MIRA INFORM REPORT

Report Date :

28.02.2011

IDENTIFICATION DETAILS

Name :	NEULAND LABORATORIES LIMITED
Registered Office :	Flat No.204, Meridian Plaza, Ameerpet, Hyderabad - 500 016, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2010
Date of Incorporation :	07.01.1984
Com. Reg. No.:	01-4393
CIN No.: [Company Identification No.]	L85195AP1984PLC004393
TAN No.: [Tax Deduction & Collection Account No.]	HYDN00013G
Legal Form :	Public Limited Liability Company. The company’s shares are listed on the Stock Exchanges
Line of Business :	Manufacturer and Exporter of bulk pharmaceutical ingredients and intermediates for the generics industry.

RATING & COMMENTS

MIRA’s Rating :

Ba (46)

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

Maximum Credit Limit :	USD 2726000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and a reputed company having good track. Financial position is reported to be satisfactory. Directors are reported to be experienced and respectable businessmen. Trade relations are reported as fair. Business is active. Payments are regular and as per commitments. The company can be considered good for normal business dealings at usual trade terms and conditions.

NOTES :

Any query related to this report can be made on e-mail : infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – April 1, 2010

Country Name	Previous Rating (31.12.2009)	Current Rating (01.04.2010)
India	A1	A1

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

LOCATIONS

Registered Office/ Corporate Office :	Flat No.204, Meridian Plaza, Ameerpet, Hyderabad - 500 016, Andhra Pradesh, India
Tel. No.:	91-40-26518682/83/84/23412934/36/37 / 66518683
Fax No.:	91-40-23412957
E-Mail :	neuland@hd1.vsnl.net.in neuland@eth.net neuland@neulandlabs.com
Website :	http://www.neulandindia.com
Manufacturing Facilities :	Unit 1: Village: Bonthapally Mandal: Jinnaram District: Medak, Andhra Pradesh India Unit 2 IDA, Pashamylaram, Isnapur, Patancheru (M) Medak, Dist – 502 319, Andhra Pradesh, India Unit 3 Plot No. 92-94, 257-259 Industrial Development Area, Village: Pashamylaram, Mandal: Patancheru, District: Medak, Andhra Pradesh, India
Overseas Office :	US Office 2500, Regency Parkway, Cary, NC 27511. Tel No: +1 (919) 654 6833 Fax No: +1 (919) 654 6834 E-Mail: johnpinna@neulandabs.com martinfrazier@neulandlabs.com North America 235 Calle Campesino, San Clemente, CA 92672 Tel No: (949) 218-1768 Fax No: (949) 218-3489 Mobile No: (949) 466-7449 E-Mail: tspeace@neulandlabs.com Japan Office 2F Maruishi Building Bekkan (Annex), 1-10-1 Kajicho, Chiyoda-ku, Tokyo Tel No: 81-3-3526-5171 Fax No: 81-3-3526-5172 E-Mail: ykizawa@neulandlabs.com
Research and Development:	Bonthapalli (V), Veerabhadraswamy Temple Road, Jinnaram (M), Medak, Dist. – 502 313, Andhra Pradesh, India

DIRECTORS

As on 31.03.2010

Name :	Dr. D. R. Rao
Designation :	Chairman and Managing Director
Name :	Dr. Bandaru S. Reddy
Designation :	Non Executive Director
Name :	Mr. Humayun Dhanrajgir
Designation :	Non Executive Director
Name :	Mr. N. Balakrishna Iyer
Designation :	Director (Nominee of SBI)
Name :	Mr. S. B. Budhiraja
Designation :	Non Executive Director
Name :	Mr. P. V. Maiya
Designation :	Non Executive Director
Name :	Mr. G. V. K. Rama Rao
Designation :	Non Executive Director
Name :	Mr. Will Mitchell
Designation :	Non-Executive Director
Name :	Mr. Russel Kaufman
Designation :	Non-Executive Director
Name :	Mr. C. Srivivasu
Designation :	Director (Nominee of IDBI)
Name :	Mr. S. K. Murthy
Designation :	Alternate Director to Dr. B. S. Reddy
Name :	Mr. D Sucheth Rao
Designation :	Executive Director and Chief Operating Officer
Name :	Mr. C. Ramakrishna
Designation :	Director (Nominee of IDBI )

KEY EXECUTIVES

Name :	Mr. V. N. Rao
Designation :	Unique Chemicals, Mumbai as Director R and D and QA

