Notes to the financial statements 1 Background The Company is a Public limited Company, incorporated under the Indian Companies Act, 1913, having its registered office in Mumbai, Maharashtra and is listed on BSE Ltd. and the National Stock Exchange of India Limited. The Company is engaged in manufacturing, marketing, trading and export of Pharmaceutical products. The Company has its own manufacturing facility at Thane and Goa. The Company has various independent contract / third party manufacturers based across the country. The Company sells its products through independent distributors primarily in India. 2 Significant Accounting Policies The accounting policies set out below have been applied consistently to the periods brsented in these financial statements. (a) Basis of brparation of financial statements The financial statements have been brpared and brsented under the historical cost convention on an accrual basis of accounting and in accordance with the accounting principles generally accepted in India and comply with the accounting standards specified under section 133 of the Companies Act, 2013 ('the Act') read with Rule 7 of the Companies (Account) Rules, 2014 and other relevant provisions of the Companies Act, 1956 to the extent applicable. (b) U se of estimates The brparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) in India requires management to make estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses and the disclosures of contingent liabilities on the date of financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods. Estimates and underlying assumptions are reviewed on an ongoing basis. (c) Current and Non-current classification All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in Schedule III of the Act. Based on the nature of it's activities and the time between the acquisition of assets for processing and their realization in cash or cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or non-current classification of assets and liabilities. (d) Fixed assets and debrciation / amortization Tangible fixed assets (i) Tangible fixed assets are stated at cost of acquisition less accumulated debrciation / amortization and impairment losses. The cost of fixed assets includes taxes (other than those subsequently recoverable from tax authorities), duties, freight and other incidental expenses related to the acquisition and installation of the respective assets. (ii) Assets costing individually up to Rs.5,000 are written off and those costing more than Rs.5,000 but up to equivalent rupees of US$5,000 are fully debrciated in the year of purchase except that - “multiple-like items” the cost of which is over equivalent rupees of US$ 10,000 in the aggregate; and “unlike items of a capital nature within an asset category” for large scale projects the aggregate cost of which exceeds US$ 10,000 are considered as one asset and debrciated in accordance with the accounting policy stated in (iii) below. (iii) Debrciation for the year has been provided as per the rates determined in Part C of Schedule II of the Act or based on estimated useful life of the assets determined by the management. Debrciation on additions other than those stated in (ii) above is provided on a pro-rata basis from the month of capitalisation. Debrciation on deletions during the year is provided up to the month in which the asset is sold / discarded. Intangible fixed assets (i) Intangible assets comprises of Trademarks and Cost of Application Software. (a) Trademarks are amortized on a straight line basis, over a period of 10 years. (b) Cost of Application Software are recorded at its acquisition cost and is amortized on straight-line basis over 3 to 5 years, which in management’s estimate rebrsents the period during which economic benefits will be derived from their use. Cost of Application Software not exceeding Rs.50 lakhs is being charged to the statement of profit and loss. (ii) Goodwill is amortized on a straight line basis over a period of 10 years. Revenue expenditure on research and development is expensed as incurred. Capital expenditure on research and development is capitalised as fixed assets and debrciated in accordance with the debrciation policy of the Company. (e) Impairment of assets In accordance with Accounting Standard 28 (AS 28) on ‘Impairment of assets’ where there is an indication of impairment of the Company’s assets, the carrying amounts of the Company’s assets are reviewed at each balance sheet date to determine whether there is any