Directors Report of Aurobindo Pharma Ltd.

Mar 31, 2025

Your Directors are pleased to present the 38^th Annual Report of your Company together with the audited accounts for
the financial year ended March 31, 2025.

FINANCIAL HIGHLIGHTS
Consolidated and Standalone Financials

('' in millions)

	2024-25	2023-24	2024-25	2023-24
Revenue from operations	317,237	290,019	109,333	106,456
Profit Before Depreciation, Interest, Tax and Exceptional Items	71,730	63,832	28,857	28,401
Depreciation	16,494	15,217	2,972	2,546
Finance cost	4,572	2,897	2,300	1,826
Profit Before Tax	50,663	45,719	23,584	24,029
Provision for Tax	15,827	12,110	6,1 17	5,028
Net Profit After Tax	34,836	31 ,690	1 7,468	19,001
Net profit from discontinued operations	-	-	-	540
Other Comprehensive Income/ (Expense)	3,036	992	(53)	(17)
Total Comprehensive Income for the period	37,872	32,681	17,415	19,524

DIVIDEND

Considering the Buyback of shares for an aggregate
value of ''7,500 million during the year, the Company has
not declared and paid any dividend during the financial
year 2024-25. In the previous financial year 2023-24, the
Company had declared and paid interim dividends of
450% i.e., ''4.50 per equity share of ''1.

Pursuant to Regulation 43A of the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015, top 1,000
listed entities based on market capitalisation are required
to formulate a Dividend Distribution Policy.The Board has
approved and adopted the Dividend Distribution Policy
and the same is available on your Company''s website:
https://www.aurobindo.com/api/uploads/disclosure
under regulation/Dividend-Distribution-Policy.pdf

PERFORMANCE REVIEW

Your Company is one of the leading generic pharma
companies globally. Your Company is also the largest
supplier in the USA by prescription volume as per IQVIA
data for the year ending March 31, 2025.

On a standalone basis, your Company''s revenue increased
by 2.7% to ''109,333 million in FY25, as against ''106,456
million in the corresponding previous period. The
Formulations business increased by 5.8% to ''102,993
million. The API business witnessed a decline of 30.6% to
''6,340 million primarily driven by transfer of API business
to Apitoria in H2FY24. Profit Before Depreciation, Interest,

Tax and Exceptional Items for FY25 increased by 1.6% to
''28,857 million, compared to ''28,401 million in FY24. Profit
BeforeTax for the year declined by 1.9%%Y-o-Y to ''23,584
million. Your Company''s Net Profit After Tax (before Other
Comprehensive Income) decreased by 10.8% to ''17,415
million as against ''19,524 million in FY24.

On a consolidated basis, the revenue increased by 9.4%
to ''317,237 million.The formulations business (excluding
Puerto Rico) increased by 12.2% to ''273,882 million from
''244,191 million in the corresponding previous period.
The Active Pharmaceutical Ingredients (APIs) business
posted a growth of 1.9% to ''43,229 million vs. ''42,405
million in FY24. Profit Before Depreciation, Interest, Tax
and Exceptional Items stood at ''71,730 million, witnessing
a 12.4% increaseY-o-Y. Profit BeforeTax for the year stood
at ''50,663 million, compared to ''45,719 million in the
previous year. Your Company reported a Net Profit After
Tax (before Other Comprehensive Income) of ''34,836
million in FY25, vs. ''31,690 million in FY24. The Diluted
Earnings Per Share (reported) stood at ''59.81 in FY25,
compared to ''54.16 in FY24.

The US is the largest market for your Company and
accounted for 46.7% of the total revenue. US revenue
increased by 6.8% to ''148,156 million. Your Company
launched 33 products in FY25. Your Company''s market
share by prescription volume (IQVIA TRX) in the US,
for the quarter ending March 2025 stands at 10.6%,

positioning your Company as the largest generic
pharmaceutical player.

Your Company continues to strengthen its pipeline for
the global markets including the US market. As on March
31, 2025, your Company filed 861 Abbreviated New Drug
Applications (ANDAs) on a cumulative basis. Of the
total count, 690 have received final approvals and 29
received tentative approvals and 142 ANDAs are currently
under review.

Your Company''s revenue in its Europe formulations
business was ''83,559 million in FY25 compared to ''71,633
million in FY24.

Your Company now operates in ten countries in EU/UK and
is present across multiple channels including pharmacy,
hospital and tender business.

The ARV formulations business stood at ''10,367 million
in FY25, increased by 19.4% compared to ''8,681 million
in FY24.

Growth Markets segment, including Brazil, Canada,
Columbia and South Africa and others, grew by 26.3%
Y-o-Y to ''31,800 million.

OUTLOOK

FY25 saw growth across the businesses mainly driven by
volume gains and new product launches. The business
grew despite the challenging geo-political environment
leading to soaring inflation and supply chain disruptions.
Your Company''s efforts in building a resilient supply
chain through its backward integration efforts, expanding
manufacturing footprint through commercialization of
new plants, diversifying product portfolio and improving
operational efficiency helped it to navigate the challenges
and deliver continued strong performance.

Your Company made significant progress in advancing the
biosimilar programs during the year with two biosimilars
receiving approval from the European Medicines Agency
(EMA), one biosimilar receiving approval from the
Medicines and Healthcare Products Regulatory Agency
(MHRA) in the UK. Further The Committee for Medicinal
Products for Human Use (CHMP) at the EMA has adopted
a positive opinion for our trastuzumab biosimilar, with
marketing approval anticipated in mid-2025. Through
continued focus on R&D, the Company has advanced
the complex product portfolio and further enhanced the
capacity for commercialisation.

Your Company maintains its strong position in the key
geographies of the US and Europe and is poised to grow
through new launches and increasing access. In the US,
your Company has filed 861 ANDAs till March 31,2025, with
estimated total market potential of US$ 188 billion as per
IQVIA data. Out of the total ANDAs filed, 690 have received
final approval, while 171 ANDAs are in different stages of

the review process. During the year, your Company filed 31
ANDAs with the US FDA, including 6 ANDAs for specialty
products, and received final approvals for 31 products
including 3 for specialty products.

For the Europe market, your Company now has operations
in ten countries with full-fledged pharmacy, hospital and
tender sales infrastructure. It now ranks amongst the top
10 generic pharmaceutical companies in 8 countries of
Europe. Your Company aims to expand its market share
and grow through new launches.

Your Company preserved its ARV market dominance this
year by leveraging the multi-year supply contracts with
Global Fund, PEPFAR and South Africa businesses. Despite
price erosion, efficient capacity utilisation and award of
New/Supplementary contracts have been a key factor in
maintaining a leading position in the Dolutegravir-based
regimen which is the standard therapy for HIV

Your Company continues to focus on the Growth Markets
expansion with new launches, market share expansion
and foray into the new geographies. During the year,
your Company has commercialized the manufacturing
facility in Taizhou, China with an initial capacity of around
2 billion units. Moreover, in China, the Company has
received 15 approvals till March 31, 2025, which will be
manufactured in units in India. In Canada, your Company
has 214 approved products while 55 products are awaiting
final approval as at the end of FY25.

RESEARCH AND DEVELOPMENT (R&D)

Your Company remains committed to providing
affordable, high-quality medicines to positively impact
patients worldwide.

Aurobindo Pharma''s overall R&D set-up includes 9 centres
(5 in Hyderabad, 4 in US) and a dedicated team of more
than 1,500 world class scientific experts who continue to
drive a relentless pursuit of excellence.

The state-of-the-art laboratories, advanced equipment,
and modern technologies provide a conducive
environment for conducting experiments, analysis, and
formulation development.

The Company''s R&D expenditure stood at ''1,622 crore
(5.1% of revenue) in FY25 and at ''1,471 crore (5.1% of
revenue) in FY24.

Your Company''s R&D efforts are aimed towards
developing biosimilars, generic APIs, generic
formulations including orals, injectables, complex
products like inhalers, nasal sprays, depot injections
and transdermal patches. Your Company''s focus on
Specialty Drug Delivery System (SDDS) demonstrates
its commitment to delivering novel solutions that
address unmet medical needs.

Your Company''s focus on capability development has
contributed significantly to the success in submitting Drug
Master Diles (DMFs), Abbreviated New Drug Applications
(ANDAs) and formulation dossiers. During the year, your
Company has filed 31 ANDAs and received approvals for
31 ANDAs.

This year, the CuraTeQ team successfully completed
a Phase I clinical study for our denosumab biosimilar,
demonstrating pharmacokinetic similarity to the
denosumab products approved in the EU and US.
Furthermore, our four biosimilars currently in global
Phase III clinical trials have made significant progress, with
recruitment completed for three of the products. Among
these, the denosumab and omalizumab biosimilars are
poised to enter the filing phase in FY2026. The Phase
III studies for tocilizumab and denosumab to support
Marketing Authorization Application (MAA) filings in India
have been completed, with filings expected in mid-2025.

ENVIRONMENT, HEALTH AND SAFETY (EHS)
Environment

Environmental preservation has been critical to your
Company, and it has assigned the highest level of
priority across the units. To accomplish this sustainability
goal, we are leaning more towards renewable energy,
improving the co-processing of hazardous waste, reusing/
recycling 100% of non-hazardous waste, managing water
resources responsibly, and expanding green belts around
our facilities. We have adopted the best standards of
responsible manufacturing across our supply chain.

Health & Safety

Health, safety, and well-being of our employees and
associates are a crucial material topic for us. We are
committed towards instilling a healthy lifestyle and
a safe working environment. Our EHS&S framework
and management practices assure compliance while
prioritising product and process safety and safeguarding all
employees. Each manufacturing facility has departmental
and plant safety committee. Every month management
review meetings are conducted which comprises top
management from corporate and representatives from all
sites including site heads to examine safety performance
and streamline operational procedures critical to safety
requirements. In addition to the above lean daily
management meetings are also conducted daily with
senior leadership team to track the actions for continuous
improvement. Health and safety training is provided to
both permanent and contractual workers, ensuring that
our team understands the significance of safe procedures
and guidelines.

Risk identification and assessments are undertaken as
part of the process before scaling up. Before commencing
any chemical process in the manufacturing area, a
Hazard and Operability Study (HAZOP) is conducted.
Qualitative and quantitative risk assessments are carried

out for establishing effective controls. Evaluation of safety
performance through EHS score card is being carried on
monthly basis. This EHS score card provides insight to
help an organisation to understand its safety performance
by evaluating on monthly basis based on Key Performance
Indicators (KPI) identified. Inter unit audits are conducted
for gap assessments and performance improvement.
Regular knowledge sharing sessions are conducted for
sharing best practices among the manufacturing facilities.

Engagement in national and global initiatives on
Antimicrobial Resistance (AMR)

As a healthcare service provider, the Company is
partnering with ''The Access to Medical Foundation,''
which is monitoring what the 30 most active firms in
antimicrobial R&D and production are doing to combat
antibiotic resistance.

We participated in The Antimicrobial Resistance
Benchmark 2018, 2020 and 2021. The Company is also a
member of the ''AMR Industry Alliance,'' which is driving
antimicrobial resistance progress via common objectives
and commitment to increase access to high-quality
antimicrobial products, encourage responsible usage, and
reduce environmental concerns. We participated in AMR
Industry Alliance Survey report 2020, 2021,2022 and 2023.

AWARDS AND ACCOLADES

• HR Leader of the Year for Large scale organisations
at the prestigious Economic Times Human Capital
(ETHC) Awards 2025

• Innovation in Training for Manufacturing Excellence
Awards at the Pharma Manufacturing & Automation
Excellence Awards 2024.

• Eugia - I won the "Special Recognition Award'''' at
the 11^th CII Telangana State Level Quality Circle
Competition for Case Study on OSD Through
put Improvement Project on 26^th September. The
team now moves to Southern Region, next level
of competition.

• Eugia SEZ won "Silver Award" out of 46 Competitors
across all industries for case study on Yield
Improvement Project in Quality Circle Forum of India
(QCFI)-Kaizen competition on 27^th November 2024.

• Eugia- I won "Silver Award" out of 46 Competitors
across all industries for the case study of OSD
throughput Improvement Project in Quality Circle
Forum ofIndia (QCFI)- Kaizen competition on 27^th
November 2024.

• Unit- XV won ''Special Recognition Award'' at
the CII state level Kaizen Competition for Water
Conservation & Recycling Project: A Step towards
Sustainable Future on 22^nd November 2024.

• Merit Award at NIPM National HR Excellence Awards
for Eugia Pharma Specialities Limited

• Special Recognition award at the National Level
13^th Annual Kaizen Congress at Pune for case
study on Institutionalisation of TWI Training Within
Industry to achieve business results through rapid
manpower skills.

• CE Worldwide have organized 166^th Corporate Real
Estate & Facilities Management 2024 Hyderabad
Leadership Award Conference held on 28^th June 2024
at Hyderabad.

• Excellent Energy Efficient Unit & Most Innovative
Project, during the event of National Energy Awards
- 2024 conducted by CII from 10-12 September 2024

• 9^th CII National 5S Excellence Awards 2024-Diamond
Rating in Pharmaceutical & FMCG Category

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act,
2013 read with the Companies (Accounts) Rules 2014, a
separate statement containing the salient features of the
financial statements of Subsidiary companies/Associate
companies/Joint ventures is detailed in Form AOC-1 and
is in Annexure-1 to this Report.

The Company has formulated a Policy for determining
Material Subsidiaries. The Policy is available on the
Company''s website and can be accessed at https://
www.aurobindo.com/investors/disclosures-under-
regulation-46/policy-material-subsidiary

During the year, the following changes were implemented
in the subsidiaries / JVs of the Company:

New Subsidiaries / JVs

Agile Pharma BV, The Netherlands, a wholly owned
step-down subsidiary of the Company, acquired entire
share capital of Ace Laboratories Limited, UK, and made
it a wholly owned subsidiary of Agile Pharma BV, The
Netherlands effective from July 1, 2024.

The Company acquired the balance 49% equity share
capital of GLS Pharma Limited, India, and made it 100%
wholly owned subsidiary of the Company.

Ceased Subsidiaries / JVs

Aurogen South Africa (Pty) Ltd., (Aurogen), a wholly
owned step-down subsidiary of the Company in South
Africa, has entered into an agreement with Novabee
Proprietary Limited, to sell and dispose of the entire 50%
shares held by Aurogen in Novagen Pharma (Pty) Ltd.,
(Novagen), South Africa, a joint venture company. The
transaction was completed on October 4, 2024. After the

said disposal of 50% shares in Novagen, Novagen ceased
to be the joint venture company of Aurogen.

Aurogen South Africa (Pty) Ltd., (Aurogen), a wholly owned
step-down subsidiary of the Company in South Africa,
has entered into an agreement with Rene Glyne Family
trust to sell and dispose of the entire 24.5% shares held
by Aurogen in Novagen BBBEE Invest Co (Pty) Limited, a
joint venture of Aurogen. After disposal, Aurogen ceased
to be the joint venture partner of Novagen BBBEE Invest
Co (Pty) Limited.

Changes in ownership of Subsidiaries / JVs

Aurex B.V. The Netherlands, a wholly owned step-down
subsidiary, merged with other subsidiary, Aurobindo
Pharma B.V. The Netherlands, anther wholly owned step-
down subsidiary, during the year.

The Company purchased entire 80% equity share capital
of Tergene Biotech Limited, a step-down subsidiary of
the Company, held by Auro Vaccines Private Limited, a
wholly owned stepdown subsidiary of the Company on
February 28, 2025 and made Tergene Biotech Limited a
direct subsidiary of the Company.

Theranym Biologics Private Limited, a wholly owned
subsidiary of the Company ("Theranym") has allotted
2,041 equity shares (2% of the post allotment equity
share capital of Theranym) of ''10/- each to Dr. Satakarni
Makkapati on preferential basis on December 11, 2024.
Post allotment, Theranym ceased to be a wholly owned
subsidiary of the Company and continues as a subsidiary
of the Company.

CuraTeQ Biologics Private Limited, a wholly owned
subsidiary of the Company ("CuraTeQ") has allotted
Compulsory Convertible Preference Shares (CCPSs)
to Dr. Satakarni Makkapati which will entitle him to 2%
equity share capital post conversion of such CCPSs
and on conversion, CuraTeQ will cease to be a wholly
owned subsidiary of the Company and will continue as a
subsidiary of the Company.

Aurogen South Africa (Pty) Limited, South Africa, a wholly
owned step-down subsidiary of the Company, entered into
agreement with the shareholders of Purple Bellflower
(Pty) Limited, South Africa, a joint venture company, to
purchase entire shares held by other joint venture partners
and make Purple Bellflower (Pty) Limited a wholly owned
subsidiary of Aurogen South Africa (Pty) Ltd, and also
Aurobindo Pharma (Pty) Limited, South Africa, a wholly
owned subsidiary of Aurogen South Africa (Pty) Limited.
The transaction was completed on April 30, 2024.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared
by the Company in accordance with the Indian Accounting
Standards (Ind AS) 110 and 111 as specified in the
Companies (Indian Accounting Standards) Rules, 2015
and as per the provisions of the Companies Act, 2013.

The Company has placed separately, the audited accounts
of its subsidiaries on its website https://www.aurobindo.
com/investors/disclosures-under-regulation-46/financials-
subsidiaries in compliance with the provisions of Section
136 of the Companies Act, 2013. Audited financial
statements of the Company''s subsidiaries will be provided
to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

Pursuant to SEBI (Prohibition of Insider Trading)
Regulations, 2015, as amended, ("SEBI PIT Regulations"),
the Company has in place a Code of Conduct to regulate,
monitor and report trading by the Designated Persons
and a code of practices and procedures for fair disclosure
of unpublished price sensitive information. The code of
practices and procedures for fair disclosure of unpublished
price sensitive information has been made available on
the Company''s website at https://www.aurobindo.com/
investors/corporate-governance/code-of-practices-and-
procedures-for-fair-disclosure.

During training sessions, all the employees and the
Designated Persons are informed about the regulatory
requirements of these codes for creating awareness
among them. Further, the Audit Committee reviews the
compliance with the provisions of SEBI PIT Regulations
on a quarterly basis and also verify that the systems for
internal control are adequate and are operating effectively.

VIGIL MECHANISM

The Board of Directors have adopted the Whistle Blower
Policy which is in compliance with Section 177(9) of the
Companies Act, 2013 and Regulation 22 of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations,
2015.The Whistle Blower Policy aims to conduct the affairs
in a fair and transparent manner by adopting the highest
standards of professionalism, honesty, integrity, and
ethical behaviour. All permanent employees and Whole¬
time Directors of the Company are covered under the
Whistle Blower Policy.

Under Whistle Blower Policy, a mechanism has been
established for employees to report their concerns
about unethical behaviour, actual or suspected fraud or
violation of the Code of Conduct and Ethics, and leak of
price-sensitive information under the Company''s Code
of Conduct formulated for regulating, monitoring, and
reporting by Insiders under SEBI (Prohibition of Insider
Trading) Regulations, 2015, as amended from time to
time. It also provides for adequate safeguards against the
victimisation of employees who avail of the mechanism
and allows direct access to the Chairperson of the Audit
Committee in exceptional cases. During the year, no
complaints were reported under the Whistle Blower Policy.
The Whistle Blower Policy is available on the Company''s
website https://www.aurobindo.com/api/uploads/
disclosure under regulation/Whistle%20Blower%20
Policy-APL-New-March2024.pdf

PREVENTION AND PROHIBITION OF SEXUAL
HARASSMENT

Your Company has a policy and framework for employees
to report sexual harassment cases at the workplace
and the said process ensures complete anonymity
and confidentiality of information. Your Company
has constituted an Internal Complaints Committee in
compliance with the Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal) Act,
2013 and the Rules there under.The Company has a policy
on prevention and prohibition of sexual harassment at
the workplace. The policy provides for protection against
sexual harassment of women at the workplace and for
the prevention and redressal of such complaints. During
the year, the Company has not received any complaint.
The Company has been conducting regular awareness
programmes aimed at prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled,
and a tentative calendar of the meetings is created, in
consultation with the Directors. However, in case of
special and urgent business needs, approval is taken
by passing resolutions through circulation. During the
year under review, six Board Meetings and six Audit
Committee Meetings were convened and held. The
details of the meetings including composition of the
Audit Committee and other committees are provided in
the Corporate Governance Report. During the year, all
the recommendations of the Audit Committee and other
committees were accepted by the Board.

DETAILS OF DIRECTORS AND KEY MANAGERIAL
PERSONAL

Key Managerial Personnel

Mr. K. Nithyananda Reddy, Vice Chairman & Managing
Director, Mr. M. Madan Mohan Reddy, Whole-time
Director, Mr. Santhanam Subramanian, Chief Financial
Officer, and Mr. B. Adi Reddy, Company Secretary
are the Key Managerial Personnel of the Company in
accordance with the provisions of Section(s) 2(51), and
203 of the Companies Act, 2013 read with the Companies
(Appointment and Remuneration of Managerial Personnel)
Rules, 2014.

None of the Directors of the Company are disqualified
under the provisions of the Companies Act, 2013 (the "Act")
or under the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (the "SEBI Listing
Regulations"). All Independent Directors have provided
confirmations as contemplated under section 149(7) of
the Act. As required by the SEBI Listing Regulations, a
certificate from a Company Secretary in practice, that
none of the Directors on the Board of the Company has
been debarred or disqualified from being appointed or
continuing as Directors of company by SEBI, Ministry of
Corporate Affairs or any such statutory authority, forms
part of Corporate Governance Report as Annexure-A.

Changes in Board of Directors
During the year and upto the date of this report,
the members approved the appointment /
reappointment of the following Directors

The members of the Company at their 37^th Annual
General Meeting held on August 29, 2024 re-appointed
Mr. K. Nithyananda Reddy as Vice Chairman & Managing
Director and Mr. M. Madan Mohan Reddy as Whole-time
Director, for a period of three years with effect from June
1, 2024.

The members of the Company at their 37^th Annual
General Meeting held on August 29, 2024 approved the
continuation of Mr. P.V.Ramprasad Reddy, as non-executive
director whose term shall not be liable to determination by
retirement of directors by rotation, subject to approval of
the members at least once in every five years

The members of the Company through postal ballot
approved the re-appointment of Mr. Santanu Mukherjee
(DIN: 07716452) as an Independent Director of the
Company, not liable to retire by rotation, to hold office for
a second term of 5 (Five) consecutive years commencing
from February 9, 2025 to February 8, 2030.

As per the provisions of the Companies Act, 2013,
Mr. P. Sarath Chandra Reddy and Dr. Satakarni Makkapati
will retire as Directors at the ensuing Annual General
Meeting and being eligible, seek re-appointment. The
Board recommends their reappointment for the approval
of the shareholders of the Company.

During the year, the following directors resigned/
retired from the Board:

Mrs. Savita Mahajan (DIN 06492679) retired as an
Independent Director of the Company on close of business
hours of December 15, 2024, upon completion of her
second term as an Independent Director of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013,
your Directors confirm that:

a. in the preparation of the annual accounts, the
applicable accounting standards have been followed
along with proper explanation relating to material
departures, if any;

b. appropriate accounting policies have been selected
and applied consistently. Judgement and estimates
which are reasonable and prudent have been made
so as to give a true and fair view of the state of affairs
of your Company as at the end of the financial year
and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the
maintenance of adequate accounting records in
accordance with the provisions of the Companies

Act, 2013 for safeguarding the assets of your
Company and for preventing and detecting fraud and
other irregularities;

d. the annual accounts have been prepared on an on¬
going concern basis;

e. proper internal financial controls have been laid down
to be followed by your Company and such internal
financial controls are adequate and are operating
effectively; and

f. proper systems to ensure compliance with the
provisions of all applicable laws have been
devised, and such systems are adequate and are
operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration
of independence stating that they meet the criteria of
independence as provided in sub-section (6) of Section
149 of the Companies Act, 2013 as well as clause (b) of
sub-regulation (1) of Regulation 16 of the SEBI Listing
Regulations (including any statutory modification(s) or
re-enactment(s) thereof for the time being in force) and
confirmed that they have registered their names in the
Independent Directors'' Data bank. In terms of Regulation
25(8) of the SEBI Listing Regulations, the Independent
Directors have confirmed that they are not aware of
any circumstance or situation, which exist or may be
reasonably anticipated, that could impair or impact their
ability to discharge their duties.

BOARD DIVERSITY

The Company recognises and embraces the importance
of a diverse Board in its success. The Board has adopted
the Board Diversity Policy which sets out with an approach
to diversify the Board of Directors. The Board Diversity
Policy is available on the Company''s website: https://www.
aurobindo.com/api/uploads/Policy-on-Board-Diversity.pdf

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015 mandate that the Board shall
monitor and review the Board evaluation framework.
The Companies Act, 2013 states that a formal annual
evaluation needs to be conducted by the Board of its own
performance and that of its committees and individual
Directors. Schedule IV of the Companies Act, 2013 states
that the performance evaluation of Independent Directors
shall be conducted by the entire Board of Directors,
excluding the Director being evaluated.

The Annual Performance Evaluation was conducted for
all Board Members, for the Board and its Committees for
the financial year 2024-25. This evaluation was led by the
Nomination and Remuneration/Compensation Committee
of the Company. The Board evaluation framework has

been designed in compliance with the requirements
under the Companies Act, 2013 and the SEBI Listing
Regulations and in accordance with the Guidance Note
on Board Evaluation issued by SEBI.The Board evaluation
was conducted through questionnaires designed with
qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as
adequate independence of each Committee, frequency of
meetings and time allocated for discussions at meetings,
functioning of Board Committees and effectiveness of its
advice/recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as
participation and contribution in Board and Committee
meetings, representation of shareholders interest and
enhancing shareholders value, experience, and expertise
to provide feedback and guidance to the top management
on business strategy, governance, risk and understanding
of the organisation''s strategy, etc.

POLICY ON DIRECTORS'' APPOINTMENT AND
REMUNERATION

The policy of the Company on Directors'' appointment
and remuneration, including criteria for determining
qualifications, positive attributes, independence of
a director and other matters are adopted as per the
provisions of the Companies Act, 2013. The remuneration
paid to the Directors is as per the terms laid out in the
Nomination and Remuneration Policy of the Company.
The Nomination and Remuneration Policy as adopted
by the Board is available on the Company''s website:
https://www.aurobindo.com/api/uploads/Remuneration-
Policy-Feb2025.pdf

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves
during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section
186 of the Companies Act, 2013 form part of the Notes to
the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED
PARTIES

All transactions entered with Related Parties for the year
under review were on arm''s length basis and in the ordinary
course of business. All Related Party transactions are
mentioned in the Notes to the Financial Statements. The
Company has developed a framework through Standard
Operating Procedures for the purpose of identification and
monitoring of such Related PartyTransactions. A statement
giving details of all Related Party Transactions are placed
before the Audit Committee and the Board for review and
approval. The policy on Related Party Transactions, as
approved by the Board of Directors, has been uploaded

on the website of the Company https://www.aurobindo.
com/api/uploads/RPT%20Policy-May2025.pdf

The particulars of contracts or arrangements with Related
Parties referred to in sub-section (1) of Section 188 of
the Companies Act, 2013 is prepared in Form No. AOC-2
pursuant to clause (h) of sub-section (3) of Section 134 of
the Act and Rule 8(2) of the Companies (Accounts) Rules,
2014 and is in Annexure-2 to this Report.

There were no materially significant Related Party
Transactions which could have potential conflict with the
interests of the Company at large.

CONSERVATION OF ENERGY, TECHNOLOGY
ABSORPTION, FOREIGN EXCHANGE EARNINGS &
OUTGO

Information with respect to conservation of energy,
technology absorption, foreign exchange earnings &
outgo pursuant to Section 134(3)(m) of the Act read with
the Companies (Accounts) Rules, 2014 is in Annexure-3
to this Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31,2025,
is available on the Company''s website and can be accessed
at: https://www.aurobindo.com/investors/disclosures-
under-regulation-46/annual-returns

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists
of two Independent Directors viz. Mr. Girish Paman
Vanvari as Chairman and Mr. Santanu Mukherjee and
one executive director viz. Mr. M Madan Mohan Reddy
as members as on March 31, 2025 and the details of the
meetings including composition and terms of reference
of the Risk Management Committee are provided in the
Corporate Governance Report.

The Company has established a separate department
to monitor the enterprise risk and for its management.
The Committee had formulated a Risk Management
Policy for dealing with different kinds of risks which the
Company faces in its day-to-day operations. The Risk
Management policy of the Company outlines a framework
for identification of internal and external risks specifically
faced by the Company, in particular including financial,
operational, sectoral, sustainability (particularly, ESG-
related risks), information, cyber security risks, or any other
risk as may be determined by the Committee; measures
for risk mitigation including systems and processes for
internal control of identified risks; and Business continuity
plan. Risk is an integral part of the Company''s business,
and sound risk management is critical to the success of
the organisation. The Company has adequate internal
financial control systems and procedures to combat the
risk. The risk management procedure is reviewed by the
Audit Committee and Board of Directors on a regular basis

at the time of review of the quarterly financial results of the
Company. A report on the risks and their management is
enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

Pursuant to Section 139 (2) of the Companies Act, 2013,
read with Companies (Audit and Auditors) Rules, 2014, the
Company at its 35^th Annual General Meeting (AGM) held
on August 2, 2022, had appointed M/s. Deloitte Haskins &
Sells, Chartered Accountants, as Statutory Auditors of the
Company for a period of 5 years i.e. up to the conclusion of
the 40^th AGM to be held in the year 2027.The Auditors have
confirmed that they are not disqualified from continuing
as Auditors of the Company.

The Statutory Auditors'' report forms part of the Annual
Report. The notes on financial statements referred to in
the Auditors'' Report are self-explanatory and do not call
for any further comments. There are no specifications,
reservations, adverse remarks on disclosure by the
statutory auditors in their report. They have not reported
any incident of fraud to the Audit Committee of the
Company during the year under review.

INTERNAL AUDITORS

Ernst &Young LLP are the Internal Auditors of the Company
and to maintain its objectivity and independence, the
Internal Auditors report to the Chairman of the Audit
Committee. The scope and authority of the Internal Audit
function is clearly defined by the Audit Committee of
the Board. The Internal Auditors monitor and evaluate
the efficacy and adequacy of the internal control system
of the Company, its compliance with applicable laws/
regulations, accounting procedures and policies. Based
on the reports of the Internal Auditors, corrective actions
will be undertaken, thereby strengthening the controls.
Significant audit observations and action plans were
presented to the Audit Committee of the Board on a
quarterly basis.

COST RECORDS AND COST AUDIT

During the year under review, in accordance with Section
148(1) of the Act, your Company has maintained the
accounts and cost records, as specified by the Central
Government. M/s. EVS & Associates, Cost Accountants,
Hyderabad, the Cost Auditors, are in the process of
carrying out the cost audit for applicable products during
the financial year 2024-25. Pursuant to Section 148 of the
Companies Act, 2013 read with the Companies (Audit and
Auditors) Rules, 2014 and the Companies (Cost Records
and Audit) Rules, 2014, the Company is maintaining the
cost records as its business is covered under the regulated
sector viz. drugs and pharmaceuticals. Audit of the
Company''s cost records is not applicable for the financial
year 2025-26 since the Company''s revenues from exports,
in foreign exchange, exceed 75% of its total revenues.

INTERNAL FINANCIAL CONTROLS AND THEIR
ADEQUACY

The internal financial controls (IFC) framework
institutionalised in Aurobindo has been evaluated in-depth
for its adequacy and operating effectiveness, wherein
the Company has covered financial reporting controls,
operational controls, compliance-related controls and also
InformationTechnology (IT) controls, comprising IT general
controls (ITGC) and application-level controls. The ITGC
would include controls over IT environment, computer
operations, access to programmes and data, programme
development and programme changes. The application
controls would include transaction processing controls in
ERP Oracle system which supports accurate data input,
data processing and data output, workflows, reviews and
approvals as per the defined authorisation levels.

To further strengthen the existing IFC framework and
support the growing business, the Company has redefined
all the process level controls at activity level which has
brought in more clarity and transparency in day-to-day
processing of transactions and in addressing any related
risks. All the controls so redefined and identified have
been properly documented and tested with the help
of an independent auditor to ensure their adequacy
and effectiveness.

The Internal Auditors conduct ''Process & control review''
on a quarterly basis as per the defined scope and submit
the audit findings along with management comments and
action taken reports to the Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

• Establishment of policies and procedures, assignment
of responsibility, delegation of authority, segregation
of duties to provide a basis for accountability
and controls;

• Physical existence and ownership of assets at a
specified date;

• Enabling proactive anti-fraud controls and a risk
management framework to mitigate fraud risks to
the Company;

• Recording of all transactions occurred during a specific
period. Accounting of assets, liability, and revenue
and expense components at appropriate amounts;

• Preparation of financial information as per the
timelines defined by the relevant authorities.

These controls cover the policies and procedures
adopted by the Company for ensuring the orderly and
efficient conduct of its business including adherence to
the Company''s policies, safeguarding of its assets of the
Company, prevention and detection of its frauds and errors,

accuracy and completeness of accounting records and
timely preparation of reliable financial information. The
Company has an internal control system, commensurate
with the size, scale and complexity of its operation.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies
Act, 2013 and Rule 9 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, the
Company has appointed Mr. A. Mohan Rami Reddy, a Peer
reviewed Company Secretary in Practice, to undertake
the secretarial audit of the Company for the financial year
2024-25.The Secretarial Audit Report issued in form MR-3
is in Annexure- 4 of this Report.

As per regulation 24A(1) of the SEBI Listing Regulations,
your Company is required to annex a secretarial audit
report of its material unlisted subsidiary companies
incorporated in India to its Annual Report. Accordingly, the
Secretarial Audit Reports for the Financial Year 2024-25 of
APL Healthcare Limited, Apitoria Pharma Private Limited
and Eugia Pharma Specialities Limited, the material
subsidiaries incorporated in India, are annexed along with
Annexure-4 of this report.

There are no qualifications, reservations or adverse
remarks in the Secretarial Audit Report. Also, pursuant
to Regulation 24A of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015, the Company
has obtained the Annual Secretarial Compliance Report
from a Practicing Company Secretary who has been peer
reviewed by the Institute of Company Secretaries of India
and submitted the same to stock exchanges where the
shares of the Company are listed.

Further, as per amended Regulation 24A of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations,
2015, the Company is required to appoint a Secretarial
Auditor who has been peer reviewed by the Institute of
Company Secretaries of India for a period of five years.The
Board of Directors of the Company has in its meeting held
on May 26, 2025 recommended the appointment of M/s.
MRR & Associates (Firm Regn. No.S2025TS1022400) who
has furnished a certificate of its eligibility and consent for
appointment and has been peer reviewed by the Institute
of Company Secretaries of India as the Secretarial Auditor
of the Company for a period of five years.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the Companies Act, 2013
read with the Companies (Corporate Social Responsibility
Policy) Rules 2014, the Company has established
the Corporate Social Responsibility Committee (CSR
Committee).

The Board, on the recommendation of the CSR
Committee, adopted a CSR Policy. The same is available
on the Company''s website at https://www.aurobindo.com/

sustainability/csr-policy. The CSR objectives are designed
to serve societal, local and national goals in the locations
that we operate in, to create a significant and sustained
impact on local communities.

The Company undertakes its CSR activities through
Aurobindo Pharma Foundation, a wholly-owned
subsidiary of the Company incorporated under Section 8
of the Companies Act, 2013.

The CSR projects approved by the Board for the financial
year 2025-26 are available on the Company''s website
at https://www.aurobindo.com/sustainability/annual-
action-plan. The Annual Report on Corporate Social
Responsibility as per Rule 8 of the Companies (Corporate
Social Responsibility Policy) Rules, 2014 is annexed as
Annexure - 5 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and
remuneration of managerial personnel as required under
Section 197(12) of the Companies Act, 2013 read with Rule
5 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014 is in Annexure-6 to this
Report.The statement containing particulars of employees
pursuant to Section 197(12) of the Companies Act, 2013
read with Rule 5(2) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014
is open for inspection at the Registered Office of the
Company during business hours on all working days
of the Company, up to the date of the ensuing Annual
General Meeting. Any shareholder interested in obtaining
such details may write to the Company Secretary of
the Company.

Affirmation that the remuneration is as per the
remuneration policy of the Company.

In compliance with the provisions of the Companies Act,
2013 and SEBI Listing Regulations, the Board, on the
recommendation of the Nomination and Remuneration/
Compensation Committee approved the Policy for
Selection, Appointment of Directors, KMPs and Senior
Management persons. The said Policy provides a
framework to ensure that suitable and efficient succession
plans are in place for appointment of Directors on the
Board and other management members. The Policy
also provides for selection and remuneration criteria for
the appointment of Directors and senior management
persons. The Company affirms that the remuneration is
as per the remuneration policy of the Company.

INSURANCE

All properties and insurable interests of the Company
including building, plant and machinery and stocks
have been fully insured. The Company has also taken
D&O Insurance Policy covering Company''s Directors
and Officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the
business operations of the Company during the financial
year ended March 31, 2025, to the date of signing of
this Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards
followed by your Company, as stipulated under Schedule
V (C) of the SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 is enclosed as a separate
section forming part of this report. The certificate of the
Practicing Company Secretary, Mr. S. Chidambaram with
regard to compliance of conditions of corporate governance
as stipulated under Schedule V(E) of the SEBI (Listing
Obligations and Disclosure Requirements) Regulations,
2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year
under review as stipulated under SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015 is
presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the
public within the purview of Chapter V of the Companies
Act, 2013

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company and its
subsidiaries have been harmonious and cordial.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT
TO IEPF

The dividends that remained unpaid/unclaimed for a
period of seven years, have been transferred on due dates
by the Company to the Investor Education and Protection
Fund (IEPF) established by the Central Government.
Section 124 of the Companies Act, 2013 read with the
Investor Education and Protection Fund Authority
(Accounting, Audit,Transfer and Refund) Rules, 2016 (''the
Rules'') mandates that companies shall apart from transfer
of dividend that has remained unclaimed for a period of
seven years in the unpaid dividend account to the IEPF,
also transfer the corresponding shares with respect to the
dividend, which has not been paid or claimed for seven
consecutive years or more to IEPF.

Accordingly, the dividends that remain unclaimed for
seven years and also the corresponding shares have been
transferred to IEPF account on due dates. The details of
amount of unclaimed unpaid dividend and corresponding
shares transferred to IEPF during the financial year 2024¬
25 have been provided in the AGM Notice.

Further, in accordance with the IEPF Rules, the Board of
Directors have appointed Mr. B. Adi Reddy, Company
Secretary as Nodal Officer of the Company for the purpose
of verification of claims of shareholders pertaining to
shares transferred to IEPF and / or refund of dividend from
IEPF Authority and for coordination with IEPF Authority.
The details of the Nodal Officer are available on the
website of the Company at https://www.aurobindo.com/
api/uploads/unpaiddividendaccountdetails/Nodal-Officer-
IEPF.pdf

SHARE CAPITAL

During the financial year under review, there has
been no change in the Authorised Share Capital of
the Company. During the year, the paid-up capital
reduced from 58,59,38,609 equity shares of '' 1 each
to 58,08,01,623 equity shares of '' 1 each on account of
buyback of 51,36,986 equity shares of '' 1/- each from the
shareholders of the Company. The paid-up share capital
of the Company as on March 31,2025, was '' 58,08,01,623
divided into 58,08,01,623 equity shares of ''1 each. The
Company has not issued any shares, debentures, bonds
or any convertible or non-convertible securities during the
financial year under review.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY
REPORT

A detailed Business Responsibility sustainability Report in
terms of the provisions of Regulation 34 of SEBI (Listing
Obligations and Disclosure Requirements) Regulations,
2015 is available as a separate section in this Annual Report.

SIGNIFICANT/ MATERIAL ORDERS PASSED BY
COURTS/ REGULATORS/TRIBUNALS

There was no significant material order passed by the
Regulators or Courts or Tribunals that would impact the
going concern status of the Company and its operations
in future.

SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial
Standards issued by the Institute of Company Secretaries
of India, i.e., SS-1 and SS-2, relating to ''Meetings of the
Board of Directors'' and ''General Meetings'' respectively.

OTHER DISCLOSURES
Buyback

As per the approval by the Board of Directors at its
meeting held on July 18, 2024, the Company bought
back 51,36,986 Equity Shares of '' 1 each, representing
approximately 0.88% of the total number of Equity Shares
in the paid-up share capital of the Company, at a price
of '' 1,460 per Equity Share for an aggregate amount of
'' 7,500 million excluding transaction costs, from all of the
equity shareholders/ beneficial owners of the Company,

including the members of the Promoter & Promoter Group
on a proportionate basis through the Tender Offer route.

The buyback offer was opened on August 5, 2024 and
closed on August 9, 2024 and completed settlement of
bids by the Clearing Corporation/ BSE on August 19, 2024.
The buyback was completed on August 19, 2024 and the
shares were extinguished on August 22, 2024.

In accordance with Section 69 of the Companies Act,
2013, as of March 31, 2025, the Company created ''Capital
Redemption Reserve'' of '' 5.14 million equal to the nominal
value of the shares bought back as an appropriation from
general reserve.

Other disclosures

During the year under review:

• no proceedings are made or pending under the
Insolvency and Bankruptcy Code, 2016;

• no instance of one-time settlement with any Bank or
Financial Institution;

• no shares with differential voting rights and sweat
equity shares have been issued; and

• there has been no change in the nature of business
of the Company.

CREDIT RATING

The Company has obtained the Credit ratings from India
Ratings & Research Private Limited, and it has assigned
ND AA /Stable/IND A1 on Rating Watch Evolving for
Company''s fund based working capital facilities and ND
A1 on Rating Watch Evolving for Company''s non-fund-
based working capital limits vide their letter dated March
11, 2025.

ACKNOWLEDGEMENTS

Your directors are grateful for the invaluable contribution
made by the employees and are encouraged by the
support of the customers, business associates, banks and
government agencies. The Directors deeply appreciate
their faith in the Company and remain thankful to them.
The Board shall always strive to meet the expectations of
all the stakeholders.

For and on behalf of the Board
Mangalam Ramasubramanian Kumar

Place: Hyderabad Chairman

Date: May 26, 2025 DIN: 03628755

---

Mar 31, 2024

Your Directors are pleased to present the 37^th Annual Report of your Company together with the audited accounts for the financial year ended March 31, 2024.

FINANCIAL HIGHLIGHTS

Consolidated and Standalone Financials

? million

	Consolidated		Standalone
	2023-24	2022-23	2023-24	2022-23
Revenue from operations	290,019	248,554	106,456	84,570
Profit Before Depreciation, Interest, Tax and Exceptional Items	63,832	39,976	28,401	19,488
Depreciation	15,217	12,446	2,546	2,433
Finance cost	2,897	1,405	1,826	746
Profit Before Tax	45,719	26,125	24,029	16,310
Provision for Tax	12,110	6,849	5,028	3,888
Net Profit After Tax	31,690	19,277	19,001	12,422
Net profit from discontinued operations	-	-	540	(151)
Other Comprehensive Income/(Expense)	992	7,356	(17)	59
Total Comprehensive Income for the period	32,681	26,632	19,524	12,330

DIVIDEND

Your Company has paid an interim dividend of 450% i.e., ?4.50 per equity share of ?1 for the financial year 2023-24 against 300% i.e., ?3.00 per equity share of ?1 paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top 1000 listed entities based on market capitalisation are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on your Company''s website: https://www.aurobindo.com/ api/uploads/disclosure under regulation/Dividend-Distribution-Policy.pdf

PERFORMANCE REVIEW

Your Company is one of the leading generic pharma companies globally. Your Company is also the largest supplier in the USA by prescription volume as per IQVIA data for the year ending March 31, 2024.

On a standalone basis, your Company''s revenue increased by 25.9% to ?106,456 million in FY24, as against ?84,570 million in the corresponding previous period. The Formulations business increased by 23.0% to ?94,279 million. The API business witnessed a growth of 66.7% to ?8,430 million. Profit Before Depreciation, Interest,

Tax and Exceptional Items for FY24 increased by 45.7% to ?28,401 million, compared to ?19,488 million in FY23. Profit Before Tax for the year increased by 47.3% Y-o-Y

to ?24,029 million. Your Company''s Net Profit After Tax (before Other Comprehensive Income) increased by 59.2% to ?19,541 million as against ?12,271 million in FY23.

On a consolidated basis, the revenue increased by 16.7% to ?290,019 million. The formulations business (excluding Puerto Rico) increased by 18.7% to ?244,191 million from ?205,794 million in the corresponding previous period. The Active Pharmaceutical Ingredients (APIs) business posted a growth of 10.2% to ?42,405 million vs. ?38,479 million in FY23. Profit Before Depreciation, Interest, Tax and Exceptional Items stood at ?63,832 million, witnessing a 59.7% increase Y-o-Y. Profit Before Tax for the year stood at ?45,719 million, compared to ?26,125 million in the previous year. Your Company reported a Net Profit After Tax (before Other Comprehensive Income) of ?31,690 million in FY24, vs. ?19,277 million in FY23. The Diluted Earnings Per Share (reported) stood at ?54.16 in FY24, compared to ?32.90 in FY23.

The US is the largest market for your Company and accounted for 48% of the total revenue. US revenue increased by 24% to ?138,672 million. Your Company launched 62 products in FY24. Your Company''s market share by prescription volume (IQVIA TRX) in the US, for the quarter ending March 2024 stands at 10.2%, positioning your Company as the largest generic pharmaceutical player.

Your Company continues to strengthen its pipeline for the global markets including the US market. As on March 31, 2024, your Company filed 830 Abbreviated New Drug Applications (ANDAs) on a cumulative basis. Of the

total count, 658 have received final approvals and 27 received tentative approvals and 145 ANDAs are currently under review.

Your Company''s revenue in its Europe formulations business was ?71,663 million in FY24 compared to ?64,256 million in FY23. Your Company now operates in ten countries in EU/UK and is present across multiple channels including pharmacy, hospital and tender business.

The ARV formulations business stood at ?8,681 million in FY24, declining by 11% compared to ?9,762 million in FY23.

Growth Markets segment, including Brazil, Canada, Columbia and South Africa and others, grew by 29% Y-o-Y to ?25,174 million.

OUTLOOK

FY24 saw growth across the businesses mainly driven by volume gains and new product launches. The business grew despite the challenging geo-political environment leading to soaring inflation and supply chain disruptions. Your Company''s efforts in building a resilient supply chain, enhancing manufacturing footprint, diversifying product portfolio and improving operational efficiency helped it to navigate the challenges and deliver continued strong performance.

Your Company made significant progress in advancing the biosimilar programs during the year with multiple products now in late stage development. Through continued focus on R&D, the Company has advanced the complex product portfolio and further enhanced the capacity for commercialisation.

Your Company maintains its strong position in the key geographies of the US and Europe and is poised to grow through new launches and increasing access. In the US, your Company has filed 830 ANDAs till March 31,

2024, with estimated total market potential of US$169 billion as per IQVIA data. Out of the total ANDAs filed,

658 have received final approval, while 172 ANDAs are in different stages of the review process. During the year, your Company filed 40 ANDAs with the US FDA, including 9 ANDAs for specialty products, and received final approvals for 68 products including 22 for specialty products.

For the Europe market, your Company now has operations in ten countries with full-fledged pharmacy, hospital and tender sales infrastructure. It now ranks amongst the top 10 generic pharmaceutical companies in 8 countries of Europe. Your Company aims to expand its market share and growth, through new launches including day 1

launches, differentiated offerings, niche and complex products like biosimilars.

Your Company preserved its ARV market dominance by winning bids to supply in both the Global Fund and PEPFAR allocation this year. Despite price erosion, efficient capacity utilisation and pricing capability have been a key factor in maintaining a leading position in the Dolutegravir-based regimen which is the standard therapy for HIV.

Your Company continues to focus on the Growth Markets expansion with new launches, market share expansion and foray into the new geographies. During the year, your Company completed the acquisition of 17 brands from Pfizer/Viatris in Indonesia and forayed into the Indonesian market. Your Company has completed building an orals facility at Taizhou, China which is in the process of commissioning. Moreover, in China, the Company has received 13 approvals till March 31, 2024, which will be manufactured in units in India. In Canada, your Company has 203 approved products while 58 products are awaiting final approval as at the end of FY24.

Your Company has long been focused on creating an efficient API business, which is a key component in the Company''s overall growth journey. As part of the ongoing strategy, the API business operations have been carved-out into a wholly owned subsidiary. This move is expected to bring higher management bandwidth and more emphasis on growth and productivity within the API segment.

Your Company has commissioned four manufacturing plants during the year viz. Penicillin-G, 6-APA, Injectables and Granulation. Penicillin-G project in Kakinada, Andhra Pradesh, of 15,000 tonnes/annum capacity, is part of the Indian Government''s Production Linked Incentives (PLI) scheme. Further, as part of the efforts towards building a resilient supply chain, your Company has commissioned the 6-APA facility in Kakinada, Andhra Pradesh, of 3,600 tonnes/annum capacity. Your Company also commissioned the injectables facility at Vishakhapatnam, India, to further bolster the manufacturing capacities, ensure de-risking and supplies to European countries.

RESEARCH AND DEVELOPMENT (R&D)

Your Company remains committed to providing affordable, high-quality medicines to positively impact patients worldwide.

Aurobindo Pharma''s overall R&D set-up includes 9 centres (5 in Hyderabad, 4 in US) and a dedicated team of more than 1,500 world class scientific experts who continue to drive a relentless pursuit of excellence.

The state-of-the-art laboratories, advanced equipment, and modern technologies provide a conducive environment for conducting experiments, analysis, and formulation development.

The Company''s R&D expenditure stood at ^ 1,471 crore (5.1% of revenue) in FY24 and at ?1,411 crore (5.7% of revenue) in FY23.

Your Company''s R&D efforts are aimed towards developing biosimilars, vaccines, generic APIs, generic formulations including orals, injectables, complex products like inhalers, nasal sprays, depot injections and transdermal patches.

In the fiscal year 2024-25, your Company is poised to file approximately 12 products within our Specialty Drug Delivery System (SDDS) division across various therapeutic areas. Your Company''s focus on SDDS demonstrates its commitment to delivering novel solutions that address unmet medical needs.

Your Company''s focus on capability development has contributed significantly to the success in submitting Drug Master Diles (DMFs), Abbreviated New Drug Applications (ANDAs) and formulation dossiers.

During the year, your Company has filed 40 ANDAs and received approvals for 68 ANDAs.

Your Company has also completed licensure clinical trials for three oncology biosimilars, which are filed with European Medicines Agency. Four more biosimilars are in global Phase 3 clinical trials, of which at least two biosimilars will complete their clinical study requirements and will enter filing phase in the next year.

The vaccines portfolio has gained momentum with four development programs. The focus is on developing vaccine candidates that can help address public health problem in low and middle-income countries.

Your Company continues to focus on three products GLP-1 API portfolio and is aligning additional new capacities to support their manufacturing. By the end of FY24, 14 peptide API DMFs have been filed with the US FDA. Out of which, your Company''s DMFs have contributed to five ANDA approvals thus far.

ENVIRONMENT, HEALTH AND SAFETY (EHS) Environment

Environmental preservation has been critical to your Company and it has assigned the highest level of priority across the units. To accomplish this sustainability goal, we are leaning more towards renewable energy, improving the co-processing of hazardous waste, reusing/

recycling 100% of non-hazardous waste, managing water resources responsibly, and expanding green belts around our facilities. We have adopted the best standards of responsible manufacturing across our supply chain.

Health & Safety

Health, safety, and well-being of our employees and associates are a crucial material topic for us. We are committed towards instilling a healthy lifestyle and a safe working environment. Our EHS&S framework and management practices assure compliance while prioritising product and process safety and safeguarding all employees. Each manufacturing facility has departmental and plant safety committee. Every month management review meetings are conducted which comprises top management from corporate and representatives from all sites including site heads to examine safety performance and streamline operational procedures critical to safety requirements. In addition to the above lean daily management meetings are also conducted daily with senior leadership team to track the actions for continuous improvement. Health and safety training is provided to both permanent and contractual workers, ensuring that our team understands the significance of safe procedures and guidelines. Risk identification and assessments are undertaken as part of the process before scaling up. Before commencing any chemical process in the manufacturing area, a Hazard and Operability Study (HAZOP) is conducted. Qualitative and quantitative risk assessments are carried out for establishing effective controls.

Evaluation of safety performance through EHS score card is being carried on monthly basis. This EHS score card provides insight to help an organisation to understand its safety performance by evaluating on monthly basis based on Key Performance Indicators (KPI) identified.

Inter unit audits are conducted for gap assessments and performance improvement. Regular knowledge sharing sessions are conducted for sharing best practices among the manufacturing facilities.

Engagement in national and global initiatives on Antimicrobial Resistance (aMr)

As a healthcare service provider, the Company is partnering with ''The Access to Medical Foundation,'' which is monitoring what the 30 most active firms in antimicrobial R&D and production are doing to combat antibiotic resistance. We participated in The Antimicrobial Resistance Benchmark 2018, 2020 and 2021.

The Company is also a member of the ''AMR Industry Alliance,'' which is driving antimicrobial resistance progress via common objectives and commitment to increase access to high-quality antimicrobial products,

encourage responsible usage, and reduce environmental concerns. We participated in AMR Industry Alliance Survey report 2020, 2021, 2022 and 2023.

AWARDS AND ACCOLADES

• "L&D Excellence” and "Best L&D Team” in 12^th Edition Learning and development Summit & Awards 2023 organised by UBS FORUMS PVT. LTD.

• The following units were recognised with 24^th National Award on "Energy Excellence and Energy Efficient Units” by CII.

- Apitoria-1 - Energy Efficient Unit - Consistent in the same category in the last 04 Years.

- Apitoria-2 - Excellent Energy Efficient Unit - Excellence Energy efficient Unit in opening participation.

- Apitoria-3 - Excellence Energy Efficient Unit -Excellence Energy efficient last two Years and Energy Efficient Unit in current years.

- Apitoria-4 - Energy Efficient Unit Consistent in the same category in the last 03 Years.

- Apitoria-4U - Energy Efficient Unit last 2 Year.

- Apitoria-5 - Energy Efficient Unit last 2 Years.

- Apitoria-6 - Energy Efficient Unit Current year

- Consistent Excellence Energy efficient Unit in the last Year.

• Felicitated by Pharmaceuticals Export Promotion Council of India - 2023 for Outstanding Contribution in India''s Pharmaceutical Export

• CE Worldwide 153^rd Corporate Real Estate and Facilities Management Professional Excellence Awards in 4 different categories to Aurobindo Corporate Administration team

- Professional Excellence in Workplace management

- Professional Excellence in Transport Management

- Professional Excellence in Facilities Management

- Professional Excellence in Travel management

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statements of Subsidiary companies/Associate companies/Joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The Company has formulated a Policy for determining material subsidiaries. The policy is available on the Company''s website and can be accessed at https:// www.aurobindo.com/api/uploads/disclosure under regulation/Policy-MaterialSubsidiary.pdf.

During the year, the following changes were implemented in the subsidiaries of the Company:

Ceased subsidiaries/JVs

Laboratorios Aurobindo Sociedad Limitada, Spain, a 100% subsidiary, merged with Aurovitas Spain SA, Spain, a 100% subsidiary, w.e.f. April 1, 2023.

Auroscience PTY Ltd., Australia, deregistered w.e.f.

June 4, 2023.

Auronext Pharma Private Limited and Mviyes Pharma Ventures Private Limited merged with Aurobindo Pharma Ltd., India w.e.f. April 1, 2023 as per the Scheme of Amalgamation sanctioned by the Hon''ble National Company Law Tribunal, Hyderabad Bench vide its orders dated April 29, 2024.

New subsidiaries/JVs

During the period under review, following subsidiary/step-down subsidiary companies were incorporated/acquired:

Auro Pharma LLC, Russia, was incorporated on July 24, 2023 as a 100% subsidiary.

Auro Trading Private Limited, India, was incorporated as 100% subsidiary of the Company on November 22, 2023.

Subsidiaries/JVs Name Changed

During the period under review, name of the following subsidiary/JVs was changed:

Vespyr Brands LLC, USA is changed from Vespyr Brands, Inc

Subsidiaries/JVs Ownership Changed

During the period under review, ownership of the following subsidiaries/JVs were changed:

Entire 100% shares held by the Company in Auro Vaccines Private Limited, India, a wholly owned subsidiary of the Company, were transferred to Curateq Biologics Private Limited, India, also a wholly owned subsidiary of the Company, with effect from July 1, 2023.

Entire 100% shares held by Curateq Biologics Private Limited, India, a wholly owned subsidiary of the Company in TheraNym Biologics Private Limited, India, a wholly owned step-down subsidiary of the Company, were acquired by the Company with effect from November 22, 2023.

Entire 80% shares held by the Company in Tergene Biotech Limited , India (formerly known as Tergene Biotech Pvt. Ltd.) were transferred to Auro Vaccines Private Limited, India, a wholly owned subsidiary, with effect from April 1, 2023.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of the Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website https:// www.aurobindo.com/investors/disclosures-under-regulation-46/financials-subsidiaries in compliance with the provisions of Section 136 of the Companies Act,

2013. Audited financial statements of the Company''s subsidiaries will be provided to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

Pursuant to SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended, (''SEBI PIT Regulations''), the Company has in place a Code of Conduct to regulate, monitor and report trading by the Designated Persons and a code of practices and procedures for fair disclosure of unpublished price sensitive information. The code of practices and procedures for fair disclosure of unpublished price sensitive information has been made available on the Company''s website at https://www. aurobindo.com/investors/corporate-governance/code-of-practices-and-procedures-for-fair-disclosure

During training sessions, all the employees and the Designated Persons are informed about the regulatory requirements of these codes for creating awareness among them. Further, the Audit Committee reviews the compliance with the provisions of SEBI PIT Regulations on a quarterly basis and also verify that the systems for internal control are adequate and are operating effectively.

VIGIL MECHANISM

The Board of Directors have adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims to conduct the affairs in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity, and ethical behaviour. All permanent employees and Whole-time Directors of the Company are covered under the Whistle Blower Policy.

Under Whistle Blower Policy, a mechanism has been established for employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct and Ethics, and leak of price-sensitive information under the Company''s Code of Conduct formulated for regulating, monitoring, and reporting by Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. It also provides for adequate safeguards against the victimisation of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. During the year, no complaints were reported under the Whistle Blower Policy and no person has been denied access to the Chairman of the Audit Committee. The Whistle Blower Policy is available on the Company''s website https:// www.aurobindo.com/api/uploads/disclosure under regulation/Whistle%20Blower%20Policy-API-New-March2024.pdf

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexual harassment cases at the workplace and the said process ensures complete anonymity and confidentiality of information. Your Company has constituted an Internal Complaints Committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)

Act, 2013 and the Rules there under. The Company has a policy on prevention and prohibition of sexual harassment at the workplace. The policy provides for protection against sexual harassment of women at the workplace and for the prevention and redressal of such complaints. During the year, the Company has not received any complaint. The Company has been conducting regular awareness programmes aimed at prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled, and a tentative calendar of the meetings are created, in consultation with the Directors. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, seven Board Meetings and five Audit Committee Meetings were convened and held. The details of the meetings including composition of the Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONAL

Key Managerial Personnel

Mr. K. Nithyananda Reddy, Vice Chairman and Managing Director, Mr. M. Madan Mohan Reddy, Whole-time Director Mr. Santhanam Subramanian, Chief Financial Officer, and Mr. B. Adi Reddy, Company Secretary are Key Managerial Personnel of the Company in accordance with the provisions of Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

None of the Directors of the Company are disqualified under the provisions of the Companies Act, 2013 (the "Act”) or under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "Listing Regulations”). All Independent Directors have provided confirmations as contemplated under section 149(7) of the Act. As required by the SEBI Listing Regulations, a certificate from the Company Secretary in practice, that none of the Directors on the Board of the Company has been debarred or disqualified from being appointed or continuing as Directors of companies by SEBI, Ministry of Corporate Affairs or any such statutory authority, forms part of Corporate Governance Report as Annexure-A.

Changes in Board of Directors

During the year and upto the date of this report, the members approved the appointment of the following directors:

1) Dr. Satakarni Makkapati (DIN: 09377266) as a Non-executive Director of the Company with effect from November 9, 2023.

2) Dr. (Mrs.) Deepali Pant Joshi (DIN: 07139051) as an Independent Director of the Company for a period of two years from February 10, 2024 to February 9, 2026.

3) Mr. Mangalam Ramasubramanian Kumar

(DIN: 03628755) as an Independent Director of the Company for a period of three years from April 1, 2024 to March 31, 2027.

In the opinion of the Board Dr. (Mrs.) Deepali Pant Joshi and Mr. Mangalam Ramasubramanian Kumar are the persons of integrity, fulfil requisite conditions as per the applicable laws and are independent of the management and promoters of the Company.

As per the provisions of the Companies Act, 2013,

Mr. K. Nithyananda Reddy and Mr. M. Madan Mohan Reddy will retire as Directors at the ensuing Annual General Meeting and being eligible, seek re-appointment. As per Regulation 17(1D) of the SEBI (Listing Obligations

and Disclosure Requirements) Regulations, 2015, the continuation of Mr. P. V. Ramprasad Reddy (DIN: 01284132) as Director of the Company is subject to approval of the members in the ensuing Annual General Meeting. Also, proposals seeking the approval of the members of the Company for reappointment of Mr. K. Nithyananda Reddy as Vice Chairman & Managing Director and Mr. M. Madan Mohan Reddy as Whole-time Director of the Company for a further period of three years with effect from June 1, 2024 are placed for the approval of the members in the ensuing Annual General Meeting. The Board recommends all these proposals for the approval of the shareholders of the Company.

During the year, the following directors resigned/retired from the Board:

1) Dr. M. Sivakumaran (DIN: 01284320) resigned as Whole-time Director and Director of the Company w.e.f. August 25, 2023.

2) Dr. (Mrs.) Avnit Bimal Singh (DIN: 01316166) resigned as Non-executive Independent Director of the Company w.e.f. February 11, 2024 and she confirmed that there are no other material reasons other than those mentioned in her resignation letter.

3) Mr. K. Ragunathan (DIN: 00523576) retired as an Independent Director of the Company on close of business hours of March 31, 2024, upon completion of his second term as an Independent Director of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act,

2013, your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on an on-going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation (1) of Regulation 16 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and confirmed that they have registered their names in the Independent Directors'' Data bank. In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognises and embraces the importance of a diverse Board in its success. The Board has adopted the Board Diversity Policy which sets out with an approach to diversify the Board of Directors. The Board Diversity Policy is available on the Company''s website: https://www.aurobindo.com/api/uploads/Policy-on-Board-Diversity.pdf

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework.

The Companies Act, 2013 states that a formal annual evaluation needs to be conducted by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be conducted by the entire Board of Directors, excluding the Director being evaluated.

The Annual Performance Evaluation was conducted for all Board Members, for the Board and its Committees for the financial year 2023-24. This evaluation was led by the

Nomination and Remuneration/Compensation Committe of the Company. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the Listing Regulations and in accordance with the Guidance Note on Board Evaluation issued by SEBI. The Board evaluation was conducted through questionnaires designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of shareholders interest and enhancing shareholders value, experience, and expertise to provide feedback and guidance to top management or business strategy, governance, risk and understanding o the organisation''s strategy, etc.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The policy of the Company on Directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the Nomination and Remuneration Policy of the Company.

The Nomination and Remuneration Policy as adopted by the Board is available on the Company''s website: https://www.aurobindo.com/api/uploads/NRC-Policy-AUROBINDO-09022023.pdf

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under review were on arm''s length basis and in

the ordinary course of business. All Related Party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval. The policy on Related Party Transactions, as approved by the Board of Directors, has been uploaded on the website of the Company https://www.aurobindo.com/api/uploads/ Related-Party-Transaction-Policy.pdf

The particulars of contracts or arrangements with Related Parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

There were no materially significant Related Party Transactions which could have potential conflict with the interests of the Company at large.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-3 to this Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2024 is available on the Company''s website and can be accessed at: https://www.aurobindo.com/investors/ disclosures-under-regulation-46/annual-returns

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of three Independent Directors viz., Mr. Girish Paman Vanvari as Chairman, Mr. Santanu Mukherjee and Mrs. Savita Mahajan as members of the Committee as on March 31, 2024.

The Company has established a separate department to monitor the enterprise risk and for its management. The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. The Risk Management policy of the Company outlines a framework

for identification of internal and external risks specifically faced by the Company, in particular including financial, operational, sectoral, sustainability (particularly, ESG-related risks), information, cyber security risks, or any other risk as may be determined by the Committee; measures for risk mitigation including systems and processes for internal control of identified risks; and Business continuity plan. Risk is an integral part of the Company''s business, and sound risk management is critical to the success of the organisation. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on a regular basis at the time of review of the quarterly financial results of the Company. A report on the risks and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 35^th Annual General Meeting (AGM) held on August 2, 2022, had appointed M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company for a period of 5 years i.e. up to the conclusion of the 40^th AGM to be held in the year 2027. The Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

The Statutory Auditors'' report forms part of the Annual Report. The notes on financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

INTERNAL AUDITORS

Ernst & Young LLP are the Internal Auditors of the Company and to maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is clearly defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of the internal control system of the Company, its compliance with applicable laws/regulations, accounting procedures and policies. Based on the reports of the Internal Auditors, corrective actions will be undertaken, thereby strengthening the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on a quarterly basis.

COST RECORDS AND COST AUDIT

During the year under review, in accordance with Section 148(1) of the Act, your Company has maintained the accounts and cost records, as specified by the Central Government. M/s. EVS & Associates, Cost Accountants, Hyderabad, the Cost Auditors, are in the process of carrying out the cost audit for applicable products during the financial year 2023-24. The Board of Directors of the Company has on the recommendation of the Audit Committee, approved the appointment of EVS & Associates, a firm of Cost Accountants in Practice (Registration No. 000175) as the Cost Auditors of the Company to conduct cost audits for relevant products prescribed under the Companies (Cost Records and Audit) Rules, 2014 for the year ending on March 31, 2025. The Board on recommendations of the Audit Committee, have approved the remuneration payable to the Cost Auditors subject to ratification of their remuneration by the Members in the forthcoming AGM. EVS & Associates have, under Section 139(1) of the Companies Act, 2013 and the Rules framed thereunder, furnished a certificate of their eligibility and consent for their appointment as Cost Auditors of the Company.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

The internal financial controls (IFC) framework institutionalised in Aurobindo has been evaluated indepth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance-related controls and also Information Technology (IT) controls, comprising IT general controls (ITGC) and application-level controls. The ITGC would include controls over IT environment, computer operations, access to programmes and data, programme development and programme changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorisation levels.

To further strengthen the existing IFC framework and support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined and identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The Internal Auditors conduct ''Process & control review'' on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to the Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

• Establishment of policies and procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability

and controls;

• Physical existence and ownership of assets at a specified date;

• Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

• Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate amounts;

• Preparation of financial information as per the timelines defined by the relevant authorities.

These controls cover the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to the Company''s policies, safeguarding of its assets of the Company, prevention and detection of its frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has an internal control system, commensurate with the size, scale and complexity of its operation.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. A. Mohan Rami Reddy, a Company Secretary in Practice, to undertake the secretarial audit of the Company for the financial year 2023-24. The Secretarial Audit Report issued in form MR-3 is in Annexure-4 of this Report.

As per regulation 24A(1) of SEBI Listing Regulations, your Company is required to annex a secretarial audit report of its material unlisted subsidiary incorporated in India to its Annual Report. Accordingly, the Secretarial Audit Report for the Financial Year 2023-24 of APL Healthcare

Limited, Apitoria Pharma Private Limited and Eugia Pharma Specialities Limited, material subsidiaries incorporated in India, are annexed along with Annexure-4 of this report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report. Also, pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the same to stock exchanges where the shares of the Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established the Corporate Social Responsibility Committee (CSR Committee).

The Board, on the recommendation of the CSR Committee, adopted a CSR Policy. The same is available on the Company''s website at https://www.aurobindo. com/api/uploads/CSR-policy.pdf The CSR objectives are designed to serve societal, local and national goals in the locations that we operate in, to create a significant and sustained impact on local communities.

The Company undertakes its CSR activities through Aurobindo Pharma Foundation, a wholly-owned subsidiary of the Company incorporated under Section 8 of the Companies Act, 2013.

The CSR projects approved by the Board for the financial year 2023-24 are available on the Company''s website at https://www.aurobindo.com/sustainability/annual-action-plan. The Annual Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-5 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-6 to this Report. The statement containing particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open for inspection at the Registered Office of the Company during business

hours on all working days of the Company, up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining such details may write to the Company Secretary of the Company.

