Notes to Accounts of Procter & Gamble Health Ltd.

Mar 31, 2025

n. Provisions, Contingent Liabilities and Contingent
Assets

Provisions are recognised when the Company has
a present obligation (Legal or constructive) as a
result of a past event, it is probable that an outflow
of resources embodying economic benefits will
be required to settle the obligation and a reliable
estimate can be made of the amount of the
obligation. When the Company expects some or
all of a provision to be reimbursed, for example,
under an insurance contract, the reimbursement
is recognised as a separate asset, but only
when the reimbursement is virtually certain.
The expense relating to a provision is presented
in the Statement of Profit and Loss net of any
reimbursement.

Cost of return on account of breakage and
expiries are estimated on the basis of past
experience. Provision is made in respect of cost
for breakage and expiries in the year of sale of
goods.

If the effect of the time value of money is material,
provisions are discounted using a current pre¬
tax rate that reflects, when appropriate, the
risks specific to the Liability. When discounting
is used, the increase in the provision due to the
passage of time is recognised as a finance cost.

Contingent Liabilities are disclosed in the
notes. Contingent Liabilities are disclosed for (1)
possible obligations which will be confirmed only
by future events not wholly within the control of
the Company or (2) present obligations arising
from past events where it is not probable that an
outflow of resources will be required to settle the
obligation or a reliable estimate of the amount of
the obligation cannot be made.

Contingent assets are not recognised in the
financial statements as this may result in the
recognition of income that may never be there.

o. Financial instruments

Financial assets and financial Liabilities are
recognised when the Company becomes a party
to the contractual provisions of the instrument.

Financial assets and financial Liabilities (other
than trade receivables) are initially measured
at fair value. Transaction costs that are directly
attributable to the acquisition or issue of the
financial assets and financial Liabilities (other
than financial assets and financial Liabilities at
fair value through profit or Loss) are added to
or deducted from the fair value of the financial
assets or financial Liabilities, as appropriate, on
initial recognition. Transactions costs directly
attributable to the acquisition of financial assets
and financial Liabilities at fair value through
profit or Loss are recognised immediately in the
Statement of Profit and Loss. However, trade
receivables that do not contain significant
financing component are measured at transaction
price.

p. Financial assets

ALL regular way purchases or sales of financial
assets are recognised and derecognised on a
trade date basis. Regular way purchases or sales
are purchases or sales of financial assets that
require delivery of assets within the time frame
established by regulation or convention in the
market place.

ALL recognised financial assets are subsequently
measured at either amortised cost or fair value
through profit or Loss or fair value through
other comprehensive income, depending on the
classification of the financial assets. Financial
assets are not reclassified subsequent to
their recognition, except during the period
the Company changes its business model for
managing financial assets.

Classification of financial assets

Debt instruments that meet the following
conditions are subsequently measured at
amortised cost:

a) The asset is held within a business model
whose objective is to hold assets in order or
collect contractual cash flows; and

b) The contractual terms of the instrument give
rise on specified dates to cash flows that are
solely payments of principal and interest on
the principal amount outstanding.

Debt instruments that does not meet the above
conditions are subsequently measured at fair
value.

Effective interest method

The effective interest is a method of calculating
the amortised cost of a debt instrument and

of allocating interest income over the relevant
period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts
through the expected Life of the debt instrument,
or, where appropriate, a shorter period, to the
net carrying amount in initial recognition.

Income is recognised on an effective interest
basis for debt instruments. Interest income is
recognised in the Statement of Profit and Loss
and is included in the "Other income" Line item.

Impairment of financial assets

The Company applies expected credit Loss
model for recognising impairment Loss on
financial assets measured at amortised cost,
trade receivables and other contractual rights to
receive cash or other financial asset.

Expected credit Losses are the weighted average
of credit Losses with the respective risks of
default occurring as the weights. Credit Loss
is the difference between all contractual cash
flows that are due to the Company in accordance
with the contract and all the cash flows that
the Company expects to receive (i.e. all cash
shortfalls), discounted at the original effective
interest rate (or credit-adjusted effective interest
rate for purchased or originated credit-impaired
financial assets). The Company estimates cash
flows by considering all contractual terms of the
financial instrument (for example, prepayment,
extension, call and similar options) through the
expected Life of that financial instrument.

The Company measures the Loss allowance for
a financial instrument at an amount equal to
the Lifetime expected credit Losses if the credit
risk on that financial instrument has increased
significantly since initial recognition. If the
credit risk on a financial instrument has not
increased significantly since initial recognition,
the Company measures the Loss allowance for
that financial instrument at an amount equal
to 12-month expected credit Losses. 12-month
expected credit Losses are portion of the Life¬
time expected credit Losses and represent the
Lifetime cash shortfalls that will result if default
occurs within the 12 months after the reporting
date and thus, are not cash shortfalls that are
predicted over the next 12 months.

For trade receivables or any contractual right to
receive cash, the Company always measures the
Loss allowance at an amount equal to Lifetime
expected credit Losses.

Further, for the purpose of measuring Lifetime
expected credit Loss allowance for trade
receivables, the Company has used a practical
expedient as permitted under Ind AS 109. This
expected credit Loss allowance is computed
based on a provision matrix which takes into
account historical credit Loss experience with
adjusted for forward-looking information.

Derecognition of financial assets

The Company derecognises a financial asset
when the contractual rights to the cash flows
from the asset expire, or when it transfers the
financial asset and substantially all the risks and
rewards of ownership of the asset to another
party. If the Company neither transfers nor
retains substantially all of the risks and rewards
of ownership and continues to control the
transferred asset, the Company recognises its
retained interest in the asset and an associated
Liability for amounts it may have to pay. If the
Company retains substantially all of the risks
and rewards of ownership of a transferred
financial asset, the Company continues to
recognise the financial asset and also recognises
a collateralised borrowing for the proceeds
received.

On derecognition of a financial asset in its
entirety, the difference between the asset''s
carrying amount and the sum of the consideration
received and receivable and the cumulative
gain or Loss that had been recognised in other
comprehensive income and accumulated in
equity is recognised in profit or Loss if such gain
or Loss would have otherwise been recognised in
the Statement of Profit and Loss on disposal of
that financial asset.

On derecognition of a financial asset other
than in its entirety, the Company allocates the
previous carrying amount of the financial asset
between the part it continues to recognise under
continuing involvement, and the part it no Longer
recognises on the basis of the relative fair values
of those parts on the date of the transfer. The
difference between the carrying amount allocated
to the part that is no Longer recognised and the
sum of the consideration received for the part
no Longer recognised and any cumulative gain or
Loss allocated to it that had been recognised in
other comprehensive income is recognised in the
Statement of Profit and Loss on disposal of that
financial asset. A cumulative gain or Loss that had
been recognised in other comprehensive income

is allocated between the part that continues
to be recognised and the part that is no Longer
recognised on the basis of the relative fair values
of those parts.

Foreign exchange gains and losses

The fair value of financial assets denominated in
a foreign currency is determined in that foreign
currency and translated at the spot rate at the
end of each reporting period.

For foreign currency denominated financial
assets measured at amortised cost, the exchange
differences are recognised in the Statement of
Profit and Loss.

q. Financial liabilities and equity instruments
Classification as debt or equity

Debt and equity instruments issued by the
Company are classified as either financial Liability
or as equity in accordance with the substance of
the contractual arrangements and the definitions
of a financial Liability and an equity instrument.

Equity instruments

An equity instrument is any contract that
evidences a residual interest in the assets of an
entity after deducting all of its Liabilities. Equity
instruments issued by the Company is recognised
at the proceeds received, net of direct issue
costs.

Repurchase of the Company''s own equity
instruments is recognised and deducted directly
in equity. No gain or Loss is recognised in the
Statement of Profit and Loss on the purchase,
sale, issue or cancellation of the Company''s own
equity instruments.

Financial liabilities

ALL financial Liabilities are subsequently measured
at amortised cost using the effective interest
method.

Financial Liabilities are classified, at initial
recognition, as financial Liabilities at fair value
through profit or Loss, Loans and borrowings,
payables, as appropriate.

Financial Liabilities that are not held-for-trading
and are not designated as at fair value through
profit or Loss are measured at amortised cost at
the end of the subsequent accounting period.
The carrying amount of financial Liabilities that
are subsequently measured at amortised cost
are determined based on the effective interest
method. Interest expense that is not capitalised as

part of costs of an asset is included in the "Finance
costs" Line item.

The effective interest method is a method of
calculating the amortised cost of a financial
Liability and of allocating interest expense over the
relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash
payments through the expected Life of the financial
Liability, or, (where appropriate), a shorter period, to
the net carrying amount at initial recognition.

Foreign exchange gains and losses

For financial Liabilities that are denominated in a
foreign currency and are measured at amortised
cost at the end of each reporting period, the foreign
exchange gains and Losses are determined based
on the amortised cost of the instrument and are
recognised in the Statement of Profit and Loss.

Derecognition

The Company derecognises a financial Liability
when, and only when, the Company''s obligations
are discharged, cancelled or have expired. An
exchange with a Lender of debt instruments
with substantially different terms is accounted
for as an extinguishment of the original financial
Liability and the recognition of a new Liability.
Similarly, a substantial modification of the terms
of an existing financial Liability is accounted for
as an extinguishment of the original financial
Liability and the recognition of a new Liability.
The difference between the carrying amount
of the financial Liability derecognised and the
consideration paid and payable is recognised in
the Statement of Profit and Loss.

If the Company neither transfers nor retains
substantially all the risks and rewards of
ownership and continues to control the
transferred asset, the Company recognises its
retained interest in the asset and an associated
Liability for amounts it may have to pay.

r. 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 recognised amounts and there is an
intention to settle on a net basis or realise 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.

s. Segment Reporting

Operating segments are reported in a manner
consistent with the internal reporting provided
to the Chief Operating Decision Maker (CODM)
of the Company. The CODM is responsible for
allocating resources and assessing performance
of the operating segments of the Company.

t. Cash and Cash Equivalents

Cash and Cash equivalents for the purpose
of Statement of Cash Flows comprise cash
and cheques in hand, bank balances, demand
deposits with banks where the original maturity
is three months or Less and other short term
highly Liquid investments.

u. Research and development

Expenditure on research activities, undertaken
with the prospect of gaining new scientific or
technical knowledge and understanding, is
recognised in the Statement of Profit and Loss
as and when incurred.

The development activities undertaken by the
Company are subject to technical, regulatory and
other uncertainties, such that, in the opinion of
management, the criteria for capitalization are
not met prior to obtaining marketing approval
by the regulatory authorities in markets. Internal
development cost that do not meet these criteria
are therefore expensed as and when incurred.

v. Earnings Per Share

Basic earnings per share is computed by dividing the
profit / Loss for the year after tax attributable to the
equity shareholders of the Company by the weighted
average number of equity shares outstanding during
the period. The weighted average number of equity
shares outstanding during the period and for all
periods presented is adjusted for events, such as
bonus shares, other than the conversion of potential
equity shares that have changed the number of
equity shares outstanding, without a corresponding
change in resources.

For the purpose of calculating diluted earnings
per share, diluted earnings per share adjusts
the figures used in the determination of basic
earnings per share to take into account the after
income tax effect of interest and other financing
costs associated with dilutive potential equity
shares, and the weighted average number of
additional equity shares that would have been
outstanding assuming the conversion of all
dilutive potential equity shares.

w. Claims

Claims against the Company not acknowledged
as debts are disclosed after a careful evaluation
of the facts and Legal aspects of the matter
involved.

3 Critical accounting judgments and key sources
of estimation uncertainty

3.1 Critical judgments in applying accounting
policies

In the application of the Company''s accounting
policies, which are described in note 2, the
directors of the Company are required to make
judgments, estimates and assumptions about
the carrying amounts of assets and Liabilities
that are not readily apparent from other sources.
The estimates and associated assumptions are
based on historical experience and other factors
that are considered to be relevant. Actual results
may differ from these estimates.

The estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the
period in which the estimate is revised if the
revision affects only that period, or in the period
of the revision and future periods of the revision
affects both current and future periods.

3.2 Key sources of estimation uncertainty

The following are the key assumptions concerning
the future, and other key sources of estimation
uncertainty at the end of the reporting period
that may have a significant risk of causing a
material adjustment to the carrying amounts of
assets and Liabilities within the next financial
year.

a. Useful lives of property, plant and equipment

As described at 2.3 (h) above, the Company
reviews the estimated useful Lives of
property, plant and equipment at the end of
each reporting period.

b. Fair value measurements and valuation
processes

Some of the Company''s assets and Liabilities
are measured at fair value for financial
reporting purposes. The management of
the Company determines the appropriate
valuation techniques and inputs for fair
value measurements.

In estimating the fair value of an asset
or a Liability, the Company uses market-
observable data to the extent it is available.
Where Level 1 inputs are not available, the
Company engages third party qualified
valuers (Registered Valuer in terms of Section
247 of the Companies Act, 2013) to perform
the valuation. The management works
closely with the qualified external valuers
(Registered Valuer in terms of Section 247
of the Companies Act, 2013) to establish the
appropriate valuation techniques and inputs
to the model.

Information about the valuation techniques
and inputs used in determining the fair value
of various assets and Liabilities are disclosed
is note 34.

c. Defined benefit obligation

The costs of providing pensions and other
post-employment benefits are charged
to the Statement of Profit and Loss in
accordance with Ind AS 19 ‘Employee
benefits’ over the period duringwhich benefit
is derived from the employees’ services.
The costs are assessed on the basis of
assumptions selected by the management.
These assumptions include salary escalation
rate, discount rates, expected rate of return
on assets and mortality rates. The same is
disclosed in Note 28, ‘Employee benefits
expense’.

d. Income taxes

The Company’s tax jurisdiction is India.
Significant judgments are involved in
estimating budgeted profits for the purpose
of paying advance tax, determining the
provision for income taxes, including amount
expected to be paid / recovered for uncertain
tax positions (refer note 30).

e. Measurement and Likelihood of occurrence of
provisions and contingencies - As disclosed
in Note 18 and Note 40, Management has
estimated and measured the Likelihood of
the Litigations and accounted the provision
and contingencies as appropriate.

f. Expected Credit Loss (ECL)

In accordance with Ind AS 109 - Financial
Instruments, the Company applies ECL
model for measurement and recognition of

impairment Loss on the trade receivables
or any contractual right to receive cash or
another financial asset that result from
transactions that are within the scope of
Ind AS 115 - Revenue from Contracts with
Customers.

For this purpose, the Company follows
‘simplified approach’ for recognition of
impairment Loss allowance on the trade
receivable balances, contract assets
and Lease receivables. The application of
simplified approach requires expected
Lifetime Losses to be recognised from initial
recognition of the receivables based on
Lifetime ECLs at each reporting date.

As a practical expedient, the Company uses
a provision matrix to determine impairment
Loss allowance on portfolio of its trade
receivables. The provision matrix is based on
its historically observed default rates over
the expected Life of the trade receivables and
is adjusted for forward-looking estimates. At
every reporting date, the historical observed
default rates are updated and changes in the
forward-looking estimates are analysed.

In case of other assets, the Company
determines if there has been a significant
increase in credit risk of the financial asset
since initial recognition. If the credit risk of
such assets has not increased significantly,
an amount equal to twelve months ECL is
measured and recognised as Loss allowance.
However, if credit risk has increased
significantly, an amount equal to Lifetime
ECL is measured and recognised as Loss
allowance.

g. Inventories obsolescence

The factors that the Company considers in
determining the provision for slow moving,
obsolete and other non-saleable inventory
include estimated shelf Life, planned product
discontinuances, price changes, ageing of
inventory and introduction of competitive
new products, to the extent each of these
factors impact the Company’s business
and markets. The Company considers all
these factors and adjusts the inventory
obsolescence to reflect its actual experience
on a periodic basis.

3.3 Recent accounting pronouncement

Ministry of Corporate Affairs (“MCA”) notifies
new standards or amendments to the existing
standards under Companies (Indian Accounting
Standards) Rules as issued from time to time.
MCA had made certain amendments to Ind AS 116
- Leases and introduced Ind AS 117 - Insurance
Contracts during the financial year ended March
31, 2025. The said amendments are effective
from April 01, 2024. The Company has reviewed

the new pronouncements and based on its
evaluation has determined that it does not have
any significant impact in its financial statements.
Additionally, MCA has also made certain
amendments to Ind AS 21 - The effects
of changes in foreign exchange rates vide
its notification dated 07.05.2025. The said
amendments are effective from April 01, 2025.
Based on preliminary assessment, the Company
does not expect these amendments to have any
significant impact on its financial statements.

b) Contractual Obligations

The Company has no contractual obligations to purchase, construct or develop investment property.
However, the responsibility for its repairs, maintenance or enhancements is with the Company.

c) Fair Value

In case of Office premises property, based on Independent valuation report as on 20 May 2025, for one
of the property Located in the same premises, the management has estimated fair value of '' 3 460
Lakhs for the investment properties. The aforesaid estimated amount will not be materially different
from the fair value of the property as on March 31, 2025.

In case of Land and building given on Lease during the year, Management has estimated the fair market
value of at ?2 066 Lakhs.

d) Policy for Estimation of Fair Value
The Average Market Value

The Average Market Value is the value “As is where is Basis” derived by the average of Direct Comparison
Method of valuation and the Rent Capitalization Method of the Office Space.

The Direct Comparison Approach involves a comparison of the subject property to similar properties
that have actually sold in arms-Length transactions or are offered for sale. This approach demonstrates
what buyers have historically been willing to pay (and sellers willing to accept) for similar properties
in an open and competitive market and is particularly useful in estimating the value of the Land and
properties that are typically traded on a unit basis.

The Rent Capitalisation Approach envisages capitalizing the annual net rent receivable / achievable
from a property on market value basis using appropriate applicable yield rate for a respective asset
class.

In case of Land and building given on Lease, Land has been valued at prevailing asking rates in the
said micro-market. In case of industrial building the same has been valued based on the current
construction cost, the age of the building, Lifespan of the building.

34 Financial instruments & related disclosures

34.1 Capital management

The Company manages its capital to ensure that it will be able to continue as going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance. Equity
share capital and other equity are considered for the purpose of Company''s capital management.

The Company is not subject to any externally imposed capital requirements.

The Company manages its capital structure and makes adjustments in Light of changes in economic
conditions and the requirements of the financial covenants. To maintain or adjust the capital structure,
the Company may adjust the dividend payment to shareholder''s if any, return on capital to shareholders
or issue new shares.

34.3 Fair value measurements

The carrying amount of financial assets and financial Liabilities measured at amortised cost in the
financial statements are a reasonable approximation of their fair values since the Company does
not anticipate that the carrying amounts would be significantly different from the values that would
eventually be received or settled.

