GENERAL INFORMATION

FOUNDER: Late Mr. Ramanbhai B. Patel. BOARD OF DIRECTORS: Pankaj R Patel. (Chairman & Manging director.) DIRECTORS: Dr. Manubhai A. Patel. Mukesh M. Patel. Pranlal Bhogilal. Sharvil P Patel. H.K. Bilpodiwala. H.Dhanrajgir. A.S. Diwanji. COMPANY SECRETARY Upen H Shah. CHIEF ACCOUNT OFFICER: Jyotinder B Gor. BANKERS: Bank of Baroda. ICICI Bank. Corporation Bank. State Bank of Saurashtra. State Bank of India. Citibank IDBI Bank. AUDITORS: R.R.Patel. Mukesh M Shah & Co. (Charted Account)

COMPANY AT GLANCE:
DOMESTIC FORMULATION MARKETING DEPARTMENT: ZYDUS CADILA: Allied products and mega brands division addressing mainly ZYDUS ALIDAC: Gastro and gynecology segments. ZYDUS MEDICA: Cardiovascular, anti-diabetic and cholesterol management ZYDUS BIOZEN: Immunologicals and vaccines. ZYDUS NEUROSCIENCES: Central nervous system. GERMAN REMEDIES: Formulation, women s health cares. RESPICARE: Asthma and COPD. EVONA: Premium womens health care. RECON HEALLTHCARE: Pain management, anti-infective and DIAGONASTIC DIVISION: Imaging products. ONCOLOGY DIVISION: Anti-cancer. ZYDUS PATHLINE: Diagnostics. MICRO MARKETING AND GERMED: Generics. INDON HEALTHCARE: Allied products division launched in August 2003.

the anti-infectives, pain management and cardiovascular segments.

segment.

cardiovascular.

INTERNATIONAL DIVISION: REGULATED MARKET: USA, Europe. SEMI-REGULATED MARKETS: South Africa, Brazil. DEVELOPING MARKETS: Asia Pacific, Africa, Middle East and CIS.

APIS AND INTERMEDIATES MANUFACTURING Ankleshwar and Pataguanga FORMULATIONS MANUFACTURING Moraiya (ahmedabad) and Goa Vatva (nutritional supplement and diagnostics) RESEARCH Zydus Research Center (Ahemdabad) Banglore and Mumbai

CONSUMER AND OTC DIVISION SUBSIDIARIES (100%)

Bnayan Chemicals Limited Cialforhealth India Limited Zydus Pharmaceuticals Limited INTERNATIONAL SUSIDIARIES Zydus Healthcare (USA) LLC Zydus International Pvt Ltd. Zydus Healthcare SA (Proprietary) Zydus Healthcare Brasil Ltd.

JOINT VENTURES (50:50)

Zydus Atlanta Healthcare Pvt Ltd. Sarabhai Zydus Animal Health Limited.

IMPORTANT MILESTONES
1950

1957:

Cadila sets a trend in introducing new innovative products. In 1957,

introduce Isopar, a rational formulation on INH & PAS for the treatment of Tuberculosis. 1959: In 1959 introduced Neroxin-12, which was the first of its kind product, where incompatible neurotopics-B1, B6, B12 was made compatible in vial.

1960

1967: Answering the call to increase exports was set up in 1967 at Kandala Free Trade Zone. The late Prime Minister of India, Indira Gandhi, inaugurated the unit. 1969: A full-fledged R&D was set up in 1969 with recognition from the Department of Science and Technology, Govt. of India. 1970

1972: The group set up it bulk drug manufacturing plant at Ankleshwar in 1972. 1973: Cadila receives the National Award for important substitution in 1973. Develops the process Technology for the anti-diabetic drug Glibenclamide. 1977: Another first Dexona-20 is launched for the first time in India in 1977 to provide Dexamethasone in concentrated from for the treatment of shocks.

