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Notes to Accounts of Neuland Laboratories Ltd.

Mar 31, 2023

Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of ''10 per share. Each holder of equity shares is entitled to one vote per share.

The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to prior consent from consortium and approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts in proportion of their shareholding.

Nature and purpose of reserves Capital reserve

Capital reserve was created on account of merger of Neuland Drugs & Pharmaceuticals Private Limited with the Company. The Company uses capital reserve for transactions in accordance with the provisions of the Act.

Securities premium

The amount received in excess of face value of the equity shares is recognised in securities premium. In case of equity-settled share based payment transactions, the difference between fair value on grant date and face value of share is accounted as securities premium. This reserve is utilised in accordance with the provisions of the Act.

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes.

Revaluation reserve

Revaluation reserve was created on account of revaluation of certain property, plant and equipment during the earlier years.

FVOCI equity instruments

The Company has elected to recognise the change in fair value of certain investments in other comprehensive income. These changes are accumulated within the FVOCI equity instruments reserve within equity. The Company transfers amounts from this reserve to retained earnings when the relevant equity instruments are derecognised.

Remeasurement of defined benefit plan

The reserve represents the remeasurement gains/(losses) arising from the actuarial valuation of the defined benefit plan of the Company. The remeasurement gains/(losses) are recognized in other comprehensive income and accumulated under this reserve within equity. The amounts recognized under this reserve are not reclassified to the statement of profit and loss.

(i) The above loans are secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The term loans of 1 & 3 from banks are also secured by way of personal guarantees extended by Dr. Davuluri Rama Mohan Rao and Davuluri Sucheth Rao.

(ii) Vehicles loans outstanding to the tune of ''459.57 (31 March 2022: ''420.84) are secured by hypothecation of specific vehicles against which the loan was availed. These vehicle loans are repayable in instalments ranging from 35 to 59 months from the date of the loan.

(iii) All the above loans carry interest in the range of 1.8% to 9.6% per annum as at 31 March 2023(31 March 2022: 1.8% to 8.5% per annum).

(i) Loans outstanding represent packing credit and working capital demand facility availed with various banks and carry interest linked to the respective bank''s prime / base lending rate, and range from 0.70% to 8.9% per annum (31 March 2022: 0.70% to 8.5% per annum).

(ii) The above loans with all working capital lenders are secured by way of pari-passu first charge on all the current assets of the Company and pari-passu second charge on the Company''s property, plant and equipment. All of the above working capital loans are also secured by way of personal guarantees extended by Dr. Davuluri Rama Mohan Rao and Davuluri Sucheth Rao in favour of the working capital lenders.

(iii) The quarterly returns submitted with banks are in agreement of the books of accounts.

(a) Gratuity

The Company has a defined benefit funded gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The Company has subscribed to a group gratuity scheme of Life Insurance Corporation of India (LIC) & Kotak Gratuity Group Plan. Under the said policy, the eligible employees are entitled for gratuity upon their resignation or in the event of death in lumpsum after deduction of necessary taxes up to a maximum limit of ''20.

Performance Obligation:

Sale of products: Performance obligation in respect of sale of goods is satisfied when control of the goods is transferred to the customer, generally on delivery of the goods and payment is generally due as per the terms of contract with customers.

Sale of services: The performance obligation in respect of maintenance services is satisfied over a period of time and acceptance of the customer. In respect of these services, payment is generally due upon completion of maintenance period based on time elapsed and acceptance of the customer. In certain non-standard contracts, where the Company provides warranties in service of consumer durable goods, the same is accounted for as a separate performance obligation and a portion of the transaction price is allocated based on its relative standalone prices. The performance obligation for the warranty service is satisfied over a period of time based on time elapsed.

Remaining performance obligations

The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations in case of contracts for which revenues are recorded over a period of time is ''1,475.36 which is expected to be fully recognised as revenue in the next year. No consideration from contracts with customers is excluded from the amount mentioned above and contract asset relating to partially satisfied performance obligations aggregates to ''693.86 as at 31 March 2023 (31 March 2022: ''363.70)

(i) Details of CSR expenditure :

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR)activities. The Company has a CSR committee as per the Act. The funds were primarily utilized through the year on skill building, covid support activities etc pursuant to Schedule VII of the Companies Act, 2013. Total expenditure incurred on Corporate Social Responsibility (CSR) activities during the year ended March 31,2023 is ''176.16 (March 31, 2022 is ''116.84 ). The Company has availed a set-off of ''12.06 out of excess amount of ''17.10 spent during the financial year end March 31,2021 and considering the same, the cumulative spend for the financial year ended March 31,2022 is considered at ''128.90.

30. Earnings per equity share (EPES)

Basic earnings /(loss) per share amounts are calculated by dividing the profit/loss for the year attributable to equity holders by the weighted average number of equity shares outstanding during the year.

Diluted earnings /(loss) per share amounts are calculated by dividing the profit/loss attributable to equity holders (after adjusting for interest on the convertible preference shares) by the weighted average number of equity shares outstanding during the year plus the weighted average number of equity shares that would be issued on conversion of all the dilutive potential equity shares into equity shares.

31. Fair value measurements (i) Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the Balance Sheet are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: Quoted prices (unadjusted) in active markets for financial instruments.

Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data either directly or indirectly.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

The Company''s principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets comprise of loans, trade and other receivables, cash and cash equivalents and other bank balances derived directly from its operations. The Company also holds FVOCI investments and investment in its subsidiary.

(iv) The carrying amounts of trade receivables, trade payables and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature. Difference between carrying amounts and fair values of bank deposits, other financial assets, other financial liabilities and borrowings subsequently measured at amortised cost is not significant in each of the years presented. For all other amortised cost instruments, carrying value represents the best estimate of fair value.

For financial assets measured at fair values, the carrying amounts are equal to the fair values.

32. Financial instruments risk management

The Company is exposed to various financial risks arising from its operations and the use of financial instruments. The key financial risks include market risk, credit risk and liquidity risk. The Company''s risk management policies are established to identify and analyse the risks faced by the Company and seek to, where appropriate, minimize potential impact of the risk and to control and monitor such risks. The Company''s risk management is coordinated by the Board of Directors and focuses on securing long term and short term cash flows. The Company does not engage in trading of financial assets for speculative purposes.

The following sections provide details regarding the Company''s exposure to the financial risks associated with financial instruments held in the ordinary course of business and the objectives, policies and processes for management of these risks.

A. Market risk:

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises two types of risk: interest rate risk and currency risk. Financial instruments affected by market risk include borrowings, deposits, trade receivables and other financial instruments.

The sensitivity analyses in the following sections relate to the position as at 31 March 2023 and 31 March 2022. The analysis exclude the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations; provisions; and non-financial assets and liabilities.

i. Interest rate risk:

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has loan facilities on floating interest rate, which exposes the Company to risk of changes in interest rates. The management monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary. The Company''s investment in deposits with banks are for short durations and therefore do not expose the Company to significant interest rate risk. Below are the details of exposure to fixed rate and variable rate instruments:

Every 0.5% increase/decrease in the interest rate component applicable to the respective borrowings would effect the Company''s net profit before tax resulting in an expense/income of ''39.54 and ''91.61 for the year ended 31 March 2023 and 31 March 2022 respectively.

ii. Foreign currency risk:

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company''s exposure to the risk of change in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in foreign currency) and financing activities (when borrowings are denominated in foreign currency). The foreign currencies in which these transactions are denominated are US Dollars, Euros, Japanese Yen, Great British Pound and Swiss Franc. The Company uses foreign exchange forward contracts to hedge its exposure in foreign currency risk.

iii. Equity price risk:

The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as FVOCI/FVTPL. An increase/(decrease) in fair value of investments by 10% shall impact the Company''s equity and total comprehensive income by ''5.25 (31 March 2022: ''38.70).

B. Credit risk

Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, leading to a financial loss. The Company is mainly exposed to the risk of its balances with the bankers and trade and other receivables. None of the Company''s cash equivalents, other bank balances, loans and security deposits were past due or impaired as at 31 March 2023 and 31 March 2022.

C. Liquidity risk

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

Management monitors rolling forecasts of the Company''s liquidity position (comprising the undrawn borrowing facilities) and cash and cash equivalents on the basis of expected cash flows.

33. Capital risk management

The Company''s objective when managing capital is to safeguard the Company''s ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Hence, the Company may adjust any dividend payments, return capital to shareholders or issue new shares or sell assets to reduce debt. Total capital is the equity as shown in the statement of financial position. Currently, the Company primarily monitors its capital structure on the basis of the following gearing ratio. Management is continuously evolving strategies to optimize the returns and reduce the risks. It includes plans to optimize the financial leverage of the Company.

During the year, the Board of Directors of the Company approved transfer of the Company''s property by way of perpetual lease to various parties, subject to receipt of requisite approvals. The transaction is yet to receive approval of regulatory authorities.

37. Goodwill

Pursuant to the Scheme of Amalgamation and Arrangement ("the Scheme") duly approved by the National Company Law Tribunal, Hyderabad Bench vide their order dated 21 March 2018, Neuland Health Sciences Private Limited ("NHSPL") and Neuland Pharma Research Private Limited ("NPRPL") (together referred to as "Transferor Companies"), were merged with the Company with appointed date of 1 April 2016. NHSPL is engaged in the business of conducting research and development of Peptides and NPRPL is in the business of contract research services.

The purchase consideration of ''31,084.99 paid by way of issue of 2,270,635 equity shares of ''10 each [in accordance with the Scheme, 4,590,608 equity shares of ''10 each held by NHSPL in the Company stands cancelled and the Company shall issue 6,861,095 and 148 fully paid-up equity shares of ''10 each to the shareholders of NHSPL and NPRPL respectively] at a premium of ''1,359 per equity share.

The planning horizon reflects the assumptions for short-to-mid term market developments which are based on key assumptions such as margins, expected growth rates based on past experience, new product launches and management''s expectations / extrapolation of normal increase / steady terminal growth rate. Discount rate reflects the current market assessment of the risks. The discount rate is estimated based on the weighted average cost of capital for the Company. Post-tax discount rates used were 14.69% for the year ended 31 March 2023. The management believes that any reasonable possible change in the key assumptions would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash- generating unit.

(d) Transaction with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the subsidiaries, are carried at an arm''s length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at arm''s length price. The Company is in the process of updating the transfer pricing documentation for the financial year ended March 31, 2023. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

39. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to ''950.85 (31 March 2022: ''1,831.45).

40. Contingent liabilities and pending litigations
	As at 31 March 2023	As at 31 March 2022
Disputed income tax liabilities
Assessment year 2004-05 - refer note (a) below	693.33	693.33
Other income tax matters	54.87	55.20
GST/Customs
Assessment year 2017-18 towards availment of transitional input tax credit (GST)	47.95	47.94
Assessment year 2017-18 towards Refund of un-utilised Education & Secondary Higher Education Cess & Krishi Kalyan Cess not transferred in TRAN_1	64.38	-
Non- fulfilment of export obligation (customs)	46.25	46.25

(All amounts are in Indian '' in lakhs, except for share data and where otherwise stated)
	As at 31 March 2023	As at 31 March 2022
Other Disputes/Matters
Public litigation against land parcel allotment by APIICL- refer note (b) below	1,934.30	1,965.84
CIGSR Order for land parcel at Bonthapally in survey no 490/2- refer note (c) below	0.64	0.64
CIGSR Order for land parcel at Bonthapally in survey no 490/1- refer note (d) below	3.30	3.30
Certain disputes, for unascertained amounts are pending in the Labour Courts, Telangana. Since, the chance of appellants succeeding in their claims is less than probable, the Company does not expects any liability in this respect.	Not ascertainable	Not ascertainable
Other Claims and Guarantees
Letter of Credits, Bank Guarantees including performance bank guarantees issued by the banks on behalf of the Company	6,276.13	4,655.20

Note:

(a) The Income tax authorities had re-opened the income tax assessment of the Company for the assessment year 2004-05 later than the periods permitted by the provisions of the Income Tax Act, 1961 and thereby demanded an additional tax amount of ''693.33 on account of disallowance of certain prior period expenditure recognized by the Company in the computation of gross total income for the assessment year then ended. Aggrieved by the order of the Income Tax department, the management had filed an appeal with the higher authorities which had been successfully decided in favour of the Company. The Income Tax department has however filed an appeal with the Hon''ble High Court of Telangana in this regard, which is pending final outcome. However, on the basis of its internal assessment and considering the order of the first level appellate authority, the Company is confident of securing an favourable order from the High Court and accordingly, no adjustments have been made to the standalone financial statements in this regard.

Other pending litigations / contingent liabilities:

(b) During 2004, the Company was allotted land parcel by the then Andhra Pradesh Industrial Infrastructure Corporation Limited ("APIIC''j for setting up a basic research and development center. Subsequently public interest litigation was filed challenging allotments made by APIIC as unconstitutional and to cancel the allotments and resume the lands in all cases where the development has not commenced or the substantial progress has not been made as per the terms of allotments and regulations. The Company has been named as one of the parties to the said public interest litigation and the case is currently pending for hearing at Hon''ble High Court of Telangana. If there is an adverse ruling against the Company, the estimated financial impact on the Company could be ''1,934.30.

(c) Our Company purchased land in Survey No. 490/2 situated at Bonthapally Village, Jinnaram Mandal, Medak District. The Revenue department issued notices to our Company for resumption of the said land on the ground that the same was "assigned land". Our Company has filed an application before the Collector, Medak District for regularization of the said land as per the applicable laws. Our Company also filed a writ petition before the High Court praying for an order not to take any coercive steps. The High Court vide its order dated March 18,2011 directed the revenue department to not take any coercive steps till the disposal of the representation filed by our Company. The matter is pending before the Collector, Medak District. The management believes that the outcome will be in favour of the Company and hence no adjustment is made in the financial statements.

(d) During the financial year ended 31 March 2008, the Commissioner and Inspector General of Stamps and Registration (CIGSR), Andhra Pradesh has vide itâs order dated 22 February2008 has cancelled the registration of the land parcel owned by the Company situated at Bonthapally pursuant to complain made by one of the sellers. Aggrieved by the aforesaid order the Company has filed a writ petition challenging order of CIGSR with Honâble High Court of Telangana (the ''Court'') as the Company was not involved during the proceedings. The Court has vide its order dated 31 December 2010 has directed to maintain the status quo with regards to the possession of the property till further orders passed. Proceedings of the case are still pending with the Court. The management is confident that orders will be in the favour of the Company, hence no adjustment is deemed necessary to these Standalone financial statements.

43. Segment reporting

In accordance with Ind AS 108 - ''Operating segments'', segment information has been given in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

44. The Code on Social Security 2020 (''the Code'') relating to employee benefits, during the employment and post-employment, has received Presidential assent on September 28, 2020. The Code has been published in the Gazette of India. Further, the Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. However, the effective date from which the changes are applicable is yet to be notified and rules for quantifying the financial impact are also not yet issued. The Company will assess the impact of the Code and will give appropriate impact in the financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

45. The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company did not have any long-term contracts (including derivative contracts) for which there were any material foreseeable losses.

