Directors Report of Claris Lifesciences Ltd.

Mar 31, 2017

Dear Members,

The Directors are pleased to present the Twenty Second Annual Report of the Company covering the operating and financial performance together with the Audited Financial Statements and the Auditors'' Report thereon for the financial year ended on March 31, 2017.

FINANCIAL RESULTS

The financial highlights of the Company on Consolidated and Standalone basis are as below:

(Rupees in Lacs)

	Consolidated		Standalone
Particulars	For the year ended on March 31, 2017	For the year ended on March 31, 2016	For the year ended on March 31, 2017	For the year ended on March 31, 2016
Total Revenue from continuing operations	6,298.75	17,901.00	6,914.20	16,457.22
Profit/(loss) before Interest, Depreciation, Exceptional Items and Tax	(2,565.31)	(3,211.05)	(1,101.05)	(3,585.69)
Finance Costs	398.32	547.92	373.18	391.04
Depreciation & Amortization Expenses	396.84	385.73	332.41	355.95
Exceptional Items	-	-	-	-
Profit / (Loss) before share in Profit/ (Loss) of Associate and Tax	(3,360.47)	(4,144.70)	(1,806.64)	(4,332.68)
Share in Profit/ (Loss) of Associate	(2,609.27)	(9,212.10)	-	-
Profit / (Loss) before tax	(5,969.74)	(13,356.80)	(1,806.64)	(4,332.68)
Provision for tax	(1955.48)	(2,291.50)	(1,297.54)	(229.86)
Net Profit / (Loss) after taxes from continuing operations	(4,014.26)	(11,065.30)	(509.10)	(4,102.82)
Net Profit / (Loss) after taxes from discontinued operations	15,006.76	7,121.80	1,664.66	2,076.57
Profit/ (Loss) for the year	10,992.50	(3,943.50)	1,155.56	(2,026.25)
Other comprehensive income	(804.67)	(496.73)	(39.92)	(52.86)
Total comprehensive income or loss for the year	10,187.83	(4,440.24)	1,115.64	(2,079.11)
Balance brought forward from previous year	47,034.78	50,997.38	49,720.66	51,755.47
Balance available for Appropriation	57,926.92	47,034.78	50,857.57	49,720.66
Dividend paid	1091.36	-	1091.36	-
Tax on Dividend on equity share shares paid	222.17	-	222.17	-
Tax on Dividend on preference shares paid	2.62	-	-	-
Balance carried to Balance Sheet	56,610.77	47,034.78	49,544.05	49,720.66

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. For all periods up to and including the year ended March 31, 2016, the Company prepared its financial statements in accordance with the accounting standards notified under the Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements are the Company''s first standalone financial statements prepared in accordance with Ind AS based on the permissible options and exemptions available to the Company in terms of Ind AS 101 ''First time adoption of Indian Accounting Standards''.

RESULTS OF OPERATIONS AND STATE OF COMPANY AFFAIRS

During the financial year under review, the Company''s consolidated total revenue (including discontinued operations) stood at Rs. 86,642.25 Lacs as against Rs. 77,519.74 Lacs in the previous year.

EBITDA, PBT and PAT on consolidated basis (including discontinued operations) reached to Rs. 26,288.94 Lacs, Rs. 16,246.57 Lacs and Rs. 10,992.50 Lacs respectively. While EBITDA, PBT and PAT margins on consolidated basis stood at 30.34%, 18.75% and 12.69% respectively as against 17.04%, (4.14%) and (5.09%) respectively in previous year. EPS has increased from Rs. (7.23) in the previous year to Rs. 20.14 in the current year.

Detailed analysis of the financials has been provided in the "Management Discussion & Analysis" forming part of this Annual Report.

TRANSFER TO RESERVES / DIVIDEND

During the year under review, the Board of Directors has recommended Final Dividend of Rs. 2/- per Equity Share of Rs. 10/- each i.e. 20% aggregating to Rs. 1091.36 Lacs (excluding Tax on Dividend) for the financial year ended on March 31, 2017, subject to approval of the Members at the Annual General Meeting of the Company. The Board does not recommend to transfer any amount of profits for the financial year ended on March 31, 2017 to the reserves.

SHARE CAPITAL

During the year under review, there is no change in the paid up share capital of the Company. Further, the paid up share capital of the Company as on March 31, 2017 is Rs. 5,456.78 Lacs.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY AND CHANGE IN NATURE OF THE BUSINESS

During the year under review, the Board of Directors of the Company in its meeting held on December 15, 2016 has approved sale and transfer of the ''Injectables Business'' carried on by the Company in India and overseas, through its subsidiary Claris Injectables Limited and other identified indirect subsidiaries of the Company, through one or more transactions involving the transfer of ownership of the subsidiary(ies), to one or more subsidiaries/ affiliates of Baxter International Inc. and/or their respective nominees (cumulatively the "Baxter Group") at an aggregate enterprise value of approximately USD 625,000,000 for the said transaction relating to the sale of injectables business, subject to agreed adjustments, permitted under applicable law, including for repayment of lenders debt, certain inter-group transactions, and other closing adjustments, which may be substantial. With respect to the said transactions, the Company had obtained approval of the shareholders through the postal ballot on February 17, 2017.

Further, the Board of Directors in its meeting held on May 8, 2017, has approved entering into a definitive agreement with Otsuka Pharmaceutical Factory, Inc. (Japan) ("Otsuka") to sell the Company''s 20% stake in the Joint Venture ("JV"), Otsuka Pharmaceutical India Private Limited (formerly known as Claris Otsuka Private Limited); for a total consideration of USD 20,000,000. The aforesaid transaction is subject to regulatory approvals, including FIPB; after this, the Company will not have any stake in Otsuka Pharmaceutical India Private Limited.

There have been no material changes and commitments except as mentioned above affecting the financial position of the Company between the end of the financial year and the date of this Directors'' Report.

There is no change in the nature of business of the Company during the year under review.

FUTURE OUTLOOK / GROWTH PLANS

The specialty injectables business continue to grow at 30% growth year on year on the back of a 63% growth in USA as compared to the previous year; with 26 ANDAs in the pipeline including a few large products expected to be approved over the next couple of years; USA will continue to drive the growth in future as well. The Company has identified its 3 year growth capex, which included installing 2 additional lines in Clarion 2 and targeting a new plant for commercialization 2020, to meet the growing demands of generic injectables products in the US.

The company has entered into Definitive Agreements with Baxter Group in December 2016, to sell its Specialty Injectable Business, further it has also entered into agreements with Otsuka for the sale of 20% stake in the JV, the Company plans to repatriate a significant majority of the funds received from the sale of businesses to its shareholders.

DEPOSITS

During the year under review, the Company has neither invited nor accepted any deposits from the public under Section 76 and Chapter V of the Companies Act, 2013 and rules made there under.

SUBSIDIARIES AND ASSOCIATES

The Company has five Indian Subsidiaries, fifteen Foreign Subsidiaries and one Associate Company as on March 31, 2017.

The consolidated financial statements of the Company and all its subsidiary companies have been prepared and duly audited by the Auditors, and forming part of this Annual Report. Pursuant to first proviso to sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014 a statement containing salient features of the financial statement of subsidiaries/associate companies/joint ventures is attached to the Consolidated Financial Statements in prescribed Form AOC-1. The statement also provides the details of performance and financial position of each of subsidiaries/associate companies/joint ventures.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements and related information of the subsidiaries, where applicable, will be available for inspection during working hours at the Company''s registered office in Ahmadabad, India, for a period of twenty-one days before the date of the Annual General Meeting. These are also available on the Company''s website www.clarislifesciences.com

INSURANCE

The assets/ properties of the Company are adequately insured against the loss of fire, riots, earthquake, terrorism, etc and other risks that are considered necessary by the management. Apart from the above, the Company has also Public and Product Liability and Directors'' and Officer''s Liability Insurance Policies.

AWARDS AND RECOGNITION

Sheer perseverance and performance coupled with able leadership and stringent management frameworks, have time-and-again took your company to the top echelon of organizational and individual recognitions. These awards and citations motivate us to continue striving, harder. These are covered in detail in the "Management Discussion & Analysis" forming part of this Annual Report.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNELS

Mr. Aditya Handa, Non-Executive and Non-Independent Director of the Company, retire by rotation at the conclusion of this Annual General Meeting and being eligible offer himself for re-appointment. A brief resume of Mr. Aditya Handa, being the Director retiring by rotation and seeking appointment/re-appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

Ms. Milina Bose, Non-Executive and Non-Independent Director of the Company, retire by rotation at the conclusion of this Annual General Meeting and being eligible offer herself for re-appointment. A brief resume of Ms. Milina Bose, being the Director retiring by rotation and seeking appointment/re-appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

During the year under review and upto the date of this Report, Mr. Amish Vyas''s appointment had been regularized as a Non-Executive and Non-Independent Director of the Company in its last Annual General Meeting held on July 29, 2016. Mr. Chetan S. Majmudar has been re-designated from Whole Time Director to Non-Executive and Non-Independent Director of the Company from August 19, 2016. Further, Mr. Chetan S. Majmudar resigned as a Non-Executive and Non-Independent Director w.e.f. May 20, 2017. The Board of Directors appointed Mr. Shyamsunder Sharma as an Additional Executive and Non-Independent Director of the Company w.e.f. May 20, 2017. Mr. Shyamsunder Sharma holds office as an Additional Executive and Non-Independent Director until this Annual General Meeting of the Company, and is eligible for appointment as a Director who is liable for retirement by rotation. The Company has received a notice under Section 160 of the Companies Act, 2013 from a member with requisite deposit signifying his intention to propose the candidature of Mr. Shyamsunder Sharma for the office of an Executive and Non-Independent Director. A brief resume of Mr. Shyamsunder Sharma being an Additional Director seeking appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

Mr. Arjun Handa, Vice - Chairman & Managing Director, Mr. Chandrasingh Purohit, Whole Time Director & CFO, Mr. Kirit H. Kanjaria, Company Secretary & Compliance Officer and Mr. Shyamsunder Sharma, Additional Executive and Non-Independent Director also appointed as Whole Time Director of the Company w.e.f. May 20, 2017, are the Key Managerial Personnel in terms of Section 203(1) of the Companies Act, 2013.

