MIRA INFORM REPORT

Report Date :

15.11.2011

IDENTIFICATION DETAILS

Name :	NATCO PHARMA LIMITED [w.e.f.1994]
Formerly Known As :	NATCO FINE PHARMACEUTICALS PRIVATE LIMITED
Registered Office :	Natco House, Road No.2, Banjara Hills, Hyderabad – 500033, Andhra Pradesh
Country :	India
Financials (as on) :	31.03.2011
Date of Incorporation :	19.09.1981
Com. Reg. No.:	01-003201
Capital Investment / Paid-up Capital :	Rs.281.479 Millions
CIN No.: [Company Identification No.]	L24230AP1981PLC003201
TAN No.: [Tax Deduction & Collection Account No.]	HYDN00304D / HYDN00010D
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchanges.
Line of Business :	The Company is primarily engaged in manufacturing of active pharmaceuticals ingredients and finished dosage formulations
No. of Employees :	1400 [Approximately]

RATING & COMMENTS

MIRA’s Rating :

A (66)

RATING		STATUS	PROPOSED CREDIT LINE
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

Maximum Credit Limit :	USD 13800000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and a reputed company having fine track. Financial position of the company appears to be sound. Trade relations are reported as fair. Business is active. Payments are reported to be regular and as per commitments. The company can be considered normal for 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 – September 30, 2011

Country Name

Previous Rating (30.06.2011)

Current Rating (30.09.2011)

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

LOCATIONS

Registered Office / Corporate Headquarters:	Natco House, Road No.2, Banjara Hills, Hyderabad – 500033, Andhra Pradesh, India
Tel. No.:	91-40-2354 7532 / 2354 8243
Fax No.:	91-40-2354 5298
E-Mail :	natinfo@natcopharma.co.in info@natcopharma.co.in legal@natcopharma.co.in investors@natcopharma.co.in
Website :	http://www.natcopharma.co.in
Factory 1 :	Pharma Division Kothur Post, Kothur Mandal, Mahaboobnagar District - 509228, Andhra Pradesh, India
Tel. No.:	91-8548-257289 / 257173
Fax No.:	91-8548-257290
Factory 2 :	Pharma Division- Parenterals Vijayapuri North, Nagarjuna Sagar, Nalgonda District – 508202, Andhra Pradesh, India
Tel. No.:	91-8680-276661
Fax No.:	91-8680-276246
Factory 3 :	Chemical Division Mekaguda, Kothur Mandal, Mahaboobnagar District – 509228, Andhra Pradesh, India
Tel. No.:	91-8548-2492493 / 229496
Fax No.:	91-8548-249401
Factory 4 :	Chemical R and D Division B – 11, Industrial Estate, Sanathnagar, Hyderabad – 500018, Andhra Pradesh, India
Tel. No.:	91-40-23710575
Fax No.:	91-40-23710578
Factory 5 :	Formulations Division Plot No.19, Pharma City, Selaqui Industrial area, Vakas Nagar, Dehradun - 248001, Uttarakhand, India
Tel. No.:	91-40-23547532 (for Domestic Marketing)
Fax No.:	91-40-23541217
E-mail :	sales@natcopharma.co.in
Factory 6 :	Formulations Division Plot No.A3, UPSIDC, Selaqui Industrial area, Dehradun – 248001, Uttarakhand, India
Factory 7 :	Natco Organics Limited No.74/B, Vakkadu Village, Manali New Town, Chennai – 600103, Tamilnadu, India
Tel. No.:	91-44-29011779

DIRECTORS

As on 31.03.2011

Name :	Mr. V.C Nannapaneni
Designation :	Chairman and Managing Director
Qualification :	M.Pharma, MS
Date of Appointment :	3.10.1981
Name :	Mr. C.P. Ravindranath
Designation :	Director – Nominee of Export-Import Bank of India
Name :	Mr. G.S. Murthy
Designation :	Director
Name :	Dr B.S. Bajaj
Designation :	Director
Name :	Dr. Jasti Samba Siva Rao
Designation :	Director
Name :	Dr. A.K.S. Bhujanga Rao
Designation :	President [Research and Development and Technical]
Date of Birth/Age :	12.07.1952
Qualification :	M.Sc. Chemistry with specialization in Organic Chemistry, Andhra University, Visakhapatnam, India Ph.D.Synthetic Organic Chemistry, Chemistry of 4- and 5 - Nitroimidazoles from the Indian Institute of Science (IISc), Bangalore, India.
Experience :	He worked with IDPL, IDL, Reckitt and Colmen and Vera Laboratories Limitd, also worked as collaborative Research Fellow, University of Hull, UK and University of Texas, USA before joining with NATCO. He has got good knowledge in Bulk pharmaceuticals especially on Anti Asthmatic /Drugs, Beta Blockers and Cox-inhibitors and he has well acquaintance with Technology Transfer to commercial scale, quality control and regulatory affairs and also looking after the Patent related issues of the Company. He has 30 publications to his credit and applied for 40 international patents. He is a visiting faculty and also approved Research Investigator and Supervisor for Ph.D. Students to many universities
Date of Appointment :	30.07.2009
Name :	Mr. Rajeev Nannapaneni
Designation :	Director and Chief Operating Officer
Date of Birth/Age :	22.06.1977
Qualification :	B.A. in Quantitative Economics and B.A. in History from Tufts University, USA
Experience :	He Worked in Merill Lynch and Natco Systems LL.C in USA. Joined the Company in 2000. Got experience and exposure in General Management, New Business / New Product Development in international markets.
Date of Appointment :	30.11.2005
Name :	Mr. P. Bhaskara Narayana
Designation :	Director and Chief Operating Officer
Date of Birth/Age :	12.02.1955
Qualification :	Fellow Member of ICWAI and ICSI, Gold Medalist in Law, Masters in Commerce and Business Administration. CMA - Member of Institute of Certified Management Accountants of the Institute of Management Accountants, USA. He was awarded a Doctorate in Business Management from Kakatiya University in the year 2010
Experience :	He is having rich and varied experience in Finance, Secretarial and legal disciplines spanning over more than three decades
Date of Appointment :	30.11.2005

KEY EXECUTIVES

Name :	Mr. M. Adinarayana
Designation :	Company Secretary and General Manager (Legal and Corporate Affairs)
Name :	Mr. Habeeb Sheriff
Designation :	Senior Manager - Exports
Name :	Mr. C.P. Dwarakanath
Designation :	General Manager – Domestic Marketing

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

AS ON 30.09.2011

Category of Shareholders	No. of Shares	Percentage of Holding
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family	10645939	37.82
Bodies Corporate	6551679	23.28
Trusts	79000	0.28
Sub Total	17276618	61.38
(2) Foreign
Individuals (Non-Residents Individuals / Foreign Individuals)	487708	1.73
Sub Total	487708	1.73
Total shareholding of Promoter and Promoter Group (A)	17764326	63.11
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI	2494618	8.86
Financial Institutions / Banks	1340	-
Foreign Institutional Investors	1789222	6.36
Sub Total	4285180	15.22
(2) Non-Institutions
Bodies Corporate	1446917	5.14
Individuals
Individual shareholders holding nominal share capital up to Rs. 0.100 Million	3280630	11.65
Individual shareholders holding nominal share capital in excess of Rs. 0.100 Million	1167759	4.15
Any Others (Specify)	203140	0.72
Non Resident Indians	159834	0.57
Clearing Members	42806	0.15
Trusts	500	-
Sub Total	6098446	21.67
Total Public shareholding (B)	10383626	36.89
Total (A)+(B)	28147952	100.00
Shares held by custodians and against which depository receipts have been issued (C)	-	-
Total (A) + (B) +(C)	28147952	-

BUSINESS DETAILS

Line of Business :

The Company is primarily engaged in manufacturing of active pharmaceuticals ingredients and finished dosage formulations

Products :

Item Code Number	Product Description
29419090	Cefotaxime
29051200	Isopropyl Alcohol
39123901	Ethyl Cellulose
29420039	Cotalopram
29420090	Sumatriptan Succinate
29420090	Sertraline

• Diltiazem
• Omeprazole
• Lansoprazole
• Isosorbides
• Sumartriptan Succinate
• Ondanssetron
• Sertraline
• Granisetron
• Paroxetine
• Newer Quinolones and fourth generation Cephalosorins

PRODUCTION STATUS [As on 31.03.2011]

Particulars	Unit	Licensed Capacity	Installed Capacity
Bulk Drugs and Drug Intermediates	Kilolitres	384	384
Formulations	Million units	2221	2221

Note: Licensed and installed capacities are as certified by Management and have not been verified by the Auditors as this is a technical matter.

