"Tonira PHARMA LIMITED

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"tonira PHARMA LIMITED

14th ANNUAL REPORT 2005-2006

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PHARMA LIMITED

FINANCIAL HIGHLIGHTS OF LAST FIVE YEARS AT A GLANCE

(Rs. in lacs except EPS and Book Value )

Particulars 2005-06 2004-05 2003-04 2002-03 2001-02

Gross Income 3123.47 2428.82 2755.77 2591 .09 2397.41

Profit before Dep. & Interest 611.31 411.49 449.11 426.37 331.33

Profit before Tax & 268.16 238.17 280.19 262.00 147.97 Extra Ordinary Items

Net Profit after Tax 264.11 237.50 55.09 262.00 147.97

Earning Per Share (EPS) (in Rs.) 3.32 2.99 0.69 3.30 1.86

Equity Share Capital 794.42 794.42 794.42 794.42 794.42

Reserve & Surplus 1049.54 877.38 614.19 541 .82 476.71

Book Value per Share (Rs.) 23.04 20.97 17.55 16.49 15.43

Major achievements (Awards and recognitions)

01. The Company has two 100% Export Oriented Units (EOUs) and Green Card Holder one at Ankleshwar, Dist. Bharuch and another at Nandesari, Dist. Vadodara, registered with Kandla Special Economic Zone, Gandhidham, Ministry of Commerce & Industry, Government of India.

02. Both the Plants of the Company are WHO GMP certified whereas plant set up at Nandesari is US FDA compliant.

03. The Company has been awarded with Export Excellence Certificate in the 100% EOU sector for best export performance during the year 1997-98 to year 2001 -02, by Development Commissioner, Kandla Special Economic Zone, Gandhidham, Ministry of Commerce & Industry, Government of India.

04. The Company has been recognized as "Export House" by Kandla Special Economic Zone, Gandhidham, Ministry of Commerce & Industry, Government of India.

05. The Company has two Research and Development Centres, one at Ankleshwar, Dist. Bharuch and another at Nandesari, Dist. Vadodara, recognized as In House R & D Unit, by Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India.

06. The Company has been issued ISO 9001 -2000 certification by BVQI.

07. The Company has been availing "AA" Credit Rating from its Banker viz. Bank of Baroda.

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PHARMA LIMITED

14th ANNUAL REPORT 2005 - 2006

Board of Directors Bhailalbhai B. Shah. Executive Chairman Mahesh N. Shah CEO & Managing Director Janardan P. Sanyal. Executive Director Virendra B. Shah Wholetime Director Mahesh Bhatt Independent Director Rajesh Shah Independent Director Dr. A. A. Natu Independent Director Pradip Gandhi Independent Director Prakash Hirani Independent Director

Company Secretary Mukesh Khanna

Bankers Bank of Baroda, International Business Branch, Sayajigunj, Vadodara

Auditors Mitesh P. Vpra & Company Chartered Accountants Ahmedabad.

Registered Office 23-24, GIDC Estate, Nandesari, Dist. Vadodara Gujarat - 391 340

Corporate Office 301, Yogi Complex, 44, Sampatrao Colony, Alkapuri, Vadodara Gujarat - 390 005, India E-mail : [email protected] Ph : (0265)2343263, 2358266

Works i) 4722, G.I.D.C. Industrial Estate, Ankleshwar, Dist. Bharuch Gujarat - 393 002, India

ii) 23-24, G.I.D.C. Industrial Estate, Nandesari, Dist. Vadodara Gujarat 391 324, India

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"tonira PHARMA LIMITED

NOTICE

NOTICE is hereby given that the 14th Annual General Meeting of the Members of Tonira Pharma Limited will be held on Thursday, the 28th September, 2006 at 9.30 a.m. at its Registered Office at 23-24, GIDC Estate, Nandesari, Dist. Vadodara - 391 340, Gujarat to transact the following business:

Ordinary Business :

1. To receive, consider and adopt the Audited Profit & Loss Account for the year ended 31st March, 2006 and Balance Sheet as of that date together with reports of Directors and the Auditors thereon.

2. To appoint a Director in place of Shri Prakash Hirani, who retires by rotation and being eligible, offers himself for re-appointment.

3. To appoint a Director in place of Shri Pradip Gandhi, who retires by rotation and being eligible, offers himself for re-appointment.

4. To appoint Auditors and to fix their remuneration.

Special Business :

5. To consider and, if thought fit, to pass with or without modification, the following resolution as Special Resolution.

"RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309, 310, 314 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, (including any statutory modifications or reenactment thereof, for the time being in force), Shri Bhailal B Shah, be and is hereby reappointed as Executive Chairman of the Company for a period of 5 years from 01.07.2006 to 30.06.2011 on the terms and conditions including remuneration as are set out in the Letters of Appointment dated 30.06.2006 and 28.07.2006, issued by the Company to Shri Bhailal B Shah, copies whereof are placed before the Meeting which are hereby specifically approved, with liberty to fhe Board of Directors (hereinafter referred to as "the Board" which term shall be deemed to include the Remuneration Committee constituted by the Board) to alter and vary the terms and conditions of the said reappointment and / or remuneration and /or letter of appointment without approaching shareholders for obtaining approval, subject to the same not exceeding the limits set out in the said Schedule XIII to the Companies Act 1956 including any statutory modification or reenactment thereof for the time being in force or as may hereafter be made by the Central Government in this behalf, from time to time or any amendments thereto as may be agreed by the Board and Shri Bhailal B Shah."

"FURTHER RESOLVED THAT in the event of inadequacy or absence of profits in any financial year, Shri Bhailal B Shah, Executive Chairman be paid remuneration as minimum remuneration, subject to the ceiling as prescribed in Section II of Part II of Schedule XIII to the Companies Act, 1956."

"FURTHER RESOLVED THAT the Board of Directors of the Company be and are hereby authorised to take all necessary steps as may be required to give effect to the above resolutions."

6. To consider and, if thought fit, to pass with or without modification, the following resolution as Special Resolution.

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"tonira PHARMA LIMITED

and /or remuneration and /or letter of appointment without approaching shareholders for obtaining approval, subject to the same not exceeding the limits set out in the said Schedule XIII to the Companies Act 1956 including any statutory modification or reenactment thereof for the time being in force or as may hereafter be made by the Central Government in this behalf, from time to time or any amendments thereto as may be agreed by the Board and Shri Mahesh N Shah."

"FURTHER RESOLVED THAT in the event of inadequacy or absence of profits in any financial year, Shri Mahesh N Shah, CEO & Managing Director, be paid remuneration as minimum remuneration subject to the ceiling as prescribed in Section II of Part II of Schedule XIII to the Companies Act, 1956."

"FURTHER RESOLVED THAT the Board of Directors of the Company, be and are hefeby authorised to take all necessary steps as may be required to give effect to the above resolutions."

7. To consider and, if thought fit, to pass with or without modification, the following resolution as Special Resolution.

"RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309, 310, 314 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1956, (including any statutory modifications or reenactment thereof, for the time being in force), Shri Janardan P Sanyal, be and is hereby reappointed as the Executive Director of the Company for a period of 5 years from 01.08.2006 to 31.07.2011 on the terms and conditions including remuneration as, are set out in the Letter of Appointment dated 28.07.2006 issued by the Company to Shri Janardan P Sanyal, a copy whereof is placed before the Meeting which is hereby specifically approved with liberty to the Board of Directors (hereinafter referred to as "the Board" which term shall be deemed to include the Remuneration Committee constituted by the Board) to alter and vary the terms and conditions of the said reappointment and / or remuneration and /or letter of appointment without approaching shareholders for obtaining approval, subject to the same not exceeding the limits set out in the said Schedule XIII to the Companies Act 1956 including any statutory modification or reenactment thereof for the time being in force or as may hereafter be made by the Central Government in this behalf, from time to time or any amendments thereto as may be agreed by the Board and Shri Janardan P Sanyal."

"FURTHER RESOLVED THAT in the event of inadequacy or absence of profits in any financial year, Shri Janardan P Sanyal, the Executive Director, be paid remuneration as minimum remuneration subject to the ceiling as prescribed in Section II of Part II of Schedule XIII to the Companies Act, 1956."

"FURTHER RESOLVED THAT the Board of Directors of the Company be and are hereby authorised to take all necessary steps as may be required to give effect to the above resolutions."

8. To consider and, if thought fit, to pass, with or without modification, the following Resolution as a Special Resolution.

"RESOLVED THAT pursuant to the provisions of Section 163 and other applicable provisions, if any, of the Companies Act, 1956, and subject to such approvals or permissions as may be necessary, approval of the members of the Company be and is hereby accorded to maintain the Register of members, the Index of Members and copies of all annual returns prepared under Section 159 and 160 together with the copies of certificates and documents required to be annexed thereto under Section 160 and 161 and other Registers and documents as are permissible, at the office of the Company's Registrar and Transfer Agents i.e. M/s. Intime Spectrum Registry Limited or any other Registrar and Transfer Agent appointed in lieu thereof."

