Cipla Ltd. இன் கணக்கு குறிப்புகள்

Mar 31, 2023

Notes for changes in current year:

i. During the year, pursuant to the Board resolution passed on 22^nd March, 2023, the Company further invested H 48.00 crores and acquired 2,58,06,452 equity shares of Cipla Pharmaceuticals Limited of H 10 each at H 18.60 per share.

ii. During the year, pursuant to the Board resolutions passed on 29^th July, 2022 and 4^th November, 2022, the Company further invested H 276.69 crores and acquired 2,82,77,674 equity shares of Cipla (EU) Limited of GBP 1 each.

iii. During the year, the Company further invested H 13.00 crores and acquired 1,30,00,000 equity shares of Cipla Digital Health Limited of H 10 each.

iv. During the year, pursuant to the Board resolutions passed on 4^th November, 2022, the Company invested H 0.08 crores and acquired 1 equity share of Cipla USA Inc of USD 0.01 each.

v. On 17^th June, 2022, the Company has entered into definitive agreements with Achira Labs Private Limited to acquire 21.05% stake on fully diluted basis for a total consideration of H 25.00 crores. Pursuant to this, the Company acquired 1,04,074 equity shares of H 1 each and 10,32,949 compulsorily convertible preference shares of H 10 each. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 “Investments in associates and joint ventures”.

vi. On 27^th June, 2022, the Company has entered into an definitive agreement for acquisition of additional stake for total consideration of H 25.90 crores leading to cumulative holding of 22.02% stake on fully diluted basis.

vii. As a part of impairment assessment, the Company has identified that Saba Investment Limited, on account of change in local regulations, business model change and market dynamics, the current recoverable amount would be less than the current carrying amount of investment and hence recognised impairment loss of H 185.90 crores.

Notes for changes in previous year:

viii. The Company further invested H 15.00 crores and acquired 1,50,00,000 equity shares of Cipla Pharmaceuticals Limited of H 10 each.

ix. Pursuant to the Board resolutions passed on 14^th May, 2021, 5^th August, 2021, 26^th October, 2021, the Company further invested H 1,185.81 crores and acquired 11,59,04,062 equity shares of Cipla (EU) Limited of GBP 1 each.

x. On 25^th February, 2022, the Company has incorporated a new subsidiary, Cipla Digital Health Limited and subscribed its 5,00,000 equity shares of H 10 each.

xi. Pursuant to Share Purchase, Subscription and Shareholder''s agreement (SPSSA) dated 23^rd May, 2019 and amendments thereof, the Company has further invested H 1.17 crores in AMPSolar Power Systems Private Limited, representing 11,800 equity shares of H 10 each and 11,642, 0.01% Compulsory Convertible Debentures of H 1,000 each. Further, there has been no change in the stake and has been accounted in the same manner as it was accounted at the time of initial investment.

xii. Pursuant to Share Purchase, Subscription and Shareholder''s agreement (SPSSA) dated 4^th February, 2022, the Company has acquired 32.49% stake on fully diluted basis in AMP Energy Green Eleven Private Limited, representing 7,50,000 equity shares of H 10 each and 67,500, 0.01% Compulsory Convertible debentures of AMP Energy Green Eleven Private Limited of H 1,000 each for a total consideration of H 7.50 crores. Further, the Company also entered in a Power Purchase Agreement (''PPA'') with AMP Energy Green Eleven Private Limited to procure 100% of the output of solar energy produced for next 25 years as per the rates negotiated in agreement. As per the SPSSA, in the event of termination of the contracts or completion of the PPA term, the Company will receive nominal value of its investment without any share of profit/loss in the associate. Accordingly, the investment amount has been amortised to give the effect of expected fixed return on such investment. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 - Investments in associates and joint ventures.

xiii. Pursuant to the Board resolutions passed on 5^th August, 2021, the Company invested H 0.05 crores and acquired 5,000 equity shares of Swasth Digital Health Foundation of H 100 each. Swasth Digital Health Foundation is a Not-for-Profit initiative (registered under Section 8 of the Companies Act) that aims to leveraging digital technologies to improve healthcare outcomes and increase healthcare inclusion in India. The investment is accounted as fair value through other comprehensive income (FVTOCI) as per Company''s election in accordance with lnd AS 109 - Financial Instruments.

xiv. Pursuant to Limited Liability Partnership Agreement (“LLP Agreement”) dated 14^th December, 2021 and amendments thereof, the Company has acquired 33% stake in Clean Max Auriga LLP (''Clean Max'') for a total consideration of H 6.75 crores. Further, the Company has also entered in a Power Purchase Agreement (''PPA'') with Clean Max to procure 100% of the output of solar energy produced for next 25 years as per the rates negotiated in the PPA. Further, in the event of termination of the contracts or completion of the PPA term, the Company will receive fair market value of its investment on the date of termination/ completion. Accordingly, the investment amount will be amortised over a period of 25 years. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 - Investments in associates and joint ventures.

xv. The Company has further invested H 4.78 crores, pursuant to tripartite agreement entered during the previous year wherein ESOP holders of Cipla Health Limited agreed to extinguish their right of exercise of ESOPs vested.

There are no loans which have significant increase in credit risk and which are credit impaired

(i) Pursuant to Board resolutions passed on 25^th January, 2022 and 16^th March, 2022, the Company has granted unsecured loans of H 114.89 crores and H 65.20 crores to its wholly owned subsidiary Cipla Health Limited at an interest rate of 7.35%- 7.50% for certain asset/business acquisitions. Out of the above H 52 crores has been repaid during the current year. The loans are repayable by 31^st August, 2032 and 18^th July, 2029 respectively.

(ii) Pursuant to Board resolution passed on 26^th October, 2021, the Company has granted unsecured loan of H 6.00 crores to its wholly owned subsidiary Sitec Labs Limited at an interest rate of 6.88% for certain asset aquisitions. Out of the above H 3 crores has been repaid during the current year. The loan is repayable by 20^th September, 2027.

The Company has ongoing disputes which includes receipt of demands, notices and inquiries from income tax authorities in India. The disputes relate to tax treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives or allowances and transfer pricing adjustments.

The Company has disclosed amount of H 20.52 crores (31^st March, 2022: H 20.52 crores) as contingent liability, in respect of tax demands which are being contested by it based on the management evaluation and advice of tax consultants as the management believes that the ultimate tax determination is uncertain due to various tax positions taken by adjudicating authorities in the past.

The Company has made provisions for taxes basis its best judgement, considering past resolutions to disputed matters by adjudicating authorities, prior year assessments and advice from external experts, if required. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.

i. In line with Circular No 04/2015 issued by Ministry of Corporate Affairs dated 10^th March, 2015, loans given to employees as per the Company''s policy are not considered for the purposes of disclosure under Section 186(4) of the Companies Act, 2013.

ii. There are no loans or advances in the nature of loans granted to Promoters, Directors, KMPs and their related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, except as disclosed in note 40, that are:

(a) repayable on demand; or

(b) without specifying any terms or period of repayment

iii. Loans have been granted for the purpose of their business.

iv. There are no loans which have significant increase in credit risk and which are credit impaired.

v. Pursuant to board resolutions passed on 4^th November, 2022 and 25^th January, 2023, the Company has granted an unsecured loan of H 772.40 crores to its wholly owned subsidiary Cipla USA Inc at an interest rate of SOFR 140bps for working capital requirement. The loan is repayable by 15^th March, 2024.

Terms and rights attached to equity shares

The Company has only one class of equity shares having a par value of H 2 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholder.

Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date

The Company has not issued any bonus shares, shares for consideration other than cash or bought back any shares during five years immediately preceding the reporting date.

Equity shares reserved for issue under employee stock options and share appreciation rights

For number of stock options against which equity shares to be issued by the Company upon vesting and exercise of those stock options and rights by the option/ESAR holders as per the relevant schemes - refer note 41.

Nature and purpose of reserve:-

Capital reserve

The Company recognised profit or loss on sale, issue, purchase or cancellation of the Company''s own equity instruments to capital reserve. Capital reserve may be used by the Company only for some specific purpose.

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. In case of equity settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium. This reserve is utilised in accordance with the provisions of the Act.

General reserve

The General reserve is used from time to time to transfer profit from retained earnings for appropriation purpose.

Employee stock options/ESAR

Employee stock options/ESAR is used to record the share based payments, expense under the various schemes as per SEBI regulations. The reserve is used for the settlement of ESOS and ESAR (refer note 41).

Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends, or other distributions paid to shareholders.

Financial Instruments fair value through other comprehensive income

This reserve represents the cumulative gains and losses arising on the revaluation of equity instrument measured at fair value through other comprehensive income. The Company transfers amounts from this reserve to retained earnings when the relevant equity instruments are de-recognised/disposed off.

Cash flow hedge reserve

For the forward contracts designated as cash flow hedges, the effective portion of the fair value of forward contracts are recognised in cash flow hedging reserve under other equity. Upon de-recognition, amounts accumulated in other comprehensive income are taken to profit or loss at the same time as the related cash flow (refer note 45).

Provision is made for return/discount/refund liabilities and others in respect of products sold as per the contractual terms and conditions. These claims are expected to be settled in the next financial year. Management estimates the provision based on historical information and any recent trends that may suggest future claims could differ from historical amounts. The assumptions made in relation to the current period are consistent with those in the prior year.

(iii) Contract assets

The Company recognises an asset, i.e., right to the returned saleable goods (included in inventories) for the products expected to be returned in saleable condition. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of returned goods. The Company updates the measurement of the asset recorded for any revision to its expected level of returns, as well as any additional decrease in value of the returned products.

As on 31^st March, 2023, the Company has H 20.93 crores (31^st March, 2022: H 20.63 crores) as contract asset.

Note 37: Discontinuing/restructuring operations

The Board at its meeting held on 25^th January, 2022 had approved the

restructuring/transfer of:

a) the India based US business undertaking to Cipla Pharma and Life Sciences Limited, a wholly owned subsidiary of the Company; and

b) the Consumer Business Undertaking to Cipla Health Limited (“CHL”), a wholly owned subsidiary of the Company, as a going concern on a slump sale basis through a Business Transfer Agreement (“BTA”). Accordingly, the assets and liabilities pertaining to these business undertaking were classified as “Assets Held for sale” as per Ind AS 105 as at 31^st March, 2022.

(A) In respect of Consumer Business Undertaking, Company and CHL have successfully completed business transfer as agreed under BTA with closing date of 31^st August, 2022. Accordingly, disclosures as required under Ind AS 105 “Non-Current Assets Held for Sale and Discontinued Operations”, in the financial statements have been suitably presented in respect of Consumer Business undertaking.

Note 38: Contingent liabilities, commitments and other litigations (to the extent not provided for) A. Details of contingent liabilities and commitments: H in crores
Particulars	As at 31st March, 2023	As at 31st March, 2022
Contingent liabilities
Claims against the Company not acknowledged as debt	145.63	147.64
Guarantees excluding financial guarantees	234.13	237.43
Letters of credit	15.84	76.81
Income tax on account of disallowance/additions	20.52	20.52
Excise duty/service tax on account of valuation/cenvat credit	130.66	129.88
Sales tax on account of credit/classification	6.02	7.43
	552.80	619.71
Commitments
(a) Estimated amount of contracts unexecuted on capital account	344.29	355.60

Note 38: Contingent liabilities, commitments and other litigations (to the extent not provided for) (Contd..)

Notes:

i. Claims against the Company not acknowledged as debt include claim relating to pricing, commission, etc.

ii. It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of our pending resolution of the respective proceedings as it is determined only on receipt of judgements/decisions pending with various forum/authorities.

iii. The Company does not expect any reimbursements in respect of the above contingent liabilities.

iv. The Company''s pending litigations comprise of proceedings pending with various direct tax, indirect tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.

v. There has been a Supreme Court (SC) judgement dated 28^th February, 2019 relating to components of salary structure that need to be taken into account while computing the contribution to provident fund under the EPF Act. In view of the interpretative aspects related to the Judgement including the effective date of application, the Company has been advised to await further developments in this matter. The Company will continue to assess any further developments in this matter for the implications on financial statements, if any.

B. Details of other litigations:-

(i) The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of H 5.46 crores along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

(ii) The Company had received various notices of demand from the National Pharmaceutical Pricing Authority (NPPA), Government of India, on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Orders. The total demand against the Company as stated in NPPA public disclosure amounts to H 3,703.40 crores.

Out of the above, demand notices pertaining to a set of products being Norfloxacin, Ciprofloxacin, Salbutamol and Theophylline were challenged by the Company (i) in the Honourable Bombay High Court on the ground that bulk drugs contained in the said

Note 38: Contingent liabilities, commitments and other litigations (to the extent not provided for) (Contd..)

formulations are not amenable to price control, as they cannot be included in the ambit of price control based on the parameters contained in the Drug Policy, 1994 on which the DPCO, 1995 is based and (ii) in the Honourable Allahabad High Court on process followed for fixation of pricing norms. These Petitions were decided in favour of the Company and the matters were carried in appeal by the Union of India to the Honourable Supreme Court of India. The Honourable Supreme Court in its judgement of 1^st August, 2003 remanded the said writ petitions to the Honourable Bombay High Court with directions that the Court will have to consider the petitions afresh, having due regard to the observations made by the Honourable Supreme Court in its judgement. On the Union of India filing transfer petitions, the Honourable Supreme Court ordered transfer of the said petitions to the Honourable Bombay High Court to it for being heard with the appeal filed against the Honourable Allahabad High Court order. Subsequently, in its order of 20^th July, 2016 the Honourable Supreme Court recalled its transfer order and remanded the petitions to Honourable Bombay High Court for hearing. While remanding the matter to Honourable Bombay High Court, the Honourable Supreme Court directed Cipla to deposit 50% of the overcharged amount with the NPPA as stated in its order of 1^st August, 2003 which at that point of time was H 350.15 crores. Complying with the directions passed by the Honourable Supreme Court, Cipla has deposited an amount of H 175.08 crores which has been received and acknowledged by NPPA. Furthermore, the Company has not received any further notices in these cases post such transfer of cases to Honourable Bombay High Court. Meanwhile, the Honourable Supreme Court vide its Order and Judgement dated 21^st October, 2016, allowed the Appeals filed by the Government against the Judgement and Order of the Honourable Allahabad High Court regarding basis of fixation of retail prices. The said order was specific to fixation of retail prices without adhering to the formula/process laid down in DPCO, 1995. However, the grounds relating to inclusion of certain drugs within the span of price control continues to be sub-judice with the Honourable Bombay High Court.

The Honourable Bombay High Court had, in expectation of NPPA filing its counter-statement on status of each petitioner''s compliance with the 2003 and 2016 Honourable Supreme Court orders (on deposit 50% of amount demanded), re-scheduled the hearing for 5^th June, 2019, but the same was not listed on that date.

The Company had filed amendment applications before the Honourable Bombay High Court to incorporate the effect of a ruling by the Honourable Supreme Court to adjust trade margins of 16% from outstanding demands as not accrued to the manufacturers and to re-calculate interest from date of non-payment of demand within the time period stated in each demand. The said amendment also places certain additional grounds on record. The Honourable Bombay High Court issued notice to Union of India and NPPA on the amendment applications and set 25^th January, 2021 for further

hearing but the case was not listed due to the COVID-19 lockdown and the next date is awaited.

The Company has been legally advised that it has a substantially strong case on the merits of the matter, especially under the guidelines/principles of interpretation of the Drug Policy enunciated by the Honourable Supreme Court. Although, the decision of Honourable Supreme Court dated 21^st October, 2016 referred above was in favour of Union of India with respect to the appeals preferred by the Government challenging the Honourable Allahabad High Court order, basis the facts and legal advice on the matter sub-judice with the Honourable Bombay High Court, no provision is considered necessary in respect of the notices of demand received till date aggregating to H 1,736.00 crores. It may be noted that NPPA in its public disclosure has stated the total demand amount against the Company in relation to the above said molecules to be H 3,281.31 crores (after adjusting deposit of H 175.08 crores), however, the Company has not received any further notices beyond an aggregate amount of H 1,736.00 crores.

In addition, Company had made provision of H 125.38 crores as of 31^st March, 2023 (H 118.49 crores as 31^st March, 2022) for products not part of the referenced writ proceedings. Further, no new recovery notices were received by the Company in the year, thus not requiring any fresh cases to be filed by the Company in that regard. Due to COVID-19, courts are hearing only urgent cases, hence the writs that are pending will be heard in due course.

Note 39: Employee benefitsa. Description of the plan:

Retirement benefit plans of the Company include Gratuity and Provident Fund. The Company established the Cipla Limited Employees Gratuity Fund (the “Gratuity Fund”) to fund the Gratuity Plan. Liabilities in respect of the Gratuity Plan are determined by an actuarial valuation, based upon which the Company makes contributions to the Gratuity Fund. Provident Fund is managed through the trust, Cipla Limited Employees Provident Fund Trust (the “Provident Fund”) managed by the Company.

b. Governance of the plan:

The Company has setup an income tax approved irrevocable trust fund to finance the plan liability. The trustees of the trust fund are responsible for the overall governance of the plan in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy. Further, since these funds are income-tax approved, the Company and the trustees have to ensure that they are at all times fully compliant with the relevant provisions of the Income Tax Act, 1961 and Rules.

c. Investment strategy:

The Company''s investment strategy in respect of its funded plans is implemented within the framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Company of the benefits provided. To achieve this, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.

The sensitivity analysis above has been determined based on reasonable possible changes of the respective assumption 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 projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

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

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

g. There are no amounts included in the Fair Value of Plan Assets (Gratuity and Provident fund):

- Company''s own financial instrument

- Property occupied by or other assets used by the Company

h. Compensated absences note:

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilised compensated absences and utilise them in future periods or receive cash in lieu thereof as per the Company''s policy. The Company records a liability for compensated absences in the period in which the employee renders the services that increases this entitlement. The total liability recorded by the Company towards this obligation was H 98.90 crores and H 99.78 crores as at 31^st March, 2023 and 31^st March, 2022, respectively.

B. Employee Stock Appreciation Rights (''ESARs'')

The Company has implemented "Cipla Employee Stock Appreciation Rights Scheme 2021 (''ESAR 2021/the Scheme'')" as approved by the shareholders by postal ballot on 25^th March, 2021. The Scheme covers the employees who are in permanent employment, including director(s) other than independent directors of the Company and its subsidiaries [collectively "eligible employees"]. The nomination and remuneration committee of the Board of Cipla Limited will administer this scheme and grant ESARs to the eligible employees. Further, the maximum number of Employee Stock Appreciation Rights (ESARs) that may be granted under the Scheme shall not exceed 1,75,00,000 and the maximum number of equity shares that may be issued towards appreciation of the ESARs to be granted under the Scheme shall not exceed 33,00,000 shares of H 2 each, i.e., face value. As per the terms of the ESAR Scheme, each ESAR will be settled by the issue of shares and hence been accounted as equity settled.

Note 42: Segment information

In accordance with paragraph 4 of Indian Accounting Standard (Ind AS) 108 - Operating Segments, segment information has been given in the consolidated financial statements of the Company, and therefore, no separate disclosure on segment information is given in these standalone financial statements.

Note 44: Additional disclosure with respect to amendments to Schedule III

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

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

c. The Company has not been declared a wilful defaulter by any bank or financial institution or other lender (as defined under the Companies Act, 2013) or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India.

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

e. The Company has not traded or invested in Crypto Currency or Virtual Currency during the financial year.

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

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

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

g. The Company has not entered into any scheme of arrangement which has an accounting impact on the current or previous financial year.

h. The Company has complied with the number of layers prescribed under the Companies Act, 2013.

Note 45: Financial instruments A. Fair value measurement

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

The carrying amount of trade receivable, trade payable, capital creditors, loans, margin deposit, security deposit, incentives/benefits receivable from government, cash and cash equivalents, other bank balances and other receivables as at 31^st March, 2023 and 31^st March, 2022 are considered to be the same as their fair values, due to their short-term nature. Difference between carrying amounts and fair values of other financial assets, other financial liabilities and short term borrowings subsequently measured at amortised cost is not significant in each of the year presented.

Financial Instruments with fixed and variable interest rates are evaluated by the company based on parameters such as interest rate and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of following:

Level 1 - category includes financial assets and liabilities, that are measured in whole or in significant part by reference to published quoted price (unadjusted) in an active market.

Level 2 - category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions. These include assets and liabilities for which pricing is obtained via pricing services, but where prices have not been determined in an active market, financial assets with fair values based on broker quotes and assets that are valued using the Company''s own valuation models whereby the material assumptions are market observable. The majority of Company''s over-the-counter derivatives and several other instruments not traded in active markets fall within this category.

Level 3 - category includes financial assets and liabilities measured using valuation techniques based on non market observable inputs. This means that fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. However, the fair value measurement objective remains the same, that is, to estimate an exit price from the perspective of the Company. The main asset classes in this category are unlisted equity investments as well as unlisted funds.

B. Financial risk management objectives and policies

The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance.

The Company''s financial liabilities comprise of trade payable and other liabilities to manage its operation and financial assets include trade receivables, security deposits, loans and advances, etc, arises from its operation.