As on date of this Report, the Board of Directors of the Company comprised of nine Directors, one of whom is the Vice - Chairman & Managing Director. The remaining eight Directors comprises of one Chairman who is a Non-Executive and Independent Director, two Whole Time Director (including one Additional Director), three Non-Executive and Non-Independent Directors and two Non-Executive and Independent Directors.

DECLARATIONS OF INDEPENDENT DIRECTORS

The Company has received declaration pursuant to Section 149(7) of the Companies Act, 2013 from each of its Non-Executive and Independent Directors to the effect that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013, Regulation 16(1)(b) and Regulation 25 of the SEBI (Listing obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred as "Listing Regulations"). These declarations have been placed before and noted by the Board.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013, your Directors state that:

(a) In the preparation of the annual accounts for the financial year ended on March 31, 2017, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) They have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year March 31, 2017 and of the profit and loss of the Company for that period;

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

(d) They have prepared the annual accounts on a going concern basis;

(e) They have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

(f) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

NUMBER OF MEETINGS OF THE BOARD

During the year under review, five meetings of the Board of Directors were held and the details of the meetings of the Board of Directors are given in the section on "Report on Corporate Governance" forming part of this Annual Report.

POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION

The Company has formed Nomination and Remuneration Committee which has framed Nomination and Remuneration Policy. The Nomination and Remuneration Policy inter alia deals with the selection, appointment and remuneration of the Directors, Key Managerial Personnel and other employees of the Company including criteria for determining qualifications, positive attributes, independence and other matters as provided in Section 178(3) of the Companies Act, 2013.

The Nomination and Remuneration Policy pursuant to Section 178(4) of the Companies Act, 2013 is on the Company''s website and the link thereto is http://www.clarislifesciences.com/global/Financial/1 Dec15%20-%20Nomination%20and%20Remuneration%20Policy%20(LODR).pdf There has been no change in the policy since last year. We affirm that the remuneration paid to the directors is as per the terms laid out in the Nomination and Remuneration Policy.

CODE OF CONDUCT

For Board of Directors and Senior Management Group

The Board of Directors of the Company has laid down a code of conduct for all the Board Members and Senior Management Group of the Company. The main object of the Code is to set a benchmark for the Company''s commitment to values and ethical business conduct and practices. Its purpose is to conduct the business of the Company in accordance with its value systems, fair and ethical practices, applicable laws, rules and regulations. Further, the Code provides for the highest standard of professional integrity while discharging the duties and to promote and demonstrate professionalism in the Company.

All the Board Members and Senior Management Group of the Company have affirmed compliance with the code of conduct for the financial year ended on March 31, 2017 as required by Regulation 26(3) of the Listing Regulations. A declaration signed by the Vice - Chairman & Managing Director to this effect is attached as a part of this Annual Report. The code of conduct is also available on the website of the Company www.clarislifesciences.com

For Prevention of Insider Trading

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 is a framework for prohibition of insider trading in securities and to strengthen the legal framework thereof. Pursuant to Regulation 8 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the Company has formulated and adopted the Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information ("Code of Fair Disclosure") of the Company. The Code of Fair Disclosure is available on the website of the Company www.clarislifesciences.com

Further, pursuant to Regulation 9 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the Company has formulated and adopted the Code of Conduct for Prevention of Insider Trading. The Code lays down guidelines and procedures to be followed and disclosures to be made while dealing with the shares of the Company and cautioning them on the consequence of non-compliances. The Company Secretary has been appointed as a Compliance Officer and is responsible for monitoring adherence to the Code. The code of conduct to regulate, monitor and report trading by insiders is also available on the website of the Company www.clarislifesciences.com

BOARD EVALUATION

Pursuant to the provisions of Sections 178(2) of the Companies Act, 2013 and Regulation 17(10) of the Listing Regulations, the Nomination and Remuneration Committee / Board has carried out evaluation of the performance of the Board, its Committees and individual Directors. A structured evaluation feedback form was prepared pursuant to Guidance Note on Board Evaluation issued by Securities and Exchange Board of India vide Circular No. SEBI/HO/CFD/CMD/CIR/P/2017/004 dated January 5, 2017 and after taking into consideration the inputs received from the Directors, covering various aspects such as board composition, flow of board process, information and functioning, establishment and determination of responsibilities of Committees, and quality of relationship between the Board and the management. The performance of Individual Directors and the Board Chairman was also carried out in terms of attendance, contribution at the meetings, circulation of sufficient documents to the Directors, timely availability of the agenda, etc. Further, pursuant to Schedule IV of the Companies Act, 2013, the performance evaluation of the Independent Directors was carried out by the entire Board of Directors of the Company, except the one being evaluated. The Board of Directors expressed their satisfaction with the evaluation process.

BOARD COMMITTEES

The Company has five Committees of Board, viz,

(a) Audit Committee

(b) Nomination and Remuneration Committee

(c) Stakeholders Relationship Committee

(d) Corporate Social Responsibility Committee

(e) Executive Committee re-named as Committee of Directors w.e.f August 19, 2016

Details of the Committees of the Board vis-a-vis their terms of reference, composition, number of meetings held during the year, etc. are given in the section on ''Report on Corporate Governance'' forming part of this Annual Report.

STATUTORY AUDITORS

Pursuant to Section 139 and other applicable provisions of the Companies Act, 2013 and rules made thereunder, M/s. Shah & Shah Associates (Firm Registration Number: 113742W), Chartered Accountants, Ahmedabad, Statutory Auditors were appointed as a Statutory Auditors of the Company at the Twentieth Annual General Meeting held on September 23, 2015 for five years i.e. Financial Year 2015-16 to Financial Year 2019-2020 from conclusion of Twentieth Annual General Meeting till the conclusion of Twenty fifth Annual General Meeting subject to ratification at every Annual General Meeting. Accordingly, the members are requested to ratify the appointment of M/s. Shah & Shah Associates (Firm Registration Number: 113742W), Chartered Accountants, Ahmedabad as Statutory Auditors for the financial year ending on March 31, 2018.

The eligibility certificate pursuant to Section 141 of the Companies Act, 2013 and the rules made thereunder is also received from the Statutory Auditors of the Company.

The Standalone and Consolidated Auditors'' Report for the financial year ended on March 31, 2017 have been provided in "Financial Statements" forming part of this Annual Report.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Companies Act, 2013 and rules made thereunder, the Company has appointed M/s. SPANJ & Associates, Company Secretaries as Secretarial Auditor of the Company for the financial year ended on March 31, 2017. The Secretarial Audit Report for the financial year ended on March 31, 2017 is attached as Annexure - 1 to the Directors'' Report and forming part of this Annual Report.

DIRECTORS'' RESPONSE ON AUDITORS'' QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR DISCLAIMER MADE

There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their Auditors'' Report or by the Company Secretary in practice in their Secretarial Audit Report. Further, pursuant to Section 143(12) of Companies (Amendment) Act, 2015, the Auditors in the course of performance of their duties have not reported any incident of fraud to the Audit Committee of the Company or the Central Government during the year under review.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Companies Act, 2013 and rules made thereunder, the extract of the Annual Return in the prescribed Form MGT - 9 is attached as Annexure - 2 to the Directors'' Report and forming part of this Annual report.

CORPORATE GOVERNANCE

Pursuant to the Regulation 34(3) read with Schedule V Part C of the Listing Regulations, a "Report on Corporate Governance" is given separately, forming part of this Annual Report. Pursuant to Regulation 34(3) read with Schedule V, Part E of the Listing Regulations, the Certificate from M/s. SPANJ & Associates, Company Secretaries, Mr. Ashish C. Doshi, Partner, confirming compliance with the conditions of Corporate Governance is annexed to the Corporate Governance Report forming part of this Annual Report.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to the Regulation 34(2)(e) read with Schedule V, Part B of the Listing Regulations, "Management Discussion & Analysis" is given separately forming part of this Annual Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Pursuant to Section 186 of the Companies Ac, 2013 and the rules made thereunder, particulars of loans given, investments made or guarantees given or securities provided, have been provided in "Financial Statements" forming part of this Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Pursuant to the provision of Section 188 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, particulars of contracts or arrangements with related parties falling within the scope of Section 188(1) of the Companies Act, 2013 given in prescribed Form AOC-2 is attached as Annexure - 3 to the Directors'' Report and forming part of this Annual Report.

RISK MANAGEMENT AND INTERNAL CONTROLS

A strong risk management and internal control system forms the backbone for our robust risk management practices. In line with our commitment to provide sustainable returns to all our stakeholders, Claris has clearly defined systems and policies for timely addressing key business challenges and opportunities. Claris ERM framework has been developed in assistance with Deloitte Touche Tohmatsu India Limited Liability Partnership ("Deloitte") and international standards & references such as COSO (Committee of Sponsoring Organization of Treadway Commission). The framework has effectively been used to identify and analyze unforeseen risks, resulting in the management taking risk informed decisions. The final ownership for and implementation of risk response strategies rests with the Senior Executives of the functional units or the risk owners.

