Notes to Accounts of Solara Active Pharma Sciences Ltd.

Mar 31, 2025

xvi) Provisions

Provisions are recognised when the Company
has a present obligation (legal or constructive)
as a result of a past event, it is probable that
the Company will be required to settle the
obligation, and a reliable estimate can be made
of the amount of the obligation.

The amount recognised as a provision is the
best estimate of the consideration required to
settle the present obligation at the end of the
reporting period, taking into account the risks
and uncertainties surrounding the obligation.

Onerous contracts

Present obligations arising under onerous
contracts are recognised and measured as
provisions. An onerous contract is considered
to exist where the Company has a contract
under which the unavoidable costs of meeting

the obligations under the contract exceed the
economic benefits expected to be received
from the contract.

(xvii) Contingent liabilities

Contingent liabilities are disclosed in notes
when there is a possible obligation that arises
from past events and whose existence will
be confirmed only by the occurrence or non¬
occurrence of one or more uncertain future
events not wholly within the control of the
entity or a present obligation that arises from
past events where it is either not probable that
an outfl ow of resources will be req uired to settle
or a reliable estimate of the amount cannot
be made.

(xviii) Financial instruments

Investment in subsidiaries

The Company has accounted for its investments
in subsidiaries at cost less impairment.

Other financial assets and financial liabilities

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

Initial recognition and measurement:

Other financial assets and financial liabilities
are initially measured at fair value. Transaction
costs that are directly attributable to the
acquisition or issue of 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.
Transaction costs directly attributable to the
acquisition of financial assets or financial
liabilities at fair value through profit or loss are
recognised immediately in statement of profit
and loss.

Subsequent measurement:

Financial assets at amortised cost: Financial
assets are subsequently measured at amortised
cost if these financial assets are held within
a business whose objective is to hold these
assets in order to collect contractual cash flows
and contractual terms of financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.

Financial assets at fair value through profit
or loss: Financial assets are measured at fair
value through profit or loss unless it measured
at amortised cost or fair value through other
comprehensive income on initial recognition.
The transaction cost directly attributable to the
acquisition of financial assets and liabilities at
fair value through profit or loss are immediately
recognised in the statement of profit and loss.

Financial liabilities are measured at amortised
cost using effective interest rate method. For
trade and other payables maturing within one
year from the balance sheet date, the carrying
amounts approximate fair value due to the
short maturity of these instruments.

Derecognition of financial assets and
liabilities:

The Company derecognises the financial
asset only when the contractual rights to
the cashflows from the asset expires or it
transfers the financial asset and substantially
all the risks and rewards of the ownership of
the asset to the other entity . If the Company
neither transfers nor retains substantially all
risks and rewards of ownership and continues
to control the transferred asset , the Company
recognizes its retained interest in the asset and
associated liability for the amounts it may have
to pay. If the Company retains substantially
all risks and rewards of the ownership of a
transferred financial asset, the Company
continues to recognize the financial asset and
also recognizes a collaterized borrowing for
the proceeds received. On derecognition of a
financial asset measured at amortised cost,
the difference between the asset’s carrying
amount and the sum of the consideration
received and receivable is recognised in profit
or loss. Financial liabilities are derecognised
when these are extinguished , that is when
the obligation is discharged, cancelled or has
expired.The difference between the carrying
amount of the financial liability derecognised
and the consideration paid and payable is
recognised in profit or loss.

Equity instruments

An equity instrument is a contract that
evidences residual interest in the assets of the
company after deducting all of its liabilities.
Equity instruments recognised by the Company
are recognised at the proceeds received net off
direct issue cost.

(xix) Operating Cycle

Based on the normal time between acquisition
of assets and their realisation in cash or cash
equivalents, the Company has determined
its operating cycle as 12 months. The above
basis is used for classifying the assets and
liabilities into current and non-current as the
case may be.

(xx) Cash Flow Statement

Cash flows are reported using the indirect
method, whereby profit / (loss) before tax is
adjusted for the effects of transactions of non¬
cash nature and any deferrals or accruals of past
or future cash receipts or payments. The cash
flows from operating, investing and financing
activities of the Company are segregated based
on the available information.

(xxi) Key sources of estimation uncertainty

In the application of the Company''s accounting
policies, the directors of the Company are
required to make judgements, 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 if the revision
affects both current and future periods.

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.

Impairment of goodwill and other non¬
financial assets

Determining whether the asset is impaired
requires to assess the recoverable amount of
the asset or Cash Generating Unit (CGU) which
is compared to the carrying amount of the asset
or CGU, as applicable. Recoverable amount is
the higher of fair value less costs of disposal
and value in use. Where the carrying amount

of an asset or CGU exceeds the recoverable
amount, the asset is considered impaired and
is written down to its recoverable amount.

Impairment of financial assets

The impairment provisions for financial
assets are based on assumptions about risk
of default and expected cash loss rates. The
Company uses judgement in making these
assumptions and selecting the inputs to the
impairment calculation, based on Company’s
past history, existing market conditions as well
as forward looking estimates at the end of each
reporting period.

Useful lives of property, plant and
equipment

The Company reviews the useful life of
property, plant and equipment at the end of
each reporting period. This assessment may
result in change in the depreciation expense
in future periods.

Defined benefit plans and compensated
absences:

The cost of the defined benefit plans,
compensated absences and the present value
of the defined benefit obligations are based
on actuarial valuation using the projected unit
credit method. An actuarial valuation involves
making various assumptions that may differ
from actual developments in the future. These
include the determination of the discount rate,
future salary increases and mortality rates. Due
to the complexities involved in the valuation
and its long-term nature, a defined benefit
obligation is highly sensitive to changes in these
assumptions. All assumptions are reviewed at
each reporting date.

Income taxes

Significant judgments are involved in
determining the provision for income taxes
including judgment on whether tax positions
are probable of being sustained in tax
assessments. A tax assessment can involve
complex issues, which can only be resolved
over extended time periods.

Deferred tax is recorded on temporary
differences between the tax bases of assets
and liabilities and their carrying amounts, at the
rates that have been enacted or substantively
enacted at the reporting date. The ultimate
realisation of deferred tax assets is dependent
upon the generation of future taxable profits
during the periods in which those temporary

differences and tax loss carry-forwards
become deductible. The Company considers
expected reversal of deferred tax liabilities and
projected future taxable income in making this
assessment. The amount of deferred tax assets
considered realisable, however, could reduce
in the near term if estimates of future taxable
income during the carry-forward period
are reduced.

Controlling parties assessment

The Company performs assessment for
identification of controlling parties. The
assessment involves judgements which
included consideration of controlling parties’
absolute size of holding in the Company,
determination of whether other parties are
acting on the investor’s behalf, determination
of whether parties have the practical ability to
exercise that right and the relative size of and
dispersion of the shareholdings owned by the
other shareholders. Based on assessment,
the Company is not controlled by any single
shareholder or group of shareholders.

Going Concern

The Management has prepared cash flow
forecasts for the next 12 months. The forecasts

include assumption such revenue projection,
increase in gross margin and EBTIDA due to
cost control measures and strategic focus to
maintain reduced inventory levels.

Inventory

The Company estimates the net realisable value
(NRV) of its inventories by taking into account
their estimated selling price, estimated cost of
completion, estimated costs necessary to make
the sale. Management reviews the inventory
age listing on a periodic basis. This review
involves comparison of the carrying value of the
aged inventory items with the respective net
realisable value. Inventories are written down
to NRV where such NRV is lower than their cost.

Litigations

The Company is a party to certain direct and
indirect tax disputes. Uncertain tax items for
which a provision is made relate principally to
the interpretation of tax legislation applicable
to arrangements entered into by the Company.
Due to the uncertainty associated with such tax
items, it is possible that, on conclusion of open
tax matters at a future date, the final outcome
may differ significantly.

Impairment assessment of goodwill allocated to the “Human API business” as at March 31, 2025:

The Management of the Company have performed annual impairment assessment of the goodwill by determining
the "value in use” of this Cash Generating Unit (CGU) as an aggregate of present value of cash flow projections
covering a five year period and the terminal value. Determination of value in use involves significant estimates and
assumptions that affect the reporting CGU’s expected future cash flows. These estimates and assumptions, primarily
include, but are not limited to, the revenue growth and profitability during the forecast period, the discount rate and
the terminal growth rate.

Considering the historical performance of this business since acquisition and based on the forward looking estimates,
including the changes in estimated future economic conditions, revisions were made to the cash flow projections
and other key assumptions such as discount rate and the terminal growth rate. The cash flows are discounted using
a post tax discount rate of 1700% (March 31, 2024: 16.00%). The terminal value of cash generating unit is arrived at
by extrapolating cash flows of latest forecasted year to perpetuity using a constant long-term growth rate of 3.00%
(March 31, 2024: 3.00%) p.a. which is consistent with the industry forecasts for the generic API market.