The Company has constituted a Risk Management Committee consisting of a majority of directors and senior managerial personnel. The Company has implemented a robust Business Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimise adverse impact on the business objectives and enhance the Company''s competitive advantage. The business risk framework defines the risk management approach across the enterprise

at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level.

The Audit Committee of the Board periodically reviews the risk management framework.

Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices. The Company''s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:

• currency risk;

• other price risk; and

• interest rate risk

The above risks may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of these risks are explained below.

The Company operates internationally and a major portion of the business is transacted in multiple currencies and consequently the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services and purchases from overseas suppliers in various foreign currencies. The Company also holds derivative financial instruments such as foreign exchange forward and currency option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations are affected as the Rupee (INR) appreciates/ depreciates against US Dollar (USD), Euro (EUR), Great Britain Pound (GBP), South African Rand (ZAR) and other currencies.

The Company is mainly exposed to the price risk due to its investment in mutual funds. The price risk arises due to uncertainties about the future market values of these investments. At 31^st March, 2023, the investments in mutual funds amounts to H 2,771.44 crores (31^st March, 2022: H 2,038.80 crores). These are exposed to price risk. The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in mutual funds. A 1% increase/ (decrease) in prices would increase/(decrease) the profit or loss by the amounts shown below.

H in crores
Particulars	As at 31st March, 2023	As at 31st March, 2022
Impact on profit/loss
Increase by 1%	27.71	20.38
Decrease by 1%	(27.71)	(20.38)

(c) Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing financial assets or borrowings because of fluctuations in the interest rates if such assets/borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates. The Company does not have any borrowings and therefore not exposed to interest rate risk. Considering the short-term nature, there is no significant interest rate risk pertaining to short-term deposits.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers and investment securities. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables, cash and cash equivalents and investments. The management have evaluated receivable from customers based out of Sri Lanka in view of ongoing economic crisis and have concluded that there is no increase in credit risk as on 31^st March, 2023 and 31^st March, 2022 from such receivables on account of business

T rade and other Receivables

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

Cash and cash equivalents and investments:

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating.

The Company does not expect any losses from non-performance by these counterparties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

Details of financial assets - not due, past due and impaired

None of the Company''s cash equivalents, including term deposits (i.e., certificates of deposit) with banks, were past due or impaired as at 31^st March, 2023.

For ageing analysis of the receivable (gross of provision) - refer note 12.

Expected credit loss:

In accordance with Ind AS 109- Financial Instruments, the Company uses the expected credit loss (“ECL”) model for measurement and recognition of impairment loss on its trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115- Revenue from contracts with customers. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers. The default in collection as a percentage to total receivable is low.

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31^st March, 2023 and 31^st March, 2022. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits and other highly marketable debt investments with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

(d) Impact of hedging activities

The Company uses foreign exchange forward and currency option contracts to hedge against the foreign currency risk of highly probable USD, AUD, EUR and ZAR sales. Such derivative financial instruments are governed by the Company''s policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Company''s risk management strategy. As the value of the derivative instrument generally changes in response to the value of the hedged item, the economic relationship is established.

Hedge effectiveness is determined at the inception of hedge relationship, and through periodic prospective effectiveness assessment to ensure that an economic relationship exists between the hedged item and hedging instruments. It is calculated by comparing changes in fair value of the hedged item, with the changes in fair value of the hedging instrument.

If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.

A. Risk Management

The Company''s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell new assets to reduce debt. Consistent with others in Industry, the Company monitors capital on the basis of the following gearing ratio: (net debt divided by total ''equity'')

Net debt = Total borrowings (including lease liabilites) less [Cash and cash equivalents Bank balance other than cash and cash equivalents (excluding balance earmarked for unclaimed dividend) Current investments]

Note 48: Earnings Per Share (EPS)

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit attributable to equity shareholders and the weighted average number of shares outstanding are adjusted for the effect of all dilutive potential equity shares which includes all stock options granted to employees. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares which are to be issued in the conversion of all dilutive potential equity shares into equity shares.

Dilutive potential equity shares are deemed converted at the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.

Note 49: Income Tax Search and Survey

The Income Tax Department (“the Department”) conducted a Survey & Search under Section 132 of the Income Tax Act (“the Search”) on the Company in February 2023. The Company at the time of search and subsequently has co-operated with the department and responded to the clarifications, data and details sought by the Department. No assets of the Company were seized by the Department as part of the Search. The Company after considering all available records, facts known to it and legal advice as of date, has not identified any adjustments to the current or prior period standalone financial statements at this stage. Pending outcome of the proceedings in this matter, the Company will re-evaluate the adjustments to the financial statement if needed at a future date as appropriate.

Note 50: Reclassification note

The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable. The impact of such reclassification/regrouping is not material to the financial statements.

Note 51: Subsequent events

Subsequent to year end, the Company has signed a perpetual license agreement with Novartis Pharma AG on 10^th April, 2023 to manufacture and market Galvus and combination brands, used in the treatment of type 2 diabetes from 1^st January, 2026. The agreement is subject to satisfaction of certain conditions precedent. Other than as disclosed, there are no other subsequent events that occurred after the reporting date.

Note 52: Unforeseeable losses

The Company has a process whereby periodically all long -term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company did not have any long-term contracts (including derivative contracts) for which there were any material foreseeable losses.

Note 53: Impact of Code on Social Security, 2020

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Note 54: Authorisation of financial statements

The financial statements for the year ended 31^st March, 2023 were approved by the Board of Directors on 12^th May, 2023.

---

Mar 31, 2022

Rental income recognised in profit or loss for investment properties aggregates to H 12.60 crores (31^st March, 2021: H 15.83 crores). Total direct operating expenses from property that generated rental income aggregates to H 0.35 crores (31^st March, 2021: H 0.70 crores).

The fair valuation of the assets is based on the perception about the macro and micro economic factors presently governing the construction industry, location of property, existing market conditions, degree of development of infrastructure in the area, demand supply conditions, internal amenities, common amenities, etc.

This value is based on valuation conducted by an external valuation specialist who is registered valuer as defined under rule 2 of Companies (Registered Valuers and Valuation) Rules, 2017. The fair value measurement is categorised in level 3 fair value hierarchy.

As at 31^st March, 2022 and 31^st March, 2021, the fair value of the contingent consideration was assessed as H Nil in respect of acquired intangibles as the sales targets are not probable and estimable. Determination of the fair value as at balance sheet date is based on discounted cash flow method. Contingent consideration is arrived at, basis weighted average probability approach of achieving various financial and non-financial performance targets. Basis the future projections and the performance of the products, the contingent consideration is subject to revision on a yearly basis.

iii. On 25^th February, 2022, the Company has incorporated a new subsidiary, Cipla Digital Health Limited and subscribed its 5,00,000 equity shares of H 10 each.

Notes for changes in current year:

i. During the year, the Company further invested H 15.00 crores and acquired 1,50,00,000 equity shares of Cipla Pharmaceuticals Limited of H 10 each.

ii. During the year, pursuant to the Board resolutions passed on 14^th May 2021, 5^th August 2021, 26^th October 2021, the Company further invested H 1,185.81 crores and acquired 11,59,04,062 equity shares of Cipla (EU) Limited of GBP 1 each.

iv. Pursuant to Share Purchase, Subscription and Shareholder''s agreement (SPSSA) dated 23^rd May, 2019 and amendments thereof, the Company has further invested H 1.17 crores in AMPSolar Power Systems Private Limited, representing 11,800 equity shares of H 10 each and 11,642, 0.01% Compulsory Convertible Debenture of H 1,000 each.

viii. During the year, the Company has further invested H 4.78 crores, pursuant to tripartite agreement entered during the previous year wherein ESOP holders of Cipla Health Limited agreed to extinguish their right of exercise of ESOPs vested.

Further, there has been no change in the stake and has been accounted in the same manner as it was accounted at the time of initial investment.

v. Pursuant to Share Purchase, Subscription and Shareholder''s agreement (SPSSA) dated 4^th February, 2022, the Company has acquired 32.49% stake on fully diluted basis in AMP Energy Green Eleven Private Limited, representing 750,000 equity shares of H 10 each and 67,500, 0.01% Compulsory Convertible debentures of AMP Energy Green Eleven Private Limited of H 1,000 each for a total consideration of H 7.50 crores. Further, the Company also entered in a Power Purchase Agreement (''PPA'') with AMP Energy Green Eleven Private Limited to procure 100% of the output of solar energy produced for next 25 years as per the rates negotiated in agreement. As per the SPSSA, in the event of termination of the contracts or completion of the PPA term, the Company will receive nominal value of its investment without any share of profit/loss in the associate. Accordingly, the investment amount has been amortised to give the effect of expected fixed return on such investment. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 - Investments in associates and joint ventures.

vi. Pursuant to the Board resolutions passed on 5^th August, 2021, the Company invested H 0.05 crores and acquired 5,000 equity shares of Swasth Digital Health Foundation of H 100 each. Swasth Digital Health Foundation is a Not-for-Profit initiative (registered under Section 8 of the Companies Act, 2013) that aims to leveraging digital technologies to improve healthcare outcomes and increase healthcare inclusion in India. The investment is accounted as fair value through other comprehensive income (FVTOCI) as per Company''s election in accordance with lnd AS 109 -Financial Instruments.

vii. Pursuant to Limited Liability Partnership Agreement ("LLP Agreement") dated 14^th December, 2021 and amendments thereof, the Company has acquired 33% stake in Clean Max Auriga Power LLP (''Clean Max'') for a total consideration of H 6.75 crores. Further, the Company has also entered in a Power Purchase Agreement (''PPA'') with Clean Max to procure 100% of the output of solar energy produced for next 25 years as per the rates negotiated in the PPA. Further, in the event of termination of the contracts or completion of the PPA term, the Company will receive fair market value of its investment on the date of termination/completion which is expected to be Nil at the end of the PPA term. Accordingly, the investment amount will be amortised over a period of 25 years. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 - Investments in associates and joint ventures.

Notes for changes in previous year:

ix. During the year, pursuant to the board resolution passed on 1^st July, 2020, 5,34,658 Series A and 33,039 Series A1 0.01% Compulsory Convertible Preference Shares of Cipla Health Limited were converted into equivalent number of 5,67,697 equity shares.

x. (a) During the year, pursuant to the board resolution

passed on 8^th May, 2020, the Company has by way of right issue invested in 1,62,469 equity shares of face value of H 10 each at a premium of H 6,145 per share of Cipla Health Limited.

(b) During the year ended 31^st March, 2021, the ESOP holders entered into a tripartite agreement with the Company and Cipla Limited wherein they agreed to extinguish their right of exercise of ESOPs vested against the payment received from Cipla Limited.

xi. The Company has re-assessed the carrying value of investment in Cipla Pharma and Life Sciences Limited (formerly known as Cipla BioTec Limited) and recorded impairment charge of H 10.88 crores.

xii. Pursuant to the Board resolutions passed on 15^th May, 2020, 7^th August, 2020 and 6^th November, 2020, the Company further invested H 1,191.49 crores and acquired 12,41,44,449 equity shares of Cipla (EU) Limited of GBP 1 each.

xiii. On 9^th June, 2020, the Company has signed Amended and Restated Shareholders'' Agreement with GoApptiv Private Limited to acquire 21.85% stake on fully diluted basis for a total consideration of H 9 crores. Pursuant to this, the Company acquired 6,927 equity shares of H 10 each from the sellers via Share Purchase Agreement for a total consideration of H 1.80 crores and via Share Subscription Agreement with GoApptiv Private Limited to acquire 27,706, 0.001% compulsorily convertible preference shares of H 10 each for a total consideration of H 7.20 crores. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 -Investments in associates and joint ventures.

xiv. On 30^th March, 2021, the Company has signed Restated and 2^nd Amended Limited Liability Partnership Agreement ("LLP Agreement") to make an strategic investment of H 40 crores in ABCD Technologies LLP (to be renamed as IndoHealth Services LLP). The investment is accounted as fair value through other comprehensive income (FVTOCI) as per Company''s ele ction in accordance with lnd AS 109 -Financial Instruments.

There are unused capital losses amounting to H 129.50 crores (expiring from FY 2025-26 to FY 2027-28) as at 31^st March, 2022 (31^st March, 2021: H 129.50 crores) for which no deferred tax asset has been recognised as the Company believes that availability of taxable profit against which such temporary difference can be utilised is not probable.

The Company has ongoing disputes which includes receipt of demands, notices and inquiries from income tax authorities in India. The disputes relate to tax treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives or allowances and transfer pricing adjustments.

The Company has disclosed amount of H 20.52 crores (31^st March, 2021: H 49.97 crores) as contingent liability, in respect of tax demands which are being contested by it based on the management evaluation and advice of tax consultants as the management believes that the ultimate tax determination is uncertain due to various tax positions taken by adjudicating authorities in the past.

The Company has made provisions for taxes basis its best judgement, considering past resolutions to disputed matters by adjudicating authorities, prior year assessments and advice from external experts, if required. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.

Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.

The Company recorded inventory write down (net) of H 494.86 crores (31^st March, 2021: H 241.50 crores). This is included as part of cost of materials consumed and changes in inventories of finished goods, work-in-progress and stock-in-trade in profit or loss, as the case may be.

Trade receivables are interest and non-interest bearing and are generally due upto 180 days.

There are no trade receivables which have significant increase in credit risk and trade receivables which are credit impaired.

1. In line with Circular No 04/2015 issued by Ministry of Corporate Affairs dated 10^th March, 2015, loans given to employees as per the Company''s policy are not considered for the purposes of disclosure under Section 186(4) of the Companies Act, 2013.

2. There are no loans or advances in the nature of loans granted to Promoters, Directors, KMPs and their related parties (as defined under Companies Act, 2013), either severally or jointly with any other person, that are:

(a) repayable on demand; or

(b) without specifying any terms or period of repayment.

Terms and rights attached to equity shares

The Company has only one class of equity shares having a par value of H 2 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution

of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholder.

Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date

The Company has not issued any bonus shares, shares for consideration other than cash or bought back any shares during five years immediately preceding the reporting date.

Equity shares reserved for issue under employee stock options and share appreciation rights.

For number of stock options against which equity shares are to be issued by the Company upon vesting and exercise of those stock options and rights by the option/ESAR holders as per the relevant schemes - Refer note 40.

Nature and purpose of reserve:

Capital reserve

The Company recognised profit or loss on sale, issue, purchase or cancellation of the Company''s own equity instruments to capital reserve. Capital reserve may be used by the Company only for some specific purpose.

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. In case of equity settled share based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium. This reserve is utilised in accordance with the provisions of the Act.

General reserve

The General reserve is used from time to time to transfer profit from retained earnings for appropriation purpose.

Employee stock options/ESAR

Employee stock options/ESAR is used to record the share based payments, expense under the various schemes as per SEBI regulations. The reserve is used for the settlement of ESOS and ESAR (refer note 40).

Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends, or other distributions paid to shareholders.

Investments through other comprehensive income

This reserve represents the cumulative gains and losses arising on the revaluation of equity instrument measured at fair value through other comprehensive income. The Company transfers amounts from this reserve to retained earnings when the relevant equity instruments are de-recognised/disposed off.

Cash flow hedge reserve

Provision is made for right of return/discounts and others in respect of products sold as per the contractual terms and conditions. These claims are expected to be settled in the next financial year. Management estimates the provision based on historical information and any recent trends that may suggest future claims could differ from historical amounts. The assumptions made in relation to the current period are consistent with those in the prior year.

For the forward contracts designated as cash flow hedges, the effective portion of the fair value of forward contracts are recognised in cash flow hedging reserve under other equity. Upon de-recognition, amounts accumulated in other comprehensive income are taken to profit or loss at the same time as the related cash flow (refer note 44).

- The above amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 0-90 days of recognition based on the credit terms. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

The Company recognises an asset, i.e., right to the returned saleable goods (included in inventories) for the products expected to be returned in saleable condition. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of returned goods. The Company updates the measurement of the asset recorded for any revision to its expected level of returns, as well as any additional decrease in value of the returned products.

As on 31^st March, 2022, the Company has H 20.63 crores (31^st March, 2021: H 16.68 crores) as contract asset.

(v) Information about major customers

No single external customer represents 10% or more of the Company''s total revenue for the years ended 31^st March, 2022 and 31^st March, 2021 respectively.

i Government grants pertain to subsidy on property, plant and equipment of manufacturing set up. There are no unfulfilled conditions or contingencies attached to these grants.

ii Previous year includes Litigation settlement income received from innovator pursuant to a settlement agreement entered into on 18^th December, 2020. The agreement effectively settles all outstanding claims in the litigation. Innovator has agreed to provide Cipla with a license to its patent required to manufacture and sell certain volume-limited amounts of certain product in the US beginning on a confidential date that is some time after March 2022. For each consecutive twelve-month period (or part thereof) following the volume-limited entry date until 31^st January, 2026, the volume of certain product sold by Cipla cannot exceed certain agreed-upon percentages. In addition, Innovator has agreed to provide Cipla with a license to its patent required to manufacture and sell an unlimited quantity of certain product in the US beginning no earlier than 31^st January, 2026.

iii Income below 1% of revenue from operation are aggregated in accordance with Schedule III to the Companies Act, 2013.

Note 36: Discontinuing/restructuring operations

The board at its meeting held on 26^th October, 2021 decided not to proceed with the draft scheme of arrangement as approved by the Board in its meeting held on 29^th January, 2021.

Subsequently, the Board at its meeting held on 25^th January, 2022 considered and approved the transfer of the India based US business undertaking to CPLS for a consideration of H 1,400 crores and the Consumer Business Undertaking to CHL for a consideration of H 80 crores as a going concern on a slump sale basis through a Business Transfer Agreement ("BTA"). The final consideration is subject to the adjustments as on the date of transfer as per the terms of BTA. The Company is currently in the process of completing the regulatory and legal process for transfer as on 31^st March, 2022. Accordingly, as per Ind AS 105 -Non- Current Assets Held for Sale and Discontinued Operations the disclosures have been made in these financial statements for all the periods presented.

A. Details of contingent liabilities and commitments: H in crores
Particulars	As at 31st March, 2022	As at 31st March, 2021
Contingent liabilities
Claims against the Company not acknowledged as debt	147.64	152.14
Guarantees*	237.43	1,279.58
Letters of credit	76.81	81.40
Income tax on account of disallowance/additions	20.52	49.97
Excise duty/service tax on account of valuation/cenvat credit	129.88	129.68
Sales tax on account of credit/classification	7.43	8.02
	619.71	1,700.79
Commitments
(a) Estimated amount of contracts unexecuted on capital account	355.60	272.16

*The Company has given guarantees in favour of various banks for H Nil (31^st March, 2021: h 1,094.84 crores) relating to loan obtained by Cipla (EU) Limited and InvaGen Pharmaceuticals Inc. (wholly-owned subsidiaries) (refer note 39).

Note:

i. Claims against the Company not acknowledged as debt include claim relating to pricing, commission, etc.

ii. It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of our pending resolution of the

respective proceedings as it is determined only on receipt of judgements/decisions pending with various forum/authorities.

iii. The Company does not expect any reimbursements in respect of the above contingent liabilities.

iv. The Company''s pending litigations comprise of proceedings pending with various direct tax, indirect tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.

v. There has been a judgement by the Honourable Supreme Court of India dated 28^th February, 2019, relating to components of salary structure that need to be taken into account while computing the contribution to provident fund under the Employee Provident Fund Act, 1952 ("EPF"). In view of the interpretative aspects related to the Judgement including the effective date of application, the Company has been advised to await further developments in this matter. The Company will continue to assess any further developments in this matter for the implications on financial statements, if any.

B. Details of other litigations:-

(i) The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of H 5.46 crores along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

(ii) The Company had received various notices of demand from the National Pharmaceutical Pricing Authority (NPPA), Government of India, on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Order. The total demand against the Company as stated in NPPA public disclosure amounts to H 3,703.40 crores.

Out of the above, demand notices pertaining to a set of products being Norfloxacin, Ciprofloxacin, Salbutamol and Theophylline were challenged by the Company (i) in the Honourable Bombay High Court on the ground that bulk drugs contained in the said formulations are not amenable to price control, as they cannot be included in the ambit of price control based on the parameters contained in the Drug Policy, 1994 on which the DPCO, 1995 is based and (ii) in the Honourable Allahabad High Court on process followed for fixation of pricing norms. These petitions were

decided in favour of the Company and the matters were carried in appeal by the Union of India to the Honourable Supreme Court of India. The Honourable Supreme Court in its judgment of 1^st August, 2003 remanded the said writ petitions to the Honourable Bombay High Court with directions that the Court will have to consider the petitions afresh, having due regard to the observations made by the Honourable Supreme Court in its judgment. On the Union of India filing transfer petitions, the Honourable Supreme Court ordered transfer of the said petitions to the Honourable Bombay High Court to it for being heard with the appeal filed against the Honourable Allahabad High Court order. Subsequently, in its order of 20^th July, 2016 the Honourable Supreme Court recalled its transfer order and remanded the petitions to Honourable Bombay High Court for hearing. While remanding the matter to Honourable Bombay High Court, the Honourable Supreme Court directed Cipla to deposit 50% of the overcharged amount with the NPPA as stated in its order of 1^st August, 2003 which at that point of time was H 350.15 crores. Complying with the directions passed by the Honourable Supreme Court, Cipla has deposited an amount of H 175.08 crores which has been received and acknowledged by NPPA. Furthermore, the Company has not received any further notices in these cases post such transfer of cases to Honourable Bombay High Court. Meanwhile, the Honourable Supreme Court vide its Order and Judgment dated 21^st October, 2016, allowed the Appeals filed by the Government against the Judgment and Order of the Honourable Allahabad High Court regarding basis of fixation of retail prices. The said order was specific to fixation of retail prices without adhering to the formula/process laid down in DPCO, 1995. However, the grounds relating to inclusion of certain drugs within the span of price control continues to be sub-judice with the Honourable Bombay High Court.

