SHASUN CHEMICALS AND DRUGS LIMITED

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SHASUN CHEMICALS AND DRUGS LIMITED

TWENTY EIGHTH ANNUAL REPORT 2002-2003


F O R W A R D - L O O K I N G STAT E M E N T

In this Annual Report we have disclosedforward-looking information to enable investorsto comprehend our prospects and takeinformed investment decisions. This report andother statements - written and oral - that weperiodically make contain forward-lookingstatements that set out anticipated results basedon the management's plans and assumptions.We have tried wherever possible to identifysuch statements by using words such as'anticipate', 'estimate', 'expects', 'projects','intends', 'plans', 'believes', and words of similarsubstance in connection with any discussion offuture performance.

We cannot guarantee that these forward-lookingstatements will be realized, although we believewe have been prudent in assumptions. Theachievement of results is subject to risks,uncertainties and even inaccurate assumptions.Should known or unknown risks oruncertainties materialize, or should underlyingassumptions prove inaccurate, actual resultscould vary materially from those anticipated,estimated or projected. Readers should bear thisin mind.

We undertake no obligation to publicly updateany forward-looking statements, whether as aresult of new information, future events orotherwise.

28TII ANNUM (iFNFRAl MUTING

Saturday, July 19, 20033 p.m.Russian Cultural Centre64 Kasturi Ranga Road, Alwarpet, Chennai 600018.

1. Members are requested to bring their copies of the Annual Reportto the meeting, since further copies will not be available.

2. It may please be noted that no gifts will be distributed at theAnnual General Meeting.

Directors' Report 1

Corporate Governance 7

Auditors' Report 17

Balance Sheet 20

Profit & Loss Account 21

Schedules 22

Cash Flow Statement 33

R&D Financials 34

Balance Sheet Abstract & Business Profile 34

Accounts of Subsidiary 35

Consolidated Accounts 39

Economic Value Added 48


BOARD OF DIRECTORS

DR. s. DEVENDRAManaging Director

S. ABHAYA KUMARJoint Managing Director

S. VIMAL KUMARFinance Director

K.S.S. RAAGHAVANDirector - Safety

EXECUTIVEDIRECTORS

NON-EXECUTIVEDIRECTORS

s.N. BHATTChairman

C.M. TOLIADirector

PATRICK J. CORBOYDirector

C.L. JAINDirector

S. KALYANAMDirector

DR. JAGDISH N. SHETHDirector


SF.NIOR MANAGFMFNTTFAM

N. GOVINDARAJANChief Executive Officer

V. PARTHASARATHYCompany Secretary

M. BALASUBRAMANIANChief Financial Officer

V. RAJASEKARANVice PresidentRegulatory Affairs

R.V. RAMESHVice PresidentOperations - Cuddalore Plant

B.S. RAVIVice President

Human Resources

N. THYAGARAJANVice President

Projects

K. RAMACHANDRANVice President

Coordination - Cuddalore Plant

B.B. PANCHANNAVARGeneral ManagerProduction

A.M. MOHANGeneral ManagerOperations - Pondicherry Plant

V.R. CHANDRAMOULIGeneral ManagerMarketing

S.R. JAGANATHANGeneral ManagerTechnical Services

c. TAMILMARANGeneral Manager

Production

S. SARANATHANGeneral Manager

Finance

c. BHASKAR RAOGeneral ManagerAdministration

SOUTHA THOMASGeneral ManagerUK

JITESH D.Business Development ManagerUSA

A. CHANDRASEKARDeputy General ManagerProduction

Dr. M. DAMODHARANDeputy General ManagerQuality Control

JATIN V.Assistant General Manager

Business Development

S. VINOD KUMAR JAINAssistant General Manager

Accounts

MAYUR A.Assistant General ManagerBusiness Development


DIRECTORS' REPORTTO THE MEMBERS

The Directors have pleasure in presenting the Twenty Eighth Annual Report together with the audited statement of

accounts for the year ended March 31, 2003.

FINANCIAL HIGHLIGHTS

Profit Before Interest, Depreciation and Tax

merest

'rofit Before Depreciation and Tax

)epreciation

•rofit Before Tax

'revision for Current tax

'revision for Deferred Tax

•rofrt After Tax

'rofit Brought Forward

•roftt Available for Appropriation

Appropriated as follows :

)ividend on Equity Shares

ax on Dividend

ransfer to General Reserve

Balance Carried Forward

March 3 1,2003

410323

70346

339977

143362

196615

23000

12200

161415

286417

447832

36168

4634

25000

382030

(Rs. in OOO's)

March 3 1,2002

35866680694

277972

123598

154374

13310

20785120279

219018339297

32880-

20000

286417

DIVIDENDrour Directors recommend a dividend of 44% on the equity share capital of the Company as on 31.03.2003, which

absorb a sum of Rs.4.08 crores. Dividend, if declared will be paid to those members whose name appear on theegister of members of the Company on July 19, 2003 in case of holding in physical form and the beneficial ownersif those equity shares held in electronic form on the said date as per details furnished by the Depositories viz.ational Securities Depository Limited and Central Depository Services (India) Limited.

REVIEW OF THE YEAR

The Company recorded a revenue of Rs.240.41 crores as compared to Rs.210.70 crores for the previous year therebyigistering a growth of 14%. The profit before tax and after tax stood at Rs.19.66 crores and Rs.16.14 crores:spectively as against Rs.15.44 crores and Rs.12.03 crores respectively for the previous year thereby registering a

gjrowth of 27% and 34% respectively.

The increase in profit is attributed to higher sales of Nizatidine and other customised products, process efficiencyattained in existing products, savings in interest cost by debt restructuring and deft treasury management operations.

During the year sales from new products contributed 24% of sales as against 9% in the previous year. Thecontribution from new products has also increased the share of revenue.

EXPORTS

The Export Turnover of the Company inclusive of deemed exports amounted to Rs. 162.88 crores as againstPs. 135.73 crores for the previous year registering a growth of 20%. Your Company remains focussed on increasede sport of its products in the regulated markets.

I-OK LIH: - S C I E N C L ; WORKS


DIRECTORS' RF.PORT4. FUTURE OUTLOOK

The consistent investment in the Research & Development for the past few years facilitated certain goodCollaborative Research assignments which in turn have paved way for a good product mix at the commercial level.We have a good mix of generic products as well as new products, which will take care of our long term interest. Ourconsistent focus on Research & Development would facilitate more new APIs as well as Intermediates at thecommercial levels with long term contracts.

5. RESEARCH AND DEVELOPMENT

Thrust on Research & Development for the past few years has yielded considerable results for your Company interms of product pipelines and enhancement of commercial capabilities. Thrust on Collaborative Research with themajor multi-national companies have provided us a platform to be in the cutting edge of the chemistry. ThisCollaborative Research have also enhanced our capabilities at commercial levels. In view of the increased R&Dactivities and to meet international standards, your Company is planning to set up a state of the art R&D facility atthe outskirts of Chennai with investments to the tune of Rs.30 crores.

6. COMMERCIAL PAPER

ICRA has assigned Al + rating for Rs.100 million commercial paper programme of the Company. The rating indicateshighest safety; the prospect of timely repayment of debt/obligation being the best.

7. AWARDS

Your Directors are happy to inform about the awards that your Company received during the year.

a) Repeat Safety Award from British Safety Council for the third consecutive year.b) Silver Award for Quality Excellence in the category of bulk drug from Indian Drug Manufacturers Association

for Cuddalore facility for the year 2002.

8. DIRECTORS

In accordance with Articles of Association of the Company Mr. S.N. Bhatt and Mr. C.M. Tblia retire by rotation at theforthcoming Annual General Meeting and being eligible offer themselves for re-appointment.

9. AUDITORS

The Statutory Auditors of the Company, M/s. Jagadisan & Co. Chartered Accountants retire at the forthcomingAnnual General Meeting and are eligible for re-appointment.

10. COST AUDITORS

Mr. S. Ramanathan, FICWA, Cost Accountant, who was the Cost Auditor of the Company for the year 2001-02 has beenappointed cost auditor of the Company for the years 2002-03 and 2003-04.

11. SUBSIDIARY - SHASUN USA INC.

The Company's wholly owned subsidiary has posted a turnover of USD 8.39 million and a profit after tax ofUSD 28660 as against turnover of USD 9.69 million and a profit after tax of USD 21161 for the previous year. Theresults of the subsidiary Company are attached to this report along with statement pursuant to section 212 of theCompanies Act, 1956.

12. SAFETY AND ENVIRONMENT

Aspects concerning safety and environment are always high on the agenda of the Company. Proactive measureshave been taken for improving systems and procedures so as to align with global standards and best practices. Theupgraded treatment plant for the effluent has been commissioned at Pondicherry.

13. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

The Corporate Governance and Management Discussion and Analysis reports as set out in annexure hereto form anintegral part of this report. A certificate from the auditors of the Company certifying compliance of the conditions ofcorporate governance as stipulated in clause 49 of the listing agreement with stock exchanges is also annexed to thereport on corporate governance.

2 SHASUN CHEMICALS AND U K I K IS I.I MITKI) TWF.NTY EIGHTH A N N U A L Rid'OKI'


DIRECTORS' RFPORT

14. PERSONNEL

The Directors wish to place on record their appreciation to the employees for the co-operation extended to ther lanagement in maintaining harmonious industrial relations at the various units.

15. PARTICULARS OF EMPLOYEES

Information as per section 217(2A) of the Companies Act,1956 read with the Companies (particulars of employees)Rules, 1975 is given in annexure 1 to this report.

.. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO

Particulars in respect of conservation of energy, technology absorption and foreign exchange earnings and outgo asrsquired under section 217(1) (e) of the Companies Act, 1956 are given as annexure 2,3 & 4 to this report.

17. EMPLOYEE STOCK OPTION PLAN (ESOP)

Details of the Shares issued under ESOP, as also the disclosures in compliance with clause 12 of the Securities andExchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999re set out in the annexure 5 to this Report.

18. DIRECTORS RESPONSIBILITY STATEMENT

The Directors confirm :

a) that in preparation of the annual accounts, the applicable accounting standards have been followed and thatno material departure have been made from the same;

b) that they have 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 theCompany at the end of financial year and of the profit or loss of the Company for that period;

c) that they have 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 andfor preventing and detecting fraud and other irregularities;

d) that they have prepared the annual accounts on a going concern basis.

. PUBLIC DEPOSITS

The Company has not accepted any public deposits

0. ACKNOWLEDGEMENTS

Your Directors would like to express their grateful appreciation for the assistance and co- operation received from theFinancial Institutions and Banks during the year under review. Your Directors also wish to place on record theirppreciation for the continued support of customers and suppliers of the Company.

On behalf of the Board

DR.S. DEVENDRA, Managing Director. ABHAYA KUMAR, Joint Managing Director

S.VIMAL KUMAR, Finance DirectorChennai, June 09, 2003

LIFE - SCIl' .NCK WORKS


AISINFXURF TO THF DIRECTORS' RFPORTANNEXURE 1STATEMENT PURSUANT TO SECTION 217(2A) OF THE COMPANIES ACT 1956 READ WITH COMPANIES

(PARTICULARS OF EMPLOYEES) RULES 1975 AS AMENDED.

NameDesignation

Dr. S. DevendraManaging Director

S. Abhaya KumarJoint Managing Director

S. Vimal KumarFinance Director

Remuneration(Rs. OOO's)

4124

4062

4059

AgeYears

52

50

47

Qualification

MBBS

ExperienceYears

25

B.Tech (Chem) 27

B.Com. FCA 18

Commencementof service

12.05.1978

01.07.1976

26.06.1985

Last

employment

Private Practitioner

Private Practitioner

Note : Remuneration includes basic salary, commission, allowances, perquisites and contribution to provident fund, gratuity and other funds.

ANNEXURE 2

STATEMENT AS PER SECTION 217(1) (e) OF THE COMPANIES ACT 1956

A) POWER & FUEL CONSUMPTION Year endedPondicherry

31.03.2003Cuddalore

Electricitya. Purchased units

Total amount paidRate per unit

b. Own generation byI. Diesel Generator (Units)

Total amount paidRate per unit

II. Windmills (units)*

Amount AdjustedRate per unit

OthersFurnace Oil

Total Amount paidRate per unit

* Power generated from windmill is adjusted

B) CONSUMPTION PER UNIT OF

ElectricityDiesel Generator

Furnace Oil

in OOO'sRs. in OOO's

Rupees

in OOO'sRs. in OOO's

Rupeesin OOO'sRs. in OOO's

Rupees

Ltrs in OOO's

Rs in OOO'sRupees

to power consumption at Cuddalore

PRODUCTION

KWH/tonKWH/tonKlVton

1226637236

3.04

522

22854.38

-

-

2595

2795310.77

unit

3.82

0.16

0.81

11742

522404.49

807

44985.58

2874

96553.36

3244

3553510.95

12.57

1.12

4.52

1066925915

2.43

1044

47764.58

-

-

-

223618831

8.42

3.50

0.34

0.73

Year ended 31.03.2002Pondicherry Cuddalore

9889

432354.37

334

1766

5.29

284599923.51

292825187

8.60

13.32

0.45

3.95


ANNFXURF TO THF DIRECTORS' RFPORTiNNEXURE 3NFORMATION 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

IESEARCH AND DEVELOPMENT

hasun believes in maintaining a strong R&D bias for supporting and improving its existing business. Shasun's

ommitment to invest heavily in R&D is for augmenting the Company's business ventures in new dimensions

omprising the frontier areas of pharmaceutical research.

I. PRESENT R&D ACTIVITIES

A To continue to improve the existing technologies by modifications driven by innovative thinking.

A Technology development for new APIs and key intermediates complying with the strictest international

quality norms as required for advanced regulated markets.A Development of cost effective and environment friendly technologies for high value products involving

difficult chemistry.A. Contract synthesis of new chemical entities as required for the drug disco very/medicinal chemistry

program of pharmaceutical giants, and many others. The compounds encompass the entire spectrum of

early leads required in the discovery/development stage to those in the preclinical/clinical trials.

A Custom synthesis projects for multinational pharmaceutical industries having strong research orientation.A Collaborative research for commercial production of therapeutic protein using biotechnological avenues.

II. BENEFITS DERIVED FROM R&D

A Improved productivity, process efficiencies and capacity utilization.A Internationally competitive price and product quality.

A Enhanced global presence in the niche segment of research oriented business activity resulting in strong

market visibility.A Fast commercialization of new products inclusive of APIs and key intermediates.

A Enhanced business through global alliances and licensing arrangements.

A Generation of Intellectual Property as evident from filing of four PCT with four more in the pipeline.

III.FUTURE PLAN OF ACTION

A Continue enhancing R&D capabilities through upgradation.

A Continue developing innovative and commercially viable process know-how for APIs.

A Procuring state-of the-art instrumentation and simulation software to facilitate scaling up of laboratory

processes.

A Greater thrust on the areas of custom synthesis through creative thinking.A Expansion of Bio-technology research infrastructure to produce oncological products and also anti-infective

active against resistant pathological strains.A Enhancing the library facility.