By order of the Board of Directors,

Date : 28.07.2006 Mukesh Khanna Place : Vadodara Company Secretary

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"tonira PHARMA LIMITED NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE, INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER. The Proxy Form duly completed and signed should be lodged with the Company 48 hours before the commencement of the meeting, in order to be effective. 2. Explanatory Statement pursuant to Section 173 of the Companies Act, 1956 in respect of Special Businesses at Item Nos. 5 to 8, are annexed herewith. 3. Register of Members and Share Transfer Register of the Company will remain closed from Monday, 25th September, 2006 to Thursday, 28th September, 2006 (both the days inclusive). 4. ONLY the Shareholders and Proxies will be allowed to attend the meeting. The Board of Directors will decide question of admittance. Relevance of question and the order of speaking at the meeting will be decided by the Chairman. 5. MEMBERS DESIROUS OF OBTAINING ANY INFORMATION IN RESPECT OF ACCOUNTS OF THE COMPANY, ARE REQUESTED TO WRITE TO THE COMPANY SO AS TO REACH ATLEAST SEVEN CLEAR DAYS BEFORE THE DATE OF THE MEETING. 6. Members are requested to take note of change of Registrar & Transfer Agents of the Company. M/s. Intime Spectrum Registry Ltd is new Registrar and Transfer Agent of the Company and Members are requested to send all communication related to RTA at M/s. Intime Spectrum Registry Ltd, having its office at 1st Floor, Jaldhara Complex, Manisha Char Rasta.Old Padra Road, Vadodara - 390 015. EXPLANATORY STATEMENT PURSUANT TO SECTION 173 (2) OF THE COMPANIES ACT, 1956. Item No. 5 to 7 The Board of Directors of the Company, upon recommendation of Remuneration Committee, at its meetings held on 30.06.2006 and 28.07.2006, has considered and approved reappointment and payment of remuneration of Shri Bhailal B Shah as Executive Chairman and Shri Mahesh N Shah as CEO & Managing Director for a period of 5 years from 01.07.2006 to 30.06.2011 whereas, the Board of Directors, upon the recommendation of Remuneration Committee, at its meeting held on 28.07.2006, has considered and approved reappointment and payment of remuneration of Shri Janardan P Sanyal as Executive Director for a period of 5 years from 01.08.2006 to 31.07.2011, on following main terms and conditions including remuneration as enumerated in the Letters of Appointment dated 30.06.2006 and 28.07.2006, subject to the approval of the shareholders :

Particulars Shri B B Shah Shri M N Shah Shri J P Sanyal ' Tenure 5 years from date of 5 years from date of 5 years from date of reappointment reappointment reappointment Remuneration Rs. 80,000 per month Rs. 1,50,000 per month Rs. 1,00,000 per month plus plus other amenities as per other amenities as per rules rules of the Company of the Company applicable to applicable to its senior its senior executives executives Alteration The terms and conditions (including remuneration) of reappointments may be altered from time to time, by the Board as it may deem fit, subject to provision of Schedule XIII of the Act or any amendment made hereafter in this regard. Prohibitions Directors being reappointed shall not be entitled to supplement their earning with any buying or selling commission. They shall not also become interested or otherwise concerned directly or through their relatives in any selling commission. They shall not also become interested or otherwise concerned directly or through their relatives in any selling agency of the Company, without the prior approval of the Company. Termination ', Either party giving the other party three months notice or the Company paying three months salary in lieu thereof may terminate the appointment.

The Explanatory Statement togetherwith the accompanying Notice shall be treated as an abstract of the terms of appointment and Memorandum of Concern or Interest under Section 302 of the Companies Act, 1956. Copies of Letters of Appointment issued by the Company to Shri Bhailal B Shah, Shri Mahesh N Shah and Shri Janardan P Sanyal are available for inspection by the members of the Company at its Registered and Corporate Office between 3.00 p.m. to 5.00 p.m. on any working day of the Company, till the date of Meeting.

