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Notes to Accounts of Divi's Laboratories Ltd.

Mar 31, 2017

* Write downs of Work in Progress to net realizable value amounted to RS,397.49 lakhs (2016: RS,402.41 lakhs, 2015: RS,218.50 lakhs). These were recognized as an expense during the year and included in “Changes in inventories of finished goods, stock-in-trade and work-in-progress" in statement of profit and loss.

** Write downs of Finished goods to net realizable value amounted to RS,74.07 lakhs (2016: RS,7.14 lakhs, 2015: RS,40.58 lakhs). These were recognized as an expense during the year and included in “Changes in inventories of finished goods, stock-in-trade and work-in-progress" in statement of profit and loss.

Aggregate number of bonus shares issued during the period of five years immediately preceding the reporting date :

On 28th September, 2015, the Company issued 13,27,34,290 equity shares of INR 2 each as fully paid bonus shares by capitalization of securities premium reserve. Terms and rights attached to equity shares

The Company has only one class of equity shares having par value of INR 2 per share. The Company declares and pays dividends in Indian rupees. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. Every holder of equity shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant acturial assumptions, the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

Defined benefit liability and employer contributions

The Company has purchased insurance policy to provide for payment of gratuity to the employees. Every year, the insurance company carries out a funding valuation based on the latest employee data provided by the Company. Any deficit in the assets arising as a result of such valuation is funded by the Company. The company considers that the contribution rate set at the last valuation date is sufficient to eliminate the deficit over the agreed period and that regular contributions, which are based on service costs will not increase significantly.

Risk exposure

Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:

Interest Rate Risk: The plan exposes the Company to the risk of fall in interest rates. A fall in interest rates will result in an increase in the ultimate cost of providing the above benefit and will thus result in an increase in the value of the liability.

Salary Escalation Risk: The present value of the defined benefit plans calculated with the assumption of salary increase rate of plan participants in future. Deviation in the rate of increase of salary in future for plan participants from the rate of increase in salary used to determine the present value obligation will have a bearing on the plan''s liability.

Demographic Risk: The Company has used certain mortality and attrition assumptions in valuation of the liability. The Company is exposed to the risk of actual experience turning out to be worse compared to the assumption.

Regulatory Risk: Gratuity benefits is paid in accordance with the requirements of the Payment of Gratuity Act, 1972 (as amended from time to time). There is a risk of change in regulations requiring higher gratuity payouts (eg. Increase in the maximum limit on gratuity.)

Asset Liability Mismatching or Market Risk: The duration of the liability is longer compared to duration of assets, exposing the Company to market risk for volatilities/fall in interest rate.

Investment Risk: The probability and likelihood of occurrence of losses relative to the expected return on any particular investment.

asset Volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets under perform this yield, this will create a deficit. Most of the plan asset investments are in fixed income securities with high grades and in government securities. A portion of the fund is invested in equity securities and in alternative investments which have low correlation with equity securities. The equity securities are expected to earn a return in excess of the discount rate and contribute to the plan deficit. The company has a risk management strategy where the aggregate amount of risk exposure on a portfolio level is maintained at a fixed range. Any deviations from the range are corrected by rebalancing the portfolio. The company intends to maintain the investment mix in the continuing years.

Changes in bond yields: A decrease in bond yields will increase plan liabilities, although this will be partially off-set by an increase in the value of the plan''s bond holdings.

The Company makes contribution to a scheme administered by the Life Insurance Corporation of India (''LIC) to discharge gratuity liabilities to the employees. The Company actively monitors the investment positions and ensures the same is adequately managed within an asset-liability matching(ALM) framework. The company actively monitors how the duration and the expected yield of the investments are matching the expected cash outflows arising from the employee benefit obligations. The company has not changed the processes used to manage its risks from previous periods. A large portion of assets in 2017 consists of government and corporate bonds, although the company also invests in equities, cash and mutual funds. The company believes that equities offer the best returns over the long term with an acceptable level of risk. The majority of equities are in a globally diversified portfolio of international blue chip entities, with a target of 60% equities held in India. The plan asset mix is in compliance with the requirements of the respective local regulations.

Note 19: Provisions - employee Benefit obligations (contd..)

(iii) defined Contribution plans

employer''s Contribution to Provident Fund: Contributions are made to provident fund in India for employees at the rate of 12% of basic salary as per regulations. The contributions are made to registered provident fund administered by the government. The obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognized during the period towards defined contribution plan is RS,984.64 lakhs (31 March 2016- RS,819.23 lakhs; 01 April 2015- RS,516.78 lakhs)

employer''s Contribution to State Insurance Scheme: Contributions are made to State Insurance Scheme for employees at the rate of 4.75%. The Contributions are made to Employee State Insurance Corporation(ESI) to the respective State Governments of the Company''s location. This Corporation is administered by the Government and the obligation of the company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognized during the period towards defined contribution plan is RS,118.52 lakhs (31 March 2016- RS,93.26 lakhs; 01 April 2015- RS,120.79 lakhs)

Secured borrowings and assets pledged as security

Secured by pari-passu first charge on inventories, receivables and other current assets of the company and pari-passu second charge on movable fixed assets of the company, both present and future.

The carrying amounts of financial and non-financial assets pledged as security are disclosed in Note 48

Current tax expense for the year ended March 31, 2017 and March 31, 2016 includes reversals (net of provisions) amounting to (RS,71.00 lakhs) and RS,51.62 lakhs respectively pertaining to prior periods.

Entire deferred income tax for the year ended March 31, 2017 and March 31, 2016 relates to origination and reversal of temporary differences.