impairment. The recoverable amount of the assets (or where applicable that of the cash generating unit to which the asset belongs) is estimated at the higher of its net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of it’s useful life. An impairment loss is recognised whenever the carrying amount of an asset or a cash generating unit exceeds its recoverable amount. Impairment loss is recognized in the statement of profit and loss. (f) Foreign exchange transactions Transactions in foreign exchange are accounted for at the standard exchange rates as determined by the Company on a monthly basis. The exchange differences arising on foreign exchange transactions settled during the year are recognized in the statement of profit and loss of the year. Monetary assets and liabilities in foreign exchange, which are outstanding as at the year end, are translated at year end at the closing exchange rate and the resultant exchange differences are recognized in the statement of profit and loss. (g) Investments Long-term investments are stated at cost less other than temporary diminution in value, determined separately for each individual investment. Current investments are recognized at cost or net realisable value whichever is lower. Investment in land or buildings that are not intended to be occupied substantially for use by or in operations of the Company, or held for rental purpose is classified as investment property. Investment property is stated at cost less accumulated debrciation. (h) Inventories Raw materials, stock-in-trade, work-in-progress, finished goods and packing materials are valued at the lower of weighted average cost and net realizable value. Cost of finished goods and work-in-progress includes cost of materials, direct labour and an appropriate portion of overheads to bring the inventory to the brsent location and condition. Stores and maintenance spares are valued at average cost. The net realizable value of work-in-progress is determined with reference to the selling price of related finished goods. Raw materials and other supplies held for use in production of inventories are not written down below cost except in cases where material prices have declined and it is estimated that the cost of the finished products will exceed their net realizable value. Finished goods expiring within 90 days (near-expiry inventory) as at the balance sheet date have been fully provided for. (i) Samples Physicians’ samples are valued at standard cost, which approximates actual cost and are charged to the statement of profit and loss when distributed. (j) Revenue recognition Revenue from sale of goods in the course of ordinary activities is recognized when property in the goods or all significant risks and rewards of their ownership are transferred to the customer and no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of the goods and regarding its collection. The amount recognized as revenue is exclusive of sales tax, value added taxes (VAT) and service tax and is net of returns and discounts. Revenue from services is recognized as and when services are rendered and related costs are incurred, in accordance with the terms of the specific contracts. Interest income is recognized on a time proportion basis taking into account the amount outstanding and the interest rate applicable. (k) Employee benefits 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, bonus, short term compensated absences and the expected cost of ex-gratia is recognized in the period in which the employee renders the related service. Long term employee benefits (i) Defined contribution plan The Company’s contribution towards employees’ Superannuation plan is recognized as an expense during the year. (ii) Defined benefit plans Provident fund Provident fund contributions are made to a trust administered by the trustees. Trust makes investments and settles members claims. Interest payable to the members shall not be at a rate lower than the statutory rate. Liability is recognized for any shortfall in the plan assets vis-à-vis actuarially determined liability of the fund obligation. Gratuity plan The Company’s gratuity benefit scheme is a defined benefit plan. The Company’s net obligation in respect of the gratuity benefit scheme is calculated by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its brsent value and the fair value of any plan assets is deducted. The brsent value of the obligation as at the balance sheet date under such defined benefit plan is determined based on actuarial valuation using