New Page 2
The Directors take pleasure in presenting the Seventy-Fifth Annual Report of the
Company along with the Audited Accounts for the financial year ended 31st March 2011.
||Year ended 31st March 2011
||Year ended 31st March 2010
|Sales and other income
|Profit before exceptional item and tax
|Add: Exceptional item
|Profit before tax
|Profit after tax
|Surplus brought forward from last balance sheet
|Profit available for appropriation
|Tax on dividend
|Transfer to general reserve
|Surplus carried forward
||Rupees in crore
On the occasion of its 75th anniversary, Cipla declared a special interim
dividend of 80 paise per equity share (face value of Rs 2 each) in August 2010 amounting
to Rs 74.90 crore (inclusive of dividend tax).
The Directors recommend a final dividend of Rs 2 per share on 80,29,21,357 equity
shares of Rs 2 each for the year 2010-11 amounting to Rs 160.58 crore.
The total dividend payout for the year 2010-11 inclusive of dividend tax would
aggregate to Rs 261.53 crore.
MANAGEMENT REVIEW: 2010311
Industry Structure and Development
The financial year 2010-11 marked a resurgence in growth post the financial crisis.
Higher investment spending, specially in the emerging markets, is pushing growth in the
global economy. As a result, several countries are gradually returning to normal
macroeconomic policies. However, the economic health in parts of Europe and the fiscal
trends in some other countries is cause for concern and continues to impact the world
The forecast for the Indian economy is positive with growth expected to touch 8.5 per
cent in the current fiscal year. Yet, constant inflation in the country is taking its toll
and rising global commodity prices is only compounding the problem.
The pharmaceutical industry in India retains its position of strength as the pharmacy
capital of the world. It supplies an estimated one-third of all global pharmaceutical
produce in terms of volume. In the financial year 2010-11, the Indian pharmaceutical
industry grew more than 14 per cent, according to ORG IMS, though this growth was mainly
driven by the top 50 companies.
A growing trend was that more Indian pharmaceutical companies focussed on semi-urban
and rural markets for incremental growth opportunities. During the year, the industry also
witnessed Indian pharma companies selling out to the multinationals.
During the year under review, the Company’s total income from operations increased
by 12 per cent. Domestic turnover rose by 12 per cent while export income went up by 16
per cent. Profit after tax for the year was Rs 960 crore compared to Rs 1081 crore last
year, excluding the one-time sale of the I-pill brand last year.
This year, there was a dip in operating margins of about 3 per cent, as a percentage of
total revenue. This was mainly due to lower technical fees (Rs 60 crore compared to Rs 150
crore last year), as the development stage of several projects reached completion and the
products have either been commercially launched or will be launched by the Company’s
partners. Another major reason for the decline is that the Indore SEZ factory is in its
first year of operations and is still to reach its optimum capacity levels. Besides, the
Rupee has appreciated compared to the US dollar which has in turn reduced earnings by
about 4 per cent.