46. The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable. There are no other subsequent events that occurred after the reporting date.

47. Other Statutory Information:

i. The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

ii. The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority.

iii. The Company does not have any transactions with companies struck off under section 248 of the Companies Act, 2013 or section 560 of Companies Act, 1956.

iv. The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period.

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

vi. The Company has not entered into any scheme of arrangement which has an accounting impact on current or previous financial year.

vii. No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).

The Company has not received any fund from any party(s) (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

viii. The Company does not have any undisclosed income which is not recorded in the books of account that has been surrendered or disclosed as income during the year (and previous year) in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

48. The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable. There are no other subsequent events that occurred after the reporting date.

49. The standalone financial statements are approved for issue by the Company''s Board of Directors on 11 May 2023.

This is the Summary of Significant Accounting Policies and Other Explanatory Information referred to in our report of even date.

Mar 31, 2022

Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of ?10 per share. Each holder of equity shares is entitled to one vote per share.

I n the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts in proportion of their shareholding.

Nature and purpose of reserves Capital reserve

Securities premium

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes.

Revaluation reserve

Revaluation reserve was created on account of revaluation of certain property, plant and equipment during the earlier years.

FVOCI equity instruments

Remeasurement of defined benefit plan

(ii) Vehicles loans outstanding to the tune of ? 420.84 (31 March 2021: ? 313.47) are secured by hypothecation of specific vehicles against which the loan was availed. Vehicle loans are repayable in instalments ranging from 35 to 59 months from the date of the loan.

(i) Loans outstanding represent packing credit and working capital demand facility availed with various banks and carry interest linked to the respective bank''s prime / base lending rate, and range from 0.70% to 8.5% per annum (31 March 2021: 0.70% to 9.90% per annum).

(ii) The above loans with all working capital lenders are secured by way of pari-passu first charge on all the current assets of the Company and pari-passu second charge on Company''s property, plant and equipment. All of the above working capital loans are also secured by way of personal guarantees extended by Dr. Davuluri Rama Mohan Rao and Davuluri Sucheth Rao in favour of the working capital lenders.

(iii) The quarterly returns submitted with banks are in agreement of the books of accounts

(a) Gratuity

In assessing whether the deferred tax assets will be realised, management considers whether some portion or all of the deferred tax assets will not be realised. The ultimate realisation of the deferred income tax assets in the nature of business loss carry forward is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realise the benefits of those recognised deductible difference of business loss carry forward. Recoverability of deferred tax assets is based on estimates of future taxable income and any changes in such future taxable income would impact the recoverability of deferred tax assets. However, management believes that any reasonable possible change in the key assumptions would not effect the Company''s ability to recover the deferred tax asset

Unsatisfied performance obligations

The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations in case of contracts for which revenues are recorded over a period of time is ?944.98, which is expected to be fully recognised as revenue in the next year. No consideration from contracts with customers is excluded from the amount mentioned above and contract asset relating to partially satisfied performance obligations aggregates to ?363.70 as at 31 March 2022 (31 March 2021: ? 292.75)

(ii) Details of CSR expenditure :

puruant to Schedule VII of the Companies Act, 2013. Total expenditure incurred on Corporate Social Responsibility (CSR) activities during the year ended March 31, 2022 is '' 116.84 lakhs (March 31, 2021 is '' 88.02 lakhs). The Company has availed a set-off of '' 12.06 lakhs out of excess amount of '' 17.10 Lakhs spent during the financial year ended March 31,2021 and considering the same, the cumulative spend for the financial year ended March 31,2022 is considered at '' 128.90 Lakhs

31. Fair value measurements

(i) Fair value hierarchy

Level 1: Quoted prices (unadjusted) in active markets for financial instruments.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

The Company''s principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations. The Company''s principal financial assets include loans, trade and other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVOCI investments and investment in its subsidiary.

For financial assets measured at fair values, the carrying amounts are equal to the fair values.

32. Financial instruments risk management

The Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include market risk, credit risk and liquidity risk. The Company''s risk management policies are established to identify and analyse the risks faced by the Company and seek to, where appropriate, minimize potential impact of the risk and to control and monitor such risks. There has been no change to the Company''s exposure to these financial risks or the manner in which it manages and measures the risks or the manner in which it manages and measures the risks.

A. Market risk:

The sensitivity analyses in the following sections relate to the position as at 31 March 2022 and 31 March 2021. The analysis exclude the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations; provisions; and non-financial assets and liabilities.

i. Interest rate risk:

Every 0.5% increase/decrease in the interest rate component applicable to the respective borrowings would effect the Company''s net profit before tax resulting in an expense/income of ?91.61 and ?69.61 for the year ended 31 March 2022 and 31 March 2021 respectively.

ii. Foreign currency risk:

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company''s exposure to the risk of change in foreign exchange rates relates primarily to the Company''s operating activities (when revenue or expense is denominated in foreign currency) and financing activities (when borrowings are denominated in foreign currency), The foreign currencies in which these transactions are denominated are US Dollars, Euros, Japanese Yen, Great British Pound and Swiss Franc. The Company uses foreign exchange forward contracts to hedge its exposure in foreign currency risk.

iii. Equity price risk:

''The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as FVOCI/FVTPL. An increase/(decrease) in fair value of investments by 10% shall impact the Company''s equity and total comprehensive income by ?38.70 (31 March 2021: ?68.96).

B. Credit risk

C. Liquidity risk

Management monitors rolling forecasts of the Company''s liquidity position (comprising the undrawn borrowing facilities) and cash and cash equivalents on the basis of expected cash flows.

33. Capital risk management

38. Goodwill

The purchase consideration of ?31,084.99 paid by way of issue of 2,270,635 equity shares of ?10 each [in accordance with the Scheme, 4,590,608 equity shares of ?10 each held by NHSPL in the Company stands cancelled and the Company shall issue 6,861,095 and 148 fully paid-up equity shares of ?10 each to the shareholders of NHSPL and NPRPL respectively] at a premium of ?1,359 per equity share.

Excess of consideration paid over net assets taken over aggregating to ?27,946.10 is recognized as Goodwill.

The recoverable amount of the above cash generating unit ("CGU") has been assessed using a value-in-use model. The recoverable value is computed based on the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows. The cash flow projections include specific estimates for five years developed using internal forecasts and a terminal growth rate thereafter of 5%. The planning horizon reflects the assumptions for short-to-mid term market developments which are based on key assumptions such as margins, expected growth rates based on past experience, new product launches and management''s expectations / extrapolation of normal increase / steady terminal growth rate. Discount rate reflects the current market assessment of the risks. The discount rate is estimated based on the weighted average cost of capital for the Company. Post-tax discount rates used were 14.50% for the year ended 31 March 2022. The management believes that any reasonable possible change in the key assumptions would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash- generating unit.

(d) Transaction with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the subsidiaries, are carried at an arm''s length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at arms length prices. The Company is in the process of updating the transfer pricing documentation for the financial year ended 31 March 2022. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

40. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to ?1831.45 (31 March 2021: ?2,284.55).

(All amounts are in Indian '' in lakhs, except for share data and where otherwise stated)
41. Contingent liabilities and pending litigations
	As at 31 March 2022	As at 31 March 2021
Disputed income tax liabilities
Assessment year 2004-05 - refer note (a) below	693.33	693.33
Other income tax matters	55.20	19.01
GST/Customs
Assessment year 2017-18 towards availment of transitional input tax credit (GST)	47.94	-
Non- fulfilment of export obligation (customs)	46.25	-
Other Disputes/Matters
Public litigation against land parcel allotment by APIICL- refer note (b) below	1,965.84	1,890.64
CIGSR Order for land parcel at Bonthapally in survey no 490/2- refer note (c) below	0.64	0.64
CIGSR Order for land parcel at Bonthapally in survey no 490/1- refer note (d) below	3.30	3.30
Certain disputes, for unascertained amounts are pending in the Labour Courts, Telangana Since, the chance of appellants succeeding in their claims is less than probable, the Company does not expects any liability in this respect.	Not ascertainable	Not ascertainable
Other Claims and Gurantees
Letter of Credits, Bank Guarantees including performance bank guarantees issued by the banks on behalf of the Company	4,655.20	7,863.71

Note:

(a) The Income tax authorities had re-opened the income tax assessment of the Company for the assessment year 2004-05 later than the periods permitted by the provisions of the Income Tax Act, 1961 and thereby demanded an additional tax amount of ?693.33 on account of disallowance of certain prior period expenditure recognized by the Company in the computation of gross total income for the assessment year then ended. Aggrieved by the order of the Income Tax department, the management had filed an appeal with the higher authorities which had been successfully decided in favour of the Company. The Income Tax department has however filed an appeal with the Hon''ble High Court of Telangana in this regard, which is pending final outcome. However, on the basis of its internal assessment and considering the order of the first level appellate authority, the Company is confident of securing an favourable order from the High Court and accordingly, no adjustments have been made to the standalone financial statements in this regard.

Other pending litigations / contingent liabilities:

(c) Our Company purchased land in Survey No. 490/2 situated at Bonthapally Village, Jinnaram Mandal, Medak District. The Revenue department issued notices to our Company for resumption of the said land on the ground that the same was ""assigned land"". Our Company has filed an application before the Collector, Medak District for regularization of the said land as per the applicable laws. Our Company also filed a writ petition before the High Court praying for an order not to take any coercive steps. The High Court vide its order dated March 18,2011 directed the revenue department to not take any coercive steps till the disposal of the representation filed by our Company.

The matter is pending before the Collector, Medak District. The management believes that the outcome will be in favour of the Company and hence no adjustment is made in the financial statements."

(d) During the financial year ended 31 March 2008, the Commissioner and Inspector General of Stamps and Registration (CIGSR), Andhra Pradesh has vide itâs order dated 22 February 2008 has cancelled the registration of the land parcel owned by the company situated at Bontapally pursuant to complain made by one of the seller. Aggrieved by the aforesaid order the Company has filed a writ petition challenging order of CIGSR with Honâble High Court of Telangana (the ''Court'') as the Company was not involved during the proceedings. The Court has vide its order dated 31 December 2010 has directed to maintain the status quo with regards to the possession of the property till further orders passed. Proceedings of the case are still pending with the court. The management is confident that orders will be in the favour of the Company, hence no adjustment is deemed necessary to these standalone financial statements.

44. Segment reporting

45. The Code on Social Security 2020 (''the Code'') relating to employee benefits, during the employment and post-employment, has received Presidential assent on September 28, 2020. The Code has been published in the Gazette of India. Further, the Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. However, the effective date from which the changes are applicable is yet to be notified and rules for quantifying the financial impact are also not yet issued.

The Company will assess the impact of the Code and will give appropriate impact in the financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

46. The standalone financial statements are approved for issue by the Company''s Board of Directors on 10 May 2022.

This is the Summary of Significant Accounting Policies and Other Explanatory Information referred to in our report of even date.

Mar 31, 2019

1. General information

Neuland Laboratories Limited (âthe Companyâ) is a public company domiciled in India and incorporated in accordance with the provisions of the erstwhile Companies Act, 1956. The Companyâs registered office is at Sanali Info Park, âAâ Block, Ground Floor, 8-2-120/113, Road No 2, Banjara Hills, Hyderabad - 500 034. Its shares are listed on two recognised stock exchanges of India, the National Stock Exchange of India Limited and BSE Limited. The Company is engaged in manufacturing and selling of bulk drugs and caters to both domestic and international markets.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (âInd ASâ) as notified under Section 133 of the Companies Act, 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules 2015, as amended, issued by the Ministry of Corporate Affairs (âMCAâ).

These financial statements have been prepared for the Company as a going concern on the basis of relevant Ind AS that are effective at the Companyâs annual reporting date March 31, 2019.

These financial statements have been prepared on the historical cost convention and on an accrual basis except for the following material items in the balance sheet:

- Certain financial assets and liabilities which are measured at fair value;

- Net defined benefit assets / (liability) are measured at fair value of plan assets, less present value of defined benefit obligations.

(i) Use of estimates and judgements

The preparation of financial statements in conformity with Ind AS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

- Note (e), (f) and (g) â Useful lives of property, plant and equipment, investment properties, goodwill and other intangible assets;

- Note (i) - Impairment;

- Note (k) â Financial instruments;

- Note (n) â Employee benefits;

- Note (p) - Provisions, contingent liabilities and contingent assets; and

- Note (q) â Income taxes

*During the year, the Company has allotted 1,675,000 equity shares of RS.10 each at a premium of RS.740 per share through Qualified Institutional Placement in accordance with provisions of Chapter VIII of the Securities Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (âQIP Issueâ) pursuant to the approval accorded by the shareholders in the extra-ordinary general meeting on May 11, 2018. ii) Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of RS.10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to prior consent from consortium and the approval of the shareholders in the ensuing general meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts in proportion of their shareholding.

* Equity shares held by Davuluri Vijaya Rao as at March 31, 2019, were less than five percent of the paid up equity share capital of the Company, hence the relevant disclosure is not applicable.

** The disclosure as at March 31, 2018 represents details of shareholders holding more than five percent equity shares post giving effect to the Scheme of Amalgamation and Arrangement duly approved by NCLT (refer note 37).

Nature and purpose of reserves

Capital reserve

Capital Reserve was created on account of merger of Neuland Drugs & Pharmaceuticals Private Limited with the Company. The Company uses capital reserve for transactions in accordance with the provisions of the Act.

Securities premium

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes.

Revaluation reserve

Revaluation reserve was created on account of revaluation of certain property, plant and equipment during the earlier years. FVOCI equity instruments

Remeasurement of defined benefit plan

(a) Terms and conditions of loans and nature of security

(i) Term loans outstanding to the tune of DNil (March 31, 2018: RS.828.98) was secured by first charge on fixed assets and equitable mortgage of land and buildings situated at Bonthapally Village, Jinnaram Mandal, Medak District on first pari passu basis along with other Banks. The loan is repayable in 20 quarterly installments commencing from June 2017. However, during the year, the company had prepaid the loan.

(ii) Term loans outstanding to the tune of RS.400.00 (March 31, 2018: RS.640.00) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The loan is repayable in 18 quarterly installment commencing from September 2016.

(iii) Term loans outstanding to the tune of RS.4,331.57 (March 31, 2018: RS.8,813.00) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The loan is repayable in 28 quarterly installment commencing from March 2019.

(iv) Term loans outstanding to the tune of RS.697.58 (March 31, 2018: RS.1,350.57) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge on current assets of the Company. The loan is repayable in 29 monthly installments commencing from 8 September 2017.

(v) Term loans outstanding to the tune of RS.2,500.00 (March 31, 2018: D Nil) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The loan is repayable in 28 quarterly installment commencing from April, 2019.

(vi) All the above term loan from banks are also secured by way of personal guarantees extended by Dr. D. R. Rao and Mr. D. Sucheth Rao.

