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Notes to Accounts of Torrent Pharmaceuticals Ltd.

Mar 31, 2023

(i) Term Loans from banks referred above to the extent of:

(a) ''657.42 crores (Previous year ''947.60 crores ) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) ''209.37 crores (Previous year ''355.34 crores) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(c) ''145.00 crores (Previous year ''NIL) are secured by first pari passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions, in respect of which company is in the process of creating charge.

(d) ''349.78 crores (Previous year ''NIL) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the Company including its future line extensions.

(e) ''400.00 crores (Previous year ''NIL) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the Company including its future line extensions, in respect of which company is in the process of creating charge.

(ii) Non-convertible debentures referred above to the extent of :

(a) ''427.89 crores (Previous year ''570.50 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) ''345.00 crores (Previous year ''670.00 crores) are secured by first pari passu mortgage/ charge on tangible immovable and movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(c) ''500.00 crores (Previous year ''NIL) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land) and Bhat (Research facility) as well as on certain identified trademarks of the Company including its future line extensions.

(iii) Term Loans from others referred above to the extent of ''333.33 crores (previous year ''400.00 crores) are secured by first

exclusive mortgage/ charge on identified Land situated at ShiIaj-Thaltej, Ahmedabad as well as first pari passu mortgage/ charge

on certain identified trademarks of the Company including its future line extensions.

(iv) Short term Borrowings from banks are in nature of working capital facilities which are secured by hypothecation of inventories

and book debts.

(v) Average interest rate on borrowings is 7.52% for the year ended 31^st March, 2023 (previous year 6.09%).

Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis:

Investment in mutual funds: The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

Equity investments: Equity investments traded in an active market determined by reference to their quoted market prices. Other equity investments where quoted prices are not available, fair values are determined by reference to the expected discounted cash flows from the underlying net assets or current market value of net assets.

Derivative instruments: For forward contracts and cross currency interest rate swaps, future cash flows are estimated based on forward exchange rates and forward interest rates (from observable forward exchange rates / yield curves at the end of the reporting period) and contract forward exchange rates and forward interest rates, discounted at a rate that reflects the credit risk of respective counterparties.

(iii) Financial risk management

The Companyâs activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Companyâs overall risk management programme seeks to minimise potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk:

Market risk refers to the possibility that changes in the market rates may have impact on the Companyâs profits or the value of its holding of financial instruments. The Company is exposed to market risks on account of foreign exchange rates, interest rates and underlying equity prices.

(a1) Foreign currency exchange rate risk:

The Companyâs foreign currency risk arises from its foreign operations, investments in foreign subsidiaries, foreign currency transactions and foreign currency borrowings. The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets/liabilities are denominated in a currency other than the functional currency of the Company.

Since a major part of the Companyâs revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Companyâs performance. Consequently, the overall objective of the foreign currency risk management is to minimise the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows upto a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The foreign exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1 based on management''s current assessment. Hedge effectiveness is assessed on a regular basis.

With respect to the Companyâs derivative financial instruments which is in the form of forward contracts and currency swap, a 5% increase / decrease in relation to USD & EURO of each of the currencies underlying such contracts would have resulted in increase / decrease of ''89.31 crores (''66.50 crores) in the Companyâs net profit and ''143.62 crores (''70.57 crores) in cash flow hedge reserve from such contracts as at 31^st March, 2023 and 31^st March, 2022 respectively.

With respect to the Companyâs non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EURO on the underlying would have resulted in increase /decrease of ''62.92 crores (''51.75 crores ) in the Companyâs net profit for the year ended 31^st March, 2023 and 31^st March, 2022 respectively.

(a2) Interest rate risk:

As at 31^st March, 2023, the Company has outstanding rupee borrowings of ''3,541.76 crores with variable rate of interest and ''1,027.10 crores with fixed rate of interest.

Cash flow risk in respect of variable rate instruments:

A change of 100 basis points in interest rate at the reporting date would have increased / (decreased) profit by ''35.42 crores. This analysis assumes that all other variables remains constant and change occurs on reporting date. The year end balances are not representative of the average borrowings during the year.

Fair value risk in respect of fixed rate instruments:

The Company carries borrowings at amortised cost and hence, change in the interest rate at reporting date does not affect statement of profit or loss.

(b) Credit risk:

Credit risk is the risk of financial loss arising from counterparty failure to repay or service debt according to the contractual terms or obligations. Credit risk encompasses of both, the direct risk of default and the risk of deterioration of creditworthiness as well as concentration of risks. Financial instruments that are subject to concentrations of credit risk materially consists of trade receivables, investments and derivative financial instruments.

All trade receivables are subject to credit risk exposure. The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through established policies, controls relating to credit approvals and procedures for continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company does not have significant concentration of credit risk related to trade receivables. No single third party customer contributes to more than 10 % of outstanding accounts receivable (excluding outstanding from subsidiaries) as at 31^st March, 2023 and 31^st March, 2022.

With respect to investments, the Company limits its exposure to credit risk by investing in liquid securities with counterparties depending on their Composite Performance Rankings (CPR) published by CRISIL. The Companyâs investment policy lays down guidelines with respect to exposure per counterparty, rating, processes in terms of control and continuous monitoring. The Company therefore considers credit risks on such investments to be negligible.

With respect to derivatives, the Company''s forex management policy lays down guidelines with respect to exposure per counter party i.e. with banks with high credit rating, processes in terms of control and continuous monitoring. The fair value of the derivatives are credit adjusted at the period end.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is ''2,151.14 crores and ''1,928.56 crores as at 31^st March, 2023 and 31^st March, 2022 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

(c) Liquidity risk:

Liquidity risk refers to 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 objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company generates cash flows from operations to meet its financial obligations, maintains adequate liquid assets in the form of cash & cash equivalents and has undrawn short term line of credits from banks to ensure necessary liquidity.

41 Commitments and Contingencies		('' in crores)
	As at 31^s1 March, 2023	As at 31^st March, 2022
Commitments:
(a) Estimated amount of contracts remaining unexecuted on capital account (net of advances) not provided for	431.59	368.37
(b) Uncalled liability on partly paid shares of Torrent Australasia Pty Ltd., a wholly owned subsidiary. [Australian Dollar (AUD) 0.06 crores (previous year AUD 0.06 crores)]	3.25	3.34
	434.84	371.71
(c) Guarantees of ''863.28 crores and ''795.97 crores are outstanding as at 31^st March, 2023 and 31^st March, 2022 respectively, which were issued to third parties on behalf of wholly owned subsidiaries for contractual obligations.
Contingent liabilities:
(a) Claims against the Company not acknowledged as debts:
Disputed demand of income tax for which appeals have been preferred	1.60	1.46
Disputed employee state insurance contribution liability under E.S.I. Act, 1948	16.08	15.50
Disputed demand of goods and service tax / excise	121.95	100.81
Disputed demand of local sales tax and C.S.T.	0.24	0.24
Disputed demand of stamp duty and registration charges	3.43	3.43
Disputed cases at labour court / industrial court	7.28	7.05
Disputed bonus liability under Payment of Bonus (Amendment) Act, 2015	0.25	0.25
	150.83	128.74

In most of the cases above, the relevant authorities have raised a demand or disallowed / deducted the relevant taxes. The Company has preferred an appeal and the outcome is awaited.

Against the claims not acknowledged as debts, the Company has paid ''3.96 crores (previous year ''3.84 crores). The expected outflow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

41 Commitments and Contingencies (Continued)

(b) The Company and/or its subsidiaries are involved in certain legal proceedings, including product liability and other commercial matters, that arise from time to time in the ordinary course of business. It is difficult to ascertain the financial effect, if any, of such proceedings that will result from its ultimate disposition due to involvement of complex issues with substantial uncertainties and without any precedents. Additionally, many factors like stage of the proceedings, overall length and extent of discovery process; the entitlement of the parties to an action to appeal a decision; the extent of the claims; the possible need for further legal proceedings to establish the appropriate amount of damages, if any; the settlement posture of the other parties to the litigation; uncertainty in timing of litigation and any other factors that may have an implications on the ultimate outcome of the ongoing litigations. The Company assesses likely outcome based on internal assessment as well as considers views of legal counsel representing the Company. Moreover, Company carries product liability insurance policy of amount which it believes to be sufficient for its needs.

(c) In view of amendment in Section 37(1) of Income Tax Act, 1961 introduced in Finance Act, 2022, it is possible that the Company may get involved in the litigation on allowability of certain expenses in relation to the years for which assessment proceedings have not commenced. It is difficult to ascertain the financial effects from such future proceedings, if any, that will result in to its ultimate disposition. The Company assesses likely outcome based on internal assessment as well as considers views of external consultants representing the Company.

42 Acquisition And Amalgamation of Curatio Health Care (I) Private Limited

On 14^th October, 2022, the Company acquired 100% shares in Curatio Health Care (I) Private Limited (âCuratioâ), including its two subsidiaries for a consideration of ''2,000 crores. Curatio has presence in the cosmetic dermatology segment with a portfolio of over 50 brands, marketed in India.

The Board of Directors of the Company, at its meeting held on 21^st December, 2022, had approved the Scheme of Arrangement in the nature of Amalgamation of Curatio with the Company subject to requisite statutory and regulatory approvals. The scheme was approved by the National Company Law Tribunal (âNCLTâ), Ahmedabad Bench vide its order dated 17^th May, 2023 and certified copy of the said order was filed with Registrar of Companies on 25^th May, 2023. The management has determined this as a subsequent adjusting event and hence, the financial statements for the year ended 31^st March, 2023 reflect the financial information of Curatio from the date of its acquisition, i.e. 14^th October, 2022.

Measurement of fair values

Fair value of identifiable intangible assets acquired has been determined by an independent valuer. Fair value of other assets, including receivables, has been considered same as the carrying value of these assets as of the acquisition date in the books of Curatio.

Revenues and Profit or Loss of Acquiree entity

The revenue of Curatio from 14^th October, 2022 to 31^st March, 2023 is ''126.35 crores with Profit before tax of ''36 crores.

Revenues and Profit or Loss of combined entity

Assuming the business combination had occurred from the beginning of reporting period i.e. 1^st April, 2022, the combined revenue of the Company would be ''7,834.79 crores with Profit before tax of ''1,477.84 crores.

Identifiable assets acquired and liabilities assumed

The Company has accounted for the transaction in accordance with Ind AS 103, âBusiness Combinationsâ, and carrying value of assets and liabilities pertaining to Curatio as appearing in the consolidated financial statements of the Company as at appointed date (i.e. at fair values of identifiable assets acquired and liabilities assumed based on purchase price allocation as determined by independent valuer) has been recognised in the standalone financial statements of the Company.