Affirmation that the remuneration is as per the remuneration policy of the Company

In compliance with the provisions of the Companies Act, 2013 and SEBI Listing Regulations, the Board, on the recommendation of the Nomination and Remuneration/ Compensation Committee approved the Policy for Selection, Appointment of Directors, KMPs and Senior Management persons. The said Policy provides a framework to ensure that suitable and efficient succession plans are in place for appointment of Directors on the Board and other management members. The Policy also provides for selection and remuneration criteria for the appointment of Directors and senior management persons. The Company affirms that the remuneration is as per the remuneration policy of the Company.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. The Company has also taken D&O Insurance Policy covering Company''s Directors and Officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2024 to the date of signing of the Board''s Report other than

• the merger of Auronext Pharma Private Limited and Mviyes Pharma Ventures Private Limited, wholly owned subsidiaries of the Company, with the Company by virtue of orders of Hon''ble National Company Law Tribunal, Hyderabad Bench.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report. The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015 is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules,

2016 (''the Rules'') mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years in the unpaid dividend account to the IEPF, also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF.

Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to IEPF account on due dates.

The details of amount of unclaimed unpaid dividend and corresponding shares transferred to IEPF during the financial year 2023-24 have been provided in the AGM Notice.

Further, in accordance with the IEPF Rules, the Board of Directors have appointed Mr. B. Adi Reddy, Company Secretary as Nodal Officer of the Company for the purpose of verification of claims of shareholders pertaining to shares transferred to IEPF and/ or refund of dividend from IEPF Authority and for coordination with IEPF Authority. The details of the

Nodal Officer are available on the website of the Company at https://www.aurobindo.com/api/uploads/ unpaiddividendaccountdetails/Nodal-Officer-IFPF.pdf

SHARE CAPITAL

During the financial year under review, there has been no change in the Authorised and Paid-up Share Capital of the Company. The paid-up share capital of the Company as on March 31, 2024 was ?585,938,609 divided into 585,938,609 equity shares of ?1 each. The Company has not issued any shares, debentures, bonds or any non-convertible securities during the financial year under review.

However, the Authorised Share Capital increased from ?261,15,00,000 (Rupees two hundred sixty one crores and fifteen lakhs only) to ?666,39,93,820 (Rupees six hundred sixty six crores thirty nine lakhs ninety three thousand eight hundred twenty only) as per Clause 26 of the Scheme of Amalgamation of Auronext Pharma Private Limited and Mviyes Pharma Ventures Private Limited with the Company, as approved by the Hon''ble National Company Law Tribunal, Hyderabad Bench, Hyderabad as per its order dated April 29, 2024.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

A detailed Business Responsibility sustainability Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

SIGNIFICANT/MATERIAL ORDERS PASSED BY COURTS/REGULATORS/TRIBUNALS

There were no significant material orders passed by the Regulators or Courts or Tribunals that would impact the going concern status of the Company and its operations in future.

SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India, i.e., SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'' respectively.

OTHER DISCLOSURES

Acquisitions/Disinvestment/demerger/merger

Merger of subsidiaries

The Board of directors at its meeting held on August 12, 2021, had approved the Scheme of Amalgamation providing for the amalgamation of wholly owned subsidiaries of the Company viz., Auronext Pharma Private Limited and Mviyes Pharma Ventures Private Limited with the Company subject to the requisite statutory/ regulatory approvals including the approval of the National Company Law Tribunal (Hyderabad Bench). Since there were other restructuring proposals in discussion, this amalgamation was put on hold and the Board of Directors at its meeting held on April 1, 2023 has decided to proceed with the aforesaid Scheme of Amalgamation.

The said Scheme of Amalgamation has been approved by the Hon''ble National Company Law Tribunal, Hyderabad Bench vide its order dated April 29, 2024.

Sale of business assets of Eugia US Manufacturing LLC

Eugia US Manufacturing LLC, USA, a wholly owned step-down subsidiary of the Company, had entered into an asset purchase agreement with Empower Clinic Services New Jersey, LLC on February 3, 2024 to dispose of its business assets as a going concern with related assets and liabilities and employees for a cash consideration of US$ 52 million to be received from the disposal, plus US$ 58 million in lease payments made to Eugia US Manufacturing LLC and/or its affiliates, over the 20 years lease term including extensions.

The transaction was completed on May 1, 2024.

Acquisition of balance shares in Purple Bellflower Pty Limited

Acquisition of balance 52% shares from the Joint Venture Partners of Purple Bellflower Pty Limited, South Africa, on April 30, 2024 and on such acquisition, it became a wholly owned step-down subsidiary of the Company.

Also, Aurobindo Pharma Pty Limited, South Africa, became a wholly owned subsidiary by virtue of the aforesaid acquisition.

Transfer of Units to Apitoria Pharma Private Limited

Pursuant to the Business Transfer Agreements entered into between the Company and Apitoria Pharma Private Limited (formerly known as Auro Pharma India Private Limited), a wholly owned subsidiary of the Company, Unit-I, Unit-VIII, Unit-IX, Unit-XI, Unit-V, Unit-XIV, Unit-XVII and APLRC-II of the Company were sold and transferred to Apitoria Pharma Private Limited with effect from October 1, 2023.

Other disclosures

During the year under review:

• no proceedings are made or pending under the Insolvency and Bankruptcy Code, 2016;

• no instance of one-time settlement with any Bank or Financial Institution;

• no shares with differential voting rights and sweat equity shares have been issued; and

• there has been no change in the nature of business of the Company.

CREDIT RATING

The Company has obtained the Credit ratings from India Ratings & Research Private Limited and it has assigned ND AA /Stable/IND A1 on Rating Watch Evolving for Company''s fund based working capital facilities and ND A1 on Rating Watch Evolving for Company''s non-fund-based working capital limits vide their letter dated December 20, 2023.

ACKNOWLEDGEMENTS

Your directors are grateful for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and remain thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For and on behalf of the Board Mangalam Ramasubramanian Kumar

Place: Hyderabad Chairman

Date: May 25, 2024 DIN: 03628755

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Mar 31, 2023

Your Directors are pleased to present the 36^th Annual Report of your Company together with the audited accounts for the financial year ended March 31, 2023.

FINANCIAL HIGHLIGHTS

Consolidated & Standalone Financials (f in million)

('' in million)
	Consolidated		Standalone
	2022-23	2021-22	2022-23	2021-22
Revenue from operations	2,48,554	2,34,555	1,27,923	1,12,871
Profit Before Depreciation, Interest, Tax and Exceptional Items*	39,976	46,759	21,647	21,444
Depreciation	12,446	11,265	4,354	4,153
Finance cost	1,405	486	1,150	169
Exceptional items	-	1,280	-	747
Profit Before Tax	26,125	33,727	16,144	16,375
Provision for Tax	6,849	7,256	3,839	1,828
Net Profit After Tax	19,277	26,471	12,304	14,547
Other Comprehensive Income/ (Expense)	7,356	2,617	59	17
Total Comprehensive Income for the period	26,632.3	29,088	12,363	14,564
* Including other income and share of loss of joint venture and associates (net of tax)

DIVIDEND

Your Company has paid an interim dividend of 300% i.e., '' 3.00 per equity share of '' 1 for the financial year 2022-23 against 900% i.e., '' 9.00 per equity share of '' 1 paid in the previous year. The dividend recommended for the financial year 2022-23 is in accordance with the Company’s Dividend Distribution Policy. Higher dividends were paid during the previous year considering the profits made by the Company on disposal of Natrol LLC, USA, a wholly owned step-down subsidiary of the Company engaged in nutraceutical business.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top 1,000 listed entities based on market capitalisation are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on the Company’s website: https://www.aurobindo. com/api/uploads/disclosure_under_regulation/Dividend-Distribution-Policy.pdf

PERFORMANCE REVIEW

Your Company is one of the leading generic pharma companies globally. Your Company is also the largest supplier in the USA by prescription volume as per IQVIA data for the quarter ending March 31, 2023. Your Company maintained its growth momentum in revenue despite headwinds caused by the pandemic.

On a standalone basis, your Company’s revenue increased by 13.3% to ''127,923 million in FY22, as against ''112,871 million in the corresponding previous period. The Formulations business increased by 14.8% to ''76,653 million. The API business witnessed a growth of 8.2% to ''47,410 million. Profit Before

Depreciation, Interest, Tax and Exceptional Items for FY23 increased by 0.9% to ''21,647 million, compared to ''21,444 million in FY22. Profit Before Tax for the year decreased by 1.4% Y-o-Y to ''16,114 million. Your Company’s Net Profit After Tax (before Other Comprehensive Income) decreased by 15.4% to ''12,304 million as against ''14,547 million in FY22.

On a consolidated basis, the revenues increased by 6.0% to ''2,48,554 million. The formulations business increased by 5.4% to ''210,074 million from ''199,393 million in the corresponding previous period. The Active Pharmaceutical Ingredients (APIs) business posted a growth of 9.5% to ''38,478 million vs. ''35,156 million in FY22. Profit Before Depreciation, Interest, Tax and Exceptional Items stood at ''39,976 million, witnessing a 14.5% decrease Y-o-Y. Profit Before Tax for the year stood at ''26,125 million, compared to ''33,727 million in the previous year.

Your Company reported a Net Profit After Tax (before Other Comprehensive Income) of ''19,277 million in FY23, vs. ''26,471 million in FY22. The Diluted Earnings Per Share (reported) stood at ''32.9 in FY23, compared to ''45.19 in FY22.

The US is the largest market for your Company and accounted for 46.9% of the total revenue. US revenue increased by 4.8% to ''116,544 million. Your Company launched 34 products in FY23. Your company’s market share by prescription volume (IQVIA TRX) in the US, for the quarter ending March 2023 stands at 8.7%, positioning your Company as the largest generic pharmaceutical player.

Your Company continues to strengthen its pipeline for the global markets including the US market. As on March 31, 2023, your Company filed 774 Abbreviated New Drug Applications (ANDAs) on a cumulative basis. Of the total count, 565 have

received final approvals and 34 received tentative approvals and 175 ANDAs are currently under review.

Your Company’s revenue in its Europe formulations business was ''64,256 million in FY23 compared to ''64,803 million in FY22. Your Company now operates in ten countries in EU/UK and is present across multiple channels including pharmacy, hospital and tender business.

The ARV Formulations business stood at ''9,544 million in FY23, growing 14.6% compared to ''8,330 million in FY22.

Growth Markets segment, including Brazil, Canada, Columbia and South Africa and others, grew by 31.2% Y-o-Y to ''19,729 million.

OUTLOOK

FY23 was a challenging year for businesses, as the global economy slowly recovering from the pandemic was subjected to geo-political shocks leading to soaring inflation and hurting demand. Your company’s effort in diversifying product portfolio and improving operational efficiency helped it to overcome the turbulent macro-economic environment significantly.

Your Company made significant progress in advancing the biosimilar and vaccine development program during the year. Through continued focus on R&D, the company has advanced the complex product portfolio and capacity further for commercialization.

Your company maintains its strong position in the key geographies of the US and Europe and is poised to grow through new launches and increasing access. In the US, your company has filed 774 ANDAs till March 31, 2023, with estimated total market potential of US$150 billion as per IQVIA data. 565 out of the total filed ANDAs have received final approval, while 209 ANDAs are in different stages of the review process. During the year, your company filed 49 ANDAs with the US FDA, including 10 ANDAs for injectable products, and received final approvals for 59 products including for 16 injectable products. The company remains committed to broaden the array of branded OTC products in line with the market trend.

For the Europe market, your Company now has Operations in ten countries with full-fledged pharmacy, hospital and tender sales infrastructure. It now ranks amongst the top 10 generic pharmaceutical companies in 8 countries of Europe. Your Company aims to expand its market share and growth, through new launches including day 1 launches, differentiated offerings, niche and complex products like Biosimilars. The company also completed building the Europe market focused injectable facility at Vishakhapatnam, India, which is in the process of commissioning.

Your company preserved its ARV market dominance by winning bids to supply in both the Global fund and PEPFAR allocation

this year. Despite price erosion, its efficient capacities and pricing capability have been a key factor in maintaining leading position in the Dolutegravir-based regimen which is the standard therapy for HIV.

Among the key growth markets, your Company has completed building a Orals facility at Taizhou, China which is in the process of commissioning. Moreover, in China, the Company has filed 30 import products and has received 6 approvals till March 31, 2023, which will be manufactured in units in India. In Canada, your Company has 188 approved products while 52 products are awaiting final approval as at the end of FY23.

Your Company has long been focused on creating an efficient API business, which is a key component in the company’s overall growth journey. As part of the ongoing strategy, the API business operations have been carved into a wholly owned subsidiary. This move is expected to bring higher management bandwidth and more emphasis on growth and productivity within the API segment.

Last year your Company had launched a Penicillin-G project in Kakinada, Andhra Pradesh, of 15,000 tonnes/annum capacity, as part of the Indian Government’s production linked incentives (PLI) scheme. The project is progressing well on time and is expected to be completed in FY24.

RESEARCH AND DEVELOPMENT (R&D)

Aurobindo, over the years, has consistently invested in R&D for improving capabilities and on-boarding talented people across the globe. Your Company now has a team of more than 1,500 scientists and analysts. This enables your Company to develop a wide range of medications from generics to complex speciality products. Currently, Aurobindo has nine Research and Development (R&D) centres, of which five are in India and four are in the USA. The R&D centres are equipped with cutting-edge technologies where the talented scientists develop generics and difficult-to-develop products and strive to improve productivity. During FY23, your Company invested 5.7% of its consolidated revenue or '' 14,115 million as against '' 15,814 million or 6.7% of its consolidated revenue in FY22 in R&D.

Your Company is focused on developing specialty and difficult-to-develop complex products in the respiratory and dermatological therapeutic areas, including metered dose inhalers (MDIs), dry powder inhalers (DPIs), nasal sprays, topical lotions, creams, ointments and transdermal patches.

The products are developed for global markets, where your Company will be able to file the product, get approval and market the products. Your Company is further diversifying its product portfolio by working on multiple R&D initiatives.

During the year, your Company has continued to advance our Phase 3 clinical trials of two oncology and one ophthalmic biosimilar products, including completion of the treatment phase of our trastuzumab, a biosimilar to Herceptin.

To support future product launches, it has incurred a capacity expansion in both the microbial and mammalian drug substance manufacturing facilities. The additional microbial drug substance manufacturing capacities are commissioned for use already in FY23, while the two new mammalian production lines will be ready for use in FY24.

The 15 Valent Pneumococcal Conjugate Vaccine, developed by Tergene Biotech, a joint venture 80% owned by your Company, completed successful 3 0 trial in 1,130 pediatric subjects.

The vaccine received recommendation from Subjects Expert Committee, that operates under the aegis of CDSCO, for grant of permission to Tergene to manufacture and market the vaccine with three dose schedule in pediatric age group of 6,

10 and 14 weeks.

ENVIRONMENT, HEALTH AND SAFETY (EHS) Environment

Environmental preservation has been critical to your company and it has assigned the highest level of priority across the units. To accomplish this sustainability goal, we are leaning more towards Renewable Energy, improving the Co-Processing of Hazardous Waste, Reusing/Recycling 100% of NonHazardous waste, Managing Water resources responsibly, and expanding Green belts around our facilities. We have adopted the best standards of responsible manufacturing across our supply chain.

Health & Safety

Health, safety, and well-being of our employees and associates are a crucial material topic for us. We are committed towards instilling a healthy lifestyle, a safe working environment. Our EHS framework and management practices assure compliance while prioritizing product and process safety and safeguarding all employees. Each manufacturing facility has departmental and Plant safety committee. Every month Management review meetings are conducted which comprises top management from Corporate and representatives from all sites including site heads to examine safety performance and streamline operational procedures critical to safety requirements. In addition to the above Lean Daily Management meetings are also conducted daily with Senior leadership team to track the actions for continuous improvement. Health and safety training is provided to both permanent and contractual workers, ensuring that our team understands the significance of safe procedures and guidelines. Risk identification and assessments are undertaken as part of the process before scaling up. Before commencing any chemical process in the manufacturing area, a hazard and operability study (HAZOP) is conducted. Qualitative and Quantitative risk assessments are carried out for establishing effective controls.

Evaluation of Safety performance through EHS Score card on monthly basis. This EHS Score card provides insight to help an organization to understand its safety performance by evaluating on monthly basis based on Key Performance Indicators identified. Inter Unit audits are conducted for gap assessments

and performance improvement. Regular Knowledge sharing session are conducted for sharing best practices among the manufacturing facilities.

Engagement in National and global initiatives on Antimicrobial Resistance (AMR)

As a healthcare service provider, the Company is partnering with ‘The Access to Medical Foundation,’ which is monitoring what the 30 most active firms in antimicrobial R&D and production are doing to combat antibiotic resistance. We participated in The Antimicrobial Resistance Benchmark 2018, 2020 and 2021.

The Company is also a member of the ‘AMR Industry Alliance,’ which is driving antimicrobial resistance progress via common objectives and commitment to increase access to high-quality antimicrobial products, encourage responsible usage, and reduce environmental concerns. We participated in AMR Industry Alliance Survey report 2020,2021 and 2022.

Membership with Pharmaceutical Supply Chain Initiative (PSCI):

The Pharmaceutical Supply Chain Initiative (PSCI) is a group of pharmaceutical and healthcare companies who share a vision of better social, health, safety and environmental outcomes in the communities. Aurobindo became Associate Member of PSCI in 2022.

Participation in Carbon Disclosure Project (CDP):

CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts. CDP holds the largest environmental database in the world, and this year scored nearly 15,000 companies on their climate change, forests and water security disclosures.

Your company participated in the CDP Disclosure 2022 (Performance in Climate Change and Water security) and it has received a CDP score of ‘C’ for Climate Change and Water Security for exemplary performance as a First-Time responder.

AWARDS AND ACCOLADES

• Significant Achievement in HR Excellence, 13^th CII National HR Excellence Award, 2022

• Excellence in Business Partnering, Economic Times Human Capital Awards, 2022

• IKON Talent Acquisition Awards - HR Guru, 2022

• “L&D Excellence” and “Best L&D Team ” in 12^th Edition Learning and development Summit & Awards 2023 organised by UBS FORUMS PVT LTD

• “23^rd National Award for Excellence in Energy Management 2022” at CII Virtual Platform:

• Unit IX received the Excellence Energy Efficient Unit -Consistent in the same category in the last 02 years.

• Unit XIV received Excellence Energy Efficient Unit - Current year and Energy Efficient Unit category in the last year.

• Unit I received Energy Efficient Unit - Consistent in the same category in the last three Years.

• Unit V received Energy Efficient Unit Current Year.

• Unit XI received Energy Efficient Unit Consistent in the same category in the last two Years.

• Unit XIU received Energy Efficient Unit Current Year.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statements of Subsidiary companies/Associate companies/Joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The Company has formulated a Policy for determining Material Subsidiaries. The Policy is available on the Company’s website and can be accessed at https://www.aurobindo.com/api/uploads/ disclosure_under_regulation/Policy-MaterialSubsidiary.pdf

During the year, the following were the changes in the subsidiaries of the Company:

Ceased subsidiaries / JVs

During the period under review, the following are the companies that ceased as subsidiaries/JVs:

• Auro PR I LLC (formerly known as Mylan LLC) Merged with Auro PR Inc w.e.f. May 23, 2022.

• Eugia Injectable Inc, is dissolved w.e.f. April 26, 2022

• Auro Steriles LLC, a wholly owned stepdown subsidiary in USA has been cancelled w.e.f. September 30, 2022.

New subsidiaries / JVs

During the period under review, following subsidiary/step-down subsidiary companies were incorporated/acquired:

• Theranym Biologics Private Limited was incorporated as wholly owned subsidiary of Curateq Biologics Private Limited w.e.f. September 22, 2022.

• PT Aurogen Pharma Indonesia was incorporated as a wholly owned stepdown subsidiary (99% held by Helix Healthcare BV and 1% held by Agile Pharma BV) w.e.f. July 1, 2022

• 51% share capital of GLS Pharma Limited was acquired and it became a subsidiary with effect from August 17, 2022

Name changes of Subsidiaries / JVs

During the period under review, names of the following subsidiary/JVs were changed:

• Acrotech Biopharma LLC name has been changed to Acrotech Biopharma Inc. w.e.f. June 2, 2022

• Auro Cure Private Limited name has been changed to Eugia Steriles Private limited w.e.f. July 26, 2022

• Wytells Pharma Private Limited name has been changed to Eugia SEZ Private Limited w.e.f. September 2, 2022

• Auro Medics Pharma LLC name has been changed to Eugia US LLC w.e.f. August 8, 2022

• Tergene Biotech Private Limited has been converted from private limited company to public limited company w.e.f. October 20, 2022, hence the name changed to Tergene Biotech Limited.

• Auro Pharma India Private Limited name has been changed to Apitoria Pharma Private Limited w.e.f. March 29, 2023.

Ownership changes in Subsidiaries

During the period under review, ownership of the following subsidiaries was changed from one subsidiary to other subsidiary:

• AuroMedics Pharma LLC (now Eugia US LLC) - Ownership changed from Aurobindo Pharma USA Inc to Auro Steriles LLC w.e.f. April 1, 2022. Consequent to cancellation of Auro Steriles LLC on September 30, 2022, ownership of Eugia US LLC changed from Auro Steriles LLC to Eugia Inc w.e.f. October 1, 2022

• Auro Steriles LLC - Ownership changed from Aurobindo Pharma USA Inc to Eugia Inc w.e.f. April 1, 2022

• Eugia US Manufacturing LLC - Ownership changed from Aurobindo Pharma USA Inc to Eugia Inc w.e.f. April 1, 2022

INTEGRATED ANNUAL REPORT

In compliance with the SEBI Circular SEBI/HO/CFD/CMD/ CIR/P/2017/10 dated February 6, 2017 and based on the International Integrated Reporting Framework, the Company Voluntarily adopted the Integrated Annual Report for the financial year 2022-23, which encompasses both financial and non-financial information to Members of the Company to view insight into the organization’s strategy, governance framework, stakeholder relationship and future outlook and performance and prospects of value creation based on the six forms of capitals viz. financial capital, manufactured capital, intellectual capital, human capital, social capital, relationship capital and natural capital.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website https:// www.aurobindo.com/investors/disclosures-under-regulation-46/

financials-subsidiaries in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Company’s subsidiaries will be provided to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

The Company adopted a Code of Conduct to regulate, monitor and report trading in securities of the Company by the designated persons and their immediate relatives pursuant the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code of practices and procedures for fair disclosure of unpublished price sensitive information and has been made available on the Company’s website at https://www. aurobindo.com/api/uploads/Code-Fair-Disclosure-PIT-Feb2019. pdf. Company has implemented System Driven Disclosures for monitoring dealings in the securities of the Company by the promoters, directors and designated persons and also structured digital database to keep record of the persons with whom the unpublished price sensitive information of the Company has been shared with.

VIGIL MECHANISM

The Board of Directors adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims to conduct the affairs of the Company in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity, and ethical behaviour.

All permanent employees and Whole-time Directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees and other stakeholders to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct and Ethics, and leak of price-sensitive information under the Company’s Code of Conduct formulated for regulating, monitoring, and reporting by Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. It also provides for adequate safeguards against the victimisation of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee and also Managing Director of the Company in exceptional cases. During the year, no complaints were reported under the Whistle Blower Policy. The Whistle Blower Policy is available on the Company’s website https://www.aurobindo.com/investors/ disclosures-under-regulation-46/vigil-mechanism-whistle-blower-policy

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexual harassment cases at the workplace and the said process ensures complete anonymity and confidentiality of information. Your Company has constituted an Internal Complaints Committee in compliance with the Sexual

Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention and prohibition of sexual harassment at the workplace. The policy provides for protection against sexual harassment of women at the workplace and for the prevention and redressal of such complaints. During the year, the Company has not received any complaint. The Company has been conducting regular awareness programmes aimed at prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled, and a tentative calendar of the meetings is created, in consultation with the Directors. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, five Board Meetings and six Audit Committee Meetings were convened and held.

The details of the meetings including composition of the Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONALKey Managerial Personnel

Mr. K. Nithyananda Reddy, Vice Chairman & Managing Director, Dr. M. Sivakumaran, Whole-time Director, Mr. M. Madan Mohan Reddy, Whole-time Director, Mr. Santhanam Subramanian, Chief Financial Officer, and Mr. B. Adi Reddy, Company Secretary are Key Managerial Personnel of the Company in accordance with the provisions of Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. In view of temporary inability to perform executive functions of the Company by Mr. P. Sarath Chandra Reddy, he has been relieved from his executive responsibilities with effect from November 12, 2022. However, he continues to remain as director on the Board of the Company.

None of the Directors of the Company are disqualified under the provisions of the Companies Act, 2013 (‘Act’) or under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Independent Directors have provided confirmations as contemplated under section 149(7) of the Act. As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a certificate from the Company Secretary in practice, that none of the Directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority, forms part of Corporate Governance Report as Annexure-A.

Appointments/Reappointments

During the year, the Members approved the reappointment of Mr. Girish Paman Vanvari (DIN: 07376482) as an Independent Director for second term of five years from November 5,

2022 to November 4, 2027 and approved the appointment of Mr. Santanu Mukherjee (DIN: 07716452) as an Independent

Director for a period of two years from February 9, 2023 to February 8, 2025. In the opinion of the Board, both Mr. Girish Paman Vanvari and Mr. Santanu Mukherjee are the persons of integrity, fulfil requisite conditions as per applicable laws and are independent of the management and promoters of the Company.

Further, as per the provisions of the Companies Act, 2013,

Dr. M.Sivakumaran and Mr. P. Sarath Chandra Reddy will retire as Directors at the ensuing Annual General Meeting and being eligible, seek reappointment. The Board recommends their reappointment.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,

2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on an on-going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration as to the compliance with the Company’s Code of Conduct and the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation (1) of Regulation 16 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and confirmed that they have registered their names in the Independent Directors’ Data bank. In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of

any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognises and embraces the importance of a diverse Board in its success. The Board has adopted the Board Diversity Policy which sets out with an approach to diversify the Board of Directors. The Board Diversity Policy is available on the Company’s website: https://www.aurobindo.com/api/uploads/ Policy-on-Board-Diversity.pdf

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be conducted by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be conducted by the entire Board of Directors, excluding the Director being evaluated.

The Annual Performance Evaluation was conducted for all Board Members, for the Board and its Committees for FY23.

This evaluation was led by the Nomination and Remuneration/ Compensation Committee of the Company. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the Listing Regulations and in accordance with the Guidance Note on Board Evaluation issued by SEBI in January 2017 The Board evaluation was conducted through questionnaires designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/ recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of shareholders interest and enhancing shareholders value, experience, and expertise to provide feedback and guidance to top management on business strategy, governance, risk and understanding of the organisation’s strategy, etc.

POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

The policy of the Company on Directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the Nomination and Remuneration Policy of the Company. The Nomination and Remuneration Policy

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz., Mr. Girish Paman Vanvari, Mr. P. Sarath Chandra Reddy and Mr. K. Ragunathan as on March 31, 2023.

The Risk Management Committee was re-constituted on April 1, 2023 with the following Directors viz., Mr. Girish Paman Vanvari, Mr. Santanu Mukherjee and Mrs. Savita Mahajan as members.

Mr. Girish Paman Vanvari is the Chairman of the Committee.

The Company has established a separate department to monitor the enterprise risk and for its management. The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which the Company faces in its day-today operations. The Risk Management policy of the Company outlines a framework for identification of internal and external risks specifically faced by the Company, in particular including financial, operational, sectoral, sustainability (particularly, ESG-related risks), information, cyber security risks, or any other risk as may be determined by the Committee; measures for risk mitigation including systems and processes for internal control of identified risks; and Business continuity plan. Risk is an integral part of the Company’s business, and sound risk management is critical to the success of the organisation. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on a regular basis at the time of review of the quarterly financial results of the Company. A report on the risks and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS’ REPORT

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 35^th Annual General Meeting (AGM) held on August 2,

2022, had appointed M/s. Deloitte Haskins & Sells, Chartered Accountants as Statutory Auditors for a period of 5 years i.e. up to the conclusion of the 40^th AGM to be held in the year 2027 Further, as per the Companies (Amendment) Act, 2017 effective from May 7, 2018, the provisions relating to ratification of the appointment of Statutory Auditors at every AGM are not required to be followed. The Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company. The Statutory Auditors’ report forms part of the Annual Report. The notes on financial statements referred to in the Auditors’ Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

INTERNAL AUDITORS

Ernst & Young LLP are the Internal Auditors of the Company and to maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is clearly

as adopted by the Board is available on the Company’s website: https://www.aurobindo.com/api/uploads/NRC-Policy-AUROBINDO-09022023.pdf

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under review were on arm’s length basis and in the ordinary course of business. All Related Party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval. The policy on Related Party Transactions, as approved by the Board of Directors, has been uploaded on the website of the Company https://www. aurobindo.com/investors/disclosures-under-regulation-46/ policy-on-rpt

The particulars of contracts or arrangements with Related Parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

There were no materially significant Related Party Transactions which could have potential conflict with the interests of the Company at large.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-3 to this Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2023 is available on the Company’s website and can be accessed at: https://www.aurobindo.com/investors/disclosures-under-regulation-46/annual-returns

defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of the internal control system of the Company, its compliance with applicable laws/regulations, accounting procedures and policies on a standalone basis. Based on the reports of the Internal Auditors, corrective actions will be undertaken, thereby strengthening the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on a quarterly basis.

COST AUDIT

As per Section 148 of the Act, the Company is required to have the audit of its cost records conducted by a Cost Accountant. The Board of Directors of the Company has on the recommendation of the Audit Committee, approved the appointment of EVS & Associates, a firm of Cost Accountants in Practice (Registration No. 000175) as the Cost Auditors of the Company to conduct cost audit for relevant products prescribed under the Companies (Cost Records and Audit) Rules, 2014 for the year ending on March 31, 2024 at a remuneration of '' 650,000/- plus reimbursement of out-of-pocket expenses at actuals and applicable taxes. As per the provision of the Act, the remuneration payable to the Cost Auditor for audit of cost records, subject to ratification by the Members in the forthcoming AGM. The Cost Auditor, EVS & Associates have, under Section 139(1) of the Companies Act, 2013 and the Rules framed thereunder, furnished a certificate of their eligibility and consent for appointment.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework institutionalised in Aurobindo has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance-related controls and also Information Technology (IT) controls, comprising IT general controls (ITGC) and application-level controls. The ITGC would include controls over IT environment, computer operations, access to programmes and data, programme development and programme changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorisation levels.

To further strengthen the existing IFC framework and support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined and identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The Internal Auditors conduct ‘Process & control review’ on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to the Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

• Establishment of policies and procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

• Physical existence and ownership of assets at a specified date;

• Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

• Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate amounts;

• Preparation of financial information as per the timelines defined by the relevant authorities.

These controls cover the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to the Company’s policies, safeguarding of its assets of the Company, prevention and detection of its frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has an internal control system, commensurate with the size, scale and complexity of its operation.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. A. Mohan Rami Reddy, a Company Secretary in Practice, to undertake the secretarial audit of the Company for the financial year 2022-23. The Secretarial Audit Report issued in form MR-3 is in Annexure-4 of this Report.

As per regulation 24A(1) of SEBI Listing Regulations, your Company is required to annex a secretarial audit report of its material unlisted subsidiary incorporated in India to its Annual Report. Accordingly, the Secretarial Audit Report for the Financial Year 2022-23 of APL Healthcare Limited, a material subsidiary incorporated in India, is annexed along with Annexure-4 of this report.

There are no qualifications, reservations or adverse remarks in either of these Secretarial Audit Reports. Also, pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the same to stock exchanges where the shares of the Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established the Corporate Social Responsibility Committee (CSR Committee).

The Board, on the recommendation of the CSR Committee, adopted a CSR Policy. The same is available on the Company’s website at https://www.aurobindo.com/api/uploads/CSR-policy. pdf The CSR objectives are designed to serve societal, local and national goals in the locations that we operate in, to create a significant and sustained impact on local communities.

The Company undertakes its CSR activities through Aurobindo Pharma Foundation, a wholly-owned subsidiary of the Company incorporated under Section 8 of the Companies Act 2013.

The details of CSR projects approved by the Board for the financial year 2022-23 are available on the Company’s website at https://www.aurobindo.com/sustainability/annual-action-plan. The Annual Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-5 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-6 to this Report. The statement containing particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel)

Rules, 2014 is open for inspection at the Registered Office of the Company during business hours on all working days of the Company, up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining such details may write to the Company Secretary of the Company at [e-mail].

Affirmation that the remuneration is as per the remuneration policy of the Company.

In compliance with the provisions of the Companies Act, 2013 and SEBI Listing Regulations, the Board, on the recommendation of the Nomination and Remuneration/Compensation Committee approved the Policy for selection, appointment of Directors,

KMPs and Senior Management persons. The said Policy provides a framework to ensure that suitable and efficient succession plans are in place for appointment of Directors on the Board and other management members. The Policy also provides for selection and remuneration criteria for the appointment of Directors and senior management persons. The Company affirms that the remuneration is as per the Remuneration Policy of the Company.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. The Company has also taken D&O Insurance Policy covering Company’s Directors and Officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2023 to the date of signing of the Board’s Report other than the transfer of certain Units of the Company viz. Unit 1, Unit 5, Unit 8, Unit 9, Unit 11, Unit 14, Unit 17 and R&D Unit 2, to the Company’s wholly owned subsidiary Apitoria Pharma Private Limited for an aggregate consideration of '' 38,0979 million subject to necessary adjustments as prescribed in the business transfer agreements and on a cash free basis.

CORPORATE GOVERNANCE

A separate report on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report. The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company’s overall performance during the year.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules’) mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years in the unpaid dividend account to the IEPF, also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF.

Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to

IEPF account on due dates. The details of amount of unclaimed unpaid dividend and corresponding shares transferred to IEPF during the financial year 2022-23 have been provided in the AGM Notice.

Further, in accordance with the IEPF Rules, the Board of Directors have appointed Mr. B. Adi Reddy, Company Secretary as Nodal Officer of the Company for the purpose of verification of claims of shareholders pertaining to shares transferred to IEPF and / or refund of dividend from IEPF Authority and for coordination with IEPF Authority. The details of the Nodal Officer are available on the website of the Company at https://www.aurobindo.com/api/ uploads/unpaiddividendaccountdetails/Nodal-Officer-IEPF.pdf

SHARE CAPITAL

During the financial year under review, there has been no change in the Authorised, Subscribed and Paid-up Share Capital of the Company. The paid-up share capital of the Company as on March 31, 2023 was '' 585,938,609 divided into 585,938,609 equity shares of '' 1 each. The Company has not issued any shares, debentures, bonds or convertible / non-convertible securities during the financial year under review.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

A detailed Business Responsibility and Sustainability Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

SIGNIFICANT/ MATERIAL ORDERS PASSED BY COURTS/ REGULATORS/TRIBUNALS

There were no significant material orders passed by the Regulators or Courts or Tribunals that would impact the going concern status of the Company and its operations in future.

SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India, i.e., SS-1 and SS-2, relating to ‘Meetings of the Board of Directors’ and ‘General Meetings’ respectively.

OTHER DISCLOSURES

Acquisitions / Disinvestment / merger / demerger

Acquisition of 51% equity stake in GLS Pharma Limited

The Board of Directors of the Company at its meeting held on June 17, 2022, approved the acquisition of 51% equity shares in GLS Pharma Limited, operating in oncology business and having manufacturing facility in Hyderabad for a cash consideration of '' 280.5 millions. GLS Pharma Limited is engaged in the business of Oncology products which include orals and injectables used in chemotherapy for solid malignancies, chemotherapy for hematological malignancies and chemo supportive products.

GLS Pharma Limited was incorporated on September 1, 2014

and initiated manufacturing in the year 2015. It had a total sales of '' 258 millions during the financial year 2021-22 and '' 273 millions during the financial year 2022-23.

Acquisition of business operations of Veritaz Healthcare Limited

The Company completed the acquisition of business and certain assets of Veritaz Healthcare Limited on slump sale basis in July 2022, for a consideration of '' 1,710 million as per the Business Transfer Agreement dated March 28, 2022. Veritaz operates in the pharmaceutical industry in India and sells branded generic formulations and other health care related products.

Merger Scheme

The Board of directors at its meeting held on August 12, 2021 had approved Scheme of Amalgamation providing for the amalgamation of two of its wholly owned subsidiaries viz., Auronext Pharma Private Limited and Mviyes Pharma Ventures Private Limited with the Company subject to the requisite statutory / regulatory approvals including the approval of the National Company Law Tribunal (Hyderabad Bench). Since there were other restructuring proposals in discussion, this amalgamation was put on hold and the Board of Directors at its meeting held on April 1, 2023 has decided to proceed with the aforesaid Scheme of Amalgamation.

CREDIT RATING

The Company has obtained the Credit ratings from India Ratings & Research Private Limited and it has assigned ND AA /Stable/ IND A1 on Rating Watch Evolving for Company’s fund based working capital facilities and ND A1 on Rating Watch Evolving for Company’s non-fund-based working capital limits vide their letter dated October 20, 2022.

ACKNOWLEDGEMENTS

Your directors are grateful for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and remain thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For and on behalf of the Board K. Ragunathan

Date: May 27, 2023 Chairman

Place: Hyderabad DIN: 00523576

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Mar 31, 2022

'' in million
	2021-22	2020-21
Revenue from operations	112,871.4	158,236.8
Profit Before Depreciation, Interest, Tax and Exceptional Items	14,734.0	41,198.3
Depreciation	4,152.6	4,880.0
Finance cost	169.4	286.8
Profit Before Tax	16,374.8	41,930.1
Provision for Tax	1,827.7	10,801.0
Net Profit After Tax	14,547.1	31,129.1
Other Comprehensive Income/ (Expense)	16.9	(64.2)
Total Comprehensive Income for the period	14,564.0	31,064.9

DIVIDEND

Your Company has paid first interim dividend of 150% i.e. ''1.50 per equity share of ''1, second interim dividend of 150% i.e. ''1.50 per equity share of ''1, third interim dividend of 150% i.e. ''1.50 per equity share of ''1 and fourth interim dividend of 450% i.e. ''4.50 per equity share of ''1. The total dividend for the financial year 2021-22 comes to 900% i.e. ''9.00 per equity share of ''1 against 400% i.e. ''4.00 per equity share of ''1 paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top 1000 listed entities based on market capitalisation are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on your Company’s website: https://www.aurobindo. com/wp-content/uploads/2018/10/Dividend-Distribution-Policy. pdf

PERFORMANCE REVIEW

Your Company is the leading generic pharma company globally and now ranks as seventh largest generic company by sales and second largest listed Indian pharmaceutical company by revenues. Your Company has become the largest supplier in the USA by volume in last quarter of the financial year. Your Company maintained its growth momentum in revenue and profitability despite headwinds caused by the pandemic.

On a standalone basis, your Company’s revenue stood at ''112,871.4 million in the financial year 2021-22, as against ''158,236.8 million in the corresponding previous period.

The Formulations business stood at ''66,942.9 million due to

Your Directors are pleased to present the 35^th Annual Report of your Company together with the audited accounts for the financial year ended March 31, 2022.

FINANCIAL HIGHLIGHTSStandalone Financials

transfer of formulation units (Unit IV, Unit XVI) to wholly-owned subsidiaries of Aurobindo Pharma Limited. The API business witnessed a growth of 28.5% to ''44,022.6 million. EBITDA for the year decreased by 64.2% to ''14,734.0 million vs. ''41,198.3 million in the corresponding previous period. Gross Profit margin decreased by 6% to 48.2% of revenue (vs. 54.2% revenue in FY21), which led EBITDA margin for the year to decrease by 13% to 13.1% of revenue (vs. 26% of revenue in FY21). Profit before Tax for the year is at ''16,374.8 million. Your Company’s net profit (before Other Comprehensive Income) is at ''14,547.1 million as against ''31,129.1 million in FY21. The diluted Earnings Per Share stood at ''24.83 compared to ''53.13 in FY21.

On a consolidated basis, the revenues stood at '' 234,554.9 million. The Formulations business stood at ''199,393.2 million vs ''216,859.7 million in the corresponding previous period.

The Active Pharmaceutical Ingredients (APIs) business posted a growth of 13.9% to ''35,155.7 million vs. ''30,859.0 million in FY21. The growth in API segment led by strong growth of 20.4% in Beta Lactam segment to ''20,825.0 million. EBITDA margin decreased by 2.8% to 18.7% vis-a-vis 21.5% in FY21.

R&D expenditure for the year was ''15,813.5 million or 6.7% of revenue, increased from ''15,095.7 million or 6.1% of revenue in FY21. EBITDA before forex and other income stood at ''43,867.9 million. Your Company reported a Net Profit of ''26,471.0 million, vs. ''53,338.4 million (including one off gains from the sale of Natrol business in FY21) in corresponding previous period. The Diluted Earnings Per Share (reported) stood at ''45.19 compared to ''91.05 in FY21. During the year, Company received net loss (net of the tax) of ''1,216.8 on exceptional items including Gain on sale of tangible assets, Impairment of intangible assets & goodwill and Impairment of capital work in progress.

The US is the largest market for your Company and accounted for 47.4% of the total revenue. US revenue stood at ''111,221.1 million. Your Company has launched 22 products in FY22. Your Company has maintained its dominant position in the US market and is ranked as the largest volume player as per IQVIA QTR March 2022 data.

Your Company continues to strengthen its pipeline for the global markets including the US market. As on March 31, 2022, your Company filed 727 Abbreviated New Drug Applications (ANDAs) on a cumulative basis. Of the total count, 505 have received final approvals and 33 received tentative approvals, including 8 ANDAs, which are tentatively approved under the US President’s Emergency Plan for AIDS Relief (PEPFAR), while 189 ANDAs are currently under review.

Your Company registered a 6.9% growth in its Europe formulations business to ''64,802.9 million in FY22 compared to the previous year’s revenue of ''60,607.9 million. Your Company is listed among the top 10 generics businesses in 6 of the 9 EU/UK nations where it operates, having a presence in all market channels such as pharmacies, hospitals, and tenders, as well as sales infrastructure and 550 INNs commercialised (International Non-proprietary Names). Despite headwinds,

your Company’s performance in France, Portugal, Poland and Italy led to overall growth in Europe. Your Company’s focus during the year was to improve the profitability of the acquired Apotex business.

The ARV Formulations business stood at ''8,329.9 million in FY22 vs. ''18,627.7 million in FY21, due to COVID impact as well as excess procurement in the previous FY.

Growth Markets, which include Brazil, Canada, Columbia and South Africa grew by 4.6% to ''15,039.4 million.

OUTLOOK

FY22 was different in every aspect and held more than its fair share of challenges, as the world reeled under the pandemic through the year, we stayed focused on diversifying our product basket and launching new products consistently. Your Company has plans to leverage the infrastructure of the acquired business to drive penetration and optimise value creations.

Your Company remains focused on developing on complex and differentiated products in multiple areas comprising oncology and hormonal products, biosimilars, depot injections, vaccines, topicals, transdermal patches, inhalers, nasals, and complex peptide products which will drive the next phase of growth.

Your Company is also in the process of commissioning the capacities for some of the complex therapeutic areas.

Your Company is committed to grow in its key geographies i.e. US and Europe. In the US, around 220 ANDAs are awaiting final approval and annual sales as per IQVIA data is US$105 billion as on March 31, 2022. Apart from this, as of March 31, 2022, Your Company is seeking final clearance for 128 ANDAs, with a goal of expanding the number of submissions and approvals across treatments in oral solids, and for 48 ANDAs in injectables. With the pandemic situation easing, Your Company will resume its development trajectory, with a focus on developing a product range of complicated injectables. As more pharmaceuticals transition from prescription to OTC, the array of branded OTC products will grow.

For Europe markets, your Company have total 58 products filed and awaiting approval. Additionally, there are nearly 200 products under development in general oral/ general/ oncology product categories, which will be launched in the next two to three years. Your Company is also building a dedicated injectable facility for Europe and Growth Markets to strengthen its presence in the Hospital segment. The facility will start filing new injectable products in FY23 with earliest possible commercialisation in FY24.

In the ARV space, due to the Covid effect as well as surplus procurement in the previous fiscal year, this category had a 55 percent year-on-year decline to '' 8,330 million. Your Company intends to maintain a substantial chunk of its market position in the ARV sector via Dolutegravir-based regimen, which is the

first line therapy in HIV, by utilising big capacities at low pricing. This regimen is projected to be the standard therapy in the future years.

In Growth Markets, Canada, South Africa, Brazil and China are the key geographies for your Company. In Canada, your Company has a robust product pipeline with over 43 products awaiting approval. In China so far, we have approval for 2 products and are awaiting approval for additional 29 products.

In its API business, your Company produces and sells Betalactam and Non-Betalactam products from its 10 API and intermediate plants. To satisfy consumer demands while being cost-effective, the Company has focused on growing capacity and continually upgrading its production processes. The Indian government established production linked incentives (PLI) to enhance local manufacturing capacity, including high-value items across the global supply chain. We replied by launching a plant in Kakinada, Andhra Pradesh, to produce 15,000 tonnes of Penicillin G.

In R&D, your Company will maintain focus on difficult-to-manufacture, differentiated products, with possible low competitive pressure. Filing momentum is in line with the strategy of moving towards complex and differentiated products.

RESEARCH AND DEVELOPMENT (R&D)

Aurobindo, over the years, has consistently invested in R&D for improving capabilities and on-boarding talented people across the globe. Your Company now has a team of more than 1,500 scientists and analysts. This enables your Company to develop a wide range of medications from generics to complex speciality products. Currently, Aurobindo has nine Research and Development (R&D) centres, of which five are in India and four are in the USA. The R&D centres are equipped with cutting-edge technologies where the talented scientists develop generics and difficult-to-develop products and strive to improve productivity. During FY22, your Company invested 6.7% of its consolidated revenue or ''15,813.5 million as against ''15,095.7 million or 6.1% of its consolidated revenue in FY21 in R&D.

Your Company is focused on developing specialty and difficult-to-develop complex products in the respiratory and dermatological therapeutic areas, including metered dose inhalers (MDIs), dry powder inhalers (DPIs), nasal sprays, topical lotions, creams, ointments and transdermal patches.

The products are developed for global markets, where your Company will be able to file the product, get approval and market the product globally. Your Company is further diversifying its product portfolio by working on multiple R&D initiatives.

Our biosimilars are developing steadily. We filed two cancer biosimilars in FY22. One cancer biosimilar monoclonal antibody is expected to end patient enrolment in its Phase III efficacy and safety trial in early FY23. This product should be filed in select markets by Q4FY2022. In Q4 FY22, a Phase 1 clinical trial for one of our biosimilar antibodies started.

In our North Carolina R&D centre, we develop respiratory medicine products including MDIs and DPIs for asthma and COPD (Chronic Obstructive Pulmonary Disease). Our India and US R&D centres create dermatological products. 33 items are under development at different levels (ANDA filed for 1 product, 32 products are under development, development to be initiated for another 6 products). At least 30% of developing goods need clinical or BE studies. First clinical trial and show batches for 6 items in FY22. Our India and US factories will make these items.

10-transdermal patches are under development. The underdevelopment items have a $3 billion market. In FY22, we submitted 1 product''s technical data package and began 1 exhibit batch.

We have bacterial and viral vaccines in the works. We are developing a fifteen serotype PCV via our Company Tergene Biotech (Pneumococcal Conjugate Vaccine). We have completed one phase 3 clinical investigation for PCV, which we intend to move forward to the filing stage in FY23. Our research and development centres in Hyderabad, India, and the United States are working on various candidate vaccines that are in the early stages of development.

ENVIRONMENT, HEALTH AND SAFETY (EHS) Environment

The Company continuously monitors its energy usage, regulates the emissions released and waste generated, and makes sure it follows responsible water consumption practices. To commit itself further to protect the environment, it holds tree planting initiatives and drives to protect the ecology of the regions it operates in.

Health & Safety

Aurobindo undertakes a number of steps to upgrade and enhance employee safety. For all new projects, existing production units, distribution centres, and so on, the Company observes and monitors the safety laws and procedures. In order to avoid mishaps, the Company also offers several safety training programmes to its employees.

Engagement in national and global initiatives on Antimicrobial Resistance (AMR)

As a healthcare service provider, the Company is partnering with ''The Access to Medical Foundation,'' which is monitoring what the 30 most active firms in antimicrobial R&D and production are doing to combat antibiotic resistance. The

Company is also a member of the ''AMR Industry Alliance,'' which is driving antimicrobial resistance progress via common objectives and commitment to increase access to high-quality antimicrobial products, encourage responsible usage, and reduce environmental concerns.

AWARDS AND ACCOLADES

• Excellence in Business Partnering, Economic Times Human Capital Awards

• Significant Achievement in HR Excellence, 12^th CII National HR Excellence Award

• Transformance Forums “HR Innovation & Tech Fest 2021” winner in the categories of ‘Most Collaborative Hiring Team’ and ‘Innovation in Employee Engagement’

• Aurobindo Pharma Limited, Unit XIV, Visakhapatnam was adjudged the ‘WINNER of Golden Peacock Occupational Health & Safety Award - 2021’ conducted by The Institute of Directors (IOD)

SUBSIDIARIES / JOINT VENTURES

As per the provisions of Section 129 of the Companies Act,

2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statements of Subsidiary companies/Associate companies/Joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The Company has formulated a Policy for determining Material Subsidiaries. The Policy is available on the Company’s website and can be accessed at https://www.aurobindo.com/wp-content/uploads/2022/04/Policy-MaterialSubsidiary-2021.pdf

Eugia Pharma Specialities Limited, a wholly owned subsidiary of the Company, is engaged in oncology, hormonals and sterile products. Its Board of Directors comprises of professionals having managerial experience and business acumen in diverse fields. Eugia is independently run by professionally qualified and experienced team of professionals in the field of quality control, quality assurance and manufacturing. It has its own strong R&D team.

During the year, the following changes were implemented in the subsidiaries of the Company:

Ceased subsidiaries/JVs

During the period under review, Aurobindo Pharma Gmbh Germany merged with Puren Pharma GmbH w.e.f. October 1, 2021. CuraTeQ Biologics GmbH was Liquidated w.e.f. October 7, 2021 and Longxiang Pharma Taizhou Co. Ltd. was Liquidated w.e.f. August 31, 2021.

New subsidiaries/JVs

During the period under review, following subsidiary/step-down subsidiary companies were incorporated/acquired:

• CuraTeQ Biologics s.r.o was incorporated in Czech Republic as a wholly-owned subsidiary of Helix Healthcare B.V. w.e.f. July 27, 2021.

• Eugia Pharma B.V., was incorporated in The Netherlands as a wholly-owned subsidiary of Eugia Pharma Specialities Ltd. w.e.f. September 8, 2021.

• Eugia Pharma (Malta) Limited was incorporated in Malta as a wholly-owned subsidiary of Eugia Pharma B.V. w.e.f. October 14, 2021.

• Eugia (UK) Limited was incorporated in U.K as a wholly-owned subsidiary of Eugia Pharma B.V. w.e.f.

October 21, 2021.

• Aurosalud SA De CV was incorporated in Mexico as subsidiary of Helix Healthcare B.V. & Agile Pharma B.V. w.e.f. July 16, 2021.

• Auro PR Inc was incorporated in Puerto Rico as a wholly-owned subsidiary of Helix Healthcare B.V w.e.f. September 22, 2021.

• Eugia Pharma Inc was incorporated in Canada as a wholly-owned subsidiary of Eugia Pharma B.V. w.e.f.

October 29, 2021.

• Eugia Pharma (Australia) Pty. Limited was incorporated in Australia as a wholly-owned subsidiary of Eugia Pharma B.V., w.e.f. December 15, 2021.

• Eugia Pharma Industria Farmaceutica Limitada was incorporated in Brazil as a wholly-owned subsidiary of Eugia Pharma B.V. w.e.f. December 20, 2021.

• Mylan LLC was acquired in Puerto Rico as a wholly-owned subsidiary of Auro PR Inc w.e.f. December 30, 2021.

• Aurobindo Pharma Ukraine LLC was incorporated in Ukraine as a wholly-owned subsidiary of Helix Healthcare B.V. w.e.f. February 2, 2022.

• Eugia Pharma Colombia S.A.S was incorporated in Colombia as a wholly-owned subsidiary of Eugia Pharma B.V, w.e.f. March 2, 2022.

• Auro Steriles LLC was incorporated in USA as a wholly-owned subsidiary of Aurobindo Pharma USA Inc. w.e.f.

April 1, 2021.

• Vespyr Brands, Inc (formerly known as Nurya Brands Inc) was incorporated in USA as a wholly-owned subsidiary of Auro Health LLC w.e.f. April 28, 2021.

• Eugia US Manufacturing LLC was incorporated in USA as

a wholly-owned subsidiary of Aurobindo Pharma USA Inc., w.e.f. August 31, 2021.

• Eugia Injectable Inc was incorporated in USA as a wholly-owned subsidiary of Eugia Pharma Specialities Ltd. w.e.f. April 1, 2021.,

• Eugia Inc was incorporated in USA as a wholly-owned subsidiary of Eugia Pharma Specialities Ltd., w.e.f.

February 23, 2022.

• Auro vaccines Private Limited was incorporated in India as a wholly-owned subsidiary of the Company w.e.f. November 8, 2021

The name of Aurovitas Nederland B.V (formerly Apotex Nederland B.V.), a wholly-owned subsidiary of Aurobindo Pharma B.V., was changed w.e.f. February 1, 2022

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website www. aurobindo.com, in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Company’s subsidiaries will be provided to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

On December 31, 2018 Securities and Exchange Board of India amended the Prohibition of Insider Trading Regulations, 2015, prescribing various new requirements with effect from 1^st April 2019. In line with the amendments, your Company has adopted an amended Code of Conduct to regulate, monitor and report trading by Designated Persons and their Immediate Relatives under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code of practices and procedures for fair disclosure of unpublished price sensitive information and has been made available on the Company’s website at https://www.aurobindo. com/investors/corporate-governance/code-of-conduct/

Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONAL

Key Managerial Personnel

Mr. K. Nithyananda Reddy, Whole-time Director and Vice Chairman up to December 31, 2021 and Vice Chairman and Managing Director from January 1, 2022, Mr. N. Govindarajan, Managing Director (up to December 31, 2021), Dr. M. Sivakumaran, Whole-time Director, Mr. M. Madan Mohan Reddy, Whole-time Director, Mr. P Sarath Chandra Reddy, Whole-time Director, Mr. Santhanam Subramanian, Chief Financial Officer, and Mr. B. Adi Reddy, Company Secretary are the Key Managerial Personnel of the Company in accordance with the provisions of Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. During the year, Mr. N. Govindarajan resigned as Managing Director of the Company w.e.f. January 1, 2022 and Mr. K. Nithyananda Reddy, Vice Chairman and Whole-time Director was appointed and redesignated as Vice Chairman and Managing Director from January 1, 2022.

None of the Directors of the Company are disqualified under the provisions of the Companies Act, 2013 (‘Act’) or under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Independent Directors have provided confirmations as contemplated under Section 149(7) of the Act. As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a certificate from the Company Secretary in practice, that none of the Directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority, forms part of Corporate Governance Report as Annexure-A.

Appointments/Re-appointment of Directors

As per the provisions of the Companies Act, 2013, Mr. K. Nithyananda Reddy and Mr. Madan Mohan Reddy will retire as Directors at the ensuing Annual General Meeting and being eligible, seek re-appointment. The Board recommends their re-appointment.

The re-appointment of Mr. P Sarath Chandra Reddy as Whole-time Director is being proposed.

Cessation

Mr. N. Govindarajan resigned as Managing Director and Director of the Company w.e.f. January 1, 2022.

VIGIL MECHANISM

The Board of Directors have adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims to conduct the affairs in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity, and ethical behaviour.

All permanent employees and Whole-time Directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Code of Conduct and Ethics, and leak of price-sensitive information under the Company’s Code of Conduct formulated for regulating, monitoring, and reporting by Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. It also provides for adequate safeguards against the victimisation of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy is available on the Company’s website https://www.aurobindo.com/wp-content/uploads/2022/04/ Whistle-Blower-Policy-APL-New-March2022.pdf

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexual harassment cases at the workplace and the said process ensures complete anonymity and confidentiality of information. Your Company has constituted an Internal Complaints Committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention and prohibition of sexual harassment at the workplace. The policy provides for protection against sexual harassment of women at the workplace and for the prevention and redressal of such complaints. During the year, the Company has not received any complaint. The Company has been conducting regular awareness programmes aimed at prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled, and a tentative calendar of the meetings are created, in consultation with the Directors. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, nine Board Meetings and six Audit Committee Meetings were convened and held. The details of the meetings including composition of the Audit Committee are provided in the Corporate Governance

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be conducted by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be conducted by the entire Board of Directors, excluding the Director being evaluated.

The Annual Performance Evaluation was conducted for all Boar Members, for the Board and its Committees for the financial year 2021-22. This evaluation was led by the Nomination and Remuneration/Compensation Committee of the Company. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the Listing Regulations and in accordance with the Guidance Note on Board Evaluation issued by SEBI in January 2017. The Boarc evaluation was conducted through questionnaires designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of shareholders interest and enhancing shareholders value, experience, and expertise to provide feedback and guidance to top management on business strategy, governance, risk and understanding of the organisation’s strategy, etc.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The policy of the Company on Directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the Nomination and Remuneration Policy of the Company. The Nomination and Remuneration Policy as adopted by the Board is available on the Company’s website: https://www.aurobindo.com/wp-content/uploads/2022/02/ NominationRemunerationPolicy-APL.pdf

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the year under review.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, your Directors confirm that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d) the annual accounts have been prepared on an on-going concern basis;

e) proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f) proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation (1) of Regulation 16 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force) and confirmed that they have registered their names in the Independent Directors’ Data bank. In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognises and embraces the importance of a diverse Board in its success. The Board has adopted the Board Diversity Policy which sets out with an approach to diversify the Board of Directors. The Board Diversity Policy is available on the Company’s website: https://www.aurobindo.com/wp-content/uploads/2018/10/Policy-on-Board-Diversity.pdf

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under review were on arm’s length basis and in the ordinary course of business. All Related Party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval. The policy on Related Party Transactions, as approved by the Board of Directors, has been uploaded on the website of the Company https://www.aurobindo.com/wp-content/uploads/2022/04/ PolicyOnRPT-Feb2022.pdf.

The particulars of contracts or arrangements with Related Parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

There were no materially significant Related Party Transactions which could have potential conflict with the interests of the Company at large.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-3 to this Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2022 is available on the Company’s website and can be accessed at: https://www.aurobindo.com/investors/results-reports-presentations/annual-returns/

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz., Mr. Girish Paman Vanvari, Mr. P. Sarath Chandra Reddy and Mr. K. Ragunathan as on March 31, 2022.

Mr. N. Govindarajan ceased to be member of Risk Management Committee w.e.f. January 1, 2022 on his resignation.

Mr. Girish Paman Vanvari was appointed as a Chairman of Risk Management Committee w.e.f. April 1, 2021. The Company has established a separate department to monitor the enterprise risk and for its management. The Committee had formulated a

Risk Management Policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. The Risk Management policy of the Company outlines a framework for identification of internal and external risks specifically faced by the Company, in particular including financial, operational, sectoral, sustainability (particularly, ESG-related risks), information, cyber security risks, or any other risk as may be determined by the Committee; measures for risk mitigation including systems and processes for internal control of identified risks; and Business continuity plan. Risk is an integral part of the Company’s business, and sound risk management is critical to the success of the organisation. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on a regular basis at the time of review of the quarterly financial results of the Company. A report on the risks and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

Pursuant to Section 139 (2) of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, the Company at its 30^th Annual General Meeting (AGM) held on August 31, 2017, had appointed B S R & Associates LLP, Chartered Accountants as Statutory Auditors for a period of 5 years i.e. up to the conclusion of the 35^th AGM to be held in the year 2022. The present term of B S R & Associates LLP as Statutory Auditors of the Company would expire at the conclusion of the ensuing AGM.

The Board of Directors of the Company has proposed the appointment of Deloitte Haskins & Sells, Chartered Accountants (Firm''s Registration No. 008072S) as the Statutory Auditors of the Company to hold office from the conclusion of 35^th AGM until the conclusion of the 40^th AGM in place of retiring auditors, B S R & Associates LLP on completion of their term.

The Company has received a letter from Deloitte Haskins & Sells, Chartered Accountants confirming that they are eligible for appointment as Statutory Auditors of the Company under Section 139 of Companies Act, 2013 and meet the criteria for appointment as specified in Section 141 of the Companies Act, 2013.

The statutory Auditors’ Report forms part of the Annual Report. The notes on financial statements referred to in the Auditors’ Report are self-explanatory and do not call for any further comments. There are no qualifications, reservations, adverse remarks or disclaimers by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

INTERNAL AUDITORS

Ernst & Young LLP are the Internal Auditors of the Company and to maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is clearly

The IFC framework at Aurobindo ensures the following:

• Establishment of policies and procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

• Physical existence and ownership of assets at a specified date;

• Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

• Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate amounts;

• Preparation of financial information as per the timelines defined by the relevant authorities.

These controls cover the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to the Company’s policies, safeguarding of its assets of the Company, prevention and detection of its frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has an internal control system, commensurate with the size, scale and complexity of its operation.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. A. Mohan Rami Reddy, a Company Secretary in Practice, to undertake the secretarial audit of the Company for the for the financial year 2021-22. The Secretarial Audit Report issued in form MR-3 is in Annexure-4 of this Report.

There are no qualifications, reservations, or adverse remarks in the Secretarial Audit Report. Also, pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained the Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the same to stock exchanges where the shares of the Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established the Corporate Social Responsibility Committee (CSR Committee).

The Board, on the recommendation of the CSR Committee, adopted a CSR Policy. The same is available on the Company’s website at https://www.aurobindo.com/wp-content/uploads/2021/07/CSR-policy.pdf. The CSR objectives

defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of the internal control system of the Company, its compliance with applicable laws/regulations, accounting procedures and policies. Based on the reports of the Internal Auditors, corrective actions will be undertaken, thereby strengthening the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on a quarterly basis.

COST AUDIT

As per Section 148 of the Companies Act, 2013, the Company is required to have the audit of its cost records conducted by a Cost Accountant. The Board of Directors of the Company has on the recommendation of the Audit Committee, approved the appointment of EVS & Associates, a firm of Cost Accountants in Practice (Registration No. 000175) as the Cost Auditor of the Company to conduct audit of cost records of the Company for relevant products as prescribed under the Companies (Cost Records and Audit) Rules, 2014 for the year ending on March 31, 2023. The Board on recommendations of the Audit Committee has approved the remuneration payable to the Cost Auditor subject to ratification of its remuneration by the Members in the forthcoming AGM. EVS & Associates has, under Section 139(1) of the Companies Act, 2013 and the Rules framed thereunder, furnished a certificate of its eligibility and consent for appointment.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework institutionalised in Aurobindo has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance-related controls and also Information Technology (IT) controls, comprising IT general controls (ITGC) and application-level controls. The ITGC would include controls over IT environment, computer operations, access to programmes and data, programme development and programme changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorisation levels.

To further strengthen the existing IFC framework and support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined and identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The Internal Auditors conduct ‘Process & control review’ on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to the Audit Committee for its review.

are designed to serve societal, local and national goals in the locations that we operate in, to create a significant and sustained impact on local communities. During the financial year 2021-22, the Company’s CSR efforts included COVID-19 relief work over and above its usual CSR commitments.

The Company undertakes its CSR activities through Aurobindo Pharma Foundation, a wholly-owned subsidiary of the Company incorporated under Section 8 of the Companies Act 2013.

The CSR projects approved by the Board for the year 202122 is available on the Company’s website at https://www. aurobindo.com/sustainability/.Report. The Annual Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-5 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)

Rules, 2014 is in Annexure-6 to this Report. The statement containing particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open for inspection at the Registered Office of the Company during business hours on all working days of the Company, up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining such details may write to the Company Secretary of the Company.

Affirmation that the remuneration is as per the remuneration policy of the Company.

In compliance with the provisions of the Companies Act,

2013 and SEBI Listing Regulations, the Board, on the recommendation of the Nomination and Remuneration/ Compensation Committee approved the Policy for Selection, Appointment of Directors, KMPs and Senior Management persons. The said Policy provides a framework to ensure that suitable and efficient succession plans are in place for appointment of Directors on the Board and other management members. The Policy also provides for selection and remuneration criteria for the appointment of Directors and senior management persons. The Company affirms that the remuneration is as per the remuneration policy of the Company.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. The Company has also taken D&O Insurance Policy covering Company’s Directors and Officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial

year ended March 31, 2022 to the date of signing of the Board’s Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report. The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company’s performance even during the prevalence of COVID-19 pandemic challenges.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules’) mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years in the unpaid dividend account to the IEPF, also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF.

Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to IEPF account on due dates. The details of amount of unclaimed unpaid dividend and corresponding shares transferred to IEPF during the financial year 2021-22 have been provided in the AGM Notice.

SHARE CAPITAL

During the financial year under review, Authorised Share Capital increased from ''760,000,000/- (Rupees Seven Hundred and

Sixty million only) to ''2,611,500,000 (Rupees Two Thousand Six Hundred Eleven million and Five Hundred Thousands only) as per Clause 12.11 of the Scheme of Amalgamation as approved by Hon''ble National Company Law Tribunal, Hyderabad Bench, Hyderabad as per its order dated March 30, 2021. The paid-up share capital of the Company as on March 31, 2022 was ''585,938,609 divided into 585,938,609 equity shares of ''1 each. The Company has not issued any shares, debentures, bonds or any non-convertible securities during the financial year under review.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

OTHER DISCLOSURES

There were no significant material orders passed by the Regulators or Courts or Tribunals that would impact the going concern status of the Company and its operations in future.

Secretarial Standards

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India, i.e. SS-1 and SS-2, relating to ‘Meetings of the Board of Directors’ and ‘General Meetings’ respectively.

Acquisitions/ Disinvestment/ demerger/ merger

The Company has transferred 100% stake in Auro Cure Private Limited, a wholly-owned subsidiary of the Company to Eugia Pharma Specialities Limited, also a wholly-owned subsidiary of the Company. Auro Cure Private Limited has become wholly-owned step-down subsidiary of the Company.

Transfer of business undertaking comprised in Unit-16 of the Company, on a going concern basis, to Wytells Pharma Private Limited, a wholly-owned step-down subsidiary of the Company. Wytells Pharma Private Limited is a 100% subsidiary of Eugia Pharma Specialities Limited which in turn is a wholly-owned subsidiary of the Company.

Transfer of vaccines business undertaking comprised in Unit-18, on a going concern basis, to Auro Vaccines Private Limited, a wholly-owned subsidiary of the Company; and transfer of equity shares of Tergene Biotech Private Limited, a subsidiary, to Auro Vaccines Private Limited, a wholly-owned subsidiary of the Company.

The Board of Directors of the Company at its meeting held on July 1, 2021, has approved the transfer of business undertaking comprised in Unit-4, on an on-going concern basis, to Eugia

Pharma Specialities Limited, a wholly-owned subsidiary of the Company.

During the year, Auro PR Inc, a subsidiary of Helix Healthcare B.V. Netherlands, acquired certain properties including rights, title and interest in the assets and liabilities owned by Mylan LLC USA.

The Company has approved the acquisition of business and certain assets of Veritaz Healthcare Limited on slump sale basis for a consideration of ''1,710 million and accordingly entered into a Business Transfer Agreement dated March 28, 2022. Veritaz operates in the pharmaceutical industry in India and sells branded generic formulations and other health care related products

Merger Scheme

Pursuant to the provisions of Sections 230 to 232 read with Companies (Compromises, Arrangement and Amalgamation) Rules, 2016 and other applicable provisions of the Companies Act, 2013, the Board of Directors of the Company at its meeting held on August 12, 2021 has approved the Scheme of Amalgamation for merger of its wholly-owned subsidiaries viz. Auronext Pharma Private Limited and Mviyes Pharma Ventures Private Limited with the Company and the Company is yet to file the necessary applications with the concerned authorities in this matter seeking sanction for the aforesaid merger.

CREDIT RATING

The Company has obtained the Credit ratings from India Ratings & Research Private Limited and it has assigned ND AA /Stable/ IND A1 on Rating Watch Evolving for Company’s fund based working capital facilities and ND A1 on Rating Watch Evolving for Company’s non-fund-based working capital limits vide their letter dated August 4, 2021.

ACKNOWLEDGEMENTS

Your Directors are grateful for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and remain thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For and on behalf of the Board K. Ragunathan

Place: Hyderabad Chairman

Date: June 17, 2022 DIN: 00523576

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Mar 31, 2021

Your Directors are pleased to present the 34^th Annual Report of your Company together with the audited accounts for the financial year ended March 31, 2021.

