MIRA INFORM REPORT

Report Date :

14.03.2007

IDENTIFICATION DETAILS

Name :	SARABHAI ZYDUS ANIMAL HEALTH LIMITED
Registered Office :	202 & 203, M-3 AVG Bhavan, Middle Circus, Connaught Place, New Delhi – 110 001
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	27.03.2000
Com. Reg. No.:	55-104724
CIN No.: [Company Identification No.]	U24239DL2000PLC104724
TAN No.: [Tax Deduction & Collection Account No.]	BRDS01055F
Legal Form :	Closely Held Public Limited Liability Company.
Line of Business :	Manufacturers, Exporters and Importers of Drugs, Medicines and Pharmaceuticals, Chemicals including Agro Chemicals and Agro Products and restoratives compounds, foods, feed supplements.

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 500000
Status :	Satisfactory
Payment Behaviour :	Usually correct
Litigation :	Clear
Comments :	Subject is a joint venture company promoted by Sarabhai Enterprises Limited and Zydus Agrovet Limited. The company is engaged in the business as manufacturers, importers and exporters specially for veterinary and poultry consumption products and medicines. It is a well-established company and a part of Cadila and Sarabhai group of companies. Though the company could maintain its turnover level, it is continuously incurring losses for the last 3 financial years. Trade relations are fair. Payments of the subject company are currently slow, but correct. Since the company belongs to a reputed group, it can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	202 & 203, M-3 AVG Bhavan, Middle Circus, Connaught Place, New Delhi – 110 001, India
Tel. No.:	91-11-25762313
Fax No.:	91-11-25788042
E-Mail :	upen.shah@zyduscadila.com
Corporate Office :	Administration Building, Gorwa Road, Vadodara, Gujarat
Tel. No.:	91-265-2282110/2322173/2282191/2284887/2285052
Fax No.:	91-265-2284797/2284321
E-Mail :	ase.mhovet@rmp.sril.in ase.acvet@rmp.sril.in szhoe@sarazydus.com
Website:	http://www.sarazydus.com
Factory 1 :	202 & 203, M-3 AVG Bhavan, Middle Circus, Connaught Place, New Delhi – 110 001 Ø Indon Healthcare Ø Zydus Pharma Ø Zydus Agrovet Limited Ø Zoom Properties: Developing Cadila's Mumbai office

DIRECTORS

Name :	Mr. Kartikeya V. Sarabhai
Designation :	Co-Chairman
Date of Birth/Age :	16.03.1953
Date of Appointment :	27.03.2000
Name :	Mr. Pankajbhai Ramanbhai Patel
Designation :	Chairman
Date of Birth/Age :	16.03.1953
Date of Appointment :	27.03.2000
Name :	Mr. Ganesh Narayan Nayak
Designation :	Director
Date of Birth/Age :	18.05.1955
Date of Appointment :	03.04.2000
Name :	Mr. Sharvil Pankajbhai Patel
Designation :	Director
Date of Birth/Age :	13.10.1978
Date of Appointment :	11.10.2001
Name :	Dr. Anand S. Sarabhai
Designation :	Director
Name :	Dr. A. K. Shukla
Designation :	Director
Date of Appointment :	26.08.2003

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares	Percentage of Holding
Cadila Health Care Limited	2,69,99,970	50.00
Ambalal Sarabhai Enterprises Limited	1,19,60,100	22.15
Mr. Chatrapati Bijal Hemant	1,50,39,870	27.85
Mr. Patel Pankajbhai Ramanbhai	10	--
Mr. Sarabhai Kartikeya Vikrambhai	10	--
Zydus Pharmaceuticals Limited	10	--
Dialfor Health India Limited	10	--
Mautik Exim Limited	10	--
Haryana Containers Limited	10	--
Total	54,000,000	100.00

BUSINESS DETAILS

Line of Business :

Manufacturers, Exporters and Importers of Drugs, Medicines and Pharmaceuticals, Chemicals including Agro Chemicals and Agro Products and restoratives compounds, foods, feed supplements.

