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Notes to Accounts of Alkem Laboratories Ltd.

Mar 31, 2022

1. Addition to Property, Plant and Equipment includes items aggregating? 111.2 Million (For the year ended 31 March 2021 ? 49.8 Million) located at Research and Development Centres of the Company.

2. Capital work in progress comprises expenditure in respect of various plants in the course of construction/expansion. Total amount of Capital work in progress is ? 2,324.5 million as at 31 March 2022 (31 March 2021: ? 3,232.6 million). This amount also includes capitalized borrowing costs related to the construction of various plants of? 5.9 million (31 March 2021: ? 17.0 million).

3. Refer Note 3.26(b)(1) for contractual commitments with respect to property, plant and equipments.

4. Exclusive charge by way of hypothecation over the whole of the movable properties (save and except current assets) including its movable plant and machinery, machinery spares, tools and accessories and other movable assets, both present and future subject to a maximum book value of? 2,150 Million - situated at Daman and Sikkim in India against issuance of Stand by letter of credit required for loan of US $ 20.0 million advanced by Banco de Chile to Ascend Laboratories SpA, Chile, a wholly owned subsidiary of the Company.

2) During the year, the Company has contributed by way of capital contribution:

a) '' 1,785.1 Million in wholly owned subsidiary in Netherlands viz, "S & B Holdings B.V.".

b) '' 700.0 Million in subsidiary in India viz, "Enzene Biosciences Limited".

c) '' 36.9 Million in wholly owned subsidiary in India viz, "Cachet Pharmaceuticals Private Limited".

d) '' 14.9 Million in wholly owned subsidiary in Colombia viz, "Ascend Laboratories SAS.

e) '' 1,462.9 Million in wholly owned subsidiary in United States of America viz, "S&B Pharma Inc." Subsequently, the entire investment of '' 7,583.0 Million has been transferred to The PharmaNetwork LLC pursuant to restructuring of US business (Refer subnote 6 of note 3.2 C)

3) During the previous year, the Company had invested '' 400 million in ABCD Technologies LLP with an objective to digitize healthcare infrastructure in India towards facilitating good distribution practices, inter alia, in support of the National Digital Health Mission of Government of India. As at 31 March 2022, the Company had a 6.45% share of profit/loss and voting rights.

4) All Investments in Shares & Securities are fully paid up. (Except Refer Note 3.26(b)-2)

5) During the year ended 31 March 2016, pursuant to the approval of the Board of Directors in its meeting held on 9 March 2016, the Company in order to focus on its core business activities and for other commercial reasons, restructured its investment in Avenue Venture Real Estate Fund (“Fund”) by entering into an Option Agreement with Mr. Tushar Kumar, which was in force for a period of 2 years from the execution date i.e 10 March 2016, for grant of unconditional option exercisable without restriction at the option of the option holder to purchase the trust units held by the Company in the Fund at an option price of 102% of the fair market value of each trust unit as on the exercise date. The Option Agreement was subsequently renewed for a period of 2 years by executing First Supplementary agreement and Second Supplementary agreement till 9 March 2020 and 9 March 2022 respectively. During the year ended 31 March 2022, the Company had renewed the said Option Agreement, by executing a Third Supplementary Agreement, as approved in its Board meeting held on 4 February 2022 for a further period of 2 years valid till 9 March 2024.

6) Pursuant to the Board of Directors approval at its meeting held on 25 May 2021 on the proposed plan for restructuring of the USA business operations by bringing both the subsidiaries namely, S & B Pharma Inc, USA ("S & B") and The PharmaNetwork LLC, USA ("TPNC") under a single umbrella by removing intermediary holding company S & B Holdings BV, Netherlands ("S & B BV"), the Company on 4 October 2021 has consummated the transaction whereby TPNC acquired 100% shares of S&B from the Company in exchange of TPNC''s shares. Subsequently, with effect from 5 January 2022, S & B now stands dissolved and all its assets and liabilities are now transferred by TPNC as capital contribution in its wholly owned subsidiary S & B Pharma LLC.

(b) Rights, preferences and restrictions attached to Equity Shares:

The Company has issued one class of equity shares with voting rights having a par value of '' 2 per share. Each shareholder is eligible for one vote per share held. The Company declares dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

On winding up of the Company, the holders of equity shares will be entitled to receive residual assets of the Company remaining after distribution of all preferential amounts in proportion to the number of equity shares held by the shareholders.

Secured:

Loans repayable on demand from Banks include:

1. Overdrafts from banks '' 10,100.7 Million (31 March 2021: '' 3,278.8 Million) are secured against pledge of fixed deposits with the banks.

2. Overdraft Facilities carry a rate of interest ranging between 4.20% to 6.30% p.a., computed on a monthly basis on the actual amount utilized, and are repayable on demand.

Unsecured:

3. Working Capital Loan from banks comprises of overdrafts and cash credit in INR of ''Nil (31 March 2021: '' 508.8 Million) and Packing Credit in Foreign Currencies of '' 12,354.5 Million (31 March 2021: '' 9,540.8 Million) and are repayable on demand.

4. Working Capital Loan from banks in Foreign Currency carries Interest rate in the range of 0.26% to 1.30%.

Management considers that excise duty, sales tax/ Goods and service tax, custom duty and income tax demands received from the authorities are not tenable against the Company, and therefore no provision for these tax contingencies have been made.

* Claim from vendor in relation to compliance with contractual purchase commitment.

** Claim from customer in relation to product quality issues.

The Company has reviewed all its pending litigations and proceedings and has adequately provided for, where provisions are required and disclosed as contingent liabilities wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material adverse effect on its financial statements.

3.27 Dues to Micro and Small enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro and Small enterprises. On the basis of the information and records available with the Management, the outstanding dues to the Micro and Small enterprises as defined in the MSMED as set out in following disclosure.

The above information regarding Micro and Small Enterprises has been determined on the basis of information available with the Company basis the details provided by the enterprises.

3.28 Disclosure of Employee Benefits as per Indian Accounting Standard 19 is as under: i) Defined contribution plans:

The Company makes contributions towards provident fund. The Company is required to contribute a specified percentage of salary cost to the Government Employee Provident Fund, Government Employee Pension Fund, Employee Deposit Linked Insurance and Employee State Insurance, which are recognised in the Statement of Profit and Loss on accrual basis. Eligible employees receive the benefits from the said funds. Both the employees and the Company make monthly contribution to the said funds plan equal to a specific percentage of the covered employee''s salary. The Company has no obligations other than to make the specified contributions.

ii) Defined benefit plan:

The Company earmarks liability towards unfunded Group Gratuity and Compensated absences and provides for payment to vested employees as under:

a) On Normal retirement/ early retirement/ withdrawal/resignation:

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b) On death in service:

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of the present value of the defined benefit obligation for gratuity was carried out as at 31 March 2022 by an independent actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary Escalation Rate: The estimates of future salary increases, considered in actuarial valuation, takes into account the inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

3.34 Segment Reporting

The Company has presented data relating to its segments in its consolidated financial statements. Accordingly, in terms of paragraph 4 of the Indian Accounting Standard 108 (IND AS-108) "Segment Reporting", no disclosures related to segments are presented in the standalone financial statements.

3.35 Information on related party transactions as required by Indian Accounting Standard 24 (Ind AS 24) on related party disclosures.

The Company''s prinicipal related parties consist of its subsidiaries (Refer list below), Key Managerial Personnel ("KMP"), relatives of KMP and entities in which KMP and their relatives have significant influence ("Affiliates"). The Company''s material related party transactions and outstanding balances are with related parties with whom the Company routinely enters into transactions in the ordinary course of business.

d) The Company has issued corporate guarantee to its wholly owned subsidiary, Pharmacor Pty Limited, Australia amounting to '' 283.7 Mn (AUD 5 Million) (31 March 2021: '' 278.5 Mn (AUD 5 Million)), Ascend Laboratories SpA, Chile amounting to '' 151.6 Million (USD 2 Million) (31 March 2021: '' 146.2 Million (USD 2 Million)), Pharma Network SpA (Wholly owned by Ascend Laboratories SpA), Chile amounting to '' 189.5 Million (USD 2.5 Million) (31 March 2021: '' 182.8 Million (USD 2.5 Million)) and Enzene Biosciences Limited amounting to '' 500.0 Million (31 March 2021: Nil) in respect of loan taken to meet working capital requirements.

3.36 Financial instruments - Fair values and risk management A. Accounting classification and fair values

The Company uses the following hierarchic structure of valuation methods to determine and disclose information about the fair value of financial instruments:

Level 1: Observable prices in active markets for identical assets and liabilities;

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities;

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities

Carrying amounts of cash and cash equivalents, trade receivables and trade payables as at 31 March 2022 and 31 March 2021, approximate the fair value due to their nature. Carrying amounts of bank deposits, earmarked balances with banks, other financial assets and other financial liabilities which are subsequently measured at amortised cost also approximate the fair value due to their nature in each of the periods presented. Fair value measurement of lease liabilities is not required.

B. Measurement of fair values

The Management assessed that cash and bank balances, trade receivables, trade payables, cash credit and other financial assets

and liabilities approximate their carrying amounts due to short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair value :

a) Level 1: The fair value of the quoted investments/units of mutual fund scheme are based on market price/net asset value at the reporting date.

b) Level 2: The fair value of financial instruments that are not traded in an active market (i.e. venture capital funds) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on company specific estimates.

c) Level 3: The fair value of the remaining financial instrument is determined using discounted cash flow analysis. The discount rates used is based on management estimates.

Risk management framework

The Company''s Board of Directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Board of Directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The committee reports regularly to the Board of Directors on its activities.

The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to the limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with the Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

3.36 Financial instruments - Fair values and risk management (Continued)

i. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activites (primarily trade receivables) and from its financing/investing activities, including investments in debt securities, deposits with banks, equity securities and venture capital and mutual fund investments. The Company has no significant concentration of credit risk with any counterparty.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade receivables

Trade receivables are consisting of a large number of customers. The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.

The Risk Management Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each customer and reviewed quarterly.

At 31 March 2022, the carrying amout of the Company''s most significant customer (Ascend Laboratories LLC, its wholly owned step-down subsidiary) is '' 9,255.2 million (31 March 2021: '' 8,796.8 million)

Impairment

As per simplified approach, the Company makes provision of expected credit losses on trade receivable using a provision matrix to mitigate the risk of default payment and make appropriate provision at each reporting date wherever required.

Refer note 3.8 for ageing of trade receivables that were not impaired.

3.36 Financial instruments - Fair values and risk management (Continued)

Loans to subsidiaries

The Company has an exposure of '' 98.3 million as at 31 March 2022 (31 March 2021: '' 253.0 million) for loans given to subsidiaries. Such loans are classified as financial asset measured at amortised cost.

The Company did not have any amounts that were past due but not impaired at 31 March 2022 or 31 March 2021. The Company has no collateral in respect of these loans.

Investments, Cash and Cash Equivalents and Bank Deposits

Credit risk on cash and cash equivalents, deposits with banks is generally low as the said deposits have been made with the banks who have been assigned high credit rating by international and domestic credit rating agencies.

Investments of surplus funds are made only with approved financial institutions. Investments primarily include investments in subsidiaries, mutual funds, venture capital funds, investment in equity of other companies /LLP, quoted bonds and non-convertible debentures. These mutual funds and counterparties have low credit risk.

Total non-current and current investments as at 31 March 2022 is '' 25,286.0 million (31 March 2021: '' 21,523.8 million)

Debt securities

The Company has an exposure of '' 164.4 million as at 31 March 2022 (31 March 2021: '' 345.2 million) for debt securities classified as financial asset measured at amortised cost. All the debt securities have been issued by companies registered in India in Indian Rupees.

There has been no allowance for impairment in respect of such debt securities - financial asset measured at amortised cost till 31 March 2022.

ii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

The majority of the Company''s trade receivables are due for maturity within 21 - 60 days from the date of billing to the customer. Further, the general credit terms for trade payables are approximately 45 - 60 days. The difference between the above mentioned credit period provides sufficient headroom to meet the short-term working capital needs for day-to-day operations of the Company. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, are retained as Cash and Investment in short term deposits with banks. The said investments are made in instruments with appropriate maturities and sufficient liquidity.

iii. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Currency risk

The Company is exposed to currency risk on account of its borrowings, other payables, receivables and loans and advances in foreign currency. The functional currency of the Company is Indian Rupee. The Company has exposure to EUR, GBP, USD, AUD, CAD, KES and CHF. The Company has formulated hedging policy for monitoring its foreign currency exposure.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments, borrowings and loans because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments, borrowings and loans will fluctuate because of fluctuations in the interest rates.

Interest rate sensitivity - fixed rate instruments

The Company''s fixed rate borrowings and fixed rate bank deposits are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flow will fluctuate because of a change in market interest rates.

Interest rate sensitivity - variable rate instruments

A reasonably possible change of 5% in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

3.37 Capital management

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company monitors capital using a ratio of ''adjusted net debt'' to ''total equity'' For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents. Adjusted equity comprises all components of equity.

3.39 The gross amount required to be spent by the Company on Corporate Social Responsibility (""CSR"") as per section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 during the year is '' 276.0 million (Previous Year : '' 214.4 million) The Company has spent an amount of '' 77.0 Million (Previous year: '' 74.1 Million) towards the CSR obligation of the Company and an amount of '' 200.0 Million (Previous Year: '' 142.2 Million) was transferred to the "Unspent CSR Account" towards the ongoing projects initiated by the Company towards CSR as per the approved CSR policy of the Company on healthcare, women empowerment, education, sanitation, conservation of environment, rural development.

Above spend includes a transfer of '' 73.2 million (Previous Year : '' 39.6 million) to Alkem Foundation, a subsidiary of the Company, which is a Section 8 registered company under Companies Act, 2013, with the main objectives of working in the areas of social, economic and environmental issues such as healthcare, women empowerment, education, sanitation, conservation of environment, rural development and enable the less privileged segments of the society to improve their livelihood by enhancing their means and capabilities to meet the emerging opportunities.

# Subsequent to 31 March 2022, an amount of '' 200.0 million (Previous year: 142.2 million has been transferred to the separate CSR Unspent account on 28 April 2022 (Previous year: 29 April 2021) in accordance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 rules.

3.40 Government Grant

The Company is eligible for government grants which are conditional upon construction of new factories in the Sikkim region. One of the grants, received in FY 2014-15 amounted to '' 72.4 million with respect to the Kumrek facility. The factory has been constructed and in operation since August 2007. The second grant is with respect to Samardung facility in Sikkim amounting to '' 122.1 million for which the Company has received the claim amount in FY 2018-19. The factory has been constructed and in operation since October, 2012. These grants, recognized as deferred income, is being amortized over the useful life of the plant and machinery in proportion in which the related depreciation expense is recognised. The unamortised grant as on 31 March 2022 amounts to '' 71.9 million (Previous year: '' 80.9 million), the breakup of which is as below:

3.42 Exceptional item

During the previous year, the Company considered indicators of impairment for investments for decline in operational performance or changes in the outlook of future profitability or weaker market conditions, among other potential indicators.

