

Deferred tax liabilities104.26

(196.22)

Provisions481.57

396.60)

Total 13,529.04 (6,638.58)

Note: Figures in brackets relate to previous year

2.24


Information about Secondary Segment

Geographic SegmentRevenue attributable to location of customers is as follows:

Geographic locationRevenue from external customers for the year ended Dec 31, 2007

Revenue from external customers for the year ended Dec 31, 2006

Rupees in Millions

%Rupees in Millions

%

Africa 1,238.84 17% 830.18 11%

North America & Europe 1,615.30 22% 1,967.50 27%

South & Central America 2,444.29 34% 3,503.64 47%

India 767.14 11% 439.53 6%

Rest of the World 1,190.55 16% 688.99 9%

Total 7,256.12 100% 7,429.84 100%

Segment assets based on their location are as follows:


Geographic location Carrying amount of segment assets

Additions To Fixed assets

Carrying amount of segment assets

Additions To Fixed assets

At dec 31, 2007 At dec 31, 2006

Africa 356.72 73.06 710.22 0.08

North America & Europe 3,644.73 739.87 2,351.11 444.69

South & Central America 3,530.48 1,092.88 1,807.24 521.00

India 6,440.71 795.39 5,240.73 652.92

Rest of the World 521.76 8.35 201.57 4.27

Total 14,494.40 2,709.55 10,310.87 1,622.96

Note: Additions to fixed assets disclosed above do not include assets on the date of acquisition in respect of new subsidiaries that have been consolidated during the year.

17. deferred TaxationTax provision has been made in accordance with the requirements of Accounting Standard 22 “Accounting for taxes on income”The net deferred tax liability included in the balance sheet comprises the tax impact arising from timing differences on account of:


Particulars For the year ended dec 31, 2007

For the year ended dec 31, 2006

Depreciation (626.32) (604.99)

Section 43B Disallowances 15.23 12.24

Business Loss 306.68 73.00

Others (27.82) -

(332.23) (519.75)

Deferred tax liability (net) relating to the above 104.26 196.22

Recognition of Deferred tax assets with respect to Business losses has been done only in cases where there are corresponding timing differences creating Deferred tax liabilities and the amount of such assets recognised is restricted to the extent of such liabilities.

2.25


18. Related Party Transactions :Names of Related Parties:

Joint Venture •AkornStridesLLC,USA

•LaboratoriosDomac,Spain

•PlusFarmaehf.Iceland

•Farma Plus AS, Norway (Wholly owned subsidiary of Plus Farma ehf. Iceland)

•PowercliffLimited,Cyprus

•SagentStridesLLC,USA

•OncoTherapiesLimited,India

Associates •Albatross,anAssociateofPlusFarma (a step down joint venture of the Company)

Key Management Personnel •Mr.ArunKumar–ViceChairman&ManagingDirector

•Mr.K.R.Ravishankar-Director, (Ceased w.e.f December 31, 2007 as Executive Director)

•Mr.VirtanesSaatci

•Mr.V.Madhusudhan

•Mr.LincolnGomes

•Mr.ElcemarAlmeida

•Mr.MarkBisset

•Mr.CarloCantabene

•Mr.Manikandan

•Mr.MohanaKumarPillai

•Mr.R.S.Prasad(Ceasedw.e.fMarch31,2006)

Enterprises owned or significantly influenced by key management personnel and relatives of key management personnel

•ArcolabIndiaPvt.Ltd.

•KeerthapathiRavishankar–HUF

•Mrs.DeepaArunKumar

•Mrs.Saraswathi.K

•VedicElementsPvtLtd

•NetEquityVenturesPvt.Ltd

•AgnusHoldingsPvtLtd

•NousInfosystemsPvt.Ltd

•EverronSystems(India)Ltd

•ChayadeepPropertiesPvt.Ltd.

•PatsysConsultingPvt.Ltd.

•XlenseaProductsPvt.Ltd.

•CarylPharmaPvt.Ltd.

