India's first bio-fuel pump to start soon

In winter 2005, Chief Minister Narendra Modi was at the Gujarat Agriculture University campus in Navsari, riding a tractor with a difference - it ran on bio-diesel. Come September, that bio-diesel will be available at a pump for the first time in India.

The bio-diesel production, from Jatropha plants, is the brainchild of 40-year-old Dharmendra Parekh, chairman and managing director of Aditya Aromedic and Bio-Energy. Since April, the firm has been producing bio-diesel from the jatropha plant.

Registered in 2005 and set up with a capital outlay of Rs 5 crore, the company produces 17,000 litres of bio-diesel per day at its 140,000-sq ft plant located in Tarsadi village on the Navsari-Bardoli highway in Navsari district.

The bio-diesel is sold at Rs 38.90 per litre while the price of regular diesel is Rs 39.20 per litre and that of premium diesel Rs 40.40.

The firm has been pre-selling its entire output every day since April. "We don't have to do any marketing. On the contrary I take a deposit of Rs 5,00,000 from all my customers and everyone irrespective of the quantity purchased has to pay the full amount in advance. And the delivery is done only after 20 days," says Parekh.

"I have at least five customers waiting in the queue, each of whom has a daily requirement of over 500 tonnes of bio-diesel." Right now, the fuel is supplied from two depots - one at Navsari and other at Mehsana in north Gujarat.

The clientele is spread over Ahmedabad, Nadiad, Vadodara and north Gujarat, Mumbai and Delhi.

Importantly, diesel vehicles do not need to modify their engines to use bio-diesel. "I have been using my own bio-diesel in my Tata Indica diesel car for the past nine months and it runs very smoothly and also gives me a mileage of 21 to 22 km on the highway," says Parekh, a graduate in computer science and master in bio-informatics. "There is no problem at all even if you keep on changing the fuel from regular diesel to bio-diesel."

Parekh also claims that his bio-diesel was much better in quality than most of the premium diesel brands being hawked by the oil majors.

Biocon - Annual Report - 2007-2008

BIOCON LIMITED

ANNUAL REPORT 2007-2008

DIRECTOR'S REPORT

Dear Shareholders,

We are pleased to present the Thirtieth Annual Report on business and operations together with the audited financial statements and the auditor's report of your Company for the financial year ended March 31, 2008. The financial highlights for the year under review are given below:

Corporate Results: Rs in Millions

Particulars for the year ended March 31, 2008 2007

TotaI Revenues 9,292 8,631

Total Expenditure 6,511 6,267

Profit before Interest Depreciation and Tax 2,781 2,364

Interest 29 77

Depreciation 690 576

Profit before Tax 2,062 1,711

Income Tax 106 127

Profit after Tax 1,956 1,584

Exceptional items (net of tax) 2,394 -

Surplus b/f from previous year 4,376 3,301

Profit available for appropriation 8,725 4,885

Proposed dividend on equity shares 500 300

Tax on proposed divided 85 51

Transfer to General Reserve 435 158

Balance in Profit and Loss account 7,705 4376

Consolidated results (Under Indian GAAP) Particulars for the year ended March 31,

Total Revenues 10,902 9,896

Total Expenditure 7,552 7,023

Profit before Interest, Depreciation and Tax 3,350 2,873

Interest 102 98

Depreciation 939 665

Profit before Tax 2,309 2,110

Income Tax 129 169

Profit after Tax 2,180 1,941

Minority Interest 65 62

Profit after tax and Minority interest 2,245 2,003

Exceptional items (net of tax) 2,394 -

Profit after exceptional items 4,639 2,003

Results of Operations:

During the year under review the operations excluding exceptional items reflected 10 percent growth in consolidated revenues while Operating Profits (EBITDA) and Profit after Tax grew by 17 percent and 12 percent respectively. The performance for the year reflects strong focus on operational efficiencies and aggressively defending our market position in the face of strong competition in the generic API space, monetization of some of our research programs by way of licensing and partnering and the divestment of the Enzymes business.

A detailed performance analysis is given in the Management Discussion and Analysis.

Appropriations Dividend The Board of Directors recommend a dividend of 60%, which is Rs 3.00 per equity share and also recommend a Special Dividend of 40% (Rs 2/- per share) pursuant to the divestment of enzyme business, taking the total dividend payout to 100% (Rs 5 per share).

Transfer to Reserves

We propose to transfer Rs 435 millions to the General Reserves. An amount of Rs 7,705 million is proposed to be retained in the profit and loss account.

Consolidated financial statements:

As stipulated in the listing agreement with the stock exchanges, the consolidated financial statements have been prepared by the Company in accordance with the relevant accounting standards issued by the Institute of Chartered Accountants of India. The audited consolidated financial statements together with Auditors Report thereon form part of the Annual report. The consolidated net profits of the Group for the year ended 31 st March 2008 amounted to Rs 2,245 million as compared to Rs 2,003 million in the previous financial year. This represents basic earnings per share of Rs 23.25.

Business Operations overview and Outlook

Significant volume growth and increased market share in the European and US Markets for Statins helped to negate the impact of pricing pressures and the weakening US Dollar thereby maintaining Statin sales at previous year's levels.

Sales of Insulin increased significantly in both the domestic and export markets. During the year, the Company entered into licensing agreements covering certain markets in Asia and has also progressed its application for registration in the European Union and several countries across Asia, Latin America and Africa. To meet the overall increased projections for Insulin, the Company has commenced an expansion of its capacities and the new facility is near completion and is expected to be commissioned later this year.

Immunosuppressants are also expected to offer significant growth opportunities consequent to product patent expiry in key markets of Mycophenolate Mofetil and Tacrolimus in the period 2008-2012.

Biocon's foray into direct marketing of formulations continued to make impressive strides. During the year the Nephrology Division launched ERYPROTM and ERYPROSAFETM, for treatment in renal transplant and dialysis and two Immunosuppresants - RENODAPTTM and TACROGRAFTM. Biocon's Insugen has been widely prescribed and accepted with impressive gains in market share and BIOMAB EGFRTM has been prescribed to over a 1,000 patients since its launch in August 2006.

Biocon signed two important agreements with Abraxis Biosciences, USA to out- license G-CSF for the North American and European markets and in-license Abraxane. for India and a few markets across Asia and the GCC. These agreements are expected to generate a steady stream of revenues once the products get regulatory approval in the relevant territories.

Biocon also entered into an agreement to acquire a majority stake in AxiCorp GmbH, Germany. This strategic investment will enable Biocon to market and distribute biosimilar insulin and analogs in Europe which together with NeoBiocon, its joint venture in Dubai, thereby expanding Biocon's global reach. Biocon continues to invest incrementally to progress its innovation pipeline. While during the year Biocon monetized some of it's research programs by way of licensing and partnering , it's rich product pipeline including IN-105, BVX 10, BVX 20 and T1 H are expected to contribute significantly to Biocon's growth in the future years. During the year Biocon has completed Phase I studies of IN-105 in India and received approval for commencement of Phase II studies. Biocon has also initiated Phase I studies for IN 105 in Sweden and Phase II studies for T1 H in India.

Subsidiaries and Joint Ventures: Syngene International Limited: Syngene has strong knowledge base where out of the total strength 907 employees (754 in the previous year) more than 90% employees are scientists. With the focused and collaborative efforts of its employees, Syngene has achieved greater heights during the year and has built a strong international reputation.

Clinigene International Limited:

Clinigene International Limited is a wholly owned subsidiary of your Company focused on Clinical Development.

For the current financial year, Clinigene earned a profit of Rs 24 million as against Rs 8 million in the previous year. The company registered a revenue of 227 million as against Rs 11 5 million in the previous year.

During the year Clinigene has moved into a 65,000 sq. ft. fully functional facility at Semicon Park which houses a complete array of services including human pharmacology, clinical operations, clinical data management, bioanlytical services and a central laboratory supporting early phase to late phase clinical development programs. With demand for outsourced research growing exponentially, Clinigene is well positioned to strengthen its existing relationships and establishing new partnerships with top MNC pharma companies for clinical development requirements.

Biocon Biopharmaceuticals Private Limited: This is Biocon's 51 :49 JV with CIMAB SA, to manufacture monoclonal antibodies and other Recombinant Therapeutics. BBPL commenced operations during the current year and has primarily been engaged in the manufacture of BIOMAb-EGFRTM for the treatment of Head and Neck cancer.

As at March 31, 2008, BBPL had accumulated losses of Rs 325,611. Biocon's share in the accumulated losses of BBPL aggregates Rs 166.062. Approval of BIOMAb-EGFRTM for new indications and commencement of sales to global markets is expected to help improve profitability in fiscal 2010.

Report on subsidiary companies:

The Company has obtained exemption from the Government of India, Ministry of Company affairs from attaching the financial accounts of the subsidiary companies to this Report pursuant to Section 212 of the Companies Act, 1956. However, a statement showing the relevant details of the Subsidiaries is enclosed and is a part of the Annual Report.

Capital Structure During the financial year under review, the share capital of your Company remained unaltered.

Employees Stock Option Plan (ESOP): During the year Company granted employee stock options for purchase of 311,821 shares in Biocon Limited at a 20% discount to the prevailing market price, the details of the which are reported separately under the report.

Corporate Governance:

We strive to attain high standards of corporate governance while interacting with all its stakeholders. The Company has complied with the corporate governance code as stipulated under the listing agreement with the stock exchanges. A separate section on Corporate Governance along with a certificate from the auditors confirming the level of compliance is annexed and forms a part of the Directors' report.

Directors: Dr. Bala S Manian and Dr. Neville C Bain retire by rotation at the ensuing Annual General Meeting, and being eligible, offer themselves for re-appointment.

Auditors:

The Statutory Auditors M/s. S. R. Batliboi & Associates, Chartered Accountants, Bangalore, retire at the ensuing Annual General Meeting, and have confirmed their eligibility and willingness to accept office, if re-appointed.

Management Discussion and Analysis Report The report as required under the Listing agreements with the Stock Exchanges is annexed and forms part of the Directors' Report.

Cumulative disclosure under the stock option scheme as on 31 March 31, 2008: Disclosure of the particulars of stock options schemes as on the above date, as per SEBI guidelines:

Particulars First Grant (Post Second Grant (Post Equity Share Split Equity Share Split and Bonus) and Bonus)

a. Options Granted (Net of Options cancelled) 3337580 132055

b. Exercise price Rs 0.2 Rs 5 each

c. Options vested 3,337,580 132,055

d. Options exercised 3,337,580 121,765

e. Total number 3,337,580 110,985of Equity Shares to be transferred from the ESOP Trust as a result of exercise of options

f. Options lapsed Nil 10,290

g. Variation in the terms of options None None

h. Money realized by exercise of options Rs 678,016 554,925

i. Option pending exercise Nil 10,780

j. Total number of options in force Nil Nil

k. Person-wise details of options granted to:

i. Directors and key managerial employees Please see Table (I) Nil below for details regarding options granted to Directors and key managerial employees

ii. any other employee who Nil Nilreceived a grant in any one year amounting to 5% or more of the options granted duringthat year

iii. Identified employees who Nil Nilhave been granted options during any one year equal to orexceeding 1% of the issued capital (excluding outstanding warrants and conversions) ofthe Company at the time of grant

I. Diluted Earning Not applicable Not applicable sincePer Share (EPS) since shares will shares will be transferredpursuant to issue of be transferred by by the ESOP Trust uponshares on exercise the ESOP Trust upon exercise of the optionsof options exercise of the and the Company will not be options and the required to issue any new Company will not be shares required to issue any new shares

m. Vesting schedule 25% each in April of 25% each in January 2003, 2004, 2005 of 2005, 2006, 2007 and 2006. and 2008.

n. Lock-in No lock-in, subject No lock-in, subject to to a minimum vesting a minimum vesting period of 1 year. period of 1 year.



Particulars Third Grant (Post Fourth Grant (Post Equity Share Split Equity Share Split and Bonus) and Bonus)a. Options Granted (Net of Options cancelled) 387,250 3,758,361

b. Exercise price Rs 315 each 2,985,700 at Rs 275/-and 460,840 at Rs 300/- (20% discount to Prevai- ling market Price)

c. Options vested 311,250 352,925

d. Options exercised 235,625 151,900

e. Total number 235,625 Nilof Equity Shares to be transferred from the ESOP Trust as a result of exercise of options

f. Options lapsed 93,500 679,162

g. Variation in the terms of options None None

h. Money realized by exercise of options 74,221,875 41,772,500

i. Option pending exercise Nil 201,025

j. Total number of options in force 58,750 2,927,299

k. Person-wise details of options granted to:

i. Directors and key managerial employees Nil Please see Table(I) below for details regarding options granted to Directors and key managerial employees

ii. any other employee who Nil Nilreceived a grant in any one year amounting to 5% or more of the options granted duringthat year

iii. Identified employees who Nil Nilhave been granted options during any one year equal to orexceeding 1% of the issued capital (excluding outstanding warrants and conversions) ofthe Company at the time of grant

I. Diluted Earning Not applicable Not applicable sincePer Share (EPS) since shares will shares will be transferredpursuant to issue of be transferred by by the ESOP Trust uponshares on exercise the ESOP Trust upon exercise of the optionsof options exercise of the and the Company will not be options and the required to issue any new Company will not be shares required to issue any new shares

m. Vesting schedule 25% each in April of Year 1 -25% 2005, 2006, 2007 Year 2 -35% and 2008. Year 3 -40% (Year 1 being 3 years from Date of joining or 1 year from July 19, 2006 whichever is later)

n. Lock-in No lock-in, subject No lock-in, subject to to a minimum vesting a minimum vesting period of 1 year. period of 1 year.



Table (1) details regarding options granted till date to Directors and key managerial employees are provided below:

SI. Name of Director or A B No. key managerial personnel

Directors

1. Dr. Neville Bain 195,902 Nil

2. Prof. Charles Cooney 195,902 NilKey managerial employees

3. Dr. Arun Chandavarkar 195,902 Nil

4. Mr. Murali Krishnan K. N. 195,902 Nil

5. Dr. Goutam Das 195,902 Nil

6. Mr. Rakesh Bamzai 122,430 Nil

7. Mr. Chinappa M. B. 122,439 37,500

A = First Grant (Post Equity Share Split and Bonus) (No. of Options Granted)

B = Fourth Grant (Post Equity Share Split and Bonus) (No. of Options Granted)

Scientific Advisory Board:

The Scientific Advisory Board under the chairmanship of Prof. Charles Cooney met twice during the year under review. The Board has played an important role in evaluating and steering the Company's R&D programs in a pragmatic manner.

Fixed Deposits:

We have not accepted any fixed deposits during the financial year under review.

Directors' responsibility statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Board of Directors hereby confirm as under:

i) In preparation of annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

ii) We have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii) We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) We have prepared the annual accounts on a going concern basis.

Particulars of Research and Development, Conservation of energy, technology absorption etc.:

Particulars required under Section 217 (I) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in the annexure to the Report.

Particulars of employees:

The information required to be furnished under section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, is annexed and is a part of this report.

Acknowledgements:

Your Directors greatly appreciate the commitment and dedication of all the employees at all levels that has contributed to the growth and success of the Company. We would also thank all our clients, vendors, investors, bankers and other business associates for their continued support and encouragement during the year.

