"We see our investment in betapharm as a key strategic initiative towards becoming a mid-sized

global pharmaceutical company with strong presence in all key pharmaceutical markets. betapharm
has created a strong growth platform and is well positioned for the future and we are looking forward
to partner with them in building a strategic presence in Europe."

- Dr. K. Anji Reddy, Chairman, Dr. Reddy's Laboratories Limited, in March 2006

On 15th February, 2006, Dr. Reddy's Labs Ltd., a leading Indian pharmaceutical company,
acquired Germanys fourth-largest generic pharmaceutical company, betapharm Arzneimittel GmbH
(betapharm) from the 3i Group for 480 million. The sale deal also included the 'beta institut for
sociomedical research GmbH' (beta Institut), a non-profit research institute founded and funded by
betapharm. Its goal was to conduct research on issues related to social aspects of medicine and
health management. The acquisition was hailed as the biggest overseas acquisition made by an
Indian pharmaceutical company. The synergies from the acquisition were expected to benefit both
DRL and betapharm.

Through this acquisition DRL could get immediate access to the German generic drugs
market. Germany is the largest generic market in the world only second to the US. Germany also
accounted for 66 percent of the generic market in Europe (Refer to Exhibit I for a list of the major
generic markets in Europe). The acquisition was expected to help DRL gain a strategic presence in
the European market as the generic drug market in Europe was expected to show strong growth due
to rising public healthcare costs.

Risk management of following companies will be studied:

1. Mangalore Refinery & Petrochemicals Ltd. (Downstream Oil Company):

MRPL imports as well exports, which provides a natural hedge against exchange fluctuation.
Efforts are made to match the exposure in USD to the extent possible, thereby mitigating to a
large extent. Volatility in crude and product prices impacting refining margins. MRPL imports
around 80% of its requirement of crude oil and exports approximately 47% of the total
production, where sale proceeds are realized in USD. Even in case of domestic sales the
prices are based on trade/ import parity prices in International market which provides a
natural hedge to a large extent. However sudden fluctuations in crude and product prices
will have significant effect on the margins of MRPL.

MRPL has adopted a conscious business strategy for procurement of crude oil by keeping
proportion of spot/ trial crude oils at optimal levels to have cost effective crude purchase in
the projected market scenario. To mitigate price risks, MRPL enters into long-term contracts
as well as open international markets to source crude oil at competitive prices. Management
prepare the rolling plan three months ahead to identify any changes in the profile of price
risk and takes appropriate action on a timely basis. Other approaches to drive down costs
include an increase in the use of cheaper tough crudes and use of blending to improve the
product slate. The volatility to the Foreign Exchange hedging is not resorted in the Company.

2. Reliance Industries Ltd.:

a. Commodity Prices: Mainly due to fluctuating prices of crude oil and gas and
downstream oil products. Mitigation is through risks that can be offset by gains in
other parts of the Group. Reliance has a diversified crude sourcing strategy from
multiple geographies under both short-term and long-term arrangements.
 b. Interest Rate Risk: Reliance borrows funds from domestic and international markets.
The interest rate risk is managed through financial instruments available to convert
floating rate liabilities into fixed rate liabilities or vice versa.

3. Hindustan Petroleum Corporation Ltd. (Downstream Company):

The Hindustan Petroleum Corporation has various risk associated with its operations. These
risks have been hedged by entering into forwards or swaps as per the risk to be mitigated.
HPCL has total outstanding forward contract worth USD 50.27 Million on its balance sheet. In
order to manage foreign currency exposure, HPCL has booked both forward contracts and
bought JPY buy or USD sell options. Moreover Interest rate swaps have been taken to hedge
exposure against variable interest outflow on loans. Forward contracts have also been taken
to hedge the un-matured RBI swap transactions outstanding. In order to reduce the risk
company faces do to the uncertainty in the business, HPCL has hedged the discount
percentage on purchases of crude oil, the Time spreads to remove pricing exposure
mismatches and margins on sale of refined products.

4. Hindustan Oil Exploration Company (Upstream Company):

a. HOEC is exposed to volatility in the oil and gas prices since the Company does not
undertake any oil price hedge. The impact of a falling oil price is however partly
mitigated via the production sharing formula in the PSCs.
b. Company enjoys a natural hedge to a certain extent as its receivable and significant
expenditure are denominated Risk in United States Dollar (US $).

5. Indian Oil Corporation Ltd.:

IOCL faces risks related to financial and commodity market in terms of commodity risks,
currency related risks and interest rate risks. Financial and derivative instruments are at the
centre of the risk management for IOCL. All derivative contracts entered into by the
Company are for hedging its foreign currency, interest rate & commodity exposures relating
to underlying transactions and firm commitments and not for any speculative or trading
purposes. For hedging currency risks, forward contracts for foreign currency loans are used.
For hedging commodity related risks, swaps on crude oil and margin hedging are used. For
hedging interest rate related risks, interest rate swaps are used.

6. Bharat Petroleum Corporation Ltd.

The operating cost of BPCL Refineries was protected by covering Refinery margins through
the instruments of hedging in the international market. Freight costs of Voyage Chartered
vessels and bunker costs of Time Chartered Vessel were effectively hedged during the year.
The Corporation has on the Balance Sheet date, outstanding forward contracts amounting to
USD 228.75 Million (1,533.66 Crores) to hedge foreign currency exposure for payment of
crude oil. The Corporation and its Subsidiaries has on the Balance Sheet date, outstanding
forward contracts amounting to USD 228.75 Million, of which NIL is to hedge the foreign
currency exposure towards loans & USD 228.75 Million to hedge foreign currency exposure
for payment of crude oil.