(vii) Vehicles loans outstanding to the tune of RS.311.11 (March 31, 2018: RS.367.67) are secured by hypothecation of specific vehicles against which the loan is availed. Vehicle loans are repayable in installments ranging from 35 to 84 months from the date of the loan.

(viii) All the above loans carry interest in the range of 6.7% to 12.5% per annum (March 31, 2018: 6.7 % to 12.5 % per annum).

(i) Loans outstanding represent cash credit, packing credit and foreign bill discounting facility availed with various banks and carry interest linked to the respective bankâs prime / base lending rate, and range from 4.41% to 12.20% (March 31, 2018: 3.42% to 12.05% per annum).

(ii) Loans are secured by way of pari passu first charge on all the current assets of the Company and pari-passu second charge on Companyâs fixed assets with all working capital lenders and personal guarantees extended by Dr. D. R. Rao and Mr. D. Sucheth Rao. The pari passu charge on 200,000 equity shares of the Company held by Dr. D. R. Rao, in favour of the lenders.

(a) Gratuity

The Company has a defined benefit funded gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The Company has subscribed to a group gratuity scheme of Life Insurance Corporation of India (LIC). Under the said policy, the eligible employees are entitled for gratuity upon their resignation or in the event of death in lumpsum after deduction of necessary taxes upto a maximum limit of RS.20.

The following table set out the status of the gratuity plan and the reconciliation of opening and closing balances of the present value and defined benefit obligation.

(i) Change in projected benefit obligation

a) In assessing whether the deferred tax assets will be realised, management considers whether some portion or all of the deferred tax assets will not be realised. The ultimate realisation of the deferred income tax assets in the nature of MAT credit and business loss carry forward is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategy in making this assessment. Based on the level of historical taxable income and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realise the benefits of those recognised deductible differences of MAT credit and business loss carry forward. Recoverability of deferred tax assets is based on estimates of future taxable income and any changes in such future taxable income would impact the recoverability of deferred tax assets. However, management believes that any reasonable possible change in the key assumptions would not effect the Companyâs ability to recover the deferred tax asset.

Unsatisfied performance obligations

The aggregate value of transaction price allocated to unsatisfied (or partially satisfied) performance obligations in case of contracts for which revenues are recorded over a period of time is RS.450.63, which is expected to be fully recognised as revenue in the next year. No consideration from contracts with customers is excluded from the amount mentioned above and contract asset relating to partially satisfied performance obligations aggregates to RS. 182.54 as at March 31, 2019.

The major components of income tax expense and the reconciliation of expected tax expense based on the domestic effective tax rate of the Company at 34.944% (March 31, 2018: 34.608%) and the reported tax expense in the statement of profit and loss is as follows:

3. Fair value measurements

i) Fair value hierarchy

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

ii) Financial assets and financial liabilities measured at fair value

iii) Financial instruments by category

For amortised cost instruments, carrying value represents the best estimate of fair value.

The Companyâs principal financial liabilities comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include loans, trade and other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVOCI investments and investment in its subsidiary.

iv) The carrying amounts of trade receivables, trade payables and cash and cash equivalents are considered to be the same as their fair values, due to their short-term nature. Difference between carrying amounts and fair values of bank deposits, other financial assets, other financial liabilities and borrowings subsequently measured at amortised cost is not significant in each of the years presented. For all other amortised cost instruments, carrying value represents the best estimate of fair value. For financial assets measured at fair values, the carrying amounts are equal to the fair values.

4. Financial instruments risk management

The Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include market risk, credit risk and liquidity risk. The Companyâs risk management policies are established to identify and analyse the risks faced by the Company and seek to, where appropriate, minimize potential impact of the risk and to control and monitor such risks. There has been no change to the Companyâs exposure to these financial risks or the manner in which it manages and measures the risks or the manner in which it manages and measures the risks.

The following sections provide details regarding the Companyâs exposure to the financial risks associated with financial instruments held in the ordinary course of business and the objectives, policies and processes for management of these risks.

A) Market risk:

The sensitivity analyses in the following sections relate to the position as at March 31, 2019 and March 31, 2018. The analysis exclude the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations; provisions; and non-financial assets and liabilities.

i) Interest rate risk:

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has loan facilities on floating interest rate, which exposes the Company to risk of changes in interest rates. The management monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary. The Companyâs investment in deposits with banks are for short durations and therefore do not expose the Company to significant interest rate risk. Below are the details of exposure to fixed rate and variable rate instruments:

Every 0.5% increase/decrease in the interest rate component applicable to the respective borrowings would effect the Companyâs net profit before tax resulting in an expense/income of RS. 114.17 and RS. 157.76 for the year ended March 31, 2019 and March 31, 2018 respectively.

ii) Foreign currency risk:

Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Companyâs exposure to the risk of change in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in foreign currency) and financing activities (when borrowings are denominated in foreign currency), The foreign currencies in which these transactions are denominated are US Dollars, Euros, Japanese Yen, Great British Pound and Swiss Franc. The Company uses foreign exchange forward contracts to hedge its exposure in foreign currency risk.

a) Significant foreign currency risk exposure relating to financial assets and financial liabilities expressed in D terms are as follows:

b) Derivative financial instruments

The following table gives details in respect of outstanding derivate contracts. The counterparty for these contracts are banks.

c) Foreign currency sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in USD and Euro exchange rates, with all other variables held constant. The Companyâs exposure to foreign currency changes for all other currencies is not material.

iii) Equity price risk:

The Companyâs exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as FVOCI. An increase/(decrease) in fair value of investments by 10% shall impact the Companyâs equity and profit by RS.78.99 (March 31, 2018: RS.79.00).

(B) Credit risk

Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, leading to a financial loss. The Company is mainly exposed to the risk of its balances with the bankers and trade and other receivables. None of the Companyâs cash equivalents, other bank balances, loans and security deposits were past due or impaired as at March 31, 2019 and March 31, 2018.

Management monitors rolling forecasts of the Companyâs liquidity position (comprising the undrawn borrowing facilities) and cash and cash equivalents on the basis of expected cash flows.

Maturities of financial liabilities

The tables below analyse the Companyâs financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows.

5. Capital risk management

The Companyâs objective when managing capital is to safeguard the Companyâs ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Hence, the Company may adjust any dividend payments, return capital to shareholders or issue new shares or sell assets to reduce debt. Total capital is the equity as shown in the statement of financial position. Currently, the Company primarily monitors its capital structure on the basis of the following gearing ratio. Management is continuously evolving strategies to optimize the returns and reduce the risks. It includes plans to optimize the financial leverage of the Company.

6. Research and development expenses

Details of research and development expenses (excluding depreciation and amortisation expense) incurred during the year and included under various heads of expenditures are given below:

7. Investment properties

Investment properties comprise of carrying value of land and capital work-in-progress, representing the cost incurred towards development and construction activity at the said land situated at Nanakramguda, Hyderabad, duly allotted by Telangana State Industrial Infrastructure Corporation Limited (âTSIICâ) (erstwhile Andhra Pradesh Industrial Infrastructure Corporation Limited). However, owing to certain unavoidable reasons, the construction work had been temporarily suspended during the prior years.

The Company, on the basis of an approval received from TSIIC, has entered into a Joint Development Agreement (JDA) with a Developer for development of IT Park at the Companyâs land. Subsequently the Company has entered into Supplementary Development Agreement (âSDAâ) and Addendum to the SDA (collectively referred as âArrangementâ) with the Developer and its nominees. Further, in accordance with the terms of the Arrangement, the Company is entitled to a fixed leasable / saleable area of a minimum 3.38 lacs sq .ft, out of which the Company has agreed to transfer 1.20 lacs sq. ft from itâs own share at D0.02 per sq. ft to the Developer nominees on completion of the construction work and has received advance of RS.2,028 towards the proposed transfer as at March 31, 2019. The Developer has resumed the construction work, based on receipt of approvals and clearances from the concerned authorities. The management, on the basis of its assessment of the end use of its share in the proposed project has classified the entire value of land and balance of capital work-in-progress as an investment property as at March 31, 2019.

Management expects the fair value of investment property under construction is reliably measurable when construction is complete, accordingly management has determined that it shall measure the fair value of investment property under construction at the earliest of either when construction is completed or when its fair value becomes reliably measurable.

8. Goodwill

Pursuant to the Scheme of Amalgamation and Arrangement (âthe Schemeâ) duly approved by the National Company Law Tribunal, Hyderabad Bench vide their order dated March 21, 2018, Neuland Health Sciences Private Limited (âNHSPLâ) and Neuland Pharma Research Private Limited (âNPRPLâ) (together referred to as âTransferor Companiesâ), were merged with the Company with appointed date of April 1, 2016. NHSPL is engaged in the business of conducting research and development of Peptides and NPRPL is in the business of contract research services.

The purchase consideration of RS.31,084.99 payable by way of issue of 2,270,635 equity shares of RS.10 each [in accordance with the Scheme, 4,590,608 equity shares of RS.10 each held by NHSPL in the Company stands cancelled and the Company shall issue 6,861,095 and 148 fully paid-up equity shares of RS.10 each to the shareholders of NHSPL and NPRPL respectively] at a premium of RS. 1,359 per equity share was disclosed as Share Suspense Account under Other Equity as at March 31, 2018. During the year, the Company has allotted its equity shares and accordingly, RS.227.06 and RS.30,857.93 has been reclassified to equity share capital and securities premium respectively as at March 31, 2019.

Excess of consideration paid over net assets taken over aggregating to RS.27,946.10 is recognized as Goodwill.

The recoverable amount of the above cash generating unit (âCGUâ) has been assessed using a value-in-use model. The recoverable value is computed based on the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows. The cash flow projections include specific estimates for five years developed using internal forecasts and a terminal growth rate thereafter of 5%. The planning horizon reflects the assumptions for short-to-mid term market developments which are based on key assumptions such as margins, expected growth rates based on past experience, new product launches and managementâs expectations / extrapolation of normal increase / steady terminal growth rate. Discount rate reflects the current market assessment of the risks. The discount rate is estimated based on the weighted average cost of capital for the Company.

Post-tax discount rates used were 14.45% for the year ended March 31, 2019. The management believes that any reasonable possible change in the key assumptions would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash- generating unit.

9. Related party disclosures

a) Names of the related parties and nature of relationship Particulars Subsidiaries

Neuland Laboratories Inc., USA Neuland Laboratories K.K., Japan Key Management Personnel Dr. D. R. Rao - Chairman & Managing Director Mr.D. Sucheth Rao - Vice Chairman and CEO Mr.D. Saharsh Rao - Joint Managing Director

Dr. Christopher M. Cimarusti - Non-Executive Non-Independent Director Mr.Humayun Dhanrajgir - Non-Executive Independent Director Mr.Parampally Vasudeva Maiya - Non-Executive Independent Director Dr. William Gordon Mitchell - Non-Executive Independent Director Mrs.Bharati Rao - Non-Executive Independent Director Dr. Nirmala Murthy - Non-Executive Independent Director

Mr.Homi Rustam Khusrokhan (with effect from February 12, 2019) - Non-Executive Independent Director Mr.Amit Agarwal (with effect from 16 November 2017) - Chief Financial Officer Relatives of Key Management Personnel

Mrs.D. Vijaya Rao Mrs.D. Rohini Niveditha Rao

Note: Dr. D. R. Rao and D. Sucheth Rao have extended personal guarantees and Dr. D. R. Rao has additionally pledged certain share of its holding in the Company in connection with the working capital limits availed by the Company. (Refer note: 15)

d) Transaction with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the subsidiaries, are carried at an armâs length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at arms length prices. The Company is in the process of updating the transfer pricing documentation for the financial year endeRs. 31 March 2019. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

10. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to RS. 166.98 (March 31, 2018: RS.177.15).

Note:

(a) The Income tax authorities had re-opened the income tax assessment of the Company for the assessment year 2004-05 later than the periods permitted by the provisions of the Income Tax Act, 1961 and thereby demanded an additional tax amount of RS.693.33 on account of disallowance of certain prior period expenditure recognized by the Company in the computation of gross total income for the assessment year then ended. Aggrieved by the order of the Income Tax department, the management had filed an appeal with the higher authorities which had been successfully decided in favor of the Company. The Income Tax department has however filed an appeal with the Honâble High Court of Telangana in this regard, which is pending final outcome. However, on the basis of its internal assessment and considering the order of the first level appellate authority, the Company is confident of securing an favorable order from the High Court and accordingly, no adjustments have been made to the standalone financial statements in this regard.

(b) The Assessing Officer for the assessment years 2013-14 to 2018-19 has disallowed certain foreign denominated expenditure on the grounds that tax was not deducted at source in accordance with Section 201 and 201(1A) of the Income-Tax Act, 1961 and demanded an additional tax of RS. 1,357.45 (including interest u/s 201(1A). The Company has filed necessary appeals against the said demand with the Commissioner of Income-Tax (Appeals) which is pending for disposal as at 31 March 2019. The management, on the basis of its internal assessment of the facts of the case, the underlying nature of transactions, the history of judgements made by the various appellate authorities and the necessary advise received from the independent expert engaged in this regard, is of the view that the probability of the case being settled against the Company is remote and accordingly no adjustments to the financial statements are considered necessary in this regard.

(c) The Assessing Officer for the assessment year 2016-17, had issued a notice u/s 142(1) of the Income-Tax Act, 1961 proposing to disallow the employees contribution to Provident Fund and Employees State Insurance paid beyond the due date specified in the respective acts, but before the due date of filing of Income Tax return for the said assessment year. The Company has filed necessary appeals against the said demand with the Commissioner of Income-Tax (Appeals) which is pending for disposal as at 31 March 2019. The management, on the basis of its internal assessment of the facts of the case, the history of judgements made by the various appellate authorities and the necessary advise received from the independent expert engaged in this regard, is of the view that the probability of the case being settled against the Company is remote and accordingly no adjustments to the financial statements are considered necessary in this regard.

(d) The Additional Commissioner of Customs, Central Excise & Service Tax has demanded sums aggregating to RS.119.32 in relation to payment of service tax on certain services availed by the Company from non-residents. The Company has filed an appeal against the demands of the Additional Commissioner with the Honâble High Court of Telangana. The management, on the basis of assessment of the provisions of the Finance Act, 1994, is of the opinion that these demands are frivolous and not tenable and accordingly has not provided for these demands in the financial statements.

Other pending litigations / contingent liabilities:

(e) The Honâble Supreme Court (SC) has clarified in the case of Vivekananda Vidyamandir and Others Vs The Regional Provident Fund Commissioner (II) West Bengal that various allowances like conveyance allowance, special allowance, education allowance, medical allowance etc., paid uniformly and universally by an employer to its employees shall form part of basic wages for computation of the provident fund contribution. On the basis of internal evaluation, supported by a legal opinion from an independent legal expert, management has determined that the aforesaid ruling is applicable prospectively and, therefore there is no impact of such ruling on the financial statements of the Company.