1980

1982-1984:

Receives the first Award from chemical for its export performance

consecutively for two years from 1982-1984 and the top award for export performance for the year 1985-1986. 1985: Receives the awards for excellence in quality from Indian Drug Manufacturers Association in 1985.

1990 1993: Ranked the second largest in the Indian pharmaceuticals industry in 1993. 1995: 1) the group restructures operation in 1995. 2) Cadila Health Care LTD, under the ages of the Zydus group is set up in 1995. 3) In its very first year group launches 23 new products. Improves its ranking from the 16th position to the 9th position amongst the top pharmaceuticals companies in India. 1996: 1) Entered in to a strategic alliance in 1996 with Centon, the worlds largest plasma protein company. The company is now known as Aventis Behring. 2) Cadila Healthcare launches Falcigo in stretagic alliance with Guilin Pharma of China. This breakthrough product in the anti-malarial segment was launched for the first time in India in 1996.

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1997: 1) the diagnostic enters into the alliance in 1997 with Acta Services of Italy to Acto-l analyzer in the Indian market. 2) Register the fastest growth amongst the top 80 Indian pharma companies in 1997. 1998: 1) In 1998, the group enters in to a joint venture with Korea Green Cross Corporation of Korea to manufacture and market recombinant hepatitis B vaccine in India. 2) In 1998, the group also enters in to a joint venture with Byk Gulden of Germany, a research driven pharma major to create a new joint venture company Zydus Byk Healthcare LTD. 1999: The API plant at Ankleshwar receives ISO 9002 certification in the year 1999. 2000

2000: 1) the manufacturing premises at Moraiya receives MCC recognition in August 2000. South Africa has a pharma market worth US$ 1 billion. 2) The API plant at Ankleshwar receives ISO 14001certification in December 2000. 2001: 1) In January 2001,Zydus Cadila and Pantheco of Denmark sign a pact to undertake collaborative research in the field of anti-bacterial. 2) Zydus Cadila and U.S based Onconova entered in to a joint venture in May 2001 for collaborative research in the field of oncogenomics.

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3) In August 2001, the manufacturing premises at Moraiya are approved by the Bureau of Food and Drugs (BFAD) of Philippines. 4) Zydus Cadila acquires Aten, one of the largest selling anti-hypertensive brands in September 2001. The acquision catapults Zydus Cadila to the top spot in cardiovascular segment. 5) The groups founder chairman, Mr. Ramanbhai B. Patel passes away in September 2001. His contributions as a first generation pharma entrepreneur leave a lasting imprint. 2002: 1) A Fine Chemicals division is set up in March 2002. The plant will cater to the need of the industries, which require high purity products for chemical process. 2) Acquires Banyan Chemicals, a Vadodara based company with a USFDA approved plant in April 2002. The company markets high value bulk actives to the U.S.A. 3) The manufacturing premises at Moraiya are approved by the Medicines Control Agency of U.K., in April 2002.

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ACHIVEMENTS
MERGER
The company initiated a merger with four subsidiaries (German Remedies, recon The merger came into effect retrospectively from April 1 2002. The merger created the fourth largest company in Indias pharmaceuticals market The merged entity possesses total assets exceeding Rs. 10 bn (as at the end of 2002DOMESTIC FORMULATIONS Post merger, the companys exposure to anti-infective, a seasonal and price sensitive The exposure to the chronic* life style segments stands at 40% The company successfully rolled out over 100 new products. It launched a portfolio of anti-diabetic products. The newly established Neurosciences division reported commendable INTERNATIONAL The company commissioned subsidiaries inUS and Brazil. It marked its foray into Europe with the acquition of Alpharma SAS, France (postIt retained its position as the largest Indian player in Sri Lanka and one of the five growth of 46%. segment, shrunk from 14% to 8% of its formulations revenue. Healthcare, Zoom Properties and Zydus Path line), which was approved in June 2003.

with a market share of 3.8% (IMS, MAT AMY 2003) 03) with gross sales exceeding Rs 10 bn during the financial year under review.

balance sheet.) leading Indian companies in Sri Lanka, Uganda, Mauritius, Myanmar, singapore and Vietnam. It increased its global registrations from 681 to 785.

