sparc annual report fy09 complete

CLINICAL RESEARCH • THERAPEUTIC ANALOGUES • PHARMACOLOGY

DEVELOPMENT • • MEDICINAL CHEMISTRY

PHARMACEUTICS • NEW DRUGS • NOVEL DRUG DELIVERY SYSTEMS

BIOSTATISTICS • TOXICOLOGY • DRUG BINDING • ANIMAL STUDIES

PRODRUGS • TARGETED DRUG DELIVERY • INNOVATION • ACTIVE

TRANSPORT MECHANISM • BIOAVAILABILITY • RESEARCH

NANOSPHERES • BIODEGRADABLE DEPOTS

CLINICAL RESEARCH • THERAPEUTIC ANALOGUES • PHARMACOLOGY

DEVELOPMENT • MEDICINAL CHEMISTRY • PHARMACEUTICS • NEW

SEEKING INSIGHT

ANNUAL REPORT 2008-09 •

Z:\Sun All Job\Sun Annual Report 2009\A1826 - Sun Annual Report\Sparc File\A1826 - SPARC AR 08-09-23 jul-COVERS.cdrSaturday, July 25, 2009 6:44:38 PM

Color profile: DisabledComposite 150 lpi at 45 degrees

Corporate Information 01

Management Discussion and Analysis 02

- New Chemical Entity projects (NCE)

- Novel Drug Delivery System based projects (NDDS)

Directors’ Report 10

Auditors’ Report 16

Balance Sheet 18

Profit and Loss Account 19

Cash Flow Statement 20

Corporate Governance 33

C l i n i c a l R e s e a r c hTherapeut ic AnaloguesP h a r m a c o l o g yDevelopment • MedicinalChemistry • PharmaceuticsNew Drugs • Novel DrugD e l i v e r y S y s t e m sBiostat is t ics ToxicologyDrug Binding • AnimalStudies • Prodrugs TargetedDrug Delivery InnovationActive Transport Mechanism• Bioavailability Research •N a n o s p h e r e sB iodegradable DepotsC l i n i c a l R e s e a r c hTherapeut ic AnaloguesP h a r m a c o l o g yDevelopment • MedicinalChemistry • PharmaceuticsNew Drugs • Novel DrugD e l i v e r y S y s t e m sBiostatistics • ToxicologyAnimal Studies • ProdrugsTargeted Drug DeliveryInnovation • Active TransportMechanism • BioavailabilityResearch • NanospheresB iodegradable DepotsC l i n i c a l R e s e a r c hTherapeut ic AnaloguesP h a r m a c o l o g yDevelopment • MedicinalChemistry • PharmaceuticsNew Drugs • Novel DrugD e l i v e r y S y s t e m s •Biostatistics • Toxicology •Drug Binding • AnimalS t u d i e s • P r o d r u g s

Targeted Drug Delivery

Contents

Disclaimer:Statements in this “Management Discussion and Analysis” describing the Company’sobjectives, projections, estimates, expectations, plans or predictions or industry conditions orevents may be “forward looking statements” within the meaning of applicable securities lawsand regulations. Actual results, performance or achievements could differ materially fromthose expressed or implied. Important factors that could make a difference to the company’soperations include global and Indian demand supply conditions, finished goods prices,feedstock availability and prices, and competitors’ pricing in the Company’s principal markets,changes in Government regulations, tax regimes, economic developments within India and thecountries within which the Company conducts businesses and other factors such as litigationand labour unrest or other difficulties. The Company assumes no responsibility to publiclyupdate, amend, modify or revise any forward looking statements, on the basis of anysubsequent development, new information or future events or otherwise except as required byapplicable law. Unless the context otherwise requires, all references in this document to “we”,“us” or “our” refers to Sun Pharma Advanced Research Company Limited.



1

Annual Report 2008-09

Mr. Dilip S. Shanghvi

Dr. T. Rajamannar

Mr. Sudhir V. Valia

Prof. Dr. Andrea Vasella

Prof. Dr. Goverdhan Mehta

Mr. S. Mohanchand Dadha

Mr. Sunil R. Ajmera

Ms. Meetal Sampat

Deloitte Haskins & Sells

Chartered Accountants

Mumbai

ICICI Bank Ltd.

Indusind Bank Ltd.

Citibank N. A.

Bank of Baroda

Chairman & Managing Director

Wholetime Director & Executive Vice President R&D

Director

Director

Director

Director

(upto 31st January, 2009)

(w.e.f. 1st February, 2009)

Company Secretary

Auditors

Bankers

Board of Directors Offices

Registered Office

Mumbai Office

Additional Collection Centre

Sun Pharma Advanced Research Centre (SPARC),

Akota Road, Akota,

Vadodara 390 020

17-B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai - 400 093.

F.P.27, Part Survey No.27, C.S. No. 1050,

T.P.S. No. 24, Village Tandalja,

District Vadodara - 390 020.

17-B, Mahal Industrial Estate,

Mahakali Caves Road,

Andheri (East), Mumbai - 400 093

201, Daver House, 197/199,

Dr. D.N. Road, Mumbai - 400 001.

Tel: (022) 22694127

- .

.

Link Intime India Pvt. Ltd.

(Formerly Intime Spectrum Registry Ltd.)

C/13, Pannalal Silk Mills Compound,

L.B.S. Marg, Bhandup (West),

Mumbai - 400 078.

Tel: (022) 25963838 Fax: (022) 25946969

E-mail: [email protected]

[email protected]

Research Centres

Registrars &

Share Transfer Agents

Corporate Information

Sun Pharma Advanced Research Company Ltd.

2

Management Discussion and AnalysisClinical Research • Therapeutic Analogues • Pharmacology • Development • Medicina• Toxicology • Drug Binding • Animal Studies • Prodrugs • Targeted Drug Delivery • InBiodegradable Depots • Clinical Research • Therapeutic Analogues • PharmacologyDelivery Systems • Biostatistics • Toxicology • Drug Binding • Animal Studies • Prodrugs• Research • Nanospheres • Biodegradable Depots • Clinical Research • Therapeutic

Industry Structure andDevelopments

With an industry history of a little over a decade, innovative

Pharma R&D in the Indian industry is still in the early stages

of evolution. Long standing expertise in chemistry, a large

pool of professionals and untreated patients who are ideal

for clinical research, have often been cited as factors that

are working to India's advantage in pharma R&D.

However, sufficient skills and large enough scientific pool

in the area of biological sciences - molecular biology,

pharmacology, toxicology, clinical pharmacology are still

being learnt on the go as the industry evolves.

Internationally, new developmental pipelines from in-

house R&D have been shrinking due to several factors

such as: complexity of therapeutic targets, falling R&D

productivity, escalating costs associated with developing

new products, greater regulatory hurdles and increasing

challenges of managing innovation. Since there are fewer

replenishment candidates that can be sourced internally

for large blockbusters that go off patent at Big Pharma,

new molecules are often licensed in and/or acquired from

smaller or boutique pharma companies, that have

demonstrated either a delivery technology or new biology

advantage. This arrangement seems to work well, since

smaller companies appear to be adept at innovating,

while large phama companies, have the expertise in

navigating the regulatory process. Based on current trend,

it appears that 25% to 30% of research is outsourced by

Big Pharma. Another data point: The US FDA approved 21

new molecular entities and two biologics in all of 2008.

Strictly new products were estimated at less than 50% of

the total new approvals. Of these, a large number

originated outside the research laboratories of Big

Pharma.

The changes in the patent laws in India, bringing in the

same level of intellectual property protection as in the

developed nations, have been both the impetus and the

reason for investments in innovation. These have forced

Indian pharma companies to take a hard look at


3

al Chemistry • Pharmaceutics • New Drugs • Novel Drug Delivery Systems • Biostatisticsnnovation • Active Transport Mechanism • Bioavailability • Research • Nanospheres •y • Development • Medicinal Chemistry • Pharmaceutics • New Drugs • Novel Drugs • Targeted Drug Delivery • Innovation • Active Transport Mechanism • BioavailabilityAnalogues • Pharmacology • Development • Medicinal Chemistry • Pharmaceutics •

innovation, as access to new molecules would be curtailed

unless these are licensed in or developed in house. On the

other hand, companies also recognize the value they can

potentially generate as participants in the research

process.

In the long term, this trend to acquire molecules and

technologies developed elsewhere, may work to India's

advantage. Such partnering will bring in its own set of

challenges. While the industry has proven skills in

chemistry, we may still need to invest in upgrading our

knowledge base in the areas of new biology, target

validation, Good Laboratory Practice (GLP), Good Clinical

Practice (GCP), that may be a prerequisite for any such

transfer. The regulatory framework that needs to vet and

validate trials and procedures, to the extent designed for

and conducted in India, needs to be similar to that which

exists internationally, with special allowances for our

specific needs, and steps to create this framework are

being taken.

Formulation development capabilities, process chemistry

expertise, state-of-the-art tertiary healthcare facilities,

skilled work force and cheaper costs are the key factors

that are quoted as working in India's favour as an R&D

partner of choice. There are estimates that quote the cost

of doing R&D in India as a fraction of the cost in an

advanced country. Also, India offers an edge in costs over

other low cost countries such as China. Quoting from a

paper by an industry expert - global R&D spend is about

$60 billion, with a split of 1:2 in the non clinical to clinical

spend. Current data indicates that fully loaded cost of non

clinical operations in India is just a fraction of costs in US

and Western Europe and even lower for clinical

operations.

We have seen two kinds of cost arbitration in India so far-

sourcing of clinical trial work from India using a Contract

Research Organization (CRO) and outsourcing of

preclinical research, co-developing or sourcing of

molecules in the preclinical stage from Indian companies

which is now beginning to pick up. We'd view this

opportunity as a step up for companies, a learning

opportunity with a lower risk, but one that offers a chance

to learn skills for moving to the next stage of R&D.


4

Another emerging trend in recent years is that of pharma

companies and venture capital or private equity funds

partnering for specific projects or entire pipelines, in

exchange for a stake. In such cases, several rounds of

capital infusion happen before if and when, a product

reaches market. Since R&D projects carry uncertain time

frames and high risks, private equity companies typically

invest in a portfolio of leads or companies in order to

better balance the risks. With the recent crunch in the

credit market, private equity companies have found their

source of funds drying up. As a consequence, pharma

companies have found it difficult to find funding for

research. As per recent data, close to 60% of the small

pharma/biotech companies pursuing R&D have less than

two quarters of cash.

Indian companies are addressing two areas: analog

chemistry for new chemical entities with improved profiles

of validated targets and development of novel drug

delivery systems for existing/marketed molecules

designed to offer a specific advantage.

In recent times, innovative R&D in India has been

attracting venture capital funds. This may help Indian

pharma to work on innovative projects that typically have

very large R&D budgets, which would otherwise be out of

their reach. The second advantage here is the expertise

that such funds bring to the table.

There is a serious need for upgrading the quality of

services that research requires, such as quality of

background and ongoing training for scientists and

quality of goods and services from local or supplementary

vendors. There has been concern about whether our

administrative setup for patents is capable of handling a

large volume of patent applications in a timely manner.

This must be set at rest as well.

If India has to compete with developed markets for a share

of the research pie, a renewed focus on speed across the

concerned areas will be required. Regulatory lead time

when applicable, speed of patient recruitment in clinical

research, availability of high tech solutions such as high

throughput instrumentation and remote data capture are

other important factors that need to be considered for

execution speed.

Large enough capacities need to be built across the value

chain in order to compete internationally, currently these

are still very small by international standards. Capacities

need to be built in genomics, molecular biology, in vitro

studies and animal toxicology, biopharmaceutics,

execution of phase I, II and III studies, data management

and biostatistics.