FINANCIAL HIGHLIGHTS

('' in Million)
	2020-21	2019-20
Revenue from operations	158,236.8	133,707.7
Profit before depreciation, interest, tax and Exceptional items	41,198.3	26,978.7
Depreciation	4,880.0	4,733.3
Finance cost	286.8	979.1
Profit before tax	41,930.1	23,700.5
Provision for tax	10,801.0	4,931.7
Net profit after tax	31,129.1	18,768.8
Other Comprehensive Income/ (Expense)	(64.2)	(127.0)
Total Comprehensive income for the period	31,064.9	18,641.8

DIVIDEND

Your Company has paid first interim dividend of 125% i.e. ''1.25 per equity share of ''1, second interim dividend of 125% i.e. ''1.25 per equity share of ''1 and third interim dividend of 150% i.e. ''1.50 per equity share of ''1. The total dividend for the financial year 2020-21 comes to 400% i.e. ''4.00 per equity share of ''1 against 300% i.e. ''3.00 per equity share of ''1 paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top one thousand listed entities based on market capitalisation are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on your Company’s website at: https://www.aurobindo. com/wp-content/uploads/2018/10/Dividend-Distribution-Policy. pdf

Performance Review

Your Company is the leading generic pharma company globally and now ranks as 7^th largest generic company by sales and second largest listed Indian pharmaceutical company by revenues. Your Company has become the largest supplier in the USA by volume in last quarter of the financial year. Your Company maintained its growth momentum in revenue and profitability despite headwinds caused by the pandemic.

On a standalone basis, your Company’s revenue witnessed a growth of 18.3% reaching ''158,236.8 million in FY21, as against ''133,7077 million in the corresponding previous period. The Formulations business registered a growth of 23.5% to ''123,853.0 million driven by strong growth in exports, which are up by 23.6% to ''123,186.1 million. The API business witnessed a growth of 3.0% to ''34,269.3 million despite sales of weaker sales of anti-

infective products which was impacted by the pandemic. EBITDA for the year increased by 52.7% to ''41,198.3 million vs. ''26,978.7 million in the corresponding previous period. Gross Profit margin improved by 340 bps to 54.2% of revenue (vs. 50.8% revenue in FY20), which led EBITDA margin for the year to improve by 580 bps to 26.0% of revenue (vs. 20.2% of revenue in FY20). Profit before Tax for the year increased by 76.9% to ''41,930.1 million. Your Company’s net profit (before Other Comprehensive Income) increased by 65.9% to ''31,129.1 million as against ''18,768.8 million in FY20. The diluted Earnings Per Share stood at ''53.13 compared to ''32.03 in FY20.

On a consolidated basis, the revenues increased by 7.3% to ''247,746.2 million. The Company attained a healthy growth inspite sales from select therapies being impacted due to the pandemic. The growth was driven by new product launches across markets and increase in market share of existing products. The Formulations business posted a growth of 8.4% to ''216,859.7 million from ''200,119.3 million in the corresponding previous period. The Active Pharmaceutical Ingredients (APIs) business remained flat at ''30,859 million. The growth in API segment led by strong growth of 25.0% in Non Betalactam segment to ''13,557.6 million. EBITDA margin improved 40 bps to 21.5% vis-a-vis 21.1% in FY20 despite 200 bps increase in R&D expenses. R&D expenditure for the year was ''15,095.7 million or 6.1% of revenue, increased from ''9,580.2 million or 4.1% of revenue in FY20. EBITDA before forex and other income stood at ''53,334.1 million, witnessing a 9.6% growth year-on-year. Your Company reported a Net Profit of ''53,338.4 million, an increase of 87.6% over the corresponding previous period, including one off gains from the sale of Natrol business (refer below). The Diluted Earnings Per Share (reported) stood at ''91.05 compared to ''48.56 in FY20.

During the year, your Company divested Natrol LLC, the dietary supplements business in the USA, for US$ 550 million consideration and acquired the balance stake in its Joint Venture Company, Eugia Pharma Specialities Limited and also provided a goodwill write-off with respect to earlier acquisitions done by the Company. As a result of all these, the Company received an exceptional gain (net of the tax) of ''20,658.3 million. Adjusted net profit for the year was ''32,683.3 million, an increase of 13.8%.

Your Company’s performance excluding Natrol and exceptional items stood as follows - Revenue increased by 77% to ''236,807.5 million. EBITDA before Forex and Other income increased by 8.6% to ''49,971.0 million and net profit increased by 12.1% to ''30,364.7 million.

The US is the largest market for your Company and accounted for 49.8% of the total revenue. US business reported a growth of 7.3% growth at ''123,244.7 million. The business witnessed a growth despite headwinds such as reduction in elective surgeries and sales of select therapies getting impacted due to COVID-19. New product launches coupled with an increase in the market share

of existing products led to an improvement in the revenues. Your Company has launched 53 products in FY21. The TRx share in the USA for the quarter ending March 2021 stands at 8.7%, positioning us as the largest player, as per IQVIA data.

Your Company continues to strengthen its pipeline for the global markets including the US market. As on March 31, 2021, your Company filed 639 Abbreviated New Drug Applications (ANDAs) on a cumulative basis. Of the total count, 439 have received final approvals and 29 have got tentative approvals, including 8 ANDAs, which are tentatively approved under the US President’s Emergency Plan for AIDS Relief (PEPFAR), while 171 ANDAs are currently under review.

Your Company registered a marginal 2.3% growth in its Europe formulations business to ''60,607.9 million in FY21 compared to the previous year’s revenue of ''59,218.3 million on account of stock-up at the start of pandemic in Q4FY20. Your Company now operates in 11 countries in EU/UK and is present across multiple channels including pharmacy (Gx), hospital (Hx) and tender (Tx). Despite headwinds, Your Company’s performance in France, Germany, UK and Italy led to overall growth in Europe. Your Company’s focus during the year was to improve the profitability of the acquired Apotex business.

The ARV Formulations business reported a robust growth of 48.8% with revenues of ''18,627.7 million. The significant early mover advantage Aurobindo had in TLD (Tenofovir 300mg Lamivudine 300mg Dolutegravir 50mg tablet) single pill regimen along with rapid conversion of TLE to TLD in the institution segment has contributed towards this growth.

Growth Markets, which includes Brazil, Canada, Columbia and South Africa grew by 6.1% to ''14,379.4 million.

OUTLOOK

Your Company posted healthy performance in FY21 despite challenges faced by the industry due to partial lockdown across the globe. The inherent strength of your Company is a diversified product basket and launching of new products consistently. With vaccination progressing well across our key markets such as the USA and Europe, the pickup in elective surgeries and footfall in pharmacies are expected to improve. This would improve demand for some of the therapeutic segments which were impacted during the pandemic.

Your Company is working on complex and differentiated products in multiple areas comprising oncology & hormonal products, biosimilars, depot injections, vaccines, topicals, transdermal patches, inhalers, nasals and complex peptide products which will drive the next phase of growth. Your Company is also in the process of commissioning the capacities for some of the complex therapeutic areas. The viral vaccine facility will be ready for commercial production by end of July’2021.

Your Company is committed to grow in its key geographies i.e. USA and Europe. In the US, around 200 ANDAs are awaiting final approval and annual sales as per IQVIA data is US$ 95 billion as on March 31, 2021. Apart from this, over 300 ANDAs are under development, including the differentiated pipeline. Your Company is in the process of expanding the capacity in Unit X (APL Healthcare Unit IV), the oral solid manufacturing facility dedicated for the US market. It also completed the construction of injectable facility in USA which is used to manufacture high value and low volume products.

For Europe markets, more than 250 products are under development in general oral and oncology product categories, which will be launched in the next two to three years. Your Company is also building a dedicated injectable facility for Europe and Growth Markets to strengthen its presence in the Hospital segment in Europe. The facility will be commissioned in the next 12-18 months.

In the ARV space, your Company has achieved a dominant market share in Dolutegravir segment. The Company aims to retain large portion of the market share achieved by it in the respective products in the ARV segment.

In Growth Markets; Canada, South Africa and China are the key geographies for your Company. In Canada, your Company has a robust product pipeline with over 150 products registered. The Company is in the process of launching over 50 products in the next two years which include both orals and injectables. China will be an important geography for your Company going ahead. It is in the process of completing construction of its an oral solid manufacturing facility in China. So far we have filed 28 products from the China facility.

In its API business, Aurobindo has been working towards making products more competitive. Your Company is expanding capacities to cater to external sales. Recently, your Company has been awarded for setting up capacities for 3 fermentation based products from the Government of India under the PLI scheme. Aurobindo is in the process of executing these projects. Once these capacities are on-stream, it can meet a significant part of the global demand for these products.

In R&D, your Company will maintain focus on difficult to manufacture, differentiated products, with possible low competitive pressure. Filing momentum is in line with the strategy of moving towards complex and differentiated products.

RESEARCH AND DEVELOPMENT (R&D)

Aurobindo over the years has consistently invested in R&D for improving capabilities and adding talented people across the globe. Your Company now has a team of comprising of more than 1,700 scientists and analysts. This enables the Company to develop a wide range of medications from generics to complex speciality products. Currently, Aurobindo has eight Research and Development (R&D) centres, of which five are in India and three

are in the USA. The R&D centres are equipped with cutting edge technologies where the talented scientists develop generics and difficult-to-develop products and strive to improve productivity. During FY21, your Company invested 6.1% of its consolidated revenue or ''15,100 million as against ''9,580 million or 4.1% of its consolidated revenue in FY20 in research and development.

Your Company is focused on developing specialty and difficult-to-make complex products in the respiratory and dermatological therapeutic areas, including metered dose inhalers (MDIs), dry powder inhalers (DPIs), nasal sprays, topical lotions, creams, ointments and transdermal patches. The products are developed for global markets, where the Company will be able to file the product, get approval and market the product in all markets globally. Your Company is further diversifying its product portfolio by working on multiple R&D initiatives.

During the year, your Company has achieved some key milestones such as filing its first inhaler with the USFDA. It strengthened its Nasal spray portfolio by adding one more product to the pipeline. It also completed its phase II clinical trials for its PCV vaccine and would commence phase III trials soon. Apart from this the specialty pipeline including depot injections, patches, topicals etc. are progressing well.

Your Company has made progress in setting up the manufacturing facility for topical, transdermal and inhalers in North Carolina, USA where it has completed a validation batch for 1 inhaler product out of 3 and clinical studies have been initiated. For topicals, 2 manufacturing plants are in place, one in North Carolina and one in Hyderabad, India. So far, 3 products have been taken for validation batches and more than 27 products are in the pipeline for development. Besides this, your Company has built a development lab in its Research Centre-II, which is based at Hyderabad at AuroHealth.

Your Company has made substantial progress in Biosimilars with completing Phase I study of the lead molecule and proceeding to conduct Phase III clinical trials. With a focus on microbial based products the company has decided to expand one more bioreactor line (microbial). The Company has entered into a distribution partnership in certain regulated markets in Europe where we do not have presence.

Awards & Accolades

• Regional award (Telangana) for Promoting Health in the workplace & Innovative HR Practices in the Pharma space by World HRD congress

• National Best Employer of the Year 2020 by World HRD Congress & Economic times

• Innovation in Employee Engagement & Most Collaborative Hiring Team by Transformance Forums

• Aurobindo Pharma Limited has won 3 awards in India Packaging Award-2020 conducted by Innopack Pharma Confex (formerly known as UBM India Private Limited)

o Award- 1: Integrated Drug Delivery System

o Award- 2: Packaging Design Shapes & Structures

o Award- 3: Sustainable Packaging- Solid Dosage Form

o Aurobindo Pharma Limited has won Indiastar Award 2020 for Integrated Drug Delivery System from Indian Institute of Packaging

• The Energy Cell of Corporate Engineering Department, participated in the CII’s “21^st National Award for Excellence in Energy Management 2020” and was awarded as “Energy Efficient Unit” under Pharma & Bulk Drugs category. In the last three financial years, APL Unit-1 has implemented 52 energy saving projects by investing ''244.5 million, which have resulted in electricity savings of 21.66 million kWh; thermal energy savings of 21.83 MCal; and financial savings of ''286.8 million

• In recognition of Aurobindo’s flagship program on nutrition (providing meals to underprivileged), the World CSR day Organisation along with Asia HRD Congress, Mumbai awarded Aurobindo Pharma Foundation with “Telangana CSR Leadership Awards 2020” under Concern for Health and Nutrition category.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statements of Subsidiary companies/Associate companies/Joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The Company has formulated a policy for determining material subsidiaries. The policy is available on the Company’s website and can be accessed at https://www.aurobindo.com/wp-content/ uploads/2019/04/Policy-Material-Subsidiary-March-2019.pdf.

During the year, the following are the changes in the subsidiaries of the Company:

Ceased subsidiaries / JVs

During the period under review:

Aurovitas Pharma Ceska Republica S.r.o, a wholly owned step-down subsidiary of Agile Pharma B.V. merged with Aurovitas Spol s.r.o (Formerly Apotex (CR) Spol s.r.o.) w.e.f. April 1, 2020.

Apotex N.V merged with Aurobindo NV/SA w.e.f. April 1, 2020

Natrol LLC ceased to be step-down subsidiary of the Company w.e.f. November 30, 2020

New subsidiaries / JVs

During the period under review, following subsidiaries companies were incorporated/acquired:

• Curateq Biologics Private limited, India, a wholly owned subsidiary was incorporated w.e.f. April 25, 2020

• Auro Cure Private Limited was incorporated as a wholly owned subsidiary w.e.f. July 5, 2020

• Aurobindo Pharma Foundation was incorporated as a wholly owned subsidiary Ltd under Section 8 of the Companies Act 2013 w.e.f. July 20, 2020.

• AuroZest Private Limited was incorporated as a wholly owned subsidiary w.e.f. August 6, 2020

• Aurobindo Antibiotics Private Limited was incorporated as a wholly owned step-down subsidiary w.e.f. October 6,2020

• Lyfius Pharma Private Limited was incorporated as a wholly owned step-down subsidiary w.e.f. November 16, 2020

• Qule Pharma Private Limited was incorporated as a wholly owned step-down subsidiary w.e.f. November 16, 2020

• MviYes Pharma Ventures Private Limited became a wholly owned subsidiary of the Company w.e.f. November 7, 2020 by virtue of this, Eugia Pharma Specialities has become wholly owned subsidiary of the Company

• Wytells Pharma Private Limited was incorporated as a wholly owned subsidiary to Eugia Pharma Specialities Limited w.e.f. February 20, 2021.

• Auro Steriles LLC was incorporated as a wholly owned subsidiary of Aurobindo Pharma USA Inc w.e.f. April 1, 2021.

• Eugia Injectable Inc was incorporated as a wholly owned subsidiary of Eugia Pharma Specialities Limited w.e.f. April 1, 2021.

• Nurya Brands Inc, was incorporated on April 28, 2021 in the USA as a subsidiary to Auro Health LLC.

• NVNR (Ramannapet I) Power Plant Private Limited and NVNR (Ramannapet II) Power Plant Private Limited in which the Company is holding 26% each became associate companies w.e.f. May 12, 2021.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com, in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Company’s subsidiaries will be provided to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

On December 31, 2018, Securities and Exchange Board of India amended the Prohibition of Insider Trading Regulations, 2015, prescribing various new requirements with effect from April 1,

2019. In line with the amendments, your Company has adopted an amended Code of Conduct to regulate, monitor and report trading by Designated Persons and their Immediate Relatives under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. The Code of Conduct is amended from time to time in line with the amendments to SEBI (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code of practices and procedures for fair disclosure of unpublished price sensitive information and has been made available on the Company’s website at https:// www.aurobindo.com/wp-content/uploads/2019/04/Code-Fair-Disclosure-PIT-Feb2019.pdf

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims to conduct the affairs in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. All employees and Whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of Code of Conduct and Ethics and leak of price sensitive information under the Company’s Code of Conduct formulated for regulating, monitoring and reporting by Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. It also provides for adequate safeguards against the victimisation of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy is available on the Company’s website https://www.aurobindo.com/wp-content/ uploads/2021/07/Whistle-Blower-Policy-APL.pdf

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexual harassment cases at workplace and the said process ensures complete anonymity and confidentiality of information. Your Company has constituted an Internal Compliance Committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention and prohibition of sexual harassment at the workplace. The policy provides for protection against sexual harassment of women at the workplace and for the prevention and redressal of such complaints. During the year, the Company has not received any complaint. The Company has been conducting regular awareness programmes aimed at prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled and a tentative calendar of the meetings is created in consultation with

the Directors. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, seven Board Meetings and seven Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

Key Managerial Personnel

Mr. K. Nithyananda Reddy, Whole-time Director and Vice Chairman, Mr. N. Govindarajan, Managing Director, Dr. M. Sivakumaran, Whole-time Director, Mr. M. Madan Mohan Reddy, Whole-time Director, Mr. P. Sarath Chandra Reddy, Whole-time Director, Mr. Santhanam Subramanian, Chief Financial Officer and Mr. B. Adi Reddy, Company Secretary are the key Managerial Personnel of the Company in accordance with the provisions of Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. During the year, Mr. Girish Paman Vanvari was appointed as an Additional Director categorised as Independent Director of the Company.

None of the directors of the Company are disqualified under the provisions of the Companies Act, 2013 (‘Act’) or under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Independent Directors have provided confirmations as contemplated under section 149(7) of the Act. As required by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a certificate from Company Secretary in Practice that none of the directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as directors of companies by the Board/Ministry of Corporate Affairs or any such statutory authority, forms part of Corporate Governance Report as Annexure-A

Appointments/Re-appointment

As per the provisions of the Companies Act, 2013, Dr. M. Sivakumaran and Mr. P. Sarath Chandra Reddy will retire as directors at the ensuing Annual General Meeting and being eligible, seek re-appointment. The Board recommends their reappointment.

The re-appointment of Mr. K. Nithyananda Reddy as Whole-time Director designated as Vice Chairman, Mr. N. Govindarajan as Managing Director, Dr. M. Sivakumaran as Whole-time Director and Mr. M. Madan Mohan Reddy as Whole-time Director are being proposed. The appointment of Mr. Girish Paman Vanvari as Nonexecutive Independent Director is also being proposed at the ensuing Annual General Meeting for the approval of Members.

Cessation

Mr. M. Sitarama Murty ceased to be Director of the Company w.e.f. April 1, 2021 as his tenure as Independent Director of the Company was completed on close of business hours of March 31, 2021. The Board expressed its gratitude to Mr. Murty for his service on the Board as Director, for his sound business advice and valued counsel and for all that he has contributed to the Board of Directors and to the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. i n the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation(1) of Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 (including any statutory modification(s) or reenactments) thereof for the time being in force) and confirmed that they have registered their names in the Independent Directors’ Databank. In terms of Regulation 25(8) of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognises and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company’s website: https://www.aurobindo.com/wp-content/ uploads/2018/10/Policy-on-Board-Diversity.pdf

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The Annual Performance Evaluation was conducted for all Board Members, for the Board and its Committees for the financial year 2020-21. This evaluation was led by the Nomination and Remuneration / Compensation Committee of the Company. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 and in accordance with the Guidance Note on Board Evaluation issued by SEBI in January 2017. The Board evaluation was conducted through questionnaires designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/ recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of minority shareholders interest and enhancing shareholders value, experience and expertise to provide feedback and guidance to top management on business strategy, governance, risk and understanding of the organisation’s strategy, etc.

POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

The policy of the Company on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company’s website: https://www.aurobindo.com/wp-content/uploads/2018/10/Nomination-and-Remuneration-Policy.pdf.

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under review were on arm’s length basis and in the ordinary course of business. All related party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval. The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company https://www.aurobindo.com/wp-content/ uploads/2018/10/Related-Party-Transaction-Policy.pdf.

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of subsection (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

There were no materially significant related party transactions which could have potential conflict with the interests of the Company at large.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-3 to this Report.

ANNUAL RETURN

The Annual Return of the Company as on March 31, 2021 is available on the Company’s website and can be accessed at: https://www.aurobindo.com/wp-content/uploads/2021/07/ AnnualReturn202021.pdf

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz. Mr. M. Sitarama Murty, Mr. N. Govindarajan, Mr. P. Sarath Chandra Reddy, Mr. K. Ragunathan and Mr. Girish Paman Vanvari as on March 31,2021. Mr. M. Sitarama Murty ceased to be member and Chairman of Risk Management Committee w.e.f. April 1, 2021 on his retirement as an Independent Director of the

Company. Mr. Girish Paman Vanvari, was appointed as a Chairman of Risk Management Committee w.e.f. April 1,2021. The Company has established a separate department to monitor the enterprise risk and for its mitigation. The Committee had formulated a Risk Management Policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. Risk management policy of the Company outlines a framework for identification of internal and external risks specifically faced by the Company, in particular including financial, operational, sectoral, sustainability (ESG related risks), information, cyber security risks or any other risk as may be determined by the Committee; measures for risk mitigation including systems and processes for internal control of identified risks; and Business continuity plan. Risk is an integral part of the Company’s business, and sound risk management is critical to the success of the organisation. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on a regular basis at the time of review of quarterly financial results of the Company. A report on the risks and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS’ REPORT

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 30^th Annual General Meeting (AGM) held on August 31,

2017, had appointed M/s. B S R & Associates LLP, Chartered Accountants as Statutory Auditors for a period of 5 years i.e. up to the conclusion of the 35^th AGM to be held in the year 2022. Further, as per Companies (Amendment) Act, 2017 effective from May 7,

2018, the provisions relating to ratification of the appointment of Statutory Auditors at every AGM are not required to be followed. The Auditors have confirmed that they are not disqualified from continuing as Auditors of the Company.

The Statutory Auditors’ report forms part of the Annual Report. The notes on financial statements referred to in the Auditors’ Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

INTERNAL AUDITORS

Ernst & Young LLP are the internal auditors of the Company and to maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is clearly defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of the internal control system of the Company, its compliance with applicable laws/regulations, accounting procedures and policies. Based on the reports of the Internal Auditors, corrective actions were undertaken and thereby strengthened the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on quarterly basis.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014, the Company is maintaining the cost records as its business is covered under the regulated sector viz. drugs and pharmaceuticals. Audit of the Company’s cost records is not applicable since the Company’s revenues from exports, in foreign exchange, exceed 75% of its total revenues.

INTERNAL FINANCIAL CONTROLS

The Internal Financial Controls (IFC) framework institutionalised in Aurobindo has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance related controls and also Information Technology (IT) controls, comprising IT General Controls (ITGC) and application level controls. The ITGC would include controls over the IT environment, computer operations, access to programs and data, program development and program changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorisation levels.

In order to further strengthen the existing IFC framework and to support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined & identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The internal auditors conduct ‘Process & Control Review’ on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to the Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

• Establishment of policies & procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

• Physical existence and ownership of assets at a specified date;

• Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

• Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate value;

• Preparation of financial information as per the timelines defined by the relevant authorities.

These controls cover the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to the Company’s policies, safeguarding of its assets of the Company, prevention and detection

of its frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has an internal control system, commensurate with the size, scale and complexity of its operation.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. A. Mohan Rami Reddy, a Company Secretary in Practice to undertake the secretarial audit of the Company for the financial year 2020-21. The Secretarial Audit Report issued in form MR-3 is in Annexure- 4 to this Report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report. Also, pursuant to Regulation 24A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has obtained Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the same to stock exchanges where the shares of the Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the CA 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established the Corporate Social Responsibility Committee (CSR Committee).

The Board on the recommendation of CSR Committee, adopted a CSR Policy. The same is available on Company’s website at https://www.aurobindo.com/wp-content/uploads/2021/07/CSR-policy-cleaned-May2021-Reviewed.pdf. The CSR objectives are designed to serve societal, local and national goals in the locations that we operate in, creating a significant and sustained impact on local communities. During the financial year 2020-21, the Company’s CSR efforts included COVID-19 relief works over and above its usual CSR commitments.

The Company undertakes its CSR activities through Aurobindo Pharma Foundation, a wholly owned subsidiary of the Company incorporated under Section 8 of the Companies Act 2013.

The CSR projects approved by the Board for the year 2021-22 are placed on the Company’s website at: https://www.aurobindo. com/sustainability/annual-action-plan/. The Annual Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-5 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,

2014 is in Annexure-6 to this Report. The statement containing particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open for inspection at the Registered Office of the Company during business hours on all working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining such details may write to the Company Secretary of the Company.

Affirmation that the remuneration is as per the remuneration policy of the Company.

In compliance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board, on the recommendation of the Nomination and Remuneration/Compensation Committee approved the Policy for Selection, Appointment of Directors, KMPs and Senior Management persons. The said Policy provides a framework to ensure that suitable succession plan is in place for appointment of Directors on the Board and other management personnel. The Policy also provides for selection and remuneration criteria for appointment of Directors and senior management persons. The Company affirms that the remuneration is as per the remuneration policy of the Company.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. The Company has also taken D&O Insurance Policy covering the Company’s Directors and Officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2021 to the date of signing of the Board’s Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015 is enclosed as a separate section forming part of this report. The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all the units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company’s performance even during the prevalence of COVID-19 pandemic challenges. Your Board would like to express its gratitude to the employees for demonstrating high level of commitment and perseverance during the pandemic.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules’) mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years in the unpaid dividend account to the IEPF, also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF.

Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to the IEPF account on due dates. The details of amount of unclaimed unpaid dividend and corresponding shares transferred to the IEPF during the financial year 2020-21 have been provided in the AGM Notice.

SHARE CAPITAL

During the financial year under review, there has been no change in the Authorised and Paid-up Share Capital of the Company. The paid-up share capital of the Company as on March 31, 2021 was ''585,938,609 divided into 585,938,609 equity shares of ''1 each. The Company has not issued any shares, debentures, bonds or any non-convertible securities during the financial year under review.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

OTHER DISCLOSURES

There were no significant material orders passed by the Regulators or Courts or Tribunals that would impact the going concern status of the Company and its operations in future.

Secretarial Standards

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

Acquisitions / Disinvestment / Demerger / Merger

Acquisition of 100% ownership of Eugia Pharma Specialities Limited

The Company had entered into a share purchase agreement to acquire 100% equity share capital of MViyeS Pharma Ventures Private Limited (MViyeS). MViyeS was holding 32.18% shareholding in Eugia Pharma Specialities Limited, a joint venture company in which the Company was holding 67.82%. By this acquisition, both Eugia Pharma Specialities Limited and MViyeS Pharma Ventures Private Limited have become 100% subsidiaries of the Company. The said acquisition was completed on November 6, 2020.

Acquisition of 26% ownership in two solar power generating companies

The Company had entered into a binding agreement to invest ''53.8 million each in NVNR (Ramannapet I) Power Plant Private Limited and NVNR (Ramannapet II) Power Plant Private Limited, Hyderabad based solar power generating companies, aggregating to ''107.6 million by subscribing to equity shares and other securities of the said solar power generating companies to avail the benefit of captive consumption of Solar Power. After making the said investments, the Company is holding 26% of the share capital in each of the aforesaid solar power generating companies.

Disposal of Natrol LLC, a wholly owned step-down subsidiary in the USA

Aurobindo Pharma USA Inc, a wholly owned subsidiary of the Company had entered into a definite agreement with New Mountain Capital LLC, NY and its affiliate Jarrow Formulas Inc., and its entire holding in Natrol LLC for a sale consideration of US$ 550 million.

Merger Scheme

The Board of Directors of the Company at its meeting held on May 28, 2019 approved the Scheme of Amalgamation for merger of Company’s wholly owned subsidiaries viz. APL Healthcare Limited, APL Research Centre Limited, Aurozymes Limited,

Curepro Parenterals Limited, Hyacinths Pharma Private Limited and Silicon Life Sciences Private Limited (a step-down wholly owned subsidiary) with the Company. Accordingly, the Company has made a joint application on August 7, 2019 with Hon’ble National Company Law Tribunal, at Hyderabad (NCLT). Pursuant to the orders dated September 30, 2019, the required approvals of the Members and unsecured creditors were obtained at the meetings held on November 30, 2019.

Subsequently, a Joint Company Petition No. C. P (CAA) No.51/230/ HDB/2020 has been filed on December 9, 2019 for obtaining the sanction of the Hon’ble Tribunal to the Scheme of Amalgamation and the same has been allowed by the Hon’ble Tribunal at its hearing held on January 24, 2020 with directions to issue necessary paper publications seeking objections, if any, from the general public, and to serve the notices with various statutory authorities, income tax, stock exchanges, etc., and listed for final hearing on February 28, 2020. Compliance memo was filed on March 18, 2020 with the Hon’ble NCLT and thereafter the Company in its Board meeting held on August 12, 2020 authorised the Restructuring Committee to look into the exclusion of APL Healthcare Limited from the purview of the Scheme and the Restructuring Committee in its meeting held on September 7, 2020, has approved to exclude APL Healthcare Limited and filed a joint Interlocutory Application (IA) before the NCLT and necessary reports of Regional Director and Official Liquidator are filed, arguments were completed and in the hearing that took place on February 1, 2021, the Hon’ble Bench has heard from OL & RD that they didn’t have any objections and accordingly, directed OL & RD to file their no objections in writing and posted the matter for hearing on February 8, 2021. The matter was heard on February 8, 2021 and February 24, 2021.

The NCLT on March 30, 2021 approved the Scheme of Amalgamation. The certified copy of the order was issued by the NCLT on April 7, 2021. The District Registrar, Hyderabad (South) & Collector under Indian Stamp Act-1899 has made endorsement in the Order that the Order issued by the NCLT is not chargeable to stamp duty under Indian Stamp Act, 1899. The Order was filed by Aurobindo and the subsidiary companies with the Registrar of Companies on April 29, 2021 which was subsequently approved.

CREDIT RATING

The Company has obtained the Credit ratings from India Ratings & Research Private Limited and it has assigned IND AA /Stable/ IND A1 for Company’s fund based working capital facilities and IND A1 for Company’s non-fund-based working capital limits vide their letter dated July 3, 2020.

ACKNOWLEDGEMENTS

Your Directors are grateful for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and remain thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For, and on behalf of the Board,

K. Ragunathan

Place: Hyderabad Chairman

Date: May 31, 2021 DIN: 00523576

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Mar 31, 2019

BOARD’S REPORT

Dear Members,

The Directors are pleased to present the 32^nd Annual Report of the Company together with the audited accounts for the financial year ended March 31, 2019.

FINANCIAL HIGHLIGHTS

Standalone financials_ _(Rs, in Million)

	2018-19	2017-18
Revenue from operations	122,578.9	103,031.5
Profit before depreciation, interest, tax and Exceptional items	24,092.9	26,700.0
Depreciation	4,130.3	3,548.3
Finance cost	1,309.2	528.9
Profit before Tax	19,646.2	23,429.4
Provision for Tax	4,348.9	5,301.7
Net Profit after tax	15,297.3	18,127.7
Other Comprehensive Income/ (expense)	-14.1	-21.8
Total Comprehensive income for the period	15,283.2	18,105.9

DIVIDEND

Your Company has paid first interim dividend of 125% i.e. Rs,1.25 per equity share of Rs,1/- and second interim dividend of 125% i.e Rs,1.25/- per equity share of Rs,1/-. The total dividend for the financial year 2018-19 comes to 250% i.e. ''2.50 per equity share of Rs,1/- against 250% i.e ''2.50 per equity share of Rs,1/- paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top five hundred listed entities based on market capitalization are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on the Company''s website http://www.aurobindo.com/ about-us/governance/governance-policies/

PERFORMANCE REVIEW

Your Company achieved significant size and scale during the year. It is now globally the tenth largest generic Company by revenues and the second largest among the listed Indian pharmaceutical companies.

FY2018-19 was also the year during which your Company made significant acquisitions and investments to augment its global presence. In the US, it entered into a definitive agreement to acquire the portfolio of dermatology and oral solids businesses from Sandoz¹ Inc. USA. The acquisition is expected to be completed in FY2019-20. Your Company also made inroads into the branded oncology market by acquiring seven marketed oncology branded injectable products from Spectrum Pharmaceuticals Inc.

The acquisition of Apotex Inc''s businesses opened doors to markets in the Eastern Europe. Your Company also acquired R&D assets from Advent Pharmaceuticals Pty Ltd., Australia boosting its R&D capabilities in the respiratory segment.

During the year, through its wholly owned subsidiary, Helix Healthcare BV Netherlands your Company invested in a joint venture with Shandong Luoxin in China.

On a standalone basis, your Company revenues registered a growth of 19.0% reaching Rs,122,578.9 million in FY2018-19, compared to Rs,103,031.5 million in the FY 2017-18. EBITDA for FY 2018-19 stood at ''24,092.9 million vs. ''26,700.0 million in FY2017-18. EBITDA margin was at 19.7%. Profit before Tax for the year at standalone level was Rs,19,646.2 million, decline of 16.1% compared to the preceding year. Your Company''s Net Profit (before OCI) was at Rs,15,297.3 million as against Rs,18,127.7 million in FY2017-18. The Diluted Earnings Per Share stood at ''26.11 compared to ''30.94 in FY2017-18.

On a consolidated basis, revenues for FY2018-19 grew by 18.6% from Rs,164,998.4 million in the previous year to Rs,195,635.5 million. The healthy growth in revenues were driven by new product launches across markets and an improvement in market share of the existing products. The formulations business registered a revenue growth of 19.4% and improved to Rs,161,570.3 million from Rs,135,331.8 million in the previous year. The Active Pharmaceutical Ingredients (APIs) business sales stood at ''34,030.3 million from ''29,622.3 million in the corresponding previous period, witnessing a growth of 14.9% year-on-year. EBITDA margin was at 20.2% vis-a-vis 23.0% in FY2017-18. EBITDA before forex and other income stood at ''39,519.4 million, witnessing a 4.3% growth y-o-y. Your Company reported a Net Profit of ''23,647.4 million. The Diluted Earnings Per Share stood at Rs,40.36 compared to Rs,41.36 in FY2017-18.

As on 31st March 2019, the Company filed 541 Abbreviated New Drug Applications (ANDAs) on a cumulative basis. Of the total count, 377 have received final approvals and 26 have got tentative approvals, including 9 ANDAs which are tentatively approved under the US President''s Emergency Plan for AIDS Relief (PEPFAR) and the balance 138 ANDAs are currently under review.

Your Company witnessed growth across key geographies in the formulations segment. The US business reported 21.3% growth to reach Rs,90,307.3 million and contributed 46.2% to the total revenues. The growth in revenues were driven by new product launches, along with an increase in the market share of existing products across the segments such as oral solids, injectables, dietary supplements and the over the counter (OTC) business.

Your Company registered a 13.9% growth in its Europe formulations business, as revenue touched Rs,49,601.7 million in FY2018-19 compared to the previous year''s revenue of Rs,43,543.8 million. With the Acquisition of Apotex''s businesses in five countries, Aurobindo strengthened its foothold in Europe.

It now operates in 11 countries and is present across multiple channels including pharmacy, hospital and tender sales.

Your Company’s formulations sales in Growth Markets including Brazil, Canada, Columbia and South Africa grew by 33.1% to Rs,11,936.5 million vis-a-vis Rs,8,971.3 million reported in FY2017- 18. The growth was largely driven by Canada. The Company now ranks amongst the top ten generic players in Canada. The growth in Canada was propelled by the approvals for a number of products and the Company’s ability to leverage these approvals.

The ARV formulations business reported a growth of 15.8% with revenues of Rs,9,724.8 million vis-a-vis Rs,8,395.8 million a year ago. During the year, the Company was awarded a supply contract from South African government for Dolutegravir triple combination and related products, dispatches for which will begin in FY2019-20.

OUTLOOK

Your Company will continue to expand its market penetration in the core markets (US and EU) by adding more products, and scaling recently completed & announced acquisitions.

Also, through its in-house research & development capabilities. Your Company has identified multiple areas for significant value creation and synergies from recent acquisitions and plans to leverage the infrastructure of the acquired businesses to drive penetration and optimize value creation by leveraging its vertically integrated platform.

Your Company is expanding its portfolio mix towards differentiated products with pipeline encompassing oncology, hormones, inhalers and Biosimilars, among other, and an addressable market over US$100 billion (as per IQVIA MAT Mar 2019). In US the acquisition of Sandoz’s dermatology and oral solids businesses, comprising authorized generics and in-licensed products, offer significant synergy and value creation potential for your Company.

In the EU, your Company will continue to expand its portfolio through launches of targeted Day 1 products, oncology range, hormones, niche low injectables and orals. Your Company has a pipeline of over two hundred fifty products under development. Further, your Company sees an opportunity of more than US$5 billion of addressable sales coming off-patent in the near term (2019-20) and more than US$13 billion in the medium term (2021-22). In addition, countries such as Italy, Spain, Portugal and France offer growth potential as the penetration of generics improves. The acquisition of Apotex’s business in five key European countries will allow your Company to further expand its product offering and its position in Eastern Europe.

Your Company will also work on expanding its presence in Growth Markets through the launch of new products especially from its oncology portfolio and will continue its strategy of focusing on tenders for ARV formulations.

The API segment that supplies products to third parties as well as strengthens the business model of Aurobindo by providing vertical integration for the manufacturing of formulations will be scaled up as per market dynamics and business needs.

RESEARCH AND DEVELOPMENT

Aurobindo has a dedicated research team that consists of more than 1,600 scientists and analysts who work on developing a wide range of medications from simple plain-vanilla generics to complex speciality products. The research philosophy of the Company is to provide a broad basket of products in a category or a therapeutic area that the Company forays into. Currently, the Company has seven Research and Development (R&D) centres, of which five are in India and two are in the USA. In FY2018-19, the Company has invested 4.5% of its consolidated revenue i.e. Rs,8,682.6 million in research & development.

The aim of the research team is to develop affordable generic medications and products that would be accessible to all strata of society. Given the ever-rising cost of healthcare worldwide, it is imperative that less expensive, high quality generics alongside branded counterparts become available to patients worldwide.

Oncology and Hormones

Eugia has a diverse portfolio comprising more than seventy five products that are prescribed for oncology, hormones and immuno-suppressant indications. The Company has shortlisted over sixty five generic oncology products for formulations development. These products are prescribed in the treatment of over 25 different indications involving mainly first-line and second-line therapies in cancer patients either in single or in combination with other drugs. The Company has filed 13 ANDAs for Oncology products including four injectable products.

The company has shortlisted ten generic Hormone products for formulations development. These products are prescribed for indications such as Pre-term birth, Birth Control, Amenorrhea and Hypogonadism. The Company has filed nine ANDAs.

A total of 22 ANDAs have been filed as of March 31, 2019.

The development and manufacturing of Oncology & Hormone products require specialized preparations and containment measures. The manufacturing facility is designed to cater to >20% of the global volume demand for those products that are part of Eugia’s portfolio. Eugia has the capability to develop and manufacture 6 different dosage forms.

- Oral solid dosage forms (Tablets, Hard Gelatin Capsules & Soft Gelatin Capsules)

- Injectables (Wet vials, Dry (lyophilized) vials & Pre-filled syringes)

In FY2018-19, the Company has received approval for four products (two oncology and two hormonal products) and completed exhibit batches for twenty three products. The Company has also planned to develop and manufacture oncology and hormone products to cater to the requirements in Europe, Canada, China and other key emerging markets through other subsidiaries.

In FY2019-20, it is estimated that the Company will file 15-18 ANDA’s with USFDA. Registrations are in progress in Europe and other key emerging markets. The Company has commenced its commercial manufacturing operations and is expected to launch more than ten products in the US and EU markets in FY2019-20.

According to IQVIA, spending on cancer therapies and supportive care drugs accounted for US$99.5 billion in developed economies (the USA, 5-EU etc.) and selected emerging markets (Brazil, China, India, Mexico etc.) in 2018. The US is the biggest contributor to this and accounted for 46% of global spending.

The market for oncology therapeutic medicines is estimated to reach US$140-150 billion by 2023 in these selected markets growing at a CAGR of 6-7%. Oncology products are expected to account for approximately 30% of the new launched medicines (~70-90 products) over the next five years. The generic oncology market is estimated at US$20 billion currently and is forecasted to grow at CAGR of 6.7% to reach US$23 billion by 2021, considering loss of patent expiry for few branded drugs and increase in demand for generic medicines.

Biologics

Aurobindo uses recombinant DNA technology to express and produce Biologics in a living system such as a mammalian cell or a microorganism. Biologics we work with are large, complex proteins and monoclonal antibodies.

Aurobindo has one of the industry leading portfolio of 14 biosimilars, which include five molecules acquired from TL Biopharmaceuticals AG. The pipeline caters to oncology, rheumatology and ophthalmology. In first wave of development, the Company is working on five products - all advancing to different stages of clinical trials in the next two to three quarters. Phase III clinical trials of ophthalmic products is expected to start in this fiscal year, three more products including our lead molecule Bevacizumab, a biosimilar version of Avastin, will be tested in Phase I clinical trials. The combined market size of these four products is in excess of US$ 20 billion.

As this segment is an important growth driver, the Company commissioned a state-of-the-art manufacturing facility of 1,40,000 square feet comprising mammalian cell culture, microbial fermentation, quality control, fill and finish sections. The fill and finish facility can cater to filings product in vials, syringes and cartridges. This fully integrated facility is operational and is generating material for clinical trial requirement. Currently, over 160 people with a strong scientific background in cell biology bioprocess engineering, protein chemistry, regulatory and clinical sciences are employed in Biologics division of the Company.

Dermatology

Dermatology is an area of medicine concerned with the health of the skin and diseases of the hair, nails, and mucous membranes. The skin is the largest organ in the body. It is the first line of defense against bacteria and injury, and often reflects overall health.

The Company is currently working on twenty four products on different segments such as Acne Vulgaris, Inflammatory lesions of Rosacea, Atopic Dermatitis, Hypogonadism, Menopause, Vaginal Atrophy, Osteoarthritis, Herpes, Pruritus and lice infestations. The market size of these products is estimated at US$4.4 billion. The identified products have presence across various dosages including ointment, cream, gel, lotion and solutions in the pipeline.

Of the twenty four products under development, around eighteen products need clinical trials or Bioequivalence (BE) studies.

During FY2018-19, Aurobindo has completed clinical trial for one product and is planning further trails for about close to seven products in FY2019-20.

In FY2018-19, the Company has produced exhibit batches for two products and is planning to execute exhibit batches for another eight to ten products in FY2019-20.

The Company filed three ANDAs in FY2018-19, and is planning to file another 8-10 ANDAs over the next two years.

Transdermal Patches

A Transdermal patch is a medicated adhesive patch that is placed on the skin to deliver a specific dose of medication. They release small amounts of drug through the skin into the blood stream over a long period of time. These patches may include pain relievers, nicotine, hormones, and drugs to treat angina and motion sickness.

Aurobindo has eight transdermal products under development with an addressable global market size of around US$3.3 billion. All these products need either clinical trials or BE studies. The Company has successfully completed pilot BE studies for one product. The Company is likely to file two ANDAs by FY2020-21. The Company is developing transdermal products in North Carolina R&D center. The Company also completed setting up a manufacturing facility for the same.

Respiratory

Inhalers

An inhaler (puffer or pump) is a medical device used for delivering medication into the body via the lungs.

The most common type of inhaler is the pressurized Metered-Dose Inhaler (MDI), that delivers medication by using a propellant spray. Another form of inhaler is a Dry-Powder Inhaler (DPI) which is breath-activated. The medication is released only when you take a deep, fast breath-in through the inhaler.

Respiratory is one of the key therapeutic areas where Aurobindo is strengthening its presence. The Company is working on building a pipeline of metered dose inhalers and dry powder inhalers. Within respiratory products, the Company now has nine inhaler products under development; of which two products are likely to come up for clinical trials during FY2019-20. The market size of products under development is US$13.3 billion.

The Company expects to file first ANDA during FY2019-20. Inhalers will be manufactured at North Carolina facility.

Nasals

Nasals or nasal sprays are used to deliver medications locally in one’s nasal cavities as substances can be assimilated quickly and directly through the nose. In certain cases, the nasal delivery route is preferred because it provides a good alternative to injection or pills.

Aurobindo has identified seven nasal products for development.

Of which, the company already filed ANDAs for two products.

The total market size of all the seven products is US$1.4 billion. The Company is planning to file three more in ANDAs in FY2019-20. These products are manufactured in Unit X, and the unit has a current monthly capacity to produce 1.4 million units.

Depot Injections

Your Company is currently developing four depot injections that have a combined addressable market size of US$3.6 billion.

One of the products from this segment is likely to have exhibit batches ready in FY2019-20 and clinical trials will start in second half of FY2019-20. The Company plans to file the first product in FY2020-21.

Peptides

Peptides are short chains of amino acid monomers linked by peptide (amide) bonds. The Company has invested in developing a state-of-the-art peptide development laboratory and has four manufacturing suites for its commercial production. Peptides usually have a long gestation period and take four to five years for development.

Auro Peptides has developed the process for manufacturing twenty peptides. The unit has already filed 6 DMFs with the US regulatory authorities and is planning to file an additional 3-4 DMFs in FY2019-20.

For now, Auro Peptides is supplying material for formulation development and the execution of its validation batches. These peptide APIs are being utilized for the development of three liposomal injectable products and seven injectable products. Of which, two to three injectables will be filed in FY2019-20. The addressable market size of products under development is about US$13.5 billion.

Biocatalysts

Aurobindo identifies and produces biocatalysts through fermentation processes which are subsequently developed into scalable biocatalytic solutions. This reduces the usage of chemicals within the processes during pharmaceutical manufacturing, saving costs whilst benefiting from this green technology. The high technical base and core competence of Aurobindo has made it easier to initiate the entry into enzyme production.

The Company has a highly qualified dedicated team of over 30 professionals, with an on-going technology development program which has built a library of over 7,000 biocatalysts across 15 classes of enzymes. Utilising our state-of-the-art technology, we have developed several processes and these are being scaled into GMP manufacturing assets. Our new cGMP fermentation manufacturing facility is also coming online this year, and a series of new products are now expected to commence manufacturing soon.

Vaccines

The need for improved public health and medicines to protect infants is fast becoming a global priority. In view of this reality, the Company has focused on development of the Pneumococcal Conjugate Vaccine (PCV). The global market size of the product is US$6.2 billion.

In FY2018-19, the Company has completed Phase I clinical trials and started enrolment for Phase II clinical trials in March 2019, which will be completed by August 2019. Phase III clinical trials are expected to commence in early 2020. The Company has already registered the brand in India under the name ‘Pneuteger 15’.

All the clinical trials are expected to be completed by early 2021 and the Company expects to be ready for taking part in the upcoming government tender during 2021. Aurobindo has set up a new manufacturing unit for the same that has the capacity to manufacture 100 million doses a year.

ENVIRONMENT HEALTH & SAFETY (EHS)

The Company’s EHS initiatives focus on reducing its impact on the environment, improving the work life of employees and making sure that the highest safety standards for employees, contractors and visitors are met. The Company’s EHS standards are dynamic and evolving with international standards to ensure industry best practices. During the year under review, the Company undertook multiple initiatives to remain at the forefront of this journey.

Safety

The Company follows international guidelines on safety. It is working to increase safety standards across all its facilities and processes.

At this end, the Company has made it mandatory for all new projects including capacities, buildings and facilities to have EHS clearance and requires that the guidelines are followed right from the planning stage. After completion of a project, a review of the new facility is conducted to vet its compliance to the standards.

The Company has also started incorporating safety requirements in all its production processes. Its safety guidelines are included in the Batch Production and Control Record (BPCR). Such measures will ensure greater workplace safety and prevent any occurrence of hazardous incidents in the production process.

To maintain a safe working environment, safety pep-talks were initiated before every shift, on hazards in activities and necessary precautions to be taken in case of a mishap. The man-hour spent in safety training increased to 0.65% in FY2018-19 from 0.59% last year.

During the year, Hazard and Operability study (HAZOP) was conducted for eighty five products. Risk analysis was conducted for thirty nine products. Behaviour based safety processes were initiated in Units III, XII and VII.

Several initiatives were taken during the year to improve the overall safety across the boards. These included conducting quantitative risk assessments for bulk solvent storage areas, installing sprinkler systems for an additional layer of safety, conducting ergonomic assessments to assess health risks and initiating product-based risk assessments for formulation products.

Environment:

The Company is working to ensure that its activities have the least impact on the environment and is also upgrading its plants and treatment systems every year to ensure that it remains a frontrunner in promoting sustainability.

During the year, the Company initiated the augmentation and expansion of wastewater treatment facilities at two major API manufacturing units along with the introduction of MBR technology for enhancement of treatment efficiency.

Its facilities are compliant with the regulations stipulated for wastewater treatment, disposal/reuse, hazardous and other wastes management, emissions control, to name a few. Wastewater and air emissions management systems at API Units are viewed and monitored on-line by the concerned environmental regulatory agencies, apart from periodical inspections to site.

The waste streams have been successfully handled and managed effectively on cradle to grave philosophy and are complying with regulations.

The facilities located in Telangana are compliant with on-line manifest system and tracking for respective waste streams as being implemented by the concerned regulatory agency.

It has also successfully completed the environmental impact assessment process for expansion of Aurobindo Unit XI.

Sustainability:

With a view to initiate reporting on sustainability, Aurobindo has added the Sustainability vertical - Sustainability to its EHS structure.

In FY2018-19 the Company received SA 8000 accreditation for two of its formulations manufacturing facilities - Aurobindo Pharma Limited, Unit VII and APL Health Care Limited located at SEZ, Jadcherla, Telangana.

Aurobindo Pharma has initiated Environmental Management System across all its units for effective Environmental Management & as part of this 9 units of the company are already certified for ISO 14001:2015 standard. Other units are under pipeline for ISO 14001:2015 certification which will be completed by end of the year 2019 except for unit XVII & XVIII where commercial production is yet to start.

These efforts have borne fruit as the Company’s Environmental Social Governance (ESG) rating and scorecards as ranked by internationally reputed agencies such as EcoVadis have shown a significant improvement.

The Company has taken up green-belt development in close vicinity of its facilities, in schools and near the water bodies. It has planted about 10000 saplings covering a variety of indigenous plant species and is happy to report that a focussed approach and proper maintenance practices have resulted in 80% of survival rate of the saplings.

Antimicrobial Resistance (AMR)

Aurobindo recognized that AMR is a threat and has taken proactive steps to ensure it is at the forefront of the fight against it.

The Company collaborated with The Access to Medicine Foundation to participate in The Antimicrobial Resistance Benchmark 2018 and will be a part of the forthcoming 2020 AMR Benchmark.

Aurobindo is also a member of the AMR industry alliance that brings together research-based pharmaceutical companies, generics, biotech and diagnostic companies, to drive and measure industry progress to curb antimicrobial resistance.

The AMR Industry Alliance will ensure that signatories collectively deliver on the commitments made in the Declaration (January 2016) and the Roadmap (September 2016) and will measure industry’s progress in the fight against AMR.

During the year, the Company also participated in the initiatives of Government of India on combating AMR and engaged actively with the events organized by Ministry of Environment, Forest and Climate Change.

AWARDS

- Aurobindo has been awarded IP Excellence in INDIA 2018 by Questel Orbit INC, as a part of their Indian IP Awards, 2018. The Indian IP Awards are given to facilitate best professionals across the IP (Intellectual Property) Industry.

- Aurobindo Pharma has bagged award for the category of Best CSR Practices in Responsible Business Awards hosted by World CSR Day.

- Aurobindo Pharma has bagged the ''Outstanding Export Award for FY2017-18'' conducted by Pharmaceutical Export Promotion Council of India (Pharmexcil).

- The Indian Institute of Packing, a national autonomous body under the Ministry of Commerce, Government of India

has awarded the INDIASTAR - 2017 to Aurobindo Pharma Limited for its Sustainable Shelf-ready Display carton.

- The Federation of Telangana and Andhra Pradesh Chamber of Commerce and Industry (FTAPCCI) has felicitated Aurobindo with HR Best Practices Awards-2018 in the category of Large-Scale Industries

- Aurobindo has received ‘IDMA Best API Patents Award 201718’ conducted by Indian Drug Manufacturers association

- Our HR team received a Certificate of Achievement from BML Munjal Awards for attaining the ‘Expert Panel’ evaluation milestone. The certificate accolades the commitment towards investment in ‘Learning & Development’ to achieve Business Excellence

- Aurobindo’s HR team was awarded a certificate of merit in ‘Top 7 Rising Stars of HR Competition’ at CII HR Conclave

- Aurobindo HR team won the HR Frame award, a Video Competition for Young HR Professionals organized by CII Telangana. ‘My Super Heros’ a 2 minute video was displayed to a large and eminent audience, at the CII HR Conclave

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statements of subsidiary companies/associate companies/joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

During the year, the following are the changes in the subsidiaries of the Company:

Ceased as subsidiaries

Mer Medicamentos, Lda, Aurobindo Pharma (Portugal)

Unipessoal Limitada and Aurovitas, Unipessoal LDA, were ceased as subsidiaries consequent to merger of the same with Generis Farmaceutica S.A w.e.f. 1st April, 2018

New subsidiaries/Joint Ventures

Auro Science Pty Ltd., Australia was incorporated on January 6, 2019 as a wholly owned subsidiary of Aurobindo Pharma USA Inc.

Aurobindo Pharma FZ LLC, UAE was incorporated on January

6, 2019 as a wholly owned subsidiary of Helix Healthcare BV Netherlands

Cura TeQ Biologics GmbH, Switzerland, was incorporated on March 20, 2019 as a wholly owned subsidiary of Helix Healthcare BV Netherlands

Auro Science LLC, USA was incorporated on March 28, 2019 as a wholly owned subsidiary of Aurobindo Pharma USA Inc.

Purple Bell Flower Pty Ltd., South Africa was formed as a joint venture under Aurogen Pharma Pty Ltd., South Africa

Apotex Europep B.V Netehrlands; Apotex Netharlands B.V, Netehrlands; Sameko Farma B.V, Netehrlands; Leidapharm

B.V Netehrlands; Marel B.V Netehrlands; Pharma Dossier B.V Netehrlands: Apotex N.V, Belgium; Apotex Polska SP z o o, Spain Apotex (CR) Spool s.r.o, Check Republic and Apotex Espana SL, Spain became the stepdown subsidiaries of Helix Healthcare BV., Netherlands consequent to acquisition of operations of Apotex Inc., Canada.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website www. aurobindo.com, in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Company''s subsidiaries will be provided to the Members, on request.

CODE FOR PREVENTION OF INSIDER TRADING

On December 31, 2018, Securities and Exchange Board of India amended the Prohibition of Insider Trading Regulations, 2015, prescribing various new requirements with effect from April 1, 2019. In line with the amendments, your Company has adopted an amended Code of Conduct to regulate, monitor and report trading by Designated Persons and their Immediate Relatives under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. This Code of Conduct also includes code of practices and procedures for fair disclosure of unpublished price sensitive information and has been made available on the Company’s website at https://www.aurobindo. com/investors/corporate-governance/code-of-practices-and-procedures-for-fair-disclosure/

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees and whole-time directors of the Company are covered under the Whistle Blower Policy

A mechanism has been established for employees to report their concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics and leak of price sensitive information under the Company’s Code of Conduct formulated for regulating, monitoring and reporting by Insiders under SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended from time to time. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy is available on the Company''s website: http://www.aurobindo. com/about-us/governance/governance-policies /

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexual harassment cases at workplace and the said process ensures complete anonymity and confidentiality of information. Your Company has constituted an Internal Complaints Committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention & prohibition of sexual harassment at workplace. The policy provides for protection against sexual harassment of women at workplace and for the prevention and redressal of such complaints. During the year the Company received one complaint and disposed of the same. The Company has been conducting awareness programme to the employees of the Company, on prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled and a tentative calendar of the meetings finalized in consultation with the Directors to facilitate them to plan their schedule. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, six Board Meetings and five Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONAL

Key Managerial Personnel

Mr. K. Nithyananda Reddy, Executive Vice Chairman,

Mr. N.Govindarajan, Managing Director, Dr.M.Sivakumaran, Whole-time Director, Mr.M.Madan Mohan Reddy, Whole-time Director, Mr.P.Sarath Chandra Reddy, Whole-time Director,

Mr. Santhanam Subramanian, Chief Financial Officer and Mr. B. Adi Reddy, Company Secretary are Key Managerial Personnel of the Company in accordance with the provisions of Section(s) 2(51), and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. There has been no change in the Key Managerial Personnel during the financial year.

None of the directors of the Company are disqualified under the provisions of the Companies Act, 2013 (‘Act’) or under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. All Independent Directors have provided confirmations as contemplated under section 149(7) of the Act.

Appointments/Re-appointments

As per the provisions of the Companies Act, 2013, Mr. P.Sarath Chandra Reddy and Dr. M. Sivakumaran will retire at the ensuing annual general meeting and being eligible, seek reappointment. The Board of Directors recommends their re-appointment.

The re-appointment of Mr. P. Sarath Chandra Reddy as Wholetime Director with effect from June 1, 2019 is being proposed at the ensuing Annual General Meeting. The reappointment of Mr. K. Ragunathan, Mrs. Savita Mahajan and Dr. (Mrs) Avnit Bimal Singh as Independent Directors for the second term are also being proposed at the ensuing Annual General Meeting. The Board of directors recommends their re-appointment.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. i n the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 as well as clause (b) of sub-regulation (1) of Regulation 16 of the Listing Regulations (including any statutory modification(s) or re-enactment(s) thereof for the time being in force). In terms of Regulation 25(8) of the Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company''s website: http://www.aurobindo.com/about-us/ governance/governance-policies/.

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The Annual Performance Evaluation was conducted for all Board Members, for the Board and its Committees for the financial year 2018-19. This evaluation was led by the Nomination and Remuneration / Compensation Committee. The Board evaluation framework has been designed in compliance with the requirements under the Companies Act, 2013 and the Listing Regulations and in accordance with the Guidance Note on Board Evaluation issued by SEBI in January 2017. The Board evaluation was conducted through questionnaire designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequate independence of each Committee, frequency of meetings and time allocated for discussions at meetings, functioning of Board Committees and effectiveness of its advice/ recommendation to the Board, etc.

Evaluation of Directors was based on criteria such as participation and contribution in Board and Committee meetings, representation of shareholders interest and enhancing shareholders value, experience and expertise to provide feedback and guidance to top management on business strategy, governance, risk and understanding of the organization’s strategy, etc.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The policy of the Company on directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company''s website: http://www.aurobindo.com/ about-us/governance/governance-policies/.

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the year under review.

LOANS, GUARANTEES AND INVESTMENTS

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under review were on arm’s length basis and in the ordinary course of business. All related party transactions are mentioned in the Notes to the Financial Statements. The Company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval. The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company http://www.aurobindo.com/about-us/ governance/governance-policies/

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of subsection (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 134 (3) (a) and Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return prepared in Form MGT-9 and is in Annexure-3 to this report. The Annual Return of the Company will be made available on its website www.aurobindo.com

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 and is in Annexure-4 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz. Mr. M. Sitarama Murty, Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. Mr. M. Sitarama Murty is the Chairman of the Committee. The Company has established a separate department to monitor the enterprise risk and for its management. The Committee had formulated a risk management policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. Risk management policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board.

Risk is an integral part of the Company’s business, and sound risk management is critical to the success of the organization. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on regular basis at the time of review of quarterly financial results of the Company. A report on the risk and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report. The notes on financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year, under review.

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 30th Annual General Meeting (AGM) held on August 31, 2017, had appointed M/s. B S R & Associates LLP, Chartered Accountants as Statutory Auditors for a period of 5 years i.e. up to the conclusion of the 35th AGM to be held in the year 2022. Further, as per Companies (Amendment) Act, 2017 effective from May 07, 2018, the provisions relating to ratification of the appointment of Statutory Auditors at every AGM are not required to be followed.

INTERNAL AUDITORS

Ernst & Young LLP are the internal auditors of the Company and to maintain its objectivity and independence, the Internal Auditors report to the Chairman of the Audit Committee. The scope and authority of the Internal Audit function is clearly defined by the Audit Committee of the Board. The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system of the Company, its compliance with applicable laws/regulations, accounting procedures and policies. Based on the reports of the Internal Auditors, corrective actions were undertaken and thereby strengthened the controls. Significant audit observations and action plans were presented to the Audit Committee of the Board on quarterly basis.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014, the Company is maintaining the cost records as its business is covered under the regulated sector viz. drugs and pharmaceuticals. Audit of the Company''s cost records is not applicable since the Company''s revenues from exports, in foreign exchange, exceed 75% of its total revenues.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework institutionalized in Aurobindo has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance related controls and also Information Technology (IT) controls, comprising IT general controls (ITGC) and application level controls. The ITGC would include controls over IT environment, computer operations, access to programs and data, program development and program changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorization levels.

In order to further strengthen the existing IFC framework and to support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined & identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The internal auditors conduct '' Process & control review'' on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

- Establishment of policies & procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

- Physical existence and ownership of assets at a specified date;

- Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

- Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate amounts;

- Preparation of financial information as per the timelines defined by the relevant authorities.

These controls cover the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to the Company’s policies, safeguarding of its assets of the Company, prevention and detection of its frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial information. The Company has an internal control system, commensurate with the size, scale and complexity of its operation

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr.A.Mohan Rami Reddy, a Company Secretary in Practice to undertake the secretarial audit of the Company for the financial year 2018-19. The Secretarial Audit Report issued in form MR-3 is and in Annexure-5 to this Report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report. Also, pursuant to Regulation 24A of the SEBI (Listing Regulations), 2015, the Company has obtained Annual Secretarial Compliance Report from a Practicing Company Secretary and submitted the same to stock exchanges where the shares of the Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the CA 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established the Corporate Social Responsibility Committee (CSR Committee). Your Company is striving to help create a healthy, improved life of people in its neighborhood. Broadly, the initiatives are to execute on the stated CSR policy of ''give back to the society'' and make an impact on the lives of people.

The activities undertaken during 2018-19 can be summarized under the following heads:

- Promoting education;

- Supporting preventive health care;

- Eradicating hunger, poverty & malnutrition;

- Making available safe drinking water;

- Encouraging environment sustainability;

- Sustaining ecological balance & conservation of natural resources;

- Developing rural sports; and

- Setting up old age homes, etc

A detailed account of the CSR activities forms part of the annual report and placed on the Company''s website at: http://www.aurobindo.com/sustainibility/. Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is provided as Annexure-6 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration of managerial personnel as required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and is in Annexure-7 to this Report.

The statement containing particulars of employees pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is open for inspection at the Registered office of the Company during business hours on all working days of the Company up to the date of the ensuing Annual General Meeting. Any shareholder interested in obtaining such details may write to the Company Secretary of the Company.

Affirmation that the remuneration is as per the remuneration policy of the Company.

In compliance with the provisions of the Companies Act, 2013 and SEBI Listing Regulations, the Board, on the recommendation of the Nomination and Remuneration/Compensation Committee approved the Policy for Selection, Appointment and of Directors, KMPs and Senior Management persons. The said Policy provides a framework to ensure that suitable and efficient succession plans are in place for appointment of Directors on the Board and other management members. The Policy also provides for selection and remuneration criteria for appointment of Directors and senior management persons.

The Company affirms that the remuneration is as per the remuneration policy of the Company.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured. The Company has also taken D & O Insurance Policy covering Company''s Directors and officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2019 to the date of signing of the Director''s Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report.

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company''s performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government.

Section 124 of the Companies Act, 2013 read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (''the Rules'') mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund (IEPF), also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF. Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to IEPF account on due dates.

The details of amount of unclaimed unpaid dividend and corresponding shares ''transferred to IEPF during the financial year 2018-19 have been provided in the AGM Notice.

SHARE CAPITAL

During the financial year under review, there has been no change in the Authorized Share Capital of the Company. However, the paid up equity share capital of the Company increased by Rs,8,000 during the year consequent to the allotment of 8,000 equity shares of Rs,1 each on exercise of stock options under the Employee Stock Option Plan-2006 (ESOP 2006) of the Company. The paid up share capital of the Company as on March 31, 2019 was Rs,585,915,609 divided into 585,915,609 equity shares of Rs,1 each. The Company has not issued any debentures, bonds or any non-convertible securities during the financial year under review.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme- 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries. Details of the stock options as on March 31, 2019 is provided on the Company''s website: http://www.aurobindo.com/about-us/ governance/governance-policies/. The details of the employee stock options also form part of the notes to accounts of the financial statements in this Annual Report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

OTHER DISCLOSURES

There were no significant material orders passed by the Regulators or Courts or Tribunals that would impact the going concern status of the Company and its operations in future.

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India.

Acquisitions / Disinvestment/ demerger/merger

A. Acquisitions

Apotex

The wholly owned step-down subsidiary of the Company, Agile Pharma B.V. (Netherlands) has entered into an agreement in July

2018 to acquire commercial operations and certain supporting infrastructure in five European countries viz. the Netherlands, Belgium, Spain, Poland and Czech Republic from Apotex International Inc. a Canadian pharmaceutical company engaged in the manufacture and marketing of pharmaceutical products. The Acquisition of Apotex’ businesses in Poland, Czech Republic, the Netherlands, Spain and Belgium was completed in February, 2019.

Sandoz

The wholly owned subsidiary of the Company, Aurobindo Pharma USA Inc., USA, has entered into an agreement to acquire commercial operations and three manufacturing facilities in USA from Sandoz Inc., USA, a Novartis Division.

The acquisition includes in-line portfolio of dermatology and oral solids, authorised generics and in-licensing products, Branded dermatology products, 3 manufacturing facilities at, Hicksville -NY (Derma), Melville - NY(Derma), Wilson- NC (OSD), and 100% shareholding in Eon Labs Inc, a wholly owned subsidiary of Sandoz.

This is a carved out business of Sandoz in US and the product portfolio consists of Dermatology, CNS, Alimentary Tract/ Metabolic, Women’s Health, Anti-infectives, Systemic Hormones and others along with three manufacturing facilities situated in Hicksville and Melville in New York and Wilson in North Carolina. The acquisition is in progress.

Advent

The wholly owned subsidiary of the Company, Aurobindo Pharma USA Inc., USA, has in November 2018 acquired a product under development and related assets from ‘Advent Pharmaceuticals Pty Ltd., Australia, through AuroScience Pty Limited, Melbourne, a 100% subsidiary of Aurobindo Pharma USA Inc., USA.

- Acquisition provides an opportunity to acquire assets that would be used for specialty generics business.

- Acquisition will lead to enhancement of R &D capabilities in complex specialty generics

Luoxin

The wholly owned subsidiary of the Company, Helix Healthcare

B.V, Netherlands, has entered into an agreement with Shandong Luoxin Pharmaceutical Group Stock Co., Ltd, China (Luoxin) to establish a Joint Venture Company in China with manufacturing facilities to manufacture nebuliser inhaler and other products for China, US and EU markets. However, for Europe markets, the new Joint Venture Company will establish its fully owned subsidiary(ies) in any of the European countries.

Spectrum

Acrotech Biopharma L.L.C., a wholly owned subsidiary of Aurobindo Pharma USA Inc., USA, which in turn is a wholly owned subsidiary of the Company, has entered into a definitive agreement to acquire seven marketed oncology injectable products, intellectual property and commercial infrastructure from Spectrum Pharmaceuticals Inc., (NASDAQ:SPPI), a US based, global branded oncology company. Spectrum has as part of its major strategic shift to focus on novel oncology drug development and commercialization of its two late-stage pipeline products, carved out its commercial business inclusive of seven marketed oncology injectable products, intellectual property and commercial infrastructure for sale. The acquisition has been completed on March 1, 2019.

Synergy

The Company has made an investment of Rs,150 million in Synergy Remedies Private Limited (Synergy), a Tirupathi based pharma company and acquired 19.9% holding in the said company. The objective of this acquisition was to ensure assured supplies of some of the APIs and intermediates.

B. Merger

Merger of wholly owned Subsidiaries

On May 28, 2019 the Board of Directors had accorded its approval for the draft scheme for merger of Company''s 5 (Five) Wholly Owned Subsidiaries (i.e. APL Research Centre Limited, Aurozymes Limited, Curepro Parenterals Limited, Hyacinths Pharma Private Limited and APL Healthcare Limited) and 1 (one) step-down wholly owned subsidiary (i.e. Silicon Life Sciences

Private Limited) with the Company. No shares of the Company will be issued as consideration for the said amalgamation and the shares held by the Company in its wholly owned subsidiaries and step-down wholly owned subsidiary shall stand cancelled. The Scheme would be subject to the requisite statutory/ regulatory approvals including the approval of the National Company Law Tribunal (Hyderabad Bench).

CREDIT RATING

The Company has obtained credit rating from India Ratings & Research Private Limited and it has assigned “IND AA ’’/ “INDA1 ” on Rating Watch Positive for Company’s fund based working capital facilities and “IND A1 ” on Rating Watch Positive for Company’s non-fund based working capital limits vide their letter dated September 17, 2018.

ACKNOWLEDGEMENTS

Your Directors are grateful to for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For and on behalf of the Board

K. Ragunathan

Place: Hyderabad Chairman

Date: 28 May 2019 DIN: 00523576

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Mar 31, 2018

Dear Members,

The Directors are pleased to present the 31^st Annual Report of the Company together with the audited accounts for the financial year ended 31 March 2018.

