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Notes to Accounts of Syngene International Ltd.

Mar 31, 2023

(a) Land includes land held on lease under perpetual basis: Gross carrying amount - Rs. 661 (31 March 2022 - Rs. 661).

(b) Plant and equipment includes computers.

(c) Buildings with a gross carrying amount of Rs. 4,187 as at 31 March 2023 (as at 31 March 2022 - Rs. 4,035 ) have been constructed on leasehold land obtained by the Company on lease basis from Biocon Limited, the holding Company.

(d) Additions to property, plant and equipment includes additions related to borrowing cost amounting to Rs. 72 (31 March 2022 - Rs. 67).

(e) Refer note 13(i) and 13(ii) for secured borrowings obtained for Property, plant and equipment.

(f) Refer note 31 (ii) for disclosure of contractual commitments for the acquisition of property, plant and equipment and capital work-in-progress.

(a) During the year, the Company has recognised rental income of Rs. 403 (31 March 2022 : Rs. 344) in the statement of profit and loss for investment property. The fair value of investment property as at 31 March 2023 is Rs. 481 (31 March 2022 : Rs. 385).

(b) Investment property with a gross carrying amount of Rs. 146 (31 March 2022 : Rs. 111) have been constructed on leasehold land obtained by the Company on lease basis from Biocon Limited.

(c) Refer note 31 (ii) for disclosure of contractual commitments for the acquisition of investment property.

(i) In the year ending 31 March 2021, the Company invested Rs. 100 million in Immuneel Therapeutics Private Limited. In the year ending 31 March 2022, additional funding from external investors were received resulting in a dilution of the Company''s equity interest. The gain on fair valuation from Rs. 100 million to Rs. 214 million is recognised in other comprehensive income. During the year ended 31 March 2023, the Company based on a fair valuation recorded a fair value increase in its investment carrying value by Rs. 109 million.

(ii) Terms of conversion: 1 compulsory convertible preference share of face value Rs. 100/- each will convert to 1 equity share of face value Rs. 100/- at end of the tenure of 20 years from allotment.

(iii) Terms of conversion: 1 compulsory convertible debentures of face value Rs. 1000/- each will convert to 1 equity share of face value Rs. 100/- at end of the tenure of 20 years from allotment.

# Inter corporate deposits with financial institutions yield fixed interest rate.

* Less than Rs. 0.5 million.

(ii) Terms / rights attached to equity shares

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

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders.

12(b). Other equity

Securities premium

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Retained earnings

The amount represents surplus in statement of profit and loss not transferred to any reserve and can be distributed by the Company as dividends / issue of bonus shares to its equity shareholders. The amount also includes retained earnings of Syngene Employee Welfare Trust.

Treasury shares

The amount represents cost of own equity instruments that are acquired [treasury shares] by the ESOP trust and is disclosed as a deduction from other equity.

Special Economic Zone (SEZ) reinvestment reserve

The SEZ Re-Investment reserve has been created out of profit of eligible SEZ units in terms of the provisions of Section 10AA(1)(ii) of the Income-Tax Act, 1961. The reserve has been utilised for acquiring new plant and machinery for the purpose of its business in terms of section 10AA(2) of the Income-Tax Act, 1961.

Share based payment reserve

The Company has established share based payment plan for certain categories of employees of the Company. Also refer Note 33 for further details on these plans.

Cash flow hedging reserves

The cash flow hedging reserve represents the cumulative effective portion of gains or losses (net of tax) arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges.

Other Items of other comprehensive income

Other Items of other comprehensive income represents re-measurements of the defined benefits plan.

(i) The Company had entered into external commercial borrowing agreement dated 21 September 2020 to borrow USD 50 million (Rs. 4,109) term loan facility. The facility is borrowed to incur capital expenditure at Bengaluru, Hyderabad and Mangaluru premises of the Company and was used for this specific purpose. The facility carries an interest rate of Libor 1.30% and are to be paid in three instalments of USD 7.5 million in September 2023, USD 12.5 million in September 2024 and USD 30 million in September 2025. The facility is secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company. The Company is compliant with the financial covenants stipulated under the agreement.

(ii) The Company had entered into foreign currency term loan agreement dated 30 March 2021 to borrow USD 20 million (Rs. 1,644) term loan facility. The facility is borrowed to incur capital expenditure at Bengaluru, Hyderabad and Mangaluru premises of the Company and was used for this specific purpose. The facility carries an interest rate of Libor 0.87% and are to be paid in three instalments of 15%, 25% and 60% from end of 3 years, 4 years and 5 years respectively from the date of origination. The facility is secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company. The Company is compliant with the financial covenants stipulated under the agreement.

(iii) The Company had obtained foreign currency denominated short term unsecured pre-shipment credit loans of Rs. 2,862 (USD 35 million) and the balance as on 31 March 2023 is Nil [31 March 2022 : Rs. 2,581 (USD 34 million)] that carries interest rate of SOFR 40 to 60 Bps (31 March 2022: SOFR 0.20% to 0.30%). Loan has been entirely paid during the year.

(iv) Information about the Company''s exposure to interest rate, foreign currency and liquidity risks is included in Note 28.

27. Employee benefit plans

(i) The Company has a defined benefit gratuity plan as per the Payment of Gratuity Act, 1972 (''Gratuity Act''). Under the Gratuity Act, employee who has completed five years of service is entitled to specific benefit with no monetary limit. The level of benefit provided depends on the employee''s length of service and salary at retirement/termination age. The gratuity plan is a funded plan and the Company makes contributions to a recognised fund in India.

The plan assets are maintained with HDFC Life Insurance Company Limited (HDFC Life) in respect of gratuity scheme for employees of the Company. The details of investments maintained by the HDFC Life are not available with the Company and not disclosed. The expected rate of return on plan assets is 7.31% p.a. (31 March 2022: 6.4% p.a.). The Company actively monitors how the duration and expected yeild of the investments are matching the expected outflows arising from the employee benefit obligations.

The cost of the defined benefit plans and other long term benefits are determined using actuarial valuations. Actuarial valuations involve making various assumptions that may differ from actual developments in the future. These includes the determination of the discount rate, future salary increases and mortality rate. Due to these complexity involved in the valuation it is highly sensitive to the changes in these assumptions. All assumptions are reviewed at reporting date. The present value of the defined benefit obligation and the related current service cost and planned service cost were measured using the projected unit cost method.

(iv) Risk Exposure

These defined benefit plans typically expose the Company to actuarial risks as under :

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

b) Interest rate risk: A decrease in bond interest rate will increase the plan liability.

c) Longevity risk: The present value of the defined plan liability is calculated by reference to the best estimate of the mortality of plan participants. An increase in the life expectancy will increase the plan''s liability.

d) Salary risk: Higher than expected increase in salary will increase the defined benefit obligation.

# Level 3 investments comprises of unquoted equity instruments. The fair valuation exercise has the following key assumptions: (a)DCF valuation after considering WACC and post startup discount (b)Comparable company valuation approach using 8x multiple of revenue. The fair value of Level 3 investments are based on the market comparable approach of similar companies using 8x multiple of revenue. The Company has considered the lower end of the valuation considering the same on a pre-revenue development stage. They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk.

# Includes equity instruments of wholly owned subsidiary at cost aggregating to Rs. 223.

(a) The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short term nature.

(b) There have been no transfers between level 1, 2 and 3 needs to be made.

(c) The Company enters into derivative financial instruments with various counterparties. Derivatives are valued using valuation techniques in consultation with market expert. The most frequently applied valuation technique include forward pricing, swap models and Black Scholes Merton Model (for options valuation), using present value calculations. The models incorporate various inputs including foreign exchange forward rates, interest rate curve and forward rates curve.

Measurement of fair values

Fair value of liquid mutual funds are based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

Sensitivity analysis

For the fair values of forward/option contracts of foreign currencies, reasonably possible changes at the reporting date to one of the significant observable inputs, holding other inputs constant, would have the following effects.

B. Financial risk management

The Company''s activities expose it to a variety of financial risks : credit risk, market risk and liquidity risk.

(i) Risk management framework

The Company''s risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

(ii) Credit risk

Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables and unbilled revenues) and from its investment activities, including deposits with banks and financial institutions, investments in mutual funds and other financial instruments.

The Company has established a credit mechanism under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, where available, and other publicly available financial information. Outstanding customer receivables are regularly monitored.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The maximum exposure to credit risk as at reporting date is primarily from trade receivables and unbilled revenue amounting to Rs. 4,844 (31 March 2022: Rs 5,082). The movement in allowance for impairment in respect of trade receivables during the year was as follows:

Other than trade receivables the Company has no significant class of financial assets that is past due but not impaired. There is no receivable from customer (31 March 2022 : Nil) of the Company''s receivables which is more than 10 percent of the Company''s total receivables.

Credit risk on investments, cash and cash equivalent and derivatives is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. All these banks and financial institutions are high-rate funds of minimum AA and above. Investments primarily include investment in liquid mutual fund units and non-convertible debentures.

(iii)Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. In addition, the Company maintains line of credits as stated in Note 13.

(iv) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices.

Foreign currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently, the Company is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The Company holds derivative instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates and foreign currency exposure.

Sensitivity analysis

The sensitivity of profit or loss to changes in exchange rates arises mainly from foreign currency denominated financial instruments and the impact on other components of equity arises from foreign exchange forward/option contracts designated as cash flow hedges.

Derivative financial instruments

The Company uses derivative financial instruments exclusively for hedging financial risks that arise from its commercial business or financing activities. The Company''s Treasury team manages its foreign currency risk by hedging forcasted transactions like sales, purchases and capital expenditures. When a derivative is entered for hedging, the Company matches the terms of those derivatives to the underlying exposure. All identified exposures are managed as per the policy duly approved by the Board of Directors.

(b) Sensitivity

Fixed rate borrowings:

The Company policy is to maintain its long-term borrowings at fixed rate using interest rate swaps to achieve this when necessary. They are therefore not subject to interest rate risk as defined under Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

29. Capital management

The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor and customer confidence and to ensure future development of its business. The Company focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company.

The Company''s goal is to continue to be able to return excess liquidity to shareholders by continuing to distribute annual dividends in future periods. The amount of future dividends of equity shares will be balanced with efforts to continue to maintain an adequate liquidity status.

31. Contingent liabilities and commitments (to the extent not provided for) (i) Contingent liabilities

31 March 2023

31 March 2022

(a) Claims against the Company not acknowledged as debt

6,219

5,478

The above includes:

(I) Income tax matters under dispute for notices and orders received relating to

6,206

5,454

financial year 2008 - 09 to 2020 - 21 (31 March 2022 : financial year 2002 - 03 to 2019 - 20)

(II) Indirect tax matters under dispute for notices and orders received relating to

13

24

financial year 2009-10 to 2017-18 (31 March 2022 : financial year 2009 - 10 to 2017 - 18)

(III) In light of judgment of Honourable Supreme Court dated 28th February 2019 on the definition of "Basic Wages" under the Employees Provident Funds & Misc. Provisions Act, 1952 and based on Company''s evaluation, there are significant uncertainties and numerous interpretative issues relating to the judgement and hence it is unclear as to whether the clarified definition of Basic Wage would be applicable prospectively or retrospectively. The amount of the obligation therefore cannot be measured with sufficient reliability for past periods and hence has currently been considered to be a contingent liability.

Including the matters disclosed above, the Company is involved in taxation matters that arise from time to time in the ordinary course of business for years that are under assessment. Judgment is required in assessing the range of possible outcomes for some of these tax matters, which could change substantially over time as each of the matter progresses depending on experience on actual assessment proceedings by tax authorities and other judicial precedents. Based on its internal assessment supported by external legal counsel views, if any, the Company believes that it will be able to sustain its positions if challenged by the authorities and accordingly no additional provision is required for these matters. Management is of the view that above matters will not have any material adverse effect on the Company''s financial position and results of operations.

(b) Guarantees

31 March 2023

31 March 2022

Guarantees given by banks on behalf of the Company for contractual obligations of the Company.

- * -

The necessary terms and conditions have been complied with and no liabilities have arisen. (ii) Commitments

31 March 2023

31 March 2022

Estimated amount of contracts remaining to be executed on capital account not provided for, net of advances

1,836 1,163

* Less than Rs. 0.5 million.

32. Segmental Information

Operating segments

The Company is engaged in a single operating segment of providing contract research and manufacturing services. Accordingly, there are no additional disclosures to be provided Ind AS 108 ''Operating Segments'' other than those already provided in these standalone financial statements.

Major customer

Revenue from one customer (31 March 2022 - one customer) of the Company''s Revenue from operations aggregates to Rs. 6,135 (31 March 2022 - Rs. 5,645) which is more than 10 percent of the Company''s total revenue.

33. Share based compensation

Syngene ESOP Plan 2011

On 20 July 2012, Syngene Employee Welfare Trust (''Trust'') was created for the welfare and benefit of the employees and directors of the Company and administrated by the Nomination and Remuneration Committee. The Board of Directors approved the employee stock option plan of the Company. On 31 October 2012, the Trust subscribed into the equity shares of the Company using the proceeds from interest free loan of Rs. 150 million obtained from the Company.

Grant

Pursuant to the Scheme, the Company has granted options to eligible employees of the Company under Syngene Employee Stock Option Plan - 2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs. 11.25 [31 March 2022 : Rs. 11.25] per share (Face Value of Rs. 10 per share).

Syngene Restricted Stock Unit Long Term Incentive Plan 2020

The Board of Directors of the Company on 24 April 2019 and the Shareholders of the Company in the Annual General Meeting held on 24 July 2019 approved the Syngene Restricted Stock Unit Long Term Incentive Plan FY 2020. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 25%, 25% and 25% of the total grant at the end of first, second, third and fourth year from the date of first grant, respectively, with an exercise period of 5 years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs. 10 per share (Face Value of Rs. 10 per share).