(b) Significant estimates (tax calculation)

In calculating the tax expense for the current period, the company has treated certain expenditures as deductible for tax purposes. The Company benefits from the tax holiday available for units set up under the Special Economic Zone Act, 2005. These tax holidays are available for a period of ten years from the date of commencement of operations. Under the SEZ scheme, the unit which begins providing services on or after April 1, 2005 will be eligible for deductions of 100% of profits or gains derived from export of services for the first five years, 50% of such profits or gains for a further period of five years and 50% of such profits or gains for the balance period of five years subject to creation of Special Economic Zone Re-investment reserve out of profit of eligible SEZ Units and utilization of such reserve by the company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.

Fair value of the financial instruments is classified in various fair value hierarchies based on the following three levels:

Level 1: Quoted prices are (unadjusted) in active market for identical assets or liabilities.

Level 2: Inputs other than quoted prices are included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs). If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3. This is the case with listed instruments where market is not liquid and for unlisted instruments.

note 38: Financial Risk Management

The Company''s activities expose it to market risk and credit risk. The Company emphasis on risk management and has an enterprise wide approach to risk management. The Company''s risk management and control procedures involve prioritization and continuing assessment of these risks and devise appropriate controls, evaluating and reviewing the control mechanism.

(A) Credit Risk:

Credit risk is the risk of financial loss to the Company if a customer to a financial instrument fails to meet its contractual obligations and arises primarily from trade receivables, treasury operations etc. Credit risk of the Company is managed at the Company level. In the area of treasury operations, the Company is presently exposed to risk relating to investment in mutual funds. The Company regularly monitors such investments and all the investments in mutual funds are held with State Bank of India which is a nationalized bank, thereby minimizes the risk.

The credit risk related to trade receivables is influenced mainly by the individual characteristics of each customer. The credit risk is managed by the company by establishing credit limits and continuously monitoring the credit worthiness of the customer. The Company also provides for expected credit losses based on the past experience where it believes that there is high probability of default. In general, all trade receivables greater than 180 days are reviewed and provided for by analyzing individual receivables.

(B) Market Risk:

The Company has substantial exposure to foreign currency risk due to the significant exports made. Sales in other countries and purchases from overseas suppliers are exposed to risk associated with fluctuation in the currencies of those countries vis-a-vis the functional currency i.e. Indian rupee. The Company manages currency fluctuations by having a better geographic balance in revenue mix and ensures a foreign currency match between liabilities and earnings. The Company believes that the best hedge against foreign exchange risk is to have a good business mix. The Company is very cautious towards hedging as it has a cost as well as its own risks. The Company continually reassesses the cost structure impacts of the currency volatility and engages with customers addressing such risks.

(C) Price Risk:

(a) The company is exposed to risk from investments in mutual funds. The company has invested in quoted debt mutual funds with State Bank of India. The Company is very cautious in their investment decisions and takes a conservative approach of investing in nationalized banks with minimal risk. The table below summarizes the impact of increase/(decrease) in the Net Asset Value(NAV) of these investments

(b) Sensitivity

The analysis is based on the assumption that the NAV has increased/(decreased) by 1% with all other variables held constant.

note 39: Capital Management

The Company''s financial strategy aims to provide adequate capital for its growth plans for sustained stakeholder value. The company''s objective is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. And depending on the financial market scenario, nature of the funding requirements and cost of such funding, the Company decides the optimum capital structure. Currently, there are no borrowings and operations are being funded through internal accruals. The Company aims at maintaining a strong capital base so as to maintain adequate supply of funds towards future growth plans as a going concern.

note 40: Segment Information (a) description of segments and principal activities

The Chairman and Managing Director has been identified as being the Chief Operating Decision Maker(CODM). Operating segments are defined as components of an enterprise for which discrete financial information is available. This is evaluated regularly by the CODM, in deciding how to allocate resources and assessing the Company''s performance. The Company is engaged in manufacturing and sale of Active Pharma Ingredients and Intermediates and operates in a single operating segment.

The reportable segments has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

note 42: Related Party Transactions

(a) Subsidiaries : Interest in subsidiaries as set out in Note 41

(b) Key Management personnel(KMP) : Dr. Murali. K. Divi

: Mr. NV Ramana : Mr. D. Madhusudana Rao : Mr. Kiran S. Divi : Mr. K V K Seshavataram : Mr. R Ranga Rao : Dr.G Suresh Kumar : Mrs. S Sri Devi

(c) Relative of Key Management personnel : Mrs. D. Swarna Latha

: Mrs.Nilima Motaparti : Mr. D. Babu Rajendra Prasad : Mr. D. Radha Krishna Rao : Mr.D. Sri Ramachandra Rao : Mrs. D. Raja Kumari : Mr. D. Satyasayee Babu : Mrs. A. Shanti Chandra : Mrs. N. Nirmala Kumari : Mrs. N. Chandrika Ramana : Mr. NVAnirudh : Miss. N. Monisha : Mr. N. Prashanth : Mrs. L. Vijaya Lakshmi

(d) list of Related Parties over which Control / Significant Influence exists with whom the company has transactions : Relationship

Divis Laboratories (USA) Inc Wholly Owned Subsidiary

Divi''s Laboratories Europe AG Wholly Owned Subsidiary

Divi''s Properties Private Limited Company In Which Key Management Personnel have Significant

Influence

Divi''s Biotech Private Limited Company In Which Key Management Personnel have Significant

Influence

note 46: First-time adoption of Ind As Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in Note 2 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

01, 2015 (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 (previous GAAP or Indian GAAP). An explanation on 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 tables and notes.

A. 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.1 Ind AS optional exemptions A.1.1 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 recognized 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 de-commissioning liabilities. 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 value.

A.2 Ind AS mandatory exceptions A.2.1 Estimates

An entity''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with the 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 01, 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:

- Investment in Equity instruments carried at FVPL

- Investments in debt instruments carried at FVPL and;

- Impairment of financial asset based on expected credit loss model.

A.2.2 Classification and measurement of financial asset

Ind AS 101 requires an entity to assess classification and measurement of financial assets (investments in debt instruments) on the basis of the facts and circumstances that exist on the date of transition to Ind AS .