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

As on 31.12.2010

Category of Shareholders	No. of Shares	Percentage of Holding
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family	1,259,549	23.34
Bodies Corporate	392,011	7.26
Sub Total	1,651,560	30.60
(2) Foreign
Individuals (Non-Residents Individuals / Foreign Individuals)	252,172	4.67
Bodies Corporate	133,090	2.47
Sub Total	385,262	7.14
Total shareholding of Promoter and Promoter Group (A)	2,036,822	37.74
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI	400	0.01
Financial Institutions / Banks	500	0.01
Foreign Institutional Investors	98,000	1.82
Sub Total	98,900	1.83
(2) Non-Institutions
Bodies Corporate	422,904	7.84
Individuals
Individual shareholders holding nominal share capital up to Rs.0.100 million	1,111,134	20.59
Individual shareholders holding nominal share capital in excess of Rs.0.100 million	465,882	8.63
Any Others (Specify)	1,260,813	23.36
NRIs/OCBs	1,257,861	23.31
Trusts	400	0.01
Clearing Members	2,552	0.05
Sub Total	3,260,733	60.42
Total Public shareholding (B)	3,359,633	62.26
Total (A)+(B)	5,396,455	100.00
(C) Shares held by Custodians and against which Depository Receipts have been issued	-	-
(1) Promoter and Promoter Group	-	-
(2) Public	-	-
Sub Total	-	-
Total (A)+(B)+(C)	5,396,455	-

BUSINESS DETAILS

Line of Business :

Manufacturer and Exporter of bulk pharmaceutical ingredients and intermediates
for the generics industry.

Products :

Item Code No. (ITC Code)	Product Description
30049071	Enalapril Maleate
29419030	Ciprofloxacin
29420014	Ranitidine

PRODUCTION STATUS (As on 31.03.2010)

Particulars	Actual Production
Bulk Drugs (Kgs.)	839441
Intermediates (Kgs.)	61370

GENERAL INFORMATION

No. of Employees :

640 (Approximately)

Bankers :

• State Bank of India, Overseas Branch, Hyderabad- 500 016, Andhra Pradesh, India
• Lakshmi Vilas Bank Limited, Kukatpally Branch, Hyderabad- 500 016, Andhra Pradesh, India
• Bank of India, Kukatpally Branch, Hyderabad- 500 016, Andhra Pradesh, India
• Indian Overseas Bank, Basheerbagh Branch, Hyderabad- 500 016, Andhra Pradesh, India

Facilities :

	31.03.2009 (Rs. in millions)
Secured Loan
Foreign Currency Loans	523.990
Rupee Loans	726.860
The above loans are secured by a pari-passu first charge on the immovable properties and pari-passu charge on moveable properties (subject to the prior charge in favour of the Company's Bankers on specified moveable, created/to be created for securing borrowings for working capital requirements) and further guaranteed by the Chairman and Managing Director and one of the Directors in their personal capacities. As per covenant of the foreign currency loan agreement with the export import bank of India, included in (a) above, the bank has an option to convert the loan into a rupee loan in case the company defaults in repayments.
Technology Development Assistance from TIFAC	1.500
The above loan is secured by movable property of the company at Bonthapally manufacturing unit including its movable plant and machinery, machinery spares, tools and accessories and other movables both present and future (save and except book debts) whether installed or not or acquired for the purpose of the project at the cost of or from the moneys advanced by TIFAC under Technology Development Assistance Agreement.
Working Capital Finance from Bank	737.740
Working Capital loans from bank is secured by hypothecation of raw materials, stocks in process, finished goods, book debts, stores and spares and export receivables and is further secured by second charge on all fixed assets and movable machinery of the Company first charge being financial institution and guaranteed by the Chairman and Managing Director and one of the Directors in their personal capacities.
Other Loans Hire Purchase Loan	13.070
The above loan is against the hypothecation vehicles
Total	2003.160

Banking Relations :

--

Auditors :

Name :

K. S. Aiyar and Company

Chartered Accountants

Address :

4^th Floor, Janmabhoomi Bhavan, 24-26, Janmabhoomi Marg, Fort, Mumbai – 400 001, Maharashtra, India

Associates/Subsidiaries :

Sucheth and Saharsh Holdings (Private) Limited

CAPITAL STRUCTURE

AS ON (31.03.2009)

Authorised Capital :

No. of Shares	Type	Value	Amount
10000000	Equity Shares	Rs.10/- each	Rs.100.000 millions
300000	Cumulative Redeemable Preference Shares	Rs.100/-each	Rs.30.000 millions
300000	Preference Shares either Cumulative or Non Cumulative	Rs.100/-each	Rs.30.000 millions
Total			Rs.160.000 millions

Issued Capital :

