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Aurobindo Pharma Ltd.

BSE: 524804 Sector: Health care
NSE: AUROPHARMA ISIN Code: INE406A01037
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OPEN 435.00
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VOLUME 146774
52-Week high 838.00
52-Week low 281.15
P/E 14.29
Mkt Cap.(Rs cr) 22,976
Buy Price 392.15
Buy Qty 2.00
Sell Price 392.15
Sell Qty 75.00
OPEN 435.00
CLOSE 413.05
VOLUME 146774
52-Week high 838.00
52-Week low 281.15
P/E 14.29
Mkt Cap.(Rs cr) 22,976
Buy Price 392.15
Buy Qty 2.00
Sell Price 392.15
Sell Qty 75.00

Aurobindo Pharma Ltd. (AUROPHARMA) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the 32nd Annual Report of theCompany together with the audited accounts for the financial year ended March 312019.

FINANCIAL HIGHLIGHTS

Standalone financials (' in Million)
2018-19 2017-18
Revenue from operations 122578.9 103031.5
Profit before depreciation interest tax and Exceptional items 24092.9 26700.0
Depreciation 4130.3 3548.3
Finance cost 1309.2 528.9
Profit before Tax 19646.2 23429.4
Provision for Tax 4348.9 5301.7
Net Profit after tax 15297.3 18127.7
Other Comprehensive Income/ (expense) -14.1 -21.8
Total Comprehensive income for the period 15283.2 18105.9

DIVIDEND

Your Company has paid first interim dividend of 125% i.e. '1.25 perequity share of '1/- and second interim dividend of 125% i.e '1.25/- per equity share of'1/-. The total dividend for the financial year 2018-19 comes to 250% i.e. '2.50 perequity share of '1/- against 250% i.e '2.50 per equity share of '1/- paid in the previousyear.

Pursuant to Regulation 43A of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 top five hundred listed entities based onmarket capitalization are required to formulate a Dividend Distribution Policy. The Boardhas approved and adopted the Dividend Distribution Policy and the same is available on theCompany's website http://www.aurobindo.com/ about-us/governance/governance-policies/

PERFORMANCE REVIEW

Your Company achieved significant size and scale during the year. It isnow globally the tenth largest generic Company by revenues and the second largest amongthe listed Indian pharmaceutical companies.

FY2018-19 was also the year during which your Company made significantacquisitions and investments to augment its global presence. In the US it entered into adefinitive agreement to acquire the portfolio of dermatology and oral solids businessesfrom Sandoz1 Inc. USA. The acquisition is expected to be completed in FY2019-20. YourCompany also made inroads into the branded oncology market by acquiring seven marketedoncology branded injectable products from Spectrum Pharmaceuticals Inc.

The acquisition of Apotex Inc's businesses opened doors to markets inthe Eastern Europe. Your Company also acquired R&D assets from Advent PharmaceuticalsPty Ltd. Australia boosting its R&D capabilities in the respiratory segment.

During the year through its wholly owned subsidiary Helix HealthcareBV Netherlands your Company invested in a joint venture with Shandong Luoxin in China.

On a standalone basis your Company revenues registered a growth of19.0% reaching '122578.9 million in FY2018-19 compared to '103031.5 million in the FY2017-18. EBITDA for FY 2018-19 stood at '24092.9 million vs. '26700.0 million inFY2017-18. EBITDA margin was at 19.7%. Profit before Tax for the year at standalone levelwas '19646.2 million decline of 16.1% compared to the preceding year. Your Company's NetProfit (before OCI) was at '15297.3 million as against '18127.7 million in FY2017-18.The Diluted Earnings Per Share stood at '26.11 compared to '30.94 in FY2017-18.

On a consolidated basis revenues for FY2018-19 grew by 18.6% from'164998.4 million in the previous year to '195635.5 million. The healthy growth inrevenues were driven by new product launches across markets and an improvement in marketshare of the existing products. The formulations business registered a revenue growth of19.4% and improved to '161570.3 million from '135331.8 million in the previous year. TheActive Pharmaceutical Ingredients (APIs) business sales stood at '34030.3 million from'29622.3 million in the corresponding previous period witnessing a growth of 14.9%year-on-year. EBITDA margin was at 20.2% vis-a-vis 23.0% in FY2017-18. EBITDA before forexand other income stood at '39519.4 million witnessing a 4.3% growth y-o-y. Your Companyreported a Net Profit of '23647.4 million. The Diluted Earnings Per Share stood at '40.36compared to '41.36 in FY2017-18.

As on 31st March 2019 the Company filed 541 Abbreviated New DrugApplications (ANDAs) on a cumulative basis. Of the total count 377 have received finalapprovals and 26 have got tentative approvals including 9 ANDAs which are tentativelyapproved under the US President's Emergency Plan for AIDS Relief (PEPFAR) and the balance138 ANDAs are currently under review.

Your Company witnessed growth across key geographies in theformulations segment. The US business reported 21.3% growth to reach '90307.3 million andcontributed 46.2% to the total revenues. The growth in revenues were driven by new productlaunches along with an increase in the market share of existing products across thesegments such as oral solids injectables dietary supplements and the over the counter(OTC) business.

Your Company registered a 13.9% growth in its Europe formulationsbusiness as revenue touched '49601.7 million in FY2018-19 compared to the previousyear's revenue of '43543.8 million. With the Acquisition of Apotex's businesses in fivecountries Aurobindo strengthened its foothold in Europe.

It now operates in 11 countries and is present across multiple channelsincluding pharmacy hospital and tender sales.

Your Company's formulations sales in Growth Markets including BrazilCanada Columbia and South Africa grew by 33.1% to '11936.5 million vis-a-vis '8971.3million reported in FY2017- 18. The growth was largely driven by Canada. The Company nowranks amongst the top ten generic players in Canada. The growth in Canada was propelled bythe approvals for a number of products and the Company's ability to leverage theseapprovals.

The ARV formulations business reported a growth of 15.8% with revenuesof '9724.8 million vis-a-vis '8395.8 million a year ago. During the year the Companywas awarded a supply contract from South African government for Dolutegravir triplecombination and related products dispatches for which will begin in FY2019-20.

OUTLOOK

Your Company will continue to expand its market penetration in the coremarkets (US and EU) by adding more products and scaling recently completed &announced acquisitions.