EXPENDITURE ON RESEARCH AND DEVELOPMENT (Rs. in OOO's)

Year Ended 31.03.2003 Year Ended 31.03.2002

Capital

Recurring

Total

33336

77573

110909

35597

53951

89548

ANNEXURE 4Information on Foreign Exchange Earnings and Outgo is given in item Nos. 8, 9 & 10 in Notes toAccounts


ANNF.XIIRF. TO THF DIRECTORS' RFPORT

ANNEXURE 5EMPLOYEE STOCK OPTION PLAN 2001

Your Company has granted 40350 options during the year 2002-03 and the details of such option granted under 2001

plan are given below:

Description Details

Total Number of SharesPricing Formula

Option granted during the periodPrice at which option grantedOptions Vested as of 31.03.2003Options Exercised during the yearMoney raised on exercise of the optionsOption forfeited during the yearTotal Number of the Option in force at the end of the yearGrant to Senior Managerial Personnel

Variation in the terms of the optionsMoney realized by exercise of the option

164400 Equity Shares of Rs.10/- eachNot less than 50% of the closing market price of Bombay StockExchange on the date of grant of options.40350 options representing 40350 equity sharesRs.40/- per share

40350K.S.S. Raaghavan, No. of Options -1750N Govindarajan, No. of Options - 3750NilNil

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES

1. Name of the Subsidiary Company : Shasun USA Inc

2. Financial Year of Subsidiary Company Ended on : March 31, 2003

3. Paid up Capital of Subsidiary Company : USD 15000

4. Extent of Holding in Equity Share Capital : 100%

5. The net aggregate profits, losses of the subsidiary Company so far as it concerns themembers of Shasun Chemicals and Drugs Limited

a. Dealt with in the accounts of Shasun Chemicals and Drugs Limited amounted to :

For the subsidiary Company's financial year ended March31, 2003 NIL

b. Not dealt with in the accounts of Shasun Chemicals and Drugs Limited amounted to :

i) For the subsidiary's financial year ended MarchSl, 2003 USD 28660

ii) For previous financial years of the subsidiary up to March 31, 2002 USD 21161

iii) Material Changes between the end of financial year of the subsidiary andthat of Holding Company No Change


DR. S. DEVENDRA, Managing Director

S. ABHAYA KUMAR, Joint Managing Director

S. VIMAL KUMAR, Finance Director

Chennai, June 09, 2003


RFPORT ON CORPORATE GOVFRMANCF

iÂNDATORY REQUIREMENTS

COMPANY'S PHILOSOPHY ON CORPORATE GOVERNANCE

The Company is committed to good corporate governance. The Company provides detailed information on variousssues concerning the Company's business and financial performance. The Company respects the right of itshareholders to information on the performance of the Company and considers itself as trustee of its shareholders.

:>. BOARD OF DIRECTORS

The Board of Directors of the Company consists of a majority of non-executive / independent directors. The Board:omprises of four whole time directors and five independent directors as on date. The Constitution of the Board isriven below:-

Director Wholetime/ Number of outside Number of membership onIndependent Directorships held*** Board committees of other

companies

)r. Devendra Wholetime 6. Abhaya Kumar Wholetime 8. Vimal Kumar Wholetime 7

C.S.S. Raaghavan Wholetime Nil.N. Bhatt Non Executive-Independent 3

I.L.Jain Non Executive-Independent 10I.M. Tolia Non Executive-Independent 2. Kalyanam Non Executive-Independent 2l. Prakash (IDBI - Nominee Director)* Non Executive-Independent

3atrick Corboy Non-Executive 1>. Jagdish N. Sheth ** Non Executive-Independent 3

Ceased to be a Director w.e.f. 03.02.2003Appointed w.e.f. 22.07.2002.Excluding Directorships in Private Companies and Companies as defined under Section 25 of the Companies Act, 1956.

An Independent Director is a director who apart from receiving directors remuneration do not have any materialpecuniary relationship or transactions with the Company, its promoters, or its management or its subsidiaries,which in the judgement of the board may affect their independence of judgement.

3. AUDIT COMMITTEE

During the year Audit Committee meetings were held on 12.06.2002,20.10.2002 and 18.01.2003.The Constitution of the Committee and the attendance of each member of the Committee is given below:

Name Designation Wholetime/ Profession CommitteeIndependent Meeting Attended

C.L JainS.N. BhattCM. Tolia

ChairmanDirectorDirector

IndependentIndependentIndependent

Company DirectorIndustrialistIndustrialist

3

3

3V. Parthasarathy - Company Secretary acts as the Secretary of Audit Committee.

Terms of Reference of the Audit Committee include a review of• Financial reporting process.• Draft financial statements and auditors' report (before submission to the board).• Accounting policies and practices.• Internal controls and internal audit systems.

JKOK 1,1 IT. - SCIENCE WORKS


RF.PORT ONI CORPORATE GOVERNANCE• Risk management policies and practices.• Related party transactions.• Internal audit reports and adequacy of internal audit function.

The role of the audit committee includes recommending the appointment and removal of external auditor,discussion of audit plan and fixation of audit fees.

4. INVESTORS GRIEVANCE COMMITTEE

The Investor grievances Committee specifically looks into redressing of Shareholders Complaints such as transfer ofshares, non-receipt of shares, non-receipt of declared dividends and to ensure expeditious share transfer process. ThisCommittee consists of the following Directors:-

1. Mr. S.N. Bhatt2. Mr. S. Kalyanam3. Mr. S. Vimal Kumar

5. COMPENSATION COMMITTEE

The Board has constituted the Compensation Committee on 29th October 2001, with the following Directors as itsmembers :-

1. Mr. S.N. Bhatt2. Mr. C.L. Jain3. Mr. C.M. Tblia4. Mr. S. Abhaya Kumar

The Committee has mandate to review and recommend Compensation payable to whole time directors and toadminister the Company's stock option plan.

6. NAME AND DESIGNATION OF COMPLIANCE OFFICERMr. V. Parthasarathy - Company Secretary.

7. REMUNERATION OF DIRECTORS

Details of remuneration paid to Directors are given below:

Director

Dr. DevendraS. Abhaya KumarS. Vimal KumarK.S.S. RaaghavanS.N. BhattDr. Jagdish N. ShethC.L. JainC.M. ToliaS. KalyanamN. PrakashPatrick Corboy

Relationshipwith otherdirectors, if any

|̂> Brothers

Businessrelationshipwith Shasun

PromoterPromoterPromoterNoneNoneNoneNoneNoneNoneNoneNone

Loans andadvancesfrom Shasun

_

-

----

---

Remuneration paid during 2002-03 (Rs. in OOO's)

Sitting fees.

-

-45105050251510

Salary

2324

2262

2259

409

Commission

1800

1800

1800

275125250250

--

Total

4124

4062

4059

409320135300300

2515

10


RF.PORT ON CORPORATE GOVERNANCE3. BOARD MEETINGS & ATTENDANCE AT BOARD MEETINGS & ANNUAL GENERAL MEETING

The Board of the Company met five times during the last year, i.e 05.04.2002, 12.06.2002, 22.07.2002, 21.10.2002, and18.01.2003. The Company placed before the Board the annual operating plans and budgets and performance ofvarious divisions from time to time. Information regarding recruitment of senior executives, show cause notices>vhich are materially important, default if any, in financial obligations, details of joint ventures & collaborations,abour problems, signing of wage agreements, etc., is also placed before the Board as and when the same takes place.

The attendance at the Board Meeting and Annual General Meeting was as under:

Director

Dr. S. DevendraS. Abhaya Kumar

S. Vimal Kumar

K.S.S. RaaghavanS.N. Bhatt

CL Jain

CM. ToliaS. Kalyanam

N. Prakash *

Patrick Corboy

Dr. Jagdish N. Sheth **

Attendance

Board Meetings

5

5

5

5

5

5

5

5

3

2

3

AGM

/

/

/

/

/

/

/

/

-

/

/

* Ceased to be a Director w.e.f. 03.02.2003** Appointed w.e.f. 22.07.2002

). A. RELATED PARTY DISCLOSUREInformation on Related Party Disclosure is given in Item No.28 of Notes to Accounts in the financial statement.

B. COMPLIANCENo transactions of material nature are entered into by the Company with Promoters, Directors or Management,or their relatives etc., that may have a potential conflict with interest of the Company. There are no materialpecuniary transactions with the independent/non-executive directors other than the payment of remunerationdisclosed in point No.7 above.

0. MEANS OF COMMUNICATIONThe Company's quarterly un-audited financial results are being published in one English newspaper and OneVernacular newspaper, in compliance with Stock Exchange listing agreements. Annual Report is circulated to

Shareholders and is available at Company's website - www.shasun.com.

1. NOTES ON DIRECTORS APPOINTMENT / RE-APPOINTMENTRelevant details forms part of the explanatory statement to the Notice of the Annual General Meeting at which thedirector is appointed.

ftOK I.I


REPORT ON rPRPDRATF GOVFRNANCF12. MANAGEMENT DISCUSSIONS AND ANALYSIS

Revenues

A) REGION WISE EXPORTS

2002-2003USA 43%

I Europe 26%

I Asia 26%

Others 5%

B) GROWTH IN CRAM*

1000

800

600

400

200

802.93•B| 748.13

111

I APIs

I Intermediates

2002-03 2001-02

(Rs. in Lacs)

Year

Total RevenueExportsPBTPAT

2000-2001

18092.17

10750.95

1153.97

1025.67

2001-2002

22056.96

13573.20

1543.74

1202.79

2002-03

25035.96

16287.87

1966.15

1614.15

2001-2002• USA 30%

• Europe 26%

• Asia 37%

• Others 7%

C) COMPOSITION OF SALES

2002-2003Top Ten Customers 47%

I Others 53%

* Contract Research And Manufacturing.

FINANCIAL ANALYSIS

OPERATING PROFIT

During 2002-2003 the operating profit remained at 17% of revenue from operations as that of in the previous year.In 2002-03 profit after tax as a percentage of total income was 6.45% as compared to 5.45% in the previous year.

Employee cost during the year amounted to Rs.18.21 crores as against Rs.14.27 crores showing an increase of 28%.The salary structure for key employees of the Company during the year was rationalised to retain best of talentsavailable and there were additional recruitments in R&D. These two factors contributed for increase in employeecost.


RF.PORT ON mRPORATF GOVERN A NC.F.Selling and distribution expense of Rs.10.48 crores (4.67% on sales) was incurred against Rs.10.27 crores (5.30%on sales) in the previous year. The percentage of selling expenses on sales was lower due to larger consignments sentby sea shipment and less provision for commission and royalty on sales for the current year.

Interest Cost for the financial year 2002-03 stood at Rs.7.03 crores (including R&TJ interest cost) as against Rs.8.07crores. The Company has taken various initiatives during the year 2002-03 to reduce interest cost, such as,prepayment of high cost debts, using derivative to bring down the effective rate of long term debt, borrowing acrossthe long term and short term at better rates.

Depreciation. The depreciation for the year 2002-2003 is Rs 14.34 crores up from Rs 12.36 crores in 2001-2002. Theincrease is on account of full year depreciation for assets substantially added during later half of the previous yearand current year additions. The Company follows straight-line method and rates of depreciation are set out in Notesto Accounts.

lax provision including deferred tax for the year 2002-03 was at Rs.3.52 crores as against Rs.3.41 crores for theprevious year. The tax as a percentage of PBT was at 17.90% as against 22.09% in the previous year.

STATEMENT OF LOANS BORROWED, REPAID / PREPAID DURING FINANCIAL YEAR 2002-03

'articulars

Rupee Term loan from Bank/FIs:oreign currency loan from Banks/ FISHire purchase loansFST Loan

Unsecured Loan from Bank

Total

FOREIGN EXCHANGE EXPOSURE

Balanceas on

01.04.2002"3352.10

181.700.95

356.76500.00

4391.51

Borrowingsduring

the year[800.001974.51

39.9210.85

500.00

4325.28

Prepaidduring

the year1850.36

1850.36

Repaidduring

the year862.62181.70

8.715.21

500.01

1558.25

(Rs. in lacs)Balance

as on31.03.2003

2439.121974.51

32.16362.40499.99

5308.18

The Company had favourable net dollar exposure of USD 1.20 million as on 31st March 2003. The Company monitorsthe net foreign exchange exposure regularly and hedges it when appropriate.

FIXED ASSETS & CAPITAL EXPENDITURE

ross Fixed Assets as on 31st March 2003 were Rs.16853 lakhs up by Rs.2198 lakhs. Additions primarily consisted ofProcess Equipments for expansion of facilities, R&D facilities upgradation, ETP upgradation, computers andjeripherals. Funding of the capital expenditure was through term loan and internal accruals.

INVENTORY

The inventory has gone up to Rs.37.71 crores from Rs.31.28 crores primarily because of higher level of Finishedoods Stock at factory and higher level of imported stock of raw materials.

SUNDRY DEBTORS

The average collection period has increased from 82 days to 87 days during the year due to increased sales to USmarket where longer credit period offered to customers.

DEFERRED TAX LIABILITY

This includes one time adjustment of past years Deferred tax liability of Rs.8.81 crores in the year 2001-02 againstgeneral reserves. A sum of Rs.1.22 crores has been provided for the year 2002-2003 and shown in profit and lossaccount under provision for taxation.


RF.PDRT ON CORPORATE GOVERNANCE

OPPORTUNITIES

Forced by the proposed changes in patent law to be effective from 2005 on the home turf and by opportunities offeredin the international market, the mind set of Indian companies on research activities altered. The strategic focus ofkey Indian pharmaceutical companies is to have a strong foot hold in the advanced markets and shift from 'businessdriven research' to 'research driven business'.

India has the advantage in terms of excellent chemical synthesizing skills, a pool of talented scientists,manufacturing skills of international standards and quicker adoption of new technology. Investment in innovativeresearch went up significantly in line with the need of market. We believe that the opportunity pot is large enoughfor Indian companies and willingness to adopt new strategies would decide the fate of the Indian pharmaceuticalcompanies in entering the big league.

THREATS

From Jan 2005 India is expected to adopt a product patent law which at present are under process patent. This willresult in very few new products being launched in the home market and will affect growth. With the increasingglobalisation companies will also face increased risk of product liability, regulatory issues and patent litigation.

INTERNAL CONTROLS AND THEIRADEQUACY

The Company's internal controls are well established. The Company's internal auditor assesses the internal controlsystems. The statutory auditor and the audit committee review these controls regularly. Any change in the internalcontrol that is recommended is studied and implemented. The Company also has an information technology systemthat supports the organization and ensures an adequate information flow across the Company's locations.

R I S K M A N A G E M E N T

ÔDUCTÔRTFOLiq RISK)

An excessive dependence on few products could threaten the Company's revenues. Also there is risk of product getting obsoleteor being replaced by new discoveries.

RISK MITIGATION

The current major products of the Company are expected to be in the market for next ten years. A strategy has beenchalked out and is being implemented for reducing the dependency on fewer products. Revenues from new products(Excipients and new APIs) are steadily increasing. The Company is also proposing to build a formulation plant tomove up the value chain.

