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Notes to Accounts of Cadila Healthcare Ltd.

Mar 31, 2017

Note: 1-Company overview:

Cadila Healthcare Limited [“the Company”], a Company limited by shares, incorporated and domiciled in India, operates as an integrated pharmaceutical company with business encompassing the entire value chain in the research, development, production, marketing and distribution of pharmaceutical products. The product portfolio of the Company includes Active Pharmaceutical Ingredients [API], animal health & veterinary and human formulations. The Company’s shares are listed on the National Stock Exchange of India Limited [NSE] and BSE Limited. The registered office of the Company is located at “Zydus Tower” Satellite Cross Roads, Sarkhej-Gandhinagar Highway, Ahmedabad - 380015.

These financial statements were authorised for issue in accordance with a resolution passed by the Board of Directors at their meeting held on May 27, 2017.

Note: 2 - Property, Plant & Equipment and Intangible Assets - Continued:

Notes:

1 Leased Assets:

The freehold land include the following amounts where the Company is a lessor under operating lease arrangement:

The lease term in respect of the above mentioned leased assets expires within five to nine years. The lease income receipts are structured to increase in line with expected general inflation to compensate for the expected inflationary cost increases.

2 Buildings include INR 0.02 [As at March 31, 2016: INR 0.02] Millions being the value of unquoted shares held in cooperative societies.

3 Additions of INR 259 [Previous Year: INR 254] Millions in research assets during the year are included in “Additions” under the respective heads of Gross Block of Tangible assets as above.

4 Capital expenditure on Research and Development [including net decrease in Capital Work-in-progress of INR 43 {Previous year: increase of INR 23} Millions] is INR 212 [Previous Year: INR 277] Millions.

5 Other adjustments include adjustments on account of borrowing costs and exchange rate differences.

6 Legal titles of some of the immovable properties acquired pursuant to Scheme of Amalgamation of Liva Healthcare Limited, Zydus Animal Health Limited and Zydus Pharmaceuticals Limited with the Company are in the process of being transferred in the name of the Company.

7 The Company had purchased a flat in Goa for its Guest House and executed a deed of conveyance after payment of consideration to the seller and payment of stamp duties and registration fees in favor of the Government authorities. The document was presented to the Office of the Sub-Registrar of Assurance at Goa for its necessary registration, the original document duly registered is yet to be received by the Company.

8 The Company owns a Non-agricultural freehold land at Survey No. 434/6/B and 434/1/K at Village - Jarod, Taluka - Vaghodia, Dist. Vadodara and revenue survey No. 811/2 of Village : Kotambi, Taluka - Vaghodia, Dist. Vadodara, admeasuring 54,412 Sq. Mtrs. meant for bonafide industrial purposes. The Company had given the said plot of land on a 9 year lease period starting from December 1, 2013 to its wholly owned subsidiary Liva Pharmaceuticals Limited for setting up manufacturing facilities for injectable products.

The Company has given its no-objection to register mortgage created by the said subsidiary company in favor of its lenders as a first lien on the said land as a security in respect of amount borrowed by the said subsidiary company from its lending bank.

The gross amount of freehold land includes an amount of INR 120 Millions in respect of the above stated plot of land leased by the Company to Liva Pharmaceuticals Limited.

[#] Pursuant to the Business Transfer Agreement [BTA] executed between the Company and Zoetis India Limited [“Zoetis”], the Company has acquired select animal healthcare brands, related licenses, technical knowhow and tangible assets of Zoetis during the previous year. The purchase price for such group of assets is allocated to individual assets based on their respective fair values arrived at on the basis of valuation carried out by an independent valuer.

[*] International Business Development Reserve was created pursuant to Composite Scheme of Amalgamation approved by the Hon’able High Court of Gujarat and its utilization shall be as provided in the scheme.

[**] General Reserve can be used for the purposes and as per guidelines prescribed in the Companies Act, 2013.

[***] The Company had opted for accounting the exchange rate differences arising on the Long Term Foreign Currency Monetary Items [LTFCMI] in accordance with the notification dated March 31, 2009 and amended on December 29, 2011 under the Companies [Accounting Standards] Amendment Rules, 2009 on Accounting Standard 11 relating to “the effects of changes in foreign exchange rates”. Accordingly, the effects of exchange rate differences arising on translation or settlement of long term foreign currency loans availed for funding acquisition of Property, Plant and Equipment have been adjusted to the cost of respective items of Property, Plant and Equipment. In other cases, such exchange rate difference on the LTFCMI is transferred to “Foreign Currency Monetary Items Translation Difference Account”. [FCMITDA] The option of transferring exchange rate differences to FCMITDA is available on LTFCMI outstanding as on March 31, 2016 only. The FCMITDA is amortised during the tenure of the respective LTFCMI but not beyond March 31, 2020.

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

Note: 3 - Borrowings:

A Securities and Terms of Repayment for Secured Long Term Borrowings: a Foreign Currency Loans:

i ECB of USD 20 Millions is secured by hypothecation of a specific trade mark of the Company. The loan is repayable in three equal yearly installments starting from the end of four years from the date of its origination [March 20, 2014] along with accrued interest for the period. Interest rate is reset every month at the rate of 1 month USD LIBOR plus 160 bps p.a. The outstanding amount of loan as at March 31, 2017 is INR 1,297 [as at March 31, 2016: INR 1,326] Millions.

ii ECB of USD 15 Millions is secured by hypothecation of a specific trade mark of the Company. The loan is repayable in three half yearly installments starting from October 17, 2016 along with accrued interest for the period. Interest rates are reset every month at the rate of 1 month USD LIBOR plus 150 bps p.a. The outstanding amount of loan as at March 31, 2017 is INR 652 [as at March 31, 2016: INR 994] Millions.

B Terms of Repayment for Unsecured Long Term Borrowings: a Foreign Currency Loans:

i ECB of USD 20 Millions is repayable in three yearly installments starting from December 26, 2016 along with interest for the period. The first installment is of USD 6 Millions and the last two installments are of USD 7 Millions each. Interest rates are reset every month at the rate of 1 month USD LIBOR plus 120 bps p.a. The outstanding amount as at March 31, 2017 is INR 908 [as at March 31, 2016: INR 1,326] Millions.

ii ECB of USD 20 Millions is repayable on July 10, 2018 along with accrued interest for the period. Interest rate is reset every month at the rate of 1 month USD LIBOR plus 99 bps p.a. The outstanding amount of loan as at March 31, 2017 is INR 1,298 [as at March 31, 2016: INR 1,325] Millions.

iii ECB of USD 30 Millions is repayable in three yearly installments starting from January 17, 2020 along with interest for the period. Interest rates are reset every month at the rate of 1 month USD LIBOR plus 100 bps p.a. The outstanding amount as at March 31, 2017 is INR 1,946 [as at March 31, 2016: INR Nil] Millions.

iv ECB of USD 20 Millions is repayable in three yearly installments starting from March 1, 2020 along with interest for the period. Interest rates are reset every month at the rate of 1 month USD LIBOR plus 100 bps p.a. The outstanding amount as at March 31, 2017 is INR 1,298 [as at March 31, 2016: INR Nil] Millions.

v ECB of USD 100 Millions is repayable in three yearly installments starting from March 27, 2021 along with interest for the period. Interest rates are reset every month at the rate of 1 month USD LIBOR plus 110 bps p.a. The outstanding amount as at March 31, 2017 is INR 6,488 [as at March 31, 2016: INR Nil] Millions.

b Rupee Loans:

i Loan from Department of Science and Technology is repayable in ten yearly equal installments starting from November 1, 2012 along with interest @ 3% p.a. Interest accrued up to October 31, 2012 will be payable in 5 yearly installments along with repayment installment starting from November 1, 2012. The outstanding amount as at March 31, 2017 is INR 51 [as at March 31, 2016: INR 61] Millions.

ii Biotechnology Industry Research Assistance Council [BIRAC] has sanctioned a loan of INR 12 Millions @ 2% p.a. interest rate. Out of the sanctioned amount, BIRAC has disbursed INR 4 Millions on December 28, 2015. The loan is repayable in ten equal half-yearly installments starting from August 25, 2019 along with interest accrued thereon. The outstanding amount as at March 31, 2017 is INR 4 [as at March 31, 2016: INR 4] Millions.