Also through its in-house research & development capabilities.Your Company has identified multiple areas for significant value creation and synergiesfrom recent acquisitions and plans to leverage the infrastructure of the acquiredbusinesses to drive penetration and optimize value creation by leveraging its verticallyintegrated platform.

Your Company is expanding its portfolio mix towards differentiatedproducts with pipeline encompassing oncology hormones inhalers and Biosimilars amongother and an addressable market over US$100 billion (as per IQVIA MAT Mar 2019). In USthe acquisition of Sandoz's dermatology and oral solids businesses comprising authorizedgenerics and in-licensed products offer significant synergy and value creation potentialfor your Company.

In the EU your Company will continue to expand its portfolio throughlaunches of targeted Day 1 products oncology range hormones niche low injectables andorals. Your Company has a pipeline of over two hundred fifty products under development.Further your Company sees an opportunity of more than US$5 billion of addressable salescoming off-patent in the near term (2019-20) and more than US$13 billion in the mediumterm (2021-22). In addition countries such as Italy Spain Portugal and France offergrowth potential as the penetration of generics improves. The acquisition of Apotex'sbusiness in five key European countries will allow your Company to further expand itsproduct offering and its position in Eastern Europe.

Your Company will also work on expanding its presence in Growth Marketsthrough the launch of new products especially from its oncology portfolio and willcontinue its strategy of focusing on tenders for ARV formulations.

The API segment that supplies products to third parties as well asstrengthens the business model of Aurobindo by providing vertical integration for themanufacturing of formulations will be scaled up as per market dynamics and business needs.

RESEARCH AND DEVELOPMENT

Aurobindo has a dedicated research team that consists of more than1600 scientists and analysts who work on developing a wide range of medications fromsimple plain-vanilla generics to complex speciality products. The research philosophy ofthe Company is to provide a broad basket of products in a category or a therapeutic areathat the Company forays into. Currently the Company has seven Research and Development(R&D) centres of which five are in India and two are in the USA. In FY2018-19 theCompany has invested 4.5% of its consolidated revenue i.e. '8682.6 million in research& development.

The aim of the research team is to develop affordable genericmedications and products that would be accessible to all strata of society. Given theever-rising cost of healthcare worldwide it is imperative that less expensive highquality generics alongside branded counterparts become available to patients worldwide.

Oncology and Hormones

Eugia has a diverse portfolio comprising more than seventy fiveproducts that are prescribed for oncology hormones and immuno-suppressant indications.The Company has shortlisted over sixty five generic oncology products for formulationsdevelopment. These products are prescribed in the treatment of over 25 differentindications involving mainly first-line and second- line therapies in cancer patientseither in single or in combination with other drugs. The Company has filed 13 ANDAs forOncology products including four injectable products.

The company has shortlisted ten generic Hormone products forformulations development. These products are prescribed for indications such as Pre-termbirth Birth Control Amenorrhea and Hypogonadism. The Company has filed nine ANDAs.

A total of 22 ANDAs have been filed as of March 312019.

The development and manufacturing of Oncology & Hormone productsrequire specialized preparations and containment measures. The manufacturing facility isdesigned to cater to >20% of the global volume demand for those products that are partof Eugia's portfolio. Eugia has the capability to develop and manufacture 6 differentdosage forms.

• Oral solid dosage forms (Tablets Hard Gelatin Capsules &Soft Gelatin Capsules)

• Injectables (Wet vials Dry (lyophilized) vials & Pre-filledsyringes)

In FY2018-19 the Company has received approval for four products (twooncology and two hormonal products) and completed exhibit batches for twenty threeproducts. The Company has also planned to develop and manufacture oncology and hormoneproducts to cater to the requirements in Europe Canada China and other key emergingmarkets through other subsidiaries.

In FY2019-20 it is estimated that the Company will file 15-18ANDA's with USFDA. Registrations are in progress in Europe and other key emergingmarkets. The Company has commenced its commercial manufacturing operations and is expectedto launch more than ten products in the US and EU markets in FY2019-20.

According to IQVIA spending on cancer therapies and supportive caredrugs accounted for US$99.5 billion in developed economies (the USA 5-EU etc.) andselected emerging markets (Brazil China India Mexico etc.) in 2018. The US is thebiggest contributor to this and accounted for 46% of global spending.

The market for oncology therapeutic medicines is estimated to reachUS$140-150 billion by 2023 in these selected markets growing at a CAGR of 6-7%. Oncologyproducts are expected to account for approximately 30% of the new launched medicines(~70-90 products) over the next five years. The generic oncology market is estimated atUS$20 billion currently and is forecasted to grow at CAGR of 6.7% to reach US$23 billionby 2021 considering loss of patent expiry for few branded drugs and increase in demandfor generic medicines.

Biologics

Aurobindo uses recombinant DNA technology to express and produceBiologics in a living system such as a mammalian cell or a microorganism. Biologics wework with are large complex proteins and monoclonal antibodies.

Aurobindo has one of the industry leading portfolio of 14 biosimilarswhich include five molecules acquired from TL Biopharmaceuticals AG. The pipeline catersto oncology rheumatology and ophthalmology. In first wave of development the Company isworking on five products - all advancing to different stages of clinical trials in thenext two to three quarters. Phase III clinical trials of ophthalmic products is expectedto start in this fiscal year three more products including our lead molecule Bevacizumaba biosimilar version of Avastin will be tested in Phase I clinical trials. The combinedmarket size of these four products is in excess of US$ 20 billion.

As this segment is an important growth driver the Company commissioneda state-of-the-art manufacturing facility of 140000 square feet comprising mammaliancell culture microbial fermentation quality control fill and finish sections. The filland finish facility can cater to filings product in vials syringes and cartridges. Thisfully integrated facility is operational and is generating material for clinical trialrequirement. Currently over 160 people with a strong scientific background in cellbiology bioprocess engineering protein chemistry regulatory and clinical sciences areemployed in Biologics division of the Company.

Dermatology

Dermatology is an area of medicine concerned with the health of theskin and diseases of the hair nails and mucous membranes. The skin is the largest organin the body. It is the first line of defense against bacteria and injury and oftenreflects overall health.

The Company is currently working on twenty four products on differentsegments such as Acne Vulgaris Inflammatory lesions of Rosacea Atopic DermatitisHypogonadism Menopause Vaginal Atrophy Osteoarthritis Herpes Pruritus and liceinfestations. The market size of these products is estimated at US$4.4 billion. Theidentified products have presence across various dosages including ointment cream gellotion and solutions in the pipeline.