35. Exceptional items

''The Ministry of Commerce and Industry, Government of India issued a Gazette notification number 29/2015-2020 dated 23 September 2021 on Service Exports from India Scheme (SEIS) for services rendered in financial year 2019 - 2020 with the total entitlement capped at Rs. 50 million per exporter for the period. The Company has reversed the SEIS claim receivables of Rs. 307 million for the financial year 2019-2020 and the same has been presented under Exceptional items in this standalone financial statement for the year ended 31 March 2022.

Out of required amount of Rs 98 to be spent for financial year 2022-23, the Board of Directors has decided to allocate Rs 16 of the budget for year ending 31 March 2023 towards promoting education, academic sponsorship and research grants. However, the project was delayed. The Board has approved for transfer of unspent amount of Rs 16 for the year ending 31 March 2023 to a separate Unspent CSR account for utilisation during FY 2023-24.

Out of required amount Rs 59 unspent from previous financial years, the Board of Directors has decided to allocate Rs 3 of the budget towards COVID testing as well as vaccination activities and Rs. 1 towards academic sponsorship and research grants respectively. However, due to the downsurge of Covid-19 during the year, there was limited requirement of vaccines and the project was delayed. The Board has approved the retention of unspent amount of Rs 4 for the year ending 31 March 2023 in a separate Unspent CSR account for utilisation during FY 2023-24.

(e) The Company has undertaken CSR activities in nature of Community COVID 19 testing, vaccination program, mass rapid transit, women''s safety and empowerment, promoting education, school programs, smart clinic and health during the year ended 31 March 2023 and 31 March 2022. All the above are ongoing projects.

Explanation for variance more than 25% in the above ratios:

(i) Improvement in debt equity ratio is due to repayment of short term borrowings for Rs. 2,581 during the year ended 31 March 2023 compared to Rs. Nil for the year ended 31 March 2022.

(ii) Decline in debt service coverage ratio is due to increase in finance cost and repayment of short term borrowings for Rs. 2,581 during the year ended 31 March 2023 compared to Rs. Nil for the year ended 31 March 2022.

(iii) Decline in inventory turnover ratio is on account of expansion in businesses of manufacturing services of the Company and also increase in the level of inventories to meet the timelines of critical projects.

39. Other Statutory Information :

(i) The Company does not have any Benami property or any proceeding is pending against the Company for holding any Benami property.

(ii) The Company do not have any transactions with companies struck off.

(iii) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period.

(iv) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

(v) The Company has not advanced or loaned or invested any funds (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).

(vi) The Company has not received any fund from any parties (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(vii) The Company is not classifed as wilful defaulter.

(viii) The Company doesn''t have any transaction which is 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.

40. On 27 April 2022, the Board of Directors of the Company have approved an allotment of 638,000 equity shares of Rs. 10/-(Rupees Ten each) of the Company to Syngene Employee Welfare Trust at face value pursuant to the shareholders'' approval at the Annual General Meeting on 24 July 2019 to allot fresh equity shares upto 1.67% of the paid-up equity capital of the Company in tranches for the purpose of implementation of the Syngene International Limited - Restricted Stock Unit Long Term Incentive Plan FY 2020.

41. Acquisition through slump sale :

On 02 August 2022, the Company''s Board of Directors approved the acquisition of certain laboratory facilities along with a team of scientists from Biofusion Therapeutics Limited, a fellow subsidiary, through a slump sale of assets and liabilities for a consideration of Rs. 182 million. In accordance with Ind AS 103, Business combinations, the acquisition qualified to be a business combination between entities under common control. Accordingly, acquisition was accounted for at book values with the difference between consideration paid and balances taken over being recorded in reserves. The financial information, in respect of prior periods, as if the business combination had occurred from the beginning of the preceding period in these standalone financial statements have not been restated as the impact was considered to be immaterial.

The following table summarises major class of the assets and liabilities acquired through slump sale as on date of acquisition:

43. On 27 April 2022, the Board of Directors of the Company proposed a final dividend of 10% or Rs. 1 per equity share as on the record date for distribution of the final dividend (comprising of a regular dividend of 5% or Rs. 0.5 per equity share and an additional special dividend of 5% or Rs. 0.5 per equity share). The shareholders approved the dividend in the Annual General Meeting held on 20 July 2022 and was subsequently paid.

44. Events after reporting period:

(a) On 26 April 2023, the Board of Directors of the Company have approved an allotment of 580,500 equity shares of Rs. 10/- (Rupees Ten each) of the Company to Syngene Employee Welfare Trust at face value pursuant to the shareholders'' approval at the Annual General Meeting on 24 July 2019 to allot fresh equity shares upto 1.67% of the paid-up equity capital of the Company in tranches for the purpose of implementation of the Syngene International Limited - Restricted Stock Unit Long Term Incentive Plan FY 2020.

(b) On 26 April 2023, the Board of Directors recommended a final dividend of Rs. 1.25 per equity share of Rs. 10/-(comprising a regular dividend of Rs.0.5 per share and a special additional dividend of Rs. 0.75 per share to mark the 30th anniversary of the founding of the Company in November 1993). The proposed dividend is subject to the approval of the shareholders in the Annual General Meeting.

45. Prior year''s comparatives

Previous year''s figures have been regrouped / reclassified, where necessary, to conform to current year''s classification.


Mar 31, 2022

(a) Land includes land held on lease under perpetual basis: Gross carrying amount - Rs. 661 (31 March 2021 - Rs. 661).

(b) Plant and equipment includes computers.

(c) Buildings with a gross carrying amount of Rs. 4,035 as at 31 March 2022 (as at 31 March 2021 - Rs. 3,786 ) have been constructed on leasehold land obtained by the Company on lease basis from Biocon Limited, the holding Company.

(d) Additions to property, plant and equipment includes additions related to borrowing cost amounting to Rs. 67 (31 March 2021 - Rs. 10).

(e) During the year ended 31 March 2021, a portion of facility was reclassified as investment property [refer note 3(c)], as the Company leased out the facility to a related party.

(f) Refer note 31 (ii) (a) for disclosure of contractual commitments for the acquisition of property, plant and equipment and capital work-in-progress.

(a) During the year, the Company has recognised rental income of Rs. 344 (31 March 2021 : Rs. 222) in the statement of profit and loss for investment property. The fair value of investment property as at 31 March 2022 is Rs. 385 (31 March 2021 : Rs. 376).

(b) Investment property with a cost of Rs. 111 (31 March 2021 : Rs. 84) have been constructed on leasehold land obtained by the Company on lease basis from Biocon Limited.

(c) Refer note 31 (ii) (a) for disclosure of contractual commitments for the acquisition of investment property.

(i) In the year ending 31 March 2021, the Company invested Rs. 100 Mn in Immuneel Therapeutics Private Limited. In the year ending 31 March 2022, additional funding from external investors were received resulting in a dilution of the Company''s equity interest. The gain on fair valuation from Rs. 100 Mn to Rs. 214 Mn is recognised in Other comprehensive income.

(ii) Terms of conversion: 1 compulsory convertible preference share of face value Rs. 100/- each will convert to 1 equity share of face value Rs. 100/- at end of the tenure of 20 years from allotment.

* Inter corporate deposits with financial institutions yield fixed interest rate.

(ii) Terms / rights attached to equity shares

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

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders.

Other equity

Securities premium

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

Retained earnings

The amount represents surplus in statement of profit and loss not transferred to any reserve and can be distributed by the Company as dividends / issue of bonus shares to its equity shareholders. The amount also includes retained earnings of Syngene Employee Welfare Trust.

Treasury shares

The amount represents cost of own equity instruments that are acquired [treasury shares] by the ESOP trust and is disclosed as a deduction from other equity.

Special Economic Zone (SEZ) reinvestment reserve

The SEZ Re-Investment reserve has been created out of profit of eligible SEZ units in terms of the provisions of Section 10AA(1)(ii) of the Income-Tax Act, 1961. The reserve has been utilised for acquiring new plant and machinery for the purpose of its business in terms of section 10AA(2) of the Income-Tax Act, 1961.

Share based payment reserve

The Company has established share based payment plan for certain categories of employees of the Company. Also refer Note 33 for further details on these plans.

Cash flow hedging reserves

The cash flow hedging reserve represents the cumulative effective portion of gains or losses (net of tax) arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges.

Other Items of other comprehensive income

Other Items of other comprehensive income represents re-measurements of the defined benefits plan.

(i) The Company had entered into external commercial borrowing agreement dated 21 September 2020 to borrow USD 50 million (Rs. 3,796) term loan facility. The facility is borrowed to incur capital expenditure at Bangalore, Hyderabad and Mangaluru premises of the Company and was used for this specific purpose. The facility carries an interest rate of Libor 1.30% and are to be paid in three instalments of USD 7.5 million in September 2023, USD 12.5 million in September 2024 and USD 30 million in September 2025. The facility is secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company. The Company is compliant with the financial covenants stipulated under the agreement.

(ii) The Company has entered into foreign currency term loan agreement dated 30 March 2021 to borrow USD 20 million (Rs. 1,519) term loan facility. The facility is borrowed to incur capital expenditure at Bangalore, Hyderabad and Mangaluru premises of the Company and was used for this specific purpose. The facility carries an interest rate of Libor 0.87% and are to be paid in three instalments of 15%, 25% and 60% from end of 3 years, 4 years and 5 years respectively from the date of origination. The facility is secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company. The Company is compliant with the financial covenants stipulated under the agreement.

(iii) The Company has obtained foreign currency denominated short term unsecured pre-shipment credit loans of Rs. 2,581 (USD 34 million) [31 March 2021 : Rs. 2,599 (USD 35.5 million)] that carries interest rate of SOFR 0.20% to 0.30% [31 March 2021 : Libor 0.20% to 0.30%]. The loans are repayable after the end of 6 months from the date of its origination.

(iv) Information about the Company''s exposure to interest rate, foreign currency and liquidity risks is included in Note 28.

(All amounts are in Indian Rupees Million, except share data and per share data, unless otherwise stated)

(i) The remuneration to the key managerial personnel does not include the provisions made for gratuity and compensated absences, as they are determined on an actuarial basis for the Company as a whole.

(ii) Share based compensation expense allocable to key management personnel is Rs. 97 (31 March 2021 : Rs. 133), which is not included in the remuneration disclosed above.

(iii) Effective from 1 October 2006, the Company has entered into an arrangement for lease of land on lease basis and a service agreement with ''Biocon SEZ Developer'' of Biocon Limited for availing certain facilities and services. The facility charges of Rs. 185 (Year ended 31 March 2021 : Rs. 129) and power charges (including other charges) of Rs. 19 (Year ended 31 March 2021

: Rs. 9) have been charged by Biocon Limited for the year ended 31 March 2022.

(v) The above disclosures include related parties as per IND-As 24 on "Related Party Disclosures" and Companies Act, 2013.

(vi) All transactions with these related parties are priced on an arm''s length basis and none of the balances are secured.

. Employee benefit plans

(i) The Company has a defined benefit gratuity plan as per the Payment of Gratuity Act, 1972 (''Gratuity Act''). Under the Gratuity Act, employee who has completed five years of service is entitled to specific benefit with no monetary limit. The level of benefit provided depends on the employee''s length of service and salary at retirement/termination age. The gratuity plan is a funded plan and the Company makes contributions to a recognised fund in India.

The plan assets are maintained with HDFC Life Insurance Company Limited (HDFC Life) in respect of gratuity scheme for employees of the Company. The details of investments maintained by the HDFC Life are not available with the Company and not disclosed. The expected rate of return on plan assets is 6.4% p.a. (31 March 2021: 6.3% p.a.). The Company actively monitors how the duration and expected yeild of the investments are matching the expected outflows arising from the employee benefit obligations.

The cost of the defined benefit plans and other long term benefits are determined using actuarial valuations. Actuarial valuations involve making various assumptions that may differ from actual developments in the future. These includes the determination of the discount rate, future salary increases and mortality rate. Due to these complexity involved in the valuation it is highly sensitive to the changes in these assumptions. All assumptions are reviewed at reporting date. The present value of the defined benefit obligation and the related current service cost and planned service cost were measured using the projected unit cost method.

Sensitivity of significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of defined benefit obligation by one percentage, keeping all other actuarial assumptions constant. Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumption shown.

As of 31 March 2022 and 31 March 2021, the plan assets have been invested in insurer managed funds and the expected contribution to the fund during the year ending 31 March 2022, is approximately Rs 61 (31 March 2021 - Rs 45).

(iv) Risk Exposure

These defined benefit plans typically expose the Company to actuarial risks as under :

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

b) Interest rate risk: A decrease in bond interest rate will increase the plan liability.

c) Longevity risk: The present value of the defined plan liability is calculated by reference to the best estimate of the mortality of plan participants. An increase in the life expectancy will increase the plan''s liability.

d) Salary risk: Higher than expected increase in salary will increase the defined benefit obligation.

(a) The fair value of trade receivables, trade payables and other current financial assets and liabilities is considered to be equal to the carrying amounts of these items due to their short term nature.

(b) There have been no transfers between level 1, 2 and 3 needs to be made.

(c) The Company enters into derivative financial instruments with various counterparties. Derivatives are valued using valuation techniques in consultation with market expert. The most frequently applied valuation technique include forward pricing, swap models and Black Scholes Merton Model (for options valuation), using present value calculations. The models incorporate various inputs including foreign exchange forward rates, interest rate curve and forward rates curve.

Measurement of fair values

Fair value of liquid mutual funds are based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

Sensitivity analysis

For the fair values of forward/option contracts of foreign currencies, reasonably possible changes at the reporting date to one of the significant observable inputs, holding other inputs constant, would have the following effects.

Financial risk management

The Company''s activities expose it to a variety of financial risks : credit risk, market risk and liquidity risk.

(i) Risk management framework

The Company''s risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

(ii) Credit risk

Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables and unbilled revenues) and from its investment activities, including deposits with banks and financial institutions, investments in mutual funds and other financial instruments.

The Company has established a credit mechanism under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, where available, and other publicly available financial information. Outstanding customer receivables are regularly monitored.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The maximum exposure to credit risk as at reporting date is primarily from trade receivables and unbilled revenue amounting to Rs. 5,082 (31 March 2021: Rs 4,744). The movement in allowance

Other than trade receivables the Company has no significant class of financial assets that is past due but not impaired.

