MANAGEMENT DISCUSSION

Forward Looking Statements

Forward looking statements are based on certain assumptions and expectations of futureevents. The Company cannot guarantee that these assumptions and expectations are accurateor will be realized. The Company’s actual results, performance or achievements couldthus differ materially from those projected in any such forward-looking statements. TheCompany assumes no responsibility to publicly amend, modify or revise any forward lookingstatements, on the basis of any subsequent developments, information or events.

Infrastructure

The Company already has a state of the art manufacturing facility at Pigdamber, Indore(Unit-I) where it manufactures a wide range of dosage forms like Injections, Tablets,Ointments and Capsules. An up-gradation of the existing facility in terms of cGMP normsand expansion of capacities has recently been completed. At present the Company is tappingthe domestic market, export markets like East & West Africa, Latin America, South EastAsia and domestic and international Government Tender business from this facility. TheCompany also has a state of the art testing laboratory which is further being upgraded toUSFDA standards.

A new regulated market compliant tablet manufacturing facility focusing on containmentproducts such as hormonal and anti-cancer formulations is in the completion phase atUnit-II at the Pithampur Industrial Area. The plant is expected to be operational shortlyand will be backed by world class manufacturing and testing equipment. The Company expectsto offer its facility for regulatory inspections and approvals soon after completion.

Domestic Markets

The Company has a wide range of pharmaceutical products in its portfolio. A focusedapproach and increased marketing efforts has resulted in an increasingly wider reach. Inthe coming years, the Company would continue to build its reputation and strong brandequity in order to attain a leadership position. The Company has been successfullymarketing human products through a generics distribution model.

International Markets

The Company continues to lay emphasis on its overseas business. The Company worksclosely with all its overseas partners to sustain and grow its exports. In the lastfinancial year, the Company has expanded its operations in South East Asia, Africa andLatin America. With the commercial production expected to start soon at Unit-II, thecompany will be ready to take a leap into the regulated markets.

Outlook

Your company remains optimistic about the bright future lying ahead for the company. Itwill endeavor to grow by building on its strengths for competitive advantage. The Domesticbusiness is becoming more competitive with the entry of newer players from the emergingeconomies. On the other hand, the government induced changes in select markets and theongoing consolidation in the industry is bringing forth new challenges in the marketplace. The generic segment has inherent risks of patent litigation, product liability,continuous development in R&D, capital investment, increasing regulations andcompliance related issues, particularly in the developed markets.

Business Strategy

Your company has always endeavored to optimize shareholder value but due to variousfactors, the company has not been able to achieve the anticipated levels. However, in theopinion of Directors, after setting up new plant at Pithampur (Unit-II), the product rangewill be enhanced resulting in a sharp increase in profitability. The new plant shall befully established by the end of October, 2010 and is estimated to start production byJanuary 2011. The company is deriving its strength from diverse product capability,established client relationship, location advantage and an experienced management team.

Risk Concerns

Uncertainties in business offer opportunities and downside risks. Consequently, yourCompany recognizes the importance of a well structured system to identify and manage thedifferent elements of risk. Pressure on margins, high raw material prices, availability ofsubstitutes, indiscriminate imports, higher overheads, patent litigation are some factorswhich could impact adversely especially as we strive to tap into the regulated markets.

Segment wise performance

Your company operates in the single segment of drugs and chemicals.

Internal Control Systems

Internal control procedures of the Company are designed to meet the needs of theOrganization’s size and complexity of operations. These procedures ensure compliancewith various policies, practices and statutes. Internal Audit is carried out of allfunctional areas through out the year. The Company’s Internal Audit function isstaffed with qualified and experienced people.

Human Resources and Industrial Relations

The company has given emphasis to upgrading the skills of its technical and marketingpersonnel. This is in line with its policy of enhancing the individual’s growthpotential within the framework of corporate goals. The HR policy and practices areconstantly reshaped to meet newer demands. Not only better hiring practices, but alsoimproved nurturing practices are in place. Company imparts training towards continuousenhancement of technical and managerial skills. The Directors acknowledge and appreciatethe contribution of all employees towards the performance of the company. During the yearunder review the Company, maintained cordial relationship with all employees and has notlaid off any employee in its entire history.

Cautionary Statement

The information and opinion expressed in this report may contain certain forwardlooking statements which the management believe are true to the best of its knowledge atthe time of its preparation. Actual results may differ materially from those eitherexpressed or implied in this report. Important developments that could affect theCompany’s operations include a downward trend in the industry, rise in input costs,exchange rate fluctuations, and significant changes in political and economic environment,environment standards, tax laws, litigation and labor relations.