ANNUAL REPORT 2000-2001
ASTRAZENECAPHARMA INDIA LIMITED
Ladies and Gentlemen
It gives me much pleasure to extend to all of you here this afternoon a
cordial welcome to this, the 22nd Annual General Meeting of your Company.
The Directors' Report and the Audited Accounts for the year ended 31st
March, 2001 have been with you for some time. With your kind permission, I
will take them as read. The Annual Report, you will have noticed, contains
some useful information by way of graphics, which, it is hoped, will enable
shareholders to obtain a better perspective of your Company and make a
better assessment of its overall performance. Incidentally, this is the
first Annual Report of the company bearing its new name.
INCREASE IN SHAREHOLDING OF ASTRA PARMACEUTICALS AB, SWEDEN AND CHANGE OF
As you know, Astra Pharmaceuticals AB, Sweden ("Astra") acquired earlier
this year all of the 25.% equity shareholding in the Company of IDL
Industries Ltd., ("IDL"), its co-promoter. With this acquisition, your
Company has become a direct subsidiary of Astra and an indirect subsidiary
of AstraZeneca Plc.
Astra has also acquired a further 4.99%, shares in the Company. As a
result, Astra's shareholding in the Company is presently 56.49% .
At the Extra-Ordinary General Meeting of the Company held on 29th March,
2001, shareholders were pleased to approve the change of the name of the
company from "Astra-IDL Limited" to "AstraZeneca Pharma India Limited",
subject to the change being approved,by Central Government. Government's
approval having being obtained, a fresh Certificate of Incorporation with
the new name embodied therein was issued by the Deputy Registrar of
Companies, Karnataka, on 31st May, 2001, from which date the change of name
The growth rate of the Indian economy expressed in terms of gross DOMESTIC
product ("DP") during the year 000-2001 declined to 5.2% from 6.4% during
1999-2000 and 6.6% during 1998-1999. This was in large measure due to the
poor performance of the agricultural and manufacturing sectors. The
agricultural sector grew by a meagre 0.2% in 2000-2001 as against 0.7% in
1999-2000. The manufacturing sector growth declined to 5.6% during 2000-
2001 compared to the previous year's 6.8%. The services sector also
experienced slowdown during 2000-2001. The growth was 9.1% compared to
10.1% in 1999-2000. The capital markets, particularly the primary market,
showed a depressed trend during the year due to the economic slow down and
serious irregularities committed by certain market participants. The export
sector however manifested healthy growth during the year.
The Union Budget 2001-2002 introduced the second generation economic
reform, including bankruptcy and foreclosure laws, in addition to providing
Incentives for economic growth. The Export-lmport Policy has further
liberlised the economy, at the same time providing adequate protection to
Indian industry and encouraging exports.
The overall macro-economic indicators such as low interest rates, good
export performance, comfortable balance of payments position and increased
foreign exchange reserves coupled with low core inflation, are all
conducive to the revival of growth in the economy. A countrywide good
monsoon as per expectations and meaningful progress on economic reforms,
particularly in the infrastructure sector, will be key factors in the
resurgence of the Indian economy.
The pharmaceutical industry is one of the vital sectors in the Indian
economy. It is probably ranked next only to the Information Technology
industry in terms of potential and degree of technology sophistication.
According to International Medical Statistic, an internationally reputed
market research agency, the Indian Pharmaceutical industry has registered
an annual growth rate of about 7% .
India is gradually positioning itself a a global manufacturing centre for
the pharmaceutical industry, its main strengths being low costs allied to
excellent production quality, plus highly trained scientific and other
staff, language skills. a well-developed legal system and a rapidly
improving infrastructure. Coupled with the above, the Indian government,
earlier this year, decided that it would henceforth grant automatic
approval for foreign direct investment of up to 100% of equity capital new
pharmaceutical joint ventures (the previous ceiling was 74%).
The Union Budget 2001-2002 has been well received by the pharmaceutical
sector. There has been no change in the excise duty structure; there is an
extension of the 150 percent weighted deduction to biotechnology, clinical
trial, filing patents and regulatory approvals. This would encourage R&D in
the pharmaceutical sector. The reduction in corporate surcharge and
dividend tax would also benefit subsidiaries of multinational companies.