Products :

Drugs Formulations Ø Livestock · Antimicrobials · Anti-inflammatory, Analgesic and Antipyretics · Antitheileriosis · Rumenotoric · Vitamin Injections · Herbal Antiseptic Ointment · Phosphorus Injection · Anthelmintics and Ectendoparasiticidal · Corticosteroids · Ectoparaciticidal · Antihistaminic · Herbal Heat Inducer · Sedative and Tranquilizers · Fertility Inducer · Intramammaries · Feed Supplements · Intrauterine · Canine Specialities and Biologicals · Antidiarrhoeal Ø Poultry · Biological · Anti-infective · Anthelmintic · Anti-Coccidial · Liver Tonic · Growth Promoter · Nutritional · Bio-Security · Antimycotoxicosis

PRODUCTION STATUS

Particulars	Unit	Actual Production
Bolus	Thousand Nos.	302
Injections	Litres	25,169
Liquids	K. Ltrs.	317
Powders and Granules	MT	13

GENERAL INFORMATION

No. of Employees :	500
Bankers :	ICICI Bank
Facilities :	The company enjoys following facilities from it’s bankers: - Secured by way of mortgage of company’s land at village Dongargaon, Taluka Mawat, District Pune, together with structures erected/to is erected thereon and certain trademarks of the company. The land is further secured by the corporate guarantees of Cadila Healthcare Limited, one of the promoters and shareholders of the company and pledged 11,960,100 equity shares of Rs. 10/- each of the company by each of the Cadila Healthcare Limited and Ambalal Sarabhai Enterprises Limited, the Promoters and Shareholders of the company. The rights of the Bank shall automatically stand transferred to the shareholder on repayment of loans of the company. Secured by exclusive first charge by way of hypothecation of all the inventories and book debts both present and future.

Banking Relations :	Satisfactory
Auditors :	Ø Mukesh M. Shah and Company Chartered Accountants Ø Sorab S. Engineers & Company Chartered Accountants
Associates/Subsidiaries :	Ø Ambalal Sarabhai Enterprises Limited Ø Cadila Healthcare Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
55000000	Equity Shares	Rs. 10/- each	Rs. 550.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
54000000	Equity Shares	Rs. 10/- each	Rs. 540.000 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2005	31.03.2004	31.03.2003
SHAREHOLDERS FUNDS
1] Share Capital		540.000	540.000	500.000
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		(415.700)	(283.300)	(117.600)
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		124.300	256.700	382.400
LOAN FUNDS
1] Secured Loans		378.300	437.600	588.700
2] Unsecured Loans		0.000	60.000	0.000
TOTAL BORROWING		378.300	497.600	588.700
DEFERRED TAX LIABILITIES		0.000	0.000	0.000
TOTAL		502.600	754.300	971.100
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		434.600	636.600	870.800
Capital work-in-progress		0.000	0.000	0.000
INVESTMENT		0.100	0.100	0.000
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	73.500	64.500	70.500
	Sundry Debtors	79.600	156.100	119.500
	Cash & Bank Balances	18.600	17.600	18.400
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	20.000	18.700	174.800
Total Current Assets		191.700	256.900	383.200
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	118.100	137.000	278.900
	Provisions	6.800	4.800	7.900
Total Current Liabilities		124.900	141.800	286.800
Net Current Assets		66.800	115.100	96.400
MISCELLANEOUS EXPENSES		1.100	2.500	3.900
TOTAL		502.600	754.300	971.100

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2005	31.03.2004	31.03.2003
Sales Turnover		709.400	837.200	744.200
Other Income		11.400	(3.200)	34.100
Total Income		720.800	834.000	778.300
Profit/(Loss) Before Tax		(132.400)	(165.700)	(22.200)
Provision for Taxation		0.000	0.000	0.000
Profit/(Loss) After Tax		(132.400)	(165.700)	(22.200)
Expenditures :
	Cost of Goods Sold
	Manufacturing Expenses	6.400	9.800	10.200
	Administrative Expenses	67.300	70.400	67.100
	Raw Material Consumed	432.700	525.200	493.600
	Miscellaneous Expenses	150.300	167.600	41.600
	Salaries, Wages, Bonus, etc.	50.800	45.000	44.300
	Interest	55.500	67.800	75.200
	Depreciation & Amortization	86.800	106.000	62.600
	Other Expenditure	3.400	7.900	5.900
Total Expenditure		853.200	999.700	800.500

KEY RATIOS

PARTICULARS	31.03.2005	31.03.2004	31.03.2003
Debt-Equity Ratio	2.30	1.70	1.70
Long Term Debt-Equity Ratio	2.30	1.70	1.70
Current Ratio	1.68	1.49	1.55
TURNOVER RATIOS
Fixed Assets	65.08	84.99	86.53
Inventory	10.28	12.40	13.62
Debtors	6.02	6.08	5.94
Interest Cover Ratio	0.70	(1.44)	0.70
Operating Profit Margin(%)	17.75	0.97	15.53
Profit Before Interest And Tax Margin(%)	5.51	(11.69)	7.12
Cash Profit Margin(%)	9.92	(7.13)	5.43
Adjusted Net Profit Margin(%)	(2.31)	(19.79)	(2.98)