Opportunities and Threats

Clinical Research • Therapeutic Analogues • Pharmacology • Development • Medicina• Toxicology • Drug Binding • Animal Studies • Prodrugs • Targeted Drug Delivery • InBiodegradable Depots • Clinical Research • Therapeutic Analogues • PharmacologyDelivery Systems • Biostatistics • Toxicology • Drug Binding • Animal Studies • Prodrugs• Research • Nanospheres • Biodegradable Depots • Clinical Research • Therapeutic


5

A threat that needs to be factored in for research is the

unseen / unanticipated regulatory requirements that may

cause delays, need for additional investments or

requirement to make unexpected changes in the initial

research plan.

In order to better manage this risk, projects in therapeutic

analogues or bioavailability modification have been

chosen.

The first of SPARC Ltd’s leads, SUN 1334 H has completed

phase II studies in US for seasonal allergic rhinitis and in

India for urticaria. Further phase II study for perennial

allergic rhinitis study has also been completed in India.

1334 H will now be evaluated in certain critical human

safety studies and chronic toxicology (non clinical) studies

before undertaking extensive phase III studies in a larger

patient population. This is an antihistamine with

considerable advantages over available therapy.

, an anti-inflammatory glucocorticoid for

asthma and COPD has finished preclinical efficacy

displaying high therapeutic window and safety studies are

ongoing for IND filing.

is a prodrug of gabapentin for the treatment of

neuropathy and seizures Some non clinical toxicology

and safety pharmacological studies have been completed.

prodrug of a

currently marketed drug

used as a skeletal muscle

re laxant for spasm

related disorders; this has

finished efficacy, toxicity

and safety pharmacology

studies.

and are

a l l a t a d v a n c e d

preclinical stages.

SUN 461

SUN 44

.

SUN 09

SUN 461, 44 09

is a

Performance Highlights

Programmes: NCE

Other NCE Programmes include the following:



6


Programmes: NDDS

Nanoemulsion based delivery systems

(nanotectons)

Four delivery system based platforms and projects have

been shared.

NDDS programmes include :

SPARC has developed a

Dry Powder Inhaler device

(DP I ) u sed fo r t he

treatment of asthma and

COPD. Our device is far

more ef f i c ien t than

comparable marketed

devices. Currently available inhaler devices that deliver

medication directly to the lungs have serious design

shortcomings - a small fraction of the administered drug

reaches the lungs while a large part of the dose is stuck in

the throat lining from which it is absorbed. Based on this

technology, a clinical efficacy study of one combination

product is under progress in India.

In most inhalers, the patient needs to make an effort to

inhale the medication. This could be difficult when the

patient has an asthma attack, or is very old or young. Also,

on most current devices, there is no counter to indicate

whether or not a dose has been administered, and this

may result in repeat dosing and/or dose wastage.

Our device addresses all these issues. A large part of the

drug that is inhaled is actually delivered to the lungs-

hence it may be possible to reduce the dose administered.

We believe that half the delivered dose can offer the same

efficacy. This has advantages eg. it can facilitate steroid

sparing if the formulation is a long acting bronchodilator

+ steroid combination.

Our device complies completely with the US and European

guidelines for inhalers - several marketed inhalers do not.

Our device also offers an audible and visual feedback of a

dose that has been administered. This device delivers

similar dose across patient effort and hence, the very old

and young can use it.

Our device can be used to deliver currently available

asthma medication, or new steroid molecules.

One combination product based on DPI technology is

likely to reach the Indian market by Q4 FY10.

Particles in the size range 1100 nm are emerging as a

class of therapeutics for cancer. Early clinical results

suggest that nanoparticle therapeutics can show

enhanced efficacy, while simultaneously reducing side

Dry Power Inhaler (DPI)

Injectable Depot Technology


7


effects, owing to properties such as more targeted

localization in tumours and active cellular uptake. It also

protects the drug from premature degradation and

elimination.

Novel ‘insoluble drug’ self-dispersing patented

nanoparticle technology platform consists of composite

nanoparticles of anticancer drug, polymer and lipid. Few

“difficult to formulate” anticancer drugs are under

development. The nanodispersion product characteristics

are that the drug molecule is the same - it is not covalently

bound to the excipients or altered. All excipients are US

FDA approved having a long history of intravenous use. It

does not contain any excipients that lead to safety issues.

The encapsulation process developed by us offers

spontaneous high degree of encapsulation of the drug.

The product has a nanometric particle size with improved

reconstitution stability. It does not require special infusion

sets, in-line filters or aseptic mixing procedures during

drug administration to a patient as required for existing

marketed products. It is also not expected to use

premedication before administration. It is a user friendly

product.

The product has shown improved toxicity profile in

preclinical studies in rats and mice, highly significant

antitumor activity as per standard criteria and improved

tumor drug levels in nude mice implanted with tumors.

P r e c l i n i c a l s t u d i e s

required for a dose finding

human trial completed for

two anticancer drugs.

B y n a n o e m u l s i o n

e n c a p s u l a t i o n , t h e

circulation in blood is

altered and selective

accumulation of the drug

into solid tumors is achieved, thus enhancing the efficacy

and safety index of the drug.

This nanoparticle platform technology is at a preclinical

development stage, with demonstrated proof of concept.

Two cytotoxic drug products are being developed based

on this technology. Phase -1 human trials in India are

continuing for one product and an other one is in pipeline.

GRID is a controlled release system technology platform of

SPARC.

This innovative system is a dosage form with specialized

multiple coatings. On ingestion of the dosage form along

Gastro Retentive InnovativeDevice (GRID, Baclofen GRS)


8


with food, it 'FLOATS' instantaneously on the contents of

the stomach which is an attribute of its innovative

design.The interactive coatings of the GRID are activated

by the gastro intestinal fluids leading to expansion and

swelling. data indicates that it swells to about

8 11 times its initial volume.

The innovative features of GRID enable it to maintain

physical integrity, expanded size and floatation thus

leading to gastric retention of this dosage form for the

longer period. Evidence from studies for a drug

having a narrow absorption window show plasma

concentrations in the therapeutic range for a prolonged

period of time indicating the utility of this dosage form as a

once a day’ system.

The product Liofen XL (Baclofen XL) in various strengths

has been launched in India based on this system.

Few other molecules which will benefit by incorporating in

the GRID system are under study.

Wrap Matrix is an Oral Controlled Release System of

SPARC. The technology is based on modification of

surface area for tailoring of drug release profiles. The

In-vitro

-

In-vivo

‘

Wrap Matrix


9


system consists of a coated bilayer tablet which modifies

surface area in situ. The system uses US FDA approved

excipients in acceptable quantities. Various release

profiles like Zero order controlled release, Immediate

release (IR) + Controlled Release (CR), IR + CR + IR and

many other options are possible with this system. This

system can handle high drug loads and thus is also

suitable for drugs with large doses and having a high

water solubility.

This system is successfully scaled up to commercial scale

and a few products like Prolomet XL (Metoprolol ER) and

Bupron OD (Bupropion OD) are launched in Indian

market. Few ANDA and NDDS products are under

development using this system.

From a strategic perspective, inventing (new drugs,

technologies etc) and learning the intricacies of the

regulatory process (phase I to IV) are both equally

important. Taking a product as ahead as quickly as

possible on our own in the development lifecycle is our way

learning the ropes.

We are satisfied with the progress observed on our projects

so far. Some projects are closer to market than they were a

year ago.

Some of the NDDS technologies have successfully moved

beyond the proof of concept and have been used to file

products for India, the emerging markets as well as

ANDAs for the US.

Since research is inherently a high risk area, it is likely that

an investment may go waste if a project has to be

abandoned at a later stage in its development. A project

may need a much higher investment or longer time frame

than initially visualized. New tests or trials may require

much greater investment than originally envisaged.

A competing technology or product might diminish the

potential that we anticipate for NCE or NDDS.

Outlook

Risks and Concerns

10

Sun Pharma Advanced Research Company Ltd.Sun Pharma Advanced Research Company Ltd.

Directors’ Report

Your Directors take pleasure in presenting the Fourth Annual Report and Audited Accounts for the year ended 31st March,

2009.

(Rs. in Thousands)

Total Income 352,436 375,413

Profit/(Loss) before Depreciation & Tax (106,549) (32,941)

Depreciation 18,364 12,674

Profit/(Loss) before Tax (124,913) (45,615)

Provision for Tax

(includes Deferred tax, Wealth tax & Fringe Benefit Tax) (33,508) 3,212

Profit/(Loss) after Tax (91,405) (48,827)

Balance brought forward from Previous Year (98,701) (49,874)

Balance carried to Balance Sheet (190,106) (98,701)

In view of loss incurred during the year under review, your Directors do not recommend any dividend for the year under

review.

Mr. Dilip S. Shanghvi and Mr. Sudhir V. Valia, Directors of the Company, retire by rotation at the ensuing Annual General

Meeting, and being eligible offer themselves for reappointment.

The management discussion and analysis on the operations of the Company is provided in a separate section and forms

a part of this report.

Report on Corporate Governance and Certificate of the Auditors of your Company regarding compliance of the

conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, are

enclosed.

Year ended Year ended31st March, 2009 31st March, 2008

Financial Result

Dividend

Directors

Management Discussion and Analysis

Corporate Governance Report

11

Annual Report 2008-09Annual Report 2008-09

Human Resources

Public Deposits

Information on Conservation of Energy, Technology Absorption,Foreign Exchange Earning and Outgo

Internal Control Systems and their Adequacy

SPARC, which is committed to do quality research work, has a dedicated team of 210 highly qualified and experienced

scientists comparable to those existing internationally. SPARC is among the very few Indian pharmaceutical companies

engaged in new drug discovery, drug delivery systems, process development and analytical research as per

national/international standards and regulations.

Your Directors recognize the team's valuable contribution and place on record their appreciation for Team SPARC.

Information as per Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)

Rules, 1975 as amended, is available at the Registered Office of your Company. However, as per the provisions of Section

219(1)(b)(iv) of the said Act, the Report and Accounts are being sent to all shareholders of the Company and others

entitled thereto excluding the aforesaid information. Any shareholder interested in obtaining a copy of this statement may

write to the Company Secretary at the Mumbai Office or Registered Office address of the Company.

The Company has not accepted any deposit from the Public during the year under review, under the provisions of the

Companies Act, 1956 and the rules framed thereunder.

The additional information relating to energy conservation, technology absorption, foreign exchange earning and outgo,

pursuant to Section 217(1)(e) of the Companies Act 1956 read with the Companies (Disclosure of Particulars in the Report

of the Board of Directors) Rules, 1988, is given in Annexure and forms part of this Report.

Your Company has adequate internal controls for its business processes across departments to ensure efficient

operations, compliance with internal policies, applicable laws and regulations, protection of resources and assets and

accurate reporting of financial transactions. The Company also has an internal audit system which is conducted by the

independent firms of Chartered Accountants so as to cover various operations on a continuous basis. Summarised

Internal Audit Observations/Reports are reviewed by the Audit Committee on a regular basis. The finance and accounts

functions of the Company are well staffed with qualified and experienced members.

12

Sun Pharma Advanced Research Company Ltd.Sun Pharma Advanced Research Company Ltd.

Directors' Responsibility Statement

Auditors

Acknowledgements

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility

Statement, it is hereby confirmed:

(I) that in the preparation of the annual accounts for the financial year ended 31st March, 2009, the applicable

accounting standards have been followed along with proper explanation relating to material departures;

(ii) that the Directors have selected appropriate accounting policies and applied them consistently and made

judgements 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 on the loss of the Company for the year under review;

(iii) 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; and,

(iv) that the Directors have prepared the annual accounts for the financial year ended 31st March, 2009 on a 'going

concern' basis.

