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Notes to Accounts of Lupin Ltd.

Mar 31, 2023

35. Commitments

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, '' 2,195.0 million (31.03.2022''2,770.5 million).

b) Equity commitment in subsidiaries amounting to '' 1,232.6 million (31.03.2022''1,736.9 million) and other commitments in subsidiaries amounting to '' 500.0 million (31.03.2022''1,000.0 million).

c) Other commitments - Non-cancellable short-term leases is '' 3.4 million (31.03.2022''23.6 million).

Low value leases is '' 53.1 million (31.03.2022''249.4 million).

d) Dividends proposed of '' 4/- (31.03.2022''4/-) per equity share is subject to the approval of the shareholders of the Company at the Annual General Meeting, but not recognised as a liability in the financial statements is '' 1,820.1 million (31.03.2022''1,818.0 million).

e) There are product supply commitments pursuant to contracts with various customers under dossier agreements.

f) There are product procurement commitments pursuant to contracts with suppliers under supply agreements.

g) Financial and corporate guarantees issued by the Company on behalf of subsidiaries are disclosed in note 36.

36. Contingent Liabilities

('' in million) As at As at

Particulars 31.03.2023 31.03.2022

a) Income tax demands/matters on account of deductions/allowances in earlier years, 1,770.2 1,765.1 pending in appeals and potential tax demands in future years in respect of some

uncertain tax issues ['' 353.9 million (31.03.2022''370.1 million) consequent to department preferring appeals against the orders of the Appellate Authorities passed in favour of the company].

Amount paid there against and included under “Non-Current Tax Assets (Net)”

'' 1,360.3 million (31.03.2022''1,878.6 million)

b) Customs Duty, Excise duty, Service tax and Sales tax demands for input tax credit 127.7 121.8 disallowances and demand for additional Entry Tax arising from dispute on applicable

rate are in appeals and pending decisions. Amount paid there against and included under note 10 “Other Non-Current Assets” '' 23.9 million (31.03.2022''23.9 million)

c) Claims against the Company not acknowledged as debts [excluding interest (amount 2,039.3 1,830.2 unascertained) in respect of a claim] for transfer charges of land, octroi duty, local body

tax, employee claims, power*, trademarks, pricing and stamp duty.

Amount paid there against without admitting liability and included under note 10 “Other Non-Current Assets” '' 48.8 million (31.03.2022''201.8 million).

*Demand raised by Maharashtra State Electricity Development Corporation Limited (MSEDCL) challenging Group Captive Generating Plant (GCGP) status of power supplier''s plant at Tarapur and Pune location.

d) Outstanding credit facilities against corporate guarantees given in respect of 32,454.5 29,271.6 credit facilities sanctioned by bankers of subsidiary companies for the purpose of

acquisitions, working capital and other business requirements aggregating '' 35,295.3 million (31.03.2022''32,012.6 million).

e) Financial guarantee aggregating to '' 5,502.1 million (31.03.2022''5,075.1 million) - -given to third party on behalf of subsidiaries for contractual obligations.

f) From time to time, Lupin Inc. (LI) and its subsidiaries are involved in various intellectual property claims and legal proceedings, which are considered normal to its business, the liability, if any, may fall on Lupin Limited. Some of this litigation has been resolved through settlement.

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgment/decisions pending with the relevant authorities or settlement, as the case may be. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company''s financial condition, results of operations or cash flows. The Company believes that the probability of outflow is low to moderate considering the merits of the cases and stages of the litigation.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes that the probability of outflow is low to moderate considering the merits of the case and the ultimate disposition of these matters may not have material adverse effect on its Financial Statements.

38. Revenue (Ind AS 115):

a) The operations of the Company are limited to only one segment viz. pharmaceuticals and related products. Revenue from contract with customers is from sale of manufactured goods and rendering of research services. Sale of goods are made at a point in time and revenue is recognised upon satisfaction of the performance obligations which is typically upon dispatch/delivery depending on the terms of the sale. The Company has a credit evaluation policy based on which the credit limits for the trade receivables are established. There is no significant financing component as the credit period provided by the Company is not significant.

Income from research services including sale of technology/know-how (rights, licenses and other intangibles) is recognized in accordance with the terms of the contract with customers when the related performance obligation is completed.

The Company enters into certain dossier sales, licensing and supply arrangements that, in certain instances, include certain performance obligations. Based on an evaluation of whether or not these obligations are inconsequential or perfunctory, the Company recognises or defers the upfront payments received under these arrangements.

Variable components such as discounts, chargebacks, rebates, refund liabilities etc. continues to be recognised as deductions from revenue in compliance with Ind AS 115.

39. Segment Reporting:

The Company has presented data relating to its segments based on its consolidated financial statements which are presented in the same Integrated Annual Report. Accordingly in terms of paragraph 4 of the Indian Accounting Standard (Ind AS 108) "Operating Segments” no disclosures related to segments are presented in these standalone financial statements.

42. Share-based payment arrangements:(i) Employee stock options - equity settled

The Company implemented "Lupin Employees Stock Option Plan 2003” (ESOP 2003), "Lupin Employees Stock Option Plan 2005” (ESOP 2005), "Lupin Subsidiary Companies Employees Stock Option Plan 2005” (SESOP 2005), "Lupin Employees Stock Option Plan 2011” (ESOP 2011), "Lupin Subsidiary Companies Employees Stock Option Plan 2011” (SESOP 2011), "Lupin Employees Stock Option Plan 2014” (ESOP 2014) and "Lupin Subsidiary Companies Employees Stock Option Plan 2014” (SESOP 2014) in earlier years, as approved by the Shareholders of the Company and the Nomination and Remuneration Committee of the Board of Directors (the Committee).

The Committee determines which eligible employees will receive options, the number of options to be granted, the vesting period and the exercise period. The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of '' 2 each. The options issued under the above schemes vest in a phased manner after completion of the minimum period of one year with an exercise period of ten years from the respective grant dates.

The weighted average grant date fair value of options granted under Category C during the years ended 31.03.2023 and 31.03.2022 was '' nil and '' nil per option, respectively.

The weighted average share price during the years ended 31.03.2023 and 31.03.2022 was '' 692.7 and '' 981.1 per share respectively.

Valuation of stock options

The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. The key inputs and assumptions used are as follows:

Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted.

Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Nomination and Remuneration Committee.

Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.

Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live.

The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

Expected dividends: Expected dividend yield has been calculated as an average of dividend yields for four years preceding the date of the grant.

Risk free interest rate: The risk free interest rate on the date of grant considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero coupon yield curve for Government Securities.

These assumptions reflect management''s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company''s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years. The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

(ii) Employee stock options - Cash settled

The cost of cash-settled transactions is measured initially at fair value at the grant date using a Binomial Option Pricing Model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognised in employee benefits expense.

43. Post-Employment Benefits:(i) Defined Contribution Plans:

The Company makes contributions towards provident and pension fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised '' 163.4 million (31.03.2022''173.2 million) for superannuation contribution and '' 264.7 million (31.03.2022''282.0 million) for provident and pension fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC 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.

In addition to the above-mentioned scheme the Company also pays additional gratuity as ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at 31.03.2023. The present value of the defined benefit obligations and the related current service cost and past service cost were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect the following table sets out the status of the gratuity plan and the amounts recognised in the Company''s financial statements as at the Balance Sheet date.

B) The provident fund plan of the Company, except at one plant, is operated by "Lupin Limited Employees Provident Fund Trust” ("Trust”), a separate legal entity. Eligible employees receive benefits from the said Provident Fund.

Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee''s salary.

The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government of India. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Board of Trustees administer the contributions made by the Company to the schemes and also defines the investment strategy to act in the best interest of the plan participants.

The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan in accordance with Ind AS 19 "Employee Benefits”. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund as at 31.03.2023 and based on the same, there is no shortfall towards interest rate obligation.

Based on the actuarial valuation obtained, the following is the details of fund and plan assets.

Deferred tax assets have not been recognized on capital losses of '' 1,087.3 million (previous year Nil) because currently there is no reasonable certainty that the Company will be utilizing the benefits in near future. This loss can be carried forward till 31/03/2031.

Management judgement is required in determining provision for income tax, deferred income tax, assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered. Any changes in future taxable income would impact the recoverability of deferred tax assets.

47. Patent Litigation Settlement for Glumetza:

During the previous year, the Company and its subsidiary, agreed to settle the dispute with respect to antitrust class action filed, without admitting any violation of law with the two plaintiffs representing a majority of the claims for an amount of USD 252.9 million ('' 18,783.8 million) [including USD 4.9 million ('' 374.8 million) towards litigation and settlement related expenses] which was recognized as business compensation expense.

48. Acquisition through Business Combination:Brand Acquisition - Anglo French Drugs and Industries Limited (AFDIL):

The Company has acquired market leading brands in nutraceuticals, CNS, skin and respiratory segments from Anglo French Drugs and Industries Limited and its Associates to strengthen the Company''s India Formulation business. The purchase price allocation carried out during the current year resulted in goodwill of '' 158.6 million. The following table summarizes the allocation of purchase price consideration, for the fair values of the assets acquired and liabilities assumed and the resultant Goodwill.

- The recoverable amounts of the above goodwill as at 31.03.2023 have been assessed using a value-in-use model.

Value in use is generally calculated as the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows.

The key assumptions used in the estimation of the recoverable amount are set out below:

- The values assigned to the key assumptions represent management''s assessment of future trends in the relevant industries and have been based on historical data from both external and internal sources.

- The cash flow projections are based on five years specific estimates, five years estimates developed using internal forecasts and a terminal growth rate thereafter considering the value in use of cash generating units is better reflected by projections for 10 years due to the business life cycle and longer term gestation of products. The planning horizon reflects the assumptions for short-to-midterm market developments and have been adjusted for the risks of competition, product life cycle etc.

- Discount rate reflects the current market assessment of the risks. The discount rate is estimated based on the weighted average cost of capital. Post-tax discount rate used ranged from 11.3 % for the year ended 31.03.2023.

- The Company believes that any reasonably possible change in the key assumptions on which a recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the above goodwill.

The amount required to be spent by the company during the year is '' 290.3 million (31.03.2022''334.8 million).

Actual amount spent during the year is '' 292.4 million. Excess amount of '' 2.1 million is carried forward to next year and presented under prepaid expenses. No amount was spent during the year towards construction/acquisition of any asset relating to CSR expenditure and there are no outstanding amounts payables towards any other purposes.

Unspent amount as on 31.03.2023 has been deposited by the implementing agency for the ongoing projects with specified bank Account within the timelines.

52. Financial Instruments:Financial instruments - Fair values and risk management:

A. Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

B. Measurement of fair values:

Valuation techniques and significant unobservable inputs:

The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values for financial instruments measured at fair value in the statement of financial position as well as the significant unobservable inputs used.

C. Financial risk management:

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

- Credit risk;

- Liquidity risk; and

- Market risk

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 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 periodically to reflect changes in market conditions and the Company’s activities. The Company, through its training, 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 adhoc reviews of risk management controls and procedures, the results of which are reported to the audit committee.

i. Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. Credit risk is managed 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. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade receivables

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment.

As at 31.03.2023, the carrying amount of the Company''s largest customer (a wholly owned subsidiary in the USA) was '' 9,257.4 million (31.03.2022''12,801.7 million)

Expected credit loss assessment

The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments, available press information etc.) and applying experienced credit judgement.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. 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.

Cash and cash equivalents

As at the year end, the Company held cash and cash equivalents of '' 856.6 million (31.03.2022 '' 591.0 million). The cash and cash equivalents are held with banks.

Other Bank Balances

Other bank balances are held with banks.

Derivatives

The derivatives are entered into with banks.

Investment in mutual funds, non-convertible debentures and commercial papers

The Company limits its exposure to credit risk by generally investing in liquid securities, Non-Convertible debentures and Commercial papers only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter parties.

Other financial assets

Other financial assets are neither past due nor impaired.

ii. Liquidity risk:

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

The Company has obtained fund and non-fund based working capital lines from various banks. The Company invests its surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds, non-convertible debentures, commercial papers which carry no/low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.

Exposure to liquidity risk

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

iii. Market Risk:

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

Currency risk

The Company is exposed to currency risk on account of its operations in other countries. The functional currency of the Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate in the future. Consequently, the Company uses both derivative instruments, i.e., foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

The Company enters into foreign currency forward contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables/receivables.

The Company also enters into derivative contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivatives contracts are entered into by the Company for hedging purposes only and are accordingly classified as cash flow hedge.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates, if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.

The risk estimates provided assume a change of 100 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Commodity rate risk

The Company''s operating activities involve purchase and sale of Active Pharmaceutical Ingredients (API), whose prices are exposed to the risk of fluctuation over short periods of time. Commodity price risk exposure is evaluated and managed through procurement and other related operating policies. As of 31.03.2023 and 31.03.2022 the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

53. Capital Management:

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

The Board of Directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings, less cash and cash equivalents, other bank balances and current investments.

54. Hedge accounting:

The Company’s risk management policy is to hedge above 15% of its estimated net foreign currency exposure in respect of highly probable forecast sales over the following 12-24 months at any point in time. The Company uses forward exchange contracts to hedge its currency risk. Such contracts are generally designated as cash flow hedges.

The forward exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1. These contracts have a maturity of 12-24 months from the reporting date.

The Company’s policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in the cash flows of the hedged item using the hypothetical derivative method.

Offsetting arrangements

(i) Trade receivables and payables

The Company has certain customers which are also supplying materials. Under the terms of agreement there are no amounts payable by the Company that are required to be offset against receivables.

(ii) Derivatives

The Company enters into derivative contracts for hedging future sales. In general, under such agreements, the amounts owed by each counterparty on a single day in respect of all the transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other.

66. Donations under Note 34 includes donations for political purpose made through Electoral Bonds '' 180.0 million (31.03.2022 - '' Nil)

67. Other Statutory Information

(A) The Company has not entered into any transactions with Struck off Companies under section 248 of the Companies Act, 2013 or section 560 of the Companies Act, 1956 for the year ended 31 March 2023 and 31 March 2022.

(B) The Company has not traded or invested in Crypto Currency or Virtual Currency.

(C) The Company does not have any transaction not recorded in the books of account that has been surrendered or not disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 for the year ended 31 March 2023 and 31 March 2022.

(D) The Company has complied with number of layers prescribed under clause (87) of Section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017.

(E) There is no charge or satisfaction of charge which is yet to be registered with ROC beyond the statutory period.

(F) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

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


Mar 31, 2022

c) Rights attached to Equity Shares

The Company has only one class of equity shares with voting rights having a par value of '' 2 per share.

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

During the year ended March 31, 2022, the amount of dividend per equity share distributed to equity shareholders is '' 6.5 (Previous year ended March 31, 2021, '' 6.0)

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

33. Commitments:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, '' 2770.5 million (previous year '' 1758.1 million).

b) Equity commitment in subsidiaries amounting to '' 1736.9 million (previous year '' 17180.8 million) and other commitments in subsidiaries amounting to '' 1000.0 million (previous year '' 1500.0 million)

c) Other commitments - Non-cancellable short term leases is '' 23.6 million (previous year '' 53.2 million).

Low value leases is '' 249.4 million (previous year '' 290.2 million).

d) Dividends proposed of '' 4/- (previous year '' 6.50) per equity share before the financial statements approved for issue, but not recognised as a liability in the financial statements is '' 1818.0 million (previous year '' 2949.2 million).

e) There are product supply commitments pursuant to contracts with various customers under dossier agreements.

f) There are product procurement commitments pursuant to contracts with suppliers under supply agreements.

g) Financial and corporate guarantees issued by the company on behalf of subsidiaries are disclosed in note 34.

34. Contingent Liabilities:

('' in million)

Particulars

As at 31.03.2022

As at 31.03.2021

a) Income tax demands/matters on account of deductions/allowances in earlier years, pending in appeals and potential tax demands in future years in respect of some uncertain tax issues ['' 370.1 million (previous year '' 439.4 million) consequent to department preferring appeals against the order of the Appellate Authority passed in favour of the company]

Amount paid there against and included under "Non-Current Tax Assets (Net)”

'' 1878.6 million (previous year '' 1239.9 million

1765.1

2258.7

b) Customs duty, Excise duty, Service tax and Sales tax demands for input tax credit disallowances and demand for additional Entry Tax arising from dispute on applicable rate are in appeals and pending decisions. Amount paid there against and included under Note 7 "Other Non-Current Assets” '' 23.9 million (previous year '' 23.9 million).

121.8

122.6

c) Claims against the Company not acknowledged as debts [excluding interest

(amount unascertained) in respect of a claim] for transfer charges of land, octroi duty, local body tax, employee claims, power*, trademarks, pricing and stamp duty.

Amount paid there against without admitting liability and included under Note 7 "Other Non-Current Assets” '' 201.8 million (previous year '' 206.8 million). *Demand raised by Maharashtra State Electricity Development Corporation Limited (MSEDCL) challenging Group Captive Generating Plant (GCGP) status of power supplier''s Plant at Tarapur and Pune location.

1830.2

1814.9

d) Outstanding credit facilities against corporate guarantees given in respect of

credit facilities sanctioned by bankers of subsidiary companies for the purpose of acquisitions, working capital and other business requirements aggregating '' 32012.6 million (previous year '' 49702.5 million).

29271.6

44559.7

e) Financial guarantee aggregating to '' 5075.1 million (previous year '' 3399.6

million) given to third party on behalf of subsidiaries for contractual obligations.

f) From time to time, Lupin Inc. (LI) and its subsidiaries are involved in various intellectual property claims and legal proceedings, which are considered normal to its business, where the liability, if any, may fall on Lupin Limited.

Some of this litigation has been resolved through settlement.

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgment/decisions pending with the relevant authorities or settlement, as the case may be. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company''s financial condition, results of operations or cash flows. The Company believes that the probability of outflow is low to moderate considering the merits of the cases.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes that the probability of outflow is low to moderate considering the merits of the case and the ultimate disposition of these matters may not have material adverse effect on its Financial Statements.

35. The Company holds 3,007,237 (previous year 3,007,237) equity shares (unquoted) of Sai Wardha Power

Ltd., India at a cost of '' 30.1 million (previous year '' 30.1 million) which was fully impaired by the Company in earlier years.

37. Revenue (Ind AS 115)

a) The operations of the Company are limited to only one segment viz. pharmaceuticals and related products.

Revenue from contract with customers is from sale of manufactured goods and rendering of research services. Sale of goods are made at a point in time and revenue is recognised upon satisfaction of the performance obligations which is typically upon dispatch/delivery depending on the terms of the sale. The Company has a credit evaluation policy based on which the credit limits for the trade receivables are established. There is no significant financing component as the credit period provided by the Company is not significant.

Income from research services including sale of technology/know-how (rights, licenses and other intangibles) is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed.

The Company enters into certain dossier sales, licensing and supply arrangements that, in certain instances, include certain performance obligations. Based on an evaluation of whether or not these obligations are inconsequential or perfunctory, the Company recognises or defers the upfront payments received under these arrangements.

Variable components such as discounts, chargebacks, rebates, sales returns etc. continues to be recognised as deductions from revenue in compliance with Ind AS 115.

38. Segment Reporting:

The Company has presented data relating to its segments based on its consolidated financial statements which are presented in the same Integrated Annual Report. Accordingly in terms of paragraph 4 of the Indian Accounting Standard (Ind AS 108) "Operating Segments” no disclosures related to segments are presented in these standalone financial statements.

40. Leases:

The Company leases land, buildings, plant & equipment, furniture & fixtures, vehicles and office equipments. The leases typically run for the period between 12 months to 60 months.

42. Share-based payment arrangements:

(i) Employee stock options - equity settled

The Company implemented "Lupin Employees Stock Option Plan 2003" (ESOP 2003), "Lupin Employees Stock Option Plan 2005" (ESOP 2005), "Lupin Subsidiary Companies Employees Stock Option Plan 2005” (SESOP 2005), "Lupin Employees Stock Option Plan 2011” (ESOP 2011), "Lupin Subsidiary Companies Employees Stock Option Plan 2011” (SESOP 2011), "Lupin Employees Stock Option Plan 2014” (ESOP 2014) and "Lupin Subsidiary Companies Employees Stock Option Plan 2014” (SESOP 2014) in earlier years, as approved by the Shareholders of the Company and the Nomination and Remuneration Committee of the Board of Directors (the Committee).

The Committee determines which eligible employees will receive options, the number of options to be granted, the vesting period and the exercise period. The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of '' 2 each. The options issued under the above schemes vest in a phased manner after completion of the minimum period of one year with an exercise period of ten years from the respective grant dates.

Valuation of stock options

The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. The key inputs and assumptions used are as follows:

Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted. Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Nomination and Remuneration Committee.

Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.

Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

Expected dividends: Expected dividend yield has been calculated as an average of dividend yields for four years preceding the date of the grant.

Risk free interest rate: The risk free interest rate on the date of grant considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero coupon yield curve for Government Securities.

These assumptions reflect management''s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company''s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years. The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The weighted average inputs used in computing the fair value of options granted were as follows:

(ii) Employee stock options - Cash settled

The cost of cash-settled transactions is measured initially at fair value at the grant date using a Binomial Option Pricing Model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability. The liability is re-measured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognised in employee benefits expense.

43. Post-Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident and pension fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised '' 173.2 million (previous year '' 174.7 million) for superannuation contribution and '' 282.0 million (previous year '' 274.3 million) for provident and pension fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

In addition to the above mentioned scheme the Company also pays additional gratuity as an ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

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

B) The provident fund plan of the Company, except at one plant, is operated by "Lupin Limited Employees Provident Fund Trust” ("Trust”), a separate legal entity. Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee''s salary.

The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government of India. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Board of Trustees administer the contributions made by the Company to the schemes and also defines the investment strategy to act in the best interest of the plan participants.

The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan in accordance with Ind AS 19 "Employee Benefits”. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund as at March 31, 2022 and based on the same, there is no shortfall towards interest rate obligation.

The amount required to be spent by the Company during the year is '' 334.8 million (previous year '' 346.6 million). No amount was spent during the year towards construction/acquisition of any asset relating to CSR expenditure and there are no outstanding amounts payables towards any other purposes.