STOCK PRICES

Face Value	Rs.10.00/-
High	Rs.0.00/-
Low	Rs.0.00/-

LOCAL AGENCY FURTHER INFORMATION

COUNTRY'S LARGEST VETERINARY VENTURE THROUGH - 1/2/2000

Sarabhai Zydus Animal Health Ltd. will be the country's largest veterinary company. The company is a JV between Sarabhai Animal Health Ltd. and Zydus Agro Vet Ltd., a part of Zydus-Cadila. The company, a 50:50 stake JV, is aiming at a turnover of Rs. 850 Millions in its first year of inception. Subsequently, the company will target higher turnover rates keeping in mind the potential domestic veterinary market, which is worth nearly Rs. 7500 millions.

Subject is engaged in the business as Manufacturers, Exporters and Importers of Drugs, Medicines and Pharmaceuticals, Chemicals including Agro Chemicals and Agro Products and restoratives compounds, foods, feed supplements. It specially manufactures Veterinary and Poultry Consumption Products and Medicines.

It’s products range include :-

v Streptomycin/Penicillin

v Gumboro

v Vitamin B Complex with crude liver extract

Quantitative and value of Analysis for the financial year ending 31^st March, 2004 is as follows :-

Class of Goods	Unit	Quantity	Value (Rs. in millions)
Bolus	Thousand Nos.	27,324	92,141
Capsules	Thousand Nos.	575	783
Injections	Litres	399,080	248,638
Dry Powder Injections	Kilograms	26,818	156,779
Liquids	K. Ltrs.	620	65,958
Powders and Granules	M. Tonnes	1,968	63,779
Ointments	Litres	21,589	31,843
Vaccines and Syrums	Ml. Dosages	885	177,250

The company is significantly influenced by the following Enterprises controlling companies :-

· Zydus Pharmaceuticals Limited

· Synbiotics Limited

· Sarabhai Piramal Pharmaculations Private Limited

It imports raw materials and agro products.

It imports the following materials and agro products :-

· Closantel Base

· Amprolium

· Calcium Gluconate

· Sulphamethoxasole

· Dexamethazone Sodium

It exports finished products.

The company is holding 5,000 Equity Shares of Sehraul Formulations Private Limited.

The Turnover of the subject including sales and other income was Rs. 831 millions as compared to Rs. 740 millions in the previous year registering a growth of 12%. Though the company has incurred loss during the year the company has earned high operating profit of Rs. 139 millions as against Rs. 117 millions in the previous year, showing growth of 18%. Company was writing off Brand Acquisition cost over estimated life of 17 years. However, for the year under report, as per accounting standard, the company has to write off brands over 10 years only. Due to this company has to provide higher depreciation on Rs. 130 million on Brands leading to higher loss.

It is an ISO 9001 company and a joint-venture of Ambalal Sarabhai Enterprises Limited and Cadila Healthcare Limited, a Zydus Cadila Group Company. The synergy between Animal Health business of ASE Limited and CHC Limited has put the new equity “Sarabhai Zydus” one the top Animal Health Companies in India.

The subject has started operations in April 2000 and is now one of the market leaders in veterinary pharmaceutical industry in India. Sarabhai Zydus is the brand leader in various therapeutic segments.

PROFILE :

Zydus Cadila entered into a strategic alliance with Ambalal Sarabhai Enterpises in January 2000. The alliance pooled the animal healthcare business of both the groups to create the company one of the leading animal healthcare companies in India. The company commenced operations from April 2000.

Ambalal Sarabhai Enterprises has a comprehensive therapeutic coverage and is one of the leading players in the anti-infective segment which is the largest segment in the animal health care industry. With a major presence in therapeutic areas of anti-bacterials, analgesics, antihelminthics, poultry vaccines, probiotics, tonics and feed supplements, the company explored novel ways of reaching veterinarians and farmers.

Zydus Cadila has a wide-ranging presence in formulations, Active Pharmaceutical Ingredients (API), diagnostics, cosmetics, herbals and animal healthcare.

A strong player in the domestic formulation sector, Zydus Cadila markets several need based therapies through its core divisions: Zydus Cadila, Zydus Alidac, Zydus Medica, Zydus Biogen and speciality divisions Zydus Neurosciences and Zydus Vaccicare.