FINANCIAL HIGHLIGHTS

Standalone financials Rs. Million

	2017-18	2016-17
Revenue from operations	103,031.5	97,812.1
EBITDA	26,700.0	23,740.0
Depreciation	3,548.3	2,861.7
Finance cost	528.9	451.6
Profit before Tax	23,429.4	21,785.7
Provision for Tax	5,301.7	4,718.1
Net Profit after tax	18,127.7	17,067.6
Other Comprehensive Income/ (expense)	-21.8	-56.1
Total Comprehensive income for the period	18,105.9	17,011.5

DIVIDEND

Your Company has paid first interim dividend of 150% i.e. Rs.1.50 per equity share of Rs.1/- and second interim dividend of 100% i.e Rs.1/- per equity share of Rs.1/-. The total dividend for the financial year 2017-18 comes to 250% i.e. Rs.2.50 per equity share of Rs.1/- against 250% i.e Rs.2.50 per equity share of Rs.1/- paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top five hundred listed entities based on market capitalization are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on the Company’s website viz. www.aurobindo.com.

PERFORMANCE REVIEW

Your Company continued to strengthen its position across global markets during the year. It delivered yet another year of consistent and profitable growth; and fortified its manufacturing and research capabilities.

Your Company continued to build a robust pipeline of products for the future and invested in elevating operational efficiencies to improve the quality of products. The holistic wellbeing of employees also remained a priority. During the reporting period, there was a sustained focus to augment the strengths of your Company and sharpen competitive advantages with a view towards long term value creation.

On a standalone basis, your Company revenues registered a growth of 5.3% reaching Rs.103,032 million in FY 2017-18, compared to Rs.97,812 million. EBITDA stood at Rs.26,700 million, an increase of 12.5% over FY2016-17. EBITDA margins increased by ~160 bps to 25.9% during the year and profit before tax for the year at standalone level was Rs.23,429 million, a 7.5% growth over the preceding year. Your Company’s net profit was at Rs.18,128 million, a growth of 6.2% over Rs.17,068 million reported in FY2016-17. The diluted earnings per share stood at Rs.30.94 compared to Rs.29.16 in FY2016-17.

On a consolidated basis the performance for the FY2017-18 is, revenues increased to Rs.164,998 million from Rs.150,899 million in the previous year, at 9.3% growth. The formulations business registered a revenue growth of 12.4% and improved to Rs.135,332 million from Rs.120,454 million in the previous year. The API business sales stood at Rs.29,622 million from Rs.30,421 million in the corresponding previous period. EBITDA margins expanded by ~20 bps to 23.0% vis-a-vis 22.8% in 2016-17. EBITDA was Rs.37,885 million, witnessed a 10.3% growth over the corresponding previous period. Net profit grew by 5.3% to Rs.24,232 million. The growth in net profit was impacted by a onetime expense related to a tax charge.

The diluted earnings per share stood at Rs.41.36 compared to Rs.39.33 in 2016-17. The healthy growth in revenues and profits were driven by new product launches across markets, improvement in market share of existing products, enhanced productivity and cost optimizations.

In the US, the Tax Cuts and Jobs Act of 2017 was approved and enacted into a law on December 22, 2017. This resulted in reduction of federal corporate tax from 35% to 21%. As a result, the Company re-evaluated its U.S. deferred tax assets and liabilities, and recognized a one-time charge of Rs.664 million.

As on 31 March 2018, the Company filed 478 ANDAs on a cumulative basis. Of the total count, 327 have final approvals and 34 have tentative approvals, including 11 ANDAs which are tentatively approved under the US President’s Emergency Plan for AIDS Relief (PEPFAR) and the balance 117 ANDAs are under review.

Your Company witnessed growth across the key geographies in the formulations segment. The US business reported 9% growth to Rs.74,421 million and contributed 45% to total revenues. The growth in revenues was driven by new product launches, including complex products, coupled with an increase in the market share of existing products. Your Company witnessed growth, despite pricing pressures in the orals segment. The pricing pressure in orals segment was led by an increase in competition with the improved pace of USFDA approvals and customer consolidation.

Your Company registered a robust 32.9% growth in revenue from the Europe formulations business, reaching to Rs.43,544 million in FY2017-18 over the previous year revenue of Rs.32,771 million. Aurobindo continues to work towards improving synergies between the acquired businesses of Actavis and Generis, and the Company’s existing ground presence in several markets. During the year under review, the EBITDA margins in the European region touched double digit.

The improvement in revenue and profitability happened on the back of transferring manufacturing base for products to India, continued streamlining of business structures, integrating and optimizing the information flow to improve decision-making and control; and new product launches, including Day-1 launches.

As on 31 March 2018, the Company has transferred the manufacturing activities of 83 products from Europe to India.

Your Company’s formulations sales in Growth Markets including Brazil, Canada, Columbia and South Africa grew by 18.7% to Rs.8,971 million vis-a-vis Rs.7,556 million reported in 2016-17. This segment remains a key market for Aurobindo and renewed efforts are made to position your Company’s products as one of the preferred suppliers in the existing and new geographies.

The ARV formulations business was negatively impacted during the year and posted sales of Rs.8,396 million vis-a-vis Rs.11,854 million. The decline in sales was due to incremental pricing pressure in one of the key molecules and delay in some country specific tenders. During the year, the Company received tentative approval from USFDA for Dolutegravir triple combination product (Tenofovir, Lamivudine and Dolutegravir tablets) under the PEPFAR program, which enables your Company to launch the product in PEPFAR markets. Your Company is the second pharma enterprise to receive the USFDA approval for this drug.

OUTLOOK

Your Company will continue to invest in building a diversified product portfolio and improve its market share in the existing product basket. Quality and regulatory compliance will continue to be the cornerstone of your Company’s overall operations. As the demand for critical therapies continue to rise, your Company continues to develop differentiated and new drug delivery systems in these therapies and contribute to improve the lives of patients globally.

In the coming years, the organization’s key priorities will comprise: building a robust pipeline of complex molecules and setting up state-of-the art manufacturing facilities for select therapies that meet high compliance standards; minimizing wastage and maximizing the recycling of materials; reducing the risk in operations; enhancing community wellbeing and being a preferred partner to all stakeholders.

Despite shifting industry trends, your Company’s strong balance sheet and robust operations have helped it stay on track of its growth plans. Your Company’s product portfolio and pipeline has significant potential for sustainable volume growth. Research and Development (R&D) initiative has been undertaken on difficult-to-manufacture and differentiated products, with possible low competitive pressure. Work is currently in progress for development of differentiated molecules, both for oral and injectable products. FY2018-19 promises to be a year with many milestones across a differentiated product basket.

Aurobindo is optimistic of the sustained value that will be created through the planned new initiatives. In the last fiscal, your Company made considerable development across the upcoming product categories and the same is encapsulated in R&D section.

To manufacture a growing product pipeline, your Company initiated significant improvements in capacities to bolster volumes:

- Unit XVI: The Company has successfully commissioned Betalactum injectables manufacturing facility at Jadcherla, Telengana in FY2017-18, which will improve the injectable volumes for the US, EU and Growth Markets.

- Unit X: The Company is building an USFDA compliant oral manufacturing facility at Naidupet, Andhra Pradesh; and the facility will be commissioned during FY2018-19. It has been inspected by USFDA and EMA.

- Injectable facility in US: The Company is in the process of setting up a non-Betalactum injectable manufacturing facility in the US, which is in line with the diversification strategy.

For a sustainable future growth and to spread the geographical risk, Aurobindo has been steadily expanding its European footprint since 2006, via acquisitions across several key markets and organically building a diversified product basket. The acquisition of Generis, referred to earlier, builds upon an already successful growth strategy.

Your Company’s products have the potential to improve the lives of millions of patients across the globe.

RESEARCH & DEVELOPMENT

Your Company’s new product development initiatives ranges from conventional orals to injectable products to more complex and advanced dosage forms. In the last fiscal, the R&D efforts led to filing ANDAs of complex and niche products including oral and sterile drug products

Oncology and Hormones

Eugia’s product portfolio comprises of 79 products that are prescribed for Oncology, Hormone & Immuno-suppressant indications. The Oncology product portfolio is diverse and are approved for treating cancers (involving 16 different indications), either in single or in combination with other drugs. The Hormonal products that are being developed by Eugia are approved prescribed for indications involving, Pre-term birth, birth control, Amenorrhea & Hypergonadism.

Oncology products are a highly specialized class of products and are difficult to produce due to their toxic characteristics and the need for specialized preparation and handling. Of the 71 oncology products which have been shortlisted, 55 products are already in the development phase. We have filed 7 ANDAs as on 31 March, 2018, in the Oncology Segment. In hormones segment, a total of eight products have been identified for development and the Company has already filed six ANDAs.

The Company has also planned to develop and manufacture the Oncology and Hormone products for distribution in Europe markets. With a plan to de-risk the portfolio and improve market share, the Company aims to file these products across Canada and other key emerging markets in future. The facility is designed to cater to ~20% of the global volume demand for the products that are part of Eugia’s portfolio.

The manufacturing facility at Eugia comprises of the Oral solid dosage forms (Tablets & Capsules) and Injectables (Wet vials, dry vials & pre-filled syringes) and was inspected twice by the USFDA in FY2017-18. The facility has also been inspected by EMA in FY2017-18 and has been approved without any observations.

In FY2017-18, the Company filed 11 ANDAs with the USFDA and Exhibit batches for 25 products were completed.

In FY2018-19, it is estimated that Exhibit batches for 20-24 products will be completed and 15-18 ANDA’s will be filed in US market.

The Company has received its first ANDA approval (product name: Capecitabine) in the first quarter of FY2018-19.

According to IQVIA, global spending on cancer therapies and supportive care drugs now exceeds $133 billion. The U.S. is the biggest contributor to this trend with spends accounting for 46% of global spending. The global market for oncology therapeutic medicines is estimated to reach $200 billion by 2022, averaging 10—13% growth over the next five years, with the U.S. market reaching as much as $100 billion by 2022, averaging 12-15% growth. The global market size of the products under development is $ 45 billion.

Biologics

The Company started working on biosimilars a couple of years ago. In February 2017, Aurobindo acquired five molecules from TL Biopharmaceuticals. Your Company is currently developing nine more products and the pipeline spans across oncology, rheumatology and ophthalmology. The global market size of these products is around $ 45 billion.

To build this segment into an important future growth driver, your Company has invested in a state-of-the-art manufacturing facility with 1,40,000 square feet comprising of mammalian cell culture, microbial fermentation, quality control, fill and finish sections.

This facility has been commissioned and the exhibit batches will be completed in FY2018-19. With a total R&D employee strength of 75 people for biologics division, the Company will start Phase I clinical trials for its lead molecule i.e. Bevacizumab - a biosimilar to Avastin® in FY2018-19. Apart from Bevacizumab, the Company has also started doing animal toxic studies on an ophthalmic product which will be ready for Phase III trials in FY2019-20.

Peptides

Peptides are short chains of amino acid monomers linked by peptide (amide) bonds. The Company has invested in developing a state-of-the-art peptide development laboratory and four manufacturing suites for its commercial production. Till date,

Auro Peptides have developed the process for manufacturing 14 peptides; and two more molecules are in the process of development.

The unit has already filed four DMFs with US regulatory authorities and is planning to file an additional 3 DMFs in FY2018-19. Presently, Auro Peptides is supplying material for formulation development and the execution of its validation batches. These peptide APIs are being utilized for the development of three liposomal injectable products and seven injectable products. The addressable market size of these products is about $ 12.2 billion

Biocatalysis

Aurobindo invents, identifies and produces biocatalysts through fermentation processes which are subsequently developed into scalable biocatalytic solutions. This reduces the usage of chemicals within the processes during pharmaceutical manufacturing, saving costs whilst benefiting from this green technology. The high technical base and core competence of Aurobindo has made it easier to initiate the entry in to enzyme production.

The Company has a highly qualified dedicated team of over 30 professionals, with an on-going technology development program which has built a library of over 7,000 biocatalysts across 15 classes of enzymes. Supplementing the initial R&D molecular and microbiology facilities, your Company has invested in state-of-the-art fermentation development equipment which encompasses twelve 20 litre automated fermentation vessels, with associated downstream processing including: homogenization, tangential flow filtration and resin purification. A number of biocatalytic projects and processes have been identified utilizing internally developed technology, and these are now progressing through process validation. This development work is supported by the 1KL pilot facility leading to the 10KL enzyme production facility.

Penems

Penem products are manufactured at the Company’s Auronext manufacturing facility at Bhiwadi, Rajasthan. The total capacity of the unit is ~ 1.0 million vials per month. The facility was re-inspected in February 2018 and received Establishment Inspection Report (EIR).

The Company has filed two ANDAs with USFDA and received approvals for both the products. The approval for Meropenem was received in March 2017 and the same was launched in US in April 2017. In the month of June 2018, an approval was received for Ertapenem injection and is in the process of launching in US. The market size of these products put together is around $ 480 million for the 12 months ending 31 March 2018. In Europe, the Company already launched Meropenem injection (with a market size which is over $ 200 million) and expects to launch Ertapenem in FY2018-19

Dermatology

Topicals

The Company has currently identified 38 products for development and started working on 23 products. The market size of these products is $ 5 billion.

The identified products have presence across various dosages including Ointment (7 nos), Cream (14 nos), Gel (12 nos) and Solution (5 nos) in the pipeline. Of the 38 products under development, around 24 products need clinical trials or BE studies which are planned to kick-start in Jan 2019.

In FY2017-18, the Company has produced exhibit batches for two products and is planning to execute exhibit batches for another 17 products in FY2018-19. APL, North Carolina site, is expected to be ready for manufacturing these products in August 2018. The Company filed the first ANDA in the first quarter of FY2018-19; and is planning to file another five ANDAs by the end of this fiscal.

Transdermal

Currently, the Company’s pipeline includes five patches under development. The addressable global market size of these products is around $ 2.8 billion. The clinical studies for these products had started in June 2018 and the first ANDA for patches will be filed in November 2019. APL, North Carolina site is planned for manufacturing these products; and the capacity will be ready by October 2018.

Respiratory

Inhalers

Your Company has been working towards creating a diverse portfolio of products with different drug delivery systems. With the respiratory portfolio, the Company now has six inhaler products under development; of which four products are likely to come up for exhibit batches during FY2018-19. The market size of these products under development is $ 7.5 billion.

The pilot pharmacokinetics analysis will start during April 2019 for one of the key products; and the Company expects to file its first ANDA during the first quarter of 2020. These products will be manufactured from APL, North Carolina, which will be commissioned in October 2018 for exhibit batch production. This facility will be equipped with a capacity to handle 10 to 15 million units with eight head filling machines and a 500L vessel.

Nasals

The Company has a strong pipeline of nasals with five products under development, of which two products already had exhibit batches in FY 18; and another two products are expected to have exhibit batches during FY2018-19. The market size of these products is $ 0.5 billion. The Company expects to file two ANDAs in FY2018-19 and the remaining will be filed in FY2019-20. These products are manufactured in Unit X; and the unit has a current monthly capacity to produce 1.4 million units.

Depot Injections

Your Company is currently developing four depot injections, which have a combined addressable market size of $ 3.6 billion. These products are ready for scaling-up and waiting for manufacturing capabilities to be commissioned.

Vaccines

The need for improved public health and medicines to protect infants is fast becoming a global priority. In view of this reality, your Company was focused on development of the pneumococcal conjugate vaccine (PCV), and the development was completed in FY2017-18. The global market size of the product is $ 6 billion.

The Company has received the approval to conduct Phase I clinical trials from the Drug Controller General of India (DCGI) in April 2018; and has initiated the trials in May 2018 and completed the same in June 2018. The Company will be submitting the report to DGCI by August 2018 and Phase 2 clinical trials are expected to commence in the third quarter of FY2018-19.

All the clinical trials are expected to be completed by 2020; and the Company expects to be ready for taking part in the upcoming government tender during 2021. Your Company is setting up a manufacturing facility in Hyderabad with an annual capacity of 100 million doses.

ENVIRONMENT, HEALTH & SAFETY

Your Company’s EHS imperatives are part of its broader sustainability journey. These initiatives focus on reducing the environment footprint, help enhance wellbeing of employees and set high safety standards for employees, contractors and visitors. While several steps have been taken to enhance these standards and raise awareness across the organization, Team Aurobindo believes that it is an area with no finish line; and more needs to be done to remain ahead of the curve in this dynamic industry.

Few initiatives taken during the year comprise of Environment

In FY2017-18, the Company continued to ensure that environmental norms were abided by all its API and Formulation units. API manufacturing units in Telangana state demonstrated compliance to Zero Liquid Discharge norms.

The Formulations Units and other API units have conformed to the regulations for disposal of wastewater to Common Effluent Treatment Plants (CETPs) or marine discharge. New initiatives for treatment of wastewater using advanced technologies, viz., membrane bio-reactors, supplementing the infrastructure required in line with expansion projects have been started for some of the API manufacturing facilities.

Standardized practices for disposal of organic wastes to cement units for reuse as auxiliary fuel in cement kilns continues. While inorganic and miscellaneous solid wastes are being disposed to treatment, storage and disposal facilities (TSDF). New initiatives for additional control measures on fugitive emissions at waste treatment facilities at some of the API initiatives like providing hoods on waste water storage tanks, arrangement of additional scrubbers, among others have been started. The API units are equipped with monitoring instruments for continuous assessments of fugitive emissions in the premises.

Vermi-composting of garden and kitchen waste was attempted in one of the API manufacturing units on a pilot basis that proved to be highly successful. This initiative will be taken forward to other units in the future.

The Company has installed, online continuous emissions monitoring systems across manufacturing units. These are connected to the Central and concerned State Pollution Control Boards as per norms. Public consultation process for expansion of Aurobindo Unit XI is completed and is gearing up for the submission of Environmental Impact Assessment (EIA) report to the Ministry of Environments and Forests & Climate Change (MoEF & CC). Environment assessments across API and DP formulations units by Aurobindo’s customers in FY2017-18 concluded on a highly satisfactory note.

Safety

To maintain a safe working environment, safety pep-talks were initiated before every shift, on hazards in activities and necessary precautions to be taken in case of a mishap. As an important process inclusion, hazard and operability study (HAZOP) and risk analysis were conducted for all new products.

Historical events including injuries and other incidents were analysed and actions have been initiated to address the common root causes. The Company has created a training matrix for contract workers, based on their initiatives and special training modules have been implemented for production heads for managing and leading the safety agenda.

HUMAN RESOURCES

Your Company’s ability to respond to new challenges and opportunities depends on effective leadership, knowledge, expertise and new ideas shared at all levels. Therefore, Aurobindo recognizes human capital as the most important element to drive its progress. Hence, your Company has devised initiatives that enable training and development of employees across levels and enables their professional and personal growth.

Your Company’s human resources management framework is aligned to the business goals and drives key decisions on business processes and introduction of new technology. The HR interventions of the Company focuses on skilling the existing workforce and empowering them to step beyond their defined roles. Emphasis is laid on ensuring that every colleague is well informed with the Standard Operating Procedures on quality and compliance. Shop floor executives are continuously trained and groomed in the area of compliance, supported adequately to raise their competence, confidence and anytime readiness.

Employees at the shop floor undergo classroom training, on-the-job training and assessments. Over 8,000 person days of training was conducted for them during the year under review.

Nalanda, the online learning program, helps employees to choose from a range of strategic leadership courses in partnership with CROSS knowledge. Launched with a vision towards business excellence through leadership and functional competency development, 271 employees were trained under the program in FY2017-18. Nalanda training is exclusively for junior, middle and senior management.

Employees covered under Technical, Safety & Quality Trainings in addition to mandatory cGMP Trainings (FML API) is above 1,000 during the year. Several employees underwent multiple, need-based programs. Aurobindo Training and Development Centre (ATDC) developed 464 talented professionals, who can be leaders of tomorrow. During the year, your company recruited 4,135 employees.

Established in 2014 with a vision to impart Technical and Application skills to the future workforce of Aurobindo, ATDC (Aurobindo Training & Development Centre) has since been making steadfast contribution in Talent space to compliment the steady yet rapid growth our APL has achieved. It is a great privilege to report our ATDC achieved major milestone with placement of 1004 trained candidates since inception and enculturated future ready workforce into Aurobindo ranks.

AWARDS

- Received “Pharmexcil Outstanding Exports Award 201617” in the category of highest Number of ANDAs filed in the calendar year 2016.

- Bagged two Awards in “Excellence in Skill Development” & “Excellence in Pharma Digital Innovation” for the 2nd time in row at the India Pharma Awards 2017 in South-Asia’s largest pharmaceutical event- CPhI& PMEC India.

- Have won the “IDMA MARGI MEMORIAL BEST PROCESS PATENTS AWARD 2016-17” (for 2 Indian & 1 US Granted patents; supported by several other patent applications filed during the said year) awarded by Indian Drug Manufacturers’ Association.

- Our HR team received certificate of appreciation from BML Munjal Awards 2018 for attaining Expert Panel evaluation level in the category of “Learning and Development”.

- Received “2017 Business Award” from The East Windsor Township for best community enhancement contributions in East Windsor Township.

- Aurobindo won “Company of the Year, Asia Pacific” award at Global Generics and Biosimilars Awards 2017.

- Aurobindo’s Unit 15 at Parawada - Vizag awarded by the State Government of Andhra Pradesh for best management award in manufacturing sector. (in Mid-Size Industries category)

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statement of subsidiary companies/associate companies/joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

During the year, the following are the changes in the subsidiaries of the Company:

Ceased as subsidiaries

Raidurgam Developers Limited (formerly known as Aurobindo Antibiotics Limited) now became a joint venture

Aurobindo Pharma USA LLC (Liquidated w.e.f. 31.03.2018)

Aurobindo Pharma (Portugal) Unipessoal Limitada (Merged with Generis Farmaceuita SA effective 1st April, 2018)

Aurovitas, Unipessoal LDA

(Merged with Generis Farmaceuita SA effective 1st April, 2018)

Aurobindo Ilac Sanayi Ve Ticaret Limited Sirketi (Liquidated on 31st October, 2017)

Mer Medicamentos, Lda

(Merged with Generis Farmaceuita SA effective 1st April, 2018) Farma APS (Liquidated w.e.f 25.01.2018)

Generis Mozambique (Liquidated w.e.f 19.03.2018)

Incorporation of New subsidiaries

Aurobindo Pharma Saudi Arabia Limited, Saudi Arabia

AuroLogistics LLC, USA

Auro Pharma India Pvt.Ltd, India

Aurovitas Pharma Ceska Republica s.r.o, Check Slovakia

Acquisition

Agile Pharma BV, a step down subsidiary of the Company acquired Generis Farmaceutica SA and its 4 subsidiaries viz. Mer Medicamentos, Portugal, Generis Phar, Portugal, Pharma APS, Portugal and Generis Mozambique, Portugal. Post acquisition of Generis Farmaceutica SA, Portugal, as part of restructuring of operations in Portugal, Aurobindo Pharma (Portugal) Unipessoal Limitada and Aurovitas, Unipessoal LDA, Mer Medicamentos, Lda, Farma APS and Generis Mozambique have been either merged with Generis Farmaceutica SA or liquidated.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com, in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Company’s subsidiaries will be provided to the Members, on request.

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees and whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report their concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases. The Whistle Blower Policy is available on the Company’s website: http://www.aurobindo.com/about-us/corporategovernance.

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has constituted an internal complaints committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention & prohibition of sexual harassment at workplace. The policy provides for protection against sexual harassment of women at workplace and for the prevention and redressal of such complaints. During the year, no complaints have been received.

RATING

India Ratings and Research (Ind-Ra) has affirmed Aurobindo’s current long-term rating at ‘IND AA ’ with outlook positive.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled and a tentative calendar of the meetings is finalized in consultation with the Directors to facilitate them to plan their schedule. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, five Board Meetings and six Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DIRECTORS

As per the provisions of the Companies Act, 2013, Mr. K.Nithyananda Reddy and Mr.Madan Mohan Reddy will retire at the ensuing annual general meeting and being eligible, seek reappointment. The Board of Directors recommends their re-appointment.

The re-appointment of Mr. K.Nithyananda Reddy Dr.M.Sivakumaran and Mr.M. Madan Mohan Reddy as Wholetime Directors and Mr. N.Govindarajan as Managing Director with effect from June 1, 2018 are being proposed at the ensuing Annual General Meeting. The Board of directors recommends their re-appointments.

The appointment of Mrs. Savita Mahajan as an Independent Director of the Company for a period of two years up to December 15, 2019 is being proposed at the ensuing Annual General Meeting. The Board of Directors recommends her appointment.

Mr.Rangaswamy Rathakrishnan Iyer resigned as Independent Director of the Company with effect from December 9, 2017. The Board has placed on record its sincere appreciation and gratitude for contributions made by him during his tenure as Independent Director of the Company.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

Board of Directors appointed Mrs.Savita Mahajan as an Independent Director of the Company for a period of two years up to December 15, 2019.

Mr.Rangaswamy Rathakrishnan Iyer resigned as Independent Director of the Company with effect from December 9, 2017 due to pre-occupation and time constraints.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. i n the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company’s website: http://www.aurobindo.com/about-us/ corporategovernance.

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the Directors and the Board as a whole was conducted against the parameters laid down by the Nomination and Remuneration / Compensation Committee including performance and working of its Committees.

POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION

The policy of the Company on directors’ appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company’s website: http://www.aurobindo.com/ about-us/corporategovernance.

TRANSFER TO RESERVE

The Company has not transferred any amount to general reserve out of the profits of the year.

LOANS, GUARANTEES OR INVESTMENTS

Loans, guarantees or investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of subsection (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return prepared in Form MGT-9 is in Annexure-3 to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-4 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz. Mr. M. Sitarama Murty, Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. Mr. M. Sitarama Murty is the Chairman of the Committee. The Company has established a separate department to monitor the enterprise risk and for its management. The Committee had formulated a risk management policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. Risk management policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board.

The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on regular basis at the time of review of quarterly financial results of the Company. A report on the risks and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS’ REPORT

The statutory auditors’ report is annexed to this report. The notes on financial statements referred to in the Auditors’ Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 30th Annual General Meeting (AGM) held on August 31, 2017, had appointed M/s. B S R & Associates LLP, Chartered Accountants as Statutory Auditors of the Company for a period of 5 years i.e. up to the conclusion of the 35th AGM to be held in the year 2022.

INTERNAL AUDITORS

The internal audit of the Company was conducted by in-house team of professionals up to December, 2017. Form January, 2018

Ernst & Young LLP has been appointed as internal auditors of the Company and they submit their report to the Audit Committee.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014, the Company is maintaining the cost records as its business is covered under the regulated sector viz. drugs and pharmaceuticals. Audit of the Company’s cost records is not applicable since the Company’s revenues from exports, in foreign exchange, exceed 75% of its total revenues.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework institutionalized in Aurobindo last year has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance related controls and also Information Technology (IT) controls, comprising IT general controls (ITGC) and application level controls. The ITGC would include controls over IT environment, computer operations, access to programs and data, program development and program changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorization levels.

In order to further strengthen the existing IFC framework and to support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined & identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The internal auditors conduct ‘ Process & control review’ on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

- Establishment of policies & procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

- Physical existence and ownership of assets at a specified date;

- Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

- Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate amounts;

- Preparation of financial information as per the timelines defined by the relevant authorities.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr.A.Mohan Rami Reddy, a Company Secretary in Practice to undertake the secretarial audit of the Company for the financial year 2017-18. The Secretarial Audit Report issued in form MR-3 is in Annexure-5 to this Report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.

CORPORATE SOCIAL RESPONSIBILITY

Your Company is striving to help create a healthy, improved life of people in its neighborhood. Broadly, the initiatives are to execute on the stated CSR policy of ‘give back to the society’ and make an impact on the lives of people.

The activities undertaken in FY2017-18 can be summarized under the following heads:

- Promoting education;

- Supporting preventive health care;

- Eradicating hunger, poverty & malnutrition;

- Making available safe drinking water;

- Encouraging environment sustainability;

- Sustaining ecological balance & conservation of natural resources;

- Developing rural sports; and

- Setting up old age homes, etc

A detailed account of the CSR activities forms part of the annual report on CSR placed on the Company’s website at: http://www. aurobindo.com/social-responsibility/csr-activities. Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is in Annexure-6 to this Report.

STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

The statement of particulars of appointment and remuneration of managerial personnel as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-7 to this Report.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2018 to the date of signing of the Board’s Report. There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future. There is no change in the nature of the business of the Company during the year.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report.

The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V (E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company’s performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends which remain unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government.

Further, Section 124 of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘the Rules’) mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund (IEPF), also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF. Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares have been transferred to IEPF account on due dates.

SHARE CAPITAL

The paid up share capital of the Company increased by Rs.25,200 during the year due to the allotment of 25,200 equity shares of Rs.1 each on exercise of stock options under the Employee Stock Option Plan-2006 (ESOP 2006) of the Company. The paid up share capital of the Company as on March 31, 2018 was Rs.585,907,609 divided into 585,907,609 equity shares of Rs.1 each.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme- 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries. Details of the stock options as on March 31, 2018 is provided on the Company’s website: http://www.aurobindo.com/about-us/ corporategovernance. The details of the employee stock options also form part of the notes to accounts of the financial statements in this Annual Report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a separate section in this Annual Report.

ACKNOWLEDGEMENTS

Your Directors are grateful to for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and are thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For and on behalf of the Board

Place: Hyderabad K. Ragunathan

Date: 28 May 2018 Chairman

DIN: 00523576

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Mar 31, 2017

The Directors are pleased to present the 30th Annual Report of the Company together with the audited accounts for the financial year ended March 31, 2017.

FINANCIAL HIGHLIGHTS

Standalone financials Rs. Million

	2016-17	2015-16
Revenue from operations (inclusive of excise duty)	97,812.1	93,227.6
Profit before depreciation, interest, tax and exceptional items	25,099.0	24,761.1
Depreciation	2,861.7	2,630.0
Finance cost	451.6	652.7
Profit before tax	21,785.7	21,478.4
Provision for tax	4,718.1	5,211.4
Net profit after tax	17,067.6	16,267.0
Other comprehensive income/(expense)	(56.1)	(14.4)
Total comprehensive income for the period	17,011.5	16,252.6

DIVIDEND

Your Directors have approved a second interim dividend of 125% i.e. Rs.1.25 per equity share and together with the first interim dividend of 125% i.e. Rs.1.25 per equity share, the total dividend for the financial year 2016-17 comes to 250% i.e. Rs.2.50 per share on the equity share of Rs.1 against 250% i.e. Rs.2.50 per share of Rs.1 paid in the previous year.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top five hundred listed entities based on market capitalization are required to formulate a Dividend Distribution Policy. The Board has approved and adopted the Dividend Distribution Policy and the same is available on the Company''s website viz. www.aurobindo.com.

PERFORMANCE REVIEW

Your Company delivered yet another year of consistent and profitable growth, continued to build a robust pipeline of products, stepped up market development, significantly expanded manufacturing capacities, invested to further improve reliability of deliverables and enhanced the level of execution across the Company. There was a sustained focus on research and development, employee engagement, competency enhancement and relentless pursuit of excellence in quality.

The team at Aurobindo demonstrated resilience despite several challenges, especially in dealing with competitive pricing pressures in the market as well as hardening of the rupee in the latter half of the financial year. At the market place, the momentum was maintained by improving the product mix with high value, differentiated oral solid and injectable products.

Your Company was quick to respond to the challenges of the market environment by executing improvements in operations. There was considerable work done to scale up volumes, improve efficiencies, optimize costs and fine-tune supply chain and logistics in order to expand the bottom line. Productivity enhancements and process improvements were proactively undertaken to benchmark the manufacturing systems with the best in the industry.

The standalone revenue at Rs.97,812.1 million increased by 4.9% in 2016-17. Operating profit including forex and other income was higher by 1.4% over the previous year. Profit before tax was higher by 1.4% at Rs.21,785.7 million over the previous year. Net profit for the year 2016-17 at Rs.17,067.6 million was an increase of 4.9% compared to 2015-16. The diluted earnings per share for 2016-17 is Rs.29.16 as compared to Rs.27.84 in 2015-16.

At the consolidated level, your Company delivered solid financial results fuelled by strong performance in US and European markets. The revenues increased to Rs.150,898.6 million, a growth of 8.1% over the previous year with an EBITDA margin of 22.8%. EBITDA for the year was Rs.34,342.8 million as against Rs.31,881.2 million in the previous year and the diluted earnings per share grew by 13.5% to Rs.39.33.

US formulations business contributed 57% to the overall formulations revenue during the year, as against 55% in the previous year. The revenue generated from the US business grew by 12.3% at Rs.68,272.3 million in 2016-17 over the previous year sales of Rs.60,785.5 million.

Your Company maintained its momentum of growth with the launch of several new oral and injectable products in the US, led by final approvals for 61 products from the US FDA during the financial year. Aurobindo continues to witness strong pace of approvals from US FDA, which helped to maintain growth momentum in sales and improve market presence. In keeping with the past track record, speed to the market and effectiveness in execution has remained the hallmark of Aurobindo''s performance.

As a result of customer centric approach and relationship oriented marketing, your Company has become the 6th ranked Rx supplier of prescriptions dispensed (as per IMS National Prescription Audit, April 2017). In the highly competitive US market, your Company has diversified product basket in oral solids including controlled substances and injectables.

A few key developments in your Company in 2016-17 as regards product portfolio expansion were as follows:

- Received final approvals for 61 ANDAs as compared to 49, in 2015-16;

- Obtained US FDA approval for the Company''s first penem ANDA for an injectable product;

- Filed 31 ANDAs as compared to 22, in 2015-16;

- Commenced filing from new facility, Unit X. As on March 31, 2017, the Company has filed 4 ANDAs from the facility;

- Started filing for oncology products with US FDA through the Company''s joint venture entity, Eugia; Filed 2 ANDAs;

- Launched 35 products in the US market during the year under review;

- Capacity utilization was increased at every production facility to meet the growing portfolio.

As on March 31, 2017, your Company has cumulatively filed 429 ANDAs, out of which 276 have final approval and 38 have tentative approval, including 10 ANDAs which are tentatively approved under PEPFAR and the balance 115 ANDAs are under review.

Your Company clocked a growth of 4.7% in Europe to reach a revenue of ''32,771.5 million in 2016-17 as against sales of ''31,304.3 million in the previous year. The focus continues to achieve improved synergies between the acquired businesses at Western Europe with the Company''s existing product pipeline. In all the addressable markets, there was volume growth, improved market presence as well as enhanced profitability, supplemented by increased manufacturing in India for larger number of products. This exercise of transferring the manufacturing base to India has streamlined and integrated the operations, optimized costs, improved the information flow, facilitated decision making and enabled better supervision and control. All of these initiatives have translated into increase in profitability.

In March 2017, formulations manufacturing facility

Unit XV at Parawada in Visakhapatnam was commissioned. The unit is primarily for supplies to European markets, and has been audited & approved by European authorities. In order to meet the growing demand, the volumes are being ramped up.

During the year, your Company further strengthened its branded products portfolio and leveraged its position as a key player in select European markets through couple of acquisitions. Arrow Generiques S.A.S., the French subsidiary of Aurobindo acquired the rights, title and interest in products Calcium and Calcium Vitamin D3, including the use of the Orocal trademark for the France market.

Agile Pharma B.V., The Netherlands, the wholly owned step-down subsidiary of your Company acquired Generis Farmaceutica S.A., which is engaged in the manufacture and sale of pharmaceutical products in Portugal. The acquisition includes the manufacturing facility in Amadora, Portugal, which has a capacity to manufacture 1.2 billion tablets/capsules/sachets annually.

Generis Farmaceutica S.A. is a generic pharmaceutical firm that focuses on both the retail and hospital segments apart from exports. Generis has a wide portfolio of products with major share in the therapeutic areas of cardiovascular (CVS), Central Nervous System (CNS), anti-infectives and genitourinary system ailments. Generis is the most sold pharmaceutical brand in Portugal, and is the 2nd largest generic group in Portugal.

The acquisition establishes Aurobindo as the leading generics group in Portugal. Synergies are expected from Aurobindo''s vertical integration and pipeline breadth, improvement in Amadora plant capacity utilization by servicing both local and European markets, and operational advantages.

The acquisition will catapult your Company to the leadership position in the Portuguese generic pharma market.

Sales of formulations to the emerging markets such as Brazil, Ukraine, Mexico and MENA (Middle East and North Africa) as well as South Africa grew by 17% to Rs.7,556.3 million against Rs.6,461.0 million reported in 2015-16. This segment remains a key market for Aurobindo and renewed efforts are made to position your Company''s products as one of the preferred suppliers in the existing and newer geographies.

ARV formulations business clocked a revenue Rs.11,854.1 million and during the year , your Company received US FDA approval for a valuable product - considered as a first line for treatment for HIV - under the PEPFAR program, and your Company has also filed an ANDA related to a triple combination product with the FDA.

Overall, formulations business constituted 79.8% of the consolidated revenue, while active pharmaceutical ingredients (API) accounted for the balance 20.2%. During the financial year, sale of formulations at Rs.120,454.2 million grew by 8.9% across all geographies in comparison to the previous year.

Revenue from API was Rs.30,420.6 million during the year under review, a growth of 5.5%. This growth in revenue of high value APIs has been achieved after meeting the very large in-house demand for manufacture of formulations. In line with anticipated further increase in formulations business, the in-house capacity for API has been further raised, even as your Company has contracted additional, newer, alternate sources for APIs.

AuroHealth, a subsidiary of your Company, which manufactures and markets pharma OTC products in the US, continued to gain penetration in to several key national retailers as well as select regional accounts. This business gained traction during the year and as at end of March 2017, AuroHealth was shipping to 24 customers with a commercialized basket of 56 products.

The dietary supplements business done by Natrol, the nutritional supplementary maker that Aurobindo acquired in 2014, was in line with the expectations, even as work continues to enhance the product pipeline. Natrol continues to be amongst the top 20 branded dietary supplement companies in the US. Existing products gained market share, while newer products are being launched. The revenues and bottom line expanded as planned and your Company sees further headroom for growth.

OUTLOOK

The Company''s endeavor has been to invest in reliability; ensure patient safety through high-end quality of products and processes; develop alternate API and excipient sources to deliver larger volumes, in line with customer expectations on-time-in-full; possess high value, differentiated portfolio of complex molecules; build state-of-the-art manufacturing facilities that meet compliance standards; ensure safe working environment to protect the health of the employees; minimize waste and maximize recycling of materials; reduce the risk in operations; and be a preferred partner to all the stakeholders. In effect, strive for execution excellence and be a responsible corporate citizen.

Aurobindo has made significant progress in all these areas, but the team works with the belief that there is room for improvement. Operational excellence is often reviewed closely to further improve productivity, become cost effective and be reliable in every transaction.

The market environment is changing rapidly, with newer challenges and newer opportunities. Your Company has been conscious to work ahead of time and has invested in several technologies and platforms such as biotechnology, oncology, hormones, steroids, biocatalysts, peptides, vaccines, penems, depot injections, dermatology, inhalers, nasal, patches and films to sustain the growth.

Aurobindo is striving to stay ahead of the curve. A large portfolio is being built of differentiated products which would act as a moat against competitive pressures; new manufacturing facilities are under construction to cater to the growing portfolio; several of the newer technologies would help enhance margins; process improvements and better logistics management are expected to strengthen competitiveness.

Your Company''s product portfolio and pipeline for the US market have significant potential for sustainable volume growth. This is a quality conscious, knowledge driven market and your

Company is far better positioned with offers in several therapeutic segments.

Pricing pressures in US markets are expected to stay and there is the risk of the ability to maintain current margins. Price sensitivities will test all the players in a crowded market where price tends to sag while volume business gets done.

This threat does not affect Aurobindo significantly, because of its large portfolio of products, control over raw material sourcing and lower product concentration. The Company is a dominant player in the active ingredients business and has been able to control its quality, improve on timelines, be competitive on its costs and has the ability to deliver at short notice. This is a unique advantage that Aurobindo enjoys over competing manufacturers across the world.

Competitive pressures and resultant price erosion in US markets has galvanized your Company to focus on the organizational strength, leverage the full capabilities and competencies of the cadre of dedicated and highly experienced professionals. Your Company will continue to work to protect the revenues and bottom line, to turn challenges and opportunities into successes.

Research and development (R&D) activity being undertaken is focused on difficult to manufacture, differentiated products, with possible low competitive pressure. Work is on-going in differentiated molecules, both for oral and injectable products.

For instance, your Company successfully developed and filed 4 penems for the US market and received approval for one product, an injection drug, at the end of the financial year. This product was successfully launched in April 2017. Penems are difficult to develop products. The development and filing is in-line with the strategy of moving towards complex/specialty products.

The recent acquisition of 5 biosimilar molecules is in furtherance of the same strategy. These are complex biosimilars, and the plans are to take a lead molecule from this transaction for clinical trials in 2017. This is an anti-antiogenesis drug used in treatment of multiple-cancers including metastatic colon or rectal cancer, non-squamous and non-small cell lung cancers. Apart from these molecules, your Company is working on development of biosimilars in therapeutic segments such as oncology, auto immune disorders and ophthalmology.

In keeping with the need to manufacture a growing product pipeline, your Company, in addition to commissioning the formulations manufacturing facility at Unit XV referred earlier, has initiated significant improvements in capacities to boost volumes, as given below:

- Unit X: Your Company is building a US FDA compliant oral manufacturing facility at Naidupet, Andhra Pradesh, which will be commissioned in 2017-18. It is presently at project stage, where validation batches are being taken and is being got ready for regulatory inspection;

- Unit XVI: Your Company is building another US FDA compliant Betalactum injectables manufacturing facility at Jedcherla, near Hyderabad. It is planned to get the facility commissioned in 2017-18;

- Your Company is in the processes of tripling the capacity at AuroLife manufacturing facility, which will significantly boost volumes for the US market.

In order to sustain future growth and spread the geographical risk, Aurobindo has been steadily expanding its European footprint since 2006, via acquisitions across several key markets and building a diversified product basket. Most notably, in 2014 the acquisition of Actavis''s commercial operations in seven Western European countries added traction to the Company''s presence in these developed markets. The acquisition of Generis, referred to earlier, builds upon an already successful growth strategy.

Members will recall, Arrow Generiques S.A.S., the French subsidiary of Aurobindo acquired select commercial products in Calcium and Calcium Vitamin D3, including the use of the Orocal trademark. This acquisition enables Arrow Generiques to continue to increase its branded products portfolio and leverage its position as a key player in the market, with focus on selling generics in the retail and hospital markets in France. The Company is well balanced between generics/branded products/biosimilars in the retail and hospital markets. A dedicated Business Unit with sales and marketing team has been set up specifically to enhance this business.

Arrow Generiques has continued developing the brand awareness among prescribers through promotion of mature products and launch of specialties for patients care. The present arrangement will boost the position of Arrow Generiques and open new opportunities for the future.

Aurobindo is committed to the larger cause of bringing affordable HIV drugs to millions of patients. Today, in addition to its existing powerful portfolio of products, your Company is bringing a one-of-its-kind generic version of a valuable drug, as also developing a fixed dose combination drug, to help achieve the UNAIDS 90-90-90 goals and an AIDS-free generation. The UNAIDS 90-90-90 goal is an ambitious treatment target aimed at goals briefly described below:

- By 2020, 90% of all people living with HIV will know their HIV status.

- By 2020, 90% of all people with diagnosed HIV infection will receive sustained antiretroviral therapy.

- By 2020, 90% of all people receiving antiretroviral therapy will have viral suppression.

Your Company is striving to help achieve these goals by proactively meeting the needs by offering products in several countries. The World Health Organization has recommended Aurobindo''s first-line therapy against HIV which is expected to see rapid growth in demand now that a cost-effective generic product is made available to the market. Your Company''s products have the potential to improve the lives of millions of patients.

RESEARCH & DEVELOPMENT

As in earlier years, your Company''s new product development initiatives ranged from conventional oral and injectable products to more complex and advanced dosages. The focus was to prioritize on the more complex and niche products including oral and sterile, peptide drug products. Filing ANDAs of such products involved innovative and development intensive work.

The oncology, dietary supplements and the OTC teams made significant contributions by developing new products. A notable activity during the financial year was the start of development work on 58 products in the oncology and 8 products in the hormone segments, both in injectable and solid dosage forms. Regulatory filings are expected to happen for all these products within the next 3 years. Out of these 66 products that have been shortlisted, two products were filed in the US in 2016-17 and the plans are to file, at least 15 products in 2017-18. Further, product development has been initiated in new segments such as dermatology and nasal drug delivery.

The continuous innovative and skilful work being done by the R&D team is seen in the number of approvals received over the years with revenue growth and productivity gains. The regulatory product approvals for the ANDAs filed in the past as well as increased contribution/ commercialization of the development projects already undertaken, demonstrate the intellectual property strengths of your Company.

To take-up development of additional oncology molecules, another Chemical Research Laboratory has been created with isolators and appropriate personal safety protection equipment. Process development of six anti-cancer APIs is underway to commercially validate those in the next financial year.

ENVIRONMENT, HEALTH & SAFETY

In keeping with the increasing manufacturing infrastructure and in order to continuously upgrade the environmental and safety standards, your Company took several initiatives, all of which were dedicated to ensure renewability of the natural resources, reduce environmental footprint, and ensure all our employees, contractors and visitors go home safely. This is an area of management where prevention and proactive supervision is embedded in the systems and processes.

While several steps have been taken to enhance these standards and raise awareness across the organization, Team Aurobindo believes that it is an area where there is no finishing line and shall remain a work-in-progress. A few of the actions taken during the year are listed below:

Environment

In 2015-16, the Company planned additional environmental management infrastructure, particularly in wastewater management. These have been installed in 2016-17, commissioned and are working satisfactorily. This year too, environment management across all facilities attained a steady state and have proved that the systems are consistent with environmental regulations and customer expectations.

During the year under review, there was a surge in environmental assessments of API and formulations units by experts from reputed multinational customers and your Company demonstrated its efforts on environmental management to the satisfaction of all stakeholders. This journey moves forward as part of continual improvement of the organization''s efforts.

In 2016-17, the biggest of Aurobindo''s API manufacturing units, Unit XI, got accredited to ISO 14001 international standard. A rigorous and continuous evaluation of environmental performance triggered a new initiative of comprehensive and robust rain water management across Aurobindo''s manufacturing units. As part of this drive, existing storm water drainage system/ network stands re-engineered.

As part of setting up of dedicated sewage treatment plants (STP), three sewage treatment plants were installed; one each in two of the manufacturing units and one in a formulation manufacturing unit. These STPs are in addition to the ones planned and installed in 2015-16.

During 2016-17, your Company was successful in obtaining consent for expansion of two API manufacturing units. Regulatory approvals and consents are in place for all the units while the Company has ensured compliance with all applicable environmental regulations.

Safety

Your Company engaged the employees and contractors to commit themselves for their own safety and those of their colleagues. In order to motivate the contractors, a reward and penalty system for contractors was initiated so as to complete their projects with zero safety incidents.

As an awareness initiative, a month long safety program was organized, where promotional activities were taken up to increase awareness of prevention of hazards, and unsafe actions among the work force. Nitrogen blanketing, prevention of static electricity, volatiles in work place and learning from past incidents were the themes of the safety month. The program has inspirational impact on the need for employees to align with the best interests of each other.

Training remains a continual effort to create a culture of safety. Formal safety training inputs were provided, accounting for 0.54% of total man-hours of each employee. Shift pep talks are organized in API units to communicate the hazards and precautions that need to be taken in the operations planned for each shift.

All new processes and changes to existing processes are reviewed by the safety team and tests are conducted to ensure that safety issues in scale-up are identified and addressed. HAZOP studies have been completed for 58 processes during the year and risk assessments are completed for 47 activities.

Over and above the routine up gradations, your Company installed earth interlock and monitoring systems. A new technology fire fighting system with aerosol based extinguishers was installed to raise the in-house capability.

HUMAN RESOURCES

Aurobindo has aligned its human resources learning and development to the needs of a growing and fast track organization. Year-on-year as the organization catapults ahead to meet its newest strategies and challenges, the immediate impact is felt on its processes, technology and most importantly its people. The very same people have to now perform with a certain sense of urgency, do more with less, be assertive yet be compliant and feel the heat of increase in their span of control.

This presupposes skilling the existing manpower to perform at their optimum best. The shop floor resources are hence encouraged to stay focused on key development areas as they are the doers, and hence are required to maintain the necessary cGMP compliance levels. Shop floor executives are continuously trained and groomed in the area of compliance, supported adequately to raise their competence, confidence and anytime readiness.

Key employees at the shop floor undergo classroom training, on-the-job training and assessments. 5,968 mandays of training was conducted for them in 2016-17.

Customized programs such as Auro Disha, Naa Unnati specially designed for the block and area in-charges covering supervisory and managerial skills with emphasis on project implementations was organized. Such projects ranged from process improvements to cost efficiencies with the support of their managers. 1,560 mandays of training was conducted in 2016-17 for supervisory and managerial resources.

Mid-level managers were put through year-long management development programs to bullet proof them wherein they undergo and participate in 24 important competencies to raise them to be successful leaders. They are required to implement projects on cost improvements, customer service and process improvements. 120 participants are undergoing a full year of training in four batches. Each batch on an average has helped save significant amount of cost, where the savings are objectively accounted for, even as the managers are raising their expertise to their next level. Individual''s career plan is tailored and aligned with the organization''s strategic growth requirements.

A unique intervention has paved its way into the organization where 30 General Executive Trainees are being hired from premium colleges and are being groomed to grow into future leaders. A yearlong hand-holding process is organized to help them understand the complexities of the organization. They are put through classroom training, on-the-job training, projects, robust reviews and minimum of three rotations. Three batches have been hired into the system.

During the year, 27,637 employees have been covered in compliance, safety and behavioral training. Several employees underwent multiple, need based programs.

Aurobindo Training and Development Centre (ATDC) recruits, trains and helps absorb talented candidates. During the year, your Company recruited 257 employees (29 M. Pharmacy, 113 M.Sc., 55 B. Pharmacy degrees and 60 ITI/Diploma holders). During training, they are prepared both on theoretical and practical aspects to meet the requirements of quality control, quality assurance; regulatory affairs, analytical techniques, stability/ quality compliance, safety compliance and good documentation practices.

ITI/Diploma candidates are trained on production and packaging operations. Apart from imparting technical knowledge, ATDC plays a critical role in holistic learning which includes internalizing the corporate culture, work ethics and behavior attributes towards effective leadership development and progression and making a difference to the organization.

AWARDS

For its HR practices, your Company received recognition during the year, such as:

- Certificate of Honor in the category of Excellence in HR by CPhI India & UBM India for the initiatives taken for e-learning, skill development, HR automation, talent engagement, leadership competencies & its integration with HR sub-systems.

- Certificate of Appreciation in the 12th edition of BML Munjal Awards for Excellence in Learning & Development.

Your Company has received an award for Most Consistent IR (Investor Relations) Practice in Large Cap category for 2016-17 conducted by KPMG, BSE, Bloomberg and IR Society.

Aurobindo Pharma is a winner of the Clarivate Analytics India Innovation Awards 2016. Clarivate

Analytics - formerly the IP & Science division of Thomson Reuters -honors the top 50 most innovative companies in India according to patent-related metrics that get to the essence of what it means to be truly innovative.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014, a separate statement containing the salient features of the financial statement of subsidiary companies/associate companies/joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

During the year, the following companies were incorporated as step down subsidiaries of the Company:

a. Auro AR LLC;

b. Auro Pharma USA LLC;

c. Aurogen South Africa (Pty) Limited;

d. Auro Vaccine LLC, USA;

e. Aurovitas Pharma Polska, Poland.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in the Companies (Indian Accounting Standards) Rules, 2015 and as per the provisions of Companies Act, 2013. The Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com, in compliance with the provisions of Section 136 of the Companies Act, 2013. Audited financial statements of the Company''s subsidiaries will be provided to the Members, on request.

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(9) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees and whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report their concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases. The Whistle Blower Policy is available on the Company''s website: http://www. aurobindo.com/about-us/ corporate governance.

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has constituted an internal complaints committee in compliance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention & prohibition of sexual harassment at workplace. The policy provides for protection against sexual harassment of women at workplace and for the prevention and redressal of such complaints. During the year, no complaints have been received.

RATING

India Ratings and Research (Ind-Ra) has revised Aurobindo ''s outlook to Positive from Stable and affirmed its long-term rating of the Company at ''IND AA ''.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled and a tentative calendar of the meetings finalized in consultation with the Directors to facilitate them to plan their schedule. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, four Board Meetings and five Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DIRECTORS

As per the provisions of the Companies Act, 2013, Mr. P. Sarath Chandra Reddy and Dr. M. Sivakumaran will retire at the ensuing annual general meeting and being eligible, seek reappointment. The Board of Directors recommends their re-appointment.

The appointment of Mr. Rangaswamy Rathakrishnan Iyer as an Independent Director of the Company for a period of two years upto February 8, 2019 is being proposed at the ensuing Annual General Meeting. The Board of Directors recommends his appointment.

Dr. D. Rajagopala Reddy resigned as Independent Director of the Company with effect from February 10, 2017. The Board has placed on record its sincere appreciation and gratitude for contributions made by him during his tenure as Independent Director of the Company.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

The Members of the Company at their 29th Annual General Meeting held on August 24, 2016 have appointed Mr. P. Sarath Chandra Reddy as Whole-time Director for a period of three years with effect from June 1, 2016.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently.

Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company''s website: http:// www.aurobindo.com/about-us/corporate-governance.

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board including performance and working of its Committees.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The policy of the Company on directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company''s website: http://www.aurobindo.com/about-us/corporate-governance.

TRANSFER TO RESERVE

The Company has not transferred any amount to general reserve out of the profits of the year.

LOANS, GUARANTEES OR INVESTMENTS

Loans, guarantees or investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return prepared in Form MGT-9 is in Annexure-3 to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-4 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors viz.

Mr. M. Sitarama Murty, Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. Mr. M. Sitarama Murty is the Chairman of the Committee. The Company has established a separate department to monitor the enterprise risk and for its management.

The Committee had formulated a risk management policy for dealing with different kinds of risks which the Company faces in its day-to-day operations. Risk management policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on regular basis at the time of review of quarterly financial results of the Company. A report on the risk and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report. The notes on financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year, under review.

Pursuant to Section 139 (2) of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, the Company at its 27th Annual General Meeting (AGM) held on August 27, 2014, had appointed M/s. S.R.Batliboi & Associates LLP, Chartered Accountants as Statutory Auditors for a period of 3 years i.e. up to the conclusion of the 30th AGM to be held in the year 2017. The present term of M/s. S.R.Batliboi & Associates LLP, Statutory Auditors, would expire at the conclusion of the ensuing AGM.

The Board of Directors of the Company has proposed the appointment of M/s. B S R & Associates LLP, Chartered Accountants as the Statutory Auditors of the Company to hold office from the conclusion of 30th AGM until the conclusion of the 35th AGM.

The Company has received a letter from M/s. B S R & Associates LLP, Chartered Accountants confirming that they are eligible for appointment as Statutory Auditors of the Company under Section 139 of Companies Act, 2013 and meet the criteria for appointment as specified in Section 141 of the Companies Act, 2013.

INTERNAL AUDITORS

The internal audit of the Company was conducted by a professional firm of Chartered Accountants up to September 2016. From October 2016, internal audit is being conducted by an in-house team of professionals. The internal audit reports are being reviewed by the Audit Committee of the Company.

COST AUDIT

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014 and the Companies (Cost Records and Audit) Rules, 2014, the Company is maintaining the cost records as its business is covered under the regulated sector viz. drugs and pharmaceuticals. Audit of the Company''s cost records is not applicable since the Company''s revenues from exports, in foreign exchange, exceed 75% of its total revenues.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework institutionalized in Aurobindo last year has been evaluated in-depth for its adequacy and operating effectiveness, wherein the Company has covered financial reporting controls, operational controls, compliance related controls and also Information Technology (IT) controls, comprising IT general controls (ITGC) and application level controls. The ITGC would include controls over IT environment, computer operations, access to programs and data, program development and program changes. The application controls would include transaction processing controls in ERP Oracle system which supports accurate data input, data processing and data output, workflows, reviews and approvals as per the defined authorization levels.

In order to further strengthen the existing IFC framework and to support the growing business, the Company has redefined all the process level controls at activity level which has brought in more clarity and transparency in day-to-day processing of transactions and in addressing any related risks. All the controls so redefined & identified have been properly documented and tested with the help of an independent auditor to ensure their adequacy and effectiveness.

The internal auditors conduct '' Process & control review'' on a quarterly basis as per the defined scope and submit the audit findings along with management comments and action taken reports to Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

- Establishment of policies & procedures, assignment of responsibility, delegation of authority, segregation of duties to provide a basis for accountability and controls;

- Physical existence and ownership of assets at a specified date;

- Enabling proactive anti-fraud controls and a risk management framework to mitigate fraud risks to the Company;

- Recording of all transactions occurred during a specific period. Accounting of assets, liability, and revenue and expense components at appropriate amounts;

- Preparation of financial information as per the timelines defined by the relevant authorities.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. D.V. Rao & Associates, a firm of Company Secretaries in practice to undertake the secretarial audit of the Company for the financial year 2016-17. The Secretarial Audit Report issued in form MR-3 is in Annexure-5 to this Report.

There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.

CORPORATE SOCIAL RESPONSIBILITY

Your Company is striving to help create a healthy, improved life of people in its neighborhood. Broadly, the initiatives are to execute on the stated CSR policy of ''give back to the society'' and make an impact on the lives of people.

The activities undertaken in 2016-17 can be summarized under the following heads:

- Promoting education;

- Supporting preventive health care;

- Eradicating hunger, poverty & malnutrition;

- Making available safe drinking water;

- Encouraging environment sustainability;

- Sustaining ecological balance & conservation of natural resources;

- Developing rural sports; and

- Setting up old age homes, etc

A detailed account of the CSR activities forms part of the annual report on CSR placed on the Company''s website at: http://www.aurobindo.com/ social-responsibility/csr-activities. Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is in Annexure-6 to this Report.

STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

The statement of particulars of appointment and remuneration of managerial personnel as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-7 to this Report.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2017 to the date of signing of the Director''s Report. There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report.

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company''s performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends which remain unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government.

Section 124 of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (''the Rules'') mandates that companies shall apart from transfer of dividend that has remained unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund (IEPF), also transfer the corresponding shares with respect to the dividend, which has not been paid or claimed for seven consecutive years or more to IEPF. Accordingly, the dividends that remain unclaimed for seven years and also the corresponding shares would be transferred to IEPF account on due dates.

SHARE CAPITAL

The paid up share capital of the Company increased by Rs.712,823 during the year due to the allotment of 712,823 equity shares of Rs.1 each on exercise of stock options under the Employee Stock Option Plan-2006 (ESOP 2006) of the Company. The paid up share capital of the Company as on March 31, 2017 was 585,882,409 equity shares of Rs.1 each.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme-2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries. Details of the stock options as on March 31, 2017 is provided on the Company''s website: http://www.aurobindo.com/about-us/corporate-governance. The details of the employee stock options also form part of the notes to accounts of the financial statements in this Annual Report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is available as a seperate section in this Annual Report.

ACKNOWLEDGEMENTS

Your Directors are grateful to for the invaluable contribution made by the employees and are encouraged by the support of the customers, business associates, banks and government agencies. The Directors deeply appreciate their faith in the Company and thankful to them. The Board shall always strive to meet the expectations of all the stakeholders.

For and on behalf of the Board

K. Ragunathan

Hyderabad Chairman

June 20, 2017 DIN: 00523576

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Mar 31, 2016

Dear Members ,

The Directors are pleased to present the 29th Annual Report of the Company together with the audited accounts for the financial year ended March 31, 2016.

FINANCIAL RESULTS

Standalone financials Rs. Million

2015-16 2014-15

Gross Turnover 93,227.6 82,448.4

Profit before depreciation, interest, tax and exceptional items 26,323.6 23,176.4

Depreciation/amortization 2,630.0 2,451.5

Finance cost 652.7 565.8

Exchange difference adjusted to borrowing cost 1,640.4 755.6

Profit before tax 21,400.5 19,403.4

Provision for tax/deferred tax 5,203.8 4,240.0

Net Profit after tax 16,196.7 15,163.5

Balance brought forward from previous year 41,682.3 28,278.4

Balance available for appropriation 57,879.0 43,441.9

Appropriations

Dividend on equity shares: Interim 1,461.4 1,312.8

Final - -

Tax on dividend 297.5 250.4

Depreciation adjusted (as per Schedule II) - 196.4

Transferred to general reserve - -

Surplus carried to Balance Sheet 56,120.1 41,682.3

DIVIDEND

Your Directors have approved a fourth interim dividend of 70% i.e. Rs.0.70 per equity share and together with the first interim dividend of 50% i.e. Rs.0.50 per equity share, second interim dividend of 60% i.e. Rs.0.60 per equity share and third interim dividend of 70% i.e.Rs.0.70 per equity share, the total dividend for the financial year 2015-16 comes to 250% (Post 1:1 bonus issue) i.e. Rs.2.50 per share on the equity share of Rs.1 against 450% i.e. Rs.4.50 per share of Rs.1 paid in the previous year.

BONUS

As Members are aware, during the year, your Company allotted 291,982,275 equity shares of Rs.1 each to the shareholders of the Company as bonus shares in the ratio of 1:1.

PERFORMANCE REVIEW

Your Company had a healthy financial performance during the year contributed by a strong product portfolio of complex products and differentiated technology. There was a significant growth momentum in all markets with solid overall results. The focus was on execution of the strategies, improving the product mix and gaining presence in the markets. Your Company shall strive to sustain the performance with the continuation of approvals, expansion of manufacturing capacities and being in verticals that add value to Aurobindo and its stakeholders.

There was a robust growth in revenues, operating profit and net profit. Aurobindo achieved a 14.5% increase in standalone revenue in 2015-16 to Rs.93,495.0 million. At Rs.26,323.6 million, the operating profit including forex and other income exceeded the corresponding previous year by 13.6%.

Profit before tax for the year at standalone level was Rs.21,400.5 million, a growth of 10.3% over 2014-15 while the net profit at Rs.16,196.7 million is a growth of 6.8% over Rs.15,163.5 million reported in 2014-15. The diluted earnings per share is Rs.27.72 as compared to Rs.25.98 (adjusted for bonus shares issued in July 2015).

The rupee depreciated by 7% during the year which entailed a foreign exchange loss of Rs.1,640.4 million to your Company, due to restatement of the Company''s debt, most of which are dollar denominated.

At the consolidated level, the revenues increased to Rs.138,960.8 million, a growth of 14.6% over the previous year. EBITDA margin widened to 23.1% as compared to 21.2% in 2014-15. EBITDA for the year was Rs.32,055.8 million as against Rs.25,636.2 million in the previous year and the diluted earnings per share grew by 25.6% to Rs.33.92, reflecting robust execution, improved product mix, enhanced productivity and optimization of costs. The Company saw sustained growth in all markets, especially in the US, emerging markets and for its ARV/HIV product portfolio.

US formulation business contributed 55% to the overall formulation revenue during the year, as against 50.5% in the previous year. The revenue generated from the US business grew by 27.2% at Rs.61,439.9 million in 2015-16 over the previous year sales of Rs.48,317.0 million. The sales uptick gained traction with the launch of several new oral and injectable products in the US and the performance of the nutraceuticals business. Aurobindo received 49 final approvals from the US FDA during the financial year, which helped add to the momentum and market presence.

OTC products in the US continued to gain penetration into several key regional markets. The current portfolio consists of over 75 products and a few more are being developed which are expected to be commercialized in 2016-17.

Europe sales were at Rs.31,303.7 million in 2015-16 over the previous year sales of Rs.31,947 million. The focus during the year was on working towards synergies between the acquired businesses at Western Europe with the Company''s existing ground presence in several markets. The acquired business witnessed profitability during the year, contributed by business structures getting streamlined, integrated and optimized to improve information flow, decision making and control. The processes were simplified and made more efficient. These initiatives translate into better customer contact, add to cost effectiveness, create superior inventory management and drive profitability.

As part of further enhancing the European business with a focus on cost optimization, several products earmarked for Europe are being developed at the research centre at Hyderabad and a large manufacturing facility is being commissioned dedicated for supplies at Visakhapatnam. Shipments from this Unit XV facility would commence in 2016-17.

Formulations sales to the emerging markets such as Brazil, Ukraine, Mexico, and MENA (Middle East and North Africa) as well as South Africa and Canada grew by 21.5% to Rs.6,914.2 million during the year as compared to Rs.5,691.9 million reported in 2014-15. There has been a growth in ARV formulations revenues by 24.5% to Rs.11,998.8 million during the year, predominantly due to participation in certain notable tenders.

Formulations sales across all geographies grew by 16.8% to Rs.111,656.6 million as against Rs.95,586 million in the previous year and constituted 79.5% of the revenues while active pharmaceutical ingredients (APIs) made the balance 20.5%.

Revenue from APIs has been Rs.28,836.5 million in the year under review, which is higher by 6.6% over 2014-15. The growth has mainly been led by the high value non-betalactam APIs, despite ramping up volumes to meet the exponential demand for in-house formulation manufacture. Debottlenecking efforts are being undertaken at the existing facilities to supplement API capacities. Your Company sells API to domestic as well as the global markets.

As in the past, Aurobindo made long-term investments in all key markets with its customer relationships, strategic partnerships and improved business mix and market share. With a view to ensure sustainable growth, the Company continued to augment manufacturing capacity. This was another year focused on operational excellence, compliance standards, quality assurance, productivity improvement and highest priority to health and safety.

In order to enhance business intensity, employee engagement and performance was targeted. Aurobindo continued to attract and develop people for the future to ensure good leadership and organizational efficiency. Determined efforts on enhancing margins, raising profitability and cash flow generation helped lower the debt and improve the quality of the balance sheet.

Overall, every initiative and endeavour was designed to shape a successful future for the Company.

OUTLOOK

Aurobindo''s strategy is to develop and bring to market specialty and complex generic products including injectables, where the active pharmaceutical ingredient is difficult to source, or significant manufacturing or regulatory hurdles exist and are difficult to overcome, or where product is in short supply. The focus is on demand led products that have a sustainable elevated market, where the demand is for high value, difficult to develop complex products.

Accordingly, your Company has been having a strategy of filing for select, differentiated products and as the approvals are received, commercialization leads to market expansion.

Increasing launch of recently approved injectable products and improved economics of the commercialized products are likely to make an impact on the revenues and bottom line. Several of these are niche and high value products which would further improve the product mix in the market.

The anticipated launch of some of the products recently approved by the FDA and increased volumes of existing products is expected to keep the momentum going over the next few quarters. Several of the products that were approved by the FDA in recent times and several others that await approval are considered to be large market opportunities. More important, the manufacturing capacities are in place to meet the requirement. The Company therefore looks forward to significantly ramp up contributions from the products over the foreseeable future.

There are several products under development in the oncology and hormonal verticals which are likely to be filed over the next 12 to 18 months. Progress is being made at development stage in microsphere technology, especially on formulation feasibility, fine tuning and scaling up of technology with a view to enter depot injection products. Plans are on-going to file the first product in 2017-18. The objective is to launch four identified products, which together account for a market size of around USD 3 billion. As stated earlier, the focus is in qualitatively adding to a differentiated product basket.

The Company has developed and made penem filings for three injectable products for the US market and the fourth product is filed in first quarter of 2016-17. These four penems have an addressable market of about USD 500 million as per IMS March 2016 data. Aurobindo has selected difficult to develop penem products, in keeping with the corporate strategy. While the products have been launched in Brazil and Mexico, the impetus will be gained when the launch takes place in US in 2016-17.

At Natrol, the business is encouraging. New products are being developed and launched and in line with the growth momentum the R&D pipeline is being strengthened.

Aurobindo offers solid value proposition to its customers with a breadth of portfolio. The build up in portfolio with complex products makes your Company a partner of choice. The team at Aurobindo has been steadily improving on its timing of supplies, especially its on-time-in-full (OTIF) record. Investments are being made in further enhancing the supply chain dynamics, to improve reliability of deliveries while optimizing on costs. There is a perceptible change favourably impacting the customers and driving your Company''s growth.

Aurobindo is driving growth through several verticals. There is a determined foray into oncology and hormonal products, enzymes, peptides including microspheres, oral contraceptives, nasal products, steroids, OTC offers, differentiated technology viz depot injections, inhalers, patches and films. In all the newer ventures, Aurobindo will build and leverage on its inherent strengths augmented by a team of generic industry-seasoned professionals. Your Company has strong relationships in the market that would help to create businesses with a broad, unique product portfolio in record time. In essence, the new business models are founded on core competencies.