Defined benefit plan and long term employment benefit A General description:

Leave wages [Long term employment benefit]:

The leave encashment scheme is administered through Life Insurance Corporation of India’s Employees’ Group Leave Encashment cum Life Assurance [Cash Accumulation] Scheme. The employees of the company are entitled to leave as per the leave policy of the company. The liability on account of accumulated leave as on last day of the accounting year is recognised [net of the fair value of plan assets as at the balance sheet date] at present value of the defined obligation at the balance sheet date based on the actuarial valuation carried out by an independent actuary using projected unit credit method.

Gratuity [Defined benefit plan]:

The Company has a defined benefit gratuity plan. Every employee who has completed continuous services of five years or more gets a gratuity on death or resignation or retirement at 15 days salary [last drawn salary] for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

Note:4 - Deferred Tax:

A Break up of Deferred Tax Liabilities and Assets into major components of the respective balances are as under:

B The Net Deferred Tax Expense of INR 791 Millions for the year has been reversed [Previous Year Liabilities : INR 340 Millions has been charged] in the Statement of Profit and Loss.

C The Company offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Company has tax losses which arose in India of INR 2,581 Millions [as at March 31, 2016 - INR NIL {as at April 1, 2015 - INR 6,290 Millions}] that are available for offsetting against future taxable profits of the companies in which the losses arose. Unabsorbed Depreciation is allowed to be set-off for indefinite period. MAT Credit not recognised as at March 31, 2017 is INR 5,538 Millions.

Note: 5-Interim Dividend :

The Board of Directors, at its meeting held on March 7, 2017 declared and paid dividend of INR 3.20 per equity share of INR1/- each.

Note: 6 - Segment Information:

Segment Information has been given in the Consolidated Financial Statements of the Company. Hence, as per Ind AS-108 “Operating Segments” issued by the Institute of Chartered Accountants of India, no separate disclosure on segment information is given in these financial statements.

Note: 7-Details of Loans given, Investments made and guarantee given covered u/s 186(4) of the Companies Act, 2013:

A Details of loans and investments are given under the respective heads.

B Corporate guarantees given by the Company [#]:

Note: 8-Financial Instruments:

A Fair values 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 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 rely as little as possible on entity specific estimates.

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

B Financial assets and liabilities measured at fair value - recurring fair value measurements:

C Fair value of instruments measured at amortised cost:

Financial assets and liabilities measured at amortised cost for which fair values are disclosed:

Financial Assets:

The carrying amounts of trade receivables, loans and advances to related parties and other financial assets [other than investment in preference shares], cash and cash equivalents are considered to be the approximately equal to the fair values.

Financial Liabilities:

Fair values of loans from banks, other financial liabilities and trade payables are considered to be approximately equal to the carrying values. Fair values of investment in preference shares were calculated based on cash flows discounted using the applicable adjusted market interest rates.

D Valuation process and technique used to determine fair value:

Specific valuation techniques used to value financial instruments include:

a The use of quoted market prices for similar instruments.

b Fair value of Forward Contract value related to investment in a Joint Venture has been determined considering the estimated exercise price and value of the underlying entity. The valuation has been derived using the Present Value technique under Income Approach. The valuation includes significant unobservable inputs like Weighted Average Cost of Capital [WACC], revenue forecast, etc.

Significant unobservable inputs:

Budgeted Sales growth rate: 9% - 24% per annum

Weighted Average Cost of Capital: 15.5% per annum

For recurring fair value measurements using significant unobservable inputs [Level 3], the effect of the measurement on profit or loss or other comprehensive income for the period is provided below:

Sensitivity analysis for valuation of Forward Contract value related to investment in a Joint Venture:

B Risk Management:

The Company’s activities expose it to market risk, liquidity risk and credit risk. This note explains the sources of risk which the entity is exposed to and how the entity manages the risk and the related impact in the financial statements.

The Company’s risk management is done in close co-ordination with the board of directors and focuses on actively securing the Company’s short, medium and long-term cash flows by minimizing the exposure to volatile financial markets. Long-term financial investments are managed to generate lasting returns. The Company does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Company is exposed are described below:

a Credit risk:

Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. The Company is exposed to credit risk from investment in preference shares measured at amortised cost, loans and advances to related parties, trade receivables, bank deposits and other financial assets. The Company periodically assesses the financial reliability of the counter party taking into account the financial condition, current economic trends, analysis of historical bad debts and ageing of accounts receivable. Individual customer limits are set accordingly.

i Investments at Amortised Cost : They are strategic investments in the normal course of business of the company.

ii Bank deposits : The Company maintains its Cash and cash equivalents and Bank deposits with reputed and highly rated banks. Hence, there is no significant credit risk on such deposits.

iii Loans to related parties : They are given for business purposes. The Company reassesses the recoverability of loans periodically. Interest recoveries from these loans are regular and there is no event of defaults.

iv The counter party to the Forward Contract value related to investment in a Joint Venture is the associate entity of co-venturer of one of Joint Venture. The contract is governed by a shareholder’s agreement which has the needful representations by the counter party. The Company is exposed to insignificant credit risk in relation to the same.

v Trade Receivable: The Company trades with recognized and credit worthy third parties. It is the Company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an on-going basis with the result that the Company’s exposure to bad debts is not significant.

vi There are no significant credit risks with related parties of the Company. The Company is exposed to credit risk in the event of non-payment by customers. Credit risk concentration with respect to trade receivables is mitigated by the Company’s large customer base. Adequate expected credit losses are recognized as per the assessments. The history of trade receivables shows an allowance for bad and doubtful debts of INR 7 Millions as at March 31, 2017 [INR 10 Millions as at March 31, 2016]. The Company has made allowance of INR 6 Millions [Previous Year- INR 10 Millions], against trade receivables of INR 9,290 Millions [Previous year - INR 17,073 Millions].

b Liquidity risk:

a 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.

b Management monitors rolling forecasts of the Company’s 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 it operates. In addition, the Company’s 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.

Maturities of financial liabilities:

The tables below analyse the Company’s 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. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

c Foreign currency risk:

The Company is exposed to foreign exchange risk arising from foreign currency transactions, primarily with respect to the US Dollar and Euro. Foreign exchange risk arises from recognised assets and liabilities denominated in a currency that is not the Company’s functional currency. The Company’s operations in foreign currency creates natural foreign currency hedge. This results in insignificant net open foreign currency exposures considering the volumes and operations of the Company.

Sensitivity:

The sensitivity of profit or loss and equity to changes in the exchange rates arises mainly from foreign currency denominated financial instruments:

Sensitivity impact on profit after tax includes exposures for which the Company has the policy of capitalising exchange differences to reserves - FCMITDA or eligible items of Property, Plant and Equipment [refer note 2 for detailed policy]. The outstanding amount of such foreign currency loans are INR 4,156 [as at March 31, 2016 INR 6,120] Millions.

d Interest rate risk:

Liabilities:

The Company’s policy is to minimise interest rate cash flow risk exposures on long-term financing. As at March 31, 2017, the Company is exposed to changes in market interest rates through bank borrowings at variable interest rates. The Company’s investments in Fixed Deposits are at fixed interest rates.