C: Notes to first-time adoption: Note 1: Fair valuation of investments

Under the previous GAAP investments in equity instruments and mutual funds were classified as long term investments or current investments based on the intended holding period and realizibility. Long term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments has been recognized in retained earnings as at the date of transition and subsequently in the profit and loss for the year ended March 31, 2016. This increased the retained earnings by RS,32.71 lakhs as at March 31, 2016 (April 01, 2015- RS,200.74 lakhs).

Note 2: proposed dividend

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for proposed dividend and tax thereon of H Nil as at March 31, 2016 (April 01, 2015- RS,31951.17 lakhs) included under provisions have been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an equivalent amount.

Note 3: Excise duty

Under the previous GAAP, 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 inclusive of excise duty. The excise duty paid is presented on the face of the statement of profit and loss as part of expenses. This change has resulted in an increase in total revenue and total expenses for the year ended March 31, 2016 by RS,2851.81 lakhs. There is no impact on the total equity and profit

note 46: First-time adoption of Ind As (Contd..)

Note 4: Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e, Actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31,

2016 decreased by RS,372.71 lakhs. There is no impact on the total equity as at March 31, 2016.

Note 5: Reserves and Surplus

Retained earnings as at April 01, 2015 has been adjusted consequent to the above Ind AS transition adjustments.

The Company had received a Government grant towards State Investment Subsidy in the year 1998 with an outstanding amount of RS,32.58 lakhs. These amounts have been transferred to retained earnings since the assets related to the grant have been fully depreciated as at April 01, 2015.

Note 6: Loans considered as equity contribution:

The Company had given loan to its wholly owned subsidiaries, M/s Divis Laboratories (USA) Inc. and M/s. Divi''s Laboratories Europe AG having an outstanding amount of RS,1566.71 lakhs and RS,2791.37 lakhs respectively. Since they are interest free loans, the loan has been initially measured at fair value estimated by discounting the future repayments over the tenure of the loan using a rate based on the rate the borrower would pay to an unrelated lender for a loan with similar conditions i.e. market rate.

The difference between the fair value and the loan amount is considered as a deemed investment and taken to Noncurrent investments amounting to RS, 736.22 lakhs. Subsequently the loan is measured at amortized cost using effective interest method.

Note 7: Deferred tax

As per Ind AS-12, the Company has recognized deferred tax asset on the indexation benefit available on free hold land as it has no plans to sell the business on a slump sale thereby increasing the retained earnings by RS,558.34 lakhs as at March 31, 2016 (April 01, 2015: RS,495. 39 lakhs).

Other Deferred tax adjustments amounting to (RS,327.04 lakhs) as at march 31, 2016 (April 01, 2015: (RS,305.59 lakhs)) include deferred tax impact on account of differences between previous GAAP and Ind AS. The profit for the year ended i.e. March 31, 2016 increased by RS,62.56 lakhs due to the deferred tax adjustments made.

Note 8 : Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in the profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit or loss as ''other comprehensive income'' includes remeasurements of defined benefit plans. The concept of ''other comprehensive income'' did not exist under previous GAAP

Note 9: Rental Deposits:

Under the previous GAAP, rental deposits are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value. Accordingly the company has fair valued the rental deposits. Difference between the fair value and transaction value is recognized as prepaid rent. Consequent to this change, the amount of security deposit decreased by RS,209.07 lakhs as at March 31, 2016 (April 01, 2015: H Nil). The prepaid rent increased by RS,204.73 lakhs as at March 31, 2016 (April 01, 2015: H Nil).

* Specified Bank Notes (SBNs) mean the bank notes of denominations of the existing series of the value of five hundred rupees and one thousand rupees as defined under the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs no. S.O. 3407(E), dated the 8th November, 2016.


Mar 31, 2015

I. OTHER EXPLANATORY INFORMATION

1. CORPORATE INFORMATION :

Divi's Laboratories Limited (the Company or Divi's) is a manufacturer of Active Pharmaceutical Ingredients and Intermediates having headquarters at Hyderabad, India. The major portion of its turnover is on account of export of its products to European and American countries. The Company's main manufacturing and research and development facilities are located in the States of Andhra Pradesh and Telangana, India. The Equity Shares of the Company are listed in The Bombay Stock Exchange Limited, Mumbai and The National Stock Exchange, Mumbai.

2. Previous year figures have been regrouped/ recast/ rearranged wherever necessary to conform to current year classification.

3. CHANGE IN ACCOUNTING ESTIMATES :

As per the requirements of the Companies Act, 2013 ("the Act") effective from 1st April, 2014, the useful lives of fixed assets of the Company have been revised to the useful lives specified in Part-C of Schedule II of the Act. Consequently, depreciation for the year is higher by Rs.1564 lakhs and depreciation of Rs. 1583.67 Lakhs on account of assets whose useful life is already exhausted as on 1st April, 2014 has been charged off to Statement of Profit and Loss.

4. CONTINGENT LIABILITIES AND COMMITMENTS :

(Rs. in Lakhs) Particulars 2014-15 2013-14

A. CONTINGENT LIABILITIES

(i) On account of Letter of Credit and Guarantees issued by the bankers. 7493.16 5435.30

(ii) Claims against the Company not acknowledged as debts in respect of : Central Excise 400.82 354.66

Customs 154.47 32.91

Service Tax 69.96 57.09

Income Tax 172.25 2200.32

Sales Tax 10.30 -

Note : It is not practicable for the company to estimate the timings of cash flows, if any, in respect of the above pending resolution of the respective proceedings.

B. COMMITMENTS

(i) Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) 2862.36 2056.62

(ii) On account of bonds and / or legal agreements executed with Central Excise/

Customs authorities/ Development Commissioners 11950.00 11950.00

5. In the opinion of Board, assets other than Fixed Assets and non-current investments have a value on realization in the ordinary course of business atleast equal to the amount at which they are stated and provision for all known liabilities have been made.

6. Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Note No. 24 " Change in Inventory of Finished Goods, Stock-in-Trade and Work-in-Progress".

7. DERIVATIVE INSTRUMENTS :

The details of net foreign currency exposures that are not hedged by any derivative instruments or otherwise are as under :

8. DUES OF MICRO AND SMALL ENTERPRISES :

The information as required to be disclosed under Schedule III of the Act, w.r.t. Micro and Small Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006(Act) is as given below and the information mentioned at Note No. 7- Trade Payables w.r.t. dues of Micro and Small Enterprises, has been determined to the extent such parties have been identified on the basis of information available with the Company and relied on by the auditors :

9. ADVANCES TO SUBSIDIARIES :

a. The Company had undertaken to provide financial assistance to its wholly owned subsidiaries Viz., Divi's Laboratories (USA) Inc., and Divi's Laboratories Europe AG by way of Interest free loans with no specific repayment schedule before 1.04.2014. In respect of loan to Divi's Laboratories Europe AG, the same is subordinated to other creditors to the extent of CHF 50.00 Lakhs equivalent to Rs.3231.25 Lakhs (Previous year CHF 45.00 Lakhs equivalent to Rs. 3046.05 Lakhs.)

b. Information pursuant to Clause 32 of Listing Agreement with Stock Exchanges w.r.t. Loans and Advances in the nature of interest free loans to wholly owned Subsidiaries is as given below :

c. In respect of above loans to subsidiaries, Management is confident to achieve profitability and continued development of current and new sales bases and the introduction of new profitable products in its current markets. Based on improved market at subsidiaries, the management is confident to achieve good progress on turnover and profitability of these subsidiaries. As per the projections/ cash in-flows submitted by the wholly owned subsidiaries, the accumulated losses will be recovered in future. The advances will be repaid by the subsidiaries in near future. In view of the above, no provision for decline in value of investment /advances has been made in accounts for the year ended 31.03.2015.

III Defined Benefit Plans :

LEAVE ENCASHMENT (UNFUNDED) :

The present value of obligation in respect of Provision for Payment of Leave encashment is determined, based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation, recognised and charged off

The estimates of rate of escalation in salary considered in actuarial valuation, is determined after taking in to account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

10. SEGMENT REPORTING :

Segments are identified in line with AS 17 "Segment Reporting", taking into consideration the internal organisation and management structure as well as the differential risk and returns of the segment.

a. Identification of reportable segments :

(i) Business Segments :

The company is engaged in manufacturing and sale of Active Pharma Ingredients and Intermediates which is considered the Primary reportable business segment.

(ii) Geographical Segments :

Revenue is segregated into two segments namely India (Sales to customers with in India) and other countries (Sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

b. In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

11. DISCLOSURE OF RELATED PARTIES/RELATED PARTY TRANSACTIONS PURSUANT TO ACCOUNTING STANDARD (AS) 18 "RELATED PARTY DISCLOSURES" :

(i) Names of Key Management Personnel with whom transactions were carried out during the year :

1. Dr. Murali. K. Divi 3. Mr. D. Madhusudana Rao

2. Mr. N.V. Ramana 4. Mr. Kiran S. Divi

(ii) Names of Relatives of Key Management Personnel with whom transactions were carried out during the year :

1. Mrs. D. Swarna Latha 8. Mrs. A. Shanti Chandra

2. Mrs. M. Nilima 9. Mrs. N. Nirmala Kumari

3. Mr. D. Babu Rajendra Prasad 10. Mrs. N. Chandrika Ramana

4. Mr. D. Radha Krishna Rao 11. Mr. N.V.Anirudh

5. Mr.D. Sri Ramachandra Rao 12. Miss. N. Monisha

6. Mrs. D. Raja Kumari 13. Mr. N. Prashanth

7. Mr. D. Satyasayee Babu 14. Mrs. L. Vijaya Lakshmi

(iii) List of Related Parties over which Control exists and status of transactions entered during the year :

12. LEASES :

The Company has operating lease for office premise, which is renewable on a periodical basis and cancellable at its option. Rental expenses for operating lease recognised in Statement of Profit and Loss for the year is Rs.73.49 Lakhs (Previous Year Rs. 65.53 Lakhs).The future minimum lease payments are as given below : (Rs in iakhs)


Mar 31, 2014

1. CORPORATE INFORMATION :

Divi''s Laboratories Limited (the Company or Divi''s) is a manufacturer of Active Pharmaceutical Ingredients and Intermediates having headquarters at Hyderabad, India. The major portion of its turnover is on account of export of its products to European and American countries. The Company''s main manufacturing and research and development facilities are located in the State of Andhra Pradesh, India. The Equity Shares of the Company are listed in The Bombay Stock Exchange Limited, Mumbai and The National Stock Exchange, Mumbai.

2. Previous year figures have been regrouped/ recast/ rearranged wherever necessary to conform to current year classification.

3. CONTINGENT LIABILITIES AND COMMITMENTS :

(Rs. in Lakhs)

Particulars 2013-14 2012-13

A. CONTINGENT LIABILITIES

(i) On account of Letter of Credit and Guarantees issued by the bankers 5435.30 3878.06

(ii) Demands being disputed / contested by the Company 2644.98 2681.39

B. COMMITMENTS

(i) Estimated amount of contracts remaining to be executed on

capital account and not provided for (Net of advances) 2056.62 3663.91

(ii) On account of bonds and / or legal agreements executed with Central

Excise/ Customs authorities/ Development Commissioners 11950.00 11950.00

4. In the opinion of Board, assets other than Fixed Assets and non-current investments have a value on realization in the ordinary course of business atleast equal to the amount at which they are stated and provision for all known liabilities have been made.

5. Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Note No. 24 " Change in Inventory of Finished Goods, Stock-in-Trade and Work-in-Progress".

