From CMD's Desk :

Dear Shareholders, The past year was an extremely turbulent one for the world economy. The year witnessed one of the worst global financial crisis. The sequence of crisis began with the sub-prime mortgage transactions in the US which led to serious difficulties in a host of financial institutions. The economies of almost all the countries in the world were seriously affected. The general consumer demand in both the US and other developed economies dropped. As a consequence, emerging economies saw export markets contract. The financial credit literally dried up thereby considerably lowering the economic activity. The year also witnessed the crude oil prices soar to $150 per barrel and then drop down to less than $40 per barrel. Expert reports emanating from knowledgeable sources suggest that the recessionary trend might prevail until at least the end of 2009 and the recovery might commence in the first quarter of 2010. The developments in the international financial markets have had an impact on the pace of economic activity the worldover, and India was no exception. Owing to the impact of global financial crisis, Indian GDP growth rate fell to 6.7 per cent during 2008-09, after posting 9 per cent in three consecutive earlier years. One notable positive feature of the Indian economy is that inspite of the crisis the banking system remained strong as compared to many other countries. The Indian Banking system is better prepared to deal with crisis today, than at any time before. The Economic Survey Report (ESR) for 2008-09 is optimistic about the future. The ESR estimates strong recovery through the second half of 2009-10. The possibility of 7.50 per cent GDP growth in 2009-10 is much higher than the 6.25 per cent projected earlier. The ESR projection is also shared by the World Bank which too expects India to hit 8 per cent growth in 2009-10. To achieve this growth rate, there are some underlying assumptions that the US economy must bottom out by the fourth quarter of 2009, the monsoon in India must be reasonable and private consumption must surge. Besides, the government spending on infrastructure projects needs dramatic acceleration. The mood going into 2009-10 is one of slightly heightened optimism. As far as the Pharma sector is concerned the Economic Survey has recommended that the government should control prices of essential drugs that have limited number of manufacturers and decontrol all other medicines. To quote the Survey Report – “Drug price control should be limited to essential drugs in which there are less than five producers. All other drugs should be decontrolled”. Since the Economic Survey recommendations are based on reality, it is hoped that the Government heeds the Survey Report and notifies a policy that is in the best interest of all concerned. This would definitely trigger substantial investment in world class manufacturing facilities in specifically high-tech areas such as vaccines and injectables, besides encouraging innovation and increased spend on R & D in the Indian Pharmaceutical Industry. The Industry could then consolidate its status as a force to reckon with on the Global pharma scenario. On the export front, INDOCO achieved yet another significant milestone crossing Rs.100 crores for the year. During the year Indoco was awarded the prestigious AOK Tender for Metformin Tablets through its agents in Germany. The total value of USD 10 million would accrue against supplies for 2 years. Our Baddi facility has been approved by the UK-MHRA. This will definitely boost the supply chain for regulated markets. The International Business now contributes over 26% of our total revenue. With the initiatives planned on new geographies and the resounding opportunities from our existing customers mainly in Europe, we are confident of the International Business contributing over 40% of the revenue in the next 2 to 3 years. The domestic sales during the year registered a degrowth because of the tight credit control policy implemented by the company. It has significantly reduced the company’s outstandings thereby improving the liquidity position and reducing the working capital debt by half. At Indoco we put in our best efforts to develop our Human Resource. My sincere thanks to all Indocoites for their unstinted support and co-operation during one of the most challenging times. I would also like to express my gratitude to our customers, bankers, vendors and above all our shareholders for reposing their faith in us. SURESH G. KARE Chairman & Managing Director