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Notes to Accounts of Natco Pharma Ltd.

Mar 31, 2017

1. FAIR VALUE MEASUREMENTS i) Fair value hierarchy

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

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

Level 2: 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 rely as little as possible on entity specific estimates.

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

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

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

The carrying amounts reported in the statement of financial position for cash and cash equivalents, trade and other receivables, trade and other payables and other liabilities approximate their respective fair values due to their short maturity.

2. FINANCIAL INSTRUMENTS RISK MANAGEMENT

A. Market risk:

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

The sensitivity analysis in the following sections relate to the position as at 31 March 2017 and 31 March 2016. The analysis exclude the impact of movements in market variables on: the carrying values of gratuity and other post retirement obligations; provisions; and the non-financial assets and liabilities.

i. Interest rate risk

The Company''s fixed rate borrowings are carried at amortized cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates. The Company considers the impact of fair value interest rate risk on investment in deposits with banks and financial institutions and debentures as not material.

The Company''s variable rate borrowing is subject to interest rate risk. Below is the details of exposure to fixed rate and variable rate instruments:

ii. Foreign currency risk:

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company''s exposure to the risk of changes in foreign exchange rates relates primarily to the Group''s operating activities (when revenue or expense is denominated in a foreign currency) and the Company''s net investments in foreign subsidiaries.

iii. Equity price risk:

The Company''s exposure to equity securities price risk arises from investments held by the Company and classified in the balance sheet as FVOCI (Note 8).

To manage its price risk arising from investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set up by the Company.

The majority of the Company''s equity investments are publicly traded and are included in the NSE Nifty 50 index.

The table below summarizes the impact of increase/decrease of the index on the Company''s equity and profit for the period. The analysis is based on the assumption that the equity index had increased/decreased by 10% with all other variables held constant, and that of the Company''s equity instruments moved in line with the index.

3. FINANCIAL INSTRUMENTS RISK MANAGEMENT (CONTINUED)

B. CREDIT RISK

Credit risk is the risk that a counterparty fails to discharge an obligation to the Company, leading to a financial loss. The Company is mainly exposed to the risk of its balances with the bankers and trade and other receivables.

c. Liquidity risk

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

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

The Company''s principal sources of liquidity are the cash flows generated from operations. The Company has no long-term borrowings and believes that the working capital is sufficient for its current requirements. Accordingly, no liquidity risk is perceived.

Maturities of financial liabilities

The tables below analyse the Company''s financial liabilities into relevant maturity groupings based on their contractual maturities for all non-derivative financial liabilities. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is insignificant.

4. CAPITAL RISK MANAGEMENT

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

5. RELATED PARTY DISCLOSURES

a) Names of the related parties and nature of relationship (as per Ind AS 24)

Names of related parties Nature of relationship

NATCO Pharma Inc., United States of America Time cap Overseas Limited, Mauritius

NATCO Pharma (Canada) Inc., Canada Subsidiary company

NATCO Pharma Asia PTE Ltd., Singapore NATCO Pharma Australia PTY Ltd., Australia

NATCO Farma Do Brazil Ltda., Brazil Step-down subsidiary company

Time Cap Pharma Labs Limited NATCO Trust NATCO Aqua Limited

Entities in which KMP have control or have significant influence

NDL Infratech Private Limited NATCO Group Employees Welfare Trust Natsoft Information Systems Private Limited V. C. Nannapaneni

Key management personnel ("KMP")

Rajeev Nannapaneni Durga Devi Nannapaneni Venkata Satya Swathi Kantamani

Relative of KMP

Neelima Nannapaneni Dr. Ramakrishna Rao

(e) Transaction with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the related parties, are carried at an arm''s length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at arm’s length prices. The Company is in the process of updating the transfer pricing documentation for the financial year ended 31 March 2017. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

6. SEGMENT REPORTING

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

(c) The Company is contesting certain patent infringement cases filed against it by the innovators. A few of these casespertain to products already launched by the Company in the market. These cases are pending before different authorities / courts within the Indian jurisdiction and the outcome cannot be ascertained with reasonable certainty. Accordingly, a reliable estimate of the liability towards damages/penalties, if any, cannot be made at present. These amounts will be recognized during the periods in which such liabilities can be reasonably measured. Further, the management does not expect such liabilities to be significant.

The aforementioned expenditure, other than capital equipments, are included under the respective heads of the Statement of Profit and Loss.

7. During the year ended 31 March 2016, the Company made a Qualified Institutional Placement (''QIP'') and allotted 8,000,000 equity shares (post split) on 18 September 2015 of face value of ''2 each (post split) at a premium of ''424.11 per equity share (post split), pursuant to clause 49 of the erstwhile listing agreement with the stock exchanges, for the purposes of capital expenditure and long-term working and capital requirements, expenses for exploring acquisition opportunities and general corporate requirements of the Company.

8. AMALGAMATION OF NATCO ORGANICS LIMITED

(a) NATCO Organics Limited (“NOL”), a wholly owned subsidiary of the Company, amalgamated with the Company, with effect from 1 April 2015 (“the appointed date”). NOL was engaged in the business of manufacturing and selling of bulk drugs in domestic markets. The amalgamation was pursuant to a composite scheme of amalgamation sanctioned by the Honourable High Court of Judicature at Madras vide their Order dated 28 April 2016. Pursuant thereto all the assets and properties, both movable and immovable, rights, title and interests, secured and unsecured debts, borrowings, and all other duties, debts, liabilities, undertakings and obligations of NATCO Organics Limited, have been transferred to and vested in the Company retrospectively with effect from 1 April 2015. The amalgamation has been accounted for under the ''pooling of interests'' method as prescribed by the Indian Accounting Standard 103 (Ind AS 103) - “Business Combinations” specified under Section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014. Accordingly, the assets, liabilities and reserves of NATCO Organics Limited as at 1 April 2015 have been taken over at their book values and in the same form.