•FraxisLifeSciencesLtd

•PIDrugs&PharmaceuticalsLtd.

•AtmaProjects

•SequentScientificLtd,Indiaw.e.f26.11.2007

2.26


Details of transactions with Related Parties (Rupees in Millions)

Particulars Associates Joint ventures Key management Personnel

enterprises owned or significantly influenced by

key management personnel or their

relatives

2007 2006 2007 2006 2007 2006 2007 2006

Sale of materials / services

1. Akorn Strides LLC, USA 7.22 28.88

2. Sagent Strides LLC, USA 44.14 -

3. Powercliff Ltd, Cyprus 27.19 -

4. Onco Therapies Limited 10.20 -

Sales of fixed assets / transfer of undertaking


Interest and other income

1. Sequent Scientific Ltd 1.04 -

Purchase of materials

1. P I Drugs & Pharmaceuticals Ltd

0.84 -

2. Vedic Elements Pvt Ltd - 9.28

Interest paid

1. Agnus Holdings Pvt Ltd - 0.49

Remuneration and sitting fees

1. Mr. Arun Kumar 4.80 20.29

2. Mr. K R Ravishankar 4.80 15.72

3. Mr. R S Prasad - 4.37

4. Mr. Virtanes Saatci - 4.47

5. Mr. Padmakumar Pillai - 9.30

6. Mr. V Madhusudhan 23.73 26.70

7 Mr. Lincoln Gomes 6.95 6.41

8 Mr. Elcemar Almeida - 5.30

9. Mr Carlo Cantabene 2.22 -

10. Mr. Mohana Kumar Pillai 3.52 -

11. Mr. Manikandan 7.38 -

Reimbursement of expenses incurred by

1. Agnus Holdings Pvt Ltd., - 0.56

2. Mrs. Deepa Arun Kumar - 0.50

3. Mrs. K Saraswathi - 0.50

4. Mr. K.R.Ravishankar - 0.66

2.27



Particulars Associates Joint ventures Key management Personnel

enterprises owned or significantly influenced by

key management personnel or their

relatives

2007 2006 2007 2006 2007 2006 2007 2006

Rent Paid

1. Chayadeep Properties Pvt Ltd 38.50 42.70

Loans and advances given by / repaid by Company

1. Agnus Holding Pvt Ltd., - 44.50

2. Mr. Arun Kumar 18.30 -

3. Mr. K.R.Ravishankar 8.75 -


Loans and advances taken by / repaid to Company

1. Agnus Holding Pvt Ltd., - 44.50

Investments during the year


2. Albatross 19.45 - -

Refund of Share Application monies received against share warrents

1. Agnus Holdings Pvt Ltd 206.97 318.58

Payment of Share application money pending allotment

1. Agnus Holdings Pvt Ltd 318.57 -

Investment sold

1. Fraxis Life Sciences Ltd (See Note No1)

55.20 -

Forfeiture of amount received for share warrants

1. Agnus Holdings Pvt Ltd 35.74 -

deposits given

1. Atma Projects 85.00 -

Advances Receivable (Payable) as at

1. Akorn Strides LLC 6.43 7.22

2. Atma Projects 85.00 -

3. Chayadeep Properties Pvt Ltd. 44.89 0.27

4. P I Drugs & Pharmaceuticals Ltd. (0.84) -

5. Vedic Elements Pvt Ltd., 0.45 1.24

6. Powercliff Limited (295.50) -

7. Sagent Strides LLC (28.60) -

8. Mr. Arun Kumar 18.30 - -

9. Mr. K.R. Ravishankar 8.75 - -

10. Onco Therapies Ltd 37.39 -

Note : 1. Investment in Sequent Scientific Limited was sold to Fraxis Life Sciences Limited during the year.

2. Related parties disclosed above are as identified by the Management and relied upon by the Auditors.

2.28


19. Leases The group’s significant leasing arrangements are mainly in respect of factory buildings, residential and office premises. The aggregate lease rentals payable on these cancellable leasing arrangements charged to the Profit and Loss account is Rs.66.20 Million (Previous year Rs. 105.96 Million).