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PHARMA LIMITED

None of the Directors except Shri Bhailal B Shah, Shri Mahesh N Shah and Shri Janardan P Sanyal, Shri Virendra B Shah, the relative of Shri B. B. Shah, are concerned or interested in the said resolutions. The Board recommends the resolution for adoption. Item No. 8 The Company has appointed M/s. Intime Spectrum Registry Limited as its Registrar and Transfer Agent in place of M/s. MCS Ltd, consequent to the divestment of Registrar and Share Transfer Business by M/s. MCS Ltd and accordingly the Register of Members, the index of Members and copies of all annual returns prepared under Section 159 and 160 together with the copies of certificates and documents required to be annexed thereto under Section 160 and 161 including all records pertaining to the shares, share transfers, etc., would be maintained by M/s. Intime Spectrum Registry Limited. Pursuant to the provisions of Section 163 of the Companies Act, 1956, approval of the Members of the Company is required to keep the said Registers, documents and records at the office of M/s. Intime Spectrum Registry Limited at 1st Floor, Jaldhara Complex, Manisha Char Rasta.Old Padra Road, Vadodara - 390 015, or any other Registrar and Transfer Agent appointed in lieu thereof. None of the Directors is, in any way, concerned or interested in this Resolution. The Board recommends the resolution for adoption.

By order of the Board of Directors,

Date 28.07.2006 Mukesh Khanna Place Vadodara Company Secretary

ANNEXURE TO THE NOTICE OF ANNUAL GENERAL MEETING Information pursuant to Clause 49 of the Listing Agreement regarding appointment/ reappointment of Directors

Name of the Directors B B Shah M N Shah J P Sanyal Prakash Hirani Pradip Gandhi

Date of Birth 02.09.1945 01.05.1955 08.12.1932 27.04.1953 05.09.1967

Date of Appointment 13.08.1992 13.08.1992 06.08.1994 24.03.2003 24.03.2003

Specialised Expertise General Technical, Technical, Chemical Taxation, Management Production Production Business Accounts and business and and audit administration administration and management

Qualification's Matriculate B.E. (Chem) M.Sc. B.E. Chem. Eng. B.Com. Diploma in (Org Chem) L.L.B., F.C.A. Industrial Management

Directorships of other Tirupati "~™"" — -•" Companies as on 31st Surjan Ltd. March, 2006

Chairman/Member of Both are members of Audit Committees of Committee, Shareholders' Companies as on Grievance Committee and 31st March, 2006 Remuneration Committee of Tonira Pharma Limited

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PHARMA LIMITED

DIRECTORS' REPORT To, The Shareholders Tonira Pharma Limited .

Your Directors have pleasure in presenting herewith their Fourteenth Annual Report for the year ended 31st March, 2006.

FINANCIAL PERFORMANCE : Following figures summarize the financial performance of the Company.

( Rs. in Lacs )

Particulars 2005-06 2004-05 Total Sales 2985,85 2288.54 Other Income 11.29 4.41 Total Income 2997.14 2292.95 Profit before Depreciation, Interest & tax 612,31 411.49 Percentage of Gross Profit to Total Income 20.43% 17.95% Depreciation 243,80 142.94 Interest 100.35 30.38 Profit Before Tax 268.16 238.17

Provision for Tax (including Fringe Benefit Tax) 4.04 0.68 Net Profit after tax 264.12 237.49

DIVIDEND : With a view to conserve financial resources, for future business consolidation, the Board does not recommend payment of any dividend to the shareholders for the year under review.

OPERATIONS IN RETROSPECT : During the year under review the Company has fetched total income of Rs. 2997.14 lacs against Rs.2292.95 lacs of the previous year, whereas earned Profit before Interest and Depreciation of Rs. 612.31 lacs against 411.49 lacs of the previous year and Net Profit after tax of Rs. 264.12 lacs as against Rs. 237.49 lacs of the previous year. •

Closer critical look to the Audited Annual Statement of Accounts for the period ended 31.03.2006, reflect that, during the year under review ;

1. Gross Sales increased by Rs.697.31 lacs (30.47% growth) whereas Net Profit increased by Rs.30 lacs (12.60% growth) compared to previous year.

! 2. The Company earned Net Foreign Exchange of Rs. 1696.17 lacs.

As an Export Oriented Unit 90.94% of the Gross Income are generated from Export Sales which shows growth of 29.49% over previous year, in export sales.

3. New Unit at Plot 23-24, GIDC Estate, Nandesari, Dist. Vadodara fully commissioned and made operative with aggregate investment of Rs.237.83 lacs made during the year under review.