Particulars	Unit	Actual Production
Bulk Drugs and Drug Intermediates	Kgs	26254
Formulations	Million units	240

Note: Actual production of formulation products excludes 835 (previous year: 789) million units produced on loan licensing basis from outside parties.

GENERAL INFORMATION

No. of Employees :

1400 [Approximately]

Bankers :

• Allahabad Bank
• State Bank of India
• Corporation Bank
• Oriental Bank of Commerce
• Export-Import Bank of India

Facilities :

Secured Loan	Rs. In Millions 31.03.2011	Rs. In Millions 31.03.2010
Loans and advances from banks
Term loans from banks [Repayable within one year Rs.137.500 millions]	549.497	500.000
Term loans from others [Repayable within one year Rs. 97.353 millions]	925.000	141.458
Working capital loans from banks [Payable within one year]	720.225	496.645
Total	2194.722	1138.103
Secured loans Loans availed from the financial institutions and banks are fully secured by way of hypothecation of fixed assets, capital work in progress and other assets of the Company. The term loans from banks are further guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing Director in his personal capacity.
Unsecured Loan	Rs. In Millions 31.03.2011	Rs. In Millions 31.03.2010
Short-term loans and advances
From banks – [Payable within one year Rs. Nil]	0.000	50.000
Other loans and advances
From others [Repayable within one year Rs.1.908 millions]	4.104	4.869
Total	4.104	54.869
Unsecured loans Unsecured loans represent loans taken from Citibank amounting to Rs.Nil (2010: Rs.50.000 millions) and interest free sales tax deferment amounting to Rs.4.104 millions (2010: Rs.4.868 millions), availed under the 'TARGET 2000' Scheme of the State Government of Andhra Pradesh. The unsecured loan from Citibank is guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing Director in his personal capacity.

Banking Relations :	--
Auditors :
Name :	Walker Chandiok and Company Chartered Accountants
Address :	3^rd Floor, Uptown Banjara Road No.3, Banjara Hills, Hyderabad – 500034, Andhra Pradesh, India
Subsidiary company:	NATCO Pharma Inc., United States of America Time Cap Overseas Limited, Mauritius
Ultimate Subsidiary Company :	NATCO Farma Do Brazil (formerly Uniao Distributors), Brazil (from 27 January 2011)
Partnership firm in which the Company is a partner :	K and C Pharmacy, United States of America
Entity in which directors are interested :	NATCO Organics Limited, Chennai Time Cap Pharma Labs Limited, Hyderabad NATCO Trust, Hyderabad NATCO Group Employees Welfare Trust NDL Infratech Private Limited, Hyderabad

CAPITAL STRUCTURE

AS ON 31.03.2011

Authorised Capital :

No. of Shares	Type	Value	Amount
35,000,000	Equity Share	Rs.10/- each	Rs.350.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
28,147,952	Equity Share [Fully Paid Up]	Rs.10/- each	Rs.281.479 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2011	31.03.2010	31.03.2009
SHAREHOLDERS FUNDS
1] Share Capital		281.479	281.479	280.408
2] Stock Option Outstanding		0.000	0.000	14.975
3] Reserves & Surplus		3187.584	2732.849	2283.655
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		3469.063	3014.328	2579.038
LOAN FUNDS
1] Secured Loans		2194.722	1138.103	1206.682
2] Unsecured Loans		4.104	54.869	55.258
TOTAL BORROWING		2198.826	1192.971	1261.940
DEFERRED TAX LIABILITIES		250.870	268.345	240.886
TOTAL		5918.759	4475.645	4081.864
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		2541.477	2332.002	2011.488
Capital work-in-progress		987.146	396.016	469.633
INVESTMENT		711.899	792.293	591.004
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	930.200	656.215	646.723
	Sundry Debtors	703.706	546.278	571.641
	Cash & Bank Balances	319.303	35.032	200.950
	Other Current Assets	1.075	0.809	3.061
	Loans & Advances	766.489	568.827	547.262
Total Current Assets		2720.773	1807.161	1969.637
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditors	889.791	707.864	735.892
	Other Current Liabilities	64.822	87.903	119.535
	Provisions	87.918	56.060	104.471
Total Current Liabilities		1042.531	851.827	959.898
Net Current Assets		1678.242	955.334	1009.739
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		5918.759	4475.645	4081.864

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2011	31.03.2010	31.03.2009
	SALES
		Income	3260.565	2814.875	2520.142
		Sale of product dossiers	75.406	158.396	22.357
		Job works charges	109.777	101.093	104.053
		Other Income	89.598	54.773	110.038
		TOTAL	3535.346	3129.137	2756.590
Less	EXPENSES
		Materials consumed	871.558	736.191	808.612
		(Increase) / Decrease in inventory	[114.776]	33.490	[70.957]
		Purchase of traded goods	167.273	131.328	99.020
		Manufacturing expenses	477.695	368.002	332.138
		Staff costs	513.445	420.311	356.467
		Operating and other expenses	694.848	544.335	433.326
		TOTAL	2610.043	2233.657	1958.606
	PROFIT/[LOSS] BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION		925.303	895.480	797.984
Less	FINANCIAL EXPENSES		141.979	146.925	150.476
	PROFIT/[LOSS] BEFORE TAX, DEPRECIATION AND AMORTISATION		783.324	748.555	647.508
Less/ Add	DEPRECIATION/ AMORTISATION		143.481	124.454	103.499
	PROFIT / [LOSS] BEFORE TAX		639.843	624.101	544.009
	Prior period items		0.000	15.459	9.847
Less	TAX		118.640	132.011	106.758
	PROFIT / [LOSS] AFTER TAX		521.203	476.631	427.404
Add	PREVIOUS YEARS’ BALANCE BROUGHT FORWARD		1546.906	1176.138	819.742
Less	APPROPRIATIONS
		Transfer to General Reserve	40.000	40.000	30.000
		Dividend	56.296	56.296	35.051
		Tax on Dividend	9.350	9.567	5.957
	BALANCE CARRIED TO THE B/S		1962.463	1546.906	1176.138
	EARNINGS IN FOREIGN CURRENCY
		FOB Value of Export	1300.937	964.396	1032.622
		Interest on loans to a subsidiary company	8.043	12.910	18.813
		Income from royalty	18.940	5.045	5.116
	TOTAL EARNINGS		1327.920	982.351	1056.551
	IMPORTS
		Raw materials and packing materials	169.597	77.889	104.442
		Capital equipments (including spares and components)	153.510	109.479	124.301
	TOTAL IMPORTS		323.107	187.368	228.743
	Earnings/[Loss] Per Share (Rs.)		18.52	16.95	15.24

QUARTERLY RESULTS

PARTICULARS	30.06.2011	30.09.2011
Type	1^st Quarter	2^nd Quarter
Sales Turnover	1018.600	1129.300
Total Expenditure	766.100	829.000
PBIDT (Excl OI)	252.500	300.300
Other Income	10.500	15.600
Operating Profit	263.000	315.900
Interest	53.000	59.500
Exceptional Items	0.000	0.000
PBDT	210.000	256.400
Depreciation	37.800	37.800
Profit Before Tax	172.200	218.600
Tax	34.500	58.300
Reported PAT	137.700	160.300
Extraordinary Items	0.000	0.000
Prior Period Expenses	0.000	0.000
Other Adjustments	0.000	0.000
Net Profit	137.700	160.300

KEY RATIOS

PARTICULARS		31.03.2011	31.03.2010	31.03.2009
PAT / Total Income	(%)	14.74	14.81	15.50
Net Profit Margin (PBT/Sales)	(%)	19.62	22.17	21.58
Return on Total Assets (PBT/Total Assets}	(%)	12.16	15.08	13.66
Return on Investment (ROI) (PBT/Networth)		0.18	0.21	0.21
Debt Equity Ratio (Total Liability/Networth)		0.93	0.68	0.86
Current Ratio (Current Asset/Current Liability)		2.61	2.12	2.05

LOCAL AGENCY FURTHER INFORMATION

Company overview

Subject incorporated on 19 September 1981 in accordance with the provisions of the Indian Companies Act, 1956 ("the Act") is a limited liability company. The Company was originally incorporated as Natco Fine Pharmaceuticals Private Limited changed its name to NATCO Pharma Limited, in 1994.

The Company is primarily engaged in manufacturing of active pharmaceuticals ingredients and finished dosage formulations.