The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition

Gross amount required to be spent by Curatio (merged with the Company with effect from 14^th October, 2022) was ''0.68 crores for the year ended 31^st March, 2023 and the same has been fully spent during the year. Further, actual spent on CSR activities for the period from 14^th October, 2022 to 31^st March, 2023 amounts to ''0.53 crores which has been included in the Corporate social responsibility expenditure of the Company under other expenses in the standalone statement of profit and loss.

44 Relationship with Struckoff Companies

The Company has balances of ''0.03 crores as of 31^st March, 2023 (Previous year ''0.03 crores) with respect to four companies, which are struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956 during the financial year.

45 Non-Current Assets Held for Sale

During the year, the company has disposed off its Land at Shilaj, Ahmedabad and recognised gain of ''22.53 crores.

46 Registration of Charges

All the charges created or satisfied during the current year and previous year were registered with Registrar of Companies within statutory period.

47 No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (âIntermediariesâ), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries. The Company has not received any funds from any person(s) or entity(ies), including foreign entities (âFunding Partiesâ), with the understanding, whether recorded in writing or otherwise, that the Company shall directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Parties (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

48 Proposed Dividend

The Board of Directors in their meeting held on 30^th May, 2023, recommended a final equity dividend of ''8/- per equity share.

49 The financial statements for the year ended 31^st March, 2023 were approved for issue by the Board of Directors on 30^th May, 2023.

Mar 31, 2022

(i) Lease contracts entered by the Company majorly pertains for land, buildings and vehicles taken on lease to conduct its business in the ordinary course.

(ii) Lease expenses of '' 20.36 crores and '' 17.92 crores recognised in statement of profit and loss in other expenses for the year ended 31^st March, 2022 and 31^st March, 2021 respectively towards short-term leases, lease of low value assets and variable lease rental not included in measurement of lease liability.

(iii) Extension and termination options are included in some of the lease contracts. These are used to maximise operational flexibility in terms of managing assets used in Companyâs operations.

(iv) Lease obligations, interest expense on lease, maturity profile of lease obligation and payment of lease obligations are disclosed respectively in Balance Sheet, Finance costs (refer note 31), Liquidity risk (refer note 39) and Statement of Cash Flows.

The Company tests goodwill for impairment annually or based on an indicator. The Company provides for impairment if the carrying amount of goodwill exceeds its recoverable amount. The recoverable amount is determined based on âvalue in useâ calculations which is calculated as the net present value of forecasted cash flows of cash generating unit (CGU) to which the goodwill is related.

Key assumptions for CGUs with significant amount of goodwill are as follows :

a) Projected cash flows for five years based on financial budgets / forecasts in line with the past experience. The perpetuity value is taken based on the long term growth rate depending on macro economic growth factors.

b) Discount rate applied to projected cash flow is 13.00% to 15.60%.

Acquired brands are considered as CGU for testing of impairment of goodwill generated on such acquisitions.

The Company believes that any reasonably possible change in the key assumptions on which a recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.

(i) Term Loans from banks referred above to the extent of :

(a) '' 947.60 crores (Previous year '' 1487.65 crores ) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) '' 355.34 crores (Previous year '' 526.73 crores) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(ii) Non-convertible debentures referred above to the extent of :

(a) '' NIL (Previous year '' 150.00 crores) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(b) '' 570.50 crores (Previous year '' 713.11 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(c) '' 670.00 crores (Previous year '' 695.00 crores) are secured by first pari passu mortgage/ charge on tangible immovable and movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(iii) Term Loans from others referred above to the extent of '' 400.00 crores (previous year '' 400.00 crores ) are secured by first exclusive mortgage/

charge on identified Land situated at ShiIaj-Thaltej, Ahmedabad as well as first pari passu mortgage/ charge on certain identified trademarks of the

Company including its future line extensions.

(iv) Short term Borrowings from banks are in nature of working capital facilities which are secured by hypothecation of inventories and book debts.

(v) Average interest rate on borrowings is 6.09% for the year ended 31^st March, 2022 (previous year 6.96%).

* The Company has not disclosed the fair value of financial instruments, because their carrying amount are a reasonable approximation of fair value. Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis: Investment in mutual funds: The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

(iii) Financial risk management

The Companyâs activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Companyâs overall risk management program seeks to minimize potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk:

(a1) Foreign currency exchange rate risk:

Since a major part of the Companyâs revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Companyâs performance. Consequently, the overall objective of the foreign currency risk management is to minimize the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows upto a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The foreign exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1 based on managementâs current assessment. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.

With respect to the Companyâs derivative financial instruments which is in the form of forward contracts, a 5% increase / decrease in relation to USD & EURO of each of the currencies underlying such contracts would have resulted in increase /decrease of '' 66.50 crores ('' 71.32 crores) in the Companyâs net profit and '' 70.57 crores ('' 157.99 crores) in cash flow hedge reserve from such contracts as at 31^st March, 2022 and 31^st March, 2021 respectively. With respect to the Companyâs non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EURO on the underlying would have resulted in increase / decrease of '' 51.75 crores ('' 54.64 crores ) in the Companyâs net profit for the year ended 31^st March, 2022 and 31^st March, 2021 respectively.

(a2) Interest rate risk :

As at 31^st March, 2022, the Company has outstanding rupee borrowings of '' 2,573.44 crores with variable rate of interest and '' 769.97 crores with fixed rate of interest.

Cash flow risk in respect of variable rate instruments :

A change of 100 basis points in interest rate at the reporting date would have increased / (decreased) profit by '' 25.73 crores. This analysis assumes that all other variables remains constant and change occurs on reporting date. The year end balances are not representative of the average borrowings during the year.

Fair value risk in respect of fixed rate instruments :

The Company carries borrowings at amortised cost and hence, change in the interest rate at reporting date does not affect statement of profit or loss.

(b) Credit risk :

With respect to derivatives, the Companyâs forex management policy lays down guidelines with respect to exposure per counter party i.e. with banks with high credit rating, processes in terms of control and continuous monitoring. The fair value of the derivatives are credit adjusted at the period end. Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is '' 1,928.56 crores and '' 1,864.92 crores as at 31^st March, 2022 and 31^st March, 2021 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

In most of the cases above, the relevant authorities have raised a demand or disallowed / deducted the relevant taxes. The Company has preferred an appeal and the outcome is awaited.

Against the claims not acknowledged as debts, the Company has paid '' 3.84 crores (previous year '' 3.86 crores). The expected outflow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

(d) Guarantees of '' 795.97 crores and '' 839.79 crores are outstanding as at 31^st March, 2022 and 31^st March, 2021 respectively, which were issued to third parties on behalf of wholly owned subsidiaries for contractual obligations.

42. The Company has considered the possible effects that may result from COVID-19 on the carrying amounts of tangible and intangible assets, financials assets, inventory, receivables etc as well as borrowings and liabilities accrued. In developing the assumptions relating to the possible future uncertainties in the economic conditions because of this pandemic, the Company has used internal and external information such as future estimate of volumes, continuity of supply chain etc. Having reviewed the underlying data and based on current estimates the Company expects the carrying amount of these assets will be recovered and there is no significant impact on the Companyâs ability to discharge its borrowings and liabilities. 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.

44. RELATIONSHIP WITH STRUCKOFF COMPANIES

The Company has balances of '' 0.03 crores as of 31^st March, 2022 (Previous year '' 0.03 crores) with respect to four companies, which are struck off under Section 248 of the Companies Act, 2013 or Section 560 of Companies Act, 1956 during the financial year.

45. NON-CURRENT ASSETS HELD FOR SALE

During the year, considering that there is no alternate use in the foreseeable future, the Company has classified the land with carrying value of '' 126.65 crores as non-current assets held for sale since the sale is highly probable and is expected to qualify for recognition as a completed sale within one year from the date of classification.

46. REGISTRATION OF CHARGES

All the charges created or satisfied during the current year and previous year were registered with Registrar of Companies within statutory period.

47. No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person(s) or entity(ies), including foreign entities (âIntermediariesâ) 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) other than in the ordinary course of business with its subsidiary companies. The Company has not received any fund from any party(s) (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 (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

48. PROPOSED DIVIDEND

The Board of Directors in their meeting held on 25^th May, 2022, recommended a final equity dividend of '' 8/- per equity share. The Company is completing 50 years of its incorporation this year. To commemorate the same, the Board has additionally recommended :

1. A special dividend of ''15/- per equity share. Considering this, the total dividend for year become '' 48/- per equity share (includes interim dividend of '' 25/- per equity share).

2. Bonus share issue in the ratio of 1:1 i.e. one equity bonus share for each fully paid up equity share. Consequent to the bonus issue, the total paid up share capital will be '' 169.22 crores from the existing '' 84.62 crores.

49 . The financial statements for the year ended 31^st March, 2022 were approved for issue by the Board of Directors on 25^th May, 2022.

50 . The figures for the previous year have been restated/regrouped wherever necessary to make them comparable.

Mar 31, 2021

Lease contracts entered by the Company majorly pertains for land, buildings and vehicles taken on lease to conduct its business in the ordinary course.

Lease expenses of ''17.92 crores and ''9.44 crores recognised in statement of profit and loss in other expenses for the year ended 31^st March, 2021 and 31^st March, 2020 respectively towards short-term leases, lease of low value assets and variable lease rental not included in measurement of lease liability.

Extension and termination options are included in some of the lease contracts. These are used to maximise operational flexibility in terms of managing assets used in Company''s operations.

Lease obligations, interest expense on lease, maturity profile of lease obligation and payment of lease obligations are disclosed respectively in Other financial liabilities (refer note 24), Finance costs (refer note 31), Liquidity risk (refer note 39) and Statement of Cash Flows.

The Company tests goodwill for impairment annually or based on an indicator. The Company provides for impairment if the carrying amount of goodwill exceeds its recoverable amount. The recoverable amount is determined based on "value in use" calculations which is calculated as the net present value of forecasted cash flows of cash generating unit (CGU) to which the goodwill is related.

Key assumptions for CGUs with significant amount of goodwill are as follows:

a) Projected cash flows for five years based on financial budgets / forecasts in line with the past experience. The perpetuity value is taken based on the long-term growth rate depending on macroeconomic growth factors.

b) Discount rate applied to projected cash flow is 13.00% to 15.60%.