In respect of ongoing projects, the company is in the process of transferring the unspent amount of '' 64.0 million for the year ended March 31, 2021 to a special account as per section 135(6) of the said Act.

48. Patent Litigation Settlement for Glumetza

In September 2019, 12 lawsuits were filed by purchasers of drug Glumetza in the US against several stakeholders including Lupin Limited and its subsidiary Lupin Pharmaceuticals Inc., U.S. During September 2021, the company and its subsidiary, agreed to settle the dispute, without admitting any violation of law. Accordingly, the company has settled with two plaintiffs representing a majority of the claims for an amount of USD 252.9 million ('' 18783.8 million) [including USD 4.9 million ('' 374.8 million) towards litigation and settlement related expenses]. This amount has been recognized as business compensation expense.

49. As per best estimate of the management, provision has been made as under:

European Commission fine

During the year ended March 31, 2019, the General Court of the European Union delivered its judgement concerning Lupin''s appeal against the European Commission''s (EC) 2014 decision in case of alleged breach of the EU Antitrust Rules in respect of IPs for product Perindopril. Accordingly, the Company has made a provision of '' 3783.9 million (previous year '' 3796.1 million) (including interest thereon) as under:

50. Financial Instruments

Financial instruments - Fair values and risk management:

A. Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities including their levels in the fair value hierarchy are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

C. Financial risk management:

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

- Credit risk;

- Liquidity risk; and

- Market risk

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 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 periodically to reflect changes in market conditions and the Company’s activities.

The Company through its training 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.

i. Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company''s receivables from customers and investment securities. Credit risk is managed 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. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade receivables

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer including the default risk of the industry and country in which the customer operates also has an influence on credit risk assessment. Credit risk is managed 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.

As at year end the carrying amount of the Company''s largest customer (a Subsidiary based in North America) was '' 12801.7 million (previous year '' 18998.2 million).

Expected credit loss assessment

The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments available press information etc.) and applying experienced credit judgement.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. 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 2022 related to several 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.

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

The Company has obtained fund and non-fund based working capital lines from various banks.

The Company invests its surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds non-convertible debentures commercial papers which carry no/low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.

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.

Cash and cash equivalents

As at the year end the Company held cash and cash equivalents of '' 591.0 million (previous year '' 1774.1 million). The cash and cash equivalents are held with banks.

Other Bank Balances

Other bank balances are held with banks.

Derivatives

The derivatives are entered into with banks.

Investment in mutual funds, non-convertible debentures and commercial papers

The Company limits its exposure to credit risk by generally investing in liquid securities non convertible debentures commercial papers and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties.

Other financial assets

Other financial assets are neither past due nor impaired.

iii. Market Risk:

Market risk is the risk that changes in market prices - such as foreign exchange rates interest rates and equity prices - will affect the Company''s income or the value of its holdings of financial instruments. Market risk is attributable to all market risk sensitive financial instruments including foreign currency receivables and payables and long term debt. We are exposed to market risk primarily related to foreign exchange rate risk. Thus our exposure to market risk is a function of revenue generating and operating activities in foreign currency. The objective of market risk management is to avoid excessive exposure in our foreign currency revenues and costs. The Company uses derivatives to manage market risk. Generally the Company seeks to apply hedge accounting to manage volatility in profit or loss.

Currency risk

The Company is exposed to currency risk on account of its operations in other countries. The functional currency of the Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate in the future. Consequently the Company uses both derivative instruments i.e. foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

The Company enters into foreign currency forward contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables/receivables.

The Company also enters into derivative contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivatives contracts are entered into by the Company for hedging purposes only and are accordingly classified as cash flow hedge.

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.

Fair value sensitivity analysis for fixed-rate instruments

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

The risk estimates provided assume a change of 100 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Commodity rate risk

The Company''s operating activities involve purchase and sale of Active Pharmaceutical Ingredients (API) whose prices are exposed to the risk of fluctuation over short periods of time. Commodity price risk exposure is evaluated and managed through procurement and other related operating policies. As of March 31, 2022 and March 31, 2021 the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

51. Capital Management

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

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Company monitors capital using a ratio of ''adjusted net debt'' to ''total equity''. For this purpose adjusted net debt is defined as total liabilities comprising interest-bearing loans and borrowings less cash and cash equivalents other bank balances and current investments.

52. Hedge accounting

The Company''s risk management policy is to hedge above 15% of its estimated foreign currency exposure in respect of highly probable forecast sales over the following 12-24 months. The Company uses forward exchange contracts to hedge its currency risk. Such contracts are generally designated as cash flow hedges.

The forward exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1. These contracts have a maturity of 12-24 months from the reporting date.

The Company''s policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in the cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships changes in timing of the hedged transactions is the main source of hedge ineffectiveness.

(G) The Company has not entered into any transactions with Struck off Companies under section 248 of the Companies Act, 2013 or section 560 of the Companies Act, 1956 for the year ended 31 March 2022.

(H) The Company has not traded or invested in Crypto currency or Virtual Currency.

(I) The Company do not have any transaction not recorded in the books of account that has been surrendered or not disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 for the year ended 31 March 2022 and 31 March 2021.

(J) There is no charge or satisfaction of charge which is yet to be registered with ROC beyond the statutory period.

(K) The Company has complied with number of layers prescribed under clause (87) of Section 2 of the Act read with the Companies (Restriction on number of Layers) Rules, 2017.

(L) The Company do not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

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

58. Previous period figures have been re-grouped/re-classified wherever necessary, to confirm to current period''s classification in order to comply with the requirements of the amended Schedule III to the Companies Act, 2013 effective April 01, 2021.


Mar 31, 2021

Rights attached to Equity Shares

The Company has only one class of equity shares with voting rights having a par value of '' 2 per share.

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

During the year ended March 31, 2021, the amount of dividend per equity share distributed to equity shareholders is '' 6.0. (Previous year ended March 31, 2020, '' 5.0)

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

34, 35 Commitments:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, '' 1758.1 million (previous year '' 3036.1 million).

b) Letter of comfort for support in respect of its subsidiaries. The Company considers its investments in subsidiaries as strategic and long-term in nature. The Company is committed to operationally, technically and financially support the operations of its subsidiaries.

c) Equity commitment in subsidiaries amounting to '' 17180.8 million.

d) Other commitments - Non-cancellable short term leases is '' 53.2 million (previous Year '' 1.7 million).

Low value leases is '' 290.2 million (Previous Year '' 212.5 million).

e) Dividends proposed of '' 6.50 (previous year '' 6/-) per equity share before the financial statements

approved for issue, but not recognised as a liability in the financial statements is '' 2949.2 million (previous year '' 2718.4 million).

f) There are product supply commitments pursuant to contracts with customers under dossier agreements.

g) There are product procurement commitments pursuant to contracts with suppliers under supply agreements.

h) Financial and corporate guarantees issued by the company on behalf of subsidiaries are disclosed in note 36.

36. Contingent Liabilities:

('' in million)

Particulars

As at 31.03.2021

As at 31.03.2020

a) Income tax demands/matters on account of deductions/allowances in earlier years, pending in appeals and potential tax demands in future years in respect of some uncertain tax issues ['' 439.4 million (previous year '' 16.3 million) consequent to department preferring appeals against the order of the Appellate Authority passed in favour of the company]

Amount paid there against and included under "Non-Current Tax Assets (Net)” '' 1239.9 million (previous year '' 839.8 million)

2258.7

2028.4

b) Customs duty, Excise duty, Service tax and Sales tax demands for input tax

credit disallowances and demand for additional Entry Tax arising from dispute on applicable rate are in appeals and pending decisions. Amount paid there against and included under Note 7 "Other Non-Current Assets” '' 23.9 million (previous year '' 24.2 million).

122.6

122.2

c) Claims against the Company not acknowledged as debts [excluding interest (amount unascertained) in respect of a claim] for transfer charges of land, octroi duty, local body tax, employee claims, power*, trademarks, pricing and stamp duty.

Amount paid there against without admitting liability and included under Note 7 "Other Non-Current Assets” '' 206.8 million (previous year '' 206.5 million). *Demand raised by Maharashtra State Electricity Development Corporation Limited (MSEDCL) challenging Group Captive Generating Plant (GCGP) status of power supplier''s Plant at Tarapur and Pune location.

1814.9

1103.3

d) Letter of comfort issued by the Company towards the credit facilities sanctioned by the bankers of subsidiary companies aggregating '' 29.2 million (previous year '' 7566.5 million).

7566.5

e) Outstanding credit facilities against corporate guarantees given in respect of credit facilities sanctioned by bankers of subsidiary companies for the purpose of acquisitions, working capital and other business requirements aggregating '' 49702.5 million (previous year '' 60993.6 million).

44559.7

54777.1

f) Financial guarantee aggregating to '' 3399.6 million (previous year '' 9382.4

million) given to third party on behalf of subsidiaries for contractual obligations.

-

-

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgment/decisions pending with the relevant authorities. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes that the probability of outflow is low to moderate considering the merits of the case and the ultimate disposition of these matters may not have material adverse effect on its Financial Statements.

37. The Company holds 3,007,237 equity shares (unquoted) of Sai Wardha Power Ltd., India at a cost of '' 30.1 million which was fully impaired by the Company.

38. Expenses incurred prior to commencement of commercial production included in Capital Work-In-Progress represent direct attributable expenditure for setting up of plants. The same will be capitalised on completion of projects and commencement of commercial operations. The details of pre-operative expenses are:

39. Revenue (Ind AS 115)

a) The operations of the Company are limited to only one segment viz. pharmaceuticals and related products. Revenue from contract with customers is from sale of manufactured goods and rendering of research services. Sale of goods are made at a point in time and revenue is recognised upon satisfaction of the performance obligations which is typically upon dispatch/delivery. The Company has a credit evaluation policy based on which the credit limits for the trade receivables are established. There is no significant financing component as the credit period provided by the Company is not significant.

Income from research services including sale of technology/know-how (rights, licenses and other intangibles is recognised in accordance with the terms of the contract with customers when the related performance obligation is completed, or when risks and rewards of ownership are transferred, as applicable.

The Company enters into certain dossier sales, licensing and supply arrangements that, in certain instances, include certain performance obligations. Based on an evaluation of whether or not these obligations are inconsequential or perfunctory, the Company recognise or defer the upfront payments received under these arrangements.

Variable components such as discounts, chargebacks, rebates, sales returns etc. continues to be recognised as deductions from revenue in compliance with Ind AS 115.

40. Segment Reporting:

The Company has presented data relating to its segments based on its consolidated financial statements which are presented in the same Integrated report. Accordingly in terms of paragraph 4 of the Indian Accounting Standard (Ind AS 108) "Operating Segments” no disclosures related to segments are presented in these standalone financial statements.

iii) Commitments and contingencies

The Company has not entered into lease contracts that have not yet commenced as at March 31, 2021.

iv) Changes in accounting policies and disclosures New and amended standards and interpretations

Ind AS 116 was notified with effect from April 1 2019 which replaces Ind AS 17. Ind AS 116 sets out the principles for the recognition measurement presentation and disclosure of leases and requires lessees to recognise most leases on the balance sheet.

Lessor accounting under Ind AS 116 is substantially unchanged from Ind AS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in Ind AS 17. Therefore Ind AS 116 did not have an impact for leases where the Company is the lessor.

The Company adopted Ind AS 116 using the modified retrospective method of adoption with the date of initial application of April 1 2019. Under this method the standard is applied retrospectively with the cumulative effect of initially applying the standard recognised at the date of initial application.

44. Share-based payment arrangements:

Employee stock options - equity settled

The Company implemented "Lupin Employees Stock Option Plan 2003” (ESOP 2003), "Lupin Employees Stock Option Plan 2005” (ESOP 2005), "Lupin Subsidiary Companies Employees Stock Option Plan 2005” (SESOP 2005), "Lupin Employees Stock Option Plan 2011” (ESOP 2011), "Lupin Subsidiary Companies Employees Stock Option Plan 2011” (SESOP 2011), "Lupin Employees Stock Option Plan 2014” (ESOP 2014) and "Lupin Subsidiary Companies Employees Stock Option Plan 2014” (SESOP 2014) in earlier years, as approved by the Shareholders of the Company and the Remuneration/Compensation/Nomination and Remuneration Committee of the Board of Directors (the Committee).

The Committee determines which eligible employees will receive options, the number of options to be granted, the vesting period and the exercise period. The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of '' 2 each. The options issued under the above schemes vest in a phased manner after completion of the minimum period of one year with an exercise period of ten years from the respective grant dates.

Valuation of stock options

The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. The key inputs and assumptions used are as follows:

Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted. Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Remuneration and Compensation Committee.

Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.

Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

Expected dividends: Expected dividend yield has been calculated as an average of dividend yields for four years preceding the date of the grant.

Risk free interest rate: The risk free interest rate on the date of grant considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero coupon yield curve for Government Securities.

These assumptions reflect management''s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company''s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years. The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The weighted average inputs used in computing the fair value of options granted were as follows:

45. Post-Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised '' 174.7 million (previous year '' 186.9 million) for superannuation contribution and '' 274.3 million (previous year '' 266.5 million) for provident and pension fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

In addition to the above mentioned scheme the Company also pays additional gratuity as an ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2021. The present value of the defined benefit obligations and the related current service cost and past service cost were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at the Balance Sheet date.

B) The provident fund plan of the Company, except at one plant, is operated by "Lupin Limited Employees Provident Fund Trust” ("Trust”), a separate legal entity. Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee’s salary.

The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government of India. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Board of Trustees administer the contributions made by the Company to the schemes and also defines the investment strategy to act in the best interest of the plan participants.

The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan in accordance with Ind AS 19 "Employee Benefits”. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund as at

Management judgement is required in determining provision for income tax deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered. Any changes in future taxable income would impact the recoverability of deferred tax assets.

The Ministry of Corporate Affairs, vide its notification dated 30th March 2019, inserted Appendix C "Uncertainty over Income Tax Treatments” to Ind AS 12 "Income Taxes”, applicable from 1st April 2019. The company had opted the transition provision provided in this Appendix C. The company had identified uncertain tax positions and has estimated the liability based on the most likely amount. These estimates are based on its probability assessment of the uncertain tax treatment, accordingly the Company had recognised tax provision of '' 804.5 million as an adjustment to the opening balance of retained earnings on 1st April 2019.

47. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is '' 11272.9 million (previous year '' 11700.7 million).

48. The aggregate amount of expenditure incurred during the year on Corporate Social Responsibility (CSR) is

'' 351.1 million (previous year '' 342.0 million) and is shown separately under note 33 based on Guidance Note on Accounting for Expenditure on CSR Activities issued by the ICAI.

50. Exceptional Items:

During the previous year, the company recognized following items as exceptional items:

a) Settlement with the State of Texas:

The Texas Attorney General''s office served Lupin Pharmaceuticals Inc. (LPI), with several Civil Investigative Demands from May 29, 2012 and continuing through 2016. The State of Texas (the "State”) filed a lawsuit against LPI, Lupin Ltd (LL), Lupin Inc. (LI) and certain executives on June 14, 2016 (the Original Lawsuit) alleging violations of the Texas Medicaid Fraud Prevention Act (TMFPA). During the previous year, the State offered a settlement of $ 63.5 million to Lupin Group, of which $ 10.0 million was already accrued by LPI in earlier years. Under the settlement agreement, the State and Lupin Group had agreed on all of the terms of the settlement and the State agreed to dismiss the individual defendants, immediately. Final payment of $ 53.5 million ('' 3791.8 million) by LL and $ 10 million by LPI made during the previous year.

b) Impairment of IPs:

Following our annual impairment review the impairment charges recognized during the previous year in the standalone profit and loss account in relation to certain intangible assets and intangible assets under development is as follows:

Intangible assets - '' 2122.8 million

Intangible assets under development - '' 1677.5 million

Both the categories referred to above relate to intangibles acquired as part of the acquisition of Gavis Group (Gavis), related to US market, having impaired primarily on account of (i) significant pricing pressure resulting from customer consolidation into large buying groups capable of extracting greater price reductions (ii) implementation of countermeasures against usage of Opioids in United states and (iii) delays in the launch of some of our new generic products.

The impairment has been determined by considering each individual intangible asset as a cash generating unit (CGU) except for IPs under development which have been assessed together as one CGU. Recoverable amount of CGUs for which impairment is done is '' 167.6 million. Recoverable amount (i.e. higher of value in use and fair value less cost to sell) of each individual CGU was compared to carrying value and impairment amount was arrived as follows:

• CGUs where carrying value was higher than recoverable amount were impaired and

• CGUs where recoverable amount was higher than carrying value were carried at carrying value The fair value so used is categorized as a level 3 valuation in line with the fair value hierarchy per requirements of Ind AS 113 "Fair Value Measurement” (Ind AS 113).

The fair value has been determined with reference to the discounted cash flow technique.

The key assumptions used in the estimation of the recoverable amounts is as mentioned below.

The value assigned to the key assumptions represents management''s assessment of the future trends in the industry and have been based on historical data from both external and internal sources.

The cash flow projections are based on five years specific estimates, five years estimates developed using internal forecasts and a terminal growth rate thereafter considering the life of intangibles being approx. 10 years. The management has considered ten year growth rate since the same appropriately reflects the period over which the future benefits of the intangibles will accrue to the Company.

Based on the assessment carried out as at March 31, 2020 and after considering performance for the full year ended March 31, 2020 no further provision have been made.

52. Financial Instruments:

Financial instruments - Fair values and risk management:

A. Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities including their levels in the fair value hierarchy are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (i.e. as prices) or indirectly (i.e. derived from prices).

C. Financial risk management:

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

- Credit risk;

- Liquidity risk; and

- Market risk

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 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 periodically to reflect changes in market conditions and the Company’s activities. The Company through its training 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.

i. Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers and investment securities. Credit risk is managed 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.

The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade receivables

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer including the default risk of the industry and country in which the customer operates also has an influence on credit risk assessment. Credit risk is managed 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.

As at year end the carrying amount of the Company''s largest customer (a Subsidiary based in North America) was '' 18998.2 million (previous year '' 24424.2 million).

Summary of the Company''s exposure to credit risk by age of the outstanding from various customers is as follows:

Expected credit loss assessment The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments available press information etc.) and applying experienced credit judgement.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. 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 movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:

The impairment loss at March 31 2021 related to several 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.

Cash and cash equivalents

As at the year end the Company held cash and cash equivalents of '' 1774.1 million (previous year '' 11680.2 million). The cash and cash equivalents are held with banks.

Other Bank Balances

Other bank balances are held with banks.

Derivatives

The derivatives are entered into with banks.

Investment in mutual funds non-convertible debentures and commercial papers

The Company limits its exposure to credit risk by generally investing in liquid securities non convertible debentures commercial papers and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties.

Other financial assets

Other financial assets are neither past due nor impaired.

ii. Liquidity risk:

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial

asset. The Company’s approach to managing liquidity is to ensure as far as possible that it will have sufficient liquidity to meet its liabilities when they are due under both normal and stressed conditions without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company has obtained fund and non-fund based working capital lines from various banks.

The Company invests its surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds non-convertible debentures commercial papers which carry no/low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.

Exposure to liquidity risk

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

iii. Market Risk:

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

Currency risk

The Company is exposed to currency risk on account of its operations in other countries. The functional currency of the Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate in the future. Consequently the Company uses both derivative instruments i.e. foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

The Company enters into foreign currency forward contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables/receivables.

The Company also enters into derivative contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivatives contracts are entered into by the Company for hedging purposes only and are accordingly classified as cash flow hedge.

The risk estimates provided assume a change of 100 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Commodity rate risk

The Company’s operating activities involve purchase and sale of Active Pharmaceutical Ingredients (API) whose prices are exposed to the risk of fluctuation over short periods of time. Commodity price risk exposure is evaluated and managed through procurement and other related operating policies. As of March 31, 2021 and March 31,

2020 the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

53. Capital Management:

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

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose adjusted net debt is defined as total liabilities comprising interest-bearing loans and borrowings less cash and cash equivalents other bank balances and current investments.

The Company’s policy is to keep the ratio below 1.5. The Company’s adjusted net debt to total equity ratio at March 31 2021 was as follows:

54. Hedge accounting:

The Company’s risk management policy is to hedge above 15% of its estimated foreign currency exposure in respect of highly probable forecast sales over the following 12-24 months. The Company uses forward exchange contracts to hedge its currency risk. Such contracts are generally designated as cash flow hedges.

The forward exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1. These contracts have a maturity of 12-24 months from the reporting date. The Company’s policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in the cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships changes in timing of the hedged transactions is the main source of hedge ineffectiveness.

(i) Trade receivables and payables

The Company has certain customers which are also supplying materials. Under the terms of agreement there are no amounts payable by the Company that are required to be offset against receivables.

(ii) Derivatives

The Company enters into derivative contracts for hedging future sales. In general under such agreements the amounts owed by each counterparty on a single day in respect of all the transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other.

58. In March 2020, the World Health Organisation declared COVID-19 to be a pandemic. Supply Chain disruptions as a result of the outbreak started with restrictions on movement of goods, closure of borders etc., in several countries followed by a global lockdown in March 2020 announced by the various governments, to contain the spread of COVID-19. Similar restrictions continue to prevail in 2021 in various geographies. Since the Company manufactures and supplies pharmaceutical products which is categorized under essential goods, the manufacturing and supplies of the products has been functioning with minimal disruptions. The situation is likely to further improve with easing of restrictions in the coming days.

In light of these circumstances, the Company has adopted measures to curb the spread of infection in order to protect the health of its employees and ensure business continuity with minimal disruption including remote working, maintaining social distancing, sanitization of workspaces etc. The Company has considered internal and external information while finalizing various estimates in relation to its financial statement up to the date of approval of the financial statements by the Board of Directors and has not identified any material impact on the carrying value of tangible and intangible assets, financials assets, inventory, receivables etc as well as borrowings and liabilities accrued.

