CIENCE F JU ANNUAL REPORT BILANT PARTNERS P · 2019. 11. 26. · ScienceActive ANNUAL REPORT 2005-2006 of Science Partnerships Jubilant To find out more on what we can do for you,

-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------JUBILANT ORGANOSYS LIMITED ANNUAL REPORT - 2005-2006

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Your Directors have pleasure in presenting the Twenty Eighth Annual Report and Audited Accounts for the year ended 31stMarch, 2006, reporting a progressive financial performance in line with the management expectations. Your Company hastaken various initiatives during the year to strengthen its position as an integrated pharmaceutical industry player deliveringproducts and services to the global life sciences industry across the value chain.

FINANCIAL RESULTS

Year ended Year ended31st March 2006 31st March 2005

[Rs./Million] [Rs./Million]

Sales and Other Income 15226 12318

Net Sales 13860 11145

EBITDA 2380 2064

Interest 147 213

PBDT 2233 1851

Depreciation 442 348

PBT 1791 1503

Provision for Taxation 403 370

PAT 1388 1133

Profit brought forward from previous year 1662 1064

PROFIT AVAILABLE FOR APPROPRIATION 3050 2197

Which the Directors have appropriated as follows:

- Proposed Dividend on Equity shares 183* 162

- Tax on Dividend on Equity Shares 26 23

- Transfer to General Reserve 400 350

Balance to be carried forward 2441 1662

* Includes Rs. 5.72 million (inclusive of Dividend Tax) in respect of shares allotted between 31st March, 2005 and the record date for dividend payment.

OPERATIONS

Financial Year 2005-06 has been a year of significant achievements in the key focus business areas of Pharmaceuticalsand Life Science Chemicals. Custom Research and Manufacturing Services (CRAMS) and Active PharmaceuticalIngredients (API), the major contributors to this business segment continued to record robust growth. The API businessfiled 5 Drug Master Files (DMFs) in USA and 9 European Drug Master Files (EDMFs) in Europe during the financial year.Your Company has made significant capital expenditure to increase manufacturing capacity and the R&D capabilities inthese businesses. The capacity of pyridine plant has been increased by 20% and a new multipurpose plant becameoperational for fine chemicals during FY 06. In view of the increased demand from the market, the Kilo labs facility atGajraula was further expanded. In APIs, the plant for Oxcarbazepine, an anti epileptic drug and a new multi purposeplant have been commissioned.

Your Company entered the dosage forms market of USA by acquiring Trinity Laboratories, Inc. (renamed Trigen Laboratories,Inc.) along with its wholly owned subsidiary - Trigen Laboratories, Inc. (renamed Jubilant Pharmaceuticals, Inc.)Jubilant Pharmaceuticals, Inc. has a US FDA approved manufacturing facility for solid dosage forms and has 7 approvedAbbreviated New Drug Application in its portfolio. During the financial year, the dosage forms R&D became operationaland the work has been initiated for setting up a new solid dosage forms plant near Roorkee in Uttaranchal.

Your Company also acquired Target Research Associates, Inc. (renamed Clinsys, Inc.), a US based Clinical ResearchOrganization (CRO) involved in clinical operations for phase II to IV, clinical data management, bio statistics, QA andregulatory services and contract staffing. The business profile of Clinsys, Inc. forms perfect synergy with JubilantClinsys Ltd. involved in Bio availability (BA)/ Bio equivalence (BE) and Clinical Trials phase I studies. This acquisitionmade Jubilant the only Indian CRO having presence in the US market.

During FY 06, the Company has filed 7 new patents and currently 56 patent applications are pending whereas 9patents have been granted. Net Sales recorded a growth of 24.3% to Rs.13.86 billion as compared to Rs.11.15 billion inthe previous year. Export revenues increased by 30.6% to Rs.4.76 billion from Rs.3.64 billion. This increase in exportswas mainly due to high growth in Pharma and Life Sciences business in regulated markets of USA, Europe and China.The Industrial Chemicals business witnessed 20% growth in sales to Rs.6.23 billion. The Performance Chemicals

Directors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ ReportDirectors’ Report

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JUBILANT ORGANOSYS LIMITED ANNUAL REPORT - 2005-2006-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------45

business also recorded a robust growth of 19.2% to Rs.1.99 billion as compared to Rs.1.67 billion in FY 05. EBITDAat Rs.2.38 billion recorded a growth of 15.3% as compared to Rs.2.06 billion in the previous year. The operatingmargin was lower due to the impact of high input material cost mainly in Industrial Chemicals business.

Profit before tax (PBT) improved to Rs.1.79 billion (12.9% of net sales) from Rs.1.50 billion (13.5% of net sales), anincrease of 19.2%.

Profit after tax (PAT) increased to Rs.1.39 billion (10% of net sales) from Rs.1.13 billion (10.2% of net sales), anincrease of 22.5%.

CONSOLIDATED FINANCIALS

On a consolidated basis, Net Sales recorded a growth of 28.6% to Rs.15.05 billion as compared to Rs.11.70 billion inthe previous year. Export revenues increased 41.6% to Rs.5.95 billion from Rs.4.20 billion. EBITDA at Rs.2.37 billionrecorded a growth of 5.5% as compared to Rs.2.24 billion in the previous year.

PBT improved to Rs.1.68 billion (11.2% of net sales) from Rs.1.64 billion (14.0% of net sales), an increase of 2.44%.

PAT increased to Rs.1.30 billion (8.61% of net sales) from Rs.1.19 billion (10.2% of net sales), an increase of 8.79%.

DIVIDEND

Your Directors recommend a dividend of 125%, i.e. Rs.1.25 on each fully paid up equity share of Re.1, for the yearended 31st March, 2006. This will absorb Rs. 203 million (inclusive of tax) based on existing capital. The final outgomight increase if the paid up capital increases due to conversion of FCCBs or otherwise.

APPROPRIATIONS

It is proposed to transfer Rs. 400 million to General Reserve. An amount of Rs. 2.44 billion is proposed to be retainedin Profit and Loss Account.

CAPITAL STRUCTURE

(a) SUB-DIVISION

As approved by the members through Postal Ballot, each equity share of Rs.5 of the Company was sub-divided into 5equity shares of Re.1 each on March 24, 2006. Accordingly, credit was given to the shareholders holding shares inelectronic segment on March 25, 2006 and new certificates were sent to other shareholders who surrendered existingshare certificates. Any member who has not received the sub-divided shares, may write to the Registrar & ShareTransfer Agent of the Company.

(b) FCCB 2010 ISSUE

During the year under review, the Company issued Zero Coupon Foreign Currency Convertible Bonds due 2010 (FCCB2010) for an aggregate value of US$75 million, convertible any time between July 3, 2005 and May 14, 2010 byholders into fully paid equity shares of Rs.5 each of the Company or Global Depositary Shares (GDS), each GDSrepresenting one equity share at an initial conversion price of Rs.1365.324 per share with a fixed rate of exchange ofRs.43.35 = US$1. The conversion price is subject to adjustment in certain circumstances. The Bonds may also beredeemed, in whole but not in part, at the option of the Company at any time on or after May 23, 2008, subject tosatisfaction of certain conditions. Unless previously converted, redeemed or purchased and cancelled, the Bonds willbe redeemed on May 24, 2010 at 138.383% of their principal amount. The FCCBs are listed on Singapore StockExchange. The GDSs arising out of conversion of FCCBs are listed on Luxembourg Stock Exchange.

Upon sub-division of each equity share of Rs.5 into 5 equity shares of Re.1 each, the conversion price for FCCB 2010stands reduced from Rs.1365.324 to Rs.273.0648 per share and the number of shares to be allotted on conversionwill be 5 times the initially agreed number.