the Projected Unit Credit Method by an independent actuary, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation is measured at the brsent value of the estimated future cash flows. The discount rates used for determining the brsent value of the obligation under defined benefit plan, are based on the market yields on government securities as at the balance sheet date. Actuarial gains and losses are recognized immediately in the statement of profit and loss. (iii) Other Long-term employment benefits Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognized as a liability at the brsent value of the defined benefit obligation as at the balance sheet date using Projected Unit Credit method by an independent actuary. The discount rates used for determining the brsent value of the obligation under defined benefit plan, are based on the market yields on government securities as at the balance sheet date. (l) Leases Lease rentals under an operating lease, are recognized as an expense in the statement of profit and loss on a straight line basis over the lease term. Lease income from operating leases is recognized in the statement of profit and loss on a straight line basis over the lease term. (m) Voluntary Retirement Scheme (VRS) Liability under the VRS is accrued on the acceptance of the applications of the employees under the VRS scheme issued by the Company and is charged to the statement of profit and loss. (n) Taxation Income tax expense comprises current tax and deferred tax charge or credit. Provision for current tax is based on the results for the year, in accordance with the provisions of the Income Tax Act, 1961. The deferred tax charge or credit is recognized using substantively enacted rates. In the case of unabsorbed debrciation or carried forward losses, deferred tax assets are recognized only to the extent there is virtual certainty of realization of such assets. Other deferred tax assets are recognized only to the extent there is reasonable certainty of realization in future. Such assets are reviewed as at each balance sheet date to reassess realization. (o) Earnings per share Basic and diluted earnings per share are computed by dividing the net profit after tax attributable to equity shareholders for the year, with the weighted number of equity shares outstanding during the year. (p) Provisions and contingent liabilities The Company creates a provision when there exists a brsent obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resources. When there is a possible obligation or a brsent obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made. Contingent assets are not recognized in financial statements. (q) Employee Stock options scheme The Company measures compensation cost relating to employee stock options using the fair value method. Compensation expense, if any, is amortized over the vesting period of the option on a straight line basis. 3 Amalgamation of Wyeth Limited with the Company during financial year 2014-15 In the brvious year, the Scheme of Amalgamation (‘Scheme’) between the Company and Wyeth Limited with an appointed date of 1 April 2013, whereby all the assets and liabilities of Wyeth Limited which were transferred to and vested in the Company, have been recorded at their fair values from the appointed date. The said Scheme received the approval of the Hon’ble High Court of Judicature at Mumbai on 31 October 2014 and subsequent to approvals by other relevant regulatory authorities; the Scheme became effective on 1 December 2014. Since the Scheme received all the requisite approvals after the financial statements for the year ending 31 March 2014 were authorised by the shareholders, the impact of amalgamation has been given in the brvious financial year with effect from the appointed date. In accordance with the provisions of the aforesaid Scheme, i) The approved share swap ratio was 7 equity shares of the face value of Rs.10 each fully paid up of the Company for every 10 equity shares of the face value of Rs.10 each fully paid up of Wyeth Limited. Accordingly, for a total consideration of Rs.131,379 lakhs, the Company allotted and issued 15,906,292 equity shares of Rs.10 each to the shareholders of erstwhile Wyeth Limited in December 2014, and accounted for the share brmium of Rs.129,879 lakhs in the brvious year. ii) The amalgamation was accounted under the “Purchase Method” as per Accounting Standard 14 - Accounting for Amalgamations, as referred to in the Scheme of Amalgamation approved by the High court. iii) The transfer