Sensitivity *:

Below is the sensitivity of profit or loss and equity changes in interest rates:

e Price risk:

Exposure:

The Company’s exposure to price risk arises from investments in equity and mutual fund held by the Company and classified in the balance sheet at fair value through OCI and at fair value through profit or loss respectively. To manage its price risk arising from investments in equity securities and mutual fund, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the Company.

C Hedge:

Disclosure of effects of hedge accounting on financial position:

Hedged item - Changes in fair value of trade receivables attributable to changes in foreign exchange rates

Hedging instrument - Changes in fair value of certain foreign currency borrowings attributable to foreign exchange rates

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Company uses the dollar offset method to assess effectiveness. There was no hedge ineffectiveness in any of the periods presented above.

Note: 9-Capital Management:

The Company’ s capital management objectives are: a to ensure the Company’s ability to continue as a going concern b to provide an adequate return to shareholders c maintain an optimal capital structure to reduce the cost of capital.

Management assesses the Company’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. This takes into account the subordination levels of the Company’s various classes of debt. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

Loan covenants:

Under the terms of the major borrowing facilities, the Company is required to comply with the following financial covenants, based on consolidated financial information:

- Total Debt to Equity must be less than 2:1

This is in line with the Company’s covenants as agreed with external Lenders.

Note: 10- First Time Adoption of Ind AS:

The accounting policies set out in the note here have been applied in preparing the financial statements for the year ended March 31, 2017, the comparative information presented in these financial statements for the year ended March 31, 2016 and in the preparation of an opening Ind AS balance sheet at April 1, 2015 [the Company’s date of transition].

In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies [Accounting Standards] Rules, 2006 [as amended] and other relevant provisions of the Act [Indian GAAP]. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following notes.

Exemptions and exceptions availed:

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

A Deemed cost:

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment 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 after making necessary adjustments for consequential impacts of applying standards other than that of property, plant and equipment. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets. Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying values.

B Leases:

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material. The Company has elected to apply this exemption for such contracts/ arrangements.

C 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 investment in equity investments [other than investment in subsidiary].

D Estimates:

An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP [after adjustments to reflect any difference in accounting policies], unless there is objective evidence that those estimates were in error.

Ind AS estimates as at April 1, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP.

E Classification of financial assets:

As per the requirements of Ind AS 101 the Company has assessed classification of financial assets on the basis of the facts and circumstances that existed at the date of transition to Ind AS.

F De-recognition of financial assets and liabilities:

Ind AS 101 requires a first-time adopter to apply the de-recognition provisions of Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS. However, Ind AS 101 allows a first time adopter to apply the de-recognition requirements in Ind AS 109 retrospectively from a date of entity’s choosing; provided that the information needed to apply Ind AS 109 to financial assets or financial liabilities derecognised as a result of past transactions was obtained at the time of initially accounting for those transactions. The Company has elected to apply the de-recognition provision of Ind AS 109 prospectively from the date of transition to Ind AS.

G Government Loans:

As per Ind AS 101, if a first-time adopter did not, under its previous GAAP, recognise and measure a government loan at a below-market rate of interest on a basis consistent with Ind AS requirements, it shall use its previous GAAP carrying amount of the loan at the date of transition to Ind AS as the carrying amount of the loan in the opening Ind AS Balance Sheet. An entity shall apply Ind AS 109 to the measurement of such loans after the date of transition to Ind AS.

The Company has applied this exception to the loans from the government authorities existing as at April 1, 2015.

H Long term foreign currency Monetary items:

A first-time adopter may continue the policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognised in the financial statements for the period ending immediately before the beginning of the first Ind AS financial reporting period as per the previous GAAP. The Company has opted for the above exemption for the longterm foreign currency monetary items recognised upto April 1, 2016

Note: 11- Reconciliation with previous GAAP - Continued:

1 Fair valuation of Forward Contract value related to investment in a Joint Venture

Fair value of forward contract value related to investment in a Joint Venture is recognised under Ind AS and was not required to be recognised under previous GAAP.

The impact on this has resulted in increase of Equity by INR 1,267 Millions as at the date of transition to Ind AS and gain of INR 256 Millions in the Statement of Profit and Loss for the year ended March 31, 2016.

2 Fair valuation of investments in Mutual Funds

Under previous GAAP, investment in mutual funds, being current investments, were accounted at the lower of cost or fair value.

Under Ind AS, mutual funds are not equity instruments and the cash flows do not represent solely payments for principal and interest and hence are to be accounted at fair value through profit and loss.

The impact on this account has resulted in increase in Equity by INR 1 Million as at the date of transition to Ind AS.

3 Reversal of amortisation on capitalised foreign exchange differences on account of change in classification of certain financial assets

Under previous GAAP, foreign exchange gains/ losses on certain long term foreign currency monetary items were capitalised as foreign currency monetary items translation difference account [FCMITDA] in the Balance Sheet to be amortised over the period of respective monetary item as permitted by AS 11 and the effects of changes in foreign exchange rates of such items were routed through FCMITDA amortisation.

Under Ind AS, financial instruments are required to be classified into debt and equity as per the terms and conditions of the instrument.

Certain financial instruments have been classified as equity investments under Ind AS and accordingly recognised at the historical exchange rates. Consequently,

a the foreign exchange gains amortised in Statement of Profit and Loss under previous GAAP on these items of INR 36 millions for the year ended March 31, 2016 have been reversed.

b the unamortised foreign exchange gains accumulated as FCMITDA under Reserve and Surplus under previous GAAP on these items of INR 248 Millions have been reversed.

4 Preference shares issued by JV to the Company

Under previous GAAP, the holder recognised investment in preference shares at the transaction price reduced by repayments made.

Under Ind AS, investments in preference shares are financial assets as per Ind AS 109. Such financial assets are not equity instruments and the cash flows represent solely payments for principal and interest, as such they are initially recognised at fair value and subsequently at amortised cost. The difference between the fair value and the transaction price is accounted for basis the underlying reason for deviation from fair value. In the case of investment in preference shares of joint venture, the difference is accounted for as an additional investment in the joint venture. Subsequently, the investment is measured at amortised cost resulting into finance income in Statement of Profit and Loss.

The net impact of such transaction in the equity of the Company is INR 32 Millions as at the date of transtition of Ind AS and finance income of INR 18 Millions in the Statement of Profit and Loss for the year ended March 31, 2016.

5 Interest free loan to a wholly owned subsidiary

Under previous GAAP, loan assets were recognised at the transaction price reduced by repayments made.

Under Ind AS, loans are financial assets and are initially recoginsed at fair value. The difference between the fair value and the transaction price is accounted for basis the underlying reason for deviation from fair value. In the case of loan given to a wholly owned subsidiary, the difference is accounted for as an additional investment in the subsidiary. Subsequently, the loan given is measured at amortised cost resulting into finance income in Statement of Profit and Loss.

The net impact of such transaction in the equity of the Company is INR 38 Millions as at the date of transtition of Ind AS and finance income of INR 11 Millions in the Statement of Profit and Loss for the year ended March 31, 2016.