No. of Shares	Type	Value	Amount
5590000	Equity Shares	Rs.10/- each	Rs.55.900 millions

Subscribed Capital :

No. of Shares	Type	Value	Amount
5499731	Equity Shares	Rs.10/- each	Rs.54.997 millions

Paid-up Capital :

No. of Shares	Type	Value	Amount
5396455	Equity Shares fully paid up	Rs.10/- each	Rs.53.964 millions
Add:	103276 Forfeited Equity Shares a) Of the above shares 715040 Equity shares of Rs. 10 each are allotted as fully paid up by way of Bonus shares)	Rs.10/- each	Rs.0.710 million
	b) 11080 Equity share of Rs. 10 each for consideration other than cash to erstwhile shareholders of Neuland Drugs and Pharmaceuticals Private Limited
Total			Rs. 54.674 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2010	31.03.2009	31.03.2008
SHAREHOLDERS FUNDS
1] Share Capital		54.700	54.670	54.670
2] Share Warrants		0.000	0.000	0.000
3] Reserves & Surplus		626.700	698.220	632.090
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		681.400	752.890	686.760
LOAN FUNDS
1] Secured Loans		2331.800	2003.160	1340.850
2] Unsecured Loans		0.000	0.000	0.000
TOTAL BORROWING		2331.800	2003.160	1340.850
DEFERRED TAX LIABILITIES		233.500	41.380	27.780
TOTAL		3246.700	2797.430	2055.390
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		1627.400	1465.200	597.220
Capital work-in-progress		302.400	368.020	596.470
INVESTMENT		75.500	74.600	72.710
DEFERREX TAX ASSETS		233.500	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	719.200	704.660	550.130
	Sundry Debtors	728.300	711.500	514.260
	Cash & Bank Balances	127.700	106.200	92.120
	Loans & Advances	394.900	277.560	352.090
Total Current Assets		1970.100	1799.920	1508.600
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditor and Current Liabilities	852.200	801.610	626.400
	Provisions	110.000	108.700	93.210
Total Current Liabilities		962.200	910.310	719.610
Net Current Assets		1007.900	889.610	788.990
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		3246.700	2797.430	2055.390

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2010	31.03.2009	31.03.2008
	SALES
		Income	2784.200	3067.300	2176.700
		Other Income	54.300	105.300	53.400
		TOTAL (A)	2838.500	3172.600	2230.100
Less	EXPENSES
		Raw material	1670.900	2047.300	1393.200
		Power and Fuel Cost	106.000	108.100	70.000
		Employee Cost	219.100	209.500	142.400
		Other manufacturing expenses	178.000	190.200	136.600
		Selling and administration expenses	340.100	350.800	221.300
		Miscellaneous Expenses	67.400	43.900	33.800
		Stock adjustments	(35.600)	(138.600)	(28.000)
		TOTAL (B)	2545.900	2811.200	1969.300
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		292.600	361.400	260.800
Less	FINANCIAL EXPENSES (D)		256.700	143.600	99.300
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		35.900	217.800	161.500
Less/ Add	DEPRECIATION/ AMORTISATION (F)		135.600	73.700	54.900
	PROFIT BEFORE TAX (E-F) (G)		(99.700)	144.100	106.600
Less	TAX (H)		(29.300)	26.200	(6.900)
	PROFIT AFTER TAX (G-H) (I)		(70.400)	117.900	113.500
	Earnings Per Share (Rs.)		(13.05)	21.85	21.04

QUARTERLY RESULTS

PARTICULARS	30.06.2010	30.09.2010	31.12.2010
Type	1^st Quarter	2^nd Quarter	3^rd Quarter
Net Sales	896.040	1009.210	968.310
Total Expenditure	834.710	883.330	812.790
PBIDT (Excl OI)	61.330	125.880	155.520
Other Income	0.390	16.040	0.830
Operating Profit	61.720	141.930	156.350
Interest	71.450	74.460	75.740
Exceptional Items	0.0000	0.000	0.000
PBDT	(9.730)	67.480	80.610
Depreciation	37.930	38.640	39.020
Profit Before Tax	(47.660)	28.830	41.590
Tax	0.000	0.000	2.100
Provisions and contingencies	0.000	0.000	0.000
Profit After Tax	(47.660)	28.830	39.490
Extraordinary Items	0.000	0.000	0.000
Prior Period Expenses	0.000	0.000	0.000
Other Adjustments	0.000	0.000	0.000
Net Profit	(47.660)	28.830	39.490