Deloitte has further advised the company with respect to internal controls over financial reporting and have shared recommendations for management''s selection and development of an internal control framework and development of risk and control matrices.

Enterprise Risk Management

At Claris, Risk Management is a key strategic focus for the Members of Board and the Senior Management. Company has formulated a ERM framework, developed based on the COSO (Committee of Sponsoring Organisations of the Treadway Commission, USA). The ERM framework includes the process for identification, evaluation, monitoring and mitigation of risks relevant to achieve the business objectives, besides prioritisation of risks in terms of their relevance and frequency. This assists the management to prioritise the risks and focus on high priority items which may have significant adverse impact. All key functions of the Company are independently responsible to monitor risks associated with in their respective areas of operations such as production, supply chain, marketing, finance, accounting, treasury, legal and others areas like health, safety and environment. The main purpose of Risk Management is to minimise adverse impacts and to leverage market opportunities effectively. This also helps to sustain and enhance short-term and long-term competitive advantages to the Company. To sustain the risk management, Senior Management Group will be responsible for ensuring periodic reviews in their internal functions and then the risks prioritised based on the ERM framework of the Company will be discussed in the Management Committee and the Audit Committee on Annual basis.

Internal Controls & Internal Financial Controls

The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses, executing transactions with proper authorization and ensuring compliance of corporate policies. The Company, through its own Internal Audit Department & the Co-sourced firm of Internal Auditors (M/s. KPMG, Ahmedabad), carries out periodic audits to cover all the functions & business segments based on the plan approved by the Audit Committee and bring out any deviation to internal control procedures. The observations arising out of audit are periodically reviewed and compliance ensured. The summary of the Internal Audit observations and status of the implementation is submitted to the Audit Committee. The status of implementation of the recommendations is reviewed by the Committee on a regular basis and concerns, if any, are reported to the Board.

The details of the risk faced by the Company and the mitigation thereof have been covered in "Management Discussion & Analysis" forming part of this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Pursuant to Section 177(9) of the Companies Act, 2013 and rules made thereunder, the Company has established a Vigil Mechanism Policy to provide a mechanism for the Directors and employees to report their grievances, genuine concerns about unethical behaviour, actual or suspected fraud, and violation of the Company''s Code of Conduct or Ethics Policy. The mechanism provides for adequate safeguards against victimisation of Directors/employees and also provides for direct access to the Chairman of the Audit Committee in appropriate or exceptional cases.

CORPORATE SOCIAL RESPONSIBILITY

The Board has constituted the Corporate Social Responsibility (CSR) Committee in terms of Section 135 of the Companies Act, 2013 and rules made thereunder and the composition of CSR Committee is given under Annexure - 4 to the Directors'' Report. The Board of Directors has adopted a CSR policy which inter alia contains activities that can be undertaken by the Company for CSR, composition and meetings of the CSR Committee, annual allocation for CSR activities, areas of CSR projects, criteria for selection of CSR projects, modalities of execution/ implementation of CSR projects and monitoring mechanism of CSR activities/ projects. An annual report on the CSR activities of the Company in the prescribed format is attached as Annexure - 4 to the Directors'' Report and forming part of this Annual Report. The CSR Policy is available on the website of the Company and link thereto is http://www.clarislifesciences.com/global/Financial/Corporate-Social-Responsibility-Policy.pdf

POLICY FOR PREVENTION AND REDRESSAL OF SEXUAL HARASSMENT OF WOMEN AT WORK PLACE

Your Directors state that during the year under review, there were no complaints reported under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

PARTICULARS OF EMPLOYEES

Details required pertaining to the ratio of the remuneration of each Director to the median employees'' remuneration and such other details in accordance with the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is attached as Annexure - 5(A) to the Directors'' Report and forming part of this Annual report.

A statement containing particulars of employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure - 5(B) to the Directors'' Report and forming part of this Annual Report. However, in terms of Section 136 of the Companies Act, 2013, the Annual Report are being sent to the Members and other entitled thereto, excluding the said annexure, which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company, if any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.

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

In view of the nature of activities which are being carried on by the Company, the particulars as prescribed under Section 134(3) (m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, the Conservation of Energy, Technology Absorption and Research and Development are not applicable to the Company.

The Company used foreign exchange amounting to Rs. 1026.79 Lacs and earned foreign exchange amounting to Rs. 728.71 Lacs during the year ended March 31, 2017.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS

During the year under review, there were no significant and/or material orders passed by any Court or Regulator or Tribunal, which may impact the going concern status or the Company''s operations in future.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34(2)(f) of the Listing Regulations read with notification SEBI/HO/CFD/CMD/CIR/P/2017/10 dated February 6, 2017, the Business Responsibility Report is to be given only by top 500 listed companies, therefore the same is not applicable to the Company as on March 31, 2017.

ACKNOWLEDGMENTS

The Board of Directors greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Gujarat, Ministry of Commerce and Industry, Ministry of Finance, Customs and Excise Departments, Income Tax Department and all other Government Agencies for their support during the year and look forward to their continued support in future.

For and on Behalf of the Board of Directors

Arjun Handa Chandrasingh S. Purohit

Vice - Chairman & Managing Director Whole Time Director & CFO

(DIN: 00159413) (DIN: 00199651)

Place : Ahmedabad

Date : May 20, 2017

---

Mar 31, 2015

Dear Members,

The Directors are pleased to present the Twentieth Annual Report of the Company covering the operating and financial performance for the fifteen months period ended on March 31, 2015.

CHANGE IN FINANCIAL YEAR

Pursuant to the provisions of Section 2(41) of the Companies Act, 2013, the Company has changed its financial year from January-December to April- March in its Board Meeting held on November 8, 2014. Consequently, the current financial year is of fifteen months period from January 1, 2014 to March 31, 2015. Hence these figures, are not comparable with those of the previous financial year ended on December 31, 2013.

FINANCIAL RESULTS

The financial highlights of the Company on Consolidated and Standalone basis are as below:

(Rupees in Lacs)

Consolidated

For the Fifteen Months Period For the Financial Year ended

Particulars ended on March 31, 2015 on December 31, 2013

Total Revenue 88,605.58 71,120.11

Profit before Interest, depreciation, Exceptional items and tax 24,177.68 20,997.41

Finance Costs 4,826.04 5,219.45

Depreciation & Amortisation 4,904.83 6,535.38

Exceptional Item - 1,505.98

Profit before tax 14,446.81 10,748.56

Provision for tax (1,220.36) 2,207.71

Profit after tax 15,667.17 8,540.85

Share in Loss of Associate (719.18) (99.87)

Net Profit / (Loss) after taxes and share in loss of associates 14,947.99 8,440.98

Balance brought forward from previous year 65,585.07 64,703.67

Balance available for Appropriation

Proposed dividend - 5,743.60

Corporate tax on dividend - 976.12

Tax on dividend of earlier year - 9.86

Transfer to General Reserve - 830.00

Balance carried to Balance Sheet 80,533.06 65,585.07

Standalone

For the Fifteen Months Period For the Financial Year ended ended on March 31, 2015 on December 31, 2013

79,853.93 68,152.69

16.260.83 19,821.10

3,104.40 5,210.12

2,957.56 5,796.11

523.03 1,505.98

10,721.90 10,320.86

(3,147.06) 2,199.01

13,868.96 8,121.85

- -

13,868.96 8,121.85

47.447.84 46,885.57

- 5,743.60 - 976.12

- 9.86

- 830.00

61,316.80 47,447.84

RESULTS OF OPERATIONS AND STATE OF COMPANY AFFAIRS

Your Company has delivered another year of strong performance. During the financial year under review, the Company''s total revenue stood at Rs. 88,605.58 Lacs as against Rs. 71,120.11 Lacs in the previous year. As highlighted earlier, previous year''s figures are not comparable with current year due to change in financial year as per the Companies Act, 2013.

EBITDA, PBT and PAT reached to Rs. 24,177.68 Lacs, Rs. 14,446.81 Lacs and Rs.14,947.99 Lacs respectively. While EBITDA, PBT and PAT margins stood at 27.28%, 16.32% and 16.87% respectively as against 31.89%, 17.80% and 13.62% respectively in previous year. EPS has increased from Rs. 13.23 in the previous year to Rs. 25.89 in the current year.

Pursuant to slump sale on a going concern basis of Speciality Injectable business of the Company to Claris Injectables Limited (formerly known as Claris Lifesciences International Limited), a wholly owned subsidiary, the Company has booked profit of Rs. 523.03 Lacs at standalone level under the head of Exceptional Item and reversed deferred tax liability worth Rs. 5,179.11 Lacs.

Detailed analysis of the financials has been provided in the "Management Discussion and Analysis" forming part of this Annual Report.

SHARE CAPITAL

During the year under review, the Company has bought back 9,250,000 equity shares of the face value of Rs. 10/- each (representing 14.49% of the total number of the equity share capital of the Company) at a price of Rs. 250 per equity share aggregating to Rs. 23,125 Lacs, on a proportionate basis through the Tender Offer route as prescribed under the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 1998, as amended. In this respect, the approval of the Board of Directors was granted on January 7, 2014 and the approval of members of the Company received through postal ballot, the results of which were declared on March 18, 2014.