In financial terms, the objective is to strive for higher predictable and calibrated growth, and improve EBITDA margin and Return on Investment. The target is to stay cash flow positive, improve the quality of the balance sheet, lower the leverage, reduce interest outgo and expand earnings year-on-year

Your Company has set a vision to build businesses that meaningfully impact their addressable markets, are respected for customer centric products and services, meet industry benchmarks in productivity of resources, are recognized for quality and compliance standards and in the ultimate analysis, create societal wealth for all stakeholders.

RESEARCH & DEVELOPMENT

Aurobindo''s new product development initiatives range from conventional oral and injectable products to more complex and advanced dosages. The focus during the year was to prioritize on the difficult and niche products including oral and sterile, peptide drug products involving difficult clinical end-point studies. In filing ANDAs such products involved innovative and highly development intensive work. Cost optimization continued to be a core area that was worked upon, for both the US and EU markets.

The nutraceuticals and the OTC teams made significant contributions by launching new products. Another notable activity during the financial year was the start of development work on more than 20 products in the oncology and hormone segments, both in injectable and solid dosage forms for which the filings are expected over the next 12 to18 months. Further, product development has been initiated in new segments such as dermatology products and nasal drug delivery.

The continuous innovative and skillful work being done by R&D team is seen in the number of approvals received over the years with revenue growth and productivity gains. The regulatory product approvals for the ANDAs filed in the past as well as increased contribution/ commercialization of the development projects already undertaken, will continue to demonstrate the intellectual property strengths of your Company.

In order to develop oncology APIs, an exclusive laboratory has been created with isolators and appropriate personal safety protection. A few APIs have been identified and development work is on- going.

Analytical capabilities were enhanced by acquiring the advanced models of GCMS, LCMS and ICPMS in order to comply with the stringent ICH guidelines for control of genotoxic impurities and toxic metal ions. These would further improve quality of drug substances and would also facilitate regulatory approvals as impurities as low as less than 1 ppm can be identified and quantified with these new equipments. Additionally, an advanced XRD machine has been acquired to detect and quantify polymorph contamination at very low levels.

Chemical manufacturing processes of four APIs were validated for in-time filing of NCE-1 ANDAs in the US with Paragraph-IV certification. At the same time, six additional molecules were identified during the year and process development was undertaken for NCE-1 filing in 2016-17.

In terms of the filings to US FDA, a total of 398 ANDAs have been filed by Aurobindo as on March 31, 2016 out of which 251 ANDA approvals (215 final approvals including 10 for Aurolife Pharma LLC, and 36 tentative approvals) have been received. The balance 147 ANDAs are under review for approval. During the year, Aurobindo filed 22 ANDAs, while 49 final approvals were received.

Similarly, as on March 31, 2016, the team has filed over 2,700 DMFs including 202 with US FDA. So far, 158 patent applications are pending with various authorities and 18 have been granted patents.

ENVIRONMENT, HEALTH & SAFETY

Your Company demonstrated consistency in successful implementation of wastewater treatment, recycle/reuse, hazardous waste disposal and recycling from environmental management considerations, across all manufacturing locations. Consents from local regulatory agencies have been obtained for four green field drug formulation units.

Environmental infrastructure has been further upgraded in some of the manufacturing facilities. In some cases, the existing systems are further augmented with additional infrastructure that would lead to energy saving or cleaner handling of waste streams or emissions. Some of these systems include ATFD systems, RO systems, paddle/double drum driers and ESP for boiler. Some of these systems are planned to be replicated in other manufacturing units where necessary during 2016-17.

On-line ambient air quality monitoring system is set up in one of the API facility and additional systems of the same are augmented in another API unit. The Company''s facilities are in compliance with the regulatory requirements in respect of on-line continuous monitoring systems.

Dedicated STPs are installed in two of the formulations units with MBBR technology; a patented procedure which is functioning satisfactorily. Similar systems are being planned in some of the API manufacturing units.

Preparation for ISO 14001 accreditation process of one of the API unit is complete and certification is expected during the year. It is proposed to initiate the process for one more API unit during 2016-17.

As part of plantation drive, about 15,000 saplings were planted in 2015-16. In 2016-17, it is proposed to plant another 10,000 saplings.

On the safety aspect, all new chemical processes are reviewed for safety elements before lab validation is done, so that necessary changes can be implemented in the processes, and inherent safety is enhanced. Reaction calorimeter and DSC are installed in the research centre to generate data on reaction hazards. Powder safety data is also generated at a third party lab and hazards identified at lab stage itself. This data will provide key inputs for safe design of process and plant in which the process operates.

Hazard and operability (HAZOP) studies initiated in earlier years are continuing and 77 processes have been subjected to HAZOP study. Activity based risk assessment is also progressing well and 59 activities have been completed this year.

In order to effectively oversee implementation of actionable items derived from multiple sources, a corrective and preventive action (CAPA) tracking methodology is implemented, where incomplete action items are highlighted to senior management on immediate basis.

Aurobindo''s safety team ensures that all new facilities comply with EHS guidelines, and hence all project proposals and layouts are reviewed for EHS, and necessary requirements are in-built from the construction phase itself.

Training is a focus area, and a target of 0.5% of all man-hours on safety training was set at the start of the year. At the end of year, 0.52% was achieved. The awareness levels will be further enhanced with higher targeted training in the coming years.

HUMAN RESOURCE DEVELOPMENT

During the year, the aim was to strategize for future leaders of tomorrow; creation of a talent pool that can be depend upon. Therefore, a meaningful multi-layered model was designed and implemented.

25 graduate engineers were inducted into the system at the entry level, and were oriented, trained and integrated into the system. This is a year-long effort that will reap its benefits in years to come. Year on year, the 25 GETs would be inducted in to the system. Much benchmarking and study was conducted to develop a robust recruitment and induction policy.

At the mid level management, the Company tied up with international consultants to work on 24 key competencies required to transform managers to leaders and was implemented within the year. A year-long MDP was designed with assessment centers, reviews and presentations made to senior management which had a perceptible impact on the Company''s operations.

The in-house Aurobindo Training and Development Centre (ATDC) recruits, trains and helps absorb talented employees. During the year, we have recruited through this route over 230 employees (M.Pharm, M.Sc., B. Pharm & ITI/diploma holders). Adequate care is taken to ensure that the candidates were fully equipped with appropriate skill sets to perform their duties from day one.

Across the organization, every employee has been sensitized towards technical excellence, continuous improvement and to respect the assurance standards in the interest of protecting the process and product quality and patient health.

An advanced management training system ''Nichelon 5 CMS'' is implemented at all formulation units, global pharmaco-vigilance and at APL Healthcare. As part of harmonization, Nichelon5 CMS has been implemented at Auronext, a subsidiary of the Company during 2015-16 and also initiated implementation at other subsidiaries such as Aurobindo USA, and in the Western Europe operations.

AWARDS

Your Company was honoured in January 2016, the Indian Drug Manufacturers'' Association IDMA Margi Memorial Best Process Patent Award 2014-15 for three US patents.

The Pharmaceuticals Export Promotion Council of India (Pharmexcil) conferred upon your Company a Certificate of Appreciation in recognition of commendable contribution in bulk/APIs category.

The Chief Commissioner of Central Excise, Customs and Service Tax, Hyderabad felicitated your Company in February 2016 for outstanding performance during the financial year 2014-15.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary companies/associate companies/joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

During the year, the following are the changes in the subsidiaries of the Company:

Closure of subsidiaries

a. Actavis France (Merged with Arrow Generiques, France retrospectively from April 1, 2015);

b. APL IP Company Limited;

c. APL Holdings (Jersey) Limited;

d. Helix Healthcare B.V. has sold entire shareholding of Aurobindo Pharma (Australia) Pty Limited, Australia and its subsidiary Aurobindo Pharma NZ Limited, New Zealand on April 10, 2015.

Changes in structure/ownership

a. Milpharm Limited was acquired by Agile Pharma B.V. from Helix Healthcare B.V.;

b. Aurobindo Pharma B.V. was merged into Actavis B.V. On the same day, Actavis B.V. was renamed as Aurobindo Pharma B.V.

Changes in the names of subsidiaries

a. Aurex B.V. was renamed as Pharmacin B.V.;

b. A separate company Pharmacin B.V. was renamed as Aurex B.V.;

c. Actavis Deutschland GmbH & Co. KG was renamed as Puren Pharma GmbH & Co. KG.

The process of liquidation of Aurobindo Pharma (Singapore) Pte Limited, a dormant company, is pending with Registrar of Companies, Singapore.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standards 21 issued by the Institute of Chartered Accountants of India (ICAI) and as per the provisions of Companies Act, 2013. As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com and copy of audited financial statements of its subsidiaries will be provided to the Members at their request.

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(10) of the Companies Act, 2013 and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees and whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases. The Whistle Blower Policy is available on the Company''s website http://www.aurobindo.com/about-us/ corporategovernance.

POLICY ON SEXUAL HARASSMENT

Your Company has constituted an Internal Complaints Committee as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention & prohibition of sexual harassment at workplace. The policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. During the year, no complaints have been received under the policy.

RATING

The Long-term Fitch Rating of your Company has been upgraded to ''IND AA '' from ''IND AA'' indicating stable outlook of the Company.

MEETINGS OF THE BOARD

The Board and Committee meetings are pre- scheduled and a tentative calendar of the meetings finalized in consultation with the Directors to facilitate them to plan their schedule. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, six Board Meetings and six Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are provided in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DIRECTORS

As per the provisions of the Companies Act, 2013, Mr. K. Nithyananda Reddy and Mr. M. Madan Mohan Reddy will retire at the ensuing annual general meeting and being eligible, seek re-appointment. The Board of Directors recommends their re-appointment.

The appointment of Mr. P. Sarath Chandra Reddy as the Whole-time Director of the Company is being proposed at the ensuing Annual General Meeting. The Board of Directors recommonds his appointment.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

The Members of the Company at the 28th Annual General Meeting of the Company held on August 27, 2015 have re-appointed Mr. N. Govindarajan as Managing Director, Mr. K. Nithyananda Reddy as Vice Chairman and Whole-time Director, Dr. M. Sivakumaran as Whole-time Director and Mr. M. Madan Mohan Reddy as Whole-time Director for a period of three years with effect from June 1, 2015. The Members also appointed Dr. (Mrs.) Avnit Bimal Singh as an Independent Director of the Company for a period of five years up to March 24, 2020.

Mr. P. Sarath Chandra Reddy, a Non-Executive Director of the Company was appointed as a Whole-time Director of the Company with effect from June 1, 2016 subject to the approval of the Member at the ensuing Annual General Meeting.

Mr. A. Mohan Rami Reddy, Vice President (Legal) & Company Secretary is retiring from the services of the Company at the close of business hours on May 31, 2016. Mr. B. Adi Reddy has been appointed as Company Secretary of the Company with effect from June 1, 2016.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgment and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The independent directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company''s website http://www.aurobindo.com/about-us/corporate- governance.

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the Directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board including performance and working of its committees.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The policy of the Company on directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the Directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company''s website http://www.aurobindo.com/about-us/corporate- governance.

TRANSFER TO RESERVE

The Company has not transferred any amount to general reserve out of the profits of the year.

LOANS, GUARANTEES OR INVESTMENTS

Loans, guarantees or investments covered under Section 186 of the Companies Act, 2013 form part of the Notes to the financial statements provided in this Annual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-2 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return prepared in Form MGT-9 is in Annexure-3 to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-4 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of three Directors viz. Mr. M. Sitarama Murty, Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. The Company has established a separate department to monitor the enterprise risk and for its management.

The Committee had formulated a risk management policy for dealing with different kinds of risks which it faces in day-to-day operations of the Company. Risk management policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on regular basis at the time of review of quarterly financial results of the Company. A report on the risk and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report. The notes on financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

The Members of the Company at the 27th Annual General Meeting had appointed M/s. S.R. Batliboi & Associates LLP, Chartered Accountants as Statutory Auditors of the Company up to the conclusion of 30th Annual General Meeting of the Company subject to ratification of the appointment by the members at every Annual General Meeting. The ratification of the appointment of statutory auditors is proposed at the ensuing Annual General Meeting.

COST AUDIT

M/s. Sagar & Associates, Cost Accountants, were appointed as Cost Auditors of the Company to conduct cost audit of the Company for the year 2014-15. The Cost Audit Report of the Company in XBRL format for 2014-15 was filed with the Ministry of Corporate Affairs within the due date.

INTERNAL AUDITORS

The Board of Directors of the Company has appointed a professional firm of Chartered Accountants to conduct internal audit of the Company for the financial year ended March 31, 2016.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework at Aurobindo encompasses internal controls over financial reporting (ICOFR) as well as operational controls that have been put in place across all key business processes of the Company. The internal controls are designed to facilitate and support the achievement of the Company''s business objectives and such controls do enable the Company to adapt to changing and operating environment, to mitigate risks to acceptable levels and to support sound decision making and good governance.

Details in respect of adequacy of internal financial controls with reference to the financial statements are briefly iterated below:

a. The Company maintains all its major records in ERP System (Oracle Financials) and the work flow and approvals are routed accordingly;

b. The Company has appointed internal auditors to examine the internal controls, and examine whether the workflow of the organization is being done through the approved policies of the Company. In every quarter, during the approval of financial statements, internal auditors present the internal audit report and the management comments on the internal audit observations; and

c. The Board of Directors of the Company has adopted various SOPs and policies such as related party transactions policy, whistle blower policy, policy to determine material subsidiaries and such other procedures for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. S. Chidambaram, Practicing Company Secretary (C.P.No:2286) to undertake the Secretarial Audit of the Company for the financial year 2015-16. The Secretarial Audit Report issued in form MR-3 is in Annexure-5 to this Report. There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.

CORPORATE SOCIAL RESPONSIBILITY

Your Company believes that there must be a healthy partnership between business and the society. Initiatives are therefore taken to execute on the stated CSR policy of ''give back to the society.''

The activities during the year centered on providing educational support, healthcare, sanitation, public safety, poverty alleviation and sports. In educational area, the activities included renovation of school buildings, construction of class rooms, library and toilets, provision of furniture such as desks, payment of salaries at municipal schools, and encouraging school children with bags, note books, scholarship etc.

In healthcare, the Company continued to supply safe drinking water to an entire village, provide pipelines to transport water to overhead tanks, underground storages and installation of RO plants. Drains were constructed and ambulance donated to a village.

Under the category of public safety, Aurobindo also contributed fire engines and paid monthly salaries of fire safety staff. At the request of the police authorities, the Company installed CCTV cameras on national highway covering areas such as Hyderabad, Polepally, Siddipet and Jedcherla.

From August 2015, the Company provides 300 meals every day for the attendants and staff of a government hospital at Sangareddy. A centralized kitchen is also run for the benefit of the public at an Iskcon centre.

A detailed account of the CSR activities forms part of the annual report on CSR placed on the Company''s website at: http://www.aurobindo.com/ social-responsibility/csr-activities. Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is in Annexure-6 to this Report.

STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

The statement of particulars of appointment and remuneration of managerial personnel as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-7 to this Report.

INSURANCE

All properties and insurable interests of the Company including buildings, plant and machinery and stocks have been fully insured.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2016 to the date of signing of the Director''s Report. There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Schedule V (C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is enclosed as a separate section forming part of this report.

The certificate of the Practicing Company Secretary, Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Schedule V (E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Report on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is presented in a separate section forming part of this report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company''s performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends which remain unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government.

SHARE CAPITAL

The paid up share capital of the Company increased by Rs.293,187,311 during the year due to the allotment of 291,982,275 equity shares of Rs.1 each as Bonus and 1,205,036 equity shares of Rs.1 each on exercise of stock options under the Employee Stock Option Plan-2006 (ESOP 2006) of the Company. The paid up share capital of the Company as on March 31, 2016 was 585,169,586 equity shares of Rs.1 each.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme- 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries. Details of the stock options as on March 31, 2016 is provided on the Company''s website: http://www.aurobindo.com/about-us/corporate- governance. The details of the employee stock options also form part of the notes to accounts of the financial statements in this Annual Report.

ACKNOWLEDGEMENTS

Your Directors are grateful to the employees of Aurobindo for building a strong foundation for the Company and working towards enhancing growth in the future. The Directors want to thank the customers, business associates, banks, central and state governments and their agencies for their trust, encouragement and support. Every day, the investors have shown their faith in Aurobindo. The Board shall always strive to perform to meet their expectations. For and on behalf of the Board

K. Ragunathan

Hyderabad Chairman

May 30, 2016 DIN: 00523576

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Mar 31, 2015

Dear Members,

The Directors are pleased to present the 28th Annual Report of the Company together with the audited accounts for the financial year ended March 31, 2015.

FINANCIAL RESULTS

Standalone financials Rs. Million

2014-15 2013-14

Gross Turnover 82,448.4 72,695.3

Profit before depreciation, interest, tax and exceptional items 23,176.4 19,942.7

Depreciation/amortization 2,451.5 1,859.7

Finance cost 565.8 866.2

Exchange difference adjusted to borrowing cost 755.6 2,022.2

Profit before tax 19,403.5 15,194.6

Provision for tax/deferred tax 4,240.0 3,473.7

Net profit after tax 15,163.5 11,720.9

Balance brought forward from previous year 28,278.4 18,752.2

Balance available for appropriation 43,441.9 30,473.1

Appropriations:

Dividend on equity shares - Interim 1,312.8 874.1

Final - -

Tax on dividend 250.4 148.5

Depreciation adjusted (as per Schedule II) 196.4 -

Transferred to general reserve - 1,172.1

Surplus carried to Balance Sheet 41,682.3 28,278.4

DIVIDEND

Your Directors have approved a third interim dividend of 100% i.e. Rs.1 per equity share and together with the first interim dividend of 150% i.e. Rs.1.50 per equity share and second interim dividend of 200% i.e. Rs.2.00 per equity share, the total dividend for the financial year 2014-15 comes to 450% i.e. Rs.4.50 per share on the equity share of Rs.1 against 300% i.e. Rs.3 per share of Rs.1 paid in the previous year.

PERFORMANCE REVIEW

Your Company delivered financially satisfactory results by executing on core strategies and setting the stage for long term growth. The revenue from operations was Rs.80,951 million on a standalone basis, an increase of 13.8% over 2013-14. On a standalone basis, the EBITDA for 2014-15 was Rs.23176.4 million, an increase of 16.2% over the previous year.

Profit before tax was increased to Rs.19,403.5 million from Rs.15,194.6 million in the previous year. This 27.7% increase was achieved by ramping up the volumes, improving productivity and saving on finance costs. Profit after tax was higher by 29.4% for the year under review at Rs.15,163.5 as compared to Rs.11,720.9 million in the previous fiscal. Diluted earnings per share on standalone basis is Rs.51.97 as compared to Rs.40.20 in the previous year.

Members will be pleased to know that the Company did well at the consolidated level, as well. In 2014-15, the consolidated revenues increased by 49.6% to Rs.121,205.2 million. EBITDA for the year grew 23.4% and was Rs.26,603.3 million as compared to Rs.21,552.1 million in 2013-14 and diluted earnings per share grew by 34.3% to Rs.54.0 reflecting strong execution and continued momentum in the business.

Your Company made the necessary long term investments to advance the geographical reach of formulations, to grow both in the US and Europe. The performance in 2014-15 was driven by competitive edge of the products across the portfolio. Over the financial year, formulation sales grew by 42% in the US and 375% in Europe, complimented by the acquisition of commercial operations from Actavis across seven Western European countries with effect from April 1, 2014.

Formulations in the US contributed 50.5% to the overall formulations revenues in the year under review and share of Europe has increased to 33.4% in 2014-15 from 12.5% in the previous year, demonstrating the focus on both the markets.

Formulation sales across all geographies grew by 77.7% to Rs.95,586 million as compared Rs.53,785 million in 2013-14. Formulations business constituted 77.9% of the revenues while active ingredients make the balance 22.1%.

In the US, Aurobindo Pharma continued to deliver strong revenue growth with its customer relationships and increased market penetration of existing products.

While sales of several generic products have been raised through the year, the growth has been more skewed towards controlled substances and non-institutional business. The injectable business in the US continued to outperform and grew by 88.7% over fiscal 2013-14.

In addition to the US, your Company is now present in over 150 countries with growing visibility in advanced markets such as France, Germany, Spain and Italy.

Aurobindo has delivered to expectations in Europe. The revenues from Europe stood at Rs.31,947 million, significantly growing over the previous year. This has been primarily on account of the acquisition of the products from Actavis in Western European markets. Presently, France is the biggest market in Europe for Aurobindo followed by Germany, Netherlands, Spain, UK and Portugal. A concerted effort is being made to create an impact in Western Europe, and reach a critical mass.

Aurobindo has been supporting several multilateral agencies to provide cost effective treatment of HIV/AIDS patients. Your Company started executing a few notable tenders and stepped up deliveries across regions, of triple combination products. Anti-retroviral formulations sales increased by about 14.7% over the previous year. Your Company''s products are estimated to have targeted treatment of over 2 million HIV/AIDs affected people across 110 countries.

In the emerging markets such as Africa, CIS, Latin America and MENA (Middle East and North Africa), there was a major shift from tenders/generics to more sustainable and better valued branded generics, especially in the high value therapy areas of cardiovasculars and neuro-psychiatry ailments. Close customer interaction helped gain traction in markets such as Malaysia, Myanmar, Philippines, Vietnam and Cambodia.

Proportion of revenue from active ingredients came down from 34.7% to about 22.1%, since there was an exponential growth in the formulations business, as compared to the API business. Your Company sees opportunities for growth of API business. Hence, the manufacturing capacities of API are being further expanded.

During the year, your Company completed the acquisition of the assets of nutritional supplement maker Natrol LLC, which was acquired for a consideration of Rs.8,344 million. Natrol manufactures and sells quality nutritional supplements in the US and select international markets. It offers branded products including vitamins, minerals, and supplements; diet and weight management products; sports nutrition products; and products for hair, skin, and nails. This acquisition is a strategic move to gain an entry for Aurobindo into the growing nutraceutical segment.

The US based Natrol is a leading 35 year old nutraceuticals manufacturer with established brands and was acquired with all the manufacturing assets, personnel and commercial infrastructure including the well established brands of Natrol along with an agreement to take on certain liabilities. The due approval was obtained from authorities and the acquisition was completed on December 4, 2014. In the consolidated financial statements, the financials of the acquired entity have been integrated effective that date.

OUTLOOK

Aurobindo is shaping its future, by ensuring sustainable growth with niche and differentiated basket of products, offering the highest product quality while being cost competitive, to meet the needs of customers and patients.

Your Company has already demonstrated its capabilities by creating a portfolio of very large number of generic products, including 193 ANDA approvals from the US FDA. The product profile includes wide range of injectables and more difficult to develop complex products and drug delivery systems.

The existing manufacturing capacities have helped reach revenues of almost USD 2 billion. Three new plants are being commissioned over the next 12 months, while three more are being expanded to double their existing capacities. Systems and processes are being improved with the help of a well-known consultant. Aurobindo aims to service its customers with performance standards in deliveries that meet their expectations.

The developed markets of US, Europe and Japan will remain the focus on the organisational dash board for generics and APIs. There are huge opportunities for your Company''s ARV products which are being addressed. Emerging markets will be another thrust area for growth. Overall, Team Aurobindo is striving to create an impact in all these key markets.

As Members are aware, your Company develops, manufactures, markets and distributes store brand Over-the-Counter (OTC) products. The mission is to develop as many OTC products for most of US retail market as possible, providing a consistent and reliable supply, at a fair price and of the highest quality.

The plans are to include Rx to OTC switch molecules, ANDA & Monograph OTC products in various dosage forms/formats - solids (tablets, capsules, soft gels), liquids, semi solids & nasal sprays. The manufacturing sites are located in New Jersey, US at Lawrenceville with facility to make liquids, semi solids & nasal sprays (about 52 million units per year); another manufacturing site is at Dayton with facility to make solids including Drug Enforcement Administration (DEA) controlled products (about 3 billion doses per year); and the third facility is set up at Jedcherla, near Hyderabad, with capacity to manufacture solids (about 8 billion doses a year). This business is supported with adequate infrastructure including 200,000 sq ft of packaging & distribution facilities for solids & liquids.

70 liquid products have been developed, exhibit batches have been made for a few solids and some are undergoing stability tests. Your Company has also commenced marketing a few products through well-established chain stores in the US. Aurobindo will work to get a strong foothold in this competitive but attractive market.

Streamlining of the newly acquired Natrol''s current operation would expand operating margin in the near term. The management aims to enlarge the market, improve revenues and enhance efficiencies significantly.

Your Company is making determined foray into oncology and hormonal products, penems and peptides technology. In all the newer ventures, Aurobindo will build and leverage on its inherent strengths augmented by a team of generic industry-seasoned professionals. Your Company has strong relationships in the market that would help to create businesses with a broad, unique product portfolio in record time. In essence, the new business models are founded on core competencies.

Your Company has set a vision to build businesses that meaningfully impact their addressable markets, are respected for customer centric products and services, meet industry benchmarks in productivity of resources, are recognized for quality and compliance standards and in the ultimate analysis, create societal wealth for all stakeholders.

In financial terms, the objective is to lower earnings volatility, strive for higher predictable and calibrated growth, and improve EBITDA margin and Return on Investment higher than industry average. The target is to stay cash flow positive, improve the quality of the balance sheet, lower the leverage, reduce interest outgo and expand earnings year-on-year.

RESEARCH & DEVELOPMENT

Clearly your Company''s best investment for future growth has been and remains in research and development, and in order to maintain the momentum, allocation of funds was increased during the year under review. R&D expenses constituted 3.9% of the gross revenue for the year. In absolute amount, the expenditure in 2014-15 on standalone basis was Rs.3,182.4 million, while it was Rs.2,550.5 million in the previous year. More importantly, the resource base was ramped up by adding experienced scientists and researchers.

Aurobindo''s expertise in R&D has given your Company the edge in designing the product basket, process technology, drug delivery systems, anticipation of customer and patient needs of the future and intellectual property challenges. Every effort has been made to ensure quality and compliance standards are met both at the lab and on the production floor, while reviewing the costs and time to launch the products in to the market.

During the year, 15 molecules (API/Intermediates) were taken up to modify/optimize the manufacturing technology to bring down the raw materials cost. Four new CRAMS API projects were taken up for development during 2014-15. Process for one complex API was successfully commercialized for a Japanese customer.

First half of the financial year saw large number of ANDA filings, especially for difficult to develop niche products, primarily in the steriles portfolio as well as oncology and hormonal products. Such products are highly development intensive, hold high risk in bioequivalence, but are rewarding from a business perspective. Cost optimization continued to be a focus area with alternate APIs, excipients and packs being worked upon, for both the US and EU markets.

In order to execute the requirements of products for which marketing rights were acquired for the key western European markets from Actavis, your Company has set up a dedicated formulation R&D. The objective is to design and develop cost effective compositions to compete with generics in the EU tender market. Development work has been initiated to create a pipeline of 60-70 products to be manufactured at Vizag and commercialized in the next 12 to 18 months.

Development work is on-going, on as many as 20 products in the oncology and hormone segments, both injectable and solid dosage forms. Dossier filings are expected to start in the financial year 2015-16.

Your Company is deepening the integration of the products acquired from Actavis and it will remain a priority in 2015-16 to grow the business profitably and create value for shareholders. The value is being realized through a combination of cost and growth synergies and excellence in deliveries.

In terms of the filings to US FDA, a total of 376 ANDAs have been filed as on March 31, 2015 out of which 166 final approvals had been received and another 27 tentative approvals (including 21 ANDA approved under PEPFAR, which are not for sales in the US market) too have been received. The balance 183 ANDAs are under review for approval.

The filings with regulatory authorities across all products are in excess of 2,100 generic registrations and over 2,500 API filings. In addition, 594 process patent applications have been filed so far.

ENVIRONMENT, HEALTH & SAFETY

The year under review ended on a satisfactory note in environmental management across API and formulations divisions. In respect of environment management operations at manufacturing locations and R&D establishments, activities and operations across all sites are adequately stabilized.

This was yet another year that witnessed competencies and commitment demonstrated by Aurobindo in sustained environmental management in its manufacturing locations.

From a regulatory perspective, environment regulatory approvals have been obtained well on time for all green field projects. State and central level environmental approvals have been obtained for one of the acquired API units. Process for central level environmental clearance for one of the expansion projects of an API unit is completed and awaiting consideration of the Expert Technical Committee concerned.

Investments continued to be made for up-gradation of existing environmental infrastructure and development of new projects in line with planned manufacturing activities. Planned activity of establishment of sewerage treatment plants at API units is completed for one unit and the project is nearing completion in one more unit. With an objective to reduce wastewater disposal to CETP and reuse treated wastewater, installation of RO plant was taken up in one of the formulations unit. One major achievement in the year is reduction of disposal costs of organic solid wastes by 50% which was made possible due to increased awareness, discipline and efforts in environmental management practices at manufacturing locations.

The EHS team of your Company prepared and implemented ''Guidelines for EHS risk assessment''. This framework provides methodologies to be followed to:

a. perform risk assessment of all activities of Aurobindo;

b. rank and prioritize activities;

c. identify and define risk controls;

d. ensure that the controls are working effectively to maintain risk within acceptable levels.

Several training programs were initiated to increase employee awareness and knowledge. Safety videos were used extensively to make an impact. A separate EHS training matrix was prepared for contract workmen based on work activities they perform.

Chemical exposure risk assessment was initiated to determine hazardous effects of chemical exposure. This risk assessment has been completed for 129 materials.

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary companies/associate companies/joint ventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

The following companies have become the Company''s subsidiaries during the year: Aurovitas Spain S.A.U., Spain; Actavis France SAS, France; Arrow Generiques SAS, France; Actavis Deutschland GmbH & Co., Germany; Actavis B.V., The Netherlands; Actavis Management GmbH, Germany; Aurovitas S.L., Spain; Aurex B.V., Spain and Natrol, LLC, U.S.A.

The following companies have ceased to be the Company''s subsidiaries during the year: Aurobindo Pharma Limited S.R.L., Dominican Republic; Aurobindo Pharma France SARL, France merged into Arrow Generiques SAS, France; Aurovitas SL, Spain while Agile Malta Holdings Limited, Malta merged into Aurobindo Pharma (Malta) Limited, Malta.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standards 21 issued by the Institute of Chartered Accountants of India (ICAI) and as per the provisions of Companies Act, 2013. As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separately, the audited accounts of its subsidiaries on its website www.aurobindo.com and copy of audited financial statements of its subsidiaries will be provided to the Members at their request.

HUMAN RESOURCE DEVELOPMENT

Your Company has the necessary managerial bandwidth to navigate the growth opportunities. Planning ahead of the requirement has ensured that Aurobindo has a strong team in many markets, in manufacturing facilities, research labs, supply-chain management and in fact, in every functional area. However, considering the potential opportunities and the organizational growth targets, there is a constant review being done to be ahead of the curve. Talent acquisition and talent retention are being given considerable emphasis in people management.

The strength of the organization is manifest in the enthusiasm to overcome competitive pressures, in building a robust pipeline of products, in the focus to monitor and control quality, in the premium attached to data governance, in the commitment to improve On-Time-In-Full (OTIF) performance and in the hunger to deliver results.

To strengthen the alignment between strategy, accountability, performance and recognition, there is a challenging but participative target setting, and the progress is closely tracked on a dashboard of milestones and actions, key operational metrics and financial performance. Individual goals are getting aligned to corporate results. The goal setting has ring fenced the risks, driven the business model towards sustainable growth and made the enterprise collaborative.

At every level in the hierarchy, learning & development inputs ensure that people stay agile and resilient to the challenges of growth.

While Team Aurobindo seeks new opportunities to extend geographies and build on the existing relationships, at every level, in every transaction, your Company will strive to minimize risks. The team is being sensitized to do whatever it takes to anticipate and pre-empt challenges. The measure of this approach is in the full involvement of the management at the senior most level. For instance, the team makes no compromise on quality and compliance. This approach is targeted to achieve predictable growth.

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which is in compliance with Section 177(10) of the Companies Act, 2013 and Clause 49 of the Listing Agreement with the stock exchanges. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees and whole-time directors of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the audit committee in exceptional cases. The Whistle Blower Policy is available on the Company''s website http://www.aurobindo.com/about-us/corporate- governance.

POLICY ON SEXUAL HARASSMENT

Your Company has constituted an Internal Complaints Committee as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has a policy on prevention & prohibition of sexual harassment at workplace The policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. During the year, no complaints have been received under the policy.

RATING

The National Long-term Fitch Rating of your Company has been upgraded to ''IND AA'' from ''IND AA-'' indicating stable outlook of the Company.

MEETINGS OF THE BOARD

The Board and Committee meetings are pre-scheduled and a tentative calendar of the meetings finalized in consultation with the Directors to facilitate them to plan their schedule. However, in case of special and urgent business needs, approval is taken by passing resolutions through circulation. During the year under review, nine Board Meetings and five Audit Committee Meetings were convened and held. The details of the meetings including composition of Audit Committee are given in the Corporate Governance Report. During the year, all the recommendations of the Audit Committee were accepted by the Board.

DIRECTORS

As per the provisions of the Companies Act, 2013 Mr. P. Sarath Chandra Reddy and Dr. M. Sivakumaran will retire at the ensuing annual general meeting and being eligible, seek re- appointment. The Board of Directors recommends their re-appointment.

The re-appointments of Mr. K. Nithyananda Reddy, Dr. M. Sivakumaran and Mr. M. Madan Mohan Reddy, Whole-time Directors and Mr. N. Govindarajan, Managing Director are being proposed at the ensuing Annual General Meeting.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONNEL

The Members of the Company at the 27th Annual General Meeting of the Company held on August 27, 2014 have re-appointed Mr. K. Ragunathan, Mr. M. Sitarama Murty and Dr. Rajagopala Reddy as independent directors of the Company for a period of five years up to March 31, 2019.

Dr. C. Channa Reddy ceased to be a Director due to his resignation from the Board of the Company for personal reasons with effect from January 27, 2015. The Board places on record its appreciation of the services rendered by him as a Director during his association with the Company.

Dr. (Mrs.) Avnit Bimal Singh was appointed by the Board as an Additional Director (Independent Director) of the Company with effect from March 25, 2015 and being eligible, her appointment as an independent director for a period of five years up to March 24, 2020 is being proposed at the ensuing Annual General Meeting. The Board of Directors recommends her appointment.

Mr. Sudhir B. Singhi relinquished his responsibilities as Chief Financial Officer of the Company with effect from July 1, 2014 and was re-designated as Head of Global Finance & Operations Department. Mr. Santhanam Subramanian was appointed as Chief Financial Officer of the Company with effect from July 1, 2014.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013 your Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. appropriate accounting policies have been selected and applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of your Company as at the end of the financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to be followed by your Company and such internal financial controls are adequate and are operating effectively; and

f. proper systems to ensure compliance with the provisions of all applicable laws have been devised, and such systems are adequate and are operating effectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The independent directors have submitted the declaration of independence stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on the Company''s website http://www.aurobindo.com/about-us/corporate-governance.

BOARD EVALUATION

Clause 49 of the Listing Agreement mandates that the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board including performance and working of its Committees.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The policy of the Company on directors'' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters are adopted as per the provisions of the Companies Act, 2013. The remuneration paid to the directors is as per the terms laid out in the nomination and remuneration policy of the Company. The nomination and remuneration policy as adopted by the Board is placed on the Company''s website http://www.aurobindo.com/about-us/corporate-governance.

TRANSFER TO RESERVE

The Company has not transferred any amount to general reserve out of the profit of the Company. LOANS, GUARANTEES OR INVESTMENTS

The details of loans, guarantees, investments given during the financial year ended on March 31, 2015 is in Annexure-2 to this Report in compliance with the provisions of Section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 is prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 and is in Annexure-3 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, the extract of Annual Return prepared in Form MGT-9 is in Annexure-4 to this Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information with respect to conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies (Accounts) Rules, 2014 is in Annexure-5 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the following Directors namely Mr. M. Sitarama Murty, Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy. The Company has established a separate department to monitor the enterprise risk and its management.

The Committee had formulated a risk management policy for dealing with different kinds of risks which it faces in day-to-day operations of the Company. Risk management policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal financial control systems and procedures to combat the risk. The risk management procedure is reviewed by the Audit Committee and Board of Directors on regular basis at the time of review of quarterly financial results of the Company. A report on the risk and their management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report. The notes on financial statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. There are no specifications, reservations, adverse remarks on disclosure by the statutory auditors in their report. They have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

The members of the Company at the 27th Annual General Meeting had appointed M/s. S.R. Batliboi & Associates LLP, Chartered Accountants as Statutory Auditors of the Company up to the conclusion of 30th Annual General Meeting of the Company subject to ratification of the appointment by the members at every Annual General Meeting. The ratification of the appointment of statutory auditors is proposed at the ensuing Annual General Meeting.

COST AUDIT

M/s. Sagar & Associates, Cost Accountants, were appointed as Cost Auditors of the Company to conduct cost audit of the Company for the year 2013-14. The due date for filing Cost Audit Report of the Company in XBRL format for 2013-14 was September 30, 2014 and the same was filed with the Ministry of Corporate Affairs on September 26, 2014.

INTERNAL AUDITORS

The Board of Directors of the Company has appointed M/s. KPMG to conduct internal audit of the Company for the financial year ended March 31, 2015.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework at Aurobindo encompasses internal controls over financial reporting (ICOFR) as well as operational controls that have been put in place across all key business processes of the Company. The internal controls are designed to facilitate and support the achievement of the Company''s business objectives and such controls do enable the Company to adapt to changing and operating environment, to mitigate risks to acceptable levels and to support sound decision making and good governance.

Details in respect of adequacy of internal financial controls with reference to the financial statements are briefly iterated below:

a. The Company maintains all its major records in ERP System (Oracle Financials) and the work flow and approvals are routed accordingly;

b. The Company has appointed internal auditors to examine the internal controls, whether the workflow of the organization is being done through the approved policies of the Company. In every quarter, during the approval of financial statements, internal auditors present the internal audit report and the management comments on the internal audit observations; and

c. The Board of Directors of the Company has adopted various SOPs and policies such as related party transactions policy, whistle blower policy, policy to determine material subsidiaries and such other procedures for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. S. Chidambaram, Practicing Company Secretary (C.P.No: 2286), Company Secretary in Whole- time Practice, to undertake the Secretarial Audit of the Company for the financial year 2014-15. The Secretarial Audit Report issued in form MR-3 is in Annexure-6 to this Report. There are no qualifications, reservations or adverse remarks in the Secretarial Audit Report.

CORPORATE SOCIAL RESPONSIBILITY

Your Company has formulated a corporate social responsibility policy with the objective ''give back to the society''. In line with this approach, Aurobindo has undertaken social activities such as promoting education, hygiene, preventive health care, eradicating hunger, poverty & malnutrition, making available safe drinking water, environment sustainability, ecological balance & conservation of natural resources, rural sports and setting up of old age homes etc.

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, the Corporate Social Responsibility (CSR) Committee of the Board of Directors has been formed consisting of following members namely Mr. K. Nithyananda Reddy, Mr. K. Ragunathan (Independent Director), Dr. M. Sivakumaran and Mr. P. Sarath Chandra Reddy to recommend the policy on Corporate Social Responsibility and monitor its implementation. Your Company has initially decided to focus on education, health, drinking water and sanitation as key areas which require attention. The objective is to make an impact on the quality of life of the common people in its neighborhood.

Your Company assesses each project for feasibility, organizes the volunteers and support staff before initializing the activity. Being the first year of a co-ordinated approach, the earmarked monies i.e. the stipulated two per cent of the average net profit of the last three financial years, could not be spent in full and hence is being carried forward.

Corporate Social Responsibility policy was adopted by the Board of Directors on the recommendation of Corporate Social Responsibility Committee and it is placed on the Company''s website at: http://www.aurobindo.com/about-us/corporate-governance.

Annual report on the CSR activities of the Company during the year are also placed on the Company''s website at: http://www.aurobindo.com/social-responsibility/csr-activities.

Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is in Annexure-7 to this Report.

STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

The statement of particulars of appointment and remuneration of managerial personnel as per Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is in Annexure-8 to this Report.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and stocks have been fully insured.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the business operations of the Company from the financial year ended March 31, 2015 to the date of signing of the Director''s Report.

There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is enclosed as a separate section forming part of this report.

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges in India is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is presented in a separate section forming part of this report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits from the public within the purview of Chapter V of the Companies Act, 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company''s performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends which remain unpaid/unclaimed for a period of seven years, have been transferred on due dates by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government.

SHARE CAPITAL

The paid up share capital of the Company increased by Rs.525,254 during the year due to the allotment of 525,254 equity shares of Rs.1 each on exercise of stock options under the Employee Stock Option Plan - 2006 (ESOP 2006) of the Company.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries. Details of the stock options as on March 31, 2015 is in Annexure-9 to this Report. The details of the employee stock options form part of the notes to accounts of the financial statements in this Annual Report.

ACKNOWLEDGEMENTS

Your Directors would like to thank the employees of Aurobindo for the dedication they have shown to accelerate the Company towards sustainable growth and shaping the future. The Directors are also grateful to the customers, business associates, banks and government agencies for their support and co-operation. Every day, the investors have shown their trust in Aurobindo. The Board shall continue to reciprocate their trust in the Company.

For and on behalf of the Board K. Ragunathan

Hyderabad Chairman

May 28, 2015 DIN: 00523576

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Mar 31, 2014

Dear Members ,

The Directors are pleased to present the 27th Annual Report of the Company together with the audited accounts for the financial year ended March 31, 2014.

FINANCIAL RESULTS

Standalone financials Rs. Million

2013-14 2012-13

Gross Turnover 72695.3 55695.0

Profit before depreciation, interest, tax and exceptional items 19942.7 9845.7

Depreciation/amortization 1859.7 1713.9

Finance cost 866.2 1147.4

Exchange difference adjusted to borrowing cost (Revised Schedule VI) 2022.2 1353.2

Profit before tax 15194.6 5631.2

Provision for tax/deferred tax 3473.7 671.3

Profit after tax before exceptional item 11720.9 4959.9

Less: Exceptional items - -

Net profit after exceptional items 11720.9 4959.9

Balance brought forward from previous year 18752.2 14797.1

Balance available for appropriation 30473.1 19757.0

Appropriations

Dividend on equity shares - Interim 874.1 291.2

Final - 145.6

Tax on dividend 148.5 72.0

General reserve 1172.1 496.0

Surplus carried to Balance Sheet 28278.4 18752.2

DIVIDEND

Your Directors have approved a second interim dividend of 175% i.e. Rs.1.75per equity share and together with the interim dividend of 125% i.e. Rs.1.25 per equity share, the total dividend for the financial year 2013-14 comes to 300% i.e. Rs.3 per share on the equity share of Rs.1 as against 150% i.e. Rs.1.50 per share of Rs.1 paid in the previous year.

PERFORMANCE REVIEW

Your Company has delivered satisfactory results despite several challenges including rising costs, severe competitive pressures and sluggishness in customer countries. We are pleased to report that market conditions for your Company''s products were better exploited with focused investments in the markets and products supplemented by significant first- to-launch advantages. Your Company continued to invest to add to its market presence for existing products, widen the geographical reach both within US and Europe, position new products by adding to shelf space, convert product approvals into invoices by reducing the time-to-market and rationalize on low value offers.

Team Aurobindo focused on continued growth within boundaries of its business plan. Initiatives were carefully planned in new products and investments were made in to prioritized growth markets. The year''s performance demonstrates Aurobindo''s strength in the injectables segment, successful introduction of new products in the developed markets, emphasis on cost competitiveness benefiting from the structured integrated business model, and the ability to seize the opportunities in a highly competitive market. There was a more positive momentum in a number of high value products and the teams are presently striving to ensure sustained growth quarter-on-quarter.

The consolidated revenue (net) from operations was higher over the previous year by 38.3% at Rs.80,997.9 million in the year under review as against Rs.58,553.2 million in the previous year. The formulation and API ratio during the year was 65:35. Consolidated net profit is Rs.11,728.5 million, a significant growth over Rs.2,938.6 million reported in the previous year. Your Company delivered earnings per share of Rs.40.2 as against Rs.10.1 in the previous year.

Gross revenue from formulation during the year was Rs.53,785 million, 58.8% higher on a year- on-year basis as compared to Rs.33,872 million reported in 2012-13. Your Company strived to increase its share of high value products and special efforts were made to build relationships in the developed markets. API revenues for the year under review were Rs.28,642 million, a growth of 12.9% over the previous year, on account of favorable demand scenario as well as focused efforts at enhancing product realizations.

EBITDA at the consolidated level for the year was Rs.21,552.1 million, which is 26.6% of consolidated revenue (net), and has gone up by 142.3% over 2012-13. Profitability during the year under review has improved due to better sales and business mix which had favorable impact on material consumption to net sales. Cost of materials for the year under review was 44.5% of consolidated revenue (net) in comparison to 51.1% in the previous year.

As far as foreign exchange is concerned, the closing rupee dollar rate was Rs.59.915 on March 31, 2014 while it was Rs.54.285 on March 31, 2013. The rupee has been highly volatile through the year and has depreciated by 10.4% during the financial year. This has resulted in a net exchange loss of Rs.2,030.5 million during the year which includes an amount of Rs.2,022.2 million on borrowings adjusted to finance charges as per revised Schedule VI of the Companies Act, 1956.

Europe and the rest of the world geographies recorded a sale of Rs.11,355 million, thereby growing at 28.4% over the previous year, and in ARV formulation sales by 12% to Rs.8,402 million. As in the previous year, strategic action was taken to be selective in building products and markets that contribute to the bottom line.

In terms of segmental contribution to the formulations revenue, the share of US was 63.2% against 51.7% in the previous year. Similarly, European as well as the rest of the world was 21.2% against 26.2% and ARV was 15.6% against 22.1% in the previous year. The segmental shift in both API and formulations is reflective of your Company''s efforts to improve margins and this trend is expected to continue.

In generic markets of US, UK, Germany, Spain, France and Netherlands, your Company is progressing well. Additional thrust to raise the marketing presence and gain margin is ongoing in countries such as Japan, Portugal and Italy. Focused efforts were made during the year to improve bottomline, even as progress was made to expand markets.

In the formulation business, your Company identifies and secures success by market adapted product development together with quick and effective commercializing of new launches. Aurobindo has had a significant success in its new launches, especially in the US. The priority has been to optimize the portfolio and capitalize on the opportunities for our product offering. Efforts were made to increase market share and leverage existing relationships. Aggressive positions were taken in preparations for new launches. Aurobindo today has a balanced portfolio withvisibility for clearly defined plan to climb the value chain.

Your Company has completed acquisition of certain commercial operations in Western Europe from Actavis plc. Aurobindo acquired personnel, commercial infrastructure, products, marketing authorizations and dossier licence rights in seven European countries. Actavis and your Company have also entered into a mutually beneficial long-term commercial and supply arrangement which envisages collaboration with Actavis to ensure business continuity and a smooth transition.

Following receipt of clearances from competent authorities, your Company intends to combine the strength of both enterprises (including its vertically integrated platform and existing commercial infrastructure) in these markets and to identify and maximise all opportunities to improve the Company''s performance. Your Company with its inherent cost competitiveness and group structure would build on Actavis'' strong market position in the West European countries and strive to become a significant generics player in Europe.

Your Company will position itself as one of the leading Indian pharmaceutical companies in Europe and strive to achieve a critical mass in Western Europe with a top 10 position in several key markets. The objective is to expand the front-end operations into five segments (generics, prescription products, over-the- counter products, hospital products and generics tenders) with approximately 1,250 dossiers and an additional pipeline of over 200 products.The efforts are on to achieve a rapid and successful integration.

Aurobindo has a clear commitment to creating value for all its stakeholders. Your Company has the strategies and core strengths required to expand the market, scale and efficiencies to leverage product portfolio globally and enhance the profitability.

OUTLOOK

Aurobindo is building momentum on its way to become one of the world''s leading generic pharmaceutical companies. The efforts of the past in setting up a formidable foundation with several drivers of growth have started to pay off. The Company has carefully crafted architecture for sustained growth with a robust structure of manufacturing systems, large regulatory approved product basket, an enviable geographic and marketing spread created by a reservoir of talented and experienced managers and employees focused on piloting the Company''s staircase of growth.

The global pharmaceutical market has several driving factors, which primarily include demand for cost effective drugs to meet the needs of growing population, gradual increase in life expectancy, and a shift towards generics for a range of drugs with a greater focus on lifestyle diseases. Aurobindo anticipated and prepared itself for the paradigm over the years.

The Company has technologies for collecting and synthesizing complex chemistry to face industry challenges of patent cliff,more efficient and compliance conscious processes to offer cost effective products that answer the needs of markets coping with spiraling healthcare cost. Actions to improve the operational efficiencies, especially in the area of supply chain are expected to support profitability and cash flow going forward.

Every effort now is to sustain the momentum to become a stake holder friendly company that meets customer expectations, grows to be a preferred employer, and expands earnings while it enhances shareholder value.

RESEARCH & DEVELOPMENT

During the year under review, research and development team transferred the technology to manufacture certain niche drug substances for regulatory filings of injectable products. This technology involves complex chemistry and tough purification procedures.

As per your Company''s cost optimization plan, chemical technology was modified/optimized to reduce the raw materials cost for a number of drug substances. Further, R&D activities were initiated to identify and develop neutraceutical products. During 2013-14, process development to manufacture a few neutraceutical products have been completed.

Three chemical research laboratories and one analytical research laboratory were added to the existing facilities and several experienced scientists were recruited during the year to strengthen the chemical process development capabilities. The know-how and analytical capabilities were enhanced to test and to comply with the stringent requirements of the new guidelines on elemental impurities in drug substances.

As in the past, your Company will always focus on the timely development of drug substances for Paragraph IV filings to avail ''Day-One Launch'' opportunities in the US market.

ENVIRONMENT, HEALTH & SAFETY

Environment management operations across your Company stabilized and consistency in performance was improved as compared to previous years. Constant efforts were made to conduct gap analysis and develop more comprehensive processes. Implementation of operating procedures was given emphasis to guide supervisory managers to improve their performance levels and compliance monitoring.

Two new projects were taken up at Unit I; one project is already put to operation and another project is under installation. Environmental clearance project taken up for Unit VIII was completed and formal clearance from the agency concerned is awaited.

The outcome of initiatives taken up during 2013-14 helped in sustaining and supporting uninterrupted manufacturing/project activities at all manufacturing facilities. Aurobindo is consciously reducing the Company''s environmental footprint.

Efforts to improve safety culture during 2013-14 include formation of apex EHS committee in manufacturing units; Setting up of EHS council at corporate level to facilitate corporate review of EHS; Safety training for contractor workmen; Near miss reporting and reward scheme with visible increase in near miss reporting and prevention of incidents; and, integration of safety into job descriptions.

HAZOP studies initiated in the earlier year are progressing well, and has been completed for 38 products during the year under review.

Based on the root causes of incidents which happened at Aurobindo in the last three years, specific targeted safety training was given to all production employees on importance of earthing, nitrogen blanketing, usage of conductive materials, and avoiding solvent concentrations in closed rooms.

Specific targeted training was also given to all employees in the engineering stream on handling of machine tools, hand tools and work permit system. Hardware improvements have been taken up such as installation of nitrogen blanketing breather valves and fire alarm system, installation of explosion flaps in tray driers, etc.

Your Company offers a safe, healthy and pleasant atmosphere to work. In order to raise the level of awareness and consciousness amongst employees to ensure compliance with relevant occupational health and safety SOPs and legislations, dedicated staff have been earmarked to actively raise the benchmarks and minimize the risk levels.

SUBSIDIARIES/JOINT VENTURES

As approved by the Board the reports and accounts of the Subsidiary Companies are not annexed to this report. A statement pursuant to Section 212 of the Companies Act, 1956 however, is annexed.

The audited financial statements of the subsidiaries are available for inspection during business hours at the Registered Office of the Company. Members interested in obtaining a copy of the accounts of the subsidiaries may write to the Company Secretary. The audited financial statements of subsidiary companies are also kept at the Registered Office of the respective subsidiary companies.

HUMAN RESOURCES

Aurobindo has an inspired team of around 9,500 employees that is led by professional managers committed to building a robust pharma company focused on quality systems, regulatory affairs, and compliance standards with predictability in operations and results. The team has set store by accountability, takes pride in delivering what it sets out to do and overcome challenges.

Your Company is creating a stimulating and rewarding work environment. The leadership team supports initiatives, fosters commitment and consciouslyworks towards people development. Employee engagement processes are designed to let individuals and teams to define the goals with freedom to get things done. Your Company empowers people to drive the business and take the risks that are appropriate and necessary.

A remarkable facet of Aurobindo''s employee engagement philosophy is to motivate employees to gain experience, build capabilities and skills and overcome challenges. Training tools are provided to prepare them for larger responsibilities.

DIRECTORS

As per the provisions of the Companies Act, 2013, Mr. M. Madan Mohan Reddy and Mr. K. Nithyananda Reddy will retire in the ensuing annual general meeting and being eligible, seek re-appointment. The Board of Directors recommends their re-appointment.

Further, the Board also recommends the appointment of the existing independent Directors viz. Mr. M. Sitarama Murty, Dr. D. Rajagopala Reddy and Mr. K. Ragunathan as Independent Directors under the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, not liable to retire by rotation and to hold office for the period as stated in their respective resolutions and the explanatory statement forming part of the Notice of the Annual General Meeting. Dr. C. Channa Reddy, the existing independent Director will continue his term in accordance with the provisions of the Companies Act, 2013.

A brief profile of Mr. M. Madan Mohan Reddy, Mr. K. Nithyananda Reddy, Mr. M. Sitarama Murty, Dr. D. Rajagopala Reddy and Mr. K. Ragunathan are provided in the Report on Corporate Governance forming part of the Annual report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirm that in the preparation of the Statement of Profit and Loss for the year ended March 31, 2014 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed:

ii. appropriate accounting policies have been selected and applied consistently and judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the year have been made;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by your Company, as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is enclosed as an annexure to this report

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges in India is annexed.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is presented in a separate section forming part of this annual report.

AUDITORS & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report. The notes on financial statements referred to in the Auditors'' Report are self explanatory and do not call for any further comments.

The statutory auditors of the company, M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of the statutory auditors, if re-appointed. The Audit Committee and the Board of Directors recommend the re-appointment of M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, as statutory auditors of the Company up to 30th Annual General Meeting of the Company with the approval of the Members.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been reappointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of the Company for the year 2013-14. The due date for filing Cost Audit Report of the Company in XBRL format for 2012-13 was September 30, 2013 and the same was filed with the Ministry of Corporate Affairs on September 27, 2013.

Based on the recommendations of the Audit Committee, the Board of Directors appointed M/s. Sagar & Associates as Cost Auditors of the Company for 2014-15. As per the provisions of the Companies Act, 2013 the remuneration of the cost auditor as approved by the Board is to be ratified by the Members.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of 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 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees are motivated and have shown initiative in improving the Company''s performance.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors'' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

CORPORATE SOCIAL RESPONSIBILITY

In terms of Section 135 of the Companies Act, 2013, the Company has constituted Corporate Social Responsibility Committee to monitor the CSR activities of the Company in terms of the provisions of the Companies Act, 2013.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

Under ESOP 2006 Scheme, 30,000 options were granted and 245,731 equity shares of Rs.1 each were issued and allotted during the year. Details of the options granted up to March 31, 2014 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Company wishes to thank the customers and business associates for their solid support and encouragement. Your Board recognizes competent individuals run this Company with their hard work, contribution and dedication. Your Directors wish to place on record their gratitude to the central and state governments, banks, financial institutions, and shareholders and seek their continuing support for the progress of the Company.

For and on behalf of the Board

Hyderabad K. RAGUNATHAN

May 30, 2014 Chairman

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Mar 31, 2013

Dear Members'',

The Directors are pleased to present the 26th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2013.

FINANCIAL RESULTS

Standalone financials Rs. Million

2012-13 2011-12

Gross Turnover 55695.0 43787.3

Profit before depreciation, finance costs, tax and exceptional items 9845.7 5925.6

Depreciation/Amortization 1713.9 1429.4

Finance costs 1147.4 931.1

Exchange difference adjusted to borrowing cost (Revised Schedule VI) 1353.2 1744.7

Profit before tax 5631.2 1820.4

Provision for tax/Deferred tax 671.3 (952.1)

Profit after tax before exceptional item 4959.9 2772.5

Less: Exceptional items - 3198.6

Net Profit/(Loss) after exceptional items 4959.9 (426.1)

Balance brought forward from previous year 14797.1 15561.5

Balance available for appropriation 19757.0 15135.4

Appropriations

Dividend on equity shares 436.8 291.1

Tax on dividend 72.0 47.2

General reserve 496.0 -

Surplus carried to Balance Sheet 18752.2 14797.1

DIVIDEND

Your Directors have proposed a final dividend of 50% i.e. Rs.0.50 per equity share and with the interim dividend of 100% i.e. Rs.1 per equity share, the total dividend for the financial year 2012-13 comes to 150% i.e. Rs.1.50 per share on the equity share of Rs.1 against 100% i.e. Rs.1 per share of Rs.1 paid in the previous year.

FINANCIAL HIGHLIGHTS

Your Company continued to show steady performance, achieved increase in revenues, operating profit and bottom line during the financial year 2012-13, despite the macroeconomic challenges in almost all the overseas markets. On the manufacturing side, there was severe stress due to shortage as well as high cost of power purchased from state grids. Currencies remained volatile, with intermittent sharp movements.

Your Company demonstrated its resilience and the strength of its business model by expanding the product portfolio and aggressively marketing them, managing costs better in an inflationary environment, stepping up its manufacturing efficiencies and by staying focused on steadily raising its bottom line. Every effort as in the past was made to expand the global footprint and consolidate the position in the existing growth markets. Overall, the focus was on improving shareholder value.

The consolidated gross revenue from operations was higher by 27% at Rs.60008.3 million in the year under review, over the previous year. The formulation and API ratio during the year was 57:43. Consolidated net operating income inclusive of dossier income of Rs.759.8 million is Rs.58553.2 million showing a growth of 26.5% over the previous year.

Consolidated gross revenue from formulation during the year was Rs.33872 million, 30.1% higher on a year-on-year basis. In the API markets, both domestic and overseas, your Company strived to increase its share of high value products and special efforts were made to build relationships in the developed markets. API revenues for the year under review were Rs.25362 million, a growth of 23% over the previous year, on account of favorable demand scenario as well as focused efforts at enhancing product realizations.

There has been a year-on-year improvement in EBITDA by 200 basis points. EBITDA before forex adjustments and other income for the year was Rs.8891 million which is 15.2% of net operating income and has gone up by 45.7% on year-on-year basis. Profitability during the year under review has improved due to better sales and business mix which had favorable impact on material consumption to net sales by 3.4%, and staff cost to net sales marginally decreased by 25 basis points and other expenses to net sales increased by 1.1%.

As far as foreign exchange is concerned, the closing rupee dollar rate was Rs.54.285 on March 31, 2013 while it was Rs.50.875 on March 31, 2012. The rupee has been highly volatile through the year and has depreciated by 6.7% during the financial year. This has resulted in a net exchange loss of Rs.1634.4 million during the year which includes an amount of Rs.1353.2 million on borrowings adjusted to finance charges as per revised Schedule VI. It has also increased your Company''s borrowings by approximately Rs.2100 million as on March 31, 2013 on account of restatement.

REVIEW OF OPERATIONS

Formulations sales to USA was Rs.17526 million, recording a 48.1% growth over the previous year. Europe and Rest of the World geographies recorded a sale of Rs.8843 million in 2012-13, an increase of 39.8% over the previous fiscal. There was a 4.6% fall in ARV formulation sales at Rs.7503 million, in an endeavour to shed low margin products and optimize on our margins. Strategic action was taken to be selective in building products and markets that contribute to the bottom line.

In terms of segmental contribution to the formulations revenue, the share of US was 51.7% against 45.5% in the previous year. Similarly, European as well as the rest of the world was 26.1% against 24.3% and ARV was 22.2% against 30.2% in the previous year. The segmental shift in both API and formulations is reflective of your Company''s efforts to improve margins and this trend is expected to continue.

In generic markets of US, UK, Germany, Spain and the Netherlands, your Company is progressing well. Additional thrust to raise the marketing presence and gain margin is ongoing in countries such as Japan, Portugal and Italy. The subsidiaries in the US have turned around and are substantially improving their sales.

In respect of US business, your Company has had a balanced growth between new product introductions and the base business. There was an increased presence with key customers. The marketing efforts were directed towards expanding strongly through retail chains with new product launches. Necessarily, aggressive positions were taken from an inventory standpoint in preparations for those launches; wherever required, your Company built inventory to take advantage of launch needs, while trimming inventory costs as a routine. Today, Aurobindo has a well balanced portfolio and a pragmatic growth plan.

In the formulation business, your Company is spreading across the geographies to grow in each of the geography independently rather than trying to be focused on only one or two markets. In case of API business, the objective is to grow high value and niche products while taking advantage of the vertically integrated manufacturing systems.

Your Company targets to grow the ARV business while ensuring that the focus remains on the bottom line. During the year, in keeping with this strategy, Aurobindo participated in tenders where the Company could quote a price which will ensure competitive margins rather than just chasing the top-line. There is a very large portfolio of ARV products with your Company and the objective is to grow this business while climbing the value chain.

OUTLOOK

Going ahead, introduction of new products by your Company is expected to be a strong driver in the formulations market with about 20 to 25 launches in 2013-14 and efforts shall continue to increase the penetration in the existing baseline business.

The focus on API is to reduce the dependency on the pure Betalactam products. Your Company has 279 DMFs filed in the U.S., Europe and Japan. While Aurobindo has a growing presence in the US and several countries of Europe for over several years, a determined effort is being made to make inroads in to Japan. Today Aurobindo exports six API products and intermediates to several prestigious customers in that country. Purposeful efforts are being made to grow this quality-conscious market, and your Company has been able to maintain more than 50% growth in Japan in each of the last six quarters.

Aurobindo has a wide array of well-balanced products on offer. Some are specialized and can drive higher margins, some belong to niche spaces such as ophthalmics, while others are typical mass market, high volume molecules that are expected to boost the bottom line over the next couple of years. There are others that are gaining higher volumes which are being leveraged to take advantage of the in-house API strengths, vertical integration of capacities and improving manufacturing efficiencies.

There are a large number of ANDA applications that have been submitted in the past few months, which await approvals, adding to the pipeline of products on offer. Your Company believes that there would be significant increase in the product basket over next 2 to 3 years. Aurobindo is making a foray in to the injectables market which could gain traction in the latter half of 2013-14. Given that there are fewer competitors than in solid orals, the objective is to gain around 10-15% market share as the Company moves forward.

It needs to be highlighted that the improved performance in 2012-13 was without the manufacturing capacities at Unit-IV, Unit-VI and less than optimum capacity utilization at Unit-XII. The recent spate of approvals would further ramp up the capacity utilization at Unit-VII. Team Aurobindo is fairly confident of improving the market share and top line every quarter of the year ahead.

It is expected that European operations in countries such as Italy and Portugal would stabilize in 2013-14 and turn around a year later. Meanwhile operations in countries such as UK, the Netherlands, Germany and Spain are targeted to grow faster than the previous year. Volumes in Canada are also picking up and Australian operations are likely to stabilize over the next 18 to 24 months.

Aurobindo has made a foray into the CRAMS business in the past few months and believes that it should become a significant portion of the income in about 3 years. While it has started contributing to the business model, and is likely to improve gradually, your Company shall work to ramp up the CRAMS business, build a mutually advantageous relationship with customers, become a dependable resource and contribute meaningfully to the revenue stream.

Your Company will be overcoming a major challenge in availability and cost of power. The possibility of plant shutdown and cost escalation through diesel generation threatened the operations of almost all your Company''s facilities. The year under review witnessed an energy crisis which included three-day week power holiday, surprise power- cuts and prohibitive cost increases. Considerable relief has now been worked out by independently installing the meters in all but one of the production units, to do power trading through the power exchange which has brought down the cost and added to the certainty of power availability.

RESEARCH & DEVELOPMENT

During 2012-13, your Company developed certain niche products involving complex chemistry and technology and strived to reduce cost of certain fast moving/high volume products. Further, your Company has opted to go for establishing the CRAMS division and a few projects have been activated.

Your Company carried out process development/scale-up of various niche products (such as Fondaparinux Sodium, Isosulfan Blue, Iron Sucrose, Fosaprepitant Dimeglumine etc.), which involve complex chemistry and complicated purification technology. Further, Aurobindo has developed the processes to commercialize different Carbapenem antibiotics, such as Meropenem, Imipenem, Doripenem and Ertapenem. During the year under review, your Company has also initiated R&D in the area of nutraceuticals, peptides and biocatalysis.

New technologies and processes were worked out to develop soft gel capsules, infusion bags, OTC ANDA products, OTC monograph products and suspension based injectables.

Looking ahead, your Company would focus on the R&D activities in the coming year as well, with special emphasis on the development of niche products, nutraceuticals, peptides and biocatalysis and strengthen its CRAMS business.

ENVIRONMENT, HEALTH & SAFETY

During the year under review, your Company initiated benchmarking itself with the best in the industry by conducting safety management evaluation (SME) in partnership with one of the best consultants in the chemical industry for safety performance. The consultants visited all the API facilities, interacted with senior management personnel and representative employee groups, observed the operations, and provided key insights on areas of improvement. Action is being taken on all their suggested improvements.

Substantial investments were made in the area of wastewater treatment, recycling and disposal. As part of the Company policy and to comply with regulations, disposal of wastewater generated from manufacturing processes of API units to common effluent treatment plants has been stopped. Two of your Company''s facilities have even achieved zero liquid discharge competencies. In 2012-13, it was decided to sustain the same level of operating conditions of treatment systems and demonstrate consistency in performance of organization in wastewater treatment.

More importantly, your Company could successfully demonstrate to the government on the commitment of Aurobindo to environment management relating to its activities through the inspections and audits conducted by high level technical expert committees constituted for the purpose.

SUBSIDIARIES/JOINT VENTURES

As approved by the Board the reports and accounts of the subsidiary companies are not annexed to this Report. A statement pursuant to Section 212 of the Companies Act, 1956 however, is annexed.

Annual accounts of the subsidiary companies are kept at the Registered Office of the Company as well as at the Registered Offices of the respective subsidiary companies for scrutiny by any member. Members interested in obtaining a copy of the accounts of the subsidiaries may write to the Company Secretary.

HUMAN RESOURCES

A governing council has been constituted to serve as an apex body in Aurobindo to shape HR agenda and actions within the organization with the objective of enhancing business performance and capability of people under a strong value based framework. The council gives a broad direction and support initiation for talent management programs in line with short term and long term business imperatives/organizational needs.

A new chapter has been added in the area of strategic leadership development by partnering with a leading consulting firm. This initiative aims at providing role clarity, mapping of functional and behavioral skills and consequently creation of individual development plan and covers all middle level and senior level leadership positions across API and formulations business.

The management has given adequate attention to employee communications to share various developments in the business and at the organizational level. Apart from a periodic newsletter mode of communication, half-yearly Town Hall meeting is organized at API and formulations level to address the group at large and communicate various developments and apprise them of short and long term dimensions of the business and for better interactions. There is a perceptible improvement in the corporate performance and proactive approach to business, by employees at all levels.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. P. Sarath Chandra Reddy, Mr. K. Ragunathan and Dr. M. Sivakumaran retire by rotation at the ensuing Annual General Meeting. All of them being eligible offer themselves and seek re-appointment.

Mr. P.V. Ramprasad Reddy relinquished his responsibilities as Whole-time Director of the Company with effect from December 1, 2012 and continues to be a Non-Executive Director on the Board. He has been appointed as Managing Director designated as Chairman in Aurobindo Pharma USA Inc., US, the wholly owned subsidiary of the Company with effect from December 1, 2012.

Mr. Ravindra Y. Shenoy ceased to be the Joint Managing Director of the Company due to his resignation with effect from November 9, 2012.

A brief profile of Mr. P. Sarath Chandra Reddy, Mr. K. Ragunathan and Dr. M. Sivakumaran are provided in the Report on Corporate Governance forming part of the Annual report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirm that in the preparation of the Statement of Profit and Loss for the year ended March 31, 2013 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed:

ii. selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of a Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS'' & AUDITORS'' REPORT

The statutory auditors'' report is annexed to this report.The notes on financial statements referred to in the Auditors'' Report are self explanatory and do not call for any further comments.

M/s. S.R. Batliboi & Associates LLP, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2013-14.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been reappointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of the Company for the year 2012-13. The due date for filing Cost Audit Report of the Company in XBRL format for 2011-12 was February 28, 2013 and the same was filed with the Ministry of Corporate Affairs on February 27, 2013.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of 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 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmonious and cordial. The employees stand motivated and have shown initiative in improving the Company''s performance.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors'' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme-2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

Under ESOP 2006 Scheme 1,715,500 options were granted and 90,000 equity shares of Rs.1 each were issued and allotted during the year.