(b) Since NOL was wholly owned by the Company, no shares were exchanged to effect the amalgamation.

Accordingly, the amalgamation has resulted in transfer of assets, liabilities and reserves in accordance with the terms of the Scheme at the following summarized values:

9. FIRST TIME ADOPTION OF IND AS

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

The accounting policies set out in note 4 have been applied in preparing the financial statements for the year ended

31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 1 April 2015 (the Company''s date of transition). An explanation of how the transition from previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows is set out in the following tables and notes.

A Ind AS optional exemptions

A1 Deemed cost for property, plant and equipment and intangible assets

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.

A2 Designation of previously recognized financial instruments

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

B Ind AS mandatory exemptions B1 Estimates

An entity''s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with 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 1 April 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:

a) Investment in equity instruments carried at FVTPL or FVOCI

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

B2 Classification and measurement of financial assets and liabilities

The classification and measurement of financial assets will be made considering whether the conditions as per Ind AS 109 are met based on facts and circumstances existing at the date of transition.

Financial assets can be measured using effective interest method by assessing its contractual cash flow characteristics only on the basis of facts and circumstances existing at the date of transition and if it is impracticable to assess elements of modified time value of money i.e. the use of effective interest method, fair value of financial asset at the date of transition shall be the new carrying amount of that asset. The measurement exemption applies for financial liabilities as well.

Applying a requirement is impracticable when the entity cannot apply it after making every reasonable effort to do so. It is impracticable to apply the changes retrospectively if:

a) The effects of the retrospective application or retrospective restatement are not determinable;

b) The retrospective application or restatement requires assumptions about what management''s intent would have been in that period;

The retrospective application or retrospective restatement requires significant estimates of amounts and it is impossible to distinguish objectively information about those estimates that existed at that time.

10. FIRST TIME ADOPTION OF IND AS (CONTINUED)

B3 De-recognition of financial assets and liabilities

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

The Company has elected to apply the de-recognition provisions of Ind AS 109 prospectively from the date of transition to Ind AS.

11. FIRST TIME ADOPTION OF IND AS (CONTINUED)

C Reconciliations between previous GAAP and Ind AS (continued)

NOTES TO THE RECONCILIATIONS

i. 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 and reliability. 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 or fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments (other than equity instruments designated as at FVOCI) have been recognized in retained earnings as at the date of transition and subsequently in the profit or loss for the year ended 31 March 2016. This increased the retained earnings by ''11 as at 31 March 2016 (1 April 2015: ''11).

Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognized in FVOCI - Equity investments reserve as at the date of transition and subsequently in the other comprehensive income for the year ended 31 March 2016. This increased other reserves by ''17 as at 31 March 2016 (1 April 2015: ''6).

Consequent to the above, the total equity as at 31 March 2016 increased by ''28 (1 April 2015: ''17) and profit and other comprehensive income for the year ended 31 March 2016 increased/(decreased) by (''11) and ''5 respectively.

ii. Revenue from operations

Under Indian GAAP, sale of goods was presented as net of excise duty. However, under Ind AS, sale of goods includes excise duty. Excise duty on sale of goods is separately presented in the face of statement of profit and loss. Thus sale of goods under Ind AS has increased by ''378 with a corresponding increase in expense.

iii. Remeasurement 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 31 March 2016 decreased by ''31. There is no impact on the total equity as at 31 March 2016.

iv. Deferred tax

Deferred tax have been recognized on the adjustments made on transition to Ind AS.

v. Retained earnings

Retained earnings as at April 1, 2015 has been adjusted consequent to the above Ind AS transition adjustments.

vi. Other comprehensive income

Under Ind AS, all items of income and expense recognized in a period should be included in 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 and loss as ''other comprehensive income'' includes re-measurements of defined benefit plans, foreign exchange differences arising on translation of foreign operations and fair value gains or (losses) on FVOCI equity instruments. The concept of other comprehensive income did not exist under previous GAAP.


Mar 31, 2016

1. a) Change in accounting estimate

In accordance with the provisions of the Act, effective 1 April 2014, the Company has adopted useful lives as prescribed under Schedule II, which coincides with the useful lives as estimated by the management. Accordingly the depreciation on tangible fixed assets for the previous year ended was higher by Rs.127,839,130 and further an amount of Rs.62,258,333 was charged to the opening balance of the general reserve in respect of the assets whose remaining useful life was nil as at 1 April 2014.

b) Change in accounting policy

Hitherto, the group had used intrinsic value method for recognition of employee stock option compensation cost arising on account of grant of stock options. However, during the year management of the group has elected the fair value method of accounting for compensation on stock options granted during the year. Management is of the opinion that the impact of such change is expected to be insignificant on the consolidated financial statements of the group.

(b) Terms and rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs.2 per share. Each holder of equity shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing general meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive the remaining assets of the Company, after distribution of all preferential amounts in proportion of their shareholding.