Your Directors thank the Government of India, Government of Karnataka, Ministry of Commerce and Industry, Ministry of Finance, Ministry of Information technology and Biotechnology and Customs and Excise Department, Income Tax Department, CSEZ and all other Government agencies for their support during the year and look forward to their continued support in the future.

For and on behalf of the Board

Kiran Mazumdar-Shaw John Shaw Chairman and Managing Vice Chairman Director April 22, 2008Conservation of Energy

During the year, the Company has taken significant measures to reduce the energy consumption by using energy-efficient machines and equipment.

FORM A

For the year ended March 31,

2008 2007

A. Power and Fuel Consumption

1. Electricity

a. Electricity Purchase Unit (000) 55,288 48,728

Total Amount (Rs in Lakhs) 2,464 2,222 Rate per Unit 4.46 4.56

b. Own Generation from Diesel Generator Unit (000) 38,009 26,239 Total Amount (Rs in Lakhs) 3,194 2,363 Rate per Unit 8.4 9.00

2. Furnace Oil Unit (K. Ltrs.) 8,536 8,002 Total Cost (Rs in Lakhs) 1,696 1,622 Average/K. Ltrs. 19,869 20,275

B. Consumption per unit of Production

The disclosure of consumption figures per unit of production is not meaningful as the operations of the Company is not power intensive and involves multiple products.

FORM B

1. Specific areas in which R&D work has been carried out by the Company

- Process and Clinical Development of Novel Biotherapeutics in Oncology, Diabetes, Rheumatology and Cardiovascular segments.

- Process and Clinical Development of Biosimilars in Oncology, Metabolic disorders, Diabetes, Rheumatology and Cardiovascularsegments.

- Development of Synthetic and Fermentation based Generic Small Molecules for Anti-infective, Cardio-vascular, Nephrology and Transplantation segments.

- Generation of Intellectual Property Development- Process Patents for manufacture of key Generic Small Molecules and Biotherapeutics and unraveling the mechanism of action of novel biotherapeutics.

- Development of globally competitive manufacturing processes.

- Clinical Development of new drug combinations.

B. Benefits derived as a result of R&D activities.

- Scale-up of key Biosimilars with improved productivity and process efficiencies.

- Strategic collaborations for development of new Biotherapeutics.

- Global presence in supply of fermentation based Small Molecules to the Generic Industry in regulated markets.

- Rich Pipeline of Generic Small Molecules catering to varied therapeutic areas.

- Internationally competitive prices and product quality.

- Generation of high quality data compliant with International Regulatory requirements.

- Established intellectual property with 861 Patents/ PCT applications filed in Indian and International markets.

- Safe and environment friendly processes.

C. Future Plan of Action

- Greater importance in the research areas of New Drug Discovery.

- Clinical Development of existing pipeline of Biotherapeutics for Regulated markets.

- Strategic Collaborations for increased speed and cost competitiveness in Drug Discovery.

- Continued emphasis on Monoclonal Antibodies and Biotherapeutics leveraging on Biocon's in-house process development and analytical skills.

- Continue to strengthen R&D capabilities in the area of New Biotherapeutics.

- Progress our R&D programs in respect of Monoclonal antibodies against CD6, EGFR, CD20 & TNF- and Oral insulin.

2. Expenditure on scientific Research & Development:

Rs in Millions 31.03.2008 31.03.2007

(a) Capital 175 98(b) Recurring 471 381(c) Total 646 479(d) Total R& D expenditure as percentage of sales 6.9% 5.5%

3. Technology Absorption, Adoption and Innovation:

No imported technology during the year

4. Foreign Exchange earnings and outgo:

Foreign exchange earned and used for the year ended 31st March, 2008,

Rs in Millions

31.03.2008 31.03.2007

Gross Earnings 5,226 4,800

Outflow* 3,277 2,829

Net foreign exchange earnings 1,949 1,971

*For details please refer to information given in the notes to accounts to the annual accounts of the Company in Schedule 22 Notes to accounts Item No. iv to vi.

MANAGEMENT DISCUSSION AND ANALYSIS(All amounts in Indian Rupees thousands, except share data, share price and amounts expressed in foreign currency)

1. INDUSTRY STRUCTURE AND DEVELOPMENT

The global pharmaceutical sales grew 6 percent at constant exchange rates in 2007, to reach a record USD 712 billion. North America, Europe and Japan continued to account for about 80 percent of the total global pharmaceutical market, with North America experiencing slower growth at 4 percent. Emerging markets in Asia and Latin America continued to outpace global performance with double-digit growth. In terms of regional performance, North America, which accounts for 43 percent of global pharmaceutical sales, grew 4 percent, to USD 305 billion, while Europe buoyed by the appreciating Euro experienced higher growth of 7 percent, to USD 206 billion. Sales in Latin America grew 12 percent to USD 32 billion, while Asia Pacific (outside of Japan) and Africa grew 13 percent to USD 62 billion with China, Korea and India growing by 26 percent, 11 percent, and 13 percent respectively. Sales in Japan reversed the decline experienced in the previous year on account of the biennial price cuts which occurred April , 2006 and grew 4 percent to USD 59 billion.

Oncologics grew 16 percent to USD 41 billion and displaced Lipid Regulators as the top selling therapy class for 2007. Patent expiry of Zocor. and declining sales of Lipitor. partially contributed to Lipid Regulators sales declining by 7percent to USD 34 billion. Respiratory Agents with sales of USD 29 billion grew 12 percent and retained its position as the third largest class of therapeutic drugs. Antidiabetics at the 5th position also experienced double digit growth with sales of USD 24 billion.

The biopharmaceutical market represented 10 percent of the global pharmaceutical market, having grown 17 percent in 2007 and the double-digit growth of the market is expected to continue to the end of the decade.

Generic Pharmaceutical Industry

The generic drugs market refers to regulated markets for drugs whose patents have expired or been invalidated. The expiration or invalidation of product patents typically leads to the entry of generic, or non-branded, formulations in the regulated markets, resulting in increased competition and leading to a decline in price and margin of drugs.

Drugs with approximately $20 billion in annual sales will face patent expiry in 2008, similar to levels seen over the past two years. This is expected to drive growth of generics by 14-15 percent next year, to more than $70 billion. In 2008, more than two-thirds of all prescriptions written in the U.S. are expected to be for generics. New government contracting initiatives in Germany, and educational programs in Japan, Spain and Italy, will drive greater generics use in those markets. Also, generics competition within the biotech sector will rise as the biosimilar epoeitin alfa is marketed across Europe. This trend reflects a changing balance between new and old products and a growing 'genericization' of many primary care categories. Low cost producers such as India and China are expected to play a key role in the development of the generics industry.

2. OUTLOOK

The global pharmaceutical market is expected to grow at a 5-6 percent in 2008, compared with 6 percent in 2007. In the U.S. and the five largest European markets, sales growth in 2008 is expected to range from 4-5 percent and 1-2 percent in Japan. Key factors limiting growth in these markets include: a leveling off of growth from the introduction of the Medicare Part D prescription drug benefit in the U.S., patent expiration of branded product, and an associated increase in the use of lower-cost generics; increased pressure from payers to control costs and limit access to certain treatments; and heightened safety scrutiny and healthcare legislation that is slowing, and in some cases halting, the introduction of new medicines. The seven 'pharmerging' markets of China, Brazil, Mexico, South Korea, India, Turkey and Russia are expected to grow 12-13 percent next year, to $85-90 billion. In these markets, there is significantly greater access both to generic and innovative new medicines as primary care improves and becomes more available in rural areas, and as private health insurance becomes more commonly held. Ongoing economic growth in the developing world will continue to shift the focus away from infectious diseases and toward cardiovascular, diabetes and other chronic illnesses.

3. OPPORTUNITIES

The surge in generics together with the expected patent expiry of key immunosuppressant drugs provides Biocon with attractive opportunities in the near to medium term. In addition the opening up of bio-similar in US and Europe is seen as a large opportunity in the medium term. Success in Biocon's Research and Development initiatives into new drug discovery could also yield significant benefits.

4. RISKS & CONCERN The Generic Industry is subject to patent litigation and regulatory issues. Patent challenges or delay in receipt of regulatory approvals could delay our product launch in key markets. In addition significant additional competition in key products could erode our market shares and result in reduced prices and profitability. The consolidation of the generic industry could result in larger generic players acquiring manufacturing capabilities thereby reducing the market for third party manufacturers. The failure to obtain regulatory approval for new drugs under development could affect long term business opportunities. Other key risks related to our business include loss of key personnel, increase in input costs and strengthening/depreciation of the Indian Rupee against the US Dollar.

The Company carries out a detailed Risk Management exercise or purposes of identification of risks and putting in place processes and controls to mitigate these risks. The audit committee reviews the Company's risk management framework and approves risk management action plans.

5. INTERNAL CONTROLS

Biocon has well established internal control systems for operations of the Company and its subsidiaries. The Finance Department is well staffed with experienced and qualified personnel who play an important role in implementing and monitoring the internal control environment and compliance with statutory requirements.

The Internal Audit is conducted by an independent firm of Chartered Accountants.

The Audit committee addresses significant issues raised by the Internal & Statutory Auditors.

6. HUMAN RESOURCES:

Biocon recognizes that nurturing and recruiting the best talent is vital to the long-term success of the enterprise. Employees are provided with continuous opportunities for active learning and development which are viewed as key drivers of their personal growth and the success of Biocon. The remuneration structure links rewards directly with performance. This performance management system reinforces our work ethics. Employees also participate in the Employee Stock Option Plan and about 10 percent of the Company is owned by Employees and a Trust formed for the benefit of Employees.

The total employee strength of the Company and its subsidiaries at end of the financial year post transfer 2007-08 was 2,772 as against 2,543 at the end of the previous financial year.

7. CAUTIONARY STATEMENT:

The statements made in this report and those appearing elsewhere, may be 'forward looking statements' that set forth anticipated results based on management plans and assumptions. These statements are likely to address the Company's growth strategy, financial results, product development, product approvals, product potential and development programs. Achievement of future results is subject to risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. Among the factors that could cause actual results to differ materially are:

a) Success of our research and development initiatives;

b) The impact of existing and future regulatory provisions on product exclusivity;

c) Competitive developments affecting our product portfolio;

d) Interest rate and foreign currency exchange rate fluctuations;

e) Statutory legislations and regulations affecting domestic and foreign operations, including tax obligations; and other allied factors

8. Discussion on financial performance with respect to operational performance Overview The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted

Accounting Principles (GAAP) in India.BALANCE SHEET - MARCH 31 (All amounts in Indian Rupees thousands)

2008 2007 ChangeSOURCES OF FUNDSShareholder's FundsShare Capital 500,000 500,000 -

Reserves and Surplus 12,781,963 8,916,405 43% 13,281,963 9,416,405 41%Loan Funds

Secured loans 892,634 587,331 52%

Unsecured loans 546,219 480,402 14%

1,438,853 1,067,733 35%

Deferred Tax Liability 398,237 397,569 - 15,119,053 10,881,707 39%APPLICATION OF FUNDS

Fixed Assets

Cost 8,525,081 8,099,852 5%

Less: Accumulated depreciation 2,006,485 1,449,958 38%

Net book value 6,518,596 6,649,894 (-2%)

Capital work-in-progress 646,341 299,048 116% 7,164,937 6,948,942 3%

Intangible Assets 276,000 512,000 (-46%)

Investments 4,772,602 470,238 915%

Current Assets, Loans and Advances Inventories 1,677,350 1,506,589 11%

Sundry debtors 2,256,629 2,748,526 (-18%)

Cash and bank balances 81,244 76,313 6%

Loans and advances 1,235,457 783,541 58% 5,250,680 5,114,969 3%

Less: Current Liabilities and Provisions 2,345,166 2,164,442 8%

Net Current Assets 2,905,514 2,950,527 -2% 15,119,053 10,881,707 39%

Share Capital (Issued, Subscribed & Paid up)Year ended March 2008 2007 Nos. Amount Nos. AmountBalance at the beginning of the year 100,000,000 500,000 100,000,000 500,000

Share issued during the year - - - -

Balance at the end of the year 100,000,000 500,000 100,000,000 500,000

The Company has only one class of shares viz. equity shares of par value of Rs 5 each. The authorized share capital of the Company was raised from Rs 20,000 in 2002-03 to Rs 600,000 in 2003-04 represented by 120,000,000 equity shares of Rs 5 each.

The Company carried out a sub-division of equity shares of face value of Rs 10 each into 2 equity shares of Rs 5 each. Consequently, the issued, subscribed and paid -up capital of Rs 18,377 has been divided into 3,675,300 shares of Rs 5 each.

The Company in 2003-04 issued 86,324,700 equity shares of Rs 5 each as bonus shares in the ratio of 23.4877958 shares for every one share held to the shareholders existing as on November 11, 2003, which was the approved record date for this purpose, by capitalisation of the balance in the profit and loss account of Rs 431,624.

In March 2004, the Company made an IPO of 10,000,000 fresh equity shares of Rs 5 each at a price of Rs 31 5 per share.

Reserves and surplus

The total reserves and surplus has increased from Rs 8,916,405 in March 31, 2007 to Rs 12,781,963 in March 31, 2008. The increase has been on account of profits made during the year Rs 1,955,591 from operations and net exceptional income of Rs 2,393,654 constituted predominantly by the divestment of enzymes division to M/s Novozymes South Asia and adjusted for the proposed dividend of Rs 584,975 inclusive of Dividend distribution tax.

Loan funds

There has been an increase in the loans outstanding from Rs 1,067,733 in March 2007 to Rs 1,438,853 in March 2008. The unsecured loans increased by Rs 65,817 on account of accumulation of interest free deferred sales tax liability in respect of sales made during the year. The sales tax liability(including turnover tax) outstanding to the extent of Rs 542,685 is repayable in five years of ten equal half yearly installments commencing from August 2012.

The secured loan has increased from Rs 587,331 to Rs 892,634 in fiscal 2008 due to increase in borrowed funds for operational purposes.

Fixed Assets 2008 2007 %

Cost 8,525,081 8,099,852 5%

Less : Accumulated depreciation 2,006,485 1,449,958 38%

Net Block 6,518,596 6,649,894 (-2%)

Net Asset turnover ratio 1.35 1.24

Add: capital work in progress 646,341 299,048 116%

Net fixed assets 7,164,937 6,948,942 3%

During the year 2008, the Company has capitalized fixed assets to the extent of Rs 595,401. The company has started depreciating these assets over their estimated useful lives during the year thereby resulting in an increase in accumulated depreciation.

The capital work in progress as at March 31, 2008 represents advances paid towards acquisition of fixed assets and the cost of assets not put to use. These comprise assets relating to expansion of insulin manufacturing capacities and construction of additional infrastructure facilities at Biocon Park.

The company has a outstanding capital commitments of Rs 261,210 as at March 31, 2008 as compared to Rs 400,600 as of March 31, 2007 on account of the aforesaid ongoing projects.

Investments

The Company as at March 31, 2008 held investments of Rs 4,772,602 as compared to Rs 470,238 as of March 31, 2007. The substantial increase in investments amounting to Rs 4,302,364 is contributed by investment of Rs 4,280,365 in money market instruments (mutual funds) in respect of funds realized from the divestment of enzymes business during the year. The Company during the year made a fresh investment in IATRICa Inc of USD 1,000,000 amounting to Rs 39,650 IATRICA is engaged in and to the Company has entered into a collaborative project for antibodies.