The Honourable Bombay High Court had, in expectation of NPPA filing its counter-statement on status of each petitioner''s compliance with the 2003 and 2016 Honourable Supreme Court orders (on deposit 50% of amount demanded), re-scheduled the hearing for 5^th June, 2019, but the same was not listed on that date.

The Company had filed amendment applications before the Honourable Bombay High Court to incorporate the effect of a ruling by the Honourable Supreme Court to adjust trade margins of 16% from outstanding demands as not accrued to the manufacturers and to re-calculate interest from date of non-payment of demand within the time period stated in each demand. The said amendment also places certain additional grounds on record. The Honourable Bombay High Court issued notice to Union of India and NPPA on the amendment applications and set 25^th January, 2021 for further hearing but the case was not listed due to the COVID-19 lockdown and the next date is awaited.

The Company has been legally advised that it has a substantially strong case on the merits of the matter, especially under the guidelines/principles of interpretation of the Drug Policy enunciated by the Honourable Supreme Court. Although, the decision of Honourable Supreme Court dated 21^st October, 2016 referred above was in favour of Union of India with respect to the appeals preferred by the Government challenging the Honourable Allahabad High Court order, basis the facts and legal advice on the matter sub-judice with the Honourable Bombay High Court, no provision is considered necessary in respect of the notices of demand received till date aggregating to H 1,736.00 crores. It may be noted that NPPA in its public disclosure has stated the total demand amount against the Company

in relation to the above said molecules to be H 3,281.31 crores (after adjusting deposit of H 175.08 crores), however, the Company has not received any further notices beyond an aggregate amount of H 1,736.00 crores.

In addition, Company had made provision of H 118.49 crores as of 31^st March, 2022 (H 111.15 crores as of 31^st March, 2021) for products not part of the referenced writ proceedings against total demand of H 247.01 crores. Further, no new recovery notices were received by the Company during the year, thus not requiring any fresh cases to be filed by the Company in that regard. Due to COVID-19, courts are hearing only urgent cases, hence the writs that are pending will be heard in due course.

Note 38: Employee benefits

a. Description of the plan:

Retirement benefit plans of the Company include Gratuity and Provident Fund. The Company established the Cipla Limited Employees Gratuity Fund (the "Gratuity Fund") to fund the Gratuity Plan. Liabilities in respect of the Gratuity Plan are determined by an actuarial valuation, based upon which the Company makes contributions to the Gratuity Fund.

Provident Fund is managed through the trust, Cipla Limited Employees Provident Fund Trust (the "Provident Fund") managed by the Company.

b. Governance of the plan:

The Company has setup an income tax approved irrevocable trust fund to finance the plan liability. The trustees of the trust fund are responsible for the overall governance of the plan in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy.

Further, since these funds are income tax approved, the Company and the trustees have to ensure that they are at all times fully compliant with the relevant provisions of the Income Tax Act, 1961 and Rules.

c. Investment strategy:

The Company''s investment strategy in respect of its funded plans is implemented within the framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Company of the benefits provided. To achieve this, investments are well diversified,

such that the failure of any single investment would not have a material impact on the overall level of assets.

The sensitivity analysis above has been determined based on reasonable possible changes of the respective assumption 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 projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

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

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

g. Compensated absences note:

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilised compensated absences and utilise them in future periods or receive cash in lieu thereof as per the Company''s policy. The Company records a liability for compensated absences in the period in which the employee renders the services that increases this entitlement. The total liability recorded by the Company towards this obligation was H 99.78 crores and H 127.06 crores as at 31^st March, 2022 and 31^st March, 2021, respectively.

Note - Amount mentioned as ”0.00” denotes value less than H 1 lac.

Terms and conditions of transactions with related parties:

All related party transactions entered during the year were in ordinary course of the business and on arms length basis. Outstanding balances at the year end are unsecured and settlement occurs in cash.

Note 40: Share based payments

A. Employee stock option scheme (''ESOS'')

The Company has implemented Employee Stock Option Scheme 2013-A (''ESOS 2013-A Scheme'') as approved by the shareholders on 22^nd August, 2013. The ESOS 2013-A Scheme covers the permanent employees of the Company and its subsidiaries and directors (excluding promoter directors) [collectively "eligible employees”]. The Nomination and Remuneration Committee of the Board of Cipla Limited administers the ESOS 2013-A Scheme and grants stock options to eligible employees. Details of the options granted during the year under the Scheme(s) are given below:

B. Employee Stock Appreciation Rights ("ESAR") Scheme

The Company has implemented "Cipla Employee Stock Appreciation Rights Scheme 2021 (''ESAR 2021/the Scheme'')” as approved by the shareholders by postal ballot on 25^th March, 2021. The Scheme covers the employees who are in permanent employment, including director(s) other than independent directors of the Company and its subsidiaries [collectively "eligible employees"]. The

Nomination and Remuneration Committee of the Board of Cipla Limited will administer this scheme and grant ESARs to the eligible employees. Further, the maximum number of Employee Stock Appreciation Rights (ESARs) that may be granted under the Scheme shall not exceed 1,75,00,000 and the maximum number of equity shares that may be issued towards appreciation of the ESARs to be granted under the Scheme shall not exceed 33,00,000 shares of H 2 each, i.e. face value. As per the terms of the ESAR Scheme, each ESAR will be settled by the issue of shares and hence been accounted as equity settled.

Note 43: Additional disclosure with respect to amendments to Schedule III

a. The Company do not have any Benami property, where any proceeding has been initiated or pending against them for holding any Benami property.

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

c. The Company has not been declared a wilful defaulter by any bank or financial institution or other lender (as defined under the Companies Act, 2013) or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India.

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

e. The Company have not traded or invested in Crypto Currency or Virtual Currency during the financial year.

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

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

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

g. The Company have not entered into any scheme of arrangement which has an accounting impact on the current or previous financial year.

h. The Company have complied with the number of layers prescribed under the Companies Act, 2013.

A. Fair value measurement

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

The carrying amount of trade receivable, trade payable, capital creditors, loans, margin deposit, security deposit, incentives/benefits receivable from government, cash and cash equivalents, other bank balances and other receivables as at 31^st March, 2022 and 31^st March, 2021 are considered to be the same as their fair values, due to their short-term nature. Difference between carrying amounts and fair values of other financial assets, other financial liabilities and short-term borrowings subsequently measured at amortised cost is not significant in each of the year presented.

Financial Instruments with fixed and variable interest rates are evaluated by the company based on parameters such as interest rate and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

Fair value hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of following:

Level 1 - category includes financial assets and liabilities, that are measured in whole or in significant part by reference to published quotes in an active market.

Level 2 - category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions. These include assets and liabilities for which pricing is obtained via pricing services, but where prices have not been determined in an active market, financial assets with fair values based on broker quotes and assets that are valued using the Company''s own valuation models whereby the material assumptions are market observable. The majority of Company''s over-the-counter derivatives and several other instruments not traded in active markets fall within this category.

Level 3 - category includes financial assets and liabilities measured using valuation techniques based on non market observable inputs. This means that fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. However, the fair value measurement objective remains the same, that is, to estimate an exit price from the perspective of the Company. The main asset classes in this category are unlisted equity investments as well as unlisted funds.

B. Financial risk management objectives and policies

The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance.

The Company''s financial liabilities comprise of borrowings, trade payable and other liabilities to manage its operation and financial assets include trade receivables, security deposits, loans and advances, etc., arises from its operation.

The Company has constituted a Risk Management Committee consisting of a majority of directors and senior managerial personnel. The Company has instituted Business Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimise the adverse impact on the business objectives and enhance Company''s competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risk trend, exposure and potential impact analysis at a Company level.

The Audit Committee of the Board reviews the risk management framework at periodic intervals.

Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse changes in market rates and prices. The Company''s size and operations

result in it being exposed to the following market risks that arise from its use of financial instruments:

• currency risk;

• price risk; and

• interest rate risk

The above risks may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of these risks are explained below.

(a) Currency risk:

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services and purchases from overseas suppliers in various foreign currencies. The Company also holds derivative financial instruments such as foreign exchange forward and currency option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations are affected as the Rupee (INR) appreciates/ depreciates against US Dollar (USD), Euro (EUR), Great Britain Pound (GBP), South African Rand (ZAR) , Australian Dollar (AUD) and other currencies.

(b) Price risk

The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments. At 31^st March, 2022, the investments in debt mutual funds amounts to H 2,038.80 crores (31^st March, 2021: H 2,004.84 crores). These are exposed to price risk. The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in debt mutual funds. A 1% increase in prices would have led to approximately an additional H 20.38 crores gain in profit or loss (31^st March, 2021: H 20.04 crores gain). A 1% decrease in prices would have led to an equal but opposite effect.

(c) Interest rate risk

Company''s interest rate risk arises from borrowings and investment in short-term deposits. The Company adopts a policy of ensuring that maximum of its interest rate risk exposure is at a fixed rate. Considering the short-term nature, there is no significant interest rate risk pertaining to short-term deposits. Further, the Company does not have any borrowings and therefore not exposed to interest rate risk.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers and investment securities. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables, cash and cash equivalents and investments. The management have evaluated receivable from customers based out of Sri Lanka in view of ongoing economic crisis and have concluded that there is no increase in credit risk as on 31^st March, 2022 from such receivables on account of business continuity.

Trade and other financial assets

The Company''s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and

country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business.

Cash and cash equivalents and investments:

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating.

The Company does not expect any losses from non-performance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

Details of financial assets - not due, past due and impaired

None of the Company''s cash equivalents, including term deposits (i.e., certificates of deposit) with banks, were past due or impaired as at 31^st March, 2022.

For ageing analysis of the receivable (gross of provision) -Refer note 11.

Expected credit loss:

In accordance with Ind AS 109 - Financial Instruments, the Company uses the expected credit loss ("ECL") model for measurement and recognition of impairment loss on its trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115 - Revenue from Contracts with Customers. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers.

Liquidity risk

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31^st March, 2022 and 31^st March, 2021. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits and other highly marketable debt investments with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

The Company uses foreign exchange forward and currency option contracts to hedge against the foreign currency risk of highly probable USD, AUD, EUR and ZAR sales. Such derivative financial instruments are governed by the Company''s policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Company''s risk management strategy. As the value of the derivative instrument generally changes in response to the value of the hedged item, the economic relationship is established.

Hedge effectiveness is determined at the inception of hedge relationship, and through periodic prospective effectiveness assessment to ensure that an economic relationship exists between the hedged item and hedging instruments. It is calculated by comparing changes in fair value of the hedged item, with the changes in fair value of the hedging instrument.

If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.

Note 45: Corporate social responsibility (CSR) expenditure

The Company meets the criteria specified under Section 135 of the Companies Act, 2013 and has formed a Corporate Social Responsibility (CSR) Committee to monitor the CSR activities implemented as per the CSR Policy of the Company. The Company spends in each financial year at least 2% of its average net profit for the immediately preceding three financial years as per provisions of Section 135 of the Act and in compliance of its CSR policy. The funds allocated are utilised through the year on the activities which are specified in Schedule VII of the Act. Key focus areas for CSR activities include Health, Education, Skilling, Environmental Sustainability, Disaster Response, Rural development projects, Research and Development and any other activity permissible under Schedule VII of the Act.

*This includes contribution to Cipla Foundation which is a trust, with the main objective of working across focus areas of Health, Education, Skilling, Environmental Sustainability & Disaster Response and COVID-19 relief projects.

The Company does not have any ongoing projects as at 31^st March, 2022 and 31^st March, 2021.

The Company did not set-off any excess CSR amount spent during the year 2020-21 against current year''s CSR obligation. The Company will be setting off the excess spend of H 0.33 crores during the year 2021-22 against the next year''s CSR obligation.

Note 46: Capital management

A. Risk Management

The Company''s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell new assets to reduce debt. Consistent with others in Industry, the Company monitors capital on the basis of the following gearing ratio: (net debt divided by total ''equity'')

Net debt = Total borrowings (including lease liabilities) less [Cash and cash equivalents Bank balance other than cash and cash equivalents (excluding balance earmarked for unclaimed dividend) Current investments]

The Board of Directors of the Company at its meeting held on 10^th May, 2022 has recommended a final dividend of H 5.00 per equity share (face value of H 2.00 each) of which is subject to approval at the ensuing Annual General Meeting of the Company and hence was not recognised as a liability.

Note 47: Earnings Per Share (EPS)

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit attributable to equity shareholders and the weighted average number of shares outstanding are adjusted for the effect of all dilutive potential equity shares which includes all stock options granted to employees. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares which are to be issued in the conversion of all dilutive potential equity shares into equity shares.

Note 49: Subsequent events

There are no other subsequent events that occurred after the reporting date.

Note 50: Unforeseeable losses

The Company has a process whereby periodically all longterm contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the Company did not have any long-term contracts (including derivative contracts) for which there were any material foreseeable losses.

Note 51: Impact of Code on Social Security, 2020

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Note 52: Authorisation of financial statements

The financial statements for the year ended 31^st March, 2022 were approved by the Board of Directors on 10^th May, 2022.

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

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Mar 31, 2021

Notes for changes in previous year:

i. During the year, pursuant to the board resolution passed on 1^st July, 2020, 5,34,658 Series A and 33,039 Series A1 0.01% Compulsory Convertible Preference Shares of Cipla Health Limited were converted into equivalent number of 5,67,697 equity shares.

ii. (a) During the year, pursuant to the board resolution passed

on 8^th May, 2020, the Company has by way of right issue invested in 1,62,469 equity shares of face value of H 10 each at a premium of H 6,145 per share of Cipla Health Limited.

(b) During the year ended 31^st March, 2021, the ESOP holders entered into a tripartite agreement with the Company and Cipla Limited wherein they agreed to extinguish their right of exercise of ESOPs vested against the payment received from Cipla Limited.

iii. The Company has re-assessed the carrying value of investment in Cipla BioTec Limited (formerly known as Cipla BioTec Private Limited) and recorded impairment charge of H 10.88 crore (31^st March, 2020: H 32.36 crore).

iv. Pursuant to the Board resolutions passed on 15^th May, 2020, 7^th August, 2020 and 6^th Novemeber, 2020, the Company further invested H 1,191.49 crore and acquired 12,41,44,449 equity shares of Cipla (EU) Limited of GBP 1 each.

v. On 9^th June, 2020, the Company has signed Amended and Restated Shareholders'' Agreement with GoApptiv Private Limited to acquire 21.85% stake on fully diluted basis for a total consideration of H 9 crore. Pursuant to this, the Company acquired 6,927 equity shares of H 10 each from the sellers via Share Purchase Agreement for a total consideration of H 1.80 crore and via Share Subscription Agreement with GoApptiv Private Limited to acquired 27,706, 0.001% compulsorily convertible preference shares of H 10 each for a total consideration of H 7.20 crore. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 “Investments in associates and joint ventures”.

vi. On 30^th March, 2021, the Company has signed Restated and 2^nd Amended Limited Liability Partnership Agreement ("LLP Agreement”) to make an strategic investment of H 40 crore in ABCD Technologies LLP (to be renamed as IndoHealth Services LLP). The investment is accounted as fair value through other comprehensive income (FVTOCI) as per Company''s

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vii. On 19^th November, 2019, the Company has incorporated a new wholly-owned subsidiary, Cipla Pharmaceuticals Limited and subscribed its 2,00,00,000 equity shares of H 10 each.

viii. Pursuant to the Board resolution passed on 22^nd May, 2019, the loan of H 169.08 crore, interest accrued of H 4.37 crore during the year and equity component of intercorporate deposits of H 50.70 crore were converted to equity share capital of Meditab Specialities Limited for H 224.15 crore divided into 946,179 shares of H 1 each at a premium of H 2,368 per share.

ix. Pursuant to the Board resolution passed on 22^nd May, 2019 and 7^th August, 2019, the Company has further invested H 2,093.48 crore and acquired 23,22,85,015 equity shares of Cipla (EU) Limited of GBP 1 each.

x. On 7^th August, 2019, the Company has acquired non-controlling interest of 26.16% representing 5,34,658 Series A Compulsory Convertible Preference Shares of H 50 each, 33,039 Series A1 Compulsory Convertible Preference Shares of H 50 each and 1,000 equity shares of H 10 each, on a fully diluted basis for a total cash consideration of H 350 crore of its Subsidiary, Cipla Health Limited from Eight Road Investments Mauritius II Limited (formerly knowns as FIL Capital Investments (Mauritius) II Limited).

xi. Pursuant to the board resolution passed on 19^th November, 2019, the Company has invested in Cipla Health Limited H 40 crore divided into 64,987 equity shares of face value of H 10 each at a premium of H 6,144.42 per share.

xii. On 26^th March, 2020, the Company has cancelled 115,000 equity shares of Cipla Holding B.V. of EUR 100 each at par. Accordingly, the Company received back H 92.21 crore.

xiii. Pursuant to Share Purchase, Subscription and Shareholder''s agreement dated 23 ^rd May, 2019, the Company has acquired 26% stake on fully diluted basis in AMPSolar Power Systems Private Limited, divided into 90,000 equity shares of H 10 each and 89,100, 0.01% Compulsory Convertible debentures of AMPSolar Power Systems Private Limited of H 1,000 each for a total consideration of H 9.00 crore. The Company is further committed to invest in 39,000 equity shares of H 10 each and 38,610, 0.01% Compulsory Convertible debentures of AMPSolar Power Systems Private Limited of H 1,000 each for a total consideration of H 3.90 crore on second stage closing. Also, the Company has entered the Power Purchase Agreement (''PPA'') with AMPSolar Power Systems Private Limited to procure 100% of the output of solar energy produced by the Company for the next 25 years on subsidised rates. As per the agreements entered, in the event of termination of the contracts or completion of the contract term, the Company will receive the investment made by it without any share of profit/loss in associate. Accordingly, the investment amount has been amortised to give the effect of subsidised rates of power and fixed return expected out of the investment. As the Company has significant influence, the investment has been accounted as investment in associate as per Ind AS 28 "Investments in associates and joint ventures”

*The Government of India, on 20^th September, 2019 vide the Taxation Laws (Amendment) Ordinance, 2019, inserted a new Section 115BAA in the Income Tax Act, 1961, which provides an option to the Company for paying tax at reduced rates (lower tax rate) as per the provisions/ conditions defined in the said section. Based on its evaluation, the Company elected to avail lower tax rate only from the financial year ended 31^st March, 2021 and therefore has applied the lower tax rate of 25.17% in measurement and recognition of current tax for the year ended 31^st March, 2021.

During previous year ended 31^st March, 2020, the Company has applied the lower tax rate of 25.17% in measurement of deferred taxes to the extent that such deferred tax assets/ liabilities were expected to be realised/ settled in the periods during which the Company expects to be subject to lower tax rate. Consequently, deferred tax liabilities (net) reversed by the Company as at 31^st March, 2020 was not significant.

There are unused capital losses amounting to H 129.50 crore as at 31^st March, 2021: (31^st March, 2020 H 129.50 crore) for which no deferred tax asset has been recognised as the Company believes that availability of taxable profit against which such temporary difference can be utilised, is not probable.

The Company has ongoing disputes which includes receipt of demands, notices and inquiries from income tax authorities in India. The disputes relate to tax treatment of certain expenses claimed as deductions, computation or eligibility of tax incentives or allowances and transfer pricing adjustments.

The Company has contingent liability of H 49.97 crore (31^st March, 2020: H 49.97 crore), in respect of tax demands which are being contested by it based on the Management evaluation and advice of tax consultants as the Management believes that the ultimate tax determination is uncertain due to various tax positions taken by adjudicating authorities in the past.

The Company has made provisions for taxes basis its best judgement, considering past resolutions to disputed matters by adjudicating authorities, prior year assessments and advice from external experts, if required. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.

Terms and rights attached to equity shares

The Company has only one class of equity share; having a par value of H 2 per share. Each holder o'' equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board o Directors is subject to the approval of the shareholder in the ensuing Annual General Meeting except in case of interim dividend. In the event of liquidation of the Company, the holders of equity shares will be entitlec to receive remaining assets of the Company, afte distribution of all preferential amounts. The distribution will be in proportion to the number of equity share held by the shareholder.

Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date

The Company has not issued any bonus shares, share for consideration other than cash or bought back any shares during five years immediately preceding the reporting date.

Equity shares reserved for issue under employee stock options

For number of stock options against which equity shares to be issued by the Company upon vesting and exercise of those stock options by the option holder; as per the relevant schemes - refer note 42.

Nature and purpose of reserve:-Capital reserve

The Company recognised profit or loss on sale, issue, purchase or cancellation of the Company''s own equity instruments to capital reserve. Capital reserve may be used by the Company only for some specific purpose.

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. In case of equity-settled share-based payment transactions, the difference between fair value on grant date and nominal value of share is accounted as securities premium. This reserve is utilised in accordance with the provisions of the Act.

General reserve

The General reserve is used from time to time to transfer profit from retained earnings for appropriation purpose.

Employee stock options reserve

Employee stock options reserve is used to record the share-based payments, expense under the various ESOS schemes as per SEBI regulations. The reserve is used for the settlement of ESOS (refer note 42).

Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends, or other distributions paid to shareholders.

Cash flow hedge reserve

For the forward contracts designated as cash flow hedges, the effective portion of the fair value of forward contracts are recognised in cash flow hedging reserve under other equity. Upon de-recognition, amounts accumulated in other comprehensive income are taken to profit or loss at the same time as the related cash flow (refer note 45).

o These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 0-90 days of recognition based on the credit terms. Trade and other payables are presented as

current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

o There are no micro and small enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31^st March, 2021 and no interest payment made during the year to any micro and small enterprises. This information as required to be disclosed under the Micro, Small and Medium Enterprises Deveolpment Act, 2006 has been determined to the extent such parties have been identified on the basis of information available with the Company.

(iii) Contract assets

The Company recognises an asset, i.e., right to the returned saleable goods (included in inventories) for the products expected to be returned in saleable condition. The Company initially measures this asset at the former carrying amount of the inventory, less any expected costs to recover the goods, including any potential decreases in the value of returned goods. The Company updates the measurement of the asset recorded for any revision to its expected level of returns, as well as any additional decrease in value of the returned products.

As on 31^st March, 2021, the Company has H 16.68 crore (31^st March, 2020: H 15.96 crore) as contract asset.

i Government grants pertain to subsidy on property, plant and equipment of manufacturing set up. There are no unfulfilled conditions or contingencies attached to these grants.

ii On 12^th December, 2019, the investment made in Cipla (Mauritius) Limited was liquidated. On liquidation, the Company received H 1.27 crore against the total investment of H 1.20 crore, accordingly, a gain of H 0.07 crore was accounted as gain from liquidation of investment in subsidiary.

iii Includes Litigation settlement income received from innovator pursuant to a settlement agreement entered into on 18^th December, 2020. The agreement effectively settles all outstanding claims in the litigation. Innovator has agreed to provide Cipla with a license to its patent required to manufacture and sell certain volume-limited amounts of certain product in the US beginning on a confidential date that is some time after March 2022. For each consecutive twelvemonth period (or part thereof) following the volume-limited entry date until 31^st January, 2026, the volume of certain product sold by Cipla cannot exceed certain agreed-upon percentages. In addition, Innovator has agreed to provide Cipla with a license to its patent required to manufacture and sell an unlimited quantity of certain product in the US beginning no earlier than 31^st January, 2026.

iv Income below 1% of revenue from operation are aggregated in accordance with Schedule III to the Companies Act, 2013.

"Pursuant to provisions of section 35(2AB) of the Income tax, Act, 1961 the weighted deduction on R&D has been restricted to 100% from the assessment year 2021-22. Hence, the Company has allowed deduction to the extent of 100% on R&D expenses while computing current tax provision.

Note 38: Scheme of arrangement

The Board in its meeting held on 29^th January, 2021 has approved a draft scheme of arrangement (Scheme) which entails demerger of the US business undertaking (Demerged Undertaking 1) of Cipla Limited (Demerged Company) into its wholly-owned subsidiary, Cipla BioTec Limited (Resulting Company 1) and consumer business undertaking (Demerged Undertaking 2) of Cipla Limited into its wholly-owned subsidiary, Cipla Health Limited (Resulting Company 2) pursuant to Sections 230 to 232 and the other relevant provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The said Scheme would be subject to the receipt of requisite approvals including from the National Company Law Tribunal, BSE Limited, National Stock Exchange of India Limited and Securities and Exchange Board of India, the shareholders and/or creditors of the Demerged Company, Resulting Company 1 and Resulting Company 2. Pending aforementioned approval, the Scheme has not been accounted for in the financial statements.

i. Claims against the Company not acknowledged as debt include claim relating to pricing, commission, etc.

ii. It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of our pending resolution of the respective proceedings as it is determined only on receipt of judgements/decisions pending with various forum/ authorities.

iii. The Company does not expect any reimbursements in respect of the above contingent liabilities.

iv. The Company''s pending litigations comprise of proceedings pending with various direct tax, indirect tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its

financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.

v. There has been a Supreme Court (SC) judgement dated 28^th February, 2019 relating to components of salary structure that need to be taken into account while computing the contribution to provident fund under the EPF Act. In view of the interpretative aspects related to the Judgement including the effective date of application, the Company has been advised to await further developments in this matter. The Company will continue to assess any further developments in this matter for the implications on financial statements, if any.

B. Details of other litigations:-

(i) The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of H 5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

(ii) The Company had received various notices of demand from the National Pharmaceutical Pricing Authority (NPPA), Government of India, on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Order. The total demand against the Company as stated in NPPA public disclosure amounts to H 3,676.07 crore.

Out of the above, demand notices pertaining to a set of products being Norfloxacin, Ciprofloxacin, Salbutamol and Theophylline were challenged by the Company (i) in the Honourable Bombay High Court on the ground that bulk drugs contained in the said formulations are not amenable to price control, as they cannot be included in the ambit of price control based on the parameters contained in the Drug Policy, 1994 on which the DPCO, 1995 is based and (ii) in the Honourable Allahabad High Court on process followed for fixation of pricing norms. These Petitions were decided in favour of the Company and the matters were carried in appeal by the Union of India to the Honourable

Supreme Court of India. The Honourable Supreme Court in its judgment of 1^st August, 2003 remanded the said writ petitions to the Honourable Bombay High Court with directions that the Court will have to consider the petitions afresh, having due regard to the observations made by the Honourable Supreme Court in its judgment. On the Union of India filing transfer petitions, the Honourable Supreme Court ordered transfer of the said petitions to the Honourable Bombay High Court to it for being heard with the appeal filed against the Honourable Allahabad High Court order. Subsequently, in its order of 20^th July, 2016 the Honourable Supreme Court recalled its transfer order and remanded the petitions to Honourable Bombay High Court for hearing. While remanding the matter to Honourable Bombay High Court, the Honourable Supreme Court directed Cipla to deposit 50% of the overcharged amount with the NPPA as stated in its order of 1^st August, 2003 which at that point of time was H 350.15 crore. Complying with the directions passed by the Honourable Supreme Court, Cipla has deposited an amount of H 175.08 crore which has been received and acknowledged by NPPA. Furthermore, the Company has not received any further notices in these cases post such transfer of cases to Honourable Bombay High Court. Meanwhile, the Honourable Supreme Court vide its Order and Judgment dated 21^st October, 2016, allowed the Appeals filed by the Government against the Judgment and Order of the Honourable Allahabad High Court regarding basis of fixation of retail prices. The said order was specific to fixation of retail prices without adhering to the formula/process laid down in DPCO, 1995. However, the grounds relating to inclusion of certain drugs within the span of price control continues to be sub-judice with the Honourable Bombay High Court.

The Honourable Bombay High Court had, in expectation of NPPA filing its counter-statement on status of each petitioner''s compliance with the 2003 and 2016 Honourable Supreme Court orders (on deposit 50% of amount demanded), re-scheduled the hearing for 5^th June, 2019, but the same was not listed on that date.

The Company had filed amendment applications before the Honourable Bombay High Court to incorporate the effect of a ruling by the Honourable Supreme Court to adjust trade margins of 16% from outstanding demands as not accrued to the manufacturers and to re-calculate interest from date of non-payment of demand within the time period stated in each demand. The said amendment also places certain additional grounds on record. The Honourable Bombay High Court issued notice to Union of India and NPPA on the amendment applications and set 25^th January, 2021 for further hearing but the case was not listed due to the COVID-19 lockdown and the next date is awaited.

The Company has been legally advised that it has a substantially strong case on the merits of the matter, especially under the guidelines/principles of interpretation of the Drug Policy enunciated by the Honourable Supreme Court. Although, the decision of Honourable Supreme Court dated 21^st October, 2016 referred above was in favour of Union of India with respect to the appeals preferred by the Government challenging the Honourable Allahabad High Court order, basis the facts and legal advice on the matter sub-judice with the Honourable Bombay High Court, no provision is considered necessary in respect of the notices of demand received till date aggregating to H 1,736.00 crore. It may be noted that NPPA in its public disclosure has stated the total demand amount against the Company in relation to the above said molecules to be H 3,281.31 crore (after adjusting deposit of H 175.08 crore), however, the Company has not received any further notices beyond an aggregate amount of H 1,736.00 crore.

In addition, Company had made provision of H 111.15 crore as of 31^st March, 2021 for products not part of the referenced writ proceedings. Further, no new recovery notices were received by the Company during the year, thus not requiring any fresh cases to be filed by the Company in that regard. Due to COVID-19, courts are hearing only urgent cases, hence the writs that are pending will be heard in due course.

a. Description of the plan:

Retirement benefit plans of the Company include Gratuity and Provident Fund. The Company established the Cipla Limited Employees Gratuity Fund (the "Gratuity Fund") to fund the Gratuity Plan. Liabilities in respect of the Gratuity Plan are determined by an actuarial valuation, based upon which the Company makes contributions to the Gratuity Fund.

Provident Fund is managed through the Cipla Limited Employees Provident Fund Trust (the "Provident Fund") managed by the Company.

b. Governance of the plan:

The Company has setup an income tax approved irrevocable trust fund to finance the plan liability. The trustees of the trust fund are responsible for the overall governance of the plan in accordance with the provisions of the trust deed and rules in the best interests of the plan participants. They are tasked with periodic reviews of the solvency of the fund and play a role in the long-term investment, risk management and funding strategy.

Further, since these funds are income tax approved, the Company and the trustees have to ensure that they are at all times fully compliant with the relevant provisions of the income-tax Act and Rules.

c. Investment strategy:

The Company''s investment strategy in respect of its funded plans is implemented within the framework of the applicable statutory requirements. The plans expose the Company to a number of actuarial risks such as investment risk, interest rate risk, longevity risk and inflation risk. The Company has developed policy guidelines for the allocation of assets to different classes with the objective of controlling risk and maintaining the right balance between risk and long-term returns in order to limit the cost to the Company of the benefits provided. To achieve this, investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of assets.

The sensitivity analysis above has been determined based on reasonable possible changes of the respective assumption 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 projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

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

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

g. Compensated absences note:

The Company provides for accumulation of compensated absences by certain categories of its employees. These employees can carry forward a portion of the unutilised compensated absences and utilise them in future periods or receive cash in lieu thereof as per the Company''s policy. The Company records a liability for compensated absences in the period in which the employee renders the services that increases this entitlement. The total liability recorded by the Company towards this obligation was H 127.06 crore and H 121.07 crore as at 31^st March, 2021 and 31^st March, 2020, respectively.

Terms and conditions of transactions with related parties:

All related party transactions entered during the year were in ordinary course of the business and on arms length basis. Outstanding balances at the year end are unsecured and settlement occurs in cash.

Refer note 44 for terms and conditions for loans given to subsidiaries.

B. Employee Stock Appreciation Rights (''ESARs'')

The Company has implemented "Cipla Employee Stock Appreciation Rights Scheme 2021 (''ESAR Scheme 2021 / the Scheme'')" as approved by the shareholders by postal ballot on 25^th March, 2021. The plan will cover all the employees, including director(s) other than independent directors of the Company and its subsidiaries [collectively "eligible employees"]. The nomination and remuneration committee of the Board of Cipla Limited will administer this scheme and grant ESARs to the eligible employees. Further, the maximum number of Employee Stock Appreciation Rights (ESARs) that may be granted under the Scheme shall not exceed 1,75,00,000 and the maximum number of equity shares that may be issued towards appreciation of the ESARs to be granted under the Scheme shall not exceed 33,00,000 of H 2/- each, i.e. face value. As at 31^st March, 2021 no ESARs have been granted.

Note 43: Segment information

In accordance with paragrah 3 of Indian Accounting Standard (Ind AS) 108 - Operating Segments, segment information has been given in the consolidated financial statements of the Company, and therefore, no separate disclosure on segment information is given in these standalone financial statements.

A. Fair value measurement

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

The carrying amount of trade receivable, trade payable, capital creditors, loans, cash and cash equivalents and other bank balances as at 31^st March, 2021 and 31^st March, 2020 are considered to be the same as their fair values, due to their short term nature. Difference between carrying amounts and fair values of other financial assets, other financial liabilities and short term borrowings subsequently measured at amortised cost is not significant in each of the year presented.

Financial Instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rate and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

Fair value hierarchy

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable and consists of following:

Level 1 - category includes financial assets and liabilities, that are measured in whole or in significant part by reference to published quotes in an active market.

Level 2 - category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions. These include assets and liabilities for which pricing is obtained via pricing services, but where prices have not been determined in an active market, financial assets with fair values based on broker quotes and assets that are valued using the Company''s own valuation models whereby the material assumptions are market observable. The majority of Company''s over-the-counter derivatives and several other instruments not traded in active markets fall within this category.

Level 3 - category includes financial assets and liabilities measured using valuation techniques based on non market observable inputs. This means that fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. However, the fair value measurement objective remains the same, that is, to estimate an exit price from the perspective of the Company. The main asset classes in this category are unlisted equity investments as well as unlisted funds.

B. Financial risk management objectives and policies

The Company''s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company''s primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance.

The Company''s financial liabilities comprise of borrowings, trade payable and other liabilities to manage its operation and financial assets include trade receivables, security deposits, loans and advances, etc., arises from its operation.

The Company has constituted a Risk Management Committee consisting of a majority of directors and senior managerial personnel. The Company has instituted Business Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimise the adverse impact on the business objectives and enhance the Company''s competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risk trend, exposure and potential impact analysis at a Company level.

The Audit Committee of the Board reviews the risk management framework at periodic intervals.

Market risk

Market risk is the risk of loss of future earnings, fair values or future cash flows that may result from adverse

changes in market rates and prices. The Company''s size and operations result in it being exposed to the following market risks that arise from its use of financial instruments:

• currency risk;

• price risk; and

• interest rate risk

The above risks may affect the Company''s income and expenses, or the value of its financial instruments. The Company''s exposure to and management of these risks are explained below.

(a) Currency risk:

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services and purchases from overseas suppliers in various foreign currencies. The Company also holds derivative financial instruments such as foreign exchange forward and currency option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company''s operations are affected as the Rupee appreciates/ depreciates against US Dollar (USD), Euro (EUR), Great Britain Pound (GBP), South African Rand (ZAR) and othe currencies.

(b) Price risk

The Company is mainly exposed to the price risk due to its investment in debt mutual funds. The price risk arises due to uncertainties about the future market values of these investments. At 31^st March, 2021, the investments in debt mutual funds amounts to H 2004.84 crore (31^st March, 2020: H 834.43 crore). These are exposed to price risk. The Company has laid policies and guidelines which it adheres to in order to minimise price risk arising from investments in debt mutual funds. A 1% increase in prices would have led to approximately an additional H 20.04 crore gain in profit or loss (31^st March, 2020: H 8.34 crore gain). A 1% decrease in prices would have led to an equal but opposite effect.

(c) Interest rate risk

Company''s interest rate risk arises from borrowings and investment in short-term deposits. The Company adopts a policy of ensuring that maximum of its interest rate risk exposure is at a fixed rate. Considering the short-term nature, there is no significant interest rate risk pertaining to short-term deposits.

The interest rate profile of the Company''s variable interest-bearing financial instruments (including sensitivity) as reported to the Management of the Company is as follows:

Note 45: Financial instruments (Contd.)

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company''s receivables from customers and investment securities. The Company establishes an allowance for credit losses and impairment that represents its estimate of expected losses in respect of trade and other receivables, cash and cash equivalents and investments.

Trade and other receviables

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

Cash and cash equivalents and investments:

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. The Company limits its exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating.

The Company does not expect any losses from non-performance by these counter-parties, and does not have any significant concentration of exposures to specific industry sectors or specific country risks.

Details of financial assets - not due, past due and impaired

None of the Company''s cash equivalents, including term deposits (i.e., certificates of deposit) with banks, were past due or impaired as at 31^st March, 2021.

Expected credit loss:

In accordance with Ind AS 109, the Company uses the expected credit loss ("ECL") model for measurement and recognition of impairment loss on its trade receivables or any contractual right to receive cash or another financial asset that result from transactions that are within the scope of Ind AS 115. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers.

Liquidity risk is the risk that the Company will face in meeting its obligations associated with its financial liabilities. The Company''s approach in managing liquidity is to ensure that it will have sufficient funds to meet its liabilities when due without incurring unacceptable losses. In doing this, the Management considers both normal and stressed conditions. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended 31^st March, 2021 and 31^st March, 2020. Cash flow from operating activities provides the funds to service the financial liabilities on a day-to-day basis. The Company regularly monitors the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess is invested in interest bearing term deposits and other highly marketable debt investments with appropriate maturities to optimise the cash returns on investments while ensuring sufficient liquidity to meet its liabilities.

Hedge effectiveness is determined at the inception of hedge relationship, and through periodic prospective effectiveness assessment to ensure that an economic relationship exists between the hedged item and hedging instruments. It is calculated by comparing changes in fair value of the hedged item, with the changes in fair value of the hedging instrument.

If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.

Note 46: Corporate social responsibility (CSR) expenditure

The Company has incurred H 42.84 crore (31^st March, 2020: H 36.31 crore) towards CSR activities, as per Section 135 of the Companies Act, 2013 and Rules thereon. It is included in other expenses head in the profit or loss. Amount spent on construction/ acquisition of any assets is Nil during the year.

Gross amount required to be spent by the Company during the year H 42.80 crore (31^st March, 2020: H 36.24 crore).

The above includes contribution of H 30.75 crore (31^st March, 2020: H 35.11 crore) to Cipla Foundation which is a trust, with the main objective of working in the areas of social, economic and environmental issues.

Note 46: Corporate social responsibility (CSR) expenditure (Contd.)

The Company has not carried any provisions for Corporate social responsibility expenses for current year and previous year.

The Company does not wish to set-off any excess CSR amount spent during the year 2019-20 against current year''s CSR obligation.

The Company does not have any ongoing projects as at 31^st March, 2021 as defined under Companies (Corporate Social Responsibility Policy) Rules, 2014 (as amended).

Note 47: Capital management A. Risk Management

The Company''s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell new assets to reduce debt. Consistent with others in Industry, the Company monitors capital on the basis of the following gearing ratio : (net debt divided by total ''equity'')

Net debt = Total borrowings less [Cash and cash equivalents Bank balance other than cash and cash equivalents (excluding balance earmarked for unclaimed dividend) Current investments]

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.

For the purpose of calculating diluted earnings per share, the net profit attributable to equity shareholders and the weighted average number of shares outstanding are adjusted for the effect of all dilutive potential equity shares which includes all stock options granted to employees. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares which are to be issued in the conversion of all dilutive potential equity shares into equity shares.

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

Note 50: Subsequent events

There are no other subsequent events that occurred after the reporting date.

Note 51: Unforeseeable losses

The Company has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material forseeable losses. At the year end, the Company did not have any long term contracts (including derivative contracts) for which there were any material foreseeable losses.

Note 52: Impact of Code on Social Security, 2020

The Indian Parliament has approved the Code on Social Security, 2020 which would impact the contributions by the Company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on 13^th November, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

Note 53: Authorisation of financial statements

The financial statements for the year ended 31^st March, 2021 were approved by the Board of Directors on 14^th May, 2021.

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Mar 31, 2019

Corporate information

Cipla Limited (Corporate identification number: L24239MRS.1935PLC002380) (“Cipla” or “the Company”) having registered office at Cipla house, Peninsula Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400013, is a public company domiciled in India and is incorporated under the provisions of the Companies Act, 2013 (“the Act”) applicable in India. Cipla is a global pharmaceutical company which uses cutting edge technology and innovation to meet the everyday needs of all patients. The Company has its wide network of operations in India and International markets. Equity Shares of the Company are listed on BSE Limited and National Stock Exchange of India Limited Global Depository Receipts are listed on Luxembourg Stock Exchange.

o Full retrospective - Retrospectively to each prior period presented applying Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors

o Modified retrospective - Retrospectively, with the cumulative effect of initially applying the standard recognised at the date of initial application

Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as:

o Its carrying amount as if the standard had been applied since the commencement date, but discounted at the lessee’s incremental borrowing rate at the date of initial application, or

o An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that lease recognised under Ind AS 17 immediately before the date of initial application.