Your Company's auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, retire at the conclusion of the

forthcoming Annual General Meeting. Your Company has received a letter from them to the effect that their re-

appointment, if made, will be in accordance with the provisions of Section 224(1-B) of the Companies Act, 1956.

Your Directors wish to thank all stakeholders and business partners - your Company's bankers, medical profession and

business associates for their continued support and valuable co-operation. The Directors also wish to express their

gratitude to investors for the faith that they continue to repose in the Company.

For and on behalf of the Board of Directors

Dilip S. ShanghviChairman & Managing Director

Place : MumbaiDate : 23rd May, 2009


13

Annexure to Directors’ ReportCONSERVATION OF ENERGY

Power and Fuel Consumption

Our operations are not Energy intensive. However the Company has endeavored to optimise the use of energy resources andtaken adequate steps to avoid wastage & use latest technology & equipments, wherever feasible, to reduce energy consumption.

TECHNOLOGY ABSORPTION

A. Research and Development

1. Specific areas in which R&D is carried out by the Company

Sun Pharma Advanced Research Company Ltd (SPARC Ltd) works on innovation and new product development for globalmarkets. It undertakes projects in innovative research and technology for new chemical entities (NCE’s) or new molecules,and novel drug delivery systems (NDDS).

New Chemical Entities (NCE’s)

The thrust areas of research programs for new molecules or new chemical entities (NCE’s) are:

> Design and development of therapies for

Allergy

Inflammation

> Design and development of pro-drugs (chemical delivery systems) for currently marketed drugs that have poor oralabsorption profile.

Allergy

SUN-1334H is a novel selective histamine H1 receptor antagonist for the therapy of allergic disorders such as seasonaland perennial allergic rhinitis, urticaria, etc. This molecule has finished phase II clinical studies in USA.

Inflammation

SUN-461 is a locally acting anti-inflammatory glucocorticoid receptor agonist in pre-clinical development for use in thetreatment of asthma and COPD. It belongs to the category called “soft steroids”.

Pro-drugs

Anticonvulsant/ Modification of absorption

Our lead molecule, SUN-44 is a pro-drug of the currently marketed drug gabapentin which is used for the treatment ofneuropathy and seizures. SUN-44 is currently under pre-clinical development.

Muscle relaxant/ Modification of absorption

Our lead SUN-09 is a pro-drug of a currently marketed drug used as a skeletal muscle relaxant for the treatment of spasmsrelated to CNS disorders. SUN-09 is currently under pre-clinical development.

Novel Drug Delivery Systems (NDDS)

In the drug delivery systems research (NDDS) platform technologies that are being developed are:

> Novel device for inhaled drugs

> Controlled release systems

Gastric retention systems (GRS)

Matrix system (wrap-matrix)

> Targeted drug delivery

Nanoemulsions

> Biodegradable injections/ implants

14


Novel device for inhaled drugs

A newly engineered dry powder inhalation device is under development which would enable convenient and uniformdose administration of drugs for asthma and COPD. The device would be small, convenient to carry and have a simplethree step operating sequence - “open-inhale-close”. The device is being developed to comply with the US and EuropeanFDA requirements.

Controlled release systems

Gastro retentive innovative device (GRID)

An innovative gastro retentive system (GRS) has been devised that allows longer retention of drugs in the stomach andimproves gastrointestinal absorption of drugs that have a narrow absorption window. The mechanism for gastroretentionis based on flotation, size expansion and mucoadhesion.

Wrap matrix system

A novel platform technology, with a core and coat has been developed that offers gradual and controlled release ofmedicines that are highly soluble and are required to be administered in high doses. Based on this technology a fewANDA’s for controlled release dosage form have been filed with US FDA.

Targeted drug delivery

Nanoemulsion

Nanotechnology based delivery systems (Nanotectons) enable selective delivery of cytotoxic drugs to cancerous tissues.In this technology, drugs are encapsulated within nanoscale carriers derived from biocompatible/ biodegradable polymersand lipids.

This nanoparticle platform technology is at a preclinical development stage, with demonstrated proof of concept.

Biodegradable injections/ implants

Depot formulations using biodegradable polymers obviate the requirement of frequent injections of certain drugs in caseof ailments such as hormone dependant cancers. The depot technology developed by us uses long-acting microparticles.

Two peptide drugs formulations using this technology are in development.

2. Benefits derived as a result of the above R&D

These are long term projects, with a higher risk profile compared to generic projects., and typically take 8-10 years toreach market, if at all. NCE’s upon commercialization are expected to provide patients with better treatment options orsafer side effect profile for the disorders for which these therapies are being developed.

The new drug delivery systems that are being developed are platform technologies that can be used for several differentdrugs. The eventual commercialization of the products based on these technologies would provide patients with newerdosage forms that are safer, more effective in terms of availability in the body, and easier for the patient to take or toadminister.

3. Future plan of action

New Chemical Entities (NCE’s)

Allergy –SUN-1334H- Complete ongoing phase II human trials in the USA for season allergic rhinitis- Complete studies on cardiovascular safety,metabolism, toxicity etc required for phase III trials- Carinogenicity study initiation

Inflammation – SUN-461- Complete the required preclinical and toxicity studies for Investigational New Drug (IND) application- IND filing with US FDA in 2009- Obtain regulatory approval and commence phase I human studies

Pro-drug – SUN-44- Complete the required preclinical and toxicity studies for Investigational New Drug (IND) application- IND filing in India in 2009- Obtain regulatory approval and commence phase I human studies


15

Pro-drug – SUN-09- Complete the required preclinical and toxicity studies for Investigational New Drug (IND) application- IND filing in India in 2009- Obtain regulatory approval and commence phase I human studies

Novel Drug Delivery Systems (NDDS)Novel device for inhaled drugs- Design and validation of device- Clinical trials in humans for semi-regulated markets- Launch in semi-regulated markets in 2010- IND filing with US FDA in 2009

Gastro retentive innovative device (GRID)- Likely IND filing with US FDA in 2009, the product has already been launched in India.

Wrap matrix system- Launch controlled release products based on wrap matrix technology after approval is obtained for the ANDA’s that SunPharma has filed with US FDA,To develop innovative products based on this technology, take through clinical trials and file these productsTechnology overview was presented to US regulatory agencies for one of the ANDA filed with FDA

Nanoemulsion- To Complete technology development for two cytotoxic products that are being studiedPhase 1 for one cytotoxic, the first in human study has been initiated, for the second cytotoxic, first in human study is likelyin 2010.

Biodegradable injections/ implants

- Clinical trials in humans in India completed.

- Launch in semi-regulated markets in 2010

- Complete preclinical studies for depot injection of GnRH analogue that is being developed. likely take it for Clinical trialsin humans

4. Expenditure on R&D Year ended Year ended31st March, 2009 31st March, 2008

Rs in Thousand Rs in Thousand

a) Capital 224,185 38,876b) Revenue 456,558 408,219c) Total 680,743 447,095d) Total R&D expenditure as % of Total Turnover 193.7% 119.3%

B. Technology Absorption, Adaptation and Innovation

1. Efforts in brief, made towards technology absorption, adaptation and innovation

The Company continues its endavour for research in the area of Innovative and Novel Drug Delivery System with latesttechnology and skilled scientific team.

2. Benefits derived as a result of the above efforts e.g. Product improvement, cost reduction, product development,import substitution

Innovative NCE and NDDS programs being undertaken by the company will help in making available new andeffective products. These products when commercialised will improve quality of life of patients.

3. Your company has not imported technology since its inception.

C. Foreign Exchange Earnings and Outgo

1. Earnings 323,014 365,8952. Outgo 263,948 148,027

16


Auditors’ Report1. We have audited the attached Balance Sheet of Sun Pharma Advanced Research Company Limited (“the Company”) as

at March 31, 2009 and also the Profit and Loss Account and the Cash Flow Statement for the year ended annexed thereto.These financial statements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. As required by the Companies (Auditors’ Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specifiedin paragraphs 4 and 5 of the said Order.

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

(i) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessaryfor the purposes of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from ourexamination of those books;

(iii) in our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this reportcomply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(iv) on the basis of written representations received from directors as on March 31, 2009 and taken on record by the Boardof Directors, we report that none of the directors is disqualified as on March 31, 2009 from being appointed as adirector in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956;

(v) in our opinion and to the best of our information and according to the explanations given to us, the said accounts readtogether with the significant accounting policies and notes thereon give the information required by the CompaniesAct, 1956, in the manner so required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2009;

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

(c) in the case of the Cash Flow Statement, of the Cash Flows for year ended on that date.

For Deloitte Haskins & SellsChartered Accountants

K. A. KatkiPlace: Mumbai PartnerDate: May 23, 2009 (Membership No. 038568)


17

Annexure to the Auditors’ Report(Referred to in paragraph 3 of our report of even date)Sun Pharma Advanced Research Company Limited

1. In our opinion and according to the information and explanations given to us, the nature of the Company’s activities, is such that clausesviii, x, xii, xiii, xiv, xviii, xix and xx of Paragraph 4 of Companies (Auditors’ Report) Order, 2003 are not applicable to the Company.

2. In respect of its fixed assets:

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

(b) As explained to us, some of the fixed assets of the Company have been physically verified during the year by the management inaccordance with a phased programme of verification designed to cover all assets over a period of three years, which in ouropinion, is reasonable having regard to the size of the Company and the nature of its assets. The discrepancies noticed on suchverification were not material and have been properly dealt with in the books of account.

(c) Although some of the fixed assets have been disposed off during the year, in our opinion and according to the information andexplanations given to us, the ability of the Company to continue as a going concern is not affected.

3. According to the information and explanations given to us, the Company did not have any inventory during the year.

4. The Company had not granted or taken any loan, secured or unsecured, to or from Companies, firms or other parties covered in theregister maintained under section 301 of the Companies Act 1956.

5. In our opinion and according to the information and explanations given to us, there are adequate internal control systems commensuratewith the size of the Company and nature of its business with regard to purchase of consumables and fixed assets and for sale of goods(technology) and services and we have not observed any continuing failure to correct major weaknesses in such internal controlsystems.

6. In respect of contracts or arrangements entered in the register maintained in pursuance of section 301 of the Companies Act, 1956,to the best of our knowledge and belief and according to the information and explanations given to us:

(a) The particulars of contract or arrangements referred to in Section 301 that needed to be entered into the register, maintainedunder the said section have been so entered.

(b) Where each such transaction (excluding loans reported under paragraph 4 above) is in excess of Rs. 5 lakhs in respect of anyparty, the transactions have been made at prices which are prima facie reasonable having regard to prevailing market prices atthe relevant time, except that reasonableness could not be ascertained where comparable quotations are not available havingregards to the specialized nature of some of the transactions of the Company.

7. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from publicwithin the meaning of Section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies(Acceptance of Deposits) Rules, 1975 with regard to deposits accepted from the public. No order has been passed by the CompanyLaw Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal.

8. In our opinion, the internal audit functions carried out during the year by firms of Chartered Accountants appointed by the managementhave been commensurate with the size of the Company and the nature of its business.

9. According to the information and explanations given to us, in respect of statutory dues:

(a) the Company has been regular in depositing undisputed statutory dues, including, Provident Fund, Employees’ State Insurance,Income tax, Sales tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, cess and other material statutory dues with theappropriate authorities during the year. There were no dues payable in respect of Investor Education and Protection Fund, duringthe year. There were no undisputed dues that were outstanding as at March 31, 2009 for a period of more than six months fromthe date they became payable.

(b) there were no disputed dues in respect of Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess andother material statutory dues during the year.

10. In our opinion and according to the information and explanation given to us, the Company has not defaulted in repayment of dues tobanks. The Company has not obtained any borrowings from financial institutions or by way of debentures.

11. In our opinion and according to the information and explanation given to us, the Company has not given any guarantees for loans takenby others from banks and financial institutions.