Of the twenty four products under development around eighteen productsneed clinical trials or Bioequivalence (BE) studies.

During FY2018-19 Aurobindo has completed clinical trial for oneproduct and is planning further trails for about close to seven products in FY2019-20.

In FY2018-19 the Company has produced exhibit batches for two productsand is planning to execute exhibit batches for another eight to ten products in FY2019-20.

The Company filed three ANDAs in FY2018-19 and is planning to fileanother 8-10 ANDAs over the next two years.

Transdermal Patches

A Transdermal patch is a medicated adhesive patch that is placed on theskin to deliver a specific dose of medication. They release small amounts of drug throughthe skin into the blood stream over a long period of time. These patches may include painrelievers nicotine hormones and drugs to treat angina and motion sickness.

Aurobindo has eight transdermal products under development with anaddressable global market size of around US$3.3 billion. All these products need eitherclinical trials or BE studies. The Company has successfully completed pilot BE studies forone product. The Company is likely to file two ANDAs by FY2020-21. The Company isdeveloping transdermal products in North Carolina R&D center. The Company alsocompleted setting up a manufacturing facility for the same.

Respiratory

Inhalers

An inhaler (puffer or pump) is a medical device used for deliveringmedication into the body via the lungs.

The most common type of inhaler is the pressurized Metered- DoseInhaler (MDI) that delivers medication by using a propellant spray. Another form ofinhaler is a Dry-Powder Inhaler (DPI) which is breath-activated. The medication isreleased only when you take a deep fast breath-in through the inhaler.

Respiratory is one of the key therapeutic areas where Aurobindo isstrengthening its presence. The Company is working on building a pipeline of metered doseinhalers and dry powder inhalers. Within respiratory products the Company now has nineinhaler products under development; of which two products are likely to come up forclinical trials during FY2019-20. The market size of products under development is US$13.3billion.

The Company expects to file first ANDA during FY2019-20. Inhalers willbe manufactured at North Carolina facility.

Nasals

Nasals or nasal sprays are used to deliver medications locally in one'snasal cavities as substances can be assimilated quickly and directly through the nose. Incertain cases the nasal delivery route is preferred because it provides a goodalternative to injection or pills.

Aurobindo has identified seven nasal products for development. Ofwhich the company already filed ANDAs for two products.

The total market size of all the seven products is US$1.4 billion. TheCompany is planning to file three more in ANDAs in FY2019-20. These products aremanufactured in Unit X and the unit has a current monthly capacity to produce 1.4 millionunits.

Depot Injections

Your Company is currently developing four depot injections that have acombined addressable market size of US$3.6 billion.

One of the products from this segment is likely to have exhibit batchesready in FY2019-20 and clinical trials will start in second half of FY2019-20. The Companyplans to file the first product in FY2020-21.

Peptides

Peptides are short chains of amino acid monomers linked by peptide(amide) bonds. The Company has invested in developing a state-of-the-art peptidedevelopment laboratory and has four manufacturing suites for its commercial production.Peptides usually have a long gestation period and take four to five years for development.

Auro Peptides has developed the process for manufacturing twentypeptides. The unit has already filed 6 DMFs with the US regulatory authorities and isplanning to file an additional 3-4 DMFs in FY2019-20.

For now Auro Peptides is supplying material for formulationdevelopment and the execution of its validation batches. These peptide APIs are beingutilized for the development of three liposomal injectable products and seven injectableproducts. Of which two to three injectables will be filed in FY2019-20. The addressablemarket size of products under development is about US$13.5 billion.

Biocatalysts

Aurobindo identifies and produces biocatalysts through fermentationprocesses which are subsequently developed into scalable biocatalytic solutions. Thisreduces the usage of chemicals within the processes during pharmaceutical manufacturingsaving costs whilst benefiting from this green technology. The high technical base andcore competence of Aurobindo has made it easier to initiate the entry into enzymeproduction.

The Company has a highly qualified dedicated team of over 30professionals with an on-going technology development program which has built a libraryof over 7000+ biocatalysts across 15 classes of enzymes. Utilising our state-of-the-arttechnology we have developed several processes and these are being scaled into GMPmanufacturing assets. Our new cGMP fermentation manufacturing facility is also comingonline this year and a series of new products are now expected to commence manufacturingsoon.

Vaccines

The need for improved public health and medicines to protect infants isfast becoming a global priority. In view of this reality the Company has focused ondevelopment of the Pneumococcal Conjugate Vaccine (PCV). The global market size of theproduct is US$6.2 billion.

In FY2018-19 the Company has completed Phase I clinical trials andstarted enrolment for Phase II clinical trials in March 2019 which will be completed byAugust 2019. Phase III clinical trials are expected to commence in early 2020. The Companyhas already registered the brand in India under the name ‘Pneuteger 15'.

All the clinical trials are expected to be completed by early 2021 andthe Company expects to be ready for taking part in the upcoming government tender during2021. Aurobindo has set up a new manufacturing unit for the same that has the capacity tomanufacture 100 million doses a year.

ENVIRONMENT HEALTH & SAFETY (EHS)

The Company's EHS initiatives focus on reducing its impact on theenvironment improving the work life of employees and making sure that the highest safetystandards for employees contractors and visitors are met. The Company's EHS standards aredynamic and evolving with international standards to ensure industry best practices.During the year under review the Company undertook multiple initiatives to remain at theforefront of this journey.

Safety

The Company follows international guidelines on safety. It is workingto increase safety standards across all its facilities and processes.

At this end the Company has made it mandatory for all new projectsincluding capacities buildings and facilities to have EHS clearance and requires that theguidelines are followed right from the planning stage. After completion of a project areview of the new facility is conducted to vet its compliance to the standards.

The Company has also started incorporating safety requirements in allits production processes. Its safety guidelines are included in the Batch Production andControl Record (BPCR). Such measures will ensure greater workplace safety and prevent anyoccurrence of hazardous incidents in the production process.

To maintain a safe working environment safety pep-talks were initiatedbefore every shift on hazards in activities and necessary precautions to be taken in caseof a mishap. The man-hour spent in safety training increased to 0.65% in FY2018-19 from0.59% last year.

During the year Hazard and Operability study (HAZOP) was conducted foreighty five products. Risk analysis was conducted for thirty nine products. Behaviourbased safety processes were initiated in Units III XII and VII.

