CIPLA LIMITED
ANNUAL REPORT 2009-2010
NOTES ON ACCOUNTS
1. Significant Accounting Policies:
i. Basis of Accounting
The financial statements are prepared under the historical cost convention
on accrual basis in accordance with the Companies (Accounting Standards)
Rules, 2006 issued under sub section (3C) of section 211 of the Companies
Act, 1956.
ii. Use of Estimates
The preparation of financial statements requires the management of the
Company to make estimates and assumptions that affect the reported balance
of assets and liabilities, revenue and expenses and disclosures relating to
the contingent liabilities. The management believes that the estimates used
in preparation of the financial statements are prudent and reasonable.
Future results could differ from these estimates. Any revision of
accounting estimates is recognised prospectively in the current and future
periods.
iii. Fixed Assets
Fixed Assets are stated at cost of acquisition (net of recoverable taxes &
Government grants wherever availed) or construction or other amounts
substituted for historical costs on revaluation less accumulated
depreciation.
iv. Depreciation
Depreciation on fixed assets is provided on the Straight Line Method at the
rates and in the manner prescribed under Schedule XIV to the Companies Act,
1956.
All individual items of fixed assets, where the actual cost does not exceed
Rs.5,000 each have been written off entirely in the year of acquisition.
Cost of leasehold land including premium is amortised over the primary
period of lease.
v. Inventories
Raw materials are valued at lower of cost and net realisable value.
However these items are considered to be realisable at cost if the finished
products, in which they will be used, are expected to be sold at or above
cost.
Work-in-process and finished goods are valued at lower of cost and net
realisable value. Finished goods and work-in-process include costs of raw
material, labour, conversion costs and other costs incurred in bringing the
inventories to their present location and condition.
Cost of finished goods includes excise duty.
Cost of inventories is computed on weighted average basis.
vi. Foreign Exchange Transactions
Transactions in foreign currencies are recorded at the exchange rates
prevailing on the date of the transaction.
Foreign currency monetary assets & liabilities and forward contracts are
restated at year end exchange rates. Exchange differences arising on the
settlement of foreign currency monetary items or on reporting Company's
foreign currency monetary items at rates different from those at which they
were initially recorded during the year or reported in the previous
financial statements, are recognised as income or expense in the year in
which they arise.
In respect of forward contracts, the premium or discount on these contracts
is recognised as income or expenditure over the period of the contract. Any
profit or loss arising on cancellation or renewal of such contracts is
recognised as income or expense of the year.
vii. Employee Benefits
Liability on account of short term employee benefits is recognised on an
undiscounted and accrual basis during the period when the employee renders
service/vesting period of the benefit.
Post retirement contribution plans such as Provident Fund are charged to
Profit and Loss Account of the year when the contributions to the
respective funds accrue.
Post retirement benefit plans such as gratuity and leave encashment are
determined on actuarial valuation made by an independent actuary as at the
Balance Sheet date. Actuarial gains and losses are recognised immediately
in the Profit and Loss Account.
viii. Research and Development
Revenue expenditure on Research and Development is recognised as expense in
theyear in which it is incurred.
Capital expenditure on Research and Development is shown as addition to
Fixed Assets.
ix. Expenditure on Regulatory Approvals
Expenditure incurred for obtaining regulatory approvals and registration of
products for overseas markets is charged to revenue.
x. Investments
Long term investments are stated at cost, less any provision for diminution
(other than temporary) in value. Current investments are stated at lower of
cost and fair value.
xi. Revenue Recognition
Revenue is recognised to the extent it is probable that the economic
benefits will flow to the Company and the revenue can be reliably measured.
Revenue from sale of goods is recognised when significant risks and rewards
of ownership of the goods have been passed to the buyer which ordinarily
coincides with despatch of goods to customers. Revenues are recorded at
invoice value, net of sales tax, returns and trade discounts.
Revenue from rendering of services are recognised on completion of
services.
Benefits on account of entitlement of export incentives is recognised as
and when the right to receive is established.
Fees from technical services are recognised as and when the right to
receive such income is established as per terms and conditions of relevant
agreement.
Interest income is recognised on time proportion basis.
Dividend income is recognised when the right to receive is established.
xii. Income Tax
Current income tax is measured at the amount expected to be paid to the tax
authorities in accordance with the provisions of local Income Tax Laws as
applicable to the financial year.