Acquired brands are considered as CGU for testing of impairment of goodwill generated on such acquisitions.

Torrent Investments Private Limited (formerly known as Torrent Private Limited), the holding Company, holds 120,563,720 (Previous year 120,563,720) equity shares of ''5 each, equivalent to 71.25% (Previous year 71.25%) of the total number of subscribed and paid-up equity shares, which is the only shareholder holding more than 5% of total equity shares.

The Company has one class of equity shares having par value of ''5 each. Each shareholder is eligible for one vote per share held. The final 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, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount, in proportion to shareholding.

(i) Term Loans from banks referred above to the extent of:

(a) ''1,487.65 crores (Previous year ''1,943.72 crores) are secured by first pari passu mortgage / charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) ''Nil (Previous year ''251.29 crores) from bank is secured by first charge on certain identified trademarks of the Company including its future line extensions.

(c) ''Nil (Previous year ''75.38 crores) are secured by first pari passu mortgage / charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh.

(d) ''526.73 crores (Previous year ''526.24 crores) are secured by first pari passu mortgage / charge on immovable and tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(ii) Non-convertible debentures referred above to the extent of:

(a) ''150.00 crores (Previous year ''549.57 crores) are secured by first pari passu mortgage / charge on immovable and tangible movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(b) ''713.11 crores (Previous year ''855.71 crores) are secured by first pari passu mortgage / charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(c) ''695.00 crores (Previous year ''300.00 crores) are secured by first pari passu mortgage / charge on tangible immovable and movable assets, present and future, located at Dahej (SEZ) in Gujarat (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(iii) Term Loans from others referred above to the extent of ''400.00 crores (Previous year ''Nil) are secured by first exclusive mortgage/

charge on identified land situated at ShiIaj-Thaltej, Ahmedabad as well as first pari passu mortgage / charge on certain identified

trademarks of the Company including its future line extensions.

(iv) Short-term Borrowings from banks are in nature of working capital facilities which are secured by hypothecation of inventories

and book debts.

(v) Average interest rate on borrowings is 6.96% for the year ended 31^st March, 2021 (Previous year 7.82%).

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Donation to Political Parties

Donation includes political contributions of ''10.00 crores and ''25.00 crores for the year ended 31^st March, 2021 and 31^st March, 2020 respectively.

. Defined Benefit Plans

The accruing liability on account of retirement benefit plans (in the nature of defined benefits plan) is accounted as per Ind-AS 19 "Employee Benefits".

Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis:

(iii) Financial risk management

The Companyâs activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Companyâs overall risk management program seeks to minimise potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk:

(a1) Foreign currency exchange rate risk:

The Companyâs foreign currency risk arises from its foreign operations, investments in foreign subsidiaries, foreign currency transactions and foreign currency borrowings. The fluctuation in foreign currency exchange rates may have potential impact on the income statement and equity, where any transaction references more than one currency or where assets / liabilities are denominated in a currency other than the functional currency of the Company.

Since a major part of the Companyâs revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Companyâs performance. Consequently, the overall objective of the foreign currency risk management is to minimise the short-term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows up to a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The foreign exchange forward contracts are denominated in the same currency as the highly probable forecast sales, therefore the hedge ratio is 1:1 based on management''s current assessment. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.

With respect to the Companyâs derivative financial instruments which is in the form of forward contracts and currency swap, a 5% increase / decrease in relation to USD & EURO of each of the currencies underlying such contracts would have resulted in increase / decrease of ''71.32 crores (''82.61 crores) in the Companyâs net profit and ''157.99 crores (''152.54 crores) in cash flow hedge reserve from such contracts as at 31^st March, 2021 and 31^st March, 2020 respectively.

With respect to the Companyâs non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EURO on the underlying would have resulted in increase / decrease of ''54.64 crores (''33.72 crores) in the Companyâs net profit for the year ended 31^st March, 2021 and 31^st March, 2020 respectively.

(a2) Interest rate risk:

As at 31^st March, 2021, the Company has outstanding rupee borrowings of ''3,222.78 crores with variable rate of interest and ''1,161.65 crores with fixed rate of interest.

Cash flow risk in respect of variable rate instruments:

A change of 100 basis points in interest rate at the reporting date would have increased / (decreased) profit by ''32.23 crores. This analysis assumes that all other variables remains constant and change occurs on reporting date. The year end balances are not representative of the average borrowings during the year.

Fair value risk in respect of fixed rate instruments:

The Company carries borrowings at amortised cost and hence, change in the interest rate at reporting date does not affect statement of profit or loss.

(b) Credit risk:

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is ''1,864.92 crores and ''1,956.41 crores as at 31^st March, 2021 and 31^st March, 2020 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

(c) Liquidity risk:

Liquidity risk refers to 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 objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company generates cash flows from operations to meet its financial obligations, maintains adequate liquid assets in the form of cash & cash equivalents and has undrawn short-term line of credits from banks to ensure necessary liquidity.

(iv) Capital management

The capital structure of the Company consists of equity, debt, cash and cash equivalents. The Companyâs objective for capital management is to maintain the capital structure which will support the Companyâs strategy to maximise shareholderâs value, safeguarding the business continuity and help in supporting the growth of the Company.

In most of the cases above, the relevant authorities have raised a demand or disallowed / deducted the relevant taxes. The Company has preferred an appeal and the outcome is awaited.

Against the claims not acknowledged as debts, the Company has paid ''3.86 crores (Previous year ''3.56 crores). The expected outflow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

The Company and / or its subsidiaries are involved in certain legal proceedings, including product liability and other commercial matters, that arise from time to time in the ordinary course of business. It is difficult to ascertain the financial effect, if any, of such proceedings that will result from its ultimate disposition due to involvement of complex issues with substantial uncertainties and without any precedents. Additionally, many factors like stage of the proceedings, overall length and extent of discovery process; the entitlement of the parties to an action to appeal a decision; the extent of the claims; the possible need for further legal proceedings to establish the appropriate amount of damages, if any; the settlement posture of the other parties to the litigation; uncertainty in timing of litigation and any other factors that may have an implications on the ultimate outcome of the ongoing litigations. The Company assesses likely outcome based on internal assessment as well as considers views of legal counsel representing the Company. Moreover, Company carries product liability insurance policy of amount which it believes to be sufficient for its needs.

Guarantees of ''839.79 crores and ''861.28 crores are outstanding as at 31^st March, 2021 and 31^st March, 2020 respectively, which were issued to third parties on behalf of wholly-owned subsidiaries for contractual obligations.

42 . The Company has considered the possible effects that may result from COVID-19 on the carrying amounts of tangible and intangible assets, financials assets, inventory, receivables etc as well as borrowings and liabilities accrued. In developing the assumptions relating to the possible future uncertainties in the economic conditions because of this pandemic, the Company has used internal and external information such as future estimate of volumes, continuity of supply chain etc. Having reviewed the underlying data and based on current estimates the Company expects the carrying amount of these assets will be recovered and there is no significant impact on the Companyâs ability to discharge its borrowings and liabilities. 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.

44. Proposed dividend

The Board of Directors in their meeting held on 18^th May, 2021, recommended a final equity dividend of ''15.00 per equity share of ''5.00 each fully paid-up for the year 2020-21.

45. The financial statements for the year ended 31^st March, 2021 were approved for issue by the Board of Directors on 18^th May, 2021.

46. The figures for the previous year have been restated/regrouped wherever necessary to make them comparable.

Mar 31, 2019

1. CORPORATE INFORMATION

Torrent Pharmaceuticals Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India. The address of its registered office is Torrent House, Off Ashram Road, Ahmedabad - 380 009, Gujarat, India. The Company is one of the leading Indian Pharmaceutical Company engaged in research, development, manufacturing and marketing of generic pharmaceutical formulations. The Companyâs research and development facility is located in the state of Gujarat, India and its manufacturing facilities are located in the states of Gujarat, Himachal Pradesh, Madhya Pradesh, Andhra Pradesh and Sikkim.

2. STATEMENT OF COMPLIANCE

The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with the Companies (Indian Accounting Standards) Rules as amended from time to time and other relevant provisions of the Act.

3. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

3.1. Basis of preparation and presentation

The financial statements have been prepared and presented under the historical cost convention on an accrual basis of accounting except for the following material items which have been measured at fair value.

- Derivative financial instrument

- Investments in mutual funds & equity investments

- Defined benefit plan - plan assets measured at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if the market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value measurement and/or disclosure purposes in the financial statements is determined on such a basis except for leasing transactions that are within the scope of Ind AS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 Inventories or value in use in Ind AS 36 Impairment of asset.

In addition, for financial reporting purposes, fair value measurements are categorized into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

3.2. Functional and presentation currency

The financial statements are presented in Indian Rupees, the currency of the primary economic environment in which the Company operates. All the amounts are stated in the nearest rupee crores.

3.3. use of estimates

The preparation of financial statements are in conformity with the recognition and measurement principles of Ind AS which requires management to make critical judgements, estimates and assumptions that affect the reporting of assets, liabilities, income and expenditure. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to the estimates are recognised in the period in which the estimates are revised and future periods are affected.

Key source of estimation of uncertainty at the date of financial statements, which may cause material adjustment to the carrying amount of assets and liabilities within the next financial year, is in respect of:

- Useful lives of property, plant and equipment ( refer note no. 4.1)

- Valuation of assets acquired as part of business combination (refer note no. 4.2.1)

- Useful lives of intangible assets ( refer note no. 4.3)

- Impairment of investments in subsidiaries (refer note no. 4.5.3)

- Valuation of inventories ( refer note no. 4.7)

- Impairment of intangible assets and goodwill ( refer note no. 4.8)

- Employee benefits (refer note no. 4.9)

- Provisions & contingent liabilities ( refer note no. 4.11)

- Sales returns ( refer note no. 4.12)

- Valuation of deferred tax assets ( refer note no. 4.14)

4. RECENT IND AS

The Company has not applied the following new and revised Ind ASs that have been issued but are not yet effective :

a) In March 2019, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment Rules, 2019, notifying Ind AS 116 Leases and consequential amendments to other standards. The amendments are applicable to the Company from 01-Apr-2019.

