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Notes to Accounts of Divi's Laboratories Ltd.

Mar 31, 2023

Terms and rights attached to equity shares

The company has only one class of equity shares having par value of ''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.

Nature and purpose of reserves:

Securities premium reserve:

Securities premium reserve is used to record the premium on issue of securities. This reserve is utilised in accordance with the provisions of the Act.

General Reserve:

General Reserve represents amounts transferred from retained earnings in earlier years under the provisions of the erstwhile Companies Act, 1956

Special Economic Zone Re-investment reserve:

Under the SEZ scheme, the unit which begins production of Goods/ services on or after April 1, 2005 is eligible for deduction of 100% of profits or gains derived from export of Goods/ services for the first five years, 50% of such profits or gains for a further period of 5 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 profits of eligible SEZ units and utilisation of such reserve by the company for acquiring new plant and equipment for the purpose of its business as per the provisions of the Income Tax Act, 1961.

(a) Compensated Absences Obligations:

The Compensated Absences covers the company''s liability for earned leave which is classified as other long-term benefits. The liabilities for earned leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured at the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefit is discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligations. Remeasurements as a result of the experience adjustments and changes in actuarial assumptions are recognised in statement of profit and loss

(b) Post-employment Obligations- Gratuity: (Defined Benefit)

The company provides gratuity for employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity benefit. The amount of gratuity payable on retirement/termination is the employees'' last drawn basic salary per month computed proportionately for 15 days'' salary multiplied for the number of years of service. The gratuity plan is a funded plan and the company makes contributions, through an approved trust, to recognised funds administered by Life Insurance Corporation of India (Insurer)

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 actuarial 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 and when calculating the defined benefit liability recognised in the balance sheet. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the previous year.

The company has established a trust to administer its obligation for payment of gratuity to employees. The trust in turn contributes to a scheme administered by the Life Insurance Corporation of India (Insurer). Every year, the insurer 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 trust has not changed the process used to manage the risks from previous years.

(d) 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.

Liquidity risk: This is the risk that the company is not able to meet the short term gratuity pay-out. This may arise due to non-availability of enough cash / cash equivalents to meet the liabilities or holdings liquid assets not being sold in time. 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 are 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 (e.g. 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.

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

(e) 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 the employee''s qualifying 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 recognised during the year towards defined contribution plan is ''2,560 (March 31, 2022- ''2,108).

Employer''s contribution to state insurance scheme: Contributions are made to state insurance scheme for employees at the rate of 3.25% . The contributions are made to employee state Insurance corporation (ESI), a corporation 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 recognised during the period towards defined contribution plan is ''342 (March 31, 2022- ''311)

b) Quarterly statements filed with banks

The quarterly statements of current assets filed by the company in respect of its working capital facilities with banks are in agreement with the books of accounts.

c) Wilful defaulter

The company has not been declared as wilful defaulter by any bank or financial institutions or government or any government authority.

Secured borrowings and assets pledged as security

Working capital loans are secured by pari-passu first charge on Inventories, receivables and other current assets of the company. Overdraft facilities from banks are secured by pledge of specific term deposits with banks

30 (b): 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 fifteen years from the date of commencement of operations. Under the SEZ scheme, the unit which begins production of Goods/services on or after April 01, 2005 and on or before June 30, 2020 will be eligible for deductions of 100% of profits or gains derived from export of Goods/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 profits of eligible SEZ units and utilisation of such reserve in terms of the provisions of the Income Tax Act, 1961.

Note 32: Fair Value Hierarchy

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

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

Level 2: Inputs other than quoted price 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 maximise 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 is 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.

â¢ Optionally convertible debentures are redeemable at 10th year at 70% premium, if not converted. Incase of an early redemption, debenture holder is eligible to get prorated premium. At any point of tenure, company can opt for conversion to equity shares at mutually agreed terms. These are secured by way of first charge created over the aircraft.

Valuation Technique used to Determine Fair Value:

Specific valuation techniques used to value financial instruments include:

â¢ the use of quoted market prices or dealer quotes for similar instruments.

â¢ the fair value of remaining financial instruments is determined using discounted cash flow analysis.

Valuation Process:

The Level 3 inputs for investment in equity shares and OCDs are derived using the discounted cash flow analysis.

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

(A) Credit Risk:

Credit risk management

I. Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks that are majorly owned by the Government of India thereby minimising its risk.

II. Credit risk on security deposits, term deposits, trade receivables and other financial assets are evaluated as follows:

Expected Credit Loss from Treasury Operations and for Trade Receivables:

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 term deposits made with State Bank of India and Scheduled banks. The Company regularly monitors such deposits and credit ratings of the banks thereby minimising 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 payment profiles of sales over a period of 12 months before the reporting date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables where it believes that there is high probability of default. The Company has considered possible effect on Credit risks including forward looking information to develop expected credit losses.

As the management deals with highly credit worthy customers and in past three years there were no instances of defaults w.r.t the receivables from customers, accordingly provision matrix has not been disclosed.

(B) Market Risk:

The Company has substantial exposure to foreign currency risk due to the significant exports. Sales to overseas customers 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 notes that historically rupee has depreciated against major foreign currencies, and hence no additional measures taken to hedge the foreign currency risk exposure. The Company is also very cautious towards hedging as it has a cost as well as its own risks. Further, Company continually reassesses the cost structure impact of the currency volatility and engages with customers addressing such risks.

(a) 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. 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.

Description of segments and principal activities

The Managing Director has been identified as 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 the manufacture of Active Pharmaceutical Ingredients (API''s), Intermediates and Nutraceutical Ingredients and operates in a single operating segment.

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

Note 36: Short Term Lease

The Company has lease for office premise, which is renewable on a periodical basis and cancellable at the option of the lessee and lessor. Rental expenses for short term lease recognised in statement of profit and loss for the year is ''915 (March 31, 2022: ''870).

Note 38: Contingent Liabilities:
	March 31, 2023	March 31, 2022
Claims against the Company not acknowledged as debts in respect of:
Disputed demands for excise duty, customs duty, sales tax, service tax and Goods and service tax for various periods	8,903	8,903

(a) I t 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.

Note 39: Additional Regulatory Information Required under Schedule III of Companies Act 2013:

(i) Details of Benami Property held

No proceedings have been initiated on or are pending against the company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

(ii) Relationship with Struck Off Companies

The company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

(iii) Compliance with Number of Layers of Companies

The company has complied with the number of layers prescribed under the Companies Act, 2013.