As mentioned above, since the Company is into manufacturing and supply of pharmaceutical products (essential goods) there is no significant impact on the overall demand of the goods and its supply chain. The Company has also not observed any significant delay in the collection from customers thus there is no significant increase in Credit risk. Further, the Company’s liquidity position is adequate to service all its near term debt and other financing arrangements/liabilities.

The actual impact of the global health pandemic may be different from that which has been estimated, as the COVID-19 situation evolves globally. The Company will continue to closely monitor any material changes to future economic conditions.


Mar 31, 2018

IA. OVERVIEW:

Lupin Limited, (‘the Company’) incorporated in 1983, is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations, biotechnology products and active pharmaceutical ingredients (APIs) globally. The Company has significant presence in the Cardiovascular, Diabetology, Asthama, Pediatrics, Central Nervous System, Gastro-Intestinal, Anti-Infectives and Nonsteroidal Anti Inflammatory Drug therapy segments and is a global leader in the Anti-TB and Cephalosporins segments. The Company along with its subsidiaries has manufacturing locations spread across India, Japan, USA, Mexico and Brazil with trading and other incidental and related activities extending to the global markets.

a) Rights attached to Equity Shares

The Company has only one class of equity shares with voting rights having a par value of Rs.2 per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

During the year ended March 31, 2018, the amount of dividend per equity share distributed to equity shareholders is Rs.7.5 (previous year ended March 31, 2017, Rs.7.5).

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

b) No shares have been allotted without payment being received in cash or by way of bonus shares during the period of five years immediately preceding the Balance Sheet date.

* Represents amount received on allotment of 505,981 (previous year 993,900) Equity Shares of the face value of Rs.2 each, pursuant to “Lupin Employees Stock Option Plans”. [Refer note 43 ]

** Represents Corporate Tax on Final Dividend Rs.689.5 million (previous year Rs.688.0 million) and on dividend paid for previous year on Equity Shares issued after year end pursuant to ESOPs allotment Rs.0.2 million (previous year Rs.0.6 million).

Nature of Reserves

a) Capital Reserve

The Capital reserve is created on receipts of government grants for setting up the factories in backward areas, for performing research on critical medicines for the betterment of the society and on restructuring of the Capital of the Company under various schemes of Amalgmation.

b) Capital Redemption Reserve

This reserve represents redemption of redeemable cumulative preference shares in earlier years.

c) Securities Premium

Securities premium account comprises of premium on issue of shares. The reserve is utilised in accordance with the specific provision of the Companies Act, 2013.

d) General Reserve

The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be reclassified subsequently to the statement of profit and loss.

e) Amalgamation Reserve

This reserve represents creation of amalgamation reserve pursuant to the scheme of amalgamation between erstwhile Lupin Laboratories Ltd. and the Company.

f) Cash Flow Hedge Reserve

The cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for Cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of cash flow reserve will be reclassfied to statement of profit and loss only when the hedged items affect the profit or loss.

a) Deferred Sales Tax Loan is interest free and payable in 5 annual installments after expiry of initial 10 years moratorium period from each such year of deferral period beginning from 1998-99 to 2009-10 and ending from 2013-14 to 2024-25.

b) Term Loans from CSIR carry interest of 3.00% p.a. and is payable in 2 annual installments of Rs.30.9 million each alongwith interest.

c) Term Loans from DST carry interest of 3.00% p.a. and is payable in 1 annual installment of Rs.10.4 million each alongwith interest.

d) The Company has not defaulted on repayment of loans and interest during the year.

a) Secured loans comprise of Cash Credit, Current Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit and are secured by hypothecation of inventories and trade receivables, and all other moveable assets, including current assets at godowns, depots, in course of transit or on high seas and a second charge on immovable properties and moveable assets of the Company both present and future. It includes foreign currency loans of Rs. nil (previous year Rs.454.0 million)

b) Unsecured loans comprise of Current Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit. It includes Foreign Currency Loan of Rs. nil (previous year Rs.3,826.2 million)

c) Foreign Currency loans carry interest rate at LIBOR plus market driven margins and those in Indian Rupees carry interest rate at MCLR plus market driven margins.

d) The Company has not defaulted on repayment of loans and interest during the year.

2. COMMITMENTS:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs.1824.7 million (previous year Rs.3655.4 million).

b) Letters of comfort for support in respect of a subsidiary in the previous year. The Company considers its investments in subsidiary as strategic and long-term in nature. The Company is committed to operationally, technically and financially support the operations of its subsidiary.

c) Other commitments - Non-cancellable operating leases (Refer note 41).

d) Dividends proposed of Rs.5/- (previous year Rs.7.5) per equity share before the financial statements approved for issue, but not recognised as a liability in the financial statements is Rs.2260.5 million (previous year Rs.3386.8 million)

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgement/decisions pending with the relevant authorities. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including claims against the Company pertaining to Income tax, Excise, Customs, Sales/VAT tax, product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liability where applicable, in the financial statements. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defences, the ultimate disposition of these matters will not have material adverse effect on its financial statements.

3, a) During the year, the Company has made additional Capital Contribution of Rs.3283.5 million (previous year Rs.10610.4 million) in Lupin Atlantis Holdings SA, Switzerland (LAHSA), a wholly owned subsidiary.

b) During the year, Novel Clinical Research (India) Private Limited, India (Novel India), wholly owned subsidiary of the Company had applied for removal of its name from the Register of Companies w.e.f. March 27, 2018 with the Registrar of Companies, Bangalore, and the order pursuant to such application is awaited as at March 31, 2018. The Company has written-off its investment of Rs.0.1 million in Novel India (previous year, 100% shareholding of Novel India was transferred from Novel Laboratories Inc., USA to the Company for Rs.0.1 million).

c) During the year, the Company, through its wholly owned subsidiary Lupin Holdings B.V., Netherlands (LHBV), acquired/ subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Generic Health SDN. BHD., Malaysia at a total cost of Rs.0.8 million (previous year Rs.1.0 million).

ii) Additional investment in Lupin Ukraine LLC, Ukraine at a total cost of Rs. nil (previous year Rs.269/- for 0.01% equity stake).

d) During the year, the Company, through its wholly owned subsidiary LAHSA acquired/subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Lupin Inc., USA at a total cost of Rs.3294.3 million (previous year Rs.5319.6 million) as additional paid-in capital - securities premium.

ii) Additional investment in Lupin Pharma LLC, Russia at a total cost of Rs. nil (previous year Rs.33.7 million as capital contribution for 99.99% equity stake).

iii) Additional investment in Lupin Pharma Canada Ltd., Canada (LPCL) at a total cost of Rs. nil (previous year Rs.250.8 million for 100% equity stake transferred from LHBV).

iv) Additional investment in Lupin Healthcare (UK) Limited, UK [formerly Lupin (Europe) Limited, UK] at a total cost of Rs. nil (previous year Rs.259.7 million).

v) Additional investment in Lupin Ukraine LLC, Ukraine at a total cost of Rs. nil (previous year Rs.0.3 million for 99.99% equity stake).

vi) Additional investment in Lupin Japan & Asia Pacific, Japan at a total cost of Rs. nil (previous year Rs.2.9 million for 100% equity stake).

vii) Additional investment in Lupin Latam, Inc., USA at a total cost of Rs.12.9 million as capital contribution (previous year Rs.68/- for 100% equity stake).

viii)Additional investment in Medquimica Industria Farmaceutica LTDA, Brazil (MQ) at a total cost of Rs. nil (previous year Rs.268.8 million resulting into LAHSA’s equity stake in MQ equal to 95.44%).

ix) 100% equity stake in Lupin Europe GmbH at a total cost of Rs.2.0 million (previous year Rs. nil).

e) During the current year, Lupin Inc., USA (LINC), a wholly owned subsidiary of LAHSA, made additional investment in Lupin Research Inc., USA at a total cost of Rs.769.1 million as capital contribution (previous year Rs. nil).

The above acquisitions/subscriptions/disposals are based on the net asset values, the future projected revenues, operating profits, cash flows and independent valuation reports; as applicable, of the investee companies.

4. Pre-operative expenses pending capitalisation included in Capital Work-In-Progress represent direct attributable expenditure for setting up of plants prior to the date of commencement of commercial production. The same will be capitalised on completion of projects and commencement of commercial operations. The details of pre-operative expenses are:

The Company has presented data relating to its segments based on its consolidated financial statements, which are presented in the same Annual Report. Accordingly, in terms of paragraph 4 of the Indian Accounting Standard (Ind AS 108) “Operating Segments”, no disclosures related to segments are presented in these standalone financial statements.

5. The Company procures equipments, vehicles and office premises under operating lease agreements that are renewable on a periodic basis at the option of both lessor and lessee. The initial tenure of the lease is generally between 12 months to 60 months. The lease rentals are included in ‘Lease Rent and Hire Charges’ in the Statement of Profit and Loss (Refer note 34) for the year are Rs.736.4 million (previous year Rs.652.8 million). The contingent rent recognised in the Statement of Profit and Loss for the year is Rs. nil (previous year Rs. nil). The future minimum lease payments and payment profile of non-cancellable operating leases are as under:

6. SHARE-BASED PAYMENT ARRANGEMENTS:

Employee stock options - equity settled

The Company implemented “Lupin Employees Stock Option Plan 2003” (ESOP 2003), “Lupin Employees Stock Option Plan 2005” (ESOP 2005), “Lupin Subsidiary Companies Employees Stock Option Plan 2005” (SESOP 2005), “Lupin Employees Stock Option Plan 2011” (ESOP 2011), “Lupin Subsidiary Companies Employees Stock Option Plan 2011” (SESOP 2011), “Lupin Employees Stock Option Plan 2014” (ESOP 2014) and “Lupin Subsidiary Companies Employees Stock Option Plan 2014” (SESOP 2014) in earlier years, as approved by the Shareholders of the Company and the Nomination and Remuneration Committee of the Board of Directors (the Committee).

The Committee determines which eligible employees will receive options, the number of options to be granted, the vesting period and the exercise period. The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of Rs.2 each. The options issued under the above schemes vest in a phased manner after completion of the minimum period of one year with an exercise period of ten years from the respective grant dates.

The weighted average grant date fair value of discounted fair market value options granted under Category C during the years ended March 31, 2018 and 2017 was Rs.483.2 and Rs.808.8 per option, respectively.

The weighted average share price during the year ended March 31, 2018 and 2017 was Rs.1010.3 and Rs.1516.0 per share respectively.

Valuation of stock options

The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. The key inputs and assumptions used are as follows:

Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted.

Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Remuneration and Compensation Committee.

Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.

Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

Expected dividends: Expected dividend yield has been calculated as an average of dividend yields for four years preceding the date of the grant.

Risk free interest rate: The risk free interest rate on the date of grant considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero coupon yield curve for Government Securities.

These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years. The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised Rs.203.8 million (previous year Rs.196.1 million) for superannuation contribution and Rs.243.0 million (previous year Rs.231.9 million) for provident and pension fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC, a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

In addition to the above mentioned scheme, the Company also pays additional gratuity as an ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

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

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at the Balance Sheet date.

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

Reasonably, possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

B) The provident fund plan of the Company, except at two plants, is operated by “Lupin Limited Employees Provident Fund Trust” (“Trust”), a separate legal entity. Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee’s salary.

The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government of India. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Board of Trustees administer the contributions made by the Company to the schemes and also defines the investment strategy to act in the best interest of the plan participants.

The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan in accordance with Ind AS 19 “Employee Benefits”. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund as at March 31, 2018 and based on the same, there is no shortfall towards interest rate obligation.

7. INCOME TAXES:

a) Tax expense recognised in profit and loss:

b) Tax expense recognised in other comprehensive income:

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered. Any changes in future taxable income would impact the recoverability of deferred tax assets.

As on March 31, 2018, tax liability with respect to the dividends proposed before the financial statements approved for issue, but not recognised as a liability in the financial statements is Rs.464.7 million (previous year Rs.689.5 million).

8. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is Rs.14105.8 million (previous year Rs.16116.8 million).

9. The aggregate amount of cash expenditure incurred during the year on Corporate Social Responsibility (CSR) is Rs.216.8 million (previous year Rs.196.8 million) and is shown separately under note 34 based on Guidance Note on Accounting for Expenditure on CSR Activities issued by the ICAI.

The amount required to be spent by the Company during the year is Rs.750.5 million (previous year Rs.662.5 million). No amount was spent during the year towards construction/acquisition of any asset relating to CSR expenditure.

10. The information regarding Micro Enterprises and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.

11. As per best estimate of the management, provision has been made towards probable return of goods from customers, as per Indian Accounting Standard (Ind AS) 37.

12. FINANCIAL INSTRUMENTS:

Financial instruments - Fair values and risk management:

A. Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

* These are for operation purposes and the Company expects its refund on exit. The Company estimates that the fair value of these investments are not materially different as compared to its cost.

B. Measurement of fair values:

Valuation techniques and significant unobservable inputs:

A he following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used:

C. Financial risk management:

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

- Credit risk;

- Liquidity risk; and

- Market risk

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 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 periodically to reflect changes in market conditions and the Company’s activities. The Company, through its training, 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.

i. Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. Credit risk is managed 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. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade receivables

T he Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed 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.

As at year end, the carrying amount of the Company’s largest customer (a Subsidiary based in North America) was Rs.39130.8 million (previous year Rs.29436.2 million).

Summary of the Company’s exposure to credit risk by age of the outstanding from various customers is as follows:

Expected credit loss assessment

The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments, available press information etc.) and applying experienced credit judgement.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. 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 movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:

The impairment loss at March 31, 2018 related to several 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.

Cash and cash equivalents

As at the year end, the Company held cash and cash equivalents of Rs.1056.7 million (previous year Rs.1580.1 million). The cash and cash equivalents are held with banks.

Other Bank Balances

Other bank balances are held with banks.

Derivatives

The derivatives are entered into with banks.

Investment in mutual funds

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counterparties.

Other financial assets

Other financial assets are neither past due nor impaired.

ii. Liquidity risk:

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

The Company has obtained fund and non-fund based working capital lines from various banks. The Company invests its surplus funds in bank fixed deposit and liquid schemes of mutual funds, which carry no/low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.

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.

* Guarantees issued by the Company on behalf of subsidiaries are with respect to borrowings raised by the respective subsidiary. These amounts will be payable on default by the concerned subsidiary. As of the reporting date, none of the subsidiary have defaulted and hence, the Company does not have any present obligation to third parties in relation to such guarantees (Refer note 54C).

iii. Market Risk:

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

Currency risk

The Company is exposed to currency risk on account of its operations in other countries. The functional currency of the Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate in the future. Consequently, the Company uses both derivative instruments, i.e, foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

The Company enters into foreign currency forward contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables/receivables.

The Company also enters into derivative contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivatives contracts are entered into by the Company for hedging purposes only, and are accordingly classified as cash flow hedge.

In addition to the above, the Company has entered into foreign currency forward contract (buy) aggregating USD nil (with cross currency INR) (previous year USD 66.0 million) for purposes other than hedging.

Exposure to Currency risk

Following is the currency profile of non-derivative financial assets and financial liabilities:

Sensitivity analysis

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

Interest rate risk

I nterest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates, if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

Company’s interest rate risk arises from borrowings and finance lease obligations. The interest rate profile of the Company’s interest-bearing borrowings is as follows:

Fair value sensitivity analysis for fixed-rate instruments

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

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

The risk estimates provided assume a change of 100 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Commodity rate risk

The Company’s operating activities involve purchase and sale of Active Pharmaceutical Ingredients (API), whose prices are exposed to the risk of fluctuation over short periods of time. Commodity price risk exposure is evaluated and managed through procurment and other related operating policies. As of March 31, 2018 and March 31, 2017 the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

13. CAPITAL MANAGEMENT:

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

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings, less cash and cash equivalents, other bank balances and current investments.

14. HEDGE ACCOUNTING:

The Company’s risk management policy is to hedge above 15% of its estimated net foreign currency exposure in respect of highly probable forecast sales over the following 12-18 months at any point in time. The Company uses forward exchange contracts to hedge its currency risk. Such contracts are generally designated as cash flow hedges.

The forward exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1. Most of these contracts have a maturity of 12-18 months from the reporting date. The Company’s policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in the cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships, changes in timing of the hedged transactions is the main source of hedge ineffectiveness.

Offsetting arrangements

(i) Trade receivables and payables

The Company has certain customers which are also supplying materials. Under the terms of agreement, the amounts payable by the Company are offset against receivables and only net amounts are settled.

(ii) Derivatives

The Company enters into derivative contracts for hedging future sales. In general, under such agreements, the amounts owed by each counterparty on a single day in respect of all the transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other.

* During the previous year, the Company had entered into foreign currency forward contracts (buy) for purposes other than hedging.

15. RELATED PARTY DISCLOSURES, AS REQUIRED BY INDIAN ACCOUNTING STANDARD 24 (IND AS 24) ARE GIVEN BELOW: A. Relationships -Category I: Entity having significant influence over the company:

Lupin Investments Pvt. Limited (w.e.f. July 28, 2017)

Category II: Subsidiaries:

Lupin Pharmaceuticals, Inc., USA Kyowa Pharmaceutical Industry Co., Limited, Japan Lupin Australia Pty Limited, Australia Lupin Holdings B.V., Netherlands

Pharma Dynamics (Proprietary) Limited, South Africa Hormosan Pharma GmbH, Germany Multicare Pharmaceuticals Philippines Inc., Philippines Lupin Atlantis Holdings SA, Switzerland

Lupin Healthcare (UK) Limited, UK [formerly Lupin (Europe) Limited]

Lupin Pharma Canada Limited, Canada Lupin Mexico S.A. de C.V., Mexico Generic Health Pty Limited, Australia Bellwether Pharma Pty Limited, Australia Lupin Philippines Inc., Philippines Lupin Healthcare Limited, India Generic Health SDN. BHD., Malaysia Kyowa CritiCare Co., Limited, Japan Lupin Middle East FZ-LLC, UAE Lupin GmbH, Switzerland Lupin Inc., USA

Medquimica Industria Farmaceutica LTDA, Brazil Nanomi B.V., Netherlands Laboratorios Grin S.A. de C.V., Mexico Lupin Pharma LLC, Russia

VGS Holdings, Inc., USA (upto February 24, 2017)

Novel Laboratories, Inc., USA

Novel Clinical Research (India) Private Limited, India (upto March 27, 2018)

Gavis Pharmaceuticals, LLC., USA

Edison Therapeutics, LLC, USA (upto February 24, 2017)

Lupin Research Inc., USA

Lupin Ukraine LLC, Ukraine (w.e.f. July 6, 2016)

Lupin Latam, Inc., USA (w.e.f. December 15, 2016)

Lupin Japan & Asia Pacific K.K., Japan (w.e.f. March 13, 2017)

Saker Merger Sub LLC, USA (from April 7, 2017 and upto October 10, 2017)

Symbiomix Therapeutics LLC, USA (w.e.f. October 10, 2017)

Lupin IP Ventures Inc., USA (w.e.f. October 10, 2017)

Lupin Europe GmbH, Germany (w.e.f. February 5, 2018)

Category III: Jointly Controlled Entity:

YL Biologics Ltd., Japan

Category IV: Key Management Personnel (KMP)

Dr. D. B. Gupta (upto June 26, 2017) Chairman

Mrs. Manju D. Gupta (w.e.f. August 11, 2017) Chairman

Dr. Kamal K. Sharma Vice Chairman

Ms. Vinita Gupta Chief Executive Officer

Mr. Nilesh Deshbandhu Gupta Managing Director

Mrs. Manju D. Gupta (upto August 10, 2017) Executive Director

Mr. Ramesh Swaminathan Chief Financial Officer & Executive Director

Mr. RV Satam Company Secretary

Non-Executive Directors

Dr. Vijay Kelkar

Mr. R. A. Shah

Mr. Richard Zahn

Dr. K. U. Mada

Mr. Dileep C. Choksi

Mr. Jean-Luc Belingard

Category V: Others (Relatives of KMP and Entities in which the KMP and Relatives of KMP have control or significant influence)

Mrs. Kavita Gupta (Daughter of Chairman)

Dr. Anuja Gupta (Daughter of Chairman)

Dr. Richa Gupta (Daughter of Chairman)

Mrs. Pushpa Khandelwal (Sister of Chairman) (upto June 26, 2017)

Mrs. Shefali Nath Gupta (Wife of Managing Director)

Ms. Veda Nilesh Gupta (Daughter of Managing Director)

BS Merc Private Limited (upto July 28, 2017)

D. B. Gupta (HUF)

Lupin Human Welfare and Research Foundation Lupin Foundation

Lupin International Pvt. Limited (upto September 21, 2016)

Lupin Investments Pvt. Limited (upto July 27, 2017)

Lupin Holdings Pvt. Limited (upto July 28, 2017)

Matashree Gomati Devi Jana Seva Nidhi Polynova Industries Limited

Rahas Investments Pvt. Limited (upto July 28, 2017)

Synchem Investments Pvt. Limited (upto September 21, 2016)

Visiomed Investments Pvt. Limited (upto July 28, 2017)

Zyma Laboratories Limited (upto July 28, 2017)

Zyma Properties Pvt. Limited (formerly known as Visiomed Properties Pvt. Limited)

Concept Pharmaceuticals Limited (upto June 26, 2017)

Shuban Prints

TeamLease Services Limited

Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. For the year ended 31 March 2018, the Company has not recorded any impairment of receivables relating to amounts owed by related parties (previous year Rs. nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

16. Excise duty (Refer note 34) includes Rs.165.8 million (previous year Rs.49.0 million) credit being net impact of the excise duty provision on opening and closing stock.

17 Consequent to the introduction of Goods and Services Tax (GST) with effect from 1st July 2017, Central Excise has been subsumed into GST. In accordance with Ind AS 18 and Schedule Ill to the Companies Act, 2013, levies like GST, VAT etc. are not part of revenue, unlike Excise Duty, which was presented as part of revenue. Accordingly, the figures for the year ended 31 March 2018 are not comparable with the previous year, to that extent. The following additional information is being provided to facilitate such understanding:

18. ASSETS CLASSIFIED AS HELD FOR SALE:

During the year, the Company has entered into a Memorandum of Understanding (MOU) to sell a parcel of land along with the related manufacturing facility (collectively referred to as “Facility”) in Ankleshwar, Gujarat for a consideration in excess of the carrying value of the Facility. The Company is in the process of seeking necessary regulatory approvals and the sale is expected to be completed by June 30, 2018. Upon completion of the terms, the Facility shall be transferred to the buyer. Accordingly, the Facility has been presented as non-current assets held for sale (refer note 2). There was no indicator/trigger to assess for its impairment.

