FDC Ltd

Your directors are pleased to present their report on the business and operations ofyour Company for the year ended March 31, 2010.

1. FINANCIAL RESULTS

Previous year's figures have been re-grouped/re-classified, wherever necessary toconfirm to this year's classification.

2. DIVIDEND

Your board of directors recommend a dividend of Rs.1.75 (175%) per equity share ofRe.1/- each for the year 2009-2010. The same, if declared at the forthcoming annualgeneral meeting will be paid to those shareholders whose names stand registered in theregister of members as on August 21, 2010. This dividend is tax free in the hands of theshareholders.

3. BUYBACK OF EQUITY SHARES

The shareholders vide a postal ballot resolution dated December 21, 2009, approved thebuyback of 86,50,000 fully paid up equity shares having a face value of Re. 1/- each,through the stock exchanges, at a price not exceeding Rs. 65/- per share, upto an amountof Rs. 5,600 lacs.

The buyback of shares commenced on April 12, 2010. The Company has however not beenable to buyback any shares in the buyback offer, since the current market price is higherthan the maximum offer price, stipulated in the buyback offer.

4. BUSINESS REVIEW

The world economy witnessed signs of recovery from one of the worst global recession.Even though India experienced the tremors of the global economic melt down, the impact wasnot that severe. It is expected that by the year 2015, the Indian Pharmaceutical Market(IPM) will be valued at US $20 billion. Many factors will lead way to a healthy growth inthe pharma sector. Generics are seen as the future markets, wherein India and China areexpected to play key roles.

The Indian Pharma market looks bright, with loads of opportunities for growth. Theincreasing disposable income, the growing health awareness, the increase in the lifestylerelated diseases, the easy availability of modern medicinal amenities and affordablemedical insurance will increase the demand for the domestic and allopathic medicines.Further, the increasing population in the ageing group, will boost the demand for thetypical age related diseases such as cardiovasculars, diabetics, hypertensives andoncology.

The IPM grew by 17.7% to touch the market size of Rs. 41,701 crores during the yearended March 2010. Around 2,100 products were introduced in the current year 2009-2010.Indian Companies continued to lead the IPM as compared to the multinationals. IndianCompanies outgrew the market at 15.9%, while multinationals registered a growth of 15%.Acute segment continued to dominate the market.

The Indian Pharma Industry still has to face some great challenges. The new pricecontrol policy is still pending review by the Government. Compulsory licensing, patentoppositions and litigations, increasing regulations and compliances, infrastructuredevelopment and menace of counterfeit drugs are seen as major hurdles.

Against the above market background, we give below a brief review of various functionsof your Company:

a. Marketing

Your Company registered a growth of 12.8% as against the IPM growth of 17.7%. YourCompany is ranked at the 23rd position, attaining a market share of 1.68%. [Source:Organisation Research Group (ORG) March, Moving Annual Total (MAT) 2010]

In 2009, the Company's top brand "ELECTRAL" was launched in a ready to servetetra pack. This brand has registered a robust growth and is the only innovative WorldHealth Organisation (WHO) recommended Oral Rehyderation Salt (ORS) in tetra pack for thefirst time in the country. This brand has been well accepted by pediatricians for itsrationale osmolarity.

Gutrite, with its aggressive performance in the pre- probiotic combination market hasdone impressively well and has been very well appreciated by pediatricians.

Your Company introduced various products during the year 2009-2010 which are beingaggressively promoted in various therapeutic c a t e g o r i e s . T h e performance ofthe new products are encouraging.

With a view to improve the doctor coverage, the Company has launched a new divisionwith a primary focus on coverage of pediatricians. The new division will have a pan Indiapresence in the current year.

b. Financial Performance

Your Company's turnover and net profits increased by 11.30% and 78.38% respectivelyover the previous year.

The measures initiated by the Company in terms of investments in the field / newproduct pipeline and cost control have resulted in better sales and profitability.