In respect of the overseas investments in Alkem Laboratories Corporation, Philippines, a wholly owned subsidiary of the Company, where indicators of impairment were identified, the Company estimated the recoverable amount based on the value in use of the underlying business. The computation uses cash flow forecasts based on the most recently approved financial budgets and strategic forecasts for the next year and future projections taking the analysis out into perpetuity. Key assumptions for the value in use computations are those regarding the discount rate, growth rate, exchange rate, market demand, expected changes to selling prices and other direct costs. Changes in selling prices, exchange rates and demand are based on historical experience and expectations of future changes in the market. Beyond the specifically forecasted period, a growth rate of 5% is used to extrapolate the cash flow projections. This rate does not exceed the average long-term growth rate for the relevant market.

The Company estimates discount rates using pre-tax rates that reflect the current market rates for investments of similar risk. The rate for these investments were estimated from the weighted average cost of capital of participants, which operate a portfolio of assets similar to those of the Company''s assets. The weighted average pre-tax discount rates used for discounting the cash flows projections was 14.2%.

The outcome of the test as on 31 March 2021 resulted in the Company recognizing an impairment loss of '' 127.8 Million with respect to investment in Alkem Laboratories Corporation, Philippines.

3.43 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries). The Company has not received any fund from any party with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

3.44 Sale of brand

During the year ended 31 March 2022, the Company has received net consideration of '' 34.0 Million (Previous Year: '' 351.0 Million) towards assignment of a trademark together with associated goodwill, business and commercial rights and the same has been recognised under Other Income.


Mar 31, 2021

Secured:

Loans repayable on demand from Banks include:

1. Overdrafts from banks '' 3,278.8 Million (31 March 2020: '' 2,322.8 Million) are secured against pledge of fixed deposits with the banks.

2. Overdraft Facilities carry a rate of interest ranging between 4.50% to 7.00% p.a., computed on a monthly basis on the actual amount utilized, and are repayable on demand.

Unsecured:

3. Working Capital Loan from banks comprises of overdrafts and cash credit in INR of '' 508.8 Million (31 March 2020: '' Nil) and Packing Credit in Foreign Currencies of '' 9,540.8 Million (31 March 2020: '' 9,707.8 Million) and are repayable on demand.

4. Working Capital Loan from banks in Foreign Currency carries Interest rate in the range of 0.50% to 2.50% and those in Indian Rupees carries Interest rate in the range of 7% to 9% p.a.

i) Defined contribution plans:

The Company makes contributions towards provident fund. The Company is required to contribute a specified percentage of salary cost to the Government Employee Provident Fund, Government Employee Pension Fund, Employee Deposit Linked Insurance and Employee State Insurance, which are recognised in the Statement of Profit and Loss on accrual basis. Eligible employees receive the benefits from the said funds. Both the employees and the Company make monthly contribution to the said funds plan equal to a specific percentage of the covered employee''s salary. The Company has no obligations other than to make the specified contributions.

3.34 Segment Reporting

The Company has presented data relating to its segments in its consolidated financial statements. Accordingly, in terms of paragraph 4 of the Indian Accounting Standard 108 (IND AS-108) "Segment Reporting", no disclosures related to segments are presented in the standalone financial statements.

3.35 Information on related party transactions as required by Indian Accounting Standard 24 (Ind AS 24) on related party disclosures.

The Company''s prinicipal related parties consist of its subsidiaries (Refer list below), Key Managerial Personnel ("KMP"), relatives of KMP and entities in which KMP and their relatives have significant influence ("Affiliates"). The Company''s material related party transactions and outstanding balances are with related parties with whom the Company routinely enters into transactions in the ordinary course of business.

3.35 Information on related party transactions as required by Indian Accounting Standard 24 (Ind AS 24) on related party disclosures (Continued)

D) Entities in which Key Managerial Personnel''s and their relatives have significant influence and with whom transactions have taken place during the year ("Affiliates"):

M/s Galpha Laboratories Ltd., M/s. Samprada and Nanhamati Singh Family Trust, Legal heirs of Late Mr. Samprada Singh.

3.36 Financial instruments - Fair values and risk management (Continued)

B. Measurement of fair values

The Management assessed that cash and bank balances, trade receivables, trade payables, cash credit and other financial assets

and liabilities approximate their carrying amounts due to short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair value :

a) Level 1: The fair value of the quoted investments/units of mutual fund scheme are based on market price/net asset value at the reporting date.

b) Level 2: The fair value of financial instruments that are not traded in an active market (i.e. venture capital funds) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on company specific estimates.

c) Level 3: The fair value of the remaining financial instrument is determined using discounted cash flow analysis. The discount rates used is based on management estimates.

Note: The above sensitivity analysis for the significant unobservable input of sale price has been performed only for 4 projects (Carrying value: CY: ''1,218.2 million; PY: '' 1,295.2 million) out of total 5 projects (Carrying value: CY: '' 1,288.3 million ; PY: '' 1,460.0 million) since the existing land will be sold without construction. For other two significant unobservable inputs (Cost of Construction and Absorption timelines), the sensitivity analysis has been performed only for 3 projects (Carrying value: CY : '' 938.5 million; PY: '' 1,015.6 million). the exit value has already been agreed and hence no sensitivity analysis has been performed.

The Company has exposure to the following risks arising from financial instruments:

¦ Credit risk ;

¦ Liquidity risk ; and

¦ Market risk

Risk management framework

The Company''s Board of Directors has overall responsibility for the establishment and oversight of the Company''s risk management framework. The Board of Directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company''s risk management policies. The committee reports regularly to the Board of Directors on its activities.

The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to the limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company''s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with the Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activites (primarily trade receivables) and from its financing/investing activities, including investments in debt securities, deposits with banks, equity securities and venture capital and mutual fund investments. The Company has no significant concentration of credit risk with any counterparty.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade receivables

Trade receivables are consisting of a large number of customers. The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.

The Risk Management Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each customer and reviewed quarterly.

Loans to subsidiaries

The Company has an exposure of '' 253.0 million as at 31 March 2021 (31 March 2020: '' 259.7 million) for loans given to subsidiaries. Such loans are classified as financial asset measured at amortised cost.

The Company did not have any amounts that were past due but not impaired at 31 March 2021 or 31 March 2020. The Company has no collateral in respect of these loans.

Investments, Cash and Cash Equivalents and Bank Deposits

Credit risk on cash and cash equivalents, deposits with banks is generally low as the said deposits have been made with the banks who have been assigned high credit rating by international and domestic credit rating agencies.

Investments of surplus funds are made only with approved financial institutions. Investments primarily include investments in subsidiaries, mutual funds, venture capital funds, investment in equity of other companies /LLP, quoted bonds and non-convertible debentures. These mutual funds and counterparties have low credit risk.

Total non-current and current investments as at 31 March 2021 is ? 21,523.8 million (31 March 2020: ? 19,560.4 million)

Debt securities

The Company has an exposure of '' 345.2 million as at 31 March 2021 (31 March 2020: '' 556.8 million) for debt securities classified as financial asset measured at amortised cost. All the debt securities have been issued by companies registered in India in Indian Rupees.

There has been no allowance for impairment in respect of such debt securities - financial asset measured at amortised cost till 31 March 2021.

ii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

The majority of the Company''s trade receivables are due for maturity within 21 - 60 days from the date of billing to the customer. Further, the general credit terms for trade payables are approximately 45 - 60 days. The difference between the above mentioned credit period provides sufficient headroom to meet the short-term working capital needs for day-to-day operations of the Company. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, are retained as Cash and Investment in short term deposits with banks. The said investments are made in instruments with appropriate maturities and sufficient liquidity.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.

iii. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Currency risk

The Company is exposed to currency risk on account of its borrowings, other payables, receivables and loans and advances in foreign currency. The functional currency of the Company is Indian Rupee. The Company has exposure to EUR, GBP, USD, AUD, CAD and KES. The Company has formulated hedging policy for monitoring its foreign currency exposure.

3.37 Capital management

The Company''s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company monitors capital using a ratio of ''adjusted net debt'' to ''total equity'' For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents. Adjusted equity comprises all components of equity.

3.39 The gross amount required to be spent by the Company on Corporate Social Responsibility ("CSR") as per section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 during the year is '' 214.4 million (Previous Year : '' 185.5 million) The Company has spent an amount of '' 74.1 Million towards the CSR obligation of the Company and an amount of '' 142.2 Million was transferred to the "Unspent CSR Account" towards the ongoing projects initiated by the Company (Previous Year : '' 144.4 million) towards CSR as per the approved CSR policy of the Company on healthcare, women empowerment, education, sanitation, conservation of environment, rural development.

Above spend includes a transfer of '' 39.6 million (Previous Year : '' 25.0 million) to Alkem Foundation, a subsidiary of the Company, which is a Section 8 registered company under Companies Act, 2013, with the main objectives of working in the areas of social, economic and environmental issues such as healthcare, women empowerment, education, sanitation, conservation of environment, rural development and enable the less privileged segments of the society to improve their livelihood by enhancing their means and capabilities to meet the emerging opportunities.

3.40 Government Grant

The Company is eligible for government grants which are conditional upon construction of new factories in the Sikkim region. One of the grants, received in FY 2014-15 amounted to '' 72.4 million with respect to the Kumrek facility. The factory has been constructed and in operation since August 2007. The second grant is with respect to Samardung facility in Sikkim amounting to '' 122.1 million for which the Company has received the claim amount in FY 2018-19. The factory has been constructed and in operation since October, 2012. These grants, recognized as deferred income, is being amortized over the useful life of the plant and machinery in proportion in which the related depreciation expense is recognised. The unamortised grant as on 31 March 2021 amounts to '' 80.9 million (Previous year: '' 92.6 million), the breakup of which is as below:

During the year ended 31 March 2020, the Company had decided to sell various Property, Plant and Equipment in the category of Land, Plant & equipment, Office Equipments, Buildings, Vehicles and Furniture & Fixtures being no longer required for business purposes. Accordingly, the said Property, Plant and Equipment are stated at lower of its carrying value and its fair value less costs to sell.

3.42 Disclosure under Ind AS 103 - Business Combinations

During the year ended 31 March 2020, the Company had acquired an industrial undertaking having facility of manufacturing liquid and food products, on a going concern basis from Cachet Pharmaceuticals Pvt. Ltd. (Cachet), a subsidiary of the Company for a total consideration of '' 518.5 million.

At the time of acquisition, the written down value of the Property, Plant and Equipment in the books of Cachet was '' 518.5 million. This value is also the purchase consideration paid by the Company to Cachet. With reference to Ind AS 103 Appendix C, the Company has allocated the consideration value to the various Property, Plant and Equipment purchased at carrying value. The carrying value of other assets and liabilities taken over are immaterial and hence no purchase price has been allocated to them.

3.43 During the year ended 31 March 2020, a case of misappropriation by an employee was detected by the Company. The Company had filed a police complaint and upon investigation the police registered a case against the said employee and his accomplice. As on 31 March 2021, the entire amount has been recovered from the said employee.

3.44 COVID-19

The Company has considered internal and external information while assessing recoverability of its assets upto the date of approval of these financial results by the Board of Directors. Based on such assessment and considering the current economic indicators, the Company expects to recover the carrying amount of these assets. The Board of Directors has also considered the impact of COVID-19

on the business for the foreseeable future and have concluded that the Company has sufficient resources to continue as a going concern. The impact of the global health pandemic may be different from that estimated as at the date of approval of these financial results and the Company will continue to closely monitor any material changes to future economic conditions.

3.45 Exceptional item

During the current year, the Company considered indicators of impairment for investments for decline in operational performance or changes in the outlook of future profitability or weaker market conditions, among other potential indicators.

In respect of the overseas investments in Alkem Laboratories Corporation, Philippines, a wholly owned subsidiary of the Company, where indicators of impairment were identified, the Company estimated the recoverable amount based on the value in use of the underlying business. The computation uses cash flow forecasts based on the most recently approved financial budgets and strategic forecasts for the next year and future projections taking the analysis out into perpetuity. Key assumptions for the value in use computations are those regarding the discount rate, growth rate, exchange rate, market demand, expected changes to selling prices and other direct costs. Changes in selling prices, exchange rates and demand are based on historical experience and expectations of future changes in the market. Beyond the specifically forecasted period, a growth rate of 5% is used to extrapolate the cash flow projections. This rate does not exceed the average long-term growth rate for the relevant market.

The Company estimates discount rates using pre-tax rates that reflect the current market rates for investments of similar risk. The rate for these investments were estimated from the weighted average cost of capital of participants, which operate a portfolio of assets similar to those of the Company''s assets. The weighted average pre-tax discount rates used for discounting the cash flows projections was 14.2%.

The outcome of the test as on 31 March 2021 resulted in the Company recognizing an impairment loss of '' 127.8 Million with respect to investment in Alkem Laboratories Corporation, Philippines.

3.46 Sale of brand

During the year ended 31 March 2021, the Company has received net consideration of '' 351.0 Million towards assignment of a trademark together with associated goodwill, business and commercial rights and the same has been recognised under Other Income.

3.47 For business synergies, ease of administration and simplification in the organization structure for its business operations in USA market, the Company''s Board of Directors at its meeting held on 25 May 2021 has approved the proposed plan for restructuring of the USA business operations by bringing both the subsidiary entities namely, S & B Pharma Inc, USA (engaged in manufacturing of pharmaceutical products and contract research) and The PharmaNetwork LLC, USA (engaged in sales & marketing of pharmaceuticals products) under a single umbrella by removing intermediary holding company S & B Holdings BV, Netherlands. This Board approved restructuring is subject to necessary statutory and regulatory approvals.

3.48 Recent accounting pronouncements

Ministry of Corporate Affairs ("MCA") notifies new standard or amendments to the existing standards. There is no such notification which would have been applicable from 1 April 2021.

MCA issued notifications dated 24 March, 2021 to amend Schedule III to the Companies Act, 2013 to enhance the disclosures required to be made by the Company in its financial statements. These amendments are applicable to the Company for the financial year starting 1 April 2021.


Mar 31, 2018

1 GENERAL INFORMATION

Alkem Laboratories Limited (‘the Company’) was incorporated in 1973 under the provisions of Companies Act, 1956 of India, as a company with limited liability. The Company is domiciled in India with its registered office address being Alkem House, Senapati Bapat Marg, Lower Parel, Mumbai - 400013, India.The Company is engaged in pharmaceutical business with global operations. The Company is engaged in the development, manufacture and sale of pharmaceutical and nutraceutical products.