0

KEY RATIOS

PARTICULARS		31.03.2010	31.03.2009	31.03.2008
PAT / Total Income	(%)	(2.48)	3.72	5.09
Net Profit Margin (PBT/Sales)	(%)	(3.58)	4.99	4.89
Return on Total Assets (PBT/Total Assets}	(%)	(2.77)	4.41	5.06
Return on Investment (ROI) (PBT/Networth)		(0.14)	0.19	0.16
Debt Equity Ratio (Total Liability/Networth)		4.83	1.21	1.05
Current Ratio (Current Asset/Current Liability)		2.04	1.98	0.40

LOCAL AGENCY FURTHER INFORMATION

HISTORY

The company was promoted by Dr. D. R. Rao and incorporated on 7^th January 1984 at Hyderabad in Andhra Pradesh having Company Registration Number 4393.

Neuland Drugs and Pharmaceuticals Private Limited, a company set up by the same promoters to manufacture bulk drugs was merged with the company with effect from April, 1992. The company manufactures bulk drugs such as salbutamol sulphate, terbutaline sulphate, laberalol hydrochloride and ciprofloxacin.

The company came out with its initial public offering in April, 1994 at a premium of Rs. 35 aggregating Rs. 56.900 millions to part-finance the capacity expansion to manufacture bulk drugs and to diversify its product-mix. The cost of the project as estimated by ICICI was Rs. 157.000 millions.

During the year 1999-2000, the company introduced Itraconazole, an anti-fungal drug and Ipratropium Bromide, an anti-asthmatic drug and the R and D has developed a process for manufacture of Oflaxacin for Regulatory Markets. The Pashamylaram unit has received USFDA approval for manufacturing of Rantidine Hydrochloride Form.

Mirtrazapine, an anti-depressive drug and Ramipril a cardiovascular drug were introduced during the year 2001. The installed capacities of Ciprofloxacin and Rantidine were increased with Rs. 65.000 millions financial assistance from IDBI.

Subject is closely working with several companies in Europe and North America for supply of active Pharmaceutical ingredients and intermediates.

BUSINESS REVIEW:

The financial year 2009-10 was a challenging year for the Global economy and for several players in the pharmaceutical industry with drop in selling prices, reduced margins and Liquidation of inventories. These had a cascading effect on several suppliers, including the Company. The circumstances in the market place coupled with the Company's recent investments in new assets created a situation where the Company has posted a net toss far the financial year.

There are three major factors that have contributed to the wide gap between expected performance and actual results. First, couple of product launches into the market fell significantly short of expectations. These products were developed for several of the tea frog players in the generic space and was expected to contribute significantly to the sates and profitability of the Company on the financial year 2009-10. A new production facility was competissioned in 03 of 2008-09 to support the manufacture of the active ingredients. Members are aware, it is not possible to obtain alternative customers or substitute markets immediately since regulatory and customer approvals entail long lead time; However, the Company sees this as a temporary setback and has stepped up its marketing thrust to regain ground, modified its production facilities, established alternative products and created new revenue streams for the future. Also, the facilities that have been commissioned for this product were mini-product facilities and are being utilized far other current and future products.

Second, during the year, almost all products witnessed added and unanticipated price erosion, margin compression and competitive risks. The situation was compounded with a stiff mark up in costs of raw materials, especially from China. The product mix underwent a change with demand growth for low value products, white in the previous year, the sales mix had larger quantities of high value products. In the best interest of its customers, the Company worked at tighter margins and offered competitive prices, enabling them to compete better in their markets.

Third, the currency market remained volatile and the rupee tended to weaken intermittently throughout the year against the USS. Rupee which was around Rs.51.50 in March 2009, closed the year ending March 2010 at approximately Rs.44.90. It was challenging to manage the ferex transactions and in the year the Company reported a Loss on foreign exchange of Rs.22.34 Tuition (debited to Administrative, Selling and Other Expenses). In contrast, there was a net foreign exchange gain of Rs.60.65 million in the year ended March 2009.

Overall, the Company reported lower revenues at Rs.2812.53 million which was a 9.8% decline over Rs.3120.26 million achieved in the previous year. Neuland attempted to improve productivity and yield in a bid to contain the costs. Despite cast optimization steps initiated throughout the value chain, better sourcing of materials and effective risk management, the Company recorded tower Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of Rs.280.76 million in 2009-10 as compared to Rs.361.41 million in 2008-09.

Members would recall, the Company has been steadily investing far its future growth. In the past three years, the Company has added to its gross block with fresh investment of Rs.1547 million, which is approximately twice the total investment made in the first 23 years. The Company has invested in products, product pipeline, R&D, regulatory and compliance standards, manufacturing capabilities and environmental systems and is now better equipped to offer higher volume of a larger number of products and services.