The Company also during the year formed a joint venture in the UAE with M/s Neo Pharma LLC. NeoBiocon FZ LLC, is a 50:50 joint venture focused in the development of west asian markets for the Company's products. The Company has subscribed to 150 shares amounting to Rs 16,371. The Joint Venture was incorporated in the last quarter of the fiscal and is slated to commence commercial operations in the first half of the ensuing fiscal. The company continues to hold investments in 2 wholly owned subsidiaries and other joint venture company iz., Syngene Clinigene, Biocon Biopharmaceuticals of Rs 84,328 , Rs 500 , 89,760 respectively.

Intangible Assets

In April 2006, the Company had emerged at the successful bidder for the assets of Nobex, Inc which primarily included, without limitation, patents relating to certain technologies for Oral Insulin, Oral BNP, Basal Insulin, Apaza and others (collectively referred to as IPs) for a total consideration of Rs 521,138 including costs directly attributable to the said acquisition.

The Company had since decided to amortise the investment in IP-Apaza from October 2006 after its decision to license the same and retain the other IPs for further commercialization / monetization. Further, in December 2007, as a matter of prudence, the Company recorded a total impairment of Rs 220,000 in respect of one of its intellectual property- Oral BNP in view of adverse reports and decline in sales trend of Natrear / Neseritide, a competitive drug. In addition, an amount of Rs 16,000 has been amortised during the year in respect of IPs that were identified as being ready for commercialisation during the earlier period.

Current assets, loans and advances

The current assets, loans and advances have increased from Rs 5,114,969 to Rs 5,250,680 , an increase of 3% over the previous year. This was mainly due to

- Increase in inventories from Rs 1,506,589 to Rs 1,677,350 largely on account of increase in purchase of raw materials and semifinished goods which rose by Rs 87,376 and Rs 84,216 respectively as compared to the previous year.

- Sundry debtors stood at 2,256,629 (net of provision for doubtful debts of Rs 40,454) as at March 31, 2008 as compared to Rs 2,748,526 (net of provision for doubtful debts of Rs 29,555) as at March 31, 2007. These debtors are considered good and realisable. Provision for doubtful receivables as on March 31, 2008 has been made for debtors overdue for more than 360 days subject to review of collectibility of specific dues. Debtors represent an outstanding of 99 days and 116 days of revenue as at March 31, 2008 and March 31, 2007 respectively on a moving average of 3 month's sales.

Provision for doubtful debts represents 0.13% and 0.12% of gross sales for the year ended March 31, 2008 and March 31, 2007 respectively.

Loans and advances has increased from Rs 783,541 to Rs 1,235,457 as on March 31, 2008. This increase of 57.7% is mainly on account of increase in inter corporate deposits to subsidiary / Joint venture company , which has increased from Rs 316,447 to Rs 581,540 , increase in balances with customs, excise and sales tax authorities, which has increased from Rs 173,149 to Rs.281,568 compared to the previous year and increase in advance income tax (net of provisions) amounting to Rs 87,405 as against the previous year.

Current liabilities and provisions

The current liabilities and provisions has increased by 8.3 % from Rs 2,164,442 as at March 31, 2007 to Rs 2,345,166 as at March 31, 2008. This increase is primarily due to proposed dividend of Rs 500,000 (100%) for the year ended March 31, 2008 as against 300,000 (60%) in the previous year .There is a decrease in Sundry creditor balances for capital expenditure as well as other creditors from Rs 370,630 to Rs 301,351 and from Rs.1,105,800 to Rs 1,030,374 respectively as at March 31, 2007.

Revenues

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2008 2008 2007 Change% INCOME

Gross sales 8,587,496 8,599,119 -0.1% Less: Excise duty 266,657 361,717 -26.3% Net sales 8,320,839 8,237,402 1.0% Licensing and Development fees 448,413 272,352 64.6% Other income 522,752 121,105 331.7% 9,292,004 8,630,859 7.7% EXPENDITURE Material costs 3,914,284 4,158,125 -5.9% Employee costs 696,263 603,735 15.3% Operating and other expenses 1,900,804 1,504,830 26.3% Interest and finance charges 28,698 77,618 -63.0% 6,540,049 6,344,308 3.1% PROFIT BEFORE DEPRECIATION, EXCEPTIONAL ITEMS AND TAXES 2,751,955 2,286,551 20.4%

Depreciation and Amortisation (net of transfers) 689,980 576,060 19.8% PROFIT BEFORE TAXES AND EXCEPTIONAL ITEMS 2,061,975 1,710,491 20.5% Provision for Income Tax Current Tax 93,036 - Deferred taxes 668 117,831 -99.4% Fringe benefit tax 12,680 9,158 38.5% PROFIT AFTER TAXES AND EXCEPTIONAL ITEMS 1,955,591 1,583,502 23.5% EXCEPTIONAL ITEMS NET OF TAX 2,393,654 - 100.0% NET PROFIT FOR THE YEAR 4,349,245 1,583,502 174.7% Balance brought forward from the previous year 4,375,617 3,301,451 32.5% PROFIT AVAILABLE FOR APPROPRIATION 8,724,862 4,884,953 78.6% Proposed dividend on equity shares 500,000 300,000 66.7% Tax on proposed dividend 84,975 50,985 66.7% Transfer to general reserve 434,925 158,351 174.7% BALANCE, END OF THE YEAR 7,704,962 4,375,617 76.1%

Biocon's total income has four components:

* Sales of Biopharmaceuticals products;* Sales of Enzymes products;* Technical Licensing fees; and* Other income.

The following table sets out the contribution of each of these components of Biocon's income expressed as a percentage of Biocon's total income for the years ended March 31, 2008 and March 31, 2007:

Sales 2008 2007

Sale of Products

Biopharmaceuticals 84.6% 82.8% Enzymes 4.9% 12.6%

Technical Licensing Fees 4.8% 3.2%

Other Income 5.6% 1.4%

Total Income 100.0% 100.0%

Share of revenues from net sales between domestic and export markets are as follows:

Share of revenues 2008 % 2007 %

Domestic 3,544,564 42.6% 3,748,241 45.5%Exports 4,776,275 57.4% 4,489,161 54.5%

Total 8,320,839 8,237,402 100.0%

Biocon's net sales grew by 1 percent to Rs 8,320,839 in 2007-08 while the total income grew by 7.7 percent to Rs 9,292,004. The Company's export revenues from product sales have increased by 6 percent, and domestic sales have decreased by 5.4 percent. The increase in export sales is mainly driven by increase in sale of bio-pharmaceutical products and domestic sales decreased primarily due to the fact that the enzymes business was divested from October 1, 2007.

Revenues from sale of biopharmaceuticals registered a growth of 7.9 percent in March 31, 2008 over March 31, 2007, and the enzymes segment registered a decrease of 51.9 percent over the same period. Enzymes business was divested from October 1, 2007.

Segment and product-wise performance

The segmentation of Biocon's sales is as follows:

2008 % 2007 %

Biopharmaceuticals 7,863,823 94.5% 7,287,258 88.5%Enzymes 457,016 5.5% 950,144 11.5%

Total 8,320,839 100.0% 8,237,402 100.0%

Bio-pharmaceuticals In pharma, we focus on the manufacture and marketing of APIs that require fermentation and synthetic chemistry skills. Our biopharmaceuticals business contributes towards 94.5 percent & 88.5 percent of our sales in 2007-08 and 2006-07 respectively.

Statins: Statins are cholesterol-lowering agents used to treat and prevent coronary diseases and are amongst the largest selling drugs worldwide. The Company's statins portfolio presently comprises lovastatin, simvastatin, pravastatin, atorvastatin besides other statins under development. Biocon is currently exporting simvastatin to the US, Europe, Japan and Canada, lovastatin to the US and pravastatin to the US and European markets. The Company has over the years been facing severe pricing pressure in this segment due to increased competition and changing industry price dynamics.

The US patent for Simvastatin and Pravastatin expired during fiscal 2007 and the Company has commenced exports to USA in the 2nd half of fiscal 2007. The Company has also during the year received US FDA qualification for its new facilities at Biocon Park thereby substantially increasing the production capacity to address the Statin global demand.

Immunosuppressants: Immunosuppressants prevent organ and tissue rejection in transplants and require high technology based manufacturing capabilities. Currently Biocon produces mycophenolate mofetil (MMF), sirolimus and tacrolimus. MMF and tacrolimus are sold largely in the domestic market and certain export markets. Biocon will actively promote it's product in the US, Japanese and European markets. Biocon has filed a DMF for MMF, tacrolimus and sirolimus to address the US markets following patent expiry.

Other biopharmaceutical products:

Biocon also supplies a range of other Biopharmaceutical products. Biocon markets recombinant human insulin in India under its own brand name INSUGEN and has also registered the Insulin in several export markets. In addition Biocon has supply arrangements with Pharma Majors and device companies to supply recombinant human insulin for use in their novel insulin formulations. Some of these delivery systems are undergoing clinical trials.

Sale of Formulations: Biocon has a dedicated marketing team for finished formulations. This segment, though in the nascent stage, has been growing rapidly. With a focus on the anti-diabetic and cardio-vascular market, Biocon's own insulin brand 'Insugen' is also marketed by the formulation team. The formulation segment currently has a team which comprises of field staff spread across the country, with sales registering impressive growth in FY 2008 as compared to FY 2007. During the fiscal year 2008, Biocon Limited launched its new Nephrology Division and a comprehensive portfolio of renal therapy products. Biocon's Nephrology division is committed to finding solutions to kidney disorders using the highest standards of biotherapeutics and will simultaneously strive towards reducing the risks of the disease in the future, through progressive research and innovative therapies. Biocon also launched BIOMAb-EGFRTM, a therapeutic monoclonal antibodybased drug for treating solid tumors of epithelial origin, such as head and neck cancers. BIOMAb-EGFRTM is produced at Biocon's state-of-the-art manufacturing facility at Biocon Park.

Enzymes Biocon develops and markets a mix of specialty and industrial enzymes for a broad range of industries including food, beverages, brewing and distilling, textiles and paper. The enzymes business has been sold to M/s. Novozymes South Asia Private Limited during the year. Hence, Enzymes sales is only recorded for the first 6 months during the fiscal 2008.

Technical Licensing Fees These fees represent income received by Biocon towards transfer of proprietary technology in respect of certain bio-generics under long term contracts. They also include fees received by Biocon towards out-licensing it's proprietary products. During the year, there has been an increase of Rs 176,061 in respect of such fees from Rs 272,352 in fiscal 2007 to Rs 448,413 in fiscal 2008. Biocon is committed towards tapping more revenues from this source by scaling up a large number of bio-generics including Insulin, GCSF, ERYPRO, Streptokinase, Retiplase, etc. and advancing our discovery programs including oral insulin and Monoclonal Antibodies against CD6, EGFR, CD 20 & CD 10.

Other Income The Other income has registered a increase of 331.7 percent compared to the previous year. Other income consists primarily of dividend income from investment amounting to Rs 138,746 as compared to Rs 2,922 in the fiscal 2007. It also includes milestone receipts of Rs 174,997 and charges billed to group companies for services rendered for support services which has increased from Rs 70,792 in fiscal 2007 to Rs 169,202 in fiscal 2008.

Material costs Material costs includes Biocon's consumption of raw materials and traded goods and increases or decreases in stock. Materials costs has decreased by 5.9 percent from Rs 4,158,125 to Rs 3,914,284 over the previous year. But as a percentage of sales, the material cost has decreased by 3.5 percent mainly on account of increased manufacturing activity and reduction in sourcing of advanced intermediates.

Employee costs

Staff cost comprises:

* Salaries, wages, allowances and bonuses;

* Contributions to provident fund;

* Contributions to superannuation, gratuity and leave encashment;

* Amortisation of Employees stock compensation expenses, and

* Welfare expenses (including employee insurance schemes and other miscellaneous employee benefits) Staff costs has increased from Rs 603,735 for the fiscal year 2007 to Rs 696,263 for the fiscal year 2008. The increase in employee costs is mainly due to increments during the year and addition to employees.

Operating and other expenses Operating and other expenses comprises of rent; travelling and conveyance; communication; professional charges; power and fuel; patent fees; consumables; repairs and maintenance; general expenses; freight outwards; sales promotion; commissions; bad debts write off; provisions for bad and doubtful debts; printing and stationary; insurance; rates, taxes and fees; and losses on sales of assets. Operating and other expenses have increased by 26.3 percent from Rs 1,504,830 for the year 2007 to Rs 1,900,804 for the year 2008 mainly on account of the following:

- 23 percent increase in power and fuel costs from Rs 620,71 5 in fiscal 2007 to Rs 761,171 in fiscal 2008 and 26 percent increase in repairs and maintenance costs from Rs 166,500 in the previous year to Rs 209,925 in fiscal 2008 on account of increase in production activity at Biocon Park .

- 20 percent increase in research and development expenses from Rs 1 59,738 to 191,169 on account of increase in our ongoing research initiatives including the oral insulin project

- 38.8 percent increase in Selling expenses from Rs 226,41 5 in FY 2007 to Rs 314,246 in FY 2008 due to increased sales of Healthcare products and launch of oncology and nephrology marketing division.

Interest and Finance Charges Interest and finance charges have decreased from Rs 77,618 in fiscal 2007 to Rs 28,698 in fiscal 2008 due to decrease in average borrowings to finance the working capital.

Depreciation

During the year depreciation has increased by Rs 113,920 amounting to an increase of 19.8 percent over fiscal 2007 on account capitalization of Biocon park assets resulting in high depreciation charge for full year on additions made in the previous year on June 7, 2006. This cost as a percentage of sales has also increased from 7.0 percent in fiscal 2007 to 7.4 percent in fiscal 2008.

Provision for Taxes

Provision for current, fringe benefits and deferred taxes in the year ended March 31, 2008 was Rs 106,384 as against Rs 126,989 in fiscal 2007. The reduction in taxes is mainly due to higher depreciation associated with Biocon Park and exemption on export sales from 100 percent EOUs. Tax provision on exceptional income is Rs 683,892.

Net Profit, As Restated

Net profit from operations, for fiscal year 2008 has increased by 23.5 percent amounting to Rs 1,955,591 resulting in an earning per share of Rs 20.25. Increase in sales volume has offset impact of pricing pressure and increased fixed costs. The exceptional income net of taxes from divestment of Enzymes business is Rs 2,393,654 .

Liquidity Our primary liquidity needs have been to finance our working capital requirements and our capital expenditures. These costs have been funded principally by cash flows from operations and short-term borrowings. The Company has during the year deployed the amounts realised from sale of Enzymes business in money market instruments.

2008 2007Net cash generated from operating activities 2,647,224 1,168,145

Net cash used for investing activities (2,708,798) (867,749)

Net cash generated from/(Used) in financing activities 66,129 (244,427)

Net increase/(decrease) in cash and cash equivalents 4,555 55,969

As at March 31, 2008, cash and cash equivalents amounted to Rs 79,834. The principal source of cash and cash equivalents in fiscal 2008 was from cash flows from operations and cash realised from divestment of Enzymes business amounting to Rs 2,647,224 which was partly invested in fixed assets to the extent of Rs 960,856 and the balance was deployed in non-trade instruments.

Operating activities Net Cash flows from operating activities for fiscal 2008 increased by 126.6 percent over fiscal 2007 due to higher operating income and decrease in working capital.

