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Notes to Accounts of Novartis India Ltd.

Mar 31, 2016

1. (a) Salaries, Wages and Bonus include Rs, 6.0 million (Previous year Rs, 18.7 million) paid/payable to employees under the Voluntary Retirement Schemes.

(b) Voluntary Retirement Costs represent the actuarial value as at 31st March, 2016 of compensation payable under the Voluntary Retirement Schemes. [Refer Note 4 and 7].

2. Disclosures as required under the Micro, Small and Medium Enterprises Development Act, 2006. This information and that given in Note 6 – Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company.

Notes:

(a) Business Segments

The businesses comprise Pharmaceuticals, Generics, OTC and Animal Health. The operational performance of the business is reviewed by the management based on such segmentation.

(i) The Pharmaceuticals segment comprises a portfolio of prescription medicines which are provided to patients through healthcare professionals. These are mainly products of original research of the Novartis Group.

(ii) The Generics segment comprises Retail Generics products. The business unit primarily focuses on the therapeutic segments such as Anti-TB, Anti-DUB (Gynaecology), Anti- histamines, Antibiotics, Anti-ulcer ants, Anti-diabetes and Cardiovascular.

(iii) The Animal Health segment has a presence primarily in the cattle and poultry market segments. This business unit has been divested on 31 December 2015. [Refer Note 51].

(iv) The OTC segment is mainly in the VMS (vitamins, minerals and nutritional supplements) and CoCoA (cough, cold and allergy) market segments. This business unit has been divested on 30 September 2015. [Refer Note 51].

(b) Geographical Segments

Revenue is segregated into two segments namely India (sales to customers within India) and Other Countries (sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

(c) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for the preparation of financial statements as disclosed in Note 1 above.

3. Related Party Disclosures

(A) Enterprise where control exists Holding Company Novartis AG, Basel, Switzerland

(B) Other Related Parties with whom the company had transactions during the year and/or the previous year

(a) Fellow Subsidiaries Alcon Laboratories (India) Private Limited, India

Alcon Pharmaceuticals Limited, Switzerland

Befico Limited, Bermuda

Novartis (Bangladesh) Limited, Bangladesh

Novartis (Singapore) Pte Ltd, Singapore

Novartis (Thailand) Limited, Thailand

Novartis Animal Health Inc, Switzerland

Novartis Asia Pacific Pharmaceuticals Pte. Limited, Singapore

Novartis Consumer Health Inc., USA

Novartis Consumer Health SA, Switzerland

Novartis Corporation (Malaysia) Sdn Bhd, Malaysia

Novartis Healthcare Private Limited, India

Novartis International AG, Switzerland

Novartis Korea Limited, South Korea

Novartis Pharma AG, Switzerland

Novartis Pharmaceuticals Corporation Inc., USA

Novartis South Africa (Pty) Ltd., South Africa

PT Novartis Indonesia, Indonesia

Sandoz International GmbH, Germany

Sandoz Private Limited, India

Shanghai Novartis Animal Health Co. Limited, China

Novartis Pharma Services Inc., Kenya

Novartis Pharmaceuticals East Hanover, USA

Novartis Singapore Pharmaceutical Manufacturing Pte. Ltd,

Singapore

Novartis Pharma K.K., Japan

Novartis Healthcare Philippines Inc., Philippines

(b) Entity under common

control Novartis Comprehensive Leprosy Care Association, India

(c) Key Management

Personnel R. Shahani

M. Patil

A. Matai (Up to 31st August, 2014) J. Zia (From 1st June, 2014) V. Singhal (Up to 30th September, 2015) Dr. V. A. Kumar (Up to 31st December, 2015) D. Charak M. Noble G. Tekchandani 46. Basic earnings per share has been calculated by dividing profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The company has not issued any potential equity shares and accordingly, the basic earnings per share and diluted earnings per share are the same. Earnings per share has been computed as under:

4. Disclosures for Employee Share based Payments

The Institute of Chartered Accountants of India has issued a Guidance Note on "Accounting for Employee Share based Payments" (''the Guidance Note''), which is applicable to employee share based payment plans, the grant date in respect of which falls on or after 1st April, 2005. The company offers its employees, share based payments in the form of a "Select" plan. The Equity Plan "Select" is a global equity incentive plan for eligible employees. This plan allows it participants to choose the form of their equity compensation in ''Restricted Shares'' or ''Tradable Options'' of the ultimate holding company, Novartis AG, Basel. The "Select" plan of the ultimate holding company is being managed and administered by the group company, Befico Limited, Bermuda and the company is compensating Befico Limited for the grants made to the employees with effect from January 2013 and accordingly, these costs are being reflected in the financial statements. The information given below, in respect of the "Select" plan has been determined and provided by the ultimate holding company.

There are two schemes under which employees are granted stock options:

(A) Tradable Stock Options, as per which the employee can sell the options to market maker once it is vested. Tradable Options have a contractual life of 10 years from the date of grant.

(B) Restricted Shares are the shares of its ultimate holding company. These do not have voting rights until vested to employees. There is no time limit to sell the Restricted Shares once these are vested.

5. The Company has filed a Writ Petition on 8th May 2014 before the Hon''ble Delhi High Court challenging the move of the National Pharmaceuticals Pricing Authority ("NPPA") to include Voveran 50 GE Tablets, marketed by the Company, under price control in terms of the Drug Price Control Order 2013 ("DPCO 2013").

During the pendency of the Writ Petition the NPPA issued a Show Cause Notice dated 24th September 2014 to the Company alleging over charge on sales of Voveran 50 GE Tablets by the Company. The Company responded to the show cause notice vide its letters dated 13th October 2014 and 27th October 2014. The NPPA issued a Demand Notice dated 31st October 2014 directing the company to pay Rs, 281.8 million (including interest) by 15th November 2014. This demand has been challenged before the Hon''ble Delhi High Court which granted a stay on the demand. The matter is posted for further hearing on 13th July 2016.

6. Transactions with GSK and Lilly

On 22nd April 2014, Novartis AG, Basel, Switzerland (Novar tis) entered into the following agreements with GlaxoSmithKline plc, UK (GSK) and Eli Lilly and Company, USA (Lilly):

(a) Combination of Novartis OTC with GSK Consumer Healthcare in a Joint Venture Novartis and GSK agreed to create a consumer healthcare business through a Joint Venture between Novartis OTC and GSK Consumer Healthcare.

In connection with the divestment of the Novartis OTC business to GSK, the Board of Directors of Novartis India Limited (the "Company") in its meeting held on 13th January 2015 approved the slump sale of the Company''s OTC Division to GlaxoSmithKline Consumer Private Limited ("GSK CPL"), a private unlisted company incorporated under the Companies Act, 2013 or another affiliate of GSK for a consideration of Rs, 1,097.3 million. Closing of this slump sale was subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities. On the basis of the approval received from the Foreign Investment Promotion Board, Government of India and the Competition Commission of India, the transaction for the transfer of the Company''s OTC Division to GSK CPL was completed on 30th September 2015. The Company made separate announcements on 13th January 2015, 28th August 2015 and 1st October 2015 to BSE Limited in this regard.

(i) The carrying amounts of the total assets and the total liabilities attributable to the discontinued operation — OTC Division * 1st April, 2015 to 30th September, 2015

(b) Divestment of Novartis Animal Health business to Lilly As part of its global portfolio transformation, Novartis agreed on 22nd April, 2014 to divest its global Animal Health business to Lilly.

In connection with the Global Animal Health Transaction, the Board of Directors of Novartis India Limited (the "Company") considered and approved on 7th November, 2014, the transfer of the Company''s Animal Health Division as a going concern by way of a ''slump sale'' to Elanco India Private Limited ("Elanco India"), or another affiliate of Lilly, for a consideration of Rs, 866.8 million. Closing of this slump sale was subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities. On the basis of the approval received from the Foreign Investment Promotion Board, Government of India and the Competition Commission of India, the transaction for the transfer of the Company''s Animal Health Division to Elanco India was completed on 31st December, 2015. The Company made separate announcements on 7th November, 2014, 27th May, 2015, 10th July, 2015, 16th September, 2015 and 10th December, 2015 to BSE Limited in this regard.