Future lease rentals payable in respect of lease: (Rupees in Millions)



Not Later than one year 38.13 14.79

Later than one year upto five years 106.56 1.14

Later than five years - -

20. Development Income included under Schedule J to the financial statements are net of reversals of such income recognised in prior years amounting to Rs.203.41 Million (Previous year Rs.Nil). The reversal of such incomes have arisen due to cancellation of some of the contracts with customers.

21. Disclosures in respect of Contracts in Progress (relating to Contracts for Production and Sale of Dossiers).

Aggregate amount of Costs incurred and recognised profits (less Losses) upto December 31, 2007, in respect of such contracts Rs. 27.19 Million.

Amount of Advances received in respect of such contracts – Rs. 295.50 Million.

22. earnings per share : (Rupees in millions)

Particulars For the year ended Dec 31, 2007 For the year ended Dec 31, 2006

Profit / (Loss) after tax, minority interest and share from Associate

(501.21) 402.29

Differential tax on equity dividend of previous year (2.07) -

Dividend tax on equity dividend distributed by Subsidiaries

(6.72) -

Preference Dividend and tax there on (34.51) (33.66)

Profit / (Loss) attributable to Equity Shareholders (544.49) 368.63

Interest on Foreign Currency Convertible Bonds (FCCBs) and Fully Convertible debentures (FCDs)

67.34 11.15

Profit / (Loss) attributable to Equity Shareholders (on dilution)

(477.15) 379.78

Weighted Average number of Shares for Basic EPS

34,978,947 34,954,289

Add: Effect of Warrants, FCCB and FCD’s outstanding 12,349,421 5,756,077

Weighted Average Number of equity shares for diluted EPS

47,328,368 40,710,366

Rs. Rs.

Nominal value of equity shares 10.00 10.00

Earnings / (Loss) Per Share

Basic (15.57) 10.55

Diluted (15.57) 9.33

Notes:

• Intheabsenceofprofitsin2007,nopreferencedividendsandtaxthereonhasbeenaccruedforintheProfitandLossaccount. However these have been considered for determining Loss per share in 2007.

• TheWarrants,FCCB’sandFCDsoutstandingareantidilutiveandhenceignoredforthepurposesofcomputingDilutedLoss per share in 2007.

2.29


23. During 2007, the Company has paid excess managerial remuneration to its Whole time directors to the extent of Rs. 27.05 Million. Such excess payments is subject to the approval of the Central Government, for which an application is being made.

24. Cash flow statement

a) The Cash Flow Statement has been prepared under the indirect method as set out in the Accounting Standard – 3 on “Cash Flow Statements”, issued by the Institute of Chartered Accountants of India.

b) Interest paid is inclusive of and purchase of Fixed Assets excludes, interest capitalised Rs.8.60 Million (Previous year Rs. 13.41 Million).

c) Reconciliation of Cash and Cash Equivalents to Cash and Bank balances included in Schedule G.A.3


ParticularsFor the year ended

Dec 31, 2007For the year ended

Dec 31, 2006

Cash in hand 2.00 7.28

Balance with banks in current accounts [Includes unutilized monies Rs. 4.01 Million (Previous year Rs.15.67 Million) out of the issue of Foreign Currency Convertible Bonds. These monies can be utilized for certain specified purposes for which the Bonds were issued].

1792.30 260.62

Cash and cash equivalents 1794.30 267.90

Margin money not included above 123.28 107.15

Cash and bank balances as per Schedule G.A.3 1917.58 375.05

25. Disclosure on Derivatives and forward contracts that are outstanding at the balance sheet date

(I). Derivative Instruments:

The Group has entered into the following derivative instruments:

(a) Forward Exchange Contracts [being a derivative instrument], which are not intended for trading or speculative purposes, but for hedge purposes, to establish the amount of reporting currency required or available at the settlement date of certain payables and receivables.