(c) FCCB 2009 CONVERSIONS

The Company had issued 1.5% Foreign Currency Convertible Bonds due 2009 (FCCB 2009) aggregating US $ 35million, in the year 2004-05.

The Bonds are convertible at any time between June 14, 2004 and April 15, 2009 by holders into fully paid equityshares of Rs.5 each of the Company or GDS, each GDS representing one equity Share at an initial conversion price ofRs.818.23 per share with a fixed rate of exchange on conversion of Rs. 44.805 = US $1. The conversion price issubject to adjustment in certain circumstances. The Bonds may also be redeemed, in whole but not in part, at theoption of the Company at any time on or after May 14, 2007 and prior to May 8, 2009, subject to satisfaction of certainconditions. The outstanding Bonds remaining after conversion will be redeemed on May 15, 2009 at 113.70% of theirprincipal amount. The FCCB 2009 are listed on Singapore Stock Exchange. The GDS arising out of conversion of FCCBsare listed on Luxembourg Stock Exchange.

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As on 31st March, 2006, FCCB 2009 of US $ 5.55 million were outstanding.

Upon sub-division of each equity share of Rs.5 into 5 equity shares of Re.1 each, the conversion price for FCCB 2009stands reduced from Rs.818.23 to Rs.163.646 per share and the number of shares to be allotted on conversion will be5 times the initially agreed number.

(d) PRIVATE EQUITY PLACEMENT

During the year under review, the Company allotted 990,000 fully paid up Equity Shares of Rs.5 each, at a premiumof Rs.1,095 per share aggregating to Rs.1.09 billion, on private placement basis to GA European Investments Limited,a Foreign Financial Investor, in accordance with SEBI Guidelines.

(e) EMPLOYEES STOCK OPTIONS

At the last Annual General Meeting, members had approved grant of upto 717,500 Stock Options (each Optionconvertible into one equity share of Rs.5 to eligible Directors (other than promoter directors) and other employees of theCompany/ subsidiaries, as per the Jubilant Employees Stock Option Plan, 2005.

During the year, 594,391 Stock Options were granted. As a result of sub division of shares into shares of Re.1 each, thenumber of shares to be allotted on exercise of options would be five times the earlier agreed number and the exerciseprice would be one-fifth of earlier agreed price.

The details as required under Regulation 12 of SEBI (ESOP & ESPS) Guidelines, 1999 are given in Annexure-A.

(f) PAID-UP CAPITAL

The Paid-up Capital as at March 31, 2006 stands at Rs.142.44 million, comprising of 142,442,995 equity shares ofRe.1 each.

The impact of conversion of FCCB 2009 and FCCB 2010 into equity shares and exercise of Employees Stock Optionsby employees on the share capital assuming full conversion/ exercise would be as follows:

No. of Shares of Re.1 each

Paid-up Share Capital as on March 31, 2006 142,442,995

Add : Conversion of balance FCCB 2009 1,519,546

Add : Conversion of FCCB 2010 11,906,514

Add : Exercise of Employees Stock Options (717,500 options) 3,587,500*

Eventual Paid-up Capital 159,456,555

* Assuming grant of all the Stock Options approved by the members, i.e. 717,500 Stock Options.

SUBSIDIARIES

Brief particulars of each of the subsidiaries are given below:.

1. Jubilant Biosys Ltd. – A subsidiary of your Company since 2003-04, Jubilant Biosys provides Discovery Informaticsproducts and services and collaborative drug discovery services that include pre-clinical, in-vivo and formulationservices. It also provides Discovery Research Services which is driven by the concept of Structure Directed DrugDesign. During the year, Jubilant Biosys signed a 5 year collaborative drug discovery services contract with Eli Lilly.Your Company currently holds 66.98% of the equity of Jubilant Biosys.

2. Jubilant Chemsys Ltd. – A wholly owned subsidiary of your Company since September 2004, Jubilant Chemsyscontinues to offer medicinal chemistry services to drug discovery companies on Full Time Equivalent or moleculebasis. It also works closely with Jubilant Biosys in collaborative drug discovery and discovery research servicesareas.

3. Jubilant Clinsys Ltd. – A wholly owned subsidiary of your Company since September 2004, Jubilant Clinsysprovides Bio Availability and Bio Equivalence studies and clinical trials management services. It conducted someof the BA/BE studies for product development for European and US market for your Company and its othersubsidiaries. It has a 54 bed facility along with analytical laboratory facility at Noida to conduct phase I clinicaltrials for New Chemical Entity.

4. Clinsys Holdings, Inc. - This Company was incorporated in Delaware, USA as wholly owned subsidiary of yourCompany. This holding company was incorporated for acquisition of 100% equity in Clinsys, Inc. (earlier TargetResearch Associates, Inc.), during the year.

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5. Clinsys, Inc. (earlier Target Research Associates, Inc.) - This Company became a subsidiary of Jubilant OrganosysLtd. by virtue of its becoming a wholly owned subsidiary of Clinsys Holdings, Inc. during the year. Clinsys, Inc. isinvolved in Clinical Operation for phase II to IV, bio statistics, clinical data management, (QA) and regulatoryservices and contract staffing services.

6. Jubilant Pharma Pte Ltd. – This wholly owned subsidiary was incorporated during the year, to make investmentsin Trigen Laboratories, Inc.

7. Trigen Laboratories, Inc. – This Company, earlier known as Trinity Laboratories, Inc., became a subsidiary ofJubilant Organosys Ltd. by virtue of its becoming a subsidiary of Jubilant Pharma Pte. Ltd. during the year. JubilantPharma Pte Ltd. holds 66.61% equity stake in this company.

8. Jubilant Pharmaceuticals, Inc. – This company, earlier known as Trigen Laboratories, Inc., became a subsidiary ofJubilant Organosys Ltd. by virtue of it being a wholly owned subsidiary of Trigen Laboratories, Inc. JubilantPharmaceuticals is a generic pharmaceutical company located in the US having US FDA approved manufacturingfacility in Maryland, USA.

9. Jubilant Organosys (USA) Inc. – A wholly owned subsidiary of your Company since January 2000, it undertakessales and distribution of advance intermediates, fine chemicals and APIs in Northern America.

10. Jubilant Organosys (Shanghai) Limited –This is a wholly owned subsidiary of your Company that undertakes salesand distribution of products in China. This subsidiary is also a sourcing hub for raw materials for your Company.

11. Jubilant Pharma NV – This company is a wholly owned subsidiary of your Company. This company holds 80%equity of Pharmaceutical Services Inc. NV and PSI Supply NV.

12. Pharmaceutical Services Inc. NV – This Belgian company offers regulatory affairs services to generic pharmaceuticalcompanies for the diverse European market. Jubilant Pharma NV holds 80% stake in this company.

13. PSI Supply NV – This Belgian company undertakes development and supply of generic dosage forms to Europeanmarkets. Jubilant Pharma NV holds 80% equity stake in this company.

The Company has received exemption from Central Govt. under Section 212(8) of the Companies Act, 1956 fromattaching Balance Sheets and other particulars of subsidiaries vide letter dated April 05, 2006.

ACQUISITIONS

During the year, your Company made two acquisitions in USA. In June 2005, your Company through its wholly ownedsubsidiary, Jubilant Pharma Pte Ltd., acquired Trinity Laboratories, Inc. (renamed as Trigen Laboratories, Inc.) and itswholly owned subsidiary Trigen Laboratories, Inc. (renamed as Jubilant Pharmaceuticals, Inc.), a generic pharmaceuticalscompany having US FDA approved manufacturing facility for solid dosage forms in Maryland, USA. Your Company hasinvested US$ 14.25 million to acquire 66.61% equity in Trigen of which US$ 8.25 million has been paid to theshareholders of Trigen and balance US$ 6 million has been invested as growth capital.