(d) Shares reserved for issue under options

(i) The Company has instituted the NATCO Employee Stock Option Plan ''ESOP-2015'' ("the Scheme") as per the special resolution passed in the Extraordinary General Meeting of the Company held on 27 June 2015. The scheme was formulated in accordance with the Securities Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 issued by the Securities and Exchange Board of India ("SEBI"). Pursuant to such order, the Board of the Directors of the Company have granted 750,000 options (post split) to eligible employees on 12 August 2015. The terms of the Scheme provide that each option entitles the holder to 5 equity shares of Rs.2 each (post split) and that the options can be settled only by way of issue of equity shares. The options vest on an annual basis over a period of 5 years from the date of grant and the options are entirely time-based with no performance conditions.

(ii) The Company had instituted NATCO Stock Option Plan 2010 ("ESOP 2010") as per the special resolution passed in the annual general meeting of the members held on 30 September 2010. The Scheme was formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("SEBI ESOP Guidelines") issued by the Securities and Exchange Board of India ("SEBI") and pursuant to the provisions of Section 81(1A) and other applicable provisions of the Companies Act, 1956. Pursuant to such approval, the Board was authorized to issue employee stock options, that were exercisable into not more than 600,000 equity shares of the Company to eligible employees based on specific recommendations of the remuneration committee. Each option comprises of one underlying equity share of TIO each (pre split) 236,551 options were granted during August 2011 at an exercise price of TIO each (pre split) and were accounted at an intrinsic value of Rs.252.55 per share (pre split), being the difference between the market value, calculated in accordance with the valuation methods prescribed by the SEBI and the grant price and accounted as stock option compensation over the vesting period of twelve months from the date of the grant. During the year the Company has terminated NATCO Employee Stock Option Plan, 2010 (NATSOP 2010).

(i) During the year ended 31 March 2015, the Company has issued 808,875 equity shares (post split) of Rs.2 each, fully paid- up at a premium of Rs.238 per equity share (post split) to the erstwhile shareholders of Natco Organic Limited (''NOL'') in exchange of 19,310,000 equity shares of TIO each at face value held in NOL.

(ii) Balance equity shares comprising of 1,125,610 (31 March 2015:1,125,610) (post split) were allotted during the period of five years, on exercise of the options granted under the employee stock option plan (ESOP 2010) wherein part consideration was received in the form of employee services.

(f) Equity shares of the Company with face value of TIO per share were sub-divided into 5 equity shares of T2 each effective 30 November 2015, accordingly comparative has been restated to be inline with the current year''s face value per share and number of shares. Consequently, in accordance with Accounting Standard (AS) 20 - "Earnings Per Share", the basic and diluted earnings per share of the previous year have been recomputed and disclosed accordingly.

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

(i) Term loans amounting to Rs.75,000,000 (31 March 2015: Rs.623,235,295) is secured by pari-passu first charge on the entire immovable properties and movable fixed assets both present and future of Mekaguda Unit and part of the loan is further secured by an exclusive charge on all the immovable properties and movable fixed assets of both the units (Plot No-19 and Plot NoA-3) at Dehradun and exclusive charge on the R&D equipment acquired from the loan amount.

(ii) Term loan amounting to Rs.66,581,648 (31 March 2015: Rs.122,086,614) is secured by first charge on the movable and immovable fixed assets of Mekaguda unit along with other lenders.

(iii) Term loan amounting to Rs.Nil (31 March 2015: Rs.657,781,706) is secured by pari-passu first charge on the entire fixed assets both present and future of Kothur Unit.

2. Exceptional item

Exceptional item represents amount paid on settlement of pending legal dispute with M/s. SMS Pharmaceuticals Limited.

3. Segment reporting

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

4. Amalgamation of NATCO Organics Limited

(a) NATCO Organics Limited ("NOL"), a wholly owned subsidiary of the Company, amalgamated with the Company, with effect from 1 April 2015 ("the appointed date"). NOL was engaged in the business of manufacturing and selling of bulk drugs in domestic markets. The amalgamation was pursuant to a composite scheme of amalgamation, "the Scheme" sanctioned by the Honourable High Court of Judicature at Madras vide their Order dated 28 April 2016. Pursuant thereto all the assets and properties, both movable and immovable, rights, title and interests, secured and unsecured debts, borrowings, and all other duties, debts, liabilities, undertakings and obligations of NATCO Organics Limited, have been transferred to and vested in the Company retrospectively with effect from 1 April 2015. The amalgamation has been accounted for under the ''pooling of interests'' method as prescribed by Accounting Standard 14 specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. Accordingly, the assets, liabilities and reserves of NATCO Organics Limited as at 1 April 2015 have been taken over at their book values and in the same form.

(b) Since NOL was wholly owned by the Company, no shares were exchanged to effect the amalgamation. The difference between the amounts recorded as investments of the Company and the amount of share capital of NATCO Organics Limited, if any has been adjusted in the General Reserve.

Accordingly, the amalgamation has resulted in transfer of assets, liabilities and reserves in accordance with the terms of the Scheme at the following summarised values:

5. Additional information as required under paragraph 5 of the part II of the Schedule III to the Act to the extent either "Nil" or "Not Applicable" has not been furnished.

6. Comparatives

Previous year figures have been reclassified / regrouped wherever necessary, to confirm to current year presentation.


Mar 31, 2015

1. COMPANY OVERVIEW

NATCO Pharma Limited ("the Company") is a public company listed in India and incorporated in accordance with the provisions of Companies Act, 1956. The Company is engaged in manufacturing and selling of bulk drugs and finished dosage formulations and caters to both domestic and international markets.