7. DUES OF MICRO AND SMALL ENTERPRISES :

The information as required to be disclosed under Schedule VI of the Companies Act, 1956 w.r.t. Micro and Small Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006(Act) is as given below and the information mentioned at Note No. 7 - Trade Payables w.r.t. dues of Micro and Small Enterprises, has been determined to the extent such parties have been identified on the basis of information available with the Company and relied on by the auditors :

8. ADVANCES TO SUBSIDIARIES :

a. The Company has undertaken to provide financial assistance to its wholly owned subsidiaries Viz., Divis Laboratories (USA) Inc., and Divi''s Laboratories Europe AG by way of loans with no specific repayment schedule. In respect of loan to Divi''s Laboratories Europe AG, the same is subordinated to other creditors to the extent of CHF 45.00 lakhs equivalent to Rs.3046.05 lakhs (Previous year CHF 45.00 lakhs equivalent to Rs. 2569.95 Lakhs.)

b. Information pursuant to Clause 32 of Listing Agreement with Stock Exchanges w.r.t. Loans and Advances in the nature of interest free loans to wholly owned Subsidiaries is as given below :

c. In respect of above loans to subsidiaries, Management is confident to achieve profitability and continued development of current and new sales bases and the introduction of new profitable products in its current markets. Based on improved market at subsidiaries, the management is confident to achieve good progress on turnover and profitability of these subsidiaries. As per the projections/ cash in-flows submitted by the wholly owned subsidiaries, the accumulated losses will be recovered in future. The advances will be repaid by the subsidiaries in near future. In view of the above, no provision for decline in value of investment / advances has been made in accounts for the year ended 31.03.2014 as the decline is temporary in nature.

III.Defined Benefit Plans :

LEAVE ENCASHMENT (UNFUNDED) :

The present value of obligation in respect of Provision for Payment of Leave encashment is determined, based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation, recognised and charged off during the year are as under :

The estimates of rate of escalation in salary considered in actuarial valuation, is determined after taking into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

11. SEGMENT REPORTING :

Segments are identified in line with AS 17 "Segment Reporting", taking into consideration the internal organisation and management structure as well as the differential risk and returns of the segment.

a. Identification of reportable segments :

(i) Business Segments :

The company is engaged in manufacturing and sale of Active Pharma Ingredients and Intermediates which is considered the Primary reportable business segment.

(ii) Geographical Segments :

Revenue is segregated into two segments namely India (Sales to customers with in India) and other countries (Sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

b. In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

12. DISCLOSURE OF RELATED PARTIES/RELATED PARTY TRANSACTIONS PURSUANT TO ACCOUNTING STANDARD (AS) 18 "RELATED PARTY DISCLOSURES":

(i) Names of Key Management Personnel with whom transactions were carried out during the year :

1. Dr. Murali. K. Divi

2. Mr. N.V. Ramana

3. Mr. D. Madhusudana Rao

4. Mr. Kiran S. Divi

(ii) Names of Relatives of Key Management Personnel with whom transactions were carried out during the year :

1. Mrs. D. Swarna Latha

2. Mrs. M. Nilima

3. Mr. D. Babu Rajendra Prasad

4. Mr. D. Radha Krishna Rao

5. Mrs. D. Raja Kumari

6. Mr. D. Satyasayee Babu

7. Mrs. A. Shanti Chandra

8. Mrs. N. Nirmala Kumari

9. Mrs. N. Chandrika Ramana

10. Mr. N.V.Anirudh

11. Miss. N. Monisha

12. Mr. N. Prashanth

13. Mrs. L. Vijaya Lakshmi

25. The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 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 the subsidiaries has been included in Consolidated Financial Statements.


Mar 31, 2013

1. CORPORATE INFORMATION :

Divi''s Laboratories Limited (the Company or Divi''s) is a manufacturer of Active Pharmaceutical Ingredients and Intermediates having headquarters at Hyderabad, India. The major portion of its turnover is on account of export of its products to European and American countries. The Company''s main manufacturing and research and development facilities are located in the State of Andhra Pradesh, India. The Equity Shares of the Company are listed in The Bombay Stock Exchange Limited, Mumbai and The National Stock Exchange, Mumbai.

2. Previous year figures have been regrouped/ recast/ rearranged wherever necessary to conform to current year classification.

3. CONTINGENT LIABILITIES AND COMMITMENTS :

(Rs. in Lakhs)

Particulars 2012-13 2011-12

A. CONTINGENT LIABILITIES

(i) On account of Letter of Credit and Guarantees issued by the bankers. 3878.06 4721.40

(ii) Demands being disputed / contested by the Company 2681.39 621.20

B. COMMITMENTS

(i) Estimated amount of contracts remaining to be executed on capital 3663.91 9553.05 account and not provided for (Net of advances)

(ii) On account of bonds and / or legal agreements executed with 11950.00 11950.00 Central Excise/ Customs authorities/ Development Commissioners

(iii) Derivative related commitments - 3069.39

4. In the opinion of Board, assets other than Fixed Assets and non-current investments have a value on realization in the ordinary course of business atleast equal to the amount at which they are stated and provision for all known liabilities have been made.

5. Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Note No. 26 " Change in Inventory of Finished Goods, Stock- in-Trade and Work-in-Progress".

6. EMPLOYEE STOCK OPTION SCHEME :

In respect of Options granted to employees during the year 2005-06 under the Employees Stock Option Scheme, in accordance with the guidelines issued by Securities and Exchange Board of India, the accounting value of Options, determined based on market price of the share on the day of the grant of the Option, is accounted as Deferred Employee Compensation Costs and the same is being amortised on straight line basis over the vesting period (2006-07 to 2009-10) of Stock Options.