In October 2005, your Company, through its wholly owned subsidiary, Clinsys Holdings, Inc. acquired 100% equitystake in Clinsys, Inc. at a price of US$ 33.5 million subject to adjustment in case of change in net working capital fromzero. The net working capital is currently assessed at US$ 1.07 million. Clinsys Holdings, Inc. raised a debt of US$ 20million and your Company has infused equity of US$ 15.5 million in Clinsys Holdings, Inc. to fund the acquisitions.Clinsys is a clinical research organization based in New Jersey having 161 employees and around 20 customerrelationships. Clinsys is the preferred partner to some of the large global pharmaceutical companies.

ADDITIONAL INFORMATION TO SHAREHOLDERS

In keeping with its commitment to high standards of Corporate Governance, your Company continued voluntarily tocompile and present financial statements that conform to US GAAP.

Your Company believes that a sustainable growth is possible only through the partnership approach with all thestakeholders of the Company. We identify the stakeholders, take their feedback with a mechanism of action on thatfeedback. We have published the Corporate Sustainability Report as per the Global Reporting Initiatives (GRI) standards.This report has been duly audited by Ernst & Young and is being mailed to all our shareholders.

FIXED DEPOSITS

Your Company is no more accepting fixed deposits from the public. The existing fixed deposits are being paid onmaturity. The total amount of Fixed Deposits held as on 31st March, 2006 was Rs.65.30 million. There were nooverdue deposits. There were, however, 390 unclaimed deposits amounting to Rs. 6.07 million. Of these, 65 depositsamounting to Rs.0.97 million have since been repaid/claimed.

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DIRECTORS

During the year, pursuant to issue of shares to GA European Investments Ltd. (GA) and in accordance with the InvestmentAgreement, Mr. Abhay Havaldar, nominee of GA, joined the Board as an Additional Director and holds office upto theensuing Annual General Meeting. Notice under section 257 of the Companies Act, 1956, has been received from amember, proposing Mr. Havaldar’s candidature as Director.

Mr. Sanjeev Kapur resigned as Alternate Director to Mr. Ajay Relan. In his place, Mr. Vishal Marwaha was appointed asAlternate Director to Mr. Ajay Relan.

Mr. Hari S. Bhartia, Mr. S.N. Singh, Mr. Shyam Bang and Mr. H.K. Khan, Directors of the Company, retire by rotation atthe forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The Report required to be made pursuant to section 217(1)(e) of the Companies Act, 1956 read with Companies[Disclosure of Particulars in the Report of Board of Directors] Rules, 1988 is attached as Annexure – B.

EMPLOYEES

As required under the provisions of section 217(2A) of the Companies Act 1956 read with the Companies (Particularsof Employees) Rules, 1975, a Statement of employees in receipt of remuneration in excess of the prescribed limits, isattached as Annexure - C.

MANAGEMENT DISCUSSION & ANALYSIS

Notes on Management Discussion & Analysis have been given in preceding pages.

AUDITORS

K N Gutgutia & Co, Chartered Accountants, Auditors of the Company retire at the ensuing Annual General Meeting andoffer themselves for re-appointment. They have confirmed that their re-appointment, if made, shall be within the limitslaid down in Section 224 (1B) of the Companies Act, 1956.

CORPORATE GOVERNANCE

A Section on Corporate Governance, a certificate from the auditors of the Company regarding compliance of conditionsof Corporate Governance as stipulated under Clause 49 of the Listing Agreements with Stock Exchanges, and a certificatefrom the Chairman & Managing Director that all Board members and senior management personnel have affirmedcompliance with the Code of Conduct for the year ended March 31, 2006, are attached to this Report as Annexures D,E and F respectively .

AWARDS

The efforts of your Company to be the best in each and every area of its business and functions have been recognizedby various organizations.

During the year, your company was given the following awards:

• Golden Peacock Environment Management award 2005 (Gajraula plant)

• Greentech Foundation’s award for Outstanding achievement in Safety Management (Awarded Gold) - (Nira plant)

• Greentech Foundation’s award for Outstanding achievement in Environment Management (Awarded Silver) (Niraplant)

INVESTOR SERVICES

With a view to improving investor services, the following steps have been taken :

• A shareholders’ feedback survey was conducted so as to identify the areas of improvement. Based on responsesreceived, the Company is taking requisite steps.

• A dedicated e-mail [email protected] has been made effective. Members may lodge their complaints or suggestionson this e-mail.

• The Investor Section on the website of the Company www.jubl.com has been revamped and covers Code ofConduct, press releases, financial results and frequently asked questions.

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MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY AFTER 31ST

MARCH, 2006

Your Company is proposing to raise up to US$ 325 million in the global markets through issue of equity shares or equityrelated instruments including Foreign Currency Convertible Bonds/ Global Depository Shares/ American DepositoryShares, subject to members’ and other requisite approvals. For this, an Extra-ordinary General Meeting has beenconvened on 16th May, 2006. These funds would be utilized for making acquisitions, direct investments in jointventure/subsidiary companies, new projects, capital expenditure, general corporate purposes and other permitted uses.

DIRECTORS’ RESPONSIBILITY STATEMENT

In compliance of Section 217 (2AA) of the Companies Act, 1956, the Directors of your Company confirm:

• that in the preparation of annual accounts, the applicable accounting standards had been followed along withproper explanation relating to material departures.

• that the Directors had selected such accounting policies and applied them consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company ason 31st March, 2006 and of the profit and loss of the Company for the year ended 31st March, 2006.

• that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities.

• that the Directors had prepared the annual accounts on a going concern basis.

ACKNOWLEDGMENTS

Your Directors acknowledge with gratitude the co-operation and assistance received from the Central and State GovernmentAuthorities, Financial Institutions, Banks and other Lenders. Your Directors thank the Shareholders, Depositors, Customers,Vendors and other business associates for their continued support. The Board wishes to place on record its appreciationof the contribution made by the employees at all levels.

FOR AND ON BEHALF OF THE BOARD

NOIDA Shyam S. BhartiaApril 18, 2006 Chairman & Managing Director

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Annexure-ADetails as per Regulation 12 of SEBI (ESOP & ESPS) Guidelines, 1999

a) Options granted 594,391b) Pricing formula Market price of share as on the date of grant, as per SEBI Guidelines.*c) Options vested Nild) Options exercised Nile) Total number of shares arising as a results of exercise of options 594,391 equity shares of Rs. 5 each. However, due to sub-division

of shares, 2,971,955 Equity Shares of Re.1/- each will arise.f) Options lapsed 32,913g) Variation of terms of options Nilh) Money realized by exercise of options Nili) Total number of options in force 561,478j) Employee-wise details of options granted to :–

i) senior management personnel; Dr. Jag Mohan Khanna 38,747Mr. S N Singh 36,878Mr. S Bang 30,305Mr. R Sankaraiah 36,695Mr. Promod Yadav 19,386Mr. Rajesh Srivastava 18,504Mr. Pankaj Kapoor 14,360Mr. Raju Kapoor 12,490Mr. Ananda Mukherjee 11,615Dr. Ashutosh Agrawal 19,847Mr. Dilip Roy 14,750Mr. Bundla Venkat Kamlakar 12,185Dr. Sukhbir Puri 11,405Dr. Anjan Ray 10,022Mr. Satya Dev Adurti 12,939Mr. A P Srivastava 16,169

ii) any other employee who received a grant in any one year of options Mr. Lloyd Baroody 30,000amounting to 5% or more of options granted during that year;

iii) identified employees who are granted options, during any one year, Nilequal to or exceeding 1% of the issued capital (excluding outstandingwarrants and conversions) of the company at the time of grant

k) Diluted earning per share pursuant to issue of shares on exercise of option The Company has calculated the employee compensation cost usingcalculated in accordance with Accounting Standard AS-20. the intrinsic value method of accounting to account for options issued under

“Jubilant Employees Stock Option Plan 2005”. The stock basedcompensation cost as per the intrinsic value method for the financialyear 2005-06 is Nil.

l) Where the company has calculated the employee compensation cost If the employee compensation cost was calculated as per the fair valueusing the intrinsic value of the stock options, the difference between of options based on Black Scholes methodology, read with Guidancethe employee compensation cost so computed and the employee Note on “Accounting for Employee Share-based Payments” issued bycompensation cost that shall have been recognized if it had used Institute of Chartered Accountants of India, the total cost to bethe fair value of the options, shall be disclosed. recognized in the financial statements for the year 2005-06 would beThe impact of this difference on profits and on EPS of the Rs.43.57 million. The effect of adopting the fair value method on thecompany shall also be disclosed net income and earnings per share is presented below.