(ENVIRONMENTAL RISK)The manufacture of Active Pharmaceutical Ingredients involves different chemical reactions. This will generate liquideffluent, gaseous emissions and solid waste. Any emission or discharge beyond the norms laid out by the relevant pollutioncontrol boards could bring in legal censure and affect the Company image as a clean producer.

RISK MITIGATION

Management treats issues pertaining to safety and environment on high priority. The SHE (Safety, Health andEnvironment) policy of the Company clearly demonstrates the commitment of the management to maintain a safework place and on a healthy environment. Towards achieving this objective, necessary systems and procedures arein place.

All incidents and near misses are investigated in-depth and corrective measures taken to avoid further accidents.Necessary training on various aspects of safety involving the hazardous properties of the chemicals etc. are impartedto the employees.


RF.PORT ON CORPORATE GOVERNANCE . _.

More focus is given towards engineering control and personal protective equipments are provided to all theemployees. Fire hydrant systems, fire alarm system and sprinkler system are installed at a cost of Rs.8 million atCuddalore Plant and are functioning satisfactorily.

The state of art ETP which has been constructed at a cost of Rs. 30 million has been commissioned and is functioningsatisfactorily. To further enhance the quality of the treated effluent, additional aeration system, dis-infection systemare under way. The Reverse Osmosis (R.O.) system is also planned to recover re-cycle of a sizeable amount of treatedeffluent.

At Pondicherry plant, fire hydrant system has been installed at a cost of Rs. 6 million and is working satisfactorily.In order to further upgrade the quality of the treated effluent, a modern ETP plant has been commissioned at a costof nearly Rs.12 million. R.O. system is also being planned to enable re-cycle of treated effluent.

In order to safely contain the sludge and solid waste generated in the operation, secured landfill is provided.

Our Pondicherry factory has been awarded the National Safety Award, 2002 by British Safety Council, U.K. It is reallya matter of pride to get this award for the third year consecutively.

Work on certification of Environment Management System based on ISO 14001 and Safety Management Systembased on OSHA's 18001 is in progress

GEOGRAPHICAL RISK'

Excessive dependence on Income from specific geographical location.

RISK MITIGATION

The Company sells its products through out the world. The share of export and domestic turnover is 70% and 30%respectively. Exports are widely distributed over various countries.

;TECHNOLOGY OBSOLESCENCE_RISK)Technology currently used by the Company could become obsolescent

RISK MITIGATION

The Company's R&D is continuously working on product / process improvement to achieve the twin objective ofimproved quality at reduced cost. Further the Company has automated the final stage of Ibuprofen Production toreduce the risk of human error.

CLIENT RISK;

Dependency on fewer clients for products

RISK MITIGATION

Shasun is continuously building up its client base for its existing products and also entering into long term supplyagreements with key customers.

EXCHANGE RATE RISK)

The Company derives its major revenues from exports. The depreciation of Indian rupee would have favourable bottom lineimpact; an appreciation could adversely affect its bottom line.

RISK MITIGATION

The unprecedented raise of rupee against dollar in the last one year has affected the export realisation, which wasnot expected. Shasun has started to hedge its future export earnings and the same is reviewed periodically.


RFPORT ONI CORPORATE GOVFRNANJCF

12. GENERAL SHAREHOLDERS INFORMATION

1. ANNUAL GENERAL MEETING

The Twenty Eighth Annual General Meeting of the Company will be held on Saturday, July 19, 2003 at RussianCultural Centre, 64 Kasturi Ranga Road, Alwarpet, Chennai 600018 (behind Hotel Chola Sheraton).

2. FINANCIAL CALENDAR;Financial reporting forQuarter ending March 31, 2003 June 2003Quarter ending June 30, 2003 July 2003Quarter ending September 30,2003 October 2003Quarter ending December 31, 2003 January 2004Annual General Meeting for the year ended March 31, 2003 July 2003

3. BOOK CLOSURE

The Company's Register of Members and Share Transfer Books will remain closed from July ^6, 2003 to July 19, 2003(both days inclusive) for the purpose of dividend.

4. DIVIDEND

The dividend as recommended by the Board of Directors, if declared at this Annual General Meeting, will be paid atpar on or after July 29, 2003 to those shareholders whose names appear on the Company's register of Members asholders of Equity Shares on July 19, 2003. In respect of shares held in demat mode, the dividend will be paid on thebasis of beneficial ownership details to be furnished by National Securities Depository and Central DepositoryServices India Limited for this purpose.

5. REGISTERED OFFICE/CORPORATE OFFICE :

'Shasun House', 3 Doraiswamy Road, T.Nagar, Chennai 600017.

6. LISTING ON STOCK EXCHANGES

The Company's shares are listed at Madras, Bombay and National Stock Exchange. The listing fees has been paid toall Stock Exchanges for the year 2002-2003.

7. STOCK MARKET DATA:a. Stock Code:The Stock Code for the Company's shares are as follows:-The Stock Exchange, Madras : SHUThe Stock Exchange Mumbai : 524552The National Stock Exchange of India Limited : SHASUNCHEM EQ

b. The ISIN Nos. for the Company's shares in demat mode : ISIN NO.INE317A01010

c. Details of shares traded

Shares traded during April 1, 2002 to March 31, 2003N S E B S E

No. of Shares traded : 6386352 1994877Highest Share Price : Rs.112.35 119.00Lowest Share Price : Rs. 65.90 65.00Closing Share Price as on March 31, 2003 : Rs. 81.15 80.45

Market capitalization as on March 31, 2003 was Rs.6670.53 lacs based on the closing price of National Stock Exchange.Market capitalization as on March 31, 2003 was Rs.6612.99 lacs based on the closing price of Bombay Stock Exchange.

REPORT ON CORPORATE GOVERNANCE.d. Stock details over the last financial year on a month to month basis 2002-2003.

Period(April '02 - March '03)

AprilMayJuneJulyAugustSeptemberOctoberNovemberDecemberJanuaryFebruaryMarch

N S EHigh

93.9589.9097.55

101.4082.7574.7071.2574.0591.15

112.35101.3087.45

Low

67.3568.9584.3582.5573.6567.6065.9068.2571.2588.6586.0578.25

VolumeRs. In lacs1250.64519.76815.26731.64

75.0554.3030.9388.80

407.781592.27

157.83169.98

B S EHigh

102.9593.40

104.00105.2584.1083.6076.9078.8093.25

119.00107.0090.50

Low

67.0068.0080.1080.0072.5567.0565.0073.2570.0088.3585.7572.55

VolumeRs. In lacs

383.5145.96369.38338.73

16.376.38

9.10

117.68139.53963.62

68.34214.04


8. REGISTRARAND SHARE TRANSFERAGENT

Transfer Agent for Physical Transfers and Demat Shares :Integrated Enterprises (India) Limited, 2nd Floor, Kences Towers, 1 Ramakrishna Street, North Usman Road,T.Nagar, Chennai 600017, Ph : 28140801-03, FAX : 0091-44-28142479.

9. SHARE TRANSFER SYSTEM

Transfers of shares are processed by "Integrated Enterprises (India) Limited" and approved by the Share TransferCommittee which meets once in 20 days. Transfers of shares are effected and share certificates are despatched within25-30 days from the date of receipt, if the relevant documents are completed in all respects.

The Total number of shares transferred during the last 2 financial years were as follows :2002-2003

Numbers of transfers (physical and demat)Numbers of shares transferred (Inclusive of Physical to

971Demat) 336450

2001-20021110

1508020

10. REDRESSAL OF INVESTOR'S COMPLAINTSA Statement of the various complaints received and cleared by the Company during the financial year 2002-2003 isgiven below :Nature of Complaints Received ClearedNon-receipt of shares certificates duly transferred 18 18Non-receipt of dividend warrant 28 28Letters from SEBI Nil NilLetters from Stock Exchange 2 2Letters from Department of Company Affairs Nil Nil

11. DISTRIBUTION OF SHAREHOLDING AS AT MARCH 31, 2003.

No.of Shares held

Up to 500501-1,0001,001-2,0002,001-3,0003,001-4,0004,001-5,0005,001-10,000Above 1 0,000TOTAL

No.ofShareholders

9384391239

6725246377

10270

%ofShareholders

91.38%3.81%2.33%0.65%0.24%0.23%0.61%0.75%

100.00%

Amount

136532030755134342417072888722

110297458652

53750068220000

%

16.60%3.74%4.18%2.08%1.08%1.35%5.58%

65.39%100.00%


RF.PORT ON CORPORATE GOVFRKJAMrF

According to Categories of shareholders as on March 31, 2003.

CategoriesPromoter Directors & Relatives and Associated CompaniesFinance Institutions / MF / Banks / FllNon-Resident IndiansOther Bodies CorporatePublic

Number of Shares3743388430571

11825296963

3737253Total 8220000

45.545.240.143.61

45.47100.00

12.DEMATERIALISATION OF SHARES

Your Company has signed a tripartite agreement with National Securities Depository Limited on February 23, 1999and Central Depository on March 15, 2000. Trading in shares of the Company in demat form is compulsory witheffect from July 24, 2000 as per SEBI. As on March 31, 2003, 82.48% of the total shares have been dematerialised.

13. INVESTORS CORRESPONDENCE.

For the convenience of our investors, transfer requests, etc., are accepted at the Registered Office :

CONTACT PERSON : MR. V PARTHASARATHY - Company SecretaryTime 9 am to 1.30 pm and 2.00 pm to 6.15 pmon all working days (Monday to Friday)Phone: 24348930, 31, 32 extn. 038. E-Mail.: [email protected]

AUDITORS' CERTIFICATE ON COMPLIANCE OF CONDITIONS OF CORPORATE GOVERNANCE

THE BOARD OF DIRECTORS,

SHASUN CHEMICALS AND DRUGS LIMITED

We have read the Report of the Board of Directors on Corporate Governance and have examined the relevantrecords relating to compliance of conditions of corporate governance by Shasun Chemicals And Drugs Limitedfor the year ended March 31, 2003, as stipulated in Clause 49 of the Listing Agreement of the said Companywith the Stock exchanges.

The compliance of conditions of corporate governance is the responsibility of the management, ourexamination was conducted in the manner described in the "Guidance Note on Certification of CorporateGovernance" issued by the Institute of Chartered Accountants of India and was limited to procedures andimplementation thereof adopted by the Company for ensuring compliance with the conditions of corporategovernance. Our examination was neither an audit nor was it conducted to express an opinion on the financialstatements of the Company.

In our opinion and to the best of our information and according to the explanations given to us and on the basisof our examination described above, the Company has complied with the conditions of Corporate Governanceas stipulated in Clause 49 of the above mentioned Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Company nor theefficiency or effectiveness with which the management has conducted the affairs of the Company.

For Jagadisan &" Co., Chartered Accountants

V JAGADISAN, PartnerChennai, June 09, 2003


AI iniTORS' RFPORTTO THE MEMBERS OF SHASUN CHEMICALS AND DRUGS LIMITED

We have audited the attached Balance Sheet of Shasun Chemicals and Drugs Limited as at March 31, 2003 and alsothe Profit and Loss Account for the year ended on that date annexed thereto and the Cash Flow Statement for theyear ended on that date. These financial statements are the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are freeof material mis-statement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.

As required by the Manufacturing and Other Companies (Auditor's Report) Order, 1988 issued by the Centralovernment of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the

Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

Further to our comments in the Annexure referred to above, we report that:

(i) We have obtained all the information and explanations, which to the best of our knowledge and belief arenecessary for the purposes of our audit;

(ii) In our opinion, proper books of account as required by law have been kept by the Company so far asappears from our examination of those books.

(iii) The Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the booksof account.

(iv) In our opinion, the Balance Sheet and Profit and Loss Account dealt with by this report comply with theaccounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.

(v) On the basis of written representations received from the directors, as on March 31, 2003 and taken onrecord by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2003from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the CompaniesAct, 1956;

(vi) In our opinion and to the best of our information and according to the explanation given to us, the saidaccounts give the information required by the Companies Act, 1956, in the manner so required and give atrue and a fair view in conformity with the accounting principles generally accepted in India.

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2003;

(b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

(c) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.

For Jagadisan &" Co., Chartered Accountants

V. JAGADISAN, Partner'hennai, June 09, 2003

FOR LIFE - SCIENCE WORKS 17


ANNFXURF. TO THF AUDITORS' REPORT1. The Company is maintaining proper records showing full particulars, including quantitative details and situation

of fixed assets. A physical verification of fixed assets had been taken by the Management and completed afterthe year-end. In our opinion the program of verification carried out is reasonable having regard to the size ofthe Company and to the nature of the assets and on the basis of explanations given to us, no seriousdiscrepancies have been noticed on verification.

2. None of the fixed assets have been revalued during the year.

3. Physical verification has been conducted by the Management at reasonable intervals during the year in respectof all materials, stores, spares and finished goods.

4. In our opinion, the physical verification of stocks followed by the Management is reasonable and adequate inrelation to the Company and the nature of its business.

5. No material discrepancies have been noticed on physical verification of stocks as compared to book records.

6. In our opinion, the valuation of stocks is fair and proper and is in accordance with the normally acceptedaccounting principles.

7. The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed inthe register(s) maintained under section 301 and/or from the companies under the same management asdefined under sub section IB of section 370 of the Companies Act, 1956.

8. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed inthe register(s) maintained under section 301 and/or to the companies under the same management as definedunder sub section IB of section 370 of the Companies Act, 1956.

9. The parties to whom the loans, or advances in the nature of loans, have been given by the Company arerepaying the principal amount regularly and are also regular in paying the interest.

10. In our opinion, and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and the nature of its business with regard tothe purchase of raw materials, stores, plant and machinery, equipment and other assets and for the sale ofgoods.

11. In our opinion, and according to the information and explanations given to us, the transactions of purchase ofgoods & materials and the sale of goods, materials and services made in pursuance of contracts or agreementsentered in the register maintained under section 301 of the Companies Act, 1956, and aggregating during theyear to Rs.50,000 or above in respect of each party have been made at prices which are reasonable having regardto prevailing market prices for such goods, materials or services have been made with other parties.

12. There were no unserviceable or damaged raw materials and finished goods.

13. The Company has not accepted or renewed any deposits from the public.

14. As explained to us, the Company is maintaining reasonable records for the sale and disposal of realisable by-products and scrap.

15. In our opinion, the Company has an adequate internal audit system commensurate with its size and nature ofits business.

16. We broadly reviewed the books of account maintained by the Company, pursuant to the rules made by theCentral Government for the maintenance of Cost Records under Section 209(l)(d) of the Companies Act, 1956and are of the opinion that the prescribed records have been maintained.

17. The Company is regular in paying the Provident Fund and Employees State Insurance dues to the appropriateauthorities.


ANNJF.XIIRF. TO THF AUDITORS' RF.PORT18. According to the information and explanations given to us there are no material undisputed amounts payable in

respect of income tax, sales tax, customs duty and excise duty which are outstanding as on March, 31, 2003 fora period of more than six months from the date they become payable.