Certain practical expedients are available under both the methods. The Company is evaluating the requirement of the amendment and the impact on the financial statements.

(ii) Ind AS 12: Taxes

(a) Appendix C, Uncertainty over Income Tax Treatments:

On 30^th March, 2019, the Ministry of Corporate Affairs has notified Ind AS 12, Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. The standard permits two possible methods of transition:

o Full retrospective approach - Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight; and

o Retrospectively with cumulative effect of initially applying Appendix C recognised by adjusting equity on initial application, without adjusting comparatives.

(b) Dividend distribution tax:

On 30^th March, 2019, the Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, Income Taxes, in connection with accounting for dividend distribution taxes. The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.

The effective date for adoption of Ind AS 12 is annual periods beginning on or after April 1, 2019.

The Company will adopt the standard on 1^st April, 2019. The Company is currently evaluating the effect of these amendments on the financial statements.

(iii) Amendment to Ind AS 19, plan amendment, curtailment or settlement:

On 30^th March, 2019, the Ministry of Corporate Affairs issued amendments to Ind AS 19, Employee Benefits, in connection with accounting for plan amendments, curtailments and settlements. The amendments require an entity:

o To use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and

o To recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling.

Effective date for application of this amendment is annual period beginning on or after 1^st April, 2019. The Company does not have any impact on account of this amendment.

Rental income recognised in profit or loss for investment properties aggregates to RS.3.77 Crore (previous year RS.0.09 Crore)

Estimation of fair value

The fair valuation of the assets is based on the perception about the macro and micro economic factors presently governing the construction industry, location of property, existing market conditions, degree of development of infrastructure in the area, demand supply conditions, internal amenities, common amenities, etc.

This value is based on valuation conducted by an independent valuer. The fair value measurement is categorised in level 3 fair value hierarchy.

o Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less loss allowance.

o Trade receivables are interest and non-interest bearing and are generally due upto 180 days.

o For ageing analysis of trade receivables, refer note 45.

o There are no trade receivables which have significant increase in credit risk and trade receivables which are credit impaired.

Terms and rights attached to equity shares

The Company has only one class of equity shares having a par value of RS.2 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholder.

Aggregate number of bonus shares issued, shares issued for consideration other than cash and shares bought back during the period of five years immediately preceding the reporting date

The Company has not issued any bonus shares, shares for consideration other than cash or bought back any shares during five years immediately preceding the reporting date.

Equity shares reserved for issue under employee stock options

Refer note 42 for number of stock options against which equity shares to be issued by the Company upon vesting and exercise of those stock options by the option holders as per the relevant schemes.

Nature and purpose of reserve:-

Capital reserve

The Company recognised profit or loss on sale, issue, purchase or cancellation of the Company’s own equity instruments to capital reserve. Capital reserve may be used by the Company only for some specific purpose.

Securities premium reserve

Securities premium reserve is used to record the premium on issue of shares. This reserve is utilised in accordance with the provisions of the Act.

General reserve

The General reserve is used from time to time to transfer profit from retained earnings for appropriation purpose.

Employee stock options reserve

Employee stock options reserve is used to record the share based payments expense under the various ESOS schemes as per SEBI regulations. The reserve is used for the settlement of ESOS payments. (refer note 42)

Cash flow hedge reserve

For the forward contracts designated as cash flow hedges, the effective portion of the fair value of forward contracts are recognised in cash flow hedging reserve under other equity. (refer note 45)

o These amounts represent liabilities for goods and services provided to the Company prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 0-90 days of recognition based on the credit terms. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

o There are no micro and small enterprises, to whom the company owes dues, which are outstanding for more than 45 days as at 31^st March, 2019, and no interest payment made during the year to any Micro and Small Enterprises. This information as required to be disclosed under the Micro, Small and Medium Enterprises Deveolpment Act, 2006, has been determined to the extent such parties have been identified on the basis of information available with the Company.

(i) After applicability of Goods and Services Tax (GST) w.e.f. 1^st July, 2017, sales are required to be disclosed net of GST. Accordingly, the figures of income from operations for the year ended 31^st March, 2019 are not comparable with the corresponding previous period.

(ii) Disaggregation of revenue

The Company’s revenue disaggregated by business unit is as follows:

Contract liabilities from contracts with customers

The Company records a contract liability when cash payments are received or due in advance of its performance.

Note 2: Lease accounting Where the Company is a lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and license agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the profit or loss under ‘Rent’ in Note 36- Other expenses.

Where the Company is a lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as Operating lease. Lease income on such operating lease is recognised in Profit or Loss under ‘Rent’ in Note 29- Other income.

Note:

i. Claims against the Company not acknowledged as debt includes claim relating to pricing, commission, etc.

ii. It is not practicable for the Company to estimate the timing of cash outflow, if any, in respect of our pending resolution of the respective proceedings as it is determined only on receipt of judgements/ decisions pending with various forum/authorities.

iii. The Company does not expect any reimbursements in respect of the above contingent liabilities.

iv. The Company’s pending litigations comprise of proceedings pending with various direct tax, indirect tax and other authorities. The Company has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed as contingent liabilities where applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.

v. There has been a Supreme Court (SC) judgement dated 28^th February, 2019, relating to components of salary structure that need to be taken into account while computing the contribution to provident fund under the EPF Act. In view of the interpretative aspects related to the judgement including the effective date of application, the Company has been advised to await further developments in this matter. The Company will continue to assess any further developments in this matter for the implications on financial statements, if any.

B. Details of other litigations:

(i) The Government of India has served demand notices in MarcRs.1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of RS.5.46 Crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

(ii) The Company had received various notices of demand from the National Pharmaceutical Pricing Authority (NPPA), Government of India, on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Orders. The total demand against the Company as stated in NPPA public disclosure amounts to RS.2,655.09 Crore.

Out of the above, demand notices pertaining to a set of products being Norfloxacin, Ciprofloxacin, Salbutamol and Theophylline were challenged by the Company (i) in the Hon’ble Bombay High Court on the ground that bulk drugs contained in the said formulations are not amenable to price control, as they cannot be included in the ambit of price control based on the parameters contained in the Drug Policy, 1994 on which the DPCO, 1995 is based and (ii) in the Hon’ble Allahabad High Court on process followed for fixation of pricing norms. These Petitions were decided in favour of the Company and the matters were carried in appeal by the Union of India to the Supreme Court of India. The Supreme Court in its judgement of 1^st August, 2003 restored the said writ petitions to the Bombay High Court with directions that the Court will have to consider the petitions afresh, having due regard to the observations made by the Supreme Court in its judgement. On the Union of India filing transfer petitions, the Supreme Court ordered transfer of the said petitions to the Bombay High Court to it for being heard with the appeal filed against the Allahabad High Court order. Subsequently, in its order of 20^th July, 2016 the Supreme Court recalled its transfer order and remanded the petitions to Bombay High Court for hearing. While remanding the matter to Bombay High Court, the Hon’ble Supreme Court directed Cipla to deposit 50% of the overcharged amount with the NPPA as stated in its order of 1^st August, 2003 which at that point of time was RS.350.15 Crore. Complying with the directions passed by the Hon’ble Supreme Court, Cipla has deposited an amount of RS.175.08 Crore which has been received and acknowledged by NPPA. Furthermore, the Company has not received any further notices post such transfer of cases to Bombay High Court. Meanwhile, the Hon’ble Supreme Court of India vide its Order and Judgement dated 21^st October, 2016, allowed the Appeals filed by the Government against the Judgement and Order of the Hon’ble Allahabad High Court regarding basis of fixation of retail prices. The said order was specific to fixation of retail prices without adhering to the formula/process laid down in DPCO, 1995. However, the grounds relating to inclusion of certain drugs within the span of price control continues to be sub-judice with the Hon’ble Bombay High Court.

The Bombay High Court had, in expectation of NPPA filing its counter-statement on status of each petitioner’s compliance with the 2003 and 2016 Hon’ble Supreme Court orders (on deposit 50% of amount demanded), rescheduled the hearing on 8^th April, 2019; but as all the connected matters were not listed on this date, the case has now been listed on 5^th June, 2019.

The Company has been legally advised that it has a substantially strong case on the merits of the matter, especially under the guidelines/principles of interpretation of the Drug Policy enunciated by the Hon’ble Supreme Court of India. Although, the decision of Hon’ble Supreme Court dated 21^st October, 2016 referred above was in favour of Union of India with respect to the appeals preferred by the Government challenging the Hon’ble Allahabad High Court order, basis the facts and legal advice on the matter sub-judice with the Hon’ble Bombay High Court, no provision is considered necessary in respect of the notices of demand received till date aggregating to RS.1,736.00 Crore. It may be noted that NPPA in its public disclosure has stated the total demand amount against the Company in relation to the above said molecules to be RS.2,272.32 Crore (after adjusting deposit of RS.175.08 Crore), however, the Company has not received any further notices beyond an aggregate amount of RS.1,736.00 Crore.

For the balance demand aggregating to RS.197.62 Crore (pertaining to set of products not part of the above mentioned writ proceedings in the Hon’ble Bombay High Court), basis the facts and legal advice, the Company carries a total provision of RS.98.49 Crore as of 31^st March, 2019.

(iii) During the year ended 31^st March, 2019, the Group has launched gSensipar (Cinacalcet hydrochloride) at risk (“LAR”) as second US generic of Sensipar.® in the US market. On considering the various factors such as district court opinion, terms of settlement with Amgen and the opinions from both internal and external legal counsels, the management is of the view that there are remote chances to pay damages following the LAR. Also, following Cipla’s LAR of its gSenispar product, the District Court denied Amgen’s motion for a Preliminary Injunction (PI) on 2^nd May, 2019.

Note 3: Employee benefits

a. Regulatory framework:

There are no minimum funding requirements for a gratuity plan in India. The trustees of the gratuity fund have a fiduciary responsibility to act according to the provisions of the trust deed and rules. Since the fund is Income tax approved, the Company and the trustees have to ensure that they are at all times fully compliant with the relevant provisions of the Income Tax Act and Rules. Besides this if the Company is covered by the Payment of Gratuity Act, 1972 then the Company is bound to pay the statutory minimum gratuity as prescribed under this Act.

b. Governance of the plan:

The Company has setup an income tax approved irrevocable trust fund to finance the plan liability. The trustees of the trust fund are responsible for the overall governance of the plan.

c. Inherent risks:

The plan is of a final salary defined benefit in nature which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. In particular, there is a risk for the Company that any adverse salary growth or demographic experience or inadequate returns on underlying plan assets can result in an increase in cost of providing these benefits to employees in future. Since the benefits are lump sum in nature the plan is not subject to any longevity risks.

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

The sensitivity analysis above has been determined based on reasonable possible changes of the respective assumption 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 projected benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

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

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

Note: 4 Related Party Disclosures

Information on related party transactions as required by Ind AS - 24 - Related Party Disclosures are given below:-

A. Subsidiary Companies including step-down subsidiaries and associate companies :

B. Key management personnel (KMP)

1 Ms. Samina Vaziralli - Executive ViceChairperson

2 Mr. Umang Vohra - Managing Director and Global Chief Executive Officer

3 Mr. S. Radhakrishnan - Whole-time Director (upto 11^th November, 2017)

4 Mr. Kedar Upadhye - Global Chief Financial Officer

5 Dr. Raghunathan Ananthanarayanan - Global Chief Operating Officer (w.e.f. 08^th August, 2018)

C. Non-executive Chairman & Non-executive Vice Chairman

1 Dr. Y.K. Hamied, Chairman

2 Mr. M.K. Hamied, Vice Chairman

D. Non-executive Directors

1 Mr. Ashok Sinha

2 Mr. Adil Zainulbhai

3 Ms. Punita Lal

4 Ms. Naina Lal Kidwai

5 Ms. Ireena Vittal (upto 31^st March, 2019)

6 Mr. Peter Lankau

7 Dr. Peter Mugyenyi

8 Mr. S. Radhakrishnan - (w.e.f. 12^th November, 2017)

E. Entities over which Key management personnel are able to exercise significant influence

1 Cipla Foundation

2 Hamied Foundation

3 Cipla Cancer and AIDS Foundation

F. Trust over which entity has control/significant influence

1 Cipla Limited Employees Provident Fund

2 Cipla Limited Employees Gratuity Fund

3 Cipla Employees Stock Option Trust

4 Cipla Health Employees Stock Option Trust

Note 5: Employee stock option scheme Employee stock option scheme

The Company has implemented “ESOS 2013”, “ESOS 2013 - A” and “ESOS 2013 - B” as approved by the Shareholders on 8^th April 2013, 22^nd August 2013 and 22^nd August 2013 respectively. Details of the options granted during the year under the Scheme(s) are as given below:

The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of RS.2 each.

Note 6: Segment information

In accordance with Indian Accounting Standard (Ind AS) -108 “Operating Segments”, Segment information has been given in the consolidated financial statements of Cipla Limited and therefore, no separate disclosure on segment information is given in these standalone financial statements.

Note 7: Details of loans given, investment made and guarantee given

(a) Disclosure as per Regulations 34(3) and 53(f) of Securities Exchange Board of India - Listing Obligations and Disclosure Requirements (LODR)

Note 8:

Fair value measurement

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

The carrying amount of trade receivable, trade payable, capital creditors, loans, cash and cash equivalents and other bank balances as at 31^st March, 2019 and 31^st March, 2018 are considered to be the same as their fair values, due to their short term nature. Difference between carrying amounts and fair values of other financial assets, other financial liabilities and short term borrowings subsequently measured at amortised cost is not significant in each of the year presented.

Financial Instruments with fixed and variable interest rates are evaluated by the company based on parameters such as interest rate and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method at 31^st March, 2019 and 31^st March, 2018. The different levels have been defined as follows.

Level 1 - category includes financial assets and liabilities, that are measured in whole or in significant part by reference to published quotes in an active market.

Level 2 - category includes financial assets and liabilities measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions. These include assets and liabilities for which pricing is obtained via pricing services, but where prices have not been determined in an active market, financial assets with fair values based on broker quotes and assets that are valued using the Company’s own valuation models whereby the material assumptions are market observable. The majority of Company’s over-the-counter derivatives and several other instruments not traded in active markets fall within this category.

Level 3 - category includes financial assets and liabilities measured using valuation techniques based on non market observable inputs. This means that fair values are determined in whole or in part using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. However, the fair value measurement objective remains the same, that is, to estimate an exit price from the perspective of the Company. The main asset classes in this category are unlisted equity investments as well as unlisted funds.

Financial risk management objectives and policies

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimise potential adverse effects on its financial performance.

The Company’s financial liabilities comprise of borrowings, trade payable and other liabilities to manage its operation and financial assets includes trade receivables, security deposit and loans and advances etc. arises from its operation.

The Company has constituted a Risk Management Committee consisting of majority of directors and senior managerial personnel. The Company has a robust Business Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance Company’s competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risk trend, exposure and potential impact analysis at a Company level.

The Company has instituted a self governed risk management framework based on identification of potential risk areas, evaluation of risk intensity, and clear-cut risk mitigation policies, plans and procedures both at the enterprise and operating levels. The framework seeks to facilitate a common organisational understanding of the exposure to various risks and uncertainties at an early stage, followed by timely and effective mitigation. The Audit Committee of the Board reviews the risk management framework at periodic intervals.

Market risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services and purchases from overseas suppliers in various foreign currencies. Market Risk is the risk that changes in market prices such as foreign exchange rates will effect groups income or value of its holding financial assets/ instruments. The Company also holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Indian Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company’s operations are affected as the Indian Rupee appreciates/ depreciates against US dollar (USD), Euro (EUR), South African Rand (ZAR) and Great Britain Pound (GBP).

(c) Sensitivity analysis

A reasonably possible change in foreign exchange rates by 2% would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables in particular interest rates remain constant.

(d) Impact of hedging activities

The Company uses foreign exchange forward contracts to hedge against the foreign currency risk of highly probable USD and ZAR sales. Such derivative financial instruments are governed by the Company’s policies approved by the Board of Directors, which provide written principles on the use of such instruments consistent with the Company’s risk management strategy. As the value of the derivative instrument generally changes in response to the value of the hedged item, the economic relationship is established.

Hedge effectivenss is determined at the inception of hedge relationship, and through periodic prospective effectiveness assessment to ensure that an economic relationships exists between the hedged item and hedging instruments. It is calculated by comparing changes in fair value of the hedged item, with the changes in fair value of the hedging instrument.

If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the profit or loss at the time of the hedge relationship rebalancing.

Interest rate risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates, in cases where the borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

Company’s interest rate risk arises from borrowings. The Company adopts a policy of ensuring that maximum of its interest rate risk exposure is at a fixed rate. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

The Company does not account for any fixed-rate financial assets or financial liabilities at fair value through profit or loss, and the Company does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 50 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

The risk estimates provided assume a parallel shift of 50 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Credit risk

Credit risk refers to the risk of default on its obligation by the customer/ counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is carrying value of trade receivables.

Trade receivables are typically unsecured and are derived from revenue earned from customers. Credit risk has always been managed by each business segment through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses Expected Credit Loss (ECL) model for assessing the impairment loss. For this purpose, the Company uses a provision matrix to compute the expected credit loss amount for trade receivables. The provision matrix takes into account external and internal credit risk factors and historical data of credit losses from various customers.

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units and certificates of deposit which are funds deposited at a bank for a specified time period.

The ageing analysis of the receivable (gross of provision) has been considered from the date the invoice falls due.

Liquidity risk

The Company’s principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Company has no outstanding borrowings as at 31^st March, 2019. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.

Note 9: Corporate social responsibility (CSR) expenditure

The Company has incurred RS.33.42 Crore (previous year RS.32.20 Crore) towards CSR activities, as per Section 135 of the Companies Act, 2013 and Rules thereon. It is included in other expenses head in profit or loss. Amount spent on construction/aquisition of any assets is Nil during the year.

Gross amount required to be spent by the Company during the year RS.32.14 Crore (previous year RS.31.05 Crore.)

Note 10: Capital management A. Risk management

The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell new assets to reduce debt. Consistent with others in Industry, the Company monitors capital on the basis of the following gearing ratio : (net debt divided by total ‘equity’).

Net debt = Total borrowings less cash and cash equivalents including current investments.

Total ‘equity’ is as shown in the balance sheet.

Dividend not recognised at the end of the reporting period:

The Board of Directors of the Company at its meeting held on 22^nd May, 2019 has recommended a final dividend of RS.3.00 per equity share (previous year RS.3.00 per equity share) for the financial year ended 31^st March, 2019. The same amounts to RS.291.40 Crore including dividend distribution tax.

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

Note 11: Earnings per share (EPS)

Basic earnings per share is calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit attributable to equity shareholders and the weighted average number of shares outstanding are adjusted for the effect of all dilutive potential equity shares from the exercise of options on unissued share capital. The number of equity shares is the aggregate of the weighted average number of equity shares and the weighted average number of equity shares which are to be issued in the conversion of all dilutive potential equity shares into equity shares.

Disclosure as required by Indian Accounting Standard (Ind AS) 33-Earnings per share:

Note 12: Exceptional item

During the previous year ended, with respect to various notices of demand from the NPPA, Government of India on account of alleged overcharging in respect of products which are not part of the writ proceedings in the Hon’ble Bombay High Court (refer note 39 B), based on correspondence with NPPA and notices received, the Company performed a thorough legal evaluation. Of the total demand received for such products, basis the facts and legal advice, the Company had recorded an additional provision of RS.77.52 Crore in profit or loss for the year ended 31^st March, 2018, disclosed as exceptional item. The total provision against these demands is RS.98.49 Crore (previous year RS.93.94 Crore) as of 31^st March, 2019.

Note 13: Reclassification note

Certain prior year amounts have been reclassified for consistency with the current year presentation. As a result, certain line items have been amended in the financial statements. These reclassifications had no effect on the reported results of operations. Comparative figures have been adjusted to conform to the current year’s presentation. The figures for the corresponding previous year have been regrouped/reclassified wherever necessary, to make them comparable.

Note 14: Subsequent events

There are no subsequent events that occurred after the reporting date.

Note 15: Authorisation of financial statements

The financial statements for the year ended 31^st March, 2019 were approved by the Board of Directors on 22^nd May, 2019.

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Mar 31, 2017

Corporate Information

Cipla Ltd. (“the Company") is a public company domiciled in India and is incorporated under the provisions of the Companies Act applicable in India. Cipla Ltd. is a global pharmaceutical company which uses cutting edge technology and innovation to meet the everyday needs of all patients. The Company has its wide network of operations in local as well foreign markets.

Note 1: Lease Accounting

Where the Company is a Lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and license agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under ‘Rent’ in Note 36.

Where the Company is a Lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as Operating lease. Lease income on such operating lease is recognised in Statement of Profit and Loss under ‘Rent’ in Note 29.