In June 2014, after the buy-back and extinguishment of 9,250,000 equity shares, the paid-up equity share capital of the Company reduced from Rs. 638,177,650 to Rs. 545,677,650 comprising of 54,567,765 equity shares of Rs. 10/- each. Pursuant to which the Company has become the subsidiary company of Athanas Enterprise Private Limited. The Company has not made any issue of shares during the year under review.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY AND CHANGE IN NATURE OF THE BUSINESS

During the year under review, in October 2014, the Company has transferred its Speciality Injectable business by way of a slump sale as a "going concern" to its wholly owned subsidiary company i.e. Claris Injectables Limited (formerly known as Claris Lifesciences International Limited) at a consideration of Rs. 55,400 Lacs. In July 2013, the Company had transferred its infusion business for India and Emerging Markets to its joint venture company i.e. Claris Otsuka Private Limited (formerly known as Claris Otsuka Limited) by way of a slump sale as a "going concern", where in the Company continues to hold 20% stake. The Company will concentrate and focus on the strategic – business, financial growth and development of all the businesses in the group. The Company will also continue to handhold and support the Joint venture with Otsuka Pharmaceutical Factory Inc., and Mitsui & Co. Ltd along with the activities for identifying and implementing the strategies required for the long term development of the Company as a group.

There have been no other material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Director''s Report.

FUTURE OUTLOOK / GROWTH PLANS

As on October 31, 2014, the Company has transferred its Specialty Injectable business along with all the employees, assets and liabilities pertaining thereto including all licenses, permits, approvals, consents, contracts whatsoever to its wholly owned subsidiary company i.e. Claris Injectables Limited (formerly known as Claris Lifesciences International Limited). The business operations of the subsidiary company are now managed by a dedicated team. This transition will allow the Speciality Injectable business to drive the growth in the future as well. The Company is on track towards 100 ANDAs pipeline in the USA and continue to see a lot of traction of its products in the USA. USA will continue to drive the growth in future as well and is expected to grow at 30- 35% CAGR over the next 3-5 years.

This transition will also allow the Company to free up management resources and allocate them to more strategic initiatives like small & mid-sized M&A activities in the pharmaceutical industry and also seek and evaluate new business ideas and opportunities to drive the next phase of growth for the Company.

TRANSFER TO RESERVES / DIVIDEND

During the year under review, the Board of Directors has not recommended any dividend on the equity shares of the Company therefore there was no amount to be transferred to reserves.

DEPOSITS

During the year under review, the Company has neither invited nor accepted any deposits from the public under Section 76 and Chapter V of the Companies Act, 2013.

SUBSIDIARIES AND ASSOCIATES

The Company has four Indian Subsidiaries, fifteen Foreign Subsidiaries and one Associate Company as on March 31, 2015. During the year, the Company has incorporated two foreign companies (i) A wholly owned subsidiary of the Company in Dubai, UAE in the name of "Claris Middle East FZ-LLC" and (ii) A step down subsidiary of the Company in Dubai, UAE in the name of "Elda International DMCC" which in turn is a wholly owned subsidiary of "Claris Middle East FZ-LLC". The Company is also in process of incorporating a wholly owned subsidiary as Non Banking Finance Company with Registrar of Companies, Gujarat.

The consolidated financial statements of the Company and all its subsidiary companies have been prepared and duly audited by the Auditors, forming part of this Annual Report. Pursuant to the Circular No. 08/2014 dated April 4, 2014 of Ministry of Corporate Affairs, a statement containing salient features of the financial statements of the subsidiaries is attached as per the Section 212 of the Companies Act, 1956.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements and related information of the subsidiaries, where applicable, will be available for inspection during working hours at the Company''s registered office in Ahmedabad, India, for a period of twenty-one days before the date of the Annual General Meeting. These are also be available on the Company''s website www.clarislifesciences.com

As required by Clause 49(V) of the Listing Agreement, the Company has formulated a policy on determining "material subsidiaries" and link thereto is http://www.clarislifesciences.com/global/Financial/Determining % 20 Material%20Subsidaries%20Policy.pdf

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The details of internal financial control, their adequacy are included in the section on "Management Discussion & Analysis" forming part of this Annual Report.

INSURANCE

The assets/ properties of the Company are adequately insured against the loss of fire, riots, earthquake, terrorism, etc and other risks that are considered necessary by the management. Apart from the above, the Company has also Public and Product as well as Director''s and Officer''s Liability Insurance Policies.

AWARD AND RECOGNITIONS

The Company''s growth, innovation and success have aided in winning several accolades and recognitions from various spheres of the industry.

MedAssets Award

Your Company received ''Silver Supplier Award'' for the year 2013 from MedAssets, a premium Group Purchasing Organisation in the USA. This award was conferred in April 2014 for the consistent supply of contracted products and market-leading prices. The prestigious MedAssets Supplier Recognition Program provides recognition for suppliers that proactively and consistently bring market-leading pricing, cost-reduction strategies and value extending beyond price to the industry.

Merit Award from State Pharmaceutical Corporation, Sri Lanka

Your Company received Merit Award - Pharmaceuticals from State Pharmaceutical Corporation (SPC), Sri Lanka for the year 2014. Your Company had won Best Supplier''s Award in 2010 and Merit Award - Pharmaceuticals in 2011. This award, received in July 2014, from SPC - the largest organisation supplying pharmaceuticals in Sri Lanka - signifies the Company''s excellence on various parameters like supplies of different product range, timely delivery, quality compliances, etc.

"India''s Best Companies to Work for 2014" Award

Your Company was declared one of the ''Best Places to Work'' and one among the Industry Best workplaces in ''Healthcare'' for the 5th time on the trot by The Economic Times & Great Place to Work® Institute, India in June 2014. The robust people practices were once again recognised in the 2014 Study, which surveyed about 600 organisations spanning across 20 industries to measure the level of trust, pride and camaraderie among people. This acknowledges yet again the unswerving belief that ''people are everything''.

Greentech Safety Award 2014

Your Company received ''Silver Award'' in 13th Annual Greentech Safety Awards 2014 in Pharmaceutical sector for outstanding achievement in Safety Management. This award, bestowed in September 2014 and won for the 2nd time, is a unique form of benchmarking the stringent quality standard & credibility and honouring the proactive practices of the awardees, enhancing their esteem and global stature.

Shram Award 2013-14

Your Company won ''Shram Award 2013-14'', constituted by Commissioner of Labour, Govt. of Gujarat to encourage & recognise innovative work done by industrial workmen (technicians) in the field of industrial peace, welfare, and productivity. The award, received in December 2014, was presented to The Company technician Shankar Khaire for his innovation and achievement in increasing productivity.

Merit Certificate in In-house Communication Excellence Awards

Your Company''s newsletter ''Claris Quarterly'' was awarded ''Certificate of Merit'' in In-house Communication Excellence (ICE) Awards 2014, an initiative by Shailaja Nair Foundation. This award, conferred in June 2014, promotes the print medium and recognises & honours the best talent and creativity in, in-house magazines.

Inc. India Innovative 100 List

Your Company found the place in the Inc. India Innovative 100 2013 list, and has been conferred ''Certificate of Excellence'' for smart innovation. Inc. India is an Indian version of Inc., a more than 30 years old premier print publication house of New York, which released the first-of-its-kind list in December 2013 issue of monthly business magazine, published by 9dot9 media.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNELS

Mr. Aditya S. Handa, a Non-Executive and Non-Independent Director of the Company, retire by rotation at the conclusion of this Annual General Meeting and being eligible offer himself for re-appointment. A brief resume of Mr. Aditya S. Handa, being the Director retiring by rotation and seeking appointment/re-appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

During the year, the Board of Directors appointed Ms. Milina Bose as an Additional Non-Executive and Non-Independent Director of the Company w.e.f. August 11, 2014. Ms. Milina Bose holds office as an Additional Non-Executive and Non-Independent Director until this Annual General Meeting of the Company, and is eligible for appointment as a Director who is liable for retirement by rotation. The Company has received a notice under Section 160 of the Companies Act, 2013 from a member with requisite deposit signifying his intention to propose the candidature of Ms. Milina Bose for the office of a Non-Executive and Non-Independent Director. A brief resume of Ms. Milina Bose being an Additional Director seeking appointment/re- appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

Mr. Arjun Handa was appointed as Managing Director & CEO of the Company on September 26, 2011 for a period of three years and his term expired on September 25, 2014. The Board of Directors of the Company has re-appointed and designated him as Vice - Chairman & Managing Director of the Company for a further period of three years from September 26, 2014 to September 25, 2017. Mr. Arjun Handa is a Key Managerial Personnel (KMP) of the Company in terms Section 203 (1) of the Companies Act, 2013. A brief resume of Mr. Arjun Handa, being the Director seeking appointment/re- appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

Mr. Chandrasingh S. Purohit was appointed as a Whole Time Director of the Company on July 3, 2012 for a period of three years and his term is expiring on July 2, 2015 and was appointed as the Chief Financial Officer (CFO) of the Company pursuant to the provisions of Section 203(1) of the Companies Act, 2013 and rules thereunder by the Board of Directors at its meeting held on May 9, 2014. The Board of Directors of the Company has re-appointed and re-designated him as a Whole Time Director & CFO of the Company for a further period of three years from July 3, 2015 to July 2, 2018. Mr. Chandrasingh S. Purohit is a Key Managerial Personnel (KMP) of the Company in terms Section 203 (1) of the Companies Act, 2013. A brief resume of Mr. Chandrasingh S. Purohit being the Director seeking appointment/re-appointment at the ensuing Annual General Meeting, is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

Mr. Chetan S. Majmudar, Whole Time Director and Mr. Kirit H. Kanjaria, Company Secretary & Compliance Officer, are other Key Managerial Personnels in terms of Section 203(1) of the Companies Act, 2013.

As on March 31, 2015, the Board of Directors of the Company comprised of eight Directors, one of whom is the Vice - Chairman & Managing Director. The remaining seven Directors comprises of one Chairman who is an Independent Director, two Whole Time Directors, two Non-Executive Directors and two Independent Directors.