The following Forward Exchange Contracts are outstanding as on December 31, 2007:

Currency Amount Buy/Sell Cross Currency

US Dollar 17,500,000 Sell Rupees

US Dollar 5,000,000 Buy Rupees

Swiss Franc 7,524,000 Buy US Dollar

(b) Interest Rate Swaps to hedge against fluctuations in interest rate changes:

No. of contracts: 3

NotionalPrincipal:US$20Million

(c) Currency Swaps (other than forward exchange contracts stated above) to hedge against fluctuations in changes in exchange rate

No. of contracts: 6

NotionalPrincipal:US$80Million

An amount of Rs.155.48 Million (Previous Year Rs. Nil) has been accrued towards estimated losses incurred on Derivative instruments that are outstanding at December 31,2007.

(II) Derivative Instruments (causing an unhedged foreign currency exposure):

Currency Amount Buy/Sell

US Dollar 8,000,000 Sell

26. Inventories at December 31, 2006 (pertaining to the subsidiaries) amounting to Rs.250.45 Million representing 20.32% of total inventories at that date has been valued using FIFO method instead of Weighted average method.

2.30


27. a. Employee benefits pertaining to overseas subsidiaries have been accrued based on their respective local labour laws. b. Details of Gratuity benefits provided to employees in the Company and its subsidiaries in India.


Sl. No.


I. Components of employer expense 1 Current Service cost 5.97


3 Expected return on plan assets (0.21)



6 Past Service Cost -

7 Actuarial Losses/(Gains) (2.64)

8 Total expense recognised in the Statement of Profit & Loss 5.96

II. Actual Contribution and Benefits Payments for year ended december 31, 20071 Actual benefit payments 2.90

2 Actual Contributions 5.39

III. Net asset/(liability) recognised in balance sheet as at december 31, 20071 Present value of Defined Benefit Obligation (DBO) 41.32

2 Fair value of plan assets 24.15

3 Funded status [Surplus/(Deficit)] (17.17)

4 Unrecognised Past Service Costs -

5 Net asset/(liability) recognised in balance sheet (17.17)

IV. Change in defined Benefit obligations during the year ended december 31, 20071 Present Value of DBO at beginning of period 35.07





6 Plan amendments -

7 Acquisitions -

8 Actuarial (gains)/ losses 0.34


10 Present Value of DBO at the end of period 41.32

V. Change in Fair Value of Assets during the year ended december 31, , 20071 Plan assets at beginning of period 18.54

2 Acquisition Adjustment -

3 Actual return on plan assets 3.12

4 Actual Company contributions 5.39


6 Plan assets at the end of period 24.15

VI. Assumptions 1 Discount Rate 8.00%

2 Expected Return on plan assets 7.80%

3 Salary escalation 7.40%





2.31


STAT

EMEN

T PU

RSU

ANT

TO S

ECTI

ON

212

OF

THE

COM

PAN

IES

ACT,

195

6, R

ELAT

ING

TO

SU

BSID

IARY

CO

MPA

NIE

S.

Ru

pees

In M

illio

ns

Nam

e of

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sidi

ary

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pany

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try

12

34

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l ye

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idia

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of S

trid

es

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lab

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l Ltd

co

nseq

uent

to

mer

ger o

f St

rides

Pol

ska

sp.z

o.o

with

St

rides

Arc

olab

Pol

ska

sp.z

o.o)

Pola

ndD

ecem

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1,

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May

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200

638

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equ

ity

shar

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f PLN

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each

(

Prev

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yea

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,114

equi

ty s

hare

s of

PLN

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) fu

lly p

aid

up

100%

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6.13

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ilN

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rcol

ab S

DN B

HD

( sub

sidi

ary

of S

trid

es

Arco

lab

Inte

rnat

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l Lt

d., )