19. In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of Cash Flows’. These amendments are in accordance with the amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of Cash Flows’. The below disclosure is in line with such amendments suggested:

20. The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable loss. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/accounting standard for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.

21 Previous year’s figures have been regrouped/reclassified wherever necessary to correspond with the current year’s classification/disclosure.


Mar 31, 2017

IA. OVERVIEW:

Lupin Limited,(‘the Company’) incorporated in 1983, is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations, biotechnology products and active pharmaceutical ingredients (APIs) globally. The Company has significant presence in the Cardiovascular, Diabetology, Asthama, Pediatrics, Central Nervous System, Gastro-Intestinal, Anti-Infectives and Nonsteroidal Anti Inflammatory Drug therapy segments and is a global leader in the Anti-TB and Cephalosporins segments. The Company along with its subsidiaries has manufacturing locations spread across India, Japan, USA, Mexico and Brazil with trading and other incidental and related activities extending to the global markets.

1B. RECENT ACCOUNTING PRONOUNCEMENTS:

Standards issued but not yet effective:

In March 2017, the Ministry of Corporate Affairs issued the Companies(Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of Cash Flows’ and Ind AS 102, ‘Share-based Payment.’ These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of Cash Flows’ and IFRS 2 ‘Share-based Payment’ respectively. The amendments are applicable to the Company from April 1, 2017.

Amendment to Ind AS 7:

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

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

Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash-settled awards and awards that include a net settlement feature in respect of withholding taxes. However, this amendment is not applicable to the Company.

a) Capital Reserve

The Capital reserve is created on receipts of government grants for setting up the factories in backward areas for performing research on critical medicines for the betterment of the society and on restructuring of the Capital of the Company under various schemes of Amalgmation.

b) Capital Redemption Reserve

This reserve represents redemption of redeemable cumulative preference shares in earlier years.

c) Securities Premium

Securities premium account comprises of premium on issue of shares. The reserve is utilised in accordance with the specific provision of the Companies Act, 2013.

d) General Reserve

The General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General reserve will not be reclassified subsequently to the statement of profit and loss.

e) Amalgamation Reserve

This reserve represents creation of amalgamation reserve pursuant to the scheme of amalgamation between erstwhile Lupin Laboratories Ltd. and the Company.

f) Cash flow hedge reserve

The cash flow hedge reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for Cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of cash flow reserve will be reclassfied to statement of profit and loss only when the hedged items affect the profit or loss.

1. NON-CURRENT BORROWINGS

a) Deferred Sales Tax Loan is interest free and payable in 5 equal annual installments after expiry of initial 10 years moratorium period from each such year of deferral period from 1998-99 to 2009-10.

b) Term Loans from CSIR carry interest of 3% p.a. and is payable in 3 annual installments of Rs.30.9 million each alongwith interest.

c) Term Loans from DST carry interest of 3% p.a. and is payable in 2 annual installments of Rs.10.4 million each alongwith interest.

d) The Company has not defaulted on repayment of loans and interest during the year.

2. CURRENT BORROWINGS

a) Secured loans comprise of Cash Credit, Current Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit and are secured by hypothecation of inventories and trade receivables, and all other moveable assets, including current assets at godowns, depots, in course of transit or on high seas and a second charge on immovable properties and moveable assets of the Company both present and future. It includes foreign currency loans of Rs.454.0 million (31.03.2016 Rs.1,855.1 million , 01.04.2015 Rs.nil)

b) Unsecured loans comprise of Current Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit. It includes Foreign Currency Loan of Rs.3,826.2 million (31.03.2016 Rs.1,523.9 million , 01.04.2015 Rs.nil)

c) Foreign Currency loans carry interest rate at LIBOR plus market driven margins and those in Indian Rupees carry interest rate in the range of 8.25% to 11.70% p.a.

d) The Company has not defaulted on repayment of loans and interest during the year.

3. Commitments:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs.3655.4 million (31.03.2016 - Rs.3766.7 million, 01.04.2015 - Rs.2399.6 million).

b) Letters of comfort for support in respect of a subsidiary. The Company considers its investments in subsidiary as strategic and long-term in nature. The Company is committed to operationally, technically and financially support the operations of its subsidiary.

c) Other commitments - Non-cancellable operating leases (Refer note 41).

d) Dividends proposed of Rs.7.5 per equity share before the financial statements approved for issue, but not recognised as a liability in the financial statements is Rs.3386.8 million (31.03.2016 - Rs.3379.4 million, 01.04.2015 - Rs.3371.2 million).

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgement / decisions pending with the relevant authorities. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including claims against the Company pertaining to Income tax, Excise, Customs, Sales/VAT tax, product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liability where applicable, in the financial statements. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defences, the ultimate disposition of these matters will not have material adverse effect on its financial statements.

4. a) During the year, the Company has made additional Capital Contribution of Rs.10610.4 million (previous year Rs.13142.3 million) in Lupin Atlantis Holdings SA, Switzerland (LAHSA), a wholly owned subsidiary.

During the year, the Company has made Capital Contribution of Rs.nil (previous year Rs.6385.5 million) in Lupin Holdings

B.V., Netherlands (LHBV), a wholly owned subsidiary.

During the year, 100% shareholding of Novel Clinical Research (India) Pvt. Ltd., India (Novel India) has transferred from Novel Laboratories Inc., USA to the Company for Rs.0.1 million. Consequently, Novel India has become a direct subsidiary of the company.

During the previous year, the Company has transferred its 100% shareholding in Lupin (Europe) Limited, UK (LEL) for Rs.20.0 million to LAHSA. Consequently, LEL has become a step-down subsidiary of the Company.

During the previous year, the Company has transferred its 100% shareholding in Lupin Middle East FZ-LLC, UAE (LME) for Rs.32.3 million to LAHSA. Consequently, LME has become a step-down subsidiary of the Company.

b) During the previous year, the Company, through its wholly owned subsidiary Lupin Farmaceutica do Brasil LTDA, Brazil purchased 100% stake in Medquimica Industria Farmaceutica S.A., Brazil (MQ) at a total cost of Rs.2506.4 million.

c) During the year, the Company, through its wholly owned subsidiary Lupin Holdings B.V., Netherlands (LHBV), acquired / subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Generic Health SDN. BHD., Malaysia at a total cost of Rs.1.0 million (previous year Rs.0.6 million).

ii) 0.01% equity stake in Lupin Ukraine LLC, Ukraine at a total cost of Rs.269/-.

iii) Additional investment in Lupin Farmaceutica do Brazil LTDA, Brazil (LFB) at a total cost of Rs.nil (previous year Rs.174.1 million). Effective January 01, 2016, LFB merged with MQ, its wholly owned subsidiary company, resulting into LHBV’s equity stake in MQ equal to 4.56%.

iv) 0.01% equity stake in Lupin Pharma LLC, Russia at a total cost of Rs.nil (previous year Rs.107/-).

d) During the year, the Company, through its wholly owned subsidiary LAHSA acquired / subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Lupin Inc., USA at a total cost of Rs.5319.6 million (previous year Rs.1762.0 million) as additional paid-in capital - securities premium.

ii) Additional investment in Lupin Pharma LLC, Russia at a total cost of Rs.33.7 million as capital contribution (previous year Rs.0.1 million for 99.99% equity stake).

iii) 100% equity stake in Lupin Pharma Canada Ltd., Canada (LPCC) transferred from LHBV for Rs.250.8 million.

iv) Additional investment in Lupin (Europe) Ltd., UK at a total cost of Rs.259.7 million (previous year Rs.nil).

v) 99.99% equity stake in Lupin Ukraine LLC, Ukraine at a total cost of Rs.0.3 million.

vi) 100% equity stake in Lupin Japan & Asia Pacific K. K., Japan at a total cost of Rs.2.9 million.

vii) 100% equity stake in Lupin Latam, Inc., USA at a total cost of Rs.68/-.

viii) 94.91% equity stake in LFB at a total cost of Rs.nil (previous year Rs.3627.4 million). Effective January 01, 2016, LFB merged with MQ, its wholly owned subsidiary company. Subsequently, LAHSA made an additional investment of Rs.268.8 million (previous year Rs.274.1 million) in MQ resulting into LAHSA’s equity stake in MQ equal to 95.44%.

e) During the previous year, Lupin Inc., USA (LINC), a wholly owned subsidiary of LAHSA, acquired / subscribed to the equity stake of the following subsidiaries:

i) 100% equity stake in Gavis Pharmaceuticals, LLC, USA (Gavis) and its wholly owned subsidiary Edison Therapeutics LLC, USA (Edison) at a total cost of Rs.3664.7 million. Effective February 24, 2017, Edison merged into Gavis.

ii) 100% equity stake in Novel Laboratories, Inc., USA (Novel USA) and its wholly owned subsidiary Novel Clinical Research (India) Pvt. Ltd., India at a total cost of Rs.5327.7 million.

iii) 100% equity stake in VGS Holdings, Inc., USA (VGS) at a total cost of Rs.793.2 million. Effective February 24, 2017, VGS merged into Novel USA.

iv) 100% equity stake in Lupin Research Inc., USA at a total cost of Rs.67/-.

v) Lupin Pharmaceuticals, Inc, USA (LPI) has effected a reverse split of the shares in the ratio of 10000:1 and also changed the par value of the shares from USD 1 per share to USD 0.001 per share. This has resulted in reduction of number of shares held by the Company in LPI without changing the proportionate holding of the existing shareholders.

f) During the previous year, the Company’s wholly owned subsidiary LHBV sold 356 shares (0.18% equity stake) of its subsidiary Kyowa Pharmaceutical Industry Co., Limited, Japan to Medipal Holdings Corporation, Japan for a total consideration of Rs.59.4 million.

The above acquisitions / subscriptions / disposals are based on the net asset values, the future projected revenues, operating profits, cash flows and independent valuation reports; as applicable, of the investee companies.

5. Lupin Ltd and LAHSA have agreed to co-develop a bio-similar product.

6. Pre-operative expenses pending capitalisation included in Capital Work-In-Progress (Refer note 2) represent direct attributable expenditure for setting up of plants prior to the date of commencement of commercial production. The same will be capitalised on completion of projects and commencement of commercial operations. The details of pre-operative expenses are:

7. Segment Reporting:

The Company has presented data relating to its segments based on its consolidated financial statements, which are presented in the same Annual Report. Accordingly, in terms of paragraph 4 of the Indian Accounting `Standard (Ind AS 108) “Operating Segments”, no disclosures related to segments are presented in this standalone financial statements.

8. Auditors’ Remuneration:

* Excluding service tax and Swachh Bharat Cess

** Represents fees in respect of audit of subsidiaries for consolidation requirements of the Company in terms of Section 129(3) of the 2013 Act.

*** Includes payment for taxation matters to an affiliated firm of erstwhile auditors covered by a networking arrangement which is registered with the Institute of Chartered Accountants of India.

9. The Company procures equipments, vehicles and office premises under operating lease agreements that are renewable on a periodic basis at the option of both lessor and lessee. The initial tenure of the lease is generally between 12 months to 60 months. The lease rentals recognised in the Statement of Profit and Loss (Refer note 33) for the year are Rs.652.8 million (previous year Rs.478.2 million). The contingent rent recognised in the Statement of Profit and Loss for the year is Rs.nil (previous year Rs.nil). The future minimum lease payments and payment profile of non-cancellable operating leases are as under:

The Company has entered into long-term leasing arrangements for land with government authorities which are in the nature of finance lease. These arrangements do not involve any material recurring payments, hence other disclosures are not given.

10. Share-based payment arrangements:

i) Employee stock options - equity settled

The Company implemented “Lupin Employees Stock Option Plan 2003” (ESOP 2003), “Lupin Employees Stock Option Plan 2005” (ESOP 2005), “Lupin Subsidiary Companies Employees Stock Option Plan 2005” (SESOP 2005), “Lupin Employees Stock Option Plan 2011” (ESOP 2011), “Lupin Subsidiary Companies Employees Stock Option Plan 2011” (SESOP 2011), “Lupin Employees Stock Option Plan 2014” (ESOP 2014) and “Lupin Subsidiary Companies Employees Stock Option Plan 2014” (SESOP 2014) in earlier years, as approved by the Shareholders of the Company and the Nomination and Remuneration Committee of the Board of Directors (the Committee).

The Committee determines which eligible employees will receive options, the number of options to be granted, the vesting period and the exercise period. The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of Rs.2 each. The options issued under the above schemes vest in a phased manner after completion of the minimum period of one year with an exercise period of ten years from the respective grant dates.

Valuation of stock options

The fair value of stock options granted during the period has been measured using the Black-Scholes option pricing model at the date of the grant. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected terms and risk free interest rates. They key inputs and assumptions used are as follows:

Share price: The closing price on NSE as on the date of grant has been considered for valuing the options granted.

Exercise Price: Exercise Price is the market price or face value or such other price as determined by the Remuneration and Compensation Committee.

Expected Volatility: The historical volatility of the stock till the date of grant has been considered to calculate the fair value of the options.

Expected Option Life: Expected Life of option is the period for which the Company expects the options to be live. The minimum life of a stock option is the minimum period before which the options cannot be exercised and the maximum life is the period after which the options cannot be exercised.

Expected dividends: Expected dividend yield has been calculated as an average of dividend yields for four years preceding the date of the grant.

Risk free interest rate: The risk free interest rate on the date of grant considered for the calculation is the interest rate applicable for a maturity equal to the expected life of the options based on the zero coupon yield curve for Government Securities.

These assumptions reflect management’s best estimates, but these assumptions involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense could have been materially impacted. Further, if management uses different assumptions in future periods, stock based compensation expense could be materially impacted in future years. The estimated fair value of stock options is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards.

The weighted average inputs used in computing the fair value of options granted were as follows:

ii) Share appreciation rights - cash-settled

During the years 2011-12 and 2012-13, the Company granted Stock Appreciation Rights (“SARs”) to certain eligible employees in accordance with Lupin Employees Stock Appreciation Rights Scheme 2011 (“LESARs 2011”) approved by the Board of Directors (Board) at their Board Meeting held on September 13, 2011. Under the Scheme, eligible employees are entitled to receive appreciation in value of shares on completion of the vesting period.

The Scheme is administered through the Lupin Employees Benefit Trust (“Trust”) as settled by the Company. The Trust is administered by an independent Trustee. At the end of the vesting period of 3 years, the equity shares will be sold in the market by the Trust and the appreciation on the same (if any) will be distributed to the said employees, subject to vesting conditions.

The Company has been submitting required details with stock exchanges in terms of the circulars issued by SEBI in this regard. SEBI vide its circular no. CIR/CFD/POLICYCELL/3/2014 dated June 27, 2014 had extended the timelines for alignment of the Scheme till the new regulations are notified, continuing the prohibition on acquiring securities from the secondary market.

The new regulation viz: Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (‘the Regulation’) was notified on October 28, 2014, pursuant to which the existing schemes are to be aligned within one year of the effective date of the Regulation. During the previous year, the Trust had distributed the benefits of SARs to the eligible employees in terms of LESARs 2011 and had not acquired any shares from the secondary market.

As approved by the Board, the Company had, prior to the SEBI circular no. CIR/CFD/DIL/3/2013 dated January 17, 2013 advanced an interest free loan to the Trust during the years 2011-12 and 2012-13 to acquire appropriate number of Equity Shares of the Company from the market on the grant date of SARs and the loan outstanding as at the Balance Sheet date was Rs.nil (31.03.2016 - Rs.nil, 01.04.2015 - Rs.251.3 million) and treasury shares outstanding as at the balance sheet date was Rs.nil (31.03.2016 - Rs.nil, 01.04.2015 - Rs.207.8 million).

11. Post-Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised Rs.196.1 million (previous year Rs.179.0 million) for superannuation contribution and Rs.231.9 million (previous year Rs.199.9 million) for provident and pension fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC, a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

In addition to the above mentioned scheme, the Company also pays additional gratuity as an ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

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

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at the Balance Sheet date:

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

Reasonably, possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below:

B) The provident fund plan of the Company, except at two plants, is operated by “Lupin Limited Employees Provident Fund Trust” (“Trust”). Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee’s salary.

The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government of India. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate. The Board of Trustees administer the contributions made by the Company to the schemes and also defines the investment strategy.

The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan in accordance with Ind AS 19 “Employee Benefits”. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund as at March 31, 2017 and based on the same, there is no shortfall towards interest rate obligation.

Significant management judgement is required in determining provision for income tax, deferred income tax assets and liabilities and recoverability of deferred income tax assets. The recoverability of deferred income tax assets is based on estimates of taxable income and the period over which deferred income tax assets will be recovered. Any changes in future taxable income would impact the recoverability of deferred tax assets.

As on 31st March 2017, tax liability with respect to the dividends proposed before the financial statements approved for issue, but not recognised as a liability in the financial statements is Rs.689.5 million (31.03.2016 - Rs.688.0 million, 01.04.2015 - Rs.686.3 million).

12. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is Rs.16116.8 million (previous year Rs.11020.3 million).

13. The aggregate amount of cash expenditure incurred during the year on Corporate Social Responsibility (CSR) is Rs.196.8 million (previous year Rs.205.1 million) and is shown separately under note 33 based on Guidance Note on Accounting for Expenditure on CSR Activities issued by the ICAI.

The amount required to be spent by the Company during the year is Rs.662.5 million. No amount was spent during the year towards construction/acquisition of any asset relating to CSR expenditure.

14. The information regarding Micro Enterprises and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company.

15. As per best estimate of the management, provision has been made towards probable return of goods from customers, as per Indian Accounting Standard (Ind AS) 37.

16. The details of Specified Bank Notes (SBN) held and transacted during the period from 8th November 2016 to 30th December 2016 is provided in the table below (refer note 10):

17. Financial Instruments:

Financial instruments - Fair values and risk management:

A. Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

* These are for operation purposes and the Company expects its refund on exit. The Company estimates that the fair value of these investments are not materially different as compared to its cost.

B. Measurement of fair values:

Valuation techniques and significant unobservable inputs:

The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, for financial instruments measured at fair value in the statement of financial position, as well as the significant unobservable inputs used:

C. Financial risk management:

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

- Credit risk;

- Liquidity risk; and

- Market risk

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 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 periodically to reflect changes in market conditions and the Company’s activities. The Company, through its training, 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.

i. Credit risk:

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers and investment securities. Credit risk is managed 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. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed 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.

As at year end, the carrying amount of the Company’s largest customer (a Subsidiary based in North America) was Rs.29436.2 million (31.03.2016 - Rs.34915.6 million, 01.04.2015 - Rs.16406.9 million)

Expected credit loss assessment

The Company allocates each exposure to a credit risk grade based on a variety of data that is determined to be predictive of the risk of loss (e.g. timeliness of payments, available press information etc.) and applying experienced credit judgement.

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. 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 several 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.

Cash and cash equivalents

As at the year end, the Company held cash and cash equivalents of Rs.1580.1 (31.03.2016 - Rs.184.9 million, 01.04.2015 - Rs.573.0 million). The cash and cash equivalents are held with bank and financial institution counterparties with good credit rating.

Other Bank Balances

Other bank balances are held with bank and financial institution counterparties with good credit rating. Derivatives

The derivatives are entered into with bank and financial institution counterparties with good credit rating. Investment in mutual funds

The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. The Company does not expect any losses from non-performance by these counter-parties.

Other financial assets

Other financial assets are neither past due nor impaired.

ii. Liquidity risk

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

The Company has obtained fund and non-fund based working capital lines from various banks. The Company invests its surplus funds in bank fixed deposit and liquid and liquid plus schemes of mutual funds, which carry no/low mark to market risks. The Company monitors funding options available in the debt and capital markets with a view to maintaining financial flexibility.

Exposure to liquidity risk

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

iii. Market risk

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

Currency risk

The Company is exposed to currency risk on account of its operations in other countries. The functional currency of the Company is Indian Rupee. The exchange rate between the Indian rupee and foreign currencies has changed substantially in recent periods and may continue to fluctuate substantially in the future. Consequently, the Company uses both derivative instruments, i.e, foreign exchange forward contracts to mitigate the risk of changes in foreign currency exchange rates in respect of its highly probable forecasted transactions and recognized assets and liabilities.

The company enters into foreign currency forward contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables/receivables.

The company also enters into derivative contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivatives contracts are entered into by the company for hedging purposes only, and are accordingly classified as cash flow hedge.

In addition to the above, the Company has entered into foreign currency forward contract (buy) aggregating USD 66.0 million (with cross currency INR) (31.03.2016 - Rs.nil, 01.04.2015 - Rs.nil) for purposes other than hedging.

Sensitivity analysis

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

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates, if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates.

Fair value sensitivity analysis for fixed-rate instruments

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

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

The risk estimates provided assume a change of 100 basis points interest rate for the interest rate benchmark as applicable to the borrowings summarised above. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Commodity rate risk

The Company’s operating activities involve purchase and sale of Active Pharmaceutical Ingredients (API), whose prices are exposed to the risk of fluctuation over short periods of time. Commodity price risk exposure is evaluated and managed through procurment and other related operating policies. As of March 31, 2017, March 31, 2016 and April 1, 2015 the Company had not entered into any material derivative contracts to hedge exposure to fluctuations in commodity prices.

18. Capital Management:

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

The board of directors seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

The Company monitors capital using a ratio of ‘adjusted net debt’ to ‘total equity’. For this purpose, adjusted net debt is defined as total liabilities, comprising interest-bearing loans and borrowings, less cash and cash equivalents, other bank bank balances and current investments.

19. Hedge accounting:

The Company’s risk management policy is to hedge above 15% of its estimated net foreign currency exposure in respect of highly probable forecast sales over the following 12-18 months at any point in time. The Company uses forward exchange contracts to hedge its currency risk. Such contracts are generally designated as cash flow hedges.