(f) During the prior years, the erstwhile Andhra Pradesh State Electricity Transmission authorities (APTRANSCO) had demanded amounts aggregating to RS.223.03 from Andhra Pradesh Gas Power Corporation Limited (APGPCL) towards payment of wheeling charges and surplus power charges in relation to the power supplied by APGPCL to the Company. In lieu of the Company also being the shareholder of APGPCL, the aforesaid amounts had also been demanded from the Company by APGPCL which has been duly paid under protest by the Company. Further, aggrieved by the order of the APTRANSCO, APGPCL has filed appeals with the Honâble Supreme Court and Honâble High Court of Telangana disputing the levy of wheeling charges and surplus power charges respectively, which is pending final outcome as at March 31, 2019. However, on the basis of assessment of the facts of the case, the management is confident that the amounts paid under protest would be recoverable in full and accordingly no adjustments are deemed necessary to the financial statements in this regard.

(g) During 2004, the Company was allotted land parcel by the then Andhra Pradesh Industrial Infrastructure Corporation Limited (âAPIICâ) for setting up a basic research and development center. Subsequently public interest litigation was filed challenging allotments made by APIIC as unconstitutional and to cancel the allotments and resume the lands in all cases where the development has not commenced or the substantial progress has not been made as per the terms of allotments and regulations. The Company has been named as one of the parties to the said public interest litigation and the case is currently pending for hearing at Honâble High Court of Telangana. If there is an adverse ruling against the Company, the estimated financial impact on the Company could be RS.2,981.39.

(h) During the financial year endeRs. 31 March 2008, the Commissioner and Inspector General of Stamps and Registration (CIGSR), Andhra Pradesh has vide itâs order dateRs. 22 February 2008 has cancelled the registration of the land parcel owned by the company situated at Bontapally pursuant to claims of forgery raised by the former sellers of the said land. Aggrieved by the aforesaid order the Company has filed a writ petition challenging order of CIGSR with Honâble High Court of Telangana (the âCourtâ) as the Company was not involved during the proceedings. The Court has vide its order dateRs. 31 December 2012 has granted stay on the cancellation order of CIGSR. Proceedings of the case are still pending with the court. The management is confident that orders will be in the favour of the Company, hence no adjustment is deemed necessary to these standalone financial statements.

11. Segment reporting

In accordance with Ind AS 108 - âOperating segmentsâ, segment information has been given in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

12. Events after reporting period

The Board of Directors had at the meeting held on 16 May 2019, declared a dividend of RS. 1.20 per equity share of face value of RS.10/-each (excluding applicable dividend distribution tax), subject to the approval of the shareholders in the ensuing Annual General Meeting.

13. The standalone financial statements are approved for issue by the Companyâs Board of Directors on May 16, 2019.

Mar 31, 2018

1. General information

Neuland Laboratories Limited (âthe Companyâ) is a public company domiciled in India and incorporated in accordance with the provisions of the erstwhile Companies Act, 1956. The Companyâs registered office is at Sanali Info Park, âAâ Block, Ground Floor, 8-2-120/113, Road No 2, Banjara Hills, Hyderabad - 500 034. Its shares are listed on two recognised stock exchanges of India, the National Stock Exchange of India Limited and BSE Limited. The Company is engaged in manufacturing and selling of bulk drugs and caters to both domestic and international markets.

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (âInd ASâ) as notified under Section 133 of the Companies Act 2013 (âthe Actâ) read with the Companies (Indian Accounting Standards) Rules 2015, as amended, issued by the Ministry of Corporate Affairs (âMCAâ).

For all periods up to and including the year ended 31 March 2017, the Company has prepared its financial statements in accordance with accounting standards notified under the Section 133 of the Act, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP). These financial statements for the year ended 31 March 2018 are the first, which the Company has prepared in accordance with Ind AS (see note 47 for explanation for transition to Ind AS). For the purpose of comparatives, financial statements for the year ended 31 March 2017 are also prepared under Ind AS.

These financial statements have been prepared for the Company as a going concern on the basis of relevant Ind AS that are effective at the Companyâs annual reporting date 31 March 2018.

These financial statements have been prepared on the historical cost convention and on an accrual basis except for the following material items in the balance sheet:

- Certain financial assets and liabilities which are measured at fair value;

- Net defined benefit assets / (liability) are measured at fair value of plan assets, less present value of defined benefit obligations.

(i) Use of estimates and judgements

- Note (e), (f) and (g) â Useful lives of property, plant and equipment, investment properties, goodwill and other intangible assets;

- Note (i) - Impairment;

- Note (k) â Financial instruments;

- Note (n) â Employee benefits;

- Note (p) - Provisions, contingent liabilities and contingent assets; and

- Note (q) â Income taxes

Rights, preferences and restrictions attached to equity shares

The Company has only one class of equity shares having a par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to prior consent from consortium and the approval of the shareholders in the ensuing general meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts in proportion of their shareholding.

** The above disclosure represents details of shareholders holding more than five percent equity shares post giving effect to the Scheme of Amalgamation and Arrangement duly approved by NCLT as detailed in note 37.

Employee stock option scheme (âESOPâ)

Pursuant to a resolution passed by the Board of Directors and members of the Company at the meeting of the Board of Directors and the Annual General Meeting of the members held on 20 July 2007, the Company had introduced Employee Stock Option Scheme (âthe schemeâ) for certain permanent employees and directors of the Company and its subsidiaries, duly determined by the Compensation Committee/Board. Each option, on exercise, is convertible into one equity share of the Company having face value of Rs.10 each. Pursuant to a resolution passed by the Remuneration and Compensation Committee on 17 November 2008, 34,500 options had been granted at an exercise price of Rs.104 per equity share, which was the market price as on the date of the grant. Accordingly, the Company has not recognized any expense on account of grant of stock options.

Nature and purpose of reserves Capital reserve

Securities premium reserve

The amount received in excess of face value of the equity shares is recognised in securities premium reserve. In case of equity-settled share based payment transactions, the difference between fair value on grant date and face value of share is accounted as securities premium reserve. This reserve is utilised in accordance with the provisions of the Act.

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes.

Revaluation reserve

Revaluation reserve was created on account of revaluation of certain property, plant and equipment during the earlier years.

FVOCI equity instruments

Remeasurement of defined benefit obligations

The reserve represents the remeasurement gains/(losses) arising from the actuarial valuation of the defined benefit obligations of the Company. The remeasurement gains/(losses) are recognized in other comprehensive income and accumulated under this reserve within equity. The amounts recognized under this reserve are not reclassified to statement of profit or loss.

(a) Terms and conditions of loans and nature of security

(i) Term loans outstanding to the tune of Rs.828.98 (31 March 2017: Rs.1,000.00) (1 April 2016: Rs.Nil) is secured by way of first charge on property, plant and equipment (both present and future). The loan is repayable in 20 quaterly installments commencing from June 2017.

(ii) Term loans outstanding to the tune of Rs.Nil (31 March 2017: Rs.1,928.72) (1 April 2016: Rs.2,452.25) is secured by way of first charge on the property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The loan is repayable in 48 equal quarterly installments commencing from 8 February 2016, however the Company has prepaid the loan during the year ended 31 March 2018.

(iii) Term loans outstanding to the tune of Rs.640.00 (31 March 2017: Rs.880.00) (1 April 2016: Rs.Nil) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The loan is repayable in 18 quarterly installment commencing from September 2016.

(iv) Term loans amounting to Rs.Nil (31 March 2017: Rs.Nil) (1 April 2016: Rs.1,700.00) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets held by the Company. The loan is repayable in 14 quarterly instalments commencing from September 2015.

(v) Term loans amounting to Rs.Nil (31 March 2017: Rs.Nil) (1 April 2016: Rs.375.00) is secured by first pari passu charge by way of mortgage and hypothecation over all property, plant and equipment (both present and future) of the Company, exclusive charge on identifed property, plant and equipment. The loan is repayable in 20 equal quarterly installments commencing from 29 September 2013, however the Company has prepaid the loan during the year ended 31 March 2017.

(vi) Term loans outstanding to the tune of Rs.8,813.00 (31 March 2017: Rs.Nil) (1 April 2016: Rs.Nil) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge (hypothecation) on the current assets of the Company. The loan is repayable in 28 quarterly installment commencing from March 2019.

(vii) Term loans outstanding to the tune of Rs.1,350.57 (31 March 2017: Rs.Nil ) (1 April 2016: Rs.Nil ) is secured by pari-passu first charge on property, plant and equipment (both present and future) and second charge on current assets of the Company. The loan is repayable in 29 quarterly installments commencing from 8 September 2017.

(viii) All the above term loans are also secured by way of personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao. Further certain loans were secured by corporate guarantee of Neuland Health Sciences Private Limited (âNHSPLâ) and Neuland Pharma Research Private Limited (âNPRPLâ), pari-passu charge of 200,000 equity shares of the Company held by NHSPL. However, pursuant to the Scheme of Amalgamation pronounced by NCLT, Hyderabad Bench, Hyderabad on 21 March 2018, NHSPL & NPRPL were merged with the Company with appointed date of 1 April 2016 and accordingly the Corporate Guarantee of NHSPL & NPRPL as a covenant for borrowings stands extinguished. Moreover, pari passu charge of 200,000 equity shares of the Company held by NHSPL also stand extingushed & shall be replaced with equivalent 200,000 equity shares of the Company held by Dr. D R Rao in favour of the lenders.

(ix) Vehicles loans outstanding to the tune of Rs.367.67 (31 March 2017: Rs.307.03) (1 April 2016: Rs.112.62) are secured by hypothecation of specific vehicles against which the loans are availed. Vehicle loans are repayable in instalments ranging from 23 to 84 months from the date of the loan.

(x) All the above loans carry interest in the range of 6.70% to 12.5% per annum (31 March 2017: 12.3 % to 13.5 % per annum) (1 April 2016: 12.9% to 14.6% per annum).

(i) Loans outstanding represent cash credit, packing credit and foreign bill discounting facility availed with various banks and carry interest linked to the respective Bankâs prime / base lending rate, and range from 3.42% to 12.05% (31 March 2017: 2.95% to 13.45% per annum) (1 April 2016: 2.32% to 13.65% per annum).

(ii) Loans are secured by way of pari passu first charge on all the current assets of the Company and pari-passu second charge on Companyâs property, plant and equipment and personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao. Further the loans were secured by corporate guarantee of NHSPL and NPRPL, pari-passu charge of 200,000 equity shares of the Company held by NHSPL. However, pursuant to the Scheme of Amalgamation pronounced by NCLT, Hyderabad Bench, Hyderabad on 21 March 2018, NHSPL & NPRPL were merged with the Company with appointed date of 1 April 2016 and accordingly the Corporate Guarantee of NHSPL & NPRPL as a covenant for borrowings stands extinguished. Moreover, pari passu charge of 200,000 equity shares of the Company held by NHSPL also stand extingushed & shall be replaced with equivalent 200,000 equity shares of the Company held by Dr. D R Rao in favour of the lenders.

(a) Gratuity

The Company has a defined benefit funded gratuity plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawna salary) for each completed year of service. The Company has subscribed to a group gratuity scheme of Life Insurance Corporation of India (LIC). Under the said policy, the eligible employees are entitled for gratuity upon their resignation or in the event of death in lumpsum after deduction of necessary taxes upto a maxmium limit of Rs.20 (31 March 2017: Rs.10; 1April 2016: Rs.10).

The following table set out the status of the gratuity plan and the reconciliation of opening and closing balances of the present value and defined benefit obligation.

The significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate, salary escalation rate and the average life expectancy. The calculation of the net defined benefit liability is sensitive to these assumptions. However, the impact of these changes is not ascertained to be material by the management.

Revenue from operations for the year ended 31 March 2018 is not comparable with revenue from operations for the corresponding year ended 31 March 2017, as the comparitive year include amount of excise duty which is not included for the period from 1 July 2017 till 31 March 2018 after implementation of Goods and Service Tax.

The major components of income tax expense and the reconciliation of expected tax expense based on the domestic effective tax rate of the Company at 34.608% and the reported tax expense in the statement of profit and loss is as follows:

* Weighted average number of shares considered for the year ended 31 March 2018 and 31 March 2017 includes 2,270,635 equity shares to be issued pursuant to the Scheme of Amalgamation and Arrangement with an appointed date of 1 April 2016.

3. Fair value measurements

(i) Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:

Level 1: Quoted prices (unadjusted) in active markets for financial instruments.

Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

The Companyâs principal financial liabilities, comprise borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Companyâs operations. The Companyâs principal financial assets include loans, trade and other receivables, cash and cash equivalents and other bank balances that derive directly from its operations. The Company also holds FVTOCI investments and investment in its subsidiary.

The Company is exposed to market risk, credit risk and liquidity risk. The Companyâs Board of Directors oversees the management of these risks. The Companyâs Board of Directors is supported by the senior management that advises on financial risks and the appropriate financial risk governance framework for the Company. The senior management provides assurance to the Companyâs Board of Directors that the Companyâs financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Companyâs policies and risk objectives.

4. Financial instruments risk management

A. Market risk:

The sensitivity analyses in the following sections relate to the position as at 31 March 2018 and 31 March 2017. The analysis exclude the impact of movements in market variables on the carrying values of gratuity and other post retirement obligations; provisions; and non-financial assets and liabilities.

i. Interest rate risk:

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has loan facilities on floating interest rate, which exposes the Company to risk of changes in interest rates. The management monitors the interest rate movement and manages the interest rate risk based on its policies, which include entering into interest rate swaps as considered necessary. The Companyâs investment in deposits with banks are for short durations and therefore do not expose the Company to significant interest rate risk. Below are the details of exposure to fixed rate and variable rate instruments:

Every 0.5% increase/decrease in the interest rate component applicable to the variable rate borrowings would effect the Companyâs net profit before tax resulting in an expense/income of Rs.157.76 and Rs.84.94 for the year ended 31 March 2018 and 31 March 2017 respectively.

ii. Foreign currency risk:

Foreign currency risk is the risk that the fair value or future cash flows of an exposure shall fluctuate because of change in foreign exchange rates. The Companyâs exposure to the risk of change in foreign exchange rates relates primarily to the Companyâs operating activities (when revenue or expense is denominated in foreign currency). The Company is exposed to exchange rate risk that arises from its foreign exchange revenues and expenses, primarily denominated in US Dollars, Euros, Japanese Yen, Great British Pound and Swiss Franc. The Company uses foreign exchange forward contracts to hedge its exposure in foreign currency risk.

b) Derivative financial instruments

The following table gives details in respect of outstanding derivate contracts. The counterparty for these contracts are banks.

(A) Foreign currency sensitivity

B. Credit risk

Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, leading to a financial loss. The Company is mainly exposed to the risk of its balances with the bankers and trade and other receivables. None of the Companyâs cash equivalents, other bank balances, loans and security deposits were past due or impaired as at 31 March 2018, 31 March 2017 and 1 April 2016.

C. Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due. Due to the nature of the business, the Company maintains flexibility in funding by maintaining availability under committed facilities.

Management monitors rolling forecasts of the Companyâs liquidity position and cash and cash equivalents on the basis of expected cash flows. The Company takes into account the liquidity of the market in which the entity operates. In addition, the Companyâs liquidity management policy involves projecting cash flows in major currencies and considering the level of liquid assets necessary to meet these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.