There is no receivable from customer (31 March 2021 : Nil) of the Company''s receivables (31 March 2021 : Nil) which is more than 10 percent of the Company''s total receivables.

Credit risk on investments, cash and cash equivalent and derivatives is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units and non-convertible debentures.

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

(iv) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices.

Foreign currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently, the Company is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The Company holds derivative instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates and foreign currency exposure.

Derivative financial instruments

The Company uses derivative financial instruments exclusively for hedging financial risks that arise from its commercial business or financing activities. The Company''s Treasury team manages its foreign currency risk by hedging forcasted transactions like sales, purchases and capital expenditures. When a derivative is entered for hedging, the Company matches the terms of those derivatives to the underlying exposure. All identified exposures are managed as per the policy duly approved by the Board of Directors.

Cash flow and fair value interest rate risk

The Company''s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. During the year ended 31 March 2022 and 31 March 2021 the Company''s borrowings at variable rate were mainly denominated in USD.

(b) Sensitivity

Fixed rate borrowings:

The Company policy is to maintain its long-term borrowings at fixed rate using interest rate swaps to achieve this when necessary. They are therefore not subject to interest rate risk as defined under Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

Variable rate borrowings:

A reasonably possible change of 100 bps would have increased / (decreased) profit and loss and equity by Rs. 15 (31 March 2021 : Rs. 15).

29. Capital management

The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor and customer confidence and to ensure future development of its business. The Company focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company.

The Company''s goal is to continue to be able to return excess liquidity to shareholders by continuing to distribute annual dividends in future periods.

The amount of future dividends of equity shares will be balanced with efforts to continue to maintain an adequate liquidity status.

31. Contingent liabilities and commitments

(to the extent not provided for)

(i) Contingent liabilities

31 March 2022

31 March 2021

(a) Claims against the Company not acknowledged as debt

The above includes:

5,478

4,297

(I) Income tax matters under dispute for notices and orders received relating to financial year 2002 - 03 to 2019 - 20 (31 March 2021 : financial year 2002 - 03 to 2018 - 19)

5,454 #

4,273 #

(II) Indirect tax matters

24

24

(III) In light of judgment of Honourable Supreme Court dated 28th February 2019 on the definition of "Basic Wages" under the Employees Provident Funds & Misc. Provisions Act, 1952 and based on Company''s evaluation, there are significant uncertainties and numerous interpretative issues relating to the judgement and hence it is unclear as to whether the clarified definition of Basic Wage would be applicable prospectively or retrospectively. The amount of the obligation therefore cannot be measured with sufficient reliability for past periods and hence has currently been considered to be a contingent liability.

Including the matters disclosed above, the Company is involved in taxation matters that arise from time to time in the ordinary course of business for years that are under assessment. Judgment is required in assessing the range of possible outcomes for some of these tax matters, which could change substantially over time as each of the matter progresses depending on experience on actual assessment proceedings by tax authorities and other judicial precedents. Based on its internal assessment supported by external legal counsel views, if any, the Company believes that it will be able to sustain its positions if challenged by the authorities and accordingly no additional provision is required for these matters. Management is of the view that above matters will not have any material adverse effect on the Company''s financial position and results of operations.

# includes Rs. 660 of contingent liability for the favourable order received by the Company during the previous year from the Honourable High Court of Karnataka against the matters appealed by the tax authorities with respect to financial year 2002-03 to 2008-09.

32. Segmental Information

Operating segments

The Company is engaged in a single operating segment of providing contract research and manufacturing services. Accordingly, there are no additional disclosures to be provided Ind AS 108 ''Operating Segments'' other than those already provided in these standalone financial statements.

Geographical information

The geographical information analyses the Company''s revenues and non-current assets by the Company''s country of domicile (i.e. India) and other countries. In presenting the geographical information, revenue has been based on the geographic location of the customers and assets which have been based on the geographical location of the assets.

Major customer

Revenue from one customer (31 March 2021 - one customer) of the Company''s Revenue from operations aggregates to Rs. 5,645 (31 March 2021 - Rs. 4,730) which is more than 10 percent of the Company''s total revenue.

33. Share based compensation

Syngene ESOP Plan 2011

On 20 July 2012, Syngene Employee Welfare Trust (''Trust'') was created for the welfare and benefit of the employees and directors of the Company and administrated by the Nomination and Remuneration Committee. The Board of Directors approved the employee stock option plan of the Company. On 31 October 2012, the Trust subscribed into the equity shares of the Company using the proceeds from interest free loan of Rs. 150 obtained from the Company.

Grant

Pursuant to the Scheme, the Company has granted options to eligible employees of the Company under Syngene Employee Stock Option Plan - 2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance of the employees.

The weighted average remaining contractual life for the stock options outstanding as at 31 March 2022 is 0.9 years [31 March 2021 : 1.40 years].

Syngene Restricted Stock Unit Long Term Incentive Plan 2020

The Board of Directors of the Company on 24 April 2019 and the Shareholders of the Company in the Annual General Meeting held on 24 July 2019 approved the Syngene Restricted Stock Unit Long Term Incentive Plan FY2020. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 25%, 25% and 25% of the total grant at the end of first, second, third and fourth year from the date of first grant, respectively, with an exercise period of 5 years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs. 10 per share (Face Value of Rs. 10 per share).

34. Leases

The Company has entered into lease agreements for use of land, buildings, plant and equipment and vehicles which expires over a period ranging upto the year of 2039. Gross payments for the year aggregate to Rs. 183 (31 March 2021 - Rs. 146).

The weighted average borrowing rate of 7% has been applied to lease liabilities recognised in the balance sheet at the date of initial application.

35. Exceptional items

(a) Pursuant to a fire incident on 12 December 2016, certain fixed assets, inventory and other contents in one of the buildings were damaged. The Company had lodged an estimate of loss with the insurance company and the final assessment is currently pending. The Company in the past years have received an aggregate amount of Rs. 2,120 million as interim amounts which were presented net of losses incurred under Exceptional items in this standalone financial statement. The amount for the year ended 31 March 2021 aggregated Rs. 350 million with a consequential tax of Rs. 122 million was included within tax expense in this standalone financial statement for the year ended 31 March 2021.

(b) ''The Ministry of Commerce and Industry, Government of India issued a Gazette notification number 29/2015-2020 dated 23 September 2021 on Service Exports from India Scheme (SEIS) for services rendered in financial year 2019 -2020 with the total entitlement capped at Rs. 50 million per exporter for the period. The Company has reversed the SEIS claim receivables of Rs. 307 million for the financial year 2019-2020 and the same has been presented under Exceptional items in this standalone financial statement for the year ended 31 March 2022.

36. Impact of COVID-19

In March 2020, the World Health Organization declared COVID-19 to be a pandemic. The Company has adopted measures to curb the spread of infection in order to protect the health of its employees and ensure business continuity with minimal disruption.

The Company has considered internal and external information while finalizing various estimates in relation to its financial statement captions upto the date of approval of the financial statements by the Board of Directors. The actual impact of the global health pandemic may be different from that which has been estimated, as the COVID -19 situation evolves in India and globally. The Company will continue to closely monitor any material changes to future economic conditions.

37. Corporate social responsibility

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.

Out of required amount of Rs 93 to be spent for financial year 2022-23, the Board of Directors has decided to allocate Rs 52 of the budget for year ending 31 March 2022 towards academic sponsorship and research grants. However, the project was delayed. The Board has approved for transfer of unspent amount of Rs 52 for the year ending 31 March 2022 to a separate Unspent CSR account for utilisation during FY2022-23.

Out of required amount Rs 21 unspent from previous financial year, the Board of Directors had decided to allocate Rs 7 of the budget for year ending 31 March 2022 towards COVID testing as well as vaccination activities. However, due to the limited availability of the vaccines at the beginning of the year, the project was delayed. The Board has approved the retention of unspent amount of Rs 7 for the year ending 31 March 2022 in a separate Unspent CSR account for utilisation during FY2022-23.

The Company has undertaken CSR activities in nature of Community COVID 19 testing, vaccination program, mass rapid transit, women''s safety, school programs, smart clinic and health during the year ended 31 March 2022 and 31 March 2021.

(All amounts are in Indian Rupees Million, except share data and per share data, unless otherwise stated)

(ii) Decline in inventory ratio is on account of expansion in businesses of development and manufacturing services of the Company and also increase in the level of inventories to safeguard business for potential Covid-19 lockdown and logistics challenges witnessed across the globe.

(iii) Increase in trade payable ratio is on account of expansion in businesses of development and manufacturing services of the Company.

40. Other Statutory Information :

(i) The Company does not have any Benami property or any proceeding is pending against the Company for holding any Benami property.

(ii) The Company do not have any transactions with companies struck off.

(iii) The Company do not have any charges or satisfaction which is yet to be registered with Registrar of Companies beyond the statutory period.

(iv) The Company has not traded or invested in crypto currency or virtual currency during the financial year.

(v) The Company has not advanced or loaned or invested any funds (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other persons or entities, including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Company (Ultimate Beneficiaries).

(vi) The Company has not received any fund from any parties (Funding Party) with the understanding that the Company shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(vii) The Company is not classifed as wilful defaulter.

(viii) The Company doesn''t have any transaction which is 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.

41. On 27 April 2021, the Board of Directors of the Company have approved an allotment of 796,500 equity shares of Rs. 10/-

(Rupees Ten each) of the Company to Syngene Employee Welfare Trust at face value pursuant to the shareholders'' approval

at the Annual General Meeting on 24 July 2019 to allot fresh equity shares upto 1.67% of the paid-up equity capital of the

Company in tranches for the purpose of implementation of the Syngene International Limited - Restricted Stock Unit Long

Term Incentive Plan FY2020.

42. Events after reporting period:

(a) On 27 April 2022, the Board of Directors of the Company have approved an allotment of 638,000 equity shares of Rs. 10/- (Rupees Ten each) of the Company to Syngene Employee Welfare Trust at face value pursuant to the shareholders'' approval at the Annual General Meeting on 24 July 2019 to allot fresh equity shares upto 1.67% of the paid-up equity capital of the Company in tranches for the purpose of implementation of the Syngene International Limited - Restricted Stock Unit Long Term Incentive Plan FY2020.

(b) On 27 April 2022, the Board of Directors of the Company has proposed a final dividend of 10% or Re. 1 per equity share as on the record date for distribution of final dividend (comprising of regular dividend of 5% or Rs.0.5 per equity share and additional special dividend of 5% or Rs.0.5 per equity share). The proposed dividend is subject to the approval of the shareholders in the Annual General Meeting.

43. Prior year''s comparatives

Previous year''s figures have been regrouped / reclassified, where necessary, to conform to current year''s classification.


Mar 31, 2021

(a) Land includes land held on lease under perpetual basis; Gross carrying amount - Rs 661 (31 March 2020 - Rs 661).

(b) Plant and equipment includes computers.

(c) Buildings with a gross carrying amount of Rs 3,786 as at 31 March 2021 (as at 31 March 2020 - Rs 3,593 ) have been constructed on leasehold land obtained by the Company on lease basis from Biocon Limited, the holding Company.

(d) Foreign exchange loss of Rs 712 [as at 31 March 2020 - Rs 667] on long term foreign currency monetary liabilities relating to acquisition of a depreciable capital asset has been adjusted with the cost of such asset pursuant to option available on long-term foreign currency monetary items which were obtained before the beginning of the first Ind AS financial reporting period as per the previous GAAP (refer note 2(b)(1)).

(e) Additions to property, plant and equipment includes additions related to borrowing costs capitalised during the year amounting to Rs 10 (31 March 2020 - Rs Nil).

(f) During the year ended 31 March 2020, leasehold improvements was reclassified as right-of-use assets [refer note 3(b)] on account of adoption of Ind AS 116.

(g) During the year ended 31 March 2021, a portion of facility was reclassified as investment property [refer note 3(c)], as the Company leased out the facility to a related party.

(h) Refer note 31 (ii) (a) for disclosure of contractual commitments for the acquisition of property, plant and equipment.

(a) During the year, the Company has recognised rental income of Rs 222 (31 March 2020 : Rs 225) in the statement of profit and loss for investment property. The fair value of investment property as at 31 March 2021 is Rs 376 (31 March 2020 : Rs 360).

(b) Investment property with a cost of Rs 84 (31 March 2020 : Rs 34) have been constructed on leasehold land obtained by the Company on lease basis from Biocon Limited.

(c) Refer note 31 (ii) (a) for disclosure of contractual commitments for the acquisition of investment property.

(i) Terms of conversion; 1 compulsory convertible preference share of face value Rs 100/- each will convert to 1 equity share of face value Rs 100/- at end of the tenure of 20 years from allotment.

(ii) Terms of conversion; 4,950 unsecured compulsorily convertible debentures of face value Rs 10/- each will convert to 1 equity share of Rs 49,500/- (Face value of Rs 10/- and premium of Rs 49,490) at end of the tenure of 12 months from allotment.

* Inter corporate deposits with financial institutions yield fixed interest rate.

Terms / rights attached to equity shares

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

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts, if any. The distribution will be in proportion to the number of equity shares held by the shareholders.

(vi) Issue of bonus shares

The shareholders approved through postal ballet on 13 July 2019, the Issue of fully paid up bonus shares of face value of Rs 10/- each In the ratio of 1:1 by capitalisation of general reserves and surplus In statement of profit and loss.

(vii) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 33.

12(b). Other equity Securities premium

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. It is utilised in accordance with the provisions of the Companies Act, 2013.

Retained earnings

The amount represents surplus in statement of profit and loss not transferred to any reserve and can be distributed by the Company as dividends / issue of bonus shares to its equity shareholders. The amount also includes retained earnings of Syngene Employee Welfare Trust.

Treasury shares

The amount represents cost of own equity instruments that are acquired [treasury shares] by the ESOP trust and is disclosed as a deduction from other equity.