Deferred income taxes reflect the impact of current year timing differences
between taxable income and accounting income of the year and reversal of
timing differences of earlier years. Deferred tax is measured based on the
tax rates and the tax laws enacted or substantively enacted at the Balance
Sheet date.
In cases where the tax assessments have been completed but the appeals are
pending at various appeal fora, the tax payments have been set-off against
the provisions in the Balance Sheet. Appropriate disclosures have been made
towards contingent liabilities, if any.
xiii. Impairment of Assets
At each Balance Sheet date, the Company assesses whether there is any
indication that any asset may be impaired. If any such indication exists,
the carrying value of such assets is reduced to its estimated recoverable
amount and the amount of such impairment loss is charged to Profit and Loss
Account. lf,at the Balance Sheet date there is an indication that a
previously assessed impairment loss no longer exists, the recoverable
amount is reassessed and the asset is reflected at the recoverable amount
subject to a maximum of depreciated historical cost.
xiv. Government Grants
Capital subsidy/Government grants are accounted for where it is reasonably
certain that the ultimate collection will be made.
Capital subsidy/Government grants related to specific depreciable assets
are shown as deduction from the gross value of the asset concerned in
arriving at its book value. The grant/subsidy is thus recognised in the
Profit and Loss Statement over the useful life of such depreciable assets
by way of a reduced depreciation charge.
xv. Borrowing Costs
Borrowing costs attributable to acquisition and/or construction of
qualifying assets are capitalised as a part of the cost of such assets, up
to the date such assets are ready for their intended use.
Other financing/borrowing costs are charged to Profit and Loss Account.
xvi. Provisions and Contingent Liabilities
A provision is recognised when the Company has a present obligation as a
result of a past event, it is probable that an outflow of resources will be
required to settle the obligation, in respect of which a reliable estimate
can be made. Provisions are not discounted to its present value and are
determined based on best estimate required to settle the obligation at the
Balance Sheet date.
A disclosure for a contingent liability is made when there is a possible
obligation or a present obligation that may, but probably will not, require
an outflow of resources. Where there is a possible obligation or a present
obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
xvii. Earning Per Share
Basic earning 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 earning 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 would
be issued on the conversion of all the dilutive potential equity shares
into equity shares.
Notes to the Accounts
2. The previous year's figures have been recast/regrouped wherever
necessary in order to conform to current year's presentation.
3. 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).
4. 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. Income Tax- Rs.115.35 crore (Previous year Rs.Nil).
The above Rs.115.35 crore represents claims where the Company has filed
appeals and 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).
5. The Governmentof 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.1157.12 crore (inclusive of interest) for the period July 1995 to April
2009.
7. The net difference in foreign exchange debited to the Profit and Loss
Account is Rs.63.89 crore (Previous year Rs.228.37 crore).
8. Expenditure on Research & Development
Rupees in crore
2010 2009
Capital Expenditure 11.99 16.00
Revenue Expenditure charged to
Profit and Loss Account 250.69 235.50
262.68 251.50
Of the above, capital expenditure of Rs.11.99 crore (Previous year Rs.14.87
crore) and revenue expenditure of Rs.126.90 crore (Previous year Rs.114.30
crore) are eligiblefor weighted deduction under section 35(2AB) of the
Income Tax Act, 1961. The eligible revenue expenditure includes employee
cost Rs.33.86 crore (Previous year Rs.27.73 crore), raw materials &
consumables Rs.25.23 crore (Previous year Rs.29.96 crore), clinical trials
& research grants Rs.24.75 crore (Previous year Rs.22.86 crore) and other
expenditure Rs.43.06 crore (Previous year Rs.33.75 crore).
9. Capacities and Actual Production
Installed Capacity Actual Production
Class of Goods Unit 2010 2009 2010 2009
Bulk Drugs
(including Malts) Tonne 1866.1 1866.1 1316.9 960.1
Tablets & Capsules Million 16662.4 16662.4 16632.9 16119.2
Liquids Kilolitre 1346.4 1346.4 8600.9 8432.0
Creams Tonne 861.3 861.3 1021.7 851.9
Aerosols/
Inhalation Devices Thousand 96030.0 96030.0 53387.5 61195.8
Injections/
Sterile Solutions Kilolitre 1168.0 1168.0 2204.0 2222.5
Others - - 440.4 480.3
Notes:
i. The installed capacity is as certified by the management and not
verified by the auditors, this being a technical matter.
ii. Actual production includes production at loan licencee locations.
iii. Actual production includes production of goods captively consumed.