Investing activities The Company's cash flows from investing activities were used primarily to fund purchase of fixed assets and trade investments.

Financing activities The net cash flows from financing activities increased due to increase in short-term borrowings.

PERFORMANCE OF SUBSIDIARIES

Syngene International Limited

Syngene is a 99.99 percent owned subsidiary of Biocon Limited. Syngene was incorporated on November 18, 1993 with an authorised share capital of Rs 5,000. Syngene works in two main research areas: Synthetic chemistry and molecular biology. Syngene is also involved in custom chemical synthesis.

Syngene's total income primarily consists of net sales from contract research services and sales of compounds. Substantially all Syngene's contracts are based on time and material management. Revenue from these contracts are recognised as and when services are rendered, in accordance with the terms of the contract. Syngene's total revenue has increased Rs 1,316,928 to Rs 1,604,283 representing a growth of 22 percent. This growth in revenue is on account of increase in the number of clients. In addition, Syngene's income from investment of its surplus funds in mutual fund units has decreased from Rs 34,1 50 in the fiscal 2007 to Rs 23,419 in the fiscal 2008.

Syngene's expenses mainly comprises of raw-material costs and staff costs. Raw material cost consists of lab consumables used for research. The increase in revenue was mainly offset by increase in material cost by 39 percent from Rs 349,060 in fiscal 2007 to Rs 483,71 5 in fiscal 2008 and staff cost by 40 percent from Rs 261,855 to Rs 366,835 as compared to the previous year. Increase in material cost and staff cost are due to increased business and increase in head count. Other costs increased by 95 percent from Rs 121,387 to Rs 236,438 in fiscal 2008.

Net profit for fiscal 2008 has decreased by Rs 164,879 to Rs 331,772 from Rs 496,651 primarily due to increased depreciation charge of Rs 86,445, over the previous fiscal and impact of the strengthening of the Indian rupee.

Abbreviated profit and loss statement - Syngene

2008 2007

Total Income 1,604,283 1,316,928

Profit before tax (PBT) 354,652 512,182

PBT Margin 22.1% 38.9%

Profit after tax (PAT) 331,772 496,651

Net Margin 10.7% 37.7%

Syngene contributes 14.7 percent to the consolidated income and 14.8 percent to the consolidated profits of the group. In the previous year, Syngene contributed 13.3 percent and 24.8 percent to the consolidated income and profits of the group respectively.

Clinigene International Limited

Clinigene is a 100 percent owned subsidiary of Biocon Limited. Clinigene was incorporated on August 4, 2000 with an authorised share capital of Rs 5,000. Clinigene was established to undertake clinical and other trials and validation for drugs and pharmaceuticals and to conduct research in the area of medical sciences for development of new and improved drugs.

Clinigene's total income principally consists of income from clinical research fees and also Bio-analytical and Bio-equivalence studies.

Clinigene enters either into time and material contracts and/or fixed price arrangements. Revenue from time and material contracts are recognised on a monthly basis as services are rendered in accordance with the terms of the applicable contracts. Revenue from fixed price contracts is recognised based on the percentage completion method. Total revenue of Clinigene increased from Rs 115,502 in fiscal 2007 to Rs 227,163 in fiscal 2008, primarily on account of increase in clinical research fees.

Clinigene's expenses comprise of research material costs, consultancy fees, staff cost, other operating expense, interest cost, depreciation and provisions for fringe benefit tax. Consultancy fees has increased by 20 percent from Rs 9,230 to Rs 11,075 as compared to 2007,

Clinigene's staff cost has increased by 46.2 percent from Rs 32,252 to Rs 47,147 as compared to previous year. This is because Clinigene is in the process of developing its clinical research capabilities and is hiring employees. As Clinigene require additional funds to develop its capabilities and become profitable, Biocon Limited is supporting it in its funding. The interest expenses has increased from Rs 9,010 to Rs 9,807 on account of borrowings for setting up of its new clinical research facility at Semicon Park. As at March 31, 2008, it had accumulated losses of Rs 31,207.

Profit for the year ended March 31, 2008 of Rs 23,739 as against Rs 7,812 in the previous year ,has been consolidated with the profits of the group in the consolidated financial statements.

Biocon Biopharamaceuticals Private Limited

BBPL is a joint venture company and currently 51 percent of its shares are held by Biocon and the balance 49 percent by CIMAB, Cuba.

BBPL was incorporated on June 17, 2002 with an authorised share capital of Rs 500 and in the year 2004 increased to Rs.10,000. In 2007 the authorized share capital was increased from Rs 132,000 to Rs 440,000. BBPL has been established to produce and sell certain biologicals. BBPL has commenced commercial operations during fiscal 2008. Biocon holds 8,976,000 equity shares and CIMAB holds 8,624,000 equity shares of Rs.10 each respectively.

As at March 31, 2008, BBPL has accumulated losses of Rs 325,611. Biocon's share in the accumulated losses of BBPL aggregates Rs 166.062.

Consolidated financial statements

Biocon has prepared consolidated financials in accordance with Indian GAAP and US GAAP by consolidating its subsidiaries - Syngene and Clinigene and Joint Ventures BBPL and NeoBiocon - FZ LLC. The abbreviated consolidated Indian GAAP and US GAAP profit and loss account is as under

Abbreviated consolidated profit and loss statement -Indian GAAP

2008 2007

Total Income 10,902,049 9,896,179

Profit before tax (PBT) 2,309,094 2,109,968

PBT margin 21.2% 21.3%

PAT after minority interest 2,245,440 2,002,616

Net margin 20.6% 20.2%

Indian Hotels - Annual Report - 2007-2008

THE INDIAN HOTELS COMPANY LIMITED

ANNUAL REPORT 2007-2008

DIRECTOR'S REPORT

TO THE MEMBERS

The Directors have pleasure in presenting the 107th Annual Report of the Company together with its Audited Profit and Loss Account for the year ended March 31, 2008 and the Balance Sheet as on that date:

FINANCIAL RESULTS:

Rs./CroresParticulars 2007/08 2006/07

Total Income 1823.16 1617.31

Profit before Depreciation, Interest and Tax 760.23 637.97

Less: Depreciation 85.48 91.44

Less: Interest 94.28 71.89

Profit before tax 580.47 474.64

Less: Provision for tax 198.91 152.25

Less: Short Provision of Tax of earlier years (Net) 4.10 -

Profit after tax 377.46 322.39

Add: Balance brought forward from the previous year 331.33 156.80

Profit before Appropriations 708.79 479.19

APPROPRIATIONS:

(i) General Reserve 38.00 35.00

(ii) Dividend:

An interim dividend of 190% i.e. Re. 1.90/- per Ordinary Share was declared by the Board of Directors on 15t' April, 2008and paid to Members on the Record date April 23, 2008'. (In respect of the previous year, a dividend of 160% i.e.Re. 1.60/- per Ordinary Share was declared and paid to the Members) 114.54 96.46

Tax on Dividend 19.47 16.40

(iii) Balance carried to Balance Sheet 536.78 331.33

708.79 479.19

INCOME:

The total income for the year ended March 31, 2008 at Rs. 1,823.16 crores was higher than that of the previous year by 13%.

Room Income was higher than the previous year by 16%. The Average Room Rate (ARR) increased by 16% over the previous year, contributing significantly to the total increase in room income.

Food & Beverage (F&B) income was 12% higher than the previous year. Banquets income grew by 16% over the previous year.

INTEREST AND DEPRECIATION:

Interest cost was higher at Rs. 94.28 crores for the year ended March 31, 2008 as compared to Rs. 71.89 crores in the previous year consequent to complete utilization of FCCB proceeds and incremental debt to fund acquisition of Campton Place in San Francisco, USA.

Depreciation for the year was lower due to one time charge on leased assets taken in the previous year.

PROFITS:

Profit before Tax at Rs. 580.47 crores was higher than the previous year by 22%. Profit after Tax at Rs. 377.46 crores was also higher by 17% over the previous year.

DIVIDEND:

Your Directors declared an interim dividend of 190% (Rs.1.90/- per Ordinary Share), involving an outflow of Rs. 134.01 crores including dividend tax. The interim dividend was paid in April, 2008. No further dividend is proposed to be paid for the year ended March 31, 2008.

FCCB ISSUE:

During the year under review, all outstanding Foreign Currency Convertible Bonds (FCCBs) have been converted by the Company. Consequently, there are no outstanding FCCBs.

RIGHTS ISSUE:

During the year, your Company raised an aggregate of Rs. 1447 crores through a simultaneous but unlinked Rights Issue of Equity Shares in the ratio of 1:5 at a price of Rs. 70/- per Equity Share raising Rs. 844 crores and 6% Non Convertible Debentures (NCDs) with Detachable Warrants in the ratio of 1:10 of the face value of Rs. 100/- each raising Rs. 603 crores. Each Detachable Warrant can be converted into 1 Equity Share at a price of Rs. 150/- in September 2009. The Rights Issue opened on March 14, 2008 and closed on April 24, 2008. The Equity Shares portion was subscribed 1.22 times while the NCDs was only partly subscribed. The Promoters pursuant to their undertaking subscribed to the unsubscribed portion of the NCD issue. The allotment of NCD with Detachable Warrants was made on May 13, 2008 and Equity Shares on May 23, 2008 and all the three instruments namely NCDs, Detachable Warrants and Equity Shares have been listed and are being traded on the Bombay Stock Exchange and National Stock Exchange.

BORROWINGS:

The total borrowings stood at Rs. 1134.18 crores as at March 31, 2008 as against Rs. 941.90 crores as on March 31, 2007.

NON CONVERTIBLE DEBENTURES:

During the year, in addition to the Rights Issue of NCDs, the Company also privately placed secured Non-Convertible Redeemable Debentures for Rs. 300 crores repayable at the end of the third year from the date of allotment.

CAPITAL EXPENDITURE:

During the year under review, the Company incurred Rs. 105.07 crores towards capital expenditure. Major expenditure was incurred on Taj Mahal Hotel, Mumbai, Taj Lands End, Mumbai,Taj Palace Hotel, New Delhi, Taj Mahal Hotel, New Delhi, Taj West End, Bangalore and Gateway on Residency Road, Bangalore.

BUSINESS OVERVIEW:

Global tourism continued to move upward during 2007-08 with the number of international tourist arrivals worldwide reaching about 1,000 million (UNWTO estimates) and international tourism receipts scaling US$ 900 billion in the year. Despite continuing challenges, 2007-08 proved to be another excellent year for travel and tourism - the fourth consecutive year of healthy growth, in fact. World travel and tourism is expected to contribute nearly US$5,890 billion to global GDP in 2008, rising to approximately US$10,855 billion over the next ten years, according to the latest tourism satellite accounting (TSA) research from the World Travel & Tourism Council (WTTC). In terms of regional performance, Africa, Asia Pacific and the Middle East are experiencing higher growth rates than the world average, in terms of total Travel & Tourism Demand, at 5.9%, 5.7% and 5.2% respectively, while the matured markets - most notably the Americas and Europe - are falling below the world average with growth of 2.1% and 2.3% respectively.

The Indian Tourism and Hospitality Industry driven by the huge surge in both business and leisure travel by domestic and foreign tourists as per the World Travel & Tourism Council (WTTC) is expected to generate approximately USD 100 billion in 2008. The flow of foreign tourist arrivals recorded a growth rate of 11.9% in 2007 over 2006 and was 4.9 million in 2007. The first 4 months of 2008 recorded a growth rate of 11.9% (in tourist arrivals) over the corresponding arrivals in 2007 receiving 2.02 million in foreign tourist arrivals. According to the WTTC, Indian tourism demand is estimated to grow at an average of 8.8% between 2004 to 2013 making India the world's third fastest growing tourist market.

The booming tourism industry has had a cascading effect on the hospitality sector with an increase in the occupancy ratio and average room rates. While occupancy ratio is 75-80%, the average increase in the room rates has been hovering around 22-25% per annum. The Government's move to declare the Tourism industry as a high priority sector with a provision for 100% FDI has provided a further impetus in attracting investments to this industry. Government has also taken various initiatives for the development in this sector.

Launch of Incredible India campaign to promote tourism both in domestic and international markets.

* Recognition of spare rooms available with various house owners by classifying these facilities as 'Incredible India Bed and Breakfast Establishments', under Gold' or Silver' category.

* A new category of visa, 'Medical Visa' (M'-Visa), has been introduced which can be given for specific purpose to foreign tourists coming into India.

* Guidelines have been formulated by Department of AYUSH prescribing minimum requirements for Ayurveda and Panchkarma Centres.

* Ministry of tourism has tied up with United Nations Development Programme (UNDP) to promote rural tourism. India has also received international accolades as a leading global tourist destination.

* India has been elected to head the UN World Tourism Organisation (UNWTO), the highest policy making world tourism body represented by 150 countries.

* The world's leading travel and tourism journal, 'Conde Nast Traveller', ranked India as the numero uno travel destination in the world.

* The Association of British Travel Agents (ABTA) has ranked India as No. 1 amongst the top 50 places for 2006.

* The 'Incredible India' campaign has been ranked as the Highest Recall Advertisement worldwide by 'Travel and Leisure'.

* India was adjudged Asia's leading destination at the regional World Travel Awards (WTA).

* India's Taj Mahal continues to figure in the Seven Wonders of the World.

Your Company would aggressively pursue its strategy both in the domestic and international market at different price points from the smart basic hotels to the luxury segment. Against this backdrop, your Company expects to achieve sustainable and profitable growth.

THE TAJ WAY:

Your Company along with its Subsidiaries, Associates and Joint Venture companies operating under the brand 'Taj Hotels Resorts and Palaces' runs the hotels under the brands Taj', Gateway' and Ginger' hotels and has been able to leverage the sources of competitive advantage in the present buoyant and growth oriented environment. The Company has taken several initiatives during the year and a brief summary of the same is given below with details in the section- Management Discussion and Analysis.

PRODUCT UPGRADATION:

Your Company continues with, its ongoing programme of investing in renovation and upgradation of its property. During the year the following properties were renovated - Taj Mahal Palace and Tower, Mumbai, Taj Palace, Delhi, Taj Bengal , Kolkata, Fort Aguada Beach Resort, Goa, Lake Palace, Udaipur, Taj Mahal, New Delhi, Taj West End, Bangalore, Gateway on Residency Road, Bangalore. The Pierre in New York is closed down for refurbishment on January 1, 2008 and will reopen in first quarter of 2009. The Company also over-saw and supported renovation in some of the key properties of Associate companies as part of its ongoing programme of investing in renovation and product upgradation.

NEW PROPERTIES:

During the year, the Company commenced operations under Management and Operating Contract at the 'Gateway' a 100 room Hotel in Vijaywada, Andhra Pradesh and a beautiful 66 room Hotel Taj Tashi' in the heart of Bhutan's capital city Thimpu which reflects Bhutan's rich heritage and architecture. The project at Whitefield, Bangalore a 199 room premium hotel is slated to open shortly. Roots Corporation Ltd., the Company's wholly owned subsidiary, commenced operation of its four new 100 rooms Ginger' hotels at Nashik, Agartala, Pondicherry & Baroda under the Smart basics' format.

During the year, your Company launched several unique restaurants in the domestic & international hotels, notably 'Latitude' the exquisite all day dining restaurant at Taj Samudra, Sri Lanka, the Italian restaurant 'Prego' at Taj Coromandel, Chennai, 'Masala Club' at the Taj West End, Bangalore and the 'Wasabi' restaurant at the Taj Mahal, New Delhi.