34.4 Financial risk management objectives

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and
Liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects
of market risk on its financial performance. The Company’s risk management assessment, policies and
processes are established to identify and analyze the risks faced by the Company, to set appropriate
risk Limits and controls, and to monitor such risks and compliance with the same. Risk assessment and
management policies and processes are reviewed regularly to reflect changes in market conditions and
the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing
the Company’s risk assessment and management policies and processes.The Company has exposure
to the following risks arising from financial instruments:

34.4.1 Credit risk management

Credit risk is the risk of financial Loss to the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations, and arises principally from the Company’s
receivables from customers. Credit risk is managed through credit approvals, establishing
credit Limits and continuously monitoring the creditworthiness of customers to which the
Company grants credit terms in the normal course of business. The Company establishes an
allowance for doubtful debts and impairment that represents its estimate of incurred Losses
in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of
each customer. The demographics of the customer, including the default risk of the industry
and country in which the customer operates, also has an influence on credit risk assessment.
Credit risk is managed through credit approvals, establishing credit Limits and continuously
monitoring the creditworthiness of customers to which the Company grants credit terms in the
normal course of business.

Company’s exposure to credit risk by age of the outstanding from various customers is as per
note 13.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the
Company to determine incurred and expected credit Losses. Historical trends of impairment of
trade receivables do not reflect any significant credit Losses. Given that the macro economic
indicators affecting customers of the Company have not undergone any substantial change,
the Company expects the historical trend of minimal credit Losses to continue. Further,
management believes that the unimpaired amounts that are past due by more than 30 days
are still collectible in full, based on historical payment behaviour and extensive analysis of
customer credit risk. The impairment Loss at 31 March 2025 related to several customers that
have defaulted on their payments to the Company and are not expected to be able to pay their
outstanding balances, mainly due to economic circumstances.

The movement in the allowance for impairment in respect of trade receivables during the year
is as per note 13.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy
banks and financial institutions of ? 18 208 Lakhs (30 June 2024 ? 23 850 Lakhs). The credit¬
worthiness of such banks and financial institutions is evaluated by the management on an
ongoing basis and is considered to be good.

Other financial assets

Other financial assets include employee Loans, security deposits etc. Based on historical
experience and credit profiles of counterparties, the Company does not expect any significant
risk of default.

The Company’s maximum exposure to credit risk for each of the above categories of financial
assets is their carrying values.

34.4.2 Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as
they become due. The Company manages its Liquidity risk by ensuring, as far as possible, that
it will always have sufficient Liquidity to meet its Liabilities when due, under both normal and
stressed conditions, without incurring unacceptable Losses or risk to the Company’s reputation.

As of 31 March 2025 the Company has working capital of ? 31 108 Lakhs (30 June 2024: ? 30 531
Lakhs) including cash and cash equivalents and other bank balances of ? 18 208 Lakhs (30 June
2024: ? 23 850 Lakhs). Working capital is calculated as current assets Less current Liabilities.
The table below analyse financial Liabilities of the Company into relevant maturity groupings
based on the reporting period from the reporting date to the contractual maturity date:

34.4.3 Market risk

Market risk is the risk of Loss of future earnings, fair values or future cash flows that may result
from adverse changes in market rates and prices (such as interest rates, foreign currency
exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse
changes in market rates and prices. Market risk is attributable to all market risk-sensitive
financial instruments, all foreign currency receivables and payables and all short term and Long¬
term debt. The Company is exposed to market risk primarily related to foreign exchange rate
risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure
to market risk is a function of investing and borrowing activities and revenue generating and
operating activities in foreign currencies.

(i) Foreign currency risk management

The fluctuation in foreign currency exchange rates may have potential impact on the profit
and Loss account, where any transaction references more than one currency or where assets/
Liabilities are denominated in a currency other than the functional currency of the entity.

Considering the countries and economic environment in which the Company operates, its
operations are subject to risks arising from fluctuations in exchange rates in those countries.
The risks primarily relate to fluctuations in EURO and USD against the respective functional
currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and
interest rate exposure.

The Company is mainly exposed to the currencies stated above.

The following table details impact to profit or Loss of the Company by sensitivity analysis of a
10% increase and decrease in the respective currencies against the functional currency of the
Company. 10% is the sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management''s assessment of the reasonably possible
changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign
currency denominated monetary items and adjusts their translation at the period end for a 10%
change on foreign currency rates.

The Company does not account for any fixed-rate financial assets or financial Liabilities at fair
value through profit and Loss, and the Company does not have any designated derivatives.
Therefore, a change in interest rates at the reporting date would not affect profit and Loss for
any of these fixed interest bearing financial instruments.

(iii) Other price risk management

Other price risk is the risk that the fair value of a financial instrument will fluctuate due to
changes in market traded price. The Company is not exposed to pricing risk as the Company
does not have any investments in equity instruments and bonds.

35 Share-based payments

a) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “International Stock Ownership Plan” (employee share
purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase
shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA. Every employee
who opts for the scheme contributes by way of payroll deduction up to a specified percentage (upto
15%) of base salary towards purchase of shares on a monthly basis. The Company contributes 50%
of employee''s contribution (restricted to 2.5% of his base salary). Such contribution is charged under
employee benefits expense.

The shares of The Procter & Gamble Company, USA are Listed with New York Stock Exchange and are
purchased on behalf of the employees at market price on the date of purchase. During the year ended
March 31, 2025, 2 375.29 (Previous year ended June 30, 2024: 2 784.66) shares excluding dividend were
purchased by employees at weighted average fair value of '' 14 470.00 (Previous year ended June 30,
2024: '' 13 177.93) per share. The Company’s contribution during the year on such purchase of shares
amounts to '' 94 Lakhs (Previous year ended June 30, 2024: '' 97 Lakhs) has been charged under
employee benefits expense under Note 28.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “Employee Stock Option PLan”whereby specified employees
of its subsidiaries covered by the plan are granted an option to purchase shares of the Ultimate Holding
Company i.e. The Procter & Gamble Company, USA at a fixed price (grant price) for a fixed year of time.
The shares of The Procter & Gamble Company, USA are Listed with New York Stock Exchange. The
Options Exercise price equal to the market price of the underlying shares on the date of the grant. The
Grants issued are vested after 3 years and have a 5/10 years Life cycle.

The employees of the Company are members of a state-managed employer''s contribution to employees''
state insurance plan and superannuation fund which is administered by the Life Insurance Corporation
of India. The Company is required to contribute a specific percentage of payroll costs to the contribution
schemes to fund the benefit. The only obligation of the Company with respect to the contribution plan is
to make the specified contributions.

36.2 Defined Benefit plans/ long term benefit plans

The Company operates two post employment defined benefit plans that provide Gratuity and Provident
fund benefits. The gratuity plan entitles an employee, who has rendered at Least five years of continuous
service, to receive one-half month’s salary for each year of completed service at the time of retirement/exit.
The Company also makes specified monthly contributions towards employee provident fund to the Procter
& Gamble Health Limited staff Provident Fund. The interest rate payable by the trust to the beneficiaries
every year is being notified by the Government. The Company has an obligation to make good the shortfall,
if any, between the return from the investments of the trust and the interest payable at the notified rate.

a) Gratuity Plan (Funded)

The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company.
The Company’s defined benefit gratuity plan is a final salary plan for India employees, which requires
contributions to be made to a separately administered trust. The gratuity plan is governed by the
Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service
is entitled to specific benefit. The Level of benefits provided depends on the member’s Length of
service and salary at retirement age. The gratuity plan is administered by a separate trust that is
Legally separated from the Company. The board of the trust is composed of representatives from both
employer and employees. The board of the trust is required by Law and by its articles of association to
act in the interest of the trust and of all relevant stakeholders in the scheme, i.e. active employees,
inactive employees, retirees, employer. The board of the trust is responsible for the investment policy
with regard to the assets of the trust.

b) Provident Fund (Funded)

Provident Fund for all permanent employees is administered through a trust. The provident fund is
administered by trustees of an independently constituted common trust recognised by the Income
Tax authorities. Periodic contributions to the fund are charged to revenue. The interest rate payable
by the trust to the beneficiaries every year is being notified by the Government. The Company has
an obligation to make good the shortfall, if any, between the return from the investment of the trust
and notified interest rate by the Government. The contribution by employer and employee together
with interest are payable at the time of separation from service or retirement whichever is earlier. The
benefit under this plan vests immediately on rendering of service.

c) Post Retirement Medical Benefit (PRMB) (Unfunded)

The Company provides certain post-employment medical benefits to employees. Under the scheme,
employees get medical benefits subject to certain Limits of amount, periods after retirement and
types of benefits, depending on their grade at the time of retirement. Employees separated from the
Company as part of early separation scheme are also covered under the scheme. The Liability for post
retirement medical scheme is based on an independent actuarial valuation.

d) Compensated absences (Unfunded)

The Company also provides for compensated absences as per its policies, which allows for encashment
of Leave on termination / retirement of service or Leave with pay subject to certain rules. The employees
are entitled to accumulate Leave subject to certain Limits for future encashment / availment. The
Company makes provision for compensated absences based on an actuarial valuation carried out at
the end of the year.

e) Long term service award (Unfunded)

Long term service award is given on completion of minimum 10 years of service.

If the expected salary escalation rate increases (decreases) by 0.5%, the defined benefit obligation
would increase by '' 195.49 Lakhs (decrease by '' 185.09 Lakhs) (as at June 30, 2024: increase by
'' 169.36 Lakhs (decrease by ''160.41 Lakhs)).

Compensated absence plan (Unfunded)

If the discount rate is 50 basis points higher (Lower), the defined benefit obligation would decrease
by '' 25.17 Lakhs (increase by? 27.09 Lakhs) (as at June 30, 2024: decrease by''17.38 Lakhs (increase
by '' 18.68 Lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would
increase by '' 26.13 Lakhs (decrease by? 24.56 Lakhs) (as at June 30, 2024: increase by''18.64 Lakhs
(decrease by '' 17.53 Lakhs)).

Post retirement medical benefit (PRMB) (Unfunded)

If the discount rate is 50 basis points higher (Lower), the defined benefit obligation would decrease
by '' 1.38 Lakhs (increase by '' 1.46 Lakhs) (as at June 30, 2024: decrease by '' 1.2 Lakhs (increase
by ''1.26 Lakhs)). If the medical inflation rate is 50 basis points higher (Lower), the defined benefit
obligation would increase by '' 1.47 (decrease by '' 1.40 Lakhs) (as at June 30, 2024: increase by '' 1.28
Lakhs (decrease by '' 1.22 Lakhs)).

The sensitivity analysis presented above may not be representative of the actual change of the
defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation
of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit
obligation has been calculated using the projected unit credit method as the end of the reporting
period, which is the same as that applied in calculating the defined benefit obligation Liability
recognised in the Balance Sheet.

Long term service award (Unfunded)

If the discount rate is 50 basis points higher (Lower), the defined benefit obligation would decrease
by '' 18.25 Lakhs (increase by '' 19.41 Lakhs) (as at June 30, 2024: decrease by '' 15.38 Lakhs (increase
by '' 16.32 Lakhs)).

If the gold inflation rate is 50 basis points higher (Lower), the defined benefit obligation would
increase by ''19.21 Lakhs (decrease by''18.23 Lakhs) (as at June 30, 2024: decrease by''16.25 Lakhs
(increase by ''15.45 Lakhs)).

There was no change in the methods and assumptions used in preparing the sensitivity analysis
from prior years.

36.3 Defined Contribution Plan

The Provident Fund assets and Liabilities are managed by "Procter & Gamble Health Limited Staff Provident
Fund" in Line with The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.

The plan guarantees minimum interest at the rate notified by the Provident Fund Authorities. The
contribution by the employer and employee together with the interest accumulated thereon are payable
to employees at the time of separation from the Company or retirement, whichever is earlier. The benefit
vests immediately on rendering of the services by the employee. In terms of the guidance note issued by
the Institute of Actuaries of India for measurement of provident fund Liabilities, the actuary has provided a
valuation of provident fund Liability and based on the assumptions provided below, there is no shortfall as
at March 31, 2025.

Future cash flow in respect of the above, if any, is determinable only on receipt of judgements/decisions
pending with the relevant authorities.

b) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company
alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml
syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by
Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to
any of the Company’s contention and issued a fresh demand notice demanding a sum of ? 3 307 Lakhs
(? 1 168 Lakhs on account of overcharge during the said period and ? 2 138 Lakhs for interest thereon)
for sales made by the Company during the period May 2006 to June 2009. The Company has challenged
the said demand byway of writ petition, which is pending before Hon’ble Delhi High Court. In a separate
proceedings hied by the manufacturer of the said drug, CradeL Pharmaceutical Private Limited, Hon’ble
Kolkata High Court stayed the demand provided it deposits a sum of ? 225 Lakhs with the NPPA. The
Company has been Legally advised that the Company has a defendable case before Delhi High Court.
The Company holds provision of ? 580 Lakhs in its books towards possible Liability.

c) During the year 2014, the Company had made a provision of ? 699 Lakhs towards a possible Liability
which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014
impacting the Pharmaceutical industry in India including the Company. The provision of ? 108 Lakhs was
transferred as a part of BPL Business transferred to Merck Life Science Private Limited. The Company
holds provision of ? 591 Lakhs in its books towards possible Liability.

d) During the year 2015, Central Excise issued a show cause cum demand notice on the Company covering
a period of five years for alleged wrong classification of the products, Vitamin E Acetate min. 92% for
Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry
Powder 50% for Animal Nutrition. The value of total demand was ? 2 369 Lakhs.

Further, for same classification matter, the Company has received VAT/CST assessment orders and
notices covering a period of five years disallowing VAT exemption claimed for Vitamin E Acetate, Vitamin
E dry powder, Vitamin E Liquid for Animal nutrition classified as Animal feed. For the orders received,
the Company had contested before the respective state appellate authorities. The Company during the
financial year 2023-24 has applied for Amnesty pertaining to the cases which are pending at the State
Appellate Authority Level.

The Central Excise had issued show cause cum demand on similar matter in the past as well. This was
contested by the Company before the Lower authorities. On the representation made by the Company
the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial
authorities at the relevant time.

The Company based on Legal opinion believes that it has a good case on merits as well as on Limitations.
The aforesaid amounts have already been included under contingent Liability at note 40 (a) to the
financial statements.

47 There are no significant subsequent events that would require adjustments or disclosures in the financial
statements as on the balance sheet date.

48 (a) No transactions to report against the following disclosure requirements as notified by MCA pursuant

to amended Schedule III:

i) Crypto Currency or Virtual Currency

ii) Benami Property held under Benami Transactions (Prohibition) Act, 1988 (45 of 1988)

iii) Registration of charges or satisfaction with Registrar of Companies

iv) Relating to borrowed funds:

a) Wilful defaulter

b) Borrowings obtained on the basis of security of current assets

c) Discrepancy in utilisation of borrowings

d) Current maturity of Long term borrowings

48 (b) The Company has not entered into any such transaction which is not recorded in the books of account
that has been surrendered or disclosed as income during the year in the tax assessments under the
Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act,
1961).

48 (d) Utilization 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:

(i) 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

(ii) 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:

(i) 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

(ii) Provide any guarantee, security or the Like on behalf of the ultimate beneficiaries.

49 During the quarter ended June 30, 2024, the Company had discontinued production of injections at its
manufacturing plant in Goa effective September 30, 2023, as the Company started to source injections
portfolio of its products from a contract manufacturer. Post evaluation of various alternatives, during the
quarter ended June 30, 2024, the Company had entered into an agreement for sale of the assets of its
injection plant for a consideration of '' 790 Lakhs and impaired the balance amount of '' 627 Lakhs. Based
on above, the company has re-evaluated the usability of assets in their capital work in progress and thereby
impaired other related assets by an amount of '' 1 392 Lakhs. The above total amount of '' 2 019 Lakhs have
been disclosed as an exceptional item for the year ended June 30, 2024.

50 a. During the previous year, the Company’s unpaid dividend pertaining to final dividend declared for

the Financial Year 2016 amounting to 13 Lakhs became due for its transfer to Investor Education and
Protection Fund (IEPF) on June 9, 2024 which was required to be transferred to the fund within 30 days
from the due date i.e. July 9, 2024 as per applicable IEPF rules. However, due to restructuring of forms
on Ministry of Corporate Affairs’ (MCA) portal, forms were not available for filing effective July 3, 2024
and accordingly, an extension was provided by MCA till August 16, 2024 for filing form without any delay
charges. The Company had in this period, uploaded form IEPF-1, however, due to technical glitches on
the portal, Company was not able to successfully transfer the said unpaid dividend amount to the IEPF
as on the due date, however, which had been duly transferred to the IEPF on September 27, 2024.

b. For the current year, there has been no delay in transferring amounts, since no dividend was due to be
transferred to the Investor Education and Protection Fund by the Company.

51 Figures for the previous year have been re-grouped/re-arranged wherever necessary to conform current

period’s classification.

52 Approval of financial statements

The financial statements were approved for issue by the board of directors on May 29, 2025.

Signatures to Notes 1 to 52

As per our attached report of even date. For and on behalf of Board of Directors

For HARIBHAKTI & Co. LLP

Chartered Accountants

ICAI Firm Regn. No.: 103523W/W100048

Sumant Sakhardande S. Madhavan Milind Thatte

Partner Chairman Managing Director

Membership No. 034828 DIN No. 06451889 DIN No. 08092990

Lokesh Chandak Zeal Rupani

PLace:Mumbai Chief financial officer Company Secretary

Date: May 29, 2025 DIN No. 10083315 Membership No. A52286

---

Jun 30, 2024

n. Provisions, Contingent Liabilities and Contingent Assets

Provisions are recognised when the Company has a present obligation (Legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Company expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the Statement of Profit and Loss net of any reimbursement.

Cost of return on account of breakage and expiries are estimated on the basis of past experience. Provision is made in respect of cost for breakage and expiries in the year of sale of goods.

If the effect of the time value of money is material, provisions are discounted using a current pretax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Contingent liabilities are disclosed in the notes. Contingent liabilities are disclosed for (1) possible obligations which will be confirmed only by future events not wholly within the control of

the Company or (2) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

Contingent assets are not recognised in the financial statements as this may result in the recognition of income that may never be there.

o. Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities (other than trade receivables) are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of the financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transactions costs directly attributable to the acquisition of financial assets and financial liabilities at fair value through profit or loss are recognised immediately in the Statement of Profit and Loss. However, trade receivables that do not contain significant financing component are measured at transaction price.

p. Financial assets

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the market place.

All recognised financial assets are subsequently measured at either amortised cost or fair value through profit or loss or fair value through other comprehensive income, depending on the classification of the financial assets. Financial assets are not reclassified subsequent to their recognition, except during the period the Company changes its business model for managing financial assets.

Classification of financial assets

Debt instruments that meet the following conditions are subsequently measured at amortised cost:

a) The asset is held within a business model

whose objective is to hold assets in order or collect contractual cash flows; and

b) The contractual terms of the instrument give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Debt instruments that does not meet the above conditions are subsequently measured at fair value.

Effective interest method

The effective interest is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount in initial recognition.

Income is recognised on an effective interest basis for debt instruments. Interest income is recognised in the Statement of Profit and Loss and is included in the "Other income" line item.

Impairment of financial assets

The Company applies expected credit loss model for recognising impairment loss on financial assets measured at amortised cost, trade receivables and other contractual rights to receive cash or other financial asset.