19. On the basis of examination of books of account carried out by us in accordance with generally accepted auditingpractices and according to the information and explanations given to us, no personal expenses of the employeesor directors have been charged to the profit and loss account, other than those payable under contractualobligations or in accordance with the generally accepted business practice.

20. The Company is not a sick industrial Company within the meaning of clause (o) of sub-section (1) of section 3of the Sick Industrial Companies (Special Provisions) Act 1985.

For Jagadisan & Co., Chartered Accountants

V. JAGADISAN, Partner


FOR L I K E - S C I E N C E WORKS

i

i1

11

SANSCO SERVICES - Annual Reports Library Services

SOURCES OF FUNDS

Shareholders' Funds

Share Capital

Reserves & Surplus

ESOP Outstanding

Loan Funds

Secured Loans

Unsecured Loans

APPLICATION OF FUNDS

Fixed Assets

Gross Block

Less : Depredation

Net Book Value

Capital Work in Progress

nvestments

Current Assets, Loans & Advances

nventory

Sundry Debtors

Cash and bank balances

Loans and Advances

Less : Current Liabilities & Provisions

Liabilities

Provisions

Net Current Assets

Deffered Tax Liability

Miscellaneous Expenditure

[to the extent not written off or adjusted)

Total

Notes to Accounts

Schedules annexed are an integral part of this

BALANCE SHEETA.S AT MARCH 31, 7,003

- www.sansco.net

(RsSch.No. As at 31. 03.2003 As at 31

1

2

3

4

5

6

7

8

9

10

11

12

13

22

82200

640819

1104

607413

49999

1381535

1647629

601884

1045745

37648

1083393

1587

377084

472040

18465

122180

989769

503467

69432

572899

416870

(121143)

828

1381535

in OOO's)

.03.2002

82200

520206

-

585432

50000

1237838

1435792

464301

971491

29623

1001114

1587

312846

369158

10808

63772

756584

356919

55585

412504

344080

(108943)

.

1237838

Balance Sheet and should be read in conjunction therewith.


V. PARTHASARATHY DR S. DEVENDRA, Managing Director

Company Secretary S. ABHAYA KUMAR, Joint Managing Director

Chennaijune 09, 2003 S. VlMAL KUMAR, Finance Director

This is the Balance Sheet referredto in our Report of even date

For Jagadisan & Co.,

Chartered Accountants


i

|I


PROFIT & LOSS ACCOUNTFOR THF YFAR FNDFn MARCH 11 7.00.1

SchNo

Income

Sales & Operating Revenues 14

Less : Excise Duty

Other Income 15

Expenditure

Manufacturing Cost 1 6

Employee Cost 1 7

Maintenance Cost 18

Administrative Expenses 19

Selling and Distribution Expenses 20

Research and Development Expenses

Total

Profit Before Interest, Depreciation and Tax

Finance Cost 21

Depreciation

Profit Before Tax

Provision for Tax for the year

Deferred Tax Provision

Profit After Tax

Earlier Year's Profit Brought Forward

Profit Available for Appropriation

Appropriations

Dividend on Equity Shares

Tax on Distributed Profits

Transfer to General Reserve

Balance Transferred to Balance Sheet

Earnings per Share (in Rs.)

- Basic

- Diluted

Year Ended

31.03.2003

2472842

99490

2373352

30754

2404106

1527478

160166

75877

50724

104827

74711

1993783

410323

70346

143362

196615

23000

12200

161415

286417

447832

36168

4634

25000

382030

19.64

19.60

(Rs. in OOO's)

Year Ended

31.03.2002

2197660

98740

2098920

8036

2106956

1363863

127804

59303

43935

102734

50651

1748290

358666

80694

123598

154374

13310

20785

120279

219018

339297

32880

20000

286417

14.64

14.64

Notes to Accounts 22

Schedules annexed are an integral part of this Profit and Loss Account and should be read in


V. PARTHASARATHY DR. S. DEVENDRA, Managing Director

Company Secretary S. ABHAYA KUMAR, Joint Managing Director

Chennaijune 09, 2003 S. VlMAL KUMAR, Finance Director

Conjunction therewith.

This is the Profit & Loss Accountreferred to in our Report of even date

For Jagadisan & Co.,Chartered Accountants


[•'OK 1,1 KK - SUENCi: WORKS

1. SHARE CAPITAL

Authorised : 1 5000000 Equity Shares of Rs. 1 0 each

1000000 Preference Shares of Rs.100 each

"Issued, Subscribed and Paid up"

: 8220000 Equity Shares of Rs. 10 each fully paid up

As at

31.03.2003

150000

100000

82200

82200

(Rs. in OOO's)

As at

31.03.2002

150000

100000

82200

82200

Note:1. Of the above 8220000 Equity shares of Rs. 10 each fully paid up, 5500000 Equity Shares of Rs. 10 each have been allotted as fully paid bonus

shares by way of capitalisation of reserves.2. During the year Company granted 40350 Equity Shares as options under the Company's Employee Stock Option Plan 2001. No Shares have

been allotted as on Balance Sheet date under the scheme.


SCHEDULESF O R M I N G PART OF TH F ACCOUNTS

2. RESERVES & SURPLUS

General Reserve

Share Premium Account

Capital Reserve

Profit and Loss Account

Balance as at01.04.2002

154189

26600

53000

286417

520206

Additions/Transfers

during the year

25000-

161415

186415

Deductions/Transfers

during the year

--

65802

65802

Balance as at31.03.2003

179189

26600

53000

382030

640819

3. SECURED LOANS *

Rupee Term Loans from Financial Institutions / Banks

Foreign Currency Term Loans from Financial Institutions / Banks

Interest Free Sales Tax Loan

Hire purchase Loan

Banks**

As at31.03.2003

243912

197451

36240

3216

126594

607413

As at

31.03.2002

335210

18170

35676

95

196281

585432

Loans Repayable within a period of one year

* Refer item 25 of Schedule 22 - Notes to accounts for nature of security.

Excludes bills discounted with banks for Rs.88440 (Rs.91378)

4. UNSECURED LOANS

From Bank

148223 122446

49999 50000

49999 50000

Loans Repayable within a period of one year 50000


SCHEDULESF O R M I N G P A R T D F T H F ACCOUNTS

(Rs. in OOO's)

5. FIXED ASSETS

Particulars

Land - Freehold

Land - Leasehold

Factory Building

Non Factory Building

Plant & Machinery

Factory Equipment

Power Gen. Equipment

Electrical Installations

Lab Equipment

R&D Equipment

Office Equipment

Computers

Furniture & Fixtures

Vehicles

Total

Gross Block

Cost as on

01.04.2002

7726

4129

235708

10399

889088

11095

42689

55612

15244

79440

14007

31819

15550

23286

1435792

Additions Deletions

22813 501

9951

12761

926

103927 3157

1275

3994

1514

17260

29556

5102 399

3479 24

1674

5957 4271

220189 8352

Cost as on

31.03.2003

30038

14080

248469

11325

989858

12370

46683

57126

32504

108996

18710

35274

17224

24972

1647629

Depreciation Block

Depn as on

01.04.2002

-

35272

271

308506

6427

18750

21604

4582

19450

5550

26917

3943

13029

464301

For

Addition

-

524

8019

180

97927

1204

4724

5852

2220

10204

1646

4786

1218

4858

143362

On

Deletions

-

-

-

-

2331

-

-

-

-

156

24

-

3268

5779

Depn as on

31.03.2003

-

524

43291

451

404102

7631

23474

27456

6802

29654

7040

31679

5161

14619

601884

Net Block

As on

31.03.2003

30038

13556

205178

10874

585756

4739

23209

29670

25702

79342

11670

3595

12063

10353

1045745

As on

31.03.2002

7726

4129

200436

10128

580582

4668

23939

34008

10662

59990

8457

4902

11607

10257

971491

Note:

1. Addition to land includes Rs.9951 towards leasehold land for which Company has possession but lease hold deed is yet to be executed as at March 31, 2003.

2. Additions is net of Foreign Exchange Gain / (Loss) of Rs.507 (Nil).

6. INVESTMENTS - LONG TERM

UNQUOTED (TRADE INVESTMENT)

1 .Investment in Govt. or Trust Securities

(a) Tamil Nadu Bond

(b) SIPCOT Industrial Common Utilities Ltd

2. Investment in Shares, Debentures or Bonds

(a) Fully Paid up Shares of Subsidiary Company of Shasun USA Inc

(b) State Bank of Travancore-Bond

3. Investment in Austin Shasun LLC

7. INVENTORY

(as certified by the Management)

Raw Materials

In Process StockFinished Goods

Traded Goods

Stores / Lab Chemicals

Finished Goods in Transit

As at

31.03.2003

50424

540

100

473

1587

147267

51552

164817

2439

4084

6925

377084

As at

31.03.2002

50424

540

100

4731587

120243

37368

141487-

6775

6973

312846

FOR LIFE - SCIF.NCF WORKS


SCHEDULESFORMING PART OF THF ACCOUNTS

8. SUNDRY DEBTORSDebts Outstanding for a period exceeding six monthsDebts Considered Good and in respect of which the Company holds nosecurity other than personal guarantee of the Debtors

OthersDebts Considered Good and in respect of which the Company holds nosecurity other than personal guarantee of the Debtors

*9. CASH AND BANK BALANCESCash on handBalances with scheduled banks

in current accountsin deposits accounts in Indian rupeesin deposits accounts in foreign currency

Balances with non - scheduled banksin current accounts in foreign currencyABN Amro Bank US Dollars a/c, UKABN Amro Bank Pound Sterling a/c, UK

* Refer item 21 & 22 to Schedule 22 - Notes to Accounts

10. LOANS AND ADVANCES(Unsecured & considered good)

Advances recoverable in cash or in kind or for value to be receivedDeposit with Government Bodies and others

11. LIABILITIESBills PayableSundry Creditors*

a)Due to SSI'sb) Others

Unclaimed DividendOther Liabilities

Interest accrued but not due on loans

- www.sansco.net

As at31.03.2003

8360

463680

472040

376

3475

1735

52

12529

298

18465

109675

12505

122180

25578

13187

342796

1654

118639

1613

503467

(Rs. in OOO's)

As at

31.03.2002

13680

355478

369158

273

670

7640

334

228

1663

10808

55075

8697

63772

23273

12089

252178

1324

65212

2843

356919

* Sundry Creditors includes Rs.2.74 crores (Rs.2.62 crores) being Creditors for Capital items.

SIIASUN CHEMICALS AND DRUC.S LIMl'I ED TWF.NTY EKIHTH ANNUAL REPORT


SCHEDULES.. FORMING PART OF THF ArrOll NTS

12. PROVISIONS

Provision for Tax (Net)

Proposed dividend

Provision for tax on Dividend

Provision for Employee Benefits

Provident Fund

ESI

Superannuation & Gratuity Fund

Bonus

Leave Encashment

13. MISCELLANEOUS EXPENDITURE

(to the extent not written off or adjusted)

Employee Stock Options - Deferred Expenditure

Less : Written off during the year

- www.sansco.net

As at31.03.2003

4889

36168

4634

1317

216

3312

12083

6813

69432

1104

276

(Rs. in OOO's)

As at

31.03.2002

3153

32880

1218

271

2118

10791

5154

55585

-

-

828

14. SALES & OPERATING REVENUES *

Bulk Drugs and Intermediates

By-Product Sales

Trade Sales

Export Incentives

Contract Research Fees

* Refer item 23 to Schedule 22 - Notes to Accounts

15. OTHER INCOME

Dividend Income on Trade Investment (Gross)

Miscellaneous Receipts

Insurance Claims

Profit on sale of Asset (Net)

Provision no longer required written back

Exchange Gain (Net)

Year Ended

31.03.2003

2298810

20184

22972

107655

23221

2472842

290

2434

23853

991

818

2368

30754

Year Ended

31.03.2002

1932812

20076

85735

149889

9148

2197660

292

3524

3489

-

-

731

8036

Tax Deducted at Source on Dividend Income from Trade Investments Nil Nil

FOR L I F L - SCIENCL WORKS



6. MANUFACTURING COST

Raw Materials ConsumptionStock lost due to FirePacking MaterialConsumable StoresPower and FuelKnow How/License FeesQuality Control and Assurance ExpensesOther Manufacturing CostCost of Traded Goods(Increase) / Decrease in WIP / FG(Increase) / Decrease in ED provision for FG

17. EMPLOYEE COSTSalaries, Wages and BonusContribution to Provident Fund and Other FundsContribution to Gratuity and Superannuation FundsESOP ExpensesWorkmen and Staff Welfare Expenses

18. MAINTENANCE COSTBuildingPlant and MachineryOthers

19. ADMINISTRATIVE EXPENSESRent

a) Rent for Premisesb) Lease Rent

Rates and TaxesElectricity ChargesInsuranceCommunication ExpensesTravelling ExpensesConveyanceLegal and Professional ChargesAuditors' RemunerationDirectors' RemunerationPrinting and StationeryMeeting ExpensesLoss on Sale of Fixed Assets (Net)Fixed Assets Written OffGeneral Expenses

- www.sansco.net

Year Ended

31.03.2003

129329823853

22747

6671

167905

1032

10683

7021

17843

(37466)

13891

1527478

136981

8564

3026

276

11319

160166

10497

54736

10644

75877

1958

3258

449

1187

10095

5521

7919

2901

4394

525

900

2892

701-

349

7675

50724

(Rs. in OOO'S)

Year Ended

31.03.2002

1185202-

23318

6117

127603

19893

5496

5677

76344

(87343)

1556

1363863

109466

7008

2529

-

8801

127804

6945

43572

8786

59303

1924

4851

3643

777

6643

4363

5721

2336

3792

239

620

2323

271

219-

6213

43935



20. SELLING AND DISTRIBUTION EXPENSES

Carriage OutwardsInsuranceDiscount

RoyaltyCommission on salesSales Promotion Expenses

Advertisement Expenses

Other Expenses

21. INTEREST AND FINANCE CHARGESInterest on Term Loans from Financial Institutions & BanksInterest on Term loans for R&DOther InterestLess: Interest Earned (including TDS Rs.4.52 Lacs (Rs.2.62 Lacs))Bank Charges

Year Ended31.03.2003

510785555

5994

691

35907

4626

538

438

104827

40778

2862

27021

5811 21210

5496

70346

(Rs. in OOO'S)

Year Ended

31.03.2002

48422

3257

3518

1209

40532

4408

641

747

102734

49998

3300

27586

4389 23197

4199

80694

22. NOTES ON ACCOUNTS

1. Significant Accounting Policies

1.1 Basis of preparation of Financial StatementsThe financial statements have been prepared to comply in all material aspects with applicable accountingprinciples in India, the Accounting Standards issued by the Institute of Chartered Accountants of India and therelevant provisions of the Companies Act, 1956.

1.2 Basis of AccountingThe financial statements have been prepared under the historical cost convention under accrual basis ofaccounting.

