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Notes to Accounts of Lupin Ltd.

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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