Expected credit losses are the weighted average of credit losses with the respective risks of default occurring as the weights. Credit loss is the difference between all contractual cash flows that are due to the Company in accordance with the contract and all the cash flows that the Company expects to receive (i.e. all cash shortfalls), discounted at the original effective interest rate (or credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets). The Company estimates cash flows by considering all contractual terms of the financial instrument (for example, prepayment, extension, call and similar options) through the expected life of that financial instrument.

The Company measures the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses if the credit risk on that financial instrument has increased significantly since initial recognition. If the credit risk on a financial instrument has not increased significantly since initial recognition,

the Company measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. 12-month expected credit losses are portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if default occurs within the 12 months after the reporting date and thus, are not cash shortfalls that are predicted over the next 12 months.

For trade receivables or any contractual right to receive cash, the Company always measures the loss allowance at an amount equal to lifetime expected credit losses.

Further, for the purpose of measuring lifetime expected credit loss allowance for trade receivables, the Company has used a practical expedient as permitted under Ind AS 109. This expected credit loss allowance is computed based on a provision matrix which takes into account historical credit loss experience with adjusted for forward-looking information.

Derecognition of financial assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Company neither transfers nor retains substantially all of the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all of the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset''s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss if such gain or loss would have otherwise been recognised in the Statement of Profit and Loss on disposal of that financial asset.

On derecognition of a financial asset other than in its entirety, the Company allocates the previous carrying amount of the financial asset

between the part it continues to recognise under continuing involvement, and the part it no Longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had been recognised in other comprehensive income is recognised in the Statement of Profit and Loss on disposal of that financial asset. A cumulative gain or loss that had been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts.

Foreign exchange gains and losses

The fair value of financial assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period.

For foreign currency denominated financial assets measured at amortised cost, the exchange differences are recognised in the Statement of Profit and Loss.

q. Financial liabilities and equity instruments Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liability or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company is recognised at the proceeds received, net of direct issue costs.

Repurchase of the Company''s own equity instruments is recognised and deducted directly in equity. No gain or loss is recognised in the Statement of Profit and Loss on the purchase, sale, issue or cancellation of the Company''s own equity instruments.

Financial liabilities

All financial liabilities are subsequently measured at amortised cost using the effective interest method.

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, as appropriate.

Financial liabilities that are not held-for-trading and are not designated as at fair value through profit or loss are measured at amortised cost at the end of the subsequent accounting period. The carrying amount of financial liabilities that are subsequently measured at amortised cost are determined based on the effective interest method. Interest expense that is not capitalised as part of costs of an asset is included in the "Finance costs" line item.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, (where appropriate), a shorter period, to the net carrying amount at initial recognition.

Foreign exchange gains and losses

For financial liabilities that are denominated in a foreign currency and are measured at amortised cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortised cost of the instrument and are recognised in the Statement of Profit and Loss.

Derecognition

The Company derecognises a financial liability when, and only when, the Company''s obligations are discharged, cancelled or have expired. An exchange with a lender of debt instruments with substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in the Statement of Profit and Loss.

If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay.

r. 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 recognised amounts and there is an intention to settle on a net basis or realise 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.

s. Segment Reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (CODM) of the Company. The CODM is responsible for allocating resources and assessing performance of the operating segments of the Company.

t. Cash and Cash Equivalents

Cash and Cash equivalents for the purpose of Statement of Cash Flows comprise cash and cheques in hand, bank balances, demand deposits with banks where the original maturity is three months or less and other short term highly liquid investments.

u. Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the Statement of Profit and Loss as and when incurred.

The development activities undertaken by the Company are subject to technical, regulatory and other uncertainties, such that, in the opinion of management, the criteria for capitalization are not met prior to obtaining marketing approval by the regulatory authorities in markets. Internal development cost that do not meet these criteria are therefore expensed as and when incurred.

v. Discontinued operation

A discontinued operation is a component of the entity that has been disposed and that represents a separate line of business. The results of discontinued operation is presented separately in the statement of profit and loss.

w. Earnings Per Share

Basic earnings per share is computed by dividing the profit / loss for the year after tax attributable

to the equity shareholders of the Company by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period and for all periods presented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential equity shares, and the weighted average number of additional equity shares that would have been outstanding assuming the conversion of all dilutive potential equity shares.

x. Claims

Claims against the Company not acknowledged as debts are disclosed after a careful evaluation of the facts and legal aspects of the matter involved.

3 Critical accounting judgments and key sources of estimation uncertainty

3.1 Critical judgments in applying accounting policies

In the application of the Company''s accounting policies, which are described in note 2, the directors of the Company are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods of the revision affects both current and future periods.

3.2 Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period

that may have a significant risk of causing a material adjustment to the carrying amounts of assets and Liabilities within the next financial year.

a. Useful lives of property, plant and equipment

As described at 2.3 (h) above, the Company reviews the estimated useful lives of property, plant and equipment at the end of each reporting period.

b. Fair value measurements and valuation processes

Some of the Company''s assets and liabilities are measured at fair value for financial reporting purposes. The management of the Company determines the appropriate valuation techniques and inputs for fair value measurements.

In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where level 1 inputs are not available, the Company engages third party qualified valuers (Registered Valuer in terms of Section 247 of the Companies Act, 2013) to perform the valuation. The management works closely with the qualified external valuers (Registered Valuer in terms of Section 247 of the Companies Act, 2013) to establish the appropriate valuation techniques and inputs to the model.

Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed is note 34.

c. Defined benefit obligation

The costs of providing pensions and other post-employment benefits are charged to the Statement of Profit and Loss in accordance with Ind AS 19 ‘Employee benefits’ over the period during which benefit is derived from the employees’ services. The costs are assessed on the basis of assumptions selected by the management. These assumptions include salary escalation rate, discount rates, expected rate of return on assets and mortality rates. The same is disclosed in Note 28, ‘Employee benefits expense’.

d. Income taxes

The Company’s tax jurisdiction is India. Significant judgments are involved in estimating budgeted profits for the purpose of paying advance tax, determining the provision for income taxes, including amount expected to be paid / recovered for uncertain tax positions (refer note 30).

e. Measurement and likelihood of occurrence of provisions and contingencies - As disclosed in Note 18 and Note 40, Management has estimated and measured the likelihood of the litigations and accounted the provision and contingencies as appropriate.

f. Expected Credit Loss (ECL)

In accordance with Ind AS 109 - Financial Instruments, the Company applies ECL model for measurement and recognition of impairment loss on the trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 - Revenue from Contracts with Customers.

For this purpose, the Company follows ‘simplified approach’ for recognition of impairment loss allowance on the trade receivable balances, contract assets and lease receivables. The application of simplified approach requires expected lifetime losses to be recognised from initial recognition of the receivables based on lifetime ECLs at each reporting date.

As a practical expedient, the Company uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables. The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward-looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed.

In case of other assets, the Company determines if there has been a significant increase in credit risk of the financial asset since initial recognition. If the credit risk of such assets has not increased significantly, an amount equal to twelve months ECL is

measured and recognised as Loss allowance. However, if credit risk has increased significantly, an amount equal to lifetime ECL is measured and recognised as loss allowance.

g. Inventories obsolescence

The factors that the Company considers in determining the provision for slow moving, obsolete and other non-saleable inventory include estimated shelf life, planned product

discontinuances, price changes, ageing of inventory and introduction of competitive new products, to the extent each of these factors impact the Company’s business and markets. The Company considers all these factors and adjusts the inventory obsolescence to reflect its actual experience on a periodic basis.

34.3 Fair value measurements

The carrying amount of financial assets and financial Liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

34.4 Financial risk management objectives

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment, policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.The Company has exposure to the following risks arising from financial instruments:

34.4.1 Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Company’s exposure to credit risk by age of the outstanding from various customers is as per note 13.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at 30 June 2024 related to several customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

The movement in the allowance for impairment in respect of trade receivables during the year is as per note 13.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of '' 23 850 lakhs (30 June 2023''43 505 lakhs). The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

Other financial assets

Other financial assets include employee Loans, security deposits etc. Based on historical experience and credit profiles of counterparties, the Company does not expect any significant risk of default.

The Company’s maximum exposure to credit risk for each of the above categories of financial assets is their carrying values as at the reporting dates.

34.4.2 Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation. As of 30 June 2024 the Company has working capital of '' 30 531 lakhs (30 June 2023: '' 49 220 lakhs) including cash and cash equivalents and other bank balances of '' 23 850 lakhs (30 June 2023: '' 43 505 lakhs). Working capital is calculated as current assets less current liabilities.

The table below analyse financial liabilities of the Company into relevant maturity groupings based on the reporting period from the reporting date to the contractual maturity date:

34.4.3 Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

(i) Foreign currency risk management

The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the entity. Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in EURO and USD against the respective functional currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and interest rate exposure.

Foreign currency sensitivity analysis

The Company is mainly exposed to the currencies stated above.

The following table details impact to profit or loss of the Company by sensitivity analysis of a 10% increase and decrease in the respective currencies against the functional currency of the Company. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management''s assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change on foreign currency rates.

The following analysis has been worked out based on the exposures as of the date of statements of financial position.

35 Share-based payments

a) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “International Stock Ownership Plan” (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA. Every employee who opts for the scheme contributes by way of payroll deduction up to a specified percentage (upto 15%) of base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee''s contribution (restricted to 2.5% of his base salary). Such contribution is charged under employee benefits expense.

The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange and are purchased on behalf of the employees at market price on the date of purchase. During the year ended June 30, 2024, 2 784.66 (Previous period ended June 30, 2023: 2 506.10) shares excluding dividend were purchased by employees at weighted average fair value of '' 13 177.93 (Previous period ended June 30, 2023: '' 11 896.54) per share. The Company’s contribution during the year on such purchase of shares amounts to '' 97.46 Lakhs (Previous period ended June 30, 2023: '' 77.21 lakhs) has been charged under employee benefits expense under Note 28.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “Employee Stock Option Plan” whereby specified employees of its subsidiaries covered by the plan are granted an option to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA at a fixed price (grant price) for a fixed year of time. The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange. The Options Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years and have a 5/10 years life cycle.

The Company operates defined contribution superannuation fund and employees'' state insurance plan for all qualifying employees of the Company. Where employees leave the plan, the contributions payable by the Company is reduced by the amount of forfeited contributions

The employees of the Company are members of a state-managed employer''s contribution to employees'' state insurance plan and superannuation fund which is administered by the Life Insurance Corporation of India. The Company is required to contribute a specific percentage of payroll costs to the contribution schemes to fund the benefit. The only obligation of the Company with respect to the contribution plan is to make the specified contributions.

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/ exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

a) Gratuity Plan (Funded)

The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company. The Company’s defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered trust. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The gratuity plan is administered by a separate trust that is legally separated from the Company. The board of the trust is composed of representatives from both employer and employees. The board of the trust is required by law and by its articles of association to act in the interest of the trust and of all relevant stakeholders in the scheme, i.e. active employees, inactive employees, retirees, employer. The board of the trust is responsible for the investment policy with regard to the assets of the trust.

b) Provident Fund (Funded)

Provident Fund for all permanent employees is administered through a trust. The provident fund is administered by trustees of an independently constituted common trust recognised by the Income Tax authorities. Periodic contributions to the fund are charged to revenue. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investment of the trust and notified interest rate by the Government. The contribution by employer and employee together with interest are payable at the time of separation from service or retirement whichever is earlier. The benefit under this plan vests immediately on rendering of service.

b) Post Retirement Medical Benefit (PRMB) (Unfunded)

The Company provides certain post-employment medical benefits to employees. Under the scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

c) Compensated absences (Unfunded)

The Company also provides for compensated absences as per it''s policies, which allows for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year/ period.

d) Long term service award (Unfunded)

Long term service award is given on completion of minimum 10 years of service.

These plans typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

G. Sensitivity analysis Gratuity Plan (Funded)

If the discount rate is 50 basis points higher (Lower), the defined benefit obligation would decrease by ''157.87 lakhs (increase by '' 168.29 lakhs) (as at June 30, 2023: decrease by '' 134 lakhs (increase by '' 141 lakhs)).

If the expected salary escalation rate increases (decreases) by 0.5%, the defined benefit obligation would increase by '' 169.36 lakhs (decrease by '' 160.41 lakhs) (as at June 30, 2023: increase by '' 145 lakhs (decrease by '' 139 lakhs)).

Compensated absence plan (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 17.38 lakhs (increase by '' 18.68 lakhs) (as at June 30, 2023: decrease by '' 7.5 lakhs (increase by '' 7.9 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by '' 18.64 lakhs (decrease by '' 17.53 lakhs) (as at June 30, 2023: increase by '' 7.8 lakhs (decrease by '' 7.5 lakhs)).

Post retirement medical benefit (PRMB) (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 1.2 lakhs (increase by '' 1.26 lakhs) (as at June 30, 2023: decrease by '' 1.0 lakhs (increase by '' 1.1 lakhs)).

If the medical inflation rate is 50 basis points higher (lower), the defined benefit obligation would increase by '' 1.28 lakhs (decrease by '' 1.22 lakhs) (as at June 30, 2023: increase by '' 1.10 lakhs (decrease by '' 1.05 lakhs))."

The sensitivity analysis presented above may not be representative of the actual change of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method as the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the Balance Sheet.

Long term service award (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 15.38 lakhs (increase by '' 16.32 lakhs) (as at June 30, 2023: decrease by '' 11.9 lakhs (increase by '' 12.6 lakhs)).

b) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company’s contention and issued a fresh demand notice demanding a sum of '' 3 307 lakhs ('' 1 168 lakhs on account of overcharge during the said period and '' 2 138 lakhs for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon’ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon’ble Kolkata High Court stayed the demand provided it deposits a sum of '' 225 lakhs with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. The Company holds provision of '' 580 lakhs in its books towards possible liability.

c) During the year 2014, the Company had made a provision of '' 699 lakhs towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company. The provision of ''108 lakhs was transferred as a part of BPL Business transferred to Merck Life Science Private Limited. The Company holds provision of '' 591 lakhs in its books towards possible liability.

d) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on 21 June 2013 including Metformin, a formulation used by the Company in Company’s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA, however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company made a provision of '' 320 lakhs towards a possible liability which may accrue to the Company. Since Carbophage was part of the BPL business transferred to Merck Life Science Private Limited, the underlying provision was transferred out.

Further, NPPA has also issued a demand order dated May 10, 2017 of '' 52 lakhs to the Company under the provisions of Drug Prices (Control) Order, 2013 (“DPCO”) for overcharging in respect of Concor 5 mg Tablets (containing the bulk drug Bisoprolol 5 mg) with interest thereon @15% on the said amount. The Company has challenged both the above matters by writ petition which are pending adjudication in the Bombay High Court. In the view of the management, future course of action in relation to both these matters, including any liabilities thereof will be managed directly by Merck Life Science Private Limited. Managements of the Company and Merck Life Science Private Limited are aligning this understanding basis business transfer agreements and hence, these matters are disclosed as contingent liabilities.

e) During the year 2015, Central Excise issued a show cause cum demand notice on the Company covering a period of five years for alleged wrong classification of the products, Vitamin E Acetate min. 92% for Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition. The value of total demand was '' 2 369 lakhs.

Further, for same classification matter, the Company has received VAT/CST assessment orders and notices covering a period of five years disallowing VAT exemption claimed for Vitamin E Acetate, Vitamin E dry powder, Vitamin E liquid for Animal nutrition classified as Animal feed. For the orders received, the Company had contested before the respective state appellate authorities. The Company during the financial year 2023-24 has applied for Amnesty pertaining to the cases which are pending at the State Appellate Authority level.

The Central Excise had issued show cause cum demand on similar matter in the past as well. This was contested by the Company before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

The Company based on legal opinion believes that it has a good case on merits as well as on limitations. The aforesaid amounts have already been included under contingent liability at note 40 (a) to the financial statements.

The Board of Directors at its meeting held on August 21, 2024 have recommended a payment of final dividend of '' 60 per equity share of face value of '' 10 each for the financial year ended June 30, 2024 resulting in a dividend payout of '' 9 959 lakhs.

45 As per the MCA notification dated August 5, 2022, and the Companies (Accounts) Fourth Amendment Rules, 2022, the Company is required to maintain backups of books of account on servers physically located in India on a daily basis. During the current year, in a phased manner, the Company has implemented the process of maintaining periodic backups of its books of accounts and other relevant books and papers in electronic mode on servers physically located in India. The Company also faced certain technical issues post implementation due to which the backup was not possible during certain days of the year.

46 Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company’s transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2023. Management believes that the Company’s transactions with related parties post March 2023 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

47 There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date.

48 (a) No transactions to report against the following disclosure requirements as notified by MCA pursuant

to amended Schedule III:

i) Crypto Currency or Virtual Currency

ii) Benami Property held under Benami Transactions (Prohibition) Act, 1988 (45 of 1988)

iii) Registration of charges or satisfaction with Registrar of Companies

iv) Relating to borrowed funds:

a) Wilful defaulter

b) Borrowings obtained on the basis of security of current assets

c) Discrepancy in utilisation of borrowings

d) Current maturity of long term borrowings

48 (b) The Company has not entered into any such transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

48 (d) Utilization 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:

(i) 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

(ii) 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:

(i) 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

(ii) Provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

49 During the financial year, the Company discontinued production of injections at its manufacturing plant in Goa effective September 30, 2023, as the Company started to source injections portfolio of its products from a contract manufacturer. Post evaluation of various alternatives, during the quarter the Company has entered into an agreement for sale of the assets of its injection plant for a consideration of '' 790 Lakhs and impaired the balance amount of '' 627 Lakhs. Based on above, the company has re-evaluated the usability of assets in their capital work in progress and thereby impaired other related assets by an amount of '' 1 392 Lakhs. The above total amount of '' 2 019 Lakhs have been disclosed as an exceptional item for the quarter and the year ended June 30, 2024.

50 The Company’s unpaid dividend pertaining to final dividend declared for the Financial Year 2016 amounting to '' 13 Lakhs became due for its transfer to Investor Education and Protection Fund (IEPF) on June 9, 2024 which was required to be transferred to the fund within 30 days from the due date i.e. July 9, 2024 as per applicable IEPF rules. However, due to restructuring of forms on Ministry of Corporate Affairs’ (MCA) portal, forms were not available for filing effective July 3, 2024 and accordingly, an extension was provided by MCA till August 16, 2024 for filing form without any delay charges. Company has in this period, uploaded form IEPF-1, however, due to technical glitches on the portal, Company has not been able to successfully transfer the said unpaid dividend amount to the IEPF as on date.

51 Figures for the previous year have been re-grouped/re-arranged wherever necessary to conform current period’s classification.

52 Approval of financial statements

The financial statements were approved for issue by the board of directors on August 21, 2024.

Signatures to Notes 1 to 52

As per our attached report of even date. For and on behalf of Board of Directors

For HARIBHAKTI & Co. LLP

Chartered Accountants

ICAI Firm Regn. No.: 103523W/W100048

Deepak G. Morolia S.N Talwar Milind Thatte

Partner Chairman Managing Director

Membership No. 130533 DIN No.00001456 DIN No. 08092990

Lokesh Chandak Zeal Rupani

Place: Mumbai Chief financial officer Company Secretary

Date: August 21, 2024 DIN No.10083315 Membership No. A52286

---

Jun 30, 2023

Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of '' 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation 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.