2A KEY ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with the Ind AS requires judgements, estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements, the reported amounts of revenues and expenses during the reporting period and the disclosures relating to contingent liabilities as of the date of the financial statements. Although these estimates are based on the management’s best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in outcomes different from the estimates. Difference between actual results and estimates are recognised in the period in which the results are known or materialise. Estimates and underlying assumptions are reviewed on an ongoing basis. Any revision to accounting estimates is recognised prospectively in the current and future periods.

Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provide an explanation of each below. The discussion below should also be read in conjunction with the Company’s disclosure of significant accounting policies which are provided in Note 2A to the standalone financial statements, ‘Significant accounting policies’

a. Estimate of current and deferred tax

The Company’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Company’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profits/losses and/or cash flows.

The complexity of the Company’s structure makes the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Company and it is often dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which the Company operates. Issues can, and often do, take many years to resolve. Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result there can be substantial differences between the tax charge in the Statement of Profit and Loss and tax payments.

b. Recognition of MAT credit entitlement

The credit availed under MAT is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.

c. Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits, reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits.

d. Estimation of useful life

The useful life used to amortise or depreciate intangible assets or property, plant and equipment respectively relates to the expected future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset based on its technical expertise. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Statement of Profit and Loss.

The useful lives and residual values of Company’s assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events which may impact their life such as changes in technology.

e. Provisions and contingent liabilities

The Company exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be different from the originally estimated provision.

f. Fair value measurements and valuation processes

Some of the Company’s assets and liabilities are measured at fair value for the financial reporting purposes. Central corporate treasury team works with various banks for determining appropriate fair value of derivative assets and liabilities. Central treasury team reports to the Chief Financial Officer. In estimating the fair value of derivative assets and liabilities, the Company uses market-observable data to the extent it is available.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in note

g. Defined Benefit Plans:

The cost of the defined benefit gratuity plan and other post-employment benefits and present value of the gratuity obligation are determined using actuarial valuation. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

h. Provision for anticipated sales return:

I n determining the provision for anticipated sales returns, estimates for probable saleable and non-saleable returns of goods from the customers are made on scientific basis after factoring in the historical data of such returns and its trend.

3) Investments in 8% Indian Railway Finance Corporation Limited, 8.63% NHB Limited, 9.01% NHB Limited,11% Bank of India, 9.55% Kotak Mahindra Prime Aggregating to face value of Rs.1,378.0 Million has been pledged against issuance of Stand by letter of credit required for Loan of US$ 25.0 Million advanced by Citi Bank USA to ThePharmaNetwork LLC (USA), a 100% step down subsidiary of the company and Loan of US$ 35.0 Million advanced by Citi Bank USA to S&B Pharma Inc. (USA), a wholly owned subsidiary of the Company and Loan of US$ 4 Million advanced by Banco De Chile to Ascend Laboratories SpA, Chile, a wholly owned subsidiary of the Company. With effect from 7 September 2017, the said loans are secured by way of hypothecation over the whole of the moveable properties (save and except current assets) including its movable plant and machinery, machinery spares, tools and accessories and other movable, both present and future subject to a maximum book value of Rs.2,150 Million -situated at Daman and Sikkim in India.

4a) During the year, the Company has contributed Rs.147.2 Million in wholly owned subsidiary in Chile viz, “Ascend Laboratories SpA” by way of conversion of loans and advances to equity.

4b) During the year, the Company has contributed Rs.1,250 Million in subsidiary in India viz, “Enzene Biosciences Limited” by way of a capital contribution.

5) During the year ended 31 March 2016, pursuant to the approval of the Board of Directors in its meeting held on 9 March 2016, the Company in order to focus on its core business activities and for other commercial reasons, restructured its investment in Avenue Venture Real Estate Fund (“Fund”) by entering into an option agreement with Mr.Tushar Kumar for grant of unconditional option exercisable without restriction at the option of the option holder to purchase the trust units held by the Company in the Fund at an option price of 102% of the fair market value of each trust unit as on the exercise date. This Agreement shall remain in force for a period of 2 years from the execution date and may be renewed with mutual consent of the parties. During the year the Company has renewed the option agreement as approved in its Board meeting held on 9 February 2018 for a period of 2 years.

Note:

Bank Deposits of Rs.45.0 Million (31 March 2017: Rs.1,455.0 Million) are under lien with the Banks against Overdraft facility.

Bank Deposits of Rs.55.0 Million (31 March 2017 Rs.55.0 Million) are pledged against loan taken by Cachet Pharmaceuticals Private Limited, subsidiary of the Company in India.

The Company’s weighted average tax rates for the years ended 31 March 2018 and 2017 were 34.6% and 34.6%, respectively. Income tax expense was Rs.2,184.5 Million for the year ended 31 March 2018, as compared to income tax expense of Rs.112.7 Million for the year ended 31 March 2017.

The Company’s effective tax rate for the year ended 31 March 2018 was 23.4% (31 March 2017: 1.3%)

The effective tax rate for the year ended 31 March 2018 and 31 March 2017 was lower primarily as a result of additional allowance under Income tax.

-During the year ended 31 March 2018, the Company has utilised Minimum Alternate Tax (“MAT”) credit amounting to Rs.217.7 Million derecognised in the year ended 31 March 2016. The current tax charge for year ended 31 March 2018 is after MAT credit of said amount.

(C) Movement in deferred tax assets and liabilities (Continued)

The company offsets tax assets and liabilities only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income by each jurisdiction in which the relevant entity operates and the period over which deferred income tax assets will be recovered.

(b) Rights, preferences and restrictions attached to Equity Shares:

The Company has issued one class of equity shares with voting rights having a par value of Rs.2/- per share. Each shareholder is eligible for one vote per share held. The Company declares dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the Shareholders in the ensuing Annual General Meeting.

On winding up of the Company, the holders of equity shares will be entitled to receive residual assets of the Company remaining after distribution of all preferential amounts in proportion to the number of equity shares held by the shareholders.

(d) Aggregate Number of Bonus Shares Issued for the consideration other than cash during the period of five years immediately preceeding the reporting date:

During the year ended 31 March 2015, 59,782,500 Equity Shares of Rs.2 Each fully paid up have been allotted as Bonus Shares by capitalisation of General Reserves.

Notes:

Secured:

Loans repayable on demand from Banks include:

1. Overdrafts from Banks Rs.1,043.8 Million (31 March 2017 Rs.1,080.0 Million) are secured against pledge of Fixed Deposits with the banks.

2. Overdraft Facilities carry a rate of Interest ranging between 7.50% to 9.00% p.a., computed on a monthly basis on the actual amount utilised, and are repayable on demand.

Unsecured:

3. Working Capital Loan from banks comprises of Overdraft in ’ of Rs.359.9 Million (31 March 2017; Rs.73.2 Million) and Packing Credit in Foreign Currencies of Rs.4,008.3 Million (31 March 2017: Rs.2,529.1 Million) and are repayable on demand.

4. Working Capital Loan from banks in Foreign Currency carries Interest rate in the range of 1.50% to 2.75% and those in Indian Rupees carries Interest rate in the range of 7.5% to 9% p.a.

6.1 Dues to Micro and Small enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro and Small enterprises. On the basis of the information and records available with the Management, the outstanding dues to the Micro and Small enterprises as defined in the MSMED as set out in following disclosure.

6.2 Disclosure of Employee Benefits as per Indian Accounting Standard 19 is as under:

The Company

i) Defined contribution plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of salary cost to the Government Employee Provident Fund, Government Employee Pension Fund, Employee Deposit Linked Insurance and Employee State Insurance which are recognised in the Statement of Profit and Loss on accrual basis. Eligible employees receive the benefits from the said funds. Both the employees and the Company make monthly contribution to the said funds plan equal to a specific percentage of the covered employee’s salary. The Company has no obligations other than to make the specified contributions.

The Superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute pre determined percentage of salary cost of the eligible employee to the superannuation plan to fund the benefit.

ii) Defined benefit plan:

The Company earmarks liability towards unfunded Group Gratuity and Compensated absences and provides for payment to vested employees as under:

a) On Normal retirement/ early retirement/ withdrawal/resignation:

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b) On death in service:

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of the present value of the defined benefit obligation for gratuity was carried out as at 31 March 2018 by an independent actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary Escalation Rate: The estimates of future salary increases, considered in actuarial valuation, takes into account the inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The amounts of the present value of the obligation and experience adjustment arising on plan liabilities are as below:

6.3 a) The Company has entered into non - cancellable operating lease agreements for premises/car/Computers. Rent expenses debited to the Statement of Profit and Loss is as below:

(b) During the year, the Company has entered into long-term leasing arrangements for land with government authorities which are in the nature of finance lease. The future obligation in respect of the above are as under:

6.4 The aggregate amount of revenue expenditure incurred during the period on Research and Development and shown in the respective heads of account is Rs.3,142.5 Million (Previous year Rs.2,886.6 Million).

After the reporting dates the following dividend (excluding dividend distribution tax) was proposed by the directors subject to the approval at the annual general meeting; the dividends have not been recognised as liabilities. Dividends would attract dividend distribution tax when declared or paid.

6.5 Segment Reporting

The Company has presented data relating to its segments in its consolidated financial statements. Accordingly, in terms of paragraph 4 of the Indian Accounting Standard 108 (IND AS-108) “Segment Reporting”, no disclosures related to segments are presented in this standalone financial statement.

6.6 Information on related party transactions as required by Indian Accounting Standard 24 (Ind AS 24) on related party disclosures.

The Company’s prinicipal related parties consist of its subsidiaries (Refer list below), key managerial personnel and entities in which key management personnel and their relatives have significant influence (“Affiliates”). The Company’s material related party transactions and outstanding balances are with related parties with whom the Company routinely enter into transactions in the ordinary course of business.

Based on the recommendation of the Nomination and Remuneration committee, all decisions relating to the remuneration of the directors are taken by the Board of Directors of the Company, in accordance with shareholders’ approval, wherever necessary.

All related party transactions are made in the normal course of business and on terms equivalent to those that prevail in an arm’s length transactions.

Figures in the brackets are the comparative figures of the previous year.

d) The Company has issued corporate gurantee to its wholly owned subsidiary, Pharmacor Pty Limited, Australia amounting to Rs.275.2 Million (AUD 5.5 Million) (31 March 2017 Rs.272.7 Million (AUD 5.5 Million)) and Ascend Laboratories SpA, Chile amounting to Rs.391.1 Million (USD 6 Million) (31 March 2017 ‘ Nil) in respect of loan taken to meet working capital requirements.

6.7 Financial instruments - Fair values and risk management

A. Accounting classification and fair values

The Company uses the following hierarchic structure of valuation methods to determine and disclose information about the fair value of financial instruments:

Level 1: Observable prices in active markets for identical assets and liabilities;

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities;

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities

B. Measurement of fair values

The Management assessed that cash and bank balances, trade receivables, trade payables, cash credit and other financial assets and liabilities approximate their carrying amounts due to short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair value:

a) Level 1: The fair value of the quoted investments/units of mutual fund scheme are based on market price/net asset value at the reporting date.

b) Level 2: The fair value of financial instruments that are not traded in an active market (i.e. venture capital funds) is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on company specific estimates.

c) Level 3: The fair value of the remaining financial instrument is determined using discounted cash flow analysis. The discount rates used is based on management estimates.

The significant unobservable inputs used to determine the fair value of investment in fund together with the quantitative sensitivity analysis as at 31 March 2018; 31 March 2017 are as shown below:

Level 3 fair values

Reconciliation of Level 3 fair values

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values of Investment in avenue venture real estate fund.

Transfer out of Level 3

There has been no transfer out of Level 3 during the period

Sensitivity analysis

For the fair values of Avenue venture real estate fund investment possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects.

The Company has exposure to the following risks arising from financial instruments:

Credit risk ;

Liquidity risk ; and Market risk

i. Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the board of directors on its activities

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to the limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activites (primarily trade receivables) and from its financing/investing activities, including investments in debt securities, deposits with banks, equity securities and venture capital and mutul fund investments. The Company has no significant concentration of credit risk with any counterparty.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade receivables

Trade receivables are consisting of a large number of customers. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.

The Risk Management Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each customer and reviewed quarterly.

At 31 March 2018, the carrying amout of the Company’s most significant customer (Ascend Laboratories LLC, its wholly owned step-down subsidiary) is Rs.3,342.2 Million (31 March 2017 Rs.2,650.2 Million)

Impairment

As per simplified approach the Company makes provision of expected credit losses on trade receivable using a provision matrix to mitigate the risk of default payment and make appropriate provision at each reporting date wherever.

Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.

Loans to subsidiaries

The Company has an exposure of Rs.995.6 Million as 31 March 2018 (Rs.335.5 Million: 31 March 2017) for loans given to subsidiaries. Such loans are classified as financial asset measured at amortised cost.

The Company did not have any amounts that were past due but not impaired at 31 March 2018 or 31 March 2017. The Company has no collateral in respect of these loans.

Investments, Cash and Cash equivalents and Bank Deposits

Credit risk on cash and cash equivalents, deposits with banks is generally low as the said deposits have been made with the banks who have been assigned high credit rating by international and domestic credit rating agencies.

Investments of surplus funds are made only with approved financial institutions. Investments primarily include investments in subsidiaries, mutual funds, venture capital funds, quoted bonds and non-convertible debentures. These mutual funds and counterparties have low credit risk.

Total non-current and current investments as on 31 March 2018 is Rs.15,444,9 Million (31 March 2017: Rs.15,176.4 Million)

Debt securities:

The Company has an exposure of Rs.1,558.4 Million as at 31 March 2018 (Rs.2,310.3 Million: 31 March 2017) for debt securities classified as financial asset measured at amortised cost. All the debt securities have been issued by companies registered in India in Indian Rupees.

There has been no allowance for impairment in respect of such debt securities - financial asset measured at amortised cost till 31 March 2018.

The Company did not have any debt securities that were past due but not impaired at 31 March 2018 ,31 March 2017. The Company has no collateral in respect of these investments.

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The majority of the Company’s trade receivables are due for maturity within 21 days from the date of billing to the customer. Further, the general credit terms for trade payables are approximately 45 days. The difference between the above mentioned credit period provides sufficient headroom to meet the short-term working capital needs for day-to-day operations of the Company. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, are retained as Cash and Investment in short term deposits with banks. The said investments are made in instruments with appropriate maturities and sufficient liquidity.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of our investments. Thus, our exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

The Company is exposed to currency risk on account of its borrowings, other payables, receivables and loans and advances in foreign currency. The functional currency of the Company is Indian Rupee. The Company has exposure to USD, EURO, GBP, CHF, KES and AUD. The Company has formulated hedging policy for monitoring its foreign currency exposure.

Exposure to currency risk

The currency profile of financial assets and financial liabilities as at 31 March 2018, 31 March 2017 in there respective currencies are as below:

A reasonably possible strengthening (weakening) of the Indian Rupee against various foreign currencies at March 31 would have affected the measurement of financial instruments denominated in foreign currencies and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments, borrowings and loans because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments, borrowings and loans will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

Company’s interest rate risk arises from borrowings and fixed income securities. Fixed income securities exposes the Company to fair value interest rate risk. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

A change of 100 basis points in interest rates would not have any material impact on the equity.