12. To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, during the periodof our audit, the Company has not availed any term loans.

13. According to the information and explanations given to us and on an overall examination of the balance sheet of the company, we reportthat the Company has, prima – facie, used funds raised on short term basis through bank overdraft facility along with the reductionin the current assets and increase in current liabilities aggregating to Rs. 25,887 Thousand, towards long term investment in fixedassets.

14. To the best of our knowledge and belief and according to the information and explanation given to us, no fraud on or by the Companywas noticed or reported during the year.


K. A. KatkiPlace: Mumbai PartnerDate: May 23, 2009 (Membership No. 038568)

18


As at 31st March Schedules 2009 2008

As per our report of even date attached For and on behalf of the Board

DILIP S. SHANGHVIChairman & Managing Director

SUDHIR V. VALIADirector

Mumbai, 23rd May 2009

Dr. T. RAJAMANNARWholetime Director

San Francisco - U.S.A., 23rd May 2009

MEETAL S. SAMPATCompany Secretary



K. A. KATKIPartner


Balance Sheet as at 31st March, 2009Rs in Thousand

SOURCES OF FUNDS

Shareholders’ FundsShare Capital 1 207,116 207,116Reserves and Surplus 2 339,766 339,766

546,882 546,882

Loan FundsUnsecured Loan 3 17,186 4,296

Deferred Tax Liability (Net) 4 — 34,128

TOTAL 564,068 585,306

APPLICATION OF FUNDS

Fixed Assets 5Gross Block 599,721 379,377Less: Depreciation 71,328 53,732

Net Block 528,393 325,645Capital Work-in-Progress(including Advances on Capital Account) 44,376 572,769 6,212 331,857

Current Assets, Loans and AdvancesSundry Debtors 6 5,086 244,810Cash and Bank Balances 7 5,227 1,120Loans and Advances 8 32,445 37,303

42,758 283,233

Less: Current Liabilities and Provisions 9Current Liabilities 231,122 117,073Provisions 10,443 11,412

241,565 128,485

Net Current Assets (198,807) 154,748

Profit and Loss account (Debit Balance) 190,106 98,701

TOTAL 564,068 585,306

SIGNIFICANT ACCOUNTING POLICIES ANDNOTES TO THE FINANCIAL STATEMENTS 15

Schedules referred to herein form anintegral part of the Financial Statements


19

Profit and Loss Account for the year ended 31st March, 2009

Year ended 31st March Schedules 2009 2008

Rs in Thousand

INCOME

Income from operations 10 351,419 374,629Other Income 11 1,017 784

352,436 375,413

EXPENDITURE

Materials consumed 12 93,777 68,618Personnel Cost 13 164,301 133,271

Operating and Other Expenses 14 198,480 206,330Depreciation 18,364 12,674

Bank Interest 2,427 135

477,349 421,028

LOSS BEFORE TAXATION (124,913) (45,615)

Provision for Taxation- Current Tax (Wealth Tax) 100 74

- Deferred Tax Expense / (Credit) (Net) (34,128) 2,638- Fringe Benefit Tax 520 500

LOSS AFTER TAX (91,405) (48,827)

BALANCE OF LOSS BROUGHT FORWARD (98,701) (49,874)

BALANCE OF LOSS CARRIED TO BALANCE SHEET (190,106) (98,701)

EARNING PER SHARE

(Refer Note B.8 of Schedule 15)

Basic (Rs.) (0.44) (0.25)

Diluted (Rs.) (0.44) (0.25)face value per share Re. 1

SIGNIFICANT ACCOUNTING POLICIES ANDNOTES TO THE FINANCIAL STATEMENTS 15

Schedules referred to herein form anintegral part of the Financial Statements










K. A. KATKIPartner


20


Cash Flow Statement for the year ended 31st March, 2009

Year ended 31st March 2009 2008

Rs in Thousand

Particulars

Cash Flow From Operating Activities:Loss before Tax (124,913) (45,615)

Adjustments for:Depreciation 18,364 12,674(Profit) / Loss on Sale of Fixed Assets 2,353 105Interest Expenses 2,427 135Interest Income (730) (745)Provision for compensated absences (979) 3,933Unrealised Foreign Exchange (Gain) / Loss 1,070 (1,085)

Operating Loss Before Working Capital changes (102,408) (30,598)

Adjustments for changes in Working Capital:(Increase) / Decrease in Sundry Debtors 238,288 (243,385)(Increase) / Decrease in Other Receivables 8,395 (28,439)Increase / (Decrease) in Trade payable and Other Liabilities 114,415 100,136

Cash Generated / (used in) from Operations 258,690 (202,286)Taxes Paid (4,147) (1,634)

Net Cash generated from (used in) Operating Activities 254,543 (203,920)

Net Cash Flow from Investing Activities:Amount received pursuant to the scheme of demerger — 244,929Interest received 730 745Purchase of Fixed Assets / CWIP (262,349) (45,089)Sale Proceeds of Fixed Asset 720 166

Net Cash Generated from (used in) Investing Activities (260,899) 200,751

Cash Flow From Financing Activities:Interest Paid (2,427) (135)Bank Overdraft Facility 12,890 4,296

Net Cash Flow generated from Financing Activities 10,463 4,161

Net Increase in Cash or Cash Equivalents 4,107 992

Cash and Cash equivalents at the beginning of the year 1,120 128

Cash and Cash equivalents at the close of the year 5,227 1,120

NOTES TO CASH FLOW STATEMENT

1 Cash and Cash equivalents included in cash flow statement comprise of the following:Cash on hand and balances with Bank 5,227 1,120

Cash and Cash equivalents 5,227 1,120










K. A. KATKIPartner



21

1 SHARE CAPIT1 SHARE CAPIT1 SHARE CAPIT1 SHARE CAPIT1 SHARE CAPITALALALALAL

2 RESERVES AND SURPLUS2 RESERVES AND SURPLUS2 RESERVES AND SURPLUS2 RESERVES AND SURPLUS2 RESERVES AND SURPLUS

As at 31st March 2009 2008

Rs in Thousand

3 UNSECURED LOAN3 UNSECURED LOAN3 UNSECURED LOAN3 UNSECURED LOAN3 UNSECURED LOAN

Authorised266,500,000 (Previous Year 266,500,000) Equity Shares of Re. 1 each 266,500 266,500

Issued, Subscribed and Paid Up207,116,391 (Previous Year 207,116,391) Equity Shares of Re. 1 each, fully paid up 207,116 207,116

Notes:Of the above :192,260,055 (*) (Previous Year 192,260,055) Equity Shares of Re. 1 eachfully paid up were issued to Shareholders of Sun Pharmaceutical Industries LimitedPursuant to scheme of demerger.

14,856,336 (*) (Previous Year 14,856,336) Equity Shares of Re.1 each were allotted tothe holders of Zero Coupon Foreign Currency Convertible Bonds of Sun PharmaceuticalIndustries Limited upon exercise of conversion option.

( * ) (All of above Equity Shares were allotted for consideration other than cash)

207,116 207,116

General ReserveBalance as per last Balance Sheet 339,766 353,481Less : Utilised for issuance of share capital to the holders of

Zero Coupon Foreign Currency Convertible Bonds of — 13,715Sun Pharmaceutical Industries Limited

339,766 339,766


Bank Overdraft 17,186 4,296(Secured by Corporate Guarantee given by a company underthe same management) 17,186 4,296


4 4 4 4 4 DEFERRED TDEFERRED TDEFERRED TDEFERRED TDEFERRED TAX LIABILITY (NET)AX LIABILITY (NET)AX LIABILITY (NET)AX LIABILITY (NET)AX LIABILITY (NET) (Refer Note No.B.4 to Schedule 15)


Deferred Tax LiabilityDepreciation on Fixed Assets 135,908 38,002

Deferred Tax AssetsProvision for compensated absences 3,541 3,874Unabsorbed losses (Restricted to the extent of deferred tax liability ondepreciation on account of virtual certainity) 132,367 —

135,908 3,874

— 34,128

Schedules to the Financial Statements

22


6 SUNDR6 SUNDR6 SUNDR6 SUNDR6 SUNDRY DEBTY DEBTY DEBTY DEBTY DEBTORSORSORSORSORS

PARTICULARS

GROSS BLOCK (At Cost) DEPRECIATION NET BLOCK

As at Additions Deletions As at As at Deletions For the As at As at As at01.04.2008 during 31.03.2009 01.04.2008 year 31.03.2009 31.03.2009 31.03.2008

the year

TANGIBLE ASSETS

Buildings 159,566 13,263 — 172,829 10,192 — 2,675 12,867 159,962 149,374Equipments 211,728 201,033 2,643 410,118 41,164 482 14,575 55,257 354,861 170,564Vehicles 6,316 8,514 1,198 13,632 1,881 286 949 2,544 11,088 4,435Furniture and Fixtures 1,767 1,375 — 3,142 495 — 165 660 2,482 1,272

TOTAL 379,377 224,185 3,841 599,721 53,732 768 18,364 71,328 528,393 325,645

Previous Year 340,923 38,876 422 379,377 41,209 151 12,674 53,732 325,645 —

Capital Work-in-Progress (including advances on capital account) 44,376 6,212

572,769 331,857

5 FIXED ASSETS5 FIXED ASSETS5 FIXED ASSETS5 FIXED ASSETS5 FIXED ASSETS

7 CASH AND BANK BALANCES7 CASH AND BANK BALANCES7 CASH AND BANK BALANCES7 CASH AND BANK BALANCES7 CASH AND BANK BALANCES

Rs in Thousand

(Unsecured-Considered Good, unless stated otherwise)Debts due less than Six Months 5,086 244,810(Refer Note B.13 of Schedule 15)

5,086 244,810

Cash in hand 584 242Balances with Scheduled Banks in :

Current Accounts 4,625 863Deposit Accounts 18 15

5,227 1,120



8 L8 L8 L8 L8 LOOOOOANS AND ADANS AND ADANS AND ADANS AND ADANS AND ADVVVVVANCESANCESANCESANCESANCES

(Unsecured-Considered Good, unless stated otherwise)Loans to Employees 8,851 9,375Advances Recoverable in cash or in kind or for value to be received 3,112 753Balance with Custom and Excise Authorities 11,529 7,502Advance Income Tax/ Tax deducted at source(Net of Provisions Rs.102 Thousand (Previous year Rs.42 Thousand)) 4,603 1,066Advances to Suppliers 4,350 18,607

32,445 37,303




23


9 CURRENT LIABILITIES AND PROVISIONS9 CURRENT LIABILITIES AND PROVISIONS9 CURRENT LIABILITIES AND PROVISIONS9 CURRENT LIABILITIES AND PROVISIONS9 CURRENT LIABILITIES AND PROVISIONS


10 INCOME FROM OPERA10 INCOME FROM OPERA10 INCOME FROM OPERA10 INCOME FROM OPERA10 INCOME FROM OPERATIONSTIONSTIONSTIONSTIONS


11 O11 O11 O11 O11 OTHER INCOMETHER INCOMETHER INCOMETHER INCOMETHER INCOME

Rs in Thousand

Current LiabilitiesSundry Creditors

Dues to micro and small enterprises — —Dues to others 72,117 84,893

Advances from customers 123,716 —Security Deposits 923 855Other Liabilities 34,366 31,325

231,122 117,073

ProvisionsProvision for Fringe Benefit Tax [Net of Advance FBTof Rs.1,004 Thousand (Previous year Rs. 494 Thousand)] 26 16

Provision for compensated absences 10,417 10,443 11,396 11,412

241,565 128,485

Sale of Technology / Knowhow 323,014 354,845Fees / Service Charges 28,405 19,784

351,419 374,629

Interest on Loan / Deposit 730 745[TDS Rs.Nil (Previous year Rs. Nil )]Miscellaneous Income 287 39