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REGULATORY APPROVAL AND FILINGS It reinforced its DMF pipeline to nine filings (including post balance sheet) It commissioned a strong infrastructure to file ANDAs. Its Moraiya formulations plant received the UK MCA and ANVIASA Brazil It received the WHO GMP certificate for 12 products manufactured at the Patalganga Filed 25 patent applications in India, 7 under PCT and 40 in foreign countries. OPERATIONAL EFFICIENCY VRS. It launched the Prism program directed at quantum jump in profits through cost It integrated and rationalized C&F agents of the merging companies. MERGED FINANCIAL HIGHLIGHTS The company reported a 75% increase in tis turnover to Rs. 10282mn. Its PBIDT increased 91% to Rs.1912 mn. Its PBIDT margin increased from 17% to 18.6% Its profit after tax increased 14% to Rs. 766 mn. Its earning per share increased from Rs. 11.27 in 2001-02 to Rs. 12.20. CONSOLEDATED FINANCIALS The company reported a 29% increase in its turnover to Rs. 11.3 bn Its PBIDT increased 39% to Rs. 2190 mn. Its PBIDT margin increased from 18% in 2001-02 to 19.4% Its profit after Tax, attributable to the group increased 25% to Rs. 888 mn. optimization. The company closed the high cost Andheri formulations unit following a successful

approvals. plant.

Its Earnings per share increased from Rs. 11.25 in 2001-02 to Rs.15.36.

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RISK MANAGEMENT
At Zydus Cadila, we recognize that no business is without risk. As a responsible organization, the company is committed to an ongoing management of risk across various functions. The result is a comprehensive risk minimization culture, which ensures that only those business decisions are taken that balance risk and reward, ensuring that the companys revenue generating initiatives is consistent with its risk and standards. As a result of these initiatives, the risks undertaken by the company are consistent with its desired risk appetite and are aligned to the companys strategic direction, consistent with the shareholders desired total returns and the companys credit rating. 1. BUSINESS PORTFOLIO RISK
The company may be overly dependent on some therapeutic areas.

RISK MITIGATION
Zydus Cadila addresses diverse therapeutic areas some small but growing rapidly and others large but in the mature phases of their respective growth cycles. This prudent volume and value mix is spread across the cardiovascular, womens healthcare, respiratory, anti- diabetes, neuron psychiatry, anti infective, pain

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management, gynecological, gastro intestinal and preventive (vaccines) therapeutic areas. Following the merger, the company has rationalized its focus from the anti-infective segment to the rapidly growing chronic and lifestyle-influenced therapeutic areas (cardiovascular, ant-diabetes and neuron-psychiatry). As a result, income from the lifestyle therapeutic areas now accounts for about 40% of the domestic formulation sales, This de-risk the organization from the competitive pressures of the anti-infective segment which accounts for only 8% of the domestic formulation sales.

2. ENVIRONMENT RISK
Some of the manufacturing processes used in the companys API plant are hazardous, posing a risk to the people who work on them and, in the event of unchecked effluent release, a Rick to the immediate community.

RIKS MITIGATION
The three API plants-Ankleshwar, Patalganga And Vadodara (Banyan) have either been appraised by some of the most stringent regulatory authorities the world over, testifying to the adequate use of safe environmental standards. Ankleshwar : Approved as per the guidelines of ISO 9002 and the 14001 (Quality and Environment Management System.) Patalganga : Conforming to WHO GMP and PIC guidelines. Vadodara : Approved by the US FDA and conforming to WHO GMP guidelines. The companys zero-pollution discharge record is a result of an ongoing in pipe tratment backed by an investment commitment: a state-of-the-art incineration palnt, awastewater treatment facility of physical treatment, an effluent treatment plant and the use of the activated sludge process.