Details of the options granted up to March 31, 2013 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Company is grateful to the customers and business associates for their support and encouragement. Your Board is appreciative of the passion, dedication and commitment demonstrated on the job by all the employees and is confident that they shall continue to underwrite the Company''s growth. Your Directors wish to place on record their gratitude to the valuable clientele, Union and state governments, banks, financial institutions, and shareholders and seek their continuing support, guidance, and assistance in all our future endeavors.

For and on behalf of the Board

Hyderabad K. RAGUNATHAN

May 30, 2013 Chairman

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Mar 31, 2012

The Directors are pleased to present the 25th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2012.

FINANCIAL RESULTS

Standalone financials Rs.Million

2011-12 2010-11

Gross Turnover 43787.3 42299.9

Profit before depreciation, finance costs, tax and exceptional items 5925.6 10142.2

Depreciation/Amortization 1429.4 1250.4

Finance costs 931.1 550.2

Exchange difference adjusted to borrowing cost (revised Schedule-VI) 1744.7 -

Profit before tax 1820.4 8341.6

Provision for tax/Deferred tax (952.1) 2116.5

Profit after tax before exceptional item 2772.5 6225.1

Less: Exceptional items 3198.6 287.1

Net Profit/(Loss) after exceptional items (426.1) 5938.0

Balance brought forward from previous year 15561.5 10900.9

Balance available for appropriation 15135.4 16838.9 Appropriations

Dividend on Equity Shares 291.1 587.2

Tax on Dividend 47.2 96.4

General Reserve - 593.8

Surplus carried to Balance Sheet 14797.1 15561.5

DIVIDEND

Your Directors have recommended a dividend of 100% i.e. Rs1 per equity share of Rs1 against the dividend of Rs2 per share on the equity share of Rs1 paid in the previous year.

In view of the loss for the financial year ended March 31, 2012 the dividend is proposed to be paid out of accumulated profits of the Company.

FINANCIAL HIGHLIGHTS

Your Company''s performance must be viewed against an extremely challenging year for the western economies and a highly volatile currency with a tendency to turn weak. Several of the advanced markets that we deal with experienced weak growth, while the emerging markets were implementing policies to dampen inflation. While these undermined business confidence, the volatile rupee biased towards a weakening trend added to the pressure throughout the financial year.

The first half of the current fiscal was challenging on account of lower formulation sales, full impact of the USFDA alert on Unit VI Cephalosporin manufacturing facility, subdued demand environment in Europe, disruption in operations due to regional unrest and exchange loss on repayment of foreign currency borrowings.

The fact that we achieved remarkable presence in each of our markets, improved our volume sales and earned steadily growing margins, underlines the robust business that Aurobindo has created and the benefit of the actions your Company has taken to optimize operations and hold costs on a sustainable basis.

However, there was a decline in dossier income by Rs1958 million on year-on-year basis. Dossier income is non-recurring and subject to periodic variability. The US formulation sales was shaded to the extent of a potential USD 36 million as a full-year impact due to import alert.

Despite constraints, consolidated net operating income was Rs46274 million showing a growth of 5.6% over the previous year. Gross sales from formulations have been at Rs26020 million, which is 7.4% higher on year-on-year basis.

The ARV sales have grown by 13.4% to Rs7866 million during the year under review. Europe and the rest of the world geographies recorded a sale of Rs6315 million, thereby growing at 17% over the financial year 2010-11. Gross sales from API have been at Rs20634 million which is 14.5% higher over the corresponding previous fiscal while the SSP sales grew by 11.4%. There is a decline in Cephalosporin sales to the extent 11.8%. However, non-betalactam (non-penicillin and non-cephalosporin) product sales has seen a rapid growth at 76% at Rs6870 million during the year over Rs3901 million last year.

Profit from operations before other income, finance costs, foreign exchange gain/loss, exceptional items, depreciation/ amortization and tax for the year was Rs6101 million which is 13.2% of net operating income, declined as compared to the previous year by 36.7%.

As already referred, EBITDA was impacted due to lower dossier income by Rs1958 million. Loss of margin is mainly due to full year sales impact on USFDA alert on Unit-VI, material consumption to net sales higher by 2.5% on account of change in sales mix, increase in staff cost by 1.4% mainly due to the new hiring in Europe and USA, increase in other expenses such as power, fuels, consumables and freight by 1.2%. Further, your Company booked redemption premium of Rs3198.6 million while the outstanding FCCBs were redeemed on due date in the first quarter of the financial year.

As far as foreign exchange is concerned, the closing rupee- dollar rate was Rs50.875 on March 31, 2012 while it was Rs44.595 on March 31, 2011. The rupee has been highly volatile and depreciated by 14.1% during the financial year. This has resulted in a net exchange loss of Rs2232.9 million during the year includes an amount of Rs1744.7 millions on borrowings adjusted to finance charges as per revised Schedule VI. It has also increased your Company''s borrowings by approximately Rs3500 million as on March 31, 2012 on account of restatement.

REVIEW OF OPERATIONS

Your Company consolidated its business during the year and climbed the value chain by focusing on quality of its processes and products, controlling the variable costs, building on its relationship with its customers and enhancing the commitment towards environment, health and safety.

On the product and process front, your Company worked on time cycle reductions by practicing lean manufacturing concepts to improve productivity. Similarly, process stabilization efforts increased yields, while newer methods of recycling of solvents added to by-product recoveries. Energy costs account for approximately 5.75% of total revenue and the organization was audited and sensitized to make judicious and effective use of energy to minimize costs, strive for saving potential of 12% and enhance competitive position.

Several scale up efforts were attempted successfully which helped launch new products. A new API plant was commissioned to cater exclusively to the quality conscious Japanese market.

Members would be gratified to note that your Company has been launching one new product in major markets, every month.

Despite increasing the product base and stepping up volume deliveries, the capacity utilization is at around 50% in formulation facilities and about 70% in the API units. The investments made in the past in vertically integrated mega manufacturing facilities have provided headroom for growth and enabled your Company to compete better for several more quarters. The built-in manufacturing flexibility offers Aurobindo the opportunity to optimize its product mix, reduce the time- to-launch new products after regulatory approvals and provide customers a single-window approach to draw from the large basket of approved products from Aurobindo.

OUTLOOK

Aurobindo''s growth strategy will be to work towards profitable growth, focus on high value products, ramp up its operations, with higher utilization of capacities for top ten products both in APIs and formulations and deliver larger volume of existing products and by commercializing newer products that have received regulatory approvals. Your Company has a basket of largest number of approved products. For instance, the regulatory approvals for generics (ANDAs) as at March 31, 2011 were 133 which stood increased to 145 as at March 31, 2012.

The Company''s manufacturing facilities are approved by several leading regulatory agencies like US FDA, UK MHRA, WHO, Health Canada, MCC (South Africa) and ANVISA (Brazil). The Company''s robust product portfolio is spread over 6 major therapeutic/ product areas encompassing antibiotics, anti-retroviral, CVS, CNS, gastroenterological, and anti-allergic, supported by an outstanding R&D set-up. The Company is marketing these products globally, in over 125 countries. The intellectual property and a well-organized manufacturing and marketing team will continue to add traction to the growth trajectory.

The Company has benefited from several learning opportunities to improve its processes with specific emphasis on quality and regulatory requirements. At the same time, Aurobindo believes that improvements need to be closely monitored internally as a dynamic day-to-day exercise and every effort made to meet/ exceed expectations. The level of vigilance has been raised to offer excellence through proactive initiatives to carve out more focus and add impetus to the quality culture in the production process. The accountability levels stand enhanced with responsibility for vendor quality, adherence to quality management systems and post-marketing surveillance.

Your Company has a mutually advantageous relationship with some of the best pharma companies globally, who have shown enormous trust in Aurobindo meeting their market needs. Your Company will continue to strive building a strong relationship and be a dependable resource for all of them. Their feedback has been positive in areas such as collaboration, order handling and product quality which helped your Company to further hone its systems and processes. Systematic monitoring and management of customer relationships, reliable processes and enhanced product quality has enabled Aurobindo to understand and meet their needs and expectations.

Internally, several cost control measures have been put in place by strengthening the budgeting process and carefully controlling cost of operations and reducing overhead and capital expenditure. Production unit-wise focus on bottom line improvement, alignment of input: output ratios, productivity improvements and inventory management to lower the holding costs are some of the aggressive efforts made to implement a unified policy to enhance margins.

RECOGNITION

The export promotion council for EOUs and SEZ under Ministry of Commerce & Industry, Government of India has selected your Company for our outstanding export performance in 2009-10. Mr. Jyotiraditya M. Scindia, Hon''ble Minister for State for Commerce & Industries handed over the award on May 17, 2012.

RESEARCH & DEVELOPMENT

The year under review has been one of the formidable years for the API R&D team in terms of the technology transfer dossiers (TTD) submissions, patent filings and regulatory agency submissions. In addition to working on close to 30 new products, the team also worked on the various improvement initiatives on the commercialized products.

The R&D function has 68 projects under various stages of development including 5 products with first-to-file (FTF) opportunities, 7 processes for patent applications, and 10 recipients. Several other products are under active development in therapeutic areas such as ophthalmic, inhalation and injectables and a few more have been taken up for cost optimization.

During the year, the API R&D Center has been shifted from Bachupally to Pashamylaram in a seamless manner and is fully operational. The new Center is dedicated to API research (synthetic and analytical) along with creating relevant intellectual property rights and is duly supported by a strong regulatory affairs team.

ENVIRONMENT, HEALTH & SAFETY

Your Company is committed to ensuring ecological balance and protecting the health and safety of its employees and neighborhood. In the long run, environmentally conscious process design and development are central ways to reduce harmful ecological impact. Therefore, the Company has taken up initiatives to optimize energy efficiency, minimize substances harmful to the environment and people, and recycle materials and resources as far as practicable.

A few of the initiatives undertaken in 2011-12 include, introduction of activity based risk assessment for non-process activities, enhancement of the safety culture and work ethics on the shop floor and empowerment of the safety committees charged with the task of improving the well-being of the people and the neighborhood. More specifically, some of the safety initiatives undertaken include:

- Process risk analysis in all the API units;

- A hazard and operability study (HAZOP) i.e. a structured and systematic examination of existing process/operations were undertaken to review all processes in API units in order to identify and evaluate problems that may represent risks to personnel or equipment and steps taken to prevent them;

- Activity based risk assessment for non-process activities (warehouse, engineering, QC) in both API and formulation units;

- Devised specific handling procedures for hazardous chemicals and training personnel on those procedures;

- Process safety testing - Determination of thermal conductivity of all powders, flammability of powders which are non-conductive in character; and,

- Review of layouts and product improvement and development by the EHS team, before finalization of new projects.

Several initiatives were also made in the area of environmental management. A few of them are listed below:

- Achieved zero process liquid discharge status at two API Units (Units VIII and IX);

- Installed on-line stack monitoring equipment for boiler stacks at Units I, V and VI;

- Installed and commissioned stripper, multiple-effect evaporator (MEE) and agitated thin film drier (ATFD) at Unit XI;

- Installation of stand-by wastewater treatment systems at Units V and IX (MEE and ATFD) for business continuity;

- Entered in to agreements with cement units for disposal of liquid organic wastes at ''zero'' handling and disposal costs;

- Sewage treatment plant at Unit I;

- Initiation for installation of continuous ambient air quality monitoring station at Unit XI; and,

- Accredited to ISO:14001 certification for Units VI (A&B).

During the year under review, your Company was proud to receive the National Award for Energy Excellence & Energy Management

- 2010 conferred by the Confederation of Indian Industry (CII) for Unit I.

FOREIGN CURRENCY CONVERTIBLE BONDS

During 2006-07, your Company had issued 150,000 Zero Coupon Foreign Currency Convertible Bonds of USD 1,000 each due in 2011 (Tranche A Bonds) and 50,000 Forward Conversion Convertible Bonds of USD 1,000 also due in 2011 (Tranche B Bonds). After repurchase and cancellation (43,750 of Tranche A bonds and 17,050 of Tranche B bonds), the outstanding 106,250 of Tranche A bonds and 32,950 of Tranche B bonds were repaid on due date in May, 2011 at 146.285% and 146.991% respectively to the principal amount.

The redemption premium (Yield to Maturity) has been charged to the Statement of Profit and Loss and is disclosed as an exceptional item in the financial results. By virtue of such redemption, all outstanding FCCBs have been fully redeemed and extinguished.

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Board of Directors of the Company have approved and passed a resolution in this regard. A statement pursuant to the provisions of Section 212 of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any Member at the Registered Office of the Company as well as at the Registered Office of the respective subsidiary companies. Any Member interested in a copy of the accounts of the subsidiaries may write to the Company Secretary.

HUMAN RESOURCES

Your Company has been ably managed and competitively better positioned by the commitment demonstrated by all the 8,635 employees in their effort generate sustainably profitable growth. They are the key building block for implementing the Company''s strategy and the financial year 2011-12 saw them respond flexibly to the dynamic changes in a highly challenging globalized market.

Several business excellence initiatives started in 2010-11 under the program Aurobindo Achieving Competitive Edge (A CE) has been further strengthened during the year under review with the involvement of more teams at shop floor level. Significant number of project proposals on yield improvement, quality enhancement, waste reduction and productivity upscale are implemented at both formulation and API units. A cross

functional team has been formed to validate the results and share the critical learning across the organization. A CE platform has given significant opportunity to the people at all levels to exercise their creative talents and channelize their potential to impact the company''s performance in a positive manner.

DIRECTORS

Dr. K. Ramachandran ceased to be Director due to his resignation from the Board with effect from May 3, 2011. The Board places on record its appreciation for the services rendered by him as a Director during his association with the Company.

Dr. C. Channa Reddy has been appointed as an Additional Director of your Company with effect from January 18, 2012 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office up to the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment.

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Mr. M. Sitarama Murthy, Dr. D. Rajagopala Reddy and Dr. P.L. Sanjeev Reddy retire by rotation at the ensuing Annual General Meeting. All of them being eligible, offer themselves and seek re-appointment except Dr. Sanjeev Reddy.

Dr. P.L. Sanjeev Reddy expressed his intention not to seek re-reappointment. The members of the Board place on record the deep sense of appreciation for the services rendered by Dr. Sanjeev Reddy during his tenure as a member of the Board.

The re-appointment of Dr. M. Sivakumaran, and Mr. M. Madan Mohan Reddy, Wholetime Directors are being proposed at the ensuing Annual General Meeting.

Mr. K. Nithyananda Reddy seeks to relinquish his responsibilities as Managing Director of the Company and the Board has appointed him as Wholetime Director of your Company designated as Vice Chairman with effect from June 1, 2012 subject to approval of the Members at the ensuing Annual General Meeting.

Mr. N. Govindarajan has been appointed as a Director of the Company with effect from June 1, 2012 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office up to the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment. Further, Mr. Govindarajan has been appointed as Managing Director of the Company with effect from June 1, 2012 subject to approval of the Members at the ensuing Annual General Meeting.

Mr. Ravindra Y. Shenoy has been appointed as a Director of the Company with effect from June 1, 2012 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office up to the date of the ensuing Annual General Meeting and being eligible, offers himself for appointment. Further, Mr. Shenoy has been appointed as Joint Managing Director of the Company with effect from June 1, 2012 subject to approval of the Members at the ensuing Annual General Meeting.

Mr. P.V. Ramprasad Reddy seeks to relinquish his responsibilities as Executive Chairman of the Company with effect from June 1, 2012 and continues to be on the Board as a Whole time Director.

Mr. K. Ragunathan, an Independent Director, has been appointed as Non-Executive Chairman of the Board with effect from June 1, 2012.

A brief profile of Dr. C. Channa Reddy, Mr. M. Sitarama Murthy, Dr. D. Rajagopala Reddy, Mr. K. Nithyananda Reddy, Dr. M. Sivakumaran, Mr. M. Madan Mohan Reddy, Mr. N. Govindarajan and Mr. Ravindra Y. Shenoy are provided in the Report on Corporate Governance forming part of the Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Statement of Profit and Loss for the year ended March 31, 2012 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed:

ii. had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the loss of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary Mr. S. Chidambaram with regard to compliance of conditions of corporate governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges in India is annexed.

AUDITORS & AUDITORS'' REPORT

M/s. S.R. Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2012-13.

The notes on financial statements referred to in the Auditors'' Report are self explanatory and do not call for any further comments.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been reappointed as Cost Auditors of the Company with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2011-12. The due date for filing cost audit report reports of the Company for 2010-11 was September 30, 2011 and the same was filed with the Ministry of Corporate Affairs on September 26, 2011.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of 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 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

As in the earlier years, your Company had cordial relations with its employees at all levels. There is a continuous effort to step up leadership and technical skills that has helped them function better, stay focused on systems and best practices and in the process, build a robust Aurobindo with capabilities to face emergent challenges.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors'' Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956 the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of Employee Stock Option Scheme - 2004 (ESOP 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year 1,205,000 options were granted under ESOP- 2006. Further, no options were exercised and no shares were allotted under the ESOP Schemes.

Details of the options granted up to March 31, 2012 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Board is grateful for the passion, dedication and commitment demonstrated on the job by all employees and is confident that they shall continue to underwrite the Company''s growth. Your Company as in the past, looks forward to the support and encouragement from the customers and business associates. Your Directors thank the banks, financial institutions, government departments and shareholders and seeks their continuing guidance and assistance in all our future endeavors.

For and on behalf of the Board

Hyderabad P. V. RAMPRASAD REDDY

May 29, 2012 Chairman

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Mar 31, 2011

The Directors are pleased to present the 24th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2011.

FINANCIAL RESULTS

Rs. Million

2010-2011 2009-2010

Gross Turnover 42299.9 33196.0

Profit before Depreciation, Interest, Tax and exceptional items 10096.9 8579.4

Depreciation/Amortization 1250.4 954.6

Interest (Net) 504.9 523.3

Profit before tax 8341.6 7101.5

Provision for tax/Deferred tax 2116.5 1865.8

Profit after tax before exceptional item 6225.1 5235.7

Exceptional items (287.1) 21.9

Net Profit after exceptional items 5938.0 5257.6

Balance brought forward from previous year 10900.9 6493.2

Balance available for appropriation 16838.9 11750.8

Appropriations

Dividend on Equity Shares 587.2 277.4

Tax on Dividend 96.4 46.7

General Reserve 593.8 525.8

Surplus carried to Balance Sheet 15561.5 10900.9

DIVIDEND

Your Directors have proposed a final dividend of 100% i.e. Rs.1 per equity share of Rs.1 and with the interim dividend of 100% i.e. Rs.5 per equity share of Rs.5, the total dividend for the financial year 2010-2011 comes to 200% i.e. Rs.2 per share on the equity share of Rs.1 against 100% i.e. Rs.5 per share of Rs.5 paid in the previous year.

FINANCIAL HIGHLIGHTS

Members will be happy to know that your Company is in its Silver Jubilee year. This eventful journey has been a period of planned growth and success, and your Directors take this opportunity to compliment each one of the Members, customers, business associates and employees for their encouragement, support and co-operation. Your Company shall maintain the momentum and stands dedicated to strive for continued growth and thereby meet every stakeholder expectation in the future, as well.

The year under review witnessed Aurobindo cross the one billion dollar revenue mark, a landmark that truly reflects the presence

your Company has in the global pharmaceutical market. The challenges of the market were met vigorously due largely to the enormous advantage that your Company has built with its customer relationships, product basket, manufacturing capabilities and organizational strength. Aurobindo demonstrated great speed and flexibility in its marketing and manufacturing efforts and resilience while dealing with competitive pressures. The performance results showcase the success.

The financial year 2010-2011 saw significant improvement in all parameters including revenues, operating income, profit before tax, profit after tax and earnings per share. The revenue growth of over 27.4% at Rs.42299.9 million was a culmination of our strategic initiatives in widening our presence in Europe and USA, penetrating better with larger basket of products with existing customers and commercializing of new products as well as creating footprints in untapped markets such as Japan.

Net profit after tax at Rs.5938 million was higher by 12.9% over ~ Rs.5257.6 million in the previous year. It is a new high for your

Company translating to Earnings per Share of Rs.18.56 (Face Value Rs.1) as compared to Rs.16.63 (adjusted for split in Face Value from Rs.5 to Rs.1). Effectively, your Company earned 11.6% higher earnings over the previous year.

REVIEW OF OPERATIONS

Despite the difficult economic environment, your Company delivered sales growth both in USA and Europe. Your Companys total volume was higher in each of the existing markets. More importantly, there were higher deliveries in all the key therapeutic segments.

Your Company continues to hold an enviable basket of a large number of products in several therapeutic segments approved by regulatory authorities across the globe. The marketing efforts were galvanized to create demand, deliver on expectations and ensure top line growth. Converting approvals and quickly commercializing them remains one of your Companys key strengths.

The newly commercialized manufacturing unit, Unit VII (SEZ) at Gedcherla added to the existing huge production capabilities of your Company to support the marketing thrust. The unit at Dayton (USA) was significantly scaled up to deliver high value products.

Consolidation of facilities helped add newer products in all other facilities. Across all facilities, production was optimized and utilization was stepped up. Overall, capacity utilization was higher month after month from June 2010.

Large state-of-the-art manufacturing facilities have created headroom for growth for your Company to meet market expectations. Rising volume deliveries and new product launches during 2010-2011 are a testimony to your Companys improving competitiveness.

OUTLOOK

Aurobindos business strategies and financial position are on solid footing even as the dynamics of the global market are challenging and changing increasingly towards cost effective generic formulations. This change is accelerating and driving the need for Aurobindo to continuously renew and upgrade its operations. Your Company is equal to the challenges and expected results are being achieved by the dedicated teamwork on the manufacturing side as well as by aligning with the needs of the customers.

Today, greater traction is visible in formulation sales in USA, Europe and the emerging markets. Working closely with MNCs has enabled Aurobindo to become a preferred choice supplier.

During 2011-2012, your Company is striving towards commercializing 12 new generics, with 4 of them expected to be on a first-to-launch basis. Higher volumes, higher utilization and improvements in productivity would improve visibility of revenues, margins and earnings.

Your Companys clear focus on quality, product development, manufacturing efficiencies, productivity improvements and quicker reach to market will drive the future success. This focus will enable Aurobindo to enter the financial year 2011-2012 with optimism and keep the Company on track to deliver revenue of USD 2 billion in 2013-2014.

In order to further strengthen and provide focus to the growing volume of APIs and formulation business, the Board has constituted a Restructuring Committee to explore and evaluate possible growth linked restructuring options, inter alia, including spin-off or demerger or any other suitable form, with the ultimate objective of enhancing shareholders value and customer satisfaction. The Restructuring Committee, consisting of Directors including independent directors, will take all necessary steps and recommend the best options to the Board for consideration.

RESEARCH & DEVELOPMENT

The Company has maintained its momentum to enlarge the product pipeline. Given the nature of the pharmaceutical industry, all activities translate into results after considerable investment of inputs, necessary process validations, stringent quality assurances and uncompromising compliance needs. Therefore, there is a time lag in achieving results and/or commercializing new products.

Your Company has invested in a large pool of skilled talents to actively create newer products. Their accomplishments have been in areas as varied as product development, quality enhancement, process development, customer support and knowledge sharing.

During the year under review, the R&D team has entered into newer therapeutic areas such as ophthalmic products and contraceptives. Validation batches are planned to be taken in 2011-2012. The R&D team in USA have commercialized and launched new products and many more are expected in the forthcoming financial year.

Overall, your Company filed 46 new patent applications taking the total applications filed to 464. During the year under review, Aurobindo filed 380 DMFs taking the aggregate of DMFs filed in different countries to 1,937. At the same time, 98 formulation dossiers were filed taking the aggregate of formulation dossiers filed in different countries to 588. As at March 31, 2011 your Company holds 133 FDA approved/tentatively approved ANDAs, and 156 formulation dossier approvals from other regulatory authorities.

Every R&D effort is focused on enhancing the competitiveness and long term sustainability of your Company.

QUALITY MANTRA

Your Company is pledged to supplying highest quality medicines to customers founded on the belief that Aurobindo is committed to healthier life. This presupposes that your Company at all times is regulatory compliant, meets stringent requirements of customers and that the drugs sold shall provide health care and wellness for the consumers.

While your Company has put in place the necessary systems, regularly all the systems, procedures and controls are continuously fine-tuned. As a consequence, the quality systems have been revisited to strengthen them while training inputs have been stepped up to elevate the level of awareness, supervision and controllership.

Aurobindo is striving to ensure that it is benchmarked as the best-in-class and thereby provide reassurance to all stakeholders. Every effort is hence being made to ensure that there is no compromise on quality of products and processes.

ENVIRONMENT, HEALTH & SAFETY

At Aurobindo, in every activity, your Company safeguards its employees, facilities and the environment, conserves natural resources and promotes environmental awareness. In the pursuit of the corporate goal as a responsible corporate, your Company has initiated several activities and adopted best practices such as:

/ Stepped up investments on wastewater treatment systems across all facilities;

. Installed stripper system, multiple effect evaporation, agitated thin film drier systems and reverse osmosis systems established across API Units;

. Established multiple effect evaporation systems in three formulation units;

. Significantly reduced wastewater disposal to common effluent treatment facility;

. Explored avenues for disposal of hazardous wastes through alternate destruction and reuse technologies; and,

. Instituted continuous on-line monitoring systems for treated wastewater and on-line emission of suspended particulate matter. Safety and health of all the employees continues to be of paramount importance. Considerable work has gone into making our operations safer by implementation of Standard Operating procedures, ergonomics initiatives, regular safety audits etc. Among the focus area during the year under review were as follows:

. Introduction of risk assessments to identify all risks in the work area and devise and implement proper controls to mitigate the risk;

/ Training to all new employees and contract workmen;

/ Identification of process hazards at lab stage itself and usage of calorimetric reaction.

Your Company stayed on track to get accreditation to ISO 14001:2004, a key objective of the year. One of the API units achieved ISO 14001:2004 certification while three formulation units are on the verge of being certified.

FOREIGN CURRENCY CONVERTIBLE BONDS

As Members are aware, in 2005, your Company had issued 60,000 Foreign Currency Convertible Bonds of USD 1,000 each due in 2010. After conversion into equity shares, repurchase and cancellation, the outstanding bonds aggregating to face value of USD 2.118 million were repaid on due date in August, 2010.

During 2006, your Company had issued 150,000 Zero Coupon Foreign Currency Convertible Bonds of USD 1,000 each due in 2011 (Tranche A Bonds) and 50,000 Forward Conversion Convertible Bonds of USD 1,000 also due in 2011 (Tranche B Bonds).

The outstanding FCCBs as at March 31, 2011 is 139,200 bonds and are due for repayment as per the terms of the Offering Circular. Your Company is confident of discharging its commitment.

EQUITY SHARE CAPITAL

The Board of Directors of your Company at their meeting held on November 3, 2010, approved the sub-division of equity shares of the face value of Rs.5 each in the Company into equity shares with the face value of Rs.1 each. With approval of the Members at the Extraordinary General Meeting of the Company held on December 23, 2010, the sub-divided shares were issued to Members as on February 11, 2011 (the Record Date).

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Board of Directors of the Company have approved and passed a resolution in this regard. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any investor at the Registered Office of the Company as well as at the Registered Office of the respective subsidiary companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

HUMAN RESOURCES

Aurobindo is well known for its execution capabilities, manufacturing strengths, product quality, ability to keep to its commitments and be a reliable partner for its customers. Over the years, organizational strengths have enabled your Company to grow faster than the industry average in each of the past decade.

The momentum continued during the year under review with a new high in volume sold, highest ever revenues and profit after tax. Your Company has been well served by all the employees, Aurobindos valuable resources.

As at March 31, 2011 employees on roll constituted 8,317, higher by 3% over 8,066 as on the same date a year ago.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. K. Ragunathan, Dr. M. Sivakumaran and Mr. M. Madan Mohan Reddy, Directors retire at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

The re-appointment of Mr. P.V. Ramprasad Reddy, Chairman and Mr. K. Nithyananda Reddy, Managing Director is being proposed at the ensuing Annual General Meeting.

A brief profile of Mr. K. Ragunathan, Dr. M. Sivakumaran, Mr. M. Madan Mohan Reddy, Mr. P.V. Ramprasad Reddy and Mr. K. Nithyananda Reddy are provided in the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit and Loss Account for the year ended March 31, 2011 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed;

ii. had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

GROUP

Pursuant to an intimation from the promoters, the names of the promoters and entities comprising group as defined under the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 are disclosed in the Annual Report for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary Mr. S. Chidambaram confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS

M/s. S.R.Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2011-2012.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been re- appointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2010-2011. The due date for filing Cost Audit Report Reports of the Company for 2009-10 was September 30, 2010 and the same was filed with the Ministry of Corporate Affairs on September 18, 2010.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of 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 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

As in the earlier years, your Company had cordial relations with its employees at all levels. There is a continuous effort to step up leadership and technical skills that has helped them function better, stay focused on systems and best practices and in the process, build a robust Aurobindo with capabilities to face emergent challenges.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors Report. However, as per the provisions of Section 219 (l)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the members of the Company excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of Employee Stock Option Scheme - 2004 (ES0P 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ES0P 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year no options were granted under ESOP-2004 and ESOP-2006. 29,707 equity shares of Rs.5 each were issued and allotted under the ESOP-2004 Scheme.

Details of the options granted up to March 31, 2011 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Directors place on record their sincere appreciation for the dedication and commitment of the employees at all levels and their significant contribution to your Companys growth. Your Company is grateful to the customers and business associates for their support and encouragement. Your Directors thank the banks, financial institutions, government departments and shareholders and look forward to having the same support in all our future endeavors

Annexure-I to the Directors Report

RESEARCH AND DEVELOPMENT

Specific areas in which Research and Development carried out by the Company

The Company carried out process development and commercialized various products in cephalosporin antibiotics and antiviral compounds. Further, it continued process research for maximizing the yield with improved quality.

Benefits derived as a result of the above R&D

The Companys continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

Newer products and processes have facilitated Aurobindo to expand its market.

Future plan of action

Your Company has ambitious plans to invest further for enhancing its R&D capabilities.

Expenditure on Research and Development , Million

2010-2011 2009-2010

Capital 338.4 42.1

Recurring 1,394.0 972.7

Total R&D expenditure 1,732.4 1014.8

as a percentage of total turnover 4.10 3.06

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts, in brief, made towards technology absorption, adaptation and innovation:

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the Company.

Benefits derived as a result of the above efforts, e.g., product improvement, cost reduction, import substitution etc.

The processes were simplified and thereby achieving reduction in cost and improvement in products.

Particulars of imported technology: Nil

Foreign Exchange Earning & Outgo

Activities relating to exports, initiatives taken to increase exports. Registration of more product dossiers with global authorities, setting up of foreign subsidiaries and commencement of activities at subsidiaries and joint ventures.

For and on behalf of the Board

P. V. RAM PRASAD REDDY

Chairman Hyderabad,

May 9, 2011.

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Mar 31, 2010

The Directors are pleased to present the 23rd Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2010.

FINANCIAL RESULTS



Rs. Million

2009-2010 2008-2009

Gross Turnover 33196.0 28852.5

Profit before Depreciation, Interest, Tax and exceptional items 8579.4 2945.1

Depreciation/Amortization 954.6 824.1

Interest (Net) 523.3 550.6

Profit before tax 7101.5 1570.4

Provision for tax/Deferred tax 1865.8 321.2

Profit after tax before exceptional item 5235.7 1249.2

Exceptional items 21.9 36.2

Net Profit after exceptional items 5257.6 1285.4

Balance brought forward from previous year 6493.2 5619.4

Balance available for appropriation 11750.8 6904.8 APPROPRIATIONS

Dividend on Equity Shares 277.4 242.0

Tax on Dividend 46.7 41.1

General Reserve 525.8 128.5

Surplus carried to Balance Sheet 10900.9 6493.2





DIVIDEND

Your Directors have proposed a final dividend of 40% i.e., Rs.2 per equity share and together with the interim dividend of 60% i.e. Rs.3 per equity share, the total dividend for the financial year 2009-10 amounts to 100% i.e. Rs.5 per share on the equity shares of Rs.5 against 90% i.e. Rs.4.50 per share paid in the previous year.

FINANCIAL HIGHLIGHTS

Your Company achieved all-time high revenues, operating income, EBITDA, operating profit before tax and profit after tax. New highs were also recorded in several other parameters such as volume sold and Earnings per Share, while your Company became long-term debt free and holds its net assets free of all encumbrances.

The gratifying part of the performance was the accomplishment in a year which saw recessionary conditions in several countries, where your Company has a presence, at a time of high volatility in raw material prices and exchange rate.

The revenues at Rs.33196 million for the year under review was higher by 15% over Rs.28852.5 million reported in 2008-09. Volume sold was higher year-on-year and more significantly, with higher average realization per product sold.

Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) excluding foreign exchange adjustments was Rs.7723.6 million in 2009-10 higher by 47.9% over Rs.5223.3 million earned in 2008-09. EBITDA margin excluding foreign exchange adjustments was 23.3% in the year under review compared to 18.1% in the previous year. It is relevant to mention that your Company had an exchange gain of Rs.855.8 million during the year, while there was a foreign exchange fluctuation loss of Rs.2278.2 million in 2008-09.

Profit after Tax after exceptional items was Rs.5257.6 million during the year under review, a significant improvement over Rs.1285.4 million reported in 2008-09. The diluted Earnings per Share for the year is hence Rs.83.16 as compared to Rs.19.86 for the previous year.

REVIEW OF OPERATIONS

In the face of global recessionary conditions and the consequent severe competitive pressures, your Company strengthened its presence in all its geographies and improved its marketing reach. The expanded product portfolio and the investments made to augment manufacturing capacities were leveraged to gain market share, strengthen distribution channels and build further on the existing relationships with customers.

Formulations sales (Consolidated) during the year under review were up by 32.6% to Rs.18520 million from Rs.13971 million in 2008-09. Formulations sales constituted 53.6% of gross sales, while it accounted for 46.2% in the previous year.

As in the earlier years, your Company continued to pursue newer product offerings to respond to market needs. While Aurobindo has a presence in several therapeutic segments in the formulations business, the focus has been to increase the offerings in six segments in all the addressable markets, both in the premium and emerging markets. In order to ensure a sustainable growth, the product pipelines were further expanded by filing 22 more ANDAs covering both Indian and US facilities.

Your Company has a mutually rewarding relationship with all its multinational customers including some of the best pharmaceutical majors across the globe and strives to meet their exacting demands. Volume sales have been rising and your Company has been working to keep to their expectations, especially quality and timelines.

Manufacturing capacity stands optimized with the commissioning of the Unit VII (SEZ) at Jedcherla as well as de- bottlenecking at other units. The manufacturing facility at Dayton, New Jersey, U.S.A. commenced commercial production during the year under review. Capacities were added both at the active ingredient units as well as in the formulation units. While some of them were commissioned in the course of the year, the full benefits at both revenue and profitability levels are anticipated in the financial year 2010-11.

There has been improvement in efficiencies, increase in power generation and moderate increase in operating margins. While productivity and yields have increased, focused efforts are being made to improve on the key parameters at the manufacturing units.

EVENTS AFTER THE BALANCE SHEET DATE

As Members are aware, your Company in 2006 had issued 60,000 Zero Coupon Foreign Currency Convertible Bonds (bonds) due in 2010 of $ 1,000 each on the following terms:

- either convertible by the holders at any time on or after September 20, 2005 but prior to close of business on August 1, 2010. Each bond will be converted into 83.12 fully paid up equity share with par value of Rs.5 per share at a fixed price of Rs.522.036 per share at a fixed exchange rate conversion of Rs. 43.3925 = $ 1; or

- redeemable in whole but not in part at the option of the Company at any time on or after February 25, 2008 and on or prior to August 1, 2010 as per the terms and conditions of the bonds mentioned in the Offering Circular;

- redeemable on maturity date at 139.954% of its principal amount if not redeemed or converted earlier.

The bonds have been since determined and crystallized and all except 2,118 bonds of $ 1,000 each have been converted/ repurchased. The balance bonds are due for repayment as per the terms of the Offering Circular.

OUTLOOK

Going ahead, your Company will continue to focus on higher capacity utilization and augmenting the existing large portfolio of generic products. The marketing plans are also tailored to becoming more geographically diversified in the emerging markets and deepen the presence in the premium markets in order to have a more balanced and derisked growth.

Your Company is well-positioned for the long term with its proven business strategy that has withstood the challenges of global economic environment, regulatory compliant product basket, sound financials and dedicated team of people working together to achieve superior results.

However, in the recent past, raw material prices have tended to rise leading to cost push and supply-demand mismatch. Your Company is cognizant of such challenges and is geared to face them. Aurobindos vertically integrated manufacturing facilities enable producing and delivering on due dates as well as managing margin pressures.

In order to ensure sourcing reliability and provide for growth requirements, your Company will continue to invest in manufacturing systems and add to capacity of both intermediates and active ingredients. Similarly, investment will continue to be made to add to product pipeline as well launch products soon after they are approved by regulatory authorities. Today, your Company is managed by competent and experienced people and initiatives are being taken to add to resources, equip them for present and future needs and enable them to face the challenges of a high energy organization on a fast track.

In the ultimate analysis, your Company will maintain its momentum to grow sustainably and reach the stated objective of $ 2 billion revenues by 2012-13.

RESEARCH & DEVELOPMENT

Your Companys research and development (R&D) activities are focused on developing new products and new non-infringing processes, as well as maintaining and improving the quality of the existing products. Research is also being carried out on risk characterization, patenting new process patents, creating a framework for ensuring regulatory compliance and for understanding the future needs of the markets.

Efforts are on to launch a focused program of Quality by Design to ensure and improve assurance standards in processes and products. Risk reduction such as developing technologies that have the potential to ensure valence and conform to regulatory requirements is a central part of the R&D program.

Aurobindos strength is its research based chemistry capabilities and expertise in developing dosage forms that meet compliance standards and market needs. On an on-going basis, your Company continues to invest in high-end talents to identify new products and non-infringing processes and improve process controls.

During the year under review, the R&D Centre filed 22 ANDAs including 7 Paragraph IV applications. The R&D facility in the U.S.A. filed 3 ANDAs for controlled substances. The new formulation facility in SEZ has been formally inaugurated and has commenced filing ANDAs /Dossiers.

Further, 49 more patent applications covering improved processes for various active pharmaceutical ingredients and pharmaceutical compositions were filed. Your Company is proud to report that the patent Appreciation Award was received for its API process from the Indian Drug Manufacturers Association, Mumbai.

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Company has obtained in writing an exemption in this regard from the relevant authority. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary Companies are kept for inspection by any investor at the Registered Office of your Company as well as at the Registered Office of the respective subsidiary Companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

ENVIRONMENT & SAFETY

Your Company places considerable emphasis on its commitment and responsibility towards the health and safety of its employees as well as on its environmental footprint. Considerable care is taken to not only meet the regulatory standards, but also to become best-in-class in the pharmaceutical industry.

Large investments have been made in competent and experienced supervisory human resources, state-of-the-art hardware, latest technologies, updated systems and processes and focused training of employees. Site visits were made by the supervisory teams to familiarize themselves and train to get a hands-on understanding of the international practices.

The team at Aurobindo is upgrading the facilities to implement a comprehensive safety improvement and capacity building program.

On the environmental front, some of the initiatives taken during the year include:

- establishing environmental management infrastructure across all units;

- streamlining the process of disposal of certain categories of hazardous wastes through alternate destruction and reuse technologies;

- promoting and encouraging innovative emerging technologies of water treatment; and

- progressing towards achieving zero liquid discharge.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. K. Ramachandran, Dr. P.L. Sanjeev Reddy and Mr. P. Sarath Chandra Reddy, Directors retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

A brief profile of Dr. K. Ramachandran, Dr. P.L. Sanjeev Reddy and Mr. P. Sarath Chandra Reddy are provided in the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit and Loss Account for the year ended March 31, 2010 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed;

ii. had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

CREDIT RATING

Fitch Ratings has upgraded and assigned a National Long Term Issuer rating of AA-(ind) with a Stable Outlook to your Company.

The upgrades reflect an improvement in your Companys financial and credit profile during 2009-10. The ratings also factor in Fitchs expectation of a further improvement in Aurobindos capacity utilization, strong visibility of business growth and profitability as well as a reduction in its financial risks despite the additional capital expenditure planned during 2010-11.

GROUP

Pursuant to an intimation from the promoters, the names of the promoters and entities comprising group as defined under the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 are disclosed in the Annual Report for the purpose of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS

M/s. S.R. Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2010-11.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been re-appointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2009-10.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

HUMAN RELATIONS

Aurobindos 8,066 (as at March 31, 2010) employees bring their skills and motivation to their workplace and their specialized knowledge is valuable to steer the future growth. Employees play a major role in putting Aurobindos strategy into practice and are being encouraged to innovate, improve and measurably contribute to creating a strong and successful pharmaceutical company.

Your Companys goals include instilling the organizations values and commitments, recruiting and maintaining skills tuned to present needs and future growth, providing employees with a continually safe, stimulating and satisfying work environment.

Your Board would like to thank all of the employees of Aurobindo for the role that they have played in 2009-10 to build a stronger, fitter organization.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors Report. However, as per the provisions of Section 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of Employee Stock Option Scheme - 2004 (ESOP-2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP-2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year, no options were granted under ESOP-2004 and ESOP-2006. 150,030 equity shares were issued and allotted under the ESOP-2004 scheme.

Details of the options granted up to March 31, 2010 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENT

Your Directors place on record their sincere appreciation for significant contribution made by the employees at all levels through their dedication, hard work and commitment and look forward to their continued support. Your Company has hugely benefited by the encouragement and patronage of its large number of customers and is deeply indebted to them. Your Directors are grateful to the central and state governments for their continued support for the Companys expansion plans and wish to place on record their appreciation and acknowledge with gratitude the co-operation extended by regulatory authorities, banks, financial institutions and shareholders and look forward to having their support in the future.

For and on behalf of the Board

P. V. RAMPRASAD REDDY Chairman

Hyderabad August 5, 2010

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Mar 31, 2009

The Directors are pleased to present the 22nd Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2009.

FINANCIAL RESULTS

Rs. Million 2008-2009 2007-2008

Gross Turnover 28852.5 24092.8 Profit before Depreciation, Interest, Tax and Exceptional Item 2945.1 4355.5 Depreciation/Amortization 824.1 746.0 Interest (net) 550.6 161.1 Profit before Tax 1570.4 3448.4 Provision for Tax/Deferred tax 321.2 540.6 Profit after tax before Exceptional items 1249.2 2907.8 Exceptional items 36.2 – Net Profit after Exceptional items 1285.4 2907.8 Balance brought forward from Previous year 5619.4 3207.9 Balance available for appropriation 6904.8 6115.7 APPROPRIATIONS Dividend on Equity Shares 242.0 175.7 Tax on Dividend 41.1 29.8 General Reserve 128.5 290.8 Surplus carried to Balance Sheet 6493.2 5619.4

DIVIDEND

Your Directors have proposed a final dividend of 30% i.e. Rs.1.50 per equity share and together with the interim dividend of 60% i.e. Rs.3 per equity share, the total dividend for the financial year 2008-09 comes to 90% i.e. Rs.4.50 per equity share of Face Value of Rs.5 against 65% i.e. Rs.3.25 per equity share of Face Value of Rs.5 paid in the previous year.

REVIEW OF OPERATIONS

Your Company achieved commendable results with larger volume sales and higher revenues. While the environment was challenging with low liquidity and several government health services under pressure with budgetary constraints, Aurobindo stepped its volumes and revenues and introduced larger number of products. The geographical reach was improved with presence in 125 countries and more significantly several products launched in earlier years gained market volume. Your Company therefore witnessed volume growth from existing products and new launches.

One of the key strengths of your Company is the ability to shorten the time-to-market and convert product approvals into invoices. With a large basket of approvals added in the past three years, your Company has built a strong presence in North America, Europe and key markets such as Latin America and South Africa. The vertically integrated manufacturing operations from key intermediates to formulations is a unique strength that brings flexibility, shortens the production cycle and offers consistency in product quality.

Your Company leveraged on its strengths and has been able to report 98.17% improvement in volume of formulations over the previous year while the value climbed by 41.8% at Rs.12035.3 million over the corresponding period.

Gross revenue for the year at Rs.28852.5 million was 19.75% higher over the previous year and is the highest ever recorded by your Company. The costs were contained with material consumption rising by 19.35% at Rs.16416.2 million as compared to Rs.13754.6 million in the previous year. Similarly the manufacturing expenses were higher by only 9.12% at Rs.2725.0 million in the same comparative period.

The profit after tax and extraordinary items was lower at Rs.1285.4 million as compared to Rs.2907.8 million. During the year under review, there was exchange fluctuation loss of Rs.2278.2 million while there was an exchange fluctuation gain of Rs.481.3 million in 2007-08. Members will appreciate that the business has shown better earnings and have been shaded only be extraordinary and non-recurring items.

Your Company has preferred to be conservative and prudent in its accounting and has booked its known losses with the result the diluted EPS for the year is Rs.19.9 on the face value of Rs.5.

LICENSING AND SUPPLY AGREEMENTS WITH PFIZER

Your Company entered into a partnership with Pfizer Inc., a global leader in pharmaceuticals and executed a licensing and supply agreements for several solid dosage and sterile products. The agreement allows access to Pfizer to exploit the sales potential for these products through its global commercial presence. Your Company has a large manufacturing base approved by several regulatory authorities with strong product portfolio for the manufacture of formulations. The partnership alliance hence is mutually beneficial.

The partnership has been initiated with a few products and their execution agreements will pave the way for further strengthening the relationship and accelerate the mutually beneficial strategy for expanding the products portfolio of solids, steriles and product reformulations.

This is an exciting opportunity for your Company and facilitates stability in earnings and accelerates its growth plans. The current agreements are targeted towards the U.S. and European markets and both parties will continue to explore ways to further extend this partnership.

ACQUISITION OF TRIDENT LIFE SCIENCES

During the current financial year the Company has acquired 100% equity stake in Trident Life Sciences Limited at its book value as on June 30, 2009. The total cash-flow for the acquisition was Rs.388.4 million. The acquisition will give your Company fill a critical gap in its manufacturing capabilities and an opportunity to enter the high-growth injectables business and further enhance its capabilities in providing comprehensive pharma manufacturing, distribution, services and solutions to its customers. It is also proposed for merger of Trident with the Company subject to the requisite approval of the shareholders, creditors of the Company and the Stock Exchange, the sanction of the High Court of Judicature at Hyderabad, Andhra Pradesh.

Trident is building liquid injectables facility in Medak District, A.P. which would be made regulatory compliant to supply regulated markets and is set to commence operations in early 2011. The facility being set up on 30.38 acres will manufacture general injectable range of formulation products, including glass vials for lyophilized sterile powder and liquids, ampoules, pre- filled syringes and blow-filled seals.

OUTLOOK

The investments made in research & development, product portfolio, manufacturing facilities, marketing infrastructure and skilled and competent human resources have started paying off. Your Company has been able to put them all together and expand the product offerings and enhance the business volume. This trend will continue.

Your Company has also been building long term relationships with customers and they in turn have reciprocated with large orders for Aurobindos products and services. All such efforts are creating sustainable long term growth and a more focused, more strategic and more profitable company of the future.

The commissioning of the SEZ Unit VII at Jedcherla, Andhra Pradesh will add to manufacturing capacity and optimize the manufacturing capabilities. Aurobindo is recognised by the customers for its ability to deliver on promises and commissioning of the new facility would improve on the due date performance and add to your Companys ability to accept large batch order sizes. The manufacturing economics would be further augmented and your Companys products can be more competitive.

The priorities are to expand volumes, meet expectations of customers and associates and in the process become cash positive, reduce the borrowings, improve cost of funds and make a significant impact on the overall results.

Your Company is conscious of its outstanding FCCBs and believes that improving Company fundamentals will enhance the shareholder value as well as the Companys ability to service commitments with a strong balance sheet.

Research & Development

Your Company is a knowledge led entity with focus on the customer needs. The strengths of Aurobindo commence at its research centre where products and processes are created that meet regulatory standards and address the needs of the consumer.

The R&D Centre continues to file ANDAs on an on-going basis, and strives for first-to-file status. Your Company has a technically competent team which ensures that all process controls and compliances are met.

Your Company has filed and received approvals for a very large number of products across several countries. With its research based chemistry capabilities and expertise in developing various dosage forms, your Company has product offers in six key therapeutic segments that have demand pull.

As soon as the approvals are received, your Company continues to scale up and commercialize them. Product basket will continue to grow and your Company is presently focused on offering high value, high growth and niche products.

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Company has obtained in writing an exemption in this regard from the relevant authority. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any investor at the Registered Office of your Company as well as at the Registered Office of the respective subsidiary companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

ENVIRONMENT & SAFETY

The manufacturing units comply with all relevant governmental regulations relating to Environment, Safety and Health. The Ministry of Environment and Forests, Government of India has accorded clearance for all the units of your Company. Regular safety audits are carried out in the plants. No major incidents have occurred at any of the plants that have led to any environmental liabilities.

Your Company as a responsible corporate citizen has been not only protecting the health of the employees but also safeguarding the environment. Health and safety of the employees are primary concern, and adequate training inputs as well as counseling are done to retain the awareness levels of the operating staff. Dedicated officials have been vested with the authority to follow through to ensure that employees protect themselves and those around them.

DIRECTORS

Dr. S. Bimal Singh ceased to be Director due to his resignation from the Board of the Company for his personal reasons with effect from October 30, 2009. The Board places on record its appreciation of the services rendered by him as a Director during his association with the Company.

Dr. D. Rajagopala Reddy has been appointed as an Additional Director of the Company with effect from October 30, 2009 and pursuant to Section 260 of the Companies Act, 1956 and Article 37 of the Articles of Association of the Company, he holds office as such up to the date of the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. In terms of Section 257 of the Companies Act, 1956, the Company has received notice in writing along with a deposit of Rs.500, from a Member signifying his intention to propose the candidature of Dr. D. Rajagopala Reddy as a Non-Executive Director of the Company. A separate Notice of the Annual General Meeting in this regard is being circulated to all the Members.

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. M. Sivakumaran, Mr. M. Madan Mohan Reddy and Mr. M. Sitarama Murthy, Directors, retire at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. The re-appointment of Dr. M. Sivakumaran and Mr. M. Madan Mohan Reddy as Whole-time Director(s) of the Company is being proposed at the ensuing Annual General Meeting.

A brief profile of Dr. D. Rajagopala Reddy, Dr. M. Sivakumaran, Mr. M. Madan Mohan Reddy and Mr. M. Sitarama Murthy are furnished in the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that:

i. in the preparation of the Annual Accounts for the year ended March 31, 2009, the applicable accounting standards have been followed;

ii. appropriate accounting policies had been applied consistently, judgement and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretary Mr. S. Chidambaram confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India is annexed.

AUDITORS

M/s. S.R. Batliboi & Associates, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditors of the Company for the financial year 2009-10.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been re- appointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2008-09 and the cost audit reports have been submitted to the Central Government in compliance of the statutory requirements.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

HUMAN RELATIONS

Your Directors are pleased to record their sincere appreciation of the contribution by the workmen, staff and managers at all levels. They have worked as a team to build world class manufacturing facilities, develop products that meet the stringent requirements of pharmacopoeia and global regulatory authorities, scale them up to commercialize and successfully launch the products across geographies and climb the value chain. They bring competence, skills and result oriented efforts and Aurobindos success in the market is a tribute to all the human resources of your Company.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Sec. 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors Report. However, as per the provisions of Sec. 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information. Any Member interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of "Employee Stock Option Scheme - 2004 (ESOP 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of "Employee Stock Option Scheme - 2006" (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year under review, no options were granted under ESOP- 2004 and ESOP- 2006. Further, no options were exercised and no shares were allotted under these Schemes.

Details of the options granted up to March 31, 2009 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Company has hugely benefited by the support and patronage of its large number of customers and is deeply indebted to them for their encouragement. Your Directors also wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by vendors, banks, financial institutions, government agencies and shareholders and looks forward to having the same support in all the future endeavors.

For and on behalf of the Board P. V. RAMPRASAD REDDY Chairman

Hyderabad November 12, 2009

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Mar 31, 2008

The Directors are pleased to present the Twenty First Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2008.

FINANCIAL RESULTS

Rs. Millions 2007-2008 2006-2007

Gross Sales 23511.2 19797.2

Profit before Depreciation, Interest and Tax including Extraordinary Income 4355.5 3217.3

Depreciation/Amortisation 746.0 718.4

Interest (Net) 161.1 187.3

Profit before Tax 3448.4 2311.6

Provision for Tax/Deferred Tax 540.6 20.8

Net Profit 2907.8 2290.8

Balance brought forward from previous year 3207.9 1303.1

Balance of Profit and Loss Account taken over on amalgamation - 0.1

Balance available for appropriation 6115.7 3594.0

Appropriations

Dividend on Equity Shares 175.7 133.4

Tax on Dividend 29.8 22.7

Transfer to General Reserve 290.8 230.0

Balance carried to Balance Sheet 5619.4 3207.9

DIVIDEND

Your Directors have proposed a dividend of 65% on the equity shares of Rs.5 each for the financial year 2007-08 against 50% paid in the previous year.

REVIEW OF OPERATIONS

Members would be happy to know that the revenues and net earnings were the highest in the history of the Company. Revenues were higher by 18.76% at Rs.23511.2 million over the previous year, while the net earnings were Rs.2907.8 million as compared to Rs.2290.9 million in the previous year. The impact of the volatility in the dollar affected both the top and bottom line, despite the hedging done to cushion the movements.

The financial results, however, do not reflect all the strides the business has made and the improvements in the product mix. Most of the initiatives have been in the nature of creating a marketing infrastructure as well as launching of large product portfolio built over a decade of R&D efforts.

Your Company made significant progress during the year under review gaining market presence, volume growth and visibility for its formulation products in all the addressable markets. Larger number of products were launched and there was good traction for most of them. Formulation revenues were higher by approximately 40% over the previous year and more important, a platform was created for future growth. Your Companys growth in U.S. and Europe was heartening considering the competitive pressures.

Marketing efforts during the year were focused on widening the reach as well as deepening them in the established markets. Indeed, for several products your Company improved market shares both in the U.S. and in Europe. Your Companys ARV products have gained leadership in the market and are now the preferred source for prestigious agencies under the PEPFAR and WHO programs.

Generally, the prices tended to be lower primarily on account of the competitive pressures, as well as due to increasing efforts by several governments to procure drugs under the health care programs. There was a marked preference for the generic products, a market segment in which your Company has been successful.

The challenges of the market were managed better by Aurobindo because of the vertically integrated manufacturing platform. The ability to support formulations from the fermentation stage in some of the key products, and the strategically built manufacturing strength in active pharma ingredients added to certainty of supplies, improved flexibility, shortened the time to market and kept the costs lower. Orders from customers with short lead times were accepted and executed.

Your Company also coped satisfactorily with the volatility in the raw material availability and price movements. Productivity improvements and better yields helped to moderate the price impact. The facility at China showed huge improvement with better quality strains and larger production. The year also saw higher capacity utilization at all the manufacturing facilities while maintaining top end product quality.

OUTLOOK

The Company has begun to see the benefits of its investment in R&D, technology and manufacturing facilities. There are larger product approvals on hand, and your Company is able to transfer the technology and commercialise the products at significantly rapid rate. The timelines from approval to launch in the market have been reduced, offering enormous strength to the marketing team. The pipeline is being further strengthened with the recent approvals and large product portfolio on hand.

Your Company has a well structured marketing team that is able to convert approvals into invoicing. The investment made in the market place and the expertise of the team will be leveraged to differentiate Aurobindo from competition. Channels to market have been broadened to increase revenue. These efforts allow the marketing team to better anticipate opportunities and shifts in the market and understand changing customer and market needs. With such knowledge, your Company is able to effectively manage the product mix to achieve highest possible market share and margins.

At the same time, your Company is reducing the time it takes to realize returns by participating aggressively in the most advantageous markets and generating revenue more quickly. Your Company uses fewer resources and spends less money to generate more value than the competition.

At the market level, Aurobindo is building long term relationships with customers who rely on the Company for consistent supply of high quality products and services. All such efforts are creating sustainable long term growth and a more focused, more strategic and more profitable company of the future.

RESEARCH & DEVELOPMENT

The strengths of research at Aurobindo are primarily in its ability to offer what the market wants. Your Company has filed and received approvals for a very large number of products across several countries. With its research based chemistry capabilities and expertise in developing various dosage forms, your Company has product offers in six key therapeutic segments that have demand pull.

The R&D Centre continues to file fresh ANDAs on an on-going basis, and strives to file for Paragraph IV challenges and seeks first to file status. Your Company has a technically competent team which ensures that all process controls and compliances are met.

As soon as the approvals are received, your Company will continue to scale up and commercialize them. Product basket will continue to grow and your Company is presently focused on offering high value, high growth products.

INVESTMENTS

Your Company made fresh investments during the year to add value to its business operations. The details of additional investments made during the financial year 2007-2008 were as follows:

Rs. Millions Subsidiary Country

Helix Healthcare B.V. The Netherlands

Aurobindo Pharma Produtos Farmaceuticos Limitada Brazil

APL Holdings (Jersey) Limited Jersey

Aurobindo Shanghai (Trading) Co. Limited China

APL Reasearch Centre Limited India

Form Amount

Equity 299.4

Equity 2.1

Equity 12.2

Equity 20.5

Equity 1.0

SUBSIDIARIES/JOINT VENTURES

The reports and accounts of the subsidiary companies are not annexed to this Report. The Company has obtained in writing an exemption in this regard from the relevant authority. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any investor at the Registered Office of your Company as well as at the Registered Office of the respective subsidiary companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

ENVIRONMENT & SAFETY

Your Company is giving utmost priority to the environmental considerations. The Company is continuously upgrading effluent treatment facilities and waste disposal methods to safeguard the environs.

Regular safety audits are carried out in the plants. No major incidents have occurred at any of the plants that have led to any environmental liabilities.

Your Company as a responsible corporate citizen has been not only protecting the health of the employees but also safeguarding the environment. Health and safety of the employees are primary concern, and adequate training inputs as well as counseling are done to retain the awareness levels of the operating staff. Dedicated officials have been vested with the authority to follow through to ensure that employees protect themselves and those around them.

DIRECTORS

Mr. Srinivas Lanka ceased to be Director due to his resignation from the Board of the Company w.e.f. October 17, 2007. The Board places on record its appreciation for the services rendered by him as a Director during his association with the Company.

Mr. K. Ragunathan has been appointed as Additional Director of the Company during the year. As per Article 37 of the Articles of Association of the Company, the appointment of Mr. K. Ragunathan requires approval of the Members at the ensuing Annual General Meeting.

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. S. Bimal Singh and Dr. K. Ramachandran, Directors retire at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

A brief profile of Dr. S. Bimal Singh, Dr. K. Ramachandran and Mr. K. Ragunathan are provided in the Report on Corporate Governance.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit and Loss Account for the year ended March 31, 2008 and the Balance Sheet as at that date:

i. the applicable accounting standards have been followed;

ii. had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Practicing Company Secretaries M/s. S. Chidambaram & Associates confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the stock exchanges is annexed.

AUDITORS

M/s. S.R. Batliboi & Co., Chartered Accountants are not seeking re-appointment as Statutory Auditors of the Company. M/s. S.R. Batliboi & Associates, Chartered Accountants, have expressed their willingness to act as Statutory Auditors of the Company. The Audit Committee and the Board of Directors recommend M/s. S.R. Batliboi & Associates as Statutory Auditors of the Company for the financial year 2008-2009.

COST AUDITORS

M/s. Sagar & Associates, Cost Accountants, have been re- appointed as Cost Auditors of the Company with the consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2007-2008.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure-I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

HUMAN RESOURCES

A knowledge company is built on the strength of the people. Aurobindo has been consciously adding skilled and experienced professionals on a regular basis. In the year under review, resources were added to the technical and research teams. They function in a decentralised environment, and are encouraged to produce the best results. It is an empowered team.

Aurobindo is a result oriented organisation, with tasks and milestones set in consultation with the team members. Results are achieved always on time, and the satisfaction of challenges and being part of a winning team motivates the staff.

Your Company recognises the need for formal human resources planning and strategy, and has initiated steps to create systems and procedures that will further enhance the work environment.

Your Company values the resources and will add to their satisfiers.

There was cordial relationship with employees at all levels.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Sec. 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors Report. However, as per the provisions of Sec. 219 (l)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

EMPLOYEE STOCK OPTION SCHEME

At the Annual General Meeting of the Company held on July 31, 2004 the Memebrs approved formulation of Employee Stock Option Scheme - 2004 (ESOP 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of Employee Stock Option Scheme - 2006 (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year 23000 options were granted under ESOP- 2006. Under ESOP - 2004, total of 42,060 options were exercised and 42,585 Equity Shares were issued and allotted (including 525 shares allotted for the options exercised last year) under the Scheme.

Details of the options granted upto March 31, 2008 are set out in the Annexure-II to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by banks, financial institutions, central and state governments, customers, medical fraternity and others and thank the shareholders for their continued confidence reposed in the Company.

For and on behalf of the Board

Hyderabad P. V. RAMPRASAD REDDY June 18, 2008 Chairman

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Mar 31, 2007

The Directors are pleased to present the 20th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2007.

Financial Results

Rs. Millions

2006-07 2005-06

Gross Sales 19797.2 14722.0 Profit before Depreciation, Interest and Tax including Extraordinary Income 3217.3 1888.5 Depreciation/Amortisation 718.4 511.2 Interest (net) 187.3 448.3 Profit before Tax 2311.6 929.0 Provision for Tax/Deferred Tax 20.8 235.2 Net Profit 2290.8 693.8 Balance brought forward from Previous Year 1303.1 522.7 Balance of Profit and Loss Account taken over on amalgamation 0.1 - Balance available for appropriation 3594.0 1216.5 Appropriations Dividend on Equity Shares 133.4 81.2 Tax on Dividend 22.7 11.6 Transfer to General Reserve 230.0 69.4 Withdrawal from Debenture Redemption Reserve - (248.8) Balance carried to Balance Sheet 3207.9 1303.1

Dividend

The Directors have recommended a dividend of 50 per cent on the equity shares of Rs.5 each for the financial year 2006-2007 against 30 per cent paid in the previous year.

Review of Operations

Revenues for the year at Rs.19797.2 million were higher by 34.5 per cent and the net profit showed a growth of 230 per cent at Rs.2290.9 million. Domestic sales increased by 28 per cent and larger revenues from exports included participation in the prestigeous PEPFAR program.

The Company effectively faced the challenges of entering into severely competitive markets, high raw material costs and pressure on product prices. During the year under review, leveraging on the large product basket, successful efforts were made to achieve volume growth in the US market. Some of the products have carved out a large slice of the market share.

Exports constituted Rs.10968 million, approximately 55.4 per cent of the revenues maintaining the same proportion as in the previous year. However, in the year under review, there was higher proportion of value added products with exports of formulations to the regulated markets. Formulations sales accounted for 31 per cent of the revenues in 2006-07, as against 16 per cent in 2005-06.

The Company's products found rapid acceptance in US, UK, Brazil and the key ARV markets. A strong marketing infrastructure has been set up in US, UK and Europe manned by outstanding professionals with rich management experience in their respective markets. Subsidiaries and offices in key markets have helped getting nearer to the customer. Acquisition of Milpharm in UK with over 100 market authorizations on hand, and Pharmacin in the Netherlands with over 200 market authorizations have become powerful engines to drive your Company's products.

These efforts augur well for the future. Your Company has gained a foothold in the highly competitive markets and with further additions to the product basket in 2007, the momentum of growth is expected to be maintained. There is huge potential for the products in the regulated markets, with its large basket of market specific regulatory approved products.

The pipeline of new products being developed by the team in R&D and the pending dossiers awaiting approvals, would add to the offers to the market in future. Aurobindo has filed 112 DMFs and 98 ANDAs for the USA market alone in addition to filings in other countries.

Merger

The scheme of arrangement for the merger of APL Life Sciences Limited and Senor Organics Private Limited, the subsidiaries of the Company with itself w.e.f. April 1, 2006 was approved by the shareholders at the Meeting held on February-20, 2007, convened as per the directions of the Hon'ble High Court of Andhra Pradesh.

The Hon'ble High Court of Andhra Pradesh, vide order dated June 21, 2007, in the Company Petition of No.40/2007 has sanctioned the scheme of arrangement as proposed and for utilizing the Securities Premium Account. Accordingly, the Order of the Hon'ble High Court of Andhra Pradesh has been reflected in the accounts of the Company for the year ended March 31, 2007.

Acquisitions

The Company through its wholly owned subsidiary Agile Pharma B.V., The Netherlands, has acquired 100% holding in Pharmacin International B.V. and its two subsidiary companies viz., Pharmacin Products B.V. and Pharmacin B.V. This enterprise is engaged in the business of supply of licensing of generic pharmaceuticals in the Netherlands and select key markets in Europe. Your Company believes that similar to the acquisition of Milpharm Limited in U.K. in early 2006, these acquisitions reduce the time to market and enhance the relationships in the generic value chain and help build a broad and formidable product portfolio.

Recognition

Aurobindo Pharma was invited to participate in a conference on July 24, 2006 by the then UN Secretary General Mr. Kofi Annan to review the progress in expanding access to HIV prevention, treatment, care and support in low-and-middle income countries. Mr. P. V. Ramaprasad Reddy, Chairman and Dr. M. Sivakumaran, Whole-time Director represented the Company. The Chairman addressed the august audience and committed higher delivery targets, work towards reducing production costs, and contribute to better access to medicines across the world. He also assured that your Company's people, manufacturing facilities and market relationships will be better used to improve the health of the HIV patients.

Dr. M. Sivakumaran, Whole-time Director of the Company was invited to the White House, at Washington to explore the prospects of addressing the needs of HIV affected children and pharmaceutical industry's support for pediatric drugs.

The Company was awarded "Asia Star 2006" award for Packaging Excellence. This award is presented for excellence in packaging product designed for US markets called Compliance pack. The pack is developed keeping in mind the compliance of the patient, consumer friendliness, child resistant and eco friendliness. The Asia Star is an award presented by Asian Packaging Federation (APF), a non-profit organisation, established in Tokyo, Japan to unite the packaging interests of all trades and industries in the Asia-Pacific region and beyond, under one co-operative umbrella.

Disinvestment

Aurobindo Tongling (Datong) Pharmaceutical Company Limited (ATDPL) located at Economic and Technology Development Zone, Datong, Shanxi, China, a wholly owned subsidiary engaged in the manufacture of pharmaceutical products catering to the local Chinese markets had been incurring losses and in the best interests of your Company, the entire holding was disinvested. However, Aurobindo (Datong) Bio-Pharma Company Limited, the other Wholly Owned Subsidairy in China, which is manufacturing raw materials such as PenicillinG, 6 APA etc. for our captive consumption, would continue its operations in China.

The operations of Aurobindo (H.K.) Limited, Hong Kong was discontinued during the year.

FCCB Issue

During the year your Company has issued Foreign Currency Convertible Bonds (FCCB) aggregating to US$ 200 million equivalent to approximately Rs.9000 million in the overseas market for the purpose of financing new projects, modernization, expansion of existing plants, acquisitions and for any other use including other growth requirements and repayment of existing loans, as may be permitted under applicable laws or regulations.

Out of these, convertible bonds (Tranche A) of US$ 150 million are convertible at any time on or after June 27, 2006 upto May 10, 2011 into Equity Shares of Rs.5 each for each bond at a conversion price of Rs.1,014.16. The balance of US$ 50 million (Tranche B) are convertible at any time on or after May 17, 2007 upto May 10, 2011 into Equity Shares of Rs.5 each for each bond at a conversion price of Rs.879.13.

The funds raised through FCCB issue are being utilized as stated above.

Pursuant to the applications received, US$ 4.5 million out of US$ 60 million FCCB raised during 2005-2006 was converted into 374,046 Equity Shares of Rs.5 each at a premium of Rs.517.036 on July 11, 2007 as per the terms of the issue.

Outlook

The Company is on track to make a strong presence in select premium markets such as US, Canada, Europe and Australia leveraging on the large product portfolio, well balanced therapeutic presence, well-organised manufacturing infrastructure and experienced marketing resources. While these are highly competitive markets, the products of the Company are in large therapeutic segments that are as yet growing. The team at Aurobindo is highly motivated and confident of increasing volumes and market share, and be a significant player in these markets.

One of the major strengths of your Company is its ability to offer products at competitive prices because of the vertically integrated manufacturing platform. While your Company protects its margins on its products, it is able to offer them at competitive prices.

Looking ahead, the strengths of the Company in complex chemistry, large investments made in facilities and people skills, and the ability to deliver what the customer wants at affordable prices, would make Aurobindo a significant player in the developed markets. Rising volumes and larger geographical presence in segments that hold value would enable your Company to demonstrate robust growth in both top and bottom lines. Efforts will be made to improve margins and enhance shareholder value.