DECLARATIONS OF INDEPENDENT DIRECTORS

The Company has received declaration pursuant to Section 149(6) of the Companies Act, 2013 from all its Non-Executive and Independent Directors to the effect that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Clause 49(II) of the Listing Agreement. These declarations have been placed before and noted by the Board.

DIRECTOR''S RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors state that:

(a) In the preparation of the annual accounts for the financial year ended on March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) The Board of Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year ended on March 31, 2015 and of the profit and loss of the Company for that period;

(c) The Board of Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The Board of Directors have prepared the annual accounts on a going concern basis.

NUMBER OF MEETINGS OF THE BOARD

During the year under review, seven meetings of the Board of Directors were held. The details of the meetings of the Board of Directors are given in the section on "Report on Corporate Governance" forming part of this Annual Report.

POLICY ON DIRECTOR''S APPOINTMENT AND REMUNERATION

The Company has formed Nomination and Remuneration Committee which has framed Nomination and Remuneration Policy. The Nomination and Remuneration Policy inter alia deals with the selection, appointment and remuneration of the Directors, Key Managerial Personnels and other employees of the Company including criteria for determining qualifications, positive attributes, independence and other matters provided in Section 178(3) of the Companies Act, 2013 and Clause 49(IV) of the Listing Agreement. Pursuant to Section 178(4) of the Companies Act, 2013 and Clause 49(IV) and 49(VIII) of the Listing Agreement, the Nomination and Remuneration Policy is given in the section on "Report on Corporate Governance" forming part of this Annual Report.

CODE OF CONDUCT

For Board of Directors and Senior Management Group

The Board of Directors of the Company has laid down a code of conduct for all the Board Members and Senior Management Group of the Company. The main object of the Code is to set a benchmark for the Company''s commitment to values and ethical business conduct and practices. Its purpose is to conduct the business of the Company in accordance with its value systems, fair and ethical practices, applicable laws, rules and regulations. Further, the Code provides for the highest standard of professional integrity while discharging the duties and to promote and demonstrate professionalism in the Company.

All the Board Members and Senior Management Group of the Company have affirmed compliance with the code of conduct for the financial year ended on March 31, 2015 as required by Clause 49(II) of the Listing Agreement. A declaration signed by the Vice - Chairman & Managing Director to this effect is attached as a part of this Annual Report. The code of conduct is also available on the website of the Company

www.clarislifesciences.com

For Prevention of Insider Trading

Pursuant to Regulation 8 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the Company has formulated and adopted the Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information ("Code of Fair Disclosure") of the Company. The Code of Fair Disclosure is available on the website of the Company www.clarislifesciences.com

Further, pursuant to Regulation 9 of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, the Company has formulated and adopted the Code of Conduct for Prevention of Insider Trading. The Code lays down guidelines and procedures to be followed and disclosures to be made while dealing with the shares of the Company and cautioning them on the consequence of non-compliances. The Company Secretary has been appointed as a Compliance Officer and is responsible for adherence to Code. The code of conduct to regulate, monitor and report trading by insiders is also available on the website of the Company www.clarislifesciences.com

BOARD EVALUATION

Pursuant to the provisions of Section 178(2) of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Nomination and Remuneration Committee / Board has carried out evaluation of its performance, its Board, Committees and Individual Directors. A structured evaluation feedback form was prepared after taking into consideration the inputs received from the Directors, covering various aspects such as board composition, flow of board process, information and functioning, establishment and determination of responsibilities of Committees, and quality of relationship between the Board and the management. Performance of Individual Directors and the Board Chairman was also carried out in terms of attendance, contribution at the meetings, circulation of sufficient documents to the Directors, timely availability of the agenda, etc.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

Pursuant to Clauses 49(II) of the Listing Agreement, suitable training to Independent Directors was provided by the Company to familiarize them with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. The web link thereto is http://www.clarislifesciences.com/global/Financial/Familiarization- Programme.pdf

BOARD COMMITTEES

The Company has six Committees of Board, viz,

(a) Audit Committee

(b) Nomination and Remuneration Committee

(c) Stakeholders Relationship Committee

(d) Corporate Social Responsibility Committee

(e) Share Transfer Committee

(f) Executive Committee

Details of the Committees of the Board vis-à-vis their terms of reference, composition, number of meetings held during the year, etc. are given in the section on ''Report on Corporate Governance'' forming part of this Annual Report.

STATUTORY AUDITORS

Pursuant to Section 139 of the Companies Act, 2013 and rules thereunder, M/s. Shah & Shah Associates, Chartered Accountants, Ahmedabad (Firm Registration Number: 113742W), Statutory Auditors of the Company, hold office till the conclusion of this Annual General Meeting and are eligible for re-appointment for the term of five consecutive years i.e. F. Y. 2015-16 to F. Y. 2019-2020 from the conclusion of Twentieth Annual General Meeting until the conclusion of the Twenty Fifth Annual General Meeting of the Company subject to ratification by members at every Annual General Meeting. Accordingly, the members are requested to appoint M/s. Shah & Shah Associates, Chartered Accountants, Ahmedabad (Firm Registration Number: 113742W) as Statutory Auditors at the Twentieth Annual General Meeting.

The eligibility certificate pursuant to Section 141 of the Companies Act, 2013 and the rules thereunder is also received from the Statutory Auditors of the Company.

COST AUDITOR

Pursuant to Section 148 of the Companies Act, 2013 and rules thereunder, the Company has appointed M/s. Kiran J. Mehta & Co., Cost Accountants, Ahmedabad as a Cost Auditor for conducting the cost audit for the financial year ended on March 31, 2015. A report on Cost Audit for the financial year ended on March 31, 2015 will be filed with the Central Government in due time period.

SECRETARIAL AUDITOR

Pursuant to Section 204 of the Companies Act, 2013 and rules thereunder, the Company has appointed SPANJ & Associates, Company Secretaries as Secretarial Auditor of the Company for the financial year ended on March 31, 2015. The Secretarial Audit Report for the financial year ended on March 31, 2015 is attached as Annexure – 1 to the Director''s Report and forming part of this Annual Report.

DIRECTOR''S RESPONSE ON AUDITORS'' QUALIFICATION, RESERVATION OR ADVERSER REMARK OR DISCLAIMER MADE

There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their Auditors Report or by the Company Secretary in practice in their Secretarial Audit Report. The Statutory Auditors have not reported any incident of fraud to the Audit Committee of the Company during the year under review.

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 of the Companies Act, 2013 and rules thereunder, the extract of the Annual Return in the prescribed Form MGT – 9 is attached as Annexure – 2 to the Director''s Report and forming part of this Annual report.

CORPORATE GOVERNANCE

Pursuant to the Clause 49 of the Listing Agreement with the Stock Exchange, a "Report on Corporate Governance" is given separately as forming part of this Annual Report. Pursuant to Clause 49(X) of the Listing Agreement, the Certificate from Mr. Ashish C. Doshi, practicing company secretary, confirming compliance with the conditions of Corporate Governance is annexed to the Corporate Governance Report forming part of this Annual Report.

MANAGEMENT DISCUSSION & ANALYSIS

Pursuant to the Clause 49(VIII) of the Listing Agreement with the Stock Exchange, "Management Discussion & Analysis" is given separately forming part of this Annual Report.

PARTICULARS OF LOANS, GUARANTEE OR INVESTMENT

Pursuant to Section 186 of the Companies Ac, 2013 and the rules thereunder, particulars of loans given, investments made or guarantee given or security provided, have been provided in "Financial Statements" forming part of this Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

Pursuant to the provision of Section 188 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014, particulars of contracts or arrangements with related parties falling within the scope of Section 188(1) of the Companies Act, 2013 given in prescribed Form AOC-2 is attached as Annexure – 3 to the Director''s Report and forming part of this Annual Report.

As required by Clause 49(VII) of the Listing Agreement, the Company has formulated a policy on determining materiality of related party transactions and also on dealing with related party transactions and the same is uploaded on the Company''s website and link thereto is http://www.clarislifesciences.com/global/Financial/Determining % 20 Material%20Related%20Party%20Transactions%20Policy.pdf

RISK MANAGEMENT

The Company has established a mechanism to inform the Board Members about the risk assessment and risk minimizations procedures. Based on the suggestions and advice of the Audit Committee and the Board Members, necessary action is taken to mitigate potential risks of the Company. The objective of the mechanism is to minimize the impact of risks identified and taking advance actions to mitigate it and enhance the Company''s competitive advantage. This mechanism thus helps in managing market, credit and operations risks and quantifies exposure and potential impact at a Company level. The KPMG, Ahmedabad, Internal Auditors of the Company, have a robust audit programme covering vital areas of the risk faced by the Company

The details of the risk faced by the Company and the mitigation thereof have been covered in "Management Discussion& Analysis" forming part of this Annual Report.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

Pursuant to Section 177(9) of the Companies Act, 2013 and rules thereunder, the Company has established a vigil mechanism to provide a mechanism for the Directors and employees to report their grievances, concerns about unethical behaviour, actual or suspected fraud, and violation of the Company''s Code of Conduct or ethics policy. The mechanism provides adequate safeguards against victimisation of Directors/employees and also provides for a direct access to the Chairman of the Audit Committee in appropriate or exceptional cases.