7. DERIVATIVE INSTRUMENTS :

a. The Company uses foreign exchange forward contracts and options to hedge its foreign currency exposures relating to the underlying transactions and firm commitments, to reduce the foreign exchange fluctuation risk or cost to the Company. The Company does not use these derivative instruments for trading and speculative purposes.

d. The losses on account of Exchange difference on Foreign Currency Forward Contracts and Options have been fully provided for in the books of accounts and the outstanding provision for loss at the year end is Rs. Nil (Previous year Rs. 707.41 Lakhs).

8. DUES OF MICRO AND SMALL ENTERPRISES :

The information as required to be disclosed under Schedule VI of the Companies Act, 1956 w.r.t. Micro and Small Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006(Act) is as given below and the information mentioned at Note No.5 - Other Long-term Liabilities and Note No. 8 - Trade Payables w.r.t. dues of Micro and Small Enterprises, has been determined to the extent such parties have been identified on the basis of information available with the Company and relied on by the auditors :

9. ADVANCES TO SUBSIDIARIES :

a. The Company has undertaken to provide financial assistance to its wholly owned subsidiaries Viz., Divis Laboratories (USA) Inc., and Divi''s Laboratories Europe AG by way of loans with no specific repayment schedule. In respect of loan to Divi''s Laboratories Europe AG, the same is subordinated to other creditors to the extent of CHF 45,00,000 equivalent to Rs.2569.95 lakhs (Previous year CHF 45.00 lakhs equivalent to Rs. 2538.00 Lakhs.)

c. In respect of above loans to subsidiaries, Management is confident to achieve profitability and continued development of current and new sales bases and the introduction of new profitable products in its current markets. Based on improved market at subsidiaries, the management is confident to achieve good progress on turnover and profitability of these subsidiaries. As per the projections/ cash in-flows submitted by the wholly owned subsidiaries, the accumulated losses will be recovered in future. The advances will be repaid by the subsidiaries in near future. In view of the above, no provision for decline in value of investment /advances has been made in accounts for the year ended 31.03.2013 as the decline is temporary in nature.

10. SEGMENT REPORTING :

Segments are identified in line with AS 17 "Segment Reporting", taking into consideration the internal organisation and management structure as well as the differential risk and returns of the segment.

a. Identification of reportable segments :

(i) Business Segments :

The company is engaged in manufacturing and sale of Active Pharma Ingredients and Intermediates which is considered the Primary reportable business segment.

(ii) Geographical Segments :

Revenue is segregated into two segments namely India (Sales to customers with in India) and other countries (Sales to customers outside India) on the basis of geographical location of customers for the purpose of reporting geographical segments.

b. In accordance with Accounting Standard 17 - Segment Reporting, segment information has been provided in the Consolidated Financial Statements of the Company and therefore no separate disclosure on segment information is given in these standalone financial statements.

11. DISCLOSURE OF RELATED PARTIES/RELATED PARTY TRANSACTIONS PURSUANT TO ACCOUNTING STANDARD (AS) 18 "RELATED PARTY DISCLOSURES" :

(i) Names of Key Management Personnel with whom transactions were carried out during the year :

1. Dr. Murali. K. Divi

2. Mr. N.V. Ramana

3. Mr. D. Madhusudana Rao

4. Mr. Kiran S. Divi

(ii) Names of Relatives of Key Management Personnel with whom transactions were carried out during the year :

1. Mr. N. Laxmana Rao

2. Mr. Mallikarjuna Rao Divi

3. Mrs. Nilima Motaparti

12. The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 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 the subsidiaries has been included in Consolidated Financial Statements.


Mar 31, 2012

1. CORPORATE INFORMATION :

Divi's Laboratories Limited (the Company or Divi's) is a India based manufacturer of Active Pharmaceutical Ingredients and Intermediates having headquarters at Hyderabad, India. The major portion of its turnover is on account of export of products to European and American countries. The Company's main manufacturing and research and development facilities are located in the State of Andhra Pradesh, India. The Equity Shares of the Company are listed in The Bombay Stock Exchange Limited, Mumbai and The National Stock Exchange, Mumbai.

2. PRESENTATION AND DISCLOSURE OF FINANCIAL STATEMENTS :

During the year ended 31st March 2012, the Revised Schedule VI notified under the Companies Act 1956, has become applicable to the company, for preparation and presentation of its financial statements. Adoption of Revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statements. However , it has significant impact on presentation and disclosures made in the financial statements. The company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

3. CONTINGENT LIABILITIES AND COMMITMENTS :

(Rs. in Lakhs)

2011-12 2010-11

A. CONTINGENT LIABILITIES

(i) On account of Letters of Credit and Guarantees issued by the bankers. 4721.40 3510.49

(ii) Demands being disputed / contested by the Company 621.20 1768.86

B. COMMITMENTS

(i) Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of advances) 9553.05 5501.22

(ii) On account of bonds and / or legal agreements executed with Central Excise / Customs authorities/ Development Commissioners 11950.00 10750.00

(iii) Derivative related commitments 3069.39 8037.00

4. In the opinion of Board, assets other than Fixed Assets and non-current investments have a value on realization in the ordinary course of business atleast equal to the amount at which they are stated and provision for all known liabilities have been made.

5. Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Note No. 26 " Change in Inventory of Finished Goods, Work-in-Progress and Stock-in-Trade".

6. EMPLOYEE STOCK OPTION SCHEME :

In respect of Options granted to employees during the year 2005-06 under the Employees Stock Option Scheme, in accordance with the guidelines issued by Securities and Exchange Board of India, the accounting value of Options, determined based on market price of the share on the day of the grant of the Option, is accounted as Deferred Employee Compensation Costs and the same is being amortised on straight line basis over the vesting period (2006-07 to 2009-10) of Stock Options.