As you are aware, the Company's treasury operations suffered a set back in the previousyear due to extreme market volatility. However, with the new Government in place duringthe current year, the markets have stabilised and have yielded good returns during thecurrent year.

On international front your Company was not much affected by foreign exchangefluctuations, due to less dependence on exports.

Cost controls across all levels of functions is a continuous and ongoing exercise.

The Company's internal control procedures commensurate to the extent and nature of itsoperations. The internal audit reports are regularly placed before the audit committee forits review.

c. Exports

The annual export turnover of your Company for the year ended March 31, 2010 was Rs.5,587.74 lacs as compared to Rs. 5,064.39 lacs for the year ended March 31, 2009. Theimproved performance resulted from products exported to USA, UK, South America, Ukraine,Myanmar and Afghanistan. New product registrations were received in the UK, Ukraine,Malaysia, Vietnam, Kenya, Lithuania, Chile, Ethiopia and Mozambique. Opportunities formarkets in USA, UK and rest of the world are being explored.

Major NGOs continued to endorse their faith in Company's competence and reliability indelivering quality products. The Company is a preferred source for procurement of ORS,ReSomal and Zinc Sulphate tablets by the leading NGOs for their emergency procurementplans.

5. RESEARCH & DEVELOPMENT

a. Formulations

Your Company as reported earlier, has launched products in the various therapeuticgroups. R&D is in the pipeline for various other products. Cost reduction exercise wascompleted on products which would result in cost savings besides being environmentalfriendly and solvent free process.

Your Company recently commissioned NOVEL DRUG DELIVERY RESEARCH LABORATORY,(NDDR)for increasing overall therapeutic and commercial value of commonly prescribed drugs, byenhancing their performance and reducing adverse effect profile, thereby improving patientconvenience and compliance. The current focus of the NDDR is on the selected therapeuticsegments like anti-infectives, respiratory and anti-inflammatory agents.

Various patent applications and dossier filing were undertaken during the current year.

b. Synthetics

Laboratory process development for the synthesis of Famciclovir was developed andtechnology was successfully transferred to Roha Plant.

Backward integrated APIs in Dermatology and Ophthalmology segments are under activedevelopment. In collaboration with National Chemical Laboratory, Pune, several compoundswith antifungal activity have been developed. Few of those compounds have shown promisingresults.

Seven process patents have been filed. Three Patents have been granted for improvedprocess for Dorzolamide and manufacture of Flurbiprofen, respectively. U.S. Drug MasterFile submissions for Latanoprost is in the final stage.

c. Nutraceuticals

Your Company successfully launched brand extension to its well established andrecognised energy drink "ENERZAL" Orange and Lime flavour.

After the successful launch of its infant milk substitute, MUM-MUM 1, your Company isin the process of launching MUM-MUM 2, a specially developed infant milk substitute forinfants between 6 months to 1 year taking into account the nutritional needs of theinfants.

d. Biotechnology

As reported to you earlier, with regard to the license technology agreement signed byyour Company with an Israel based Company, for production and purification of recombinantprotein licensed to FDC, your Company has received the test license from Daman Food andDrug Administration, for containerisation of the recombinant product in the pre-filledsyringes from an external party. Compilation of data for consistency batch dossier isunderway. The consistency batch data will be submitted to the Department ofBio-technology, for obtaining permission to conduct pre-clinical trials of the recombinantproduct.

6. PERSONNEL

The overall industrial and employee relations remained healthy. Information as persection 217(2A) of the Companies Act, 1956, read with Companies (Statement of Particularsof Employees) Rules, 1975, forms a part of this report. However, as per the provisions ofsection 219(1)(b)(iv) of the said Act, this report and the accounts are being sent to allshareholders excluding the particulars of employees under section 217(2A). Any shareholderinterested in obtaining a copy of the statement may write to the secretarial department atthe corporate office of the Company.