The forward exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1. Most of these contracts have a maturity of 12-18 months from the reporting date. The Company’s policy is for the critical terms of the forward exchange contracts to align with the hedged item.

The Company determines the existence of an economic relationship between the hedging instrument and hedged item based on the currency, amount and timing of their respective cash flows. The Company assesses whether the derivative designated in each hedging relationship is expected to be and has been effective in offsetting changes in the cash flows of the hedged item using the hypothetical derivative method.

In these hedge relationships, changes in timing of the hedged transactions is the main source of hedge ineffectiveness.

Offsetting arrangements:

(i) Trade receivables and payables

The Company has certain customers which are also supplying materials. Under the terms of agreement, the amounts payable by the Company are offset against receivables and only net amounts are settled.

(ii) Derivatives

The Company enters into derivative contracts for hedging future sales. In general, under such agreements, the amounts owed by each counterparty on a single day in respect of all the transactions outstanding in the same currency are aggregated into a single net amount that is payable by one party to the other.

* During the year, the Company has entered into foreign currency forward contracts (buy) for purposes other than hedging.

20. Related Party Disclosures, as required by Indian Accounting Standard 24 (Ind AS 24) are given below: A. Relationships -

Category I: Subsidiaries:

Lupin Pharmaceuticals, Inc., USA

Kyowa Pharmaceutical Industry Co., Limited, Japan

Lupin Australia Pty Limited, Australia

Lupin Holdings B.V., Netherlands

Pharma Dynamics (Proprietary) Limited, South Africa

Hormosan Pharma GmbH, Germany

Multicare Pharmaceuticals Philippines Inc., Philippines

Lupin Atlantis Holdings SA, Switzerland

Lupin (Europe) Limited, UK

Lupin Pharma Canada Limited, Canada

Lupin Mexico S.A. de C.V., Mexico

Generic Health Pty Limited, Australia

Bellwether Pharma Pty Limited, Australia

Lupin Philippines Inc., Philippines

Lupin Healthcare Limited, India

Generic Health SDN. BHD., Malaysia

Kyowa CritiCare Co., Limited, Japan

Lupin Middle East FZ-LLC, UAE

Lupin GmbH, Switzerland

Lupin Inc., USA

Lupin Farmaceutica do Brasil LTDA, Brazil (upto December 31, 2015)

Medquimica Industria Farmaceutica LTDA, Brazil Nanomi B.V., Netherlands Laboratorios Grin S.A. de C.V., Mexico Lupin Pharma LLC, Russia (from February 11, 2016)

VGS Holdings, Inc., USA (from March 8, 2016 and upto February 24, 2017)

Novel Laboratories, Inc., USA (from March 8, 2016)

Novel Clinical Research (India) Private Limited., India (from March 8, 2016)

Gavis Pharmaceuticals, LLC., USA (from March 8, 2016)

Edison Therapeutics, LLC, USA (from March 8, 2016 and upto February 24, 2017)

Lupin Research Inc., USA (from March 8, 2016)

Lupin Ukraine LLC, Ukraine (w.e.f. July 6, 2016)

Lupin Latam, Inc., USA (w.e.f. December 15, 2016)

Lupin Japan & Asia Pacific K.K., Japan (w.e.f. March 13, 2017)

Category II: Jointly Controlled Entity:

YL Biologics Ltd., Japan

Category III: Key Management Personnel (KMP)

Dr. D. B. Gupta Chairman

Dr. Kamal K. Sharma Vice Chairman

Ms. Vinita Gupta Chief Executive Officer

Mr. Nilesh Gupta Managing Director

Mrs. M. D. Gupta Executive Director

Mr. Ramesh Swaminathan Chief Financial Officer and Executive Director

Mr. R.V. Satam Company Secretary

Non-Executive Directors

Dr. Vijay Kelkar

Mr. R. A. Shah

Mr. Richard Zahn

Dr. K. U. Mada

Mr. Dileep C. Choksi

Mr. Jean-Luc Belingard

Category IV: Others (Relatives of KMP and Entities in which the KMP and Relatives of KMP have control or significant influence)

Mrs. Kavita Sabharwal (Daughter of Chairman)

Dr. Anuja Gupta (Daughter of Chairman)

Dr. Richa Gupta (Daughter of Chairman)

Mrs. Pushpa Khandelwal (Sister of Chairman)

Mrs. Shefali Nath Gupta (Wife of Managing Director)

Ms. Veda Nilesh Gupta (Daughter of Managing Director)

BS Merc Private Limited (formerly Bharat Steel Fabrication and Engineering Works)

D. B. Gupta (HUF)

Lupin Human Welfare and Research Foundation Lupin Foundation

Lupin International Pvt. Limited (upto September 21, 2016)

Lupin Investments Pvt. Limited Lupin Holdings Pvt. Limited Matashree Gomati Devi Jana Seva Nidhi Polynova Industries Limited Rahas Investments Pvt. Limited

Synchem Investments Pvt. Limited (upto September 21, 2016)

Visiomed Investments Pvt. Limited Zyma Laboratories Limited Concept Pharmaceuticals Limited Shuban Prints

TeamLease Services Limited

Terms and conditions of transactions with related parties:

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. For the year ended 31 March 2017, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (31.03.2016 - Rs.nil, 01.04.2015 - Rs.nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

21. First time adoption of Ind AS:

Transition to Ind AS:

For the purposes of reporting as set out in Note 1B(a), the Company has transitioned basis of accounting from Indian generally accepted accounting principles (“IGAAP”) to Ind AS. The accounting policies set out in note 1B have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 1 April 2015 (the “transition date”).

In preparing opening Ind AS balance sheet, the Company has adjusted amounts reported in financial statements prepared in accordance with IGAAP. On transition, the Company did not revise estimates previously made under IGAAP except where required by Ind AS.

C. Reconciliation of Statement of Cash Flows

There were no material differences between the Statement of Cash Flows presented under Ind AS and under IGAAP.

Notes to the reconciliation:

1. Proposed dividend

Under previous GAAP, proposed dividends are recognised as a liability in the period to which they relate, irrespective of when they are declared. Under Ind AS, a proposed dividend is recognised as a liability in the period in which it is declared by the Company (usually when approved by shareholders in a general meeting) or paid.

In the case of the Company, the declaration of dividend has occurred after period end. Therefore, the liability recorded for this dividend and tax thereon, has been derecognised against retained earnings.

2. Revenue Recognition - Measurement of Revenue, Linked arrangements

Under Ind AS, revenue is required to be measured at the fair value of consideration received or receivable. Further, under Ind AS, rebates and cash discounts expected to be offered in subsequent periods are required to be factored in and a corresponding reduction from revenue is considered.

The Company enters into out licensing products for the purpose of selling its products in various markets. Ind AS requires an evaluation of separate standalone value of a deliverable while determining the timing and subsequently measuring revenue. In view of this requirement, revenue in relation to dossier arrangements have been re-allocated and consequent impact on timing of revenue recognition has been considered.

3. Trade and other Receivables

Under previous GAAP, the Company has created provision for impairment of receivables only in respect of specific amount for incurred losses. Under Ind AS, impairment allowance has been determined based on Expected Credit Loss (ECL) model.

4. Stock Appreciation Rights (SARs) Liability

Under previous GAAP, expenses in relation to SARs were measured with reference to intrinsic value and the corresponding sum was reflected as part of the reserves. Under Ind AS, the expense in relation to the SARs are required to be measured at fair value and to be presented as a liability.

Further, under Ind AS, the Company has elected to treat the Trust (set up to administer the SARs) as a branch. Consequently, the equity shares of the Company held by the Trust have been presented as Treasury Stock and reduced from the equity.

5. ESOP Cost

Under previous GAAP, the Company recognised only the intrinsic value for the ESOP plan as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognised over the vesting period. An additional expense of Rs.354.9 million (net of Rs.124.4 million cross charged to subsidiaries) has been recognised in profit or loss for the year ended March 31, 2016.

6. Fair valuation of Mutual Funds Investments

Under previous GAAP, Mutual Funds Investments were carried at cost and only mark to market losses were recognised in Statement of Profit and Loss. Under Ind AS, Mutual Funds Investments are fair valued at the period end and resulting mark to market loss or gain is transferred to Statement of Profit and Loss.

7. Effective portion of Losses on hedging instruments transferred to Cash Flow Hedge

The fair value of forward foreign exchange contracts is recognised under both previous GAAP and Ind AS. Under previous GAAP, effective portion of Losses on hedging instruments is transferred to Cash Flow Hedge Reserve, and was not part of net profit reported under previous GAAP. Under Ind AS, said amount is disclosed as a part of Other Comprehensive Income.

8. Fair valuation of non-current security deposits

Under previous GAAP, security deposits are carried at their book values. Under Ind AS, non-cancellable deposits (other than statutory in nature) are required to be measured at their fair values at inception using an appropriate discounting rate.

9. Reversal of straight lining of lease rent

Lease rentals straight-lined under previous GAAP, to the extent linked to inflation are reversed under Ind AS 17.

22. Excise duty (Refer note 33) includes Rs.165.8 million (previous year Rs.74.2 million) being net impact of the excise duty provision on opening and closing stock.

23. No borrowing cost has been capitalised during the year.

24. The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable loss. At the year end, the Company has reviewed and ensured that adequate provision as required under any law/accounting standard for material foreseeable losses on such long term contracts (including derivative contracts) has been made in the books of accounts.


Mar 31, 2015

IA. OVERVIEW:

Lupin Limited, (''the Company'') incorporated in 1983, is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations and active pharmaceutical ingredients (APIs). The Company along with its subsidiaries has manufacturing locations spread across India, Japan and Mexico with trading and other incidental and related activities extending to the global markets.

b) Rights attached to Equity Shares

The Company has only one class of equity shares with voting rights having a par value of Rs. 2 per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting, except in case of interim dividend.

During the year ended 31 March 2015, the amount of dividend per equity share recognised as distributions to equity shareholders is Rs. 7.5 (previous year Rs. 6 which includes Rs. 3 interim dividend and Rs. 3 final dividend).

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

c) No shares have been allotted without payment being received in cash or by way of bonus shares during the period of five years immediately preceding the Balance Sheet date.

a) Deferred Sales Tax Loan is interest free and payable in 5 equal annual installments after expiry of initial 10 years moratorium period from each such year of deferral period from 1998-99 to 2009-10.

b) Term Loans from CSIR carry interest of 3% p.a. and is payable in 5 annual installments of Rs.30.9 million each alongwith interest.

c) Term Loans from DST carry interest of 3% p.a. and is payable in 4 annual installments of Rs.10.4 million each alongwith interest.

d) The Company has not defaulted on repayment of loans and interest during the year.

a) Secured loans comprise of Cash Credit, Short-Term Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit and are secured by hypothecation of inventories and trade receivables, and all other moveable assets, including current assets at godowns, depots, in course of transit or on high seas and a second charge on immovable properties and moveable assets of the Company both present and future.

b) Unsecured loans comprise of Short-Term Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit. It includes foreign currency loans of Rs.nil (previous yearRs.608.1 million).

c) Loans in Indian Rupees carry interest rate in the range of 10.50% to 12.25% p.a.

d) The Company has not defaulted on repayment of loans and interest during the year.

2. Commitments:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs.2399.6 million (previous year Rs.1867.4 million).

b) Letters of comfort for support in respect of certain subsidiaries. The Company considers its investments in subsidiaries as strategic and long-term in nature. The Company is committed to operationally, technically and financially support the operations of its subsidiaries.

c) Other commitments - Non-cancellable operating leases (Refer note 37).

3. Contingent Liabilities:

As at 31.03.2015 As at 31.03.2014 Rs. in million Rs. in million

a) Income tax demands / matters on account of deductions / disallowances for earlier 826.4 173.2 years, pending in appeals [Rs. 49.7 million (previous year Rs. 49.7 million) consequent to department preferring appeals against the orders of the Appellate Authorities passed in favour of the Company].

Amount paid there against and included under note 14 "Long-Term Loans and Advances” Rs. 55.4 million (previous year Rs. 26.3 million).

b) Excise duty, Service tax and Sales tax demands for input tax credit disallowances 377.0 355.5 and demand for additional Entry Tax arising from dispute on applicable rate are in appeals and pending decisions. Amount paid there against and included under

Note 4 "Short-Term Loans and Advances" Rs. 28.5 million (previous year Rs.30.4 million) and under note 14 "Long Term Loans and Advances” Rs.2.5 million (previous year Rs.nil).

c) Claims against the Company not acknowledged as debts [excluding interest (amount 753.7 830.8 unascertained) in respect of a claim] for transfer charges of land, octroi duty, local body tax, employee claims, power, trade marks, pricing, indemnity and stamp duty.

Amount paid there against without admitting liability and included under note 20 "Short-Term Loans and Advances" Rs.12.3 million (previous year Rs.12.6 million).

d) Counter guarantee given to GIDC in connection with repayment of loan sanctioned by - 7.5 a financial institution to a company, jointly promoted by an Association of Industries (of which, the Company is a member) and GIDC.

e) Letter of comfort issued by the Company towards the credit facilities sanctioned - 26.7 by the bankers of subsidiary companies aggregating Rs.139.5 million (previous year Rs.133.5 million).

f) Corporate guarantee given in respect of credit facilities sanctioned by bankers of 1666.9 2124.1 subsidiary companies aggregating Rs.1849.9 million (previous year Rs. 2264.2 million).

g) During the year, the Company received a notice from the European Commission for alleged breach of the EU Antitrust Rules, whereby it has sought to levy a fine of Euro 40.0 million (Rs.2687.6 million) on the Company in respect of an agreement entered into by the Company with Laboratories Servior, France, for sale of certain patent applications and IPs for the product Perindopril which the European Commission considered as anti-competitive. The Company, based on facts of the matter and legal advice received does not agree with the said notice / demand and is of the view that it has a strong case to defend itself. Accordingly, the Company has filed an appeal before the European General Court. A bank guarantee of Euro 40.0 million has been furnished to the European Commission.

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgement / decisions pending with the relevant authorities. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company''s financial condition, results of operations or cash flows.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defenses, the ultimate disposition of these matters will not have material adverse effect on its Financial Statements.

5. a) During the previous year, the Company purchased 100% stake consisting of Equity and Capital contribution of Lupin Atlantis Holdings SA, Switzerland (LAHSA) from its wholly owned subsidiary Lupin Holdings B.V., Netherlands at a total cost of Rs.2993.7 million pursuant to which LAHSA became direct wholly owned subsidiary of the Company (Refer note 13(a)). During the year, the Company has made additional Capital Contribution of Rs.7982.8 million in LAHSA.

Further, the Company invested an additional amount of Rs.24.8 million (previous year Rs. nil) in Lupin Middle East FZ-LLC, UAE, a wholly owned subsidiary.

b) During the year, the Company, through its wholly owned subsidiary LAHSA acquired / subscribed to the equity stake of the following subsidiaries / jointly controlled entity:

i) 45% equity stake in YL Biologics Ltd., Japan a jointly controlled entity at a total cost of Rs.33.0 million. Initial investment was Rs.80.8 million of which Rs.47.8 million was refunded subsequently in terms of resolution passed at extraordinary shareholders meeting of YL Biologics Ltd. on November 14, 2014 which has been accounted as reduction in investment by LAHSA.

ii) 100% equity stake in Laboratorios Grin S.A. de C.V., Mexico at a total cost of Rs.6149.6 million.

iii) Additional investment in Nanomi B.V., Netherlands at a total cost of Rs.nil (previous year Rs.857.0 million for 100% equity stake).

iv) Additional investment in Lupin Inc., USA at a total cost of Rs.542.1 million (previous year Rs.325.0 million for 100% equity stake) including additional paid-in capital - securities premium of Rs.542.1 million (previous year Rs.321.9 million).

v) Additional investment in Lupin GmbH, Switzerland at a total cost of Rs.93.5 million (previous year Rs.1.3 million for 100% equity stake) including capital contribution of Rs.93.5 million (previous year Rs.nil).

c) During the previous year, Lupin Inc., USA (LINC) wholly owned subsidiary of LAHSA subscribed to equity stake of Company''s wholly owned subsidiary Lupin Pharmaceuticals, Inc., USA (LPI) at a total cost of Rs.71.9 million resulting into LINC holding 80% and the Company holding 20% of LPI''s equity stake. During the year, LINC has further subscribed to additional equity stake of LPI at a total cost of Rs.538.5 million resulting into LINC holding 97% and the Company holding 3% of LPI''s equity stake.

d) During the year, the Company, through its wholly owned subsidiary Lupin Holdings B.V., Netherlands (LHBV), acquired / subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Lupin Farmaceutica do Brasil LTDA, Brazil (formerly Farma World Importacao e Exportacao de Medicamentos LTDA - EPP) at a total cost of Rs.51.7 million (previous year Rs.29.8 million for 100% equity stake).

ii) Additional investment in Generic Health Pty Ltd., Australia at a total cost of Rs.144.5 million (previous year Rs.nil) thereby making it 100% (previous year 91.04%) subsidiary of LHBV.

iii) Additional investment in Generic Health SDN. BHD., Malaysia at a total cost of Rs.1.4 million (previous year Rs.2.2 million).

iv) Acquired balance 40% shareholding of Pharma Dynamics (Proprietary) Ltd., South Africa (PD) consequent to exercise of Put Option by the minority shareholders of PD, for a consideration of Rs.5977.6 million. Accordingly PD has become wholly owned subsidiary of LHBV. Pending the completion of certain formalities as at the year end, the transfer of share certificates in the name of LHBV for the said balance shareholding is in process.

v) Additional investment in Lupin Philippines Inc., Philippines at a total cost of Rs.nil (previous year Rs.10.9 million).

vi) Additional investment in Hormosan Pharma GmbH, Germany at a total cost of Rs.nil (previous year Rs.237.6 million).

vii) Additional investment in Lupin Mexico S.A. de C.V., Mexico at a total cost of Rs.nil (previous year Rs.32.8 million).

viii) Additional investment in Lupin Pharma Canada Limited, Canada at a total cost of Rs.nil (previous year Rs.30.2 million).

e) During the year, the Company, through Kyowa Pharmaceutical Industry Co., Limited, Japan, wholly owned subsidiary of LHBV subscribed to additional investment in Kyowa CritiCare Co., Limited, Japan (formerly I''rom Pharmaceutical Co., Limited) at a total cost of Rs.835.8 million (previous year Rs.nil)

The above acquisitions / subscriptions are based on the net asset values, the future projected revenues, operating profits, cash flows and independent valuation reports; as applicable, of the investee companies.

f) The Company considers its investments in subsidiaries as strategic and long-term in nature and accordingly, in view of the management, any decline in the value of such long-term investments in subsidiaries is considered to be temporary in nature and hence no provision for diminution in value of investments is considered necessary.

6. Pre-operative expenses pending capitalisation included in Capital Work-In-Progress (Refer note 12) represent direct attributable expenditure for setting up of plants prior to the date of commencement of commercial production. The same will be capitalised on completion of projects and commencement of commercial operations. The details of pre-operative expenses are:

7. Segment Reporting:

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

8. Additional information pursuant to the provisions of Paragraph 5 (viii) of Part II of Schedule III to the Companies Act, 2013. a) Value of Imported and Indigenous consumption:

i) Consumption of Raw Materials:

9. Employees Stock Option Plans:

a) The Company implemented "Lupin Employees Stock Option Plan 2003” (ESOP 2003), "Lupin Employees Stock Option Plan 2005" (ESOP 2005), "Lupin Subsidiary Companies Employees Stock Option Plan 2005" (SESOP 2005), "Lupin Employees Stock Option Plan 2011" (ESOP 2011), "Lupin Subsidiary Companies Employees Stock Option Plan 2011" (SESOP 2011) in earlier years; and "Lupin Employees Stock Option Plan 2014" (ESOP 2014) and "Lupin Subsidiary Companies Employees Stock Option Plan 2014" (SESOP 2014) in the current year, as approved by the Shareholders of the Company and the Remuneration / Compensation / Nomination and Remuneration Committee of the Board of Directors. Details of the options granted during the year under the plans are as under:

The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of Rs. 2 each. The options have vesting periods as stated above in accordance with the vesting schedule as per the said plans with an exercise period of ten years from the respective grant dates.

b. The Company has followed the intrinsic value based method of accounting for stock options granted after April 1,2005 based on Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India (ICAI). Had the compensation cost for the Company''s stock based compensation plans been determined in the manner consistent with the fair value approach as described in the said Guidance Note, the Company''s net income would be lower by Rs. 444.7 million (previous year Rs. 291.5 million) and earnings per share as reported would be as indicated below:

10. Stock Appreciation Rights:

During the years 2011-12 and 2012-13, the Company granted Stock Appreciation Rights ("SARs") to certain eligible employees in accordance with Lupin Employees Stock Appreciation Rights Scheme 2011 ("LESARs 2011”) approved by the Board of Directors (Board) at their Board Meeting held on September 13, 2011. Under the scheme, eligible employees are entitled to receive appreciation in value of shares on completion of the vesting period.

The Scheme is administered through the Lupin Employees Benefit Trust (the "Trust”) as settled by the Company. The Trust is administered by an independent Trustee. At the end of the vesting period of 3 years, the equity shares will be sold in the market by the Trust and the appreciation on the same (if any) will be distributed to the said employees, subject to vesting conditions. The Company has been submitting required details with stock exchanges in terms of the circulars issued by SEBI in this regard. During the year, SEBI vide its circular no. CIR/CFD/POLICYCELL/3/2014 dated June 27, 2014 has extended the timelines for alignment of the Scheme till the new regulations are notified, continuing the prohibition on acquiring securities from the secondary market.

The new regulation viz: Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (''the Regulation'') was notified on October 28, 2014, pursuant to which the existing schemes are to be aligned within one year of the effective date of the Regulation. During the year, the Trust has distributed the benefits of SARs to the eligible employees in terms of LESARs 2011 and has not acquired any shares from the secondary market.