of assets and liabilities of Wyeth Limited at fair values was effected from “appointed date” of 1 April 2013 as defined in the Scheme. iv) Fair value of assets and liabilities acquired from Wyeth Limited aggregated to Rs.22,724 lakhs. The total purchase consideration paid was Rs.131,379 lakhs.The Company recognised intangible assets of Rs.42,720 lakhs and resultant goodwill of Rs.65,935 lakhs 29 Pricing Litigations - Contingencies (a) Ox tetracycline and other formulations In respect of certain price fixation Orders of 1981 of the Government of India, the Subrme Court vide its Order of 22 March 1993 held that, pending disposal of the Company’s Writ Petition in the High Court of Mumbai, the Company may deposit 50% of the impugned amount of Rs.87.61 lakhs (March 2015: Rs.87.61 lakhs), less Rs.19.90 lakhs (March 2015: Rs.19.90 lakhs) already deposited, with the Union of India before 15 May 1993 which has been done. In the event that the Company succeeds before the High Court of Mumbai, this amount will be returned within one month from the date of the decision of the High Court with interest at the rate of 15% per annum. However, if the Company loses the Writ Petition, the balance amount of Rs.43.80 lakhs (March 2015: Rs.43.80 lakhs) with interest at the rate of 15% per annum will have to be paid to the Government. (b) Multivitamin Formulations In respect of certain price fixation Orders of 1986 of the Government of India, the Subrme Court vide its Order dated 3 December 1992, held that, pending disposal of the Company’s Writ Petition in the High Court of Mumbai, the Company may deposit 50% of the impugned amount of Rs.98.00 lakhs (March 2015: Rs.98.00 lakhs) with the Union of India before 31 January 1993 which has been done. In the event that the Company succeeds before the High Court of Mumbai, this amount will be returned within one month from the date of the decision of the High Court with interest at the rate of 15% per annum. However, if the Company loses the Writ Petition, the balance amount of Rs.49.00 lakhs (March 2015: Rs.49.00 lakhs) with interest at the rate of 15% per annum will have to be paid to the Government. (c) Protinex In yet another case, the Company had challenged in 1986 a price fixation Order of the Government of India by a Writ Petition before the High Court of Mumbai. The Hon’ble Court passed an ad interim and interim order staying the impugned order. The Petition, while it was still pending for hearing and final disposal, was withdrawn in 1989 on redressal of the Company’s grievances. After protracted correspondence on the subject, in 1993 the Government raised a demand of Rs.81.83 lakhs (March 2015: Rs.81.83 lakhs) on the Company for the period April 1986 to July 1989 and directed the Company to deposit the same into the Drug Prices Equalization Account (DPEA). Thereafter, the Drug Prices Liability Review (DPLR) Committee sent a letter dated 15 February 1996 seeking the Company’s submission/ rebrsentation against the reduced claim amount of Rs.33.87 lakhs (March 2015: Rs.33.87 lakhs)for the period April 1986 to August 1987 as intimated to the DPLR Committee by the Government of India. The Company has made its submissions to the DPLR Committee vide its letter of 29 March 1996 claiming that no amount whatsoever is due and payable having regard to the facts and relevant material of the case. In the meantime, the Department of Chemicals and Petrochemicals vide their letter dated 11 February 1997 raised an additional demand of Rs.178.56 lakhs (March 2015: Rs.178.56 lakhs) for the earlier period of February 1984 to March 1986 over and above the revised claim of Rs.33.87 lakhs (March 2015: Rs.33.87 lakhs) for the period April 1986 to August 1987. Thus, the total demand raised now stands revised to Rs.212.43 lakhs (March 2015: Rs.212.43 lakhs). The DPLR Committee had, vide its letter dated 24 February 1997 invited the Company to make its submissions/ rebrsentations against the above said claim. The Company has made its submissions to the DPLR Committee vide its letter dated 14 May 1997 claiming that no amount whatsoever is due and payable having regard to the facts and relevant material of the case Pursuant to the submissions made by the Company, the DPLR Committee directed by an Order on 17 November 1998 that clarifications should be obtained from the Bombay High Court on whether the Interim Stay granted in the Civil Writ Petition Number 2368 of 1996 is applicable to this matter. (This Writ Petition is filed by OPPI and IDMA jointly against any