In the pharmaceutical industry, additional capacities, regulatory and customer approvals are the primary steps in commercializing products, and invoicing takes 18 to 24 months. In the initial period, the Return on Investment takes time and effort, with skewed cash flaws.

During the year, with additional borrowing for capital expenditure as well as working capital, the Company incurred interest casts of Rs.256.73 million. Depreciation accounted for another Rs.135.60 million. In the previous year, interest cost was Rs.143.59 million, white depreciation amounted to Rs.73.70 million. Personnel ended the financial year 2009-10 with a loss of Rs.70.45 million as compared to profit after tax of Rs.117.90 million in the previous year. The lass per share in 2009-10 was Rs.13.03.

OUTLOOK:

Investments made in capacities are now paying off, with the Company better placed to offer high-value and niche products as well as service volume Led markets. While several initiatives take in 2009-10 are likely to positively impact revenues and net income, incremental gains are more likely to be visible from attic of the quarter ending September, 2010. The newly created manufacturing facilities am now being utilized far APIs with higher demands as well as for executing contract manufacturing projects.

The Company has started camping up selling volumes for its attive a pharmaceutical ingredients, especially its top six products. Sing Itaneously, seven am active ingredients are being scaled up end commercialized during 2010-11. Another eight active pharmaceutical ingredients am ready for scale up activity. The order book is robust and the endeavor is to achieve 30% incremental growth in revenues.

The Company has also recently made a foray into the area of kepi. As a first step, the Company has been able to develop economical manufacturing processes for multi-kilogram production of high value peptide building blocks called pseuloproline dipeptides. The Company's high quality standards together with competitive prices have been recognized and Would be leveraged to offer these high quality peptide building block to other pharmaceutical companies that am active in the area of peptides. In order to fully exploit the market opportunity in this area, Neuland has entered into a commercial manufacturing agreement with one of the leading global biotechnology companies, a pioneer in developing and making available high-value building blocks, to be their exclusive producer of pharmaceutical grade pseudoproline dipetatices. This is a high-value high-growth segment and the Company is technically equipped and has the skill sets to create a niche for itself in a growing market. Neuland has commenced commercializing its products, and expects to ramp up volumes in calendar year 2011. Success in commercializing the peptide building blocks will lead to expansion of the Companies interests into other area in peptides such as generic peptide APIs, etc.;

Today the Company offers contract manufacturing services to innovator companies and presently executes projects far pharmaceutical companies in Europe, North America and Japan.

Rootage's execution capabilities have been recognized and this is a segment that is showing encouraging signs of growth.

The Company has a robust platform for growth and perceives several opportunities to ramp up the business in each of its verticals. Aggressive efforts are being made to improve revenues, offer more products and leverage on customer relationships. At the same time, Neuland is working to improve manufacturing processes, ptimize costs, reduce waste and operational expenses, increase cash flaw, rationalize manpower, protect margins, report positive earnings, and dersk the business.

SUBSIDIARIES:

The Company's subsidiaries, Neuland Laboratories K.K. Japan and Neuland Laboratories Inc. USA, have come into operation and started working aggressively on market development. The efforts have been to build Neuland's business by being close to the customers and market the products as well as respond immediately to their needs. In 2009-10, contract manufacturing business was given an additional thrust, with encouraging response in Japan as well as at North America. The Company sees long-term sustainable opportunities in these regions and is further strengthening the organizational resources.

JOINT VENTURE:

The outlook is positive far the joint venture, Cato Research Neuland India Private Limited formed in collaboration with Cato Research Israel Limited, a wholly owned subsidiary of Cato Research Limited, a global contract research and development organization based in USA. As already known to Members, the Company's share in the joint venture is 70% as per the Share Subscription and Shareholder Agreement.

The joint venture company commenced operation and the Company is excited with the prospects for the business, primarily in clinical research in India. Global health care companies have been rescuing out to competent researched companies to bring innotivative drugs to the market in the shortest possible time span, using high quality and cost-effective resources available in India. deuland is confident for the long-term since it has the best available partner in Cato Research.

MANAGEMENT DISCUSSION AND ANALYSIS

GLOBAL PERSPECTIVE

In 2009, the global pharmaceutical market grew by 7% to $837 billion, compared with a 4.8% growth rate in 2008. The U.S. market remained the largest single market and witnessed 5.1% growth in 2009 with sales of ethical pharmaceuticals and insulins through retail and non-retail channels reaching $300.3 billion, compared with growth of 1.8% in 2008.