Cash flow sensitivity analysis for variable-rate instruments

A change of 100 basis points in interest rates would not have any material impact on the equity.

6.8 Capital management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents. Adjusted equity comprises all components of equity.

6.9 The gross amount required to be spent on Corporate Social Responsibility (“CSR”) by the Company during the year is Rs.136.6 Million (Previous year: Rs.106.4 Million) The Company has spent Rs.106.3 Million (Previous Year: Rs.61.8 Million) towards CSR as per the approved CSR policy of the Company on healthcare, women empowerment, education, sanitation, conservation of environment, rural development.

Figures in the brackets are the corresponding figures of the previous year.

6.10 Recent accounting pronouncements

Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2018 has notified the following new and amendments to Ind ASs which the Company has not applied as they are effective for annual periods beginning on or after 1 April 2018:

Ind AS 21 - The effect of changes in Foreign Exchange rates

The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.

Ind AS 115 Revenue from Contracts with Customers (“Standard”)

Ind AS 115 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Ind AS 115 will supersede the current revenue recognition standard Ind AS 18 Revenue, Ind AS 11 Construction Contracts when it becomes effective from 1 April 2018.

The core principle of Ind AS 115 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the standard introduces a 5-step approach to revenue recognition:

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligation in contract

Step 3: Determine the transaction price

Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Under Ind AS 115, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when ‘control’ of the goods or services underlying the particular performance obligation is transferred to the customer.

The Company is evaluating the impact of this Standard on its financial statements.

6.11 Government Grant

The Company is eligible for government grants which are conditional upon construction of new factories in the Sikkim region. One of the grants, received in 2014-15 amounted to Rs.72.4 Million with respect to the Kumrek facility. The factory has been constructed and in operation since August 2007. The second grant is with respect to Samardung facility in Sikkim amounting to Rs.122.1 Million for which the Company has subsequently received the claim amount post 31 March 2018. The factory has been constructed and in operation since October, 2012. These grants, recognised as deferred income, is being amortised over the useful life of the plant and machinery in proportion in which the related depreciation expense is recognised.

6.12 Asset Held for Sale

During the previous year, the Company has decided to sell land situated at Panoli GIDC, Gujarat, being no longer required for business purposes. Accordingly, the said land has been stated at its carrying value (being lower of its fair value less costs to sell) amounting to Rs.18.2 Million and is presented as “Asset held for sale” as on 31 March 2017. This has been subsequently sold during the year.


Mar 31, 2017

1 General Information

Alkem Laboratories Limited (‘the Company’) was incorporated in 1973 under the provisions of Companies Act, 1956 of India, as a company with limited liability. The Company is domiciled in India with its registered office address being Alkem House, Senapati Bapat Marg, Lower Parel, Mumbai - 400013, India.The Company is engaged in pharmaceutical business with global operations. The Company is engaged in the development, manufacture and sale of pharmaceutical and nutraceutical products.

2A Critical accounting judgements and key sources of estimation uncertainty

The Company prepares its financial statements in accordance with Ind AS as issued by the MCA, the application of which often requires judgments to be made by management when formulating the Company’s financial position and results. The Directors are required to adopt those accounting policies most appropriate to the Company’s circumstances for the purpose of presenting fairly the Company’s financial position, financial performance and cash flows.

In determining and applying accounting policies, judgment is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Company should it later be determined that a different choice would be more appropriate.

Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provide an explanation of each below. The discussion below should also be read in conjunction with the Company’s disclosure of significant accounting policies which are provided in Note 2A to the standalone financial statements, ‘Significant accounting policies’

a. Estimate of current and deferred tax

The Company’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Company’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profits/losses and/or cash flows.

The complexity of the Company’s structure makes the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Company and it is often dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which the Company operates. Issues can, and often do, take many years to resolve. Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result there can be substantial differences between the tax charge in the Statement of Profit and Loss and tax payments.

b. Recognition of MAT credit entitlement

The credit availed under MAT is recognised as an asset only when and to the extent there is convincing evidence that the company will pay normal income tax during the period for which the MAT credit can be carried forward for set off against the normal tax liability. This requires significant management judgement in determining the expected availment of the credit based on business plans and future cash flows of the Company.

c. Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. To determine the future taxable profits, reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits.

d. Estimation of useful life

The useful life used to amortise or depreciate intangible assets or property, plant and equipment respectively relates to the expected future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset based on its technical expertise. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the Statement of Profit and Loss.

The useful lives and residual values of Company’s assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events which may impact their life such as changes in technology.

e. Provisions and contingent liabilities

The Company exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities. Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be different from the originally estimated provision.

f. Fair value measurements and valuation processes

Some of the Company’s assets and liabilities are measured at fair value for the financial reporting purposes. Central corporate treasury team works with various banks for determining appropriate fair value of derivative assets and liabilities. Central treasury team reports to the Chief Financial Officer. In estimating the fair value of derivative assets and liabilities, the Company uses market-observable data to the extent it is available.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in note

g. Defined Benefit Plans:

The cost of the defined benefit gratuity plan and other post-employment benefits and present value of the gratuity obligation are determined using actuarial valuation. An actuarial valuation involves making various assumptions that may defer from actual development in the future. These includes the determination of the discount rate, future salary increases and mortality rates. Due to complexities involved in the valuation and its long term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

h. Provision for anticipated sales return:

In determining the provision for anticipated sales returns, estimates for probable saleable and non-saleable returns of goods from the customers are made on scientific basis after factoring in the historical data of such returns and its trend.

3) At 31 March 2017: Investments in 8% Indian Railway Finance Corporation Limited, 8.63% NHB Limited, 9.01% NHB Limited,11% Bank of India, 9.55% Kotak Mahindra Prime Aggregating to face value of Rs.1,378.0 Million has been pledged against issuance of Stand by letter of credit required for Loan of US$ 25.0 Million advanced by Citi Bank USA to ThePharmaNetwork LLC (USA), a 100% step down subsidiary of the company and Loan of US$ 20.0 Million advanced by Citi Bank USA to S&B Pharma Inc. (USA), a wholly owned subsidiary of the Company and Loan of US$ 4 Million advanced by Banco De Chile to Ascend Laboratories SpA, Chile, a wholly owned subsidiary of the Company

At 31 March 2016 Investments in 8% Indian Railway Finance Corporation Limited, 10.17% HDB Financial Services Limited, 8.63% NHB Limited, 9.01% NHB Limited,11% Bank of India, 9.55% Kotak Mahindra Prime Aggregating to face value of Rs.1,578.0 Million has been pledged against issuance of Stand by letter of credit required for Loan of US$ 25.0 Million advanced by Citi Bank USA to ThePharmaNetwork LLC (USA), a 100% step down subsidiary of the company and Loan of US$ 20.0 Million advanced by Citi Bank USA to S&B Pharma Inc. (USA), a wholly owned subsidiary of the Company and Loan of US$ 4 Million advanced by Banco De Chile to Ascend Laboratories SpA, Chile, a wholly owned subsidiary of the Company At 1 April 2015: Investments in 8% Indian Railway Finance Corporation Limited, 10.17% HDB Financial Services Limited, 8.63% NHB Limited, 9.01% NHB Limited,11% Bank of India, 9.55% kotak Mahindra Prime Aggregating to Rs.1,387.5 Million were in the process of pledge against issuance of Stand by letter of credit required for Term Loan of US$ 29.80 Million advanced by Citi Bank USA to ThePharmaNetwork LLC (USA), a 100% step down Subsidiary of the Company.

4a) During the year, the Company has contributed Rs.67.9 Million in wholly owned subsidiary in South Africa viz, “Alkem Laboratories (Pty) Limited” by way of a capital contribution.

4b) During the year, the Company has contributed Rs.67.5 Million in wholly owned subsidiary in Philippines viz, “Alkem Laboratories Corporation” by way of a capital contribution.

4c) During the year, the Company has contributed Rs.57.1 Million in wholly owned subsidiary in Kazakhstan viz, “The PharmaNetwork LLP, Kazakhstan:” by way of a capital contribution.

4d) During the year, the Company has contributed Rs.250.0 Million in partly owned subsidiary in India viz, “Cachet Pharmaceuticals Private Limited” by way of a capital contribution.

4e) During the year, the Company has contributed Rs. 133.7 Million in wholly owned subsidiary in Chile viz, “Ascend Laboratories SpA” by way of a capital contribution. 6f) During the year, the Company has contributed Rs. 500.0 Million and Rs. 532.6 Million in wholly owned subsidiary in India viz,”Enzene Biosciences Limited” by way of a capital contribution and by way of conversion of loans and advances to equity respectively.

4g) During the year, the Company has contributed Rs. 1,069.2 Million and Rs. 480.4 Million in wholly owned subsidiary in USA viz,”S&B Pharma Inc.” byway of a capital contribution and by way of conversion of loans and advances to equity respectively.

5) During the previous year ended 31 March 2016, pursuant to the approval of the Board of Directors in its meeting held on 9 March 2016, the Company in order to focus on its core business activities and for other commercial reasons, restructured its investment in Avenue Venture Real Estate Fund (“Fund”) by entering into an option agreement with Mr.Tushar Kumar for grant of unconditional option exercisable without restriction at the option of the option holder to purchase the trust units held by the Company in the Fund at an option price of 102% of the fair market value of each trust unit as on the exercise date. This Agreement shall remain in force for a period of 2 years from the execution date and may be renewed with mutual consent of the parties.

The company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

In India, in case income tax payable on book profit (that is Minimum alternate tax - ‘MAT’) exceeds the income tax payable on tax profit, the differential amount shall be carried forward as a MAT credit for a period of 15 years. The said MAT credit can be offset against any future income tax payable. The Company has carry forward amount of MAT of Rs.6,988.8 Million as at 31 March 2017. (Rs.5,079.4 million as at March 31, 2016; Rs.4,470.5 million as at April 1, 2015).

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income by each jurisdiction in which the relevant entity operates and the period over which deferred income tax assets will be recovered.

5.1 Dues to Micro and Small enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro and Small Enterprises. On the basis of the information and records available with the Management, the outstanding dues to the Micro & Small enterprises as defined in MSMED are set out in following disclosure.

5.2 Disclosure of Employee Benefits as per Indian Accounting Standard 19 is as under:

i) Defined contribution plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The provident fund plan is operated by the Government administered employee provident fund. Eligible employees receive the benefits from the said Provident Fund. Both the employees and the Company make monthly contribution to the Provident Fund plan equal to a specific percentage of the covered employee’s salary. The Company has no obligations other than to make the specified contributions.

The Superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute pre determined percentage of payroll cost of the eligible employee to the superannuation plan to fund the benefit.

ii) Defined benefit plan:

The Company earmarks liability towards unfunded Group Gratuity and Compensated absences and provides for payment to vested employees as under:

a) On Normal retirement/ early retirement/ withdrawal/resignation:

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b) On death in service:

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of the present value of the defined benefit obligation for gratuity was carried out as at 31 March 2017 by an independent actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary Escalation Rate: The estimates of future salary increases, considered in actuarial valuation, takes into account the inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

5.3 The Company has entered into non - cancellable operating lease agreements for premises/car/Computers. Rent expenses debited to the Statement of Profit and Loss is as below:

5.4 The aggregate amount of revenue expenditure incurred during the period on Research and Development and shown in the respective heads of account is Rs.2,886.6 Million (Previous year Rs.2,020.1 Million).

5.5 Segment Reporting

The Company has presented data relating to its segments based on its consolidated financial statements, Accordingly, in terms of paragraph 4 of the Indian Accounting Standard 108 (IND AS-108) “Segment Reporting”, no disclosures related to segments are presented in this standalone financial statement.

5.6 Information on related party transactions as required by Indian Accounting Standard 24 (Ind AS 24) on related party disclosures for the year ended 31 March 2017.

Based on the recommendation of the Nomination and Remuneration committee, all decisions relating to the remuneration of the directors are taken by the Board of Directors of the Company, in accordance with shareholders’ approval, wherever necessary.

All other related party transactions are made in the normal course of business and on terms equivalent to those that prevail in an arm’s length transactions.

Figures in the brackets are the comparative figures of the previous year.

Note:

1 The Company’s international transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2016. Management believes that the Company’s international transactions and domestic transactions with related parties post 31 March 2016 continue to be at arm’s length and that the transfer pricing legislation will not have any material impact on these financial statements,particularly on amount of tax expense and that of provision for taxation.

2 Disclosures pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 186 of the Companies Act, 2013 (hereinafter referred to as “Act”)

a) Loans and Advances in the nature of loans to subsidiaries (net of provision for doubtful advances) *

*The above loans given during the year are given towards meeting working capital requirements and are repayable in accordance with the terms and conditions of loan agreements carries an interest rate of 9% p.a. for foreign subsidiaries and 10% p.a. for Indian subsidiaries

b) Details of investments made under section 186 of the Act are given in Note 3.2 “Non Current Investments”.

c) Securities pledged against loan taken by subsidiaries **

** The securities pledged against loans taken by subsidiaries are for the purpose of meeting working capital requirements

d) The Company has issued corporate guarantee to its wholly owned subsidiary, Pharmacor Pty Limited, Australia amounting to Rs.272.7 Million (5.5 Million AUD) (31 March 2016 Rs.Nil; 1 April 2015 Rs.Nil) in respect of term loan taken to meet working capital requirements.

5.7 Financial instruments - Fair values and risk management

A. Accounting classification and fair values

The Company uses the following hierarchic structure of valuation methods to determine and disclose information about the fair value of financial instruments:

Level 1: Observable prices in active markets for identical assets and liabilities;

Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities;

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities

B. Measurement of fair values

The Management assessed that cash and bank balances, trade receivables, trade payables, cash credit and other financial assets and liabilities approximate their carrying amounts largely due to short-term maturities of these instruments.

The following methods and assumptions were used to estimate the fair value

a) The fair value of the quoted investments/units of mutual fund scheme are based on market price/net asset value at the reporting date.

b) The fair value of the remaining financial instrument is determined using discounted cash flow analysis. The discount rates used is based on management estimates.

The significant unobservable inputs used to determine the fair value of investment in fund together with the quantitative sensitivity analysis as at 31 March 2017; 31 March 2016 and 1 April 2015 are as shown below:

Level 3 fair values

Reconciliation of Level 3 fair values

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values of Investment in avenue venture real estate fund.

Transfer out of Level 3

There has been no transfer out of Level 3 during the period

Sensitivity analysis

For the fair values of Avenue venture real estate fund investment possible changes at the reporting date to one of the significant unobservable inputs, holding other inputs constant, would have the following effects.