1.3 Fixed AssetsFixed assets are stated at the historical cost less accumulated depreciation. Cost of the fixed asset is inclusive offreight, installation, duties and other incidental expenses but excludes taxes and duties that are recoverablesubsequently from taxing authorities. Adjustments to carrying value of the assets are made in a manner as statedin Para 1.7 below wherever applicable.

1.4 Depreciation and AmortisationDepreciation on fixed assets is provided on Straight Line Method (SLM) based on Management's estimates ofuseful life of the assets at the following rates :

Building1.63 %3.34 %6.33 %10.34 %10.34 %20.00 %40.00 %

Non-factoryFactory Building

Furniture and FixturesPlant and MachineryEquipments and Electrical InstallationsVehiclesComputersLease hold land are amortised over the period of lease.


SCHEDULESFORMtlSir, PART OF THF ACCOUNTS

All assets costing Rs.5000 and below are fully depreciated in the year of acquisition.Depreciation on assets added/disposed off during the year has been calculated on prorata basis from the monthof addition or up to the month of disposal, as applicable.

1.5 InvestmentsInvestments are classified into current and long-term investments in accordance with Accounting Standard 13issued by the Institute of Chartered Accountants of India. Current investments are stated at lower of cost and fairvalue. Long term investments are stated at cost. A provision for diminution is made to recognise any decline,other than temporary decline in the value of Long Term investments. Gain/losses arising on disposal ofinvestments are recognised as income/expenditure in the year of disposal.

1.6 InventoriesInventories are valued at lower of Cost or Net realizable value and cost is ascertained as mentioned below.

Cost includes taxes and duties and other incidental expenses but excludes taxes and duties that are subsequentlyrecoverable from taxing authorities.

Cost is ascertained as follows:Raw materialsSparesLab chemicalsWork in progressFinished GoodsTraded Goods

First in first out basis.First in first out basis.First in first out basis.Direct expenses plus a share of manufacturing overheads.Direct cost plus appropriate share of manufacturing overheads.At actual cost (or) Net realizable value whichever is less.

Provision for Customs duty and excise duty have been made on closing stock of Raw materials in customswarehouse and finished goods respectively, which have no impact on the profits of the Company.

1.7 Foreign Currency TransactionsTransactions in foreign currency are recorded at exchange rates ruling on the date of transactions. At the year endall monetary foreign currency assets and liabilities are restated at closing exchange rates. Exchange differencesarising out of actual purchase / sale in foreign currency during the period and from the year end restatementreferred to above are adjusted if material to the original cost of the fixed asset, if the related liability is contractedfor acquisition of the fixed asset; In other cases dealt with in the profit and loss account.In the case of forward exchange contracts, the difference between the forward rate and the exchange rate at thedate of the transaction is recognised as income or expense over the life of the contract, except in respect ofliabilities incurred for acquiring fixed assets, in which case such difference is adjusted in the carrying amount ofthe respective fixed assets. Any profit or loss arising on cancellation or renewal of a forward exchange contract isrecognised as income or expense for the period, except in the case of forward exchange contract relating toliabilities incurred for acquiring fixed assets in which case such profit or loss is adjusted in the carrying amountof the respective fixed assets.

1.8 Retirement BenefitsThe cost of all retirement benefits is charged to Profit and Loss Account. Contribution to Provident Fund andPension Fund maintained by the Government are determined at the stipulated rates. The Company has coveredits Gratuity and Superannuation Liability with Life Insurance Corporation of India (LIC) through the approvedEmployee Gratuity and Superannuation Trusts set up by the Company. The premiums paid are based on advicefrom LIC, which determines the same on the basis of actuarial valuation. Provision for the year-end accruedliability on account of leave encashment benefit payable to employees is determined and made with reference tothe accumulated leave to the credit of each employee as at the year end.

1.9 Research and DevelopmentRevenue expenditure on Research & Development is charged to the Profit and Loss Account. Capital expenditureon assets acquired for Research & Development is accounted as fixed assets. A separate financial statements onResearch & Development as per separate books of accounts maintained, are enclosed as part of this report.

SANSCO SERVICES - Annual Reports Library Services - www


.sansco.net

1.10 Recognition of Income and Expenditure(i) Revenue from sale is recognized on despatch of goods to customers. Sales are inclusive of excise duty,

exchange gain realised on exports and are net of sales returns and discounts,(ii) Dividend income is accounted on receipt basis.

1.11 Miscellaneous Expenditure Written Off

(i) Deferred Revenue ExpenditureDeferred revenue expenses, as and when they are incurred, are written off over a period of five years. As atthe year end, the total deferred expenditure which is deferred is NIL.

(ii) ESOP ExpensesThe Company based on SEBI (ESOP & ESOS) Guidelines 1999, amortises the difference between the marketprice of the Company's share and the offer price as on the date of grant for the total number of sharesoffered, over the vesting period.

As at2. Estimated amount of contracts remaining to be executed on

Capital account and not provided for (net of advances)

3. Contingent LiabilitiesIn Respect of Direct and Indirect Taxation MattersCounter guarantee given by the Company to the bankers for bank guaranteeBills discounted with banks

4. Capacities (Tons) - InstalledBulk Drug and Intermediates

2002 - 20035. Quantitative Particulars Qty (tons) Value (OOOs)

Bulk Drug & IntermediatesOpening Stock 300 148460Production 3927Captive Consumption (259)Sales (3780) 2298810Closing Stock 188 171742

6. Analysis of Raw Materials - ConsumedQty Value (OOOs)

Solvent (Ltrs in OOOs) 21 264 318135Chemicals (Tons) 22700 999016Total 1317151

Note : In view of secrecy of production process, item wise raw materials are not furnished. Permission from

7. Consumption of Materials Value (OOOs) PercentageImported at landed Cost 312386 24%Indigenous 1004765 76%Total 1317151

(Rs. in OOO'S)31.03.2003 As at 3 1.03.2002

48313 6668

32602 2589821943 1051588440 91378

4627 4352

2001 - 2002Qty (tons) Value (OOOs)

93 54283

3788

(202)

(3379) 1932812

300 148460

Qty Value (OOOs)

20172 305870

29253 879332

1185202

Central Government is awaited.

Value (OOOs) Percentage290873 25%

894329 75%

1185202

Note : 1 . Consumption figures do not include spare parts as they do not form part of manufacturing process.2. Total RM Consumed includes value of Raw Materials consumed for stocks lost due to fire to the extent of Rs.23853.

FOR L I F E - SCIENCE WORKS


SCHEDULES

- www.sansco.net

FORM INC, PART OF THF ACCOUNTS

As at 31. 03.2003 As at 31.03.2002

8. GIF Value of Imports

Raw MaterialsCapital Goods & Spare parts

9. Expenditure in Foreign Currency

Travel ExpenditureSubscriptionsR&D ExpensesCommissionExport Promotion ExpensesConsultancy ChargesRoyalty & Technical KnowhowTotal

10. Earnings in foreign currency

Export - EOB SalesRoyalty, know how, Professional and ConsultationInterest and Dividend

Note : Export Sales includes FOB value of goods

11. Auditors Remuneration

FeeTax MattersConsultancy ChargesCertification feesExpenses

12. Performance Ratios

Sales / Fixed Assets

Sales / Total Assets

PAT/ Sales (%)

13. I. Earnings Per Share (EPS)

(Nominal Value Rs. 10 per share)

Profit after tax (Rs.OOO's)

(a) Basic EPS (Rs.)

Number of Shares

(b) Diluted EPS (Rs.)

Number of Shares

Values (Rs. in OOO's) Values

347919

2002 - 2003

(USD in OOO's) (Rs. in

753

43295

222230

490

(USD in OOO's) (Rs. in

36617

2001 -

OOO's) (USD in OOO's)

3607 37

136 4

2112 40

14221 483

1062 25

1057 51

1432 170

23627 810

OOO's) (USD in OOO's)

31123 1513744 26779

fees 483

6

sent to UK Branch.

2002

23221 187

290 6

-2003

162

283

50

11

19

2.16

1.70

6.89

2002 - 2003

161415

19.64

8220000

19.60

8236386

(Rs. in OOO's)

301908

20878

2002

(Rs. in OOO's)

1763

1791939

23167

1209

2447

7952

38656

(Rs. in OOO's)

1287289

9148

292

(Rs. in OOO'S)

2001 - 2002

10526503919

2.04

1.65

5.90

2001 - 2002

120279

14.64

8220000

14.64

8220000

II. Reconciliation on Number of Shares considered

for Basic and Diluted EPS

Number of Equity Shares

Add: Number of shares under Option

Less: Number of shares that would have been issued at Fair Value (40350 x 40/67.35)

Total

8220000

40350

(23965)

8236385

--

-



14. Remuneration to Managing Director, Whole time Directors

Salary and AllowanceCommissionContribution to Provident FundContribution to GratuityContribution to SuperAnnuationPerquisites

15. Calculation of Managerial Remuneration under section 198of the Companies Act, 1956Net profit as per Profit and Loss A/cAdd:

Directors Remuneration(Profit)/Loss on Sale of Assets / Investments

Net profit Under Section 198Commission EligibleCommission Restricted

- Executive Directors- Non Executive Directors

2002 - 200357825400

432156360524

196615

13554(991)

209178836763005400900

(Rs. in OOO'S)2001 - 2002

43234500

324116360325

154374

10568219

165161660651204500

620

16. Separate books of accounts are being maintained for Pondicherry, Cuddalore and R&TJ units and are consolidated.

17. Future commitments towards lease rentals is Rs. 2.10 lacs in respect of assets taken on lease.

18. There are no specific claims form suppliers for interest on delayed payments to Small Scale Industries as definedin the Small Scale and Ancillary Undertakings Act, 1993.

19. There were no amount overdue to Small Scale and / or Ancillary industrial suppliers on accounts of principaland/or interest as at close of the year.

20. Sundry debtors includes (Rs. in Lacs)

2002 - 2003 2001 - 2002(a) Due by directors of the Company - 144.00(b) Due from Subsidiary Companies 2059.29 747.18(c) Due from a Company in which director is interested 1117.56 1288.62

21. Maximum balance held during the year in Current accounts in Foreign Currency

ABN Amro Bank U.K. - USD Account 428.65 201.13ABN Amro Bank U.K. - GBP Account 31.46 55.76

22. Balance with Schedule banks in current account includes balances in respect ofUnclaimed Dividend 16.55 13.24

23. Exchange Gain / (Loss) included in Sales 46.99 111.15

24. Maximum amount due at any time during the year by directors of the Company Rs.144 lacs (Rs.144 Lacs).

25. Security for Loans(i) Term loan from Financial Institutions Rs.4.09 crores and Banks Rs.40.05 crores are secured by pari passu first

charge on fixed assets of the Company (excluding specific charge),(ii) Term loan from Financial Institutions to the extent of Rs.14.38 crores are additionally secured by second

charge on current assets of the Company on which banks are holding first charge,(iii) Term loan from Financial Institutions to the extent of Rs.3.06 crores are additionally secured by personal

guarantee of Dr. Devendra, Mr. Abhaya Kumar and Mr. Vimal Kumar directors of the Company,(iv) Interest free sales tax loan are secured by second charge on Ranitidine and Ibuprofen plant at Cuddalore.(v) The working capital limit of Rs.40 crores is secured by hypothecation on the whole of current assets and

Second charge on the Fixed assets. Further, Dr. S. Devendra - Managing Director, Mr. S. Abhaya Kumar - JointManaging Director and Mr. S. Vimal Kumar - Finance Director have furnished a personal guarantee for thesaid Working Capital limit,

(vi) Hire purchase loans for Rs.32.16 lakhs are secured by hypothecation of respective assets financed.

FOR LIFE - SC1KNCF, WORKS ;j|



26. The Company under the Employee Stock Option Plan 2001 granted 40350 Equity Share Options to the Employeeson 01.04.2002. Deferred Employee Stock Option Expense of Rs.11.04 lacs is amortized over the vesting period offour years. Consequently the amount charged off to revenue for the current period is Rs.2.76 lacs (2002 - Rs.Nil).

27. The Company is in only one Business segment i.e. "Pharmaceuticals"

28. A. Related Party DisclosureAs per Accounting Standard - 18 issued by the Institute of Chartered Accountants of India, the Company'srelated parties are disclosed as below

I. Particulars of Subsidiary / Associate Companies

1.2.3.4.5.6.7.

II.

1.2.3.4.5.6.7.8.9.10.

Name of Related Party

Shasun USA Inc.,Shasun Finance LimitedShasun Leasing & Finance (P) Ltd.,Shasun Textiles Ltd.,Shasun Pharma Ltd.,Devendra Estate (P) Ltd.,AustinShasun LLC,

Key Management Personnel & their relatives

Dr. DevendraAbhaya KumarVimal KumarK.S.S.RaaghavanJitesh .DChaitanya .DMayur .ADeepak .ANitin .VJatin .V

Nature of Relationship

Wholly Owned subsidiaryAssociate CompanyAssociate CompanyAssociate CompanyAssociate CompanyAssociate CompanyJV Company

Relationship

Managing DirectorJoint Managing DirectorFinance DirectorSafety DirectorSon of Managing DirectorSon of Managing DirectorSon of Joint Managing DirectorSon of Joint Managing DirectorSon of Finance DirectorSon of Finance Director

B. Related Party Transactions

The following are the transactions that were carried out with related parties in the ordinary course ofbusiness.

I. Particulars of transaction with related Subsidiary / Associate / JV Companies(Rs: in Lacs)

Sales Of Goods (Finished)Purchases Of Goods (Finished)Leasing Or Hire Purchase ArrangementsOutstanding Amount as at year end and included in current assets

Subsidiary Company4039.41

40.66

2059.29

Associate Companies

32.25

JV Company

-

II. Details of Transaction relating to persons referred to in A (II) above(Rs. in Lacs)

Remuneration 77.60Rent for leased property 1 2.96

29. Previous year's figures have been regrouped / reclassified wherever necessary to conform to the presentation ofthe current year's accounts.