(iv) Compliance with Approved Scheme(s) of Arrangements

The company has not entered into any scheme of arrangements which has an accounting impact on current and previous financial year.

(v) Utilisation of Borrowed Funds and Share Premium

A The company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries

B. The company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the funding party (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries

(vi) Undisclosed Income

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961.

(vii) Loans or Advances to Specified Persons

The company has not granted any loans or advances in the nature of loans to promoters, directors, KMP''s and the related parties as defined under Companies Act, 2013.

(viii) Details of Crypto Currency or Virtual Currency

The company has not traded or invested in crypto currency or virtual currency during the current or previous year.

Description of Numerator and Denominator: a Current Ratio

Current Ratio is computed as a ratio of total current assets to total current liabilities b Debt - Equity Ratio

Debt - Equity Ratio is computed as a ratio of borrowings to total equity c Debt Service Coverage Ratio

Debt Service Coverage Ratio is computed as a ratio of earnings available for debt service to debt service

i) Earnings available for debt service is sum of proft after tax, finance cost and non cash expenditure

ii) Debt service is sum of finance cost and principal repayments d Return on Equity Ratio

Return on Equity Ratio is computed as a ratio of profit after tax to average of opening & closing total equity (i.e., Average Total Equity)

e Inventory Turnover Ratio

Inventory Turnover Ratio is computed as a ratio of revenue from sale of products to average of opening & closing inventory(i.e., Average Inventory)

f Trade Receivables Turnover Ratio

Trade Receivables Turnover Ratio is computed as a ratio of revenue from operations to average of opening & closing trade receivables(i.e., Average trade receivables)

g Trade Payables Turnover Ratio

Trade Payables Turnover Ratio is computed as a ratio of net credit purchases to average of opening & closing trade payables (i.e., Average trade payables)

Net credit purchases consists of purchase of raw material, packing material, stores, spares & other products and services h Net Capital Turnover Ratio

Net Capital Turnover Ratio is computed as a ratio of revenue from operations to average of opening & closing working capital (i.e., Average working capital)

i Net Profit Ratio

Net Profit Ratio is computed as a ratio of profit after tax to total income j Return on Capital Employed

Return on Capital Employed is computed as a ratio of profit before interest & taxes to average of opening & closing capital employed (i.e., Average Capital employed). Capital employed consists of total equity and deferred tax liability

k Return on Investment

Return on investment is computed as ratio of Profit after tax to average of the opening and closing total assets(i.e., Average total assets)

The accompanying notes are an integral part of the financial statements

Mar 31, 2022

Note:

(a) Title deeds of the Immovable properties included above are held in the name of the company.

(b) Movable fixed assets are pledged as security: Refer Note 18(d) for information on plant and equipment pledged as security for availing working capital facilities from Banks.

(c) Contractual obligations and other commitments: Refer Note 40 for disclosure of contractual and other commitments for the acquisition of property, plant and equipment.

(d) The Gross carrying amounts of Roads and Buildings and Plant and machinery includes staff cost of ?437(March 31, 2021T306) relating to projects team involved in supervision and monitoring of these projects and cost of power consumed of ?281 (March 31, 2021: ?242)

(e) The company has not revalued its Property, Plant and Equipment during the year or in the previous year

Note 4(b): There are no capital-work-in progress, whose completion is overdue or has exceeded its cost compared to its original plan as at March 31, 2022 and March 31, 2021.

Note 4(c): Assets under construction majorly consist of Roads & Buildings, Plant & Machinery and corresponding internal development costs. During the year, the Company has incurred capital costs of H69,387 on Capital work-in-progress at various locations and which includes staff cost of H131 (March 31, 2021: H155) relating to projects team involved in supervision and monitoring of these projects and cost of power consumed H39 (March 31, 2021: H84)

Raw materials and finished goods consists of goods in transit of H 6,979 (March 31, 2021- H 7,912) and H 14,351 (March 31, 2021-H 12,838) respectively.

Amounts recognised in Profit and loss

Write-downs of Inventories to net realisable value and on account of slow moving inventory amounted to H 548 (March 31, 2021 -H 586). These were recognised in statement of profit and loss and included in ''Changes in inventories of finished goods and work in progress '' and ''Cost of raw materials consumed''.

Terms and rights attached to equity shares

The Company has only one class of equity shares having par value of H 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.

Nature and purpose of reserves:

Securities premium reserve:

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act.

General Reserve:

General Reserves represent amounts transferred from Retained Earnings in earlier years under the provisions of the erstwhile Companies Act, 1956

Special Economic Zone Re-investment reserve:

Under the SEZ scheme, the unit which begins production of Goods/ services on or after April 1, 2005 is eligible for deduction of 100% of profits or gains derived from export of Goods/ services for the first five years, 50% of such profits or gains for a further period of 5 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 profits of eligible SEZ Units and utilisation 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.

(a) Compensated Absences obligations: (Defined benefit)

(b) Post-employment obligations- Gratuity: (Defined benefit)

The Company provides gratuity for employees as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity benefit. The amount of gratuity payable on retirement/termination is the employees'' last drawn basic salary per month computed proportionately for 15 days'' salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions, through an approved trust, to recognised funds administered by Life Insurance Corporation of India (Insurer).

(b) Post-employment obligations- Gratuity: (Defined benefit) (Contd..)

(iii). Sensitivity analysis (Contd..)

(c) Defined benefit liability and employer contributions

The Company has established a trust to administer its obligation for payment of gratuity to employees. The trust in turn contributes to a scheme administered by the Life Insurance Corporation of India (Insurer). Every year, the insurer 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. The trust has not changed the process used to manage the risks from previous years.

(d) 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.

Liquidity Risk: . This is the risk that the company is not able to meet the short term gratuity pay-out. This may arise due to nonavailability of enough cash / cash equivalents to meet the liabilities or holdings liquid assets not being sold in time.

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.

(d) Risk exposure (Contd..)

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 are 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.

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.

(e) 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 the employee''s qualifying 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 recognised during the period towards defined contribution plan is H 2,108 (March 31, 2021- H 1,750).

