MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Industry Perspective vis-a-vis company

The Company operates primarily in the manufacture of Bulk Drugs and Real Estate.

FINANCE:

The gross revenue of the Company was Rs. 149.94 Crores for the year under review as compared to Rs. 160.92 Crores for the brvious year ended on 31st March, 2014. The Company registered a net profit of Rs. 24.15 Crores as compared to net profit of Rs. 29.53 Crores for the brvious year ended on 3Ist March, 2014.

OUTLOOK:

The fermentation division of the Company has done a remarkable improvement in one of its two fermentation products i.e. Lovastatin. This enabled the company to be cost-competitive against the ever-falling market price of this product.

The Company has completed its maiden real estate project -"Samsara" well within time and is in the process of starting a new project in the same vicinity at Vadodara. The general outlook for the industry remains subdued.

OPPORTUNITY:

The company has invested in a pilot-validation set-up, in order to enter into 'small-volume / big-value' niche products.

The Company has refurbished some of its facilities conforming to the latest GMp-standards, in order to produce better margin-synthetic products.

CONCERN / RISK:

During the year, Gas Authority of India Limited (GAIL) increased the basic fuel price by about 40% & also reduced the quantity allocation to the company. This dual adverse situation negatively impacted the Company's performance by way of under-performance of the co-generation sets and high cost of power generation. The Company is making efforts with GAIL for restoration of the original quantity allocation.

THREAT:

The National pharmaceuticals pricing Authority (NppA) has modified its pricing policy with regard to a key product manufactured by the Company. The Company was the sole manufacturer of this product with an indigenous backward integration set up. This revision in NppA's pricing policy is a major set-back to the Company's operations. The Company is in the process of making rebrsentations with the Government in this regard.

INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Company maintains a system of well-established policies and procedures for internal control of operations and activities.

The internal audit function is further strengthened in consultation with statutory auditors for monitoring statutory and operational issues. The Company has appointed Internal Auditors for the Bulk Drugs division and Real Estate Division to ensure proper system of Internal Control and its adequacy.

The reports of Internal Auditors are brsented quarterly before the Audit Committee and their recommendations are implemented.

HUMAN RESOURCE INTERVENTION:

The Company's HR policies are result oriented and aims at overall professional and personal development of Human Resources while keeping the organizational goal in focus. Taking into account the actual work-load demand of numbers & skills, company decided to right-size the manpower, still ensuring the smooth-running of its operations.

HEALTH, SAFETY, SECURITY AND ENVIRONMENT:

Health, Safety, Security and Environment is at the core of our business and all employees are accountable for it. Alembic's operations follow the best industry practices as regards to Health, Safety, Security and Environment.

During the year under review, various safety audits were carried out by Independent consultants. Environmental audits (statutory) were carried out & submitted to pollution control boards for their review. Efforts are made at all levels to conserve energy and resources. Enzymatic processes are being tried for waste water treatment at our Baroda plant to reduce energy consumption & also recycling of water. Tree plantation programs were organized and special attention is provided to the Solvent Recovery program.