6 Loss on sale of investment to a wholly owned subsidiary

Under previous GAAP, loss or gain arising on sale or purchase of inter company investments are recognised to the Statement of Profit and Loss. Under Ind AS, such loss or gain are accounted for as an investment in the subsidiary to whom the investment is transferred.

The net impact of such transaction is INR 235 Millions in the Statement of Profit and Loss for the year ended March 31, 2016.

7 Fair valuation of investments in equity instruments through OCI

Under previous GAAP, long term investments in equity shares were carried at cost less provision for diminution (other than temporary), wherever applicable.

Under Ind AS, investments in equity instruments (other than subsidiaries and joint ventures) are required to be recognised and measured at fair value through profit and loss or can be irrevocably designated as fair value through other comprehensive income. The Company has designated investment in certain equity instruments at fair value through other comprehensive income.

Consequently, the impact of INR 387 millions has been recognised in retained earnings at the transition date and INR 222 Millions were recognised in OCI for the year ended March 31, 2016.

8 Proposed dividend [including Corporate Dividend Tax]

Under previous GAAP, dividend on equity shares recommended by the Board of Directors after end of the reporting period but before the date of approval of financial statements was considered as an adjusting event and consequently, provision for proposed dividend was recognised as a liability in the financial statements in the reporting period relating to which dividend was proposed.

Under Ind AS, such dividend is recognised in the reporting period in which the same is approved by the members in a general meeting. Consequently, the impact of INR 2,907 Millions has been recognised in retained earnings at the transition date.

9 Actuarial loss on employee defined benefit plan recognised in OCI

Under previous GAAP, remeasurement of defined benefit plans (gratuity), arising primarily due to change in actuarial assumptions was recognised as employee benefits expense in the Statement of Profit and Loss.

Under Ind AS, such remeasurement (excluding the net interest expenses on the net defined benefit liability) of defined benefit plans is recognised in OCI. Consequently, the related tax effect of the same is also recognised in OCI.

For the year ended March 31, 2016, remeasurement of gratuity liability resulted in a actuarial loss of INR 216 Millions which has now been reduced from employee benefits expense in the Statement of Profit and Loss and recognised separately in OCI.

The above changes do not affect Equity as at date of transition to Ind AS and as at March 31, 2016.

10 Deferred Tax adjustments

Under previous GAAP, Deferred tax was accounted as per the income statement approach which required creation of deferred tax asset/ liability on temporary differences between taxable profit and book profit.

Under Ind AS, deferred tax is accounted as per the Balance Sheet approach which requires creation of deferred tax asset/ liability on temporary differences between the carrying amount of an asset/ liability in the Balance Sheet and its corresponding tax base. The adjustment in equity and net profit, as discussed above, resulted in additional temporary differences on which deferred taxes are calculated.

The impact of these has resulted in recognition of deferred tax liability of INR 270 Millions as at the date of transition to Ind AS and deferred tax liability of INR 101 Millions in the Statement of Profit and Loss for the year ended March 31, 2016.

Others: Sale of goods:

a Under the IGAAP, revenue from sale of products was presented exclusive of excise duty. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. The excise duty paid is presented on the face of the Statement of Profit and Loss as part of expenses.

b Under Ind AS, the Company recognises revenue at the fair value of consideration received or receivable. Any sales incentive, free goods, discounts or rebates in any form given to customers is considered as selling price reductions and is accounted as reduction from revenue.

Under previous IGAAP, some of these costs were included in “other expenses”. Consequently, for the year ended March 31, 2016, there is decrease in “other expenses” of INR 33 Millions with a corresponding reduction in “Sale of Products”.

Statement of Cash Flows:

The transition from IGAAP to Ind AS has not had a material impact on the Statement of cash flows.

Note: 12- Merger of Zydus Healthcare Limited and Biochem Pharmaceutical Industries Limited:

Pursuant to the Scheme of Amalgamation [Scheme 1] between Zydus Healthcare Limited [ZHL] and Biochem Pharmaceutical Industries Limited [Biochem], both 100% subsidiary companies, which was sanctioned by the Hon’able National Company Law Tribunal [NCLT] vide its order dated March 15, 2017 and effective date being March 27, 2017, Biochem has been amalgamated with ZHL w.e.f. the appointed date being, March 31, 2016. In accordance with the Scheme 1, the Company will receive 223,500 Equity shares of INR 100/- each in ZHL of exchange of 7,500,000 Equity shares of INR 10/- each of Biochem.

Note: 13- Demerger of India Human Formulations Undertaking [‘IHFU’]:

Pursuant to the Scheme of Arrangement u/s 230 to 232 of the Companies Act, 2013 between the Company, Zydus Healthcare Limited [ZHL], a 100% subsidiary of the Company and their respective shareholders and creditors [‘Scheme-2’] as sanctioned by the Hon’able National Company Law Tribunal, Ahmedabad Bench [‘NCLT’] vide its order dated May 18, 2017 and effective date being May 19, 2017, the India Human Formulations Undertaking [‘IHFU’] of the Company comprising all the businesses, undertakings, activities, properties and liabilities as specified in the Scheme-2 pertaining to the India Human Formulations Business of the Company was transferred to and vested in ZHL on a going concern basis by way of a Slump Sale for a lump sum cash consideration, with effect from April 1, 2016, the appointed date. As per the generally accepted accounting practice, Scheme 2 has accordingly been given effect to in these financial statements.

In compliance of the Scheme-2, the Company has reduced, from its books, the book value of assets and liabilities pertaining to India Human Formulations Undertaking as on the appointed date and transferred to ZHL and therefore the figures of the current financial year are not comparable with those of previous financial year.

Note: 14- Acquisition of Sentynl Therapeutics Inc. :

The Company has incorporated Zydus Holdings Inc. [ZHI] as a wholly owned subsidiary in the US on December 5, 2016. On January 19, 2017, pursuant to the Share Purchase Agreement [‘SPA’], ZHI acquired Sentynl Therapeutics Inc. [Sentynl], a US based specialty pharmaceutical company specialised in the marketing of products in the pain management segment. Post-acquisition, on same day, ZHI has been merged with Sentynl. Sentynl is now the wholly owned subsidiary of the Company.

Note: 15- Investment in Zydus International Private Limited:

Pursuant to the Share Purchase Agreements [‘SPAs] entered into by the Company on March 23, 2017 with Zydus International Private Limited, Ireland, a 100% subsidiary of the Company [‘ZIPL’], the Company has acquired 100% of the common stock of Zydus Pharmaceuticals (USA) Inc. [‘ZPUI’], 85% of the common stock of Zydus Noveltech Inc. [‘ZNI’] and entire membership interest in Zydus Healthcare (USA) LLC [‘ZHUL] from ZIPL for cash consideration.

Also, pursuant to the Share Purchase Agreement [‘SPA’] entered into by the Company on March 28, 2017 with ZAHL Europe B.V., a 100% subsidiary of the Company held through ZIPL, the Company has acquired 100% of the shares of Bremer Pharma GmbH [‘Bremer’], from ZAHL Europe B.V. for cash consideration. Pursuant to these, ZPUI, ZNI, ZHUL and Bremer have become direct overseas subsidiaries of the Company.


Mar 31, 2014

I-Company overview:

Cadila Healthcare Limited ["the Company"] operates as an integrated pharmaceutical company with business encompassing the entire value chain in the development, production, marketing and distribution of pharmaceutical products. The product portfolio of the Company includes API, veterinary and human formulations. The Company''s shares are listed on the National Stock Exchange of India Limited [NSE], Bombay Stock Exchange Limited [BSE] and the Ahmedabad Stock Exchange Limited [ASE].