Employer''s Contribution to State Insurance Scheme: Contributions are made to State Insurance Scheme for employees at the rate of 3.25% . The Contributions are made to Employee State Insurance Corporation (ESI), a Corporation 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 recognised during the period towards defined contribution plan is H 311 (March 31, 2021-H 303)

a) Utilisation of borrowings availed from banks

The borrowings obtained by the company from banks have been applied for the purposes for which such loans were taken.

b) Quarterly statements filed with banks

The quarterly statements of current assets filed by the company in respect of its working capital facilities with banks are in agreement with the books of accounts.

c) Wilful defaulter

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

d) Secured borrowings and assets pledged as security

Secured by pari-passu first charge on inventories, receivables and other current assets of the company and first charge on movable fixed assets of the company. The carrying amounts of financial and non-financial assets pledged as security for current borrowings as disclosed below.

30 (b) Significant estimates:

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 fifteen years from the date of commencement of operations. Under the SEZ scheme, the unit which begins production of Goods/services on or after April 01, 2005 and on or before June 30, 2020 will be eligible for deductions of 100% of profits or gains derived from export of Goods/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 Reinvestment Reserve out of profit of eligible SEZ Units and utilisation of such reserve in terms of the provisions of the Income Tax Act, 1961.

Note 32: Fair value hierarchy

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

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

Level 2: Inputs other than quoted price 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.

Valuation technique used to determine fair value:

Specific valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments.

- the fair value of remaining financial instruments is determined using discounted cash flow analysis.

Valuation Process:

The Finance and Accounts department of the Company performs the valuation of financial assets and liabilities required for financial reporting purposes, and report to the Board of Directors. The Level 3 inputs for investment in equity shares and OCDs are derived using the discounted cash flow analysis.

The Company''s activities expose it to credit risk, market risk, price risk and liquidity risk. The Company emphasizes 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 management

I. Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with nationalised bank thereby minimising its risk.

II. Credit risk on security deposits, term deposits, trade receivables and other financial assets are evaluated as follows:

Expected credit loss from treasury operations and for trade receivables:

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 payment profiles of sales over a period of 12 months before the reporting date and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables where it believes that there is high probability of default. The Company has considered possible effect from the pandemic relating to Covid-19 on Credit risks including forward looking information to develop expected credit losses.

(B) Market Risk:

The Company has substantial exposure to foreign currency risk due to the significant exports. Sales to overseas customers 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 impact of the currency volatility and engages with customers addressing such risks.

(ii) Cash Flow and fair value interest rate risk:

Interest rate exposure: The Company does not have long term borrowings. The interest rate risk is towards short term working capital borrowings and from term deposits. Below is the sensitivity analysis, which presents impact on the cash flow due to the increase/decrease in the interest rates with all other variables held constant.

(C) Price Risk:

There are no company''s investments which are subjected to price risk.

(D) Liquidity Risk:

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding to meet obligations when due. Company''s treasury maintains flexibility in funding by maintaining availability under deposits in banks, adequate limits in the current accounts etc.

Note 35: Segment Information

Description of segments and principal activities

Note 36: Leases

The Company has lease for office premise, which is renewable on a periodical basis and cancellable at the option of the lessee and lessor. Rental expenses for operating lease recognised in statement of profit and loss for the year is H 870 (March 31, 2021: H 829).

(a) 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) Provident Fund:

The Company is in the process of evaluating the impact of the recent Supreme Court Judgment in case of "Vivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengalâ and the related circular (Circular No. C-I/1(33)2019/ Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employees'' Provident Fund Organisation in relation to nonexclusion of certain allowances from the definition of "basic wagesâ of the relevant employees for the purposes of determining contribution to provident fund under the Employees'' Provident Funds & Miscellaneous Provisions Act, 1952. In the assessment of the management which is supported by legal advice, the aforesaid matter is not likely to have a significant impact and accordingly, no provision has been made in these financial statements.

Note 39: Additional regulatory information required under Schedule III of Companies Act 2013:

(i) Details of Benami Property held

No proceedings have been initiated on or are pending against the company for holding benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

(ii) Relationship with struck off companies

The company has no transactions with the companies struck off under Companies Act, 2013 or Companies Act, 1956.

(iii) Compliance with number of layers of companies

The company has complied with the number of layers prescribed under the Companies Act, 2013.

(iv) Compliance with approved scheme(s) of arrangements

The company has not entered into any scheme of arrangements which has an accounting impact on current and previous financial year.

(v) Utilisation of borrowed funds and share premium

The company has not advanced or loaned or invested funds to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding that the Intermediary shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like to or on behalf of the ultimate beneficiaries

The company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall:

a. directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

b. provide any guarantee, security or the like on behalf of the ultimate beneficiaries

Note 39: Additional regulatory information required under Schedule III of Companies Act 2013: (Contd..)

(vi) Undisclosed income

There is no income surrendered or disclosed as income during the current or previous year in the tax assessments under the Income Tax Act, 1961.

(vii) Loans or advances to specified persons

The company has not granted any loans or advances in the nature of loans to promoters, directors, KMP''s and the related parties as defined under Companies Act, 2013.

(viii) Details of crypto currency or virtual currency

The company has not traded or invested in crypto currency or virtual currency during the current or previous year.

Description of numerator and denominator: a Current Ratio

Current Ratio is computed as a ratio of total current assets to total current liabilities b Debt - Equity Ratio

Debt - Equity Ratio is computed as a ratio of borrowings to total equity c Debt Service Coverage Ratio

Debt Service Coverage Ratio is computed as a ratio of earnings available for debt service to debt service

i) Earnings available for debt service is sum of proft after tax, finance cost and non cash expenditure

ii) Debt service is sum of finance cost and principal repayments d Return on Equity Ratio

Return on Equity Ratio is computed as a ratio of profit after tax to average of opening & closing total equity (i.e., Average Total

Equity)

e Inventory Turnover Ratio

Inventory Turnover Ratio is computed as a ratio of revenue from sale of products to average of opening & dosing inventory(i.e., Average Inventory)

f Trade Receivables Turnover Ratio

Trade Receivables Turnover Ratio is computed as a ratio of revenue from operations to average of opening & closing trade receivables(i.e., Average trade receivables)

g Trade Payables Turnover Ratio

"Trade Payables Turnover Ratio is computed as a ratio of net credit purchases to average of opening & closing trade payables (i.e., Average trade payables)â