7. SOCIAL RESPONSIBILITIES

In discharge of its social obligations, your Company regularly contributes to trustsformed for charitable purposes. FDC also assists several organisations in conductingmedical camps all over the country.

8. DIRECTORS

In accordance with Article 60 of the Articles of Association and the relevantprovisions of the Companies Act, 1956, Dr. R.H. Muljiani and Dr. S.S. Ugrankar, retire byrotation at the ensuing annual general meeting and being eligible, offer themselves forre-appointment.

Mr. Ameya A. Chandavarkar was appointed as a whole- time director of the Company for aperiod of five years, w.e.f. from November 01, 2009, subject to the approval of theCentral Government. His appointment was approved by the shareholders vide a postal ballotspecial resolution dated December 21, 2009. Necessary application for seeking approval ofthe Central Government is already submitted .

9. DIRECTORS' RESPONSIBILITY STATEMENT

Your directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards havebeen followed;

b. the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company for the financial year ended March 31,2010 and of the profit and loss account for that period;

c. the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956, forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

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

10. CORPORATE GOVERNANCE

As required by the existing clause 49 of the listing agreement entered into with thestock exchanges, a separate report on corporate governance is given as a part of theannual report alongwith the auditors' statement on its compliance.

11. AUDITORS

The auditors of your Company M/s. S.R. Batliboi & Associates, CharteredAccountants, Mumbai, retire at the ensuing annual general meeting and have confirmed theireligibility and willingness to accept office, if re-appointed.

12. COST AUDITORS

The directors have appointed Shri. Prakash Sevekari, Cost Auditor, to conduct the costaudit of bulk drugs and formulations for the financial year ending March 31, 2011. Therequisite applications for approval of his appointment will be submitted to the CentralGovernment.

13. PUBLIC DEPOSITS

During the year under review, the Company has not accepted any fixed deposits.

14. PARTICULARS OF SUBSIDIARIES AND ITS OPERATIONS

Your Company's Wholly Owned Subsidiary (WOS) at USA, namely FDC Inc., reported a lossof USD 1,260 (Rs. 6.19 lacs) for the year ended March 31, 2010.

Your Company's WOS at UK, namely FDC International Ltd., has reported a profit of GBP219,748 (Rs.150.16 lacs) for the year ended March 31, 2010.

Your Company's joint venture business at South Africa namely Fair Deal CorporationPharmaceutical SA (Pty) Ltd., reported a loss of ZAR 1,990,094 (Rs. 118.82 lacs) for theyear ended March 31, 2010.

In terms of section 212(8) of the Companies Act, 1956, the Company has receivedexemption from Government of India, Ministry of Company Affairs, New Delhi, from attachingthe accounts of its subsidiaries viz. FDC International Limited, UK and FDC Inc., USA, forthe financial year ended March 31, 2010. However, as directed by the Central Government,the financial data of the subsidiaries have been furnished under "Notes to theConsolidated Financial Statements".

Also, as directed by the Central Government, annual accounts of the subsidiaries andthe related detailed information will be made available to the holding and subsidiaryCompany's investors, on request and the same is available for inspection by the members atthe registered office of the Company, between 10.00 a.m. to 12.00 noon on all days exceptFridays and holidays, till the date of the forthcoming meeting and will also be placedbefore the said meting.

Any shareholder interested in obtaining a copy of the annual accounts of thesubsidiaries and the detailed information with the financial statement of the saidsubsidiaries, may write to the secretarial department at the corporate office of theCompany. Also details of accounts of the individual subsidiary companies are available onthe Company's website www.fdcindia.com

15. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The information pursuant to Section 217(1)(e) of the Companies Act, 1956, read with theCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, isannexed as Annexure A to this Report.

16. ACKNOWLEDGMENTS

Your Directors take this opportunity to place on record their gratitude for thecontinued support and co-operation extended to the Company by the medical fraternity,trade, Government agencies, financial institutions, investors, bankers, consumers andemployees.