Pursuant to Clauses 49(II) of the Listing Agreement, Vigil Mechanism/Whistle Blower Policy is posted on the website of Company and web link thereto is http://www.clarislifesciences.com/global/Financial/Final%20Vigil % 20Mechanism%20Policy-Website%20Updation.pdf

CORPORATE SOCIAL RESPONSIBILITY

The Board has constituted the Corporate Social Responsibility (CSR) Committee in terms of Section 135 of the Companies Act, 2013 and rules thereunder. The Board of Directors has adopted a CSR policy which inter alia contains activities that can be undertaken by the Company for CSR, composition and meetings of the CSR Committee, annual allocation for CSR activities, areas of CSR projects, criteria for selection of CSR projects, modalities of execution/ implementation of CSR projects and monitoring mechanism of CSR activities/ projects. An annual report on the CSR activities of the Company in the prescribed format is attached as Annexure – 4 to the Director''s Report and forming part of this Annual Report. The CSR Policy is available on the website of the Company and link thereto is http://www.clarislifesciences.com/global/Financial/Corporate-Social- Responsibility-Policy.pdf

POLICY FOR PREVENTION AND REDRESSAL OF SEXUAL HARASSMENT OF WOMEN AT WORK PLACE

Your Directors further state that during the year under review, there were no cases filed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

PARTICULARS OF EMPLOYEES

The Particulars of employees covered under section 217(2A) of the Companies Act, 1956 and rules thereunder, forms part of this Annual Report. However, as per Section 219(1)(b)(iv) of the Companies Act, 1956, the Annual Report is being sent to all members excluding the said annexure. Any Member interested in obtaining the particulars may obtain the same in writing to the Company Secretary of the Company or the same is available for inspection at the Registered Office of the Company during the working hours of the Company.

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

The information required under the Companies Act, 2013 as given in Companies (Accounts) Rules, 2014 is attached as Annexure – 5 to the Director''s

Report and forming part of this Annual Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE COURTS/REGULATORS

During the year under review, there were no significant and/or material orders passed by any Court or Regulator or Tribunal, which may impact the going concern status or the Company''s operations in future.

ACKNOWLEDGMENTS

The Board of Directors greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Gujarat, Ministry of Commerce and Industry, Ministry of Finance, Customs and Excise Departments, Income Tax Department and all other government agencies for their support during the year and look forward to their continued support in future.

DISCLAIMER

The Ministry of Corporate Affairs vide its Circular No. 08/2014 dated April 4, 2014 clarified that the financial statements and the documents required to be attached thereto, the Auditor''s Report and Director''s Report in respect of the financial year commenced earlier than April 1, 2014 shall continue to be governed by the relevant provisions, schedules, rules of the Companies Act, 1956. Accordingly, the financial statements and the Auditor''s Report as aforesaid are prepared as per the requirements of the Companies Act, 1956 and the Companies (Accounting Standards) Rules, 2006 as amended). The significant accounting policies which are consistently applied have been set out in the Notes to the Financial Statements. The Company, as per its commitment towards transparency and good governance, has to the extent possible provided the information in the Director''s Report and Report on Corporate Governance as per the Companies Act, 2013.



For and on Behalf of the Board of Directors

Arjun Handa Chandrasingh S. Purohit

Vice - Chairman & Managing Director Whole Time Director & CFO

(DIN: 00159413) (DIN: 00199651)

Place : Ahmedabad

Date : May 22, 2015

---

Dec 31, 2012

Dear Members,

The Directors are pleased to present the 18th Annual Report of the Company and annual audited accounts for the financial year ended 31st December, 2012.

Financial Results:

The financial highlights of the Company for the financial year 2012 as compared to the previous financial year 2011 on Consolidated and Standalone basis is as below:

(Rupees in lacs)

Particulars Consolidated Standalone 2012 2011 2012 2011

Income 77,766.19 75,645.09 73,014.53 66,730.73

Profit before Interest, 27,510.29 26,156.57 24,343.67 20,455.75 depreciation and tax

Finance Costs 6,505.26 5,542.69 6,491.24 5,529.88

Depreciation & Amortisation 7,426.91 5,468.24 7,179.44 5,434.13

Exceptional Item - - 45.10 -

Profit before tax 13,578.12 15,145.64 10,627.89 9,491.73

Provision for tax 3,187.00 2,520.10 3,186.27 2,516.40

Profit after tax 10,391.12 12,625.54 7,441.62 6,975.33

Balance brought forward from 56,360.96 45,738.90 41,492.36 36,520.51 previous year

Balance available for Appropriation

Proposed Dividend 1,276.35 1,276.35 1,276.35 1,276.35

Corporate tax on dividend 207.06 207.06 207.06 207.06

Tax on Dividend of earlier year - (493) - (493) Reversed

Transfer to General Reserve 565.00 525.00 565.00 525.00

Balance carried to Balance 64,703.67 56,360.96 46,885.57 41,492.36 Sheet

Results of Operations:

During the financial year under review your company''s income from net sales stood at Rs. 76,272.34 Lacs as against Rs 73,876.57 Lacs in the previous year which increased by 3.24% compared to previous year. Our revenues from international markets stood at Rs. 40,671.23 Lacs as compared to Rs. 39,272.83 Lacs in previous financial year representing 53.32% of the net revenues as compared to 53.16% of previous financial year.

EBITDA, PBT and PAT reached to Rs. 27,510.29 Lacs, Rs. 13,578.12 Lacs and Rs. 10,391.12 Lacs respectively as against Rs. 26,156.57 Lacs, Rs. 15,145.64 Lacs and Rs. 12,625.54 Lacs respectively, in the previous year. As a percentage of net sales, the EBITDA, PBT and PAT margins stood at 36.07%, 17.80% and 13.62% respectively in fiscal year 2012 compared to 35.41%, 20.50% and 17.09% respectively in the previous year.

Detailed analyses of the financials have been provided in the Management Discussion and Analysis which is a part of this Directors Report.

IPO Update

Your company has utilized the entire IPO proceeds during the year ended 31st December, 2012. Detailed utilization has been provided in the notes forming part of the financial statements.

Joint Venture

On December 7, 2012, your Company entered into certain agreements with Otsuka Pharmaceutical Factory, Inc., Japan ( Otsuka) and Mitsui & Co. Ltd., Japan (Mitsui) for transfer of its Infusion Business to Claris Otsuka Limited (JV Company) presently a wholly owned subsidiary of the Company on ''slump sale'' basis. The said infusion business includes identified products of Common Solutions, Anti Infective, Plasma Volume Expanders and Parenteral Nutrition in India and in Emerging markets (herein after referred to as ''the infusion business''). The transfer of the infusion business is subject to the necessary and applicable approvals from the regulatory authorities, the shareholders of the Company and on other closing formalities to be completed between the parties. The Shareholders of the Company have approved the resolution through Postal Ballot for slump sale of the Company''s infusion business to its wholly owned subsidiary M/s. Claris Otsuka Limited as a going concern basis on 18th February, 2013. The transaction is expected to be closed in financial year 2013, subject to receipt of necessary approvals from regulatory authorities and on completion of necessary closing formalities.

As per the terms of the agreements, the infusion business is valued at an enterprise value of Rs.1,313 Crores and the Company is to receive Rs.1,050 Crores in cash on closing against multiple agreements for the portion to be transferred in favor of the Otsuka and Mitsui, who will subscribe Rs.1,050 Crores towards fresh equity capital including securities premium of Claris Otsuka Limited, pursuant to which Otsuka, Mitsui and your Company will respectively hold 60%, 20% and 20% of the equity share capital of Claris Otsuka Limited.

Mr. Arjun S. Handa, the Managing Director & CEO of the Company would continue to provide leadership to the JV Company and would be holding the position of Chairman. The CEO of the JV Company would be appointed by the Company. The detailed applicable disclosure relating to "Discontinuing Operation" as per AS-24 as notified by the Government of India under section 211(3C) of the Companies Act, 1956 is given under notes forming part of the financial statements.

Withdrawal of Import Alert and Warning Letter by USFDA

During the year, the USFDA has withdrawn its import alert and warning letter on the Company and the products which was imposed by them on November 1, 2010. With this withdrawal, Clarion 1 (Plant 1) of the Company will now be able to again manufacture and sell its products in the US. The Company has a wide product basket and is also working on developing certain new product targeted for the regulated markets. The Company is working towards increasing its product basket and product approvals for the regulated market including USA.

Dividend

Your Directors are pleased to recommend a dividend of Rs. 2 per equity share of Rs. 10 each on 6,38,17,765 total outstanding equity of the Company for the year ended December 31, 2012, subject to the approval of the members at the ensuing Annual General Meeting.

Transfer to Reserves

Your Company proposed to transfer Rs. 565.00 Lacs to the General Reserves. An amount of Rs. 64,703.67 Lacs is proposed to be retained in the profit and loss account (of consolidated accounts) .

Subsidiaries:

Your Company has 13 International and 5 Indian Subsidiaries to market the products of the Company across the globe. These subsidiaries are well positioned and contributing to the growth of the Company.

Accounts of Subsidiaries

Pursuant to General Circular No.2/2011 dated 08.02.2011 issued by The Ministry of Corporate Affairs, the Board of Directors of your company in its meeting held on 23rd February, 2013 has decided for not attaching the accounts of its subsidiaries for the financial year ended 31st December, 2012. However, the Company has presented a consolidated financial statement of holding company and all its subsidiaries duly audited by the Statutory Auditors. The annual accounts of the subsidiary companies and the related detailed information will be made available to the shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiaries will also be kept for inspection by any shareholders at the head office of the holding company and of the subsidiary companies concerned.

Fixed Deposits

Your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956.

Insurance

The assets/ properties of the Company are adequately insured against the loss of fire, riot, earthquake, terrorism, etc and other risks that are considered necessary by the management. Apart from the above, your company has also Product as well as Director''s and Officer''s Liability Insurance Policies.