Pro Forma Adjusted Net Income and Earnings Per Share:

Particulars Rs. MillionsNet IncomeAs Reported 1387.90Add: Intrinsic Value Compensation Cost NilLess: Fair Value Compensation Cost 43.57Adjusted Pro Forma Net Income 1344.33Earnings Per Share of Re. 1 each:

Basic (In Rupees)As reported 10.15Adjusted Proforma 9.83Earnings Per Share of Re.1 each:Diluted (In Rupees)As reported 9.17Adjusted Proforma 8.88

m) Weighted-average exercise prices and weighted-average fair values of (i) Where exercise price equals the marketoptions shall be disclosed separately for options whose exercise price price of the stock options:either equals or exceeds or is less than the market price of the stockoptions - Weighted average of exercise prices of options: 201.26

- Weighted average of fair values of options: Rs. 100.26(ii) Where exercise price exceeds the market price of the stock

options: Not applicable(iii)Where exercise price is less than the market price of the stock

options: Not applicablen) A description of the method and significant assumptions used during

the year to estimate the fair values of options, including the followingweighted-average information :–i) risk-free interest rate,ii) expected life,iii) expected volatility,iv) expected dividends, andv) the price of the underlying share in market at the time of option grant.

* The grant price was Rs. 1006.65 for 564,391 Options and Rs. 1002.05 for 30,000 Options. As a result of sub-division, the exercise price for the two tranchesshall be reduced to Rs. 201.33 and Rs. 200.41 per share (Re. 1 paid up) respectively and the number of shares to be allotted on conversion would be 5 times theoriginal entitlement.

AnneAnneAnneAnneAnnexure to the Directors’ Reportxure to the Directors’ Reportxure to the Directors’ Reportxure to the Directors’ Reportxure to the Directors’ Report

The fair value has been calculated using the Black Scholes Option PricingModel.

7.52%6.75 years40%0.90%201.33

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Annexure - B

DISCLOSURE 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.

A. CONSERVATION OF ENERGY

(a) Energy Conservation measures taken:

• Commissioning of new boiler with higher efficiency resulting in lower steam generation cost

• Commissioning of new turbine with higher efficiency resulting in lower power generation cost

• Phasing out of inefficient old diesel fired generator

• Reduction of power consumption in Distillery by improving pumping efficiency

• Reduction in power consumption in Acetaldehyde and Acetic Anhydride plants by installation of lower head maincooling water pumps & providing booster pumps for higher elevation

• Reduction in steam consumption in Acetaldehyde plant by recovering heat available in waste stream

• Reduction in power consumption in Acetic Acid and Ethyl Acetate plants by improving cooling water pumping efficiency

• Reduction in steam consumption in Acetic Anhydride plant by recovering heat of distillation column vapours

• Reduction in steam consumption in Ethyl Acetate plant by reducing the size of reboiler of distillation column

• Reduction in steam consumption norms for 3 Cyno-Pyridine by recovering heat from column vapours

• Reduction of Light Diesel Oil (LDO) consumption for 3 Cyno-Pyridine production by recovering heat from exothermicreaction in reactors

• Reduction in power consumption in Pyridine plant by installation of matching capacity compressors for process air

• Reduction of LDO consumption in Lutidine plant by improving hot oil piping insulation and replacing nozzles

• Replacement of existing electric heater with steam heater for raw furnance oil heating at Separator & Booster unit

• Installation of Oxygen Analyser for improving boiler efficiency

• Utilization of flash steam in 3 Cyno-Pyridine plant

• Reduction in steam/condensate losses and utilization of Pyridine plant flash steam for deareator by right sizing ofcondensate pumping and flash steam recovery system

• Installation of dual speed motors and temperature control on Cooling Tower fans

• Installation of photo sensors on streetlight network, conversion of existing MV lamp to CFL

• Replacement of 75 MVA transformers with 500 KVA on UPSEB power

• Reduction of furnace oil consumption in Dry Choline Chloride Plant by optimizing dryer outlet temperature andimproving insulation in the plant

• Reduction of electricity consumption in Liquid Choline plant

• Installation of biogas boiler to reduce consumption of coal and LDO for steam generation

• Enhanced biogas generation from biogas reactor by process improvement resulting in reduction of coal and LDOconsumption

• Reduction in specific consumption of power is achieved by replacing higher size motor with optimum size motor aswell as better capacity utilization

• Recovery of flash steam from condensate tank by installing scrubber over condensate tank

• Replaced 2 higher sized pump and motor with optimum size pump and motor to reduce power consumption

• Compressed air in fermentation section replaced by purge Co2 gas thus reducing the power consumption of air

compressors

• Reduction in steam consumption by optimizing waste water and wash column

• Installed variable frequency drive on various electric motors which has resulted in substantial power saving

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(b) Additional investment and proposals, if any, being implemented for reduction of consumption of energy:

1. Improving the recovery of condensate in process plants.

2. To increase heat recovery in Sulphuric Acid plant.

3. Recovery of flash steam from condensate in Acetic Anhydride plant.

4. Reduction in chilled water pumping power.

5. Reduction in cost of refrigeration by revamping/ replacement of chiller unit and brine unit.

6. Reduction in cooling water pumping cost.

7. Reduction of steam consumption in Pyridine plant by pyridine column heat utilisation.

8. Utilisation of waste steam for steam tracing / storage tank in place of steam from boiler.

9. Reduction of steam and power consumption in 3 Cyno-Pyridine plant.

10. Provision of high pressure/ low pressure cooling water system in Acetic Acid plant.

11. Installation of booster pumps for cooling water in Acetic Acid plant.

12. To convert hot oil unit from LDO firing to biogas firing system at polyurethane plant.

13. Rerouting of high pressure steam for additional power generation using 8 Kg/cm2 steam instead of15Kg/cm2 in Pyridine plant.

14. Use flue gas analyser for monitoring O2 level in boiler.

15. Recovery of condensate from Latex plant and Liquid Choline plant.

16. Reduction in steam consumption by heat recovery.

17. Conservation of energy by increasing condensate recovery.

18. Rationalization of cooling water distribution in Acetic Acid plant.

19. Installation of VFD on electric motors to save power.

20. Maintenance of steam traps and valves to reduce steam loss.

Rs.36.79 million is expected to be invested in the above proposals.

(c) Impact of measures at (a) & (b) above for reduction of energy consumption and consequent impact on the cost of

production of goods.

• Reduction in steam and power consumption norms in all plants

• Reduction in coal/LDO/furnace oil consumption

• Reduction in steam and power generation cost

• Improved consistency in production.