Several initiatives were taken during the year to improve the overallsafety across the boards. These included conducting quantitative risk assessments for bulksolvent storage areas installing sprinkler systems for an additional layer of safetyconducting ergonomic assessments to assess health risks and initiating product-based riskassessments for formulation products.

Environment:

The Company is working to ensure that its activities have the leastimpact on the environment and is also upgrading its plants and treatment systems everyyear to ensure that it remains a frontrunner in promoting sustainability.

During the year the Company initiated the augmentation and expansionof wastewater treatment facilities at two major API manufacturing units along with theintroduction of MBR technology for enhancement of treatment efficiency.

Its facilities are compliant with the regulations stipulated forwastewater treatment disposal/reuse hazardous and other wastes management emissionscontrol to name a few. Wastewater and air emissions management systems at API Units areviewed and monitored on-line by the concerned environmental regulatory agencies apartfrom periodical inspections to site.

The waste streams have been successfully handled and managedeffectively on cradle to grave philosophy and are complying with regulations.

The facilities located in Telangana are compliant with on-line manifestsystem and tracking for respective waste streams as being implemented by the concernedregulatory agency.

It has also successfully completed the environmental impact assessmentprocess for expansion of Aurobindo Unit XI.

Sustainability:

With a view to initiate reporting on sustainability Aurobindo hasadded the Sustainability vertical - Sustainability to its EHS structure.

In FY2018-19 the Company received SA 8000 accreditation for two of itsformulations manufacturing facilities - Aurobindo Pharma Limited Unit VII and APL HealthCare Limited located at SEZ Jadcherla Telangana.

Aurobindo Pharma has initiated Environmental Management System acrossall its units for effective Environmental Management & as part of this 9 units of thecompany are already certified for ISO 14001:2015 standard. Other units are under pipelinefor ISO 14001:2015 certification which will be completed by end of the year 2019 exceptfor unit XVII & XVIII where commercial production is yet to start.

These efforts have borne fruit as the Company's Environmental SocialGovernance (ESG) rating and scorecards as ranked by internationally reputed agencies suchas EcoVadis have shown a significant improvement.

The Company has taken up green-belt development in close vicinity ofits facilities in schools and near the water bodies. It has planted about 10000 saplingscovering a variety of indigenous plant species and is happy to report that a focussedapproach and proper maintenance practices have resulted in 80% of survival rate of thesaplings.

Antimicrobial Resistance (AMR)

Aurobindo recognised that AMR is a threat and has taken proactive stepsto ensure it is at the forefront of the fight against it.

The Company collaborated with The Access to Medicine Foundation toparticipate in The Antimicrobial Resistance Benchmark 2018 and will be a part of theforthcoming 2020 AMR Benchmark.

Aurobindo is also a member of the AMR industry alliance that bringstogether research-based pharmaceutical companies generics biotech and diagnosticcompanies to drive and measure industry progress to curb antimicrobial resistance.

The AMR Industry Alliance will ensure that signatories collectivelydeliver on the commitments made in the Declaration (January 2016) and the Roadmap(September 2016) and will measure industry's progress in the fight against AMR.

During the year the Company also participated in the initiatives ofGovernment of India on combating AMR and engaged actively with the events organized byMinistry of Environment Forest and Climate Change.

AWARDS

• Aurobindo has been awarded IP Excellence in INDIA 2018 byQuestel Orbit INC as a part of their Indian IP Awards 2018. The Indian IP Awards aregiven to facilitate best professionals across the IP (Intellectual Property) Industry.

• Aurobindo Pharma has bagged award for the category of Best CSRPractices in Responsible Business Awards hosted by World CSR Day.

• Aurobindo Pharma has bagged the 'Outstanding Export Award forFY2017-18' conducted by Pharmaceutical Export Promotion Council of India (Pharmexcil).

• The Indian Institute of Packing a national autonomous bodyunder the Ministry of Commerce Government of India has awarded the INDIASTAR - 2017 toAurobindo Pharma Limited for its Sustainable Shelf-ready Display carton.

• The Federation of Telangana and Andhra Pradesh Chamber ofCommerce and Industry (FTAPCCI) has felicitated Aurobindo with HR Best PracticesAwards-2018 in the category of Large-Scale Industries

• Aurobindo has received ‘IDMA Best API Patents Award 201718'conducted by Indian Drug Manufacturers association

• Our HR team received a Certificate of Achievement from BMLMunjal Awards for attaining the ‘Expert Panel' evaluation milestone. The certificateaccolades the commitment towards investment in ‘Learning & Development' toachieve Business Excellence

• Aurobindo's HR team was awarded a certificate of merit in‘Top 7 Rising Stars of HR Competition' at CII HR Conclave

• Aurobindo HR team won the HR Frame award a Video Competitionfor Young HR Professionals organized by CII Telangana. ‘My Super Heros' a 2 minutevideo was displayed to a large and eminent audience at the CII HR Conclave

SUBSIDIARIES/JOINT VENTURES

As per the provisions of Section 129 of the Companies Act 2013 readwith the Companies (Accounts) Rules 2014 a separate statement containing the salientfeatures of the financial statements of subsidiary companies/associate companies/jointventures is detailed in Form AOC-1 and is in Annexure-1 to this Report.

During the year the following are the changes in the subsidiaries ofthe Company:

Ceased as subsidiaries

Mer Medicamentos Lda Aurobindo Pharma (Portugal)

Unipessoal Limitada and Aurovitas Unipessoal LDA were ceased assubsidiaries consequent to merger of the same with Generis Farmaceutica S.A w.e.f. 1stApril 2018

New subsidiaries/Joint Ventures

Auro Science Pty Ltd. Australia was incorporated on January 6 2019 asa wholly owned subsidiary of Aurobindo Pharma USA Inc.

Aurobindo Pharma FZ LLC UAE was incorporated on January 6 2019 as awholly owned subsidiary of Helix Healthcare BV Netherlands

Cura TeQ Biologics GmbH Switzerland was incorporated on March 202019 as a wholly owned subsidiary of Helix Healthcare BV Netherlands

Auro Science LLC USA was incorporated on March 28 2019 as a whollyowned subsidiary of Aurobindo Pharma USA Inc.

