1. Management Discussion Report FY 2004-05

2. Index Key Financial Numbers Operating Margins Balance Sheet Summary Performance Highlights Business Operations & Outlook

3. Key Financial Numbers Q4 2004-05 - DF Net Sales Rs 45 Cr  Due to VAT impact, sales loss of approx. 6 weeks  VAT adjusted growth (on net sales basis) – 11% - Consolidated Net Exports Rs 44 Cr  Growth mainly due to improved performance from Brazil & Asia / Africa  First supply of generic to Europe commenced - PAT Rs 3 Cr  Stand-alone PAT de-growth Rs. 6 Cr

4. Key Financial Numbers Year 2004-05 - DF Net Sales Rs 290 Cr  2% Growth  VAT adjusted growth (on net sales basis) – 10% -Consolidated Exports Rs 130 Cr  Growth Rs 63 Cr & 95 %; -PAT Rs 53 Cr ; Consolidated PAT Rs 49 Cr  Stand-alone PAT de-growth Rs 11 Cr  Consolidated PAT de-growth Rs 6 Cr

5. Operating Margins – Q4 Rs in lacs Particulars 2004-052003-04Growth Net Sales & Op. Income10446101542.9% Operating Profits (PBIDT)*6531803-63.8% Operating Margin %6.3 % 17.8%-11.5% PBT(before exceptional item)-2181324-116.4% PBT %-2.1%13.0% -15.1% Income-tax expense(547)344 -259.2% Tax as % of PBT26.0% PAT(before exceptional item)330980 -66.4% PAT %3.2%9.6% -6.5% EPS for the quarter1.56 4.63 -66.3% * PBIDT excludes discovery expenditure & other income & is after R&D development costs for EU/US market of Rs. 718 lacs. Jan-Mar

6. Operating Margins – FY 2004-05 Particulars 2004-052003-04Gwth Net Sales & Op. Income (Adj.) # 48370443089.2% Operating Profits (PBIDT)*913611395-19.8% Operating Margin %18.9%25.7%-6.8% PBT(before exceptional item)60879097-33.1% PBT %12.6%20.5% -7.9% Income-tax expense7952519 -68.5% Tax as % of PBT13.1%27.7 % -14.6% PAT(before exceptional item)52926577 -19.5% PAT %10.9%14.8% -3.9% EPS25.01 31.09 -19.6% Consolidated EPS23.05 25.74 -10.5% Apr - Mar # Excludes research income from Novartis - Rs. 1389 lacs for 04-05. * PBIDT excludes discovery expenditure & other income & is after R&D development costs for EU / US for Rs.2000 lacs. Rs in lacs

7. Balance Sheet Summary Source of Funds: Shareholders’ Fund Loan Funds Net Deferred Tax Liability: 36011 21092 4481 58% 34% 7% 30719 0 4154 88% 0% 12% Total61585100%34873100% Application of Funds: Net Fixed Assets Long Term Investments Current Investments 29567 3863 14695 48% 6% 24% 20965 3355 2117 60% 10% 6% Working Capital: Inventories Cash & Bank Balances Debtors Other Current Assets Loans & Advances Less Current Liabilities & Prov. 14511 830 5980 577 3598 12037 24% 1% 10% 1% 6% 20% 9464 979 4300 393 2636 9336 27% 3% 12% 1% 8% 27% Net Current Assets:1345922%843624% Total61585100%34873100% Rs in lacs

8. Performance Highlights One-off items affecting the top line and bottom line: –De-stocking by stockists due to uncertainty in VAT implementation  Sales loss in domestic expected to be recouped in the first quarter of 2005-06 –Stricter implementation of NDPS Act by Narcotics Department  Retailers and wholesalers stopped fresh purchases  Subsequent amendment in NDPS rules in Feb 05 restored things to normalcy –Withdrawal of Toroxx following withdrawal by the innovator  Resulting in to sales and margin loss  Loss to be nearly recouped through launch of Toroxx A / AP (Aceclofenac/ Paracetamol Combination) and re-launch of Diclomax in April / May 05

9. Performance Highlights Other major reasons for lower profitability are: –Higher R & D expenditure in nature of investments Aimed at strengthening product pipe line for regulated markets (e.g. EU & US) Fully charged to P & L, pursuant to conservative accounting policy Higher R & D expenditure eligible for weighted deduction under Income Tax law, bringing down tax out-go significantly –Increased marketing infrastructure resulting in higher staff cost Field force taking time to stabilize Lower productivity & higher lead time of field force due to initial phase of learning curve

10. Business Operations And Outlook Domestic Market: –Maintained 14 th rank in domestic market even in cut-throat competition –Introduced 22 new products (including line extensions) –Pace of new introductions to continue during this year as well –NPPA driven price reductions likely to affect contribution –Baddi operations will provide excise / income tax benefits from Q3 onwards

11. Business Operations And Outlook International Market: –Geographical expansion to continue to drive growth and profitability in Brazil –New product launches & higher export revenue expected from EU market –Received marketing authorisation in Netherlands for Lamotrigine & completed first MRP registration in UK & Germany –Received plant approval from UK MHRA for oral solid formulations –First DMF with US FDA filed in Apr. ’05 –First ANDA expected to be filed with US FDA in the current quarter

12. Business Operations And Outlook R & D initiative: –Received USD 3 million as license income from Novartis for out- licensing AGE breaker compound –Signed a collaborative research agreement with AstraZeneca for novel drug discovery in the area of hyper tension –R & D expansion already under way to ramp up the R & D infrastructure to support product pipeline of regulated markets

13. Thus, strategic investments like increased marketing expense owing to increased field force and higher R&D investments during FY 2004-05 shall benefit the company in the medium to long term. Also, readiness to enter the US markets, commencement of exports to EU and good performance in other international markets like Brazil and Russia, are expected to boost the Company’s performance in near future.

14. Torrent Pharmaceuticals Limited Ready for tomorrow

15. Thank You