notice issued by the Government of India after 25 August 1987 to any member of the OPPI or IDMA, initiating proceedings for recovery of an amount demanded in respect of a period prior to that date). On a Notice of Motion filed by the Company in the said Writ Petition, the Bombay High Court has granted ad interim Order that “pending the hearing and final disposal of this Notice of Motion, further proceedings in the said Case No 49/1996 pending before the said Drug Prices Liability Review Committee be stayed.” The Bombay High Court vide its judgement dated 22 December 2011 dismissed the Writ Petition filed by OPPI & IDMA and directed the companies who have been issued show cause notices to file appropriate replies and directed the government to pass appropriate orders accordingly. (d) Vitamin and other formulations The Government has arbitrarily determined the liability of the Company at Rs.1,466 lakhs (March 2015: Rs.1,466 lakhs) being the difference in price in respect of Vitamin and other formulations sold by the Company during the years 1983 to 1989. The Company has repudiated the liability on this account. The Company’s Solicitors have advised that the repudiation by the Company is legally sustainable. The Government has pursued the matter. The Company maintains its position that the claim by the Government is not legally sustainable. (e) Chloramphenicol The Government has arbitrarily determined the liability of the Company at Rs.145 lakhs (March 2015: Rs.145 lakhs) and Rs.14 lakhs (March 2015: Rs.14 lakhs) being the difference between the price of bulk drug Chloramphenicol powder and Chloramphenicol Palmitate respectively allowed in the formulation price and actual procurement price for the period 1979 to 1988. The Company has repudiated the liability on this account as advised by the Company’s Solicitors. The Company has also obtained a Stay order from the Hon’ble High Court of Mumbai against the demand. Pursuant to the submissions made by the Company, the DPLR Committee directed by an Order on 17 November 1998 that clarifications should be obtained from the Bombay High Court on whether the Interim Stay granted in the Civil Writ Petition Number 2368 of 1996 is applicable to this matter. (This Writ Petition is filed by OPPI and IDMA jointly against any Notice issued by the Government of India after 25 August 1987 to any member of the OPPI or IDMA, initiating proceedings for recovery of an amount demanded in respect of a period prior to that date). Similar applications were filed as in the matter of Protinex before the Bombay High Court in Writ Petition filed by OPPI & IDMA and similar order was passed i.e. Case No 23/95 pending before the said Drug Prices Liability Review (DPLR) Committee was stayed. The OPPI & IDMA Writ Petition have been disposed with the direction as aforesaid. (f) Pursuant to the repeal of DPCO 1970, erstwhile Warner-Hindustan Limited (merged with Parke-Davis (India) Limited in 1988 and Parke - Davis (India) Limited merged with Pfizer Limited in 2003) had classified Isokin Tablets, Isokin Liquid and Pyridium tablets as decontrolled products under the DPCO 1979. The categorization was, however, challenged by the Government in 1984 and a demand of Rs.113 lakhs (March 2015: Rs.113 lakhs) was raised against the Company. Against this demand an excise duty set off of Rs.7 lakhs (March 2015: Rs.7 lakhs)was allowed to the Company and a final demand of Rs.106 lakhs (March 2015: Rs.106 lakhs) was raised in 1987. The Company had deposited an amount of Rs.30 lakhs (March 2015: Rs.30 lakhs) in February 1987 and Rs.25 lakhs (March 2015: Rs.25 lakhs) in May 1990 totalling to Rs.55 lakhs (March 2015: Rs.55 lakhs) in full and final settlement of the demand, as per the arguments set forth by the Company. The Government subsequently raised a demand of Rs.117 lakhs (March 2015: Rs.117 lakhs) towards interest on principal demand. (i.e. interest of Rs.43 lakhs (March 2015: Rs.43 lakhs) for Pyridium for the period 1982 to August 1995 and Rs.74 lakhs (March 2015: Rs.74 lakhs) for Isokin for the period 1982 to June 1997). The Company filed a Writ Petition in the Andhra Pradesh High Court in September 1997 for staying all further proceedings against the Company. The High Court stayed the demand in respect of collection of interest but directed the Company to deposit the balance demand of Rs.51 lakhs (March 2015: Rs.51 lakhs) (which amount was deposited in November 1997). The said Writ Petition has been heard and disposed off by final judgement of the Hon’ble Andhra