Purple Bell Flower Pty Ltd. South Africa was formed as a joint ventureunder Aurogen Pharma Pty Ltd. South Africa

Apotex Europep B.V Netehrlands; Apotex Netharlands B.V Netehrlands;Sameko Farma B.V Netehrlands; Leidapharm

B.V Netehrlands; Marel B.V Netehrlands; Pharma Dossier B.VNetehrlands: Apotex N.V Belgium; Apotex Polska SP z o o Spain Apotex (CR) Spool s.r.oCheck Republic and Apotex Espana SL Spain became the stepdown subsidiaries of HelixHealthcare BV. Netherlands consequent to acquisition of operations of Apotex Inc.Canada.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements have been prepared by the Company inaccordance with the Indian Accounting Standards (Ind AS) 110 and 111 as specified in theCompanies (Indian Accounting Standards) Rules 2015 and as per the provisions of CompaniesAct 2013. The Company has placed separately the audited accounts of its subsidiaries onits website www. aurobindo.com in compliance with the provisions of Section 136 of theCompanies Act 2013. Audited financial statements of the Company's subsidiaries will beprovided to the Members on request.

CODE FOR PREVENTION OF INSIDER TRADING

On December 312018 Securities and Exchange Board of India amended theProhibition of Insider Trading Regulations 2015 prescribing various new requirementswith effect from April 1 2019. In line with the amendments your Company has adopted anamended Code of Conduct to regulate monitor and report trading by Designated Persons andtheir Immediate Relatives under the Securities and Exchange Board of India (Prohibition ofInsider Trading) Regulations 2015. This Code of Conduct also includes code of practicesand procedures for fair disclosure of unpublished price sensitive information and has beenmade available on the Company's website at https://www.aurobindo.com/investors/corporate-governance/code-of-practices-and- procedures-for-fair-disclosure/

VIGIL MECHANISM

The Board of Directors has adopted the Whistle Blower Policy which isin compliance with Section 177(9) of the Companies Act 2013 and Regulation 22 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015. The Whistle BlowerPolicy aims for conducting the affairs in a fair and transparent manner by adoptinghighest standards of professionalism honesty integrity and ethical behavior. Allpermanent employees and whole-time directors of the Company are covered under the WhistleBlower Policy.

A mechanism has been established for employees to report their concernsabout unethical behavior actual or suspected fraud or violation of Code of Conduct andEthics and leak of price sensitive information under the Company's Code of Conductformulated for regulating monitoring and reporting by Insiders under SEBI (Prohibition ofInsider Trading) Regulations 2015 as amended from time to time. It also provides foradequate safeguards against the victimization of employees who avail of the mechanism andallows direct access to the Chairperson of the Audit Committee in exceptional cases. TheWhistle Blower Policy is available on the Company's website: http://www.aurobindo.com/about-us/governance/governance-policies /

PREVENTION AND PROHIBITION OF SEXUAL HARASSMENT

Your Company has a policy and framework for employees to report sexualharassment cases at workplace and the said process ensures complete anonymity andconfidentiality of information. Your Company has constituted an Internal ComplaintsCommittee in compliance with the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the Rules there under. The Company has a policyon prevention & prohibition of sexual harassment at workplace. The policy provides forprotection against sexual harassment of women at workplace and for the prevention andredressal of such complaints. During the year the Company received one complaint anddisposed of the same. The Company has been conducting awareness programme to the employeesof the Company on prevention of sexual harassment.

MEETINGS OF THE BOARD

The Board and Committee meetings are prescheduled and a tentativecalendar of the meetings finalized in consultation with the Directors to facilitate themto plan their schedule. However in case of special and urgent business needs approval istaken by passing resolutions through circulation. During the year under review six BoardMeetings and five Audit Committee Meetings were convened and held. The details of themeetings including composition of Audit Committee are provided in the Corporate GovernanceReport. During the year all the recommendations of the Audit Committee were accepted bythe Board.

DETAILS OF DIRECTORS & KEY MANAGERIAL PERSONAL

Key Managerial Personnel

Mr. K. Nithyananda Reddy Executive Vice Chairman

Mr. N.Govindarajan Managing Director Dr.M.Sivakumaran Whole-timeDirector Mr.M.Madan Mohan Reddy Whole-time Director Mr.P.Sarath Chandra ReddyWhole-time Director

Mr. Santhanam Subramanian Chief Financial Officer and Mr. B. AdiReddy Company Secretary are Key Managerial Personnel of the Company in accordance withthe provisions of Section(s) 2(51) and 203 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014. There hasbeen no change in the Key Managerial Personnel during the financial year.

None of the directors of the Company are disqualified under theprovisions of the Companies Act 2013 (‘Act') or under the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015. All Independent Directors have providedconfirmations as contemplated under section 149(7) of the Act.

Appointments/Re-appointments

As per the provisions of the Companies Act 2013 Mr. P.Sarath ChandraReddy and Dr. M. Sivakumaran will retire at the ensuing annual general meeting and beingeligible seek reappointment. The Board of Directors recommends their re-appointment.

The re-appointment of Mr. P. Sarath Chandra Reddy as Wholetime Directorwith effect from June 12019 is being proposed at

the ensuing Annual General Meeting. The reappointment of Mr. K.Ragunathan Mrs. Savita Mahajan and Dr. (Mrs) Avnit Bimal Singh as Independent Directorsfor the second term are also being proposed at the ensuing Annual General Meeting. TheBoard of directors recommends their re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act 2013 your Directorsconfirm that:

a. i n the preparation of the annual accounts the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures if any;

b. appropriate accounting policies have been selected and appliedconsistently. Judgement and estimates which are reasonable and prudent have been made soas to give a true and fair view of the state of affairs of your Company as at the end ofthe financial year and of the profit of your Company for the year;

c. proper and sufficient care has been taken for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of your Company and for preventing and detecting fraud andother irregularities;

d. the annual accounts have been prepared on a going concern basis;

e. proper internal financial controls have been laid down to befollowed by your Company and such internal financial controls are adequate and areoperating effectively; and

f. proper systems to ensure compliance with the provisions of allapplicable laws have been devised and such systems are adequate and are operatingeffectively.

DECLARATION FROM INDEPENDENT DIRECTORS

The Independent Directors have submitted the declaration ofindependence stating that they meet the criteria of independence as provided insub-section (6) of Section 149 of the Companies Act 2013 as well as clause (b) ofsub-regulation (1) of Regulation 16 of the Listing Regulations (including any statutorymodification(s) or re-enactment(s) thereof for the time being in force). In terms ofRegulation 25(8) of the Listing Regulations the Independent Directors have confirmed thatthey are not aware of any circumstance or situation which exist or may be reasonablyanticipated that could impair or impact their ability to discharge their duties.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse boardin its success. The Board has adopted the Board Diversity Policy which sets out theapproach to diversity of the Board of Directors. The Board Diversity Policy is availableon the Company's website: http://www.aurobindo.com/about-us/governance/governance-policies/.