Net credit purchases consists of purchase of raw material, packing material, stores, spares & other products and services h Net Capital Turnover Ratio

Net Capital Turnover Ratio is computed as a ratio of revenue from operations to average of opening & closing working capital (i.e.,Average working capital)

i Net Profit Ratio

Net Profit Ratio is computed as a ratio of profit after tax to revenue from operations j Return on Capital Employed

k Return on Investment

Return on investment is computed as ratio of Profit after tax to average of the opening and closing total assets(i.e., Average total assets)

Note 44: Impact of Covid-19 Pandemic

The Company considered the uncertainty relating to the COVID-19 pandemic in assessing the recoverability of its inventories, receivables and investments. As the company is into essential manufacturing service, which is exempt from restrictions, the pandemic did not have any significant impact on its operations or its supply chain. In this regard, the Company has considered internal and external information while finalizing various estimates in relation to its financial statements upto the date of approval by the Board of Directors and has not identified any material impact on the carrying value of assets, liabilities or provisions.

Mar 31, 2021

1. Corporate Information

1.1 Divi''s Laboratories Limited (Divi''s/''Company'') is a Company limited by shares, incorporated and domiciled in India. The Company is engaged in the manufacture of Active Pharmaceutical ingredients (API''s), Intermediates and Nutraceutical ingredients with predominance in exports. In addition to generic business, the Company, through its custom synthesis business, supports innovator pharma companies for their patented products business right from gram scale requirements for clinical trials to launch as well as late life cycle management. The Company is a public limited company and the Company''s equity shares are listed in BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) in India.

1.2 The Financial statements are approved for issue by the Company''s Board of Directors on May 29, 2021.

2. Significant Accounting Policies

Significant accounting policies adopted in the preparation of these financial statements are detailed below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of Preparation:

(i) Compliance with Ind AS

The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act and guidelines issued by Securities and Exchange Board of India (SEBI).

(ii) Historical cost convention

The financial statements have been prepared on a historical cost basis, except for the following:

â¢ Certain financial assets and liabilities that are measured at fair value; (refer accounting policy regarding financial instruments)

â¢ Defined benefit plans - plan assets measured at fair value

(iii) New and amended standards adopted by the Company

The Company has applied the following standards and amendments for the first time for their annual reporting period commencing April 01, 2020:

â¢ Definition of Material - amendments to Ind AS 1 and Ind AS 8

â¢ Definition of a Business - amendments to Ind AS 103

â¢ Covid-19 related concessions - amendments to Ind AS 116

â¢ Interest Rate Benchmark Reform - amendments to Ind AS 109 and Ind AS 107

The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods.

(iv) Current and non-current classification

An asset / liability is classified as current if:

(a) The amount is expected to be realized or sold or consumed in the Company''s normal operating cycle; the liability is expected to be settled in normal operating cycle;

(b) Asset / liability is held primarily for the purpose of trading;

(d) The asset is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period. The liability has no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.

All other assets / liabilities are classified as noncurrent.

The operating cycle is the time between acquisition of assets for processing and their realization in

cash and cash equivalents. Based on the nature of products and time between acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current/non-current classification of assets and liabilities.

2.2 Segment Reporting:

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker. Managing Director of the Company has been identified as being the Chief Operating Decision Maker. Refer Note 36 for the segment information presented.

2.3 Foreign currency translation:

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The financial statements are presented in Indian rupee (INR), which is Divi''s (the Company''s) functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in statement of profit and loss.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation differences on non-monetary assets and liabilities such as equity instruments held at fair value through profit or loss are recognised in statement of profit and loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equity investments classified as FVOCI are recognised in other comprehensive income.

2.4 Revenue recognition:

Revenue is measured at the transaction price determined under IND AS 115- Revenue from contracts with customers. Amounts disclosed as revenue are net of returns, trade allowances, rebates, Goods & Service Tax (GST) collections and amounts collected on behalf of third parties.

(i) Revenue from Sale of Goods:

Revenue from sale of goods is recognized when the customer obtains control of the Company''s product, which occurs at a point in time, usually upon shipment, with payment terms typically in the range of 60 to 180 days after invoicing depending on product and geographic region. Taxes collected from customers relating to product sales and remitted to government authorities are excluded from revenues.

The Company does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the company does not adjust any of the transaction prices for the time value of money.

For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative standalone selling price. The Standalone selling price of each performance obligation is estimated using expected costs of satisfying such performance obligation and then an appropriate margin is added for such goods or services.

(ii) Revenue from Sale of Services:

Revenue from Sale of services is recognised as per the terms of the contracts with customers when the related services are performed, or the agreed milestones are achieved.

(iii) Dividend Income:

Dividends are received from financial assets at fair value through profit or loss. Dividends are recognised as other income in profit or loss when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits unless the dividend clearly represents a recovery of part of the cost of the investment.

(iv) Interest Income:

Interest income from financial assets at fair value through profit or loss is disclosed as interest income within other income. Interest income on financial assets at amortised cost is calculated using the effective interest method is recognised in the statement of profit and loss as part of other income. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired. For credit-impaired financial assets the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance).

2.5 Income Taxes:

The income tax expense or credit for the period is the tax payable on the current period''s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

The current income tax charge is calculated based on the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, based on amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized, or the deferred income tax liability is settled.

Deferred tax assets are recognised for all deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses.

Deferred tax liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the Company is able to control the timing of the reversal of the temporary

differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where it is not probable that the differences will reverse in the foreseeable future and taxable profit will not be available against which the temporary difference can be utilized.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

For operations carried out in Special Economic Zones which are entitled to tax holiday under the Income tax Act, 1961 no deferred tax is recognised in respect of temporary differences which reverse during the tax holiday period, to the extent company''s gross total income is subject to the deduction during the tax holiday period. Deferred tax in respect of temporary differences which reverse after the tax holiday period is recognised in the year in which temporary difference originate.

2.6 Impairment of assets:

Assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset''s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset''s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cashgenerating units). Non- financial assets that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses).

Fair value through other comprehensive income (FVOCI): Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets'' cash flows represent solely payments of principal and interest, are measured at fair value through other comprehensive income (FVOCI). Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue, foreign exchange gains and losses which are recognised in profit and loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/ (losses). Interest income from these financial assets is included in other income using the effective interest rate method.