The Company introduced many new drugs and formulations during the year. Some
significant products are mentioned below:
• Entavir (entecavir tablets) - antiviral for hepatitis B
• Febucip (febuxostat tablets) - drug for gout
• Flosoft (fluorometholone acetate ophthalmic suspension) - topical steroid for
• Foracort (formoterol and budesonide autohaler) - asthma controller therapy in a
new easy-to-use breath actuated inhaler
• Furamist AZ (fluticasone furoate and azelastine hydrochloride nasal spray) - new
combination nasal spray for allergic rhinitis
• Imudrops (cyclosporine eye drops) - immunomodulatory drug for severe dry eye
• Lacsyp (lactitol monohydrate liquid syrup) - lactulose analogue for constipation
and hepatic encephalopathy
• Levolin (levosalbutamol tartarate autohaler) - asthma reliever in an easy-to-use
breath actuated inhaler
• Montair FX (montelukast and fexofenadine tablets) - antiallergic combination for
• Moxicip KT (moxifloxacin and ketorolac eye drops) - topical combination for eye
• Panstal (pancreatin capsules) - digestive enzyme for pancreatic insufficiency
• Paracip (paracetamol infusion) - for pain and fever management in intensive care
units and hospitals
• Phosome (liposomal amphotericin injection) - high potency antifungal in a new
targeted drug delivery system
• Pirfenex (pirfenidone tablets) - the first and only approved drug for idiopathic
pulmonary fibrosis (IPF)
• Prandial M (voglibose and metformin tablets) - combination antidiabetic
• Prasuvas (prasugrel tablets) - antiplatelet drug
• Pulmopres (tadalafil tablets) - the first once-daily therapy for pulmonary
• Rixmin (rifaximin tablets) - locally acting antibacterial for infectious
• Rokfos (zoledronic infusion) - once-yearly treatment for osteoporosis
• Rosulip-F (rosuvastatin and fenofibrate tablets) - combination drug for mixed
• Soranib (sorafenib tablets) - breakthrough drug for liver cancer
• Sornip (boswellic acid cream) - topical non-steroidal formulation for psoriasis
• Synthivan (atazanavir sulphate and ritonavir tablets) - two-drug combination
antiretroviral for HIV/AIDS
• Triohale (formoterol fumarate, ciclesonide and tiotropium bromide rotacaps) -
world’s first triple-drug North, South dry powder inhalation for COPD
• VC-15(vitaminCserum)-antioxidantfordermatological conditions
• Vertipress (betahistine hydrochloride tablets) - therapy for vertigo
• Xovatra (travoprost eye drops) - prostaglandin analogue for glaucoma
• Zolmist (zolmitriptan nasal spray) - rapid-acting drug for migraine
In April 2010, the Company commenced commercial production of pharmaceutical
formulations at the Special Economic Zone (SEZ) project, at Indore, Madhya Pradesh. This
project includes facilities for the manufacture of aerosols, respules, liquid orals,
pre-filled syringes (PFS), nasal sprays, large volume parenterals (LVP), eye drops,
tablets and capsules. The total investment for this project is about Rs 900 crore.
The Company is setting up API facilities at Bengaluru and Kurkumbh. It is also
upgrading the API facilities at Patalganga. The total investment for these projects is
about Rs 400 crore.
Several dosage forms and APIs manufactured at the Company’s plants continued to
enjoy the approval of major international regulatory agencies. These agencies included the
US FDA, MHRA (UK), PIC (Germany), MCC (South Africa), TGA (Australia), Department of
Health (Canada), ANVISA (Brazil), SIDC (Slovak Republic), Ministry of Health (Kingdom of
Saudi Arabia), the Danish Medical Agency and the WHO.
According to ORG IMS, Cipla is one of the largest pharmaceutical companies in India.
New technology and new products, including dosage forms, which are being introduced every
year, offer significant growth opportunities for the Company.
Cipla is increasing its focus in various segments to meet the growing market needs in
the future. The Company is giving a renewed focus to two therapeutic segments namely,
oncology and neuropsychiatry.
The Company’s venture on biotechnology products is making significant progress and
the regulatory process is underway.
Cipla’s international business continues to be a major revenue driver for the
Company. During the year under review, almost 55 per cent of the total income originated
from international markets. As a result, Cipla contributed significant net foreign
exchange earnings to the tune of USD 420 million.
The Company is in the process of consolidating and rationalising its international
business and strategies are being reviewed to optimize value for its technology and
The Company continues to forge partnerships and alliances with large generic
pharmaceutical companies for product development and supply in developed markets.
Cipla continues its humanitarian mission of making affordable medicines available to
the entire world. It is today the largest single supplier of HIV and anti-malarial drugs
in the world in terms of volume.
