Krebs Biochemicals & Industries Ltd

Dear members,

Your Directors are pleased to present the 17^th Annual Report of your Company together with the Audited Accounts for the year ended 31^st March 2009.

Financial Results:

(Rs. In Lakhs)

Overall Performance:

The sales of the company during the Financial Year 2008-09 have remained around the same level as the previous year. The effect of the global financial crisis coupled with very little capacity utilization at the Nellore Plant resuKing from Ranbaxy stopping operations due to its own problems with US FDA are the main reasons for this stagnation.

Dividend:

Considering the fact that your company is not profit making no dividend is proposed to be declared for the financial year 2008 - 2009.

Taxation:

In view of the net losses no provision for Income Tax has been made in this financial year under review . Deferred Tax Asset of Rs 93.36 Lakhs is adjusted in the financial year under review. Provision for Fringe Benefit Tax (FBT)for this year was Rs 2.31 Lakhs as against Rs 3.05 Lakhs during the last year.

Equity Capital:

During the year the company allotted 20,00,000 shares of Rs10 each on Preferential basis to the promoters and strategic investors on account of conversion of warrants into shares which had been issued during the financial year 2006-07.As a result the paid up equity capital of the company has increased by Rs 200 Lakhs to Rs 905 Lakhs. There has been an addition of Rs1286 Lakhs to Securities Premium Account on this account.

Board of Directors:

Mr. G. V. L. Prasad and Dr. Naresh Kumar retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re appointment. The Board recommends their re appointment.

Mr. Avinash Ravi was appointed as Additional Director in the Board Meeting held on 31.01.2009 with effect from 01.02.2009 and holds office till the date of Annual General Meeting. He was also appointed as the Whole Time Director designated as Director and Chief Operating Officer with effect from the-same date which was approved by the remuneration committee.The position of Whole'Time Director has to be approved by the members of the company.

Directors responsibilities Report:

Your Directors confirm in terms of section 217 (2AA) of the Companies Act 1956 on the basis of the documents and information available to them that:

a) There has been no material departure from the accepted accounting standards in the preparation of financial statements presented to you.

b) The Directors have chosen only accepted accounting policies and have applied them consistently. The judgments and estimates made by them are prudent and reasonable to give a true and fair view of the state of affairs of the Company as on 31st March 2009 and of the results of operation for the financial year.

c) The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the requirements of the Companies Act 1956 and to safeguard the assets of the company, and to prevent and detect any irregularities and frauds.

d) The accounts presented are prepared on a going concern basis. The properties and assets of your company are adequately covered by insurance policies.

Auditors:

M/s. G.P. Associates, Chartered Accountants, are the statutory auditors to, the company and they retire at this Annual General Meeting and in their place M/s Pavuluri & Co., Chartered Accountants have accorded their consent for appointment according to Section 224 of the Companies Act, 1956. The Board recommends their appointment.

Management Discussion and Analysis:

A report on Management Discussion and Analysis is provided as part of this Annual Report.

Corporate Governance And Share holder's Information:

A report on Corporate Governance is included as part of this Annual Report.

Conservation of Energy , Technology Absorption and Foreign Exchange:

Particulars required under Section 217(1 )(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of particulars in the Report of Beard of Directors )Ruies,1988 is given in Annexure I attached and forms part of this report.

Employee Relations:

The Directors are happy to report that the company has cordial relations with its employees. In spite of many difficulties, the employees have been cooperating with the management and enthusiastically offering their services as required by the management. Your directors extend thanks to al! of them.

Human Resources:

None of persons employed during the financial year under review is required to be furnished under Section 217(2A)of the Companies of the Companies Act, 1956 ^read with the Companies (Particulars of Employees ) Rules, 1975.

Social Responsibility:

As a responsible partner of society your company participates in social welfare activities in the villages within the vicinity of its operating units. Financial support is offered to welfare activities like Education, Public Health and Eradication of child labor. The company contributes to provide for qualified teachers in village schools thus improving the quality of primary education in neighborhood schools.

Acknowledgement:

We extend our appreciation and thanks to our customers, suppliers and investors for their continued support. We are also grateful for the continued co-operation extended by the Government Authorities, Financial Institutions and Banks to the company. The Board is most appreciative of the dedication and commitment extended by its employees at all levels and their contribution to the progress of the company.

for and on behalf of the Board of Directors

Annexure I

Information under section 217(1)(e) of the companies Act, 1956 read with Companies (Disclosure of particulars in the Report of Board of Directors) Rules, 1988 and forming part of Directors' Report:

Form - A

Form for disclosure of particulars with respect to conservation of energy

Unit-I (Nellore)

Manufacturing capacity of the plant is little utilized so the power demand from AP Trasco grid was derated to enable lower power costs.

Unit-ll(Vizag)

The implementation of energy conservation measures completed during the financial year 2008-09 resulted in significant energy savings

Unit-I (Nellore)

1) Installation of 125 KVA D.G set to maintain limited load period to save fuel.

2) Installation of V.F.D systems for cooling tower pumps to conserve Energy.

3) Installation of electronic timer based switching device in street lights on/off modes to conserve Energy.

Unit-ll (Vizag)

1) Chillers, Hot sumps, Cold Sumps and Brine distribution lines have to be modified to minimize the running hours of Chillers.

2) Condensate recovery system has to be implemented at the following sections.

(a). Steam Header lines.

(b). Fermenters and Broth Tanks.

3) Manometers provision to High Pressure Boiler Secondary and Turbulent Air for tuning to improve boiler efficiency.

Unit-I (Nellore)

The implementation of Energy conservation measures completed during the financial year 2008 - 09 resulted in substantial energy savings.

Unit-ll (Vizag)

Estimated savings for the year 2008-09 will be around Rs. 21.44 Lakhs

(d) The total energy Consumption:

Consumption per unit of Production :

Since the Company manufactures different types of active pharmaceutical ingredients and intermediates, it is not practicable to give consumption per unit of production.

FORM -B

Form for disclosure of particulars with respect to technology absorption.

A. Research and Development:

4. Expenditure on R & D

B. Technology Absorption, Adaptation and Innovation:

Foreign Exchange Earnings and Out Goings :

(Rs. In lakhs)

for and on behalf of the Board of Directors