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Dr.Datsons Labs Ltd.

BSE: 533412 Sector: Health care
NSE: DRDATSONS ISIN Code: INE928K01013
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Dr.Datsons Labs Ltd. (DRDATSONS) - Chairman Speech

Company chairman speech

MESSAGE FROM MANAGING DIRECTOR

At Dr. Datsons Labs Ltd we believe that nothing toughens like the tough times. 2013-14was a tough year as input cost continued to rise and key segments faced competitivepressures.

The rupee devaluation on account of fiscal challenges in the country resulted infurther pushing up the costs. Delay in financial commitments led to deferred timelines andlow capacity build-up.

The company has been Facing Liquidity Issues for Its working Capital Requirement henceperformance of manufacturing operations are greatly affected to overcome the same wehave undertaken steps to raise equity through sale of stake bringing in strategicinvestors and even selling the assets so that the company gets in required funding for itsWorking Capital & Capex Program. We are looking for long term investors who can takeforward the legacy of the company We chose not to stop but to carry on; not be witheredbut to persist. Rough seas make better sailors.

At Dr. Datsons we continued to wade through multiple challenges diligently patientlyand persistently. Our investments made over the years into an integrated business modelalso stemmed the decline.

In wake of growing competition and increased inflation cost control emerged as thebiggest challenge during 2013-14. We focused on critically analysing each process andproduct to clearly identify avoidable elements in the cost structures. This enabled us toimprove efficiency process time and capacity utilisation without any compromise on theend product/process quality. We continued to add new clients across all our divisions. Weutilised the blend of our competitive cost structures with our global standards in R&Dand synthetic chemistry skills to partner large pharma companies for long-term productdevelopment. Presently we have forged four long-term partnerships for our products andderive 37 per cent of our total revenues from these partnerships.

Long-term growth still intact

The Emerging Markets are expected to grow at four times the growth rate of EstablishedMarket largely on account of lower base as well as highly underpenetrated healthcare andlarge population. India remains attractive on both counts - being a large market and alsothe largest pharma hub outside US. We at Dr. Datsons had realised this opportunity fewyears ago. Our strategy to improve capacities strengthen cost structures fortifyproduct/process quality expand customer base and ensure presence in diverse yetintegrated verticals of the pharma value chain makes us attractively poised to capitaliseupon the impending upturn. We believe that the input costs have also peaked and are onlyexpected to go southwards in the coming months. We look forward with optimism onfructification of new developments during the current year.

Our product pipeline comprising of more than 15 APIs under development will also propelour growth in the coming years. At the same time our recent foray in domestic market foranimal health formulations holds a huge latent potential in one of the fastest growingmarkets in the world. Tough times are not controllable. However one's reaction to thetough times is. At t Dr. Datsons we believe that strong and respected organisations arebuilt with a long-term vision and each adversity obstacle and hardship plays an importantrole in shaping them nurturing them and preparing them for bigger challenges to come.

Dr. Datsons Labs Ltd is getting ready for tomorrow. Every segment of the business isbeing refashioned with intent to dominate the generics market of the future. The Companywould like to retain its leadership even as it ventures into the competitive globalmarkets.

We at Dr. Datsons can take a wider view of the future largely because of thepreparatory work done so far. A blue print was made mapping the future plans. Thiscontained multi-tasking of activities most of them being simultaneously implemented. Someof the major initiatives would need mention.

Our objective is to contain raw material costs and all the other costs includingoverheads. Improving margins on an increasing topline would create excitement amongst ourstakeholders. These planned set of activities would effectively derisk the business. Alongthe way during the year low margin products have been shed and the business modelspruced up. All the changes are being put through simultaneously even as the existingstrengths in products and markets are being consolidated.

Of course there was a price attached to such massive change process. Dr. Datsonsdecided to charge off the costs to the revenue with the result the year end showed a flatbottom line. We will be controlling many levers of performance. We will have strategiesthat will improve the rate of growth. Product renewals volume expansion and strongself-sustaining bottom line should result in predictable value creation.

One thing is certain. While the past has been solid on strong foundations we cannotextrapolate the past into the future.

Dr. Datsons of tomorrow will be totally different and growing at a faster clip withstrategic infusion of equity

Dr. Datsons is busy creating excitement in the interest of its stakeholders. Theevolution now taking place is an essential part of this agenda.

With warm regards

Dr. Kannan Vishwanath

(Vice Chairman & Managing Director )