BOARD EVALUATION

SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 mandates that the Board shall monitor and review the Board evaluation framework. TheCompanies Act 2013 states that a formal annual evaluation needs to be made by the Boardof its own performance and that of its committees and individual directors. Schedule IV ofthe Companies Act 2013 states that the performance evaluation of independent directorsshall be done by the entire Board of Directors excluding the director being evaluated.

The Annual Performance Evaluation was conducted for all Board Membersfor the Board and its Committees for the financial year 2018-19. This evaluation was ledby the Nomination and Remuneration / Compensation Committee. The Board evaluationframework has been designed in compliance with the requirements under the Companies Act2013 and the Listing Regulations and in accordance with the Guidance Note on BoardEvaluation issued by SEBI in January 2017. The Board evaluation was conducted throughquestionnaire designed with qualitative parameters and feedback based on ratings.

Evaluation of Committees was based on criteria such as adequateindependence of each Committee frequency of meetings and time allocated for discussionsat meetings functioning of Board Committees and effectiveness of its advice/recommendation to the Board etc.

Evaluation of Directors was based on criteria such as participation andcontribution in Board and Committee meetings representation of shareholders interest andenhancing shareholders value experience and expertise to provide feedback and guidance totop management on business strategy governance risk and understanding of theorganization's strategy etc.

POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION

The policy of the Company on directors' appointment and remunerationincluding criteria for determining qualifications positive attributes independence of adirector and other matters are adopted as per the provisions of the Companies Act 2013.The remuneration paid to the Directors is as per the terms laid out in the nomination andremuneration policy of the Company. The nomination and remuneration policy as adopted bythe Board is placed on the Company's website: http://www.aurobindo.com/about-us/governance/governance-policies/.

TRANSFER TO RESERVES

Your Company has not transferred any amount to reserves during the yearunder review.

LOANS GUARANTEES AND INVESTMENTS

Loans guarantees and investments covered under Section 186 of theCompanies Act 2013 form part of the Notes to the financial statements provided in thisAnnual Report.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered with Related Parties for the year under reviewwere on arm's length basis and in the ordinary course of business. All related partytransactions are mentioned in the Notes to the Financial Statements. The Company hasdeveloped a framework through Standard Operating Procedures for the purpose ofidentification and monitoring of such Related Party Transactions. A statement givingdetails of all Related Party Transactions are placed before the Audit Committee and theBoard for review and approval. The policy on Related Party Transactions as approved by theBoard of Directors has been uploaded on the website of the Companyhttp://www.aurobindo.com/about-us/ governance/governance-policies/

The particulars of contracts or arrangements with related partiesreferred to in sub-section (1) of Section 188 of the Companies Act 2013 is prepared inForm No. AOC-2 pursuant to clause (h) of subsection (3) of Section 134 of the Act and Rule8(2) of the Companies (Accounts) Rules 2014 and is in Annexure-2 to this Report.

EXTRACT OF ANNUAL RETURN

As required under Section 134 (3) (a) and Section 92(3) of theCompanies Act 2013 read with Rule 12(1) of the Companies (Management and Administration)Rules 2014 the extract of Annual Return prepared in Form MGT-9 and is in Annexure-3 tothis report. The Annual Return of the Company will be made available on its websitewww.aurobindo.com

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS & OUTGO

Information with respect to conservation of energy technologyabsorption foreign exchange earnings & outgo pursuant to Section 134(3)(m) of the Actread with Companies (Accounts) Rules 2014 and is in Annexure-4 to this Report.

RISK MANAGEMENT COMMITTEE

Risk Management Committee of the Company consists of the followingDirectors viz. Mr. M. Sitarama Murty Mr. N. Govindarajan and Mr. P. Sarath Chandra Reddy.Mr. M. Sitarama Murty is the Chairman of the Committee. The Company has established aseparate department to monitor the enterprise risk and for its management. The Committeehad formulated a risk management policy for dealing with different kinds of risks whichthe Company faces in its day-to-day operations. Risk management policy of the Companyoutlines different kinds of risks and risk mitigating measures to be adopted by the Board.

Risk is an integral part of the Company's business and sound riskmanagement is critical to the success of the organization. The Company has adequateinternal financial control systems and procedures to combat the risk. The risk managementprocedure is reviewed by the Audit Committee and Board of Directors on regular basis atthe time of review of quarterly financial results of the Company. A report on the risk andtheir management is enclosed as a separate section forming part of this report.

AUDITORS & AUDITORS' REPORT

The statutory auditors' report is annexed to this report. The notes onfinancial statements referred to in the Auditors' Report are selfexplanatory and do notcall for any further comments. There are no specifications reservations adverse remarkson disclosure by the statutory auditors in their report. They have not reported anyincident of fraud to the Audit Committee of the Company during the year under review.

Pursuant to Section 139 (2) of the Companies Act 2013 read withCompanies (Audit and Auditors) Rules 2014 the Company at its 30th Annual General Meeting(AGM) held on August 31 2017 had appointed M/s. B S R & Associates LLP CharteredAccountants as Statutory Auditors for a period of 5 years i.e. up to the conclusion of the35th AGM to be held in the year 2022. Further as per Companies (Amendment) Act 2017effective from May 07 2018 the provisions relating to ratification of the appointment ofStatutory Auditors at every AGM are not required to be followed.

INTERNAL AUDITORS

Ernst & Young LLP are the internal auditors of the Company and tomaintain its objectivity and independence the Internal Auditors report to the Chairman ofthe Audit Committee. The scope and authority of the Internal Audit function is clearlydefined by the Audit Committee of the Board. The Internal Auditors monitor and evaluatethe efficacy and adequacy of internal control system of the Company its compliance withapplicable laws/regulations accounting procedures and policies. Based on the reports ofthe Internal Auditors corrective actions were undertaken and thereby strengthened thecontrols. Significant audit observations and action plans were presented to the AuditCommittee of the Board on quarterly basis.

COST AUDIT

Pursuant to Section 148 of the Companies Act 2013 read with theCompanies (Audit and Auditors) Rules 2014 and the Companies (Cost Records and Audit)Rules 2014 the Company is maintaining the cost records as its business is covered underthe regulated sector viz. drugs and pharmaceuticals. Audit of the Company's cost recordsis not applicable since the Company's revenues from exports in foreign exchange exceed75% of its total revenues.