The much awaited draft pharmaceutical policy was announced in June 2001.
lt has recommended price control on bulk drugs with a turnover of over
Rs.200 million and 50% market share. In case of drugs with turnover of
between Rs.50 to Rs.200 million, a 90% share with a single formulator will
invite price controls. The pharmaceutical industry would favour higher
turnover limit in the range of Rs.300 to Rs.350 million. The draft policy
has proposed the removal of the present provision limiting profitability of
pharmaceutical companies. The draft policy also specifies that in case of
drugs which are not included in the price control list, but are part of the
essential drug list or are used in national health programmes, the National
Pharmaceutical Pricing Authority ("NPPA") will monitor the price movement
and consumption pattern. It has been. proposed that research and
development intensive companies who have achieved the 'gold standard',
should qualify for an additional cost of 5% of ex-factory cost in
determination of prices of scheduled formulations manufactured by it.
Exemption from price control would be provided for a 15 year period to
manufacturers producing new drugs developed through indigenous R & D. Drugs
and new delivery systems patented under the lndian Patents Act, 1970 would
also be eligible for exemption from price control till expiry of the
As you will have observed from the Notes to the Annual Accounts, there has
been a significant departure from the practice hitherto followed of
reporting the sales figures inclusive of excise duty and sales tax.
Henceforth, the sales figures reported shall be the net sales i.e.
excluding excise duty and sales tax. This, it is felt, reflects a truer
sales picture and is in line with AstraZeneca's worldwide practice.
The Company has provided for deferred taxation in the year under review and
also for earlier years. The deferred taxation provision has become
mandatory from 1st April 2001. Accordingly a sum of Rs.29.11 million has
been provided as deferred tax liability for earlier years. For the year
under review, the treatment for deferred tax liability has resulted in a
asset of Rs.8.86 million which has been used to offset current year's
provision. After so providing, the profit for the year was Rs. 113.62
The gross revenue comprising sales and other income increased from Rs
1,003.57 million to Rs.1,117.34 mil1ion, despite stiff competition and
slowing down of the industrial growth rate.
You will be pleased to note that material cost as a percentage of sales
registered a further reduction of 2.8% over last year, despite the erosion
in the rupee value and additional customs duties. This was achieved
through a sustained thrust on import substitution, innovative packaging
design and improvements in vendor development of critical raw materials.
Your Company continues to maintain its zero debt status. Its fixed deposit
programme was upgraded during the year to 'FAA+' by Credit Rating
Information Services of India Ltd. ("CRISIL"). The upgraded rating will
continue in force till 18th April, 2002.
Despite the Company's not too satisfactory performance during the year
under review, the Board has recommended a dividend of 40% i.e. at the same
level as last year. The Dividend will not suffer tax in the hands of the
On a brighter note,the year under review has been one where your Company
has been the proud recipient of several prestigious awards. The Company's
Formulation Plant won the prestigious Gold Award for Quality Excellence.
The Bulk Drugs Plant won the Silver Award. Your Company also won the golden
Peacock National Quality Award from The Institute of Directors. lt was
adjudged third in the category of 'Large Manufacturing Organizations'
across all industries in recognition of the high quality practices followed
in providing goods and services to its customers.
NEW PRODUCT INTRODUCTIONS
With the Company's integration into the AstraZeneca Group, a comprehensive
review of the entire portfolio of the Company's products is under way so as
to gain a better understanding of the Company's distr-ibution network, the
market and its trends. The lack of adequate patent protection continues to
be a significant inhibiting factor for mutinatonal companies to introduce
major original research products in India. However, steps are being taken
to register a few AstraZeneca products. The For-mulation Development
department is also currently involved in developing products for the
Maternal Health Care and Cardio-Vacular segments.
CURRENT YEAR'S PERFORMANCE
Your Company's performance during the past three months of the current
financial year has fallen short of expectations, showing a dip in sales
compared to the same period last year. This has been mainly due to
increased competition and a general sluggishness in secondary market
conditions. The Company is hopeful that the current scenario will show
improvement during the next six months; though the overall growth rate for
the year may not be of the same order a during the last two years.
MODERNISATION AND EXPANSION
In its continuing pursuit of enhancing the level of Good Manufacturing
Practices followed, a new monolithic flooring was laid in the Tablet,
Liquid and Aerosol departments of the Formulation Plant; The company also
undertook the upgradation of its Micr obiology laboratory to meet latest
international regulatory norms. Another state-of-the-art de-mineralised
water plant with a loop system as per present USP norms was commissioned in
the Bulk Drugs plant at a cost of Rs.4 million.