Fair value through profit or loss: Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognised in profit or loss and presented net in the statement of profit and loss within other gains/(losses) in the period in which it arises. Interest income from these financial assets is included in other income.

Equity instruments

The Company subsequently measures all equity investments at fair value. Where the Company''s management has elected to present fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments are recognised in profit or loss as other income when the Company''s right to receive payments is established. Changes in the fair value of financial assets at fair value through profit or loss are recognised in other income in the statement of profit and loss. Impairment losses (and reversal of impairment losses) on equity investments measured at fair value are not reported separately from other changes in fair value.

2.7 Cash and cash equivalents:

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short- term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

2.8 Trade receivables:

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.

2.9 Inventories:

Raw materials, stores and spares, work-in-progress and finished goods are stated at the lower of cost, calculated on weighted average basis, and net realizable value. Cost of raw materials and stores comprise of cost of purchases. Cost of work-in-progress and finished goods comprises cost of direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost of inventories also include all other cost incurred in bringing the inventories to their present location and condition. Costs of purchased inventory are determined after deducting rebates and discounts. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Items held for use in the production of inventory are not written below cost if the finished product in which these will be incorporated are expected to be sold at or above the cost.

2.10Investments and other financial assets:

(i) Classification:

The Company classifies its financial assets in the

following measurement categories:

â¢ those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and

â¢ those measured at amortised cost.

The classification depends on the entity''s business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income. The Company reclassifies debt investments when and only when its business model for managing those assets changes.

(ii) Recognition

Purchases and sale of financial assets are recognised on trade date, the date on which company commit to purchase or sale the financial assets.

(iii) Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Debt instruments

Subsequent measurement of debt instruments depends on the Company''s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Company classifies its debt instruments:

Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method.

(iv) Impairment of financial assets

The Company assesses on a forward-looking basis, the expected credit losses associated with its assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. Note 34 details how the Company determines whether there has been a significant increase in credit risk.

For trade receivables only, the Company applies the simplified approach permitted by Ind AS 109 Financial Instruments, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

(v) Derecognition of financial assets

A financial asset is derecognized only when

â¢ the Company has transferred the rights to receive cash flow from the financial asset or

â¢ retains the contractual rights to receive the cash flows of the financial assets but assumes a contractual obligation to pay cash flows to one or more recipients.

Where the entity has transferred an asset, the Company evaluates whether it has transferred substantially all risks and rewards of ownership of the financial asset. In such cases, the financial asset is derecognized. Where the entity has not transferred substantially all risks and rewards of ownership of the financial asset the same is not derecognized.

Where the entity has neither transferred a financial asset nor retains substantially all risks and rewards of ownership of the financial asset, the financial asset is derecognised. Where the Company retains control of the financial asset, the asset is continued to be recognised to the extent of continuing involvement in the financial asset.

2.11 Offsetting financial instruments:

Financial assets and liabilities are offset, and the net amount is reported in the balance sheet where there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on

future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.

2.12 Property, Plant & Equipment:

Freehold land is carried at historical cost. AH other items of property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. On transition to Ind AS, the Company had elected to continue with the carrying value of all its property, plant and equipment recognized as at April 01, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment.

Subsequent costs are included in the asset''s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any component accounted for as separate asset is derecognized when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Capital work-in-progress includes cost of property, plant and equipment under installation/under development as at the balance sheet date.

(i) Depreciation methods, estimated useful lives and residual value

Depreciation on Property, Plant & Equipment is provided on straight-line basis to allocate their cost, net of residual value over the estimated useful lives of the assets. The useful lives have been determined in order to reflect the actual usage of the assets.

Following are the estimated useful lives:
Plant & Machinery	7.5-25 years
Roads and Buildings	30 & 60 years
Furniture and Fixtures	10 years
Vehicles	8 & 10 years
Office Equipments	5 years
Laboratory Equipments	10 years
Computer and data processing units	3-6 years

The residual values are not more than 5% of the original cost of the asset. The assets'' residual values and useful

lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset''s carrying amount is written down immediately to its recoverable amount if the asset''s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in profit or loss within other income/other expenses.

2.13 Intangible Assets:

(i) Computer software

Computer software is stated at historical cost less amortisation. Historical cost includes expenditure that is directly attributable to the acquisition of the computer software. Costs associated with maintaining software programmes are recognised as an expense as incurred.

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met:

- it is technically feasible to complete the software so that it will be available for use

- management intends to complete the software and use or sell it

- there is an ability to use or sell the software

- it can be demonstrated how the software will generate probable future economic benefits

- adequate technical, financial, and other resources to complete the development and to use or sell the software are available: and

- the expenditure attributable to the software during its development can be reliably measured.

Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is available for use.

On transition to Ind AS, the Company had elected to continue with the carrying value of all of intangible assets recognized as at April 01, 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of intangible assets.

(ii) Research and development

Research and Development expenses that do not meet the criteria in (i) above are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period.

(iii) Amortization methods and periods

The Company amortizes intangible assets over a period of 3 years based on their estimated useful lives.

2.14 Trade and Other Payables:

These amounts represent liabilities for goods and services provided to the company prior to the end of financial year which are unpaid. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at their fair value and subsequently measured at amortized cost using the effective interest method.

2.15 Borrowings:

Borrowings are initially recognized at fair value, net of transaction cost incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other gains/(losses).

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer

settlement of the liability for at least 12 months after the reporting period. Where there is a breach of a material provision of a long-term loan arrangement on or before the end of the reporting period with the effect that the liability becomes payable on demand on the reporting date, the entity does not classify the liability as current, if the lender agreed, after the reporting period and before the approval of financial statements for issue, not to demand payment as consequence of the breach.

2.16 Borrowing Costs:

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing cost eligible for capitalization. Other borrowings costs are expensed in the period in which they are incurred.

2.17 Provisions:

Provision for legal claims are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognized for future operating losses.

Provisions are measured at the present value of management''s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provisions due to the passage of time is recognized as interest expense. Provision for litigation related obligation represents liabilities that are expected to materialize in respect of matters in appeal.

2.18 Employee benefits:

(i) Short-term obligations

Liabilities for wages and salaries, bonus, ex-gratia

etc. that are expected to be settled wholly within

12 months after the end of the period in which the employees render the related service are recognized in respect of employees'' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

(ii) Long-term employee benefit obligations

The liabilities for compensated absences are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. The benefits are discounted using the market yields at the end of the reporting period that have terms approximating to the terms of the related obligations. Remeasurements as a result of the experience adjustments and changes in actuarial assumptions are recognized in profit or loss.