10. Purchases of each class of Finished Goods
Rupees in crore
2010 2009
Class of Goods Unit Qty. Value Qty. Value
Bulk Drugs
(including Malts) Tonne 1085.8 115.41 1092.5 94.58
Tablets & Capsules Million 2490.0 236.07 2101.0 216.74
Liquids Kilolitre 5464.0 86.53 5513.8 68.14
Creams Tonne 685.0 29.54 357.7 11.00
Aerosols/Inhalation
Devices Thousand 6043.8 23.93 9992.4 39.20
Injections/Sterile
Solutions Kilolitre 416.8 70.43 380.8 47.12
Others - 59.75 - 111.26
621.66 588.04
11. Sales of each class of Finished Goods
Rupees in crore
2010 2009
Class of Goods Unit Qty. Value Qty. Value
Bulk Drugs
(including Malts) Tonne 1930.0 669.97 1869.0 597.21
Tablets &Capsules Million 17909.8 3202.23 17938.4 2879.78
Liquids Kilolitre 13689.5 306.30 13808.6 300.54
Creams Tonne 1525.2 113.77 1226.4 89.55
Aerosols/Inhalation
Devices Thousand 59137.4 475.40 68073.4 503.83
Injections/Sterile
Solutions Kilolitre 2511.6 525.85 2616.0 436.76
Others - 118.16 - 213.97
5411.68 5021.64
12. Closing Stock of each class of Finished Goods
Rupees in crore
2010 2009
Class of Goods Unit Qty. Value Qty. Value
Bulk Drugs
(including Malts) Tonne 278.3 159.83 262.9 127.12
Tablets & Capsules Million 3263.4 306.29 2336.3 198.42
Liquids Kilolitre 2066.9 38.13 1887.5 26.61
Creams Tonne 347.1 16.92 191.9 7.67
Aerosols/Inhalation
Devices Thousand 6519.6 29.42 6685.7 34.05
Injections/Sterile
Solutions Kilolitre 552.9 62.05 425.7 43.65
Others - 11.12 - 7.17
623.76 444.69
Note: The Closing Stock stated above is after adjustments for in-transit
breakage, obsolete/date-expired stocks, physician samples and also for
captive consumption in case of bulk drugs.
13. Consumption of Raw and Packing Materials
Rupees in crore
2010 2009
Class of Goods Value % Value %
Purchased indigenously 1187.31 56 1137.43 57
Imported 927.26 44 845.45 43
2114.57 100 1982.88 100
Less: Recoverable duties
(included in the above cost) 99.16 109.97
Total Consumption
(Net of Cenvat) 2015.41 1872.91
Note: Figures as certified by the management.
14. Break-up of Materials Consumed
Rupees in crore
2010 2009
Class of Goods Unit Qty. Value Qty. Value
Purchased Bulk Drugs Tonne 4298.5 909.59 3447.7 776.56
Intermediates Tonne 580.4 307.55 582.2 263.27
Solvents Tonne 18679.4 78.56 16960.1 73.41
Capsules Million 3166.7 27.06 2752.5 27.84
Packing Materials 465.27 461.25
Others
(None of which
individually account
for more than 10 per
cent of the total
consumption) 326.54 380.55
2114.57 1982.88
Less: Recoverable
duties (included
in the above cost) 99.16 109.97
Total Consumption
(Net of Cenvat) 2015.41 1872.91
Note: Figures as certified by the management.