B. Details of Other Litigations

i The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

ii The Company had received notices of demand from the National Pharmaceutical Pricing Authority (NPPA), Government of India, on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Order, 1995 (“DPCO, 1995"). These notices have been subject to challenge by the Company on the question of fixation of retail prices without adhering to the formula/process laid down in DPCO, 1995 and also if some of the specified drugs be subjected to price control, based on the parameters contained in the Drug Policy, 1994. The Company challenged these notices in the Hon’ble Bombay High Court on the ground that bulk drugs contained in the said formulations are not amenable to price control, based on the parameters contained in the Drug Policy, 1994 on which the DPCO, 1995 is based and in the Hon’ble Allahabad High Court on process followed for fixation of pricing norms. These Petitions were decided in favour of the Company and the matters were carried in Appeal by the Government to the Hon’ble Supreme Court of India. The Hon’ble Supreme Court of India in August 2003 remanded the question of inclusion of certain drugs under price control to the Hon’ble Bombay High Court, after interpreting some of the criteria laid down in the Drug policy for inclusion/exclusion of drugs under price control.

In February 2013, the Hon’ble Supreme Court of India transferred the Hon’ble Bombay High Court Petitions, also before itself for a final hearing on both the matters. These Petitions were thereafter transferred back to Bombay High Court vide Order dated 20^th July, 2016, along with directions that 50% of the demands raised as mentioned in its earlier

Order dated August 2003 be deposited by the Petitioners in the Bombay Petitions, within six (6) weeks. Accordingly, the Company deposited a sum of Rs.175.08 crore on 22^nd August, 2016.

The Hon’ble Supreme Court of India vide its Order and Judgment dated 21^st October, 2016, allowed the Appeals filed by the Government against the Judgment and Order of the Hon’ble Allahabad High Court regarding fixation of retail prices. Further, the said order was specific to fixation of retail prices without adhering to the formula/process laid down in DPCO, 1995. The grounds relating to inclusion of certain drugs within the span of price control continues to be sub-judice with the Hon’ble Bombay High Court. The Company has been legally advised that it has a substantially strong case on the merits of the matter, especially under the guidelines/principles of interpretation of the Drug Policy enunciated by the Hon’ble Supreme Court of India. Although, the recent decision of Hon’ble Supreme Court dated 21^st October, 2016 referred above was in favour of the Government, basis the facts and legal advice on the matter sub-judice with the Hon’ble Bombay High Court, no provision is considered necessary in respect of the notices of demand received till date aggregating to Rs.1768.51 crore. It may be noted that NPPA in its public disclosure has stated the total demand amount against the Company to be Rs.2567.53 crore, however, the Company has not received any further notices beyond an aggregate amount of Rs.1768.51 crore.

Note 2: Employee Benefits

Employee Benefits

i Short Term Employee Benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, short terms compensated absences, etc., and the expected cost of bonus, ex-gratia are recognised in the period in which the employee renders the related service.

ii Long Term Employee Benefits

The disclosures as per Ind AS-19 are as under:

a. Brief description of the Plans

Defined Contribution Plan:

The Company’s defined contribution plan is Employees’ Pension Scheme (under the provisions of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions.

Defined Benefit and other Long term Benefit Plans:

i. The Company has two schemes for long term benefits namely, Provident Fund and Gratuity:

- The provident fund plan, a funded scheme is operated by the Company’s Provident Fund

Trust, which is recognised by the Income tax authorities and administered through trustees/ appropriate authorities.

- The Company provides for Gratuity, a defined Benefit plan based on actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the Insurer Managed Funds.

ii. The employees of the Company are also entitled to leave encashment .The provision is made based on actuarial valuation for leave encashment at the year end.

Note 3. Related Party Disclosures

As per Ind AS-24, “Related Party Disclosures", the related parties where control exists or where significant influence exists and with whom transaction have taken place are as below:

A. Subsidiary Companies including step-down subsidiaries and associate companies are as follows:

B. Key Management Personnel

Ms. Samina Vaziralli - Executive Vice-Chairperson *

Mr. Umang Vohra - Managing Director and Global Chief Executive Officer **

Mr. S. Radhakrishnan - Whole-time Director

Mr. Kedar Upadhye - Global Chief Financial Officer (w.e.f. 1^st August, 2016)

Mr. Subhanu Saxena - Managing Director and Global Chief Executive Officer (resigned w.e.f. close of business hour on 31^st August, 2016)

Mr. Rajesh Garg - Executive Director and Global Chief Financial Officer (Demitted office w.e.f. close of business hours on 12^th June, 2015)

* appointed as Executive Director (w.e.f. 10^th July, 2015) and as Executive Vice-Chairperson (w.e.f. 1^st September, 2016)

** Global Chief Operating Officer and Global Chief Financial Officer upto 31^st July, 2016; Global Chief Operating Officer from 1^st August, 2016 to 31^st August, 2016 and Managing Director and Global Chief Executive Officer w.e.f. 1^st September, 2016

C. Non-Executive Chairman & Non-Executive Vice-Chairman

Dr. Y. K. Hamied - Chairman Mr. M. K. Hamied - Vice-Chairman

D. Non-Executive Directors

Mr. Ashok Sinha Mr. Adil Zainulbhai Ms. Punita Lal

Ms. Naina Lal Kidwai (w.e.f. 6^th November, 2015)

Dr. Nachiket Mor (resigned w.e.f. 7^th August, 2015)

Ms. Ireena Vittal (w.e.f. 1^st December, 2016)

Mr. Peter Lankau ( w.e.f. 10^th January, 2017)

Dr. Peter Mugyenyi

E. Entities over which Key Management Personnel are able to exercise significant influence

Cipla Foundation

Hamied Foundation (w.e.f. 3^rd February, 2016)

Cipla Cancer & AIDS Foundation

F. Trust over which Entity has control/significant influence

Cipla Employees Stock Option Trust Cipla Health Employees Stock Option Trust

Note 4: Employee Stock Option Schemes

The Company has implemented “ESOS 2013", “ESOS 2013 - A" and “ESOS 2013 - B" as approved by the Shareholders on 8^th April, 2013, 22^nd August, 2013 and 22^nd August, 2013 respectively. Details of the Options granted during the year under the Scheme(s) are as given below:

The options are granted at an exercise price, which is in accordance with the relevant SEBI guidelines in force, at the time of such grants. Each option entitles the holder to exercise the right to apply for and seek allotment of one equity share of Rs.2 each.

Note 5: Segment Information

In accordance with Ind AS-108 “Operating Segments", segment information has been given in the Consolidated Financial Statements of Cipla Ltd., and therefore, no separate disclosure on segment information is given in these financial statements.

Note 6: Details of Loans given, Investments made and Guarantees given covered under Section 186(4) of the Companies Act, 2013

a) Loans and Advances in the nature of Loans given to Subsidiaries and Associates

b) Loans given to Others

Notes:

i. All the above loans have been given for business purposes.

ii. The loans and advances shown above, fall under the category of ‘Non-current Financial Assets’ and are re-payable within 3 to 6 years except Current Loans and Advances to Bakul Pharma Pvt. Ltd. and Cipla Health Ltd.

iii. Loans given to employees as per the Company’s policy are not considered.

c) Investments made are given under the respective heads.

d) Corporate Guarantees given by the Company in respect of Loans and Interest Rate Swaps as at 31^st March, 2017

Note 7:

A. Fair Value Measurement

The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

Fair value of cash and current deposits, trade and other current receivables, trade payables, other current liabilities, current loans from banks and other financial institutions approximate their carrying amounts largely due to the current maturities of these instruments.

Financial Instruments with fixed and variable interest rates are evaluated by the company based on parameters such as interest rate and individual credit worthiness of the counterparties. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

Fair Value Hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

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

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

B. Financial Risk Management Objectives and Policies

The Company’s activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company’s primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance.

The Company’s financial liabilities comprise of borrowings, trade payable and other liabilities to manage its operation and financial assets includes trade receivables and other receivables etc. that arise from its operation.

The Company has constituted a Risk Management Committee consisting of majority of directors and senior managerial personnel. The Company has a robust Business Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company’s competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels including documentation and reporting. The framework has different risk models which help in identifying risks trend, exposure and potential impact analysis at a Company level as also separately for business segments.

The Company has instituted a self governed Risk Management framework based on identification of potential risk areas, evaluation of risk intensity, and clear-cut risk mitigation policies, plans and procedures both at the enterprise and operating levels. The framework seeks to facilitate a common organisational understanding of the exposure to various risks and uncertainties at an early stage, followed by timely and effective mitigation. The Audit Committee of the Board reviews the risk management framework at periodic intervals. Our risk management procedures ensure that the management controls various business related risks through means of a properly defined framework.

Market risk

The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services and purchases from overseas suppliers in various foreign currencies. Market Risk is the risk that changes in market prices such as foreign exchange rates will effect groups income or value of its holding financial assets/ instruments.

The Company also holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the Rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Company’s operations are adversely affected as the Rupee appreciates/ depreciates against US dollar (USD), Euro (EUR), South African Rand (ZAR) and British Pound (GBP).

Sensitivity Analysis

A reasonably possible change in foreign exchange rates by 2% would have increased/ (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables in particular interest rates remain constant.

Interest Rate Risk

Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates, in cases where the borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates.

Exposure to interest rate risk

Company’s interest rate risk arises from borrowings. The Company adopts a policy of ensuring that maximum of its interest rate risk exposure is at a fixed rate. The interest rate profile of the Company’s interest-bearing financial instruments as reported to the management of the Company is as follows.

Cash Flow sensitivity analysis for variable-rate instruments

A reasonably possible change of 50 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

The risk estimates provided assume a parallel shift of 50 basis points interest rate across all yield curves. This calculation also assumes that the change occurs at the balance sheet date and has been calculated based on risk exposures outstanding as at that date. The period end balances are not necessarily representative of the average debt outstanding during the period.

Credit Risk

Credit risk refers to the risk of default on its obligation by the customer / counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is carrying value of respective financial assets.

Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers. Credit risk has always been managed by each business segment through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The group uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into account available external and internal credit risk factors such as default risk of industry, credit default swap quotes, credit ratings from international credit rating agencies and historical experience for customers.

Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organisations and certificates of deposit which are funds deposited at a bank for a specified time period.

Liquidity Risk

The Company’s principle sources of liquidity are cash and cash equivalents, current investments and the cash flow that is generated from operations. The Company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived. The Company closely monitors its liquidity position and maintains adequate source of funding.

Note 8. Corporate Social Responsibility (CSR) Expenditure

The Company has incurred a total expenditure of Rs.28.25 crore, which is being debited to the profit and loss account for the year ended 31^st March, 2017

The CSR committee constituted by the Board of Directors of the Company under Section 135 of the Act supervises all the expenditure incurred for CSR purposes. The Company makes contribution to two trusts being set up to execute and manage the projects being undertaken as directed and monitored by the CSR committee.

Following is the information regarding projects undertaken and expenses incurred on CSR activities during the year ended 31^st March, 2017:

i. Gross amount required to be spent by the Company during the year - Rs.33.38 crore (31^st March, 2016 Rs.35.80 crore).

ii. Amount spent during the year (by way of contribution to the trusts and projects undertaken).

Note 9

A. Risk Management

The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern so that they can continue to provide returns for shareholders and benefits for other stakeholders, and maintain an optimal structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amounts of dividends paid to shareholders, return capital to shareholders, issue new shares or sell new assets to reduce debt.

Net Debt = Total Borrowings less Cash and Cash Equivalents including Current Investments.

Total ‘Equity’ is as shown in the Balance Sheet.

Proposed Dividend:

The Board of Directors at its meeting held on 25^th May, 2017 have recommended a payment of final dividend of Rs.2.00 per equity share of the face value of Rs.2 each for the financial year ended 31^st March, 2017. The same amounts to Rs.193.66 crore including dividend distribution tax.

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

Note 10: First time adoption of Indian Accounting Standards

The Company has adopted Indian Accounting Standards (Ind AS) notified by the Ministry of Corporate Affairs with effect from 1^st April, 2016,with a transition date of 1^st April, 2015. Ind AS 101 ‘First-time Adoption of Indian Accounting Standards’ requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements which is for the year ended 31^st March, 2017 for the company, be applied retrospectively and consistently for all financial years presented.

Consequently, in preparing these Ind AS financial statements, the Company has availed certain exemptions and complied with the mandatory exceptions provided in Ind AS 101, as explained below. The resulting difference of, Rs.410.44 crore, in the carrying values of the assets and liabilities as at the transition date and Rs.353.41 crore as at 31^st March, 2016 between the Ind AS and Previous GAAP have been recognised directly in other equity.

1. Exemptions and Exceptions availed:

Set out below are the Ind AS 101 optional exemptions availed as applicable and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

(a) Deemed Cost

The Company has opted para D7 AA and accordingly considered the carrying value of property, plant and equipments, Intangible assets and Investment Properties as deemed cost as at transition date.

(b) Designation of previously recognised Financial Instruments

Ind AS 101 allows an entity to designate investments in equity instruments at FVOCI on the basis of the facts and circumstances at the date of transition to Ind AS.

The Company has elected to apply this exemption for its investment in equity instruments.

(c) De-recognition of Financial Assets and Liabilities

The Company has elected to apply de-recognition requirements for financial assets and liabilities under Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.

(d) Classification and measurement of Financial Assets

The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist on the date of transition to Ind AS.

(e) Estimates

Upon an assessment of the estimates made under Previous GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS except as a part of transition where following estimates were required by Ind AS and not required by Previous GAAP Impairment of financial assets based on expected credit loss model.

1. Notes to first time adoption of Ind AS:

a. Property, Plant and Equipment

With respect of clarification dated 17^th April, 2017 issued by Ind AS Transition Facilitation Group, the Company has recognised the amount of unamortised deferred income as at the date of transition and the carrying amount of the property, plant and equipment as at the date of transition has been increased by the amount of government grant deducted as per previous GAAP (net of cumulative depreciation impact). The difference between the unamortised deferred income and increase in the carrying amount of PPE has been recognised in retained earnings as at the date of transition.

Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group companies will comply with all attached conditions. Government grants relating to the purchase of property, plant and equipment are included in noncurrent liabilities as deferred income and are credited to Profit and Loss on a straight-line basis over the expected lives of related assets and presented within other income.

On the assessment of lease agreement at the time of transition to Ind AS, the Company has regroup prepaid portion of operating leases from leasehold and to other non-current assets.

b. Interest free loans to subsidiaries

The Company has recorded the equity component of interest free loans given to subsidiaries in Noncurrent investments.

c. Investment

Under the previous GAAP, investments in equity instruments of subsidiaries were classified as longterm investments and were carried at cost less provision for other than temporary decline in the value of such investments. Ind AS, allow first-time adopters to use a ‘deemed cost’ of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries in the separate financial statements. The Company has elected to measure investment amounting to Rs.2713.55 crore in Cipla Medpro South Africa (Proprietary) Ltd at fair value as of the transition date. The resulting fair value changes of these investments amounting to Rs.632.46 crore have been recognised in retained earnings as at the date of transition. This decreased the retained earnings by Rs.632.46 crore as at 1^st April, 2015.

Pursuant to Para 53 of Ind AS 103, the Group has charged off acquisition-related costs in the periods in which the costs are incurred and the services are received.

Current investments were carried at lower of cost and fair value. Under Ind AS, these investments are required to be measured at fair value. The resulting fair value changes of these investments have been recognised in retained earnings.

d. Proposed Dividend:

Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were considered as adjusting events and accordingly, provision for proposed dividend was recognised as a liability. Under Ind AS, such dividends are recognised when the same is approved by the shareholders in the general meeting. As a result, liability for dividend is a non—adjusting event. Accordingly, the liability for proposed dividend as at 1^st April, 2015 included under provisions in the previous GAAP has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity has been increased by an equivalent amount.

e. Forward Contracts

Under the previous GAAP the premium or discount arising at the inception of forward exchange contracts entered into to hedge an existing asset/liability, was amortised as expense or income over the life of the contract. Under the Ind AS 109, Forward Contracts are carried at fair value and the resultant gains and losses are recorded in the Statement of Profit and Loss.

f. Re-measurements of Post Employment Benefit Obligation

Under Ind AS, re-measurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit and loss. Under the previous GAAP, these re-measurements were forming part of the Statement of Profit and Loss for the year.

g. Retained Earnings

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

h. Deferred Tax

Deferred tax under Ind AS has been recognized for temporary differences between tax base and the book base of the relevant assets and liabilities. Under IGAAP the deferred tax was accounted based on timing differences impacting the profit or loss for the period. Deferred Tax on aforesaid Ind AS adjustments has been created for both periods - as on 31^st March, 2016 and 1^st April, 2015.

i. Contingent consideration

During the year 2014-15, Cipla Limited has acquired 51% stake in a pharmaceuticals manufacturing and distribution business in Yemen (in turn owned by a UAE based parent company).

The business acquisition was completed by entering into share purchase agreement for cash consideration of USD 21 million and contingent consideration of up to USD 20.3 million. The payment of contingent consideration was dependent upon the achievement of certain revenue targets over a period of two years.

During the year ended 1^st April, 2015, an assessment of the probability of Yemen entity achieving the required revenue was conducted by the Cipla. The assessment was based on actual and projected revenue and it was estimated that the liability will become due, hence the provision was created in the books of Cipla for such contingent consideration.

Group has created provision for payables for acquisition of business by debiting the investments. Out of the total amount payable Rs.50 crore is Long term provision payable in year 2016-2017 and remaining Rs.76.88 is part of short term provision payable in 2015-2016.

Adjustments include impact of discounting the deferred and contingent consideration payable for acquisition under Ind AS.

j. Effect of Ind AS adoption on Statement of Cash Flow for the year ended 31^st March, 2016:

The Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities.

Consequently, Ind AS adoption has no impact on the net cash flow for the year ended 31^st March, 2016 as compared with the previous GAAP.

k. Revenue from Operations & Excise Duty:

Under previous GAAP, revenue from sale of goods was presented net of excise duty on sales. Under Ind AS, revenue from sale of goods is presented inclusive of excise duty. Excise duty is presented in the Statement of Profit and Loss as part of other expenses. This has resulted in an increase in the revenue from operations and expenses for the year ended 31^st March, 2016. The total comprehensive income for the year ended and equity as at 31^st March, 2016 has remained unchanged.

l. Other Operating Income:

Upfront fees received on development and distribution was recognised in IGAAP. As per Ind AS 18 same has been deferred and recognised over the period of contract.

Note 11:

Authorisation of Financial Statements

The financial statements for the year ended 31^st March, 2017 were approved by the Board of Directors on 25^th May, 2017.

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Mar 31, 2016

1 Lease Accounting

Where the Company is a Lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and license agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under ''Rent'' in Note 28. Where the Company is a Lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as operating lease. Lease income on such operating lease is recognised in Statement of Profit and Loss under ''Rent'' in Note 23.

2 Segment Information

In accordance with AS-17 "Segment Reporting", segment information has been given in the Consolidated Financial Statements of Cipla Ltd., and therefore, no separate disclosure on segment information is given in these financial statements.

3 The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

4 In 2003, the Company received notice of demand from the National Pharmaceutical Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Order, 1995. This was contested before the jurisdictional High Courts in Mumbai, Karnataka and Allahabad wherein it was held in favour of the Company. The orders of Hon''ble High Court of Allahabad and Bombay were challenged before the Hon''ble Supreme Court of India by the Government. Although in the challenge to the decision of the Hon''ble Bombay High Court, the Hon''ble Supreme Court of India restored the matter to the Hon''ble Bombay High Court in August 2003 for interpreting the Drug Policy on the basis of directions and principles laid down by them and the same was pending, in the challenge to the Hon''ble High Court of Allahabad''s order, in February 2013, the Hon''ble Supreme Court of India transferred the Bombay High Court petition also before itself for a final hearing on both the matters. In an earlier order, the Hon''ble Supreme Court has already restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence no provision is considered necessary in respect of notice of demand received by the company up to date aggregating to Rs.1768.51 crore.

5 Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.

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Mar 31, 2015

1. Terms and Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 2 per share. Each holder of equity share is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

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

2. Equity shares reserved for issue under employee stock options

Refer Note 43 for number of stock options against which equity shares are to be issued by the Company upon vesting and exercise of those stock options by the option holders as per the relevant scheme(s).

3. Employee Benefits

i. Short Term Employee Benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, short term compensated absences, etc., and the expected cost of bonus, ex-gratia are recognised in the period in which the employee renders the related service.

ii. Long Term Employee Benefits

The disclosures as per the revised AS-15 are as under:

a. Brief description of the plans Defined Contribution Plan

The Company's defined contribution plan is Employees' Pension Scheme (under the provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions.

Defined Benefit and other Long term Benefit Plans

The Company has two schemes for long term benefits namely, Provident Fund and Gratuity:

* The Provident Fund plan, a funded scheme is operated by the Company's Provident Fund, which is recognised by the income tax authorities and administered through trustees/appropriate authorities. The Guidance Note on implementing the revised AS-15, "Employee Benefits (revised 2005)" issued by Accounting Standards Board (ASB) states benefit involving employer established provident funds, which require interest shortfalls to be recompensed, are to be considered as defined benefit plans. Accordingly, the Company has considered the provident fund as defined benefit plan.