As approved by the Board, the Company had, prior to the SEBI circular no. CIR/CFD/DIL/3/2013 dated January 17, 2013 advanced an interest free loan to the Trust during the years 2011-12 and 2012-13 to acquire appropriate number of Equity Shares of the Company from the market on the grant date of SARs and the loan outstanding as at the balance sheet date aggregating to Rs. nil (previous year Rs.258.0 million) is included under "Long-Term Loans and Advances” (Refer note 14) and Rs. 251.3 million (previous year Rs. 218.9 million) is included under "Short-Term Loans and Advances" (Refer note 20).

The related compensation cost for outstanding SARs and in case of redeemed SARs upto the date of redemption amounting to Rs. 620.1 million (previous year Rs.191.6 million) has been recognized as Employee Benefits Expense and the corresponding credit is included under "Reserves and Surplus" as Employee Stock Appreciation Rights Outstanding. In respect of SARs redeemed during the year, the corresponding amount of Rs. 379.0 million (previous year Rs. nil) has been transferred from Employee Stock Appreciation Rights Outstanding to General Reserve. Had the compensation cost for the Company''s stock based compensation plans been determined in the manner consistent with the fair value approach as described in the Guidance Note on Accounting for Employee Share-based Payments issued by ICAI, the Company''s net income would be higher by Rs. 587.3 million (previous year by Rs. 110.3 million) and earnings per share as reported would be as indicated below:

11. Post Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised Rs. 165.5 million (previous year Rs. 161.6 million) for superannuation contribution and Rs. 147.5 million (previous year Rs. 92.5 million) for provident fund and pension contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC of India, a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

In addition to the above mentioned scheme, the Company also pays additional gratuity as an ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

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

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company''s financial statements as at the balance sheet date.

B) The provident fund plan of the Company, except at two plants, is operated by "Lupin Limited Employees Provident Fund Trust” (the "Trust”). Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee''s salary. The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government of India. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.

The ASB Guidance on Implementing AS-15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefit plans involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund as at March 31, 2015 and shortfall aggregating Rs. nil (previous year Rs. 9.0 million) has been provided for. The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan.

The Company recognised Rs. 266.4 million (previous year Rs. 257.0 million) for provident fund contributions in the Statement of Profit and Loss.

12. (i) The Company has entered into foreign currency forward and futures contracts which are not intended for trading or speculative purposes but for hedge purposes to establish the amount of reporting currency required or available at the settlement date of certain payables. The following are the outstanding foreign currency forward contracts entered into by the Company:

13. Details of Derivative Contracts:

The Company enters into derivative contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivative contracts are entered into by the Company for hedging purposes only, and are accordingly classified as cash flow hedges.

The category wise break-up of outstanding derivative contracts entered into by the Company is as under:

The changes in the fair value of the derivative contracts during the year ended March 31, 2015 aggregating Rs. 92.6 million (previous year Rs. 265.5 million) designated and effective as hedges have been credited to the Cash Flow Hedge Reserve and Rs. 42.6 million (previous year Rs. 36.8 million) is credited to the Statement of Profit and Loss, being the ineffective portion thereof.

14. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is Rs. 8455.9 million (previous year Rs. 8112.0 million).

15. The aggregate amount of expenditure incurred during the year on Corporate Social Responsibility and shown in the respective heads of account is Rs. 125.8 million.

16. Related Party Disclosures, as required by Accounting Standard 18 (AS-18) are given below : A. Relationships -

Category I : Subsidiaries:

Lupin Pharmaceuticals, Inc., USA

Kyowa Pharmaceutical Industry Co., Limited, Japan

Lupin Australia Pty Limited, Australia

Lupin Holdings B.V., Netherlands

Pharma Dynamics (Proprietary) Limited, South Africa

Hormosan Pharma GmbH, Germany

Multicare Pharmaceuticals Philippines Inc., Philippines

Lupin Atlantis Holdings SA, Switzerland

Lupin (Europe) Limited, UK

Lupin Pharma Canada Limited, Canada

Lupin Mexico S.A. de C.V., Mexico

Generic Health Pty Limited, Australia

Bellwether Pharma Pty Limited, Australia

Max Pharma Pty Limited, Australia (upto 17 December 2014)

Lupin Philippines Inc., Philippines Lupin Healthcare Limited, India Generic Health SDN. BHD., Malaysia

Kyowa CritiCare Co., Limited, Japan (formerly I''rom Pharmaceutical Co., Limited)

Lupin Middle East FZ-LLC, UAE

Lupin GmbH, Switzerland (from 15 August 2013)

Lupin Inc., USA (from 27 June 2013)

Lupin Farmaceutica do Brasil LTDA, Brazil (formerly Farma World Importacao e Exportacao De Medicamentos LTDA - EPP, Brazil (from 17 December 2013))

Nanomi B.V., Netherlands (from 30 January 2014)

Laboratorios Grin S.A. de C.V., Mexico (from 30 September 2014)

Category II: Jointly Controlled Entity:

YL Biologics Ltd., Japan (from 23 April 2014)

Category III: Key Management Personnel (KMP)

Dr. D. B. Gupta Chairman

Dr. Kamal K. Sharma Vice Chairman

Ms. Vinita Gupta Chief Executive Officer

Mr. Nilesh Gupta Managing Director

Mrs. M. D. Gupta Executive Director

Category IV: Others (Relatives of KMP and Entities in which the

KMP and Relatives of KMP have control or significant influence)

Dr. Anuja Gupta (Daughter of Chairman)

Mrs. Kavita Sabharwal (Daughter of Chairman)

Dr. Richa Gupta (Daughter of Chairman)

Mrs. Pushpa Khandelwal (Sister of Chairman)

Mrs. Shefali Nath (Wife of Managing Director)

Ms. Veda Nilesh Gupta (Daughter of Managing Director)

Bharat Steel Fabrication and Engineering Works D. B. Gupta (HUF)

Lupin Human Welfare and Research Foundation

Lupin International Pvt. Limited

Lupin Investments Pvt. Limited

Lupin Holdings Pvt. Limited

Matashree Gomati Devi Jana Seva Nidhi

Novamed Investments Pvt. Limited

Polynova Industries Limited

Rahas Investments Pvt. Limited

Synchem Investments Pvt. Limited

Visiomed Investments Pvt. Limited

Zyma Laboratories Limited

Concept Pharmaceuticals Limited

Shuban Prints

17. Sale of research services include I 227.7 million in respect of income accrued w.e.f. April 1, 2013 for providing captive research services at cost plus an arm''s length mark-up in relation to certain products development under Amendment II dated March 15, 2015 to the Product Development Agreement dated October 8, 2012, as amended, between the Company and Lupin Atlantis Holdings SA (LAHSA). The rights, interest and title to the said products and their use together with all associated intellectual property rights vest with LAHSA.

18. During the year, in terms of Schedule II to the Companies Act, 2013 read together with Accounting Standard 6 (AS - 6) "Depreciation Accounting”, the management of the Company has, based on independent technical evaluation, reassessed the remaining useful lives of fixed assets to align with those specified in Schedule II and undertaken the componentization of major items of fixed assets with effect from April 1, 2014. In terms of these evaluations, changes have been made in the useful lives of certain assets from their previous estimates as under:

Pursuant to the transition provisions prescribed in Schedule II to the Companies Act, 2013, the Company has fully depreciated the carrying value of assets, net of residual value, where the remaining useful life of the asset was determined to be nil as on April 1, 2014, and has adjusted an amount of Rs. 610.8 million (net of deferred tax of Rs. 314.6 million) against the opening Surplus balance in the Statement of Profit and Loss under Reserves and Surplus.

The depreciation expense in the Statement of Profit and Loss for the year is higher by Rs. 1618.2 million consequent to the change in the useful lives of the assets.

19. Excise duty (Refer note 28) includes Rs. 32.9 million (previous year Rs. 34.2 million) being net impact of the excise duty provision on opening and closing stock.

20. No borrowing cost has been capitalised during the year.

21. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Mar 31, 2014

1. OVERVIEW:

Lupin Limited, (''the Company'') was incorporated in 1983 as Lupin Chemicals Private Limited. Lupin Laboratories Limited which was incorporated in 1972 was amalgamated with the Company w.e.f. 01.04.2000, pursuant to an Order passed by the Mumbai High Court. The Company is an innovation led Transnational Pharmaceutical Company producing, developing and marketing a wide range of branded and generic formulations and APIs. The Company along with its subsidiaries has manufacturing locations spread across India and Japan with trading and other incidental & related activities extending to the world markets.

2. Contingent Liabilities:

As at 31.03.2014 As at 31.03.2013 Rs. in million Rs.in million

a) Income tax demands / matters on account of deductions / disallowances in earlier 173.2 82.3 years, pending in appeals [Rs.49.7 million (previous year Rs. 49.7 million) consequent to department preferring appeals against the orders of the Appellate Authorities passed in favour of the Company]. Amount paid there against and included under note 14 "Long-Term Loans and Advances" Rs. 26.3 million (previous year Rs. 23.5 million).

b) Excise duty, Service tax and Sales tax demands for input tax credit disallowances 355.5 424.4 and demand for additional Entry Tax arising from dispute on applicable rate are in appeals and pending decisions. Amount paid there against and included under note 19 "Short-Term Loans and Advances" Rs.30.4 million (previous year Rs. 31.7 million).

c) Claims against the Company not acknowledged as debts [excluding interest (amount 830.8 419.9 unascertained) in respect of a claim] for transfer charges of land, octroi duty, local body tax, employee claims, power, trade marks, pricing, indemnity and stamp duty.

Amount paid there against without admitting liability and included under note 19 Term Loans and Advances" RS. 12.6 million (previous year Rs. 12.6 million).

d) Counter guarantee given to GIDC in connection with repayment of loan sanctioned by 7.5 7.5 a financial institution to a company, jointly promoted by an Association of Industries (of which, the Company is a member) and GIDC.

e) Letter of comfort issued by the Company towards the credit facilities sanctioned by the 26.7 39.9 bankers of subsidiary companies aggregating Rs. 133.5 million (previous year Rs. 133.0 million).

f) Corporate guarantee given in respect of credit facility sanctioned by bankers of 2124.1 2645.8 subsidiary companies aggregating Rs. 2264.2 million (previous year Rs. 2738.9 million).

Future cash outflows in respect of the above, if any, is determinable only on receipt of judgement / decisions pending with the relevant authorities. The Company does not expect the outcome of the matters stated above to have a material adverse impact on the Company''s financial condition, results of operations or cash flows.

The Company does not envisage any likely reimbursements in respect of the above.

The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defenses the ultimate disposition of these matters will not have material adverse effect on its Financial Statements.

3. a) During the year, the Company purchased 100% stake consisting of Equity and Capital contribution of Lupin Atlantis

Holdings SA, Switzerland (LAHSA) from its wholly owned subsidiary Lupin Holdings B.V., Netherlands at a total cost of Rs. 2993.7 million pursuant to which LAHSA has become direct wholly owned subsidiary of the Company [Refer note 13(a)]. b) During the year, the Company, through its wholly owned subsidiary LAHSA acquired / subscribed to the equity stake of the following subsidiaries: i) 100% equity stake in Nanomi B.V., Netherlands at a total cost of Rs.857.0 million.

ii) 100% equity stake in Lupin Inc., USA at a total cost of Rs. 325.0 million (including additional paid-in capital -securities premium of Rs.321.9 million).

iii) 100% equity stake in Lupin GmbH, Switzerland at a total cost of Rs. 1.3 million.

c) During the year, Lupin Inc., USA (LINC) wholly owned subsidiary of LAHSA has subscribed to equity stake of Company''s wholly owned subsidiary Lupin Pharmaceuticals, Inc., USA (LPI) resulting into LINC holding 80% and the Company holding 20% of LPI''s equity stake.

d) During the year, the Company, through its wholly owned subsidiary Lupin Holdings B.V., Netherlands (LHBV), acquired / subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Hormosan Pharma GmbH, Germany at a total cost of Rs. 237.6 million (previous year Rs. 262.2 million).

ii) Additional investment in Lupin Mexico SAde CV, Mexico at a total cost of Rs. 32.8 million (previous year Rs. 10.7 million).

iii) Additional investment in Lupin Pharma Canada Limited, Canada at a total cost of Rs.30.2 million (previous year Rs. nil).

iv) 100% equity stake of Farma World Importacao e Exportacao De Medicamentos LTDA - EPP, Brazil at a total cost of Rs.29.8 million.

v) Additional investment in Lupin Philippines Inc., Philippines at a total cost of Rs. 10.9 million (previous year Rs.33.7 million).

vi) Additional investment in Generic Health Pty Ltd., Australia at a total cost of Rs. nil (previous year Rs. 465.1 million).

vii) Additional investment in Generic Health SDN. BHD., Malaysia at a total cost of Rs.2.2 million (previous year Rs. nil).

The above acquisitions / subscriptions are based on the net asset values, the future projected revenues, operating profits, cash flows and independent valuation reports; as applicable, of the investee companies.

e) The Company considers its investments in subsidiaries as strategic and long-term in nature and accordingly, in view of the management, any decline in the value of such long-term investments in subsidiaries is considered to be temporary in nature and hence no provision for diminution in value of investments is considered necessary.


Mar 31, 2013

1 A. OVERVIEW:

Lupin Limited, (''the Company'') was incorporated in 1983 as Lupin Chemicals Private Limited. Lupin Laboratories Limited which was incorporated in 1972 was amalgamated with the Company w.e.f. 01.04.2000, pursuant to an Order passed by the Mumbai High Court. The Company is an innovation led Transnational Pharmaceutical Company producing a wide range of quality generic and branded formulations and bulk drugs. The Company along with its subsidiaries has manufacturing locations spread across India and Japan with trading and other incidental and related activities extending to world markets.

2. Commitments:

a) Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, H 1225.3 million (previous year H 1518.2 million).

b) Other commitments - Non-cancellable operating leases (Refer note 35).

3. a) During the year, the Company, through its wholly owned subsidiary Lupin Holdings B.V., Netherlands ("LHBV"), acquired / subscribed to the equity stake of the following subsidiaries:

i) Additional investment in Hormosan Pharma GmbH, Germany at a total cost of H 262.2 million (previous year H 177.1 million).

ii) Additional investment in Lupin Philippines Inc., Philippines at a total cost of H 33.7 million (previous year H 6.1 million).

iii) Additional investment in Lupin Mexico SA de CV, Mexico at a total cost of H 10.7 million (previous year H 8.6 million).

iv) Additional Investment in Generic Health Pty Limited, Australia at a total cost of H 465.1 million (previous year H nil).

b) During the previous year, Kyowa Pharmaceutical Industry Co. Ltd., Japan (wholly owned subsidiary of LHBV) acquired 99.99% equity stake of I''rom Pharmaceutical Co. Ltd., Japan at a total cost of H 2289.4 million.

The above acquisitions / subscriptions are based on the net asset values, the future projected revenues, operating profits, cash flows etc. of the investee companies.

4. Pre-operative expenses pending capitalisation included in Capital Work-In-Progress (Refer note 12) represent direct attributable expenditure for setting up of plants prior to the date of commencement of commercial production. The same will be capitalised on completion of projects and commencement of commercial operations. The details of pre-operative expenses are:

5. Segment Reporting:

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

6. Remittance in Foreign currency on account of dividend:

The Company has paid dividend in respect of shares held by Non-Resident Shareholders on repatriation basis. This inter- alia includes portfolio investment and direct investment, where the amount is also credited to Non Resident External Account (NRE A/c). The total amount remittable in this respect is given below:

7. The Company procures equipments, vehicles and office premises under operating leases. These rentals recognised in the Statement of Profit and Loss (Refer note 26) for the year are H 294.8 million (previous year H 243.7 million). The future minimum lease payments and payment profile of non-cancellable operating leases are as under:

8. Employees Stock Option Plans:

a) The Company implemented "Lupin Employees Stock Option Plan 2003" (ESOP 2003), "Lupin Employees Stock Option Plan 2005" (ESOP 2005) and "Lupin Subsidiary Companies Employees Stock Option Plan 2005" (SESOP 2005), "Lupin Employees Stock Option Plan 2011 (ESOP 2011)" and "Lupin Subsidiary Companies Employees Stock Option Plan 2011 (SESOP 2011)" as approved in earlier years by the Shareholders of the Company and the Remuneration/ Compensation Committee of the Board of Directors. Details of the options granted during the year under the plans are as under:

9. Stock Appreciation Rights:

During the previous year, the Company has granted Stock Appreciation Rights ("SARs") to certain eligible employees in accordance with Lupin Employees Stock Appreciation Rights Scheme ("LESARs 2011") approved by the Board of Directors (Board) at their Board Meeting held on September 13, 2011. Under the scheme, eligible employees are entitled to receive appreciation in value of shares on completion of the vesting period.

The Scheme is administered through the Lupin Employees Benefit Trust (the "Trust") as settled by the Company. The Trust is administered by an independent Trustee. At the end of the vesting period of 3 years, the equity shares will be sold in the market by the Trust and the appreciation on the same (if any) will be distributed to the said employees, subject to vesting conditions.

Pursuant to the circular no. CIR/CFD/DIL/3/2013 dated January 17, 2013 (the "Circular") issued by the Securities and Exchange Board of India (SEBI), the Company has submitted the required details with the stock exchanges within a prescribed period.

As approved by the Board, the Company has, prior to the Circular, advanced an interest free loan of H 256.8 million (previous year H 220.1 million) to the Trust during the year to acquire appropriate number of Equity Shares of the Company from the market on the grant date of SARs and the loan outstanding as at the balance sheet date aggregating to H 476.9 million (previous year H 220.1 million) is included under "Long-Term Loans and Advances" (Refer note 14). The particulars of the rights assigned and lapsed under the Scheme are as below:

The related compensation cost for outstanding SARs amounting to H 30.8 million (previous year H 3.5 million) has been recognized as Employee Benefits Expense and the corresponding credit is included under "Reserves and Surplus" as Employee Stock Appreciation Rights Outstanding. Had the compensation cost for the Company''s stock based compensation plans been determined in the manner consistent with the fair value approach as described in the Guidance Note on Accounting for Employee Share-based Payments issued by ICAI, the Company''s net income would be lower by H 7.9 million (previous year H 5.7 million) and earnings per share as reported would be lower as indicated below:

10. Post Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised H 141.9 million (previous year H 120.1 million) for superannuation contribution and H 82.9 million (previous year H 72.2 million) for provident fund and pension contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The provident fund plan of the Company, except two plants, is operated by the "Lupin Limited Employees Provident Fund Trust" (the "Trust"). Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee''s salary. The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.

The ASB Guidance on Implementing AS-15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefit plans involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund and shortfall aggregating H 19.9 million has been provided for. The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan.

The Company recognised H 186.6 million (Previous year H 172.9 million) for provident fund contributions in the Statement of Profit and Loss.

B) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC of India, a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

In addition to the above mentioned scheme, the Company also pays additional gratuity as an ex-gratia and the said amount is provided as non-funded liability based on actuarial valuation.

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2013. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company''s financial statements as at the balance sheet date.

11. Details of Derivative Contracts:

The Company enters into forward and option contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivative contracts (including contracts for a period extending beyond the financial year 2013-14) are entered into by the Company for hedging purposes only, and are accordingly classified as cash flow hedges.

The changes in the fair value of the derivative contracts during the year ended March 31, 2013, aggregating H 441.9 million (previous year H 631.9 million debited) designated and effective as hedges have been credited to the Cash Flow Hedge Reserve and H 11.8 million (previous year H 4.7 million) is debited to the Statement of Profit and Loss, being the ineffective portion thereof.

12. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is H 6472.7 million (previous year H 4630.4 million).

13. The information regarding Micro Enterprises and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors. Amounts due to Micro Enterprises and Small Enterprises as on March 31, 2013 is H 262.1 million, interest H nil (previous year H 219.4 million, interest H nil), interest paid during the year H nil (previous year H nil).

14. As per best estimate of the management, provision has been made towards probable non-saleable return of goods from customers, as per Accounting Standard 29 (AS-29) notified under Companies (Accounting Standards) Rules, 2006.

15. Related Party Disclosures, as required by Accounting Standard 18 (AS-18) are given below :

A. Relationships -

Category I : Subsidiaries:

Lupin Pharmaceuticals, Inc., USA

Kyowa Pharmaceutical Industry Co., Limited, Japan

Lupin Australia Pty Limited, Australia

Lupin Holdings B.V., Netherlands

Pharma Dynamics (Proprietary) Limited, South Africa

Hormosan Pharma GmbH, Germany

Multicare Pharmaceuticals Philippines Inc., Philippines

Lupin Atlantis Holdings SA, Switzerland

Lupin (Europe) Limited, UK

Amel Touhoku, Japan (upto 28th February 2013)

Lupin Pharma Canada Limited, Canada Lupin Mexico SA de CV, Mexico Generic Health Pty Limited, Australia Bellwether Pharma Pty Limited, Australia

Generic Health Inc., USA (from 27th September 2010) (upto 4th October 2011)

Max Pharma Pty Limited, Australia Lupin Philippines Inc., Philippines Lupin Healthcare Limited, India

Generic Health SDN. BHD., Malaysia (from 18th May 2011)

I''rom Pharmaceutical Co., Limited, Japan (from 30th November 2011)

Lupin Middle East FZ-LLC, UAE (from 13th June 2012)

Category II: Key Management Personnel:

Dr. D. B. Gupta Chairman

Dr. K. K. Sharma Managing Director

Mrs. M. D. Gupta Executive Director

Mr. Nilesh Gupta Executive Director

Category III: Others (Relatives of Key Management Personnel and Entities in which the Key Management Personnel have control or significant influence)

Mrs. Vinita Gupta (Daughter of Chairman)

Dr. Anuja Gupta (Daughter of Chairman)

Mrs. Kavita Gupta Sabharwal (Daughter of Chairman)

Dr. Richa Gupta (Daughter of Chairman)

Mrs. Pushpa Khandelwal (Sister of Chairman)

Bharat Steel Fabrication and Engineering Works

D. B. Gupta (HUF)

Enzal Chemicals (India) Limited (upto 31st March 2012)

Lupin Human Welfare and Research Foundation Lupin International Pvt. Limited Lupin Investments Pvt. Limited Lupin Marketing Pvt. Limited Matashree Gomati Devi Jana Seva Nidhi

Novamed Investments Pvt. Limited (formerly Novamed Pharmaceuticals Pvt. Limited)

Polynova Industries Limited Rahas Investments Pvt. Limited

Synchem Investments Pvt. Limited (formerly Synchem Chemicals (I) Pvt. Limited)

Visiomed (India) Pvt. Limited Zyma Laboratories Limited

16. Excise duty (Refer note 26) includes H 3.2 million (previous year H 23.2 million) being net impact of the excise duty provision on opening and closing stock.