Note: 1-Deffered Tax:

A The Net Deferred Tax Liabilities of Rs. Nil [Previous Year: Rs. 4 Millions] for the year has been provided in the statement of Profit and Loss.

B The Company has substantial unabsorbed depreciation allowances available for set off in future for an indefinite period. Based on the review of the business plan, there is a convincing evidence that there would be sufficient future taxable income against which such deferred tax assets can be realised. However, as a matter of prudence, such deferred tax assets are recognised only to the extent of net deferred tax liability arising for the year.

INR - Millions

As at March 31

2014 2013

Note: 2-Contingent Liabilities and commitments [to the extent not provided for]:

A Contingent Liabilities:

a Claims against the Company not acknowledged as debts [Net of advance of Rs. 4 {Previous Year: Rs. 5} Millions]

[Including Rs. 2 {as at March 31, 2013: Rs. 1} Millions in respect of Amalgamated {*} Companies] 92 89

b i In respect of guarantees given by Banks and/ or counter guarantees given by the Company 32 84

ii In respect of letter of comforts/ corporate guarantees given by the Company to Banks for the outstanding dues of loans availed by some of the subsidiary companies 11,095 10,510

c Other money for which the company is contingently liable:

i In respect of the demands raised by the Central Excise, State Excise & Service Tax Authority [Net of advance of Rs. 11 {Previous Year: Rs. 11} Millions]

[Including Rs. 9 {as at March 31, 2013: Rs. 9} Millions in respect of Amalgamated {*} Companies] 258 184

ii In respect of the demands raised by the Ministry of Chemicals & Fertilizers, Govt. of India under Drug Price Control Order, 1979/ 1995 for difference in actual price and price of respective bulk drug allowed while fixing the price of certain formulations and disputed by the Company, which the Company expect to succeed based on the legal advice [Net of advance of Rs. 264 {Previous Year: Rs. 144} Millions]

[Including Rs. 49 {as at March 31, 2013: Rs. 49} Millions in respect of Amalgamated {*} Companies] 227 184

iii In respect of Income Tax matters pending before appellate authorities which the Company expects to succeed, based on decisions of Tribunals/ Courts [Net of advance of Rs. 33

{Previous Year: Rs. 74} Millions] 28 25

iv In respect of Sales Tax matters pending before appellate authorities/ Court which the Company expects to succeed, based on decisions of Tribunals/ Courts [Net of advance of Rs. 50 {Previous Year: Rs. 50} Millions] 55 41

v Letters of Credit for Imports 56 50

vi The Company has imported certain capital equipment at concessional rate of custom duty under "Export promotion of Capital Goods Scheme" of the Central Government. The Company has undertaken an incremental export obligation to the extent of US $ 10 Millions [equivalent to Rs. 611 Millions approx. {Previous Year: US $ 35 Millions (equivalent to Rs. 1,905 Millions approx.)}] I to be fulfilled during a specified period as applicable from the date of imports. The unprovided liability towards custom duty payable thereon in respect of unfulfilled export obligations 102 366

[*] represents contingent liabilities taken over by the Company under the Scheme of Arrangement and Amalgamation of Cadila Laboratories Limited, and erstwhile Cadila Chemicals Limited, Cadila I Antibiotics Limited, Cadila Exports Limited and Cadila Veterinary Private Limited with the Company I w.e.f. June 1, 1995.

B Commitments:

a Estimated amount of contracts remaining to be executed on capital account and not provided for [Net of Advances of Rs. 59 {Previous Year: Rs. 90} Millions] 477 779

Note: 3- Proposed Dividends:

The Board of Directors, at its meeting held on May 16, 2014, recommended the final dividend of Rs. 9/- per equity share of Rs. 5/- each.

Note: 4-Segment Information:

Segment Information has been given in the Consolidated Financial Statements of the Company. Hence, as per Accounting Standard- 17 issued by the Institute of Chartered Accountants of India, no separate disclosure on segment information is given in these financial statements.

Note: 5

In terms of the Scheme of Amalgamation [the Scheme] of Liva Healthcare Limited, Zydus Animal Health Limited and Zydus Pharmaceuticals Limited [transferor companies], which was sanctioned by the Orders of the Hon''ble High Court of Gujarat, effective date under the Scheme being August 26, 2013, transferor companies have been amalgamated with the Company w.e.f. the appointed date under the Scheme, being April 1, 2012.

Note: 6

The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated February 8, 2011 and February 21, 2011 respectively has granted a general exemption from compliance with Section 212 of the Companies Act, 1956, subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to exemption. Necessary information relating to subsidiaries has been included in the Consolidated Financial Statements.

Note: 7

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


Mar 31, 2013

1-Company overview:

Cadila Healthcare Limited ["the Company"] operates as an integrated pharmaceutical company with business encompassing the entire value chain in the development, production, marketing and distribution of pharmaceutical products. The product portfolio of the Company includes API, veterinary and human formulations. The Company''s shares are listed on the National Stock Exchange of India Limited [NSE], Bombay Stock Exchange Limited [BSE] and the Ahmedabad Stock Exchange Limited [ASE].

Note: 2-Interim Dividends:

The Board of Directors, at its meeting held on May 30, 2013, has declared an interim dividend of Rs. 7.50 per equity share of Rs. 5/- each.

Note: 3-Segment Information:

Segment Information has been given in the Consolidated Financial Statements of the Company. Hence, as per Accounting Standard-17 issued by the Institute of Chartered Accountants of India, no separate disclosure on segment information is given in these financial statements.

Note: 4-Related Party Transactions:

A Name of the Related Parties and Nature of the Related Party Relationship:

a Subsidiary Companies/ Concerns:

Dialforhealth India Limited

Dialforhealth Unity Limited

Dialforhealth Greencross Limited

German Remedies Limited

Zydus Pharmaceuticals Limited [#]

Zydus Animal Health Limited [#]

Zydus Wellness Limited

M/s. Zydus Wellness-Sikkim, a Partnership Firm

Liva Healthcare Limited [#]

Zydus Technologies Limited

Biochem Pharmaceutical Industries Limited

M/s. Zydus Healthcare, a Partnership Firm

Zydus Lanka (Private) Limited [Sri Lanka]

Zydus International Private Limited [Ireland]

Zydus Netherlands B.V. [the Netherlands]

Zydus France, SAS [France]

Etna Biotech S.R.L. [Italy]

Zydus Pharmaceuticals (USA) Inc. [USA]

Nesher Pharmaceuticals (USA) LLC [USA]

Zydus Healthcare (USA) LLC [USA]

Zydus Noveltech Inc. [USA]

Hercon Pharmaceuticals LLC [USA]

Zydus Healthcare S.A. (Pty) Ltd [South Africa]

Simayla Pharmaceuticals (Pty) Ltd [South Africa]

Script Management Services (Pty) Ltd [South Africa]

Zydus Nikkho Farmaceutica Ltda. [Brazil]

Zydus Pharma Japan Co. Ltd. [Japan]

Laboratorios Combix S.L. [Spain]

Zydus Pharmaceuticals Mexico SA De CV [Mexico]

Zydus Pharmaceuticals Mexico Services Company SA De C.V.[Mexico]

ZAHL B.V. [the Netherlands]

ZAHL Europe B.V. [the Netherlands]

Bremer Pharma GmbH [Germany]

b Joint Venture Companies:

Zydus BSV Pharma Private Limited

Zydus Takeda Healthcare Private Limited

[Formerly known as Zydus Nycomed Healthcare Private Limited]