15. Value of Imports on C.I.F. basis
Rupees in crore
2010 2009
Raw Materials/Packing Materials 846.14 963.79
Components & Spare Parts 27.46 19.43
Capital Goods 167.23 256.80
16. Expenditure in Foreign Currency
Rupees in crore
2010 2009
Legal and Professional Charges 27.09 16.27
Royalties - 3.32
Other matters - Commission,
Travelling, etc. 134.23 207.33
17. Earnings in Foreign Exchange
Rupees in crore
2010 2009
F.O.B. Value of Exports 2900.58 2742.69
Technical Know-how/Fees 153.76 217.45
Others 3.34 0.02
18. Foreign exchange derivatives and exposures outstanding at the year end
Amount (equivalent
Rupees in crore)
Nature of lnstrument Cross 2010 2009
Currency Currency
Forward contracts-Sold USD INR 898.19 624.05
Forward contracts-Bought USD INR - 748.75
Forward contracts-Bought JPY USD - 43.81
Forward contracts-Bought JPY INR - 51.92
Forward contracts-Bought CAD USD - 24.81
Unhedged foreign exchange
exposures
- Receivables 620.58 1071.29
- Payables 264.85 344.22
Note: The Company uses forward contracts/derivatives for hedging purposes
and/or reducing interest costs.
19. Managerial Remuneration
Managerial Remuneration under section 198 of the Companies Act, 1956 paid
or provided for during the year to the Chairman & Managing Director and the
Joint Managing Directors:
Rupees in crore
2010 2009
i. Salary and Allowances 2.21 1.78
ii. Commission 27.00 26.50
iii. Company's contribution to
Provident Fund 0.09 0.08
iv. Approximate monetary value
of other perquisites or benefits 0.21 0.11
29.51 28.47
Note: The above figures exclude provision for leave encashment and
contribution to the approved Group Gratuity Fund which are actuarially
determined on an overall basis.
20. Computation of Net Profits under section 349 of the Companies Act, 1956
and Commission payable to Directors
Rupees in crore
2010
Profit before Tax as per Profit & Loss Account 1324.99
Add: Managerial Remuneration 29.51
Directors' Sitting Fees 0.08
Provisions for Doubtful Debts 39.68 69.27
1394.26
Less: Profit on sale of Investments 0.10
Less: Sale of brand and other related rights 95.00
Net Profit under section 349 of the
Companies Act, 1956 1299.16
Commission to Executive Directors
(as determined by the Board of Directors) 27.00
21. Related Party Disclosures
i. The related parties areas under:
a. Subsidiary Company- Cipla FZE, U.A.E.
b. Key Management Personnel -
1. Dr.Y K.Hamied-Chairman and Managing Director
2. Mr.M.K.Hamied-Joint Managing Director
3. Mr.Amar Lulla-Joint Managing 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. 1st March
2010)
ii. Transactions with related parties:
Rupees in crore
Particulars A B C D E F G H
Receipts
- Interest 0.19 0.73 0.55 0.74 0.73
- Others 0.00* 0.00*
Loan Repayment 17.76 17.76
Capital
Contribution 17.42 17.42
Loans Given 5.82 5.82
Remuneration Paid 29.51 28.47 29.51 28.47
Deposits Repaid 38.00 38.00
Interest Paid 3.13 1.58 3.13 1.58
Purchase of
Materials/
Finished Goods 23.65 23.65
Services Availed 3.85 3.85
Donations Given 0.40 0.47 0.40 0.47
Balances at end
of the year
- Outstanding
Payables 39.58 28.55 28.55 39.58
- Outstanding
Receivables 17.76 69.21 69.21 17.76
A = Subsidiary - 2010
B = Subsidiary - 2009
C = Key Management Personnel - 2010
D = Key Management Personnel - 2009
E = Entities over which Key Management Personnel exercise significant
influence - 2010
F = Entities over which Key Management Personnel exercise significant
influence - 2009
G = Total - 2010
H = Total - 2009
* Rs.20,040
Disclosures in respect of material related party transactions during
theyear:
a. Receipts include interest received from Cipla FZE Rs.0.19 crore
(Previous year Rs.0.73 crore) and Goldencross Pharma Pvt. Ltd. Rs.0.55
crore (Previous year Rs.Nil).
b. Loan repayment from Cipla FZE Rs.17.76 crore (Previous year Rs.Nil).
c. Capital contribution into Cipla FZE Rs.17.42 crore (Previous year
Rs.Nil).
d. Loans given to Golden cross Pharma Pvt. Ltd. Rs.5.82 crore (Previous
year Rs.Nil).
e. Remuneration paid to Dr.Y.K.Hamied Rs.8.53 crore (Previous year Rs.8.30
crore), Mr. M.K.Hamied Rs.8.11 crore (Previous year Rs.7.84 crore) and
Mr.Amar. Lulla Rs.12.87 crore (Previous year Rs.12.33 crore).
f. Deposit repaid to Dr.Y K. Hamied Rs.38.00 crore (Previous year Rs.Nil).
g. Interest paid to Dr.Y K. Hamied Rs.3.13 crore (Previous year Rs.1.58
crore).
h. Purchase of materials/finished goods include Golden cross Pharma Pvt.