In 2009, demand for pharmaceuticals proved stronger than in the prior two years. Use of generic products, including branded generics, continued to rise in 2009 and now represents 75% of all dispensed prescriptions in the U.S., up from 57% in 2004. The total number of generic prescriptions dispensed increased 5.9% in 2009, while the number of branded prescriptions dispensed declined 7.6%.

Looking ahead

Global pharmaceutical sales growth of 4 to 6% is expected in 2010. Looking ahead, the global market for pharmaceuticals is expected to grow nearly $300 billion over the next five years, reaching $1.1 trillion in 2014. The 5 to 8% compounded annual growth rate during this period reflects the impact of leading products losing patent protection in developed markets, as well as strong overall growth in the world's emerging countries.

Patient demand for pharmaceuticals is estimated to remain robust, despite the ongoing effects of the economic downturn being felt in many parts of the world. Net growth over the next five years is expected to be strong - even as the industry faces the peak years of patent expiries for innovative medicines introduced 10 - 15 years ago and subsequent entry of lower-cost generic alternatives.

Changing dynamics

Market analysts perceive a few key market dynamics:

a. Geographic balance of the pharmaceutical market continues to shift toward emerging countries.

b. Therapy area growth dynamics driven by innovation cycle and areas of unmet need.

c. Broad cuts in spending applied by public payers to reduce growth in healthcare budgets.

d. Peak years of patent expiries shift major therapies to generic dominance.

e. Closer scrutiny of new products contributes to lower initial spending by payers.

f. Leading up to 2020, there will be a continuing shift toward biopharmaceuticals, specialty-driven products, and changes in the mix of disease areas of interest.

ACTIVE PHARMACEUTICAL INGREDIENTS

Active pharmaceutical ingredients (APIs) are any substance or mixture of substances intended to be used in the manufacture of a medicinal product and that, when used in its production becomes an active ingredient of the product.

Sourcing APIs from low-cost suppliers is a key strategy for pharmaceutical companies pressured by the competitive forces. The trends in active pharmaceutical ingredient outsourcing are getting clear, and can be iterated as follows:

China is the largest API-producing country in the world. India is predicted to be the second largest market, growing from 6.5% of the global API market to around 10.5% by 2011.

The manufacturing industry is growing faster in India closely followed by China. India has already achieved a level of sophistication in chemicals and now offers biologics as well.

Outsourcing the production of APIs, or if already outsourced, finding a cheaper supplier, is key to saving money at the API manufacturing stage, whether it is for APIs for preclinical or clinical trials, or for the production of finished dosages.

Growth in the overall pharmaceutical market has slowed, as a result of patent expiries, generic encroachment, and price erosion, but growth is expected to revive from 2010, driven by increased demand for healthcare. Growth in the pharmaceutical market in-turn will drive expansion in the API market.

Forward view

Going forward, an overall growth rate of around 7.3% is projected for the global APIs market, which is higher than the growth rate expected in the overall pharmaceutical market. The upcoming peak years of patent expiries for innovative medicines is resulting in a surge in sales for generic APIs, which should comfortably outpace growth for innovator APIs over the next five years.

India in particular is well positioned, thanks to low labour and environmental costs, the size and dynamism of its economy, and incentives provided by the Indian government. Indian API manufacturers expect their sales to foreign countries, and especially regulated markets, will increase faster than sales to the domestic market. In the area of intellectual property rights, India appears to fare better in terms of the confidence it inspires in foreign investors. Indian companies have perfected their scientific, technical and manufacturing skills to match the requirements of global players that are increasingly seeking to offshore many manufacturing activities previously performed in-house.

Today, India has barely 4% of the global CRAMs market, and it is estimated that there would be an explosive growth in the area for the capable players in the country.

COMPANY PERSPECTIVE and OPPORTUNITIES

Neuland has become a one stop provider from research to commercial production of Active Pharmaceutical Ingredients (APIs). For over two decades, Neuland has strived to be the best value for money without compromising on quality and time. Strong chemistry, regulatory support and reliability are bundled with the APIs.

The Company's product portfolio spans an impressive mix of APIs across 10 major therapeutic categories, including anti-asthmatics, anti-infectives, cardiovascular diseases, CNS (including anti-depressants, anti-parkinsons and anti-alzheimers), anti-ulcerants and anti-fungals. The Company has over 35 active U.S. Drug Master Files and 330 Drug Master Files worldwide and Certificate of Suitability (CoS).