The above assessment did not result in impairment in the carrying amount of goodwill.

The table below shows the percentage movement in key assumptions that (individually) would be required to reach
the point at which the value in use approximates its carrying value.

Movement

Terminal growth rate 3.00% decrease

(3.00% decrease)

Post tax discount rate 6.90% increase

(6.45% increase)

Expected net revenue growth rates 6.30% decrease for short term and 3.0% decrease for long term

(9% decrease for short term and 3.0% decrease for long term)

The details given in brackets relate to previous year
NOTE NO. 8 OTHER INTANGIBLE ASSETS

Notes:

(i) The Company has presently, decided not to opt for the New Tax Regime inserted as section 115BAA of the
Income-tax Act, 1961 and enacted by the Taxation Laws (Amendment) Ordinance, 2019 (‘the Ordinance’) which
is applicable from Financial Year beginning April 1, 2019. The Company has accordingly applied the existing tax
rates in the financial statements for the year ended March 31, 2025

(ii) During Financial year 2017-18, the Company acquired the Human API and Commodity API businesses vide a
NCLT approved Scheme of demerger. For purposes of recognising tax expenses and deferred tax balances in the
books of account, the Company has considered Goodwill as non-tax deductible and the Company continued
to apply the initial recognition exemption under Ind AS 12 "Income taxes”.

(iii) The Company has significant carried forward losses under income tax act. While the Company expects to
increase operations in the future, in view of the significant carried forward losses and resulting impact on future
taxable profits, the Company has written off Deferred tax assets (including MAT credit entitlement) amounting
to 78.54 crores during the previous year ended March 31, 2024 and also, the Company has restricted the
recognized Deferred Tax Asset up to the amount of the Deferred Tax Liability.

(iv) Based on legal advice received by the Company, the Company has claimed in its income tax returns,
depreciation on Goodwill and Product Portfolios relating to both businesses acquired through the
aforesaid demerger. These claims were disallowed by the assessing officer. The Company has preferred
appeal with Commisisoner of income tax (appeals). Order against appeal had been passed vide order
dated April 18, 2024, confirming disallowance of depreciation on goodwill & product portfolio and
the Company has filed an appeal before the ITAT against it on May 06, 2024.The Company has not
recognised deferred tax assets in the books of account in respect of claims relating to depreciation on the
Goodwill relating to both the businesses and Product portfolio (relating to the Commodity API business).
While the Company has consistently taken a view as aforesaid in the books of account, the Company has
been legally advised that the claims made in the tax returns are tenable. As at March 31, 2025, the potential
unrecognised claims in respect of the above is amounting to ''600.38 Crores (''591.22 crores as on March
31, 2024). The benefit of these tax credits will be evaluated and recognized in the year in which, based on
management’s best judgement, such credits are confirmed to be available for future set offs against taxable
profits. Also refer note 38, regarding income tax litigations.

(v) In addition to above, the Company has not recognised deferred tax assets ''160.04 crores as on March 31, 2025
(''173.93 crores as on March 31, 2024) relating to carried forward loss (including unabsorbed depreciation)
as there is no reasonable certainty that sufficient future taxable income will be available against which such
deferred tax asset can be realised.

Employee Stock Option Scheme (ESOP 2018)

The ESOP titled "Solara Employee Stock Option Plan 2018” (ESOP 2018) was approved by the shareholders and
stock exchanges. 1,228,778 options are covered under the plan which are convertible into equal number of equity
shares of the Company. The vesting period of these options range over a period of three years. The options must be
exercised within a period of 120 days from the date of vesting. The Company has granted 110,200 options (March
31, 2024: 250,000 options) under this plan during the current year.

Employee Stock Option Scheme (ESOP 2024)

The ESOP titled "Solara Employee Stock Option Plan 2024” (ESOP 2024) was approved by the shareholders and
stock exchanges.960,000 options are covered under the plan which are convertible into equal number of equity
shares of the Company. The vesting period of these options range over a period of three years. The options must be
exercised within a period of 120 days from the date of vesting. The Company has granted 350,000 options (March
31, 2024: Nil) under this plan during the current year.

During the current year, employee compensation costs of ''2.68 Crores (Previous year: ''0.60 Crores) relating to the
above referred Employee Stock Option Plans have been charged to the Statement of Profit and Loss.

Fair value of share options granted during the year

The fair value of the share options were priced using a Black-Scholes model of valuation at grant date.The assumptions
used in this model for calculating fair value of the ESOP granted during the year are as below:

Financial risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s
primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on
its financial performance. The primary market risk to the Company is foreign exchange risk. The Board of Directors
reviews and agrees policies for managing each of these risks, which are summarised below:

44.3 Foreign currency risk management

The Company is exposed to foreign exchange risk due to:

- debt availed in foreign currency

- exposure arising from transactions relating to purchases, revenues, expenses, etc., to be settled (within and outside
the group) in currencies other than the functional currency (i.e. Indian rupees).

The carrying amount of the Company’s foreign currency denominated monetary liabilities (payables) and assets
(receivables) as at the end of reporting period are as under:

Interest rate sensitivity analysis

Financial instruments affected by interest rate changes include secured long term loans from banks and secured
short term loans from banks. The impact of a 1% change in interest rates on the profit of an annual period will be ''7.76
Crores (March 31, 2024: ''9.99 Crores) assuming the loans at each year end remain constant during the respective
years. This computation does not involve a revaluation of the fair value of loans as a consequence of changes in
interest rates. The computation also assumes that an increase in interest rates on floating rate liabilities will not
necessarily involve an increase in interest rates on floating rate financial assets.

44.5 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Company. Credit Risk to the company primarily arises from trade receivables. Credit risk also arises from cash and
cash equivalents, financial instruments and deposits with banks and financial institutions and other financial assets.

The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the
risk of financial loss from defaults. The Company has an internal mechanism of determining the credit rating of
the customers and setting credit limits. Credit exposure is controlled by counterparty limits that are reviewed and
approved by the risk management committee annually. Ongoing credit evaluation is performed on the financial
condition of accounts receivable.

The Company is not significantly exposed to geographical credit risk as the counterparties operate across various
countries across the globe.

Credit risk on cash and cash equivalent is limited as the Company generally transacts with banks and financial
institutions with high credit ratings assigned by international and domestic credit rating agencies.

44.6 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an
appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term
and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining
adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual
short term and long term cash flows, and by matching the maturity profiles of financial assets and liabilities.

(i) Explanation for variances exceeding 25%:

(a) Decrease in Debt-Equity ratio is due to decrease in current borrowings

(b) Increase in Debt Service Coverage ratio is on account of increase in Earnings Before Interest, Taxes,
Depreciation and Amortisation (EBITDA)

(c) Increase in Return on Equity ratio is on account of increase in Net profit (PAT)

(d) Increase in Trade receivables turnover ratio is on account of reduction in Trade receivables

(e) Decrease in Net capital turnover ratio is on account of decrease in Working capital

(f) Increase in Net profit ratio is on account of increase in Net profit (PAT)

(g) Increase in Return on capital employed ratio is on account of increase in Earnings Before Interest and Taxes
(EBIT)

Definitions:

Debt is defined as non-current borrowings, current maturities of non-current borrowings and current borrowings
and includes lease liabilities

Equity is defined as Equity share capital and Other equity.

Tangible Equity is defined as Equity share capital and Other equity less Goodwill less Intangible Assets
Earnings before interest,taxes, depreciation and amortisation (EBITDA) is defined as:

Profit for the year before exceptional items and taxes (add) Depreciation and Amortisation (add) Finance costs (less)
interest income

Debt repayment is defined as non-current borrowings repaid during the year
Interest payments is defined as interest paid on borrowings during the year
Net profit (PAT) is defined as Profit for the year after tax

Cost of goods sold is defined as Cost of materials consumed, Purchases of stock-in-trade and Changes in inventories
of finished goods and work-in-progress

Sales Turnover is defined as Sale of products and Sale of services
Earnings before interest and taxes (EBIT) is defined as:

The Code on Social Security, 2020 (the Code) has been enacted, which would impact the contributions by the
Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to
be notified. The Company will complete its evaluation and will give appropriate impact in its financial statements in
the period in which the Code becomes effective and the related rules are published.

NOTE NO. 49 OTHER STATUTORY INFORMATION

(a) The Company does not have any Benami property, where any proceeding has been initiated or pending against
the Company for holding any Benami property.

(b) The Company does not have any transactions with companies struck off.