** 1st April, 2015 to 31st December, 2015

The differential between the total consideration and the net assets transferred in relation to slump sale of the OTC and Animal Health division''s net of cost in relation to these transactions have been disclosed as Extraordinary Item.

7. The Company has entered into Consignment Sales Agency Agreements (CSA) and Transitional Distribution Service Agreements (TDSA) with various parties.

Pursuant to the above agreements, amounts collected on behalf of such parties and payable (net of deductibles) as at 31st March, 2016 aggregating Rs, 637.2 million have been included in ''Cash and Bank balances'' [Refer Note 16] and ''Other Current Liabilities'' [Refer Note 7].

8. Previous year figures have been regrouped/restated where necessary. The figures for the year ended 31st March, 2016 are not comparable to those of the previous year ended 31st March, 2015 on account of the sale of OTC and Animal Health Divisions [Refer Note 51].


Mar 31, 2015

1. The company has only one class of shares i.e. Equity Shares having a face value of Rs. 5 each. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the company after distribution of all preferential amounts, in proportion to their shareholding.

2. Of the above, 23,970,597 (Previous year - 23,970,597) shares are held by Novartis AG, Basel, Switzerland, the holding company.

3. Contingent Liabilities

Claims against the company not acknowledged as debts Income-tax matters

(i) Matters decided in favour of the company but disputed further by the income-tax authorities 76.6 76.4

(ii) Matters decided against the company in respect of which the company has preferred an appeal 122.8 118.5

Sales tax matters 568.0 463.4

Service tax matters 4.5 4.5

Excise matters 3.0 3.0

Drug Price Control Order 2013 [Refer Note 51] 281.8 —

Claims from third party manufacturers in respect of Excise matters 39.0 38.0

Claims from Consumers 0.2 0.2

Others 2.1 2.1

Note:

Future cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various authorities/forums and/or final outcome of the matters.

4. Estimated amount of contracts remaining to be executed on capital account and not provided for - Rs. 0.2 million (Previous year Rs. Nil).

5. (a) Salaries, Wages and Bonus include Rs. 18.7 million (Previous year Rs. 18.8 million) paid/payable to employees under the Voluntary Retirement Schemes.

(b) Voluntary Retirement Costs represent the actuarial value as at 31st March, 2015 of compensation payable under the Voluntary Retirement Schemes. [Refer Note 4 and 7].

6. Disclosures as required under the Micro, Small and Medium Enterprises Development Act, 2006. This information and that given in Note 6 - Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company.

7. Other Long-term Employee Benefit

The liability for Long Service Awards as at the year end Rs. 16.8 million (Previous year Rs. 15.1 million).

8. NOTES:

(a) Business Segments

The businesses comprise Pharmaceuticals, Generics, OTC and Animal Health. The operational performance of the business is reviewed by the management based on such segmentation.

(i) The Pharmaceuticals segment comprises a portfolio of prescription medicines which are provided to patients through healthcare professionals. These are mainly products of original research of the Novartis Group.

(ii) The Generics segment comprises Retail Generics products. The business unit primarily focuses on the therapeutic segments such as Anti-TB, Anti-DUB (Gynaecology), Anti- histamines, Antibiotics, Anti-ulcerants, Anti-diabetes and Cardiovascular.

(iii) The Animal Health segment has a presence primarily in the cattle and poultry market segments.

(iv) The OTC segment is mainly in the VMS (vitamins, minerals and nutritional supplements) and CoCoA (cough, cold and allergy) market segments.

(b) Geographical Segments

Revenue is segregated into two segments namely India (sales to customers within India) and Other Countries (sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

(c) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for the preparation of financial statements as disclosed in Note 1 above.