Operating Results:

During the year, the API division performed well, recording a growth of 19%. The revenues from this division jumped from Rs.890.000 Millions (2009-10) to Rs.1060.000 Millions (2010-11). The exports of finished dosage pharmaceutical formulations also exhibited a robust growth of 113%, recording a revenue base of Rs.510.000 Millions (2010-11) as against Rs.240.000 Millions (2009-10). The domestic oncology (finished dosage pharmaceutical formulations) business, however, remained stable, owing to lack of new launches and severe competition, which saw price erosions in respect of a couple of brands.

The company's operations for the year resulted in a surplus of Rs.667.300 millions (as compared to Rs.623.800 millionss for the financial year 2009-2010).

Review of 2011 performance:

API Division:

A robust growth of 19% was exhibited by the API business during the year in spite of continued pressure on realizations as well margins, together with some amount of volatility in the exchange rate of US $ vis-à-vis Indian Rupee, which continued during a part of the year 2011. Domestic sales as well as exports from this segment recorded growth - domestic sales at Rs.230.000 Millions (as against Rs.130.000 Millions last year) and API exports at Rs.830.000 Millions (as against Rs.750.000 Millions last year). This segment could record a revenue base of Rs.1060.000 Millions (as against Rs.890.000 Millions last year).The depreciation in the value of the Indian Rupee against the US Dollar and other foreign currencies has been helpful in sustaining this division's performance.

Efforts would be made to enhance the efficiency, productivity and profitability of this segment during the fiscal 2011-12 as well.

Despite its foray into new products, the Revenues and margins on products from this division continue to experience pressure. The new cyto-toxic API facility being established by the Company's associate – NATCO Organics Limited - has commenced operations and is likely to throw up new avenues of growth, coupled with new products and new markets for this division.

However, the performance of this Division, with the expected Marketing Authorization approvals from US FDA which would result in large volume supplies to the company's marketing partners. The first mile-stone in this direction - the establishment of dedicated blocks for the manufacture of Glatiramer Acetate is expected to result in increased revenues from this segment and consequently, the performance is likely to record significant growth during the year 2012-13 onwards.

The business strategy for this segment continues to focus on concentrating on high value, low value specialty drugs. The API segment forms the life-line for the company's finished dosage pharmaceutical formulations business as well - as it supplies the raw material for almost all oncology drugs that the company manufactures and markets. This results in substantial cost savings and value addition.

The manufacturing facilities of the Division continue to enjoy US FDA, Australian TGA and ISO:14001 certification. Efforts continue to develop niche products and capture niche markets.

The Company continues to record satisfactory progress in the matter of regulatory filings.

Capital Investments and Projects:

Mylan Inc., with whom the Company has a tie-up for the manufacture and supply of Glatiramer Acetate had asked the Company to set-up exclusive dedicated facilities for the product. Accordingly, the Company has initiated the establishment of a multi-production block for Mylan. The cost of this facility is estimated to be around Rs.903.000 millions. While the validations and approvals for this block are expected to take some time, Mylan has asked the Company to make available an existing block for the manufacture of this product, with certain modifications. These modifications are expected to cost around Rs.282.500 millions. Mylan has agreed to extend financial assistance to part-fund these projects. Work on these two blocks is progressing at a rapid pace, so as to be ready by the calendar year end 2011.

Finished Dosage Formulations Division :

The revenues from this division could not sustain the continued growth rates that it exhibited during the last several years. The aggregate revenues from this Division recorded Rs.2320.000 Millions (as against Rs.2020.000 Millions last year) - recording an increase of about 15%. These figures, however, do not include the revenues from the US retail business, which had dwindled owing to their sale during the year . The revenues from the oncology segment remained more or less flat, while the formulations exports have recorded a significant growth of around 113% from Rs.240.000 Millions during 2009-10 to Rs.510.000 Millions during the year .

The oncology segment had to face severe competition in the market place which was one of the reasons for the flat performance of this segment. Added to this, the company could not launch any new products in the segment during the current year. As is always, the company makes a careful evaluation before launching a brand as to its utility and market opportunity

During the year , the Company launched anti-biotics - Zubact Injection and PT-Max Injection.

Supply and Distribution Agreements :

The company aims to target the US markets, whilst several of its applications for Marketing Authorizations are expected to be approved in the next couple of years. The company's applications have always been aimed at products with significant market size.

The company has filed Abbreviated New Drug Applications - five of which seek to challenge the existing patents. All these products have significant market size and have exhibited good growth during the last couple of years. Out of these five, the Company has obtained the First-to-File status for ftheir products - which would result in a 180-days market exclusivity after the patent expiry, if the said ANDAs are approved.

The supply and distribution agreements entered into with Mylan Inc., Dr. Reddys' Laboratories Limited, Actavis, Breckinridge Pharmaceuticals, Watson Pharmaceuticals and Lupin Limited present substantial and significant market opportunities for the Company. This is the best way the company can explore and encash its technical abilities while using the vast marketing net work available to the partners. What is more important is that the company is insulated from any kind of litigation, mitigating the legal risks.

Realizing this is the best form suitable for un-locking the hidden value, the company is pursuing more of such opportunities. The existing arrangements are being pursued to their logical conclusion. However, benefits in terms of revenue growth or earnings could be expected only after fiscal 2012.

Up-gradation of Kothur Facility :

A new manufacturing block for liquids and pellets is being planned at Kothur. The cyto-toxic orals manufacturing facility has been commissioned.

During the year, the company's application for Abbreviated New Drug Applications (ANDA) in respect of Trihexyphenidyl Hcl 2 mg / 4 mg tablets, Chloroquine Phosphate 250/500 mg. tablets and Letrozole 2.5 mg. tablets have been approved by the US FDA authorities.

The company has launched some of these products in the USA through its marketing partners.

The applications for Marketing Authorizations which have been applied for would warrant significant amount of capital expenditure and creation of capacity.

Proposed issue of securities :

To part finance the capital investments required at the various manufacturing facilities, the Company is contemplating issue of securities not exceeding 3.000 million equity shares aggregating in value, up to INR 1000.000 Millions. The Members of the company had, at an Extra-ordinary General Meeting held on 15th December, 2010, approved the issue. The company is exploring various options available for raising these resources.

US Pharmacy business:

On 6th December, 2010, K and C Pharmacy, a general partnership firm registered in the USA (in which the company is a major partner) had sold the assets and business of Nicks Drugs. With the several budgetary cuts imposed by the New Jersey Government in respect of Medicaid reimbursements, the business no longer remained profitable and hence was sold. The loss incurred on the sale of this business has duly been accounted in the books of accounts for the year ended on 31st March, 2011.

SaveMart Pharmacy, Lancaster, Pennsylvania, USA, which was acquired through the company's wholly owned subsidiary, NATCO Pharma Inc., USA also continues to do well and for the year ended on 31st March, 2011, the subsidiary has recorded a net profit, after tax, of Rs.17.600 millions (against Rs.11.100 millions previous year) after accounting for interest of Rs.8.000 millions (previous year Rs.12.900 millions) payable to the Company on the loans advanced by the parent company. The subsidiary has also repaid Rs.50.500 millions (Rs.49.600 millions previous year) out of the loan advanced by the Company.

Branded Generics and Institutional Sales :

In spite of lower margins and severe competition, business from these segments is quite satisfactory. The company has made in-roads into new markets in Sri Lanka, Myanmar, Nepal and Bangladesh. The Company has made an offer to the Government of India to set up generic medicine outlets in select government-run hospitals under the Jan Aushadi scheme.

Efforts are being made to introduce branded generics in new therapeutic areas.

Manufacturing facilities:

Finished dosage orals are being manufactured at both the manufacturing facilities situated at Dehradoon and these units continue to be eligible for income-tax and excise duty concessions. However, on and from the accounting year 2011-12, the first unit at Dehradoon would be eligible for a reduced income-tax benefit of 30%, while the profit from the second unit would be completely exempt from the income-tax.

Sales from the manufacturing facilities at Dehradoon, Uttarakhand, for the year ended on 31st March, 2011 amounted to Rs.1009.300 millions as against Rs.1162.100 millions last year.

Abbreviated New Drug Applications (ANDAs) :

The Company continues to sell Granisetron, Anastrazole and Ondansetron tablets in USA and Canada and has been receiving royalties from its constituents as per the agreements in force.

Research Efforts and Intellectual Property

The division continuously evaluates several compounds for their efficacy in disease management and control. Multiple teams would be working on several compounds simultaneously. These teams are typically engaged in the development of molecules, processes and products.

In respect of one molecule - NRC 19 - Phase I clinical trials are in their final stage and Phase II clinical trials are expected to commence shortly. Another compound - NRC 2694 - is being evaluated for commissioning of Phase I clinical trials.