2. CHANGE IN ACCOUNTING ESTIMATE

Hitherto, depreciation on all tangible fixed assets was provided on straight line method over the estimated useful lives using the rates prescribed under erstwhile Schedule XIV of the Companies Act, 1956. Effective 1 April 2014, in accordance with the requirements to Schedule II of the Act, the Company has adopted the rates prescribed under Schedule II and accordingly, depreciation on the tangible fixed assets for the year ended 31 March 2015 is higher by Rs.127,839,130 and further an amount of Rs.62,258,333 has been charged to the opening balance of the general reserve in respect of the assets whose remaining useful life is nil as at 1 April 2014 in accordance with Schedule II of the Act.

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

(i) The Company had instituted NATCO Stock Option Plan 2010 ("ESOP 2010") as per the special resolution passed in the annual general meeting of the members held on 30 September 2010. The Scheme was formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("SEBI ESOP Guidelines") issued by the Securities and Exchange Board of India ("SEBI") and pursuant to the provisions of Section 81(1 A) and other applicable provisions of the Companies Act, 1956. Pursuant to such approval, the Board is authorized to issue employee stock options, that are exercisable into not more than 600,000 equity shares of the Company to eligible employees based on specific recommendations of the remuneration committee. Each option comprises of one underlying equity share of Rs.10 each. 236,551 options were granted during August 2011 at an exercise price of Rs.10 each and were accounted at an intrinsic value of T252.55 per share, being the difference between the market value, calculated in accordance with the valuation methods prescribed by the SEBI and the grant price and accounted as stock option compensation over the vesting period of twelve months from the date of the grant.

(ii) During the year ended 31 March 2015, the Company has not granted any options to the employees and no options were pending for vesting / exercise as at 31 March 2015.

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

(i) Term loans amounting to Rs.623,235,295 (31 March 2014: Rs.457,205,883) is secured by pari-passu first charge on the entire immovable properties and movable fixed assets both present and future of Mekaguda Unit and part of the loan is further secured by an exclusive charge on all the immovable properties and movable fixed assets of both the units (Plot No-19 and Plot NoA-3) at Dehradun and exclusive charge on the R&D equipment acquired from the loan amount.

(ii) Term loan amounting to Rs.122,086,614 (31 March 2014:Rs.241,300,697) is secured by an exclusive charge over all movable and immovable fixed assets of NATCO Research Centre and a part of the loan is secured by first charge on the movable and immovable fixed assets of Mekaguda unit along with other lenders.

(iii) Term loan amounting to Rs.657,781,706 (31 March 2014:Rs.686,805,556) is secured by pari-passu first charge on the entire fixed assets both present and future of Kothur Unit.

All the above loans are guaranteed by Mr.V.C Nannapaneni, Chairman and Managing Director and carry interest linked to the respective Bank''s / Institution''s prime / base lending rate, and range from 3.53% per annum to 12.75% per annum (31 March 2014:3.53% per annum to 12.50% per annum).

(a) Loans repayable on demand represents cash credit, overdraft, bills purchased and discounted with various banks and carry interest linked to the respective Bank''s / Institution''s prime / base lending rate, and range from 10% per annum to 14% per annum (31 March 2014:5.75% per annum to 14% per annum)

(b) Loans repayable on demand are secured by way of first charge on all the current assets of the Company. The collatera security is joint pari-passu first charge on the corporate Office and all fixed assets of Nagarjuna Sagar Unit apart from personal guarantees of Mr. V.C. Nannapaneni, Chairman and Managing Director, Mrs. Durga Devi Nannapaneni, promoter and Dr. N. Ramakrishna Rao, relative of Chairman and Managing Director.

(c) Unsecured loans are personally guaranteed by Mr. V.C. Nannapaneni, Chairman and Managing Director.

(a) Investment in portfolio management services

The Company has made an investment, aggregating to Rs.15,000,000 in the private equity opportunities fund of Anand Rathi Financial Services Limited (ARFSL). By virtue of shareholders agreement and share subscription agreement, both dated 29 November 2010, ARFSL has invested the Company''s fund in the Compulsorily Convertible Preference Shares of Ravindranath GE Medical Associates Private Limited. The Company''s investment in the private equity opportunities fund of ARFSL provides for a return of 20% in excess of 16% on a gross pre-tax IRR basis. In the absence of reasonable certainty of realization of return, no income was accrued on such investment for the year ended 31 March 2015.

3. SEGMENT REPORTING

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

As at 31 March, 2015 As at 31 March, 2014

4. CONTINGENT LIABILITIES AND COMMITMENTS

(a) Commitments

Estimated amount of contracts remaining to be executed on capital 17,95,36,081 17,84,85,937 account and not provided for (net of advances)

(b) Contingent liabilities

Claims against the company not acknowledged as debt - 20,42,27,280

Disputed sales tax liabilities 86,90,000 86,90,000

Disputed service tax liabilities 17,49,256 -

Disputed customs liability 20,00,000 -

Disputed income tax liabilities 6,56,957 2,99,52,680

5. EXPENDITURE ON CORPORATE SOCIAL RESPONSIBILITY ACTIVITIES

(a) Gross amount required to be spent by the company during the year

(b) Contribution to trusts controlled by the company NATCO Trust

(c) Provision towards CSR activities undertaken by entering into a contractual obligation and which have completed during the year

6. Additional information as required under paragraph 5 of the part II of the Schedule III to the Act to the extent either "Nil" or "Not Applicable" has not been furnished.

7. COMPARATIVES

Previous year figures have been reclassified / regrouped wherever necessary, to confirm to current year presentation.


