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Notes to Accounts of Aurobindo Pharma Ltd.

Mar 31, 2015

A. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par values of Rs.1 per share. Each holder of equity shares is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2015, the amount of dividend per share recognized as distribution to equity shareholders was Rs.4.5 (March 31, 2014: Rs.3) including interim dividend of Rs.4.5 (March 31, 2014: Rs.3).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

2. LONG-TERM BORROWINGS

i. Secured term loans in foreign currency carry interest in the range of LIBOR plus 2% to 2.5%. Out of these loans, loans amounting to Rs.4,270.8 (March 31, 2014: Rs.6,291.1) are repayable in 3 equal installments in 4th, 5th, 6th years from the respective final draw down dates, and loans amounting to Rs.2,187.5 (March 31, 2014: Rs.4,493.6) are repayable at the end of 5th year from the respective final draw down date.

ii. Deferred sales tax loan is interest free and payable in various installments as per sales tax deferment scheme. The last installment is payable in 2028-29.

iii. Term loans are secured by first pari passu charge on all the present and future fixed assets, both movable and immoveable property of the Company.

3. Capital and other commitments

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for: Rs.3,538.0 (March 31 2014: Rs.1,272.7).

4. Contingent liabilities

Particulars As at As at March 31, 2015 March 31, 2014

Outstanding bank guarantees 718.5 771.8

Corporate guarantees for loans taken by 100% subsidiaries** 3,090.7 -

Claims arising from disputes not acknowledged as debts

- indirect taxes (excise duty and service tax)*# 272.4 223.3

Claims arising from disputes not acknowledged as debts - direct taxes* 308.8 105.0

Claims against the Company not acknowledged as debts - other duties/claims* 150.3 150.3

Bills discounted with banks 1,048.5 1,060.6

* in respect of above matters, future cash outflows in respect of contingent liabilities are determinable only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company.

# Excludes Rs.13.4 where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. All these cases are under litigation and are pending with various authorities, expected timing of resulting outflow of economic benefits cannot be specified.

**Business requirement in respective subsidiaries.

5. The income tax authorities had carried out search operations on the Company at certain locations in February, 2012. The Company has fully co-operated with the authorities and various statements were recorded during the course of these operations. In order to avoid possible litigations, without admitting any irregularities, the Company had decided to offer an additional income and to pay the resultant tax. Accordingly, provision for income tax of Rs.48.7 on this additional income had been made during the year 2011-12. The proceedings are in progress and no other material implications are expected by the management in this matter.

6. Employee stock options

a. Employee Stock Option Plan 'ESOP-2006'

The Company instituted an Employee Stock Option Plan 'ESOP-2006' as per the special resolution passed in the 19th Annual General Meeting held on September 18, 2006. This scheme has been formulated in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The compensation committee accordingly, granted total 3,240,500 options under seven grants of 175,000, 25,000, 90,000, 1,205,000, 300,000, 500,000, 915,500 and 30,000 options to eligible employees on October 30, 2006, July 31, 2007, October 31, 2007, December 16, 2011, June 19, 2012, January 09, 2013, January 28, 2013 and August 9, 2013 respectively. The method of settlement under scheme is by issue of equity shares of the Company. Each option comprises of one underlying Equity Share of Rs.1 each. The said options vest on an annual basis at 10%, 15%, 25% and 50% over a period of four years and can be exercised over a period of six years from the date of grant of options. The options have been granted at the then prevailing market price of Rs.120.70, Rs.132.35, Rs.114.50, Rs.91.60, Rs.106.05, Rs.200.70, Rs.187.40 and Rs.161.30 per share respectively and hence the question of accounting for employee deferred compensation expenses does not arise as the Company follows intrinsic value method.

b. Disclosures as per Fair Value Method

The Company's net profit and earnings per share would have been as under, had the compensation cost for employees' stock options been recognized based on the fair value at the date of grant in accordance with 'Black Scholes' model.

7. Employee benefits

b. Disclosures related to defined benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days last drawn salary for each completed year of service.

The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarize the components of net benefit expense recognized in the Statement of Profit and Loss, the fund status and Balance Sheet position:

8. In respect of the amounts mentioned under Section 125 of the Companies Act, 2013 there are no dues that are to be credited to the Investor Education and Protection Fund as at March 31, 2015 (March 31, 2014: Rs.NIL).

9. Related party disclosures

Names of related parties and description of relationship Subsidiaries

1. APL Pharma Thai Limited, Thailand

2. All Pharma (Shanghai) Trading Company Limited, China

3. Aurobindo Pharma USA Inc, U.S.A.

4. Aurobindo Pharma Industria Farmaceutica Ltda, Brazil

5. Helix Healthcare B.V., The Netherlands

6. APL Holdings (Jersey) Limited, Jersey

7. Aurobindo Pharma Produtos Farmaceuticos Ltda, Brazil

8. APL Healthcare Limited, India

9. Auronext Pharma Private Limited, India

10. APL Research Centre Limited, India

11. Auro Pharma Inc., Canada

12. Aurobindo Pharma (Pty) Limited, South Africa

13. Aurobindo Pharma (Australia) Pty Limited, Australia

14. Agile Pharma B.V., The Netherlands

15. Auro Healthcare (Nigeria) Limited, Nigeria

16. Aurobindo ILAC Sanayi ve Ticaret Limited, Turkey

17. Aurobindo Pharma (Singapore) Pte Limited, Singapore

18. Aurobindo Pharma Limited s.r.l., Dominican Republic (liquidated during the year)

19. Aurobindo Pharma Japan K.K., Japan

20. Pharmacin B.V., The Netherlands

21. Aurobindo Pharma GmbH, Germany

22. Aurobindo Pharma (Portugal) Unipessoal Lda, Portugal

23. Aurobindo Pharma France SARL, France (merged with Arrow Generics SAS, France w.e.f. April 1, 2014)

24. Laboratorios Aurobindo S. L., Spain

25. Agile Malta Holdings Limited, Malta (merged with Aurobindo Pharma (Malta) Limited w.e.f. December 31, 2014)

26. Aurobindo Pharma B.V, The Netherlands

27. Aurobindo Pharma (Romania) s.r.l, Romania

28. Aurobindo Pharma (Italia) S.r.l., Italy

29. Aurobindo Pharma (Malta) Limited, Malta

30. APL IP Company Limited, Jersey

31. APL Swift Services (Malta) Limited, Malta

32. Milpharm Limited, U.K.

33. Aurolife Pharma LLC, U.S.A.

34. Auro Peptides Limited, India

35. Auro Medics Pharma LLC, U.S.A.

36. Aurobindo Pharma NZ Limited, New Zealand

37. Aurovida Farmaceutica S.A. de C.V., Mexico

38. Curepro Parenterals Limited, India

39. Hyacinths Pharma Private Limited, India

40. Silicon Life Sciences Private Limited, India

41. AuroZymes Limited, India

42. Eugia Pharma Specialities Limited, India

43. Aurobindo Pharma Columbia S.A.S., Columbia

44. Aurovitas, Unipessioal Lda, Portugal (w.e.f. March 25, 2014)

45. Arrow Generiques S.A.S., France (w.e.f. April 1, 2014)

46. Actavis B.V., The Netherlands (w.e.f. April 1, 2014)

47. Auro Health LLC, U.S.A.

48. Aurobindo Antiboitics Limited, India

49. Aurovitas S.L., Spain (Incorporated during current year and closed w.e.f. December 2, 2014)

50. Aurex B.V., The Netherlands (Incorporated during current year)

51. Actavis France S.A.S., France (w.e.f. April 1, 2014)

52. Actavis Management GmbH, Germany (w.e.f. April 1, 2014)

53. Actavis Deutschland GmbH & Co, KG, Germany (w.e.f. April, 2014)

54. Aurovitas Spain S.A. (formerly Actavis Spain S.A.) (w.e.f. April 1, 2014)

55. Natrol LLC, U.S.A. (w.e.f. December 4, 2014)

56. Aurobindo Switzerland AG, Switzerland (Closed w.e.f. September 11, 2013)

57. Aurobindo Pharma (Poland) Sp.z.o.o., Poland (Closed w.e.f. June 28, 2013)

58. Agile Pharma (Malta) Limited, Malta (Closed w.e.f. October 9, 2013)

Joint ventures

1. Novagen Pharma (Pty) Limited, South Africa (Joint Venture of a Subsidiary)

Enterprises over which key management personnel or their relatives exercise significant influence

1. Pravesha Industries Private Limited, India

2. Sri Sai Packaging, India (Partnership firm)

3. Trident Chemphar Limited, India

4. Auropro Soft Systems Private Limited, India

5. Axis Clinicals Limited, India

6. Pranit Projects Private Limited, India

7. Pranit Packaging Private Limited, India

8. Cogent Glass Limited

9. Orem Access Bio Inc, India

10. Veritaz Healthcare Limited, India

11. Alex Merchant Pte. Limited, Singapore

12. Trident Petrochemicals DMCC, Dubai

Key managerial personnel

1. Mr. K. Nithyananda Reddy, Whole-time Director

2. Dr. M. Sivakumaran, Whole-time Director

3. Mr. M. Madan Mohan Reddy, Whole-time Director

4. Mr. N. Govindarajan, Managing Director

5. Mr. Sudhir B. Singhi, Chief Financial Officer (upto June 30, 2014)

6. Mr. Santhanam Subramanian, Chief Financial Officer (w.e.f. July 1, 2014)

7. Mr. A. Mohan Rami Reddy, Company Secretary

Relatives to key managerial personnel

1. Mr. P. Sarath Chandra Reddy (Son-in-law of Mr. K.Nithyananda Reddy, Wholetime Director)

2. Mr. Vishnu M. Sriram (Son-in-law of Dr. M. Sivakumaran, Whole-time Director)

10. Leases

a. Operating lease

i. Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable/cancellable at the option of either of the parties except for details in (ii) below. There is no escalation clause in the lease agreement. There are no sub-leases. There are no restrictions imposed by lease arrangements. The aggregate amount of operating lease payments recognized in the Statement of Profit and Loss is Rs.74.3 (March 31, 2014: Rs.43.2 ).

The Company has not recognized any contingent rent as expense in the Statement of Profit and Loss.

b. Finance lease

Building includes factory buildings acquired on finance lease. The agreement is silent on renewal terms and transfer of legal title at the end of lease term.

The lease agreement did not specify minimum lease payments over the future period. The factory building is acquired on lease at a consideration of Rs.25.6 (March 31, 2014: Rs.25.6).

The net carrying amount of the buildings obtained on finance lease: Rs.12.1 (March 31, 2014: Rs.13.3).

11. In accordance with paragraph 10 of Notified Accounting Standard 9 on Revenue Recognition, excise duty on sales amounting to Rs.1,497.5 (March 31, 2014: Rs.1,588.2) has been reduced from sales in Statement of Profit and Loss and excise duty on (increase)/decrease in closing stock of finished goods amounting to Rs.2.7 [March 31, 2014: (Rs.0.8)] has been (credited)/debited to the Statement of Profit and Loss.

12. Details of advances due from private companies in which Company's director is a director:

Auropro Soft Systems Private Limited, India Rs.Nil (March 31, 2014: Rs.0.08).

Pranit Projects Private Limited, India Rs.Nil (March 31, 2014: Rs.1.3).

Pranit Packaging Private Limited, India Rs.0.6 (March 31, 2014: Rs.Nil).

13. i. Details of trade receivables due from private companies in which Company's director is a director:

Pravesha Industries Private Limited, India Rs.Nil (March 31, 2014: Rs.0.06). ii. Details of trade receivables due from partnership firm in which Company's director is a partner:

Sri Sai Packaging, India Rs.Nil (March 31, 2014: Rs.Nil)

14. The Board of Directors at their meeting held on September 12, 2013 decided to transfer its injectable unit of the Company on a going concern basis comprising assets and liabilities pertaining to the said unit to its wholly owned subsidiary Curepro Parenterals Limited with effect from April 1, 2014. The same is subject to requisite consent, approval or permission of the statutory or regulatory authorities. Pending such approvals, no effect of this scheme has been given in the financial statements.

a. Contingent liabilities of the above joint ventures Rs. Nil (March 31, 2014: Rs.Nil).

b. Capital commitments of the above joint ventures Rs. Nil (March 31, 2014: Rs. Nil)

c. Novagen Pharma (Pty) Ltd incorporated in South Africa, is engaged in distribution of pharmaceuticals products.

d. Previous year's figures have been disclosed in italics.

e. All figures presented above represents Company's share only.

15. Segment reporting

In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

16. The figures of previous year have been regrouped/rearranged, wherever necessary to conform to those of the current year.


Mar 31, 2014

1. Capital and other commitments

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for - Rs.1,272.7 (March 31, 2013: Rs.211.5).



2. Contingent liabilities

Particulars As at As at March 31, 2014 March 31, 2013

Outstanding bank guarantees 771.8 486.3 Claims arising from disputes not acknowledged as debts

- Indirect taxes (excise duty and service tax)* 223.3 196.3

Claims arising from disputes not acknowledged as debts - direct taxes* 105.0 105.0

Claims against the Company not acknowledged as debts* 150.3 493.1

Bills discounted with banks 1,060.6 3,252.9

* in respect of above matters, future cash outfows in respect of contingent liabilities are determinable only on receipt of judgements pending at various forums/authorities.

3. The income tax authorities had carried out search operations on the Company at certain locations in February 2012. The Company has fully co-operated with the authorities and various statements were recorded during the course of these operations. In order to avoid possible litigations, without admitting any irregularities, the Company had decided to offer an additional income and to pay the resultant tax. Accordingly provision for income tax of Rs.48.7 on this additional income had been made during the year 2011-12. The proceedings are in progress and no other material implications are expected by the management in this matter.

4. Employee stock options

a. Employee Stock Option Plan ''ESOP-2006''

The Company instituted an Employee Stock Option Plan ''ESOP-2006'' as per the special resolution passed in the 19th Annual General Meeting held on September 18, 2006. This scheme has been formulated in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The compensation committee accordingly, granted total 3,240,500 options under seven grants of 175,000; 25,000; 90,000; 1,205,000; 300,000; 500,000; 915,500 and 30,000 options to eligible employees on October 30, 2006; July 31, 2007; October 31, 2007; December 16, 2011; June 19, 2012; January 09, 2013; January 28, 2013 and August 9, 2013 respectively. The method of settlement under scheme is by issue of equity shares of the Company. Each option comprises of one underlying equity share of Rs.1 each. The said options vest on an annual basis at 10%, 15%, 25% and 50% over a period of four years and can be exercised over a period of six years from the date of grant of options. The options have been granted at the then prevailing market price of Rs.120.70; Rs.132.35; Rs.114.50; Rs.91.60; Rs.106.05; Rs.200.70; Rs.187.40 and Rs.161.30 per share respectively and hence the question of accounting for employee deferred compensation expenses does not arise as the Company follows intrinsic value method.

5. Employee benefits

b. Disclosures related to defined benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days last drawn salary for each completed year of service.

The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarise the components of net benefit expense recognized in the Statement of Profit and Loss, the fund status and Balance Sheet position:

6. In respect of the amounts mentioned under Section 205C of the Companies Act, 1956 there are no dues that are to be credited to the Investor Education and Protection Fund as at March 31, 2014 Rs. Nil (March 31, 2013: Rs. Nil).

7. Related party disclosures

Names of related parties and description of relationship

Subsidiaries

1. APL Pharma Thai Limited, Thailand

2. All Pharma (Shanghai) Trading Company Limited, China

3. Aurobindo Pharma USA Inc, U.S.A.

4. Aurobindo Pharma Industria Farmaceutica Ltda, Brazil

5. Helix Healthcare B.V., The Netherlands

6. APL Holdings (Jersey) Limited, Jersey

7. Aurobindo Pharma Produtos Farmaceuticos Ltda, Brazil

8. APL Healthcare Limited, India

9. Auronext Pharma Private Limited, India

10. APL Research Centre Limited, India

11. Auro Pharma Inc. Canada

12. Aurobindo Pharma (Pty) Limited, South Africa

13. Aurobindo Pharma (Australia) Pty Limited, Australia

14. Agile Pharma B.V., The Netherlands

15. Aurobindo Switzerland AG, Switzerland (Closed w.e.f. September 11, 2013)

16. Auro Healthcare (Nigeria) Limited, Nigeria

17. Aurobindo ILAC Sanayi ve Ticaret Limited Sirketi, Turkey

18. Aurobindo Pharma (Singapore) Pte Limited, Singapore

19. Aurobindo Pharma Limited, s.r.l., Dominican Republic

20. Aurobindo Pharma Japan K.K., Japan

21. Pharmacin B.V., The Netherlands

22. Aurobindo Pharma GmbH, Germany

23. Aurobindo Pharma (Portugal) Unipessoal Lda, Portugal

24. Aurobindo Pharma France SARL, France

25. Laboratorios Aurobindo S. L., Spain

26. Agile Malta Holdings Limited, Malta

27. Aurobindo Pharma B.V., The Netherlands

28. Aurobindo Pharma (Romania) s.r.l., Romania

29. Aurobindo Pharma (Poland) Sp.z.o.o., Poland (Closed w.e.f. June 28, 2013)

30. Aurobindo Pharma (Italia) S.r.l., Italy

31. Agile Pharma (Malta) Limited, Malta (Closed w.e.f. October 9, 2013)

32. Aurobindo Pharma (Malta) Limited, Malta

33. APL IP Company Limited, Jersey

34. APL Swift Services (Malta) Limited, Malta

35. Milpharm Limited, U.K.

36. Aurolife Pharma LLC, U.S.A.

37. Auro Peptides Limited, India

38. Auro Medics Pharma LLC, U.S.A.

39. Aurobindo Pharma NZ Limited, New Zealand

40. Aurovida Farmaceutica S.A. de C.V., Mexico

41. Aurobindo Antibiotics Limited, India (w.e.f. July 10, 2012)

42. Auro Health LLC, U.S.A. (w.e.f. September 13, 2012)

43. Aurobindo Pharma Hungary Kereskedelmi KFT, Hungary (Closed w.e.f. September 13, 2012)

44. Curepro Parenterals Limited, India (w.e.f. April 19, 2013)

45. Hyacinths Pharma Private Limited, India (w.e.f. October 1, 2013)

46. Silicon Life Sciences Private Limited, India (w.e.f. October 11, 2013)

47. AuroZymes Limited, India (w.e.f. November 28, 2013)

48. Eugia Pharma Specialities Limited, India (w.e.f. September 16, 2013)

49. Aurobindo Pharma Columbia S.A.S., Columbia (w.e.f. January 28, 2014)

50. Aurovitas, Unipessoal Lda, Portugal (w.e.f. March 25, 2014)

Joint ventures

1. Novagen Pharma (Pty) Limited, South Africa (Joint venture of a subsidiary)

2. Zao Auros Pharma, Russia (Joint venture of a subsidiary) (Closed during the year without any operations)

Enterprises over which key management personnel or their relatives exercise significant influence

1. Pravesha Industries Private Limited, India

2. Sri Sai Packaging, India (Partnership firm)

3. Trident Chemphar Limited, India

4. Auropro Soft Systems Private Limited, India

5. Axis Clinicals Limited, India

6. Pranit Projects Private Limited, India

7. Pranit Packaging Private Limited, India

8. Cogent Glass Limited (formerly known as Matri Mirra Packaging Private Limited), India

9. Vaxer Pharma Limited, India

10. Orem Access Bio Inc, India

11. Veritaz Healthcare Limited, India

Key managerial personnel

1. Mr. P.V. Ramprasad Reddy, Director

(Resigned as Chairman w.e.f. June 1, 2012 and retired as Whole-time Director w.e.f. December 1, 2012)

2. Mr. K. Nithyananda Reddy, Whole-time Director

3. Dr. M. Sivakumaran, Whole-time Director

4. Mr. M. Madan Mohan Reddy, Whole-time Director

5. Mr. N. Govindarajan, Managing Director

6. Mr. Ravindra Shenoy, Joint Managing Director (Resigned w.e.f. November 9, 2012)

Relatives to key managerial personnel

1. Mr. P. Sarath Chandra Reddy (Son of Mr. P.V. Ramprasad Reddy, Director)

2. Mr. Vishnu M. Sriram (Son-in-law of Dr. M. Sivakumaran, Whole-time Director)

8. Leases

a. Operating lease

i. Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable/cancellable at the option of either of the parties except for details in (ii) below. There is no escalation clause in the lease agreement. There are no sub-leases. There are no restrictions imposed by lease arrangements. The aggregate amount of operating lease payments recognized in the Statement of Profit and Loss is Rs.43.2 (March 31, 2013: Rs.17.1).

The Company has not recognized any contingent rent as expense in the Statement of Profit and Loss.

b. Finance lease

Building includes factory buildings acquired on finance lease. The agreement is silent on renewal terms and transfer of legal title at the end of lease term.

The lease agreement did not specify minimum lease payments over the future period. The factory building is acquired on lease at a consideration of Rs.25.6 (March 31, 2013: Rs.25.6).

The net carrying amount of the buildings obtained on finance lease: Rs.13.3 (March 31, 2013: Rs.14.6).

9. In accordance with paragraph 10 of Notified Accounting Standard 9 on Revenue Recognition, excise duty on sales amounting to Rs.1,588.2 (March 31, 2013: Rs.1,444.0) has been reduced from sales in Statement of Profit and Loss and excise duty on (increase)/decrease in closing stock of finished goods amounting to (Rs.0.8) (March 31, 2013: Rs.4.2) has been (credited)/debited to the Statement of Profit and Loss.

10. Details of advances due from private companies in which Company''s Director is a director: Pravesha Industries Private Limited, India Rs.Nil (March 31, 2013: Rs.0.03).

Auropro Soft Systems Private Limited, India Rs.0.08 (March 31, 2013: Rs.Nil). Pranit Projects Private Limited, India Rs.1.3 (March 31, 2013: Rs.Nil).

11. i. Details of trade receivables due from private companies in which Company''s Director is a director:

Pravesha Industries Private Limited, India Rs.0.06 (March 31, 2013: Rs.Nil).

ii. Details of trade receivables due from partnership firm in which Company''s Director is a partner: Sri Sai Packaging, India Rs.Nil (March 31, 2013: Rs.Nil).

12. Segment reporting

In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

13. The figures of previous year have been regrouped/rearranged, wherever necessary to conform to those of the current year.


Mar 31, 2013

1. Capital and other commitments

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for - Rs.211.5 (March 31, 2012: Rs.476.5).

2. Contingent liabilities

Particulars As at As at March 31, 2013 March 31, 2012

Outstanding bank guarantees 486.3 391.9

Claims arising from disputes not acknowledged as debts

- indirect taxes (excise duty and service tax)* 196.3 140.7

Claims arising from disputes not acknowledged as debts - direct taxes* 105.0 105.0

Claims against the Company not acknowledged as debts* 493.1 23.7

Bills discounted with banks 3,252.9 -

Corporate guarantee to bank for loan taken by 100% subsidiary - 1,589.8

* in respect of above matters, future cash outfows in respect of contingent liabilities are determinable only on receipt of judgements pending at various forums/authorities.

3. The income tax authorities had carried out search operations on the Company at certain locations during the previous year. The Company has fully co-operated with the authorities and various statements were recorded during the course of these operations. In order to avoid possible litigations, without admitting any irregularities, the Company had decided to offer an additional income and to pay the resultant tax. Accordingly, provision for income tax of Rs.48.7 on this additional income had been made in the previous year. The proceedings are in progress and no other material implications are expected by the management in this matter.

4. Employee stock options

a. Employee Stock Option Plan ''ESOP-2004''

The Company instituted an Employee Stock Option Plan ''ESOP-2004'' as per the special resolution passed in the 17th Annual General Meeting held on July 31, 2004. This scheme has been formulated in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 to grant options of 2,538,500 to eligible employees on August 1, 2004 and July 28, 2005. The method of settlement under scheme is by issue of equity shares of the Company. Each option comprises of one underlying equity share of Rs.1 each. The said options vest on an annual basis at 15%, 20%, 25% and 40% over a period of four years and can be exercised over a period of six years from the date of grant of options.

The options have been granted at the then prevailing market price of Rs.72.52 per share and hence the question of accounting for employee deferred compensation expenses does not arise as the Company follows intrinsic value method.

b. Employee Stock Option Plan ''ESOP-2006''

The Company instituted an Employee Stock Option Plan ''ESOP-2006'' as per the special resolution passed in the 19th Annual General Meeting held on September 18, 2006. This scheme has been formulated in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Compensation Committee accordingly, granted total 3,210,500 options under seven grants of 175,000, 25,000, 90,000, 1,205,000, 300,000, 500,000 and 915,500 options to eligible employees on October 30, 2006, July 31, 2007, October 31, 2007, December 16, 2011, June 19, 2012, January 9, 2013 and January 28, 2013 respectively. The method of settlement under scheme is by issue of equity shares of the Company. Each option comprises of one underlying equity share of Rs.1 each. The said options vest on an annual basis at 10%, 15%, 25% and 50% over a period of four years and can be exercised over a period of six years from the date of grant of options. The options have been granted at the then prevailing market price of Rs.120.70, Rs.132.35, Rs.114.50, Rs.91.60, Rs.106.05, Rs.200.70 and Rs.187.40 per share respectively and hence the question of accounting for employee deferred compensation expenses does not arise as the Company follows intrinsic value method.

b. Disclosures related to defined benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days last drawn salary for each completed year of service.

The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarise the components of net benefit expense recognized in the Statement of Profit and Loss, the fund status and Balance Sheet position:

5. Disclosure regarding derivative financial instruments

a. The aggregate amount of forward contracts entered into by the Company and remaining outstanding at year end are given below: Sell

US $ Nil, Rs.Nil (March 31,2012: US $ 18.0, Rs.915.8) - To hedge receivables in foreign currency.

US $ Nil, Rs.Nil (March 31,2012: US $ 27.0, Rs.1,373.6) - To hedge external commercial borrowing draw down.

b. Particulars of unhedged foreign currency exposure are detailed below at the exchange rate prevailing as at the Balance Sheet date:

6. In respect of the amounts mentioned under Section 205C of the Companies Act, 1956 there are no dues that are to be credited to the Investor Education and Protection Fund as at March 31, 2013 Rs.Nil (March 31, 2012: Nil)

7. Research and Development expenses

a. Details of Research and Development expenses incurred during the year, debited under various heads of Statement of Profit and Loss is given below:

8. Related party disclosures

Names of related parties and description of relationship Subsidiaries

1. APL Pharma Thai Limited, Thailand

2. ALL Pharma (Shanghai) Trading Company Limited, China

3. Aurobindo Pharma USA Inc., U.S.A.

4. Aurobindo Pharma Industria Farmaceutica Ltda, Brazil

5. Helix Healthcare B.V., The Netherlands

6. APL Holdings (Jersey) Limited, Jersey

7. Aurobindo Pharma Produtos Farmaceuticos Ltda, Brazil

8. APL Healthcare Limited, India

9. Auronext Pharma Private Limited, India

10. APL Research Centre Limited, India

11. Auro Pharma Inc., Canada

12. Aurobindo Pharma (Pty) Limited, South Africa

13. Aurobindo Pharma (Australia) Pty Limited, Australia

14. Agile Pharma B.V., The Netherlands

15. Aurobindo Switzerland AG, Switzerland

16. Auro Healthcare (Nigeria) Limited, Nigeria

17. Aurobindo ILAC Sanayi ve Ticaret Limited Sirketi, Turkey

18. Aurobindo Pharma (Singapore) Pte Limited, Singapore

19. Aurobindo Pharma Limited, s.r.l., Dominican Republic

20. Aurobindo Pharma Japan K.K., Japan

21. Pharmacin B.V., The Netherlands

22. Aurobindo Pharma GmbH, Germany

23. Aurobindo Pharma (Portugal) Unipessoal LDA, Portugal

24. Aurobindo Pharma (Bulgaria) EAD, Bulgaria

25. Aurobindo Pharma France SARL, France

26. Laboratorios Aurobindo S L, Spain

27. Agile Malta Holdings Limited, Malta

28. Aurobindo Pharma B.V., The Netherlands

29. Aurobindo Pharma (Romania) s.r.l., Romania

30. Aurobindo Pharma (Poland) Sp.z.o.o., Poland

31. Aurobindo Pharma (Italia) S.r.l., Italy

32. Agile Pharma (Malta) Limited, Malta

33. Aurobindo Pharma (Malta) Limited, Malta

34. APL IP Company Limited, Jersey

35. APL Swift Services (Malta) Limited, Malta

36. Milpharm Limited, U.K.

37. Aurolife Pharma LLC, U.S.A.

38. Auro Peptides Limited, India

39. Auro Medics Pharma LLC, U.S.A.

40. Aurobindo Pharma NZ Limited, New Zealand

41. Aurovida Farmaceutica SA DE CV, Mexico

42. Aurobindo Antibiotics Limited, India

43. Auro Health LLC, U.S.A. (w.e.f. September 13, 2012)

44. Aurobindo Pharma Hungary Kereskedelmi KFT, Hungary (Closed w.e.f. September 13, 2012)

Joint ventures

1. Novagen Pharma (Pty) Limited, South Africa (Joint venture of a subsidiary)

2. Zao Auros Pharma, Russia (Joint venture of a subsidiary) (Closed during the year without any operations)

Enterprises over which key management personnel or their relatives exercise significant influence

1. Pravesha Industries Private Limited, India

2. Sri Sai Packaging, India (Partnership firm)

3. Trident Chemphar Limited, India

4. Auropro Soft Systems Private Limited, India

5. Axis Clinicals Limited, India

6. Pranit Projects Private Limited, India

7. Pranit Packaging Private Limited, India

8. Matri Mirra Packaging Private Limited, India

9. Vaxer Pharma Limited, India

10. Silicon Life Sciences Private limited, India

11. Orem Access Bio Inc., India

Key managerial personnel

1. Mr. P.V. Ramprasad Reddy, Director

(Resigned as Chairman w.e.f. June 1, 2012 and retired as Whole-time Director w.e.f. December 1, 2012)

2. Mr. K. Nithyananda Reddy, Whole-time Director

3. Dr. M. Sivakumaran, Whole-time Director

4. Mr. M. Madan Mohan Reddy, Whole-time Director

5. Mr. N. Govindarajan, Managing Director

6. Mr. Ravindra Shenoy, Joint Managing Director (Resigned w.e.f. November 9, 2012)

Relatives to key managerial personnel

1. Mr. P. Sarath Chandra Reddy (Son of Mr. P.V. Ramprasad Reddy, Director)

2. Mrs. Kambam Kirthi Reddy (Daughter of Mr. K. Nithyananda Reddy, Whole-time Director)

3. Mr. Vishnu M. Sriram (Son-in-law of Dr. M. Sivakumaran, Whole-time Director)

9. Leases

a. Operating lease

Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable/cancellable at the option of either of the parties. There is no escalation clause in the lease agreement. There are no sub-leases. There are no restrictions imposed by lease arrangements. The aggregate amount of operating lease payments recognized in the Statement of Profit and Loss is Rs.17.0 (March 31, 2012: Rs.23.7).

The Company has not recognized any contingent rent as expense in the Statement of Profit and Loss.

b. Finance lease

Building includes factory buildings acquired on finance lease. The agreement is silent on renewal terms and transfer of legal title at the end of lease term.

The lease agreement did not specify minimum lease payments over the future period. The factory building is acquired on lease at a consideration of Rs.25.5 (March 31, 2012: Rs.25.5).

The net carrying amount of the buildings obtained on finance lease - Rs.14.6 (March 31, 2012: Rs.15.9).

10. In accordance with paragraph 10 of Notified Accounting Standard 9 on Revenue Recognition, excise duty on sales amounting to Rs.1,444.0 (March 31, 2012: Rs.972.8) has been reduced from sales in Statement of Profit and Loss and excise duty on increase/decrease in closing stock of finished goods amounting to Rs.4.2 [March 31, 2012: Rs.31.8 (credit)] has been debited to the Statement of Profit and Loss.

11. Details of advances due from private companies in which Company''s Director is a director.

Pravesha Industries Private Limited, India Rs.Nil (March 31, 2012: Rs.22.6)

12. i. Details of trade receivables due from private companies in which Company''s Director is a director.

Pravesha Industries Private Limited, India Rs.Nil (March 31, 2012: Rs.2.5)

ii. Details of trade receivables due from partnership firm in which Company''s Director is a partner.

Sri Sai Packaging, India Rs.Nil (March 31, 2012: Nil)

13. Interest in joint ventures

Details of interest in jointly controlled entities are given below:

a. Contingent liabilities of the above joint ventures Rs. Nil (March 31, 2012: Nil).

b. Capital commitments of the above joint ventures Rs. Nil (March 31, 2012: Nil).

c. Novagen Pharma (Pty) Limited, incorporated in South Africa, is engaged in distribution of pharmaceuticals products.

d. Previous year''s figures have been disclosed in italics.

e. All figures presented above represent Company''s share only.

14. Segment reporting

In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

15. The figures of previous year have been regrouped/rearranged, wherever necessary to conform to those of the current year.


Mar 31, 2012

A. Terms/rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs1 per share. Each holder of equity shares is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting.

During the year ended March 31, 2012 the amount of per share dividend recognized as distributions to equity shareholders was Rs1 (March 31, 2011: Rs2).

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently. The distribution will be in proportion to the number of equity shares held by the shareholders.

i. Secured term loans in foreign currency carry interest in the range of LIBOR plus 2% to 2.5%. Out of these loans, loans amounting to Rs3,815.6 (March 31, 2011: Rs2,229.7) are repayable in 3 equal installments in 4th, 5th, 6th years from the respective final draw down dates, and loans amounting to Rs3,815.6 (March 31, 2011: Rs1,783.8) are repayable at the end of 5th year from the respective final draw down date.

ii. Unsecured term loans in foreign currency carry interest in the range of LIBOR plus 3% to 3.75%. These loans are repayable in 2012-13.

iii. Refer Note 30 for terms of issue of Foreign Currency Convertible Bonds ('FCCBs').

iv. Deferred sales tax loan is interest free and payable in various installments as per sales tax deferment scheme. The last installment is payable in 2025-26.

v. Term loans are secured by first pari passu charge on all the present and future fixed assets both movable and immoveable property of the Company.

Capital work-in-progress Rs5,580.8 (March 31, 2011: Rs5,367.3).

i. The title deeds of land and buildings aggregating to Rs148.4 (March 31, 2011: 140.6) are pending transfer to the Company's name.

ii. Capital work-in-progress include expenditure during construction period amounting to Rs1,226.5 (March 31, 2011: Rs692.7) (Refer Note 33).

iii. An amount of Rs4.5 (March 31, 2011: RsNil) is transferred from capital work-in-progress to assets held for sale.

iv. Depreciation for the year include Rs4.1 (March 31, 2011: Rs4.6) taken as pre-operative capital expenditure on capital projects pending capitalization.

v. Additions to fixed assets and capital work-in-progress during the year include value of capital expenditure towards research centre aggregating to Rs396.0 (March 31, 2011: Rs363.2) [Refer Note 37(b)].

vi. Details of finance lease (Refer Note 41).

Note:

i. The outstanding Tranche A and Tranche B Zero Coupon Foreign Currency Convertible Bonds ('FCCB' or 'Bonds') of USD 139.20 Million, issued in May 2006, were repaid in entirety on maturity during the year along with the redemption premium (Yield to Maturity) amounting to Rs3,198.6, inclusive of withholding taxes.

ii. During the previous year the Company has divested its 80.5% stake in Aurobindo (Datong) Bio-Pharma Company Limited, China, (ADBPL) one of its subsidiary.

1. Capital and other commitments

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for - Rs476.5 (March 31, 2011: Rs1,980.1).

Company has given corporate guarantee for the loan extended by DBS, Singapore to Aurobinodo Pharma U.S.A. The loan amount outstanding as on March 31,2012 is Rs1,589.8 (March 31, 2011: RsNil).

2. Contingent liabilities

Particulars As at As at March 31, 2012 March 31, 2011

Outstanding bank guarantees 391.9 341.4 Claims arising from disputes not acknowledged as debts relating to

- indirect taxes (Excise duty & Service tax) 140.7 90.6

- direct taxes 105.0 100.0 Claims against the Company not acknowledged as debts 23.7 20.4 Premium on potential redemption of FCCBs Nil Refer

Note 3 (c)

3. Foreign Currency Convertible Bonds ('FCCBs'):

a. Terms of Issue

During the year ended March 31, 2007, the Company issued 150,000 zero coupon FCCBs due in 2011 (Tranche A Bonds) of USD 1,000 each and 50,000 Zero coupon FCCBs due in 2011 (Tranche B Bonds) of USD 1000 each, on the following terms:

Either convertible by the Tranche A bondholders at any time on or after June 27, 2006 but prior to close of business (at the place the bonds are deposited for conversion) on May 10, 2011 and by the Tranche B bondholders at any time on or after May 17, 2007 (Conversion price setting date) but prior to close of business (at the place the bonds are deposited for conversion) on May 10, 2011. Each Tranche A bond will be converted into fully paid up equity shares with par value of Rs5 per share at a fixed price of Rs1,014.06 per share at a fixed exchange rate conversion of Rs45.145 = USD 1. Each Tranche B bond will be converted into fully paid up equity shares with par value of Rs5 per share at a fixed price of Rs879.13 per share at a fixed exchange rate conversion of Rs45.145 = USD 1; or

Redeemable by the Company in respect of Tranche A bonds at the relevant Accreted Principal Amount, in whole but not in part at any time on or after November 16, 2008 and on or prior to May 10, 2011 and in respect of Tranche B bonds at the relevant Accreted Principal Amount, in whole but not in part at any time on or after May 17, 2009 and on or prior to May 10, 2011 as per the terms and conditions of the bonds mentioned in the Offering Circular;

Redeemable at 146.285% of its principal amount on maturity date in respect of Tranche A bonds and at 146.991% of its principal amount on maturity date in respect of Tranche B bonds if not redeemed or converted earlier.

b. Outstanding FCCBs

The outstanding FCCBs as at March 31, 2011 were 139,200, which were redeemed in full during the current year.

c. Redemption premium on potential redemption of FCCBs

As at March 31, 2011 the cumulative premium on potential redemption of FCCBs issued during the year ended March 31, 2007 aggregates to USD 70.2 equivalent to Rs3,132.0. The payment of such premium on redemption was contingent in nature, the outcome of which was dependent upon uncertain future events, hence no provision was considered. The outstanding FCCBs along with Yield to Maturity were redeemed during the current year.

4. Employee stock options

a. Employee Stock Option Plan 'ESOP-2004'

The Company instituted an Employee Stock Option Plan 'ESOP-2004' as per the special resolution passed in the 17th Annual General Meeting held on July 31, 2004. This scheme has been formulated in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 to grant options of 2,538,500 to eligible employees on August 1, 2004 and July 28, 2005. The method of settlement under scheme is by issue of equity shares of the Company. Each option comprises of one underlying Equity Share of Rs1 each. The said options vest on an annual basis at 15%, 20%, 25% and 40% over a period of four years and can be exercised over a period of six years from the date of grant of options.

The options have been granted at the then prevailing market price of Rs72.52 per share and hence the question of accounting for employee deferred compensation expenses does not arise as the Company follows intrinsic value method.

b. Employee Stock Option Plan 'ES0P-2006'

The Company instituted an Employee Stock Option Plan 'ESOP-2006' as per the special resolution passed in the 19th Annual General Meeting held on September 18, 2006. This scheme has been formulated in accordance with the Securities Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The compensation committee accordingly, granted total 1,495,000 options under four grants of 175,000, 25,000 , 90,000 and 1,205,000 options to eligible employees on October 30, 2006, July 31, 2007, October 31, 2007 and December 16, 2011 respectively. The method of settlement under scheme is by issue of equity shares of the Company. Each option comprises of one underlying Equity Share of Rs1 each. The said options vest on an annual basis at 10%, 15%, 25% and 50% over a period of four years and can be exercised over a period of six years from the date of grant of options. The options have been granted at the then prevailing market price of Rs120.70, Rs132.35, Rs114.50 and Rs91.60 per share respectively and hence the question of accounting for employee deferred compensation expenses does not arise as the Company follows intrinsic value method.

5. Employee benefits

a. Disclosures related to defined contribution plan

Provident fund contribution recognized as expense in the Statement of Profit and Loss Rs82.8 (March 31, 2011: Rs72.2).

b. Disclosures related to defined benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days last drawn salary for each completed year of service.

The scheme is funded with an insurance company in the form of a qualifying insurance policy. The following tables summarise the components of net benefit expense recognized in the Statement of Profit and Loss, the fund status and Balance Sheet position:

Notes:

i. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

ii. Percentage of plan assets as investments with insurer is 100%.

iii. The expected rate of return on assets is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

iv. The Company expects to contribute Rs25.0 (March 31, 2011: Rs60.0) to the qualifying insurance policy in 2012-13.

6. Disclosure regarding derivative financial instruments

a. The aggregate amount of forward contracts entered into by the Company and remaining outstanding at year end are given below: Sell US $ 18.0, Rs915.8 (March 31,2011: US $ Nil) - To hedge receivables in foreign currency.

US $ 27.0, Rs1,373.6 (March 31,2011: US $ Nil) - To hedge external commercial borrowing draw down.

Buy

US$ Nil (March 31, 2011: US $ 11.6, Rs519.3) - To hedge payables in foreign currency.

7. In respect of the amounts mentioned under Section 205C of the Companies Act, 1956 there are no dues that are to be credited to the Investor Education and Protection Fund as at March 31, 2012 (March 31, 2011: RsNil).

8. Related party disclosures

Names of related parties and description of relationship Subsidiaries

1. APL Pharma Thai Limited, Thailand

2. ALL Pharma (Shanghai) Trading Company Limited, China

3. Aurobindo Pharma U.S.A. Inc, U.S.A.

4. Aurobindo Pharma Industria Farmaceutica Ltda, Brazil

5. Helix Healthcare B.V., The Netherlands

6. APL Holdings (Jersey) Limited, Jersey

7. Aurobindo Pharma Produtos Farmaceuticos Ltda, Brazil

8. APL Health Care Limited, India

9. Auronext Pharma (Private) Limited, India

10. APL Research Centre Limited, India

11. Auro Pharma Inc., Canada

12. Aurobindo Pharma (Pty) Limited, South Africa

13. Aurobindo Pharma (Australia) Pty Limited, Australia

14. Agile Pharma B.V., The Netherlands

15. Aurobindo Pharma Hungary Kereskedelmi Kft, Hungary

16. Aurobindo Switzerland AG, Switzerland

17. Auro Healthcare (Nigeria) Limited, Nigeria

18. Aurobindo ILAC Sanayi ve Ticaret Limited, Turkey

19. Aurobindo Pharma (Singapore) Pte Limited, Singapore

20. Aurobindo Pharma Limited, s.r.l., Dominican Republic

21. Aurobindo Pharma Japan K.K., Japan

22. Pharmacin B.V., The Netherlands

23. Aurobindo Pharma GmbH, Germany

24. Aurobindo Pharma (Portugal) Unipessoal LDA, Portugal

25. Aurobindo Pharma (Bulgaria) EAD, Bulgaria

26. Aurobindo Pharma France SARL, France

27. Laboratorios Aurobindo S L, Spain

28. Agile Malta Holdings Limited, Malta

29. Aurobindo Pharma B.V., The Netherlands

30. Aurobindo Pharma (Romania) s.r.l., Romania

31. Aurobindo Pharma (Poland) Sp.z.o.o., Poland

32. Aurobindo Pharma (Italia) S.r.l., Italy

33. Agile Pharma (Malta) Limited, Malta

34. Aurobindo Pharma (Malta) Limited, Malta

35. APL IP Company Limited, Jersey

36. APL Swift Services (Malta) Limited, Malta

37. Milpharm Limited, U.K.

38. Aurolife Pharma LLC, U.S.A.

39. Auro Peptides Limited, India

40. Auro Medics Pharma LLC, U.S.A.

41. Aurobindo Pharma NZ Limited, New Zealand

42. Aurovida Farmaceutica SA DE CV, Mexico

43. Aurobindo (Datong) Bio-Pharma Company Limited, China

(Refer Note 27)

44. Aurex Generics Limited, U.K. (Liquidated w.e.f. March 31, 2011)

45. Zao Express Pharma, Russia (Liquidated w.e.f. April 1, 2010)

46. Aurobindo Pharma Aps, Denmark (Liquidated w.e.f. September 16, 2010)

47. Sia Aurobindo Baltics, Latvia (Liquidated w.e.f. November 26, 2010)

48. Aurobindo Pharma (Ireland) Limited, Ireland (Liquidated w.e.f. May 31, 2010)

Joint ventures

1. Aurosal Pharmaceuticals LLC, U.S.A. (Joint Venture of a Subsidiary) (Closed w.e.f. December 31, 2011)

2. Novagen Pharma (Pty) Limited, South Africa (Joint venture of a subsidiary)

3. Zao Auros Pharma, Russia (Joint venture of a subsidiary)

4. Cephazone Pharma LLC, U.S.A, (Joint venture of a subsidiary) (Disposed w.e.f. October 1, 2010)

Enterprises over which key management personnel or their relatives exercise significant influence

1. Pravesha Industries Private Limited, India

2. Sri Sai Packaging, India (Partnership firm)

3. Trident Chemphar Limited, India

4. Auropro Soft Systems Private Limited, India

5. Axis Clinicals Limited, India

6. Pranit Projects Private Limited, India (Formerly known as Pranit Happy Homes Private Limited)

7. Pranit Packaging Private Limited, India

8. Matri Mirra Packaging Private Limited, India

Key managerial personnel

1. Mr. P.V. Ramprasad Reddy, Chairman

2. Mr. K. Nithyananda Reddy, Managing Director

3. Dr. M. Sivakumaran, Whole-time Director

4. Mr. M. Madan Mohan Reddy, Whole-time Director

Relatives to key managerial personnel

1. Mr. P. Sarath Chandra Reddy (Son of Mr. P.V. Ramprasad Reddy, Chairman)

2. Mrs. Kambam Kirthi Reddy (Daughter of Mr. K. Nithyananda Reddy, Managing Director)

3. Mr. Vishnu M. Sriram (Son-in-law of Dr. M. Sivakumaran, Whole-time Director)

9. Leases

a. Operating lease

Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable/ cancellable at the option of either of the parties. There is no escalation clause in the lease agreement. There are no sub-leases. There are no restrictions imposed by lease arrangements. The aggregate amount of operating lease payments recognized in the Statement of Profit and Loss is Rs23.8 (March 31, 2011: Rs19.4).

The Company has not recognized any contingent rent as expense in the Statement of Profit and Loss.

b. Finance lease

Building includes factory buildings acquired on finance lease. The agreement is silent on renewal terms and transfer of legal title at the end of lease term.

The lease agreement did not specify minimum lease payments over the future period. The factory building is acquired on lease at a consideration of Rs25.6 (March 31, 2011: Rs55.2).

The net carrying amount of the buildings obtained on finance lease - Rs15.9 (March 31, 2011: Rs32.0).

10. In accordance with paragraph 10 of Notified Accounting Standard 9 on Revenue Recognition, excise duty on sales amounting to Rs972.8 (March 31, 2011: Rs968.7) has been reduced from sales in Statement of Profit and Loss and excise duty on increase/decrease in closing stock of finished goods amounting to Rs31.8 (March 31, 2011: Rs26.7) has been credited (March 31, 2011: debit) to the Statement of Profit and Loss.

11. The Company is in the process of applying to the Central government for approval of excess managerial remuneration amounting to Rs25.1 paid to four directors during the year beyond the limits specified in Part II of Section II (B) and Section III of Schedule XIII of the Companies Act, 1956. The Company believes that such approval will be obtained in due course and would not have any material impact upon the financial statements.

12. i. Details of advances due from private companies in which Company's Director is a director.

Pravesha Industries Private Limited, India Rs22.7 (March 31, 2011: Rs175.2)

ii. Details of advances due from partnership firm in which Company's Director is a partner.

Sri Sai Packaging, India RsNil (March 31, 2011: Rs8.4)

13. i. Details of trade receivables due from private companies in which Company's Director is a director.

Pravesha Industries Private Limited, India Rs2.5 (March 31, 2011: Rs6.2)

ii. Details of trade receivables due from partnership firm in which Company's Director is a partner.