1. Saving due to Conservation of energy : Rs.32 million per annum approx.

2. Saving due to the proposal b (1) to b (20) : Rs.25 million per annum approx.


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(d) Total Energy Consumption and energy consumption per unit of production

FORM A

A. Power & Fuel Consumption

2005-06 2004-051. ELECTRICITY

A. Purchased

i) Units KWH 42,760,732 37,915,701

ii) Total Amount Rs./million 161.07 142.51

iii) Rate / unit Rs./KWH 3.77 3.76

B. Own Generation

Through DG

i) Units KWH 67,123,599 81,140,593

ii) Unit per litre of RFO/LDO KWH/LTR 3.72 3.70

iii) Cost / unit Rs./KWH 3.68 2.96

Through Steam Turbine Generator *

i) Units KWH 78,594,560 46,915,940

ii) Units per MT of Steam KWH/MT 481.27 328.85

iii) Cost / unit Rs./KWH 1.56 1.93

2. Coal**

Quantity MT 264,478.17 222,602.25

Total Cost Rs./million 621.67 490.58

Average Rate Rs./MT 2,350.53 2,203.85

3. Furnace Oil

Quantity KL 27,052 32,125

Total Cost Rs./million 408.41 386.39

Average Rate Rs./KL 15,097.26 12,027.61

4. Others/Internal Generation

Internal Generation - Biogas

Quantity NM3 47,644,554 41,235,094

Total Cost *** Rs./million 18.13 21.39

Average Rate Rs./NM3 0.38 0.52

* Steam is produced in boilers using coal, fuel and gas.** E grade coal is used for power generation and C/D grade is used for steam generation.*** No raw material cost as it is produced from waste water only.

B. Consumption per Unit of Production

2005-06 2004-05

Pharmaceuticals & Life Science Chemicals

Electricity KWH/MT 565.75 842.65

Steam MT/MT 5.45 6.09

Furnace Oil LT/MT 43.24 59.73

Bio Gas NM3/MT 261.14 465.31

Performance Chemicals



Furnace Oil L/MT 4.09 4.75

Bio Gas NM3/MT - -

Industrial Chemicals



Furnace Oil L/MT 1.34 2.14

Bio Gas NM3/MT 9.04 8.45

Reason for variation in consumption of power and fuel from standard of previous year :

1. In Pharma & Life Science segment consumption reduced due to higher production of formaldehyde wherein onlypower is consumed.

2. Reduction in power & fuel due to various process improvements undertaken under six sigma velocity initiatives.

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54

B. TECHNOLOGY ABSORPTION

(a) Research and Development (R & D)

The Company has R&D Centres at Noida, Gajraula, Nanjangud and Samlaya. The Company has 242 R&D employeesout of which 81 are doctorates and others are post graduates and graduates. R&D supports the activities of variousbussineses through new product development, diversification, process development, absorption of technology andestablishing the technology on plant scale.

1. Specific areas in which R&D carried out by the company:

(i) Active Pharmaceutical Ingredients and Dosage Forms

• Process development of Active Pharmaceutical Ingredients (APIs)

• Improvements in the processes for the manufacture of APIs

• Creation of intellectual property through development of new synthetic routes

(ii) Biotechnology

• Microbial processes for the treatment of industrial effluents

• Bio composting

• Processes for the manufacture of speciality and fine chemicals using bio-conversion routes

• A special emphasis is laid down to create collaborative approach with leading institutions to fast trackdevelopment of biocatalytic processes for synthesis of organic compounds

(iii) CRAMS

• Product/process developments in the field of pyridine and its derivatives and heterocyclic chemistry

• Chemistry skill diversification to non-heterocyclic compounds leveraging skills while handling heteroafalicchemistry.

• Process improvements in the manufacture of key products

• Chiral compounds

(iv) Contract Research

• Advance intermediates for pharmaceuticals and agrochemicals

• Synthesis of new compounds for drug discovery, pre-clinical and clinical studies

(v) Performance Chemicals

• Development of speciality polymers

• Development of ethoxylates & emulsifiers

• Development of new latexes based on Butadiene chemistry

• Development of animal healthcare products

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

• Strong position in knowledge based businesses

• Partners of choice for global pharmaceuticals and agrochemical companies

• Global leadership in select segments of our business

• Development of new products

• Generation of own Intellectual Property Rights to provide competitive edge

• Major growth in export of our products

• Competitiveness in cost and quality

• Pollution control


49-68.p65 8/11/2006, 1:44 PM54


3. Future action plan

• Process development for identified active pharmaceutical ingredients

• Process development for identified dosage forms

• Process development of new derivatives of Pyridine and other heterocyclic chemicals

• Process development for non-heterocyclic chemicals leaveraging on skill already developed while handlingheterocyclic chemistry

• New Drug Delivery System research

• Bio transformations for the manufacture of fine and speciality chemicals

• Synthesis of chiral compounds

• Improvement in the fermentation technology and effluent treatment

• Development of new products in the field of polymers and adhesives for application in coating, textile, footwear,paper, auto, electronic and other industries

4. Expenditure on R&D

(Rs./million)

2005-06 2004-05

(a) Capital 291.95 226.36

(b) Recurring 101.78 119.69

(c) Total 393.73 346.03

(d) Total R & D expenditure as a percentage of total turnover 2.84% 3.10%

(e) R & D expenditure as a percentage of Pharmaceuticals & Life ScienceChemicals turnover 6.98% 8.08%

(b) Technology absorption, adaptation and innovation:

1. Efforts, in brief, made towards technology absorption, adaptation and innovation

Research & Development plays a vital role in developing and adopting new technologies to enhance our operationalefficiencies. We develop new technologies at the lab scale and the scientists and manufacturing engineers work inclose co-ordination to seamlessly scale-up the processes to commercial scale without losing on the efficiency of theprocess. Six Sigma initiatives at plants and R&D support the adoption of new technologies and enhancing theefficiencies of our manufacturing plants to provide better services to our customers.

2. Benefits derived as a result of the above efforts, e.g. product improvement, cost reduction, product development,

import substitution etc.

The innovation in all the areas of our business results in new and more efficient products, which helps in improvementof the performance of our customers. Our R&D is grounded in business reality and we measure the performance ofour R&D through the new product launches over the last five years and their contribution to the net sales of yourCompany. Over the last five years your Company developed 80 products which contribute 16% of the net sales.

These continuous efforts result in improvement in cost and our service to the customers.

3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial

year): Not Applicable

Technology Imported Year of import Has technology been If not fully absorbed, areas wherefully absorbed? this has not taken place, reasons

therefor and future plans of action.

—————————— NIL ———————————-

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56

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for products

and services

• Activities relating to exports

Exports is the focus area of growth for your company. During FY 2006, exports were Rs. 4.8 billion as comparedto Rs. 3.6 billion in the previous year, recording a growth of 30.5%. Exports contributed 34.3% of the net sales ofthe Company during FY 2006 as compared to 32.7% in FY 2005.

With pharmaceuticals and life science chemicals business as the growth driver, exports to regulated markets ofUSA, Europe and Japan have grown significantly over the last one year. Exports to regulated markets contributed53.1% of the total exports of the Company. China is another key growth market for Jubilant Organosys with salesgrowing by 87.7% during the financial year 2006.

Your Company exports around 60 products to more than 50 countries worldwide. The API division has opened upnew market of Latin America whereas CRAMS business has expanded its presence in Japanese market.

• Initiatives taken to increase exports

Exports is the focus area for growth for all the businesses of your Company. In pharmaceuticals and life sciencechemicals business, where the Company already has more than 150 global customer relationships, the focus wason expanding the presence in the existing markets and providing more products and services to meet our customersdemand. New markets were also added during the year. Your company will continue to leverage strong customerrelationships with global pharmaceutical, biotech, agrochemicals and food & feed companies.

To further enhance the quality of services to our customers, your Company increased the staff in its existingsubsidiaries. Jubilant Organosys also acquired companies in USA in generic pharmaceuticals and clinical researchbusinesses which will further enhance the Company’s presence as an outsourcing partner of choice for global lifesciences companies.