3. REGULATORY RISK
Being a sensitive business, the pharmaceutical industry is regulated by a number of national and international agencies. Over the years, the international regulatory environment, varying form country to country, has become increasingly demanding.

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 RISK MITIGATION
Zydus Cadilas products conform to International quality standard. The companys manufacturing plants are approved by some of the worlds leading regulatory authorities. As a simple de-risking initiative, Zydus Cadilaproducts are generally manufactured in line with the most stringent standards. The company has commissioned a special division, which tracks the evolving standards from country to country. Besides, this team works with the process and manufacturing teams so that the production can be evolved in line with the demands of the respective markets.

4. LIQUIDITY RISK
If the companys receivables and outflows are not competently managed, it could suffer from liquidity problems.

RISK MITIGATION
The company tightened the domestic debtors cycle for formulations in 2002-03. But as exports and API sales conformed to a longer debtors cycle of 120 to 180 days of turnover, the companys receivables increased from 41 days of turnover in 2001-02 to 49 days or turnover in 2002-03. However, thanks to a number of initiatives, working capital outlay declined 30% during the course of the year under review. As a measure of prudence, the company kept Rs.90 mn in its cash and bank balance ot meet short-term liquidity requirements. The company is confident of meeting its repayment obligation of Rs. 520 mn during the normal course of its business in 200304.

5. CURRENTLY RISK
The volatile movement of foreign currencies could adversely impact the companys earnings.

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 RISK MITIGATION
During 2002-03, the company made imports of Rs.1345 mn and exports of Rs.1037 mn. In an environment where the rupee strengthened against the US dollar but weakened against the Euro, the company took appropriate measures to de-risk its export earnings The company enlisted the advice of experts to hedge its exposure at all times. The company also had forex debt of USD 8.6 mn on its books, which were completely hedged, an adequate de-risking initiative.

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UTILITY OF RATIO ANALYSIS

1. PROFITABILITY:

Useful information about the trend of profitability is available from profitability ratios. The gross profit ratio, net profit ratio and ratio of return on investment give a good idea of the profitability of business. On the basis of these ratios investors can get an idea about the overall efficiency of managers and bank as well as other creditors draw useful conclusion about repaying capacity of the borrowers.

2.

LIQUIDITY:

In fact, the use of ratios mode initially does ascertain the liquidity of business. The current ratio, liquid ratio and acid test ratio will tell whether the business will be able to meet its current liabilities and when they matter. Banks and other lenders will be able to conclude from these ratio whether the firm will be able to pay regularly the interest and loan installments.

3.

EFFICIENCY:

The turnover ratios are excellent guide to measure the efficiency of Manager For example, the stock turnover will indicate how efficiency is being made the debtors turnover will indicate the efficiency of collection department and assets turnover shows the the efficiency with which the assets are used in business. Such ratios related to present a good picture of the success or otherwise of the business.

4.

INTER FIRM COMPARISION:

The absolute ratios of a firm are not of much use, unless they are compared with similar ratios of other firms belonging to the same industry. This is inter firm comparison, which shows the strength and weaknesses of the firm as compared to other firms and will indicate correctives measures.

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5.

INDICATE TREND:

The ratios of the last three to five years will indicate the trend in the respective fields. For Example, the current ratio of a firm is lower than the industry average, but is the ratio of last five years shows an improving trend, it is an encouraging trend reverse may also be true. A particular ratio of a company for one year may compare favorably with industry average but, if its trend shows a deteriorating position. It is not desirable. Only ratio analysis will provide this information.

6.

USEFUL FOR BUDGETARY CONTROL:

Regular budgetary reports in a business whether the system of a budgetary control is in use. It various ratios are presented in these reports, it will give a fairly good idea about various aspects of financial position.

7.

USEFUL FOR DECISION-MAKING:

Ratios guide the management in making some of the important decisions. Suppose, the liquidity ratio shows an unsatisfactory position, the management may decide to get addition liquid funds. Even for capital expenditure decisions, the ratio of return on investment will guide the management. The efficiency of various departments can be judge on the basis of their profitability ratios and efficiency of each department can thus be determined.