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PHARMA LIMITED

4. The Company has earned Cash Profit of Rs.515.16 lacs which show growth by 31.48% over previous year.

5. Earning per share increased to Rs.3.32 against of Rs. 2.99 of previous year.

6. Percentage of Profit before Depreciation, Interest & Tax to Total Income reached to 20.43% which shows growth of 2.48% over previous year.

FUTURE OUTLOOK :

With increased mergers World over and increased Indian generic companies presences in USA, Formulation Companies in USA are in look out for API for their Formulation to compete against Indian and Chinese Generic Companies. Tonira is in right slot viewed as and a better partner for such companies. As a result, the Company will have a good future prospects upon receipt of USFDA approval. Determined efforts are continued to avail USFDA approval.

DIRECTORS' RESPONSIBILITY STATEMENT :

In terms of the Section 217 (2AA) of the Companies Act, 1956, the Directors would like to state that: i. In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed. ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give true and fair view of the State of Affairs of the Company at end of the financial year and of the Profit of the Company for the year under review. iii. The Directors have taken proper and sufficient care for the maintenance of adequate Accounting Records in accordance with the provisions of this Act for safeguarding the Assets of the Company and for preventing and detecting fraud and other irregularities. iv. The Directors have prepared the Annual Accounts on a going concern basis.

DIRECTORATE :

The Board of Directors, upon recommendation of Remuneration Committee, at its meeting held on 30.06.2006 reappointed Shri Bhailal B Shah as Executive Chairman and Shri Mahesh N Shah as CEO & Managing Director for a further term of 5 years and at its meeting held on 28.07.2006 reappointed Shri Janardan P Sanyal as Executive Director for a further term of 5 years, subject to the approval of Shareholders, on terms and conditions mentioned in the Explanatory Statement attached to Notice.

Shri Prakash Hirani and Shri Pradip Gandhi, retire by rotation and being eligible, offer themselves for reappointment.

MANAGEMENT DISCUSSION & ANALYSIS :

Management Discussion and Analysis is made part of the Annual Report and a separate report thereon is annexed as "Annexure A" to this Report.

CORPORATE GOVERNANCE : A separate report on Corporate Governance is annexed as "Annexure B" to this Report and the certificate from the Company's Auditors regarding compliance of conditions of Corporate Governance, is also annexed therewith.

DEMATERIALIZATION OF SECURITIES : The Shares of the Company are traded at the Bombay Stock Exchange Ltd., only in dematerialized form. The Shares of the Company bear ISIN INE844F01012 as allotted by National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL).

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PHARMA LIMITED

Share holders are requested to avail the facilities of dematerialisation of their shares by approaching their Depository Participants (DPs) so as to facilitate their dealing and safe custody.

STATUTORY DISCLOSURES : The particulars in accordance with provisions of Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are given in the "Annexure - C".

Particulars of Employees required to be furnished under Section 217 (2A) of the Companies Act, 1956 and the Companies (Particulars of Employees) Rules, 1975, are not furnished as no employee is covered therein.

PUBLIC DEPOSIT : The Company has not accepted any deposit from the Public, during the period under review.

AUDIT COMMITTEE : Pursuant to the provisions of Section 292A of the Companies Act, 1956, the Company have Audit Committee constituted with five Independent and Non-Executive Directors viz. Serve Shri Rajesh J. Shah, Mahesh Bhatt, (Dr) A. A. Natu, Pradip Gandhi and Prakash Hirani with Shri Rajesh J. Shah as the Chairman of the Committee. The Committee performed the tasks, inter alia, provided thereunder. The terms of reference stipulated by the Board for the Audit Committee covers the all matters specified in aforesaid Section.

AUDITORS : The Auditors M/s. Mitesh P. Vora & Co., the Chartered Accountants, Ahmedabad hold office until the conclusion of ensuing Annual General Meeting and being eligible, offer themselves for reappointment. Members are requested to consider their reappointment and fix remuneration.

INSURANCE : All the properties and insurable interests of the Company including Buildings, Plant and Machineries and Stocks, have been adequately insured.

ACKNOWLEDGEMENT : Your Directors place on record their sincere appreciations to Bank of Baroda, all the esteemed Shareholders, Business Associates, Consultants and Employees of the Company for their valued contributions, continued Co- Operation and support given in furthering the interest of the Company.

By order of the Board of Directors, Date : 28.07.2006 Place : Vadodara Mahesh N Shah Vice Chairman, CEO & Managing Director