Special Economic Zone (SEZ) reinvestment reserve

The SEZ Re-Investment reserve has been created out of profit of eligible SEZ units in terms of the provisions of Section 10AA(1)(ii) of the Income-Tax Act, 1961. The reserve has been utilised for acquiring new plant and machinery for the purpose of its business in terms of section 10AA(2) of the Income-Tax Act, 1961.

Share based payment reserve

The Company has established share based payment plan for certain categories of employees of the Company. Also refer Note 33 for further details on these plans.

Cash flow hedging reserves

The cash flow hedging reserve represents the cumulative effective portion of gains or losses (net of tax) arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges.

Other Items of other comprehensive income

Other Items of other comprehensive income represents re-measurements of the defined benefits plan.

(i) (a) The Company has entered into external commercial borrowing agreement dated 21 September 2020 to borrow

USD 50 million (Rs 3,660) term loan facility. The facility is borrowed to incur capital expenditure at Bengaluru, Hyderabad and Mangaluru premises of the Company.

(b) The facility carries an interest rate of Libor 1.30% and are to be paid in three instalments of USD 7.5 million in September 2023, USD 12.5 million in September 2024 and USD 30 million in September 2025. The facility is secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company.

(ii) (a) The Company has entered into foreign currency term loan agreement dated 30 March 2021 to borrow USD 50

million (Rs 3,660) comprising (a) USD 20 million (Rs 1,464) term loan facility (''Facility A'') drawn on 31 March 2021; and (b) USD 30 million (Rs 2,196) term loan facility (''Facility B'') to be drawn by 30 June 2021. The facilities are borrowed to incur capital expenditure at Bengaluru, Hyderabad and Mangaluru premises of the Company.

(b) The facility carries an interest rate of Libor 0.87% and are to be paid in three instalments of 15%, 25% and 60% from end of 3 years, 4 years and 5 years respectively from the date of origination. The facility is secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company.

(iii) (a) The Company had entered into external commercial borrowing agreement dated 30 March 2016 to borrow USD 100

million comprising (a) USD 50 million term loan facility (''Facility A''); and (b) USD 50 million term loan facility (''Facility B''). The facilities were borrowed to incur capital expenditure at Bengaluru and Mangaluru premises of the Company.

(b) ''Facility A'' of USD 50 million carried an interest rate of Libor 1.04% and was repaid in two instalments of USD 12.5 million in March 2019 and USD 37.5 million in March 2020 in line with the agreement ; and ''Facility B'' of USD 50 million carried an interest rate of Libor 1.30% and was repaid in March 2021 and the facilities provided were secured by first priority pari passu charge on fixed assets (movable plant and machinery) and second charge on current assets of the Company.

(iv) The Company has obtained foreign currency denominated short term unsecured pre-shipment credit loans of Rs 2,599 (USD 35.5 million) [31 March 2020 : Rs 3,089 (USD 41 million)] that carries interest rate of Libor 0.20% to 0.30% [31 March 2020 : Libor 0.35% to 0.60%]. The loans are repayable after the end of 6 months from the date of its origination.

(v) Information about the Company''s exposure to interest rate, foreign currency and liquidity risks is included in note 28.

r-vi i umvui I w u i t 111 i i i ti i ti i i i\u 1''__> i v i i i i i i I, 1. _»i i <-i i uuiu ti i iti f-/ t i j i i ti i t. uu i.u4 ti i i it jj vu iti v»ut jvuitu/

(i) The remuneration to the key managerial personnel does not include the provisions made for gratuity and compensated absences, as they are determined on an actuarial basis for the Company as a whole.

(ii) Share based compensation expense allocable to key management personnel is Rs. 133 (31 March 2020 : Rs. 80), which is not included in the remuneration disclosed above.

(iii) Effective from 1 October 2006, the Company has entered into an arrangement for lease of land on lease basis and a service agreement with ''Biocon SEZ Developer'' of Biocon Limited for availing certain facilities and services. The facility charges of Rs. 129 (Year ended 31 March 2020 : Rs. 115) and power charges (including other charges) of Rs. 9 (Year ended 31 March 2020 : Rs. 245) have been charged by Biocon Limited for the year ended 31 March 2021.

(iv) Fellow subsidiary companies with whom the Company did not have any transactions -

- Biocon Biologics Inc. - Biocon Pharma Ireland Limited

- Biocon Biologics Do Brasil Ltda - Biocon Pharma Malta Limited

- Biocon Biologics FZ-LLC - Biocon Pharma Malta I Limited

- Biocon Biologics Healthcare SDN. BHD - Biocon Pharma UK Limited

- Biofusion Therapeutics Limited - Biocon SA

- Biocon Pharma Inc. - Biocon FZ LLC

- Biocon Academy

(v) The above disclosures include related parties as per IND-As 24 on "Related Party Disclosures" and Companies Act, 2013.

(vi) All transactions with these related parties are priced on an arm''s length basis and none of the balances are secured.

27. Employee benefit plans

(i) The Company has a defined benefit gratuity plan as per the Payment of Gratuity Act, 1972 (''Gratuity Act''}, Under the Gratuity Act, employee who has completed five years of service is entitled to specific benefit with no monetary limit, The level of benefit provided depends on the employee''s length of service and salary at retirement/termination age, The gratuity plan is a funded plan and the Company makes contributions to a recognised fund in India,

The plan assets are maintained with HDFC Life Insurance Company Limited (HDFC Life) in respect of gratuity scheme for employees of the Company. The details of investments maintained by the HDFC Life are not available with the Company and not disclosed, The expected rate of return on plan assets is 6,3% p.a. (31 March 2020: 6,4% p.a.). The Company actively monitors how the duration and expected yeild of the investments are matching the expected outflows arising from the employee benefit obligations,

The cost of the defined benefit plans and other long term benefits are determined using actuarial valuations, Actuarial valuations involve making various assumptions that may differ from actual developments in the future, These includes the determination of the discount rate, future salary increases and mortality rate, Due to these complexity involved in the valuation it is highly sensitive to the changes in these assumptions, All assumptions are reviewed at reporting date, The present value of the defined benefit obligation and the related current service cost and planned service cost were measured using the projected unit cost method,

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company''s financial statements as at balance sheet date:

Sensitivity of significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of defined benefit obligation by one percentage, keeping all other actuarial assumptions constant. Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumption shown.

As of 31 March 2021 and 31 March 2020, the plan assets have been invested in insurer managed funds and the expected contribution to the fund during the year ending 31 March 2021, is approximately Rs 45 (31 March 2020 - Rs 42).

(iv) Risk Exposure

These defined benefit plans typically expose the Company to actuarial risks as under :

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

b) Interest rate risk: A decrease in bond interest rate will increase the plan liability.

c) Longevity risk: The present value of the defined plan liability is calculated by reference to the best estimate of the mortality of plan participants. An increase in the life expectancy will increase the plan''s liability.

d) Salary risk: Higher than expected increase in salary will increase the defined benefit obligation.

(a) The fair value of trade receivables, trade payables and other current financial assets and liabilities Is considered to be equal to the carrying amounts of these items due to their short term nature.

(b) There have been no transfers between level 1, 2 and 3 needs to be made.

(c) The Company enters into derivative financial instruments with various counterparties. Derivatives are valued using valuation techniques in consultation with market expert. The most frequently applied valuation technique include forward pricing, swap models and Black Scholes Merton Model (for options valuation), using present value calculations. The models incorporate various inputs including foreign exchange forward rates, interest rate curve and forward rates curve.

Measurement of fair values

Fair value of liquid mutual funds are based on quoted price. Derivative financial instruments are valued based on quoted

prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

B. Financial risk management

The Company''s activities expose it to a variety of financial risks : credit risk, market risk and liquidity risk.

(i) Risk management framework

The Company''s risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

(ii) Credit risk

Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables and unbilled revenues) and from its investment activities, including deposits with banks and financial institutions, investments in mutual funds and other financial instruments.

The Company has established a credit mechanism under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, where available, and other publicly available financial information. Outstanding customer receivables are regularly monitored.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The maximum exposure to credit risk as at reporting date is primarily from trade receivables and unbilled revenue amounting to Rs 4,744 (31 March 2020: Rs 4,491). The movement in allowance for impairment in respect of trade receivables during the year was as follows:

Other than trade receivables the Company has no significant class of financial assets that is past due but not impaired.

There are no receivable from customer (31 March 2020 : Nil) of the Company''s receivables (31 March 2020 : Nil) which is more than 10 percent of the Company''s total receivables.

Credit risk on investments, cash and cash equivalent and derivatives is limited as the Company generally transacts with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units and non-convertible debentures.

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

(iv) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices.

Foreign currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently, the Company is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The Company holds derivative instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates and foreign currency exposure.

(b) Sensitivity

Fixed rate borrowings:

The Company policy is to maintain its long-term borrowings at fixed rate using interest rate swaps to achieve this when necessary. They are therefore not subject to interest rate risk as defined under Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

Variable rate borrowings:

A reasonably possible change of 100 bps would have increased / (decreased) profit and loss and equity by Rs 15 (31 March 2020 : Rs 11).

29. Capital management

The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor and customer confidence and to ensure future development of its business. The Company focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company.

The Company''s goal is to continue to be able to return excess liquidity to shareholders by continuing to distribute annual dividends in future periods.

The amount of future dividends of equity shares will be balanced with efforts to continue to maintain an adequate liquidity status.

(Ill) in light of judgment of Honourable Supreme Court dated 28th February 2019 on the definition of "Basic Wages" under the Employees Provident Funds & Misc. Provisions Act, 1952 and based on Company''s evaluation, there are significant uncertainties and numerous interpretative issues relating to the judgement and hence it is unclear as to whether the clarified definition of Basic Wage would be applicable prospectively or retrospectively. The amount of the obligation therefore cannot be measured with sufficient reliability for past periods and hence has currently been considered to be a contingent liability.

Including the matters disclosed above, the Company is involved in taxation matters that arise from time to time in the ordinary course of business. Judgment is required in assessing the range of possible outcomes for some of these tax matters, which could change substantially over time as each of the matter progresses depending on experience on actual assessment proceedings by tax authorities and other judicial precedents. Based on its internal assessment supported by external legal counsel views, if any, the Company believes that it will be able to sustain its positions if challenged by the authorities and accordingly no additional provision is required for these matters. Management is of the view that above matters will not have any material adverse effect on the Company''s financial position and results of operations.

# includes Rs 660 for the favourable order received by the Company during the year from the Honourable High Court of Karnataka against the matters appealed by the tax authorities with respect to financial year 2002-03 to 2008-09.

32. Segmental Information Operating segments

The Company is engaged in a single operating segment of providing contract research and manufacturing services. Accordingly, there are no additional disclosures to be provided Ind AS 108 ''Operating Segments'' other than those already provided in these standalone financial statements.

Geographical information

The geographical information analyses the Company''s revenues and non-current assets by the Company''s country of domicile (i.e. India) and other countries. In presenting the geographical information, revenue has been based on the geographic location of the customers and assets which have been based on the geographical location of the assets.

33. Share based compensation Syngene ESOP Plan 2011

On 20 July 2012, Syngene Employee Welfare Trust (''Trust''} was created for the welfare and benefit of the employees and directors of the Company and administrated by the Nomination and Remuneration Committee. The Board of Directors approved the employee stock option plan of the Company. On 31 October 2012, the Trust subscribed into the equity shares of the Company using the proceeds from interest free loan of Rs 150 million obtained from the Company. The cost for the year has been accounted in the statement of profit and loss is Rs 124 million [31 March 2020 : Rs 181 million].

Grant

Pursuant to the Scheme, the Company has granted options to eligible employees of the Company under Syngene Employee Stock Option Plan - 2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs 11.25 [31 March 2020 : Rs 11.25] per share (Face Value of Rs 10 per share}.

Syngene Restricted Stock Unit Long Term Incentive Plan 2020

The Board of Directors of the Company on 24 April 2019 and the Shareholders of the Company in the Annual General Meeting held on 24 July 2019 approved the Syngene Restricted Stock Unit Long Term Incentive Plan FY 2020. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 25%, 25% and 25% of the total grant at the end of first, second, third and fourth year from the date of first grant, respectively, with an exercise period of 5 years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs 10 per share (Face Value of Rs 10 per share).

34. Leases

The Company has entered into lease agreements for use of land, buildings, plant and equipment and vehicles which expires over a period ranging upto the year of 2039. Gross payments for the year aggregate to Rs 140 (31 March 2020 - Rs 109).

The weighted average borrowing rate of 9% has been applied to lease liabilities recognised in the balance sheet at the date of initial application.

35. Exceptional item

Pursuant to a fire incident on 12 December 2016, certain fixed assets, inventory and other contents in one of the buildings were damaged. The Company lodged an estimate of loss with the insurance company and the survey is currently ongoing. The Company has recorded a loss of Rs 1,057 million arising from such incident and also recognised a minimum insurance claim receivable for equivalent amounts in the respective periods till 31 March 2021. The Company has received disbursement approval of Rs 2,120 million from the insurance company against the loss till 31 March 2021. The aforementioned receivable and the disbursement approval from the insurance claim has been presented on a net basis as Rs 350 million and Rs 713 million under Exceptional items in these standalone financial statement for the year ended 31 March 2021 and 31 March 2020 respectively. Consequential tax of Rs 122 milllion and Rs 254 million is included within tax expense in standalone financial statement for the year ended 31 March 2021 and 31 March 2020 respectively.

As at 31 March 2021, the Company has receivable of Rs 105 million (31 March 2020: Rs Nil) from the insurance company against the approved disbursements and the same has been recorded as amount recoverable from the insurance company.

In addition, the Company is in the process of determining its final claim for loss of fixed assets and Business Interruption and has accordingly not recorded any further claim arising therefrom at this stage.

36. Impact of COVID-19

In March 2020, the World Health Organisation declared COVID-19 to be a pandemic. The Company has adopted measures to curb the spread of infection in order to protect the health of its employees and ensure business continuity with minimal disruption.