Directors

Mr. Surrinder Lal Kapur and Mr. T. V Ananthanarayanan retire by rotation at the conclusion of this Annual General Meeting and being eligible offer themselves for reappointment. Dr. Pravin P. Shah passed away on 4th December, 2012. Mr. Nikhil Mohta and Mr. Amish Vyas has resigned from the position of Director on 21st September, 2012 and 4th December, 2012 respectively. Mr. Anup P. Shah has been appointed as an additional Independent Non- Executive Director of the Company by the Board of Directors at their meeting held on 23rd February, 2013 up to the ensuing Annual General Meeting of the Company.

Directors'' Responsibility Statement

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to the Directors'' Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the Accounts for the Financial Year ended 31st December 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the Directors have prepared the accounts for the financial year ended 31st December 2012 on a ''going concern'' basis.

Auditors

The Statutory Auditors of the Company M/s. Deloitte Haskins & Sells, Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors have recommended the reappointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company for the financial year 2013 for shareholder''s approval.

Cost Auditor

Pursuant to Section 233B of the Companies Act, 1956, M/s. Kiran J. Mehta & Co., Cost Accountants, Ahmedabad was appointed as Cost Auditors of the Company in respect of cost audit of the Company''s pharmaceutical activities for the year ended 31st December 2012. Report of the Cost Auditor in respect of Cost Audit for the year under review would be filed with the Central Government in due time period.

Energy, Technology and Foreign Exchange

The information required under the Companies Act (Disclosure of particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure - I.

Particulars of Employees

Particulars of employees covered under section 217(2A) of the Companies Act, 1956 are attached read with Companies (Particulars of Employees) Rules, 1975 and forms part of this report. However, as per Section 219(1)(b)(iv) of the Companies Act, 1956, the annual report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain the same in writing to the Company Secretary or the same is available for inspection at the registered office during working hours.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, a report on Corporate Governance is given in Annexure - II.

Management Discussion & Analysis

Management Discussion & Analysis is given separately and forms part of this annual report.

Acknowledgment

The Board greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We would also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Gujarat, Ministry of Commerce and Industry, Ministry of Finance, Customs and Excise Departments, Income Tax Department, and all other Government Agencies for their support during the year and look forward to their continued support in the future.

For and on Behalf of Board

Arjun S. Handa Chandrasingh Purohit

Managing Director & CEO Whole Time Director

Place : Ahmedabad

Date : 23rd February, 2013

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Dec 31, 2011

The Directors are pleased to present the 17th Annual Report of the Company and audited accounts for the financial year ended 31st December, 2011.

Financial Results:

The financial highlights of the Company for the financial year 2011 as compared to the previous financial year 2010 on consolidated and standalone basis are as given below:

(Rupees in lacs)

Particulars Consolidated Standalone

2011 2010 2011 2010

Income 74,332.05 76,776.59 65,304.76 64,053.83

Profit before Interest, 24,041.78 24,338.14 18,353.47 18,029.98 depreciation and tax

Interest 3,427.90 3,619.59 3,427.80 3,619.40

Depreciation 5,468.24 4,671.59 5,434.14 4,637.79

Provision for tax 2,520.10 1,902.91 2,516.20 1,870.36

Profit after tax 12,625.54 14,144.05 6,975.32 7,902.43

Balance brought forward 45,738.90 33,708.19 36,520.51 30,731.42 from previous year

Balance available for Appropriation:

Proposed Dividend 1,276.35 1,276.35 1,276.35 1,276.35

Corporate tax on dividend 207.06 211.99 207.06 211.99

Transferred to General Reserve 525.00 625.00 525.00 625.00

Tax on Dividend of earlier years (4.93) - (4.93) -

reversed

Balance carried to Balance 56,360.96 45,738.90 41,492.3 36,520.51

Sheet

Results of Operations:

Despite of no sales of its products in the US markets due to the import alert and the adverse situations for business in the Middle East and EU, the company has done well to deliver flattish revenue this year. During the financial year under review your company's income from net sales stood at Rs. 73,876.57 Lacs as against Rs 75,233.53 Lacs in the previous year which decreased marginally by 1.80% compared to previous year. Our revenues from international markets stood at Rs. 39,272.83 Lacs as compared to Rs. 43,725.33 Lacs in previous financial year representing 53% of the net revenues as compared to 58.12% of previous financial year.

EBITDA, PBT and PAT reached to Rs. 24,041.78 Lacs, Rs. 15,145.64 Lacs and Rs. 12,625.54 Lacs respectively as against Rs. 24,338.14 Lacs, Rs. 16,046.96 Lacs and Rs. 14,144.05 Lacs respectively, in the previous year. As a percentage of net sales, the EBITDA, PBT and PAT margins stood at 32.54%, 20.50% and 17.09% respectively in fiscal year 2011 compared to 32.35%, 21.33% and 18.80% respectively in the previous year.

Detailed analyses of the financials have been provided in the Management Discussion and Analysis which is a part of this Directors Report.

Product Registrations

Marketing Authorization or Product Registration are an important factors to determine the potential of growth in the coming years. The company is working aggressively toward increasing its reach in newer markets. Your company now sells across 91 countries as compared to 76 in the previous year; and also increasing the product basket in existing markets. During the year the company has received 139 new Product Registrations across various countries, the company has also filed 174 dossiers for approval, this gives us a total approval basket of 1228; including 161 and 25 approvals in the EU and US respectively; and a

pipeline of 357; including 93 and 14 in the EU and US respectively as on 31st December 2011.

IPO Update

Your company had raised Rs. 30000 Lacs from its initial public offering in December 2010; out of the proceeds received, as on 31st December, 2011 your company has utilized Rs. 22326.73 Lacs as per the shareholders approval and the remaining proceeds amounting to Rs. 7673.27 Lacs will be utilized as per the approval received from the shareholders.

Dividend

Your Directors are pleased to recommend a dividend of Rs. 2 per equity share of Rs. 10 each for the year ended December 31, 2011, subject to the approval of the members at the ensuing Annual General Meeting.

Transfer to Reserves

Your Company proposed to transfer Rs. 525.00 Lacs to the General Reserves. This would lead to an amount of Rs. 56,360.96 Lacs to be retained in the profit and loss account in form of accumulated reserves and surplus from previous years.

Subsidiaries:

Your Company has 13 International and 4 Indian Subsidiaries to market the products of the Company across the globe. These subsidiaries are well positioned and generating good revenue in the growth of the Company.

Accounts of Subsidiaries

Pursuant to General Circular No.2/2011 dated 08.02.2011 issued by The Ministry of Corporate Affairs, the Board of Directors of your company in its meeting held on 29th February, 2012 has consented for not attaching accounts of its subsidiaries for the financial year ended 31st December, 2011. However, the Company has presented a consolidated financial statement of holding company and all subsidiaries duly audited by the Statutory Auditors. The annual accounts of the subsidiary companies and the related detailed information will be made available to the shareholders of the holding and subsidiary companies seeking such information at any point of time. The annual accounts of the subsidiaries will also be kept for inspection by any shareholders in the head office of the holding company and of the subsidiary companies concerned.

FDA Update

During the year, the company has worked hard with the consultants toward implementing the Corrective And Preventive Action (CAPA) Plan. The Company has completed it's the entire CAPA plan which was decided post comments received from the FDA, this also include a complete up gradation of the quality policies and systems that the company follows.

The company has submitted its finals reply to the USFDA in the Q4CY11 and is expected a positive result post the FDA re-audit.

Fixed Deposits

Your Company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956.

Insurance

The assets/ properties of the Company are adequately insured against the loss of fire, riot, earthquake, terrorism, etc and other risks that are considered necessary by the management. Apart from the above, your company has also Product as well as Director's and Officer's Liability Insurance Policies.

Directors

Mr. Surrinder Lal Kapur and Mr. Aditya S. Handa retire by rotation at the conclusion of this Annual General Meeting and being eligible offer themselves for reappointment. Mr. Nikhil Mohta has resigned as Nominee Director on 12th January, 2011 and was appointed as an Additional Director on 24th February, 2011. He was appointed as Non- Executive Director by the members at their meeting held on 12th May, 2011. Mr. Amish Vyas and Mr. Chandrasingh Purohit has been re- appointed as whole time director of the Company by the Board of Directors, subject to the approval of shareholders and other regulatory authority if any.

Directors' Responsibility Statement

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to the Directors' Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the Accounts for the Financial Year ended 31st December 2011, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the Directors have prepared the accounts for the financial year ended 31st December 2011 on a 'going concern' basis.

Auditors

The Statutory Auditors of the Company M/s. Deloitte Haskins & Sells, Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors proposed reappointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company for the financial year 2012, subject to shareholder's approval.

Cost Auditor

Pursuant to Section 233B of the Companies Act, 1956, M/s. Kiran J. Mehta & Co., Cost Accountants, Ahmedabad was appointed as Cost Auditors of the Company in respect of cost audit of the Company's pharmaceutical activities for the year ended 31st December 2011. Report of the Cost Auditor in respect of Cost Audit for the year under review would be filed with the Central Government in due time period.

Energy, Technology and Foreign Exchange

The information required under the Companies Act (Disclosure of particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure – I.

Particulars of Employees

Particulars of employees covered under section 217(2A) of the Companies Act, 1956 are attached read with Companies (Particulars of Employees) Rules, 1975 and forms part of this report. However, as per Section 219(1)(b)(iv) of the Companies Act, 1956, the annual report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain the same in writing to the Company Secretary or the same is available for inspection at the registered office during working hours.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, a report on Corporate Governance is given in Annexure – II.

Management Discussion & Analysis

Management Discussion & Analysis is given separately and forms part of this annual report.

Acknowledgment

The Board greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We would also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Gujarat, Ministry of Commerce and Industry, Ministry of Finance, Customs and Excise Departments, Income Tax Department, and all other Government Agencies for their support during the year and look forward to their continued support in the future.