No shares are bought back by the Company during the period of 5 years immediately preceding the Balance Sheet date.

No shares are allotted as fully paid up by way of bonus shares during the period of 5 years immediately preceeding the Balance Sheet date.

No shares are reserved for issue under options and contracts/commitments for the sale of shares/ disinvestment.

No shares are allotted as fully paid up pursuant to contracts without being payment received in cash during the period of 5 years immediately preceeding the Balance Sheet date.

This reserve represents the cumulative profits / (Losses) of the Company and effects of remeasurement of defined benefit obligations. This reserve can be utilised in accordance with the provisions of the Act.

In November 2022, final dividend of '' 11.5 per share (total dividend '' 1 909 lakhs) for the year ended June 30, 2022 was paid to holders of fully paid equity shares. In February 2023, interim dividend of '' 45 per share (total dividend '' 7 470 lakhs).

In November 2021, final dividend of '' 130 per share (total dividend '' 21 579 lakhs) for the year ended June 30, 2021 was paid to holders of fully paid equity shares. In May 2022, a special interim dividend of '' 41 per share (total dividend '' 6 806 lakhs was paid to holders of fully paid equity shares.

33 Segment information33.1 General Information

The Company’s chief operating decision maker (CODM) examined the Company’s performance based on its business unit ‘Pharmaceuticals’

The Company will now operate under only one segment i.e. Pharmaceuticals.

33.2 Geographical segment information

In respect of secondary segment information, the Company has identified its geographical segment as (i) India and (ii) Outside India.

34 Financial instruments & related disclosures34.1 Capital management

The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Equity share capital and other equity are considered for the purpose of Company''s capital management.

The Company is not subject to any externally imposed capital requirements.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders if any, return on capital to shareholders or issue new shares.

34.3 Fair value measurements

The carrying amount of financial assets and financial Liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

34.4 Financial risk management objectives

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment, policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.The Company has exposure to the following risks arising from financial instruments:

34.4.1 Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Company’s exposure to credit risk by age of the outstanding from various customers is as per note 13.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at 30 June 2023 related to several customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

The movement in the allowance for impairment in respect of trade receivables during the year is as per note 13.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of ? 43 505 lakhs (30 June 2022 ? 31 940 lakhs). The credit

worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

34.4.2 Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.

As of 30 June 2023 the Company has working capital of ? 49 220 lakhs (30 June 2022: ? 37 614 lakhs) including cash and cash equivalents and other bank balances of ? 43 505 lakhs (30 June 2022: ? 31 940 lakhs). Working capital is calculated as current assets less current liabilities.

34.4.3 Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and longterm debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

34.4.4 Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the entity.

Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in EURO and USD against the respective functional currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and interest rate exposure.

34.4.5 Foreign currency sensitivity analysis

The Company is mainly exposed to the currencies stated above.

The following table details impact to profit or loss of the Company by sensitivity analysis of a 10% increase and decrease in the respective currencies against the functional currency of the Company. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management''s assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change on foreign currency rates.

34.4.6 Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate sensitivity - fixed rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit and loss, and the Company does not have any designated derivatives. Therefore, a change in interest rates at the reporting date would not affect profit and loss for any of these fixed interest bearing financial instruments.

35 Share-based paymentsa) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “International Stock Ownership Plan” (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA. Every employee who opts for the scheme contributes by way of payroll deduction up to a specified percentage (upto 15%) of base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee''s contribution (restricted to 2.5% of his base salary). Such contribution is charged under employee benefits expense.

The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange and are purchased on behalf of the employees at market price on the date of purchase. During the year ended June 30, 2023, 2 506.10 (Previous period ended June 30, 2022: 2 043.58) shares excluding dividend were purchased by employees at weighted average fair value of '' 11 896.54 (Previous period ended June 30, 2022: '' 11 655.75) per share. The Company’s contribution during the year on such purchase of shares amounts to '' 77.21 Lakhs (Previous period ended June 30, 2022: '' 60.97 lakhs) has been charged under employee benefits expense under Note 28.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “Employee Stock Option Plan” whereby specified employees of its subsidiaries covered by the plan are granted an option to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA at a fixed price (grant price) for a fixed year of time. The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange. The Options Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years and have a 5/10 years life cycle.

The weighted average share price at the date of exercise of these options was $ 131.49 (June 30, 2022: $ 158.22).

The weighted average remaining contractual Life for the share options outstanding as at June 30, 2023 was 6.47 years (June 30, 2022: 6.92 years).

The weighted fair value of options granted during the year was '' 3 788 (June 30, 2022: '' 4 931).

These fair values for share options granted during the year were calculated using binomial lattice-based model. The following tables list the inputs to the models used for the plans for the years ended June 30, 2023 and June 30, 2022, respectively:

36 Employee benefit plans36.1 Defined Benefit plans / long term benefit plan

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/ exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

a) Gratuity Plan (Funded)

The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company. The Company''s defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered trust, which is administered through trustees and/or Life Insurance Corporation of India. The gratuity plan is governed by the Payment of Gratulty Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member''s length of service and salary at retirement age.

b) Post Retirement Medical Benefit (PRMB) (Unfunded)

The Company provides certain post-employment medical benefits to employees. Under the scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

c) Compensated absences (Unfunded)

The Company also provides for compensated absences as per its policies, which allows for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year/ period.

d) Long term service award (Unfunded)

Long term service award is given on completion of minimum 10 years of service.

These plans typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

In respect of the plan, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at June 30, 2023. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

Significant actuarial assumptions of the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

G. Sensitivity analysis Gratuity Plan (Funded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 134 lakhs (increase by '' 141 lakhs) (as at June 30, 2022: decrease by '' 129 lakhs (increase by '' 135 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by '' 145 lakhs (decrease by '' 139 lakhs) (as at June 30, 2022: increase by '' 140 lakhs (decrease by '' 135 lakhs)).

Compensated absence plan (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 7.5 lakhs (increase by '' 7.9 lakhs) (as at June 30, 2022: decrease by '' 4.5 lakhs (increase by '' 4.7 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by '' 7.8 lakhs (decrease by '' 7.5 lakhs) (as at June 30, 2022: increase by '' 4.8 lakhs (decrease by '' 4.7 lakhs)).

Post retirement medical benefit (PRMB) (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 1.0 lakhs (increase by '' 1.1 lakhs).

If the medical inflation rate is 50 basis points higher (lower), the defined benefit obligation would increase by '' 1.10 lakhs (decrease by '' 1.05 lakhs)

The sensitivity analysis presented above may not be representative of the actual change of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method as the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the Balance Sheet.

If the discount rate is 50 basis points higher (Lower), the defined benefit obligation would decrease by '' 11.9 lakhs (increase by '' 12.6 lakhs).

If the gold inflation rate is 50 basis points higher (lower), the defined benefit obligation would increase by '' 12.5 lakhs (decrease by '' 12.0 lakhs)

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

e) Contribution to Provident fund, Superannuation fund and others

Amount of '' 991 lakhs (2022: '' 905 lakhs) is recognised as an expense and included in “Employee costs” (refer note 28) in the Statement of Profit and Loss.

In respect of provident fund set up by employer which requires interest shortfall to be met by the employer, it needs to be treated as defined benefit plan.

The Institute of Actuaries of India has issued guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 30 June 2023.

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions.

Outstanding balances at the year-end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. The Company has not recorded any impairment of receivables relating to amounts owed by related parties in the current year or prior years. (Except general provision coming in accordance with ECL Model). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

# Remuneration does not include charge for gratuity, compensated absences and share based payments, as employee-wise break-up is not available.

Amounts are inclusive of GST wherever applicable.

The Company does not face a significant Liquidity risk with regard to its Lease LiabiLities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

The Company has taken on lease certain warehouses with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. The cost of lease for the warehouses are disclosed under rent expense.

38.2 Company as a lessor38.2.1 Leasing arrangements

The Company has leased out certain office premises which have been classified as investment property. The lease term is 60 months with non cancellable period of 48 months. There is escalation clause in the lease agreement. The carrying amount of property given on operating lease and depreciation thereon for the year are:

39 Commitments
	As at June 30, 2023 '' in lakhs	As at June 30, 2022 '' in lakhs
Estimated amount of contracts remaining to be executed on capital account and not provided for [net of capital advance ? 20 lakhs (30 June 2022: ? Nil)]	897	2 322
	897	2 322
40 Contingent liabilities
	As at June 30, 2023 '' in lakhs	As at June 30, 2022 '' in lakhs
a) Claims against company not acknowledged as debts
Income tax matters	9 403	10 020
Sales tax matters	2 067	3 611
Excise duty, GST, Service tax and custom duty matters	4 181	4 488
	15 651	18 119

Future cash flow in respect of the above, if any, is determinable only on receipt of judgements/decisions pending with the relevant authorities.

b) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company’s contention and issued a fresh demand notice demanding a sum of ? 3 307 lakhs (? 1 168 lakhs on account of overcharge during the said period and ? 2 138 lakhs for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon’ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon’ble Kolkata High Court stayed the demand provided it deposits a sum of ? 225 lakhs with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. The Company holds provision of ? 580 lakhs in its books towards possible liability.

c) During the year 2014, the Company had made a provision of ? 699 lakhs towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company. The provision of ?108 lakhs was transferred as a part of BPL Business transferred to Merck Life Science Private Limited. The Company holds provision of ? 591 lakhs in its books towards possible liability.

d) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on 21 June 2013 including Metformin, a formulation used by the Company in Company’s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA, however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company made a provision of ? 320 lakhs towards a possible liability which may accrue to the Company. Since Carbophage was part of the BPL business transferred to Merck Life Science Private Limited, the underlying provision was transferred out.

Further, NPPA has also issued a demand order dated May 10, 2017 of ? 52 Lakhs to the Company under the provisions of Drug Prices (Control) Order, 2013 (“DPCO”) for overcharging in respect of Concor 5 mg Tablets (containing the bulk drug Bisoprolol 5 mg) with interest thereon @15% on the said amount.

The Company has challenged both the above matters by writ petition which are pending adjudication in the Bombay High Court. In the view of the management, future course of action in relation to both these matters, including any liabilities thereof will be managed directly by Merck Life Science Private Limited. Managements of the Company and Merck Life Science Private Limited are aligning this understanding basis business transfer agreements and hence, these matters are disclosed as contingent liabilities.

e) During the year 2014, Central Excise issued a show cause cum demand notice on the Company covering a period of five years for alleged wrong classification of the products, Vitamin E Acetate min. 92% for Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition. The value of total demand was ? 2 178 lakhs including penalty and interest.

Further, for same classification matter, the Company has received VAT/CST assessment orders of ? 2 178 lakhs and notices covering a period of five years disallowing VAT exemption claimed for Vitamin E Acetate, Vitamin E dry powder, Vitamin E liquid for Animal nutrition classified as Animal feed. For the orders received, the Company has contested before the respective state appellate authorities.

The Central Excise had issued show cause cum demand on similar matter in the past as well. This was contested by the Company before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

The Company based on legal opinion believes that it has a good case on merits as well as on limitations. The aforesaid amounts have already been included under contingent liability at note 40 (a) to the financial statements.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

43 (a) Reimbursement / (recovery) of expenses cross charged to related parties include payments / recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreements with Procter & Gamble Hygiene & Health Care Limited, Procter & Gamble Home Products Private Limited, Gillette Diversified Operations Pvt Ltd and Gillette India Limited.

43 (b) Certain expenses in the nature of employee costs, relocation costs and other expenses are cross charged by the Company to its fellow subsidiaries at actual. Similar expenses incurred by fellow subsidiaries are cross charged to the Company at actual.

The Board of Directors at its meeting held on August 23, 2023 have recommended a payment of final dividend of '' 50 per equity share of face value of '' 10 each for the financial year ended June 30, 2023 resulting in a dividend payout of '' 8 299.7 lakhs.

45 As per the MCA notification dated August 5, 2022, and the Companies (Accounts) Fourth Amendment Rules, 2022, the Company is required to maintain backups of books of account on servers physically located in India on a daily basis. The Company has maintained periodic backups of certain part of their books of accounts and other relevant books and papers maintained in electronic mode on servers physically located in India. This is in addition to regular backups on the Company’s Global Servers. The Company is in process of implementing a system to perform daily backups to comply with the requirements of the relevant Rules

46 Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company’s transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2022. Management believes that the Company’s transactions with related parties post March 2022 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

47 There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date.

48 (a) No transactions to report against the following disclosure requirements as notified by MCA pursuant

to amended Schedule III:

i) Crypto Currency or Virtual Currency

ii) Benami Property held under Benami Transactions (Prohibition) Act, 1988 (45 of 1988)

iii) Registration of charges or satisfaction with Registrar of Companies

iv) Relating to borrowed funds:

a) Wilful defaulter

b) Borrowings obtained on the basis of security of current assets

c) Discrepancy in utilisation of borrowings

d) Current maturity of long term borrowings

48 (b) The Company has not entered into any such transaction which is not recorded in the books of account that has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (such as, search or survey or any other relevant provisions of the Income Tax Act, 1961).

48 (d). Utilization 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:

(i) 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

(ii) 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:

(i) 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

(ii) Provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

49 During the earlier year, Company had impaired plant and machinary related to product oxynex whose supply terms were completed as at March 31, 2022.

The Company no longer plants for future manufacture and supply of the said product.

The impairment has been reversed during the year on actual sale of the said plant.

50 Figures for the previous year have been re-grouped/re-arranged wherever necessary to conform current period’s classification.

51 Approval of financial statements

The financial statements were approved for issue by the board of directors on August 23, 2023.

---

Jun 30, 2022

Contractual Obligations

The Company has no contractual obligations to purchase, construct or develop investment property. However, the responsibility for its repairs, maintenance or enhancements is with the Company.

Fair Value

Based on Independent valuation report as on 25 August 2022, for one of the property located in the same premises, the management has estimated fair value of '' 2 970 lakhs for the investment properties. The aforesaid estimated amount will not be materially different from the fair value of the property as on June 30, 2022.

Policy for Estimation of Fair Value

Market Approach / Direct Comparison Approach

The Direct Comparison Approach involves a comparison of the subject property to similar properties that have actually sold in arms - length transactions or are offered for sale. This approach demonstrates what buyers have historically been willing to pay (and sellers willing to accept) for similar properties in an open and competitive market and is particularly useful in estimating the value of the land and properties that are typically traded on a unit basis.

(a) Loans given to employees as per the Company’s policy are not considered for the purposes of disclosure under Section 186 (4) of the Act.

(b) There are no loans or advances in the nature of loans granted to Promoters, Directors, KMPs and their

related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are:

(i) repayable on demand; or

(ii) without specifying any terms or period of repayment

(a) Includes amounts deposited with Excise, Sales Tax and other authorities pending resolution of disputes.

(b) Advances given to employees as per the Company’s policy are not considered for the purposes of disclosure under Section 186 (4) of the Companies Act, 2013.

The Company has used a practical expedient by computing the expected credit Loss allowance for trade receivables based on a provision matrix. The provision matrix takes into account historical credit loss experience and adjusted for forward-looking information. The expected credit loss allowance is based on the ageing of the days the receivables are due and the rates as per the provision matrix.

Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of '' 10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation 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.

No shares are bought back by the Company during the period of 5 years immediately preceding the Balance Sheet date.

No shares are allotted as fully paid up by way of bonus shares during the period of 5 years immediately preceeding the Balance Sheet date.

No shares are reserved for issue under options and contracts/commitments for the sale of shares/ disinvestment.

No shares are allotted as fully paid up pursuant to contracts without being payment received in cash during the period of 5 years immediately preceeding the Balance Sheet date.

This reserve represents the cumulative profits / (Losses) of the Company and effects of remeasurement of defined benefit obligations. This reserve can be utilised in accordance with the provisions of the Act.

In November 2021, final dividend of '' 130 per share (total dividend '' 21 579 lakhs) for the year ended June 30, 2021 was paid to holders of fully paid equity shares. In November 2020, the final dividend paid was '' 230 per share (total dividend '' 38 178 lakhs) for the year ended June 30, 2020.

In May 2022, a special interim dividend of '' 41 per share (total dividend '' 6 806 lakhs was paid to holders of fully paid equity shares.

The Company’s chief operating decision maker (CODM) examined the Company’s performance based on its business unit ‘Pharmaceuticals’

The Company will now operate under only one segment i.e. Pharmaceuticals.

In respect of secondary segment information, the Company has identified its geographical segment as (i) India and (ii) Outside India.

34 Financial instruments & related disclosures34.1 Capital management

The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Equity share capital and other equity are considered for the purpose of Company''s capital management.

The Company is not subject to any externally imposed capital requirements.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders if any, return on capital to shareholders or issue new shares.

34.3 Fair value measurements

The carrying amount of financial assets and financial Liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

34.4 Financial risk management objectives

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment, policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.The Company has exposure to the following risks arising from financial instruments:

34.4.1 Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Company’s exposure to credit risk by age of the outstanding from various customers is as per note 13.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit Losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at 30 June 2022 related to several customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

The movement in the allowance for impairment in respect of trade receivables during the year is as per note 13.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of ? 31 940 lakhs (30 June 2021: ? 46 412 lakhs). The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

34.4.2 Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.

As of 30 June 2022 the Company has working capital of ? 37 781 lakhs (30 June 2021: ? 48 817 lakhs) including cash and cash equivalents and other bank balances of ? 31 940 lakhs (30 June 2021: ? 46 412 lakhs). Working capital is calculated as current assets less current liabilities.

The table below analyse financial liabilities of the Company into relevant maturity groupings based on the reporting period from the reporting date to the contractual maturity date:

34.4.3 Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and Longterm debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

34.4.4 Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/ liabilities are denominated in a currency other than the functional currency of the entity.

Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in EURO and USD against the respective functional currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and interest rate exposure.

34.4.5 Foreign currency sensitivity analysis

The Company is mainly exposed to the currencies stated above.

The following table details impact to profit or loss of the Company by sensitivity analysis of a 10% increase and decrease in the respective currencies against the functional currency of the Company. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management''s assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change on foreign currency rates.

34.4.6 Interest rate risk management

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate sensitivity - fixed rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit and loss, and the Company does not have any designated derivatives. Therefore, a change in interest rates at the reporting date would not affect profit and loss for any of these fixed interest bearing financial instruments.

35 Share-based paymentsa) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “International Stock Ownership Plan” (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA. Every employee who opts for the scheme contributes by way of payroll deduction up to a specified percentage (upto 15%) of base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee''s contribution (restricted to 2.5% of his base salary). Such contribution is charged under employee benefits expense.

The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange and are purchased on behalf of the employees at market price on the date of purchase. During the year ended June 30, 2022, 2 043.58 (Previous period ended June 30, 2021: 1 350.97) shares excluding dividend were purchased by employees at weighted average fair value of '' 11 655.75 (Previous period ended June 30, 2021: '' 10 557.23) per share. The Company’s contribution during the year on such purchase of shares amounts to '' 60.97 Lakhs (Previous period ended June 30, 2021: '' 32.6 lakhs) has been charged under employee benefits expense under Note 28.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “Employee Stock Option Plan” whereby specified employees of its subsidiaries covered by the plan are granted an option to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA at a fixed price (grant price) for a fixed year of time. The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange. The Options Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years and have a 5/10 years life cycle.