During the year, your Company invested in a Singapore subsidiary, BJETS Pte Limited which, when operational, will provide a range of services including private non-scheduled aviation services, fractional ownership programmes, acquisition and maintenance of private jet fleet. BJETS aiso intends to target high net worth individuals and MNC's across India, Sri Lanka, Bangladesh, Pakistan, Nepal and South-east Asian countries .

Your Company, along with Tata Realty and Infrastructure Limited, successfully bid for setting up an IT SEZ in Chennai which, apart from creation of IT space, will include setting up of a 5 Star Hotel, Serviced Apartments and Convention Centre which will also be of international standard be managed by your Company.

EXPANSION IN DOMESTIC AND INTERNATIONAL MARKETS:

The Domestic market has been rapidly expanding and your Company's expansion strategy in the domestic market has been in line with the expectations given the buoyancy in the industry. During the year under review, the Company has at strategic locations made commitments by way of acquiring properties on lease, entering into tie ups for equipping hotels being built by partners and executing a number of management and technical services contracts for managing, operating and rendering technical services.

The Company also entered into management contracts for several properties which will commence operation over the next few years both in the domestic and international markets. In the domestic sector, the Company has signed Management Contracts for hotels at Pune, Kolkata, Pondicherry and a Service Apartment at Pune. On the international front, Management Contracts are in place for properties at YAS Island-Abu Dhabi, Ras A1 Khaimah Saraya Islands-UAE, Doha in Qatar and Cape Town, South Africa. All these new hotels will come in the market in the next few years. On the wild life safari lodges business, while two high end lodges are operational, two more lodges are slated to open shortly at Panna and Kanha, thereby completing the first safari circuit in India. Under the Ginger' brand in addition to the 11 operational hotels, various projects at New Delhi, Ludhiana, Goa, Mangalore, Ahmedabad and Guwahati are under implementation. Management Contracts are also in place under the Ginger' brand in Jaipur, Katra, Lucknow and Tirupur.

SERVICE EXCELLENCE:

Guest Experience:

In its commitment to continually enhance the guest experience, your Company has initiated a series of programmes to upgrade the product and service levels. The online Customer Feedback Survey has greatly facilitated the direction and focus of the service enhancement programme and the training efforts as identified through the Voice of the Customer. Efforts are ongoing to streamline processes in all departments and these have resulted in an increase in the Customer Satisfaction index. The number of HACCP certified hotels increased from nine (9) in the previous year to thirteen (13) in the current year. Feedback from our guests on their changing needs have been incorporated into planned hotel renovations and into the design planning for new builds. A competency based training matrix was introduced to augment knowledge, skill & total quality of service and enhance the guest experience. A 'Personal Contact' programme was developed to ensure a consistent guest experience which is unique and personalized to each guest's needs. This helps in building customer loyalty and eventually giving us a competitive edge.

Key guest service touch points like the Concierge, Butler Services, the Sommelier and Bartender programmes were further reinforced. Associates who had undergone the initial training under these programmes, received focused development inputs through dedicated training sessions and on-site interactions using international experts. Currently, 15 of our Concierge team members have been recognized as members by the International Association of Concierges, the Clefs d'Or (including adherent members). The crossed gold keys worn on the lapels of the Concierge uniform are more than just the symbol of the organization - they represent guaranteed, quality service. A world-renowned Sommelier has been recruited to create unique Wine Programmes in our hotels and enhance the dining experience of our guests. This ongoing development of such key guest facing areas will ensure that service delivery at Taj Luxury Hotels is personalized and further differentiated.

As a commitment to the safety and security of our guests, we have instituted a process of independent external audits to evaluate the preparedness of our hotels from a hygiene and safety perspective. The efforts in Food & Beverage benchmarking to create awareness of global food and beverage trends are continuing. Alternate dining experiences and local cuisine dining experiences have been well-received by our guests. A project to cultivate organic vegetables in kitchen gardens and make home-made preserves in all hotels was initiated. Spa cuisine was introduced in hotels where Taj Spas are located.

The Tata Business Excellence Model was introduced in the three hotels in the United States of America and some other international luxury hotels in the first phase of the roll-out. This exercise has resulted in a) identifying the priority areas to focus on for improving the service levels and b) introducing a process-oriented model to achieve excellence. The increase of certified internal / external Tata Business Excellence Model assessors has helped to implement and enforce a process-driven operation. This has reflected in a positive trend of results in measures pertaining to financials, customer satisfaction, internal processes and human resources. In our effort to provide defect free product and services, a Six Sigma programme was launched as a pilot project.

MARKETING ALLIANCES:

During the year, your Company entered into some Marketing initiatives. The key amongst those were the alliance with Okura Hotels & Resorts, one of the largest international hotel groups in Japan, to develop cross-promotional opportunities for both companies to harness each other's strengths in their respective markets of dominance.

During the year, your Company also tied up with several Airlines for their Frequent Flier loyalty programme, the key amongst them being with Lufthansa, American Airlines and KLM. The major tie-ups entered into are like 'Miles & More', the frequent flyer programme of Lufthansa, Adria Airways, Air Dolomiti, Air One, Austrian Airlines, Croatia Airlines, LOT Polish Airlines and Luxair, 'Flying Blue', an innovative frequent flyer program with a four-tier structure (Platinum, Gold, Silver and Ivory levels) launched jointly by AIR FRANCE and KLM and 'AAdvantage' a frequent flyer program of American Airlines.

Your Company in collaboration with ICICI Bank and American Express launched the new ICICI Bank Ascent American Express@ Card. The Card is six times more rewarding for the consumer than the other leading credit cards in India. Consumers earn attractive 6 reward points per Rs 100 spent on dining, shopping, travel and overseas expenses. Additionally, there are exciting offers and privileges to help customers save even as they prepare for that long awaited getaway.

SUBSIDIARIES:

The Company has obtained an exemption from the Department of Company Affairs (DCA) vide its letter no. 47/267/2008 - CL-III dated May 16, 2008, for publication of the Accounts of its subsidiaries under the provision of Section 212 of the Companies Act of 1956. Hence, the accounts of the subsidiary companies are not separately included in the Annual Report. However, the Consolidated Financial Statements of the Company and its Subsidiaries, Joint Ventures and Associates, in accordance with relevant Accounting Standards of the Institute of Chartered Accountants of India, duly audited by the Statutory Auditors, form a part of the Annual Report and are reflected in the consolidated accounts.

The Financial Statements of the subsidiary companies and other detailed information will be made available to the investors seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection at the Registered Office of the Company as well as the respective Registered Offices of subsidiary companies.

LISTING:

The Ordinary Shares of your Company are listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. The Global Depository Shares (GDS) issued by the Company are listed on the London Stock Exchange.

FIXED DEPOSITS:

The Company accepts/renews fresh deposits only from the Members of the Company at a rate of 6.25% p. a. for a period of three years with the minimum amount of the deposit being Rs. 25,000.

The outstanding amount of fixed deposits placed with the Company amounted to Rs. 3.38 crores (previous year Rs. 5.13 crores) including Rs. 0.30 crores (previous year Rs. 0.73 crores), which remained unclaimed by depositors as on March 31, 2008.

DIRECTORS:

Mr. Anil P Goel and Mr. Abhijit Mukerji were appointed as Additional Directors and as Whole Time Directors of the Company for a period of five years with effect from March 17, 2008. They respectively hold office upto the date of the forthcoming Annual General Meeting of the Company. Taking into consideration their knowledge and experience, the Board commends their appointment as Whole-time Directors of the Company to the Members of the Company. Members' approval for their appointment as Directors and Whole-time Directors has been sought in the Notice convening the Annual General Meeting of the Company.

Mr. Raymond N. Bickson's tenure as Managing Director ends on July 18, 2008. The Company has greatly benefited from his expertise and international experience. In view of the same, it is proposed to re-appoint Mr. Bickson as the Managing Director of the Company for a period of 5 years w.e.f. July 19, 2008. The Board commends his re-appointment as the Managing Director of the Company to the Members of the Company.

In accordance with the Companies Act, 1956, and the Articles of Association of the Company, three of your Directors, viz., Mr. R.K. Krishna Kumar, Mr. Shapoor Mistry and Mr. K.B. Dadiseth retire by rotation, and are eligible for re-appointment.

CORPORATE GOVERNANCE:

As required by Clause 49 of the Listing Agreement with the Stock Exchanges, the report on Management Discussion and Analysis, Corporate Governance as well as the Auditors' Certificate regarding compliance of conditions of Corporate Governance, form part of the Annual Report.

AUDITORS:

M/s S.B. Billimoria & Company, the retiring Auditors, have by their letter dated May 29, 2008 informed the Company of their decision not to seek re-appointment as Joint Auditors of the Company. The Board of Directors recommend the appointment of M/s. Deloitte Haskins & Sells and M/s. N.M. Raiji & Company as Joint Auditors. The Members are requested to appoint M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai and re-appoint M/s. N.M. Raiji & Co., Chartered Accountants, Mumbai as Joint Auditors for the current year and authorise the Board of Directors to fix their remuneration.

FOREIGN EXCHANGE EARNINGS AND OUTGO:

As required under Section 217(1)(e) of the Companies Act, 1956, read with rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, the information relating to foreign exchange earnings and outgo is in Note Nos. 18, 19, 20 & 21 of the Notes to the Accounts.

STAFF:

As required by Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, a statement of information relating to the employees has been given in the Annexure to the Report and forms a part of it.

The Board desires to place on record, its appreciation to all employees of the Company who during the year under review with sustained dedicated effort enabled the Company to deliver a good all-round record performance.

DIRECTORS REPONSIBILITY STATEMENT:

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Board of Directors, based on the representations received from the Operating Management, hereby confirms that:

i. In the preparation of the annual accounts, the applicable accounting standards have been followed and that there>are no material departures;

ii. It has in the selection of the accounting policies, consulted the Statutory Auditors and has applied'them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at March 31, 2008 and of the profit of the Company for that period;

iii. It has taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, to the best of its knowledge and ability. There are however, inherent limitations, which should be recognized while relying on any system of internal control and records; and

iv. It has prepared the annual accounts on a going concern basis.

GLOBAL COMPACT:

As part of the Tata Group, your Company had signed up to promote the United Nations 'Global Compact' which lays down ten key principles to specifically address issues in the areas of human rights, labour, corruption and the environment. Your Company continues to be an active member of Global Compact. Your Company annually submits a Corporate Sustainability Report' detailing its economic, environmental and social performance.

On behalf of the Board of Directors

Ratan N. Tata ChairmanPlace: Mumbai, Date : June 23, 2008.

Management Discussion and Analysis:

In line with the international practice, The Indian Hotels Company Limited (IHCL) has been reporting consolidated results taking into account the results of its Subsidiaries, Joint Ventures and Associates (together referred to as 'the Group'). This discussion, therefore, covers the financial results and other Group developments during April, 2007 to March, 2008 in respect of the Group.

Some statements in this discussion describing the projections, estimates, expectations or outlook may be forward looking. Actual results may, however, differ materially from those stated on account of various factors such as changes in Government Regulations, Tax Regimes, Economic Developments within India and the countries within which your Company conducts its business, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints.

INDUSTRY STRUCTURE AND DEVELOPMENTS:

An Overview of the Global Tourism Industry:

Global tourism continued to move upward during 2007-08 with the number of international tourist arrivals worldwide reaching about 1,000 million (UNWTO estimates) and international tourism receipts scaling US$ 900 billion in the year. Despite continuing challenges, 2007-08 proved to be another excellent year for travel & tourism - the fourth consecutive year of healthy growth. Since 2004-05, the annual increase in travel & tourism economy GDP has averaged 4% in real terms - faster than the overall global economy and in the same period, travel & tourism has created more than 34 million jobs.

The prospects for Travel & Tourism over the coming decade look bright, with the Travel & Tourism Economy forecast to sustain annual growth of more than 4% over the next ten years. Emerging economies are expected to continue growing rapidly, boosting both international and domestic travel and globalisation will be sustained, as these economies become increasingly integrated into the world economy, providing ongoing support for both business and personal travel. In developed countries, rising living standards and an increasing preference for leisure are expected to generate new long-haul travel, while the popularity of short breaks shows little sign of abating. Although growth is expected to slow in 2008-09, in line with the recent deterioration in the economic environment in developed economies, led by the USA, WTTC forecasts - developed in collaboration with research partner Oxford Economics indicated a 3% increase in Travel & Tourism Economy GDP and 6 million additional Travel & Tourism Economy jobs worldwide. World travel & tourism is expected to contribute nearly US$5,890 billion to global GDP in 2008, rising to approximately US$10,855 billion over the next ten years, according to the latest tourism satellite accounting (TSA) research from the World Travel & Tourism Council (WTTC). In terms of regional performance, Africa, Asia Pacific and the Middle East are experiencing higher growth rates than the world average, in. terms of total Travel & Tourism Demand, at 5.9%, 5.7% and 5.2%a respectively, while the matured markets - most notably the Americas and Europe - are falling below the world average with growth of 2.1% and 2.3% respectively.

The Charts below depict the Travel & Tourism demand amongst the top nine countries in the world and the employment potential contributed by Travel & Tourism as per the research based forecast from the WTTC.Indian Economy:

The Indian economy has moved decisively to a higher growth phase with growth in GDP at market prices exceeding 8 per cent in every year since 2003-04. The projected economic growth of 8.7 per cent for 2007-08 is fully in line with this trend. There was an acceleration in domestic investment and saving rates to drive growth and provide the resources for meeting the 9 per cent (average) growth target of the Eleventh Five-Year Plan. Macroeconomic fundamentals continue to inspire confidence and the investment climate is full of optimism. The recent increase in inflation levels and increase in crude prices will impact the economic activity, which is the current cause of concern for the economy.

Indian Tourism Industry:

The Indian Tourism and Hospitality Industry driven by the huge surge in both business and leisure travel by domestic and foreign tourists as per the World Travel & Tourism Council (WTTC) is expected to generate approximately USD 100 billion in 2008. The flow of foreign tourist arrivals recorded a growth rate of 11.9% in 2007 over 2006 and was 4.9 million in 2007. The first 4 months of 2008 recorded a growth rate of 11.9% (in tourist arrivals) over the corresponding arrivals in 2007 receiving 2.02 million in foreign tourist arrivals. According to the WTTC, Indian tourism demand is estimated to grow at an average of 8.8% between 2004 to 2013 making India the world's third fastest growing tourist market.

Source: Ministry of Tourism:

Further, tourism is an important industry in Indian economy contributing around 6.8 per cent of the Gross Domestic Product and providing employment to over 41 million persons. According to a research by University of New South Wales (UNSW), Australian School of Business (ASB), India and China will be the new global players competing for a huge chunk of tourists, transforming the geopolitical landscape. Significantly, while India's share in world arrivals was about 0.5 per cent, its share in revenue generated from tourism worldwide was over 1 per cent. India, with its diverse landscape, offers huge scope for various theme-based travel like Medical Tourism, Adventure tourism, Heritage tourism, Wellness tourism, Pilgrimage tourism, Golf tourism, Eco-tourism, Wildlife tourism among others. India's growing reputation as a major medical tourism destination is attracting more and more foreign visitors. In fact, Indian hospitals are fast becoming the first choice for foreign patients and many travel agents are now offering packages combining treatment with a vacation. The boom in the Indian tourism industry has cascaded to the rural areas as well. India continues to attract tourists owing to its splendid historical architecture and rich culture along with beautiful beaches. Rural tourism or what now is called responsible tourism' is also fast gaining popularity with travelers flocking to discover the best in rural arts and heritage.