The Companyâs principal sources of liquidity are the cash flows generated from operations. Further the Company also has long term borrowings and working capital facilities which the management believes are sufficient for its current requirments. Accordingly, no liquidity risk.

Maturities of financial liabilities

5. Capital risk management

The Companyâs objective when managing capital is to safeguard the Companyâs ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Hence, the Company may adjust any dividend payments, return capital to shareholders or issue new shares or sell assets to reduce debt. Total capital is the equity as shown in the statement of financial position.Currently, the Company primarily monitors its capital structure on the basis of the following gearing ratio. Management is continuously evolving strategies to optimize the returns and reduce the risks. It includes plans to optimize the financial leverage of the Company.

The capital for the reporting year under review is summarized as follows:

6. Segment reporting

In accordance with Ind AS 108 - âOperating segmentsâ, segment information has been given in the consolidated financial statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

7. Research and development expenses

Details of research and development expenses (excluding depreciation and amortisation expense) incurred during the year and included under various heads of expenditures are given below:

8. Investment properties

Opening balances of land and capital work-in-progress include amounts aggregating to Rs.189.38 and Rs.2,792.01, respectively, representing the cost incurred towards development and construction activity at the Companyâs land situated at Nanakramguda, Hyderabad, duly allotted by Telangana State Industrial Infrastructure Corporation Limited (âTSIICâ) (erstwhile Andhra Pradesh Industrial Infrastructure Corporation Limited). However, owing to certain unavoidable reasons, the construction work had been temporarily suspended during the prior years.

The Company, on the basis of an approval received from TSIIC, has entered into a Joint Development Agreement (JDA) with a Developer for development of IT Park at the Companyâs land. Subsequently the Company has entered into Supplementary Development Agreement (âSDAâ) with the Developer and its nominees, and is entitled to a fixed leasable / saleable area of minimum 0.33 million sq.ft., subject to the terms and conditions of the SDA. Further, the Company has agreed to sell 0.12 million sq. ft from itâs own share at Rs.0.02 per sq. ft to the Developer nominees on completion of the construction work and has received advance of Rs.2,028 towards the proposed sale as at 31 March 2018. The Developer has resumed the construction work, based on receipt of approvals and clearances from the concerned authorities. The management, on the basis of its assessment of the end use of its share in the proposed project has reclassified the entire value of land and balance of capital work-in-progress as an investment property as at 31 March 2018.

9. Amalgamation of Neuland Health Sciences Private Limited and Neuland Pharma Research Private Limited

Pursuant to the Scheme of Amalgamation and Arrangement (the âSchemeâ) u/s 391 to 394 of the Companies Act, 1956 and u/s 52 of the Companies Act, 2013 for amalgamation of erstwhile Neuland Health Sciences Private Limited (âNHSPLâ), Holding Company and Neuland Pharma Research Private Limited (âNPRPLâ), a fellow subsidiary (âTransferor Companiesâ) with the Company, with effect from 1 April 2016 (Appointed Date), as sanctioned by the Honâble National Company Law Tribunal (âNCLTâ), Hyderabad Bench on 21 March 2018, all the assets, liabilities of Transferor Companies were transferred to and vested in the Company, on an going concern basis. NHSPL was engaged in the business of providing research services and marketing of peptides and NPRPL in the business of research and contract manufacturing services to pharmaceutical companies.

The amalgamation has been accounted under the âPurchase Methodâ as per the then prevailing Accounting Standard 14 - Accounting for Amalgamations, as referred to in the Scheme approved by the Honâble NCLT, Hyderabad Bench. Accordingly the assets and liabilities of NHSPL and NPRPL have been recorded at their fair value as on Appointed Date and all amounts owed to/owed by the Company to Transferor Companies and vice versa as at the Appointed Date has been adjusted.

Amalgamation of NHSPL & NPRPL

The purchase consideration of Rs.31,084.99 payable by way of issue of 2,270,635 equity shares of Rs.10 each [in accordance with the Scheme, 4,590,608 equity shares of Rs.10 each held by NHSPL in the Company stands cancelled and the Company shall issue 6,861,095 and 148 fully paid-up equity shares of Rs.10 each to the shareholders of NHSPL and NPRPL respectively] at a premium of Rs.1,359 per equity share has been disclosed as Equity Suspense Account under Other Equity.

âThe recoverable amount of goodwill has been assessed using a value-in-use model. Value in use is calculated as the net present value of the projected post-tax cash flows plus a terminal value of the cash generating unit to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the net present value of the post-tax cash flows. The cash flow projections include specific estimates for five years developed using internal forecasts and a terminal growth rate thereafter of 5%. The planning horizon reflects the assumptions for short-to-mid term market developments which are based on key assumptions such as margins, expected growth rates based on past experience, new product launches and managementâs expectations / extrapolation of normal increase/ steady terminal growth rate). Discount rate reflects the current market assessment of the risks. The discount rate is estimated based on the weighted average cost of capital for the Company. Post-tax discount rates used were 15.03% for the year ended 31 March 2018. The management believes that any reasonable possible change in the key assumptions would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.

* KMPâs are covered by the Companyâs mediclaim insurance policy and are eligible for gratuity and leave encashment along with other employees of the Company. The proportionate premium paid towards this policy and provision made for gratuity and leave encashment pertaining to the KMPâs has not been included in the aforementioned disclosures as these are not determined on an individual basis.

Note:

(i) Dr. D. R. Rao and D. Sucheth Rao have extended personal guarantees in connection with the loans availed by the Company. (Refer note: 15)

(ii) Dr. D. R. Rao have pledged certain share of its holding in the Company in connection with the loans availed by the Company. (Refer note: 15)

(d) Transaction with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the related parties, are carried at an armâs length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at arms length prices. The Company is in the process of updating the transfer pricing documentation for the financial year ended 31 March 2018. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

10. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to Rs.177.15 (31 March 2017: Rs.149.01) (1 April 2016: Rs.288.96).

Note:

(a) In connection with the income tax assessment of the Company for the assessment year ended 31 March 1999, the income tax assessing officer had disallowed certain expenditure incurred towards commission paid to non-residents in the computation of gross total income for the aforementioned period and accordingly demanded an additional tax of Rs.18.14 from the Company in this regard. The management, on the basis of assessment of the nature of expenditure incurred and the applicability of the provisions relating to deduction of income tax at source and an independent expert advise sought in this regard, had filed an appeal with Honorable High Court of the Combined State of Telangana and Andhra Pradesh against the order received from the assessing officer and the outcome of the earlier appeals filed with Commissioner of Appeals (Income Tax) and Income Tax Appellate Tribunal. Pending outcome of the appeal filed with the High Court, no adjustments to the financial statements are considered necessary in this regard.

(b) The Income tax authorities had re-opened the income tax assessment of the Company for the assessment year ended 31 March 2005 later than the periods permitted by the provisions of the Income Tax Act, 1961 and thereby demanded an additional tax amount of Rs.693.33 on account of disallowance of certain prior period expenditure recognized by the Company in the computation of gross total income for the assessment year then ended. Aggrieved by the order of the income tax department, the management had filed an appeal with the higher authorities which had been successfully decided in favor of the Company. The income tax department has however filed an appeal with the Honorable High Court of the Combined State of Andhra Pradesh and Telangana in this regard, which is pending final outcome. The management, however, on the basis of assessment of the assessment provisions of the Income Tax Act, 1961, an independent expert advise sought in this regard and the orders of the appellate authorities in favor of the Company, is confident of securing an order from the High Court in the favor of the Company and accordingly, no adjustments have been made to the financial statements in this regard.

(c) The Additional Commissioner of Customs, Central Excise & Service Tax has demanded sums aggregating to Rs.119.32 in relation to payment of service tax on certain services availed by the Company from non-residents. The Company has filed an appeal against the demands of the Additional Commissioner with the Honorable High Court of the combined State of Andhra Pradesh and Telangana. The management, on the basis of assessment of the provisions of the Finance Act, 1994, is of the opinion that these demands are frivolous and not tenable and accordingly has not provided for these demands in the books of account.

(d) During the prior years, the erstwhile Andhra Pradesh State Electricity Transmission authorities (APTRANSCO) has demanded amounts aggregating to Rs.223.03 from Andhra Pradesh Gas Power Corporation Limited (APGPCL) towards payment of wheeling charges and surplus power charges in relation to the power supplied by APGPCL to the Company. In lieu of the Company also being the shareholder of APGPCL, the aforesaid amounts had also been demanded from the Company by APGPCL which has been duly paid under protest by the Company. Further, aggrieved by the order of the APTRANSCO, APGPCL has filed appeals with the Honorable Supreme Court and Honorable High Court of the Combined State of Andhra Pradesh and Telangana disputing the levy of wheeling charges and surplus power charges respectively, which is pending final outcome as at 31 March 2018. However, on the basis of assessment of the facts of the case, the management is confident that the amounts paid under protest would be recoverable in full and accordingly no adjustments are deemed necessary to the financial statements in this regard.

(e) In 2004 the then Andhra Pradesh Industrial Infrastructure Corporation Limited (âAPIICâ) had allotted a land parcel to the Company for setting up of a basic research and development center. Subsequently, a public interest litigation was filed with the Honorable High Court of Andhra Pradesh challenging the allotments made by the APIIC as unconstitutional and also for cancellation of the allotments in all cases where the development has not commenced or the substantial progress has not been made as per the terms of allotment. The matter is presently subjudice and pending with an appropriate authorities; management is confident of positive outcome and has considered the matter accordingly in the accompanying financial statements.

f) During the financial year ended 31 March 2008 the Commissioner and Inspector General of Stamps and Registration (CIGSR), Andhra Pradesh has vide itâs order dated 22 February 2008 has cancelled the registration of the land parcel owned by the company situated at Bontapally pursuant to claims of forgery raised by the former sellers of the said land. Aggrieved by the aforesaid order the Company has filed a writ petition challenging order of CIGSR with Honâble High Court of Andhra Pradesh (the âCourtâ) as the Company was not involved during the proceedings. The Court has vide its order dated 31 December 2012 has granted stay on the cancellation order of CIGSR. Proceedings of the case are still pending with the court. The management is confident that orders will be in the favour of the Company, hence no adjustment is deemed necessary to these standalone financial statements.

11. Capital work-in-progress for the year ended 31 March 2018 includes amount aggregating to Rs.11,884.73, incurred towards acquisition and development of a existing manufacturing facility. The management is in the process of mutation of the title for the acquired immovable property (i.e., land and building) in the Companyâs name.

12. Events after reporting period

(a) In accordance with the terms of the Scheme approved by the NCLT, the Company has allotted 6,861,243 equity shares of Rs.10 each at a premium of Rs.1,359 per equity share to the shareholders of NHSPL and NPRPL on 30 April 2018.

(b) The Board of Directors of the Company at its meeting held on 9 April 2018, has subject to the approval of the members and other appropriate approvals has approved issuance of maximum 1,675,000 equity shares of Rs.10 each through qualified institutional placement, in accordance with the provisions of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and applicable provisions of the Companies Act, 2013 and Rules issued thereunder.

13. First time adoption of Ind AS

These financial statement have been prepared in accordance with the Ind AS. For the purpose of transition from previous GAAP to Ind AS, the Company has followed the guidance prescribed under Ind AS 101 - First time adoption of Indian Accounting Standards (âInd AS 101â), with effect from 1 April 2016 (âtransition dateâ).

In preparing its Ind AS Balance Sheet as at 1 April 2016 and in presenting the comparative information for the year ended 31 March 2017, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. This note explains how the transition from previous GAAP to Ind AS has affected the Companyâs balance sheet and financial performance.

I Optional exemptions availed and mandatory exemptions applied Set out below are the Ind AS 101 optional exemptions availed as applicable and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

(i) Deemed cost for property, plant and equipment and intangible assets

On transition to Ind AS, the Company has elected to continue with the carrying value of all of its property, plant and equipment and intangible assets recognised as at 1 April 2016 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment and intangible assets.

(ii) Designation of previously recognised financial instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS. The Company has elected to apply this exemption for its investments, except for investment in subsidiaries.

(iii) Investment in subsidiary

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its investments in subsidiaries, joint ventures and associate as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition. Accordingly, the Company has elected to measure its investment in subsidiary at their previous GAAP carrying value.

(iv) Estimates

As per Ind AS 101, an entityâs estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error.

The Companyâs estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:

a) Investment in equity instruments carried at FVOCI.

b) Impairment of financial assets based on expected credit loss model.

c) Determination of the discounted value for financial instruments carried at amortised cost.

(v) Classification and measurement of financial assets and liabilities

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.

(vi) De-recognition of financial assets and liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after the transition date.

(vii) Hedge accounting

Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in accordance with the requirements of Ind AS 109, Financial Instruments. As at the date of transition to Ind AS, the Company has measured all derivatives at fair value through profit or loss and eliminated all deferred losses and gains arising on derivatives that were reported in accordance with previous GAAP assets or liabilities.

iii Notes to the reconciliations

a) Proposed dividend (including dividend distribution tax)

Under the Indian GAAP till 31 March 2016, dividends proposed by the Board of Directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend (including dividend distribution tax) as at 31 March 2016 included under short-term provisions has been de-recognised against retained earnings. Consequently, the total equity increased by an equivalent amount.

b) Remeasurement of post-employment benefit obligations

Both under Indian GAAP and Ind AS, the Company recognised costs related to its post-employment defined benefit plan on an actuarial basis. Under Indian GAAP, the entire cost, including actuarial gains and losses, are charged to statement of profit or loss. Under Ind AS, remeasurements comprising of actuarial gains and losses are recognised in the balance sheet with a corresponding debit or credit to retained earnings through OCI.

c) Amortization of goodwill

Goodwill acquired in a business combination is not amortized and is mandatorily tested for impairment as per the requirements of Ind AS 36 Impairment of Assets. Accordingly, the Company has reversed the goodwill amortized under Indian GAAP for the year ended 31 March 2017.

d) FVTOCI financial assets

Under Indian GAAP, the Company accounted for investments at cost. Under Ind AS, the Company has designated such investments, except for investments in subsidiaries, as FVTOCI investments. Ind AS requires FVTOCI investments to be measured at fair value. At the date of transition to Ind AS, difference between the instruments fair value and Indian GAAP carrying amount has been recognised as a separate component of equity, in the retained earnings, net of related deferred taxes.

e) MAT credit entitlement

MAT credit entitlement is to be presented under loans and advance in accordance with Guidance Note on âAccounting for Credit available in respect of MAT under the Income Tax Act, 1961â issued by the ICAI. However, as per Ind AS, MAT credit entitlement is generally recognized as a deferred tax asset with a corresponding deferred tax benefit in the statement of profit and loss. Accordingly, the Company has reclassified the MAT credit entitlement from loans and advances to deferred tax assets as at 31 March 2017 and 1 April 2016.

f) Excise duty on sale of goods

As per Indian GAAP, excise duty should included be in the turnover and should be shown as reduction from the gross turnover on the face of the statement of profit and loss. However, Ind AS 18 does not specifically prescribe any guidance for inclusive presentation of excise duty. Accordingly the Company has presented revenue gross of excise duty, which has resulted in increase of revenue and increase of excise duty expense by Rs.883.97 for the year ended 31 March 2017.

g) Retained earnings

Retained earnings as at 1 April, 2016 has been adjusted consequent to the above Ind AS transition adjustments.

h) Statement of cash flows

The transition from Indian GAAP to Ind AS had no material impact on the statement of cash flows.