The weighted average share price at the date of exercise of these options was $ 158.22 (June 30, 2021: $ 140.42).

The weighted average remaining contractual Life for the share options outstanding as at June 30, 2022 was 6.92 years (June 30, 2021: 6.51 years).

The weighted fair value of options granted during the year was '' 4 931 (June 30, 2021: '' 2 765).

These fair values for share options granted during the year were calculated using binomial lattice-based model. The following tables list the inputs to the models used for the plans for the years ended June 30, 2022 and June 30, 2021, respectively:

36 Employee benefit plans 36.1 Defined Benefit plans

The Company operates post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

a) Gratuity Plan (Funded)

The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company. The Company’s defined benefit gratuity plan is a final salary plan for India employees, which requires

contributions to be made to a separately administered trust. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The gratuity plan is administered by a separate trust that is legally separated from the Company. The board of the trust is composed of representatives from both employer and employees. The board of the trust is required by law and by its articles of association to act in the interest of the trust and of all relevant stakeholders in the scheme, i.e. active employees, inactive employees, retirees, employer. The board of the trust is responsible for the investment policy with regard to the assets of the trust.

b) Post Retirement Medical Benefit (PRMB) (Unfunded)

The Company provides certain post-employment medical benefits to employees. Under the scheme, employees get medical benefits subject to certain limits of amount, periods after retirement and types of benefits, depending on their grade at the time of retirement. Employees separated from the Company as part of early separation scheme are also covered under the scheme. The liability for post retirement medical scheme is based on an independent actuarial valuation.

c) Compensated absences (Unfunded)

The Company also provides for compensated absences as per it''s policies, which allows for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year.

These plans typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

Investment risk The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.

Interest risk A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan investments.

Longevity risk The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality rate of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plans liability.

Salary risk The present value of the defined benefit plan liability is calculated by reference to

the future salaries of plan participants. As such, an increase on the salary of plan participants will increase the plans liability.

In respect of the plan, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at June 30, 2022. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

Significant actuarial assumptions of the determination of the defined obligation are discount rate, expected salary increase and mortality. The sensitivity analyses below have been determined based on reasonable possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

G. Sensitivity analysis Gratuity Plan (Funded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 129 lakhs (increase by '' 135 lakhs) (as at June 30, 2021: decrease by '' 133 lakhs (increase by '' 140 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by '' 140 lakhs (decrease by '' 135 lakhs) (as at June 30, 2021: increase by '' 129 lakhs (decrease by '' 124 lakhs)).

Compensated absence plan (Unfunded)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 4.5 lakhs (increase by '' 4.7 lakhs) (as at June 30, 2021: decrease by '' 5.1 lakhs (increase by '' 5.4 lakhs)).

If the expected salary growth increases (decreases) by 0.5%, the defined benefit obligation would increase by '' 4.8 lakhs (decrease by '' 4.7 lakhs) (as at June 30, 2021: increase by '' 4.9 lakhs (decrease by '' 4.7 lakhs)).

Post retirement medical benefit (PRMB)

If the discount rate is 50 basis points higher (lower), the defined benefit obligation would decrease by '' 1.0 lakhs (increase by '' 1.1 lakhs).

If the medical inflation rate is 50 basis points higher (Lower), the defined benefit obligation would increase by '' 1.09 (decrease by '' 1.05 lakhs)

The sensitivity analysis presented above may not be representative of the actual change of the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method as the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the Balance Sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

Long term service award (unfunded)

Long term service award is given on completion of minimum 10 years of service.

Contribution to Provident fund, Superannuation fund and others

Amount of '' 905 lakhs (2021: '' 774 lakhs) is recognised as an expense and included in “Employee costs” (refer note 28) in the Statement of Profit and Loss.

In respect of provident fund set up by employer which requires interest shortfall to be met by the employer, it needs to be treated as defined benefit plan.

The Institute of Actuaries of India has issued guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 30 June 2022.

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions.

Outstanding balances at the year-end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. The Company has not recorded any impairment of receivables relating to amounts owed by related parties in the current year or prior years. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

# Remuneration does not include charge for gratuity, compensated absences and share based payments, as employee-wise break-up is not available.

As referred in note 2.3 (b) of the accounting policy the company has adopted Ind AS 116 using modified retrospective approach whereby Right-of-use assets (ROU) and Lease Liabilities of '' 1 166 Lakhs was recognised on transition date. Also, in accordance with IND AS 116 the ROU asset has been adjusted towards the fair value of security deposit of '' 61 Lakhs.

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

The Company has taken on lease certain warehouses with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. The cost of lease for the warehouses are disclosed under rent expense.

b) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company’s contention and issued a fresh demand notice demanding a sum of ? 3 307 lakhs (? 1 168 lakhs on account of overcharge during the said period and ? 2 138 lakhs for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon’ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon’ble Kolkata High Court stayed the demand provided it deposits a sum of ? 225 lakhs with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. The Company holds provision of ? 580 lakhs in its books towards possible liability.

c) During the year 2014, the Company had made a provision of ? 699 lakhs towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company. The provision of ? 108 lakhs was transferred as a part of BPL Business transferred to Merck Life Science Private Limited. The Company holds provision of ? 591 lakhs in its books towards possible liability.

d) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on 21 June 2013 including Metformin, a formulation used by the Company in Company’s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA,however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company made a provision of ? 320 lakhs towards a possible liability which may accrue to the Company. Since Carbophage was part of the BPL business transferred to Merck Life Science Private Limited, the underlying provision was transferred out.

Further, NPPA has also issued a demand order dated May 10, 2017 of ? 52 lakhs to the Company under the provisions of Drug Prices (Control) Order, 2013 (“DPCO”) for overcharging in respect of Concor 5 mg Tablets (containing the bulk drug Bisoprolol 5 mg) with interest thereon @15% on the said amount.

The Company has challenged both the above matters by writ petition which are pending adjudication in the Bombay High Court. In the view of the management, future course of action in relation to both these matters, including any liabilities thereof will be managed directly by Merck Life Science Private Limited. Managements of the Company and Merck Life Science Private Limited are aligning this understanding basis business transfer agreements and hence, these matters are disclosed as contingent liabilities.

e) During the year 2014, Central Excise issued a show cause cum demand notice on the Company covering a period of five years for alleged wrong classification of the products, Vitamin E Acetate min.92% for Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition. The value of total demand was ? 2 241 lakhs including penalty and interest.

Further, for same classification matter, the Company has received VAT/CST assessment orders of ? 2 240 lakhs and notices covering a period of five years disallowing VAT exemption claimed for Vitamin E Acetate, Vitamin E dry powder, Vitamin E liquid for Animal nutrition classified as Animal feed. For the orders received, the Company has contested before the respective state appellate authorities.

The Central Excise had issued show cause cum demand on similar matter in the past as well. This was contested by the Company before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

The Company based on legal opinion believes that it has a good case on merits as well as on limitations.

Accordingly, no provision has been created in the books of accounts.The aforesaid amounts have already been included under contingent liability at note 40 (a) to the financial statements.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

43 (a) Reimbursement / (recovery) of expenses cross charged to related parties include payments / recoveries on account of finance, personnel, secretarial, administration and planning services rendered under common services agreements with Procter & Gamble Hygiene & Health Care Limited, Procter & Gamble Home Products Private Limited and Gillette India Limited.

43 (b) Certain expenses in the nature of employee costs, relocation costs and other expenses are cross charged by the Company to its fellow subsidiaries at actual. Similar expenses incurred by fellow subsidiaries are cross charged to the Company at actual.

The Board of Directors at its meeting held on August 29, 2022 have recommended a payment of final dividend of '' 11.5 per equity share of face value of '' 10 each for the financial year ended June 30, 2022 resulting in a dividend payout of '' 1 908.9 lakhs.

45 Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company’s transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2021. Management believes that the Company’s transactions with related parties post March 2021 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

46 There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date.

47 (d). Utilization 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:

(i) 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

(ii) 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:

(i) 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

(ii) Provide any guarantee, security or the like on behalf of the ultimate beneficiaries.

48 During the year, Company has impaired plant and machinary related to product oxynex whose supply terms have been completed as at March 31, 2022. The Company no longer plans for future manufacture and supply of the said product.

49 Figures for the previous year have been re-grouped/re-arranged wherever necessary to conform current period’s classification.

50 Approval of financial statements

The financial statements were approved for issue by the board of directors on August 29, 2022.

---

Jun 30, 2021

b) Contractual Obligations

The Company has no contractual obligations to purchase, construct or develop investment property. However, the responsibility for its repairs, maintenance or enhancements is with the Company.

c) Fair Value

Based on Independent valuation report as on 21 July 2021, for one of the property located in the same premises, the management has estimated fair value of '' 2 817 lakhs for the investment properties. The aforesaid estimated amount will not be materially different from the fair value of the property as on June 30, 2021.

d) Policy for Estimation of Fair Value

Market Approach/ Direct Comparison Approach

The Direct Comparison Approach involves a comparison of the subject property to similar properties that have actually sold in arms - length transactions or are offered for sale. This approach demonstrates what buyers have historically been willing to pay (and sellers willing to accept) for similar properties in an open and competitive market and is particularly useful in estimating the value of the land and properties that are typically traded on a unit basis.

Terms/ rights attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid. Failure to pay any amount called up on shares may lead to forfeiture of the shares. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

No shares are bought back by the Company during the period of 5 years immediately preceding the Balance Sheet date.

No shares are allotted as fully paid up by way of bonus shares during the period of 5 years immediately preceding the Balance Sheet date.

Proposed Dividend:

Subject to approval of shareholders at the annual general meeting, Board of Directors have recommended dividend of 1300% (at the rate of ? 130/- per share of ? 10 each) on 16,599,382 equity shares for the year ended 30 June 2021.

The above is subject to approval at the ensuing Annual General Meeting of the Company and hence is not recognised as a liability.

33 Financial instruments & related disclosures33.1 Capital management

The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. Equity share capital and other equity are considered for the purpose of Company''s capital management.

The Company is not subject to any externally imposed capital requirements.

The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders if any, return on capital to shareholders or issue new shares.

33.3 Fair value measurements

The carrying amount of financial assets and financial Liabilities measured at amortised cost in the financial statements are a reasonable approximation of their fair values since the Company does not anticipate that the carrying amounts would be significantly different from the values that would eventually be received or settled.

33.4 Financial risk management objectives

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment, policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes. The Company has exposure to the following risks arising from financial instruments:

33.4.1 Credit risk management

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at 30 June 2021 related to several customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of ? 46,412 lakhs (30 June 2020: ? 63,569 lakhs). The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

33.4.2 Liquidity risk management

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.

As of 30 June 2021 the Company has working capital of ? 49,980 lakhs (30 June 2020: ? 72,662 lakhs) including cash and cash equivalents and other bank balances of ? 46,412 lakhs (30 June 2020: ? 63,569 lakhs). Working capital is calculated as current assets less current liabilities.

33.4.3 Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and longterm debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

33.4.4 Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the profit and Loss account, where any transaction references more than one currency or where assets/ Liabilities are denominated in a currency other than the functional currency of the entity.

Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in EURO and USD against the respective functional currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and interest rate exposure.

33.4.5 Foreign currency sensitivity analysis

The Company is mainly exposed to the currencies stated above.

The following table details impact to profit or loss of the Company by sensitivity analysis of a 10% increase and decrease in the respective currencies against the functional currency of the Company. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management''s assessment of the reasonably possible changes in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change on foreign currency rates.

34 Share-based paymentsa) International Stock Ownership Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “International Stock Ownership Plan” (employee share purchase plan) whereby specified employees of its subsidiaries have been given a right to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA. Every employee who opts for the scheme contributes by way of payroll deduction up to a specified percentage (upto 15%) of base salary towards purchase of shares on a monthly basis. The Company contributes 50% of employee''s contribution (restricted to 2.5% of his base salary). Such contribution is charged under employee benefits expense.

The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange and are purchased on behalf of the employees at market price on the date of purchase. During the year ended June 30, 2021, 1 350.97 (Previous period ended June 30, 2020: Nil) shares excluding dividend were purchased by employees at weighted average fair value of '' 10,557.23 (Previous period ended June 30, 2020: Nil) per share. The Company’s contribution during the year on such purchase of shares amounts to '' 32.6 Lakhs (Previous period ended June 30, 2020: Nil) has been charged under employee benefits expense under Note 27.

b) Employees Stock Options Plan (Stocks of the Ultimate Holding Company)

The Procter & Gamble Company, USA has an “Employee Stock Option Plan” whereby specified employees of its subsidiaries covered by the plan are granted an option to purchase shares of the Ultimate Holding Company i.e. The Procter & Gamble Company, USA at a fixed price (grant price) for a fixed year of time. The shares of The Procter & Gamble Company, USA are listed with New York Stock Exchange. The Options Exercise price equal to the market price of the underlying shares on the date of the grant. The Grants issued are vested after 3 years and have a 5/10 years life cycle.

35.1 Defined Benefit plans

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/ exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

a) Gratuity Plan (Funded)

The Company sponsors funded defined benefit gratuity plan for all eligible employees of the Company. The Company’s defined benefit gratuity plan is a final salary plan for India employees, which requires contributions to be made to a separately administered trust. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The gratuity plan is administered by a separate trust that is legally separated from the Company. The board of the trust is composed of representatives from both employer and employees. The board of the trust is required by law and by its articles of association to act in the interest of the trust and of all relevant stakeholders in the scheme, i.e. active employees, inactive employees, retirees, employer. The board of the trust is responsible for the investment policy with regard to the assets of the trust.

b) Compensated absences (Unfunded)

The Company also provides for compensated absences as per it''s policies, which allows for encashment of leave on termination / retirement of service or leave with pay subject to certain rules. The employees are entitled to accumulate leave subject to certain limits for future encashment / availment. The Company makes provision for compensated absences based on an actuarial valuation carried out at the end of the year/ period.

These plans typically expose the Company to actuarial risks such as: Investment risk, interest rate risk, longevity risk and salary risk.

Investment risk	The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds.
Interest risk	A decrease in the bond interest rate will increase the plan liability; however, this will be partially offset by an increase in the return on the plan investments.
Longevity risk	The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality rate of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plans liability.
Salary risk	The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase on the salary of plan participants will increase the plans liability.

In respect of the plan, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at June 30, 2021. The present value of the defined benefit obligation, and the related current service cost and past service cost, were measured using the projected unit credit method.

The sales to and purchases from related parties are made on terms equivalent to those that prevail in arm’s length transactions.

Outstanding balances at the year-end are unsecured and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. The Company has not recorded any impairment of receivables relating to amounts owed by related parties in the current year or prior years. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

# Remuneration does not include charge for gratuity, compensated absences and share based payments, as employee-wise break-up is not available.

As referred in note 2.3 (b) of the accounting policy the company has adopted Ind AS 116 using modified retrospective approach whereby Right-of-use assets (ROU) and Lease Liabilities of '' 1 166 Lakhs was recognised on transition date. Also, in accordance with IND AS 116 the ROU asset has been adjusted towards the fair value of security deposit of '' 61 Lakhs.

The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.

The Company has taken on lease certain warehouses with an option of renewal at the end of the lease term and escalation clause in some of the cases. These leases can be terminated with a prior notice as per terms and conditions of the respective lease agreements. The cost of lease for the warehouses are disclosed under rent expense.

b) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company’s contention and issued a fresh demand notice demanding a sum of ? 3307 lakhs (? 1168 lakhs on account of overcharge during the said period and ? 2138 lakhs for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon’ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon’ble Kolkata High Court stayed the demand provided it deposits a sum of ? 225 lakhs with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. The Company holds provision of ? 580 lakhs in its books towards possible liability.

c) During the year 2014, the Company had made a provision of ? 699 lakhs towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company. The provision of ?108 lakhs was transferred as a part of BPL Business transferred to Merck Life Science Private Limited. The Company holds provision of ? 591 lakhs in its books towards possible liability.

d) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on 21 June 2013 including Metformin, a formulation used by the Company in Company’s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA,however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company made a provision of ? 320 lakhs towards a possible liability which may accrue to the Company. Since Carbophage was part of the BPL business transferred to Merck Life Science Private Limited, the underlying provision was transferred out.

Further, NPPA has also issued a demand order dated May 10, 2017 of ? 52 lakhs to the Company under the provisions of Drug Prices (Control) Order, 2013 (“DPCO”) for overcharging in respect of Concor 5 mg Tablets (containing the bulk drug Bisoprolol 5 mg) with interest thereon @15% on the said amount.

The Company has challenged both the above matters by writ petition which are pending adjudication in the Bombay High Court. In the view of the management, future course of action in relation to both these matters, including any liabilities thereof will be managed directly by Merck Life Science Private Limited. Managements of the Company and Merck Life Science Private Limited are aligning this understanding basis business transfer agreements and hence, these matters are disclosed as contingent liabilities."

42 Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company’s transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2020. Management believes that the Company’s transactions with related parties post March 2020 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

43 There are no significant subsequent events that would require adjustments or disclosures in the financial statements as on the balance sheet date.

44 Figures for the previous period have been re-grouped/re-arranged wherever necessary to conform current period’s classification. The Figures of the current year are for twelve months and hence are not comparable with previous period which were for eighteen months.

45 Approval of financial statements

The financial statements were approved for issue by the board of directors on August 26, 2021.

---

Dec 31, 2017

1. Background of the Company

Merck Limited (‘the Company’) is a public company domiciled and headquartered in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is in the business of manufacturing and marketing of pharmaceuticals and chemicals.

2. Basis of preparation

(a) Statement of compliance with Ind AS

The financial statements of the Company comply with 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.

The financial statements up to year ended 31 December 2016 were prepared in accordance with the accounting standards notified under Companies (Accounting Standard) Rules, 2006 (as amended) and other relevant provisions of the Act.

Accordingly, the transition to Ind AS has been carried out from the accounting principles generally accepted in India (“Indian GAAP”) which is considered as the “Previous GAAP” for purposes of Ind AS 101. An explanation of how the transition to Ind AS has affected the Company’s equity and its net profit or loss is provided in note 51. These financial statements are the first financial statements of the Company under Ind AS.

All assets and liabilities are classified as current or non-current as per the company’s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realisation 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.

(b) Historical cost convention

The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities including defined benefit plans - plan assets measured at fair value.

(c) Use of estimates and judgements

The preparation of the financial statements in conformity with Ind AS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The areas involving critical estimates and judgements are:

(i) Estimation of useful life of property, plant and equipment

(ii) Estimation of defined benefit obligation

(iii) Provision for inventories

(iv) Impairment of trade receivables

(b) Terms/ rights attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity shares rank equally with regard to dividends and share in the Company’s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid. Failure to pay any amount called up on shares may lead to forfeiture of the shares. On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

Financial instruments - Fair values

A. Accounting classification and fair values

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities if the carrying amount is a reasonable approximation of fair value.

Financial instruments - Risk management Risk management framework

The Company’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Company’s primary risk management focus is to minimize potential adverse effects of market risk on its financial performance. The Company’s risk management assessment, policies and processes are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor such risks and compliance with the same. Risk assessment and management policies and processes are reviewed regularly to reflect changes in market conditions and the Company’s activities. The Board of Directors and the Audit Committee is responsible for overseeing the Company’s risk assessment and management policies and processes.