V PARTHASARATHYCompany Secretary"hennai, June 09, 2003


DR. S. DEVENDRA Managing DirectorS. ABHAYA KUMAR Joint Managing DirectorS. VIMAL KUMAR Finance Director

As per Report of even Date

For Jagadisan & Co.,Chartered AccountantsV. JAGADISAN, Partner

SHASUN CHEMICALS AND DRUGS L I M 1 T L I ) TWENTY E I G H T H A N N U A L REPORT


CASH FLOW STATEMENTFOR THF YFAR FMDFD MARCH .11. ?.nfH

A. CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax and extraordinary items

DepreciationAsset Written offESOP Written offForeign Exchange (Gain) / LossDividend ReceivedInterest paidInterest Received(Gain) / Loss on sale of Fixed Assets / Investments

Operating profit before working capital changes

InventoriesAdjustments for trade & other receivablesTrade payables / Other Payables

Cash generated from operationsDirect taxes paid (Net of Refunds)

Net Cash flow from Operating Activities

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assetsSale of fixed assets / InvestmentsPurchase of InvestmentsInterest ReceivedDividend Received

Net Cash used in Investing Activities

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from long term borrowingsProceeds from short term borrowingsDividend paidInterest paid

Net Cash used in Financing Activities

Net Changes in Cash & Cash equivalents (A+B+C)Cash and Cash equivalents on 01.04.2002Cash and Cash equivalents on 31.03.2003

Year Ended

31.03.2003

196615

143362349

276

(855)

(290)

76157(5811)

(991)

408812

(64239)(161237)

151540334876(21265)

313611

(228215)3216

-

5811

290

(218898)

91669(69688)(32880)(76157)

(87056)

76571380818465

(Rs. in OOO's)

Year Ended

31.03.2002

154374

123598-

-

(3148)(292)

85083(4389)

220

355446

(100131)(70378)

62968247905

(9193)

238712

(166282)1819

(473)

4389292

(160255)

(92097)95914

(27175)(85083)

(108441)

(29984)4079210808

V PARTHASARATHYCompany SecretaryChennai, June 09, 2003




For Jagadisan & Co.,Chartered Accountantsv JAGADISAN, Fanner


RESEARCH & DEVELOPMENT CENTREVFf.ACHF.RY

BALANCE SHEET AS AT MARCH 31, 2003

Sources of FundsHead Office Control a/cAdd : TransfersLess : Excess of Expenditure over incomeSecured LoansTerm Loans from FIs - Exim Bank - R&DTotal

Application of FundsFixed AssetsR&D EquipmentsGross Block Opening as on 01 .04.2002

AdditionsClosing as on 31.03.2003Less : Accumulated DepreciationNet Block as on 3 1.03.2003

Other Gross Block Opening as on 01.04.2002AdditionsDeletionsClosing as on 31. 03.2003Less : Accumulated DepreciationNet Block as on 31. 03.2003

Current AssetsInventory - Lab ChemicalsTotal

STATEMENT OF INCOME & EXPENDITURE

ExpenditureEmployee CostMaterial / Consumables / SparesUtilitiesOther ExpenditureInterestTotal Revenue Expenditure excluding Depreciation

DepreciationTotal Expenditure

IncomeCommercial Sale of PrototypesFTE IncomeOthersTotalExcess of Expenditure over Income

As at 31. 03.20037707588120

(65727) 99468

22500121968

7944029556

108996(29654)

7934263103

5172

(1392)66882

(25724)41 1 58

1468

121968

For the year ended31.03.2003

2194717077

6154

295332862

77573

1711994692

5185

23221559

2896565727

(Rs. in OOO's)

As at 31. 03.2002130065

(52989) 77076

30000107076

576182182379440

(19450)59990

13854(80)

63103(19232)

4387 1

3215

107706

For the year ended31.03.2002

1487013091

6513

161773300

53951

1198965940

3641

9148

1621295152989

BALANCE SHEET ABSTRACT AND GENERAL BUSINESS PROFILE

Registration DetailsRegn. no.State CodeBalance Sheet date

Capital Raised during the YearPublic IssueRights IssueBonus IssuePrivate Placement

Mobilisation and Deployment of FundsTotal LiabilitiesTotal AssetsSources of FundsPaid-up CapitalReserves and SurplusSecured LoansUnsecured LoansDeferred Tax LiabilitiesESOP Outstanding

712218

31.03.2003

(Rs. in OOO's)NilNilNilNil

20755772075577

8220064081960741349999

1211431104

Application of FundsNet Fixed AssetsInvestmentsNet Current AssetsMiscellaneous ExpenditureAccumulated Loses

Performance of the CompanyTurnover & Other IncomeTotal ExpenditureProfit / Loss Before TaxProfit / Loss after TaxEarning per Share, (in Rs.)Dividend Rate (%)

Generic names of three PrincipalProducts/Services of the CompanyItem Code no. (ITC code)Product DescriptionItem Code no. (ITC code)Product DescriptionItem Code no. (ITC code)Product Description

(Rs. in OOO's)1083393

1587416870

828Nil

25035962306981

196615161415

19.6044

294200.03IBUPROFEN294200.05

RANITIDINE294200.29

NIZATIDINE

\NNI LAI . Kl.l'OK


SHASIINHISA INK"!

DIRECTORS' REPORTThe Directors are pleased to present their Report and Financial Statements for the year ended March 31, 2003.

PRINCIPAL ACTIVITYThe Principal activity of the Company was that of importing and trading of bulk drugs. During the year GrossRevenue of the Company amounted to USD 8.39 million as against USD 9.69 million. The Company has made a profitafter tax of USD 28660 as compared to USD 21161 in the previous year. The Company during the year has declareddividend of USD 6000.

FUTURE PROSPECTSThe Company is now diversifying the product portfolio and efforts are continued to enlarge its overall market sharein the US, Canada and South American market.

The audit report of your Company for the year ended March 31, 2003 is attached along with financial reports.

On behalf of the BoardS. ABHAYA KUMARS. VIMAL KUMARJune 07, 2003

INDEPENDENT AUDITOR'S REPORT

To the Board of DirectorsShasun USA IncEdison, New Jersey

I have audited the accompanying Balance Sheet of Shasun USA Inc as of March 31, 2003 and 2002 and the relatedstatements of Income and Retained Earnings and Cash Flows for the years then ended. These Financial Statementsare the responsibility of the Company's management. My responsibility is to express an opinion on the FinancialStatement based on my audit.I have conducted my Audit in accordance with generally accepted auditing standards. Those standards require thatI plan and perform the audit to obtain reasonable assurance about whether the Financial Statements are free ofmaterial mis-statement. An audit includes examining on a test basis, evidence supporting the amounts anddisclosures in the Financial Statements. An audit includes assessing the accounting principles used and significantestimates made by management, as well as evaluating overall financial statement presentation. I believe that myaudit of the Financial Statements provide a reasonable basis for my opinion.In my opinion, the Financial Statements referred to above present fairly, in all material respects, the financialposition of Shasun USA Inc as of March 31, 2003 and 2002 and the results of its operations and its cash flows for theyears then ended, in conformity with generally accepted accounting principles.

RAVI VENKATRAMAN, CPANorth Brunswick, NJ

June 07, 2003


SHASUN USA INC

BALANCE SHEET AS AT 31.03.2003

AssetsCash and Bank BalancesAccounts ReceivableDepositsOther AdvancesEmployee AdvancePrepaid ExpensesInventoriesFixed AssetsTotal

LiabilitiesShare CapitalRetained EarningsAccounts payableAccrued ExpensesPayroll Taxes PayableDeferred Tax LiabilityProvision for Taxation (Net)Proposed DividendTotal

As at 31. 03.2003

in USD Rs. in OOO's

596292 28312

1356722 64417

1330 63

43066 2045

41403 1906

649 31

2487518 118107

39985 1898

4566965 216839

15000 712

80254 3810

4353881 206722

106799 5071

1780 85

1291 61

1960 93

6000 285

4566965 216839

As at 31

in USD

243889

1013615

1330

15274

67769

1648

1049730

46925

2440180

15000

57594

2293132

63104

2379

-

2971

6000

2440180

.03.2002

Rs. in OOO's

11902

49464

65

745

3307

80

51227

2290

119081

732

2811

111905

3079

116

-

145

293

119081

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2003

IncomeSales & Operating RevenuesOther IncomeTotal

ExpenditureCost of Goods SoldEmployee CostGeneral Sales & Administrative ExpensesBad debtsDepreciation & AmortisationInterest ExpensesTotal

Profit Before TaxLess : Provision for Tax

Profit After TaxEarlier year's profiV(loss) brought forwardProposed Dividend on Common Stock

Balance Carried over to Balance Sheet

For Shasun USA Inc

S. ABHAYA KUMARS. VIMAL KUMARJune 07, 2003

Year Ended 31. 03.2003

in USD Rs.in OGO's

8388088 398266

973 46

8389061 398312

7981365 378955

44098 2094

302349 14356

9200 437

17302 821

-

8354314 396663

34747 1649

6087 ''Sg

28660 1 360

57594 ?735

6000 .'«5

80254 3810

Year Ended 3 1.03.2002

in USD

9688636

4074

9692710

9439829

47366

169904

8249

5

9665353

27357

6196

21161

42433

6000

57594

Rs.in OOO's

472805

199

473004

460664

2311

8291-

403-

471669

1335

302

1033

2071

293

2811

RAVI VENKATRAMAN, CPA

Note : Audited figures are in USD. Rupee equivalent is calculated as per the exchange rate prevailing as on 31.3.2003 (1 USD =respectively and the same is given for better understanding.

,WT SIIA.M N f . l ir.MK \l S AM) DKI ( A 1.1 Ml ! r 1)

North Brunswick,

Rs.47 .48) 8.31.3.2002(1

n\ i rvi \ i H .H i M \

NJ

USD = Rs.48.80)

yv 1 M K ; | ', 1 1." i


SHASUNJ USA INJCCASH FLOW STATEMENT FOR THE YEAR ENDED 31.03.2003

A) Cash Flow from Operating activities :

Net Income / (Loss) for the periodAdd : DepreciationChanges in assets and liabilities:Accounts ReceivableEmployee LoansPrepaid ExpensesInventory ,DepositsOther AssetsAccounts PayableAccrued ExpensesPayroll Taxes PayableCorporate Tax PayableDeferred Taxes Payable

31.03.2003

2866017302

(343108)26366

999

(1437788)

(27792)2060750

43695(599)

(1011)1291

in USD

31.03.2002

21161

8249

1055507

(58881)

(1648)

25969

(520)

(15000)

(839883)7875

(6408)(411)

Net increase in cash from Operating activities

B) Cash flow from Investing activities :Purchase of Fixed AssetsNet Cash used in Investing activities

368765 196010

(10362)

C) Cash flow from Financing activitiesDividend paid

J10362)_

(6000)

C7_669)(7669)

(6000)Net Cash used in Financing activities (6000) (6000)Cash-April 1,2002Cash-March 31,2003

243889596292

61548

243889

The Notes to financial statements are an integral part of this statement.

NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.03.2003

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. GeneralShasun USA Inc was incorporated in New Jersey in 1997 as a wholly owned subsidiary of ShasunChemicals and Drugs Limited (SCDL) with a paid-up capital of $15000.00. The subsidiary is a tradingoutfit of SCDL. The main business of the Company is to stock and sell finished products of SCDL and alsodo marketing for SCDL's existing as well as new products. It also assists SCDL in procurement of referencestandards and other regulatory related activities with the end customers.

B. InventoryInventory is carried at lower of cost or market price.

C. Property and Equipment / DepreciationProperty and equipment are stated at cost. Depreciation is provided on the straight line method over theestimated useful lives of the respective assets.

NOTE 2. SIGNIFICANT BUSINESS WITH CERTAIN CLIENTS :Shasun USA Inc, has four customers who accounted for approximately 86% of sales for the year endedMarch 31, 2003 and 86% of account receivable as at March 31, 2003. A loss of these clients could have amaterial impact on the financial condition of the Company.


SHASUN I ISA INC

1.03.2003

$

$

$

$

$

$

$

7640

26664

3430

36082

73816

33831

39985

31.03.2002

7640

16873

2859

36082

63454

16529

46925

NOTE 3. EMPLOYEE ADVANCE :Employee advance consists of amounts advanced to employees for resettlement expenses, and advances

against salary.

NOTE 4. PREPAID EXPENSE :The amount represents prepaid insurance for April 2003.

NOTE 5. PROPERTY AND EQUIPMENT:Property and Equipment at March 31, 2003 and 2002 consists of the following:

Office EquipmentComputersFurnitureOther AssetsTotal AssetsLess: Accumulated DepreciationNet Assets

The depreciation expense for the year ended March 31, 2003 and 2002 is $ 17,302 and 8,249 respectively.

The depreciation rates used for Property and Equipment are as follows:

Office Equipments 14%

Computers 40 %Furniture 18%Other Assets 20 %

NOTE 6. SECURITY DEPOSITS :The amount represents utility deposits for New Jersey Office.

NOTE 7. RELATED PARTY TRANSACTIONS:Shasun USA Inc is a 100% subsidiary of Shasun Chemicals and Drugs Limited (SCDL). During the year,the total purchases from the parent Company is $ 8,456,970.

NOTE 8. COST OF GOODS SOLD FOR THE YEAR ENDED MARCH 31, 20032002-2003 2001-2002

Beginning Inventory $ 1049730 1075699

Purchases (Less Returns) $ 8994570 9212508

Other direct costs:

Customs Duty,Freight & Storage charges $ 424583 201352Total Cost of Goods available for sale "$ 10468883 10489559Less: Ending Inventory $(2487518) (1049730)Total Cost of Goods sold $ 7981365 9439829

1


CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET OF

Sch.No. 31.Sources of Funds

Shareholders' FundsShare Capital 1Reserves & Surplus 2ESOP Outstanding

SHASUN CHEMICALS AND DRUGS LTD AND

As at As at03.2003 31.03.2002

Application of Funds1 . Fixed Assets

82200 82200 Gross Block

599423 520025 Less : Depreciation11 04 Nel Book Value

r 'i 1 I A J 1 • n682727 602225 Capltal Work m Pr°9ress

ITS SUBSIDIARY AS AT 31.03.2003

(Rs. in OOO's)

As at As atSch.No. 31.03.2003 31.03.2002

5 1651040 1438702603366 46501 1

1047674 97369137648 29621

1085322 1003312

Secured 3Unsecured 4

Total

Schedules annexed are an integral part

CONSOLIDATED PROFIT & LOSS

Sch.No.

IncomeSales & Operating Revenues 1 4Less : Excise Duty

Other Income 1 5

ExpenditureManufacturing Cost 1 6Employee Cost 1 7Maintenance Cost 1 8Administrative Expenses 1 9Selling & Distribution Expenses 20Research & Development ExpensesTotal

Schedules annexed are an integral part

V PARTHASARATHY

Company Secretary


607413 585970 investments o iui/ iut/

49999 50000 3. Current Assets, Loans & Advances657412 635970 Inventory 7 449495 362446

Sundry Debtors 8 322445 334321Cash and bank balances 9 46778 22710Loans and Advances 10 126284 55558

(A) 945002 775036Less : Current Liabilities & ProvisionsLiabilities 11 501331 376526Provisions 12 69525 55731

(B) 570856 432257Net Current Assets (A B) 374146 3427794. Deferred Tax Liability (121204) (108943)5. Miscellaneous Expenditure 1 3 828

(to the extent not written off or adjusted)1340139 1238195 Total 1340139 1238195

Notes on Accounts 22

of this Balance Sheet and should be read in conjunction therewith.

ACCOUNT OF SHASUN CHEMICALS & DRUGS LTD & ITS SUBSIDIARY AS AT 31.03.2003

(Rs. in OOO's)Year Ended Year Ended Sch.No. Year Ended Year Ended31.03.2003 31.03.2002 31.03.2003 31.03.2002

Profit Before InterestDepreciation & Tax 370352 3570762468637 2242722 Finance Cost . 21 70529 80742

99490 98740 Depreciation 144134 1239902369147 2143982 Profit Before Tax 155689 152345

29606 7499 Current year Tax Provision 23228 1361223^8753 71S1481 Deferred Tax Provision 12261 20/85

Profit After Tax 120200 1179471545162 1398038 Earlier Year's Profit Brought Forward 286236 221169162289 130061 Profit Available for Appropriation 406436 33911676134 59721 Appropriations57217 49321 Final Dividend on Equity Shares 36168 32880

112888 106612 Tax on Distributed Profits 463474711 50651 Transfer to General Reserve 25000 20000

2028401 1794404 Balance carried Forward 340634 286236

Notes on Accounts 22

of this Profit and Loss account and should be read in conjunction therewith.