Mar 31, 2014

1. Exceptional item

Exceptional item represents written-off of amount deposited with the Hon''ble High Court of Andhra Pradesh for payment against a pending legal dispute with M/s. SMS Pharmaceuticals Limited.

2. Related party disclosures

(a) Names of the related parties and nature of relationship

Names of related parties Nature of relationship

NATCO Pharma Inc., United States of America

Subsidiary company

Timecap Overseas Limited, Mauritius NATCO Pharma (Canada) Inc., Canada

NATCO Organics Limited

Subsidiary company (w.e.f. 30 June 2012) Entity in which Directors have control or have significant influence (up to 29 June 2012)

K & C Pharmacy, United States of America (Up to 14 June 2012)

Partnership firm in which the Company is a partner

NATCO Farma Do Brazil Ltda EPP Step-down subsidiary company

Time Cap Pharma Labs Limited

NATCO Trust, Hyderabad

NATCO Group Employees Welfare Trust

Natsoft Information Systems Private Limited

NDL Infratech Private Limited

Entities in which Directors have control or have significant influence

V C Nannapaneni Rajeev Nannapaneni P Bhaskara Narayanan A K S Bhujanga Rao

Key management personnel ("KMP")

Durga Devi Nannapaneni Neelima Nannapaneni Dr. Ramakrishna Rao

Relative of KMP

(e) Transaction with related parties

In accordance with the applicable provisions of the Income Tax Act, 1961, the Company is required to use certain specified methods in assessing that the transactions with the related parties, are carried at an arm''s length price and is also required to maintain prescribed information and documents to support such assessment. The appropriate method to be adopted will depend on the nature of transactions / class of transactions, class of associated persons, functions performed and other factors as prescribed. Based on certain internal analysis carried out, management believes that transactions entered into with the related parties were carried out at arms length prices. The Company is in the process of updating the Transfer Pricing documentation for the financial year ended 31 March 2014. In opinion of the management, the same would not have an impact on these financial statements. Accordingly, these financial statements do not include the effect of the transfer pricing implications, if any.

3. Segment reporting

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

As at As at 31 March, 2014 31 March, 2013

4. Contingent liabilities and commitments

(a) Commitments

Estimated amount of contracts remaining to be executed on 17,84,85,937 13,51,07,882 capital account and not provided for (net of advances)

(b) Contingent liabilities

Claims against the company not acknowledged as debt 20,82,29,663 20,82,29,663

Disputed sales tax liabilities 86,90,000 86,90,000 Disputed income tax liabilities 2,99,52,680 2,60,28,878

Claims against the Company not acknowledged as debt, represents claim including interest lodged by M/s. SMS Pharmaceuticals Limited, against the Company. During the previous year, the Hon''ble City Civil Court, Hyderabad has passed the judgment against the Company. Based on a legal advice received, the Company has preferred an appeal before the Hon''ble High Court of Andhra Pradesh as the management is confident of favorable outcome.

Disputed tax liabilities primarily represents additional tax demanded by the Tax Authorities, challenging the Company''s basis of computing profits of units covered by the provisions of Section 80IC of the Income Tax Act, 1961. Pending final outcome of such matters and in view of the stand taken by the Assessing Officer while passing revised orders for the Assessment Year 2007-08 and 2008-09, management is confident of favorable outcome of the proceedings.

5. Additional information as required under paragraph 5 of the part II of the Schedule VI to the Act to the extent either "Nil" or "Not Applicable" has not been furnished.

6. Comparatives

Previous year figures have been reclassified / regrouped wherever necessary, to confirm to current year presentation.

The annual accounts of the subsidiary companies and the related detailed information will be made available to the investors seeking such information at any point of time. The annual accounts of the subsidiary companies will also be available for inspection by any investor at the Registered Office of the Company on all working days during business hours and is also available on the company''s website www.natcopharma.co.in


Mar 31, 2013

As at As at 31 March, 2013 31 March, 2012

1. Contingent liabilities and commitments

(a) Commitments

Estimated amount of contracts remaining to be executed capital account and not provided for (net of advances) 135,107,882 67,213,981

(b) Contingent liabilities

Claims against the company not acknowledged as debt 204,227,280 320,068,008

Disputed sales tax liabilities 8,690,000 8,690,000

Disputed income tax liabilities 26,028,878 169,259,702

Claims against the Company not acknowledged as debt, represents claim including interest lodged by M/s. SMS Pharmaceuticals Limited, against the Company. During the current year, the Hon''ble City Civil Court, Hyderabad has passed the judgement against the Company. Based on a legal advice received, the Company has preferred an appeal before the Hon''ble High Court of Andhra Pradesh as the management is confident of favorable outcome and has recorded an expense aggregating to Rs. 115,840,728 in the accompanying financial statements.

Disputed tax liabilities primarily represents additional tax demanded by the Tax Authorities, challenging the Company''s basis of computing profits of units covered by the provisions of Section 80IC of the Income Tax Act, 1961. Pending final outcome of such matters and in view of the order for Assessment Year 2007-08 and 2008-09 being set aside by appellate authorities, management is confident of favorable outcome of the proceedings.

2. Dues to Micro and small enterprises

The Micro and Small Enterprises have been identified on the basis of information available with the Company. This has been relied upon by the auditors. Details of dues to such parties are given below:

3. Additional information as required under paragraph 5 of the part II of the Schedule VI to the Act to the extent either "Nil" or "Not Applicable" has not been furnished.

4. Comparatives

Previous year figures have been reclassified / regrouped wherever necessary, to confirm to current year presentation.