1,017 784


12 MA12 MA12 MA12 MA12 MATERIALS CONSUMEDTERIALS CONSUMEDTERIALS CONSUMEDTERIALS CONSUMEDTERIALS CONSUMED

R&D Material consumed 93,777 68,618

93,777 68,618


24


Rs in Thousand


14 OPERA14 OPERA14 OPERA14 OPERA14 OPERATING AND OTING AND OTING AND OTING AND OTING AND OTHER EXPENSESTHER EXPENSESTHER EXPENSESTHER EXPENSESTHER EXPENSES

Power and Fuel 24,994 22,987Rates and Taxes 1,237 521Insurance 407 669Repairs

- Building 2,247 732- Plant & Machinery 22,894 12,696- Others 2,182 27,323 980 14,408

Printing and Stationery 2,725 2,028Travelling and Conveyance 6,513 5,514Testing 17,175 12,707Communication 2,464 3,874Loss on sale of fixed assets 2,353 105Customer Entertainment 1,664 1,741License and Fees 4,732 18,137Labour Charges 6,885 5,723Maintenance Charges 1,952 1,359Membership Fees and Subscription 2,116 715Professional Charges 91,179 110,154Donation — 31Auditors’ Remuneration (net of service tax ) - Audit Fees 700 700Miscellaneous Expenses 4,061 4,957

198,480 206,330


13 PERSONNEL COST13 PERSONNEL COST13 PERSONNEL COST13 PERSONNEL COST13 PERSONNEL COST

Salaries, Wages, Bonus and Benefits 149,253 114,163Contribution to Provident and Other Funds 6,449 6,962Staff Welfare Expenses 8,599 12,146

164,301 133,271



25

15 SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS

A Significant Accounting Policies

I Basis of Preparation of Financial StatementsThese financial statements are prepared under historical cost convention on an accrual basis in accordance with theGenerally Accepted Accounting Principles in India and the Accounting Standards (AS) as notified under Companies(Accounting Standards) Rules, 2006.

II Use of EstimatesThe presentation of financial statements in conformity with the generally accepted accounting principles requiresestimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of thefinancial statements and the reported amount of revenues and expenses during the reporting period. Differencebetween the actual result and estimates are recognised in the period in which the results are known / materalised.

III Fixed Assets and DepreciationFixed Assets are stated at historical cost less accumulated depreciation/amortisation thereon and impairment losses,if any. Depreciation is provided on Straight Line Method at the rates specified in Schedule XIV to The Companies Act,1956. Assets costing Rs.5,000/- or less are depreciated at hundred percent rate on prorata basis in the year ofpurchase.

IV Research and DevelopmentRevenue expenditure including purchase of materials related to Research and Development are charged to the Profitand Loss Account.

V Revenue RecognitionSales of products (rights, licenses and other intangibles) are recognised when performance obligation is completedand risk and rewards of ownership of the products are passed on to the customers, which is generally as peragreement. Royalty income is recognised on accrual basis as per relevant agreement. Sales includes Sales tax / VAT,excluding Service Tax and are stated net of returns, if any.

VI Foreign Currency TransactionsTransactions denominated in foreign currencies are recorded at the exchange rate prevailing at the date of transaction.Monetary items denominated in foreign currency at the year end are translated at year end rate. The exchangedifferences arising on settlement / translation are recognised in the Profit and Loss Account.

VII Taxes on IncomeProvision for taxation comprises of Current Tax, Deferred Tax and Fringe Benefit Tax. Current Tax provision has beenmade on the basis of reliefs and deductions available under the Income Tax Act, 1961. Deferred tax resulting from“timing differences” between taxable and accounting income is accounted for using the tax rates and laws that areenacted or substantively enacted as on the balance sheet date. The deferred tax asset is recognised and carriedforward only to the extent that there is a reasonable certainty that the assets can be realised in future. However, wherethere is unabsorbed depreciation or carry forward losses under taxation laws, deferred tax assets are recognisedonly if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed as at each Balance sheetdate. The Fringe Benefits tax has been calculated and accounted for in accordance with the provisions of the IncomeTax Act, 1961.

VIII Employee Benefits(a) The Company’s contribution in respect of provident fund is charged to Profit and Loss Account each year.(b) With respect to gratuity liability, Company contributes to Life Insurance Corporation of India (LIC) under LIC’s

Group Gratuity policy. Gratuity liability as determined on actuarial basis by the independent valuer is charged toProfit and Loss Account.

(c) Liability for accumulated compensated absences of employees is ascertained on actuarial basis by theindependent valuer and provided for as per company rules.

Schedules Forming Integral part of the Financial Statements as at March 31, 2009

26


IX Provisions, Contingent Liabilities and Contingent AssetsProvisions are recognised only when there is a present obligation as a result of past events and when a reliableestimate of the amount of the obligation can be made. Contingent liability is disclosed for (i) Possible obligationswhich will be confirmed only by future events not wholly within the control of the company or (ii) Present obligationsarising from past events where it is not probable that an outflow of resources will be required to settle the obligationor a reliable estimates of the amount of the obligation cannot be made. Contingent Assets are not recognised in thefinancial statements since this may result in the recognition of the income that may never be realised.

B Notes to accountsYear ended 31st March 2009 Year ended 31st March 2008

Rs in Thousand Rs in Thousand

1 REMUNERATION TO DIRECTORS

Managerial Remuneration U/s 198 of The Companies Act, 1956Salaries and Allowances 11,507 8,707Contribution to Provident and Superannuation Funds 547 457Perquisites and Benefits 23 13

12,077 9,177

The above remuneration has been approved by the share holders of the company and by the Central Governmentvide its letter No.:12/901/2007-CL-VII dated 17th January 2008, 16th February 2008 and 4th March 2008.

Director’s sitting fees of Rs.1,400 Thousand (Previous Year Rs. 1,020 Thousand) paid to Non-Executive Directors isnot included in above.

No Commission was paid to Directors during the year accordingly, computation of net profits in accordance withSection 309(5) read with Section 349 of the Companies Act, 1956 has not been given.

The remuneration reported above excludes contributions to Gratuity Fund, since the same is ascertained on anaggregated basis for the Company as a whole by way of actuarial valuation and separate values attributable toDirectors are not available.

2 Estimated amount of contracts remaining to beexecuted on capital account [net of advances]. 6,136 22,061

3 INCOME/EXPENDITURE IN FOREIGN CURRENCY

IncomeSales / Income from operations 323,014 365,895

ExpenditureMaterial (CIF basis) 31,911 14,675Capital Goods (CIF basis) 123,243 19,755Spares and Components (CIF basis) 11,028 3,684Professional charges 95,126 95,480Overseas Travel 1,252 1,150License Fees — 12,482Others 1,388 801

4 The timing differences relating mainly to unabsorbed depreciation and carried forward losses under the Income TaxAct, 1961, results in a deferred tax asset as per AS-22 – on “Accounting for Taxes on Income”. Deferred tax asset hasbeen recognised in respect of business losses to the extent that future taxable income will be available from futurereversal of any deferred tax liability recognised at the balance sheet date and is restricted to the extent of suchliabilities. As a prudent measure, the excess of deferred tax asset (net) of Rs. 1,35,384 Thousand (Privious yearRs. NIL) in relation to the above has not been recognised in the accounts as there is no virtual certainty supported byconvincing evidence that sufficient future taxable income will be available against which such deferred tax assets canbe realised.



27

5 The net exchange gain of Rs.6,963 Thousand (Previous Year Rs. 1,790 Thousand) is included under respectiveheads of Profit and Loss Account.

6 There are no Micro, Small and Medium Enterprises, as defined in the Micro, Small and Medium EnterprisesDevelopment Act, 2006 to whom the Company owes dues on account of principal amount together with interest andaccordingly no additional disclosures have been made.

The above information regarding Micro, Small and Medium Enterprises has been determined to the extent suchparties have been identified on the basis of information available with the Company. This has been relied upon by theauditors.

7 Accounting Standard (AS-17) on Segment Reporting

(a) Primary Segment

The Company has identified “Pharmaceuticals Research & Development” as the only primary reportable businesssegment.

(b) Secondary Segment (by Geographical Segment )

Year ended 31st March 2009 Year ended 31st March 2008Rs in Thousand Rs in Thousand

Sales – India 28,405 8,734Sales – Outside India 323,014 365,895

Total Sales 351,419 374,629

8 Accounting Standard (AS-20) on Earnings Per Share

Loss used as Numerator for calculating Earnings per Share 91,405 48,827

Weighted Average number of Shares used in computingbasic earnings per share 207,116,391 199,159,782

Weighted Average number of shares used in computingdiluted Earnings per Share 207,116,391 207,116,391

Nominal Value Per Share (in Rs.) 1 1Basic Earnings Per Share (in Rs.) (0.44) (0.25)Diluted Earnings Per Share (in Rs.) (0.44) *(0.25)

Note:

*Dilution in earnings per share on account of further issue of equity shares to holders of Zero Coupon ForeignCurrency Convertible Bonds has not been considered, as they are anti-dilutive.

9 Other information required under para 3 and information with regard to matters specified in paragraph 4 of Part II toSchedule VI of the Companies Act, 1956 is stated to the extent applicable to the Company.

10 As per the best estimate of the management, no provision is required to be made as per Accounting Standards (AS-29) as notified by Companies (Accounting Standard) Rules, 2006 in respect of any present obligation as a result of apast event that could lead to probable outflow of resources, which would be required to settle the obligation.

11 Disclosure with respect to Accounting Standards (AS-18) on related party disclosure, as notified by Companies(Accounting Standard) Rules, 2006, is as per Annexure - “A” annexed.


28


12 The Company has not entered into any forward exchange contracts being derivative instruments.

As at the year end, foreign currency exposures that have not been hedged by a derivative instrument or otherwise aregiven below :

a) Amounts receivable in foreign currency on account of the following :

As at 31st March, 2009 As at 31st March, 2008Currency Amount in Thousand Amount in Thousand

Exports of Goods & Services US Dollar — — $ 5,930.0 INR 236,133Reimbursement of expenses Euro € 61.6 INR 4,162 — —

b) Amounts payable in foreign currency on account of the following :Import of Goods & Services US Dollar $ 253.5 INR 12,893 $ 197.4 INR 7,860

Swiss Franc CHF 14.0 INR 623 — —Euro € 96.3 INR 6,504 € 38.40 INR 2,422Pound £ 116.9 INR 8,520 £ 3.9 INR 306JPY JPY 725.9 INR 377 — —

13 Outstanding due from Company under same management.

Balance As at Maxi. Balance Balance As at Maxi. Balance31st March, 2009 2008-09 31st March, 2008 2007-08

Rs. in Thousand Rs. in Thousand

Amount due pursuant to the Scheme of DemergerSun Pharmaceutical Industries Limited — — — 244,929

Sun Pharma Global Inc. BVI — 252,826 236,133 256,532

14 Accounting Standard (As-15) on Employee Benefits

Contributions are made to Recognised Provident Fund/ Government Provident Fund, Family Pension Fund, ESICand other Statutory Funds which covers all regular employees. While both the employees and the Company makepredetermined contributions to the Provident Fund and ESIC, contribution to the Family Pension Fund are made onlyby the Company. The contributions are normally based on a certain proportion of the employee’s salary. Amountrecognised as an expense in respect of these defined contribution plans, aggregate to Rs. 7,027 Thousand (PreviousYear Rs 5,501 Thousand).