On behalf of the Board As per Report of even Date

DR. S. DEVENDRA Managing Director For Jagadisan & Co.,

S. ABHAYA KUMAR Joint Managing Director Chartered Accountants

S. VIMAL KUMAR Finance Director V. JAGADISAN, Partner


CONSOI IDATFD F I N A N C I A L STATF.MF.ISFTSSCHEDULES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS

1. SHARE CAPITAL

Authorised

(Rs. in OOO's)As on 31.03.2003 As on 31.03.2002

: 1500000 Equity Shares of Rs.10 each: 1000000 Preference Shares of Rs.100 each

Issued, Subscribed and Paid up : 8220000 Equity Shares of Rs. 10 each fully paid up

150000100000

82200

150000

100000

82200

82200 82200

2. RESERVES & SURPLUS

General ReserveShare Premium AccountCapital ReserveProfit & Loss Account

As on 01 .04.20021541892660053000

286236520025

Additions25000

120200145200 j

Deletions

6580265802

As on 31. 03.20031791892660053000

340634599423

3. SECURED LOANSRupee Term Loans from El's/BanksForeign Currency Term Loans from El's/BanksInterest Free Sales Tax LoanHire Purchase LoanBanks

243912197451362403216

126594

3352101817035676633

196281

4. UNSECURED LOANSUnsecured Loans

607413

49999

49999

585970

50000

50000

5. FIXED ASSETS

Particulars

Land - Freehold

Land - Leasehold

Factory Building

Non Factory Building

Building - Leasehold

Plant & Machinery

Factory Equipment

Power Gen. Equipment

Electrical Installations

Lab Equipment

R&D Equipment

Office Equipment

Computers

Furniture & Fixtures

Vehicles

Gross BlockCost as on

01.04.2002

7726

4129

235708

10399

1680

889088

11095

42689

55612

15244

79440

14342

32581

15683

23286

1438702

Additions Deletions

22813 501

9951

12761

926

103927 3157

1275

3994

1514

17260

29556

5102 399

3952 24

1702

5957 4271

220690 8352

Cost as on

31.03.2003

30038

14080

248469

11325

1680

989858

12370

46683

57126

32504

108996

19045

36509

17385

24972

1651040

Depreciation Block

Depn as on

31.3.2002

-

35272

271

168

308506

6427

18750

21604

4582

19450

5662

27322

3968

13029

46501 1

Additions Deletions

524

8019

180

336

97927 2331

1204

4724

5852

2220

10204

1692 156

5148 24

1246

4858 3268

144134 5779

Depn as on

31.03.2003

-

524

43291

451

504

404102

7631

23474

27456

6802

29654

7198

32446

5214

14619

603366

NetAs on

31.03.2003

30038

13556

205178

10874

1176

585756

4739

23209

29670

25702

79342

11847

4063

12172

10353

1047674

Block

As on

31.03.2002

7726

4129

200435

10129

1512

580583

4668

23939

34008

10662

59990

8679

5259

11715

10257

973691


CONSOI IDATFD F1MANJCIA1 STATFMFMTS

SCHEDULES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS

6. INVESTMENTS - LONG TERMUNQUOTED (TRADE INVESTMENT)

1 .Investment in Govt. or Trust Securities(a) Tamil Nadu Bond(b) SIPCOT Industrial Common Utilities Ltd

2. Investment in Shares, Debentures or BondsState Bank of Travancore - Bond

3. Investment in Austin Shasun LLC

7. INVENTORY(as certified by the Management)Raw MaterialsIn Process StockFinished GoodsTraded GoodsStores / Lab ChemicalsFinished Goods in Transit

8. SUNDRY DEBTORSDebts Outstanding for a period exceeding six monthsDebts Considered Good and in respect of which the Company holds nosecurity other than personal guarantee of the DebtorsOthersDebts Considered Good and in respect of which the Company holds no

As on31.03.2003

50424

(Rs. in OOO's)As on

31.03.2002

50424

100

473

1047

100

473

1047

147267

51552

237228

24394084

6925

449495

8360

10. LOANS AND ADVANCES(Unsecured & considered good)Advances recoverable in cash or in kind or for value to be receivedDeposit with Government Bodies and others

113779

12505

126284"

120243

37368

191088

67756973

362446

14314

security other than personal guarantee of the Debtors

9. CASH AND BANK BALANCESCash on handBalances with scheduled banks

in current accountsin deposits accounts in Indian rupeesin deposits accounts in foreign currency

Balances with non - scheduled banksin current accounts in foreign currencyABN Amro Bank US Dollars a/c, UKABN Amro Bank Pound Sterling a/c, UK

314085

322445

379

31785

1735

52

12529

298

46778

320007

334321

274

12571

7640

334

228

1663

22710

46861

869755558


CONSOLIDATED FINANCIAL STATFMF.NTS


11. LIABILITIESBills PayableSundry Creditors

a) Due to SSI'sb) Others

Unclaimed DividendOther LiabilitiesInterest accrued but not due on loans

12. PROVISIONSProvision for Tax (Net)Proposed dividendProvision for tax on DividendProvision for Employee Benefits

Provident FundESISuperannuation & Gratuity FundBonusLeave Encashment

13. MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)Employee Stock Options - Deferred ExpenditureLess : Written off during the year

(Rs.

As on31.03.2003 31

25578

13187

340660

1654

118639

1613

501331

4982

36168

4634

1317

216

3312

12083

6813

69525

1104

276

in OOO'S)

As on

.03.2002

23273

12089

281915

1324

55083

2843

376526

3299

32880-

1218

271

2118

10791

5154

55731

-

-

828

Year Ended Year Ended14. SALES & OPERATING REVENUES

Bulk Drugs and IntermediatesBy-Product SalesTrade SalesExport IncentivesContract Research Fees

15. OTHER INCOME

Dividend Income on Trade InvestmentMiscellaneous ReceiptsInsurance Claims receivedProfit on Sale of Asset (Net)Provision no longer required written backExchange Gain (Net)

31.03.2003 31

1894868

20184

422709

107655

23221

2468637

-

2481

23853

991

818

1463

29606

.03.2002

1565111

20075

498498

149889

9148

2242722

292

3718

3489

-

-

7499


CONSOI .1 DATED FTNANCIAI STATEMENTS

SCHEDULES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS (Rs. in OOO'S)

Year Ended Year Ended16. MANUFACTURING COST

Raw Materials ConsumptionStock Lost due to FirePacking MaterialConsumable StoresPower and FuelKnow How/License FeesQuality Control and Assurance ExpensesOther Manufacturing CostCost of Traded Goods(Increase) / Decrease in WIP / FG(Increase) / Decrease in ED

17. EMPLOYEE COSTSalaries, Wages and BonusContribution to Provident Fund and Other FundsContribution to Gratuity and Superannuation FundsESOP ExpensesWorkmen and Staff Welfare Expenses

18. MAINTENANCE COSTBuildingPlant and MachineryOthers

19. ADMINISTRATIVE EXPENSESRent

a) Rent for Premisesb) Lease Rent

Rates and TaxesElectricity ChargesInsuranceCommunication ExpensesTravelling ExpensesConveyanceLegal and Professional ChargesAuditors' RemunerationDirectors' RemunerationPrinting and StationeryMeeting ExpensesExchange Loss (Net)Loss on Sale of Fixed Assets (Net)Bad Debts Written offFixed Assets Written offGeneral Expenses

31.03.2003 31.03.2002

1293298

23853

22747

6671

167905

1032

10683

7021

60096

(62035)

13891

1545162

138907

8759

3026

276

11321

162289

10711

54736

10687

76134

2824

3733

690

1187

10095

6578

10051

2900

5492

525

900

2891

701-

-

443

349

7858

57217

1185202

-

23318

6117

127603

19893

5496

5677

108309

(85133)

1556

1398038

111724

5443

2529-

10365

130061

7129

43572

9020

59721

2771

5129

3760

111

6829

4995

6486

2336

4115

439

620

2430

271

1632

219-

-

6513

49321


CONSOI IDATFD FINANCIAI STATFMFNTS

SCHEDULES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS (Rs. in OOO'S)

Year Ended Year Ended20. SELLING AND DISTRIBUTION EXPENSES

Carriage OutwardsInsuranceDiscountRoyaltyCommission on salesSales Promotion ExpensesAdvertisement ExpensesOther Expenses

21. FINANCE COSTInterest on Term Loans from Financial Institutions & BanksInterest on Term loans for R&DOther Interest (Net of Interest earned)Bank Charges

31.03.2003 31

51078

5959

5994

691

42710

4950

538

968

112888

40778

2862

21210

5679

70529

03.2002

48422

3257

3518

1209

44325

4493

641

747

106612

49998

3300

23197

4247

80742

22. NOTES TO ACCOUNTS

1. Shasun Chemicals and Drugs Limited together with its 100% subsidiary, Shasun USA Inc (collectively, 'theGroup') is primarily engaged in the business of manufacture and trading of bulk drug chemicals and itsintermediates. Further, these Consolidated Financial Statements have been prepared to meet the requirementsof clause 32 of the listing agreement with the Stock Exchanges.

2. The Consolidated Financial Statements are prepared in accordance with Accounting Standard 21"Consolidated Financial Statements" issued by the Institute of Chartered Accountants of India.

3. Conversion of Foreign Exchange transaction is translated into Indian Rupees in accordance withAccounting Standard 11 - "Accounting for the Effects of Changes in Foreign Exchange Rates"

4. Fixed assets are stated at cost less depreciation. None of the assets have been revalued during the year.Depreciation for the subsidiary Company is calculated as per the relevant practices applicable in the countrywhere the subsidiary Company is located.

5. I. Earnings Per Share (EPS)(Nominal Value Rs. 10 per share)Profit after tax (Rs. in OOO'S)(a) Basic EPS (Rs.)

Number of Shares(b) Diluted EPS (Rs.)

Number of Shares

II. Reconciliation on Number of Shares consideredfor Basic and Diluted EPSNumber of Equity SharesAdd: Number of shares under OptionLess: Number of shares that would have been issued at Fair Value (40350 x 40/67.35)

2002 - 2003

120200

14.628220000

14.598236385

8220000

40350(23965)

2001 - 2002

117947

14.358220000

14.358220000

Total 8236385


CONSOIIDATFD FINANCIAL STATF.MF.NTS


6. A. Related Party DisclosureAs per Accounting Standard - 18 issued by the Institute of Chartered Accountants of India, the Company's

related parties are disclosed as below :

I.

1.2.3.4.5.6.

II.

1.2.3.4.5.6.7.8.9.10.

Particulars of Associate Companies

Name of Related PartyShasun Finance LimitedShasun Leasing & Finance (P) Ltd.,Shasun Textiles Ltd.,Shasun Pharma Ltd.,Devendra Estate (P) Ltd.,AustinShasun LLC,

Key Management Personnel £f their relatives

Dr. DevendraAbhaya KumarVimal KumarK.S.S. RaaghavanJitesh. DChaitanya. DMayur. ADeepak. ANitin. VJatin. V

Nature of RelationshipAssociate CompanyAssociate CompanyAssociate CompanyAssociate CompanyAssociate CompanyJV Company

Relationship

Managing DirectorJoint Managing DirectorFinance DirectorSafety DirectorSon of Managing DirectorSon of Managing DirectorSon of Joint Managing DirectorSon of .Managing DirectorSon of Finance DirectorSon of finance Director

B. Related Party Transactions

The following are the transactions that were carried out with related parties in the ordinary course of business.

I. Particulars of transaction with related Associate / JV Companies

(Rs. in Lacs)

Leasing Or Hire

Associate C

Purchase Arrangements

II. Details of Transaction relating to persons referred to in A (II) above

Remuneration

Rent for leased property

ompanies JV Company

32.25

(Rs. in Lacs)

98.83

21.63

7. Previous year's figures have been regrouped / reclassified wherever necessary to conform to this year's

classification.

V. PARTHASARATHYCompany Secretary'hennai, June 09, 2003




For Jagadisan # Co.,Chartered AccountantsV. JAGADISAN, Partner

FOR i . i I T - S C I K N C I : W O R K S

I

i1


CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH

Year Ended

A CASH FLOW FROM OPERATING ACTIVITIES

Net profit before tax and extraordinary itemsDepreciationAsset Written offESOP Written offForeign Exchange (Gain) / LossDividend ReceivedInterest paidInterest Received(Gain) / Loss on sale of Fixed Assets / Investments

Operating profit before working capital changes

InventoriesAdjustments for trade & other receivablesTrade payablesCash generated from operationsDirect taxes paid (Net of Refunds)

Net Cash flow from Operating Activities

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of fixed assetsSale of fixed assets / InvestmentsPurchase of InvestmentsInterest ReceivedDividend Received

Net Cash used in Investing Activities

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from long term borrowingsProceeds from short term borrowingsDividend paidInterest paid

Net Cash used in Financing Activities

Net Changes in Cash & Cash equivalents (A+B+C)Cash and Cash equivalents on 01 .04.2002Cash and Cash equivalents on 31.03.2003


V. PARTHASARATHY DR. S. DEVENDRA Managing Director

31.03.2003

155689144134

349

276

(855)-

76340(5811)

(991)

369131

(88807)3718835029

352541(21545)

330996

(228716)3216

-

5811-

(219689)

91669(69688)(32880)(76340)

(87239)

240682271046778

Company Secretary S. ABHAYA KUMAR Joint Managing DirectorChennai, June 09, 2003 S. VlMAL KUMAR Finance Director

•!<> MIASUN C.HKMK.A I .S AND I>R ' ( ,S LliMITKn

2003(Rs. in OOO's)

Year Ended31.03.2002

152345123990

-

-

(3148)(292)

85131

(4389)220

353857

(97921)(3947)

6236258225

(9787)

248438

(166642)1819

(473)

4389292

(160615)

(92097)95914

(27455)(85131)

(108769)

(20946)4365622710


For Jagadisan & Co.,Chartered AccountantsV JAGADISAN, Partner

TWKNTY KiCHTII ANNUAL RI.I'OKT


AUDITORS' REPORTOKI rniMsni IDATFD F I N A N C I A L .STATF.MFIMTS

Auditors' Report to the Board of Directors of Shasun Chemicals and Drugs Limited on the consolidatedfinancial statements of Shasun Chemicals and Drugs Limited and its subsidiary.

We have examined the attached Consolidated Balance Sheet of Shasun Chemicals and Drugs Limited and itsSubsidiary (Shasun USA Inc) as at March 31, 2003, the Consolidated Profit and Loss Account and the consolidatedCash Flow Statement for the year then ended.