The Company has considered internal and external information while finalizing various estimates in relation to its financial statement captions upto the date of approval of the financial statements by the Board of Directors. The actual impact of the global health pandemic may be different from that which has been estimated, as the COVID -19 situation evolves in India and globally. The Company will continue to closely monitor any material changes to future economic conditions.

39. Events after reporting period

On 27 April 2021, the Board of Directors of the Company have approved an allotment of 796,500 equity shares of Rs 10/-(Rs Ten each) of the Company to Syngene Employee Welfare Trust at face value pursuant to the shareholders'' approval at the Annual General Meeting on 24 July 2019 to allot fresh equity shares upto 1.67% of the paid-up equity capital of the Company in tranches for the purpose of implementation of the Syngene International Limited - Restricted Stock Unit Long Term Incentive Plan FY 2020.

40. Disclosure on Specified Bank Notes (SBNs)

The disclosures regarding details of SBNs held and transacted during 8 November 2016 to 30 December 2016 has not been made in these standalone financial statements since the requirement does not pertain to financial year ended 31 March 2021 and 31 March 2020.

41. Prior year''s comparatives

Previous year''s figures have been regrouped / reclassified, where necessary, to conform to current year''s classification.


Mar 31, 2019

28. FINANCIAL INSTRUMENTS: FAIR VALUE AND RISK MANAGEMENTS

A. Accounting classification and fair values

Carrying amount

Fair value

31 March 2019

FVTPL

FVTOCI

Amortised Cost

Total

Level 1

Level 2

Level 3

Total

Financial assets

Investments (non-current)#

-

-

3

3

-

-

-

-

Derivative assets (non-current)

-

677

-

677

-

677

-

677

Other financial assets (non-current)

-

-

208

208

-

-

-

-

Investments (current)

560

-

6,600

7,160

560

-

-

560

Trade receivables

-

-

3,387

3,387

-

-

-

-

Cash and cash equivalents

-

-

1,637

1,637

-

-

-

-

Bank balances other than above

-

-

2,717

2,717

-

-

-

-

Derivative assets (current)

-

699

-

699

-

699

-

699

Other financial assets (current)

-

-

930

930

-

-

-

-

560

1,376

15,482

17,418

560

1,376

-

1,936

Financial liabilities

Borrowings (non-current)

-

-

3,617

3,617

-

-

-

-

Derivative liabilities (non-current)

-

296

-

296

-

296

-

296

Borrowings (current)

-

-

1,907

1,907

-

-

-

-

Trade payables

-

-

2,235

2,235

-

-

-

-

Derivative liabilities (current)

-

97

-

97

-

97

-

97

Other financial liabilities (current)

-

-

3,440

3,440

-

-

-

-

-

393

11,199

11,592

-

393

-

393

31 March 2018

FVTPL

FVTOCI

Amortised Cost

Total

Level 1

Level 2

Level 3

Total

Financial assets

Investments (non-current)*

-

-

3

3

-

-

-

-

Derivative assets (non-current)

-

1,078

-

1,078

-

1,078

-

1,078

Other financial assets (non-current)

-

-

81

81

-

-

-

-

Investments (current)

1,577

-

-

1,577

1,577

-

-

1,577

Trade receivables

-

-

2,668

2,668

-

-

-

-

Cash and cash equivalents

-

-

2,518

2,518

-

-

-

-

Bank balances other than above

-

-

7,147

7,147

-

-

-

-

Derivative assets (current)

19

867

-

886

-

886

-

886

Other financial assets (current)

-

-

911

911

-

-

-

-

1,596

1,945

13,328

16,869

1,577

1,964

-

3,541

Financial liabilities

Borrowings (non-current)

-

-

5,855

5,855

-

-

-

-

Derivative liabilities (non-current)

-

118

-

118

-

118

-

118

Borrowings (current)

-

-

781

781

-

-

-

-

Trade payables

-

-

2,034

2,034

-

-

-

-

Derivative liabilities (current)

-

13

-

13

-

13

-

13

Other financial liabilities (current)

-

-

2,047

2,047

-

-

-

-

-

131

10,717

10,848

-

131

-

131

# valued at cost

Measurement of fair values

Fair value of liquid mutual funds are based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

Sensitivity analysis

For the fair values of forward/option contracts of foreign currencies, reasonably possible changes at the reporting date to one of the significant observable inputs, holding other inputs constant, would have the following effects.

Significant observable inputs

Impact on profit or loss

Impact on other equity

31 March 2019

31 March 2018

31 March 2019 31

March 2018

Movement in spot rate of the foreign currency

INR/USD - Increase by 1%

-

(3)

(406)

(342)

INR/USD - Decrease by 1%

-

3

372

342

Movement in Interest rates

LIBOR - Increase by 100bps

-

-

(176)

(290)

LIBOR - Decrease by 100bps

-

-

176

290

B. Financial risk management

The Company''s activities expose it to a variety of financial risks : credit risk, market risk and liquidity risk.

(i) Risk management framework

The Company''s risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

(ii) Credit risk

Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables and unbilled revenues) and from its investment activities, including deposits with banks and financial institutions, investments in mutual funds and other financial instruments.

The Company has established a credit mechanism under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, where available, and other publicly available financial information. Outstanding customer receivables are regularly monitored.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The maximum exposure to credit risk as at reporting date is primarily from trade receivables and unbilled revenue amounting to Rs. 3,642 (31 March 2018: Rs. 3,224). The movement in allowance for impairment in respect of trade receivables during the year was as follows:

Allowance for Impairment

31 March 2019

31 March 2018

Opening balance

64

32

Impairment loss recognised

(11)

32

Closing balance

53

64

Receivable from one customer (31 March 2018 - two customers) of the Company''s receivables is Rs. 397 (31 March 2018 - Rs. 671) which is more than 10 percent of the Company''s total receivables.

Credit risk on cash and cash equivalent is limited as the Company generally invests in deposits with banks having high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units and inter-corporate deposits with financial institutions.

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation.

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. In addition, the Company maintains line of credits as stated in Note 13.

The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March 2019:

Particulars

Less than 1 year

1 - 2 years

2-5 years

5 - 10 years

Total

Borrowings (non-current)

2,609

3,477

47

93

6,226

Borrowings (current)

1,907

-

-

-

1,907

Trade payables

2,235

-

-

-

2,235

Derivative liabilities (non-current)

-

57

108

131

296

Derivative liabilities (current)

97

-

-

-

97

Other financial liabilities

831

-

-

-

831

Total

7,679

3,534

155

224

11,592

The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of 31 March 2018:

Particulars

Less than 1 year

1 - 2 years

2-5 years

5 - 10 years

Total

Borrowings (non-current)

1,238

2,450

3,295

110

7,093

Borrowings (current)

781

-

-

-

781

Trade payables

2,034

-

-

-

2,034

Derivative liabilities (non-current)

-

2

24

92

118

Derivative liabilities (current)

13

-

-

-

13

Other financial liabilities

809

-

-

-

809

Total

4,875

2,452

3,319

202

10,848

(iv) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices.

Foreign currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently, the Company is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The Company holds derivative instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates and foreign currency exposure.

The currency profile of financial assets and financial liabilities as at 31 March 2019 and 31 March 2018 are as below:

31 March 2019

USD

EUR

Others

Total

Financial assets

Trade receivables

2,768

53

-

2,821

Cash and cash equivalents

812

98

-

910

Other financial assets (current)

344

28

-

372

Financial liabilities

Borrowings (non-current)

(3,466)

-

-

(3,466)

Borrowings (current)

(1,907)

-

-

(1,907)

Trade payables

(302)

(37)

(10)

(349)

Other financial liabilities (current)

(2,802)

(19)

(8)

(2,829)

Net assets / (liabilities)

(4,553)

123

(18)

(4,448)

31 March 2018

USD

EUR

Others

Total

Financial assets

Trade receivables

2,284

75

-

2,359

Cash and cash equivalents

434

-

-

434

Other financial assets (current)

575

14

-

589

Financial liabilities

Borrowings (non-current)

(5,695)

-

-

(5,695)

Borrowings (current)

(781)

-

-

(781)

Trade payables

(466)

(3)

(104)

(573)

Other financial liabilities (current)

(1,345)

(36)

(20)

(1,401)

Net assets / (liabilities)

(4,994)

50

(124)

(5,068)

Sensitivity analysis

The sensitivity of profit or loss to changes in exchange rates arises mainly from foreign currency denominated financial instruments and the impact on other components of equity arises from foreign exchange forward/option contracts designated as cash flow hedges.

Particulars

Impact on profit or loss

Impact on other equity

31 March 2019

31 March 2018

31 March 2019 31

March 2018

USD Sensitivity

INR/USD -Increase by 1%

(46)

(53)

(452)

(395)

INR/USD -Decrease by 1%

46

53

418

395

EUR Sensitivity

INR/EUR - Increase by 1%

1

(1)

1

(1)

INR/EUR - Decrease by 1%

(1)

1

(1)

1

Derivative financial instruments

The following table gives details in respect of outstanding foreign exchange forward and option contracts:

Particulars

31 March 2019

31 March 2018

Foreign exchange forward contracts to buy

USD 436

USD 383

(INR 30,256)

(INR 24,916)

European style option contracts with periodical maturity dates

USD 150

USD 190

(INR 10,370)

(INR 12,368)

Interest rate swaps used for hedging LIBOR component in External Commercial Borrowings

USD 75

USD 75

(INR 5,199)

(INR 4,881)

Cash flow and fair value interest rate risk

The Company''s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. During the year ended 31 March 2019 and 31 March 2018 the Company''s borrowings at variable rate were mainly denominated in USD.

(a) Interest rate risk exposure

The exposure of the Company''s borrowinq to interest rate chanqes at the end of the reporting period are as follows:

Particulars

31 March 2019

31 March 2018

Variable rate borrowings

2,773

2,826

Fixed rate borrowings

5,360

5,048

Total borrowings

8,133

7,874

(b) Sensitivity

Fixed rate borrowings:

The Company policy is to maintain its long-term borrowings at fixed rate using interest rate swaps to achieve this when necessary. They are therefore not subject to interest rate risk as defined under Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

Variable rate borrowings:

A reasonably possible change of 100 bps would have increased/(decreased) profit and loss and equity by Rs. 28 (31 March 2018 - Rs. 28).

29. CAPITAL MANAGEMENT

The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company.

The Company''s goal is to continue to be able to return excess liquidity to shareholders by continuing to distribute annual dividends in future periods.

The amount of future dividends of equity shares will be balanced with efforts to continue to maintain an adequate liquidity status. The capital structure as of 31 March 2019 and 31 March 2018 was as follows:

Particulars

31 March 2019

31 March 2018

Total equity attributable to the equity shareholders of the Company

19,672

17,201

As a percentage of total capital

71%

69%

Long-term borrowings

6,226

7,093

Short-term borrowings

1,907

781

Total borrowings

8,133

7,874

As a percentage of total capital

29%

31%

Total capital (Equity and Borrowings)

27,805

25,075

30. TAX EXPENSE

31 March 2019

31 March 2018

(a) Amount recognised in Statement of profit and loss

Current tax

864

793

Deferred tax:

MAT credit entitlement

(44)

(182)

Others related to:

Origination and reversal of other temporary differences

15

59

Tax expense for the year

835

670

Reconciliation of effective tax rate

Profit before tax

4,142

3,721

Tax at statutory income tax rate 34.94% (31 March 2018 - 34.61 %)

1,447

1,288

Tax effects of amounts which are not deductible / (taxable) in calculating taxable

income

Exempt income

-

(7)

Tax incentive

(529)

(519)

Non-deductible expense

32

44

Basis difference that will reverse during the tax holiday period

(174)

(62)

Others

59

(74)

Income tax expense

835

670

(b) Recognised deferred tax assets and liabilities

The following is the movement of deferred tax assets / liabilities presented in the balance sheet

For the year ended 31 March 2019

Opening balance

Recognised in profit or loss

Recognised in OCI

Closing balance

Deferred tax asset

MAT credit entitlement

1,081

44

_

1,125

Defined benefit obligations

76

12

11

99

Others

27

(5)

-

22

Gross deferred tax assets Deferred tax liability

1,184

51

11

1,246

Derivatives, net

185

_

(151)

34

Property, plant and equipment, investment property and intangible assets, net

256

41

-

297

Others

19

(19)

-

-

Gross deferred tax liability

460

22

(151)

331

Deferred tax assets / (liabilities), net

724

29

162

915

For the year ended 31 March 2018

Opening balance

Recognised in profit or loss

Recognised in OCI

Closing balance

Deferred tax asset

MAT credit entitlement

899

182

_

1,081

Defined benefit obligations

58

16

2

76

Others

15

12

-

27

Gross deferred tax assets Deferred tax liability

972

210

2

1,184

Derivatives, net

147

-

38

185

Property, plant and equipment and intangible assets, net

158

98

-

256

Others

30

(11)

19

Gross deferred tax liability

335

27

38

460

Deferred tax assets / (liabilities), net

637

123

(36)

724

31. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

31 March 2019

31 March 2018

(i) Contingent liabilities

(a) Claims against the Company not acknowledged as debt

3,357

2,383

The above includes:

(I) Income tax matters relating to financial year 2002 - 03 to 2015 -16 (31 March 2018 : financial year 2002 - 03 to FY 2014-15)

3,330

2,358

(II) Indirect tax matters

27

25

(III) In light of recent judgment of Honorable Supreme Court dated 28th February 2019 on the definition of "Basic Wages" under the Employees Provident Funds & Misc. Provisions Act, 1952 and based on Company''s evaluation, there are significant uncertainties and numerous interpretative issues relating to the judgement and hence It is unclear as to whether the clarified definition of Basic Wage would be applicable prospectively or retrospectively. The amount of the obligation therefore cannot be measured with sufficient reliability for past periods and hence has currently been considered to be a contingent liability.

Other than the matters disclosed above, the Company is involved in taxation matters that arise from time to time in the ordinary course of business. Management is of the view that these will not have any material adverse effect on the Company''s financial position or results of operations.

(b) Guarantees

Guarantees given by banks on behalf of the Company for contractual obligations of the Company.

2

2

The necessary terms and conditions have been complied with and no liabilities have arisen.