Ind AS 116 supersede Ind AS 17. The new standard introduces single lease accounting model for the lessees under which all major leases are recognised on-balance sheet, removing the lease classification test. Lease assets are initially recognised as right of use asset and subsequently measured using the cost model. Lease liabilities are initially measured at present value of future lease payments and subsequently adjusted for interest, payments and remeasurement, if any. Exemption is provided for short-term leases and low value underlying items. Lease accounting for lessors essentially remains unchanged except for additional guidance and new disclosure requirements. The Company is evaluating the impact of Ind AS 116 on its financial statements and plans to adopt on effective date using the practical expedients.

b) I n March 2019, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Second Amendment Rules, 2019, amending :

i) Ind AS 12 - income Taxes with Appendix C Uncertainty over income Tax Treatments

The amendments are applicable to the Company from 01-Apr-2019. Appendix C to Ind AS 12 clarifies the recognition and measurement requirements in Ind AS 12 when there is uncertainty over income tax treatments. The Company is evaluating the impact of this amendment on its financial statements.

ii) Ind AS 19 - Plan Amendment, Curtailment or Settlement

The amendments clarify that if a plan amendment, curtailment or settlement occurs, it is mandatory that the current service cost and the net interest for the period after the re-measurement are determined using the assumptions used for the re-measurement. In addition, amendments have been included to clarify the effect of a plan amendment, curtailment or settlement on the requirements regarding the asset ceiling. The Company does not expect this amendment to have any significant impact on its financial statements.

iii) Ind AS 23 - Borrowing Costs

The amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. The Company does not expect any impact from this amendment.

(i) Certain property, plant and equipments hypothecated/mortgaged as security for borrowings as disclosed under note 18.

(ii) Capital work-in-progress includes expenditure of Rs. 12.40 crores (previous year : Rs. 9.00 crores) incurred in the course of construction.

(iii) The amount of capital commitments is disclosed in note 41.

(iv) Additions to research and development assets during the year are as under:

The Company tests goodwill for impairment annually or based on an indicator and provides for impairment if the carrying amount of goodwill exceeds its recoverable amount. The recoverable amount is determined based on âvalue in useâ calculations which is calculated as the net present value of forecasted cash flows of cash generating unit (CGU) to which the goodwill is related.

Key assumptions for CGUs with significant amount of goodwill are as follows :

b) Discount rate applied to projected cash flow is 13.00% to 15.60%.

Acquired brands are considered as CGU for testing of impairment of goodwill amounting to Rs. 209.34 crores generated on acquisition of brands.

(ii) Details of shares allotted for consideration other than cash, bonus shares and shares bought back in previous five financial years is as under :

The Company allotted 84,611,360 equity shares as fully paid up bonus shares of Rs. 5 each, pursuant to the shareholdersâ resolution passed on 12^th July, 2013.

(iii) Torrent Private Limited, the holding Company, holds 120,563,720 (previous year 120,563,720) equity shares of Rs. 5 each, equivalent to 71.25% (previous year 71.25%) of the total number of subscribed & paid up equity shares, which is the only shareholder holding more than 5 % of total equity shares.

(iv) The Company has one class of equity shares having par value of Rs. 5 each. Each shareholder is eligible for one vote per share held. The final 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, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount, in proportion to shareholding.

Notes:

(i) Term Loans from banks referred above to the extent of :

(a) Rs. 1515.44 crores (Previous year '' Nil) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(b) Rs. 749.54 crores (Previous year Rs. 1593.12 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions, in respect of which Company is in the process of creating charge.

(c) Rs. 345.86 crores (Previous year Rs. 325.22 crores) from bank is secured by first charge on certain identified trademarks of the Company including its future line extensions.

(d) Rs. 193.68 crores (Previous year Rs. 266.68 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh.

(e) Rs. 131.66 crores (Previous year Rs. 172.18 crores ) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(f) Rs. Nil (Previous year Rs. 43.12 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh.

(ii) Non-convertible debentures referred above to the extent of :

(a) Rs. 956.22 crores (Previous year Rs. 1,396.88 crores) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(b) Rs. 998.32 crores (Previous year Rs. 998.07 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions.

(iii) Short term borrowings from banks are in nature of working capital facilities which are secured by hypothecation of inventories and book debts.

Amount of Rs. 66.31 crores pertains to deferred tax asset created on unabsorbed depreciation. The Company, based on future taxable income generation projections, expects to realise the same in future periods.

Under the Income-tax Act, 1961, the Company is liable to pay Minimum Alternate Tax (MAT). MAT paid can be carried forward for a period of 15 years and can be set off against the future tax liabilities. MAT is recognised as a deferred tax asset only when the asset can be measured reliably and it is probable that the future economic benefit associated with the asset will be realised.

NOTE - 5 : DONATION TO POLITICAL PARTIES

Donation includes political contributions of Rs. 25.50 crores and Rs. 10.00 crores for the year ended 31-Mar-2019 and 31-Mar-2018 respectively.

NOTE - 6 : BUSINESS COMBINATIONS AND ACQUISITIONS

The Company had entered into Business Transfer Agreement with Unichem Laboratories Limited (âUnichemâ) for the acquisition of branded business of Unichem for India and Nepal, including its Sikkim manufacturing facility, on a going concern basis by way of slump sale, which has been completed on 14-Dec-2017.

The total purchase consideration of Rs. 3,515.00 crores has been paid in cash. The Company has accounted for the transaction under Ind AS 103, âBusiness Combinations, and allocated the aggregate purchase consideration to identifiable assets acquired and liabilities assumed based on purchase price allocation as follows:

The acquisition costs of Rs. 7.75 crores for the year ended 31-Mar-2018 have been included in other expenses in the statement of profit and loss.

NOTE - 7 : LOANS TO GROUP COMPANIES

(a) The details of loans given by the Company to its wholly owned subsidiaries are as under :

(b) There are no loans where either no interest is charged or interest is below the rate specified in section 186 of the Companies Act, 2013, wherever applicable.

NOTE - 8 : DEFINED BENEFIT PLANS

The accruing liability on account of retirement benefit plans (in the nature of defined benefits plan) is accounted as per Ind-AS 19 âEmployee Benefitsâ.

General description of the plan :

The Company operates a defined benefit plan (the gratuity plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment.

Expected long term productivity gains & long term risk-free real rate of interest have been used as guiding factors to determine long term salary growth.

Future mortality rates are obtained from relevant table of Indian Assured Lives Mortality (2006-08) Ultimate.

(i) Sensitivity Analysis for each significant actuarial assumption :

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

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

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

(j) Investment details of plan assets :

The plan assets are managed by insurance company viz Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited which has invested the funds substantially as under :

(k) Maturity profile :

The defined benefit obligations shall mature after year ended 31-Mar-2019 as follows:

(l) Asset-liability matching strategies :

The Company contributes to the insurance fund based on estimated liability of the next financial year end. The projected liability statement is obtained from the actuarial valuer.

NOTE - 9 : FINANCIAL INSTRUMENTS

(i) Financial assets and liabilities

Accounting classification and fair values:

* The Company has not disclosed the fair value of financial instruments, because their carrying amount are a reasonable approximation of fair value.

Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis :

Investment in mutual funds : The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

Equity investments : Equity investments traded in an active market determined by reference to their quoted market prices. Other equity investments where quoted prices are not available, fair values are determined by reference to the expected discounted cash flows from the underlying net assets or current market value of net assets.

(ii) Derivative financial instruments Cash flow hedges :

Derivatives are taken to cover foreign exchange risk of highly probable forecasted sales transactions occurring in foreign currencies and foreign currency borrowings. The following are outstanding derivative contracts designated as cash flow hedges :

(iii) Financial risk management

The Companyâs activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Companyâs overall risk management program seeks to minimize potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk :

a1 Foreign currency exchange rate risk :

Since a major part of the Companyâs revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Companyâs performance. Consequently, the overall objective of the foreign currency risk management is to minimize the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows upto a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.

With respect to the Companyâs derivative financial instruments which is in the form of forward contracts, currency swap, a 5% increase / decrease in relation to USD & EUR of each of the currencies underlying such contracts would have resulted in increase /decrease of Rs. 48.14 crores (Rs. 33.49 crores) in the Companyâs net profit and Rs. 98.45 crores (Rs. 110.74 crores) in cash flow hedge reserve from such contracts as at 31-Mar-2019 and 31-Mar-2018 respectively.

With respect to the Companyâs non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EUR on the underlying would have resulted in increase /decrease of Rs. 11.09 crores (Rs. 8.11 crores) in the Companyâs net profit for the year ended 31-Mar-2019 and 31-Mar-2018 respectively.

a2 Interest rate risk :

In respect of foreign currency loans, the Company has outstanding borrowing of USD 78 millions. As per the Companyâs risk management policy to minimize the interest rate cash flow risk exposure on foreign currency long term borrowings, interest rate swaps are taken to convert the variable interest rate risk into rupee fixed interest rate. There is no interest rate risks associated with foreign currency loans. In respect of rupee loans, the outstanding loan with variable rate of interest is not significant as compared to total amount of borrowings and hence interest rate sensitivity has not been performed.

(b) Credit risk :

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is Rs. 2,073.27 crores and Rs. 1,914.40 crores as at 31-Mar-2019 and 31-Mar-2018 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

(iv) Capital management

The capital structure of the Company consists of equity, debt, cash and cash equivalents. The Companyâs objective for capital management is to maintain the capital structure which will support the Companyâs strategy to maximize shareholderâs value, safeguarding the business continuity and help in supporting the growth of the Company.

In most of the cases above, the relevant authorities have raised a demand or disallowed / deducted the relevant taxes. The Company has preferred an appeal and the outcome is awaited.

Against the claims not acknowledged as debts, the Company has paid Rs. 0.15 crores (previous year Rs. 0.18 crores). The expected outflow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

(b) The Company is in the process of evaluating the impact of the Supreme Court (âSCâ) judgement dated February 28, 2019 in the case of Regional Provident Fund Commissioner (II) West Bengal v/s Vivekananda Vidyamandir and Others, in relation to non-inclusion of certain allowances from the definition of âbasic wagesâ of the relevant employees for the purposes of determining contribution to Provident Fund (âPFâ) under the Employeesâ Provident Fund & Miscellaneous Provisions Act, 1952. Based on legal advice received by the management, there are interpretation issues relating to the said SC judgement and review petitions are pending before the SC in this matter. In the assessment of the management, the aforesaid matter is not likely to have a significant impact and accordingly, no provision has been made in the financial statements.

NOTE - 10 : PROPOSED DIVIDEND

The Board of Directors in their meeting held on 20-May-2019, proposed a final equity dividend of Rs. 4.00 per equity share of Rs. 5.00 each fully paid up for the year 2018-19.

NOTE - 11

The financial statements for the year ended 31-Mar-2019 were approved for issue by the Board of Directors on 20-May-2019.