9. Related Party Disclosures

(A) Enterprise where control exists

Holding Company Novartis AG, Basel, Switzerland

(B) Other Related Parties with whom the company had transactions during the year and/or the previous year

(a) Fellow Subsidiaries

Alcon Laboratories (India) Private Limited,India

Alcon Pharmaceuticals Limited, Switzerland

Befico Limited, Bermuda

Chiron Behring Vaccines Private Limited, India

Novartis (Bangladesh) Limited, Bangladesh

Novartis (Singapore) Pte Ltd, Singapore

Novartis (Taiwan) Co. Ltd, Taiwan

Novartis (Thailand) Limited, Thailand

Novartis Animal Health Inc, Switzerland

Novartis Asia Pacific Pharmaceuticals Pte. Limited, Singapore

Novartis Consumer Health Inc., USA

Novartis Consumer Health SA, Switzerland

Novartis Corporation (Malaysia) Sdn Bhd, Malaysia

Novartis Healthcare Private Limited, India

Novartis Holding AG, Switzerland

Novartis International AG, Switzerland

Novartis Korea Limited, South Korea

Novartis Pharma AG, Switzerland

Novartis Pharmaceuticals Australia Pty Limited, Australia

Novartis Pharma GmbH, Germany

Novartis Pharmaceuticals Corporation Inc., USA

Novartis South Africa (Pty) Ltd., South Africa

PT Novartis Indonesia, Indonesia

Sandoz International GmbH, Germany

Sandoz Private Limited, India

Shanghai Novartis Animal Health Co. Limited, China

(b) Entity under common control

Novartis Comprehensive Leprosy Care Association, India

(c) Key Management Personnel

R. Shahani

P Gupta (Up to 30th September, 2013)

A. Matai (Up to 31st August, 2014)

J. Zia (From 1st June, 2014)

V Singhal Dr V A. Kumar

M. Patil (From 1st October, 2013)

D. Charak (From 23rd July, 2013)

M. Noble (From 1st October, 2013)

G. Tekchandani

(C) Disclosure of transactions between the company and related parties and outstanding balances as at the year end:

10. Basic earnings per share has been calculated by dividing profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year The company has not issued any potential equity shares and accordingly, the basic earnings per share and diluted earnings per share are the same. Earnings per Share has been computed as under:

11. Disclosures for Employee Share based Payments

The Institute of Chartered Accountants of India has issued a Guidance Note on "Accounting for Employee Share based Payments" (''the Guidance Note''), which is applicable to employee share based payment plans, the grant date in respect of which falls on or after 1st April, 2005. The company offers its employees, share based payments in the form of a "Select" plan. The Equity Plan "Select" is a global equity incentive plan for eligible employees. This plan allows it participants to choose the form of their equity compensation in ''Restricted Shares'' or ''Tradable Options'' of the ultimate holding company, Novartis AG, Basel. The "Select" plan of the ultimate holding company is being managed and administered by the group company, Befico Limited, Bermuda and the company is compensating Befico Limited for the grants made to the employees with effect from January 2013 and accordingly, these costs are being reflected in the financial statements. The information given below, in respect of the Select plan has been determined and provided by the ultimate holding company

There are two schemes under which employees are granted stock options:

(A) A Tradable Stock Options, as per which the employee can sell the options to market maker once it is vested. Tradable Options have a contractual life of 10 years from the date of grant.

12. Current Tax (Net) for earlier years includes write back of provision for current tax for the Assessment Year 1995-1996 amounting to Rs. 139.3 million (previous year Rs. 387.7 million). The aforesaid write backs are on account of favourable Orders of the Income Tax Appellate Tribunal, received by the Company in the respective years, for non-taxability of consideration from sale of its Oral Hygiene Business.

13. The Company has filed a Writ Petition on 8th May, 2014 before the Hon''ble Delhi High Court challenging the move of the National Pharmaceuticals Pricing Authority ("NPPA") to include Voveran 50 GE Tablets, marketed by the Company, under price control in terms of the Drug Price Control Order 2013 ("DPCO 2013").

During the pendency of the Writ Petition the NPPA issued a Show Cause Notice dated 24th September, 2014 to the Company alleging over charge on sales of Voveran 50 GE Tablets by the Company. The Company responded to the show cause notice vide its letters dated 13th October, 2014 and 27th October, 2014. The NPPA issued a Demand Notice dated 31st October, 2014 directing the company to pay Rs. 281.8 million (including interest) by 15th November, 2014. This demand has been challenged before the Hon''ble Delhi High Court which granted a stay on the demand. The matter is posted for further hearing on 10th August, 2015.

