Mumbai, May 10, 2005:Chennai-based Malladi Drugs and Pharmaceuticals Limited ("Malladi"), the largest manufacturers of Ephedrine and& Pseudoephedrine salts, on Tuesday announced the acquisition of Novus Fine Chemicals ("Novus"), a US based Pseudoephedrine major, the first such cross-border acquisition by an Indian pharmaceutical company in the API segment.

The acquisition of Novus by Malladi is a move towards industry consolidation, since the US company is present in the same API segment i.e. cough and cold. The combined entity will be of similar size as the current industry leader. The acquisition also strengthens Malladi's position in the high growth Phenylepherine segment since Novus is currently the only company manufacturing Phenylepherine in the US.DSP Merrill Lynch acted as the financial advisor to Malladi Drugs and Pharmaceuticals Ltd.

The Novus acquisition is in line with the trend of globalization of Indian companies and offers Malladi a manufacturing presence in the US, which will enhance client acceptance and raise its profile. The front-end facility in the US market will also help Malladi accelerate its progress in the contract manufacturing business.

Announcing the acquisition, Mr. Prashant Malladi, Managing Director said: "With the Novus acquisition, Malladi will be in a position to provide a platform to innovators and also start-up biotech companies, which will be fully backward integrated into India with a front end in the US. "

Mr Aluri Srinivasa, Director, ICICI Venture said: "We are happy that we are partnering with Malladi and helping the company take this significant step in its growth path. This transaction is in keeping with ICICI Venture's vision of actively enabling Indian companies achieve their global aspirations through such cross-border acquisitions."

In a deal structured by DSP Merrill Lynch, Malladi has financed the cross-border acquisition through strategic funding aggregating Rs. 100 crore from a consortium of private equity investors - ICICI Venture, Sanders Morris Harris Group and IL&FS. Malladi has entered into a definitive agreement with the three private equity firms for infusion of funds through the issue of common stock.

Malladi has financed the cross-border acquisition through strategic funding from a consortium of private equity investors led by ICICI Venture and with participation from Sanders Morris Harris Group (SMHG) and IL&FS amounting to Rs 100 crore. Malladi has entered into a definitive agreement with the three VC firms for infusion of funds through the issue of common stock.

About Malladi Drugs and Pharmaceuticals:

Malladi Group was established in 1980 & and is now a professionally run Public Limited managed pharmaceutical Ccompany focused on the API segment. Malladi is US-FDA approved manufacturer with bulk part of its sales in the global regulated markets. Within the cough and cold API segment, Ephedrine & Pseudoephedrine salts were the first products manufactured by fully indigenously developed process. The company is also the first to manufacture these complex molecules in India. the company is a leader in Ephedrine and Pseudoephedrine. PHENYEPHRINE/CUSTOM SYNTHEIS??Malladi is also involved in custom synthesis and manufacturing for global companies.

The Malladi Group is a Leader in its Product category. The growth of the Organization has been built through its emphasis on core-competencies in terms of Process & Product.

Malladi is the largest manufacturer in India & also an US-FDA approved manufacturer of Pseudoephedrine Hcl. Malladi has a strong thrust on is a Research research based Company and is on the threshold of developing a NCE. An International Patent is already in place. All pre clinical studies are completed and the company is in the process of getting approvals for Phase I clinicals.