(ii) Commitments

(a) Estimated amount of contracts remaining to be executed on capital account not provided for, net of advances

3,732

2,447

(b) Operating lease commitments (Company is a lessee)

(I) Rent

The Company has entered into lease agreements for use of land and buildings which expires over a period ranging upto the year of 2027. Gross rental expenses for the year aggregate to Rs. 105 (31 March 2018- Rs. 97). Future minimum rentals payable under non-cancellable operating leases are as follows:

Not later than one year

34

29

Later than one year and not later than five years

152

133

Later than five years

143

180

(II) Vehicles

The Company has taken vehicles for certain employees under operating leases, which expire over a period ranging upto the year of 2022. Gross rental expenses for the year aggregate to Rs. 5 ( 31 March 2018 - Rs. 2). Future minimum rentals payable under non-cancellable operating leases are as follows:

Not later than one year

11

Later than one year and not later than five years

23

31 March 2019

31 March 2018

(c) Finance lease commitments (Company is a lessee) The Company has entered into lease for use of certain items of leasehold improvements on finance lease basis. The legal title to these items vests with lessor. The lease term of leasehold improvements is 10 years covering a upto the year of 2027.

Future minimum lease payable including interest element under finance leases are as follows:

Not later than one year

23

22

Later than one year and not later than five years

105

100

Later than five years

107

135

32. SEGMENTAL INFORMATION

Operating segments

The Company is engaged in a single operating segment of providing contract research and manufacturing services. Accordingly, there are no additional disclosures to be provided Ind AS 108 ''Operating Segments'' other than those already provided in the financial statements.

Geographical information

The geographical information analyses the Company''s revenues and non-current assets by the Company''s country of domicile (i.e. India) and other countries. In presenting the geographical information, revenue has been based on the geographic location of the customers and assets which have been based on the geographical location of the assets.

Year ended 31 March 2019

Year ended 31 March 2018

Revenue from operations:

India

1,843

1,403

United States of America

12,880

9,014

Rest of the World

3,533

3,814

Total

18,256

14,231

The following is the carrying amount of non current assets by geographical area in which the assets are located:

31 March 2019

31 March 2018

Carrying amount of non-current assets

India

17,594

12,805

Outside India

-

-

Total

17,594

12,805

Note: Non-current assets excludes financial assets and deferred tax assets. Major customer

Revenue from two customers (31 March 2018 - one customer) of the Company''s Revenue from operations is Rs. 6,293 (31 March 2018 - Rs.3,499) which is more than 10 percent of the Company''s total revenue.

33. SHARE BASED COMPENSATION

Syngene ESOP Plan

On 20 July 2012, Syngene Employee Welfare Trust (Trust'') was created for the welfare and benefit of the employees and directors of the Company. The Board of Directors approved the employee stock option plan of the Company. On 31 October 2012, the Trust subscribed 6,680,000 equity shares (Face Value of Rs. 10 per share) of the Company using the proceeds from interest free loan of Rs. 150 obtained from the Company, adjusted for the consolidation of shares and bonus issue. As at 31 March 2019, the Trust holds 2,038,001 (31 March 2018: 3,065,964) equity shares of face value of Rs. 10 each, adjusted for the consolidation of shares and bonus issue. As of 31 March 2019, the Trust has transferred 4,641,999 (31 March 2018 - 3,614,036) equity shares to the employees on exercise of their stock options.

Grant

Pursuant to the Scheme, the Company has granted options to eligible employees of the Company under Syngene Employee Stock Option Plan - 2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs. 22.50 per share (Face Value of Rs. 10 per share).

Details of Grant

Particulars

31 March 2019 No. of options

31 March 2018 No. of options

Outstanding at the beginning of the year

2,235,222

3,634,457

Granted during the year

191,668

121,500

Forfeited during the year

(52,139)

(73,174)

Exercised during the year

(1,027,963)

(1,447,561)

Outstanding at the end of the year

1,346,788

2,235,222

Exercisable at the end of the year

360,102

1,121,670

Weighted average exercise price

22.5

22.5

Weighted average fair value of shares granted during the year under Black Scholes Model (In Rs.)

556.5

479.8

Weighted average share price at the date of exercise (In Rs.)

578.7

472.0

The weighted average remaining contractual life for the stock options outstanding as at 31 March 2019 is 1.85 years [31 March 2018-2.13 years].

Assumptions used in determination of the fair value of the stock options under the Black Scholes Model are as follows:

Particulars

31 March 2019

31 March 2018

Dividend yield (%)

0.2%

0.3%

Exercise Price (In Rs.)

22.5

22.5

Volatility

30.5%

33.5%

Life of the options granted (vesting and exercise period) [in years]

6.15

6.15

Average risk-free interest rate

7.9%

7.7%

34. EXCEPTIONAL ITEM

Pursuant to a fire incident on 12 December 2016, certain fixed assets, inventory and other contents in one of the buildings were damaged. The Company lodged an estimate of loss with the insurance company and the survey is currently ongoing. The Company had recorded a loss of Rs. 1,032 million arising from such incident till 31 March 2018. The Company has recorded a further loss of Rs. 23 million during the year ended 31 March 2019. The Company also recognised a minimum Insurance claim receivable for equivalent amounts in the respective periods. The aforementioned loss and the corresponding credit arising from insurance claim receivable has been presented on a net basis (Rs. Nil) under Exceptional items in these standalone financial statements. The Company has received a disbursement of Rs. 815 (31 March 2018: Rs. 815) from the insurance company and the same has been adjusted with the amount recoverable from the insurance company.

In addition, the Company is in the process of determining its final claim for loss of fixed assets and Business Interruption and has accordingly not recorded any further claim arising therefrom at this stage.

35. CORPORATE SOCIAL RESPONSIBILITY

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.

31 March 2019

31 March 2018

(a) Amount required to be spent by the Company during the year

63

52

(b) Amount spent during the year (in cash)

(i) Construction / acquisition of any asset

-

-

(ii) On purposes other than (i) above

63

52

36. EARNINGS PER EQUITY SHARE (EPS)

31 March 2019

31 March 2018

Earnings

Profit for the year

3,307

3,051

Shares

Basic outstanding shares

200,000,000

200,000,000

Less: Weighted average shares held with the ESOP Trust

(2,249,371)

(2,624,879)

Weighted average shares used for computing basic EPS

197,750,629

197,375,121

Add: Effect of dilutive options granted but not yet exercised / not yet eligible for

613,078

613,597

exercise

Weighted average shares used for computing diluted EPS

198,363,707

197,988,718

Earnings per equity share

Basic (in Rs.)

16.72

15.46

Diluted (in Rs.)

16.67

15.41

37. DISCLOSURE ON SPECIFIED BANK NOTES (SBNs)

The disclosures regarding details of SBNs held and transacted during 8 November 2016 to 30 December 2016 has not been made in these standalone financial statements since the requirement does not pertain to financial year ended 31 March 2019 and 31 March 2018.

38. EVENTS AFTER REPORTING PERIOD

On 24 April 2019, the Board of Directors of the Company approved issue of bonus shares in the proportion of 1:1 i.e. 1 (one) bonus equity shares of Rs. 10 each for every 1 (one) fully paid-up equity shares held as on the record date, subject to the approval by the shareholders of the Company through postal ballot.

On 24 April 2019, the Board of Directors of the Company has proposed a final dividend of 5% or Rs. 0.50 per equity share as on the record date for distribution of final dividend. The proposed dividend is subject to the approval of the shareholders in the Annual General Meeting of the Company.

39. PRIOR YEARS'' COMPARATIVES

Previous year''s figures have been regrouped / reclassified, where necessary, to conform to current year''s classification.

As per our report of even date attached

for and on behalf of Board of Directors of Syngene International Limited

for B S R & Co. LLP

Chartered Accountants

Kiran Mazumdar-Shaw

Jonathan Hunt

Firm Registration No: 10 248W/W-100022

Managing Director

Director & Chief Executive Officer

DIN: 00347229

DIN: 07774619

S. Sethuraman

M. B. Chinappa

Mayank Verma

Partner

Chief Financial Officer

Company Secretary

Membership No. 203491

ACS Number: 18776

Chennai

Bengaluru

April 24, 2019

April 24, 2019


Mar 31, 2018

* The Company issued fully paid bonus shares of 41,750,000 (Face value: Rs. 5 per share) in ratio of 1:7.260869565 on 28 February 2012 by capitalization of surplus in statement of profit and loss pursuant to the approval of the shareholders of the Company at the EGM held on 14 December 2011.

# The Company issued fully paid bonus shares of 171,931,136 (Face value: Rs. 10 per share) in ratio of 1:6.1253329 on 27 March 2015 by capitalization of securities premium pursuant to the approval of the shareholders of the Company at the EGM held on 16 March 2015.

@ syngene Employees Welfare Trust transferred equity shares to eligible employees upon meeting of the vesting conditions as per syngene Employee stock Option Plan 2011. The consideration other than exercise price was received in form of employee services.

(vi) Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (EsOP) plan of the Company, refer note 34.

(All amounts are in Indian Rupees Million, except share data and per share data, unless otherwise stated)

12(b) OTHER EQUITY Securities premium

securities premium is used to record the premium received on issue of shares. It is utilized in accordance with the provisions of the Companies Act, 2013.

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes.

Retained earnings

The amount represents surplus in statement of profit and loss not transferred to any reserve and can be distributed by the Company as dividends to its equity shareholders. The amount also includes retained earning of syngene Employee Welfare Trust.

Share based payment reserve

The Company has established share based payment plan for certain categories of employees of the Company. Also refer Note 34 for further details on these plans.

Treasury shares

The amount represents cost of own equity instruments that are acquired [treasury shares] by the EsOP trust and is disclosed as a deduction from equity.

Cash flow hedging reserves

The cash flow hedging reserve represents the cumulative effective portion of gains or losses (net of tax) arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges.

Notes:

(i) The Company has obtained foreign currency denominated long term secured buyer''s credit loans of Rs. 418 (UsD 6.42 million) [March 31, 2017 - Rs. 611 (UsD 9.41 million)] as of March 31, 2018 from HsBC Bank (Mauritius) Limited that carry interest rate in the range of Libor 0.60% to Libor 0.80%. The loan is guaranteed by Hongkong and shanghai Banking Corporation Limited, India to HsBC Bank (Mauritius) Limited. All of the credit facilities provided by Hongkong and shanghai Banking Corporation Limited, India is secured by a pari passu charge on the current assets and movable fixed assets of the Company with a carrying amount of Rs. 1,636. The loans are repayable at end of 960 days to 1,079 days from the date of its origination.

(ii) (a) The Company has entered into External Commercial Borrowing agreement with The Hongkong and shanghai Banking Corporation

Limited (the Agent), Citibank N.A. and HsBC Bank (Mauritius) Limited (the Lead arrangers) dated March 30, 2016 to borrow UsD 100 million comprising (a) UsD 50 million term loan facility (''Facility A''); and (b) UsD 50 million term loan facility (''Facility B''). The facilities are borrowed to incur capital expenditure at Bangalore and Mangalore premises of the Company,

(b) ''Facility A'' of UsD 50 million carries an interest rate of Libor 1.04% and is repayable in two instalments of UsD 12.5 million in March 2019 and UsD 37.5 million in March 2020; and ''Facility B'' of UsD 50 million carries an interest rate of Libor 1.30% and is repayable in March 2021.

(c) The facilities provided are secured by first priority pari passu charge on fixed assets and second charge on current assets of the Company with a carrying amount of Rs. 6,700,

(iii) The Company had obtained foreign currency denominated short term secured pre-shipment credit loans of Rs. 324 (UsD 5 Million) as at March 31, 2017 from The Hongkong and shanghai Banking Corporation Limited that carried interest rate of Libor 1.42%. The loans were repayable after the end of 6 months from the date of its origination. The facility provided were secured by a pari passu charge on the current assets and movable fixed assets of the Company. The loan was repaid during the current year.

(All amounts are in Indian Rupees Million, except share data and per share data, unless otherwise stated)

(iv) The Company has obtained foreign currency denominated short term unsecured pre-shipment credit loans of Rs. 781 (UsD 12 Million)

[March 31, 2017 - Rs. 648 (UsD 10 Million)] from HDFC Bank Limited that carries interest rate of Libor 0.55% to Libor 0.60% [March 31,

2017 - Libor 1.42%]. The loans are repayable after the end of 6 months from the date of its origination.

(v) The Company has obtained lease of utilities for its office use from Velankani Information systems Limited (VIsL) on a ten year non-cancellable basis. Finance Lease obligations reflect present value of such discounted monthly payments payable to VIsL over the tenure of the lease contract.

(vi) Information about the Company''s exposure to interest rate, foreign currency and liquidity risks is included in Note 28,

* Less than Rs. 0.5 million.

# Trust in which Kiran Mazumdar Shaw is a Trustee,

j Notes:

(i) The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Company ; as a whole.

(ii) Salary and perquisites of Jonathan Hunt includes contribution to provident fund of Rs. 3 relating to earlier period.

(iii) Effective from October 1, 2006, the Company has entered into an arrangement for lease of land on an operating lease basis and a service agreement with''Biocon SEZ Developer'' i of Biocon Limited for availing certain facilities and services. The facility charges of Rs 157 (Year ended March 31, 2017 - Rs 106) and power charges (including other charges) of Rs ; 390 (Year ended March 31, 2017 - Rs 317) have been charged by Biocon Limited for the year ended March 31, 2018.

(iv) The Company has incorporated its wholly owned overseas subsidiary, Syngene USA Inc., USA (''the Subsidiary'') during the year and operational from 1 November 2017.

(v) Fellow subsidiary companies with whom the Company did not have any transactions -I NeoBiocon FZ LLC, a subsidiary of Biocon Limited j Biocon FZ LLC, a subsidiary of Biocon Limited i Biocon Pharma Limited, India - subsidiary of Biocon Limited i Biocon Pharma Inc, USA - subsidiary of Biocon Limited ; Biocon Biologies India Limited, India - subsidiary of Biocon Limited ; Biocon Academy, India - subsidiary of Biocon Limited j Biocon Healthcare Sdn Bhd, Malaysia - subsidiary of Biocon Limited

I (vi) The above disclosures include related parties as per IND-As 24 on "Related Party Disclosures" and Companies Act, 2013.