• Development of new export markets for products and services

Your Company added new international markets during FY 2006 which include Latin American countries for API,Japan for Advance Intermediates and Fine Chemicals and Russia for organic intermediates.

Performance Chemicals business enhanced its presence in Middle East and Indian sub-continents.

• Export Plans

Your Company will continue to focus on exports for all its business divisions. In pharmaceuticals and life sciencechemicals focus would be on increasing the high growth regulated markets and select opportunities in othermarkets in Latin America and Africa. Industrial Chemicals and Performance Chemicals will continue to focus onAsian markets with exports to Europe whenever opportunities exist.

International subsidiaries will further enhance the Company’s presence in international markets.

• Approach towards Foreign Exchange Risk Management

Your Company actively manages foreign exchange risk on its exposures. The objective is to protect foreign exchangeexposures from the risk of unfavourable market trends. When exchange rate movements reveal a trend whichadversely affects the value of the Company’s exposures, forward contracts or derivatives are evaluated andimplemented to ensure that there is a high degree of certainty about the exchange rates at which actual transactionswill be recorded. When market exchange rate trends are in favour of the Company’s exposures, such exposuresare kept unhedged to benefit from these movements.

Your Company also entered into Interest Rate Swaps in FY 2006 to protect the Company’s interest cost on USDliabilities.

(b) Total foreign exchange used and earned

(Rs. million)

2005-06 2004-05

Foreign exchange used 2729.03 2157.72

Foreign exchange earned 4653.94 3396.95


49-68.p65 8/11/2006, 1:44 PM56


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49-68.p65 8/11/2006, 1:44 PM57


58

ANNEXURE-D

REPORT ON CORPORATE GOVERNANCE

a) Company’s Philosophy

The Company is driven by the fundamental objective of maximising value by employing its assets and resources inopportunities that generate the greatest returns and position it for sustained growth, guided by the promise of“Caring, Sharing, Growing”.

“We will with utmost care for the environment, continue to enhance value; for our customers by providing innovativeproducts and economically efficient solutions; and for our shareholders through sales growth, cost effectiveness andwise investment of resources.”

In line with the aforementioned promise, your Company has adopted a comprehensive Corporate SustainabilityManagement System that focuses on triple bottom-line reporting on economic, environment and society as perGlobal Reporting Initiatives standards. This was put in place in fiscal 2003 and the Company has reported onprogress made, in the subsequent years.

The Company has a stated policy on sustainability which clearly articulates its approach towards sustainabledevelopment through a well laid process for identification of stakeholders and a formal programme for interactionwith them to take their feedback and take action to mitigate the risks indicated through such interactions. This willnot only ensure long term sustainability of the Company but would also help in enhancing shareholder value.

Jubilant’s commitment to high standards of corporate governance practices is reflected in the well-balanced andindependent structure of the Company’s eminent and well-represented Board of Directors. The Board has a fairrepresentation of executive, non-executive and independent directors, and this emphasis on an independent perspectiveof the Board is further reinforced by the fact that more than three-fourths of the board members are non-promoters.Your Company met all the standards of revised Clause 49 of the Listing Agreement and has proactively completedthe documentation required as per Sarbanes Oxley Act. This reflects the Company’s philosophy to meet internationalstandards in corporate governance and reporting even more than what is statutorily required.

The Company recognises the importance of sustained and constructive communication with all stakeholders includinginvestors, lenders, vendors, customers and the community surrounding its operating facilities as a key element in itsoverall Corporate Governance framework. Jubilant Organosys, through multiple forms of corporate and financialcommunication such as Annual Reports, Corporate Sustainability Reports, Quarterly and Annual Results,Announcements, Media Releases, implements continuous, efficient and relevant communication to all its stakeholders,research analysts and business associates.

b) Board of Directors

The Board comprises of twelve directors out of which seven are Non-Executive Independent Directors, two ManagingDirectors and three Executive Directors. During the year under review, 6 Board Meetings were held on April 4,2005, April 16, 2005, July 30, 2005, September 6, 2005, October 28, 2005 and January 14, 2006. Thecomposition of the Board of Directors and attendance of directors at the Board meetings, Annual General Meeting asalso number of other directorships/committee memberships in Indian public limited companies are as follows:

Report on Corporate GovernanceReport on Corporate GovernanceReport on Corporate GovernanceReport on Corporate GovernanceReport on Corporate Governance

49-68.p65 8/11/2006, 1:44 PM58


Name of the Director Attendance No. of Category of Other Committee

at last Board Meetings Director Director- memberships

AGM attended ships^ (including

Chairman-ship) **^

Mr. Shyam S Bhartia Yes 6 CMD (Promoter) 12 1(1)

Mr. Hari S Bhartia Yes 6 CCMD (Promoter) 12 2

Dr. J M Khanna No 6 ED 3 2

Mr. S N Singh No 6 ED 2 1

Mr. Shyam Bang Yes 6 ED 1 -

Mr. Bodhishwar Rai Yes 5 NED/ID 13 10 (5)

Mr. Arabinda Ray No 6 NED/ID 2 1

Mr. Surendra Singh Yes 6 NED/ID 6 8 (3)

Dr. Naresh Trehan No 4 NED/ID 6 1 (1)

Mr. H K Khan No 6 NED/ID 2 3 (1)

Mr. Ajay Relan # No 4 NED/ID 9 3

Mr. Abhay Havaldar * Not applicable 3 NED/ID 4 5

Mr. Sanjiv Kapur #(Alternate Director to Mr. AjayRelan till October 28, 2005) No — NED/ID N/A N/A

Mr. Vishal Marwaha #(Alternate Director to Mr AjayRelan from October 28, 2005) Not applicable — NED/ID 1 -

CMD - Chairman & Managing Director; CCMD - Co-Chairman & Managing Director NED - Non Executive Director;ED- Executive Director; ID - Independent Director

# Nominee of Citicorp International Finance Corporation and HPC Mauritius Ltd. – Equity Investors.

* Nominee of GA European Investments Limited – Equity Investors, appointed w.e.f. September 6, 2005.

** Committees for this purpose include Audit Committee and Investors Grievance Committee only.

^ Excluding private companies and foreign companies

c) Committees of the Board

The Board of Directors have constituted Committees of Directors with adequate delegation of powers to dischargeurgent business of the Company. The Committees under the Corporate Governance are (a) Audit Committee (b)Investors Grievance Committee (c) Remuneration Committee. The Committees meet as often as required.

1) Audit Committee

(i) Terms of reference:

The terms of reference of Audit Committee are the reviewing of all matters specified in revised clause 49of the Listing Agreement and section 292A of the Companies Act, 1956, which inter-alia include thefollowing:

� Oversight of financial reporting process and disclosure of financial information

� Reviewing the performance of statutory auditors and recommendation of their appointment/re-appointment/ replacement/removal and fixing of their remuneration

� Reviewing the quarterly and yearly financial statements before submission to the Board

� Reviewing the adequacy of internal control systems and internal audit functions

� Discussion with internal auditors of any significant findings and follow up thereon

� Reviewing Management Discussion and Analysis of financial condition and results of operations

� Reviewing internal audit reports relating to internal control weaknesses

49-68.p65 8/11/2006, 1:44 PM59


60

� Reviewing financial statements of subsidiaries, in particular, the investments made by the unlistedsubsidiary companies

� Reviewing related party transactions

(ii) Composition

The Committee comprises of 6 Non-Executive Independent Directors. The Company Secretary is theSecretary of the Committee. The Internal Auditors and External Auditors are also invited to attend themeetings of the Committee. The Committee met 5 times during the year on April 15, 2005, July 26,2005, September 20, 2005, October 28, 2005 and January 13, 2006. The attendance of members atthe meetings was as follows:

Name of the Member Status No. of meetings attended

Mr. Bodhishwar Rai Chairman 5

Mr. Arabinda Ray Member 5

Mr. Surendra Singh Member 3

Mr. Ajay Relan Member —

Mr. Abhay Havaldar (w.e.f. September 6, 2005) Member 1

Mr. H K Khan (w.e.f. October 28, 2005) Member 1

2) Investors Grievance Committee

(i) Terms of reference:

The Committee has been formed to approve the matters relating to transfer/transmission of shares, issueof duplicate certificates, non-receipt of balance sheet, non-receipt of dividend, review / redressal ofinvestors’ grievances etc.

ii) Composition

The Committee comprises of 2 Non Executive Directors viz. Mr. H K Khan and Mr. Bodhishwar Rai andone Executive Director- Mr. S N Singh. Mr. H K Khan is the Chairman of the Committee.