Neuland's product portfolio combined with robust systems, global standards, strong customer focus geographically spread covering more than 80 countries makes Brand Neuland, a preferred source worldwide. For over two decades, the Company has built up some of the best client list and markets over 90% of its production in the developed markets of Europe and North America. Japan offers huge opportunities for quality conscious manufacturers and Neuland has both its manufacturing sites, processes and quality management system inspected by Pharmaceuticals and Medical Devices Agency (PMDA), Japan.

OUTLOOK

They are introducing new products and reducing cost of operations. The Company is conscious that the operating environment will be challenging in 2010-11 and hence would maintain high level of customer service and save on costs. Neuland is stepping up its operations, making proactive moves in the market and is improving cost competitiveness.

Neuland has planned to increase the importance of rapidly growing and high value-adding businesses and find ways to exploit new opportunities. Cost discipline and cash preservation are measures being taken to cope with the business needs.

PERFORMANCE HIGHLIGHTS:

Neuland grew its revenue by 38.7% to Rs.3120.260 millions as compared to 2248.850 millions reported in the previous year. Exports accounted for 84% of revenues while the balance 16% was sold in the domestic market. Europe constituted 36% of the revenues while North America accounted for 38%. The balance 10% was exported to rest of the world.

Improved reach was made possible by the newly launched subsidiary in the US and Neuland could step up exports to North America from 14% of revenues in the previous year to 38% in the year. Significantly, the sharp rise was on higher revenues of Rs.3120.260 millions.

Considerable investments have been made in enhancing the marketing infrastructure both in the US and Japan. Similarly, Neuland invested in manufacturing, de-bottlenecked the production processes and augmented capacity. While the costs were booked during the year, the returns can be expected in the future. Significant savings in the cost of production and reduction in the total variable cost and time cycle, as well as improvement in yield and quality was made possible by the modification of manufacturing processes.

UNAUDITED FINANCIAL RESULTS FOR THE QUARTER ENDED 31.12.2010

Particulars	3 months ended 31.12.2010 (Unaudited)	9 months ended 31.12.2010 (Unaudited)
1. a) Net Sales / Income from Operations	953.416	2847.807
b) Other Operating Income	14.891	25.757
Total Income	968.307	2873.564
2. Expenditure
(a) (Increase)/decrease in Stock in Trade	28.295	(0.544)
(b) Consumption of Raw Materials	550.299	1797.267
(c) Employees Cost	84.448	193.769
(d) Depreciation	39.017	115.586
(e) manufacturing Expenses	85.683	248.742
(f )administration, Selling and other expenses	86.071	291.598
Total Expenditure	851.813	2646.418
3. Profit / (Loss) From Operations before other Income foreign exchange (gain)/loss and exceptional item (1-2)	118.494	227.145
4. Interest (net)	75.738	221.644
Profit / (Loss) before foreign exchange (gain)/loss and exceptional item (3-4)	40.756	5.502
5. Foreign exchange (gain)/loss	0.834	17.264
6. Profit / (Loss) before ordinary Activities before tax/ prior period items (5-6)	41.590	22.765
7. Prior period adjustments	0.000	0.000
8. Profit / (Loss) Before Taxation	41.590	22.765
9. Tax Expenses
a) current tax	(4.493)	(4.493)
b) provision for wealth tax	0.000	0.000
c) Fringe Benefit tax	0.000	0.000
c) deferred tax (credit)	(2.100)	(2.100)
d) MAT Credit Entitlement	4.493	4.493
11. Net Profit/(Loss) for the period	39.490	20.665
12. Paid Up Equity Share Capital ( Face Value of the share Rs.10/- each )	54.671	54.671
13. Reserves excluding revaluation Reserves as per balance sheet of previous accounting year
14. Earning per shares before prior period items	--	--
Basic	7.32	3.83
Diluted	7.30	3.82
Earning per shares after prior period items
Basic	7.32	3.83
Diluted	7.30	3.82
15. Public Share Holding
Number of Shares	3359633	3359633
Percentage of Shareholding	62.26	62.26
16. Promoters and Promoter group share holding	2036822	2036822
a) Pledged / Encumbered
- Number of Shares	200000	200000
- Percentage of share (as a % of the total shareholding of promoter and promoter group)	9.82	9.82
- Percentage of shares(as a % of the total share capital of the company)	3.71	3.71
b) Non-encumbered
- Number of Shares	1836822	1836822
- Percentage of Share (as a % of the total shareholding of promoter and promoter group)	90.18	90.18
- Percentage of Share (as a % of the total share capital of the company)	34.01	34.01

Segmentwise Revenue, Results and capital Employed under clauses 41 of the listing agreement

1. Segment Revenue (Net Sales/Income)

a) Local Sales	171.913	523.162
b) exports Sales	781.503	2324.645
Total	953.416	2847.807

1. The above unaudited financial results which have been subjected to a limited review by statutory Auditors, were reviewed by the Audit Committee at their held on February 01, 2011, and approved and taken on records at the Board of Directors meeting held on February 02, 2011.