Research & Development

The ability to work on complex chemistry, create products that have market potential, present them for regulatory approvals and follow through to get them commercialised has been the driver for your Company's path breaking entry into the premium markets. A highly result oriented in-house R&D has strived to offer a strong pipeline of products at the time they are needed.

As at July 31, 2007 your Company's R&D team has filed 100 ANDAs in US and 40 ANDAs in Europe and approvals on hand from US and Europe aggregate to 57. Your Company has the infrastructure to market the new products at the shortest lead time and convert the approvals into invoicing. The additional product pipeline is expected to improve the income stream in 2007-08.

The enormous strength in R&D is being further leveraged to expand the strategic entry already made into the business of contract research. Your Company has a large reservoir of knowledge base, skills and experience which would be rewardingly utilized to partner the global pharmaceutical industry in conducting research and development. A new state-of-the-art research center is being planned and is expected to be operational in the foreseeable future. This business would not only be adding to the income stream but would also help build long term sustainable relationship with the customers.

The Company has mapped a development program to work on identified molecules which would culminate in new research findings and would be commercially patented. More important, the R&D efforts will be directed towards a meaningful contribution to the healthcare industry.

Investments

The Company made fresh investments during the year to add value to its business operations. The details of additional investments made during the financial year 2006-2007 were as follows:

Rs. Millions

Subsidiary Country Form Amount

AB Farmo Industria Farmaceutica Ltda Brazil Equity 26.8 Helix Healthcare B.V. The Netherlands Equity 151.6 Loan 235.0 Aurobindo Pharma USA Inc. U.S.A. Equity 483.6 Loan 1070.3 Aurobindo (Datong) China Equity 499.5 Bio-Pharma Company Limited Loan 977.6 Aurobindo (H.K.) Limited Hong Kong Equity 12.2 Aurobindo TongLing (Datong) Pharmaceutical Company Limited China Loan 111.0 APL Healthcare Limited India Equity 0.5 Loan 1.2 APL Research Centre Limited India Equity 0.5 Loan 24.5 Subsidiaries/Joint Ventures

The reports and accounts of the subsidiary companies are not annexed to this Report. The Company has obtained in writing an exemption in this regard from the relevant authority. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary Companies are kept open for inspection by any investor at the Registered Office of your Company as well as at the Registered Office of the respective subsidiary companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

Environment & Safety

The production units comply with all relevant governmental regulations relating to Environment, Safety and Health. The Ministry of Environment and Forests, Government of India has accorded clearance for all the units of your Company.

Regular safety audits are carried out in the plants. No major incidents have occurred at any of the plants that have led to any environmental liabilities.

The Company as a responsible corporate citizen has been not only protecting the health of the employees but also safeguarding the environment. Health and safety of the employees are primary concern, and adequate training inputs as well as counseling are done to retain the awareness levels of the operating staff. Dedicated officials have been vested with the authority to follow through to ensure that employees protect themselves and those around them.

Directors

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. V.S. Janardhanam, Dr. K.A. Balasubramanian and Mr. B. Siva Prasad Reddy, retire by rotation. However due to their preoccupation, they have expressed their inability to continue as directors of the Company and therefore have not offered themselves for re-appointment.

Consequent to the termination of share subscription and shareholders' agreement between the Company, Promoters and Merlion India Fund (I) Limited, the nominee of Merlion, Mr. Karamjit Singh Butalia, Director of the Company, resigned from the Board w.e.f. June 11, 2007.

The Board places on record its appreciation for the services rendered by the aforesaid Directors during their association with the Company.

Mr. M. Sitarama Murthy, Dr. P. L. Sanjeev Reddy and Mr. P. Sarath Chandra Reddy are proposed to be appointed as directors liable to retire by rotation in the vacancy caused by the inability of Mr. V.S. Janardhanam, Dr. K.A. Balasubramanian and Mr. B. Siva Prasad Reddy to continue as directors.

A brief profile of Mr. M. Sitarama Murthy, Dr. P. L. Sanjeev Reddy and Mr. P. Sarath Chandra Reddy proposed as directors are provided in the Report on Corporate Governance. The Notice containing the agenda for their appointment is provided separately to the Members.

Directors' Responsibility Statement

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit and Loss Account for the year ended March 31, 2007 and the Balance Sheet as at that date:

i. the applicable accounting standards issued by the Institute of Chartered Accountants of India have been followed;

ii. appropriate accounting policies have been applied consistently. Judgement and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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,

iv. the annual accounts have been prepared on a going concern basis.

Corporate Governance

A Report on Corporate Governance is given in the Annexure forming part of this Report along with the certificate of the Company Secretaries M/s. S. Chidambaram & Associates confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India.

Auditors

The Auditors, Messrs. S.R. Batliboi & Co., a member firm of Ernst & Young, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

Cost Auditors

Mr. E. Vidya Sagar, Cost Accountant, has been re-appointed as Cost Auditor of the Company subject to consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2006-07.

Conservation of energy, technology absorption etc

Information in accordance with the provisions of Sec. 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure forming part of this Report.

Fixed Deposits

The Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding as on the date of the Balance Sheet.

Industrial Relations

The Company enjoyed cordial relations with its employees at all levels. The constant upgradation of the facilities, product and facility approvals from international regulators and the present thrust into the regulated markets is a testimony to the competence, skills and result oriented efforts made by the entire team at Aurobindo. Your Directors record their appreciation of the support and co-operation of all employees and counts on them for the accelerated growth of the Company.

Particulars of Employees

The particulars of employees as required to be disclosed in accordance with the provisions of Sec. 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as per the provisions of Sec. 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

Employee Stock Option Scheme

At the Annual General Meeting of the Company held on July 31, 2004 the Members approved formulation of "Employee Stock Option Scheme - 2004" (ESOP 2004) for the eligible employees and Directors of the Company and its subsidiaries.

Further, the Members at the Annual General Meeting of the Company held on September 18, 2006 approved formulation of "Employee Stock Option Scheme - 2006" (ESOP 2006) for the eligible employees and Directors of the Company and its subsidiaries.

During the year, 35,000 options were granted under ESOP-2006. Under ESOP - 2004, total of 79,162 options were exercised and 78,637 Equity Shares were issued and allotted under the Scheme and for the balance 525 options exercised, the shares were allotted during the current financial year.

Details of the options granted up to 31st March 2007 are set out in the annexure to this Report, as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Options Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

Acknowledgements

The Directors place on record their sincere appreciation for significant contribution made by the employees at all levels through their dedication hard work and commitment and look forward to their continued support. Your Company has been hugely benefited by the support and patronage of its large number of customers and is deeply indebted to them for their encouragement. Your Directors also wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by banks, financial institutions, government and shareholders and look forward to having the same support in all our future endeavors.

For and on behalf of the Board

Hyderabad P. V. RAMAPRASAD REDDY July 31, 2007 Chairman

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Mar 31, 2006

19TH DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH 2006

Your Directors are pleased to present the 19th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2006.

FINANCIAL RESULTS

Rs. Millions 2005-06 2004-05

Gross Turnover 14722.0 11591.7 Profit before Depreciation, Interest and Tax including Extraordinary income 2046.6 1234.0 Depreciation/Amortisation 511.2 404.9 Interest 606.4 399.9 Profit before Tax 929.0 429.2 Provision for Tax/Deferred tax 235.2 78.4 Net Profit 693.8 350.8 Balance brought forward from previous year 522.7 200.6 Balance available for appropriation 1216.5 551.4

APPROPRIATIONS Dividend on Equity Shares 81.2 25.4 Tax on Dividend 11.6 3.3 General Reserve 69.4 - Withdrawal from Debenture Redemption Reserve (248.8) - Balance carried to Balance Sheet 1303.1 522.7

REVIEW OF OPERATIONS

During 2005-06, your Company made a strategic entry with its generic formulations in the premium markets of USA & Europe, participated in the PEPFAR program initiated by the Government of USA and consolidated its strengths in the less regulated and emerging markets. This was done while retaining its leadership position in the domestic API market.

All these positive developments helped your Company improve its top and bottom line. Margins were better, and hence the operating profit was higher over the previous year.

Revenues for the year at Rs.14722.0 million were higher by 27% and the consolidated net income was Rs.693.8 million, an increase of 98%. Aurobindo effectively faced the challenges of entering into severely competitive markets, prevailing high raw material costs and pressure on product prices. The strengths of the Company - efficient production systems, ability to manage resources from end-to-end, cost competitiveness, and capacity to deliver what the customer wants at affordable prices - helped overcome the constraints.

Your Company sees big potential for its products in the regulated markets, with its large basket of regulatory approved products. As at March 31, 2006, Aurobindo holds 27 product approvals from US FDA (inclusive of tentative) and approvals for 3 products each from EDQM, UK MHRA and Health Canada. The pipeline of new products being developed by the team in R&D and the pending dossiers awaiting approvals, would add to the offers to the market in the future.

RECOGNITION

The State Labour Department of the Government of Andhra Pradesh has awarded the "Best Management Award" for the year 2005 for your Company's contributions towards community development, harmonious employee relations and their welfare. The award was presented by the Hon'ble Chief Minister of Andhra Pradesh on May 1, 2006 during May Day Celebrations.

Aurobindo's three US Patents received the prestigious national level Patent Appreciation Award from the Indian Drug Manufacturers' Association for the year 2004-2005. Aurobindo received the award for the following patents:

* Preparation of pure Citalopram (Depression)

* A process for Lactonization to produce Simvastatin (Hypercholesterolemia) and,

* Process for producing highly pure Simvastatin (Hypercholesterolemia).

Your Company has filed applications for over 160 patents in various countries.

DIVIDEND

Your Directors have proposed a dividend of 30% (Rs.1.50) on the equity shares of Rs.5 each for the year ended March 31, 2006 and will be paid, subject to the approval of the Members, to the registered Members as on the book closure date.

ACQUISITIONS

Your Company acquired UK based Milpharm Limited, the generic formulation pharmaceutical company engaged in marketing generic formulations mainly in the UK market.

Under the terms of the share purchase agreement, Aurobindo Pharma Limited has acquired 100% shares of Milpharm Limited, a profit making generic formulations company, which owns over one hundred Marketing Authorizations (MAs) approved by Medicines and Healthcare Products Regulatory Agency, UK (UK MHRA).

Milpharm recorded a sale of ·7.7 million for the 12 month period ended September 30, 2005. The MAs are well diversified into various segments - CNS, CVS, GI, diabetology, anti- fungal, Anti-bacterial, oncology, macrolides, cephalosporins and SSPs, anti diabetic, NSAIDS and others. Milpharm has established relationships in the generic pharmaceuticals and Aurobindo expects to build on these relationships to participate in the generic pharmaceuticals value chain.

Your Company also acquired a business entity in Dayton, New Jersey, USA, for US$ 19 million, which has US FDA Compliant cGMP facility and freehold land spread over 20 Acres. It has 100,000 sft. of fully integrated state-of-the-art facility with R&D capabilities and for manufacture of formulations and distribution.

In addition to expanding its reach in the market, your Company is pursuing inorganic growth in USA and Europe to reduce the time to market and enhance the relationships in the generic value chain.

OUTLOOK

The presence of your Company in almost all major markets, ability to read the market trends, a large product basket in key therapeutic segments, well-organised manufacturing infrastructure with necessary inspections by international regulatory authorities, a reservoir of skills amongst scientists and technical staff have all made Aurobindo into a powerhouse of opportunities. The Company today has the strategy and strength to play a larger role in all its addressable markets.

Your Company's robust product portfolio is spread over 6 major therapeutic/product areas encompassing (antibiotics, anti-retrovirals, CVS, CNS, gastroenterologicals, and anti-allergics) 65 APIs in the non-antibiotics and 55 APIs in the antibiotic segment. Within each segment, they are well represented.

For instance, Aurobindo has 13 products in its ARV portfolio. This has made it easier for the countries participating in the PEPFAR program to place order at a single window.

RESEARCH & DEVELOPMENT

Your Company's strategic strength is its R&D capabilities. Over the years, the in-house team has committed and contributed to a strong product pipeline, reducing cost of production and ensuring therapeutic values.

Your Company has a planned development program and has identified certain molecules to be patented. The R&D team is involved in the process of optimisation, in-process control tests, analytical method of development, the subsequent activity tests, validation studies and stability of products. Apart from developing new technologies, the team aims at continuously upgrading existing manufacturing techniques to improve process yields, and make world-class quality products.

INVESTMENTS

Your Company made fresh investments during the year to add value to its business operations. The details of additional investments made during the financial year 2005-2006 were as given in the table below.

SUBSIDIARIES/JOINT VENTURES

Your Company has set up subsidiaries and joint ventures at various strategic locations to take advantage of the available opportunities, and improve the business stream. Necessary systems, processes and people in place at every location add value and fast track your Company's stated goals of becoming a powerhouse in the generics markets of the world.

Rs. Millions Subsidiary Country Form Amount

Aurobindo TongLing (Datong) China Loan 191.9 Pharmaceutical Co. Limited

Aurobindo (Datong) China Loan 232.1 Bio-Pharma Co. Limited

Helix Healthcare B. V. The Netherlands Equity 149.4 Loan 373.3

Aurobindo Pharma USA Inc. USA Equity 79.1 Loan 94.0

Your Company has effectively completed its backward and forward integration, and creates value from fermentation to formulation. The production units not only provide cost advantage, but also ensure stability in source of supplies and consistent quality. Marketing linkages give the necessary capacity to reach the customer much faster. Your Company's enormous strengths are expected to be visible as more and more products compete in the generics markets and in particular the regulated segments.

Most of the subsidiaries and joint ventures are yet to reach their optimum revenues and profits. These units are presently establishing business interests, creating the necessary infrastructure and alliances, and are being readied to handle volume business. Efforts will continue to be made to increase the operating efficiency.

Some of the units incurred operating losses. All the results of the subsidiaries have been fully reflected in the consolidated accounts of the Company.

There has been a diminution in the value of investments made in subsidiary companies, namely Aurobindo Pharma USA, Inc., Aurobindo (Datong) Bio-Pharma Co. Ltd, China and Aurobindo Tongling (Datong) Pharmaceutical Co. Ltd., China to an extent of Rs.126.0 million, Rs.546.9 million and Rs.63.4 million respectively, on the basis of net asset value of the said subsidiaries as at March 31, 2006. Considering the nature of the industry and gestation period involved, your Company believes that the diminution in value is temporary in nature and no provision is necessary for such diminution.

Name of the Entity Country Category % of Activity Interest

Aurobindo (H.K.) Limited Hong Kong Subsidiary 100 Marketing APL Pharma Thai Limited Thailand Subsidiary1 48 Marketing AB Farmo Quimica Limitada Brazil Subsidiary 99.8 Marketing & Manufacturing Aurobindo (Datong) China Subsidiary 100 Manufacturing BioPharma Co. Limited Aurobindo TongLing (Datong) China Subsidiary 100 Manufacturing Pharmaceutical Co. Limited APL Life Sciences Limited India Subsidiary 100 Trading (formerly APL Chemi Natura Ltd.) Helix Healthcare B.V. The Netherlands Subsidiary 100 Investment Citadel Aurobindo Biotech India Joint Venture 50 JV Marketing - Ceased to be Limited JV w.e.f. Feb 22, 2006 Cephazone Pharma, LLC USA Joint Venture 50 Manufacturing JV Aurosal Pharmaceuticals, LLC USA Joint Venture 50 Manufacturing JV Aurobindo Pharma USA, Inc. USA Subsidiary 100 Marketing & Investment Auro Pharma Inc. Canada Subsidiary 100 Marketing Milpharm Limited UK Subsidiary 100 Marketing Aurobindo Pharma (Pty.) Limited South Africa Subsidiary 100 Marketing ZAO Aurobindo Pharma Russia Subsidiary 100 Marketing Aurex Generics Limited UK Subsidiary 100 Marketing

1 APL Pharma Thai Limited is considered to be a subsidiary by virtue of the parent company's control of the composition of the board of directors of APL Pharma Thai Limited.

Summarised performance of subsidiaries and joint venture entities for the year ended March 31, 2006 (at average annual exchange rate)

Rs.Million Name of Subsidiary Country Turnover PBT Net Profit/ (Loss)

APL Life Sciences Ltd. (formerly APL Chemi India 649.0 20.7 13.4 Natura Limited) APL Pharma Thai Ltd. Thailand 237.8 13.3 11.5 AB Farmo Quimica Limitada Brazil 938.0 71.6 50.4 Aurobindo Pharma USA Inc. USA 584.0 15.3 15.3 Aurobondo (Datong) China 1,210.7 (175.4) (175.4) Bio-Pharma Co.Ltd. Aurobindo TongLing (Datong) China 1,279.5 (64.0) (64.0) Pharmaceticals Co.Ltd. Aurobindo (H.K.) Ltd. Hong Kong 3.2 (4.0) (4.0) Helix Healthcare B.V. The Netherlands -- (2.8) (2.8) Aurex Generics Ltd. UK 24.6 (0.2) (0.2) (Subsidiary of Helix Healthcare) Auro Pharma Inc. Canada -- (1.8) (1.8) (Subsidiary of Helix Healthcare) Milpharm Limited UK 118.4 10.2 7.1 (Subsidiary of Aurex Generics Ltd.) Aurobindo Pharma (Pty.) Ltd. South Afric -- (6.1) (6.1) ZAO Aurobindo Pharma Russia -- (0.6) (0.6) Joint Venture Companies Cephazone Pharma LLC USA -- (30.5) (30.5) (JV of Aurobindo Pharma USA Inc.) Aurosal Pharmaceuticals LLC USA 4.0 (0.7) (0.7) (JV of Aurobindo Pharma USA Inc.)

The reports and accounts of the subsidiary companies are not annexed to this Report. The Company has obtained in writing an exemption in this regard from the relevant authority. A statement pursuant to Section 212(8) of the Companies Act, 1956 is annexed.

Annual accounts of the subsidiary companies are kept for inspection by any investor at the Registered Office of your Company as well as at the registered office of the respective subsidiary companies. Any investor interested in a copy of the accounts of the subsidiaries may write to the Company Secretary at the Registered Office of the Company.

ENVIRONMENTAL REGULATION

Your Company would always remain a responsible corporate citizen. The production units comply with all relevant governmental regulations relating to Environment, Safety and Health. The Ministry of Environment and Forests, Government of India has accorded clearance for all the units of your Company.

Regular safety audits are carried out in the plants. No major incidents have occurred at any of the plants that have led to any environmental liabilities.

Indeed, your Company believes in benchmarking itself with the best industry standards, and shall keep updating its systems and processes on an on-going basis.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. I. Sathyamurthy, Mr. Karamjit Singh Butalia and Dr. M. Sivakumaran retire by rotation at the ensuing Annual General Meeting. Mr. Karamjit Singh Butalia and Dr. M. Sivakumaran being eligible, offer themselves for re-appointment.

Dr. I. Sathyamurthy, due to his pre-occupation, has expressed his inability to continue as a Director of the Company and therefore has not offered himself for re-appointment.

Dr. K. Ramachandran is proposed to be appointed as a Director liable to retire by rotation in the vacancy caused by the inability of Dr. I. Satyamurthy to continue as a Director.

The Board is also being strengthened by the induction of Mr. M. Madan Mohan Reddy as a Whole-Time Director. A brief profile of M/s. K. Ramachandran and M. Madan Mohan Reddy are provided in the Report on Corporate Governance. The Notice containing the agenda for their proposed appointments are provided separately to the Members.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit & Loss Account for the year ended March 31, 2006 and the Balance Sheet as at that date:

i. the applicable accounting standards issued by the Institute of Chartered Accountants of India have been followed;

ii. appropriate accounting policies have been applied consistently. Judgement and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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;

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Company Secretaries M/s. S. Chidambaram & Associates confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the stock exchanges in India is annexed.

AUDITORS

The Auditors, Messrs. S.R. Batliboi & Co., a member firm of Messrs. Ernst & Young, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

The Board noted the comments made by the Statutory Auditors in their Report. As regards non-compete fee of Rs.300 million and non- provision for diminution in the value of certain investments, the note 5 and note 9(b) respectively of Schedule 24 are self explanatory.

COST AUDITORS

Mr. E. Vidya Sagar, Cost Accountant, has been re-appointed as Cost Auditor of the Company subject to consent of the Central Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2005-06.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION etc.

Information in accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

The Company enjoyed cordial relations with its employees at all levels. The constant upgradation of the facilities, product and facility approvals from international regulators and the present thrust into the regulated markets is a testimony to the competence, skills and result oriented efforts made by the entire team at Aurobindo. Your Directors record their appreciation of the support and co-operation of all employees and counts on them for the accelerated growth of the Company.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Sec. 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as permitted by the provisions of Sec. 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

ACKNOWLEDGEMENTS

Your Directors place on record their sincere appreciation for significant contribution made by the employees at all levels through their dedication, hard work and commitment and look forward to their continued support. Your Company has been hugely benefited by the support and patronage of its large number of customers and is deeply indebted to them for their encouragement. Your Directors also wish to place on record their appreciation and acknowledge with gratitude the advice and cooperation extended by banks, financial institutions, government and shareholders and look forward to having the same support at all times in our future endeavors.

Signed on : 31st July, 2006

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Mar 31, 2005

The Directors are pleased to present the 18th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2005.

FINANCIAL RESULTS

Rs. Million

2004-05 2003-04

Gross Turnover 11591.7 13410.7 Profit before Depreciation, Interest and Tax 1234.0 2389.3 Depreciation 404.9 341.6 Interest 399.9 322.4 Profit before Tax 429.2 1725.3 Provision for Tax/Deferred tax 78.4 455.0 Net Profit 350.8 1270.3 Balance brought forward from Previous year 200.6 139.2 Balance available for appropriation 551.4 1409.5 APPROPRIATIONS Dividend on Equity Shares 25.4 114.2 Tax on Dividend 3.3 14.7 General Reserve - 1080.0 Balance carried to Balance Sheet 522.7 200.6

REVIEW OF OPERATIONS

During 2004-05, your Company significantly improved its fundamentals and added to its strengths. The production facilities as well as product basket were upgraded and a series of approvals were received from international regulators.

The Company has a clearly laid out strategy to move up the scale as a generic pharmaceutical company in the developed world, and become a significant player in its chosen segments. As Members are aware, your Company has been upgrading its manufacturing facilities, preparing Drug Master Files (DMFs) and Abbreviated New Drug Applications (ANDAs) and has been having the facilities inspected and products approved by authorities such as US PDA, World Health Organisation, EDQM, and so on.

Indeed, the first of the approvals were received from US FDA during the year under review. It is a matter of pride for your Company that marketing of products commenced in the US during the last quarter of the financial year.

In the interim, while the inspection and approval procedures were underway, there has been unavoidable under-utilisation of production capacities earmarked for the regulatory markets. Although your Company had planned and budgeted such under utilisation, Members will appreciate the revenues were inevitably affected.

However, your Company stepped up its manufacture for the emerging markets, from the rest of the facilities and increased its volume produced and sold. There were severe competitive pressures in the market, and your Company's products were subjected to lower realisation.

Prices ruled low throughout the year, and at times, it was found to be unremunerative to manufacture. In a market affected by consolidation pressures, competitive pricing hurt all manufacturers. Your Company took measures to control costs; raw material costs were brought down as a proportion to sales. Yet, the operating margins were squeezed.

The industry also witnessed pressures in the domestic market, with the introduction of VAT. The traders took time to adjust to the changed regulations, and this had an impact on the quantities delivered to them. In line with the industry, your Company also witnessed lower off-take. This phenomenon affected the second half, and it is believed it would impact the performance results for HI in the current year 2005-06.

In preparation for the stated goal of entering the regulated markets, your Company continued its efforts to file more DMF/ANDAs/dossiers to the regulatory authorities in US and Europe. The Company did incur substantial costs for preparing the dossiers for filing to authorities as well as incur costs of a revenue nature, which while improving the business model for the long-term, did impact the operating costs for the year under review. These expenses, in line with prudential norms, have been charged to revenue, further impacting the profits for the year.

During the year, the Company changed its accounting policy with respect to treatment of Product Development costs. The accounting policy adopted by the Company is in conformity with the Accounting Standards issued by the Institute of Chartered Accountants of India. The Company has capitalized an amount of Rs.167.3 million. Research costs which is of revenue nature, is charged to revenue, while capital expenditure is included in the respective heads under fixed assets.

Product Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured. The carrying value of product development costs is reviewed as required.

The year also witnessed high volatility in the forex market, and your company incurred an exchange loss of Rs.134.5 million, as against an exchange gain of Rs.92.5 million in the preceding year. The loss was incurred despite the best efforts of the management. Currency risk is inherent in exports, and can only be minimised.

These factors impacted the overall financial and your Company. The revenues were lower by 13.5% and the profit before tax was lower by 75%. Profit after tax was lower by 72.4% at Rs.350.8 million, which translated to an EPS of Rs.6.9.

Members will appreciate while the financial performance for 2004-05 was impacted by the strategic changes being made to the fundamentals of the Company, it has leveraged itself better and is poised for dramatic changes in its revenue model. Aurobindo's capabilities to meet the challenges of the future have been significantly improved during the year. This is expected to enhance the earning potential of your Company in the foreseeable future.

RECOGNITION

Its a matter of gratification to report that your Company was listed by the highly respected "Forbes Magazine" as being among the "Best under a Billion - Asia's Rising Companies" in its issue dated November 1, 2004. The list covers the 100 best smaller-size enterprises in both Asia-Pacific and Europe.

The magazine informed that a database of 2,600 publicly traded Asian companies, which had under US$ 1 billion year revenue and five-year returns on capital of at least 5 percent, was screened to prepare the list. Sustained gains in sales and returns were considered for ranking. It also looked for companies with a track record of rewarding their shareholders.

The Company believes such international recognition shall further fuel the Aurobindo team to excel in its efforts.

DIVIDEND

The Directors have proposed a dividend of 10% on the Equity Shares of Rs.5 for the year ended 31st March, 2005 and will be paid, subject to the approval of the Members, to the registered Members as on the book closure date.

ACQUISITION

The Company purchased a sterile plant of Dee Pharma under a court auction (Delhi High Court) for a sale consideration of Rs.38 million. The unit is located at Bhiwadi in Rajasthan and it is intended to be utilised for growing the sterile business.

OUTLOOK

The Company is ensuring a smooth transition from being an API company to a significant player in the generic segments of the premium pharmaceutical markets. The business model and revenue streams have been scaled up, with appropriate infrastructure, product basket and marketing strategies. Your Company has tested out its assumptions, and has received encouraging response on its marketing efforts in the USA.

There are enormous opportunities in the high margin markets of Europe and your Company has made arrangements for marketing its products. Necessary product approvals are underway, and it is expected that your Company would launch them before the end of the year.

Considerable efforts have been made to position your Company's products in the domestic and emerging markets. Your Company will continue to optimise on its strengths in these markets. Efforts however, will be made to improve margins.

While your Company would see value in accelerating its efforts in marketing its generic products in the regulated markets of North America and Europe, the market mix would continue to include the existing API and generic markets.

The Company is one of the few producers of anti-retrovirals in the world with product and facility approvals from WHO, US PDA and others.

There is an increased effort from the developed world to address the growing HIV related ailments. A budgetary provision of the Government of USA, named PEPFAR with a budget of US$ 5 billion is expected to contain the ailment in Africa.

The World Health Organisation is taking keen interest in containing this ailment and is sponsoring new programmes that will need supplies from qualified vendors. Your Company is qualified to participate in all such programmes, and expects to contribute to the containment of the ailment.

Most of the initiatives and improvements in the business mix are expected to impact the top and bottomline in the second half of the FY2006. While investments have been made on ground over the last two years, and the approvals from regulatory authorities are being received in recent months, your Company would leverage its strengths and convert revenue potentials in the near future.

The visibility of revenue and net income are expected to improve in the foreseeable future.

RESEARCH & DEVELOPMENT

The Company is one of the few horizontally integrated pharma companies, and R&D constitutes one of the cornerstones. The R&D function of the Company identifies drugs for launch, creates the necessary processes, validates the systems, pilot-produces the product and hands over the product to the manufacturing function.

It is a matter of pride for the Company that the in-house resources have spearhead and filed DMFs and ANDAs for a very large number of drugs and obtained regulatory approvals from international authorities on a fast-track basis.

Aurobindo is working towards creating a very broad portfolio of approvals from international regulatory authorities, and hence is filing DMFs and ANDAs in the therapy areas of oral and injectable cephalosporins, oral and injectable penicillins, CMS drugs such as antidepressants, cardiovasculars such as ace inhibitors, cholesterol reducing drugs such as statins, anti-diabetic drugs and other lifestyle disease drugs. Your Company is readying itself to make a significant impact in the regulated markets in USA, Europe and a few other countries.

Allocation for R&D was stepped up during the year under review by 10.8% over the amount set aside in the previous year. The amount incurred on R&D expenses constituted 4.62% of the total turnover as against 3.57% in 2003-04.

INVESTMENTS

The Company made fresh investments during the year to add value to its business operations. The details of additional investments made during the financial year 2004-2005 were as follows:

Rs. Million

Subsidiary Country Form Amount

APL Holdings Inc USA Loan 22.2 Aurobindo (Datong) Bio-Pharma Co. Ltd China Loan 199.1 Helix Healthcare B. V. The Netherlands Equity 1.8 Aurobindo Pharma USA Inc USA Equity 51.9 Loan 124.7 SUBSIDIARIES/JOINT VENTURES

The Company has set up subsidiaries and joint ventures at various strategic locations to take advantage of the available opportunities, and improve the business value chain. Necessary systems, processes and people have been resourced and deputed at every location. The professional managers in the different Locations and the value they create are expected to fast track your Company's stated goals of becoming a powerhouse in the generics markets of the world.

The Company has effectively completed its backward and forward integration, and creates value from fermentation to formulation. The production units not only provide cost advantage, but will also ensure stability in source of supplies and consistent quality.

The marketing linkages will give the necessary capacity to reach the customer much faster. Your Company's enormous strengths are expected to be visible as more and more products compete in the generics markets, and in particular the regulated segments.

Most of the subsidiaries and ventures are at a start-up stage, and have therefore not reached their optimum revenues and profits. These units are presently establishing business interests, creating the necessary infrastructure and alliances, and are being readied to handle volume business.

The raw material sourcing unit at China has stabilized production although the profitability was affected due to lower prices and severe competitive pressure for the products manufactured. The losses were however not significant. For instance, the two subsidiaries at China incurred losses which amounted to 4.75% and 5.5% of their respective turnover for the year.

Efforts have been made to increase the operating efficiency. The prices of their products in the market appear to have bottomed-out, and are expected to stabilize at higher levels.

Some of the other units also incurred operating losses. All the results of the subsidiaries have been fully reflected in the consolidated accounts of the Company.

There has also been a diminution in the value of investments made in subsidiary companies, namely APL Holdings Inc., and Aurobindo Datong Bio-Pharma Co. Ltd, China to an extent of Rs.112.5 million and Rs.373.3 million respectively, on the basis of net asset value of the said subsidiaries, as at March 31, 2005.

Considering the nature of the industry and gestation period involved, your Company believes that the diminution in value is temporary in nature and no provision is necessary for such diminution.

Summarised details of the subsidiaries/joint venture are as follows:

Names of the Entities Country Category % of Interest

Aurobindo (H.K.) Limited Hong Kong Subsidiary 100 APL Pharma Thai Ltd. Thailand Subsidiary 48 APL Holdings, Inc. USA Subsidiary 100 AB Farmo Quimica Limitada. Brazil Subsidiary 99.8 Aurobindo (Datong) Bio-Pharma Co., Ltd. China Subsidiary 100 Aurobindo TongLing (Datong) Pharmaceutical Co., Ltd. China Subsidiary 100 APL Chemi Natura Ltd. India Subsidiary 100 Helix Healthcare B.V. The Netherlands Subsidiary 100 Citadel Aurobindo Biotech Limited India Joint Venture 50 Cephazone Pharma, LLC USA Joint Venture 50 Aurosal Pharmaceuticals, LLC USA Joint Venture 50 Aurobindo Pharma USA, Inc. USA Subsidiary 100 Auro Pharma Inc. Canada Subsidiary 100

Names of the Entities Country Activity

Aurobindo (H.K.) Limited Hong Kong Marketing APL Pharma Thai Ltd. Thailand Marketing APL Holdings, Inc. USA Investment (Merged with Aurobindo Pharma USA, Inc.) AB Farmo Quimica Limitada. Brazil Marketing & Manufacturing Aurobindo (Datong) Bio-Pharma Co., Ltd. China Manufacturing Aurobindo TongLing (Datong) Pharmaceutical Co., Ltd. China Manufacturing APL Chemi Natura Ltd. India Trading Helix Healthcare B.V. The Netherlands Marketing Citadel Aurobindo Biotech Limited India JV Marketing Cephazone Pharma, LLC USA Manufacturing JV Aurosal Pharmaceuticals, LLC USA Manufacturing JV Aurobindo Pharma USA, Inc. USA Marketing & Investment Auro Pharma Inc. Canada Marketing

APL Pharma Thai Limited is considered to be a subsidiary by virtue of the parent company's control of the composition of the board of directors of APL Pharma Thai.

A brief summary of the activities/features of some of the subsidiaries are enumerated below:

Aurobindo TongLing (Datong) Pharmaceutical Co. Limited (ATPL)

This subsidiary caters to the local API market in China and has a plant to manufacture 1,000 TPA of amoxicillin 600 TPA of-oral cephalosporins.

For the financial year ended 2004-05 ATPL has registered a total turnover of Rs.1440.4 million and incurred a loss of Rs.78.8 million, mainly on account of lesser realisation of end products and depreciation & amortisation of Rs.48.0 million. Aurobindo Pharma has invested U.S.$ 3.3 million as equity in the period up to March 31, 2005.

Aurobindo (Datong) Bio-Pharma Co. Limited (ADPL)

ADPL has set up a plant for manufacture of 1500 TPA of 6APA by manufacturing Penicillin G from the basic stage. The entire production is for captive consumptions and used by the parent company and by Aurobindo Tongling (Datong) Pharmaceutical Co. Ltd for their APIs.

The company has commenced commercial production during in the beginning of the year 2003-2004. For the year 2004-05 ADPL has registered turnover of Rs.1254.7 million and incurred a loss of Rs.59.6 million mainly on account of depreciation of Rs.129.1 million and also implementation of phase II which is expected to double the capacity by second half of 2005.

Aurobindo Pharma has invested U.S.$ 21.8 million as equity and extended debt of U.S.$20.3 million in the period up to March 31, 2005. The investment made is of strategic importance keeping in mind the backward integration of the parent company's operations. The company assures raw materials supplies and price stability.

Helix Healthcare B.V. (HHB)

HHB was incorporated to seize the business opportunities available in Europe and the main objects of the HHB are to carry on R&D, investments in business entities, and the provision of services in the field of pharmaceuticals.

It is an investment vehicle for the step-down subsidiaries planned in UK, Canada and South Africa. The company has incurred a loss of Rs.2.1 million for the financial year ended 2004-05 mainly on account of operating expenses. Aurobindo Pharma has invested U.S.$ 0.1 million in the form of equity in HHB.

APL Pharma Thai Limited (APTL)

APTL is a marketing company and sells goods mainly manufactured by the parent company in India in the South East Asian market and has achieved a turnover of Rs.397.9 million and profit before tax of Rs.11.8 million and profit after tax of Rs.8.8 million for the financial year ended 2004-05. Aurobindo Pharma has invested U.S.$ 0.1 million in the form of equity in APTL in the period up to March 31, 2005.

AB Farmo Quimica Limitada (AFQL)

AFQL's activities are confined to promoting and selling mainly the products of the parent company. AFQL has a warehouse and necessary infrastructure to setup a production facility. AFQL has registered a turnover of Rs.844.7 million and profit before tax of Rs.59.8 million and profit after tax of Rs.24.6 million for the financial year ended 2004-05. Aurobindo Pharma has invested U.S.$ 1 million in the form of equity and U.S.$ 0.2 million in the form of debt to AFQL in the period up to March 31, 2005.

Citadel Aurobindo Biotech Ltd. (CABL)

CABL is a marketing company focused on ethical branded formulations businesses on specific therapeutic areas like cardio vascular, diabetology, gasteroenterology, infection, nutrition, and pain management. CABL has achieved sales of Rs.916.6 million and loss of Rs.200.1 million for the financial year ended 2004-05, out of which APL's share is 50 per cent. i.e. sales Rs.458.3 million and loss of Rs.100.1 million. The total loss of Rs.200.1 million is mainly on account of writing off non- compete fee of Rs.80.0 million depreciation of Rs.43.7 million on formulation brands acquired.

Further, the business of all pharmaceutical companies in India has been affected in the last quarter because of a change in the tax. regime with respect to VAT (in lieu of State Sales tax) and levy of excise duty on MRP (maximum retail price). Aurobindo Pharma has invested Rs.10 million in the form of equity and Rs.30 million in the form of debt in the period up to March 31, 2005. Provision in the books of the Company for the diminution in the value to the extent of equity investments has been made.

Cephazone Pharma LLC (CPL)

CPL was formed to make sterile and non-sterile Cephalosporins. For the financial year ended 2004-05 it has incurred a loss of Rs.57.7 million, out of which APL's share is 50 per cent, i.e. Rs.28.9 million. The loss is mainly on account of pre-operating expenses. CPL is waiting for its AN DA approvals to begin the sales.

APL Holding Inc. had invested U.S.$ 3 million in the form of equity and U.S.$ 2.3 million in the form of debt in the period up to March 31, 2005 in CPL. Consequent to the merger of APL Holdings, Inc. with Aurobindo Pharma USA, Inc., this investment got transferred to Aurobindo Pharma USA, Inc.

ENVIRONMENTAL REGULATION

The Company would always remain a responsible corporate citizen. The production units comply with all relevant governmental regulations relating to Environment, Safety and Health. The Ministry of Environment and Forests, Government of India has accorded clearance for all the units of your Company.

Regular safety audits are carried out in the plants. Indeed, your Company believes in bench marking itself with the best industry standards, and shall keep updating its systems and processes on an on-going basis.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. S. Bimal Singh, Dr. K. A. Balasubramanian and Mr. Srinivas Lanka retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit & Loss Account for the year ended March 31, 2005 and the Balance Sheet as at that date:

i. the applicable accounting standards issued by the Institute of Chartered Accountants of India have been followed;

ii. appropriate accounting policies have been applied consistently. Judgement and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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;

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Auditors, Messrs. S.R. Batliboi & Co., confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is annexed.

AUDITORS

The Auditors, Messrs. S.R. Batliboi & Co., a member firm of Ernst & Young, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

The statutory auditors have reported on the Consolidated Financial Statements based on the accounts of subsidiaries as at March 31, 2005. The accounts of subsidiaries are closed every year at their respective financial year ends, and these accounts are audited by professional accountants in their respective locations.

Following subsidiaries closed their books as at December 31, 2004 - APL Pharma Thai Limited, APL Holdings Inc., AB Farmo Quimica Limitada, Aurobindo (Datong) Bio-Pharma Co. Limited and Aurobindo TongLing (Datong) Pharmaceutical Co. Limited.

In order to facilitate consolidation of the accounts, all the above subsidiaries, except APL Pharma Thai Limited and Helix Healthcare B.V., also had their books audited as at March 31, 2005. Your Company's auditors have relied on the audited statements of all companies as audited upto 31st March 2005.

The auditors have relied on the management certification for unaudited accounts prepared as at March 31, 2005 for the following entities - APL Pharma Thai Limited, Citadel Aurobindo Biotech Limited and Helix Healthcare B.V.

Four subsidiaries, APL Chemi Natura Limited, Aurobindo (H.K.) Limited, Auro Pharma Inc. and Aurobindo Pharma USA, Inc., had their books audited as at March 31, 2005, and your Company's auditors have considered them.

The subsidiary in the Netherlands, Helix Healthcare B.V. qualifies as a small entity and in conformity with the Dutch Civil Code, auditing of its annual accounts is not required.

The statutory auditors have commented in their report on the Consolidated Financial Statements regarding non-conformity with Accounting Standard- 22 "Accounting for Taxes on Income" and Accounting Standard- 16 "Borrowing Costs" issued by the Institute of Chartered Accountants of India, in the preparation of the Consolidated Financial Statements in the case of certain subsidiary and joint venture companies. While your Company is grateful for the valuable comments, the accounts of the respective entities have been drawn up in conformity with the laws of the land where those companies have been incorporated.

Earnings per Share was computed on the consolidated profit of the current year, prior to reversal of deferred tax assets of earlier years. While the adjustment has been done as required, the ratio has been drawn to differentiate the earnings for the year. The difference in Earnings per Share as reported in the accounts and as computed by the statutory auditors is on account of such differentiation.

The statutory auditors have commented on Aurobindo (H.K.) Limited, a Wholly Owned Subsidiary of your Company, with respect to the appropriateness of the use of going concern basis in preparation of the financial statements of the said subsidiary for the year ended March 31, 2005. Your Company believes that the assets of the subsidiary are recoverable and adequate to discharge the known liabilities. No provision is hence considered necessary.

COST AUDITORS

Mr. E. Vidya Sagar, Cost Accountant, has been re-appointed as Cost Auditor of the Company with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2004-05.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

The Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

The Company enjoyed cordial relations with its employees at all levels. The constant upgradation of the facilities, product and facility approvals from international regulators and the present thrust into the regulated markets is a testimony to the competence, skills and result oriented efforts made by the entire team at Aurobindo. Your Directors record their appreciation of the support and co-operation of all employees and counts on them for the accelerated growth of the Company.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Sec. 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as per the provisions of Sec. 219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

ACKNOWLEDGEMENTS

The Directors record their sincere appreciation and are grateful for the support and co-operation extended by banks, financial institutions, central and state governments. Your Company has been hugely benefited by the support and patronage of its large number, of customers and is deeply indebted to them for their encouragement.

The Company will always keep the interest of its customers, the medical fraternity, employees and the shareholders as a priority, and shall reciprocate their confidence reposed in the Company. It has been a mutually beneficial relationship and looks forward to their continued support.

For and on behalf of the Board

K. NITYANANDA REDDY Managing Director

Dr. M. SIVAKUMARAN Director

Hyderabad, June 30, 2005

FORM - B

TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT

Specific Areas in which Research and Development carried out by the Company

The Company carried out process development and commercialized various products in the segment of cephalosporin antibiotics and antiviral compounds. Further, it continued process research for maximizing the yield with improved quality.

Benefits derived as a result of the above R&D

The Company's continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

Future Plan of Action

Your Company has ambitious plans to invest further for enhancing its R&D capabilities.

Expenditure on Research and Development:

Rs. Million

2004-05 2003-04

Capital 183.98 216.63 Recurring 359.13 273.19 543.11 489.82 Total R&D expenditure as a percentage of total turnover 4.62% 3.57%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts, in brief, made towards technology absorption, adaptation and innovation:

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the company.

Benefits derived as a result of the above efforts, e.g., Product improvement, cost reduction, product development, import substitution etc.,

The Processes were simplified and thereby reduction in cost and products improvement.

Particulars of Imported Technology : Nil

Foreign Exchange Earning & Outgo

Activities relating to exports, initiatives taken to increase exports. Registration of more product dossiers with global authorities, setting up of foreign subsidiaries and commencement of activities at subsidiaries and joint ventures.

Foreign exchange earned and out-go during the year ended March 31, 2005.

Rs. Million

2004-05 2003.04 Foreign Exchange earned Exports (FOB) 5546.20 6420.45 Others 81.00 28.26 5627.20 6448.71

Foreign Exchange Outgo Materials 5306.90 5395.87 Other expenses 286.97 319.37 5593.87 5715.24

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Mar 31, 2004

The Directors are pleased to present the 17th Annual Report of the Company together with the Audited Accounts for the financial year ended 31st March 2004.

FINANCIAL RESULTS

(Rs. Million)

2003-04 2002-03

Gross Turnover 13410.7 11903.8 Profit before Depreciation, Interest and Tax including Extraordinary income 2389.2 2058.6 Depreciation 341.6 231.8 Interest 322.4 425.9 Profit before Tax 1725.2 1400.9 Provision for Tax/Deferred tax 455.0 369.5 Net Profit 1270.2 1031.4 Balance brought forward from Previous year 139.2 125.3 Profit & Loss Account Debit balance Transferred on amalgamation - (5.8) APPROPRIATIONS

Debentures Redemption Reserve - 172.1 Dividend on Equity Shares 114.2 79.4 Tax on Dividend 14.6 10.2 General Reserve 1080.0 750.0 Balance carried to Balance Sheet 200.6 139.2

REVIEW OF OPERATIONS AND OUTLOOK

The Company marched ahead during the year under review, creating value and laying a strong foundation for the future years. Considerable improvements were made in the business architecture. Going forward, your Company would see visible benefits especially in its marketing and product strengths.

In terms of financials, the year's highlights include a 12.6 percent increase in gross turnover to Rs.13410.7 million, and a healthy rise in pre-tax profit to Rs.1725.2 million. This is a 23.1 percent improvement over the previous year.

The increase in pre-tax profits is despite the 47.1 per cent increase in provision for depreciation in the current year consequent to a higher asset base.

Profit after tax at Rs.1270.2 million is an improvement of 23.1 per cent over the previous year. Members will recall the net profit in 2002-03 was Rs. 1031.4 million including an item of extraordinary income of Rs.124 million. Net of such non-recurring gain, the performance during the year under review showed a robust 40 per cent increase over the earlier year. Earnings per Share (EPS) of Rs. 26.41 points a healthy growth of 16.2 per cent, on enhanced capital.

In 2003-04, in continuation of the efforts initiated earlier, your Company further streamlined the organization. The objective was, and continues to be, to ensure a smooth transition to premium pharmaceutical markets.

Manufacturing facilities earmarked for generics, were upgraded to ensure that regulatory norms are met. Each of these facilities now has improved capacities, state-of-the-art technologies, and standard processes in keeping with current Good Manufacturing Practices (cGMP). A quality team, trained to spot deviations and with the skill to set them right, functions at each unit.

Expansions made at existing units have brought powerful economies of scale. The active pharma ingredients (API) facilities are now run at enhanced capacities. The flexibility to step up volumes has added to the Company's strengths.

Cost efficiencies across all manufacturing plants have created significantly higher operating margins. Reduced costs and higher margins are generating more value for every invested shareholder rupee. These efforts will continue into the future. Your Company is determined in its goal to be the most cost-effective producer.

The raw material sourcing unit at China has stabilized production and has recently turned profitable. Efforts are on to increase its operating efficiency and thereby significantly impact the Company's bottom line. With the addition of this facility as part of its strategic plan, your Company has effectively completed its backward integration.

The Company has now brought almost all processes under its own umbrella and in doing so, reduced its external dependencies. Every known sensitivity in sourcing is being addressed, not only to insulate the Company from the pressures of the market, but also to enhance operating profits.

The facility at Pydibhimavaram got off to a successful start. In its first operational year, it has begun contributing to cost and volume synergies. Careful thought and planning had gone into the design of this unit. This is paying rich rewards in the form of lower power costs, higher productivity and consistently better solvent recovery. The facility has skilled people guiding quality processes that will go a long way towards the realization of your Company's ambitious plans for the future.

A milestone was crossed when approvals for your Company's Unit 3 facility located at Bachupally, was received from the MHRA (UK) and from ANVISA (Brazil). The Medicines and Healthcare products Regulatory Agency (MHRA), is the executive agency of the Department of Health, and the licensing authority for pharmaceuticals in the U.K. In Brazil, the Agenda Nacional de Vigilancia Sanitaria (ANVISA) is the national health surveillance agency. These regulatory authorities have cleared the facility for export to their countries. As you are already aware, this unit is also holding approval from the MCC (South Africa). Exports to the UK and to Brazil have since commenced.

Approvals from recognized regulatory organizations are crucial to the Company's impending thrust into premium markets. In April 2004, the US PDA inspected Unit 1 (API) and Unit 3 (formulations). Your Company is hopeful of receiving these approvals in due course.

As you are aware, your Company is aiming to garner a piece of the growing market for generic drugs. To that end, your Company's research and development efforts are currently focused on a few near-term strategies. The Company intends to broaden its product portfolio, create non-infringing processes and patent protect its intellectual property.

So far, your Company filed 2 ANDAs (Abbreviated New Drug Applications) and 5 DMF (Drug Master Files) with the US FDA. 5 Certificates of Suitability (CoS) and 10 EDMFs were also filed with the European Directorate for Quality Medicines (EDQM) for Certificates of Suitability. In addition, applications were submitted for 11 process patents.

It is gratifying to report, your Company received its first CoS approval from the European Directorate for Quality Medicines (EDQM), for its product in the therapeutic segment of Gastro-Enterology.

Aurobindo is working towards creating a very broad portfolio of approvals from international regulatory authorities, and hence is filing DMFs and ANDAs in the therapy areas of oral and injectable cephalosporins, oral and injectable penicillins, CNS drugs such as antidepressants, cardiovasculars such as ace inhibitors, cholesterol reducing drugs such as statins, anti-diabetic drugs and other lifestyle disease drugs. Your Company is readying itself to make a significant impact in the regulated markets in USA, Europe and a few other countries.

The Company forecasts steadily growing business and would translate it into higher revenue and profits in 2004-05 and looks forward to the future with optimism. The corporate goal is to achieve long-term growth both in its established strong-holds, and by expanding into new markets with its formulations.

Aurobindo is on a fast forward mode. Your Directors believe the Company is positioned well to ride into the future. Your Company has a strong and vertically integrated architecture and a highly focused set of competencies, unique to it, with a very wide range of potential applications. Aurobindo is leveraging it and is on track for sustainable and reliable growth.

PREFERENTIAL ISSUE & INCREASE IN SHARE CAPITAL

As you are aware, the Company has proposed to place around 8.4 million equity shares of Rs.5 each at a price of Rs.302 per share as per the approvals the Company received from its shareholders on 5th November, 2003 and 26th December, 2003. Due to re-rating of the pharmaceutical sector and other capital market related developments, your Company revised the issue price upwards and your promoters committed to subscribe at the enhanced price of Rs.375 per share. The Citicorp Banking Corporation and ChrysCapital could not subscribe to the preferential issue for want of their internal approvals for this revised subscription price.

Merlion India Fund subscribed for 2,370,000 equity shares of Rs.5 each at Rs.375 per share. 2,500,000 convertible share warrants were issued and allotted to Mr. P.V.Ramaprasad Reddy, Chairman of the Company at a price of Rs.375 per warrant. A non-refundable amount of Rs.350 million was paid by him with the balance payable at the time of conversion of these warrants into equity shares of the Company on a one-to-one basis. The Company therefore mobilized a sum of Rs.1238.75 million. These funds were used to prune the Company's high cost debts as well as in meeting other corporate needs.

Further, the balance 950,000 convertible share warrants issued and allotted in the year 2002 to the Promoters and Directors were fully converted.

Consequent to these issues, the paid up equity share capital of the Company has increased from Rs.242 million to Rs.253.85 million and now stands at 50,770,000 equity shares of Rs.5 each.

DIVIDEND

The Directors are pleased to recommend for approval of Members at the ensuing Annual General Meeting dividend of 45% for the year ended 31st March, 2004 on the expanded capital of Rs.253.85 million. The dividend will be paid, subject to the approval of the Members, to the registered Members as on the book closure date.

RESEARCH & DEVELOPMENT

The R&D function in Aurobindo is focused on generating the information and knowledge required to develop, register, commercialize and ultimately market medicines for the treatment and prevention of human disease. Fundamental to this goal is gaining a thorough understanding of the chemistry of the process.

The Company's research efforts are currently bent towards widening the product portfolio with a view to maximizing impact on regulated markets. The emphasis is on creation of non-infringing processes to produce high quality and cost effective generic drug versions.

Aurobindo has stepped up its commitment to the generics program by creating a new R&D centre at Mumbai and equipping this facility with sophisticated laboratory testing equipment. This facility will supplement the existing R&D Centre at Hyderabad and would aid your Company's scientists in their quest for non-infringing bioequivalent versions of brand-name drugs.

As Aurobindo moves into the regulated markets, active R&D efforts will continue to shape its future. Your Company is confident that its research function will lead the organization's march into new markets and new segments. In support of this objective, during the year, R&D investment has been stepped up by Rs.141.5 million. The total spend, both capital and revenue, on R&D was Rs.486.82 million constituting 3.57 per cent of the turnover.

INVESTMENTS

The Company made fresh investments during the year to add value to its business operations. The details of additional investments made during the financial year 2003-2004 were as follows:

(Rs. Million)

Subsidiary Country Form Amount Remarks

Aurobindo (H.K.) LimitedO HongKong equity 45.65 additional working capital requirements APL Holdings Inc USA loan 15.36 formulation facility Aurobindo (Datong)

Bio-Pharma Co.Ltd China loan 424.26 capacity expansion AB Farmo Quimica Ltda Brazil loan 8.72 formulation facility Helix Health Care B.V The equity 0.86 entry into regulated Netherlands market (Europe)

SUBSIDIARIES

The Company's subsidiaries have been strategically placed at different key locations so as to facilitate global production and marketing initiatives. Significant advantages have been obtained from the China operations, and the Company would stand to gain at all the locations as the business plans gather momentum.

While the infrastructure is being set up, all overheads are not absorbed. Such losses for all the subsidiaries and JVs during the year, totaled USD 6.25 million approximately, and have been recognised in the Consolidated Financial Statements annexed to this Annual Report.

Major activities/features of some of the subsidiaries are enumerated below:

APL Holdings, Inc. a 100 per cent subsidiary, is an investment company for setting up investment subsidiaries and joint ventures in USA. The Company has invested in two joint ventures viz. Cephazone Pharma LLC and Aurosol Pharmaceuticals LLC.

Aurobindo (Datong) Bio-Pharma Co. Ltd, a 100 per cent subsidiary, has set up a plant for manufacture of 1,500 TPA of 6APA, a key intermediate in the manufacture of semi synthetic penicillins. The entire production is for captive consumption. Being a large facility, it took some time to get clearances, stabilizing the processes and yield. The operations have been streamlined and optimised. The company has started earning net profit from quarter ended March 2004.

Aurobindo TongLing (Datong)

Pharmaceutical Co. Ltd. is a subsidiary with 50 per cent each being held by your Company and by Aurobindo (Datong) Bio-Pharma Co. Ltd. This subsidiary caters to the local API market in China and has a plant to manufacture 1,000 TPA of amoxicillin 600 TPA of oral cephalosporins.

Helix Health Care B.V. is a newly incorporated 100 per cent subsidiary. Based in the Netherlands, the company will coordinate the regulated market activities of the step-down subsidiaries planned in various countries.

APL Chemi Natura Ltd. is a trading company which had a turnover of Rs.259.5 million (Rs.324.6 million in 2002-03). The operating profit was Rs.8.2 million as against break even operations in the earlier year. The Company reported a profit before tax of Rs.4.5 million as against a loss of Rs.10.3 million in the previous year.

Citadel Aurobindo Biotech Ltd., a joint venture with 50 per cent holding by your Company, is making inroads into the domestic markets, and has reported a significant improvement in operations. The turnover more than doubled at Rs. 1058.1 million from the previous year figure of Rs.516.9 million. The operating profit was Rs.121.1 million as against an operating loss of Rs.59.2 million. After adjusting for write-off of non-compete fees and brand value totaling Rs.111.2 million and charge for deferred tax, the net loss is only Rs.20.2 million as against Rs.136.1 million.

PERFORMANCE OF SUBSIDIARIES AND JOINT VENTURE ENTITIES

(Rs. Million)

Name of Subsidiary Total Income PBT Net Profit/(Loss)

APL Pharma That Limited 424.5 5.6 2.9 Aurobindo (H.K.) Limited 113.5 (77.5) (77.5) APL Chemi Natura Limited 259.5 4.5 2.4 AB Farmo Quimica Limitada 617.0 35.6 28.0 APL Holdings Inc., 6.5 (6.1) (6.1) Aurobindo (Datong) Bio-Pharma Co. Limited 991.7 (98.1) (98.1) Aurobindo Tongling (Datong) Pharmaceutical. Co. Limited 1,374.2 (58.5) (58.5) ShangHai Widetex Chemical Co. Limited 66.6 (10.5) (10.5)

Name of Joint Venture Company

Aurosol Pharma LLc 0.1 (17.3) (17.3) Cephazone Pharma Inc - (67.1) (67.1) Citadel Aurobindo Biotech Limited 1,058.1 (44.3) (23.7)

The reports and accounts of the subsidiary companies are annexed to this Report along with statement pursuant to Section 212 of the Companies Act, 1956.

ENVIRONMENT

The Company is aware of its responsibility for the environment. In keeping with the principles of sustainable development, Aurobindo places emphasis on environment friendly processes and products that are safe and gentle on natural resources.

Considerable care is taken in disposal of its effluents. Aurobindo uses a reverse osmosis method of processing waste leading to a significantly reduced pollution load.

Aurobindo is a responsible corporate citizen, and shall work towards preserving a cleaner environment.

DIRECTORS

Mr. Karamjit Singh Butalia, has been inducted with effect from 18th February 2004 into the Board as a nominee of Merlion India Fund and acts as an Independent Non- executive Director of the Company. He is the Managing Director at Merlion India Fund Ltd and Global Head for Private Equity at Standard Chartered Bank. He holds an M.B.A in Investment & Finance from Hull University, U.K., as well as a Masters and Bachelors degree in Economics from Delhi University. His association with the Company is expected to add to its caliber.

With the induction of a new additional director, your Company's Board comprises of 10 Directors of which 6 are independent non-executive directors and 4 are executive directors.

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. M. Sivakumaran, Mr. B. Sivaprasad Reddy and Mr. V. S. Janardhanam retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. Further, Mr. Karamjit Singh Butalia is being proposed to the office of Director under Section 257 of the Companies Act 1956.

DELISTING OF COMPANY'S EQUITY SHARES FROM AHMEDABAD AND MADRAS STOCK EXCHANGES

As per the approvals received from the Members of the Company at the last Annual General Meeting, the equity shares of your Company were delisted from the Stock Exchange, Ahmedabad and the Madras Stock Exchange Limited and are presently listed on the following stock exchanges:

The Hyderabad Stock Exchange Ltd The Stock Exchange, Mumbai (BSE) The National Stock Exchange of India Limited (NSE)

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit & Loss Account for the year ended 31st March 2004 and the Balance Sheet as at that date:

i. the applicable accounting standards issued by the Institute of Chartered Accountants of India have been followed;

ii. appropriate accounting policies have been applied consistently. Judgement and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii. proper and sufficient care has been taken 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;

iv. the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

The certificate of the Auditors, Messrs. S.R. Batliboi & Co., confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is annexed.

AUDIT COMMITTEE

The Company's Audit Committee comprises of Mr. Srinivas Lanka who is Chairman, and Mr. Karamjit Singh Butalia and Mr. V.S. Janardhanam as Members. Each of them has rich and varied experience in managing companies and all are conversant with the intricacies of the global pharmaceutical industry.

AUDITORS

The Auditors, Messrs. S.R. Batliboi & Co., a member firm of Ernst & Young, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

The statutory auditors have commented in the audit report on fixed assets of the Company. The Company has taken the observation in a positive spirit. The assets referred by them were transferred from one unit within the Company to other units within the Company. As said by the auditors, the Company confirms that these assets have been properly dealt with in the books of account.

The statutory auditors have reported on the Consolidated Financial Statements based on the accounts of subsidiaries as at 31st March 2004. The accounts of subsidiaries are closed every year at their respective financial year ends, and these accounts are audited by professional accountants in their respective locations. Following subsidiaries closed their books as at 31st December 2003 - APL Pharma That Limited, APL Holdings Inc., AB Farmo Quimica Limitada, Aurobindo (Datong) Bio-Pharma Co. Limited, Aurobindo TongLing (Datong) Pharmaceutical Co. Limited and ShangHai Widetex Chemical Co. Limited.

In order to facilitate consolidation of the accounts, all the above subsidiaries, except APL Pharma Thai Limited and AB Farmo Quimica Limitada, also had their books audited as at 31st March 2004. Your Company's auditors have relied on the audited statements of all companies as audited upto 31st March 2004.

The auditors have relied on the management certification for unaudited accounts prepared as at 31st March 2004 for the two subsidiaries - APL Pharma Thai Limited and AB Farmo Quimica Limitada.

Aurobindo (H.K.) Limited and APL Chemi Natura Limited as in the earlier years, closed their books on 31st March 2004 and your Company's auditors have considered them.

The subsidiary in the Netherlands, Helix Health Care B.V. effected no business transaction during the year, and hence no audit was carried out.

Unaudited figures of the Joint Venture company, Citadel Aurobindo Biotech Limited duly certified by the management was considered by your Company's auditors.

COST AUDITORS

Mr. E. Vidya Sagar, Cost Accountant, was appointed as Cost Auditor of the Company with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2004-05, in place of Mr. R.R. Sharma, who has expressed his inability to be re-appointed as Cost Auditor on health grounds and opted for voluntary retirement.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec.217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

The Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

The Company enjoyed cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Sec.217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as per the provisions of Sec.219(1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company Secretary.

ACKNOWLEDGEMENTS

The Directors record their appreciation and acknowledge with gratitude the support and co-operation extended by banks, financial institutions, central and state governments. Your Board is grateful to the customers, the medical fraternity, employees and the shareholders for the confidence reposed in the Company and looks forward to their continued support.

For and on behalf of the board

P. V. RAMAPRASAD REDDY Chairman Hyderabad, 2nd June, 2004.

Information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

FORM - B

TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT

Specific Areas in which Research and Development carried out by the Company:

The Company carried out process development and commercialized various products in the segment of cephalosporin antibiotics and antiviral compounds. Further, it continued process research for maximizing the yield with improved quality.

Benefits derived as a result of the above R&D

The Company's continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production, and enabled the Company to own Intellectual Property Rights.

Future Plan of Action:

The Company has ambitious plans to invest further for enhancing its R&D capabilities.

Expenditure on Research and Development:

(Rs. Million)

Capital 216.63 75.13 Recurring 273.19 145.33

486.82 220.46 Total R&D expenditure as a percentage of total turnover 3.57 1.82

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts, in brief, made towards technology absorption, adaptation and innovation:

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the company.

Benefits derived as a result of the above efforts, e.g.. Product improvement, cost reduction, product development, import substitution etc.

The Processes were simplified and thereby reduction in cost and products improvement.

Particulars of Imported Technology: Nil

Foreign Exchange Earning & Outgo:

Activities relating to exports, initiatives taken to increase exports. Registration of more product dossiers with global authorities, setting up of foreign subsidiaries and commencement of activities at subsidiaries and joint ventures.

Foreign exchange earned and outgo during the year ended 31st March, 2004.

(Rs. Million)

2003-04 2002-03 Foreign exchange earned

Exports (FOB) 6420.45 5637.38 Others 28.26 14.34 6448.71 5651.72

Foreign exchange outgo

Materials 5395.87 4925.93 Other expenses 319.37 121.27

5715.24 5047.20

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Mar 31, 2003

Your Directors have pleasure in presenting the 16th Annual Report of the Company together with the Audited Accounts for the financial year ended 31st March, 2003.

FINANCIAL RESULTS

(Rs. Million) 2002-03 2001-02

Gross Turnover 11903.8 10377.2 Profit before Depreciation, Interest and Tax including Extraordinary income 2058.6 1470.4 Depreciation 231.8 158.1 Interest 425.9 423.9 Provision for Tax/Deferred tax 369.5 203.3 Net Profit 1031.4 685.1 Balance brought forward from Previous year 125.3 25.8 Profit & Loss Account Debit balance Transferred on amalgamation (5.8) - APPROPRIATIONS Debentures Redemption Reserve 172.1 - Dividend on Equity Shares 79.4 60.6 Tax on Dividend 10.2 - General Reserve 750.0 525.0 Balance carried to Balance Sheet 139.2 125.3

REVIEW OF OPERATIONS AMD OUTLOOK

The past year has seen your Company achieve advances across all areas of its operations, and also record a strong financial performance. Gross turnover improved by 14.7 per cent, while the pre-tax profit of Rs.1276.6 million, net of exceptional items, showed a healthy 61.9 per cent growth.

As Members are aware, your Company had earned a pre-tax profit of Rs.788.4 million from operations in the previous year, and in comparison the pre tax profits are Rs.1400.9 million in the year under review. This growth is despite the increased provision for depreciation in the current year, consequent to a larger asset base of the Company.

The financial strength continues to successfully sustain your Company's business model, which is centered on attaining market leadership in its chosen areas of competence at an internationally competitive level. Your Company wilt always endeavour to leverage its product, technological and people strength to enhance share owner value. This sustainable growth model is being further strengthened with new initiatives that will add to the Company's fundamentals.

Looking to the future needs, your Company has made strategic investments in upgrading its production facilities both at Hyderabad and Pydhibhimavaram (Srikakulam district) added to its offshore infrastructure for sourcing raw materials and has extended its reach through its marketing subsidiaries and joint ventures. Significant improvement already made and those in the pipeline will transform your Company into a serious player in the regulated and other global markets.

The restructuring process of upgradation and modernization of existing units and construction of new units, initiated in the year 2001-02 are being completed as per schedule. Most of these facilities have already gone live and your Company sees the benefits accruing in the forward years. Part of the gains are already visible in the current financial year.

Substantial progress has already been made by continuing with the Company's development pipeline. Your Company's Research & Development wing has initiated steps to file dossiers and prepare Drug Master Files, as well as seek non- infringing process patent approvals.

Approvals from international regulatory authorities are expected in the near future. Two patent approvals have already been received and the Company will pursue its efforts to seek exclusivity with its non-infringing processes.

Your Company is addressing large market opportunities both in active pharmaceutical ingredients (API) and generic/ speciality generic formulations in the regulated markets. The world class manufacturing facilities in place, compliance with Good Manufacturing Practices as a routine, consistently best quality production and adherence to approved production systems is supporting this effort.

The endeavour is to become a large volume player in the generics market, on the back of the Company's strong presence in the API segment. Your Company sees potential, and is building a strong platform in global generics business.

Your Company is also ensuring that its marketing efforts stay tuned to the needs of the customers and has initiated steps to develop its presence in quality conscious premium markets. Subsidiaries and joint ventures will help reduce marketing lag and improve the reach for your Company's products.

The present initiatives also include converting the Company into a cost effective producer. This will enable your Company to meet the challenges of competitive global markets in the future, especially in the generics markets. Only stronger players with basket of quality products and financial muscle are expected to deliver, and your Company is ensuring to be one of the few leading players.

Your Company is working towards accelerated growth, both in revenues as well as its earnings. Sustainable medium and long-term goals are being pursued. Our customer focus will always be matched by our efforts to meet the stakeholder interest. Investors in Aurobindo can look forward to robust growth.

MANAGEMENT DISCUSSION AND ANALYSIS

A detailed discussion on the Company's financial results, opportunities available, risks and concerns, quality, cost management, internal controls, subsidiaries. Joint ventures, human resources and outlook forms part of this report.

AMALGAMATION OF RANIT PHARMA & CALAC

During the year Ranit Pharma Limited (RPL) and Calac Private Limited amalgamated with your Company with effect from 1st April, 2002 and the Company's audited financial results are inclusive of results of both the companies. Calac was a wholly owned subsidiary of RPL and RPL, in turn, had become a wholly owned subsidiary of the Company during the year. As per the Scheme of Amalgamation, no equity shares of your Company were allotted to the erstwhile shareholders of RPL and Calac.

INCREASE IN SHARE CAPITAL

•As you are aware, the Company has successfully completed its private placement issue and allotted 2,000,000 equity shares of Rs.10 each to Promoters/Directors and Templeton Strategic Emerging Markets Fund LDC at Rs.226 per share and equal number of convertible share warrants. The warrants of Templeton have been converted into equity shares of the Company by exercising its option in the month of September 2002. Part of the promoter's warrants have also been converted into equity shares during the year.

The funds so mobilized were used mainly for construction of new facilities and for upgradation of existing facilities and investment in the Company's wholly owned subsidiary companies. Consequent to the private placement, the paid up equity share capital of the Company was increased from 2,0670,000 equity shares of Rs.10 each to 23,250,000 equity shares of Rs.10 each.

DIVIDEND

Your Directors are pleased to recommend for approval of Members at the ensuing Annual General Meeting dividend of 35% for the year ended 31st March, 2003 on the expanded capital of Rs.232.5 million. The dividend will be paid on pro rata basis subject to the approval of the Members, to the registered members as on the book closure date.

RESEARCH & DEVELOPMENT

Your Company's state-of-the-art R&D Centre concentrates on two categories of reverse engineering processes. The focus of research is anti-infectives and drugs for the central nervous system and cardiovascular system.

The emphasis has been to help create a strong presence in the global generics business. Hence research efforts are directed towards creating non-infringing processes, resolving complex chemistry and building challenging manufacturing environment. In the long term, your Company will explore opportunities in biotechnology, bioinformatics and new chemical entities.