Other molecules are continuously being evaluated for their efficacy. Various analogues useful in the field of anti-cancer, anti-depressant and anti-ulcer therapies, and new drug delivery systems are continuously evaluated for taking up for further development.

NATCO Organics Limited :

NATCO Organics Limited has commenced the trial runs of its cyto-toxic API manufacturing facility near Chennai. Under an arrangement with NATCO Organics Limited, the company would procure these APIs from NATCO Organics Limited and would convert them into finished dosage pharmaceutical formulations for sale in the open markets.

In line with its commitment to this project, the company has opted to convert the advances made by it to NATCO Organics into equity shares of NATCO Organics Limited.

NATCO Farma Do Brasil, Brazil:

The Company had acquired, during the year , a small distributing business - called Uniao Distributors, later renamed as NATCO Farma Do Brasil - in Brazil. The acquisition was undertaken by Time Cap Overseas Limited (TCOL), an entity registered in the Republic of Mauritius. While the Company owns 75% of TCOL, 25% is owned by Levomed Inc., USA. TCOL owns 90% of the outstanding quotas of NATCO Farma Do Brasil, while the rest 10% is owned by Mr. Lincoln Gomes, a Brazilian national. Thus, NATCO Farma Do Brasil is a stepdown subsidiary of the Company. The company aims to register its products in Brazil and distribute them through this enterprise.

The step-down subsidiary is yet to commence full-scale operations.

Products / Markets :

While it is economically prudent to operate in a segment which is most profitable, thereby resulting in dependence on a single market, product or customer in certain circumstances, efforts are made by the Company to reduce such dependence to the minimum. Constant efforts are made to widen the business horizon and to enter niche markets and introduce niche products.

The company prides itself in being numero uno in oncology segment, while at the same time, making efforts to diversify and introduce new products in new therapeutic areas.

Competition :

Competition is the hall mark of any growing economy and India in general and pharmaceutical industry in particular are no exception. The company has devised several strategies to ward off or minimize the effect of competition, which include, among others, increasing its rapport with the medical profession and generally spreading the knowledge about the company's products by organizing continuous knowledge programs for the medical profession. The company has thus created for itself a niche position among the companies operating in this segment.

In line with this policy, the company continues to pursue a very aggressive pricing policy for some of its products, and continues its drug donation program.

The company has always stood for quality in every aspect of its operations. Standards of manufacture and quality play a vital role in managing competition and retaining and developing customer base, By maintaining its facilities at world standards, and continuously upgrading them to suit international standards and US FDA requirements, NATCO is able to not only retain but widen its international customer base. Regular audits are undertaken by customers and the observations made in these audits are duly attended to.

CORPORATE SOCIAL RESPONSIBILITY

About the Trust

NATCO TRUST is the corporate social responsibility division of subject, and it is based in Hyderabad. The core areas of the Trust are Health, Hygiene, Sanitation, Water, Education, Livelihoods and Need Based Community Infrastructure. It operates in the vicinity of wherever it has a business presence. Since its inception in 1995, the Trust has been evolving and constantly revisiting its role in society.

Introduction about the activities/ interventions initiated

The Trust has initiated activities in the areas of Health (school health, community health, referral cases, positioning of counselors in hospital settings, health education), school sanitation, awareness on open defecation and its impact on health), hygiene (personal hygiene and community hygiene); Education (need based support to preprimary school, anganawadi centers, primary, upper primary schools and high schools in terms of building, sanitation, play materials, learning materials, library, science lab, mid day meal plates, uniforms, sports materials etc.), Livelihoods(in house vocational trainings and out sourcing) and community based infrastructure.

NATCO TRUST's Areas of Intervention:-

The Trust activities revolve around the following areas-

1. Health 2. Education 3. Livelihood 4. Water and Sanitation 5. Environment

1. Health

Natco Trust is committed to enhance the health and well being of the targeted communities. It attempts to improve the health seeking behavior of the communities regarding nutritious food, mother and child health, communicable diseases, preventive mechanisms through community based health services and health educations

Natco Mobile Health Clinic:

Objective: -"Health Services at the door steps of the community"

The Natco mobile health clinic (NMHC) is a boon for the community (as apparent by the community); it serves more than 5000 households with a population of more than 32000 in 17 villages of Peddavura and Chandampet Mandals on a rotation basis with a weekly schedule. It has all the basic equipments and free medicines provided apart from the health services health education too provided to the community.

Natco Mobile Health Clinic

NMHC provides Primary health care for the community. The main part of this is to examine the patients and treat them accordingly. The patients who cannot be treated at NMHC and who needs high end care are referred to higher centers at Hyderabad. NMHC visits home and treats terminally ill patients and others who cannot come to NMHC because of serious disease or very old age.

AIDS AWARENESS CAMPS: As part of the NMHC services AIDS awareness camps were conducted in Pedamunagala, Nagarjunapet, Nayakunithanda and Nellikal. These are conducted mainly to control the spread of the disease in the community. All pregnant ladies were advised to do HIV testing which is done free of cost in Government hospitals.

NUTRITION CENTER VISIT: As part of the NMHC services Antenatal and postnatal care is provided to the pregnant and lactating mothers respectively. They were treated of the basic ailments like Anaemia…etc and are referred for higher centers for Ultrasound scan, blood investigations and when abnormalities like high Blood pressure, abnormal presentation of foetus, bleeding p/v…etc are detected.

NMHC team works with the government ANM and makes sure that all the antenatal mothers are immunized with 2 doses of TT. Pregnant mothers are advised about the diet, immunization, Family planning…etc. Any issues raised by the pregnant and lactating mothers are discussed with them. All pregnant mothers are motivated to go for institutional delivery. They are discouraged to deliver at homes.

HEALTH EDUCATION: Apart from the health education provided at the Nutrition centers and Schools the community is also given health education on various matters when they come to NMHC to avail the services, by home visit and also by small gatherings. Advice is given on the ways to prevent seasonal diseases like Typhoid, Malaria, Dengue, Acute gastroenteritis, Dysentery etc. People are advised to boil and filter water before drinking. They were advised to take personal protective measures like using mosquito nets to prevent from the disease spreading mosquitoes biting them.

IMMUNISATION: NMHC is actively involved in the immunization program conducted by government ANMs in the villages. NMHC team will be present in the village at the time of immunization. The missed out children in a particular month are noted. NMHC team visits their houses and discusses with their parents about the failure to get their children immunized. Parents are assured that they will take care if any adverse effects like fever or swelling develop after immunization. As NMHC is visiting and taking care of their health since two years they have got good opinion on us. They have confidence and believe in what they say regarding health related matters. The good will and the confidence that people have on us is used to motivate them for immunization, thus they are facilitating the government run program.

SCHOOL HEALTH: School children are examined and treated for minor ailments. They were given Albendazole tablets to treat worm infestation. Children are made aware about the personal hygiene and causation of diseases. They are educated about having bath daily, cutting nails, washing hands with soap before eating and after going for toilet etc,. They were told not to insert slate pencils, pencils, match sticks… etc into their ears. A total number of 2685 children were examined and treated in these 6 months.

Specialized camps: - Eye camp in convergence with Sankar Eye hospital, Guntur

Community Eye camp:- Apart from the School health camp and NMHC, specialized health camps being conducted on need base, one such specialized eye camp have been conducted in convergence with Sankar eye hospital, Guntur at Thangalli thanda village, in which community from 59 nearby habitations got benefited. Around 695 persons from different thandas got eye screened/ checkups, got free medicines, spectacles and cataract surgery, 152 persons got spectacles and 61 persons got cataract surgery.

Nutrition centers

Nutrition centers at Yerra cheruvu thanda, Nayakuni thanda, Thimmaiah palyam, Chinthalapalyam and Peddamunigala

Objective:- Prevention of disability and malnutrition, healthy motherhood with healthy baby and institutional delivery.

The Nutrition center catered 292 mothers; out of which 88 lactating and 92 are pregnant mothers in 7 villages i.e, Yerracheruvu thanda, Mekaguda, Nayakuni thanda, Thimmaiah palyam, Chinthalapalyam and Peddamunigala and out of 292 benefiaciareis 112 were completed one year (the trust supports a benefiaciary for a period of one year that is from conception (3rd month) to 6 month after delivery. 100 mothers gave safe deliveries, out of which 40 are institutional deliveries and 60 are home deliveries supervised by trained local dhai (nurse)

According to NIN (National Institute for Nutrition, Hyderabad) that the Indian women have the deficiency of 430 calories, to fill this gap the center provides nutritional supplementary food (430 calories) consisting of egg, milk, dates, chikki, biscuits, (annexed the weekly menu) for a period of 1 year.