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

(iii) Post-employment obligations

The Company operates the following postemployment schemes:

(a) Defined benefit plans-Gratuity obligations

The liability or assets recognized in the balance sheet in respect of defined benefit gratuity plans is the present value of the defined benefit obligations at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by actuaries using the projected unit credit method.

The present value of the defined benefit obligation denominated in INR is determined by discounting the estimated future cash

outflows by reference to market yields at the end of the reporting period on government bonds that have terms approximating to the terms of the related obligation. The benefits which are denominated in currency other than INR, the cash flows are discounted using market yields determined by reference to high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss.

Remeasurement gains and losses arising from experience adjustments and change in actuarial assumptions are recognized in the period in which they occur, directly in other comprehensive income. They are included in retained earnings in the statement of changes in equity and in the balance sheet.

Changes in the present value of the defined benefit obligation resulting from plan amendments or curtailments are recognized immediately in profit or loss as past service cost.

In respect of funded post-employment defined benefit plans, amounts due for payment within 12 months to the fund may be treated as ''current''. Regarding unfunded post-employment benefit plans, settlement obligations which are due within 12 months in respect of employees who have resigned or expected to resign or are due for retirement within the next 12 months is ''current''. The remaining amount attributable to other employees, who are likely to continue in the services for more than a year, is classified as "non-currentâ.

Normally an actuary should determine the amount of current and non-current liability for unfunded post-employment benefit obligations.

(b) Defined contribution plans

The Company pays provident fund contributions to publicly administered funds as per local regulations. The Company has no further payment obligations once the contributions have been paid. The contributions are accounted for as defined contribution plans and the contributions are recognized as employee benefit expense when they are due.

Termination benefits in the nature of voluntary retirement benefits are recognised in the Statement of Profit and Loss as and when incurred.

2.19 Dividends:

Provision is made for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Proposed dividend is recognised as a liability in the period in which it is declared by the Company, usually when approved by shareholders in a general meeting, or paid.

2.20 Contributed equity:

Equity shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.21 Earnings per share:

(i) Basic earnings per share

Basic earnings per share is calculated by dividing:

â¢ The profit attributable to owners of the Company

â¢ By the weighted average number of equity shares outstanding during the financial year, adjusted for bonus elements in equity shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:

â¢ the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and

â¢ the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.

2.22 Leases:

As a lessee

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the company. Contracts may contain both lease and non-lease components. The company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

â¢ fixed payments (including in-substance fixed payments), less any lease incentives receivable

â¢ variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date

â¢ amounts expected to be payable by the company under residual value guarantees

â¢ the exercise price of a purchase option if the company is reasonably certain to exercise that option, and

â¢ payments of penalties for terminating the lease, if the lease term reflects the company exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the company, the lessee''s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

To determine the incremental borrowing rate, the company:

â¢ where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received

â¢ uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the company which does not have recent third party financing, and

â¢ makes adjustments specific to the lease, e.g. term, country, currency and security.

The company is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Right-of-use assets are measured at cost comprising the following:

â¢ the amount of the initial measurement of lease liability

â¢ any lease payments made at or before the commencement date less any lease incentives received

â¢ any initial direct costs, and

â¢ restoration costs.

Right-of-use assets are generally depreciated over the shorter of the asset''s useful life and the lease term on a straight-line basis. If the company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset''s useful life.

Short-term leases of equipment and all leases of low-value assets are recognised as expense over the lease

term on straight-line basis or another systematic basis if that basis is more representative of the pattern of the benefit. Short-term leases are leases with a lease term of 12 months or less.

As a lessor

Lease income from operating leases where the company is a lessor is recognised in income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the balance sheet based on their nature.

2.23 Contingent Liability & Commitments:

Contingent liability is disclosed in the case of:

- a present obligation arising from past events, when it is not probable that an outflow of resources will be required to settle the obligation.

- a present obligation arising from past events when no reliable estimate possible.

- a possible obligation arising from past events unless the probability of outflow of resources is remote.

Commitments include the amount of purchase order (net of advances) issued to parties for completion of assets.

2.24 Critical estimates and Judgements:

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also exercise judgement in applying the Company''s accounting policies.

Detailed information about the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The areas involving critical estimates or judgements are:

(i) Estimation of current tax expense and current tax payable - refer Note : 31(b)

(ii) Estimation of defined benefit obligations- refer note: 17

(iii) Allowance for uncollected accounts receivable and advances. Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrevocable amounts. Individual trade receivables are written off when management deems them not to be collectible. Impairment is made on the expected credit losses, which are the present value of the cash shortfall over the expected life of the financial assets.

Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the company and that are believed to be reasonable under the circumstances.

2.25 Government grants:

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the company will comply with all attached conditions.

Government grants relating to income are deferred and recognised in the profit or loss over the period necessary to match them with the costs that they are intended to compensate and presented within other income.

Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to profit or loss on a straight-line basis over the expected lives of the related assets and presented within other income.

Export incentives comprise of Duty draw back and MEIS (Merchandise Exports Incentive scheme) scrips.

Export entitlements from government authorities are recognised in the statement of profit and loss as income or as a reduction from "Cost of materials consumedâ, when there is reasonable assurance that the entity will comply with the conditions attaching to them and the grants will be received

2.26 Rounding of Amounts:

All amounts disclosed in the financial statements and notes have been rounded off to the nearest lakhs as per the requirement of Schedule III of the Companies Act, 2013 unless otherwise stated.

Mar 31, 2019

1. Background:

1.1 (Diviâs), (the âcompanyâ) is a company limited by shares, incorporated and domiciled in India. The company is engaged in the manufacture of Active Pharmaceutical ingredients (APIâs), Intermediates and Nutraceutical ingredients with predominance in exports. In addition to generic business, the company, through its Custom synthesis business, supports innovator pharma companies for their patented products business right from gram scale requirements for clinical trials to launch as well as late life cycle management. The Company is a public limited company and the Companyâs equity shares are listed on the BSE Limited and National Stock Exchange of India Limited (NSE) in India.