Ltd. Rs.18.45 crore (Previous year Rs.Nil) and Medispray Laboratories Pvt.
Ltd. Rs.4.88 crore (Previous year Rs.Nil).
i. Services availed from Golden cross Pharma Pvt. Ltd. Rs.1.04 crore
(Previous year Rs.Nil), Mediorals Laboratories Pvt. Ltd. Rs.0.94 crore
(Previous year Rs.Nil), Medispray Laboratories Pvt. Ltd. Rs.0.84 crore
(Previous year Rs.Nil) and Advanced Remedies Pvt. Ltd. Rs.1.03 crore
(Previous year Rs. Nil).
j. Donations made to Cipla Public Charitable Trust Rs.0.40 crore (Previous
year Rs.0.47 crore).
k. Outstanding payables as on 31st March 2010 include Golden cross Pharma
Pvt. Ltd. Rs.3.90 crore (Previous year Rs. Nil), Medispray Laboratories
Pvt. Ltd. Rs.13.60 crore (Previous year Rs.Nil), Advanced Remedies Pvt.
Ltd. Rs.8.89 crore (Previous year Rs.Nil), and Dr.YK. Hamied Rs.Nil
(Previous year Rs.39.58 crore).
l. Outstanding receivables as on 31st March 2010 include Goldencross Pharma
Pvt. Ltd. Rs.69.21 crore (Previous year Rs.Nil), Cipla FZE Rs.Nil (Previous
year Rs.17.76 crore).
22. Segment Information
i. Information about primary business segments:
The Company is exclusively in the pharmaceutical business segment.
ii. Information about secondary business segments:
Rupees in crore
India Outside India Total
2010 2009 2010 2009 2010 2009
Gross revenue by
geographical market 2511.10 2278.95 2900.58 2742.69 5411.68 5021.64
Less: Excise duty 52.16 61.04 - - 52.16 61.04
Net revenue by
geographical market 2458.941 2217.91 2900.58 2742.69 5359.52 4960.60
a. Export
lncentives &
Technical
Know-how/Fees - - 246.17 273.69 246.17 273.69
b. Other Revenue 79.50 57.71 - - 79.50 57.71
Segment revenue 2538.44 2275.62 3146.75 3016.38 5685.19 5292.00
Carrying amount
of segment assets 5291.95 4618.62 1521.70 1741.48 6813.65 6360.10
Carrying amount of
other unallocated
assets 563.40 418.28
Capital expenditure 529.29 642.18 0.02 0.15 529.31 642.33
Notes:
a. The Segment Revenue in the geographical segments considered for
disclosure are as follows:
Revenue within India includes sales to customers located within India and
earnings in India. Revenue outside India includes sales to customers
located outside India and earnings outside India.
b. Segment Revenue comprises:
Rupees in crore
2010 2009
Sales (Net of Excise Duty) 5359.52 4960.60
Other income excluding interest,
dividend income and profit on
sale of investments & fixed assets 325.67 331.40
5685.19 5292.00
c. Segment Revenue and Assets include the respective amounts identifiable
to each of the segment.
23. 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.
Disclosures as required by the Micro, Small and Medium Enterprises
Development Act, 2006 areas under:
Rupees in crore
2010 2009
i. The principal amount and the interest due
thereon remaining unpaid to Suppliers
a. Principal 0.19 0.79
b. Interest due thereon - -
ii. a. The delayed payments of principal
paid beyond the appointed date during the
entire accounting year - -
b. Interest actually paid under section 16
of the Micro, Small and Medium Enterprises
Development Act, 2006 - -
iii. a. Normal interest accrued during the
year, for all the delayed payments, as per
the agreed terms - -
b. Normal interest payable for the period
of delay in making payment, as per the
agreed terms - -
iv. a. Total interest accrued during the year - -
b. Total interest accrued during
the year and remaining unpaid - -
24. Employee Benefits
The Company has with effect from 15th April 2007, adopted Accounting
Standard 15, Employee Benefits (revised 2005), issued by the Institute of
Chartered Accountants of India (the'revised 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 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.
