My Dear Shareholders,

On behalf of the Board of Directors, I welcome you all and take immense pride and pleasure in addressing this 32nd annual general meeting.

The Annual Report for 2004-05 which has now been with you for some time discusses in detail, the business performance and financial position of your Company. With your kind permission, I take the Directors’ Report and Audited Accounts for the year 2004-05, as read.

At this very forum last year, we had shared the vision of growing your Company at a much faster pace – to become a leading player in the global generic pharmaceutical market. We are indeed delighted to now talk about the rapid strides made along this path, to realize our vision.

Performance during the Last Year :

Consolidated international sales grew by a phenomenal rate of 95% during FY 2004-05. The same has crossed Rs. 100 crores barrier to reach Rs. 130 crores in FY 2004-05. This was primarily driven by a strong growth in Brazil, Europe and Rest of the World territories.

Our growth rate in the domestic market during FY 2004-05 was temporarily and marginally affected due to some external factors mainly due to de-stocking by the stockists due to VAT implementation as detailed in the Directors’ Report, and not due to any adverse fundamental change in the business. We have the requisite infrastructure in place to further improve our ranking amongst our peers in the domestic market, as is reflected by the sales growth during the first three months of FY 2005-06. The sales in domestic market in Q1 of the current year has been Rs.132 crores, a growth of 33%. After adjusting for the sales gain due to VAT implementation, the growth is 7%.

The proposed dividend rate of 80% for FY 2004-05 is the same as that of last year. We have decided to maintain the dividend inspite of reduction in profits as a part of steady dividend policy and better outlook in the coming years.

Let me now dwell on the two most important milestones of your company during recent times.

First and foremost, we acquired Heumann Pharma GMbH & Co. Generika KG of Germany. Heumann is a Pfizer group company with sales of euro 50 million (Rs.265 crores) for the fiscal year ended 30th Nov 04 and is ranked 11th in the German generic market. Heumann is a 90-year old brand and enjoys good equity with the doctors in Germany in the therapeutic areas of cardiovascular, gastro-intestinal and anti infectives. Torrent will now have access to 315 marketing authorizations and 34 product registration applications, together giving your company an immediate marketing set-up required to establish a firm foothold in the European generic market. The German generic pharmaceutical market constitutes nearly 66% of the total European generic market, which is worth around euro 8 billion (nearly Rupees 40,000 crores).

With this acquisition, your company’s consolidated global sales in the next year is expected to reach Rs.1000 crores. Torrent will become one of the few companies, whose 50% of revenues is expected to now come from its international business.

Let me assure you that the cost of acquisition is reasonable in our estimate to provide sufficient room to create a valuable business for us. There are strategic advantages associated with this acquisition such as the feasibility to shift manufacturing to a lower cost base in India, the common therapeutic areas of Torrent and Heumann which will enable us to leverage our research and development set-up in India, the provision of a direct distribution/marketing arm for our pipeline of products going off-patent, and the provision of a strong brand name in Germany. Your company is now focused on growing this exciting business by adding more products and shifting the production requirement to India. All of this will require additional investments of time and money. The management team of your company is confident of delivering valuable results from these investments.

I would like to highlight two major events in the field of R&D. During the year Novartis Pharma AG, with whom we had an alliance for our patented AGE breaker compound decided to in-license the same on payment of USD 3 million (Rs.14 crores). We also signed a collaborative agreement with AstraZeneca, another leading global pharmaceutical company for new drug discovery in the area of hypertension. I consider these two events as an act of faith in our R&D capability.

Last year, I informed you about our second manufacturing facility at Baddi. The project is progressing well and we are expecting it to commence operations by the third quarter of 2005-06. It will cater to the domestic formulations business. Further to the approvals received from the European authorities which I briefed you about last year, our current plant at Indrad (Gujarat) also got approvals from TGA in Australia and MHRA in UK. I would like to mention that this plant is on its way to get USFDA approval in the current year. In this direction, we have recently filed our first set of DMFs & ANDAs with US FDA .We expect the first product sales in US market to commence from next year .

Outlook :

In terms of our international operations, FY 04-05 has been a good year. We hope to capitalise on this performance during 05-06. Further to the acquisition of Heumann, we believe that we are poised for a big leap in this period.

In the backdrop of solid growth foundations laid down during the last few years, we believe that international sales of your company are expected to grow by leaps and bounds. Consolidated revenues from international operations has increased by 118 % in the first quarter of FY 2005-06. The European, Brazilian and Russian operations will help in sustaining the high growth rates for the foreseeable future. We also have the pipeline of products for the US markets in place.

Immediate outlook for the domestic branded business has been marred by certain price control orders from the NPPA in March 2005. Nevertheless, we believe that your company has the sales organization in terms of manpower, technological support and a large portfolio of recent good quality products that are expected to grow much faster than the market in the next few years. We are keen to consolidate our share in the fragmented domestic branded market, and we will not rule out any interesting opportunities, either organic or inorganic, that may come our way.

The successes of the Research team have encouraged us to commit additional resources for R&D and the coming year is expected to see a substantial increase in this expenditure, which includes setting-up of a new facility adjacent to the existing facility at Bhat. Globally, generic pharmaceutical companies spend around 10% of their revenues on research, and we believe that the research spend in India should provide higher productivity. It is therefore very pertinent that we are building our research infrastructure in an era when global research endeavors will look out for Indian talent.

The government has thankfully taken into consideration most of the genuine concerns of the Indian consumer and the industry while implementing the new Patent law in January 2005. It is expected that the new patent regime will not have any significant impact in the medium term in view of lower representation of patented products in the Indian market and a host of other factors.

Two important regulatory changes introduced during last one year relate to Value Added Tax (VAT) introduction and the Retail Selling Price-based excise duty payment. VAT has helped bring uniform and lower sales tax rates across the country as compared to the earlier sales tax regime and hence has helped to reduce the prices of medicines to the patients. However certain major States have yet to adopt VAT. Retail Price-based excise duty had no significant impact on the Company. The Union Budget, 2005 has also extended fiscal incentives on R&D expenses – we welcome this measure.

To Conclude :

Your Company has successfully mobilized financial resources for the growth initiatives at very attractive terms. However, keeping in mind the large monetary values of international markets and the potential opportunities in domestic markets, in the new patent era, we believe that the financial resources of your company need to be further bolstered. We are at present exploring a number of options in this regard. We seek your support and encouragement in our endeavors.

Appreciation :

I would like to take this opportunity to extend our gratitude to the medical fraternity and all our customers for their faith & support. I also thank the Central and State Governments, related authorities, financial institutions, banks and above all, the shareholders and employees of the Company for their continued support.

I thank you all for making it convenient to attend today’s meeting and giving your whole-hearted encouragement.

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This does not purport to be a report on the Proceedings of the 32nd Annual General meeting of Torrent Pharmaceuticals Limited