All the mothers have to undergo the diagnosis and accordingly provided the health services. Apart from the nutrition food the health education on breast-feeding, personal hygiene, institutional deliveries, family planning etc., also been provided as part of the NMHC services

School medical health camp at Hyderabad

The school medical health camp has been conducted at Natco Government high school, Borabanda, Hyderabad, A team of 10 doctors (2 female and 8 male doctors) from Gandhi hospital conducted the school health camp at Natco Government high school, where in 1177 students belonging to 3 government primary and one high school got benefitted, 78 referral cases identified (opthomology, ENT, Neurology, Dental, General surgery, CT surgery. Skin, General medicine, Ortho and cardio, out of 78 referral cases, 19 students had been refereed to Gandhi hospital, the Natco Counselors facilitated further investigations and treatment for the students.

Institutional support:-

The Mehdi Nawaz Jung Bahadur Institute of Oncology and Regional Cancer Center (MNJIO and RCC), at Hyderabad has approached the NATCO TRUST to support a pediatric oncology ward to meet the need of ever increasing pediatric inpatients to provide better services, as there was no separate ward for the pediatric palliative care. The Natco Trust on request from the MNJIO and RCC cancer hospital has constructed and donated the "NATCO TRUST Pediatric oncology ward" to MNJIO and RCC, in Hyderabad. It is a 44 bed ward and first of its kind in the state of Andhra Pradesh for children. It has all the basic facilities to serve the deserving community. Apart from constructing of the ward, the Trust provided 2 patient counselors and supplies medicines on need basis.

INDIAN NATIONAL BRAIN BEE 2010-11

Objective: - To inculcate and encourage the scientific temperament among the students

Natco organized the Indian National Brain Bee quiz on neurosciences in association with NIMS Hyderabad. Around 40 students ( 1st inter science students) took part in the regional quiz competition held at Natco corporate office, Hyderabad and the final was held at Chandigarh in association with PGIMER

Patient Counselor support to government hospitals at Hyderabad

-2 Counselors in Gandhi Hospital, 4 in MNJ Cancer Hospital and 2 at Niloufer hospital

-Objective: To help poor, illiterate patients get proper access to the available healthcare services.

The Natco trust has positioned 8 counselors in different government hospitals at Hyderabad to support and facilitate the patients coming from different parts of the state and neighboring state. They act as link between the service provider and service seeker. The following table provides information on the services extended by the patient counselors in the hospitals

EDUCATION ACTIVITIES:

They are committed to create enabling environment for children through education initiatives, emphasis laid on access, equity and quality of education by extending the need based support on appropriate infrastructure, skilled teachers, innovative teaching methodology and curriculum, access to basic teaching learning materials for improving the learning competence of the children, in addition to this adapted innovative methods to make learning more interactive and participatory.

Objective: - To strengthen the government schools in terms of infrastructure, libraries, science labs etc. in order to retain all the eligible school going children in the school and impart qualitative education.

Natco High School, Rangapur, Kothur Mandal, Mahaboobnagar district

Natco High School was established in the year 1995 under the Natco Trust, to facilitate education in the surrounding villages and also to the employee children of Natco Pharma Limited Though the school started with strength of 77 students, 10 rooms and 10 staff members in 1995 by 2010 it has increased to 1233 students, 70 staff and a building of 50 rooms. The service motive of the management has helped many students to pass out with good results. From the initial years the strength of the school was a combination of students from Natco and Non Natco who belonged to the surrounding villages and thandas. The idea behind establishing school remained to impart education with free and subsidized fees.

Initially the system which was adopted in education was suitable to the people around; gradually many changes have taken place. Children were given chance to get exposed to the society. Presently the system which is adopted in school is to create awareness and also to explore the world as it comes. As the years passed by Natco school remained as a mile stone giving importance to different kinds of learning like Sports, Art and Craft, Carpentry, Clay modeling etc. The aim is to build confidence in the students to take up any kind of challenge.

Many activities, workshops, guest lectures and orientation classes are conducted not only to children and teachers but also to parents, to make them realize the importance of education. The staff of Natco School is fully equipped with required training to impart the above said ideas.

In the recent past, the management has also established Computer lab, Science Lab, Activity rooms, library and Audio visual rooms, Butterfly fields which initiates science and math practical activities for the high school and curriculum support for the primary school which is based on activity and child centered education with idiscoveri to facilitate students through different learning experiences. In terms of infrastructure the school is equipped with good furniture for students and teachers, supporting materials and also hygiene drinking water facility with an RO plant fixed in the school premises. Teachers are also supported with residential quarters.

The academic year 2009 -10 came to an end of the annual examination in the month of April. The pass percentage of Grade X student was 100% where as the pass percentage of students from LKG to Gr IX was 98%. The month of May was given as summer vacation and the new academic year 2010 - 11 started in the month of June. The strength of the students increased from 1167 to 1236 teaching staff 57, non - teaching staff -04 and sub staff 10.

The new academic year was taken up with zeal and excitement to reach the motive of providing quality education in school, for which the help of certain aids have been taken up - like.

X- Seed

Adapting X - seed syllabus for grade 6 was a new assignment for academic year of 2010-11, through X-seed program they were able to achieve good communication skills, interpretation skills, drawing, self-confidence and ability to think out of the box among the students. Environment of teaching has been made more existing to the child.

Butterfly fields:

The Butterfly field's activities help children to develop greater skills in subjects like science and mathematics. Experiments in backyard science using simple material and demonstrations of relevant concepts help them to enhance their thinking and interpretation skills. These sessions are held for students from class VII to X. No of session conducted in the first term: 22

Library:

Library being one of the major learning areas of the school, it has been updated by another 275 books in the new academic year. New activities and competition based on library have also been planned and executed like, active listeners contest and spell bee.

Co - curricular activities:

As these activities also furnish to the needs of the student in developing their skills, they have been made a part of regular course in school. Activities like Quiz, debates essay writing Recitation, singing, Rhymes, Thematic singing show and tell and make and talk have been conducted in the first term. Field trips have also been organized for all the classes, according to their syllabus. For ex: Science Museum, Planetarium, Pillalamarri, Salarjung museum, old age home ect.

Sports.

In sports students have achieved good Laurel in Tchock ball and volley Ball. Three students, Master Harish, Master Naresh and Master Ashok were selected for National championship and played for Andhra Pradesh team. Master Imran, and Master Venkatesh for Tchock ball were selected for Andhra Pradesh team in Volley Ball.

"Natco's Panorama of knowledge - 2010"

Natco's Panorama is a unique blend of learning, research, innovation and experience. The students and teachers of Natco high school have conducted an Educational fair involving 956 students out of 1233. The idea behind the event was to take the children through the process of learning and to exhibit the same to the students of neighboring government schools and teachers, parents and visitors.

The event was scheduled for 2 days with visitors from surrounding villages. The Chief Guest for the opening ceremony was Mr. Purushotham Reddy IAS, Collector Mahaboobnagar District.

The chief guest Mr. Purushotham Reddy visited every room and spent time talking and listening to the students. He also visited the games zone and encouraged students by playing few games. Food court and scary house was also organized by the students and teachers to raise fund for school library. Parents have encouraged the students by not only visiting but actively participating in all the activities conducted in rooms. The response from the surrounding 15 government schools was splendid and on the request of HMs of 8 more government school the students have been allowed to visit the fair.

Natco School of Learning, Gollamudipadu village, Ponnur Mandal, Guntur District

Natco Trust has initiated the setting up of NATCOSCHOOL OF learning (an English Medium School), at Gollamudipadu village, Ponnur Mandal of Guntur District, A.P. with an objective of providing good education to the local community and to many of the surrounding village children.

This School has been set up with well-established infrastructural facilities, well-trained teaching staff, x-seed idiscoveri methodology and activity based learning with an affiliation of CBSE board. It is also facilitated with good transport system and well-equipped Library, Computer Lab and Science Lab etc.

Nagarjuna Sagar, Nalagonda district

Adult Literacy Centers:

In the ALC at Chenchuvani Tanda, by the end of June nearly 23 women were pursuing the program learning Telugu and Math in MGML method. They had learnt till nearly 9th milestone by then, along with solving of additions and subtractions and story problems related to their daily life, which enable them to apply their math skills to their daily life.

After School Tutions for primary and high school students

The objective: to inculcate the activity based learning process amongst the students

Introduction: It has been observed that dropping out of government schools, is rampant among children in the communities with which the Trust works. In most of the cases, children studies till the 2nd standard and drop out due to various reasons. This is because, in the absence of proper tutoring and coaching, children, who are mostly first-generation learners, find it difficult to cope with their syllabus and school environment.