Zydus Hospira Oncology Private Limited

Bayer Zydus Pharma Private Limited

c Directors and their relatives:

Shri Pankaj R. Patel

Dr. Sharvil P. Patel

Chairman & Managing Director [ C.M.D. ]

Deputy Managing Director & son of C.M.D.

d Enterprises significantly influenced by Directors and/ or their relatives:

Cadmach Machinery Company Private Limited

Zydus Hospitals and Healthcare Research Private Limited

Zydus Hospitals (Vadodra) Private Limited

Zydus Hospitals (Rajkot) Private Limited

MabS Biotech Private Limited

Zydus Infrastructure Private Limited

Cadila Laboratories Private Limited

Pripan Investment Private Limited

Western Ahmedabad Effluent Conveyance Company Private Limited Zest Aviation Private Limited Zandra Infrastructure LLP Zydus Hospital LLP M/s. C. M. C. Machinery M/s. Cadam Enterprises

Note: 5

A In terms of the Scheme of Amalgamation [the Scheme] of:

a Liva Healthcare Limited [LHL] is engaged in the business of marketing and distribution of pharmaceutical products,

b Zydus Animal Health Limited [ZAHL] is engaged in the business of manufacturing, marketing and distribution of veterinary pharmaceutical products, and c Zydus Pharmaceuticals Limited [ZPL] was engaged in the business of distribution of drugs and pharmaceuticals products in earlier years [all three wholly owned subsidiaries of the Company, collectively referred to as the Transferor Companies] which was sanctioned by the Orders of the Hon''able High Court of Gujarat dated August 23, 2013, effective date under the Scheme being August 26, 2013, Transferor Companies have been amalgamated with the Company w.e.f. the Appointed Date under the Scheme, being April 1, 2012.

B In accordance with the Scheme,

a All the assets and liabilities of the Transferor Companies stand transferred to and vested in the Company with effect from the Appointed Date at their carrying amounts appearing in the books of the Transferor Companies except:

i in case of land and buildings, which are recorded at their estimated market values as at the Appointed Date,

ii adjustments are made wherever necessary to conform to the accounting policies and methods adopted by the Company.

b The amalgamation has been accounted under the "Purchase Method" in terms of Accounting Standard [AS] - 14 on "Accounting for

Amalgamations".

c All the issued equity shares of LHL, ZAHL and ZPL held by the company have been extinguished.

d The shortfall in the aggregate value of the assets over the aggregate value of the liabilities of the Transferor Companies taken over by the Company, after adjusting carrying amount of investments in the Transferor Companies held by the Company as on the Effective Date has been debited to Goodwill account to the extent of Rs. 102 Millions. e Such goodwill arising on account of amalgamation as referred to in clause (d) above will be amortised over a period of five years in compliance with the accounting treatment as prescribed under AS - 14 referred earlier. f Pending completion of the formalities of transfer of titles of some of the assets taken over under the Scheme, such assets remain included in the books of the Company under the name of the respective Transferor Companies.

C In view of the aforesaid Scheme of Amalgamation w.e.f. April 1, 2012, the figures of the current year are not comparable with those of Previous year.

Note: 6

The Ministry of Corporate Affairs, Government of India, vide General Circular No.2 and 3 dated February 8, 2011 and February 21, 2011 respectively has granted a general exemption from compliance with Section 212 of the Companies Act, 1956, subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to exemption. Necessary information relating to subsidiaries has been included in the Consolidated Financial Statements.

Note: 7

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


Mar 31, 2012

A Securities and Terms of Repayment for Secured Long Term Borrowings: a Debentures:

The Company has issued the following Secured Redeemable Non-convertible Debentures ["Debentures"]:

i 500 debentures each of Rs. 1 Million allotted on December 4, 2009, which carry interest rate of 8.5% p.a. payable on half- yearly basis. These debentures are redeemable at par at the end of five years from the date of allotment.

ii 1,750 debentures each of Rs. 1 Million allotted on July 14, 2011, which carry interest rate of 9.7% p.a., payable on half-yearly basis. These debentures are redeemable at par at the end of five years from the date of allotment, with an option to the Company for redemption at the end of third year from the date of allotment. If the Company exercises its option, these debentures will be redeemed at the end of third year from its date of allotment.

These debentures are secured by way of mortgage on specific trade mark[s] and pari-passu charge on land of the Company situated at village Manipur in the State of Gujarat.

b Rupee Term Loans:

Rupee Term Loan of Rs. 750 Millions is secured by an equitable mortgage of immovable properties and hypothecation of movable plant and machineries of the Company's Formulation Unit at village Moraiya in the State of Gujarat on pari-passu basis with other lenders. The loan is further secured by way of a hypothecation of a specific brand. The loan is repayable in three yearly installments each of Rs. 250 Millions after a moratorium period of three years from the date of its origination [April 29, 2009] along with accrued interest for the period. Interest rates are reset at the end of each six months from the date of origination, at the rate applicable for 5 years Government Security yield 3.45% p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 750 [as at March 31, 2011: Rs. 750] Millions.

c Foreign Currency Loans:

i External Commercial Borrowing [ECB] of USD 8 Millions was secured by an equitable mortgage of immovable properties and hypothecation of movable plant and machineries of the Company's Formulation Unit at village Moraiya in the State of Gujarat on pari-passu basis with other lenders. The loan was repayable in six half yearly installments, with first five installments each of Rs. 45 Millions [USD 1 Million] and the sixth installment of Rs. 132 Millions [USD 3 Millions] after a moratorium period of forty two months from the date of its origination [December 29, 2008] along with accrued interest for the period. Interest rates are reset every three months at the rate of 3 months USD LIBOR plus 450 bps p.a. The loan was fully repaid on September 29, 2011 [as at March 31, 2011: Rs. 357 Millions].

ii External Commercial Borrowing [ECB] of USD 10 Millions was secured by hypothecation on movable plant and machineries of the Company's Formulation Unit at village Moraiya in the State of Gujarat on pari-passu basis with other lenders. The loan is further secured by way of hypothecation on a specific trade mark of the Company. The loan was repayable in three equal installments at the end of third, fourth and fifth year from the date of its origination [May 14, 2009] along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 450 bps p.a. The loan was fully repaid on September 15, 2011 [as at March 31, 2011: Rs. 446 Millions].

iii External Commercial Borrowing [ECB] of USD 10 Millions was secured by hypothecation on movable plant and machineries of the Company's Formulation Unit at village Moraiya in the State of Gujarat on pari-passu basis with other lenders. The loan is further secured by way of hypothecation on a specific trade mark of the Company. The loan was repayable in three equal installments at the end of second, third and fourth year from the date of its origination [2nd February 2010] along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 235 bps p.a. The loan was fully repaid on March 22, 2012 [as at March 31, 2011: Rs. 446 Millions].

iv External Commercial Borrowing [ECB] of USD 10 Millions is secured by an equitable mortgage of immovable properties and hypothecation of movable plant and machineries of the Company's API Unit at village Dabhasa/ Umraya in the State of Gujarat. The loan is further secured by way of hypothecation on a specific trade mark of the Company. The loan is repayable in five half yearly installments after initial moratorium period of four years from the date of its origination [April 5, 2007] along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 71.5 bps p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 305 [as at March 31, 2011: Rs. 446] Millions.

v External Commercial Borrowing [ECB] of USD 27 Millions is secured by hypothecation of specific trademarks of the Company. The loan is repayable in three half yearly equal installments starting from April 12, 2012 along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 77.5 bps p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 1374 [as at March 31, 2011: Rs. 1205] Millions.