"These financial statements are the responsibility of the Company's management. Our responsibility is to expressan opinion on these financial statements based on our audit. We conducted our audit in accordance withgenerally accepted auditing standards in India. These standards require that we plan and perform the audit toobtain reasonable assurance whether the financial statements are prepared, in all material respects, inaccordance with an identified financial reporting framework and are free of material mis-statements. An auditincludes, examining on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statements. We believe that our audit provides a reasonable basis forour opinion.

We report that the consolidated financial statements have been prepared by the Company in accordance with therequirements of Accounting Standard (AS21), Consolidated Financial Statements, issued by the Institute ofChartered Accountants of India and on the basis of the separate audited financial statements of ShasunChemicals and Drugs Limited and its Subsidiary included in the consolidated financial statements.

On the basis of the information and explanation given to us and the consideration of the separate audit reportson individual audited financial statements of Shasun Chemicals and Drugs Limited and its aforesaid Subsidiary,we are of the opinion that:

(a) The Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of ShasunChemicals and Drugs Limited and its Subsidiary as at 31st March 2003; and

(b) The Consolidated Profit and Loss Account gives a true and fair view of the consolidated results of operationsof Shasun Chemicals and Drugs Limited and its Subsidiary for the year then ended.

(c) The Consolidated Cash Flow Statement is in agreement with corresponding consolidated Profit & LossAccount and Balance Sheet of Shasun Chemicals and Drugs Limited and its Subsidiary for the year thenended.

For Jagadisan & Co.,'hartered Accountants


Ohennai, June 09, 2003

FOR LIFE - SCILNCK WORKS


VAT I IF ADDED (FVA)

ECONOMIC VALUE ADDED (EVA)

Traditional approaches to measuring "Shareholders' Value Creation" have used parameters such as earningscapitalisation, market capitalisation and present value of estimated future cash flows. Extensive equity research hasnow established that it is not earnings per se, but VALUE which is important. A new measure called "Economic ValueAdded" is increasingly being applied to understand and evaluate financial performance. EVA is the surplus generatedfrom operating activities over and above the cost of capital.

EVA = Net Operating Profit after Taxes (NOPAT) (-) Cost of Capital Employed (COCE), where,

NOPAT : Profits after Depreciation and Taxes (excluding deferred taxes) but before Interest Costs. NOPAT thusrepresents the total pool of profits available on an ungeared basis to provide a return to Lenders and Shareholders,andCOCE : Weighted Average Cost of Capital (WACC) (x) Average Capital Employed

Cost of Debt is taken at effective rate of Interest net of taxes.

Cost of Equity is the return expected by the investors to compensate them for the variability in returns caused byfluctuating earnings and share prices

Cost of Equity = Risk free return equivalent to yield on long term Government Bonds (taken at 6% for 2002-03)

Market-risk premium (taken at 8%) (x) Beta variant for the Company, (taken at 1.06) where theBeta is a relative measure of risk associated with the Company's shares as against the market (S&PCNX Nifty Index) as a whole.

Thus Shasun's Cost of Equity = 6% + 8% (x) 1.06 = 14.48%

EVA will increase if:a. Operating Profits can be made to grow without employing more capital, i.e. greater efficiency.b. Additional Capital is invested in projects that return more than the cost of obtaining new capital, i.e. profitable

growth.c. Capital is curtailed in activities that do not cover the cost of capital , i.e. liquidate unproductive capital.

EVA TRENDS : 1998-2003 (SOURCE : COMPANY DATA) (Rs. in Lakhs)Year ended March 31

1 . Average Debt2. Average Equity3. Average Capital Employed (1) + (2)4. Cost of Debt, post-tax (%)5. Cost of Equity (%)6. Weighted Average Cost of Capital (%)7. Cost of Capital Employed (3) x (6)8. Profit after current tax9. Interest, after taxes10. Net Operating Profit after Taxes (8) + (9)1 1 . Economic Value Added (10) - (7)

1999

7722

41631188512.8723.66

16.651979783994

1777(202)

2000

62855092

1137710.1321.0515.0217082046

6362682

974

2001

65705927

12497

10.1120.90

15.2319031026664

1690(213)

2002

79196028

13947

9.3116.8412.5717521411

7372148396

2003

85186627

151457.29

14.4810.4415811736

6212357

776

ECONOMIC VALUE ADDED (Rs. in Lakh,)1000

800

600

400

200

0

-200

974

i mm

1

• 1• I

_ _ — •__ — •_

(202) (213)

1998-99 1999-00 2000-01 2001-02 2002-03

Si IASI N C I H ' . M I l . A I . S A N D I ) !< ! ' ( ,S 1 . 1 Ml I I , I > T W I - . N T Y F.K i l l ' l ' l I A N N I ' A l . R


Earnings Per Share Net Worth Debt Equity RatioRupees Rupees in Millions

98-99 99-00 00-01 01-02 02-03 98-99 99-00 00-01 01-02 02-03 98-99 99-00 00-01 01-02 02-03

250

200

150

100

50

Profit Before TaxRupees in Millions

Profit After Tax

7

250

200

150

100

50

Rupees in Millions

98-99 99-00 00-01 01-02 02-03 98-99 99-00 00-01 01-02 02-03

1700

1500

1300

1100

900

700

Average Capital EmployedRupees in Millions

1514.49

JL_

98-99 99-00 00-01 01-02 02-03

Domestic & Export Sales How the Rupee was spent in 2002-2003

2500Rupees in Millions

« R.M. Consumption 55%• Mfg. Expenses 16%• Employee Cost 7%• Maintenance Cost 3%» Administration Expenses 2%m Selling Expenses 5%• Depreciation 6%• R&D Expenses 3%• Interest 3%

98-99 99-00 00-01 01-02 02-03

• Domestic • Exports • Total


EIV.EYEARJ.1NAMC1ALSTATEMENT

Sales

Profit Before Depreciation, Interest & Tax

Interest

Depreciation

Profit Before Tax

Profit After Tax

Dividend Distributed on Equity Shares

Dividend Distributed on Preference Shares

Dividend (%)

Earnings Per Share (Rs.)

Share Capital

Reserves

Net Worth

Gross Block

* Includes Preference Capital of Rs. 50 Million

RATIOS

Financial Ratios 2000 2001

Total Income / Capital employed 146%

Total Income/Gross Block 145%

PBDIT /Total Income 16%

Cash Profit / Total Income 1 1 %

Net profit / Total Income 6%

Net profit / Net Worth 17%

Current Assets / Total Turnover 36%

Performance Ratios

Domestic Turnover / Total Turnover 36%

Exports Turnover / Total Turnover 64%

Other Income / Total Income 8%

Raw Material Cost / Total Turnover 57%

Overheads / Total Turnover 34%

Interest / Total Turnover 4%

Depreciation / Total Turnover 6%

Turnover /Capital Employed 135%

Research Spending / Total Turnover 3%

2001-2002 2002-2003

178% 181%

154% 152%

16% 16%

11% 12%

5% 6%

20% 22%

37% 42%

33% 30%

67% 70%

8% 7%

58% 55%

33% 34%

4% 3%

6% 6%

165% 170%

3% 3%

31.03.99 31.03.00

1657.15 1757.49

231.47 386.63

104.35 68.32

44.96 98.76

82.17 219.55

74.97 204.55

24.66 45.21

7.25 7.25

30 55

8.24 23.92

* 132. 20 *132.20

303.99 449.99

436.19 582.20

924.03 998.73

Balance Sheet RatiosDebt Equity Ratio

Debtors Turnover Ratio

Average Collection Period

Inventory Turnover Ratio

Inventory Holding Period (

Current Ratio

Depreciation / Gross Block

Fixed Assets Turnover

Growth Ratios

Growth in Turnover

Growth in Domestic Sales

Growth in Exports

Growth in PBDIT

Growth in PAT

Growth in Cash Profit

Per Share DataEarnings per Share (Rs.)DividendBook Value (Rs.)Dividend Pay OutPrice/ Earnings (Rs.)

31.03.01

1670.28

292.88

74.77

102.71

115.40

102.57

24.66

3.63

30

11.94

82.20

520.97

603.17

1304.38

2000-2001

1.05

4

(days) 86

8

days) 47

1.12

8%

1.74

-5%

6%

-10%

-24%

-50%

-32%

11.94

30%

73

31%

3.34

31.03.02

2038.62

358.67

80.69

123.60

154.38

120.28

32.88

40

14.64

82.20

520.21

602.41

1465.42

2001-2002

1.05

4

82

7

56

1.07

9%

2.04

22%

14%

26%

22%

17%

19%

14.64

40%

73

27%

4,54

(Rs. in millions)

31.03.03

2341,97

410.32

70.35

143.36

196,62

161.42

36.17

-

44

19.60

82.20

640.82

723.30

1685.28

2002-2003

0.91

4

87

6

59

1.21

9%

2.16

15%

5%

20%

14%

34%

25%

19.60

44%

88

25%

4.13


-SHASUM SNIPPETS

RECOGNITIONF ROM EIT LILLYMr. S. Abhaya Kumar,

Joint Managing Director,receives a memento from

Mr. Sidney Taurel,CEO, President & MD of

Eli Lilly & Co., USA,in recognition of the launch

of Lilly product usingShasun API.

RECOGNITION FROMUNIVERSITY OF MADRASShasun - R&D Centre at Velacheryhas been recognised by theUniversity of Madras as a Centre forconducting research leading toPh.D. Degree in Chemistry.

Shasun - Cuddalore facility has been recognizedfor its Quality Excellence by the Indian DrugManufacturers' Association in 2002.Mr. N. Govindarajan - C.E.O receives the IDMASilver Award from Dr. Marshal Kar, ScientificAdvisor to the Government of India, at a functionheld at Mumbai.

_CAMP

An eye campconducted atPondicherry.


.SHASIJRMILESTQNES.

1976

Incorpcom pc(Made,

pprated as private limited' - "Shasun Chemicals

is) Private Limited" - atChennai in south India.

1977

First p eduction facilityestablished atVelachery,Chennai for manufacture ofAnalgin (anti-pyretic) with acapad:y of 3 MT per month.

1986

Second production facilityestablished at Pondicherry formanufacture of Ibuprofen (anti-inflam natory) with a capacity of5 MT per month

1990

First UJFDA inspection ofPondicherry Ibuprofen facility.

1991

Analgh production shifted fromVelachsry, Chennai to Cuddalore.Capacity expanded to 100 MTper month.

Velachery facility converted intoReseaich & Development Centrewith pilot plant.

1993

Received the prestigious 'Trishul'award for exports during 1990-91 from CHEMEXCIL (ExportPromotion Council, Governmentof India)

1994

US subsidiary, "Shasun Inc.",

Nizatidine (anti-ulcerative) -breakthrough in development ofnon-patent-infringing process byShasun R&D. Scaled up to pilotplant level.

1995

Technology and joint marketingagreement signed with Nagase& Co., Japan for S+lbuprofen.

1996

ISO 9002 certification from BVQI.

Awarded 'Certificate of Merit',for outstanding exportperformance during 1993-94 byCHEMEXCIL.

Glaxo Wellcome PLC,innovator of Ranitidine approvesShasun for sourcing theirRanitidine Base requirementsworldwide

1997

Rs. 100 crore (US $22.93million) turnover mark exceeded.

Recognised as an Export Houseby Ministry of Commerce,Government of India.

1998

Boots, innovator of Ibuprofenapproves Shasun as a source

Signed three year exclusivityagreement for Canadian marketwith Apotex, Canada.

1999

Joint venture agreement signedwith Austin Chemical Company,USA., for process developmentand custom manufacturing formultinationals.

USFDA inspection of Cuddalorefacility for Ranitidine andNizatidine.

Recognised as a 'Trading House'by Ministry of Commerce,Government of India.

2000

Export turnover exceeded Rs.100 crores (US $22.93 million)mark.

Technology Partnership signedwith Eastman ChemicalCompany, USA, for themanufacture of HPMCP.

Received 'Visvesvaraya IndustrialAward' from All IndiaManufacturers' Association, foroutstanding performance.

2001

US FDA Inspection ofPondicherry facility for Naproxen.

Eastman Technology transfer formanufacture of MAP.

Chemexcil Award for the year1998-99 & 1999-2000 forexport performance.

Quality excellence award forPondicherry factory from IDMA

British Safety Council Award forPondicherry Factory.

Recognition of R & D Centre byDSIR for claiming weighteddeduction under Section 35(2AB)of Income Tax Act, 1961.

2002

Completed 25 years ofproduction on 23rd April, 2002.

Rs. 200 crore (US $ 41.77million) turnover mark crossed.

Patent filed for anti-inflammatorydrug and anti-epileptic drug.

Commercialisation of HPMCP.

DSIR Recognition of R&D centrerenewed upto 2005.

Established Biotech Laboratory inR & D Centre.

Received British Five Star awardfor safety.

A1+ rating from ICRAfor 100million Commercial PaperProgramme.

Commissioning of modern ETPplant.

2003

IDMA Quality Silver Award forBulk Drug manufacture atCuddalore.

Successful completion of USFDAinspection of Cuddalore facilityfor three API's.

Repeat Safety Award from BritishSafety Council for the thirdconsecutive years.

Shasun signed an LOI withEli Lilly for Anti-TB drug.

Foundation stone laid forKnowledge Management Centreat the outskirts of Chennai.


niRFCTORY

AUDITORSM/s. Jagadisan & Co.Chartered Accountants

BANKERSState Bank of TravancoreState Bank of MysoreState Bank of IndiaABN Amro Bank N.V.Punjab National BankIDBI Bank Ltd

R E G I S T E R E D &CORPORATE O F F I C E'Shasun House'3 Doraiswamy RoadT. Nagar, Chennai 600017.Phone : 24348930, 24348931, 32,

24346541, 24348279Fax : 091-44-24348924Email : shasun(g>shasun.comWebsite : www.shasun.com

FACTORIESPeriakalapet, Pondicherry 605014.Phone : 0413-2655441, 42

2655156, 57Fax : 0413-2655154Email : [email protected]

Sipcot Complex, KudikkaduCuddalore 607005.Phone : 04142-239701 - 705Fax : 04142-239709Email : [email protected]

R&D C E N T R E60 Velachery Road, Chennai 600042.Phone : 22451361, 1010

22445568, 5569Fax : 091-44-22452462Email : [email protected]

BRANCH OFFICE105 Hoppers Road, Winchmore HillLondon N213LPRep : Ms. Southa ThomasPhone : 0044-20-8882 1542Fax : 0044-20-8372 7475Email : [email protected]

S U B S I D I A R Y COMPANYShasun USA Inc.503 Merrywood Drive Edison,NJ 08817Rep : Jitesh DevendraPhone : 001 732 777 3357Fax : 001 737 777 3352Mobile : 001 848 248 1253Email : [email protected]


P l e a s e v i s i t o u r w e b s i t e a t

www.shasun.com

Shasun ChemicalsAnd Drugs LimitedFor Life - Science Works'Shasun House'3 Doraiswamy Road, T. NagarChennai 600017. India.

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SHASUN CHEMICALS AND DRUGS LIMITED