The Natco trust initiated the after school tuitions to the government schools students in the targeted villages where in the emphasis has been put on inculcating activity based learning process in addition to the class room learning. The child has the freedom to explore and learn in joyful way. Accordingly the learning process has been designed that is Multi grade and multi level methodology has been adopted. Where in the 89 students in 4 villages are getting benefited

A few dropout children are also availing the benefit of this system along with the school children. While these dropouts are taught using MGML method, the school students are taught using MGML or the concept chain method depending upon the suitability.

Pre -primary school - Thangalli thanda:-

The early childhood years are essential for the proper mental, physical, emotional and social development of the child. This lays the foundation for the child's future. Thus, it is very essential to provide children with quality pre-school education. It is with this objective that the Natco Trust has initiated pre primary school

Thangalli thanda is a rehabilitated village, consisting of 87 households belonging to Schedule tribal community. It has been earlier (palthi thanda) situated on the banks of Krishna River and very often inundated by the backwaters of river Krishna. The Trust has started a pre-primary school for the benefit of the children. The center has 25 students in the age group of 3 to 5 years and they have been imparting activity based play way method learning. The Trust provided all teaching learning materials, play equipments, slates, and books; the center was taken care by a teacher and an ayah.

A nutritious snack is provided daily to the children. In addition, efforts are made to develop the innate abilities of the children through activities like songs, games etc. The concerted efforts with this age group has helped in school-preparedness while also engaging parents in their ward's learning process

This period has witnessed the completion of one academic year and commencement of another.

Children's Clubs: This has been motivated in Government schools, defining the purposes, forming groups and initiating activities in language clubs, cultural clubs, art clubs etc.

These activities are being focused only from the second half of the period as first half consists of Exams and vacation time. These are being presently held in YCT Government primary school, through which, they are exposed to various academic and co curricular games and activities enhancing their interest in coming to school.

Summer Camp:

This was held at Nayakuni Tanda for the first time during the summer. It was a 5-day program including various activities like drawing, singing, glass work, and collage works, dramatization etc. It also consisted of Group discussions on various topics related to community and personality development. The elderly people of the village were also involved in teaching the local songs and sharing the stories of their community and a valedictory function was also organized.

Education activities at Hyderabad district

Infrastructure support: - to meet the ever increasing student's strength in the Natco government high school at Borabanda, the Natco trust has extended support for another 10 additional class rooms in convergence with the Rajiv Vidya Mission (SSA) Hyderabad district, the school currently has both Telugu and English mediums of instruction for classes starting from 1st standard to 10th standard with a total strength of 1358 students (600 in primary school and 758 in the high school) and supported snacks to 1 high school, 3 primary schools and 11 anganawadi centers for the independence day celebrations apart from providing the housekeeping services and a watch man for security

As per the requisition of the GHMC Commissioner and District Collector and Rajiv Vidya Mission of Hyderabad, the Natco Trust has took up renovating the existing sanitation and providing new sanitation facilities to 5 government schools at Hyderabad jurisdiction namely

1. Government Primary and High School, Daram Karam Road, Ameerpet,

2. Government Primary and High School, B.S Makta, Begumpet ,

3. Government Girls High School, Sultan Bazar, Koti

4. Natco Government Primary and High School, site III Borabanda (GBHS Nampally) and

5. Government Primary and High School, Jamia Osmania, O.U campus

The renovation of sanitation completed in 3 government schools i.e., Government Primary and High School, Daram Karam Road, Ameerpet, Government Girls High School, Sultan Bazar, Koti and Government Primary and High School, Jamia Osmania, O.U campus and new sanitation (porta cabin sanitation) facility provided at Government Primary and High School, B.S Makta, Begumpet and new sanitation facility extended at Natco Government Primary and High School, site III Borabanda,

Educational support at Guntur district:- Infrastructure support to Zilla Parishad High School at Pachala thatiparu village of Ponnur mandal at Guntur district: - the Natco Trust on the requisition of the Chairperson - Zilla Parishad of Guntur district and the school authorities renovated the existing dilapidated Zilla Parishad high school building at Pachalathati paru village. And the Natco Trust has proposed to start up an educational institution at Gollamudipadu village in Ponnur mandal of Guntur district and the work is under progress.

Education initiation at Uttarkhand state:- The trust initiated educational support to government anganawadi centers at Sela Qui village, Dehradun district in the state of Uttarkhand. The trust has distributed sweaters to 180 students of 6 anganawdi centers at Sela Qui village.

Infrastructure support to Chenchus of Nallamall forest:-

The Trust has took up the initiative to support the chenchus (Primitive tribal adivasi) solar lamps, educational materials to government tribal welfare ashram primary school at appapur village in Linagala and Amarabad mandal of Mahaboobnagar district

Distributed solar lamps to 170 families of Chenchu tribes belonging to 9 pentas (thandas) and uniforms and other educational materials to Govt. Tribal welfare Ashram primary school, Appapur

Livelihoods:- Skill up gradation for Wage employment, self-employment/value addition income generation for the youth and women.

Vocational training centers: -

The Trust has started 4 channels of vocational training centers at Hyderabad and Nagarjuna Sagar that is on Fashion designing), Beauty parlor and computer course (one at Hyderabad and the other one at Nagarjuna Sagar). 370 women got trained in different courses (Fashion designing 141 (18 from Nagarjuna Sagar), Beauty parlor 120, Computer course 89 (19 students from Nagarjuna Sagar) and Driving course 20 candidates (male). Most of them are self employed and facilitated for 134 candidates to get wage employment in different organizations the average salary is Rs.0.005 million per month. 7 beautician trainees are started their own beauty parlors in different locations and earning Rs. 0.005 to 0.007 million per month.

Outsourcing

The Trust has sponsored to 20 candidates to undergo driving course, all of them them succeeded in getting the 4 wheeler driving licenses and working as taxi drivers in their locality.

Objective: - Providing safe drinking water within the reach of the community with permissible limits of minerals with special reference to floride

Most of the villages in Nalagonda districts are florosis affected both dental and skeletal, it has a considerable impact on quality of life and hampering the everyday activities. The Natco Trust has provided RO purified drinking water plants in 4 grama panchayats namely Haliya (4000 LPH), Peddavura (2000 LPH), Peddamunigal (3000 LPH) and at Kambalapally 1000 LPH) in each village, that caters 1268 households with a population of 8643; each family has to pays `60 per month and get 600 liters of water per month, that is 20 liters of water for `2 per day.

The plant has been managed by the community and supervised by a committee consisting of village youth, panchayat raj institution and key person and the Trust extends the technical support for the maintenance. The left over revenue after paying honorarium, electricity bill, maintenance charges etc. would be used for the development of village level government institutions like schools, hospitals etc., Government schools, anganawadi

centers get free drinking water services.

The RO purified water plant provided employment for 10 youth directly and another 20 youth indirectly and at Haliya the Grama Panchayat handed over the RO plant to a third party for maintenance.

Sanitation:-

The pride of women has been enhanced and women started enjoying the privacy, the trust has taken up sanitation issue as a priority core area and motivated the community to construct the individual sanitation latrines (ISL), with the active participation of the community, 64 families constructed and using the ISL, the trust as a back end support extended `5000/- to each family and the rest has been contributed by the respective families.

Environment - Community Kitchen Gardens (non pesticide management)

The Trust has facilitated and supported 48 community kitchen gardens in 4 villages (Chenchuvani thanda, Nayakuni thanda, Thimmaiah palyam and Yarra Cheruvu thanda) to supplement the nutritious food to the beneficiaries of the nutrition center; it has been maintained by the beneficiaries. The community kitchen garden started yielding the crops, they have cultivated Brinjals and Snake guard, lady fingers, greens etc., by using vermi - compost and they have earned on an average an amount of Rs.0.001 million apart from family consumption

Plantation of saplings and supporting the vermi compost fits:

The Trust facilitated in planting the more than 1300 saplings of different varieties like drum sticks, kanuga etc in 3 thandas i.e., Thangalli thanda, Yerra cheruve thanda and Pilliguntla thanda and supported vermicompost fits for 3 families at Chenchuvani thanda.