Pradesh High Court, on 15 April 2011. The Hon’ble High Court has inter alia set aside all the demand notices and further directed the respondents to refund the monies paid under the interim orders. The Union of India has brferred a Special Leave Petition (SLP) before the Hon’ble Subrme Court against the above judgment. In view of there being a discrepancy in the English and Hindi Notification of DPCO, 1979 in para 13(5) of the DPCO, 1979 the Special Leave Petition (SLP) came to be allowed vide order dated 12 April 2013 setting aside the impugned judgment and restoring the writ petition to file, to conduct appropriate enquiry and for hearing and fresh disposal. The matter now stands remanded back to the Andhra Pradesh High Court. (g) Multivitamin Formulations: The Government has arbitrarily raised a demand of Rs.182.38 lakhs (March 2015: Rs.182.38 lakhs)on account of alleged overpricing of certain multivitamin formulations marketed by erstwhile Pharmacia Healthcare Limited (merged with Pfizer Limited) for the period 1983 to 1986. The Company has repudiated the liability on this account as advised by its solicitors. The Company filed a Writ Petition No.814 of 1992 in the High Court at Mumbai. The Subrme Court of India, in a Special Leave Petition (SLP) filed by the Company held that pending disposal of Writ Petition filed before the High Court at Mumbai, the Company shall furnish an undertaking in respect of 50% of its liability and shall deposit the balance 50% aggregating to Rs.91.19 lakhs (March 2015: Rs.91.19 lakhs). This amount has been deposited with the Government of India and is included under the head “Long Term Loans and Advances”. Pursuant to a Transfer Petition (Civil) no 475-496 of 2003 filed under Article 139A(1) of the Constitution of India, all pending writ petitions in respect of DPEA liabilities are now to be transferred to the Subrme Court to be heard and finally decided by the Subrme Court of India. Consequently as a result of the said transfer petition, Writ Petitions referred to in (a), (b), (c), (e), (f) and (g) above will now be heard and disposed of by the Subrme Court. The Subrme Court however, by order dated 3 May 2010 disposed off the Transfer Petition, directing the concerned High Courts to take up the writ petitions before them and dispose them on merits. The Writ Petitions filed before the Hon’ble Bombay High Court came up for hearing on 1 February 2013. The Hon’ble Bombay High Court was of the view that the Orders passed by the Union may be set aside and the Union may be directed to decide the matters afresh keeping all the issues and contentions open. Consequently, as directed by the Hon’ble Court draft minutes of the order were brpared and circulated to the Advocates of the Union for their perusal. In view of the disagreement between the parties on the draft minutes, on 12 March 2013 the Union sought to brss for their Notice of Motion for all the matters to be listed for final hearing. Thereafter, the Hon’ble Bombay High Court passed an Order for the matters to be listed in due course and rejected the Notice of Motion of the Union. Thereafter, the Union made an application before the Hon’ble Chief Justice for having this group of matters to be assigned to a Division Bench for expeditious hearing. However, till date no Order has been passed in the matter In view of matters (a), (b), (c), (e), (f) and (g) being subjudice, the legal opinion being in favor of the Company, and based on the assessment of the Management, no further provision is considered necessary over and above the sum of Rs.198.37 lakhs (March 2015: Rs.198.37 lakhs)which has been paid off in earlier years. The Company would continue to seek legal recourse in all the above matters. (h) The Government of India had served demand notices on erstwhile Wyeth Limited in respect of its product, claiming that an amount of Rs.4,507.07 lakhs (March 2015: Rs.4,507.07 lakhs) inclusive of interest of Rs.3,186.55 lakhs (March 2015: Rs.3,186.55 lakhs) is payable in respect of price fixation under the Drugs (Prices Control) Order 1979. The Company has disputed the demand. Without brjudice to its contention, the Company paid the principal amount of Rs.1,320.52 lakhs (March 2015: Rs.1,320.52 lakhs). The Company carries a provision of Rs.1,469.08 lakhs (March 2015: Rs.1,469.08 lakhs) in respect of the said demand. The Company has furnished corporate bonds for amount aggregating to Rs.3,186.55 lakhs (March 2015: Rs.3,186.55 lakhs) for interest. (i) The Government of India had served demand