7. DERIVATIVE INSTRUMENTS :

a. The Company uses foreign exchange forward contracts and options to hedge its foreign currency exposures relating to the underlying transactions and firm commitments, to reduce the foreign exchange fluctuation risk or cost to the Company. The Company does not use these derivative instruments for trading and speculative purposes.

d. The losses on account of Exchange difference on Foreign Currency Forward Contracts and Options have been fully provided for in the books of accounts and the outstanding provision for loss at the year end is Rs 707.41 Lakhs (Previous year Rs.893.78 Lakhs).

8. DUES OF MICRO AND SMALL ENTERPRISES :

The information as required to be disclosed under Schedule VI of the Companies Act, 1956 w.r.t. Micro and Small Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006 (Act) is as given below and the information mentioned at Note No 5 - Other Long-term Liabilities and Note No. 8 - Trade Payables w.r.t. dues of Micro and Small Enterprises, has been determined to the extent such parties have been identified on the basis of information available with the Company and relied on by the auditors :

9. Land admeasuring 29.30 acres acquired under deeds of assignment and under possession of the company at Chippada village, Bheemunipatnam Mandal, Visakhapatnam Dist. is yet to be registered in the name of the company.

LEAVE ENCASHMENT (UNFUNDED) :

The present value of obligation in respect of Provision for Payment Leave encashment is determined, based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation, recognised and charged off during the year are as under:

The estimates of rate of escalation in salary considered in actuarial valuation, is determined after taking in to account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

10.SEGMENTAL REPORTING :

(i) As the Company's business for the year consists of one reportable business segment of manufacturing and sale of Active Pharma Ingredients and Intermediates and consists of major revenue on account of exports out of India, no separate disclosures pertaining to attributable Revenues, Profits, Assets, Liabilities and Capital Employed are given.

11.TRANSACTIONS WITH RELATED PARTIES :

a) The List of Related Parties with whom transactions have taken place and nature of relationship is :

i) KEY MANAGEMENT PERSONNEL :

1. Dr. Murali K. Divi

2. Mr. N.V Ramana

3. Dr. P. Gundu Rao

4. Mr. D. Madhusudana Rao

5. Mr. Kiran S. Divi

ii) RELATIVES OF KEY MANAGEMENT PERSONNEL :

1. Mr. N. Lakshmana Rao

2. Mr. Mallikarjuna Rao Divi

3. Mrs. Nilima Motaparti

(iii) SUBSIDIARIES :

1. Divis Laboratories (USA) Inc

2. Divi's Laboratories Europe AG

12. LEASES :

The Company has operating lease for office premise, which is renewable on a periodical basis and cancellable at its option. Rental expenses for operating lease recognised in Profit and Loss account for the year is Rs.56.70 Lakhs (Previous Year Rs.54.00 Lakhs).

13.The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 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 the subsidiaries has been included in Consolidated Financial Statements.


Mar 31, 2011

1 Previous year figures have been regrouped/ recast/ rearranged wherever necessary to conform to current year classification.

2 CONTINGENT LIABILITIES :

(Rs. in Lakhs)

Particulars 2010-11 2009-10

i) On account of Letters of Credit and Guarantees issued by the bankers. 3510.49 4404.68

ii) On account of bonds and / or legal agreements executed with Central Excise/ Customs authorities/ Development Commissioners 10750.00 7250.00

iii) Demands being disputed / contested by the Company 1768.86 1778.64

3 Estimated amount of contracts remaining to be executed on capital account and 5501.22 691.96 not provided for (Net of advances)

4 Land admeasuring 29.30 acres acquired under deeds of assignment and under possession of the company at Chippada village, Bheemunipatnam Mandal, Visakhapatnam Dist. is yet to be registered in the name of the company.

5 Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Schedule 23 "(Increase) in Stocks".

6 EMPLOYEE STOCK OPTION SCHEME :

In respect of Options granted to employees during the year 2005-06 under the Employees Stock Option Scheme, in accordance with the guidelines issued by Securities and Exchange Board of India, the accounting value of Options, determined based on market price of the share on the day of the grant of the Option, is accounted as Deferred Employee Compensation Costs and the same is being amortised on straight line basis over the vesting period of Stock Options. Consequently for the Current Year, an amount of Rs. Nil/-(Previous year Rs. 225.70 Lakhs) has been amortised.

7 CALCULATION OF COMMISSION :

Computation of Net Profit in accordance with Section 349 read with section 198 of the Companies Act, 1956 with relevant details of the calculation of commission payable by way of percentage of such Profits to Chairman and Managing Director, Executive Director and Director (Business development) for the year ending 31st March, 2011.

8 SEGMENTAL REPORTING :

(i) As the Companys business for the year consists of one reportable business segment of manufacturing and sale of Active Pharma Ingredients and Intermediates and consists of major revenue on account of exports out of India, no separate disclosures pertaining to attributable Revenues, Profits, Assets, Liabilities and Capital Employed are given.

9 TRANSACTIONS WITH RELATED PARTIES :

a) The List of Related Parties with whom transactions have taken place and nature of relationship is:

i) KEY MANAGEMENT PERSONNEL :

1. Dr. Murali. K. Divi

2. Mr. N.V. Ramana

3. Dr. P. Gundu Rao

4. Mr. D. Madhusudana Rao

5. Mr. Kiran S. Divi

ii) RELATIVES OF KEY MANAGEMENT PERSONNEL :

1. Mr. N. Laxmana Rao

2. Mr. Mallikarjuna Rao Divi

3. Mrs. Nilima Motaparti

(iii) SUBSIDIARIES:

1. Divis Laboratories (USA) Inc

2. Divis Laboratories EUROPE AG

10 ADVANCES TO SUBSIDIARIES :

a. The Company has undertaken to provide financial assistance to its wholly owned subsidiaries Viz., Divis Laboratories (USA) Inc., and Divis Laboratories Europe AG by way of loans with no specific repayment schedule. In respect of loan to Divis Laboratories Europe AG, the same is subordinated to other creditors to the extent of CHF 40,00,000 equivalent to Rs.1952.00 Lakhs (Previous year CHF 40.00 Lakhs equivalent to Rs. 1695.60 Lakhs)

11 DERIVATIVE INSTRUMENTS :

a. The Company uses foreign exchange forward contracts and options to hedge its foreign currency exposures relating to the underlying transactions and firm commitments, to reduce the foreign exchange fluctuation risk or cost to the Company. The Company does not use these derivative instruments for trading and speculative purposes.

d. The losses on account of Exchange difference on Foreign Currency Forward Contracts and Options have been fully provided for in the books of accounts and the outstanding provision for loss at the year end is Rs 893.78 Lakhs (Previous year Rs.1,527.56 Lakhs).