14. Transactions with GSK and Lilly

On 22nd April 2014, Novartis AG, Basel, Switzerland (Novartis) entered into the following agreements with GlaxoSmithKline plc, UK (GSK) and Eli Lilly and Company, USA (Lilly):

(a) Combination of Novartis OTC with GSK Consumer Healthcare in a Joint Venture

Novartis and GSK have agreed to create a consumer healthcare business through a Joint Venture between Novartis OTC and GSK Consumer Healthcare. The transaction, except in respect of the Company''s OTC Division, closed on 2nd March, 2015.

In connection with the divestment of the Novartis OTC business to GSK, the Board of Directors (Board) of Novartis India Limited (Company) in its meeting held on 13th January, 2015 approved the slump sale of the Company''s OTC Division to GlaxoSmithKline Consumer Private Limited (GSK CPL), a private unlisted company incorporated under the Companies Act, 2013 (or another affiliate of GSK) for a consideration of Rs. 1,097.3 million. Closing of this slump sale is subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities. The Company had made a separate announcement on 13th January, 2015 to BSE Limited in this regard.

(b) Divestment of Novartis Animal Health business to Lilly

As part of its global portfolio transformation, Novartis AG, Basel, Switzerland ("Novartis AG") agreed on 22nd April 2014 to divest its global Animal Health business to Eli Lilly and Company ("Lilly"). Closing of this global transaction was subject to receipt of applicable anti-trust and regulatory approvals, as well as the satisfaction or waiver (as applicable) of various other conditions (the "Global Animal Health Transaction").

In connection with the Global Animal Health Transaction, the Board of Directors of Novartis India Limited (the "Company") considered and approved on 7th November 2014, the transfer of the Company''s Animal Health Division as a going concern by way of a ''slump sale'' to Elanco India Private Limited ("Elanco India"), or another affiliate of Lilly, for a consideration of Rs. 866.8 million, on or before 22nd July 2015, subject to the receipt of all applicable legal and regulatory approvals, consents, permissions and sanctions as may be necessary from concerned authorities, as well as the closing of the Global Animal Health Transaction (the "Animal Health Transaction"). This approval of the Company''s Board of Directors was disclosed to the Stock Exchange on 7th November 2014. The Global Animal Health Transaction closed globally (but not with respect to India, as explained below) on 1st January 2015.

Closing of the Animal Health Transaction in India is conditional upon the receipt by Elanco India of the written approval of the Foreign Investment and Promotion Board, Government of India (the "FIPB"). Further to the FIPB''s response to Elanco India''s application that it would not approve the Animal Health Transaction due to the existence of the restrictions on competition explained below, and at Elanco India''s request, the Company and Elanco India have executed a letter which records the parties'' agreement that the terms of the Global Animal Health Transaction agreed between Novartis AG and Lilly restricting the competition by the Novartis AG group of companies in connection with animal health activities, will not apply with respect to the Company vis-a-vis Elanco India in India (the "Non-Compete Amendment Letter"). The Non-Compete Amendment Letter will be submitted by Elanco India to the FIPB, together with a representation against the FIPB''s non-approval of Elanco India''s application for the Animal Health Transaction. The Company will continue to co-operate with Elanco India, to the extent necessary, and monitor the FIPB process in this matter and will provide further updates if and when required.

15. Previous year figures have been regrouped/restated where necessary.


Mar 31, 2013

1. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 0.8 million [Previous year Rs. 1.4 million].

2. (a) Salaries, Wages and Bonus include Rs. 8.2 million [Previous year Rs. 2.8 million] paid/payable to employees under the Voluntary Retirement Schemes.

(b) Voluntary Retirement Costs represent the actuarial value as at 31st March 2013 of compensation payable under the Voluntary Retirement Schemes.