NOTE - 12

The figures for the previous year have been restated/regrouped wherever necessary to make them comparable.

Mar 31, 2018

1. CORPORATE INFORMATION

2. STATEMENT OF COMPLIANCE

The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 (the Act) [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

3. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

3.1. Basis of preparation and presentation

- Derivative financial instrument

- Investments in mutual funds & equity investments

- Defined benefit plan - plan assets measured at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if the market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value measurement and/or disclosure purposes in the financial statements is determined on such a basis except for leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

3.2. Functional and presentation currency

The financial statements are presented in Indian Rupees, the currency of the primary economic environment in which the Company operates. All the amounts are stated in the nearest rupee crores.

3.3. Use of estimates

The preparation of financial statements are in conformity with the recognition and measurement principles of Ind AS which requires management to make critical judgments, estimates and assumptions that affect the reporting of assets, liabilities, income and expenditure. Actual results may differ from these estimates.

- Useful lives of property, plant and equipment ( refer note no. 4.1)

- Valuation of assets acquired as part of business combination (refer note no. 4.2.1)

- Useful lives of intangible assets (refer note no. 4.3)

- Impairment of investments in subsidiaries (refer note no. 4.5.3)

- Valuation of inventories (refer note no. 4.7)

- Impairment of intangible assets and goodwill (refer note no. 4.8)

- Employee benefits (refer note no. 4.9)

- Provisions & contingent liabilities (refer note no. 4.11)

- Salesreturns(refer note no. 4.12)

- Valuation of deferred tax assets (refer note no. 4.13)

4. RECENT IND AS

The Company has not applied the following new and revised Ind ASs that have been issued but are not yet effective :

a) In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, notifying Ind AS 115 Revenue from Contracts with Customers and consequential amendments to other standards. The amendments are applicable to the Company from 1^st April, 2018.

Ind AS 115 âRevenue from Contracts with Customersâ outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further, the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entityâs contracts with customers. The company does not expect Ind AS 115 to significantly change the timing or the amount of revenue recognised under these contracts. The Companyâs analysis is preliminary and subject to change.

b) In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2018, amending Ind AS 21- The Effect of Changes in Foreign Exchange Rates. The amendment clarifies on the accounting of transactions that include the receipt or payment of advance consideration in a foreign currency. The appendix explains that the date of the transaction, for the purpose of determining the exchange rate, is the date of initial recognition of the non-monetary prepayment asset or deferred income liability. If there are multiple payments or receipts in advance, a date of transaction is established for each payment or receipt. The Company is evaluating the impact of this amendment on its financial statements.

The Company tests goodwill for impairment annually and provides for impairment if the carrying amount of goodwill exceeds its recoverable amount. The recoverable amount is determined based on âvalue in useâ calculations which is calculated as the net present value of forecasted cash flows of cash generating unit (CGU) to which the goodwill is related.

Key assumptions for CGUs with significant amount of goodwill are as follows :

b) Discount rate applied to projected cash flow is 13.00% to 15.60%.

Acquired brands are considered as CGU for testing of impairment of goodwill amounting to Rs.209.34 crores generated on acquisition of brands.

(ii) Details of shares allotted for consideration other than cash, bonus shares and shares bought back in previous five financial years is as under:

The Company allotted 84,611,360 equity shares as fully paid up bonus shares of Rs.5 each, pursuant to the shareholders'' resolution passed on 12^th July, 2013.

(iii) Torrent Private Limited, the holding Company, holds 120,563,720 (previous year 120,563,720) equity shares of Rs.5 each, equivalent to 71.25% (previous year 71.25%) of the total number of subscribed & paid up equity shares, which is the only shareholder holding more than 5 % of total equity shares.

(iv) The Company has one class of equity shares having par value of Rs.5 each. Each shareholder is eligible for one vote per share held. The final 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, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amount, in proportion to shareholding.

Nature and purpose of reserves :

Retained earnings : Retained earnings are the profits earned till date, less any transfers to other reserves and dividends distributed.

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

Debenture redemption reserve : The company is required to create a debenture redemption reserve out of the profits in accordance with Companies Act, 2013.

Securities premium account : Securities premium account comprises of the premium on issue of shares. The reserve is utilised in accordance with the specific provision of the Companies Act, 2013.

Equity instruments through other comprehensive income : This represents the cumulative gains and losses arising on revaluation of equity instruments measured at fair value through other comprehensive income.

Effective portion of cash flow hedges : This represents the cumulative effective portion of gains or losses arising on changes in fair value of designated portion of hedging instruments entered into for cash flow hedges. The cumulative gain or loss arising on changes in fair value of the designated portion of the hedging instruments that are recognised and accumulated under the heading of effective portion of cash flow hedges will be reclassified to statement of profit and loss only when the hedged items affect the profit or loss.

Notes:

(i) Term Loans from banks referred above to the extent of :

(a) Rs.43.12 crores (Previous year Rs.376.14 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh.

(b) Rs.266.68 crores (Previous year Rs.32.42 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh.

(c) Rs.172.18 crores (Previous year Rs.212.68 crores ) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(d) Rs.325.22 crores (Previous year Rs.324.20 crores) from bank is secured by first charge on certain identified trademarks of the Company including its future line extensions.

(e) Rs.1,593.12 crores (Previous year '' Nil) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions., in respect of which Company is in the process of creating charge.

(ii) (a) Non Convertible Debentures referred above to the extent of Rs.1,396.88 crores (Previous year Rs.487.82 crores) are secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(b) Non Convertible Debentures referred above to the extent of '' Nil (Previous year Rs.998.62 crores) will be secured by first pari passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions. The Company is in the process of creating charge.

(c) Non Convertible Debentures referred above to the extent of Rs.998.07 crores (Previous year '' Nil) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh as well as on certain identified trademarks of the Company including its future line extensions., in respect of which Company is in the process of creating charge.

(iii) Short term borrowings from banks are in nature of working capital facilities which are secured by hypothecation of inventories and book debts.

(iv) The terms of repayment of loan obligations on principal amount repayable in yearly instalments, for the secured and unsecured long-term loans are as under:

NOTE - 5 : BUSINESS COMBINATIONS AND ACQUISITIONS

(a) The Company had entered into Business Transfer Agreement with Unichem Laboratories Limited (''Unichem'') for the acquisition of branded business of Unichem for India and Nepal, including its Sikkim manufacturing facility, on a going concern basis by way of slump sale, which has been completed on 14-Dec-2017.

The total purchase consideration of Rs.3,515.00 crores has been paid in cash. The Company has accounted for the transaction under Ind AS 103, "Business Combinations", and allocated the aggregate purchase consideration to identifiable assets acquired and liabilities assumed based on purchase price allocation as follows:

The acquisition costs incurred till the date of financial statement of Rs.7.75 crores have been included in other expenses in the statement of profit and loss.

(b) The Company on 03-Sep-2016 acquired API manufacturing unit of Glochem Industries at Vizag on a going concern slump sales basis. The acquisition has been accounted for using the acquisition method of accounting.

NOTE - 6 : LOANS TO GROUP COMPANIES

(a) The details of loans given by the Company to its wholly owned subsidiaries are as under :

(b) Other than above, the Company has not given any loans or advances in the nature of loan to any of its subsidiaries and associates or firms / companies in which Directors are interested.

(c) There are no loans where either no interest is charged or interest is below the rate specified in section 186 of the Companies Act, 2013, wherever applicable.

NOTE - 7 : DEFINED BENEFIT PLANS

The accruing liability on account of retirement benefit plans (in the nature of defined benefits plan) is accounted as per Ind-AS 19 "Employee Benefits".

General description of the plan :

(i) Sensitivity Analysis for each significant actuarial assumption :

(j) Investment details of plan assets :

The plan assets are managed by insurance company viz Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited which has invested the funds substantially as under :

(l) Asset-liability matching strategies :

The Company contributes to the insurance fund based on estimated liability of the next financial year end. The projected liability statement is obtained from the actuarial valuer.

NOTE - 8 : FINANCIAL INSTRUMENTS

(i) Financial assets and liabilities

Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below.

Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis :

Investment in mutual funds : The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

Equity investments : Equity investments traded in an active market determined by reference to their quoted market prices. Other equity investments where quoted prices are not available, fair values are determined by reference to the expected discounted cash flows from the underlying net assets or current market value of net assets.

(ii) Derivative financial instruments Cash flow hedges :

(iii) Financial risk management

The Companyâs activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Companyâs overall risk management program seeks to minimize potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk :

a1 Foreign currency exchange rate risk :

Since a major part of the Companyâs revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Companyâs performance. Consequently, the overall objective of the foreign currency risk management is to minimize the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows upto a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.

With respect to the Companyâs derivative financial instruments which is in the form of forward contracts, currency swap, a 5% increase / decrease in relation to USD & EUR of each of the currencies underlying such contracts would have resulted in increase /decrease of Rs.33.49 crores (Rs.48.78 crores) in the Companyâs net profit and Rs.110.74 crores (Rs.143.18 crores) in cash flow hedge reserve from such contracts as at 31-Mar-2018 and 31-Mar-2017 respectively.

With respect to the Companyâs non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EUR on the underlying would have resulted in increase /decrease of Rs.8.11 crores (Rs.6.10 crores) in the Companyâs net profit for the year ended 31-Mar-2018 and 31-Mar-2017 respectively.

a2 Interest rate risk :

In respect of foreign currency loans, the Company has outstanding borrowing of USD 97.67 millions. As per the Companyâs risk management policy to minimize the interest rate cash flow risk exposure on foreign currency long term borrowings, interest rate swaps are taken to convert the variable interest rate risk into rupee fixed interest rate. There is no interest rate risks associated with foreign currency loans. In respect of rupee loans, the outstanding loan with variable rate of interest is not significant as compared to total amount of borrowings and hence interest rate sensitivity has not been performed.

(b) Credit risk :

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is Rs.1,914.40 crores and Rs.2,426.11 crores as at 31-Mar-2018 and 31-Mar-2017 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

(iv) Capital management

The capital structure of the Company consists of equity, debt, cash and cash equivalents. The Companyâs objective for capital management is to maintain the capital structure which will support the Companyâs strategy to maximize shareholderâs value, safeguarding the business continuity and help in supporting the growth of the Company.

Against the claims not acknowledged as debts, the Company has paid Rs.0.18 crores (previous year Rs.0.23 crores). The expected outflow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

NOTE - 9 : PROPOSED DIVIDEND

The Board of Directors in their meeting held on 30^th May, 2018, proposed a final equity dividend of Rs.5.00 per equity share of Rs.5.00 each fully paid up for the year 2017-18. The aggregate amount of final equity dividend proposed to be distributed is Rs.102.00 crores including dividend distribution tax of Rs.17.39 crores.