* The Company provides for gratuity, a defined benefit plan based on actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the Insurer Managed Funds.

The employees of the Company are also entitled to leave encashment. The provision is made based on actuarial valuation for leave encashment at the year end.

4. Lease Accounting

Where the Company is a Lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and license agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under 'Rent' in Note 28.

Where the Company is a Lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as operating lease. Lease income on such operating lease is recognised in Statement of Profit and Loss under 'Rent' in Note 23.

5. Segment Information

In accordance with AS-17, "Segment Reporting", segment information has been given in the Consolidated Financial Statements of Cipla Ltd., and therefore, no separate disclosure on segment information is given in these financial statements.

Rs. in crore 2015 2014

6. Contingent Liabilities and Commitments (to the extent not provided for)

Contingent Liabilities

Claims against the Company not acknowledged as debt 15.85 4.82

Guarantees 126.95 152.38

Letters of Credit 49.30 9.32

Refund of Technical Know-how and Licensing Fees on account of non-compliance of certain obligations as per respective agreements - 2.95

Income Tax on account of disallowances/additions 108.42 100.29

Excise Duty/Service Tax on account of valuation/cenvat credit 108.47 80.93

Sales Tax on account of credit/classification 5.66 5.46

414.65 356.15

Commitments

Estimated amount of contracts unexecuted on Capital Account 367.10 200.88

Other Commitments 978.61 644.33

1345.71 845.21

1760.36 1201.36

7. The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs. 5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

8. In 2003, the Company received notice of demand from the National Pharmaceutical Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drugs (Price Control) Order, 1995. This was contested before the jurisdictional High Courts in Mumbai, Karnataka and Allahabad wherein it was held in favour of the Company. The orders of Hon'ble High Court of Allahabad and Bombay were challenged before the Hon'ble Supreme Court of India by the Government. Although in the challenge to the decision of the Hon'ble Bombay High Court, the Hon'ble Supreme Court of India restored the matter to the Hon'ble Bombay High Court in August 2003 for interpreting the Drug Policy on the basis of directions and principles laid down by them and the same was pending, in the challenge to the Hon'ble High Court of Allahabad's order, in February 2013, the Hon'ble Supreme Court of India transferred the Bombay High Court petition also before itself for a final hearing on both the matters. In an earlier order, the Hon'ble Supreme Court has already restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence no provision is considered necessary in respect of notice of demand received by the Company up to date aggregating to Rs. 1768.51 crore.

9. Related Party Disclosures

i. As per AS-18, "Related Party Disclosures", the related parties where control exists or where significant influence exists and with whom transaction have taken place are as below:

a. Subsidiary Companies including step-down subsidiaries, associate companies and joint venture:

Sr. Name of the Company No. Subsidiaries (held directly)

1. Cipla FZE

2. Goldencross Pharma Pvt. Ltd.

3. Cipla (Mauritius) Ltd.

4. Meditab Specialities Pvt. Ltd.

5. Cipla Medpro South Africa Proprietary Ltd.

6. Cipla Holding B.V.

7. Mabpharm Pvt. Ltd.*

8. Cipla (EU) Ltd.

9. Saba Investment Ltd.

10. Jay Precision Pharmaceuticals Pvt. Ltd.#

Subsidiaries (held indirectly)

11. Cipla (UK) Ltd.

12. Cipla Australia Pty. Ltd.

13. Medispray Laboratories Pvt. Ltd.

14. Sitec Labs Pvt. Ltd.

15. Four M Propack Pvt. Ltd.

16. Meditab Holdings Ltd.

17. Meditab Specialities New Zealand Ltd.

18. Meditab Pharmaceuticals South Africa Proprietary Ltd.

19. Cipla ilac Ticaret Anonim sirketi

20. Cipla USA Inc.

21. Cipla Kenya Ltd.

22. Cipla Malaysia Sdn. Bhd.

23. Cipla Europe NV

24. Cipla Quality Chemical Industries Ltd.

25. Cipla Croatia d.o.o. (Formerly known as Celeris d.o.o.)

26. Inyanga Trading 386 Proprietary Ltd.

27. Xeragen Laboratories Proprietary Ltd.

28. Galilee Marketing Proprietary Ltd.

29. Cipla Medpro Manufacturing Proprietary Ltd.

30. Cipla Medpro Holdings Proprietary Ltd.

31. Cipla Nutrition Proprietary Ltd.

32. Cipla Health Care Proprietary Ltd.

33. Cipla-Medpro Distribution Centre Proprietary Ltd.

34. Cipla-Medpro Proprietary Ltd.

35. Medpro Pharmaceutica Proprietary Ltd.

36. Cipla Life Sciences Proprietary Ltd.

37. Cipla Personal Care Proprietary Ltd.

38. Cipla Vet Proprietary Ltd.

39. Cipla Agrimed Proprietary Ltd.

40. Cipla Dibcare Proprietary Ltd.

41. Cipla Medpro Botswana Proprietary Ltd.

42. Med Man Care Proprietary Ltd.

43. Medpro Pharmaceutica Africa Proprietary Ltd.

44. Cape to Cairo Exports Proprietary Ltd.

45. Cipla Medpro ARV Proprietary Ltd.

46. Cipla Medpro Cardio Respiratory Proprietary Ltd.

47. Cipla Medpro Research and Development Proprietary Ltd.

48. Gardian Cipla Proprietary Ltd.

49. Medpro Gen Proprietary Ltd.

50. Medpro Holdings Proprietary Ltd.

51. Medpro-On-Line Proprietary Ltd.

52. Smith and Couzin Proprietary Ltd.

53. Breathe Free Lanka (Private) Ltd.

54. Cipla Canada Inc.

55. Medica Pharmaceutical Industries Company Ltd.

56. Al-Jabal For Drugs and Medical Appliances Company Ltd.

57. Cipla Pharma Lanka (Private) Ltd.

58. Cipla Pharma Nigeria Ltd.

Associates

59. Stempeutics Research Pvt. Ltd.

60. Biomab Holding Ltd.

61. Jiangsu Cdymax Pharmaceuticals Co. Ltd.®

62. Mabpharm Pvt. Ltd.**

Joint Venture

63. Aspen-Cipla Australia Pty, Ltd,

* With effect from 24th July 2014

# With effect from 26th February 2015 ® Upto 30th March 2015

** Upto 16th July 2014

b. Key Management Personnel

1. Mr. Subhanu Saxena - Managing Director and Global Chief Executive Officer

2. Mr. S. Radhakrishnan - Whole-time Director

3. Mr. Rajesh Garg - Executive Director and Global Chief Financial Officer

c. Entities over which Key Management Personnel are able to exercise significant influence

1. Cipla Foundation

10. During the year, the Company acquired 51% stake in Saba Investment Ltd., UAE, which in turn holds 99% stake in two entities in Yemen. Accordingly the Company's effective stake in the Yemen entities is 50.49%.

As per the share purchase agreement, a provision of USD 20.3 million (equivalent to Rs. 126.88 crore) has been accounted for and given effect in these financial statements towards additional consideration to be paid on achievement of agreed milestones.

11. Previous year's figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification/ disclosure.

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Mar 31, 2014

[1] Lease Accounting

Where the Company is a Lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and license agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under ''Rent''in Note 28.

Where the Company is a Lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as Operating lease. Lease income on such operating lease is recognised in Statement of Profit and Loss under''Rent''in Note 23.

[2] Segment Information

In accordance with AS-17,"Segment Reporting" Segment information has been given in the Consolidated Financial Statements of Cipla Ltd., and therefore, no separate disclosure on segment information is given in these financial statements.

Rs. in crore

2014 2013

[3] Contingent Liabilities and Commitments (to the extent not provided for)

Contingent Liabilities

Claims against the Company not acknowledged as debt 4.82 6.51

Guarantees (refer Note) 152.38 2750.66

Letters of Credit 9.32 11.59

Refund of Technical Know-how and Licensing Fees on account of 2.95 2.54 non compliance of certain obligations as per respective agreements

Income Tax 100.29 191.78

Excise Duty/Service Tax 80.93 29.85

Sales Tax 5.46 3,99

356.15 2996.92 Commitments

Estimated Amount of Contracts unexecuted on Capital Account 200.88 171.89

Other Commitments 644.33 824.85

845.21 996.74

Note: Guarantees disclosed under Contingent Liabilities during previous year includes counter indemnity/guarantees furnished by the Company in an aggregate amount of ZAR 4520 million (approximately Rs.2667 crore) in relation to acquisition of Cipla Medpro South Africa (Pty) Ltd.

1201.36 3993.66

[4] The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

[5) In 2003, the Company received notice of demand from the National Pharmaceutical Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drugs (Prices Control) Order, 1995. This was contested before the jurisdictional High Courts in Mumbai, Karnataka and Allahabad wherein it was held in favour of the Company. The orders of Hon''ble High Court of Allahabad and Bombay were challenged before the Hon''ble Supreme Court of India by the Government. Although in the challenge to the decision of the Hon''ble Bombay High Court, the Hon''ble Supreme Court of India restored the matter to the Hon''ble Bombay High Court in August 2003 for interpreting the Drug Policy on the basis of directions and principles laid down by them and the same was pending, in the challenge to the Hon''ble High Court of Allahabad''s order, in February 2013, the Hon''ble Supreme Court of India transferred the Bombay High Court petition also before itself for a final hearing on both the matters. In an earlier order, the Hon''ble Supreme Court has already restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence no provision is considered necessary in respect of notice of demand received by the Company up to date aggregating to Rs.1768.51 crore.

6) Related Party Disclosures

i. The related parties where control exists or where significant influence exists and with whom transaction have taken place:

a. Subsidiary Companies including step-down subsidiaries, associate companies and joint venture:

Sr. No. Name of the Company

Subsidiaries (held directly)

1. CiplaFZE

2. Goldencross Pharma Pvt. Ltd.

3. Cipla (Mauritius) Ltd.

4. Meditab Specialities Pvt. Ltd.

5. Cipla Medpro South Africa (Pty) Ltd. (formerly Cipla Medpro South Africa Ltd.)*

6. Cipla Holding B.V.® Subsidiaries (held indirectly)

7. Cipla (UK) Ltd.

8. Cipla Australia Pty. Ltd.

9. Cipla (EU) Ltd.

10. Medispray Laboratories Pvt. Ltd.

11. Sitec Labs Pvt. Ltd.

12. Four M Propack Pvt. Ltd.

13. Meditab Holdings Ltd.

14. Meditab Pharmaceuticals South Africa (Pty) Ltd.

15. Meditab Specialities New Zealand Ltd.

16. Cipla NacTicaret Anonim Sirketi

17. Cipla USA Inc.

18. Cipla Kenya Ltd.

19. Cipla Malaysia Sdn. Bhd.

20. Cipla Europe NV*

21. Cipla Quality Chemical Industries Ltd. (formerly Quality Chemical Industries Ltd.) **

22. Celeris d.o.o. ***

23. Cipla Medpro Manufacturing Proprietary Ltd.*

24. Galilee Marketing Proprietary Ltd.*

25. Inyanga Trading 386 Proprietary Ltd.*

26. Xeragen Laboratories Proprietary Ltd.*

27. Cipla Medpro Holdings Proprietary Ltd.*

28. Cape to Cairo Exports Proprietary Ltd.*

29. Cipla Agrimed Proprietary Ltd.*

30. Cipla Dibcare Proprietary Ltd.*

31. Cipla Health Care Proprietary Ltd.*

32. Cipla Life Sciences Proprietary Ltd.*

33. Cipla-Medpro Proprietary Ltd.*

34. Cipla-Medpro Distribution Centre Proprietary Ltd.*

35. Cipla Medpro ARV Proprietary Ltd.*

36. Cipla Medpro Botswana Proprietary Ltd.*

37. Cipla Medpro Cardio Respiratory Proprietary Ltd.*

38. Cipla Medpro Research and Development Proprietary Ltd.*

39. Cipla Nutrition Proprietary Ltd.*

40. Cipla Personal Care Proprietary Ltd.*

41. Cipla Vet Proprietary Ltd.*

42. Gardian Cipla Proprietary Ltd.*

43. Medpro Gen Proprietary Ltd.*

44. Medpro Holdings Proprietary Ltd.*

45. Medpro Pharmaceutica Proprietary Ltd.*

46. Medpro Pharmaceutica Africa Proprietary Ltd.*

47. Medpro-On-Line Proprietary Ltd.*

48. Med Man Care Proprietary Ltd.*

49. Smith and Couzin Proprietary Ltd.* Associates

50. Quality Chemical Industries Ltd.**

51. Stempeutics Research Pvt. Ltd.

52. Mabpharm Pvt. Ltd. Joint Venture

53. Aspen-Cipla Australia Pty Ltd. ® With effect from 28/08/2013

* With effect from 30/09/2013 "With effect from 20/11/2013 *** With effect from 04/12/2013 -With effect from 15/07/2013 "from 01 /10/2010 upto 19/11/2013 b. Key Management Personnel:

1. Mr. M.K. Hamied - Executive Vice-Chairman

2. Mr. S. Radhakrishnan - Whole-time Director

3. Mr. Subhanu Saxena - Managing Director and Global Chief Executive Officer

c. Relatives of Key Management Personnel:

1. Dr.Y.K. Hamied

2. Mr. Kami I Hamied

3. Mrs. SaminaVaziralli

d. Entities over which Key Management Personnel are able to exercise significant influence:

1. Okasa Pvt. Ltd.

2. Okasa Pharma Pvt. Ltd.

3. Cipla Cancer and AIDS Foundation

4. Hamied Foundation (earlier known as Dr. K. A. Hamied Foundation)

5. Cipla Foundation

[7] Previous year''s figures have been regrouped/reclassified wherever necessary to correspond with the current year''s classification/disclosure.

---

Mar 31, 2013

1 Lease Accounting

Where the Company is a Lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under cancellable operating lease or leave and license agreements ranging from 11 months to 5 years or longer which are subject to renewal at mutual consent. The cancellable lease arrangements can be terminated by either party after giving due notice. Lease payments are recognised in the Statement of Profit and Loss under "Rent" in Note 28.

Where the Company is a Lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as operating lease. Lease income on such operating lease is recognised in the Statement of Profit and Loss under "Rent'''' in Note 23.

2 Segment Information

In accordance with AS-17 "Segment Reporting", segment information has been given in the Consolidated Financial Statements of Cipla Limited., and therefore, no separate disclosure on segment information is given in these financial statements.

Note: On 15th May 2013 the shareholders of Cipla Medpro South Africa Ltd. ("Medpro"), a company incorporated in the Republic of South Africa and listed on JSE Ltd., have approved the Scheme of Arrangement ("Scheme") for Cipla Limited ("the Company") to acquire 100% of the ordinary share capital of Medpro at a price of ZAR 10 per share, and to settle all outstanding options to acquire Medpro shares. Based on Medpro''s current shares and share options outstanding, the total consideration payable would be approximately ZAR 4518 million (approximately Rs.2666 crore). Medpro is a distributor of the Company''s products in South Africa and certain neighbouring countries. Guarantees disclosed under contingent liabilities include counter indemnity/guarantees furnished by the Company in an aggregate amount of ZAR 4520 million (approximately Rs.2667 crore) in respect of bank guarantees which have been issued in connection with the Scheme by two South African banks in favour of the Takeover Regulation Panel, South Africa and which are valid until 10th September 2013. Implementation of the Scheme is still subject to regulatory and other approvals and conditions.

3 The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

4 In 2003, the Company received notice of demand from the National Pharmaceutical Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drug Price Control Order. This was contested before the jurisdictional High Courts in Mumbai, Karnataka and Allahabad wherein it was held in favour of the Company. The orders of Hon''ble High Court of Allahabad and Bombay were challenged before the Hon''ble Supreme Court of India by the Government. Although in the challenge to the decision of the Hon''ble Bombay High Court, the Hon''ble Supreme Court of India restored the matter to the Hon''ble Bombay High Court in August 2003 for interpreting the Drug Policy on the basis of directions and principles laid down by them and the same was pending, in the challenge to the Hon''ble High Court of Allahabad''s order, in Feb 2013, the Hon''ble Supreme Court of India transferred the Bombay High Court petition also before itself for a final hearing on both the matters. In an earlier order, the Hon''ble Supreme Court has already restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence no provision is considered necessary in respect of notice of demand aggregating to Rs.1654.92 crore (inclusive of principal amount for the period July 1995 to April 2009 and interest upto January 2012).

5 Related Party Disclosures

i. The related parties where control exists or where significant influence exists and with whom transactions have taken place:

a. Subsidiary Companies including step-down subsidiaries, associate companies and joint venture:

1. Cipla FZE

2. Goldencross Pharma Pvt. Ltd.

3. Cipla (Mauritius) Ltd.

4. Meditab Specialities Pvt. Ltd.

Subsidiaries (held indirectly)

5. Cipla (UK) Ltd.

6. Cipla Australia Pty Ltd. (formerly Cipla-Oz Pty Ltd.)

7. Cipla (EU) Ltd. (formerly STD Chemicals Ltd.)

8. Medispray Laboratories Pvt. Ltd.

9. Sitec Labs Pvt. Ltd.

10. Four M Propack Pvt. Ltd.

11. Meditab Holdings Ltd.

12. Meditab Pharmaceuticals South Africa (Pty) Ltd.

13. Meditab Specialities New Zealand Ltd.

14. Cipla i lag Ticaret Anonim §irketi

15. Cipla USA Inc. (w.e.f. 12th September 2012)

16. Cipla Kenya Ltd. (w.e.f. 8th October 2012)

17. Cipla Malaysia Sdn. Bhd. (w.e.f. 20th March 2013)

Associates

18. Quality Chemical Industries Ltd.

19. Stempeutics Research Pvt. Ltd.

20. Biomab Holding Ltd.

21. Mabpharm Pvt. Ltd. (w.e.f. 29th October 2012)

Joint Venture

22. Aspen-Cipla Australia Pty Ltd.

b. Key Management Personnel:

1. Dr. Y.K. Hamied - Chairman and Managing Director

2. Mr. M.K. Hamied - Joint Managing Director

3. Mr. S. Radhakrishnan - Whole-time Director

4. Mr. Subhanu Saxena - Chief Executive Officer (w.e.f. 1st February 2013)

c. Relatives of Key Management Personnel:

1. Mr. Kamil Hamied

2. Mrs. Samina Vaziralli

d. Entities over which Key Management Personnel are able to exercise significant influence:

1. Okasa Pvt. Ltd.

2. Okasa Pharma Pvt. Ltd.

3. Cipla Foundation

ii. Transactions during the year with related parties:

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Mar 31, 2012

(1) Lease Accounting

Where the Company is a Lessee

The Company has obtained certain premises for its business operations (including furniture and fixtures, therein as applicable) under operating lease or leave and license agreements. These are generally not non-cancellable and range between 11 months to 5 years under leave and licence, or longer for other lease and are renewable by mutual consent on mutually agreeable terms. The Company has given refundable interest free security deposits in accordance with the agreed terms. Lease payments are recognised in the Statement of Profit and Loss under 'Rent' in Note 27.

Where the Company is a Lessor

The Company has given certain premises under operating lease or leave and license agreement. The Company retains substantially all risks and benefits of ownership of the leased asset and hence classified as operating lease. Lease income on such operating lease is recognised in the Statement of Profit and Loss under 'Rent' in Note 22.

(2) Segment Information

In accordance with AS-17 'Segment Reporting; segment information has been given in the Consolidated Financial Statements of Cipla Ltd., and therefore, no separate disclosure on segment information is given in these financial statements.

Rs.in crore

2012 2011

(3) Contingent Liabilities and Commitments (to the extent not provided for)

Contingent Liabilities

Claims against the Company not acknowledged as Debt 1.88 1.64

Guarantees 100.51 59.97

Letters of Credit 20.75 36.54

Refund of Technical Know-how/Fees on account of non- compliance of certain obligations as per respective agreements 27.19 7.45

Income Tax 179.73 204.44

Excise Duty/Service Tax 29.55 49.23

Sales Tax 3.64 4.02

363.25 363.29

Commitments

Estimated Amount of Contracts unexecuted on Capital Account 291.61 218.93

Other Commitments 665.21 528.74

956.82 747.67

1320.07 1110.96

(4) In a proceeding instituted against the Company for patent infringement of an animal health care product, the US District Court issued an injunction and the Federal Circuit Court at Washington upheld this order. Pursuant to this, the District Court is required to initiate hearings to determine the award for damages, which has not yet commenced. Therefore, it is now not possible to make any reliable estimate of the liability that may come about and accordingly no provision is made in the accounts. The Company is also examining further legal remedies as may be advised.

(5) The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

(6) In 2003, the Company received notice of demand from the National Pharmaceutical Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drug Price Control Order. This was contested before the jurisdictional High Courts wherein it was held in favour of the Company.

The orders were challenged before the Hon'ble Supreme Court by the Government. The Hon'ble Supreme Court by separate orders restored the matter to the jurisdictional High Court for interpreting the Drug Policy on the basis of directions and principles laid down by them and also restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence no provision is considered necessary in respect of notice of demand aggregating to Rs.1654.92 crore (inclusive of principal amount for the period July 1995 to April 2009 and interest upto January 2012).