Mar 31, 2012

1. RECOGNITION OF MINIMUM ALTERNATE TAX (MAT) CREDIT

The Company has not recognized MAT credit available to it as it opines that it would not be in a position to utilize such credit in view of the continued tax holiday being available for the profits arising out of manufacture and sales made from two of its manufacturing facilities. In the eventuality of the Company being made to pay tax on a regular basis, it would make suitable adjustments by taking credit for the MAT entitlement available at such point of time.

2. Segment reporting

In accordance with AS 17 - Segment Reporting, segment information has been given in the consolidated financial statements of NATCO Pharma Limited and therefore no separate disclosure on segment information is given in these financial statements. As at As at 31 March, 2012 31 March, 2011

3. Contingent liabilities and commitments

a. Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 67,213,981 380,896,183

b. Contingent liabilities

Claims against the company not acknowledged as debt 275,572,800 156,290,615

Disputed sales tax liabilities 8,690,000 8,690,000

Disputed income tax liabilities 169,259,702 162,335,436

Claims against the Company not acknowledged as debt, represents claim including interest lodged by M/s. SMS Pharmaceuticals Limited, against the Company. During the current year, the Hon'ble City Civil Court, Hyderabad has passed the judgement against the Company. Based on a legal advice received, management is of the opinion that the Hon'ble City Civil Court has not taken due cognizance of certain material facts and is confident of favorable outcome of the proposed appeal before the Hon'ble High Court of Andhra Pradesh.

Disputed tax liabilities primarily represents additional tax demanded by the Tax Authorities, challenging the Company's basis of computing profits of units covered by the provisions of Section 80IC of the Income Tax Act, 1961. Pending final outcome of such matters and in view of the order for Assessment Year 2007-08 being set aside by appellate authorities, management is confident of favorable outcome of the proceedings.

4. Terms and conditions of loans and nature of security Secured term loans:

1) Exim Bank term loans, (a) outstanding Rs.328,647,059 (2011: Rs.410,000,000) is repayable in 17 equal quarterly installments (b) outstanding Rs.475,000,000 (2011: Rs.500,000,000) is repayable in 20 equal quarterly installments (c) outstanding Rs.Nil, (2011: Rs.15,000,000). All the above loans are secured by pari-passu first charge on the entire immovable properties and movable fixed assets both present and future of Mekaguda Unit along with Citibank and Barclays Bank for part of the loan and loans (a) and (b) are further secured by an exclusive charge on all the immovable properties and movable fixed assets of both the units (Plot No-19 and Plot NoA- 3) at Dehradun.

2) Axis Bank term loans (a) outstanding Rs.254,000,000 (2011: Rs.350,000,000), is repayable in 16 equal quarterly installments (b) outstanding Rs.150,000,000 (2011: Rs.Nil) is repayable in 48 equal monthly installments. Both the loans are secured by first charge on the entire fixed assets both present and future of Kothur Unit on pari- passu basis with SBI.

3) Citibank term loan, outstanding Rs.137,500,000 (2011: Rs.187,500,000) is repayable in 16 equal quarterly installments and is secured by a pari-passu first charge on the entire immovable properties and movable fixed assets both present and future of Mekaguda Unit along with Exim Bank and Barclays Bank for part of the loan.

4) State Bank of India (SBI), outstanding Rs.11,880,812 (2011: Rs.11,996,853) is repayable in 16 equal quarterly installments and is secured by a first charge on the entire fixed assets both present and future of Kothur Unit on pari-passu basis with Axis Bank.

5) Barclays Bank, External Commercial Borrowing outstanding of Rs.410,814,800 (2011: Rs.Nil) is repayable in 16 equal quarterly installments and a part of the loan is secured by an exclusive charge over all movable and immovable fixed assets of NATCO Research Center and a part of the loan is secured by first charge on the movable and immovable fixed assets of Mekaguda unit along with Exim Bank and Citibank.

6) All the above loans are guaranteed by Mr. V.C Nannapaneni, Chairman and Managing Director and have been granted with a moratorium of 12 months and carry interest linked to the respective Bank's / Institution's prime / base lending rate, and range from 3.53% per annum to 14% per annum.

Secured working capital:

The working capital Loans are re-payable on demand. The primary security is joint pari-passu first charge on all current assets of the Company. The collateral security is joint pari-passu first charge on the corporate Office and all fixed assets of Nagarjuna Sagar Unit apart from personal guarantees of Mr. V.C. Nannapaneni, Chairman and Managing Director and (a) Ms. Durga Devi Nannapaneni, promoter and (b) Dr. N. Ramakrishna Rao, relative of Chairman and Managing Director, in case of working capital limits availed from SBI, Corporation Bank, Oriental Bank of Commerce and Allahabad Bank

Unsecured Loans:

Unsecured loans are re-payable on demand and are personally guaranteed by Mr. V.C. Nannapaneni, Chairman and Managing Director.

5. Comparatives

Previous year comparatives have been reclassified and regrouped wherever necessary, to confirm to current years' presentation.


Mar 31, 2011

1. Company overview

NATCO Pharma Limited ("the Company" or "NATCO") incorporated on 19 September 1981 in accordance with the provisions of the Indian Companies Act, 1956 ("the Act") is a limited liability company. The Company was originally incorporated as Natco Fine Pharmaceuticals Private Limited changed its name to NATCO Pharma Limited, in 1994.

The Company is primarily engaged in manufacturing of active pharmaceuticals ingredients and finished dosage formulations.