(vii) All transactions with these related parties are priced on an arm''s length basis and none of the balances are secured.

(All amounts are in Indian Rupees Million, except share data and per share data, unless otherwise stated)

1. EMPLOYEE BENEFIT PLANS

(i) The Company has a defined benefit gratuity plan as per the Payment of Gratuity Act, 1972 (''Gratuity Act''). Under the Gratuity Act, employee who has completed five years of service is entitled to specific benefit with no monetary limit. The level of benefit provided depends on the employee''s length of service and salary at retirement/termination age. The gratuity plan is a funded plan and the Company makes contributions to a recognized fund in India.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognized in the Company''s financial statements as at balance sheet date:

The nature of assets allocation of the plan assets is in debt based mutual funds of high credit rating,

Assumptions regarding future mortality experience are set in accordance with published statistics and mortality tables. The weighted average duration of the defined benefit obligation was 8 years (March 31, 2017 - 8 years)

The defined benefit plan exposes the Company to actuarial risks, such as longevity and interest rate risk, sensitivity of significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of defined benefit obligation by one percentage, keeping all other actuarial assumptions constant. Although the analysis does not take account of the full distribution of cash flows expected under the plan, it does provide an approximation of the sensitivity of the assumption shown,

As of March 31, 2018 and March 31, 2017, the plan assets have been invested in insurer managed funds and the expected contribution to the fund during the year ending March 31, 2019, is approximately Rs 30 (March 31, 2018 - Rs 40)

Measurement of fair values

Fair value of liquid mutual funds are based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place,

Sensitivity analysis

For the fair values of forward/option contracts of foreign currencies, reasonably possible changes at the reporting date to one of the significant observable inputs, holding other inputs constant, would have the following effects,

B. Financial risk management

The Company''s activities expose it to a variety of financial risks : credit risk, market risk and liquidity risk,

(i) Risk management framework

The Company''s risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

(ii) Credit risk

Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables and unbilled revenues) and from its investment activities, including deposits with banks and financial institutions, investments In mutual funds and other financial instruments.

The Company has established a credit mechanism under which each new customer is analysed individually for creditworthiness before the Company''s standard payment and delivery terms and conditions are offered. The Company''s review includes external ratings, where available, and other publicly available financial information. Outstanding customer receivables are regularly monitored,

Receivable from two customers of the Company''s receivables is Rs. 671 [March 31, 2017 - Rs. Nil] which is more than 10 percent of the Company''s total receivables.

Credit risk on cash and cash equivalent is limited as the Company generally invests in deposits with banks having high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units,

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company''s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company''s reputation,

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. In addition, the Company maintains line of credits as stated in Note 13,

The table below provides details regarding the undiscounted contractual maturities of significant financial liabilities as of March 31, 2018:

(iv) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices.

Foreign currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently, the Company is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The Company holds derivative instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates and foreign currency exposure,

(All amounts are in Indian Rupees Million, except share data and per share data, unless otherwise stated)

Cash flow and fair value interest rate risk

The Company''s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. During the year ended March 31, 2018 and March 31, 2017 the Company''s borrowings at variable rate were mainly denominated in usd.

(b) Sensitivity

The Company policy is to maintain most of its borrowings at fixed rate using interest rate swaps to achieve this when necessary. They are therefore not subject to interest rate risk as defined under Ind As 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

2. CAPITAL MANAGEMENT

The key objective of the Company''s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company,

The Company''s goal is to continue to be able to return excess liquidity to shareholders by continuing to distribute annual dividends in future periods.

3. SEGMENTAL INFORMATION Operating segments

The Company is engaged in a single operating segment of providing contract research and manufacturing services. Accordingly, there are no additional disclosures to be provided Ind As 108 ''Operating segments'' other than those already provided in the financial statements.

Geographical information

The geographical information analyses the Company''s revenues and non-current assets by the Company''s country of domicile (i.e. India) and other countries. In presenting the geographical information, revenue has been based on the geographic location of the customers and assets which have been based on the geographical location of the assets,

Major customer

Revenue from one customer of the Company''s Revenue from operations is Rs. 3,499 (March 31, 2017 - Rs.3,372) which is more than 10 percent of the Company''s total revenue,

4. SHARE BASED COMPENSATION Syngene ESOP Plan

On July 20, 2012, syngene Employee Welfare Trust (''Trust'') was created for the welfare and benefit of the employees and directors of the Company. The Board of Directors approved the employee stock option plan of the Company. On October 31, 2012 the Trust subscribed

6,680,000 equity shares (Face Value of Rs. 10 per share) of the Company using the proceeds from interest free loan of Rs. 150 obtained from the Company, adjusted for the consolidation of shares and bonus issue. As at March 31, 2018, the Trust holds 3,065,964 (March 31, 2017: 4,513,525) equity shares of face value of Rs. 10 each, adjusted for the consolidation of shares and bonus issue. As of March 31, 2018, the Trust has transferred 3,614,036 (March 31, 2017 - 2,166,475) equity shares to the employees on exercise of their stock options.

Grant

Pursuant to the scheme, the Company has granted options to eligible employees of the Company under syngene Employee stock Option Plan - 2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs. 22.50 per share (Face Value of Rs. 10 per share),

The weighted average remaining contractual life for the stock options outstanding as at March 31, 2018 is 2.13 years [March 31, 2017 - 1.36 years ].

5. EXCEPTIONAL ITEM

Pursuant to a fire incident on 12 December 2016, certain fixed assets, inventory and other contents in one of the buildings were damaged,

The Company lodged an estimate of loss with the insurance company and the survey is currently ongoing. The Company recorded a loss of Rs 795 arising from such incident during the year ended 31 March 2017. During the year ended 31 March 2018, the Company has additionally recorded losses aggregating to Rs. 237. The Company also recognized a minimum Insurance claim receivable for equivalent amounts in the respective periods. The aforementioned loss and the corresponding credit arising from insurance claim receivable has been presented on a net basis (Rs. Nil) under Exceptional items in these standalone financial statements. During the year ended March 31, 2018, the Company has received a disbursement of Rs. 615 (March 31, 2017: Rs 200) from the insurance company and the same has been adjusted with the amount recoverable from the insurance company.

In addition, the Company is in the process of determining its final claim for loss of fixed assets and Business Interruption and has accordingly not recorded any further claim arising therefrom at this stage,

6. CORPORATE SOCIAL RESPONSIBILITY

As per section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CsR) activities,

7 EVENTS AFTER REPORTING PERIOD

On April 25, 2018, the Board of Directors of the Company has recommended a final dividend of Rs. 1 per equity share on face value of Rs. 10 each. The recommended dividend is subject to the approval of the shareholders in the Annual General Meeting of the Company,

8. PRIOR YEARS'' COMPARATIVES

Previous year''s figures have been regrouped / reclassified, where necessary, to conform to current year''s classification,


Mar 31, 2017

1. Company Overview

1.1 Reporting entity

Syngene International Limited (“Syngene” or “the Company”), is engaged in providing contract research and manufacturing services in early stage drug discovery and development to pharmaceutical and biotechnology companies worldwide. Syngene’ s services include discovery chemistry and biology services, toxicology, pharmaceutical development, process development /manufacture of advanced intermediates, active pharmaceutical ingredients and bio-therapeutics. The Company is a public limited company incorporated and domiciled in India and has its registered office in Bengaluru, Karnataka, India. The Company’s shares are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India.

1.2 Basis of preparation of financial statements

a) Statement of compliance

The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as per the Companies (Indian Accounting Standards) Rules, 2015 notified under Section 133 of Companies Act, 2013, (the ‘Act’) and other relevant provisions of the Act.

The Company’s financial statements up to and for the year ended March 31, 2016 were prepared in accordance with the Companies (Accounting Standards) Rules, 2006, notified under Section 133 of the Act, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (“Previous GAAP”).

Is these are the Company’s first financial statements prepared in accordance with Indian Accounting Standards (Ind AS), Ind AS 101, First-time Adoption of Indian Accounting Standards has been applied. An explanation of how the transition to Ind AS has affected the previously reported financial position and financial performance of the Company is provided in Note 30.

These financial statements have been prepared for the Company as a going concern on the basis of relevant Ind AS that are effective at the Company’s annual reporting date, March 31, 2017. These financial statements were authorised for issuance by the Company’s Board of Directors on April 27, 2017.

Details of the Company’s accounting policies are included in Note 2.

b) Functional and presentation currency

These financial statements are presented in Indian rupees (INR), which is also the functional currency of the Company. All amounts have been rounded-off to the nearest million, unless otherwise indicated.

c) Basis of measurement

These financial statements have been prepared on the historical cost basis, except for the following items:

- Certain financial assets and liabilities (including derivative instruments) are measured at fair value;

- Net defined benefit assets/(liability) are measured at fair value of plan assets, less present value of defined benefit obligations;

d) Use of estimates and judgements

The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgements and assumptions. These estimates, judgements and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.

Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

- Note 2(a) and 28 — Financial instruments;

- Note 2(b) and 2(c) — Useful lives of property, plant and equipment and intangible assets;

- Note 27 — Assets and obligations relating to employee benefits;

- Note 35 — Share based payments; and

- Note 2(k) and 31 — Provision for income taxes and related tax contingencies.

1.3 Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending March 31, 2018 is included in the following notes:

— Note 28 - impairment of financial assets; and

— Note 16 and 32 - recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources.

A number of the Company’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

— Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

— Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

— Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Further information about the assumptions made in measuring fair values is included in the following notes:

— Note 35 - share based payment arrangements; and

— Note 2(a) and 28 - financial instruments.

2(a). Other equity

Securities premium

Securities premium is used to record the premium received on issue of shares. It is utilised in accordance with the provisions of the Companies Act, 2013.

General reserve

General reserve is used from time to time to transfer profits from retained earnings for appropriation purposes.

Share based payment reserve

The Company has established share based payment plan for certain categories of employees of the Company. Also refer Note 35 for further details on these plans.

Cash flow hedging reserves

The cash flow hedging reserve represents the cumulative effective portion of gains or losses (net of tax) arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges

3. Employee benefit plans

(i) T he Company has a defined benefit gratuity plan as per the Payment of Gratuity Act, 1972 (‘Gratuity Act’). Under the Gratuity Act, employee who has completed five years of service is entitled to specific benefit. The level of benefit provided depends on the employee’s length of service and salary at retirement/termination age. The gratuity plan is a funded plan and the Company makes contributions to a recognised fund in India.

Based on the actuarial valuation obtained in this respect, the following table sets out the status of the gratuity plan and the amounts recognised in the Company’s financial statements as at balance sheet date:

Fair value of liquid mutual funds are based on quoted price. Derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the market place.

Sensitivity analysis

For the fair values of forward/option contracts of foreign currencies, reasonably possible changes at the reporting date to one of the significant observable inputs, holding other inputs constant, would have the following effects.

B. Financial risk management

The Company’s activities expose it to a variety of financial risks : credit risk, market risk and liquidity risk.

(i) Risk management framework

The Company’s risk management is carried out by the treasury department under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative and non-derivative financial instruments and investment of excess liquidity.

(ii) Credit risk

Credit risk is the risk that the counterparty will not meet its obligation under a financial instrument or customer contract, leading to financial loss. The credit risk arises principally from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions and other financial instruments.

The Company has established a credit mechanism under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings, where available, and other publicly available financial information. Outstanding customer receivables are regularly monitored.

The Company establishes an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables. The maximum exposure to credit risk as at reporting date is primarily from trade receivables amounting to Rs.1,987 (March 31, 2016: Rs.1,852, April 01, 2015: Rs.1,799). The movement in allowance for impairment in respect of trade receivables during the year was as follows:

Receivable from one customer of the Company’s trade receivables is Rs.222 [March 31, 2016 - Rs.492(two customers)] which is more than 10 percent of the Company’s total trade receivables.

Credit risk on cash and cash equivalent is limited as the Company generally invest in deposits with banks having high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units.

(iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. In addition, the Company maintains line of credits as stated in Note 13.

(iv) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices, such as foreign exchange rates, interest rates and equity prices.

Foreign currency risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently, the Company is exposed to foreign exchange risk through operating and borrowing activities in foreign currency. The Company holds derivative instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates and foreign currency exposure.

Sensitivity analysis

The sensitivity of profit or loss to changes in exchange rates arises mainly from foreign currency denominated financial instruments from foreign exchange forward/option contracts designated as cash flow hedges.

Cash flow and fair value interest rate risk

The Company’s main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk. During the year ended March 31, 2017 and March 31, 2016 the Company’s borrowings at variable rate were mainly denominated in USD.

(a) Interest rate risk exposure

The exposure of the Company’s borrowing to interest rate changes at the end of the reporting period are as follows:

(b) Sensitivity

The Company policy is to maintain most of its borrowings at fixed rate using interest rate swaps to achieve this when necessary. They are therefore not subject to interest rate risk as defined under Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of change in market interest rates.

4. Capital management

The key objective of the Company’s capital management is to ensure that it maintains a stable capital structure with the focus on total equity to uphold investor, creditor, and customer confidence and to ensure future development of its business. The Company focused on keeping strong total equity base to ensure independence, security, as well as a high financial flexibility for potential future borrowings, if required without impacting the risk profile of the Company,

The Company’s goal is to continue to be able to return excess liquidity to shareholders by continuing to distribute annual dividends in future periods.

The amount of future dividends/buy back of equity shares will be balanced with efforts to continue to maintain an adequate liquidity status.

5. First-time adoption of Ind AS

These financial statement have been prepared in accordance with the Ind AS. For the purpose of transition from previous GAAP to Ind AS, the Company has followed the guidance prescribed under Ind AS 101 - First time adoption of Indian Accounting Standards (“Ind AS 101”), with effect from April 01, 2015 (“transition date”).