(c) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the
statutory period,

(d) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(e) The Company has no transaction not recorded in the books of accounts 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).

(f) The Company has borrowings from banks on the basis of security of current assets, the quarterly returns or
statements of current assets has been filed by the Company with banks are in agreement with the books
of accounts.

(g) The Company has not been declared willful defaulter by any bank or financial Institution or other lender.

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

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

(B) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

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

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

(B) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,

With effect from 1 April 2023, the Ministry of Corporate Affairs (MCA) has made it mandatory for companies to
maintain an audit trail throughout the year for transactions impacting books of accounts.

The Company uses accounting software for maintaining the books of account which has a feature of recording audit
trail and has defined process to enable audit trail of books of accounts and has enabled the feature of recording audit
trail (edit log) facility except that in respect of accounting software used by the Company, audit trail feature was not
enabled for certain direct changes to tables at the application level for the period April 1, 2024 to March 31, 2025.
The Management is of the view that this does not have any impact on its Standalone Financial Statements for the
year ended March 31, 2025.

The audit trail that was enabled and operated for the year ended March 31, 2024, has been preserved by the
Company as per the statutory requirements for record retention.

NOTE NO. 51

There was a fire accident at the Company Puducherry facility on November 04, 2023 whereby 3 blocks out of the
total 76 blocks were impacted by the fire. The resultant fire caused injuries to 14 workers and 12 workers were
recovered and discharged while 2 succumbed to injuries despite maximum efforts put to recover them. The fire also
caused damages to the plant and equipment amounting to ''2.25 crores, inventories amounting to ''51.35 crores,
Goods and service tax reversal on inventory loss amounting to ''752 crores and other expense such as medical
expenses etc. amounting ''1.38 crores.The losses arising on account of the fire incident have been accounted under
exceptional item during the previous year ended March 31, 2024. There was disruption in the production at the
Puducherry facility for a brief period and production was resumed after receiving the statutory approvals post the
tire incident.The Company has submitted the initial insurance claims which are subject to assessment by the Insurers,
pending which, the claim has not been recognised in these standalone financial statements. The insurance claim
will be accrued once there is certainty of the amount expected to be reimbursed by the Insurers.

NOTE NO. 52

The Board of the Company had approved the transfer of 100% shareholding in Sequent Penems Private Limited,
a wholly owned subsidiary, through a circular resolution dated March 22, 2024. The share purchase agreement
was executed on March 28, 2024, for a cash consideration of ''12.50 crores. The Company had a carrying value
of investment in this subsidiary of ''14.30 crores. Hence, the Company has accounted for an impairment on the
nvestment in this subsidiary amounting to ''1.80 crores during the previous year ended March 31, 2024. The shares
were transferred on April 25, 2024.

Due to the above sale, certain assets of the Company were no longer usable. Hence, the Company had written off
these assets, amounting to ''2.53 crores and disclosed under exceptional items during the previous year ended
March 31, 2024.

NOTE NO. 53

The Company, vide its letter of offer dated May 09, 2024 offered upto 1,19,98,755 Equity shares of face value of
''10/- each at a price of ''375 per Equity share (including Share premium of ''365 per Equity share) for an amount
aggregating ''449.95 crores to the existing share holders of the Company on right basis in the ratio of One Equity
share for every three Equity shares held by the Equity shareholders on the record date i.e May 15, 2024. Rights issue
has been done in accordance with Section 62(1)(a) of the Companies Act and other applicable laws. The Company
has allotted 1,19,98,755 Nos. of partly paid up equity shares on June 19, 2024.

Out of net proceeds from allotment, ''118.61 crores is used against repayment of borrowings, ''35.87 crores towards
general corporate purposes in line with terms of utilization mentioned in letter of offer.

Pursuant to the Rights issue, earnings per share (EPS) in repect of previous year have been adjusted as per Indian
Accounting Standard 33 “Earnings per share”, prescribed under Section 133 of the Companies Act, 2013.

The Board of Directors of the Company at its meeting held on January 24, 2025 had discussed a proposal to explore
‘demerger of the CRAMS and Polymers business into an independent listed entity’ and granted in-principle approval
for the same.

NOTE NO. 55

According to management’s evaluation of events subsequent to the balance sheet date there were no significant
adjusting events that occured other than those disclosed/given effect to, in these financial statements as of March
31, 2025.

NOTE NO. 56

On May 07, 2025, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards)
Amendment Rules, 2025. This notification has resulted into amendments in the "Indian Accounting Standard (Ind AS)
21 - The Effects of Changes in Foreign Exchange Rates ” which are applicable to the Company from April 01, 2025.The
Company is in the process of evaluating the impact of the this amendments on the Company’s financial statements.

NOTE NO. 57

All the amounts included in the standalone financial statements are rounded off to the neareast crores, except per
share data and unless stated otherwise. Further, due to rounding off, certain amounts are appearing as ‘0’.

For and on behalf of Board of Directors

Sandeep Rao M Mohan Sarat Kumar Pooja Jaya Kumar

Managing Director & Chief Executive Officer Executive Director Chief Financial Officer Company Secretary

DIN: 10838251 DIN: 03610282 Membership Number: A57415

Place : Bengaluru
Date : May 15, 2025

---

Mar 31, 2024

(xvi) Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.

(xvii) Contingent liabilities

Contingent liabilities are disclosed in notes when there is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

(xviii) Financial instruments

Investment in subsidiaries

The Company has accounted for its investments in subsidiaries at cost less impairment.

Other financial assets and financial liabilities

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

Initial recognition and measurement:

Other financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of 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. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in statement of profit and loss.

Subsequent measurement:

Financial assets at amortised cost: Financial assets are subsequently measured at amortised cost if these financial assets are held within

a business whose objective is to hold these assets in order to collect contractual cash flows and contractual terms of financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Financial assets at fair value through profit or loss: Financial assets are measured at fair value through profit or loss unless it measured at amortised cost or fair value through other comprehensive income on initial recognition. The transaction cost directly attributable to the acquisition of financial assets and liabilities at fair value through profit or loss are immediately recognised in the statement of profit and loss.

Financial liabilities are measured at amortised cost using effective interest rate method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.

Derecognition of financial assets and liabilities:

The Company derecognises the financial asset only when the contractual rights to the cashflows from the asset expires or it transfers the financial asset and substantially all the risks and rewards of the ownership of the asset to the other entity . If the Company neither transfers nor retains substantially all risks and rewards of ownership and continues to control the transferred asset , the Company recognizes its retained interest in the asset and associated liability for the amounts it may have to pay . If the Company retains substantially all risks and rewards of the ownership of a transferred financial asset , the Company continues to recognize the financial asset and also recognizes a collaterized borrowing for the proceeds received. Financial liabilities are derecognised when these are extinguished , that is when the obligation is discharged, cancelled or has expired.

Equity instruments

An equity instrument is a contract that evidences residual interest in the assets of the company after deducting all of its liabilities. Equity instruments recognised by the Company are recognised at the proceeds received net off direct issue cost.

(ixx) Operating Cycle

Based on the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months. The above basis is used for classifying the assets and liabilities into current and non-current as the case may be.

(xx) Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit / (loss) before tax is adjusted for the effects of transactions of noncash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

(xxi) Key sources of estimation uncertainty

In the application of the Company''s accounting policies, the directors of the Company are required to make judgements, 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 if the revision affects both current and future periods."

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.

Impairment of goodwill and other nonfinancial assets

The value in use calculation requires the directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a impairment loss may arise.

Impairment of financial assets

The impairment provisions for financial assets are based on assumptions about risk of default and expected cash loss rates. The Company uses judgement in making these assumptions and selecting the inputs to the impairment calculation, based on Company''s past history, existing market conditions as well as forward looking estimates at the end of each reporting period.

Useful lives of property, plant and equipment

The Company reviews the useful life of property, plant and equipment at the end of each reporting period. This assessment may result in change in the depreciation expense in future periods.

Defined benefit plans and compensated absences:

The cost of the defined benefit plans, compensated absences and the present value of the defined benefit obligations are based on actuarial valuation using the projected unit credit method. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

Income taxes

Significant judgments are involved in determining the provision for income taxes including judgment on whether tax positions are probable of being sustained in tax assessments. A tax assessment can involve complex issues, which can only be resolved over extended time periods.

Deferred tax is recorded on temporary differences between the tax bases of assets and liabilities and their carrying amounts, at the rates that have been enacted or substantively enacted at the reporting date. The ultimate realisation of deferred tax assets is dependent upon the generation of future taxable profits during the periods in which those temporary differences and tax loss carry-forwards become deductible. The Company considers expected reversal of deferred tax liabilities and projected future taxable income in making this assessment. The amount of deferred tax assets considered realisable, however, could reduce in the near term if estimates of future taxable income during the carry-forward period are reduced.

Controlling parties assessment

The Company performs assessment for identification of controlling parties. The assessment involves judgements which included consideration of controlling parties absolute size of holding in the Company, determination of whether other parties are acting on the investor''s behalf, determination of whether parties have the practical ability to exercise that right and the relative size of and dispersion of the shareholdings owned by the other shareholders. Based on assessement, the Company is not controlled by any single shareholder or group of shareholders.

Going Concern

The Management has prepared cash flow forecasts for the next 12 months. The forecasts include assumption regarding increased

revenues, increase in gross margin and EBTIDA due to cost control measures and strategic focus to maintain reduced inventory levels.

Inventory

The Company estimates the net realisable value (NRV) of its inventories by taking into account their estimated selling price, estimated cost of completion, estimated costs necessary to make the sale. Management reviews the inventory age listing on a periodic basis. This review involves comparison of the carrying value of the aged inventory items with the respective net realisable value. Inventories are written down to NRV where such NRV is lower than their cost.

Litigations

The Company is a party to certain direct and indirect tax disputes. Uncertain tax items for which a provision is made relate principally to the interpretation of tax legislation applicable to arrangements entered into by the Company. Due to the uncertainty associated with such tax items, it is possible that, on conclusion of open tax matters at a future date, the final outcome may differ significantly.

(v) Fair value of investment properties: ^v

The Company obtains independent valuations for its investment properties once in three years. The latest fair value of the Company''s investment properties were carried out as at March 31, 2024 which indicated fair value of '' 7.53 Crores on the basis of a valuation carried out by independent valuers. The said valuers are registered with the authority which governs valuers in India and have appropriate qualifications and relevant experience in the valuation of properties in the relevant locations.

The inputs used are as follows:

a) Valuation is done using discounted cash flow approach, where the value of an asset is measured in terms of future cash flow streams, discounted to the present time at 12.50%.

b) Lease rent agreements are cancellable which are expected to be renewed either with the existing lessee or with others, on similar terms and conditions.

Impairment assessment of goodwill allocated to the "Human API business” as at March 31, 2024:

The Management of the Company have performed annual impairment assessment of the goodwill by determining the "value in use” of this Cash Generating Unit (CGU) as an aggregate of present value of cash flow projections covering a five year period and the terminal value. Determination of value in use involves significant estimates and assumptions that affect the reporting CGU''s expected future cash flows. These estimates and assumptions, primarily include, but are not limited to, the revenue growth and profitability during the forecast period, the discount rate and the terminal growth rate.

Considering the historical performance of this business since acquisition and based on the forward looking estimates, including the changes in estimated future economic conditions, revisions were made to the cash flow projections and other key assumptions such as discount rate and the terminal growth rate. The cash flows are discounted using a post tax discount rate of 16.00% (March 31, 2023: 13.00%). The terminal value of cash generating unit is arrived at by extrapolating cash flows of latest forecasted year to perpetuity using a constant long-term growth rate of 3.00% (March 31,2023: 4.00%) p.a. which is consistent with the industry forecasts for the generic API market.

NOTE NO. 39 EMPLOYEE BENEFITS PLANS Defined contribution plan

The Company makes contributions to provident fund and employee state insurance schemes which are defined contribution plans, for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll cost to fund the benefits.The Company recognised '' 12.81 Crores (March 31, 2023: '' 12.69 Crores) for provident fund contributions, '' 0.10 Crores (March 31, 2023: '' 0.17 Crores) for employee state insurance scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

Defined benefit plan

The Company offers gratuity benefits, a defined employee benefit scheme to its employees. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting.

NOTE NO. 42 SEGMENT REPORTING:

The Company is engaged in the manufacture and sale of Active Pharma Ingredients. The operating segment of the Company is identified to be "Manufacture and sale of Active Pharma Ingredients”, The Managing Director and Chief executive officer of the Company who has been identified as the chief operating decision maker (CODM) reviews business performance at an overall Company level as one segment.

As the Company operates in single operating segment i.e., ’’Manufacture and sale of Active Pharma Ingredients”, the reporting disclosures envisaged in Ind AS 108 on operating segments, are not applicable to the Company. However, the geographical information are disclosed below:

NOTE NO. 43 SHARE-BASED PAYMENTS:

Details of the employee share option plan of the Company:

The ESOP titled "Solara Employee Stock Option Plan 2018” (ESOP 2018) was approved by the shareholders and stock exchanges. 1,228,778 options are covered under the plan which are convertible into equal number of equity shares of the Company. The vesting period of these options range over a period of three years. The options must be exercised within a period of 120 days from the date of vesting. The Company has granted 250,000 options (March 31, 2023: 324,600 options) under this plan during the current year.

During the current year, employee compensation costs of '' 0.60 Crores (Previous year: '' 0.05 Crores) relating to the above referred Employee Stock Option Plan have been charged to the Statement of Profit and Loss.

Interest rate sensitivity analysis

Financial instruments affected by interest rate changes include secured long term loans from banks and secured short term loans from banks. The impact of a 1% change in interest rates on the profit of an annual period will be '' 9.99 Crores (March 31, 2023: '' 10.05 Crores) assuming the loans at each year end remain constant during the respective years. This computation does not involve a revaluation of the fair value of loans as a consequence of changes in interest rates. The computation also assumes that an increase in interest rates on floating rate liabilities will not necessarily involve an increase in interest rates on floating rate financial assets.

44.5 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit Risk to the company primarily arises from trade receivables. Credit risk also arises from cash and cash equivalents, financial instruments and deposits with banks and financial institutions and other financial assets.

The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Company has an internal mechanism of determining the credit rating of the customers and setting credit limits. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The Company is not significantly exposed to geographical credit risk as the counterparties operate across various countries across the globe.

Credit risk on cash and cash equivalent is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

44.6 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company''s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual short term and long term cash flows, and by matching the maturity profiles of financial assets and liabilities.

44.6.1 Liquidity analysis for Non- Derivative Financial liabilities

The following table details the Company''s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table include repayment of principal amounts. The contractual maturity is based on the earliest date on which the Company may be required to pay.

NOTE NO. 45 CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in note 21 offset by cash and bank balances) and total equity.

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

Definitions:

Debt is defined as non-current borrowings, current maturities of non-current borrowings and current borrowings and includes lease liabilities

Equity is defined as Equity share capital and Other equity.

Earnings before interest,taxes, depreciation and amortisation (EBITDA) is defined as:

Profit for the year before exceptional items and taxes (add) Depreciation and Amortisation (add) Finance costs (less) interest income

Debt repayment is defined as non-current borrowings repaid during the year Interest payments is defined as interest paid on borrowings during the year Net profit (PAT) is defined as Profit for the year after tax

Cost of goods sold is defined as Cost of materials consumed, Purchases of stock-in-trade and Changes in inventories of finished goods and work-in-progress

Sales Turnover is defined as Sale of products and Sale of services Earnings before interest and taxes (EBIT) is defined as:

Profit for the year before exceptional items and taxes (add) Finance costs (less) interest income

Working capital is defined as Currents Assets less Current Liabilities

Capital employed is defined as Equity and Debt less Goodwill less Intangible Assets

NOTE NO. 48

The Code on Social Security, 2020 (the Code) has been enacted, which would impact the contributions by the Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified. The Company will complete its evaluation and will give appropriate impact in its financial statements in the period in which the Code becomes effective and the related rules are published.

NOTE NO. 49 OTHER STATUTORY INFORMATION

(a) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(b) The Company does not have any transactions with companies struck off.

(c) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,

(d) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(e) The Company has no transaction not recorded in the books of accounts 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).

(f) The Company has borrowings from banks on the basis of security of current assets, the quarterly returns or statements of current assets has been filed by the Company with banks are in agreement with the books of accounts.

(g) The Company has not been declared willful defaulter by any bank or financial Institution or other lender.

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

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

(B) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

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

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

(B) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,

NOTE NO. 50

With effect from 1 April 2023, the Ministry of Corporate Affairs (MCA) has made it mandatory for companies to maintain an audit trail throughout the year for transactions impacting books of accounts.

The Company uses accounting software for maintaining the books of account which has a feature of recording audit trail and has defined process to enable audit trail of books of accounts. The Company for the financial year ended 31 March 2024 has enabled the feature of recording audit trail (edit log) facility except that no audit trail feature was enabled for certain direct changes to tables at the application level for the period April 1,2023 to March 31, 2024.

The management is of the view that this does not have any impact on its standalone Financials Statements for the year ended March 31,2024.

NOTE NO. 51

There was a fire accident at the Company Puducherry facility on November 04, 2023 whereby 3 blocks out of the

total 76 blocks were impacted by the fire. The resultant fire caused injuries to 14 workers and 12 workers were recovered and discharged while 2 succumbed to injuries despite maximum efforts put to recover them. The fire also caused damages to the plant and equipments amounting to '' 2.25 crores, inventories amounting to '' 51.35 crores, Goods and service tax reversal on inventory loss amounting to '' 7.52 crores and other expense such as medical expenses etc. amounting '' 1.38 crores. The losses arising on account of the fire incident have been accounted under exceptional item. There was disruption in the production at the Puducherry facility for a brief period and production was resumed after receiving the statutory approvals post the fire incident.The Company has submitted the initial insurance claims which are subject to assessment by the Insurers, pending which, the claim has not been recognised in these standalone financial statements. The insurance claim will be accrued once there is certainty of the amount expected to be reimbursed by the Insurers.

NOTE NO. 52

The Company, vide its letter of offer dated May 09, 2024 offered upto 1,19,98,755 Equity shares of face value of '' 10/- each at a price of '' 375 per Equity share (including Share premium of '' 365 per Equity share) for an amount aggregating '' 449.95 crores to the existing share holders of the Company on rights basis in the ratio of One Equity share for every three Equity shares held by the Equity shareholders on the record date i.e May 15, 2024. Rights issue has been done in accordance with Section 62(1) (a) of the Companies Act and other applicable laws and the Rights issue window is open from May 28, 2024 to June 11, 2024.

NOTE NO. 53

According to management''s evaluation of events subsequent to the balance sheet date there were no significant adjusting events that occured other than those disclosed/given effect to, in these financial statements as of March 31, 2024

NOTE NO. 54

The previous year''s figures have been re-grouped/ reclassified, where necessary to confirm to current year''s classification.

For and on behalf of Board of Directors

Poorvank Purohit M Mohan Arun Kumar Baskaran S Murali Krishna

Managing Director and Chief Executive Officer Executive Director Chief Financial Officer Company Secretary

DIN: 10158900 DIN: 03610282 Membership Number: 13372

Place : Bengaluru Date : May 29, 2024

---

Mar 31, 2023

(vii) Fair value of investment properties:

The Company obtains independent valuations for its investment properties once in three years. The latest fair value of the Company’s investment properties were carried out as at March 31, 2021 which indicated fair value of H 63.78 Crores on the basis of a valuation carried out by independent valuers. The said valuers are registered with the authority which governs valuers in India and have appropriate qualifications and relevant experience in the valuation of properties in the relevant locations.

The inputs used are as follows:

a) Valuation is done using discounted cash flow approach, where the value of an asset is measured in terms of future cash flow streams, discounted to the present time at 12.50%.

b) Lease rent agreements are cancellable which are expected to be renewed either with the existing lessee or with others, on similar terms and conditions.

Impairment assessment of goodwill allocated to the “Human API business” as at March 31, 2023:

The Management of the Company have performed annual impairment assessment of the goodwill by determining the "value in use” of this Cash Generating Unit (CGU) as an aggregate of present value of cash flow projections covering a five year period and the terminal value. Determination of value in use involves significant estimates and assumptions that affect the reporting CGU’s expected future cash flows. These estimates and assumptions, primarily include, but are not limited to, the revenue growth and profitability during the forecast period, the discount rate and the terminal growth rate.

Considering the historical performance of this business since acquisition and based on the forward looking estimates, including the changes in estimated future economic conditions, revisions were made to the cash flow projections and other key assumptions such as discount rate and the terminal growth rate. The cash flows are discounted using a post tax discount rate of 13.00% (March 31, 2022: 17.5%). The terminal value of cash generating unit is arrived at by extrapolating cash flows of latest forecasted year to perpetuity using a constant long-term growth rate of 4.00% (March 31, 2022: 2.75%) p.a. which is consistent with the industry forecasts for the generic API market.

The above assessment did not result in impairment in the carrying amount of goodwill.

The table below shows the percentage movement in key assumptions that (individually) would be required to reach the point at which the value in use approximates its carrying value.

(i) The Board at its meeting held on February 3, 2021 has approved to acquire additional share capital in Sequent Penems Private Limited, subsidiary company of Solara. During the previous year end, the said transaction was completed and Sequent Penems Private Limited is wholly owned subsidiary of Company with effect from April 27, 2021.

(ii) During the current year, the Company has invested in 7,07,182 shares of H 10 each of Huoban Energy 3 Private Limited for 26% stake in order to become captive user as per electricity laws, resulting to electricity at subsidised prices. As per the share holder agreement, the Company is not allowed to directly or indirectly participate in the management of Huoban Energy. As there is no significant influence by the Company over Huoban Energy, it is not considered an associate company.

(i) The Company has presently, decided not to opt for the New Tax Regime inserted as section 115BAA of the Income-tax Act, 1961 and enacted by the Taxation Laws (Amendment) Ordinance, 2019 (‘the Ordinance’) which is applicable from Financial Year beginning April 1, 2019. The Company has accordingly applied the existing tax rates in the financial statements for the year ended March 31, 2023

(ii) Under the Indian Income Tax Act, 1961, the Company is liable to pay Minimum Alternate Tax (MAT). MAT paid can be carried forward for a certain period and can be set off against the future tax liabilities. MAT is recognised as deferred tax asset only when the asset can be measured reliably and it is probable that the future economic benefits associated with the asset will be realised.

(iii) During FY 2017-18, the Company acquired the Human API and Commodity API businesses vide a NCLT approved Scheme of demerger. For purposes of recognising tax expenses and deferred tax balances in the books of account, the Company has considered Goodwill as non-tax deductible and the Company continued to apply the initial recognition exemption under Ind AS 12 "Income taxes”.

(iv) Based on legal advice received by the Company, the Company has claimed in its income tax returns, depreciation on Goodwill and Product Portfolios relating to both businesses acquired through the aforesaid demerger. These claims were disallowed by the assessing officer and the Company’s appeal is pending at the Commission of Income Tax. The Company has conservatively not recognised deferred tax assets in the books of account in respect of claims relating to depreciation on the Goodwill relating to both the businesses and Product portfolio (relating to the Commodity API business). While the Company has consistently taken a conservative view as aforesaid in the books of account, the Company has been legally advised that the claims made in the tax returns are tenable. As at March 31, 2023, the potential unrecognised tax credits in respect of the above amount to H 579.01 Crores. The benefit of these tax credits will be evaluated and recognized in the year in which, based on management’s best judgement, such credits are confirmed to be available for future set offs against taxable profits. Also refer note 38, regarding income tax litigations.

(ii) Detail of the rights, preferences and restrictions attaching to each class of shares outstanding equity shares of K 10/- each:

The Company has only one class of equity shares, having a par value of H10/-. The 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 approval by the shareholders at the ensuing annual general meeting. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution to all preferential amounts. The distribution will be in proportion to number of equity shares held by the shareholders.

Distributions made:

(i) The Company has not declared any dividend during the year ended March 31, 2023 and March 31, 2022.

(ii) The Board of Directors at their meeting held on May 06, 2021 had recommended a final dividend of H 3/- per equity share of H10/- each for the financial year ended March 31, 2021 which was approved by the shareholders at the Annual General Meeting held on August 25, 2021. The aforesaid dividend was paid during the previous year.

During the financial year ended March 31, 2023, for non-current borrowings aggregating to H 352.35 Crores (including current maturities of non-current borrowings), some of the financial covenants have been breached mainly due to temporary softness in demand for some of the key products. The Company has made representation to the lenders to waive from the testing of financial covenants for the year ended March 31, 2023.

Details of security for the current borrowings repayable on demand:

a) Working capital loans from banks are secured by first pari passu charge over current assets of the Company and second pari passu charge on movable and immovable fixed assets of the Company.

b) Rate of interest for H borrowings ranges from 9.15% to 12.00%

c) Rate of interest for US$ borrowings ranges from 4.19% to 8.46%

This information as required under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company and has been relied upon by the auditors.

(b) Revenue from major customers

Revenue from one customer of the Company during the year ended March 31, 2023 was 189.70 Cr which is individually more than 10% of the Company’s total revenue for the year. Revenue from such customer during previous year was H 119.22 Crores. No customer individually contributed for more than 10% of the Company’s total revenue during the year ended March 31, 2022.

Performance obligations and remaining performance obligations:

The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts that have original expected duration of one year or less.

NOTE NO. 38 COMMITMENTS AND CONTINGENT LIABILITIES (TO THE EXTENT NOT PROVIDED FOR) C in Crores
	For the year ended March 31, 2023	For the year ended March 31, 2022
Particulars
a) Contingent liabilities - Pending Litigations
(i) Indirect taxes	3.61	3.49
(ii) The Company has received assessment orders from the assessing officer. For the assessment year 2018-19, the officer disallowed the Company''s claim for depreciation on goodwill and product portfolio amounting to C 115.97 Crores. For the assessment year 2020-21, the officer disallowed the Company''s claim for weighted deduction under Section 35(2AB) amounting to C 20.60 Crores, depreciation on goodwill and product portfolio amounting to C 164.04 Crorees, and deemed income under Section 41 amounting to C 0.13 Crores. The Company has preferred appeal to the above two assessment orders defending their claims and the matter is pending with Commisisoner of income tax (appeals). The tax impact of above disallowance is C 40.52 Crores for assessment year 2018-19 and C 64.56 Crores for assessment year 2020-21. The Company has in its return of income for subsequent years also has claimed the aforesaid allowances. Refer note 12 (iv) for details.
b) Commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances)
- Property, plant and equipment	34.20	63.10
- Intangible assets	0.19	0.29

NOTE NO. 39 EMPLOYEE BENEFITS PLANS

Defined contribution plan

The Company makes contributions to provident fund and employee state insurance schemes which are defined contribution plans, for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll cost to fund the benefits.The Company recognised H12.69 Crores (March 31, 2022: H 13.19 Crores) for provident fund contributions, H 0.17 Crores (March 31, 2022: H 0.23 Crores) for employee state insurance scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

Defined benefit plan

The Company offers gratuity benefits, a defined employee benefit scheme to its employees. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting.

Composition of the plan assets

The fund is managed by LIC and SBI, the fund manager. The details of composition of plan assets managed by the fund manager is not available with the company. However, the said funds are subject to Market risk (such as interest risk, investment risk, etc.).

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

If the discount rate increases (decrease) by 1%, the defined benefit obligation would be H 55.36 Crores (H 60.83 Crores) as at March 31, 2023

If the expected salary growth increases (decrease) by 1%, the defined benefit obligation would be H 60.80 Crores (H 55.46 Crores) as at March 31, 2023

The sensitivity analysis presented above may not be representative of the actual change in 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 at 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.

There has been no change in the process used by the Company to manage its risks from prior periods.

NOTE NO. 42 SEGMENT REPORTING:

The Company is engaged in the manufacture and sale of Active Pharma Ingredients. The operating segment of the Company is identified to be "Manufacture and sale of Active Pharma Ingredients” as the chief operating decision maker (CODM) reviews business performance at an overall Company level as one segment.

As the Company operates in single operating segment i.e., "Manufacture and sale of Active Pharma Ingredients”, the reporting disclosures envisaged in Ind AS 108 on operating segments, are not applicable to the Company. However, the geographical information are disclosed below:

NOTE NO. 43 SHARE-BASED PAYMENTS:

Details of the employee share option plan of the Company:

The ESOP titled "Solara Employee Stock Option Plan 2018” (ESOP 2018) was approved by the shareholders and stock exchanges. 1,228,778 options are covered under the plan which are convertible into equal number of equity shares of the Company. The vesting period of these options range over a period of three years. The options must be exercised within a period of 120 days from the date of vesting. The Company has granted 324,600 options (March 31, 2022: 85,000 options) under this plan during the current year.

During the current year, employee compensation costs of H 0.05 Crores (Previous year: H (1.31) Crores) relating to the above referred Employee Stock Option Plan have been charged to the Statement of Profit and Loss. Employee stock compensation expenses for the previous year ended March 31, 2022 is negative as it is net-off of stock options lapsed during the previous year.

Financial risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

44.3 Foreign currency risk management

The Company is exposed to foreign exchange risk due to:

- debt availed in foreign currency

- exposure arising from transactions relating to purchases, revenues, expenses, etc., to be settled (within and outside the group) in currencies other than the functional currency (i.e. Indian rupees).

The impact on profit has been arrived at by applying the effects of appreciation / deprecation effects of currency on the net position (Assets in foreign currency - Liabilities in foreign currency) in the respective currencies.

For the purpose of the above table, it is assumed that the carrying value of the financial assets and liabilities as at the end of respective financial years remains constant thereafter. The exchange rate considered for the sensitivity analysis is the exchange rate prevalent as at each year end.

The sensitivity analysis might not be representative of inherent foreign exchange risk due to the fact that the foreign exposure at the end of the reporting period might not reflect the exposure during the year.

44.4 Interest rate risk management

Interest rate risk arises from borrowings. Debt issued at variable rates exposes the company to cash flow risk. Debt issued at fixed rate exposes the company to fair value risk.

Interest rate sensitivity analysis

Financial instruments affected by interest rate changes include secured long term loans from banks and secured short term loans from banks. The impact of a 1% change in interest rates on the profit of an annual period will be H 10.05 Crores (March 31, 2022: H 9.33 Crores) assuming the loans at each year end remain constant during the respective years. This computation does not involve a revaluation of the fair value of loans as a consequence of changes in interest rates. The computation also assumes that an increase in interest rates on floating rate liabilities will not necessarily involve an increase in interest rates on floating rate financial assets.

44.5 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit Risk to the company primarily arises from trade receivables. Credit risk also arises from cash and cash equivalents, financial instruments and deposits with banks and financial institutions and other financial assets.

The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Company has an internal mechanism of determining the credit rating of

the customers and setting credit limits. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The Company is not significantly exposed to geographical credit risk as the counterparties operate across various countries across the globe.

Credit risk on cash and cash equivalent is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

44.6 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual short term and long term cash flows, and by matching the maturity profiles of financial assets and liabilities.

The Company manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in note 21 offset by cash and bank balances) and total equity.

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

Notes:

(i) Explanation for variances exceeding 25%:

(a) Increase in Debt Service Coverage ratio is on account of increase in Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA)

(b) Increase in Return on Equity ratio is on account of reduction in Net loss (PAT)

(c) I ncrease in Net capital turnover ratio is on account of decrease in Inventory and increase in Sales Turnover.

(d) I ncrease in Net profit ratio is on account of reduction in Net loss (PAT)

(e) Increase in Return on capital employed ratio is on account of increase in Earnings Before Interest and Taxes (EBIT)

Definitions:

Debt is defined as non-current borrowings, current maturities of non-current borrowings and current borrowings and includes lease liabilities

Equity is defined as Equity share capital and Other equity.

Tangible Equity is defined as Equity share capital and Other equity less Goodwill less Intangible Assets

Earnings before interest,taxes, depreciation and amortisation (EBITDA) is defined as:

Profit for the year before exceptional items and taxes (add) Depreciation and Amortisation (add) Finance costs (less) interest income

Debt repayment is defined as actual non-current borrowings repaid during the year

Interest payments is defined as actual interest paid on borrowings during the year

Net profit (PAT) is defined as Profit for the year after tax

Cost of goods sold is defined as Cost of materials consumed, Purchases of stock-in-trade and Changes in inventories of finished goods and work-in-progress

Sales Turnover is defined as Sale of products and Sale of services

Earnings before interest and taxes (EBIT) is defined as:

Profit for the year before exceptional items and taxes (add) Finance costs (less) interest income

Working capital is defined as Currents Assets less Current Liabilities

Tangible Capital employed is defined as Equity and Debt less Goodwill less Intangible Assets

The Board of Directors in its meeting held on 29th April 2022 have considered and approved the withdrawal of the Scheme of amalgamation of Empyrean Lifesciences Private Limited, Hydra Active Pharma Sciences Private Limited and demerger of pharma business of Aurore Life Science Private Limited ("Aurore”) with the Company as the same is not financially viable. Aurore has not been able to achieve its financial goals set for FY22 due to weak demand for covid products and tactical opportunities. Further, there are uncertainties in the completion of the processes related to the Scheme due to disputes raised by one of the minority shareholder of the subsidiary of Aurore.

NOTE NO. 49

The Code on Social Security, 2020 (the Code) has been enacted, which would impact the contributions by the Company towards Provident Fund and Gratuity. The effective date from which the changes are applicable is yet to be notified. The Company will complete its evaluation and will give appropriate impact in its financial statements in the period in which the Code becomes effective and the related rules are published.

NOTE NO. 50 OTHER STATUTORY INFORMATION

(a) The Company does not have any Benami property, where any proceeding has been initiated or pending against the Company for holding any Benami property.

(b) The Company does not have any transactions with companies struck off.

(c) The Company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period,

(d) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

(e) The Company has no transaction not recorded in the books of accounts 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).

(f) The Company has borrowings from banks on the basis of security of current assets, the quarterly returns or statements of current assets has been filed by the Company with banks are in agreement with the books of accounts.

(g) The Company has not been declared willful defaulter by any bank or financial Institution or other lender.

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

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

(B) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries

(i) The Company has not received any fund from any person(s) or entity(ies),

including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the Company shall:

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

(B) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries,

NOTE NO. 51 AMENDMENTS EFFECTIVE FROM APRIL 1, 2023:

On March 31, 2023, the Ministry of Corporate Affairs (MCA) has notified Companies (Indian Accounting Standards) Amendment Rules, 2023. This notification has resulted into amendments in the following existing accounting standards which are applicable to the Company from April 1, 2023.

i. Ind AS 101 - First time adoption of Ind AS

ii. Ind AS 102 - Share-based payment

iii. Ind AS 103 - Business Combinations

iv. Ind AS 107 - Financial Instruments: Disclosures

v. Ind AS 109 - Financial Instruments

vi. Ind AS 115 -Revenue from Contracts with Customers

vii. Ind AS 1 - Presentation of Financial Statements

viii. Ind AS 8 - Accounting Policies, Changes in Accounting Estimates and Errors

ix. Ind AS 12 - Income Taxes

x. Ind AS 34 - Interim Financial Reporting

The Company is in the process of evaluating the impact of the above amendments on the Company’s financial statements.

NOTE NO. 52

The previous year’s figures have been re-grouped/ reclassified, where necessary to confirm to current year’s classification.

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Mar 31, 2018

NOTE NO. 1 BACKGROUND

Solara Active Pharma Sciences Limited, formerly known as SSL Pharma Sciences Limited, (hereinafter referred as “the Company”) is a public limited Company incorporated on February 23, 2017 under the provisions of Companies Act, 2013 with the object of, inter alia, undertaking the business of manufacturing, production, processing, formulating, sale, import, export, merchandising, distributing, trading of and dealing in active pharmaceutical ingredients. The Company has its registered address at 201, Devavrata, Sector 17, Vashi, Navi Mumbai 400 703. Also, refer note 35 on Composite Scheme of Arrangement.

The standalone Ind AS financial statements were approved by the Board of Directors and authorised for issue on May 19, 2018.

Since the Company was incorporated only in February 2017 and that the Company is preparing these financial information for the first time, these financial statements cover the period from inception until March 31, 2018. These financial statements comprise the Standalone Balance sheet of the Company as at March 31, 2018, Standalone Statement of Profit and Loss (including Other Comprehensive Income) and Standalone Cash flow statement for the period February 23, 2017 to March 31, 2018, Standalone statement of changes in equity as at March 31, 2018, and significant accounting policies and other explanatory information (together the “Standalone Ind AS Financial Statements).

(i) Fair value of Investment properties:

The Company obtains independent valuations for its investment properties once in three years. Accordingly, the fair value of the Company’s investment properties as at March 31, 2018 has been arrived at Rs.71.13 Million on the basis of a valuation carried out by independent valuers not related to the Company. The said valuers are registered with the authority which governs the valuers in India and have appropriate qualifications and relevant experience in the valuation of properties in the relevant locations. The inputs used are as follows:

a) Monthly market rent, taking into account the differences in location, and individual factors, such as frontage and size, between the comparables and the property; and

b) Capitalisation rate, taking into account the capitalisation of rental income potential, nature of the property, and prevailing market condition.

The Company has identified Human API business acquired from Sequent as a Cash Generating Units (CGU) and the goodwill has been allocated to this CGU for the purpose of impairment testing. This goodwill is tested for impairment at least on an annual basis or more frequently when there is an indication for impairment. As of March 31, 2018, the Directors of the Company have assessed the goodwill for impairment by determining the “value in use” of the CGU. The “value in use” of the CGU is determined as an aggregate of present value of cash flow projections covering a five year period and the terminal value. The terminal value of cash generating unit is arrived at by extrapolating cash flows of latest forecasted year to perpetuity using a constant long term growth rate of 3% p.a. The cash flows are discounted using a pre tax discount rate of 16.82%.

The growth rates of the cash generating unit have been considered based on the market conditions prevalent.

The management believes that the projections used by the management for determining the “Value in use” of cash generating unit are based on past experience of the business acquired and external sources of information and any reasonable possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash generating unit.

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

(ii) Detail of the rights, preferences and restrictions attaching to each class of shares outstanding equity shares of Rs.10/- each:

The Company has only one class of equity shares, having a par value of Rs.10/-. The holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the Company, after distribution to all preferential amounts. The distribution will be in proportion to number of equity shares held by the shareholders.

Details of security and terms of repayment for current borrowings:

Working capital loans from banks are secured by first pari passu charge over current assets of the Company and second pari passu charge on movable and immovable fixed assets of the Company.

In relation to the acquisition of the Human API business acquired from Sequent pursuant to the Scheme referred in Note 35, the Company is in the process of quantifying the tax losses that would be available to it for carry forward and setoff in the subsequent periods. As this amount would be determined based on the tax returns filed by the respective companies in November 2018, no deferred tax asset has been recognised in these financial statements on such losses that may be available to the Company. Necessary adjustment will be made in the subsequent period, upon determination of such losses.

Dues to micro and small enterprises have been admitted 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.

The Company is not subject to tax under normal provisions of the Income Tax Act, 1961, for the current period ended March 31, 2018. However, it is liable for Minimum Alternate Tax on its book profits taxable at 21.34%. Accordingly, the Company has made provision towards MAT amounting to Rs.4.17 Million on a book profit of Rs.19.50 Million.

Refer Note 20 for significant components of deferred tax assets and liabilities.

In addition, the Company has also incurred capital expenditure in such facilities of Rs.222.98 Million which has been capitalised under respective heads in the financial statements.

The amount quantified as research and development expenditure (both capital and revenue) is as certified by the management of the Company and relied upon by the auditors.

NOTE NO. 2 COMPOSITE SCHEME OF ARRANGEMENT BETWEEN THE COMPANY, STRIDES SHASUN LIMITED AND SEQUENT SCIENTIFIC LIMITED:

In accordance with the terms of the Composite Scheme of Arrangement (the ‘Scheme’) between the Company, Strides Shasun Limited (“Strides”) and Sequent Scientific Limited (“Sequent”), as approved by the National Company Law Tribunal, the Commodity API business of Strides and the Human API business of Sequent were demerged from respective Companies and transferred into the Company with the appointed date of October I, 2017 (“the appointed date”) for a consideration of equity shares to be issued by the Company to the equity shareholders of Strides and Sequent in the proportion of agreed share entitlement ratio. The effective date of the Scheme is March 31, 2018, the date on which all the requirements under the Companies Act, 2013, to give effect to the Scheme, were completed. Accordingly, the effect has been given in these Standalone Ind AS financial statements from the appointed date of the Scheme - October 1, 2017.

Pursuant to the Scheme, the Company allotted 24,674,267 equity shares to the shareholders of Strides and Sequent in the ratio of 1 equity share of Rs.10/- each of the Company for every 6 shares of Rs.10/- each held by the shareholders of Strides, and 1 equity share of Rs.10/- each of the Company for every 25 shares of Rs.2/each held by the shareholders of Sequent, on April

II, 2018, the effect of which has been given in these financial statements as on the appointed date of the Scheme. Further, in accordance with the terms of the Scheme, the authorised share capital of the Company is increased to Rs.300 Million represented by 30 Million equity shares of Rs.10 each.

As per the requirements of the Scheme, transfer of the above businesses into the Company have been accounted in accordance with the Ind AS notified under Section 133 of the Act, as on the appointed date of the Scheme as under:

a) Transfer of API business of Strides

(I) The Company has recorded the assets and liabilities of the API Business of Strides at their respective book values appearing in the books of Strides as on the appointed date.

(II) The face value of equity shares issued by the Company to the shareholders of Strides has been recorded to the credit of share capital account of the Company. The premium on issue of these equity shares has been recorded, to the credit of securities premium account, to the extent of difference between (i) the book value of the net assets (i.e. book value of assets and liabilities) recorded pursuant to (I) above and (ii) the face value of such shares allotted.

(III) Shares held by Strides in the Company prior to this Scheme has been cancelled and transferred to Capital reserve.

Principal Activity of API business of Strides:

The commodity API business of Strides being demerged into the Company is primarily focused in the therapeutic area of pain management. The commodity API business is carried out through two manufacturing facilities, located at Cuddalore and Pondicherry, which are transferred to the Company, pursuant to the Scheme.

b) Transfer of Human API business of Sequent

(I) Assets and liabilities of the Human API Business of Sequent have been recorded to reflect at their fair values as on the appointed date. The difference between the fair value of equity shares issued to the shareholders of Sequent and the net assets (i.e. fair value of assets and liabilities recorded as mentioned above), is recorded as goodwill.