Year ended 31st March 2009 Year ended 31st March 2008Rs in Thousand Rs in Thousand

Contribution to Provident Fund 6,973 5,336Contribution to Employees State Insurance Scheme (E.S.I.C.) 52 163Contribution to Labour Welfare Fund 2 2

Contributions made to LIC of India’s Recognised Group Gratuity Fund scheme in respect of gratuity is in excess by Rs.675 Thousand (Previous Year 2,795 Thousand) as compared to the actuarial valuation obtained from independentactuary as at the year end. Actuarial Valuation for Compensated Absences is done as at the year end and theprovision is made as per Company rules amounting to Rs. 325 Thousand (Previous Year Rs. 4,834 Thousand) and itcovers all regular employees. Major drivers in actuarial assumptions, typically, are years of service and employeecompensation. Commitments are actuarially determined using the ‘Projected Unit Credit’ method. Gains and losseson changes in actuarial determination are accounted for in the Profit and Loss account.



29

In respect of gratuity (Funded): Rs. in Thousand (Dr/ (Cr))

Reconciliation of liability recognised in the Balance sheet

Present value of commitments (as per Actuarial Valuation) (10,565) (7,547)

Fair value of plans assets 11,240 10,342

Net Asset / (Liability) in the Balance sheet 675 (2,795)

Movement in net liability recognised in the Balance sheet

Net liability as at beginning of the year (2,795) (4,328)

Net expense recognised in the Profit and Loss account 2,120 1,662

Contribution during the year — (129)

Net Asset / (Liability) as at the end of the year 675 (2,795)

Expense recognised in the Profit and Loss account

Current service cost 927 1,027

Interest cost 604 414

Expected return on plan assets (827) (761)

Actuarial (gains)/ losses 1,416 982

Expense charged to the Profit and Loss account 2,120 1,662

Return on plan assets

Expected return on plan assets 827 761

Actuarial (gains)/ losses 126 73

Actual return on plan assets 953 834

Reconciliation of defined-benefit commitments

Commitments as at the beginning of the year 7,547 5,180

Current service cost 927 1,027

Interest cost 604 414

Paid benefits (55) (129)

Actuarial (gains)/ losses 1,541 1,055

Commitments as at the end of the year 10,564 7,547

Reconciliation of plan assets

Plan assets as at beginning of the year 10,342 9,508

Expected return on plan assets 827 761

Contributions during the year — 129

Paid benefits (55) (129)

Actuarial (gains)/ losses 126 73

Plan assets as at the end of the year 11,240 10,342

The actuarial calculations used to estimate commitments and expenses in respect of gratuity are based on the

following assumptions which if changed, would affect the commitment’s size, funding requirements and expense.

Discount rate 7.75% 8.00%

Expected return on plan assets 7.75% 8.00%

Expected Retirement age of employees (years) 58/60 Years; as applicable

LIC (1994-96) Ultimate


30


Rs in Thousand (Dr / (Cr))

Year ended

31st March 2009 31st March 2008Experience adjustmentOn plan liabilities 417 957On plan assets 126 73Present value of benefit obligation (10,565) (7,547)Fair value of plan assets 11,240 10,342Excess of (obligation over plan assets) / plan assets over obligation 675 2,795

Category of Plan Assets

The Company’s Plan Assets in respect of Gratuity are funded through the Group Schemes of the Life InsuranceCorporation of India.

The estimate of future salary increases, considered in the actuarial valuation, taken on account of inflation, seniority,promotion and other relevant factors such as supply and demand factors in the employment market.

Contribution expected to be made by the Company during financial year ending March 31, 2010 has not beenascertained.

As, this is the second year in which the AS-15 has been applied, the amounts of the present value of the obligation,fair value of plan assets, surplus or deficit in the plan and experience adjustment arising on plan liabilities and planassets for the previous four years have not been furnished.

15 Previous years’ figures are restated / regrouped / rearranged wherever necessary in order to confirm to current years’groupings and classifications.



31

Accounting Standard (AS-18) “ Related Party Disclosure “ Annexure : ‘A’Rs in Thousand

ParticularsApril 1, 2008 April 1, 2007

to toMarch 31, 2009 March 31, 2008

Enterprises under Significant Influence of Key Management Personnel:

Sun Pharmaceutical Industries LtdReimbursement of Expenses 26,068 67,913Purchase of Materials / DEPB 11,286 7,468Fees for use of Technology 13,139 —Reimbursement of Expenses incurred 2,588 —Corporate Guarantee given to bank 125,000 125,000Outstanding Balance Receivable / (Payable) (Net) (26,746) (65,833)

Sun Pharma Global Inc. BVISale of Technology 46,036 352,759Outstanding Balance Receivable / (Payable) (Net) — 234,709

Sun Pharma Global (FZE)Sale of Technology 276,978 —Outstanding Balance Receivable / (Payable) (Net) (123,716) —

Sun Pharmaceutical IndustriesPurchase of Materials 491 224Fees for use of Technology 14,458 5,734Reimbursement of Expenses incurred 2 —Outstanding Balance Receivable / (Payable) (Net) 395 5,463

Key Management Personnel:Remuneration to Directors 12,077 9,177

Note :

Names of related parties and description of relationship

1.Key Management Personnel Mr. Dilip S. ShanghviDr. T. Rajamannar

2.Enterprise under significant Influence of Sun Pharmaceutical Industries Ltd.Key Management Personnel Sun Pharma Global Inc. BVI.

Sun Pharma Global – FZESun Pharmaceutical (Bangladesh) Ltd.Sun Pharma De Mexico S. A. DE C.V.SPIL De Mexico S.A. DE C.V.Sun Farmaceutica Ltda – BrazilSun Pharmaceutical Industries Inc., USASun Pharmaceuticals UK LtdALKALOIDA Chemical Company exclusive group LimitedCaraco Pharmaceutical Laboratories Ltd – U.S.A.Universal Enterprise Pvt. Ltd.Zao Sun Pharma Industries Limited – RussiaSun Pharmaceutical Peru S.A.C.Sun Petrochemical Pvt Ltd.Sun Speciality Chemicals Pvt Ltd.Navjivan Rasayan (Gujarat) Pvt Ltd.Sun Pharma ExportsSun Pharmaceutical IndustriesOOO “Sun Pharmaceutical Industries” Ltd.Sun Pharmaceutical Industries (Australia) PTY Ltds.Sun Pharmaceuticals FranceSun Pharmaceuticals Germany GmbHAditya Acquisition Company Limited – IsraelSun Pharmaceuticals Italia S.R.L.Sun Pharmaceutical Industries Europe BVSun Pharmaceutical Spain, SL.Sun Pharmaceuticals (SA) (Pty) Ltd-South AfricaSun Development Corporation IChattem Chemical Inc.Sun Pharma Sikkim


32


Information required as per Part IV of Schedule VI to The Companies Act, 1956

I Registration Details

Registration No. Balance Sheet Date State Code

II Capital Raised during the year (Rs in Thousand)

III Position of Mobilisation and Deployment of Funds (Rs in Thousand)

IV Performance of the Company (Rs in Thousand)

V Generic Names of Three Principal Products of the Company (as per monetary terms) - N.A.

For and on behalf of the Board








04

NIL

Public Issue

Bonus Issue

NIL

Right Issue

NIL

NIL

Total Liabilities

564068

Sources of FundsPaid-up Capital

207116

Secured Loans

NIL

Application of FundsNet Fixed Assets

572769

Net Current (Liabilities) / Assets(198807)

Total Assets564068

Reserves and Surplus

17186

Unsecured Loans

339766

Investments

NIL

Miscellaneous Expenditure

NIL

Total Income

352436

Profit/ (Loss) Before Tax(124913)

Earning per share Rs.(0.44)

Total Expenditure

477349

Profit / (Loss) After Tax

(91405)

Dividend RateNIL

Private Placement

31st March, 200904/047837

Accumulated Losses

190106

Balance Sheet Abstract and Company’s General Business Profile


33

In compliance with Clause 49 of the Listing Agreement with Stock Exchanges, the Company submits the report on the mattersmentioned in the said Clause and lists the practices followed by the Company.

1. Company’s Philosophy on Corporate Governance

The Company’s philosophy on Corporate Governance is guided by strong emphasis on transparency, accountability,responsibility, fairness, integrity, consistent value systems, and delegation across all facets of its operations leading tosharply focused and operationally efficient growth. The Company’s beliefs on Corporate Governance are intended atsupporting the management of the Company for competent conduct of its business and ensuring long term value forshareholders, as well as customers, suppliers, employees and statutory authorities.

The Company is committed to implement the standards of good Corporate Governance and endeavors to preserve andnurture these core values in all its activities with an aim to increase and sustain its corporate value through growth andinnovation.

2. Board of Directors

The present strength of the Board of Directors of your Company is six Directors.

Composition and category of Directors is as follows:

Category Name of the Directors Inter-se Relationshipbetween Directors

Promoter Executive Director Mr. Dilip S. Shanghvi Brother-in-law of(Chairman and Managing Director) Mr. Sudhir V. Valia

Non-Promoter Executive Director Dr. T. Rajamannar —(Whole - Time Director)

Non Executive & Mr. Sudhir V. Valia Brother-in-law ofNon Independent Director Mr. Dilip S. Shanghvi

Mr. S. Mohanchand Dadha —

Non Executive Independent Directors Dr. Goverdhan Mehta —

Dr. Andrea Vasella —

Number of Board Meetings held and the dates on which held: Five Board meetings were held during the year, as againstthe minimum requirement of 4 meetings.

The dates on which the meetings were held are as follows: 14th May, 2008, 29th July 2008, 6th September 2008,27th October 2008, and 24th January 2009.

Attendance of each Director at the Board meetings, last Annual General Meeting (AGM), and number of other Directorshipand Chairmanship/Membership of Committee of each Director, is given below:

Name of the Director Number of Attendance *No. of other directorships andBoard meetings Particulars for the committee memberships /

held during year ended chairmanships as ofthe year 31st March, 2009 31st March, 2009

Board Last AGM Other Committee CommitteeMeetings held on 6th Director- Memberships Chairmanships

September, ships ** **2008

Mr. Dilip S. Shanghvi 5 4 Yes 1 1 —

Mr. Sudhir V. Valia 5 4 Yes 2 1 —

Dr. T. Rajamannar 5 5 Yes — — —

Mr. S. Mohanchand Dadha 5 5 Yes 3 2 —

Dr. Goverdhan Mehta 5 5 Yes 2 1 —

Dr. Andrea Vasella 5 4 Yes — — —

Corporate Governance

34


Note:

* The above list does not include Directorships, Committee Memberships and Committee Chairmanships in Private,Foreign and Section 25 Companies.

** The Committee Memberships and Chairmanships in other Companies include Memberships and Chairmanships ofAudit and Shareholders’/ Investors Grievance Committee only.

3. Code of Conduct

The Board of Directors have laid down a code of conduct for all Board members and senior management of theCompany. All the Directors and senior management personnel have affirmed compliance with the code of conduct asapproved and adopted by the Board of Directors and a declaration to this effect has been annexed to the CorporateGovernance Report. The code of conduct has been posted on the website of the Company www.sunpharma.in.

4. Audit Committee

The Audit Committee comprises of three independent non-executive Directors viz. Mr. S. Mohanchand Dadha, Dr.Goverdhan Mehta and Dr. Andrea Vasella. Mr. S. Mohanchand Dadha is the Chairman of the Audit Committee. Theconstitution of Audit Committee also meets with the requirements under Section 292A of the Companies Act, 1956. Mr.Sunil Ajmera, Company Secretary of the Company upto 31st January, 2009, was the Secretary of the Audit Committeeupto that date. With effect from 1st February, 2009, Ms. Meetal Sampat was appointed as the the Company Secretary ofthe Company and as the Secretary of the Audit Committee from that date.