The company has solidified its position by launching several new products in cardiovascular, gastrointestinal, biological, pain management and anti-infective segments.

v Zydus Cadila

v Zydus Biogen

v Zydus Pathline

v Zydus CND

v Zydus Alidac

v Zydus Neurosciences

v Phytosurge Division

v Indon Healthcare

v Zydus Medica

v Consumer Products Division

v Vital Statistics

v German Remedies

v Ambalal Sarabhai Enterprises Limited

It has been a pioneer in pharmaceutical industry in India, with long and outstanding base in manufacturing, research and marketing of pharmaceuticals. It had been into Animal Health Business in India, since 1964. The company entered into marketing tie-up with ABIC Limited (TEVA Group), Israel in 1996 to market their products in India. Nepal and Sri Lanka.

v Cadila Healthcare Limited

It started its operations in 1952, and is one of the fastest growing pharmaceutical groups in India; having a long and commendable standing in production, marketing, research and development of pharmaceuticals and has global presence. The company entered into Animal Health business in 1982; and has an alliance with Schering Plough, to market their products in India and Nepal.

Two families, "the Patel's" and "the Modi's", promoted the Cadila group of companies. The flagship Company was Cadila Laboratories. There were other companies named Cadila Chemicals, Cadila Exports, Cadila Antibiotics and Cadila Veterinary Limited. In 1995 to pursue their independent business philosophies a restructuring of the group was carried out under which two companies were formed Cadila Healthcare Limited (Patel's) and Cadila Laboratories Limited (Modi's).

The business was divided into two equal parts. After the restructuring the company embarked on a major marketing exercise, which helped it, catapult from 15th rank to 6^th rank in the Indian Pharma industry. The promoters of the Cadila Health Care Limited, Ramanbhai Patel and Pankaj Patel are both well qualified in the field of Pharmaceuticals and have received several awards for their recognition.

PLANTS :

The Company’s formulations plant & Research &Development center at Ghodsar, Ahmedabad has been relocated to Moriya, Ahmedabad where the company had set up a new utlra modern formulation plant and R&D center. The company also has a plant at Ankleshwar in Gujarat, which manufactures Bulk Drugs. Another plant at Vatwa, Ahmedabad manufactures food products like Sugar free, Dietman and GRD. The Moriya plant recently got the approval from MCC South Africa.

- It has following subsidiaries:

v Indon Healthcare:

Engaged in manufacturing and trading of pharmaceuticals. (FY 99 sales Rs 380 millions and PAT Rs18.5 millions). In FY 2000, Indon sold its marketing rights and trademarks to CHL for a sum of Rs106.6mn. Subsequently CHL has sold its 100% holding in Indon to Zydus BYK Limited for sum of Rs104 millions.

v Zydus Pharma:

Engaged in manufacturing and trading of pharmaceuticals saw a dip in sales & PAT to Rs 4.8 millions Rs 0.28 million FY 00 as compared to sales & net profit of Rs 180 millions & PAT of 5.8 millions in FY 99 mainly due to discontinuation of business. Since then, the company has commenced business in distribution of pharmaceutical products and expects sales to go up this year.

v Zydus Agrovet Limited:

The company is into trading of veterinary products. Following the parent company’s plan to set up a new joint venture with Sarabhai Enterprises Limited for veterinary products, it had decided to transfer the existing business to the company. The company plans to enter the business of manufacturing and marketing of diagnostic instruments/kits/reagents etc. among others by taking over the existing infrastructure of "Zydus Pathline" a division of Cadila Health Care Limited. It also planned to change its name to "Zydus Pathline Limited."

v Zoom Properties: Developing Cadila's Mumbai office.

JOINT VENTURES :

1. It has formed a JV with BYK Gulden, Germany for manufacture of a key intermediate of "Pantaprazole", a proton pump inhibitor.
2. With Cross Green Corporation of Korea it has 60:40 JV to manufacture and market Hepatitis B vaccine in India.
3. It has also formed a 50:50 JV with Ambalal Sarabhai (ASEL) named "Sarabhai Zydus Animal Healthcare Private Limited." which will takeover the veterinary business of both Zydus Agrovet Limited. (100% subsidiary) & ASEL and will be the largest veterinary products company in India.

TECHNICAL COLLABORATIONS :

1. Cadila Health Care Limited has entered in a technical collaboration with Swiss Serum and Vaccine Institute to manufacture purified embryo anti-rabies vaccine.
2. Cadila Health Care Limited has also entered in a technical collaboration with Ethical Holdings of U.K. to manufacture transdermal drug delivery technologies in India in the areas of anti-smoking, female healthcare & pain management.

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.44.22
UK Pound	1	Rs.85.51
Euro	1	Rs.58.47

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	4
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	8
--PROFITABILIRY	1~10	3
--LIQUIDITY	1~10	5
--LEVERAGE	1~10	5
--RESERVES	1~10	5
--CREDIT LINES	1~10	5
--MARGINS	-5~5	-
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	NO
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		48

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions