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Notes to Accounts of GlaxoSmithKline Pharmaceuticals Ltd.

Mar 31, 2017

(aa) Recent accounting pronouncements Standards issued but not yet effective

The Ministry of Corporate Affairs has issued the Companies (Indian Accounting Standards) (Amendment) Rules, 2017 (the ‘Amendment Rules'') on March 17, 2017 notifying amendments to Ind AS 7, ‘Statement of Cash Flows'' and Ind AS 102, ‘Share-based payment'' effective for annual periods beginning on or after April 1, 2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of Standalone 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.

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance for measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes. It clarifies that the fair value of cash-settled awards is determined on a basis consistent with that used for equity-settled awards. Also, the amendment clarifies that if the terms and conditions of a cash-settled share-based payment transaction are modified with the result that it becomes an equity-settled share-based payment transaction, the transaction is accounted for as such from the date of the modification. Further, the amendment requires the award that include a net settlement feature in respect of withholding taxes to be treated as equity-settled in its entirety. The cash payment to the tax authority is treated as if it was part of an equity settlement.

The Company does not expect a significant impact on its Standalone Financial Statements on initial application of these ‘Amendment Rules''.

(ab) Rounding of amounts

All amounts disclosed in the Standalone Financial Statements and notes have been rounded off to the nearest lakhs as per the requirement of Schedule III, unless otherwise stated.

1 CRITICAL ESTIMATES AND JUDGEMENTS

The preparation of Standalone Financial Statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgment in applying the Company’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgment or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed.

a Recognition and measurement of defined benefit obligations

The obligation arising from defined benefit plan is determined on the basis of actuarial assumptions. Key actuarial assumptions include discount rate, trends in salary escalation and vested future benefits and life expectancy. The discount rate is determined by reference to market yields at the end of the reporting period on government bonds. The period to maturity of the underlying bonds correspond to the probable maturity of the post-employment benefit obligations

b Estimation of useful life

Useful lives of tangible assets and intangible assets are based on the estimate by the management. The useful lives as estimated are same as prescribed in Schedule II of the Companies Act, 2013. In cases, where the useful lives are different from that prescribed in Schedule II, they are based on management estimate, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers'' warranties and maintenance support. Assumptions also need to be made, when the Company assesses, whether an asset may be capitalized and which components of the cost of the asset may be capitalized.

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.

c Provisions and contingent liabilities

The Company exercises judgment in measuring and recognizing 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. Judgment 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.

(ii) Premises given on operating lease

The Company has an apartment given on operating lease on cancellable terms. The lease arrangement is for the period of 3 years and is renewable for a further period on mutually agreeable terms. Rental income of Rs, 68.40 lakhs is disclosed under Other Income.

(iii) Estimation of fair value

The Company has four properties that have been considered as investment properties. These include three vacant land sites that are not in operational use at present and an apartment that is leased at commercial rates.

In view of management, the fair market value of the land sites is not reliably measurable as there are very few recent transactions of comparable composition of these properties in the market. Further, the fair market value will be subject to numerous municipal deductions dependent upon the current use and intended use of the property. Based on the above, it is not possible to ascertain and disclose the range of fair market value. The estimated Ready Reckoner value at year end, based on latest published data and on current stated use, totals Rs,1700,00.00 lakhs. Ready Reckoner rates are the prices of the residential property, land or commercial property for a given area that is published and regulated by the respective State Governments as a guide towards payment of stamp duty at the time of transaction. The Ready Reckoner value is regarded as a gross value and does not represent the underlying fair market value of the properties. The company will further detail the fair value of its investment properties upon entering a committed agreement with a third party, unless an alternative reliable estimate of the fair value is attainable.

The fair value of the leased apartment is estimated at Rs, 24,00.00 lakhs (As at March 31, 2016 : Rs, 25,00.00 lakhs and April 1, 2015 Rs, 26,00.00 lakhs). The fair valuation is based on the recent deal, concluded by the Company, of a comparable property in the same location during the current year. Fair valuation for the comparative years is based on the current deal price of the concluded sale adjusted for the historical property price trend of past two years in the same location. The fair value measurement is categorized in level 3 fair value hierarchy.

Terms of repayment

Interest free Sales Tax Loan from SICOM Limited as at March 31, 2017 of Rs, 1,59.50 lakhs (March 31, 2016 of Rs, 2,37.30 lakhs and April 1, 2015 Rs, 3,11.55 lakhs) availed under the 1993 Sales Tax deferment Scheme repayable in thirteen installments (March 31, 2016 - seventeen installments, April 1, 2015 - twenty one installments) closing on April 30, 2021. The current maturity amount as at March 31, 2017 is Rs, 60.60 lakhs (March 31, 2016 of Rs, 77.80 lakhs and April 1, 2015 Rs, 48.95 lakhs) of the loan has been disclosed under Note 24 - Current financial liabilities - others.

Notes:

(i) Rationalization relating to a manufacturing site: This represents an estimated amount of cost required to be incurred to rationalize closed manufacturing sites of the Company. The Company utilizes the same as and when actual costs are incurred. It is expected to be utilized within 12 months from the end of the year.

(ii) Pricing matters, Divestment/ Restructuring and other matters: Provision for pricing matters, Divestment/ Restructuring and other matters made for probable liabilities/ claims arising out of pending dispute, litigations/ commercial transactions with statutory authorities/ third parties. The outflow with regard to the said matters depends on the exhaustion of remedies available to the Company under the law and hence the Company is not able to reasonably ascertain the timing of the outflow. Also refer notes 43, 44 and 45

(iii) Long term incentive plan: Refer note 60.

(iv) Provision for expected sales return: This represents provision made for expected sales return. Revenue is adjusted for the expected value of return. It is expected to be utilized within 1 to 2 years from the end of the year.

2 The recurring expenditure on research and development charged off to revenue amounts to Rs, 1,89.62 lakhs (Previous year - Rs, 1,99.57 lakhs)

3 Miscellaneous expenses in Note 34 includes loss on foreign currency transactions (net) Rs, Nil (Previous year - Rs, 8,82.11 lakhs)

4 Reimbursement of expenses (net) in Note 34 are amounts recovered from subsidiary company Rs, 1,60.06 lakhs (Previous year -Rs, 2,26.13 lakhs), from Stiefel India Private Limited Rs, Nil (Previous year - Rs, 19.85 lakhs), from GlaxoSmithKline Pte Limited Rs, Nil (Previous year - Rs, 8.18 lakhs), from GlaxoSmithKline Service Unlimited Rs, 17.81 lakhs (Previous year - Rs, 71.33 lakhs), GlaxoSmithKline Brasil Ltd Rs, 25.96 lakhs (Previous year - Rs, 40.34 lakhs), from GlaxoSmithKline Research & Development Limited Rs, 15.96 lakhs (Previous year - Rs, 98.19 lakhs), from Chiron Behring Vaccines Private Limited Rs, 56.18 lakhs (Previous year - Rs, Nil), from GlaxoSmithKline Inc USA Rs, 86.85 lakhs (Previous year -Rs, Nil), from GlaxoSmithKline Latin America S.A. Rs, 23.91 lakhs (Previous year - Rs, Nil), from GlaxoSmithKline Pharma Nigeria Limited Rs, 50.17 lakhs (Previous year - Rs, Nil ) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs, 25,08.76 lakhs (Previous year -Rs, 23,09.5 lakhs) and GlaxoSmithKline Asia Private Limited Rs, 1,60.17 lakhs (Previous year - Rs, 1,13.07 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

Note: Includes profit on sale of a property sold vide a binding agreement for sale on March 31, 2017, pending adjudication by the transferee. Subsequently, in April 2017, all the formalities relating to stamping and registration were concluded. As at March 31, 2017, the proceeds for this disposal is held as cheques on hand.

5 EMPLOYEE BENEFIT OBLIGATIONS

The Company obtained actuarial reports as required by Ind AS 19 (Employee Benefits) based on which disclosures have been made in the financial statement for the year ended March 31, 2017. The disclosures as required by the Ind AS 19 are as below.

(i) Defined Contribution Plan

The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952). The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

(ii) Defined Benefit Plan Gratuity

The Company makes annual contributions to an income tax approved irrevocable trust gratuity fund to finance the plan liability, a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

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

ii) On death in service: As per the provisions of the Payment of Gratuity Act, 1972 without any vesting period.

Post-Retirement medical benefit

The Company earmarks liability towards unfunded Post - Retirement medical benefit and provides for payment to vested employees. The benefits under the plan are in form of a medical benefit paid to employees post their employment with the Company.

Provident Fund

The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any.

Leave Encashment and compensated absences

The liability for leave encashment and compensated absences as at year end is Rs, 31,62.20 lakhs. (March 31, 2016 - Rs, 43,94.04 lakhs, April 1, 2015 - Rs, 43,01.90 lakhs).

Based on the actuarial valuation obtained, the following table sets out the status of the gratuity plan, post retirement medical benefits and provident fund and the amounts recognized in the Company''s Standalone Financial Statements as at balance sheet date:

6 The demand of Rs, 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made there from during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated October 19, 2001 which was held in favour of the Company, the Supreme Court has, vide its judgment and order dated March 31, 2011, upheld the demand. The Company had accrued a liability of Rs, 18,68 lakhs in earlier years and a further provision of Rs, 53,11 lakhs was accrued in 2011. Based on a legal advice, the Company has filed an application in the Supreme Court seeking, inter alia, clarifications on some aspects of the judgment and directions for recompilation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs, 63,60 lakhs, which together with the amount of Rs, 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs, 71,79 lakhs made by the Government in November 1990. The Company filed a review petition in the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs, 117,66 lakhs for the period May 12, 1981 to October 17, 1996, for which no provision was made in earlier years. The Government has vide letter dated May 4, 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated October 10, 2011, raised a demand on the Company for the interest amount amounting to Rs, 247,44 lakhs .Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs, 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a writ petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the writ petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP, passed an order on April 3, 2012. The said order stayed the demand notice dated October 10, 2011 during the pendency of the writ petition at the Delhi High Court subject to the Company depositing Rs, 136,82 lakhs in three equal installments within six month''s time from the date of order. All three installments have been deposited with the Government as of date. The Supreme Court, vide its order dated October 5, 2012, directed the Delhi High Court to dispose of the writ petition as expeditiously as possible. The Delhi High Court has listed the writ petition for hearing on October 27, 2017.

7 MATTERS IN RESPECT OF ERSTWHILE BURROUGHS WELLCOME (INDIA) LIMITED (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on July 21, 1993, directing erstwhile BWIL to pay an amount of Rs, 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983.

Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/or implementation of the order dated July 21, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs, 2,00 lakhs from a nationalized bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs, 10.93 lakhs for the year ended August 31, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs, 0.31 lakhs and in Tanzania - Rs, 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

8 MATTERS IN RESPECT OF ERSTWHILE SMITHKLINE BEECHAM PHARMACEUTICALS (INDIA) LIMITED:

(i) Rs, 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under non-current provisions and Income tax paid thereon aggregating to Rs, 64.77 lakhs has been included under other non-current assets. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs, 96.81 lakhs, and interest thereon amounting to Rs, 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognized as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated April 18, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

(ii) The details of cancellable operating leases are as follows:

The Company has taken various residential, office and go down premises under operating lease arrangements. These are cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements. The lease rentals of Rs, 20,68.92 lakhs (Previous year Rs, 19,65.17 lakhs) have been included under the head Rent under Note 34 in the Statement of Profit and Loss.

9 In April 2014, GlaxoSmithKline Plc (GSK), London, UK, entered into an inter-conditional agreement with Novartis AG (Novartis), Basel, Switzerland where GSK (i) will acquire the Novartis''s Vaccines Business and manufacturing capabilities and facilities from Novartis, and (ii) will sell the rights to its Marketed Oncology Portfolio, related R&D activities and AKT Inhibitors currently in development to Novartis. Globally, this transaction with Novartis was completed on March 2, 2015.

In connection to the above transactions, GLAXOSMITHKLINE PHARMACEUTICALS LIMITED (“Company”), concluded the transaction on an Asset Sale basis with Novartis Healthcare Private Limited (“NHPL”), a private unlisted Company incorporated under the Companies Act 1956 on September 30, 2015. The Company terminated its distribution rights with GSK Group for the oncology portfolio in return for accessing the distribution rights of the acquired vaccines portfolio. The Company entered into interim transitional arrangements with NHPL to continue to sell the Oncology portfolio relating to this transaction to meet patient demand and up until the marketing authorizations transferred to NHPL. The transitional arrangement and the transfer of marketing authorizations concluded during the year.

10 (a) Current tax liabilities is net of advance tax and tax deducted at source amounting to Rs, 160,85.90 lakhs (As on March 31, 2016 Rs, 204,42.17 lakhs, As on April 1, 2015 Rs, 251,92.00 lakhs).

(b) Current tax assets (net) represents payment in excess of provisions of Rs, 3455,48.82 lakhs (As on March 31, 2016 Rs, 3247,99.75 lakhs, As on April 1, 2015 Rs, 2980,21.26 lakhs) and includes a net tax refund with interest of Rs, 110,35 lakhs (As on March 31, 2016 and April 1, 2015: Rs, 110,35 lakhs) which has been held as provision pending the final outcome of a litigation.

11 Other non-current assets are net of allowances for doubtful loans and advances aggregating Rs, 29,96.83 lakhs (As at March 31, 2016 and April 1, 2015: Rs, 29,96.83 lakhs).

12 Capital work-in-progress and estimated amount of contracts (net of advances) remaining to be executed on capital account and not provided for as at March 31, 2017, March 31, 2016 and April 1, 2015 mainly comprises of the ongoing investments in the new Greenfield manufacturing factory being constructed at Bengaluru.

13 Pursuant to the Board approval, an amount of Rs, 68.71 lakhs and Rs, 102.98 lakhs have been paid in current year to Dr. Hasit Joshipura, the earlier Managing Director of the Company as performance bonus and performance share plan of 2015.

B. Fair Value Hierarchy

This section explains the judgments and estimates made in determining the fair values of the financial instruments that are (a) recognized and measured at fair value and (b) measured at amortized cost and for which fair values are disclosed in the Standalone Financial Statements.

(a) Financial instruments that are recognized and measured at fair value

To provide an indication about the reliability of the inputs used in determining fair value, the company has classified its financial instruments into the three levels prescribed under the accounting standard.

Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

The impact of fair valuation of Equity investment is considered as insignificant and hence carrying value and fair value is considered as same.

The amount of fair value of the above Financial assets and liabilities is considered to be insignificant in value and hence carrying value and the fair value is considered to be same.

The carrying amounts of cash and cash equivalents, other bank balance, current account balances with group companies, advances recoverable, trade receivables, unclaimed dividends, trade payables, dues to subsidiary company, creditors for capital goods and other payables are considered to be the same as their fair values due to their short term nature.

C. Financial risk management

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 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, and arises principally from the Company''s receivables from customers.

Trade and other receivables

The Company''s trade receivables are largely from sales made to wholesale customers and direct sales to hospital with a smaller proportion of sales to Indian Government Institutions. The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer, demographics of the customer and the default risk of the industry.

The company manages credit risk through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Exposures to customers outstanding at the end of each reporting period are reviewed to determine incurred and expected credit losses and the Company establishes an allowance for doubtful debts and impairment that represents its estimate of expected losses in respect of trade receivables. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macroeconomic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. The impairment loss at March 31, 2017 related to customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

In case of receivables from wholesale customers and hospitals, the Company has followed a provision approach consistent with expected credit loss approach as per Ind AS 109.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company''s reputation.

The Company''s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding bank borrowings. The Company believes that the working capital is sufficient to meet its current requirements. 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.

As of March 31, 2017, the Company had working capital of Rs, 932,38.61 lakhs, including cash and cash equivalents of Rs, 139,28.80 lakhs, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of Rs, 750,73.15 lakhs.

As of March 31, 2016, the Company had working capital of Rs, 1572,93.64 lakhs, including cash and cash equivalents of Rs, 113,68.03 lakhs, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of Rs, 1239,04.64 lakhs.

As of April 1, 2015 the Company had working capital of Rs, 2067,75.15 lakhs, including cash and cash equivalents of Rs, 114,65.92 lakhs, investments in term deposits (i.e., bank certificates of deposit having original maturities of more than 3 months) of Rs, 1827,90.93 lakhs.

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.

Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the entity. The Company is exposed to currency risk on account of its receivables and payables in foreign currency. The functional currency of the Company is Indian Rupee. The Company has exposure to GBP, USD, EURO and other currencies. The Company has not hedged this foreign currency exposure and strives to achieve asset liability offset of foreign currency exposure.

Sensitivity analysis

A reasonably possible strenghtening / weakening of the respective foreign currencies with respect to functional currency of Company would result in increase or decrease in profit or loss and equity as shown in table below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. The following analysis has been worked out based on the exposures as of the date of statements of financial position.

14 CAPITAL MANAGEMENT

(a) Risk 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 has adequate cash and bank balances and no interest bearing liabilities. The Company has Interest free Sales Tax Loan from SICOM Limited availed under the 1993 Sales Tax deferment Schemes. The Company monitors its capital by a careful scrutiny of the cash and bank balances, and a regular assessment of any debt requirements. In the absence of any interest bearing debt, the maintenance of debt equity ratio etc. may not be of any relevance to the Company.

Information about major customers

The Company did not have any external revenue from a particular customer which exceeded 10% of total revenue.

15 RELATED PARTY DISCLOSURES

Related party disclosures, as required by Ind AS 24, “Related Party Disclosures”, notified under Section 133 of the Companies Act, 2013 are given below:

1. Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, U.K.

GlaxoSmithKline Pte Limited, Singapore Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K.

Castleton Investment Limited, Mauritius (Upto March 30, 2017)

Holding company / ultimate holding company of the above shareholders GlaxoSmithKline plc, U.K. *

GlaxoSmithKline Finance plc, U.K.*

Setfirst Ltd, U.K. *

SmithKline Beecham Limited, U.K.*

Wellcome Limited, U.K.*

The Wellcome Foundation Limited, U.K.*

Wellcome Consumer Healthcare Limited, U.K.*

* no transactions during the year

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year:

GlaxoSmithKline Asia Private Limited, India GlaxoSmithkline Philippines Inc., Philippines

GlaxoSmithKline Brasil Ltda, Brazil GlaxoSmithKline Australia Pty Limited, Australia

GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Trading Services Limited, Ireland

GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Limited, Hong Kong

GlaxoSmithKline Services Unlimited, U.K. GlaxoSmithKline South Africa (Pty) Ltd, South Africa

Glaxo Operations UK Limited, U.K GlaxoSmithKline LLC, U.S.A

GlaxoSmithKline Export Limited, U.K. Stiefel India Private Limited, India

GlaxoSmithKline Latin America S.A Glaxo Wellcome Ceylon Ltd., Sri Lanka

GlaxoSmithKline Pakistan Limited, Pakistan US GMS Financial Services, U.S.A.

GlaxoSmithKline Research & Development Ltd, U.K Chiron Behring Vaccines Private Ltd, India (w.e.f. March 31, 2016) GlaxoSmithKline Pte Limited, Singapore

(iv) Directors and members of GSK India Management Team and their relatives:

Directors: GSK India Management Team:

Mr. A. Vaidheesh (w.e.f August 3, 2015) # Mr. A. Nadkarni (w.e.f. April 17, 2017)

Mr. A. Aristidou # Mr. B. Akshikar (up to December 31, 2016)

Mr. R. C. Sequeira (up to February 11, 2017) Mr. H. Buch (up to June 15, 2015)

Mr. R. Krishnaswamy # Mr. K. Hazari

Dr. H. B. Joshipura (up to July 31, 2015) Mr. Ransom D''souza (w.e.f. April 17, 2017)

Mr. N. Kaviratne Mr. R. Bartaria

Mr. P. Bhide Mr. R. C. Sequeira

Mr. P. V. Nayak (up to October 31, 2015) Mr. S. Khanna (up to November 30, 2016)

Ms. A. Bansal Mr. S. Dheri

Mr. A. N. Roy Mr. S. Venkatesh (up to December 31, 2016)

Mr. D. S. Parekh Ms. S. Choudhary (w.e.f. January 18, 2017)

Mr. D. Sundaram Mr. S. Webb (w.e.f. April 17, 2017)

Mr. R. R. Bajaaj Ms. V. Desai

Mr. R. Simard (up to February 11, 2017) * Mr. V. Balakrishnan (w.e.f. March 20, 2017)

Mr. S. Harford (up to May 18, 2015) *

Mr. V. Thyagarajan (up to October 31, 2015)

Mr. S. Williams (w.e.f. April 7, 2017)

Mr. M. Jones (w.e.f. April 7, 2017)

# Also a member of GSK India Management Team

* No transactions during the year

16. The following transactions were carried out with the related parties in the ordinary course of business.

(i) Dividend paid to parties referred to in item 1(i) above:

60 SHARE-BASED PAYMENT ARRANGEMENTS Restricted Share Awards (RSAs)

Certain employees of the Company are entitled to receive cash settled stock based awards (‘awards'') pursuant to employee share schemes (‘scheme'') administered by GlaxoSmithKline Plc. (‘Plc'').

Under this plan, certain employees are granted cash settled RSAs at no cost, which entitle them to receive cash equivalent to the stock price of the Plc''s shares listed at London stock exchange after two and a half to three year vesting period during which the employee has to remain in continuous employment with the Company. These RSA''s do not give any voting rights or the right to accrue dividends.

The fair value of these awards is determined based on the closing share price on the day of grant, after deducting the expected future dividend yield of 4.5% (2015 - 5.7%; 2014 - 5.2%) over the duration of the award.

17 FIRST-TIME ADOPTION OF IND AS

These are the company''s first financial statements prepared in accordance with Indian Accounting Standards.

The accounting policies set out in note 1 have been applied in preparing Standalone Financial Statements for the year ended March 31, 2017, the comparative information presented in the standalone financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS Balance Sheet as at April 1, 2015 (the company''s date of transition).

In preparing its opening Ind AS Balance Sheet, the company has adjusted the amounts reported previously in Standalone Financial statements prepared in accordance with Accounting Standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP/Indian GAAP).

An explanation of how the transition from previous GAAP to Ind AS has affected the company''s position and the financial performance is set out in the following tables and notes :

(1) Exemptions and exceptions availed:

(i) Exemptions from retrospective applications

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) Business combination

Ind AS 101 provides the option to apply Ind AS 103 prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Business combinations occurring prior to the transition date have not been restated.

(b) Deemed cost for Property, plant and equipment (PPE) and Intangible assets

Ind AS 101 permits a first time adopter to continue with the carrying value for all its property, plant and equipment as recognized in the Standalone Financial Statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. This exemption can also be used for Investment property covered by Ind AS 40 Investment Properties.

Accordingly, the company has elected to measure all of its PPE and Investment property at their previous GAAP carrying value.

(c) Deemed cost for investment in subsidiary

The Company has elected to use the previous GAAP carrying amount of its investment in subsidiary on the date of transition as its deemed cost on that date, in its separate Financial Statements.

The remaining voluntary exemptions as per Ind AS 101 - First time adoption either do not apply or are not relevant to the Company.

(ii) Exceptions from full retrospective application

Sales tax deferral loan

By applying the exception available as per Ind AS 101, the company has used previous GAAP carrying amount of the loan at the date of transition to Ind AS as the carrying amount of the loan in the opening Ind AS Balance Sheet.

The remaining mandatory exceptions either do not apply or are not relevant to the Company.

(18) Notes to first time adoption of Ind AS

A. Proposed dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of Financial Statements were considered as adjusting events. Accordingly, provision for proposed divided was recognized as liability. Under Ind AS, such dividend are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend of Rs, 509,73.42 lakhs as at March 31, 2016 (April 1, 2015 - Rs, 637,16.78 lakhs) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

B. Provision for expected sales return

The company has recognized Rs, 30,95.37 lakhs (April 1, 2015 Rs, 30,35.25 lakhs) for the year ended March 31, 2016 for the amount of expected non saleable return.

C. Depreciation on investment property reclassified from asset held for sale

The Company has recognized Rs, 9,44.56 lakhs as investment property which ceased to be classified as asset held for sale on the date of transition. The Company has charged depreciation Rs, 3,31.32 lakhs on the above investment property from the date it was held for sale to date of transition, resulting in the recognition of investment property of Rs, 6,13.24 lakhs after depreciation. The Company has provided for depreciation on the above investment property Rs, 17.33 lakhs during the year ended March 31, 2016.

D. Deferred tax

The Company has recognized deferred tax asset Rs, 12,20.09 lakhs as at March 31, 2016 (April 1, 2015 Rs, 11,91.48 lakhs) on the above Ind AS adjustments.

E. Actuarial gains passed through OCI

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP, these measurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31, 2016 decreased by Rs, 30.26 lakhs. There is no impact on the total equity as at March 31, 2016.

F. Notes to reclassification between Indian GAAP and Ind AS:

Excise duty of Rs, 86,29.43 lakhs has been reclassified from revenue to other expenses. This has resulted in increase of revenue and other expenses by Rs, 86,29.43 lakhs.

Trade Discounts of Rs, 29,30.49 lakhs to customers has been reclassified from other expenses to revenue. This has resulted in decrease of revenue and other expenses by Rs, 29,30.49 lakhs.

Provision for non saleable return of Rs, 31,38.33 lakhs has been reclassified from other expenses to revenue. This has resulted in decrease of revenue and other expenses by Rs, 31,38.33 lakhs

Expenses relating to service income of Rs, 44,74.00 lakhs has been reclassified from other operating revenue to other expenses. This has resulted in increase of other operating revenue and other expenses by Rs, 44,74.00 lakhs.

Free samples of Rs, 4,79.66 lakhs to customers has been reclassified from cost of materials consumed to other expenses. This has resulted in decrease of cost of materials consumed and increase of other expenses by Rs, 4,79.66 lakhs.

Penalties of Rs, 48.96 lakhs paid to customers has been reclassified from other expenses to revenue. This has resulted in decrease of revenue and other expenses by Rs, 48.96 lakhs.

19 EVENT OCCURRING AFTER BALANCE SHEET DATE

The Board of Directors has recommended Equity dividend of Rs, 30.00 per share for the year ended March 31, 2017 (March 31, 2016 : Rs, 50.00 per share) (Refer Note 57)


Mar 31, 2015

GENERAL INFORMATION

GlaxoSmithKline Pharmaceuticals Limited (''the Company'') is a public limited company and is listed on the BSE Ltd. (Bombay Stock Exchange) and the National Stock Exchange of India Ltd. (NSE). The Company is engaged interalia, in the business of manufacturing, distributing and trading in pharmaceuticals.

2 SHARE CAPITAL

(b) Rights, preferences and restrictions attached to equity shares:

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(c) Shares held by subsidiaries of ultimate holding company in aggregate

(d) Details of equity shares held by shareholders holding more than 5% shares of the aggregate shares in the Company:

3 RESERVES AND SURPLUS

(a) I ncludes Central Government subsidy Rs. 15.00 lakhs and capital profit on reissue of shares forfeited of erstwhile Burroughs Wellcome (India) Limited Rs. 0.51 lakhs.

(b) On account of buy back of equity shares.

4 LONG TERM BORROWINGS

Terms of repayment

Interest free Sales Tax Loan from SICOM Limited as at 31st March, 2015 of Rs. 3,11.55 lakhs (Previous year - Rs. 4,14.24 lakhs) includes NIL (Previous year - Rs. 4.80 lakhs repayable in one installment) availed under the 1988 Sales Tax deferment Scheme, closing on 31st January, 2014 and Rs. 3,11.55 lakhs (Previous year - Rs. 4,09.44 lakhs) under the 1993 Sales Tax deferment Scheme repayable in twenty one instalments (previous year twenty seven instalments) closing on 30th April, 2021. The current maturity amount of Rs. 48.95 lakhs (Previous year - Rs. 53.74 lakhs) of the loan has been disclosed under Note 8 - Other Current Liabilities.

Rupees in lakhs

As at 31st As at 31st March, 2015 December, 2013

22 CONTINGENT LIABILITIES AND COMMITMENTS

A. Contingent Liabilities not provided for:

(i) Cheques discounted with banks 3,74.00 1,56.84

(ii) In respect of claims made against the Company not acknowledged as debts by the Company

- Sales tax matters 34,39.35 34,16.65

- Excise matters 5,93.30 5,93.30

- Service tax matters 1,29.20 1,29.20 - Labour matters 69,31.23 62,81.49

- Other legal matters 22,01.55 22,01.55

which net of current tax amount to 87,75.79 83,31.91

(iii) Income-tax matters in respect of which appeals are pending

- Tax on matters in dispute 177,46.83 199,70.77

Notes:

Future cash outflows in respect of (i) above are dependant on the return of cheques by banks.

Future cash outflows in respect of (ii) and (iii) above are determinable on receipt of decisions / judgements pending with various forums / authorities.

6 The demand of Rs. 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made therefrom during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated 19th October 2001 which was held in favour of the Company, the Supreme Court has, vide its Judgement and Order dated 31st March 2011, upheld the demand. The Company had accrued a liability of Rs. 18,68 lakhs in earlier years and a further provision of Rs. 53,11 lakhs was accrued in 2011.

Based on a legal advice, the Company has filed an Application in the Supreme Court seeking, inter alia, clarifications on some aspects of the Judgement and directions for recomputation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the Application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs. 63,60 lakhs, which together with the amount of Rs. 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs. 71,79 lakhs made by the Government in November 1990. The Company filed a Review Petition in the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs. 117,66 lakhs for the period 12th May 1981 to 17th October 1996, for which no provision was made in earlier years. The Government has vide letter dated 4th May 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated 10th October 2011, raised a demand on the Company for the interest amount amounting to Rs. 247,44 lakhs. Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs. 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a Writ Petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the Writ Petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP passed an order on 3rd April 2012. The said order stayed the Demand Notice dated 10th October 2011 during the pendency of the Writ Petition at the Delhi High Court subject to the Company depositing Rs. 136,82 lakhs in three equal installments within six month''s time from the date of order. All three instalments have been deposited with the Government as of date. The Supreme Court, vide its order dated 5th October 2012, directed the Delhi High Court to dispose of the Writ Petition as expeditiously as possible.The Delhi High Court has listed the Writ Petition for hearing on 27th August, 2015.

24 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983.

Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/ or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

7 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Long term provisions and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under long term loans and advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

8 The Company has appointed Mr. Andrew Aristidou as Executive Director for the period December 1, 2014 to June 30, 2017 at the Board Meeting held on November 6, 2014. Shareholders of the Company have approved his appointment and remuneration vide postal ballot dated March 26, 2015. The Company has filed the application with the Central Government for approval of his appointment and payment of remuneration on April 30, 2015. Approval of the Central Government is awaited.

9 The recurring expenditure on research and development charged off to revenue amounts to Rs. 2,19.35 lakhs (Previous year - Rs. 2,62.86 lakhs).

10 Miscellaneous expenses in Note 35 include loss on foreign currency transactions (net) Rs. 1,64.38 lakhs (Previous year - Rs. 9,33.91 lakhs)

11 " Reimbursement of expenses (net)" in Note 35 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 1,64.65 lakhs (Previous year - Rs. 3,46.92 lakhs), from subsidiary company Rs. 3,03.15 lakhs (Previous year - Rs. 2,94.13 lakhs), from Stiefel India Private Limited Rs. 24.97 lakhs (Previous year - Rs. 18.43 lakhs), from GlaxoSmithKline Pte Limited Rs. 30.96 lakhs (Previous year - Rs. 58.96 lakhs), from GlaxoSmithKline Services unlimited Rs. 2,19.75 lakhs (Previous year - 92.03 lakhs), GlaxoSmithKline Research and Development Rs. 1,05.74 lakhs (Previous year - NIL), GlaxoSmithKline Brasil Ltda Rs. 46.98 Lakhs (Previous year - Rs. 9.18 Lakhs) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 27,69.44 lakhs (Previous year - Rs. 21,79.14 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

12 Employee Benefits:

The company obtained actuarial reports as required by the Accounting Standard 15, Employee Benefits (revised 2005) [''the revised AS 15''], notified under sub-section (3C) of Section 211 of the Companies Act, 1956 based on which disclosures have been made in the financial statements for the fifteen months ended 31st March, 2015.

The disclosures as required by the revised AS 15 are as given below:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any. The employees of the Company are also entitled to leave encashment and compensated absences as per the Company''s policy. The Company''s defined benefit plans include gratuity, post retirement medical and other benefits.

3 The liability for leave encashment and compensated absences as at period end is Rs. 43,01.90 lakhs (Previous year - Rs. 33,37.71 lakhs) #.

4 Disclosures for defined benefit plans as on 31st March, 2015:

13 The Company has only one reportable segment which is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

14 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the period):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, u.K.

GlaxoSmithKline Pte Limited, Singapore Eskaylab Limited, u.K.

Burroughs Wellcome International Limited, u.K.

Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline plc, u.K.

GlaxoSmithKline Finance plc, u.K.

Setfirst Ltd, u.K.

SmithKline Beecham Limited, u.K.

Wellcome Limited, u.K.

The Wellcome Foundation Limited, u.K.

Wellcome Consumer Healthcare Limited, u.K.

* no transactions during the period

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the period:

GlaxoSmithKline Asia Private Limited, India GlaxoSmithKline Brasil Ltda, Brazil GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Services unlimited, u.K.

Glaxo Operations uK Limited, u.K Laboratoire GlaxoSmithKline S.A.S., France GlaxoSmithKline Export Limited, u.K.

GlaxoSmithKline Research & Development Ltd GlaxoSmithKline Pte Limited, Singapore GlaxoSmithkline Philippines Inc., Philippines GlaxoSmithKline Australia Pty Limited, Australia GlaxoSmithKline Trading Services Limited, Ireland GlaxoSmithKline Limited, Hong Kong GlaxoSmithKline South Africa (Pty) Ltd, South Africa GlaxoSmithKline LLC, u.S.A Stiefel India Private Limited, India Glaxo Wellcome Ceylon Ltd., Sri Lanka uS Pharmaceuticals, u.S.A. uS GMS Financial Services, u.S.A.

(iv) Directors and members of GSK India Management Team and their relatives:

Mr. A. Aristidou (w.e.f 1st December, 2014) Mr. PV. Nayak

Ms. A. Bansal (w.e.f 19th February, 2013) Mr. R. Bartaria

Mr. A.N. Roy Mr. R.C. Sequeira

Mr. C.T. Renganathan (up to 31st December, 2014) Mr. R.R. Bajaaj

Mr. D.S. Parekh Mr. R. Krishnaswamy

Mr. D. Sundaram Mr. S. Harford *

Dr. H.B. Joshipura Dr. S. Joglekar (up to 21st February, 2014)

Mr. H. Buch Mr. S. Khanna

Mr. K. Hazari Mr. S. Dheri

Mr. M.B. Kapadia (up to 30th November, 2014) Mr. S. Venkatesh (w.e.f 25th June, 2014)

Mr. N. Kaviratne Ms. V. Desai (w.e.f 11th February, 2014)

Mr. P. Bhide Mr. V. Thyagarajan

* no transactions during the period

15 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Statement of Profit and Loss under ''Rent'' in Note 35.

16 (a) Provision for tax is net of advance tax and tax deducted at source amounting to Rs. 251,92.00 lakhs (Previous year - Rs. Nil).

(b) Advance income-tax (net) represents payments in excess of provisions of Rs. 2980,21.26 lakhs (Previous year - Rs. 2980,21.26 lakhs) and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provision pending the final outcome of a litigation.

17 Other Loans and advances are net of allowances for doubtful loans and advances aggregating Rs. 29,96.83 lakhs (Previous year - Rs. 29,96.83 lakhs).

18 During the period, a complaint filed against the company and others by Bio Med (P) Ltd is pending determination before the Competition Commission of India (CCI).

19 In April 2014, GlaxoSmithKline Plc (GSK), London, UK, entered into an inter-conditional agreement with Novartis AG (Novartis), Basel, Switzerland where GSK (i) will acquire the Novartis''s Vaccines Business and manufacturing capabilities and facilities from Novartis, and (ii) GSK sell the rights to its Marketed Oncology Portfolio, related R&D activities and AKT Inhibitors currently in development to Novartis. Globally, this transaction with Novartis was completed on March 2nd 2015.

In connection to the above transactions, the GlaxoSmithKline Pharmaceuticals Limited ("Company") Board in its meeting held on 12th February 2015, approved the transactions on an Asset Sale basis with Novartis Healthcare Private Limited, a private unlisted Company incorporated under the Companies Act 1956. Pursuant to the global deal, the Company will have its distribution rights terminated for the oncology portfolio in return for accessing the distribution rights of the acquired vaccines portfolio. The transaction would be profit neutral for the Company.

GSK Plc and Novartis AG have obtained the approval from Competition Commission of India. The Company has filed application with Foreign Investment Promotion Board (FIPB). The closing of the asset sales between the companies is subject to the receipt of all applicable legal and regulatory approvals, consent, permissions and sanctions as may be necessary from concerned authorities.

20 The accounting year of the company has been changed from January - December to April - March with effect from the current year. Consequently, the current year''s financial statements are for the 15 months from 1st January, 2014 to 31st March, 2015. The previous year figures relate to the 12 months ended 31st December, 2013.

In view of the above, the current year''s figures are not comparable with those of the previous year. Previous year''s figures have been regrouped wherever necessary.


Dec 31, 2013

The liability for leave encashment and compensated absences is provided on the basis of valuation, as at Balance Sheet date, carried out by an independent actuary.

(ii) The expenditure on voluntary retirement schemes is charged to the Statement of Profit and Loss in the year in which it is incurred.

(iii) Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised in the Statement of Profit and Loss in the year in which they arise.

(p) Earnings Per Share

Basic earnings per share is calculated by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares, that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit for the period attributable to equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

(b) Rights, preferences and restrictions attached to equity shares :

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

22 CONTINGENT LIABILITIES AND COMMITMENTS

A. Contingent Liabilities not provided for:

(i) Cheques discounted with banks .. .. .. 1,56.84 4,84.58

(ii) I n respect of claims made against the Company not acknowledged as debts by the Company

- Sales tax matters .. .. .. .. .. .. 34,16.65 30,74.86

- Excise matters .. .. .. .. .. .. .. 5,93.30 5,92.64

- Service tax matters .. .. .. .. .. .. 1,29.20 1,29.20

- Labour matters .. .. .. .. .. .. .. 62,81.49 56,83.79

- Other legal matters .. .. .. .. .. .. 22,01.55 22,01.55

which net of current tax amount to - .. .. 83,31.91 78,91.80

(iii) Income-tax matters in respect of which appeals are pending

- Tax on matters in dispute .. .. .. .. 199,70.77 106,72.90 Notes:

Future cash outflows in respect of (i) above are dependant on the return of cheques by banks.

Future cash outflows in respect of (ii) and (iii) above are determinable on receipt of decisions / judgements pending with various forums / authorities.

B. Commitments

(i) Estimated amount of contracts (net of advances) remaining to be executed on

capital account and not provided for .. .. 53,72.63 48,59.74

(ii) Uncalled liability on partly paid shares:

- in Hill Properties Limited .. .. .. .. .. 0.12 0.12

Note:

Future cash outflow is dependent on the call to be made by Hill Properties Limited.

1 The demand of Rs. 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made therefrom during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated 19th October 2001 which was held in favour of the Company, the Supreme Court has, vide its Judgement and Order dated 30th March 2011, upheld the demand. The Company had accrued a liability of Rs. 18,68 lakhs in earlier years and a further provision of Rs. 53,11 lakhs was accrued in 2011.

Based on a legal advice, the Company has filed an Application in the Supreme Court seeking, inter alia, clarifications on some aspects of the Judgement and directions for recomputation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the Application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs. 63,60 lakhs, which together with the amount of Rs. 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs. 71,79 lakhs made by the Government in November 1990. The Company filed a Review Petition with the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs. 117,66 lakhs for the period 12th May 1981 to 17th October 1996, for which no provision was made in earlier years. The Government has vide letter dated 4th May 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated 10th October 2011, raised a demand on the Company for the interest amount amounting to Rs. 247,44 lakhs. Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs. 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a Writ Petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the Writ Petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP passed an order on 3rd April 2012. The said order stayed the Demand Notice dated 10th October 2011 during the pendency of the Writ Petition at the Delhi High Court subject to the Company depositing Rs. 136,82 lakhs in three equal installments within six month''s time from the date of order. All three instalments have been deposited with the Government as of date. The Supreme Court, vide its order dated 5th October 2012, directed the Delhi High Court to dispose of the Writ Petition as expeditiously as possible. The Delhi High Court has listed the Writ Petition for hearing on 4th July, 2014.

2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983. Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and / or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Long term provisions and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under long term loans and advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

4 Employee benefits expenses in Note 34 include amounts subject to approval of members in ensuing Annual General Meeting - NIL (Previous year - Rs. 80.18 lakhs).

5 The recurring expenditure on research and development charged off to revenue amounts to Rs. 2,62.86 lakhs (Previous year - Rs. 2,40.34 lakhs).

6 Miscellaneous expenses in Note 35 include loss on foreign currency transactions (net) Rs. 9,33.91 lakhs (Previous year - Rs. 3,14.72 lakhs).

7 " Reimbursement of expenses (net)" in Note 35 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 3,46.92 lakhs (Previous year - Rs. 3,25.98 lakhs), from subsidiary company Rs. 2,94.13 lakhs (Previous year - Rs. 3,20.63 lakhs), from Stiefel India Private Limited Rs. 18.43 lakhs (Previous year - Rs. 15.53 lakhs) , from GlaxoSmithKline Pte Limited Rs. 58.96 lakhs (Previous year - Rs. 62.04 lakhs), from GlaxoSmithKline Service Unlimited Rs. 92.03 lakhs (Previous year - 80.68 lakhs), GlaxoSmithKline Brasil Ltda Rs. 9.18 Lakhs (Previous year - NIL) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 21,79.14 lakhs (Previous year - Rs. 11,00.66 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

8 Employee Benefits:

The Company obtained actuarial reports as required by the Accounting Standard 15, Employee Benefits (revised 2005) [‘the revised AS 15''], notified under sub-section (3C) of Section 211 of the Companies Act, 1956 based on which disclosures have been made in the financial statements for the year ended 31st December, 2013.

The disclosures as required by the revised AS 15 are as given below:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any. The employees of the Company are also entitled to leave encashment and compensated absences as per the Company''s policy. The Company''s defined benefit plans include gratuity, post retirement medical and other benefits.

# excludes impact of actualisation of gratuity Rs. 22.01 lakhs, leave encashment and compensated absences Rs. 6.62 lakhs (Previous year - gratuity Rs. 39.65 lakhs, leave encashment and compensated absences Rs. 15.53 lakhs).

* The Guidance Note on Implementing AS 15, ‘Employee Benefits'' issued by the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India states that Provident Funds set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by the employer would be defined benefit plans in accordance with the requirements of paragraph 26(b) of AS 15. The current year is the first year in which the actuary has given the detailed disclosures in the actuarial valuation report, in view of the issuance of the Guidance Note by the Institute of Actuaries of India. Accordingly the compliance with the disclosure requirements of paragraph 120(n) of AS 15: Employee Benefits has been done prospectively from this year onwards.

9 The Company has only one reportable segment which is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

10 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company:

Glaxo Group Limited, U.K.

Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K.

Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline plc, U.K.

GlaxoSmithKline Finance plc, U.K.

SmithKline Beecham Limited, U.K.

Wellcome Limited, U.K.

The Wellcome Foundation Limited, U.K.

Wellcome Consumer Healthcare Limited, U.K.

* no transactions during the year

(ii) Subsidiary of the Company:

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year:

SmithKline Beecham Private Limited, Sri Lanka GlaxoSmithKline Asia Private Limited, India GlaxoSmithKline Brasil Ltda, Brazil GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Services Unlimited, U.K.

Glaxo Operations UK Limited, U.K Laboratoire GlaxoSmithKline S.A.S., France GlaxoSmithKline Export Limited, U.K.

GlaxoSmithKline Pte Limited, Singapore GlaxoSmithKline Australia Pty Limited, Australia GlaxoSmithKline Trading Services Limited, Ireland GlaxoSmithKline Limited, Hong Kong GlaxoSmithKline LLC, U.S.A Stiefel India Private Limited, India US Pharmaceuticals, U.S.A.

US GMS Financial Services, U.S.A.

GlaxoSmithKline Ilaclari Sanayi ve Ticaret AS, Turkey GlaxoSmithKline Manufacturing SPA, Italy

49 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Statement of Profit and Loss under ‘Rent'' in Note 35.

11 Advance income-tax (net) represents payments in excess of provisions of Rs. 2980,21.26 lakhs (Previous year - Rs. 2747,20.91 lakhs) and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provision pending the final outcome of a litigation.

12 The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2013 and the provision based on the figures for the remaining nine months up to 31st December, 2013, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2013 to 31st March, 2014.

13 Other Loans and advances are net of allowances for doubtful loans and advances aggregating Rs. 29,96.83 lakhs (Previous year - Rs. 30,06.19 lakhs).

14 Previous year''s figures have been regrouped wherever necessary.


Dec 31, 2012

GENERAL INFORMATION

GlaxoSmithKline Pharmaceuticals Limited (''the Company'') is a public limited company and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The Company is engaged interalia, in the business of manufacturing, distributing and trading in pharmaceuticals.

(a) Rights, preferences and restrictions attached to equity shares :

The Company has one class of equity shares having a par value of Rs. 10 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

Terms of repayment

Interest free Sales Tax Loan from SICOM Limited as at 31st December, 2012 of Rs. 4,59.33 lakhs (Previous year - Rs. 4,90.52 lakhs) includes Rs. 20.94 lakhs (Previous year - Rs. 42.78 lakhs) availed under the 1988 Sales Tax deferment Scheme repayable in three installments, closing on 31st January, 2014 and Rs. 4,38.39 lakhs (Previous year - Rs. 4,47.74 lakhs) under the 1993 Sales Tax deferment Scheme repayable in twenty nine instalments closing on 30th April, 2021. The current maturity amount of Rs. 45.09 lakhs (Previous year - Rs. 31.19 lakhs) of the loan has been disclosed under Note 8 - Other Current Liabilities.

1 The demand of Rs. 71,79 lakhs made by the Central Government on the Company in respect of Betamethasone bulk drugs and formulations made therefrom during the period May 1981 to August 1987 has been under litigation for a period spanning nearly 30 years. Pursuant to the special leave petition of the Central Government in the Supreme Court of India against the Delhi High Court''s Judgment and Order dated 19th October, 2001 which was held in favour of the Company, the Supreme Court has, vide its Judgement and Order dated 30th March, 2011, upheld the demand. The Company had accrued a liability of Rs. 18,68 lakhs in earlier years and a further provision of Rs. 53,11 lakhs was accrued in 2011.

Based on a legal advice, the Company has filed an Application in the Supreme Court seeking, inter alia, clarifications on some aspects of the Judgement and directions for recomputation of the demand. Simultaneously, the Company without prejudice to and subject to the outcome of the Application filed in the Supreme Court, has tendered as a further deposit, an amount of Rs. 63,60 lakhs, which together with the amount of Rs. 8,19 lakhs previously deposited with the Government, aggregates to the demand of Rs. 71,79 lakhs made by the Government in November 1990. The Company filed a Review Petition with the Supreme Court which was rejected in March 2012.

In October 1996, the Government had claimed interest of Rs. 117,66 lakhs for the period 12th May, 1981 to 17th October, 1996, for which no provision was made in earlier years. The Government has vide letter dated 4th May, 2011 called upon the Company to discharge the entire liability, including upto date interest calculated at 15% p.a., and has vide letter dated 10th October, 2011, raised a demand on the Company for the interest amount amounting to Rs. 247,44 lakhs. Without prejudice to the position that interest is not payable, the Company has recognized a provision of Rs. 247,44 lakhs in respect of the Government''s claim for interest in 2011. The Company has filed a Writ Petition at Delhi High Court against the above demand which has been admitted. The Company also filed stay applications which have been dismissed and has filed a Special Leave Petition (SLP) before the Supreme Court for stay of the interest demand until final determination of the Writ Petition filed in the Delhi High Court. The Supreme Court on hearing the above SLP passed an order on 3rd April, 2012. The said order stayed the Demand Notice dated 10th October, 2011 during the pendency of the Writ Petition at the Delhi High Court subject to the Company depositing Rs. 136,82 lakhs in three equal installments within six month''s time from the date of order. All three instalments have been deposited with the Government as of date. The Supreme Court, vide its order dated 5th October, 2012, directed the Delhi High Court to dispose of the Writ Petition as expeditiously as possible. The Delhi High Court has listed the Writ Petition for hearing on 21st February, 2013.

2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983. Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/ or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Company''s stand that the demand is not sustainable has been confirmed by an eminent counsel. The Government of India''s application in the Supreme Court praying that the writ petition be transferred to the Supreme Court from the Bombay High Court was not allowed and the Company''s writ petition will now be heard by the Bombay High Court.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of India''s sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Long term provisions and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under long term loans and advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunal''s order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Company''s favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

4 Employee benefits expenses in Note 35 include amounts subject to approval of members in ensuing Annual General Meeting - Rs. 80.18 lakhs (Previous year - Nil).

5 The recurring expenditure on research and development charged off to revenue amounts to Rs. 2,40.34 lakhs (Previous year - Rs. 3,82.79 lakhs).

6 Miscellaneous expenses in Note 36 include loss on foreign currency transactions (net) Rs. 3,14.72 lakhs (Previous year - Rs. 6,05.80 lakhs).

7 " Reimbursement of expenses (net)" in Note 36 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 3,25.98 lakhs (Previous year - Rs. 3,00.37 lakhs), from subsidiary company Rs. 3,20.63 lakhs (Previous year - Rs. 5,31.59 lakhs), from Stiefel India Private Limited Rs. 15.53 lakhs (Previous year - Rs. 14.50 lakhs), from GlaxoSmithKline Pte Limited Rs. 62.04 lakhs (Previous year - Rs. 59.86 lakhs), from GlaxoSmithKline Service Unlimited Rs. 80.68 lakhs (Previous year - 23.95 lakhs) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 11,00.66 lakhs (Previous year - Rs. 10,04.34 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

8 Employee Benefits:

The Company obtained actuarial reports as required by the Accounting Standard 15, Employee Benefits (revised 2005) [‘the revised AS 15''], notified under sub-section (3C) of Section 211 of the Companies Act, 1956 based on which disclosures have been made in the financial statements for the year ended 31st December, 2012.

The disclosures as required by the revised AS 15 are as given below:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees / appropriate authorities. The Company''s defined contribution plans are superannuation and employees'' pension scheme (under the provisions of the Employees'' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The liability of the Company on the exempt Provident Fund managed by the trustees is restricted to the interest shortfall if any. The employees of the Company are also entitled to leave encashment and compensated absences as per the Company''s policy.

3 The Guidance Note on Implementing AS 15, ‘Employee Benefits'' issued by the Accounting Standard Board (ASB) of the Institute of Chartered Accountants of India states that Provident Funds set up by employers that guarantee a specified rate of return and which require interest shortfall to be met by the employer would be defined benefit plans in accordance with the requirements of paragraph 26(b) of AS 15. Pursuant to the Guidance Note, the liability in respect of the shortfall of interest earnings of Fund is Nil determined on the basis of an actuarial valuation. The interest shortfall liability being "Other Long Term Employee Benefits", detailed disclosures are not required.

4 The liability for leave encashment and compensated absences as at year end is Rs. 27,37.69 lakhs (Previous year - Rs. 24,63.29 lakhs) #.

10 The Company has only one reportable segment which is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

11 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, U.K.

Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K.

Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline plc, U.K.

GlaxoSmithKline Finance plc, U.K.

SmithKline Beecham Limited, U.K.

Wellcome Limited, U.K.

The Wellcome Foundation Limited, U.K.

Wellcome Consumer Healthcare Limited, U.K.

* no transactions during the year

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year:

SmithKline Beecham Private Limited, Sri Lanka

GlaxoSmithKline Pakistan Limited, Pakistan

GlaxoSmithKline Asia Private Limited, India

GlaxoSmithKline Consumer Healthcare Limited, India

GlaxoSmithKline Biologicals S.A., Belgium

GlaxoSmithKline Services Unlimited, U.K.

GlaxoSmithKline Export Limited, U.K.

SmithKline Beecham Pharmaceuticals R & D, U.S.

Glaxo Operations UK Limited, U.K

GlaxoSmithKline Pte Limited, Singapore

GlaxoSmithKline Australia Pty Limited, Australia

GlaxoSmithKline Trading Services Limited, Ireland

GlaxoSmithKline Limited, Hong Kong

GlaxoSmithKline LLC, U.S.A

GlaxoSmithKline Limited, Kenya

Stiefel India Private Limited, India

Glaxo Wellcome Ceylon Ltd., Sri Lanka

US Pharmaceuticals, U.S.A.

GlaxoSmithKline Ilaclari Sanayi ve Ticaret AS, Turkey

GlaxoSmithKline Manufacturing SPA, Italy

12 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Statement of Profit and Loss under ‘Rent'' in Note 36.

13 Advance income-tax (net) represents payments in excess of provisions of Rs. 2747,20.91 lakhs (Previous year - Rs. 2452,83.36 lakhs) and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provision pending the final outcome of a litigation.

14 The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2012 and the provision based on the figures for the remaining nine months upto 31st December, 2012, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2012 to 31st March, 2013.

15 Previous year figures

The financial statements for the year ended December 31, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended December 31, 2012 are prepared as per Revised Schedule VI. Accordingly, the previous year figures have also been reclassified to conform to this year''s classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of financial statements.

The accompanying notes are an integral part of the financial statements.


Dec 31, 2009

1 The Company received a demand for Rs. 71,79 lakhs from the Central Government contained in its orders dated 18th June, 1990 and 16th November, 1990 in respect of prices relating to Betamethasone bulk drugs and formulations therefrom. These orders were challenged by the Company by a writ petition in the Honble High Court at Delhi. After hearing the submissions of the Company, as well as the Government, in the writ petition, the Honble High Court by its judgement and order dated 19th October, 2001, was pleased to set aside the impugned demands raised by the Central Government. The claim to interest made by the Government vide its letter dated 29th October, 1996, demanding interest of Rs. 117,66 lakhs for the period 12th May, 1981 to 17th October, 1996 thereby, does not survive. The Honble High Court has also directed that the Company be given an opportunity to present its case with full facts to enable the Central Government to raise a fresh demand. The Company has sent a letter to the Government giving details of the quantities based on which the demand has to be raised as per the judgement of the Honble High Court at Delhi and has intimated to the Government that according to the Company, after considering the set offs which the Company has claimed, the amount payable would be Rs. 18,68 lakhs. The Company had accrued a liability of Rs. 18,68 lakhs of which an amount of Rs. 8,19 lakhs has been paid to the Government in the earlier years. Accordingly, the Company has retained the liability of Rs. 10,49 lakhs in the Balance Sheet.

The Central Government has filed a special leave petition in the Supreme Court against the Delhi High Courts judgement and order dated 19th October, 2001. The Supreme Court has admitted the said special leave petition, which has come up for hearing and disposal.

2 Matters in respect of erstwhile Burroughs Wellcome (India) Limited (BWIL):

(i) The Government of India, Ministry of Chemicals and Fertilisers, New Delhi, passed a final order on 21st July, 1993, directing erstwhile BWIL to pay an amount of Rs. 1,91.15 lakhs along with interest due thereon from the date of default into the Drugs Prices Equalisation Account (DPEA) in respect of a bulk drug procured by erstwhile BWIL during the period April 1981 to April 1983.

Erstwhile BWIL filed a writ petition in August 1993 which was admitted by the Bombay High Court. After hearing both the parties, the High Court granted an interim injunction restraining the Government of India from taking any action in furtherance of and/or implementation of the order dated 21st July, 1993 or from in any manner seeking to compel erstwhile BWIL to deposit any amount into the DPEA, pending the hearing and final disposal of the petition on the condition that erstwhile BWIL furnishes a bank guarantee for Rs. 2,00 lakhs from a nationalised bank and undertakes to pay the amount demanded with interest at the rate of 20% per annum in case the petition fails.

Erstwhile BWIL had accordingly furnished the required bank guarantee. If calculated on the basis of correct data, taking into account set offs claimable for earlier years for which data has been provided by erstwhile BWIL, no amount will be payable by the Company and accordingly no provision in that respect is considered necessary. The Companys stand that the demand is not sustainable has been confirmed by an eminent counsel. In the meanwhile, the Government of India has filed an application in the Supreme Court praying that the writ petition (along with several others filed by other pharmaceutical companies) be transferred to the Supreme Court from various High Courts. The Supreme Court is yet to hear the transfer petition.

(ii) Erstwhile BWIL had made an application to the Government of India for approval under Section 198(4) of the Companies Act, 1956, in respect of payment of remuneration to the Managing Director and three whole time Directors amounting to Rs. 10.93 lakhs for the year ended 31st August, 1986, which was in accordance with the minimum remuneration provided in the agreement entered into with them prior to erstwhile BWIL becoming public, which required such Government of Indias sanction. The approval is still awaited.

(iii) Remittances in transit represent monies deposited by customers in favour of erstwhile BWIL with banks in Zambia - Rs. 0.31 lakhs and in Tanzania - Rs. 5.61 lakhs, the remittance of which is pending clearance of the authorities in those countries.

3 Matters in respect of erstwhile SmithKline Beecham Pharmaceuticals (India) Limited:

(i) Rs. 1,44.44 lakhs received from Beckman Instruments International S.A. on account of disputed alleged additional commission has been included under Sundry Creditors and Income tax paid thereon aggregating to Rs. 64.77 lakhs has been included under Loans and Advances. The Company is contesting the matter with the concerned authorities.

(ii) Refund of surtax Rs. 96.81 lakhs, and interest thereon amounting to Rs. 48.52 lakhs, received during 1994, have not been adjusted against the provision for tax in the books of account and recognised as income respectively, since the Income tax department had filed a reference application against the income tax tribunals order which was pending before the High Court of Karnataka. The Company has received an order dated 18th April, 2007 from the High Court of Karnataka which is partially in the Companys favour. On the basis of the aforesaid order, Income Tax Appellate Tribunal (ITAT), Bangalore will pass an order giving directions. On receipt of the ITAT order, the Company will take appropriate steps in the matter.

Previous year

Rupees in Rupees in lakhs lakhs

4 Contingent Liabilities not provided for:

(i) Cheques discounted with banks 3,97.41 6,85.69

(ii) In respect of claims made against the Company not acknowledged as debts by the Company

Sales tax matters . . 29,73.24 32,29.65

Excise matters 7,98.19 7,98.63

Service tax matters . . 2,42.18 2,42.18

Labour matters 37,41.03 33,75.66

Other legal matters . . . . . . 8,62.09 8,69.90

which net of current tax amount to 56,87.90 56,21.42

(iii) Taxation matters in respect of which appeals are pending

Tax on matters in dispute 110,78.74 87,87.48

Other consequential matters (net of tax) 3,74.39 3,74.39

Notes:

Future cash outflows in respect of (i) above are dependant on the return of cheques by banks.

Future cash outflows in respect of (ii) and (iii) above are determinable on receipt of decisions / judgements pending with various forums / authorities.

5 The tax year for the Company being the year ending 31st March, the provision for taxation for the year is the aggregate of the provision made for the three months ended 31st March, 2009 and the provision based on the figures for the remaining nine months up to 31st December, 2009, the ultimate tax liability of which will be determined on the basis of the figures for the period 1st April, 2009 to 31st March, 2010.

6 In the previous year:

(a) Profit on sale / redemption of investments (net) (Exceptional Item) comprises profit on sale of long term investments amounting to Rs. 132,66.51 lakhs, current investments of Rs. 14,54.07 lakhs and loss on sale of current investments of Rs. 6.74 lakhs.

(b) Miscellaneous expenses in Schedule - 16 Operating and Other Expenses include loss on sale of long term investments Rs. 5.69 lakhs.

7 The recurring expenditure on research and development charged off to revenue amounts to Rs. 4,66.82 lakhs (Previous year - Rs. 4,63.69 lakhs).

8 "Recovery of expenses (net)" in Schedule 16 are amounts recovered from GlaxoSmithKline Asia Private Limited Rs. 7,02.62 lakhs (Previous year - Rs. 10,61.83 lakhs), from subsidiary company Rs. 5,12.25 lakhs (Previous year - Rs. 4,13.61 lakhs), from GlaxoSmithKline Pte Limited Rs. 28.03 lakhs (Previous year - Rs. 11.18 lakhs), from GlaxoSmithKline S.A.E Rs. 15.29 lakhs (Previous year - Rs. 14.17 lakhs), from GlaxoSmithKline Pharmaceutical Sdn Bhd Rs. 25.54 lakhs (Previous year - Rs. 22.26 lakhs) and paid to GlaxoSmithKline Consumer Healthcare Limited Rs. 8,89.83 lakhs (Previous year - Rs. 7,27.07 lakhs) towards the value of costs apportioned, in accordance with the agreements on allocation of expenses with the companies.

9 Employee Benefits

The disclosures as required as per the revised AS 15 are as under:

1 Brief description of the Plans

The Company has various schemes for long-term benefits such as provident fund, superannuation, gratuity and post retirement medical. In case of funded schemes, the funds are recognised by the Income tax authorities and administered through trustees/ appropriate authorities. The Companys defined contribution plans are superannuation and employees pension scheme (under the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The Companys defined benefit plans include gratuity and post retirement medical. In terms of the Guidance on implementing the revised AS 15, issued by the Accounting Standards Board of the Institute of Chartered Accountants of India, the provident fund set up by the Company is treated as a defined benefit plan since the Company has to meet the interest shortfall, if any. However, as at the year end no shortfall remains unprovided for. As advised by an independent actuary, itis not practical or feasible to actuarially value the liability considering that the rate of interest as notified by the Government can vary annually. Further the pattern of investments for investible funds is as prescribed by the Government. Accordingly other related disclosures in respect of provident fund have not been made. The employees of the Company are also entitled to leave encashment and compensated absences as per the Companys policy.

10 The Company has only one reportable segment which Is Pharmaceuticals. Accordingly, no separate disclosures of segment information have been made.

11 Related Party disclosures

Related party disclosures, as required by Accounting Standard 18, "Related Party Disclosures", notified under sub-section (3C) of Section 211 of the Companies Act, 1956 are given below:

1 Relationships (during the year):

(i) Shareholders (the GlaxoSmithKline (GSK) Group shareholding) in the Company Glaxo Group Limited, U.K. Eskaylab Limited, U.K.

Burroughs Wellcome International Limited, U.K. Castleton Investment Limited, Mauritius

Holding company / ultimate holding company of the above shareholders *

GlaxoSmithKline pic, U.K.

GlaxoSmithKline Finance pic, U.K.

SmithKline Beecham pic, U.K.

Wellcome Limited, U.K.

Wellcome Foundation Limited, U.K.

Wellcome Consumer Healthcare Limited, U.K.

* no transactions during the year

(ii) Subsidiary of the Company

Biddle Sawyer Limited, a wholly owned subsidiary of the Company

(iii) Other related parties in the GlaxoSmithKline (GSK) Group where common control exists and with whom the Company had transactions during the year: SmithKline Beecham Private Limited, Sri Lanka GlaxoSmithKline Bangladesh Limited, Bangladesh GlaxoSmithKline Pakistan Limited, Pakistan GlaxoSmithKline Asia Private Limited, India GlaxoSmithKline Consumer Healthcare Limited, India GlaxoSmithKline Biologicals S.A., Belgium GlaxoSmithKline Services Unlimited, U.K. Laboratoire GlaxoSmithKline S.A.S., France GlaxoSmithKline Export Limited, U.K. GlaxoSmithKline Pte Limited, Singapore GlaxoSmithkline Philippines Inc., Philippines GlaxoSmithKline Australia Pty Limited, Australia GlaxoSmithKline Canada Inc, Canada GlaxoSmithKline Trading Services Limited, Ireland GlaxoSmithKline Limited, Hong Kong Stiefel India Private Limited, India US Pharmaceuticals, U.S.A.

(iv) Directors and members of GSK India Management Team and their relatives:

Dr. A. Banerjee Mr. P.V. Nayak

Mr. A.M. Nimbalkar (w.e.f 27th July, 2009) Mr. R. Bartaria (w.e.f 23rd April, 2009)

Mr. C.T. Renganathan (w.e.f 22nd May, 2009) Mr. R.C. Sequeira

Mr. D.S. Parekh Mr. R.R. Bajaaj

Mr. D. Sundaram (w.e.f 27th July, 2009) Mr. R. Limaye (up to 30th April, 2009)

Mr. H. Singh (up to 23rd March, 2009) Dr. S. Joglekar

Dr. H.B. Joshipura Mr. Sunder Rajan

Mr. H. Buch (w.e.f 23rd April, 2009) Mr. S. Khanna

Mr. M.B. Kapadia Mrs. S. Patel

Mr. M.K. Vasanth Kumar Mr. V. Narayanan

Dr. M. Reilly (up to 27th July, 2009) * Mr. V. Thyagarajan

Mr. N. Kaviratne Mrs. Neeru Nayak (up to 15th October, 2009) Mr. P. Bains (up to 27th July, 2009) *

* no transactions during the year

12 Disclosures as required by Accounting Standard 19, "Leases", notified under sub-section (3C) of Section 211 of the Companies Act, 1956, are given below:

(i) The Company has taken various residential, office and godown premises under operating lease or leave and licence agreements. These are generally not non-cancellable and range between 11 months and 3 years under leave and licence, or longer for other leases and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits under certain agreements.

(ii) Lease payments are recognised in the Profit and Loss Account under Rent in Schedule 16.

13 Amount recognised as expense for the year under the long-term incentive plan is Rs. 1,72.64 lakhs (Previous year - Rs. 1,26.03 lakhs).

The total carrying amount of the corresponding liability at the year end is Rs. 3,21.26 lakhs (Previous year - Rs. 2,69.92 lakhs).

14 Provision for taxation represents provisions in excess of payments of Rs. 1938,85.90 lakhs and includes a net tax refund with interest of Rs. 110,35.00 lakhs which has been held as provison pending the final outcome of a litigation. (Previous year - Current taxation represents payments in excess of provisions of Rs. 1709,15.11 lakhs).

15 Fringe benefits tax represents payments in excess of provisions of Rs. 30,37.48 lakhs (Previous year - provision in excess of payments of Rs. 28,35.00 lakhs ).

16 Previous years figures have been regrouped wherever necessary.

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