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Mar 31, 2011

1. The previous year's figures have been recast/regrouped wherever necessary in order to conform to current year's presentation.

2. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) Rs.218.93 crore (Previous year Rs.255.75 crore).

3. Contingent Liabilities

i. Financial and performance guarantees given by banks on behalf of the Company Rs.59.97 crore (Previous year Rs.63.72 crore).

ii. Letters of credit issued by banks on behalf of the Company Rs.36.54 crore (Previous year Rs.42.60 crore).

iii. Refund of Technical Know-how/fees on account of non compliance of certain obligations as per respective agreements Rs.7.45 crore (Previous year Rs.15.38 crore)

iv. Income Tax Rs.204.44 crore (Previous year Rs.115.35 crore) The above Rs.204.44 crore represents claims where the Company has f led appeals and expects a favourable outcome, based on decisions in earlier assessment years.

v. Excise Duty/Service Tax Rs.49.23 crore (Previous year Rs.47.80 crore).

The above claims were based on decisions in earlier years where the Company is of the opinion that the demand is not sustainable.

vi. Sales Tax Rs.4.02 crore (Previous year Rs.0.86 crore).

vii. Other claims against the Company not acknowledged as debts Rs.1.64 crore (Previous year Rs.4.11 crore).

4. The Government of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has f led its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

5. In 2003, the Company received notice of demand from the National Pharmaceutical Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drug Price Control Order. This was contested before the jurisdictional High Courts wherein it was held in favour of the Company.

The orders were challenged before the Hon'ble Supreme Court by the Government. The Hon'ble Supreme Court by separate orders restored the matter to the jurisdictional High Court for interpreting the Drug Policy on the basis of directions and principles laid down by them and also restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence, no provision is considered necessary in respect of notice of demand aggregating to Rs.1230.28 crore (inclusive of interest) for the period July 1995 to April 2009.

6. The net difference in foreign exchange credited to the profit and Loss Account is Rs.12.86 crore (Previous year debit Rs.63.89 crore).

7. The Ministry of Corporate Affairs, Government of India vide its General Notification No. S.O. 301(E) dated 8th February 2011 issued under section 211(3) of the Companies Act, 1956 has exempted certain classes of companies from disclosing certain information in their Prof -it and Loss Account. The Company being an ‘Export Oriented Company' is entitled to the exemption. Accordingly, disclosures mandated by paragraphs 3(i)(a), 3(ii)(a), 3(ii)(b) and 3(ii)(d) of Part II, Schedule VI to the Companies Act,1956 have not been provided.

8. Related Party Disclosures

i. The related parties are as under:

a. Subsidiary Companies including step-down subsidiary and associate companies:

Sr. Name of the Company With effect from No.

Subsidiaries (held directly)

1 Cipla FZE 04/10/2006

2 Goldencross Pharma Pvt. Ltd. 14/05/2010

3 Cipla (Mauritius) Ltd. 27/01/2011

4 Meditab Specialities Pvt. Ltd. 01/10/2010

Subsidiaries (held indirectly)

5 Cipla (UK) Ltd. 27/01/2011

6 Cipla-Oz Pty Ltd. 04/03/2011

7 STD Chemicals Ltd. 27/01/2011

8 Medispray Laboratories Pvt. Ltd. 01/10/2010

9 Four M Propack Pvt. Ltd. 14/05/2010

10 Sitec Labs Pvt. Ltd. 01/10/2010

11 Meditab Holdings Ltd. 01/10/2010

12 Meditab Pharmaceuticals South Africa (Pty) Ltd. 14/01/2011

13 Meditab Specialities New Zealand Ltd. 21/01/2011

Associates

14 Quality Chemicals Industries Ltd. 01/10/2010

15 Stempeutics Research Pvt. Ltd. 01/10/2010

16 Desano Holdings Ltd. 01/10/2010

17 Shanghai Desano Chemical Pharmaceutical Co. Ltd. 01/10/2010

18 Shanghai Desano Pharmaceutical Investment Co. Ltd. 01/10/2010

b. Key Management Personnel:

1. Dr. Y. K. Hamied – Chairman and Managing Director

2. Mr. M. K. Hamied – Joint Managing Director

3. Late Mr. Amar Lulla – Joint Managing Director (up to13th December 2010)

4. Mr. S. Radhakrishnan – Whole-time Director (w.e.f. 12th November 2010)

c. Entities over which Key Management Personnel exercise significant influence – Cipla Public Charitable Trust, Cipla Cancer and AIDS Foundation, Mediorals Laboratories Pvt. Ltd., Good Earth Remedies Ltd., Globus Healthcare Ltd., Advanced Remedies Pvt. Ltd., Medispray Laboratories Pvt. Ltd. (up to 19th August 2010), Goldencross Pharma Pvt. Ltd. (up to 13th May 2010), Okasa Pvt. Ltd. & Okasa Pharma Pvt. Ltd. (w.e.f. 1st March 2011)

Disclosures in respect of material related party transactions during the year :

a. Receipts include interest received from Cipla FZE Rs.Nil (Previous year Rs.0.19 crore), Goldencross Pharma Pvt. Ltd. Rs.1.54 crore (Previous year Rs.0.55 crore) and Meditab Specialities Pvt. Ltd. Rs.0.19 crore (Previous year Rs.Nil)

b. Loan repayment from Cipla FZE Rs.Nil (Previous year Rs.17.76 crore), Goldencross Pharma Pvt. Ltd. Rs.76.55 crore (Previous year Rs.Nil) and Meditab Specialities Pvt. Ltd. Rs.102.70 crore (Previous year Rs.Nil)

c. Investment-Equity into Cipla FZE Rs.Nil (Previous year Rs.17.42 crore), Goldencross Pharma Pvt. Ltd. Rs.191.12 crore (Previous year Rs.Nil) , Meditab Specialities Pvt. Ltd. Rs.133.72 crore (Previous year Rs.Nil) and Cipla (Mauritius) Ltd. Rs.3.16 crore (Previous year Rs.Nil)

d. Loans given to Goldencross Pharma Pvt. Ltd. Rs.27.00 crore (Previous year Rs.5.82 crore) and Meditab Specialities Pvt. Ltd. Rs.225.67 crore (Previous year Rs.Nil)

e. Remuneration paid to Dr. Y.K. Hamied Rs.6.03 crore (Previous year Rs.8.53 crore), Mr. M.K. Hamied Rs.6.10 crore (Previous year Rs.8.11 crore), Mr. Amar Lulla Rs.3.91 crore (Previous year Rs.12.87 crore) and Mr. S. Radhakrishnan Rs.2.56 crore (Previous year Rs.Nil)

f. Deposit repaid to Dr. Y.K. Hamied Rs.Nil (Previous year Rs.38.00 crore).

g. Interest paid to Dr. Y.K. Hamied Rs.Nil (Previous year Rs.3.13 crore).

h. Purchase of goods from Goldencross Pharma Pvt. Ltd. Rs.169.25 crore (Previous year Rs.18.45 crore), Medispray Laboratories Pvt. Ltd. Rs.11.40 crore (Previous year Rs.4.88 crore), Advanced Remedies Pvt. Ltd. Rs.0.32 crore (Previous year Rs.Nil), Mediorals Laboratories Pvt. Ltd. Rs.1.16 crore (Previous year Rs.Nil), Meditab Specialities Pvt. Ltd. Rs.63.52 crore (Previous year Rs.Nil), Four M Propack Pvt. Ltd. Rs.7.99 crore (Previous year Rs.Nil) , Shanghai Desano Chemical Pharmaceutical Co. Ltd. Rs.11.96 crore (Previous year Rs.Nil) , Shanghai Desano Pharmaceutical Investment Co. Ltd. Rs.174.21 crore (Previous year Rs.Nil) , Okasa Pharma Pvt. Ltd. Rs.3.21 crore (Previous year Rs.Nil) and Okasa Pvt. Ltd. Rs.10.61 crore (Previous year Rs.Nil) .

i. Processing charges paid to Goldencross Pharma Pvt. Ltd. Rs.2.89 crore (Previous year Rs.1.04 crore), Mediorals Laboratories Pvt. Ltd. Rs.2.63 crore (Previous year Rs.0.94 crore), Medispray Laboratories Pvt. Ltd. Rs.9.57 crore (Previous year Rs.0.84 crore), Advanced Remedies Pvt. Ltd. Rs.2.61 crore (Previous year Rs.1.03 crore), Meditab Specialities Pvt. Ltd. Rs.15.09 crore (Previous year Rs.Nil), Sitec Labs Pvt. Ltd. Rs.29.46 crore (Previous year Rs.Nil), Okasa Pharma Pvt. Ltd. Rs.0.84 crore (Previous year Rs.Nil), STD Chemicals Ltd. Rs.0.79 crore (Previous year Rs.Nil) , Cipla(UK) Ltd. Rs.0.37 crore (Previous year Rs.Nil) and Cipla-Oz Pty Ltd. Rs.0.34 crore (Previous year Rs.Nil) and Okasa Pvt. Ltd. Rs.0.30 crore (Previous year Rs.Nil).

j. Sale of goods to Goldencross Pharma Pvt. Ltd. Rs.8.43 crore (Previous year Rs.Nil), Meditab Specialities Pvt. Ltd. Rs.2.76 crore (Previous year Rs.Nil), Four M Propack Pvt. Ltd. Rs.0.05 crore (Previous year Rs.Nil), Medispray Laboratories Pvt. Ltd. Rs.14.91 crore (Previous year Rs.Nil), Advanced Remedies Pvt. Ltd. Rs.0.14 crore (Previous year Rs.Nil), Mediorals Laboratories Pvt. Ltd. Rs.0.37 crore (Previous year Rs.Nil), Sitec Labs Pvt. Ltd. Rs.0.41 crore (Previous year Rs.Nil), Okasa Pharma Pvt. Ltd. Rs.0.42 crore (Previous year Rs.Nil), Okasa Pvt. Ltd. Rs.1.55 crore (Previous year Rs.Nil), Shanghai Desano Chemical Pharmaceutical Co.Ltd. Rs.56.97 crore (Previous year Rs.Nil) and Quality Chemicals Industries Ltd. Rs.92.36 crore (Previous year Rs.Nil).

k. Advance paid against services to Stempeutics Research Pvt. Ltd. Rs.6.10 crore (Previous year Rs.Nil).

l. Processing charges received from Meditab Specialities Pvt. Ltd. Rs.0.23 crore (Previous year Rs.Nil), Medispray Laboratories Pvt. Ltd. Rs.1.34 crore (Previous year Rs.Nil), Advanced Remedies Pvt. Ltd. Rs.0.01crore (Previous year Rs.Nil), Mediorals Laboratories Pvt. Ltd. Rs.0.03 crore (Previous year Rs.Nil), Okasa Pharma Pvt. Ltd. Rs.0.05 crore (Previous year Rs.Nil) and Okasa Pvt. Ltd. Rs.0.03 crore (Previous year Rs.Nil).

m. Donations made to Cipla Public Charitable Trust Rs.0.41 crore (Previous year Rs.0.40 crore).

n. Purchase of Shares from Good Earth Remedies Ltd. Rs.0.51 crore (Previous year Rs.Nil) and from Globus Healthcare Ltd. Rs.0.51 crore (Previous year Rs.Nil).

o. Rent paid to Okasa Pvt. Ltd. Rs.0.03 crore (Previous year Rs.Nil) and Medispray Laboratories Pvt. Ltd. Rs.45,000 (Previous year Rs.Nil).

p. Outstanding payables as on 31st March 2011 include Goldencross Pharma Pvt. Ltd. Rs.5.63 crore (Previous year Rs.3.90 crore), Medispray Laboratories Pvt. Ltd. Rs.4.55 crore (Previous year Rs.13.60 crore), Mediorals Laboratories Pvt. Ltd. Rs.0.38 crore (Previous year Rs.Nil), Advanced Remedies Pvt. Ltd. Rs.0.02 crore (Previous year Rs.8.89 crore), Four M Propack Pvt. Ltd. Rs.1.23 crore (Previous year Rs.Nil), Sitec Labs Pvt. Ltd. Rs.7.69 crore (Previous year Rs.Nil), Okasa Pharma Pvt. Ltd. Rs.12.12 crore (Previous year Rs.Nil), Okasa Pvt. Ltd. Rs.9.72 crore (Previous year Rs.Nil), Shanghai Desano Chemical Pharmaceutical Co.Ltd. Rs.7.13 crore (Previous year Rs.Nil), Shanghai Desano Pharmaceutical Investment Co.Ltd. Rs.20.13 crore (Previous year Rs.Nil), STD Chemicals Ltd. Rs.0.79 crore (Previous year Rs.Nil), Cipla(UK) Ltd. Rs.0.37 crore (Previous year Rs.Nil) and Cipla-Oz Pty Ltd. Rs.0.34 crore (Previous year Rs.Nil).

q. Outstanding Receivables as on 31st March 2011 include Goldencross Pharma Pvt. Ltd. Rs.Nil (Previous year Rs.69.21 crore) , Meditab Specialities Pvt. Ltd. Rs.51.33 crore (Previous year Rs.Nil), Medispray Laboratories Pvt. Ltd. Rs.12.48 crore (Previous year Rs.Nil), Mediorals Laboratories Pvt. Ltd. Rs.0.21 crore (Previous year Rs.Nil) and Sitec Labs Pvt. Ltd. Rs.0.54 crore (Previous year Rs.Nil), Okasa Pharma Pvt. Ltd. Rs.6.03 crore (Previous year Rs.Nil), Okasa Pvt. Ltd. Rs.15.10 crore (Previous year Rs.Nil) Shanghai Desano Chemicals Pharmaceutical Co. Ltd. Rs.56.09 crore (Previous year Rs.Nil), Shanghai Desano Pharmaceutical Investment Co.Ltd. Rs.1.14 crore (Previous year Rs.Nil) and Quality Chemicals Industries Ltd. Rs.39.29 crore (Previous year Rs.Nil).

9. In accordance with AS-17 "Segment Reporting", Segment information has been given in the Consolidated Financial Statements of Cipla Ltd., and therefore, no separate disclosure on segment information is given in these financial statements.

10. The Company has identified Micro, Small and Medium Enterprises on the basis of information made available during the year by the respective suppliers or vendors of the Company.

11. Employee benefits

i. Short Term Employee benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. benefits such as salaries, wages, short term compensated absences, etc., and the expected cost of bonus, ex-gratia are recognised in the period in which the employee renders the related service.

ii. Long Term Employee benefits

The disclosures as per the revised AS-15 are as under:

a. Brief description of the Plans

The Company's defined contribution plan is Employees' Pension Scheme (under the provisions of Employees' Provident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions.

The Company has two schemes for long term benefits namely, Provident Fund and Gratuity:

- The Provident Fund plan, a funded scheme is operated by Company's Provident Fund Trust, which is recognised by the Income Tax authorities and administered through trustees/appropriate authorities. The Guidance note on Implementing the revised AS-15, Employee benefits (revised 2005) issued by Accounting Standards Board (ASB) states benefit involving employer established provident funds, which require interest shortfalls to be recompensed, are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of India, the Company's actuary has expressed an inability, to reliably measure provident fund liabilities. Accordingly, the Company is unable to present the related information.

- The Company provides for gratuity, a defined benefit plan based on actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the Insurer Managed Funds.

The employees of the Company are also entitled to leave encashment and compensated absences as per the Company's policy.

12. During the year, the Company acquired an industrial undertaking at Kurkumbh on slump sale basis for a consideration of Rs.30.64 crore. Consequently, the Goodwill of Rs.60,461 arising on this transaction has been amortized in entirety during the year.

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Mar 31, 2010

1. The previous years figures have been recast/regrouped wherever necessary in order to conform to current years presentation.

2. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) Rs.255.75 crore (Previous year Rs.316.83 crore).

3. Contingent Liabilities

i. Financial and performance guarantees given by banks on behalf of the Company - Rs.63.72 crore (Previous year Rs.34.52 crore).

ii. Letters of credit issued by banks on behalf of the Company - Rs.42.60 crore (Previous year Rs.37.80 crore).

iii. Refund of Technical Know-how/fees on account of non compliance of certain obligations as per respective agreements - Rs.15.38 crore (Previous year Rs.44.05 crore).

iv. Claims against the Company not acknowledged as debts:

a. IncomeTax- Rs.115.35 crore (Previous year Rs.Nil).

The above Rs.115.35 crore represents claims where the Company has filed appeals apd expects a favourable outcome, based on decisions in earlier assessment years.

b. Excise Duty/Service Tax - Rs.47.80 crore (Previous year Rs.44.90 crore).

The above represents claims where, based on decisions in earlier years, the Company is of the opinion that the demand is not sustainable.

c. Sales Tax - Rs.0.86 crore (Previous year Rs.0.50 crore).

d. Others - Rs.4.11 crore (Previous year Rs.2.31 crore).

4. TheGovernment of India has served demand notices in March 1995 and May 1995 on the Company in respect of six bulk drugs, claiming that an amount of Rs.5.46 crore along with interest due thereon is payable into the DPEA under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company.The Company has filed its replies to the notices and has contended that no amount is payable into the DPEA under the Drugs (Prices Control) Order, 1979.

5. In 2003, the Company received notice of demand from the National Pharmaceuticai Pricing Authority, Government of India on account of alleged overcharging in respect of certain drugs under the Drug Price Control Order.This was contested before the jurisdictional High Courts wherein it was held in favour of the Company.

The orders were challenged before the Honble Supreme Court by the Government.The Honble Supreme Court by separate orders restored the matter to the jurisdictional High Court for interpreting the Drug Policy on the basis of directions and principles laid down by them and also restrained the Government from taking any coercive action against the Company. The Company has been legally advised that on the basis of these orders there is no probability of demand crystallising. Hence, no provision is considered necessary in respect of notice of demand aggregating to Rs.1157.12 crore (inclusive of interest) for the period July 1995 to April 2009.

6. The net difference in foreign exchange debited to the Profit and Loss Account is Rs.63.89 crore (Previous year Rs.228.37 crore).

7. Related Party Disclosures

i. The related parties are as under:

a. Subsidiary Company-CiplaFZE, U.A.E.

b. Key Management Personnel-

1. Dr.Y.K.Hamied- Chairman and Managing Director

2. Mr.M.K.Hamied-JointManaging Director

3. Mr.AmarLulla-JointManaging Director

c. Entities over which Key Management Personnel exercise significant influence-Cipla Public Charitable Trust, Cipla Cancer & Aids Foundation, Goldencross Pharma Pvt.Ltd.*,Mediorals Laboratories Pvt. Ltd.*, Medispray Laboratories Pvt. Ltd.*, Advanced Remedies Pvt. Ltd.* (*w.e.f. VMarch2010)

8. Employee Benefits

The Company has with effect from 1st April 2007, adopted Accounting Standard 15, Employee Benefits (revised 2005), issued by the Institute of Chartered Accountants of India (therevised AS-15).

i. Short Term Employee Benefits

All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee benefits. Benefits such as salaries, wages, short term compensated absences, etc. and the expected cost of bonus, ex-gratia are recognised in the period in which the employee renders the related service.

ii. Long Term Employee Benefits

The disclosures as per the revised AS-15 are as under: a. Brief description of the plans

The Companys defined contribution plan is Employees Pension Scheme (under the provisions of EmployeesProvident Funds and Miscellaneous Provisions Act, 1952) since the Company has no further obligation beyond making the contributions. The Company has two schemes for long term benefits namely, Provident Fund and Gratuity:

- The Provident Fund plan, a funded scheme is operated by Companys Provident Fund Trust, which is recognised by the Income Tax authorities and administered through trustees/ appropriate authorities. The Guidance note on implementing the revised AS-15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states benefit involving employer-established providentfunds, which require interest shortfalls to be recompensed, are to be considered as defined benefit plans. Pending the issuance of the guidance note from the Actuarial Society of lndia,the Companys actuary has expressed an inability, to reliably measure provident fund liabilities. Accordingly, theCompany is unable to present the related information.

- The Company provides for gratuitya defined benefit plan based on actuarial valuation as of the Balance Sheet date, based upon which, the Company contributes all the ascertained liabilities to the Insurer Managed Funds.

The employees of theCompany are also entitled to leave encashment and compensated absences as per the Companys policy.

9. During the year, the Company sold its intellectual property rights and technical know-how of "i-pill" an emergency contraceptive brand, to Pi ra ma I Healthcare Limited for the territory of India at an aggregate consideration of Rs.95 crore.

10. The shareholders in the Annual General Meeting held on 26th August 2009 approved the raising of long term funds by way of Qualified Institutions Placement (QIPs) in terms of Chapter VIII of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. In pursuance thereof, the Company has raised Rs.675.99 crore from Qualified Institutional Buyers (QIBs) and 2,56,30,000 equity shares having face value of Rs.2 each at a premium of Rs.261.75 per equity share, were issued and allotted to the investors on 29th September 2009. The funds thus raised have been used as per the terms of the issue.