NOTE - 10

The financial statements for the year ended 31-Mar-2018 were approved for issue by the Board of Directors on 30^th May, 2018.

NOTE - 11

The figures for the previous year have been restated/regrouped wherever necessary, to make them comparable.

Mar 31, 2017

1. CORPORATE INFORMATION

Torrent Pharmaceuticals Limited (âthe Companyâ) is a public limited company incorporated and domiciled in India. The address of its registered office is Torrent House, Off Ashram Road, Ahmedabad - 380 009, Gujarat, India. The Company is one of the leading Indian Pharmaceutical Company engaged in research, development, manufacturing and marketing of generic pharmaceutical formulations. The Companyâs research and development facility is located in the state of Gujarat, India, and its manufacturing facilities are located in the states of Gujarat, Himachal Pradesh, Madhya Pradesh, Andhra Pradesh and Sikkim.

2. STATEMENT OF COMPLIANCE

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

These financial statements are the first financial statements of the Company under Ind AS. The date of transition to Ind AS is April 1, 2015. Refer Note 5 for the details of significant exemptions availed by the Company on first-time adoption of Ind AS and for an explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows.

3. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

3.1. Basis of preparation and presentation

- Derivative financial instrument

- Investments in mutual funds & equity investments

- Defined benefit plan - plan assets measured at fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if the market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value measurement and/or disclosure purposes in the financial statements is determined on such a basis except for leasing transactions that are within the scope of Ind AS 17, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in Ind AS 2 or value in use in Ind AS 36.

- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

- Level 2 inputs are inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly; and

- Level 3 inputs are unobservable inputs for the asset or liability.

3.2. Functional and presentation currency

The financial statements are presented in Indian Rupees, the currency of the primary economic environment in which the Company operates. All the amounts are stated in rupee crores.

3.3. Use of estimates

- Useful lives of property, plant and equipment (refer note no. 4.1)

- Impairment of intangible asset (refer note no. 4.8)

- Valuation of deferred tax assets (refer note no. 4.13)

- Valuation of inventories (refer note no. 4.7)

- Provisions & contingent liabilities (refer note no. 4.11)

- Sales returns (refer note no. 4.12)

- Employee benefits (refer note no. 4.9)

- Impairment of investments in subsidiaries (refer note no. 4.5.3)

4 EXPLANATION OF TRANSITION TO IND AS

These financial statements are the first financial statements of the Company under Ind AS. The date of transition to Ind AS is April 1, 2015. The transition is carried out from Indian GAAP (previous GAAP) to Ind AS, notified under Section 133 of the Companies Act, 2013 [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act. The Company has applied exceptions and exemptions in accordance with Ind AS 101 "First-time Adoption of Indian Accounting Standards".

Exceptions :

1 Estimates :

Ind AS estimates on the date of transition are consistent with the estimates as at the same date made in conformity with previous GAAP.

2 Derecognition of financial assets & liabilities :

The Company has applied the de-recognition requirements of Ind AS 109 prospectively from the date of transition to Ind AS.

3 Hedge accounting :

The Company had designated various hedging relationships as cash flow hedges under the previous GAAP. On the date of transition to Ind AS, as per Company''s assessment, the same qualify for hedge accounting as per Ind AS 109.

4 Classification and measurement of financial assets :

The Company has assessed classification and measurement of financial assets based on facts and circumstances prevalent on the date of transition to Ind AS.

5 Impairment of financial assets :

The Company has applied impairment requirements of Ind AS 109 retrospectively to financial instruments and concluded that there is no need to recognize any additional loss allowance on financial assets.

6 Government loans :

The Company has prospectively applied requirements of Ind AS 109 and Ind AS 20 in respect of government loans at below-market interest rate. Previous GAAP carrying amount of loan is used as the carrying amount as on the date of transition to Ind AS.

Exemptions :

1 Business combinations :

The Company has not applied Ind AS 103 Business Combinations retrospectively for the business combinations consummated before 01-Apr-2015.

2 Investment in subsidiaries in separate financial statement :

The Company has measured investment in subsidiaries at previous GAAP carrying amount as deemed cost on transition to Ind AS in the separate financial statements.

3 Designation of previously recognised financial instruments :

The Company has classified investment in mutual funds at fair value through profit or loss, investment in equity instruments at fair value through other comprehensive income and financial liability of derivative instruments at fair value through profit or loss.

Notes to reconciliations between previous GAAP and Ind AS :

(A) Proposed dividend including dividend distribution tax

Under Ind AS, dividend payable and dividend distribution tax is recognised as a liability in the period in which it is declared and approved by the shareholders. Under previous GAAP, dividend payable and dividend distribution tax was recorded as a liability in the period to which it relates. This difference has resulted in increase in equity under Ind AS by Rs.Nil as at March 31, 2016 (Rs.126.91 crores as at April 1, 2015).

(B) Derivative financial instruments

Under Ind AS, derivative financial instruments are measured at fair value. Under previous GAAP, in case of forward contracts covered under AS 11, difference between forward rate and spot rate was recognised in profit or loss over the term of contract. This difference has resulted in increase of equity under Ind AS Rs.0.07 crores as at March 31, 2016 (Rs.2.68 crores as at April 1, 2015) and decrease of profit by Rs.2.61 crores for the year ended March 31, 2016.

Under Ind AS, security deposits are carried at fair value. Under previous GAAP, the same were carried at cost. This difference has resulted in decrease in equity under Ind AS Rs.0.56 crores as at March 31, 2016 (Rs.0.53 crores as at April 1, 2015) and decrease of profit by Rs.0.03 crores for the year ended March 31, 2016.

(D) Fair valuation of mutual funds

Under Ind AS, Investment in mutual funds are classified at fair value through profit or loss. Under previous GAAP, the same were carried at lower of cost or market value. This difference has resulted in increase in equity under Ind AS Rs.18.97 crores as at March 31, 2016 (Rs.0.71 crores as at April 1, 2015) and increase of profit by Rs.18.26 crores for the year ended March 31, 2016.

(E) Long-term borrowings at amortised cost

Under Ind AS, long-term borrowings are carried at amortised cost. Under previous GAAP, the borrowings are carried at their historical cost. This difference has resulted in increase in equity under Ind AS Rs.11.21 crores as at March 31, 2016 (Rs.9.32 crores as at April 1, 2015) and increase of profit by Rs.1.89 crores for the year ended March 31, 2016.

(F) Government grant recognised as income

Under Ind AS, government grants related to assets is presented in the balance sheet as deferred income and recognised in profit or loss on a systematic basis over the useful life of the asset. Under previous GAAP, government grant by way of investment subsidy scheme in relation to total investment were credited to capital reserve and treated as part of owner''s fund. This difference has resulted in decrease in equity under Ind AS Rs.0.07 crores as at March 31, 2016 (Rs.0.10 crores as at April 1, 2015) and increase of profit by Rs.0.03 crores for the year ended March 31, 2016.

(G) Reversal of goodwill amortisation

Under Ind AS, goodwill is not amortised and carried at acquisition cost less impairment loss. Under previous GAAP, goodwill was amortised over the estimated useful life. This difference has resulted in increase in equity under Ind AS by Rs.765 crores as at March 31, 2016 (Rs.Nil as at April 1, 2015) and increase of profit by Rs.7.65 crores for the year ended March 31, 2016.

(H) Share of profit from partnership firm

Profit of partnership firm is increased due to Ind AS adjustments and allocated to the Company. This difference resulted in increase of profit and total equity by Rs.0.23 crores for the year ended March 31, 2016.

(I) Deferred tax on cash flow hedge reserve and transitional adjustments

Under Ind AS, transitional adjustments and cash flow hedge reserve are recognised net of applicable deferred tax. Under previous GAAP, deferred tax was not recognised on cash flow hedge reserve. This difference has resulted in decrease in equity under Ind AS Rs.16.18 crores as at March 31, 2016 (Rs.3765 crores as at April 1, 2015) and decrease of profit by Rs.8.06 crores for the year ended March 31, 2016.

(J) Fair valuation of investment in equity recognised in other comprehensive income

Under Ind AS, Investment in equity shares is classified for fair value through other comprehensive income. Under previous GAAP, long-term investments are carried at cost less provision for diminution in the value of investment, other than temporary. This difference has resulted in decrease of profit by Rs.53.34 crores for the year ended March 31, 2016.

(K) Remeasurement of gratuity recognised in other comprehensive income

Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability / asset and are recognised in other comprehensive income. Under previous GAAP, actuarial gains and losses were recognised in statement of profit and loss. This difference has resulted in increase of profit by Rs.15.63 crores for the year ended March 31, 2016.

Cash Flow Statement

The transition from previous GAAP to Ind AS has not had a material impact on the statement of cash flows.

a) Projected cash flows for five years based on financial budgets / forecasts in line with the Companyâs past experience. The perpetuity value is taken based on the long term growth rate depending on macro economic growth factors.

b) Discount rate applied to projected cash flow is 15.60%.

Acquired brands are considered as CGU for testing of impairment of goodwill amounting to Rs.109.01 crores generated on acquisition of brands.

Notes:

(i) Term Loans from banks referred above to the extent of :

(a) Rs.376.14 crores (Previous year Rs.549.59 crores) are secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh.

(b) Rs.32.42 crores (Previous year Rs.Nil) will be secured by first pari-passu mortgage/ charge on immovable as well as tangible movable assets, present and future, located at village Indrad (Manufacturing facility on identified land), Bhat (Research facility), Corporate office, Ahmedabad, all in Gujarat, and village Baddi (Manufacturing facility) in Himachal Pradesh. The Company is in the process of creating charge.

(c) Rs.212.68 crores (Previous year Rs.999.50 crores) are secured by first pari-passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(d) Rs.Nil (Previous year Rs.200 crores) is secured by first pari-passu mortgage/ charge on freehold land located at village Rakanpur and freehold land and buildings located at Delhi, to the extent of Companyâs share in such properties, as well as on certain identified trademarks of the Company.

(e) Rs.324.20 crores (Previous year Rs.Nil) from bank is secured by first charge on certain identified trademarks of the Company including its future line extensions.

(ii) (a) Non-convertible debentures referred above to the extent of Rs.48782 crores (Previous year Rs.487.06 crores) are secured by first pari-passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions.