In preparing its Ind AS balance sheet as at April 1, 2015 and in presenting the comparative information for the year ended March 31, 2016, the Company has adjusted amounts reported previously in financial statements prepared in accordance with previous GAAP. This note explains how the transition from previous GAAP to Ind AS has affected the Company’s balance sheet and financial performance.

Optional exemptions availed and mandatory exceptions

In preparing these financial statements, the Company has applied the below mentioned mandatory exceptions.

Mandatory exemptions availed

(1) Estimates

As per Ind AS 101, an entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with the previous GAAP unless there is objective evidence that those estimates were in error.

The Company’s estimates under Ind AS are consistent with the above requirement. Key estimates considered in preparation of the financial statements that were not required under the previous GAAP are listed below:

- Fair valuation of financial instruments carried at FVTPL and/ or FVOCI.

- Impairment of financial assets based on the expected credit loss model.

- Determination of the discounted value for financial instruments carried at amortised cost.

(2) Classification and measurement of financial assets

Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable,

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of the financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.

(3) Hedge accounting

Hedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in Ind AS 109, Financial Instruments, at the date of transition. Hedging relationships cannot be designated retrospectively, and the supporting documentation cannot be created retrospectively. As a result, only hedging relationships that satisfied the hedge accounting criteria as on the date of transition are reflected as hedges in the financial statements under Ind AS,

Reconciliations

The following reconciliations provides the effect of transition to Ind AS from previous GAAP in accordance with Ind AS 101 - First-time adoption of Ind AS.

6. Disclosure on Specified Bank Notes (SBNs)

During the year, the Company had SBNs or other denomination note as defined in the MCA notification G.S.R. 308(E) dated March 31, 2017 on the details of SBN held and transacted during the period from November 8, 2016 to December, 30 2016, the denomination wise SBNs and other notes as per the notification is given below:

7. Segmental Information

Operating segments

The Company is engaged in a single operating segment of providing contract research and manufacturing services. Accordingly, there are no additional disclosures to be provided Ind AS 108 ‘Operating Segments’ other than those already provided in the financial statements.

Geographical information

The geographical information analyses the Company’s revenues and non-current assets by the Company’s country of domicile (i.e. India) and other countries. In presenting the geographical information, segment revenue has been based on the geographic location of the customers and segment assets which have been based on the geographical location of the assets.

8. Share based payments to employees

Syngene ESOP Plan

On July 20, 2012, Syngene Employee Welfare Trust (‘Trust’) was created for the welfare and benefit of the employees and directors of the Company. The Board of Directors approved the employee stock option plan of the Company. On October 31, 2012 the Trust subscribed 6,680,000 equity shares (Face Value of Rs.10 per share) of the Company using the proceeds from interest free loan of Rs.150 obtained from the Company, adjusted for the consolidation of shares and bonus issue. As at March 31, 2017, the Trust holds 4,513,525 (March 31, 2016: 5,919,219; April 1, 2015 - 6,680,000) equity shares of face value of Rs.10/- each, adjusted for the consolidation of shares and bonus issue. As at March 31, 2017, the Trust transferred 2,166,475 (March 31, 2016 - 760,781) equity shares to the employees on exercise of their stock options.

Grant

Pursuant to the Scheme, the Company has granted options to eligible employees of the Company under Syngene Employee Stock Option Plan -2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance of the employees. These options are exercisable at an exercise price of Rs.22.50 per share (Face Value of Rs.10 per share).

9. Exceptional item

Pursuant to a fire incident on 12 December 2016, certain fixed assets, inventory and other contents in one of the buildings was damaged. The Company lodged an initial estimate of loss with the insurance company and the survey is currently ongoing. During the year ended 31 March 2017, the Company has written off the net book value of assets aggregating to Rs.795 million and recognised a minimum Insurance claim receivable for an equivalent amount. During the current year, the Company has received an initial disbursement of Rs.200 from the insurance company and the same has been adjusted with the amount recoverable from the insurance company.

In addition, the Company is in the process of determining its claim for Business Interruption and has accordingly not recorded any claim arising there from at this stage.

10. Corporate social responsibility

As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities.

11. Events after reporting period

On April 27, 2017, the Board of Directors of the Company has recommended a final dividend of Rs.1/- per equity share on face value of Rs.10/- each. The recommended dividend is subject to the approval of the shareholders in the Annual General Meeting of the Company,

12. Prior years’ comparatives

Previous year’s figures have been regrouped / reclassified, where necessary, to conform to current year’s classification.


Mar 31, 2015

1. Corporate information

Syngene International Limited (Syngene* or 'the Company') was incorporated at Bangalore in 1993. On March 30, 2002, the Company became the subsidiary of Biocon Limited ('Bioconi).

The Company is engaged in providing contract research and manufacturing services in early stage drug discovery and development to pharmaceutical and biotechnology companies worldwide. Syngene's services include discovery chemistry and biology services, toxicology, pharmaceutical development, process development /manufacture of advanced intermediates, active pharmaceutical ingredients and bio therapeutics. Pursuant to merger as discussed in note 1.1, the Company also undertakes clinical research activities in India on discovering new biomarkers and discovering new diseases subsets and novel data based on pharmacogenomics.

1.1 Scheme of arrangement

On April 23, 2014, the Board of Directors of the Company approved a scheme of amalgamation ('the Scheme') of Clinigene International Limited (Clinigene* / "Transferor Company"), a wholly owned subsidiary, with the Company under section 391 and 394 of the Companies Act, 19S6. The Honourable High Court of Karnataka ('the Court') approved the aforesaid Scheme with Appointed Date as April 01, 2014 ("Appointed Date") vide its order dated February 5, 201S ("the Order"). The copy of the Order was filed with the Registrar of Companies on March 2, 2015. Clinigene was Incorporated on August 4,2000 at Bangalore and became a wholly owned subsidiary of Biocon on March 31,2001. In February 2012, Syngene purchased the shares in Clinigene from Biocon.

Accordingly, the assets and liabilities, and balance in reserves and surplus of Clinigene as at Appointed Date have been recorded at their carrying values in the books of Syngene under the Pooling of Interest method as prescribed by Accounting Standard 14 - Accounting for Amalgamation ('AS 14').

2. Basis of preparation

The financial statements of the Company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014. The financial statements have been prepared on an accrual basis and under the historical cost convention.

3. Share capital

a. Terms / rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10/- (March 31, 2014: Rs. 5/-) per share. The Company declares and pays dividend in Indian Rupees. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

During the year ended March 31, 2015, interim dividend distributed to equity shareholders was Rs. 21 (March 31, 2014 - Rs. Nil) per share on face value of Rs. 5/- each.

b. The Shareholders' at the Extraordinary General Meeting ('EGM') of the Company held on October 31, 2012, approved increase in authorised share capital from 50,000,000 equity shares of Rs. 5/- each to 60,000,000 equity shares of Rs. 5/- each.

c. The Company alloted 1,875,000 equity shares on October 31,2012 at the rate of Rs 80 per share (Face Value : Rs. 5 per Share) to Syngene Employees Welfare Trust ('Trust') under section 81 (1A) of the Companies Act, 1956. [Refer Note 38 (b)].

d. The Board of Directors of the Company in the meeting held on September 12, 2014 approved allotment of 1,971,060 equity shares at the rate of Rs.676.91 per share (Face value: Rs. 5 per share) on rights basis to Biocon Research Limited (a wholly owned subsidiary of Biocon Limited), in accordance with the provisions of section 62(1)(a) of the Companies Act, 2013.

e. The Board of Directors of the Company in the meeting held on September 10, 2014 approved the transfer of 4,166,667 equity shares (Face value: Rs. 5 per share) in the Company pursuant to the share purchase agreement dated September 9, 2014, executed between Biocon Research Limited, the Company and GE Equity International Mauritius

f. The Board of Directors of the Company in the meeting held on October 20, 2014 noted the execution of the share purchase agreement between Silver Leaf Oak (Mauritius) Limited ['Silver Leaf'], Biocon Research Limited ['BRL'] and the Company for transfer of 5,613,773 equity shares (Face value: Rs. 5 per share) in the Company by BRL to Silver Leaf. In January 2015, Silver Leaf assigned its rights and obligations to purchase the aforesaid 10% equity stake in the Company to IVF Trustee Company Private Limited ['IVF'], a fund advised by India Value Fund Advisors. Thereafter, BRL concluded such sale of Shares to IVF.

g. The Board of Directors of the Company in the meeting held on March 14, 2015 approved allotment of 1 equity share (Face value: Rs. 5 per share) at the rate of Rs.676.91 on rights basis, in accordance with the provisions of section 62(1 )(a) of the Companies Act, 2013.

h. The Shareholders' at the Extraordinary General Meeting ('EGM') of the Company held on March 16, 2015, approved the consolidation (i.e. reverse share split) of 2 equity shares of face value of Rs. 5/- each into 1 equity share of face value of Rs. 10/- each. Subsequent to this, the authorised share capital of 60,000,000 equity shares of Rs. 5/- each consolidated to 30,000,000 equity shares of Rs. 10/- each.

i. The Shareholders' at the EGM of the Company held on March 16, 2015, approved increase in authorised share capital from Rs. 300 to Rs. 2,500. Subsequent to this, the authorised share capital increased from 30,000,000 equity shares of Rs. 10/- each to 250,000,000 equity shares of Rs 10/- each

j. The Shareholders' at the EGM of the Company held on March 16, 2015, approved the issue of fully paid bonus shares of face value of Rs. 10/- each in the ratio of 1: 6.1253329 by capitalisation of Securities premium account.

k. Pursuant to a share purchase agreement dated March 31, 2015, IVF agreed to sell 20,000,000 equity shares (Face value: Rs. 10/- per share) in the Company to Silver Leaf. The Board of Directors of the Company recorded the transfer of shares to Silver Leaf on April 21, 2015.

l. Shares reserved for issue under options

For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer to note 38.

4. Contingent liabilities

(a) The Company has given corporate guarantees in favour of the Customs and Excise department ('CED') in respect of certain performance obligations of Biocon aggregating to Rs 500 (March 31, 2014- Rs 465).The necessary terms and conditions have been complied with and no liability has arisen till date. Biocon has given corporate guarantees of Rs 242 (March 31, 2014 - Rs 218) to the Customs and Excise department ('CED') on behalf of the Company.

March31,2015 March 31, 2014

(b) Taxation matters under appeal 1,045 1,045

Income tax demand from the tax authorities for payment of tax, based on assessment orders issued for which the Company has gone on appeal. The tax demand is mainly on account of denial of relief under section 10B of the Income-tax Act, 1961 and denial of relief under section 10AA of the Income-tax Act, 1961. The matter is pending final assessments / conclusion of appeals.

The Company is contesting the demands and the management is confident that its position will be upheld in the appellate process. Accordingly, no tax expense has been accrued in the financial statements for the demand raised.

c) Service Tax matters 57 -

d) VAT matters under appeal 1 -

5. Segmental Information

Business segments

The Company is engaged in a single business segment of providing contract research and manufacturing services.

6. Employee Stock Incentive Plan

(a) Selected employees of the Company were granted stock options of Biocon Limited('Biocon'), the holding company based upon performance, criticality to business and long-term potential to the Company. The options vest rateably over a period of 4 years. The Institute of Chartered Accountants of India has issued a Guidance Note on Accounting for Employee Share-based Payments, which is applicable to employee share based payment plans, the grant date in respect of which falls on or after April 1, 2005. The management is of the opinion that the schemes detailed above are managed and administered by Biocon for its own benefit and do not have any settlement obligations on the Company. Further the aforesaid schemes pertain to shares of Biocon. The compensation benefits in respect of such schemes is paid by the Company based on the cross charge from Biocon. Accordingly, the Company is of the opinion that there is no further accounting treatment/ disclosure required under the said Guidance Note.

(b) Syngene ESOP Plan:

On July 20, 2012, Syngene Employee Welfare Trust ('Trust') was created for the welfare and benefit of the employees and directors of the Company and subsidiary company. The Board of Directors has approved the employee stock option plan of the Company. On October 31, 2012 the Trust subscribed 1,875,000 equity shares (Face Value of Rs. 5 per share) of the Company using the proceeds from interest free loan of Rs. 150 obtained from the Company. The loan granted and receivable from the Trust has been adjusted in the shareholders' funds as per the Guidance Note on Accounting for Employee Share- based Payments issued by Institute of Chartered Accountants of India. Also refer note 3 and 4 above. As at March 31, 2015, the Trust holds 6,680,000 equity shares of face value : Rs. 10/- each, adjusted for the consolidation of shares and bonus issue.

7. Employee Stock Incentive Plan (contd.)

Grant

Pursuant to the Scheme, the Company has granted options to eligible employees of the Company under Syngene Employee Stock Option Plan - 2011. Each option entitles for one equity share. The options under this grant will vest to the employees as 25%, 35% and 40% of the total grant at end of second, third and fourth year from the date of grant, respectively, with an exercise period of three years for each grant. The vesting conditions include service terms and performance grades of the employees. These options are exercisable at an exercise price of Rs. 80/- per share (Face Value of Rs. 5 per share).

8. During the year ended March 31,2015,the Company identified a)certain discrepancies in the list of allottees in the e-form filed with Registrar of Companies (ROC) dated April 24, 2012 in respect of Bonus shares allotted on February 28, 2012 and b) that the explanatory statement in respect of notice for EGM held on December 14, 2011 for preferential issue of 625,000 shares of Face Value of Rs. 5/- each did not contain certain information as required under Rule 6 of Unlisted Public Companies (Preferntial Allotment) Rules, 2003.

Accordingly, the Company has made an application for Compounding of offences with the ROC. Based on the legal advice received, the Company is confident that the penalty, if any, levied by the ROC, will not be material to the financial statements and hence no provision for penalty has been made in the financial statements.

9. Prior years' comparatives

The current period financial information include the state of affairs and operations of the Transferor Company, as described in note 1.1 above. Hence, the current period's figures are strictly not comparable with the previous year's figures. The Company has reclassified and regrouped the previous year figures to confirm to current period's classification.

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