b. Charge to Profit and Loss Account based on contributions
Rupees in crore
2010 2009
Employees' Pension Scheme 6.62 5.93
Provident Fund 9.37 7.43
15.99 13.36
c. Disclosures for defined benefit plans based on actuarial reports
Rupees in crore
2010 2009
Gratuity Gratuity
(Funded (Funded
Plan) Plan)
i. Change in defined benefit obligation
Opening defined benefit obligation 20.58 17.89
Interest cost 1.75 1.59
Current service cost 4.09 2.61
Actuarial (gain)/loss on obligations 2.27 (0.24)
Benefits paid (2.55) (1.27)
Liability at the end of the year 26.14 20.58
ii. Change in fair value of assets
Opening fair value of plan assets 15.91 14.21
Expected return on plan assets 1.67 1.24
Actuarial gain/(loss) 0.57 (0.17)
Contributions by employer 2.49 1.90
Transfer of plan assets 3.75 -
Benefits paid (2.55) (1.27)
Closing fair value of plan assets 21.84 15.91
iii. Amount recognised in Balance Sheet
Present value of obligations as at year end 26.14 20.58
Fair value of plan assets as at year end (21.84) (15.91)
Net (asset)/liability recognised 4.30 4.67
iv. Expenses recognised in Profit and
Loss Account
Current service cost 4.09 2.61
Interest on defined benefit obligation 1.75 1.59
Expected return on plan assets (1.67) (1.24)
Net actuarial (gain)/loss recognised
in the current year 1.70 (0.07)
Transfer of plan assets (3.75) -
Total expense recognised in Profit
and Loss Account 2.12 2.89
v. Actual return on plan assets
Expected return on plan assets 1.67 1.24
Actuarial gain/(loss) on plan assets 0.57 (0.17)
Actual return on plan assets 2.24 1.07
vi. Asset information
Insurer managed funds 100% 100%
vii. Principal actuarial assumptions used
Discounted rate (per annum) 8.00% 7.75%
Expected rate of return on plan assets
(per annum) 8.00% 8.00%
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
viii. Experience adjustments
Defined benefit obligation 26.14 20.58
Plan assets (21.84) (15.91)
Deficit 4.30 4.67
Experience adjustment on plan
liabilities-(gain)/loss 2.61 (2.46)
Experience adjustment on plan
assets-gain/(loss) 0.57 (0.17)
ix. Expected employer's
contribution for the next year 7.03 3.46
25. During the year, the Company sold its intellectual property rights and
technical know-how of 'i-pill' an emergency contraceptive brand, to Piramal
Healthcare Limited for the territory of India at an aggregate consideration
of Rs.95 crore.
26. 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 Vill 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.
27. Basic and Diluted Earning per Share has been computed asunder:
Rupees in crore
2010 2009
Profit After Tax-Before Exceptional Item 986.49 776.81
Weighted Average No. of Shares Outstanding 79,01,41,467 77,72,91,357
Basic/Diluted EPS - Before Exceptional Item Rs.12.49 Rs.9.99
Profit After Tax - After Exceptional Item 1081.49 776.81
Weighted Average No. of Shares outstanding 79,01,41,467 77,72,91,3570
Basic/Diluted EPS-After Exceptional Item Rs.13.69 Rs.9.99
Face value per share Rs.2.00 Rs.2.00
As per our report of even date
For V. Sankar Aiyar & Co., For R.G.N.Price & Co.,
Chartered Accountants Chartered Accountants
Firm Reg. No. 109208W Firm Reg. No.0027855
V. Mohan R.Rangarajan
Partner Partner
Membership No. 17748 Membership No. 41883
Y.K.Hamied
Chairman & Managing Director
M.K. Harried S. Radhakrishnan
Joint Managing Director Chief Financial Officer
H.R. Manchanda Mital Sanghvi
M.R. Raghavan Company Secretary
Ramesh Shroff
Pankaj Patel
Directors
Mumbai, 15th June 2010
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