17. During the year, the Company has received notice under Section 153A(1)(a) of the Income Tax Act, 1961 requiring the Company to file revised returns for six assessment years from AY 2006-07 to AY 2011-12.

In pursuance to the same, the Company has filed revised returns for the said assessment years and this has resulted in additional tax payments of H 35.1 million and a reduction of MAT Credit Entitlement of H 228.2 million as is disclosed under "Statement of Profit and Loss" and note 14 "Long-Term Loans and Advances" respectively.

18. The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defenses the ultimate disposition of these matters will not have material adverse effect on its Financial Statements.

19. No borrowing cost has been capitalised during the year.

20. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Mar 31, 2012

1 A - OVERVIEW

Lupin Limited ('the Company') was incorporated in 1983 as Lupin Chemicals Private Limited. Lupin Laboratories Limited which was incorporated in 1972 was amalgamated with the Company w.e.f. 01.04.2000, pursuant to an Order passed by the Mumbai High Court. The Company is an innovation led transnational pharmaceutical Company producing a wide range of quality generic and branded formulations and bulk drugs. The Company along with its subsidiaries has manufacturing locations spread across India and Japan with trading and other incidental and related activities extending to world markets.

a) Rights attached to Equity Shares

The Company has only one class of equity shares with voting rights having a par value of Rs 2 per share. The Company declares and pays dividends in Indian Rupees.The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the ensuing Annual General Meeting.

During the year ended 31 March 2012, the amount of per share dividend recognised as distributions to equity shareholders is Rs 3.2 (31 March 2011: Rs 3.0)

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

a) Foreign Currency Term Loans from Banks consist of two loans of USD 20 million (Rs 1,017.5 million) each. One of the loans carries interest @ LIBOR plus 1.55% and is repayable after 3 years in installments of USD 10 million (Rs 508.8 million) each from the date of their origination on 10th December 2012 and 7th January 2013. Second loan bears interest @ LIBOR plus 1.05% and is repayable after 3 years in installments of USD 10 million (Rs 508.8 million) each from the date of their origination on 3rd June 2013 and 29th July 2013.

b) Deferred Sales Tax Loan is interest free and payable in 5 equal annual installments after expiry of initial 10 years moratorium period from each such year of deferral period from 1998-99 to 2009-10.

c) Term Loans from CSIR carry interest of 3% p.a. and is payable in 8 annual installments of Rs 30.9 million each alongwith interest.

d) Term Loans from DST carry interest of 3% p.a. and is payable in 7 annual installments of Rs 10.4 million each alongwith interest.

e) The Company has not defaulted on repayment of loans and interest during the year.

a) Working Capital Loans from Consortium of Banks comprise of Cash Credit, Short-Term Loans, Packing Credit, Post Shipment Credit, Bills Discounted and Overseas Import Credit and are secured by hypothecation of inventories and trade receivables, and all other moveable assets, including current assets at godowns, depots, in course of transit or on high seas and a second charge on immovable properties and moveable assets of the Company both present and future.

b) Secured Working Capital Loans from Banks include foreign currency loans of Rs 5,536.3 million (previous year Rs 6,039.2 million).

c) Unsecured Working Capital Loans from Banks comprise of Cash Credit and Short-Term Loans.

d) Unsecured Working Capital Loans from Banks include foreign currency loans of Rs 2,716.9 million (previous year Rs 1,161.8 million).

e) Working Capital Loans from Banks in foreign currency carries interest rate in the range of 1.5% to 3% p.a. and those in Indian Rupees carries interest rate in the range of 11% to 13% p.a.

f) The Company has not defaulted on repayment of loans and interest during the year.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs 1518.2 million (previous year Rs 1278.0 million).

3. Contingent Liabilities:

(Rs in million)

As at As at 31.03.2012 31.03.2011

a) Income tax demands / matters in respect of earlier years, pending in appeals [Rs 17.7 million (previous year Rs 152.4 million)] consequent to department preferring appeal against the order of the Appellate Authority passed in favour of the Company.

Amount paid there against and included under note 19 "Short-Term Loans and Advances" Rs 27.0 million (previous year Rs nil). 44.7 152.4

b) Excise duty, Service tax and Sales tax demands for input tax credit disallowances and demand for additional Entry Tax arising from dispute on applicable rate are in appeals and pending decisions. Amount paid there against and included under note 19 "Short-Term Loans and Advances" Rs 28.4 million (previous year Rs 29.0 million). 416.8 195.1

c) Claims against the Company not acknowledged as debts [excluding interest (amount unascertained) in respect of a claim] for transfer charges of land, octroi duty, employee claims, power and stamp duty. Amount paid there against without admitting liability and included under note 19 "Short-Term Loans and Advances" Rs 78.6 million (previous year Rs 76.8 million). 432.9 311.1

d) Counter guarantee given to GIDC in connection with repayment of loan sanctioned by a financial institution to a company, jointly promoted by an Association of Industries (of which, the Company is a member) and GIDC. 7.5 7.5

e) Guarantees given in respect of standby letter of credit issued by the Company's bankers in connection with the credit facilities availed for its subsidiaries aggregating Rs nil (previous year Rs 221.6 million). - 214.4

f) Letter of comfort issued by the Company towards the credit facilities sanctioned by the bankers of subsidiary companies aggregating Rs 118.6 million (previous year Rs 102.9 million). 81.4 37.5

g) Corporate guarantee given in respect of credit facility sanctioned by bankers of subsidiary companies aggregating Rs 3034.2 million (previous year Rs 78.2 million). 2902.8 26.9

h) Financial guarantee given to third party on behalf of subsidiary for contractual obligations. 152.6 133.8

i) Bank Guarantees given on behalf of the Company to third party. 15.9 -

The Company does not envisage any likely reimbursements in respect of the above.

4. a) During the year, the Company, through its wholly owned subsidiary Lupin Holdings B.V., Netherlands

("LHBV"), acquired / subscribed to the equity stake of the following 100% subsidiaries:

i) Additional investment in Hormosan Pharma GmbH, Germany at a total cost of Rs 177.1 million.

ii) Additional investment in Lupin Philippines Inc., Philippines at a total cost of Rs 6.1 million.

iii) Additional investment in Lupin Mexico SA de CV, Mexico at a total cost of Rs 8.6 million.

b) During the year, Kyowa Pharmaceutical Industry Co. Ltd., Japan (wholly owned subsidiary of LHBV) acquired 99.99% equity stake of I'rom Pharmaceutical Co. Ltd., Japan at a total cost of Rs 2289.4 million.

The above acquisitions / subscriptions are based on the net asset values, the future projected revenues, operating profits, cash flows etc. of the investee companies.

5. Segment Reporting:

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

* Excluding service tax.

** Includes payment for taxation matters to an affiliated firm covered by a networking arrangement which is registered with the Institute of Chartered Accountants of India.

6. Employees Stock Option Plans:

a. The Company implemented "Lupin Employees Stock Option Plan 2003" (ESOP 2003), "Lupin Employees Stock Option Plan 2005" (ESOP 2005) and "Lupin Subsidiary Companies Employees Stock Option Plan 2005" (SESOP 2005), "Lupin Employees Stock Option Plan 2011" (ESOP 2011) and "Lupin Subsidiary Companies Employees Stock Option Plan 2011" (SESOP 2011) as approved in earlier years by the Shareholders of the Company and the Remuneration / Compensation Committee of the Board of Directors. Details of the options granted during the year under the plans are as under:

7. Stock Appreciation Rights:

During the year, the Company has granted Stock Appreciation Rights ("SARs") to certain eligible employees in accordance with Lupin Employees Stock Appreciation Rights Scheme ("LESARs 2011") approved by the Board of Directors (Board) at their Board Meeting held on September 13, 2011. Under the scheme, eligible employees are entitled to receive appreciation in value of shares on completion of the vesting period.

The Scheme is administered through the Lupin Employees Benefit Trust (the "Trust") as settled by the Company. The Trust is administered by an independent Trustee. At the end of the vesting period of 3 years, the equity shares will be sold in the market by the Trust and the appreciation on the same (if any) will be distributed to the said employees, subject to vesting conditions.

As approved by the Board, the Company has advanced an interest free loan of Rs 220.1 million to the Trust during the year to acquire appropriate number of Equity Shares of the Company from the market on the grant date of SARs and the loan outstanding as at the balance sheet date aggregating to Rs 220.1 million is included under "Long-Term Loans and Advances" (Refer note 14).

8 Post Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The Company recognised Rs 120.1 million (previous year Rs 96.0 million) for superannuation contribution and Rs 1.5 million (previous year Rs 3.8 million) for provident fund contributions in the Statement of Profit and Loss.

(ii) Defined Benefit Plan:

A) The provident fund plan of the Company, except one plant, is operated by the "Lupin Limited Employees Provident Fund Trust" (the "Trust"). Eligible employees receive benefits from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specified percentage of the covered employee's salary. The minimum interest rate payable by the Trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

The ASB Guidance on Implementing AS-15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefit plans involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. As per the Guidance Note from the Actuarial Society of India, the Company has obtained the actuarial valuation of interest rate obligation in respect of Provident Fund and shortfall aggregating Rs 24.6 million has been provided for. The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classified as Defined Benefit Plan.

The Company recognised Rs 175.7 million (Previous year Rs 137.0 million) for provident fund contributions in the Statement of Profit and Loss.

B) The Company makes annual contributions to the Group Gratuity cum Life Assurance Schemes administered by the LIC of India, a funded defined benefit plan for qualifying employees. The scheme provides for payment as under:

a) 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.

b) On death in service:

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

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

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and provident fund plan and the amounts recognised in the Company's financial statements as at the balance sheet date.

9. Details of Derivative Contracts:

The Company enters into forward and option contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivative contracts (including contracts for a period extending beyond the financial year 2012-13) are entered into by the Company for hedging purposes only, and are accordingly classified as cash flow hedges.

The changes in the fair value of the derivative contracts during the year ended March 31, 2012 aggregating Rs 631.9 million (previous year Rs 126.3 million) designated and effective as hedges have been debited to the Cash Flow Hedge Reserve and Rs 4.7 million (previous year Rs 20.3 million credited) is debited to the Statement of Profit and Loss, being the ineffective portion thereof.

10. The aggregate amount of revenue expenditure incurred during the year on Research and Development and shown in the respective heads of account is Rs 4630.4 million (previous year Rs 4310.9 million).

11. The information regarding Micro Enterprises and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

Amounts due to Micro Enterprises and Small Enterprises as on March 31, 2012 is Rs 219.4 million, interest Rs nil (previous year Rs 187.2 million, interest Rs nil), interest paid during the year Rs nil (previous year Rs nil).

12. During the previous year:

a) Under Sections 391-394 of the Companies Act, 1956, Lupin Pharmacare Limited and Lupin Herbal Limited together with Novodigm Limited, wholly owned subsidiaries of the Company ('transferor companies'), stood amalgamated with the Company on a going concern basis effective from May 27, 2010, pursuant to the scheme sanctioned by the Honourable High Court of Judicature at Ahmedabad vide its order dated May 6, 2010.

b) The said amalgamation was accounted for under the "Pooling of Interests" method as prescribed by the Accounting Standard 14 'Accounting for Amalgamations' as notified by the Companies (Accounting Standards) Rules, 2006. In terms of the Scheme, all the assets and liabilities of the transferor companies were transferred to the Company at their respective book values and all inter-company balances were cancelled. Since the transferor companies were wholly owned subsidiaries, the shares held by the Company in the aforesaid companies stood cancelled and no shares were issued to effect the amalgamation.

c) Consequently, the goodwill of Rs 218.1 million arising on amalgamation is reflected in the standalone financial statements of the Company from the year ended March 31, 2011. The said goodwill is being amortized over a period of five years.

13. Related Party Disclosures, as required by Accounting Standard 18 are given below:

A. Relationships:

Category I : Subsidiaries:

Lupin Pharmaceuticals Inc., USA

Kyowa Pharmaceutical Industry Co. Ltd., Japan

Lupin Australia Pty Ltd., Australia

Lupin Holdings B.V., Netherlands

Pharma Dynamics (Proprietary) Ltd., South Africa

Hormosan Pharma GmbH, Germany

Multicare Pharmaceuticals Philippines Inc., Philippines

Lupin Atlantis Holdings SA, Switzerland

Lupin (Europe) Ltd., UK

Amel Touhoku, Japan

Lupin Pharma Canada Ltd., Canada

Lupin Mexico SA de CV, Mexico (from 23rd August 2010)

Generic Health Pty Ltd., Australia (from 27th September 2010)

Bellwether Pharma Pty Ltd., Australia (from 27th September 2010)

Generic Health Inc., USA (from 27th September 2010) (upto 4th October 2011)

Max Pharma Pty Ltd., Australia (from 27th September 2010)

Lupin Philippines Inc., Philippines (from 20th December 2010)

Lupin Healthcare Ltd., India (from 17th March 2011)

Generic Health SDN. BHD., Malaysia (from 18th May 2011)

I'rom Pharmaceutical Co. Ltd., Japan (from 30th November 2011)

Category II : Key Management Personnel:

Dr. D. B. Gupta Chairman

Dr. K. K. Sharma Managing Director

Mrs. M. D. Gupta Executive Director

Mr. Nilesh Gupta Executive Director

Category III : Others (Relatives of Key Management Personnel and Entities in which the

Key Management Personnel have control or significant influence):

Mrs. Vinita Gupta

Dr. Anuja Gupta

Mrs. Kavita Gupta Sabharwal

Dr. Richa Gupta

Mrs. Pushpa Khandelwal

Bharat Steel Fabrication and Engineering Works

D. B. Gupta (HUF)

Enzal Chemicals (India) Limited

Lupin Human Welfare and Research Foundation

Lupin International Pvt. Limited

Lupin Investments Pvt. Limited

Lupin Marketing Pvt. Limited

Matashree Gomati Devi Jana Seva Nidhi

Novamed Pharmaceuticals Pvt. Limited

Polynova Industries Limited

Rahas Investments Pvt. Limited

Synchem Chemicals (I) Pvt. Limited

Visiomed (India) Pvt. Limited

Zyma Laboratories Limited

i) Figures in brackets are for previous year.

ii) Related party relationship is as identified by the Company and relied upon by the Auditors.

14. Excise duty (Refer note 27) includes Rs 23.2 million (previous year Rs 2.8 million) being net impact of the excise duty provision on opening and closing stock.

15. The Company is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is sufficient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defenses the ultimate disposition of these matters will not have material adverse effect on its Financial Statements.

16. No borrowing cost has been capitalised during the year.

17. The Revised Schedule VI has become effective from 1 April 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous years figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.


Mar 31, 2011

The consolidated accounts thus include the results of the aforesaid subsidiaries and associates and there are no other body corporate / entities, where the Company holds more than 50% of the share capital or where the Company can control the composition of the Board of Directors / Governing Bodies of such Companies / Entities, where the holding may be less than 50%.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances, Rs. 1353.8 million (previous year Rs. 907.1 million).

3. Contingent Liabilities:

(Rs. in million)

As at As at

31.03.2011 31.03.2010

a) Income tax demands / matters in respect of earlier years, pending in 152.4 107.8 appeals [ Rs. 152.4 million (previous year Rs. 90.3 million)] consequent to department preferring appeals against the orders of the Appellate Authorities passed in favour of the Company. Amount paid there against and included under Schedule 10 "Advances recoverable in cash or in kind" Rs. nil (previous year Rs. 17.5 million).

b) Excise duty, Service tax and Sales tax demands disputed in appeals 195.1 197.1 and pending decisions. Amount paid thereagainst and included under Schedule 10 Rs. 29.0 million (previous year Rs. 17.9 million).

c) Claims against the Company not acknowledged as debts [excluding 311.1 259.2 interest (amount unascertained) in respect of a claim]. Amount paid there against without admitting liability and included under Schedule 10 Rs. 76.8 million (previous year Rs. 76.5 million).

d) Counter guarantee given to GIDC in connection with loan sanctioned by 7.5 7.5 a financial institution to a company, jointly promoted by an Association of Industries (of which, the Company is a member) and GIDC.

e) Corporate guarantee given 133.8 135.0

4. Pre-operative expenses pending capitalisation included in Capital Work-In-Progress (Schedule 5) represent directly attributable expenditure for setting up of plants prior to the date of commencement of commercial production. The same will be capitalised on completion of the projects and the commencement of commercial operations. The details of the pre-operative expenses are:

5. (i) The current tax in respect of foreign subsidiaries has been computed considering the applicable tax laws and tax rates of the respective countries, as certifed by the local tax consultants / local management of the said subsidiaries.

6. Segment Reporting :

i) Primary segment:

The Group operates exclusively in the Pharmaceutical business segment which is the only reportable business segment.

a) The segment revenue in geographical segments considered for disclosure is as follows: i) Revenue within India includes sales to customers located within India and other operating income earned in India.

ii) Revenue outside India includes sales to customers located outside India and other operating income outside India.

Notes :

i) Remuneration for the current year includes increased remuneration of the Chairman and an Executive Director w.e.f. 1st January 2011 and Managing Director and an Executive Director w.e.f. 1st July 2010 in accordance with the Shareholders resolutions.

ii) The provision for gratuity and compensated absences is made on the basis of actuarial valuation, for all the employees of the Company, including for the managerial personnel. Proportionate amount of gratuity and compensated absences is not included in the above disclosure, since the exact amount is not ascertainable.

9. a) The Company procures on lease equipments, vehicles and offce premises under operating leases. These rentals recognised in the Proft and Loss Account for the year are Rs. 281.1 million (previous year Rs. 119.1 million). The future minimum lease payments and payment profle of non cancellable operating leases are as under:

10. Employees Stock Option Plans:

a) The Company implemented "Lupin Employees Stock Option Plan 2003" (ESOP 2003), "Lupin Employees Stock Option Plan 2005" (ESOP 2005) and "Lupin Subsidiary Companies Employees Stock Option Plan 2005" (SESOP 2005) as approved in earlier years by the Shareholders of the Company and the Remuneration / Compensation Committee of the Board of Directors. Details of the options granted during the year under the plans are as under:

b) The Company has followed the intrinsic value based method of accounting for stock options granted after April 1, 2005 based on Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India. Had the compensation cost for the Companys stock based compensation plans been determined in the manner consistent with the fair value approach as described in

the said Guidance Note, the Companys net income would be lower by Rs. 86.2 million (previous year Rs. 52.5 million) and earnings per share as reported would be lower as indicated below:

11. Post Employment Benefts:

(i) Defned Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defned contribution retirement beneft plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, they are required to contribute a specifed percentage of payroll cost to the retirement beneft plan to fund the benefts.

The Company and subsidiaries recognised Rs. 308.8 million (previous year Rs. 282.2 million) for superannuation contribution and social security in the Proft and Loss Account.

(ii) Defned Beneft Plan:

(A) The provident fund plan of the Company except Dabhasa plant is operated by the "Lupin Ltd Employees Provident Fund Trust" (the "Trust"). The provident fund plan of Dabhasa plant, is operated by the Government administered Employees Provident Fund Organisation. Eligible employees receive benefts from the said Provident Fund. Both the employees and the Company make monthly contributions to the Provident Fund Plans equal to a specifed percentage of the covered employees salary. The minimum interest rate payable by the Trust to the benefciaries every year is being notifed by the Government. The Company has an obligation to make good the short fall, if any, between the return from the investments of the trust and the notifed interest rate.

The Guidance Note on Implementing Accounting Standard 15 (AS 15) Employee Benefts (revised 2005) issued by Accounting Standards Board (ASB) states that beneft plans involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defned beneft plans. Pending the issuance of the guidance note from the Actuarial Society of India, the Companys actuaries have expressed an inability to reliably measure provident fund liabilities. Accordingly, the Company is unable to exhibit the related information. The Company has an obligation to service the shortfall on account of interest generated by the fund and on maturity of fund investments and hence the same has been classifed as Defned Beneft Obligation. Having regard to the assets of the fund and return on investments, the estimated shortfall aggregating Rs. 0.5 million has been provided for.

The Company recognised Rs. 140.8 million (previous year Rs. 103.3 million) for provident fund contributions, superannuation contribution and social security in the Proft and Loss Account.

(B) The Company makes annual contributions to the Group Gratuity cum Life Assurance Scheme administered by the LIC, a funded defned beneft plan for qualifying employees. The scheme provides for payments to vested employees as under:

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

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

b) On death in service:

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

The most recent actuarial valuation of plan assets and the present value of the defned beneft obligation for gratuity were carried out as at March 31, 2011. The present value of the defned beneft obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

b) Kyowa Pharmaceutical Industry Co. Ltd., Japan

The Companys subsidiary at Japan has retirement and pension plans to cover all its employees. The plans consist of a defned beneft pension plan (upto 30.09.2010) and a retirement beneft sum payment plan (referred as "plans"). From October 1, 2010 defned beneft pension plan has been discontinued and new defned contribution pension plan has started.

Under the plans, employees are entitled to benefts based on level of salaries, length of service and certain other factors at the time of retirement or termination.

The Company makes annual contributions to a private bank to fund defned beneft pension plan (upto 30.09.2010) for qualifying employees.

The most recent actuarial valuation of plan assets (upto 30.09.2010) and the present value of the defned beneft obligation for retirement benefts, for all employees other than directors were carried out as at March 31, 2011. The present value of the defned beneft obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

Retirement allowances for directors are provided for liability of the amount that would be required if all directors retired at the balance sheet date.

13. Derivative Financial Instruments:

i) The Company has entered into forward and option contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivative contracts (including contracts for a period extending beyond the financial year 2010-11) which are in the nature of highly probable forecast transactions are entered into for hedging purposes only, and are accordingly classifed as cash flow hedges.