Productivity at your Company's APL Research Centre is high. Aurobindo is able to rapidly scale up and commercialise products because of its process skills and research capabilities.

Your Company will continue to strengthen ifs knowledge base and intellectual property, and add to its product strengths. Investments in R&D efforts were stepped up during the year under, review. This trend will continue.

INVESTMENTS

During the year, your Company has made the following investments in its wholly owned subsidiary companies. The total investment made during the year is Rs.846,7 million. '

Rs. Millions Aurobindo (H.K.) Limited, Hong Kong 93.2 Aurobindo (Datong) Bio-Pharma Co. Limited, China 585.9 Aurobindo Tongling (Datong) Pharmaceutical Co. Limited, China 58.9 APL Holdings, Inc., USA, 69.8 AB Farmo Quimica Limitada, Brazil 38.9

There has been diminution in the value of investments in Aurobindo (H.K.) Limited, Hong Kong and the Brazil based Aurobindo Farmaceutica Do (Brasil) Limitada. The subsidiary at Brazil has been amalgamated with another subsidiary AB Farmo Quimica Limitada, Brazil. Rs.57.9 million has been provided for diminution in the value of the above mentioned two subsidiaries.

Aurobindo Tongling (Datong) Pharmaceutical Company Limited, a joint venture company, is a 100% subsidiary with effect from 31st October 2002 by virtue of acquisition of 50 per cent share held by 3V Partner by Aurobindo (Datong) Bio-pharma Company Limited.

Aurobindo (Datong) Bio-Pharma commenced commercial production in November 2002. This subsidiary is expected to increase its operations in the coming years and report improved results.

Your Company's joint venture in the country. Citadel Aurobindo Biotech Limited has been a source of strength to your Company's efforts in marketing formulations in the domestic markets. The joint venture company has stabilized and is making enviable progress.

Brief financials of the subsidiaries and joint ventures are given in the table below. The figures are exclusive of minority interest and the interest of the respective joint venture partners.

Rs. Millions

Name of Subsidiary Total Income Proflt(Loss) Net profit before Tax after tax

APL Pharma That Limited 422.8 4.8 3.6 Aurobindo (H.K.) Limited 455.4 (43.3) (43.3) APL Chemi Natura Limited 330.2 (10.3) (6.5) AB Farmo Quimica Limitada 173.2 (15.3) (15.3) APL Holdings Inc 0.9 (3.3) (3.3) Aurobindo (Datong) Bio-Pharma Company Limited 305.8 (73.7) (73.7) Aurobindo Tongling (Datong) Pharmaceutical Company Limited 853.8 14.5 14.5 Name of Joint Venture Aurosol Pharma LLc 0.03 (1.7) (1.7) Cephazone Pharma Inc 0.2 (15.4) (15.4) Citadel Aurobindo Biotech Limited 233.8 (90.5) (90.5)

ENVIRONMENT

Your Company is giving utmost priority to the environmental considerations. The Company is continuously upgrading effluent treatment facilities and waste disposal methods to safeguard the environs. As reported in the last year's review, the reverse osmosis technology in the production process has helped reduce pollution load.

DIRECTORS

V.S. Janardhanam, Dr. S. Bimal Singh and Dr. K.A. Balasubramanian have been inducted into the Board as

Independent Non-executive Directors of the Company. V.S. Janardhanam, M.Sc. (Ag.), is a senior banker retired as Asst. General Manager, Allahabad Bank. He has an extensive knowledge and experience in industrial finance and banking. His association in the Board is expected to benefit the Company in its financial planning.

Dr. S. Bimal Singh, M.B.B.S., D.M.RD, is a Consultant Radiologist in Hyderabad. His expertise as a healthcare practitioner is expected to help the Company in certain areas of research and development etc.

Dr. K.A. Balasubramanian, Ph.D., is a Scientist worked in India and Canada for about 14 years. He was associated as Technical Director and Chief Consultant with a number of Chemical Companies. Dr. K.A. Balasubramanian, has also been the promoter and Technical Director of Calac Private Limited, a company which has been now merged with Aurobindo Pharma Ltd. With extensive chemical and technology knowledge and experience in the Chemical Industry in various capacities, is expected to contribute to the benefit of the Company in the technology area.

With the induction of new additional directors, your Company's Board comprises of 9 Directors of which 5 are independent non executive directors and 4 are executive directors.

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Lanka Srinivas & Dr. I. Sathyamurthy retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

DELISTING OF COMPANY'S EQUITY SHARES FROM AHMEDABAD AND MADRAS STOCK EXCHANGES

The equity shares of your Company are presently listed on the following stock Exchanges:

The Hyderabad Stock Exchange Ltd The Stock Exchange, Mumbai (BSE) The Stock Exchange, Ahmedabad The Madras Stock Exchange Limited The National Stock Exchange of India Limited

Trading pattern of your company's shares on Ahmedabad and Madras Stock Exchanges, shows that the Company's shares are not traded in material volumes in both these exchanges during the last few years. The Board of Directors of your Company at its meeting held on 30th June, 2003 recommended the voluntarily delisting of shares from' Ahmedabad and Madras Stock Exchanges subject to Members and other necessary approvals. The Company's shares will however continue to be listed on the Stock Exchange, Mumbai, the National Stock Exchange of India Limited and the Hyderabad Stock Exchange.

A Special Resolution seeking your approval for such delisting is included in the Agenda of the ensuing Annual General Meeting.

DIRECTORS'RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Board of Directors confirms that in the preparation of the Profit & Loss Account for the year ended 31st March 2003 and the Balance Sheet as at that date:

i) in the preparation of the annual accounts, the applicable Accounting Standards issued by the Institute of Chartered Accountants of India have been followed;

ii) appropriate accounting policies have been applied consistently. Judgement and estimates which are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profits of the Company for the year;

iii) proper and sufficient care has been taken 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;

iv) the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE

Your Company has been making every endeavor to put in place a formalized system of Corporate Governance. As per the requirements of the Listing Agreement with the stock exchanges, a report on Corporate Governance, duly certified, is given in the Annexure.

AUDIT COMMITTEE

The Company has formed an Audit Committee comprising Srinivas Lanka as the Chairman, with V.S. Janardhanam and Dr. S. Bimal Singh as its Members. All of them have rich and varied experience in managing companies and are conversant with the intricacies of the global pharma industry.

AUDITORS

The Auditors, Messrs. S.R. Batliboi & Co., Chartered Accountants, Secunderabad, a member firm of Ernst & Young International, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for reappointment

The statutory auditors have reported on the Consolidated Financial Statements based on the unaudited accounts of the subsidiaries as at 31st March 2003. All the seven subsidiaries referred by them in their report close their respective books of account as at 31st December every year and the accounts are duly audited. In order to facilitate consolidation of the accounts as at 31st March 2003, the books of account of all the seven subsidiaries are compiled and certified by the management as on that date. Reliance has been made by the statutory auditors on the audited accounts as at 31st December 2002 and on the unaudited accounts as at 31st March 2003.

The comments of the statutory auditors in their report on the accounts of the Company and on the Consolidated Financial Statements are self-explanatory.

COST AUDITORS

The Cost Auditors, Messrs. R.R. Sharma & Co., Cost Accountants, Secunderabad have been re-appointed with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2003-04.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in" accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

The Company enjoyed cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company.

PATICULARS OF EMPLOYEES

None of the employees drew remuneration of Rs.2.4 million or more per annum / Rs.0.2 million or more per month during the year. This information is furnished as required under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by banks, financial institutions, central and state governments, customers, medical fraternity and others and thank the shareholders for the confidence reposed in the Company.

TECHNOLOGY ABSORPTION RESEARCH AND DEVELOPMENT

Specific Areas in which Research and Development carried out by the Company

The Company carried out process development and commercialized various products in the segment of cephalosporin antibiotics and antiviral compounds. Further, it continued process research for maximizing the yield with improved quality.

Benefits derived as a result of the above R&D

The Company's continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

Future Plan of Action

Your Company has ambitious plans to invest further for enhancing its R&D capabilities.

Expenditure on Research and Development (Rs. Millions)

2002-2003 2001-2002

a) Capital 75.13 49.3 b) Recurring 145.33 80.1 220.46 129.4 c) Total R&D expenditure as a percentage of total turnover 1.82% 1.23%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts, in brief, made towards technology absorption, adaptation and innovation:

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the company.

Benefits derived as a result of the above efforts, e.g. Product improvement, cost reduction, product development, import substitution etc.,

The Processes were simplified and thereby reduction in cost and products improvement.

Particulars of Imported Technology: Nil

Foreign Exchange Earning & Outgo

a) Activities relating to exports, initiatives taken to increase exports. Registration of more product dossiers with global authorities, setting up of foreign subsidiaries, and commencement of activities at subsidiaries and joint ventures.

b) Foreign exchange earned and out-go during the year ended 31st March, 2003.

(Rs. Millions)

2002-03 2001-02

Foreign exchange earned 5,651.70 4,868.86 Foreign exchange outgo Raw materials 4,925.93 3,351.16 Other expenses 121.27 99.26 5,047.20 3,450.42 For,and on behalf of the Board

Dr. M. Sivakumaran K. Nityananda Reddy Whole-time Director Managing Director

Place : Hyderabad Date : 30th June, 2003

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Mar 31, 2002

Your Directors are pleased to present the 15th Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2002.

FINANCIAL RESULTS

(Rs. Million) 2001-02 2000-01

Sales/Total income (net of sales tax) 10,524.0 10,064.7

Profit before Depreciation, Interest and Tax including extraordinary income 1,470.4 1,398.9

Depreciation 158.1 147.8

Interest 423.9 416.8

Tax 203.3 151.2

Net Profit 685.1 683.1

Balance brought forward from previous year 25.8 4.2

Profit & Loss Account Debit balance Transferred on Amalgamation - (22.1)

APPROPRIATIONS

Debentures Redemption Reserve - 29.5

Preference Share Redemption Reserve - 11.0

Dividend on Equity Shares 60.6 60.6

Dividend on Preference Shares - 1.9

Tax on Dividend - 6.4

General Reserve 525.0 530.0

Balance carried to Balance Sheet 125.3 25.8

REVIEW OF OPERATIONS

It is a matter of gratification that under very challenging situation, your Company performed well. In a year in which your Company undertook major restructuring of production facilities, there was marginal growth in turnover and profits.

During 2001-02, your Company registered a gross turnover of Rs. 10,524 million against Rs. 10,064.7 million in the previous year. Net profit including an item of extraordinary income and tax is Rs. 685.1 million against 683.1 million during the previous year.

The marginal increase in turnover, despite odds while the revamping was undertaken, demonstrates your Companys ability, to cater to customer needs. While growth was inhibited, the Company maintained its customer relationships.

As Members are aware, with a view to ensure sustainable growth in the forward years, your Company has initiated enterprise wide restructuring that involved setting up new facilities, as well as expanding/revamping the existing units. Major part of the activity affected operations in the year under review.

Aurobindos team did a creditable job, not only in keeping to the time and cost schedule of the projects, but also ensured that the customers never had to feel any level of uncertainty as regards supplies. Your Company is working to its estimated schedules, and during the financial year 2002-03, in a phased manner, all units would be going live on the expanded capacities.

Your Company is pursuing the goal of becoming a leading quality producer of generics in the developed western markets. The production facilities are hence being readied to cater to global regulatory approvals, and the processes, systems and validations are being suitably improved to cater to the needs of stringent customer demands.

Your Company has been filing Drug Master Files as well as applying for process patents to global regulatory authorities. While today, your Company provides the quality that customer wants, the approvals will add to the credibility and recognition.

Aurobindo received Brazilian GMP certification for its formulations unit (Unit 3) located in Hyderabad. This is expected to give a major boost to the Companys efforts to penetrate that market. The Companys two formulation units (Unit 3 & Unit 6) have already received regulatory approvals from MCC, South Africa. The MCA, UK approval for Formulations Unit 3 is expected shortly. A new formulation production facility (Unit 2) is under construction and will cater to the requirements of regulatory markets.

Aurobindo is also working towards USFDA approvals for two of its Active Pharmaceutical Ingredients plants (Unit 1 and Unit 6).

During the year, Aurobindo formed a 50:50 joint venture with Citadel Group for marketing of branded formulations in the domestic market. The joint venture. Citadel Aurobindo Biotech Ltd. focuses on specific therapeutic areas like cardiovascular, diabetology, gastroenterology, infection, nutrition and pain management.

During the year under review, your Company acquired 79.37% equity in Ranit Pharma, a profit making, dividend paying, unlisted company under the same management. This Company has been extending manufacturing facility for Aurobindos requirement of anti virals, anti fungals and anti emetics. Your Company will benefit with this acquisition.

Marketing efforts are being reinforced by working for product and process approvals. With enhanced presence in non-regulated markets and eventual entry into regulated markets, Aurobindo Pharma is well placed to become a generics player of global standing. Your Company would believes in a wider reach, and shall pursue aggressive growth in all key markets.

Aurobindo is changing. The change is improving the fundamentals of the Company. Products are being strengthened with strategic repositioning of production, systems and processes. Over the foreseeable future, these are expected to make a positive impact on the Companys marketing abilities and thereby the revenue models.

DIVIDEND

The Board is pleased to recommend for approval of Members at the Annual General Meeting, a pro rata dividend of 30% for the year ended March 31, 2002 on the enhanced capital of Rs. 206.7 million.

PREFERENTIAL ISSUE AND INCREASE IN SHARE CAPITAL

As you are aware, the Company has successfully completed its private placement issue and allotted 20,00,000 equity shares of Rs. 10 each at Rs. 226 per share and an equal number of convertible share warrants to the Promoters/Directors and Templeton Strategic Emerging Markets Fund LDC and mobilised a sum of Rs. 497.2 million.

The funds so mobilised were used for construction of new manufacturing facility at Visakhapatnam, which would be operational by the end of, 2002 and for Upgradation of existing facilities and investment in the Companys wholly owned subsidiary, Aurobindo (Datong) Bio-Pharma Co. Ltd.

Consequent to the above issue, the paid up Equity Share capital of the Company increased from 20,200,000 Equity Shares of Rs. 10 each to 22,200,000 Equity Shares of Rs. 10 each.

RESEARCH AND DEVELOPMENT

Your Company made fresh investments and expanded the activities at Research & Development Centre. More stress has been laid on our future plan of entering into the generics market. Satisfactory progress has been made in developing non-infringing processes for some of the drug molecules. In pursuance of this objective, the Centre has already filed 12 patents during the course of the year.

INVESTMENTS

During the year, your Company has invested Rs. 511.5 million in its wholly owned subsidiary companies as follows:

Rs. Million

Aurobindo (Datong) Bio-Pharma Co. Ltd. China 471.4

APL Holdings, Inc., USA 24.9

Aurobindo Farmaceutica Do Brazil Ltda. 5.6

A B Farmo Quimica Ltda, Brazil 9.6

Your Company has entered into an agreement to form a joint venture company called Cephazone Pharma LLC, USA in association with Geravi Inc, a subsidiary of Medpharmex, USA to make sterile and non-sterile cephalosporin. The investment in the joint venture will be made by your Companys wholly owned subsidiary viz., APL Holdings Inc.

ENVIRONMENT

Your Company is giving utmost priority to the environmental considerations. The Company is continuously upgrading effluent treatment facilities and waste disposal methods to safeguard the environs. As reported in the last years review, the reverse osmosis technology in the production process has helped reduce pollution load.

DIRECTORS

During the year, Mr. A. Siva Rama Prasad, Mr. AJ. Kamath and Mr. Srinivas Lanka resigned from the Board. Your Board places on record its appreciation for the services rendered by them during their tenure as Directors.

Mr. Srinivas Lanka was reinducted as an Non-executive Independent Director of the Company. Dr. I. Sathyamurthy, MD DM, an eminent cardiologist and a Director of Department of Cardiology, Apollo Hospitals has been inducted into the Board as a Non-executive Independent Director.

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Mr. B. Sivaprasad Reddy and Dr. M. Sivakumaran retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217 (2AA) of the Companies Act, 1956 as amended, the Directors Responsibility statement forming part of this Report has been given in the Annexure.

CORPORATE GOVERNANCE

Your Company believes in creating wealth for its stakeholders. In pursuit of this objective, the policies of the Company are designed to strengthen the ability of the Board of Directors to supervise the management and to enhance long term shareholder value.

Your Company constantly reviews, evaluates and modifies its governance practices to ensure ongoing effectiveness. It is in the process of expanding the Board to induct non-executive independent directors into the Board. In this connection Dr. I. Satyamurthy and Mr. Srinivas Lanka have been inducted as independent Directors.

Your Companys Board however, is conscious that it has to formally put in place a few more improvements. The Board will be further strengthened with industry experienced non-executive independent directors. Committees of Directors will be appointed. These initiatives will be put into practice during the financial year 2002-03.

AUDIT COMMITTEE

The Company has formed an Audit Committee comprising Mr. Srinivas Lanka as the Chairman, with Dr. I. Satyamurthy and Mr. B. Sivaprasad Reddy as its Members. All of them have rich and varied experience in professionally managing pharma companies and are conversant with the intricacies of the industry.

AUDITORS

The Auditors, Messrs. S. R. Batliboi & Co., Chartered Accountants, Hyderabad, a member firm of Ernst & Young International, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

COST AUDITORS

The Cost Auditors, Messrs. R. R. Sharma, have been re-appointed with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2001-02.

AUDIT REPORT

The Board has taken cognizance of the comments made by the Statutory Auditors. While the Board accepts the comments and commits itself to improve the standards of reporting on an on-going basis, the following clarificatory remarks are offered:

As regards the capital receipt of non-compete fee of Rs. 300 million, the notes to the accounts are self explanatory. A chartered accountant in practice carries out internal audit of the Company. The internal audit reports are considered for assessing the systems in force and to take corrective actions. The comments of the Statutory Auditors however, will be viewed constructively for necessary action.

The comments of the Statutory Auditors in their report on the consolidated financial statements are self explanatory.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

The Company enjoyed cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company.

PARTICULARS OF EMPLOYEES

As per the Companies (Particulars of Employees) Rules, 1975 as amended, the details under Sec. 217 (2A) of the Companies Act, 1956 are required to be published only in respect of employees who were in receipt of monthly remuneration of Rs. 2 lakhs and above during the year 2001-2002. The Company had no employee receiving a monthly remuneration of Rs. 2 lakhs and above during the year. As such furnishing the particulars under Sec. 217 (2A) does not arise.

ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by banks, financial institutions, central and state governments, customers, medical fraternity and others and thank the shareholders for their continued confidence reposed in the Company.

ANNEXURE TO THE DIRECTORS REPORT

Information required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

CONSUMPTION PER UNIT OF PRODUCTION

Electricity, Coal, Furnace, Oil Wood

Since the Company manufactures different types of bulk drugs, drug intermediaries and formulations, its not practical to give consumption per unit of production.

FORM - B

DISCLOSURE OF PARTICULARS WITH RESPECT TO TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT (R&D)

Specific Areas in which Research and Development carried out by the Company:

The Company carried out process development and commercialized various products in the segment of cephalosporin antibiotics and antiviral compounds. Further it continued process research for maximizing the yield with improved quality.

Benefits derived as a result of the above R&D:

The Companys continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

Future Plan of Action:

Your Company has ambitious plans to invest further for enhancing its R&D capabilities.

Expenditure on Research and Development:

(Rs. Millions) 2001-2002 2000-2001

a) Capital 49.3 28.0

b) Recurring 80.1 57.9

129.4 85.9

c) Total R&D expenditure as a percentage of total turnover 1.23% 0.86%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

Efforts, in brief, made towards technology absorption, adaptation and innovation:

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the Company.

Benefits derived as a result of the above efforts, e.g.. Product improvement, cost reduction, product development, import substitution etc.,

The Processes were simplified and thereby reduction in cost and products improvement.

Particulars of Imported Technology: Nil

Foreign Exchange Earning & Outgo:

Activities relating to exports, initiatives taken to increase exports. Registration of more product dossiers with global authorities, setting up of foreign subsidiaries, and commencement of activities at subsidiaries and joint ventures.

Foreign exchange earned and out-go during the year ended March 31, 2002.

(Rs. Million) 2001-02 2000-01

Foreign exchange earned 4,866.6 5,451.8

Foreign exchange Outgo

Raw materials 3,351.2 3,159.6

Other expenses 99.3 63.1

3,450.5 3,222.7

MANAGEMENT RESPONSIBILITY STATEMENT

The Board of Directors confirm that in the preparation of the Profit & Loss Account for the year ended March 31, 2002 and the Balance Sheet as at that date:

* the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the Companies Act, 1956 have been followed as a going concern basis and on accrual basis for the financial year ended March 31, 2002;

* that the Directors selected such accounting policies which would give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the company for the year under review;

* Directors have taken sufficient and proper care for maintenance of accounting records;

* the accounts for the year ended March 31, 2002 were prepared on a going concern basis.

For and on behalf of the Board

P. V. Ramaprasad Reddy Chairman

Place: Hyderabad Date: June 30, 2002

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Mar 31, 2001

Your Directors have pleasure in presenting the 14th Annual report of the Company together with the Audited Accounts for the year ended March 31, 2001.

FINANCIAL RESULTS

(Rs.Cr.) 2000-01 1999-2000

Sales 1007.75 749.08

Profit before Depreciation, Interest and Tax 139.89 120.71

Depreciation 14.78 9.52

Interest 41.68 29.40

Tax 15.12 7.19

Net Profit 68.31 74.60

Balance brought forward from previous year 0.42 1.49

(Profit & Loss Account Debit balance Transferred on Amalgamation) (2.21) -

APPROPRIATIONS

Debenture Redemption Reserve 2.95 3.00

Preference Share Redemption Reserve 1.10 6.55

Dividend on Equity Shares 6.06 4.88

Dividend on Preference Shares 0.19 1.08

Tax on Dividend 0.64 0.65

General Reserve 53.00 59.50

Balance carried to Balance Sheet 2.58 0.42

REVIEW OF OPERATIONS & FUTURE OUTLOOK

Your Company achieved satisfactory results during the year. The gross income crossed the landmark figure of Rs. 1,000 crore. The year saw the gross income rise to Rs. 1,007.75 crore, a healthy 34.5 per cent improvement over the previous year.

Profit before depreciation, interest and taxes at Rs. 139.89 crore has registered a growth of 15.9 per cent. Your Company has changed its accounting policies relating to export entitlements, retirement benefits, provisions for claims/debts etc. This is with the intent to eventually move towards the goal of meeting internationally accepted Generally Accepted Accounting Policies (GAAP).

The year end figures include the combined results consequent to the amalgamation of Sri Chakra Remedies Limited. Your Company, as a prudential measure, preferred to charge off in the consolidated accounts, the losses of Sri Chakra Remedies Limited.

As a result, the current year's figures are not comparable with the previous year. After giving effect to all the changes as mentioned above, the net profit for the year at Rs. 68.31 crore is lower when compared with the previous year's net profit of Rs. 74.60 crore

The Company introduced over twenty new bulk actives in speciality health care areas such as 3rd and 4th generation cephalosporins, cholesterol reducers, antihypertensives, new proton pump inhibitors, new generation penicillins and antivirals. The Company has now a larger basket of products in its areas of core competence.

The four formulations divisions, Indus, Argus, Imunus and Genus, were fully operational. The formulations business of your Company is growing at an exponential rate, and during the year under review, there was more than 89 per cent growth. The Company is making investments in technology as well as in marketing efforts to carry forward the competitive advantage. The Company sees potential for significant growth in business over the foreseeable future.

The South African regulatory authorities have approved your Company's cephalosporins and non-cephalosporins dosage manufacturing facilities. The approval for the sterile formulations unit constitutes an important milestone in the industry.

Your Company is pursuing the UK MCA approval, which will enable Aurobindo to enter regulated markets with its planned speciality formulations. This will stand your Company in good stead, at a time when the patents regime is undergoing a major overhaul. Your Company is taking a series of actions that will facilitate moving into the post 2005 era.

Your Company has initiated moves to scale up all the production facilities and convert them to cGMP standards/regulatory approved. After the ongoing exercises are completed, Aurobindo will have some of the most cost competitive production units, and have quality norms that will meet the highest expectations.

The year saw significant gains in exports. Your Company's products are being well accepted in overseas markets, and the secular growth trend was continued. Export income stood at Rs. 544.86 crore (FOB basis), an increase of 48 per cent over the previous year.

As a strategy to meet the challenges of the future, your Company has set up joint ventures/100 per cent subsidiaries at certain strategic locations on the world map. These production/marketing strategies will help Aurobindo make a presence in all its target markets. The objective is to entrench the Company wherever it can meet customer needs and work for mutual advantage.

Every activity today is directed towards making your Company ever more stronger and your Board is confident that the on-going initiatives will position Aurobindo to play a promising role in the pharma industry.

AMALGAMATION OF SRI CHAKRA REMEDIES

During the year Sri Chakra Remedies Limited was amalgamated with your Company with effect from April 01, 2000 and the Company's audited accounts is inclusive of income of Sri Chakra Remedies Limited and the Board has allotted, as per the Scheme of Amalgamation, 1,98,000 equity shares of Rs. 10 each in the ratio of 3:100 to the erstwhile shareholders of Sri Chakra Remedies Limited.

Your Board takes this opportunity to welcome the new Members joining the Aurobindo family.

INCREASE IN SHARE CAPITAL

Consequent to the amalgamation mentioned above, the issued, subscribed and paid-up equity share capital of the Company was increased during the year under review, from 2,00,02,000 equity shares of Rs. 10 each to 2,02,00,000 equity shares of Rs. 10 each.

DIVIDEND

The Board is pleased to recommended for approval of Members at the Annual General Meeting, a dividend of 30 per cent for the year ended March 31, 2001 on the post bonus, post merger capital of Rs.20.20 crore.

Dividend on redeemable preference shares was paid as per the terms of allotment.

RESEARCH & DEVELOPMENT

Aurobindo believes in becoming a global knowledge company lead by its research activities. In keeping with this objective, the Company continued to make fresh investments and today has some of the finest equipments and human resources skilled to discover, develop and deliver results.

During the year under review, the Company invested Rs. 8.59 crore in capital assets and revenue expenditure. The new initiatives have not only improved the process yields, but have created an infrastructure to build new processes. The Company did considerable work in reverse engineering and custom synthesis. The present activities give confidence to look forward to the future with optimism.

INVESTMENTS

During the year, your Company has invested Rs. 9.52 crore in the joint venture in China, Rs. 6.27 crore in APL Holdings, Inc., USA, Rs. 5.00 crore in the 100 per cent subsidiary APL Chemi Natura, Rs. 0.90 crore in the subsidiary Aurobindo Farmaceutica Do Brazil Ltda at Saopaolo, Brazil and Rs. 5.7 lakhs in the equity shares of Andhra Bank.

ENVIRONMENT

Your Company is giving utmost priority to the environmental considerations. The Company is continuously upgrading effluent treatment facilities and waste disposal methods to safeguard the environs. As reported in the last year's review, the reverse osmosis technology in the production process has helped reduce pollution load.

SUSIDIARY COMPANIES

The annual accounts of the subsidiary companies have been attached to this report for your reference.

DIRECTORS

The Company has undertaken major growth initiatives with the objective of reaching out to the global markets, and in particular to the regulated markets. In order to meet the challenges involved, the Company has restructured the management responsibilities. Mr. P.V.Ramaprasad Reddy has been appointed the Chairman of the Company. Mr. K. Nityananda Reddy has assumed the responsibilities of the Managing Director.

This new structure will enable Mr. P.V.Ramaprasad Reddy to concentrate fully on the strategies of change. The Company is on an ambitious plan to scale up its value chain and become an R&D based international pharmaceutical company.

During the year, Mr. M. Ajaya Kumar. Mr. K. Venkatachalam and Mrs. P Suneela Rani have resigned from the Board. Your Board places on record its appreciation for the services rendered by them during their tenure as Directors.

In accordance with the provisions of the Companies Act, 1956, read with the Articles of Association of the Company, Dr. M. Sivakumaran and Mr. Lanka Srinivas retire by rotation at the ensuing Annual General Meeting and being eligible they offer themselves for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 as amended, the Directors' Responsibility statement forming part of this Report has been given in the Annexure.

CORPORATE GOVERNANCE

Aurobindo is committed to the best corporate practices and is in the process of further fine tuning its governing standards. Your Company values ethics, systems and its reputation. Every transaction is hence tailored to meet these requirements, as well as protecting the stakeholder interests.

Your Company is required to comply with the provisions of Clause 49 of the Listing Agreement by March 31, 2002. Compliance work has been initiated and the report as required will be furnished in the Annual Report for the year ending March 2002.

AUDIT COMMITTEE

The Company has formed an Audit Committee comprising Mr. A.J.Kamath as the Chairman, with Mr. L. Srinivas and Mr. A. Siva Rama Prasad as Members. All of them have rich and varied experience in professionally managing pharma companies and are conversant with the intricacies of the industry.

AUDITORS & AUDITORS' REPORT

The Auditors, Messrs. S.R.Batliboi & Co., Chartered Accountants, Secunderabad, a member firm of Ernst & Young international, retire at the ensuing Annual General Meeting and, being eligible, offer themselves for re-appointment.

The observations of the Auditors in their Report have been taken note of by the Board and the Audit Committee. Your Company is instituting systems that will strengthen procedures to facilitate reconciliation and reporting transactions, and appointing a firm of Chartered Accountants has strengthened the internal audit process. The re-appointment and remuneration of a whole-time Director has been included in the agenda of the ensuing Annual General Meeting for your approval.

COST AUDITORS

The Cost Auditors, Messrs. R.R.Sharma, have been re-appointed with the consent of the Government of India to conduct cost audit of both the bulk drug and formulations divisions of the Company for the year 2000-01.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Sec. 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure I forming part of this Report.

FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review. As such no amount of principal or interest was outstanding on the date of the Balance Sheet.

INDUSTRIAL RELATIONS

The Company enjoyed cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company.

PARTICULARS OF EMPLOYEES

The particulars of employees as required to be disclosed in accordance with the provisions of Sec. 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended are annexed to the Directors' Report. However, as per the provisions of Sec. 219 (1)(b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company.

ACNOWLEDGEMENTS

Your Directors wish to place on record their appreciation and acknowledge with gratitude the support and co-operation extended by banks, financial institutions, central and state governments, customers, medical fraternity and others and thank the shareholders for the confidence reposed in the Company.

For and on behalf of the Board

P.V. RAMAPRASAD REDDY Chairman Hyderabad June 29, 2001

ANNEXURE TO DIRECTORS' REPORT

Form B

Foreign Exchange Earning & Outgo :

a) Activities relating to exports, initiatives taken to increase exports.

Registration of more product dossiers with global authorities, setting up of foreign subsidiaries, and commencement of activities at subsidiaries and joint ventures.

b) Foreign exchange earned and out-go during the year ended March 31, 2001.

(Rs. in lakhs) 2000-01 1999-2000

Foreign exchange earned 545,18.32 367,35.32

Foreign exchange outgo

Raw materials 315,95.46 268,64.56

Other expenses 6,31.20 3,53.62

322,26.66 272,18.18

MANAGEMENT RESPONSIBILITY STATEMENT

c) The Board of Directors confirm that in the preparation of the Profit & Loss Account for the year ended March 31, 2001 and the Balance Sheet as at that date:

i) the applicable Accounting Standards issued by the Institute of Chartered Accountants of India and the Companies Act, 1956 have been followed as a going concern basis and on accrual basis for the financial year ended March 31, 2001;

ii) that the Directors selected such accounting policies which would give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

iii) Directors have taken sufficient and proper care for maintenance of accounting records;

iv) the accounts for the year ended March 31, 2001 were prepared on a going concern basis.

d) Auditor's Certificate on compliance with mandatory recommendation of Kumar Mangalam Biria Committee Report on Corporate Governance:

Your Company is required to comply with the provisions of Clause 49 of the Listing Agreement by March 31, 2002. However the Company has taken various measures to comply with Clause 49 of the Listing Agreement and the same are included in the report at appropriate places.

FORM - B

TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT

1. Specific Areas in which Research and Development carried out by the Company :

The Company carried out process development and commercialized various products in the segment of cephalosporin antibiotics and antiviral compounds. Further it continued process research for maximizing the yield with improved quality.

2. Benefits derived as a result of the above R&D :

The Company's continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

3. Future Plan of Action :

Your Company has ambitious plans to invest further for enhancing its R & D capabilities

4. Expenditure on Research and Development :

(Rs. in Lakhs) 2000-2001 1999-2000

a) Capital 280.25 1276.73

b) Recurring 579.32 156.69

Total 859.57 1433.42

c) Total R&D expenditure as a percentage of total turnover 0.86% 1.92%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adaptation and innovation :

Technology absorption is not involved as the process for manufacture of bulk drug is being developed in-house by the Company.

2. Benefits derived as a result of the above efforts, e.g.. Product improvement, cost reduction, product development, import substitution etc.,

The Processes were simplified and thereby reduction in cost and products improvement.

3. Particulars of Imported Technology : Nil

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Mar 31, 2000

The Directors have pleasure in presenting the 13th Annual Report of the Company together with the Audited Accounts for the year ended 31st March, 2000.

FINANCIAL RESULTS

Rs. in Crores 1999-2000 1998-1999

Sales 739.90 550.02

Profit before Depreciation, Interest & Tax 116.54 78.72

Depreciation 9.52 6.29

Interest 25.23 17.10

Tax 7.19 5.19

Net Profit 74.60 50.14

Balance brought forward from previous year 1.49 1.46

Surplus available for Appropriation 76.09 51.60

APPROPRIATIONS

Debenture Redemption Reserve 3.00 2.81

Preference Share Redemption Reserve 6.55 1.34

Dividend on Equity Shares 4.88 3.17

Dividend on Preference Shares 1.08 0.43

Tax on Dividend 0.66 0.36

General Reserve 59.50 42.00

Balance carried to Balance Sheet 0.42 1.49

76.09 51.60

REVIEW OF OPERATIONS AND FUTURE OUTLOOK

During the year under review, the Company achieved robust results.

The Company has diversified its product portfolio further with the introduction of wide range of Cephalosporins (Oral & Sterile) and anti - virals in addition to macrolides, anti-ulcerants, Quinolones, Semi-Synthetic Penicillins and formulations for domestic and export markets.

During the year, the Company's dependence on SSP Bulk Drugs has been further reduced to 45% from 52% in the previous year. However, the Company saw both volume and turnover increase and maintained the leadership position in the country.

The Company has introduced a wide range of value added advanced technology based Sterile Cephalosporins and the revenues from the Cephalosporins group of products has increased to 25% from 11% last year.

Focused and consistent changes in the product and sales mix by the Company has resulted in improvement in the operating margins of the Company.

The Company has given a major thrust to exports, during the year. As a result, exports have increased to Rs. 367.35 Crores from Rs. 215.60 Crores last year. At present the Company has presence in 73 countries. Exports account for approximately 50% of the total revenues of the Company.

The Company is continuing its efforts to focus on the formulation business. Two of the new facilities for manufacture of different finished dosage formulations are aimed principally to cater to the regulated markets.

The Company's programme of Commercial Paper for Rs.35 crores has been rated by ICRA as A1+ which indicates highest safety. Similarly ICRA has rated as LAA the Company's long term borrowings which indicate high safety.

DIVIDEND

An interim dividend of 50% was declared by the Board for the year ended 31st March, 2000 and the same was distributed to those shareholders whose names appeared in the Register of Members on the Record date viz. 25th May, 2000.

The Board has decided to treat the interim dividend already paid as the final dividend for the year 1999-2000. Similarly dividend on Redeemable Preference Share Capital was paid as per the terms of allotment.

INCREASE IN THE SHARE CAPITAL

Preferential Allotment

During the year, the Company has allotted 5,51,000 Equity Shares of Rs. 10 each at a premium of Rs.480 per share to the Foreign Institutional Investors, Financial Institutions, Mutual Funds etc., on preferential basis by way of private placement.

Bonus Shares

In accordance with the Special Resolution passed by the Members of the Company in the Extra Ordinary General Meeting held on 18th February, 2000, the Company has allotted Bonus Shares in the ratio of 1:1 to those shareholders whose names appeared in the Register of Members on 7th April, 2000. Accordingly, the paid up Equity Share Capital of the Company has increased to Rs.20,00,20,000 consisting of 2,00,02,000 Equity Shares of Rs.10 each.

SUBSIDIARY COMPANIES

Presently, exports constitute about 50% of the total turnover. The company's efforts for further penetration into export market is being relentlessly pursued. The subsidiary companies at Miami (USA), HongKong and Thailand are fully operational. The Company has obtained necessary approvals for setting up two joint ventures in the United States of America, one joint venture in the Peoples Republic of China and a subsidiary in Brazil. The project works are in progress.

The Annual Accounts of the subsidiary companies have been attached to this Report for the reference.

RESEARCH AND DEVELOPMENT

The Company is continuing its efforts to become a strong knowledge based and technology oriented R&D driven health care Company. During the year, the Company has set up a state-of-the-art Research Centre, at Bachupally near Hyderabad, with most sophisticated analytical instrumentation which is positioned to be the key driver for the Company's imposing growth both in the immediate and future years. The regulated markets, advanced research based products, patentable processes will be the strategic shift in the focus of research efforts of the Company.

DEMATERIALISATION OF SHARES

The Company has entered into separate Tripartite Agreements with the National Securities Depository Limited (NSDL), Central Securities Depository Limited and Karvy Consultants Limited for dematerialisation of its Equity Shares. Members have the option/discretion to hold their demat shares in the Company through the NSDL or the CSDL.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Mr. A. Siva Rama Prasad, Mr. B. Sivaprasad Reddy and Mr. A.J. Kamath retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

AUDITORS

The Board recommends for the appointment of M/s. S.R. Batliboi & Co. a member firm of M/s. Ernst & Young International, one of the top five global auditing firms as the Statutory Auditors of the Company. M/s. K. Nagaraju & Associates, the Statutory Auditors of the Company who are retiring at the conclusion of the ensuing Annual General Meeting have not opted for re-appointment.

It is the intention of the Company to conform to the international accounting practices including the disclosure norms in line with Generally Accepted Accounting Principles of the United States of America (USGAAP).

COST AUDIT

M/s. R.R. Sharma & Co., Cost Auditors are re-appointed as the Cost Auditors of the Company to conduct cost audit of both the bulk drug and Formulations divisions of the Company for the year 1999-2000 with the consent of the Government of India.

ENVIRONMENT

The Company is giving utmost priority to the environmental considerations. On an ongoing basis, the Company is upgrading its effluent treatment facilities and waste disposal methods to safeguard the environs. The Company has introduced reverse osmosis technology in the production process and thereby reduced pollution.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with the (Disclosure of Particulars in the Report of Directors) Rules, 1988, are given in Annexure I which forms part of this Report.

INDUSTRIAL RELATIONS

Industrial relations remained cordial during the year. The Directors record their appreciation of the support and co-operation of all employees towards the growth of the Company.

PARTICULARS OF EMPLOYEES

The Particulars of Employees required to be disclosed in accordance with the provisions of section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975 as amended, are annexed to the Directors' Report. However, as per the provisions of Section 219 (1) (b) (iv) of the Companies Act, 1956 the report and the accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company.

FIXED DEPOSITS

The Company has not accepted any fixed deposits during the year under review. As such, no amount of principal or interest was outstanding on the date of the Balance Sheet.

VOLUNTARY DELISTING FROM AHMEDABAD AND MADRAS STOCK EXCHANGES

The Equity Shares of the Company are presently listed on five stock exchanges at Hyderabad, Mumbai, Madras, Ahmedabad and the National Stock Exchange. The Mumbai and National Stock Exchanges are accessible for on-line dealings across the country. Since initial listing the Company noticed that there is insignificant trading in the equity shares of the Company at Ahmedabad and Madras Stock Exchanges. In view of the above, the Company proposes to delist the Company's scrip from these two Stock Exchanges. The interests of the shareholders in the said regions will not be affected adversely as the services of the National Stock Exchange and Mumbai Stock Exchange are available in the said places.

FORM-B

TECHNOLOGY ABSORPTION

RESEARCH AND DEVELOPMENT

1. Specific Areas in which Research and Development carried out by the Company :

The Company carried out process development and commercialized various products in the segment of cephalosporin antibiotics and antiviral compounds. Further it continued process research for maximizing the yield with improved quality.

2. Benefits derived as a result of the above R&D :

The Company's continuing efforts to become a strong knowledge based and technology oriented R&D driven health care Company have yielded results by way of improved processes in the commercial production.

3. Future Plan of Action :

The Company has ambitious plans to invest further for enhancing its R & D capabilities

4. Expenditure on Research and Development : (Rs. in Lakhs) 1999-2000 1998-1999 a) Capital 1276.73 R&D ex- b) Recurring 156.69 penses Total 1433.42 upto 31.3.1999 were classified c) Total R & D expenditure under usual as a percentage of total heads of ex- turnover 1.94% penditure.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts, in brief, made towards technology absorption, adaptation and innovation :

Technology absorption is not involved as the process for manufacture of bulk actives and formulations is being developed in-house by the Company.

2. Benefits derived as a result of the above efforts, e.g., Product improvement, cost reduction, product development, import substitution etc. :

The Processes were simplified and thereby achieving reduction in cost and improvement in quality of products.

3. Particulars of imported Technology : Nil

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Mar 31, 1999

The Directors have pleasure in presenting the 12th Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 1999.

FINANCIAL RESULTS

(Rs. in cross)

1998-99 1997-98

Sales 550.03 295.31

Profit before Depreciation, Interest and Tax 78.72 39.85

Depreciation 6.29 2.22

Interest 17.10 11.87

Tax 5.19 1.97

Net Profit 50.14 23.79

Balance brought forward from previous year 1.46 1.45

APPROPRIATIONS

Debenture Redemption Reserve 2.81 0.16

Pref. Share Redemption Reserve 1.34 0.01

Dividend on Equity Shares 3.17 2.36

Dividend on Pref. Shares 0.43 0.02

Tax on Dividend 0.36 0.23

General Reserve 42.00 21.00

Balance carried to Balance Sheet 1.49 1.46

DIVIDEND

The Directors are pleased to recommend a dividend of 50% on the enhanced Equity Share Capital of the Company. The Bonus Shares allotted on 27th November, 1998 are eligible for pro rata dividend. Similarly the Board recommend for payment of dividend on Redeemable Preference Share Capital as per the terms of allotment.

REVIEW OF OPERATIONS AND FUTURE OUTLOOK

Operations

As may be observed from the above, the Company has achieved robust results during the year 1998-99.

The Sales recorded an increase of 86% over the sales of 1997-98. the Company could achieve this higher growth by increasing the capacities of semi synthetic penicillins, quinolones etc., and also by introducing both sterile and non sterile cephalosporins to its product mix.

The Net profit recorded an increase of 110% over the Net profit of 1997-98. This higher growth could be achieved by change in the product mix with better value addition, improvement in production yields, better recoveries and higher export realisations.

The Export turnover recorded an increase of 129% over that of previous year. the Company has increased its global presence by exporting its products to over sixty countries.

During the year under review, the Company has launched a wide range of cephalosporins drugs both sterile and non sterile which have huge market potential. During the current financial year major growth of the Company is expected in this segment. While maintaining its leaderships in semi synthetic penicillin bulk actives, the Company's dependence on these products is gradually reduced over the years due to introduction of high value new generation bulk active with better margins.

Credit Rating

The Company is programme of commercial paper for Rs. 35 Crores has been rated by ICRA as A1+ which indicates highest safety.

Similarly LAA rating has been conferred and renewed by ICRA for the Company's long term borrowing which indicate high safety.

Subsidiaries

Presently, exports constitute about 40% of the total turnover. the Company's efforts for further penetration into export market is being continued. The wholly owned subsidiary Company at Miami has commenced operations. During the current financial year the Company has set up a wholly owned subsidiary in HongKong and a joint venture in Thailand. Plans are underway to start a few more subsidiaries/joint ventures in other countries.

The Annual Report of the wholly owned subsidiary Company viz. Aurobindo Pharma Limited Company Miami. has been attached to this Report for the reference.

As regard to the submission of the Annual Report of the wholly owned subsidiary at Hong Kong the said subsidiary is yet to complete the first full year of operations.

Research & Development

During the year under review, the Company has started a separate division for R&G namely "APL Research Centre". The new R&D Centre is being set up near Hyderabad with an initial investment of Rs. 15 Crores. It will be commissioned by end of the current year. With the state of art facilities and highly qualified team, the R&D centre should be a source of considerable strength to the Company's future plans and growth.

Formulations

the Company is increasing its thrust on formulations. Majority of the future investments would be in this direction. The new manufacturing facilities located near Hyderabad for formulations with a capital outlay of Rs. 25 crores would be operational during the second half of the current year. Plans are on to launch new products to increase the therapeutic range.

The Company has already increased the strength of its marketing team to over four hundred for ethical promotion of branded formulations in the country. The Company has reorganised its distribution net work by starting its own sales depots in various parts of the country.

The Company is considering acquisition of suitable brands and also to start specialty marketing divisions.

DEMATERIALISATION OF SHARES

In tune with the emerging trends in the capital markets, the Company has voluntarily entered into a Tripartite Agreement with the National Depository Services Limited (NSDL) and Karvy Consultants Limited for optional dematerialisation of its equity shares. the Company has also made one time payment of the custody fees to NSDL on behalf of the shareholders.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Dr. M. Sivakumaran, Mr. K. A. Venkatachalam and Mr. P. Suneela Rani retire by rotation at the ensuring Annual General Meeting and being eligible, offer themselves for reappointment.

During the year Mr. M. Ajaya Kumar was appointed as an Additional Director. Under Sections 260 of the Companies Act, 1956 he holds office upto the date of the forthcoming Annual General Meeting. A notice together with necessary deposit has been received from a shareholder under Sections 257 of the Companies Act, 1956 proposing the candidature of Mr. M. Ajaya Kumar for the office of Director.

Mr. M. Ajaya Kumar was appointed as a Whole Time Director on 1st September 1998 on such terms as set out in the notice of the 12th Annual General Meeting.

AUDITORS

M/s. K. Naga Raju & Associates, Chartered Accountants, the Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

COST AUDIT

M/s. R. R. Sharma & Co, Cost Accountants, Hyderabad are appointed as the cost auditors of the company to conduct cost audit of both the Bulk drug and Formulations divisions of the Company for the year 1998-1999 and the report would be submitted to the Central Government accordingly.

INVESTMENTS

During the year the Company has invested in the share capital of two wholly owned subsidiaries in Miami (USA) and Hongkong after obtaining necessary approval from the Reserve Bank of India.

ENVIRONMENT

The Company is giving utmost priority to the environmental considerations. The Company has incurred about Rs. 5 Crores for setting up effluent treatment facilities and waste disposal.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC.

Information in accordance with the provisions of Section 217(1)(e) of the Companies Act, 1956 read with the (Disclosure of particulars in the Report of Directors) Rules, 1998, are given in Annexure I which forms part of this Report.

PARTICULARS OF EMPLOYEES

The industrial relations remained cordials during the year. The Directors record their appreciation of the support and operation of all employees towards the growth of the Company.

The Particulars of Employees as required to be disclosed in accordance with the provisions of Section 217(2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules 1975 as amended, are annexed to the Director's Report. However, as per the provisions of Sections 219(1)(b)(iv) of the Companies Act, 1956 the Report and the Accounts are being sent to all the Shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Company.

FIXED DEPOSITS

the Company has not accepted any fixed deposits. As such, no amount of principal or interest was outstanding on the date of balance sheet.

Y2K COMPLIANCE

The Company has engaged the services of the consultants wherever necessary to comply with the Y2K issue by August, 1999.

FORM - B

TECHNOLOGY ABSORPTION

Research and Development

1. Specific Areas in which Research and Development carried out by the Company.

- The Company is continuously carrying out process Research & Development of various products.

2. Benefits derived as a result of the above R&D.

- Improved yields and quality

3. Future Plan of Action

- The Company is setting up a full-fledged R&D facility near Hyderabad at capital out lay of Rs. 15 Crores. A separate division has been created by name APL Research Centre for carrying out R&D activities.

4. Expenditure on Research and Development

- R&D expenditure upto 31.3.99 is included under usual heads of expenditure.

Technology Absorption, Adaptation and Innovation

1. Efforts, in brief, made towards technology absorption, adaptation innovation.

- Technology absorption is not involved as the process for the manufacture of bulk drugs is being developed in house by the Company.

2. Benefits derived as a result of the above efforts, e.g., Product improvement, cost reduction, product development, import substitution etc.,

- Product improvement and cost reduction.

3. Particulars of Imported Technology

- There is no imported technology.

FOREIGN EXCHANGE EARNINGS AND OUTGO

The Information on foreign exchange earnings and outgo is contained in the Notes to Accounts in Schedule Q.

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Mar 31, 1998

The Directors have pleasure in presenting the Eleventh Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 1998.

FINANCIAL RESULTS (Rs.in Crores) Year ended Previous 31.3.98 Year Actuals Projected Actuals Total Income 296.79 167.21 222.46 PBDIT 39.85 18.83 26.87 PBT 25.77 15.06 14.61 PAT 23.79 13.23 12.73 EPS (Rs) 50.35 28.01 26.94 Dividend 50% 25% 30%

Balance brought forward from 1.45 0.71 previous year

Appropriations : Debenture Redemption Reserve 0.16 - Preference Share Redemption Reserve 0.01 - Interim Dividend on Equity Shares 0.94 0.71 Proposed Dividend on Equity Shares 1.42 0.71 Dividend on Preference Shares 0.02 - Tax on Dividend 0.23 0.07 General Reserve 21.00 10.50

Balance carried to Balance Sheet 1.46 1.45

DIVIDEND

The Board of Directors have declared on 26.12.1997 an Interim Dividend @ 20% for the year 1997-98 amounting to Rs.94,50,000/- and the same was paid. The Directors are pleased to recommend for payment of final dividend @ 30% for the year 1997-98 amounting to Rs.1,41,75,000/-. Thus the total Dividend declared for the year 1997-98 is 50% as against that of 30% for the previous year. If approved, the final dividend would be payable to the shareholders registered at the close of business hours on 18th August, 1998.

Further as per the terms of allotment, a dividend @ 12.5% p.a. aggregating to Rs.4,60,000/- has been paid for the year on the Preference Share Capital on prorata basis as interim dividend.

REVIEW OF OPERATIONS

The Company has performed well during the year and has shown excellent results. The turnover and net profit have increased by about 33% and 87% respectively over the previous year. The Company has achieved an export turnover of Rs.93.99 Crores during the year as against Rs.90.55 Crores in the previous year.

During the year under review, the Company has incurred a capital expenditure of Rs.14.86 Crores for setting up a modern unit near Hyderabad, for manufacture of Cephalosporin Drugs and expansion of production capacities in the existing plants. The trial production of Cephalosporin drugs are in progress.

The Company had made a modest beginning in formulations about three years ago. During the year the Company has expanded its marketing net work through out the country with a total field force of 350 for ethical promotion of branded formulations.

The Directors are pleased to inform that during the year the Registered and Corporate Office of the Company has been shifted to newly constructed own premises.

The Company has been accorded by ICRA the highest credit rating of A1+ for it's Commercial paper programme and LAA for long term Non Convertible Debentures programme indicating high safety.

OUT LOOK FOR THE CURRENT YEAR

The Company has now emerged as the largest producer of semi synthetic penicillin products in the Country. The Company aims to maintain its leadership in this segment by further improvement in productivity and by total quality management.

Presently the Company is exporting its products to over 35 countries. In order to increase its global presence with better customer service, the Company is setting up two wholly owned subsidiaries based at USA and Hong Kong. The approval of the Government of India in this regard is awaited.

Having well established in Bulk Drugs, the Company is now focussing more on formulations. The Company has envisaged a capital expenditure of about Rs.25 crores on new/expansion of manufacturing facilities for formulations.

The Bulk Drug Industry is looking up with healthy competion and improvement in price realisations. Apart from this the benefits of expansions under taken during the last year would accrue in the current year 1998-99. The Company would be launching shortly a wide range of Cephalosporin drugs. In view of this, barring unforeseen circumstances, the Company is expected to achieve much better results in the current year.

ISSUE OF BONUS SHARES

The paid up Equity Share Capital of the Company as on 31st March, 1998 is Rs.4,72,50,000/- and the free reserves that can be capitalised as on the same date are Rs.64,66,52,457/-

Keeping this and the expected growth rate in view, the Board of Directors felt it desirable to reward the shareholders suitably. Accordingly, the Directors recommends for capitalisation of an amount of Rs.4,72,50,000/- (Rupees Four Crores Seventy Two Lakhs Fifty Thousand Only) by issue of 47,25,000 Equity Shares of Rs.10/- (Rupees Ten Only) each as Bonus Shares in the proportion of one Equity Share for each Equity Share held by a member.

The Bonus Shares shall rank pari passu in all respects with the existing equity shares and will be issued to the persons who are the holders of the existing equity shares on the record date to be fixed by the Board of Directors.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Mr. A.J.Kamath and Mr. A.Siva Rama Prasad Directors retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Mr. P.S.R.K. Durga Prasad has resigned as wholetime Director of the Company during the year for personal reasons. The Board of Directors express their gratitude for the services rendered by Mr. P.S.R.K. Durga Prasad during his tenure as a wholetime Director.

Mr. B. Sivaprasad Reddy, was appointed as Additional Director, on 20th March, 1998 under Section 260 of the Companies Act, 1956 and he holds office upto the date of the forthcoming Annual General Meeting. A Notice together with deposit of Rs.500/- has been received from a Shareholder under Section 257 of the Companies Act, 1956 proposing the candidature of Mr. B. Sivaprasad Reddy for the office of Director.

Mr. B. Sivaprasad Reddy, was appointed as a wholetime Director on 6.6.1998 on such terms as set out in the Notice of the Eleventh Annual General Meeting.

AUDITORS

M/s.K. Nagaraju & Associates, Chartered Accountants, the Statutory Auditors of the Company retire at the conclusion of the ensuing Annual General Meeting and are eligible for reappointment.

PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO:

Conservation of energy continues to be a priority area for the Company and all efforts are being made to save energy thereby reduce cost of production.

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules 1988, are given in Annexure I which forms part of this Report.

PARTICULARS OF EMPLOYEES

The Industrial Relations remained cordial during the year. The Directors record their appreciation of the support and cooperation of all employees towards the growth of the Company.

A statement showing the particulars of employees as required by Sub Section 2A of Section 217 of the Companies Act, 1956 is given in Annexure II which forms part of this Report.

FIXED DEPOSITS

The Company has not accepted any fixed deposits during the year under review.

TECHNOLOGY ABSORPTION

Research and Development :

1. Specific Areas in which Research and Development carried out by the Company.

The Company is continuously carrying out process Research & Development of various products.

2. Benefits derived as a result of the above R&D.

Improved yields and quality

3. Future Plan of Action:

The Company is planning to setup a fulfledged R&D facility in the near future.

4. Expenditure on Research and Development :

Not being substantial, included under usual heads of expenditure.

Technology Absorption, Adaptation and Innovation :

1. Efforts, in brief made towards technology absorption, adaptation and innovation.

Technology absorption is not involved as the process for the manufacture of bulk drugs is being developed in house by the Company.

2. Benefits derived as a result of the above efforts, e.g., Product improvement, cost reduction, product development, import substitution etc.,

Product improvement and cost reduction.

3. Particulars of Imported Technology :

There is no imported technology.

FORM- C

FOREIGN EXCHANGE EARNINGS AND OUTGO

The Information on foreign exchange earnings and outgo is contained in the Notes to Accounts in Schedule Q.

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Mar 31, 1997

Your Directors have pleasure in presenting the Tenth Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 1997.

1. FINANCIAL PERFORMANCE

(Rs. in Crores) 1996-97 1995-96

Gross Income 222.46 121.80 Profit before interest and Tax 25.16 10.59 Interest 10.55 3.25 Profit before Tax 14.61 7.34 Provision for Tax 1.88 0.22 Profit after Tax 12.73 7.12 (available for appropriation) Appropriations: Proposed Dividend 1.42 1.18 Tax on proposed Dividend 0.07 - Transfer to General Reserve 10.50 5.75 Balance Carried to Balance Sheet 0.74 0.19 12.73 7.12

2. DIVIDEND

An interim dividend of 15% for the year 1996-97 amounting to Rs.70.87 Lakhs was declared by the Directors on 27.02.1997. Your Directors now recommended to the Annual General Meeting the declaration of a Final Dividend of 15% for the year 1996-97 amounting to Rs.70.87 Lakhs. The aggregate divided declared for the year 1996-97 comes to 30% as against the 25% for the previous year.

3. REVIEW OF OPERATIONS

The performance of your Company for the Financial Year under review is quite impressive. The sales has increased to Rs.221.70 Crores, up by 83% and the Profit After Tax has increased to Rs. 12.73 Crores, up by 79% as compared to previous year.

The Exports have also gone up to Rs.90.55 Crores as against Rs.48.25 Crores in the previous year.

During the year, the Company's new unit of bulk sterile has gone into production. Further the expansion of existing production facilities has also contributed to the overall performance of the Company.

Performance Vs. Projections:

(Rs. in Crores) Year ended 31.03.97 Particulars Projections Performance

Sales/Other Income 153.52 222.46 Profit Before Interest Depreciation & Tax 17.27 26.87 Profit after Tax 12.38 12.73 Earnings Per Share (Rs.) 26.20 26.93 Dividend(%) 25.00 30.00

4. FUTURE PLANS & PROSPECTS

Your Company has now emerged as a major player in semi synthetic pencillin products, being the core business. Presently, the Company is in the process of consolidation of it's operations to meet the global challenges. Further investments are envisaged to create modern manufacturing facilities to augment formulation operations. The R&D efforts of the Company shall continue to achieve further growth.

Barring unforeseen circumstances, your Company is confident to continue to perform well in the years ahead.

5. DIRECTORS

In accordance with the provisions of the. Companies Act, 1956 read with the Articles of Association of the Company, Sri P.S.R.K.Durga Prasad and Smt. P. Suneelarani retire by rotation at the Tenth Annual General Meeting and being eligible, offer themselves for reappointment.

6. AUDITORS

M/s. K. Nagaraju & Associates, Chartered Accountants, the statutory Auditors of the Company retire at the conclusion of the Tenth Annual General Meeting and are eligible for reappointment.

7. PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO:

Information in accordance with the provisions of Section 217 (1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules 1988, are given in Annexure I which forms part of this Report.

8. PARTICULARS OF EMPLOYEES

A statement showing the particulars of employees as required by Sub Section 2A of Section 217 of the Companies Act, 1956 is given in the Annexure II which forms part of this Report.

9. FIXED DEPOSITS

Your Company has not accepted any fixed deposits during the year under review.

10. INDUSTRIAL RELATIONS

Industrial Relations remained cordial during the year and your Directors wish to place on record their deep appreciation for the same.

11. ACKNOWLEDGEMENTS

Your Directors would like to express their appreciation of committed services and contribution of employees of the Company at all levels.

Your Directors would like to thank Company's Financial Institutions, Banks, customers and Government for their cooperation and continued support.

Your Directors also wish to express their gratitude to the shareholders for their trust and confidence reposed in the Company.

B. TECHNOLOGY ABSORPTION:

FORM - B

Research and Development:

1 Specific Areas in which Research and Development carried out by the Company.

- The Company is continuously carrying out process Research & Development of various products.

2. Benefits derived as a result of the above Research & Development.

- Improved yields and quality.

3. Future Plan of Action:

- The Company is planning to further strengthen its Research & Development efforts both in Bulk Drugs and Formulations.

4. Expenditure on Research and Development:

- Not being substantial included under usual heads of expenditure

Technology Absorption, Adaptation and Innovation:

1. Efforts, in brief, made towards technology absorption, adaptation and innovation.

- Technology absorption is not involved as the process for the manufacture of bulk drugs is being developed in house by the Company.

2. Benefits derived as a result of the above efforts, e.g., Product improvement, cost reduction, product development, import substitution etc.,

- Product improvement and cost reduction.

3. Particulars of Imported Technology:

- There is no imported technology.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

FORM - C

(Rs. in Lakhs) 1996-97 1995-96

Foreign Exchange Earnings: FOB Value of exports 9055.25 4825.36

Foreign Exchange Outgo: Import of Raw Materials 7869.76 5168 32 Import of Capital Goods - 513.20 Traveling Expenses 22.27 46.94 Other Expenses - 16.85

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Mar 31, 1996

Directors have pleasure in presenting the Ninth Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 1996.

* DIVIDEND

Directors are pleased to recommend a Dividend of 25% p.a., subject to deduction of tax at source for the year 1995-96 (previous year @ 25%).

* REVIEW OF OPERATIONS

During the year under review, the turnover has increased by 42%, Profit after Tax by 18% and the exports by 92%

PERFORMANCE Vs PROJECTIONS

(Rs.in lakhs) Particulars Year Ended 31-3-1996 Projections Performance

Sales/Other Income 12546.91 12275.45 PBIDT 1347.80 1123.85 P A T 970.22 712.54 E P S (Rs.) 20.53 15.08

* FUTURE PLANS & PROSPECTS

Having successfully completed the Bulk Sterile Project, your Company is now contemplating further expansion plans and entry into allied activities to maintain its growth trend. Barring unforeseen circumstances, your Company is confident of performing well in the coming years.

* DIRECTORS

In accordance with the provisions of the Companies Act, 1956 read with the Articles of Association of the Company, Sri K.A. Venkatachalam, Dr. M.Sivakumaran and Sri A. Sivarama Prasad retire by rotation at the Ninth Annual General Meeting and being eligible, offer themselves for reappointment.

* AUDITORS

K. Nagaraju & Associates, Chartered Accountants, the statutory Auditors of the Company retire at the conclusion of the Ninth Annual General Meeting and are eligible for reappointment.

* PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO:

Information in accordance with the provisions of Section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules 1988, are given in Annexure I which forms part of this Report.

* PARTICULARS OF EMPLOYEES

A statement showing the particulars of employees as required by Sub Section 2A of Section 217 of the Companies Act, 1956 is given in the Annexure II which forms part of this Report.

* FIXED DEPOSITS

Company has not accepted any fixed deposits during the year under review.

* INDUSTRIAL RELATIONS

Industrial Relations remained cordial during the year and Directors wish to place on record their deep appreciation for the same.

* ACKNOWLEDGEMENTS

Directors take this opportunity to take on record their appreciation of the dedication and commitment of employees at all levels.

Directors also take this opportunity to place on record their appreciation for the co-operation and support received from Company's Financial Institutions, Banks, State & Central Government.

Directors also wish to express their gratitude to the shareholders for the confidence reposed by them in the Company.

FORM-B

1. Research and Development:

1. Specific Areas in which Research and Development carried out by the Company.

- The Company is continuously carrying out process Research & Development of various products.

2. Benefits derived as a result of the above Research and Development.

- Improved yields and quality.

3. Future Plan of Action: - The Company is contemplating to further strengthen its Research and Development efforts particularly in Penicillin G down stream products.

4. Expenditure on Research and Development:

- Not being substantial included under usual heads of expenditure.

Technology Absorption, Adaptation and Innovation:

1. Efforts, in brief, made towards technology absorption, adaptation and innovation.

- Technology absorption is not involved as the process for the manufacture of bulk drugs is being developed inhouse by the Company.

2. Benefits derived as a result of the above efforts, e.g., Product improvement, cost reduction, product development. import substitution etc.,

- Product improvement and cost reduction.

3. Particulars of Imported Technology:

- There is no imported technology.

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Mar 31, 1995

Your Directors have pleasure in presenting the Eighth Annual Report together with the Audited Accounts of the company for the year ended 31st March, 1995.

DIVIDEND Your Directors are pleased to recommend a dividend of 25% p.a, pro-rata subject to deduction of tax at source for the year 1994-95.

AMALGAMATION the amalgamation of Chaitanya Organics Pvt. Ltd. (COPL), with the company was sanctioned by the High Court of Andhra Prades and this year's Annual Accounts are presented for the combined company taking into consideration the amalgamation of COPL with the company with effect from 01.04.94. The shareholders of COPL were allotted for every one equity share held by them in COPL. Accordingly, the capital has gone up by Rs 47.25 lakhs on account of amalgamation, alongwith the reserves of COPL transferred to the company. The amalgamation formalities have since been completed.

REVIEW OF OPERATIONS The Performance of your company during the year under review has further improved over that of the previous year. The turnover has increased by 126%, the net profit by 119% and export turnover by 145%.

Your Directors are pleased to inform you that your company has been accorded the Export House status by Ministry of Commerce, Government of India.

The variation between projections and performance is mainly on account of consequential loss due to a fire accident in one othe units which is engaged in the manufacture of intermediates during January, 1995. The necessary repairs and replacements work is completed and the plant is running at its full capacity from middle of April, 1995. The company has made a change in the expansion project by doubling the capacity of the bulk sterile project instead of additional formulations block in the same unit. The bulk sterile project is progressing well as per schedule. The funds are being deployed towards the projects with such variations are necessary.

FUTURE PLANS AND PROSPECTS Your company has integrated facilities for the manufacture of bulk drugs, drug intermediates and formulations. With the execution of the bulk sterile project, your company will have wide range of Life saving Semi-Synthetic Pencillin based antibiotics and its benefits will accrue in the coming years. Your company is emphasising more on R & D and total quality management as done in the past. Moreover, the company is aiming to further increase its presence in the Export Market.

PUBLIC OFFER As you are aware, Videocon group of Companies have made an offer for sale of 1181300 Equity shares of Rs 10 each for cash at a premium of Rs 180 per share aggregating Rs 224447000 to the public in January, 1995. The Public response was good and the offer was over subscribed.

BONUS ISSUE Your company made a 7:20 Bonus Issue and allotted 1102500 shares in November 1994.

CONSERVATION OF ENERGY a) Energy Conservation measures taken: The company depends on the power supplied by the PSEB/APSEB. The company also installed generators to meet the energy requirements, when there is break down in the power supply, Capacitors have been installed as a part of various other measures for conservation of energy.

b) Additional investments and proposals, if any, being implemented for reduction of consumption of energy: An outside Agency has been engaged to conduct energy audit of the existing units. A part of their recommendations have already been implemented in the area of coal consumption in boiler and the remianing recommendations will be implemented in a phased manner. The impact will be felt in the coming years.

c) Impact of measures at (a) and (b) above for reduction of energy consumption and consequent impact on the cost of production of goods: There is no significant impact on the cost of production of the goods on account of the above measures.

RESEARCH AND DEVELOPMENT 01. Specific Areas in which Research and Development carried out by the company. * Process Development for manufacture of Oxacillin Sodium, Norfloxacin, Ciprofloxacin, CMIC Chloride and DCMIC Chloride. * Process Development of high value drugs like Enalapril Maleate Astemizole, Citrazine Hydrochloride Omerprazole, Famotidine Domperidone. * Process development for Omeprazole Pellets, and film coated tablets of antibiotics for export market, liquid orals for domestic market.

02. Benefits derived as a result of the above Research and Development * Improvement in productivity and overall yield, improved recovery of solvents, optimum utilisation of raw materials and recovery of by-products. * Commercialisationof Norfloxacin, Ciprofloxacin and Development * Cost reduction.

03. Future plan of action: * To improve the technology developed. * To strengthen the product mix. * To further improve the quality of finished products. * To manufacture drug intermediates presently being imported, to achieve further backward integration. * To introduce new dosage forms like dry powder of antibiotics and some time release formulations into domestic and export markets. * To develop new types of formulations from the drugs manufactured by the company in other bulk drug units ex:- Ciprofloxacin Tablets, omeprazole pellets and Capsules etc.

04. Expenditure on Research and Development Non substantiable and included under usual heads of expenditure.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION 01. Efforts, in brief, made towards technology absorption, adaptataion and innovation. * The company is continuously engaged in Research and Development of the existing products as well as new products with an aim for better yields. * Technology absorption is not involved as the process for the manufacture of Bulk Drugs, Drug Intermediates and Formulations is being developed by the company itself. Continuous efforts are being made to improve the existing process developed inhouse.

02. Benefits derived as a result of the above efforts, ex Product improvement, cost reduction, product development, import substitution etc. * The continuous upgradation of technology has benefited the company in the form of better production process, better yields, better quality. * Manufacture of Drug Intermediates which are being imported will help the company in cost reduction as well as import substitution.

03. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year), following information may be furnished. * Technology Imported : There is no imported technology * Year of Import : Not Applicable * Has technology been fully absorbed : Not applicable * If not fully absorbed, areas where this has not taken place, reasons thereof and future plans of action : Not applicable

1994-95 1993-94

FOREIGN EXCHANGE EARNINGS : FOB Value of exports 2517.02 1028.68

FOREIGN EXCHANGE OUTGO Travelling expenses 11.46 12.92 Import of Raw Materials 3892.02 1411.13

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Mar 31, 1994

INFORMATION NOT AVAILABLE