Brun

eiD

ecem

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1,

2007

Dec

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r 24,

20

071

shar

e of

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olla

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eac

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res

of

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fully

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gust

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0 (P

revi

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year

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equ

ity

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of A

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1 ea

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ully

pai

d up

10

0%(1

8.63

)(3

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es It

alia

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l (

subs

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715

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000

equi

ty s

hare

s of

Eur

o 1

fully

pai

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100%

(116

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2.35


Nam

e of

Sub

sidi

ary

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pany

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try

12

34

The

fina

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l ye

ar o

f th

e Su

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ded

on

date

fro

m

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hey

beca

me

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mit

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with

it

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in

the

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at

the

end

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at

the

end

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th

e fin

anci

al

year

of

the

subs

idia

ry

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pani

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The

net

aggr

egat

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ount

of

the

sub

sidi

ary

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pani

es P

rofit

/(Lo

ss)

so

far

as it

con

cern

s th

e m

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rs o

f th

e ho

ldin

g Co

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a) N

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deal

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unts

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ear

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cem

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31, 2

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ii)

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ious

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ears

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ince

th

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mpa

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the

fi

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ear

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the

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evio

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fina

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l yea

rs

of t

he s

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mpa

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sin

ce

they

bec

ame

the

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ing

Com

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's su

bsid

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s.

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es L

atin

a, S

AU

rugu

ayD

ecem

ber 3

1,

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5,

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2,92

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0 (P

revi

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year

1,9

59,9

18)

Equi

ty s

hare

s of

the

fac

e va

lue

of

US$1/-eachfullypaidup.

100%

(281

.55)

(155

.76)

Nil

Nil

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es S

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tern

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1 (P

revi

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equi

ty s

hare

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ly p

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ital

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eria

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., ( s

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rica

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)N

iger

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7,40

0,00

0 eq

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sha

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of N

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each

ful

ly p

aid

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%0.

27

Nil

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es In

c.U

SAD

ecem

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1,

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st 3

0, 1

999

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00

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face

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ear 4

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of t

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84.5

3%

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0%

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Nil

2.36


Key

Info

rmat

ion

pert

aini

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o Su

bsid

iary

com

pani

es F

inan

cial

Sta

tem

ents

as

at d

ecem

ber

31,2

007

(Rup

ees

in M

illio

ns)

Nam

e of

the

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sidi

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try

of

Inco

rpor

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n

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tal (

incl

udes

m

onie

s pe

ndin

g al

lotm

ent)

Rese

rves

Tota

l Ass

ets

Tota

l Li

abili

ties

Inve

stm

ent

Turn

over

Prof

it be

fore

Ta

xTa

x Pr

ovis

ion

Prof

it af

ter

Tax

Prop

osed

di

vide

nd

Arco

lab

SASw

itze

rland

35.

02

(0.5

6) 3

4.46

3

4.46

-

4

1.75

(1

0.10

) -

(1

0.10

) -

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apha

rm S

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Ital

y 8

5.58

4

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373

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373

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(7.2

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de

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taci

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ifar

ma

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nezu

ela

19.

02

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61

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-

135

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6.4

1 1

8.66

-

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farm

Ltd

a.Br

azil

445

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280

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2,5

54.9

4 2

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-

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9 (2

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) 1

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3 (1

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5) -

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harm

a Lt

d.U

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188

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187

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66

6.6

0 1

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6 -

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g H

ouse

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Asi

a) P

te L

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apor

e 4

1.01

2

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6 -

4

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s 1

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2.37


Consolidated Financials 2007 2007 2006 2005 2003-2004 2002-2003

No. of Months In USD Mio 12 months 12 months 12 months 15 months 18 months

Income, Profit & dividend

Total Income 219.50 8,648.48 7,601.98 5,293.44 4,624.50 4,276.73

EBIDTA 29.65 1,168.06 1,409.56 1,158.77 1,061.38 475.03

Depreciation & Amortisation 9.57 377.14 336.18 235.75 214.18 292.70

Exceptional Items 13.70 539.85 - - - -

Profit After Tax (PAT) (12.72) (501.21) 402.29 485.64 439.98 (271.95)