3. Disclosures as required under the Micro, Small and Medium Enterprises Development Act, 2006. This information and that given in Note 7 - Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

4. Basic earnings per share has been calculated by dividing profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The company has not issued any potential equity shares and accordingly, the basic earnings per share and diluted earnings per share are the same. Earnings per Share has been computed as under:

5. Disclosures for Employee Share based Payments

The Institute of Chartered Accountants of India has issued a Guidance Note on "Accounting for Employee Share based Payments" (''the Guidance Note''), which is applicable to employee share based payment plans, the grant date in respect of which falls on or after 1st April, 2005. The company offers its employees, share based payments in the form of a "Select" plan. The Equity Plan "Select" is a global equity incentive plan for eligible employees. This plan allows it participants to choose the form of their equity compensation in ''Restricted Shares'' or ''Tradable Options'' of the ultimate holding company, Novartis AG, Basel. The "Select" plan of the ultimate holding company is being managed and administered by the group company, Befico Limited, Bermuda, and the company is compensating Befico Limited for the grants made to the employees with effect from January 2013 and accordingly, these costs are being reflected in the financial statements. The information given below, in respect of the Select plan r-as peer* determined and provided by the ultimate holding company.

There are two schemes under which employees are granted stock options:

(A) A Tradable Stock Options, as per which the employee can sell it to market maker once its vested. Tradable Options have a contractual life of 10 years from the date of grant.

(B) Restricted Shares, which are the shares of its ultimate holding company. This does not have voting rights until vested to employees. Unlike Tradable Options, there is no time limit to sell the Restricted Shares once these are vested.

6. Previous year figures have been regrouped where necessary.


Mar 31, 2012

1. Contingent Liabilities

Claims against the company not acknowledged as debts

Income-tax matters

(i) Matters decided in favour of the company but disputed further by the income-tax authorities 300.4 301.6

(ii) Matters decided against the company in respect of which the company has preferred an appeal 135.7 147.1

Sales tax matters 282.7 252.5

Service tax matter 3.3 3.3

Excise matters 3.0 5.1

Claims from third party manufacturers in

respect of Excise matters 34.6 32.9

Claim from a third party in respect of

Property tax matter - 699.8

Claims from Consumers 0.2 1.8

Others 2.1 2.1

Notes:

Future cash outflows in respect of the above are determinable only on receipt of judgements/decisions pending with various authorities/forums and/or final outcome of the matters.

2. Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) Rs 1.4 million [Previous year Rs 7.9 million].

3. (a) Salaries, Wages and Bonus include Rs 2.8 million [Previous year Rs 5.2 million] paid to employees under the Voluntary Retirement Schemes.

(b) Voluntary Retirement Costs represent the actuarial value as at 31st March 2012 of compensation payable under the Voluntary Retirement Schemes.

4. Disclosures as required under the Micro, Small and Medium Enterprises Development Act, 2006. This information and that given in Note 7 - Trade Payables regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

Notes:

(a) Business Segments

The businesses comprise Pharmaceuticals, Generics, OTC and Animal Health. The operational performance of the business is reviewed by the management based on such segmentation.

(i) The Pharmaceuticals segment comprises a portfolio of prescription medicines which are provided to patients through healthcare professionals. These are mainly products of original research of the Novartis Group.

(ii) The Generics segment comprises Retail Generics products. The business unit primarily focuses on the therapeutic segments such as Anti-TB, Anti-DUB (Gynaecology), Anti-histamines, Antibiotics, Anti-ulcerants, Anti-diabetes and Cardiovascular.

(iii) The Animal Health segment has a presence primarily in the cattle and poultry market segments.

(iv) The OTC segment is mainly in the VMS (vitamins, minerals and nutritional supplements) and CoCoA (cough, cold and allergy) market segments.

(b) Geographical Segments

Revenue is segregated into two segments namely India (sales to customers within India) and Other Countries (sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

(c) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for the preparation of financial statements as disclosed in Note 1 above.