Financial risk management

The Company has exposure to the following risks arising from financial instruments:

- Credit risk;

- Liquidity risk and

- Market risk

i. Credit Risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company’s receivables from customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company establishes an allowance for doubtful debts and impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments.

Trade and other receivables

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Expected credit loss assessment

Exposures to customers outstanding at the end of each reporting period are reviewed by the Company to determine incurred and expected credit losses. Historical trends of impairment of trade receivables do not reflect any significant credit losses. Given that the macro economic indicators affecting customers of the Company have not undergone any substantial change, the Company expects the historical trend of minimal credit losses to continue. Further, management believes that the unimpaired amounts that are past due by more than 30 days are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk. The impairment loss at 31 December 2017 related to several customers that have defaulted on their payments to the Company and are not expected to be able to pay their outstanding balances, mainly due to economic circumstances.

Cash and cash equivalents

The Company held cash and cash equivalents and other bank balances with credit worthy banks and financial institutions of Rs. 2,781.8 million (31 December 2016: Rs. 2,792.7 million, 01 January 2016: Rs. 1,884.2 million). The credit worthiness of such banks and financial institutions is evaluated by the management on an ongoing basis and is considered to be good.

Other financial assets

Other financial assets are neither past due nor impaired.

ii. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risk to the Company’s reputation.

As of 31 December 2017 the Company has working capital of Rs. 5,270.7 million (31 December 2016: Rs. 4,496.8 million, 01 Janaury 2016: Rs. 4,139.7 million) including cash and cash equivalents and other bank balances of INR 2,781.8 million (31 December 2016: Rs. 2,792.7 million, 01 January 2016: Rs. 1,884.2 million). Working capital is calculated as current assets less current liabilities.

Note - 3

Financial instruments - Risk management Exposure to liquidity risk

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities for:

iii. Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices (such as interest rates, foreign currency exchange rates) or in the price of market risk-sensitive instruments as a result of such adverse changes in market rates and prices. Market risk is attributable to all market risk-sensitive financial instruments, all foreign currency receivables and payables and all short term and long-term debt. The Company is exposed to market risk primarily related to foreign exchange rate risk, interest rate risk and the market value of its investments. Thus, the Company’s exposure to market risk is a function of investing and borrowing activities and revenue generating and operating activities in foreign currencies.

(a) Currency risk

The fluctuation in foreign currency exchange rates may have potential impact on the profit and loss account, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the entity.

Considering the countries and economic environment in which the Company operates, its operations are subject to risks arising from fluctuations in exchange rates in those countries. The risks primarily relate to fluctuations in EURO and USD against the respective functional currency of the Company.

The Company does not use any derivative financial instruments to hedge foreign exchange and interest rate exposure.

Exposure to currency risk

The currency profile of financial assets and financial liabilities in respect of major currencies is as follows:

Sensitivity analysis

A 10% strenghtening / weakening of the respective foreign currencies with respect to functional currency of Company would result in increase or decrease in profit or loss and equity as shown in table below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. The following analysis has been worked out based on the exposures as of the date of statements of financial position.

(b) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Exposure to interest rate risk

The interest rate profile of the Company’s interest-bearing financial instruments is as follows.

Interest rate sensitivity - fixed rate instruments

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit and loss, and the Company does not have any designated derivatives. Therefore, a change in interest rates at the reporting date would not affect profit and loss for any of these fixed interest bearing financial instruments.

Capital Management

The Company’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

The Company is a debt free Company and its funding requirements based on business plans are met through a mixture of equity and free reserves. Note - 37

Related party relationships, transactions and balances

The table provides the information about the Group’s structure including the details of the subsidiaries and the holding company. The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year:

Related parties and nature of relationship where control exists

Ultimate Holding Company:

Merck KGaA, Germany through its subsidiary listed below as investing associate holds 51.8% (31 December 2016: 51.8%; 01 January 2016: 51.8%) of equity share capital as at 31 December 2017.

Investing Associates:

Chemitra GmbH, Germany

Emedia Export Company GmbH, Germany

Merck International Beteiligungen GmbH, Germany

Other related parties with whom transactions have taken place during the year:

Fellow Subsidiaries:

Ares Trading S.A., Switzerland EMD Millipore Corporaton, USA Merck & Cie., Switzerland

Merck (Pvt.) Limited, Pakistan (ceased to be a fellow subsidiary w.e.f. December 2016)

Merck Chemicals (Shanghai) Company Ltd., China Merck Inc., Philippines Merck Limited, Japan

Merck Performance Materials Manufacturing G.K., Japan

Merck KGaA & Co. Werk Spittal, Austria

Merck Limited, Taiwan

Merck Limited, Thailand

Merck Pte Ltd, Singapore

Merck spol. s.r.o, Czech Republic

Merck SA, Brazil

Merck Sdn Bhd, Malaysia

Merck Selbstmedikation GmbH, Germany

Merck Serono Co., Limited, Japan

Merck Serono Middle East FZE-LLC

Merck Serono SA, Switzerland

Merck S. L. U., Spain

Merck Specialities Private Limited, India

Merck Life Science Private Limited (formerly known as Millipore (India) Private Limited, India)

P.T. Merck Chemicals and Lifesciences, Indonesia

P.T. Merck Tbk., Indonesia

Seven Seas Limited, United Kingdom

Suzhou Taizhu Technology Development Co. Ltd., China

Merck (Pty) Limited, South Africa

Heipha Dr. Muller GmbH, Germany

EMD Performance Materials Corporation, USA

Ares Trading Uruguay S.A., Uruguay

Merck Serono (Beijing) Pharmaceutical R&D Co., Ltd, China

Merck Performance Materials Private Limited, India, (Previously known as Chemtreat Composites Private Limited, India)

Merck Accounting Solutions & Services Europe GmbH

Merck Business Solutions Asia Inc., Philippines

Merck Ltd., South Korea

Merck (Pty) Ltd., South Africa

Merck Pharmaceutical (HK) Ltd, Hongkong

Sigma Aldrich India Private Limited, India

Merck Performance Materials Ltd., South Korea

Merck Pharmaceuticals Manufacturing (Jiangsu) Co., Ltd, China

Merck Pty. Ltd., Australia

Merck Sdn Bhd, Malaysia

Merck Serono Australia Pty. Ltd., Australia

Merck Vietnam Ltd, Vietnam

Sigma-Aldrich Pte. Ltd., Singapore

Sigma-Aldrich Pty. Ltd., Australia

Post Employment Benefit Plan Merck Provident Fund Trust, India Key Managerial Personnel:

Mr. Anand Nambiar (Managing Director)

Mr. Brijesh Kapil (Executive Director) (Resigned w.e.f. 04 October 2016)

Mr. Ali Sleiman (Executive Director) (Resigned w.e.f. 04 October 2016)

Mr. N Krishnan (Director)

Mr. S N Talwar (Chairman)

Mr. H.C.H Bhabha (Independent Director)

Mrs. Rani A. Jadhav (Independent Director)

Mrs. Zoe Tang (Nominee Director) (appointed w.e.f. 23 December 2016)

Mr. Bradley Simpson (Nominee Director) (resigned w.e.f. 04 October 2016)

Note - 4 Employee benefit Defined Benefit Plans

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month’s salary for each year of completed service at the time of retirement/exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

Note - 5

Employee benefit (continued)

Contribution to Provident and Superannuation fund

Amount of Rs. 80.9 million (2016: Rs 59.7 million) is recognised as an expense and included in “Employee costs” (refer note 31) in the Statement of Profit and Loss.

In respect of provident fund set up by employer which requires interest shortfall to be met by the employer, it needs to be treated as defined benefit plan.

The Institute of Actuaries of India has issued guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 31 December 2017.

As per the report of the independent actuary, there is no shortfall as at 31 December 2017 (31 December 2016: Rs. Nil; 01 January 2016: Rs. Nil) that needs to be recorded by the Company.

Other long term employee benefits

Compensated absences are recognized when the employees render service that increase their entitlement to future compensated absence. Employees can carry forward and avail/ encash leave as per the policy of the Company. Compensated absences have been provided for, based on outstanding leave balance and the employees’ gross pay.

The undiscounted amount of short term employee benefits of Rs. 9.4 million (2016: Rs. 6.0 million) is expected to be paid in the exchange for the services rendered by employees and is recognised as an expense during the year.

Note - 6

Segment Reporting

A. General Information

The Company’s chief operating decision maker (CODM) examines the Company’s performance based on its business units ‘Pharmaceuticals’ and ‘Chemicals’. Segment revenue, results, assets and liabilities have been accounted for on the basis of their relationship to the operating activities of the segment and amounts allocated on reasonable basis as determined by the management.

Pharmaceutical business comprises of products used in the treatment of Cardiovascular and Metabolic diseases, Consumer Healthcare products and Vitamins-based formulations.

Chemicals business comprises Bulk drugs and Pigments. Segment Revenue relating to the Chemicals business segment includes income from services provided to customers of this segment.

Note - 7 Operating leases

The Company has entered into cancellable/ non-cancellable operating lease agreements for vehicles and office premises/godowns. The lease charges of Rs. 6.9 million (2016: Rs. 17.4 million) and Rs. 117.3 million (2016: Rs. 120.6 million) for vehicles and office premises/godowns respectively have been included under the sub-head Travelling, Conveyance and Vehicle Expenses and Rent respectively under the head “Other expenses” in the Statement of Profit and Loss. There are no subleases.

Operating Lease as Lessor:

The Company had leased out its flat. The lease term was twenty-four months. There was no escalation or renewal clause in the lease agreement and sub-letting was not permitted. The lease has been terminated on 29 February 2016 and the asset has been sold on 30 December 2017. The carrying amount of flat given on operating lease and depreciation thereon for the period are:

Contingent liabilities and commitments

a) Contingent liabilities

Summary of disputed statutory demands not accepted by the Company are given below:

Management considers that the Excise duty/Value added tax/Sales tax/Income tax demands received from tax authorities are not tenable against the Company and hence no provision has been made.

b) Commitments

Estimated amount of contracts remaining to be executed on Capital Account (net of capital advances Rs. 33.2 million; 31 December 2016: Rs. 18.0 million) and not provided for Rs.138.0 million (31 December 2016: Rs. 48.9 million).

Note - 8

a) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on 05 June 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company’s contention and issued a fresh demand notice dated 13 December 2016 demanding a sum of Rs. 292.2 million (Rs. 116.8 million on account of overcharge during the said period and Rs. 175.4 million for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon’ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon’ble Kolkata High Court stayed the demand provided it deposits a sum of Rs. 22.5 million with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. Accordingly, no provision has been created in the books.

b) During the year 2014, the Company had made a provision of Rs. 69.9 million towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company.

c) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on 21 June 2013 including Metformin, a formulation used by the Company in Company’s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA, however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company has made a provision of Rs. 32.0 million towards a possible liability on some pharma products which may accrue to the Company.

d) During the year 2014, Central Excise issued a show cause cum demand notice on the Company covering a period of five years for alleged wrong classification of the products, Vitamin E Acetate min.92% for Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/ Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition. The value of total demand was Rs. 188.7 million including penalty and interest.

The Central Excise had issued show cause cum demand on similar matter in the past as well. The value of such demand was Rs.18 million. This was contested by the Company before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

The Company based on legal opinion believes that it has a good case on merits as well as on limitations. Accordingly, no provision has been created in the books of accounts. If the Company succeeds on merits the entire duty demand including penalty and interest would be dropped. However, if the Company does not succeed on merits the Company has still chances of succeeding on limitations as the matter was known to the authorities and there was no suppression or misdeclaration of facts by the Company. In such an eventuality the duty demand would be restricted to one year and interest and the penalty would be dropped.

Dues to micro and small enterprises:

Under the Micro Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006 certain disclosures are required to be made relating to with Micro Small and Medium enterprises. On the basis of the information and records available with the Management, the following disclosures are made for the amounts due to the Micro Small and Medium enterprises, who have registered with the competent authorities:

Note - 9

Disclosure relating to provisions Personnel and other related provision

The Company has made provisions for performance-based incentives.

Provisions in respect of sales tax matters

The Company has made provisions for various sales tax / value added tax related matters, which will be settled on completion of the respective assessments.

Other provisions

The Company has also made provisions for matters related to National Pharmaceutical Pricing Authority (NPPA).

Summary of the movement in the provisions is given below:

The power plant in Goa faced continued cost pressures over last few years owing to which the cost of electricity generated from captive power plant is higher than cost of Government power and this is expected to continue to remain high in future also. Accordingly, it has been decided to shut down the captive power generation plant and switch to government power. Consequently, during the current year, the Company has made provision for impairment of Rs.172.3 million on its Power Plant assets used for captive consumption. This has been considered in the results of pharmaceuticals and chemicals segments.

Note - 10

Exceptional items comprise of profit from the sale of Office premises and residential flat located at Mumbai which were held for sale.

Note - 11 Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company’s transactions with related parties are at arm’s length as per the independent accountants report for the year ended 31 March 2017. Management believes that the Company’s transactions with related parties post March 2017 continue to be at arm’s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

Note - 12

Corporate social responsibility

As per Section 135 of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility (CSR) Committee. During the year, the Company has spent on eradicating hunger, poverty, malnutrition, promoting education/education including skill development, preventive healthcare and sanitation and making available safe drinking water. The total amount spent by the Company towards CSR activities during the year is Rs. 16.2 million (31 December 2016: Rs. 16.3 million)

(a) Gross amount required to be spent by Company during the year is Rs. 17.9 million (2016: Rs. 16.3 million)

(b) Amount spent during the year on: (Paid in Cash)

Disclosure on specified bank notes

As defined in the MCA notification G.S.R. 308(E) dated 31 March, 2017, the details of specified bank notes held and transacted during the period from 08 November, 2016 to 30 December, 2016, as per the notification is given below:

* For the purpose of this clause ‘specified bank notes’ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 08 November 2016.

Note - 13

Transition to Ind AS:

For the purposes of reporting as set out in Note 2, we have transitioned our basis of accounting from Indian generally accepted accounting principles (“IGAAP”) to Ind AS. The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 December 2017, the comparative information presented in these financial statements for the year ended 31 December 2016 and in the preparation of an opening Ind AS balance sheet at 01 January 2016 (the “transition date”).

In preparing our opening Ind AS balance sheet, we have adjusted amounts reported in financial statements prepared in accordance with IGAAP. An explanation of how the transition from IGAAP to Ind AS has affected our financial performance and financial position is set out in the following tables and the notes that accompany the tables. On transition, we did not revise estimates previously made under IGAAP except where required by Ind AS.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from IGAAP to Ind AS: Ind AS optional exemptions

(a) Deemed Cost

Ind AS 101 permits a first time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognised in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for 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.

(b) Business Combination

Ind AS 101 Provides the option to apply Ind AS 103 “Business combinations” prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. Business combinations occurring prior to the transition date have not been restated.”

Ind AS mandatory exceptions

1) Estimates

An entity’s estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consitent 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 01 January 2016 are consitent with the estimates as at the same date made in conformity with previous GAAP.

2) Classification and measurement of financial assets

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

B. Reconciliations between previous GAAP and Ind AS

Ind AS 101 requires an enity to reconcile equity and total comprehensive income for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.

1 Derecognition of physician samples from inventory:

Under Ind AS, inventory manufactured and identified for distribution as physician’s samples is to be recognized as an expense in the period in which such inventory is manufactured.

2 Proposed dividend:

Under Indian GAAP, proposed dividends are recognised as a liability in the period to which they relate, irrespective of when they are declared. Under Ind-AS, a 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.

3 Trade receivable:

Under previous GAAP, the Company has created allowance for doubtful debts based on its estimation. Under Ind AS, the allowance for credit loss has been made based on Expected Credit Loss (ECL) provision matrix.

4 (a) Security deposit:

Under Indian GAAP, interest free security free lease security deposits (that are refundable in cash) are recorded at their transaction value. Under Ind AS, all financial instruments are required to be measured at their fair value on initial recognition. Accordingly, security deposits have been fair valued under Ind AS. Difference between transaction value and fair value has been recognised as prepaid rent. Prepaid rent is amortised over the lease term and notional interest income is recognised on unwinding of security deposits.

(b) Tax Adjustments:

Tax adjustments include the tax effects of certain pre-tax previous GAAP to Ind AS adjustments described above.

Note - 14

These financial statements are the Company’s first Ind AS financial statements and accordingly previous year figures have been regrouped where necessary to conform to current year’s classification.

---

Dec 31, 2016

Note:

1. The company has provided for accelerated depreciation of Rs. 27.3 million for its idle production line related to Vitamin E. Management considers that the idle production capacity would not be utilised in short term.

2 Lease accounting

The Company has entered into cancellable operating lease agreements for vehicles and office premises/god owns. The lease charges of Rs. 17.4 million (2015: Rs. 15.8 million) and Rs.120.6 million (2015: Rs. 138.5 million) for vehicles and office premises/go downs respectively have been included under the sub-head Travelling, Conveyance and Vehicle Expenses and Rent respectively under the head "Other expenses" (refer Note 25) in the Statement of Profit and Loss.

Operating Lease as Less or:

The Company had leased out its flat. The lease term is twenty-four months. There was no escalation or renewal clause in the lease agreement and sub-letting was not permitted. The lease has been terminated on 29/02/2016 and the asset has been held for sale. The carrying amount of flat given on operating lease and depreciation thereon for the period are:

During the year, an amount of Rs. 0.9 million (2015: Rs. 1.8 million) has been recognized as rental income and has been included in Other income under the head "Miscellaneous income" (refer note 19) in the Statement of Profit and Loss.

3 Employee Benefits :

(i) Defined Benefit Plans

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement/exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

Note: Employer''s contribution includes payments made of Rs.19.5 million (2015 Rs.12.7 million) towards gratuity obligation by the Company directly to its past employees.

Estimate of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Assumptions regarding future mortality are based on published statistics and mortality tables. The calculation of the defined benefit obligation is sensitive to the mortality assumptions.

(iii) Broad category of plan assets relating to Gratuity as a percentage of total plan assets

The Company''s gratuity fund is managed by its insurer, Life Insurance Corporation n of India. The plan assets under the fund are deposited under approved securities.

(iv) Disclosure for defined benefit plan (Provident fund)

(i) Contribution to Provident and Superannuation fund

Amount of Rs. 57.1 million (2015: Rs. 55.0 million) is recognized as an expense and included in "Employee costs" (Refer note 23) in the Statement of Profit and Loss.

The guidance issued by the Accounting Standard Board on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employer, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan.

The Institute of Actuaries of India has issued guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 31 December 2016.

As per the report of the independent actuary, there is no shortfall as at 31 December 2016 (2015: shortfall of Rs. Nil) that needs to be recorded by the Company.

(v) Compensated absences

Compensated absences are recognized when the employees render service that increase their entitlement to future compensated absence. Employees can carry forward and avail/ encash leave as per the policy of the Company. Compensated absences have been provided for, based on outstanding leave balance and the employees'' gross pay.