INTERNAL FINANCIAL CONTROLS

The internal financial controls (IFC) framework institutionalized inAurobindo has been evaluated in-depth for its adequacy and operating effectivenesswherein the Company has covered financial reporting controls operational controlscompliance related controls and also Information Technology (IT) controls comprising ITgeneral controls (ITGC) and application level controls. The ITGC would include controlsover IT environment computer operations access to programs and data program developmentand program changes. The application controls would include transaction processingcontrols in ERP Oracle system which supports accurate data input data processing and dataoutput workflows reviews and approvals as per the defined authorization levels.

In order to further strengthen the existing IFC framework and tosupport the growing business the Company has redefined all the process level controls atactivity level which has brought in more clarity and transparency in day-to-day processingof transactions and in addressing any related risks. All the controls so redefined &identified have been properly documented and tested with the help of an independentauditor to ensure their adequacy and effectiveness.

The internal auditors conduct ' Process & control review' on aquarterly basis as per the defined scope and submit the audit findings along withmanagement comments and action taken reports to Audit Committee for its review.

The IFC framework at Aurobindo ensures the following:

• Establishment of policies & procedures assignment ofresponsibility delegation of authority segregation of duties to provide a basis foraccountability and controls;

• Physical existence and ownership of assets at a specified date;

• Enabling proactive anti-fraud controls and a risk managementframework to mitigate fraud risks to the Company;

• Recording of all transactions occurred during a specific period.Accounting of assets liability and revenue and expense components at appropriateamounts;

• Preparation of financial information as per the timelinesdefined by the relevant authorities.

These controls cover the policies and procedures adopted by the Companyfor ensuring the orderly and efficient conduct of its business including adherence to theCompany's policies safeguarding of its assets of the Company prevention and detection ofits frauds and errors accuracy and completeness of accounting records and timelypreparation of reliable financial information. The Company has an internal control systemcommensurate with the size scale and complexity of its operation

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act 2013and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the Company has appointed Mr.A.Mohan Rami Reddy a Company Secretary in Practice toundertake the secretarial audit of the Company for the financial year 2018-19. TheSecretarial Audit Report issued in form MR-3 is and in Annexure-5 to this Report.

There are no qualifications reservations or adverse remarks in theSecretarial Audit Report. Also pursuant to Regulation 24A of the SEBI (ListingRegulations) 2015 the Company has obtained Annual Secretarial Compliance Report from aPracticing Company Secretary and submitted the same to stock exchanges where the shares ofthe Company are listed.

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the CA 2013 read with the Companies(Corporate Social Responsibility Policy) Rules 2014 the Company has established theCorporate Social Responsibility Committee (CSR Committee). Your Company is striving tohelp create a healthy improved life of people in its neighbourhood. Broadly theinitiatives are to execute on the stated CSR policy of 'give back to the society' and makean impact on the lives of people.

The activities undertaken during 2018-19 can be summarized under thefollowing heads:

• Promoting education;

• Supporting preventive health care;

• Eradicating hunger poverty & malnutrition;

• Making available safe drinking water;

• Encouraging environment sustainability;

• Sustaining ecological balance & conservation of naturalresources;

• Developing rural sports; and

• Setting up old age homes etc

A detailed account of the CSR activities forms part of the annualreport and placed on the Company's website at: http://www.aurobindo.com/sustainibility/.Report on Corporate Social Responsibility as per Rule 8 of the Companies (Corporate SocialResponsibility Policy) Rules 2014 is provided as Annexure-6 to this Report.

PARTICULARS OF EMPLOYEES

The statement of particulars of appointment and remuneration ofmanagerial personnel as required under Section 197(12) of the Companies Act 2013 readwith Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 and is in Annexure-7 to this Report.

The statement containing particulars of employees pursuant to Section197(12) of the Companies Act 2013 read with Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is open for inspection at the Registeredoffice of the Company during business hours on all working days of the Company up to thedate of the ensuing Annual General Meeting. Any shareholder interested in obtaining suchdetails may write to the Company Secretary of the Company.

Affirmation that the remuneration is as per the remuneration policy ofthe Company.

In compliance with the provisions of the Companies Act 2013 and SEBIListing Regulations the Board on the recommendation of the Nomination andRemuneration/Compensation Committee approved the Policy for Selection Appointment and ofDirectors KMPs and Senior Management persons. The said Policy provides a framework toensure that suitable and efficient succession plans are in place for appointment ofDirectors on the Board and other management members. The Policy also provides forselection and remuneration criteria for appointment of Directors and senior managementpersons.

The Company affirms that the remuneration is as per the remunerationpolicy of the Company.

INSURANCE

All properties and insurable interests of the Company includingbuilding plant and machinery and stocks have been fully insured. The Company has alsotaken D & O Insurance Policy covering Company's Directors and officers.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments in the businessoperations of the Company from the financial year ended March 312019 to the date ofsigning of the Director's Report.

CORPORATE GOVERNANCE

A separate section on Corporate Governance standards followed by yourCompany as stipulated under Schedule V (C) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is enclosed as a separate section forming partof this report.

The certificate of the Practicing Company Secretary Mr. S. Chidambaramwith regard to compliance of conditions of corporate governance as stipulated underSchedule V(E) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is annexed to the Corporate Governance Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis Report for the year under review asstipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015is presented in a separate section forming part of this report.

DEPOSITS

Your Company has not accepted any deposits from the public within thepurview of Chapter V of the Companies Act 2013.

INDUSTRIAL RELATIONS

Industrial relations at all units of the Company have been harmoniousand cordial. The employees are motivated and have shown initiative in improving theCompany's performance.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF

The dividends that remained unpaid/unclaimed for a period of sevenyears have been transferred on due dates by the Company to the Investor Education andProtection Fund (IEPF) established by the Central Government.

Section 124 of the Companies Act 2013 read with the Investor Educationand Protection Fund Authority (Accounting Audit Transfer and Refund) Rules 2016 ('theRules') mandates that companies shall apart from transfer of dividend that has remainedunclaimed for a period of seven years from the unpaid dividend account to the InvestorEducation and Protection Fund (IEPF) also transfer the corresponding shares with respectto the dividend which has not been paid or claimed for seven consecutive years or more toIEPF. Accordingly the dividends that remain unclaimed for seven years and also thecorresponding shares have been transferred to IEPF account on due dates.