(II) The face value of equity shares issued by the Company to the shareholders of Sequent has been recorded to the credit of share capital account of the Company. The premium on issue of these equity shares has been recorded to the credit of securities premium account, to the extent of difference between (i) the fair value of such shares so issued and (ii) the face value of such shares allotted.

Details of the fair value of assets and liabilities of the Human API business recorded by the Company as at

October 1, 2017 are as below:

* As on the date of finalisation of these Standalone Ind AS financial statements, the initial accounting for the above business combination has not been finalised in respect of deferred tax asset on brought forward losses from this acquisition as explained in note 20. Any consequential changes due to finalisation of initial accounting will be recognised in the subsequent period upon such finalisation.

Principal Activity of Human API business of Sequent:

The Human API business of Sequent comprises of a portfolio of niche APIs, carried out through three manufacturing facilities, located in Mangalore, (Karnataka), Mysore (Karnataka) and Mahad (Maharashtra) which are transferred to the Company, pursuant to the Scheme.

Upon the Scheme coming into effect, the investments in following entities, held by the respective businesses above, have also been transferred to the Company:

NOTE NO. 3 BUSINESS ACQUISITION:

The company entered into an agreement to acquire a R&D business at Bengaluru from Sovizen Life Sciences Private Limited and the transaction was completed on February 1, 2018.

Assets and liabilities of the R&D business have been recorded to reflect at their fair values as on the transaction closure date (i.e. February 1, 2018). The difference between the consideration paid and the fair value of the net assets acquired (i.e. fair value of assets and liabilities recorded as mentioned above) is recorded as goodwill.

Principal Activity of the R&D business acquired:

The R&D business at Bengaluru is a state-of-art new facility engaged in the development of generic API and is also engaged in the business of providing product development solutions to its clients.

NOTE NO. 4 EMPLOYEE BENEFITS PLANS

Defined contribution plan

The Company makes contributions to provident fund and employee state insurance schemes which are defined contribution plans, for qualifying employees. Under the schemes, the company is required to contribute a specified percentage of the payroll cost to fund the benefits. The company recognised Rs.38.82 Million for provident fund contributions, Rs.2.33 Million for employee state insurance scheme contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

Defined benefit plan

The Company operates a gratuity plan, a defined employee benefit scheme covering qualifying employees. The benefit vests upon completion of five years of continuous service and once vested it is payable to employees on retirement or on termination of employment. In case of death while in service, the gratuity is payable irrespective of vesting.

Composition of the plan assets

The fund is managed by LIC and SBI, the fund manager. The details of composition of plan assets managed by the fund manager is not available with the company. However, the said funds are subject to Market risk (such as interest risk, investment risk, etc.).

The said benefit plan is exposed to actuarial risks such as longevity risk and salary risk.

The current service cost and the net interest expense for the year are included in the ‘Employee benefits expense’ line item in the standalone statement of profit and loss. The remeasurernent of the net defined benefit liability is included in other comprehensive income.

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

If the discount rate increases/(decrease) by 1%, the defined benefit obligation would be Rs.313.59 Million (Rs.349.70 Million) as at March 31, 2018

If the expected salary growth increases/(decrease) by 1%, the defined benefit obligation would be Rs.348.71 Million (Rs.314.02 Million) as at March 31, 2018

The sensitivity analysis presented above may not be representative of the actual change in 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 at 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.

NOTE NO. 5 OPERATING LEASES

The Company’s significant operating lease arrangements are mainly in respect of its residential and office premises. The cancellable arrangements can be terminated by either party after giving due notice. The lease rent expense recognized during the period amounts to Rs.18.61 Million. The schedule for future minimum lease payments in respect of non-cancellable operating leases is set out below:

NOTE NO. 6 RELATED PARTY INFORMATION

Holding Company

Strides Shasun Limited (Upto September 30, 2017)

Wholly owned subsidiary:

Shasun USA Inc., USA

Other Subsidiaries:

Sequent Pemems Private Limited Chemsynth Laboratories Private Limited

Enterprises owned or significantly influenced by KMP or person holding significant interest in the Company:

Strides Shasun Limited, India (From October 01, 2017)

Devendra Estates LLP, India Devicam LLP

Alivira Animal Health Limited, India Sequent Scientific Limited, India Sterling Pharma Solutions Limited, UK Tenshi Life Sciences Private Limited

Aurore Life Sciences Private Limited

Tenshi Kaizen Private Limited (formerly Higher Pharmatech Private Limited)

Olene Life Sciences Private Limited

GMS Tenshi Holdings Pte Limited

Stelis Biopharma Private Limited

Sovizen Life Sciences Private Limited

Tenshi Active Pharma Sciences Limited

Styrax Pharma Private Limited

Tenshi Life Care Private Limited

Triphase Pharmaceuticals Private Limited

Oncobiologics Inc.

Naari Pharma Private Limited Sequent Research Limited, India Chayadeep Properties Private Limited, India Tenshi Kaizen Inc., USA Tenshi Kaizen USA Inc., USA

NOTE NO. 7 SEGMENT REPORTING

The Company’s operations has only one reportable segment viz Active Pharmaceutical Ingredient (API). Accordingly no separate disclosure of segment information has been made.

8.1 Fair value of financial assets and financial liabilities that are not measured at fair value (but fair value disclosures are required)

Except as detailed in the following table, the Company considers that the carrying amounts of financial assets and financial liabilities recognised in the financial statements at amortized cost will reasonably approximate their fair values.

Financial risk management objectives

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Company is foreign exchange risk. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:

8.2 Foreign currency risk management

The Company is exposed to foreign exchange risk due to:

- debt availed in foreign currency

- exposure arising from transactions relating to purchases, revenues, expenses, etc., to be settled (within and outside the group) in currencies other than the functional currency of the respective entities

The details of Unhedged foreign currency exposure are as follows:

Foreign currency sensitivity analysis

Financial instruments affected by changes in foreign exchange rates include External Commercial Borrowings (ECBs) and Working capital loans. The Company considers US Dollar and the Euro to be principal currencies which require monitoring and risk mitigation. The Company is exposed to volatility in other currencies including the Great Britain Pounds (GBP) and the Japanese Yen (JPY). The impact on account of 5% appreciation / depreciation in the exchange rate of the above foreign currencies against INR is given below:

The impact on profit has been arrived at by applying the effects of appreciation / deprecation effects of currency on the net position (Assets in foreign currency - Liabilities in foreign currency) in the respective currencies.

The exchange rate considered for the sensitivity analysis is the exchange rate prevalent as at each period end.

The sensitivity analysis might not be representative of inherent foreign exchange risk due to the fact that the foreign exposure at the end of the reporting period might not reflect the exposure during the period.

8.3 Interest rate risk management

Interest rate risk arises from borrowings. Debt issued at variable rates exposes the company to cash flow risk. Debt issued at fixed rate exposes the company to fair value risk.

Interest rate sensitivity analysis

Financial instruments affected by interest rate changes include Secured Long term loans from banks, Secured Long term loans from others and Secured Short term loans from banks. The impact of a 1% change in interest rates on the profit of an annual period will be Rs.33.78 Million assuming the loans at each year end remain constant during the respective years. This computation does not involve a revaluation of the fair value of loans as a consequence of changes in interest rates. The computation also assumes that an increase in interest rates on floating rate liabilities will not necessarily involve an increase in interest rates on floating rate financial assets.

8.4 Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. Credit Risk to the company primarily arises from trade receivables. Credit risk also arises from cash and cash equivalents, financial instruments and deposits with banks and financial institutions and other financial assets.

The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Company has an internal mechanism of determining the credit rating of the customers and setting credit limits. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee annually. Ongoing credit evaluation is performed on the financial condition of accounts receivable.

The credit risk arising from receivables is subject to currency risk in that the receivables are predominantly denominated in USD, EUR and GBP and any appreciation in the INR will affect the credit risk. Further, the Company is not significantly exposed to geographical distribution risk as the counterparties operate across various countries across the Globe.

The credit risk on financial instruments like forward exchange contracts is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

8.5 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium-term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual short term and long term cash flows, and by matching the maturity profiles of financial assets and liabilities.

8.1.1 Liquidity analysis for Non-Derivative Liabilities

The following table details the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

NOTE NO. 9 CAPITAL MANAGEMENT

The Company manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in notes 18 and 23 offset by cash and bank balances) and total equity.

The Company reviews the capital structure on a semi-annual basis to ensure that it is in compliance with the required covenants. The Company has a target gearing ratio of 1:1 determined as the proportion of net debt to total equity. The gearing ratio at March 31, 2018 is 0.76.

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

Gearing ratio

The gearing ratio at end of the reporting period was as follows.