The booming tourism industry has had a cascading effect on the hospitality sector with an increase in the occupancy ratio and average room rates. While occupancy ratio is 75-80%, the average increase in the room rates has been hovering around 22-25%. The level of activity would depend on the impact of inflation and increase in crude prices on the overall economic activity. The Governments move to declare the Tourism industry as a high priority sector with a provision for 100% FDI has provided a further impetus in attracting investments to this industry. Government has also taken various initiatives for the development in this sector.

* Launch of 'Incredible India' campaign to promote tourism both in domestic and international markets.

* Recognition of spare rooms available with various house owners by classifying these facilities as 'Incredible India Bed and Breakfast Establishments', under Gold' or Silver' category.

* Anew category of visa, 'Medical Visa' (M'-Visa), has been introduced which can be given for specific purpose to foreign tourists coming into India.

* Guidelines have been formulated by Department of Tourism for AYUSH prescribing minimum requirements for Ayurveda and Panchkarma Centres.

* Ministry of tourism has tied up with United Nations Development Programme (UNDP) to promote rural tourism.

* India has also received international accolades as a leading global tourist destination.

* India has been elected to head the UN World Tourism Organisation (UNWTO), the highest policy making world tourism body represented by 150 countries.

* The world's leading travel and tourism journal, 'Conde Nast Traveller', ranked India as the numero uno travel destination in the world.

* The Association of British Travel Agents (ABTA) has ranked India as No. 1 amongst the top 50 places for 2006.

* The 'Incredible India' campaign has been ranked as the Highest Recall Advertisement worldwide by 'Travel and Leisure'.

* India was adjudged Asia's leading destination at the regional World Travel Awards (WTA).

* India's Taj Mahal continues to figure in the Seven Wonders of the World.

Your Company would aggressively pursue its strategy both in the domestic and international market at different price points from the smart basic hotels to the luxury segment. Against this backdrop your Company expects to achieve sustainable and profitable growth.

The Taj Advantage:

Your Company operates its hotels under the 'Taj Hotels Resorts and Palaces' umbrella brand and is the largest hotel chain in South Asia. It comprises of hotels with 10487 rooms and over 280 Food & Beverage outlets. The total numbers of hotels which are owned or managed by the Company have grown to 88 as against 82 in 2006/07. Internationally, the Company has hotels, among other locations, at USA, Australia, Maldives, Mauritius, Malaysia, UK, Sri Lanka, Africa and the Middle East. Your Company owns either directly or through its associates and partners, properties in many key business and leisure destinations and has built for itself several sources of competitive advantage.

Among the key sources of competitive advantage that your Company enjoys are branding, infrastructure and best in class services. The 'Taj' brand has been built over the years by consciously investing into brand building, establishing high brand standards and adhering to the same with the objective of providing an exclusive TAJ experience to the guests. The brand equity is further strengthened by the ownership and backing of Tatas, a Group with varied business interest operating in several countries and enjoying high credibility.

The Company has a good infrastructure by way of properties at prime location in India. It has the largest portfolio of rare and authentic Original Palaces and is the largest hotel chain in South Asia. The Sales and Marketing network, the network of Partners and Associates, Reservation network and the Information Technology Services add to a robust and strong infrastructure. The Company has also been a pioneer in the Food & Beverage experience in India.

Your Company is the First hotel chain in India to announce the elimination of 'Trans Fat' from all its F & B offerings across its hotels. Taking cognizance of the ill-effects and health hazards that surround Trans fats, the Master Chefs of the Taj have made every effort to ensure that this move will have no impact whatsoever, on the taste and texture of the food.

In an endeavour to reinstate its vision and efforts to boost sustainable tourism and integrate environment management in all business areas your Company initiated EARTH (Environment Awareness & Renewal at Taj Hotels), a project which reiterates the conscious effort of one of Asia's largest and finest group of hotels to commit to energy conservation and environmental management. EARTH has received certification from Green Globe, the only worldwide environmental certification program for travel and tourism.

Your Company Taj Hotels Resorts and Palaces is delighted to have won the Selling Long Haul Travel Awards 2007 an award nominated by travel agents and tour operators across the UK and Ireland,

Opportunities:

Your Company is poised strategically to take advantage of:

* Rapidly growing market in India, South Asia and key gateway cities in source-market destinations.

* Expansion in international destinations with top-of-the-line luxury and leisure properties.

* Meeting growing demand in the budget and mid-market segments.

* Extending the product portfolio into related offerings viz. luxury residences, wildlife lodges and spas.

Key initiatives taken by your Company during the year are:discussed in a separate section.

Threats:

The threats identified by your Company are related mainly to the markets in which your Company operates and general factors related to the tourism industry. Significant among these are:

* General downturn in global & domestic economies

* Interest rates fluctuation could have adverse effect on performance.

* Cheaper international airfares increasing the affordability of travel to international destinations, especially South East Asia, Europe and Australia.

* Growing presence of international hospitality chains competing in the luxury and business segments to meet excess demand situation.

These threats and your Company's strategy to overcome them have been discussed in detail in the section on Risk and Concerns and the Risk Mitigation Initiatives.

Update on Key Initatives:

New Properties and Expansion Plans:

The Domestic market has been rapidly expanding and your Company's expansion strategy in the domestic market has been in line with the expectations given the buoyancy in the industry. During the year under review, the Company has at strategic locations made commitments by way of acquiring properties on lease, entering into tie ups for equipping hotels being built by partners and executing a number of management and technical services contracts for managing, operating and rendering technical services.

During the year the Company commenced operations at the 'Gateway' a 100 room Hotel in Vijaywada, Andhra Pradesh and a beautiful 66 room Hotel Taj Tashi in the heart of Bhutan's capital city Thimpu which reflects Bhutan's rich heritage and architecture. The project at Whitefield, Bangalore a 199 room premium hotel is slated to open shortly. Roots Corporation Ltd. the Company's wholly owned subsidiary commenced operation of it's four new 100 rooms Ginger' hotels at Nashik, Agartala, Pondicherry & Baroda under the Smart basic's' format. During the year your Company launched several unique restaurants in the domestic & International arena notably being 'Latitude' the exquisite all day dining restaurant at Taj Samudra, Sri Lanka, The Italian restaurant 'Prego' at Taj Coromandel, Chennai, 'Masala Club' at the Taj West End, Bangalore and The 'Wasabi' restaurant at the Taj Mahal, New Delhi.

The Company also entered into management contracts for several properties which will commence operation over the next few years both in the domestic & international market. In the domestic sector the Company has signed Management Contracts for hotels at Pune, Kolkata, Pondicherry and a Serviced Apartment at Pune. On the International front Management contracts are in place for properties at YAS Island-Abu Dhabi, Ras Al Khaimah Saraya Islands-UAE, Doha in Qatar & Cape Town, South Africa. On the Wild life safari lodges business, while two high end lodges are operational, two more lodges are slated to open shortly at Panna and Kanha, thereby completing the first safari circuit in India.

During the year your Company invested in a Singapore subsidiary, BJETS Pte Limited which when operational will provide a range of services including private , non-scheduled aviation services , fractional ownership programmes, acquisition and maintenance of private jet fleet. BJETS intends to target high net worth individuals and MNC's across India, Sri Lanka, Bangladesh, Pakistan, Nepal and South-east Asian countries.

Your Company along with Tata Realty and Infrastructure Limited successfully bid for setting up an TT SEZ in Chennai which will apart from creation of IT space will include setting up of a 5 Star Hotel, Service Apartments and Convention centre which will be managed by your Company.

Ginger Hotels:

Under the Ginger' brand your Company's subsidiary commenced operations of four new 100 rooms hotels at Nashik, Agartala, Pondicherry and Baroda. Under this brand currently there are 12 operational hotels at Bangalore, Haridwar, Bhubaneshwar, Mysore, Trivandrum, Pune, Durgapur, Nashik, Agartala, Pondicherry, Baroda & Pantnagar. In addition several projects are at various stages of construction at New Delhi, Ludhiana, Goa, Mangalore, Ahmedabad, & Guwahati. In addition, to expand the market of 'Ginger Hotels', we have signed up management contracts for hotels in Jaipur, Katra, Lucknow and Tirupur.

The focus during the year was to commission a new ERP system, SAP - Simhotels across all properties. We undertook Mystery audits, Brand Health Track, Customer Feed back to identify gap areas and improve the operational efficiency of the hotels. Caf6 Coffee Day outlets were opened at 8 locations and a Landmark book and gifts store is being evaluated at Pondicherry. An advertising campaign with coverage in magazines, TV, internet and outdoor media was launched.

Wildlife Lodges:

Your Company's Joint Venture operates two lodges viz. Mahua Kothi at Bandhavgarh and Baghvan Pench, both in Madhya Pradesh and is now gearing up to open two new lodges at Panna and Kanha by October 2008 thereby completing the first safari circuit in India.

Serviced Apartments:

Your Company recognizes that Serviced Apartments J Apartment Hotels is emerging as an important segment in the hospitality business. Various options are being evaluated to enable your Company to have a significant presence in this segment of the hospitality areas.

Spas:

The philosophy of our spas is rooted inherently in India's ancient approach to wellness. The ethos of our carefully recreated treatments is drawn on the rich and ancient wellness heritage of India; the fabled lifestyle and culture of Indian royalty and the healing therapies that embrace Indian spirituality. Taj Spa is an eco-sensitive brand hence all spa products are natural and contain Indian herbs, pure essential oils, lipids, clays, mud, salts and flower waters all of a botanical source. Taj Spa uses organic linen and eco-friendly toxin-free pottery.

In the year 2007 - 08, two new Taj Spas were launched - at Rambagh Palace, Jaipur in April 2007 and at Taj Tashi, Thimphu, Bhutan in February 2008. Set in luxurious tents, Taj Spa at Rambagh Palace, Jaipur, recreates the authentic grandeur synonymous with royal India's exquisite Rajput palaces, beautiful Mughal encampments, water gardens, and fabled lifestyle. The spa was featured under the World's Top Spas in the Tatler Body and Soul Guide 2007, UK. Drawing on the rich and ancient wellness traditions of both countries, Taj Spa at Taj Tashi Thimphu offers luxurious Indian and Bhutanese signature spa therapies and experiences.

Within two months of opening, the spa has been featured in the prestigious Conde Nast Traveler Hot List 2008, USA. Taj Spa at Umaid Bhawan Palace, Jodhpur, Taj Green Cove Resort, Kovalam and Taj Malabar, Cochin underwent facility upgradation and renovations. As on date, 16 Taj Spas are operational in Taj Hotels Resorts and Palaces in India and international locations.

Product Upgradation:

Your Company continues with its ongoing program of investing in renovation and upgradation of its property. During the year Taj Mahal Palace and Tower, Mumbai, Taj Palace, Delhi, Taj Bengal , Kolkata, Fort Aguada Beach Resort, Goa, Lake Palace, Udaipur, Taj Mahal, New Delhi, Taj West End, Bangalore, Gateway on Residency Road, Bangalore were renovated. The Pierre in New York is currently under major renovation and will open soon. The Company also over saw and supported renovation in some of the key properties of Associate companies as part of its ongoing programme of investing in renovation and product upgradation.

Experience

Your Company is committed to enhancing Guest experience by improving the product and service levels so that they are best in class. Towards this objective the Company has continued its efforts and this has resulted in several key initiatives being taken in terms of service and product aspects. The hotel concierge service was further reinforced through on-site training by expert international trainers and enhanced technology. The concierge service has been received well by our guests and has been a significant value addition. The continuing efforts in training our Food & Beverage associates in the skills required for sommeliers and bartenders has significantly improved the guest experience in our restaurants.

Similarly, various product refinements were introduced in the hotels covering the entire aspect of floral arrangements, lighting aroma etc.

In your Company's quest to benchmark against the world's finest hotels, the services of world renowned international firm was retained to refine the Taj brand standards. This will enable your Company to establish a unique identity in its endeavor to clearly differentiate the brand.

Recognition and retention of talent is of critical importance in a people-intensive industry such as ours. Key initiatives to identify lcoy resources were the 'Role Models' programme for executives and the 'Diamonds are Forever' for staff were commenced during the year.

Your Company is aware that well-trained frontline employees are key to retaining our market positioning. Training initiatives for the year included new modules on Inter-cultural Sensitization, Accent Rectification and Voice Modulation, etc.

The focus on employee engagement in improving processes and procedures to ensure guest delight is reflected in the Process Improvement Teams deployed across the Strategic Business Units (SBUs). These teams meet, analyze and implement improvements in operational processes that impact guest satisfaction.

The SBUs have created and implemented, a series of initiatives, focusing on service excellence and delighting the guests. Brand Service Standards, Procedures & Standards Manual, Internal & External Audits, were rolled out for all front line departments to focus on ensuring consistency in service, enhancing service standards and ensuring defect free product and services. The SBUs launched the Competency Based Training Module, targeting at all front line employees, to build people capabilities, to deliver service excellence. Cross exposure training, international talent swaps and developing talent were focused on. Key performance indicators (KPIs) have been created and implemented for all departments, to track in-process measures to ensure adherence to service and operating standards.

During the year, the Customer Feedback System was extended to all the international hotels. All the hotels are HACCP certified. Standardization of crockery, cutlery, recipes and menu templates, uniforms for frontline positions and also the back of the house positions and room amenities in the form of mini bar standards were undertaken. Standardization of cuisine of different regions and types were driven to enhance quality of food and provide innovative F&B offerings. A range of food items like exotic breads, desserts and felchlin chocolates were launched to provide higher level of F&B experience.

Pre-Opening Manuals have been created and implemented for new opening properties, to ensure consistency in service delivery and enhance guest interaction. The SBUs launched a series of employee related initiatives. These include Wall of Fame for recognizing outstanding service delight stories, Brick Bats - a stepping stone to proactively correct a mistake to ensure that measures are taken to enhance service delight, Empower - to recognize employees for acts of empowerment and Joy at Work activities to energize employees.

Several Service Excellence initiatives were taken during the year. These included focus on processes/systems by continuously increasing the number of Tata Business Excellence Model certified internal/ external assessors resulting in the process orientated work culture. This has again resulted in consistency in service delivery and enhanced guest interaction. Besides the above, the other areas of focus which has resulted in Service Excellence include Competency Assessment Model for all operational staff with focus on training need identification leading to enhanced service experience, cross exposure training programme, international talent swaps, individual development swaps, food & beverage bench marking exercise for senior managers and chefs- resulting in awareness in global F & B trends and corporate chefs competition called the 'Dish of the month' to innovate and enhance the quality of food resulting in innovation in F & B offerings leading to enhanced guest experience.

Business Excellence:

i. Brand Standards:

Two major changes in the hospitality industry in India are intensive competition from other hotel chains and the emergence of a more demanding and discerning customer.

Creation of Brand Standards:

The Business Excellence Team partnered with Hotel Operations Teams to:

* Ensure consistent brand standards based on international benchmarking

* Monitor and measure customer satisfaction to bring about sharper customer focus and implement service improvements.