(b) Non-convertible debentures referred above to the extent of Rs.998.62 crores (Previous year Rs.Nil) will be secured by first pari-passu mortgage/ charge on immovable and tangible movable assets, present and future located at Dahej (SEZ) in Gujarat (Manufacturing facility) and Gangtok in Sikkim (Manufacturing facility) as well as on certain identified trademarks of the Company including its future line extensions. The Company is in the process of creating charge.

(iii) Short Term Borrowings are in nature of working capital facilities which are secured by hypothecation of inventories and book debts.

NOTE - 5 : BUSINESS COMBINATIONS AND ACQUISITIONS

(a) The Company on 3^rd September 2016 acquired API manufacturing unit of Glochem Industries at Vizag on a going concern slump sales basis. The acquisition has been accounted for using the acquisition method of accounting.

(b) The Company acquired 100% stake in formulation facility of Zyg Pharma Private Limited on 17^th July 2015, which is engaged in the business of manufacturing various dermatological formulations.

The Honourable High Court of Gujarat vide its Order dated February 11, 2016, has sanctioned the Scheme of Amalgamation of Zyg Pharma Private Limited with Torrent Pharmaceuticals Limited under Sections 391 to 394 and other applicable provisions of the Companies Act, 1956 (âthe Act") with effect from Appointed Date of October 1, 2015.

The amalgamation has been accounted for under the âPurchase Method" as prescribed in scheme of amalgamation approved by High Court of Gujarat. The goodwill arising on account of the difference between the investment and the fair value of net assets acquired by the Company of Rs.192.82 crores has been written off pursuant to the said scheme of amalgamation approved by the Honourable High Court of Gujarat vide its order dated February 11, 2016 and disclosed as exceptional item in statement of profit and loss.

NOTE - 6 : LOANS TO GROUP COMPANIES

(a) The details of loans given by the Company to its wholly owned subsidiaries are as under :

(b) Other than above, the Company has not given any loans or advances in the nature of loan to any of its subsidiaries and associates or firms / companies in which Directors are interested.

(c) There are no loans where either no interest is charged or interest is below the rate specified in section 186 of the Companies Act, 2013, wherever applicable.

NOTE - 7 : DEFINED BENEFIT PLANS

The accruing liability on account of retirement benefit plans (in the nature of defined benefits plan) is accounted as per Ind-AS 19 "Employee Benefits".

General description of the plan :

(i) Sensitivity Analysis for each significant actuarial assumption:

(j) Investment details of plan assets:

The plan assets are managed by Insurance Company viz Life Insurance Corporation of India and ICICI Prudential Life Insurance Company Limited which has invested the funds substantially as under :

(l) Asset-liability matching strategies:

The Company contributes to the insurance fund based on estimated liability of the next financial year end. The projected liability statement is obtained from the actuarial valuer.

NOTE - 8 : FINANCIAL INSTRUMENTS (i) Financial assets and liabilities

The carrying value and fair value of financial instruments by category is as follows :

Fair value hierarchy :

The following tables categorise the financial assets and liabilities held at fair value by the valuation methodology applied in determining their fair value.

Determination of fair values:

The following are the basis of assumptions used to estimate the fair value of financial assets and liabilities that are measured at fair value on recurring basis :

Investment in mutual funds : The fair values represent net asset value as stated by the issuers of these mutual fund units in the published statements. Net asset values represent the price at which the issuer will issue further units in the mutual fund and the price at which issuers will redeem such units from the investors.

Equity investments : Equity investments traded in an active market determined by reference to their quoted market prices. Other equity investments where quoted prices are not available, fair values are determined by reference to the expected discounted cash flows from the underlying net assets or current market value of net assets.

Derivative instruments : For forward contracts and cross currency interest rate swaps, future cash flows are estimated based on forward exchange rates and forward interest rates (from observable forward exchange rates / yield curves at the end of the reporting period) and contract forward exchange rates and forward interest rates, discounted at a rate that reflects the credit risk of respective counterparties.

(ii) Derivative financial instruments Cash flow hedges :

(Iii) Financial risk management

The Companyâs activities are exposed to variety of financial risks. These risks include market risk (including foreign exchange risk and interest rate risks), credit risks and liquidity risk. The Companyâs overall risk management program seeks to minimize potential adverse effects on the financial performance of the Company through established policies and processes which are laid down to ascertain the extent of risks, setting appropriate limits, controls, continuous monitoring and its compliance.

(a) Market risk :

a1 Foreign currency exchange rate risk :

Since a major part of the Companyâs revenue is in foreign currency and major part of the costs are in Indian Rupees, any movement in currency rates would have impact on the Companyâs performance. Consequently, the overall objective of the foreign currency risk management is to minimize the short term currency impact on its revenue and cash-flow in order to improve the predictability of the financial performance.

The major foreign currency exposures for the Company are denominated in USD & EURO. Additionally, there are transactions which are entered into in other currencies and are not significant in relation to the total volume of the foreign currency exposures. The Company hedges all trade receivables and future cash flows upto a maximum of 24 months forward based on historical trends, budgets and monthly sales estimates. The Company enters into cross-currency swaps to hedge all foreign currency borrowings. Hedge effectiveness is assessed on a regular basis.

With respect to the Companyâs derivative financial instruments which is in the form of forward contracts, currency swap, a 5% increase / decrease in relation to USD & EUR of each of the currencies underlying such contracts would have resulted in increase /decrease of Rs.48.78 crores (Rs.34.58 crores) in the Companyâs net profit and Rs.143.18 crores (Rs.153.08 crores) in cash flow hedge reserve from such contracts as at 31-March-2017 and 31-March-2016 respectively.

With respect to the Companyâs non-derivative financial instruments (as given above), a 5% increase / decrease in relation to USD & EUR on the underlying would have resulted in increase /decrease of Rs.6.10 crores (Rs.11.23 crores) in the Companyâs net profit for the year ended 31-March-2017 and 31-March-2016 respectively.

a2 Interest rate risk :

Interest rate risk refers to the possibility that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rate. The Company is exposed to fluctuations in interest rates in respect of foreign currency loans and rupee loans carrying a floating rate of interest. In respect of foreign currency loans, the Company has outstanding borrowing of USD 113.33 millions. As per the Companyâs risk management policy to minimize the interest rate cash flow risk exposure on foreign currency long term borrowings, interest rate swaps are taken to convert the variable interest rate risk into rupee fixed interest rate. There is no interest rate risks associated with foreign currency loans. In respect of rupee loans, the outstanding loan with variable rate of interest is not significant as compared to total amount of borrowings and hence interest rate sensitivity has not been performed.

(b) Credit risk :

All trade receivables are subject to credit risk exposure. The Companyâs exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country, in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through established policies, controls relating to credit approvals and procedures for continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. The Company does not have significant concentration of credit risk related to trade receivables. No single third party customer contributes to more than 10% of outstanding accounts receivable (excluding outstanding from subsidiaries) as of 31-March-2017 and 31-March-2016.

Exposure to credit risk

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is Rs.2,426.11 crores and Rs.2,084.70 crores as at 31-March-2017 and 31-March-2016 respectively, being the total of the carrying amount of balances with banks, bank deposits, trade receivables, other financial assets and investments excluding equity investments, and these financial assets are of good credit quality including those that are past due.

(iv) Capital management

The capital structure of the Company consists of equity, debt, cash and cash equivalents. The Companyâs objective for capital management is to maintain the capital structure which will support the Companyâs strategy to maximize shareholderâs value, safeguarding the business continuity and help in supporting the growth of the Company.

Against the claims not acknowledged as debts, the Company has paid Rs.0.23 crores (previous year Rs.0.13 crores). The expected outflow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

NOTE - 9 : PROPOSED DIVIDEND

The Board of Directors in their meeting held on 26-May-2017, proposed a final equity dividend of Rs.4.00 per equity share of Rs.5.00 each fully paid up for the year 2016-17. The aggregate amount of final equity dividend proposed to be distributed is Rs.81.47 crores including dividend distribution tax of Rs.13.78 crores.

NOTE - 10

The financial statements for the year ended 31-Mar-2017 were approved for issue by the Board of Directors on 26-May-2017.

Mar 31, 2014

(Rs.in Crores) Year Ended Year Ended 31-Mar-2014 31-Mar-2013

NOTE - 1 : CONTINGENT LIAbILITIES

Contingent Liabilities not provided for in respect of :

(a) Claims against the Company not acknowledged as debts

Disputed demand of income tax for which appeals have been preferred 5.25 5.25

Disputed employee state insurance contribution liability under E.S.I. Act, 1948 7.30 5.80

Disputed cases for supply of goods and services 0.19 40.97

Disputed demand of excise and service tax 32.41 37.93

Disputed demand of local sales tax and C.S.T. 0.19 0.17

Disputed cases at labour court / industrial court 2.86 2.22

48.20 92.34

Against the above, the Company has paid Rs. 0.28 Crores (previous year Rs. 8.16 Crores).

The expected outfow will be determined at the time of final outcome in respect of the concerned matter. No amount is expected to be reimbursed.

(b) The Company has issued guarantees aggregating USD 0.6 crore (previous year Nil) to secure lines of credit to its wholly owned subsidiaries. The outstanding amount of liabilities by the subsidiaries as on balance sheet date, converted at closing exchange rate, is 36.06

84.26 92.34

NOTE - 2 : ACQUISITION OF IDENTIFIED bRANDED FORMULATION bUSINESS OF ELDER PHARMACEUTICALS LIMITED

The Company has entered into a defnitive binding agreement, on 13-Dec-2013, with Elder Pharmaceuticals Limited to acquire its Identified Branded Formulations Business in India and Nepal on a going concern basis for a consideration of Rs. 2004 crores. Both the parties are in the process of taking applicable regulatory approvals and satisfying with various Conditions Precedent.

NOTE - 3 : GRATUITY BENEFIT PLAN

The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan) is accounted as per Accounting Standard 15 (revised 2005) "Employee benefits".

NOTE - 4 : EXCISE DUTIES

Excise duties shown as deduction from domestic sales represents the amount of excise duty collected on sales. Excise duty expense under Note -21, "Other Expenses", represents (i) the difference between excise duty element in closing stock and opening stock, and (ii) excise duty paid on samples and on inventory write-off, which is not recoverable from sales.

NOTE - 5 : SEGMENT REPORTING

Accounting Standard 17 requires segment information to be presented on the basis of consolidated financial statements. Accordingly segment information is disclosed in consolidated financial statements.

NOTE - 6 : REGROUPING

Previous year figures have been regrouped / recasted, wherever necessary, so as to make them comparable with those of the current year.