The Company has exposure to the following risks arising from financial instruments:

- Credit risk ;

- Liquidity risk ; and

- Market risk

i. Risk management framework

The Company’s board of directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the board of directors on its activities

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and adherence to the limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The audit committee oversees how management monitors compliance with the company’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The audit committee is assisted in its oversight role by internal audit. Internal audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

ii. Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Company is exposed to credit risk from its operating activites (primarily trade receivables) and from its financing/investing activities, including investments in debt securities, deposits with banks, equity securities and venture capital and mutual fund investments. The Company has no significant concentration of credit risk with any counterparty.

The carrying amount of following financial assets represents the maximum credit exposure:

Trade receivables

Trade receivables are consisting of a large number of customers. The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk of the industry and country in which customers operate.

The Risk Management Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, if they are available, and in some cases bank references. Sale limits are established for each customer and reviewed quarterly.

At 31 March 2017, the carrying amout of the Company’s most significant customer (Ascend Laboratories LLC, its wholly owned step-down subsidiary) is Rs.2,650.2 million (31 March 2016 Rs.1,646.1 million ;1 April 2015 Rs.963.5 million)

Impairment

As per simplified approach the Company makes provision of expected credit losses on trade receivable using a provision matrix to mitigate the risk of default payment and make appropriate provision at each reporting date wherever.

Management believes that the unimpaired amounts that are past due by more than 180 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk, including underlying customers’ credit ratings if they are available.

Loans to subsidiaries

The Company has an exposure of Rs.335.5 million as 31 March 2017 (Rs.1,317.5 million : 31 March 2016; Rs.884.6 Million 1 April 2015) for loans given to subsidiaries. Such loans are classified as financial asset measured at amortised cost.

The Company did not have any amounts that were past due but not impaired at 31 March 2017 or 31 March 2016. The Company has no collateral in respect of these loans.

Investments, Cash and Cash equivalents and Bank Deposits

Credit risk on cash and cash equivalents, deposits with banks is generally low as the said deposits have been made with the banks who have been assigned high credit rating by international and domestic credit rating agencies.

Investments of surplus funds are made only with approved financial institutions. Investments primarily include investments in subsidiaries, mutual funds, venture capital funds, quoted bonds and non-convertible debentures. These mutual funds and counterparties have low credit risk.

Total non-current and current investments as on 31 March 2017 is Rs.15,176.4 million (31 March 2016: Rs.11,576.8 million; 1 April 2015 Rs.10,777.9 million)

Debt securities:

The Company has an exposure of Rs.2,310.3 million as at 31 March 2017 (Rs.2,014.9 million : 31 March 2016; Rs.2,358.2 million as at 1 April 2015) for debt securities classified as financial asset measured at amortised cost. All the debt securities have been issued by companies registered in India in Indian Rupees.

There has been no allowance for impairment in respect of such debt securities - financial asset measured at amortised cost till 31 March 2017.

The Company did not have any debt securities that were past due but not impaired at 31 March 2017 ,31 March 2016 and 1 April 2015. The Company has no collateral in respect of these investments.

iii. Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The majority of the Company’s trade receivables are due for maturity within 21 days from the date of billing to the customer.

Further, the general credit terms for trade payables are approximately 45 days. The difference between the above mentioned credit period provides sufficient headroom to meet the short-term working capital needs for day-to-day operations of the Company. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, are retained as Cash and Investment in short term deposits with banks. The said investments are made in instruments with appropriate maturities and sufficient liquidity.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments and exclude the impact of netting agreements.

The gross inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement

The gross inflows/(outflows) disclosed in the above table represent the contractual undiscounted cash flows relating to derivative financial liabilities held for risk management purposes and which are not usually closed out before contractual maturity. The disclosure shows net cash flow amounts for derivatives that are net cash-settled and gross cash inflow and outflow amounts for derivatives that have simultaneous gross cash settlement

iv. Market risk

Market risk is the risk that changes in market prices - such as foreign exchange rates, interest rates and equity prices - will affect the Company’s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. We are exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of our investments. Thus, our exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs.

Currency risk

The Company is exposed to currency risk on account of its borrowings, other payables, receivables and loans and advances in foreign currency. The functional currency of the Company is Indian Rupee. The Company has exposure to USD, EURO, GBP and AUD. The Company has formulated hedging policy for monitoring its foreign currency exposure.

Exposure to currency risk

The currency profile of financial assets and financial liabilities as at March 31, 2017, March 31, 2016 and April 1, 2015 in there respective currencies are as below:

Sensitivity analysis

A reasonably possible strengthening (weakening) of the Indian Rupee against various foreign currencies at March 31 would have affected the measurement of financial instruments denominated in foreign currencies and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments, borrowings and loans because of fluctuations in the interest rates. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments, borrowings and loans will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

Company’s interest rate risk arises from borrowings and fixed income securities. Fixed income securities exposes the Company to fair value interest rate risk. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

Fair value sensitivity analysis for fixed-rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

A change of 100 basis points in interest rates would not have any material impact on the equity

Cash flow sensitivity analysis for variable-rate instruments

A change of 100 basis points in interest rates would not have any material impact on the equity

5.8 Capital Management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Management monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings and obligations under finance leases, less cash and cash equivalents. Adjusted equity comprises all components of equity.

5.9 First- time adoption of Ind AS

I. First-time adoption of Ind AS

The financial statements for the year ended March 31, 2016 have been prepared in accordance with Ind AS as issued and effective as at March 31, 2016. The Company’s opening Ind AS balance sheet was prepared as at 1 April 2015, the Company’s date of transition to Ind AS. In preparing the opening balance sheet, the Company has applied the mandatory exceptions and certain optional exemptions from full retrospective application of Ind AS in accordance with the guidance in Ind AS 101 ‘First Time Adoption of Indian Accounting Standards’

This note explains the principal adjustments made by the Company in restating its previous GAAP financial statements to Ind AS, in the opening balance sheet as at April 1, 2015 and in the financial statements as at and for the year ended 31 March 2016.

II. Optional exemptions from retrospective application

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has applied the following exemptions:

a) Deemed cost for Property, Plant and Equipment (PPE), Intangible assets and investment property

The Company has elected to measure all the items of PPE and intangible assets at its previous GAAP carrying values which shall be the deemed cost as at the date of transition. As per FAQs issued by Accounting Standards Board (ASB) by Ind AS Transition Facilitation Group of Ind AS (IFRS) Implementation Committee of ICAI, deemed cost, is the amount used as a surrogate for the cost or depreciated cost and for the purpose of subsequent depreciation or amortisation, deemed cost becomes the cost as the starting point. Information regarding gross block of assets, accumulated depreciation and provision for impairment under Previous GAAP has been disclosed by way of a note forming part of the financial statements.

b) Deemed cost for investment in subsidiary

The Company has elected to use the previous GAAP carrying amount of its investment in subsidiaries on the date of transition as its deemed cost on that date, in its standalone financial statements. Consequently, deemed investment arising on account of financial guarantee contract on behalf of the subsidiaries, for no consideration, has not been recognised.

III. Mandatory exemptions from retrospective application

The Company has applied the following exceptions to the retrospective application of Ind AS as mandatorily required under Ind AS 101:

i. Estimates

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.

ii. Classification and measurement of financial assets

The classification of financial assets to be measured at amortised cost or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.

IV Transition to Ind AS - Reconciliations

The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:

i. Reconciliation of equity as at 1st April 2015

ii. Reconciliation of equity as at 31 March 2016

iii. Reconciliation of Statement of Profit and Loss for the year ended 31 March 2016

iv. Adjustments to Statement of Cash Flows for the year ended 31 March 2016

Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with financial statements prepared under Ind AS.

Notes to reconciliation of equity as at 1 April 2015 between Previous GAAP to Ind AS:

(a) Fair valuation of investment in venture capital funds and amortisation of investment in fixed income corporate bonds under effective interest rate method:

The Company has invested Rs.169.4 million in venture capital funds. It has designated such investments as financial assets measured at fair value through profit and loss on the date of transition. The fair value of the investments is Rs.226.4 million on the date of transition and an unrealised gain of Rs.57.0 million has been recognised in retained earnings.

The Company has invested in certain fixed income corporate bonds at a premium to the face value of the bonds with the sole intention to collect payments of principal and interest till maturity. Accordingly, the investments has been classified as financial assets measured at amortised cost. The premium over the face value of the bonds has been amortised under effective interest rate (EIR) method with a negative impact of Rs.4.2 million on the equity on the date of transition.

(b) Fair valuation of interest free and concessional interest rate loans to subsidiaries:

The Company has provided interest free and concessional interest rate loans to subsidiaries. These loans to subsidiaries have been fair valued on the date of their initial recognition, by discounting such loans using the market rate of interest on the date of initial recognition, and subsequently amortised under effective interest rate. This has resulted in a negative impact of Rs.259.0 million on the equity on the date of transition.

(c) Fair valuation of security deposits for rented premises The Company has given interest free security deposits for rented premises. The interest free security deposits have been fair valued on the date of initial recognition and the difference between the transaction amount and the fair value has been recognised as prepaid rent. The security deposits have been subsequently amortised under effective interest rate method and the prepaid rent on a straight line basis over the term of the lease. This has resulted in recognising prepaid rent of Rs.2.0 million in other non-current assets and Rs. 0.7 million in other current assets. Also, security deposits have been reduced by Rs.2.7 million with a cumulative impact of Rs. 0.2 million on retained earnings on the date of transition.

(d) Fair valuation of investment in quoted equity shares:

The Company has investment in quoted equity shares of other companies. These investments have been fair valued on the date of transition with a corresponding unrealised gain of Rs. 19.6 million, being recognised in retained earnings.

(e) Fair valuation of loans to entities other than subsidiaries: The Company has provided an interest free loan to an entity which is not its subsidiary. It has fair valued this loan on initial recognition and subsequently accounted these at amortised cost using effective interest rate method. As a result the amount has been reduced from Rs.59.3 million to Rs.45.2 million.

(f) Amortisation of loan processing fees under effective interest rate method:

Transaction cost incurred on external commercial borrowings have been reduced from the borrowings on the date of initial recognition and amortised using effective interest rate method. Accordingly, Non-current borrowings are reduced by Rs.2.3 million and current maturity of Non-current borrowings by Rs.2.3 million with a corresponding gain recognised in Retained earnings.

(g) Restatement of provision for compensated absences

An amount of Rs.51.5 million pertaining to the period prior to 1 April 2015 was recognised during the financial year ended 31 March 2016. The same has been restated on the date of transition with a corresponding loss recognised in equity on the date of transition.

(h) Deferral of income related to dossier licensing arrangement

An amount of Rs.11.3 million in respect of consideration received for dossier licensing arrangement is not considered as a separate obligation and shall be recognised when the corresponding goods under the agreement are sold. There were no sales till the date of transition and the entire amount has been deferred with a corresponding negative impact recognised in Retained earnings.

(i) Fair valuation of financial guarantee contract

The Company has provided guarantees for loans taken by the subsidiaries. This financial guarantees have been measured at fair value on the date of initial recognition with corresponding amount being recognised as unearned guarantee commission. The same has been amortised over the term of the guarantee on a straight line basis. As a result an amount of Rs.16.2 million has been recognised as unearned guarantee commission on the date of the transition with a corresponding negative impact to retained earning.

(j) Deferred tax

The Company has recognised a deferred tax asset of Rs.85.3 million on the temporary differences arising on account of the above Ind AS adjustments

Notes to reconciliation of equity as at 31 March 2016 between Previous GAAP to Ind AS:

(a) Fair valuation of investment in venture capital funds and amortisation of investment in fixed income corporate bonds under effective interest rate method:

The Company has invested Rs.252.1 million in venture capital funds as at 31 March 2016. The fair value of the investment was Rs.332.3 million on that date. Cumulatively the amount of investment has increased by Rs.80.2 million under Ind AS from that under previous GAAP, as at 31 March 2016.

The Company has invested in certain fixed income corporate bonds at a premium to the face value of the bonds with the sole intention to collect payments of principal and interest till maturity. Hence the investments has been classified as financial assets measured at amortised cost. The premium over the face value of the bonds has been amortised under effective interest rate (EIR) method. Also the Company has reversed the premium that it had written off against such investments during the year ended 31 March 2016. As a result, there is a net increase of Rs.0.2 million in non-current investments.

(b) Fair valuation of interest free and concessional interest rate loans to subsidiaries:

The Company has provided interest free and concessional interest rate loans to subsidiaries. These loans to subsidiaries have been fair valued on the date of their initial recognition by discounting such loans using the market rate of interest on the date of initial recognition, and subsequently amortised under effective interest rate. Also, interest rates have been revised for loans given during the financial year 2014-15 in the year ended 31 March 2016. This change resulted in substantial modification of contractual cash flows, requiring to remeasure the financial assets in accordance with the revised terms. This has resulted in a net decrease of Rs. 177.6 million in the loans to subsidiaries.

(c) Fair valuation of security deposits for rented premises The Company has given interest free security deposits for rented premises. The interest free security deposits have been fair valued on the date of initial recognition and the difference between the transaction amount and the fair value has been recognised as prepaid rent. The security deposits have been subsequently amortised under effective interest rate method and the prepaid rent on a straight line basis over the term of the lease. This has resulted in recognising prepaid rent of Rs.2.2 million in other non-current assets and Rs.1.1 million in other current assets. Also, security deposits have been reduced by Rs.3.6 million as at 31 March 2016 from other current financial assets with a cumulative impact of Rs.0.3 million in statement of profit and loss.

(d) Fair valuation of investment in Avenue Venture Capital Fund:

The Company lost control over Avenue Venture Capital Fund and designated the investment in the fund as financial asset measured at fair value through profit and loss. This has resulted in increase of Rs.785.0 million in current investment on account of fair value measurement of the same as at 31 March 2016.

(e) Fair valuation of loans to entities other than subsidiaries: The Company has provided an interest free loan to an entity which is not its subsidiary. It has fair valued this loan on initial recognition and subsequently accounted these at amortised cost using effective interest rate method. As a result the amount has been reduced from Rs.52.3 million to Rs.41.4 million.

(f) Amortisation of loan processing fees under effective interest rate method:

The Company has incurred transaction costs on its external commercial borrowing. The same has been reduced from the borrowing on the date of initial recognition and amortised using effective interest rate method. As a result current maturity of long term borrowing has been reduced by Rs.1.6 million.

(g) Deferral of income related to dossier licensing arrangement

An amount of Rs.23.7 million pertains to amount received in consideration for dossier licensing arrangement. The same is not considered as a separate obligation and shall be recognised when goods are sold. There were no sales till 31 March 2016 and the entire amount has been deferred and recognised as advance from customers in other current liabilities.

(h) Deferred tax

The Company has recognised a net deferred tax liability of Rs.226.3 million on the temporary differences arising on account of the above Ind AS adjustments as at 31 March 2016

Notes to reconciliation of Statement of profit and loss for the year ended 31 March 2016 between previous GAAP to Ind AS:

(a) Reclassification of excise duty and customers’ incentives Excise duty (net of excise benefits) of Rs.856.2 million has been reclassified from revenue to other expenses. This has resulted in increase of revenue and other expenses by Rs.856.2 million.