* Explore the latest trends in hospitality for absorption / implementation into the group.

* Update operating manuals for all brands, products and services.

In your Company's quest to benchmark against the world's finest hotels, it partnered with an internationally acknowledged expert on hotel experiences to refine the Taj Luxury Experience Standards, thus enabling it to establish a unique identity in its endeavor to clearly differentiate the Taj brand.

World-class trainers trained associates in competencies such as personal butler services, concierge, sommeliers and bartenders.

Taj fosters and encourages associate engagement in improving processes and procedures to ensure guest delight. This is reflected in the Process Improvement Teams deployed across the organization. These teams meet, analyze and implement improvements in operational processes to impact guest satisfaction positively.

ii. Mystery Shopper Audits:

Mystery Shopper Audits continued to help your company improve associate guest service awareness by the use of audits and detailed narratives. These audits provided an unbiased opinion of how your company is perceived by it's guests and uniquely assesses each moment of truth.

iii. Customer Feedback System (CFS):

The Customer Feedback System was further refined to capture guest feedback from multiple channels. An advanced CFS data warehouse now provides sharper and more insightful data to all user departments thus ensuring that guest feedback drives improvement. The system is functional at hotels across the organization, including international locations and sales & marketing offices.

iv. Guest Satisfaction Tracking System (GSTS):

The online GSTS survey allows guests to record their feedback on the entire gamut of products and services being offered by Taj Hotels, at the convenience of the guests. GSTS includes extensive evaluation parameters pertaining to ALL aspects of a resident guest's experience at the hotel. These evaluation parameters have been designed to translate guest expectations into tangible, measurable information which is used for decision making. The GSTS form was redesigned based on guest feedback to capture feedback on all touch points during a guest's stay.

v. Tata Business Excellence Model:

This year, your Company has once again applied for the Tata Business Excellence Model (TBEM) Assessment. The feedback from past assessments has gone a long way in helping your company improve its processes to deliver a robust business performance, building a high sense of associate commitment in a high performance work culture.

vi. Accreditation Processes:

ISO 22000:

Your company has taken the lead in the implementation of ISO 22000 (a food safety management system). This is an upgrade over the earlier Hazard Analysis and Critical Control Point (HACCP) certifications. Several hotels were certified last year.

ISO 14000 / Environment Management System:

The ISO has developed international environmental management standards which are known as the ISO 14000. ISO 14000 provides a framework for the development of an environmental management system and the supporting audit programme. Your company is conscious of the role it plays in impacting the environment and has hence commenced implementation of ISO 14000.

Key Marketing Initiatives:

Marketing Alliances:

During the year your Company entered into some Marketing alliances. The key amongst those were the alliance with Okura Hotels & Resorts, one of the largest international hotel groups in Japan, to develop cross-promotional opportunities for both companies and to harness each other's strengths in their respective markets of dominance.

During the year, your Company also tied up with several Airlines for their Frequent Flier loyalty program the key amongst them being with Lufthansa, American Airlines and KLM. The alliance allows your company to have access to their data base and thereby gives your company an opportunity to do a customized communication in their respective dominant markets. Members of the frequent flyer tie-ups can earn miles for stay at all Taj properties. This association is in recognition to the rise of the world traveler today, who is discerning and is extremely demanding of every offering. With associations of such nature, the Taj aims to garner a lifetime connection with its guests and their families.

Your Company in collaboration with ICICI Bank and American Express launched the new ICICI Bank Ascent American Express@ Card. The Card is six times more rewarding for the consumer than the other leading credit cards in India. Consumers earn attractive 6 reward points per Rs 100 spent on dining, shopping, travel and overseas expenses. Additionally, there are exciting offers and privileges to help customers save even as they prepare for that long awaited getaway. Your Company enhances the customer experience by offering attractive privileges for the cardmembers including discounts on best available rates for stay at the Company properties.

Your Company continues to promote its existing marketing alliances for the mutual benefit of both the partners.

Outlook:

On the backdrop of a successful year, the outlook for the hotel industry in the coming year remains bullish. With the number of tourist arrivals expected to go upto 10 million by 2010, the interest in India as a leisure destination has tremendously gone up. This will drive tourist traffic into India. Further, the general economic conditions in most industrial sectors remain bullish for the coming year. This will drive business travel into India which will benefit the hotel industry. Certain major events like the Commonwealth Games planned in Delhi in 2010 would require addition to the inventory of rooms which would again help the hotel industry.

Your Company would aggressively pursue its strategy both in the domestic as well as the international market at different price points from the Smart Basic Hotels to the luxury segments. With its leadership position in most markets in the luxury and leisure segments, your Company expects to achieve sustainable and profitable growth in the coming years.

Management Discussion and Analysis of Operating Results and Financial Positions:

The Annual Report contains Financial Statements of your Company, both on a stand-alone and consolidated basis. An analysis of the financial affairs is discussed below under summarized headings.

Results of Operations for the year ended March 31, 2008:

Standalone Financial Results:

The following table sets forth financial information for the Company for the year ended March 31, 2008:

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007Income

Sales & Other operating income 1764.51 1540.86

Other Income 58.65 76.45

Total Income 1823.16 1617.31

Expenditure

Consumption of Raw Materials 128.24 121.20

Staff costs 312.77 280.77

License Fees 104.73 99.48

Fuel, Power & Light 92.61 80.49

Depreciation 85.48 91.44

Other Expenditure 436.00 399.68

Less: Unallocated Expenditure during (11.42) (2.28)construction period transferred to Fixed Assets

Total Expenditure 1148.41 1070.78

Profit Before Interest and Tax 674.75 546.53

Interest (Net) 94.28 71.89

Profit from Ordinary Activities before tax 580.47 474.64

Provision for Tax 198.91 152.25

Tax Provision of earlier years (Net) 4.10 -

Profit from Ordinary Activities after tax 377.46 322.39

Revenues:

The summary of total income is provided in the table below:

Rs/CroresParticulars Year Ended % Change March 31, 2008 March 31, 2007

Rooms sales 978.71 845.15 16Food & Beverages Sales 585.32 523.73 12Other Operating Income 200.48 171.98 17Non-Operating Income 58.65 76.45 (23)Total Income 1823.16 1617.31 13Statistical InformationAverage Room Rate 10,674 9,233 16Occupancy (%) 73 72 -

* Room sales were mainly driven by increase in Average Room Rate by 16% from Rs 9,233 to Rs 10,674.

* Strong Food & Beverages sales growth achieved with banquets revenue increasing by 16%.

* Other operating income mainly includes income from management fees and other operating income from hotels, which increased in line with overall buoyancy in the business.

* Non-operating income was lower mainly due to lower Dividend Income and Profit on sale of investments received in the previous year.

Operating expenses:

The operating expenses increased by 7% from Rs. 1070.78 crores to Rs. 1148.41 crores. The increase was mainly on account of payroll to keep in line with competition and industry, increase in advertisement and general administration expenses. Operating revenue expenses were in line with the increased volume of business. The increased advertisement expenses are an endeavour to make Taj a global brand and create awareness of its rapid international expansion.

Depreciation for the year was lower due one time charge on leased assets

considered in the previous year.

Profit before Interest and Tax (PBIT):

The PBIT increased by 23% from Rs. 546.53 crores to Rs. 674.75 crores. The Company achieved a PBIT margin of 37% of sales for the current year, an improvement from 34% margin achieved in the previous year.

Interest costs:

Interest cost was higher at Rs. 94.28 crores for the year ended March 31, 2008 as compared to Rs. 71.89 crores in the previous year consequent to complete utilization of FCCB proceeds and incremental debt to fund acquisition of Campton Place in San Francisco.

Profit before Tax:

Profit before tax, increased from Rs. 474.64 crores to Rs. 580.47 crores, an increase of 22 %.

Profit after Tax:

Profit after tax for 2007/08 increased by 17% over that of 2006/07 from Rs.322.39 crores to Rs. 377.46 crores.

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007

Net cash from operating activities 474.36 520.49

Net cash used for investing activities (492.97) (354.88)

Net cash from/(used in) financing activities 5.33 (260.30)

Net Increase / (Decrease) in cash and cash equivalents (13.28) (94.69)

Operating Activities:

Net cash from operating activities was lower at Rs 474.36 crores as compared to Rs 520.49 crores in the previous year, mainly due to lower tax outflow in the previous year on account of adjustment of tax losses of the merging companies.

Investing Activities:

Net cash used for investing activities was mainly on account of:

* Rs. 259.00 crores spent towards expansion plans, renovation of existing properties and replacement/up-gradation of existing fixed assets .

* Rs. 49.60 crores for investment in Joint Venture Company, Bjets Pte. Ltd.

* Rs. 179.02 crores for acquisition of Campton Place, San Francisco and renovation of The Pierre, New York.

Financing Activities:

The Company during the year, repaid 11.42% secured Non-Convertible Debentures totaling to Rs 330.74 crores by raising 9.86% Secured Non-Convertible Debentures totaling to Rs 300 crores. In addition, the Company raised a debt of US$ 30 million through External Commercial Borrowings route to part finance the acquisition of Campton Place, San Francisco.

Certain Financial Ratios for Standalone Financials:

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007

Net Debt to Total Capital (total debt less cash and bank balances divided by the sum of net debt and net worth) 0.33 0.34

Net Debt to Equity (total debt less cash and bank balances divided by the sum of net debt and net worth) 0.52 0.52

Consolidated Financial Results:

Your Company has Consolidated its Financial Statements with those of its Subsidiaries, Joint Ventures and Associates (together referred as Group Companies' or Group') in accordance with generally accepted accounting practices prevailing in India. The Consolidated statements include the financial position of Subsidiaries on line by line basis, Jointly Controlled entities on a line by line basis to the extent of proportionate holding and Associates by a one-line consolidation of share of profit after tax.

The following table sets forth the Consolidated Financial results for the year ended March 31, 2008:

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007

Income:

Sales & Other operating income 2920.03 2506.25

Other Income 92.59 94.88

Share of Profit in Associates 64.18 54.39

Total Income 3076.80 2655.52

Expenditure:

Consumption of Raw Materials 266.07 253.76

Staff costs 784.11 652.73

License Fees 113.64 112.19

Fuel, Power & Light 153.25 132.83

Depreciation 167.62 160.67

Other Expenditure 729.83 642.54

Less: Unallocated Expenditure during (18.90) (8.29)construction period transferred to Fixed Assets

Total Expenditure 2195.62 1946.43

Profit Before Interest and Tax 881.18 709.09

Interest (Net) 202.32 122.15

Profit from Ordinary Activities before tax 678.86 586.94

Provision for Tax 242.63 196.15

Tax Provision of earlier years (Net) 4.35 0.37

Less: Minority Interest in Subsidiaries 22.74 20.11

Profit from Ordinary Activities after tax 409.14 370.31

Less: Exceptional Items 54.16 -

Profit after Exceptional items and tax 354.98 370.31

Revenues:

The Company, its subsidiaries and its Jointly Controlled Entities (the Group) are primarily engaged in the business of hoteliering with the exception of two Jointly Controlled Entities, which are engaged in the business of Air Catering. The other areas of business primarily include Ready to Eat / Ready to Cook foods business.

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007

Hoteliering 2641.15 2256.66Air Catering 298.87 265.39Others 25.93 17.15Unallocable Income 46.67 61.93Share of Profit in Associates 64.18 54.39Total Revenue 3076.80 2655.52

* Increase in hoteliering revenue is mainly on account of continued buoyancy in domestic market and acquisitions in USA over last couple of years.

* Air Catering business improved on account of strong performance of Air Line Industry.

* Unallocable Income represents Dividend Income and Profit on sale of Investments.

* Share of profit in Associates represents Company's proportionate share in Profit After tax of its associates. The increase is on account of improved performance of its associates carrying out hoteliering business.

Operating expenses:

The operating expenses increased by 13% from Rs. 1946.43 crores to Rs.2195.62 crores. The increase was mainly on account of payroll to keep in line with competition and industry, new properties acquired in USA over last couple of years, increase in advertisement and general administration expenses. The increased advertisement expenses are an endeavour to make Taj a global brand and create awareness of its rapid international expansion.

Consolidated Profits:

Profit Before tax & Interest increased by 24% from Rs. 709.09 crores to Rs.881.18 crores, which is in line with the growth in domestic properties.

Interest costs:

Interest cost was higher at Rs. 202.32 crores for the year ended March 31, 2008 as compared to Rs. 122.15 crores in the previous year consequent to incremental debt to fund acquisition of Campton Place in San Francisco and 11.57% of the Common Stock A of Orient-Express Hotels Limited, USA.

Profit after Tax from Ordinary Activities:

Profit after Tax from Ordinary Activities, increased from Rs. 409.14 crores to Rs. 370.31 crores, an increase of 10%.

Exceptional Items:

International Hotel Management Services Inc., a 100% overseas subsidiary of the Company, in order to undertake extensive renovation, shut down all the rooms at The Pierre Hotel, New York. Consequent to the closure of rooms for renovation, the Company incurred an expenditure of Rs. 54.16 crores as employee severance cost.

Profit after Exceptional items and Tax:

Profit after tax for 2007/08 in view of the exceptional items and higher interest cost was marginally lower from Rs. 370.31 crores to Rs. 354.98 crores.

Cash Flow Data:

The following table sets forth selected items from the consolidated cash flow statements:

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007

Net cash from operating activities 583.68 670.30

Net cash used for investing activities (1,650.99) (1,097.74)

Net cash from financing activities 1,127.34 148.39

Net Increase / (Decrease) in cash and cash equivalents 60.03 (279.05)

Operating Activities:

Net cash from operating activities was lower at Rs 583.68 crores as compared to Rs 670.30 crores in the previous year, mainly due to lower tax outflow in the previous year on account of adjustment tax losses that were available to The Indian Hotels Company Ltd. and incremental working capital requirement for the purpose of new properties acquired during the year.

Investing Activities:

Net cash used for investing activities was mainly on account of:

* Rs. 677.73 crores spent towards purchase of Fixed Assets, including US$ 60 million for acquisition of Campton Place, San Francisco and balance for expansion plans, renovation of existing properties and replacement/up-gradation of existing fixed assets.

* Samsara Properties Limited, a 100% overseas subsidiary of the Company had acquired 11.57% of the Common Stock A of Orient-Express Hotels Limited, USA at an aggregate cost of US$ 246.9 million

Financing Activities:

Net cash raised from financing activities was mainly due to

* US$ 60 million raised for acquisition of Campton Place, San Francisco.

* US$ 260 million raised by Samsara Properties Limited, a 100% overseas subsidiary for acquisition of 11.57% of the Common Stock A of Orient-Express Hotels Limited, USA.

Rs./CroresParticulars Year Ended March 31, 2008 March 31, 2007

Net Debt to Total Capital (total debt less cash and bank balances divided by the sum of net debt and net worth) 0.53 0.38

Net Debt to Equity (total debt less cash and bank balances divided by the sum of net debt and net worth) 1.42 0.90

Risks & Concerns:

Industry Risk:

General economic conditions:

Hotel business in general is sensitive to fluctuations in the economy. The hotel sector may be unfavourably affected by changes in global and domestic economies, changes in local market conditions, excess hotel room supply, reduced international or local demand for hotel rooms and associated services, competition in the industry, government policies and regulations, fluctuations in interest rates and foreign exchange rates and other natural and social factors. Since demand for hotels is affected by world economic growth, a global recession could lead to a downturn in the hotel industry.