RESEARCH AND DEVELOPMENT
Your Company's R&D laboratory. recognised by the Department of Scientific
and Industrial Research, Government of India, continues to actively pursue
product innovation, process simplification, import substitution, cost
reduction and enhanced quality control. Strengthening of R&D facilities
will help contribute to further cost reduction and successful introduction
of new products.
In the coming years, the major thrust of R&D will be in the areas of custom
synthesis, synthesis of intermediate for phase-I and 11 clinical trials.
Recognising the importance of R&D activities to the health and growth of
the Company, the expenditure on R&D during the year under review was
increased. The increased expenditure represented 4.27% of total sales as
compared 3.31% in the previous year. Your Company will continue to make
substantial investments in R&D activities.
CHANGE OF ACCOUNTING YEAR
The Company"s Accounting Year, since its incorporation, has been April to
March of every year. Following the Company's integration into the
AstraZeneca Group which has resulted in it becoming an indirect subsidiary
of AstraZeneca Plc, your Directors have decided to change the Company's
Accounting Year from April to March to the calendar year, namely, January
to December, in line with the reporting requirements of AstraZeneca Plc.
Accordingly, the current financial year will be for a nine months period
only, i.e. April to December, 2001. The following Accounting Years will be
January to December of every year.
ENVIRONMENT PROTECTION AND SAFETY
A safe and healthy environment is integral to your Company's operations.
Your Company has a comprehensive Safety, Health and Environment management
policy embracing air, water and noise pollution and disposal of waste.
Every employee has a personal responsibility for ensuring that quality and
environment aspects are taken into account in the production units as well
as the laboratories. Efforts are continuously being made to improve the
environment by developing and employing cleaner technology in all of the
The devastating earthquake in Gujarat earlier this year left thousands
dead and many more disabled an homeless. It was, by any standards, a
horrific disaster. The Company, on its part, contributed life saving
medicines though the lndian Drug Manufacturers Association. The employees
of your Company also willingly contributed a day's wages to the Prime
Minister's Relief Fund.
Your Company has also contributed towards the beautification of Hebbal
Lake. It organised a free medical check up camp at Kattigenahalli and
installed a solar powered Bus Stop at Bagalur Cross.
AstraZeneca celebrate, its Foundation Day on 1st of June every year.
Consequently, Foundation Day was also observed on 1st June, 2001 to mark
the change of name from Astra-IDL Limited to AstraZeneca Pharma India
Limited. The Foundation Day function in Bangalore was inaugurated by the
Hon'ble Chief Minister of Karnataka, Mr.S.M Krishna. The function was well
attended by employee,, the medical fraternity and many distinguished
Your Company's Marketing activities, including Medical Service, have
recently obtained ISO 9002 certain from Bureau Veritas Quality
International. This is a significant achievement and I am sure all of you
will join my colleague on the Board and me in congratulating the
management and employees at all level for this.
Following the expiry of the Memorandum of Settlement between the Management
and the Union representing the Professional Service Representatives
("PSRs"), a fresh charter of demands is under negotiation.
Employee relations at all levels continue to be cordial.
The current year represents an important milestone in the history of your
Company. It is the first year of the new century and also the new
millenium. It also marks the end of the long association with your Company
of IDL Industries Ltd.("IDL'), one of the two founder promoters. the same
time, it heralds the entry of your Company into the AstaZeneca fold, an
internationally renowned pharmaceutical Group; the fourth largest in the
I wish to avail myself of this opportunity to thank IDL and its erstwhile
representatives on the Board of Directors of the company for their
contribution to the steady growth and development of your Company. I also
wish to extend a warm welcome to AstraZeneca and their representatives on
the Board of Directors of the Company. I am confident that with
AstraZeneca's experience, technological expertise, knowledge of the
pharmaceutical business and able management, your Company will over time be
one of the leading pharmaceutical companies in India.
Last, but not the least, I thank all, my colleagues on the Board for their
continued support and wise counsel. The employees at all levels merit
highest appreciation for their strong commitment and devotion. Their
contribution has been as always, significant. Before I conclude, my thanks
go to you dear shareholders for the unfailing support, trust and confidence
you have throughout reposed, which will, I am certain, be amply rewarded in
the years ahead.
Place : Bangalore
Date : 09.07.2001