The Board has designated Mr. Lalit Jain, Company Secretary as the “Compliance Officer”.

iii) Investors’ Complaints received and resolved during the year

During the year the Company received 261 complaints, which were resolved. No complaint was pendingas on March 31, 2006.

The Company had 19,335 investors as on 31.03.2006. During the year under review, the Companyreceived 66,526 (61,361 shares of Rs. 5 each and 5165 shares of Re. 1 each) shares for transfer/transmission/transposition out of which 39,443 (35,578 shares of Rs. 5 each and 3,865 shares ofRe. 1 each) were transferred and the rest rejected for technical reasons.

3) Remuneration Committee

(i) Terms of reference

The Committee is empowered to decide and approve the remuneration of the Executive Board Membersof the Company.

(ii) Composition

The Committee comprises of 3 Non-Executive Independent Directors namely, Mr. Arabinda Ray,Mr. Bodhishwar Rai and Mr. Surendra Singh. Mr. Arabinda Ray is the Chairman of the Committee. TheCompany Secretary is the Secretary of the Committee.

During the year, one meeting of the Committee was held on September 6, 2005 which was attended byMr. Arabinda Ray, Chairman and Mr. Bodhishwar Rai and Mr. Surendra Singh, Members.

(iii) Remuneration Policy

Remuneration policy aims at encouraging and rewarding good performance/contribution to the Companyobjectives.


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d) Details of remuneration paid to directors for the year 2005-06

i) Remuneration to Managing/Whole-Time Directors

Mr. Shyam S Bhartia, Chairman & Managing Director and Mr. Hari S Bhartia, Co-Chairman & ManagingDirector were re-appointed for a period of five years each w.e.f. April 01, 2002. Mr. S N Singh andMr. Shyam Bang, Executive Directors were re-appointed for a period of five years each w.e.f. November 01,2003. Dr. J M Khanna, was appointed on August 16, 2002 as Executive Director for a period of five years.

Remuneration including perquisites, commission and retirement benefits paid to directors for the year 2005-06 was as follows:

(Amount in Rupees)

Mr. Shyam Mr. Hari Mr. S N Mr. Shyam Bang Dr. J MS Bhartia S Bhartia Singh Khanna

Salary 1,500,000 1,500,000 3,270,150 2,574,075 4,140,300

Commission 16,500,000 16,500,000 Nil Nil Nil

Perquisites 1,270,184 2,682,822 2,589,117 2,106,154 3,375,401

Bonus/ Exgratia Nil Nil Nil Nil Nil

Contribution toSuperannuation Fund 225,000 225,000 490,523 386,111 621,045

Contribution toProvident Fund 180,000 180,000 392,418 308,889 496,836

TOTAL 19,675,184 21,087,822 6,742,208 5,375,229 8,633,582

Stock Options (Number) Nil Nil 36,878* 30,305* 38,747*

The above excludes the provision for gratuity as the same is calculated on overall Company basis.

* Stock Options were granted on September 6, 2005. The holder of each Stock Option has a right to subscribe to oneequity share of Rs.5 at an exercise price of Rs.1,006.65 per share (market price as at the date of grant). The Options vestin the holders in stages, over five years from the date of grant. However, as a result of sub-division of equity shares, theholder of each Stock Option has a right to subscribe to five equity shares of Re.1 each at an exercise price of Rs.201.33 perequity share.

Service Contracts, Notice Period, Severance Fees

The appointments of Managing Directors and Whole time Directors are contractual. The appointments of theWhole time Directors are terminable by the Company by giving 3 months notice or salary in lieu thereof.

ii) Remuneration to Non-Executive Directors

Sitting fees for Board Meetings/ Committee Meetings, commission and stock options paid/granted tothe Non-Executive Directors for year ended March 31, 2006 were as under :

Sitting Fees (Rs.) Commission* (Rs.) Stock Options#

Mr. Bodhishwar Rai 212,500 200,000 5,000

Mr. Arabinda Ray 165,000 200,000 5,000

Mr. Surendra Singh 155,000 200,000 5,000

Mr. H K Khan 182,500 200,000 5,000

Dr. Naresh Trehan 70,000 200,000 5,000

Mr. Ajay Relan Nil Nil Nil

Mr. Abhay Havaldar Nil Nil Nil

Mr. Sanjeev Kapoor Nil Nil Nil

Mr. Vishal Marwah Nil Nil Nil

Total 785,000 1,000,000 25,000

* Commission to the Non-Executive Directors is payable in terms of approval obtained from the Central Government.

# Stock Options were granted on September 6, 2005. The holder of each Stock Option has a right to subscribe toone equity share of Rs.5 at an exercise price of Rs.1,006.65 per share (market price as at the date of grant). The

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Options vest in the holders in stages, over five years from the date of grant. However, as a result of sub-division ofequity shares, the holder of each Stock Option has a right to subscribe to five equity shares of Re.1 each at anexercise price of Rs.201.33 per equity share.

Number of Equity Shares in the Company held by Non-Executive Directors as on March 31, 2006

Name Shares of Re.1 each held

Mr. Bodhishwar Rai Nil

Mr. Arabinda Ray 1,740

Mr. Surendra Singh Nil

Mr. H K Khan Nil

Dr. Naresh Trehan Nil

Mr. Ajay Relan Nil

Mr. Abhay Havaldar Nil

Mr. Vishal Marwah Nil

Other than holding shares/options as above and remuneration indicated above, the Non-Executive Directors did nothave any pecuniary relationship or transactions with the Company.

iii) Criteria for making payment to Non-Executive Directors

The Company considers the time and efforts put in by the Non-Executive Directors in deliberations at Board/Committee meetings. They are compensated through sitting fees for attending the meetings and also throughcommission as approved by Central Govt.

e) General Body Meetings

(i) The last three Annual General Meetings of the Company were held as under:

Financial Year Date Time Location

2004-05 29-08-2005 11.30 a.m. Registered Office: Bhartiagram,Gajraula, District Jyotiba PhoolayNagar, U.P.

2003-04 15-09-2004 11.30 a.m. Same as above

2002-03 26-09-2003 11.30 a.m. Same as above

(ii) Special resolutions passed during last 3 AGMs

AGM Date of AGM Subject matter of Special Resolutions Passed

27th

AGM August 29, 2005 1. Payment of commission to Non-Executive Directorsnot exceeding 1% p.a. of the net profits of theCompany, subject to a maximum of Rs.2 Lacs p.a.to each such Non-Executive Director.

2. Permitting one or more Foreign Institutional Investorsto invest and hold in the aggregate, upto 45% of thepaid-up capital of the Company.

3. Preferential issue of 990,000 equity shares of Rs.5each, at a price of Rs.1,100 per equity share to GAEuropean Investments Ltd.