Threats, Risks, Concerns
The Company is currently involved in a number of patent litigations at the pre grant,
post grant, appellate board and at the level of the judicial courts. As anticipated, the
number of patent litigations has gone up dramatically post Patents Amendment Act, 2005 and
more so because companies are filing frivolous patent applications and multiple
applications with almost identical claims. The Appellate Board is saddled with a huge
backlog of pending cases. Cipla, so far, has been successful in challenging a number of
patent applications at different stages in the grant process.
The government is yet to decide conclusively on the issues of Data Exclusivity and Data
Protection which are both "Trips Plus" measures. The European Union government
is pushing for Trips Plus provisions and dilution of the Patents Act through bilateral
agreements. There is a lot of uncertainty with regard to the government’s position on
these two vital issues.
Taking advantage of the new patents regime, the Company is witnessing an increase in
the number of patented products being launched in India by multinational companies. A
number of these products have been launched at exorbitant prices. Cipla has sought a
voluntary license on anti-HIV drugs, Raltegravir and Rilpivirine and will continue to
pursue the in-licensing route to bring the latest products to the Indian consumers at
affordable prices. The Government of India must also clearly spell out its policy on how
it plans to control the prices of patented products which enjoys a monopoly.
India is considered the pharmaceutical hub of the world and the Government of India
must try to preserve and promote the Indian industry in every which way.
In the light of these threats, Cipla is continuously fighting these issues on various
fronts, not only to protect the interest of the Company but also of the Indian patients.
It is well over 15 years since the last drug policy was implemented which resulted in
the Drugs Price Control Order 1995. The Government should re-haul the drug policy and
bring it in line with the current market conditions. It must be fair, transparent and
non-ambiguous. The drug policy should only seek to bring under price control, drugs which
are not manufactured in India and those which enjoy 100 per cent monopoly.
The Indian market is highly dynamic and competitive and it is believed that market
competition will ensure that drug prices are within the reach of the common man. Drug
prices today in India are the lowest in the world even when compared to neighbouring
countries like Bangladesh, Pakistan, etc.
As per newspaper reports, it appears that the Government of India is planning to bring
under price control all the drugs which are listed in the National List of Essential
Medicines. More than 350 drugs are expected to be covered. This will have an adverse
impact on the Indian Pharmaceutical Industry which is already reeling under high
inflationary pressures. The proposed move will destroy the country’s self-sufficiency
Cipla has some pending legal cases on account of alleged overcharging in respect of
certain drugs under the Drug Price Control Order. The aggregate amount of the demand
notices received is about Rs 1230 crore (inclusive of interest). The Company has been
legally advised that based on the directions given by the Supreme Court, there is no
probability of the demand becoming payable by the Company. Any unfavourable outcome in
these proceedings could have an adverse impact on the Company.
Our manufacturing facilities are regularly monitored and approved by various regulatory
authorities across the globe. These authorities have become more vigilant and strict with
respect to compliance. Periodically, the US FDA conducts routine audits of all approved
facilities and accordingly several of our plants including Goa, Patalganga, Kurkumbh and
Bengaluru were inspected by the US FDA. Currently, all facilities continue to be approved
by the US FDA.
Exchange Rate Movements
During the year, the Indian Rupee appreciated by more than 3-4 per cent compared to the
US Dollar. Such severe fluctuations in foreign currency exchange rates can have a
significant impact on the Company’s operations and financial results.
The Company believes in Safety first – whether for its patients, plants and
employees. Periodical safety audits are conducted at all units and regular reviews are
done by safety committees with an objective of enhancing safety measures.
As always, the Company kept up high standards of occupational health, safety and
environment preservation practices at all its manufacturing units. Various health, safety
and environment awareness programmes were organised for employees, villagers and school
children living around the Company’s units at Sikkim, Baddi (Himachal Pradesh),
Patalganga (Maharashtra), Kurkumbh (Maharashtra), Verna (Goa) and Bengaluru (Karnataka)
with the objective of achieving and maintaining safety, health and environment standards.
Training was imparted to school children, teachers and nearby villagers on road safety,
home safety, hygiene and environment.