2. Commitments and contingent liabilities

As at As at 31 March, 2011 31 March, 2010

Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) 380,896,183 95,245,770

Contingent liabilities

Disputed statutory liabilities 147,407,308 51,883,190

Claims against the Company not acknowledged as debts 156,290,615 157,052,546

3. The Company has not recognized MAT credit available to it as it opines that it would not be in a position to utilize such credit in view of the continued tax holiday being available for the profits arising out of manufacture and sales made from two of its manufacturing facilities. In the eventuality of the Company being made to pay tax on a regular basis, it would make suitable adjustments by taking credit for the MAT entitlement available at such point of time.

4. Secured loans

Loans availed from the financial institutions and banks are fully secured by way of hypothecation of fixed assets, capital work in progress and other assets of the Company. The term loans from banks are further guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing Director in his personal capacity.

5. Unsecured loans

Unsecured loans represent loans taken from Citibank amounting to Rs.Nil (2010: Rs.50,000,000) and interest free sales tax deferment amounting to Rs.4,103,934 (2010: Rs.4,868,571), availed under the 'TARGET 2000' Scheme of the State Government of Andhra Pradesh. The unsecured loan from Citibank is guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing Director in his personal capacity.

6. Government grants

The Company has received Rs.200,000 (2010: Rs.3,000,000) towards the investment subsidy for the purpose of setting up and expansion of an industrial unit in the State of Uttaranchal.

7. Employee stock options

The Company had instituted NATCO Stock Option Plan 2010 ("ESOP 2010"). The scheme was formulated in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("SEBI Guidelines") issued by the Securities and Exchange Board of India ("SEBI") and pursuant to the provisions of Section 81 (1A) and all other applicable provisions of the Act, and was duly approved by way of a special resolution passed in the annual general meeting of the members held on 30 September 2010, authorizing the Board to issue employee stock options, that are exercisable into not more than 600,000 equity shares of the Company to eligible employees based on specific recommendations of the Remuneration Committee under the plan. Each option comprises of one underlying equity share of Rs.10 each, however, no options were granted under the said plan as of 31 March 2011.

8. Employee benefits

Provident fund

During year ended 31 March 2011 the Company contributed Rs.27,822,377 (2010: Rs.21,818,451) to the Provident Fund.

Employee state insurance

During year ended 31 March 2011 the Company contributed Rs.4,978,299 (2010: Rs.2,752,233) to the Employee's State Insurance Corporation.

Gratuity

The Company has obtained the actuarial valuation report in line with the requirements of Accounting Standard -15 'Employee Benefits', in respect of gratuity liability and the estimated liability as at 31 March 2011 is provided in the books of accounts. The details of present value of obligations, current service cost and actuarial assumptions are given hereunder:

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market. The Company evaluates these assumptions annually based on its long term plans of growth and industry standards.

Information relating to amounts recognized in the profit and loss account, change in fair value of plan assets was not disclosed in the report issued by the Life Insurance Corporation of India, hence the comparative information could not be disclosed.

9. Segment reporting

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

10. Investments

Investment in Time Cap Overseas Limited, Mauritius

During the year ended 31 March 2011, the Company has entered into an arrangement with LevoMed Inc, ('LevoMed') New Jersey, USA and has established a company viz., Time Cap Overseas Limited ('Time Cap), in the Republic of Mauritius. Pursuant to the terms of arrangement, the Company has paid and / or incurred preliminary expenses aggregating of Rs.30,770,188 to be adjusted towards subscription to the common stock of Time Cap. Pending allotment of shares, investment, by way of share application money has been accounted as investment in subsidiaries and has been considered for the purposes of preparation of consolidated financial statements of the Company and its subsidiaries for the year ended 31 March 2011.

Investment in portfolio management services

As at 31 March 2011 the Company has made an investment, aggregating to Rs.15,000,000 in the private equity opportunities fund of Anand Rathi Financial Services Limited (ARFSL). By virtue of shareholders' agreement and share subscription agreement, both dated 29 November 2010, ARFSL has invested, among others, the investment made by the Company, in the Compulsorily Convertible Preference Shares of Ravindranath GE Medical Associates Private Limited. The company's investment in the private equity opportunities fund of ARFSL provides for a return of 20% in excess of 16% on a gross pre-tax IRR basis. In the absence of reasonable certainty of realization of return, no income was accrued on such investment for the year ended 31 March 2011.

Sale of partnership interest in K & C Pharmacy, United States of America

On 6 December 2010, K & C Pharmacy, USA, a general partnership firm, in which the Company has a substantial interest, has sold its only Drug Store to Crystal Drugs, Inc. Pending formal dissolution of the said firm, remaining investment in the firm is carried at cost based on the net assets of the firm as at 31 March 2011.

11. Payable to micro enterprises and small enterprises

On the basis of the information and records available with management, there are no dues/ overdue principal amounts payable to micro and small enterprises as at 31 March 2011 and there is no interest is paid / payable for the year ended 31 March 2011.

12. Prior year comparatives

The previous year figures are regrouped /rearranged to confirm to current period presentation.


Mar 31, 2010

1. Commitments and contingent liabilities

As at As at

31 March, 2010 31 March, 2009

Commitments

Guarantees and letters of

credit issued by banks 35,769,986 45,163,000

Estimated amount of contracts

remaining to be executed

on capital account and not

provided for (net of advances) 95,245,770 13,601,538

Contingent liabilities

Disputed statutory liabilities 51,883,190 92,522,843

Claims against the Company not

acknowledged as debts 157,052,546 157,052,546

Corporate guarantees - 100,000,000

2. Transactions with related party

Corporate guarantee, covered by the provisions of the Section 295 of the Act, issued to one of the banks on behalf of NATCO Organics Limited a company in which directors are interested was withdrawn on 19 June 2009. The Company is in the process of obtaining requisite approvals as required in accordance with the applicable provisions of the Act.