2. No investor Complaints was received during the quarter. There were no investor complaints pending at the beginning and at the end of the quarter.

3. EPS for the quarters and nine months are not annualized

4. The company’s operations are predominantly related to the manufacturer of active pharmaceutical Ingredients (API) as such there is only one primary reportable segment.

5. Previous quarter/ year figures have been regrouped wherever necessary.

FIXED ASSETS:

v Land

v Building

v Plant and Machinery

v R and D Equipments

v Data Processing Machines

v Furniture and Fittings

v Vehicles

WEBSITE DETAILS:

History of Neuland

1984 - January 7, Neuland Laboratories was incorporated in Hyderabad

1986 - June 30, Neuland made its first sale of salbutamol sulphate/albuterol sulfate.

1994 - Neuland went public with an IPO; raised capital for construction of second production facility.

1997 - Received first US FDA approval.

1999 - Both manufacturing facilities inspected by USFDA. Received Certificate of Suitability for Ranitidine.

2003 - US and EU markets contribute over 40% of Neuland’s sales.

2004 - Established North American operations.

2006 - Number of products with Certificate of Suitability reaches 9;

US office started operations from California

2007 - Established Japanese subsidiary in Tokyo

Inspected by German Health Authority (Unit – 2)

2008 - Certified in ISMS. SAP enabled Business Processes.

Unit-1 successfully inspected by USFDA

Unit-1 Certified for ISO 14001 and OHSAS 18001

2008 - Unit 1 and 2 receive approval from PMDA of Japan.

2009 - Neuland is one of the first Indian API manufacturers to receive such an approval

2010- Unit-2, Pashamylaram facility is certified for ISO 14001:2004 and OHSAS 18001:2007 standard.

The Company

Neuland is a Hyderabad based manufacturer of active pharmaceutical ingredients (APIs) and an end-to-end solution provider for the pharmaceutical industry for chemistry related services. They are more than 1000 employees strong and the core competence lies in the application of strong process chemistry to manufacturing in regulatory environment.

For 25 years, Neuland has been at the forefront of facilitating and accelerating drug development and cGMP manufacturing of APIs. The Company’s technical and scientific teams provide reliable solutions and services to the global pharmaceutical industry.

The organization's strength lies in its ability to partner with companies (over 700 customers spread across the globe) from early stage and throughout the life cycle of the products, with speed and efficiency in order to maintain their competitiveness.

The Businesses

Manufacture of APIs They have developed processes for over 50 APIs across various therapeutic categories in the laboratory and scaled them up to plant scale, and selling them to over 700 customers in 80 countries. Since the last decade, they have been selling in the regulated markets.

Contract Research and Contract Manufacturing Since 2000, Neuland has been offering Contract Research and Contract Manufacturing Services. Neuland's customers include Large MNC's; mid-sized pharmaceutical companies; stand-alone Research organizations as well as large Generic companies. Currently they are working with more than 20 companies worldwide.

Clinical Research Clinical research services are being developed as a joint venture with US-based Cato Research Inc. to conduct clinical trials in India. Cato Research has some of the best names in the pharmaceutical industry as its clients, and Neuland would be supporting the execution of the clinical trials. Initially, the joint venture company will conduct phase II and III trials in areas such as diabetes, dermatology, oncology and other therapeutic segments.

The markets

Neuland has meaningful footprints in several countries with more than 80% of the revenues accounted for by exports in 2009-10. US and Europe are the key markets, accounting for 75 % of total exports.

The Company has filed 33 DMFs with the USFDA and over 350 DMFs with various health authorities in Europe, Canada, Japan, Korea and Australia.

The production facilities

Neuland has two world-class API manufacturing facilities close to the city of Hyderabad, capable in handling complex and hazardous reactions. The manufacturing facilities for the APIs comply with stringent guidelines and requirements of Good Manufacturing Practices (GMP) and have been inspected by international health and regulatory agencies such as the USFDA, EDQM, BfArM (Germany), KFDA (Korea) and PMDA (Japan).

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 records 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.45.37
UK Pound	1	Rs.73.25
Euro	1	Rs.62.68

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	5
OPERATING SCALE	1~10	5
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	5
--PROFITABILIRY	1~10	5
--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	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		46

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	Capability to overcome financial difficulties seems comparatively below average.	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
-	NB	New Business	-

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

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.