ANNEXURE A

Information pursuant to the Companies (Disclosure of Particulars in the Report of theBoard of Directors) Rules, 1988, forming part of the report of the directors for the yearended March 31, 2010.

A. CONSERVATION OF ENERGY

a. Energy conservation measures undertaken at various plants

Baddi

• Humidstat for Bry Air humidifiers.

• Temperature Controller for Cooling Tower.

• New Brine Chiller for Low RH Area (50 TR).

• Sull- Air Screw Compressor.

Goa

• LED fixtures have been installed in place of standard fluorescent lamps for newareas.

• VRF (Variable Refrigeration Flow) system has been installed with digital scrollcompressor for the new areas saving substantial energy.

• Diesel fired hot water generator has been totally stopped by utilizing the warmwater from condenser of the chiller for maintaining environmental conditions in the area.

Waluj

• AHU of total 30TR DX system taken on centralised chilled water system.

b. Proposals for energy conservation

• Photovoltaic Solar Modules for Security, Street & Toilet Lights (AllPlants).

• Electronically Controlled, Eddy Current Motor with Blowers for AHU's (AllPlants).

• 240 TR Screw Chiller to replace Air Conditioning Load of split & windowA/C's (Jogeshwari).

c. Impact of the measures of (a) and (b)

The adoption of energy conservation measures of the type indicated above has resultedin significant savings.

d. Total energy consumption and energy consumption per unit of production as per Form A

Since pharmaceutical production comprises of wide variety of products, each requiringdifferent compositions and mix, the compilation of consumption per unit of production isnot feasible.

A. Power and fuel consumption

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

• Launching new products in various therapeutic segments.

• D e v e l o p m e n t o f r e c o m b i n a n t D N A b a s e d biotherapeuticssuch as colony stimulating factor and third generation thrombolytics.

• Ocular cytotoxicity studies by Invitro assay to evaluate the effect ofophthalmic products on corneal cell lines.

• Development processes to synthesize enantio pure drugs.

• Process development and improvement for the existing range of products such asFlurbiprofen, Timolol Maleate and Dorzolamide.

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

• A competitive therapeutic molecule at a lower cost.

• Improved in-house assay for our formulated ophthalmic products and for newchemical entities.

• Improvement in quality and yield.

• Development/improvements of products and processes with patent potential.

• Reduction in time cycles of conversion and raw material consumption.

3. Future plan of action

• Pre-clinical and clinical trials of recombinant cytokine followed by commercialproduction using optimised and standardised process parameters.

• Develop and launch of novel drug delivery systems for different molecules.

• Development of APIs based on patent expiry.

• To file process and product patents.

4. Expenditure on R&D

* Including W.I.P.

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

1. Efforts in brief, made towards technology absorption, adaptation andinnovation

• Bio-availability enhancement of poorly soluble drugs by using technologies likesolid dispersion, colloidal dispersion.

• Formulation strategies for NCEs to reduce failure of NCE molecules in drugdevelopment pipelines. Nanotechnology for better Ophthalmic suspension.

2. Benefits derived as a result of the above efforts

• Product development and cost competitiveness.

• Development of an enhanced in-house assay for our formulated ophthalmicproducts.

• Patent application filed in U.S. Patent office and in Indian patent office forNovel use of Indicator cell line for Bioassay of product under examination.

3. Information regarding imported technology (imported during the last 5 yearsreckoned from the beginning of the financial year) - None

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to exports, initiative taken to increase exports,development of new export markets for products and services, and export plans

FDC's foreign exchange earnings, stood at Rs. 5,616.99 lacs for the year 2009-2010against Rs. 5,086.05 lacs in 2008-2009. This was achieved despite the strong US dollaragainst the Indian rupee for a major part of the financial year. The Company iscontinuously exploring possibilities of exporting more of its products to differentmarkets.

2. Total foreign exchange earnings and outgo

Previous year's figures have been re-grouped/ re-classified, wherever necessary toconfirm to this year's classification.