Socio-political risks:

In addition to economic risks, your Company faces risks from the socio-political environment, internationally as well as within the country and is affected by events like political instability, conflict between nations, threat of terrorist activities, occurrence of infectious diseases, extreme weather conditions and natural calamities, etc. which may affect the level of travel and business activity.

Company specific Risks:

The Company specific risks remain by and large the same as enumerated last year. These are:

Heavy Dependence on India:

A significant portion of your Company's revenues are realised from its Indian operations, making it susceptible to domestic sociopolitical and economic conditions. Moreover, within India, the operations and earnings are primarily concentrated in hotel properties in five cities.

Dependence on the high-end Luxury segment:

Luxury hotels contribute a significant proportion of the total revenue and earnings of your Company. This segment is affected by the international events and travel behaviour and suffers from high operating leverage. Adverse development affecting these hotels or the cities in which they operate could have a materially adverse effect on the Taj Group.

Competition from International Hotel Chains:

The Indian subcontinent, South East Asia and Asia Pacific with high growth rates have become the focus area of major international chains. Several of these chains have announced their plans to establish hotels to take advantage of the demand supply imbalance.

These entrants are expected to intensify the competitive environment. The success of Taj Group will be dependent upon its ability to compete in areas such as room rates, quality of accommodation, brand recognition, service level, convenience of location and to a lesser extent, the quality and scope of other amenities, including food and beverage facilities.

Increased outbound travel:

Recent competitiveness in international airfares and strengthening of the Indian Rupee resulted in destinations like Europe, South East Asia and Australia becoming more affordable to the average Indian traveler. This has increased outbound travel and presents a risk to the domestic segment for leisure resorts.

High Operating Leverage:

The industry in general has a high operating leverage which has further increased with on-going renovations and product upgrades. However, it has been observed that your Company has been able to earn higher revenues with acceptance of its products in the market and improved economic conditions.

Foreign exchange fluctuation risks:

Your Company also has a portfolio of foreign currency debt, in respect of which it faces exposure to fluctuations in currency as well as interest rate risks.

Risk mitigation Initiatives:

Your Company employs various policies and methods to counter these risks effectively, as enumerated below:

* To reduce the geographical and economic risk, your Company is looking at increasing its presence internationally in key gateway cities and resorts in South East Asia and the Indian Ocean rim.

* To counter the risk of dependence on the high end luxury segment, your Company is entering the mid-market segment which is comparatively insulated from political and social changes in India. The Company through its subsidiary Roots Corporation Limited is also increasing its presence in Budget Hotel' segment under the brand Ginger'.

* To successfully counter the risk from growing competition and new properties, your Company is renovating and repositioning all its key properties. It is also improving its service standards in consultation with international experts to provide exceptional service consistently across its hotels.

* Operating and financial leverage, by expansion through management contracts and leveraging the strengths of its Associates.

* Your Company closely monitors foreign currency exposures and hedges in consultation with its advisors. Net exposures, including those from derivative instruments, are kept at acceptable levels and within overall limits approved by the Board. These exposures are subjected to regular reviews.

Internal control systems and their adequacy:

Your Company has reviewed internal controls and its effectiveness through the internal audit process. Internal audits were undertaken for every operational Unit and all major corporate functions under the direction of the Group Internal Audit department. The focus of these reviews are as follow:

* Identify weaknesses and areas of improvement

* Compliance with defined policies and processes

* Safeguarding of tangible and intangible assets

* Management of business and operational risks

* Compliance with applicable statutes

* Compliance with the Tata Code of Conduct

The Taj Positive Assurance Model', which is an objective methodology of providing a positive assurance based on the audits of operating units and corporate functions, was institutionalized in 2004/05 as a standard audit process in conjunction with empanelled internal audit firms. While this methodology was adopted for select Units in the year 2004/05 and 2005/06, it was successfully implemented at all operational Units during the last year.

The novelty of this model is that it is a convergence of Process Framework, Risk and Control Matrix and a Scoring Matrix. A framework developed for each functional area identified on the basis of an assessment of risk and control and provides a score, allowing the Unit to improve on high risk and weak areas.

The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the compliance reports submitted to them.

Human Resources & Industrial Relations:

The manpower employed in your Company for 2006/07 was 10018 (previous year was 8553), which included executives, bargainable staff, probationers, trainees, apprentices and contract employees. The increase in numbers is mainly on account of amalgamation of five Group companies with your Company.

Your Company has embarked on a strategic initiative to identify and develop top talent in the company through a structured developmental process. This initiative, called Emerging Leaders of Taj or EL Taj, is a process that provides an opportunity to high performing executives in different grades to participate in a process that begins with defining competencies required at each executive grade, nominating high performing executives, participating in Developmental and Assessment Centers where these executives participate in exercises and simulations to identify strong and weak competencies. The process ends with creating developmental plans for each individual and executing these to prepare the executives for future leadership positions. The aim is to create a reservoir of talent of 400 top notch people by the erkd of this decade with leadership qualities to man the slots that will arise due to the growth and expansion plans of the Company.

The expansion plans of your Company are being supported by an initiative of aggressively recruiting young catering college graduates and providing them with high quality training. The existing Taj Management Trainee Program is being further strengthened and as an extension of this young hotelier program a Hotel Operations Management Trainee Program is being initiated. Several training programs to improve operational efficiency have been launched.

Based on Guest or Peer feedback process of the internationally recognized reinforcement program of your Company, Special Thanks and Recognition System - STARS', 56 employees have qualified to the highest category, the MD's Club and will be felicitated.

The Employee Satisfaction Survey conducted by Gallup Organization was completed for the year, where your Company seeks regular feedback from its employees to ascertain their levels of satisfaction and to ensure that employees' morale and motivation are constantly improved. Critical human resource issues are analyzed, corrective actions initiated and results monitored regularly.

Industrial relations throughout the year were cordial at all hotels and operating units of your Company. Period wage settlement agreements were entered into with the Staff representatives and Unions at various locations.

Awards & Acclaims:

AWARDS -TAJ HOTELS RESORTS AND PALACES:

Corporate Global Awards

* Taj Hotels Resorts & Palaces was the Winner of the Selling Long Haul Travel Awards 2007.

* Taj Spa was honored with the SENSES Visions Award 2007 at the SENSES Wellness Awards 2007 held in Berlin

Corporate National Awards:

* CNBC TV 18 International Travel Award for the Outstanding Exporter of the Year 2007, in the Travel Tourism & Hospitality Category.

* Dun & Bradstreet - American Express Corporate Awards 2007 accolades The Indian Hotels Company Ltd. as India's Top 500 Companies 2007 - in the 'Hotels' category

* India's Most Customer Responsive Hotel - Category Hotels by the Avaya Global Connect Customer Responsiveness Awards 2007-.

* Abacus & TAFI Awards 2007 (Malaysia) by Travel Biz Monitor for Business Leadership in Hospitality in the category of Best Luxury Hotel Brand'.

* Today's Traveller Leadership Award 2007 for India's Most Recognised Hotel Brand.

* The Best Hotel Website in India namely the Genius of the Web 2007' award, given by CNBC-Web 18 in association with Frost & Sullivan.

* India's most respected Company by Business World magazine in 2007.

* Taj is the winner of the Reader's Digest Trusted Brands Platinum Award for the Hotel Category in India in 2007.

LUXURY HOTELS:

Taj Exotica Resort & Spa, Maldives:

* Taj Exotica Resort & Spa, Maldives The Rehendi Presidential Suite received the Annual World Travel Award as Maldives Leading Suite' 2007.

* Maldives Spa has been recognized as Asia's Connoisseur Collection of the World's Finest Spas in 2007.

* Taj Exotica Resort & Spa, Maldives has been selected in the category of 'Best for Water Sports' in the 2007 Spa Finder Readers' Choice Awards.

* Spa Finder's Reader's Choice Award - amongst World's 10 best spas.

Taj Exotica Resort & Spa, Mauritius:

* Best Spa Resort in the world by Italy's No 1 'Luna' Spa awards 2008.

* TERS Mauritius - Mauritius' Leading Suite in the Indian Ocean - 14th Annual World Travel Awards 2007 - Presidential Suites, Taj Exotica Resort & Spa, Mauritius.

Rambagh Palace, Jaipur:

* Selected in the Travel + Leisure 500 list of The World's Best Hotels in January 2007.

* Conde Nast Traveler USA Gold List 2007 - The Best Places to Stay in the World, Selected by the Readers of Conde Nast Traveler.

* Tatlers Body & Soul Guide 2007 - World's Top Spas.

Taj Coromandel Hotel, Chennai:

* Taj Coromandel Chennai features in the Conde Nast Traveler USA Hot List Tables 2008.

Taj Lake Palace, Udaipur:

* Taj Lake Palace, Udaipur Spa received 'Luna' Spa awards, Italy in May 2008.

* Taj Lake Palace, Udaipur features in the Conde Nast Traveler USA Gold List 2008.

* Conde Nast Traveler, USA Gold List 721 World's Best Places to Stay in January 2008 has featured Taj Lake Palace, Udaipur.

* Taj Lake Palace, Udaipur has been honored as India's Top 10 Hotels by Forbes.com, USA in 2007.

* Taj Lake Palace, Udaipur - Spa Asia's Connoisseur Collection of the World's Finest Spas

* Selected in the Travel + Leisure 500 list of The World's Best Hotels.

* Taj Lake Palace, Udaipur is ranked 8 in the Travel + Leisure Top 20 Reader's Poll - World's Best Hotel Value Awards

* Taj Lake Palace, Udaipur wins the award for India's Leading Castle and

Palace in the Regional 2007 World Travel Asia, Australasia & Indian Ocean Awards (World Travel Awards).

* Spa Finder's Reader's Choice Award - amongst World's 10 best spas.

Taj Mahal Palace & Tower, Mumbai:

* Taj Mahal Palace & Tower, Mumbai features among the Conde Nast Traveller, UK Gold List 2008, Best Hotels in the World Best for Food amongst 17 hotels

* Taj Mahal Palace & Tower, Mumbai features in the Conde Nast Traveler USA Gold List 2008.

* Conde Nast Traveler, USA - Gold List 721 World's Best Places to Stay - The Taj Mahal Palace & Tower, Mumbai, 91.9 in Asia, Australia & Pacific Nations

* Robb Report Luxury Hotels accolades The Taj Mahal Palace & Tower, Mumbai among 100 Ultimate City Escapes Hotels in Asia and the Pacific.

* Listed in India's Top 10 Hotels by Forbes.com, USA

* Awarded as CNBC AWAAZ Travel Award for being the Best Leisure Hotel and Best Business Hotel.

* The Taj Mahal Palace & Tower, Mumbai receives the CNBC TV 18 International Travel Award for Best Business Hotel

* The Taj Mahal Palace & Tower, Mumbai has been honored as Asia's Leading Hotel in the Regional 14th Annual World Travel Awards 2007

* Destin Asian Readers' Choice Awards 2008, Jakarta, Indonesia accolades The Taj Mahal Palace & Tower, Mumbai as winner for being the Best Hotel in Mumbai.

* Best Hotel in Mumbai - Destin Asian Readers' Choice Awards 2007

Umaid Bhawan Palace, Jodhpur:

* Umaid Bhawan Palace, Jodhpur features in the Conde Nast Traveler USA Gold List 2008.

* Conde Nast Traveler, USA- Gold List 721 World's Best Places to Stay - Umaid Bhawan Palace, Jodhpur.

* Tatter Travel Guide states Umaid Bhawan Palace, Jodhpur in the best 101 hotels - within the 'Crazy Beautiful' section and monumental palace with serious wow factor.

* Umaid Bhawan Palace, Jodhpur - Spa Asia's Connoisseur Collection of the World's Finest Spas.

* Robb Report Luxury Hotels - 100 Ultimate City Escapes Hotels - Asia and the Pacific.

* Taj Palace Hotel, New Delhi Taj Palace, New Delhi receives the CNBC TV 18 International Travel Award for Best Business Hotel July 2007.

* Business Traveller Asia-Pacific Reader Poll voted Taj Palace, New Delhi the Best Business Hotel in New Delhi.

The Taj West End, Bangalore:

* Times Good Food Guide awarded Blue Ginger as 'Best Vietnamese Cuisine', Mynt as 'Best All Day Dining' and Blue Bar as 'Best Bar'.

* Mysore Horticultural Society has awarded Taj West End, Bangalore for its 'Best Ornamental Gardens' and 'Best Landscaped Gardens'.

Taj Wellington Mews:

* Has been recognized as Asia's Connoisseur Collection of the World's Finest Spas

Taj Boston, Boston, USA:

* Taj Boston, USA features in the Conde Nast Traveler USA Gold List 2008

* Conde Nast Traveler, USA - 2008 Gold List 721 World's Best Places to Stay

* Travel & Leisure - The Worlds 500 Best Hotels - Taj Boston.

* Taj Boston earns inclusion in Institutional Investor's ranking by Chief Executive Officers and other senior executives from around the world.

51 Buckingham Gate, London, U.K.:

* 51 Buckingham Gate, London, U.K Quilon has been awarded with the prestigious Michelin star in January 2008.

PREMIUM HOTELS:

BLUE Sydney, Australia:

* Selected amongst the World's 100 Best Spas in the Conde Nast Traveller's UK Readers Spa Awards 2007

Taj Samudra, Colombo, Sri Lanka:

The 14th Annual World Travel Awards 2007 awarded The Presidential Suite, Taj Samudra Hotel, Colombo Sri Lanka as Sri Lanka's Leading Suite

Taj Tashi, Bhutan:

Taj Tashi, Bhutan featured in the Conde Nast Traveller, UK Hot List 2008 being recognized among the 65 most stylish, most innovative, most luxurious hotels

Taj Exotica, Goa:

* Conde Nast Traveller, UK - Readers Spa awards 2007 acclaims Taj Exotica Spa, Goa as Worlds 100 best Spas in March 2007.

Taj Malabar, Cochin:

Conde Nast Travellers Readers Awards - 100 best spas Taj Malabar, Cochin - 8th Best in Asia.

Taj President, Mumbai:

Times Food Guide has given the Times Nightlife award for Wink at Taj President, Mumbai among the Best Bars/Restobars

Taj Residency, Bangalore:

* Times Good Food Guide awarded Sugar N Spice as the 'Best Patisserie' and Graze as the 'Best European Dining'

* National Tourism Award, Department of Tourism - Best 5 Star Hotel

GATEWAY HOTELS:

Baghvan, Pench National Park:

Travel+Leisure: IT List: Editor's pick 2007- favourite places to stay - from Mexico to the Mediterranean has featured Baghvan in Asia.

Mahua Kothi, Bandhavgarh National Park:

* Travel+Leisure: IT List: Editor's pick 2007 - favourite places to stay - from Mexico to the Mediterranean - Mahua Kothi featured in Asia.

* Mahua Kothi was mentioned in the Conde Nast Traveler, US 2007 Hot List of the Year's 138 Top New Hotels. Was also highlighted among the magazine's choice for the top 5 hotels in India

* Mahua Kothi features in the Conde Nast Traveller, UK - 2007 Hot List amongst 65 cool new places to stay

* Awarded Best Wildlife Resort' in the inaugural May 2007 Madhya Pradesh Tourism State Awards