3. The Company has recognized a sum of Rs. 50,000,000 received from a customer as revenue, as it believes that a substantial portion of the deliverables against the payment have since been completed. In the opinion of the management, there is not likely to be any event or situation which would warrant repayment of this amount.

4. As per the Management estimates, the company will not be in a position to avail all the MAT credit available to it. The Company would review the position at the end of the Financial year ending on 31st March, 2011. Hence, on a prudent basis, no MAT Credit is recognized in the books of accounts. Accordingly, the company has recognized the deferred tax asset / liability after considering the tax holiday impact.

5. Secured loans

Loans availed from the financial institutions and banks are fully secured by way of hypothecation of fixed assets, capital work in progress and other assets of the Company. The term loans from banks are further guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing Director in his personal capacity.

6. Unsecured loans

Unsecured loans represent loans taken from Citibank amounting to Rs.50,000,000 (2009: Rs.49,998,457) and interest free sales tax deferment availed from Andhra Pradesh State Government of Rs.4,868,571 (2009: Rs.5,259,947). The unsecured loan from Citibank is guaranteed by Mr. V. C. Nannapaneni, Chairman and Managing Director in his personal capacity.

7. Government grants

The Company has received Rs.3,000,000 (2009: Nil) towards the investment subsidy for the purpose of setting up and expansion of an industrial unit in the State of Uttaranchal.

8. Employee stock options

The Company had instituted Employee Stock Option Plan 2004 ("NATSOP 2004"). The scheme was formulated in accordance with the provisions of Section 81(1A) and other applicable provision of the Act, and was duly approved by way of a special resolution passed in the annual general meeting of the members held on 4 September 2004, authorizing the Board to issue employee stock options, that are exercisable into not more than 600,000 equity shares of the Company to employees, with each such option conferring a right upon the employee to apply for one equity share of Rs.10 each of the Company.

Based on the recommendations of Compensation Committee, 596,300 equity shares of Rs. 10 each, fully paid- up were granted at an exercise price of Rs.10 each to the eligible employees of the Company subject to the exercise period of five years from the date of vesting. These options were granted at an exercise price lower than the market value per share of Rs. 144 and using the intrinsic value method as prescribed under the Guidance Note, the Company has recognized the excess of market value per share over the exercise price as compensation expense over the progressive vesting period.

9. Employee benefits

Provident fund

During year ended 31 March 2010 the Company contributed Rs.21,818,451 (2009: 19,358,401) to the Provident Fund.

Employee state insurance

During year ended 31 March 2010 the Company contributed Rs.2,752,233 (2009: Rs.3,029,222) to the Employees State Insurance Corporation.

Gratuity

The Company has obtained the actuarial valuation report in line with the requirements of Accounting Standard -15 Employee Benefits, in respect of gratuity liability and the estimated liability as at 31 March 2010 is provided in the books of accounts. The details of present value of obligations, current service cost and actuarial assumptions are given hereunder:

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market. The Company evaluates these assumptions annually based on its long term plans of growth and industry standards.

Information relating to amounts recognised in the profit and loss account, change in fair value of plan assets was not disclosed in the report issued by the Life Insurance Corporation of Inida, hence the comparative information could not be disclosed.

10. The Company has pledged the share certificates of NATCO Pharma Inc. and the interest in K & C Pharmacy, in favor of Aceto Corporation, Germany towards the supply advance received by the Company amounting to $ 2,000,000. The relevant documents are deposited in an escrow account, as per the agreed arrangement. Advance outstanding in the books of accounts as of 31 March 2010 is Rs.52,638,740 (2009: Rs.94,860,000).

11. Related party disclosures

i. Names of related parties and nature of relationship

Names Nature of relationship

NATCO Pharma Inc., United States of America Subsidiary Company

K & C Pharmacy, United States of America Partnership firm in which the Company is a partner

NATCO Organics Limited, Chennai Entity in which directors are interested

Time Cap Pharma Labs Limited, Hyderabad Entity in which directors are interested

NATCO Trust, Hyderabad Entity in which directors are interested

NDL Infratech Private Limited, Hyderabad Entity in which directors are interested

V C Nannapaneni, Chairman and Managing Director Key management personnel

Rajeev Nannapaneni, Director and Chief Operating Officer Key management personnel

Durga Devi Nannapaneni Relatives of a key management personnel

A K S Bhujanga Rao (from 30 July 2009) Key management personnel

P Bhaskara Narayana, Director and Chief Financial Officer Key management personnel

15. Disclosure in respect of interest in K & C Pharmacy, partnership firm

Name of the partnership firm K & C Pharmacy

Proportion of ownership interest 75%

Country of residence United States of America

12. Segment reporting

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

Note: Actual production of formulation products excludes 789 (previous year: 833) million units produced on loan licensing basis from outside parties.

13. Payable to micro enterprises and small enterprises

On the basis of the information and records available with management, there are no dues/ overdue principal amounts payable to micro and small enterprises as at 31 March 2010 and there is no interest is paid / payable for the year ended 31 March 2010.

14. Prior year comparatives

The previous year figures are regrouped to confirm to current period presentation.

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