The undiscounted amount of short term employee benefits of Rs.6.0 million (2015: Rs. 1.9 million) is expected to be paid in the exchange for the services rendered by employees and is recognized as an expense during the year.

a Business segment

For management reporting purposes, the Company is organized into two major operating divisions - Pharmaceuticals and Chemicals. The divisions are the basis on which the Company reports its primary segment information. The above segments have been identified taking into account the organization structure as well as the differing risks and returns of these segments.

Pharmaceutical business comprises of products used in the treatment of Cardiovascular and Metabolic diseases, Consumer Healthcare products and Vitamins-based formulations.

Chemicals business comprises Bulk drugs and Pigments. Segment Revenue relating to the Chemicals business segment includes income from services provided to customers of this segment.

b Geographical segment

In respect of secondary segment information, the company has identified its geographical segment as (i) Domestic and (ii) Exports. The secondary segment information has been disclosed accordingly.

c Accounting policies

The accounting policies adopted for segment reporting are in line with the accounting policies adopted by the Company for the purpose of these financial statements, except in respect of inter-segment revenues, which have been accounted on the basis of prevailing market rates.

Segment assets include all operating assets used by a segment and consist principally of debtors, inventories and fixed assets, net of allowances and provisions which are reported as direct offsets in the Balance Sheet. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liabilities. Segment assets and liabilities do not include current and deferred income taxes.

Segment revenue: Segment revenue comprises the portion of company''s revenue that is directly attributable to a segment or that can be allocated on a reasonable basis to a segment, and intersegment transfer.

Segment Expense: Segment Expense comprises of the expense resulting from the operating activities of a segment that is directly attributable to the segment or that can be allocated on a reasonable basis to the segment and expense relating to transaction with other segments.

Inter-segment transfer''s: Segment Revenue, segment expense and segment result includes transfers between business segments and between geographical segments. Those transfers are eliminated in preparing company-wide results.

4 (a) Related party disclosures

Ultimate Holding Company:

Merck KGaA, Germany through its subsidiaries listed below as Investing Associates holds 51.8% (2015: 51.8%) of the equity share capital, as at 31 December 2016 Investing Associates:

- Chemitra GmbH, Germany

- Emedia Export Company GmbH, Germany

- Merck International Beteiligungen GmbH, Germany

Other related parties with whom transactions have taken place during the year:

Fellow Subsidiaries:

- Ares Trading S.A., Switzerland

- EMD Millipore Corporaton, USA

- Merck & Cie., Switzerland

- Merck (Pvt.) Limited, Pakistan

- Merck Chemicals (Shanghai) Company Ltd., China

- Merck Limited, Japan

- Merck KGaA & co. Wek Spittal, Austria

- Merck Limited, Taiwan

- Merck Limited, Thailand

- Merck Pte Ltd, Singapore

- Merck spol. S.R.O, Czech Republic

- Merck SA, Brazil

- Merck Sdn Bhd, Malaysia

- Merck Selbstmedikation GmbH, Germany

- Merck Serono Middle East FZE LLC

- Merck Serono S.A., Switzerland

- Merck Specialities Private Limited, India

- Merck Life Science Private Limited (formerly known as Millipore (India) Private Limited, India)

- P.T. Merck Indonesia, Indonesia

- Seven Seas Limited, United Kingdom

- EMD Performance Materials Corporation, USA

- Ares Trading, Uruguay

- Merck Serono (Beijing) Merck Pharmaceutical Consulting Ltd., China

- Merck Performance Materials Private Limited, India, (Previously known as Chemtreat Composites Private Limited, India)

- Sigma Aldrich India Private Limited, India Key Managerial Personnel:

- Mr. Anand Nambiar (Managing Director) (Appointed w.e.f. 05 February 2015)

- Dr. Claus Boedecker (Managing Director) (Resigned w.e.f. 31 January 2015)

- Mr. Brijesh Kapil (Executive Director) (Appointed w.e.f. 05 February 2015, Resigned w.e.f. 04 October 2016)

- Mr. Ali Sleiman (Executive Director) (Appointed w.e.f. 05 February 2015, Resigned w.e.f. 04 October 2016)

- Mr. N Krishnan (Director)

- Mr. P. H. Pimplikar (Director) (Resigned w.e.f. 13 January 2015)

Management considers that the Excise duty/Value added tax/Sales tax/Income tax demands received from tax authorities are not tenable against the Company and hence no provision has been made.

5 a) In June 2016, National Pharmaceutical Pricing Authority (NPPA) served a demand notice on the Company alleging that during the period from January 2006 to June 2009 the Company sold Polybion 100ml syrup at a price higher than the ceiling price fixed by it on June

05, 2008. Pursuant to orders passed by Kolkata High Court, NPPA gave another opportunity of hearing to the Company. NPPA did not accede to any of the Company''s contention and issued a fresh demand notice dated December 13, 2016 demanding a sum of Rs. 274.6 million (Rs. 116.8 million on account of overcharge during the staid period and Rs. 157.8 million for interest thereon) for sales made by the Company during the period May 2006 to June 2009. The Company has challenged the said demand by way of writ petition, which is pending before Hon''ble Delhi High Court. In a separate proceedings filed by the manufacturer of the said drug, Cradel Pharmaceutical Private Limited, Hon''ble Kolkata High Court stayed the demand provided it deposits a sum of Rs. 22.5 million with the NPPA. The Company has been legally advised that the Company has a defendable case before Delhi High Court. Accordingly, no provision has been created in the books.

b) During year 2014, the Company had made a provision of Rs. 69.8 million towards a possible liability which may accrue to the Company due to a judgment passed by the Supreme Court in the year 2014 impacting the Pharmaceutical industry in India including the Company.

c) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on June 21, 2013 including Metformin, a formulation used by the Company in Company''s product Carbophage 500 SR. The orders did not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA, however, no clear response has been received. Pending this clarification NPPA had sent a notice dated June 06, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified. On the basis of a recent judgement passed by the High Court of Bombay, the Company has made a provision of Rs.32.0 million towards a possible liability on some pharma products which may accrue to the Company.

d) During the year 2014, Central Excise issued a show cause cum demand notice on the Company covering a period of five years for alleged wrong classification of the products, Vitamin E Acetate min.92% for Poultry/ Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition. The value of total demand was Rs. 188.7 million including penalty and interest.

The Central Excise had issued show cause cum demand on similar matter in the past as well. The value of such demand was Rs 18 million. This was contested by the Company before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

The Company based on legal opinion believes that it has a good case on merits as well as on limitations. Accordingly, no provision has been created in the books of accounts. If the Company succeeds on merits the entire duty demand including penalty and interest would be dropped. However, if the Company does not succeed on merits the Company has still chances of succeeding on limitations as the matter was known to the authorities and there was no suppression or misdeclaration of facts by the Company. In such an eventuality the duty demand would be restricted to one year and interest and the penalty would be dropped.

6 Commitments

Estimated amount of contracts remaining to be executed on Capital Account (net of capital advance Rs. 18.0 million ; 2015: Rs. 6.2 million) and not provided for Rs.48.9 million (2015: Rs. 44.8 million).

7 Dues to micro, small and medium enterprises:

Under the Micro Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006 certain disclosures are required to be made relating to with Micro Small and Medium enterprises. On the basis of the information and records available with the Management, the following disclosures are made for the amounts due to the Micro Small and Medium enterprises, who have registered with the competent authorities:

8. During the current year, the Company has impaired the fixed assets classified under oxynex plant on basis of determination of utilised production capacity of the plant. This plant is situated at the Company''s production facility at Goa. Management noted that there is an indication for impairment of the fixed asset for oxynex plant on account of significant reduction in market demand of the product and no alternate use of plant expected as at date. The amount of impairment loss aggregating Rs. 57.5 million has been debited to profit and loss account for the year ended 31 December 2016. The plant is a chemical plant and forms a part of the Chemicals segment of the Company.

9. Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company''s international and domestic transactions with related parties are at arm''s length as per the independent accountants report for the year ended 31 March 2016. Management believes that the Company''s international and domestic transactions with related parties post March 2016 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

10. Corporate social responsibility

As per Section 135 of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility (CSR) Committee. During the year, the Company has spent on eradicating hunger, poverty, malnutrition, promoting preventive healthcare and sanitation and making available safe drinking water. The total amount spent by the Company towards CSR activities during the year is Rs. 16.3 million (2015: Rs. 5.8 million)

(a) Gross amount required to be spent by Company during the year is Rs. 16.3 million (2015: Rs.18.3 million)

(b) Amount spent during the year on:

11. Information with regard to other matter specified in schedule III of Companies Act, 2013 is either nil or not applicable to the Company for the year.

12. Prior year figures

Previous year''s figures have been regrouped/rearranged wherever necessary to conform to current year''s presentation.

---

Dec 31, 2014

1. Company overview

Merck Limited (''the Company'') is a public company domiciled and headquartered in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is in the business of manufacturing and marketing of pharmaceuticals, bulk drugs, fine chemicals and pigments. The Company is organized in two major divisions – Pharmaceuticals and Chemicals.

2. (a) Related party disclosures

Related parties where control exists Ultimate Holding Company:

Merck KGaA, Germany through its subsidiaries listed below as Investing Associates holds 51.8% (2013: 51.8%) of the equity share capital, as at 31 December 2014.

Investing Associates:

Chemitra GmbH, Germany

Emedia Export Company mbH, Germany

Merck Internationale Beteiligungen GmbH, Germany

Other related parties with whom transactions have taken place during the year: Fellow Subsidiaries:

Ares Trading S.A., Switzerland

Ares Trading, Uruguay

EMD Millipore Corporation, USA

Heipha Dr. Müller GmbH, Germany

Merck & Cie., Switzerland

Merck (Private) Limited, Pakistan

Merck (Pty) Limited, South Africa

Merck Chemicals (Shanghai) Co., Limited, China

Merck Inc., Philippines

Merck KGaA & Co. Werk Spittal, Austria

Merck Limited, Japan

Merck Limited, Taiwan

Merck Limited, Thailand

Merck Pte Ltd, Singapore

Merck Sdn Bhd, Malaysia

Merck Selbstmedikation GmbH, Germany

Merck Serono (Beijing) Merck Pharmaceutical Consulting Ltd., China

Merck Serono Co., Limited, Japan

Merck Serono Middle East FZE, United Arab Emirates

Merck Serono S.A., Switzerland

Merck Specialities Private Limited, India

Merck spol. s r.o., Czech Republic

Millipore India Private Limited, India

P.T. Merck Indonesia, Indonesia

Seven Seas Limited, United Kingdom

Suzhou Taizhu Technology Development Co., China

Key Managerial Personnel:

Dr. Claus Boedecker (Managing Director)

Mr. N Krishnan (Director)

Mr. P.H. Pimplikar (Director)

3. Contingent liabilities

(to extent not provided for)

Summary of disputed statutory demands not accepted by the Company are given below:

2014 2013

Income tax 504.2 554.1

State and Central Sales Tax, Entry Tax 62.0 35.8

Excise duty 5.7 5.7

571.9 595.6

4. (a) During previous year, the Company had received a show cause notice from National Pharmaceutical Pricing Authority (NPPA) alleging that the Company had sold product Polybion L Syrup 250ml without price approval from the period January 2008 until June 2009. The notice calculates Rs. 128.0 million as the value of over charge equivalent to the entire sale value of said product for the referred period. The Company, based on the legal opinion believes that no provision is required to be made in the books of account.

(b) During the year, the Company has made a provision of Rs. 69.8 million towards a possible liability which may accrue to the Company due to a recent judgement passed by the Supreme Court impacting the Pharmaceutical industry in India including the Company.

(c) National Pharmaceutical Pricing Authority (NPPA) issued the price fixation orders for about 350 drugs on June 21, 2013 including Metformin, a formulation used by us in our product Carbophage 500 SR. The orders do not clarify whether the prices so fixed are applicable only for plain tablet or innovative dosages as well. The Company sought clarification from NPPA, however, no clear response has been received. Pending this clarification NPPA has sent us a notice dated June 6, 2014, claiming the differential pricing charged by the Company for Carbophage 500 SR over the prices notified.

(d) Central Excise show cause cum demand raised on the Company covering the period of five years for alleged wrong classification of the products, Vitamin E Acetate min. 92% for Poultry/Cattle/Pig-feed, Vitamin E Liquid for Animal Nutrition (for Pig/Cattle/Poultry) and Vitamin E Dry Powder 50% for Animal Nutrition – total demand Rs. 276.0 million including penalty and interest. Earlier also on the same issue the demand was raised on the Company to the tune of Rs. 18.0 million which was then contested before the lower authorities. On the representation made by the Company the demand was dropped after considering various decisions pronounced by judicial and quasi-judicial authorities at the relevant time.

Management feels that the Company has a good case on merits as well as on limitations. If the Company succeeds on merits the entire duty demand including penalty and interest would be dropped. However, if the Company does not succeed on merits the Company has still chances of succeeding on limitations as the matter was known to the authorities and there was no suppression or mis-declaration of facts by the Company. In such an eventuality the duty demand would be restricted to one year with interest and the penalty would be dropped.

5. Commitments

Estimated amount of contracts remaining to be executed on Capital Account (net of capital advance Rs. 5.3 million; 2013 Rs. 78.6 million) and not provided for Rs. 72.1 million (2013: Rs. 50.2 million).

6. Dues to micro, small and medium enterprises

Under the Micro Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006 certain disclosures are required to be made relating to with Micro Small and Medium Enterprises. On the basis of the information and records available with the Management, the following disclosures are made for the amounts due to the Micro Small and Medium Enterprises, who have registered with the competent authorities:

7. Disclosure relating to provisions

Personnel and other related provisions

The Company has made provisions for performance-based incentives which are expected to be paid in the next financial year.

8. Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company''s international and domestic transactions with related parties are at arm''s length as per the independent accountants report for the year ended 31 March 2014. Management believes that the Company''s international transactions with related parties post March 2014 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

9. Information with regard to other matter specified in schedule VI to the Act is either nil or not applicable to the Company for the year.

10. Prior year figures

Previous year''s figures have been regrouped/rearranged wherever necessary to conform to current year''s presentation.

---

Dec 31, 2013

1. Company overview

Merck Limited (''the Company'') is a public company domiciled and headquartered in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The Company is in the business of manufacturing and marketing of pharmaceuticals, bulk drugs, fine chemicals and pigments. The Company is organized in two major divisions – Pharmaceuticals and Chemicals.

2. Lease accounting

The Company has entered into cancellable operating lease agreements for vehicles and office premises/godowns. The lease charges of Rs. 17.0 million (2012: Rs. 21.5 million) and Rs. 104.6 million (2012: Rs. 114.6 million) for vehicles and office premises/godowns respectively have been included under the sub-head Travelling, Conveyance and Vehicle Expenses and Rent respectively, which are shown under the head "Other Expenses" [refer note 25] in the Statement of profit and loss.

3. Employee Benefits:

(i) Defined Benefit Plans

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plan entitles an employee, who has rendered at least five years of continuous service, to receive one-half month''s salary for each year of completed service at the time of retirement/exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

Note: Employer''s contribution includes payments made of Rs. 10.6 million (2012: Rs. 23.3 million) towards Gratuity obligation by the Company directly to its past employees.

Estimate of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

Assumptions regarding future mortality are based on published statistics and mortality tables. The calculation of the defined benefit obligation is sensitive to the mortality assumptions.

(iii) Broad category of plan assets relating to Gratuity as a percentage of total plan assets:

The Company''s gratuity fund is managed by its insurer, Life Insurance Corporation of India. The plan assets under the fund are deposited under approved securities.

(iv) Disclosure for defined benefit plan (Provident fund): (i) Contribution to Provident and Superannuation fund

Amount of Rs. 36.2 million (2012: Rs. 31.0 million) is recognised as an expense and included in "Personnel costs" (Refer note 23) in the Statement of profit and loss.

The guidance issued by the Accounting Standard Board on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employer, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan.

The Institute of Actuaries of India has issued guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 31 December 2013.

As per the report of the independent actuary, there is no shortfall as at 31 December 2013 (2012: shortfall of Rs. Nil) that needs to be recorded by the Company.

(v) Compensated absences:

Compensated absences are recognised when the employees render service that increase their entitlement to future compensated absence. Employees can carry forward and avail/encash leave as per the policy of the Company. Compensated absences have been provided for, based on outstanding leave balance and the employees'' gross pay.

The undiscounted amount of short term employee benefits of Rs. 14.3 million (2012: Rs. 8.3 million) is expected to be paid in the exchange for the services rendered by employees and is recognised as an expense during the year.

(a) Business segment:

For Management reporting purposes, the Company is organised into two major operating divisions - Pharmaceuticals and Chemicals. The divisions are the basis on which the Company reports its primary segment information. The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

Pharmaceutical business comprises of Ethicals used in the treatment of Cardiovascular and Metabolic diseases, Consumer Healthcare products and Vitamins-based formulations.

Chemicals business comprises Bulk drugs and Pigments. Segment Revenue relating to the Chemicals business segment includes income from services provided to customers of this segment.

(b) Geographical segment:

In respect of secondary segment information, the Company has identified its geographical segment as (i) Domestic and (ii) Exports. The secondary segment information has been disclosed accordingly.

(c) Accounting policies:

The accounting policies adopted for segment reporting are in line with The accounting policies adopted by the Company for the purpose of these financial statements, except in respect of inter-segment revenues, which have been accounted on the basis of prevailing market rates.

Segment assets include all operating assets used by a segment and consist principally of debtors, inventories and fixed assets, net of allowances and provisions which are reported as direct offsets in the Balance Sheet. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liabilities. Segment assets and liabilities do not include current and deferred income taxes.

Segment revenue: Segment revenue comprises the portion of company''s revenue that is directly attributable to a segment or that can be allocated on a reasonable basis to a segment, and intersegment transfer.

Segment expense: Segment expense comprises of the expense resulting from the operating activities of a segment that is directly attributable to the segment or that can be allocated on a reasonable basis to the segment and expense relating to transaction with other segments.

Inter-segment transfers: Segment revenue, segment expense and segment result include transfers between business segments and between geographical segments. Those transfers are eliminated in preparing company-wide results.

4. (a) Related party disclosures

Related parties where control exists Ultimate Holding Company:

Merck KGaA, Germany through its subsidiaries listed below as Investing Associates holds 51.8% (2012: 51.8%) of the equity share capital, as at 31 December 2013.