The changes in the fair value of the derivative instruments during the year ended 31st March 2011, aggregating Rs. 124.6 million (previous year Rs. 3087.4 million credited) designated as effective have been debited to the Cash Flow Hedge Reserve Account and Rs. 20.3 million (previous year Rs. 13.3 million) credited to the Proft and Loss Account, being the ineffective portion thereof.

14. The aggregate amount of revenue expenditure incurred by the Company and subsidiary companies during the year on Research and Development and shown in the respective heads of account is Rs. 4834.2 million (previous year Rs. 3570.1 million).

15. a) During the year, the Company through its wholly owned subsidiary Lupin Holdings B.V., Netherlands

(LHBV), acquired / subscribed to the equity stake / made capital contribution in the following:

i) Additional Investment in Hormosan Pharma GmbH, Germany (100% subsidiary of the Company) at a total cost of Rs. 220.1 million.

ii) At the beginning of the year, the Company was holding 30,199,214 shares of Rs. 326.6 million in an associate company - Generic Health Pty Ltd., Australia (GH) representing 49.91% stake in that company. During the year the Company acquired further 44,004,876 shares at a cost of Rs. 252.5 million as a result of which the aggregate holding of the company in GH has increased to 76.65%, resulting in GH becoming a subsidiary of the Company.

iii) 100% equity stake of Lupin Mexico SA de C V, Mexico at a total cost of Rs. 0.2 million.

iv) 100% equity stake of Lupin Philippines Inc., Philippines at a total cost of Rs. 9.2 million.

The above acquisitions / subscriptions are based on the net asset values, the future projected revenues, operating profits and cash flows, etc. of the investee companies.

16. Foreign Currency Translation Reserve (Schedule 2) represents the net exchange difference on translation of the financial statements of foreign subsidiaries located at Japan, Australia, Germany, South Africa, Philippines, Switzerland and Canada from their local currency to

the Indian currency. Such operations are considered as ‘non integral to the Company. Consequently, in accordance with the Accounting Standard (AS 11) ‘The Effects of Changes in Foreign Exchange Rates (Revised 2003)", the exchange gain on translation of Rs. 188.2 million is credited (previous year loss of Rs. 388.4 million is debited) during the year to such reserve instead of to the Proft and Loss Account [Refer note no. 22].

18. The information regarding Micro Enterprises and Small Enterprises has been determined to the extent such parties have been identifed on the basis of information available with the Company. This has been relied upon by the auditors.

Amounts due to vendors under Micro Enterprises and Small Enterprises for the year ended March 31, 2011 is Rs. 187.2 million, interest paid during the year and outstanding at the year end Rs. nil (previous year Rs. 88.5 million, interest Rs. nil).

19. Disclosures as required by Accounting Standard 29 (AS 29) "Provisions, Contingent Liabilities and Contingent Assets"

During the previous year, in accordance with the terms of ‘Asset Purchase Agreement entered into with the vendor, with respect to purchase of Marketing Right, the subsidiary company at Switzerland (Lupin Atlantis Holdings SA) has made provision in accordance with the provisions of AS 29 "Provisions, Contingent Liabilities and Contingent Assets" of Rs. 45.1 million on best estimate basis with regard to assumed liabilities. The disclosure of the said provision is as under:

20. a) Lupin Pharmacare Limited, Lupin Herbal Limited and Novodigm Limited (wholly owned subsidiaries of the Company) had fled petitions before the Honourable High Courts of Mumbai and Gujarat for amalgamation with the Company, the appointed date being April 1, 2009.

b) Vide its order dated January 8, 2010, the Honourable High Court of Mumbai sanctioned the

Scheme of Amalgamation between Lupin Pharmacare Ltd., Lupin Herbal Ltd. and the Company subject to the order to be passed by the High Court of Gujarat sanctioning the scheme of amalgamation between Novodigm Ltd and the Company. The Scheme has been sanctioned by the Honourable High Court of Gujarat vide its order dated May 6, 2010. The Scheme is effective from May 27, 2010.

Since the transferor companies are the wholly-owned subsidiaries, there is no accounting impact of the amalgamation, in the consolidated financial statements of the Company, except for the matters stated in note no. 20 (d) and 20 (e).

c) On coming into effect from the appointed date i.e. April 1, 2009, the transferor companies stand amalgamated with the Company on a going concern basis. Pending the receipt of the order of the High Court of Gujarat, the Scheme had not been given effect to in the financial statements of the Company for the previous year ended March 31, 2010.

d) After giving effect to the accounting treatment in terms of the Scheme, the balance lying in the investment account of the Company standalone accounts aggregating to Rs. 218.1 million pertaining to purchase of Novodigm Limited (an entity acquired by the Company from its erstwhile promoters in the financial year 2007-08 which had resulted into wholly owned subsidiary - parent relationship), being goodwill, as was already refected in the Consolidated Financial Statements (CFS) of the Company; has now been refected as ‘Goodwill in the Schedule of "Fixed Assets" in the standalone financial statements of the Company and which is consequently so refected in the CFS of the Company for the current year. The said Goodwill is being amortised over a period of fve years.

e) As the Scheme is with effect from the appointed date, the costs in respect of amortisation of the resultant goodwill pursuant to the amalgamation of Novodigm Limited for the year ended March 31, 2010 aggregating Rs. 43.6 million has been adjusted against the opening balance in the Proft and Loss account of the Company as at April 1, 2010.

21. a) The Company through its wholly owned subsidiary at Netherlands held 100% equity stake at cost Euro 4704449 Rs. 310.7 million in Hormosan Pharma GmbH, Germany (Hormosan). The Company has made further capital contribution of Rs. 220 million during the year in the aforesaid subsidiary. The Goodwill on consolidation of the said subsidiary aggregates Rs. 240.6 million as at the year end. The said subsidiary continued to incur losses during the year and has negative networth aggregating to Rs. 116.3 million as at the end of the year. Considering the financial, technical and operational support from the Company and Hormosans projections / plans for introducing many new products (including products from the Company) in the German Market in the near future, growth in the turnover is expected, which would result in profitability and in improvement in networth, over a period of time.

b) The Company through its wholly owned subsidiary at Netherlands has increased its stake in Generic Healthcare Pty Ltd. (GH) from 49.91% to 76.65% representing 74,204,090 shares, costing Rs. 579.1 million. Consequently, GH has become a subsidiary company. The Goodwill on consolidation of GH aggregates Rs. 139.5 million as at the year end. The Companys investment in GH is long term and strategic in nature. During the year, though, GH has incurred loss, there is an improvement in its networth as at the year end due to further capital contribution from the Company. GH has plans to introduce many new products (including products from the Company) in the Australian market in the near future. As a result of this it is expected that the companys turnover would increase leading to profitability and improvement in networth over a period of time.

Based on the above and considering that the Companys investments in these subsidiaries are held as strategic long term investments, in the opinion of the management, there is no impairment in the value of the goodwill as aforesaid and accordingly, no provision is considered necessary in this respect thereof.

c) During the previous year, a wholly owned subsidiary company located at Switzerland acquired certain assets (Manufacturing Knowhow / Product Marketing Rights, etc.) related to a product, in accordance with the terms of agreement entered into by the Company. Further, another wholly owned subsidiary of the Company located at Canada, also commenced setting up of plant and machinery related to the said product. Accordingly, pending completion of activities necessary for product availability, the said assets were included under "Capital-Work-In-Progress (CWIP)".

During the year, the aforesaid two subsidiaries initiated trial run batches of the said product, to test whether the product output is as per the desired specifcation. During the course of such trial runs, some technical issues were faced and these companies are working upon to resolve the same. Hence, there has been some delay in commencement of commercial production.

The Manufacturing Knowhow / Product Marketing Rights and the plant and machinery would be

available for use only upon successful resolution of such technical issues and obtaining successful trial run batches of the product. Accordingly, the said assets continue to be included under CWIP.

The Company expects successful resolution of the technical issues and commencement of commercial production shortly. Accordingly, in the opinion of the management, there is no impairment of these assets as at the balance sheet date.

22. Hitherto, the subsidiary company at Switzerland used its local currency CHF as the reporting currency for the purposes of preparation of its financial statements used by the Company for the purposes of preparation of its CFS. Since most transactions of the said subsidiary, including its cash flows and income and expenditures, are transacted in USD, the said subsidiary, with effect from the current financial year, has used USD as its reporting currency in the preparation of its financial statements. As a result of the said change, the net proft for the year on account of foreign exchange difference is higher by Rs. 523.7 million and the debit to the Foreign Currency Translation Reserve for the year in balance sheet is higher by Rs. 792.1 million.

23. Excise duty (Schedule 17) includes Rs. 2.8 million (previous year Rs. 19.8 million) being net impact of the excise duty provision on opening and closing stock.

24. During the year, the Company had issued short term MIBOR linked secured debentures, which have been repaid prior to creation of security in favour of the debenture holders, as per details below:

25. The Company and its wholly owned subsidiary located in USA is involved in various legal proceedings, including product liability related claims, employment claims and other regulatory matters relating to conduct of its business. The Company carries product liability insurance policy with an amount it believes is suffcient for its needs. In respect of other claims, the Company believes, these claims do not constitute material litigation matters and with its meritorious defences the ultimate disposition of these matters will not have material adverse effect on its Financial Statements.

26. During the year, the Company acquired an undertaking / business unit as a going concern, from a party on slump sale basis for an agreed consideration of Rs. 195.0 million as approved by the Board, on the basis of fair valuation report of an independent valuer.

27. No borrowing cost has been capitalised during the year.

29. Related Party Disclosures, as required by AS-18 are given below :

A. Relationships -

Category I : Associates of the Company :

Shinko Yakuhin, Japan (upto 10th March 2010)

Generic Health Pty Ltd., Australia (upto 26th September 2010)

Category II : Key Management Personnel :

Dr. D. B. Gupta Chairman

Dr. K. K. Sharma Managing Director

Mrs. M. D. Gupta Executive Director

Ms. Vinita Gupta Group President and CEO of Lupin Pharmaceutical Inc., USA

Mr. Nilesh Gupta Executive Director

Category III : Others (Relatives of Key Management Personnel and Entities in which the Key Management Personnel have control or signifcant infuence)

Dr. Anuja Gupta

Mrs. Kavita Gupta Sabharwal

Dr. Richa Gupta

Mrs. Pushpa Khandelwal

Adhyatma Investments Pvt. Ltd. (upto 31st March 2010)

Bharat Steel Fabrication and Engineering Works

Concept Pharmaceuticals Ltd. (upto 31st March 2010)

D. B. Gupta (HUF)

Enzal Chemicals (India) Ltd.

Lupin Human Welfare and Research Foundation

Lupin International Pvt. Ltd.

Lupin Investments Pvt. Ltd.

Lupin Marketing Pvt. Ltd.

Matashree Gomati Devi Jana Seva Nidhi

Novamed Pharmaceuticals Pvt. Ltd.

Polynova Industries Ltd.

Pranik Landmark Associates (upto 3rd March 2010)

Rahas Investments Pvt. Ltd.

S N Pharma (upto 31st March 2010)

Synchem Chemicals (I) Pvt. Ltd.

Visiomed (India) Pvt. Ltd.

Zyma Laboratories Ltd.

30. Hitherto, the Cost of inventories of the susbidiaries located in South Africa and Switzerland was computed by frst in frst out (FIFO) method. From the current year, these subsidiaries have changed the cost formula used in the valuation of inventories from FIFO method to moving weighted average method, so as to fall in line with group accounting policy. There is no material impact on the inventory values and on the proft for the year, consequent to the aforesaid change.

31. The Consolidated Financial Statement includes results of operations of three new subisidaries incorporated during the year, results of one company which has become a subsidiary with effect from September 27, 2010 (earlier being an associate) and the results of operations of the entire twelve months of two subsidiaries acquired during the previous year. Accordingly, the current year fgures are not strictly comparable with those of the previous year. Previous year fgures have been regrouped wherever necessary to correspond with the fgures of the current year.


Mar 31, 2010

1. Estimated amount of contracts remaining to be executed on capital account and not provided for, net of advances,Rs.525.2million(previousyearRs.680.0million).

2. Contingent Liabilities: (Rs. in million)

As at As at 31.03.2010 31.03.2009

a) Income tax demands/matters in respect of earlier years, pending in 107.8 46.9 appeals [including Rs. 90.3 million (previousyear Rs. Nil) consequentto department preferring appeals against the orders of the Appellate Authorities passed in favour of the company].

Amount paid thereagainstand included under Schedule 10"Advances recoverable in cash or in kind" Rs. 17.5 million (previous year Rs. 38.0 million).

b) Excise duty,Service tax and Sales tax demands disputed in appeals and 194.7 118.3 pending decisions. Amount paid there against and included under Schedule 10 Rs. 17.9 million (previous year Rs. 13.8 million).

c) Claims against the Company not acknowledged as debts [excluding 258.5 298.9 interest (amount unascertained) in respect of a claim].

Amount paid thereagainst without admitting liability and included under Schedule 10 Rs. 76.5 million (previousyear Rs.64.2 million).

d) Counter guarantee given to GIDC in connection with loan sanctioned by 7 5 7 5 a financial institution to a company, jointly promoted by an Association oflndustries(ofwhich,theCompanyisamember)andGIDC.

e) Guarantees given in respect of standby letter of credit issued by 151.2 164.8 the Companys bankers in connection with the credit facilities to its subsidiaries aggregating Rs. 181.6 million (previous year Rs.239.0million).

f>Letter of comfort issued by the Company towards the credit facilities 254.8 246.2 sanctioned by the bankers of subsidiary companies aggregating Rs.620.4 million (previousyear Rs.425.3 million).

g) Corporate guarantee given in respect of credit facility sanctioned by 27.7 the bankers of subsidiary companies aggregating Rs. 40.5 million (previousyear Rs. Nil).

h) Other corporate guarantee given. 135.0

3. During the year, the Company through its wholly owned subsidiary Lupin Holdings B.V., Netherlands (LHBV),acquired/subscribed to the equitys take of the following:

i) Additional Investment in Lupin Atlantis Holdings SA, Switzerland (100% subsidiary of the Company) at a total cost of Rs. 2349.2 million.

ii) Additional Investment in Generic Health Pty Ltd., Australia (Associate) at a total cost of Rs.122.2 million.

iii) 100% equitys take of Lupin Pharma Canada Ltd.,Canada at a total cost of Rs.125.3 million. The above acquisitions/subscriptions are based on the net assets values, the future projected revenues, operating profitsand cash flows, etc. of the investee companies.

4. Segment Reporting:

The Company has presented data relating to its segments based on its consolidated financial statements, which are presented in the same Annual Report. Accordingly, in terms of the provisions of Accounting Standard 17 (AS 17) "Segment Reporting", no disclosures related to segments are presented in its standalone financial statements.

5. Additional information pursuant to the Provisions of Paragraphs 3, 4C, and 4D of Part II of Schedule VI to the Companies Act, 1956.

6. Employees StockOption Plans:

a) The Company implemented "Lupin Employees StockOption Plan 2003" (ESOP 2003), "Lupin Employees Stock Option Plan 2005" (ESOP 2005) and "Lupin Subsidiary Companies Employees StockOption Plan 2005" (SESOP 2005) as approved in earlier years by the Shareholders of the Company and the Remuneration/Compensation Committee of the Board of Directors. Details of the options granted during theyear underthe plansareas under:

7. Post Employment Benefits:

(i) Defined Contribution Plans:

The Company makes contributions towards provident fund and superannuation fund to a defined contribution retirement benefit plan for qualifying employees. The superannuation fund is administered by the Life Insurance Corporation of India (LIC). Under the plan, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit plan to fund the benefits.

The provident fund plan is operated by the "Lupin Ltd Employees Provident Fund Trust" (the "Trust"). Eligible employees receive benefits from the said Provident Fund Trust. Both the employees and the Company make monthly contributions to the Provident Fund Plan equal to a specified percentage of the covered employees salary.The minimum interest rate payable by theTrustto the beneficiaries everyyear is being notified by the Government. The Company has an obligation to make good the short fall, if any, between the return from the investments of the trust and the notified interest rate.

The Guidance Note on Implementing Accounting Standard 15 (AS -15), Employee benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefit plans involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, the Companys actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly, theCompanyisunabletoexhibittherelatedinformation.

The Company recognised Rs. 99.7 million (Previous year Rs. 78.5 million) for provident fund contributions and Rs. 71.9 million (previous year Rs. 54.9 million) for superannuation contribution in the Profit and Loss Account.

(ii) Defined Benefit Plan:

The Company makes annual contributions to the Lupin Limited Employees Group Gratuity cum Life Assurance Scheme administered by the LIC, a funded defined benefit plan for qualifying employees. The schemeprovidesforpaymenttovestedemployeesasunder:

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

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

b) On death in service:

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

The most recent actuarial valuation of plan assets and the present value of the defined benefit obligation for gratuity were carried out as at March 31, 2010 by the LIC. The present value of the defined benefit obligations and the related current service cost and past service cost, were measured using the Projected Unit Credit Method.

8. Derivative Financial Instruments:

The Company enters into forward and option contracts in order to hedge and manage its foreign currency exposures towards future export earnings. Such derivative contracts (including contracts for a period extending beyond the financial year 2010-11) which are in the nature of highly probable forecast transactions are entered into by the Company for hedging purposes only, and are accordingly classified as cash flow hedges.

9. The aggregate amount of revenue expenditure incurred during the year on Research and Developmentand shown in the respective heads of account is Rs. 2738.3 million (previousyear Rs. 1905.0 million).

10. During theyear, in accordance with the terms of issue, Foreign Currency Convertible Bondsaggregating US $ 71.3 million (aggregate to date US $ 98.6 million) were converted into 5,816,742 equity shares (aggregate to date 8,043,911 equity shares) of Rs. 10/- each, fully paid-up, at a predetermined price of Rs. 567.04 per share, resulting in an increase in the paid-up share capital by Rs. 58.2 million (aggregate to date Rs. 80.4 million) and securities premium by Rs. 3240.1 million (aggregate to date Rs. 4480.7 million). Balance FCCBs aggregating US $ 1.4 million were redeemed during the year and the redemption premium of Rs. 12.6 million (net of tax of Rs. 6.5 million) is adjusted against securities premium account. There were no Bonds outstandingasonMarch31,2010.

20. The information regarding Micro Enterprises and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company. This has been relied uponbytheauditors. Amount due to Micro Enterprises and Small Enterprises as on March 31, 2010 is Rs. 88.3 million, interest Rs.nil (previousyear Rs.64.1 million,interestRs.nil),interestpaidduring theyear Rs. nil (previousyear Rs. nil).

21. a) Lupin Pharmacare Limited, Lupin Herbal Limited and Novodigm Limited (wholly owned subsidiaries of the Company) had filed petitions before the Honourable High Courts of Mumbai and Gujarat for amalgamation with theCompany, the appointed date being April 1,2009.

b) Vide its order dated January 8, 2010, the High Court of Mumbai sanctioned the scheme of amalgamation between Lupin Pharmacare Ltd., Lupin Herbal Ltd. and the Company subject to the order to be passed by the High Court of Gujarat sanctioning the scheme of amalgamation between Novodigm Ltd. and the Company. The order of the Gujarat High Court is awaited pending which, the results of these subsidiaries have not been considered in these financial statements of the Company.

c) Based on the audited accounts of the aforesaid wholly-owned subsidiary companies, aggregate net loss for the year ended March 31, 2010 is Rs. 280.5 million. While calculating commission payable to Executive Chairman, this has been considered on a conservative basis.

22. Related Party Disclosures, as required by AS-18 are given below: A. Relationships -

Category I: Subsidiaries and Associates of the Company: Subsidiaries:

Lupin Pharmaceuticals Inc., USA

Kyowa Pharmaceutical Industry Co, Ltd., Japan

AmelTouhoku, Japan

Novodigm Ltd., India

Max Pharma Pty. Ltd., Australia (upto 31 st May, 2009)

Lupin Pharmacare Ltd., India

Lupin Australia Pty Ltd., Australia

Lupin Holdings B.V., Netherlands

Lupin Herbal Ltd., India

Lupin Atlantis Holdings SA, Switzerland

Hormosan Pharma GmbH, Germany (from 25th July 2008)

Pharma Dynamics(Proprietary) Ltd., South Africa

Multicare Pharmaceuticals Philippines Inc., Philippines (from 26th March 2009)

Lupin (Europe) Ltd., UK (from 5th June 2009)

Lupin Pharma Canada Ltd., Canada (from 18th June 2009)

Associates:

Generic Health Pty Ltd., Australia (from 20th August 2008) Shinko Yakuhin, Japan (upto 10th March 2010)

Category II: Key Management Personnel

Dr. D.B.Gupta Chairman

Dr. K. K. Sharma Managing Director

Mrs.M.D.Gupta Executive Director

Mr. Nilesh Gupta Executive Director (from 8th October 2008)

Category III: Others (Relatives of Key Management Personnel and Entities in which the Key Management Personnel have control or significant influence)

Mrs. Vinita Gupta

Mr. Nilesh Gupta (upto 7th October 2008)

Dr. Anuja Gupta

Mrs. Kavita Gupta Sabharwal

Dr. Richa Gupta

Mrs. Pushpa Khandelwal

Adhyatma Investments Pvt. Limited

Bharat Steel Fabrication and Engineering Works

Concept Pharmaceuticals Limited

D.B. Gupta (HUF)

Enzal Chemicals (India) Limited

Lupin Human Welfare and Research Foundation

Lupin International Pvt. Limited

Lupin Investments Pvt. Limited

Lupin Marketing Pvt. Limited

Matashree Gomati Devi Jana Seva Nidhi

Novamed Pharmaceuticals Pvt. Limited

Polynova Industries Limited

Pranik Landmark Associates (upto 3rd March 2010)

Rahas Investments Pvt. Limited

SN Pharma

Synchem Chemicals (I) Pvt. Limited

Zyma Laboratories Limited

23. Excise duty (Schedule 16) includes Rs. 22.0 million being net impact of the excise duty provision on opening and closing stock.

24. Previous year figures have been regrouped wherever necessary to correspond with the figures of the current year.

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