Sri Sai Packaging, India RsNil (March 31, 2011: RsNil)

14. The Income Tax Authorities had carried out search operations on the Company at certain locations during the current year. The Company has fully co-operated with the authorities and various statements were recorded during the course of these operations. In order to avoid possible litigations, without admitting any irregularities, the Company has decided to offer an additional income of Rs150.0 for tax and to pay the resultant tax. Accordingly provision for income tax of Rs48.7 on this additional income has been made. The proceedings are in progress and no other material implications are expected by the management in this matter.

a. Contingent liabilities of the above joint ventures RsNil (March 31, 2011: Rs Nil).

b. Capital commitments of the above joint ventures RsNil (March 31, 2011: Rs Nil).

c. Aurosal Pharmaceuticals LLC, U.S.A. engaged in the development, manufacturing and distribution of pharmaceutical products, was closed on December 31, 2011.

d. Novagen Pharma (Pty) Limited incorporated in South Africa, is engaged in distribution of pharmaceuticals products.

e. Cephazone Pharma LLC, U.S.A. engaged in the production of sterile and non-sterile Cephalosporin's, was sold in the previous year.

f. ZAO Auros Pharma incorporated in Russia during the year, is engaged in distribution of pharmaceuticals products. There were no transactions during the year.

g. Previous year's figures have been disclosed in italics.

h. All figures presented above represent Company's share only.

15. Segment reporting

In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.


Mar 31, 2010

1. Capital commitments

Estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for - Rs. 1168 (March 31, 2009: Rs. 709).

2. Contingent Liabilities

Particulars March 31, 2010 March 31, 2009

Premium on potential redemption of Foreign Currency Convertible Bonds Refer note Refer note

6(d) below 6(d) below

Outstanding bank guarantees 244.8 213.3

Bills discounted with banks - 62.8*

Claims arising from disputes relating to direct and indirect taxes

not acknowledged as debts 217.5 123.6

Dossier sales with refund clause 1,095.6 635.3

Claims against the Company not acknowledged as debts 4.9 4.9



- secured by personal guarantees of the Chairman and the Managing Director

3. Scheme of Arrangement under Sections 391 to 393 of the Companies Act, 1956

The shareholders of the Company vide a Court convened meeting held on May 21, 2009 approved a Scheme of Arrangement under Sections 391 to 393 read with Sections 100 to 103 and other applicable provisions of the Companies Act, 1956. The said Scheme provides for utilization of capital profit arising on buy-back and cancellation of Foreign Currency Convertible Bonds (FCCBs), the balances standing to the credit of Capital Reserve Account and Capital Redemption Reserve Account to adjust certain expenses as determined by the management detailed below. The aforesaid Scheme was filed before the Honble High Court of Andhra Pradesh.

In the current year, the Honble High Court of Andhra Pradesh has dismissed the Scheme filed by the Company. The Company has appealed against the Order of the High Court and the appeal is pending before the appellate body.

In the previous year, pending approval of the High Court, the Company had credited the entire capital profit on buyback and cancellation of FCCBs net of expenses, amounting to Rs. 36.2 as an exceptional item to the Profit and Loss Account. Similarly the capital profit on buy- back of FCCBs made during the year ended March 31, 2010 amounting to Rs. 21.9 has been credited to the Profit and Loss Account and has been disclosed as an exceptional item.

Acquisition and amalgamation of Trident Life Sciences Limited (Trident)

Trident is in the process of setting up a state-of-the-art facility for manufacturing injectables at Medak District in Andhra Pradesh. The Company acquired the entire equity shares of Trident Life Sciences Limited (Trident) on September 18, 2009. Pursuant to this acquisition, Trident became a wholly owned subsidiary of the Company.

In order to achieve the synergies of consolidation and to achieve cost optimization through reduction of administration and other operational cost, it was decided to amalgamate Trident with the Company with effect from October 1, 2009 (the appointed date). Accordingly, a Scheme of Amalgamation (the Scheme) of Trident with the Company under Sections 391 to 394 of the Companies Act, 1956 was approved by the shareholders of the Company at a Court convened meeting held on January 20, 2010. The Honble High Court of Andhra Pradesh approved the Scheme on March 30, 2010. The salient features of the Scheme are set out below:

- With effect from the appointed date, entire business and whole of the undertaking(s) of Trident including all its properties and assets, investments, licenses, permits, approvals, lease, tenancy rights, permissions, and all its debts, liabilities, contingent liabilities, duties and obligations shall vest with the Company;

- All assets and liabilities of Trident transferred to and vested shall be recorded in the books of the Company at their respective book values;

- The authorized equity share capital of Trident has got merged with the authorized equity share capital of the Company;

- All inter-company balances, if any, including share application money shall be eliminated; and

- The value of investment in the share capital of Trident appearing in the books of the Company shall stand cancelled. As Trident is a wholly owned subsidiary of the Company, the amalgamation does not involve any consideration.

4. Foreign Currency Convertible Bonds

The Company issued Foreign Currency Convertible Bonds (FCCBs) during the years ended March 31, 2006 and March 31, 2007. The details of such issue are given below:

a. FCCBs issued during the year ended March 31, 2006:

60,000 Zero Coupon Foreign Currency Convertible Bonds (bonds) due in 2010 of USD 1,000 each on the following terms:

- either convertible by the holders at any time on or after September 20, 2005 but prior to close of business (at the place the bonds are deposited for conversion) on August 8, 2010. Each bond will be converted into 83.12 fully paid up equity share with par value of Rs. 5 per share at a fixed price of Rs. 522.036 per share at a fixed exchange rate conversion of Rs. 43.3925= USD 1; or

- Redeemable in whole but not in part at the option of the Company at any time on or after February 25, 2008 and on or prior to August 1, 2010 as per the terms and conditions of the bonds mentioned in the Offering Circular;

- Redeemable on maturity date at 139.954% of its principal amount if not redeemed or converted earlier.

b. FCCBs issued during the year ended March 31, 2007:

150,000 zero coupon FCCBs due in 2011 (Tranche A Bonds) of USD 1,000 each and 50,000 Forward Conversion Convertible Bonds due in 2011 (Tranche B Bonds) of USD 1000 each were issued on the following terms:

- Either convertible by the Tranche A bondholders at any time on or after June 27, 2006 but prior to close of business (at the place the bonds are deposited for conversion) on May 10, 2011 and by the Tranche B bondholders at any time on or after May 17, 2007 (Conversion price setting date) but prior to close of business (at the place the bonds are deposited for conversion) on May 10, 2011. Each Tranche A bond will be converted into 44.52 fully paid up equity share with par value of Rs. 5 per share at a fixed price of X1,014.06 per share at a fixed exchange rate conversion of Rs. 45.145 = USD 1. Each Tranche B bond will be converted into 51.35 fully paid up equity shares with par value of Rs. 5 per share at a fixed price of Rs. 879.13 per share at a fixed exchange rate conversion of Rs.45.145 = USD 1; or

- Redeemable by the Company in respect of Tranche A bonds at the relevant Accreted Principal Amount, in whole but not in part at any time on or after November 16, 2008 and on or prior to May 10, 2011 and in respect of Tranche B bonds at the relevant Accreted Principal Amount, in whole but not in part at any time on or after May 17, 2009 and on or prior to May 10, 2011 as per the terms and conditions of the bonds mentioned in the Offering Circular;

- Redeemable at 146.285% of its principal amount on maturity date in respect of Tranche A bonds and at 146.991% of its principal amount on maturity date in respect of Tranche B bonds if not redeemed or converted earlier.

c. Outstanding FCCBs

- In respect of the bonds issued during the year ended March 31, 2006, 21,818 bonds of USD 1,000 each were converted into 1,813,539 equity shares of Rs. 5 each at premium of Rs. 517.036 during the year. The outstanding FCCBs as at March 31, 2010 is 31,782 bonds (March 31, 2009: 53,600). Subsequent to the Balance Sheet date, 6,714 bonds of USD 1,000 each were converted into equity shares and the conversion of 2,000 bonds of USD 1,000 each lodged with the Company is in progress.

- In respect of the bonds issued during the year ended March 31, 2007, 1,800 bonds (March 31, 2009: 59,000 bonds) of USD 1,000 each were cancelled pursuant to a buy back during the year. The outstanding FCCBs as at March 31, 2010 is 139,200 bonds (March 31, 2009: 141,000).

d. Redemption premium on potential redemption of FCCBs

- The cumulative premium on potential redemption of FCCBs issued during the years ended March 31, 2006 and March 31, 2007 aggregates to USD 58.6 (March 31, 2009: USD 53.2) equivalent to Rs. 2,632.6 (March 31, 2009: Rs. 2,699.4). The payment of premium on redemption is contingent in nature, the outcome of which is dependent on uncertain future events. Hence, no provision is considered in the accounts in respect of such premium for the year.

e. In the opinion of the Company, as the bonds are convertible into equity shares and accordingly, the creation of debenture redemption reserve is not required.