For and on Behalf of Board

Arjun S. Handa Chandrasingh Purohit

Managing Director & CEO Whole Time Director

Place : Ahmedabad

Date : 29th February, 2012

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Dec 31, 2010

The Directors are pleased to present the 16th Annual Report of the Company and Audited Accounts for the financial year ended 31st December, 2010.

Financial Results

The financial highlights of the Company for the fiscal year 2010 as compared to the previous fiscal year on Consolidated and Standalone basis are as below:

(Rupees in Mn)

Particulars Consolidated Standalone

2010 2009 2010 2009

Income 7,677.66 7,594.01 6,405.39 6,458.04

Profit before Interest, 2,433.82 2,294.71 1,803.00 1,874.56 depreciation and tax

Interest 361.96 409.58 361.94 407.29

Depreciation 467.16 448.07 463.78 444.60

Provision for tax 190.28 133.41 187.04 132.04

Profit after tax 1,414.42 1,303.65 790.24 890.63

Balance brought forward from 3,370.82 2,189.23 3,073.15 2,304.58 previous year

Balance available for

Appropriation

Transferred to General Reserve 62.50 90.00 62.50 90.00

Proposed Dividend 127.64 102.37 127.64 102.37

Corporate tax on dividend 21.20 17.40 21.20 17.40

Reversal of Dividend no longer payable - (75.09) -- (75.09)

Reversal of Tax on Dividend no - (12.62) -- (12.62) longer payable

Balance carried to Balance 4,573.90 3,370.82 3,652.05 3,073.15 Sheet

Results of Operations

During the current financial year, your company took various strategic initiatives to improve its volumes and profitability, which helped the Company to post an impressive performance for the year inspite of product recall from the US and the import alert. The income from net sales stood at Rs. 7,523.35 Mn (Rs 7,435.25 Mn in the previous year) which increased marginally by 1.18% compared to previous year. Our income from net sales in the international markets stood at Rs. 4,372.53 Mn compared to Rs. 4,068.19 Mn in previous fiscal year which is increased by 7.48 % equivalent to Rs. 304.34 Mn. During the year, our exports revenue, which as a percentage of net sales, stood at 58.12% compared to 54.71% of previous fiscal year.

EBITDA, PBT and PAT reached to Rs. 2,433.82 Mn, Rs. 1,604.70 Mn and Rs. 1,414.42 Mn respectively (Rs. 2,294.71 Mn, Rs. 1,437.06 Mn and Rs. 1,303.65 Mn respectively, in the previous year) registering 6.06% , 11.67% and 8.50% growth over the previous fiscal year.

As a percentage of net sales, our EBITDA margin increased to 32.35% in fiscal year 2010 compared to 30.86% of previous fiscal year. As a percentage of net sales, our PBT margin increased to 21.33% in fiscal year 2010 compared to 19.33% of previous fiscal year. As a percentage of net sales, our PAT increased to 18.80% in the fiscal year 2010 compared to 17.53% in previous fiscal year.

Out of the issue proceeds of Rs. 3,000 Mn, your company utilized the issue proceeds for repayment of an identified term loan of Rs. 459.14 Mn and Rs. 174.77 Mn towards the issue expenses. The remaining proceeds will be utilized for growth capex.

Dividend

Your company has a consistent dividend policy of balancing the dual objective of appropriately regarding shareholders through dividends and retaining capital to maintain a healthy capital adequacy ratio to support future growth. It has a consistent track record of moderate but steady increases and expansions in dividend declarations over its history.

Considering the achievement of targets for the year and growth of the business, Directors are pleased to recommend dividend of Rs. 2 per equity share for the financial year ending 31st December, 2010.

Transfer to Reserves

Your company proposed to transfer Rs. 62.50 Mn to the General Reserves. An amount of Rs. 4,573.90 Mn is proposed to be retained in the profit and loss account.

Share Capital

The paid up equity share capital of your company increased to Rs. 638,177,650 due to allotment of 12,632,477 Equity Shares of Rs. 10 each at a premium of Rs. 283 per share to Anchor Investors and Rs. 218 per share to investors other then Anchor Investors in the Initial Public Offer of the Company.

Subsidiaries

With a view to market the products of the Company across the globe, your company has 13 International subsidiaries. Apart from International subsidiaries, there are 4 Indian subsidiaries. During the year under review, one additional International subsidiary Claris Pharmaservices was incorporated. The subsidiaries are well positioned in the global market and facilitating in the growth of the Company.

Accounts of Subsidiaries

The Company has obtained approval from the Ministry of Corporate Affairs, New Delhi under Section 212(8) of the Companies Act, 1956 and accordingly the individual Annual Accounts of all the Indian and International subsidiaries for the year ended 31st December, 2010 have not been attached to the Annual Report. Copies of these annual accounts and related information will be made available on request. The annual accounts of the subsidiary companies will be available at the registered office of the Company and also at the venue during the Annual General Meeting.

Listing at Bombay Stock Exchange Limited

During the year under review, your company has successfully launched its Initial Public Offer of 12,632,477 equity shares of Rs. 10 each for cash at a price of Rs. 228 per equity share to all investors other than Anchor investors amounting to Rs. 2,460 Mn and at a Price of Rs. 293 per Equity share to Anchor investors amounting to Rs. 540 Mn, aggregating upto Rs. 3,000 Mn. The issue constituted 19.79 % of the post issue paid-up share capital of the Company. The equity shares of the company were listed in Bombay Stock Exchange Ltd (BSE) and the trading in the shares of the Company commenced on 20th December, 2010 on BSE.

Product Recall

During the year your company received complaints in relation to certain of the products, namely, Ciprofloxacin, Metronidazole and Ondansetron that were contaminated or suspected to be contaminated; pursuant to which the Company and the partners/distributors recalled some or all of products from the United States, Denmark, Finland, Canada, Australia and New Zealand. The recalls were initiated by the Company and the partners in Australia and the United States pursuant to receipt of complaints of contamination in some of the products. Further, the USFDA has imposed an import alert on the Company and the products,

which is subsisting. Further, USFDA issued a warning letter dated 1st November, 2010. The Company vide its letter dated 19th November, 2010, responded to the Warning Letter issued by the USFDA. The Company is working on addressing the USFDA issue and post a productive meeting with the USFDA, the Company is optimistic on resolving the issue.

Fixed Deposits

Your company has not accepted any fixed deposit under Section 58A of the Companies Act, 1956 and hence no amount of principal or interest were outstanding as at the Balance Sheet date.

Insurance

The assets of the Company are adequately insured against the loss of fire, riots, earthquake, terrorism, loss of profits, etc, and other risks that are considered necessary by the management. Apart from the above, your company has also Statutory Public Liability Insurance Policy and Director’s and Officer’s Liabilities Policy.

Directors

Dr. Pravin P. Shah and Mr. T.V. Ananthanarayanan retire by rotation at the conclusion of this Annual General Meeting and being eligible offer themselves for reappointment. Mr. Nikhil Mohta has resigned as Nominee Director w.e.f 12th January, 2011 and was appointed as an Additional Director w.e.f 24th Februray 2011.

During the year, Mr. Arvind Bansal has tendered his resignation as Independent Director. The Board appreciated the valuable contribution made by Mr. Arvind Bansal during his tenure as Independent Director of the Company.

Directors Responsibility Statement

Pursuant to the requirement under section 217(2AA) of the Companies Act, 1956, with respect to the Directors Responsibility Statement, it is hereby confirmed:

1. That in the preparation of the Accounts for the Financial Year ended 31st December, 2010, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for the year under review;

3. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

4. That the Directors have prepared the accounts for the financial year ended 31st December, 2010 on going concern’ basis.

Auditors

The Statutory Auditors of the Company M/s. Deloitte Haskins & Sells, Chartered Accountants, retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept office of Statutory Auditors, if reappointed. The Audit Committee and the Board of Directors recommended reappointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company for the financial year 2011 for shareholder’s approval.

Cost Auditor

Pursuant to Section 233B of the Companies Act, 1956, M/s. Kiran J. Mehta & Co., Cost Accountants, Ahmedabad was appointed as Cost Auditors of the Company in respect of cost audit of the Company’s Bulk Drug division and Formulation division for the year ended 31st December, 2010. Report of the Cost Auditor in respect of Cost Audit for the year under review would be filed with the Central Government as per timeline.

Energy, Technology and Foreign Exchange

The information required under the Companies Act (Disclosure of particulars in the report of Board of Directors) Rules, 1988 is given in the Annexure – I.

Particulars of Employees

Particulars of employees covered under section 217(2A) of the Companies Act, 1956 are attached read with Companies (Particulars of Employees) Rules, 1975 forms part of this report. However, as per Section 219(1)(b)(iv) of the Companies Act, 1956, the annual report is being sent to all shareholders excluding the said Annexure. Any shareholder interested in obtaining the particulars may obtain the same in writing to the Company Secretary or the same is available for inspection at the registered office during working hours.

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, a report on Corporate Governance is given in Annexure – II.

Management Discussion & Analysis

Management Discussion & Analysis is given separately and forms part of this annual report.

Acknowledgment

The Board greatly appreciates the commitment and dedication of employees at all levels who have contributed to the growth and success of the Company. We would also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

We also thank the Government of India, Government of Gujarat, Ministry of Commerce and Industry, Ministry of Finance, Customs and Excise Departments, Income Tax Department, and all other Government Agencies for their support during the year and look forward to their continued support in the future.

For and on Behalf of Board

Arjun S. Handa Chandrasingh Purohit

Managing Director & CEO Whole Time Director

Place : Mumbai

Date : 24th February, 2011