14. The standalone financial statements are approved for issue by the Companyâs Board of Directors on 11 May 2018

Mar 31, 2016

1. Change in accounting estimate

From the previous year, in accordance with the requirements to Schedule II of the Act, the Company had re-assessed the useful lives and adopted the rates prescribed under Schedule II. Accordingly, depreciation on the tangible fixed assets for the year ended 31 March 2015 was lower by Rs, 33.59 and further an amount of Rs, 88.03 and Rs, 10.73 has been charged to the general reserve and revaluation reserve of the previous year, in respect of the assets whose remaining useful life was Rs, Nil as at 1 April 2014 in accordance with Schedule II of the Act.

(b) Terms and rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs, 10 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to prior consent from banks and the approval of the shareholders in the ensuing general meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts in proportion of their shareholding.

(e) During the previous year, the Company issued 1,225,276 equity shares of Rs, 10/- each at a premium of Rs, 194 on rights basis to its existing shareholders in the ratio of 4 equity shares for every 25 shares held. The said shares were fully subscribed.

(f) Employee stock option scheme ("ESOP")

(i) Pursuant to the resolution passed by the Board of directors on 20 July 2007 and members of the Company at the Annual General Meeting held on 20 July 2007, the Company had introduced Employee Stock Option Scheme ("the scheme") for permanent employees and directors of the Company and of its subsidiaries, as may be decided by the Compensation Committee/Board. The scheme provides that the total number of options granted there under will be not more than 3% of the paid up capital. Each option, on exercise, is convertible into one equity share of the Company having face value of Rs, 10. Pursuant to a resolution passed by the Remuneration and Compensation Committee on 17 November 2008, 34,500 options have been granted at an exercise price of Rs, 104 per equity share, which is the market price as on the date of the grant. Accordingly, the Company has not recognized any expense on account of grant of stock options.

(a) Terms and conditions of secured loans and nature of security

(i) Term loans amounting to Rs, Nil (31 March 2015: Rs, 396.60) is secured by the pari-passu first charge on the fixed assets and second charge (hypothecation) on the current assets of the Company. Pari Passu second charge on the shares of Andhra Pradesh Gas Power Corporation Limited ("APGCL") subordinate to the first charge created in favour of APGCL and personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao. The loan is further secured by the corporate guarantee given by NHSPL and Neuland Pharma Research Private Limited (''NPRPL''), pari-passu charge of 200,000 equity shares of the Company held by NHSPL and creation of charge on certain immovable properties belonging to NPRPL as collateral security.

(ii) Term loans amounting to Rs, 1,700.00 (31 March 2015: Rs, 2,000) is secured by the pari-passu first charge on the fixed assets and second charge (hypothecation) on the current assets and shares of APGCL held by the Company and personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao. The loan is further secured by the corporate guarantee given by NHSPL and NPRPL, first pari-passu charge on fixed assets belonging to NPRPL and 200,000 equity shares of the Company held by NHSPL and creation of charge on certain immovable properties belonging to NPRPL as collateral security.

(iii) Term loans amounting to Rs, 375.00 (31 March 2015: Rs, 487.50 ) is secured by first Pari Passu charge by way of mortgage and hypothecation over all fixed assets (excluding of assets that are specifically charged), both present and future, of the Company, exclusive charge on the lease rental received by the Company on its movable plant and machinery leased to NPRPL and personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao. The loan is further secured by the first pari passu charge over fixed assets of NPRPL and the corporate guarantee given by NPRPL.

(iv) Term loans amounting to Rs, 2,452.25 (31 March 2015: Rs, Nil) is secured by the pari-passu first charge on the fixed assets and second charge (hypothecation) on the current assets of the Company. The loan is further secured by Personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao and the corporate guarantee given by Neuland Health Sciences Private Limited (NHSPL).

(v) Vehicles loans are secured by hypothecation of specific vehicles against which the loan is availed.

(vi) All the above loans carry interest in the range of 12.9 % to 14.6 % per annum. (31 March 2015: 13.70% to 14.75% per annum).

(vii) Details of repayment of long term borrowings

(b) Terms and conditions of unsecured loans

Represents inter-corporate deposits availed from NHSPL and NPRPL repayable in five years from the date of disbursement i.e.,

11 December 2012 and carries an interest rate of 0.0001% per annum (31 March 2015: 0.0001% per annum).

(a) Gratuity

The Company has subscribed to a group gratuity scheme of Life Insurance Corporation of India (LIC). Under the said policy, the eligible employees are entitled for gratuity upon their resignation or in the event of death in lump sum after deduction of necessary taxes up to a maximum limit of Rs,1,000,000.

The following table set out the status of the gratuity plan and the reconciliation of opening and closing balances of the present value and defined benefit obligation.

(a) Loans repayable on demand represents cash credit, packing credit and foreign bill discounting facility availed with various banks and carry interest linked to the respective Bank''s prime / base lending rate, and range from 2.32% to 13.65% per annum (31 March 2015: 3.90% to 14.75% per annum).

(b) Loans repayable on demand aggregating to Rs,11,022.24 (31 March 2015: ''13,166.49) are secured by way of first charge on all the current assets of the Company and pari-passu second charge on Company''s fixed assets and shares of APGCL subordinate to the first charge created in favour of APGCL and personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao. The loan is further secured by the corporate guarantee given by NHSPL and NPRPL, pari-passu charge of 200,000 equity shares of the Company held by NHSPL and creation of charge on first pari-passu basis on certain immovable properties belonging to NPRPL. Further loans aggregating to Rs,1,340.66 (31 March 2015: Rs,1,413.32) is secured by way of first charge on all the current assets of the Company and pari-passu second charge on Company''s fixed assets and personal guarantees extended by Dr. D.R.Rao and Mr. D. Sucheth Rao.

Notes :

(i) NHSPL, has extended corporate guarantee and pledged certain share of its holding in the Company in connection with the loans availed by the Company. Refer note 6 and 10.

(ii) NPRPL, has extended corporate guarantee and created charge on certain immovable properties belonging to NPRPL in connection with the loans availed by the Company. Refer note 6 and 10.

(iii) Dr. D. R. Rao and Mr. D. Sucheth Rao has extended personal guarantees in connection with the loans availed by the Company. Refer note 6 and 10.

(d) Transactions with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the related parties, are carried at an arm''s length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at armâs length prices. The Company is in the process of updating the Transfer Pricing documentation for the financial year ended 31 March 2015. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

2. Segment reporting

In accordance with AS 17 - Segment Reporting, segment information has been given in the consolidated financial statements of Neuland Laboratories Limited and therefore no separate disclosure on segment information is given in these financial statements.

3. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounts to Rs,288.96 (31 March 2015: Rs,254.42)

Note:

(a) Certain disputes, for unascertained amounts are pending in the Labour Courts, A.P. Since, the chance of appellants succeeding in their claims is less than probable, the Company does not expects any liability in this respect.

(b) During 2004, the Company was allotted land by the Andhra Pradesh Industrial Infrastructure Corporation Limited ("APIIC") for setting up a basic research and development center. Subsequently public interest litigation was filed challenging allotments made by APIIC as unconstitutional and to cancel the allotments and resume the lands in all cases where the development has not commenced or the substantial progress has not been made as per the terms of allotments and regulations. The Company has been named as one of the parties to the said writ petition and the case is currently pending for hearing at Hon''ble High Court of Andhra Pradesh. If there is an adverse ruling against the Company, the estimated financial impact on the Company would be '' 2,792.01.

Dr. D.R. Rao, Mr. D. Sucheth Rao and Mr. D. Saharsh Rao are related to each other

# Includes directorship in Private Limited companies; excludes directorship in Foreign Companies

* Only Membership / Chairmanship in Audit and Stakeholders Relationship Committee are considered ^A Attended 1 meeting through video conference.

$ Attended 2 meetings through video conference.

Tenure of office of the Chairman & Managing Director and the Whole Time Directors is for a term of five years from the date of appointment and can be terminated by either the Company or such directors by giving 12 months'' notice in advance or salary in lieu thereof.

The Company has not provided any stock options to its directors.

During the financial year 2015-16, the Non-Executive Directors were paid Sitting fee of Rs, 30,000 for attending each meeting of the Board and Audit Committee and Rs, 20,000 for each meeting of the Nomination and Remuneration Committee and Corporate Social Responsibility Committee and Rs, 10,000 for Stakeholder Relationship Committee. The Independent Directors were paid a fees of Rs, 20,000 each for the separate meeting of the Independent Directors.

Mar 31, 2014

1. CORPORATE INFORMATION

Neuland Laboratories Limited ("the Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing and selling of bulk drugs. The Company caters to both domestic and international markets.

Contingent liabilities are disclosed after careful examination of the facts and legal aspects of the matter involved.

b. (i) During the current year, the Company had on January 21, 2014, issued and allotted 10,700 fully paid up equity shares of a face value of Rs. 10 each, to eligible employees pursuant to exercise of stock options granted under Employee Stock Option Scheme, 2008.

(ii) During the previous year, the Company had on April 27, 2012, allotted 22,48,523 equity shares of a face value of Rs. 10 each for cash at a price of Rs. 45 per equity share, including a Share Premium of Rs. 35 per equity share, aggregating to Rs. 1,011.84 lacs to the existing equity shareholders of the Company on a rights basis in the ratio of 5 shares for every 12 shares held. Expenses incurred by the Company in relation to Rights Issue activity aggregating to Rs. 58.08 lacs were adjusted to the securities premium account.

c. During the year, the Board of Directors of the Company at its meeting held on February 5, 2014 approved the issue of Equity Shares on rights basis up to Rs. 2,500 lacs and the Company has fled the Draft Letter of Offer dated March 26, 2014 with the Securities and Exchange Board of India (SEBI) on March 27, 2014. Subsequently, the Company had received in-principle approval from The National Stock Exchange of India Ltd. and BSE Ltd. in respect of the proposed Rights Issue of the Company.

Proceeds of the proposed Rights issue will be utilized (i) to meet incremental working capital requirement, and (ii) to meet issue expenses.

The Company has incurred expenses aggregating Rs. 6.36 lacs in relation to the proposed Rights Issue which have been disclosed as "Rights Issue Expenses" under "Other Assets" (Refer Note 15). These expenses will be charged to the securities premium account proposed to be received from the Rights Issue of the equity shares of the Company.

d. Terms / Rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each shareholder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to prior consent from the Banks and approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of the 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 shareholder.

f. Employee Stock Option Scheme Â 2008

Pursuant to the resolution passed by the Board of directors on July 20, 2007 and members of the Company at the Annual General Meeting held on July 20, 2007, the Company had introduced Employee Stock Option Scheme ("the scheme") for permanent employees and directors of the Company and of its subsidiaries, as may be decided by the Compensation Committee/Board. The scheme provides that the total number of options granted there under will be not more than 3% of the paid up capital. Each option, on exercise, is convertible into one equity share of the Company having face value of Rs. 10. Pursuant to a resolution passed by the Remuneration & Compensation Committee vide Circular Resolution dated November 17, 2008, 34,500 options have been granted at an exercise price of Rs. 104, which is the market price as on the date of the grant. Accordingly, the Company has not recognized any expense on account of grant of stock options.

2. SEGMENT REPORTING

(a) Company''s operations are predominantly related to the manufacture of Bulk drugs, as such there is only one primary reportable segment. Secondary reportable segments are identified taking into account the geographical markets available to the products, the differing risks and returns and internal reporting system.

(b) As a part of secondary reporting, in view of the management the Indian and export markets represent geographical segments.

The amount of Rs. 25.53 lacs (March 31, 2013: Rs. 58.44 lacs) being the provision for leave encashment is included in Salaries, Wages and Bonus under Note 23 forming part of the financial statements.

The estimates of future salary increases considered in Actuarial valuation takes into account the inflation rate on long term basis.

(c) Contribution to Provident Fund Â Defend Contribution Plan

Amount recognised and included in Note 23 forming part of the financial statements - "Contribution to Provident and Other Funds" Rs. 153.66 lacs (March 31, 2013: Rs. 122.38 lacs).

31. In the opinion of the Board, all the assets other than fixed assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated in the financial statements.

32. Disclosure required by Micro, Small and Medium Enterprises (Development) Act, 2006.

As per requirement of Section of 22 of Micro, Small & Medium Enterprises Development Act, 2006 following information is disclosed:

The above information regarding Micro, Small and Medium 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.

3. Contingent Liability:

(a) Claims against the Company not acknowledged as debts

(i) Andhra Pradesh Gas Power Corporation Limited and its shareholders (including Neuland) have fled writ petition before the Division Bench of High Court of A.P, which has been admitted and favorable interim orders have been granted. The Company has been advised that it has a strong case to succeed in the pending appeal.

(ii) Certain disputes, for unascertained amounts, are pending in the Labor Courts, A.P. As the chances of appellants succeeding in their claims being remote, the Company expects no liability on this account.

(iii) Income Tax department has fled a writ petition before the Hon''ble High Court of Andhra Pradesh to set aside the Income Tax Appellate Tribunal orders for the Assessment Year 2001-2002 and 2002-2003 against the claim on deduction U/sec 80HHC. The Hon''ble High Court of Andhra Pradesh has admitted the appeal and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs. 3.42 lacs and Rs. 14.15 lacs respectively.

(iv) Income Tax department has fled a writ petition before the Hon''ble High Court of Andhra Pradesh to set aside the Income Tax Appellate Tribunal order bearing TA No. 842/H/06 dated May 5, 2008 for the Assessment Year 2003-2004 against the allow ability of Employee''s contribution towards P F, ESI. The Hon''ble High Court of Andhra Pradesh has admitted the appeal on June 20, 2012 and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs. 1.44 lacs.

(v) The Company has filed an appeal before Income Tax Appellate Tribunal against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 1998-1999 against the disallowance of Commission paid to Non- resident agents for not deducted at source u/s 40(a)(i) of Income Tax Act, 1961 and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs. 6.34 lacs.

(vi) The Company has filed an appeal before Income Tax Appellate Tribunal against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2008-2009 and 2009-2010 against the disallowance of Commission paid to Non-resident agents and other payments to Non-residents for not deducted at source u/s 40(a)(i) of Income Tax Act, 1961 and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs. 19.17 lacs and Rs. 16.82 lacs respectively.

(b) Unexpired Letters of Credit opened on behalf of the Company by Bank for the raw material amounting to Rs. 3,501.47 lacs (March 31, 2013: Rs. 3,521.30 lacs).