Equity Dividend - - 69.90 69.90 50.64 -

Dividend rate % - - 20.00 20.00 15.00 -

Assets & liabilities

Net Worth

Equity Share Capital 8.88 350.04 349.54 349.54 337.58 306.89

Preference Share Capital 12.48 491.61 491.61 491.61 - 60.00

Monies pending allotment 4.82 189.87 354.31 138.90 - 102.98

Reserves & surplus 43.90 1,729.65 2,585.13 2,123.71 1,739.45 1,552.66

Total networth 70.08 2,761.17 3,780.59 3,103.76 2,077.03 2,022.53

Long Term 71.58 2,820.20 2,473.58 1,366.62 1,651.93 1,224.80

Short Term 61.41 2,419.40 1,274.58 1,200.99 536.99 626.98

FCCB / FCD's 191.23 7,534.29 1,770.40 1,802.00 - -

ESOP 0.12 4.73 - - - -

Borrowings: 324.21 12,773.89 5,518.56 4,369.61 2,188.92 1,851.78

Minority Interest 4.30 169.34 527.20 361.91 99.97 74.79

Deferred tax Liability 2.65 104.26 196.22 128.50 168.50 135.38

Total liabilities 401.36 15,813.39 10,022.57 7,963.78 4,534.42 4,084.48

Represented by

Fixed Assets

Gross Block 150.95 5,947.48 5,667.18 3,537.06 2,430.68 2,191.10

Net Block 188.53 7,427.91 5,816.32 3,837.10 2,224.66 1,752.23

Goodwill 140.29 5,527.48 1,695.12 1,281.06 30.97 358.87

Investments 0.49 19.45 14.97 0.31 614.07 81.12

Net Current Assets 71.88 2,832.18 2,487.49 2,821.03 1,641.47 1,674.37

Miscellaneous Expenditure 0.16 6.37 8.67 24.28 23.25 217.99

Total Assets 401.36 15,813.39 10,022.57 7,963.78 4,534.42 4,084.58

Key Indicators

Earnings Per Share (EPS) (0.40) (15.57) 10.55 13.43 13.13 (9.26)

Cash Earnings Per Share (CEPS) 0.67 26.56 37.11 31.67 28.75 15.12

Book Value 0.83 32.71 65.33 51.80 61.53 60.59

Debt : Equity Ratio - 3.75:1 1.12:1 1.02:1 0.80:1 0.61:1

Operating Profit Margin (%) - 13.51 18.54 21.89 22.95 11.11

Net Profit Margin (%) - (5.80) 5.29 9.17 9.51 (6.36)

Return on Net Worth (RONW %) - (18.15) 10.64 15.65 21.18 (13.45)

*1US$=Rs.39.40(Exchangerateason31.12.2007)

A HISTORICAL PERSPECTIVE

2.38



Strides Arcolab Limited

Registered office:201, Devavrata, Sector 17, Vashi, Navi Mumbai 400 703, India. Tel.: (91) 22 – 27893199 Fax No. (91) 22 – 27892942

Statutory Auditors Deloitte Haskins & Sells Deloitte Centre, Anchorage II, 100/2, Richmond road, Bangalore 560 025, India.

Advocates & Solicitors DSK Legal 4th Floor, Express Towers Nariman Point, Mumbai 400 021, India.

Corporate office: ‘Strides House’, Bilekahalli Bannerghatta Road, Bangalore 560 076, India. Tel.: (91) 80 – 66580738/739 Fax No. (91) 80 – 66580700/800 Email: [email protected] Website: www.stridesarco.com

Internal Auditors Gnanoba & Bhat Ist floor, Annamalai Arcade, # 45, 1st cross, Wilson Garden, Hosur Main Road, Bangalore 560 027, India.