UNAUDITED FINANCIAL RESULTS FOR THE THREE AND SIX MONTHS PERIOD ENDED 30.09.2011

Rs.in millions

Particulars	Three Months Ended 30.09.2011 [Reviewed]
Income
a) Net Sales / Income from Operations	1047.900
b) Other Operating Income	81.400
Total Operating Income	1129.300
Expenditure
(a) (Increase)/decrease in Stock in Trade	[6.700]
(b) Consumption of Raw Materials	266.200
(c) Purchase of traded goods	58.800
(d) Employees Cost	151.000
(e) Depreciation	37.800
(f) Other Expenditure	359.700
Total Expenditure	866.800
Profit / (Loss) From Operations before other Income Interest and Exceptional Items	262.500
Other Income	15.600
Interest	59.500
Profit / (Loss) From Ordinary activities before Tax	218.600
Tax Expenses, including deferred tax	58.300
Net Profit/(Loss) for the period	160.300
Paid Up Equity Share Capital ( Face Value of the share Rs.10/- each )	281.500
Reserves (Excluding Revaluation Reserves)	-
Public Share Holding
Before Extraordinary Items
-Basic	5.69
-Diluted	5.69
After Extraordinary Items
-Basic	5.69
-Diluted	5.69
Average of Public Share Holding
- Number of Shares	10383626
- Percentage of shareholding	36.89
Promoters and Promoter group share holding
a) Pledged / Encumbered
- Number of Shares	1050000
- Percentage of share (as a % of the total shareholding of promoter and promoter group)	5.91
- Percentage of shares(as a % of the total share capital of the company)	3.73
b) Non-encumbered
- Number of Shares	16714326
- Percentage of Share (as a % of the total shareholding of promoter and promoter group)	94.09
- Percentage of Share (as a % of the total share capital of the company)	59.38

The above un-audited financial results were reviewed by the Audit Committee and approved by the Board of Directors at a meeting held at Hyderabad, on Wednesday, the 9^th November, 2011. The net sales /income from operations include sales tax of (Rs. millions) 30.500, 50.800, 22.000, 42.800 and 85.400 and excise duty of (Rs. millions) 6.100, 11.800, 5.600, 10.700 and 26.400 respectively for the quarter and half year ended on 30^th September, 2011, 30^th September, 2010 and for the year ended on 31^st March, 2011. There are no exceptional and extraordinary items to be reported for the period . In respect of matters referred to in the limited review report by the Auditors relating to non-accounting of minimum alternative tax credit amounting to (Rs. millions) 51.400, 71.000, 29.500, 63.700 and 292.100 for the three and six months ended 30^th September, 2011 and 2010 and for the year ended 31^st March, 2011 respectively, the company will review the position at the end of the financial year ending 31 March 2012. Figures for the previous period(s) have been re-arranged / re-grouped wherever necessary.

Status of Investor Complaints as at 30.09.2011

Pending as on 01.07.2011 – nil

Received during the quarter – 35

Resolved during the quarter – 35

Pending as on 30.09.2011 - nil

Statement of Assets and Liabilities

Rs. in millions

Particulars	As at 30-09-2011
	(un-audited)
Shareholders' Funds
(a) Capital	281.500
(b) Reserves and Surplus	3495.600
Loan Funds	2708.100
Deferred Tax Liability	265.000
TOTAL	6750.200
Fixed Assets	4355.500
Investments	734.500
Current Assets, Loans and Advances
(a) Inventories	935.800
(b) Sundry Debtors	825.300
(c) Cash and Bank Balances	305.800
(d) Loans and Advances	1095.900
Less : Current Liabilities and Provisions	1502.600
TOTAL	6750.200

Report of segment wise Revenue, Results and Capital Employed.(un-audited) under Clause 41 of the Listing Agreement, for the quarter ended on 30th September, 2011

Rs.in millions

Particulars	Three months ended on 30^th September, 2011
1. Segment Revenue (net sales / income, including Sales Tax)
a) Bulk Chemicals	411.400
b) Formulations	682.800
c) Job Work	23.300
d) Unallocated (Others)	67.800
Total	1185.300
Less : Inter-segment Revenue	40.300
Net Sales / Income from Operations	1145.000
2. Segment Results : Profit (+) / Loss (-) before tax and interest
a) Bulk Chemicals	93.700
b) Formulations	279.900
c) Job Work	17.900
d) Unallocated (Others)	[113.300]
Total	278.200
Less : a) Interest	59.600
Total Profit before Tax	218.600
3. Capital Employed (Segment Assets - Segment Liabilities)
a) Bulk Chemicals	2323.300
b) Formulations	2391.400
c) Job Work	15.000
d)Unallocated (Others)	[952.700]
Total	3777.000

The above report of segment-wise revenue, results and capital employed for the three months ended on 30^th September, 2011 was considered and taken on record by the Board of Directors at a meeting held at Hyderabad, on Wednesday, the 9^th November, 2011.

FIXED ASSETS :

TANGIBLE ASSET:

• Land
• Buildings
• Plant and Machinery
• Office Equipment
• Furniture and Fixtures
• Vehicles
• Computers
• Software

INTANGIBLE ASSET:

• Software

CONTINGENT LIABILITIES

Rs.in millions

PARTICULARS	31.03.2011	31.03.2010
Disputed statutory liabilities	147.407	51.883
Claims against the Company not acknowledged as debts	156.291	157.052

As per Website Details :

Business Description

Subject is an India-based company. The Company is primarily engaged in manufacturing of active pharmaceuticals ingredients and finished dosage formulations. NATCO operates in three segments: bulk chemicals, finished dosage formulations and others. Its products include citalopram, sumatriptan succinate and sertraline. During the fiscal year ended March 31, 2010 (fiscal 2010), the Company launched new brands, which include Bendit injection, Pegfil 6 milligram (mg) (PFS), Erlonat 150 milligram (mg) tablets, Natzold Infusion 100 milliliter (ml) and Natflu 75 milligram (mg) 10s capsules. These brands are used for lung cancer- 2nd line treatment, osteoporosis and swine flu. NATCO has pharmacy retail stores in the United States. The Company continues to sell Ondansetron 4 milligram and 8 milligram tablets in United States and Canada. During fiscal 2010, NATCO launched Granisetron and Anastrazole tablets in the United States markets. For the nine months ended 31 December 2010, Subject’s revenue increased 6% to RS3.69B. Net income increased 16% to RS391.3M. Revenues reflect an increase in income from operations. Net income also reflects an increase in income from stock in trade, lower consumption of raw materials, a decrease in purchase of traded goods, decreased interest expenses and a rise in gross and operating profit margin.

Manufacture and distribution of bulk drugs, pharmaceutical formulations and drug intermediates Source: Graham and Whiteside

Subject manufactures a wide range of branded and generic dosage forms, bulk actives and intermediates for both Indian as well as international markets. Natco's branded products and generic versions include antibiotics, anti-malarial, amoebicides, analgesics, anti-pyretic, peripheral vasodilators, anti-anginal, anti-hypertensives, anti-asthmatic, tranquilizers, anti-depressants, oncologicals, anti-emetics, anti-anemic, nutritional supplements, bio-technology based drug forms and health products of natural origin.

Mile Stones

1981 Incorporated NATCO Pharma Division at Kothur, Mahaboobnagar Dist, Andhra Pradesh, India

1984 First full year in Operations - sales Rs. 0.5 million

1986 Inaugurated Parenterals Manufacturing facility at Nagarjunasagar, India

1993 Inaugurated NATCO Chemical Division at Mekaguda, Mahaboobnagar District, Andhra Pradesh, India

1995 Merged three of the group companies with the parent Company. Natco Pharma Limited was granted US Patent for its manufacturing process of Omeprazole

1997 Inaugurated NATCO Research Center(NRC) at Sanathnagar, Hyderabad, India

2003 Launched Oncology division with introduction of flagship brand VEENAT (generic Imatinib Mesylate) for the treatment of chronic myelogenous leukemia

2006 Inaugurated NATCO Pharma Division at Dehradun, India

2008 NATCO filed its first Paragraph IV filing in the US market

2009 Inaugurated NATCO Organics at Chennai, India, with facilities dedicated for Cyto-toxic APIS’s and Biotechnology products NATCO’s turnover reached $100 million

2011 NATCO and Levomed LLC, USA formed a Joint Venture company, NATCOFARMA DO BRASIL for sales and distribution in Brazil

Board of Directors

Shri. V.C. Nannapaneni

Shri. V.C. Nannapaneni has been Executive Chairman of the Board and Managing Director of Subject since its inception.Prior to this, Mr. Nannapaneni, a former NRI and technocrat entrepreneur, spent about 13 years in the United States working for three drug companies in their research and development operations. During this time, he was associated with the team that developed the time release microdialysis process.Mr. Nannapaneni holds Bachelors and Masters degree in Pharmacy from Andhra University of Vishakapatnam, India in addition to a Masters degree in Pharmaceutical Administration at the Brooklyn College of Pharmacy,U.S.A.