On World Environment Day and Earth Day, employees and government authorities went on a
‘Green Drive’ at the factory premises to plant trees and reduce pollution. The
Company continued to maintain modern, well-designed effluent treatment plants at its
factories. Treated water from these "zero discharge" facilities is used for
maintaining a green belt at all the locations.
Internal Control Systems
The Company’s internal control procedures ensure compliance with various policies,
practices and statutes in keeping with the organisation’s pace of growth and
increasing complexity of operations. Cipla’s internal audit team carries out
extensive audits throughout the year, across all functional areas and submits its reports
to the Audit Committee of the Board of Directors .
Particulars of employees required to be furnished under section 217(2A) of the
Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as
amended, form part of this report. Any shareholder interested in obtaining a copy may
write to the Company Secretary at the Registered Office of the Company.
CORPORATE SOCIAL RESPONSIBILITY
On the occasion of Cipla’s Platinum Jubilee, the Company announced setting up of
the Cipla Foundation by contributing a sum of Rs 5 crore. The Foundation will aim to
provide care and financial support to people in need of healthcare in India.
The Cipla Palliative Care and Training Centre in Pune continues to provide care to
terminally ill cancer patients. As of date, the Centre has provided comfort and solace to
more than 7000 patients. The focus is on reaching out to more cancer patients who need
palliative care and on integrating palliative medicine with curative therapy.
The Cipla Palliative Care and Training Centre is recognised as a training resource by
the Indian Association of Palliative Care (IAPC). Besides an IAPC certified training
course for doctors and nurses, learning modules in palliative care are available for
caregivers, volunteers and other interested groups. The Centre also runs a school for
training nursing assistants which is offered free-of-charge to young boys and girls from
economically weaker sections with the objective of providing an opportunity for skill
development, leading to gainful employment.
Being in the forefront of the crusade against HIV/AIDS, the Company has supported
Manavya, a Pune based organization which runs a home for children with HIV infection.
Manavya operates a mobile dispensary in villages on the outskirts of Pune and this project
is fully funded by the Company.
In addition, the Company continued to support several community welfare, health and
educational activities essentially in communities surrounding the Company’s factory
locations, both directly and through its charitable trusts by providing healthcare
education, improvement of community infrastructure, scholarships, etc.
Pursuant to section 217(2AA) of the Companies Act, 1956 it is confirmed that the
i. followed applicable accounting standards in the preparation of the annual accounts;
ii. selected such accounting policies and applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair view of the
state of affairs of the Company at the end of the financial year ended 31st
March 2011 and of the Profit of the Company for that period;
iii. taken proper and sufficient care for maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other irregularities; and
iv. prepared the annual accounts on a going concern basis.
In accordance with circular no. 2/2011 dated 8th February 2011 issued by the
Ministry of Corporate Affairs , the Balance Sheets, including annexures and attachments
thereto of the Company’s subsidiaries, are not being attached with the Annual Report
of the Company. The annual accounts of the subsidiary companies and the related detailed
information will be made available to any member of the Company seeking such information.
These documents will also be available for inspection by any member at the Registered
Office of the Company and that of the respective subsidiary companies. The consolidated
financial statements presented in this Annual Report include financial information of the
subsidiary companies. A statement containing information on the Company’s
subsidiaries is included in this Annual Report.
During the financial year ended 31st March 2011, the following companies
were acquired as subsidiaries/step-down subsidiaries: Cipla (Mauritius) Limited, Cipla
(UK) Limited, Cipla-Oz Pty Limited, Four M Propack Private Limited, Goldencross Pharma
Private Limited, Medispray Laboratories Private Limited, Meditab Holdings Limited, Meditab
Pharmaceuticals South Africa (Pty) Limited, Meditab Specialities New Zealand Limited,
Meditab Specialities Private Limited, Sitec Labs Private Limited and STD Chemicals
The Company is committed to good corporate governance practices. The report on
corporate governance as stipulated under Clause 49 of the Listing Agreement forms part of
By and large, the Company is already complying with the recommendations of Corporate
Governance Voluntary Guidelines 2009 issued by the Ministry of Corporate Affairs .