5. Basic earnings per share has been calculated by dividing profit for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. The company has not issued any potential equity shares and accordingly, the basic earnings per share and diluted earnings per share are the same. Earnings per Share has been computed as under:

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


Mar 31, 2011

1. Contingent Liabilities As at As at 31st March 2011 31st March 2010 Rs'000 Rs'000 (a) Claims against the company not acknowledged as debts

Income tax matters

(i) Matters decided in favour of the company but disputed further by the income tax authorities 301,612 305,766

(ii) Matters decided against the company in respect of which the company has preferred an appeal 147,103 128,649

Sales tax matters 227,408 180,762

Service tax matter 3,291 3,291

Excise matters 5,110 5,110

Claims from a third party manufacturer in respect of Excise matter 32,943 31,162

Claims from Consumers 1,758 1,758 Others 701,927 2,100

(b) Uncalled liability on partly paid share in Hill Properties Limited 2 2

Notes:

(i) Future cash outflows in respect of (a) above are determinable only on receipt of judgements/ decisions pending with various authorities/forums and/or final outcome of the matters.

(ii) Future cash outflow in respect of (b) above is dependent on the call to be made by Hill Properties Limited.

2. (a) Salaries, Wages and Bonus include Rs. 5,200(000) [Previous year Rs. 2,800(000)] paid to employees under the Voluntary Retirement Schemes.

(b) Voluntary Retirement Costs represent the actuarial value as at 31st March, 2011 of compensation payable under the Voluntary Retirement Schemes. Amount payable within one year approximately Rs. 2,468(000) [Previous year Rs. 3,124(000)].

3. Disclosures as required under the Micro, Small and Medium Enterprises Development Act, 2006. This information and that given in Schedule 11 - Liabilities regarding Micro and Small Enterprises has been determined to the extent such parties have been identified on the basis of information available with the company. This has been relied upon by the auditors.

(e) Included in (d) above is - Nil [Previous year - Nil] being interest on amounts outstanding as at the beginning of the accounting year.

(C) Other Long-term Employee Benefit

The liability for Long Service Awards as at the year end Rs. 6,859(000) [Previous year Rs. 7,230(000)].

(a) Business Segments

The businesses comprise Pharmaceuticals, Generics, OTC and Animal Health. The operational performance of the business is reviewed by the management based on such segmentation.

(i) The Pharmaceuticals segment comprises a portfolio of prescription medicines which are provided to patients through healthcare professionals. These are mainly products of original research of the Novartis Group.

(ii) The Generics segment comprises Retail Generics products. The business unit primarily focuses on the therapeutic segments such as Anti-TB, Anti-DUB (Gynaecology), Antihistamines,

Antibiotics, Anti-ulcerants, Anti-diabetes and Cardiovascular. (iii) The Animal Health segment has a presence primarily in the cattle and poultry market segments. (iv) The OTC segment is mainly in the VMS (vitamins, minerals and nutritional supplements) and CoCoA (cough, cold and allergy) market segments.

(b) Geographical Segments

Revenue is segregated into two segments namely India (sales to customers within India) and Other Countries (sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

(c) The accounting policies adopted for segment reporting are in line with the accounting policies adopted for the preparation of financial statements as disclosed in Note 1 above.

4. Related Party Disclosures

(A) Enterprise where control exists Hoiding Company

Novartis AG, Basel, Switzerland

(8) Other Related Parties with whom (a) Fellow Subsidiaries

the company had transactions during the year

Novartis (Bangladesh) Limited, Bangladesh

Novartis (Thailand) Limited, Thailand

Novartis Animal Health GmbH, Austria

Novartis Animal Health, USA

Novartis Asia Pacific Pharmaceuticals Pte. Ltd., Singapore

Novartis Healthcare Private Limited, India

Novartis International AG, Basel, Switzerland

Novartis Pharma AG, Basel, Switzerland

Novartis Pharmaceuticals (HK) Limited, Hong Kong

Novartis Pharmaceuticals Corporation Inc., USA

Sandoz Private Limited, India

Shanghai Novartis Animal Health Co. Limited, China

(b) Key Management Personnel

R. Shahani

R Gupta

A. Matai

V. Singhal

Dr R R. Rao

A. Sharma (From 6th January, 2010)

(b) Significant leasing arrangements

(i) Either party shall be entitled at any time during the term to terminate the agreement by giving three months' prior notice in writing.

(ii) There is no provision for renewal.

5. Previous year figures have been regrouped where necessary.

 
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