The terms of reference of the Audit Committee interalia include overseeing the Company’s financial reporting process,reviewing the quarterly/ half yearly/ annual financial statements, reviewing with the management the financial statementsand adequacy of internal audit function, recommending the appointment/ re-appointment of statutory auditors andfixation of audit fees, reviewing the significant internal audit findings/ related party transactions, reviewing the ManagementDiscussion and Analysis of financial condition and result of operations and also statutory compliance issues relating tofinancial statements. The Committee acts as a link between the management, external and internal auditors and theBoard of Directors of the Company.

Executives from the Finance Department, Representatives of the Statutory Auditors and Internal Auditors are also invitedto attend the Audit Committee Meetings.

The Committee has discussed with the external auditors their audit methodology, audit planning and significantobservations/ suggestions made by them.

In addition, the Committee has discharged such other role/ function as envisaged under Clause 49 of the ListingAgreement of the Stock Exchange and the provisions of Section 292A of the Companies Act, 1956.

Five Audit Committee Meetings were held during the year ended 31st March, 2009. The dates on which Meetings wereheld are as follows:

14th May, 2008, 29th July, 2008, 6th September, 2008, 27th October, 2008 and 24th January 2009.

The attendance of each Member of the Committee is given below:

Name of the Director Chairman/Member No. of Audit CommitteeMeetings attended

Mr. S. Mohanchand Dadha Chairman 5

Dr. Goverdhan Mehta Member 5

Dr. Andrea Vasella Member 4

5. Remuneration Committee

The Remuneration Committee comprises of three non-executive and independent Directors Mr. S. Mohanchand Dadha,Dr. Goverdhan Mehta and Dr. Andrea Vasella as Members of the Committee. Mr. S. Mohanchand Dadha is the Chairmanof the Committee.

Mr. Sunil Ajmera, was the Secretary of the Remuneration Committee upto 31st January, 2009. With effect from1st February, 2009, Ms. Meetal Sampat, Company Secretary is the Secretary of the Committee.

The terms of reference of the Remuneration Committee includes approval of remuneration of Whole-Time Directors, andreview of compensation structure/remuneration policy of the Company.


35

Five meetings of the Remuneration Committee were held during the year ended on 31st March, 2009. The dates onwhich Meetings were held are as follows:

14th May, 2008, 29th July, 2008, 6th September, 2008, 27th October, 2008 and 24th January 2009.


Name of the Director Chairman/Member No. of RemunerationCommittee Meetings attended

Mr. S. Mohanchand Dadha Chairman 5



Details of remuneration paid to all the Directors for the year:

No remuneration is paid to Mr. Dilip S. Shanghvi, Chairman & Managing Director of the Company.

The details of the remuneration paid/payable to the Directors during the year 2008-2009 are given below:

(Amount in Rs.)

Directors Salary # Bonus Perquisites* Sitting Fees Total/ Benefits

Mr. Dilip S. Shanghvi — — — — —

Dr. T. Rajamannar 72,70,248 9,12,000 38,94,881 — 120,77,129

Mr. Sudhir V. Valia — — — 1,60,000 1,60,000

Mr. S. Mohanchand Dadha — — — 3,80,000 3,80,000

Dr. Goverdhan Mehta — — — 4,80,000 4,80,000

Dr. Andrea Vasella — — — 3,80,000 3,80,000

# Salary includes Special Allowance.

* Perquisites include House Rent Allowance, Leave Travel Assistance, Medical Reimbursement, contribution to ProvidentFund and such other perquisites, the monetary value of which are determined in accordance with the Income Tax Rules,1962.

Besides this, the Whole-Time Director is also entitled to encashment of leave and mediclaim and Gratuity at the end oftenure, as per the rules of the Company.

The Non-Executive Directors are paid sitting fees at the rate of Rs.20,000/- for attending each meeting of the Board and/or of Committee thereof.

Notes: -

a) The Agreement with Mr. Dilip S. Shanghvi, Chairman & Managing Director, is for a period of 5 years. Either party to theagreement is entitled to terminate the Agreement by giving to the other party 30 days notice in writing.

b) Dr. T. Rajamannar, has been appointed as the Whole-time Director of the Company for a period of three years effectivefrom 4th June, 2007. As per terms of his employment, his appointment is terminable by giving 3 months notice, byeither party. The remuneration to Dr. T. Rajamannar, Whole-Time Director has been approved by the shareholders ofthe Company and by the Central Government vide its letter no. 12/9012007-CL-VII dated 17.01.2008, 16.02.2008 and04.03.2008.

c) The Company presently does not have a scheme for grant of stock options either to the Executive Directors oremployees.

d) There is no separate provision for payment of severance fees to Whole-time Director(s).

36


Details of Equity Shares held by Non-Executive Directors

Director No. of Shares

Mr. Sudhir V. Valia (including shares held jointly) 1839600

Mr. S. Mohanchand Dadha (including shares held jointly) 28428

Dr. Goverdhan Mehta Nil

Dr. Andrea Vasella Nil

6. Shareholders’/Investors’ Grievance Committee

The Shareholders’/Investors’ Grievance Committee comprises of Dr. T. Rajamannar, Dr. Goverdhan Mehta,Dr. Andrea Vasella as members with Mr. Sudhir V. Valia, Non-Executive Director, as the Chairman of the Committee.

The Committee, inter alia, approves issue of duplicate certificates and oversees and reviews all matters connected withthe transfer of securities. The Committee looks into shareholders’ complaints like transfer of shares, non receipt ofbalance sheet, non receipt of declared dividends, etc. The Committee oversees the performance of the Registrar andTransfer Agents, and recommends measures for overall improvement in the quality of investor services. The Board ofDirectors has delegated the power of approving transfer of securities to M/s. Link Intime India Pvt. Ltd. (formerly known asIntime Spectrum Registry Ltd.), and/or the Company Secretary of the Company.

Mr. Sunil Ajmera, was the Compliance Officer and the Secretary of the Shareholders’/Investors’ Grievance Committeeupto 31st January, 2009. With effect from 1st February, 2009, the Board has designated Ms. Meetal Sampat, CompanySecretary as the Compliance Officer and as the Secretary of the Shareholders’/Investors’ Grievance Committee of theCompany.

Five meetings of the Shareholders’/Investors’ Grievance Committee were held during the year ended 31st March, 2009.The dates on which Meetings were held are as follows: 14th May, 2008, 29th July 2008, 6th September 2008, 27th October2008, and 24th January 2009.


Name of the Director Chairman/ Member No. of Shareholders’/ Investors’ Grievance Committee Meetings attended

Mr. Sudhir V. Valia Chairman 4

Dr. T. Rajamannar Member 5



Investor Complaints :

The total numbers of complaints received and resolved to the satisfaction of shareholders during the year under review,were 12.

7. Ethics & Compliance Committee

The Company has formed an Ethics & Compliance Committee of its Board of Directors with effect from 29th July, 2008. TheCommittee comprises of three non-executive and independent Directors Dr. Goverdhan Mehta, Mr. S. MohanchandDadha, and Dr. Andrea Vasella as Members of the Committee. Dr. Goverdhan Mehta is the Chairman of the Committee.

The brief terms of reference of the Ethics & Compliance Committee include to set forth the policies, recommend changesand monitor the implementation and review compliance by the Company’s directors, officers and employees with theCompany’s Code of Conduct, Prevention of Insider Trading Rules and such other applicable policies of the Company asthe Committee or the Board may consider necessary.

Mr. Sunil Ajmera, was the Secretary of the Ethics & Compliance Committee upto 31st January, 2009. With effect from 1st

February, 2009. Ms. Meetal Sampat, Company Secretary is the Secretary of the Committee.

Four meetings of the Ethics & Compliance Committee were held during the year ended on 31st March, 2009, on thefollowing dates:


37

29th July 2008, 6th September 2008, 27th October 2008 and 24th January 2009.


Name of the Director Chairman/ Member No. of Ethics & ComplianceCommittee Meetings Attended

Dr. Goverdhan Mehta Chairman 4

Mr. S. Mohanchand Dadha Member 4


8. Subsidiary Companies

The Company does not have any subsidiary company.

9. General Body Meetings

(i) Location and time of the Annual General Meetings (AGM) held during the last 3 years, are as follows:

Year Meeting Location Date Time

2005-06 First AGM SPARC, Tandalja, Vadodara - 390 020 Gujarat 12-08-2006 10.30 A.M

2006-07 Second AGM Chandarva Hall, Welcom Hotel, R. C. Dutt Road, 05-09-2007 11.45 A.MVadodara - 390 007 Gujarat

2007-08 Third AGM Hotel Taj Residency, Akota Gardens, Akota, 06-09-2008 11.30 A.MVadodara – 390 020, Gujarat.

(ii) Special Resolutions passed during the last three years

(a) At the First Annual General Meeting :

1. Authority for Inter Corporate Loans and Investment under Section 372A of the Companies Act, 1956, upto thelimits specified in the resolution.

2. Authority to the Board to borrow in excess of the aggregate Paid-up Capital and its Free Reserves pursuant tosection 293 (1) (d) of the Companies Act, 1956, upto the limits specified in the resolution.

3. Authority to the Board pursuant to section 293(1)(a) of the Companies Act, 1956, to create such charges, mortgagesand hypothecations, on such movable and immovable properties, upto the limits specified in the resolution.

4. Authority to the Board pursuant to section 293(1)(e) of the Companies Act, 1956, to contribute to charitable andother funds, upto the limits specified in the resolution.

(b) At the Second Annual General Meeting :

1. Approval of appointment and remuneration of Dr. T. Rajamannar, Whole Time Director.

(c) At the Third Annual General Meeting :

1. Approval for payment of Commission to Non Executive & Independent Directors of the Company

(iii) Postal Ballot

During the year the Company did not pass any resolution by Postal Ballot and does not have any business thatrequires Postal Ballot.

10. Disclosures

* No transaction of a material nature has been entered into by the Company with Directors or Management and theirrelatives, etc. that may have a potential conflict with the interests of the Company. The Register of contracts containingtransactions, in which directors are interested, is placed before the Board of Directors regularly. The transaction with therelated parties are disclosed in the Annexure A attached to the Annual Accounts.

* There were no instances of non-compliance by the Company on any matters related to the capital markets or penalties/strictures imposed on the Company by the Stock Exchange or SEBI or any statutory authority during the last threefinancial years.

38


* In the preparation of the financial statements, the Company has followed the Accounting Standards as notified byCompanies (Accounting Standard) Rules, 2006.

* The Company has laid down procedures to inform Board members about the risk assessment and its minimization,which are periodically reviewed to ensure that risk control is exercised by the management effectively.

* During the year under review, the Company has not raised funds through any public, rights or preferential issue.

* Adoption/ Non Adoption of the Non- mandatory requirements :

(i) The Company has not fixed a period of nine years as the tenure of Independent Directors on the Board of theCompany.

(ii) The Company has formed Remuneration Committee of the Board of Directors of the Company.

(iii) The Company does not send half-yearly financial results to the household of each shareholder as the same arepublished in the newspapers and also posted on the website of the Company and the websites of the BSE andNSE.

(iv) The Company’s Board comprise of perfect mix of Executive and Non Executive Independent Directors who areCompany Executives and/ or Professionals having in depth knowledge of pharmaceutical industry and/ or expertisein their area of specialisation.

(v) The Company’s Board of Directors endeavor to keep themselves updated with changes in global economy andlegislation. They generally attend various workshops and seminars to keep themselves abreast with the changesin business environment.

(vi) At present the Company does not have a mechanism for evaluating its Non-Executive Directors by peer group.

(vii) The Company has not adopted whistle blower policy. However the Company has not denied access to anyemployee to approach the management on any issue. The Company has adopted a Code of Conduct for its Boardof Directors and senior management which meets the requirements of the Whistle Blower Policy.

11. Means of Communication

* Website: The Company’s website www.sunpharma.in contains a separate dedicated section ‘Financials’ whereshareholders information is available. Full Annual Report is also available on the website in a user friendly anddownloadable form. Apart from this, official news releases, detailed presentations made to media, analysts etc. are alsodisplayed on the Company’s website.