4. Issue of upto 717,500 Stock Options to employees.

5. Issue of Stock Options to employees of subsidiarycompanies.

26th

AGM September 15, 2004 NIL

25th

AGM September 26, 2003 NIL

(iii) Special resolutions passed through Postal Ballot last year

During the year under review, 2 special resolutions, both for alteration of Objects Clause of Memorandum ofAssociation, were passed through Postal Ballot on September 6, 2005 and March 7, 2006 respectively.Mr. Tanuj Vohra, Practising Company Secretary, conducted the postal ballot exercise on both the occasions, asScrutinizer. Details of voting pattern for both the resolutions are as under :


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September 6, 2005 March 7, 2006(Alteration of Objects Clause of the Memorandum (Alteration of Objects Clause ofof Association covering ‘Research & Development’, the Memorandum of‘Pharmaceuticals and Life Sciences Products’ and Association for insertion of SEZ Objects)

‘Alcohol and Alcohol Related Products’)

Particulars No. of Postal No. of % age of No. of No. of % age ofBallot Forms Votes total valid Ballot Forms Votes total valid

received votes cast received votes cast

1. Total Postal Ballot Forms received 76 14,714,690 N/A 245 14,254,945 N/A

2. Less : Defaced and MutilatedPostal Ballot Forms received Nil Nil N/A Nil Nil N/A

3. Less : Invalid Postal BallotForms 3 280 N/A 22 2,152 N/A

4. Net Valid Postal Ballots 73 14,714,410 100% 223 14,252,793 100%

5. Postal Ballots assentingto the resolution 73 14,714,410 100% 221 14,252,623 99.999%

6. Postal Ballots dissentingfrom the resolution Nil Nil Nil 2 170 0.001%

(iv) Whether any Special resolutions are proposed to be passed through Postal Ballot

No

(v) Procedure for Postal Ballot

The notices containing the proposed resolutions and explanatory statements thereto were sent to the registeredaddresses of every shareholder of the Company alongwith a Postal Ballot Form and a postage pre-paid envelopecontaining the address of the Scrutinizer. Mr. Tanuj Vohra, Practising Company Secretary, was appointed by theBoard as the Scrutinizer for carrying out postal ballot process on both the occasions. The Postal Ballot Formsreceived within 30 days of despatch were considered by the Scrutinizer, who submitted his report to the Chairman& Managing Director of the Company, who on the basis of the report, announced the resolutions to be passedwith requisite majority.

f) Disclosures

(i) There are no materially significant transactions with the related parties viz. promoters, directors or themanagement, their subsidiaries or relatives, etc. that may have a potential conflict with the interests of theCompany at large. Related party transactions are given at Note No. 19(a) of Schedule ‘O’ to the accounts.

(ii) No non- compliances have taken place nor have any penalties or strictures been imposed on the Company by theStock Exchanges or SEBI or any statutory authority on any matter related to capital markets during the last threeyears.

(iii) The Company does not have a whistle-blower policy which is non-mandatory.

g) Means of Communication

(i) The quarterly results of the Company are sent to the Stock Exchanges immediately after they are approved bythe Board. The results are published in leading Business Newspapers of the country like The Economic Timesand The Hindu Business Line, general interest national newspapers like The Times of India, Hindustan Timesand The Pioneer and the regional newspapers like Amar Ujala and Dainik Jagran in accordance with theguidelines of Stock Exchanges.

(ii) The results are also posted on the website of the Company at http://www.jubl.com. The website also displaysofficial news release. The results are also posted on the official website of SEBI http://www.sebiedifar.com.

(iii) Your Company has well laid out plans for communication to institutional shareholders and brokers. A detailedinvestors communication is sent through e-mail to all the leading Indian and international analysts on both buyand sell side and fund managers. During the financial year the company organised Earnings Calls after everyquarterly results which were well attended by the analysts and fund managers. The Company also organisedone to one meetings with investors in Mumbai post the announcement of quarterly results.

To keep the international investors informed on the developments in the Company, your Company madeinvestor presentations during the company roadshows and investor conferences in USA, Europe, Singaporeand Hong Kong.

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h) General Shareholders’ Information

(i) Date, time and venue for 28th Annual General Meeting : As per notice of 28th

Annual General Meeting.

(ii) Tentative Financial Calendar- 2006-07(Subject to change)

First Quarter Results Last week of July, 2006

Half Yearly Results Last week of October, 2006

Third Quarter Results Last week of January, 2007

Audited Annual Results for the year Last week of May, 2007

(iii) Book Closure & Dividend Payment Dates

As per Notice of 28th

Annual General Meeting, the Dividend, if declared, will be paid within 30 days from thedate of the

Annual General Meeting. Book closure dates as per Notice of 28th Annual General Meeting.

(iv) Listing on Stock Exchange and Stock codes

The names of the Stock Exchanges at which the equity shares of the Company are listed and the respectivestock codes are as under:

S.No. Name of the Stock Exchange Stock Code

1. Bombay Stock Exchange Limited 530019

2. National Stock Exchange of India Ltd. JUBILANT

(v) Market price data

High/low of market price of the Company’s equity shares traded on the Stock Exchanges during 2005-06 was asfollows:

(Equity Shares of Rs.5/- each)

Month NSE BSEHigh (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April, 2005 960.00 860.00 940.00 845.05

May, 2005 939.70 884.10 950.00 880.00

June, 2005 955.00 901.20 1000.00 900.00

July, 2005 977.00 920.40 974.00 930.00

August, 2005 1015.00 931.80 1010.00 940.25

September, 2005 1054.90 917.50 1054.00 985.00

October, 2005 1089.90 947.55 1089.90 950.00

November, 2005 1019.90 962.50 1043.00 965.00

December, 2005 1080.00 985.00 1090.00 989.00

January, 2006 1210.00 1025.00 1209.90 1055.00

February, 2006 1100.00 989.00 1094.00 1030.00

March, 2006* 1295.00* 1002.75* 1267.50* 1080.05*

* During March, 2006, the equity shares of Rs.5/- were sub-divided into equity shares of Re.1/- each.However, for proper comparison the above high/low share prices have been adjusted at Rs. 5 per share.

(vi) Performance of the Company’s equity shares in comparison to BSE Sensex

The above chart is based on the monthly closing prices of the shares of the Company and monthly closing BSE Sensex.

During March, 2006, the equity shares of Rs.5 were sub-divided into equity shares of Re.1 each. However, for propercomparison the above high/low share prices have been adjusted at Rs. 5 per share.


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(vii) Registrar and Transfer Agent

The Company has appointed M/s Alankit Assignments Limited, Alankit House, 2E/21, Jhandewalan Extension,New Delhi 110 055 as Registrar and Share Transfer Agent for physical as well as electronic connectivity withthe depositories for dematerialised shares.

(viii) Share Transfer System

Investor Grievance Committee is authorised to approve transfers of securities. Share transfers which are receivedin physical form are processed and the share certificates are normally returned within a period of 15 days fromthe date of receipt subject to the documents being valid and complete in all respects. The dematerialisedshares are transferred directly to the beneficiaries by the depositories.

(ix) Disclosures

In accordance with the SEBI (Prohibition of Insider Trading) Regulations, 1992 and subsequent amendments,the Company has implemented a Code of Conduct for Prevention of Insider Trading in Equity Shares of theCompany for observance by its Directors and other identified persons.

The Company Secretary is the Compliance Officer in this regard.

(x) Unclaimed Dividends

Dividends pertaining to the financial years upto and including 1993-94 remaining unclaimed have beentransferred to the General Revenue Account of the Central Govt. Shareholders having valid claims of unpaiddividend for any of these financial years may approach the Registrar of Companies, U.P. & Uttaranchal,Kanpur.

Dividends pertaining to the financial years 1994-95 to 1997-98 remaining unpaid have been t

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