vi External Commercial Borrowing [ECB] of USD 15 Millions is secured by hypothecation of a specific trade mark of the Company. The loan is repayable on the maturity of loan at the end of five years and one day from the date of its origination [August 19, 2010] along with accrued interest for the period. Interest rates are reset every three months at the rate of 3 months USD LIBOR plus 275 bps p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 764 [as at March 31, 2011: Rs. 670] Millions.

vii External Commercial Borrowing [ECB] of USD 8 Millions is secured by hypothecation of a specific trade mark of the Company. The loan is repayable in six half yearly installments, first five installments each of Rs. 51 Millions [USD 1 Million] and the last installment of Rs. 152 Millions [USD 3 Millions] to commence from June 29, 2012 along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 160 bps p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 407 [as at March 31, 2011: Nil] Millions.

viii External Commercial Borrowing [ECB] of USD 15 Millions is secured by hypothecation of a specific trade mark of the Company. The loan is repayable in three half yearly installments after initial moratorium period of five years from the date of its origination [October 17, 2011] along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 205 bps p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 764 [as at March 31, 2011: Nil] Millions.

ix External Commercial Borrowing [ECB] of USD 20 Millions is secured by English mortgage of immovable properties and hypothecation of movable plant and machineries of the Company's Formulation Unit at village Moraiya in the State of Gujarat on pari-passu basis with other lenders. The loan is repayable in five half yearly installments each of Rs. 204 Millions [USD 4 Millions] after a moratorium period of 30 months from the date of its origination [November 15, 2011] along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 145 bps p.a. Facility fees of 0.72% to be paid in 4 equal installments with first four interest payment date. The outstanding amount of loan as at March 31, 2012 is Rs. 1018 [as at March 31, 2011: Nil] Millions.

x External Commercial Borrowing [ECB] of USD 6.67 Millions will be secured by hypothecation of specific trademarks] of the Company. The loan is repayable in two equal yearly installments starting from February 2, 2013 along with accrued interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 150 bps p.a. The outstanding amount of loan as at March 31, 2012 is Rs. 340 [as at March 31, 2011: Nil] Millions.

B Terms of Repayment for Unsecured Long Term Borrowings:

a Interest Free Deemed loan against deferment of sales tax from a financial institution is guaranteed personally by the Chairman and Managing Director of the Company and another loan is interest free sales tax deferred loan, repayable in seven equal installments starting from May 30, 2009. The outstanding amount as at March 31, 2012 is Rs. 213 [as at March 31, 2011: Rs. 285] Millions.

b Loan from Department of Science and Technology is repayable in ten yearly equal installments starting from November 1, 2012 along with interest @ 3% p.a. Interest accrued up to October 31, 2012 will be payable in 5 yearly installments along with repayment installment starting from November 1, 2012. The outstanding amount as at March 31, 2012 is Rs. 38 [as at March 31, 2011: Rs. 38] Millions.

c External Commercial Borrowing [ECB] of USD 10 Millions is repayable in three equal yearly installments starting from May 14, 2012 along with interest for the period. Interest rates are reset every six months at the rate of 6 months USD LIBOR plus 150 bps p.a. The outstanding amount as at March 31, 2012 is Rs. 509 [as at March 31, 2011: Nil] Millions.

Disclosure pursuant to Accounting Standard-15 [Revised] "Employee Benefits": Defined benefit plan and long term employment benefit A General description:

Leave wages [Long term employment benefit]:

The leave encashment scheme is administered through Life Insurance Corporation of India's Employees' Group Leave Encashment cum Life Assurance [Cash Accumulation] scheme. The employees of the company are entitled to leave as per the leave policy of the company. The liability on account of accumulated leave as on last day of the accounting year is recognised [net of the fair value of plan asset as at the balance sheet date] at present value of the defined obligation at the balance sheet date based on the actuarial valuation carried out by an independent actuary using projected unit credit method.

Gratuity [Defined benefit plan]:

The Company has a defined benefit gratuity plan. Every employee who has completed continuous services of five years or more, gets a gratuity on death or resignation or retirement at 15 days salary [last drawn salary] for each completed year of service. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

Note: 1-Foreign Currency Monetary Items Translation Difference Account:

The Company had opted for accounting the exchange rate differences arising on the Long Term Foreign Currency Monetary Items [LTFCMI] in accordance with the notification dated March 31, 2009 under the Companies [Accounting Standards] Amendment Rules, 2009 on Accounting Standard 11 relating to "the effects of changes in foreign exchange rates". Accordingly, the effects of exchange rate differences arising from long term foreign currency loans availed for funding acquisition of fixed assets have been adjusted to the cost of respective items of fixed assets. While, in other cases, such exchange rate difference on the LTFCMI is transferred to "Foreign Currency Monetary Items Translation Difference Account" [FCMITDA], which is amortised during the tenure of the respective LTFCMI but not beyond March 31, 2020.

INR - Millions

Figures as at end of Current Reporting Previous Reporting Period Period

March 31 2012 2011

Note: 2-Contingent Liabilities and commitments [to the extent not provided for]:

A Contingent Liabilities:

a Claims against the Company not acknowledged as debts [Including Rs. 1 {as at March 31, 2011: Rs. 1} Million in respect of Amalgamated {*} Companies] 57 57

b i In respect of guarantees given by Banks and/or counter guarantees given by the Company 151 150

ii In respect of letter of comforts/ corporate guarantees given by the Company to Banks for the outstanding dues of loans availed by some of the subsidiary companies and a joint venture company 8,752 4,643

c Other money for which the company is contingently liable:

i In respect of the demands raised by the Central Excise, State Excise & Service Tax Authority [Including Rs. 9 {as at March 31, 2011: Rs. 9} Millions in respect of Amalgamated {*} Companies] 41 40

ii In respect of the demands raised by the Ministry of Chemicals & Fertilizers, Govt. of India under Drug Price Control Order, 1979/1995 for difference in actual price and price of respective bulk drug allowed while fixing the price of certain life saving formulations and disputed by the Company, which the Company expect to succeed based on the legal advice [Including Rs. 51 {as at March 31, 2011: Rs. 51} Millions in respect of Amalgamated {*} Companies] 328 319

iii In respect of Income Tax matters pending before appellate authorities which the Company expects to succeed, based on decisions of Tribunals/ Courts. 917 66

iv In respect of Sales Tax matters pending before appellate authorities/ Court which the Company expects to succeed, based on decisions of Tribunals/ Courts. 36 93

v Letters of Credit for Imports 46 2

vi The Company has imported certain capital equipment at concessional rate of custom duty under "Export promotion of Capital Goods Scheme" of the Central Government. The Company has undertaken an incremental export obligation to the extent of US $ 19 Millions [equivalent to Rs. 971 Millions approx.{Previous reporting period: US $ 4 (equivalent to Rs. 163 Millions approx.)}] to be fulfilled during a specified period as applicable from the date of imports. The unprovided liability towards custom duty payable thereon in respect of unfulfilled export obligations 156 5

[*] represents contingent liabilities taken over by the Company under the Scheme of Arrangement and Amalgamation of Cadila Laboratories Limited, and erstwhile Cadila Chemicals Limited, Cadila Antibiotics Limited, Cadila Exports Limited and Cadila Veterinary Private Limited with the Company w.e.f. June 1, 1995. B Commitments:

a Estimated amount of contracts remaining to be executed on capital account and not provided for

[Net of Advances] 2,082 651

Note: 3-Dividends proposed to be distributed:

The Board of Directors, in its meeting held on May 10, 2012, recommended the final dividend of Rs. 7.50 per equity share of Rs. 5/- each.