notices on erstwhile Wyeth Limited in respect of its product, claiming that an amount of Rs.1,069.35 lakhs (March 2015: Rs.1,069.35 lakhs) inclusive of interest of Rs.832.47 lakhs (March 2015: Rs.832.47 lakhs) is payable in respect of price fixation under the Drugs (Prices Control) Order 1979. The Company has disputed the demand. Without brjudice to its contention, the Company has paid principal amount of Rs.236.88 lakhs (March 2015: Rs.236.88 lakhs) under protest. The Company carries a cumulative provision of Rs.40.50 lakhs (March 2015: Rs.40.50 lakhs) in the books of accounts. Corporate bonds for amount aggregating to Rs.832.47 lakhs (March 2015: Rs.832.47 lakhs) for interest has been furnished. (j) The Government of India had served demand notices on erstwhile Wyeth Limited in respect of its certain bulk drugs, claiming that an amount of Rs.331.24 lakhs (March 2015: Rs.331.24 lakhs) inclusive of interest Rs.187.34 lakhs (March 2015: Rs.187.34 lakhs) is payable into the Drug Prices Equalization Account (DPEA) under the Drugs (Prices Control) Order, 1979 on account of alleged unintended benefit enjoyed by the Company. The Company has disputed the demand. Without brjudice to its contentions, the Company has paid an amount of Rs.45 lakhs (March 2015: Rs.45 lakhs) under protest. (k) The Government of India had served a demand notice on erstwhile Wyeth Limited claiming an amount of Rs.1,726.35 lakhs (March 2015: Rs.1,726.35 lakhs) inclusive of interest of Rs.134.90 lakhs (March 2015: Rs.134.90 lakhs) due thereon for alleged non compliance under the Drugs (Prices Control) Order, 1995 in respect of production of Prednisolone based formulations. Without brjudice to its contentions, the Company has provided and paid Rs.1,287.93 lakhs (March 2015: Rs.1,287.93 lakhs) and disputed the balance demand. The demands stated in (h),(i),(j) and (k) above aggregate to Rs.7,634.06 lakhs (March 2015: Rs.7,634.06 lakhs) inclusive of interest of Rs.4,341.26 lakhs (March 2015: Rs.4,341.26 lakhs). Based on the legal opinions obtained in respect of these cases, the Company is of the opinion that the estimated liability in respect of these cases involved shall not exceed Rs.1,509.57 lakhs (March 2015: Rs.1,509.57 lakhs) provided in the books of accounts. (l) Other Pricing related disputes The government had raised demands on account of alleged non-adherence of certain price notifications on four products marketed / traded by the Company. The total liability in respect of these demands amounted to Rs.1,511.32 lakhs (March 2015: Rs.2,074.97 lakhs) against which the Company has made a provision of Rs.499 lakhs (March 2015: Rs.761 lakhs). Based on the legal opinions obtained, the Company is of the opinion that the estimated liability in respect of these cases involved shall not exceed the amount provided in books of accounts. 1 Segmental information After considering the factors mentioned in Accounting Standard 17 on segment reporting, the Company has concluded that it has only one segment which is Pharmaceuticals and the Company primarily operates in domestic market, therefore disclosure relating to segments is not applicable and accordingly not made. 2 Employee stock option scheme Certain employees of the Company are eligible for Stock options (ESOP) and Restricted stock units (RSU) granted by the Ultimate Holding Company (“Pfizer Inc., USA”). Pursuant to the Securities Exchange Board of India (SEBI) (Share based employee benefits) Regulations, 2014, which became effective during the year, the Company has accounted for employee stock options expenses in the statement of profit and loss amounting to Rs.480.08 lakhs. Until 31 March 2015, the Company made the necessary disclosures as required by the erstwhile regulations. Nature and extent of Employee Share-based Payment Plans: Pfizer Inc., USA, as a part of the Long-term incentive awards offers certain Common stock (shares) to the employees of the Company and its subsidiaries. These shares are offered through grant of awards which is a combination of stock options (ESOP) and restricted stock units (RSU) under the Pfizer Inc. 2004 Stock plan. As per the plan, the vesting period of the stock options and the restricted stock units is 3 years from the grant date. As per the plan, the stock options have a term of 10 years from the grant date. All stock options and restricted stock units are settled through equity. The employees of the Company have been issued 90,426 (March 2015: 86,712) share options, 18,085 (March 2015: 17,792 ) restricted stock units