Cash discount and other incentives directly attributable to sales of Rs.559.0 million have been reclassified from other expenses to revenue. This has resulted in decrease of revenue and other expenses by Rs.559.0 million

(b) Reclassification of cash discount from suppliers, deferral of income from dossier license agreement and foreign exchange loss arising on amortisation of loans to subsidiaries in foreign currency under EIR method Cash discount received from suppliers of Rs.11.1 million has been reclassified from other operating income to cost of raw material consumed. An income of Rs.12.4 million from the dossier licence agreement has been deferred and recognised as advance from customers.

Foreign exchange loss of Rs.10.2 million arising on amortisation of loans to subsidiaries in foreign currency under EIR method has been reduced from other operating revenue.

(c) Reversal on account of restatement of provision of compensated absences and reclassification of period cost from employee benefit expense to finance cost A provision of compensated absences of Rs.51.5 million pertained to period before 1 April 2015 and hence has been restated under Ind AS, resulting in reversal of the expense recognised during the year ended 31 March 2016.

The interest cost of Rs.50.7 million on long term employee benefits has been reclassified from employee benefit expense to finance costs.

(d) Amortisation of prepaid rent arising on fair valuation of security deposits on initial recognition

An amount of Rs.2.1 million has been recognised as rent expenses on account of amortisation of prepaid rent arising on fair valuation of security deposit on initial recognition

(e) Unwinding of interest income on interest free and concessional interest rate loans to subsidiaries:

An amount of Rs.21.9 million has been recognised as interest income on unwinding of interest free and concessional rate loans to subsidiaries recognised at fair value on initial recognition.

(f) Gain on substantial modification of contractual cash flows from loans to subsidiaries

An amount of Rs.69.8 million has been recognised as gain on substantial modification of cash flows from loans to subsidiaries on account of change in interest rates on loans disbursed, during the financial year 2014-15, in the year ended 31 March 2016.

(g) Gain on change in fair value of investment in venture capital fund

An amount of Rs.808.4 million has been recognised as gain on change in fair value of investment in venture capital funds during the financial year ended 31 March 2016.

(h) Unwinding of interest income on interest free loans to entities other than subsidiaries:

The Company has provided an interest free loan to an entity which is not its subsidiary. It has fair valued this loan on initial recognition and amortised the same under effective interest rate method. The Company has recognised an interest income Rs.3.2 million on unwinding of such loan which was recognised at fair value on initial recognition.

(i) Amortisation of unearned guarantee commission The Company has recognised guarantee commission on financial guarantee provided on loans taken by subsidiaries. This has resulted in an increase of other income by Rs.16.2 million.

(j) Fair valuation of quoted equity shares recognised in earlier period

The Company has recognised mark to market gain on quoted equity shares amounting to Rs.19.6 million in retained earnings on transition to Ind AS. Accordingly, the realised gain accounted under previous GAAP on sale of such equity shares in the year ended 31 March 2016 was reversed.

(k) Reversal of amortisation of premium on Bonds and unwinding of interest income on discounted interest free premise deposits

The other income has been increased due to reversal of amortisation of premium on bonds amounting to Rs.4.4 million and unwinding of interest income on discounted interest free premise deposits amounting to Rs.1.9 million.

(l) Amortisation of loan processing fees under effective interest rate method:

The Company has incurred transaction costs on its external commercial borrowing. The same has been reduced from the borrowing on the date of initial recognition and amortised using effective interest rate method. As a result an amount of Rs.3.0 million has been recognised as finance cost on account of amortisation under the effective interest rate method

(m) Deferred tax

The Company has recognised a deferred tax expense of Rs.311.6 million on the temporary differences arising on account of the above Ind AS adjustments

(n) Actuarial gain/loss

Under Ind AS, all actuarial gain and loss are recognised in other comprehensive income. Under previous GAAP the Company has recognised actuarial gains and losses in the statement of profit and loss amounting to Rs.0.7 million.

(iv) Adjustments to Statement of Cash Flows for the year ended 31 March 2016

There are no material differences between the Statement of Cash Flows presented under Ind AS and previous GAAP

5.10 During the previous year ended 31 March 2016, the Company has sold brands and trademarks relating to its In Vitro Fertilisation (IVF) formulations to Ordain Health Care Global Private Limited for a total consideration of Rs.205.0 million.

5.11 Derivative Contracts

Company has entered into an interest rate swap contract to hedge the interest rate risk with respect to the foreign currency borrowing with a variable interest rates based on LIBOR. However the Company has opted not to follow hedge accounting and it has fair valued the financial instruments and the reversal of mark to market losses on the instrument has been recognised to the Statement of Profit and Loss during the year amounting to Rs.Nil ( for the previous year ended 31 March 2016 Rs.3.1 million). During the year Company has repaid the loan as per repayment schedule.

5.12 The gross amount required to be spent on Corporate Social Responsibility (“CSR”) by the Company during the year is Rs.106.4 million (Previous year : Rs.90.9 million) The Company has spent Rs.61.8 million (Previous Year : 30.1 million) towards CSR as per the approved CSR policy of the Company on healthcare, women empowerment, education, sanitation, conservation of environment, rural development.

Figures in the brackets are the corresponding figures of the previous year.

5.13 Disclosure for specified bank notes:

During the year, the Company had specified bank notes (SBNs) and other denomination notes as defined in the MCA notification G.S.R. 308(E) dated 31st March, 2017, on the details of Specified Bank Notes (SBNs) held and transacted during the period from 8th November, 2016 to 30th December, 2016, the denomination wise SBNs and other notes as per the notification is given below:

*For the purpose of this clause ‘Specified Bank Notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8th November, 2016.

5.14 Recent accounting pronouncements

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of Cash Flows’. These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of Cash Flows’. The amendments are applicable to the Company from 1 April 2017.

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the balance sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated.

5.15 Government Grant

The Company is eligible for government grants which are conditional upon construction of new factories in the Sikkim region. One of the grants, received in 2014-15 amounted to Rs.72.4 million with respect to the Kumrek facility. The factory has been constructed and been in operation since August 2007. The second grant is with respect to Samardung facility in Sikkim amounting to Rs.122.1 million for which the Company has initiated the process for claim. The factory has been constructed and been in operation since October, 2012. These grants, recognized as deferred income, is being amortized over the useful life of the plant and machinery in proportion in which the related depreciation expense is recognised.

5.16 Asset Held for Sale

During the year, the Company has decided to sell land situated at Panoli GIDC, Gujarat, being no longer required for business purposes. Accordingly, the said land has been stated at its carrying value (being lower of its fair value less costs to sell) amounting to Rs.18.2 Million and is presented as “Asset held for sale” as on 31 March 2017. The Company has entered into a Memorandum of Understanding (“MoU”) with the potential buyers for the sale of land.

5.17 During the year ended 31 March 2016, considering future growth requirement of domestic business, the Company had commenced construction of new units at Sikkim which would be entitled for fiscal incentives including benefit under income tax. Further, Finance Act 2016 had partially extended income tax benefit on R&D expenditure up to fiscal year 2019-20. Considering that these factors could result in to lower utilisation of accumulated MAT credit entitlement to the extent of Rs. 834.1 million as at 31 March 2016, the Company had charged off MAT credit entitlement to the extent of Rs.834.1 million under ‘tax expense’ in year ended 31 March 2016.


Mar 31, 2016

NOTE-1.1 DUES TO MICRO AND SMALL ENTERPRISES

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro and Small Enterprises. On the basis of the information and records available with the Management, the outstanding dues to the Micro & Small enterprises as defined in MSMED are set out in following disclosure.

NOTE-1.2 DISCLOSURE OF EMPLOYEE BENEFITS AS PER ACCOUNTING STANDARD 15 IS AS UNDER:

i) Defined contribution plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The provident fund plan is operated by the Government administered employee provident fund. Eligible employees receive the benefits from the said Provident Fund. Both the employees and the Company make monthly contribution to the Provident Fund plan equal to a specific percentage of the covered employee''s salary. The Company has no obligations other than to make the specified contributions.

The Superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute pre determined percentage of payroll cost of the eligible employee to the superannuation plan to fund the benefit.

NOTE-1.3 Segmental Reporting as required by Accounting Standard - 17 (AS-17)

The Company has presented data relating to its segments based on its consolidated financial statements, Accordingly, in terms of paragraph 4 of the Accounting Standard 17 (AS-17) "Segment Reporting", no disclosures related to segments are presented in this standalone financial statement.

NOTE-1.4 The aggregate amount of revenue expenditure incurred during the period on Research and Development and shown in the respective heads of account is Rs. 2,020.1 million (Previous year Rs. 1,513.1 million).

NOTE-1.5 During the year ended 31 March 2016, the Company has sold brands and trademarks relating to its In Vitro Fertilisation (IVF) formulations to Ordain Health Care Global Private Limited for a total consideration of Rs. 205.0 million.

NOTE-1.6 DERIVATIVE CONTRACTS

Company has entered into an interest rate swap contract to hedge the interest rate risk with respect to the foreign currency borrowing with a variable interest rates based on LIBOR. The Company has fair valued the financial instruments and the reversal of mark to market losses on the instrument has been recognised to the Statement of Profit and Loss during the year amounting to Rs. 3.1 million (Previous year Rs. 10.9 million - Charged to the statement of profit & loss)

NOTE-1.7 The gross amount required to be spent on Corporate Social Responsibilities ("CSR") by the Company during the year is Rs. 90.9 million (Previous year: Rs. 94.6 million) The Company has spent Rs. 30.1 million (Previous Year: 12.0 million) towards CSR as per the approved CSR policy of the Company on healthcare, women empowerment, education, sanitation, conservation of environment, rural development.

NOTE-1.8 During the previous year, the Company has settled some pending legal matters. As a part of such settlements, the Company has paid Rs. 262.5 million which is shown under Miscellaneous expenses in Other Expenses in previous year under note 2.26.

NOTE-1.9 During the year ended 31 March 2016, considering future growth requirement of domestic business, the Company has commenced construction of new units at Sikkim which will be entitled for fiscal incentives including benefit under income tax. Further, Finance Act 2016 has partially extended income tax benefit on Research and Development expenditure up to fiscal year 2019-20. These factors may result into lower utilisation of accumulated MAT credit entitlement. Consequently MAT credit entitlement of Rs. 834.1 million has been written off during the year, which is shown under "MAT entitlement credit of earlier years written off" in Tax Expenses.

NOTE-1.10 Previous year''s figures have been regrouped wherever necessary to conform to this year''s classification.


Mar 31, 2015

1) Investments in 8% Indian Railway Finance Corporation Limited, 10.17% HDB Financial Services Limited, 8.63% NHB Limited, 9.01% NHB Limited,11% Bank of India, 9.55% kotak Mahindra Prime Aggregating to Rs.1,387.5 Millions (Previous Year Nil) are in the process of pledge against issuance of Stand by letter of credit required for Term Loan of US$ 29.80 Million advanced by Citi Bank USA to The Pharma Network LLC (USA), a 100% step down Subsidiary of the company.

2) a) During the year the company has acquired 51% equity stake in following companies in India:

i) Indchemie Health Specialties Pvt. Ltd ("IHSPL") at a total cost of Rs.1,640.7 Millions

ii) Cachet Pharmaceuticals Pvt. Ltd ("CPPL") at a total cost of Rs.638.9 Millions pursuant to the acquisition IHSPL & CCPL have become subsidiaries of the Company.

b) During the year the Company purchased additional 20% equity stake in its subsidiary M/s. Enzene Biosciences Limited ("EBL") at a total cost of Rs. 35.0 Millions. Pursuant to these acquisition EBL has become a wholly owned subsidiary of the company.

c) During the year Company has set up a wholly owned subsidiary in United Kingdom via, "Ascend Laboratories (UK) Limited" by way of a capital contribution of Rs.4.9 Millions.

d) During the year the Company has acquired 51% equity stake in M/s. S&B Pharma Inc. from its wholly owned subsidiary via M/s. S&B Holdings B.V. Netherlands. Pursuant to the acquisition M/s.S&B Pharma Inc. has now become a direct wholly owned subsidiary of the Company.

e) During the year the Company has contributed Rs.0.1 Million in Alkem Real Estate LLP as capital contribution and the same has been withdrawn pursuant to the process of winding up of the Alkem Real Estate LLP.

Management considers the service tax, excise duty, custom duty, sales tax and income tax demands received from the authorities are not tenable against the Company, and therefore no provision for these tax contingencies has been made.

* Claim from vendor in relation to compliance with contractual purchase commitment and alleged infringement of intellectual property

** Claim from customer in relation to product quality issues and packing norms in recipient country.

In view of the company no provision for these claims are required

3. Due to Micro, Small enterprises

Under the Micro, Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the Management, the outstanding dues to the Micro & Small enterprises as defined in the Micro, Small and Medium Enterprises Development Act, 2006 as set out in following disclosure. This has been relied upon by the auditors.

4. Disclosure of Employee Benefits as per Accounting Standard 15 is as under: i) Defined contribution plans: The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The provident fund plan is operated by the Government administrated employment provident fund. Eligible employees receive the benefits from the said Provident Fund. Both the employees and the Company make monthly contribution to the Provident Fund plan equal to a specific percentage of the covered employee''s salary. The minimum interest rate payable to the beneficiaries every year is being notified by the Government.

The Superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute pre-determined percentage of payroll cost of the eligible employee to the superannuation plan to fund the benefit. The Company has recognised the following amounts in the Statement of Profit and Loss

ii) Defined benefit plan:

The Company earmarks liability towards unfunded Group Gratuity and Compensated absences and provides for payment to vested employees as under:

a) On Normal retirement/ early retirement/ withdrawal/resignation:

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b) On death in service:

As per the provisions of Payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2015 by an independent actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

5. Segmental Reporting as required by Accounting Standard – 17 (AS-17) The Company has presented data relating to its segments based on its consolidated financial statements, which are presented in the same Annual Report. Accordingly, in terms of paragraph 4 of the Accounting Standard 17 (AS-17) "Segment Reporting", no disclosures related to segments are presented in this standalone financial statement.

6. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is Rs.1,513.1 Millions (Previous Year Rs. 1,529.1 Millions).

Until 31 March 2014,the company accounted for sales returns on actual returns. During the year ended 31 March 2015, in line with an opinion of Expert Advisory Committee of the Institute of Chartered Accountants of India on accounting for sales returns, the company has revised its approach by accounting for anticipated sales returns and has recorded a cumulative provision for anticipated sales returns as at 31 March 2015 by charging it to Statement of Profit and Loss.