1.2 The Financial statements are approved for issue by the Companyâs Board of Directors on May 25, 2019.

Amounts recognised in profit or loss

Write-down of inventories to net realisable value and provision for slow moving amounted to RS.4,437 (March 31, 2018 - RS.4,575) as at the year end. An amount of RS.138 was credited to profit or loss (March 31, 2018- RS.2,662 was charged to profit or loss) and included in âChanges in value of inventories of Finished goods and work in progress â and âCost of raw materials consumedâ in statement of profit or loss.

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.

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

On September 28, 2015, the Company issued 13,27,34,290 equity shares of RS.2 each as fully paid bonus shares by capitalization of securities premium reserve.

Nature and purpose of reserves:

Securities premium reserve:

Securities premium reserve is used to record the premium on issue of shares. The reserve is utilised in accordance with the provisions of the Act. General Reserve:

General Reserves represent amounts transferred from Retained Earnings in earlier years under the provisions of the erstwhile Companies Act, 1956. Special Economic Zone Re-investment reserve:

Under the SEZ scheme, the unit which begins production of Goods/ services on or after April 1, 2005 will be eligible for deductions of 100% of profits or gains derived from export of Goods/ 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 utilisation 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. (Refer Note 41)

(i) Compensated Absences obligations:

The Compensated Absences covers the groupâs liability for earned leave which is classified as other long-term benefits.

(ii) Post-employment obligations- Gratuity

The Company provides gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employeesâ last drawn basic salary per month computed proportionately for 15 daysâ salary multiplied for the number of years of service. The gratuity plan is a funded plan and the Company makes contributions to recognised funds in India through an approved trust administered by Life Insurance Corporation of India.

The amounts recognised in the balance sheet and the movements in the net defined benefit obligation over the year are as follows:

(iv) Defined benefit liability and employer contributions

The Company has established a trust to purchase 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.

The Company makes contributions to Defined benefit plans for qualifying employees. These Plans are administered through approved Trust, which operate in accordance with the Trust Deed, Rules and applicable Statutes. The concerned Trust is managed by Trustees who provide strategic guidance with regard to the management of investments and liabilities and also periodic review of its performance. The trust in turn contributes to a scheme administered by the Life Insurance corporation of India to discharge gratuity liability to the employees. The trust has not changed the processes used to manage its risks from previous periods. A large portion of assets consists of government and corporate bonds, although invested in equities, cash and mutual funds. The plan asset mix is in compliance with the requirements of the respective local regulations.

(v) Risk exposure

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

Liquidity Risk: . This is the risk that the company is not able to meet the short term gratuity pay-out. This may arise due to non-availability of enough cash / cash equivalent to meet the liabilities or holdings illiquid assets not being sold in time.

Regulatory Risk: Gratuity benefit 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 planâs bond holdings.

(vi) Defined Contribution plans

Employerâs 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 recognised during the period towards defined contribution plan is RS.1,159 (March 31, 2018- RS.1,032) also refer Note.40(b)

Employerâs 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 Companyâs 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 recognised during the period towards defined contribution plan is RS.287 (March 31, 2018-RS.242)

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 property, plant and equipment of the company, both present and future. The carrying amounts of financial and non-financial assets pledged as security for current and non- current borrowings are disclosed in Note 20(a)

Note 2(a): Assets pledged as security

The carrying amounts of Companyâs assets pledged as security for working capital loans from banks:

Note 3: Income tax expense

This note provides an analysis of the Companyâs income tax expense, showing the amounts that are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains significant estimates made in relation to the Companyâs tax positions.

(a) Income tax expense

Entire deferred tax for the year ended March 31, 2019 and March 31, 2018 relates to origination and reversal of temporary differences.

(b) Significant estimates (tax calculation note)

In calculating the tax expense for the current period, the company has treated certain expenditures as deductible and non-deductible based on prior year completed assessments 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 fifteen years from the date of commencement of operations. Under the SEZ scheme, the unit which begins production of Goods/services on or after April 1, 2005 will be eligible for deductions of 100% of profits or gains derived from export of Goods/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 out of profit of eligible SEZ Units and utilisation 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.

(c ) Reconciliation of tax expense and the accounting profit multiplied by Indiaâs tax rate:

The applicable Indian corporate statutory tax rate for the year ended March 31, 2019 and March 31, 2018 is 34.944% and 34.608%, respectively. The increase in the corporate statutory tax rate to 34.944% is consequent to changes made in the Finance Act, 2018.

Note 4: Fair Value Hierarchy

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

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

Level 2: Inputs other than quoted price 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.

Valuation technique used to determine fair value:

Specific Valuation techniques used to value financial instruments include:

- the use of quoted market prices or dealer quotes for similar instruments.

- the fair value of remaining financial instruments is determined using discounted cash flow analysis.

Valuation Process:

The Finance and Accounts department of the Company performs the valuation of financial assets and liabilities required for financial reporting purposes, and report to the Board of Directors. The Level 3 inputs for investment in equity shares are derived using the discounted cash flow analysis.

Note 5: Financial Risk Management

The Companyâs activities expose it to market risk, price risk, liquidity risk and credit risk. The Company emphasizes on risk management and has an enterprise wide approach to risk management. The Companyâs 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 management

I. Credit risk on cash and cash equivalents and investments is limited as the Company generally invests in deposits and mutual funds with nationalised banks, thereby minimising its risk.

II. Credit risk on security deposits, investments, loans given to a subsidiary and trade receivables are evaluated as follows:

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 nationalised bank, thereby minimises the risk.

(B) Market Risk:

The Company has substantial exposure to foreign currency risk due to the significant exports. Sales to 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 impact of the currency volatility and engages with customers addressing such risks.

(ii) Cash Flow and fair value interest rate risk:

Interest rate exposure: The Company does not have long term borrowings and interest rate risk is towards short term working capital borrowings and fixed deposits. Below is the sensitivity analysis. The analysis presents the cash flow due to the increase/decrease in the interest rates with all other variables held constant.

(c) Price Risk:

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 nationalised banks with minimal risk. The table below summarises the impact of increase/(decrease) in the Net Asset Value(NAV) of these investments

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

(d) Liquidity Risk:

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding to meet obligations when due and to close out market positions. Companyâs treasury maintains flexibility in funding by maintaining availability under deposits in banks, adequate limits in the current accounts etc.

Note 6: Capital Management

(a) The Companyâs financial strategy aims to provide adequate capital for its growth plans for sustained stakeholder value. The companyâs 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. 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.