Disclosure of Particulars
As required by the Companies (Disclosure of Particulars in the Report of Board of
Directors ) Rules, 1988, the relevant information and data are annexed to this report.
The Company deeply regrets the sad demise of Mr. Amar Lulla on 22nd April
2011. The Board of Directors would like to place on record its sincere gratitude to Mr.
Amar Lulla and appreciate his pioneering efforts during his association with the Company
for over three decades. He has been one of the key persons who played a significant role
in enabling the Company to attain its current position.
Mr. S. Radhakrishnan was appointed as an Additional Director with effect from 12th
November 2010 and holds office until the ensuing Annual General Meeting. He was appointed
as Whole-time Director for a period of five years with effect from 12th
November 2010, subject to the approval of shareholders at the ensuing Annual General
Meeting. Mr. S. Radhakrishnan is a qualified Chartered Accountant, who has been with the
Company for over 26 years and has vast experience in financial, commercial, legal and
Mr. S.A.A. Pinto resigned from the Board of Directors effective 11th
November 2010 due to health reasons. The Directors place on record their appreciation of
his contribution as a member of the Board.
Mr. M.R. Raghavan and Mr. Pankaj Patel retire by rotation and, being eligible, offer
themselves for re-appointment. A brief resume of the said directors is provided in the
Pursuant to the provisions of section 233B of the Companies Act, 1956 and with the
prior approval of the Central Government, Mr. D.H. Zaveri (Fellow Membership No. 8971)
practising Cost Accountant, has been appointed to conduct audit of cost records of bulk
drugs and formulations for the year ended 31st March 2011. The Cost Audit
Reports would be submitted to the Central Government within the prescribed time.
Pursuant to Rule 5 of the Cost Audit Report Rules, Cost Audit Reports for bulk drugs
and formulations for the year ended 31st March 2010 were filed with the Central
Government on 29th September 2010 and 30th September 2010
Messrs . V. Sankar Aiyar & Co and Messrs . R.G.N. Price & Co., joint statutory
auditors of the Company, retire at the conclusion of the forthcoming Annual General
Meeting and are eligible for re-appointment.
||On behalf of the Board,
||Y. K. Hamied
|Mumbai, 29th June 2011
||Chairman & Managing Director
Information under section 217(1)(e) of the Companies Act, 1956, read with the Companies
(Disclosure of Particulars in the Report of the Board of Directors ) Rules, 1988.
I. CONSERVATION OF ENERGY
a. The Company is striving continuously to conserve energy by adopting innovative
measures to reduce wastage and optimize consumption. Some of the specific measures
i. Installed water meter and new water level sensors in Indian duo rapid plant tank to
avoid overflow of water at Baddi factory.
ii. Energy efficient motors are installed at various factories.
iii. Installed new water chiller with capacity of 300 TR to avoid running of 500 TR
capacity chillers resulting in energy saving during night and non-working days at
iv. Diesel generator sets have been replaced with government power supply at Baddi
factory during peak period resulting in fuel cost reduction.
v. Motion sensors have been installed at Sikkim & Goa factories to reduce wastage
vi. Installed & commissioned variable-frequency drive (VFD) for various equipments
like cooling tower fans, brine secondary pump, etc. to reduce power wastage in Goa &
vii. Reduction in power costs by maintaining power factor at acceptable levels at
viii. Installation of auto timer which resulted in energy saving at various factories.
ix. Energy saving through use of compact fluorescent lamps and light-emitting diode
instead of high voltage lamps at Bengaluru & Patalganga factories.
x. Installed condensers for energy saving and to keep equipment in good operating
condition at Kurkumbh factory.
xi. Installation of economizer for boiler at Indore factory has led to fuel cost
xii. Gas kit has been installed on DG Sets to reduce fuel consumption at Indore
b. Impact of the above measures for reduction of energy consumption and consequent
impact on the cost of production of goods:
The adoption of the above energy conservation measures have helped to curtail the
proportionate increase in total energy usage consequent to overall increase in production.