As required by Accounting Standard–18, the Related Parties'' disclosures are as follows: 2.36 Names of related parties and description of relationship:

A. List of related parties and their relationship A Subsidiaries and Step down Subsidiaries

Alkem Laboratories (NIG) Limited Nigeria

Alkem Laboratories (PTY) Limited South Africa

Alkem Pharma GmbH Germany

Alkem Laboratories Corporation Philippines

S & B Holdings B.V. Netherlands

Pharmacor Pty Limited Australia

ThePharmanetwork, LLC ( Wholly owned

United States of America Subsidiary of S&B Holdings B.V)

Ascend Laboratories SDN BHD. Malaysia

Ascend Laboratories SpA Chile

Enzene Biosciences Ltd. India

Alkem Laboratories Korea Inc Korea

Pharmacor Ltd. Kenya

S & B Pharma Inc. United States of America

The PharmaNetwork, LLP Kazakhstan

Ascend Laboatories, LLC ( Wholly owned

United States of America by The Phrmanetwork LLC)

Alkem Real Estate LLP India

Ascend Laboratories (UK) Ltd. (w.e.f 6

United Kingdom

August, 2014)

Cachet Pharmaceuticals Pvt. Ltd (w.e.f 27

India

March, 2015 )

Indchemie Health Specialties Pvt.

India Ltd.(w.e.f 30 March, 2015 )

B Key Managerial Personnel C. Relatives of Key Management Personnel

Mr. Samprada Singh Chairman Emeritus Mr. Satish Kumar Singh Son of Samprada Singh

Mr. Basudeo Narain Singh Executive Chairman Mrs. Jayanti Sinha Sister of Samprada Singh

Mr. Prabhat Narain Singh (up to 20 Feb,

Director Mrs. Archana Singh Daughter of Basudev Narain Singh

2015)

Mr. Nawal Kishore Singh (up to 2 Jan,

Director Mr. Sarandhar Singh Son of Balmiki Prasad Singh

2015)

Mr. Balmiki Prasad Singh Director Mr. Srinivas Singh Son of Balmiki Prasad Singh

Mr. Dhananjay Kumar Singh Joint Managing Director Mr. Sarvesh Singh Brother of Sandeep Singh

Mr. Mrityunjay Kumar Singh (up to 31

Director Mrs. Manju Singh Wife of Balmiki Prasad Singh

July, 2014)

Mr. Sandeep Singh Joint Managing Director Mrs. Premlata Singh, Mother of Sandeep Singh

Mr. Prabhat Agrawal (w.e.f 21st Oct,

Chief Executive Officer Mrs. Madhurima Singh Wife of Dhananjay Kumar Singh 2014)

Mrs. Seema Singh Wife of Mritunjay Kumar Singh

Ms. Divya Singh Doughter of Dhananjay kumar Singh

Mst. Aniruddha Singh Son of Dhananjay Kumar Singh

Ms. Meghna Singh Doughter of Mritunjay Kumar Singh

Shrey Shree Anant Singh Son of Mritunjay Kumar Singh

Ms.Inderjit Arora Wife of Sandeep singh

Rekha Singh Wife of Basudev Narain Singh

Shalini Singh Daughter of Naval Kishore Singh

Neha Singh Daughter of Naval Kishore Singh

Khushboo Singh Daughter of Naval Kishore Singh

Anju Singh Wife of Naval Kishore Singh

Mr. Nawal Kishore Singh (w.e.f 3

Son of Samprada Singh Jan, 2015)

Mr.Mrityunjay Kumar Singh (w.e.f

Son of Basudev Narain Singh 1 August, 2014)

D Entities in which Key Management Personnel''s have contractual and significant influence:

M/s Galpha Laboratories Ltd., Travelon Services Pvt. Ltd.M/s. Cachet Pharmaceuticals Pvt. Ltd (up to 26 March, 2015) ,Indchemie Health Specialties Pvt. Ltd (up to 29 March, 2015)


Mar 31, 2014

(a) Rights attached to Equity Shares:

The Company has only one class of equity shares with voting rights having a par value of Rs. 10/- per share. The Company declares and pays dividends in Indian Rupees.

During the year ended 31 March, 2014, the amount of per share dividend paid as distributions to equity shareholders is Rs. 20/- (31st March, 2013 dividend recognized as distribution to equity shareholders Rs. 20/-).

In the event of liquidation of the Company, the shareholders of equity shares will be entitled to receive remaining assets of the Company after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

1. Sundry Creditors – Outstanding dues of Micro and Small Enterprises:

a. Principal amount outstanding to Micro and Small enterprises as at the year ended 31st March, 2014 is Rs. 4,687.88 Lakhs (Rs. 2,864.84 Lakhs)

b. No interest is paid in terms of section 16 of the Micro, Small and Medium Enterprise Development Act, 2006 and there is no delay in payment to these suppliers beyond the appointed day.

c. No amount of interest is due or payable for any delay in payment as specified under the Micro, Small and Medium Enterprise Development Act, 2006.

d. No amount of interest has accrued and remained unpaid at the end of the accounting year.

e. The above disclosure is made based on the information available with the Company and has been relied upon by the Auditors.

2. Disclosure of Employee Benefits as per Accounting Standard 15 is as under:

(i) Defined contribution plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The provident fund plan is operated by the Government administrated employment provident fund. Eligible employees receive the benefits from the said Provident Fund. Both the employees and the Company make monthly contribution to the Provident Fund plan equal to a specific percentage of the covered employee''s salary. The minimum interest rate payable to the beneficiaries every year is being notified by the Government. During the year the Company recognized Rs.1,106.30 Lakhs (P.Y. Rs. 934.77 Lakhs) for provident fund contributions.

The Superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, The Company is required to contribute pre determined percentage of payoff cost of the eligible employee to the superannuation plan to fund the benefit. During the year Company recognized Rs.26.52 Lakhs (P.Y. Rs.24.40 Lakhs) for superannuation contribution.

(ii) Defined benefit plan:

The Company earmarks liability towards unfunded Group Gratuity and Compensated absences and provides for payment to vested employees as under:

a) On Normal retirement/ early retirement/ withdrawal/resignation: As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b) On death in service: As per the provisions of Payment of Gratuity Act, 1972 without any vesting period. The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2014 by the Actuary. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The following table sets out the status of the gratuity plan and the amounts recognized in the Company''s financial statements as at March 31, 2014

3. Details of un-hedged foreign currency exposure:

The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are as below:

4. The Company has taken certain assets on operating lease and has paid lease rentals amounting to Rs.1,498.70 Lakhs (P.Y. Rs. 1,175.01 Lakhs) which has been debited to the Profit and Loss Account. The future minimum lease payments are as under:

5. Segmental Reporting as required by Accounting Standard – 17 (AS-17):-

i) Primary Business Segment:

The Company is currently focusing on two business segments i.e., pharmaceutical and investing & real estate. The business of food division is insignificant and accordingly has not been considered as a separate business segment. The research & development activity of the Company is part of the pharmaceutical business. The disclosure required as per Accounting Standard -17 (AS-17) for the segment reporting is as under.

ii) Secondary Geographical Segment:-

The Segment Revenue in the geographical segments considered for disclosure are on the basis of customer location. In case of Segment asset and segment capital expenditure the amount attributable to geographical segment Outside India "is less than 10% of the respective Total Assets and Total Capital Expenditure of the reporting enterprise and hence not disclosed separately.

6. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is 15,291.47 Lakhs (P.Y. Rs. 9,873.01 Lakhs).

7. As required by Accounting Standard–18, the Related Parties'' disclosures are as follows: Names of related parties and description of relationship:

A. Subsidiaries, Fellow Subsidiaries & Others:

Alkem Laboratories (NIG) Limited Nigeria

Alkem Laboratories (PTY) Limited South Africa

Alkem Pharma GmbH Germany

Alkem Laboratories Corporation Philippines

S & B Holdings B.V. Netherlands

Pharmacor Pty Limited Australia

Angelic Holdings SA (Up to 26th February, 2014) Switzerland

ThePharmanetwork, LLC United States of America

Ascends Laboratories SDN BHD. Malaysia

Ascends Laboratories SpA Chile

Enzene Biosciences Ltd. India

Alkem Laboratories Korea Inc Korea

Pharmacor Ltd. Kenya

S & B Pharma Inc. United States of America

The PharmaNetwork, LLP Kazakhstan

Ascend Laboatories, LLC United States of America

TPN Italia, SRS (In the process of Closure) Italy

TPN China, Inc. (In the process of Closure) China

B. Key Management Personnel:

Mr. Samprada Singh Chairman

Mr. Basudeo Narain Singh Managing Director

Mr. Prabhat Narain Singh Director

Mr. Nawal Kishore Singh Director

Mr. Balmiki Prasad Singh Director

Mr. Dhananjay Kumar Singh Director

Mr. Mrityunjay Kumar Singh Director

Mr. Sandeep Singh Director

Mr. Ravindra.Y.Shenoy Chief Operating Officer

(Up to 31st July, 2013)

ALKEM LABORATORIES LIMITED

C: Relatives of Key Management Personnel and Entities in which Key Management Personnel''s have contractual and significant influence:

Late Mrs. Nanhamati Singh, Mr. Satish Kumar Singh, Mrs. Jayanti Sinha, Mrs. Rekha Singh, Mrs. Archana Singh, Mrs. Krishna Singh, Mr. Tushar Singh, Mrs. Anju Singh, Mrs. Rinu Sharma, Ms. Shalini Singh, Ms. Neha Singh, Ms. Khushboo Singh, Mr. Sarandhar Singh, Mr. Srinivas Singh, Mr. Sarvesh Singh, Mrs. Manju Singh, Mrs. Premlata Singh, Mrs. Madhurima Singh, Mrs. Seema Singh, Ms. Divya Singh, Mst. Aniruddha Singh, Ms. Meghna Singh, Shrey Shree Anant Singh, M/s Cachet Pharmaceuticals Pvt. Ltd., M/s Indchemie Health Specialities Pvt. Ltd., M/s Galpha Laboratories Ltd., Travelon Services Pvt. Ltd.

8. During the year, the Company has expensed out Rs.5,186.18 Lakhs towards expenses incurred on product filling fees, cost of exhibit batch and outsourced product development charges. The said amount includes Rs.2,407.00 Lakhs which was recognized as assets in the earlier year. Accordingly profit for the year is reduced by Rs.5,186.18 Lakhs.

9. Debtors include debts from company under the same management as per Section 370 (1B) of the Companies Act, 1956 of Rs. 6,503.24 Lakh (P.Y. Rs. 6,266.66 Lakhs).

10. Figures of the previous year have been regrouped, rearranged, recast and reclassified wherever considered necessary to make them comparable to that of the current year or for a better presentation of accounts.

11. Figures in brackets indicate corresponding figures of previous year.


Mar 31, 2013

1. Long Term Foreign Currency Term Loans from Banks consist of two loans of US $ 5 Million (Rs 2,714 25 Lakhs) and US $ 12 Million (Rs 6514 20 Lakhs) each One of the loans carries interest @ LIBOR plus 1.50% and is repayable in installment of US $ 5 Million (Rs 2,714.25 Lakhs) on16th September, 2014 Second loan bears interest @ LIBOR plus 1 40% and is repayable in installment of US$ 3 Million (Rs 1,628.55 Lakhs) and two installments of US$ 4.5 Million (Rs 2,442.82 Lakhs) each from the date of their origination on 28th October, 2014.

Both the Long Term Foreign Currency Term Loans from banks are secured against existing and future movable and immovable fixed assets of the Company ranking pari-passu There is no default, as at the balance sheet date, in repayment of any of the above loans.

Outstanding dues of Micro and Small Enterprise:

a. Principal amount outstanding to Micro and Small Enterprises Rs. 2,864 84 Lakhs (P.Y. Rs 2,914 16 Lakhs)

b. No interest is paid in terms of section 16 of the Micro, Small and Medium Enterprise Development Act, 2006, there is no delay in payment to these suppliers beyond the appointed day.

c. No amount of interest is due or payable for any delay in payment as specified under the Micro, Small and Medium Enterprise Development Act, 2006

d No amount of interest has accrued and remained unpaid as at the end of the financial year.

b. The above disclosure is made based on the information available with the Company and has been relied upon by the Auditors.

Notes:

1. Cash Credit from bank for Rs. Rs. 9435.66 Lakhs (PY Rs. 18.21 Lakhs) is secured against charges created on stock and debt,

2. Overdraft from Banks Rs.69,931.14 Lakhs (PY Rs.47,696.01) are secured against Fixed Deposits with the banks and pledge of securities.

3. Cash Credit and Overdraft Facilities carries a rate of Interest in the range of 9 00% lo11 00% PA

4. Working Capital Loan from banks comprises of Cash Credit in INR and Packing Credit in Foreign Currencies

5. Unsecured Working Capital Loan from banks include Foreign Currency Loan of Rs 24,183 97 Lakhs (P Y. Rs 15,008 13Lakhs).

6. Working Capital Loan from banks in Foreign Currency carries Interest rate in the range of 1 10% to 2 00% and those in Indian Rupees carries interest rate in the range of 9% to 12% P.A.

7. There is no default, as at the Balance Sheet date in repayment of any of the above loans.

Current Maturities of Long Term Borrowings in Foreign Currency from Banks consist of two loans of US $ 5 Million (Rs. 2,714.25 Lakhs) and US S 3 Million (Rs 1628.55 Lakhs) each. One of the loans carries interest @ LIBOR plus 1 50% and is repayable in installment of US $ 5 Million (Rs. 2,714.25 Lakhs) on16th September, 2013 Second loan bears interest @ LIBOR plus 1 40% and is repayable in installment of USS 3 Millions (Rs 1,628 55 Lakhs)on 28th October, 2013.

Both the Current Maturities of Long Term Borrowings in Foreign Currencies from banks are secured against existing and future movable and immovable fixed assets of the Company ranking pari-passu There is no default, as at the balance sheet date, in repayment of any of the above loans.

1. Sundry Creditors - Outstanding dues of Micro and small Enterprises

a. Principal amount outstanding to Micro and small enterprises as at the year and is Rs, 2,864.84 Lakhs (Rs, 2,914.16 Lakhs)

b. No interest is paid in terms of section 16 of the Micro small Medium Enterprise Development Act,2006 and there is no delay in payment to these suppliers beyond the appointed day.

c. No. amount of interest is due or payable for any delay in payment as specified under the Micro small and medium Enterprise Development Act, 2006.

d. No. amount of interest has accrued and remained unpaid at the end of the accounting year.

e. The above disclosure is made based on the information available with the company and has been relied upon by the Auditors.

2. Disclosure of Employee Benefits as per Accounting Standard 15 is as under.

(i) Defined contribution place: The company makes contributions towards provident fund and superannuation fund to a defend contribution retirement benefit plan for qualifying employee under the plan the company is required to contribute a specified percentage of payroll cost to the retirement provident fund Eligible employees receive the benefits from the said provident fund. both the employees and the company make minimum interest rate payable to the benefits every year is being notified by the Government The company recognized Rs, 934.77 Lakhs (P.Y Rs,727.11 Lakhs) for provident fund contributions.