(c) Bank Guarantees given by the Company to Central Excise and Customs and other Government authorities amounting to Rs. 80 lacs (March 31, 2013: Rs. 95 lacs).

4. Capital and Other Commitments

(a) Estimated amounts of contracts on capital account to be executed and not provided for, net of advance Rs. 166.54 lacs (March 31, 2013: Rs. 128.20 lacs).

(b) Neuland Laboratories Limited in collaboration with Cato Research Israel Limited, (a wholly owned subsidiary of Cato Research Inc., a global contract research and development organization based in USA) formed a joint venture in India styled as Cato Research Neuland India Private Limited on May 14, 2008. Neuland''s share in the joint venture is 70%. The commitment towards initial share capital contribution is US $ 350,000- approximately Rs. 209.76 lacs (March 31, 2013: Rs. 190.05 lacs). The Company contributed Rs. 12.22 lacs (March 31, 2013: Rs. 12.22 lacs) towards share capital. The balance commitment as on March 31, 2014 is Rs. 197.53 lacs (March 31, 2013: Rs. 177.83 lacs).

5. The Company had entered into a Memorandum of Understanding ("MOU") with API Corporation, Japan ("APIC") on March 6, 2013, wherein the Company agreed to manufacture and supply various APIs and Intermediates as would be needed by APIC, for which the Company would carve out a dedicated area of manufacturing, within existing manufacturing unit at Pashamylaram.

As a part of overall arrangement, the Company, on behalf of APIC, agreed to procure and install necessary equipments as would be required to enable the facility to manufacture the products as desired by APIC. The Company has received an advance of Rs. 1,500 lacs for procuring the necessary equipment and as on March 31, 2014, the value of assets procured aggregating to Rs. 932.29 lacs are disclosed as assets held for sale (Refer Note 15). Capital advances include an amount of Rs. 197.35 lacs spent towards advances paid for purchase of equipments as per the arrangement.

6. Previous year numbers are rearranged and regrouped wherever considered necessary.

7. Pursuant to the reorganization of the Company, the previous year''s numbers are not comparable with that of the current year.

Mar 31, 2013

1. CORPORATE INFORMATION

Neuland Laboratories Limited ("the Company") is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are Listed on two stock exchanges in India. The Company is engaged in the manufacturing and selling of bulk drugs. The Company caters to both domestic and international markets.

Pursuant to the reorganization of shareholding of the Promoter Group, the Company has become a subsidiary Company of Neuland Health Sciences Private Limited (Formerly Sucheth and Saharsh Holdings Private Limited), in terms of section 4(l)(b)(ii) of the Companies Act, 1956.

Reorganization of the Company

Pursuant to the approval of the shareholders vide resolution dated May 30, 2012 passed through Postal Ballot, the Company has completed the business set out in the Postal Ballot Notice and discontinued the operations in the Contract Research and Peptide Research. Consequently, the Company has undertaken sale of land together with the Building thereon and the fixtures thereto situated at Sy. No 488/R and Sy No 489/A, situated at Bonthapally Village, Jinnaram Mandal, Medak district along with identified Intellectual Property rights to Neuland Pharma Research Private Limited. The Company has transferred its Peptide Research activities along with identified Intellectual Property rights to Neuland Health Sciences Private Limited. The Company has also leased certain identified movable assets to Neuland Pharma Research Private Limited. The Company has licensed certain Trade Marks and Copyrights on a non-exclusive basis to both Neuland Health Sciences Private Limited and Neuland Pharma Research Private Limited.

The Company has entered into an exclusive manufacturing arrangement with both Neuland Health Sciences Private Limited and Neuland Pharma Research Private Limited for their manufacturing requirements. Further the Company has entered into a Research Services Agreement for its Lab Scale research with Neuland Pharma Research Private Limited. The Company has entered into an arrangement where they are assured a cost plus 10 percent or such percentage as may be mutually agreed for the services rendered. The Company is subject to a non- compete undertaking with NHSPL and NPRPL in respect of the activities of those companies.

Neuland Health Sciences Private Limited is the Holding Company and Neuland Pharma Research Private Limited is a Fellow Subsidiary Company (Promoter Group Company). The Company has entered into a non-exclusive trademark agreement to use the brand "Neuland" by these companies.

The effective date of these agreements are November 22, 2012 and became operational from December 1, 2012.

2. SEGMENT REPORTING

(a) Company''s operations are predominantly related to the manufacture of Bulk drugs, as such there is only one primary reportable segment. Secondary reportable segments are identified taking into account the geographical markets available to the products, the differing risks and returns and internal reporting system.

(b) As a part of secondary reporting, in view of the management the Indian and export markets represent geographical segments. Sales by market- The following is the distribution of the Company''s sale by geographical market:

The estimates of future salary increases considered in Actuarial valuation takes into account the inflation rate on long term basis.

(c) Contribution to Provident Fund - Defined Contribution Plan

Amount recognised and included in Note 23 forming part of the financial statements - "Contribution to Provident and Other Funds" Rs.12.24 million (March 31, 2012: Rs.11.91 million).

3. In the opinion of the Board, all the assets other than fixed assets and non-current investments have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated in the financial statements.

4. Disclosure required by Micro, Small and Medium Enterprises (Development) Act, 2006.

As per requirement of Section of 22 of Micro, Small & Medium Enterprises Development Act, 2006 following information is disclosed:

5. Contingent Liability:

(a) Claims against the Company not acknowledged as debts

(i) Customs duty demand of Rs.2.29 million including interest (March 31, 2012: Rs.2.29 million). The same was adjusted against the pre-deposit of Rs.4.00 million (March 31, 2012: Rs.4.00 million) made by the Company. The Company has filed an appeal against the demand before the Appellate Tribunal, Chennai, which is yet to be decided. Simultaneously the Company also filed an appeal before Honorable High Court of Madras for refund of balance of Pre-deposit together with interest. As the export obligations against the material imported under DEEC scheme have been completed, the Company expects the outcome in its favour.

(ii) Andhra Pradesh Gas Power Corporation Limited and its shareholders (including Neuland) have filed writ petition before the Division Bench of High Court of A.P, which has been admitted and favourable interim orders have been granted. The Company has been advised that it has a strong case to succeed in the pending appeal.

(ill) Certain disputes, for unascertained amounts, are pending in the Labour Courts, A.P. As the chances of appellants succeeding in their claims being remote, the Company expects no liability on this account.

(iv) The Company has made a claim of sales tax credit of a Rs.0.55 million before the Assessing Authority on April 26, 2005. However, the Assessing Authority, vide proceeding in Form VAT 126 dated September 29, 2005 restricted the sales tax credit to only Rs.0.43 million. The Company filed a tax appeal bearing TA No. 398 of 2009 in Form APP 401 before the Sales Tax Appellate Tribunal, Andhra Pradesh on May 23, 2009. The matter is pending. If there is an adverse ruling against the Company, the estimated financial impact on the Company would be approx Rs.0.43 million.

(v) Income Tax department has filed a writ petition before the Hon''ble High Court of Andhra Pradesh to set aside the Income Tax Appellate Tribunal order bearing TA No. 971/H/008 dated July 24, 2008 for the Assessment Year 2001-2002 against the claim on deduction U/sec 80HHC. The Hon''ble High Court of Andhra Pradesh has admitted the appeal on July 18, 2012 and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs.4.34 million.

(vi) Income Tax department has filed a writ petition before the Hon''ble High Court of Andhra Pradesh to set aside the Income Tax Appellate Tribunal order bearing TA No. 842/H/06 dated May 5, 2008 for the Assessment Year 2003-2004 against the allowability of Employee''s contribution towards PF, ESI. The Hon''ble High Court of Andhra Pradesh has admitted the appeal on June 20, 2012 and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs.1.83 million.

(vii) The Company has filed an appeal before Income Tax Appellate Tribunal against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2003-2004 against the disallowance of Commission paid to Non-resident agents for not deducted at source u/s 40(a)(i) of Income Tax Act, 1961 and the matter is pending. If there is an adverse ruling against our Company, the estimated financial impact on the Company would be Rs.1.81 million.

(b) Unexpired Letters of Credit opened on behalf of the Company by Bank for the raw material amounting to Rs.378.28 million (March 31, 2012: Rs.499.27 million).

(c) Bank Guarantees given by the Company to Central Excise and Customs and other Government authorities amounting to Rs.9.50 million (March 31, 2012: Rs.13.10 million).

6. Capital and Other Commitments

(a) Estimated amounts of contracts on capital account to be executed and not provided for, net of advance Rs.12.82 million (March 31, 2012: Rs.25.78 million).

(b) Neuland Laboratories Limited in collaboration with Cato Research Israel Limited, (a wholly owned subsidiary of Cato Research Inc., a global contract research and development organization based in USA) formed a joint venture in India styled as Cato Research Neuland India Private Limited on May 14, 2008. Neuland''s share in the joint venture is 70%. The commitment towards initial share capital contribution is US $ 350,000- approximately Rs.19.01 million (March 31, 2012: Rs.17.92 million). The Company contributed Rs.1.22 million (March 31, 2012: Rs.1.22 million) towards share capital. The balance commitment as on March 31, 2013 is Rs.17.78 million (March 31, 2012: Rs.16.70 million).

Basis of Preparation of Statement of Profit and Loss and Cash Flow for the Discontinued Operations of the Company

Profit and Loss Account

i) ALL the direct and specifically identifiable revenue and expense items such as Sales, Material Consumption, Employee Cost and other identifiable costs have been taken at actual based on accounting records.

ii) All Overheads have been allocated based on number of labs.

iii) Interest cost on working capital has been apportioned in proportion to the total expenses before depreciation.

iv) Profit on sale of Land and Building is considered as part of discontinuing operations.

v) Current tax expense is considered as Nil on account of losses incurred by the discontinuing operations.

Balance Sheet

The Company has not identified any assets and liabilities except for the Land together with the Building thereon and the fixtures thereto in relation to the discontinued operations.

Cash Flows

Cash Flow in respect of ordinary activities attributable to discontinued operations

Operating Activities Rs. (36.83) million {Previous Year: Rs. (76.72) million} Investing Activities Rs.70.00 million {Previous Year: Rs. (10.23) million} Financing Activities Rs. (3.10) million {Previous Year: Rs. (3.79) million}

7. During the current financial year, the Company has recognized MAT credit of Rs.53.50 million (including MAT credit relating to FY 2006- 2007 and FY 2007-2008 aggregating to Rs.23.32 million) available as an asset based on convincing evidence that the Company will pay normal income tax during the specified period, i.e., the period for which MAT credit is allowed to be carried forward in accordance with the Guidance Note on "Accounting for Credit Available in respect of Minimum Alternative Tax under the Income-tax Act, 1961". The Company reviews the "MAT credit entitlement" asset at each reporting date and writes down the asset to the extent the Company does not have convincing evidence that it will pay normal tax during the specified period.

8. Previous year numbers are rearranged and regrouped wherever considered necessary.

9. Pursuant to the reorganization of the Company, the previous year''s numbers are not comparable with that of the current year.

Mar 31, 2012

1. CORPORATE INFORMATION

Neuland Laboratories Limited ('the Company') is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The Company is engaged in the manufacturing and selling of bulk drugs. The Company caters to both domestic and international markets.

a. Terms/Rights attached to equity shares

The Company has only one class of equity shares having par value of Rs10 per share. Each shareholder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to prior consent from the banks and approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of the 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 shareholder.

b. Employee Stock Option Scheme - 2008

Pursuant to the resolution passed by the Board of Directors on July 20, 2007 and members of the Company at the Annual General Meeting held on July 20, 2007, the Company had introduced Employee Stock Option Scheme ('the scheme') for permanent employees and directors of the Company and of its subsidiaries, as may be decided by the Compensation Committee/Board. The scheme provides that the total number of options granted there under will be not more than 3% of the paid up capital. Each option, on exercise, is convertible into one equity share of the company having face value of Rs10. Pursuant to a resolution passed by the Remuneration & Compensation Committee vide Circular Resolution dated November 17, 2008, 34,500 options have been granted at an exercise price of Rs104, which is the market price as on the date of the grant. Accordingly, the Company has not recognized any expense on account of grant of stock options.

2. SHARE APPLICATION MONEY

As on March 31, 2012, the Company is in the process of issuing 2,248,523 equity shares of a face value of Rs10 each for cash at a price of Rs45 per equity share, including a Share Premium of Rs35 per equity share, aggregating to Rs101.18 million to the existing equity shareholders of the company on a rights basis in the ratio of 5:12 as on the Record Date i.e. March 23, 2012. The Issue opened on March 31, 2012 and closed on April 16, 2012. The Company has sufficient authorized share capital to cover the share capital amount on allotment of shares out of the Rights Issue.

The Share Application Money represents the collection received from the shareholders as on March 31, 2012. Since the Issue was open on March 31, 2012, the refundable portion of the Share Application Money is not identifiable as on the date of Balance Sheet.

Subsequently, the Rights Issue has been subscribed fully and 2,248,523 equity shares of a face value of Rs10 each have been allotted on April 27, 2012 to the eligible shareholders as per the Basis of Allotment approved by the designated stock exchange.

The Company has incurred the expenses in relation to Rights Issue activity which have been accounted for as 'Rights Issue Expenses' and grouped under Other Current Assets. These expenses will be charged to the securities premium account proposed to be received from the Rights Issue of the equity shares of the Company. The details

*Note: 1. The Company had opted to adopt the amendment to the Companies (Accounting Standards) Rules, 2006 effected by a notification dated March 31, 2009 issued by Ministry of Corporate Affairs, Government of India (applicability extended till March 31, 2020). Pursuant to this adoption, for the year ended March 31, 2012, an amount of (Rs26.70 million) (March 31, 2011: Rs4.74 million) being foreign exchange fluctuations gain/(loss) pertaining to foreign currency loan availed for acquisition of depreciable capital assets is adjusted to the cost of such assets.

2. Fixed assets include vehicles and machinery acquired under Hire Purchase Agreement amounting to Rs44.96 million as on March 31, 2012 (March 31, 2011: Rs52.52 million). The hire purchase charges have been charged to Statement of Profit and Loss. The hire purchase installment due within one year is Rs9.50 million (March 31, 2011: Rs12.62 million).

As at March 31, 2012 and March 31, 2011, as a result of carried forward losses the deferred tax calculations result into a Deferred Tax Asset (DTA). The Company has recognized the DTA of Rs18.50 million based on virtual certainty of profits in the next quarter backed by profitable binding orders on hand.

3. SEGMENT REPORTING

a. Company's operations are predominantly related to the manufacture of bulk drugs, as such there is only one primary reportable segment. Secondary reportable segments are identified taking into account the geographical markets available to the products, the differing risks and returns and internal reporting system.

b. As a part of secondary reporting, in view of the management the Indian and export markets represent geographical segments.

c. The Company does not track its assets and liabilities by geographical area.