This has made it possible to maintain cost of production at optimum levels.
c. Total energy consumption and energy consumption per unit of production as per Form
Considering that the Company has a multi-product, multi-facility production system, it
is not possible to determine product-wise energy consumption. Therefore, the consumption
is categorised under different classes of goods as shown below. The figures for the year
are not exactly comparable with the previous year’s figures because of changes in the
A. Power and Fuel Consumption
||Rs in crore
|b. Own generation
|i. Through diesel generator
|Units per litre of diesel oil
|ii. Through steam turbine/generator
|2. Others/Internal generation
|Light diesel oil/diesel oil/furnace oil
||Rs in crore
|B. Consumption per Unit of Production
|2. Light diesel oil/diesel oil/furnace oil
It is not feasible to classify energy consumption data of formulations on the basis of
product categories, since the Company manufactures a large range of formulations with
different energy requirements.
II. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION
A. Research & Development
1. Specific areas in which R&D work is carried out:
The focus of the Company’s R&D efforts was on the following areas:
i. Development of new innovative technology for the manufacture of existing APIs and
ii. Development of products related to the indigenous system of medicines.
iii. Patenting of newer processes/newer products/newer drug delivery systems/newer
medical devices/newer usage of drugs for both local and international markets.
iv. Development of new products, both in the area of APIs as well as formulations,
specifically for export.
v. Development of new drug formulations for existing and newer active drug substances.
vi. Development of agro technology, genetics and biotechnology for cultivation of
medicinal plants and isolation of active ingredients from plant materials.
vii. Development of new drug delivery systems for existing and newer active drug
substances as also newer medical devices.
viii. Development of methods to improve safety procedures, effluent control, pollution
ix. Projects to develop APIs and formulations jointly with overseas companies.
2. Some of the major benefits derived as a result of R&D include:
i. Successful commercial scale up of several new APIs and formulations.
ii. Development of new drug delivery systems and devices.
iii. Improved processes and enhanced productivity in both APIs and formulations.
3. Future plan of action:
The Company will continue its R&D efforts in the various areas indicated in (1)
above. The major thrust would be on developing new products and drug delivery systems.
4. Expenditure on R&D:
||Rs in crore
The total R&D expenditure as a percentage of total turnover is around 5 per cent.
B. Technology Absorption, Adaptation and Innovation
1. Efforts, in brief, made towards technology absorption, adaptation and innovation:
i. Development and patenting of new molecular forms and methods of synthesis.
ii. Development of new drug delivery systems.
2. Benefits derived as a result of the above efforts:
i. Improvements in effluent treatment, pollution control and all-round safety
ii. Improvement in operational efficiency through reduction in batch hours , increase
in batch sizes, better solvent recovery and simplification of processes.
iii. Meeting norms of external regulatory agencies to facilitate more exports.
iv. Development of products for import substitution.
v. Maximum utilization of indigenous raw materials.
III. FOREIGN EXCHANGE EARNINGS AND OUTGO
1. Activities relating to exports, initiative taken to increase exports, development of
new export markets for products and services and export plans:
Exports sales were Rs 3361 crore for the financial year 2010-11. Exports constituted
more than 50 per cent of total turnover. In addition, the Company earned Rs 55 crore
towards technical know-how/fees. The Company continues to leverage on its strategic
marketing alliances and partnerships in more than 170 countries.
2. Total foreign exchange used and earned:
During the year, the foreign exchange outgo was Rs 1562 crore and the earnings in
foreign exchange was Rs 3418 crore . Details of the same have been given in Notes 12 to 14
in Schedule S to the Accounts.
||On behalf of the Board,
||Y. K. Hamied
|Mumbai, 29th June 2011
||Chairman & Managing Director