Dr. B.S. Bajaj

Dr. B.S. Bajaj serves as Non-Executive Independent Director of Subject. He holds M.Sc. and Doctorate (Ph. D.) in Microbiology. He engaged in R and D from 1952 to 1974 in the field of Antibiotics, Physiology of Fungi and Microbial Genetics and has published more than 75 scientific papers. He has a total experience of more than 55 years in the field of Bio technology, Drugs and Pharmaceuticals. He was Chief Executive Anti Biotech production plant of IDPL and worked for Torrent Gujarat Biotech Ltd. He was on the Board of several companies and member of Scientific Advisory Committee of CSIR Laboratories. He is the Chairman of All India Biotech Association, Southern Chapter and Vice Chairman of Export Promotion Forum for Biotechnology, Govt. of India. He is also member of Biotech Advisory Committee of AP Govt. and Member of the Project Management Committee (PMC) of the Biotechnology Incubation Centre Project. He is the Secretary General of Federation of Asian Biotech Association. He was awarded by the Maryland India Business Round Table Inc., USA for the global leadership. He is the Convener of Bio Asia since 2004.

Shri. G.S. Murthy

Shri. G.S. Murthy serves as Non-Executive Independent Director of Subject He holds B.A., Master of Law (LL.M.) Fellow Member of ICSI (FCS), Certified Associate of Indian Institute of Bankers (CAIIB). He practiced as Advocate in Andhra Pradesh and then worked in Reserve Bank of India (RBI) and IDBI for nearly three decades at Mumbai including in the capacity of Executive Director (Legal) of IDBI. He was the first Managing Director of Investor Services of India Ltd., Mumbai, promoted by IDBI, LIC, UTI, SBI CAPS etc. He was on the Board of several Companies as IDBI Nominee. After retirement, he provided services as Legal Consultant for ESSAR Group of Companies, Mumbai for about 3 years and as Senior Advisor for Govt. of AP for about 9 years for implementation of public enterprise reforms. He has experience specially in Legal, Corporate and General Management Disciplines.

Shri. Rajeev Nannapaneni

Shri. Rajeev Nannapaneni serves as Chief Operating Officer, Whole Time Director of Subject. He is a B.A. in Quantitative Economics and B.A. in History from Tufts University, USA. Mr. Nannapaneni Worked in Merill Lynch and Natco Systems LL.C in USA. Joined the Company in 2000. Got experience and exposure in General Mgmt., New Business / New Product Development in international markets. He is director of Natsoft Information Systems Private Limited, Natco Organics Limited., Natco Aqua Limited.

Dr. P. Bhaskar Narayana

Dr. P. Bhaskar Narayana serves as Chief Financial Officer, Whole Time Director of subject. He is a Fellow Member of ICWAI and ICSI, Gold Medalist in Law, Masters in Commerce and Business Administration. CMA - Member of Institute of Certified Management Accountants of the Institute of Management Accountants, USA. He is varied experience in Finance, Secretarial and legal disciplines spanning over more than two decades.

Dr. A. K .S. Bhujanga Rao

Dr. A. K .S. Bhujanga Rao is President - R and D and Technical, Whole Time Director of subject He has done M. Sc. in Chemistry with specialization in Organic Chemistry, from Andhra University and also holds a Ph.D. degree from Indian Institute of Science, Bangalore. He has got knowledge in Bulk pharmaceuticals especially on Anti Asthmatic /Drugs, Beta Blockers and Cox-inhibitors and he has well acquaintance with Technology Transfer to commercial scale, quality control and regulatory affairs and also looking after the Patent related issues of the company. He has 30 publications to his credit and applied for 40 international patents.

Dr. Jasti Samba Siva Rao

Dr. Jasti Samba Siva Rao serves as Non-Executive Independent Director of subject. He has got varied experience in Pharmaceutical Research and teaching and held various positions in USA in a career span of over 25 years. Presently he is the Senior Association Dean for Research and Head Cancer Biology and Pharmacology, University of Illinois College of Medicine at Peoria (UICOM-P) Peoria, IL, USA. He has to his credit 199 publications, 13 book chapters and 248 abstracts.

Press Releases

Australia Patent: Natco Pharma File Application for 'Novel phenylaminopyrimidine derivatives as inhibitors of BCR-ABL kinase'

20 October 2011

Australia, October 20 -- Natco Pharma Limited., Hyderabad, India, has filed an application (2005281299) on July 19, 2005, for 'Novel phenylaminopyrimidine derivatives as inhibitors of BCR-ABL kinase.'

Inventor(s): Adibhatla Kali Satya Bhujanga Rao, Amala Kompella, Venkaiah Chowdary Nannapaneni, Rachakonda Srinivas and Podili Khadgapathi

Natco, Chemo Lugano in bio-similars deal

19 October 2011

Mumbai, October 19 -- Hyderabad-based cancer drug maker Natco Pharma Limited on Tuesday said that it has signed a deal with Swiss company Chemo Lugano to purchase bio-similar, ingredients used in the manufacture of finished drugs.

The bio-similar division of Chemo Lugano, Mabxience, will supply Natco with four substances three in the cancer treatment segment, while the fourth helps in auto-immune disease treatment.

The company did not disclose the financial details of the deal.

"As of now, it is a deal where Natco buys drug substances from Chemo and converts them into finished dosage pharmaceutical formulations, after doing clinical trials and filing for required regulatory approvals, and thereafter, commercialization of the products," said P. Bhaskara Narayana, director and chief financial officer of Natco Pharma.

These products will signal the entrance of Natco into the bio-similars market, with competition from Dr. Reddy's Laboratories Limited and Biocon Limited, the other two companies in this segment. "This is a good opportunity for Natco to enter into a niche market," Narayana said.

Globally the bio-similar market is estimated at $35 billion while in India it's about $150 million, the company said. Natco rose 5.56% to close at '233.50 on BSE, on a day the benchmark Sensex closed at 16,748.29, down 1.63%.

Natco Pharma to enter into bio-generics (mAbs) segment

18 October 2011

India, October 18 -- Natco Pharma, the Hyderabad-based company, has entered into an exclusive agreement with Mabxience, the bio-similar division of Switzerland-based Chemo Sa Lugano, an integrated healthcare multinational involved into different fields of pharmaceutical business, including bio-similar and branded pharmaceuticals. Under the agreement, Natco will purchase four mAb drug substances from Chemo and use the same for manufacturing finished dosage pharmaceutical formulation. Three of these products viz. Trastuzumab, Bevacizumab, Rituximab belong to the oncology segment, while Etanerceptis for auto-immune disease.Oncology is the largest therapy area within the mAb market, with eight marketed product. The mAb market is highly innovative and a key trend has been the move from murine to humanized and fully human antibodies, with insignificant generic presence. Worldwide, the market for mAbs has grown rapidly and is currently at a revenue level of around $35 billion.Natco Pharma was promoted by V C Nannapaneni in the year 1981 as a private company to be in the business of research, developing, manufacturing and marketing of pharmaceutical substances and finished dosage forms for Indian and International markets.

Press Release

January 09^th 2011

NATCO Pharma Limited is pleased to announce that the Government of India has stayed the suspension of its Albupax manufacturing (product) license. Albupax is a nanotechnology based drug and is the first generic version of the international brand

- Abraxane® of Abraxis Bioscience Inc., USA.

Albupax consists of Paclitaxel in an Albumin-bound nanoparticle form and is used in the treatment of breast cancer. NATCO'S manufacturing license was suspended by the Drugs Controller General of India (DCGI), allegedly for not passing the test measuring endotoxin levels.

Subsequently, NATCO appealed to the Government of India under the provisions of the Drugs and Cosmetics Rules against the suspension order. Among other things, NATCO pleaded that:

The testing methods used to evaluate nanotechnology based protein-bound formulations are highly complex and variable. An appropriate test method needs to be employed to test such products.

The product has been aggressively priced at a fraction of the innovator’s price

The product was received well by the medical fraternity as well as patients from various parts of India.

NATCO is thankful to the Government for its decision in this regard. NATCO stands by its commitment to provide high quality and life saving drugs at affordable price to Indian patients.

NATCO would announce its future plans shortly.

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.50.08
UK Pound	1	Rs.80.36
Euro	1	Rs.68.83

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	7
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	8
--PROFITABILIRY	1~10	8
--LIQUIDITY	1~10	8
--LEVERAGE	1~10	7
--RESERVES	1~10	8
--CREDIT LINES	1~10	7
--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	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		66

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.