5. Employee benefits

a. Disclosures related to defined contribution plan

Provident fund contribution recognized as expense in the Profit and Loss Account is Rs. 57.5 (March 31, 2009: Rs. 47.5)

b. Disclosures related to defined benefit plan

The Company has a defined benefit gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days last drawn salary for each completed year of service.

6. Details of security given for secured loans

a. Term loans are secured by:

- First pari passu charge on the fixed assets of the Company located at various plants of the Company.

- Personal guarantees given by the Chairman and the Managing Director of the Company aggregating to Rs. Nil (March 31, 2009: Rs. 750.0).

b. Other working capital loans from banks are secured by:

- First charge by way of hypothecation of all the stocks, book debts and other current assets (both present and future).

- Second charge on all the fixed assets of the Company both present and future subject to charges created in favour of term lenders.

- Personal guarantees given by the Chairman and the Managing Director of the Company aggregating to Rs. Nil (March 31, 2009: Rs. 7,379.8).

- Hire purchase loans from banks are secured by hypothecation of the related assets.

7. Unsecured loans

Short term loans from banks to the extent of Rs. Nil (March 31, 2009: Rs. 1,115.0) are personally guaranteed by the Chairman and the Managing Director of the Company.

8. Export incentives

Sales for the year includes export incentives on account of various schemes amounting to Rs. 515.7 (March 31, 2009: Rs. 393.0).

9. Related Party Disclosures

i. Names of related parties and description of relationship a. Subsidiaries

1. APL Pharma Thai Limited, Thailand

2. ALL Pharma (Shanghai) Trading Company Limited, China

3. Aurobindo Pharma USA Inc., U.S.A.

4. Aurobindo Pharma Industria Farmaceutica Ltda, Brazil

5. Aurobindo (Datong) Bio-pharma Company Limited China

6. Helix Healthcare B.V., The Netherlands

7. APL Holdings (Jersey) Limited, Jersey

8. Aurobindo Pharma Produtos Farmaceuticos Ltda, Brazil

9. APL Healthcare Limited, India

10. APL Research Centre Limited, India

11. Aurex Generics Limited, U.K.

12. Auro Pharma Inc., Canada

13. Zao Aurobindo Pharma, Russia

14. Aurobindo Pharma (Pty) Limited, South Africa

15. Aurobindo Pharma (Australia) Pty Limited, Australia

16. Agile Pharma B.V., The Netherlands

17. Aurobindo Pharma Hungary Kereskedelmi Kft, Hungary

18. Aurobindo Switzerland AG, Switzerland

19. Auro Healthcare (Nigeria) Limited, Nigeria

20. Aurobindo ILAC Sanayi ve Ticaret Limited, Sirketi

21. Aurobindo Pharma Japan K.K., Japan

22. Pharmacin B.V., The Netherlands

23. Aurobindo Pharma GmbH, Germany

24. Aurobindo Pharma (Portugal) Unipessoal LDA, Portugal

25. Aurobindo Pharma ApS, Denmark

26. Sia Aurobindo Baltics, Latvia

27. Aurobindo Pharma (Bulgaria) EAD, Bulgaria

28. Aurobindo Pharma France SARL, France

29. Laboratorios Aurobindo S L, Spain

30. Agile Malta Holdings Limited, Malta

31. Aurobindo Pharma (Ireland) Limited

32. Aurobindo Pharma (Italia) S.r.l., Italy

33. Agile Pharma (Malta) Limited, Malta

34. Aurobindo Pharma (Malta) Limited, Malta

35. APL IP Company Limited, Jersey

36. APL Swift Services (Malta) Limited, Malta

37. Milpharm Limited, U.K.

38. Aurolife Pharma LLC, U.S.A.

39. Auronext Pharma Private Limited, India

40. Trident Life Sciences Limited, India*

-Amalgamated with the Company with effect from October 1, 2009.

b. Joint ventures

Aurosal Pharmaceuticals LLC, U.S.A. (Joint venture of a subsidiary)

Cephazone Pharma LLC, USA (Joint venture of a subsidiary)

Novagen Pharma (Pty) Limited, South Africa (Joint venture of a subsidiary)

c. Enterprises over which key management personnel or relatives exercise significant influence

Pravesha Industries Private Limited, India Sri Sai Packaging, India (Partnership firm) Trident Chemphar Limited, India Auropro Soft Systems Private Limited, India Axis Clinicals Limited, India RPR Trust, India

d. Key managerial personnel

Mr. P.V. Ramprasad Reddy, Chairman

Mr. K. Nithyananda Reddy, Managing Director

Dr. M. Sivakumaran, Whole-time Director

Mr. M. Madan Mohan Reddy, Whole-time Director

e. Relative to key managerial personnel

Ms. P. Suneela Rani (Wife of Mr. P.V. Ramprasad Reddy, Chairman)

Ms. K. Rajeswari (Wife of Mr. K. Nithyananda Reddy, Managing director)

Mr. P. Sarath Chandra Reddy (Son of Mr. P.V. Ramprasad Reddy, Chairman)

Mr. Penaka Rohit Reddy (Son of Mr. P.V. Ramprasad Reddy, Chairman)

Ms. Kambam Kirthi Reddy (Daughter of Mr. K. Nithyananda Reddy, Managing Director)

Ms. Spoorthi Kambam (Daughter of Mr. K. Nithyananda Reddy, Managing Director)

Mr. K. Suryaprakash Reddy (Brother of Mr. K. Nithyananda Reddy, Managing Director)

Mr. Prasad Reddy Kambam (Brother of Mr. K. Nithyananda Reddy, Managing Director)

Ms. Sashi S. Kumar (Wife of Dr. M. Sivakumaran, Whole-time Director)

Ms. Shilpa Sivakumaran (Daughter of Dr. M. Sivakumaran, Whole-time Director)

Mr. Vishnu M. Sriram (Son-in-law of Dr. M. Sivakumaran, Whole-time Director)

10. Leases

a. Operating lease

Operating leases are mainly in the nature of lease of office premises with no restrictions and are renewable/cancelable at the option of either of the parties. There is no escalation clause in the lease agreement. There are no sub-leases. The aggregate amount of operating lease payments recognized in the Profit and Loss Account Rs. 15.1 (March 31, 2009: Rs. 10.2).

b. Finance lease

Building includes factory buildings acquired on finance lease. The agreement is silent on renewal terms and transfer of legal title at the end of lease term.

The lease agreement did not specify minimum lease payments over the future period. The factory building is acquired on lease at a consideration of Rs. 49.2 (March 31, 2009: Rs. 72.0).

The net carrying amount of the buildings obtained on finance lease - Rs. 32.3 (March 31, 2009: Rs. 53.5).

The Company has not recognized any contingent rent as expense in the statement of Profit and Loss Account.

There is no escalation clause in the lease agreement. There are no restrictions imposed by lease arrangements. There are no sub-leases.

11. In accordance with paragraph 10 of Notified Accounting Standard 9 on Revenue Recognition, excise duty on sales amounting to Rs. 673.3 (March 31, 2009: Rs. 904.2) has been reduced from sales in Profit and Loss Account and excise duty on increase/decrease in closing stock of finished goods amounting to Rs. 2.1 (March 31, 2009: Rs. 0.7) has been debited to (March 31, 2009: credit) in the Profit and Loss Account.

12. The Company has appointed an employee covered under Section 314 of the Companies Act, 1956. The employment is subject to an approval from the Central Government. The Company has filed an application for obtaining the approval and the same is pending with the Central Government. In the meanwhile, the Company has paid remuneration to the employee. The Company is confident of obtaining approval from the Central Government and believes that the risk of rejection of the employment contract by the Central Government is remote.

13. In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

14. The current year figures include those relating to transferor company viz., Trident Life Sciences Limited and therefore the figures of the previous year are not comparable with those of the current year. Further, the figures of the previous year have been re-grouped/rearranged, wherever necessary to conform to those of the current year.

 
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