Investing Associates:

- Chemitra GmbH, Germany

- Emedia Export Company mbh, Germany

- Merck Internationale Beteiligungen GmbH, Germany

Other related parties with whom transactions have taken place during the year: Fellow Subsidiaries:

- Ares Trading S.A., Switzerland

- EMD Millipore Corporation, USA

- EMD Serono Inc., USA

- Heipha Dr. Müller GmbH, Germany

- Merck & Cie., Switzerland

- Merck (Private) Limited, Pakistan

- Merck Chemicals (Shanghai) Co., Limited, China

- Merck Chimie S.A.S., France

- Merck Inc., Philippines

- Merck KGaA & Co. Werk Spittal, Austria

- Merck Limited, Japan

- Merck Limited, South Korea

- Merck Limited, Taiwan

- Merck Limited, Thailand

- Merck Pte Ltd, Singapore

- Merck Sdn Bhd, Malaysia

- Merck Selbstmedikation GmbH, Germany

- Merck Serono Co., Limited, Japan

- Merck Serono S.A., Switzerland

- Merck Specialities Private Limited, India

- Merck spol. s r.o., Czech Republic

- Merck Vietnam Company, Vietnam

- Millipore India Private Limited, India

- Millipore S.A.S., France

- P.T. Merck Indonesia, Indonesia

- Seven Seas Limited, United Kingdom

- Suzhou Taizhu Technology Development Co., China

Key Managerial Personnel:

- Dr. Claus Boedecker (Managing Director) (Appointed on 1st August 2012) n Dr. M. Dziki (Managing Director) (Resigned on 31st July 2012) n Mr. N. Krishnan (Director) (Appointed on 22nd October 2012) n Mr. R.L. Shenoy (Director) (Retired on 30th September 2012) n Mr. P.H. Pimplikar (Director)

5. Contingent liabilities

(to extent not provided for)

Summary of disputed statutory demands not accepted by the Company are given below:

2013 2012 Income tax 554.1 719.0

State and Central Sales Tax, Entry Tax 35.8 40.5

Excise duty 5.7 5.7

Custom duty 1.3

595.6 766.5

6. The Company has received a show cause notice from National Pharmaceutical Pricing Authority (NPPA) alleging that the Company had sold the product Polybion L Syrup 250ml without price approval for the period January 2008 until June 2009. The notice calculates Rs.128.0 million as the value of over charge equivalent to the entire sale value of said product for the referred period. The Company, based on the legal opinion believes that no provision is required to be made in the books of account.

7. Commitments

Estimated amount of contracts remaining to be executed on Capital Account, (net of capital advance Rs. 78.6 million; 2012: Rs. 1.1 million) and not provided for Rs. 50.2 million (2012: Rs. 26.3 million).

8. Dues to micro, small and medium enterprises

Under the Micro Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certain disclosures are required to be made relating to transactions with Micro Small and Medium enterprises. On the basis of the information and records available with the Management, the following disclosures are made for the amounts due to the Micro Small and Medium enterprises, who have registered with the competent authorities:

9. Disclosure relating to provisions Personnel and other related provisions

The Company has made provisions for performance-based incentives which are expected to be paid in the next financial year.

10. Transfer pricing

Transactions with related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company''s international and domestic transactions with related parties are at arm''s length as per the independent accountants report for the year ended 31 March 2013. Management believes that the Company''s transactions with related parties post March, 2013 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expense and that of provision for taxation.

11. Information with regards to other matter specified in Schedule VI to the Companies Act, 1956 is either nil or not applicable to the Company for the year.

12. Prior year figures

Previous year''s figures have been regrouped/rearranged wherever necessary to conform to current year''s presentation.

---

Dec 31, 2012

1. COMPANY OVERVIEW

Merck Limited (''the Company'') is a public company domiciled in India. It is incorporated under the Companies Act, 1956 and its shares are listed on the National Stock Exchange (NSE)''and Bombay Stock Exchange (BSE). The Company is primarily engaged in manufacturing and marketing of pharmaceuticals, bulk drugs, fine chemicals and pigments. The Company is organized in two major divisions - Pharmaceuticals and Chemicals.

A. Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, ali equity shares rank equally with regard to dividends and share in the Company''s residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an . equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

Failure to pay any amount called up on shares may lead to forfeiture of the shares.

On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

2. CONTINGENT LIABILITIES

(to extent not provided for)

Summary of disputed statutory demands not accepted by the Company are given below:

2012 2011 Income tax 719.0 708.2

State and Central Sales Tax, Entry Tax 40.5 39.1

Excise duty 5.7 5.7

Custom duty 1.3 1.3

766.5 754.3

3. COMMITMENTS

Estimated amount of contracts remaining to be executed on Capital Account, (net of capital advance Rs. 1.1 million; 2011: Rs. 5.8 million) and not provided for Rs. 26.3 million (2011: Rs. 15.7 million).

4. SHARE BUY-BACK

The Company has, during the year, incurred expenses of Rs. Nil (2011: Rs. 0.2 million), towards the buy-back of shares, in terms of the share buy-back scheme approved by the Board of Directors on 20th May 2009.

5. IMPAIRMENT OF ASSETS

The Company had impaired one of its Chemical plants on account of significant reduction in the market demand of the product and no identified alternate use of the Cash Generating Unit (CGU) during the year ended 31 December 2010. The amount of impairment loss aggregating Rs. 142.8 million was debited to statement of profit and loss and formed part of the ''Chemicals'' segment of the Company. During the year ended 31 December 2011, the Company identified alternate uses for the said CGU and had modified and put to use the chemical plant to manufacture alternate product. Accordingly, as at the end of the previous year, based on the approved utilization plan for the CGU, the Company reversed impairment loss of Rs. 142.8 million crediting statement of profit and loss.

6. LEASE ACCOUNTING

The Company has entered into cancellable operating lease agreements for vehicles and office premises/godowns. The lease charges of Rs. 21.5 million (2011: Rs. 21.6 million) and Rs. 114.6 million (2011: Rs. 100.5 million) for vehicles and office premises/godowns have been included under the sub-head Travelling, Conveyance and Vehicle Expenses and Rent respectively under the head "Other Expenses" (refer note 22) in the statement of profit and loss.

7. DISCLOSURE RELATING TO PROVISIONS

Personnel and other related provisions:

The Company has made provisions for performance-based incentives which are expected to be paid in the next financial year.

Provisions in respect of sales tax matters:

The Company has also made provisions for various sales tax/value added tax related matters, which will be settled on completion of the respective assessments.

8. EMPLOYEE BENEFITS

(i) Contribution to Provident and Superannuation Funds

Amount of Rs. 31.0 million (2011: Rs. 29.8 million) is recognised as an expense and included in "Employee Benefits" (Refer note 21) in the statement of Profit and Loss.

(ii) Defined benefit plan

The Company operates two post employment defined benefit plans that provide Gratuity and Provident fund benefits. The gratuity plans entitles an employee, who has rendered atleast five years of continious service, to receive one-half month''s salary for each year of completed service at the time of retirement/exit. The Company also makes specified monthly contributions towards employee provident fund to the Merck Employees Provident Fund Trust. The interest rate payable by the trust to the beneficiaries every year is being notified by the Government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the interest payable at the notified rate.

Note: Note: Employer''s contribution includes payments made of Rs. 23.3 million (2011: Rs. 5.4 million) towards Gratuity obligation by the Company directly to its past employees.

Estimate of future salary increases, considered in actuarial valuation, take account of inflation, seniority, increments and other relevant factors, such as supply and demand in the employment market.

Assumptions regarding future mortality are based on published statistics and mortality tables. The calculation of the defined benefit obligation is sensitive to the mortality assumptions.

(v) Broad category of plan assets relating Gratuity as a percentage of total plan assets:

The Company''s gratuity fund is managed by its insurer, Life Insurance Corporation of India. The plan assets under the fund are deposited under approved securities.

(vi) Disclosure for defined benefit plan (Provident Fund):

The guidance issued by the Accounting Standard Board on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employer, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan. The Institute of Actuaries of India has, during the year, issued the guidance for measurement of provident fund liabilities on actuarial basis. Based on this guidance note, the actuary has provided an actuarial valuation of the provident fund liability of the Company as at 31 December 2012.

As per the report of the independent actuary, there is no shortfall as at 31 December 2012 (2011: shortfall of Rs. 5.3 million) that needs to be recorded by the Company.

(vii) Compensated absences:

Compensated absences are recognized when the employees render service that increase their entitlement to future compensated absence. Employees can carry forward and avail/ encash leave as per the policy of the Company. Compensated absences have been provided for, based on outstanding leave balance and the employees'' gross pay.

The undiscounted amount of short term employee benefits of Rs. 8.3 million (2011: Rs. 8.1 million) is expected to be paid in the exchange for the services rendered by employees is recognised as an expense during the year.

9. (a) RELATED PARTY DISCLOSURES

Related parties where control exists Ultimate Holding Company:

Merck KGaA, Germany through its subsidiaries listed below as Investing Associates holds 51.8% (2011: 51.8%) of the equity share capital, as at 31 December 2012.

Investing Associates:

- Chemitra GmbH, Germany

- Emedia Export Company mbh, Germany

- Merck Internationale Beteiligungen GmbH, Germany ''

Other related parties with whom transactions have taken place during the year:_

Fellow Subsidiaries:

- EMD Millipore Corporation, USA (Formerly known as EMD Chemicals Inc., USA)

- EMD Serono Inc., USA

- Merck Et Cie., Switzerland

- Merck (Private) Limited, Pakistan

- Merck Consumer Health Care Holding GmbH, Germany

- Merck Inc., Philippines

- Merck KGaA Et Co. Werk Spittal, Austria

- Merck Limited, Japan

- Merck Limited, South Korea

- Merck Limited, Taiwan

- Merck Limited, Thailand

- Merck Patent GmbH, Germany

- Merck Pharmaceutical (HK) Limited, Hong Kong

- Merck Pte Ltd, Singapore

- Merck S.A., France

- Merck Sdn Bhd, Malaysia

- Merck Serono Co., Limited, Japan ''

- Merck Serono S.A., Switzerland

- Merck Specialities, Private Limited, India

- Merck Vietnam Company, Vietnam

- Millipore India Private Limited, India

- Millipore S.A.S., France

- P.T. Merck Indonesia, Indonesia

- Seven Seas Limited, United Kingdom

- Suzhou Taizhu Technology Development Co., China

Key Managerial Personnel:

- Dr. Claus Boedecker (Managing Director) (Appointed on 1st August 2012)

- Dr. M. Dziki (Managing Director) (Resigned on 31st July 2012)

- Mr. N. Krishnan (Appointed on 22nd October 2012)

- Mr. R.L. Shenoy (Retired on 30th September 2012)

- Mr. P.H. Pimplikar

- Mr. K. Shivkumar (Resigned on 24 May 2011)

(a) Business segment:

For Management reporting purposes, the Company is organised into two major operating divisions - Pharmaceuticals and Chemicals. The divisions are the basis on which the Company reports its primary segment information. The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

Pharmaceutical business comprises of Ethicals used in the treatment of Cardiovascular and Metabolic diseases, Consumer Healthcare products and Vitamins-based formulations.

Chemicals business comprises Bulk drugs and Pigments. Segment Revenue relating to the Chemicals business segment includes income from services provided to customers of this segment.

(b) Geographical segment: -

In respect of secondary segment information, the Company has identified its geographical segment as (i) Domestic and (ii) Exports. The secondary segment information has been disclosed accordingly.

(c) Accounting policies: ,

The accounting policies adopted for segment reporting are in line with the accounting policies adopted by the Company for the purpose of these financial statements, except in respect of inter-segment revenues, which have been accounted on the basis of prevailing market rates.

Segment assets include all operating assets used by a segment and consist principally of debtors, inventories and fixed assets, net of allowances and provisions which are reported as direct offsets in the Balance Sheet. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liabilities. Segment assets and liabilities do not include current and deferred income taxes.

Segment revenue: Segment revenue comprises the portion of company''s revenue that is directly attributable to a segment or that can be allocated on a reasonable basis to a segment, and intersegment transfer.

Segment expense: Segment expense comprises the expense resulting from the operating activities of a segment that is directly attributable to the segment or that can be allocated on a reasonable basis to the segment and expense relating to transactions with other segments.

Inter-segment transfers: Segment revenue, segment expense and segment result include transfers between business segments and between geographical segments. Such transfers are accounted for at competitive market prices charged to unaffiliated customers for similar goods. Those transfers are eliminated in preparing company-wide results.

10. DUES TO MICRO, SMALL AND MEDIUM ENTERPRISES

Under the Micro Small and Medium Enterprises Development Act, 2006, (MSMED) which came into force from October 2, 2006, certaip disclosures are required to be made relating to transactions with Micro Small and Medium enterprises. On the basis of the information and records available with the Management, the following disclosures are made for the amounts due to the Micro Small and Medium enterprises, who have registered with the competent authorities:

11. TRANSFER PRICING

Transactions with overseas related parties are governed by transfer pricing regulations of the Indian Income-tax Act, 1961. The Company''s international transactions with related parties are at arm''s length as per the independent accountants report for the year ended 31 March 2012. Management believes that the Company''s international transactions with related parties post March 2012 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on the financial statements, particularly on the amount of tax expanse and that of provision for taxation.

12. Information with regard to other matter specified in Schedule VI to the Act is either nil or not applicable to the Company for the year.

13. PRIOR YEAR FIGURES

Previous year''s figures have been regrouped/rearranged wherever necessary to conform to current year''s presentation.

---

Dec 31, 2009

1. CONTINGENT LIABILITIES

Summary of disputed statutory demands not accepted by the Company are given below:

2009 2008

Income tax 345.0 252.2

State and Central Sales Tax 11.7 20.2

Excise duty # 108.6 108.5

Service tax 5.4 5.4

Custom Duty 1.3 1.3

472.0 387.6

# Includes Rs. 89.9 million (2008: Rs. 89.9 million) in respect of a guarantee given to a toll center, towards an excise duty demand.

2. CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on Capital Account (net of advance) and not provided for: Rs. 17.4 million (2008: Rs. 29.8 million).

3. SHARE BUY BACK

In terms of the share buy back scheme approved by the Board of Directors on 20 May 2009, the Company has, during the year, bought back 261,842 (2008: Nil) shares for an aggregate consideration of Rs. 107.4 million (2008: Rs. Nil), including related expenses. The nominal value of the shares bought back has been adjusted against the share capital. In the above scheme, the approved maximum buy back price was Rs. 435 per share.

The nominal value of shares purchased i.e. Rs. 2.6 million has been adjusted against the share capital. An equal amount has been reduced from General Reserve and credited to Capital Redemption Reserve, as per the provisions of the Companies Act, 1956.

The difference between consideration paid (including related expenses) and nominal value of shares aggregating Rs. 2.6 million has been adjusted against General Reserve.

(a) Business segment

For Management reporting purposes, the Company is organised into two major operating divisions - Pharmaceuticals and Chemicals.

The divisions are the basis on which the Company reports its primary segment information. The above segments have been identified taking into account the organisation structure as well as the differing risks and returns of these segments.

Pharmaceuticals business comprises of Ethicals used in the treatment of Cardiovascular and Metabolic diseases, Consumer Healthcare products and Vitamins-based formulations.

Chemicals business comprises of Bulk drugs and Pigments. Segment revenue relating to the Chemicals business includes income from services provided to customers of this segment.

(b) Geographical segment

In respect of secondary segment information, the Company has identified its geographical segment as (i) Domestic and (ii) Exports. The secondary segment information has been disclosed accordingly.

(c) Accounting policies

The accounting policies adopted for segment reporting are in line with the accounting policies adopted by the Company for the purpose of these financial statements, except in respect of inter-segment revenues, which have been accounted on the basis of prevailing market rates.

Segment assets include all operating assets used by a segment and consist principally of debtors, inventories and fixed assets, net of allowances and provisions which are reported as direct offsets in the Balance Sheet. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of creditors and accrued liabilities. Segment assets and liabilities do not include current and deferred income taxes.

4. (a) RELATED PARTY DISCLOSURES

Holding Company:

Merck KGaA, Germany through its subsidiaries listed below as Investing Associates holds 51.8% (2008: 51.0°/o) of the equity share capital, as at 31 December 2009.

Investing Associates:

- Chemitra GmbH, Germany

- Emedia Export Company mbh, Germany

- Merck Internationale Beteiligungen GmbH, Germany

Other related parties with whom transactions have taken place during the year:

Fellow Subsidiaries: Executive Directors:

- EMD Biosciences Inc., USA - Dr. M. Dziki (Managing Director)

- EMD Chemicals Inc., USA - Mr. R. L Shenoy

- Merck Et Cie KG, Switzerland - Mr. K. Shivkumar

- Merck Chemical (Shanghai) Pvt. Ltd., China

- Merck KGaA & Co. Werk Spittal, Austria

- Merck Ltd., Japan

- Merck Ltd., Thailand

- Merck Marker (Pvt.) Ltd., Pakistan

- Merck Pte. Ltd., Singapore

- Merck Pty. Ltd., Australia

- Merck Pty. Ltd., South Africa

- Merck Sante SAS, France

- Merck Serono International S.A., Switzerland

- Merck Specialities Pvt. Ltd., India

- PT Merck Tbk, Indonesia

- Seven Seas Ltd., UK

5. DISCLOSURE RELATING TO PROVISIONS Personnel and other related provisions

The Company has made provisions for performance based incentives which are expected to be paid in the first half of the next financial year.

6. EMPLOYEE BENEFITS

(i) Effective 1 January 2007, the Company adopted Accounting Standard 15 (AS-15) (revised 2005) on "Employee Benefits" prescribed in Companies (Accounting Standard) Rules, 2006.

(ii) Contribution to Provident and Superannuation Funds Amount of Rs. 27.3 million (2008: Rs. 21.5 million) is recognised as an expense and included in "Personnel costs" (Refer schedule 15) in the Profit and Loss Account.

(iv) Broad category of plan assets relating to Gratuity as a percentage of total plan assets

The Companys gratuity fund is managed by its insurer, Life Insurance Corporation of India. The plan assets under the fund are deposited under approved securities.

(v) Compensated absences

Compensated absences are recognised when the employee renders services that increase their entitlement to future compensated absences. As per the policy of the Company, all employees can carry forward and avail/encash leave on superannuation, death, permanent disablement, retirement and resignation subject to (a) maximum accumulation of 240 days. Compensated absence has been provided for based on outstanding leave balance and the employees gross pay

The undiscounted amount of short term employee benefits of Rs. 4.5 million (2008 Rs. 2.1 million) is expected to be paid in exchange for the services rendered by employee is recognised as an expense during the year.

(vi) The guidance issued by the Accounting Standard Board (A5B) on implementing AS 15, Employee Benefits (revised 2005) states that provident fund set up by employer, which requires interest shortfall to be met by the employer, needs to be treated as defined benefit plan. The fund does not have any existing deficit or interest shortfall. In regard to any future obligation due to interest shortfall (i.e. government interest to be paid on provident fund scheme exceeds rate of interest earned on investment), pending the issuance of guidance note from the Actuarial Society of India, the Companys actuary has confirmed no additional liability would arise as at the Balance Sheet date.

7. Provision for current tax is based on the results for the year ended December 31, 2009 and is determined in accordance with the provisions of the Income Tax Act, 1961. The final tax liability will be determined on the basis of the operations for the year April 1, 2009 to March 31, 2010, being the tax year of the Company.

8. TRANSFER PRICING

The Companys Management has developed a system of maintenance of information and documents as required by the Transfer Pricing legislation under Section 92-92F of the Income tax Act, 1961. The Companys international transactions with related parties are at arms length as per the independent accountants report for the year ended 31 March, 2009. Management believes that the Companys international transactions with related parties post 31st March, 2009 continue to be at arms length and that the Transfer Pricing legislation will not have any impact on these financial statements, particularly on amount of tax expense and that of Provision of Taxation.

9. PREVIOUS YEAR COMPARATIVES

Previous years figures have been regrouped, wherever necessary, to conform to the current years classification.