-MIn the opinion of management the current assets, loans and advances are expected to realise the value stated in the accounts, in the ordinary course of business and provision for known liabilities has been made.

-The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated 8th February 2011 and 21st February 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 the subsidiaries has been included in Consolidated Financial Statements.

12 The schedules referred to in the Balance sheet form an integral part of Accounts. Additional information as required under Part – IV to Schedule VI of the Companies Act, 1956 is given in Annexure.


Mar 31, 2010

1. Previous year figures have been regrouped/ recast/ rearranged wherever necessary to conform to current year classification.

2.CONTINGENT LIABILITIES : (Rs. in Lakhs)

Particulars 2009-10 2008-09

i) On account of Letters of Credit and Guarantees issued by the bankers. 4404.68 3055.30

ii) On account of bonds and / or legal agreements executed with Central Excise/ Customs authorities/ Development Commissioners 7250.00 7250.00

iii) Demands being disputed / contested by the Company 1778.64 260.82

3. Estimated amount of contracts remaining to be executed on 691.96 712.50 capital account and not provided for (Net of advances)

4. Land admeasuring 29.30 acres acquired under deeds of assignment and under possession of the company at Chippada village, Bheemunipatnam Mandal, Visakhapatnam Dist. is yet to be registered in the name of the company.

5. Excise duty on sales for the year has been disclosed as reduction from turnover. Excise duty relating to the difference between closing stock and opening stock has been included in Schedule 21 “(Increase) in Stocks”.

6.EMPLOYEE STOCK OPTION SCHEME :

In respect of Options granted to employees during the year 2005-06 under the Employees Stock Option Scheme, in accordance with the guidelines issued by Securities and Exchange Board of India, the accounting value of Options, determined based on market price of the share on the before day of the grant of the Option, is accounted as Deferred Employee Compensation Costs and the same is being amortised on straight line basis over the vesting period of Stock Options. Consequently for the Current Year, an amount of Rs.225.70 Lakhs (Previous year Rs. 490.26 Lakhs) has been amortised

7.DUES OF MICRO AND SMALL ENTERPRISES :

The information as required to be disclosed under Schedule VI of the Companies Act, 1956 w.r.t. Micro and Small Enterprises under the Micro, Small and Medium Enterprises Development Act, 2006(Act) is as given below and the information mentioned at Sch No.13 Current Liabilities w.r.t. dues of Micro and Small Enterprises, has been determined to the extent such parties have been identified on the basis of information available with the Company and relied on by the auditors:

8.SEGMENTAL REPORTING :

(i) As the Company’s business for the year consists of one reportable business segment of manufacturing and sale of Active Pharma Ingredients and Intermediates and consists of major revenue on account of exports out of India, no separate disclosures pertaining to attributable Revenues, Profits, Assets, Liabilities and Capital Employed are given.

9.TRANSACTIONS WITH RELATED PARTIES :

a) The List of Related Parties with whom transactions have taken place and nature of relationship is: i) KEY MANAGEMENT PERSONNEL :

1. Dr. Murali. K. Divi

2. Mr. N.V. Ramana

3. Dr. P. Gundu Rao

4. Mr. D. Madhusudana Rao

5. Mr. Kiran S. Divi

ii) RELATIVES OF KEY MANAGEMENT PERSONNEL:

1. Mr. N. Laxmana Rao

2. Mr. Mallikarjuna Rao Divi

3. Mrs. Nilima Motaparti

(iii) SUBSIDIARIES:

1. Divis Laboratories (USA) Inc

2. Divi’s Laboratories EUROPE AG

10.LEASES:

The Company has operating lease for office premises, which is renewable on a periodical basis and cancellable at its option. Rental expenses for operating lease recognised in Profit and Loss account for the year is Rs. 51.43 Lakhs (Previous Year Rs. 41.36 Lakhs)

11.ADVANCES TO SUBSIDIARIES :

a. The Company has undertaken to provide financial assistance to its wholly owned subsidiaries Viz., Divis Laboratories (USA) Inc., and Divi’s Laboratories Europe AG by way of loans with no specific repayment schedule. In respect of loan to Divi’s Laboratories Europe AG, the same is subordinated to other creditors to the extent of CHF 40.00 Lakhs equivalent to Rs. 1695.60 Lakhs (Previous year CHF 35.00 Lakhs equivalent to Rs.1555.75 Lakhs)

12.DERIVATIVE INSTRUMENTS:

a. The Company uses foreign exchange forward contracts and options to hedge its foreign currency exposures relating to the underlying transactions and firm commitments, to reduce the foreign exchange fluctuation risk or cost to the Company. The Company does not use these derivative instruments for trading and speculative purposes.

d. The losses on account of Exchange difference on Foreign Currency Forward Contracts and Options have been fully provided for in the books of accounts and the outstanding provision for loss at the year end is Rs 1527.56 Lakhs (Previous year Rs. 4521.01 Lakhs).

13.In the opinion of management the current assests, loans and advances are expected to realise the value stated in the accounts, in the ordinary course of business and provision for known liabilities has been made.

14.The schedules referred to in the Balance sheet form an integral part of Accounts.

15. Additional information as required under Part – IV to Schedule VI of the Companies Act, 1956 is given in Annexure.

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