and 1,554 (March 2015: 992) portfolio performance shares under the Pfizer Inc 2004 Share Option Plan by Pfizer Inc. USA. The cost incurred by Pfizer Inc pursuant to the said Pfizer Inc 2004 share option Plan for the year ended 31 March 2016 amounts to Rs.480.08 lakhs which has been debited to the statement of profit and loss. 3 Corporate Social Responsibility (CSR) As a part of CSR initiative the Company continues its efforts towards the Swachh Vidyalaya Campaign - a part of the Government’s National Swachh Bharat program. The Company also committed funds to build and refurbish sanitation facilities in 11 Schools, particularly for girl students across Haryana, Delhi and Lucknow, in partnership with Habitat for Humanity Foundation. The employees also volunteered in this program. The Company partnered with the Indian Institute of Technology, Delhi to launch an incubation accelerator program Pfizer IIT Delhi Innovation & IP Program to incubate healthcare startups. The Company in partnership with All India Institute of Medical Sciences (AIIMS) will evaluate linkage between poor ambient air quality and health indicators among students in schools and colleges across Delhi & NCR regions 4 Exceptional items Exceptional items include Income from surrender of lease rights at Exbrss towers (net of related expenses) and expenses incurred in relation to proposed transfer of business undertaking at Thane plant. Exceptional items for the year ended 31 March 2015 were in relation to voluntary retirement scheme / other related costs at Thane plant. 5 Proposed Sale of Business undertaking at Thane plant The Company has entered into an agreement for sale of Business undertaking at the Thane plant as a going concern, on a slump sale basis for a consideration of Rs.17,800 lakhs, to be paid in installments, subject to fulfillment of the conditions brcedent to the closing. The impact of the transaction would be reflected upon closure of the transaction. During the year, the Company has received an advance of Rs.9,000 lakhs as per the agreed terms and dislcosed under “Other Current Liabilities” in note 10. Upon the conclusion of the Business Transfer Agreement (BTA), all current workmen at the Thane Plant shall be transferred to the buyer so as to facilitate manufacturing operations. Subsequently, the Company has intimated the concerned authorities that it has withdrawn its notice dated 15 July 2015 whereby it had intended to effect closure of its Thane plant. The proposed transfer of business undertaking at the Thane plant shall not impact the supply of any of the Company’s medicines to patients as alternate supply arrangements are already in place. The fixed assets pertaining to the plant have been disclosed under the head “Assets held for sale” in note 20, “Other current assets”. 6 Stay of Ban on Product Sales The Government of India, Ministry of Health & Family Welfare, vide Notification No. S.O.909(E) dated 10 March 2016 had prohibited the manufacture for sale and distribution of fixed dose combination of Chlopheniramine Maleate and Codeine Syrup. The Company had challenged the said notification before the Hon’ble Delhi High Court for its product “Corex” and obtained an interim stay on the operation and execution of the notification. The legal proceedings are ongoing. The stay order from the Hon’ble Delhi High Court has enabled the Company to continue manufacture and sale of Corex. The annual sales of Corex for the financial year ended 31 March 2016 is Rs.24,448 lakhs. 7 Previous year figures Figures for the brvious years have been regrouped where necessary to conform to the brsent year’s brsentation. 1. Advance received from customers amounting to Rs.214.72 lakhs has been regrouped from Trade receivable to Other current liabilities. 2. Provision for Sales tax amounting to Rs.816.01 lakhs has been regrouped from Other current liabilities to Short term provisions As per our report of even date attached For and on behalf of the Board of Directors of Pfizer Limited CIN No : L24231MH1950PLC008311 For B S R & Co. LLP Chartered Accountants Firm’s Registration No. 101248W/W-100022 R. A. Shah : Chairman DIN:00009851 Pradip Shah : Director DIN:00066242 S. Sridhar : Managing Director DIN:05162648 Sadashiv Shetty Partner Membership No. 048648 Uday Khanna Director DIN:00079129 S. S. Lalbhai Director DIN:00045590 Vivek Dhariwal Wholetime Director DIN:02826679 Ravi Prakash Bhagavathula Chief Financial Officer Prajeet Nair Company Secretary Membership No: A19267 Place : Mumbai, date : 06 May 2016 |