4. RELATED PARTY TRANSACTIONS

Disclosure as required by the Accounting Standard - 18 are given below:

a. Name of the related parties and descriptions of relationships

Note: On April 27, 2012, the Board of Directors approved the Basis of Allotment and allotted 2,248,523 equity shares of face value of Rs10 each at a premium of Rs35 per equity share. Computation of Basic and Diluted Earnings per Share after considering the rights issue is as below:

The amount of Rs10.49 million being the provision for gratuity is included in Contribution to Provident and Other Funds under Note 24 forming part of the financial statements.

The estimates of future salary increases considered in Actuarial valuation takes into account the inflation rate on long term basis.

The amount of Rs0.88 million being the provision for leave encashment is included in Contribution to Provident and Other Funds under Note 24 forming part of the financial statements.

The estimates of future salary increases considered in Actuarial valuation takes into account the inflation rate on long term basis.

c. Contribution to Provident Fund - Defined Contribution Plan

Amount recognized and included in Note 24 forming part of the financial statements - 'Contribution to Provident and Other Funds' Rs11.91 million (March 31, 2011: Rs11.37 million).

5. In the opinion of the Board, all the assets other than fixed assets and non-current investments have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the financial statements.

6. DISCLOSURE REQUIRED BY MICRO, SMALL AND MEDIUM ENTERPRISES (DEVELOPMENT) ACT, 2006

As per requirement of Section 22 of Micro, Small and Medium Enterprises Development Act, 2006 following information is disclosed:

The above information regarding Micro, Small and Medium 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.

7. The Company has entered into commercial leases on items of machinery.

*Note: Amount of additions to fixed assets was arrived after reducing capital work-in-progress claimed in previous year.

8. CONTINGENT LIABILITY

a. Claims against the Company not acknowledged as debts

i. Customs duty demand of Rs2.29 million including interest (March 31, 2011: Rs2.29 million). The same was adjusted against the pre-deposit of Rs4.00 million (March 31, 2011: Rs4.00 million) made by the Company. The Company has filed an appeal against the demand before the Appellate Tribunal, Chennai, which is yet to be decided. Simultaneously the Company also filed an appeal before Hon'ble High Court of Madras for refund of balance of pre-deposit together with interest. As the export obligations against the material imported under DEEC scheme have been completed, the Company expects the outcome in its favor.

ii. Andhra Pradesh Gas Power Corporation Limited and its shareholders (including Neuland) have filed writ petition before the Division Bench of Hon'ble High Court of Andhra Pradesh, which has been admitted and favorable interim orders have been granted. The Company has been advised that it has a strong case to succeed in the pending appeal.

iii. Certain disputes, for unascertained amounts, are pending in the Labour Courts, Andhra Pradesh. As the chances of appellants succeeding in their claims being remote, the Company expects no liability on this account.

b. Unexpired Letters of Credit opened on behalf of the Company by bank for the raw material amounting to Rs499.27 million (March 31, 2011: Rs537.79 million).

c. Bank Guarantees given by the Company to Central Excise and Customs and other government authorities amounting to Rs13.10 million (March 31, 2011: Rs13.59 million).

d. A demand of Rs36.61 million was raised by the Income Tax Department for the Assessment Year 2009-10, by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961. The Company filed an appeal with Hon'ble CIT (Appeals) against the Order.

9. CAPITAL AND OTHER COMMITMENTS

a. Estimated amounts of contracts on capital account to be executed and not provided for, net of advance Rs25.78 million (March 31, 2011: Rs1.28 million).

b. Neuland Laboratories Limited in collaboration with Cato Research Israel Limited, (a wholly owned subsidiary of Cato Research Inc., a global contract research and development organization based in USA) formed a joint venture in India styled as Cato Research Neuland India Private Limited on May 14, 2008. Neuland's share in the joint venture is 70%. The commitment towards initial share capital contribution is US $350,000- approximately Rs17.92 million. The Company contributed Rs1.22 million towards share capital as on March 31, 2012. The balance commitment as on March 31, 2012 is Rs16.70 million.

Mar 31, 2011

1. SEGMENT REPORTING

a. Company's operations are predominantly related to the manufacture of bulk drugs, as such there is only one primary reportable segment. Secondary reportable segments are identified taking into account the geographical markets available to the products, the differing risks and returns and internal reporting system.

b. As part of secondary reporting, in the view of the management, the Indian and export markets represent geographical segments.

2. RELATED PARTY TRANSACTIONS

Disclosures as required by the Accounting Standard - 18

d. Subsidiary Companies

i. Neuland Laboratories K.K., Japan Wholly owned subsidiary

ii. Neuland Laboratories Inc., USA Wholly owned subsidiary

iii. Cato Research Neuland India Private Limited Partly owned subsidiary

b. The computation of profit under Section 349 of the Companies Act, 1956 is not considered necessary as the managerial remuneration that is paid is minimum remuneration based on effective capital of the Company as prescribed under Schedule XIII of the said Act.

3. During the year 2008-09, the Company had opted to adopt the amendment to the Companies (Accounting Standards) Rules, 2006 effected by a notification dated March 31, 2009 issued by the Ministry of Corporate Affairs, Government of India. Pursuant to this adoption, an amount of Rs.55.43 million being foreign exchange fluctuations gain till date pertaining to foreign currency loan availed for acquisition of depreciable capital assets is adjusted to the cost of such assets.

The amount of Rs.10.28 million being the provision for gratuity and Rs.2.76 million being provision for leave encashment is included in payments and provisions to employees under Schedule 3 of the financials.

The estimates of future salary increases considered in actuarial valuation takes into account the inflation rate on long term basis.

4. EMPLOYEE STOCK OPTION SCHEME - 2008

Pursuant to the resolution passed by the Board of Directors on July 20, 2007 and Members of the Company at the Annual General Meeting held on July 20, 2007, the Company had introduced Employee Stock Option Scheme ('the scheme') for permanent employees and Directors of the Company and of its subsidiaries, as may be decided by the Compensation Committee/Board. The scheme provides that the total number of options granted there under will be not more than 3% of the paid up capital. Each option, on exercise, is convertible into one equity share of the Company having face value of Rs.10. Pursuant to a resolution passed by the Remuneration & Compensation Committee vide Circular Resolution dated November 17, 2008, 34,500 options have been granted at an exercise price of Rs.104, which is the market price as on the date of the grant. Accordingly, the Company has not recognized any expense on account of grant of stock options.

5. Revenue of Rs.35.51 million (including Rs.5.39 million for earlier periods) has been accounted under export incentives receivable under Focus Market Scheme as per notification dated August 27, 2009 by Director General of Foreign Trade.

6. CONTINGENT LIABILITY

a. Claims against the Company not acknowledged as debts:

i. Customs duty demand of Rs.2.29 million including interest (Previous Year - Rs.2.29 million). The same was adjusted against the pre-deposit of Rs.4.00 million made by the Company. The Company has filed an appeal against the demand before the Appellate Tribunal, Chennai, which is yet to be decided. Simultaneously the Company also filed an appeal before Hon'ble High Court of Madras for refund of balance of pre-deposit together with interest. As the export obligations against the material imported under DEEC Scheme have been completed, the Company expects the outcome in its favour.

ii. Andhra Pradesh Gas Power Corporation Limited and its shareholders (including Neuland) have filed writ petition before the Division Bench of the Hon'ble High Court of Andhra Pradesh, which has been admitted and favourable interim orders have been granted. The Company has been advised that it has a strong case to succeed in the pending appeal.

iii. Certain disputes, for unascertained amounts, are pending in the Labour Courts, Andhra Pradesh. As the chances of appellants succeeding in their claims being remote, the Company expects no liability on this account.

b. Unexpired Letters of Credit opened on behalf of the Company by bank for the raw material amounting to Rs.537.79 million (Previous year - Rs.438.25 million).

c. Estimated amounts of contracts on capital account to be executed and not provided for, net of advance Rs.1.28 million (Previous Year - Rs.11.48 million).

d. Bank guarantees given by the Company to Central Excise and Customs and other Government authorities amounting to Rs.13.59 million (Previous year - Rs.9.35 million).

e. A demand of Rs.31.84 million was raised by the Income Tax Department for the Assessment Year 2004-05, by the Assessing Officer by reopening the assessment under Section 148 of the Income Tax Act 1961. The Hon'ble CIT (Appeals) vide his order dated May 3, 2011 has upheld the Company's plea and adjudicated in favor of the Company stating the re-opening of the assessment as bad in law, and the reopened proceedings void ab initio.

7. Neuland Laboratories Limited in collaboration with Cato Research Israel Limited, (a wholly owned subsidiary of Cato Research Inc., a global contract research and development organization based in USA) formed a joint venture in India styled as Cato Research Neuland India Private Limited on May 14, 2008.

The joint venture company has received all permissions/approvals from authorities to begin its operations. Neuland's share in the joint venture is 70%. The commitment towards initial share capital contribution is US $ 350,000 - approximately Rs.14.07 million.

8. Fixed assets include vehicles and machinery acquired under Hire Purchase Agreement amounting to Rs.52.52 million as on March 31, 2011 (Previous year - Rs.32.97 million). The hire purchase charges have been charged to Profit and Loss Account. The hire purchase installment due within one year is Rs.12.62 million (Previous Year - Rs.10.36 million).

9. The Ministry of Corporate Affairs, Government of India vide its General Notification No. S.O.301(E) dated February 8, 2011 issued under Section 211(3) of the Companies Act, 1956 has exempted certain classes of companies from disclosing certain information in their Profit and Loss Account. The Company being an 'export oriented company' is entitled to the exemption. Accordingly, disclosures mandated by paragraphs 3(i)(a), 3(ii)(a), 3(ii)(b) and 3(ii)(d) of Part II, Schedule VI to the Companies Act,1956 have not been provided.

A. Production Data

1As certified by the management, being technical matter accepted by the auditors as correct.

2Note a. Including contract manufacturing.

b. Installed capacity is flexible as the plant is versatile, enabling the Company to produce in different capacities and therefore it varies depending on the product programme.

E. Earnings in foreign currency

i. Export of goods on FOB basis Rs.2869.53 million (Previous year - Rs.1966.63 million). ii. Product Development Charges Rs.32.23 million (Previous year - Rs.32.73 million).

10. Previous year figures have been regrouped and/or rearranged wherever necessary.

Mar 31, 2010

1. SEGMENT REPORTING

a. Companys operations are predominantly related to the manufacture of Bulk drugs, as such there is only one primary reportable segment. Secondary reportable segments are identified taking into account the geographical markets available to the products, the differing risks and returns and internal reporting system.

2. RELATED PARTY TRANSACTIONS

Disclosures as required by the Accounting Standard - 18

a. Name of the related parties and descriptions of relationships

Name Nature of Relationship

Sucheth & Saharsh Holdings Private Limited Other Related Party

b. Key Management Personnel

Name Nature of Relationship

Dr. D. R. Rao Chairman & Managing Director

Mr. D. Sucheth Rao Chief Executive Officer & Whole-time Director

& Son of Chairman & Managing Director

Mr. D. Saharsh Rao President - Contract Research &

Whole-time Director & Son of Chairman & Managing Director

c. Relatives of Key Managerial Personnel

Name Nature of Relationship

Mrs. D. Vijaya Rao Wife of Chairman & Managing Director

Mrs. D. Rohini Niveditha Rao Wife of Whole-time Director & Chief Executive Officer Mrs. K. Deepthi Rao Wife of Whole-time Director & President - Contract Research

d. Subsidiary Companies

i. Neuland Laboratories K.K., Japan Wholly owned subsidiary

ii. Neuland Laboratories Inc., USA Wholly owned subsidiary

iii. Cato Research Neuland India Private Limited Partly owned subsidiary

3. During the previous year pursuant to implementation of SAP ERP system certain cost formulas for inventory valuation have been changed. The impact of these changes is not material.

4. During the previous year, the Company had opted to adopt the amendment to the Companies (Accounting Standards) Rules, 2006 effected by a notification dated March 31, 2009 issued by Ministry of Corporate Affairs, Government of India. Pursuant to this adoption, amount of Rs.50.70 Million being foreign exchange fluctuations gain pertaining to foreign currency loan availed for acquisition of depreciable capital assets is adjusted to the cost of such assets.

5. CONTINGENT LIABILITY

a. Claims against the Company not acknowledged as debts.

i. Customs duty demand of Rs.2.29 Million including interest (Previous Year - Rs.2.29 Million). The same was adjusted against the pre-deposit of Rs.4 Million made by the Company. The Company has filed an appeal against the demand before the Appellate Tribunal, Chennai, which is yet to be decided. Simultaneously the Company also filed an appeal before Honble High Court of Madras for refund of balance of pre-deposit together with interest. As the export obligations against the material imported under DEEC scheme have been completed, the Company expects the outcome in its favour.

ii. Andhra Pradesh Gas Power Corporation Limited and its shareholders (including Neuland) have filed writ petition before the Division Bench of Honble High Court of Andhra Pradesh, which has been admitted and favourable interim orders have been granted. The Company has been advised that it has a strong case to succeed in the pending appeal.

iii. Certain disputes, for unascertained amounts, are pending in the Labour Courts, Andhra Pradesh. As the chances of appellants succeeding in their claims being remote, the Company expects no liability on this account.

b. Bills discounted amounting Rs. Nil (Previous Year - Rs.37.82 Million).

c. Unexpired Letters of Credit opened on behalf of the Company by Bank for the raw material amounting to Rs.438.25 Million (Previous year - Rs.256.69 Million).

d. Estimated amounts of contracts on capital account to be executed and not provided for net of advance Rs.11.48 Million (Previous Year - Rs.95.00 Million).

e. Bank guarantees given by the Company to Central Excise and Customs and other government authorities amounting to Rs.9.35 Million (Previous Year - Rs.10.33 Million).

6. Neuland Laboratories Limited in collaboration with Cato Research Israel Limited, (a wholly owned subsidiary of Cato Research Inc., a global contract research and development organization based in USA) formed a joint venture in India styled as Cato Research Neuland India Private Limited on May 14, 2008.

The joint venture company has received all permissions/approvals from authorities to begin its operations. Neulands share in the joint venture is 70%. The commitment towards initial share capital contribution is US $ 350,000 - approximately Rs.14.07 Million.

7. Prior period items Rs.11.97 Million (net) include -

a. Rs.29.48 Million being credit for Cenvat Clearing Account amounts which would have been credited to raw materials consumption.

b. Consequential MAT tax liability for earlier years of Rs.3.34 Million, and,

c. Foreign exchange losses of Rs.14.17 Million arising from mark to market valuation on derivatives contracts which materialized during the year.

8. Fixed Assets include vehicles acquired under Hire Purchase Agreement amounting to Rs.32.97 Million as on March 31, 2010. (Previous year - Rs.19.33 Million). The hire purchase charges have been charged to Profit and Loss Account. The hire purchase installment due within one year is Rs. 10.36 Million. (Previous year - Rs.5.40 Million).

H. Earnings in foreign currency

i. Export of Goods on FOB basis Rs.1966.63 Million (Previous year Rs.2534.35 Million). ii. Product Development Charges Rs.32.73 Million (Previous year Rs.29.37 Million).

9. Previous year figures have been regrouped and/or rearranged wherever necessary.

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