B i For accounting of derivative instruments the company has been following Accounting Standard 11 "The effects of changes in foreign exchange rates" issued by Institute of Chartered Accountants of India ("ICAI"). However, pursuant to ICAI Announcement on "Accounting for Derivatives" and recommendation for early adoption of Accounting Standard 30 "Financial Instruments: Recognition and Measurement", the Company has voluntarily adopted the Standard with effect from October 1, 2011. The company has designated derivative instruments and non derivative financial liabilities as cash flow hedge. This has resulted in change in accounting policy followed by the company. Consequent to this, the Company's net profit after tax for the reporting period is higher by Rs. 24 Millions. ii The effective portion on fair valuation of derivative instruments and non derivative financial liabilities designated as cash flow hedge, amount to Rs. 275 Millions is shown under "Hedge Reserve" under "Reserves and Surplus".

Note: 4-Segment Information:

Segment Information has been given in the Consolidated Financial Statements of the Company. Hence, as per Accounting Standard-17 issued by the Institute of Chartered Accountants of India, no separate disclosure on segment information is given in these financial statements.

Note: 5 The Ministry of Corporate Affairs, Government of India, vide General Circular No.2 and 3 dated February 8, 2011 and February 21, 2011 respectively has granted a general exemption from compliance with Section 212 of the Companies Act, 1956, subject to fulfillment of conditions stipulated in the circular. The Company has satisfied the conditions stipulated in the circular and hence is entitled to exemption. Necessary information relating to subsidiaries has been included in the Consolidated Financial Statements.

Note: 6 The Revised Schedule VI has become effective from April 1, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous reporting period's figures have been regrouped/ reclassified wherever necessary to correspond with the current reporting period's classifications/ disclosure.


Mar 31, 2010

1 The Company has opted for accounting the exchange rate differences arising on the Long Term Foreign Currency Monetary Items [ LTFCMI ] in accordance with the notification dated March 31,2009 under the Companies 1 Accounting Standards ] Amendment Rules, 2009 on Accounting Standard 11 relating to "the effects of changes in foreign exchange rates". Accordingly, the effects of exchange rate differences arising from long term foreign currency loans availed for funding acquisition of fixed assets have been adjusted to the cost of respective items of fixed assets. While, in other cases, such exchange rate difference on the LTFCMI is transferred to "Foreign Currency Monetary Items Translation Difference Account [FCMITDA J, which is amortised during the tenure of the respective LTFCMI but not beyond March 31,2011.

2 During February, 2010, a fire broke at one of the warehouse of the Company. The Company is in process of lodging a claim with the insurance company, amounting to Rs. 195 Millions [ Mio ] as estimated by the company. Pending the final settlement this has been shown as "Insurance Claim Receivable" under "Loans & Advances". The difference, if any, on settlement of claim wilt be effected in Profit and Loss account.

3 The grant-in-aid received amounting to Rs. 39 million from Ozone Cell, Ministry of Environment and Forests for meeting the expenditure incurred towards activities carried out in relation to phasing out of Chlorofiuorocabons (CFCs) in the manufacture of Pharmaceutical Metered Dose Inhalers (MDIs) is treated as revenue in nature and accordingly is shownunder the head "Other Income" in the Profit and Loss Account.

4 The Company has imported certain capital equipments at concessional rate of custom duty under "Export Promotion of Capital Goods Scheme" of the Central Government. The Company has undertaken an incremental export obligation to the extent of US $ 2 Millions {equivalent to Rs. 105 Millions Approx.} [ Previous Year US $ 0.15 {equivalent to Rs. 8 Millions approx.} ] to be fulfilled during a specified period as applicable from the date of imports. The liability towards custom duty payable thereon in respect of unfulfilled export obligations as on March 31, 2010 of Rs. 17 [ as at 31-03-09 Rs. 13 ] Millions is not provided for.

5 The Company has taken various residential / office premises / godowns under operating lease or leave and license agreement. The lease terms in respect of such premises are on the basis of individual agreement entered into with the respective landlords. The Company has given refundable interest free security deposit in accordance with the agreed terms. The lease payments are recognised in the profit and loss account under" Rent" in schedule 16.

6 The Company has invested Rs. 50 Millions and given loans & advances of Rs. 131 [ As at 31-03-09 Rs. 122 ] Millions to Dialforhealth India Ltd. [DIL], a wholly owned subsidiary of the Company. The accumulated losses as at March 31, 2010 amounting to Rs. 105 f As at 31-03-09 Rs. 102 ] Millions has exceeded the net worth of DIL. However having regard to the long term strategic investment, the diminution in the value of investments in DIL is considered to be temporary and loans and advances are considered good and accordingly no provision has been made.

7 A Provision for product warranty claims in respect of the products sold during the year is made on the basis of managements estimation of probable customer claims in respect thereof considering the estimated stock lying with retailers. The Company does not expect any reimbursement of such claims in future.



8 Contingent liabilities not provided for: INR-Millions

As at March 31.

2010 2009

A In respect of guarantees given by Banks and counter guarantees given by the Company. 135 107

B In respect of letter of comforts / corporate guarantees given by the Company to Banks for the outstanding dues of loans availed by some of the subsidiary companies and a joint venture company 4294 4154

C Claims against the Company not acknowledged as debts [ Including Rs. 8 {as at 31-03-09 Rs. 8} Millions in respect of Amalgamated {*} Companies ] 68 57

D In respect of the demand raised by the Central Excise, State Excise & Service Tax dept. against which the Company has preferred an appeal. The Company has been legally advised that the demand is not tenable. [ Including Rs. 9 {as at 31-03-09 Rs. 9} Millions in respect of Amalgamated {*} Companies ] 49 332

E In respect of the demand raised by the Ministry of Chemicals & Fertilizers, Govt, of India under Drug Price Control Order, 1979 for difference in actual price and price of respective bulk drug allowed while fixing the price of certain life saving formulations and disputed by the Company. Based on the legal advice the Company does not foresee the crystallization of the liability.

[ Including Rs. 42 {as at 31-03-09 Rs. 42} Millions in respect of Amalgamated {*} Companies ] 227 219

F In respect of Income Tax matters pending before appellate authorities which the Company expects to succeed, based on decisions of Tribunals / Courts. 12 14

6 In respect of Sales Tax matters pending before appellate authorities / Court which the Company expects to succeed, based on decisions of Tribunals / Courts. 74 49

Note: [ * ] represents contingent liabilities taken over by the Company under the Scheme of Arrangement and Amalgamation of Cadila Laboratories Ltd., and erstwhile Cadila Chemicals Ltd., Cadila Antibiotics Ltd., Cadila Exports Ltd. and Cadila Veterinary Pvt. Ltd. with the Company w.e.f. 1st June, 1995. 9 Estimated amount of contracts remaining to be executed on capital account and not provided for

[Net of Advances] 582 698



10 Deferred Tax:

A The Deferred tax liability of Rs. 110 Millions for the year has been reversed in the Profit and Loss Account.

* Bonus Declaration:

Share holders at Extra Ordinary General Meeting held at March 22, 2010 have approved issue of bonus shares and in view of this on April 9, 2010, the Company has allotted 68,249,507 bonus shares in the ratio of one fully paid up equity shares for two equity shares held on the record date. In view of this, no effect of Bonus shares has been given in final accounts. However, the Basic & Diluted EPS has been adjusted for both the reporting periods as per the requirements of Accounting Standard - 20 on" Earning Per Share" issued by the Institute of Chartered Accountants of India.

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