Mar 31, 2013

NOTE - 1 : EXCEPTIONAL ITEMS

Exceptional item for the:

(a) currentyear represents diminution, otherthan temporary, amounting toRs.37.49 crores, in the value of long-term investments in GPC Cayman Investor I Limited, based on the assessment of value of investments.

(b) previous year represents one-time charge of estimated future sales returns, amounting to Rs. 61.20 crores, on all sales effected till 31-Mar-2012, due to change in method of estimating sales returns.

NOTE - 2 : EXCISE DUTIES

Excise duties shown as deduction from domestic sales represents the amount of excise duty collected on sales. Excise duty expense under Note -21, "Other Expenses", represents (i) the difference between excise duty element in closing stock and opening stock, and (ii) excise duty paid on samples and on inventory write-off, which is not recoverable from sales.

NOTE - 3 : GRATUITY BENEFIT PLAN

The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan) is accounted as per AS 15 (revised 2005) "Employee Benefits".

General Description of the Plan:

The Company operates a defined benefit plan (the Gratuity Plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment.

NOTE - 4 : PROVISION FOR SALES RETURNS

The Company as a trade practice accepts returns from market for formulations which are primarily in the nature of expired or near expiry products. Provision for such returns estimated on the basis of historical experience, market conditions and specific contractual terms and are provided for. Details of the provision is as under:

NOTE - 5 : SEGMENT REPORTING

AS 17 "Segment Reporting" requires segment information to be presented on the basis of consolidated financial statements. Accordingly segment information is disclosed in consolidated financial statements.

NOTE - 6 : REGROUPING AND DENOMINATION

(a) Previous year figures have been regrouped / recasted wherever necessary, so as to make them comparable with those of the current year.

(b) The Company has changed presentation denomination from " Rs. in Lacs" to " Rs. in Crores" from current year, accordingly, the figures for the previous year are re-presented in Rs. in Crores.

Mar 31, 2012

NOTE - 2 : CHANGE IN ACCOUNTING POLICY

With effect from 1st April, 2011, the Company has adopted AS 30, "Financial Instruments: Recognition and Measurement" with respect to accounting for derivatives, to the extent adoption does not conflict with existing mandatory accounting standards and other authoritative pronouncements, Company Law and other regulatory requirements. This adoption has resulted in change in accounting policy followed by the Company in respect of derivatives. As per requirement of the transitional provisions in AS 30, Rs. 128.73 lacs, being the difference between the carrying value and fair value of the derivatives, as on 1st April, 2011 has been credited to the general reserve account. Further, consequent to this, net foreign exchange loss is lower by Rs. 1,661.78 lacs and net Profit after tax is higher by Rs. 1,329.26 lacs.

NOTE - 23 : EXCEPTIONAL ITEMS

Hitherto, the Company has been accounting for sales returns as and when the returns are physically received at the Company's premises. During the year, the Company has effected a change in method of estimating sales returns. A detailed exercise was done to estimate future sales returns on all sales effected till 31st March, 2012. This has resulted into a one-time charge of Rs. 6120.00 lacs which has been shown under Exceptional items during the year ended 31st March, 2012.

Year ended Year ended 31-Mar-2012 31-Mar-2011

NOTE - 26 : CONTINGENT LIABILITIES

Contingent Liabilities not provided for in respect of:

(a) Claims against the Company not acknowledged as debts Disputed demand of income tax for which appeals have been preferred 340.32 153.17

Disputed employee state insurance contribution liability under E.S.I. Act, 1948 497.79 390.98

Disputed legal cases for supply of goods and services 1.78 1.78

Disputed demand of excise and service tax 146.64 72.16

Disputed demand of local sales tax and C.S.T. 17.44 65.32

Disputed cases at labour court / industrial court 115.66 92.67

1,119.63 776.08

NOTE - 27 : EXCISE DUTIES

Excise duties shown as deduction from domestic sales represents the amount of excise duty collected on sales. Excise duties expenses under Note - 22, "Other Expenses", represents the difference between excise duty element in closing stock and opening stock, excise duty paid on samples and on inventory write-off, which is not recoverable from sales.

NOTE - 32 : GRATUITY BENEFIT PLAN

The accruing liability on account of gratuity (retirement benefit in the nature of defi ned benefits plan) is accounted as per AS 15 (revised 2005) "Employee benefits".

General Description of the Plan :

The Company operates a defi ned benefit plan (the gratuity plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees' salary and the tenure of employment.

NOTE - 43 : SEGMENT REPORTING

AS17 requires segment information to be presented on the basis of consolidated financial statements. Accordingly segment information is disclosed in consolidated financial statements.

NOTE - 44 : REGROUPING

Previous year figures have been regrouped wherever necessary so as to make them comparable with those of the current year.

Mar 31, 2011

(Rs. in lacs) As at As at 31-Mar-2011 31-Mar-2010

1. Contingent Liabilities not provided for in respect of :

(a) Claims against the Company not acknowledged as debts Disputed Demand of Income Tax for which appeals have been preferred 153.17 227.66

Disputed Employee State Insurance Contribution Liability under E.S.I. Act, 1948 390.98 287.54

Disputed Legal cases for supply of Goods and Services 1.78 122.90

Disputed Demand of Excise and Service Tax 72.16 30.31

Disputed Demand of Local Sales Tax and C.S.T. 65.32 70.56

Disputed cases at Labour Court / Industrial Court 92.67 62.36

776.08 801.33

2. Excise Duty shown as deduction from Domestic Sales represents the amount of excise duty collected on sales. Excise duty expenses under Schedule - 18, "Manufacturing and Other Expenses", represents the difference between excise duty element in closing stocks and opening stocks, excise duty paid on samples and on inventory write-off, which is not recoverable from sales.

(b) The Government Grant income during the year represents grant received from the Department of Biotechnology for development of Diiodothyronine (T2) analogue, a New Chemical Entities [NCE] project.

(c) Depreciation and Amortisation includes Rs. 1,670.31 lacs (previous year Rs. 1,919.90 lacs) pertaining to Research and Development assets.

3. Sundry Debtors in Schedule - 8 include debts due from Torrent Power Limited, a company under the same management as per section 370(1B) of the Companies Act, 1956 amounting to Rs. 2.39 lacs (previous year Rs. Nil).

(b) Other than above, the Company has not given any loans or advances in the nature of loan to any of its subsidiaries and associates or fi rms / companies, in which Directors are interested.

(c) There are no loans where either repayment schedule is not prescribed or repayment is scheduled beyond seven years.

(d) Loan given to Zao Torrent Pharma, a wholly owned subsidiary, is at nil interest rate. There are no other loans where either no interest is charged or interest is below the rate specifi ed in section 372A of the Companies Act, 1956.

4. The accruing liability on account of gratuity (retirement benefit in the nature of defi ned benefits plan) is accounted as per Accounting Standard 15 (revised 2005) "Employee Benefits".

General Description of the Plan :

The Company operates a defi ned benefit plan (the Gratuity Plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment.

Mar 31, 2010

(Rs. in lacs) As at As at 31 -Mar-2010 31 -Mar-2009

1. Estimated amount of unexecuted capital contracts [net of advances] not provided for 6,340.02 2,381.81

2. Contingent Liabilities not provided for in respect of :

(a) Claims against the Company not acknowledged as debts Disputed Demand of Income Tax for which appeals have been preferred 227.66 846.55

Disputed Employee State Insurance Contribution Liability under E.S.I. Act, 1948 287.54 248.71

Disputed Legal cases for supply of Goods and Services 122.90 1.78

Disputed Demand of Excise and Service Tax 30.31 23.80

Disputed Demand of Local Sales Tax and C.S.T. 70.56 23.00

Disputed cases at Labour Court / Industrial Court 62.36 -

801.33 1,143.84

(b) The Company has issued guarantees aggregating USD 20.00 lacs (previous year USD 60.00 lacs) and EURO 45.00 lacs (previous year EURO 65.00 lacs) to secure lines of credit to its wholly owned subsidiaries. The outstanding amount of liabilities by the subsidiaries as on balance sheet date, converted at closing exchange rate, is 149.22 54.1 2

(c) Uncalled liability on partly paid shares of Torrent Australasia Pty Limited, a wholly owned subsidiary. [Australian Dollar (AUD) 5.88 lacs (previous yearAUD 5.88 lacs)] 243.29 206.08

3. Excise Duty shown as deduction from Domestic Sales represents the amount of excise duty collected on sales. Excise duty expenses under Schedule - 18, "Manufacturing and Other Expenses", represents the difference between excise duty element in closing stocks and opening stocks, excise duty paid on samples and on inventory write-off, which is not recoverable from sales.

4. (a) Zao Torrent Pharma (ZTP), a wholly owned subsidiary of the Company in Russia, has incurred loss of Rs. 909.30 lacs for the year. This and past losses have resulted in complete erosion of networth of ZTP. The networth of ZTP was Rs. (1,560.85) lacs against the Companys equity investment of Rs. 2,308.49 lacs. High level of payment defaults, poor liquidity conditions coupled with recent regulatory changes have brought about a high level of unpredictability to the business and pressure on profit margins. In view of the uncertainty in the recoverability of the erosion in value in the foreseeable future and considering accounting prudence, an amount of Rs. 2,308.49 lacs is recognised towards diminution in value of investment. (b) The Company has an outstanding loan balance of Rs. 2,307.67 lacs as of 31-Mar-2010 from Zao Torrent Pharma. Out of this an amount of Rs. 1,400.40 lacs is assessed as no longer recoverable and accordingly the said amount is recognised as impairment of unsecured loans.

5. MAT credit entitlement asset of Rs. 5,286.32 lacs recognised in earlier years, was written-off during the year based on amendments made in Income Tax Act 1961, and other relevant factors, and in terms of the "Guidance Note on Accounting for Credit Available in respect of MAT under the Income-tax Act, 1 961" issued by the Institute of Chartered Accountants of India.

6. The accruing liability on account of gratuity (retirement benefit in the nature of defined benefits plan) is accounted as per Accounting Standard 15 (revised 2005) "Employee Benefits".

General Description of the Plan :

The Company operates a defined benefit plan (the Gratuity Plan) covering eligible employees, which provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employees salary and the tenure of employment.

7. Accounting Standard 17 requires segment information to be presented on the basis of consolidated financial statements. Accordingly segment information is disclosed in consolidated financial statements.

8. Previous year figures have been regrouped wherever necessary so as to make them comparable with those of the current year.

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