The details of amount of unclaimed unpaid dividend and correspondingshares 'transferred to IEPF during the financial year 2018-19 have been provided in theAGM Notice.

SHARE CAPITAL

During the financial year under review there has been no change in theAuthorised Share Capital of the Company. However the paid up equity share capital of theCompany increased by '8000 during the year consequent to the allotment of 8000 equityshares of '1 each on exercise of stock options under the Employee Stock Option Plan-2006(ESOP 2006) of the Company. The paid up share capital of the Company as on March 312019was '585915609 divided into 585915609 equity shares of '1 each. The Company has notissued any debentures bonds or any non-convertible securities during the financial yearunder review.

EMPLOYEE STOCK OPTION SCHEME

The Members at the Annual General Meeting of the Company held onSeptember 18 2006 approved formulation of Employee Stock Option Scheme- 2006 (ESOP 2006)for the eligible employees and Directors of the Company and its subsidiaries. Details ofthe stock options as on March 312019 is provided on the Company's website:http://www.aurobindo.com/about-us/ governance/governance-policies/. The details of theemployee stock options also form part of the notes to accounts of the financial statementsin this Annual Report.

BUSINESS RESPONSIBILITY REPORT

A detailed Business Responsibility Report in terms of the provisions ofRegulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015is available as a separate section in this Annual Report.

OTHER DISCLOSURES

There were no significant material orders passed by the Regulators orCourts or Tribunals that would impact the going concern status of the Company and itsoperations in future.

The Company has complied with Secretarial Standards issued by theInstitute of Company Secretaries of India.

Acquisitions / Disinvestment/ demerger/merger

A. Acquisitions

Apotex

The wholly owned step-down subsidiary of the Company Agile Pharma B.V(Netherlands) has entered into an agreement in July 2018 to acquire commercial operationsand certain supporting infrastructure in five European countries viz. the NetherlandsBelgium Spain Poland and Czech Republic from Apotex International Inc. a Canadianpharmaceutical company engaged in the manufacture and marketing of pharmaceuticalproducts. The Acquisition of Apotex' businesses in Poland Czech Republic theNetherlands Spain and Belgium was completed in February 2019.

Sandoz

The wholly owned subsidiary of the Company Aurobindo Pharma USA Inc.USA has entered into an agreement to acquire commercial operations and threemanufacturing facilities in USA from Sandoz Inc. USA a Novartis Division.

The acquisition includes in-line portfolio of dermatology and oralsolids authorised generics and in-licensing products Branded dermatology products 3manufacturing facilities at Hicksville - NY (Derma) Melville - NY(Derma) Wilson- NC(OSD) and 100% shareholding in Eon Labs Inc a wholly owned subsidiary of Sandoz.

This is a carved out business of Sandoz in US and the product portfolioconsists of Dermatology CNS Alimentary Tract/ Metabolic Women's HealthAnti-infectives Systemic Hormones and others along with three manufacturing facilitiessituated in Hicksville and Melville in New York and Wilson in North Carolina. Theacquisition is in progress.

Advent

The wholly owned subsidiary of the Company Aurobindo Pharma USA Inc.USA has in November 2018 acquired a product under development and related assets from‘Advent Pharmaceuticals Pty Ltd. Australia through AuroScience Pty LimitedMelbourne a 100% subsidiary of Aurobindo Pharma USA Inc. USA.

• Acquisition provides an opportunity to acquire assets that wouldbe used for specialty generics business.

• Acquisition will lead to enhancement of R &D capabilities incomplex specialty generics

Luoxin

The wholly owned subsidiary of the Company Helix Healthcare

B. V Netherlands has entered into an agreement with Shandong LuoxinPharmaceutical Group Stock Co. Ltd China (Luoxin) to establish a Joint Venture Companyin China with manufacturing facilities to manufacture nebuliser inhaler and other productsfor China US and EU markets. However for Europe markets the new Joint Venture Companywill establish its fully owned subsidiary(ies) in any of the European countries.

Spectrum

Acrotech Biopharma L.L.C. a wholly owned subsidiary of AurobindoPharma USA Inc. USA which in turn is a wholly owned subsidiary of the Company hasentered into a definitive agreement to acquire seven marketed oncology injectableproducts intellectual property and commercial infrastructure from SpectrumPharmaceuticals Inc. (NASDAQ:SPPI) a US based global branded oncology company. Spectrumhas as part of its major strategic shift to focus on novel oncology drug development andcommercialization of its two late-stage pipeline products carved out its commercialbusiness inclusive of seven marketed oncology injectable products intellectual propertyand commercial infrastructure for sale. The acquisition has been completed on March12019.

Synergy

The Company has made an investment of '150 million in Synergy RemediesPrivate Limited (Synergy) a Tirupathi based pharma company and acquired 19.9% holding inthe said company. The objective of this acquisition was to ensure assured supplies of someof the APIs and intermediates.

B. Merger

Merger of wholly owned Subsidiaries

On May 28 2019 the Board of Directors had accorded its approval forthe draft scheme for merger of Company's 5 (Five) Wholly Owned Subsidiaries (i.e. APLResearch Centre Limited Aurozymes Limited Curepro Parenterals Limited Hyacinths PharmaPrivate Limited and APL Healthcare Limited) and 1 (one) step-down wholly owned subsidiary(i.e. Silicon Life Sciences Private Limited) with the Company. No shares of the Companywill be issued as consideration for the said amalgamation and the shares held by theCompany in its wholly owned subsidiaries and step-down wholly owned subsidiary shall standcancelled. The Scheme would be subject to the requisite statutory/ regulatory approvalsincluding the approval of the National Company Law Tribunal (Hyderabad Bench).

CREDIT RATING

The Company has obtained credit rating from India Ratings &Research Private Limited and it has assigned "IND AA+"/ "INDA1+" onRating Watch Positive for Company's fund based working capital facilities and "INDA1+" on Rating Watch Positive for Company's non-fund based working capital limitsvide their letter dated September 17 2018.

ACKNOWLEDGEMENTS

Your Directors are grateful to for the invaluable contribution made bythe employees and are encouraged by the support of the customers business associatesbanks and government agencies. The Directors deeply appreciate their faith in the Companyand thankful to them. The Board shall always strive to meet the expectations of all thestakeholders.

For and on behalf of the Board
K. Ragunathan
Place: Hyderabad Chairman
Date: 28 May 2019 DIN: 00523576