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LIMITATIONS OF RATIO ANALYSIS

ERICH HILBERT points out that it is essentials for a person analyzing business performance to have a clear awareness of the tests he should apply them. Temptation arises in financial ratio analysis to run all the numbers. Yet selected only a few relationships, when would provide clues for judgment. There is clearly some latitude for window dressing. Within limits, a company may be able to arrange its current assets and liabilities so as to have the desired ratios at the time; the balance sheet is presented to stockholders. The valuation contained in the final statement does not represent the actual position because it is based on the assumption that the financial statement presents a seasonable picture of what is happening in the business. The information relates to only a particular period and cannot be relied upon excessively. Financial standard data are not exact. Statements are only like interim reports. Moreover many management ratios are based on data, some or all of which are known and factual and therefore, to be related with great caution. Financial statements are generally based on historical or original cost. The current economic conditions are ignored. V.V.Desai points and that the advancing artisting of the technique of the ratio analysis has miserly failed to accomplish the expected impeccability or immaculacy. More over it has made the technique more complicated and complex for beyond the understanding of ordinary businessman. Not all ratios and percentage are significant and useful. One should beware of the temptation to calculate them for their own shake. R.H Prker is of the opinion that the limitation of conventional accounting should always be kept in mind out that accounting figures should not be treated as more precise they really are. A ratio is of little value in isolation. It is necessary to have some standards with which to compare it. The standard may be budgeted

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one. It may be based on the past performance of the company. It may be based on industry comparison. In using ratio computed by others, one should realize that the computation of a particular ratio ha not necessary been standardized. A frequent comparison of ratios between companies is questionable particularly when there are important differences between companies. Such as industry the nature of comparisons etc. Most ratios represent average and, therefore, may tend to obscure large variations in the underlying causative factors above and below the average. Ratios are based on financial statement suffer from the limitation in he rent in this statement. Changes in many ratios are closely associated and connected with one another. Ratios are likely to misused. There are some situations in which they may appear to this misleading. West wick observes that ratios need the upper and lower war things lines because in most case they have an optimum level. While comparing the ratio of a particular firm with those of similar firms, the difference between the firms should be recognized. For example, methods of accounting operations and financing.

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SELECTING FINBANCIAL RATIOS:There are three relationship: - Safely, Structure and efficiency. Each is present in a business regardless of the nature of the activity and all are friend in most financial statement analysis. Safely relationship can be assessed by relative liquidity. The structure relationship is a measure of the composition of the asset liability and equally structure of a company. This would indicate companys ability to with stand business adverse condition over the long run. Efficiency relationship indicates effectiveness with which the earning potential of the firm is utilized. It depends on both the assets at the disposal of management to use the efficiently. The classification of variables is an important step towards financial analysis. The principal of deviant ratios must not guide the analysis, but they must instead consider the nature of the favorable ratios, to determine as to what extent they offset the effect of those, which are negative. The analyst must learn to recognize compensating advantages. It may happen that in spite of variant ratios, the financial manager may permit the company to prosper by maintaining an unorthodox financial structure, analyst must be fully aware that deficiencies in one area can be offset straight in other areas and that as a collorary, no company can or should be average in all aspects of financial balance. Ratio analysis involves a study of the total financial picture. By passing his conclusion upon a through understanding of the importance of each ratio, the analyst can recommend and indicate positive action with confidence. 1) The manager should be provided with a single key ratio that indicates unequivocally the 2) Degree of his success. 3) Ratio should be logically interred related. 4) Manager should not be given ratios which cannot be given virtuous which cannot lead action by them. 5) A ratio must measure a material factor of the business. 6) The cost of obtaining information should be borne in mind. 7) The manager should be providing with the minimum number of ratios. 8) Different ratios are required for different industries and even for different firms within an industry.

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