R&d Centre: Strides Technology And Research, Bilekahalli, Bannerghatta Road, Bangalore 560 076. India. Tel.: (91) 80 – 66580290 Fax No. (91) 80 – 66580200/300

Registrars Karvy Computershare Private Limited, No.51/2, TKN Complex, Vani Vilas Road, Opp: National College, Basavanagudi, Bangalore 560 004, India. Tel. No. (91) 80-26613400 Tel. No. (91) 80-26621169

Bankers & Financial Institutions State Bank of India, State Bank of Hyderabad, Axis Bank Limited, Export Import Bank of India, State Bank of Indore, Punjab National Bank, Technology Development Board, Standard Chartered Bank, Deutsche Bank.

Soft Gelatin Capsules ‘KRS Gardens’, Suragajakanahalli, Anekal Taluk Bangalore 560 106, India.

Cepha Products No.152/6, 164/11 & 154/16, Doresanipalya, Bilekahalli, Begur Hobli, Bannerghatta road, Bangalore 560 076, India.

Tablets & hard Gelatin Capsules ‘KRS Gardens’ Suragajakanahalli, Anekal Taluk Bangalore 560 106, India.

Anti TB Block ‘KRS Gardens’ Suragajakanahalli, Anekal Taluk Bangalore 560 106, India.

Sterile Products Bilekahalli, Bannerghatta Road, Bangalore 560 076, India.

Antibiotics Bilekahalli, Bannerghatta Road, Bangalore 560 076, India.

Global Remedies Limited 124, Sipcot Industrial Complex, Hosur – 635 126, India.

Solara SA de CV AV, Paseo De Las Palmas 330 Plant Baja Lomas De Chapultepec, C.P. 11000, Mexico D.F.

Cellofarm Ltda., Rodovia BR-101, KM 271, (Contorno De Vitoria). S/N, Tims-Sector Industrial-Q.10-M.03, Carpina-Serra-ES 29160-970, Brazil.

Nigeria Gate No. 02, Ladipo Oluwole Avenue, Opposite Cocoa warehouse, Off Oba Akran Road, Ikeja Industrial Area, Ikeja Lagos, Nigeria.

Strides Arcolab Polska sp.zo.o ul.Daniszewska 10 03-230 Warszawa NIP 813-34-15-000, Poland.

Beltapharm SpA 20095 Cusano MIL. (MI) – Via Stelvio, 66 Italy.

drug houses of Australia (Asia) Pte Limited #2 Chia ping road, Haw Par Tiger Balm Building, Singapore 619968.

onco Therapies Ltd Plot No. 284-B, Bommasandra Jigani Link road, Industrial Area, Jigani Village, Jigani Hobli, Anekal Taluk, Bangalore 562 106.

Australia 10 Latham Court, Glen Waverley, VIC 3150.

Cameroon BP 1834, Rue DUBOIS de Saligny, AKWA, Douala, Cameroon.

South Africa 6 De Veer Ave, Arcadia, Pretoria 0007, Republic of South Africa.

Tchad BP 1167, N’Djamena, Tchad.

United Kingdom 930 High road, North Finchley, London, N12 9RT.

Chennai “Jamals Sonu Terrace”, 42, Loganathan Nagar, 100 Feet road, Chennai - 600 094.

Venezuela Centro Empresarial La Piramide, Piso 4, Oficina 408, Avenida Rio Caura, Urbanisation Parque Humboldt, Estado Miranda, Caracas 1080 Venezuela.

Vietnam 377/80 Le Dai Hanh Street, Ward 11, District 11, HCMC, Vietnam.

Canada 33 Avenue Fort St Lambert Quebec J4P 3S9

europe Arcolab SA, Chemin Du Grand Puits 28, P.O.Box No.86, 1217 Meyrin 2, Geneva, Switzerland.

myanmar 343 Second floor, BO Aung Kyaw street, Kyauktada Township, Yangon, Myanmar.

Strides Inc., 37, Veronica Avenue, Somerset, NJ 08873, New Jersey – 08873 , U.S.A.

GLoBAL oFFICeS:

GLoBAL PLANTS:

2.39

strides annual report final annual report 2007... · operations, auditors' report, financial...

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