The Superannuation fund is administered by the life insurance of India (LIC) Under the plan the company is required to contribution pre determined percentage of pay off cost of the eligible employee to the superannuation plan to fund the benefit the company recognized Rs,24.40 Lakhs (PY Rs, 20.32 Lkhs) For superannuation contribution.

(ii) Defined benefit plan.

The company earmarks liability towards unfunded Group Gratuity and compensated absence and provides for payment to vested employees as under.

a) On Normal retirement/ early retirement/ withdrawal/resignation.

As par the provisions of payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b. On death in service

As per the provisions of payment of Gratuity Act, 1972 without any vesting period.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31,2013 by the Actuary The present value of the defined benefit obligations and the related current service cost and past service cost. were measured using the projected unit credit method.

The following table sets out the status of the gratuity plan and the amounts recognized in the company''s financial statements as at March 31,2013

3. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is Rs. 9,873.01 Lakhs (P.Y. Rs. 6,963.63 Lakhs).

4. Debtors include from company under the same management as per section 370 (1B) of the companies Act, 1956 of Rs, 6,266,66 Lkhs (P.Y Rs, 6,206,26 Lkhs)

5. Figures of the previous year have been regrouped rearranged recast and reclassified wherever considered necessary to make them comparable to that of the current year or for a better presentation of accounts.

6. Figures in brackets indicate corresponding figures of previous year.


Mar 31, 2012

1. Sundry Creditors - Outstanding dues of Micro and Small Enterprises:

a. Principal amount outstanding to Micro and Small enterprises as at the year end is Rs 2,914.16 Lakhs (Rs. 2,957.18 Lakhs)

b. No interest is paid in terms of section 16 of the Micro, Small and Medium Enterprise Development Act, 2006 and there is no delay in payment to these suppliers beyond the appointed day.

c. No amount of interest is due or payable for any delay in payment as specified under the Micro, Small and Medium Enterprise Development Act, 2006.

d. No amount of interest has accrued and remained unpaid at the end of the accounting year.

e. The above disclosure is made based on the information available with the Company and has been relied upon by the Auditors.

2. Disclosure of Employee Benefits as per Accounting Standard 15 is as under:

(i) Defined contribution plans:

The Company makes contributions towards provident fund and superannuation fund to 3 defined contribution retirement benefit plan for qualifying employees Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits. The provident fund plan e operated by the Government administrated employment provident fund Eligible employees receive the benefits from the said Provident Fund Both The employees and the Company make monthly contribution to the Provident Fund plan equal to a specific percentage of the covered employees salary. The minimum (merest rate payable to the beneficiaries every year is being notified by the Government. The Company recognised Rs 727 11 Lakhs (P.Y. Rs. 626.97 Lakhs) for provident fund contributions.

The Superannuation fund is administered by the Life Insurance Corporation of India (LIC) Linder the plan, the company is required to contribute pre determined percentage of payoff cost of the eligible employee to the superannuation plan to fund the benefit. The Company recognised Rs. 20.32 Lakhs (P.Y. Rs. 25.16 Lakhs) for superannuation contribution.

(ii) Defined benefit plan:

The Company earmarks liability towards unfunded Group Gratuity and Compensated absences and provides for payment to vested employees as under:

a) On Normal retirement/ early retirement/ withdrawal/resignation:

As per the provisions of Payment of Gratuity Act, 1972 with vesting period of 5 years of service.

b) On death in service:

As per the previsions of Payment of Gratuity Act. 1972 without any vesting period.

The most recent actuarial valuation of fixed assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31. 2012 by the Actuary The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

The following table sets out the status of the gratuity plan and the amounts recognised in the Company''s financial statements as at March 31, 2012.

3. Segmental Reporting as required by Accounting Standard - 17 (AS-17):

The Company is currently focusing on two business segments i.e . pharmaceutical and investing & real estate. The business of food division is insignificant and accordingly has not been considered as a separate business segment. The research & development activity of the Company is part of the pharmaceutical business The geographical segmentation is not relevant as exports are insignificant considering the total volume of business of the Company. The disclosure required as per Accounting Standard -17 (AS-17) for the segment reporting is as under, Rs in Lakhs.

C. Relatives of Key Management Personnel and Entities in which Key Management Personnel''s have contractual and significant influence:

Mrs. Nanhamati Singh, Mr. Satish Kumar Singh. Mrs Jayanli Sinha. Mrs. Rekha Singh. Mrs. Archana Singh. Mrs. Krishna Singh. Mr. Tushar Singh. Mrs. Anju Singh. Mrs Rinu Sh''arma. Ms. Shaltni Singh. Ms. Neha Singh. Ms. Khushboo Singh. Mr. Sarandhar Singh. Mr Srinivas Singh. Mr Sandeep Singh. Mr. Sarvesh Singh. Mrs. Manju Singh, Mrs. Premtata Singh. Mrs. Madhurima Singh, Mrs. Seema Singh. Ms. Divya Singh. Msi Aniruddha Singh. Ms. Meghna Singh. Shrey Shree Anani Singh. M/s Cachet Pharmaceuticals Pvt. Ltd.. M/s Indchemie Health Specialities Pvt. Ltd . M/s Galpha Laboratories Ltd..M/ s. Trave Jon Services Pvt. Lid.

4. Debtors include debts from company under the same management as per Section 370 (1B) of the Companies Act. 1956 of Rs 7 351 56 Lakh (P.Y. Rs. 3,163.43 Lakhs).

5. Figures of the previous year have been regrouped, rearranged, recast and reclassified wherever considered necessary to make them comparable to that of the current year or for a better presentation of accounts.

6. Figures in brackets indicate corresponding figures of previous year.


Mar 31, 2011

Not available


Mar 31, 2009

1. Figures of the previous year have been regrouped, rearranged, recast and reclassified wherever considered necessary to make them comparable to that of the current year or for a better presentation of accounts.

2. Figures in brackets indicate corresponding figures of previous year.

3. All the Schedules, the Profit & Loss Account and the Cash Flow Statement form an integral part of the annual Accounts.

4. (a) The bank balances in Fixed Deposit accounts include interest accrued but not due amounting to Rs. 2799.17 lakhs (Rs. 2588.15 lakhs).

(b) The bank balances in Current accounts include remittances in transit amounting to Rs. NIL (Rs. 0.62 lakhs).

(c) The Fixed Deposits with bank of Rs. 66556.56 lakhs (Rs. 26060.32 lakhs) is kept as security with bank as margin money against issue of bank guarantees and for overdraft facilities,

5. The company has not valued the closing stock of promotional items and consumable stores in view of having no market value of promotional items and the insignificant amount of inventories of spares in formulation industry and also with a view to adopt the best practices prevalent in the pharmaceuticals formulation industry which amounts to a change in the method of accounting in respect of valuation of inventory which has an impact on reduction of the profit for the year and the value of inventories by Rs. 370.58 lakhs.

6. During the financial year 2007-08, the company has received the Central Government Cash Subsidy of Rs. 30 Lakhs for its industrial unit situated at Baddi (H.P.) and for that it has created a charge on its - plant & machinery situated at its factory at Baddi (H.P.) in favour of the Member Secretary, Single Window Clearance Agency, Baddi. The amount of central subsidy received is treated and accounted as capital reserve.

7.1. The company is currently focussed on two business segments i.e., pharmaceutical business and treasury & real estate business. The business of food division is insignificant considering the total volume of business of the company and accordingly not considered as a separate business segment for the purpose of separate reporting. The research & development activity of the company is also a part of the pharmaceutical segment of the company. The geographical segmentation is not relevant as exports are insignificant considering the total volume of business of the company.

7.2. Pharmaceutical business comprise of manufacture and sale of pharmaceutical products and the profits and surplus arising out of pharmaceutical business is invested in government securities, equity shares of listed and unlisted companies, units in mutual funds, debentures, fixed deposits with banks and real estate which constitutes the treasury & real estate business.

7.3. Above business segment have been classified as reportable segment on the basis of dominant source and nature of risks and returns of the said business segment. The segment income of pharmaceutical business constitutes manufacturing and sales of pharmaceutical products, similarly treasury & real estate business largely comprises of dividend, interest, profit on shares/mutual funds and rental income.

7.4. The segment information has been prepared in conformity with the accounting policies adopted in preparation and presentation of the financial statements of the enterprise as a whole. The segment expense resulting from the operating activities of a segment has been directly attributed to the segment and the common expense has been allocated to the segments on a reasonable basis.

7.5. Keeping in view of the recessionary condition of the market, the company has redeemed substantial amount of investments of Treasury & Real State business segment from Rs 19250.69 lakhs (balance as on March 31, 2008) to Rs 2620.48 lakhs (balance as on March 31, 2009) during the financial year 2008- 2009. The same is also evidenced from the increase in cash and bank balance of the company

8. As required by Accounting Standard-18, the Related Parties'' disclosures are as follows:

Names of related parties and description of relationship:

1. Subsidiary Companies: ,

Alkem Laboratories (Nigeria) Ltd., Nigeria''

Alkem Laboratories Do Brasil Ltda., Brazil

Alkem Laboratories(Proprietary) Ltd., South Africa

Alkem Pharma GmbH., Germany .

Alkem Laboratories Corporation, Philippines.

2. Key Management Personnel: Mr. Samprada Singh, Mr. Basudeo Narain Singh, Mr. Nawal Kishore Singh, Mr. Prabhat Narain Singh, Mr. Balmiki Prasad Singh, Mr. Dhananjay Kumar Singh and Mr. Mrityunjay Kumar Singh.

3. Relatives of Kev Management Personnel: Anju Singh, Archana Singh, Braj Nandan Sinha, Jayanti Sinha, Krishna Singh, Madhurima Singh, Manju Singh, Nanhamati Singh, Neha Singh, Premlata Singh, Rekha Singh, Satish Kumar Singh, Sarandhar Singh, Srinivas Singh, Sandeep Singh, Sarvesh Singh, Seema Singh, Shalini Singh, Tushar Singh, Divya Singh, Aniruddha Singh, Meghana Singh, Shreyshree Anant Singh, Khushboo Singh, Rajeev Sharma, Rinu Sharma, Jyoti Prakash Narain Singh, Aryan Singh, Anshika Singh, Rasika Sharma, Rishabh Sharma,

4.. Enterprise under significant influence of Kev Management Personnel or their relatives:

Cachet Pharmaceuticals Pvt. Ltd. .

Indchemie Health Specialities Pvt. Ltd.

Galpha Laboratories Ltd.

Details relating to transactions with the persons and enterprises referred to above are:

1. Directors Remuneration - Rs. 471.60 lakhs (Rs. 444.97 lakhs)

2. Interest expense on loans taken - Rs. 162.13 lakhs (Rs. 96.73 lakhs)

3. Outstanding loans payable - Rs. 1769.15 lakhs (Rs. 1327.92 lakhs)

4. Purchase of Goods Rs. 6325.90 lakhs (Rs. 5298.84 lakhs)

5. Sale of Goods Rs. 3015.64 lakhs (Rs.2133.01 lakhs) .

6. Sale of Fixed Assets Rs. NIL (Rs 5.62 lakhs)*

7. Sale of Raw & Packing Materials Rs. 63.21 lakhs

8. Purchase of Raw & Packing Materials Rs. 61.74 lakhs

9. Receiving of Services Rs. 680.44 lakhs (Rs. 718.10 lakhs)

10. Rendering of Services Rs. 65.72 lakhs (Rs. 78.48 lakhs)

11. Receipt of Rent Rs. 68.89 lakhs (Rs. 62.11 lakhs)

12. Outstanding Receivables (net of payable) Rs. 2511.83 lakhs (Rs. 1742.65 lakhs)

13. Outstanding Payable Rs. 304.47 lakhs (Rs. 118.81 lakhs)

- 14. Investments Rs. 239.53 lakhs (Rs. 32.55 lakhs)

15. Interim Dividend paid Rs. 1494.56 lakhs (Rs. 1.195.65 lakhs)

16. Deposits received for office premises under lease Rs. 10.00 lakhs (Rs. 10.00 lakhs)

9. Sundry Creditors - Outstanding dues of Micro and Small Enterprises:

1. Principal amount outstanding to Micro and Small enterprises as at the year end is Rs. 2082.55 lakhs (Rs. 1031.36 lakhs).

2. No interest is paid in terms of section 16 of the Micro, Small and Medium Enterprise Development Act, 2006 and there is no delay in payment to these suppliers beyond the appointed day.

3. No amount of interest is due or payable for any delay in payment as specified under the Micro, Small and Medium Enterprise Development Act, 2006.

4. No amount of interest has accrued and remained unpaid at the end of the accounting year.

5. The above disclosure is made based on the information available with the company and has been relied upon by the auditors.

10. a. The Company has repaid for ail the Fixed Assets taken on finance lease prior to 1st April, 2001. The Company has not taken any finance lease after 1st April, 2001.

b. The Company has taken motor cars on operating lease and has paid lease rentals amounting to Rs. 35.54 lakhs (Previous year Rs. 41.55 lakhs) which has been debited to the Profit and Loss Account. The future minimum lease payments are as under:

11. Exchange Gains/CLosses):

The profit for the year includes exchange gains/(losses) of 237.29 lakhs [Rs. (81.99) lakhs]

12. Contingent Liabilities not provided for:

31st March, 2009 31st March, 2008 (Rs. in Lakhs) (Rs. in Lakhs)

a.Letter of credit opened by the Bank 1054.90 844.79

b. Outstanding Bank Guarantees 169.99 868.88

c. Central Excise demand disputed in appeal 484.84 346.50

d. Sales tax demand disputed in appeal 111.18 121.18

e. Estimated amount of contracts remaining to be 36.14 192.13 executed on Capital Account (net of advances)

f. Pending export obligation under advance licence / 452.36 1761.18 EPCG Scheme

g. Claims against the Company not acknowledged as 652.21 NIL

debts for non supply of goods contested in court

Total 2961.62 4134.66



(a) Installed Capacity is as certified by the management and not verified by the auditors, this being a technical matter.

*(b) Actual production includes production at loan licensee locations but excludes goods manufactured for third parties on loan licence basis and physician samples.

*(c) Licensed capacity is not indicated as industrial licensing for all bulk drugs, intermediates and their formulations stands abolished in terms of press Note No.4 (1994 series) dated 25th October, 1994 issued by the Department of Industrial Development, Ministry of Industry, Government of India.

- Opening & Closing Stock includes production at loan licensee locations but excludes goods manufactured for parties on loan licence basis and physician samples.

- Opening & Closing Stock of Bulk drugs is treated as raw materials and is not shown hereinabove.

13. As per the best estimate of the management, no provision is required to be made as per Accounting Standard 29 issued by the Institute of Chartered Accounts of India, in respect of any present obligation as a result of a part event that could lead to a probable outflow of resources, which would be required to settle the obligation.

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