(b) Dividends:

Dividend paid on Equity shares:

Note 7: Segment Information 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 Companyâs performance. The company is engaged in the manufacture of Active Pharmaceutical Ingredients (APIâs), Intermediates and Nutraceutical Ingredients and operates in a single operating segment.

The reportable segments have 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 8: 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.775 (Previous Year is RS.741)

Note: (a) 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.

Note: (b) Provident Fund

The Company is in the process of evaluating the impact of the recent Supreme Court Judgment in case of âVivekananda Vidyamandir And Others Vs The Regional Provident Fund Commissioner (II) West Bengalâ and the related circular (Circular No. C-I/1(33)2019/Vivekananda Vidya Mandir/284) dated March 20, 2019 issued by the Employeesâ Provident Fund Organisation in relation to non-exclusion of certain allowances from the definition of âbasic wagesâ of the relevant employees for the purposes of determining contribution to provident fund under the Employeesâ Provident Funds & Miscellaneous Provisions Act, 1952. In the assessment of the management which is supported by legal advice, the aforesaid matter is not likely to have a significant impact and accordingly, no provision has been made in these Financial Statements.

Note 9: Payables to Micro, Small & Medium Enterprises

There are no dues to Micro, Small and Medium Enterprises as at year end. The identification of Micro, Small and Medium Enterprises as defined under the provisions of âMicro, Small and Medium Enterprises development Act, 2006â is based on management knowledge of their status.

Note 10: Changes in Accounting Policies :

The Company applied Ind AS 115 for the first time using the modified retrospective method of adoption with the date of initial application of April 01,2018. Under this method any cumulative effect of initially applying Ind AS 115 can be shown as an adjustment to the opening balance of retained earnings as at April 01, 2018. The effect on adoption of Ind AS 115 was insignificant and hence, no adjustments were made to opening balance of retained earnings.

Note 11: Events occurring after the reporting period:

Refer Note 36 for the final dividend recommended by the Board which is subject to the approval of shareholders at the ensuing Annual General Meeting.

Note 12: Previous year figures have been regrouped /reclassified to conform to current year classification.

The accompanying notes are an integral part of the financial statements

Mar 31, 2018

Note 1: Fair Value Heirarchy

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

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

Level 2: Inputs other than quoted prices 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.

Valuation technique used to determine fair value: Specific Valuation techniques used to value financial instruments include:

- The use of quoted market prices or dealer quotes for similar instruments.

- The fair value of remaining financial instruments is determined using discounted cash flow analysis.

Valuation Process:

The Finance and Accounts department of the Company performs the valuation of financial assets and liabilities required for financial reporting purposes, and report to the Board of Directors. The main Level 3 inputs for investment in equity shares are derived using the discounted cash flow analysis.

Note 2: Financial Risk Management

The Company''s activities expose it to market risk, price risk, liquidity risk and credit risk. The Company emphasizes 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 management

I. Credit risk on cash and cash equivalents and investments is limited as the Company generally invests in deposits and mutual funds with nationalized banks, thereby minimizing its 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.

(ii) Cash Flow and fair value interest rate risk:

Interest rate exposure: The Company does not have long term borrowings and interest rate risk is towards short term working capital borrowings and fixed deposits. Below is the sensitivity analysis. The analysis presents the cash flow due to the increase/ decrease in the interest rates with all other variables held constant.

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 conservatives 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.

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

(C) Liquidity Risk:

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding to meet obligations when due and to close out market positions. Company''s treasury maintains flexibility in funding by maintaining availability under deposits in banks, adequate limits in the current accounts etc.

(i) Financing Arrangement:

The company has access to the following undrawn borrowing facilities at the end of the reporting period:

Note 3: Capital Management

(a) 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. 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 4: Segment Information

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 the manufacture of Active Pharmaceutical ingredients (API''s), Intermediates and Nutraceutical ingredients 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 5: 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 recognized in Statement of Profit and Loss for the year is H741 (Previous Year is H712 )

Note 6: Related Party Transactions

(a) Subsidiaries : Divi''s Laboratories (USA) Inc.

: Divi''s Laboratories Europe AG.

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

: Mr. N.V. Ramana : Mr. D. Madhusudana Rao : Mr. Kiran S. Divi

: Mrs.Nilima Motaparti (w.e.f. 22.06.2017)

: Mr. K V K Seshavataram : Mr. R Ranga Rao : Dr.G Suresh Kumar

: Mrs. S Sri Devi (resigned w.e.f 22.06.2017)

: Dr Ramesh B V Nimmagadda (w.e.f. 22.06.2017)

: Dr S Ganapaty (w.e.f. 22.07.2017)

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

: 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. N.V.Anirudh : Miss. N. Monisha : Mrs. Jhansi Lakshmi Pendyala : Mr. N. Prashanth : Mrs. L. Vijaya Lakshmi

Disclosure pursuant to the Regulation 34(3) read with para A of Schedule V to SEBI Listing Regulations, 2015:

Loans and advances in the nature of loans to subsidiaries:

The Company had undertaken to provide financial assistance to its wholly owned subsidiary Viz., Divi''s Laboratories Europe AG by way of Interest free loan before 1.04.2014. The loan is subordinated to other creditors to the extent of CHF 10 equivalent to Rs. 686 (Previous year CHF 30 equivalent to Rs. 1,942). Effective April 01, 2017, the company is charging interest @4.50% p.a. on the outstanding loan amount.

Management is confident to maintain the 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, the Company''s management is confident to achieve good progress on turnover and profitability of its subsidiary. As per the projections/ cash in-flows submitted by the wholly owned subsidiary, the accumulated losses will be recovered in future. The advance will be repaid by the subsidiary 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 March 31, 2018 and March 31, 2017.

(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

* Specified Bank Notes (SBNs) mean the bank notes of denominations of the existing series of the value of five hundred rupees and 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.

Note 7: Previous year figures have been regrouped /reclassified to conform to current year classification.

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 âChanges 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 âChanges 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:

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.

(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.

(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.

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

: 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 Ã 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 Ã(Increase) in StocksÃ.

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 CompanyÃs 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. DiviÃs 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 DiviÃs Laboratories Europe AG by way of loans with no specific repayment schedule. In respect of loan to DiviÃs 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 Ã IV to Schedule VI of the Companies Act, 1956 is given in Annexure.

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