* Financial Results: The annual, half-yearly and quarterly results are regularly posted by the Company on its websitewww.sunpharma.in. These are also submitted to the Stock Exchanges in accordance with the Listing Agreement andpublished in all English Editions and Gujarati Edition of ‘Financial Express’.

* Annual Report: Annual Report containing inter alia Audited Annual Accounts, Directors’ Report, Auditors’ Report, andother important information is circulated to Members and others entitled thereto. The Management’s Discussion andAnalysis (MD&A) Report forms part of the Annual Report.

* Corporate filing: Announcements, Quarterly Results, Shareholding Pattern etc. of the Company regularly filed by theCompany, are also available on the website of The Bombay Stock Exchange Ltd. - www.bseindia.com, National StockExchange of India Ltd. - www.nseindia.com, and Corporate Filing & Dissemination System website - www.corpfiling.co.in.

12. General Shareholder Information

12.1 Annual General Meeting:

- Date and Time : Friday, 11th September, 2009at 11.45 am.

- Venue : The Gateway Hotel, Akota Gardens, Akota,Vadodara- 390 020, Gujarat.

12.2 Financial Calendar (tentative) : Results for quarter ending 30th June 2009– Last week of July 2009

: Results for quarter ending 30th September2009 – Last week of October 2009.

: Results for quarter ending 31st December2009 – Last week of January 2010.

: Audited Results for year ended 31st March2010 – 3rd or 4th week of May 2010.


39

12.3 Details of Book Closure For Equity Shareholders : From Tuesday, 25th August, 2009 to Saturday, 5th September2009 (both days inclusive).

12.4 Dividend Payment Date : N.A.

12.5 (i) Listing of Equity Shares on Stock Exchanges : The Equity Shares of the Company are listed on The BombayStock Exchange Ltd., (BSE) and The National Stock Exchangeof India Ltd. (NSE).

(ii) Payment of Listing Fee : Listing Fees for the year ended 2009-10 have been paid,within the stipulated time, to The Bombay Stock ExchangeLtd., and The National Stock Exchange of India Ltd, wherethe Company’s Equity Shares continue to be listed.

12.6 Stock Code:

Equity Shares

(a) Trading Symbol The Bombay Stock Exchange Ltd., (Demat Segment): SUNPHA ADV 532872

Trading Symbol National Stock Exchange (Demat Segment): SPARC

(b) Demat ISIN Numbers in NSDL and CDSL for Equity Shares of Re.1/- each ISIN No. INE232I01014

12.7 Stock Market Data

The Equity Shares of the Company are listed on The Bombay Stock Exchange Ltd., (BSE) and National Stock Exchangeof India Ltd., (NSE).

Equity Shares of Re.1/- each :

Bombay Stock Exchange Ltd. (BSE) National Stock Exchange of India Ltd., (NSE)(in Rs.) (in Rs.)

Month’s High Price Month’s Low Price Month’s High Price Month’s Low Price

April 2008 107.00 83.05 108.65 82.20

May 2008 100.90 89.00 101.00 89.40

June 2008 94.70 79.60 94.40 80.00

July 2008 86.80 75.00 95.00 75.00

August 2008 97.60 77.15 97.85 77.10

September 2008 102.30 73.10 102.75 73.50

October 2008 79.25 41.50 79.30 40.10

November 2008 54.00 39.35 53.45 39.00

December 2008 54.80 40.00 54.90 36.00

January 2009 49.20 42.10 49.20 42.05

February 2009 52.30 43.00 51.45 43.00

March 2009 53.85 40.60 53.85 40.70

(Source: BSE and NSE website)

40


100

90

80

70

60

50

40

30

20

0

20000

16000

12000

8000

4000

0

Closing Price ofSPARC’s Shareson BSE

BSE Sensex (Closing)

July08

Aug08

Sep08

Oct08

Nov08

Dec08

Jan09

Feb09

Mar09

SPARC Equity Share Price versus BSE - Sensex

1728716415

1346212860

9788 9709

48

43

51

95

7880

9094

75

10

June08

May08

Apr08

43

4753

18000

14000

10000

6000

2000

88929424

14356 14565

9093 9647

12.8 Share price performance in comparison to broad-based indices – BSE Sensex and NSE Nifty.

Share price performance relative to BSE Sensex based on share price on 31st March, 2009.


100

90

80

70

60

50

40

30

20

0

6000

5000

0

Closing Price ofSPARC’s Shareson NSE

NSE Nifty (Closing)

July08

Aug08

Sep08

Oct08

Nov08

Dec08

Jan09

Feb09

Mar09

SPARC Equity Share Price versus NSE - Nifty

51464870

4041 3921

2886 302148

43

51

94

7880

9094

75

10

June08

May08

Apr08

43

4753

4000

3000

2000

1000

27642875

4333 4360

2755 2959


41

12.9 Share price performance in comparison to broad-based indices – BSE Sensex and NSE Nifty.

Share price performance relative to BSE Sensex based on share price on 31st March, 2009.

% Change in

PERIOD SPARC SHARE PRICE BSE SENSEX SPARC RELATIVE TO SENSEX

Year-on-Year -37.51% -37.94% 0.43%

Share price performance relative to Nifty based on share price on 31st March, 2009.

% Change in

PERIOD SPARC SHARE PRICE NIFTY SPARC RELATIVE TO NIFTY

Year-on-Year -36.96% -36.19% -1.32%

(Source: Compiled from data available on BSE and NSE website)

12.10 Registrars & Transfer Agent

(Share transfer and communication regarding Mr. N. Mahadevan Iyer,share certificates, dividends and change of address) Link Intime India Pvt. Ltd.,

(formerly known as Intime Spectrum Registry Ltd.)C-13, Pannalal Silk Mills Compound, L.B.S. Marg,Bhandup (West), Mumbai – 400 078.E-Mail: [email protected]@linkintime.co.inTel: 022-25963838, Fax : 022- 25946969

12.11 Share Transfer System

Presently, the share transfers which are received in physical form are processed and transferred by Registrar andShare Transfer Agents and the share certificates are returned within a period of 15 to 16 days from the date of receipt,subject to the documents being valid and complete in all respects and confirmation in respect of the request fordematerialisation of shares is sent to the respective depositories i.e. National Securities Depository Limited (NSDL) andCentral Depository Services (India) Limited (CDSL) expeditiously.

12.12 Distribution of Shareholding as on March 31, 2009

No. of Equity Shares held No. of Accounts Shares of face value Re.1/- each

Numbers % to total accounts Numbers % to total shares

Upto 5000 60934 98.66 19404495 9.37

5001 - 10000 382 0.62 2883935 1.39

10001 - 20000 184 0.30 2634076 1.27

20001 - 30000 54 0.09 1379729 0.67

30001 - 40000 44 0.07 1515824 0.73

40001 - 50000 24 0.04 1074950 0.52

50001 - 100000 38 0.06 2802865 1.35

100001 and above 101 0.16 175420517 84.70

Total 61761 100.00 207116391 100.00

42


12.13 (a)Shareholding Pattern as on 31st March, 2009 of Equity Shares as per Clause 35 of the Listing Agreement.

Shareholding pattern as on 31st March, 2009

A. Indian Promoters andPersons acting in Concert

66.15%

B. Mutual Funds and UTI2.66%

C. Banks, Financial Institutions and Insurance Companies

1.02%

D. FIIs and Foreign Mutual Funds5.54%

E. Private Corporate bodies4.18%

F. Indian Public19.30%

G. NRIs/OCBs0.46%

H. NRN0.12%

I. Clearing Members0.24%

J. Foreign Companies0.24%

K. Trusts0.09%

Particulars Percentage No. of Shares

A. Indian Promoters and Persons acting in concert 66.15 % 137,004,946B. Mutual Funds and UTI 2.66 % 5,510,461C. Banks Financial Institutions and Insurance Companies 1.02 % 2,110,906D. FIIs and Foreign Mutual Funds 5.54 % 11,471,197E. Private Corporate Bodies 4.18 % 8,669,145F. Indian Public 19.30 % 39,965,383G. NRIs / OCBs 0.46 % 947,025H. NRN 0.12 % 260,850I. Clearing Members 0.24 % 492,265J. Foreign Companies 0.24 % 495,473K. Trusts 0.09 % 188,740

Total 100.00 % 207,116,391

12.13 Dematerialisation of Shares

About 99.08% of the Equity shares of the Company have been de-materialised up to 31st March, 2009.

Liquidity:

Your Company’s equity shares are fairly liquid and are actively traded on The Bombay Stock Exchange Ltd.(BSE), andNational Stock Exchange of India Ltd., (NSE). Relevant data for the average daily turnover for the financial year 2008-2009 is given below:

BSE NSE BSE + NSE

In no. of share (in Thousands) 222.32 183.21 405.53

In value terms (Rs. Millions) 17.99 14.21 32.20



43

12.14 Outstanding GDRs/ADRs/Warrants or any Convertible instruments, conversion date and likely impact on equity

The Company has not issued any GDRs/ ADRs / warrants or any other convertible instruments.

12.15 R&D / Plant locations :

1. SPARC, Tandalja, Vadodara, Gujarat – 390 020.

2. SPARC, 17/B, Mahal Industrial Estate, Mahakali Caves Road, Andheri (East), Mumbai - 400 093.

12.16 Investor Correspondence For Shares held in Physical Form

(a)For transfer/dematerialisation of Shares, Mr. N. Mahadevan Iyer,payment of dividend on Shares, Link Intime India Pvt. Ltd.,and any other query relating to the (formerly known as Intime Spectrum Registry Ltd.)shares of the Company C-13, Pannalal Silk Mills Compound,

L.B.S. Marg, Bhandup (West), Mumbai – 400 078.E-Mail: [email protected]@linkintime.co.inTel: 022-25963838, Fax : 022- 25946969For Shares held in Demat FormTo the Depository Participant.

(b)E-mail id designated by the Company [email protected] Investor Complaints.

(c)Any query on Annual Report Ms. Meetal S. Sampat17/B, Mahal Industrial Estate, Mahakali Caves Road,Andheri (East), Mumbai - 400 [email protected]@sparcmail.com

For and on behalf of the Board



Place: MumbaiDate: 23rd May, 2009

DR. T. RAJAMANNARWhole - Time Director

Place: San Fransisco – U.S.A.Date: 23rd May, 2009

44


DECLARATION OF COMPLIANCE WITH CODE OF CONDUCT

I, Dilip S. Shanghvi, Chairman & Managing Director of Sun Pharma Advanced Research Company Limited (“the Company”)

hereby declare that, to the best of my information, all the Board Members and senior management personnel of the Company

have affirmed their compliance and undertaken to continue to comply with the Code of Conduct laid down by the Board of

Directors of the Company for Board members and senior management.

For Sun Pharma Advanced Research Company Ltd.,

Dilip S. Shanghvi

Chairman & Managing Director

Date: 23rd May, 2009

AUDITORS’ CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDERCLAUSE 49 OF THE LISTING AGREEMENT

To The Members of

Sun Pharma Advanced Research Company Limited,

We have examined the compliance of conditions of Corporate Governance by Sun Pharma Advanced Research Company

Limited, for the year ended on March 31, 2009, as stipulated in Clause 49 of the Listing Agreement of the said Company with

stock exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited

to procedures and implementation thereof, adopted by the company for ensuring the compliance of the conditions of the

Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has

complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness

with which the management has conducted the affairs of the Company.

For Deloitte Haskins & Sells

Chartered Accountants

K. A. Katki

Place: Mumbai Partner

Date: May 23, 2009 (Membership No. 038568)

Annexure to Corporate Governance for the year ended 31st March, 2009

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